Hello everyone! I'm working on a document of FAQs to share with current/future employees that helps them understand the details around their equity compensation. In your experience, what questions have employees asked you to better understand their equity? What questions/best practices would you include in an FAQ doc? Thanks in advance for anything that you're willing to share!
In my experience employees typically want a practical guide to what the hard-to-read legalese in their agreements actually mean to them - FAQs about what they need to do to exercise their stock options for example. Or how their strike price was determined, or if in the situation they are no longer providing services to the company; how does that affect their holdings, how long after their separation date do they have to exercise their vested portion(s) of their grants, etc.
Sometimes the law firm who helped your company establish its ESOP has an already prepared FAQ document that could help you with putting together your version. But if not, a starting point could be reading thru your company's ESOP and related issuance agreements, and breaking-down the terms that you would want to know if you were in their shoes into bite-size easy-to-read language.
I would also make sure to have your company's legal counsel review the doc to "approve" it before sharing with employees.
Great points. Appreciate the response @Mate I. Zgombic. Does anyone know of any helpful videos that explain some of these terms? Just thinking that some sort of content outside of text could be helpful as well.
Hi Edwin! You should share Carta's Equity 101 course with your employees. It's covers the basics of equity ownership for employees in depth.
Our employees have asked the following about our ESOP:
1) What happens if the company is sold? [I explain acceleration of vesting]
2) Can I exercise my options as they vest or do I need to wait until they all vest?
3) Will there be the option to purchase more options? Will there be another opportunity to get more equity in the company at a later date?
4) They also have really wanted to understand the vesting schedule and how it works. Since we have a one year cliff and are a brand new start-up, I have not seen how Carta works/notifies but I look forward to learning.
I hope this helps.
Hi Edwin - I totally agree with @Mate I. Zgombic and @Nelsie Birch re: the FAQs brought up, and I'd say our number 1 question is "what happens if/when the company is sold?" Far and away, the employees want to know how they're eventually going to cash out, which is difficult to answer. You have to be careful not to overpromise or misspeak here.
The number 2 most common question we get is probably re: taxes. We (a law firm) provide cursory info on the differences between ISOs and NSOs and taxation, but it's a slippery slope if you're not a tax professional (e.g., when AMT comes into play for ISOs), so we point to a lot of Carta's FAQs/articles on that and recommend seeking professional assistance.
After that, it mostly comes down to logistics (how to exercise, when to exercise, post-termination exercise window, etc.). We also get a good number of questions about liquidity ("Can I sell my exercised options?").
Re: video resources, to @Nigeria Talley's point, Carta's Equity 101 is great, but I will say I have a lot of clients' employees that are initially hesitant to explore Carta's platform for some reason. They often prefer links to YouTube videos to start (and then turn to Carta's guides after they get the initial exposure), and there are a ton of good YT videos out there. When gathering YouTube videos, I would just caution that (1) you should re-iterate that you are not endorsing the advice or views of any particular video; (2) you should pre-screen them to get a feel for the tone of them (some that are geared toward employees can be strangely negative/adversarial towards the company); and (3) you want to make sure that the video is intended for options in the appropriate type of company (i.e., private vs. public).
Thank you all for the insight @Nelsie Birch @Nigeria Talley and @Teresa-Judith Chartrand. Will definitely add some talking points around what happens if the company is sold. I think that's a great point to highlight that for employees.
Appreciate the thoughtful answer around the language, @Teresa-Judith Chartrand. Always so important to consider. Also, love your takes on the video portion. I'll start diving into youtube to see if I can find anything to compliment the Carta resources.
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