1) Liquidation preferences: Right, and part of the problem is that as more investments are collected, more preferred shares get in line ahead of employees' common shares. "Down" rounds tend to devastate the value of common shares.
But the good news is that upper management and regular employees are in principle affected the same way by these vicissitudes, and in practice I've seen that mostly happen. Some exceptions include founders/upper-management getting special opportunities to cash out or receiving significant anti-dilutive share bonuses. I'm not saying that the founders and employees have exactly the same incentives here, but they are at least somewhat helpfully aligned.
2) Agree that I've heard gossip about these kinds of scenarios, but (I've often wondered) wouldn't this be a violation of their fiduciary duty to certain stockholders? Can a lawyer weigh in on whether (in theory) this scenario allows for a legal remedy?
3) True, the corporate charter is not a contract with an employee, and it can be rewritten at will by the Board. But it seems to me there are limits: if they edit the charter in a way that deliberately wipes out the value of your shares and had a choice not to, this resembles case 2, where I suspect one can seek legal redress (right?).
It's common to get a job offer that says something like you get 10,000 options on shares. But you don't know if the company has 2M or 20M or however many shares; your percentage ownership could be 0.5% or 0.05%. If you're receiving an offer with shares or options, you should ask and be told what the total number of shares are (a cap table would be even better).
I have not heard of cases where shares were vested then lost outright, except for perhaps Eduardo Saverin of Facebook. There are other (quite common) cases where the exit is not at a sufficiently high valuation compared to the most recent investment round and preferred shares cash out while common shares are reduced to little or no value.
2nd developer, $1.4M in an IPO after 8 years. Took what I considered to be a reduced (around 75%) salary for the first 3 years. The first 5 or so developers probably all got something in the same range or more. The company is not particularly famous; most on HN will not have heard of it.
I understand that the good outcome was partly due to years of draining work and even more so due to very good luck.
Many developers are undervalued by employers, but shares can work out. It's worth taking the time to learn what percentage stake you're getting (if you ask and the employer doesn't tell you, walk away) and doing your own assessment of the possibilities and risks for the company.
But the good news is that upper management and regular employees are in principle affected the same way by these vicissitudes, and in practice I've seen that mostly happen. Some exceptions include founders/upper-management getting special opportunities to cash out or receiving significant anti-dilutive share bonuses. I'm not saying that the founders and employees have exactly the same incentives here, but they are at least somewhat helpfully aligned.
2) Agree that I've heard gossip about these kinds of scenarios, but (I've often wondered) wouldn't this be a violation of their fiduciary duty to certain stockholders? Can a lawyer weigh in on whether (in theory) this scenario allows for a legal remedy?
3) True, the corporate charter is not a contract with an employee, and it can be rewritten at will by the Board. But it seems to me there are limits: if they edit the charter in a way that deliberately wipes out the value of your shares and had a choice not to, this resembles case 2, where I suspect one can seek legal redress (right?).