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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.
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.
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
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.
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?
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.
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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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.