The CEO of billion $ startup is firing employees before their stock options vest | Hacker News Reader

The CEO of billion $ startup is firing employees before their stock options vest

sfgate.com

64 pointslladnar19 comments

Heavily discussed 2 days ago:

https://news.ycombinator.com/item?id=14111923

This is why I'm skeptical of cliffs: it creates incentive for the employees to quit the day after vesting, and for the employer to fire them the day before.

Well in the former case, the employee has stuck it out and really is fully entitled to the shares -- and in most scenarios, has to pay tax on them right then and there.

Most likely in that scenario they got a better offer and probably did a good job. Arguably the cliff worked in keeping them around just a little longer.

I can't imagine many scenarios where the company firing at 364 days purely to avoid the vesting makes sense. Why hang on to someone so long if they're not adding value?

As the story alleges, they might be adding value but enough value to offset your loss of majority control.

It's hard to imagine that even a dozen employees stock options would transfer majority control. Surely the share split can't be so tight that tenths of a percent would make a difference?

Ah. Yes, completely right -- I was musing more on the top comment relating to cliffs and the practice in general.

In most cases if you're hiring where options are seen as necessary to get that talent - seems like it's going to be an odd (but not impossible) case where you're happy to walk that talent out the door too.

Because they're adding less value than the amount to be vested but more value than someone who (economically speaking) should be fired earlier.

They add more value than their salary. But not more value then their vested shares most recent strike price.

That said, firing them on day 364 is a shitty thing to do.

You have good points. I would like to supply some examples to illustrate mine.

Suppose an employee is dissatisfied. In the presence of a cliff in the near future he may be hesitant to stir the pot and instead decide to wait for it before bringing this up. Meanwhile not being heard he will accumulate resentment.

On the other hand, suppose an employer is dissatisfied with an employee. With a looming cliff the employer may decide not to risk it a fire the employee beforehand. Absent the time pressure of a cliff they may be able to take time and talk through the problems.

None of that would be a problem if performance discussions were happening throughout the entire year. But the cliff serves to hide the problems until they explode the day before or the day after the vesting day.

> None of that would be a problem if performance discussions were happening throughout the entire year.

Agree on that. Likely a signal of bigger systematic problems too.

Why not give employees a % of their amortized stock options per day of employment? Any other scheme is nonsensical and the power balance is clearly on the side of employers. If you're worried about the employee not adding value then maybe they shouldn't be hired to begin with.

A challenge anyone who doesn't like this to explain why they think it is bad.

Because of the reason why they introduced "cliff". To avoid "job" hoppers that try to gather stock options from multiple startups in the hope, at least one will go IPO or Unicorn basically, without even doing any substantial effort themselves. And propably for various other reasons...

That's an argument for amortization, not against it

TFA says, "The full Bloomberg story, with all the details, is worth a read »" [0] I agree; what a greedy insecure entitled shithead!

[0] https://www.bloomberg.com/news/articles/2017-04-13/tanium-s-...

Somebody designed a financial instrument to make money, in a zero sum game somebody has to lose for somebody to make money. I would rather shake someone’s hand and agree to commit to an outcome. It has always worked out well for me

So... is it potentially illegal?

"On multiple occasions, the firings came within weeks of an employment anniversary, when workers’ stock options were due to vest"

Birthday paradox? The title doesn't seem to match the Bloomberg detailed article. The CEO looks like a really bad manager though, but firing near vesting seems to be the least of his flaws.

I don't think the birthday paradox is relevant here.

A decent statistical test would be to gather all firings within some radius around work anniversaries (let's say 6 weeks), and see if there's a statistically higher chance of the firing happening before the anniversary than after. If it's egregious, you'll see a lot more before than after.

You are wrong. 5 employees saying that they were fired right before they were due to vest is a very high number and it is unlikely they interviewed too many. Judging from what else we know of the CEO, this isn't surprising at all

Reply on news.ycombinator.com