RSU, an acronym for Restricted Stock Unit, refers to a form of compensation that some companies offer to employees. It represents a promise by the employer to award future shares of company stock to the employee, typically as an incentive or reward for their performance or retention. An RSU is granted to an employee at no cost when issued, but it usually comes with certain restrictions, such as a vesting schedule or performance goals, which determine when the shares are transferred to the employee's ownership.
RSUs are commonly used as part of employee stock compensation plans, especially in the technology and finance sectors, to align the interests of employees with that of the company's shareholders. When the RSUs vest, the employee receives the promised number of company shares, which they can then sell or hold as per their choice. The value of the RSUs typically depends on the current market price of the company's stock at the time of vesting.
One significant benefit of RSUs is that they offer employees a sense of ownership in the company, as they have a potential stake in its success. This can serve as an additional motivation to increase productivity and contribute to the company's growth. However, RSUs also pose certain risks, such as fluctuations in the stock price and the potential for capital gains taxes when the shares are sold.
In summary, RSU refers to a type of equity-based compensation plan where employees receive units of company stock as a reward or incentive, subject to certain restrictions and conditions.
