Equity Compensation Overview. We have equity compensation plans for employees, as well as for non-employee members of our board of directors. The equity compensation plans seek to provide an effective means of attracting and retaining directors, officers and key employees, and to provide them with incentives to enhance our growth and profitability. Under the equity compensation plans, awards may be granted to officers, employees or non-employee directors in common stock, options to purchase common stock, restricted shares of common stock, participation units or any combination of these.

Annually, we grant awards of stock options, restricted stock and RSUs to participants in our equity compensation plans in early March. Additionally, we may make limited ad hoc grants on a quarterly basis for new hires or promotions. We issue common stock under our equity compensation plans from treasury stock. On December 31, 2021, in addition to the shares reserved for issuance upon the exercise of outstanding stock options, approximately 20 million shares have been authorized for awards that may be granted in the future.

Equity-based Compensation Expense. Equity-based compensation expense is included in G&A expenses. The following table details the components of equity-based compensation expense recognized in net earnings in each of the past three years:


Year Ended December 31	2021		2020		2019
Stock options	$	46	$	43	$	43
Restricted stock/RSUs	53		58		62
Total equity-based compensation expense, net of tax	$	99	$	101	$	105

Stock Options. Stock options granted under our equity compensation plans are issued with an exercise price at the fair value of our common stock determined by the average of the high and low stock prices as listed on the New York Stock Exchange (NYSE) on the date of grant. Our outstanding stock options generally vest over three years, with 50% of the options vesting after two years and the remaining 50% vesting the following year, and expire 10 years after the grant date.

We recognize compensation expense related to stock options on a straight-line basis over the vesting period of the awards, net of estimated forfeitures. Estimated forfeitures are based on our historical forfeiture experience. We estimate the fair value of stock options on the date of grant using the Black-Scholes option pricing model with the following assumptions for each of the past three years:


Year Ended December 31	2021		2020		2019
Expected volatility	26.7-27.3%		21.1-26.9%		19.7-20.0%
Weighted average expected volatility	27.3	%	21.2	%	19.7	%
Expected term (in months)	60		60		64
Risk-free interest rate	0.6-1.2%		0.4-1.5%		1.7-2.6%
Expected dividend yield	2.9	%	2.4	%	2.0	%

•Expected volatility is based on the historical volatility of our common stock over a period equal to the expected term of the option.

•Risk-free interest rate is the yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option at the grant date.

The resulting weighted average fair value per stock option granted (in dollars) was $28.87 in 2021, $24.86 in 2020 and $29.06 in 2019. Stock option expense reduced pretax operating earnings (and on a diluted per-share basis) by $58 ($0.16) in 2021 and $55 ($0.15) in 2020 and 2019. On December 31, 2021, we had $76 of unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of 1.8 years.


In Shares and Dollars	Shares Under Option	Weighted Average Exercise Price Per Share
Outstanding on December 31, 2020	11,128,721	$	167.00
Granted	2,266,080	169.01
Exercised	(1,272,976)	134.46
Forfeited/canceled	(191,411)	168.44
Outstanding on December 31, 2021	11,930,414	$	170.83
Vested and expected to vest on December 31, 2021	11,582,836	$	170.94
Exercisable on December 31, 2021	6,495,518	$	173.89

Summary information with respect to our stock options’ intrinsic value and remaining contractual term on December 31, 2021, follows:


	Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding	6.6	$	471
Vested and expected to vest	6.6	457
Exercisable	5.1	247

In the table above, intrinsic value is calculated as the excess, if any, of the market price of our stock on the last trading day of the year over the exercise price of the options. For stock options exercised, intrinsic value is calculated as the difference between the market price on the date of exercise and the exercise price. The total intrinsic value of stock options exercised was $62 in 2021, $57 in 2020 and $244 in 2019.

Restricted Stock/RSUs. The fair value of restricted stock and RSUs equals the average of the high and low market prices of our common stock as listed on the NYSE on the date of grant. Grants of restricted stock are awards of shares of common stock. Participation units represent obligations that have a value derived from or related to the value of our common stock. These include stock appreciation rights, phantom stock units and RSUs, and are payable in cash or common stock.

Restricted stock and RSUs generally vest over a three-year restriction period after the grant date, during which recipients may not sell, transfer, pledge, assign or otherwise convey their restricted shares to another party. During this period, restricted stock recipients receive cash dividends on their restricted shares and are entitled to vote those shares, while RSU recipients receive dividend-equivalent units instead of cash dividends and are not entitled to vote their RSUs or dividend-equivalent units.

We grant RSUs with one or more performance measures determined by the compensation committee of the board of directors as described in our proxy statement. Depending on the company’s performance, the number of RSUs earned may be less than, equal to or greater than the original number of RSUs awarded subject to a payout range.

We generally recognize compensation expense related to restricted stock and RSUs on a straight-line basis over the vesting period of the awards. Compensation expense related to restricted stock and RSUs reduced pretax operating earnings (and on a diluted per-share basis) by $68 ($0.19) in 2021, $73 ($0.20) in 2020 and $79 ($0.21) in 2019. On December 31, 2021, we had $59 of unrecognized compensation cost related to restricted stock and RSUs, which is expected to be recognized over a weighted average period of 1.6 years.


In Shares and Dollars	Shares/ Share-Equivalent Units	Weighted Average Grant-Date Fair Value Per Share
Nonvested at December 31, 2020	1,150,151	$	180.98
Granted	492,104	174.34
Vested	(302,186)	220.91
Forfeited	(19,591)	167.61
Nonvested at December 31, 2021	1,320,478	$	169.54