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Is it Better to be Paid in Shares or Cash? Comments

  • By Jocelyn Black Hodes, DailyWorth's Resident Financial Advisor
  • April 18, 2013

is it better to be paid in shares or cash?

I'm interested in better understanding employee stock options. What does it mean to "pay out in shares" instead of to "pay out in cash"? Also, can you explain in layman's terms what "equity compensation grants" are? Thanks!

Lea, Ann Arbor, MI

"Pay out in shares" means you get shares of company stock, which could gain or lose value during the time you own them. You could potentially make significant money if you manage to sell those shares when the stock price is high—or the stock could go down in value.

"Pay out in cash" means you get straight cash that wouldn't have the chance to grow or lose value unless you invested it on your own. Many would argue that if you have the option to take shares or cash, taking cash is smarter—as long as you put it to work for you in other investments!

"Equity compensation grants" are a way for companies who may not be able (or want) to pay higher salaries to attract and keep quality employees. An employee with grants has the right to exchange them for shares of company stock. Keep in mind that stock options can have complicated tax implications, so you should consult a qualified accountant for more clarity on how you might be affected.

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