Do companies really fire people at week 51 to save some stock?

Hiring is tough and you waste a lot of time onboarding people and getting them to a productive state, firing them just to save some stock after 50 weeks seems a bad idea, not to mention the morale implications.

It absolutely happens. I worked as an early employee at a company for its first 11 months … the founder was the main investor and a serial entrepreneur. He clashed with the CTO from the start and progress stalled … after a major disagreement, he decided he would rather sell the company to a competitor than continue to deal with the CTO. At the 11 month mark we were all told that we were fired, the company was shutting down, and and if we wanted severance, we’d have to sign away our rights to any claims from the sale.

Companies do let people go to avoid granting stock. Banks also do it to stiff employees on their bonus. For startups it’s a forcing function to decide if they want to keep someone. (I’m not saying this is right, just explaining why it happens)

Happened to me.

How do you know that was the reason?

Downvoted for asking a question?

That's fascinating reasoning. It makes sense, but that's the same sort of logic where employers will give hourly employees 39.5 hours a week because if you give them 40 they become "full time". Has that kind of short sighted thinking really invaded the software engineering industry? That's scary.

Why would avoiding paying employees benefits be short-sighted thinking? If anything it was short sighted of the US government to ban increased wages during WWII - leading to employers paying benefits which gums up the labor market.

It's short-sighted because employees are humans, which perform much better when healthy and excited to work. Stingy/hostile employers have high turnover and employees who treat work as a zero or negative sum game.

A good example of this is the This American Life story on NUMMI: https://www.thisamericanlife.org/561/nummi-2015

Toyota took one of GM's worst plants and turned it into one of its best by treating workers with respect. Hearing the workers talk about the transformation stunned me.

Employers are also human, and prone to the fallible traps of responsibility that befall many people managers and executives, including but not limited too:

* not trusting your team to do their work and by extension questioning whether they are working "hard enough" (or dreaming of ways to extract more blood from stones)

* some flavor of impostor syndrome, needing to prove your value by making sweeping changes to the team process even if inheriting a successful team

* not having either the back bone or clout to question status quo, including demoralizing cultural habits such as stack ranking

There is a reason the majority of employers (including managers) are generally bad and the good ones are few and far between - it's human nature.

I'm reminded of Microsoft Japan piloting a 4 day work week and announcing in 2019 that the trial ended up increasing productivity by 40%. They ended up not making the change permanent. One small company in New Zealand - Perpetual Guardian - did the same trial in 2018 and saw the same effect, they made it permanent.

Most companies operate like Microsoft.

Are you suggesting basically every retail chain in America is using a fundamentally broken compensation system?

Yes, because basically every retail chain a) can dump a lot of externalities on society at large, b) is or wants to be publicly traded and evaluated on very short-term metrics, and c) is run by believers in the managerialist ideology that dominates American business culture.

Broken systems product broken systems.

Something I don't see mentioned in the sibling comments is that this can also put the employee in a bad position when they don't like their job but are in the mid to late stages if their first year. You either tough it out the remaining _X_ months or quit and take a huge hit in income because you're leaving before the equity cliff.

I could see that with a 2-5 year cliff but 12 months is not a long time in a job.

I wrote "... when they *don't like their job* but are in the *mid to late stages* ..." so in this case, it'd be 3 to 6 months which isn't a long time to hold a job in general, but it is a long time when you hate your job.

Now they'd have an incentive to let them go in under a quarter, by that logic.

Not sure if that's really their concern here. Companies don't just ditch reasonably well performing employees because they want to avoid compensating them. That would already mean that each time RSUs vest the company would have an incentive to fire.

Sure, and they do. It’s best to avoid that incentive by having stock grants vest frequently and fractionally. It’s essentially treated as salary, it might as well be paid out fractionally at the same frequency as salary so that no perverse incentives exist.

This isn't complicated. If an employee is having a bad first year or the company is performing poorly it incentivizes firing.

Much less so, because productivity is low in the first few months.

Hiring is one of the most time sucking activity, and the whole notion of stocks/RSUs is to make people stay.

Companies sure don't act that way given that people generally need to leave for a raise.