''options'', ''restricted units'', ''imaginative instruments''?

Question

Hi,Please have a look at this:You need to be participating actively in devising new measures of performance and linking them tightly to reward vehicles. In the past these rewards vehicles have been cash, options, stock, restricted units, and more imaginative instruments. The whole compensation arena has become very complex, and the new economic environment is making it even more so. Most options granted over the last five years are now under water.What do the bold parts mean? (especially 'options')Many thanks,Nessie.

Mister Micawber · Accepted Answer

An 'option' is an opportunity to buy the company's stock. ' Restricted units' are stock that can only be sold/given to e.g. employees.  'More imaginative instruments' are other less common liquid assets of some unspecified kinds-- I have no idea, offhand, what might be available.

Nessie000 · Answer

Thank you very much, MM, but... I'm still not very clear. If 'option' here mean the right to buy the company's stock, then why does it have to be in plural ('options')? And more important is: doesn't it make the sentence seem odd? - "In the past these reward vehicles have been cash, the rights to buy stock, stock, stock that can only be sold/given to employees..." => it's all about stock, so why didn't the writer simply say 'stock'? +_+

By the way, I'm still very confused about those 'imaginative instruments'...

Please shed some light on this.

Thank you very very much

Mister Micawber · Answer

I am not able to explain the whole field of financial instruments to you--it is a complex and arcane business. Please do some research at [url=http://www.investopedia.com/dictionary/default.asp]INVESTOPEDIA[/url] or at other financial investment websites.

Avangi · Answer

Hi, Nessie,
This is a very specialized field - "a complex and arcane business," as MrM has said. If I understood it I'd probably be rich.
"Imaginative instruments" is delibrately obscure.
Question: "What did you and Bill do on your date last night?"
Answer: "You'll just have to use your imagination."
My guess is that these instruments would be constructed in such a way that your compensation would be hard to trace - "under the table," so to speak. "It's better that we not be too specific about it."
The line about "under water" is quite important. Executives now know that the "special compensation packages" which they were offered in the past have turned out to be worthless, because of the crash, or whatever you want to call it. Plus, everybody's ****** about what some of these guys did get, in view of what the public considers to be poor performance; so everybody's going to be under a microscope.
So how are you going to attract good people? With money, of course. But the compensation packages will probably have to be even more "imaginative" than before.

What does a company have that it can offer its employees besides cash? Stock. That's about it. In the past, during the boom years, you could offer an option to buy X shares of stock in five years at a specific discount price. Assuming the stock value continues to soar, this could be worth a fortune.
Why didn't the writer simply say "stock"? He's telling the story about performance and compensation. Compensation is mostly in the form of stock. The different types of stock deals is a big part of the story. He's just telling it like it is.

Why "options" in the plural? An option is an instrument. Each one is a specific document with specific details - like an IOU. (Some types of options are actually traded on the market.) An employee's contract, or terms of employment, would probably include several such documents. (This is not the same as saying he has several options/choices!)

''options'', ''restricted units'', ''imaginative instruments''?

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