05 Apr Base Salary, Bonus & Equity – Which is right for you?

I read an interesting article in the Sunday Times a couple of weekends ago about (what I took to be) a Silicon Valley viewpoint on this month’s attitude to equity.

With the Nasdaq down 20% over the last 6 months, some of the big unicorns are 60-70% off their peak.

Typically, equity makes up half of employees’ packages in unicorn land

There are plenty of examples of relatively junior positions generating millionaires if they successfully rode the right rocket ship, so is this drop in equity value an existential crisis?

No talent equals no competitive advantage

Adding fuel to the fire is the race to attract and retain the best talent and this has led to some serious changes in companies’ behaviour.

Amazon has recently doubled its corporate staff base salaries to $350,000 and other businesses have been increasing cash bonuses in a similar fashion.   Some companies are even making direct cash payments to compensate for the gap between projected and real equity performance.

Equity is not a one-way bet

There is always a balance to be struck in a package between base salary, bonus and equity (if it is on offer).

For many reasons, recent events have shown that equity is clearly more than a one-way bet, and disproportionate wins are in part a reflection of risk.  This means that candidates are in demand and currently have some leverage to change this risk into hard cash.

Equity means taking a long-term view

I was talking to an Amazon employee this week and slipped in a question about the diminishing value of her equity…. I was quickly scoffed at.

She had done very well out of her equity and had a long-term view that expected more upside (once we had got through the tail-wind turbulence of Covid and wars in Ukraine).

Candidates have leverage to shape their packages to suit their personal risk/reward profiles

Equity is interesting, and in the long term should almost always win, but it is impossible to generalise and each case must be taken on its merits…

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If you’re looking for your next leadership role and want more insight into equity, or have any questions relating to executive search, please do get in touch.