Unlocking the proverbial golden handcuffs.

Today we’re announcing a change to our stock option program that will have a huge impact on how future Coinbase employees are compensated. We’ve extended the post-termination option exercise window from the standard 90 days to seven years for new employees who join and stay at least two years.

This change is designed to alleviate the serious financial burden many startup employees face when they leave a company. If left unresolved, this burden can cause them to lose their hard earned, and already vested, equity. Although this type of program is still relatively rare, we think it is more fair, and will help us create a better culture at Coinbase.

We feel it is unfair that employees who have vested some amount of equity can still lose their stock options due to their financial situation.

We hope fixing this issue will continue as a trend in Silicon Valley and beyond. Fred Ehrsam and I were influenced to make this decision largely by Sam Altman and Pinterest, so we’d like to acknowledge them.

What does this mean?

Employees at startups are often compensated with stock options — the right to purchase stock in the company at a fixed price — which typically vests over a four year period. When it comes time for an employee to exercise his or her vested option to purchase stock, the employee needs to pay the exercise price (this requires some cash out of pocket), plus any associated tax liability (which requires even more cash out of pocket). For employees of private companies who may not be able to sell their shares in a liquid market, it may be difficult to pay these expenses out of pocket.

Stock options aren’t on most employee’s minds day to day. But when it comes time to change roles, they can have a rude awakening.

Most companies allow only 90 days for employees to purchase stock after they leave the company. If the employee cannot come up with the cash during that time (to exercise and pay the taxes), they are often forced to forfeit their option. The resulting “golden handcuffs” encourage employees to entrench themselves at a company, even if they wish to pursue other opportunities. They must await an IPO or a liquid market for the stock which would allow the employee to offset exercise costs with stock sales. To be sure, golden handcuffs incent retention (especially during difficult times), but come at the expense of the employee. It also can lead to retaining people who don’t really want to be at the company which can hurt the culture.

Some companies, like Equidate, have been created to try and solve this problem in Silicon Valley, which has helped a great deal. However, they only work for companies where there is a high demand for their private stock, so it is only a partial solution.

Why did we decide to make this change?

We believe this forward-thinking policy will demonstrate our commitment to treating employees fairly, even when it inconveniences the company, and that will attract the best and the brightest to come work with us. We also believe that by saying “you are free to leave at any time” we will create a better culture at Coinbase of people who really want to be here. We feel it is unfair that if a hard-working employee has vested some amount of equity, he or she can still lose it due to their financial situation. The opportunity to vest additional equity in the future is what should retain employees, not the fear of losing equity they have already vested. Shorter option exercise windows operate to the disadvantage of less wealthy employees who cannot come up with cash out of pocket, whereas wealthy employees may still have the freedom to change jobs.

By saying “you are free to leave at any time” we hope to create a better culture at Coinbase of people who really want to be here.

What are the terms?

New employees who join Coinbase as of August 2015 will automatically be set up with these new stock option terms. Coinbase is considering additional options to provide similar benefits to existing employees.

Coinbase founders Fred Ehrsam and Brian Armstrong at their first office in 2012, exercising their options.

To learn more about Coinbase you can read more here. We are the most popular place to buy and sell bitcoin in 26 countries. Our goal is to build financial infrastructure for the world where someday all payments flow over a fast, cheap, and global network that isn’t controlled by any one country or company. A truly open network for money. Come join us.