Questions Employees Should Ask About Stock Awards
If you receive a stock award from an employer, you become a part-owner of the company and can benefit if its share price goes higher. Like any other investment, though, stock awards come with risks. If your company grants you a stock award or you're considering a job that includes equity compensation, here are a few questions to consider:
Employee stock option plans (ESOPs) and restricted stock units (RSUs) are among the most common types of equity compensation. An employee stock option is a contract that grants you the right to buy shares in your employer's company at a specific, fixed price, known as the exercise price, after a designated date. An RSU, in contrast, is granted to an employee without any out-of-pocket costs but typically provides limited ownership rights.
There are other types of employee stock awards, including stock appreciation rights (SARs), which allow you to profit from an increase in a company's stock price without ever having to buy the stock. With SARs, you'll only benefit if shares rise, and you won't face losses in the case of a stock price falling. Restrictions are typically involved, including that you remain employed and in good standing.
Source Fool.com
