[drivingmenuts]

It's designed to provide employees an incentive to go above and beyond in their particular area of employment by providing future financial incentives, without having a say in the overall direction of the company.

Or put another way, it's a possible bonus if you and others like you do well.

[bobthepanda]

That intention is still a perversion of the actual intention of stocks and the stocks market, though. If you wanted to tie bonuses to share price, you can just do that instead of issuing these fake stocks. Plenty of people get paid with bonuses tied to share price or EPS.

[jrockway]

It's a tax thing. It's apparently cheaper to give someone $100k of stock versus $100k of cash.

[xyzzyz]

It is, but not for tax reasons: giving employees stock is cheaper because it is the shareholders who pay for it, while cash comes from actual company account. Stock that is awarded to employees as stock-based compensation is typically new-issuance stock that's added to the total number of outstanding shares, thereby depressing the share price. Thus, the company doesn't have to pay anything, it is the shareholders who suffer dilution (albeit a very minor one).