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Deferred Stock Units

The right to receive shares of common stock at a future date, such as a retirement date. This right is usually subject to vesting. Deferred stock units can earn the equivalent of any cash dividends, usually payable into more deferred stock units, but they can't be voted. These can be the same as or different than restricted stock units, depending on how your company uses these terms and designs its plan.

For example, a company may offer deferred stock units to encourage board members to convert all or part of their annual cash retainer into these. When a nonemployee director retires from the board, the company then issues shares from the corporate treasury equal in number to the deferred stock units acquired until the retirement date. To encourage deferral, companies may add a match (e.g. 20%) to any voluntarily deferred cash compensation.

See also the related FAQ elsewhere on this website.

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