A better policy for stock options would allow employees to exercise their options for a longer period, such as 10 years, to avoid losing their vested options due to financial constraints.

Companies should evaluate their stock option policies regularly to ensure they are fair and beneficial for both departing and remaining employees. To make stock options meaningful, employees must stay until an exit, have their stock vest, and the company must be worth something; otherwise, owning 10% of nothing is still nothing.

It's crucial to consider the reputational impact on your company when terminating an employee, especially regarding their ability to exercise stock options and the fairness of the process.

The regulations around stock options in Europe are complex and inconsistent, making it difficult to align employee interests with those of shareholders.

The retention trap involves vesting equity over four years, which can create a financial incentive to stay longer than intended, even if you're unhappy.

It's sometimes beneficial to offer a lower salary in exchange for a higher equity stake, but not all employees may be open to this arrangement.

If a terminated employee has invested shares, repurchase them promptly to avoid complications.

The transition from stock options to stock awards at Microsoft was crucial for employee motivation and addressing cultural issues after the dot-com bubble burst.

Typically, equity is subject to four-year vesting, meaning co-founders must work for four years to fully earn their equity stake, along with a one-year cliff where no equity is earned if they leave or are fired within the first year. Vesting with a one-year cliff acts as a safety mechanism, allowing you to correct any poor decisions about co-founders without long-term harm to the company.