Equity-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

We record compensation expense for equity-based awards, such as deferred stock and performance awards, based on the closing price of our common stock on the date of grant, adjusted if appropriate, based on the eligibility of the award to receive dividends.

Compensation expense related to equity-based and cash settled stock awards with service-only conditions and terms that provide for a graded vesting schedule is recognized on a straight-line basis over the required service period for the entire award. Compensation expense related to equity-based awards with performance conditions and terms that provide for a graded vesting schedule is recognized over the requisite service period for each separately vesting tranche of the award, and is based on the probable outcome of the performance conditions at each reporting date. Compensation expense is adjusted for assumptions with respect to the estimated amount of awards that will be forfeited prior to vesting, and for employees who have met certain retirement eligibility criteria. Compensation expense for common stock awards granted to employees meeting early retirement eligibility criteria is fully expensed on the grant date.

Dividend equivalents for certain equity-based awards are paid on stock units on a current basis prior to vesting and distribution.

The 2017 Stock Incentive Plan, or 2017 Plan, was approved by shareholders in May 2017 for issuance of stock and stock based awards. Awards may be made under the 2017 Plan for (i) up to 8.3 million shares of common stock plus (ii) up to an additional 28.5 million shares that were available to be issued under the 2006 Equity Incentive Plan, or 2006 Plan, or may become available for issuance under the 2006 Plan due to expiration, termination, cancellation, forfeiture or repurchase of awards granted under the 2006 Plan. As of December 31, 2021, a total of 20.8 million shares from the 2006 Plan have been added to and may be issued from the 2017 Plan. As of December 31, 2021, a cumulative total of 15.2 million shares have been awarded under the 2017 Plan, compared to cumulative totals of 11.3 million shares and 7.6 million shares as of December 31, 2020 and 2019, respectively.

The 2017 Plan allows for shares withheld in payment of the exercise price of an award or in satisfaction of tax withholding requirements, shares forfeited due to employee termination, shares expired under option awards, or shares not delivered when performance conditions have not been met, to be added back to the pool of shares available for issuance under the 2017 Plan. From inception to December 31, 2021, 3 million shares had been awarded under the 2017 Plan but not delivered, and have become available for re-issue. As of December 31, 2021, a total of 16.9 million shares were available for future issuance under the 2017 Plan.

For deferred stock awards granted under the Plans, no common stock is issued at the time of grant and the award does not possess dividend and voting rights. Generally, these grants vest over one to four years. Performance awards granted are earned over a performance period based on the achievement of defined goals, generally over three years. Payment for performance awards is made in shares of our common stock equal to its fair market value per share, based on the performance of certain financial ratios, after the conclusion of each performance period.

Beginning with 2012, malus-based forfeiture provisions were included in deferred stock awards granted to employees identified as “material risk-takers,” as defined by management. These malus-based forfeiture provisions provide for the reduction or cancellation of unvested deferred compensation, such as deferred stock awards and performance based awards, if it is determined that a material risk-taker made risk-based decisions that exposed us to

inappropriate risks that resulted in a material unexpected loss at the business-unit, line-of-business or corporate level. In addition, awards granted to certain of our senior executives, as well as awards granted to individuals in certain jurisdictions, may be subject to recoupment after vesting (if applicable) and delivery to the individual in specified circumstances generally relating to fraud or willful misconduct by the individual that results in material harm to us or a material financial restatement.

Compensation expense related to deferred stock awards and performance awards, which we record as a component of compensation and employee benefits expense in our consolidated statement of income, was $259 million, $240 million and $235 million for the years ended December 31, 2021, 2020 and 2019, respectively. Such expense for 2021, 2020 and 2019 excluded a release of $5 million, an expense of $29 million and a release of $4 million, respectively, associated with acceleration of expense in connection with targeted staff reductions. This expense was included in the severance-related portion of the associated restructuring or repositioning charges recorded in each respective year.

For the years ended December 31, 2021, 2020 and 2019, no stock appreciation rights were exercised. As of December 31, 2021, there was no unrecognized compensation cost related to stock appreciation rights.


	Shares (In thousands)	Weighted-Average Grant Date Fair Value
Deferred Stock Awards:




Outstanding as of December 31, 2019	5,834	$	74.33
Granted	2,926	63.56
Vested	(2,938)	71.33
Forfeited	(136)	71.79
Outstanding as of December 31, 2020	5,686	69.70
Granted	3,136	69.48
Vested	(2,801)	73.70
Forfeited	(244)	68.77
Outstanding as of December 31, 2021	5,777	67.55

The total fair value of deferred stock awards vested for the years ended December 31, 2021, 2020 and 2019, based on the weighted average grant date fair value in each respective year, was $206 million, $210 million and $220 million, respectively. As of December 31, 2021, total unrecognized compensation cost related to deferred stock awards, net of estimated forfeitures, was $192 million, which is expected to be recognized over a weighted-average period of 2.5 years.


	Shares (In thousands)	Weighted-Average Grant Date Fair Value
Performance Awards:




Outstanding as of December 31, 2019	2,139	$	71.82
Granted	811	62.58
Forfeited	(23)	94.91
Paid out	(410)	73.10
Outstanding as of December 31, 2020	2,517	68.42
Granted	802	61.87
Forfeited	(14)	57.66
Paid out	(716)	78.94
Outstanding as of December 31, 2021	2,589	63.54

The total fair value of performance awards vested for the years ended December 31, 2021, 2020 and 2019, based on the weighted average grant date fair value in each respective year, was $57 million, $30 million and $22 million, respectively. As of December 31, 2021, total unrecognized compensation cost related to performance awards, net of estimated forfeitures, was $22 million, which is expected to be recognized over a weighted-average period of 1.9 years.


	Shares (In thousands)	Weighted-Average Grant Date Fair Value
Cash Settled Restricted Stock Awards:




Outstanding as of December 31, 2019	—	$	—
Granted	—	—
Forfeited	—	—
Paid out	—	—
Outstanding as of December 31, 2020	—	—
Granted	46	69.95
Forfeited	—	—
Paid out	(23)	69.95
Outstanding as of December 31, 2021	23	69.95

The total fair value of cash settled restricted stock awards vested during the year ended December 31, 2021, based on the weighted average grant date fair value, was $2 million. As of December 31, 2021, there was no unrecognized compensation cost related to cash settled restricted stock awards.

We utilize either treasury shares or authorized but unissued shares to satisfy the issuance of common stock under our equity incentive plans. We do not have a specific policy concerning purchases of our common stock to satisfy stock issuances. We have a general policy concerning purchases of our common stock to meet issuances under our employee benefit plans, including other corporate purposes. Various factors determine the amount and timing of our purchases of our common stock, including regulatory reviews and approvals or non-objections, our regulatory capital requirements, the number of shares we expect to issue under employee benefit plans, market conditions (including the trading price of our common stock), and legal considerations. These factors can change at any time, and the number of shares of common stock we will purchase or when we will purchase them cannot be assured. Additional information on our common stock purchase program is provided in Note 15.