The Importance Of Equity In Negotiation

Most companies have larger allowable bands in the equity component of their compensation. For this reason, you should treat it with additional importance as a way to best meet your compensation target.

There are 2 reasons why companies are more willing to increase equity (RSUs or stock options) compared to other parts of the offer:

1. Equity doesn’t hurt the profit and loss (P&L) statement of the company. This is especially important for startups.
2. Equity has inherent incentive alignment between the company and the employee. The employee will be more motivated to grow the company because the equity is worth more when the company succeeds.

In addition, equity is generally less understood by employees. Rahul's friend at Uber shared stories of people who rejected an equity grant and simply asked for an additional salary (when they could have gotten significantly more in equity). The risk tolerance for receiving stock compensation is less understood outside the US, e.g. in European countries.

For many people in tech, their base salary is enough to cover their day-to-day living expenses. In a major metro area, an engineer's base salary in a Big Tech co can range from $100K - $300K. This can cover things like rent, food, travel, and even some savings.

If you are in this scenario, Rahul's advice is to be very aggressive about increasing the equity component of the comp package. You should tell the recruiter that you want to "take part in the success that you'll help to create at the company" and therefore want to be at the highest possible range for equity.

We'll share more about sample phrases you can use later in the course.