[sokoloff]

Having a portion of pay that automatically and transparently scales with company performance seems valuable and sensible. When the company outperforms expectations, the gains are shared. When it underperforms, the pain is shared.

[kelnos]

The problem is that each individual employee generally has vanishingly small individual impact on the company's performance. That can really hurt morale when the stock price goes down, often even when the company is doing just fine, or even well.

[sokoloff]

IME, it doesn’t hurt morale worse than the company instituting broad-based salary cuts would, which is an alternative structure to accomplish a similar shared-success model.

[kelnos]

Sure, but we're not talking about salary cuts or a shared-success model as the only possible alternative. Why not just do away with equity compensation or bonuses entirely, and pay people more?

(I mean, I know why; equity compensation is a much cheaper way for a company to compensate employees than extra salary or even bonuses.)

I think shared-success is a fair model (regardless of whether or not it's good for morale or productivity) when the company is small enough where you can at least somewhat understand how an individual employee's work contributes directly to revenue. But companies grow past that point, sometimes quickly.

Having said that, I think I made out very well with equity comp at my last company, much much better than I would have done if there was no equity comp, and we all just had higher salaries. But I think that outcome isn't common, especially when you only consider employees in non-executive positions.

[lazyasciiart]

My employer is making record profits every quarter and the share price is going down month after month. What shared success?

[sokoloff]

Share price is driven more by future expectations than by past performance. Your record profits are nice, but are history at this point.

What matters is expectations of profits going decades into the future and the relationship to the risk-free rate of return (which has risen dramatically recently, due to the expected future devaluation of the dollar).

[lazyasciiart]

That pretty well reinforces my point: share prices do not rise because employees have done a good job, profits do. RSUs are not, therefore a shared success model.

[bombcar]

And explicit profit-sharing exists and is found in some companies; but rarely Silicon Valley ones. (They seem more common in factory/service companies)

[zeroonetwothree]

The problem is stock price is often only loosely tied to "performance". Companies can be under- or over-valued by the market for many reasons.