Equity Incentive Programs

Equity incentive programs are a type of compensation structure used by companies to motivate employees, executives, or directors to contribute to the growth and success of the organization. These programs involve granting equity stakes, such as stock options or shares, to eligible participants in exchange for their hard work and dedication to achieving specific goals or milestones. The primary purpose of equity incentive programs is to align the interests of key personnel with those of shareholders, thereby driving business performance and increasing shareholder value.

Types of Equity Incentive Programs

Stock Options

Stock options are a popular form of equity compensation that gives participants the right to purchase a certain number of shares at a predetermined price (strike price) on or before a specified date (expiration date). If the company's stock price exceeds the strike price, participants can exercise their options and sell the shares for a profit.

Restricted Stock Units (RSUs)

RSUs are equity-based awards that vest over time and become eligible to be exercised or sold. Unlike stock options, RSUs do not require participants to exercise an option; instead, they receive a predetermined number of shares outright. This approach eliminates the need for employees to understand complex stock options terminology.

Performance Shares

Performance shares tie the participant's equity award to specific company performance metrics, such as revenue growth or earnings per share (EPS). These awards are typically granted in the form of restricted stock units (RSUs), and their vesting is contingent upon achieving the specified performance targets.