The Workologist | Many are faced with the painful reality of leaving unvested stock on the table when leaving a job — but there is a strategy that has worked for some.
Q: I’ve been employed at my company for 15 years and have received regular stock grants, on a long-term vesting schedule, each year. The stock has performed very well. But I sense we have a downsizing coming later this year, and I may be offered a “package” to leave — probably 30 weeks’ salary and a year’s benefits. It’s tempting.
However, I hate walking away from my unvested stock, which at this point totals more than two years of my salary. As such, I’d rather have them vest all my stock than give me a severance package. But I’ve spoken to others who have left, and they say the company refuses to vest stock in lieu of payouts. Why is that? Does the vesting of stock cost them something significant on the books?
A: For some context on stock-based compensation, and how employers think about it, I spoke to Lisa Brown, a partner in Brightworth, a wealth management firm based in Atlanta. She made a couple of points that may help. First, if you are correct that a downsizing is coming, it’s likely that the company (and its lawyers) have spent months crafting a severance-package strategy, and it’s unlikely that it will tweak or revise that on an employee-by-employee basis.
And second, the main reason companies issue stock grants (or options) that vest over a period of years, to executives and sometimes others, is “to keep them with the company — and working hard and helping grow the stock price,” Brown said. “It’s a golden handcuff.”
In other words, it’s a compensation tool for aligning your interests with those of the company. And let’s face it: It could be that your plan for the vested stock would be to sell it. There’s not much incentive for the company in that — and in fact it would theoretically undermine the whole point of this compensation approach. If employees figure that their vesting schedule can be arbitrarily sped up the moment they walk out the door, their motivation to think about the enterprise in the long term diminishes.
Many of Brown’s clients are faced with the “painful” reality of leaving unvested stock on the table when leaving a job for whatever reason, she said. But she does offer one strategy that has worked for some: using the value of unvested stock to negotiate compensation at a new job elsewhere. In short, try to get the new employer to match that value with a new stock grant. Admittedly, that grant will most likely also be on a long-term schedule designed to lock you in all over again. But many companies (particularly newer ones) are more likely to agree to this than, say, a cash signing bonus, she said.
Of course, it may be that your goal is not to hustle around and find a new job starting immediately, but rather to maximize your exit payout and spend as much time in Bermuda as possible. And that is a perfectly fine goal. But unfortunately, there’s not much reason for your current employer to help you achieve it.
Submit questions to Rob Walker at email@example.com.