Question

If you were on the Board of Directors for a publicly traded company, what type of share-based compensation (Stock options, RSU’s, SAR’s, etc.) would you choose as part of your executive compensation packages and why? ( Answer should be 75-100 words only)

Answer 1

Stock Options are a form of compensation given to employees which gives them right to exercise a fixed number of shares of the company at a discounted price.

RSU are another way of granting shares of the company to the employees. It is of worth even if the share price of the stock falls down drastically.

SAR is Stock Appreciation right which gives the employee money as a bonus or as an appreciation if the company performs well.

If I was on the Board of Directors for a publicly traded company, In would have opted for SAR as part of my executive compensation package. Usually, the board try to align the actions of the directors with their compensation contracts. Pay for performance is the concept which is used mostly, Risk and reward go hand in hand. Also, no money is required to be paid in order to exercise the shares. Automatically, proceeds are received to the employee on exercise without paying for the same.