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OpenAI threatened his $2 million
The hidden condition
The condition had been buried in his paperwork since he was hired, and most employees never noticed it. In the exit paperwork a more visible version appeared: because of what was signed years earlier, his equity was forfeit unless he now agreed not to criticize the company or tell anyone about the agreement. Most people signed.
Walking away
Daniel Kokotajlo did not. He was angry at a company that called itself a nonprofit acting in the interest of humanity, and after talking with lawyers and his wife, they decided to walk away from the money.
The uproar
A few weeks later, while answering questions about his experience on a messaging forum, he described the agreement, and it went mega viral. Employees were shocked, because very few knew about it and they had thought the equity they had been paid in over the years was theirs. The uproar was big enough that leadership backed down. They said they had not known about the paperwork, would find out how it got in there, and would change it so people could keep their equity. He kept his.
How can vested equity be forfeited?
Vested means earned over time, but in a private company the paperwork governing shares or units can still attach conditions, such as a company right to repurchase them. Those terms live in documents like an operating agreement, which is why a clause signed at hiring can matter years later. Vested units in private companies typically cannot be sold on an open market, so the company's rules decide when and to whom they can be sold.
Why do exit agreements include non-disparagement clauses?
Companies include them to protect their reputation after a person leaves, and they are common in severance agreements across industries. Courts and regulators treat them differently depending on place and wording. In the United States, the SEC has penalized companies whose agreements discouraged employees from reporting possible violations to regulators, beginning with a 2015 action against KBR.
Why is private company stock hard to sell?
No public exchange lists the shares, so a buyer and seller must find each other. Companies in this position often run tender offers, in which the company or investors buy shares from employees at a set price on a set date. Private companies commonly restrict transfers in their bylaws, so a sale generally needs company approval.
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