According to a recent Fortune article, Pinterest has adopted a new policy whereby employees who have been with the company for at least two years and who subsequently leave shall be able to hold onto their vested stock options for seven years before they must either exercise such options or the options automatically terminate. This is a marked departure from the standard of most companies which allows for options to be held by a departed employee only for ninety days before they must decide to exercise or lose their options.
From the employee’s standpoint, this is a positive change which rewards service to the company and allows an employee to wait and see how the fair market value or trading price of the company’s stock is doing. As the Fortune article points out, the extension is also tax advantageous for the employees, allowing them to defer any tax consequences until such time as they are able to offset the tax liability through a potential secondary sale.
It will be interesting to see if other companies follow Pinterest’s lead and if corporate talent is swayed to join a company based on the availability of this plan. For corporate lawyers, an adoption of the Pinterest philosophy would necessitate greater vigilance as to the capitalization ownership of the company, along with a general revision to standard option plan documents.