7+ Guide: What Does Vested Stock REALLY Mean?

what does vested stock mean

7+ Guide: What Does Vested Stock REALLY Mean?

Ownership of company shares granted as part of a compensation package becomes unconditional after a specified period of service. This means the recipient gains full rights to the stock and can exercise those rights, such as selling the shares, without restrictions. For instance, an employee might be granted shares that vest over four years, with 25% becoming fully owned each year they remain with the company.

This mechanism serves as a powerful tool for employee retention and alignment of interests. It incentivizes individuals to remain with the organization, contributing to its long-term success. The concept originated as a way to encourage loyalty and performance, aligning employee financial gains with the growth and profitability of the enterprise.

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