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This article is incoherent, because the notion of dead equity being unfair doesn't make any sense. If I buy a share of Microsoft, that's 'dead equity' since I
by Stasis5001 10y ago
This article is incoherent, because the notion of dead equity being unfair doesn't make any sense. If I buy a share of Microsoft, that's 'dead equity' since I don't work there and am not contributing to the company's value, yet when Microsoft sold that stock, they got paid in cash. Is that unfair to current employees?
Exactly the same for startup stock. The company granted the stock to investors for cash and employees for their service as part as a compensation package, and as the employee fulfills their service, they earn the equity as well as their salary.
>Are there any other management practices where one would optimize for former employees at the expense of current employees? I can’t think of any.
This is exactly backwards. You don't offer the 10-year clause ex post, you do it when the employee signs. That's optimizing for new employees, not old ones!
- potatolicious 10y agoExactly this - companies can't have their cake and eat it too. Equity is part of the overall compensation package for employees, which is to say that without equity these companies would have to pay more cash to attract talent. Which is just a long-winded way of saying: equity is compensation for services performed, just like your cash salary is. In fact this is exactly how it works in BigCos, where equity is treated as compensation for work performed. AmaGooFaceSoft don't try to claw back shares when you leave, even though the employee is now hanging onto equity and "no longer contributing to shareholder value". They paid for these shares with labor, same as everyone else. We wouldn't ever imagine getting an employee to repay their salary when leaving a company, but yet we're totally fine with getting them to cough up their equity?