Restricted Stock Unit (RSU)

A restricted stock unit is a promise by a company to deliver shares once a vesting condition is satisfied, most commonly continued employment through a stated schedule such as ratable vesting over three or four years. The holder owns no shares until the units settle; until then the award is a contractual right, not an equity stake. Unlike a stock option, an RSU requires no exercise price, so it delivers value whenever it vests at whatever the stock is then worth, even if the price is flat or lower than it was on the grant date. That no-purchase-price feature is a large part of why RSUs now make up a bigger share of typical long-term incentive grants than options do.

An RSU is the time-based counterpart to a performance stock unit. Where a PSU’s payout depends on hitting pre-set performance goals over a multi-year period, a standard RSU’s vesting depends only on the passage of time and the executive remaining employed. Some awards blend the two by attaching a performance condition to only part of a grant, which is why the line between “time-based” and “performance-based” is not always clean in a single company’s disclosure.

The grant-date fair value reported for a time-based RSU is the most mechanical of the equity valuations: the number of units granted multiplied by the stock price on the grant date, with no probability modeling of a performance condition. That simplicity is one reason RSU grant values are more directly comparable across companies than PSU values, and why the same unit count granted on different days carries a different reported value.

At vesting, the company settles the units by delivering shares, or in some plans by delivering cash equal to the shares’ value. Settlement commonly happens net of tax withholding, meaning the company withholds a portion of the shares to cover the holder’s income tax rather than issuing the full count and collecting cash separately. The shares delivered at settlement are the point at which the recipient becomes an actual shareholder.

An RSU holder generally has no voting rights before settlement, because no shares have been issued. Dividend treatment is less uniform: some plans credit dividend equivalents on unvested units, paying them out only when the units vest, while others pay nothing until the shares are delivered. Whether an award carries dividend equivalents is a plan-design detail that changes the total value of the award without appearing in the grant-date figure.

The Summary Compensation Table reports the grant-date fair value of RSUs granted during the year in its stock awards column. The Outstanding Equity Awards at Fiscal Year-End table, in contrast, reports the units still unvested and their market value at the end of the fiscal year, which is a snapshot rather than a grant value. The Grants of Plan-Based Awards table shows the individual grants made during the year, tying a grant date and a unit count to a named officer.

Vesting schedules shape how much of a grant a holder actually keeps. A graded schedule vests in increments over several years, while a cliff schedule vests nothing until a single date passes. Units that have not vested when employment ends are generally forfeited, though plans commonly provide for continued or accelerated vesting on retirement, death, disability, or a change in control. Because a departure mid-schedule leaves part of a grant unvested, the schedule is as consequential to the realized outcome as the size of the original grant.

Marvell granted Chris Koopmans 16,402 restricted stock units on April 15, 2022, with a grant-date fair value of $998,734 — no performance condition attached, unlike a PSU.