Negotiating Equity Compensation: A Guide for Professionals

With news of Lyft’s investor road show for its initial public offering (IPO) hitting the headlines, we are reminded of how important a strong equity compensation package is for your career. Many Silicon Valley unicorns, like Lyft, have long resisted the stock market in favor of privately raising capital. However, this ride-sharing giant is now gearing up for a big stock market splash, likely resulting in a big payday for some of their employees. But how do you negotiate equity compensation so that you may one day end up in a similar position?

Many people think that equity compensation is automatically equal to a windfall like some lucky Lyft employees are likely to receive. But the truth is, this is usually not the case for the majority of us.

Equity can be a great form of compensation, since it aligns incentives between employees and employers and enables employees to build long-term wealth. However, while equity compensation may provide significant upsides, beware: it can create complications relative to cash compensation. That’s why it is so important to understand what kind of equity you are being offered and how much to see how it impacts your overall net worth and future financial plans. Here are some questions to ask a potential employer when negotiating equity compensation.