[omgitstom]

It isn't about the vesting periods, it is about the exercise period. Vesting periods are fine in most cases.

The exercise period is usually 90 days, if you leave a company.

What happens a lot is there is no liquidation event for years meaning that an employee with shares needs to make a decision fast to convert or lose their shares (which they earned) and that cost $$$. I've seen time and time again, where people get locked in because they need to drop 4-6 figures to exercise their shares.

> If the employee loses the stock when he's fired early, then the company has a huge incentive in firing him a day before he vests, and thus he should regard the vesting compensation as nonexistent.

I've seen this happen a few times in SV where employees are fired 1-2 weeks before their vesting period. Sad when it happens. Not saying that all times it is because of the cliff, but people talk and are aware of companies that have done this.

[erichurkman]

It's even worse when you consider AMT; sure, dropping $10k to buy your stock might be achievable, but if the FMV of those shares has gone up appreciable, you may find yourself in pain come tax day. (If your strike was $1/share, but the FMV is now $10/share, $9/share "gain" has to be considered as income for calculating your alternative minimum tax.)

[ska]

The tax burden is the primary problem, that is what all this discussion is really about.

[x0x0]

I dunno, I had to pay nearly $15k to exercise options and while I barely escaped amt issues, the money wasn't easy. And represented a 10% rebate on after-tax salary for the period I worked for that company.

[ska]

Sure, that happens. But it is a very different situation from the one where AMT (in the US, other jurisdictions have similar issues) makes it financially impossible to exercise your options.