The term employee stock grants and awards refers to two types of compensation programs that provide a select group of employees with a fixed number of shares of common stock at the current market price, a discount, or free of charge. Stock grants and awards provide these employees with an immediate opportunity to share in the ownership of the company.
These grants can be transferred to the employee unrestricted, or with restrictions.
Unlike stock purchase plans, which are considered non-compensatory and provide employees with the ability to purchase shares of the company's common stock at a discount, stock grants and awards are typically provided to a select group of employees the company desires to retain.
These plans provide employees with an immediate transfer of company ownership by granting or awarding the employee with shares of common stock they can purchase at a discount or receive free of charge. Generally, these plans fall into one of the following two categories:
While the vesting schedules associated with restricted shares appears to be advantageous to the employee, if the market price of the company's common stock rises rapidly, the bargain element may be considerably higher than when first granted. The tax law allows employees to lock in this compensation through the use of a Section 83(b) election.
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