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Comment by earbitscom | Hacker News Reader

They're not worried about whether someone gets rich who doesn't deserve it. They no longer need to pay someone $10M to keep them working there because the risky part of the journey is over. So, they're saying, you earned X already for the risky portion, you can keep that, and you can keep your job, but we're not going to keep paying you a startup equity share for you to work at a big company with total stability, benefits, vacation, etc. We need to scale it back, and we want you to stick around for what is probably a competitive comp package if you look at it objectively.

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no, you're missing the point. here's how it works:

zynga: want to be an early employee in our risky little venture?

emp: um - the salary is kind of low and there's no job security

zynga: but we're tossing in 100,000 options. potentially worth $10M if our stock hits $100 in the ipo

emp: okay, that sounds better. i'm in

zynga: of course, to prevent you from just exercising the options and leaving, they'll vest over four years

emp: works for me.

so basically the entire chunk of options was the employee's payment for joining the company when there was low salary and job security. the vested part is payment for sticking around to help zynga succeed. and the implicit contract is that the unvested part is an already made promise that his compensation for each year of work will be $x in salary + $y in incrementally vested options. since employers tend to have disproportionate leverage in these matters, there are of course a whole range of clauses stating that he could be fired for any or no reason and lose his unvested stock just as if he'd resigned, but that's harking back to the letter rather than the spirit of the agreement. abusing that leverage is a scummy thing to do, regardless of the technical legality of it all.

In case that explanation was still too technical (it was accurate though, good job zem), consider it this way:

You win the lottery. You choose to have the money earned over your lifetime, instead of a lump sum. However, after a few years, the state reneggs on the original offer, and gives you the lump sum, dramatically less than what you had contractually signed for. It's that simple. You're offered x, with the understanding x matures (like a government bond). The potential worth of x is immutable, but Zynga turned around and offered x/2.

That is one of two ways to look at it. Most employers do not think of the initial stock as a grant that you have earned for signing on and then four years of dragging out payment. They look at the stock as four years of payment that, along with your salary, is designed to keep you motivated the entire time. So, the other is:

zynga: want to be an early employee in our risky little venture?

emp: um - the salary is kind of low and there's no job security

zynga: we'll toss in 25,000 options per year for the first four riskiest years. potentially worth $2.5M per year if our stock hits $100 in the ipo

emp: okay, that sounds better. i'm in

2 years later

zynga: hey, looks like you did pretty good the last two years, but the trajectory of the company has changed, there is no longer any risk in it for you, and it doesn't make fiscal sense for us to pay you $2.5M a year in stock anymore. We'd like you to stay on, though, and you'll still get a competitive salary and benefits plan. If you don't think that it is competitive, we understand.

emp: works for me. (OR) doesn't work for me.

The problem is structural. The spirit of a 4-year vest is that you should keep the employee (if they are good) and let them vest at the original rate. But if the company suddenly becomes massively more valuable and less risky, the incentive is to fire that employee and hire someone else, because you can.

I think it is incumbent on us, the startup world, to call this out as bad faith, which is what it is. Legal or not, companies that do this should be forced to walk down the hall of shame. Their founders, if they are around and party to it, should be unwelcome in our midst after reneging on the social contract that makes this whole thing workable.

They are shitting on the commons, and spoiling the fields for all of us, by making the decision to work for a startup that much riskier.

I think the keyword here is anymore. You can't change an agreement that was made in the past based on hindsight.

What you're saying would be true except that if the employee saw that the company was headed nowhere and they left after 2 years, nobody would say, "Hey! But you agreed to a 4 year plan. We have paid you all of this stock that you haven't vested yet."

The deal was x amount of shares for the risk of working for a startup.

Renegging that to x/2 amount of shares in hindsight is evil.

It's a construct in which an early employee can only lose, if the startup fizzles, he gets nothing, if the startup booms he is screwed out of half of what he and his employer agreed on.

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