Zynga CEO responds to "false" Wall Street Journal article

Zynga CEO Mark Pincus has accused the Wall Street Journal of protraying his company in a "false and skewed light."

In an internal memo acquired by the Fortune blog Term Sheet, Pincus addressed a front-page article in the Wall Street Journal that accused him of "giver's remorse" over employee stock options.

"The Wall Street Journal posted a story last night...which paints our meritocracy in a false and skewed light," Pincus stated. "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 the company expanded, Pincus offered new employees stock options in lieu of a higher salary - a standard practice with silicon-valley start-ups. However, 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 looming IPO.

Allegedly, Zynga's reasoning is that some of its earliest employees made a smaller contribution to the success of the company than those hired later, who received less stock. In some cases, the sources said, employees were threatened with termination if they did not comply.

However, a subsequent post from Term Sheet's Dan Primack suggested that the Wall Street Journal had drawn erroneous conclusions from its sources' testimonies.

According to Primack, Zynga rarely fires under-performing employees, choosing instead to re-assign them to other positions in the company that might better suit their abilities. Part of this process involves transferring some or all of their unvested stock options to the replacement - vested options are not affected.

"Zynga is a non-unionised 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."

Primack acquired the internal memo following the publication of his post, and its contents seem to validate his assessment of the situation.

"Being a meritocracy is one of our core values and it's on our walls," Pincus wrote. "We believe that every employee deserves the same opportunity to lead. Its not about where or when you enter zynga its how far you can grow. This is what our culture of levelling up is all about and its one of our coolest features."

In October, several sources dated Zynga's IPO for just after the Thanksgiving holiday.