Term of the Day
A stock appreciation right ("SAR") is a contractual arrangement between a company and an individual, usually an employee, in which the recipient has the right to receive an amount equal to the appreciation on a specified number of shares of stock over a specified period of time. A SAR differs from a stock option in the following ways:
the recipient is not required to pay an amount to exercise the SAR;
the recipient only receives the appreciation in the value of the stock between the date of grant of the SAR and the date of exercise (generally, the recipient controls the timing of exercise); and
the recipient generally does not receive any shares of stock of the granting company (that is, the amount received by the recipient is payable in cash).
Generally, a recipient's ability to exercise a SAR is subject to a contractual "vesting" provision that expires after a specified period of time, either all at once or in increments.