Distinguish between stock option and Restricted share unit (RSU).

The major differences between stock option and Restricted share unit (RSU) are as follows −

Stock Option

• It is right to employee to buy fixed share at a fixed price and time.

• The employees receive stock after vesting period.

• Stock is used as a mode of payment.

• Taxes on non- qualified stock and incentive stock.

• Market price (stock) is greater than grant price.

• The shareholders have full rights.

• There are voting rights and dividends.

• There is no exercise price.

Restricted Share Unit (RSU)

• It is an assurance by a company to pay the amount of stock/cash after questing period is completed.

• The employees can get tax benefits after vesting period.

• The mode is payment is either stock or cash.

• Taxes on regular income.

• Value gains in RSU.

• Shareholders have limited rights.

• An exercise price will be based on market price.