A candidate recently posed a question on Startupping asking if a company should share its valuation when offering shares.

After 20+ years recruiting for startups, another nine consulting/coaching startup CEOs, including a specific approach to giving out stock options, and, shortly, releasing a software program based on our option allocation methodology, I really wanted to grab the execs in that company and shake them. But if I shook every exec who wonders if they really have to tell, I wouldn’t have time to do anything else.

But just to be sure, I asked a serial entrepreneur I know what he thought and here’s his answer.

“Well, I suppose it’s not actually illegal to refuse to disclose facts about your stock plan to a candidate. It’s kind of stupid, like saying, “we can’t tell you what we are going to pay you when you join, but it’s going to be reasonable.” Who would accept that as an offer? Questions about the size of the total stock pool, the valuation of the company, the current option price and the percentage that the candidate’s initial option represents of the total stock are all fair and realistic questions that a good candidate would ask, and if the company refuses to answer them, I think the candidate should immediately get the idea that there’s something screwy with the management of the company.”

That’s really the crux of the matter. Essentially, the company is saying, “We want you to work for us, but we don’t trust you, nor do we consider our business any of your business.”

Whoee, is that an attitude to impress a candidate or what? Wouldn’t you just love to work for someone who asks for, but gives not?

Further, having staffed for startups, I know that the last thing you need is a high level of naiveté. If your candidates don’t ask about valuation it’s up to you to explain it anyway—and keep explaining until they truly understand—because if they don’t understand they have no reason to bust their buns at the level required in a startup.

Whether this company’s response was due to ignorance or information control issues it’s a very likely harbinger of their MAP and its resulting culture.

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This entry was posted on Tuesday, July 24th, 2007 at 12:10 pm and is filed under Business info, Communication, Culture, Hiring, Leadership, Stock Options. You can follow any responses to this entry through the RSS 2.0 feed.
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