What is stock grant?
Company buys shares from open market and gives them to its staff according to an incentive programme.
What is stock option?
A company issues papers to its employees giving them the right to subscribe to shares of the company at a pre-determined price (usually below current market price) after a certain vesting period.
Both forms of incentive plan enable the company to motivate employees to achieve superior performance as well as to align the interests of employees and shareholders’.
Both costs of incentive plan have to be expensed off against profit.
Expenses incurred to do stock grant is tax deductible as per cash compensation to employees. Stock option expenses are NOT tax deductible.
Determination of cost for stock grant is more definitive. There has been constant debate over the valuation of stock options.
SIA, SembCorp Industries, SMRT and StarHub, are recent adopters that have awarded employees with stock grants for the first time this year.
More expected to follow forth.