Startups must uphold their ESOP promises6 min read . Updated: 22 Mar 2021, 02:22 PM IST
- Many of them seem to be penalizing employees who leave the company by denying them their rightful stock options. This can erode trust and eventually make attracting talent harder as well as costlier for them.
At the beginning of the covid pandemic, my close friend was let go from his position as vice president at a large, well-funded startup. As a participant in the company’s Employee Stock Option Plan, or ESOP, he reasonably expected to walk away with a certain number of the company’s shares that had been promised to him in writing. Imagine his surprise when the founder informed him that his stock options were “cancelled". He complained to the company’s board, which included top venture capitalists, but found to his dismay that nobody listens to a sacked employee. As a recently-unemployed professional, he had no resources to fight the founder and company in court, so he wrote off the promised shares and decided to let karma take its course. But he has sworn never to compromise on his salary for stock options that he may or may not get.