MIP56: Alternative MKR Compensation Guidelines

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).

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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.

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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.

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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?

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Assuming there is no delegate involvement before they go up for a vote? Again, I don’t want to comment on specific proposals. I orginally wrote yes here but edited it to a “no comment” because I really want to focus on the process.

No, the MKR holders can decide for themselves they don’t need me telling them what to do. I just don’t personally think these things will pass until delegates anyway, so believe it or not I am actually trying to improve the chances that one of these things goes through. This whole saga strikes me as similar to the Black Thursday compensation issue and the unfortunate state in which it ended. I think if we had delegates for that, everyone would have at least had a more decisive outcome.

@Aes, a lot of the feedback and nuances are falling through the cracks, so it might be more productive if we have a call about this.

We can also wait for the delegates. That might actually be a better route.

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Is it correct for me to think that basic salary for working at Maker is set to 180K/yr and the suggested multipliers for MKR rewards are this number.

Example Engineering - Protocol gets 1.5 multiplier so they basically get
180K DAI/yr salary and 270K/yr MKR - on average…

My question is related to whether the MKR vesting with this MIP56 is basically modulated by trailing price so that basically this E - P person basically makes no more than 450K/yr with vesting MKR.

Second question. Why isn’t this MKR vesting option to buy with the 6 month trailing option as the strike price? vs. what is done here (MKR basically given as additional compensation in addition to salary)?

This makes a huge difference to the contractor and the protocol in that for a contractor to earn a bonus on their vesting options the protocol price has to go up. With these options the contractor always makes a bonus on top of their base salary in MKR.

I am confused by how paying 180K/yr for a Legal person (low imo), and 180K/yr for communications vs. 180K/yr for a Engineer reflects the real salaries. I mean if a Protocol Engineer can make 500K/yr somewhere else why would they come or stay here same with qualified and experienced legal.

I don’t understand how a multiplier on MKR vesting rewards is going to compensate positions that can command higher pay to come here because no-one is going to take a pay hit from 250K/yr to come work for Maker at 180K/yr just to earn the extra 270K/yr MKR. I mean maybe they would but that 250K/yr job is also going to come with some nice bennies too.

What I really wanted to understand was forward looking CU MKR reward budget requests in light of MKR price appreciation 3-5x and whether this will mean there will be extra MKR left over in CU MKR rewards budgets or not.

I guess my primary question is why isn’t the MKR reward bonus just a flat across the board 1-1.5x salary for everyone. I mean then Engineering will automatically get more rewards, Legal probably second, Growth third, risk and governance 4th etc.

I really would like to see these rewards as options with 6 month trailing MKR price strikes btw. as this then aligns worker bonuses with MKR token price increases.

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No - base salary for each Core Unit is largely based on market rates, separate from, and unrelated to MIP56. Regarding the MKR amounts, the MKR amounts and dollar values are displayed for illustrative purposes. Relative multiplier values are provided as a recommended starting point for MKR budget proposals.

‘RSU’ type compensation was proposed over options primarily due to simplicity but also to increase retention in bear market scenarios where option strike prices could be underwater.

To clarify, this proposal is only related to MKR compensation - base salaries are paid in DAI and proposed separately. Most CUs are paying at or above market rates for base salaries and with the MKR compensation (if approved) I would expect the combined compensation to be on the high end vs traditional centralized businesses.

The below are the keys points of the MIP. I have not yet proposed a calculation for the ‘RTU’ value. There are significant drawbacks using tradfi methodologies and I’d like to work with the community on it.

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
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The Talent is out there–but most follow the same path as they get enamored by the $200,000 starting salary:

$200,000 paychecks, exit opportunities and proximity to power: Why graduates flock to Wall Street

So, if you’re going to recruit the best-- make sure you pay well.

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Thanks , interesting article.

It is also said here that 1% of graduates get the chance to become a overpaid/overworked slave of a top bank. I really hope that in the remaining 99% there are some outstanding talents who don’t have this as their only goal in life (the crypto industry is full of examples). I think there are those among them who can see their future beyond the paycheck in Maker and DeFi in general, because we can’t compete with JPMorgan’s money. If you just want to catch talent with the highest paycheck, that’s not a sustainable direction because there will always be someone offering more.

What’s more worrying is who and how will find that talent for Maker. I would improve on recruitment: finding and convincing them of the long-term opportunities here is a difficult but essential task.

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Thank you for the link to this it was helpful. I will have to look back but I don’t think I saw this as a reference or even a comment in any of the compensation documents. I could have missed it though.

I think my biggest concern is sustainability here. While I understand contractors will want secure long term contracts around pay I think the only way to assure this is to design the systems so that the terms around this ‘can be sustained’ by system financial construction.

I have been noodling a bit on how to make these MKR rewards long term sustainable and after a good fraction of a day have at least one idea so far…

There was one question that came out of my analysis as I was looking for a solution to sustainability here.

Are these MKR compensation rewards thought of a bonuses or are they thought of as a competitive salary compensation package? I mean people look at packages when they are choosing jobs and stock is usually considered a bonus perk and not a salary compensation except in startups where they may not have cash… So I am wondering whether these rewards are meant to be as a bonus or as partial salary compensation to find/retain key talent.?

Thank you for well thought response!

Up until this point my assessment is that MKR compensation has only been treated as a salary compensation package / retention bonus.

The argument in favor of these high bonuses that I’ve heard is that they need to be high in order to remain competitive however truthfully I’ve personally not seen anyone provide examples that justify the compensation.

When I attempted to do my own research from levels.fyi I found the following:

Facebook E8 - 302k base salary, 796k stock option 215k bonus

Google L8 - 326k base salary, 746k stock option 121k bonus.

It’s important to note though, these top paid software engineers are typically are managing 100+ developers across multiple teams which is why I do not feel like these would be accurate comps.

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I do expect over time as Crypto/Defi matures competition will increase from new core teams to compete in existing areas.

That being said, is it even possible for the DAO properly hire/replace teams managing critical infrastructure?

It’s once thing for the DAO hire a new marketing team but I honestly don’t understand how the DAO could even replace a team like Protocol Engineering. Considering they literally have the keys to the entire protocol. Would a major change like this be possible in a decentralized way?

Few comments I wanted to make with regards to the decentralized nature of MakerDAO:

The issue with this comparison is that in a decentralized environment you will never have someone managing 100+ developers. The model works differently. Leadership is provided not through direct management and reporting lines, but through education, guidance, and protocol governance contributions.

So if you are going to look at the number of developers that are managed by someone, and set compensation to those levels, you will only get lower tier managers. Which means you can’t compete.

I believe we need to drop that comparison and develop the decentralized equivalents. As I mentioned, the direction we need to look into, in my opinion, is education, guidance, and protocol governance contributions. One thing I believe in is that (successful) dev educators in a decentralized world should be paid more than devs who don’t educate; they are the equivalent of higher level managers in a centralized organization.

We need to decompose centralized management into the goals that it’s trying to achieve. And reward those that achieve the equivalent goals in a decentralized environment on the same level.

Protocol Engineering does not have the keys to the entire protocol, and yes, it is possible to replace them should that be needed – MakerDAO is truly decentralized today. Of course there are gradations and this is something that we always need to guard by further decentralizing centers of power. But it is already possible today for an external team to come in and, fully independently, run the same operations as Protocol Engineering (or the Oracles CU.) That team would need no one’s permission.

That being said, we do need to work on (1) further lowering the barrier to entry, and we need to (2) create real redundancy.

It shouldn’t just be possible for there to be a second PE core unit, there should be an actual parallel smart contracts development team. SES has actively been working on this exact problem since day one, together with PECU, in our Sandbox grants project and through our incubation program. We’re not there yet, but significant progress has been made and I believe we’ll see a parallel smart contracts development team within 4 to 8 months.

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The MKR compensation is designed to attract and retain talent. I personally advocated for performance based rewards to be 1/3 of the total MKR compensation but after discussing with the working group, the consensus was that we were too early to implement. I think this could be revisited over the next few years once the foundation of the DAO has been laid.

I’ve outlined my view on the compensation levels here, in the “Crypto-native Risk” section. For people to move from TradFi to DeFi and working for a DAO, there is significantly more risk.

In addition to the aforementioned risks, most CU budgets are being proposed for a 3-6 month runway and the DAO can decide to defund them at any time. From a purely numbers perspective, there is significant additional administrative overhead to joining a DAO - creating your own company, getting independent and unsubsidized health care insurance, lack of benefits (401K, T&E budget).

I cannot speak for the other CUs and their members but making the decision to join the DAO full time was not an easy one for these reasons. Personally, I am taking a pay cut if I exclude MKR compensation (which has not been proposed for RWF yet) and forgoing a high degree of financial certainty in traditional FP&A compensation which gets increasingly lucrative and equity weighted with experience (based on compensation levels I’ve seen at Fortune 100 companies).

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