Restricted stock and RSUs – Choosing a compensation tool

Description

Abstract: Restricted stock and restricted stock units (RSUs) have gained popularity in recent years as a compensation tool. With restricted stock, the company awards executives nontransferable shares up front, and those shares are forfeitable until they have vested. The company typically bases vesting on continued employment, achievement of performance goals, or both. With RSUs, however, the company awards the stock, or sometimes its cash value, after the executive meets vesting conditions. Restricted stock and RSUs generally retain value despite market volatility and cause less ownership dilution. But this article explains why restricted stock can be risky for employees, while RSUs offer several benefits for the employer.