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Stock Option Vesting: Can it Predate the Board Approval?

Dan Ryan's Profile

Quick question about stock option vesting for some grants we are looking at: Can the vesting date pre-date the grant date? In other words, if we hire someone June 1 but the board meeting to approve their new hire grant is not until July 15th, can we give them vesting that starts at their first date of work or do we have to wait until the board approval date to start their vesting?

Answers

Mark Stokes
Title: CFO
Company: Private
(CFO, Private) |

So long as your Stock Option Plan (that thing your board approved that allows the company to grant options in the first place) allows for it, it should be fine. Our plan does and we routinely grant options with vesting that starts as of the employee's first day even though the board does not approve the grants until our quarterly board meetings. Clearly the options are not "approved" until the board approves them, so you do need to take care in how you describe this to your employees. Let them know that "once approved by the board" their options will have a vesting commencement of X date. So in short, make sure your option plan allows this, but otherwise it's typically fine (the only caveat there being that some companies put operating policies in place that dictate things such as vesting dates - you need to know if such a thing exists for your company). Hope that helps.

Anonymous
(Senior Accountant) |

Hi Mark, thank you for your answer. Follow up question I have is, if the option starts to vest (on start date) before it is "granted" by the board. How would you record the costs incurred between the vest start date and the grant date? Thank you!

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