### Giving: is money better than options?

January 5th, 2012
giving

When I joined Cogo Labs, about a year ago, I started getting about a third [1] of my pay in stock options. Being risk neutral in donating, I decided to spend my salary on me and donate any proceeds from my stock options. This let me increase the fraction of my pay I was giving away without decreasing what I keep. Mathematically and economically, considering just what I can give, I think this was the right decision.

The problem is, much of my potential impact is from convincing others to give, and if I have to talk about stock options, expected value, and money that I intend to give away it's confusing and distracting. Things were much simpler saying "we lived on about \$22,000 and gave about \$45,000". Should I switch back to giving money?

It would not be an easy switch. Options represent a small chance of a lot of money, and they're not very valuable to me personally. (Each additional dollar is worth less than the last). If I were to start giving a third of my compensation away as cash, that would be about 2/3 of my paycheque [2]. Which would be pretty hard. Maybe I should donate some combination of cash and options? Making this more complicated, I had negotiated more options in exchange for a \$10K lower salary, figuring that for money I was giving away this was the right thing to do. Suggestions?

[1] You might say "how can you say 'about a third' when you have no idea whether your stock options will even be worth something ever?" What I did was estimate how likely I thought Cogo Labs was to be worth \$X in about ten brackets (\$0, \$10M, \$50M, ...), and then calculate an expected value as \$0*P_1 + \$10M*P_2 + \$50M*P_3... Then I multiplied by the fraction of the company whose options would vest to me each quarter, and got something about half my quarterly salary. So: one third of compensation.

[2] It's 1/2 my salary (the last third is options) but 2/3 of takehome pay because 1/6 of my pay goes to taxes and other paycheque deductions.