How can you ensure your executive stock options are competitive and fair?

1 Know your value

Before you accept any offer, you need to know your worth in the market and in the company. Research the average salary and equity for your role, industry, and location, and compare it with your current and expected performance and impact. You can use online tools, salary surveys, or professional networks to gather this information. You also need to consider your personal goals, preferences, and risk tolerance. How much do you value cash versus equity? How confident are you in the company's growth and success? How long do you plan to stay with the company?

2 Understand the terms

Stock options are not all the same; they have different features and conditions that affect their value and usability. It is important to understand key terms such as the vesting schedule, exercise price, expiration date, and dilution. The vesting schedule is usually four years with a one-year cliff, meaning you can't exercise any options until you complete one year of service, and then you vest 25% of your options every year thereafter. The exercise price is typically based on the fair market value of the company's stock at the time of the grant; the lower the exercise price, the more profitable your options are. The expiration date is usually 10 years from the grant date, but it can be shorter if you leave the company or if there are certain events, such as a merger or an acquisition. Dilution is a reduction in percentage of ownership you have as the company issues more shares to other investors or employees; it can affect both the value of your options and your voting power in the company.

3 Negotiate strategically

Once you have a clear idea of your value and the terms of your options, you can begin negotiating your equity compensation. To get the best deal possible, focus on the potential value represented by the options, not just the number. Consider the exercise price, vesting schedule, expiration date, and dilution risk. Ask for a realistic valuation of the company and its growth prospects to estimate the future value of your options. Additionally, be flexible and creative in your negotiations; ask for more options or better terms, but be willing to compromise and explore alternative solutions. Leverage your strengths and contributions to demonstrate your commitment and loyalty to the company. Highlight your skills, experience, and achievements to show how you can add value to the company's goals. Use your influence to negotiate with the right people. Executive stock options can be an excellent way to align interests with the company's success; however, they require knowledge, preparation, and savvy. By following these strategies, you can ensure that your executive stock options are competitive and fair.

4 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?