Shooting For Overtime With Your Tax Return: IRS Filing Extensions, How To Get One, And Stock Comp Planning For 2018
Survey: Gap Between Equity Comp Aspiration And Action Shows Need For Employee Education And Financial Advice

Stock Comp In The News: Grants At Apple, Starbucks, And Tesla Show The Versatility Of Equity Compensation

At myStockOptions.com, we never tire of seeing our favorite subjects in the news. In fact, our daily routine here includes keeping up with stories about stock compensation that make their way into the popular news media. Three recent big developments at high-profile companies show the versatility of stock compensation, from broad-based grants for rank-and-file employees to carefully crafted long-term incentives for corporate CEOs.

The business news media widely reported Apple's decision in January to issue grants of restricted stock units worth $2,500 to each of its employees (see, for example, Apple Gives Employees $2,500 Bonuses After New Tax Law, Bloomberg). The Apple news blog 9to5Mac published the text of the email that CEO Tim Cook sent to Apple's employees about the grant and other increased or new benefits. His statement nicely expresses the importance of stock grants and the reasons why companies award them broadly to employees:

I'm excited to let you know that we're also increasing our investment in our most important resource—our people. You are the heart and soul of Apple and we want you to share in the success made possible through your efforts. Your dedication helps Apple make the best products in the world, surprise and delight our customers, and ultimately make the world a better place.

To show our support for our team and our confidence in Apple's future, we’ll be issuing a grant of $2,500 in restricted stock units to all individual contributors and management up to and including Senior Managers worldwide. Both full-time and part-time employees across all aspects of Apple’s business are eligible.

Meanwhile, Starbucks announced stock grants to all eligible full-time, part-time, hourly, and salaried employees at stores, support centers, and bean-roasting plants (see Starbucks Gives Workers Raises, Stock Grants Due To Tax Law in the Seattle Times). In April, for example, Starbucks granted $500 worth of its stock to every retail partner and $2,000 in stock to each store manager. These grants, which have a one-year vesting period, were awarded in addition to what those employees were already receiving this year. According to the Starbucks press release announcing the new program, the grants have a total value of more than $100 million.

Naturally, major equity awards for celebrity CEOs always attract prominent media attention. A good example occurred when Tesla recently granted stock options to nerd hero Elon Musk, the much-admired CEO of both Tesla and SpaceX, as reported by major media outlets (see, for example, Tesla Shareholders Approve Pay Plan For Elon Musk Worth Up To $55 Billion Over 10 Years in the Los Angeles Times).

The grant to Mr. Musk is 100% stock options—but this is not your typical stock option grant. In fact, Tesla's new award to its CEO has some of the most detailed performance-based vesting features that we have ever seen for stock options. According to Tesla's announcement of the award and its proxy statement for the related shareholder vote, the stock options (worth $2.6 billion) can vest in 12 tranches depending on whether Tesla achieves key marketplace and operational performance milestones over 10 years. Each tranche equals 1% of the company's outstanding shares.

Tesla needs to hit 12 market capitalization milestones and 16 revenue or EBITDA operational targets for the award to vest in full. It has to reach a market cap of $100 billion for the first tranche to vest, and then each of the remaining 11 tranches require an additional $50 billion in market value. (Whew. We told you the grant was detailed!)

For more examples, including extensive survey data, that reveal equity comp trends among major companies, see a detailed FAQ at myStockOptions.


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