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If You're Working For Stock, Read the Fine Print

timothy posted more than 3 years ago | from the see-subclause-in-above-subparagraph-g-to-wit dept.

The Almighty Buck 374

cratermoon writes with a story of interest to anyone interested in working at a start-up, or compensated even partly in company stock: "Former Skype guy Yee Lee finds out that for people working at companies controlled by private equity firm Silver Lake, 'vested' doesn't mean what you think it means, and gets no money from the stock options he thought he could exercise. 'Skype spokesman Brian O'Shaughnessy said, "You've got to be in it to win it. The company chose to include that clause in the contract in order to retain the best and the brightest people to build great products. This individual chose to leave, therefore he doesn't get that benefit."' Fortune also has the story." Some of the commentary on the confusing language surrounding the stock grant says the company was doing nothing out of the ordinary, but it seems that's because opaque language is the norm.

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Working for stock options (0, Offtopic)

betterunixthanunix (980855) | more than 3 years ago | (#36577320)

This is not an example of working for shares of stock, but rather of working for stock options. Options contracts work differently from shares of stock. Why is this such a big deal? Are people just now waking up to the reality that times have changed, and that companies don't give them actual shares of stock anymore?

Re:Working for stock options (3, Insightful)

Rakishi (759894) | more than 3 years ago | (#36577386)

Next time read the article, this has nothing to do with the difference between stock options and stocks. It has everything to do with the difference in the stock option contracts between companies.

Specifically, the issue is that normally stock options once vested (ie: you can exercise them) do not expire after an employee leaves a company. In this case they did and the language of the contract did not at all make that clear.

Re:Working for stock options (3, Funny)

93 Escort Wagon (326346) | more than 3 years ago | (#36577420)

Next time read the article

Now, now, let's not get too carried away.

Re:Working for stock options (1)

Fnord666 (889225) | more than 3 years ago | (#36577426)

Specifically, the issue is that normally stock options once vested (ie: you can exercise them) do not expire after an employee leaves a company. In this case they did and the language of the contract did not at all make that clear.

Perhaps you should read the article again as well. The options did not expire. Lee was eligible to purchase them if he wanted to. The issue was that the contract also included a clause that would let the company buy back the stock purchased using those options at the exercise price if they so desired. The company indicated in a letter to Lee that they would do so. The net effect would be $0 gained for Lee and possible tax implications where he might even lose money if he were to move forward.

Re:Working for stock options (1)

DarkOx (621550) | more than 3 years ago | (#36577556)

I don't understand the tax implications.
1. Lee decides to exercise the options to buy Z shares of the stock at price W dollars per share.

2. He sells the shares on the market for $X his capital gain is now Z * ($X - $W) //he would only do this if X > W

3. He leaves the company and in doing so becomes obliged to sell Z shares back to the company at $W.

4. To do so he buys Z shares at $Y where Y > W

  • OR

Y W; they could acquire more treasury stock on the market for the same money. So we can safely assume Y > W, his loss will be Z * ($Y - $W). His final gain or loss is then Z * (($X - $W) - ($Y - $W)).

We know that X > W, so the way I see it depending on if X > Y or not he either has a smaller gain than before or now has a loss, in both cases the taxes owed would be reduced.

Re:Working for stock options (2)

betterunixthanunix (980855) | more than 3 years ago | (#36577428)

No, according to TFA the terms of the options were spelled out in a document that the guy had not read. Why am I supposed to feel sorry for someone who failed to read and understand the terms of the contract that he signed? Just because some companies offer options contracts that work in the manner you expect does not mean that every company does.

TFS makes it seem as though this guy was supposed to receive stock but did not. That is not true. The guy received options, under specific terms which he neglected to read.

Re:Working for stock options (4, Interesting)

techsoldaten (309296) | more than 3 years ago | (#36577612)

Something tells me, if I were to ask you to read that document, you would not understand it yourself. In all likelihood, your lawyer would not have advised you about the possible implications of that clause since it is simply something that is not done.

People working for me have left to go to Google several times in the past, we had one black week once where 6 guys left within days of each other, all heading for Google. Not all of them are with that company anymore, and I have heard tell of the offers they received. $120k in stock options granted the first day, with a relatively short vesting period (I think it was about a year, but can't remember exactly).

This is the way things are supposed to work in Silicon Valley. I am never keen on options, I was granted a good number of them in the 90s and saw a lot of value vanish overnight when the bubble burst. But you should be able to lose value based on performance of the market, but an option is an option. It does not make sense that you are contributing to the growth of the company based on this compensation, and that it can be stripped from you.

Buyback clauses like this are almost certainly non-enforceable, especially since the employee has to pay taxes on the options during the time of his / her employment (at least in California). It would be like saying that the company has the right to take back your paycheck, they are measured as compensation and should rightfully belong to the employee without additional considerations.

I have a strong feeling this is not going to stand and we will be hearing about this matter for a long time.

Re:Working for stock options (5, Insightful)

Hazel Bergeron (2015538) | more than 3 years ago | (#36577660)

Why am I supposed to feel sorry for someone who failed to read and understand the terms of the contract that he signed?

Empathy block - check.

Assumption that all humans are perfect rational entities - check.

Supremacy of the business contract - check.

Internet Libertarian Warrior mode engaged!

Re:Working for stock options (1)

walternate (2210674) | more than 3 years ago | (#36577822)

Why am I supposed to feel sorry for someone who failed to read and understand the terms of the contract that he signed?

Empathy block - check.

Assumption that all humans are perfect rational entities - check.

Supremacy of the business contract - check.

Internet Libertarian Warrior mode engaged!

I have a suspicion that if this was about computers instead of stock options; that someone suddenly realized that a computer solution he bought worked differently than he had expected, because he hadn't checked details beforehand. Then many here would not respond differently.

ignore the last not (1)

walternate (2210674) | more than 3 years ago | (#36577826)

duh.. and a "not" too much in last sentence killed the whole point

Re:Working for stock options (1)

MaggieL (10193) | more than 3 years ago | (#36577394)

The issue seems to be not that it was an option but that there was a hidden clause that allowed the company basically to renege on the option, buying it back at the purchase price. Read TFA.

Re:Working for stock options (1)

betterunixthanunix (980855) | more than 3 years ago | (#36577442)

You RTFA; he didn't bother to read the agreement. He received options under particular terms; why should we feel sorry that he didn't read those terms before agreeing to them?

Re:Working for stock options (3, Informative)

symbolset (646467) | more than 3 years ago | (#36577834)

The article isn't about feeling sorry for him. It's about being aware that this has happened so that others potentially impacted by similar terms can evaluate their positions. Something like a sign on the beach that reads "Some swimmers recently eaten by sharks."

it's worse than that (0)

Anonymous Coward | more than 3 years ago | (#36577406)

If you read the legalese in the Fortune article it looks like it also applies to shares from options that have already been exercised. That is, they've exercised the options and are holding actual shares but then leave before five years are up.

Re:Working for stock options (1)

Grishnakh (216268) | more than 3 years ago | (#36577470)

Huh? I thought the whole stock option craze died out with the tech boom/bust. When I was at Intel, they used to issue options, but they stopped when that new tax law came out regarding options, and instead they starting issuing "restricted stock units", which was basically actual shares of stock, with strings attached (they don't vest until you've been there two years after being awarded them).

I don't know what other companies have been doing, but I had assumed that everyone gave up on the stock option silliness, because really it's stupid and with the economy in the toilet, you're not likely to get anything out of them (unlike the 90s).

After my not-so-great experience at Intel (I never did get much out of those stupid stock units or options), I've never worked for stock again. I want cold, hard cash. If some company is too cheap to pay real money, then I'll move on to someone that does. If they want to give them to me anyway, I'll take them, but I won't count them when I'm comparing compensation packages because to me, they're about as valuable as a lottery ticket (or really even less; at least a winning lottery ticket will make you a millionaire most likely, but stock units/options probably won't make you more than $100k total in the very best-case scenario. And I haven't seen any companies offering stock any more either, so I haven't even had a chance to put this into play.

Re:Working for stock options (0)

Anonymous Coward | more than 3 years ago | (#36577632)

Even with the economy in the toilet, we're in the midst of another tech bubble. Look at all of the services that have been getting buzz lately without any real products. We've had a few IPOs on these in the past few weeks, etc.

Re:Working for stock options (1)

Grishnakh (216268) | more than 3 years ago | (#36577778)

That's an interesting point. Are any of these companies getting huge gains on their stocks, though? (I don't know, I don't pay attention to that stuff much any more.)

Either way, the whole thing left me with a bad taste in my mouth. I think Yee Lee probably agrees with me too after his recent experience with Skype.

Re:Working for stock options (1)

symbolset (646467) | more than 3 years ago | (#36577828)

The company in question is Skype, which just entered into an agreement to be bought out by Microsoft for $8.4 billion - something over three times the market's prior evaluation of the company's market value. It's reasonable to assume that the options did increase in value if they were true options, which they weren't. The right to buy something at a set price sometime in the future, when bundled with a requirement that you sell it at that price, is not an options contract in the normal sense. It has no value at all.

The profit is the profit (4, Insightful)

alphatel (1450715) | more than 3 years ago | (#36577334)

You are the employee and you cost money. The profit is already money and therefor that is what is protected. If you want to assure you will be protected, read what you sign. Everyone wants to keep their slice of the pie. Every slice costs money. And even worse, lawyers will be making a piece from each part of the action.

Re:The profit is the profit (3, Insightful)

bughunter (10093) | more than 3 years ago | (#36577838)

I am the employee who generates value for your company. If your staff isn't generating more money than it costs, then either you're a poor manager, or your business plan has already accounted for that and hopes to recoup the losses later. If you want assured profits, then you need to compensate the employees who generate the wealth.

Yes, you steer the ship, but the employees are the engine, the sails, the hull, and the bilge pump. Without us, you'd be steering a canoe instead of a battleship. Take care of us like you'd take care of your ship, or else sooner or later you'll be swimming with the bankruptcy lawyers. (I hear they have dolls' eyes.)

...opaque language is the norm. (4, Insightful)

John Hasler (414242) | more than 3 years ago | (#36577336)

It wouldn't be if you people would quit signing things you don't understand.

Re:...opaque language is the norm. (1)

petteyg359 (1847514) | more than 3 years ago | (#36577350)

It will be quite a challenge to get millions (possibly billions) of people to quit blindly signing next to the X...

Re:...opaque language is the norm. (1)

chemicaldave (1776600) | more than 3 years ago | (#36577376)

Or perhaps we should make any verbal explanation given to you also legally binding.

Re:...opaque language is the norm. (1)

TheLink (130905) | more than 3 years ago | (#36577398)

Verbal explanation? You mean like "It's the industry standard/norm".

Re:...opaque language is the norm. (1)

Culture20 (968837) | more than 3 years ago | (#36577618)

Or perhaps we should make any verbal explanation given to you also legally binding.

That would be awesome, but salesmen would throw a fit, because they often rely on being legally allowed to say one thing while writing the opposite on paper for you to sign.

Re:...opaque language is the norm. (5, Insightful)

v1 (525388) | more than 3 years ago | (#36577390)

The 11-page stock option agreement he signed looked to him like boiler plate and suggested a typical "one-year cliff" at which point 25 percent of his four-year option grant would vest. The only mention that the company had the right to buy if he left in less than five years came in a single sentence toward the end of the document that referred him to yet another document, which he never bothered to read.

It's easy to tell someone "be sure to completely read what you sign", until the day someone sets a 45 page or otherwise excessive amount of fine print in front of you, summarizes it, and asks you to sign it. Try buying a house. If you're really going to read the entire stack of morgage papers, you're going to need a few days. And there's no chance in hell you're going to catch anything shady like the above unless you have a lawyer there the entire time, and you can bet that's going to be an expensive few days.

This one pulled a double-shaft on him... the offending bit of legalese wasn't even in the document he signed. It was something like a "this agreement also includes stipulations covered in a different document". He couldn't possibly have caught that even with a lawyer reading over his shoulder, without taking a break and doing research and chasing down the additional paperwork (that he wasn't even provided with at the time of signing) that it was binding him to. That's about as far into "dirty pool" as fine print can get.

Re:...opaque language is the norm. (2)

MightyMartian (840721) | more than 3 years ago | (#36577432)

It may cost you, but I suggest anyone signing this detailed a contract go to a lawyer. Of course, this is likely non-negotiable, so you'll either accept the contract in front of you or say "Thanks, but no thanks" and go to the next job where it's likely you'll be faced with the variation on a theme.

Re:...opaque language is the norm. (4, Insightful)

Culture20 (968837) | more than 3 years ago | (#36577648)

If you're hiring someone, and he says "let me call my lawyer", don't you get a knot in your stomach, like maybe this guy likes to sue a lot? Who calls their lawyer over an ordinary job contract (I've actually never signed a job contract; I've just been given confirmation of what I'll receive in return for my work)? Maybe he's planning on suing this company once he's hired? Maybe he's planning on suing this company for not hiring him? Maybe he's planning to slip and fall in the meeting room?

Re:...opaque language is the norm. (1)

hedwards (940851) | more than 3 years ago | (#36577686)

For things like buying a house, you'd be an idiot not to have an attorney go through it. The amount of money that you can lose if there's something obnoxious in there can very easily make it a worthwhile investment. But unfortunately, for most other contracts there isn't such a clear cut reason to have an attorney review the materials. I don't think those people a few years ago who wound up being billed for thousands of dollars for cell phone charges were expecting that given that the companies don't inform you that they're going to set up a line of credit in that amount.

Re:...opaque language is the norm. (1)

maxume (22995) | more than 3 years ago | (#36577438)

Right, get a lawyer or don't sign the mortgage contract you don't understand.

Both of those things prevent signing a document that is not well understood.

Re:...opaque language is the norm. (1)

Aighearach (97333) | more than 3 years ago | (#36577456)

Try buying a house. If you're really going to read the entire stack of morgage papers, you're going to need a few days.

One of many reasons houses don't go from "for sale" to "sold" but sit around "pending" for a couple weeks in between.

Re:...opaque language is the norm. (5, Insightful)

betterunixthanunix (980855) | more than 3 years ago | (#36577504)

If you're really going to read the entire stack of morgage papers, you're going to need a few days

Heaven forbid someone take a few days to read and understand the terms of such a large loan and purchase. It's not like people spend a large fraction of their lives repaying a mortgage. It's not like people might have to deal with the mortgage rate changing on them a few years down the line.

And there's no chance in hell you're going to catch anything shady like the above unless you have a lawyer there the entire time, and you can bet that's going to be an expensive few days.

We're not talking about buying a laptop, we are talking about buying a house. Yes, I would want to have a lawyer look over the contract before I agree to repay hundreds of thousands of dollars to the bank.

the offending bit of legalese wasn't even in the document he signed

So he should have either asked for the document that the contract referenced.

He couldn't possibly have caught that

Yes he could have, if he had actually read what he was signing. He did not read it, he just assumed that he could work at Skype for a year or so and then jump ship, like he had done nine times beforehand. Why are we feeling sorry for this guy?

Re:...opaque language is the norm. (1)

Jackie_Chan_Fan (730745) | more than 3 years ago | (#36577538)

Does it really matter if he read it or not?

These contracts are 1 way deals.

You either sign it, or no job. That is the corporate FUCK YOU mindset.

Re:...opaque language is the norm. (1)

betterunixthanunix (980855) | more than 3 years ago | (#36577554)

No, not "or no job." The guy had a job before he decided to work for Skype.

Re:...opaque language is the norm. (2)

Culture20 (968837) | more than 3 years ago | (#36577702)

These contracts are 1 way deals. You either sign it, or no job.

You can alter it and hand it back over to them. They give you a contract you like, or they don't get your work. 2-way deal.

Re:...opaque language is the norm. (1)

Rockoon (1252108) | more than 3 years ago | (#36577852)

Your mindset is precisely why you will always be a slave to those that exploit it.

I am a free man, and I have value to offer. I am not a slave, nor do I settle for less than a fair share of that value. I might be tricked into a bad deal, but I will not swallow one willingly.

You will always just be an employee, rather than a partner.

Contracts are 1-way only if you don't negiotate (4, Interesting)

Spril (524430) | more than 3 years ago | (#36577860)

When I bought my house, I read through everything, and there were three places where I requested changes to the contracts. In each case, they made the change on the spot. When I was hired for one job, I said the non-compete agreement was insane, pointed out where, and the boss tore it up on the spot. Once I was hired, he asked me to help re-write it to something more reasonable. If you don't read before signing, you're still responsible.

Re:...opaque language is the norm. (3, Insightful)

Kenja (541830) | more than 3 years ago | (#36577508)

I purchased a house. I read everything I was asked to sign. Yes it took time, but the responsibility of understanding what you sign is on you and not the contract issuer. "I didn't read it" is not a defense that will often stand up in court, so actuly spending a little time reading is your best bet. And given the amount of money involved in a job or house, why wouldn't you be willing to spend the time?

Re:...opaque language is the norm. (4, Interesting)

TheRaven64 (641858) | more than 3 years ago | (#36577690)

Same here. I don't think it took more than half a day to read everything. The contract of sale was only 3 pages, the mortgage agreement was 4. The leasehold agreement was the longest, but since I was also buying the freehold, making the leasehold agreement an agreement between me and myself, it was somewhat moot (yes, British law is weird). I read it anyway though, just in case.

When you're borrowing an amount of money that's measured in multiples of your average income, and buying something that costs even more, you'd be absolutely insane to sign without reading it in detail.

Actually, the contract my publisher uses for books is a bit more complex than any of the bits of paperwork that I had to sign for my house, and I've never received one of those without sending back a load of complaints about it and getting it amended. I'd expect to do something similar with any contract of employment.

If I were hiring a CxO, I'd put a clause in the middle of their contract saying that they could be fired for any reason within the first 10 days and would have to pay a $100,000 fee to cover the costs of hiring a replacement if this clause were invoked. If they didn't object to this, I'd fire them on the first day - I wouldn't want someone who didn't read contracts and understand the implications of the terms in a senior management position.

Re:...opaque language is the norm. (2)

Bacon Bits (926911) | more than 3 years ago | (#36577730)

"I didn't read it" is not a defense that will often stand up in court

That's true in contract law, but "intentionally deception for gain" is known as fraud. That's actionable civilly as well as criminally. If a large number of employees signed this contract and left, you're looking at a really bad situation for Skype's executives.

Re:...opaque language is the norm. (1)

Anonymous Coward | more than 3 years ago | (#36577534)

It's easy to tell someone "be sure to completely read what you sign", until the day someone sets a 45 page or otherwise excessive amount of fine print in front of you, summarizes it, and asks you to sign it. Try buying a house. If you're really going to read the entire stack of morgage papers, you're going to need a few days.

I call bullshit. I've bought a house, and I refinanced once. In both cases I read everything that I signed. It took me one evening each to read through the papers. I insisted on having the entire stack of papers in advance to give me time to review it. I can't imagine anyone refusing to honor that request, and quite frankly I would refuse to do business with anyone who did.

Re:...opaque language is the norm. (1)

CTU (1844100) | more than 3 years ago | (#36577596)

Not everybody can read through a stack of legal papers that quickly. I never thought of myself a fast reader, but if it is something hard to understand or uninteresting written, then I will need a lot more time then you to read through it.

Re:...opaque language is the norm. (1)

Adam Appel (1991764) | more than 3 years ago | (#36577862)

Even with a lawyer I have found they only look for what you tell them to look for. Lawyers, easy for them to hide something,hard for another to find something if they don't know what they are looking for given the "find anything wrong with this" instruction. Their point of view and reference is WAY off. IMEXP I have found lawyers very lacking to even do their job of protecting you.

"confusing" (3, Insightful)

superwiz (655733) | more than 3 years ago | (#36577356)

"Confusing" language often means open to interpretation (ie, ambiguous). Anyone who thinks they may have a claim because the language in their contract can be read in multiple ways is probably well-advised to talk to a lawyer and sue.

Let me guess.. (1)

Finallyjoined!!! (1158431) | more than 3 years ago | (#36577410)

talk to a lawyer and sue

You're a septic, right?

Re:Let me guess.. (1)

superwiz (655733) | more than 3 years ago | (#36577476)

I am agnostic on the claim. But if a contract is, in fact, ambiguous, then I can see how the meeting of the minds at the time of the signing of the contract actually prevails over the language. I am not a lawyer nor do I know the person making the claim.

Re:Let me guess.. (1)

superwiz (655733) | more than 3 years ago | (#36577498)

By the way, I assume you meant "skeptic" rather than someone prone to suffering from inflammations.

Re:Let me guess.. (1)

Some Bitch (645438) | more than 3 years ago | (#36577548)

By the way, I assume you meant "skeptic" rather than someone prone to suffering from inflammations.

Nope, the English gp meant what they wrote.

Re:Let me guess.. (0)

Anonymous Coward | more than 3 years ago | (#36577662)

Right, aseptic means someone who kills germs.

Re:Let me guess.. (2)

TheRaven64 (641858) | more than 3 years ago | (#36577712)

For those unfamiliar with cockney rhyming slang:

Words are rhymed with two-word phrases, but the second is omitted. For example, thief becomes tea leaf, so calling someone a tea means that they are a thief. In this case, the phrase is 'septic tank', which rhymes with 'yank' and means someone from the USA (even someone from the south - sorry!), so the grandparent was asking if the person who's immediate reaction was to consult a lawyer and sue was American.

Tick, VG (1)

Finallyjoined!!! (1158431) | more than 3 years ago | (#36577764)

Spot on :-)

Re:Let me guess.. (0)

Anonymous Coward | more than 3 years ago | (#36577720)

Common term for Americans is Yank, Cockneys took that and converted that to Septic Tank. It is now often used in the shortened form "Septic" in the UK.

Re:Let me guess.. (1)

Marcika (1003625) | more than 3 years ago | (#36577820)

By the way, I assume you meant "skeptic" rather than someone prone to suffering from inflammations.

By the way, you are wrong to assume. "Septic" is a very common word in rhyming slang, it's short for "septic tank". The rhyming is left as an exercise to the reader.

Re:Let me guess.. (0)

Anonymous Coward | more than 3 years ago | (#36577864)

Or some from the holy church of Septicia, worshipping St. Staphylococcus aureus and St. E. Coli.

Re:"confusing" (1)

Gorobei (127755) | more than 3 years ago | (#36577462)

The language was unambiguous, but pretty deceitful. Basically, it said "if you are not with the company at the time it is sold, it can take back all your vested options."

Any reasonable contract would have spelled out clearly, not described it as a repurchase agreement referencing another document. He should definitely see a lawyer.

Re:"confusing" (1)

Pascal Sartoretti (454385) | more than 3 years ago | (#36577738)

"Confusing" language often means open to interpretation (ie, ambiguous).

If it is really ambigous, you might try to use this [wikipedia.org] as a weapon.

Opaque Language (1, Insightful)

shoehornjob (1632387) | more than 3 years ago | (#36577360)

Just another way to screw the little man.

Re:Opaque Language (0)

Anonymous Coward | more than 3 years ago | (#36577564)

Using Lojban as a language in legal documents to get rid of the conflicting and opaque language would be great but then everyone would need to learn Lojban. At least it would be easier than to learn understand legalese :) FYI Lojban is a constructed language designed to be logical and unambiguous. I've just started to learn it and it seems great so far. You can check http://www.lojban.org/ [lojban.org] if you are interested.

Been there, done that (5, Informative)

mark_reh (2015546) | more than 3 years ago | (#36577370)

I worked for a startup, was given stock options, then the company went public. After about a month my options were worth about $1M on paper but I couldn't exercise them because that would have diluted the company founder's share value as they busily unloaded their shares. In the end I wrote a check for $24k to the IRS and ended up with nearly worthless options while the company founders cashed in and took their millions off to another startup to repeat the process.

If you're working for stock options you're going to get screwed.

Re:Been there, done that (0)

Anonymous Coward | more than 3 years ago | (#36577530)

If you didn't make any profit what did the IRS tax?

Re:Been there, done that (2)

Chris Mattern (191822) | more than 3 years ago | (#36577568)

If you are given options that have a market value of $X, the IRS considers you to have gotten taxable income of $X, even if you can't currently sell them. Even though they only take tax payments in cash and didn't *get* any cash. Yes, a lot of people have been very thoroughly screwed by this.

Re:Been there, done that (1)

gl4ss (559668) | more than 3 years ago | (#36577578)

*If you didn't make any profit what did the IRS tax?* the theoretical profit he made by being in possession of wealth? pseudo-wealth as he couldn't change it to dollars, but still wealth he could have actually used for buying a house on loan money backed with those options. funny eh? sounds like a normal tax agency.

Re:Been there, done that (1)

Machtyn (759119) | more than 3 years ago | (#36577750)

That is interesting. Why not loan against the shares. Default on the loan and give the shares up to the bank. Then the bank could sell the shares.

Probably wouldn't work. I still don't understand why the founders could sell their shares but you weren't be able to do so.

So what? (-1)

Anonymous Coward | more than 3 years ago | (#36577558)

The FOUNDERS did exactly what their title says, they founded the company. Just because you were, frankly, too stupid to profit from THEIR hard work doesn't mean that they are at fault. Fuck you idiot statists who want to drag down all the smartest people around you because you want money for doing none of the real work needed to build a company. *THIS* is why I am a Libertarian, because fucking assholes like YOU want to live off MY hard work.

Re:So what? (2)

Machtyn (759119) | more than 3 years ago | (#36577772)

Umm, what part of "I worked for a startup, was given stock options" did you not understand? The FOUNDERS did exactly what any normal company would do - hire people to do WORK for COMPENSATION. Of which part of that was apparently detrimental stock options - stock options that are meant to reward the WORKERS of THEIR hard work building the company. I've worked both sides of the "My company" and "someone else's company" - the concept of ownership and compensation really isn't that hard to understand.

Re:Been there, done that (3, Interesting)

hedwards (940851) | more than 3 years ago | (#36577878)

Even in cases like Microsoft where the management team isn't trying to screw people over it can still happen. I remember a few years back they stopped granting options because they had so many options outstanding and most of them could never be exercised due to the strike price.

And really companies shouldn't be granting options, the fewer options there are the better. If a company wants to tie an employees benefits to the stock price, just give them actual shares in the company. Options themselves just muddy up the waters and make it much harder to figure out what the company is really worth.

Harsh terms vs. opaque language (2)

Sgs-Cruz (526085) | more than 3 years ago | (#36577374)

It's really not that complicated to know what is the right thing to do here. Harsh terms in a contract, fine. The person you're negotiating with can take it or leave it. Opaque and intentionally misleading terms, not okay.

To repeat: nothing wrong with both parties in a transaction negotiating vigorously on their own behalf. When the one party, which has the support of teams of lawyers skilled in writing opaque legal sourcecode that no ordinary person can read, uses that to their advantage, it may be legal, but it's wrong.

Re:Harsh terms vs. opaque language (1)

Rakishi (759894) | more than 3 years ago | (#36577446)

Exactly, I suspect the VC firm behind these terms is suddenly going to find a lot fewer qualified candidates for any company they're behind.

Personally, any company that has proven to me that they will screw me over as best they can is not one I will work at.

Re:Harsh terms vs. opaque language (1)

Kenja (541830) | more than 3 years ago | (#36577552)

Hate to tell you this, but it is no longer the 90's. There are way more people out there after the same job who will sign anything if it means a paycheck.

Re:Harsh terms vs. opaque language (2)

Rakishi (759894) | more than 3 years ago | (#36577708)

Hate to tell you this, since you're apparently not part the group, but for top quality people it's almost better than the 90's. Good silicon valley companies understand that quality matters, and they will pay for it and actively recruit it. There is more demand than supply.

In Corporate America, Stock owns You! (0)

Anonymous Coward | more than 3 years ago | (#36577380)

"If you've already made so much money, why do you have to squeeze every ounce of flesh out of every person?" he asks.

Wow, how naive. The recurring argument in the article of "you made a lot of money, why can't you just give some away?" is ironic, given the idea that the whole thing is about stock options in the first place.

Welcome, for better or for worse, to corporate America. Apparently you haven't been here long.

Private options can be diluted on a whim (5, Informative)

Anonymous Coward | more than 3 years ago | (#36577384)

I was in a startup, had a ton of stock options. CEO sold the company, but just before doing so... he granted himself a million options at a penny strike price. This diluted the shares so that anyone else made $0 because they were worth less than the strike price everyone else had. This was all after working there for years and putting in a lot of OT, and creating a product that gave the company real value it would not have had otherwise.

True story. I opt for cash now, and will take options if they give them but do not consider them as part of my compensation no matter how much my bosses try to give them to me in lieu of increases.

Re:Private options can be diluted on a whim (0)

Anonymous Coward | more than 3 years ago | (#36577532)

True story. I opt for cash now, and will take options if they give them but do not consider them as part of my compensation no matter how much my bosses try to give them to me in lieu of increases.

Skype spokesman Brian O'Shaughnessy said, "You've got to be in it to win it...

Especially, when management sounds like an advertisement for a state lottery.

Re:Private options can be diluted on a whim (5, Insightful)

HungryHobo (1314109) | more than 3 years ago | (#36577790)

I think there's some old quote along the lines of the guy who owns 20% of the company owns exacty as much as the guy who owns 80% wants him to.

Options without an utterly ironclad shareholders agreement are worth exactly zero.
Even with one they're barely worth more.

Re:Private options can be diluted on a whim (0)

Anonymous Coward | more than 3 years ago | (#36577868)

That has to be some f'ed up laws in your country to allow a CEO to defraud the other stockowners.

Improper Framing (1)

Anonymous Coward | more than 3 years ago | (#36577402)

Here's the letter the OP received from skype:

http://framethink.files.wordpress.com/2011/06/lee2.pdf

Clearly Lee had 90 days to exercise after his termination. This is the same across most companies. He claims that this arrangement is some kind of Skype trap, but that's incorrect. Every company I've worked at with options lets you vest options at a standard rate which gives you the right to exercise those options. If you leave the company, it's pretty standard for a 90 day window to exercise. Lee is just pissed that he didn't know that.

Re:Improper Framing (1)

Gorobei (127755) | more than 3 years ago | (#36577502)

Read the pdf: Skype claims a "call right." Lee can exercise his vested options, but then Skype takes the stock back from him at the exercise price. So Lee gets nothing.

Re:Improper Framing (2)

Rakishi (759894) | more than 3 years ago | (#36577524)

Congratulations on showing the exact opposite of what you meant, specifically that the language used by Skype is too confusing to understand.

The letter, specifically the third paragraph, says that he can only exercise his options at the grant price. In other words he will make $0 on it and have to pay taxes despite that. So he has 90 days in which he can do nothing of value with his options.

Read before you sign (1)

Fnord666 (889225) | more than 3 years ago | (#36577404)

The only mention that the company had the right to buy if he left in less than five years came in a single sentence toward the end of the document that referred him to yet another document, which he never bothered to read.

For someone who works the startup circuit jumping from job to job every year, you would think that reading your employment contract would be a no brainer.

"I would have never gone to work there had I known," [Lee] says.

In other words, he never had any intention of staying with the company. He was only there for the minimum amount of time necessary for some options to vest, then he planned to cash in any windfall and move on to the next startup.
Sorry, but I have no sympathy for him.

Re:Read before you sign (1)

IICV (652597) | more than 3 years ago | (#36577496)

In other words, he never had any intention of staying with the company. He was only there for the minimum amount of time necessary for some options to vest, then he planned to cash in any windfall and move on to the next startup.
Sorry, but I have no sympathy for him.

And the company had no intention of keeping him around; they were only going to pay him for as long as he was useful, at which point he would be fired and they would move on to the next tech guy.

I'm not sure why you implicitly take Skype's side here.

Re:Read before you sign (1)

betterunixthanunix (980855) | more than 3 years ago | (#36577540)

He is not taking Skype's side; this is not a "us or them" issue. The point is that we have no reason to feel any sympathy for this particular employee, who did not bother to read the terms of the contract that he signed, and jumped ship at nine other companies before signing up to work for Skype. He is whining about how their contract included a clause that the other contracts did not, and how it is unfair for him to be expected to actually read what he signed.

Re:Read before you sign (2)

Rob the Bold (788862) | more than 3 years ago | (#36577570)

In other words, he never had any intention of staying with the company. He was only there for the minimum amount of time necessary for some options to vest, then he planned to cash in any windfall and move on to the next startup. Sorry, but I have no sympathy for him.

You know what, if you want me to work somewhere for at least 3 years, why don't you just make the minimum vesting time 3 years? Be it at Skype, Chotchkie's or wherever.

"You've got to be in it to win it." (0)

Anonymous Coward | more than 3 years ago | (#36577418)

Hey, that's really easy to understand. Why wasn't that kind of language in the option agreement? I hope the judge decides to send a message about legalese so dense even extremely bright college graduates have to hire lawyers (for more $$) to interpret. What in the world is an "options vesting schedule" supposed to mean?

Winning at all costs? (3, Informative)

DoofusOfDeath (636671) | more than 3 years ago | (#36577452)

, "You've got to be in it to win it.

If that's his attitude, perhaps his former employees should kill him and steal his possessions. If "winning" is all that really matters, that is.

Re:Winning at all costs? (2)

da cog (531643) | more than 3 years ago | (#36577590)

Indeed, that single quote in the context of the situation has told me enough about Skype to prevent me from even thinking about ever working there in the future.

Making it clear that you will screw over employees who will not stay with you indefinitely since you are out to "win" is not only a horrible attitude towards life, it isn't even a good way to attract "the best and the brightest people to build great products" because most such people get bored working on the same products for a few years and will want to move on to new challenges, so if you make it clear that anyone who decides to move on will be screwed over then you are basically saying, "If you are the best and brightest then don't work here because we don't want the likes of you!"

Re:Winning at all costs? (1)

7-Vodka (195504) | more than 3 years ago | (#36577796)

That's the whole point ain't it? They're not making it clear at all, in fact they are tricking people into thinking that you can leave even after one year and cash out 25% of your options, when in reality you can't cash any until one year after you're fully vested.

The entire language about 25% vesting per year has no other purpose being there than to con people.

Re:Winning at all costs? (0)

Anonymous Coward | more than 3 years ago | (#36577754)

i would grab him, then carve 'init2winit' in his forehead

Re:Winning at all costs? (0)

Anonymous Coward | more than 3 years ago | (#36577858)

Why yes, that's the definition of the "free market": The only law that they don't see as inhibiting that "freedom", is the law of the jungle. All others will be up for removal, as soon as they get people to accept that.
It's the opposite of democracy. (Yes that's right Neocons, you can only choose one.)

The company that can go furthest, and does it, wins. Every time.
So if you manage to get away with murder, and the other company doesn't, you win.

Just look at Russia, where this is actual reality: http://www.exile.ru/articles/detail.php?ARTICLE_ID=13442&IBLOCK_ID=35&PAGE=3 [exile.ru]

Private Options Worthless? (0)

Greg Hullender (621024) | more than 3 years ago | (#36577486)

Perhaps I'm misunderstanding what happened here, but my impression was that if you quit before the company went public, then they could buy back any of your shares at par. That actually seems pretty reasonable to me. I worked for a place once where a couple of guys who were there for the first year got lumps of stock they in no way deserved, yet they ended up with a nice payout when the company was acquired almost ten years later. A rule that says "you only keep the stock if you're with us when we go public or get acquired" seems very reasonable to me.

What's bad is to have such a rule but hide it from people.

--Greg

Re:Private Options Worthless? (1)

Billly Gates (198444) | more than 3 years ago | (#36577614)

I smell a rat. A week ago another skype deal article was posted where those who had stock options were all canned 1 min before deal, so the private IPO firm could steal all the cash from the executives. All the posts here are for the company saying this guy is a moron. I have to say moderators forget that the contract was made in bad faith. Basically they work under a promise they will make a fortune, while the equity firm puts as much legal terms to lie and cheat there way out. I hate laywers greatly, but I hope the get sued.

Corporations are out to fuck you. (1)

Jackie_Chan_Fan (730745) | more than 3 years ago | (#36577522)

FUCK THEM BACK.

Re:Corporations are out to fuck you. (0)

Anonymous Coward | more than 3 years ago | (#36577626)

Only paranoid twits.

Like you.

Re:Corporations are out to fuck you. (1)

Jackie_Chan_Fan (730745) | more than 3 years ago | (#36577642)

Fuck you cunt.

Go beg your corporate paymaster for a breadcrumb. They have plenty of profit. I'm sure they give a fuck about you snowflake.

Also covered in Wired (2, Informative)

Anonymous Coward | more than 3 years ago | (#36577542)

I don't see any mention of the Wired article "Downgrading Skype and Silver Lake to ‘Evil’" [wired.com] in the comments, so here it is.

quite scurrilous (1)

Anonymous Coward | more than 3 years ago | (#36577576)

Nothing odd about the exercise & repurchase part, except for the price of repurchase. After termination and exercise, Lee holds stock, that stock has no awareness of the history of the options it came from. The company repurchases the stock by force at an arbitrary price, but this transaction has to be at the then current valuation. If the company has an offer from Microsoft, or even a term sheet, it cannot pretend that the valuation is as it was when the options were issued.

Someone should verify that the company paid appropriate taxes; after all they got his shares which were clearly worth millions for pennies: they owe taxes.

There's not really any questions that they robbed him, my expectation is that he would prevail in court.

The documentary sleaziness (if it even exists and this is not 100% fraud) is that the abnormal repurchase price is stated in another document.

I honestly thought this was common knowledge (4, Insightful)

tgd (2822) | more than 3 years ago | (#36577616)

I'd say at least half the companies I've received options from had clauses just like this. It may not be par for the course with private venture-funded companies, but it sure is close.

You should always assume that options or common shares of private companies are going to be worthless to you. Never include them in your compensation evaluation. Even if you are in a company that lets you keep options without buyback if you leave, you still have common stock and they can play games and absorb the equity event's value entirely or almost entirely in the preferred shares. Or they can recapitalize the company prior to acquisition, re-issue stock to existing employees and investors and cut the rest out.

Making money off an equity event in a private company is like winning the lottery. Pretty nice if it happens, but you're not being rational about it if you think you're going to win just because you played.

Re:I honestly thought this was common knowledge (0)

Anonymous Coward | more than 3 years ago | (#36577824)

I agree with this, I thought that it was common knowledge.

As a mid-level developer, the options that I was granted at non-public firms could not be traded, and expired a short while after leaving the firm (30 days, perhaps). If you left the firm, you needed to exercise those vested options at the time. And the stock that you bought with those options was restricted (since the firm was not a public corporation yet), and could not be traded. So you needed to come up with cash for the stock, and had to hold on to it unless (and until) you could find someone properly qualified to buy restricted stock. And, to boot, you probably were subject to income taxes on the difference between the exercise price and the real price at the time that you exercised (the wonderful Alternative Minimum Tax, or AMT).

So, the bottom line, being granted a stock option is not necessarily the same as receiving manna from heaven.

Gold or Land (1)

hackus (159037) | more than 3 years ago | (#36577638)

Are the only two things I would work for on top of salary.

Stocks are worthless.

-Hack

Re:Gold or Land (1)

Rob the Bold (788862) | more than 3 years ago | (#36577814)

Are the only two things I would work for on top of salary.

Stocks are worthless.

-Hack

Even then, you might want to get those up front, or at least as you go.

Options (0)

Anonymous Coward | more than 3 years ago | (#36577866)

The options weren't worthless. He had the right to sell them at grant(exercise) price back to the company or let them expire after he quit. That was what he agreed to in his contract. He can try to spin anyway he wants but that's what he signed. He would have only paid 26-28%(AMT) taxes(he was vested less than a year) on the call if it was more than than the exercise price, which it was, prior to quitting(not the case here because he quit). It wasn't because of the contract he signed, so he would have paid $0 in taxes for selling them back at the same price he acquired them. He's just an idiot and apparently believed HR instead of talking to an accountant. They are called ISOs(incentive stock options) they differ from regular stock options in that they are regulated by the IRS. (see Internal Revenue Code 421(a) and 422).

The contract basically said you loose all of your ISOs if you quit. It's no different than people needing to return work uniforms/clothing, vehicles, credit cards, etc if they quit. The company is saying, "You are a quitter, you shouldn't profit further from us other than your salary."

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