If you are working for a company and they wont give you this information, leave and join one that will. If you are thinking of joining a company, ask for all the stock option information. Ask for the details of the funding rounds including liquidation preferences. If they don't give it to you, join another company that will. If no private companies will give you this information (though I know of many that do), join a publicly traded company.
Additionally what would more legislation do that the existing Delaware law doesn't? The fact that a lawsuit is being filed here is a good thing... a company isn't fulfilling its legal obligations and the courts will settle it.
The argument is that people routinely get abused and your equivalent of "be smarter or deal with the consequences, and if no one will give you basic transparency: TOO BAD this industry isn't for you, move on" is a rather brutal approach.
I'd prefer a state law for transparency, so if your SV start-up wants to play Wild West, they have to move to Texas or a similar state where it is a lot easier to abuse your employees legally.
You have no idea if people are being routinely "abused" or not. The original commenter's hypothetical is as follows (I've expanded a bit):
A likely extremely highly paid employee is working at a company where they aren't sure whether their stock options are valuable are not. It is extremely likely if they ask the company for information necessary to value those stock options, they would get it. Completely unrelated, founders of the business may or may not have sold stock during a previous round of funding.
How is this person a victim exactly? If an employee doesn't want any risk in their compensation, they should reject stock options in favor of salary. If they decide to take stock options there is always going to be risk, not only due to the information risk we are talking about but because the future is uncertain even to people with all the relevant information.
And FWIW, almost every startup is incorporated in Delaware which already has this law on the books.
We're talking about startups, aren't we? A group of companies who are notorious for paying well below market wages because the promise of stock is supposed to make up for it?
And who cares how "well paid" they are? How does that change things one bit? Here, tell me the exact dollar amount one can make where they can no longer complain about wrong treatment at work. And tell me why it's not ok to treat someone like that at one point, but pay them one dollar more, and suddenly it is ok.
"It is extremely likely if they ask the company for information necessary to value those stock options, they would get it."
Except the whole point is that the company isn't giving it to them.
"How is this person a victim exactly?"
Because they are not being treated fairly by the company.
"If an employee doesn't want any risk in their compensation, they should reject stock options in favor of salary."
That's not the situation at all, and you know it.
"If they decide to take stock options there is always going to be risk, not only due to the information risk we are talking about but because the future is uncertain even to people with all the relevant information."
Except right now you're advocating that the risk be artificially exacerbated due to not getting that information.
You are acting like the employee has no choice. If they choose to take a lower salary because of the allure of stock options, that is their choice. Nobody is forcing them to do this, and that employee can happily choose to work at one of the 99.9% of other companies that don't offer stock based compensation.
And again, there is already is a law in place requiring a company to give this information to shareholders -- the one the OP is talking about. I'm not defending the company that is breaking the law, I'm defending that the existing law is good enough. The fact that one company is breaking the law in one situation doesn't mean it is a widespread problem.
But I'll bite on the hypothetical. This is a widespread problem and people are being defrauded left and right. What should the new law say? What disclosure is required of the company, and to whom? The text of every funding round so the potential or current employee can investigate all the liquidation preferences (which are often incredibly complicated and company specific)? The full cap table so I know the equity amounts of every shareholder? The full details of any past share transactions and the associated prices? At what level of disclosure are people not getting abused anymore?
The reason is that the medicine might be worse than the cure. I don't like fraudulent accounting and securities fraud, so I'm glad we have the Sarbanes-Oxley law which helps to prevent it. However, SOX now makes being a public company more expensive and complicated, thus a lot of private companies decide they don't want to be public. This created new problems, for example billion dollar companies that choose to remain private.
I don't support companies being "shady". I wouldn't work for a company that didn't give me all the information I needed to evaluate any stock options. However, unless you are giving me a specific law or regulation that intends to fix the problem without creating many more, you don't know if the solution is any better than the status quo.
Part of the problem is that the instincts of treating employees poorly is so deeply ingrained that companies who think they are being transparent often aren't. EG: You ask them about the cap table and they give you a verbal, off the head, assertion about who is on it. They don't let you actually see it.
Ironically this is the case often when they are making an offer, too. They won't tell you the number of shares outstanding, but they offer you 100k shares, as if that's a lot. Is it a lot? Or is it a trivial amount? Are they so stupid they don't realize that without knowing the total number authorized or outstanding that we can't evaluate the offer? Or do they think we are that stupid?
And when you do ask the total outstanding, you often get, again, off the head, old or inaccurate information delivered in a way that implies you're being nosy.
I don't understand this argument. Why on earth are we allowing companies to operate in such a dishonest manner?
Not to mention that, usually when you try to get the information, its after you've already joined and already have some shares. Your suggestion is to just simply drop that, and walk away. How on earth is that a reasonable thing to suggest?
If you are working for a company and they wont give you this information, leave and join one that will. If you are thinking of joining a company, ask for all the stock option information. Ask for the details of the funding rounds including liquidation preferences. If they don't give it to you, join another company that will. If no private companies will give you this information (though I know of many that do), join a publicly traded company.
Additionally what would more legislation do that the existing Delaware law doesn't? The fact that a lawsuit is being filed here is a good thing... a company isn't fulfilling its legal obligations and the courts will settle it.