Options and Offer Letters

A CEO of one of our portfolio companies sent me a question about process in making offers and equity grants. I sent him a reply. And I thought, “this reply is a blog post”. So here is the reply with the specifics redacted. I hope folks will find this useful.

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It is a Board’s responsibility to approve all option grants. Most boards do this at the start of the Board Meeting. It is usually just a formality, but it is good governance to do that.

The management team obviously can’t wait for the Board Meetings to make offers. So most companies make offers that are contingent on board approval, but that approval is assumed that it is going to be there. Otherwise the management will be in a tough spot having made a promise they can’t keep.

What I generally suggest is that management have a standard options grant. It could be as simple as “everyone gets at least 1000 shares when they join, important role players get 5000 shares, directors get 10,000 shares, software engineers get 10,000 shares, senior software engineers get 20,000 shares, VPs get 50,000 shares. C level gets 100,000 shares”

I just made that up. You should make one that makes sense to you.

Then you get the Board to sign off on the standard grants. Then you can make offers with standard grants in them knowing that they will be approved.

If you want to go wildly off the standard grant for a special situation (relo, super star, etc), just shoot the board an email and get buy-in before making the offer. You will still want to get formal approval at the next Board Meeting.

I also suggest building an options budget. To do this you take yourΒ standard grant schedule, and then map it to your hiring and retention plan (I suggest granting options to current employees every two years as part of a retention plan) and then you will have an options budget for the next few years. That is a great thing to have.

For many of you, this is all obvious stuff. But you would be surprised how confusing all of this is to many entrepreneurs. So I figured I would put it out there.

#entrepreneurship#management

Comments (Archived):

  1. jason wright

    C level = Chief?relo = relocation?super star β‰  super nova

    1. Gabriel

      CIO, CFO, COO, CEO… you know, “Chiefs”.

      1. jason wright

        seems a bit top heavy

        1. pointsnfigures

          C level execs make or break companies. that goes for Fortune 500 companies too.

          1. jason wright

            top heavy…for a starter upper

    2. William Mougayar

      What’s a super nova?

      1. jason wright

        supernova

      2. pointsnfigures

        An outstanding graduate from Villanova

      3. sigmaalgebra

        Are you really asking?As I understand just from popular articles on science, as a star burns, it does nuclear ‘fusion’ so takes elements with smaller nuclei and presses them together to form elements with larger nuclei. This fusion releases energy, a lot of energy. The start converts hydrogen into helium. Then along the way are various elements, carbon, oxygen, etc., and, finally iron. Iron is the end because to make anything with a larger nucleus takes energy instead of releases energy.Commonly the end of star is a ‘nova’ where the star expands greatly. Supposedly the sun will expand enough to reach the orbit of earth — real ‘global warming’!So, as a star burns, eventually it starts to create iron in the center of the star. In a relatively large star, the iron gets to be a bit too heavy and then just from its own gravity suddenly collapses by pushing its electrons into its nuclei so that the electrons combine with the protons in the nuclei and form neutrons. So the result is a big ball of just neutrons, a ‘neutron star’, a strange object.Somehow during the collapse, a lot of energy is released, there is a huge explosion, a ‘supernova’, and the outer layers of the star are blown off into space. The shock wave that blows off the outer layers is so strong that it does more nuclear fusion and, thus, creates elements even heavier than iron — that is where all such elements come from. For a list, look a the periodic table. The result of the explosion can look like the Crab Nebula.Since earth has lots of elements heavier than iron, the earth and us had to have come from at least one supernova, back there somewhere. Since the big bang was about 15 billion years ago and since earth is about 5 billion years old, maybe some of the uranium, etc. on earth came from a star that burned when the universe was 5-10 billion years old.The neutron star can be spinning rapidly, somehow have a very strong magnetic field, and can beam radio radiation. If the aim is right, then we can pick up the radio radiation and see how fast the star is spinning.But if the original star is sufficiently large, then the collapse does not stop with just a neutron star but continues to a black hole. Then matter from the star can orbit the black hole. Since the matter closer to the black hole goes around faster than the matter farther away, there is a lot of friction and heat, and the whole thing glows and can be a quasar — shockingly bright. If there is still more matter, then it can squirt out the poles of the rotation and form a long beam in space. The beam has charged particles that move in spirals and, thus, radiate light.In an extreme case, the light from the beam can have a lot of gamma rays, and the result is called a gamma ray burst or GRB. A GRB can put out more energy for a day or so than all the rest of the visible universe or some such.Apparently nearly all the galaxies have a black hole at the center, and in the early universe a significant fraction of those were quasars shooting beams many light years into space.Spectacular light show! And we are sitting here worrying about option pools? The same universe has a big bang, galaxies, GRBs, earth, humans, option pools, ‘Swan Lake’, and pretty girls! Amazing.

  2. William Mougayar

    On the # of options granted, how about that old formula you suggested previously which is based on a value equal to a fraction of salary offered?

    1. fredwilson

      I strongly recommend that formula as a baseline for sizing option grants

  3. Fernando Gutierrez

    As someone who quit a job for another because of a written offer that wasn’t later honored, I can’t stress enough the importance of offering what you can actually deliver!!

    1. awaldstein

      In the US a job offer is often a contract. If it is broken it can be addressed legally. And it should.

      1. Fernando Gutierrez

        Some people in my same situation (we were a six or seven) sued this company. A couple of them had even relocated when they froze hiring. I preferred to move on and get another job as I wasn’t sure if we would get anything and was not willing to spend my time and money in the process. Maybe I should have joined them, but I was so embarrassed of having been played that I wanted to move on and forget.

        1. awaldstein

          Hey–its all a matter of probability of winning, cost of winning and the size of the win.

      2. JLM

        .This is a very dicey legal issue. A competently drafted offer of employment does not turn an employee into a “contract employee” as opposed to an “at will” employee. A huge distinction.Further, a well drafted offer of employment (upon acceptance) would also provide for some arbitrary probation period — 90 days is good.A well drafted offer of employment is just that an offer and is made subject to background checks, acceptance, board approval and other contingent conditions which must be met to provide a legal framework in which to file a claim.The most important thing is that the recipient has to actually accept the offer in writing to demonstrate reliance or detrimental reliance.A broken promise is not a very strong cause of action.If you like your job offer, you can keep your job offer. PERIODJLM.

        1. awaldstein

          I’m sure you are right. But this not my experience.I’ve never taken or offered a job (done a few hundred at least) that stated a probation period.I’ve never taken a job where I didn’t ask verbally and in person whether this was a lock and I should quit my other job. And never offered one where I did not consider it a contract.I’ve had people not show up. I’ve fired people within the first six months.I’ve never considered it a promise, I considered it a deal.And–in one instance where an offer was to come in and in the 11th hour, there was a shakeup (a public company) and I had already signed a years lease (in NY) the company took it over. Honor was not the reason!

          1. Donna Brewington White

            I don’t like probation periods and what they communicate. And they really are not necessary with at will employment.That’s a nice distinction between promise and deal, Arnold.

          2. awaldstein

            All this talk makes me realize yet again that your recruiter is a true partner in building your company as nothing is more important and more nerve wracking and more time consuming that team building.

          3. Donna Brewington White

            Or more fun and rewarding. But then I’m biased. And… I get to walk away — which is sometimes the part I don’t like.When the CEO/hiring exec gets it and allows the recruiter to be a partner, it makes a world of difference in terms of results. I will walk on hot coals to help this type of client.

          4. Fernando Gutierrez

            If they are not going to let the recruiter be a partner it doesn’t make sense to hire one to begin with. Not cheap at all, better make a good use of them (you)!

        2. Donna Brewington White

          Yes. Well drafted (i.e., well crafted) is the operative phrase.Speaking of this, when emphasis is placed on covering bases for what could go wrong, a great opportunity is missed to emphasize what is intended to go right and setting things off to a great start. Well crafted/drafted should do both.

    2. Donna Brewington White

      That really sucks. Sorry that happened.But you know, a company that did that is not one you want to work for anyway.

      1. Fernando Gutierrez

        I agree. At least I must say that the partner that had signed my offer resigned in the process and offered me to work for him in another place. It didn’t work out because I had other options, but he was quite decent.

  4. awaldstein

    There are huge seed rounds happening now (pre VC engagement)–$1M+ and some of them happen as dept rounds.Can you speak to how this changes things or not?

    1. JimHirshfield

      debt.I don’t think this changes option allocations for employees.

    2. fredwilson

      I don’t think it does

  5. JimHirshfield

    Where’s that video of you going thru the math on options grants? I recall it was from a session you hosted in the USV meeting area.

      1. JimHirshfield

        Boom

  6. DougG

    I don’t want to work for a CEO who doesn’t already know something so basic.

    1. fredwilson

      Well I can’t blame you. But just because you don’t know this stuff doesn’t mean you don’t have a great product and might build a great company. Education is important

      1. PhilipSugar

        Knowing what you don’t know is more important than what you know. That is what kicks your ass.

        1. sigmaalgebra

          The most dangerous knowledge is what you know, believe, and act on that is false!

          1. PhilipSugar

            That it not knowing.

      2. Dave

        Seems like a bad decision making criteria. Few first time CEOs know this off the bat. Even executives with a lot of experience may not know this because they don’t deal with equity grants. It is incumbent on a VC backed Board to make the boundaries clear to the CEO. There are only a few key topics where Board approval is mandatory and for an early stage company they usually fit on an simple, one page approval grid.

    2. David Semeria

      And I wouldn’t hire someone who wouldn’t want to work for a CEO who doesn’t already know something so basic.

    3. ErikSchwartz

      I am going to agree with you here. The CEO is (amongst other things) the employee representative on the BOD. When the discussion was going on in the financing process about the size of the employee option pool how did the CEO not already learn this? If s/he didn’t negotiate the size and structure of the equity option pool from a position of knowledge then what other non team-friendly terms are in the financing docs?

    4. Donna Brewington White

      The best ones will learn, but sometimes the best opportunities (and potential for reward) come before they do. But, yeah, it’s a risk. And you have the right to determine your own risk tolerance.

  7. Jon Michael Miles

    What are your thoughts on everyone in an organization knowing what options others get?

    1. JLM

      .Full, transparent disclosure is always the best thing.A good CEO should be able to defend their decisions.The days of a set of hidden records is over.JLM.

  8. JLM

    .I would add the following caveats:1. An option plan has to be in writing. As part of an annual update to the plan, what you write should be part of the annual budget.2. The option plan should have an updated quarterly budget–available, granted, vested, projected grants. If you are reporting or configuring IAW GAAP, you will have to do this to calculate your non-cash compensation expense. Get familiar with Black-Scholes formula.3. A Board should have a compensation committee which does this rather than always contacting the Board. Let the comp committee report to the entire Board. This can streamline things. If the comp committee plus the CEO is a majority of the Board, then it is effectively a Board majority anyway. Streamline as much of this stuff as possible.4. The option plan, the formal grant and the spreadsheet should all be delivered together to the recipient on the date of the grant. This can avoid problems down the road such as vesting and the treatment of options in the event an employee leaves the company.5. Options can deliver real value, so they should be used as an incentive. An annual or twice a year meeting of all option holders is a great opportunity to trumpet how you are taking care of folks. Why not?6. Celebrate the vesting of options like a freakin’ birthday party and this will reiterate their importance.JLM.

    1. Tom Labus

      What’s the best way to deal with under water options so you don’t get tossed in the can?

      1. JLM

        .The pricing of options is a difficult thing to get one’s mind around because they can get so far out of the money as to be a disincentive.Options are part of:Salary;Benefits;Short term incentive comp (annual bonus);Long term incentive comp (options); and,Something special.These design elements are critical to providing a balanced comp plan so no one element kills the others.When options are hopelessly out of the money, then you either have to re-price them or cancel and reissue them.If you destroy incentives, you destroy incentives and it doesn’t make any difference why. You have to re-create the incentives. PERIOD.Options are part of the crawl, walk, run growth of a company. You are still building a company regardless of what the numbers show at any instant in time.I favor cancelling them and reissuing them. I hate re-pricing because it looks like the Board is also stroking themselves. This is dangerous ground. You must document everything and it might even be prudent to get a “fairness” opinion.You have to work through the non-cash comp accounting issues and they are not easy.JLM.

        1. Tom Labus

          Thanks

    2. Twain Twain

      Super caveats, thanks.

    3. sigmaalgebra

      A keeper, along with your other posts to this thread, and the whole thread. Thanks.

  9. Richard

    Without knowing the total shares outstanding, the numbers can be interpreted a number of ways.PS you spoke of your dream a few weeks ago. Well here is mine of last night. I’m a student at HBS. (I believe it was a finance class) And who is teaching? Noneother than Fred Wilson. Well its test day. Fred passes out the exam along with a smart watch. The questions are program this watch to do X,Y and Z.

    1. fredwilson

      I love your dream. I wish it were true

    2. JLM

      .Then you drop it?The battery dies?Make it a real freakin’ nightmare.JLM.

  10. Richard

    How about founders and a Board who believe so much in their startup that they issue Put Options and Call Options.

    1. pointsnfigures

      but you can only short the puts

    2. Dave

      Your employees likely will not take the job if they are smart. Overly complicated equity structures drive employees away, particularly good ones. Even the smartest engineers and others often can barely understand options. Employees, quite rightly, assume that overly complicated equity structures–typically created by professional investors at VC or PE funds–will benefit the investors and shaft the employees. Simpler the better.

      1. Richard

        I don’t buy that smart engineers can’t understand engineering. It’s called Financial Engineering for a reason.

        1. Dave

          I’ve explained lots of equity structures and incentive instruments/plans to very smart people over the years. The level of sophistication is much lower than I would have generally assumed. And most of those who do understand, also understand they cannot figure out all the ways they can get screwed by complex instruments and understand they don’t control most of the variables that can screw them. Time based vesting options with a fixed strike price are the standard equity comp instrument for early stage companies for a reason.The more complex the compensation instrument, the more the value of the instrument is discounted by the employee.

          1. JLM

            .Any program which is misunderstood is devalued constantly thereby failing to achieve its fundamental common objective: heightened incentive.JLM.

  11. Lottery Loser

    I was offered 10,000 options when I joined a startup. It was written in my offer letter with the usual “…subject to board approval..”. 3 months after I joined, when the board was to meet to approve the grant they got an offer to be acquired for a large sum and the board simply did not approve my grant even though I had already joined in good faith and was working as hard as everyone else (if not harder having recently joined). What options (ignore the pun) does one have in this situation?

    1. fredwilson

      Well most options these days have a one year cliff vest so even if they had granted you options as promised, none would have been vested.One way for the company to fix this would be to have the acquiring company grant you a similar dollar value of options or other forms of equity in their company

      1. DerekB

        Hi Fred, thanks for this post. I’m also a first time commenter here, serial entrepreneur, and now sitting on the Board of a tech startup wrestling with acceleration on change of control. One board member who has worked in multiple tech companies has always had 100% acceleration on any change of control. My companies haven’t done this, but have put double trigger in place for key executives. Is there a ‘standard’ that you have seen that you might be able to share?

        1. awaldstein

          There is no experienced senior executive that won’t ask for–and in most cases–should have full vesting at change of control.I always got it, I still grant it. It is always something to get board buy in and I’ve never had it said no to.

          1. ErikSchwartz

            The other one I find important that is extending the time window for exercise of options after separation from the standard 30 or 90 day window to at least a year.

          2. JLM

            .This is an accounting nightmare if not done as part of the original plan.Having said that, the CEO should have huge powers to modify the plan as the plan administrator.JLM.

          3. ErikSchwartz

            In the era of computers I find many accounting “nightmares” to be overstated. :-)That said I agree it should be done as part of the original plan. My larger concern with the whole story is that from an common shareholder standpoint this kind of stuff is not in the ephemera of the financing docs like registration rights or the important but complicated stuff like participating/preferred, It is meat and potatoes. A CEO that did not pick this stuff up during closing may not well represent the common shareholders (and may not even understand that that is one of their roles).I’m less concerned because USV is a firm with a reputation, but if this was some 3rd tier VC bells and whistles would be going off in my head.

          4. JLM

            .The problem is not with the work product of computers.It has to do with actual tax treatment of the options themselves which is done by law and which must take into account the time of exercise and the volatility of the stock price which is often just not reasonably known.Run through Black-Scholes formula calcs with different criteria and see how it works.It is a nightmare.JLM.

          5. JLM

            .Right you are, my friend.This is one of the most important and most misunderstood corporate governance criteria in business today and one that is applicable to both private and public companies.In essence when one of more shareholders “act in concert” while owning a simple majority of the outstanding shares of a corporation you have a change of control.Change of control for a CEO is tantamount to being fired as the most common reason for shareholders to “act in concert” is to change or effect change by management.Upon such an action, the CEO’s severance package should be triggered including the vesting of all unvested options.Change of control features are by law (SEC rules), shareholder agreement and most importantly by employment agreement.The ability to act in concert and not trigger a change of control is tantamount to giving up any control of due process by the CEO.I have seen such features routinely screwed up in employment agreements because the CEO cannot imagine such an eventuality.It does not even require the doing of a bad act, the simple notion of “acting in concert” should trigger a change of control.JLM.

          6. awaldstein

            You are a maven my friend.Two comments:-learning how to do business in a non-attorney state like Cal was a blessing. I routinely write contracts for clients as favor and have them approved by attorneys here.-we should create a loos confederation of AVCers and beyond who are advisors to share info. I do this all the time informally with my contacts.An AVC brain trust collective open to Q & A potentially? Pre expresso thought obviously.

      2. Lottery Loser

        Thanks Fred, Good point but assuming a slightly different scenario which i didn’t anticipate until this experience — if one negotiates accelerated vesting (e.g. 18 months) triggered by change of control, then I would have had 21 months of vesting which is well past the 1-year cliff–would that cover the cliff issue? And would that change things assuming that the VCs and founders don’t screw the employees during the transition time? With regard to your point is it the acquiring company’s responsibility to fix it? Thx for your insight.

      3. JLM

        .The vast majority of option plans provide for automatic acceleration of vesting in the event of an acquisition offer and acceptance.Not to do so violates fundamental fairness.JLM.

        1. Lottery Loser

          JLM, I agree with you. Sometimes one learns to negotiate these terms from experience, especially when one chooses not to go to a larger “stable” company but instead to join a startup, where risks are high and odds are slim–and not being able to join the others at the “pay window” (JLM quote), due to a “technicality” really stings.

  12. Twain Twain

    This is an MBA Monday post?

    1. fredwilson

      Ooh. I will add that tag. Thanks!

      1. Drew Meyers

        mba monday on a thurs πŸ™‚

        1. sigmaalgebra

          Thursday is the new Monday!

  13. Mario Cantin

    First time leaving a comment — regular reader however. Very informative post for me personally, thanks for sharing.

    1. fredwilson

      I always love getting a first time commenter. Thanks!

    2. Donna Brewington White

      I second what Fred said. Although, he’s the owner. I’m just a frequenter. πŸ™‚

  14. vruz

    It’s not clear to me whose slice of the pie dillutes or how dillution is distributed.Apart from a budget, you have to be clear on this I think, once you give 1 share to your new employee, somebody will be 1 share worse.I assume it has to be written down on paper somewhere.

  15. Dave

    Great reminder. Seems basic, but a lot of CEOs have never dealt with actually making offers or how they work–particularly first time CEOs. Last week I just saw a CEO who came from a brand name tech company mess this up, I think because other people actually provided the equity offers in his prior jobs.Two additional items:1. Don’t commit to the option price in the offer letter or if you do say something like “granted at fair market value, which is currently $0.XX but is likely to change, on the date of approval by the Compensation Committee”. And be clear the FMV can change even if you discuss it verbally. I just saw a CEO create a $200K+ shortfall with an incoming senior exec by assuming the CEO knew what the stock price would be at the next meeting. The loss of confidence will be hard to overcome and the problem was easily avoided.2. Have a person designated to answer questions about the details of the current cap structure, option plans, vesting, exercise requirements, buyback rights, etc. Maybe it is is the CEO, often it is the Finance person. But it is really helpful to employees to have someone they can ask a lot of questions to without feeling stupid.

    1. JLM

      .Quick points from 33+ years of CEO experience:The hiring option plan should be in a written document prepared by the company, reviewed and approved by outside counsel, approved by the CEO, approved by the Board (comp committee), reviewed by the CFO and used by HR. Some of those functions are compressed into a single person in a startup but those are the boxes to be checked.The grant has to be in writing and has to be received and accepted by the recipient. None of this should be verbal as verbal agreements are often not enforceable as a matter of law and always have the potential for misunderstanding and even bad faith.A lot of problems are solved by pricing options at 110% of FMV with a descriptor of how FMV is determined from time to time.Squaring away options, part of long term incentive comp, should be done with the same specificity as agreeing on salary and payment terms of salary. A good discussion of salary includes — how much, when reviewed, how much can it increase in the future IAW company policies at time of hiring.This is all part of a well run “on boarding” process.JLM.

      1. Dave

        Agreed (from 20 years of dealing with options and literally reviewing thousands of sets of grant paperwork). But the offer letter doesn’t have all the option grant documents. All the option grant documents–notice of grant, option plan, stockholders or rofr agreement, etc. should/must be provided with the grant and the optionee must sign and return. I’ve provided all the forms of those documents in advance if someone wants to see them.The 110% rule is only needed for holders of more than 10% of the voting stock getting ISOs, so not applicable for normal employees and few employees want to give up 10% of their price.

        1. JLM

          .I did not mean to imply the offer letter contained anything other than the offer as I indicated in earlier comments. I am a huge advocate of giving the recipient every pertinent document and filing them somewhere they can always get to them in the future like a web page.I like the 110% pricing as a general policy but particularly when there is any chance that is it involved with a repricing.The methodology of determining price with startups is also a good thing to document.JLM.

          1. Dave

            We are on the same page!

  16. Eric Roach

    Fred,I think the real brilliance of your post is that you have moved the discussion to share amounts as opposed to % amounts. It’s the % amounts that really play havoc on startups as they are trying to grow.

    1. Dave

      But everyone ultimately wants to translate the share amounts to percentages so you have to speak to both.

      1. Eric Roach

        Much more true in the valley, not so much in my experience in other places.

    2. sprugman

      Given that discussions are always about future overall valuations (“we’re gonna be worth $200M in a year…”), not share prices, knowing the % that your options represent is necessary to have any idea what they’re worth, even if there are ways that can be misleading — dilution events, preferred liquidation, etc.

  17. ErikSchwartz

    I’m not sure how the financing deal would have closed without the CEO asking questions about the equity pool carve out in the cap table that would have covered all of these issues long before this.

  18. Chris Phenner

    My stream-of-conscious reactions to this post as I ‘read down’:Stoked! This is about Offer Letters and what they should contain.Whoops. This is about Equity Grants and how to traffic board approvals.Or wait. This is about creating an ‘Options Budget’ to smartly share equity.I am sure that each topic can command its own post, but I was most stoked about an Offer Letter post. As a full-timer and part-timer, I counted that I have seen (or written) about 20 of them, and I am so struck by how widely they vary in content and in structure.Venture Hacks (I think) were first responsible for sharing, dissecting and breaking apart the docs around early-stage financing, and boy did they Shine a Light on terms that used to be opaque and scary to me (and AVC has also been a great help).I’m feeling the urge for an ‘Offer Letter Hackpad’ in the future, and would spin one up now if I had more time and focus πŸ™‚

  19. Donna Brewington White

    I love when you post about topics like this — thanks — but like @cphenner:disqus would’ve appreciated hearing your thoughts on offer letters. Mundane stuff maybe, but not necessarily.

  20. Dasher

    Fred – This should be tagged as MBA Monday post.

  21. Nadia McDonald

    Awesome presentation!

  22. Loren Heiman

    Hey Fred,As someone who just recently joined my second startup, I have two questions on how to make the equity compensation process as fair as possible for the new hire.1. One issue I find is that the employee has absolutely no control as to when the Board can meet and approve their grant. A long delay could mean a significant increase in FMV/strike price of the options and therefore impact on their value. It doesn’t’ seem fair that a large part of an employee’s compensation can be devalued at the behest of the company’s lack of timeliness. Are there ways this can be eliminated or mitigated? Also, what recourse would the new hire have if the Board does not approve the number of shares in the grant?2. What other information regarding the Stock Option Plan do you think should be reasonably included with offer letter? While it’s obvious that things like the strike price, number outstanding fully diluted shares, vesting schedule etc should be included, what about things such as accelerated vesting, company’s right to repurchase shares, early exercising, expected date of next strike price adjustment (via 409A or round of funding)? Many of things have significant impact (albeit impossible to assign a value) on the value of the grant. Do you think that employers provide the Stock Option Plan in full?

    1. Dave

      On your question 1, there is only so much you can do. But the best way to mitigate is to ask when the next approval is and the next one after that. It often influences an employee’s start date because the options can’t be approved until you start. As companies get bigger, some start to grant options every month or every couple of months (but it depends on how often they update their valuations).On your question 2, most employers I know provide all the documentation with the formal grant after approval. But if someone asks earlier, I’ve always provided it. All the issues you raise are why I favor having one person (typically the finance person or, if you have one, legal) available to answer all those questions for incoming employees. Most of those items can be seen in documentation but much better to get color commentary from an explanation.

  23. jason wright

    i recall once using IBM’s Via Voice product – a simply dreadful experience. Google now seems to have the zeitgeist on this.The Moto X has nice voice control features. I might get one, or it’s successor.

  24. JimHirshfield

    As in, “kick the…”?

  25. Dave

    I agree. I think it is best to have one person dedicated to answering the questions. Someone who can answer both the more mechanical questions and the (more important) questions of how you grow value. Your finance person is probably the best suited to it. People can feel a little more comfortable asking questions, including seemingly mundane questions, of someone other than the CEO.

  26. awaldstein

    Agree.Does anyone really do this well? Never seen a great example of this.

  27. Brian Manning

    Totally agree, Charlie. An employee must know the current value of the company, the number of shares outstanding and the number options they have. If the employee doesn’t know those three things then they should should assign no economic value to the shares and they should not consider them a part of their compensation package. It shocks me that more founders and employees don’t look at it this way.

  28. JLM

    .An annual or every 6 month meeting — when the options are in the money — is like a bacchanal.It is one of the most important campfires, short of going to the actual freakin’ pay window, a company will ever have.Everyone has to understand value. Money is not an abstract concept. Wealth creation is good.If you do not create wealth, WTF will Obama have to redistribute?Pay window.JLM.

  29. Donna Brewington White

    Great great advice. If this is confusing to the entrepreneur (as Fred said) how much more so for the rest of the team?I think that any aspect of compensation that doesn’t show up in the paycheck (including benefits) needs to be communicated in a way that is meaningful if you want it to convey something.And a company’s philosophy on compensation/benefits can be an important aspect of the type of culture being created.

  30. Fernando Gutierrez

    Yup, I was young and fool πŸ™‚ I was working full time for HP during my last year in college and this fancy consultancy firm came to me offering an amazing package. I was gonna start in three months, so I accepted and quit my job to avoid having problems with my last credits in college. In the meanwhile, this firm entered into a merger process with another one and they froze all hirings. After they delayed a couple of times my starting date, I took another job. I could have killed someone back then. It was a valuable and expensive lesson.

  31. awaldstein

    Almost everyone does.And since these are open meetings for the employees, the info would get out to the web and it just ain’t there.I wonder–as aspirational idea or something that is happening for others to emulate?

  32. ErikSchwartz

    Maybe someone should make videos of those early employee meetings to show later employees.