1st Steps In The Hunt: Daily News For Job Hunters and Recruiters

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Options

April 02, 2002

Negotiating your salary and benefits package has never been difficult than it is in today's Job market.

It used to be cut and dried, with a prospective Employer telling you "I'll give you $17.50/hr. Take it or leave it." Today a Job offer sounds more like this, "We're looking at $30,000/yr plus medical & dental, with two weeks paid vacation and one sick day (non-cumulative) per month. Benefits begin after three months, and you'll have 500 stock options that vest in one year at $9/share."

Most of this can be sorted out so that you can compare Job offers as apples to apples, rather than as an offer from Apple versus an offer from Tropicana. The stumbling block is figuring the present value of future stock options. Options give you the right to purchase a Company's shares (at a price set now) at some future date. Furthermore, an option to buy 500 shares of Tropicana may be more valuable than an option to buy 500 shares of Apple, even if both currently have the same price.

Investigate the company's proxy options. The amount of stock options they offer you divided by the total number of outstanding shares gives you a benchmark percentage. You can compare this percentage to what your colleagues at other competing companies have received. Unless you are targeting a high level executive position, you're probably looking at less than one percent in redeemable shares.

Useful questions to consider: What is happening in the Industry as a whole? Has the stock price been rising (or dropping!) steadily, or have there been volatile swings up or down? If the Company hasn't finished looking for investors, then their next round of financing may involve issuing more stock - which will dilute the value of your options. Startup companies often use stock options in lieu of high salaries to attract new Employees. The promises of future riches are tempting, but are they really worth what you sacrifice in pay?

If you think the Company's stock is a good bet to double in price in the next year, you can gamble on a lower salary and more options. Companies tend to have more leeway in the number of options they offer you than they do in salary, so it is an easier benefit to secure in negotiations. Options usually vest in increasing numbers the longer you stay with the Company, so how good your gamble is depends on the thoroughness with which you research the Company's history and the Industry as a whole.

-Mark Poppen