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Trading systems disclaimer dubai
Providing stock to employees is an effective way of compensating and leveraging ownership. It is a common practice among technology and public companies. Although a stock plan can be constructed for a private company, it is less prevalent.
The appeal of stock is twofold: It provides a variable compensation opportunity to employees while not using cash. Additionally, it creates a link between employees and shareholders.
Stock options are typically issued as either option grants or stock purchase options. Other variations of stock options which are used less regularly, include restricted stock, phantom stock, and stock appreciation rights SAR's. Option grants can be set up either as Incentive stock options ISO's or non-qualified. These differ in their tax treatment when exercised. Typically stock options are awarded upon approval by the Board of Directors.
The grant price of the stock options equals the market price on the date granted. Employees with stock options realize a gain to the extent that the market price is greater than the grant price.
Employees can realize the gain when they exercise the stock purchase it at the grant price , and sell the stock on the open market assuming the market price is higher than the grant price. Stock options can only be exercised after they have vested. Stock Purchase plans allow employees to purchase the company stock at a discount through payroll deductions. They are very common and popular among companies that have publicly traded stock. Establish a reserve of company stock for employee stock programs.
This reserve is visible to the shareholders who typically are the ones who grant additional share reserves. Effective management of this finite reserve is advised. Establish a policy of when to grant new hire shares.
These are typically awarded to senior level employees, but can apply to all employees. High level management and key individual contributors receive a larger number of shares than lower level employees. Establish a policy on granting ongoing options to employees.
Ongoing options can be granted on a regular basis or at management's discretion. If on a regular basis, allocate shares of stock to departments based on headcount, value of skills, and levels of employees. New grants can either be automatically issued or awarded based upon performance or contribution. Again, it is typical for higher level employees to receive more shares than lower level employees.
Establish a stock option vesting schedule. Stock options are typically granted, with the approval of the Board of Directors, shortly after the employee's hire date. Ongoing stock options are typically granted near the anniversary of the employee's hire, or at the same time of the year for all stock option recipients. Issue periodic statements to holders of stock options which summarize their vesting status, number of shares and grant price, etc.
Provide educational material for employees who have received stock option grants. Establish a reserve of company stock for the stock purchase plan. Employees buy stock through payroll deductions. Other features and requirements of a stock purchase plan include: Employee contributions cannot be accelerated or decrease during a six month purchase period. Withdrawal from the plan is possible but only the amount of pay contributed to the plan is refunded and no stock is issued.
The plan is provided at the discretion of the company and can be modified or canceled. Once an employee is enrolled in the plan the employee does not have to re-enroll for successive purchase periods. Publicize the plan to employees and encourage their participation.
Establishing a stock option plan requires legal assistance. Track stock option awards and vesting Issue stock option statements for employees Report stock option grants by employees to identify possible inequities.
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