It not just looks bad. It IS bad. Arbitrarily deciding who does and who does not deserve to vest is ridiculous. If the person is not performing, let them go. They are an at-will employee.
By negotiating them to keep their job by giving stock options back, they are simply trying to keep that employee at a cheaper rate. The employees must be performing effectively if they want to keep them. The notion that these people are doing nothing and still employed by Zynga is disingenuous.
The naivete (or CEO apologism) around here is astounding. I understand keeping an unbalanced and impassionate point of view but at some point if it sounds like a duck and looks like a duck it IS a duck.
I would argue that they were promised something that the company is failing to deliver and it is thus engaging in fraud, but I am not a lawyer thus I am unsure how to make this into an effective legal argument.
> [...] maximizing value for other shareholders in the company. But at what price?
If employers are worried about a serious disconnect between performance over time and equity payout, they might cap the valuation of an equity stake by taking back call options with high strike valuations. They could then give more shares or extinguish calls in response to performance. But this would reduce the apparent value of the up-front stock grant, and thus the employee's incentive to come on board.
I don't know enough to support firm conclusions, but this doesn't sound like behavior I'd hope to emulate.
I do not understand why you need at-will employment. If an employee is behaving badly or underperforming, then you have an excuse to fire them. If you got rid of at-will employment, you can still fire bad employees. Abolishing at-will employment will just make it hard for companies to screw over employees unfairly. This is not a bad thing IMO.
Of course, the reverse is true also. Employees can leave at any time for any reason as well.
Overall, at-will employment keeps companies and labor markets flexible.
Then you make those positions redundant (or in british english terminology, you 'let them go'). It's perfectly legal (in EU which doesn't have this at-will stuff) to say "We no longer need a Django programmer, since we're moving to Ruby on Rails now, we know you're a great django programmer, but we're letting you go". You don't need 'at-will employment' to have this advantage. There are some limitations, like you actually have to make the position redundent, you can't hire your brother as a django developer the next day. But that's the point, it balances out the power.
It seems the company does not believe this to be the case. Possibly they are in a better position too know. Or they are beyond the phase where top talent is required to de-risk the business. Very calculating either way.
[I agree with all the points above, but wanted to add in the fact that early employees are rewarded for risk as well as production. Esp if they signed on for below market salaries, with stock calculated as deferred compensation.]
You said it.
Where this becomes very distasteful is if these aren't isolated incidents of very underperforming employees but Zynga using its leverage to negotiate compensation down arbitrarily. Even if a developer is performing just as well as expected upon hiring, it is unlikely that they could get a guaranteed offer of $1M from another company, and so Zynga could easily force a renegotiation of an unvested grant worth $5M down to $1M. This would be reprehensible - even if that employee isn't really adding $5M worth of value, if they are performing up to the expectations that were set when they were hired then the agreement should be honored - getting a chance of a huge upside is one of the reasons employees take lower salaries and work longer hours at startups in the first place. A company that abused its bargaining position like this should not expect to be able to hire good employees in the future.
There isn't really enough information in the article to know that this latter case is what's happening. There are scenarios in which this behavior is very malicious, and scenarios in which it's relatively reasonable. It all hinges on how the employees in question were performing and how common this tactic is. I don't think anybody here knows those details, so we should really try and avoid the typical internet rush-to-judgement here. I don't know anything about the internals of Zynga, but I have seen HN get out the pitchforks for other companies when the real story turned out to be much more mundane.