The Kentucky Directors Stock Appreciation Rights Plan is a compensation program offered by American Annuity Group, Inc. for its directors in the state of Kentucky. This plan aims to reward and incentivize directors for their commitment and contribution to the company's success. Under this plan, directors are granted stock appreciation rights (SARS) as a form of compensation. SARS is a type of equity-based incentive that allows the directors to benefit from the appreciation in the company's stock price over a specified period of time. This means that if the stock price increases, the directors have the opportunity to gain a financial benefit. The Kentucky Directors Stock Appreciation Rights Plan follows specific guidelines and regulations set by Kentucky state laws. It is designed to align the interests of the directors with those of the company and its shareholders, encouraging long-term commitment and performance. One of the key features of this plan is that it provides directors with the potential to benefit from the company's growth without the need to purchase actual shares of stock. Instead, they receive hypothetical units that reflect the increase in stock value. When the SARS vest, directors can choose to convert them into actual shares or receive a cash settlement based on the market value of those units. The Kentucky Directors Stock Appreciation Rights Plan of American Annuity Group, Inc. offers various types of SARS, including: 1. Full Value SARS: Directors receive the full value of the SARS in either shares or cash upon vesting, depending on their choice. 2. Tandem SARS: Directors receive both stock options and SARS concurrently, giving them the flexibility to choose the form of compensation that suits them best. 3. Performance-based SARS: Directors earn SARS based on the achievement of specific performance targets set by the company. This type of SAR aligns director's compensation directly with the company's performance. Overall, the Kentucky Directors Stock Appreciation Rights Plan of American Annuity Group, Inc. provides a means for the company to attract and retain talented directors in Kentucky by offering them a potential financial benefit tied to the company's growth and performance. It serves as a valuable tool for aligning the interests of directors with those of the company and its shareholders.
Kentucky Directors Stock Appreciation Rights Plan of American Annuity Group, Inc.
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SARs are taxed the same way as non-qualified stock options (NSOs). There are no tax consequences of any kind on either the grant date or when they are vested. However, participants must recognize ordinary income on the spread at the time of exercise. 2 Most employers will also withhold supplemental federal income tax.
The rights are valued once, divided evenly over the vesting period and marked as rights paid in capital. For example, a company that issues $5,000 in rights with a five-year vesting period would debit compensation expense for $1,000 and credit rights paid in capital for $1,000 once a year for five years.
What Are the Advantages of Stock Appreciation Rights? One of the benefits of SARs is that there is no money required to exercise them for cash. An employee automatically receives the proceeds from an exercise without having to pay for the cost of the shares.
Key Points: Stock appreciation rights are granted as part of a compensation package. They're issued with a grant date, exercise price, vesting date, and expiration date. The grant of an SAR is a non-taxable event.
Stock Appreciation Right (SAR) entitles an employee, who is a shareholder in a company, to a cash payment proportionate to the appreciation of stock traded on a public exchange market. SAR programs provide companies with the flexibility to structure the compensation scheme in a way that suits their beneficiaries.
There are no U.S. federal income tax consequences when an employee is granted SARs. However, at exercise an employee will recognize compensation income on the fair market value of the amount received at vesting. An employer is generally obligated to withhold taxes.
In accounting, the process that the company uses to record SAR agreements is to accrue a liability and recognize expense over the term of service. At the end of the service period, the liability is settled in cash or stock (or both).
Once a SAR vests, an employee can exercise it at any time prior to its expiration. The proceeds will be paid either in cash, shares, or a combination of cash and shares depending on the rules of an employee's plan.