For people who work in private, venture-backed companies, stock options may represent the most potentially…
stock options can act as golden handcuffs and why so many companies utilize them as a retention toolAs an executive recruiter, you may often encounter a promising candidate who is reluctant to leave his or her current position because of vested stock options — even though the candidate may feel that your client's job may have better potential. This psychological reluctance is the fundamental logic behind how stock options can act as golden handcuffs and why so many companies utilize them as a retention tool.
The Employee Stock Option Fund (ESO Fund) can help in those situations. ESO provides financing to current and former employees of private companies to allow them to exercise their stock options. This innovative service allows executive recruiters and their company clients to "take off the table" any discussion of advancing funds to a new hire to exercise options at the candidate's former company. These valuable funds can be utilized for more important expenses such as relocation. Moreover, these bonus funds are fully taxed which makes them a very expensive way to exercise options which also trigger additional taxes. No payments are due under ESO's program unless and until there is a liquidity event involving the company that issued the shares, such as a sale or IPO. Only at that time does the owner of the stock repay ESO and risk is avoided because the repayment terms will never exceed the value of the stock. For the candidate, an ESO advance allows him or her to take a portfolio approach to private company stock by obtaining stock in their old company (which provides possible opportunities for gain) as well as allowing them to assume a new position in a new company with a new option position.
For more information regarding ESO and how we can help recruiters and their placement candidates, please contact us at the ESO Fund.