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Zynga Chief Seeks to Claw Back Stock

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Re: Zynga Chief Seeks to Claw Back Stock

#51

Post by ghshephard »

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…

The right-of-repurchase grants that I've seen have always been 83-B grants where the company lets me buy all the stock up front so I can start the tax clock. The right of repurchase lapses on a vesting schedule, just like options.

From that perspective, there isn't much difference between (A) Vesting Stock, and (B) Lapsing over time a Restricted Repurchase agreements.

Nobody is going back on their word - it's just a different way of vesting.

Re: Zynga Chief Seeks to Claw Back Stock

#52

Post by staunch »

ghshephard wrote: post #48
gergles wrote: post #31

Earlier quoted context omitted.

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…

They can't touch the shares that have vested - I think we both agree here. They could just fire the non-performing executive, and put an end to the vesting schedule. Here is the thing - Firing Non-Performing executives at startups with huge stock allocations happens ALL the time at _every_ company. It's not at all unusual - I've never been at a company where it hasn't happened. And frequently. It's absolutely busines…

Good point. I'm positive I'd just fire them. It sounds like he made a list of B/C players but wants to keep them around.

Maybe he's concerned how it would look if he fired a group of execs right before the IPO?

Re: Zynga Chief Seeks to Claw Back Stock

#53

Post by ghshephard »

DevX101 wrote: post #11

This is bad for the startup community. There isn't much reason for a great hacker to join startup if he/she thinks you might want to play 'take-backs' if the company succeeds.

Well - the hacker can be fired. That also takes back all the unvested stock.

Re: Zynga Chief Seeks to Claw Back Stock

#55

Post by strlen »

What's really disgusting in the conversation is that there's some implicit assumption that it was _wrong_ for the Google Chef to have received $20mm. Indeed, the only thing wrong with that is that $20mm is far too little, given the Chef's contributions to Google (I am assuming they're talking about Charlie?)

Re: Zynga Chief Seeks to Claw Back Stock

#56

Post by gm »

hristov wrote: post #38
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 f…

"Unvested" means just that: The shares have not vested. The shares are not yours yet. You cannot lose something that is not yours. People who get fired before their shares vest, are not "losing" their unvested shares, nor are they "giving back" their unvested shares.

Re: Zynga Chief Seeks to Claw Back Stock

#57

Post by prpon »

More often, startups fire employees under the disguise of performance. I am not sure what constitutes non-performance but it has been used countless times as an excuse for getting back the unvested stock options.

Re: Zynga Chief Seeks to Claw Back Stock

#58

Post by jpdoctor »

ghshephard wrote: post #51
jwatte wrote: post #37

Earlier quoted context omitted.

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…

The right-of-repurchase grants that I've seen have always been 83-B grants where the company lets me buy all the stock up front so I can start the tax clock. The right of repurchase lapses on a vesting schedule, just like options. From that perspective, there isn't much difference between (A) Vesting Stock, and (B) Lapsing over time a Restricted Repurchase agreements. Nobody is going back on their word - it's just a…

I agree. In addition to the 83-B election, I've seen a right-of-first-refusal for share repurchase. (Third party offers you $X/share for your shares, the company has the right to purchase at that price instead.)

I've never seen a "we can repurchase shares as we see fit" clause.

Re: Zynga Chief Seeks to Claw Back Stock

#59

Post by [deleted] »

staunch wrote: post #52
ghshephard wrote: post #48

Earlier quoted context omitted.

They can't touch the shares that have vested - I think we both agree here. They could just fire the non-performing executive, and put an end to the vesting schedule. Here is the thing - Firing Non-Performing executives at startups with huge stock allocations happens ALL the time at _every_ company. It's not at all unusual - I've never been at a company where it hasn't happened. And frequently. It's absolutely busines…

Good point. I'm positive I'd just fire them. It sounds like he made a list of B/C players but wants to keep them around. Maybe he's concerned how it would look if he fired a group of execs right before the IPO?

[deleted]

Re: Zynga Chief Seeks to Claw Back Stock

#60

Post by ghshephard »

None of these employees who have had their stock (possibly millions of dollars of compensation) "clawed back" will be likely to do any productive work whatsoever for Zynga - so why not fire them and get it over with? After all - that would have the effect of instantly canceling all future vesting - no discussion or agreement with the employee required whatsoever, and zero controversy.

After some deeper thought on this topic - my new assessment is that these people are actually experiencing what is called a "Soft Termination" - they've been fired, but they are allowed to stay on as employees for things like Medical, Job Hunting, etc....

Instead of appreciating it, though - they are squawking about having their stock pulled back in return for not being "officially terminated". I bet this type of thing goes on more often than we know, particularly with Executives who may have a significant percentage of the company and are not working out.

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