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Europe's Billion-Dollar Startups Are Calling For A Stock Option Shakeup

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Stripe, Revolut and TransferWise are among the billion-dollar startups founded in Europe today calling for a shakeup in how stock options are awarded across the continent.

“Policies that currently govern employee ownership across Europe are often archaic and highly ineffective,” they write in an open letter, due to be given to national politicians across Europe next week.

In Belgium for instance, taxes are paid on stock options when they are granted, not when they are exercised and, given most startups fail, staff might end up paying for nothing … which is why most avoid such schemes.

The letter calls for most European countries to follow the models of the U.K., Estonia and France, which offer employees perks like tax-free allowances on stock options, let them defer tax payments, and tax at preferential rates.

Thirty CEOs signed, including Markus Villig, founder of Europe’s Uber rival Taxify, Jacob de Geer, founder of iZettle, which is in the process of being acquired by PayPal for $2.2 billion, and Samir Desai, cofounder of Funding Circle, which IPO’d at a valuation of $1.9 billion last month.

Calling for better treatment of stock options isn’t an entirely selfless action by these CEOs. The logic goes that better treatment of options will help them to compete with the larger paychecks offered by tech incumbents, large banks and consulting firms.

“Stock options are the single most important lever for companies to attract the best and brightest talent globally, and on that front the European landscape and frameworks are just not good enough,” Martin Mignot, the partner at Index Ventures who organized the letter, told Forbes.

The letter is also calling for the deregulation of nonvoting shares, a somewhat controversial move that would let founders dish out stock options to employees without fear of giving up control of their company.

Nonvoting shares have become a point of contention in the U.S., where their liberal use by the tech founders of Facebook, Snapchat and Google has led to concerns at the SEC that this class of shares is undermining proper corporate governance.

“It's a very different issue when you’re talking about the case of Facebook, where it was in relation to large shareholders and investors having fewer voting rights relative to Zuckerberg,” defended Mignot.

Whether or not a boom in nonvoting shares would be positive for Europe’s tech sector is unclear, but what’s certain is that today’s minefield of differing regulations around stock options is an obstacle to growth that Europe needs to clear.

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