In 2020, our Board of Directors and stockholders approved amendments to our 2011 Long-Term Incentive Plan effective October 1, 2020 (Amended and Restated 2011 LTIP), authorizing for issuance up to 171 million shares of our common stock. The Amended and Restated 2011 LTIP covers officers, directors, employees and consultants and provides for the grant of restricted or unrestricted common stock, restricted stock units (RSUs), options to acquire our common stock, stock appreciation rights, performance awards (market-based and performance-based RSUs) and other stock and non-stock awards. Shares reserved under our current and former stock incentive plans totaled approximately 145 million as of December 31, 2023. The Executive Compensation and Human Resources Committee (the Committee) of the Board of Directors, consisting of independent, non-employee directors may authorize the issuance of common stock and cash awards under the Amended and Restated 2011 LTIP in recognition of the achievement of long-term performance objectives established by the Committee.

Non-qualified options issued to employees are generally granted with an exercise price equal to the market price of our stock on the grant date, vest over a three or four-year service period and have a ten-year contractual life. In the case of qualified options, if the recipient owns more than ten percent of the voting power of all classes of stock, the option granted will be at an exercise price of 110 percent of the fair market value of our common stock on the date of grant and will expire over a period not to exceed five years. Non-vested stock awards, including restricted stock awards (RSAs) and RSUs issued to employees are generally granted with an exercise price of zero and typically vest in four equal annual installments. These awards represent our commitment to issue shares to recipients after the vesting period. Upon each vesting date, such awards are no longer subject to risk of forfeiture and we issue shares of our common stock to the recipient.

The following presents the impact of stock-based compensation on our consolidated statements of operations:


	Year Ended December 31,
(in millions, except per share data)	2023		2022		2021
Cost of products sold	$	12	$	12	$	11
Selling, general and administrative expenses	179		167		147
Research and development expenses	42		41		36
	233		220		194
Income tax (benefit) expense	(35)		(32)		(29)
	$	198	$	188	$	165
Net impact per common share - basic	$	0.14	$	0.13	$	0.12
Net impact per common share - assuming dilution	$	0.14	$	0.13	$	0.12

We use the Black-Scholes option-pricing model to calculate the grant-date fair value of stock options granted to employees under our stock incentive plans. We calculated the fair value for options granted using the following estimated weighted-average assumptions:


	Year Ended December 31,
	2023					2022					2021
Options granted (in thousands)	2,934					3,287					3,822
Weighted-average exercise price	$	47.43				$	44.02				$	37.69
Weighted-average grant-date fair value	$	16.83				$	13.64				$	10.77
Black-Scholes Assumptions
Expected volatility	26				%	28				%	29				%
Expected term (in years, weighted)	6.3					6.1					5.9
Risk-free interest rate	3.62%		-	4.75%		1.42%		-	3.87%		0.66%		-	1.20%

We have not historically paid cash dividends on our common stock and currently we do not intend to pay cash dividends on our common stock. Therefore, we have assumed an expected dividend yield of zero in our grant-date fair value assessment.


	Stock Options (in thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in millions)












Outstanding as of December 31, 2020	23,122	$	24
Granted	3,822	38
Exercised	(4,796)	13
Cancelled/forfeited	(699)	26
Outstanding as of December 31, 2021	21,448	$	29
Granted	3,287	44
Exercised	(2,745)	17
Cancelled/forfeited	(502)	34
Outstanding as of December 31, 2022	21,489	$	32
Granted	2,934	47
Exercised	(3,325)	25
Cancelled/forfeited	(249)	44
Outstanding as of December 31, 2023	20,850	$	36	5.8	462
Exercisable as of December 31, 2023	13,532	31		4.5	359
Expected to vest as of December 31, 2023	7,052	44		8.1	99
Total vested and expected to vest as of December 31, 2023	20,584	$	36	5.8	$	458


	Non-Vested Stock Award Units (in thousands)	Weighted Average Grant-Date Fair Value












Balance as of December 31, 2020	9,987	$	34
Granted	4,240	39
Vested(1)	(3,823)	31
Forfeited	(658)	36
Balance as of December 31, 2021	9,745	$	37
Granted	3,854	45
Vested(1)	(3,482)	36
Forfeited	(680)	44
Balance as of December 31, 2022	9,438	$	41
Granted	3,958	49
Vested(1)	(3,624)	39
Forfeited	(485)	44
Balance as of December 31, 2023	9,287	$	45

During 2023, 2022 and 2021 we granted market-based RSU awards to certain members of our senior management team. The number of shares ultimately issued to the recipient is based on the total stockholder return (TSR) of our common stock as compared to the TSR of the common stock of the other companies in the S&P 500 Health Care Index over a three-year period. The number of RSUs ultimately granted under this program range from 0 percent to 200 percent of the target number awarded to the participant as determined by achievement of the TSR criteria of the program. In addition, in general, award recipients must remain employed by us throughout the three-year period to attain the full amount of the market-based RSUs that satisfied the market performance criteria.

We determined the fair value of the market-based RSU awards to be approximately $13 million for 2023, $12 million for 2022 and $11 million for 2021. We determined these fair values based on Monte Carlo simulations as of the date of grant, utilizing the following assumptions:

During 2023, we granted organic net sales growth (ONSG) performance-based RSU awards to certain members of our senior management team. The attainment of these performance-based RSUs is based on our organic net sales growth over a three-year performance period beginning January 1, 2023 and ending December 31, 2025 against a target set by the Committee. The number of RSUs ultimately granted under this program range from 0 percent to 200 percent of the target number of performance-based RSUs awarded to the participant as determined by achievement of the performance criteria of the program.

During 2022 and 2021, we granted free-cash flow performance-based RSU awards to certain members of our senior management team. The attainment of these performance-based RSUs is based on our adjusted free cash flow (AFCF) measured against our goal set by the Committee, based on our internal annual financial plan performance for AFCF. AFCF was measured over a one-year performance period beginning January 1st of each year and ending December 31st. The number of RSUs ultimately granted under this program range from 0 percent to 150 percent of the target number of performance-based RSUs awarded to the participant as determined by achievement of the performance criteria of the program. In addition, in general, award recipients must remain employed by us throughout a three-year service period (inclusive of the one-year performance period) to attain the full amount of the performance-based RSUs that satisfied the performance criteria.

We recognize compensation expense for our stock incentive plan using a straight-line method over the substantive vesting period. Most of our stock awards provide for immediate vesting upon death or disability of the participant. In addition, our stock grants to employees provide for accelerated vesting of our stock-based awards, other than performance-based and market-based awards, upon retirement, if the stock award has been held for at least one year by the recipient. In accordance with the terms of our stock grants, for employees who will become retirement eligible prior to the vest date we expense stock-based awards, other than performance-based and market-based awards, over the greater of one year or the period between grant date and retirement-eligibility. The performance-based and market-based awards discussed above do not contain provisions that would accelerate the full vesting of the awards upon retirement-eligibility.

We recognize stock-based compensation expense for the value of the portion of awards that are ultimately expected to vest. FASB ASC Topic 718, Compensation – Stock Compensation allows forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock-based award. We have applied, based on an analysis of our historical forfeitures, a weighted-average annual forfeiture rate of approximately five percent to all unvested stock-based awards as of December 31, 2023, which represents the portion that we expect will be forfeited each year over the vesting period. We re-evaluate this analysis annually or more frequently if there are significant changes in circumstances and adjust the forfeiture rate as necessary. Ultimately, we will only recognize expense for those shares that vest.


	Unrecognized Compensation Cost (in millions) (1)		Weighted Average Remaining Vesting Period (in years)
Stock options	$	40
Non-vested stock awards	203
	$	243	1.7

(1) Amounts presented represent compensation cost, net of estimated forfeitures.

In May 2022, our stockholders approved an additional 10 million shares that may be issued under our global employee stock purchase plan. Our global employee stock purchase plan provides for the granting of options to purchase up to 60 million shares of our common stock to all eligible employees. Under the global employee stock purchase plan, we grant each eligible employee, at the beginning of each six-month offering period, an option to purchase shares of our common stock equal to not more than ten percent of the employee’s eligible compensation or the statutory limit under the U.S. Internal Revenue Code. Such options may be exercised only to the extent of accumulated payroll deductions at the end of the offering period, at a purchase price equal to 85 percent of the fair market value of our common stock at the beginning or end of each offering period, whichever is less. As of December 31, 2023, there were approximately 9 million shares available for future issuance under the employee stock purchase plan.


	Year Ended December 31,
	2023					2022					2021
Shares issued or to be issued (in thousands)	2,623					2,850					2,578
Range of purchase prices	$	39.11	-	$	45.51	$	31.68	-	$	32.31	$	29.98	-	$	36.11
Expense recognized (in millions)	$	29				$	28				$	24

We use the Black-Scholes option-pricing model to calculate the grant-date fair value of shares issued under the employee stock purchase plan. We recognize expense related to shares purchased through the employee stock purchase plan ratably over the offering period.