Simple English definitions for legal terms
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A type of employee compensation plan where employees receive hypothetical shares of company stock, but do not actually own the stock. The value of the shares is based on the performance of the company's actual stock.
Example: John works for XYZ Corporation and is part of their shadow stock plan. The plan gives him hypothetical shares of the company's stock, which will increase or decrease in value based on the performance of the actual stock. At the end of the year, John's hypothetical shares are worth $10,000, which he can then cash out or reinvest.
This example illustrates how a shadow stock plan works. Employees receive a form of compensation that is tied to the performance of the company's stock, but they do not actually own the stock.