SARs, or Stock appreciation rights, are a type of employee compensation offered by the organization through the company's stock price during a predetermined period.

1. WHAT ARE STOCK
APPRECIATION
RIGHTS (SARS)?

2. STOCK APPRECIATION
RIGHTS
SARs, or Stock appreciation rights, are a type of
employee compensation offered by the
organization through the company's stock price
during a predetermined period

3. SARs are highly profitable for working employees
when the company's stock value rises, which
typically makes them identical to ESOs (employee
stock options)
Nevertheless, employees don't have to pay any
exercise price with SARs as they either receive
the sum of the increase in cash or stock!

4. HOW DO SARS WORK?
SARs are similar to stock options, as they both have a set price, vesting
period, and expiry date
Once the SARs pass the expiry day,
the proceeds will be paid in cash,
shares, or a combination of both,
depending on the regulations of an
employee's plan
If the employee receives just the
shares, they will be treated as any
other stock in a brokerage
account
01 02

5. SPECIAL CONSIDERATIONS FOR
SARS
In some ways, SARs are as same
as phantom stock; but the major
difference is that phantom
stocks are typically reflective of
stock splits and dividends
Phantom stock is a promise that
an employee will receive either
the value of the company's
shares or the amount that the
stock price increases during a
specified period

6. ADVANTAGES
OF SARS
The greatest advantage of SARs is
flexibility, as companies can structure
SARs in multiple ways that work best
for different employees
Companies that offer SARs should
decide which employees receive
them, the liquidity of the SARs, the
value of these bonuses, and vesting
rules to adopt
Employees expect their efforts
to influence the future course of
the stock's market value, and
SARs will motivate such efforts

7. DISADVANTAGES
OF SARS
A major disadvantage with stock
appreciation rights is if the stock
price depreciates
When it happens, employees will
incur losses if the stock appreciation
rights are exercised
This can also demotivate
employees and increase the
employee turnover rate

8. TYPES OF SARS
Stand-alone SARs
Stand-alone shares are granted as
independent instruments
This type of SARs is not issued in
conjunction with any other stock option
1.
2.
Tandem SARs
Tandem SARs are granted with a Non-Qualified
Stock Option or an Incentive Stock Option
So it entitles the holders to exercise it as an
option or a SAR
The election of a single type of exercise can
prevent it from being exercised as another
1.
2.
3.

9. TAX TREATMENTS
FOR SARS
SARs generally are subject to the same tax treatment as
non-qualified stock options (NSOs)
Employers or organizations must shoulder the
administrative burden of collecting withholding tax and
submitting it to the Internal Revenue Service (IRS)
It also bears several disadvantages, including finding
funds to exercise the stock option, paying tax on the
employee benefit and gain, paying stock broker
commissions on any trades, and risk of market price
decline in the underlying stock
1.
2.
3.

10. SARS GLOBALLY
SARs are implemented globally as a
means of incentivizing employees
SARs are steadily being recognized as an
effective mechanism of stock-based
compensation and, more notably, as a
viable alternative to ESOPs

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