Carnival Cruises 2014 Annual Report Download - page 40

NOTE 12 – Compensation Plans
Equity Plans
We issue our share-based compensation awards under the Carnival Corporation and Carnival plc stock plans,
which have an aggregate of 18.6 million shares available for future grant at November 30, 2014. These plans
allow us to issue time-based share (“TBS”) awards, which include restricted stock awards (“RSAs”) and
restricted stock units (“RSUs”), performance-based share (“PBS”) awards, market-based share (“MBS”) awards
and stock options (collectively “equity awards”). Equity awards are principally granted to management level
employees and members of our Boards of Directors. The plans are administered by a committee of our
independent directors (the “Committee”) that determines which employees are eligible to participate, the
monetary value or number of shares for which equity awards are to be granted and the amounts that may be
exercised or sold within a specified term. These plans allow us to fulfill our equity award obligations using
shares purchased in the open market or with unissued or treasury shares. Certain equity awards provide for
accelerated vesting if we have a change in control, as defined.
Our total share-based compensation expense was $52 million, $42 million and $39 million in 2014, 2013 and
2012, respectively, of which $48 million, $39 million and $36 million has been included in selling and
administrative expenses in 2014, 2013 and 2012, respectively, and $4 million in 2014 and $3 million in both
2013 and 2012 in cruise payroll and related expenses.
TBS, PBS and MBS Awards
RSAs generally have the same rights as Carnival Corporation common stock, except for transfer restrictions and
forfeiture provisions. RSAs have been granted to certain officers and non-executive board members and vest at
the end of three years, except for shares released from restriction to satisfy retirement eligible tax obligations
(“tax release shares”). In addition, Carnival Corporation and Carnival plc grant RSUs, which also vest at the end
of three years, except for tax release shares, and accrue forfeitable dividend equivalents on each outstanding
RSU, in the form of additional RSUs, based on dividends declared. The share-based compensation expense for
TBS awards is based on the quoted market price of the Carnival Corporation or Carnival plc shares on the date of
grant.
In 2014 and 2013, the Committee approved PBS awards to be granted to certain key Carnival Corporation & plc
executives. The share-based compensation expense for these PBS awards is based on the quoted market price of
the Carnival Corporation or Carnival plc shares and expected total shareholder return rank relative to certain peer
companies on the date of grant and the probability of our annual earnings target for each year over a three-year
period being achieved. Our 2014 PBS awards also have a return on invested capital (“ROIC”) target. The PBS
awards granted in 2014 and 2013 provide an opportunity to earn from zero to 200% and zero to 187.5%,
respectively, of the number of target shares underlying the award achieved for each year over a three-year period.
In 2012, the Committee approved PBS awards to be granted to certain key Carnival Corporation & plc
executives. The share-based compensation expense for these PBS awards is based on the quoted market price of
the Carnival Corporation or Carnival plc shares on the date of grant and the probability of our earnings per share
growth over a three-year period being achieved. These PBS awards provide an opportunity to earn from zero to
200% of the number of target shares underlying the award achieved at the end of the third year. All PBS awards
will accrue forfeitable dividend equivalents based on dividends declared.
In 2014 and 2013, the Committee approved MBS awards to be granted to certain senior executives. The MBS
awards granted in 2014 and 2013 were valued at $13 million and $4 million, respectively, as of the date of grant.
The share-based compensation expense for all of the MBS awards were based on the quoted market prices of the
Carnival Corporation common stock or the Carnival plc ordinary shares on the date of grant and the probability
of certain market conditions being achieved. One-half of all of the MBS awards are expensed evenly over a
three-year period and the remaining half are expensed evenly over a four-year period.
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