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Performance Share Units (PSU) and What You Need to Know

Equity compensation becomes more prevalent the higher up the corporate ladder you climb. Many c-suite execs and top managers receive PSUs, or Performance Share Units, commonly referred to as performance shares. Non-qualified stock options (NQSO/NSO) are another vehicle that firms use to compensate employees. These options have the least amount of restrictions and are typically used to reward employees at every level.

What You Need to Know About Performance Shares (PSU)

Performance shares are granted when the company attains previously agreed-upon metrics. For instance, if the EPS reaches a target level, you may be awarded a certain amount of PSUs. The shares are typically distributed at certain periods in time, such as at annual or quarterly reviews.

Because these shares are typically given to key members of the company, the top managers of the firm are incentivized to help the firm grow and increase the value of the stock.

PSU stocks are also restricted stock. These types of stocks are rewards to employees based on their production as well as the value and longevity of the company they work for. After a set amount of time, these stocks can be sold or traded.

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