Restricted Stock: Basics
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Articles (Jump to FAQs)
Richard Friedman
Your company is no longer granting you stock options, or at least fewer than before. Instead, you're receiving restricted stock or restricted stock units. While these grants don't carry the same upside as stock options, they have benefits you will surely appreciate once you understand the special features of these grants.
Bruce Brumberg and Kate Victory
UPDATED! Your company has awarded you restricted stock. Restricted stock grants carry their own requirements, which you need to understand before you can profit from them. In Part 1 we discuss the rules and restrictions of vesting and sale.
Bruce Brumberg
myStockOptions.com
PowerPoint presentation (in PDF) that Bruce Brumberg, editor-in-chief of myStockOptions.com, developed for talks and meetings on restricted stock and RSUs. (Premium members can view it and may request permission to use it at their companies.)
Elayne Robertson Demby
Workforce Management, 1/04
For employees, there are tradeoffs in having restricted stock instead of stock options: less risk but also less chance of becoming a millionaire.
Kathleen Pender
San Francisco Chronicle, 7/10/03
Which type of equity compensation is better for employees and outside shareholders: restricted stock or stock options?
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FAQs (Jump to articles)
Generally, yes, with two exceptions. First, with RSUs you cannot...
Restricted stock refers to outright grants of company stock to employees or other service providers...
Restricted stock always has some value to you even when the stock price drops below the price on the date of grant...
Starting with the broad grants of RSUs at Microsoft and Amazon, recent corporate practices suggest it is more likely that your company will grant you...
Stock grants, such as options or restricted stock, are typically determined by the group or person that sets cash compensation levels and bonuses at your company. The full board, compensation committee, or authorized officer of the company then...
In most instances, stock grants are subject to the same types of...
Though this varies from industry to industry and among peer companies, most companies use a combination of...
Some companies have more than one stock plan. When a company offers just one omnibus plan...
Depending on the type of equity award, a stock grant agreement can be...
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...
In a public company the shares are usually granted at no cost to you...
The calculation is simple. You multiply the number of shares you received by the...
Your grant is adjusted according to the split ratio that applies...
Typically, though you cannot transfer them until vesting, shares of restricted stock are issued to you and are outstanding in your name. Therefore...
Instead of paying cash dividends, a small number of companies require...
Usually the shares are legended with the restrictions, and they are often...
A vesting schedule dictates when you may exercise your stock options or when the forfeiture restrictions lapse on restricted stock. A schedule is time-based if you must...
Yes. Vesting schedules provide for either "cliff" vesting or "graded" vesting...
Graded vesting is more common than cliff vesting...
Unlike in some benefit plans, service for time-vested option and restricted stock grants is rarely...
Yes. You forfeit whatever stock has not vested...
Generally, yes, assuming this termination is made for good-faith reasons, such as business downsizing. Most employees are "at will," which means...
"Releasing" restricted stock is the process by which your company transfers or "frees" shares to you when...
The "lapse" is the end of the restriction that prevented the shares from vesting and being transferred to you. The lapse election is the method by which you choose withholding methods and what will be done with the...
Yes. After it vests, it is stock that you own outright like any other stock...
Whether you hold stock certificates or hold your shares in a brokerage account, you will probably need the assistance of a stockbroker...
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