Stock options and stock awards as a form of compensation for executives in joint stock companies

Abstract

The paper studies international practice of the United States, as an example of the best legal framework and seasoned practice in regulating the rights and obligations both of the companies and employees during the stock awarding process. Likewise, this research is aimed at revealing the taxation specifics of that system. Afterward, the relevant Armenian legislation is analyzed. Based on this analysis Armenian legislation gaps are identified in order to prescribe the scope of reforms by which proper implementation of the employee rights may be ensured in the future. We cannot say for sure that employee ownership culture in Armenia will grow and will have the same huge effect on the country’s economy as it has in the US, because Armenian business culture and economic system strongly differs from the US and any comparison has significant limitations. However, this does not mean that the best practice of their legislation cannot be taken as a good example to follow and to make more incentives for that culture to be used in Armenian corporations as a tool to raise the success of the companies. The employees will take more responsibility to collect information, identify problems and work with management to provide solutions if there are certain long-term incentive programs, including stock options, in particular, time–based restricted stocks and restricted stock units as means for employees to obtain equity in the company. And for such mechanisms to function effectively a favorable legislative framework is necessary.