Is your role changing or were you recently promoted? Are stock options part of your new compensation package? If you answered ‘yes,’ this is no surprise. More and more companies are granting employee stock options (ESOs) to rank and file employees within compensation packages. ESOs can be a useful tool to attract, retain and motivate employees by aligning employee compensation with company growth. ESOs can also be a lucrative way for employees to grow wealth over time, however, they can be complex and difficult to understand. Familiarizing yourself with the basic concepts and terminology associated with ESOs is a good starting point.
While each stock option plan has its own rules, they all involve the transfer of an equity interest in a company to an employee in the form of compensation. In some cases, the employee is granted the right to purchase the equity interest. In others, they are simply given the shares upon meeting plan requirements, generally based 0n length of service.
