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NOTE 17 | | Stock-Based Compensation |
As part of its employee and director compensation programs, the Company currently may grant certain stock awards under the provisions of its stock incentive plan. The plan provides for grants of shares of common stock or stock units that are subject to restriction on transfer prior to vesting. Most stock and unit awards vest over three to five years and are subject to forfeiture if certain vesting requirements are not met. In addition, the plan provides for grants of options to purchase shares of common stock at a fixed price equal to the fair value of the underlying stock at the date of grant. Option grants are generally exercisable
up to ten years from the date of grant. Stock incentive plans of acquired companies are generally terminated at the merger closing dates. Participants under such plans receive the Company’s common stock, options to buy the Company’s common stock, or long term cash incentives, based on the conversion terms of the various merger agreements. At December 31, 2025, there were 41 million shares (subject to adjustment for forfeitures) available for grant under the Company’s stock incentive plan.
Restricted Stock and Unit Awards
A summary of the status of the Company’s restricted shares of stock and unit awards is presented below:
| | | | | | | | | | | | | | | | | | | | |
| | 2025 | 2024 | 2023 |
| Year Ended December 31 | Shares | Weighted-Average Grant-Date Fair Value | Shares | Weighted-Average Grant-Date Fair Value | Shares | Weighted-Average Grant-Date Fair Value |
| Outstanding at beginning of period | 9,241,387 | | $ | 44.45 | | 8,316,571 | | $ | 48.42 | | 6,880,826 | | $ | 52.59 | |
| Granted | 5,815,879 | | 46.25 | | 6,107,976 | | 42.12 | | 5,565,634 | | 45.87 | |
| Vested | (5,272,319) | | 47.05 | | (4,680,480) | | 48.52 | | (3,872,874) | | 52.05 | |
| Cancelled | (507,322) | | 44.48 | | (502,680) | | 44.06 | | (257,015) | | 50.00 | |
| Outstanding at end of period | 9,277,625 | | $ | 44.10 | | 9,241,387 | | $ | 44.45 | | 8,316,571 | | $ | 48.42 | |
The total fair value of shares vested was $252 million, $208 million and $180 million for the years ended December 31, 2025, 2024 and 2023, respectively. Stock-based compensation expense was $235 million, $232 million and $224 million for the years ended December 31, 2025, 2024 and 2023, respectively. On an after-tax basis, stock-based compensation was $177 million, $173 million and $167 million for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, there was $177 million of total unrecognized compensation cost related to nonvested share-based arrangements granted under the plans. That cost is expected to be
recognized over a weighted-average period of 1.8 years as compensation expense.
Stock Option Awards
The number of outstanding stock options was less than 1 million as of December 31, 2025, compared with approximately 2 million at December 31, 2024. The weighted-average exercise price and remaining contractual maturity of the outstanding stock options as of December 31, 2025 were $53.29 and 1.0 years, respectively.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.