In this video, Chris Haroun explains employee stock option programs (ESOPs), describing how companies grant shares through options that vest over a multi‑year period, creating "golden handcuffs" that encourage retention. He shares a personal anecdote from his time at Goldman Sachs, where he received a small number of shares that could not be sold until a lock‑up period expired. Haroun then advises job candidates on negotiating compensation, suggesting they weigh higher base salary against more equity, noting that most of an employee’s future net worth will come from equity if the company succeeds. He discusses founder dilution through venture‑capital financing and provides typical equity ranges for early hires: senior hires (director or VP level) often receive about 2–3% of the company, while many early employees receive well under 1%. The overall message is that equity stakes are generally small in percentage terms but can become highly valuable as the company grows.
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Please. Could you explain how ESOP works employee stock option programs and how much percent of equity should generally be given to them if they join us early in the company? Yeah, yeah, it's a great question. So ESOP stands for Employee Stock Option Program, which basically means when you join a company or you work at a company for a while, in addition to being given money for your salary, you're given shares. And so what happens, and an example actually for me is I worked at, I worked at Goldman Sachs, and this is just a prospectus for my MBA students for when Goldman went public in 99. I was there at the time, but when I worked there, I was given shares, a very tiny amount because I was a grunt, I was a photocopy boy, but I'm very good photocopier. And I was given shares and I wasn't allowed to sell them until a certain time. And what happens usually in a lot of companies is you're given shares in the company, but through options, but you're not allowed to actually cash them in every year. You have to wait three or four years. And that means they call it vesting, which means you can cash in your chips every three or four years. That's what vesting means. And they give you shares every single year that vest every four years. So it's like a waterfall approach. So every time you want to leave, you think, oh, my God, if I leave, I'm leaving all this money on the table. And it's like golden handcuffs. It keeps you there, keeps you there. And yeah, so anyway, that's, that's what, that's what an ESOP is. And if you have an additional question, let me know. But. Oh, you're asking also what percent should be given to them if they join us early in the company? Yeah, yeah. So if you're on the other side and you're interviewing to go to a tech company or any company where you can be given a lot of options, I would try to get a higher base salary if you have the option. Higher base salary or more shares. Here's why. Because you're going to be given shares probably every year anyway at that company. You know, it's hard to argue for a big increase in your base salary. And also, you know, like 99% of your net worth is going to be those shares anyway if the company does well. If it doesn't, well, you got cash anyway. So that's what I would say. But it all depends. Like I've seen, I've seen founders of companies get diluted from owning 100% of the company in venture capital, then venture capital investors invest, and then they own, you know, less than 20% of the company by the time goes public. That's the founder. And they don't mind owning less than 20% because they're worth much, much more, because the price of the option or the stock or private company, so to speak, goes up a lot. So I think that, like and I've seen cases where in the A rounds, one of the earlier stages, when a director of engineering or VP of engineering is brought in, they get about 2 or 3% of the company. It's not very much. So I think you should think about it in terms of a very, very small number. And I don't know the size of your company, but I would say well under 1%. Yeah. Ye.
