Employee Stock-Based Incentives

12 Months Ended

Dec. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Employee Stock-Based Incentives

Employee stock-based incentives

Employee stock-based awards

In 2016, 2015 and 2014, JPMorgan Chase granted long-term stock-based awards to certain employees under its LTIP, as amended and restated effective May 19, 2015. Under the terms of the LTIP, as of December 31, 2016, 78 million shares of common stock were available for issuance through May 2019. The LTIP is the only active plan under which the Firm is currently granting stock-based incentive awards. In the following discussion, the LTIP, plus prior Firm plans and plans assumed as the result of acquisitions, are referred to collectively as the “LTI Plans,” and such plans constitute the Firm’s stock-based incentive plans.

RSUs are awarded at no cost to the recipient upon their grant. Generally, RSUs are granted annually and vest at a rate of 50% aftertwo yearsand 50% afterthree yearsand are converted into shares of common stock as of the vesting date. In addition, RSUs typically include full-career eligibility provisions, which allow employees to continue to vest upon voluntary termination, subject to post-employment and other restrictions based on age or service-related requirements. All RSU awards are subject to forfeiture until vested and contain clawback provisions that may result in cancellation under certain specified circumstances. RSUs entitle the recipient to receive cash payments equivalent to any dividends paid on the underlying common stock during the period the RSUs are outstanding and, as such, are considered participating securities as discussed in Note 24.

In January 2016, the Firm’s Board of Directors approved the grant of performance share units (“PSUs”) to members of the Firm’s Operating Committee under the variable compensation program for performance year 2015. PSUs are subject to the Firm’s achievement of specified performance criteria over a three-year period. The number of awards that vest can range from zero to 150% of the grant amount. The awards vest and are converted into shares of common stock in the quarter after the end of the three-year performance period. In addition, dividends are notionally reinvested in the Firm’s common stock and will be delivered only in respect of any earned shares.

Once the PSUs have vested, the shares of common stock that are delivered, after applicable tax withholding, must be held for an additional two-year period, for a total combined vesting and holding period of five years from the grant date.

Under the LTI Plans, stock options and stock appreciation rights (“SARs”) have generally been granted with an exercise price equal to the fair value of JPMorgan Chase’s common stock on the grant date. The Firm periodically grants employee stock options to individual employees.There were no material grants of stock options or SARs

in 2016, 2015 and 2014. SARs generally expire ten years after the grant date.

The Firm separately recognizes compensation expense for each tranche of each award, net of estimated forfeitures, as if it were a separate award with its own vesting date. Generally, for each tranche granted, compensation expense is recognized on a straight-line basis from the grant date until the vesting date of the respective tranche, provided that the employees will not become full-career eligible during the vesting period. For awards with full-career eligibility provisions and awards granted with no future substantive service requirement, the Firm accrues the estimated value of awards expected to be awarded to employees as of the grant date without giving consideration to the impact of post-employment restrictions. For each tranche granted to employees who will become full-career eligible during the vesting period, compensation expense is recognized on a straight-line basis from the grant date until the earlier of the employee’s full-career eligibility date or the vesting date of the respective tranche.

The Firm’s policy for issuing shares upon settlement of employee stock-based incentive awards is to issue either new shares of common stock or treasury shares. During 2016, 2015 and 2014, the Firm settled all of its employee stock-based awards by issuing treasury shares.

In January 2008, the Firm awarded to its Chairman and Chief Executive Officer up to2 millionSARs. The terms of this award are distinct from, and more restrictive than, other equity grants regularly awarded by the Firm. On July 15, 2014, the Compensation & Management Development Committee and Board of Directorsdetermined that all requirements for the vesting of the2 millionSAR awards had been met and thus, the awards became exercisable.The SARs, which will expire in January 2018, have an exercise price of$39.83(the price of JPMorgan Chase common stock on the date of grant). The expense related to this award was dependent on changes in fair value of the SARs through July 15, 2014 (the date when the vested number of SARs were determined), and the cumulative expense was recognized ratably over the service period, which was initially assumed to befive yearsbut, effective in the first quarter of 2013, was extended tosix and one-half years. The Firm recognized$3 millionin compensation expense in 2014 for this award.

RSUs, PSUs, employee stock options and SARs activity

Compensation expense for RSUs and PSUs is measured based on the number of units granted multiplied by the stock price at the grant date, and for employee stock options and SARs, is measured at the grant date using the Black-Scholes valuation model. Compensation expense for these awards is recognized in net income as described previously. The following table summarizes JPMorgan Chase’s RSUs, PSUs, employee stock options and SARs activity for 2016.

	RSUs/PSUs				Options/SARs
Year ended December 31, 2016	Number of units		Weighted-average grant date fair value		Number of awards		Weighted-average exercise price		Weighted-average remaining contractual life (in years)	Aggregate intrinsic value
(in thousands, except weighted-average data, and where otherwise stated)
Outstanding, January 1	85,307		$	54.60	43,466		$	43.51
Granted	36,775		57.80		77		72.63
Exercised or vested	(37,121	)	52.09		(12,836	)	41.55
Forfeited	(3,254	)	56.45		(240	)	44.28
Canceled	NA		NA		(200	)	612.18
Outstanding, December 31	81,707		$	57.15	30,267		$	40.65	3.9	$	1,378,254
Exercisable, December 31	NA		NA		24,815		40.08		3.6	1,144,937

The total fair value of RSUs that vested during the years ended December 31, 2016, 2015 and 2014, was $2.2 billion, $2.8 billion and $3.2 billion, respectively. The total intrinsic value of options exercised during the years ended December 31, 2016, 2015 and 2014, was $338 million, $335 million and $539 million, respectively.

Compensation expense

The Firm recognized the following noncash compensation expense related to its various employee stock-based incentive plans in its Consolidated statements of income.

Year ended December 31, (in millions)	2016		2015		2014
Cost of prior grants of RSUs, PSUs and SARs that are amortized over their applicable vesting periods	$	1,046	$	1,109	$	1,371
Accrual of estimated costs of stock-based awards to be granted in future periods including those to full-career eligible employees	894		878		819
Total noncash compensation expense related to employee stock-based incentive plans	$	1,940	$	1,987	$	2,190

At December 31, 2016, approximately $700 million (pretax) of compensation expense related to unvested awards had not yet been charged to net income. That cost is expected to be amortized into compensation expense over a weighted-average period of 1.0 year. The Firm does not capitalize any compensation expense related to share-based compensation awards to employees.

Cash flows and tax benefits

Effective January 1, 2016, the Firm adopted new accounting guidance related to employee share-based payments. As a result of the adoption of this new guidance, all excess tax benefits (including tax benefits from dividends or dividend equivalents) on share-based payment awards are recognized within income tax expense in the Consolidated statements of income. In prior years these tax benefits were recorded as increases to additional paid-in capital. Income tax benefits related to stock-based incentive arrangements recognized in the Firm’s Consolidated statements of income for the years ended December 31, 2016, 2015 and 2014, were $916 million, $746 million and $854 million, respectively.

The following table sets forth the cash received from the exercise of stock options under all stock-based incentive arrangements, and the actual income tax benefit related to tax deductions from the exercise of the stock options.

Year ended December 31, (in millions)	2016		2015		2014
Cash received for options exercised	$	26	$	20	$	63
Tax benefit	70		64		104