GlossarySummary Compensation Table columns
Option awards
Also called option award, SAR awards.
The grant-date fair value of stock options and stock appreciation rights reported in the SCT Option Awards column.
What it is
Option awards in the SCT are the grant-date fair value of stock options and, when the filing uses those headers, stock appreciation rights. The value usually comes from an option-pricing model (assumptions live in footnotes): volatility, term, interest rate, dividends, exercise price.
The executive does not receive that model value in cash. Realized value, if any, is the spread at exercise, years later—or zero if the options stay underwater.
Why companies use it
Options reward stock-price appreciation above the exercise price. Boards that want more leverage than RSUs, or that want a grant to be worth nothing if the stock does not rise, still use them.
Some companies mix options with RSUs so part of LTI is full-value and part is appreciation-only.
Pros
- No value unless the stock exceeds the strike (for standard at-the-money options).
- Can cover more shares than an RSU grant of the same accounting value, increasing leverage.
- Cash is not paid at grant.
Cons
- Grant-date fair value is easy to misread as money in the bank.
- Underwater options can leave a “paid” executive with nothing from that grant.
- Dilution and overhang from large option pools are real costs to shareholders.
Examples
At-the-money grant
Options on 400,000 shares struck at $50 might be valued at $8 million under ASC 718. If the stock is $48 at expiry, realized value is zero. The SCT still showed $8 million in the grant year.
SARs in the same column
Stock appreciation rights that settle in cash or shares are often reported under Option Awards. CompensationBase follows that mapping.
On CompensationBase
Option awards include stock options and stock appreciation rights when filings use those headers. Value is grant-date fair value, which can later be worth much more or nothing.
Related terms
- Stock option
The right to buy company stock at a set strike price. The SCT reports the option’s grant-date fair value; realized gain depends on later exercise and the stock price.
- Stock appreciation right
A cash- or stock-settled award equal to the increase in share price over a base price. Filings often group SARs with option awards, and CompensationBase maps those headers to Option Awards.
- ASC 718
The U.S. accounting standard for share-based payment. SCT stock and option columns use ASC 718 grant-date fair value, which is why CompensationBase labels amounts as grant-date fair value as reported.
- Stock awards
The grant-date fair value of stock-based awards (typically RSUs, restricted stock, and PSUs) reported in the SCT Stock Awards column.