2) "We wipe out common stock at acquisition and offer employees retention bonuses, leaving 2% owner who moved on totally shafted."
3) Pretend your corporate charter is a Ruby program and a malicious adversary gets write access to it. Seriously, the sky's the limit. Integers might be kitten pictures now, and multiplication returns shades of pink.
1) Liquidation preferences: Right, and part of the problem is that as more investments are collected, more preferred shares get in line ahead of employees' common shares. "Down" rounds tend to devastate the value of common shares.
But the good news is that upper management and regular employees are in principle affected the same way by these vicissitudes, and in practice I've seen that mostly happen. Some exceptions include founders/upper-management getting special opportunities to cash out or receiving significant anti-dilutive share bonuses. I'm not saying that the founders and employees have exactly the same incentives here, but they are at least somewhat helpfully aligned.
2) Agree that I've heard gossip about these kinds of scenarios, but (I've often wondered) wouldn't this be a violation of their fiduciary duty to certain stockholders? Can a lawyer weigh in on whether (in theory) this scenario allows for a legal remedy?
3) True, the corporate charter is not a contract with an employee, and it can be rewritten at will by the Board. But it seems to me there are limits: if they edit the charter in a way that deliberately wipes out the value of your shares and had a choice not to, this resembles case 2, where I suspect one can seek legal redress (right?).
1) Liquidation preferences.
2) "We wipe out common stock at acquisition and offer employees retention bonuses, leaving 2% owner who moved on totally shafted."
3) Pretend your corporate charter is a Ruby program and a malicious adversary gets write access to it. Seriously, the sky's the limit. Integers might be kitten pictures now, and multiplication returns shades of pink.