Twitter Issues Stock Grants for Employee Retention

Twitter reportedly began handing out stock option grants to valued employees over the past two weeks, a maneuver likely designed to keep the social media company’s vested employees on the hook for a longer tenure. According to a report in AllThingsD.com, Twitter began handing out stock grants to not only executives but also valued individual contributors in recent weeks.

With Twitter’s IPO documents officially filed with the Securities and Exchange Commission, employees who have been with the seven-year-old company for more than four years are the most likely risks to bolt after the company goes public and its lock-up period expires, say recruiters.

Stock options typically vest in increments over a four-year period, says Jon Holman, Founder of IT executive recruiting firm The Holman Group.

“Most options vest 25 percent after a year [at the company] and then monthly or quarterly thereafter, with full vesting at four years,” Holman says. “So, someone who has been with a company four years at the time of the IPO is fully vested and thus leaves a lot of money on the table if he or she leaves [before the IPO].”

But if a new employee had been at Twitter for six months prior to the IPO, then none of his or her options are likely to have vested. As a result, that employee would need to stay with the company at least a year before a quarter of their options would vest, for example. Hence, the term golden handcuffs.

And to keep employees who are already fully vested by the time the IPO goes out, Twitter would have to issue more stock options, which would then carry another four-year vesting schedule from the time of issuance.

Holman says it’s virtually impossible to woo away employees at hot privately held companies before they go public, and a similar problem exists between the time they file their IPO documents and actually begin trading their shares on the open market.

Once a company is public, it becomes much easier to recruit potential candidates, Holman says.

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