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Stock Appreciation Right
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A form of incentive compensation that ties part of the income of a firm's employees to the performance of the corporation's stock. In contrast to employee stock options, stock appreciation rights pay the appreciation to the employee in cash or in shares of the stock whose value determines the value of the appreciation rights. Accounting and tax treatment of stock appreciation rights is quite different from the treatment of employee stock options. For example, with stock appreciation rights, strong stock performance will increase the corporation's compensation costs and reduce its tax payments and reported earnings. The entire payment is taxable to the employee at ordinary income rates upon receipt.
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Glossary *
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