I know this was not an easy task, and I have a lot of gratitude towards those willing to paint a target on their back by taking this on. That being said, after taking some time to think closely about this, and after some private discussions with a number of stakeholders, I think we need to start over.
I cannot really understand why every single CU would receive MKR. I understand that we want to reward people for their work, but Maker is likely to have the DAI to pay its CUs, who themselves can distribute them amongst their employees/contractors. MKR – particularly future MKR is worth far more than a standard total compensation package for many roles included in CUs. While I find the metrics a bit conservative to what I would value MKR at, I will direct you to the wonderful model that @Aes built just so people can play around with their own assumptions.
Are we really sure that the lowest-paid full-time-equivalent in any CU outside of Shop needs $30,000 in compensation for the next year’s pay on top of any DAI they draw as salary? After some discussions with large MKR holders, and more to come next week, I cannot see the logic in this.
MKR as a currency for compensation should be reserved for those CUs and individual roles that we need strong alignment of incentives. Namely, the points in our workforce that can make/break the protocol in material ways. Protocol Engineering is an obvious one, as is Risk, and Oracles. CUs where they could literally break our business need this kind of minimization of the principal-agent problem. There are also CUs that can materially improve our business – RWF and Growth – that MKR compensation is appropriate, but only if tied to performance.
The guidelines proposed above would dilute current MKR holders to the tune of nearly 1.3% – annually. In today’s prices, that is $46 million in additional expenses. If there is price appreciation – and we all hope there will be – that number will balloon. In a standard financial statement, that would be a line item expense. Just because we would not be paying DAI does not make that expense any less.
That is almost 30% of our estimated profits for this year, and >24% of our revenue. If Maker were a publicly traded company, there would only be three large companies on the NASDAQ or NYSE that pay out a greater share of their revenue in stock – SNAP, UBER, and SNOW. Note that those are all unprofitable or only marginally profitable companies, and they need the currency of their equity to meet compensation expenses. Maker does not at present have these issues.
That kind of wholesale payment of contractors/employees with our governance token is not appropriate for a cash-flow-positive, profitable enterprise. If people need payment – even extremely large payment – it can be done in DAI. MKR should be reserved for incentive alignment, and if we are all being honest, not every person doing the DAO’s business is so mission critical that they need more alignment than a steady paycheck.
I do not have an alternative proposal for exact amounts of MKR to vest with any particular unit, but I will strongly suggest that any CU whose allocation is not zero needs to be thoroughly justified. I am not aware of any large, profitable enterprise where literally everyone gets the equivalent of stock (not even options!)
As this proposal stands now, and after some lengthy discussion with both large MKR holders and stakeholders in several CUs, I will be leading opposition to this level of MKR compensation.
Thank you to everyone who worked on this proposal who probably already had to deal with many contentious discussions – you had a nearly impossible job, and exceeded expectations.