Stock-based Compensation Plans
The Corporation administers a number of equity compensation plans, including the Key Associate Stock Plan and the Merrill Lynch Employee Stock Compensation Plan. Descriptions of the significant features of the equity compensation plans are below. Under these plans, the Corporation grants stock-based awards, including stock options, restricted stock and restricted stock units (RSUs). Grants in 2013 include RSUs which generally vest in three equal annual installments beginning one year from the grant date, and awards which will vest subject to the attainment of specified performance goals.
For most awards, expense is generally recognized ratably over the vesting period net of estimated forfeitures, unless the employee meets certain retirement eligibility criteria. For awards to employees that meet retirement eligibility criteria, the Corporation records the expense upon grant. For employees that become retirement eligible during the vesting period, the Corporation recognizes expense from the grant date to the date on which the employee becomes retirement eligible, net of estimated forfeitures. The compensation cost for the stock-based plans was $2.3 billion, $2.3 billion and $2.6 billion in 2013, 2012 and 2011, respectively. The related income tax benefit was $842 million, $839 million and $969 million for 2013, 2012 and 2011, respectively.
Key Associate Stock Plan
The Key Associate Stock Plan became effective January 1, 2003. It provides for different types of awards, including stock options, restricted stock and RSUs. As of December 31, 2013, the shareholders had authorized approximately 1.1 billion shares for grant under this plan. Additionally, any shares covered by awards under certain legacy plans that cancel, terminate, expire, lapse or settle in cash after a specified date may be re-granted under the Key Associate Stock Plan.
During 2013, the Corporation issued 183 million RSUs to certain employees under the Key Associate Stock Plan. Certain awards are earned based on the achievement of specified performance criteria. RSUs may be settled in cash or in shares of common stock depending on the terms of the applicable award. In 2013, two million of these RSUs were authorized to be settled in shares of common stock with the remainder in cash. Certain awards contain clawback provisions which permit the Corporation to cancel all or a portion of the award under specified circumstances. The compensation cost for cash-settled awards and awards subject to certain clawback provisions, which in the aggregate represent substantially all of the awards in 2013, is accrued over the vesting period and adjusted to fair value based upon changes in the share price of the Corporation’s common stock.
From time to time, the Corporation enters into equity total return swaps to hedge a portion of RSUs granted to certain employees as part of their compensation in prior periods to minimize the change in the expense to the Corporation driven by fluctuations in the fair value of the RSUs. Certain of these derivatives are designated as cash flow hedges of unrecognized unvested awards with the changes in fair value of the hedge recorded in accumulated OCI and reclassified into earnings in the same period as the RSUs affect earnings. The remaining derivatives are used to hedge the price risk of cash-settled awards with changes in fair value recorded in personnel expense.
At December 31, 2013, approximately 108 million options were outstanding under this plan. There were no options granted under this plan during 2013, 2012 or 2011.
Other Stock Plans
The Corporation assumed the Merrill Lynch Employee Stock Compensation Plan with the acquisition of Merrill Lynch. Approximately eight million RSUs were granted in 2011 which generally vest in three equal annual installments beginning one year from the grant date. There were no shares granted under this plan during 2013 or 2012. At December 31, 2013, there were approximately two million unvested shares outstanding. The Corporation also assumed, with the acquisition of Merrill Lynch, the obligations of outstanding awards granted under the Merrill Lynch Financial Advisor Capital Accumulation Award Plan (FACAAP). The FACAAP is no longer an active plan and no awards were granted in 2013, 2012 or 2011. Awards still outstanding which were granted in 2003 and thereafter, are generally payable eight years from the grant date in a fixed number of the Corporation’s common shares. At December 31, 2013, there were seven million shares outstanding under this plan.
Restricted Stock/Units
The table below presents the status at December 31, 2013 of the share-settled restricted stock/units and changes during 2013.
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Stock-settled Restricted Stock/Units |
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| Shares/Units | | Weighted- average Grant Date Fair Value |
Outstanding at January 1, 2013 | 147,570,397 |
| | $ | 13.18 |
|
Granted | 2,405,568 |
| | 11.80 |
|
Vested | (75,422,919 | ) | | 14.24 |
|
Canceled | (3,350,295 | ) | | 12.22 |
|
Outstanding at December 31, 2013 | 71,202,751 |
| | $ | 12.05 |
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The table below presents the status at December 31, 2013 of the cash-settled RSUs granted under the Key Associate Stock Plan and changes during 2013.
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Cash-settled Restricted Units | |
| |
| Units |
Outstanding at January 1, 2013 | 329,556,468 |
|
Granted | 181,166,560 |
|
Vested | (137,125,114 | ) |
Canceled | (13,669,045 | ) |
Outstanding at December 31, 2013 | 359,928,869 |
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At December 31, 2013, there was an estimated $1.9 billion of total unrecognized compensation cost related to certain share-based compensation awards that is expected to be recognized over a period of up to four years, with a weighted-average period of 1.3 years. The total fair value of restricted stock vested in 2013, 2012 and 2011 was $1.0 billion, $2.9 billion and $1.7 billion, respectively. In 2013, 2012 and 2011 the amount of cash paid to settle equity-based awards for all equity compensation plans was $1.4 billion, $779 million and $489 million, respectively.
Stock Options
The table below presents the status of all option plans at December 31, 2013 and changes during 2013. Outstanding options at December 31, 2013 include 108 million options under the Key Associate Stock Plan and 14 million options to employees of predecessor company plans assumed in mergers.
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Stock Options |
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| Options | | Weighted- average Exercise Price |
Outstanding at January 1, 2013 | 154,923,623 |
| | $ | 46.22 |
|
Forfeited | (32,754,932 | ) | | 38.73 |
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Outstanding at December 31, 2013 | 122,168,691 |
| | 48.23 |
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Options vested and exercisable at December 31, 2013 | 122,168,691 |
| | 48.23 |
|
At December 31, 2013, there was no aggregate intrinsic value of options outstanding, vested and exercisable. The weighted-average remaining contractual term of options outstanding, vested and exercisable was 1.9 years at December 31, 2013. These remaining contractual terms are the same because options have not been granted since 2008 and they generally vest over three years.
