Definition of Restricted Stock



Restricted stock is the shares that are given to employees (executives and directors) as compensation for the services they have provided to the company and are termed as restricted because they are not transferable until the vesting conditions are met.

 


The restricted transferability of these shares is because they are not registered until vested and the directors might benefit from selling the stocks and have unfair advantages. The conditions attached to the restricted stocks can be performance-related and also time-related. For example, the employee has to achieve certain performance-related targets and complete a certain length of service with the company in order to vest the shares.

 

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