Should You Offer RSUs? Restricted Stock Units as an Attractive Executive Compensation Option

Top level talent remains in high demand, and many employers are seeking innovative ways to lure and retain executives. That can pose a challenge for many employers, in particular later stage start-ups, for whom stock option grants (traditionally a significant element of compensation) may be insufficient to recruit or retain employees.

In this situation, one potential solution is to grant Restricted Stock Units (RSUs).

What is an RSU?

An RSU is a contractual right to receive shares of stock in the future. Unlike a restricted stock award, where the employee is actually transferred stock on the date of grant, a person who is granted an RSU is not a stockholder on the date of grant.

RSUs, as with any other equity award, are normally issued under an equity incentive plan, and require approval by a company’s board of directors or compensation committee, as well as execution of an award agreement by the recipient of the RSUs.