When a Company Lies

We learned this week in regards to the sexual abuse scandal at Penn State University that a number of people acted in a manner that, while legal, was probably wholly immoral.

There are many more stories like this.

Today’s tale is about the people who brought you Mafia Wars , FarmVille, and Words With Friends– a small start-up whose market value has swelled to gazillions of dollars.

We’re talking about zynga, an enterprise with 3000+ employees headquartered in San Francisco.

zynga CEO Mark Pincus (Jim Wilson/The New York Times)

The company made a deal with the folks who joined early- take a little less cash now, and we’ll give you an equity stake in the operation (stock options).

Once the rage in the dot-com boom of the late 90s, these options made many Silicon Valley early believers millionaires. in recent times, as IPO’s have begun once again to bubble, this benefit was again offered as part of newbies’ compensation packages.

In 2010, as zynga CEO Mark Pincus began doing the work to take his company public, he and his minions decided the company had been too nice, behaved too generously. They determined they gave out too many options to the people who were there from Day One.

The solution? They told some of these employees the following; give us some of your options back, or you’re fired.

Pincus has said in so many words, “I want more money; I want you to have less. You helped me when I needed you most, and now, I’m going to screw you.”

What Pincus is doing is legal. If the shares he is taking back are unvested, they have no value. Vested shares of a company can be sold. There is nothing illegal about telling an employee they are making too much money, and that they must accept smaller compensation or find work elsewhere.

Just because a conference room full of attorneys says something is legal, doesn’t make it immoral.

When Skype was recently purchased by Microsoft, Skype sacked a number of executives who would have cashed in handsomely on the merger. This practice is not only not new, but growing in popularity.

So here we go again- the people doing the work, the people who helped innovate, the people who took a chance on a dream and toiled mightily get a chunk of the payoff yanked out from under them. The 1% steals again from the 99%.

I’ll try to be less populist and more capitalist here: let’s assume for the sake of argument that these particular employees, even after giving back a percentage of their options, still stand to make millions when the IPO is complete. It doesn’t matter. Zynga made a promise, and they are reneging to line the pockets of the people at the top.

Are we now to deduce that any agreement made between you an an employer is not really an agreement at all? Is your compensation package at work just a suggestion, malleable and negotiable whenever the boss tires of it? Are you still inclined to sacrifice your personal life and work a hundred hours a week for a group of people who, at endgame, might move the goalposts and change the rules to suit their spreadsheet outcomes?

I am about to launch my own startup, Universe willing, soon. What lies will the money people make me tell? What deal with the devil will I have to make?

The Roman politician Cicero (106BC-43BC) once said The strictest law often causes the most serious wrong.

He had it figured out way back then.

The powerful are crushing the meek, like they’ve always tried to do, but the modern tools employed for the practice are so much more efficient against the folks who helped build these current (and in the case of zynga, future) empires.

Mr. Pincus, you have some explaining to do. I’m listening.

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