In general, in bankruptcy or "winding up" the unpaid salaries of employees come first, then creditors, and shareholders last. In spite of this general principle, I am sure many of us know of cases where employees worked for months without pay, and vendors or even investors got paid first, from the last dot-com bust.

The post uses the phrase "And paid everyone full compensation plus some extra benefits (like health insurance)" which I interpreted to simply mean that the employees correctly got their salaries and at least some of their benefits (they should receive all salary and benefits before investors get anything), which is often (illegally) not the case.

I googled the case you cited, but it doesn't seem to apply to back pay, but instead applies to the proceeds of a winding up being given to laid-off employees as a "bonus" instead of to the shareholders.

In startups, the issue is often complecated, because the same people are often employees, investors, and company officers, and I think the courts have some sense that anyone working for a startup knew it was risky, and treat those people differently from an employee at a big, well-established corporation.

I thought that shareholders were supposed to be the last to get paid.

Yes, but the managements sole responsibility is to make money for the shareholders. Not for the employees.

Yes, but that wouldn't mean they're expected to murder & steal on behalf of shareholders if opportunity presented itself.

That money is owed to employees by shareholders.

Within the law obviously ;-)

Sorry, that sounded like a left rant. What I meant is 'isn't that outside the law?' The law says debts get paid, then shareholders can split what's left. I believe bankruptcy court is supposed to handle what debts go first. But it shouldn't theoretically make any difference to shareholders what debts go first.

Obviously the trick is to make sure your friends (the employees) get paid first by settling that debt before declaring. I can see how that might be legally troublesome. But it's the vendors, lenders, etc. that should be complaining, not shareholders.

When the employees benefit, the shareholders often do as well.

http://www.businesspundit.com/good-work-environment-higher-r...

I don't know if the data is significant, but it's certainly worth nothing.

Welcome to Capitalism! Bend over!

To clarify: I think it's really a sad state of affairs when the people who commit most of their waking hours to a company and depend on their salary for day-to-day living aren't the ones who are paid first.

Everyone knows: Bros (employees) before 'hos (shareholders).

Ok. Here's a hypothetical (actually no longer such a hypothetical scenario). The shareholders are the tax payers in a financial institution where the employees have been quite handsomely paid till now. Who gets paid first - employees or shareholders ?