Dan Walter’s Answer on Quora
Restricted Stock Units (RSUs) are a form of employee equity compensation that is an analog for restricted stock. RSUs are NOT actually stock, until they are fully vested and released. Between the Award Date and the Vesting Date RSUs are simply a contract between the the company and the participant. The contract defines how and when the company will deliver the value of the units to the participant. As a general rule: One Unit has the value of One Share of company stock.
RSUs may vest based only on time elapsed (“service based vesting”) or, performance conditions (company growth, Relative-TSR and just about anything else), or upon a corporate event (Change in Control, IPO etc…) or a combination of these. When a performance condition is included the common vernacular is Performance Unit.
I wrote an introductory article on the topic that readers may find useful. Equity Compensation – Restricted Stock Units (RSUs), Downside Protection with a Couple Downsides
For those of you more visually inclined: Here’s a presentation that compares a wide variety of equity compensation instruments. Equity Compensation – Comparison of Plan Types: Including Stock Optio…
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