A Fair, Transparent Incentive Stock Allocation Process that Preserves Trust and Improves Worker Engagement; we call it Option Sanity™
The process of allocating incentive stock options (ISO) in a startup is usually opaque and often unfairly executed.
Option Sanity™ is a framework to deisgn stock grants that are effective, fair and understandable.
The system is transparent and accurately reflects the company’s values and culture. It allocates Incentive Stock Option grants based on a role or position's ability to influence the company's success, determined by the CEO and board. This enables separation between an individual’s potential and the role’s contribution within the company.
Option Sanity™ provides a flexible structure and logical methodology that reflects both business and ethical drivers on the part of the entrepreneur and is seen as fair by employees.
Option Sanity™ benefits all stakeholders, investors, founders and participants, delivering a consistent and transparent framework for private stock management.
Option Sanity™ Features
- Recognizes that at all levels, including executives, past performance and interviewing skills are only an indication, not a guarantee, of future performance.
- Eliminates arbitrary awards based on whims, charm or negotiating skills.
- Rewards performance by blending employees' past experience with future efforts that focus on achieving the company's goals.
- Makes stock allocation process transparent to everybody.
- Accurately reflects company culture and values by incorporating the founder/CEO's attitudes and philosophy of fairness and ethical behavior.
- Provides a structured methodology to award stock in a startup or any company instituting a stock plan.
- Flexible enough to work for any type of stock (options, restricted or phantom) and with companies in any industry, of any size, with any management structure and with staffs of all skill levels.
- Structures the Annual Stock Bonus so that a significant portion of each person’s stock rewards may be based on the actual success of the company over time, as measured against quantified annual goals approved by the Board.
- Manages, simplifies and administers the stock option allocation process.
- Tracks ISOs as the company grows.
- Contains a Reporting function (Stock Plan Report for Board, Employee Options Report, Total Stock Allocations, Annual Stock Bonus, Special Project Bonus) saves significant executive time.
- Predicts and models dilution
- Audit trail Supports audit and regulatory compliance needs and transparency
- Fills a nitch (allocation) not addressed by other stock plan administration offerings.
- Works in conjunction with other stock plan administration offerings.
- As Option Sanity becomes known it will be indicative of a certain type of culture and a management that backs up its talk by putting its equity where its mouth is.
- It will attract people with the confidence to know they can achieve great results, thus increasing their equity stake over time.
- Because the Annual Bonus is dependent on accomplishing company goals, it undercuts politics, silo-creation and a "me first" attitude among employees.
- Option Sanity prevents the bad press and morale problems recently faced by Zynga.
We will be looking to meet the incubators, venture accelerators and centers of innovation, disruption and action.
High-growth company and start-up life is one huge network. Entrepreneurs ask other entrepreneurs what works. Option Sanity works. Top investors, advisors and board members bring value by recommending tools and processes and platforms that set up their companies for success. Option Sanity sets up any company for success, big or small.
Option Sanity is like super-food or super-inoculation against chaos and drama in fast-growing companies. We need to meet the “company doctors” who are responsible for great preventative medicine and accountable for rapid growth.
My thanks, as always, to Board member Matt Weeks for finding time to review and edit this hack and for filling any gaps created by those assumptions.