4 ms·

Well in the former case, the employee has stuck it out and really is fully entitled to the shares -- and in most scenarios, has to pay tax on them right then an

Well in the former case, the employee has stuck it out and really is fully entitled to the shares -- and in most scenarios, has to pay tax on them right then and there. Most likely in that scenario they got a better offer and probably did a good job. Arguably the cliff worked in keeping them around just a little longer. I can't imagine many scenarios where the company firing at 364 days purely to avoid the vesting makes sense. Why hang on to someone so long if they're not adding value?

dvogel 10y ago
As the story alleges, they might be adding value but enough value to offset your loss of majority control.
- hayd 10y ago
  It's hard to imagine that even a dozen employees stock options would transfer majority control. Surely the share split can't be so tight that tenths of a percent would make a difference?
- jwilliams 10y ago
  Ah. Yes, completely right -- I was musing more on the top comment relating to cliffs and the practice in general. In most cases if you're hiring where options are seen as necessary to get that talent - seems like it's going to be an odd (but not impossible) case where you're happy to walk that talent out the door too.
asdfologist 10y ago
Because they're adding less value than the amount to be vested but more value than someone who (economically speaking) should be fired earlier.
hayd 10y ago
They add more value than their salary. But not more value then their vested shares most recent strike price. That said, firing them on day 364 is a shitty thing to do.
DenisM 10y ago
You have good points. I would like to supply some examples to illustrate mine. Suppose an employee is dissatisfied. In the presence of a cliff in the near future he may be hesitant to stir the pot and instead decide to wait for it before bringing this up. Meanwhile not being heard he will accumulate resentment. On the other hand, suppose an employer is dissatisfied with an employee. With a looming cliff the employer may decide not to risk it a fire the employee beforehand. Absent the time pressure of a cliff they may be able to take time and talk through the problems. None of that would be a problem if performance discussions were happening throughout the entire year. But the cliff serves to hide the problems until they explode the day before or the day after the vesting day.
- jwilliams 10y ago
  > None of that would be a problem if performance discussions were happening throughout the entire year. Agree on that. Likely a signal of bigger systematic problems too.

dvogel 10y ago

As the story alleges, they might be adding value but enough value to offset your loss of majority control.

hayd 10y ago
It's hard to imagine that even a dozen employees stock options would transfer majority control. Surely the share split can't be so tight that tenths of a percent would make a difference?
jwilliams 10y ago
Ah. Yes, completely right -- I was musing more on the top comment relating to cliffs and the practice in general. In most cases if you're hiring where options are seen as necessary to get that talent - seems like it's going to be an odd (but not impossible) case where you're happy to walk that talent out the door too.

asdfologist 10y ago

Because they're adding less value than the amount to be vested but more value than someone who (economically speaking) should be fired earlier.

hayd 10y ago

They add more value than their salary. But not more value then their vested shares most recent strike price. That said, firing them on day 364 is a shitty thing to do.

DenisM 10y ago

You have good points. I would like to supply some examples to illustrate mine. Suppose an employee is dissatisfied. In the presence of a cliff in the near future he may be hesitant to stir the pot and instead decide to wait for it before bringing this up. Meanwhile not being heard he will accumulate resentment. On the other hand, suppose an employer is dissatisfied with an employee. With a looming cliff the employer may decide not to risk it a fire the employee beforehand. Absent the time pressure of a cliff they may be able to take time and talk through the problems. None of that would be a problem if performance discussions were happening throughout the entire year. But the cliff serves to hide the problems until they explode the day before or the day after the vesting day.

jwilliams 10y ago
> None of that would be a problem if performance discussions were happening throughout the entire year. Agree on that. Likely a signal of bigger systematic problems too.