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What happens if you have an underperforming employee and end up having to fire them in the first 3-6 months? Do you really want to give them permanent equity in
by drchopchop 6y ago
What happens if you have an underperforming employee and end up having to fire them in the first 3-6 months? Do you really want to give them permanent equity in a company before they've proved at least some value? Some sort of clawback structure would be necessary here.
- borishn 6y agoEmployees take less cash in exchange for equity. They earn the equity as a part of compensation. Under what theory you want to claw it back? In addition employers are protected by a vesting cliff, and after that it is their fault if they keep underperforming employee around.
- choppaface 6y agoIn the case of 83b, the unvested shares are returned. Even the bonus-to-cover can be returned contractually—- the bonus-to-cover never even has to hit the employee’s bank account. RSUs are probably better but the equity games are set up right now such that startups issue options.