When I was a corporate officer at MegaCorp, you were expected to maintain a certain % of your annual salary in company stock. I forget the exact amount, but I think it was 2-3x your annual total compensation. It wasn’t too hard, given the company had been doing well and we all had stock grants and stock options.
Still, as personal finance matriarch, Jane Bryant Quinn, warns – you don’t want to have too much of your money wrapped up in your employer. After all, you are also counting on them for your job and your pension. I think at one point, 80% of our portfolio was wrapped up in MegaCorp.
I was reflecting on this as I looked back yesterday morning on how equity investments have done since the day I retired – April Fools Day 2016. It’s been 7 years, 8 months, and 13 days. During that time the stock market has really SOARED:
⁃ S&P 500 +118% (+10.6% annual); Dow Jones +102% (+9.6% annual); and NASDAQ +178% (+14.2%)*
Yet, the two MegaCorps that I worked for have been in the DUMPS over that same period:
⁃ MegaCorp #1 +6% (+0.8% annual); MegaCorp #2 -40% (-6.4% annual)*
When I left these companies, they were flying HIGH. MegaCorp #1 stock grew a spectacular +487% in the 24 years I was there (+7.7% annual; +80pts to the S&P 500). While I was only at MegaCorp #2 for 3 years, those were 3 great years: up +64% (+17.9% annual; +14pts to the S&P 500).
Perhaps they were due for a big setback?
I was fortunate to liquidate all of my MegaCorp holdings as soon as I left these companies. With the opportunity to diversify in a big way for the first time, I sold the stock grants immediately and exercised stock options judiciously (and profitably) when I needed to. The money was largely invested into low cost S&P 500 index funds, as I did when the pandemic hit on St. Patrick’s Day 2020.
The same can’t be said for many of my colleagues that kept working longer. One MegaCorp friend said she has 8 consecutive years of stock options that are now worth less than the strike price. Some of those years are underwater by 50% of what they were issued at. Even stock grants – which are typically a bit more stable – are are worth a lot less than what they were issued at. And, they have dropped substantially in value relative to inflation (prices are +25.6% since I retired).
I like to think I was very clever when it came to saving and achieving FIRE (financial independence & retired early), but I can’t discount the fact that I was very fortunate to work for these two MegaCorps when they were really rocking. Perhaps my only real success was staying with these companies and moving steadily up the corporate ladder.
After all, while success comes from being at the right place, at the right time – one also needs to have the right skills and apply the right effort. Still, it’s all much easier when the circumstances are sprinkled with a big dose of of good luck!
How lucky were you with the company you’ve kept in your career?
*Thursday 12/14/23
MrFireStation 
When I was in my early 20s I thought I would get rich working at startups that gave early employee stock. Absolutely none of them made me any real money. One of the dirty secrets in the technology industry is that most companies do not make it, and unless you are lucky enough to work for a very successful and fast growing startup, your stocks are not going to pay because the VCs pay themselves first to get their money back.
Most technology startups work similar to a dog track. The stock is the mechanical rabbit that runs around the inside of the track and you are a greyhound. I have never seen a greyhound get the rabbit.
I mostly worked at mediocre companies, but did well by saving and investing in 401ks and in a taxable brokerage account. Most people work for mediocre companies. Don’t let mediocre employers be your excuse for not succeeding.
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At any company I worked at with stock options or grants we always joked success with our stock options equated to maybe buying a good couch. In the end it was less then that.
The only ones who ever made out with stock options were the handful of execs who controlled the game. Somehow they remained whole as the employees were washed out after round after round of VC investments
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I did really, really well with my stock options – but my MegaCorp was a multinational food company. Mature industry, stable consumer base – people gotta eat! 🙂
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I bought an engagement ring for my wife with the proceeds from the stock options at my most ‘successful’ one. The ring wasn’t a Richard Burton for Liz Taylor one either.
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Regardless of the ring’s size, it sounds like it was a good investment in the future!
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Completely agree about start-ups. When the dot-com boom hit, people were jumping ship from blue-chip MegaCorp to work at tech start-ups. I wondered if I was the biggest idiot of all, staying at my slow-growth food company. I really thought I might be missing a huge historical opportunity. Flash forward 25 years and I can think of only 1 person who really made it big after leaving. Literally no one else.
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During the dot com boom, the owner of Kingston Technologies gave bonuses OG $50K to substantial, this was 25 years ago or thereabouts. I was in a steam room at the gym and one guy asked another “hey, you work for Kingston don’t you? Were you there when the bonus was paid?” He answered “ I have been there eight years.” He clearly didn’t like the question and neither did I as it was rude. The person then said “did you say you had a condo in that high rise on Ocean Blvd in Long Beach?” The guy said yes and walked out.
The whole thing was rude, but a one bedroom was $300K and is now likely north of 2.5. Nice result with the bonus
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Ocean Blvd in Long Beach – that’s a beautiful area. My wife and I had lobster at Parker’s Lighthouse 26 years ago and I remember saying, “this would be a great place to LIVE.” If only I knew how much the real estate would explode there!
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