It absolutely happens. I worked as an early employee at a company for its first 11 months … the founder was the main investor and a serial entrepreneur. He clashed with the CTO from the start and progress stalled … after a major disagreement, he decided he would rather sell the company to a competitor than continue to deal with the CTO. At the 11 month mark we were all told that we were fired, the company was shutting down, and and if we wanted severance, we’d have to sign away our rights to any claims from the sale.

Companies do let people go to avoid granting stock. Banks also do it to stiff employees on their bonus. For startups it’s a forcing function to decide if they want to keep someone. (I’m not saying this is right, just explaining why it happens)

Happened to me.

Why would avoiding paying employees benefits be short-sighted thinking? If anything it was short sighted of the US government to ban increased wages during WWII - leading to employers paying benefits which gums up the labor market.

I could see that with a 2-5 year cliff but 12 months is not a long time in a job.

Sure, and they do. It’s best to avoid that incentive by having stock grants vest frequently and fractionally. It’s essentially treated as salary, it might as well be paid out fractionally at the same frequency as salary so that no perverse incentives exist.

This isn't complicated. If an employee is having a bad first year or the company is performing poorly it incentivizes firing.

Much less so, because productivity is low in the first few months.

Companies sure don't act that way given that people generally need to leave for a raise.