Don’t Just Take the Job, Evaluate the Equity!

Hello everyone, and welcome back to Fundamentals of Investing. I'm Brian Dress, Director of Research and Advisor here at Left Brain, joined as always by our CEO and Chief Investment Officer, Nolan Langford. Nolan, welcome to the program.

Hey Brian, excited to be here talking about this very exciting topic, equity compensation, my two favorite words.

So, Nolan, this is something that we work with on a daily basis here at Left Brain. This is one of our core competencies as a firm is working with executives with equity compensation packages. And it's not the most easy— it's not the easiest thing to navigate when you receive a job offer. You know, obviously, the salary is pretty easy to compare from one to the other, but the valuation of an equity package is really difficult. And that's something that we help clients with here at Left Brain. Today, Nolan, we're going to break down how executives can evaluate equity in a way that goes far deeper than those headline numbers and why getting that right can meaningfully affect your overall wealth-building journey over the years going forward. So, executives often focus on salary. That's pretty easy. We can take a look at, you know, $600,000 versus $800,000. That's pretty simple. But it's a little more complicated when you take a look at the equity options that are involved. With a job offer. There are a number of different types of equity that's available and valuations vary greatly between those. And that's something that we help clients with here on a daily basis as they evaluate job offer packages in terms of the equity. So in today's market, Nolan, two offers with identical base salaries can differ by hundreds of thousands or even millions of dollars when we consider the equity compensation involved with those. With those packages. Obviously, we all feel pretty confident evaluating cash compensation, but even seasoned leaders can misread the true value or the risk that comes along with those equity packages. And that's what we want to discuss here today, helping you to understand how to interpret those different elements to make an informed decision when it's time to choose a new job offer. So, no, let's jump right in. What equity value really means. So, Nolan, we've talked to a number of people in the process of considering an offer, and oftentimes they're just thinking salary, and it's understandable. I know we all pay bills on a just-in-time basis, and we think about what am I going to make in 2026? And that makes a lot of sense. But really, what are we missing is we're talking about the upside of equity compensation. So, what are your thoughts about how people think about job offers in terms of salary, and what are they kind of missing? When they're not really considering the equity portion of, of the package.

This is a very important point, and it's not subtle either. I think about in terms of salary, thinking about that as being my reward today. But the equity piece, thinking about that as my piece of opportunity to do really well over time, long term. And that's what we always say. There's a huge difference between employee A, who works as an example for a government entity, and employee B, who works for a publicly traded company. The salaries may be different, but their opportunities to do very well and get rich, very, very different.

Yes. Okay. So you've spoken or you've worked with quite a few executives over the years, and you, I'm sure you've gone through some of these situations where a new job offer, uh, comes up, comes up and you know, it's time to not only talk about negotiating that job offer, but just understanding the offer in general. What is it that you've noticed among executives that they've misunderstood, particularly about the equity portion of those job offers over the years?

I think it's definitely underappreciated. I don't recall in my career having said, having somebody say to me, you know, I work, went to work for this job. Because of the equity comp. Mm-hmm. It's generally other things, title, responsibility, my salary, bonus. Those are generally the things that are people thinking about, the opportunity to advance, but not necessarily the, my opportunity to get rich because I'm getting equity comp from a company that's doing very well. Think about how often we refer to the Microsoft millionaires.

Totally. Yeah, it's interesting, Nolan, because we spend all this time looking at stocks and choosing stocks that we think are going to do really well. But I think a lot of people don't understand or don't think about it. You know, there's tons of people working at these companies that are sitting on huge piles of equity because maybe they lucked into it and chose the right company. And it just happened to be the fact that, you know, that company 100x or whatever it is, but, you know, I think some people made intentional decisions on, I think this is a really strong business and has an opportunity to really increase in value. And those people really made out so well. I'm sure they made nice salaries over the years, but that equity piece, that equity kicker is what made them rich, right?

That's a very good distinction because I made a kind of a general statement about the average worker that we see, but there's a different group of these worker kamikazes that go to work for a company, not for the salary, but specifically for the equity. And I'm talking about startups.

Yeah.

And we all know executives or people, generally they've started either A, at some company before and they've built a certain nest egg so they can afford to take the risk.

Yep.

Or right outta grad school, they join a buddy at a startup because of the opportunity. A lot of these people on the West Coast in Silicon Valley. Okay. And then you're right, it's all about the business, the business model, the business plan, because 100% of what they're gonna earn for the most part is based off of equity comp. But that's not the majority of executives that we see. The majority of executives that we see is somebody that's mid or late career. Okay. They are well educated, maybe they're married, they make a really good income, they're very talented, and they've moved up the corporate ladder. And then it's a matter of, you know, I have this other job opportunity, I have A in my hand, but B is also out there, right? How do I evaluate one versus the other? And then generally it's a more nuanced and Generally, people there don't nearly think about equity as much, not close to as much as the VC startup type executive.

So, I do want to dig more into that, Nolan. And what happens is obviously sometimes people go out looking for a job and they get a couple of different offers, right? And we've talked about the number of different types of equity compensation that are available: restricted stock units, options, performance shares, deferred comp.

Stock purchase plan.

Yeah. So, that's all. And we've got a video out on that. So, we'll refer people to those. To learn more about those different types of equity. But I guess I think what can be complicated or challenging is if you've got two different offers and, you know, maybe one's more heavy on RSUs, maybe one's got options involved. And how do you think about evaluating those in terms of one another? Because different valuations on different types of equity comp.

This is really good. It's also a really important topic and it's really interesting because it's going to be very rare where you get two, two offers that are apples to apples, even amongst competitors. You know, if I'm working for some chip company, you know, Nvidia versus TSMC as an example, those comp packages are not going to be identical. So you're right, it's really hard to compare apples to apples, and I'm not sure that you can. Here's one of the things that you can do. I think what's more important is taking a look at the company itself and evaluating that company as if it's a stock that you're going to buy.

Because it really is.

You really are. That's far more important than A versus B. But it's, it's not a trivial thing to do. It is really important. So for all the executives that are out there in this boat, I mean, we're happy to help. If you have some other professional with knowledge, not of index funds or passive investing, you need somebody that's a specialist in looking at these stocks and evaluating them on their true worth. Because, you know, as we know, if you're an executive that were fortunate enough to go work for an, an Nvidia, Microsoft, or Netflix, then you know you're in the penthouse.

Yeah.

But if you're one of the unfortunate executives that are working at someplace like Target, Walgreens, Kohl's, Xerox, Pepsi, Whirlpool, Newell.

Yeah.

You're in the outhouse.

Right. So, that's a good point. So, you know, you could get all the RSUs you could ever want, but if the company's going nowhere, not only is that bad for your career, but it's also bad for your portfolio of equity that you've got there.

So, think about how many executives we've seen over the past few years that come in and they're showing their equity statement or their stock option statement and they're underwater. You know, that's not a really good thing. And at least if you're still working there, you have time to recoup. Right. But if you're on your way out and it's underwater, I mean, that's really painful.

Yes. You don't want that regret 10 years down the line after you've worked there. You've accumulated all this, all this equity in a number of different formats. And then, well, it's close to worthless. That's the last thing you want to do. So great point, Nolan. You want to make sure that the health of the company that you're joining is really more paramount than almost anything else. I want to talk a little bit about the equity mix. So, you know, as we said, different companies view this differently and some are heavier on RSUs. This is a little bit less relevant than it used to be, but some have options depending on where you're at in the company structure and that sort of thing. Does that say anything to you about the company? When they have a specific type of structure of their equity comp? Is that something that, that comes to mind?

It does. It goes to the character, the culture of the firm. And, you know, for most people, I think they want to work at a place that resembles them, that they like and admire, that they can grow with. I mean, you spend a lot of your working hours here. In a lot of cases, you spend more time at work with your coworkers and at work than you do with your family.

Right.

So it is something important. You really want to understand the culture and the philosophy of philosophy of the firm and make sure it matches yours. Give you a perfect case in point how a comp plan can mirror a firm. If you're an executive at Amazon, you know, their comp is $180,000. You're not going to make more in cash comp, even if you're the CEO, than $180,000. The rest of your comp comes in the form of Amazon stock. Now I'm going to go out on a limb and say, hey, if you're an executive and you were there, when Bezos started the firm or the early '90s or in the early 2000s, those equity grants were really lucrative and you did well. Amazon was a different type of business. They were a high-flying, high-growth business. Mm-hmm. Amazon's not that anymore. It's a mature business growing in high single digits. Mm-hmm. So the outlook for those equity comp shares are very different than what the executives received even 10 years or so ago. So, yes, the comp plan tells you a lot about the philosophy of the firm.

Sure. And it's, it also, I think you want to choose a firm that's going to match where you're at too, right? So, if you're later career, maybe Amazon makes more sense now in 2025, 2026, when we're talking about a little bit more mature, less high-flying. Whereas if you're 35 and you're looking for kind of upside, maybe you look for something that's got a little bit more juice to it. So I think it's definitely important. Again, we're kind of going back to the same theme of you gotta evaluate the company that you're looking at, uh, more so than anything else.

I think the biggest, um, point I'd like to make on this, uh, to back that up is, you know, a lot of businesses in the country now, more and more businesses are being owned by private equity firms. Sure. So we've had a number of executives that we've seen where they get approached by some private equity firm to take some executive gig, uh, at some private equity-owned firm. And the promise is we're gonna let you buy into the private equity firm, and that's their form of equity comp. Mm-hmm. And I would just tell you, you need to evaluate that very harshly because if you're evaluating that offer with an offer for some other publicly traded company that's more liquid and has had a you know, a good track record of performance, that's, um, you're definitely not comparing apples to apples, right? So you really need to be careful there.

Okay, I agree. Let's talk a little bit more. I want to continue talking about the company behind the offer, and, um, it's interesting the way that some people interact with their equity comp. So, Nolan, I spoke with someone about a year ago. He works at Meta And this man was selling every share of stock as it vested. And he sacrificed a ton of upside. So, that's a choice. But what is that? How do you respond to someone doing something like that? How do you feel about that?

Well, you know, you can't save people from themselves. And, you know, suicide's always an option. You know, clearly, I'm going to guess this gentleman was not working with an investment advisor or financial advisor. Right. So he was his own financial advisor and he probably wants to think about firing his advisor.

Right.

Generally speaking, if you're working for a company, that means you do believe in the company because you're, you're working there. And if you're selling all of the shares, that tells me you're probably not funding a home purchase or a college education. You're making a statement that I don't believe.

Right.

That's a huge paradox. I guess he's paying the price in terms of less commas and less zeros on his net worth.

And really, you're selling time. You know, you're going to have to work longer is the crazy part of that. So, what are some of the signs? I think we want to talk about this because we have seen this situation. What are some of the signs that a company's equity may have more risk or more potential than you may think going in?

Company-specific, you can tell, but I think you can tell more by the industry that they're in. Okay. Typically, you know, some of the tougher industries like retail, chemicals, energy, cyclical industries.

Yep.

Those are gonna be much tougher because historically that hasn't been a millionaire maker industry.

Right.

And so I think that's the first thing you can check. Hey, is this, is this business that I'm looking at, is this a profitable industry that's growing and that's commanding investment and has it historically done well? Right. I think they need to pass that test first before you go to the next test. And the next test is, okay, this industry has done well, but what about my specific business in this industry? You know, how's management? Is it the original founder? Has the business been sold recently? Have we gone through 25 rounds of layoffs in the last 3 years? Yeah, I mean, those things, you got to start looking at the clues, right? Yes.

Okay. All right. So, I think we've beat this over the head. You got to really evaluate the company that you're looking at, and that's really evaluating the, your ultimately your prospects for doing well on the investment side of it. Let's talk about taxes and timing too, Nolan. So, where do taxes fit in, in terms of evaluating your equity package?

Taxes are really a big component. I get the sense that when people are evaluating, you know, whether to go work for Company A or Company B, I rarely hear them think about taxes.

Okay.

And I'm not sure that's necessarily correct, but that has been my experience. Taxes are important. I don't think they're the most important. I think when we need to think of potential returns, we need to think of potential after-tax returns. But you're right, Brian, if— Let's compare two offers as an example. Offer A, I make $1 million is what they're gonna pay me. All W-2 salary. Okay. No equity comp. Offer number 2, they pay me $250,000 a year and I get $750,000 in different variations of equity comp.

Right.

Well, in this case it'll probably be more than 750, but to true it up, but let's just say it's 750. Okay. Executive number 1 is going to have a very different outcome. You know, at a 37% tax rate, right? You know, his after-tax is going to be about $630,000. And as you know, that W-2 income, if it's W-2, might as well be written in Sharpie because there's not a lot you can do on the W-2 to get it to go down. Executive number 2 has more options. You know, $250,000, he's probably making a— she's probably making a living wage. They can probably pay all of their monthly bills plus their taxes. Right. So now you have $750,000. If it's equity comp, it's generally going to be deferred in some sort of way from an income standpoint. So now I have planning opportunities. When I take the— I'm assuming in my example, the equity is performing at least as well as the S&P 500. Okay. But I have an opportunity there. I have some tax planning opportunities. Maybe my spouse was laid off in this year. So this year our income is temporarily lower. Maybe that's an opportunity for me to exercise some of my equity comp in a lower tax year. And so you start to be able to control a little bit more of your own destiny. If I have these other levers that I can pull.

Yeah. So I think that's— that all goes back to like a really high-level point, which is the taxation of labor and the taxation of capital is totally different. And so, if you have a more equity-forward compensation package, then you have, like you said, a lot more options in terms of planning your taxes. And so, that's certainly something that's worth considering on the way in in terms of trying to make it an apples-to-apples comparison. So, I think we've kind of understand— we understand how that all goes and what we're trying to look for when we're evaluating offers. I want to talk about one other specific topic, which is, Nolan, a lot of people who are looking at a job that's got equity comp, they had equity comp at their previous location, at their previous job. So how do you think about what they should do with that?

So we see this a lot, and I think this is a more common issue than we'd like it to be. Yeah. In executive work that Company A for 15 years. They've accumulated restricted stock units, stock in their 401(k), unvested stock options. They move on. Now they get promoted. Some recruiter called them and they're taking a job at Company B. They got a promotion, new title, car allowance, the whole thing.

Yeah.

And so now their attention is 100% focused on Company B because it has to be. I have to hit the ground running. You got to get your team going. You had to get up to snuff. And so they kind of forget about all everything that they had at Company A. It's just left there. Now, if it's a company that has been performing— if this was Nvidia 5 years ago, the leaving it there was probably— yeah, right. But if it was Target 5 years ago, sure, probably not a good idea. So I'm going to go back to what we were saying a few minutes ago. If you have equity comp, it can't be left alone. You do need to evaluate it. And as we know, in our capitalistic society that's dynamic, you can go from hero to zero quickly. So, you really need to pay attention.

And then let's talk a little bit about mechanics here. So, when someone leaves a job, they may or may not have unvested RSUs or options or other equity comp. What usually happens there? Can you kind of walk people through what they need to do?

With that? I would say you're going to need to do a lot. I'm going to go through kind of some of the line items, but in general, if you're an executive and you're planning a move, give us a call. Call your advisor. Don't wait till you get the job offer, you've submitted your termination, and then come see us. We're going to have a lot more we can do the earlier we know. So 6 months, you know, if you're 6 months out and you actually started looking around, you know you're going to look around, let's talk. Yeah, because we may want to move some things around now in anticipation. We don't want to do it afterward. But generally speaking, if they have restricted stock units and they're vested, those are just like shares, right? So if I want, I can keep them for forever. I don't need to do anything with them. Generally, if they're unvested, I'm going to forfeit them. And if it's a stock option, generally after I leave, I have 10 years. Even if they're unvested, I have 10 years. Before I vest. But you are going to want to be careful in how you play this out, particularly if you have things that are, that are unvested or underwater or that are in the money a lot. You know, a lot of cases, you know, these restricted stock units vest.

Yeah.

And when they vest, they don't really ring your bell. They just go into an account. They sit into an account at some other financial institution. In your name. And unless you do something to change it, that'll be— that'll continue to be how they operate, which may or may not be the best thing for you.

Okay. I think that's all good information. I think that's a great point you made, Nolan, is if you're looking around, do something now and not wait until it's too late to do some changes. And then also, I think the real big takeaway is evaluating the company that you're looking at. Not only kind of in terms of the structure of the package and it gives you a sense of the culture of the company, but just a sense of what the upside is. I think that's really important. I think it's underrepresented for people. They think a little bit too much about salary and a little bit too little about upside. And that's something that we want people to continue thinking more about is the upside.

The other thing I was going to say is there is a timing impact to this.

Sure.

Depending on when in the calendar year you leave and go to another job.

Right.

So as an example, a lot of companies have employee stock purchase plans, which means I can buy those shares at a discount. And then eventually they vest. With my 401(k), it's a similar thing. You know, I'm capped every year. This coming up year, it's $24,500 I can put in, you know, plus I have the catch-up of $8,000. If I'm going to leave a job and I'm going to leave it in the first half of the year, I have an opportunity to double dip. I can fill up that, I can max out the 401(k). A whole year's worth in a few months and then go to the new company and do the same thing. And my employee stock purchase plan, right? You know, generally I get a discount on those shares. I might want to front load, buy a year's worth up front and get that discount all up front if I'm not going to be there the remainder of the year.

Okay.

And then go to the next company and do the exact same thing. So there's some timing issues that people may want to think about, and that doesn't even account maybe for some after-tax things that can be done in retirement accounts. So there's a timing impact. We just encourage everybody to be active, not passive.

Yes, planning ahead is definitely going to be better in this case. So we'll close it out here, Nolan, and say evaluating an executive job offer is ultimately much more about, is about much more than just salary and bonus. The real value and real risk lives inside those equity packages. And understanding how those grants vest, what drives their value, how the company's positioned, and what happens to equity once you've left the company. That's all important. And it's all the difference between building long-term wealth or maybe stepping into unnecessary uncertainty. A thoughtful approach helps executives see past headline numbers into the structure that truly matters— timing, tax impact, company trajectory, and alignment with your long-term goals. When you evaluate offers through that lens, you're not just choosing a job, you're choosing a strategic partnership with a company's future. And that clarity puts you in a position to negotiate confidently, transition smoothly, and build wealth intentionally over the course of your career. That makes me think we need to talk about negotiating. That'll be a new video in the future. But Nolan, as always, thank you for sharing your perspective and helping us unpack those complex topics. Any final thoughts?

No, let's go get it. This is an exciting time to be an investor. It's an exciting time to be an employee and an investor. And so looking forward to the inbounds from all these success stories and seeing these statements with these large balances on them.

I like that, Nolan. Very subtle. If you found today's conversation helpful, please don't forget to like and share and subscribe. Hit the bell for notifications. You'll know next time when we're out with these videos. It helps the channel and ensures you don't miss future discussions. I'm also going to put a plug in for our Executive's Guide to Stock Compensation. That's ebook that we've got out there on our website. We'll put the link down below so that you can learn a little bit more about how we've used stock compensation and some of the puts and takes that go on with that. So, check that out. If you're an executive, you can't afford to miss it. With that, we'll say, we'll see you on the next Fundamentals of Investing, and thank you for being with us.