If You're Working For Stock, Read the Fine Print 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.
Re:Working for stock options (Score:5, Interesting)
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:...opaque language is the norm. (Score:5, Interesting)
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.
Contracts are 1-way only if you don't negiotate (Score:5, Interesting)
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:Been there, done that (Score:4, Interesting)
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.
Re:Winning at all costs? (Score:5, Interesting)
What strikes me as odd in that astonishing comment is that, without the stock option (which was instrumental in keeping those same brilliant people employed at that company), what else is there to "win"? The paycheck, which everyone can easily get from any company, or only the shaft which they are giving to their loyal employees? In fact, thanks to this dick move, does anyone believe that working for skype, or any company which private equity firm Silver Lake comes close to, is now something to dream about? Obviously not. They just demonstrated that skype managers are filled with contempt regarding their employees and that private equity firm Silver Lake is there just to screw even their mothers if it makes them a penny richer.
Another thing that strikes me as odd is that, according to the public statement, one of the reasons they did that is to stop employees from leaving their job. This is terribly insulting, even to the most hardcore neoliberal capitalist out there. This is sociopathy. They are actually stealing their employees income with the expectation that if they are poor enough they will be forced to stay in a job they hate because, being so poorly paid, if they quit their job they will face the risk of bankruptcy. Talk about grade-A psychopaths.
Re:...opaque language is the norm. (Score:4, Interesting)
Actually, if you're buying a house like most people, which is via your local association of Realtor's contract and Fannie Mae/Freddie Mac mortgage paperwork, there is probably no point in having an attorney review it. Those documents have been reviewed by more attorneys than you could ever count, and none of the terms are negotiable (with your lender, anyhow).
Now, it may still be worth a few hundred bucks to have an attorney attend closing with you, especially if you are an inexperienced buyer, to make sure nobody pulls anything shady with you. But you can be sure that the attorney is not going to read your off-the-shelf documents line by line.
Come to think of it, a banker that I've used for a few transactions tells a funny story about a buyer who brought an inexperienced attorney to closing. The attorney started going through the standard mortgage docs with a fine-toothed comb and started crossing stuff out, rewriting clauses, etc. After 20 minutes of this nonsense, the banker asked the attorney if she could speak with him privately.
They left the room and she said, and I'm paraphrasing here, "These terms are set by Fannie Mae and are not negotiable. If you don't cut this shit out, the bank will simply decline to fund the loan, and your client will lose his interest rate lock and potentially lose the house. I suggest that you advise your client to sign the agreements without modification, or you are going to become an extremely unpopular attorney with our client." Yeah, so the attorney changed his mind right quick about trying to negotiate the time-tested, court-tested docs.