Share-Based Compensation Plans

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Northern Trust recognizes expense for the grant-date fair value of share-based compensation granted to employees and non-employee directors.

Total compensation expense for share-based payment arrangements to employees and the associated tax impacts were as follows for the periods presented.

TABLE 122: TOTAL COMPENSATION EXPENSE FOR SHARE-BASED PAYMENT ARRANGEMENTS TO EMPLOYEES


	FOR THE YEAR ENDED DECEMBER 31,
(In Millions)	2020		2019		2018
Restricted Stock Unit Awards	$	78.1	$	81.4	$	96.3
Stock Options	0.5		1.4		2.6
Performance Stock Units	12.8		25.1		32.0
Total Share-Based Compensation Expense	$	91.4	$	107.9	$	130.9
Tax Benefits Recognized	$	22.9	$	26.7	$	32.5

As of December 31, 2020, there was $70.8 million of unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Corporation’s share-based compensation plans. That cost is expected to be recognized as expense over a weighted-average period of approximately two years.

The Northern Trust Corporation 2017 Long-Term Incentive Plan (2017 Plan) is administered by the Compensation and Benefits Committee (Committee) of the Board of Directors. All employees of the Corporation and its subsidiaries and all directors of the Corporation are eligible to receive awards under the 2017 Plan. The 2017 Plan provides for the grant of non-qualified and incentive stock options; tandem and free-standing stock appreciation rights; stock awards in the form of restricted stock, restricted stock units and other stock awards; and performance awards.

Beginning with grants made on February 21, 2017 under the Northern Trust Corporation 2012 Stock Plan (2012 Plan), restricted stock unit and performance stock unit grants continue to vest in accordance with the original terms of the award if the applicable employee retires after satisfying applicable age and service requirements. For all applicable periods, stock option grants continue to vest in accordance with the original terms of the award if the employee meets applicable age and service requirements upon separation from service.

Grants are outstanding under the 2017 Plan, the 2012 Plan, and the Amended and Restated Northern Trust Corporation 2002 Stock Plan (2002 Plan). The 2017 Plan was approved by stockholders in April 2017. Upon approval of the 2017 Plan, no additional shares have been or will be granted under the 2012 Plan or 2002 Plan. The total number of shares of the Corporation’s common stock authorized for issuance under the 2017 Plan is 20,000,000 plus shares forfeited under the 2012 Plan and 2002 Plan. As of December 31, 2020, shares available for future grant under the 2017 Plan, including shares forfeited under the 2012 Plan and 2002 Plan, totaled 17,168,019.

The following describes Northern Trust’s share-based payment arrangements and applies to awards under the 2017 Plan, 2012 Plan and the 2002 Plan, as applicable.

Stock Options. Stock options consist of options to purchase common stock at prices not less than 100% of the fair value thereof on the date the options are granted. Options have a maximum 10 years life and generally vest and become exercisable in 1 year to 4 years after the date of grant. All options terminate at such time as determined by the Committee and as provided in the terms and conditions of the respective option grants. There were no options granted during the years ended December 31, 2020, 2019, and 2018.

The following table provides information about stock options granted, vested, and exercised in the years ended December 31, 2020, 2019, and 2018.

TABLE 123: STOCK OPTIONS GRANTED, VESTED, AND EXERCISED


	FOR THE YEAR ENDED DECEMBER 31,
(In Millions, Except Per Share Information)	2020		2019		2018
Grant-Date Fair Value of Stock Options Vested	$	4.5	$	6.6	$	8.1
Stock Options Exercised
Intrinsic Value as of Exercise Date	13.6		35.4		28.5
Cash Received	19.5		44.0		32.6
Tax Deduction Benefits Realized	13.4		35.2		27.7

The following is a summary of changes in nonvested stock options for the year ended December 31, 2020.

TABLE 124: CHANGES IN NONVESTED STOCK OPTIONS


NONVESTED OPTIONS	SHARES	WEIGHTED- AVERAGE GRANT-DATE FAIR VALUE PER SHARE
Nonvested at December 31, 2019	384,939	$	17.45
Granted	—	—
Vested	(270,110)	16.71
Forfeited or Cancelled	—	—
Nonvested at December 31, 2020	114,829	$	19.18

A summary of the status of stock options at December 31, 2020, and changes during the year then ended, are presented in the following table.

TABLE 125: STATUS OF STOCK OPTIONS AND CHANGES


($ In Millions Except Per Share Information)	SHARES	WEIGHTED AVERAGE EXERCISE PRICE PER SHARE		WEIGHTED AVERAGE REMAINING CONTRACTUAL TERM (YEARS)	AGGREGATE INTRINSIC VALUE
Options Outstanding, December 31, 2019	1,696,936	$	64.77
Granted	—	—
Exercised	(344,686)	56.65
Forfeited, Expired or Cancelled	(2,325)	49.54
Options Outstanding, December 31, 2020	1,349,925	$	66.87	3.3	$	35.5
Options Exercisable, December 31, 2020	1,235,096	$	64.90	3.2	$	34.9

Restricted Stock Unit Awards. Restricted stock unit awards may be granted to participants which entitle them to receive a payment in the Corporation’s common stock or cash and such other terms and conditions as the Committee deems appropriate. Each restricted stock unit provides the recipient the opportunity to receive one share of stock for each stock unit that vests. The restricted stock units granted in 2020 predominately vest at a rate equal to 25% each year for four years on the anniversary of the first day of the month following the month in which the grant date falls. Restricted stock unit grants totaled 772,848, 855,112, and 815,314, with weighted average grant-date fair values of $99.58, $91.89, and $103.74 per share, for the years ended December 31, 2020, 2019, and 2018, respectively. The total fair value of restricted stock units vested during the years ended December 31, 2020, 2019, and 2018, was $100.2 million, $89.3 million, and $66.4 million, respectively.

A summary of the status of outstanding restricted stock unit awards at December 31, 2020, and changes during the year then ended, is presented in the following table.

TABLE 126: OUTSTANDING RESTRICTED STOCK UNIT AWARDS


($ In Millions)	NUMBER	AGGREGATE INTRINSIC VALUE
Restricted Stock Unit Awards Outstanding, December 31, 2019	2,644,762	$	281.0
Granted	772,848
Distributed	(1,245,412)
Forfeited	(26,547)
Restricted Stock Unit Awards Outstanding, December 31, 2020	2,145,651	$	199.8
Units Convertible, December 31, 2020	19,770	$	1.8

The following is a summary of nonvested restricted stock unit awards at December 31, 2020, and changes during the year then ended.

TABLE 127: NONVESTED RESTRICTED STOCK UNIT AWARDS


NONVESTED RESTRICTED STOCK UNITS	NUMBER	WEIGHTED AVERAGE GRANT- DATE FAIR VALUE PER UNIT		WEIGHTED AVERAGE REMAINING VESTING TERM (YEARS)
Nonvested at December 31, 2019	2,624,210	$	87.26	1.7
Granted	772,848	99.58
Vested	(1,244,630)	80.46
Forfeited	(26,547)	95.41
Nonvested at December 31, 2020	2,125,881	$	95.61	2.1

Performance Stock Units. Each performance stock unit provides the recipient the opportunity to receive one share of the Corporation’s common stock for each stock unit at the end of a three-year performance period. For performance stock unit awards granted in 2018 and 2019, the number of units that vest are subject to the attainment of specified performance targets that are a function of internal return on equity goals. For performance stock unit awards granted in 2020, the number of units that vest are subject to the attainment of specified performance targets that are a function of internal return on equity goals and relative return on equity performance compared to a performance peer group of companies. For performance stock units outstanding as of December 31, 2020, and granted in 2018 or 2019, the number of such units that may vest ranges from 0% to 150% of the original award granted based on the attainment of the applicable 3-year average annual return on equity target. Distribution of the shares is then made after vesting.

Performance stock unit grants totaled 205,847, 213,044, and 242,232 for the years ended December 31, 2020, 2019, and 2018, respectively, with weighted average grant-date fair values of $100.83, $93.00, and $104.72. Performance stock units outstanding at target level performance totaled 660,510, 667,741, and 797,531 at December 31, 2020, 2019, and 2018, respectively. Performance stock units had aggregate intrinsic values of $61.5 million, $70.9 million, and $66.7 million, and weighted average remaining vesting terms of 1.0 year each at December 31, 2020, 2019, and 2018, respectively.

Non-employee Director Stock Awards. Stock units with total values of $1.5 million (20,148 units), $1.3 million (14,232 units), and $1.2 million (11,363 units) were granted to non-employee directors in 2020, 2019, and 2018, respectively, which vest or vested on the date of the annual meeting of the Corporation’s stockholders in the following years. Total expense recognized on these grants was $1.6 million, $1.4 million, and $1.3 million in 2020, 2019, and 2018, respectively. Stock units granted to non-employee directors do not have voting rights. Each stock unit entitles a director to one share of common stock at vesting, unless a director elects to defer receipt of the shares. Directors may elect to defer the payment of their annual stock unit grant and cash-based compensation until termination of services as director. Deferred cash compensation is converted into stock units representing shares of common stock of the Corporation. Distributions of deferred stock units are made in stock. For compensation deferred prior to January 1, 2018, distributions of the stock unit accounts that relate to cash-based compensation are made in cash based on the fair value of the stock units at the time of distribution. For compensation deferred on or after January 1, 2018, distributions of the stock unit accounts that relate to cash-based compensation are made in stock.