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I'm somewhere between the 7th and 9th employee. I've been at my position for almost a year. There was supposed to be a vesting plan released in January 2014, at the time of this writing it is late March.

I like my job, it's challenging and allows me to think, but at the same time it can be very clinical and boring, and as a developer I feel entitled to more.

Edit

I don't mean entitled to more money necessarily, but instead a more fulfilling role and a more fulfilling long term outlook, given my hours and current pay.

End Edit

I literally get a recruiter contacting me every other week looking to hire me or someone I know.

I like the founders, but as far as I know, we have a great stream of revenue, at least for a company with < 20 employees, and I'm worried that the time period to get stock may be over entirely.

Also I'm underpaid by probably 10-15%.

I've already sent an email to my boss with a friendly "any updates on that vesting plan you mentioned?". I received a firm "No updates yet".

How do I say, with style and grace

I am not in business to make friends I am in business to make money.

And additionally,

If I don't get a deadline from you on when our vesting plans will be determined, you can bet I'll turn in my two weeks notice.

EDIT

The tone with which I wrote this question is not the tone I intend to use when approaching my employers :D.

2nd EDIT

I'm not trying to deliver an ultimatum or a threat. I'm not in a position to make ultimatums or threats, that would get my ass fired.

Also can you imagine what it would be like in the workplace if and employee who delivered an ultimatum wasn't fired? It would be terribly awkward. If you deliver an ultimatum and all of your demands are met, you should quit because it means that the position is clearly beneath you, or the people you work with don't know what they're doing (IMO, in most cases).

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The OPs question is legitimate. He just wants to know the etiquette for negotiating these type of things. Nothing wrong with that. –  Michael Martinez Mar 21 at 18:45
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General observation: A verbal contract is worth the paper it is printed on (nothing) or occasionally the tape it is recorded on (which I presume you don't have.) Frankly, in a startup promises of vesting in the future that aren't backed up with paper are equivalent to Kickstarter rewards -- the folks issuing them may have been entirely honest, and may still have every intent of delivering, but if the company doesn't meet its goals the reward may be delayed or may never be delivered. And remember that revenue stream and profitability are very different things. –  keshlam Mar 21 at 19:53
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If nothing else, the lesson here is get it in writing before you start. –  corsiKa Mar 21 at 21:01
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"underpaid by probably 10-15%." I am also underpaid by probably 10-15%. Indeed, everyone is underpaid by probably 10-15%. –  Quora Feans Mar 21 at 23:56

7 Answers 7

up vote 27 down vote accepted

I dislike this phrase: I feel entitled to more. Compensation changes within a company should be based on what you have earned not what you feel you are entitled to. No one is entitled to anything, we sing for our supper. So if you can begin to phrase your statements (toward management, obviously) in a way that dictates that you have earned these things you expect, then you will garner a lot more attention from those individuals who write the checks.

A question I would have is: were you promised a vesting plan in writing or was it verbal? If it was verbal, was it a hint or a teaser rather than an actual promise?

Talk to your boss directly and skip the emails. If your boss doesn't have any information immediately, ask him/her who does have the information so you can go ask them. Only through your actions can you let your boss know that this is not an issue you intend to let slide. Be persistent but not obnoxious. Don't use ultimatums or aggressive language, just let them know it's important. If you were promised this and they haven't met it, let them know that you feel they haven't met their obligations.

In the end, you need be straight-forward and honest. Don't accuse, simply indicate that compensation conditions do not match the expectations set when you signed your offer letter.

If you're ready to vote with your feet (i.e. leave the company) over this, then I would recommend regardless of what answers they give you, you begin at least a passive search for alternative employment. If you find something, be ready to take it. I wouldn't recommend bringing that offer to your current employer as some kind of bargaining chip, however. All that really does is set you up to be placated temporarily until they can replace you and sack you when it's convenient for them.

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+1 for the last sentence. Seen it so so many times! –  Mike Mar 21 at 16:31
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@BrianWheeler: I sympathize. I currently have a similar issue with a promised benefits package that was not delivered in writing yet still has not been met despite repeated assurances. Assurances only go so far, and in my opinion, this is a broken promise. –  Joel Etherton Mar 21 at 17:02
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There's nothing wrong with 'feeling entitled' if its justified. Employees aren't dancing monkeys hoping for tips from passers by, they are trading labor for money, and they are certainly 'entitled' to at least what was agreed upon, which in this case appears to include a stake in the company. –  GrandmasterB Mar 21 at 18:11
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The "feeling entitled" thing is definitely something you need to show and demonstrate as an employee. Otherwise you will just get walked all over by your employer. –  Michael Martinez Mar 21 at 18:58
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@GrandmasterB: Entirely possible, but the point still stands. Using the word entitled in the presence of those who write the checks puts a negative connotation on the statement. It's a very simple change of language that alters the entire context of the point being made. It doesn't matter how you and I see it the point he is making. It matters how they see it. –  Joel Etherton Mar 22 at 3:12

I have been a founder, and responsible for issuing stock option grants. Handled right they are a fantastic tool for motivating people, and for getting a whole team of people working for the same goals.

I would give great respect to an employee who said, "I want stock options. I think this company is going to do very well. You have a great team, and I am part of it. I'd like to share in the company's success." I seriously doubt this kind of statement will cause offense to the founders.

You DON'T have to say "if you don't follow through I'm out of here." DON'T say that. There's nothing good to come of it.

If, in fact, the founder who hired you told you (verbally or in writing) you would be getting some stock options, I would remind her of that, and ask directly what's going on with getting them issued. I would also ask to have the vesting schedule for at least some of the options backdated to your date of hire, if they can do that. It's a reasonable request.

There could be several things going on. I don't know your company's situation, but I suppose it's possible the founders don't have the business skills to follow through on their offers of stock option grants. It takes lawyers to issue stock options, and lawyers are expensive, so they may be delaying spending that money. That might be a wise business decision, but not if it costs them team members.

It's possible the board is giving the founders a hard time about their stock option plan, and refusing to approve their grants. If true, that's not good. Ordinarily founders establish a stock option plan with a budget. For example, a tech company might have 50K shares reserved for a VP of Business Development, 10K for the first four developers, and 2K each for the first two tech-support people. In-budget grants to early stage employees should be routine. If it isn't, your founders and their board of directors might be working at cross purposes. (That means it's resume time.)

As for looking for alternative employment, if you're working in the startup world you should regularly network with people you know in other places. If your place works out you may want to recruit them, and if their places work out you may want to go there.

When you are issued stock option grants, keep in mind that options are rights to purchase actual stock of the company at a specified price. here are the questions you want to ask your founding boss:

  1. What is the option price, sometimes called the "strike price"?
  2. How many options do I have?
  3. How many shares of the company are there? (What fraction do I have)?
  4. What do you, boss, think it takes to make these options worth a lot of money?
  5. What's the vesting schedule?
  6. Are there any events (such as the sale of the company) that accelerate the vesting schedule -- make my options vest sooner?
  7. What are the Alternative Minimum Tax implications of my options, if any?

Good luck.

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The fraction of the company you have in issued shares absolutely means something. It's true that future rounds of outside financing, especially if the terms are unfavorable, will reduce your fraction of ownership. But knowing fraction of ownership is far more meaningful that knowing "wow, I have options for 1000 shares." –  user987654 Mar 27 at 1:56

I'm an owner of a small company and I've worked in several different startups.

There is typically a LOT of things going on behind the scenes that you are likely not even aware of that directly impact the owners ability to create and execute on a stock option plan.

Some of that involves negotiation with current investors, if any. Some may involve negotiations with potential upcoming investors. It may simply be that they are trying to figure out how the company should be structured/restructured for the next growth stage.

One thing to remember is that the option pool is going to come directly out of the pockets of the owners.. It might simply be that one owner thinks setting aside 2% is good while another thinks it ought to be 20%... It might even be that they are trying to figure out what the vesting period ought to be. If they grant you 1000 options, should it be over a 2 year or 5 year period? Should a portion of it just be granted while the rest vest out? Also how much should everyone get and how much should be left over to help attract other employees? Even more importantly, what is the company worth? Is it $1m, $5m? Can they justify that amount? If they price the options as if the company is worth $10m and ultimately go public and the market prices the company at $2m then those options are completely worthless. If they price the company too low then raising additional capital will cause them to give up more of the company than they probably want to.

Point is: it's complicated. Really really complicated.

A few places I worked at verbally told the employees they were working on an option plan. One took almost two years to get it in place. This wasn't because the founders didn't care about the employees, nor was it because of any board member issues. Rather, they were trying to figure out how all of the finer points about multiple rounds for raising money, issuing stock, company structure, etc worked.

These are serious legal agreements and not something that you can just throw together. It might look like they aren't doing anything, but they are and, unfortunately, they can't really talk too much about it simply because the details might be constantly shifting.

My advice: don't worry about it. Options should be considered a bonus if you are ever actually allowed to exercise them. I know I've earned plenty of them over the years. Enough to paper a wall - and they are all completely worthless.

If these weren't even discussed would you still be at that job? If you like the work, the people and how much your bringing home then stick with it. However, if you aren't happy then you simply need to move on. I'll tell you straight up that it's a very very rare day that a non-C level employee in a start up "gets rich" off of options.

Threatening the owners with your resignation, no matter how eloquently phrased, will never end well.

The last thing to cover is your statement

Also I'm underpaid by probably 10-15%

I'm not sure why people ever think that. Did you agree to do work for the amount you are being paid? Did you ask your boss for more money? The only true way to be "underpaid" is if your check is less than you agreed to work for.

If you mean to say that you can make more money elsewhere, well that's entirely possible. Don't count on a stock option to make up that difference.

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All true. But company founders / owners who offer options or shares to employees should keep in mind that they're part of the deal. Those promises need to appear somewhere on the company's capitalization table. An employee with a provably unkept promise of an equity share has the power to seriously foul up an attempt to sell a company or issue public stock. –  user987654 Mar 21 at 21:31

Pretty much any time you make a demand from your employer, I feel that it needs to be made from a position of strength. I don't mean that you ought to actually go out and find another gig before you approach your boss about this but you should at least have a good grasp of exactly how much you're underpaid at the moment (it sounds like you do) and the nature of the job market for your position. It is always possible that your boss is going to either give you an excuse to try to put it off for 6 months or flat out say "no, you're not going to get that".

That being said, I'm a strong believer in the power of communication. It's always possible, particularly in a smaller company, that the company forgot about this. As always, even with something like this, I think it's helpful to talk about this with "I" rather than "you" statements ("As a condition to my taking this job, I was offered stock options with this company which, according to my calculations ought to have happened several months ago. I see this company going places and it's causing me some angst not being able to get in on the 'ground floor', so to speak"), as I think it's helpful in any situation, but I would err on the side of making sure they understand your position here.

All that being said, one thing I would not do in your situation is make this into an ultimatum. First and foremost, it's just not necessary. If you go in to your boss's office and let them know that you are not receiving promised remunerations, they have to understand that the consequences of not providing those is losing you as an employee. In fact, it's even better this way because if they turn you down, you don't necessarily have to give them notice until you actually find that other job.

On top of that, what would the endgame be of that ultimatum? Sure, ideally you get your vesting options, but you also open up a situation within the company wherein you have to threaten to quit to get your way. That's not the kind of environment I would have fun working at and I can't imagine it would be great for many other people either.

The "I'm not here to make friends" bit doesn't need to be anywhere near this either. If your employers are paying you, they understand this already.

So in summary:

  1. Go in armed (with information! Please! Only information!)
  2. Be polite but get your point across
  3. Be prepared for "no"
  4. Don't issue ultimatums
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First, in order to properly receive any stock options on a company, you have to have a vesting plan. Thus, I'm assuming from this point that you haven't been granted the options yet.

If you were supposed to be granted stock options as a condition of employment (in part of your employment agreement or contract), and you weren't granted any, I would treat this as an immediate red flag that something isn't right.

However, if it was just a verbal agreement, then you only have several options:

  1. Pressure your boss more

    This might be somewhat obvious, but if it's possible, you should start cc'ing your boss's boss on your emails, which should get your immediate boss's attention. Otherwise...

  2. Talk with your boss personally

    This might involve walking into his office and closing the door (if your boss has time). This would make him have to answer your question then and there, or at least provide an explanation why there is no vesting plan at the moment.

As a last resort...

  1. Start your job search

    If you can walk into your boss's office with a job offer from another company, you will have the best leverage you can get to either get a raise, get your vesting plan, or both.

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I wouldn't bother showing up with another job offer in hand. If you try to use a new job offer as leverage, even if they concede to your demands you've likely ruined your long term prospects with the company - and you might be the first one on the chopping block if they have layoffs. Put in your notice, and if it really matters to them they'll present you with a hurried counter. And if they don't give a counter offer, well, their loss. –  GrandmasterB Mar 21 at 21:12

There is no need for you to say "you are in it for money, not for friendships." This is implied because it is how the business itself operates.

The way you try and get what you want is to call a 1/2 hour meeting with your manager: tell him/her that you are considering some other job opportunities. Give the reasons. Then see what they say. If they are interested in keeping you, they will ask what they can do to keep you. At that point, negotiate the equity piece. If they do not show interest in keeping you, then look to join another startup.

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'Pay me me more or I leave!' rarely ends up well, and shows your disloyalty. –  Kvothe Mar 21 at 18:57

You should follow through with one of the recruiters and see that you can land another job and what they are willing to pay you. You may think you are entitled to more, but you need to find your real market value.

Once you have an offer letter in hand, you can be super polite to your employer and let them know that you have a job offer and that you are really considering it. You should be honest and tell the employer what the other job is offering so your employer will have something very concrete on which to make a decision. Doing this requires some effort on your part, but your result will always be positive.

You may find that you are not worth as much as you thought and that your current job is a good deal for you; in which case, you will be satisfied with what you have. You may find a job that you would like even more than your current one in terms of compensation, and if your employer doesn't at least match it, you can switch jobs. In any bargaining situation, each side is trying to maximize their positive outcome. If you make more effort before going to the bargaining table, you will win.

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Having on offer in hand is not a bad idea, but it is a terrible tool in terms of a bargaining chip. I promise you that if you try this you will be let go very shortly –  Brian Wheeler Mar 23 at 0:12

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