Presenting Option Grants to Boards

One of the nearly routine items at startup board meetings is the discussion and ratification of option grants for new employees and possibly refresh grants for existing employees.  Too often unfortunately this information is presented to the board in a way that requires way more time than should be necessary because critical pieces are missing.

Here is what you should always include as a bare minimum when presenting option grants to the board

1. Employee name

2. Title/role at company

3. Absolute size of grant in number of underlying shares

4. Percentage size of grant fully diluted

5. Total size of option pool and remaining available pool (absolute numbers and percentages fully diluted)

Just #1 and #3 are not enough because it assumes that board members will immediately recall the number of shares outstanding which may or may not be the case and/or be able to quickly do the percentage calculations.

In addition here is additional information you should provide for context

6. Grant size bands by role (if you have established those already) — if not, include existing employees in similar roles for comparison (including their start dates)

7. Indicate if there are any special vesting considerations that differ from the plan

8. For refresh grants: how many options does the employee already have and how far are those vested?

Providing all of the above ahead of time (or even at the board meeting) will not only make the grant process quick an painless but also assures that you can actually get meaningful input from your board on the size of grants (as opposed to spending time digging for information and calculating percentages).

Posted: 12th January 2012Comments
Tags:  startups boards directors options

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