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Thursday, November 10, 2011

Zynga Pressures Employees to Give Back Stock Ahead of IPO

Posted By on Thu, Nov 10, 2011 at 2:20 PM

click to enlarge Mark Pincus
  • Mark Pincus

Social-gaming company Zynga, along with a handful of other large tech businesses, was successful earlier this year in getting the city of San Francisco to forgo its share of tax revenue on the firm's stock options. Now it appears that wasn't enough: Zynga CEO Mark Pincus has reportedly been demanding that some employees return what will likely be extremely lucrative stock before Zynga goes through its IPO.

The Wall Street Journal (subscription required) reports today that Pincus and other Zynga executives "decided the company had doled out too many stock rights to certain people in its early days." Their solution, according to anonymous sources quoted by the Journal, was to give employees two options: Give back the stock or be fired.

Pincus was reportedly worried about early employees making more money than more valuable employees, hired later on, who didn't acquire as much stock. Zynga, creator of wildly successful Facebook games such as FarmVille and Mafia Wars, has filed for an IPO, but not stated how much it hopes to raise.

Zynga has a longstanding reputation as a corporate malefactor, based on what former employees have described as Pincus' abusive personality and the company's cutthroat approach to appropriating competitors' game ideas. In that sense, this news seems to be a fairly predictable outcome of the tech firm's culture.

But if Pincus' strong-arming succeeds, it could have implications for the rest of the tech sector. Many start-ups lure talented workers with the promise of stocks that could result in a big payout come IPO-time. If Zynga retroactively dismantles that promise, will other tech companies have a hard time luring employees with stock riches?

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Peter Jamison


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