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Stock Plans
 12 Months Ended
Dec. 31, 2016
Disclosure Text Block Abstract  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 11

Stock Plans

Stock Option and Award Programs

Under the 2016 Incentive Compensation Plan and previously under the 2007 Incentive Compensation Plan, awards may be granted to employees and other key individuals who perform services for the Company and its participating subsidiaries. These awards may be in the form of stock options, restricted stock awards or units (RSAs), portfolio grants (PGs) or other incentives, and similar awards designed to meet the requirements of non-U.S. jurisdictions.

For the Company’s Incentive Compensation Plans, there were a total of 17 million, 33 million and 35 million common shares unissued and available for grant as of December 31, 2016, 2015, and 2014, respectively, as authorized by the Company’s Board of Directors and shareholders.

A summary of stock option and RSA activity as of December 31, 2016 and changes during the year is presented below:

  Stock Options  RSAs
(Shares in thousands)SharesWeighted-Average Exercise PriceSharesWeighted-AverageGrantPrice
Outstanding as of December 31, 201510,820$44.60  7,433$74.67
Granted  2,92063.89  4,06255.55
Exercised/vested  (3,396)51.40  (3,128)63.93
Forfeited  (67)66.02  (867)70.99
Expired  (5)51.87  ――
Outstanding as of December 31, 201610,27247.68  7,500$69.22
Options vested and expected to vest as of December 31, 201610,03147.26――
Options exercisable as of December 31, 20166,963$38.55  ――

The Company recognizes the cost of employee stock awards granted in exchange for employee services based on the grant-date fair value of the award, net of expected forfeitures. Those costs are recognized ratably over the vesting period.

Stock Options

Each stock option has an exercise price equal to the market price of the Company’s common stock on the date of grant and a contractual term of 10 years from the date of grant. Stock options generally vest 100 percent on the third anniversary of the grant date.

The weighted-average remaining contractual life and the aggregate intrinsic value (the amount by which the fair value of the Company’s stock exceeds the exercise price of the option) of the stock options outstanding, exercisable, vested, and expected to vest as of December 31, 2016, are as follows:

OutstandingExercisableVested and Expected to Vest
Weighted-average remaining contractual life (in years)4.8  2.8  4.7
Aggregate intrinsic value (millions)  $277  $248  $275

The intrinsic value of options exercised during 2016, 2015 and 2014 was $51 million, $87 million and $245 million, respectively, (based upon the fair value of the Company’s stock price at the date of exercise). Cash received from the exercise of stock options in 2016, 2015 and 2014 was $175 million, $146 million and $283 million, respectively. The tax benefit realized from income tax impacts of stock option exercises, which was recorded in additional paid-in capital, in 2016, 2015 and 2014 was $4 million, $18 million and $54 million, respectively.

The fair value of each option is estimated on the date of grant using a Black-Scholes-Merton option-pricing model. The following weighted-average assumptions were used for options granted in 2016, 2015 and 2014:

201620152014
Dividend yield1.9% 1.1% 1.1% 
Expected volatility(a)25% 37% 38% 
Risk-free interest rate1.5% 1.7% 2.2% 
Expected life of stock option (in years)(b)6.3  6.7  6.7  
Weighted-average fair value per option$13.67  $29.20  $32.36  

  • The expected volatility is based on both weighted historical and implied volatilities of the Company’s common stock price.
  • The expected life of stock options was determined using both historical data and expectations of option exercise behavior.

Restricted Stock Awards

RSAs are valued based on the stock price on the date of grant and contain either a) service conditions or b) both service and performance conditions. RSAs containing only service conditions generally vest 25 percent per year beginning with the first anniversary of the grant date. RSAs containing both service and performance conditions generally vest on the third anniversary of the grant date, and the number of shares earned depends on the achievement of predetermined Company metrics. All RSA holders receive non-forfeitable dividends or dividend equivalents. The total fair value of shares vested during 2016, 2015 and 2014, was $171 million, $247 million and $298 million, respectively (based upon the Company’s stock price at the vesting date).

The weighted-average grant date fair value of RSAs granted in 2016, 2015 and 2014, was $55.55, $81.99 and $86.65, respectively.

Liability-based Awards

Certain employees are awarded PGs and other incentive awards that can be settled with cash or equity shares at the Company’s discretion and final Compensation and Benefits Committee payout approval. These awards earn value based on performance, market and service conditions, and vest over periods of one to three years.

PGs and other incentive awards are generally settled with cash and thus are classified as liabilities; therefore, the fair value is determined at the date of grant and remeasured quarterly as part of compensation expense over the vesting period. Cash paid upon vesting of these awards in 2016, 2015 and 2014 was $41 million, $74 million and $62 million, respectively.

Summary of Stock Plan Expense

The components of the Company’s total stock-based compensation expense (net of forfeitures) for the years ended December 31 are as follows:

(Millions)  2016  2015  2014
Restricted stock awards(a)  $178  $190  $193
Stock options(a)  14  12  13
Liability-based awards  60  32  84
Total stock-based compensation expense (b)  $252  $234  $290

  • As of December 31, 2016, the total unrecognized compensation cost related to unvested RSAs and options of $189 million and $24 million, respectively, will be recognized ratably over the weighted-average remaining vesting period of 2.0 years and 2.1 years, respectively.
  • The total income tax benefit recognized in the Consolidated Statements of Income for stock-based compensation arrangements for the years ended December 31, 2016, 2015 and 2014 was $89 million, $83 million and $104 million, respectively.