Good point. My thought is that to compensate the people who stick around you have to combine two things: 1) vesting period (already happening for virtually ever

Good point. My thought is that to compensate the people who stick around you have to combine two things: 1) vesting period (already happening for virtually everybody), and 2) a predefined plan to give people increasing amount of options for staying longer. So basically get 20k options in year 1, 30k options in year 2, 50 options in year 3, 70k options in year 4, or something like that.. so if you leave after 1 year and have the 10 year vesting period, you end up missing out on multiple option granting periods. The dead equity often is a small portion of around 10-15% of total equity in the company. So assuming that there are maybe 5 employees floating out there in the wild with this "dead equity", they probably are comprising a tiny portion of the equity in the company -- most likely around 1% of the company equity max. If that 1% of dead equity is having any kind of real effect on the companies day to day situation or ability to raise funding, I would be thinking the company is in some serious shit.. Yea definitely agree with the IRS trying to fix this. Think of it this way, in one case the founders get a ton of money during the IPO event. They have tons of resources and time to figure out how to avoid paying as much taxes as possible. Versus if you have a ton of people who now get relatively large payouts of stock options worth say 300k or so, those people will likely end up paying 20-30% tax or more on that since they have less ways they can try to reclassify the capital gains -- and maybe will just opt to sell everything short term and pay maximum capital gains. But the rich guy who just did the IPO is like, "eh, I already got like 10 million in the bank, so lets see.. if I just say that my stock is worth 0.1 cents per share, then put into my Roth IRA, then I can cash it out in 20 years with a 1 million X gain with no taxes.."