Long-term incentives used to be an executive perk. Now RSUs reach deep into professional ranks at public companies, and options are standard at startups, so reading an equity grant is a core pay skill.
RSUs are the simple kind: shares delivered on a vesting schedule, typically over four years. Their value is the share count times the price, they are worth something even if the stock drops, and they are taxed as income when they vest. When you compare offers, annualize them: a $100,000 grant over four years is $25,000 a year, and that number belongs in your total compensation math.
Options are a bet: the right to buy shares at today’s price, valuable only if the price rises. A big option grant at an early startup can be worth a fortune or nothing. Ask for the strike price, the latest company valuation, and the total shares outstanding; without those three numbers, an option grant is a story, not an amount.
Two traps to check in any grant. Cliffs: most schedules deliver nothing until the one-year mark, which matters if things go wrong early. And unvested forfeiture: whatever has not vested when you leave usually evaporates, which is exactly why companies use equity for retention.
When you weigh an equity-heavy offer against a cash-heavy one, put both through our offer comparison tool with the annualized equity value, and discount startup paper by your honest estimate of the odds.
Reviewed by Michael Dennis Graham
Michael Dennis Graham is the founder of Grahall, LLC, an executive compensation consulting firm, and the author of numerous books on compensation and total rewards strategy. He has advised boards and management teams on pay design and has served as an expert on compensation matters. Articles on WePayFairly are prepared by our editorial team and reviewed for accuracy and methodology.
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