Oren Barzilai is the CEO and Founder of EquityBee, the employee stock options exercising solution.
For CEOs, letting go of employees is always one of the most difficult parts of the job. It is all the harder when layoffs are the result of external circumstances over which companies have no control, like the current global health crisis. As a result of the shrinking economy, many companies have had to make very difficult staffing reduction decisions.
The transparency and compassion with which they make these decisions and communicate them to their workforces says a lot about the spirit and heart of these companies. So, too, does their treatment of departing employees, especially regarding the benefit that most closely links staff with their (former) companies: equity. Equity transforms employees into shareholders, alumni into owners. And, in the case of a major exit, equity can create enormous wealth for hardworking staff who helped build a company from the bottom up, even if they had to leave prematurely.
Two companies in particular have made recent announcements that demonstrate generous equity policies that strengthen staff relationships and the companies themselves: AirBnB and Carta. AirBnB is laying of 1,900 employees, or about 25% of its staff. In addition to other thoughtful departure benefits, AirBnB has removed its one-year cliff on equity, so all employees, regardless of tenure, have the opportunity to exercise their options. Equity Management Solutions company Carta laid off 161 employees, which is about 16% of its staff. Carta has likewise removed its one-year cliff, and extended its post termination expiration period (how long employees have to exercise their options after leaving the company) to one year from dismissal.
The language both CEOs used in their announcements is telling. AirBnB CEO Brian Chesky said, “Everyone departing, regardless of how long they have been here, is a shareholder.” Carta CEO Henry Ward said, “You joined Carta to create owners and to become one. Everyone affected today will be an owner of Carta.”
While both CEOs emphasized how much they value their staff and hate to see any of them go, it’s their equity policies that put this sentiment into action. Both are unequivocally giving their employees the chance to take ownership over their work and to reap the benefits even after they move on from the company. This demonstrates smart, savvy, honest leadership that addresses practical and emotional needs of employees in hard times, and expresses optimism in the future of their companies as well. These moves say: This company will recover and flourish again, your piece is worth something and will be worth even more in the future.
If employees are looking for great stock options success stories, they should look at the recent Intel acquisition of Moovit for $900M. EquityBee helped some of Moovit employees to exercise their stock options. As a reference, some of these not very senior employees saw gains of up to 10x their exercising price, while the investors who supported them did over 150% on their investment And those who didn’t exercise their options unfortunately saw nothing. Exercising equity options at the right company can become a life changing event.
CEOs should take a close look at equity policies as part of their severance and layoff packages. Layoffs will always be hard, but equity is a way to give back in a long-term, serious way to employees who helped build great companies, and an even better way to keep close those staff who companies would truly rather not lose.
Employees, for whom the layoffs are all the more personal, real, and pressingly critical, should do everything they can to take advantage of the silver lining that is advantageous equity opportunities. Being laid off stings and is scary, but if staff believe in the company they are departing, they have the chance to invest and own a piece of it in an intrinsic, invaluable way.