"When shares can only be sold in private transactions on secondary markets, and, increasingly can only be sold with the consent of the company, the options are actually worth less."
There's no space in the middle of "worthless" ;)
There's no space in the middle of "worthless" ;)
This is different from an asset which has zero value. Some economists enjoy the wordplay of "worth less" (first meaning) vs "worthless" (second meaning)
In this instance, it looks like the article is describing how increasing controls further devalues the options.
Edit: For instance, if the company decides on each attempt if you're allowed to exercise the option, you might value it at 25% of the stock price, or lower. Even moreso, you can't be certain that the company will still exist when your options can be traded for cash, which should devalue the options even more in your perspective.
It should be the net same as if you're working for someone, and they paid you with an IOU for 1% of the money they might win from a lottery ticket. So the value might be infinitesimally small, but not zero.
To the extent that this is a problem for founders/owners, it's largely of their own making. It seems like it should be easy enough to correct if they want to, but they will have to give up many if not all of the wildly favorable (to them) terms and/or give up more equity to their employees to do it. The alternatives all involve paying more cash, which is probably the right answer for everyone anyway; it's disappointing that the author didn't even seriously discuss the possibility of simply paying higher salaries in lieu of equity. Apparently that's simply taboo.
I have, for twenty years, used stock option agreements as a cheap alternative to toilet paper. I was talking with a friend who says he knows one guy that cashed in $8k worth one time. I prefer a bonus plan or profit sharing.
But the original response to my original comment was informative.
I think most people would like that, but options can be created out of thin air, while money cannot.