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Facebook’s Stock Options

Publication Date: 
October 25, 2007
The New York Times
Miguel Helft

Professor Joseph A. Grundfest weighs in on the question posed by The New York Times article whether stock options are more lucrative for employees who worked at a company early on as compared to those coming on board later when the company is already in the money:

The situation might not be so simple, said Joseph Grundfest, a former Securities and Exchange Commissioner and expert in corporate governance at the Stanford Law School. He warns that it is impossible to know exactly what valuation Facebook’s stock options would have without knowing the details of Microsoft’s investment. And he says that there are other ways besides stock options in which Facebook could offer equity incentives to prospective employees. What’s more, many hesitant candidates may see Microsoft’s investment as a further assurance of Facebook’s eventual success.

“To many people, this transaction may indeed be viewed as a validation,” Mr. Grundfest said.