I know Brad Feld has written a bunch about this, but I was wondering if it's a subject you could throw out there on your blog if you have one. The big problem for us is pricing options. There's no specific guidance from the SEC or IRS on pricing of options, other than "fair market value", and I fall on the side of employees: options can't be traded or sold in a private company and have very few rights, so their value is not nearly the same as actual common or preferred shares.
My board isn't aligned around this issue. Investors are more conservative, and frankly they have nothing to lose with options being priced high (unfairly high in my opinion). To me, employees of a startup take a risk just by working there, and the options may never have any value. Investors only risk capital; employees risk their livelihoods. If the employees are young and just out of college, then the risk isn't nearly as great as when they have families. At Mission Research we have a LOT of families.
Let me know your opinion. This is one of these issues that is esoteric, painful, and likely irrelevant for most companies. This problem was introduced by Sarbanes Oxley, designed to curb the excesses of the likes of Enron and Worldcom. I understand the need for oversight and regulation, but I hate to see startups crunched by the sins of public companies.