MasterCard 2009 Annual Report Download - page 122

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except percent and per share data)
Performance Stock Units
The following table summarizes the Company’s PSU activity for the year ended December 31, 2009:
Units
Weighted-Average
Grant-Date Fair
Value
Weighted Average
Remaining
Contractual Term
(in years)
Aggregate
Intrinsic
Value
Outstanding at January 1, 2009 ........ 857 $136
Granted ........................... 203 $184
Converted ......................... — $—
Forfeited/expired ................... (33) $159
Outstanding at December 31, 2009 ..... 1,027 $145 0.7 $262,888
PSUs vested at December 31, 20091.... 305 $141 0.7 $ 78,170
1Includes PSUs for participants that are eligible to retire and thus have fully earned their awards.
The fair value of each PSU is the closing price on the New York Stock Exchange of the Company’s Class A
common stock on the date of grant. With regard to the performance units granted in 2009, whether or not the
performance stock units will vest will be based upon MasterCard performance against a predetermined return on
equity goal, with an average of return on equity over the three-year period commencing January 1, 2009 yielding
threshold, target or maximum performance, with a potential adjustment determined at the discretion of the
MasterCard Human Resources and Compensation Committee using subjective quantitative and qualitative goals
expected to be established at the beginning of each year in the performance period from 2009-2011. These goals
are expected to include MasterCard performance against internal management metrics and external relative
metrics. With regard to the performance units granted in 2008, the ultimate number of shares to be received by
the employee upon vesting will be determined by the Company’s performance against predetermined net income
(two-thirds weighting) and operating margin (one-third weighting) goals for the three-year period commencing
January 1, 2008. With regard to the performance units granted in 2007, the Company expects to award 200% of
the original number of shares granted and not forfeited prior to vesting based upon the Company’s performance
against equally weighted predetermined net income and return on equity goals for the three-year period
commencing January 1, 2007 and ending December 31, 2009. The weighted-average grant-date fair value of
PSUs granted during the years ended December 31, 2008 and 2007 was $191.82 and $106.29, respectively. There
were no PSUs converted into shares of Class A common stock during the years ended December 31, 2008 and
2007.
These performance units have been classified as equity awards, will be settled by delivering stock to the
employees and contain service and performance conditions. Given that the performance terms are subjective and
not fixed on the date of grant, the performance units will be remeasured at the end of each reporting period, at
fair value, until the time the performance conditions are fixed and the ultimate number of shares to be issued is
determined. Estimates are adjusted as appropriate. Compensation expense is calculated using the number of
performance stock units expected to vest; multiplied by the period ending price of a share of MasterCard’s
Class A common stock on the New York Stock Exchange; less previously recorded compensation expense. As of
December 31, 2009, there was $28,555 of total unrecognized compensation cost related to non-vested PSUs. The
cost is expected to be recognized over a weighted average period of 1.2 years.
For the years ended December 31, 2009, 2008 and 2007, the Company recorded compensation expense for
the equity awards of $87,279, $59,761 and $57,162, respectively. The total income tax benefit recognized for the
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