Incentive Stock Option (noun)
Definition: An incentive stock option (often called ISO) is a special type of option given to employees, especially corporate executives, that allows them to buy company stock at a set price. This option is often given if the company reaches certain financial goals, which means the company is doing well financially.
Usage Instructions: You can use "incentive stock option" when talking about employee benefits, corporate finance, or when discussing how companies motivate their employees to work towards achieving financial success.
Example: "After the company reached its sales targets, the executives were granted incentive stock options, allowing them to buy shares at a lower price."
Advanced Usage: In a corporate context, incentive stock options are often part of a larger compensation package designed to align the interests of the executives with those of the shareholders. They can motivate executives to improve company performance because if the company does well, the stock price goes up, and they can buy the stock at the lower price set by the option.
Word Variants: - Incentive: This is a related noun meaning something that motivates or encourages someone to do something. - Stock Option: This is a broader term that includes any option to buy stock, not just the incentive type.
Different Meaning: While "incentive stock option" specifically refers to employee stock options with tax benefits under U.S. law, the term "stock option" can refer to other types of options that may not have the same benefits or requirements.
Synonyms: - Employee stock option - Equity compensation
Idioms and Phrasal Verbs: - There are no common idioms or phrasal verbs that directly relate to "incentive stock option," but you can use phrases like "cash in on" (to take advantage of an opportunity) when talking about exercising the options.
In summary, an incentive stock option is a financial tool that companies use to encourage their employees to help the company succeed.