How to politely ask to trade stock option in job offer for something else?

Question

I've read some related questions but:

This is just a good explanation (doesn't answer my question).

What's an employee stock option scheme?

This question is from a startup perspective (not applicable in my case, company in question is not a startup)

How to ask for a raise in exchange for revoking a stock option grant?

So with a job offer at a North American software company (age >10 years old, stock is googleable so I believe IPO-ed) and having confirmed they don't consider themselves a start up anymore from some of the some of my interviewers in person. The verbal offer later included a stock option.

However if I wish to negotiate away the stock option after finally receiving the written offer (I personally don't think the stock option for this comapny will valuable, and I'm not into lottery tickets), how can I do so politely and what are the easiest/most common things to exchange it for instead?

My current approach would be to politely mention I'm not interested in the stock option and would prefer X instead. (Should X be a salary increase, a signing bonus instead, is there a common industry substitute, are there rules of thumb for conversion rates to bumping annual salary or 1 time signing bonus?)

The other problem is I want to ensure I don't seem too greedy or that I don't believe in the company and that's why I don't want equity.

Answer 1

How to politely ask to trade stock option in job offer for something else?

Use this:

Dear XXXXX,

In lieu of Stock Options would you consider INSERT WHAT YOU WANT HERE?

Sincerely,

YOUR NAME HERE

The crux of it is you just have to ask. You need to be polite and humble. Ideally these talks would happen while negotiating your initial offer but if you are offered options after being hired, it doesn't hurt to ask.

Now, on the other side of the coin, stock options in some companies ( typically start ups ) are a way for the company to say thank for working all the extra overtime. If you refuse them or ask for an alternative, it could be seen as offensive.

Answer 2

Don't expect much in return for your stock options. It cost the company very little and can have tax benefits to the company. It also can indicate you are not confident in the company.

Not going to buy go over that you are confident in the company but not confident in the stock price. If you want more salary I think you would be better off just asking for more salary than trade salary for stock options.

If the company says something like with stock option that is equivalent to $X you can say I would be willing to forfeit the stock options. It still shows a lack of confidence in the company but you got them to put a value on it and put it on the table. They are not going likely to put a cash value on the options.

Answer 3

My wife works as a recruiter, and while she doesn't deal with the offers directly (they have another department for that) she does field questions similar to this a lot.

The basics of it are: it almost never hurts to ask, and if it does hurt to ask, odds are very good that you don't want to work for that company anyway. The hiring process is more expensive than you might think, and because of that if they get to the point where they are offering you a job, they definitely want to hire you and won't withdraw the offer for something as minor as negotiating compensation.

The important thing for you to do before you contact anyone is decide what you are and aren't willing to accept. Establishing this ahead of time prevents you from waffling on the phone or sounding unsure. Are you willing to walk away from this job if they don't offer you money instead of stock? How much money do you want for the stock they are offering you? etc. If you aren't willing to walk away if they insist on giving you the stock options instead of salary or bonus, then odds are very good you will be stuck with the stock options (as they will cite it as policy and not work very hard to circumvent that policy if you aren't willing to leave over it).

Answer 4

I would ignore the stock options unless the company emphasized their value in lieu of salary.

I had an offer from a company once that was on the lower-end salary-wise but came with stock options. Their HR person kept emphasizing the stock options as if they were something that had real value. The way the options were set-up, you couldn't exercise them for three or four years.

I turned down the offer, which ended up being a good move, since their stock tanked a few months later and hasn't recovered since then.

If you look at the options as a potential bonus that may or may not pay off in the future, and you're happy with everything else about the offer, I would recommend accepting the offer. If you're not happy with the salary, negotiate that and ignore the options.

Answer 5

You can certainly bring it up, but you need to do your homework first and its not going to be easy. Stock options are intended to create a better motivation alignment between you and the company: if the stock goes up you both win and if it goes down you both lose.

In order to ask for anything in exchange you need to valuate the stock options. Some companies will give you some "model" that comes with the offer. This is based on the predicted growth of the stock value. Let's pick an example

• Current stock price $10 share
• 10000 options
• 4 years vesting period
• Expected Stock value increase: 10%/year

After the vesting period, the stock price would be $14.61 and you could cash your options for a net gain of $46400.

Stock options are deferred payments, so the present value is significantly less. Probably the best you could do is for asking for half of this. Either as an upfront sign on bonus or as a higher baseline salary.

The break-even point for this scenario is about 5.5% annual growth. If the stock grows by less than, you win, if it grows by more, the company wins.