If equity is compensation, can an employer ever take back compensation?

(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: lawrence@krubner.com, or follow me on Twitter.

This is a very emotional point that comes up when a company pays workers with equity:

Scott’s post genuinely makes me angry. It uses subtle language to imply that employees are inferior individuals who are lucky that the owners of capital deign to share anything with them.

In Scott’s worldview, choosing to leave a company before it has exited is inherently disloyal. Even if they’re paying you under market. Even if you could contribute more value elsewhere.

I wonder if he would accept similar terms:

1. Reduce his salary at a16z to something minimal. (<$100k) 2. He only gets his carry in a company if he invests in every subsequent round. If they ever decline to follow-on, it's clearly a sign of "disloyalty" and they should forfeit all equity. I agree with Adam that it's at least nice to see the owners of capital so nakedly betraying their worldview (diversification is all well and good for them, but employees owe infinite loyalty). I will think long and hard before ever working for a company where Scott is on the board. This part is particularly troubling: > One existing solution to the “dead equity” problem has been — and still can be — to make exceptions where appropriate for certain exiting employees.

It’s essentially an argument for cronyism. The people who most need equity extensions are those unlikely to have the connections and political savvy to get them. I strongly suspect such systems would work to further disadvantaged already disadvantaged groups.

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