ABSTRACT
Many startup employees do not negotiate or seriously investigate their stock option agreements. On its face, this is concerning because stock options and other forms of equity compensation are considered a key part of the Silicon Valley system. Accordingly, scholars and regulators have called for fundamental reform of securities laws in the name of startup employees. Yet, talented employees keep flocking to startups and receiving breathtaking paydays, suggesting that something is working right in the startup labor market. This article analogizes startup employees to mostly passive and uninformed consumers who are offered standardized ‘contracts of adhesion’ when purchasing consumer goods or services. Building on long-standing scholarship asserting that market forces protect these consumers, this article argues that reputational constraints and a critical mass of informed employees mold equity compensation in ways that ultimately benefit employees.
Cable, Abraham, Stock Options of Adhesion (October 15, 2024). 50 Journal of Corporation Law (forthcoming, 2025).
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