|
12. Stock Compensation Plans
The following table summarizes stock-based compensation expense recognized in the Condensed Consolidated Statements of Income in Compensation and benefits (in millions):
|
|
|
Three months ended |
|
Nine months ended |
|
|
|
|
September 30, |
|
September 30, |
|
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
|
Restricted stock units (“RSUs”) |
|
$ |
31 |
|
$ |
29 |
|
$ |
108 |
|
$ |
99 |
|
|
Performance plans |
|
24 |
|
10 |
|
59 |
|
51 |
|
|
Stock options |
|
2 |
|
3 |
|
7 |
|
13 |
|
|
Employee stock purchase plans |
|
2 |
|
1 |
|
5 |
|
3 |
|
|
Total stock-based compensation expense |
|
$ |
59 |
|
$ |
43 |
|
$ |
179 |
|
$ |
166 |
|
Stock Awards
In the first nine months of 2011, the Company granted approximately 1.2 million shares in connection with the 2008 Leadership Performance Plan cycle, 0.3 million shares related to a 2006 performance plan, and restricted shares of approximately 3.3 million in connection with the Company’s incentive compensation plans. In the first nine months of 2010, the Company granted approximately 1.7 million shares in connection with the completion of the 2007 Leadership Performance Plan cycle and restricted shares of approximately 3.3 million in connection with the Company’s incentive compensation plans.
A summary of the status of Aon’s non-vested stock awards is as follows (shares in thousands):
|
|
|
Nine months ended September 30, |
|
|
|
|
2011 |
|
2010 |
|
|
|
|
Shares |
|
Fair
Value (1) |
|
Shares |
|
Fair
Value (1) |
|
|
Non-vested at beginning of period |
|
10,674 |
|
$ |
38 |
|
12,850 |
|
$ |
36 |
|
|
Granted |
|
4,831 |
|
50 |
|
4,984 |
|
39 |
|
|
Vested |
|
(4,850 |
) |
42 |
|
(6,288 |
) |
35 |
|
|
Forfeited |
|
(410 |
) |
39 |
|
(412 |
) |
38 |
|
|
Non-vested at end of period |
|
10,245 |
|
42 |
|
11,134 |
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents per share weighted average fair value of award at date of grant
Information regarding Aon’s performance-based plans follows (shares in thousands, dollars in millions):
|
|
|
As of September 30, |
|
|
|
|
2011 |
|
2010 |
|
|
Potential RSUs to be issued based on current performance levels |
|
5,791 |
|
4,883 |
|
|
Unamortized expense, based on current performance levels |
|
$ |
107 |
|
$ |
107 |
|
|
|
|
|
|
|
|
|
Stock Options
In connection with its incentive compensation plans, in the third quarter of 2011 the Company did not grant any options. In the first nine months of 2011 and 2010, the Company granted 80,000 stock options at $53 per share and 143,000 stock options at $38 per share, respectively.
The weighted average assumptions, the weighted average expected life and estimated fair value of employee stock options are summarized as follows:
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average volatility |
|
N/A |
|
27.8 |
% |
26.1 |
% |
28.5 |
% |
|
Expected dividend yield |
|
N/A |
|
1.6 |
% |
1.3 |
% |
1.6 |
% |
|
Risk-free rate |
|
N/A |
|
2.2 |
% |
2.2 |
% |
3.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average expected life, in years |
|
N/A |
|
6.1 |
|
5.5 |
|
6.1 |
|
|
Weighted average estimated fair value per share |
|
N/A |
|
$ |
9.13 |
|
$ |
10.92 |
|
$ |
10.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the status of Aon’s stock options and related information is as follows (shares in thousands):
|
|
|
Nine months ended September 30, |
|
|
|
|
2011 |
|
2010 |
|
|
|
|
Shares |
|
Weighted-
Average
Exercise Price |
|
Shares |
|
Weighted-
Average
Exercise Price |
|
|
Outstanding at beginning of period |
|
13,919 |
|
$ |
32 |
|
15,937 |
|
$ |
33 |
|
|
Granted |
|
80 |
|
53 |
|
142 |
|
38 |
|
|
Exercised |
|
(3,781 |
) |
32 |
|
(2,382 |
) |
30 |
|
|
Forfeited and expired |
|
(300 |
) |
37 |
|
(402 |
) |
34 |
|
|
Outstanding at end of period |
|
9,918 |
|
32 |
|
13,295 |
|
33 |
|
|
Exercisable at end of period |
|
8,566 |
|
30 |
|
10,535 |
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average remaining contractual life, in years, of outstanding options was 3.3 years and 3.6 years at September 30, 2011 and 2010, respectively.
The aggregate intrinsic value represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s closing stock price of $41.98 as of September 30, 2011, which would have been received by the option holders had those option holders exercised their options as of that date. At September 30, 2011, the aggregate intrinsic value of options outstanding was $105 million, of which $101 million was exercisable.
Other information related to the Company’s stock options is as follows (in millions):
|
|
|
Three months ended |
|
Nine months ended |
|
|
|
|
September 30, |
|
September 30, |
|
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
|
Aggregate intrinsic value of stock options exercised |
|
$ |
4 |
|
$ |
5 |
|
$ |
69 |
|
$ |
26 |
|
|
Cash received from the exercise of stock options |
|
8 |
|
12 |
|
129 |
|
71 |
|
|
Tax benefit realized from the exercise of stock options |
|
— |
|
— |
|
12 |
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized deferred compensation expense, which includes both options and awards, amounted to $294 million as of September 30, 2011, with a remaining weighted-average amortization period of approximately 2.0 years. |