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> they earned their options Yes, and that option expires in 3 months after departing... In the same way that publicly traded stock options (ie calls) typically
by beambot 10y ago
> they earned their options
Yes, and that option expires in 3 months after departing... In the same way that publicly traded stock options (ie calls) typically have expiration dates.
Part of the conflict here is that "options" aren't "shares" -- the option, including all terms (such as execution windows) are what is earned. Everything is known upfront. If you wanted comp to be around shares, then just issue shares via RSPA and deal with the cap table consequences and extra legal wrangling.
This entire "problem" is caused by tax code: you owe the IRS on gains from option conversion, even though the underlying asset is entirely illiquid and frequently non-transferrable. Sounds like a "real" solution is to lobby for tax code changes.
EDIT: to be clear... I'm not saying I agree with short expirations after departure. But there needs to be a clear distinction between shares, options, and 'intent'. Clearly the existing two ways of comp are lacking since there are either tax consequences (options) or out of pocket employee expenses to purchase (shares).
- deleted 10y ago[deleted]
- abalone 10y ago> Everything is known upfront. No, the whole point of this uproar is that the standard terms are opaque around the tax consequences of the 90-day window. It is not generally well-understood upfront by recruits that they may lose vested options on exit. You don't need to change the tax code to fix it. You can simply extend the exercise window.
- beambot 10y agoThere are legal limitations on exercise windows for ISOs that complicate matters (trickiness involving NQO conversion) that must be accounted for even in your "simple" solution (ask your attorney). It's a shitty situation for companies that want to do right too. No one wants to innovate on corporate structure (time, cost, and headache) when you're already trying to solve major product market fit problems...
- abalone 10y agoY Combinator has made this the standard for their companies and even provides boilerplate documents.[1] So not much of a distraction from product-market fit, and considerably simpler than altering the tax code. [1] http://blog.triplebyte.com/extending-stock-option-exercise-window-guide http://blog.triplebyte.com/extending-stock-option-exercise-w...
- beambot 10y agoI haven't seen YC incorporation docs since 2013... But either way, these are Triplebyte's docs, not YC standard's (though I'm open to evidence that proves otherwise). But thanks for pointer... Was informative.
- abalone 10y agoAh, I was confused by this ambiguous statement from harj.[1] I thought he was speaking for YC but I guess at this point he had moved on to triplebyte. Anyway, point is they've made it easier to adopt these terms and many are. [1] https://news.ycombinator.com/item?id=11198991 https://news.ycombinator.com/item?id=11198991
- terravion 10y agoAnd there really isn't any free lunch. Extended exercise periods have a real cost to everyone that stays (the people who are increasing the value of the option) at no cost to the departed person.
- kylec 10y agoMost employees will leave their employer at some point. It's not as though there are employees here that are paying the cost but not receiving the benefit.
- rdtsc 10y agoRight but the person who left was their earlier, during a riskier time, then probability of failure was greater. So they jumped in when others might have thought twice (remember most startups fail). Aren't those options a reward for that?
- st3v3r 10y agoWhat? No they don't.