GoPro's CEO honors a costly promise

Yes, that's the standard, but yet, everyone is still surprised.

Highlighting these events in a public manner could help push the tide to make sure this isn't such a rare event.

It would not surprise me at all if early employees get shafted when they dont have things down in writing. It doesn't even surprise me when employees get screwed even with things in writing.

Its not like people have low expectations of companies for no reason.

I am sure that there were legal ways to pay him way less.

I fought my company's general counsel for an entire quarter to get them to honor a verbal promise of a stock bonus. The bonus was decent (+20% of my original grant, though they had lowballed me originally) though essentially worthless (<$10k over 4 years) at the time. I was a junior-level individual contributor. After a quarter of fighting, the general counsel denied me by having the board change my grant without my signed approval. By then, it was basically too late to sue, the grant didn't have any value anyways, and I wouldn't have had much of a chance of vesting the grant (over 4 years) had I sued anyways (as the management had been historically liberal with firing people). I eventually got the majority of the value of the stock awarded after bringing to light the experience of another employee who had been treated with a similar gross lack of integrity. They didn't fire me, but they aggressively managed me out of the team (into a role where I had essentially zero chance of further bonuses).

Oral stock contracts are tricky business. Sometimes a court will uphold them, sometimes not:

* http://calcorporatelaw.com/2012/10/court-of-appeal-upholds-u...

* https://books.google.com/books?id=Db1uzraBVugC

It's really, really appealing for companies to weasel out of unwritten contracts, especially if they feel there's little monetary risk and their legal team has reviewed what might be discovered in a potential case. While I agree we shouldn't set such a low bar, we've yet to engineer a solid mechanism to steer companies towards the better. The law expects businesses to keep good records. We shouldn't let them abuse the privilege of non-documentation.

With how businesses will try to screw people (employers, customers, and unrelated third parties) over even with written contracts, honoring a verbal contract at least appears to be breaking the norm. Maybe it only appears so because the bad faith behavior is so over reported, but a short review of history has left me thinking that humans will sell their soul for enough money. Consider the violence companies have always deployed to protect their profits, be it historically in the US or be it currently in third world countries.

Based upon my own experience, I would say that a founder honoring a very expensive agreement, made before the company was highly successful, isn't a low bar at all. It's an exception to the rule; look at what Zynga did as an example [1]. They'll agree to whatever they have to in order to get people to work, and then use any money, power, and influence they wind up with as a result of that work to try to unravel those agreements should the company succeed.

IMO this move makes Nick Woodman a decent guy in a sea of fairly greedy and unethical people (the kinds of people that seem to make it to billionaire status).

[1] http://www.wsj.com/article_email/SB1000142405297020462190457...

Agreed, seems like this is nothing out of the ordinary. 'GoPro CEO decides not to get sued for 229M by his employee #1' would be another way to put it. I would say that this was committed to 'in writing' at that time, if not before.

Edit: From the S1 "Share of proceeds from sale of equity securities During our development stage, Nicholas Woodman, our CEO, entered into a verbal agreement with Neil Dana, an employee since October 2004, pursuant to which Mr. Woodman agreed to share 10% of any proceeds he received from the sale of our equity securities held by Mr. Woodman. Pursuant to Mr. Woodman’s agreement with Mr. Dana, in March 2011, we paid Mr. Dana a cash payment of $6.1 million, and Mr. Woodman reimbursed us in the amount of $6.1 million. We recorded the payment to Mr. Dana as compensation expense. In release of any claim Mr. Dana had to further payments under his agreement with Mr. Woodman, in June 2011 we issued Mr. Dana fully vested options to purchase 6,584,427 shares of Class B common stock under our 2010 Plan at an exercise price of $0.763 per share, and in December 2011 issued to him 270,000 RSUs under our 2010 Plan that will be settled upon a qualified acquisition. We recorded compensation expense of $6.8 million in connection with the issuance of these options. In connection with our equity awards to Mr. Dana, Mr. Woodman entered into a separate agreement with us in December 2011 pursuant to which he agreed to contribute back to us the same number of shares of Class B common stock as are issued pursuant to the exercise of Mr. Dana’s options. Mr. Dana has been employed by us since October 2004. During 2011, 2012 and 2013, Mr. Dana had total cash compensation, including base salary, bonus and other compensation, of $6.3 million (inclusive of the $6.1 million payment described above), $245,499 and $240,982, respectively."

S1 link http://www.sec.gov/Archives/edgar/data/1500435/0001193125144...

And, do realize that what's being discussed on this site are exceptions to business in the US. Most business is done fairly, without issue, over a handshake in the US as well. But, as anywhere, 10's or 100's of millions of dollars makes people do abnormal things.

I trust that someone will keep their word, but writing it down, preferably with contractual language establishing what happens if they don't, or I don't, reduces the possibility of either of us screwing over the other.

Once you get screwed over once, you use these legal instruments profusely, because the US small claims system works pretty well. Of course, the person you're going after has to have what you want from them: you cannot bleed a dry heart.

1) Every party in a business relationship is seeking to maximize their outcome.

2) The government acts as a fair arbiter in disputes and has enforcement powers.

Almost all American business theory is formed under this two-part umbrella. Importantly, Business relationships are built upon founding documents (contracts, agreements, etc.) that all parties have agreed to and those documents are used as the basis for arbitration by the government.

This is contrary to many places where personal connections and gentlemen's agreements (and some perception of honor) act as a kind of enforcing agent in business. "Everybody is out to screw me, except for my very best business friends who I've gone drinking and golfing with many times" or "If he screws me in this deal I'll make it known and it'll hurt his reputation."

These kinds of ideas only work if all parties care about them. But a single actor operating outside of these handshake and honor systems can completely upset the environment. What if somebody doesn't care about maintaining face or honor, or has a different perception of how honor works? Now what keeps them honest in an agreement? The answer, as we found out through lots of trial and error is "nothing".

Americans often find stories of other countries' business relationships gone bad (where one party simply decides not to honor their part of an agreement) amusing and almost impossibly naive sounding because we already know this truth.

On the flip side, Americans overseas continue to assume #2 from above and often find themselves screwed over by savvy business people who know the ins and outs of the local handshake-and-honor system. For example, areas with weak contract enforcement, where the ceremony of contracts are signed, but the non-U.S. party simply has no intention of honoring it (and is aware of the local weak arbitrage and enforcement options) are fairly common.

That's not to say that handshake-and-honor agreements don't happen in the U.S. But usually for very small things where it's not worth the trouble of forming an agreement that might later be enforced by the government. For example, lots of businesses give small amounts of credit to long-time customers based on a verbal agreement that the tab will be paid soon.

At any rate, our solution is the two-part system above that has provided the safety and security to form a highly permissive business environment and enables things like Silicon Valley, New York City finance, Apple's supply chain might, and so on.

What makes this unusual in the American system is that this was a handshake-and-honor agreement, which turned into a very large amount of money. But the owing party treated it like a normal enforceable agreement anyway and completed his part of the deal, even though there's not really any founding documents that would have formed he core of an enforcement action by the government.

Many if not most businesses exist primarily to generate a profit, focus on short term gains and "maximize shareholder value", with all other considerations secondary. These traits are not unique to American companies.

Guy keeps promise.

PR piece shows up on fortune.com.

Woodman agreed to pay Dana 10% of stock back in college. Woodman (through the company) gave Dana what amounts to just under $230 million. Other than the S1 filing (the document filed with the SEC prior to GoPro's IPO) which mentioned this deal, it was a verbal contract. Were he so inclined, Woodman probably could have refused to give Dana the $230 million and gotten away with it.