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What happens to executive compensation in a divorce?

On Behalf of | Aug 3, 2021 | Divorce |

If you’re going through a divorce in New Jersey, this situation can quickly become complicated. Unfortunately, things can get even more complex if you’re divorcing an executive or someone else in a high-level role within a company. These complexities arise from most executives having several types of financial holdings. Here’s a closer look at some of the common things you might encounter.

Company stock

It’s common for many executives to receive part of their compensation in company stock. This situation is often a win-win for both parties. If a company does well, its stock price should increase. This situation can also motivate an executive to work hard and achieve great results for a business. When this happens, an executive could end up having shares that became much more valuable than they initially were.

Vesting periods

Another thing that can become an issue when divorcing an executive is a vesting period, which is how long an executive must wait before exercising their stock options. In most cases, vesting periods can last anywhere between one and five years.

This situation typically happens when companies offer stocks for a grant price. If a company performs well in the future, buying stocks at a grant price can lead to sizeable profits in the future. If the company doesn’t end up performing well, these stocks might not be worth fighting for during the property division stage of the divorce proceedings.

Restricted stock awards

You might also run into the complications associated with restricted stock awards. Operating similarly to options, restricted stock awards have vesting periods. However, this type of stock gets taken off the table if an executive parts ways with the company during the vesting period.

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