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Simple English definitions for legal terms
stock-appreciation right
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A quick definition of stock-appreciation right:
Stock-Appreciation Right: A type of benefit that is often given with a stock option. When you use the stock-appreciation right, you get paid the value of the option (usually in cash) and the option is cancelled at the same time.
This is a way for companies to reward their employees for their hard work and dedication. It's like getting a bonus for doing a good job!
Abbreviation: SAR
A more thorough explanation:
A stock-appreciation right (SAR) is a type of financial instrument that is often granted alongside a stock option. It gives the holder the right to receive the value of the option in cash when exercised, while also canceling the option.
For example, let's say an employee is granted a stock option to purchase 100 shares of their company's stock at $50 per share. If the stock price rises to $70 per share, the employee could exercise their SAR and receive the difference in value ($20 per share) in cash, without having to actually purchase the shares.
Another example would be if a company grants SARs to its executives as part of their compensation package. If the company's stock price increases significantly, the executives could exercise their SARs and receive a cash payout without having to sell any of their actual shares.
Overall, SARs are a way for companies to incentivize their employees or executives by giving them the opportunity to benefit from the appreciation of the company's stock without having to actually purchase or sell any shares.