IMO, this is an area of needed legislation. There are likely thousands of people working for 'unicorns' where the founders have already cashed out, but the employees will get nothing due to liquidation preferences.
--Jeron @ capshare.com
Last year, I learned that a similar law was invoked by college students to gain access to their application files kept by the University Registrar [1]. The student, upon making the information request, would go into the registrar office and "inspect a physical copy" of the file, just like you said.
[1] My alma mater wrote to me about this since a student I had interviewed as part of the application process had made this request, and my report was part of "his file".
If you are working for a company and they wont give you this information, leave and join one that will. If you are thinking of joining a company, ask for all the stock option information. Ask for the details of the funding rounds including liquidation preferences. If they don't give it to you, join another company that will. If no private companies will give you this information (though I know of many that do), join a publicly traded company.
Additionally what would more legislation do that the existing Delaware law doesn't? The fact that a lawsuit is being filed here is a good thing... a company isn't fulfilling its legal obligations and the courts will settle it.
I'd prefer a state law for transparency, so if your SV start-up wants to play Wild West, they have to move to Texas or a similar state where it is a lot easier to abuse your employees legally.
A likely extremely highly paid employee is working at a company where they aren't sure whether their stock options are valuable are not. It is extremely likely if they ask the company for information necessary to value those stock options, they would get it. Completely unrelated, founders of the business may or may not have sold stock during a previous round of funding.
How is this person a victim exactly? If an employee doesn't want any risk in their compensation, they should reject stock options in favor of salary. If they decide to take stock options there is always going to be risk, not only due to the information risk we are talking about but because the future is uncertain even to people with all the relevant information.
And FWIW, almost every startup is incorporated in Delaware which already has this law on the books.
We're talking about startups, aren't we? A group of companies who are notorious for paying well below market wages because the promise of stock is supposed to make up for it?
And who cares how "well paid" they are? How does that change things one bit? Here, tell me the exact dollar amount one can make where they can no longer complain about wrong treatment at work. And tell me why it's not ok to treat someone like that at one point, but pay them one dollar more, and suddenly it is ok.
"It is extremely likely if they ask the company for information necessary to value those stock options, they would get it."
Except the whole point is that the company isn't giving it to them.
"How is this person a victim exactly?"
Because they are not being treated fairly by the company.
"If an employee doesn't want any risk in their compensation, they should reject stock options in favor of salary."
That's not the situation at all, and you know it.
"If they decide to take stock options there is always going to be risk, not only due to the information risk we are talking about but because the future is uncertain even to people with all the relevant information."
Except right now you're advocating that the risk be artificially exacerbated due to not getting that information.
And again, there is already is a law in place requiring a company to give this information to shareholders -- the one the OP is talking about. I'm not defending the company that is breaking the law, I'm defending that the existing law is good enough. The fact that one company is breaking the law in one situation doesn't mean it is a widespread problem.
But I'll bite on the hypothetical. This is a widespread problem and people are being defrauded left and right. What should the new law say? What disclosure is required of the company, and to whom? The text of every funding round so the potential or current employee can investigate all the liquidation preferences (which are often incredibly complicated and company specific)? The full cap table so I know the equity amounts of every shareholder? The full details of any past share transactions and the associated prices? At what level of disclosure are people not getting abused anymore?
Choice is irrelevant. There is absolutely no reason whatsoever to allow employers to be shady like this. None.
I don't support companies being "shady". I wouldn't work for a company that didn't give me all the information I needed to evaluate any stock options. However, unless you are giving me a specific law or regulation that intends to fix the problem without creating many more, you don't know if the solution is any better than the status quo.
Ironically this is the case often when they are making an offer, too. They won't tell you the number of shares outstanding, but they offer you 100k shares, as if that's a lot. Is it a lot? Or is it a trivial amount? Are they so stupid they don't realize that without knowing the total number authorized or outstanding that we can't evaluate the offer? Or do they think we are that stupid?
And when you do ask the total outstanding, you often get, again, off the head, old or inaccurate information delivered in a way that implies you're being nosy.
Not to mention that, usually when you try to get the information, its after you've already joined and already have some shares. Your suggestion is to just simply drop that, and walk away. How on earth is that a reasonable thing to suggest?