Stock option expensing - Wikipedia

A restricted stock unit is compensation offered by an employer to an employee in the form of company stock. The employee does not receive the stock immediately, but instead receives it according to a vesting plan and distribution schedule after achieving required performance milestones or upon remaining with the employer for a particular length of time.

The restricted stock units RSU are assigned a fair market value when they vest. Upon vesting, they are considered income, and a portion of the shares are withheld to pay income taxes.

The employee receives the remaining shares and can sell them at any time. For example, suppose Madeline receives a job offer.

Because the company thinks Madeline's skill set is particularly valuable and hopes she will remain a long-term employee, it offers part of her compensation as RSUs, in addition to a generous salary and benefits.

To give Madeline an incentive to stay with the company and receive the shares, it puts them on a five-year vesting schedule. After one year of employment, Madeline will receive shares; after two years, another , and so on until she has received all shares at the end of five years.

The RSUs, thus, give Madeline an incentive not only to stay with the company long term , but to help it perform well so that her shares will become more valuable. However, if Madeline had left the company after 18 months, she would have received only the shares that vested after year one. She would have forfeited the remaining shares to the company.

Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund.

RSUs vs. Options: Why RSUs (Restricted Stock Units) Could be Better Than Stock Options At Your Private Company - Capshare Blog

Latest Videos PeerStreet Offers New Way to Bet on Housing New to Buying Bitcoin? This Mistake Could Cost You Guides Stock Basics Economics Basics Options Basics Exam Prep Series 7 Exam CFA Level 1 Series 65 Exam.

Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. Restricted Stock Unit Share.

Startup Negotiations: How Preferred Stock Makes Employee Stock Less ValuableSTOCK OPTION COUNSEL

Vesting Graduated Vesting Vested Benefit Graded Vesting Fully Vested Cliff Vesting Stock Compensation Accelerated Vesting Vest Fleece. Content Library Articles Terms Videos Guides Slideshows FAQs Calculators Chart Advisor Stock Analysis Stock Simulator FXtrader Exam Prep Quizzer Net Worth Calculator.

Work With Investopedia About Us Advertise With Us Write For Us Contact Us Careers. Get Free Newsletters Newsletters. All Rights Reserved Terms Of Use Privacy Policy.