What to do when your company misses payroll?
grellas: I have been doing startup work in Silicon Valley since 1984 and have seen all the variations on this.It all depends on the facts.
When a startup struggles and misses payrolls, it is legitimate for the executive team to ask employees to stay and help the company through the struggle. Each employee then must decide based on his or her individual circumstances. Employees will have varying stakes in this. The employee who, say, owns 1-2% of the company via stock options may have a different motivation from the one who owns little or no equity, particularly if the company may eventually have a huge upside with a turnaround.If the sacrifice is significant, though, then the employees should at least be offered some additional compensation for the added risk they are taking in potentially working for nothing. A commitment to give them added option grants if the company turns it around does this well.This hits the founders and investors, but it should hit them - they are the ones asking people to do extraordinary things to help them save their dreams and they are the ones who will most benefit if it can be saved.If this is done with options, there are no special tax complications. Nor does it cost anything to make a letter commitment that can be documented formally after the turn-around once the company has money again.The one thing that has shocked me most over the years are the management types who expect employees to take the hit in such situations but who will not lift a finger to reward them for making a special sacrifice.Others have mentioned secretiveness as a danger sign for the employees. I would add to this any display of unfairness such as a failure of management to recognize that special sacrifices deserve special rewards.Of course, some cases are hopeless and then the only remedy is to run for the door, as many have noted.