Stupid question but what exactly is the “requisite service period?” Is this the length of time required to be fully vested in a stock option?
Yes. Some employee stock options vest contingent upon tenure alone, i.e. “time based” vesting. This vesting schedule is often ratable annually or cliff vests (i.e. the entire grant at once) after some period like three years, but can also be any schedule inbetween. Cliff- and the nonvested portion of ratable grants are typically forfeited upon termination, unless termination is due to a change-in-control at the company (e.g. an acquisition), whereby vesting often accelerates for all outstanding grants. From a financial reporting perspective, the compensation expense would be amortized over the requisite service period. This is the figure for stock options and restricted shares you’ll see in the summary compensation table in a proxy filing (SEC Form DEF-14A), whereas the “grant of plan based awards table” will show actual grants and their respective face values for that actual fiscal year, as opposed to just an amortized financial reporting figure.
Big thanks hiredguns.