MIP56: Alternative MKR Compensation Guidelines

Depends on the contents of the competing proposal. Would it supercede it? Does it duplicate any processes? Could Core Units choose between two sets of ratified guidelines? Maybe.

Thankfully not an issue for us right now (since the other proposal was withdrawn) :sweat_smile:

What would happen to additional core units? There are a few in the queue.

What I like about this MIP

The motivation behind this MIP

We agree that an MKR Compensation Plan is central to the survival of the DAO by attracting, retaining, and aligning talent to the MKR voters.

The work of these two Contributors

@LongForWisdom and @AES’ work cannot be overstated. These two contributors have done a vast amount of work for the DAO in numerous ways, and we cannot thank them enough. I also think they both know that I enjoy working with them, and I intend to keep doing so in the future, hopefully for a long time.

Financial Implications and Scenario Analysis :fire::fire::fire:

This is great. We need more of this. Some of us believe that we need a dedicated Core Unit to build more of these. And @AES has probably all the right skills to do this. (I’m not saying he should do it, but he probably should do it :wink:). We need much more visibility on the financials of the DAO—definitely my favourite part of the fundamental research to build this MIP.

It keeps the conversation going

This conversation started some time ago, and a lot of people have contributed with their brains. I believe that it is a crucial topic central to the future development of the DAO.

Where I think this MIP falls short

It feels rushed

It went from discussion to MIP in seven days. Is there a specific reason for this?

It is unclear on what MKR holders are voting

If the numbers are illustrative, are we voting on the ratios? Or are we voting on the definition of the primary domains? Or we’re voting in the Dai denominated compensation?

We all agree that we need some guidelines, which might be a step in the right direction. However…

Guidelines to help Facilitators

The idea of having guidelines (or at least @SES-Core-Unit’s view) is to remove hurdles for the teams to focus on what they should be doing: providing value for the DAO.

Contributors (including a potential Facilitator with 2+ years of Maker knowledge) have already raised questions about how to proceed with these guidelines.

What happens if…

Seniority

…my team is composed of an army of interns and entry-level contributors?

…my team is composed of senior superstars?

Multi-domain teams

…my team is composed of Contributors spanning multiple domains?

Contributors Specific Situation

…a person in my team will contribute part-time?

…a person in my team wants to contribute more and switch to full-time?

MKR Price

… the price of MKR tanks? The package will become less competitive. At which percentage or change is this reviewed? Or is it every three months? Or six months? Who is going to review it?

…the price of MKR skyrockets? Are we going to be handing super-competitive out-of-market packages? Will the MKR holders agree to that?

:point_up_2:t3:There are topics that might lead to huge disparities within the same Core Unit, let alone across the DAO. Should not a set of guidelines address these questions to serve the current and future teams?

Ignores the conversation

As much as I think this discussion is necessary, I am disappointed that it has completely ignored all the points raised in the SES proposal.

We intended to design guidelines to help teams while trying to solve potential edge cases. Here is the post, in case that someone missed it.

No feedback from current Facilitators or Contributors

This point might be wrong, as I have not spoken to every Facilitator or Contributor (with or without MKR Compensation in place). I have talked to a few, and no one seems to have been consulted to draft this MIP (except for @LongForWisdom, of course).

Snapshot of your vision for the DAO

While a lot of people will agree with your ratios, some might not. Worse, not every voter might infer that fixing the MKR Compensation in a certain way shapes the vision of how the DAO should be shaped.

@wouter has already articulated this idea, so I won’t make this post unnecessarily longer by repeating it.

Conclusion

While I agree with the motivation behind the MIP and some of the guiding principles, I feel that it falls short of its noble intention.

7 Likes

We believe the primary domains would capture most of the upcoming CUs - looking at what’s in formal submission, Content Production and Strategic Marcoms would fall under Growth (Marketing), CES would fall under Engineering, and GovCom would fall under Coordination. Our intent was not to create an exhaustive list of every CU and allocate specific MKR amounts to them, but to provide categories that would cover most prospective CUs.

MKR Compensation has been actively discussed for several months now between Planet’s proposal, the SES proposal, and within CU budget threads. Multiple Core Units have not proposed any MKR compensation yet and others are mixing and matching existing proposals. Lacking standardization is an issue both from attracting talent and tracking our financials. As Winston Churchill said, “Perfection is the enemy of progress” so we decided to move this proposal forward.

MKR holders are voting on the six Core Components listed under specification. To summarize:

  1. Proposed MKR Comp must be listed under one of four primary domains
  2. Core Unit MKR Comp must be pursued separately from CU operating budgets
  3. Vesting will be one year cliff with quarterly vesting thereafter, with a maximum of four years
  4. Flatter and more equitable distribution will be used compared to traditional corporate structures
  5. No individual will receive more than 10x the lowest individual’s MKR within a CU
  6. Framework will be modified based on community feedback and updated regularly

Regarding the last point - there are multiple ways we are already thinking through to improve the guidelines.

  1. One key issue raised in the discussion thread, is how we can effectively have a CU ‘negotiate’ their compensation with the DAO. Currently, the decision comes down to an on-chain vote with a binary outcome which I don’t think is great for either party. I’d love some suggestions for how this can be improved. I’ve considered adding a polling requirement for each MKR comp proposal with different voting options (requested amount is too high, too low, appropriate) but am undecided on how to implement.
  2. Another guideline I think we should consider implementing is requiring each MKR proposal to include a peer compensation analysis. This would give the DAO an understanding of how the CU is calculating their compensation and what peers are most appropriate. This would be easy to implement for CUs that align with existing functions (engineering, sales, risk) but a challenge for other CUs (governance, SES).
  3. Lastly, we considered requiring each CU to disclose the number of facilitators/team leads, senior contributors, and junior contributors with corresponding MKR amounts for each.

The guidelines are intended to be flexible for the reasons you mention - team seniority, domain applicability, etc. to be able to accommodate both superstar and junior teams. We specifically addressed this in the discussion thread:

Compensation guidelines should be flexible enough to accomodate both superstar teams and those with less experience but that have shown potential.

Ultimately, it is up to governance to evaluate each individual proposal on its merits and determine the appropriate MKR compensation.

The MKR per person is based on FTEs, I will clarify in the OP. Someone switching from part to full-time would receive a pro-rata allocation based on commitment then the full allocation after converting.

This is the nature of equity-like compensation packages - it is a trade-off between guaranteed, fixed compensation and variable, high-risk high-reward compensation.

As we’ve discussed I am in agreement with much of what SES has proposed. In fact, most CUs could use the MKR compensation formula SES provided to come up with base values for their team. We’ve opted to move something forward that focuses on simplicity and flexibility both for the facilitators and DAO rather than detailing all potential problems and solutions.

I’m not sure what you mean, we’ve stated multiple times that the MKR compensation listed is NOT fixed, and dependent on each individual team’s experience, mandate, market value, etc. You could have a superstar team that receives more than 2x a listed amount and one that receives half within the same subdomain and that could be perfectly reasonable depending on the specifics of that CU.

Appreciate the feedback and look forward to your thoughts on the additional potential guidelines and other areas the proposal can be improved.

5 Likes

Alright, then. Here are the reasons why I don’t think it’s a good idea to vote this into a MIP in its current form.

The purpose of this is unclear.

As an indication of the average MKR amount per team member, it’s not useful because that would require the team configuration to be defined. It’s understood that the amounts are relative, but not to what. What’s the baseline, a team of seniors, juniors, in what FTE proportion? Which profiles: engineers, lawyers, analysts, support, accounting? If this baseline isn’t defined, it’s not useful to define amounts.

Purely as an accounting category, it’s fine. But that has little to do with MKR comp as it would apply to the entire budget. If we want accounting categories, let’s vote on accounting categories.

This is okay if the MKR comp is part of the original set of MIPs. So, separate but simultaneous.

If it isn’t simultaneous, it’s a bad idea. You don’t hire an entire team and leave a substantial amount of their comp up in the air. The original motivation was that, else, “MKR voters arms get twisted.” The opposite is the case. Negotiating MKR comp once the team is already up and running is twisting the CU’s arm and deals more damage if a team that already started, decides to stop because they don’t agree with the MKR comp. Or it falls apart because certain team members quit because the MKR comp is lower than expected.

4 years is too long in a volatile environment like crypto. I suggest to reduce the maximum to 3 years so that we avoid a situation where governance practically has to fire a team because their bonus is unacceptably high after 3 years.

This is vague and doesn’t have any concrete consequences. Propose to leave it out.

This is concrete. It’s unclear how this will be checked, if at all. And it’s unclear if it’s necessary for governance to meddle in CUs’ affairs like this. With all the challenges before us to agree on details that we have to agree on, should we be voting in MIPs that define rules that aren’t really necessary to agree on? From the DAO’s point of view, the average and total MKR expenditure matters and what it gets in return.

For this one it would be useful to define a term. Will the amounts be reviewed on a quarterly basis or a different cadence? How will the amounts be voted on?

Overall, this proposal tries to oversimplify something that is inherently more complex. We should try and make things as simple as possible but not simpler because then we just end up with the original complexity anyway, plus a broken model.

5 Likes

I was but @Aes is in my CU (so maybe unfair, even if I don’t contribute to it). My impression is that it is quite fair, clear, and allows some flexibility with all the specific things we will face (in which linking MKR to an exponential version of the DAI compensation is not great). I see how to craft something that I’m comfortable with. Like Core Units MIPs, this MKR MIP will be extended by what I would call case law (case MIP?).

Having the perfect MKR compensation framework is one thing, having the most valuable protocol in DeFi another. I prefer to earn 2x less MKR but work for the most valuable protocol in DeFi.

I’m not saying that the multipliers are correct but somewhat reflect the MakerDAO view of the world. i.e. having a good UX and marketing is not important, and I would agree they aren’t in our current mental model. Corporate strategy meets compensation. Not saying it’s for the best (as a hint Apple (UX), Microsoft (sales?), Amazon (operations) are quite in front of Google (tech) in market cap). But they are good enough for an organization unable to define a strategy.

1 Like

Thanks, @SebVentures. Having someone like you being consulted always add a layer of quality.

MKR holders will not be voting on the multipliers.

I thought it was only me, but I find it quite saying that someone with your experience in Maker (and several others) is having a hard time interpreting this MIP.

Can you imagine how someone that wants to join Maker would feel?

1 Like

MKR holders will vote on the text. Illustrations and suggestions are part of the text. Let’s follow those suggestions and it will become custom.

It probably sounds worse than intended, but I read:
“Let’s put in numbers, when the Community questions them say that they’re just examples, and once they’re voted in we will say that they were actually not examples, but strong suggestions”.

I think I’m giving up on this topic. It does not reflect the state of conversation that was started, and it ignores obvious pitfalls in the name of oversimplification.

Why I think MKR holders should vote NO to this MIP:

:triangular_flag_on_post:It reintroduces the concept of domains (when they were abandoned in MIP38 to allow for Core Units to be multi-disciplinary). This is a huge red flag, as it sets a vision for the DAO disguised in “just example guidelines”.
:triangular_flag_on_post:It kills the possibility of thinking outside the (re)introduced domain box. This doesn’t seem right.
:triangular_flag_on_post:It introduces unnecessary rules without weighing the consequences.
:triangular_flag_on_post:It adds unnecessary overhead for reviewing guidelines (that are just suggestions). The process hasn’t even been defined and “the Community will do it” doesn’t cut it.
:triangular_flag_on_post::triangular_flag_on_post:As guidelines, they fall short of helping the future Facilitators. They probably introduce more confusion (as Contributors with a ton of experience are still wondering about the interpretation).
:triangular_flag_on_post::triangular_flag_on_post::triangular_flag_on_post:It overspends MKR, as the most junior, part-time position needs to be 1/10th of a superstar (this is not Ben & Jerry’s).

Happy to discuss this over a call if anyone think it’s needed.

1 Like

@juan this MIP is 5 days into RFC, how about we try to make it better rather than campaigning against it already? It doesn’t feel like writing it off at this stage is really fair, nor much in the spirit of cooperation or consensus building.

As far as I can see @Aes responded to your last set of comments, to which you did not respond, except to say you’re giving up and that everyone should vote against it because of a completely different set of points that you didn’t raise in your first set of feedback.

For what it’s worth, I do think it would be better to make some of discussion points raised here more clear in the MIP text.

1 Like

As a hard-liner against MKR dilution, this is my chief concern with flatter compensation structures. If we’re not lying to ourselves, then there are certain positions that will need MKR for retention under any plan. So a more equitable ratio of MKR between top and bottom compensation simply lifts the floor for those who don’t actually need much or even any MKR to be retained.

I think this can be fixed, but don’t have a specific recommendation at hand. If that philosophically is a dealbreaker, then I guess I’ll be in @juan’s camp. But as LFW said, we have lots of time so perhaps we can figure out how to bring the concerns to heel.

To be clear: I am in favor of as little MKR distribution as necessary. Note that if a group is being under-resources in DAI, then obviously that and other factors can be considered. But I’m not a huge fan of leveling compensation between those we pretty much have to give a bag of MKR to and those we don’t

2 Likes

I have been thinking about these compensation proposals a lot and I think the reason there is so much contention is that we’ve jumped a few steps ahead of the overall governance process.

Here’s the problem: Everyone proposing these frameworks is also seeking to be compensated by them. It’s basically organized labor. It’s the core units negotiating with the community, who does not necessarily represent the majority of MKR. The reason for this vacuum, in my opinion, is that the MKR holders are not sufficiently engaged with the governance process. They have requested governance delegates to remedy this, and I believe that delegates would be the best group to interpret, negotiate, and implement a compensation framework.

So my question is - would you be willing to withhold this MIP until there is at least 10% of the MKR supply in the hands of delegates? All CUs are receiving generous salaries and will not be going without compensation during the delay.

6 Likes

While there is an element of this, I will note that other community members have been engaged in the process as well at various times. Ironically Aes was more of a community member when we started this process, and is now potentially moving into a contributor role. Agree that it would be better to have more MKR Holders engaged with the process.

So that’s a question for @Aes more than me. Me being down as an author is a bit of a miscommunication, I should be down as a contributor, as I’m not making any final decisions as to content or this proposals progress in the governance cycle.

I don’t think it’s a bad idea to wait for delegates to launch (+ x weeks), personally. Though I know @Aes wanted to get it up asap. I’m less sure about holding it back until delegates have x% of the total supply, feels like a toss up at this point how highly delegates are empowered by MKR Holders, and I wouldn’t want anyone to commit to a certain percentage that might take months to reach.

1 Like

Agreed, I shouldn’t have made it sound so inflexible. I’d also say that we should put an end date on how long we’d wait for the delegates to onboard (after discussing with PE about the timeline).

1 Like

First of all - appreciate all the feedback received thus far. This is my first MIP and the intention was to provide a broad set of guidelines and refine with community feedback. I’m a bit surprised at the level of contention - my understanding was that “RFC” was for receiving community feedback, collaborating and revising a MIP until there was community consensus. If that is not the purpose of submitting a proposal for RFC, please let me know.

Let’s not forget the reason the working group was formed in the first place - the community expressed a strong desire for a standardized structure. Initially there was desire for the working group to set compensation amounts for each CU. Due to the complexity and numerous issues identified throughout the process we decided to focus on building broad guidelines and to let Governance determine the appropriate MKR compensation for each CU directly based on each individual proposal.

Purpose of Domains is to set guidelines for relative values to act as an anchor point in subsequent proposals. However, as mentioned multiple times in the proposal and comments, it is up to Governance to decide what each CU budget is appropriate.

Baseline values assume each team is the same structure. As mentioned in my prior post, we have considered adding a requirement for each proposal to disclose MKR received for each level within their CUs as this will provide better transparency to the DAO and allow them to determine a fair number based on team structure.

Best practice would be to submit the request for MKR compensation simultaneously with the DAI compensation or shortly thereafter. Allowing MKR to be requested later allows the DAO to hire and evaluate a new CUs contributions prior to making a larger investing (essentially a proof of concept).

I agree and have revised.

Removed.

Max MKR an individual will receive is recommended at 10x the lowest individual’s MKR within a CU. This recommendation does not specify that every individual within a CU must receive MKR compensation. We believe it would benefit the DAO to understand the team structure and the market rate for CU contributors.

The MKR amounts are outside the scope of this MIP and will fluctuate from the anchor values significantly based on team experience, mandate, market value (of the team and MKR price), and any other factors Governance deems are important. Regarding the domains, I am certainly open to adjusting anchor values and adding new ones when necessary. We could certainly take a poll or discuss ways of doing it, but since it ultimately doesn’t dictate what any CU will receive I’m not sure how much value that would add.

I’m not sure how I could be more clear that the table is for illustrative purposes and not recommendations for what CUs should receive. It’s listed before the table in both the discussion and MIP. Frankly, I debated including a table at all because I knew there would be people who would skip over the text and go straight to the table. I will bold and highlight the section for visibility.

We decided to include the table primarily due to feedback received and also to show the financial impact of the plan (or any plan if one wants to adjust the MKR amounts to reflect what they feel each domain/CU should receive) which was requested by many community members. This was absent from all other proposals.

These guidelines do not prevent any CU from being multi-disciplinary, I will clarify in the text.

Fortunately we are in the RFC phase and the guidelines can be revised prior to submission. I will clarify in the text, but the MIP recommends following a simply five step checklist:

Guideline (Recommendation) Checklist:

  1. Proposed MKR Comp should be justified in relation to one of four primary domains (can be listed as multi-disciplinary where necessary)
  2. Core Unit MKR Comp should be pursued separately from CU operating budgets - recommendation is to post simultaneously or shortly after operating budgets are requested
  3. Vesting will be one year cliff with quarterly vesting thereafter, with a maximum of three years
  4. Max MKR an individual will receive is recommended at 10x the lowest individual’s MKR within a CU. This recommendation does not specify that every individual within a CU must receive MKR compensation.
  5. Framework will be modified based on community feedback and updated on a quarterly basis once accepted

To re-iterate, if a CU decides to not follow these guidelines, Governance should request justification for deviations.

I do not understand how it overspends MKR on junior resources, unless you feel junior resources shouldn’t receive any MKR at all, which would be surprising to me since you were supportive of interns receiving MKR comp.

If a facilitator of a CU was making $50K-$300K in MKR per year, I don’t really see paying a junior resource $5K-$30K as overpaying. From my research this is on par and even less than what many tech firms pay for junior resources for bonuses. If you could provide an example where this is overpaying and what you think is reasonable, I would be happy to consider revising.

I’ve edited the post to clarify that there is no requirement or recommendation to provide MKR compensation to every individual within a CU. For those that do, the 10x multiplier is still a recommendation and a proposal could certainly justify a higher multiple.

2 Likes

As LFW mentioned, I started as a community member and as @Derek, @Planet_X, and @LongForWisdom can likely attest to, I pushed for what I believed was best for the DAO and CUs under methodologies which in most cases led to lower absolute MKR values awarded.

What specifically do you feel from the below guidelines are not in the best interest of the DAO?

Guideline (Recommendation) Checklist:

  1. Proposed MKR Comp should be justified in relation to one of four primary domains (can be listed as multi-disciplinary where necessary)
  2. Core Unit MKR Comp should be pursued separately from CU operating budgets - recommendation is to post simultaneously or shortly after operating budgets are requested
  3. Vesting will be one year cliff with quarterly vesting thereafter, with a maximum of three years
  4. Max MKR an individual will receive is recommended at 10x the lowest individual’s MKR within a CU. This recommendation does not specify that every individual within a CU must receive MKR compensation.
  5. Framework will be modified based on community feedback and updated on a quarterly basis once accepted

The original working group attempted to actively engage large and small stakeholders as well as a third party to assist with the development of a plan. If you go back to the volunteer threads, there were very few volunteers for the large and third party stakeholders. I’m not sure how delegation will solve the lack of participation on the forums or development of a MKR compensation proposal.

Also to re-iterate, this proposal does not give CUs any amount of MKR compensation, they are simply broad guidelines intended to bring standardization, transparency to the DAO, scalability, and aid negotiations between the CUs and DAO.

I want to avoid providing direct feedback on this or any proposal from this point on. I really believe that this is a job for delegates. My logic for that is that these frameworks and the ultimate compensation they result in do not have a high level of urgency (unlike stability fee adjustments and other governance), but do potentially have high long term impact. It just seems prudent to fill the gaps in the governance process before trying to pass something like this.

If I correctly understand the timeline presented by the PE team, these delegates will be here quite soon. Is there any reason you wouldn’t want to wait? I think the entire community will have a better experience if high-importance frameworks like this are negotiated directly with the MKR holder representatives, rather than trying to guess the preferences of the MKR holders by sourcing feedback primarily with the community.

2 Likes

That was the purpose of the working group - formed by one large MKR holder, one small MKR holder, one existing CU facilitator, one prospective CU facilitator, and a third party (which we attempted to fill with another large MKR holder but could not). All were voted in by their ‘constituents’ which is essentially delegation.

I guess it’s not clear to me how having delegates will change the current situation or when they would even come - unfortunately many whales do not actively participate in the forums and even fewer were interested in joining the working group.

The alternative to not passing a MIP is to continue to allow every CU to do whatever they want with little regard for what’s in the best interest of the DAO. Every CU having their own unique MKR compensation plan is inefficient, not scalable, will create negotiation challenges for the DAO, and will lead to high administrative burden for evaluating and tracking these expenses.

I don’t think this is the alternative. In my mind, the alternative is to delay all future MKR compensation or compensation frameworks until there are delegates who can directly interface with their sponsors. Like I said, I personally believe that all of the current salaries are generous enough where we will not have any attrition due to the minor delay. Also, the Protocol Engineering team already has their MKR comp negotiated, and that’s likely going to make up the bulk of the payments anyway. This differs from delegation because delegates are directly accountable to the MKR holders while working groups and other elected actors in the community are only tangentially accountable. For example, MKR holders are not able to “unstake” from this group without one of them proactively putting up a MIP to do so, and if they were willing/able to put up MIPs we wouldn’t be in this situation - hence the need for the delegates.

So should MKR holders reject the MKR compensation proposals that are currently in Formal Submission and any proposals posted after? Will you be organizing a campaign to go this route?

1 Like