What it is:
How it works (Example):
Let's assume that John Doe receives options to buy 2,000 shares vest over a five-year period, meaning they do not become exercisable for five years.of Company XYZ, his employer, for $10 a share. He receives the grant as part of his compensation package. His
Accordingly, if Company ABC comes along and buys a 51% stake in Company XYZ and John Doe's options automatically vest, John could exercise his options at $10 a share, sell the shares for $20 a share, and walk away with a tidy.
Why it Matters:
board of directors normally must approve grants.grants are incentive compensation that encourage employees to do work that increases the price and thus shareholder value, which is the primary objective of all businesses. A company's