Zynga Playing Stock Games With Employees

With large IPOs from companies like Pandora (NYSE:P), Groupon (Nasdaq:GRPN) and LinkedIn (NYSE:LNKD), many people are getting rich.� In a way, we are seeing a new generation of the so-called 1%.

At the core of this is the equity culture of Silicon Valley.� Typically, an early stage company will grant stock options and restricted stock to employees � and then provide a below-market salary.� It�s a smart way to preserve cash as well as provide motivation for better performance.�

Yet it can have some drawbacks.� Just look at Zynga, which is prepping for an IPO that could value the company as much as $20 billion.� According to a Wall Street Journal report, it looks like it issued too many shares.� The result has been increased dilution for investors, which always causes some griping.�

It also means fewer shares available to grant to new employees.� This is a big problem since it is highly competitive to find talent in Silicon Valley (especially engineers).

To counter the trend, Zynga apparently has a special list of employees who have basically made too much money.� Now the company is demanding that they hand back unvested stock � or risk getting fired.�

It does sound kind of harsh, but there are some things to consider. �First of all, these employees are probably already millionaires from the stock they�re allowed to keep, so it�s hard to feel too sorry for them.

Besides, these employees could have spent more time negotiating their contracts.� Getting the help of a qualified attorney can certainly be a smart thing to do.

Zynga also has focused on those employees who have shown lackluster performance.� In other words, they have gotten rich for not doing much.� In light of today�s stagnant economy, this does seem a bit unfair.

In fact, I think Zynga is actually being generous.� If an employee is not doing an adequate job, why keep them?� What�s the point?� Having these kinds of workers can certainly be a drag.� And as Zynga must continue to post strong growth � and deal with emerging competitors like Electronic Arts (Nasdaq:ERTS) � it may actually want to get even tougher on these HR matters.