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Understanding Employee Stock Options

understanding employee stock options guide for sale. When accepting stock options as a part of an overall compensation package, the employee needs to carefully review two documents:

  • The Individual Stock Option Grant

  • The Company Stock Option Plan

I have found that many employees have no real understanding of  the necessary  questions to ask when negotiating the equity (stock option) portion of their overall compensation package.

Use this checklist as you prepare your research for a salary negotiation, or your next performance review, or when you are in line for a promotion. Some of these questions are essential to understanding the value of your stock option award, and others simply help explain the implications of certain events or situations.

Don't be surprised if you have options now and can't answer some of these questions - they're not all obvious, even to people who have received stock options before.

The ten most important questions about your stock options are as follows.

  1. What type of options have you been offered?

  2. How many options do you get?

  3. How many shares in the company are outstanding and how many have been approved?

  4. What is your strike price?

  5. How liquid are your options, or how liquid will they be?

  6. What is the vesting schedule for your shares?

  7. Will you get accelerated vesting if your company is acquired or merges with another company?

  8. How long must you hold your shares after an IPO, merger, or acquisition?

  9. When you exercise your options, do you need to pay with cash, or will the company float you the exercise price?

  10. What kinds of statements and forms do you get or do you need to fill out?

Especially if you are in a privately held company.  The burden is on the employee to educate his or herself on how much they are worth in the marketplace. Additionally, I have worked in companies where the senior management team did not understand the simple mechanics of stock option pricing.  The pointers in the document for sale below are proven and sound.  They will help you get a better deal.

If you are in a pre-IPO company, how well you negotiate your option package could very well be the difference between tens and hundreds of thousands of dollars if your company is acquired or goes public.


Downloadable Microsoft Word file, 21 Pages

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