How do restricted stocks, treasury stocks and stock appreciation rights benefit employees?

By Investopedia Staff AAA
A:

Restricted stock represents any equity that is conditionally given or sold to an insider as compensation or as part of an employee stock option plan. Generally, this type of stock restricts the investor from selling the shares in the short run to make a quick profit. Furthermore, the investor may be required to stay with the company for a certain amount of time before he or she will be allowed to trade the security. In theory, this type of stock only benefits an employee if he or she does a good job of working with the company for the long run. Because the employee can only gain the full benefits of owning this stock by staying with the company for a number of years, it is in the employee's best interest to show good work performance in order to increase the value of the company. If all goes well, after a couple of years the employee will own a valuable stock, which can then be sold for a profit. (For more on this, see Option Compensation - Part One and The "True" Cost Of Stock Options.)

Company treasury stock refers to shares that have been repurchased by their issuer. The main intent of company treasury stock is to lower the number of outstanding shares. When a company repurchases stock, it benefits investors by causing an overall increase in share price. This type of stock can either be canceled or held by the company to later be resold on the market or used to fund stock option plans. (For more info, read A Breakdown Of Stock Buybacks.)

Stock appreciation rights are rights that a company gives to particular employees that allow them to receive bonuses based on the appreciation of the company's stock over a specific time period. These rights benefit employees in the same way that owning a call option would; the more the share price increases over the time period, the greater the bonus the employee will receive.

RELATED FAQS

  1. How much money do real estate agents make?

    Learn about the salaries of top earners in the real estate industry and how factors, such as location, can raise or lower ...
  2. Does my employer's matching contribution count towards the maximum I can contribute ...

    Maximize 401(k) contributions on your own without fear; employer contributions are separate and do not hinder you contributing ...
  3. How does the Bureau of Labor Statistics define contingent workers?

    Discover how contingent workers are a significant part of the labor force and are defined as persons who do not expect their ...
  4. Can I still set up an SEP if one of my employees refuses to participate?

    You can establish the SEP IRA, even if the employee refuses to participant. However, you would need to establish an IRA for ...
RELATED TERMS
  1. Employer's Liability Insurance

    A product for employers that protects them from major financial ...
  2. Strategic Management

    The management of an organization’s resources in order to achieve ...
  3. Performance Management

    The management of employees, departments, and organizations to ...
  4. Social Enterprise

    An organization that is directly involved in the sale of goods ...
  5. LLC Operating Agreement

    An LLC Operating Agreement is a document that customizes the ...
  6. Succession Planning

    A strategy for passing each key leadership role within a company ...
comments powered by Disqus
Related Articles
  1. Examples Of Using SWOT Analysis To Get ...
    Investing Basics

    Examples Of Using SWOT Analysis To Get ...

  2. The Top Technical Indicators For Options ...
    Options & Futures

    The Top Technical Indicators For Options ...

  3. How To Buy Oil Options
    Options & Futures

    How To Buy Oil Options

  4. The Economics of Hulu, Netflix, Redbox ...
    Investing News

    The Economics of Hulu, Netflix, Redbox ...

  5. How To Become A Corporate Board Member ...
    Personal Finance

    How To Become A Corporate Board Member ...

Trading Center