Employee Stock Option Vs. Employee Stock Ownership
There are many differences between employee stock options and employee stock ownership. According to the U.S. Securities and Exchange Commission, many people often confuse employee stock options with employee stock ownership.
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Employee Stock Option Vs. Employee Stock Ownership
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Employee Stock Options are stock plans between employees and the companies they work for. Employers allow employees to purchase shares in the company, usually at a fixed price. The Employee Stock Ownership Plan (ESOP) offered by employees is a plan for retirement. Shares are given to employees, usually based on their rate of pay.
ESOPs tax benefits
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The National Center for Employee Ownership (NCEO) offers information on employee stock ownership and its benefits. Employee stock ownership plans offer a number of tax benefits to a company. For example, stock contributions and dividends are considered tax deductible expenses.
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Growth in ESOPs
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CNN Money reported that employee participation in plans was one million in 1990. According to the NCEO, today more than 13 million people are covered by ESOPs.
Stock Options
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There are two basic kinds of employee stock options: incentive and non-qualified.
Important terminology
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CNN Money shares important employee stock options terms. Some important terms are exercise, exercise period and award price. Exercise is the employee's right to buy shares of the company's stock. The exercise period refers to the starting and ending dates between which the shares must be purchased. The award price is the agreed upon price at which the employee can buy the shares.
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