Here's a must read for startup employees and employers alike: On Forbes.com, Personal Capital CEO Bill Harris explains the critical knowledge gap about stock options in Silicon Valley.\r\n\r\nhere\u2019s a fissure that runs through Silicon Valley \u2013 and I don\u2019t mean the San Andreas fault. The gap that I\u2019m talking about is between tech companies and their employees. Tech companies bestow their most precious commodity \u2013 their stock \u2013 upon employees in the form of stock options. But most employees don\u2019t fully appreciate these incentives, because they don\u2019t know what they\u2019re worth.\r\n\r\nForget complex valuation methods like Black-Scholes \u2013 most employees do not even \u201cunderstand the basic economics of stock options,\u201d say Stanford professor David Larcker and Wharton\u2019s Richard Lambert in one study. In a different survey, employees with stock options reported that:\r\n\r\n \t39% knew \u201clittle\u201d or \u201cnothing\u201d about their options\r\n \t52% knew \u201clittle\u201d or \u201cnothing\u201d about the tax implications of exercising\r\n\r\nThe tax implications can be severe. In the 2000 tech bubble, many unfortunate tech workers exercised stock options on the way up, incurring a tax liability of, let\u2019s say, 35% of the value of the options when exercised. But they didn\u2019t sell. When the bubble burst, their shares were quickly worth less (or, in some cases worthless), but they still owed the tax on gains they never realized.\r\n\r\nSome companies offer some stock option data for their employees online. Some employees build a spreadsheet to calculate the value of their options. But the majority of employees don\u2019t do anything at all, and have nothing more that a vague notion of what their options are worth today, or could be worth in the future.\r\n\r\nAnd stock options are once again playing a big role in compensation among tech firms. Venture financing is up \u2013 $28.4 billion poured into the Valley in 2011, almost twice the level of two years before. This funding went into 3,700 different companies, almost all of which were issuers of stock options.\r\n\r\nContinue to the full article on Forbes.com...\r\n\r\nMore on employee stock options on Daily Capital.