Frequently, companies have a 90-day exercise window on options, meaning that employees have to exercise within 90 days of termination of employment. What that o

Frequently, companies have a 90-day exercise window on options, meaning that employees have to exercise within 90 days of termination of employment. What that often translates into is employees sticking around indefinitely at companies whose value has grown during their tenure because they: - can't exercise options and leave, because they would have to pay potentially huge taxes on an illiquid asset - don't want to lose their stock, which makes up a nontrivial part of their comp for effort already invested in the company So, your understanding is correct - but people often don't want to wait for a liquidity event to be able to exercise and don't want to miss out on something they already earned. An example: as I hear it, there are quite a few early Uber employees sitting on tens or hundreds of millions of options who can't leave because if they exercise, they'd be slammed with millions in taxes. Since Travis Kalanick disallows secondary market trading of Uber stock, they wouldn't be able to sell stock to help pay the taxes, and thus can't afford to exercise but can't afford to leave. That's how you end up with employees who just come in to work the minimum possible amount waiting for an exit.