::  Posts  ::  RSS  ::  ◂◂RSS  ::  Contact

Giving: is money better than options?

January 5th, 2012
giving  [html]

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.

Comment via: google plus, facebook

Recent posts on blogs I like:

How Fast New York Regional Rail Could Be Part 2

In my last post about New York regional rail schedules, I covered the New Haven and Harlem Lines of Metro-North and the Main Line and Hempstead Branch of the LIRR. I was hoping to cover more lines tonight, but due to time constraints only the Hudson Line …

via Pedestrian Observations October 17, 2019

Strong stances

I. The question of confidence Should one hold strong opinions? Some say yes. Some say that while it’s hard to tell, it tentatively seems pretty bad (probably). There are many pragmatically great upsides, and a couple of arguably unconscionable downsides. …

via Meteuphoric October 15, 2019

What do executives do, anyway?

An executive with 8,000 indirect reports and 2000 hours of work in a year can afford to spend, at most, 15 minutes per year per person in their reporting hierarchy... even if they work on nothing else. That job seems impossible. How can anyone make any im…

via apenwarr September 29, 2019

more     (via openring)

More Posts:


  ::  Posts  ::  RSS  ::  ◂◂RSS  ::  Contact