[rwmj]

At my first startup, the share option terms and conditions had a clause allowing the company to arbitrarily change any condition in the contract. Of course we signed it and didn't think much about it. At the IPO this clause was very predictably used to extend all the employees'[1] vesting schedule to many years after the IPO event. By that time the options were worthless because the company was acquired in a fire sale.

[1] Naturally by "employee" they didn't include the founder or members of his family who worked there.

[Spoom]

That sounds like it wasn't a contract in the first place. Doesn't it have to in some way bind both parties to be considered a contract?

I would almost think that a lawyer would be able to convince a judge that that "contract" was written so adversely that the "arbitrary change" clause should be struck, since the rest of the contract is essentially illusory if it remained.

[danielweber]

Assume you are correct and it is not a contract.

That doesn't mean the employee gets stock options. The contract granted the stock options. With no contract, there's nothing.

[Spoom]

Sure, but if it got into a courtroom, the judge would probably be apt to rule in favor of the party that didn't write the contract, so I would guess that rather than invalidating the entire contract, they would strike that provision. Not a lawyer though, so who knows.

[rwmj]

I think I left when I was 25 or 26, and I was in no position financially or otherwise to start legal action. That was 20 years ago and you live and learn.

[hedora]

Wow. Did they implode while the employees gave them the finger as they walked, or did it take a while? (This matters a lot to the remaining shareholders, since there is usually a post-IPO lockup to protect new investors).

Seriously, I can't figure out why this doesn't immediately escalate into noisy public events that tank the stock before the founders cash out (e.g., strike / unionization).

[rwmj]

Probably because we were all starry-eyed 20-somethings?

[iaw]

I helped an ex of mine work through the negotiations of an executive pay package. Everyone that's been around upper-management is fully aware of this and works clauses into their contracts to prevent it. It's such crap.

[mavelikara]

If possible, please name the company and founders involved.