We all know what happens when a startup's stock "underperforms": absolutely nothing. I'm not entirely sure why an employer should reasonably expect to manage i

We all know what happens when a startup's stock "underperforms": absolutely nothing. I'm not entirely sure why an employer should reasonably expect to manage its exposure to employee underperformance risk on a dimension where the employee doesn't have similar recourse. If employers are worried about a serious disconnect between performance over time and equity payout, they might cap the valuation of an equity stake by taking back call options with high strike valuations. They could then give more shares or extinguish calls in response to performance. But this would reduce the apparent value of the up-front stock grant, and thus the employee's incentive to come on board. I don't know enough to support firm conclusions, but this doesn't sound like behavior I'd hope to emulate.