Stock-based compensation

Our Long-Term Incentive Plans provide for the issuance of stock options, restricted stock, restricted stock units (“RSUs”) and other stock-based awards to employees and directors of BNY Mellon. At Dec. 31, 2016, under the Long-Term Incentive Plan approved in April 2014, we may issue 34,283,413 new stock-based awards. Of this amount, 19,569,848 shares (subject to potential increase as provided in the Long-Term Incentive Plan) may be issued as restricted stock or RSUs. Stock-based compensation expense related to retirement eligibility vesting totaled $106 million in 2016, $97 million in 2015 and $88 million in 2014.

Stock options

Our Long-Term Incentive Plans provide for the issuance of stock options at fair market value at the date of grant to officers and employees of BNY Mellon. Generally, each option granted is exercisable between one and 10 years from the date of grant. No stock options were granted in 2016, 2015 and 2014.

The compensation cost that has been charged against income was $2 million for 2016, $10 million for 2015 and $28 million for 2014 (including $1 million recorded in restructuring expense). The total income tax benefit recognized in the income statement was $1 million for 2016, $4 million for 2015 and $11 million for 2014.

A summary of the status of our options as of Dec. 31, 2016, and changes during the year, is presented below:



Stock option activity	Shares subject to option		Weighted-average exercise price		Weighted-average remaining contractual term (in years)
Balance at Dec. 31, 2015	35,735,264		$	33.57	3.4
Granted	—		—
Exercised	(12,746,946	)	34.17
Canceled/Expired	(1,746,750	)	41.38
Balance at Dec. 31, 2016	21,241,568		$	32.57	2.8
Vested and expected to vest at Dec. 31, 2016	21,241,568		32.57		2.8
Exercisable at Dec. 31, 2016	21,241,568		32.57		2.8



Stock options outstanding at Dec. 31, 2016
	Options outstanding					Options exercisable (a)
Range of exercise prices	Outstanding	Weighted-average remaining contractual life (in years)	Weighted-average exercise price			Exercisable	Weighted-average exercise price
$ 18 to 31	13,318,863	3.9		$	25.91	13,318,863		$	25.91
$ 31 to 41	1,587,665	0.3		40.29		1,587,665		40.29
$ 41 to 51	6,335,040	1.0		44.63		6,335,040		44.63
$ 18 to 51	21,241,568	2.8		$	32.57	21,241,568		$	32.57


(a)	At Dec. 31, 2015 and 2014, 33,703,283 and 42,137,574 options were exercisable at an average price per common share of $34.27 and $34.38, respectively.



Aggregate intrinsic value of options
(in millions)	2016		2015		2014
Outstanding at Dec. 31,	$	315	$	306	$	409
Exercisable at Dec. 31,	$	315	$	267	$	307

The total intrinsic value of options exercised was $122 million in 2016, $130 million in 2015 and $118 million in 2014.

Cash received from option exercises totaled $438 million in 2016, $326 million in 2015 and $370 million in 2014. The actual tax benefit realized for the tax deductions from options exercised totaled $3 million in 2016, $21 million in 2015 and $17 million in 2014.

Restricted stock and RSUs

Restricted stock and RSUs are granted under our long-term incentive plans at no cost to the recipient. These awards are subject to forfeiture until certain restrictions have lapsed, including continued employment, for a specified period. The recipient of a share of restricted stock is entitled to voting rights and generally is entitled to dividends on the common stock. An RSU entitles the recipient to receive a share of common stock after the applicable restrictions lapse. The recipient generally is entitled to receive cash payments equivalent to any dividends paid on the underlying common stock during the period the RSU is outstanding but does not receive voting rights.

The fair value of restricted stock and RSUs is equal to the fair market value of our common stock on the date of grant. The expense is recognized over the vesting period, which is zero to four years. The total compensation expense recognized for restricted stock and RSUs was $256 million in 2016, $235 million in 2015 and $243 million in 2014 (including $13 million recorded in restructuring expense). The total income tax benefit recognized in the income statement was $91 million for 2016, $83 million for 2015 and $94 million for 2014.

BNY Mellon’s Executive Committee members were granted a target award of 548,391 performance units (“PSUs”) in 2016 and 630,100 in 2015 that cliff vest in three years based on operating earnings per share with the potential of a risk modifier based on appropriate growth in risk-weighted assets. These awards are marked-to-market as the earnout percentages are determined at the discretion of the Human Resources Compensation Committee based on a payout table.

BNY Mellon’s Executive Committee members were granted a target award of 719,947 PSUs in 2014 and 942,428 in 2013 that are earned annually based on an earnout percentage calculated using a metric of net income divided by RWA. The awards earned in each of the three performance periods vest at the end of the third performance period. Certain of the awards are granted to Material Risk Takers, as defined under the European Banking Authority, and are required to be marked to market due to discretionary claw-back language contained in their grants.

The following table summarizes our nonvested PSU, restricted stock and RSU activity for 2016.



Nonvested PSU, restricted stock and RSU activity	Number of shares		Weighted- average fair value
Nonvested PSUs, restricted stock and RSUs at Dec. 31, 2015	16,983,971		$	34.07
Granted	8,331,206		35.10
Vested	(6,808,038	)	32.10
Forfeited	(511,624	)	34.63
Nonvested PSUs, restricted stock and RSUs at Dec. 31, 2016	17,995,515		$	35.98

As of Dec. 31, 2016, $194 million of total unrecognized compensation costs related to nonvested PSUs, restricted stock and RSUs is expected to be recognized over a weighted-average period of 1.6 years.

The total fair value of restricted stock and RSUs that vested was $236 million in 2016, $429 million in 2015 and $229 million in 2014.

Subsidiary Long-Term Incentive Plans

BNY Mellon also has several subsidiary Long-Term Incentive Plans which have issued restricted subsidiary shares to certain employees. These share awards are subject to forfeiture until certain restrictions have lapsed, including continued employment for a specified period of time. The shares are non-voting and non-dividend paying. Once the restrictions lapse, which generally occurs in three to five years, the shares can only be sold, at the option of the employee, to BNY Mellon at a price based generally on the fair value of the subsidiary at the time of repurchase. In certain instances BNY Mellon has an election to call the shares.