I don't think the form of the offered equity matters that much, it's going to be whatever is most favored by tax laws. I'm guaranteed to be worse off accepting any form of deferred equity compensation if a manager is going to sink to this:
if (market.valueOf(employee.equity) > market.valueOf(employee.labor)) {
this.equity += employee.equity;
employee.dismiss();
}
If Zynga's tactic is legitimized by succeding and not getting crushed in court, nothing short of cash or fully-vested shares will have any value for motivation, which screws all startups.
I still don't understand, it seems like what zynga is doing here is literally the entire reason why these options are structured how they are. If there wasn't this "flaw" in options then they would simply be written differently then they actually are. They would say that if you are fired and they can't demonstrate incompetence that your stock instantly vests or it vests for whatever portion of the time period that you worked.
They do that because you can't think of everything ahead of time, and it's the company's lawyers who write them. Better safe than sorry, as they say. The custom and implicit if not explicit promise is that you do your time, work hard, and get paid. And that trumps the letter of the agreement. Go to a typical startup and ask the people working there if they know what all the language means. In my experience it is the rare exception that someone does. Usually, they are relying on ethical behavior from the founders, and will admit as much if you ask them.
If that language were written for this purpose, you would see people being forced out of their options prior to the one year cliff routinely.
But then, if that were common (or even somewhat likely), options would have literally near-zero value. See the problem? This cannot be the default behavior and make sense as an incentive. It has to be reserved for very rare and special circumstances. And even then, I have trouble thinking up a scenario where you would want to keep the employee but reduce their equity compensation.
Yes, these are agreements between consenting adults. But a contract is only a contract if minds meet. And if one mind is thinking "if I work hard, I'll get paid whatever this stock is worth" and the other is thinking "I'll reduce this guy's payment later if I want to", then you don't really have a meeting of the minds at all, do you? It doesn't matter what the words on the paper say.
I happen to think the options are much closer to zero value then you seem to think they are, so there is no cognitive dissonance to me. I would never trust any start up not to fire me to save money on options if I wasn't at least arguably worth more than it.
If the cost of the options > value of employee + cost of bad PR / other employees then I expect it to always have this outcome, and I am fairly certain it happens routinely just on a smaller scale. The only reason why this is news is that it is on a massive scale, on a well known and vilified tech company that is nearing IPO, and they aren't hiding the fact that they are doing this by just firing everyone.
A random 15 person company that quietly fires their employee a month before their stock vests doesn't get to the front page of HN.
It completely blows my mind that you think this exact situation isn't completely normal and something that you should take into account when you weigh the value of the stock.
> But then, if that were common (or even somewhat likely), options would have literally near-zero value. See the problem?
Yes, I completely agree that there is a problem that the people aren't on the same page. The problem that I see is that an absurdly high number of people are apparently overvaluing their unvested stock in startups.
I still cannot comprehend that you think this is some backdoor unexpected usage of this. If you work at a tech startup and your stock is going to vest within a year before your company is going to be acquired or go to IPO, I would recommend you drastically reduce the expected value of your units based on what you are emoting here.
