> but can't you mitigate this with larger or better equity grants to those employees In a perfect world, yes, however, most companies are reticent to offer add

> but can't you mitigate this with larger or better equity grants to those employees In a perfect world, yes, however, most companies are reticent to offer additional equity to existing employees. Not that it doesn't happen, but it usually requires the employee to ask for it. One of the big issues, which I presume they expect this plan to help resolve, is how do you pre-judge a prospective employee's value? The employee wants a maximal initial grant, and the employer typically wants a minimal grant. The more they favor the grant desire of the employee, the longer the vesting period becomes - such that the employer is able to cut their losses if the employee doesn't pan out. Simply knowing that if you leave, some other guy that comes after you is going to get your 1% entices you to stay around long after your usefulness has ended. Either way, the company is already out of their 1%, but now they have an additional payroll drag. Much better to accept the 1% if you're going to give it, and be done with it. I'm also unaware of what the sourcing is by the article's author, wherein lies this huge problem that non-employees hold a bunch of stock in a company is making it difficult for companies to grow into their full potential. To be fair, if a company takes outside investment, it typically gives more stock to non-employees than employees, additionally giving them preferred upside and rights the employees as common stock option holders do not have. Again, if they feel the outside investors have much better aligned interests with the company than the current employees, they have a different problem than option grants.