Sunday, June 26, 2011

Equitable Equity: Fairness & Transparency in Equity Compensation

Let's face it, while equity compensation is quite common in the technology and new media industries, from the employee's point of view it is confusing and lacks the basic transparency that enables rational decision making. I posted about this some time ago (May of 2009) but took that post down because it had some issues that I wanted to fix up.  Well, now it is back and I've put some more work into thinking it through as well as getting feedback from a buncha folks.

The meat of it is this...

When considering an offer, particularly at a small startup, where equity is said to be a significant part of the compensation, the present ways of granting equity give the employee almost no way to value the equity granted as compensation. This is bad for the employee, but it is also bad for the company since many employees treat what may be a quite valuable part of the compensation package as "funny money" or valueless during their consideration of offers.

So, I packaged up my thoughts; threw in some of the feedback I have received from talking to everyone from lawyers who advise startups, to founders, to angel investors, and even a VC who lent a friendly ear and took my ideas about transparent and fair equity compensation to an audience. I gave this presentation on equity compensation from the employee's point of view this weekend at BarCamp Seattle. Here are the slides...

These slides can also be found here.

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