Stock Awards Can Be a Powerful Executive Pay Element

Abstract

Unlike stock options, stock awards require no cash outlay for the stock. However, like stock options they are taxable as personal income. They are taxable at the point in time when a recipient has access to its value. Some stock awards have no restrictions and are taxable when granted but it is more common to have a restriction of time and/or performance before having access to the income. There are four possible combinations of number of shares and when the shares are received: (a) fixed number at a fixed date, (b) fixed number at a variable date, (c) variable number at a fixed date and (d) variable number at a variable date.