Equity Compensation Types and Tax Treatment


Summary

This practice note discusses the basic types and tax treatment of equity compensation awards companies use as part of their overall compensation program. Whether a company is privately or public held, many reasons favor designing compensation arrangements to feature equity compensation. Compensation tied to the value of the company creates a direct link between the company's performance and the employee's compensation, aligning the interests of the company's employees with those of its shareholders. Equity compensation can also create an ownership mentality in the company's employees, incentivizing behavior and performance that adds to the company's value.