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news) nears the end of its first quarter as a public company, industry watchers say one of its emerging challenges is how to keep soon-to-be wealthy workers from cashing out and moving on.
Finance 10 Tech Toys for Travelers Stars of the Paris Auto Show Air Travel: A New Departure "The loss of key employees is a real risk for a technology company after it goes public," said Eric Jackson, an early PayPal executive who left after the online payment company's IPO and acquisition by eBay Inc.
com senior vice president Bill Coleman estimated that around 60 percent of the 1,900 Google employees with the company at the end of March each now hold stock options worth at least $1 million. While some workers may choose to go back to school, start a new company, or join the ranks of high-tech early retirees, analysts also note that $1 million is not what it used to be. "If you live in Mountain View, California, and someone gives you $1 million, you might be able to pay off your mortgage, but you can't retire," said Coleman, referring to Silicon Valley's sky-high home costs. On the other hand, Coleman estimates that 400 to 500 of Google's longer-term employees will have stock options worth $5 million or more. Jackson and others caution that post-IPO workers may struggle with boredom, burnout and a lack of purpose after the big push to go public. To be sure, Google -- which has vowed to remain unconventional -- is seen as a very employee-friendly company. It has even promised to beef up perks, which already include an in-house masseuse and free lunches prepared by the former chef to the Grateful Dead. While such extras are nice, if Google fails to instill a continued sense of mission among employees, "they're crossing their fingers and just hoping that good people will stay," said Vince Poscente, a management strategist and author. Poscente also cautioned that employee exits can snowball. "If one entrepreneurial-minded employee has a great idea and isn't happy with his company any more, who is he going to call? Meanwhile, the same high stock price that promises to make Google employees rich could hamper hiring by making it harder for new employees to cash in on their own options. "New employees need an awful lot of shares to catch up to the old employees," Coleman said. Morgan Stanley analyst Mary Meeker predicted that a big drop in Google shares was unlikely. Morgan Stanley was a lead underwriter for Google's August IPO. "It's probably unlikely that these shareholders will sell into big declines; the outcome here could be a potential ceiling for the stock price in coming months, rather than downward pressure," said Meeker.
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