Mr. Speaker, today we consider another bill requested by large corporations. But, I have to wonder, of all the things the American public want, why is a revision to the Securities and Exchange…
Mr. Speaker, today we consider another bill requested by large corporations. But, I have to wonder, of all the things the American public want, why is a revision to the Securities and Exchange Commission rules--Section 701 to be precise--the priority for this week?
We've been here for three months now. House Republicans set the agenda. They lead this governing body. Why do they keep bringing us bills that are the priorities of corporate
America? In the past few months, Congressional Republicans, who decide which bills get considered have brought forward a hodgepodge of corporate requests.
Here are some of the bills that are now law:
1) Republicans passed--and the President signed--a law to protect corporate firms from having to disclose labor violations--like wage theft--before winning government contracts (H.J. Res. 37).
2) Republicans made it easier to drug test people receiving unemployment compensation (H.J. Res 42).
3) House and Senate Republicans--and the President signed--H.J. Res. 86 which allow Internet Services Providers to sell your browser history.
4) Republicans enacted a new law making it easier to dump coal debris near rivers and streams (H.J. Res. 38).
5) Republicans stopped efforts to help governments around the world avoid corruption. H.J. Res. 41 removed the requirement that corporations disclose resource payments to foreign governments. This is a crushing blow to democracy activists working in fragile nations.
6) And, a law preventing state governments from setting up retirement plans for residents who do not have a work-based plan (H.J. Res 66).
So, in the three months we've been back, these laws, removing competition, disclosure, and consumer privacy, are the priorities of Republicans who set the agenda. These are all asks of corporate America--
1) don't punish us for polluting streams,
2) let us sell your internet browser history,
3) let us make money drug testing laid off workers receiving unemployment due them and do not make us disclose our payments to foreign governments when we drill for oil or minerals.
When I talk to my constituents, they don't ask for any of these. They say, ``Where's the jobs bill?'' My constituents say, can't we raise the minimum wage from $7.25 an hour? They say, our roads and bridges need work. Let's raise the gas tax a bit and invest in infrastructure. They say, we want to increase our skills; let's invest in pre-school, Pell grants and community colleges.
Let's put people, not corporate wish lists-- first.
But, nope, today we are asked to vote on a bill that makes it easier for private companies to provide options--like stocks--rather than compensation to their employees.
This bill makes it easier for firms to offload some of their options to their employees without disclosing financial information to them. While I'm glad to see companies reward employees with stock and other compensation in addition to salaries, workers should be told the value of the compensation they receive. Not some IOU that they cannot cash in any time soon.
With this bill, H.R. 1343, it is possible that employees would be promised stock options which could be worth less than promised, or even, completely worthless. So, employees could decide to forego a salary increase--or accept lower pay--in order to receive more stock options, yet, those stock options could be worth way less than expected. And the market to sell them could be non-existent.
Why should employees receive less information than that of any other minority shareholder? Employees should be able to receive information on the financial position of the company so they can make an educated decision about whether to invest in securities.
If an employee is trusted enough to run the day-to-day aspects of the business, they should be trusted enough to receive full disclosure about the company's financials. It's not difficult to allow participating employees to sign non-disclosure agreements. It can't be because these disclosures are an additional burden on the firm. These companies prepared these types of disclosures to receive the Rule 701 Exemption from the SEC in the first place.
I'm also concerned about the mismatch in power between the corporations and their employees. I am very concerned that employees can be more susceptible to pressure to take options instead of salary increases. For example, we could ask George Maddox. George was one of the 21,000 people who worked at ENRON. After working at ENRON for 30 years, he had 14,000 shares of company stock. It was valued at $1.3 million. Then ENRON collapsed, and he had literally nothing. All his retirement was in ENRON stocks.
If you haven't watched the movies ENRON: The Smartest Guys in the Room recently, I'd urge you watch it again. You could also read Bethany McLean's book by the same name. One image has consistently stuck with me. A staff rally where leadership extolled the virtues of the firm. Leaders whipped employees into a frenzy to buy ENRON stock even as the leaders knew it was worthless. In fact, corporate leaders had already their stock. Yet, they were urging employees to buy!
ENRON had a strategy of buying companies and then pressuring the new employees to buy ENRON stock to keep the stock price inflated. And since ENRON usually fired 10 percent of workers every year, workers felt pressured to buy stock to show a commitment to the firm.
I don't think the supporters of this bill are doing this for nefarious reasons. I'm sure they find my reference to ENRON hyperbolic. They might also say that it's irrelevant since ENRON was a public company and we are talking about private companies.
So, let's talk about Palantir Technonologies. This $20 billion company convinced top-tier engineers to accept below-market salaries by promising them generous stock options. But some employees who accepted this bargain, hoping to make money on selling their shares, cannot sell them. The only buyer of their stocks is Palantir Technologies themselves--or a buyer approved by Palantir Technologies.
Palantir is not a small firm. Palantir is the third biggest American tech startup, behind only Uber and AIRbnb. It was also founded in 2004, which makes Palantir as old as Facebook. Which is a long time to wait to cash in your options.
Pushing employees to own more of employer's stock exposes workers, like George Maddox, to put all their retirement eggs in one basket-- what we call ``concentration risk.''
I just can't support a bill that gives employees fewer protections than investors. I can't support a bill that encourages employees to possibly forego cash in their paychecks in exchange for some unverified investment option. We should not make it easier for employers to pressure workers to choose options over salary without adequate disclosures.
I ask this Congress to stop doing the bidding of corporate America until we address the priorities of American families and workers. We should increase wages and access to affordable housing, provide clean air and clean water, and protect our privacy
Vote no on H.R. 1343.
I would like to include in the Record an article from BuzzFeed News regarding ex-Palantir employees struggling to sell their shares:
[From BuzzFeed News, Oct. 28, 2016]
Ex-Palantir Employees are Struggling To Sell Their Shares
``Demand has evaporated'' for the shares that make up the
bulk of Palantir's pay packages, and the company's CEO seems
aware of financial angst among his staff.
Former employees of one of Silicon Valley's most valuable
startups are struggling to cash out of the stock options that
formed a major part of their pay packages.
As it grew into a $20 billion company, Palantir
Technologies convinced top-tier engineers to accept salaries
considered meager by Silicon Valley standards, pairing the
relatively low wages with generous stock option grants. But
some former employees who accepted this bargain, banking on a
future windfall, are now complaining that the market for
their stock has gone ``completely dead.''
The complaints add to pressure on Palantir CEO Alex Karp,
who has long contended that the company would avoid the
public markets. This week, Karp acknowledged publicly that he
was ``positioning'' Palantir for an initial public offering,
as part of efforts to reward cash-starved employees.
This reversal didn't come out of the blue. A chorus of
complaints has arisen in a private Facebook group for
Palantir alumni, with many former employees expressing
concern and regret over their inability to sell their shares.
In September and October, two former employees promoted
possible opportunities to join together to sell a block of
shares, including an unsuccessful attempt to organize a sale
in China.
Numerous other former employees shared personal stories:
Some said they needed the cash to buy a house or pay down
debt, while another said they took out a loan to fund the
process of turning the options into shares. One said it was
``infuriating'' trying to sell their shares in a ``crap''
market.
Compared with last year, when the stock was highly sought
after, demand among big investors for Palantir shares has
recently gone cold, two brokers who specialize in startup
shares told BuzzFeed News.
This chill reveals more about the fickle and sometimes
inscrutable nature of markets for startup stock than it does
about the business health of Palantir,'' which makes money by
analyzing data for government and corporate clients But it
has stirred frustration among current and former employees.
A complaint about Palantir's below-market compensation was
the most upvoted question in an internal question-and-answer
session in the first part of this year, with 259 votes from
employees, an internal document reviewed by BuzzFeed News
shows. ``Our cash compensation + bonuses are below the market
for tech and our equity growth has slown significantly,'' the
question, posed anonymously by an employee, said. ``The total
comp is not competitive; even more so due to the
illiquidity.'' The questioner continued, ``Are we planning to
change our compensation model?''
Palantir did move to address such concerns in April,
announcing it would raise salaries for many employees by 20%
and offer to buy back a portion of employee shares.
But on Wednesday, Oct. 26, in another move that seemed
aimed at placating employees and investors, Karp gave the
strongest indication yet that an IPO could be on the
horizon--though it is hardly a certainty. ``We're now
positioning the company so we could go public,'' he said from
the stage of a tech conference hosted by the Wall Street
Journal in Laguna Beach, California. ``I'm not saying we will
go public, but it's a possibility.''
An IPO would provide a payday to major investors, including
Palantir co-founder and chairman Peter Thiel. ``Of course I
want my investors to be happy,'' Karp said, ``but the primary
people I care about are the wide-eyed people at Palantir who
are working day and night.''
A Palantir spokesperson declined to comment.
With a $20 billion valuation, Palantir is the third biggest
American tech startup, behind only Uber and Airbnb. It is
also by far the oldest of that elite group, meaning its
workers have waited a long time for their stock-option
payday. Founded in 2004, Palantir is as old as Facebook--
which went public in 2012. In tech years, it is a generation
older than Airbnb, founded in 2008, and Uber, which was
founded in 2009. The much younger Snapchat, which was founded
in 2011, is reportedly laying plans for an IPO early next
year that could cause its valuation to leapfrog Palantir's.
Stock options have long been central to compensation at
Palantir. A 2015 template for a Palantir offer letter gave
new hires the ability to choose among three different pay
packages, with lower cash salaries corresponding to higher
amounts of stock options. ``It is our hope and belief that
these options will ultimately constitute the bulk of your
overall compensation,'' says this internal Palantir document,
which was reviewed by BuzzFeed News.
To illustrate the potential value of the options, the offer
letter template invites new hires to imagine a scenario in
which Palantir's valuation were to grow to $50 billion, or
$100 billion--or even $200 billion. ``Although the values in
the table below are hypothetical and inherently uncertain, we
want to emphasize our belief in Palantir's potential to
become a $100 billion company,'' the letter says. .
While it waits for this dream to materialize, the company
has sought to ease financial angst among its employees. It
held a ``liquidity event'' this year that gave current and
former employees an opportunity to sell a fraction of their
shares. But Palantir also indicated it wanted to curb share
sales done outside of its official channels, warning that
selling to outsiders could make staff ineligible for future
liquidity events.
That outside market hasn't exactly been humming with deal
activity anyway. Trading in private company shares is opaque
and fragmented, and data is hard to come by. But the two
brokers who spoke with BuzzFeed News said Palantir's prolific
fundraising--the company has raised more than $2.5 billion in
capital, according to data provider PitchBook--may have
dampened investor appetite. A number of big investors who
would want a piece of Palantir already have one, they said.
In May, BuzzFeed News revealed some of the setbacks
Palantir has experienced as it seeks to expand beyond its
roots as a government contractor and woo major corporations.
The article, based on internal documents and insider
interviews, reported that Palantir had lost some blue-chip
corporate clients, was struggling to stem staff departures,
and had recorded revenue that was a fraction of its customer
bookings.
At the conference Wednesday, Karp was asked about those
customer losses, which included Coca-Cola, American Express,
and Nasdaq. ``We date heavily before we marry,'' he answered.
Even before the article was published, members of the
private Facebook group for Palantir alumni voiced concern
about selling their shares in the so-called secondary market.
BuzzFeed News is withholding the names of former employees to
protect their privacy.
``Any 2nd market shares going on right now? My broker
disappeared,'' one former employee posted in April.
``There are still periodic deals happening,'' another
replied. ``One that I know of right now, but it's full
already.''
``Yeah, the demand has evaporated,'' another said.
More recently, however, some of the posts took on an urgent
tone, as sales appeared to grow scarcer. Options are
contracts to buy shares at a certain price; to use them, the
owner must pay this price in addition to applicable taxes--
which can amount to a large bill. What's more, options expire
at a certain point if they're not used, adding time pressure
to the equation.
In the public market, owners of options can easily sell a
portion of their holdings to cover the tax bill and the
exercise price. But this strategy is much trickier in the
private market, and there was some debate in the Facebook
group over whether Polar would even allow it.
In September, one former employee asked the group whether
anyone was ``coming up on their 3-year expiration,''
soliciting advice on ``approaches people are taking given the
less-than-stellar private market.''
Among the replies, one former employee reported taking out
``a personal loan to meet my exercise deadline.''
Another wrote: ``I'm in the same boat: 3 years coming up in
April, market is crap, and I probably don't have the
resources available for a loan. The fact that it's so
difficult to sell is infuriating and I'm wishing that I'd
taken the `high' salary option (which TBH wasn't that high to
begin with).''
``On the same boat,'' wrote another. ``Hoping to buy a
house next year and really couldn't wrap my head around
throwing so much money in addition to the stress and work
needed to process.''
The former employee who started that thread apparently
didn't receive much solace. In response to a later post,
which asked whether there were ``any secondary market sales
brewing,'' this former employee wrote, ``Sorry to be the
bearer of bad news, but the market is completely dead at the
moment.''
This person then quoted an unidentified broker as saying,
``There is absolutely nothing moving in Palantir. People who
have bought through us are trying to sell now. I don't see it
changing without the company changing their tone on an IPO.''
Others in the thread shared snippets of information they
said they had heard from brokers. According to one, a broker
``told me that there are a few `price insensitive' sellers
satisfying what little demand exists.''
Another former employee wrote: ``I'm interested in joining
any sales going down too, I've got a year to pay off a hefty
debt with the proceeds.'' The person added a neutral face
emoji.
With buyers scarce, one former employee tried looking
across the Pacific.
``I spoke to someone that brokers sales in China, they said
they might be willing to get something together if there's
enough of us,'' they wrote above a link to a Google Doc that
asked others to report information about their holdings
One of the repliers questioned whether this process would
actually turn into a sale--potential investors might just be
``fishing for information on prices''--and another cautioned
the original poster against ``acting as an agent for a group
of sellers.'' (The poster said the query was ``just intended
as an interest check.'')
In the end, none of that mattered. ``Not likely to go
anywhere in the next couple of months,'' the former employee
who posted the opportunity wrote later. ``Sorry if I got
anyone's hopes up.''
Early this month, another member of the group posted about
an opportunity to sell options through EquityZen, a startup
that arranges small transactions of private company shares.
This former employee advised others to contact the EquityZen
CEO, providing the CEO's email address. But less than 12
hours later, another former employee replied to say that the
deal ``has been already submitted,'' meaning the opportunity
had passed.
``Dang,'' another member wrote.
Discussions in the group about news related to Palantir
often come back to a familiar theme. In September, for
example, the Department of Labor accused Palantir of
discriminating against Asian job applicants, a claim Palantir
later rejected as ``flawed and illogical.'' In a thread
discussing the allegations, one former employee found a
financial angle.
``I sure hope this isn't an expensive lawsuit for them to
defend,'' this person wrote. ``I don't claim to understand
how the legal system works in cases like this, but geeeeez
this doesn't bode well for any of us looking for liquidity at
a fair price over anytime soon.''
