The Executive’s Guide to Stock Option Decision Points

Your company stock options represent years of hard work building your career and your company’s success. But when it comes to actually exercising those options—or deciding what to do with vested RSUs—many successful executives find themselves second-guessing every move.

The stakes feel high because they are high. Make smart moves and you accelerate your path to financial independence. Make poor ones and you could watch significant value disappear.
After guiding executives through these complex decisions for decades, we see remarkably consistent patterns: brilliant leaders who excel at running companies but struggle with timing and tax implications of their own equity compensation.

The Expensive Mistakes We See Repeatedly 

Holding Options Until They’re Nearly Worthless
The costliest mistake? Holding stock options too long, sometimes right up to expiration. We’ve watched executives lose substantial value because they wanted to squeeze out a little more price appreciation or delay paying taxes.

One client held options in a tech company through the entire dot-com bubble. He rode the stock up, convinced it would keep climbing, then watched it crash back down. The options expired nearly worthless. His concentration in that single stock devastated his overall portfolio.

Letting Tax Worries Drive Everything
Yes, taxes matter. But “letting the tax tail wag the dog” often costs more than the taxes themselves. We’ve seen executives hold concentrated positions far longer than prudent, simply to avoid immediate tax consequences. Then the stock price drops, and they lose more in market value than they would have paid in taxes.

Missing the RSU Opportunity
Restricted Stock Units are now more common than traditional options. Here’s what many executives miss: once your RSUs vest, you’ve already paid the full tax hit as ordinary income. At that point, there’s often a strong case for immediate diversification. Yet we regularly meet with executives who forgot they even have vested RSUs sitting in their accounts, or who keep holding them out of loyalty to the company. This is especially true for executives who’ve never sold company stock before. The emotional attachment can be strong, even when the financial logic points toward diversification. But when you’re leaving the company anyway—through retirement or career change—that attachment often dissolves, making the decision much clearer.

The Two Things That Keep Executives Awake
In our experience, executives lose sleep over two main concerns: paying the taxes and over-concentration risk.

The tax worry is immediate and obvious, especially when you’re facing a big equity compensation event in the same year as other major income. The concentration concern is often something we must bring to their attention. Many successful executives don’t realize how much their family’s financial security depends on their company’s continued success until we model different scenarios.

Ignoring the ISO vs. NQSO Differences
Not all stock options work the same way. Incentive Stock Options can offer better tax treatment than Non-Qualified Stock Options, but they trigger Alternative Minimum Tax considerations that require planning. Most executives don’t realize these distinctions until they’re facing a big tax bill.

How to Think Through These Decisions
When executives face equity compensation choices, there’s a clear framework to consider:

• How Much Time Do You Have? Options approaching expiration create urgency that leads to poor timing. Longer-dated options give you flexibility to be strategic.
• What’s Your Concentration Risk? What percentage of your total wealth depends on your company’s continued success? Generally, working toward keeping company stock below 10% of your total portfolio makes sense. But getting there takes time and planning.
• Where Are You Tax-Wise? Sometimes waiting until the next tax year saves meaningful money. But this must be weighed against the risk of holding the concentrated position longer.
• What About Your Family Goals? How do these decisions fit into your broader plans for retirement and what you want to leave your children? Modeling scenarios where your stock drops by half or goes to zero often changes everything—showing exactly how dependent your retirement plan is on your company’s success.

Real Client Success Stories*

Taking the Weight Off: Birmingham Executive’s Tax Relief
What keeps most executives awake at night? Taxes. That was certainly the case for a Birmingham telecommunications executive who elected for early retirement. Her severance package included future Restricted Stock Units plus a full year’s salary paid as a lump sum at year-end—effectively two years’ worth of income hitting her 2024 tax return.

She was overwhelmed by the tax implications of this concentrated income, especially combined with the significant company stock she’d accumulated over her career. The math felt impossible to manage. We ran preliminary tax projections and suggested a straightforward solution: sell the company stock she already owned to cover her 2024 tax bill. Since these were RSUs where she’d already paid ordinary income tax when granted, selling made perfect sense. And since she was leaving the company anyway, the emotional attachment was gone.

The relief in her voice was immediate. “Having a strategy to cover that tax bill was the most valuable thing,” she told us later. “I was already job hunting, so taxes became one less thing to worry about.”

This illustrates the two biggest concerns we see with executives: being able to pay the taxes, and over-concentration in company stock. Often, the concentration risk is something we must bring to their attention—it’s not always obvious how it could derail long-term planning.

What About Your Children?
Many executive clients worry about how company stock concentration affects what they can leave their children. There’s good news: if you hold company stock until death, your children typically get a “step-up in basis,” meaning they inherit it at current market value for tax purposes.

But there’s also a challenge: children often maintain the same emotional connection to the company stock that you had. This can cloud their judgment about appropriate concentration levels.

As the parent, you can help by giving permission—or even the directive—to diversify after they inherit. Don’t leave them with the emotional burden of deciding whether to sell “Dad’s company stock.”

Questions Every Executive Should Consider
Here are the questions that we believe matter most:

1. What percentage of your wealth is tied to your company’s success? (If it’s over 20%, consider a diversification strategy)
2. Do you understand the tax implications of your specific equity awards? (ISO vs. NQSO makes a huge difference)
3. Have you modeled what happens to your family’s financial security if your company stock drops 50%? (This exercise often changes everything)
4. Are you making these decisions as part of a broader wealth strategy? (Including estate planning, tax planning, and family goals)

When was the last time you reviewed your vesting schedule and expiration dates? (Missed deadlines cost money)

The Path Forward

The executives we work with tell us their biggest relief comes not from perfect market timing, but from having a systematic approach. When you have a plan that accounts for taxes, diversification, and your family’s goals, daily stock price movements become background noise instead of sources of stress.

Your equity compensation represents the value you’ve created through years of leadership. Make sure your decisions about it reflect the same strategic thinking you bring to your business.

The key is moving from emotional decision-making to systematic planning. Whether you work with us or another advisor, having a framework removes the weight of these choices and lets you focus on what you do best—leading your company and building your family’s future.

Every executive’s equity compensation situation is unique. If you’d like to discuss how these concepts apply to your specific circumstances, we’re here to help. Our team has guided executives through these decisions for over 50 years, and we understand both the technical complexity and emotional weight of these choices.  Feel free to reach out if you have questions or want to explore your situation further.

*The outcome experienced in this case study is educational and does not necessarily reflect the experiences of every client on this issue. Clients may have different approaches and outcomes depending on their unique circumstances. This case study does not disclose all the risks and other considerations related to investment in the securities described. Prior to transacting, clients should understand the terms of the relevant securities and any applicable risks.