Stock Options: Provides the employee with the right to buy at a specific price (the exercise price) for a given number of years. Incentive Stock Options (ISO’s): Options must be exercised within ten years of grant; must be exercised in the order of grant; and the exercise price of the option must be greater or equal to 100% of the stock’s market value at grant. Non-Qualified Stock Options: Options are not subject to the ISO infringements. Optionee has a tax event at exercise equal to the spread between the exercise price and the fair market value of the stock.
- Stock Appreciation Rights: Rights usually attached to stock options that enable executives to receive a direct payment for the related stock option gain during the options’ term without exercising the option.
- Key Elements: Awards are equivalent to share price appreciation.
- Company performance drives early vesting.
- Value of share may be tied to Company stock or other internal measure.
- Size of grants driven by company and individual performance.
- Typical plan life is five, seven, or ten years
Restricted Stock: Whole share grants made available to executives with restricted ownership rights. Generally, if the executive leaves the company before the end of the restriction, the stock must be returned to the company through a reversal of the initial transaction.
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