Pondering a career in industry? Then you need to be aware that the industry job offer may contain elements not part of offers in academia, government or non-profits; industry jobs often include a profit sharing plan.
Industry profit sharing takes two basic forms; dividends, a cash payment made to employees and share-holders based upon the performance of the company, usually on an annual basis, and equity, the actual ownership of shares of the company. Equity in a company is granted by one of the following methods:
- Stock grants: A company may grant actual shares of its stock to employees. The value of these grants is determined by the price at which the shares are traded on one of the stock exchanges. An example: You are granted 100 shares at $5 per share. Over time if the value rises to $10 per share; the grant becomes worth $1000 after a vesting period. Vesting is the time that you are required to hold the stock before you can sell. If the vesting period is four years, you may sell up to 25% of your shares each year, or you can wait the four years and opt to sell all of your stocks.
- Stock options: If the company grants a stock option, it gives you the right to buy a specific number of shares of your company’s stock during a time and at a price that the employer specifies. Typically this stock price is lower than market value. As in the above example, you are granted the option to purchase 100 shares at $5 per share. If the value rises to $10 per share, the option to you becomes worth $1000, minus the $500 you paid, or $500. As in stock grants, a vesting period usually applies for options as well.
- American Depository receipts (ADR’s): ADR’s are used by non-American companies whose stock trades on a foreign exchange to provide an equity vehicle for American employees. Its value to you would be calculated in the same manner as a stock option.
Most importantly when considering a job offer, make sure to take into account the offer in its entirety, not just the salary. The value of these other elements may comprise a significant percentage of total compensation. In some cases, where the value of the stock has risen tremendously, many of their employees have made huge sums of money. However in other cases, where the stock has hovered near its price at the public offering, employees have made very little.
The value that these profit sharing vehicles can add to your compensation may vary. Make sure you connect with your Career Services Center (for NIH intramural trainees that is the OITE) to help you with the negotiation process to optimize the value of the offer you receive.