Is this typical and accepted behavior in a transaction like this?
Pretty common, rarely as blatant.
Most commonly what you'll see is employees/founders who had vested but left the company early get screwed.
Skype Fires Executives, Avoiding Payouts
11–20 of 67 posts
Re: Skype Fires Executives, Avoiding Payouts
#12What can a (startup) employee do to prevent these sort of situations from occurring after a liquidity event? In particular, what sort of terms should be in your hiring agreement -- eg. double trigger acceleration?
This sounds like it was explicitly to get around the trigger clauses in the contract. They likely had acceleration for change of control, and fired people before the "event" that would have triggered that acceleration.
Re: Skype Fires Executives, Avoiding Payouts
#13Technically this isn't Skype anymore. Skype management needed a cue from Microsoft.
Re: Skype Fires Executives, Avoiding Payouts
#14Earlier quoted context omitted.
This is pretty standard. If your options haven't vested and you're let go there usually isn't much you can do. I doubt MS has anything to do with it, except the fact that they probably didn't express any particular concern regarding the deal if these employees were let go.
There's plenty they could have done before the contract was signed. They could have easily pushed for double trigger acceleration in their own contracts to prevent this.
Company's officers fiduciary duty is to protect interests of shareholders. Complicating contracts with the purpose of transferring that wealth from shareholders to executives could be construed as violation of that duty.
Re: Skype Fires Executives, Avoiding Payouts
#15The later the stage investor, the less they need to worry about their reputation with anyone except their LPs.
Re: Skype Fires Executives, Avoiding Payouts
#16Technically this isn't Skype anymore. Skype management needed a cue from Microsoft.
It is still Skype (well, the private equity firm that owns Skype). The msft deal hasn't gone through yet.
Re: Skype Fires Executives, Avoiding Payouts
#17Earlier quoted context omitted.
There's plenty they could have done before the contract was signed. They could have easily pushed for double trigger acceleration in their own contracts to prevent this.
Company's officers fiduciary duty is to protect interests of shareholders. Complicating contracts with the purpose of transferring that wealth from shareholders to executives could be construed as violation of that duty.
"Transferring wealth" isn't an abandonment of fiduciary duty, it's exactly what you do when you hire people and pay them. Nor is there anything wrong with negotiating contracts describing the details.
Re: Skype Fires Executives, Avoiding Payouts
#18What can a (startup) employee do to prevent these sort of situations from occurring after a liquidity event? In particular, what sort of terms should be in your hiring agreement -- eg. double trigger acceleration?
I'm curious too and would like a simpler explanation as a non-business person that's sort of familiar with shares.
Re: Skype Fires Executives, Avoiding Payouts
#19Good for them. If you're going to be cutthroat dicks, be consistent. I hope their good employees take note.
Reduction of equity stake after negotiated compensation just reeks of pure theft. So what are good employees supposed to do?
Doubtless the ones who did not get diluted were the big money while the workers get shafted (as usual). Kleptocracy at it's finest.
Re: Skype Fires Executives, Avoiding Payouts
#20The later the stage investor, the less they need to worry about their reputation with anyone except their LPs.
What is LP? Limited partners?
(Apologies for ignorance)