San Jose, Calif. – Less than three years after going public, Google is confronting one of the more confounding consequences of its phenomenal success: a potential brain drain if its earliest – and richest – employees quit after earning the right to cash in the last of the stock options that made them millionaires.
Hundreds of the 2,300 Googlers hired before the Internet juggernaut’s initial public offering in August 2004 are hitting their fourth anniversary. When they do, they’ll be free to cash in the final portions of their pre-IPO options, collectively worth an estimated $2.6 billion before taxes.
So far, the exodus has been limited to a “handful of people,” said Stacy Savides Sullivan, Google’s chief culture officer and a 43-year-old pre-IPO millionaire herself. “We anticipated more because we think it would only be natural. We worry every day about this and hope we can stay ahead of it.”
Senior executives have viewed this problem as a significant risk and have been taking aggressive and innovative steps to retain early employees, including mixing in other forms of stock compensation and rolling out a first-of-its-kind, in-house market this month that will enable workers to sell even “underwater” options – those with a grant price higher than the current stock price. Google also is working on softer issues, from conducting an annual “happiness” survey to outright coddling of critical talent.
Still, Google executives know some people will leave anyway: some because their jobs no longer seem challenging, others to start a restaurant, found a nonprofit or build a dream house.
Despite the mind-boggling dollar figures, Google’s story is no anomaly.
Every Silicon Valley startup that dishes up stock options to lure workers faces a similar predicament if an initial public offering is successful.
“This is what any of these companies struggle with,” said Steve Patchel, a tech-industry pay consultant in Watson Wyatt’s Santa Clara, Calif., office. “There are all these moving parts. Nobody can ever get it perfect.”
