Definition for: Cliff Vesting
The term "cliff vesting" refers to the process of holders of employee stock options vesting (or earning) their ownership of a portion of their stock options after a designated period of time. For example, in Silicon Valley technology companies, employees are often awarded stock options subject to a 4 year vesting schedule with a one year cliff vesting. That means that 1/4 of the shares become vested (or earned) after one year of employment, but that if the employee does not stay for at least 1 year, then no options vest (or earned). After the one year period and 1/4 of the options are vested, the remaining 3/4 of the options would typically vest on a monthly basis over the remaining 36 months.
