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Unpaid stock options: What can an executive do?

On Behalf of | Oct 19, 2023 | Stock Options

In a corporate setting, one enticing way to encourage loyalty from executives is by providing them with stock options. This can be valuable compensation, especially if the company is doing well. But what if your former company refuses to pay what they owe to you?

Reasons for nonpayment

Unpaid stock options typically arise when a company denies you access to shares or payments you are entitled to under your employment agreement. This can result from termination or various other factors, such as:

  • Poor company performance
  • Violation of contractual terms
  • Changes in leadership
  • Stock option plan restrictions
  • Legal or ethical issues
  • Financial distress
  • Market volatility
  • Stock option expiration
  • Inadequate vesting requirements
  • Board of directors’ decisions

Nevertheless, nonpayment of your stock options can lead to a dispute between you and your company.

Legal avenues

When facing unpaid stock options as an executive, it is essential to be aware of your legal rights and remedies.

  • Review your employment agreement: These documents will outline the terms and conditions of your stock options. Look for any clauses related to termination and the vesting schedule.
  • Negotiation and mediation: Initiating a negotiation or mediation process with your former employer is often beneficial. Open communication can lead to an amicable resolution. If you reach an agreement, make sure to document it properly.
  • Arbitration: If negotiation or mediation fails, your employment agreement may include an arbitration clause. In this case, you will need to engage in binding arbitration rather than pursuing a court case. It is essential to follow the arbitration process defined in your agreement.
  • Legal action: If the options above do not yield a satisfactory outcome, you can pursue a lawsuit. This involves filing a complaint in a California court, and they will determine the outcome based on what evidence you can present.

Consulting with an attorney would be advisable throughout this journey. They can provide essential guidance and representation to protect your rights.

Avoid common mistakes

Dealing with stock option disputes can be complex and stressful. But all the more for you to be careful. You must avoid common mistakes executives may encounter when dealing with unpaid stock option disputes.

To do this, make sure to review your stock option agreement thoroughly. Do not delay addressing the issues, as it can lead to forfeiture of your rights if deadlines pass. Finally, while feeling emotional is natural, maintaining a professional and level-headed approach throughout the dispute resolution process is essential.