Note 16—Share‑Based Compensation Plans

Overview

We have a long‑term incentive plan (the “Long‑Term Incentive Plan”) for executives, key employees and non‑employee directors under which awards can be granted in the form of restricted share units, restricted shares, stock options, stock appreciation rights and cash performance awards. Awards may be granted as service awards that are earned over a defined service period or as performance awards that are earned based on the achievement of certain market factors or performance targets or a combination of market factors and performance targets. Our compensation committee of our board of directors determines the terms and conditions of the awards granted under the Long‑Term Incentive Plan. As of December 31, 2016, we had 55.4 million shares authorized and 14.7 million shares available to be granted under the Long‑Term Incentive Plan. As of December 31, 2016, total unrecognized compensation costs related to all unvested share‑based awards were $43 million, which are expected to be recognized over a weighted‑average period of 1.4 years.

Service awards typically vest either in three equal annual installments beginning on the first anniversary date of the grant or in an aggregate installment at the end of the stated vesting period. Performance awards typically are subject to a three‑year measurement period during which the number of options, shares or restricted share units remains uncertain. At the end of the measurement period, the awarded number of options, shares or restricted share units is determined and, thereafter subject to a stated vesting period. The performance awards typically vest in one aggregate installment following the determination date. Stock options and stock appreciation rights are subject to a stated vesting period and, once vested, typically have a seven‑year term during which they are exercisable.

Service awards

Restricted share units—A restricted share unit is a notional unit that is equal to one share but has no voting rights until the underlying share is issued. Our service‑based restricted share units are participating securities since they have the right to receive dividends and other cash distributions to shareholders. The following table summarizes unvested activity for service‑based units granted under our incentive plans during the year ended December 31, 2016:


	Number	Weighted-average
	of	grant-date fair value
	units	per unit
Unvested at January 1, 2016	3,030,444	$	25.65
Granted	3,155,382		8.69
Vested	(1,725,734)		28.08
Forfeited	(454,010)		9.52
Unvested at December 31, 2016	4,006,082	$	13.10

During the year ended December 31, 2016, the aggregate grant‑date fair value of the service‑based units that vested was $48 million.

During the years ended December 31, 2015 and 2014, we granted 2,848,521 and 1,208,790 service‑based units, respectively, with a weighted‑average grant‑date fair value of $18.70 and $42.80 per unit, respectively. During the years ended December 31, 2015 and 2014, we had 1,817,758 and 1,520,023 service‑based units, respectively, that vested with an aggregate grant‑date fair value of $81 million and $87 million, respectively.

Stock options—The following table summarizes activity for vested and unvested service‑based stock options outstanding under our incentive plans during the year ended December 31, 2016:


				Weighted-average
	Number	Weighted-average		remaining	Aggregate
	of shares	exercise price		contractual term	intrinsic value
	under option	per share		(years)	(in millions)
Outstanding at January 1, 2016	1,622,317	$	73.66	4.81	$	—
Granted	945,724		8.61
Forfeited	(633,346)		64.44
Outstanding at December 31, 2016	1,934,695	$	44.88	6.12	$	6

Vested and exercisable at December 31, 2016	1,022,393	$	77.24	3.45	$	—

During the year ended December 31, 2016, we granted service‑based stock options with a weighted‑average grant date fair value of $8.61 per stock option. We estimated the fair value using the following weighted‑average assumptions: (a) a dividend yield of zero percent, (b) an expected price volatility of 65 percent, (c) a risk‑free interest rate of 1.26 percent and (d) an expected option life of 6.1 years. During the year ended December 31, 2016, the aggregate grant‑date fair value of service‑based stock options that vested was $3 million. During the year ended December 31, 2016, no service‑based stock options were exercised. As of December 31, 2016, there were outstanding unvested service‑based stock options to purchase 912,302 shares. At January 1, 2016, we have presented the aggregate intrinsic value as zero since the weighted‑average exercise price per share exceeded the market price of our shares on these dates.

During the years ended December 31, 2015 and 2014, we did not grant service‑based stock options. During the years ended December 31, 2015 and 2014, the total grant‑date fair value of service‑based stock options that vested was $9 million and $14 million, respectively. During the year ended December 31, 2015, no service‑based stock options were exercised. During the year ended December 31, 2014, holders exercised service‑based stock options to purchase 383,848 shares, and the total pre‑tax intrinsic value of service‑based stock options exercised was $2 million.

Stock appreciation rights—During the years ended December 31, 2016, 2015 and 2014, we did not grant stock appreciation rights and no stock appreciation rights were exercised. At January 1, 2016, there were 185,002 stock appreciation rights outstanding at a weighted‑average exercise price of $93.49 per share and less than one year remaining contractual life. At January 1, 2016 and December 31, 2016, the aggregate intrinsic value of such stock appreciation rights was zero since the weighted‑average exercise price per share exceeded the market price of our shares on that date. At December 31, 2016, 29,288 stock appreciation rights were vested and exercisable, at an exercise price of $107.63 per share with less than one year remaining contractual term.

Performance awards

Restricted share units—We grant performance awards in the form of restricted share units that can be earned depending on the achievement of (a) market factors or (b) both market factors and performance targets. Our performance awards are participating securities since they have the right to receive dividends and other cash distributions to shareholders. The number of restricted share units earned is quantified upon completion of the specified period at the determination date. The following table summarizes unvested activity for performance‑based units under our incentive plans during the year ended December 31, 2016:


	Number	Weighted-average
	of	grant-date fair value
	units	per unit
Unvested at January 1, 2016	702,131	$	18.81
Granted	997,362		11.60
Vested	(187,000)		32.05
Forfeited	(72,887)		17.12
Unvested at December 31, 2016	1,439,606	$	14.40

During the year ended December 31, 2016, performance‑based units vested with an aggregate grant‑date fair value of $6 million, which is subject to compensation committee approval in February 2017.

During the years ended December 31, 2015 and 2014, there were 652,592 and 302,630 performance‑based units granted, respectively, with a weighted‑average grant‑date fair value of $17.91 and $31.73 per unit, respectively. During the year ended December 31, 2015, no performance‑based units vested since neither the market factors nor the performance targets were achieved. During the year ended December 31, 2014, the total grant‑date fair value of the performance‑based units that vested was $8 million.

Stock options—We previously granted performance awards in the form of stock options that could be earned depending on the achievement of certain performance targets. During the years ended December 31, 2016, 2015 and 2014, we did not grant performance‑based stock options. At January 1, 2016, there were 150,360 performance‑based stock options outstanding at a weighted‑average exercise price of $82.50 per share and less than one year remaining contractual life. At January 1, 2016, the aggregate intrinsic value of such performance‑based stock options was zero since the weighted‑average exercise price per share exceeded the market price of our shares on those dates. During the years ended December 31, 2016 and 2015, no performance‑based stock options were exercised. During the year ended December 31, 2014, holders exercised performance‑based stock options to purchase 12,073 shares. During the year ended December 31, 2016, all remaining performance‑based stock options expired.