Question

9 Stock options and restricted stock Lo8 You recently spoke to a former classmate of yours who has worked for a start-up company since graduating from business school more than 10 years ago. She told you that she expects to receive some type of stock-based compensation in the near future. She has heard that she might receive stock options or a grant of restricted stock, but she is unsure of the difference. Required Explain to your friend the differences between stock options and grants of restricted stock

Answer 1

Restricted stock grant:

1)It represents actual ownership of a company. It has same rights and privileges same as common stock

2) The employee will have right to dividend distribution and right to vote in the annual general meeting

Stock option:

1)Here there is no ownership at time of issuance of stock options since it is option the ownership only comes when employee actually use rights to purchase stock.

2)Here they do not have any right to dividend or right to vote until the option is exercised