Google CEO Sundar Pichai receives stock options worth $199 MILLION
Google chief executive Sundar Pichai has been awarded restricted stock worth $199 million – making him one of the highest-paid directors of any public company.
Stock options and restricted stock units are not the same thing.
So, further to the request in the comments. And being a little bit simplistic but still covering the essentials.
A stock option is the right to buy shares at a predetermined price. Usually, the price on the date of issue of the options. So, Google is $500 today, we give 100k options to someone, they have the right to buy 100k shares in Google at $500 each at some date in the future. Say, 5 years. If the stock is at $750 in 5 years’ time then they make out like bandits.
However, people are a bit wary of this. An option is worth nothing until it is “in the money”, the share price is above the option price. So while it motivates it’s motivating only some of the time. If there’s a global shift in the markets, nothing to do with the individual company, then the options could be valueless and thus not motivating.
A restricted stock unit is actual stock. We’re going to give you, as part of your pay, 100k shares in Google over the next 5 years. 10k shares every quarter perhaps. We announce the total amount now, the plan, but they actually only move over to your ownership in steps, that 10k each quarter. The restriction is that you cannot then sell them for some period of time: say, again, 5 years.
This is thought to motivate more: because the owner of that stock gets it at today’s price (for the whole period of time) and has to pay taxes on getting that stock too, as they get it (well, the rules are a bit more complex but roughly). They are thus exposed to the down side of the stock as well: they actually lose money as it falls. This is thought to motivate better.
In both cases the stock comes from the company itself. And usually the company goes out into the market and buys the stock which it then gives/sells to the staff. This is what drives the stock buyback plans of the tech companies in fact: not entirely, differs from company to company, but there’s almost always a plan in place to buy stock in the market which is then used to fill options/RSUs to the staff.