
Ask HN: I asked for a raise, they offered me phantom stock. What next? - mydpy
I have advanced degrees in math and computer science and have been working for a very successful, independently owned software company. I was employee number 39 and the company has grown significantly since I started and my role in the company is critical.<p>Earlier this year, my predecessor who was with the company for nearly two decades parted ways. He left over disagreements during the growth process and compensation&#x2F;equity. The company is independently owned and the stock is highly concentrated in one party (70ish %) with another 10% owned by investors who are prominent in the industry and the rest owned by the principal employees (CTO owns about 10%, the rest owned by 5 individuals).<p>When I started I was &#x27;low-balled&#x27; a salary in lieu of opportunity. I have always valued industry influence and visibility over money, but I have received insignificant raises since I started (COLA stuff).<p>I have fully assumed the role and responsibilities of my predecessor without additional compensation, and I asked my boss to address this last week. He responded today and instead of offering me the raise I asked for (which was fair and modest), he offered me a 1% share in the company&#x27;s profits (phantom stock &#x2F; cash bonus plan). I don&#x27;t believe equity is an option for me at this point, and for critical employees this has been my boss&#x27;s MO for retention. The word on the street is that he is stingy and avoids even fair salaries; we are all underpaid for the level of work we do, work heavy hours, and have been successful in years past.<p>So, going back to the deal, I value the 1% profit sharing at about 15-20K from last year. There is potential for that value to increase, but factors affecting how I address its future value: (1) we have a majority of market share and a solid position in the industry, (2) we plan to grow significantly (doubling the size of the company in the next 5 years).<p>Is this a good deal or a bad one? I have had some doubts about the company&#x27;s management since my predecessor left (he may have envenomed me) and I have since looked for employment elsewhere. I have received starting offers about 30-50K more than I am currently paid with signing bonus.<p>What questions should I ask to make this decision? Should I ask for a greater share (1% -&gt; 2%?) I am not skilled or experienced with negotiating and my boss is very good at it. Any advice is greatly appreciated.
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quasque
You might want to consider deleting this post and resubmitting anonymously. As
it stands, your comment history reveals both your name and your employer's
name.

That aside, my advice would be to move on if you're being offered
significantly higher compensation for your work. Also it sounds to me like
your work environment (i.e. your boss) seems to be having somewhat of a
negative emotional effect - maybe it's best to leave rather than spend time
feeling pissed off with the place? Life is short.

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mydpy
Thanks for the heads up. Not sure how to submit anon though.

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mydpy
After thinking about this, if someone from my company were to read this they
would be able to identify me. I'll take my changes I guess.

~~~
hga
Indeed; a "negative" outcome wouldn't so negative in the greater scheme of
things.

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randomflavor
Does he pay a bonus? Seems low. I would leave - he doesn't deserve good people
around him and apparently doesn't need someone as good as you say you are -
otherwise he wouldn't take such a big risk with such a small bit of money from
his point of view.

And yes I would just tell him "In order for me to stay here, I need X Y and
Z."

Just be humble and matter of fact. If you think you deserve equity but the cap
table can't support it, ask for the equivalent in bonus. However it sounds
like you want an ownership stake at some level based on the level of input you
give.

It's hard to start something from nothing and maybe he doesn't value you as an
entrepreneur spirit and thinks you are a happy wage slave, and is just testing
you spirit here. If you are that important to his growth, and you are willing
to walk away - things might change very fast. Or perhaps you work a cog really
well, need lots of org support around you to function and don't think that
well on your own - and that is why he is toying with you. Or he's just a
stupid founder, but if he's that successful, probably not.

~~~
mydpy
He does pay a bonus, but it isn't defined, meaning I don't have objectives
that I am trying to meet and based on those defined criteria a bonus is
awarded. The bonus is historically pretty good (10-20 % of salary), but I hate
the uncertainty. I'd rather have the income now.

Do you think it would be unreasonable to ask for a retaining bonus?

-After your update: I've noticed he likes to toy with people. Regarding my position, I'm the lead calculation architect (no one in-house is capable and the system is very complex). And we are thinking of creating a new software branching off the existing product (we have one product atm) that will address the market share we don't touch.

~~~
randomflavor
OK if there is a new product being designed off your core role - if you want
more money - you need to engage yourself in more of a leadership role.

Do you have ideas of what will make success in this? And how you can build a
team/organize the current parts and execute something FASTER? That will drive
reveneue/market share/xxx quicker? Remember, the faster something is created
(in a lean point of view) - the higher chance of success. Can you help up the
% chance of success. If that is the case, present that case in a concise way
from a business logic point of view, the details of the code/engineering are
irrelevant at this point. And tie your compensation or ownership to executing
this plan, and start thinking about Why, and Value to the business. Until you
do that, you don't really deserve more money - as someone else is doing that
thinking for you. Until you can understand the actual value to the bottom line
you bring and Why things should happen - you are just a cog in a wheel. Maybe
a really big important cog, but it's not even remotely close to your machine
that you are a cog in. Make it yours, present it and convince them you can
take a load off his mind. Then you can share in the executive pay. If you want
more money as an engineer, you may have hit the glass ceiling here, and should
join an org (google type) that rewards it's engineers in this way. And I mean
think about the spirit of this rant - just start communicating from a value
point of view (value in terms of bringing lift to the business in faster more
meaningful concrete ways) - and things probably will change. Or you will leave
and start something new because it's actually really fun to mix engineering
skills with business building skills. ;) Go read ben horowitz's new book,
might give you some light on your ceo's behavior.

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mydpy
I am hiring and training people, so I am in a leadership role already. I work
closely with the CEO and CTO daily to design the software. I am constantly
creating new efficiencies and I negotiate the business contracts with some of
our largest clients (2M+ annual). I don't know how much more I could be
considered a leader within this company.

~~~
randomflavor
did you bring those clients? why arnt you getting a commission then? you
should be participating more than 20k. Why is 1% of profits only 20k anyway?
and again to clarify, as another poster said - if profits are low because of
growth - and you are there for growth - your deal should be in actual equity
not just a profit percentage. you are there supporting the growth, you need
the upside. that is the case. otherwise go elsewhere. cognitive dissonance is
a bitch. you arnt being valued to what you think your value is.

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brucehart
Speaking from experience, my advice is to use your job title to land a better
paying job at a different company and don't look back. It sounds like your
predecessor figured it out. Now it's time for you to do so too. Don't
negotiate a new deal at your current company. Take the new offer and focus
your efforts there. It can be scary to leave a role you are comfortable in,
but it's the step you need to take to grow your career. A $50k/year salary
increase is a lot of money. Even after taxes, that alone would cover the
mortgage payments on a nice house in many parts of the country.

Saying the company is on the verge of growth is common tactic that people like
your boss use. It plays into the same psychological effects that cause people
to overvalue things that they own. The pain of missing out on something seems
greater than the upside of selling, even if you logically know it's not true.
The truth is that if your boss is cheap and entitled, he will be that way even
more so when the company is more successful. Don't be surprised if he starts
doing things like giving himself a generous salary increase or investing in
capital equipment before profits are computed. Also 1% of profits is likely
worthless if he cashes out and sells the company (notice he didn't offer you
true equity). Don't let that mirage fool you into getting the paid what you
are worth in the market.

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JSeymourATL
There's an obvious disconnect between describing your current role as
'critical' and the corresponding value the CEO recognizes in your
compensation. The market is telling you that you're at least $50K subpar.
That's some significant coin. Areas to explore-- A) how important is it to you
to stay there? B) How much do they demonstrate they really want you. C) How
much do you value your personal time? D) Would 8 weeks paid annual leave be
worth a $50K trade-off?

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bret_maverick
You have several options in this situation as far as I can see:

1) Get a raise in equity - this is the option that you boss offered you. Say,
that you negotiate a better offer (2%-3%). In this case, if I judge the
numbers correctly, that will match your current salary to what other companies
on the market are offering (the 30-50K). However, that will ONLY match those
offers - your risk in this case so you would have to negotiate a lot more to
take into account the risk difference (30-50K fixed vs 30-50K potential).

Even if you do that, you will still have the insane work hours, the feeling
that you are not appreciated enough and the risk hanging above your head
whether you will hit the target salary.

2) Get a raise with both equity and money - you could negotiate a 1% equity +
a decent cash raise. It will be difficult if your boss is so stingy but it is
worth the shot. Keep in mind again your risk vs reward. I would at least want
a raise of 20K + the 1% equity. That would give you more than what the market
is offering you.

However, the point above applies here as well although you will be in a better
position this time since you will have some stable cash increase.

3) GTFO from there

I have dealt with bosses like that and, in my opinion, you run a good risk of
not being happy there, burnout, loss of motivation, etc. Your boss seems not
to value his employees very much and this will most probably never change. I
can imagine that you will always need to chaise the market average (just like
now) and negotiate to actually be paid an amount which you could easily
receive elsewhere (judging by your offers). Granted, my views on this are a
bit extreme (I think that an appreciate boss should offer you a raise instead
of you having to ask for one) but that is my opinion.

My advice: go and check out some of your other offers - it is very likely that
you will find a better paying job with less working hours. If you have worked
heavy hours until now, this change will do wonders for you. Once you find a
nice place, leave.

Edit: last paragraph

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mydpy
1) I am concerned with accepting this much risk. 2) This could be nice,
especially if the company's profits were to skyrocket. However, my family has
a few business owners and I know from experience profits can be low during
explosive growth years. 3) I am strongly considering it. A few of my
colleagues have similar fears.

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performensation
This, unfortunately, is an all too common issue. My perspective is from that
of a compensation consultant that has worked with a lot of private companies
and start-ups (among others)

First you must address WHY your base pay is so far below market.

Next you must address the concept of the phantom stock and what it's true
potential can be over whatever term they have offered (is it just for the
upcoming year...is it forever?)

Next you need to understand what potential ownership would even offer. Is
there any possibility of an exit/lquidity event in the foreseeable future? If
not, cash probably makes more sense, unless the company offers a well-funded
cash out potential or buy-back plan.

"Low-balling" base pay is pretty common. Many company find it hard to make
significant pay increases to get pay in line for key employees. If you clearly
explain your situation they may reconsider and offer something more useful

You may want to consider getting some professional help. I would recommend
talking to Mary Russell (mary@stockoptioncounsel.com). I work with the
corporate side of these equations. Mary works with the individuals. She may be
able to help put together an argument that convinces the right people.

Sadly, sometimes walking away is the best option. I would recommend that you
first make sure your other possibilities are exhausted.

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josephschmoe
If you've received starting offers 30k-50k more than you are currently being
paid in a comparable/better company, you have two options:

1\. Tell your boss you're getting an offer for 30k more. Ask for that amount
or a considerably larger profit share. 30k in direct compensation is worth 60k
in uncertain profit share (3.5%). If the profit share were high probability,
he would offer you direct compensation instead because he would prefer a
superior outcome for himself (higher profit).

2\. Leave and work for the other company. 30k is a lot of money.

~~~
mydpy
It's worth noting the offers are from companies in the same city. Anyways, I
agree. The prospect of opportunity and ownership has always kept me attached
this company, but it seems like they have been using it to bait me to the
company.

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danvoell
Question to ask: How does it vest? Sometimes phantom stock is used as
handcuffs, where you get 20% each year for the next 5 years.

Another question: Is it 1% of profits, or 1% of profit increases. I have seen
both.

~~~
mydpy
Thanks. I will research the answers to these questions.

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joeclark77
If you have other offers (real offers, not just bluster from headhunters), you
can leverage those in your request for a raise. If he thinks you're going to
stay around, he has no reason to offer you a serious raise. Show him that you
are able and willing to leave, and he'll have to decide if he wants to make a
counter-offer to keep you.

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partisan
Agreed. You are way more likely to get that raise if you show intent to leave
by having an offer on hand. You can play the "I want to stay, but I have this
great offer..." card and see if he bites.

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joezydeco
You'll get that raise using this technique. You will then be fired the moment
the boss can quietly find a replacement for you. And don't think he won't be
looking.

Seriously, don't do this. Get the new position with a better salary and don't
look back. Counteroffers never pan out for the employees, only management
benefits.

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partisan
I received a job offer and was truly considering leaving my position. I
received a good counteroffer that included increased vacation time and
addressed some of the reasons why I wanted to leave the position to begin
with. I was there for another 2 years before leaving on my own.

If his employer is going to look for another person to fill the position then
this is not the right place to work and there was no point in staying. I don't
think he loses either way, but that was just my experience.

~~~
joeclark77
I think it's always best to be sincere. If you aren't really considering
leaving, don't pretend you are. But if you have an offer and are considering
it, don't be afraid to tell your boss so.

