Zynga CEO Wants Employees to Give Back Their Stock Before IPO

By Stephanie Rabiner, Esq. on November 21, 2011 | Last updated on March 21, 2019

Things should be looking up for Zynga, the tech company responsible for FarmVille-laden Facebook walls everywhere. After about two years of planning, the company has official plans to go public just after Thanksgiving.

But instead of focusing on the IPO itself, the media is focusing on Zynga's pre-IPO preparations. It turns out that CEO Mark Pincus demanded that a number of employees return their unvested Zynga stock. Those who refused would face termination.

Some think Zynga might have earned itself a lawsuit or two.

The entire story begins when Zynga was just a lowly start-up. Instead of high salaries, the company gave out Zynga stock. But it seems as though Pincus and other executives believe they may have given out too much.

They were afraid that early, and perhaps unworthy, employees would experience a big windfall once the company went public, reports the Wall Street Journal. So they made a list of employees whose jobs may not justify a high payout.

Then they asked them to return some of their soon-to-be-vested Zynga stock.

In an e-mail sent to employees, CEO Pincus suggests that the Journal misinterpreted his actions. He did it in support of his ideal meritocracy. But what about the employees?

Demanding--with threat of termination--that an employee return earned wages can cause all sorts of problems. There are wage and hour issues, as well as potential breach of contract. And when word gets out, it'll be difficult to keep and attract top-quality talent.

So perhaps we can learn a little something from the Zynga stock debacle--if you work for a start-up, plan for the day the company goes public. And urge founders not to give out too much stock.

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