The NASPP Blog

Free lunches (not too mention breakfasts, dinners, and snacks), open offices, games and nap rooms, shuttle services for commuting employees—we all know Silicon Valley operates a little differently than the rest of corporate America.  But just how different is the Valley when it comes to stock compensation?

Last week, I attended a presentation hosted by the Silicon Valley NASPP chapter on how Silicon Valley differs from the rest of the United States when it comes to stock compensation. Tara Tays of Deloitte Consulting ran special northern California cuts of the results of the NASPP’s 2013 and 2014 Domestic Stock Plan Design and Administration Surveys and compared them to the national results.  She was joined by Sue Berry of Infoblox and Patti Hoffman-Friedes of Seagate Technology, who provided color commentary.

As it turns out, not as different as you might think.  In many areas, the northern CA data aligned fairly closely with the national data. These areas included the use of full value and performance awards, overhang levels, timing of grants, termination and forfeiture provisions, and performance metrics. But here are five areas where Silicon Valley does its own thing:

Burn Rates

This probably isn’t a big surprise to anyone, but burn rates are higher in Silicon Valley.  Nationally, 77% of respondents report a burn rate of less than 2.5%. In northern California, only 56% of respondents report burn rates below this level. Interestingly, however, the higher burn rates did not translate to higher overhang; in this area the northern California numbers align closely with the national data.

Clawbacks

In the national data, 60% of respondents report that equity awards are subject to a clawback provisions, representing an almost 90% increase in the use of these provisions since our 2010 survey.  But this trend doesn’t appear to have taken hold yet in Silicon Valley; only 34% of companies in northern California report that their awards are subject to clawbacks.

RSUs

While usage of full value awards (vs. stock options) in northern California aligns with the national data, practices vary with respect to the type of award granted.  Just over 90% of northern California respondents grant RSUs but, nationally, RSUs are granted by only 77% of respondents.  Restricted stock is granted by only 26% of northern California respondents but 44% of national respondents.

Vesting Schedules

For full value awards, graded vesting is more common in northern California (88% of respondents) than it is nationally (65% of respondents).  But vesting schedules for full value awards appear to be slightly longer in Silicon Valley.   57% of northern California respondents report a four-year schedule and 37% report a three-year schedule, whereas this trend is flipped at the national level.  There, 60% of respondent report a three-year schedule and 30% report a four-year schedule.

For stock options, monthly vesting is far more common in Silicon Valley than nationally.  53% of northern California companies report that options vesting with a one-year cliff and monthly thereafter; only 11% of respondents report this in the national data (27% for high-tech companies).

ESPP Participation

When it comes to ESPP participation, Silicon Valley comes out on top.  Close to 60% of northern California companies report that their participation rate is between 61% to 90% of employees; nationally only 20% of companies were able to achieve this.  ESPPs are also more generous in northern California, with more companies reporting that their plans offer a look-back and 24-month offering than nationally.  This may account for some of the increase in participation but I’m not sure it accounts for all of it (note to self: must do quick survey on this).

– Barbara