Pinterest recently made a landmark move by giving employees much more time to buy any unexercised stock options.
Startup employees often choose to take stock instead of higher salaries. But if they leave the company before all those options have vested, they traditionally only have a few months — often 90 days — to buy the rest. Pinterest has extended that window to seven years for any employee who’s worked there for at least two years.
This longer window is rare in the startup world and is a huge boon for any Pinterest employee — and could potentially lead other companies to follow suit.
Now Pinterest wants everyone to know exactly why it made such a big, potentially risky decision.
Michael DeAngelo, Pinterest’s head of people, writes that it all came down to wanting to remove employees’ “golden handcuffs.”
The traditional 90 day window forces some employees end up staying at a company longer than they want, he says, because they can’t afford to leave.
“Many companies who face this situation decide not to do anything about it, because they believe ‘locking people in’ is good for business,” DeAngelo writes. “But at Pinterest, we think about things a little differently.”
When employees don’t have to worry about losing all their stock if they leave, they stay at a company for the right reasons. They’re also willing to take bigger, bolder risks.
“If people are worried about getting fired and losing all their stock, they aren’t going to be as willing to make the kind of bets that help a young company like ours succeed,” DeAngelo says.
Finally, he acknowledges that even though Pinterest just made it much easier for people to leave in one of the “most competitive recruiting environments of all time,” people often have real, big important reasons to leave the company, like the opportunity to go back to school, the need to support an ailing family member, or for their own startup. And they shouldn’t be punished for making those decisions.
“Ultimately we hope the new plan gives our team the flexibility to make the right decisions for wherever their lives take them,” DeAngelo writes. “And that it unlocks even more of their passion to help us make Pinterest the kind of historic company that we all know it can be.”
In his post DeAngelo also explained some technical details that might be of interest for people working at startups with their own stock options — basically, if employees choose to take the 7-year windows, their options must be changed from incentive stock options (ISOs) to non-qualified stock options (NSOs), which can be worse from a tax perspective. But it’s still better than not being able to exercise at all.