the amount that anyone is compensated with company stock should be limited to a very small fraction of their overall compensation amount.
I don’t understand. Why? Wouldn’t more stock options to regular workers be a form of seizing the means of production? Always sounded like a good idea to me.
Let’s first clear up the difference between a stock option and a stock grant (in the US).
A stock grant is “Here’s some stock, you own it.” It is taxed as income at the price it has when you take full ownership of it. Many employee stock plans also include a vesting schedule, where you have the stock, can vote with it, and receive dividends on it - but you cannot sell it until it vests. In that case, you would pay taxes on its price when it vests.
Stock options, on the other hand, are the ability to buy the given stock at the price it had when you were issued the option. You pay no taxes upon receiving an option, you pay no taxes when you exercise the option (choose to buy the stock at the option price). You do pay taxes on the profit made between the price at purchase and the sale price, as with any stock trade. Options can also expire, and if you don’t exercise them before they expire, they are gone.
For regular people, you would do a trade which exercises and sells your options at the same time. Option price $5, current price $10, exercise and sell, and you have $5 cash. This requires no outlay of funds from you. It is also possible to just exercise the option and the hold the stock, which has a tax benefit if you hold it longer than a year, when it is taxed not as income, but at the lower capital gains rate. But regular people don’t have the liquid cash to be able to lock up for a year like that.
Anyway, the amount of stock grants that are given to regular workers are an absolute pittance compared to what is given to executives. There is no practical way to wrest corporate power away from primary shareholders by increasing the amount of stock granted to employees - especially since the primary shareholders are usually the CEO and board members, or some capital organization (venture capital, holding company, what have you). The primary shareholders would never let that happen. Even if they would, employees who need that wealth to live right now are far more likely to just sell their stock grants when they vest and pay off loans and bills, do home/car repairs, maybe go on a short vacation. They’re not going to hold the stock and wield their ownership votes - which are far too few to challenge anything anyway.
I think that, for public companies, separating control of the company direction from ownership is the best choice. Shareholders (really the primary shareholder) should be able to vote on corporate board members and executive committee roles. And that’s it. The board and executive committee should have control over the company’s direction without being primary shareholders.
I don’t understand. Why? Wouldn’t more stock options to regular workers be a form of seizing the means of production? Always sounded like a good idea to me.
Let’s first clear up the difference between a stock option and a stock grant (in the US).
A stock grant is “Here’s some stock, you own it.” It is taxed as income at the price it has when you take full ownership of it. Many employee stock plans also include a vesting schedule, where you have the stock, can vote with it, and receive dividends on it - but you cannot sell it until it vests. In that case, you would pay taxes on its price when it vests.
Stock options, on the other hand, are the ability to buy the given stock at the price it had when you were issued the option. You pay no taxes upon receiving an option, you pay no taxes when you exercise the option (choose to buy the stock at the option price). You do pay taxes on the profit made between the price at purchase and the sale price, as with any stock trade. Options can also expire, and if you don’t exercise them before they expire, they are gone.
For regular people, you would do a trade which exercises and sells your options at the same time. Option price $5, current price $10, exercise and sell, and you have $5 cash. This requires no outlay of funds from you. It is also possible to just exercise the option and the hold the stock, which has a tax benefit if you hold it longer than a year, when it is taxed not as income, but at the lower capital gains rate. But regular people don’t have the liquid cash to be able to lock up for a year like that.
Anyway, the amount of stock grants that are given to regular workers are an absolute pittance compared to what is given to executives. There is no practical way to wrest corporate power away from primary shareholders by increasing the amount of stock granted to employees - especially since the primary shareholders are usually the CEO and board members, or some capital organization (venture capital, holding company, what have you). The primary shareholders would never let that happen. Even if they would, employees who need that wealth to live right now are far more likely to just sell their stock grants when they vest and pay off loans and bills, do home/car repairs, maybe go on a short vacation. They’re not going to hold the stock and wield their ownership votes - which are far too few to challenge anything anyway.
I think that, for public companies, separating control of the company direction from ownership is the best choice. Shareholders (really the primary shareholder) should be able to vote on corporate board members and executive committee roles. And that’s it. The board and executive committee should have control over the company’s direction without being primary shareholders.