The Startup Employee Bill of Rights
Jackson Alberts | July 10, 2014
Employee rights include a minimum wage, mandatory breaks,
and occupational safety. But do they include standardized equity compensation?
Some startup industry heavyweights think so and have launched a growing movement among employees
to demand a new kind of employer concession: a “Startup Employee Equity Bill of
information on capitalization and valuation, being necessary to the employee’s
negotiation of a fair compensation package, shall be available to the employee
with his or her equity offer and after each dilution and valuation event.
of the employee to earn the full value of his or her grant shall not be limited
by unreasonable vesting terms.
to Keep Vested Shares.
of the employee to hold vested equity up to an acquisition or public offering
shall not be violated, and no forfeiture, repurchase or other provisions shall
allow the company to seize vested equity of current or former employees.
employee shall enjoy the right to all tax benefits, and shall not be subjected
to tax penalties due to company negligence, at grant, vesting, settlement, company
acquisition or sale of stock.
The right to
evaluate equity shall not be violated by company limits on access to
information or legal counsel.
strives towards harmony between companies and their employees regarding equity
compensation packages. Indeed, we feel that is the very purpose of equity
compensation: to align the interests of startups with their employees.
hires need to be able to effectively compare job offers. Given that many
startup employees take a large salary hit in favor of equity, it is vital they
know exactly how much equity they are getting (as a percentage of ownership)
and how much it’s worth, and what the attached rights are (check out our post
Equity Compensation, which includes important questions to ask when
negotiating your compensation). However, compensation packages are currently
far from transparent. Even in the best situation with a very clear set of
rights and a very clean cap table, figuring out what options will be worth when
they vest is a complicated, though certainly doable, procedure. (For an
excellent look at the math, please see our blog post “If I Joined Uber After College”). When clauses such as repurchase
rights (i.e. the right to reclaim vested shares) show up on page 30 of a dense
80 page new hire handbook, employees even at the most successful companies may
find themselves left out of the IPO at the end of the rainbow.
that employees and companies alike pay attention to developments such as the
movement for a Startup Employee Equity Bill of Rights and the liquidity needs of shareholders as the time to IPO lengthens. Companies need to keep a
pulse on the pain points of their employees, as keeping them happy and
motivated is key to productivity. Startup equity and liquidity issues are
solvable ones, and that’s core to our mission. Helping employees understand how their equity
works and what they’re entitled to is a step in the right direction. We believe
the end goal is a harmonious balance between employees and management, where
employees can enjoy transparency in their compensation and can share in the
value they are creating through controlled liquidity along the way.
Back to blog homepage