How to Negotiate Stock Options
When you negotiate a contract for a new job, it is usually the base salary that takes center stage. However, it’s often the benefits, such as health care and stock options, that provide the most value. While some companies present a set offer, others are open to negotiation. In these situations, knowing about the company and about stock options in general will help when it comes time to negotiate.
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Instructions
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Learn about the company before you sit down to negotiate. Read through the company's website, research any news or business stories about it, talk to employees and discuss its expected future with a stockbroker who is familiar with the company. Where stock options are concerned, there's a real difference between large and small companies. Large companies tend to have stocks that are fairly consistent and easy to predict, whereas smaller, startup companies are often high-risk, high-reward when it comes to stocks. Both can have their advantages, but it always pays to be knowledgeable about the company.
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Find out the current stock prices for the stocks that are available to you and learn how they have fluctuated over the past few years. Call or visit a stockbroker to get this information, or look up the stocks in the business section of major newspapers or on websites such as Nasdaq.com or NYSE.com. Not only will you know about the value of the stocks you're negotiating, you'll also appear knowledgeable, giving you further negotiating leverage.
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Translate the stock options into a real money value that you can compare to other options on the table. For example, how much cash would you receive if you were to sell the stocks the day you received them? If you can prove that the stocks are of less real value than other options, such as a cash bonus, then you’ll have the leverage needed to get more stocks.
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Show the people you are negotiating with what you are worth to the company. Give real examples of how you can make the company more money and they will be more willing to give you a larger share of the company. For example, instead of saying you can come up with great ideas, use the research you've already done on the company to come up with one or two ideas--perhaps a marketing technique, an idea for a new product or a new advertising campaign-- that can be put to use right away.
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Accept stock options instead of health benefits if you will be receiving health benefits with or without the job. Whether your get better health benefits through your spouse’s job, through the government because of a disability or by some other arrangement, stock options are definitely more valuable than a second version of something you already have.
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Agree to a lower salary if you believe the stock options will make up that amount of money or possibly earn you extra money. Don’t agree to this, however, if the upside of the stock options is no higher than the offered salary.
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Get the stock option details in writing, with all specifics spelled out, such as when you will be eligible to receive the stock options, how flexible the company is regarding who you sell the stocks to and what happens to your stock options if you are laid off. Don't sign anything until you are completely satisfied with the terms.
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