If you’re working for a company that’s publicly held or a start-up that has a credible path to initial public offering, ownership is on the table.
Employers can offer stock options, which are the right to purchase shares at a specified price — known as the strike price. Restricted stock units or RSUs, which are a promise to grant stock at a future date, are another possibility.
It can be difficult to compare these offers, said Emily Cervino, vice president of Fidelity Stock Plan Services
“Cash is cash,” she said. “But stock compensation isn’t easy to compare.
“It’s important to understand the vehicle that’s part of the discussion.”
Options have no intrinsic value until the share price exceeds the strike price. Meanwhile, restricted stock units are worth the share price on the day they vest.
Employers also place strings on these perks. Both options and RSUs are subject to vesting requirements; you need to work for the company for a specified period of time before you can tap the benefits.
“Understand your timing and your vesting schedules,” said Cervino at Fidelity. “It’s fair to assume most vesting happens over a three- or four-year cycle.”
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