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Relative Equity
The overlooked psychology of stock options
There are a lot of considerations at stake when founders choose to award stock options to their team. Covering all the variables would be the subject of a longer post.
Luckily Index Ventures have done the hard work and created an awesome OptionPlan calculator based on data from more than 200 startups across Europe.
Whatever approach you take please remember this important aspect of human psychology…
People don’t only care about what they’re given, they care as much (or more) about what they’re given in relation to others i.e. perceived fairness.
“Research consistently shows that people are just as concerned with the relative equity and fairness of their reward as by its absolute value — or indeed more so.” (Mastering Coaching, Max Landsberg)
An example…
Employees awarded with 100 shares when everyone else is rewarded with 90 are happier than people awarded with 120 when everyone else is rewarded with 130.
