6 ms·

> if a company is shutting down, it obviously can't provide severance Not really true. The company is owned by its shareholders, and they may choose to use fun

> if a company is shutting down, it obviously can't provide severance Not really true. The company is owned by its shareholders, and they may choose to use funds belonging to the company (after paying outstanding obligations) to pay severance, or they may divide the funds among themselves. If there are no funds, they can choose to invest more to pay severance. Obviously they're unlikely to want to do that, but it's not a case of "can't" but rather "won't".

stickfigure 3y ago
> choose to invest more to pay severance This is not a thing that happens in reality.
- yrdguyffvg 3y ago
  [flagged]
JumpCrisscross 3y ago
> they may choose to use funds belonging to the company (after paying outstanding obligations) to pay severance If they can do this, they can pay salaries another month. Making a go/no go call at the edge is difficult. It sounds like Convoy thought it was getting a loan that didn’t come through. Put another way: if the CEO shut down the company while loan negotiations were in place, it would have zeroed out the common stock while giving preferred investors a pay-out (in addition to everyone some severance).
- sangnoir 3y ago
  > If they can do this, they can pay salaries another month If leadership decides to use the remaining funds on salaries rather than severance - then they should be judged on that! What good is buying one extra month for a doomed company? That month is more valuable to individual employees who can use it to look for new jobs
  - JumpCrisscross 3y ago
    > What good is buying one extra month for a doomed company? You don't know it's doomed. Plenty of companies have turned around while running on fumes. This is fundamental to start-ups. > month is more valuable to individual employees who can use it to look for new jobs Everyone who lost their jobs at Convoy is eligible for unemployment. The same unemployment most workers get when they're fired. Perhaps the discussion should be around improving this benefit for everyone?
    - sangnoir 3y ago
      > You don't know it's doomed. It's swell when people gamble with employees well-being on the miniscule odds of a miracle. And even better idea is to offer severance, and those employees with the same appetite for risk can get additional options from the folks who leave. That'd be a win/win, except for the leadership who would rather gamble using other peoples chips but keep most of the winnings. > Everyone who lost their jobs at Convoy is eligible for unemployment Unemployment benefits don't come anywhere close to tech salaries! They take time to process. > Perhaps the discussion should be around improving this benefit for everyone? We can multitask. What is in my power to control is to avoid working with anyone associated with this decision and encourage everyone else to do the same - board-members and the entire C-Suite. We have a - let's call it poor culture fit
      - JumpCrisscross 3y ago
        > It's swell when people gamble with employees well-being on the miniscule odds of a miracle You don't know the odds ex ante! Again, they would have been roundly criticized if they'd prioritized severance (which means more for the highly paid) and preferred stockholders over their rank-and-file common holders. > Unemployment benefits don't come anywhere close to tech salaries! They take time to process You're arguing for special treatment of well-paid tech workers over e.g. truck drivers [1]. > What is in my power to control is to avoid working with anyone associated with this decision and encourage everyone else to do the same The solution is to not work for a start-up. That, or gain empathy for the tens of millions of Americans who work for a restaurant or with variable hours or on contracts that provide them with zero heads up when business conditions change or their employer goes under. [1] https://www.wsws.org/en/articles/2023/08/09/51c3-a09.html https://www.wsws.org/en/articles/2023/08/09/51c3-a09.html
mrcwinn 3y ago
>choose to invest more to pay severance Deploying capital into something that literally has no return just doesn't make sense. You're also ignoring the reality that most capital comes in at the start. It doesn't come in at the end. That's an irrational investment. Would you buy a house that's burning down in the interest of the current homeowners? Could a company receive funds at the end? Legally, sure, maybe (maybe not given fiduciary duties to LPs). Investors would have to say to their limited partners: we're going to take your money, and hand it over to employees, and those employees will do no work for us and the company is shutting down anyway. That's a very ineffective use of capital and those types of decisions are worse in the end for the economy, I would argue, which does impact everyone. Startups are risky for investors. They're risky for employees too. I think a better solution might be to bolster unemployment insurance. After all, investors often have downside protection (usually in the form of preferred shares or preferences). Employees need downside protection too. But let's not perverse how capital should work.
- clutchdude 3y ago
  > That's a very ineffective use of capital and those types of decisions are worse in the end for the economy Disagree - it frees those employees to begin working for more productive companies sooner rather than drag them through "you are fired with no provisions for healthcare. Good luck and don't get sick during the donut period." - yes, it's an special qualifying trigger for the exchanges but you are asking someone navigate this in short order(likely end of the month or less than two weeks)
  - datadrivenangel 3y ago
    Disagree to disagree - employees are free to begin working for more productive companies when they're fired with no provisions for healthcare. In spirit though, I agree. Social healthcare not tied to employer would allow for more labor mobility. These transitions should not abrupt or catastrophic ideally.
    - clutchdude 3y ago
      > Disagree to disagree - employees are free to begin working for more productive companies when they're fired with no provisions for healthcare. But that's a bad thing - because once your employment tied healthcare abruptly ends, you scramble to get something to restore it. This may include settling or taking less optimal jobs or accepting a lower paying job.
cheriot 3y ago
Employee claims supersede equity and debt holders. The question is whether the company shuts down with money in the bank or keeps running until it's out. People should remember the board and CEO for screwing over employees.
- _jal 3y ago
  >People should remember the board and CEO for screwing over employees. This is important if you're staying in more or less the same field - many specialties are smaller worlds than you may think. I am somewhat bad with names, so I've learned to take notes. I have a list of people I'd love to work with again, and another of people whose presence will stop me from accepting an offer.
- somic 3y ago
  My understanding is that in the US, earned wages (while employees were employed) are indeed employee claims. Not paying these is what YC guidance above says will lead to "very bad things." After people are let go, severance and continuation of healthcare beyond some term mandated by law (maybe state, maybe federal, maybe varies by state, don't know) are not considered employee claims in this sense. CEO and the board didn't follow the YC guidance mentioned above, and it's on them.
thisisbrians 3y ago
No; the fiduciary duty of the CEO/board is to the shareholders. If there is a chance to salvage continuity of operations and preserve the value of equity, that is what they will do, even if it means operating until cash runs out. It is a matter of basic incentives. As much as we'd love to do the "right thing" and pay weeks/months of severance for no work (I am a founder myself and would love to, in a perfect world), startup employees should know the risks of working at a high-risk venture and plan accordingly. The middle road here is to do a significant layoff with severance, but this isn't possible in every case. Additionally, a company-saving customer contract or funding round can fall apart at any moment. This is, unfortunately, just the nature of the business.
paulddraper 3y ago
Technically true, but no one is going to make a zero ROI investment. Severance for companies with an ROI are one thing. Severance for a failed company is quite another.
balderdash 3y ago
Ehh, talk to a lawyer, but at certain point, often before technical bankruptcy/insolvency, mgmt/board actually have an obligation to the creditors, not shareholders (as they are no longer the beneficiaries)

stickfigure 3y ago

> choose to invest more to pay severance This is not a thing that happens in reality.

yrdguyffvg 3y ago
[flagged]

JumpCrisscross 3y ago

> they may choose to use funds belonging to the company (after paying outstanding obligations) to pay severance If they can do this, they can pay salaries another month. Making a go/no go call at the edge is difficult. It sounds like Convoy thought it was getting a loan that didn’t come through. Put another way: if the CEO shut down the company while loan negotiations were in place, it would have zeroed out the common stock while giving preferred investors a pay-out (in addition to everyone some severance).

sangnoir 3y ago
> If they can do this, they can pay salaries another month If leadership decides to use the remaining funds on salaries rather than severance - then they should be judged on that! What good is buying one extra month for a doomed company? That month is more valuable to individual employees who can use it to look for new jobs
- JumpCrisscross 3y ago
  > What good is buying one extra month for a doomed company? You don't know it's doomed. Plenty of companies have turned around while running on fumes. This is fundamental to start-ups. > month is more valuable to individual employees who can use it to look for new jobs Everyone who lost their jobs at Convoy is eligible for unemployment. The same unemployment most workers get when they're fired. Perhaps the discussion should be around improving this benefit for everyone?
  - sangnoir 3y ago
    > You don't know it's doomed. It's swell when people gamble with employees well-being on the miniscule odds of a miracle. And even better idea is to offer severance, and those employees with the same appetite for risk can get additional options from the folks who leave. That'd be a win/win, except for the leadership who would rather gamble using other peoples chips but keep most of the winnings. > Everyone who lost their jobs at Convoy is eligible for unemployment Unemployment benefits don't come anywhere close to tech salaries! They take time to process. > Perhaps the discussion should be around improving this benefit for everyone? We can multitask. What is in my power to control is to avoid working with anyone associated with this decision and encourage everyone else to do the same - board-members and the entire C-Suite. We have a - let's call it poor culture fit
    - JumpCrisscross 3y ago
      > It's swell when people gamble with employees well-being on the miniscule odds of a miracle You don't know the odds ex ante! Again, they would have been roundly criticized if they'd prioritized severance (which means more for the highly paid) and preferred stockholders over their rank-and-file common holders. > Unemployment benefits don't come anywhere close to tech salaries! They take time to process You're arguing for special treatment of well-paid tech workers over e.g. truck drivers [1]. > What is in my power to control is to avoid working with anyone associated with this decision and encourage everyone else to do the same The solution is to not work for a start-up. That, or gain empathy for the tens of millions of Americans who work for a restaurant or with variable hours or on contracts that provide them with zero heads up when business conditions change or their employer goes under. [1] https://www.wsws.org/en/articles/2023/08/09/51c3-a09.html https://www.wsws.org/en/articles/2023/08/09/51c3-a09.html

mrcwinn 3y ago

>choose to invest more to pay severance Deploying capital into something that literally has no return just doesn't make sense. You're also ignoring the reality that most capital comes in at the start. It doesn't come in at the end. That's an irrational investment. Would you buy a house that's burning down in the interest of the current homeowners? Could a company receive funds at the end? Legally, sure, maybe (maybe not given fiduciary duties to LPs). Investors would have to say to their limited partners: we're going to take your money, and hand it over to employees, and those employees will do no work for us and the company is shutting down anyway. That's a very ineffective use of capital and those types of decisions are worse in the end for the economy, I would argue, which does impact everyone. Startups are risky for investors. They're risky for employees too. I think a better solution might be to bolster unemployment insurance. After all, investors often have downside protection (usually in the form of preferred shares or preferences). Employees need downside protection too. But let's not perverse how capital should work.

clutchdude 3y ago
> That's a very ineffective use of capital and those types of decisions are worse in the end for the economy Disagree - it frees those employees to begin working for more productive companies sooner rather than drag them through "you are fired with no provisions for healthcare. Good luck and don't get sick during the donut period." - yes, it's an special qualifying trigger for the exchanges but you are asking someone navigate this in short order(likely end of the month or less than two weeks)
- datadrivenangel 3y ago
  Disagree to disagree - employees are free to begin working for more productive companies when they're fired with no provisions for healthcare. In spirit though, I agree. Social healthcare not tied to employer would allow for more labor mobility. These transitions should not abrupt or catastrophic ideally.
  - clutchdude 3y ago
    > Disagree to disagree - employees are free to begin working for more productive companies when they're fired with no provisions for healthcare. But that's a bad thing - because once your employment tied healthcare abruptly ends, you scramble to get something to restore it. This may include settling or taking less optimal jobs or accepting a lower paying job.

cheriot 3y ago

Employee claims supersede equity and debt holders. The question is whether the company shuts down with money in the bank or keeps running until it's out. People should remember the board and CEO for screwing over employees.

_jal 3y ago
>People should remember the board and CEO for screwing over employees. This is important if you're staying in more or less the same field - many specialties are smaller worlds than you may think. I am somewhat bad with names, so I've learned to take notes. I have a list of people I'd love to work with again, and another of people whose presence will stop me from accepting an offer.
somic 3y ago
My understanding is that in the US, earned wages (while employees were employed) are indeed employee claims. Not paying these is what YC guidance above says will lead to "very bad things." After people are let go, severance and continuation of healthcare beyond some term mandated by law (maybe state, maybe federal, maybe varies by state, don't know) are not considered employee claims in this sense. CEO and the board didn't follow the YC guidance mentioned above, and it's on them.

thisisbrians 3y ago

No; the fiduciary duty of the CEO/board is to the shareholders. If there is a chance to salvage continuity of operations and preserve the value of equity, that is what they will do, even if it means operating until cash runs out. It is a matter of basic incentives. As much as we'd love to do the "right thing" and pay weeks/months of severance for no work (I am a founder myself and would love to, in a perfect world), startup employees should know the risks of working at a high-risk venture and plan accordingly. The middle road here is to do a significant layoff with severance, but this isn't possible in every case. Additionally, a company-saving customer contract or funding round can fall apart at any moment. This is, unfortunately, just the nature of the business.

paulddraper 3y ago

Technically true, but no one is going to make a zero ROI investment. Severance for companies with an ROI are one thing. Severance for a failed company is quite another.

balderdash 3y ago

Ehh, talk to a lawyer, but at certain point, often before technical bankruptcy/insolvency, mgmt/board actually have an obligation to the creditors, not shareholders (as they are no longer the beneficiaries)