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Comp clawbacks are quite common in finance, at least contractually. It's rare for it to go ahead, but it happens. It isn't some especially weird thing.
by danielmarkbruce 2y ago
Comp clawbacks are quite common in finance, at least contractually. It's rare for it to go ahead, but it happens. It isn't some especially weird thing.
- voxic11 2y agoIs OpenAI a finance company? I guess that would explain a lot.
- danielmarkbruce 2y agoThey pay like one.
- srockets 2y agoFinance has bigger cash and deferred cash (bonus) in their packages. OpenAI still puts a lot of the pay in restricted equity.
- spongebobism 2y agoWould it though? Presumably a finance company's claw back clause is there to protect it from you taking its trade secrets with you to its competitors, not from you tweeting "looks trashy lol" in response to a product launch of theirs, or you mentioning to a friend that your old boss was kind of a dick.
- tedivm 2y agoComp clawbacks in exit agreements, that weren't part of the employment agreement? I've seen equity clawbacks in employment agreements. Specifically, some of the contracts I've signed have said that if I'm fired for cause (and were a bit more specific, like financial fraud or something) then I'd lose my vested equity. That isn't uncommon, but its not typically used to silence people and is part of the agreement they review and approve of before becoming an employee. It's not a surprise that they learn about as they try to leave.
- danielmarkbruce 2y agoIt must have been part of the original employment document package, that the equity was cancellable. In the details of the equity grant, or similar, somewhere.
- ecjhdnc2025 2y agoMust it? Not clear what you mean. Do you mean it is generic to do that in contracts? (Been a while since I was offered equity.) Or do you mean that even OpenAI would not try it without having set it up in the original contract? Because I hate to be the guy with the square brackets ;-)
- danielmarkbruce 2y agoIt must. Joke aside - I'm saying "it must" the same way someone might say "surely".
- ecjhdnc2025 2y agoWise. Stops people saying "and don't call me Shirley!"
- dmvdoug 2y agoDon’t call me Shirley.
- ajb 2y agoIf it wasn't in the original contracts for the equity, they wouldn't be able to claw back. Fairly obviously, the mechanism can't be in the exit agreement because you didn't sign that yet. Normally a company has to give you new "consideration" (which is the legal term for something of value) for you to want to sign an exit agreement - otherwise you can just not bother to sign. Usually this is extra compensation. In this case they are saying that they won't exercise some clause in an existing agreement that allows them to claw back.
- minhazm 2y agoCan you find any specific examples? I've only seen that apply to severance agreements where you're being paid some additional sum for that non-disparagement clause. Never seen anything that says money or equity you've already earned could be clawed back.
- danielmarkbruce 2y agoWells Fargo clawed back from the CEO (and a couple others if I remember) over the fake account scandals.
- ecjhdnc2025 2y agoRight, but would that have been achieved with a clause open-ended enough to allow this additional paperwork on exit? Or would that have been an "if you break the law" thing? Seems unlikely that OpenAI are legally in the clear here with nice clear precedent. Why? Because they are backflipping to deny it's something they'd ever do.
- tsimionescu 2y agoI think they are backpedaling rapidly to avoid major discontent among their workers. By the definition of their stock as laid out in their articles of incorporation, they have the right to reduce any former employee's stock to 0, or to prevent them from ever selling it, which is basically the same thing. This makes their stock offers to employees much less valuable than the appear at face value, so their current and future employees may very well start demanding actual dollars instead.
- Bluecobra 2y agoI negotiated a starting bonus with my employer and signed a contract that I would need to pay it back if I quit within a year.
- JumpCrisscross 2y ago> Comp clawbacks are quite common in finance, at least contractually Never negotiated on exit.
- danielmarkbruce 2y agoI don't think it was negotiated on exit. It was threatened on exit. The ability to do it was almost certainly already in place.
- JumpCrisscross 2y ago> The ability to do it was almost certainly already in place Why? OpenAI is a shitshow. Their legal structure is a mess. Yanking vested equity on the basis of a post-purchase agreement signed under duress sounds closer to securities fraud than anything thought out.
- danielmarkbruce 2y agoI'm not saying it was thought out, I'm saying it was in place. My understanding is that the shareholders agreement had something which enabled the canceling of the shares (not sure if it was all shares, shares granted to employees, or what). I have not seen the document, so you may be right, but that's my understanding.
- JumpCrisscross 2y ago> the shareholders agreement had something which enabled the canceling of the shares OpenAI doesn't have shares per se, since they're not a corporation but some newfangled chimeric entity. Given the man who signed the documents allegedly didn't read them, I'm not sure why one would believe everything else is buttoned up.
- interactivecode 2y agoIf its not negotiated on exit why are they requesting additional documents to be signed when leaving? Clearly nothing like this was agreed at the start of employment.
- adastra22 2y agoWhat is the structure of those compensations, and the mechanism for the clawbacks? Equity is taxed when it becomes the full, unrestricted property of the employee, so depending on the structure these threatened clawbacks could have either (1) been very illegal [essentially theft], or (2) could have had drastic and very bad tax consequences for all employees, current and former. I'm not surprised that they're rapidly backpedaling.
- danielmarkbruce 2y agoNot sure how they deal with the tax. Ping John Stumpf (former Wells CEO) and ask, he probably has time on his hands and scar tissue and can explain it.
- londons_explore 2y ago> taxed when it becomes the full, unrestricted property of the employee I guess these agreements mean that the property isn't full unrestricted property of the employee... and therefore income tax isn't payable when they vest. The tax isn't avoided - it would just be paid when you sell the shares instead - which for most people would be a worse deal because you'll probably sell them at a higher price than the vest price.
- semi-extrinsic 2y ago> which for most people would be a worse deal It's a worse deal in retrospect for a successfull company. But there and then it's not very attractive to pay an up-front tax on something that you can sell at an unknown price in the relatively far future.
- deleted 2y ago[deleted]
- throwaway2037 2y ago> Comp clawbacks are quite common in finance Common? Absolutely not. It might be common for a tiny fraction of investment bank staff who are considered (1) material risk takers, (2) revenue generators, or (3) senior management.
- danielmarkbruce 2y ago[flagged]
- herval 2y agoIANAL but isn’t it illegal to execute something in the event of a document not being signed?
- dllthomas 2y agoI expect not... provided it's a thing you could do anyway (and it isn't extortion or something).