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What executives can learn from Odell Beckham Jr.’s bitcoin decision

When Odell Beckham Jr. became a free agent in November, he decided to be paid his $750,000 salary in bitcoin. After bitcoin’s recent plummet in January, and after taxes, the news reports estimate he will net approximately $35,000 from his contract with the Rams for the entire year.

Fortunately, Odell’s previous contracts with the Giants and Cleveland Browns paid him tens of millions of dollars – so he may have seen the risk as minimal.

But Odell’s situation has some interesting implications for executive compensation.

Many executives face similar decisions

Executives, especially when they change jobs, often get a chance to negotiate their compensation. In some cases, they can take a signing bonus in company stock instead of cash. Or they can take a bonus that is split over a few years, assuming they stay with the company long enough to collect.

At some companies, executives are also given a choice about how to receive their long-term incentive award. For example, they may be able to take:

  • Stock options. If the company’s price rises, there can be major upside here, although there is a risk that the stock could also drop, causing the options to be worthless.
  • Restricted stock. As long as the stock has market value, an executive will receive some value if they stay at the company long enough for the stock to vest.
  • Performance-based restricted stock. If the company meets the goals required, the executive could receive a payout of 100% to 150% or more of their original grant based on the company’s stock price when the award cycle ends. Of course, it can also be worth $0 if the company does not hit its performance targets.

Some rules of thumb to consider

So, what is the right choice?

Many executives take the long view, which means using long-term equity awards to meet their retirement or college savings goals, as well as to help cover expenses in retirement.

If there is a choice of all three – stock options, restricted stock and performance-based restricted stock—consider selecting a combination of all three, split into thirds. This, in essence, is a diversified portfolio of company stock plans that doesn’t place all the pressure on the stock market or the individual company’s performance.

For the executive who consistently saves money from their salary and cash bonuses over the years, they often can afford to take more risk and elect just the stock option component. Those who rely on their long-term incentives to meet living expenses or other short-term goals may want to go with the more conservative route and choose only restricted stock awards.

The final word on Odell and executive compensation

Getting back to Odell. It’s quite possible he believed he could turn his $750,000 salary into multiplies of that amount by investing in cryptocurrency. And if bitcoin rebounds dramatically, he may not regret his decision.

Similarly, most executives shouldn’t take heavy risk with compensation decisions unless they are already financially independent or are saving enough outside of their stock awards to meet their short- and long-term financial goals.

Most executives should look at their compensation decisions as part of a comprehensive financial and investment plan, so money will be there when they need it.


ABOUT THE AUTHOR

Lisa Brown

Lisa Brown

Partner

Lisa is the Practice Area Leader for Corporate Executives at CI Brightworth and is the current chairwoman of CIPW’s Business Development Committee. In addition to serving clients, Lisa has published three books, Girl Talk, Money Talk. The Smart Girl’s Guide to Money After College; Girl Talk, Money Talk II. Financially Fit and Fabulous in Your 40s and 50s; and CI Brightworth’s first book, Building Your Wealth Inside Corporate America. Lisa has been featured in The New York Times, The Wall Street Journal, YahooFinance, CNBC.com, and many more. A frequent speaker at seminars across the country, she also produces a podcast series, Taking Stock with Lisa Brown, with regular financial content for busy professionals, in under 30 minutes.




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