So is does Zynga's request run into the practice of extortion? It's another way of saying, give us your money or else something bad will happen.

I'm going to take a wild stab here and guess that none of their own names were on the list they came up with.

Whenever crap like this happens, pull out an org chart. You'll pretty much be able to draw a straight line that divides who shits and who eats shit.

An army travels on its stomach. Google's chefs helped make Google the company it is today. Why is it so wrong that they be rewarded?

So what if a chef in an early stage team made out with $20M later - an army marches on it's stomach - he probably contributed more to delivery than some of the management team at the time.

1. Don't resign, don't capitulate and hire a good lawyer immediately. If you don't have the cashflow, but are defending a huge pile of stock about to IPO you'll probably find a lawyer that will defer payment.

2. Start documenting everything including making timestamped notes of what was said to you verbally.

Then play it out. Read all documentation the company has given you and fully understand it. They usually have to fire you for cause for you to lose your options, so figure out what the angle is they're using and make sure they don't have cause. Be 100% professional and non-confrontational, but ask the hard questions when you need to. DO NOT treat the company's staff (including your boss) or their legal team as your own legal counsel. They will try to give you "good advice" or intimidate you. They will claim things are "standard". Get your own info and use your own lawyer.

Often simply retaining counsel lets the opposing team know you're serious and professional, and worst case it will up any settlement.

PS: I'm an exec, not an employee, so technically I'm the guy on the other side of the org chart that Micah (see below) is describing. But assuming the report is accurate, this is unacceptable behavior and I'd like to see more employees who take a risk on startups getting what they deserve and enforcing their rights.

The bottom line here is "You don't get to be a part of the IPO windfall." Given that the employees that are getting stung like this have accepted the risk of working at a startup, and likely have accepted lower salaries in exchange for the promise of stock options, this is morally equivalent to theft of services.

Stock as a compensation structure only works when people use it in good faith. Scummy moves like this are only going to make it harder for startups to attract talent unless they can pay full market rate right out of the gate.

If Zynga agreed to the terms as described they haven't got a leg to stand on. The time to negotiate a contract is before it is signed, not retroactively. If they use the threat of termination then they will lose even more, not only will they not get their stock back, they will also have to pay excessive severance pay due to wrongful termination and they lose their best employees (those that have options).

Prior to an IPO you make sure you don't 'rock the boat' and you make sure that your management team is seen as competent and playing by the rules.

This is neither and I really wonder who is advising them to take these steps. They are hurting themselves in just about every way that I can think of, they look incompetent and sleazy, neither of which is the kind of company that you'd want to invest in.

The IPO cake should be large enough for everybody to share, there is absolutely no need for stupid tactics like these.

What just a damn minute, here.

Are you telling me that a company that cheerfully built itself on shady shit like un-removable browser toolbars might continue screwing anyone it wants in the furtherance of its leaders' avarice?

I am shocked.

Look, it's endearing when people have scrappy stories about their origins. We all act out of desperate vigor when we're up against the wall and far from our goals. But there's a difference between being scrappy and being a swindler. Scrappiness transmutes into strength and informs your company's values. Swindling, on the other hand, is almost always forever, and informs values in a much more negative way.

A swindler will knife you at the first lucrative opportunity. Avoid them. Do not work with them or for them. They are Aesop's scorpion. Deal with honest men and women instead. Perhaps their purses are marginally smaller – but that's because they won't go rummaging through yours when your back is turned.

Altering an existing contract and threatening to terminate said contract if the new terms aren't agreed to is a really assholish thing to do, to be honest.

If Zynga employees were smart, they'd band together and threaten to quit - immediately, with no notice - en masse. You need to negotiate from whatever positions of strength you can obtain.

Either way though the company has now been poisoned beyond repair... good luck attracting any top talent from this point forward.

That's played itself out as true so many times it's basically become a rule. Equity means absolutely zero for most people - salary, vacation time, health benefits - these are now the selling points for companies in my eyes.

Stuff like this just proves that equity is way too unreliable unless you're a founder or exec. And Zynga runs a slave ship to boot.

Would you invest in a company where management is obviously looking for a short term cashout at the expense of the future success of the company? The future success is precisely what the investor is buying. It's like buying a car while the seller is actively pulling parts out of it.

The results of this will be reduced share values combined with lawsuits eating up any potential gains.

I hope Pincus, and anything he touches, is dead to anyone with the slightest amount of common sense going forward.

It's like this guy can't help but be evil.

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.

Seriously, it's bullshit. It makes me mad not just for the people getting screwed, but for the whole industry. The whole point of giving somebody early equity is that it's a gamble. Sometimes it's worth nothing; sometimes tons. If companies start doing it in a heads-I-win-tails-you-lose fashion, then that really reduces the value of the equity as an incentive.

Zynga isn't just hurting their employees; they're hurting every early-stage startup that comes after them.

Zynga's product does not provide a worthwhile service, nor does it improve people's lives. It creates no value. Rather, it (cleverly and cynically) capitalizes on weaknesses of the human psyche to relieve people of their money, one dollar at a time. This is an inherently unethical position for a company to be in. As such, regardless of the compensation offered, any prospective employee of the company should ask themselves whether the ethical foundation such a company displays in relation to its customers will extend to employees.

A CEO who is comfortable fleecing customers will feel similarly comfortable fleecing employees. I learned this lesson the hard way in the trades, working for people who would jack up prices and sell material and services that the customer did not need. They would shirk responsibility for deficiencies, and usually try to do jobs for cash so as to avoid paying taxes. Invariably, this lack of professional ethics extended to myself and my coworkers. Cheques would be short, overtime would not be paid, and promises would not be kept.

The best indicator that an employer will rip you off is their willingness to rip off customers. When you see it, start lining up interviews immediately.

I kind of got out of startups for that reason. I just couldn't take working with sociopaths anymore. I have some stories. Serious f'ing stories. And no, I'm not just "player hating." A lot of it didn't even involve me. I just couldn't take working in proximity to such sleaze.

Tech's had this reputation as a place where fortunes can be made. That's going to attract a lot of ambitious and creative people, but it's also going to attract a lot of scum.

What amazes me about my personal experiences is how unsuccessful a lot of the sociopathic behavior was. It really brought home to me that these people have a mental illness. In the same way that someone with severe OCD will do things like wash their hands until the skin comes off, these people are neurotically compelled to dominate others even if doing so actually harms them. They must win their petty battles and dominate those seen as weaker, even if it means losing in the real world.

I literally watched the moment at which a pathological sociopath tanked a million-dollar opportunity because he had to try to put one over on his partner. Had to.

Not that there aren't still ethical people out there, it's just that the unethical ones make it so hard to see them.

There's also a level of buy-in that startups demand. You're asked to make it more than "just a job." Even the guy mopping the damn floor is asked to mop it until it shines, just because "we're all in this together."

People deserve to be compensated for that if things go well. But to your stereotypical business sociopath only executive-level individuals and their cronies are real human beings. (Actually, nobody is a real human being. It's only about winning in the shortest possible term.)

And I'd be willing to wager that these particular executives were more of the empty suit, posturing, clueless, "let's do lunch," "I'll have my people talk to your people," variety. There is a negative correlation between actual merit and this kind of behavior.

"He signed up, however, and started easing the computer engineers into the long hours culture with innovations including free beer and fortnightly "big ass" barbecues, and breakfast specials. He converted the "googlers" to a diet that ensured they kept working after lunch and weaned them off pizzas."

(source: http://www.telegraph.co.uk/news/worldnews/1582494/Chef-lifts...)

From my perspective, this sort of thing scares me away from companies, because they might do it again in the future.

That way the don't have to over-compensate the performers beyond what they've already promised them.

?

Somehow, that doesn’t seem like his best work as a CEO...

It would be interesting to know the facts from someone in this situation but I also expect that such folks should not be blabbing to folks other than their lawyer.

My interpretation of the story was that they were asking for folks who had stock that was not vested which is to say part of some future vesting pool, to give that up their right to that stock. So if you gave someone 100K shares over 4 years, and they had been there 2 years, 50K was vested and 50k yet to vest, they are asking that you give back the 50k that have yet to vest.

This would be different than Skype's 'clawback' clause, and it would be slightly less onerous than canceling vested but not yet exercised options.

The article also suggests that choices were made based on some measure of value (and implied performance). I have seen folks who are doing ok work, but its not at the level that they are being compensated, that puts you in a tight spot. Few, if any, folks are open to a restructuring of their compensation package in a downward way (which is what Zynga is proposing it would seem). In California at least you simply ask them to leave (and the article suggested that the choice was 'accept this new lower compensation package, or leave, your choice.')

Frankly I think it would be less painful on the company oversall if they just laid off the folks they felt they had made the compensation error on. I don't see anything good coming out of this approach for the company, and I recognize they may think they are being compassionate by not firing people who, except for the size of their option grant, are doing ok.

Google's innovation here is something they call a 'Google Stock Unit' (GSU) (which is not an 'option' it is more like restricted stock) where the ratio of GSU to actual stock is fixed at the time it vests by a perfomance multiplier. That way they can offer a hot shot person 2500 shares of 'restricted' stock (market value of 1.25M$) which vests in four chunks of 625 'units' a year, and if you didn't meet your goal that year your multiplier could be less than 1.0 even 0. So they wouldn't actually have to give it to you if you weren't a hot shot inside of Google. To be fair the multiplier could, in theory, be greater than 1.0 too. The cleverness of that scheme is that the company could 'tune' the compensation of someone dynamically.

I'm guessing Zynga might be wishing they could do something similar for ISO type options.

Don’t you mean “Shocked, shocked to find shady business going on in here?”

Your winnings, sir.

If a seemingly honest man like pg can't arrange a nice little startup conference without having at least one speaker every year who turns out to be some sort of con man, then yes, I'd have to say tech is particularly sleazy right now. I'm not faulting the Startup School organizers for this, but it's an interesting observation.

Presumably he took stock options and was paid less than he would receive elsewhere. And the options also compensate him for career risk.

The way I read it, committing to Google was a much bigger risk for him than that of any of the programmers. What if Google had never grown beyond a handful of employees? How does that look on a resume? Instead of "sous-chef at Restaurant le Snob", "managed the cafeteria in some anonymous company in a Mountain View office park."

A few people here commented that this is obviously a move by the execs to claw back as much stock as possible for themselves before the IPO in order to ditch it and run. On one level, this sounds realistic. But you have to wonder: Isn't taking this kind of action so close to the IPO just going to put their stock price into free-fall? Did they simply not expect this kind of headlines, or maybe I'm overestimating the amount of exposure this is going to get outside the HN community?

The game is: lie, leverage, flip.

Earlier this year, one such sociopath latched onto my sister and she convinced me to get involved. As soon as the project looked like it was going to get released, the sociopath tried to dilute my sister's and my shares from 1/3 each to 1/20th each. He wanted to bring in partners that he had previously screwed over to make something up to them by screwing us.

...but I'm sure Zynga has some good ones. I don't think they're trying to annul the contract. Essentially, they're saying that these employees are underperforming, and thus they have the right to fire them "with cause". If they straight up fired the employees, those employees would lose out on their unvested shares. They would have nothing. Instead, Zynga is saying, "Give some back and you can stay."

Low and shady. Should we expect anything less from this company? The bright side is, they avoided a mass-firing (likely because engineering talent is still tough to find).

If Pincus succeeds with this, startups as a whole and this kind of compensation in particular will look much worse.

What are you talking about? It's the key to his success.

Sure but the point is the reason and the circumstance matters because of either the way laws are written or how the reason is perceived in the court of public opinion. For example you can fire someone for any reason as long as the reason that you state isn't prohibited (woman, minority you get the point) or objectionable in the eyes of the public.

In other words there is a difference in "fired because business has gone down" and "fired because your kid is sick and we need someone who isn't distracted" (by public opinion not law).

The overwhelming majority of employees at startups sign documentation acknowledging that their employment is at will and can be terminated at any time by either party for any reason, with or without cause. In relatively rare cases involving founders or high-placed executives, the company will sign contracts stating that, though the employment is at-will (i.e., can be terminated at any time for any reason without liability), the employee will get accelerated vesting of one sort or another in the event of a termination "without cause" or a resignation for "good reason." "Cause" is usually defined as willful failure or refusal to perform duties that continues after notice and an opportunity to cure, misappropriation or misuse of company trade secrets, commission of a felony or other action involving moral turpitude, etc. and "good reason" is typically defined as material reduction in compensation or duties, relocation to a remote area, etc. If you have an employment agreement that provides for such acceleration, then you are clearly protected against the Zynga-style threats described in this piece. If you do not, then you generally are not on firm legal footing but still may have some fighting chances.

What are those? If you can argue that an otherwise permissible at-will firing becomes impermissible because it is animated by discriminatory animus (race, sex, age, etc.), and you belong to a protected class, you could argue that the threatened firing is illegal and would subject the company to damages (which, of course, would include the value of the unvested stock that would otherwise have vested had the company not acted illegally to terminate your employment).

If you can argue that the ground of termination violates public policy, this might be a separate basis for claiming that the firing is illegal, notwithstanding that the employment relationship is at-will.

If you can argue that the company has given you implied promises that your employment would be for a certain duration, this also might take it out of the at-will category and give you fighting chances.

If you can argue that you were induced by fraudulent misrepresentations, e.g., to leave an existing employment based on the promise of equity compensation, or if the at-will language in your agreement is defectively implemented, or if any other ground might exist by which you can legally claim you got cheated or had some promise made to you breached, all this too can take this out of the pure at-will category as well and give you a basis for leverage.

To sum up, "cause" is not usually needed by an employer to terminate employment and recapture unvested equity. But you also by no means automatically lose just because your employment is at will. This is a complex area. With a lot at stake, it pays to get good legal advice to see if you can find a good angle by which to protect yourself.

A good legal case depends on legal rules that support it and, even more important, on good facts that motivate judges, juries, and anyone else looking at the case to want to go in a certain direction. Here, Zynga is providing all the good facts an employee needs to motivate people to want to slap them upside the head. That by itself is not enough. But if you find even one legal hook that gives you a sound basis upon which to attack what they are doing, then you can stand and fight. It is not easy, but sometimes you have no choice.

I'm not sure why people have missed this, but Silver Lake is an investor in Zynga, just like Skype...

http://www.silverlake.com/partners/investments.php?page=inve...