Restricted stock units

Restricted stock units (RSUs) are an award of units that correspond in number and value to a specified
number of shares of employer stock that typically are subject to vesting requirements and transferability
restrictions. Units do not represent any actual ownership or equity interest.

Dividend and Voting Rights
RSUs have no voting or dividend rights. However, RSUs may accrue dividend equivalents. Dividend
equivalents may be paid currently or may be paid upon satisfaction of vesting requirements.
■ Time-based. Typically, RSUs will vest upon the completion of a time-based service requirement
(e.g., 3- to 5-year “cliff” service-based vesting).
■ Time-accelerated. Under this vesting method, an RSU award is subject to a time-based service
requirement but vesting is accelerated if a predetermined performance condition or market condition
is achieved prior to the completion of the time-based service requirement.
■ Performance-based. Performance-based RSUs are similar to Performance Shares, but with no
upside above target. Performance measures fall into one of the following two categories:
(i) performance conditions (e.g., EPS, ROE) or (ii) market conditions (e.g., stock price change or total
shareholder return vs. peers)
Settlement Date
A unit’s settlement date is a specified fixed date (e.g., vesting date or a certain date or event following
vesting date).
Deferral of Settlement Date
The RSU holder may be permitted to defer settlement to a later date.
Upon settlement, RSU may be paid in cash, shares of employer stock, or a combination of the two.
Value of cash settlement based upon fair market value of underlying shares on date of settlement.
Shareholder Approval
■ NYSE and NASDAQ listing requirements. An equity plan under which stock-settled RSUs may be
granted must be approved by shareholders pursuant to stock exchange listing rules. No shareholder
approval required if RSU must be settled in cash.
■ 162(m) requirements—service-based awards. RSU awards subject solely to service-based vesting
cannot qualify as “performance-based” compensation for purposes of IRC Section 162(m). However,
through the use of a “162(m) pool” plan, service-based restricted awards may be able to qualify as
“performance-based” compensation for purposes of IRC Section 162(m).


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