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Couple years ago I was considering joining a company. It wasn't a normal hiring situation, so I had some leverage. My lawyer suggested that we could try negotia

by enra 11y ago

Couple years ago I was considering joining a company. It wasn't a normal hiring situation, so I had some leverage. My lawyer suggested that we could try negotiating a shorter vesting period or longer exercise period. The company didn't go for the shorting vesting but the said ok for the longer exercise period. Their employee stock plan was in ISO with the standards 3-month period, so their lawyers basically changed one line there, saying "You may exercise this option for xx months after termination of your continuous service status". After the 3 months the option just changes to NSO. That was it. It was such a simple thing that I don't understand why companies don't do this more often.

sskates 11y ago
The crazy thing to me is: 1) the fact that employees are granted options instead of shares is an artifact of tax law, and 2) the fact that there's a 90 day exercise window is also an artifact of tax law. Yet, companies constantly come up with post-hoc justifications of why only giving a 90 day window is fair. There is big resistance to change on this point. Even Ben Horowitz and Sam Altman don't think it's a clear decision! http://genius.com/B-horowitz-lecture-15-how-to-manage-annotated/ http://genius.com/B-horowitz-lecture-15-how-to-manage-annota... If you were to derive how to think about employee ownership of a company as a form of compensation from first principles, you'd never come up with options and you'd never come up with a 90-day exercise window on top of that. Those are both artifacts from tax law yet it's become the standard form of compensation!
- enra 11y ago
  Do you how a company would you give employees shares directly without them being taxed on the grant? One way I've seen this is with RSU double triggers: you are granted RSUs but you don't own them until the stock is actually liquid. However, at that time, you will have to pay taxes and you don't get long term capital gains. Update: Just read your link, it's crazy how on this topic, Ben goes on a rant about random things, and whether it's fair to give 10y exercise period, because the person working there doesn't somehow get that benefit. Even if you have a money, employees are not investors, they can't just throw $10-100k on one startup, without knowing liquidation preferences or anything else, and which may or may not have some kind of liquidity in the next 10 years. It's useless to give equity if most people get screwed.
x0x0 11y ago
It's obvious why companies don't do it: it removes the so-called golden handcuffs. People keep pretending an employee's inability to leave a successful company because of the strike price and tax issues is a negative rather than one of the highlights of this compensation strategy from management's perspective. Oh, and employees not exercising and returning shares to the option pool doesn't hurt any of the people with the power to make decisions about it either. viz various CTOs on here defending this practice (not in this thread, but I've seen them on HN. I'm not linking one in particular because I don't want to call anyone out and I appreciate his honesty on here.)

by enra 11y ago

sskates 11y ago

The crazy thing to me is: 1) the fact that employees are granted options instead of shares is an artifact of tax law, and 2) the fact that there's a 90 day exercise window is also an artifact of tax law. Yet, companies constantly come up with post-hoc justifications of why only giving a 90 day window is fair. There is big resistance to change on this point. Even Ben Horowitz and Sam Altman don't think it's a clear decision! http://genius.com/B-horowitz-lecture-15-how-to-manage-annotated/ http://genius.com/B-horowitz-lecture-15-how-to-manage-annota... If you were to derive how to think about employee ownership of a company as a form of compensation from first principles, you'd never come up with options and you'd never come up with a 90-day exercise window on top of that. Those are both artifacts from tax law yet it's become the standard form of compensation!

enra 11y ago
Do you how a company would you give employees shares directly without them being taxed on the grant? One way I've seen this is with RSU double triggers: you are granted RSUs but you don't own them until the stock is actually liquid. However, at that time, you will have to pay taxes and you don't get long term capital gains. Update: Just read your link, it's crazy how on this topic, Ben goes on a rant about random things, and whether it's fair to give 10y exercise period, because the person working there doesn't somehow get that benefit. Even if you have a money, employees are not investors, they can't just throw $10-100k on one startup, without knowing liquidation preferences or anything else, and which may or may not have some kind of liquidity in the next 10 years. It's useless to give equity if most people get screwed.

x0x0 11y ago

It's obvious why companies don't do it: it removes the so-called golden handcuffs. People keep pretending an employee's inability to leave a successful company because of the strike price and tax issues is a negative rather than one of the highlights of this compensation strategy from management's perspective. Oh, and employees not exercising and returning shares to the option pool doesn't hurt any of the people with the power to make decisions about it either. viz various CTOs on here defending this practice (not in this thread, but I've seen them on HN. I'm not linking one in particular because I don't want to call anyone out and I appreciate his honesty on here.)