
Mark Pincus memo to Zynga employees - adrianscott
http://finance.fortune.cnn.com/2011/11/10/exclusive-mark-pincus-memo-to-zynga-employees/
======
_delirium
I'm glad to hear that anyone at Zynga is meritocratically given a chance to
lead, rather than it being based on how early someone got in. Looking forward
to hearing more about the process that will be used to determine whether
Pincus should stay on and retain his shares, or whether he should be replaced
with a different leader.

~~~
sbashyal
Early employees were given certain number of stock options based on what Zynga
was valued at that time. They should not take it back now, period. They can
implement any policy going forward but it's taking the stock options from
early employees is a problem. Early employee should not be treated as stepping
stones and the "meritocracy" ploy is just that.

~~~
danssig
I think the parent was saying he would love to see Pincus' own rules applied
to Pincus.

------
mattsoldo
Pure spin: Pinkus is trying to make this story about merit and reward. But
really its about not honoring contracts.

The stock options given to employees were part of their employment contract
with the firm. They were based on imperfect knowledge of future facts on both
parties, i.e. taking risks. Zynga attempted to use its power to revise the
contract post-hoc.

If I have to negotiate a deal of any sort with Zynga in the future, I'll be
wary of them honoring it.

------
bgentry
This is an official memo to Zynga employees and Pincus can't even take the
time to use proper grammar and capitalization?

~~~
wyclif
Yes, after my repulsion at the idea of Zynga clawing back early stock options,
my second thought is that I can't respect a founder who writes to employees in
lowercase and doesn't know how to use an apostrophe.

~~~
cookiecaper
I don't know if it's so bad. In textual communication, we don't have
inflection, body language, or many of the other elements that can imbue a
face-to-face conversation with certain meanings or tones. One way to convey a
friendly tone can be the employment of loose-yet-intelligible grammar,
spelling, and punctuation in your messages; it assumes a certain degree of
familiarity and can dissuade notions of stiffness and reinforce notions of
laxity.

In some situations, the formality of exact punctuation and grammar can be
unsettling. Perhaps discussion of something as business-like as stock options
is not the time to drop the formality, but it isn't necessarily a sign of
disrespect; in fact, it could be the opposite.

~~~
epo
If you believe this you are destined for a lifetime of being misunderstood and
probably laughed at.

"Loose-yet-intelligible grammar, spelling and punctuation" doesn't mean
friendly to me, it means ill-educated at best, retarded at worst.

~~~
eavc
"Loose-yet-intelligble" is exactly the kind of grammar you have used in this
comment, though.

You should have put a comma after "this" in your first sentence, and you've
got a comma splice in the second sentence.

The point they were making is that violations of formal grammar can be useful
in some contexts and for some purposes.

What I just wrote is an apt example, actually. I used "they" as a gender-
neutral third-person pronoun because, though it's not standard grammar, it
suits the tone I want to convey here.

~~~
epo
This is a silly game, you mispelt "intelligible". The missing comma is well
spotted and down to my lack of proofreading, the comma splice is more
stylistic than anything in my view.

However, by concentrating on how I wrote, rather than what I wrote, you are
reinforcing my view that "loose-yet-intelligible" is not OK. You provided
further reinforcement by writing a clumsy sentence which you then felt the
need to justify.

------
tzs
That didn't really say anything.

Perhaps someone could find another company that has threatened firings unless
employees give back options, and Pincus can copy their CEO's memo to
employees.

~~~
sixtofour
"That didn't really say anything."

Actually it did. He mentioned that "leveling up" is part of the culture, which
I read as a passive/aggressive way for him to both mention and justify the
clawbacks. "Those people just weren't able to level up."

~~~
VladRussian
a nice spin to get support of the majority of the employees against the
supposedly unfair overcompensated "old guard" minority. Playing on the low
instincts of people seems to be an art mastered by Pinkus.

~~~
sounds
Yes, but it probably will backfire now, with all the publicity. One Pinkus
fail: acknowledging the bad press. He should take a page from politicians:
deny, no comment, and deny.

Most of "the guys" will listen to the moderate voices, and will probably only
join a suit if it's class-action.

------
fragsworth
The whole situation can be fairly simply explained: a conflict exists between
rapidly-growing companies and their early employees. It's kind of a flaw in
the way the system works, and it's not really just for pre-IPO companies.

A common situation is an early "non-essential" employee receives something
like 0.25% of the company, vested over 4 years. Suppose that at the time the
employee is hired, this 0.25% is worth $10,000 or so ($4 million valuation).
If the company manages to grow 100x in value, the company is now paying a non-
essential employee $250,000/year in stock. With at-will employment, the
company can legally fire them.

The conflict arises because there is no _legal_ incentive for the company to
keep this employee at this point. Fortunately, it's not all that bad for the
employees as long as they have _some_ vested stock since this problem only
arises if the stock value gets too high.

~~~
grandalf
Couldn't you make the same argument and say there's a similar conflict between
rapidly growing companies and their early investors? After all, those
investors got the shares at pennies on the dollar.

Early employees who have shares are also investors, but they pay with their
time and skill. I look at the vesting period as an insurance policy for the
firm that an employee who turns out to be extremely valuable won't decide to
quit b/c of the ongoing upside.

The only incentive the company should have to keep any employee should be that
employee's ongoing value to the company. Sure the founder might feel loyal to
some of the employees, but his/her job is to allocate resources to pick the
best talent, not to wallow in sentimentality. Even a company like Zynga hasn't
"made it", there is still a lot more work to do.

Firing an employee before he/she is fully vested is akin to canceling an
insurance policy. You only do so if you think the insurable event(s) you were
worried about are unlikely to occur.

~~~
fragsworth
To answer your initial question, an early investor is absolutely not in the
same situation, because investors do not typically vest their stock over a
period of time. They receive it all at once, and there are no future shares
that can be withheld from them.

Not to be argumentative, but I'm not quite sure how firing an employee before
they vest their stock is in any way similar to canceling an insurance policy.

~~~
grandalf
The employee does receive all shares earned "at once" on the day that they are
earned. If it's for 365 shares vesting after 1 year, then one share is earned
each day (assuming no cliff).

Just as there is nothing unfair about an investor selling his/her shares or an
employee quitting, there is nothing unfair about an employee being terminated
and not getting all of the shares he/she would have gotten if employment had
continued. Stupid != unfair.

Sure, you can go down the path of sentimentality and say, "Oh no, an investor
who believes in the firm should never sell", or "If you're a good employee
you'll be loyal to the end", both are absurd statements. Life is random and
sometimes unexpected things (good and bad) happen that make existing
arrangements non-optimal.

The problem is the greed on the part of employees who counted the dollars
before they vested.

This may harm Zynga's ability to recruit and may harm morale, and if it does
Pincus is to blame, and someday we may know whether he made the right
decision.

~~~
einhverfr
I don't disagree with your analysis as far as you take it but I think it's
different when an employee is told "give this back or quit so we can take it
back." I think that's where you have potentials for issues and even the WSJ
notes that this is an area that hasn't gotten much review from courts yet.

It seems to me, it's permissible to:

1) Let the options vest, leave them with the employees

2) Outright fire the employees and recapture the shares

3) Offer to purchase back at some specific deal

But that's different from saying "give them back or you are fired." At that
point this is a renegotiation over not only compensation for current and
future work but also for past work, and that's where I think a legal claim
might come in.

~~~
grandalf
I agree. At the very least (from what we've all been reading) the process was
messy.

If I were one of the employees I'd prefer a threat (even a serious one) to
just showing up one day and finding that I'd been fired.

I too think that your third option would be best, and I wonder why there
wouldn't have been some compromise made along those lines, but it's
complicated by the reality that Pincus can simply fire the employees and have
the shares w/o negotiating. Thus any negotiation becomes a sort of pretend
dance and is as likely as not to result in bad morale.

I think that at least for accounting purposes the shares are officially
"earned" at the end of each work day during the vesting period. I think the
argument could be made that while an employee may perceive a grant of unvested
ISOs as compensation at the time they are granted, they are indeed not
compensation but an optional incentive for the employer to use in the event
that an employee is extremely valuable during a period of rapid growth where
turnover would be harmful to the company's prospects.

If the ISOs were meant to be compensation, why not have them vest
immediately... the employee still would not have to pay taxes on them until
they were exercised and the mechanism incentivizing performance is there
simply via the purchase price.

~~~
bluedanieru
I think I would rather be sacked outright, and if I were really trying to
recapture those shares that is probably what I would do as well. Even if you
get an employee to stick around after this, the hit to morale is such that
it's almost certainly better for both parties that they go somewhere else
anyway. Especially in this case where you're telling the person they aren't
pulling their weight.

Of course, the best option is not to be such a stupid asshole, but that's not
practical in every case, as we see here.

------
rbranson
Successfully taking risks should be rewarded in any meritocracy. Portraying
employees who took a risk by working for the company before they were making
money hand over fist as undeserving is wrong.

------
zerostar07
This sounds surreal. It's like the Godfather telling his family how ethical
they all are. Cosa nostra ethics of course ... what happened to the good old
"every dirty trick in the book" days?

~~~
VladRussian
> what happened to the good old "every dirty trick in the book" days?

he's got to the end of the book, and this is him writing new chapters to the
book :)

------
Macsenour
This is the part that scares me: "we want everyone to put zynga first and
contribute to the overall success of our company...".

I have a life, I want to continue to have a life. That will always be more
important than my job.

~~~
derwiki
This is a little tangential for the overall conversation, but I feel that it's
worth bringing up. There are many ways to get fulfillment out of life. For
some, it's family, hobby, religion.. for others, work (and being productive at
it) provide life fulfillment. My manager directly tells candidates thats he's
looking for the latter.

To reiterate: it's your business what is the most important thing in your life
and it's not really fair to judge others for having different priorities.

~~~
cookiecaper
It's never appropriate for a company to presume to consume an employee's
entire life. It is not OK, even if an employee is (foolishly) willing. Taking
advantage of the short-sightedness of others is unethical.

------
mahyarm
Mark made the mistake of going half way in trying to accomplish his
Machiavellian goal. He should of either left them be or terminated them. Or
done it how it's usually done where they dilute and give the new stock to the
people they like better.

[http://www.sebastianmarshall.com/the-failure-to-execute-
koba...](http://www.sebastianmarshall.com/the-failure-to-execute-kobayakawa-
hideaki-and-the-fall-of-the-toyotomi)

------
azov
Huh? This memo doesn't seem to have much substance in it. Is he just brushing
it all off basically saying "WSJ is lying, now forget about it all and go back
to work" or am I missing something?

~~~
mkopinsky
Note that he does not dispute the facts, just the fact that it "paints our
meritocracy in a false and skewed light".

"No officer, I didn't kill him, and anyway, he deserved it!"

------
damoncali
In Pincusland, contracts are to be disregarded because of, um, you know,
merit.

So what about the merit of the people who gave out all those options? What
about them?

------
dendory
So he's basically confirming the rumor, by saying they are a meritocracy and
early comers don't get preference.. Still doesn't address the fact that if
true, they got back shares that they gave out.

------
trapped123
So all the sleazy policies are ok now as Zynga has been proclaimed to be a
meritocracy by Mark Pincus. Nothing to see here folks, please move on!

------
Mordor
Well, I hope Mark Pincus resigns and returns his stock options to concede his
lack of merit.

------
epo
It sounds like Pincus may have inadvertantly done everyone a favour in that he
will make people be much clearer from now on as to what stock options really
mean and what they are really worth. Sounds like trading present salary for
future stock value has just got a lot less compelling a proposition.

------
axefrog
Bottom line -- if Zynga feels that an employee is not pulling their weight,
they should let the employee go for that reason alone. Stock should never
enter into the equation and the fact that it has shows that Pincus'
motivations are not as pure as he'd like people to think.

------
mattee
He shouldn't be CEO if he can't write a memo that is free of grammatical
errors.

------
rglover
I'm all for a meritocratic culture, but sorry Mark, this has nothing to do
with merit. People who believed in you joined your company early and invested
in it. Irrespective of their performance, it's not their fault that their bet
was right and now that you're on the verge of success, you have to pay up.
Deal with it. If you're concerned about their performance, let them go based
on that and not an ultimatum to return stock.

------
fab13n
Those who have a material proof of the original story are going to get a
looooooooooot of shut-up stock options, whether they work in the kitchen or
not.

------
alexwolfe
Not sure how this memo addresses the complaint of employees being strong armed
into relinquishing their stock options. Seems like a very vague and general
message that didn't offer any real insite.

------
dlevine
I find that the surest sign that a company is _not_ a meritocracy is when the
CEO regularly states this. Kind of like how most Communist countries are known
as "The People's Republic."

------
jrockway
Ran out of capital letters there towards the end. That's nice work, Lou.

------
kylec
It seems his shift key broke halfway through

------
milod
on the lighter side <http://didweipoyet.com/>

------
michaelochurch
Perversely, I enjoyed reading this memo. Mark Pincus is a classic psychopath
and it's always educational to observe how people like him attempt to justify
themselves.

The psychopath's language is usually a caricature (sometimes to the point of
absurdity) of going assumptions of the culture in which he's trying to win
acceptance. Though they have no values, they are skilled at picking up others'
values and using them to make their actions seem acceptable. In Pincus's case,
he's taking the noble concept of meritocracy and twisting it into bizarre
shapes, refusing to stop even at outright fraud.

Oh, and if I understand Mr. Pinkus right, people who work with food don't
deserve to make money. Fucker.

Judging his attitudes from his writing and actions, he'd be a natural fit for
the Tea Party. Since the Tea Party and Zynga are the two malefactors most
responsible for insufferable activity on Facebook, this is a natural
transition for Mr. Pincus.

To the screwed: sorry to hear it, but I guess this is what you get when you
work for a company whose name sounds like 4th-grade anatomical slang.

~~~
protomyth
I was with you until the Tea Party comment. You are completely wrong about the
motivations of the people who show up at Tea Party events. The Tea Party
definitely in no way resembles the actions of Mr. Pincus.

I really wish people would keep politics out of a non-political discussion
especially in a way that characterizes people unfairly.

~~~
michaelochurch
The Tea Partiers are high on this idea that the country consists of "water
carriers" and "water drinkers" and that society is essentially zero-sum, with
cracking down on the "water drinkers" being the only solution to society's
problems.

Pincus's bullshit "meritocracy" justification is eerily similar. He's trying
to deprive people of equity now that it's worth something, and when people
point out that this is scummy, he points his finger and whines, "but _they_
aren't pulling their weight!"

That's the similarity I was trying to point out, though maybe I justified it
poorly in the grandparent post.

~~~
jerf
"The Tea Partiers are high on this idea that the country consists of "water
carriers" and "water drinkers" and that society is essentially zero-sum, with
cracking down on the "water drinkers" being the only solution to society's
problems."

You seem to have confused the Tea Party with the Occupy movement? I mean, both
are sort of amorphous and all, but to the extent that they have a distinct
identity from each other that would seem to be one of the core such
differences, and that's where the Occupy movement shows up, not the Tea Party.
It's basically a restatement of the 1%/99% motto.

~~~
_delirium
In that respect, the tea-party-affiliated "53%" movement has more or less the
same structure, but disagrees over how to split the water carrier/drinker
boundary.

------
earl
These employees were given options for some combination of performance and
risk / opportunity cost from taking an early job in an unproven startup. For
Pinkus to renegotiate with only the former in mind while ignoring the latter
is bs. These employees need lawyers. But such self-dealing is what you would
expect from someone like Mark; I can't understand how anyone believes someone
involved in lead-gen scams the way Zynga was retains any ability to claim to
be ethical, and particularly to be "proud of the ethical and fair way that
we've built this company."

~~~
gm
Funny... How's the conversation with the lawyer going to go?

"Ok, so you're employed at-will. You are only talking about losing your
unvested shares. Your employer has the option to fire you and prevent you from
vesting anymore shares, yet he is keeping you on board and wishes to
renegotiate the matter of your remaining unvested shares.. Do I have that
right?"

"Yes. I want to remain employed, and I want to vest all my unvested shares"

"You realize your employer can perfectly legally just fire you and you will
not vest any shares at all, right?"

"Yes, but I want to get all the shares I'm entitled to"

"I realize that, bu you realize your employer can perfectly legally just fire
you and you will not vest any shares at all, right?"

"Yes, I guess they can."

"You don't need a lawyer, you have no claim here at all, there is nothing I
could do. The underlying assumption of your employer is that you have not been
doing a good job. I'm pretty sure they have a paper trail to support their
case. You will have to contest that, but first you need to get fired,
otherwise there is no harm done. But once that happens the onus will be on you
to prove that you were fired for an illegal reason, and that is a very high
standard to meet. Very high."

"Hmm, ok"

"Now, let's see what 'at-will employment' means: 'The employer is free to
discharge individuals "for good cause, or bad cause, or no cause at all," and
the employee is equally free to quit, strike, or otherwise cease work.'"

"Oh shit."

"Maybe you better negotiate for your remaining unvested shares. Some shares
are better than no shares. You could be getting fired right now for all I
know. You could bring me in to help you negotiate, but if I were them and my
employee brought in a lawyer to negotiate, I would fire him on the spot rather
than play a game I don't need to play."

"Damn."

~~~
davidcuddeback
> You realize your employer can perfectly legally just fire you and you will
> not vest any shares at all, right?

I'm not so sure that's true. Zynga is headquartered in San Francisco and is
subject to California's employment laws. I may not be an expert on
California's laws regarding at-will employment, but I sat on a jury for a
wrongful termination lawsuit and "at-will" never came up. I would assume any
lawyer worth his salt would bring that up in the company's defense if it was
valid. Does anyone know what California's laws are regarding at-will
employment?

Edit: After Googling around for a bit, my impression is that California _is_
an at-will employment state without many exceptions (basically can't fire
someone out of discrimination).

~~~
gm
Yeah, it's pretty hard to prove you were fired for an illegal reason,
especially if your employer has a paper trail.

My point in all this is that there is no legal claim here. What's at dispute
is shares that have not vested. It's kinda like being pissed off that you will
not get the free coffee you get at work if you get fired or if the employer
chooses to not provide it anymore; or next year's bonus, or whatever else you
have not earned yet.

I guess the downvotes mean fellow readers do not like what I say, which is ok.
As long as what I say is not false I'm ok with it.

~~~
einhverfr
I don't think the firing would be the issue. It's more of a "we are changing
what we promised you. Acknowledge this or leave" that might lead to claims.

It doesn't seem that different from reneging on retro pay that an employee
might have been promised for example.

~~~
davidcuddeback
But they're not changing what they promised. Stock option vest as long as
you're still employed by the company. If the company fires you, your options
stop vesting. The promise is in regards to the stock option vesting, not the
length of your employment.

~~~
danssig
So the question becomes; _why_ are they firing you? Is it to _prevent_ you
from keeping your part of the agreement or because you're crap? Stupidly,
Zynga has _proven_ that it was not the latter.

~~~
einhverfr
That is what it boils down to, really. And the thing is that even in an at
will state, you still have contract considerations.

------
grandalf
edit: why downvote this? I've just expressed confusion that a cooperative
outcome could not be reached.

While it's reasonable that Pincus wants to find some way to obtain more shares
other than buying them, sending an email like this could not be beneficial to
morale.

If it is truly in the best interest of Pincus and Zynga to obtain the shares,
then it's also in the best interest of the targeted employees to give up the
shares in exchange for something else with equal or greater expected value.

Since the hubbub around this reflects poorly on the firm as a whole, the
employees refusing to cooperate are likely shooting themselves in the foot,
though it also seems that Pincus has blundered significantly.

Pincus at least seems to be acting rationally about the future of Zynga, while
the employees (even if they have reason to be annoyed by this) come off as
being motivated purely by greed, spite, and short-term considerations.

~~~
redthrowaway
You're being downvoted because you either misunderstand the issue, or are
deliberately misrepresenting it.

This is not a matter of exchanging unvested stocks for something of greater or
equal value. This is a matter of Pincus telling a number of employees to give
up their stocks, in exchange for nothing, or be fired. That's likely illegal.

Your solution to this is that they should roll over and accept this blatant
breach of their contracts, giving up the one financial incentive they ever had
for joining a startup, why? To preserve harmony? For the greater good of the
company?

That, sir, is why I and others downvoted you.

~~~
grandalf
It's not rolling over if the sacrifice is needed for the company to succeed.
If Zynga can't continue to grow then maybe everyone's shares will turn out to
be worthless. That's where the greed factors in.

~~~
rhizome
What do you call a company that can't grow without reneging on contracts with
_its own employees_? Hint: the word is typically an ethnic slur.

~~~
cpher
FYI, to renege is actually medieval latin, but I digress.

~~~
zem
i think he was alluding to the phrase "indian giver"

~~~
rhizome
I was thinking more along the lines of "gyp" (sorry).

~~~
zem
there are a surprising number of racial epithets for the same concept (or
perhaps not so surprising). "welsh" comes to mind too, though i was in my 20s
when i realised it had racist origins and was not just a homonym.

