The word "disingenuous" means something unflattering. Also, compensation may indeed be a rich tapestry, but options only matter if you're going to sell, go public, or buy them back. For companies without a defined trajectory towards liquidity, they're actually deceptive.
Ahh, got it. Perhaps naive would have been a better word, although I recognize that in some circles that can be a larger insult. And for the record, I think that their plan for this 5% is much less deceptive than options in an S-Corp can be.
The disparity for me is that Jason makes this claim, "And since we have no intention of selling 37signals or going public – the two scenarios where options/equity really make sense – the complexity became too hard to justify."
My claim is that that statement is disingenuous because it posits the following argument; The company will never be sold, thus options or equity would never be liquidated, so providing equity or options doesn't make sense. The implicit claim on which this argument rests is that they will never sell the company, and that claim is neither supported by a structural contingency on the company, nor supported by a statistical comparison with the ways in which LLCs are dissolved (granted medical practices and law practices seem to dominate in this area, and can skew the results). In my opinion, it deceptively leaves that impression rather than being 'up front' about what are the real constraints.
I would completely believe him if he said instead "The Articles of Organization for the LLC specify exactly how any proceeds from the sale or dissolution of this company are to be distributed, and we are loathe to change them. Thus we don't really have an option here." (no pun intended)
And again, I think its really impressive that they came up with a way to share 5% of the proceeds when the company is sold. I merely suggested some ways they could make it 'look more' like what other people get in terms of equity and options by both allowing people to keep accumulated time after leaving the company and by having those 'units' represent a similarly sized chunk of the company.
