Here’s a term that can carry multiple meanings: Deferred Stock Unit or DSU.
Some use it to refer to a plan that issues units which can be converted to actual stock in the future—sort of like restricted stock units. There’s no reason you can’t use this term for that type of plan, but I think it’s inaccurate. A DSU, in the traditional sense, is a combination of deferred compensation and full value phantom shares.
With a DSU highly compensated employees are offered the opportunity to voluntarily defer a portion of their cash income (salary and/or bonus) to a future date (as with any other deferred compensation plan). The difference is their deferral dollars are credited with phantom stock units instead of some other interest or variable account return.
It’s sort of equivalent to allowing employees to purchase shares of company stock—with two significant differences: (1) the employee is credited with phantom shares, not actual shares; and (2) the “purchase” is pre-tax.
You don’t see a lot of classic DSU plans in the market. But if employees are asking to purchase shares in the company and the shareholders aren’t interesting in selling actual shares, a DSU may be the perfect middle ground.
By the way, in Canada a DSU carries a third meaning. If you’re interested, you can find it here.
