Employee Stock Purchase Plan - ESPP

Employee Stock Purchase Plan - ESPP

A company-run program in which participating employees can purchase company shares at a discounted price. Employees contribute to the plan through payroll deductions, which build up between the offering date and the purchase date. At the purchase date, the company uses the accumulated funds to purchase shares in the company on behalf of the participating employees. The amount of the discount depends on the specific plan but can be as much as 15% lower than the market price. Depending when you sell the shares, the disposition will be classified as either qualified or not qualified. If the position is sold two years after the offering date and at least one year after the purchase date, the shares will fall under a qualified disposition. If the shares are sold within two years of the offering date or one year after the purchase date the disposition will not be qualified. These positions will have different tax implications.

Statutory Stock Option

Statutory Stock Option

A Statutory stock option is also known as incentive stock options. This type of employee stock option gives participants an additional tax advantage that unqualified or non-statutory stock options do not. Statutory stock options require a plan document that clearly outlines how many options are to be given to which employees, and those employees must exercise their options within 10 years of receiving them. Furthermore, the option exercise price cannot be less than the market price of the stock at the time the option was granted. Statutory stock options cannot be sold until at least a year after the exercise date and two years after the date the option was granted. The taxation of statutory stock options can be somewhat complicated. Exercise of statutory stock options will not result in immediate declarable taxable income to the employee. Capital gains tax is then paid on the difference between the exercise and sale price. This type of option is also considered one of the preference items for the alternative minimum tax.

Employee Stock Option - ESO

Employee Stock Option - ESO

A stock option granted to specified employees of a company. ESOs carry the right, but not the obligation, to buy a certain amount of shares in the company at a predetermined price. An employee stock option is slightly different from a regular exchange-traded option because it is not generally traded on an exchange, and there is no put component. Furthermore, employees typically must wait a specified vesting period before being allowed to exercise the option. EThe idea behind stock options is to align incentives between the employees and shareholders of a company. Shareholders want to see the stock appreciate, so rewarding employees when the stock goes up ensures, in theory, that everyone is striving for the same goals. Critics point out, however, that there is a big difference between an option and the ownership of the underlying stock. If the stock goes down, the holder of an option would lose the opportunity for a bonus, but wouldn't feel the same pain as the owner of the stock. This is especially true with employee stock options because they are often granted without any cash outlay from the employee. Another problem with employee stock options is the debate over how to value them and the extent to which they are an expense on the income statement. This is an ongoing issue in the U.S. and most countries in the developed world.

Exempt Transaction

Exempt Transaction

A type of securities transaction where a business does not need to file registrations with any regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer's operations and that no new securities are being issued. Exempt transactions cut down the amount of paperwork needed for relatively minor transactions. For example, it would be a big hassle to perform a filing with the SEC every time a non-executive employee wanted to sell back some of the company's common shares he or she purchased as part of an employee stock purchase plan.

Accelerated Share Repurchase - ASR

Accelerated Share Repurchase - ASR

A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company. The shares are returned to the client through purchases in the open market, often purchased over a period that can range from one day to several months. Accelerated share repurchases allow corporations to transfer the risk of the stock buyback to the investment bank in return for a premium. The corporation is therefore able to immediately transfer a predetermined amount of money to the investment bank in return for its shares of stock. ASRs are often used to buy shares back at a faster pace and reduce the amount of shares outstanding right away.

Core Earnings defined by S&P

Core Earnings defined by S&P

The Standard and Poor's revised version of the measurement of core earnings, which excludes any gains related to pension activities, net revenues from the sale of assets, impairment of goodwill charges, prior-year charge and provision reversals, and settlements related to litigation or insurance claims. Expenses related to employee stock option grants, pensions, restructuring of present operations or any merger and acquisition costs, R&D purchases, write-downs of depreciable or amortizable operating assets, and unrealized gains/losses from hedging activities are all included in the core earnings. This is a new standard created by S&P with the assistance from the financial and investment community. These core earnings provide for transparency and consistency, as well as a more stringent definition of a company's core earnings, clearly setting out exactly what can and cannot be considered earnings and expenses.

Core Deposits

Core Deposits

The deposits made in a bank's natural demographic market. Banks count on core deposits as a stable source of funds for their lending base. Core deposits offer many advantages to banks, such as predictable costs and a measurement of the degree of customer loyalty. In addition to the advantages mentioned above, core deposits are generally less vulnerable to changes in short-term interest rates than core deposits or money market accounts. Core deposits also encompass small denomination time deposits, as well as checking accounts. Banks can increase their core deposits with local marketing and customer incentives.