She should care about RSUs. At the very worst they are worth less than they were at hiring, unless the company folds. At best, they can be worth a bunch. Apple was $41 four years ago. Had $100k in RSUs rolled out then, the last shares would be vesting at over $140 per share now.
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She ended up getting more because she held on to her wanted salary, she told me she didnât care about them. Then her company went IPO.
There arenât RSUs as I understand it in pre-IPO companies. Those are options. I agree wholeheartedly to deemphasize potential stock. Real stockâŠdifferent story.
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My understanding is with stock options, you have to get over a certain price range to make money, I had them years ago, with RSUs, you make money regardless.
If a company goes under, nobody is making money off an RSU. (except the bankruptcy industrial complex). Young people should take a few hours and educate themselves about the upsides and downsides of different types of compensation- it will pay off. There are all sorts of studies about âfree moneyâ and why employees donât take advantage of it (i.e. if you put 5% of your salary into your retirement fund, the company puts in another 5%). Why would you turn down free money?
There are âone in a millionâ types of wealth creation vehicles in the start up world, and then the boring, day to day âwe pay you $150 a month after tax to take public transportationâ types of compensation. Young workers need to understand the whole package to make intelligent decisions.
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Of course, thatâs obvious in bankruptcy. This youngster knows more than some other nephews and nieces in my family already, including her own sister, when it comes to financial knowledge for her age. I know she peppered me with all kind of questions before she started working. She said a lot of companies promise theyâre going to IPO soon, something she didnât put much stock in the promise ever.
Whether theyâre restricted stocks or restricted options, they arenât worth their nominal value (restricted stocks) or intrinsic value (restricted options), until the restrictions on cashing out are removed. Restricted stocks have some initial nominal value based on their value at the time when they were granted. Restricted options, when granted, usually have no intrinsic value. Theyâre so-called âout-of-moneyâ options (the option strike is above the current price), but they have time value, which gives the option holder a period of time (from the time the restriction to exercise is removed to the option expiration) to exercise their options when the market price exceeds the option strike.
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And if they are options that are in the money and the company is acquired (quite common exit for small companies), they get taxed as W2 income, which is a sad surprise to many.
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There can be RSUs in pre-ipo companies. Our S has quite a few. They recently transitioned from ISOs and NSOs to RSUs.
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Iâve had both. Itâs a trade off which is better depending how the company performs. Overall, Iâve made much more money from options than RSUâs. Most companies will use a predictive value formula like BlackâScholes to compute how many options or RSUs to give. When they award RSUâs they give less quantity because they are worth more per RSU since they are profitable from $0 to current value as opposed to the only the gain above the strike price (their stock value the day they were first granted) with an option. So if your company declines in value (or only grows modestly), the RSU is better. But if the company grows a lot in value, the options will be far more valuable than the RSUs because of the greater quantity.
Hypothetical example:
At the time of the grant, the stock is worth $20/share.
If options, the company gives you 10,000 shares.
If RSUâs, the company gives you 2,500 shares.
5 years later the stock is worth $60/share.
The RSUâs are worth $150K ($60 x 2,500).
The options are worth $400K (($60-$20) x 10,000)
Of course if the stock was only worth $18/share when youâre ready to exercise, the options would be worthless and the RSUâs would at least still be worth $45K.
The other downside of RSUâs is they automatically exercise when they vest (often 25% a year for 4 years but it varies by company) â you gets the shares and can keep them or sell them but either way youâll be taxed on their value as income that year. Covering the tax liability might then force you to sell some of the net shares at the current market value even if you think its a bad time to sell and you would rather hold and wait out the market. But with options you can vest and hold on to the options (with no risk) and defer exercising them until you think the time is right (or until they expire). I had options that were underwater (i.e. worthless because the stock price had declined) for 8 of the 10 years before they expired, but then the company surged in those last two years and I ended up ahead.
Some companies do a combination of both types, RSUs and options, to hedge this upside/downside risk.
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While few undergrad colleges have posted salary stats for class of 2022, results are far more readily available for MBAs. In general, they do not show a notable decline compared to 2021. Some example numbers are below for Berkeley (Haas). I realize that things have changed at several companies since class of 2022 graduated. My point is the summer was not âpretty brutalâ for everyone.
Percent in Tech-- 34% in 2021, 33% in 2022
Median Salary for Tech - $144k in 2021, $151k in 2022
Median Overall (not just tech) â $149k in 2021, $155k in $2022
% Received Offers Overall â 90% in 2021, 94% in 2022
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My observation was purely anecdotal for an MBA program that is a peer of Haas. It was also based on return offers for first year MBA students who had a summer internship in 2022, so we are talking full time employment for 2023. Your information is lagging by 6 months to a year as it relates to MBAâs who graduated in 2022 (and 2021). Looking at the Haas data on the class of 2023 summer internships, tech/telecom went down to 27.6%. I note in 2021, the tech percent for summer internships was 37.4%. There is no data on return offers for summer interns in the report that I see. I believe the employment landscape has changed significantly this year, certainly for the large tech/media companies that have been in the news.
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Among those 27.6% with tech internships this summer, average salary increased by 20% over the previous year â a far higher rate of salary increase than inflation and far higher rate of increase than the overall average.
There are many possible reasons why this pattern could occur. Itâs possible that the relatively lower tech salary group was more likely to choose to work elsewhere this year, so a larger portion of the tech group that remained was high salary. Or itâs possible that tech compensation was more weighted in salary than non-salary compensation this year. Or itâs possible that itâs largely random noise. The report doesnât strike me as a disaster situation. 28% had summer internships in tech, and most of that group had an especially high salary.
I also looked up MIT MBAs (chosen due to expected higher percentage tech than typical), which also doesnât seem like a disaster situation.
MIT Summer 2021 Internships â 25.6% Tech, Average Salary = $8,400/Month
MIT Summer 2022 Internships â 26.5% Tech, Average Salary = $9,900/Month
Not saying it is a disaster in general. Just for the one MBA program (but a good one), the return offer situation was not pretty for the students that had tech summer internships. Itâs a limited sample size, or the students who did not get offers were lacking, but this was a deviation from prior years.
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Do not use MBA numbers to predict/understand BA/BS hiring patterns.
They are two separate animals.
Many employers of BAâs expect them to stay two years (the banking programs) and then either go to grad school or go off and do something else. So the hiring targets are developed with an eye towards âhow much value can we extract in 24 monthsâ.
Most (not all) MBA hires have a longer trajectory. Yes, the banks and MBB use âup or outâ methodologies which means not everyone stays more than two years, but the large global organizations have pretty robust data on average tenure, performance, trajectory, etc. which is reasonably predictive across offices and countries.
It is MUCH easier to trim BA hiring than MBA hiring. There are fewer consequences to a smaller class of new undergrads-- they arenât expected to stay long term (at least most of them⊠even the top training programs in industrial companies, consumer products companies, etc. have relatively high turnover) so cutting back in a tenuous economy doesnât hurt you much in the long run. MBAâs are different- the employer brand is pretty important at the core campuses so you donât want to risk that if you donât have to. And in many organizations, the leadership cadre at the top comes from folks who were hired out of grad school (not just B-school, Iâm using that as shorthand⊠also other Masterâs programs).
So donât conflate. Grad school hiring is different than undergrad. Messing up your hiring targets for undergrads is ⊠messy. Youâll have division heads irritated that they donât have as robust a class coming in for various roles and rotations. But messing up your MBA hiring is a big deal. Not just messy.
MIT MBAâs are not a good proxy for a kid graduating from ârandom Uâ with a BS in CS who wants to work in Tech. They are not interchangeable.
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Of course, âsix figure salary right out of undergradâ jobs are outliers in general compared to overall new college graduate employment.
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There are several different tangents to this thread. MBAs are not the same as BS in CS, and neither are the same as a 24 month finance program. I donât think anyone said they were the same or all show the same patterns.
The original post of this 400 post thread asks âHow common is it to get six figure offer right out of undergrad?â It is uncommon outside of a few specific fields and locations, such as software engineers working in high cost of living area like Silicon Valley and bankers working in a high cost of living area like NYC.
The limited available stats for the class of 2022 do not suggest 6 figures in tech after BS is less common than previous years. Whether it becomes less common for the class of 2023 remains to be seen. Some tech companies are in challenging situations and are not making such offers, such as Facebook, which has an âindefiniteâ freeze on most hiring. Other tech companies continue to make such offers.
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Data, you were the one who posted MIT MBA stats⊠which while interesting, seems both off-topic to undergrad hiring, AND not at all predictive of what might or might not happen in the coming year given hiring freezes, layoffs, etc.
Perhaps we can all put a pin in our âstatsâ and just be as helpful as we can to college seniors who might reach out asking for help with their job search strategy!
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I was replying to a post that discussed MBAs from a âtop schoolâ working at tech companies. MIT MBAs seems like a relevant example to this tangent. As mentioned in my post, there are several tangents to this thread, one of which is MBAs. Nobody said this tangent was predictive of future undergrad hiring.
Perhaps we can all put a pin in our âstatsâ and just be as helpful as we can to college seniors who might reach out asking for help with their job search strategy!
The original post of this thread asked how common a six figure salary is out of undergrad. I agree that MBAs are off this topic, but posting new grad salary stats is certainly not. While supporting seniors asking for help about job search strategy is an admirable goal, thatâs not the topic of this thread.
Please move on from arguing about MBA salaries or take it to PM. Thank you!
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