Share-Based Compensation

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

NOTE 2 — SHARE-BASED COMPENSATION

Stock Incentive Plans

Our stock incentive plans are designed to promote the long-term financial interests and growth of the Company by attracting and retaining management and other personnel, motivating them to achieve long range goals and aligning their interests with those of our stockholders. Stock appreciation right (“SARs”) and restricted share unit (“RSUs”) grants vest solely based upon continued employment over a specific period of time, and performance share unit (“PSUs”) grants vest based upon both continued employment over a specific period of time and the achievement of predetermined financial targets over a specific period of time. At December 31, 2022 there were 13.826 million shares available for future grants.

Employee Stock Purchase Plan

Our employee stock purchase plan (“ESPP”) provides our participating employees an opportunity to obtain shares of our common stock at a discount (through payroll deductions over three-month periods). At December 31, 2022, 4.436 million shares of common stock were reserved for ESPP issuances. During 2022, 2021 and 2020, the Company recognized $16 million, $15 million and $13 million, respectively, of compensation expense related to the ESPP.

SAR, RSU and PSU Activity

The fair value of each SAR award is estimated on the grant date, using valuation models and the weighted average assumptions indicated in the following table. Awards under our stock incentive plans generally vest based on continued employment (“Time SARs” and “RSUs”) or based upon continued employment and the achievement of certain financial targets (“Performance SARs” and “PSUs”). PSUs have a three-year cumulative earnings per share target, and the number of PSUs earned can vary from zero (for actual performance of less than 90% of target) to two times the original PSU grant (for actual performance of 110% or more of target). Each grant is valued as a single award with an expected term equal to the average expected term of the component vesting tranches. The expected term of the share-based award is limited by the contractual term. We use historical exercise behavior data and other factors to estimate the expected term of the SARs.

Compensation cost is recognized on the straight-line attribution method. The straight-line attribution method requires that total compensation expense recognized must at least equal the vested portion of the grant-date fair value. The expected volatility is derived using historical stock price information for our common stock and the volatility implied by the trading of options to purchase our stock on open-market exchanges. The risk-free interest rate is the approximate yield on United States Treasury Strips having a life equal to the expected share-based award life on the date of grant. The expected life is an estimate of the number of years a share-based award will be held before it is exercised. The expected dividend yield is estimated based on the assumption that the dividend yield at date of grant will be maintained over the expected life of the grant.


	2022			2021			2020
Risk-free interest rate		1.64	%		0.68	%		1.44	%
Expected volatility		34	%		36	%		27	%
Expected life, in years		5.11			6.17			6.15
Expected dividend yield		0.95	%		1.10	%		1.19	%

Information regarding Time SARs and Performance SARs activity during 2022, 2021 and 2020 is summarized below (share amounts in thousands):


	Time SARs			Performance SARs			Total SARs			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (dollars in millions)
SARs outstanding, December 31, 2019		9,050			2,144			11,194		$	71.79
Granted		1,120			—			1,120			144.47
Exercised		(2,159	)		(1,325	)		(3,484	)		44.07
Cancelled		(175	)		—			(175	)		111.69

SARs outstanding, December 31, 2020		7,836			819			8,655			91.53
Granted		877			—			877			174.98
Exercised		(2,443	)		(533	)		(2,976	)		67.57
Cancelled		(108	)		—			(108	)		138.32

SARs outstanding, December 31, 2021		6,162			286			6,448			113.15
Granted		570			—			570			236.00
Exercised		(660	)		(159	)		(819	)		90.84
Cancelled		(112	)		—			(112	)		182.87

SARs outstanding, December 31, 2022		5,960			127			6,087		$	126.38		5.7 years	$	691

SARs exercisable, December 31, 2022		4,022			127			4,149		$	102.20		4.7 years	$	572

The weighted average fair values of SARs granted during

2022

2021

and

2020

were $

69.55

, $

54.57

and $

35.98

per share, respectively. The intrinsic values of SARs exercised during

2022

2021

and

2020

were $

115

million, $

404

million and $

328

million, respectively. As of December

2022

, the unrecognized compensation cost related to nonvested SARs was $

million.

Information regarding RSUs and PSUs activity during

2022

2021

and

2020

is summarized below (share amounts in thousands):


	RSUs			PSUs			Total RSUs and PSUs			Weighted Average Grant Date Fair Value
RSUs and PSUs outstanding, December 31, 2019		2,620			3,035			5,655		$	105.23
Granted		1,048			808			1,856			144.17
Performance adjustment		—			206			206			81.89
Vested		(1,030	)		(1,364	)		(2,394	)		88.63
Cancelled		(162	)		(93	)		(255	)		124.50

RSUs and PSUs outstanding, December 31, 2020		2,476			2,592			5,068			125.40
Granted		899			689			1,588			174.34
Performance adjustment		—			684			684			102.02
Vested		(992	)		(1,772	)		(2,764	)		106.62
Cancelled		(192	)		(110	)		(302	)		149.07

RSUs and PSUs outstanding, December 31, 2021		2,191			2,083			4,274			150.32
Granted		611			455			1,066			235.71
Performance adjustment		—			699			699			138.45
Vested		(878	)		(1,399	)		(2,277	)		138.41
Cancelled		(140	)		(123	)		(263	)		183.86

RSUs and PSUs outstanding, December 31, 2022		1,784			1,715			3,499		$	179.18

The fair values of RSUs and PSUs that vested during 2022, 2021 and 2020 were $550 million, $475 million and $349 million, respectively. As of December 31, 2022, the unrecognized compensation cost related to RSUs and PSUs was $324 million.