Zynga CEO Displeased with WSJ Report

An internal memo obtained by Fortune's Term Sheet reveals that Zynga CEO Mark Pincus is very displeased with a Wall Street Journal report that says the company bullied employee stock holders because they gave them too much stock initially and wanted to add more value to its upcoming initial public offering. Zynga CEO Mark Pincus issued a statement saying that the WSJ story portrays his company in a "false and skewed light."

"The Wall Street Journal posted a story last night…which paints our meritocracy in a false and skewed light," Pincus wrote in the memo. "The story is based on hearsay and innuendo, which is disappointing but is to be expected as we move towards becoming a public company. We have nothing to hide in our past and present policies and I am proud of the ethical and fair way that we've built this company."

As Zynga expanded, Pincus offered new employees stock options instead of higher salaries. This is normal practice for start-ups, but the article, which is based on the accounts of two anonymous sources, claims that Pincus is now demanding the stock back ahead of the company's IPO.

Another story on Fortune's Term Sheet (written by Dan Primack) takes issue with the Wall Street Journal's conclusions. According to Primack, Zynga does not terminate under-performing employees, but re-assigns them to positions elsewhere in the company that might better suit their abilities. Part of this process apparently involves transferring some or all of their unvested stock options to the replacement – vested options are not affected.

"Zynga is a non-unionized startup, where the CEO is well within his rights to simply fire an under-performing employee (and recover unvested options)," Primack wrote. "In fact, that's what happens at most companies. The difference at Zynga is that Pincus seems intent on retaining talent, even if that talent either didn't live up to initial expectations or didn't adequately match up to the changing needs of a fast-growing company. What Zynga did may sound bad on newspaper, but is little more than morally-acceptable business as unusual."

It is rumored that Zynga will launch its IPO after the Thanksgiving holiday.

Source: Gi.biz, C|Net. Thanks to Kamendae for the original story.

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