The High Cost of Quitting Your Job with Unvested Stock Options

The High Cost of Quitting Your Job with Unvested Stock Options

July 24, 2020
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The future of work is changing, right now. With it, many executives are evaluating their own personal future and whether their current employer and career path fits that vision. As more and more of you consider career opportunities that you might not have considered prior to this pandemic, it’s important you understand how to navigate handling your stock compensation in a job change.

One critical area often overlooked by executives is their unvested stock options. It never ceases to amaze me how often unvested options are disregarded as executives leave one employer for another.

To help you in this evaluation, there are four main areas for you to consider before pulling the trigger to leave your employer.

  1. Know that your unvested options may be canceled, rendering them worthless to you, when you resign.

  2. Know whether your employer allows for continued vesting for those who meet retirement criteria. For example, if you’re over 55 and have worked with your employer for over 10 years, they might continue to vest your unvested awards, so read the fine print.

  3. Examine your next vesting dates and whether it makes sense to stay past that time to unlock value. Waiting just a couple months to unlock a large block of awards might be a prudent decision.

  4. Negotiate into your new contract the value of options you will be walking away from. This may come in the form of a sign-on bonus or options issued by the new company to match your old.

It kills me to meet executives after they have walked away from significant compensation only to realize they could have planned better to protect their value. Know these four steps when considering new opportunities and make sure you have the best team of financial Advisors to help sidestep these, and other related landmines.

-Tim Golas
Partner, Spurstone

 

Photo by Ross Findon on Unsplash