Home > Answers > Read Answer

Answer


assalaamu'alaykum, my question is regarding employee stock options. These are stock aawards that companies give employees as a bonus. There are 2 types of awards: 1 is where the company awards a certain amount of shares at the current market value and these shares vest over time. You can sell the shares once they vest and you make the difference between the price of shares on the day you sell and the price on the day of the award. For example, you are awarded 100 shares on 1/1/14 for $5 each and they vest over 4 years (ie you are eligible to sell 25 shares/year and after 4 years you can sell all 100) on 1/1/15 you are eligible to sell 25 shares, lets say on 1/1/15 the stock price is $10. The way the transaction works is, you will buy the 25 shares for $5 (the award price) and then at the same time sell the 25 shares for $10 (price on 1/1/15) and net the difference (in this case you make $125 (im ignoring taxes and fees for simplicity). Is this a permissible transaction? Another way you can do the transaction is after one year (1/1/15, in our example) you can choose to buy the 25 shares at $5 each and hold them (in this case you will pay the $125 out of your pocket) and then sell them at a later date. Is this a permissible transaction? A second type of award is what is called an RSU (restricted unit) in this case the company awards you stock for free and once the shares vest you can sell them at the current market price. There is no buy transaction in this case since you were awarded the stock for free. Is it permissible to deal with these shares? If none of the transactions are permissible, what is the best way to give away the money? and for future awards is it better not to accept the awards or is it better to accept the awards and then donate the money? Greatly appreciate your time! Jazakum Allahu Khayra Zawar

الجواب حامداومصليا

The first question that must be asked is whether the stocks that the company awards as a bonus are even Halal (lawful) or not. If the stocks that are awarded by one's employer are of those companies whose main business is Haram (forbidden) according to the teachings of Islam then such stocks must be returned to the employer or one must find a way of getting rid of them as soon as possible. It would not be permissible to benefit from such stocks in anyway.

Secondly, if it is determined that the stocks awarded by one's employer are of those companies whose primary business is deemed Halal (lawful) then if the transaction takes place seperately for buying the stocks and then selling the same then the profit would be Halal. Otherwise, the transaction maybe considered void due to combining two transaction into one.

And Allah knows best.

Mufti Ikram ul Haq

Fatwa Center of America