Everyone should stop for a minute and imagine what would happen if this legal precedent spread to the tech startup world. We might then have situations where a highly experienced programmer might sign up with a startup, and sign a contract with that startup, but then have the contract declared null and void if the startup is acquired.
I can imagine a "less likely" and "more likely" way this might play out:
1.) "less likely" would be something bordering on blatant theft -- perhaps the contract specifies options or bonuses, but the parent company, after the acquisition, no longer wants to pay. That would be fairly blatant, though not impossible.
2.) "more likely" would, I think, be issues regarding copyright, which, with software, allows something of a fudge factor, since software is always changing, and no one programmer writes the whole of a large system. I'm thinking of my own startup here: during the years 2000 to 2002 I created a content management system, which then became the basis of a company that was formed in 2002. But the founding documents of that company gave me the right to specific royalty payments for the CMS, even if we eventually agreed to dissolve the company (which we did in 2008). But suppose the company was acquired, and then the acquiring company declared that the requirement to pay royalties was null and void? This is very similar to what apparently happened with Gravity.
Happens all the time, let's say as in this example:
1. initial stock agreement promises acceleration of vesting upon acquision.
2. later on, an acquirer comes along. They want the employees to stay. So, their merger agreement nullifies the stock provision and issues new stock with reset vesting. Don't like it? Don't accept the acquisition, but you can't pretend that your initial contract is going to help you any.
> Don't like it? Don't accept the acquisition, but you can't pretend that your initial contract is going to help you any.
Not true, actually. The acceleration occurs before the acquisition. You are now a minority shareholder with a dissident vote--most states have corporation law provisions for making sure that minority, dissident shareholders are statutorily required to be paid fair market value for their shares. The acquiring company is required to buy you out, and the acquisition price establishes a de facto fair market value.
But that does happen, in way. The most well-known was Zynga - when they were getting ready to go public they did a claw-back on their outstanding options and shares. They screwed over a friend of mine that was one of the early employees.
Marcus Pincus is a piece of shit by his own admission. We should make a six degrees of separation where anyone who does any partnership or collaboration with that piece of shit immediately deserves a boycott as well. Yes, HN this includes even your god and lord Paul Graham...
Just because he admits to common practices instead of hiding behind the usual bullshit doesn't make him any worse than other CEOs. And just to make it clear which way to read that: That's not a defense of Pincus. That's a shot at the other CEOs. Business and moral don't go together, you can read that on HN all the time.
oh god yes and the entire state of Texas which makes the agreements that marcus pincus makes you sign when you join zynga sound lax.
there should be some federal minimum standard so that incompetent and malicious state actors in one state don't try to undercut fundamental economic policies of other states to lure away the companies from states like California... You should not be able to say "Come and incorporate in Texas and you'll own whatever your employees and ex-employees think for their entire lives". Or come to Texas and you won't have to pay a minimum wage to your employees.
Can you shed a bit of light on the details or motivation? It's always bothered me how we never got a full picture of what happened. So they clawed back a portion of options from people who had been awarded options at one level then demoted? Was their motivation just for money? Because it seems like absolutely the worst possible thing for morale and recruiting and I can't imagine them getting back more than 50mm.
I can imagine a "less likely" and "more likely" way this might play out:
1.) "less likely" would be something bordering on blatant theft -- perhaps the contract specifies options or bonuses, but the parent company, after the acquisition, no longer wants to pay. That would be fairly blatant, though not impossible.
2.) "more likely" would, I think, be issues regarding copyright, which, with software, allows something of a fudge factor, since software is always changing, and no one programmer writes the whole of a large system. I'm thinking of my own startup here: during the years 2000 to 2002 I created a content management system, which then became the basis of a company that was formed in 2002. But the founding documents of that company gave me the right to specific royalty payments for the CMS, even if we eventually agreed to dissolve the company (which we did in 2008). But suppose the company was acquired, and then the acquiring company declared that the requirement to pay royalties was null and void? This is very similar to what apparently happened with Gravity.
Worrisome.