stock option compensation question

What is vesting in the context of stock option compensation?

Probably the employee who is just 25% vested (and into his 1st year of employment), he could only call 25% of the stock options allocated to him for his service in that year. Similarly next year he can call-off 50% of them … so on and so forth… until he is full vested in the 4th year and can do whatever he likes… bluff ?? … BS?

Dinesh - I would def agree with you. We just had a senior VP depart the company and she was under a 4-year vesting schedule of stock options where the first year vested wasn’t considered until one full year after the granting was announced. Since the announcement of additional grants was effective Jan 1st 2008, she didn’t get sh!t. For some of our really senior people, the schedule is a little different and more to their benefit, where the first year is considered from the moment the grant is announced (ie. 25% of options available/exercisable as of Jan 1st 2008 instead of Jan 1st 2009) with ex price being that at the close of the day of grant.

Thanks Zimzim - for giving us a real time example. The concept has cleared up now.

thanks, dinesh and zimzim.