Optimal Timing for Submitting Resignation with Stock Options Vesting

When contemplating the timing of your resignation, especially in the context of your stock options vesting, it's important to weigh several key factors to avoid potential negative consequences. This guide will explore the nuances of stock option vesting schedules, company policies, and the potential impacts of submitting your resignation early.

Vesting Schedule

A vesting schedule is a predetermined timeline during which your stock options become fully owned and exercisable. Typically, options vest in stages, often on an annual basis, meaning that a portion of your options become available to you at specific intervals, such as your one-year anniversary. Submitting your resignation before the vesting date can mean missing out on a significant portion of your options. For example, if 25% of your options vest on your one-year anniversary, submitting your resignation before that date would result in you losing that 25%.

Company Policy

Many companies have specific policies regarding unvested options upon resignation. Even if the options are technically set to vest on your one-year anniversary, the company may choose not to grant those vested shares if they are aware you are leaving. It's crucial to review your employee stock option plan (ESOP) or consult with Human Resources (HR) to clarify these policies. Familiarizing yourself with these guidelines can help you understand the potential impacts of your resignation on your stock options.

Negotiation and Timing

Contemplating your stock options and compensations is a significant reason for staying with a company. If your stock options are a substantial component of your compensation, it might be advisable to wait until after the vesting date to submit your resignation. This strategy ensures that you maximize your benefits and can maintain a positive relationship with your employer.

Potential Consequences

Submitting your resignation before the vesting date can have several negative consequences, including:

Losing the opportunity to receive the vested options. Potentially damaging your relationship with the company, particularly if you are a key employee. Seeking to retain or negotiate the vesting of your options upon leaving, which can be a complex and strained process.

It's important to navigate these potential consequences carefully to protect your interests and maintain a positive professional relationship.

Recommendations

Wait Until Vesting: If possible, wait until after your one-year anniversary to submit your resignation. This ensures you receive the 25% of options that are due on that date. Consult HR: If you are uncertain about the policies, it's advisable to discuss your situation with HR or a trusted manager to clarify how your options will be affected. Understanding the company's stance early can help you negotiate more effectively. Consider Your Exit Strategy: If you must resign before the vesting date, consider negotiating your exit or a potential arrangement regarding the options. Discussing these possibilities in advance can help you manage the transition smoothly.

In summary, to avoid negative consequences regarding your stock options, it is generally advisable to wait until after your options vest before submitting your resignation. Understanding your vesting schedule, reviewing company policies, and negotiating effectively can help you protect your financial benefits and maintain a positive professional relationship.

Note: Most companies forfeit the grant option if the person leaves the company before the vesting date. Additionally, the actions you take in requesting financial benefits from your employer within a short period after joining (less than one year) are considered highly questionable and may be viewed unfavorably by stockholders and other employees.