Equity Compensation

Equity Law Group in Boston

Employers often want employees to think like company owners. They issue stock, stock options, or other equity equivalents, such as phantom stock. Companies offer various ways for employees to gain ownership, and each method affects both the company and the employee differently. Employers.

Employees can take legal action if a company cancels stock options or grants wrongly, breaches option agreements, or terminates options improperly.

We now live in the Say-on-Pay era, which brings many consequences. Say-on-Pay requires some companies to ask shareholders to vote on executive compensation. While shareholders usually cannot enforce the vote, it can significantly influence outcomes.

So, what does this mean in practice? Companies typically compensate executives with equity or equity-style grants. Each agreement differs, so employees should carefully review the plan and grant details. They should check the strike price, acceleration provisions, benefits, and exercise dates.

The most common types of equity are:

• Incentive Stock Options (ISOs) only companies can grant to employees. They provide favorable tax treatment. Typically, employees can purchase stock at a predetermined price. ISOs are the most common equity for employees.
• Non-Qualified Stock Options (NQSOs) work like ISOs but lack favorable tax treatment. Employees pay taxes on any profit when they purchase stock below market value.
• Stock Settled Appreciation Rights (SSARs) give employees stock equal to the value increase since the agreement date.
• Phantom Stock works like SSARs, but companies pay employees in cash instead of stock. The cash equals the stock’s value increase, but employees receive no shares.
• Restricted Stock Grants give employees a fixed number of shares. The company may repurchase or reclaim the shares under the grant agreement.
• Restricted Stock Units (RSUs) give employees stock at a future date. The company may also reclaim these shares. RSUs often appear in newer companies that seek growth.

Understanding your company’s equity offering is crucial. It helps you know your benefits and recognize if the company violates its equity grant agreement. Each stock type has its own rules and affects employees differently. If you negotiate a grant, suspect a breach, or believe you earned equity that you never received, contact us today. Employers.

Click here to view our FAQs on Executive Compensation.

This information does not provide a do-it-yourself guide for resolving employment disputes or handling litigation. While it explains basic issues and legal context, it does not replace experienced legal counsel. contact the team at Gordon Law Group to discuss your specific case.