What type of compensation do share appreciation rights provide?

Share appreciation rights (SARs) are a form of compensation that grant employees the right to receive the increase in the value of a company’s stock over a specified period. When an employee exercises these rights, they are entitled to the appreciation amount, rather than the actual shares. This appreciation is typically payable in cash or, in some cases, in shares equivalent to the increase in value.

In this context, the correct answer highlights that SARs provide rights to redeem the shares at a pre-established value, which aligns with the mechanism of how these rights function. Employees benefit from the increase in stock value without needing to buy actual shares upfront.

The other choices do not accurately describe share appreciation rights. The option discussing fixed cash bonuses does not align with the nature of SARs, which are linked to stock performance rather than predetermined cash amounts. Similarly, the options mentioning rights to purchase shares or receiving additional equity without conditions mischaracterize the essence of SARs, which primarily focus on capitalizing on the appreciation of existing shares instead of providing outright ownership or guaranteed bonuses.