Stock Appreciation Right (SAR)
Candlefocus EditorSARs are an attractive form of compensation for employers since they do not result in the dilution of the company’s stock price. Unlike employee stock options, SARs do not require the issuance of new shares nor do they have expiry dates. SARs are also easier to implement from the employer’s perspective, and are often less expensive to administer.
When an SAR is granted, it requires the employee to wait until the stock price reaches a predetermined level - usually above the current market price - before the SAR is rewarded. Depending on the company’s terms, the employee may be rewarded with a lump sum of cash, or they may receive a portion of the appreciation gains in cash and the remainder in shares. Some companies may also include restrictions on the transfer of the employee’s SARs, such as a waiting period or a vesting period.
Overall, SARs are a great way for employers to reward their employees with payments based on the company’s stock performance without incurring the high overhead costs associated with stock options. They also don’t have the expiry dates common with stock options, and provide more flexibility to employers as to when and at what level to reward their employees. In addition, SARs offer employers more control over the size and timing of cash payments to employees, as well as more choice when it comes to the form of compensation.