Attracting top employees can be difficult for cash-strapped startups. So, in many cases, they give out company stock to supplement salaries that employees might feel is below-market.
Zynga followed that strategy. But now the CityVille and FarmVille maker apparently wishes it hadn't, according to a new report.
Citing industry sources, The Wall Street Journal reported today that Zynga CEO Mark Pincus, along with his top executives, decided last year as they were preparing for an initial public offering (IPO) that they had given out too much stock to employees. But rather than accept that reality, the executives reportedly tried a different tactic: demand employees give back not-yet-vested stock or face termination.
In order to determine which employees would be asked to give stock back, Pincus and his executives tried to pinpoint workers whose contributions to Zynga--in the execs' eyes--didn't necessarily justify the potential cash windfall they could receive when the company went public, the Journal claims. One Journal source said that Zynga executives were especially concerned with not creating a "Google chef" scenario.
The Google chef crack is regarding a man who ended up with twenty million in stock after Google went public. But that's the purpose. Employees gamble on the company while it starts up, and rather than force cash they are investing in the company, taking a cut in exchange for stock. If the company goes belly up the employee has no right to sue for what might have been. Why does Zynga think they can go back in time and make adjustments that suit them best, at the employee's expense? They try a weak justification, saying they are only forcing this on employees who didn't meet expectations. Failing to coach or discipline employees is not a reason to ask them to give the stock back.
Lately, we've gotten pretty good as a country at saying "no" to such stupidity. Let's hope this is not an exception.
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