All Zynga Employees Receive Stock Options
It has been reported that Zynga, the largest maker of social games for Facebook, has handed out equity grants to full-time employees after share prices dropped due to an earnings shortfall which caused the value of existing grants to fall.
All full-time employees were given stock options soon after the earnings report was published on July 25th. Mark Pincus, the Chief Executive Officer, is trying to prevent his talented staff leaving
after the stock dropped 71% over the past 8 months. Many of Zynga’s employees who joined before the IPO were partially paid in restricted stock units whose value has since diminished. Zynga’s spokeswoman, Stephanie Hess, has so far declined to comment on the development.
Since the resignation of COO John Schappert employee morale has been low and by giving them all stop options it should create a feeling of attachment to the company. As Frank B. Glassner, a partner at consulting firm Meridian Compensation Partners LLC, said, “Stock ownership or equity-based incentives are an important part of Silicon Valley culture. When people have meaningful equity in a company, they have skin in the game.”
An additional advantage to Zynga is that granting options to employees does not reduce the stakes of existing shareholders as the company does not have to issue new shares. However, the real test for Zynga is still to come. On August 16th the restricted stock units lose their restrictions. This means that employees can either keep their stock or sell it and leave the company. Should they choose to sell it would be a huge public embarrassment for Zynga and a sign that the employees have lost faith in the company.
The company has recently undergone major reorganisation as they prepare to take on the mobile gaming market. The coming weeks should reveal exactly how confident they’re feeling about future success.