James T. Carroll

When negotiating stock or other forms of equity in their companies, executives too often deal in terms of percentages: an offer letter with a new employee may promise her “options for 2% of the company” or a commercial agreement might entitle a vendor to “5% of the company’s common stock.” While the executives may find percentages a convenient shorthand for understanding the size of the “slice of the pie” being negotiated, when they deliver those terms to the company’s counsel, groans and (polite) admonishments are likely to follow.