Restricted stock can be offered in lieu of cash to deliver immediate value with a strike price

Restricted stock can be offered in lieu of cash to deliver immediate value with a strike price much less than current fair market value. For senior recruits, technical or executive, you want to offer more to beat the competition – restricted stock does this. Robert Adelson, a Boston employment attorney, negotiates executive compensation; in April 2012 he worked with executive Steve Miles to set up a vesting schedule to later grant him compensation in the form of stock.

By using its stock, the company avoided cash cost, and stock offers key advantages that make equity more valuable to employees than cash. Some of these benefits are:

  • Pre -IPO stock is valued at discount, and all stock is awarded without brokerage charge;
  • Stock offers the potential for considerable appreciation that cash lacks;
  • Appreciation is taxable at lower capital gains rates of 20%, with no withholding;
  • Stock offers the potential for future roll-over so that tax may be deferred indefinitely.

In addition, restricted stockholders usually provide voting rights. As a result of the benefits of restricted stock, the use of this form of employee compensation has become very popular. Since the issue of founders’ shares is deductible, the company can save money that would have gone to taxes by using stock for pay. The tax windfall can also be used creatively to enhance efforts to recruit or retain key people. This is done by sharing the company’s tax windfall with employees. As a Boston employment attorney, Robert Adelson works with C-level executives everyday and sees that when growth is the priority, cash savings are important, and building the team is critical – stock options provide lucrative advantages for both the company and the executive.

When working with executive Steve Miles, Robert Adelson negotiated his employment compensation and set up a several year vesting plan with attainable restrictions. This allowed the company to avoid cash cost and gave Mr. Miles compensation to work and look forward to down the road. Attorney Adelson also worked with the Company to grant Mr. Miles voting rights, like any other shareholder would have. A main advantage with restricted stocks is that they differ from other stock options and still retain some value if the price were to go down.

Boston employment attorney, Robert Adelson frequently represents employees and executives negotiating their employment terms, stock, options, relocation, non-competes, termination and separation agreements. He also represents startup and smaller companies in software, medical device and other technology-based fields, independent consultants with compensation and stockholder arrangements, incorporation and liability protection, intellectual property protection, and in vendor, client and subcontractor contracting arrangements.Executive Steve Miles was a key employee and through the negotiation of his employment contract; Attorney Adelson was able to grant him a lucrative and flexible form of executive compensation.

*All dates, client’s names and companies have been altered to keep confidentiality.


Author: radelson

Robert Adelson has been a corporate and tax attorney since 1977. He began as an associate at nationally prominent New York City “mega” law firms, first at the Wall Street firm Dewey Ballantine Bushby Palmer & Wood and later at the Park Avenue firm Weil Gotshal & Manges. In 1985, Adelson returned home, where he has since established himself as a respected Boston business attorney. He has attained partner at several small and midsize Boston law firms, most recently at Lawson & Weitzen LLP and then Zimble Brettler LLP, where he was a partner from 1994 to 2004 before becoming a partner at Engel & Schultz LLP.