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Zynga Chief Seeks to Claw Back Stock

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Re: Zynga Chief Seeks to Claw Back Stock

#31

Post by gergles »

ghshephard wrote: post #24

I'm going to take a slightly controversial position here - so please read through my logic before you downvote me into oblivion. If you read the article, you'll see that what's happening at Zynga is not "Taking Back" stock, instead it's talking about _future_ compensation. Every time I've been through a Compensation Review - one item that is made very clear to my manager, is how much _unvested_ stock I have in the co…

I have to respectfully disagree with your logic. If you read the article, what is actually happening is they are retroactively trying to reduce restricted stock grants that were already made.

So, if I say "come work for me for free, and in exchange I will give you 10,000 RSU that vest over 4 years", then 3 years down the line say "just kidding, you don't get these last 2,500, but you get to keep working here", that is absolutely trying to take back comp. They can certainly withhold future restricted stock grants, but trying to take back already granted shares, vested or not, is beyond the pale in my opinion.

Re: Zynga Chief Seeks to Claw Back Stock

#32

Post by Lambent_Cactus »

Silicon Valley isn't a special place for invention and for startups because of special infrastructure or special laws, but because of special ideas and special norms. Those norms don't hold up in court, and they erode a little bit every time someone like Pincus only thinks about what they can get away with instead of what's right. This reduces the perceived value of equity for everyone in the valley, makes everyone less open, less trusting, less willing to take a risk. In the end, we all lose for that.

If I had my way, Pincus would never work in this town again. Anyone involved in this decision should be made a pariah. If we don't defend the norms that make innovation possible, we'll lose them.

Re: Zynga Chief Seeks to Claw Back Stock

#33

Post by earl »

Mark Pincus, the scum king of lead gen [1:5], is behaving in an unethical manner? I'm shocked. Shocked!

Is it rude to think these employees laid down with dogs and are bitching about fleas?

[1] http://techcrunch.com/2009/10/31/scamville-the-social-gaming...

[2] http://techcrunch.com/2009/11/07/horrible-things-slink-back-...

[3] http://cdixon.org/2009/09/28/the-new-economy/

[4] http://techcrunch.com/2009/11/08/zynga-to-stop-all-in-game-o...

[5] http://techcrunch.com/2009/11/01/scamville-hotornot-plentyof...

Re: Zynga Chief Seeks to Claw Back Stock

#37

Post by jwatte »

ghshephard wrote: post #24

I'm going to take a slightly controversial position here - so please read through my logic before you downvote me into oblivion. If you read the article, you'll see that what's happening at Zynga is not "Taking Back" stock, instead it's talking about _future_ compensation. Every time I've been through a Compensation Review - one item that is made very clear to my manager, is how much _unvested_ stock I have in the co…

The typical option agreement says that the stock you may purchase is subject to a right of repurchase by the company, and that right (by the company) lapses over time. So, I imagine that is totally negotiable until such time that that right lapses. It means going back on your word from the time of hire, but corporations go back on their word all the time, usually because it's believed to increase value for shareholders overall.

I imagine one way to make it non-claw-backable is to give the right to purchase outright right away, or to have a much shorter vesting period, although that may have tax ramifications, and be messy for the stock plan/s to deal with.

Regarding whether anyone's contributions really are worth $4B or whatever -- that's the lottery. Lots of start-ups fail, and lots of possibly valuable contributions are then valued at 0 stock. If a person contributed to a healthy start for something that grows really big, they may win the lottery; that's part of the appeal of Silicon Valley start-ups. The more companies close off this lottery ticket avenue, the less that ticket will be worth, and the worse the ecosystem will do in the long run.

But if you stand to make billions in the short run, who cares about the long run? Probably true on both sides.

Re: Zynga Chief Seeks to Claw Back Stock

#38

Post by hristov »

qq66 wrote: post #19

Grellas, PG, or others with experience in this field -- is there a legal document that I can make, as a startup CEO, that prevents my company from doing this in the future? I would never do something like this but I want that to be legally "handcuffed" so that no employee can ever think that we would/could do this.

It seems that Zynga is using a provision that says that all unvested stock grants are returned if the employee is fired. This is a pretty common provision from the contracts I have seen.

They then seem to be saying "give us back some of the stock voluntarily or we will fire you and you will lose it all."

If you want to make this impossible you can make your contracts such that unvested stock is not lost when one is fired. However, in that case you may end up with a lot of stockholders that are previously fired employees which may not be good for the company.

You can put in a provision in the contract that says that people can only be fired for good cause and that cause cannot be that they did not want to give their stock back. However, while this seems a very fair provision, it will invite a lot of lawsuits and may cost you a lot of money even if you do follow it.

You can put in a provision that says that one cannot ask employees to give back shares in exchange of not getting fired, but it is doubtful that will be effective. The courts usually allow contracts to be renegotiated if both parties agree to it, even if the provision that is to be renegotiated is the one that says "no renegotiation."

So, honestly, I cannot see a good way to "handcuff yourself" as you put it. You may as well just rely on being a decent person.

__________

PS: None of this is legal advice. This is just hypothetical discussion regarding a hypothetical situation. Please do consult a lawyer for your specific situation.

Re: Zynga Chief Seeks to Claw Back Stock

#39

Post by jaekwon »

gergles wrote: post #31
ghshephard wrote: post #24

I'm going to take a slightly controversial position here - so please read through my logic before you downvote me into oblivion. If you read the article, you'll see that what's happening at Zynga is not "Taking Back" stock, instead it's talking about _future_ compensation. Every time I've been through a Compensation Review - one item that is made very clear to my manager, is how much _unvested_ stock I have in the co…

I have to respectfully disagree with your logic. If you read the article, what is actually happening is they are retroactively trying to reduce restricted stock grants that were already made . So, if I say "come work for me for free, and in exchange I will give you 10,000 RSU that vest over 4 years", then 3 years down the line say "just kidding, you don't get these last 2,500, but you get to keep working here", that…

That's true, but the alternative that we're already familiar with is simply firing the employee, which is not any better. If we're OK with being fired, shouldn't we be OK with this?

Re: Zynga Chief Seeks to Claw Back Stock

#40

Post by jaekwon »

jwatte wrote: post #37
ghshephard wrote: post #24

I'm going to take a slightly controversial position here - so please read through my logic before you downvote me into oblivion. If you read the article, you'll see that what's happening at Zynga is not "Taking Back" stock, instead it's talking about _future_ compensation. Every time I've been through a Compensation Review - one item that is made very clear to my manager, is how much _unvested_ stock I have in the co…

The typical option agreement says that the stock you may purchase is subject to a right of repurchase by the company, and that right (by the company) lapses over time. So, I imagine that is totally negotiable until such time that that right lapses. It means going back on your word from the time of hire, but corporations go back on their word all the time, usually because it's believed to increase value for shareholde…

By 'right of repurchase', are you referring to the right of the company to purchase your vested shares, should you choose to sell them? If so, it's not related to this issue.
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