Yeah, this. You work for a company and agree to do this for amount X in whatever form. If equity is important to you and a company does not offer it, I don't know why the company should be to blame. Of course it's a pity that they could not hold up to their ideals, but I guess no one should be surprised that everybody might have a price tag when talking billions.

I don't think the withholding equity was a problem per se, it's just that the employees were lied to all this time. Not just a white lie, but a lie on a company's founding principles, its building blocks, a core aspect of their personnel's mindset when working for the company. It feels like betrayal. Like Google silently withdrawing their "don't be evil" principle when it turned out they couldn't keep that up with a straight face. And it has cost Google some good employees.

People change, their priorities & interests change. They owned the company, they paid their employees salaries - beyond that they owed them nothing unless otherwise negotiated. It just sounds like sour grapes.

Any time you pay someone an amount, you could be said to be "stealing" income from them by not paying them more. But the fact is that these MailChimp employees were not owed more than they were paid, and were not entitled to it under any widely accepted economic or legal theory in the United States, where they are employed. They agreed to work for a certain amount, which by all accounts was compliant with minimum wage and other laws, and nobody has alleged that they were paid less than that.

As far as being lied to goes, people would be better off if they replaced "never" with "not in the foreseeable future" any time they hear it. Who knows whether the founders genuinely believed their statements about never selling when they said them. Probably so, but if not, well, it's unfortunate. That being said, I doubt that anyone worked at MailChimp mainly because they believed it would always be privately held.

> Perhaps find an employer who wouldn’t treat you like a slave if legally allowed?

Are you wealthy enough to stop working entirely? If not, you (and most of us) are a slave to the system. Yes you can choose to change employers, but you cannot choose to stop working if you want to eat, have a home, electricity, etc.

Employers are not your friend. They don't pay you because they're "nice people".

What I’m trying to say is that it doesn’t have to be this way. There are plenty of companies out there which ARE NOT like this, no matter how much you try to say that employers are not your friend.

I feel you’ve been involved in some exploitative workplaces in the past that have pessimistically shaped your view of business.

With that being said, I’m still youngish and I’m probably naive. Maybe I’ll become a jaded capitalist too when I’m older.

> There are plenty of companies out there which ARE NOT like this, no matter how much you try to say that employers are not your friend.

You misunderstand. These employers/managers/etc can be decent human beings, but at the end of the day you are a resource to be utilized to further their goals in exchange for an agreed-up sum of money. As long as things are going well, everything's great for everyone involved. However, if/when things start going sideways - for example a round of layoffs are needed, they're going to make hard business decisions based on what's best for the company - your personal situation/needs will not be taken into account.

Don't mistake professional behavior and cooperation at work for friendship. They're not your friends.

> Don't mistake professional behavior and cooperation at work for friendship. They're not your friends.

Paying someone to be your friend always makes for an awkward relationship.

> I feel you’ve been involved in some exploitative workplaces in the past that have pessimistically shaped your view of business.

I don't think it's a pessimistic view of business. I've always felt this way.

Businesses view people as resources. When resources are in high demand, companies compete for you and thus must try to make/keep you happy. When supply is high and demand is low they can and will make lowball offers and make unreasonable demands like working long hours/weekends/etc.

I've worked for good companies and bad. The bad ones always tried to make you feel guilty for not putting in the extra effort. The good ones make you feel like family. But they're still companies with one core mission: grow and make someone more money.

I don't think they lied necessarily, they said they had no intent on selling and they actually proved that a few times by turning down offers. A giant offer came and their decision to sell changed.

I think lying in this case would be to say to employees, "We will never sell" while negotiating a sale in the background. Timing is everything.

This. I'd feel furious if I was not offered equity (even with a good comp package) at a company that eventually sold for this much after being told equity is not an effective form of compensation because they're never going to sell. Well, they broke that promise and the hundreds of millions of dollars that would be going to employees is not. This is a great example of why we have no middle class and why upward mobility in the US is so difficult. These employees were lied to that equity would never be worth anything so that their slimey bosses can keep it all for themselves.

It's framed like that because it gets lots of clicks and generates lots of angry discussion. It has nothing to do with presenting an honest assessment of what happened.

I wish in these cases @dang or another moderator could change the title to be less click-baity.

Because while you're strictly right, in a legal and facts-on-the-ground sense, there's an element of trust in these decisions. And the (not-legally-binding) concept of "we're in this together" is part of the startup story, and part of the pitch that company owners use to attract employees away from other high-compensation opportunities.

Employees regularly (as in, basically always) join startups for peanuts in equity compared to the equity held by founders. And they're told "we're in this together, we'll win or lose together"... without realizing that the stock they received was so tiny, that the founders' Win means a private island and trust-fund grandchildren, while their own Win will be one fifth of a down payment on a house, even in the best outcome.

The cap table isn't revealed to job candidates, but they still get vague reassurances that they're being offered a "great package." If they saw how their package compared to the founders' holdings, I think employees would demand a hell of a lot more equity, for the risk they take.

> without realizing that the stock they received was so tiny, that the founders' Win means a private island and trust-fund grandchildren, while their own Win will be one fifth of a down payment on a house, even in the best outcome.

With 1200 employees, your share will inevitably be a tiny fraction.

At that scale, of course. But what I observe is that the inequity (through lack of information) starts at day one: the first employee (often for a startup with zero code written yet) signs up for 1% because this is "industry standard" and because they believe that the investors and option pool is the bulk of the remaining 99% -- not realizing that the two founders might hold 80% of stock. And the inequity keeps propagating: the fifth employee agrees to 1/20th of what the first employee had, and so forth.

I really think non-founding employees (especially early ones) would be shocked if they saw what the cap table really looked like when they signed up.

But this only makes sense. If you're the first employee, then there's zero "social proof" that the startup is going anywhere. If you're the nth employee, the greater n is, the more social proof there is that the company is going places. Hence, the less equity you're going to get.

If one wants founder equity, found a company!

I'm not arguing against decreasing equity as a startup matures, though. I'm saying that equity decreases at a much faster rate (by an order of magnitude, sometimes two) than the risk. Again, the common real-world example (in SF) of founders having 50-80x versus Employee #1, in the case when there's zero code and zero product, just a napkin sketch and founders who convinced investors of a vision (which will anyway change once development starts). Or employee #8 who is an order of magnitude lower than emp #1, when the product hasn't launched yet.

It is my opinion that one reason people sign up for such low equity, is because they lack information about how equity is divided overall. Employee #1 is OK with 1% because he mistakenly believes that investors hold 40%, founders have 10%, and the option pool is the remaining 49% -- when really the option pool was 8% total until the next round of funding, and the lion's share overall sits with the founders.

The founder organized capital more productively than it sitting earning 3% is thus able to command a large ownership level.

Regardless of one's knowledge or feelings, the math doesn't work to keep giving out 1% shares to new employees. You've got to drop it by an order of magnitude, quickly followed by 2 orders, etc.

I think that's missing the point?

Coca Cola weren't and still aren't offering equity. Nobody describes that as "withholding equity".

Most places in the world, most jobs do not offer equity as part of compensation. And everybody understands that and chooses too apply or not based on what they are offering for compensation.

"pre-IPO unicorns" are very much the exception, very rarely actually pay off, and people who have the opportunity to shop around in that lottery should be grateful but aware that for every guy with an eight figure success story, they're are tens of thousands with some worthless option paperwork that never even made enough money to buy them a meal, let alone a house...

I think the issue here though is the MC founders repeatedly used "we will never sell" as their justification for not offering equity.

People are allowed to change their minds. They did negotiate a pretty big employee compensation package as part of the deal. So I think OP was just trying to get a clickbait title and ride on the backs of those founders.

> People are allowed to change their minds.

But that doesn't make it ok when you specifically say you won't and use that as a justification for your actions many, many times in public. Title doesn't seem sensationalist at all.

> People are allowed to change their minds.

This is absolutely right, though sometimes it pisses people off when you do it.

I'm sure when they were coming up with that statement, they had never in their wildest dreams imagined that a 12 billion dollar offer would ever be on the table. There is not a single human being on earth who can turn down that kind of money.

> There is not a single human being on earth who can turn down that kind of money

Unfortunately for all of us there are a handful of people who, due to their own wealth, certainly can.

Sure it was the justification, but it makes zero sense as a justification. I’m not saying they should have offered equity, but I think logic is completely flawed and am surprised people bought into that logic.

No idea what KO’s employee comp plans look like, but since it’s public wouldn’t you rather get your comp in cash, and then decide whether to buy stock on the open market? Rather than the company make that decision for you?

The Coca-Cola Company actually does offer RSUs to employees.

I mean, they give out <$300mn a year vs. Market Cap of $240bn[0]. Assume most of that flows to the top and it's basically 0.

[0]https://www.macrotrends.net/stocks/charts/KO/cocacola/stock-...

Slight tangent, but RSU's are "sudo equity" IMO. I'm not sure how the tax liability of RSU's works in the US, but in the UK they are treated as "income" and taxed as income, not taxed as "capital" as most other types of equity are.

As a result, I loose just over 50% of my RSU value to income tax when they vest.

pseudo.

"sudo" means "super-user do", is pronounced "soodoo"

https://en.wikipedia.org/wiki/Sudo

Yep, gotcha. I actually meant "pseudo", but I spend a lot of my day typing sudo so...

and whilst we're nitpicking, I also meant "lose" and not "loose" in the sentence below.

I thought it was pronounced pseudo, thinking it's a joke. You're not actually the super user, you're a "pseudo" super user.

Typically in the US public companies sell RSUs to employees with a discount to the market price, so there is compensation for income tax.

No. That is ESPP. RSUs are, indeed, just taxable income linked to share price.

The fact that RSUs are taxed as income in no way means “they aren’t equity”, though, so this whole thread is just filled with bizarre inaccuracies.

I don't disagree with this. They are indeed a form of equity.

My issue relates to how they're treated with respect to taxation by the various revenue authorities. In the UK, the tax paid on RSU's vesting is related to the personal income tax bracket the individual falls into. Which means for anyone in the UK's higher tax bracket, you end up losing ~50% of the amount vesting as tax.

If these behaved like other forms of equity, ordinary shares, preference shares for instance, they'd be taxed as capital, the gains of which would be taxed 'when you sell them' and at a much lower rate of tax - ~50% lower for a UK higher rate tax payer.

I'd rather a company just pay me a higher basic salary than award RSU's. At least then it's both pensionable and often used as a multiplier at bonus/salary raise calculation time.

Agreed! If you can guarantee that you're going to get the same total compensation, compensation-as-salary is always better than compensation-as-RSUs.

Of course there's upside to exposing yourself to your company's stock performance, but there's also downside risk, which people looking at equity compensation tend to downplay.

Turns out its worked out well for big tech employees, as big tech has gone up 10x over not very many years.

But that's not a reliable state of affairs into the indefinite future for big tech, and it was never reliable for smaller companies.

Nitpick: "If these behaved like other forms of equity" I don't know what "behaved like" means in this context. You start out without equity. Then your company pays you equity. That's always going to be taxed as income, because it's transparently just income, just paid in a different liquid market.

> "If these behaved like other forms of equity" I don't know what "behaved like" means in this context.

By behaved like, I actually mean't "taxed like".

You nailed it in your post. The employee is taking on increased risk with RSU's. Risk that is not rewarded with a more favourable tax rate, as other forms of stock (baring the same risk) are.

Yet, you're taxed as if the risk were the same as your salary. Which it isn't. (you'll probably still get paid even if the share price goes down, particularly in large companies).

I'm always wary of companies that try to explain away the relatively low basic salary with "look how many RSU's you're getting instead". Especially so, when they've already been though their initial growth phase. Amazon (AWS) is particularly bad for this in the UK.

Presumably the advantage of equity is also the ability to exercise some control over the business (the degree to which depends on the shareholder's agreements)

Yeah I'm wrong, I was thinking of ESPP, not RSUs.

It is the same in the US.

I would be surprised if any large publicly traded corporation doesn’t offer some form of equity compensation to basically all employees with a six figure or higher salary.

The only lesson here is it is another data point in being very skeptical of someone claiming “we’ll never sell” in a compensation negotiation — if the founder(s) never plan to raise outside money or sell the company there’s very little downside to establishing an employee stock pool and awarding options to folks that may never be exercised.

It is in fact not the practice of most publicly traded companies to award equity outside the tech company, even to highly-compensated employees.

When I worked at Cisco years ago fresh out of college, they offered an Employee Stock Purchase Program -- you could put up to X$ towards purchasing Cisco stock over the quarter, and the stock was issued at the end of the quarter at min(start_price, end_price) * 0.85.

I haven't worked at another large corporation since then but I thought that was fairly generous and I still have quite a bit of CSCO from that program.

It's fairly common for execs (both in the US and EU), it's just framed as LTIs via phantom shares. Comparable to RSUs in philosophy, outcomes, and vesting schedules. Source: we sell software to run these programs.

Almost 50% of the s&p 500 offer ESPP and ~40% of the Russel 3000 do[0].

Given that, 401k stock contributions, ESOP & RSU I think we are right at the line of “expecting” equity as part of your comp for most public companies. It’s close enough that we can presume it’s a standard benefit anyway.

[0] https://rewards.aon.com/en-us/insights/articles/2020/how-com...

I don’t get a desire for stock - why would I want all my eggs in one basket. If my savings and my income are from the same company, and it does well, that’s great and I make a fortune

But if it doesn’t do well, I lose my job and have nothing to fall back on.

Surely it’s better to have a diverse portfolio?

One benefit is that stock is typically awarded in the form of a multi-year grant, where the number of shares is priced at the time the grant starts. So if the original grant says you get $X worth of stock per year for the next 4 years, and then the stock price goes up 40% in Year 1, you’re now effectively getting $1.4X worth of stock per year for the remaining 3 years.

To illustrate this, imagine at offer time, you're given $150k + $80k worth of stock over 4 years. That works out to $170k per year. Nice, but not even doctor money. The stock is currently $100/share, so that's 800 shares. Now imagine the stock 4xes (not unusual in tech). By year 4, you're making $230k, without having had to beg for a raise or anything. This is how people end up with ludicrous total comp in tech.

But if the company goes down in value you’re screwed.

Wouldn’t it be more sensible to buy options in your competitor and hedge your bets?

The taxes on equity are substantially lower than on salary. Also equity compensation can be an order of magnitude higher than any market-based salary would ever be.

The taxes on RSUs at vesting are identical to taxes on other income.

RSUs are equity.

If you get stock options, there are (very limited) circumstances where those options have favorable taxation relative to income, but it’s a gamble, if you follow the strategies that might yield tax advantages.

> Most places in the world, most jobs do not offer equity as part of compensation.

That's not the issue. Most jobs at companies that matter do.

If you offered your friends an opportunity at your company, which based on your comment ostensibly would have paid them more and granted them equity, why did they stay at Mailchimp?

I don't think my friends thought my job was better, despite my regularly selling it. I failed to get them over for a happy hour or tech talk, which would have been a better sell than just talking about comp.

Mailchimp was also super "artsy" (they hire artists to do murals), and my friends talked about how cool the founders were. This played the biggest role, I think. They had a mythos.

Well it sounds like comp wasn't as important to your friends at that time. If that's changed following Mailchimp's acquisition, that's on them, not Mailchimp.

Agreed. While the comp situation at MailChimp was subpar due to no-equity component, it isn’t fair to blame them for the outcome of this story here.

There were no lies. The employees werent offered equity that ended up being worth nothing. They got job offers that stipulated X cash with no equity, and they willingly and knowingly accepted those offers, and they got compensated as promised. I fail to see how MailChimp is at fault here.

The fact that there is Microsoft/Google/etc. and tons of other companies in the vicinity that pay way more, and grandparent poster’s friends still were staying there despite the poster’s urging and advertising, tells more about those friends than Mailchimp.

I don't get it. One of the biggest memes around the startup scene is that equity is essentially a lottery ticket, and most lottery tickets don't win.

Taking a known cash component with no equity, especially since this is already known and in the open is well established as the safe, "smart" move.

Then you see this hullaballoo about not winning the lottery.

Well you’re not distinguishing between two situations:

1. Someone chooses not to have equity because they want more cash now, don’t want to risk part of their compensation on equity, etc.

2. The company says their equity will never be liquid so you definitely don’t want it. You accept a cash offer with profit sharing instead. Then they sell the shares for $12 billion leaving you unknown job security and low expected future compensation while they profit off their lies

> despite my regularly selling it.

This usually is a huge red flag. If one of my friends would try to regularly recruit me into their startup I would be very suspicious if the company was on solid ground or if my friend is just desperate and trying to get someone else into the bad deal they found themselves in so they don't have to deal with it alone.

I regularly wonder what definition of "friend" some people operate with. If I found myself in a losing position, I'd do my best to keep my friends out of it, not to drag them in.

Yeah, I've been at a few companies in the last few years, and would never try to recruit anyone unless I was sure that they'd enjoy the new company.

There are 'tiers' of people I would consider a 'friend', who'se pitches to me I would also be skeptical off, for suspicion they are self-interested.

Now, this tier of friend is very close to 'acquaintance' but I think there are plenty of people for whom the boundary of 'being a friend' includes these kinds of acquaintance.

What resources do you use to better understand the lay of the land in the Atlanta job market? I've been somewhat relying on levels.fyi and blind. I knew about companies like MS, VMware, square, etc. I thought the google office was just for networking stuff. I didn't even know FB had an office here.

I'm at that awkward level where I'm paid enough that I'm at the high end of 'normal' comp for local companies. I didn't think there were jobs at the $300k level for ICs in this city though. It appears the market has changed while I wasn't looking.

Whilst this is totally fair as an assessment, it would still be just as true if mailchimp founders had not sold at all.

The current new, at best, puts a fine point on this argument, but it doesn't change anything.

Words have both connotations and denotations.

The denotation is the literal dictionary definition. The connotation is the associated meaning that comes to people’s minds.

The connotation of “withholding“ is to prevent someone from getting something they are owed. Business Insider wants to imply that MC employees were owed equity, despite MC being clear and upfront about the fact this was not offered.

This way, many thousands of aggrieved employees who are unsatisfied with their career decisions and seeking someone to blame will click on the article and feel like they are victims of an unjust system. This will generate many pageviews and therefore revenue for Business Insider.