The Real 'Scandal' Over Zynga Stock Options Is Over Misleading Reporting

from the let's-work-this-out dept

There were a bunch of reports last week about a so-called "scandal" at social gaming company Zynga, concerning reports that it demanded stock options back from employees or they would be fired. Zynga certainly has done some questionable things over the years, and hasn't always had the greatest reputation... so a lot of people jumped on this story, and plenty of people submitted it. But, the details suggest that the only real "scandal" here is in the attempts by reporters to make this into a scandal (kudos to Dan Primack for not getting fooled). The reporters doing so either don't understand what really happened or are just attacking Zynga for the hell of it. I've got no problem calling out Zynga when I think the company has done something bad, but the details here suggest that what Zynga did is actually pretty reasonable.

The part that gets lost in most of the discussions is the fact that Zynga was only asking about unvested stock options, rather than vested ones. Unvested stock options are just like future salary. You can lose it if you get fired. What Zynga did here was take a few employees that it felt weren't achieving up to expectations and, rather just fire them -- in which case they would have received none of their unvested options -- try to find another role for them in the company. That other role, however, would be somewhat lower on the totem pole, and thus, would be entitled to fewer stock options. Yes, it's basically a demotion, but for some people perhaps that's preferable to an outright firing.

But here's the key point. Most of the "Zynga bad!" reporting on this made it sound as though Zynga was taking back options that had already vested. That's false and misleading. Nothing was taken back from the employees. The already vested options remained untouched. Basically Zynga was offering a way for people, who otherwise would have been fired, to keep accumulating some options, just at a lower rate. That may be insulting, but it seems like a more reasonable and humane solution than just firing them outright.
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Filed Under: journalism, options, vesting
Companies: zynga


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  1. identicon
    That Anonymous Coward, 19 Nov 2011 @ 7:07pm

    Re: Re:

    So unvested stock options are like the promise of a bonus, rather than being used to get employees to accept less money during the early days of the startup? Or they are set to vest at a rate to help make up for the fact they were paying you just enough to live on ramen for a year.

    I myself dislike the idea of a promise of future compensation for taking less today, unless that compensation is confirmed. But then I don't program, so this is totally out of my arena.

    I guess me liking or not liking would depend on how the contract was worded, and if it was clear that there would be a review that could alter it moving forward after that meeting. If everyone knows what the deal actually is and accepts it... more power to them.

    If they were told they were working for ramen wages for 2 years and at the end of 2 years they would have X Stock options and suddenly had an issue with the work 23 months in, then I could see an office rampage. Its situational.

    Well that and I think Farmville is the devil.

    Thank you for explaining this Mike, it seems much more rational than the hyped up article I read.

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