I think 1 down year has more of an affect than your crediting, although it does depend on timing.
If you're given a 4 year grant for $X and during the first year, stock/options/whatever equity form drops 25%, then you now need to wait for the company to grow 33% to get back to your original target comp.
If that same situation happens except the drop happens in year 4 of a grant and you're above your target equity, then you'll be ahead only if the company has grown more than 33% since your initial grant date.
Now let's say you're granted an amount annually. And it drops 25% your first year and you plan to stay 4 years. Your equity portion of pay goes down for 1 year and then it goes back up. Now on year 2 you're given 1.33x the number of shares you were year 1. So let's say the company goes back up by year 4 to the original price and it steadily climbed back. If you sell at time of vesting, year 1 you took a 25% loss, year 2 you made some sort of gain. Year 3 you also made some sort of gain.
Let's say you held all vested stock and decided to sell at the end of year 4. Well your 1st year is flat but it's a loss due to opportunity cost and inflation. Year 2 has gone up 33%. Year 3 has gone up some amount as well. Year 4 probably has as well (assuming equity is priced at the beginning of the year).
I'd have to run real numbers to understand this, but again, I think people under estimate the affect a drop has. 4 year grants up front are just more risky and more of a gamble since you've basically bought 4 years worth of stock at a single price (e.g. you're timing the market).
If you're given a 4 year grant for $X and during the first year, stock/options/whatever equity form drops 25%, then you now need to wait for the company to grow 33% to get back to your original target comp.
If that same situation happens except the drop happens in year 4 of a grant and you're above your target equity, then you'll be ahead only if the company has grown more than 33% since your initial grant date.
Now let's say you're granted an amount annually. And it drops 25% your first year and you plan to stay 4 years. Your equity portion of pay goes down for 1 year and then it goes back up. Now on year 2 you're given 1.33x the number of shares you were year 1. So let's say the company goes back up by year 4 to the original price and it steadily climbed back. If you sell at time of vesting, year 1 you took a 25% loss, year 2 you made some sort of gain. Year 3 you also made some sort of gain.
Let's say you held all vested stock and decided to sell at the end of year 4. Well your 1st year is flat but it's a loss due to opportunity cost and inflation. Year 2 has gone up 33%. Year 3 has gone up some amount as well. Year 4 probably has as well (assuming equity is priced at the beginning of the year).
I'd have to run real numbers to understand this, but again, I think people under estimate the affect a drop has. 4 year grants up front are just more risky and more of a gamble since you've basically bought 4 years worth of stock at a single price (e.g. you're timing the market).