A vesting idea

Employees want to balance options vs. salary vs. time. They need fixed numbers to calculate this. With your approach, they get penalized if your company takes too long to sell/go public. If I have a four year vesting schedule, I know that if I commit four years to your company, I'll be fully vested. But if I bust my ass for four years then it takes you another four to have some sort of liquidity event, your company has actually put less value on my initial four years (in fact, reduced it by 50%). That won't fly with most people. I think that's why fixed vesting schedules work best, and issuing new options to retain employees after they're fully vested makes the most sense.

If an employee leaves prior to a liquidity event they have to exercise their vested options, which involves spending their own money. The employee who stays on does not have to take any such financial risk. I don't know what problem you are really trying to solve. You mention employee retention at the end, but the rest of the piece makes it sound like you're really trying to eliminate some sort of hypothetical sour grapes. I don't think the latter is really worth solving, and the former has proven to be mostly unsolvable.

The biggest problem with this that I can see is logistical. You're trying to define how many shares of stock an employee earns for a month of work now by something that may happen in the future.

How many shares of stock do you issue when an employee decides to exercise his options four years in, and will a court uphold you trying to rescind a third of his stock when you exit in another two?

What's the mechanism that would allow a company to attract highly qualified late-comers via equity- even in the 23rd hour in order to help make the exit happen- without upsetting the fairness? (not saying this is a flaw- just would rather you spell it out since you're a math genius) (seriously, he's a math genius- I saw his CV).