Why are RSUs better than stock options?
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Last Update vor 3 Jahren
RSUs mitigate a lot of tax and financial risks that often come with stock options. For example, to exercise the stock option and pay off taxes, the worker might have to pay out thousands of dollars in personal funds. If the stock option is not exercised within a set time frame, it could expire and the worker receives nothing.
In addition, if the market value of the stock goes “underwater,” the worker will essentially lose money. There are also additional tax liability and compliance concerns with stock options like possibly having to do Section 409A valuations.
With RSUs, the worker doesn’t have to pay out anything and any tax liability may be covered by the liquidity event that accompanies the settlement of the RSUs into actual company shares. Likewise, there is no risk of workers losing money with RSUs as they don’t have to pay anything to be able to acquire it. So long as the company’s stock is worth something, the worker will receive an asset with a net value.