[manyhats]

Good explanation. I'll nudge it even more with a Scenario C to further illustrate that ignoring non-cash comp leads to an distorted picture.

Scenario C: Company hires an engineer with zero base salary and $200k/year worth of stock that gets paid monthly with the correct number of shares to get $16.7k in value. The shares can immediately be sold back to the company for the full value.

The engineer clearly receives $200k of economic value. Whether the stock is sold or not has no effect on the value transfer.

Does this hypothetical company have 1) a 100% profit margin, or 2) is it losing money?

If you picked 1), let's say the engineer quits and for whatever reason the company needs to pay the replacement $200k/year in cash. To do so, the company sells $16.7k of shares to an investor each month. Is it still a 100% margin company?