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Glossary

Understand compensation, equity, and the decisions that shape your career.

Glossary

Annual Equity Grant / Refresh Grant

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A cashless exercise is a method of exercising a Stock Option where the cost of exercising, and often the associated tax withholding, is netted out of the transaction automatically rather than requiring you to pay the Strike Price out of pocket.

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Certification / Certification Date

Certification is the point after a performance period ends when the board or compensation committee formally confirms actual performance results and applies the resulting Performance Multiplier.

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Cliff Vesting

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Common Stock

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Compensation Committee

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Disqualifying Disposition

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Fair Market Value (FMV)

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Forfeiture

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Graded Vesting

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Grant Date

The grant date is the date on which an equity award is officially awarded to you.

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Grant Notice

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Incentive Stock Option (ISO)

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In-the-Money / Out-of-the-Money

These terms describe an option's relationship between the current stock price and its Strike Price.

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Liquidation Preference

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Long-Term Capital Gains

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LTIP (Long-Term Incentive Plan)

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Material Nonpublic Information

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Modifier

A modifier describes a role a metric can play in a PSU (or short-term incentive) design, as distinct from being the primary driver of payout.

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Negative Discretion

Negative discretion is a right many incentive plans (both short-term and long-term) reserve for the compensation committee to reduce a calculated, formulaic payout after the fact.

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Non-Qualified Stock Option (NQSO)

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Option Expiration

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Ordinary Income

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Performance Multiplier

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Performance Period

The performance period is the defined span of time over which performance is measured for a PSU or other performance-based award before a payout is determined.

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Performance Stock Unit (PSU)

A PSU is an equity award where the number of shares is determined by whether specified performance conditions are met over a defined performance period.

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Plan Document

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Preferred Stock

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Proxy Statement

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Qualifying Disposition

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Relative Total Shareholder Return (rTSR)

Relative TSR is a metric that measures a company's stock price performance, plus dividends, against a peer group or index over the performance period.

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Retention Bonus

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Spread

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Stock Option

A stock option is a form of equity compensation that offers you the right, but not the obligation, to purchase a set number of company shares at a fixed price established at grant (known as the strike price).

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Straight-Line Interpolation

Straight-line interpolation (more commonly known as a sliding scale) is the methodology used to translate a result between levels into a payout that falls proportionally in between the corresponding percentages.

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Strike Price

The strike price is the fixed price at which you're entitled to purchase shares under a stock option plan.

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Tax Withholding

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Threshold / Target / Maximum Payout

This is the set of three performance levels built into most short-term and long-term incentive plans that use performance conditions.

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Tranche

A tranche is the portion of an award that vests on a single, distinct date

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True Cost of Leaving

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Vesting

Vesting is the process by which an executive earns ownership of an equity award.

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Vesting Commencement Date

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Vesting Schedule

A vesting schedule is the specific timeline and structure that governs when tranches (or portions of an award) vest

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Restricted Stock Unit (RSU)

An RSU is a promise by your employer to deliver shares of company stock to you at a future date.