Basic Accounting Knowledge: Restricted Stock

2011/1/28 10:30:00 38

Restricted stock is an incentive mechanism designed specifically for a specific plan.

The so-called restricted stock is the right of the senior management of the company to sell the stock, which is restricted by the operator's stock.

Have

The right is restricted by certain conditions (for example,

limit

The period is three years.

The operator does not have to pay for the purchase of restricted stock, but they are not allowed to dispose of the stock arbitrarily during the period of restriction. If the operator resigns or is dismissed during the period of restriction, the stock will be confiscated accordingly.

The purpose of adopting restricted stock is to encourage senior managers to devote more time and energy to one or some long-term strategic objectives.

First of all, the Remuneration Committee expects that the stock price of the company should rise to a certain target price after the realization of the strategic goal.

company

The restricted stock is given to senior managers without compensation. Only when the market price of the stock reaches or exceeds the target price, senior managers can sell restricted stock and benefit from it.