My spouse worked 13 years at what was a startup-with-traction when she started there. Last year, they were bought out (public-to-private by a hedge fund). A week later, she was sent packing, along with a lot of the "old-timers". That's not even getting out of options (although there was some of that). That's a simple purge. Purges happen.
When you ask employees to commit to ten years to get anything equity-wise, you're exposing them to tremendous risk. You're hampering their careers. You're exposing them to the risk that you'll take a down round three years down the road and their options will get diluted into near-worthlessness. You're exposing them to the risk that your business will be wiped out by a competitor, or put on the road to obsolescence by technical advances and market trends.
For a 50% bump? Screw that.
ps -- a16z funded a company that, as an A round, refused to disclose outstanding shares to value my option grant and was already on the brute force 15% of comp is bonus that you don't get if you aren't there in early April every year retention ("bonus") plan. It may be unjustified, but with some other stories I'm not a liberty to disclose, they seem very employee unfriendly.
On a separate note, it's the same underlying principle behind why people are wrong when they talk about the DAO's contract meaning that the hacker was allowed to steal. No judge is going to enforce a contract clause that allows you to steal. And if you were performing well but were fired right before your cliff, a judge can find that your employers were acting in bad faith, etc. The underlying principle is that contracts are subject to reasonable interpretations by judges.
Your other point about getting yourself fired makes no sense (you're ignoring the cliff, then month to month vesting schedule that is typical).
The exercise period is usually 90 days, if you leave a company.
What happens a lot is there is no liquidation event for years meaning that an employee with shares needs to make a decision fast to convert or lose their shares (which they earned) and that cost $$$. I've seen time and time again, where people get locked in because they need to drop 4-6 figures to exercise their shares.
> If the employee loses the stock when he's fired early, then the company has a huge incentive in firing him a day before he vests, and thus he should regard the vesting compensation as nonexistent.
I've seen this happen a few times in SV where employees are fired 1-2 weeks before their vesting period. Sad when it happens. Not saying that all times it is because of the cliff, but people talk and are aware of companies that have done this.
Not if they want to keep a reputation in the community of good developers, where demand far exceeds supply.
Which probably comes down to the position.
If the employee loses the stock when he's fired early, then the company has a huge incentive in firing him a day before he vests, and thus he should regard the vesting compensation as nonexistent.
If the employee retains the stock when he's fired early, then he can just get himself fired to ignore the vesting period, making the vesting pointless.
It seems that vesting can only work if the employee is so essential that the company would never fire him because the company would then be highly likely to fail, which should only apply for founders in a functional company.