An ISO gives an employee the right to buy shares of company stock at a discounted price. Generally, ISOs are awarded only to top management and highly-valued employees. ISOs are also called statutory or qualified stock options.
- Incentive stock options (ISOs) are a popular means of employee compensation for corporate management, granting rights to company stock at a discounted price at a future date.
- This type of employee stock purchase plan is intended to retain key employees or managers.
- ISOs require a vesting period of at least two years and a holding period of more than one year before they can be sold.
- ISOs often have more favorable tax treatment on profits than other types of employee stock purchase plans.