Restricted stock units (RSU) are a form of stock-based compensation used to reward employees. RSUs will vest at some point in the future and, unlike stock options, will have some value upon vesting unless the underlying company stock becomes worthless.
What is a restricted share award?
Restricted Share Awards or “Clogged Shares” are shares awarded to employees where the employee owns the shares up-front, but is restricted from dealing in them for a period of time.
What happens when restricted stock is awarded to an employee?
Employees are motivated to act and think like owners of the company when they are awarded restricted stock. This is because, when the restricted stock vests, the employee automatically becomes a part-owner of the company and is entitled to vote during special and annual general meetings.
What’s the difference between restricted shares and restricted shares?
Share. A: Restricted shares refer to shares of stock whose sale or acquisition is subject to specific restrictions laid out by the issuing company and agreed upon by the eventual owner of the restricted shares.
Why are restricted shares awarded to insiders?
Insiders are often awarded restricted shares after a merger or other major corporate event. The restrictions are intended to deter premature selling that might adversely affect the company. An executive who leaves the company fails to meet performance goals or runs afoul of SEC trading restrictions may have to forfeit their restricted stock.
What’s the difference between an RSU and restricted stock award?
An RSU that is converted to a stock carries the standard voting rights for the class of stock issued. A restricted stock award is similar to an RSU in a number of ways, except for the fact that the award also comes with voting rights. This is because the employee owns the stock immediately once it is awarded.
