European tech companies struggle to compensate employees with profit-sharing in a system where stock options have big restrictions and high tax rates
Lawmakers across the Continent haven't given startups the compensation tools they need to share profits with employees. That's changing. Tweets: @alecstapp . Thanks: @vojtech Tweets: Alec Stapp / @alecstapp : How equity compensation works (or doesn't work) in Germany: “Whenever Raisin grants shares, a notary must literally read the lengthy compensation agreement aloud to both the employee and Freund at a hearing that can take up to 90 minutes.” https://www.bloomberg.com/... Thanks: @vojtech
Context & Ripple Effects
This 2019 Bloomberg piece documents the structural disadvantage European startups like Raisin faced in paying talent with equity: German grants required a notary to read the compensation agreement aloud in a hearing that could run 90 minutes, layered on top of high tax rates and restrictions on options themselves. It landed the same year Steve Blank argued that growth capital, delayed IPOs, and founder RSAs had already eroded the social contract of giving startup employees stock options in the US — so Europe's problem was a stricter, slower-motion version of a global shift.
The arc since then is reform catching up to the diagnosis: France moved first with new rules making it easier for startups to grant stock options, and by 2021 the EU had formally called on member states to change stock-option and immigration laws, with 25 countries signed on. The original complaint became the policy agenda.
First-order effects
- Startups like Raisin pay a direct procedural tax on every grant — notary-read hearings, restrictive terms, and high tax rates that make equity compensation slow and expensive relative to US peers.
Second-order effects
- The friction forced a legislative response: France rewrote its option rules, and the EU's reform call pulled 25 countries toward looser stock-option regimes, turning compensation law into a competitive tool for attracting talent.
Third-order effects
- If the reform wave holds, equity-based pay stops being a structural handicap for European startups — though Germany's labor-market rigidity, which later complicated layoffs at Google and Amazon per Bloomberg's reporting on EU labor laws, shows employment law remains a broader drag beyond compensation alone.
The trend: Europe is dismantling its stock-option restrictions country by country, with EU-level pressure turning startup compensation reform from a national patchwork into a coordinated policy push.