If the only restriction is time-based vesting, companies account for restricted stock by first determining the total compensation cost at the time the award is made. Careful plan structuring can avoid this problem. Any restrictions could be imposed, however. Restricted stock is, by definition, stock that has been granted to an executive that is nontransferable and subject to forfeiture under certain conditions, such as termination of employment or failure to meet either corporate or personal performance benchmarks. Also, why not just stick with stock options? Many receive cash instead of stock, so unless they hold stock, they do not have shareholder rights.
Stock options are risky -- if the underlying stock never pierces the strike price, the options remain worthless. Restricted Shares Restricted shares have, when vested, the same value as normal.
Why is it restricted?
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Will Your Money Last Through Retirement?
Restricted Stock Units seem like a natural fit because they are quite similar to options. Pros and Cons of Restricted Stock Units (RSUs) Restricted Stock Units (RSUs) are a company’s promise to give shares or cash to an employee in the future. The increasing use of Restricted Stock Units (RSUs) has led to a good deal of confusion about their use and how similar they are to stock options. The increasing use of Restricted Stock Units (RSUs) has led to a good deal of confusion about their use and how similar they are to stock options. Welcome to the Wealthfront Knowledge Center. Issuing restricted stock is a better motivating tool than granting stock options for two reasons. First, many employees don't understand stock options.