Restricted stock, and its nearly identical twin restricted stock units (RSUs), denotes an outright grant of company stock to employees or other service providers. The stock is "restricted" because it is subject to a vesting schedule, which can be based on time or performance goals, and is governed by other limits on transfers or sales that the company can impose.
Note: Don't confuse restricted stock with restricted securities, which are very different. (Restricted securities are shares not registered with the SEC or shares owned by a senior executive and resold under SEC Rule 144 or another exemption.) Technically, the phrase "restricted shares" also refers to restricted securities, though some companies use "restricted shares" to mean restricted stock grants.
Before dilution concerns and changes in stock option accounting made restricted stock and RSUs more attractive to companies, these awards were usually granted only to key employees and executives. Many companies now grant restricted stock and RSUs more broadly to employees and managers either in place of stock options or in combination with them. A survey of 200 major companies by Charles Schwab in 2009 found that 64% now grant restricted stock/RSUs, and this figure is creeping up on stock options (71% of the companies).
For more survey data about stock grants, and for related examples, see another FAQ. |
