Share-Based Compensation Plans

The following table summarizes share-based compensation expense recognized in the Consolidated Statements of Income in Compensation and benefits (in millions):



Years ended December 31	2013		2012		2011
Restricted share units ("RSUs")	$	174	$	154	$	142
Performance share awards ("PSAs")	117		46		78
Share options	2		5		9
Employee share purchase plans	7		7		6
Total share-based compensation expense	300		212		235
Tax benefit	81		62		77
Share-based compensation expense, net of tax	$	219	$	150	$	158

Restricted Share Units

RSUs generally vest between three and five years, but may vest up to ten years from the date of grant. The fair value of RSUs is based upon the market value of the Aon ordinary shares at the date of grant. With certain limited exceptions, any break in continuous employment will cause the forfeiture of all unvested awards. Compensation expense associated with RSUs is recognized over the requisite service period. Dividend equivalents are paid on certain RSUs, based on the initial grant amount.

A summary of the status of the Company's RSUs is as follows (shares in thousands):



	2013				2012				2011
Years ended December 31	Shares		Fair Value (1)		Shares		Fair Value (1)		Shares		Fair Value (1)
Non-vested at beginning of year	10,432		$	44	9,916		$	42	10,674		$	38
Granted	3,714		62		5,113		46		3,506		51
Vested	(3,945	)	44		(3,958	)	42		(3,773	)	39
Forfeited	(442	)	47		(639	)	44		(491	)	39
Non-vested at end of year	9,759		51		10,432		44		9,916		42


(1)	Represents per share weighted average fair value of award at date of grant.

The fair value of RSUs that vested during 2013, 2012 and 2011 was $172 million, $180 million and $146 million, respectively.

Performance Share Awards

The vesting of PSAs is contingent upon meeting various individual, divisional or company-wide performance conditions, including revenue generation or growth in revenue, pretax income or earnings per share over a one to five-year period. The performance conditions are not considered in the determination of the grant date fair value for these awards. The fair value of PSAs is based upon the market price of an Aon ordinary share at the date of grant. Compensation expense is recognized over the performance period, and in certain cases an additional vesting period, based on management's estimate of the number of units expected to vest. Compensation expense is adjusted to reflect the actual number of shares issued at the end of the programs. The actual issue of shares may range from 0-200% of the target number of PSAs granted, based on the terms of the plan and level of achievement of the related performance target. Dividend equivalents are not paid on PSAs.

Information regarding the Company's target PSAs granted and shares that would be issued at current performance levels for PSAs granted during the years ended December 31, 2013, 2012 and 2011, respectively, is as follows (shares in thousands, dollars in millions, except fair value):



	2013		2012		2011
Target PSAs granted	1,135		1,369		1,715
Fair value (1)	$	58	$	47	$	50
Number of shares that would be issued based on current performance levels	1,702		2,451		1,443
Unamortized expense, based on current performance levels	$	70	$	40	$	—


(1)	Represents per share weighted average fair value of award at date of grant.

During 2013, the Company issued approximately 1.1 million shares in connection with the 2010 Leadership Performance Plan ("LPP") cycle and 0.2 million shares related to other performance plans. During 2012, the Company issued approximately 1.4 million shares in connection with the 2009 LPP cycle and 0.9 million shares related to other performance plans. During 2011, the Company issued approximately 1.2 million shares in connection with the 2008 LPP cycle and 0.3 million shares related to a 2006 performance plan.

Share Options

In prior periods, options to purchase ordinary shares were granted to certain employees at fair value on the date of grant. Commencing in 2010, the Company ceased granting new share options with the exception of historical contractual commitments. Generally, employees are required to complete two continuous years of service before the options begin to vest in increments until the completion of a four-year period of continuous employment, although a number of options were granted that require five continuous years of service before the options are fully vested. Options issued under the LPP program vest ratably over three years with a six-year term. The maximum contractual term on share options is ten years from the date of grant.

The Company uses a lattice-binomial option-pricing model to value share options. Lattice-based option valuation models use a range of assumptions over the expected term of the options. Expected volatilities are based on the average of the historical volatility of the Company's share price and the implied volatility of traded options and the Company's shares. The valuation model stratifies employees between those receiving LPP options, Special Stock Plan ("SSP") options, and all other option grants. The Company believes that this stratification better represents prospective share option exercise patterns. The expected dividend yield assumption is based on the Company's historical and expected future dividend rate. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life of employee share options represents the weighted-average period stock options are expected to remain outstanding and is a derived output of the lattice-binomial model.

In connection with its incentive compensation plans, the Company granted no shares for the years ended December 31, 2013 and 2012 and 80,000 shares at $53 per share for the year ended December 31, 2011. The weighted average assumptions, the weighted average expected life and estimated fair value of employee share options granted are summarized as follows:



Years ended December 31	2013	2012	2011
Weighted average volatility	NA	NA	26.1%
Expected dividend yield	NA	NA	1.3%
Risk-free rate	NA	NA	2.2%
Weighted average expected life, in years	NA	NA	5.5
Weighted average estimated fair value per share	NA	NA	$10.92

A summary of the status of the Company's share options and related information is as follows (shares in thousands):



Years ended December 31	2013				2012				2011
	Shares		Weighted-Average Exercise Price Per Share		Shares		Weighted-Average Exercise Price Per Share		Shares		Weighted-Average Exercise Price Per Share
Beginning outstanding	5,611		$	32	9,116		$	32	13,919		$	32
Granted	—		—		—		—		80		53
Exercised	(2,116	)	32		(3,413	)	31		(4,546	)	32
Forfeited and expired	(33	)	34		(92	)	37		(337	)	36
Outstanding at end of year	3,462		32		5,611		32		9,116		32
Exercisable at end of year	3,270		32		5,117		31		7,833		30
Shares available for grant	11,330				17,024				24,508

A summary of options outstanding and exercisable as of December 31, 2013 is as follows (shares in thousands):



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Shares Outstanding	Weighted-Average Remaining Contractual Life (years)	Weighted-Average Exercise Price Per Share		Shares Exercisable	Weighted-Average Remaining Contractual Life (years)	Weighted-Average Exercise Price Per Share
$14.71 – 22.86	1,244	1.43	$	22.45	1,244	1.43	$	22.45
22.87 – 25.51	174	1.50	25.44		174	1.50	25.44
25.52 – 32.53	304	0.90	27.41		304	0.90	27.41
32.54 – 36.88	392	2.32	35.89		323	2.09	35.77
36.89 – 43.44	830	2.55	39.49		760	2.31	39.54
43.45 – 52.93	518	3.50	47.05		465	3.09	46.38
	3,462				3,270

The aggregate intrinsic value represents the total pretax intrinsic value, based on options with an exercise price less than the Company's closing share price of $83.89 as of December 31, 2013, which would have been received by the option holders had those option holders exercised their options as of that date. At December 31, 2013, the aggregate intrinsic value of options outstanding was $179 million, of which $170 million was exercisable.

Other information related to the Company's share options is as follows (in millions):



	2013		2012		2011
Aggregate intrinsic value of stock options exercised	$	73	$	67	$	80
Cash received from the exercise of stock options	61		105		153
Tax benefit realized from the exercise of stock options	15		11		14

Unamortized deferred compensation expense, which includes both options and awards, amounted to $336 million as of December 31, 2013, with a remaining weighted-average amortization period of approximately 2.1 years.

Employee Share Purchase Plan

United States

The Company has an employee share purchase plan that provides for the purchase of a maximum of 7.5 million shares of the Company's ordinary shares by eligible U.S. employees. Prior to 2011, shares of the Company's common stock were purchased at 3-month intervals at 85% of the lower of the fair market value of the common stock on the first or the last day of each 3-month period. Beginning in 2011, the Company's ordinary shares were purchased at 6-month intervals at 85% of the lower of the fair market value of the ordinary shares on the first or last day of each 6-month period. In 2013, 2012, and 2011, 556,000 shares, 621,000 shares and 468,000 shares, respectively, were issued to employees under the plan. Compensation expense recognized was $6 million in both 2013 and 2012, and $5 million in 2011.

United Kingdom

The Company also has an employee share purchase plan for eligible U.K. employees that provides for the purchase of shares after a 3-year period and that is similar to the U.S. plan previously described. Three-year periods began in 2013 and 2010, allowing for the purchase of a maximum of 350,000 and 300,000 shares, respectively. In 2013, 2012, and 2011, 172,000 shares, 25,000 shares, and 63,000 shares, respectively, were issued under the plan. Compensation expense of $1 million was recognized in each of 2013, 2012, and 2011.