That's one way of looking at it, of course. I think another is to say that the concept of stock as compensation (especially in a private company) is to give the

That's one way of looking at it, of course. I think another is to say that the concept of stock as compensation (especially in a private company) is to give the company maximum flexibility. They (presumably) don't have cash, so they give stock as a proxy for that. However, if they hit hard times, they can issue as many new shares as the BoD will allow to any new investors they want. This includes new classes of shares. It's not "standard" practice, but it's also not uncommon--to get rid of people they want to get rid of, they can dilute them out (issuing new shares and everyone except X gets new shares), issue new classes of shares with preference, etc. I'm sure there are laws around this, but it's also a private company so it can be tricky there. Stock in a private company is much more difficult to hold, since there are many, many ways for the company to manipulate it to the company's advantage.