Equity compensation
Equity compensation rewards work through shares, rights to acquire shares or payments linked to a company's share value.
The type of award matters. An option gives you a right to buy shares at a stated exercise price under the plan's conditions. Restricted stock units, or RSUs, have their own terms for earning and receiving the award. Vesting describes when you earn rights under the plan, often through continued service or performance. The grant documents should explain the schedule and what happens when employment ends.
An advertised value can change with the share price and the award's conditions. Check whether and when shares can be sold before counting them towards near-term spending. Tax treatment also varies by country and award type. In the United States, IRS guidance distinguishes statutory and nonstatutory stock options and explains that tax consequences can arise at different stages. Cross-border work can make an individual assessment particularly important.
Example
An offer includes options that vest over four years. The candidate asks for the exercise price, vesting schedule and departure rules before comparing the award with another employer's cash bonus.
What to check
- What instrument, quantity and vesting conditions are being offered?
- What would exercising or selling require, including any deadlines?
- Which tax rules apply to your circumstances and the award?