Skype fired a bunch of execs before the $8.5 billion Microsoft acquisition closed, and they claimed it was to reduce their payout. We spoke to Skype investors who said that was a bunch of crap, and that the reason they were fired is simply relatively-new CEO Tony Bates choosing who he does and doesn’t want to work with, as incoming CEOs are wont to do.
Probably both, it turns out.
It makes sense that a new CEO would “clean house” and fire execs he doesn’t like. However, BusinessWeek reports that Skype’s stock option plan includes a highly unusual provision that employees weren’t told about and that prevents them from buying their vested stock options.
Here’s how it works: the interesting and potentially lucrative part of working at a startup isn’t the salary but the stock options, that typically vest over four years, and can give you a huge cash-out if the company ends up being acquired for multiples of its valuation, as happened with Skype. If you leave a company with vested shares, you can buy them so that if and when the company is sold you get shares.
However, Skype’s stock options contract says that if you leave your vested options become worthless.
It doesn’t seem to be technically illegal, and indeed the angry Skype execs admit they signed the contract, but it is highly, highly unusual. One of the fired Skype execs, Yee Lee, said that he signed the options plan because it looked standard to him, and if he had known it included this provision he would never have signed. Options plans in startupland are pretty standardized and most employees don’t generally lawyer up to read their contracts.
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