Pinterest To Give Employees More Liberty In Exercising Their Shares
Pinterest employees must have appreciated the company’s last week modifications in the policy that promise more latitude and less restrictions on the workforce. According to these policy changes, as reported by Fortune, Pinterest announced that all the employees working with it will be permitted to keep their vested stocks for seven more years — without exercising them — after they quit or are terminated.
The policy, however, is applicable to those staffers who have worked at least for 2 years with the content sharing service.
“The principle we’re operating under is one of fairness,” explains Pinterest co-founder Evan Sharp. “If you’ve made an important contribution to Pinterest, you should be able to keep that value. And that shouldn’t just be for people with enough cash to satisfy their tax liability.”
Nonetheless, the above stated policy change can literally help purging the tax liabilities that often handicapped startup employees. This initiative by the digital pinboard will be a source of relief due to number of factors. If other startups begin doing that, workers will acquire a chance of collecting equity on rarely excercized favorable terms.
Normally, startup employees are compelled to continue with their native companies even if they have better offers elsewhere. This compulsion arises from the stock options as the employees know that if the startup, they are working in, flourishes from that position, there will be a massive increase in the value of their stocks — this increase will be even greater than what they are sacrificing for by refusing the offers of greater salary.
The biggest challenge for the employees occurs when they leave a startup. Usually, these workers are given merely 90 days to exercise these options. Which makes the employees to buy these options at the same price which was set when the stocks were granted. Minimal benefits from the vested stocks are than followed by long bills demanding tax payments on the value of the used options.
This problem is especially grave for the employees of private companies. To explain, people from the public companies have more ways to exercise their stock options, i-e they can sell some of the shares to pay the taxes and buy the remaining shares whereas the scenario is different in the private firms where the employees are left with almost no options except to beg for the company’s mercy that it will buy back shares or permit their selling in a secondary market or they have to pay the amount not only to the startups for share exercising but to IRS as well.
Now you know, how praiseworthy Pinterest’s initiative is.
Don’t forget to share your insights on the subject. Your views are important to us.