[btilly]

The benefit of RSUs to the company is not just that they are worth more if a stock doesn't move much, but that they retain value when a stock drops. This avoids the trap where a company has a dip in value, and suddenly all of the people you were trying to keep golden handcuffs on have nothing keeping them there. So they start leaving, which causes you real problems.

The downside is exactly what you say - the potential upside on options is massively greater than RSUs.

[rboyd]

Am I missing something? You still have the same problem with RSUs. RSU value can decline enough that your staff may feel they're no longer getting fair comp and move on.

[btilly]

It can, but it is a lot harder.

If your stock price dips 20%, odds are that most of the stock options you've given out in the last couple of years are now out of the money. But your RSUs retained 80% of their value. 80% of a golden handcuff is a lot better incentive to stay than 0% of one. However Wall St can easily drop your stock price 20% based on nothing real.

[Mvandenbergh]

Of course, but if your stock price drops by 25% or so then the RSUs still maintain most of their value. If you were issued $400,000 of RSUs and they're now worth $300,000 - that's still a powerful incentive not to leave before they vest.

On the other hand, if you're issued stock options with a strike price of 10% or so below the market price when they were issued, a 25% drop means that they're completely worthless.