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Do I have a right to shares after turning them down?
January 20, 2013 12:21 PM   Subscribe

I accepted a higher salary in lieu of shares. Found of first week on the job the company is in talks to be sold. Am I entitled to demand shares?

In October, I accepted a job offer with a small family-run company. During the salary negotiation, I was told that my salary demands could be met, but only if I gave up the right to have shares in the company from the beginning. I was told we could wait a few months and see how things were going, then re-negotiate shares later.

I started the job in November and learned during the first week that the company is in talks with a vary large company about acquisition. It's looking like this will happen very soon, possibly by the end of this month. Had I known this, it would have influenced my negotiations. Do I have any recourse?
posted by DuckGirl to Work & Money (21 answers total) 5 users marked this as a favorite
 
Probably not, but see a lawyer.
posted by smorange at 12:23 PM on January 20, 2013 [5 favorites]


You might try asking if you can buy shares at this point.

Trying to sue them for shares now that it seems like a safe bet seems unfair, because you'd get the shares with less risk than the people who had shares earlier.

Shares can go down in value.
posted by sninctown at 12:35 PM on January 20, 2013


I'm not sure what recourse you could have? You're not entitled to a job there, nor to any particular compensation, nor to proprietary business information when you're applying for a job.
posted by Justinian at 12:47 PM on January 20, 2013 [15 favorites]


If this is related to your previous question, probably not. They very specifically asked you to take stock options (and working remotely) in lieu of salary and you very specifically wanted salary. When you think about it, though, how (and why) would a business renegotiate all salaries to give the best with-hindsight advantage to each employee? Starting immediately, you'd reimburse all additional salary monies, and then they'd redo the books starting with your (and everyone's) first day? That would be an accounting nightmare. Very unlikely to happen.
posted by Houstonian at 12:56 PM on January 20, 2013


It doesn't seem fair to me.
posted by michellenoel at 12:57 PM on January 20, 2013


I don't suppose it would hurt to ask, depending on company culture. But, you found out in November and now you are sniffing around for a bit of ownership, so it could look greedy and not endear you to management. It sort of looks like you don't understand that the rewards of stock ownership are supposed to go to those who also bear the risk.

Also, if they are close to a finished deal it's possible that they can't expand ownership in any way by issuing more shares.

And if the owners are willing to sell you shares, they probably would sell you at a price that incorporates the value of being acquired by the larger firm - so the net effect to you would be the same. If the larger company is a publicly traded company that you would like to own shares of, you could just take a portion of your cash earnings and purchase stock on the open market. If it's not a publicly traded company, you might want to ask about future compensation in the form of stock ownership.
posted by stowaway at 12:57 PM on January 20, 2013 [1 favorite]


No-one can give a better answer than Smorange here based on the details you've provided. TALK TO A LAWYER!!!
posted by Another Fine Product From The Nonsense Factory at 1:05 PM on January 20, 2013


IANAL, but stowaway has a point, they may not even be able to give you shares anymore, and if they do it will be based off current negotiations most likely, so your chance at getting any real profit on them is very small.

I was in talks about joining a relatively well-known small company during major acquisition-shopping a couple years ago and this was the case then, anyways. They weren't going to offer new shares in the middle of negotiations (affects outstanding shares, etc) and if I did get them it would be based on acquisition details (if one went through), so it was basically Too Late to get in on anything.
posted by wildcrdj at 1:11 PM on January 20, 2013


Also - putting this together with your last question - I think you made the best decision you possibly could with the information you had. I would have interpreted offers of stock-based compensation and remote work as cheaping out on salary (especially coming from a "small, family-run company"). But it seems possible they were trying to get you the best deal they could before new owners take control, and you didn't pick up on what they were putting down. It happens.

Maybe the classy way to bring it up is to note that it is a few months later, ownership is changing, maybe it's time to revisit the stock question as previously discussed?
posted by stowaway at 1:30 PM on January 20, 2013


You might try asking if you can buy shares at this point.

Be extremely cautious doing this; if knowledge of the buyout is not public, it is insider trading, and illegal in most countries, even if the odds of getting caught are low.
posted by smoke at 1:44 PM on January 20, 2013


i agree with those saying talk to your lawyer. also, if you do approach your employers please don't "demand" anything. you made a decision you now regret but that is how it works in the real world. there is no entitlement here.
posted by wildflower at 2:01 PM on January 20, 2013


Do you have enough money to pay them back? If not, why would they pay you twice?
posted by Ironmouth at 2:04 PM on January 20, 2013 [2 favorites]


IAAL, IANYL, TINLA.

A very similar question to yours would be, "A group of my coworkers once asked me to join a lottery pool, but I never did. Last week, they hit the jackpot. Had I known this, it would have affected my decision. Do I have any recourse?"

I think that "no" is the answer to that question. I don't know what recourse you could possibly have. This appears to be the same job as this question. You and the employer both negotiated on a salary that you obviously found acceptable since you ending up taking the job. Now that you've accepted the offer, you can't say that your compensation is unacceptable because of the likely purchase deal. Do you think they should have told you about the likely purchase deal before you took the job? Why on earth would they share such confidential business information during a job interview or salary negotiations? There's not a claim here that I can imagine.

I note that you got this advice in the last question: "Never EVER think of stock options as a substitute for salary. NEVER. They are pure gravy typically served over pie-in-the-sky." In fact, the majority commenters gave that advice. You decided to take that advice, probably because you though that the risk of stock options outweighed the possible benefit. Not necessarily bad advice to follow. Maybe at the next job, you take the stock option and it ends up being worthless. It's a gamble each time.

Take this comment as you will. As you are now learning, free advice is seldom cheap.
posted by Tanizaki at 2:10 PM on January 20, 2013 [10 favorites]


Talking to a lawyer is going to be a waste of $300/hr. you were offered shares and turned them down. You have no more right to them than I have to buy APPL for $100 because, "well, if I knew how much it'd go up, I would have bought it then!"
posted by tylerkaraszewski at 2:52 PM on January 20, 2013 [5 favorites]


"I bet the wrong way. Can I bet the other way now that I have the benefit of hindsight?"

Yes, you can ask to buy shares, but why would your employer want to sell you them after you said "I really don't want shares?" and took cash instead of stock?
posted by zippy at 4:04 PM on January 20, 2013


I agree that once you took the salary you don't get a do-over for the shares. There is no way the company could disclose to you during a salary negotiation that they were selling the company - this is very privileged and sensitive information and at that point you aren't even an employee.

However if it's any consolation even if you had taken the shares they would most likely (it depends on you company and location) not have vested since you only joined in November. For example in California a typical share grant might not vest anything until 12 months after you start (at which point 25% of the grant vests - this is called a 12-month cliff), thereafter 1/48 of the grant vests each month. This means you have no rights to any of the shares until you have worked at least a year and it takes 4 years to have rights to the whole grant.

This means any gain to you had you taken the shares would completely depend upon the terms of the deal with the acquiring company regarding unvested employee stock. There's a good chance that should you make the move to the new company then your unvested stock would simply be swapped for unvested stock of the new company and probably vesting would be reset to something different (it really depends on the deal - vesting could be reset to your start date with the new company). In any case you might still get unvested stock in the new company after the acquisition as it might be their policy to give options to everybody.

Bottom line make yourself the most vital employee you can - not everybody gets asked to join the new company in these types of deal, stock or no stock.
posted by Long Way To Go at 4:32 PM on January 20, 2013


(IANAL)

I accepted a higher salary in lieu of shares.

You did not want shares. Based on the information you had at the time, you chose money now over money later. For this reason, I don't think anyone's going to hook you up. Basically what you said to the company was "shares are cool, but I want cash".

Found of first week on the job the company is in talks to be sold... Had I known this, it would have influenced my negotiations. Do I have any recourse?

The other side of this is that it's not normal practice to disclose Secret Company Information to perspective employees. Until you agree to act in the best interests of the company (employment contract), you are assumed to act in the best interests of yourself.

Selling companies is the kind of thing that's usually kept quiet – sometimes even from staff. It can be a Big Deal. Informally, it's not the kind of thing one discusses. Formally, there may be non-disclosure agreements as part of the company sale process.

Point being, if someone from the company were to tell a prospective employee (who is not yet acting in the company's best interest) about a potential sale, and affect that sale, the representative of the company may be liable, for telling private information to someone outside of a legal agreement.

You can talk to a lawyer if it makes you feel better, but unless you have something in writing that promises you shares – rather than a 'we'll revisit this at a later time' – I don't see what leg you have to stand on.

Probably best to let this one go. You went the low-risk route, and you've already received your reward.
posted by nickrussell at 6:32 PM on January 20, 2013 [1 favorite]


You made your choice, you placed your bet, you don't get to do it over just because you don't like the way the dice fell.

However, after the company is sold you might care to try negotiating a salary increase with the new owners.
posted by flabdablet at 2:40 AM on January 21, 2013 [1 favorite]


Is there anything stopping you from buying shares seperately with your own money on the market prior to the acquisition? You could also buy them in another trusted friend or family members name.

Keep in mind that share prices can often be overvalued prior to acquisitions. Whether you're looking for a quick gain or a midterm gain with this company, you'll need to do your research eitherway.
posted by Under the Sea at 5:08 PM on January 21, 2013


Is there anything stopping you from buying shares seperately with your own money on the market prior to the acquisition? You could also buy them in another trusted friend or family members name.

Yes, it is illegal.
posted by smoke at 5:31 PM on January 21, 2013


Thanks, all. I think the best thing for me to do is let this go; it's true I was given the option and made the best choice for myself at the time I was hired. I had a conversation with my boss about a month ago and he expressed to me that while he knew the negotiations were coming, he didn't think they'd pan out in a way that was profitable enough for him to agree to sell so quickly. So, regardless of if it matters or not, I do think his intentions were to allow me the option to purchase shares before the company sold but now it's being sold more quickly than he expected. If something happens and it doesn't go through before mid-month next, I might check in with him about the original offer for later negotiation as I think that would have been enough time for him to assess my value as an employee.
posted by DuckGirl at 7:40 PM on January 21, 2013


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