A restricted stock unit is compensation offered by an employer to an employee in the form of company stock.

The employee does not receive the stock immediately, but instead receives it according to a vesting plan and distribution schedule after achieving required performance milestones or upon remaining with the employer for a particular length of time. The restricted stock units RSU are assigned a fair market value when they vest. Upon vesting, they are considered income, and a portion of the shares are withheld to pay income taxes.

The employee receives the remaining shares and can sell them at any time. For example, suppose Madeline receives a job offer.

Because the company thinks Madeline's skill set is particularly valuable and hopes she will remain a long-term employee, it offers part of her compensation as RSUs, in addition to a generous salary and benefits. To give Madeline an incentive to stay with the company and receive the shares, it puts them on a five-year vesting schedule.

How Do Stock Options and RSUs Differ?

After one year of employment, Madeline will receive shares; after two years, another , and so on until she has received all shares at the end of five years. The RSUs, thus, give Madeline an incentive not only to stay with the company long term , but to help it perform well so that her shares will become more valuable.

What is Restricted Stock?

However, if Madeline had left the company after 18 months, she would have received only the shares that vested after year one. She would have forfeited the remaining shares to the company.

Dictionary Term Of The Day. A measure of what it costs an investment company to operate a mutual fund.

Restricted Stock Units Made Simple (Part 1): Understanding The Core Concepts - bozunoteyuta.web.fc2.com

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Restricted Stock Units (RSUs): Facts

Restricted Stock Unit Share. Vesting Graduated Vesting Vested Benefit Graded Vesting Fully Vested Cliff Vesting Stock Compensation Accelerated Vesting Vest Fleece.

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