I would ask the OP to consider going even further and figuring out a way to facilitate some liquidity so the employees could sell enough to cover their taxes even if they don't do early exercise.

You have employees who own shares but need a nontrivial amount of cash to cover taxes. You have investors who may be interested in acquiring more shares (or the company may want to buy them itself). You have a notion of a current valuation of the shares. Broker a sale at a price that's beneficial to both parties.

What is the company's incentive to block such a transaction?

I'd love to see this become standard.