Stock-based comp? What else you got?
Illustration: iStock/Getty Images Plus; Protocol

Stock-based comp? What else you got?

Source Code

Good morning! Companies that were once giving out stock-based comp like it was candy now need to find alternative ways to woo employees. And that could lead to a more chaotic job market.

A harsh reality lesson

The talent war was already brutal. Now, as Wall Street punishes once high-flying technology stocks, it’s bound to get even more intense.

For decades, Big Tech has embraced stock-based compensation as a supplement to take-home pay. And workers, eager to be early members of the next Microsoft or Salesforce to reap the financial windfall that comes with that, have progressively embraced it as a meaningful portion of their compensation. It made it possible for even lower-level workers to, eventually, become millionaires.

But as share prices plummet, those same employees are getting a harsh lesson about the reality of the stock market. And it’s forcing employers to make tough decisions about their compensation strategies.

  • Stock-based pay is a common lure for employees to work in tech. Many startup employees accept lower pay in exchange for larger equity packages, hoping their pre-IPO stock makes them the next gazillionaire. And at most public companies, RSUs help supplement larger cash salaries.
  • Tying large packages of stock compensation has become so common, it earned the nickname “golden handcuffs,” thanks to most awards being tied to four-year vesting cliffs. That, however, is changing.
  • Now, as stocks sink, the challenge for tech companies is that the golden payday has lost its sheen.

With the stock market largely ballooning over the last decade, it was a relatively low-risk way to seemingly make a large chunk of money. Basically, if you picked right, someone could hop to a new company every handful of years and make a big nest egg.

  • But now, particularly for those employees who may have joined companies at or near the peak, many could be facing a situation where their on-paper compensation is now significantly lower thanks to the turmoil on Wall Street.
  • RSUs may offer some amount of downside protection — although it won't feel like much comfort to many.
  • Employees who have stock options may have exercised them at a higher price than what the stock is trading at today, finding themselves underwater. With RSUs, it's at least worth something, but if you believed you had been given $100 only to find it's $20 now, you may be upset.

The phenomenon could lead to an even more chaotic job market. Not only will it likely force workers to depart to another company and start from scratch with new equity, it could lead to an exodus from startups that are often able to woo talent through stock-based pay if potential employees think there’s no upside left.

  • “It changes the paradigm,” Temple University accounting professor Steven Balsam told me. “If I’ve only got stock options and they’re now underwater, I can just go to the company across the street, maybe get the same salary, but get a fresh set of stock options that are at the money. I’ve got nothing to lose.”

Workers shouldn’t expect the employers to help. In a time when share prices are already on the decline, CEOs are likely to be hesitant to take any actions that could further dilute their stock and risk angering investors.

  • Such a move to change employee share prices or issue more options could also put executives in the difficult position of needing to respond to wild fluctuations in the stock market in the future.

What might end up being more common are one-time cash bonuses, which would affect underlying profits at a critical time. But it’s a more straightforward way for companies to support employees battered by skyrocketing inflation.

  • “When you see such a rapid and such an extreme distortion of a market, you don't necessarily respond right away,” Twilio CEO Jeff Lawson said. “You want to be slow-and-steady. If the market distortion is prolonged and looks permanent, you want to be on that path. But if it’s a gyration up and then a gyration way back down, you don't want to necessarily be following.”

Compensation has long been a hot topic in tech. But it’s become more pronounced in the past few years. The talent war has forced businesses to increasingly dangle more lucrative offers in front of data scientists and other individuals with hard-to-find skills.

  • Historically, startups have had a harder time competing with public firms on cash salaries, prompting many to instead opt for big, pre-IPO equity packages.
  • In the last few years, that has changed. After tons of free money flooded into the U.S. economy, an insane amount went into private startups so they could offer lucrative cash salaries along with stock. However, that could now become a major problem.
  • “The private companies who said, ‘We are going to hire a ton of people, we are going to pay well beyond market cash,’ those companies are all hoarding their cash now because they know the next time they have to go to the market they are going to be looking at down rounds, if they can raise a round at all,” Lawson said. “So those huge salaries, they are probably regretting them.”

The most pressing risk for Big Tech might be that workers opt to depart the industry entirely. Everyone — including banks, retailers and manufacturers — is trying to hire software and IT talent right now. Of course, most companies are getting battered in the stock market. But if tech continues to sink, it’s a prime time for firms like JPMorgan Chase or Walmart to try to poach employees.

Either way, workers once again are put in a position of power. And they should use it to milk these corporate giants — many of which have put profits above all else for decades — for all the money they can.


You're either real-time or out of time:Applications like this power our daily lives, and if they can’t access massive amounts of data stored in a database as well as stream data “in motion” instantaneously, you — and millions of customers — won’t have these in-the-moment experiences.

Read more from DataStax

The best of Protocol

Crypto bankruptcy plunges the industry into uncharted territory — Ryan Deffenbaugh

  • The crypto crash is sending U.S. bankruptcy courts into unknown waters, having never handled crypto bankruptcy at the scale of Voyager or Celsius. And that means policymakers will be keeping close watch.

Matthew Ball on the metaverse: We've never seen a shift this enormous — Janko Roettgers

  • If you’re in the know about the metaverse, you’ve likely heard the name Matthew Ball, a former Amazon Video exec-turned-VC who started writing essays about the metaverse in early 2019. Before his upcoming book, “The Metaverse And How It Will Revolutionize Everything,” comes out, Ball sat down with Protocol Entertainment reporter Janko Roettgers to chat about all things metaverse.

How I decided to cap hiring at our high-growth software startup — Michelle Ma

  • Pausing hiring is never an easy decision to make. But Nicholas Mills, president of Pitch, saw the warning signs that tech was quickly approaching the end of its bull run.

How Meta, Google, Twitter and TikTok are 'failing' LGBTQ+ users — Kwasi Gyamfi Asiedu

  • Though tech companies often use June to publicly display support for the LGBTQ+ community, platforms like Facebook, Twitter, YouTube, Instagram and TikTok have policies that make it an unsafe place for LGBTQ+ users, according to GLAAD’s Social Media Safety Index.

How Twilio CEO Jeff Lawson is balancing a desire for profits with growth and employee retention — Aisha Counts and Joe Williams

  • Amid falling share prices, software CEOs are on the defensive, arguing that company valuations don’t measure the actual results they are posting. But Twilio CEO Jeff Lawson is still bullish about the company’s future.

Not my job: AI researchers building surveillance tech and deepfakes resist ethical concerns — Kaye Kaye

  • As more young computer vision scientists make their way into corporate AI, practitioners say there is a disconnect between work and ethics. This is prompting AI businesses to emphasize the importance of ethical considerations guiding how their products are built.

The dot-com crash has lessons for crypto, if only we can remember them — Ben Pimentel

  • The dot-com crash saw high-flying early web startups collapse and burn. Fast-forward two decades: Layoffs, bankruptcies and the rapid evaporation of wealth — the parallels are everywhere.

Activist tech CEOs are everywhere. That may backfire — Joe Williams

  • The CEO’s chair has long been a haven for business leaders to influence public policy and push causes important to their companies. But the more CEOs use their voice, the more it becomes drowned out.

VC investment in Latin America ballooned in 2021. Can it survive the downturn? — Biz Carson

  • In the last year, venture capitalists have woken up to the opportunity in Latin America and made it the fastest-growing region for investment in the world. But amid the downturn, the question now is who will stick around.


You're either real-time or out of time: Many of the challenges facing our world today are increasingly complex and critical, such as climate change, talent shortages and supply chain disruptions. Solving these problems requires analyzing large data sets, quickly. Additionally, organizations must use data to predict future issues and then determine the most effective solution.

Read more from DataStax

Thoughts, questions, tips? Send them to our tips line, Enjoy your day, see you tomorrow.

Recent Issues

The best of Protocol

The confessions of SBF

Your holiday book list

A tale of two FTXs