My manager just called me about an hour ago and said he was happy to inform me that I am the recipient of an IBM Equity Award. Apparently these types of awards are management-initiated and require the backing of your 1st, 2nd, and 3rd line managers. After a bit of research I discovered that I have received these twice before and didn’t know it! Equity Award is the fancy label IBM gives to stock-related awards which I received in 2003/06 and 2003/12. (Yes, yes, I know that stocks are equities, lay off.) The previous two Equity Awards were stock options. The new award is a set of Restricted Stock Units (RSUs) who’s label told me absolutely nothing until I read up on it.
Apparently RSUs are a way for IBM to give someone actual stock, instead of stock options. They are similar to options however in that they take time to vest. Whereas IBM options vest 25% over 4 years, RSUs vest 50% every 2 years over 4 years. When they vest you are basically ‘given’ that many shares of stock minus taxes and whatnot. IBM very clearly states that Equity Awards are a mechanism to ‘retain truly exceptional people with the critical skills … to win in the marketplace today and in the future’ [courtesy of the IBM internal website], hence the phrase ‘golden handcuffs’. Looks like IBM wants to keep me around for a while. I’m not altogether certain that stock options (or RSUs) would be enough to retain me if I really wanted to leave (’cause its only money and I’d leave it in a heartbeat if I didn’t like what I was doing for work) but I agree that they are an excellent fringe benefit for staying!
A 4-year vesting time oddly coincides with our current 5-year plan which is nice (more on that in a later post).
In actuality I’d rather IBM pony up to the table when it comes time for annual performance reviews and salary adjustments. We shall see.
4 thoughts on “Golden handcuffs”
Congrats! Though I agree that salary bumps and bonuses are generally better than stock handcuffs. I wonder if they come from different pools of money?
If you do sometime decide to go elsewhere, a lot of places will work that into their negotiation. One of the things Microsoft asked me was whether I was walking away from any options/money I had at IBM so that they could figure that into their offer.
They do come from different pools. RSUs are typically just created — companies will intentionally dilute the stock by just making more stock (which is the same way that ESPP is handled in a lot of cases). So, it has value because they don’t like to dilute the stock much, but it’s easier to think of it as a “top x%” type award, since the dilution happens all the time, anyways.
I had a long frustrating conversation amout RSU’s with an HR person at Amazon back when they made their offer, as I’d never heard of them before. Mostly it consisted of me saying, “I understand that RSU’s aren’t stock options. How are they different form actual shares of stock?” and her saying “RSU’s aren’t options.” Over and over. It was a lot more clear in the actual paperwork.
I like your analogy with the golden handcuffs! But those are useful to have as a bonus while working with IBM. It’ll be money in your pocket that you “didn’t know you had” as long as you stay. I do agree with you that happiness speaks volumes over money though.