Jan 2, 2019 · 39m · a16z
a16z Podcast | All Things Compensation
Greg Lohman · 10m spoken Tan Nguyen · 9m spoken Shannon Schiltz · 9m spoken Steve Cadigan · 4m spoken Matt Oberhardt · 42s spoken
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this a16z podcast panel, industry experts discuss how technology startups and growing companies can design, govern, and scale effective compensation strategies. The panel explores total rewards, equity vehicles, job leveling, executive board alignment, and strategies for maintaining pay equity while competing for top talent.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The host as informed peer 2.1 Guest teaching 3.7 Guest disagreement 1.0 The host pushing back 0.1
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 12:54 Greg rejects chasing big-tech compensation
Greg forcefully dismisses the premise that early startups should attempt to match companies like Google, warning that doing so creates promises startups cannot keep and damages internal equity.
Hardest push from the host ▶ 29:18 Shannon challenges out-of-band offer practiceShannon directly challenges the panel and audience on the slippery slope of approving out-of-band offers, pointing out the immediate pay equity and level disparity problems it generates.
Biggest teaching moment ▶ 22:40 Greg explains economic mechanics of stock options vs RSUsGreg delivers an authoritative breakdown explaining why RSUs are inferior to options for pre-IPO startups expecting multi-fold valuation growth, educating listeners on the risk-reward differences.
The host holds their own ▶ 26:31 Steve warns of Section 16B officer disclosure trapsSteve demonstrates host expertise by highlighting how uncleaned side deals become public liability under Section 16B officer comp reporting rules when filing for an IPO.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Unbundling Compensation vs. Total Rewards | 3 | 3 | 1 | 0 | Steve opens by sharing his pre-IPO to IPO transition experience at LinkedIn before asking the panel to differentiate between comp and total rewards. Greg and Shannon clarify how comp starts with cash/equity and evolves into total rewards as a company matures. | |
| Building the Foundations of a Compensation Strategy | 1 | 4 | 1 | 0 | Steve asks where leaders should start when building compensation foundations. Shannon, Tan, and Greg educate on balancing market data with affordability, level structuring, and benchmark banding. | |
| Executive Stakeholders and Board Alignment | 2 | 3 | 1 | 1 | Steve inquires about necessary executive stakeholders, interjecting that ignoring board alignment leads to disaster. Shannon and Tan break down CEO, CFO, and board approval alignment strategies. | |
| Competing for Top Talent as an Early-Stage Startup | 1 | 4 | 1 | 0 | Steve prompts the panel on how early-stage pre-revenue startups can compete for talent against high-paying tech giants. Greg and Tan advise against chasing Google on pay, advocating instead for mission selling and realistic expectations. | |
| Differentiating Compensation Through Pay for Performance and Mission | 1 | 4 | 1 | 0 | Steve asks for examples of recruiting top talent without top-of-market cash. Shannon and Greg explain how mission differentiation, performance-based refresh grants, and clear recognition attract high performers. | |
| Growth Triggers and Evaluating Stock Options vs. RSUs | 2 | 5 | 1 | 0 | Steve prompts on organizational triggers for revising comp strategies, leading to a deep dive into RSUs versus stock options. Greg details why stock options offer far superior tax and upside benefits for pre-IPO growth companies. | |
| Preparing Compensation Programs for an IPO | 4 | 3 | 1 | 0 | Steve asks about common pitfall mistakes during IPO prep and contributes domain expertise on Section 16B officer disclosures. Greg and Shannon cover S-1 timing, equity plan preparation, and scalability. | |
| Q&A: Managing Out-of-Band Offers, Parity, and Pay Equity | 2 | 3 | 1 | 0 | Audience Q&A focuses on managing out-of-band hiring demands and pay equity laws. Shannon and Tan explain approval matrices, leadership calibration, and recent legislation restricting past salary inquiries. | |
| Q&A: Dilution Management, Equity Refreshes, and Bottoms-Up Planning | 3 | 4 | 1 | 0 | An audience member asks how to handle equity refresh requests when the board pushes back on dilution. Shannon and Tan provide templates for proactive board communication and bottoms-up planning, while Steve notes the importance of guiding first-time CEOs. |
Statements from this episode (15)
Cadigan: Tech companies must benchmark salaries quarterly or monthly to stay competitive
“You know, it used to be you could do a salary survey once a year and you're feeling like you're pretty on top of what the competitive environment was, and if you're not doing it quarterly or even monthly now, you may be missing something. And that puts a big p…”
Lohman: Startups must establish job leveling frameworks early or face failure
“And if you don't get that framework set up initially, you're dead.”
Nguyen: Startups must reserve aggressive compensation for key roles to compete
“I think what you got to really focus on is trying to hold a general population to a general philosophy, market positioning philosophy, and really think about developing and going after really aggressive comp for key roles, key contributors, and that's how you'…”
Chiltz: Tying annual equity budgets to hiring plans accelerates board approvals
“If you actually do the entire year budget plan of equity spend off of your hiring spent or off your hiring plan, And get your board to sign off on it. You'll find your approvals go a lot faster. You can just say, like, here's what we planned. Here's what we're…”
Lohman: Early startup negotiations create five-fold equity disparities between identical roles
“And we come in and start working with companies, you might see two employees who basically do the same thing, and I have five times as many options as that other person. I mean, there are huge disparities, and that's just how they negotiated coming in and when…”
Chiltz: Compensation is rarely the true reason employees leave or decline offers
“It's really easy to say when you're leaving a company, you're leaving because of comp, and that's a tip we all know. We're HR professionals. That's not the reason people leave companies, and two, we're really quick at saying they got a better offer from anothe…”
Nguyen: Employee retention creates more business value than initial equity grants
“Everybody talks about the new hire grant and those programs, and it's just overemphasized, and I just think that when you think about the employee's development, again, that career ladder, you think about retention, and you really sell that, that you've got pr…”
Lohman: Late-stage growth rapidly inflates annual equity issuance into double digits
“Relative to what's going on in an earlier-stage company that's moving along, but hiring at kind of a reasonable rate, I mean, you can go from a few percentage points of equity to double-digit percentage points of equity pretty quickly.”
Chiltz: Early-stage tech startups adopt RSUs prematurely without legitimate business justification
“There's tons of companies who are implementing RSUs really, really early now. Or they're implementing RSUs when, like, the . Like, there isn't necessarily a need or a good reason to.”
Lohman: Stock options strictly outperform RSUs for high-growth pre-IPO startups
“There's really no scenario where RSUs are better than options in that model. And so from a pure upside, from a pure opportunity perspective, from a flexibility perspective, from a tax perspective, from an administrative perspective, there are lots of advantage…”
Lohman: Big tech RSUs function as value preservation, not high-upside returns
“We think of RSUs at a place like Google is, is value preservation, right? They're in a value preservation mode growth, but not huge returns, and you're giving an employee a share of stock, it's got value, that employee can look at that share and say, at the en…”
Cadigan: First-time CEOs overlook mandatory IPO disclosures exposing executive side deals
“A lot of times what I've found is the CEO They haven't done this before, may not be aware that the Section 16 B officers will have their comp published, and if there was some back office, you know, back alley dealings and special side things, if that's not cle…”
Lohman: Startup compensation strategies shift rapidly in the 12 months pre-IPO
“A lot of the things we talked about with RSUs versus options, the foreign and a price your dilution, all those things are going to change most rapidly, in most cases, right as you go public, right in that stage. And You know, you hire somebody 12 months out, s…”
Nguyen: Companies can easily run gender pay analyses using existing market data
“If you're doing competitive analysis, you can do gender pay analysis really, really simply. There's no reason not to do it. I mean, the data's there.”
Lohman: Incremental executive equity refreshes pass boards easier than delayed pool grants
“This would have been a lot easier if they'd been on top of this, if they'd been granting equity along the way, The numbers that they were proposing in the absolute were not ridiculous. If they had gotten there in stages, it would have been a lot easier.”