Session 12: October 31, 2007
Recruiting & Rewards
Guest: Dan Siciliano (Stanford University and LawLogix, Inc.) & Kristin Major-Siciliano (Attorney, Skadden Arps)

Quote of the Day

"Leadership is having a clear idea of what you're trying to accomplish (and) articulating it to whomever you work with... and being able to overcome all the little issues that get in the way of achieving your goals.  But only a leader can overcome the obstacles."  ~ Ralph Waldo Emerson

Summary

Barbara Arneson must decide which job offer to take. With all other factors being equal, she is now down to a decision based on the value of the stock options offered by each company. One company is a public company with easily gathered data on the financial status of the company. The other offer is from a start-up company which has only financial projections. We will analyze this case at the beginning of class with our guest speakers, one of whom is a highly regarded employment attorney and the other of whom is a multiple startup company CEO and expert on executive compensation and corporate governance, as well as immigration law. The speakers will continue with some general observations and remarks about employment issues more generally.

Required Readings (Policy on Required Readings.)

• Case:
• Barbara Arneson case, Dorf & Byers textbook, p. 585
• Additional articles to read:
• How Stock Options Work from Inc. Magazine
• Six Challenges in Designing Equity-Based Pay
• Example of Model Employment Agreements
• How Do You Cut A Founder Loose? 
• Watch the following short video clips:
• Guy Kawasaki (garage.com) - Who to Hire
• Eric Schmidt, Larry Page (Google) - Recruiting and Hiring
• David Neeleman (JetBlue) - JetBlue: Defining Organizational Structure and Culture

Study Questions and Team Case Analysis (Policy on Case Analyses.)

• Powerpoint Deck with 6 slides maximum and Excel Spreadsheet.  This is our Policy on Case Analyses.  Follow it for all cases when your team is assigned responsibility to submit your analysis.

1. What is the number of shares outstanding at BioGene as of May 31, 2006? What is its current PE ratio? Why do you think it is higher than the current average of other bioinformatics companies (hint: consider the recent annual growth rates of revenues and profits)?
2. What is Barbara's percentage ownership in each firm?
3. Compare the firms in 4 years (i.e. 2010) when the stock options will be fully vested. Assuming Barbara remains employed until that time, which stock option offer is better? Make sure to include the cost of the stock options and state all critical assumptions.
4. In addition to compensation matters, what other factors would you suggest Barbara consider in making her decision?

Recommended Readings (Policy on Recommended Readings. List of readings)

• Michael Gray, CPA's Incentive Stock Option (ISO) Frequently Asked Questions (skim only)

---