What if Pincus he had just fired them, with the reason being that they were not earning their compensation? It seems reasonable to fire someone if they are not pulling their weight? Giving them a choice seems unfair, but how is it worse than just being fired?

I think this is just Pincus being a nerd and over rationalizing the situation, instead of just decisively 'pulling the trigger'.

On the other hand, these people were given an offer of X% of the company in exchange for taking lots of risk early on. They took the risk, and now that the value of the company is greater, Pincus is taking the incentive back. So Pincus offloaded personal risk (paying lower salaries + stock instead of just paying market salaries) and then when the risk was gone he is canceling his agreement. I would never trust this man.