What about the people who got paid equity for the past few years of work and now might see all of their equity intentionally vaporized? They essentially got cheated into working for a much lower compensation than they were promised.
I get that funny money startup equity evaporates all the time, but usually the board doesn’t deliberately send the equity to zero. Paying someone in an asset you’re intentionally going to intentionally devalue seems like fraud in spirit if not in law.
There is probably a lawsuit here, I would not disagree, but I don't think the board will have too much trouble arguing that they didn't intentionally send the equity to zero. I certainly haven't seen any of them state that that was their intention here. But the counter argument that theyshould have known that their actions would result in that outcome may be a strong one.
But I think it is probably sufficient to point to the language in the contracts granting illiquid equity instruments that explicitly say that the grantee should not have any expectation of a return.
But I think this is an actual problem with the legal structure of how our industry is financed! But it's not clear to me what a good solution would even be. Without the ability to compensate people with lottery tickets, it would just be even more irrational for anyone to work anywhere besides the big public companies with liquid stock. And that would be a real shame.
Equity has value because it is a share of future profits. If the board comes out and says they never intend to make a profit and will fire any CEO who tries…
A for profit company can simply be the vehicle required to take investments that the non profit was forbidden. I doubt the non-profit parent company board ever intended the sub to be a runaway profit maker and anyone going to work for a sub of a non-profit would probably be aware that the potential there was capped compared to traditional for profit corps.
I say this as someone with 20 years of Mozilla employment, the first couple in the non profit Mozilla Foundation and then about 18 years in the taxable subsidiary. The sub is technically taxable, so "for profit" but it was never created to make people rich, but rather to allow Mozilla to reap some profits and grow it size and influence, which it did, reaching about 30% browser market share.
The structures were similar but likely different in material ways, as there was zero equity at MoCo, nevertheless, if you go to work for an arm of a non-profit, expecting to get rich, you're probably not reading the fine print carefully enough.
> anyone going to work for a sub of a non-profit would probably be aware that the potential there was capped compared to traditional for profit corps
I think this is where this all went off the rails. It's very clear that a huge percentage of the staff (I think the last numbers I saw was that over 85% of the staff had signed the letter urging the board to resign) were hired with incredibly big compensation packages, predicated on the giant equity valuation. It is not surprising that those people did not turn out to be there due to being big believers in the mission of the non-profit, or that they expected those compensation packages to be real.
The board would counter that that equity was for a stake in a non-profit open source research company and the board was simply steering the ship back towards those goals.
I get that funny money startup equity evaporates all the time, but usually the board doesn’t deliberately send the equity to zero. Paying someone in an asset you’re intentionally going to intentionally devalue seems like fraud in spirit if not in law.