I woke up this morning thinking about startup salaries and how it impacts company culture. As I started drafting this post I started having a mad case of deja vu. After a quick Google search, I discovered an old post on the very subject many years ago.
It’s a bit dated but I think the main points hold up for sure.
The only additional comment I want to add is the importance of fairness and consistency.
At board meetings, directors are asked to approve employee option grants. Management proposes all the grants offered to employees and the board has the opportunity to ask questions, comment, reject or approve. At most board meetings, this is unfortunately not given the attention it deserves. Common symptoms include, rushing the topic at the end of the meeting with a few random questions about confirming the 409a price and how much of the option pool is impacted.
I encourage all founders and investors to treat these employee grants with more respect. More respect for the company, the investors, existing employees, future employees and the impact on culture. If you respect this issue deeply, employee grants could be transparent, there would be consistency to how each employee earns equity, terms would be consistent and so would percentage grants by role.
If the employee option grants are an ad hoc mess, then it likely means the founders and the board didn’t do it’s job fully. And while there might be short term benefit to speed, the long term impact always comes home.