When Employees are “Granted” Stock Options, is the Company encouraging Long-Term investments from them?
There are two things to consider: taxes - beneficial treatment for long-term holding, and for ESPP's you can get lower taxes on higher earnings. Also, depending on local laws, some share schemes allow one to avoid some or all on the income tax. For example, in the UK £2000 in shares is treated differently to 2000 in cash vesting - restricted stocks or options can only be sold/exercised years after being granted, as long as the employee keeps his part of the contract (usually - staying at the same place of works through the vesting period). This means job retention for the employees, that's why they don't really care if you exercise the same day or not, they care that you actually keep working until the day when you can exercise arrives. By then you'll get more grants you'll want to wait to vest, and so on. This would keep you at the same place of work for a long time because by quitting you'd be forfeiting the grants.
"Most well-off people have investments which they have held for long periods of time, often of very substantial value such as a large part of a company.  They also have influence on legislators and officials through various social contacts, lobbyists, and contributions.  They managed to convince these law makers to offer a lower tax on income derived from sales of such investments.  The fig leaf covering this arrangement is that it ""contributes to the growth of economy by encouraging long-term investment in new enterprises.""" Let's work from the inside out. Options are not stock. Options are a contract that give you the right to own the stock. For options to have value they have to be exercised. Straight line means that each quarter 1/16th of the option grant becomes yours and the company cannot take it away. Four quarters in a year times four years is 16 quarters. 'Grant' means they are giving you the options at no cost to you. 'Nonqualified' means that there is nothing you have to do, or be, in order to get the options. (Some options are only for management.) What you will probably get is an option to buy, for £10,000, £10,000 worth of stock. If the stock price on the day your option is granted is £2.50, then that's 4,000 shares. Companies rarely grant discounted options, as there are tax disincentives. The benefit of the stock option is that when you exercise it, you still only pay £10,000, no matter what the 4,000 shares are now worth. This is supposed to be an incentive for you to work harder to increase the value of the company. You should also check the vesting schedule. You will typically not be able to exercise all your options for some years, although some portion of it may vest each year. "A little terminology: Grant: you get a ""gift"" with strings attached. ""Grant"" refers to the plan (legal contract) under which you get the stock options. Vesting: these are the strings attached to the grant. As long as you're employed by the company, your options will vest every quarter, proportionally. You'll become an owner of 4687 or 4688 options every quarter. Each such vest event means you'd be getting an opportunity to buy the corresponding amount of stocks at the strike price (and not the current market price which may be higher). Buying is called exercising. Exercising a nonqualified option is a taxable event, and you'll be taxed on the value of the ""gift"" you got. The value is determined by the difference between the strike price (the price at which you have the option to buy the stock) and the actual fair market value of the stock at the time of vest (based on valuations). Options that are vested are yours (depending on the grant contract, read it carefully, leaving the company may lead to forfeiture). Options that are not vested will disappear once you leave the company. Exercised options become stocks, and are yours. Qualified vs Nonqualifed - refers to the tax treatment. Nonqualified options don't have any special treatment, qualified do. 3.02M stocks issued refers to the value of the options. Consider the total valuation of the company being $302M. With $302M value and 3.02M stocks issued, each stock is worth ~$100. Now, in a year, a new investor comes in, and another 3.02M stocks are issued (if, for example, the new investor wants a 50% stake). In this case, there will be 6.04M stocks issued, for 302M value - each stock is worth $50 now. That is called dilution. Your grant is in nominal options, so in case of dilution, the value of your options will go down. Additional points: If the company is not yet public, selling the stocks may be difficult, and you may own pieces of paper that no-one else wants to buy. You will still pay taxes based on the valuations and you may end up paying for these pieces of paper out of your own pocket. In California, it is illegal to not pay salary to regular employees. Unless you're a senior executive of the company (which I doubt), you should be paid at least $9/hour per the CA minimum wages law." Insider trading is when you buy or sell an investment based on material, non-public information that gives you an unfair advantage over the rest of traders in that market.  Working for a company is one way that you might have such information, but whether it is insider trading is not contingent on you working there. You could use that information a long time after leaving the company. You don't even need to have worked there. If a friend/relative gave you non-public information because THEY work there, it is still insider trading. "they are entirely free to do whatever they want with the shares. In particular, they can sell them to whomever they choose No. Restrictions on who can sell when and to whom are a common thing with startups. ""Publicly traded"" companies are regulated in a much stricter way than private companies, so until the IPO the sales are limited to the OTC markets. But even that can be restricted by bylaws - for example ownership can only be limited to a group of investors approved by the board. As an employee - your grant was approved by the board, but when you come to sell, the buyer was not and the company may not agree to vet them. Bottom line is that it is not illegal to impose all kinds of restrictions on what the employees can do with their shares, as long as the shares are not listed on a public stock exchange (even after the company goes IPO with one class, other classes may remain restricted)." Oracle specifically is paying a dividend with a current yield of about 1.4% annually and has appreciated nearly 50% over the last 5 years.  Granted, the past doesn't guarantee the future but the company has paid a pretty steady dividend since 2009.  If you're buying as part of an employee program you would presumably be holding the shares for a long time and the daily and even monthly movements aren't terribly relevant to a long term holding period. Additionally, you may be able to buy the shares at a discount to the market price as part of your employee program.  You probably also won't pay any transaction fee. Too much of a focus on short term goals. They will do almost anything to maximize the numbers for each quarter at the expense of future quarters. Leadership incentives were not long term. So if I decide not to invest in some future technology or business so my cash is higher this quarter, I get a bigger bonus but also handicap future earnings a few years away