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.
Zynga Chief Seeks to Claw Back Stock
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Re: Zynga Chief Seeks to Claw Back Stock
#12> The equity recouped has been valuable as Zynga recruits experienced executives. The obvious question is how they could ever expect to convince executives they won't be defrauded the same way a couple of years from now. This tactic seems so unscrupulous as to be self-defeating.
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Re: Zynga Chief Seeks to Claw Back Stock
#13But several lawyers say the practice has been so rare it hasn't been tested in court.
Hopefully it remains rare. What a dick move. Bad for startups everywhere.
Re: Zynga Chief Seeks to Claw Back Stock
#14How much of Pincus' stock is getting clawed back? If this really is a problem, isn't it afterall, his fault in the first place? So shouldn't he suffer?
Re: Zynga Chief Seeks to Claw Back Stock
#15Wow this should be straight up illegal and yet: "One lawyer said that over the past year, he has heard executives of three social-media sites discuss the possibility of clawing back equity from some employees. Another lawyer, who has handled stock-compensation issues with technology companies for decades, said he never saw a company try to take equity from employees until about two years ago, but has since seen three…
To be fair, people are asked to take cash pay cuts all the time. They're talking about unvested stock (future compensation). It's tough to defend this, though. I would assume that it would be a breach of contract, but I'm no lawyer.
Re: Zynga Chief Seeks to Claw Back Stock
#16So their CEO has a list of executives that he feels did so little he considers them "missing in action". If that were the case, why didn't he just fire them for cause? That would have stopped the vesting clocks on their options.
Or was he paying so little attention to who was and was not contributing that firing them didn't occur to him at the time? In that case, who's really "missing in action" here?
If I were going to take my company public soon, the impending litigation shitstorm is exactly the kind of thing I would not want to have hanging over me.
Re: Zynga Chief Seeks to Claw Back Stock
#17How much of Pincus' stock is getting clawed back? If this really is a problem, isn't it afterall, his fault in the first place? So shouldn't he suffer?
He's an enormous holder - the article cites almost 20%, and almost double that in voting rights. It's hard to believe his contribution is worth $4B (1/2 of what Steve Job's net worth was) if the $20B valuation holds up in the IPO. Disgraceful.
Re: Zynga Chief Seeks to Claw Back Stock
#18I guess they want to make sure people don't want to come work for them...
Re: Zynga Chief Seeks to Claw Back Stock
#19Grellas, 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.
Re: Zynga Chief Seeks to Claw Back Stock
#20I think it is really important that people understand that stuff like this can happen even when you win the 100 to 1 bet that you are working for the next Zynga and not the next $NAME_A_STARTUP_RANDOMLY.
Another potential gotcha is the post-IPO sales lockout period. I don't know if it's the same in software, but in a previous life I was a chemist in a biotech startup that had an initially successful IPO. The rank and file were prohibited from cashing out options for six months after the IPO but somehow all the execs were exempt and got rich while the stock was enjoying a post-IPO high. Needless to say, by the time we peons could sell the value had plummeted.