Insight
Employee options, RSUs, and PSUs are not interchangeable
Options, RSUs, and PSUs can all deliver equity value to employees, but their payoffs, conditions, valuation inputs, and accounting patterns differ.
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Options provide leveraged upside
An option has an exercise price. It delivers value only when the share price exceeds that price, and its fair value reflects time, volatility, dividends, rates, and expected exercise behavior. A conventional option therefore requires more than multiplying the number of awards by the current share value.
RSUs track the underlying share more directly
An RSU generally promises a share or cash after vesting. A plain service-based RSU may be valued with reference to the underlying share, adjusted for differences such as dividend rights. Settlement, deferral, and special conditions can change that analysis.
PSUs add a performance framework
A PSU adds a metric, measurement period, and payout curve. Operational goals are performance conditions; stock-price or total-shareholder-return goals are market conditions. The distinction matters because ASC 718 treats them differently.
Comparing awards requires attention to expected value, dilution, risk, employee incentives, and accounting—not just the target number of units granted.
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