"Vesting over what period, you say?"

Over the past way-too-many years I’ve had occasion to interview
north of 250 individuals for dozens of positions at both startups and
large companies on both sides of the border.  Having spent my teething
years (professionally) in the maelstrom of Silicon Valley I have come
to be able to recognize many different character types and motivational
fulcrums when it comes to tech industry employees in marketing,
engineering, business development, and customer support.

Based on that experience I am rather unsurprised but still a little
disheartened to hear thru the grapevine that Thursday’s $38M+ acquisition of Verrus
by a UK-based company netted big wins for the company’s management
team, but sweet bubkus for their employees.  This is because Verrus did
not widely incent their employees with stock options. Stock options may be the oxygen coursing through the bloodstream of Silicon Valley.  But up here?  They’re an afterthought.

Down South, when companies are successful and are acquired or
achieve IPO (I still remember the nineties, yes) they very often create
windfalls for their employees.  As an example, when I worked at Cisco
one of my co-workers, a Product Manager who had been with the company
for about 10 years, was vesting stock at the rate of about ~$210,000.00
per month.

This is a gross exception to the rule, but is a fun example.  He was
a bit of a hockey nut, and once turned to me and asked whether I wanted
to help him build a rink.  I said “in your back yard?” and he replied
“No, like a two-rink complex as a business.”  These windfalls buy some
degree of freedom, for sure, but more often than not are a few hundred
thousand dollars in total.  Don’t call the architect just yet.

But a good exit of a few hundred grand is enough to leverage that
hard-working employee into a more senior role at another startup, as
often happens; or for a talented coder it buys a few years of freedom
to pursue their own startup idea without the pressure of drawing a
salary.  More often still the windfall buys the cushion so that
employees can take riskier jobs with bigger upsides, cavalierly walk
from companies that they are convinced will ultimately fail, or help
smart folks make major life-changes and start small businesses in
industries not reachable via the http protocol.

In many ways stock options, or rather the wealth they create, can be seen as antibodies to failure.

When I went to Cisco I failed to negotiate hard on my stock options
(or rather, I did not negotiate at all).  This is a shame because
during 15 months of working at Cisco my initial stock option grant grew
in value from $12 to $84.  But I came by my ignorance honestly — I was
after all from Vancouver, where I had barely heard of stock options,
and where I knew not a single person who had materially benefited from
them.

You can’t walk fifty feet in Palo Alto without tripping over someone
who made a fortune on their PayPal stock options — in those days
everyone from the caterer on up was granted them, and even commercial
landlords took options on top of astronomical office rental fees. 
There is a culture that recognizes their risk and upside and there are
plenty of examples of folks who’ve done well by them.

I have been frustrated in hiring folks in Silicon Valley by savvy
employees who negotiated stubbornly against their stock option
packages, fretted about terms within the option grant such as
accelerated vesting and cliffs, and who actually in a few cases pushed
for lower salaries or bonuses in favour of more options.

Conversely, I have not once had an interviewee in Vancouver haggle
over stock options.  In fact very few folks have an even remotely
strong understanding of what they represent and how they work.  In the
past it’s occasionally even been difficult to lure people to full-time
employee status versus working as a contractor.

Vancouverites in the tech industry and Canadians in general, in my experience, still have a fairly Neo-Marxist view
of the employee – employer relationship:  you sell me your labour for
the negotiated price and, where surplus value is created, this is
absorbed not by the company as a group but instead by its managers and
investors.  The labour is unsually neither ineffectual nor is it
inspired, and the employee has no fundamental interest in the company’s
success beyond remaining employed because the company continues to
exist.  If it fails nothing is lost by the employee, except for a few
weeks of rest before they move on to sell their labour to the next
buyer.

For a while when I started working with startups locally around
2004-2005 I used to offer equity (mostly as stock options) because I am
a nice guy and because I understood how equity has always motivated me
as a worker and as an entrepreneur.  Almost universally I found that
these options were unappreciated and indeed oftentimes misunderstood. 
More recently, recognizing that my prospective hires are more compelled
by salary and flexibility (we all love the Vancouver lifestyle … many
of us too much so) than by upside I have ceased to offer stock options
at all.

After all, since those stock options are ultimately dilutive
to my own benefit as a partial owner of the business in the event of a
successful exit, I have grown much more stingy with them.   Why incur
the paperwork hassle and decrement my own long-term financial benefit
for someone who ascribes no real value to these options?

The mercenary culture of workers on the Vancouver tech scene —
likely a product of some combination of the province’s dominant
organized labour mentality, of the very fly-by-nite startups that
emerged here in the mid-late-nineties, and of the relatively pithy (and
thus very unstable) financing amounts received by practically every
company in technology — is a real problem and an obstacle for success
to these companies.  Employees who are materially invested in a
company’s growth are necessarily harder working, more committed, and
more thoughtful employees.  Those who aren’t are likely to flit away at
the first whiff of trouble (and believe me, startups here and in
general encounter plenty) or for dumb reasons like a few hundred more
dollars in their pocket monthly from another job.

So, it may be a chicken and an egg thing.  Employers do not have an
obligation to offer stock options.  Qualified candidates will benefit
from

http://www.ianbell.com/2010/03/05/on-stock-options/