Restricted Stock Unit

A Restricted Stock Unit (RSU) is a form of Equity compensation offered by an employer to an employee in the form of company Shares. RSUs are granted to employees as part of their compensation package, but the Shares are not issued to the employee until certain conditions are met, typically related to vesting. Vesting usually occurs over a specified period of time or is contingent upon achieving certain performance goals.

For example, a company might grant an employee 1,000 RSUs that vest over four years, with 25% vesting each year. This means that after one year, the employee would receive 250 Shares, after two years 500 Shares, and so on. Until the RSUs vest, the employee does not own the Shares and has no voting rights or dividends associated with them.

In a case where an employee leaves the company before the RSUs have fully vested, the unvested RSUs are typically forfeited. Conversely, if the employee remains with the company and meets the vesting requirements, they receive the Shares, which can then be sold or held according to the employee’s discretion.