Restricted Stock: Performance Shares
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Articles (Jump to FAQs)
Bruce Brumberg
NEW! A growing number of companies are making stock grants that base your profit on more than just your continued employment or an increase in stock price. As companies take a "portfolio approach" to stock compensation, you may be granted performance shares along with restricted stock and stock options. In Part 1 of this series, learn about the structure of performance share grants.
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FAQs (Jump to articles)
Restricted stock shares are issued up front at grant, but you do not own them outright and cannot sell or transfer the shares until the restrictions lapse. With standard restricted stock units the situation is similar, except that...
Surveys show that rank-and-file employees and executives are likely to receive fewer stock options, or that grants will be made only at higher levels. In addition, the types of equity grants at companies have changed. A summary of data in surveys from 10 major consulting and research firms shows that...
Some companies let the standard time-based vesting schedule accelerate if...
These long-term incentive plans have performance targets that, when reached by the end of the measurement period (e.g., a three-year period), trigger vesting or payout according to the structure of the plan. The payout can be all or nothing of the target payout (100% or 0%), or the grant size can be based on a sliding scale that gives you less than or even more than the target grant size. Performance share grants with payouts that can exceed the target (e.g., 150%) for exceptional performance can provide...
Not for standard time-vested restricted stock. These grants do not have a term, as stock options do. Whether restricted stock vests or not depends on...
Performance shares result in ordinary income to you. This occurs when the grant vests after specified targets are reached and shares are then either delivered or paid out to you (depending on the structure of the grant). Your compensation is...
You need to complete a Schedule D, Capital Gains and Losses, for the year of the sale of your stock and file it with your Form 1040 federal income-tax return. You do this even if you are only...
Consulting firms have studied the use of stock compensation in both developed and emerging economies. Stock options remain popular, but interest is growing in restricted stock/RSUs and performance shares. Among surveyed countries...
Companies set the exercise price at some premium to the current market price as an additional...
In these grants the exercise price is equal to the fair market price on the grant date, but the grant vests only when certain targets, such as...
Within two business days of the grant, you file Form 4 electronically under the SEC's Section 16 rules. At vesting, depending on the withholding method...
This depends on what triggers vesting. Section 162(m) of the tax code limits your company's deduction to $1 million unless a senior officer's compensation over this amount meets the performance-based exception. Stock grants are structured to meet this by...
Delaying the delivery of RSU shares (and thus ordinary income taxes) at vesting depends on whether your company has a provision for this in its stock plan. Deferral is not...
With stock grants of normal size, you face no tax impact beyond the standard tax treatment. ISOs may be converted to NQSOs should any acceleration of vesting cause...
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