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Share-Based Compensation
 12 Months Ended
Dec. 31, 2021
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Compensation
NOTE 2 — SHARE-BASED COMPENSATION
Stock Incentive Plans
Our stock incentive plans are designed to promote the long-term financial interests and growth of the Company by attracting and retaining management and other personnel, motivating them to achieve long range goals and aligning their interests with those of our stockholders through opportunities for stock-based compensation and stock ownership in the Company. Stock option, stock appreciation right (“SARs”) and restricted share unit (“RSUs”) grants vest solely based upon continued employment over a specific period of time, and performance share unit (“PSUs”) grants vest based upon both continued employment over a specific period of time and the achievement of predetermined financial targets over a specific period of time. At December 31, 2021 there were
16.290 million shares available for future grants.
Employee Stock Purchase Plan
Our employee stock purchase plan (“ESPP”) provides our participating employees an opportunity to obtain shares of our common stock at a discount (through payroll deductions over three-month periods). At December 31, 2021, 5.173 million shares of common stock were reserved for ESPP issuances. During 2021, 2020 and 2019, the Company recognized $15 million, $13 million and $12 million, respectively, of compensation expense related to the ESPP.
Stock Option, SAR, RSU and PSU Activity
The fair value of each stock option and SAR award is estimated on the grant date, using valuation models and the weighted average assumptions indicated in the following table. Awards under our stock incentive plans generally vest based on continued employment (“Time Stock Options and SARs” and “RSUs”) or based upon continued employment and the achievement of certain financial targets (“Performance Stock Options and SARs” and “PSUs”). PSUs have a three-year cumulative earnings per share target, and the number of PSUs earned can vary from zero (for actual performance of less than 90% of target for 2021, 2020 and 2019 grants) to two times the original PSU grant (for actual performance of 110% or more of target for 2021, 2020 and 2019 grants). Each
 
grant is valued as a single award with an expected term equal to the average expected term of the component vesting tranches. The expected term of the share-based award is limited by the contractual term. We use historical exercise behavior data and other factors to estimate the expected term of the options and SARs.
Compensation cost is recognized on the straight-line attribution method. The straight-line attribution method requires that total compensation expense recognized must at least equal the vested portion of the grant-date fair value. The expected volatility is derived using historical stock price information for our common stock and the volatility implied by the trading of options to purchase our stock on open-market exchanges. The risk-free interest rate is the approximate yield on United States Treasury Strips having a life equal to the expected share-based award life on the date of grant. The expected life is an estimate of the number of years a share-based award will be held before it is exercised. The expected dividend yield is estimated based on the assumption that the dividend yield at date of grant will be maintained over the expected life of the grant.
 
    
2021
    
2020
    
2019
  
Risk-free interest rate
   
 
0.68
% 
     1.44 %      2.50 % 
Expected volatility
   
 
36
% 
     27 %      27 % 
Expected life, in years
   
 
6.17
 
     6.15       6.18  
Expected dividend yield
   
 
1.10
% 
     1.19 %      1.16 % 
Information regarding Time Stock Options and SARs and Performance Stock Options and SARs activity during 2021, 2020 and 2019 is summarized below (share amounts in thousands):
 
    
Time
Stock
Options
and
SARs
    
Performance
Stock
Options and
SARs
    
Total
Stock
Options
and
SARs
    
Weighted
Average
Exercise
Price
     
Weighted
Average
Remaining
Contractual Term
     
Aggregate
Intrinsic Value
(dollars in millions)
  
Options and SARs outstanding, December 31, 2018
      9,360       2,667       12,027     $ 61.49                    
Granted
      1,349       —       1,349       138.31                    
Exercised
      (1,137 )      (523 )      (1,660 )      44.45                    
Cancelled
      (522 )      —       (522 )      93.26                    
    
 
 
    
 
 
    
 
 
                            
Options and SARs outstanding, December 31, 2019
      9,050       2,144       11,194       71.79                    
Granted
      1,120       —       1,120       144.47                    
Exercised
      (2,159 )      (1,325 )      (3,484 )      44.07                    
Cancelled
      (175 )      —       (175 )      111.69                    
    
 
 
    
 
 
    
 
 
                            
Options and SARs outstanding, December 31, 2020
      7,836       819       8,655       91.53                    
Granted
   
 
877
 
  
 
—
 
  
 
877
 
  
 
174.98
 
                  
Exercised
   
 
(2,443
) 
  
 
(533
) 
  
 
(2,976
) 
  
 
67.57
 
                  
Cancelled
   
 
(108
) 
  
 
—
 
  
 
(108
) 
  
 
138.32
 
                  
    
 
 
    
 
 
    
 
 
                            
Options and SARs outstanding, December 31, 2021
   
 
6,162
 
  
 
286
 
  
 
6,448
 
  
$
113.15
 
   
 
6.2 years
 
   
$
927
 
    
 
 
    
 
 
    
 
 
                            
Options and SARs exercisable, December 31, 2021
   
 
3,486
 
  
 
286
 
  
 
3,772
 
  
$
89.70
 
   
 
5.0 years
 
   
$
631
 
 
The weighted average fair values of stock options and SARs granted during 2021, 2020 and 2019 were $54.57, $35.98 and $38.21 per share, respectively. The total intrinsic value of stock options and SARs exercised during 2021, 2020 and 2019 was $404 million, $328 million and $153 million, respectively. As of December 31, 2021, the unrecognized compensation cost related to nonvested stock options and SARs was $46 million.
Information regarding RSUs and PSUs activity during 2021, 2020 and 2019 is summarized below (share amounts in thousands):
 
    
RSUs
     
PSUs
     
Total RSUs
and PSUs
     
Weighted
Average
Grant
Date Fair
Value
  
RSUs and PSUs outstanding, December 31, 2018
      3,123        3,422        6,545      $ 86.32  
Granted
      973        796        1,769        138.45  
Performance adjustment
      —        227        227        69.94  
Vested
      (1,216 )       (1,251 )       (2,467 )       75.97  
Cancelled
      (260 )       (159 )       (419 )       103.27  
    
 
 
     
 
 
     
 
 
           
RSUs and PSUs outstanding, December 31, 2019
      2,620        3,035        5,655        105.23  
Granted
      1,048        808        1,856        144.17  
Performance adjustment
      —        206        206        81.89  
Veste
d
      (1,030 )       (1,364 )       (2,394 )       88.63  
Cancelled
      (162 )       (93 )       (255 )       124.50  
    
 
 
     
 
 
     
 
 
           
RSUs and PSUs outstanding, December 31, 2020
      2,476        2,592        5,068        125.40  
Granted
   
 
899
 
   
 
689
 
   
 
1,588
 
   
 
174.34
 
Performance adjustment
   
 
—
 
   
 
684
 
   
 
684
 
   
 
102.02
 
Vested
   
 
(992
) 
   
 
(1,772
) 
   
 
(2,764
) 
   
 
106.62
 
Cancelled
   
 
(192
) 
   
 
(110
) 
   
 
(302
) 
   
 
149.07
 
    
 
 
     
 
 
     
 
 
           
RSUs and PSUs outstanding, December 31, 2021
   
 
2,191
 
   
 
2,083
 
   
 
4,274
 
   
$
150.32
 
    
 
 
     
 
 
     
 
 
           
The total fair value of RSUs and PSUs that vested during 2021, 2020 and 2019 was $475 million, $349 million and $346 million, respectively. As of December 31, 2021, the unrecognized compensation cost related to RSUs and PSUs was $420 million.