RSUs are not necessarily better. You get taxed on those as ordinary income. If the grant is large enough, you're effectively stuck with paying tax on an illiquid asset. With options you're only taxed at the time of exercise. So in the case of the 2014 grads, they'd be underwater on the value of their options vis-a-vis the exercise price, but wouldn't necessary have any sunk costs provided they haven't exercised any of the shares. The downside with this situation of course, is that the employees have "golden handcuffs" since if they leave they'd have to exercise within 30-60-90 days or lose their vested, unexercised, options.
For those employees that did exercise their underwater options, one small silver lining is they can write those losses off on future tax returns.
> For those employees that did exercise their underwater options, one small silver lining is they can write those losses off on future tax returns.
Note this only applies to NQSOs not ISOs - since the gain in the ISO case is taxes as AMT; the loss can only be carried as an AMT loss and applied only if/when you are actually subject to the AMT.
However, you're only taxed on RSUs if they are actually released to you.
It's possible to have RSU awards that vest without them being released to the employee. This means that (unlike exercised options) you can't sell them on the secondary market, but it also means that you aren't liable for taxes on an illiquid asset.
For those employees that did exercise their underwater options, one small silver lining is they can write those losses off on future tax returns.