Stock-based compensation (SBC), where a company pays its employees partly with shares, is table stakes when attracting talent for growing companies. And for good reason too. Employees value SBC as it allows them to profit from a potential rise in a company’s stock price. From a shareholder perspective, SBC is also useful as it aligns employees’ interests with theirs. This is critical for high-level management who make executive decisions in a company; the idea is that executives who earn SBC will make decisions that drive shareholder value. In addition, using shares instead of cash for compensation also improves a company’s cash flow. For cash-strapped businesses, SBC can be a good way to attract talent without breaking the bank. But SBC is not without its drawbacks. This is becoming more apparent in recent times as stock prices of many fast-growing companies fall. How does SBC work? Before discussing some of the drawbacks of SBC, I’ll first quickly...