Executive Stock Options and Stock Appreciation Rights

Executive Stock Options and Stock Appreciation Rights (SARs) are critical components of executive compensation, offering employees the potential for significant financial rewards. This comprehensive guide covers essential topics, including the various types of stock options—nonqualified (NQSOs) and incentive stock options (ISOs)—as well as stock appreciation rights. It explains SEC disclosure and registration requirements, liabilities under Section 16(b) and Rule 16b-3, and the intricacies of stock option repricing. It also explores complex issues like IRS rulings on gifts of compensatory stock options, self-repricing past options, and federal tax implications of dividing stock options in marital property settlements. Moreover, the text examines the granting of stock options to dual or leased employees. The guide provides a balanced view of the advantages and disadvantages for both the company and the optioned, alongside practical resources like sample forms, stock option plans for public and closely held companies, proxy statements, and stockholder disclosures. These materials are invaluable for professionals navigating the complexities of executive compensation.

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