Clawback vs. vesting
What is the difference between clawback and founder vesting? It seems that the term "clawback" was used in connection with the Zynga and Skype cases Equity Clawback - how to avoid Zynga situation
2 Answers
http://en.wikipedia.org/wiki/Clawback http://www.investopedia.com/terms/c/clawback.asp http://pandodaily.com/2012/04/26/founders-should-give-their-stock-back-why-vesting-is-in-your-startups-best-interest/ The two are not related - but conditions on issuing shares can have clawback provisions. For example: Zynga has contractual provisions that states the company gets back shares (clawback) from founders under certain conditions (possible ones: leave too early, terminated under bad circumstances, miss objectives, etc).
So, they're similar in that they're both ways to take back shares that have already been awarded.
With "Vesting," the idea is that as you perform services, you "earn" the right to keep shares or options that have been awarded to you. The longer you work for the issuer, the more shares you get to keep. If you leave, then any "unvested" shares/options usually revert to the issuer.
A "Claw-back" is where shares are awarded, but can then be taken away based on some contingency -- not making a revenue target or missing a milestone, for example.
-
The answer is well structured, but to be honest I still don't see what is the difference in practice :( To me it sounds like the same thing. Vesting is often also based on meeting (or not failing) different performance goals, not leaving the company etc. Is the claw-back also limited by time (similar to the vesting schedule, where all the shares are vested after 3 or 4 years etc..) ? – Jhexp 12 years ago
-
Clawbacks usually happen in connection with a deal, and are voluntary of behalf of the issuer. Eg: "You'll get 100K shares in the merger, but if a lot of your accounts turn out to be uncollectable, then we can claw back up to 20K of those shares." – Chris Fulmer 12 years ago
