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Share-Based Compensation And Other Compensation Arrangements
 12 Months Ended
Dec. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Compensation And Other Compensation Arrangements Share-Based Compensation and Other Compensation Arrangements
Share-Based Compensation
Our 2003 Incentive Stock Plan, as amended and restated, permits awards of incentive and non-qualified stock options, stock appreciation rights, restricted stock or units, performance shares, performance restricted stock or units, performance units and other stock and cash-based awards to our employees, officers, directors, consultants, and independent contractors. The aggregate number of shares of our stock authorized for issuance under the plan is 87,000,000.
Shares issued as a result of stock option exercises or conversion of stock unit awards will be funded out of treasury shares, except to the extent there are insufficient treasury shares, in which case new shares will be issued. We believe we currently have adequate treasury shares to satisfy these issuances during 2019.
Share-based plans expense is primarily included in General and administrative expense since it is incentive compensation issued primarily to our executives. The share-based plans expense and related income tax benefit were as follows:
Years ended December 31,
2018

 
2017

 
2016

Stock options


 


 

$4

Restricted stock units and other awards

$213

 

$212

 
189

Share-based plans expense

$213

 

$212

 

$193

Income tax benefit

$46

 

$46

 

$69


Stock Options
We discontinued granting options in 2014, replacing them with performance-based restricted stock units. Options granted through January 2014 had an exercise price equal to the fair market value of our stock on the date of grant and expire ten years after the date of grant. The stock options vested over a period of three years and were fully vested at December 31, 2018.
Stock option activity for the year ended December 31, 2018 is as follows:
 
Shares
 
Weighted Average Exercise Price Per Share

 
Weighted Average Remaining Contractual Life (Years)
 
Aggregate Intrinsic Value

Number of shares under option:
 
 
 
 
 
 
 
Outstanding at beginning of year
4,417,218
 

$71.69

 
 
 
 
Exercised
(1,165,135)
 
69.53

 
 
 
 
Outstanding at end of year
3,252,083
 

$72.47

 
3.20
 

$813

Exercisable at end of year
3,252,083
 

$72.47

 
3.20
 

$813


The total intrinsic value of options exercised during the years ended December 31, 2018, 2017 and 2016 was $320, $491 and $265, with a related tax benefit of $70, $175 and $94, respectively. No options vested during the years ended December 31, 2018 and 2017. The grant date fair value of stock options vested during the year ended December 31, 2016 was $27.
Restricted Stock Units
In February 2018, 2017 and 2016, we granted to our executives 260,730, 523,835 and 777,837 restricted stock units (RSUs) as part of our long-term incentive program with grant date fair values of $361.13, $178.72 and $117.50 per unit, respectively. The RSUs granted under this program will vest and settle in common stock (on a one-for-one basis) on the third anniversary of the grant date. If an executive terminates employment because of retirement, involuntary layoff, disability, or death, the employee (or beneficiary) will receive a proration of stock units based on active employment during the three-year service period. In all other cases, the RSUs will not vest and all rights to the stock units will terminate. In addition to RSUs awarded under our long-term incentive program, we grant RSUs to certain executives and employees to encourage retention or to reward various achievements. These RSUs are labeled other RSUs in the table below. The fair values of all RSUs are estimated using the average of the high and low stock prices on the date of grant.
RSU activity for the year ended December 31, 2018 was as follows:
 
Long-Term Incentive Program

 
Other

Number of units:
 
 
 
Outstanding at beginning of year
1,627,102

 
1,156,462

Granted
287,729

 
216,949

Dividends
28,249

 
20,759

Forfeited
(80,426
)
 
(30,745
)
Distributed
(540,403
)
 
(379,190
)
Outstanding at end of year
1,322,251

 
984,235

Unrecognized compensation cost

$97

 

$108

Weighted average remaining contractual life (years)
1.8

 
3.1


The number of vested but undistributed RSUs at December 31, 2018 was not significant.
Performance-Based Restricted Stock Units
Performance-Based Restricted Stock Units (PBRSUs) are stock units that pay out based on the Company’s total shareholder return as compared to a group of peer companies over a three-year period. The award payout can range from 0% to 200% of the initial PBRSU grant. PBRSUs granted in February 2017 and 2016 will not exceed 400% of the initial value (excluding dividend equivalent credits). The PBRSUs granted under this program will vest at the payout amount and settle in common stock (on a one-for-one basis) on the third anniversary of the grant date. If an executive terminates employment because of retirement, involuntary layoff, disability, or death, the employee (or beneficiary) remains eligible under the award and, if the award is earned, will receive a proration of stock units based on active employment during the three-year service period. In all other cases, the PBRSUs will not vest and all rights to the stock units will terminate.
In February 2018, 2017 and 2016, we granted to our executives 241,284, 492,273 and 721,176 PBRSUs as part of our long-term incentive program. Compensation expense for the award is recognized over the three-year performance period based upon the grant date fair value. The grant date fair values were estimated using a Monte-Carlo simulation model with the assumptions presented below. The model includes no expected dividend yield as the units earn dividend equivalents.
Grant Year
Grant Date
Performance Period
Expected Volatility

Risk Free Interest Rate

Grant Date Fair Value

2018
2/26/2018
3 years
22.11
%
2.36
%
390.27

2017
2/27/2017
3 years
21.37
%
1.46
%
190.17

2016
2/22/2016
3 years
22.44
%
0.92
%
126.74


PBRSU activity for the year ended December 31, 2018 was as follows:
 
 
Long-Term Incentive Program

Number of units:
 
 
Outstanding at beginning of year
 
1,551,734

Granted
 
241,284

Performance based adjustment (1)
 
374,406

Dividends
 
65,339

Forfeited
 
(70,284
)
Distributed
 
(893,812
)
Outstanding at end of year
 
1,268,667

Unrecognized compensation cost
 

$86

Weighted average remaining contractual life (years)
 
1.8


(1) 
Represents net incremental number of units issued at vesting based on TSR for units granted in 2015
Other Compensation Arrangements
Performance Awards
Performance Awards are cash units that pay out based on the achievement of long-term financial goals at the end of a three-year period. Each unit has an initial value of $100 dollars. The amount payable at the end of the three-year performance period may be anywhere from $0 to $200 dollars per unit, depending on the Company’s performance against plan for a three-year period. The Compensation Committee has the discretion to pay these awards in cash, stock, or a combination of both after the three-year performance period. Compensation expense, based on the estimated performance payout, is recognized ratably over the performance period.
During 2018, 2017 and 2016, we granted Performance Awards to our executives as part of our long-term incentive program with the payout based on the achievement of financial goals for each three-year period following the grant date. The minimum payout amount is $0 and the maximum amount we could be required to pay out for the 2018, 2017 and 2016 Performance Awards is $369, $332 and $310, respectively. The 2016 grant is expected to be paid out in cash in March 2019.
Deferred Compensation
The Company has deferred compensation plans which permit employees to defer a portion of their salary, bonus, certain other incentive awards, and retirement contributions. Participants can diversify these amounts among 22 investment funds including a Boeing stock unit account.
Total expense related to deferred compensation was $19, $240 and $46 in 2018, 2017 and 2016, respectively. As of December 31, 2018 and 2017, the deferred compensation liability which is being marked to market was $1,572 and $1,547.