It's going to depend on whether the team agrees that the person is terrible though.

In recent years our management let go of two people because of "bad performance". In one case that was probably a fair assessment. The other guy just got stuck with an impossible project with absent leadership and management blamed him when nothing was finished on time.

And here we're only hearing one side of the story.

IMO it does not send that message. The vesting is compensation for work done and time spent in the role. That is in the past. The "punishment" is losing the job, and that message is clear enough.

If I worked at a place where a coworker has clearly been underperforming, but getting stocks on their way out, then that would demotivate me.

> The vesting is compensation for work done and time spent in the role.

We don't know all the facts, and definitely not both sides, but it sounds like it could be overcompensating for work done. OP said this employee "has been an issue for quite a while".

Especially since I have worked for startups that gave me the "we've set the bonus/salary bump/stock budget for this year, so who do you think should get less if you get more?". This guy! This guy should get less! (is what I'd want to say in this situation)

Employers, especially startups, commonly present comp as a zero sum game. Even if this company doesn't, don't expect all employees to believe you if you say it's not the case here. Because they've been lied to before when it comes to money.

And frankly company leadership has an eventual profitability requirement, and even if they say it's not zero sum, it's not totally independent either.

Having spoken to corp lawyers a lot I also recognize this as a legal liability. It sets a precedent, and opens you up to discrimination suits for future firings.

If the company wants to encourage "above and beyond" performance, they should do that through a bonus. In all scenarios I'm familiar with, shares vesting are tied to duration at the firm, i.e. loyalty and "toughing it out". The employee forfeits the right to those shares either by leaving the firm early, or being bad enough at their job that they get fired. This is of course the latter, but the timing is the problem. Had they fired this employee five months ago, it would have appeared less like yanking the rug from under them. But as you show, perceptions differ

>If I worked at a place where a coworker has clearly been underperforming, but getting stocks on their way out, then that would demotivate me.

That's a completely fucked up attitude. How does someone else lucking out with more than what they technically deserve influence you in any negative way?

Because you, as coworker, bear a part of the cost of their slacking?

Every dollar wasted on useless coworkers might cost you your future workplace (because the company goes bust).

In a 10 person company this may affect whether the company is profitable or not.

Which may affect if the whole company gets a year end bonus or not.

It's also insulting in salary negotiations. The company would rather piss away cash than give me what the market would pay me?

Reasons like these are why high performers leave.