Equity is often the most valuable part of a senior package, and it commonly takes the form of share options or restricted stock units (RSUs). Here is how they differ.
What share options are
Share options give an executive the right to buy a number of shares at a set price (the exercise or strike price), usually after a vesting period. Their value comes from the share price rising above the exercise price — the executive can then buy at the lower set price and benefit from the difference. If the share price does not exceed the exercise price, options have no value. Options thus offer significant upside if the business does well, but also the risk of being worth nothing.
What RSUs are
Restricted stock units (RSUs) are grants of actual shares (or their value) that vest over time, typically subject to continued employment and sometimes performance. Unlike options, RSUs have value as long as the shares have any value — they do not depend on the price rising above a set level. RSUs therefore offer more certain value than options, though usually with less dramatic upside, since the executive receives shares outright rather than the right to buy them.
Upside versus certainty
The core trade-off is upside versus certainty. Options can be worth a great deal if the business grows strongly, but nothing if it does not — high potential, higher risk. RSUs provide more reliable value that moves with the share price but does not vanish if it dips modestly — lower potential upside, more certainty. Which suits an executive depends on their risk appetite and their belief in the business's prospects, among other factors. Neither is simply better; they serve different purposes.
The specifics matter greatly
Beyond the option-versus-RSU distinction, the specifics of any equity grant matter enormously — the amount, vesting schedule, performance conditions, tax treatment, and what happens on departure or a sale. These details often determine the real value far more than the headline. Equity and tax are also complex and vary by jurisdiction. Executives and businesses alike should take proper professional advice when structuring or negotiating equity, as part of the wider long-term incentive package.
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About Equity & LTI Packages →Frequently asked questions
What is the difference between options and RSUs?
Share options give the right to buy shares at a set price, gaining value only if the price rises above it (more upside, more risk); RSUs are grants of shares that vest over time and have value as long as the shares do (more certain, often smaller value). Both are common executive equity.
Are options or RSUs better for executives?
Neither is simply better — options offer higher potential upside but can be worth nothing, while RSUs offer more certain value with less dramatic upside. Which suits an executive depends on risk appetite, belief in the business, and the specific terms, which matter greatly.
Related: What Is an Equity or LTI Package? · Executive Compensation Structures Explained · Negotiating an Executive Offer
