Stock vs. Cash
A cash bonus is an amount paid to the investors in the form of cash by the company out of the earnings. This causes the company’s shares to remain constant as the cash bonus decreases. Cash bonuses are subject to taxation on the value of distribution thus causing a decline on the final value received. They are beneficial in that they provide shareholders with steady income on their investment, therefore, leading to capital appreciation exposure. On the contrary, a stock bonus is an increase in the number of shares that is distributed amongst the shareholders. It is always the responsibility of the shareholder to decide whether to sell or keep the shares in order to earn better rates of return (Merchant, Stringer & Shantapriyan, 2018). Stock bonus is beneficial since the shareholders do not pay taxes on the value. However, for profitable companies, a cash bonus is more preferred than stock. Therefore, I would choose $1,000 worth of stock since it has an added advantage of no taxes is paid when receiving the same amount in comparison to a cash bonus.
It is a mistake for the company to give employees an award of restricted stock without training them to understand stocks and investing. This is evident for instance, with Zayo Group Holdings whereby the management decided to give stock options and realized that the employees didn’t the meaning thus hard for them to make the right decision due to lack of understanding. Therefore, company’s should consider it there responsibility to ensure that the shareholders understand well between the benefits and the drawbacks of both stock options and investing for them to easily decide on which one is more suitable. Companies should ensure proper training to the employees for better understanding of the award to choose to avoid inconveniences. For instance in the case whereby restricted stock units are taxed as income when it is received and stock option is taxed as income when the employees sell the stock which will help them in easy decision making on the award to choose.
Reference
Merchant, K. A., Stringer, C., & Shantapriyan, P. (2018). Setting Financial Performance Thresholds, Targets, and Maximums in Bonus Plans. Journal of Management Accounting Research, 30(3), 55-73.