December 08, 2000, 1:59 PM — ONE AREA WHERE START-UPS and dot-coms continue to shake up compensation scales
is in the area of employee stock options. The InfoWorld Compensation Survey found that
almost twice as many respondents at start-ups were getting stock options than those at
established companies. And when asked what was the one financial benefit they wish was
offered where they worked, more respondents at established companies said stock options
than any other financial benefit.
So it seems that although stocks are inherently volatile and unpredictable --
particularly for emerging companies -- they are still a critical compensation package
"The pre-IPO stock [of start-ups] is very attractive to those that have watched
their friends become overnight millionaires," says Kathie Lucas, CEO at Lucas
Consulting, in Scotts Valley, Calif.
Managers in charge of hiring at start-ups agree that stock options are a key
"Stock options and potential of the company has a lot more to do with attracting
employees," explains Joe Hsy, CTO at Envive, in Mountain View, Calif. "In giving up
stability, one needs other incentives to work at a start-up. And the No. 1 incentive is
the upside of stock options. Frankly, we would have an extremely difficult time
attracting anyone without [offering them] stock options."
Lee Blaylock, president and CEO of start-up ServiceLane.com, in Dallas, says that
stock options are the primary negotiating issue.
"When I have compensation discussions with prospective employees, the conversation
centers around stock options; not one has centered around salary," Blaylock says. "The
heated option discussion is directly proportional to the level of the job, though the
DBA [database administrator]-and director-level people do look for more options as
Blaylock and hiring managers at other start-ups also are finding that stock options
are important to all levels of employees, although founding team members and senior
executives obviously will have more options and a higher stake in the company's
success. Our survey reports that although 15 percent of senior managers wish their
companies offered stock options almost 11 percent of staff employees felt the same
"I think for the first time in history even those outside management ranks have the
chance to share in real wealth creation," says J.R. Reagan, CTO at LivePerson.com, a
Web customer interaction service, in New York. "Most [employees] don't believe there is
a gold watch waiting for them; so it is easier to take a risk in the short term. Stock
options are not for the privileged few anymore."