Stock option
Also called executive stock options, NQSO, ISO.
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.
What it is
A stock option gives the executive the right to buy a share at a fixed exercise price, usually the grant-date market price, after vesting and before expiry (often seven to ten years). Value at grant for SCT purposes is a model value, not the spread—which is zero for a standard at-the-money option.
CompensationBase reports the SCT Option Awards column. It does not track later exercises or Form 4 sales. Realized option profit is a different series from grant-date pay.
Why companies use it
Options concentrate payoff on stock-price appreciation. Companies that want more leverage, or that remember 1990s-style packages, still grant them, sometimes as a minority of LTI.
Early-stage or high-growth issuers may prefer options so employees only win if the equity value rises.
Pros
- Shareholders do not transfer value unless the stock beats the strike.
- Long terms can create multi-year upside without a new grant each year.
- Exercise requires a decision; some executives hold rather than sell immediately.
Cons
- Underwater options have weak retention value.
- Grant-date fair value in the SCT is routinely mistaken for cash.
- Repricing or reload features, where they exist, are controversial and separately disclosed.
Examples
Ten-year option
Options granted in 2020 at $80 might be exercised in 2026 at $140. The $60 spread times shares is realized income that year. The 2020 SCT already showed a Black-Scholes amount that will not match that $60.
Expired worthless
The same 2020 grant expires in 2030 with the stock at $70. Realized value is zero. Historical SCT Totals still include the original fair value.
On CompensationBase
Option awards are the SCT column for these grants. CompensationBase does not track later exercises or Form 4 sales.
Related terms
- Option awards
The grant-date fair value of stock options and stock appreciation rights reported in the SCT Option Awards column.
- 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.
- Grant-date fair value
The accounting value of equity awards on the day they are granted, which is what the Summary Compensation Table reports for stock and option awards—not the value later realized when shares vest or are sold.