TikTok continues to display its Chinese roots, with the latest scandal being that employees, past and present, are at risk of seeing their entire holdings seized should they talk badly of the company. The potential seizure comes from a non-disparagement clause embedded in the firm’s shareholder agreements.
The shareholder agreement, as per Fortune, is said to specifically state that shareholders can’t, “directly or indirectly make any critical, adverse or disparaging statement or comment about the Company or any of the Company’s subsidiaries, affiliates, directors, officers, or employees.”
Failure to comply results in the immediate forfeiture of restricted share units, potentially amounting to substantial financial losses for employees.
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TikTok, like many tech firms, utilizes restricted stock units as a means of incentivizing employee loyalty and dedication. However, the inclusion of a clause penalizing any form of criticism against the company in these agreements is a noteworthy departure from industry norms. While such non-disparagement clauses are not entirely uncommon in various contractual agreements, their presence within shareholder agreements is less typical.
READ: US House Panel Approves Bill That Could Force TikTok Sale
Of course, the interpretation of what constitutes disparagement is ambiguous. Critics argue that the vague language employed in TikTok’s clause makes it challenging for employees to discern acceptable boundaries for criticism. In terms of legality, legal experts have stated that as long as it does not obstruct the filing of complaints with government agencies (or prevent or intimidate employees from doing so), then it may be legally sound.
Unsurprisingly TikTok has refrained from commenting on inquiries regarding the implementation of its non-disparagement clause and whether it has ever enforced stock forfeiture as a consequence.
Information for this briefing was found via Fortune and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
