Phantom Stock and Stock Appreciation Rights (SARs)

Provided by: The National Center For Employee Ownership
Topic: Software
Format: HTML
For many companies, the route to employee ownership is through a formal employee ownership plan such as an ESOP, 401(k) plan, stock option, or employee stock purchase plan (ESPPs - a regulated stock purchase plan with specific tax benefits). But for others, these plans, because of cost, regulatory requirements, corporate considerations, or other issues are not best suited. Other companies may have one or more of these plans but want to supplement them for certain employees with another kind of plan. For these companies, phantom stock and stock appreciation rights are very attractive. This article provides a brief overview of the design, implementation, accounting, valuation, tax, and legal issues for the plans like Phantom stock is simply a promise to pay a bonus in the form of the equivalent of either the value of company shares or the increase in that value over a period of time. A Stock Appreciation Right (SAR) is much like phantom stock, except it provides the right to the monetary equivalent of the increase in the value of a specified number of shares over a specified period of time. To get the details of these plans refer to the article.

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