Stock Options and Negotiation - How I Learned to Love Uber - Part II

For those of you who read my first post, I am sure you found many things interesting (due to my great skill at narrative). However, if you have paid much attention to media reports about Uber you may have found one thing especially surprising: the proposed salary range.

Uber has gotten a lot of bad press for having created an algorithm to offer prospective employees as little money as possible. But how can that be true, if they advertise a position with such a seemingly large salary? Well, the answer turns out to be something that a lot of companies in Silicon Valley have in common: including both potential future bonuses and stock options as part of the employees starting offer.

In the spirit of full disclosure, the initial offer I received from the "$150-200k" of the posting turned out to be $100k/year in salary with $8k/year in stock options and $50-60k in potential future bonuses (of which $10k/year would be cash and $50-60k would be in stock options). I managed to negotiate for a significantly higher salary, and one of the things that allowed me to push for more compensation was reading about and understanding the actual value of stock options, and also the ways that it can actually be a liability.

Before interviewing for jobs in Silicon Valley, I knew nothing about stock options. I had purchased stocks on the stock market, but stock that are publically traded are significantly different than the stock options that companies like Uber will offer employees. Since the company has not had an IPO (initial public offering), their stock cannot be exchanged for money. In fact, the stocks are not even fully awarded to employees or 'vested' until the company has an IPO. There are also additional stipulations about exactly how long employees must wait after the stocks vest before they can actually sell their stocks (even though the stock options are taxed as soon as they fully vest!).

I found a truly amazing resource for understanding all the potential issues with stock options here. In addition to talking about the difference between publically and privately owned stock, it discusses many of the finer details of privately owned stock and how to value them (for instance, with many small startups the stock may never have had a proper valuation (like 409A), and they may offer employees seemingly gigantic stock packages that are actually worth nothing!). Armed with this knowledge, I was able to argue that stock options were not enough to compensate for the significantly reduced salary and get a generous boost. So, after all this horrible deceit involving salary, why do I still love Uber?

This has been a year of tremendous change for Uber. We have got a new SVP of Leadership and Strategy, Frances Frei, who is focused on changing the cut throat culture at Uber and a Chief Human Resources Officer, Liane Hornsey, who has been implementing change for the employees at Uber on every level of the organization. There have been several articles about these efforts, including this one.

So, one result of this is that Uber has unilaterally eliminated salary discrepancies. Every employee had their salary increased to at least 10% above the mean of their job level bracket, with a minimum increase of 5% for all employees. Therefore, the more that any employee was given a salary beneath the mean of their job level, the more of a raise they got. Personally, I received a 7.9% raise, indicating that the salary I negotiated was *still* slightly under the mean of the my job level, even after strong negotiations!

Uber has gone above and beyond to change their ways. But the majority of Silicon Valley is still playing by the same rule book. Offer employees embarrassingly low salaries, promising them the hope of making it big with stock options. Now, sometimes people do get a big pay day from their stock options in the end. But it's important to understand all the potential risks that are involved. And hey, it just might just make it possible to negotiate a reasonable salary in Silicon Valley!