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Stock-Based Compensation | 9 Months Ended
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Sep. 30, 2024
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | NOTE 18. Stock-Based Compensation The Company’s annual stock option and restricted stock unit grant is typically made in February to provide a strong and immediate link between the performance of individuals during the preceding year and the size of their annual stock compensation grants. The grant to eligible employees uses the closing stock price on the grant date. Accounting rules require recognition of expense under a non-substantive vesting period approach, requiring compensation expense recognition when an employee is eligible to retire. Employees are considered eligible to retire at age 55 and after having completed ten years of service. This retiree-eligible population represents 34 percent of the annual grant stock-based compensation expense; therefore, higher stock-based compensation expense is typically recognized in the first quarter. However, due to the spin-off of Solventum (see Note 2), the 2024 annual grant was made in May, after the April 1, 2024 separation. In addition to the annual grants, the Company makes other minor grants of stock options, restricted stock units and other stock-based grants. The Company issues cash settled restricted stock units and stock appreciation rights in certain countries. The cash settled grants do not result in the issuance of common stock and are considered immaterial by the Company, and not included in the tables below. In connection with the Solventum separation on April 1, 2024 (see Note 2), all outstanding stock-based compensation awards associated with Solventum employees converted into Solventum awards, became Solventum’s responsibility and were cancelled from 3M plans. The conversion into Solventum awards was made with the intent to preserve the intrinsic value of each award immediately before and after the Separation. In addition, for awards associated with remaining 3M employees, the number of shares underlying unvested stock awards was adjusted along with the exercise price and the number of shares underlying outstanding stock options. These adjustments were made with the intent to preserve the intrinsic value of each award immediately before and after the Separation and were determined using a ratio calculated using the 3M share price based on the market closing price before and the average of the closing price from the first three days of trading after the Separation. The terms of the outstanding awards remain the same and if unvested, continue to vest over the original vesting periods. The adjustments to shares underlying unvested stock awards and outstanding stock options did not result in a material stock-based compensation cost. Stock-Based Compensation Expense: Amounts recognized in the financial statements with respect to stock-based compensation programs, which include stock options, restricted stock, restricted stock units, performance shares and the General Employees’ Stock Purchase Plan (GESPP), are provided in the following table. Capitalized stock-based compensation amounts were not material.
|  | Three months ended September 30, |  | Nine months ended September 30, |  |
(Millions) |  | 2024 |  | 2023 |  | 2024 |  | 2023 |  |  |  |  |  |
Cost of sales |  | $ | 8 |  |  | $ | 6 |  |  | $ | 32 |  |  | $ | 32 |  |  |  |  |  |  |
Selling, general and administrative expenses |  | 26 |  |  | 30 |  |  | 151 |  |  | 130 |  |  |  |  |  |  |
Research, development and related expenses |  | 7 |  |  | 5 |  |  | 38 |  |  | 34 |  |  |  |  |  |  |
Stock-based compensation expenses |  | 41 |  |  | 41 |  |  | 221 |  |  | 196 |  |  |  |  |  |  |
Income tax benefits |  | (5) |  |  | (6) |  |  | (19) |  |  | (34) |  |  |  |  |  |  |
Stock-based compensation expenses (benefits), net of tax |  | $ | 36 |  |  | $ | 35 |  |  | $ | 202 |  |  | $ | 162 |  |  |  |  |  |  |

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