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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2024
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | STOCK-BASED COMPENSATION STOCK OPTION AND AWARD PROGRAMS Under our 2016 Incentive Compensation Plan (amended and restated effective May 6, 2024) and previously under our 2007 Incentive Compensation Plan, awards may be granted to colleagues and other individuals who perform services for us. These awards may be in the form of stock options, or in the form of restricted stock units and awards (collectively referred to as RSUs), or other incentives or similar awards designed to meet the requirements of non-U.S. jurisdictions. There were a total of 20 million, 7 million and 9 million common shares unissued and available for grant as of December 31, 2024, 2023 and 2022, respectively, as authorized by our Board of Directors and shareholders. We generally issue new common shares upon exercise of options, vesting of restricted stock units and granting of restricted stock awards. Stock-based compensation expense recognized in Salaries and employee benefits in the Consolidated Statements of Income was $508 million, $450 million and $373 million in 2024, 2023 and 2022, respectively, with corresponding income tax benefits of $124 million, $110 million and $90 million in those respective periods. Our stock options and RSUs outstanding as of December 31, 2024, and changes during the year, are as follows: TABLE 10.1: STOCK OPTIONS AND RSUs OUTSTANDING
|  | Stock Options |  | Service-Based RSUs |  | Service and Performance-Based RSUs
(Numbers in thousands) |  | Number |  | Weighted-Average Exercise Price |  | Number |  | Weighted- Average Grant- Date Fair Value |  | Number |  | Weighted- Average Grant- Date Fair Value
Outstanding as of December 31, 2023 |  | 3,553 |  |  | $ | 119.80 |  |  | 1,827 |  |  | $ | 159.95 |  |  | 3,296 |  |  | $ | 144.64 |
Granted |  | 273 |  |  | 201.07 |  |  | 922 |  |  | 204.68 |  |  | 1,223 |  |  | 176.09 |
Options exercised/RSUs vested |  | (1,108) |  |  | 91.39 |  |  | (844) |  |  | 155.92 |  |  | (1,284) |  |  | 108.44 |
Forfeited |  | — |  |  | — |  |  | (98) |  |  | 182.64 |  |  | (209) |  |  | 169.93 |
Expired |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Outstanding as of December 31, 2024 |  | 2,718 |  |  | 139.54 |  |  | 1,807 |  |  | $ | 183.41 |  |  | 3,026 |  |  | $ | 170.97 |
Options vested and expected to vest as of December 31, 2024 |  | 2,718 |  |  | 139.54 |  |  |  |  |  |  |  |  |
Options exercisable as of December 31, 2024 |  | 1,047 |  |  | $ | 99.23 |  |  |  |  |  |  |  |  |
Stock-based compensation expense is generally recognized ratably based on the grant-date fair value of the awards, net of expected forfeitures, over the vesting period. Generally, the vesting period is the time from the grant date to the earlier of the vesting date defined in each award agreement or the date the colleague will become eligible to retire. Retirement eligibility is dependent upon age and/or years of service. STOCK OPTIONS Each stock option has an exercise price equal to the market price of our common stock on the grant date. Stock options generally vest on the third anniversary of, and have a contractual term of 10 years from, the grant date. The fair value of options without market conditions is estimated on the grant date using a Black-Scholes-Merton option-pricing model. The following weighted-average assumptions were used for options granted in 2024, 2023 and 2022: TABLE 10.2: WEIGHTED-AVERAGE ASSUMPTIONS FOR OPTIONS GRANTED
|  | 2024 |  | 2023 |  | 2022
Dividend yield |  | 1.5 | % |  | 1.4 | % |  | 1.0 | %
Expected volatility(a) |  | 31 | % |  | 32 | % |  | 31 | %
Risk-free interest rate |  | 3.9 | % |  | 3.5 | % |  | 1.7 | %
Expected life of stock option (in years)(b) |  | 6.9 |  | 7.1 |  | 7.1
Weighted-average fair value per option |  | $ | 68.79 |  |  | $ | 60.03 |  |  | $ | 55.30 |
(a)The expected volatility is based on historical and implied volatilities of our common stock price. (b)The expected life of stock options was determined using historical option exercise behavior. Certain executives were awarded a grant of stock options on October 31, 2022 that vest, subject to achieving performance and market conditions. These options vest in tranches on the third and fourth anniversaries from the grant date, subject to continued employment through the applicable anniversary, and have a contractual term of seven years. The fair value was estimated at the grant date using a Monte Carlo valuation model assuming a dividend yield of 1.4 percent, expected volatility (based on historical and implied volatilities of our common stock price) of 34 percent, risk-free rate of 3.9 percent and an expected life of seven years, resulting in a fair value of $50.10. The weighted-average remaining contractual life and the aggregate intrinsic value (the amount by which the fair value of our stock price exceeds the exercise price of the option) of the stock options outstanding, exercisable, and vested and expected to vest as of December 31, 2024, were as follows: TABLE 10.3: WEIGHTED-AVERAGE CONTRACTUAL LIFE AND AGGREGATE INTRINSIC VALUE OF OPTIONS
|  | Outstanding |  | Exercisable |  | Vested and Expected to Vest
Weighted-average remaining contractual life (in years) |  | 5.3 |  | 3.7 |  | 5.3
Aggregate intrinsic value (millions) |  | $ | 427 |  |  | $ | 207 |  |  | $ | 427 |
As of December 31, 2024, there was $19 million of total unrecognized compensation cost related to unvested options, which will be recognized over the weighted-average remaining vesting period of 1.3 years. For stock options that were exercised during 2024, 2023 and 2022, the intrinsic value, based upon the fair value of our stock price at the date the options were exercised, was $179 million, $26 million and $56 million, respectively; cash received by the Company from the exercise of stock options was $100 million, $28 million and $56 million during those respective periods. The income tax benefit recognized in the Consolidated Statements of Income related to stock option exercises was $25 million, $4 million and $9 million in 2024, 2023 and 2022, respectively. RESTRICTED STOCK UNITS/AWARDS We grant RSUs that contain either a) service conditions or b) both service and performance conditions. RSUs containing only service conditions generally vest ratably over three years, or four years for awards granted prior to 2022, beginning with the first anniversary of the grant date. RSUs containing both service and performance conditions generally vest on the third anniversary of the grant date, and the number of shares earned generally ranges from zero to 120 percent of target depending on the achievement of predetermined Company metrics. RSU holders receive dividend equivalents or dividends. Performance-based RSUs include a relative total shareholder return (r-TSR) modifier so that our actual shareholder return relative to a comparable peer group is one of the performance conditions that determines the number of shares ultimately issued upon vesting. The fair value of RSUs that do not include the r-TSR modifier, including those that contain only service conditions, is measured using our stock price on the grant date. The fair value of service and performance-based RSUs that include the r-TSR modifier is determined using a Monte Carlo valuation model using assumptions based on the historical volatility of our common stock price, the historical correlations of our common stock price with that of each of the companies in the performance peer group and the risk-free interest rate, each for a period equal to the estimated remaining performance period. The weighted averages of the following assumptions used in 2024, 2023 and 2022 were: TABLE 10.4: RSU VALUATION MODEL WEIGHTED-AVERAGE ASSUMPTIONS
|  | 2024 |  | 2023 |  | 2022
Expected volatility |  | 30 | % |  | 45 | % |  | 42 | %
Risk-free interest rate |  | 4.0 | % |  | 3.7 | % |  | 1.4 | %
Remaining performance period (in years) |  | 2.9 |  | 2.9 |  | 2.9
As of December 31, 2024, there was $266 million of total unrecognized compensation cost related to non-vested RSUs, which will be recognized over the weighted-average remaining vesting period of 1.8 years. The weighted-average grant-date fair value of RSUs granted in 2024, 2023 and 2022 was $188.37, $163.88 and $168.26, respectively. For RSUs vested during 2024, 2023 and 2022, the total fair value, based upon our stock price at the date the RSUs vested, was $437 million, $389 million and $323 million, respectively. LIABILITY-BASED AWARDS Other incentive awards can be settled with cash or equity shares at our discretion and final approval from the Compensation and Benefits Committee. These awards are generally settled with cash and thus are classified as liabilities; therefore, the fair value is determined at the grant date and remeasured quarterly as part of compensation expense over the vesting period. Cash paid upon vesting of these awards in 2024, 2023 and 2022 was $60 million, $55 million and $50 million, respectively.

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