Negotiating Stock Options: What Job Seekers Need to Know

Equity compensation — stock options, RSUs, or company shares — can be worth a lot, a little, or nothing at all depending on factors that aren't always clear from an offer letter. Most job seekers either ignore it as too complex to evaluate or accept whatever's offered without understanding what they have.

Neither approach is good. With a basic understanding of how equity works, you can ask the right questions, compare offers more accurately, and negotiate more effectively.

At public companies, you'll mostly see RSUs — restricted stock units. These are straightforward: you're granted a certain number of shares that vest over time (typically four years with a one-year cliff). Once vested, they're yours, taxed as ordinary income at the value on the vesting date. The math is relatively transparent.

At private companies, you'll typically see stock options — the right to buy shares at a preset price (the strike price) at some point in the future. The value depends on whether the company's valuation ever exceeds that strike price significantly. ISOs and NSOs are the two main types, with different tax treatments. At an early-stage startup, equity can be compelling or worthless depending entirely on outcomes that nobody can predict with certainty.

For private company options, ask: what is the current valuation and what is the strike price? What percentage of the total outstanding shares does my grant represent? Has the company taken an 409A valuation recently? What does the liquidation preference structure look like — in a moderate exit, would common stockholders receive anything?

For RSUs at public companies, the math is simpler but you should still understand the vesting schedule, any cliff provisions, and how the shares are taxed at vesting in your state. Ask whether there are any blackout periods or trading restrictions that affect when you can sell.

Neither of these questions is rude to ask. Any company that balks at transparency about its equity structure is giving you information about its culture.

Equity is often more negotiable than base salary at startups and growth-stage companies, because it doesn't affect current cash flow the same way. If you're comparing two offers where one has higher base and one has more equity, you need to model out the equity scenarios honestly — not assume the best case or the worst.

Don't treat equity as a lottery ticket that justifies accepting below-market cash. Treat it as a possible upside that's worth understanding precisely and negotiating seriously, on top of fair cash compensation. If you do nothing else: understand the percentage of the company you're being offered, not just the share count.