I was so naive when I joined my first startup. When we were purchased, it came to light that the main guy never got around to signing my stock option agreement. He is a fucking mensch and signed it after the fact.
At my first startup, the share option terms and conditions had a clause allowing the company to arbitrarily change any condition in the contract. Of course we signed it and didn't think much about it. At the IPO this clause was very predictably used to extend all the employees'[1] vesting schedule to many years after the IPO event. By that time the options were worthless because the company was acquired in a fire sale.
[1] Naturally by "employee" they didn't include the founder or members of his family who worked there.
That sounds like it wasn't a contract in the first place. Doesn't it have to in some way bind both parties to be considered a contract?
I would almost think that a lawyer would be able to convince a judge that that "contract" was written so adversely that the "arbitrary change" clause should be struck, since the rest of the contract is essentially illusory if it remained.
Wow. Did they implode while the employees gave them the finger as they walked, or did it take a while? (This matters a lot to the remaining shareholders, since there is usually a post-IPO lockup to protect new investors).
Seriously, I can't figure out why this doesn't immediately escalate into noisy public events that tank the stock before the founders cash out (e.g., strike / unionization).
I helped an ex of mine work through the negotiations of an executive pay package. Everyone that's been around upper-management is fully aware of this and works clauses into their contracts to prevent it. It's such crap.
That is an interesting thought! I wonder if he did undertake some risk. I just emailed him, as I never properly thanked him. Maybe if he emails back I'll ask.
Also he negotiated a year off of our traditional 5-year vesting (at the time anyway) in the salt mine that is Microsoft, though he was never to take a position there himself.
I see no end to liquidity event horror stories. I'm so lucky.
I haven't seen many start-ups that didn't break the law in some way or another. Sometimes out of sheer ignorance and other times out of expedience. Hell, Airbnb and Uber are built on breaking the law.
rwmj|9 years ago
[1] Naturally by "employee" they didn't include the founder or members of his family who worked there.
Spoom|9 years ago
I would almost think that a lawyer would be able to convince a judge that that "contract" was written so adversely that the "arbitrary change" clause should be struck, since the rest of the contract is essentially illusory if it remained.
hedora|9 years ago
Seriously, I can't figure out why this doesn't immediately escalate into noisy public events that tank the stock before the founders cash out (e.g., strike / unionization).
iaw|9 years ago
mavelikara|9 years ago
st3v3r|9 years ago
[deleted]
tarr11|9 years ago
TheLarch|9 years ago
Also he negotiated a year off of our traditional 5-year vesting (at the time anyway) in the salt mine that is Microsoft, though he was never to take a position there himself.
I see no end to liquidity event horror stories. I'm so lucky.
iaw|9 years ago