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Earlier quoted context omitted.
The board has a fiduciary duty to act in the interest of shareholders. If the shareholders were not part of a vote, ie. the board voted, then the board is potentially liable for damages.
That is not true. It is a talking point that is repeated but has no bearing on reality.
What's often misunderstood is what "fiduciary duty" means. It doesn't mean "make the most amount of money possible", it means "act in the best interest of".
Isn't it pretty common for early employees to be screwed down the line during IPOs and acquisitions? That's been my experience and that of many colleagues, and has been a topic here on HN over the years, driving the idea that working for a startup is usually not in your interests except for particular cases.
Isn't it pretty common for early employees to be screwed down the line during IPOs and acquisitions? That's been my experience and that of many colleagues, and has been a topic here on HN over the years, driving the idea that working for a startup is usually not in your interests except for particular cases.
I remember Sam Altman posting lamenting that the most talented engineers are more interested in working for FAANG than startups. If anybody could insist on their portfolio companies' founders writing founding team friendly employment contracts, it's him.
While I'm against wealth taxes on principle, I can certainly understand the motivation for having them. I'm sure founders with fresh $100+M paychecks from acquirers can spare a few $M for those that believed in their vision enough to sacrifice the often-large opportunity cost of working for Google.
One of the reasons Woz is a personal hero of mine (alongside his engineering brilliance) is that he made sure his colleagues who toiled in their garage were treated fairly. When Jobs and Apple's investors didn't spare any would-be lucrative Apple stock for said employees, Woz made sure to "give away" some of his own to them. I'd argue Woz was still compensated quite lavishly after the "damage".
In fact, any YC startup that is currently having trouble hiring engineers might want to look into this. I would be interested in working for one that gave me more than 1% of the pie (alongside the usual "VP of Engineering" title that they always bestow to their first employee, which actually doesn't mean anything at all) as a founding eng.
EDIT: Also kudos to Cruise, which is a YC company, for actually stepping in and offering to make the founding employees whole.
Would it matter? When presented options, they aren't required to choose the best on a given metric. They can choose any, as long as the votes align. Perhaps the founders believed their product would go further (not die) under Amazon or that they stood to benefit more from stock rewards long term
Shareholders can indeed vote however they want.
Board members are fiduciaries, and vote on behalf of all shareholders. That a board member is also a shareholder (say, the founder) doesn't remove her duties to all shareholders.
While fiduciary duties are somewhat broad & fuzzy most of the time, they narrow during a sale of a company to basically "get the most money". These are "Revlon duties", after https://en.m.wikipedia.org/wiki/Revlon,_Inc._v._MacAndrews_%....
The case law that established this was the Trados[1] case.
If your company issues a huge bonus to executives for completing a sale of the company, you might have a case against the company. There are lawyers that make a very good living taking cases like this on contingency. I'm sure that's what these employees are doing in this case.
[1]https://corpgov.law.harvard.edu/2013/09/03/delaware-court-of...
Isn't it pretty common for early employees to be screwed down the line during IPOs and acquisitions? That's been my experience and that of many colleagues, and has been a topic here on HN over the years, driving the idea that working for a startup is usually not in your interests except for particular cases.
I wish YC with all of its power and influence could try to change things for the better here. Early employees' blood, sweat, and tears, not to mention burning the midnight oil, often go into actualizing the founders' vision. Often these key early hires are alongside the founders working equally hard since day 10 or even day 1. I remember Sam Altman posting lamenting that the most talented engineers are more intereste…
Then that VC needs to lead rounds and talk constantly about how the employees and companies they fund have the best chance of an equitable exit for all. How if you are not at one of their companies, you will almost definitely be screwed through dilution and bad founder actions.
YC took VC from shareholder focus to founder focus. The next YC will balance employee and founder interests in a way that delivers outsized outcomes the way that YC delivered outsized outcomes for shareholders by understanding that the founders were more important than getting an extra 1% or some other BS term in the deal.
Earlier quoted context omitted.
The board has a fiduciary duty to act in the interest of shareholders. If the shareholders were not part of a vote, ie. the board voted, then the board is potentially liable for damages.
So as per you the largest offer for common stockholders always wins? That is definitely not true since there are other considerations at play such as value creation post acquisition and/or strategic considerations.
In a cash acquisition, no. There aren't. The owners have no continuing consideration.
If the acquirer wants post-acquisition concerns to weigh on pre-acquisiton shareholders, their offer should include a stock component.
Earlier quoted context omitted.
The board has a fiduciary duty to act in the interest of shareholders. If the shareholders were not part of a vote, ie. the board voted, then the board is potentially liable for damages.
That is not true. It is a talking point that is repeated but has no bearing on reality.
Earlier quoted context omitted.
It is absolutely true that the board has a fiduciary duty to shareholders, and many states have statutes specifically protecting minority shareholder rights. Delaware is fairly unfavorable to minority shareholders though.
If you’re hired by a Delaware Corp as a California resident holding shares in that company, wouldn’t the California rights be the ones the individual suing would have? Otherwise one state would have a monopoly based on it being business friendl... oh wait, maybe that is the case.
> including employees who put in years at the company but left before May 2020. Zoox was founded in 2014. I mean, I don't want to get into the legal side, or even the ethical side, but on a practical note, former employees with stock should really expect to be at the very bottom of the pecking chain here. If you leave and hold stock, you're coming out in decent shape if you aren't completely screwed over. Like, Amazo…
If I buy a lottery ticket, my expected value is zero. That doesn't mean I won't sue if defrauded out of winnings.
A low-probability bet, when realized, should still be defended.