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Restricted Stock: Performance Shares

Does this website's content on performance shares also apply to performance share units or performance-vesting RSUs?
Companies use various names for the different types of performance-based awards. Generally, this website uses "performance shares" as an umbrella term covering all grants in which the vesting or payout of company shares is contingent on meeting predetermined goals (not just the passage of time). There are, however, three small differences among the various grant types:
  1. With performance stock units and performance-vesting RSUs (we refer to both as PSUs), you are not a shareholder until the actual delivery of the shares, so you do not have voting rights, and the company does not need to pay you any dividends that it may issue to shareholders.
  2. PSU grants to executives sometimes include features that allow the deferral of taxation beyond vesting. These features are not permitted with regular performance shares.
  3. With PSUs, you cannot make a Section 83(b) election to be taxed on the value of the award at grant. However, given the risk of failing to earn the award after paying taxes on the value at grant, it is very unlikely you would make this election for any type of performance-vesting award.

The reasons why your company may or may not grant PSUs instead of performance shares are similar to the reasons that influence a company's choice of RSUs or restricted stock (see a related FAQ).

To avoid duplicating the same content for the two basic types of performance grants, this website's content on performance shares is written to apply to all of the related grant types. You can therefore assume that the use of the term "performance shares" includes PSUs unless a difference is indicated.

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