Dividends and Restricted Stock

We get a lot of questions here about all sorts of technical issues, and occasionally one stumps not just us but even some of the experts we ask. In this case, the question was do companies have to pay dividends on unvested shares of restricted stock if the underlying stock is a dividend-paying class of stock? In some sources we found, the answer is "no," it's a matter of plan design. But after asking the people who really know about this, we found that the answer is (as it often is to more technical matters) "it depends." Mark Borges, a former NCEO board member and SEC staffer, and now a principal with Compensia, says that whether you have to pay dividends is a matter of state law and corporate bylaws or charters. So in California, for instance, a company can provide in its articles of incorporation that it will not pay dividends or provide voting rights on unvested shares.