The Zynga Ultimatum: Return Company Stock or you’re Fired

by Matt Klassen on November 11, 2011

Attracted by the viral spread of the insufferable Bart Simpson’s true-to-life comic strip titled “Angry Dad”—The Simpsons, episode 1318, “I am Furious (Yellow)”—a fictional Internet start-up company looks to hire Bart but runs into a common problem among such companies, no capital. As an alternative the CEO, Todd Linux, offers Bart a seemingly attractive offer, stock in lieu of salary. While Bart learns a valuable lesson about the value of stock when the company goes bankrupt, the joke isn’t too far off from reality.

Attracting top notch talent to an Internet start-up can be difficult, and for years companies responded to this problem by supplementing staff income with compensatory stock in the company. If the company flops, well they didn’t waste their dwindling start-up resources on staffing and if the company becomes a success, well everyone wins.

It’s a strategy that popular social gaming company Zynga employed with zeal, allowing it to attract the talent needed to create such addictive games as FarmVille, CityVille and Mafia Wars. But what happens when the company becomes a meteoric success, starts to feel that annoying giver’s remorse, and now wants that valuable stock back? It threatens to fire everyone of course.

There is a slightly humorous rags-to-riches story that came out of Google several years ago, just as the company became a success. Early on the search engine giant supplemented staff income with stock, and when the company went public there was the well-publicized story of a chef, who had been with the company since the beginning, walking away with over $20 million in Google shares.

It’s a problem that Zynga Inc. CEO Mark Pincus didn’t even consider when he opted to give his top talent shares in the company instead of paying them their market value salaries, but its one that he clearly now regrets. Pincus has seen his gaming company grow from a lowly Internet start-up into a multi-billion dollar franchise, and as the company prepares to go public in the weeks to come, he’s developed, as the WSJ calls it, “giver’s remorse.”

The WSJ report states that Pincus and his executive board met last year to discuss ways of divesting its employees of the stock they were given in an attempt to avoid the “Google chef” debacle. It was decided that the company would target employees who had stocks that didn’t equate to their role in the company and offer them an ultimatum, return the stock or lose your job.

While many of us may be disgusted by such an ultimatum, especially as it was Pincus who opted to use stocks as a way of attracting talent in all corners of the company, the company’s executives justify their actions by saying it is all in the best interest of the company, particularly as it reportedly plans to go public after Thanksgiving.

Although some of the employees have taken legal action to protect their company shares and their jobs, my advice would be the same offered to Bart Simpson upon his realization that his stocks were worthless, try to steal as much copper wire from the walls as you can.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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