Conversely, letting them vest will send a message that this behavior is tolerated.
And yes, firing + giving some percentage of what they would get from vesting corresponding to the time they made an effort sounds not unreasonable.
These are colleagues not children. Using threats will not have a good effect.
Also OP seems to have been tolerating their behavior, which sends the message that behavior will be tolerated. This is the right message to send as well.
We (and possible OP) don't know what the employee was going through, giving them lots of slack and support shows to the other employees that they will be supported. As well as just being a good thing to do, it will improve employee retention, effort, buy in to the company etc.
It's not a threat to fire someone when you pay them money and they don't work as expected. It's setting a standard.
> We (and possible OP) don't know what the employee was going through
That's a very fair point.
But is it unreasonable to request insight into why the person shifted?
Accountability comes at a cost.