Final answer:
Companies issue stock options, convertible bonds, and restricted stock units (RSUs) to employees as incentives to attract, retain, and align their interests with the company's shareholders. These forms of compensation promote employee loyalty, ownership, and commitment to the company's long-term success.
Step-by-step explanation:
Companies issue stock options, convertible bonds, and restricted stock units (RSUs) to employees for various reasons. These forms of employee compensation serve as incentives to attract and retain talented individuals and align their interests with that of the company's shareholders.
Stock options give employees the right to purchase company stock at a predetermined price, known as the exercise price, within a specified period. This provides employees with a potential financial gain if the company's stock price rises above the exercise price. Convertible bonds are debt securities that can be converted into a certain number of the company's shares at a predetermined conversion price. RSUs are grants of company stock that are subject to vesting conditions.
By offering these forms of compensation, companies aim to motivate employees, promote loyalty, and encourage a sense of ownership and commitment to the company's long-term success. They also provide a means for employees to share in the company's financial growth and success. Additionally, stock-based compensation can help companies conserve cash by using equity instead of cash as a form of employee compensation.