On Friday we brought you the news that the Wall Street Journal alleged that Zynga (makers of Farmville, Cityville, and a host of other Facebook games) was demanding some of its longest-standing employees return the stock they were offered as incentive to join the then start-up...or be fired; the idea being that Zynga wanted to tidy things up before making the jump to being a publicly-traded company. Later that day, however, Fortune offered an alternative explanation to the Wall Street Journal's, suggesting that Zynga might instead be demanding vesting shares ("vesting shares" is moneyspeak for guaranteed shares that one receives from one's employer as long as one sticks around long enough or meets certain other criteria) back from "under-performing employees" who would then be transferred to a "position lower down the corporate totem pole," but retain the same salary. The author claims that the threatened demotions and stock claw-backs are kinder than the flat-out firing of the employees (and subsequent denial of stock options) which Zynga is apparently allowed to do under US employment law.
According to Cnet's take on the Wall Street Journal article, meanwhile:
In order to determine which employees would be asked to give stock back, Pincus and his executives tried to pinpoint workers whose contributions to Zynga--in the execs' eyes--didn't necessarily justify the potential cash windfall they could receive when the company went public, the Journal claims. One Journal source said that Zynga executives were especially concerned with not creating a "Google chef" scenario.
"Google chef" refers to Charlie Ayers, who started working with Google in its early days as the company chef, and landed a reported $26 million US when the company went public. In full disclosure: This reporter does not understand what is undesirable or unfair about this scenario. An employee was guaranteed x shares for completing the service required by the company and was duly compensated when the time came. In fact, some are arguing that this sort of gamble is what built Silicon Valley into the powerhouse it has become, and Zynga is playing a risky game in allegedly trying to re-write the rules.
Fortune later released an internal memo from Zynga CEO Mark Pincus that came into its possession, stating:
The wall street journal posted a story last night (copied below) which paints our meritocracy in a false and skewed light. The story is based on hearsay and innuendo which is disappointing but is to be expected as we move towards becoming a public company.
Being a meritocracy is one of our core values and it's on our walls. We believe that every employee deserves the same opportunity to lead. Its not about where or when you enter zynga its how far you can grow...
While the memo does not directly address the allegations in the Wall Street Journal article, declaring that the article presents things in a "false and skewed light" is a fairly clear condemnation of it. What is also not directly addressed is whether the repeated references to Zynga being a "meritocracy" (a singularly American term - outside of purely political discourse - which this Canadian writer finds as difficult to nail to the wall as Jell-O) are meant to read as a coded way of saying that the employees who are being given the stock ultimatum are not performing up to expectations at the company. Pincus' coyness and Zynga's official silence regarding the issue may be related to the "mandated 'quiet period' ahead of its initial public offering." The company may also be keeping mum until its legal department has at the matter - what may be a "redistribution" of stock to some may sound like a dinner bell for the lawyers of the employees who face Zynga's alleged ultimatum.
We'll bring more to you as it comes.