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Zynga To Employees: Surrender Pre-IPO Shares Or You're Fired
ardmhacha writes "Zynga seem to think they were overly generous handing out stock to early employees. Fearing a 'Google Chef' situation they are leaning on some employees to hand back their unvested stock or face termination. From the article: 'Zynga's demand for the return of shares could expose the company to employment litigation—and, were the practice to catch on and spread, would erode a central pillar of Silicon Valley culture, in which start-ups with limited cash and a risk of failure dangle the possibility of stock riches in order to lure talent.'"
Yes. Their management is well known for doing all kinds of borderline illegal stuff. Seriously, look up stories about how they got started.
"Who is the Journal of Quantum Physics going to believe?" --Stephen Hawking
That's a false dichotomy. The choices are (1) give (some of) the UNvested shares back and don't get rich, or (2) get fired, forfeit all of the UNvested shares, and don't get rich. I hope the IPO punishes them for this.
From TFA, the small minority of employees asked to return the stocks are executives, not engineers, architects or the creative folk.... Most executives don't deserve what they get paid in USA. Most of them just lunch off of the productivity and manipulate for their personal gain. There's a term for that in the nature. It is called a parasite.
He is doing the right thing. So let's not be quick in judging him. ok ?
Quitting is a bad move. Getting fired is much, much better for your lawsuit.
"Who is the Journal of Quantum Physics going to believe?" --Stephen Hawking
Sadly, it happens. Usually it's in the form of reducing retirement benefits after employees have already put the time in.
Hey AC, top posting is how the game works, if you don't like it, don't play.
One of the first financial press conferences before (after?) the google IPO was by their CFO.. Chielf Food Officer, back in February 2005.
Google was proud of announcing the number of eggs they were cooking each day for their employees. Wall Street was pissed by their lack of respect.
http://www.nytimes.com/2005/02/10/technology/10google.html?ex=1266123600&en=60d19019bb842d20&ei=5088&partner=rssnyt
Nouvelles de jeux et technologies en français. TC
It's EXECUTIVES who awarded each other obscene levels of options. These options would DILUTE the shares that deserving rank-and-file employees should have. The CEO is playing hardball and threatening to toss the execs who pulled this.
The problem is that this is about yet-unvested stock - so if an employee quits, or is terminated for cause, he'll never get to vest them and loses them all. So company, basically, demands that employee surrenders a part of his unvested stock in exchange for being given an opportunity to vest the remainder.
That said, I've never heard of that ever happening, large corporations or no. Certainly not from anyone I know at Microsoft or Google. You can kinda understand why, too - it's morally equivalent to promising a certain payment upfront, and then reneging on it. The effect of doing so, especially in a way as public as this, will severely affect company's ability to attract talent. I mean, I know that I would never, ever consider working for Zynga after this news, and I bet many people would agree on that. I don't know what the hell they were thinking with this. Unless, of course, they plan on switching to 100% H1-B for rank and file (and even then the ones that are actually good would still skip on such an offer).
Most of the articles/commenters have used very imprecise language about the nature of what Zynga is asking their employees to give up.
When you join a tech startup you are granted the option to buy some number of shares of the company's stock at a certain price (which, when you join very early, is incredibly low compared to what it will be when the company is sold/goes public). To prevent people from taking the job for a day, buying all their shares, and leaving, the options become available ("vest") on a schedule such that you are able to buy some additional percentage of your shares every additional month you work there. Additionally, in most agreements, your options stop vesting (obviously) but also evaporate within a few months after you leave a company (so you can buy the vested shares or just get nothing).
Note that they're still just options until you actually exercise them (buy them for the low option price).
It sounds like the Zynga employees are being asked to forfeit unvested shares - not only have the employees not yet paid to own these shares, they haven't even worked at the company long enough for those shares to be available for purchase (that's what an unvested share is). This is not like Zynga taking money or any other assets from their employees - they're just modifying an agreement that's part of their compensation. It's most closely equivalent to having been promised an incredibly large bonus in the future and then them telling you that you'll be fired if you don't agree to accept a lesser bonus.
It's strange that they're threatening people with their jobs here considering that there are probably much less dramatic ways to accomplish this same thing. For one thing, most stock option agreements are granted at the board's pleasure - if the board wants to cut you off at any time, they can. In that sense, there's nothing illegal (I am not a lawyer) about reducing the number of shares in someone's option agreement.
Don't get me wrong - this is a dick move that's congruent with Zynga's less-than-stellar history of ethics. As someone who works for a tech startup, I'm scared that something similar would happen to me/lucky that I work for good natured people.
California is not an at-will state - its law recognizes "implied covenant of good faith and fair dealing" in the relationship between employee and employer, which TFA specifically refers to as what is the grounds for the lawsuits from employees here. I can certainly agree that promising unvested stock, and then at a later point threatening to fire, not for cause, but just because you have that earlier promise, and forcing you to rescind it that way, is neither fair nor in good faith. If this guy has a problem with performance of those employees, then why doesn't he fire them on those grounds?
As an owner of a corporation and one who cares about his employees, I can tell you that you paint a broad brush. "I hate to break it but no company has morals and only look at you as mathmatical functions that bring in money. Your sole existence is to make someone richer in corporation and they only care about money."
Maybe I'm bad at business but I pay my employees well over the going rate and *gasp* care about them. There could come a point where, mathematically, I would have to let some go in order for the company to continue in bad times but I would take no delight in it. At some point the goal is to keep a business running unless you think that it would be better if everyone should get fired if you go bankrupt.
Disclaimer: IANAL. You lose unvested shares if you're fired or if you quit. You can still buy vested shares at the original strike price for up to, I believe, thirty days after termination.
Whether you'd want to after getting screwed so royally is another matter, but chances are there's still money to be made (recovered may be a better term) if you keep emotion out of it and dump them just after the IPO, especially if you got in early enough and have the options at a favorable strike price. In fact you might not need to wait until they go public; there are plenty of secondary markets for privately-held stocks. The company probably has the right of first refusal in that case, but you still get paid the same amount; they just get to buy the shares back at the agreed-upon price instead of you doing business with the original buyer. This is in effect what Zynga's trying to do, but without actually paying to get the stock back.
How are sites slashdotted when nobody reads TFAs?
Zinga will still attract talent, but the contracts will have thicker prose about termination and vesting conditions, so it will be much harder to pull this stunt a second time. But perhaps at this stage of growth they are beyond that.
I watched Politics, Strategy, and Game Theory last night, which talks about Grim Trigger and the conditions under which, in iterated prisoner's dilemma, you care more about the future than defecting in the present moment.
It's a competent lecture with no great pizzazz.
Here's a fairly nice piece by an undergraduate I stumbled upon brushing up on Grim Trigger: Debunking the Prisoner(slashcode fuckup)s Dilemma on Robert Axelrod(slashcode fuckup)s Emergence of Cooperation among Egoists and why cooperation is a lot more common than the shallow analysis would have you believe.
I really wonder what payoff matrix he constructed to author that blog under no fixed identity. I found a Tweet referencing the site by the apparent author with one or two clues about his circumstance.
The punishment for Zynga in future iterations are employment contracts with a lot less room to wiggle if they screw up future hires. The reward in the present iteration is yanking back a substantial chunk of the entire company.
If the quiet vestors really aren't showing up and pulling their weight, it doesn't seem great to let them get away with that either. I don't think Zynga's presumption is that they can't fight this, but more like "the effort involved will be a shock to their lazy asses" so they are likely to settle without going ten rounds.
In CA, you can get unemployment even if you quit, get fired for stealing, etc.
False. You can get it if you quit, but you have to have a very good reason for quitting and you have to take steps to rectify the issue first.
http://www.edd.ca.gov/uibdg/Voluntary_Quit_VQ_5.htm
You cannot collect at all if you are terminated for willful theft.
http://www.edd.ca.gov/uibdg/Misconduct_MC_140.htm
Two employees at my porn store (former employees, that is,) are collecting. On our dime.
You either do not know the whole story, or are withholding relevant information.
In British English, the proper conjugation is to treat companies and other organizations as plural. A google search for the submitter, ardmhacha, gives results which are all related to Ireland. Thus he was writing correctly.
Um... did you even bother to contest it? In my state (Arizona) if an employer contests, they win. Period. You're either none too bright, a paid shill astroturfing for a right wing think tank, or withholding information. Just out of curiosity, which is it?
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I once got a job offer several years ago that included stock options, because the salary was below market. The catch was the offer merely said "stock options" and gave no terms whatsoever. WTF! That's like saying they would give me a salary compensation without saying how much. I explained to the recruiter that was trying to hire me that I had to interpret the options part of the offer as "1 share per year, vested in 10 years". He said it would be a lot more than that. I asked him how much more. But he only said that they were still working out the details with the lawyers. So I declined the offer. They later went out of business, so I guess they must have had trouble doing a lot of things right.
If you get an offer with stock options, you need to know exactly what the terms are. And technically, you should understand the risks, including the risk of the company going under. And to do that properly you need to look at the business plan and financials. You almost certainly won't get to see the latter unless the offer is for CFO or CEO. If you're sure the company will succeed, then you at least need to know the terms to know how much you could get out of it, and the risks they will cheat you.
now we need to go OSS in diesel cars
The article on WSJ.com (Here) consulted with several lawyers, who generally felt that since this has never been tried before, it is hard to know whether it would stand up in court. I'm going to assume Zynga consulted with their own lawyers before trying this trick.
Apparently the reason they used this trick instead of diluting the shares is because they didn't want to dilute all the shares (well, maybe they did that too), they wanted to get stock back from a few employees (it seems mainly executives, actually) who were 'non-contributors.'
Still seems like a lame move. When the money flows like it does from an IPO, let it flow to everyone. When you have a billion dollars coming in, paying the lowly janitor a million isn't going to hurt much. Be generous.
"First they came for the slanderers and i said nothing."
Yes; I meant threaten to sue with the help of an attorney.
-- IANAL, this isn't legal advice, and definitely isn't legal advice for you. Also, Squee!
It's not the first time for this in silicon valley. Vulcan ventures fired Leo laporte when he refused to turn over shares when they sold TechTv to comcast. I think Laporte had vested shares at least but it's not unheard of for a VC to fire a bunch of people before their vesting date.
You're either none too bright, a paid shill
Or Khyber.
This is the correct answer. Khyber constantly posts these BS stories--here, on lulz.net, forums for pot growers, and everywhere else he hangs out. Don't forget that he claims that his other job besides porn store clerk is research director for the LED company he advertises in his .sig.
Eh, Barring employees from talking about wages is a violation of The national labor relations act. I'd cry tears of joy if I had it on paper someone was firing me for that reason, because winning the resulting lawsuit would be basically guaranteed.