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This is essentially a Trolley problem that people are getting quite indignant about: http://en.wikipedia.org/wiki/Trolley_problem http://en.wikipedia.org/wiki/

This is essentially a Trolley problem that people are getting quite indignant about: http://en.wikipedia.org/wiki/Trolley_problem http://en.wikipedia.org/wiki/Trolley_problem Here's an oversimplified example that mirrors the classic Trolley problem: Suppose the company consists of three people: The founder, the engineer and the chef. The founder can't raise more money from investors and she realizes that if she fires the chef it'll free up 200K ISOs which can be used to recruit a sysadmin. Without a sysadmin the startup will fail. If the founder gives up her own shares, she loses control of the company to one of the investors, who she knows will sell the company to cash out immediately. If she stays in control, the founder aspires to grow the business to 20x its current size. Should the founder fire the chef? What small detail would have to change in order to quell the ire of all of the people claiming that Pincus is acting unethically?

blrgeek 15y ago
The fact that in this case the founder alone has 20% of the stock (after multiple investments & dilution), has 40% of the vote share, and is probably talking about < 5% given to early employees. And his investors are gaga about him, and super unlikely to take control away from him. If he gives away 5%, he will still have 15% of the equity, 30% of the voting share, and retain complete control of the company. Or he could issue 5% addn shares and dilute everyone equally by 5%. Now he just looks like as ass.
OoTheNigerian 15y ago
Like I said earlier, how about keeping your own side of the bargain? Remember the 'useless' chef already got you to where you are presently. The place where you need to raise more money. Why then did you hire the chef in the first place? If the chef has started cooking poorly, you sack him/her. Just like your board would fire you for poor performance. That this is even up for debate is baffling. PS: Grandalf, so I suppose the stock people receive in your project 'Dandelion Labs' do not really have any worth because two years down the line the people canget disposed if the founder needs to free some stock without getting diluted
- grandalf 15y ago
  I'm not making an argument here, just comparing the situation with a Trolley problem and wondering what details are most troublesome for people. I think it was probably a stupid decision by Pincus to do this, but not necessarily an unethical one. ISOs with a vesting period are not money in the bank, and anyone who thinks of them that way has been foolish.
  - scarmig 15y ago
    I have no idea why you're bringing some contorted-beyond-recognition Trolley problem into this. The situation is more like: 1) Founder hires an employee at a depressed salary using the possibility of making it big via vested options to compensate for lost income. 2) Employee works first, second, and third years performing to satisfaction. 3) Before IPO, founder goes "I can make that employee give up their money through a threat of firing them." Actually, isn't that pretty much the situation? If we really want to talk analogies, it's like if someone took a health insurance policy, but when they get really sick and the "big payout," the insurance company cuts them off because they haven't contributed enough to merit the million dollar payout.
prodigal_erik 15y ago
The answer here is dilution. Issue enough added stock to solve the problem and everyone ends up with a smaller stake in a more valuable company (if only because it's no longer doomed). You don't single out an employee and mug them, at the very least because then the sysadmin would have to be an idiot to believe it couldn't happen to him during the next crisis. For this to be a trolley problem, the chef would have to be holding a supermajority of the equity—more than the founder and the investors put together.
tkahn6 15y ago
You might fare better if you conceived of a more realistic scenario. The idea that you would hire a chef in a three person company before a sysadmin is unbelievable.
- grandalf 15y ago
  In this contrived example, the chef is the employee who turns out not to be crucial to the company's success.
nandemo 15y ago
Your example is not even remotely close to the Trolley problem in substance.
danssig 15y ago
>Should the founder fire the chef? No, the founder is incompetent and should be fired himself or go out of business. If he gave too much money to positions he doesn't even care about he has no business being responsible for share holders' money. To be honest here, the fact that you don't find this unethical sends up very large red flags about doing business with you.
maxerickson 15y ago
People think that the noble founder in your story is firing the chef because she can make more money hiring a different chef, not because the future of the company directly depends on it. You seem to think it is clear that Zynga can't afford to attract 'top talent' without the clawbacks. Other people, in the face of a billion dollar IPO, think that is silly.

blrgeek 15y ago

The fact that in this case the founder alone has 20% of the stock (after multiple investments & dilution), has 40% of the vote share, and is probably talking about < 5% given to early employees. And his investors are gaga about him, and super unlikely to take control away from him. If he gives away 5%, he will still have 15% of the equity, 30% of the voting share, and retain complete control of the company. Or he could issue 5% addn shares and dilute everyone equally by 5%. Now he just looks like as ass.

OoTheNigerian 15y ago

Like I said earlier, how about keeping your own side of the bargain? Remember the 'useless' chef already got you to where you are presently. The place where you need to raise more money. Why then did you hire the chef in the first place? If the chef has started cooking poorly, you sack him/her. Just like your board would fire you for poor performance. That this is even up for debate is baffling. PS: Grandalf, so I suppose the stock people receive in your project 'Dandelion Labs' do not really have any worth because two years down the line the people canget disposed if the founder needs to free some stock without getting diluted

grandalf 15y ago
I'm not making an argument here, just comparing the situation with a Trolley problem and wondering what details are most troublesome for people. I think it was probably a stupid decision by Pincus to do this, but not necessarily an unethical one. ISOs with a vesting period are not money in the bank, and anyone who thinks of them that way has been foolish.
- scarmig 15y ago
  I have no idea why you're bringing some contorted-beyond-recognition Trolley problem into this. The situation is more like: 1) Founder hires an employee at a depressed salary using the possibility of making it big via vested options to compensate for lost income. 2) Employee works first, second, and third years performing to satisfaction. 3) Before IPO, founder goes "I can make that employee give up their money through a threat of firing them." Actually, isn't that pretty much the situation? If we really want to talk analogies, it's like if someone took a health insurance policy, but when they get really sick and the "big payout," the insurance company cuts them off because they haven't contributed enough to merit the million dollar payout.

prodigal_erik 15y ago

The answer here is dilution. Issue enough added stock to solve the problem and everyone ends up with a smaller stake in a more valuable company (if only because it's no longer doomed). You don't single out an employee and mug them, at the very least because then the sysadmin would have to be an idiot to believe it couldn't happen to him during the next crisis. For this to be a trolley problem, the chef would have to be holding a supermajority of the equity—more than the founder and the investors put together.

tkahn6 15y ago

You might fare better if you conceived of a more realistic scenario. The idea that you would hire a chef in a three person company before a sysadmin is unbelievable.

grandalf 15y ago
In this contrived example, the chef is the employee who turns out not to be crucial to the company's success.

nandemo 15y ago

Your example is not even remotely close to the Trolley problem in substance.

danssig 15y ago

>Should the founder fire the chef? No, the founder is incompetent and should be fired himself or go out of business. If he gave too much money to positions he doesn't even care about he has no business being responsible for share holders' money. To be honest here, the fact that you don't find this unethical sends up very large red flags about doing business with you.

maxerickson 15y ago

People think that the noble founder in your story is firing the chef because she can make more money hiring a different chef, not because the future of the company directly depends on it. You seem to think it is clear that Zynga can't afford to attract 'top talent' without the clawbacks. Other people, in the face of a billion dollar IPO, think that is silly.