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This is why: the value of the options at the time of the grant is very different than at the time of the firing. You are accepting very risky options in return

This is why: the value of the options at the time of the grant is very different than at the time of the firing. You are accepting very risky options in return for a small amount of cash with the hope that it will be worth something much greater later, and the knowledge that it may be worth zero or less, if you include the strike price and taxes. To come in after the fact, and decide that the upside was too much is to retroactively change the value of the options at the time of the grant, making them worth less than the agreed upon amount. Yes, there is a detail in the agreement that the employer can fire you whenever he wants and retain unvested options, but the reason that is there is so that people who fail at their jobs do not continue to collect equity beyond their usefulness, not to greedily claw back money from employees who are fulfilling their agreed upon duties. Hiding behind that clause to justify this behavior is reprehensible. There is a BIG difference between saying "Johhny, it's just not working out, please take the options you've earned and move along. You're not needed anymore." and "Johnny, we like you, but we didn't think you'd make this much money, so we kinda wish we hadn't given you as many options. Please give them back or we will forced to fire you as permitted by clause 3.2D in the agreement."

esrauch 15y ago
> This is why: the value of the options at the time of the grant is very different than at the time of the firing. The options are worth $0 until they vest, so at the time of hiring and firing they are still worth $0. They are a promise of future compensation, just like salary, and just like salary you don't receive it if you don't work there anymore. If it was actually a decision of accepting the risk of the stock being valueless, then the compensation would be stock instead of options. > Yes, there is a detail in the agreement that the employer can fire you whenever he wants and retain unvested options No, that is the clause as written, not some sort of sneaky backdoor that they snuck in, it is the very definition of these stock options. The clause doesn't say "if you are fired for gross negligence or incompetence..." it says "If you are not employed here on date X, then you get nothing". > There is a BIG difference between saying "Johhny, it's just not working out, please take the options you've earned and move along. You're not needed anymore." You have earned nothing until they vest! That is the entire point of the structure of these options. If they were actually anything like what you are describing, they would just be monthly stock grants. If you work somewhere for 6 months you don't get half of the grant that you get after 1 year, you get nothing. It is explicitly not proportional in the contract. > "Johnny, we like you, but we didn't think you'd make this much money, so we kinda wish we hadn't given you as many options. Please give them back or we will forced to fire you as permitted by clause 3.2D in the agreement." How is this different from "Johnny, we like you, but we don't think you are worth the $200k salary that we foolishly offered you before. We aren't going to continue paying you such a high salary, so you can either accept the lower salary that we think you deserve or we will fire you"? Both are retracting an offer for future compensation for future work. Or do you think that would also be immoral?
- damoncali 15y ago
  I get that the agreements give the company all the power here. What I am saying is that it is fundamentally immoral for the company to exercise that power when the very basic meeting of the minds is something along these lines: "Take a risk working for me. I can't pay as much as you could otherwise earn, but I can give you equity instead. Some day, if we do well, it will be worth a lot of money and we'll all be rich". That lawyers and tax men have screwed up these agreements to the point of absurdity does not change the fact that this is basically the promise that is made. It should be kept.
  - esrauch 15y ago
    I agree that it is wrong for a company to claim that they are offering compensation that they aren't, and it is easily possible that that occurred here and Zynga is wrong. I am certainly not going to try to claim that Zynga is a great company that everyone should try to be more like. But I think the core issue here is that this is what stock options and RSUs are. This isn't Zynga exploiting a loophole that only they wrote into their contract and only they do, this is the definition of stock options. I understand that Zynga is awful, I am more trying to make everyone aware that this isn't some insane situation that could never happen to them because they work at a nicer startup. If you are working for RSUs there is a much much higher chance that you are going to get fired a month before your stock vests than a month after, and it seems like everyone on here has been tricked just like the Zynga employees were tricked into thinking that stock options in startup X are just as good as stock.
- BrandonM 15y ago
  As a former poker player, the problem here is very clear. Let's say there is $100 in the pot, and it's going to cost $50 for me to call and be all-in. I'm paying $50 to win a total of $150. That means that I need to have a 1/3 chance of winning to make this a financially-breakeven call. I estimate that my hand has 35% equity, so I go ahead and call. I'm going to lose 65% of the time, I'm going to be ridiculed by poor players without knowledge of equity and pot odds, and I'll question whether I actually made the right decision. The other 35% of the time, I'll win that $150, feel good that I made the right decision, and those same people will call me a lucky moron. The average result is that I gain $100 * 0.35 - $50 * 0.65 = $2.50[0] every time I make this decision. My decision was good, even if the outcome is highly volatile (nearly 2/3 of the time, I lose). Now the player I was up against says that because I got lucky and won with a worse hand, I don't deserve the full $150 that's in the pot. How about if I give him 10% of that as consolation, since he "should have won"? Everyone else at the table agrees that's reasonable (after all, I'm just an idiot who got lucky), and now the equity of my decision works out to 85 * 0.35 - 50 * 0.65 = -$2.75[1], and I'm actually losing money on my original decision. Changing the terms after I've made an informed decision is more than shady: it makes my original decision (based on the overall expected value) incorrect in retrospect. That is what people have a problem with. If early employees now have to account for some nonzero chance of getting fucked on their equity, it's going to make it that much harder for an early startup to afford anyone. Limiting the upside of an investment drastically lowers the risk an investor (and an early employee is effectively an investor) can rationally bear. [0] At the time of my decision, there was $100 in the pot for me to win. I win it 35% of time, and the other 65% of the time I lose the $50 that I'm paying now. [1] 150 - 10% = 135 - 50 (the amount that I put into the pot to call) = 85.

esrauch 15y ago

> This is why: the value of the options at the time of the grant is very different than at the time of the firing. The options are worth $0 until they vest, so at the time of hiring and firing they are still worth $0. They are a promise of future compensation, just like salary, and just like salary you don't receive it if you don't work there anymore. If it was actually a decision of accepting the risk of the stock being valueless, then the compensation would be stock instead of options. > Yes, there is a detail in the agreement that the employer can fire you whenever he wants and retain unvested options No, that is the clause as written, not some sort of sneaky backdoor that they snuck in, it is the very definition of these stock options. The clause doesn't say "if you are fired for gross negligence or incompetence..." it says "If you are not employed here on date X, then you get nothing". > There is a BIG difference between saying "Johhny, it's just not working out, please take the options you've earned and move along. You're not needed anymore." You have earned nothing until they vest! That is the entire point of the structure of these options. If they were actually anything like what you are describing, they would just be monthly stock grants. If you work somewhere for 6 months you don't get half of the grant that you get after 1 year, you get nothing. It is explicitly not proportional in the contract. > "Johnny, we like you, but we didn't think you'd make this much money, so we kinda wish we hadn't given you as many options. Please give them back or we will forced to fire you as permitted by clause 3.2D in the agreement." How is this different from "Johnny, we like you, but we don't think you are worth the $200k salary that we foolishly offered you before. We aren't going to continue paying you such a high salary, so you can either accept the lower salary that we think you deserve or we will fire you"? Both are retracting an offer for future compensation for future work. Or do you think that would also be immoral?

damoncali 15y ago
I get that the agreements give the company all the power here. What I am saying is that it is fundamentally immoral for the company to exercise that power when the very basic meeting of the minds is something along these lines: "Take a risk working for me. I can't pay as much as you could otherwise earn, but I can give you equity instead. Some day, if we do well, it will be worth a lot of money and we'll all be rich". That lawyers and tax men have screwed up these agreements to the point of absurdity does not change the fact that this is basically the promise that is made. It should be kept.
- esrauch 15y ago
  I agree that it is wrong for a company to claim that they are offering compensation that they aren't, and it is easily possible that that occurred here and Zynga is wrong. I am certainly not going to try to claim that Zynga is a great company that everyone should try to be more like. But I think the core issue here is that this is what stock options and RSUs are. This isn't Zynga exploiting a loophole that only they wrote into their contract and only they do, this is the definition of stock options. I understand that Zynga is awful, I am more trying to make everyone aware that this isn't some insane situation that could never happen to them because they work at a nicer startup. If you are working for RSUs there is a much much higher chance that you are going to get fired a month before your stock vests than a month after, and it seems like everyone on here has been tricked just like the Zynga employees were tricked into thinking that stock options in startup X are just as good as stock.
BrandonM 15y ago
As a former poker player, the problem here is very clear. Let's say there is $100 in the pot, and it's going to cost $50 for me to call and be all-in. I'm paying $50 to win a total of $150. That means that I need to have a 1/3 chance of winning to make this a financially-breakeven call. I estimate that my hand has 35% equity, so I go ahead and call. I'm going to lose 65% of the time, I'm going to be ridiculed by poor players without knowledge of equity and pot odds, and I'll question whether I actually made the right decision. The other 35% of the time, I'll win that $150, feel good that I made the right decision, and those same people will call me a lucky moron. The average result is that I gain $100 * 0.35 - $50 * 0.65 = $2.50[0] every time I make this decision. My decision was good, even if the outcome is highly volatile (nearly 2/3 of the time, I lose). Now the player I was up against says that because I got lucky and won with a worse hand, I don't deserve the full $150 that's in the pot. How about if I give him 10% of that as consolation, since he "should have won"? Everyone else at the table agrees that's reasonable (after all, I'm just an idiot who got lucky), and now the equity of my decision works out to 85 * 0.35 - 50 * 0.65 = -$2.75[1], and I'm actually losing money on my original decision. Changing the terms after I've made an informed decision is more than shady: it makes my original decision (based on the overall expected value) incorrect in retrospect. That is what people have a problem with. If early employees now have to account for some nonzero chance of getting fucked on their equity, it's going to make it that much harder for an early startup to afford anyone. Limiting the upside of an investment drastically lowers the risk an investor (and an early employee is effectively an investor) can rationally bear. [0] At the time of my decision, there was $100 in the pot for me to win. I win it 35% of time, and the other 65% of the time I lose the $50 that I'm paying now. [1] 150 - 10% = 135 - 50 (the amount that I put into the pot to call) = 85.