MasterCard 2010 Annual Report Download - page 128

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—continued
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.
With regard to the performance stock 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 stock units granted in 2007, the Company awarded 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.
In 2010, 550 thousand PSUs were converted into shares of Class A common stock. The total intrinsic value
of PSUs converted into shares of Class A common stock during the year ended December 31, 2010, was $123
million. There were no PSUs converted into shares of Class A common stock during the years ended
December 31, 2009 and 2008.
As of December 31, 2010, there was $8 million 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.
Additional Information
For the years ended December 31, 2010, 2009 and 2008, the Company recorded compensation expense for
all equity awards of $62 million, $87 million and $60 million, respectively. The total income tax benefit
recognized for the equity awards was $22 million, $30 million and $21 million for the years ended December 31,
2010, 2009 and 2008, respectively. The income tax benefit related to options exercised during 2010, 2009 and
2008 was $8 million, $8 million and $13 million, respectively. The additional paid-in capital balance attributed to
the equity awards was $156 million, $197 million and $136 million as of December 31, 2010, 2009 and 2008,
respectively.
On July 18, 2006, the Company’s stockholders approved the MasterCard Incorporated 2006 Non-Employee
Director Equity Compensation Plan, which was amended and restated as of October 13, 2008 (the “Director
Plan”). The Director Plan provides for awards of Deferred Stock Units (“DSUs”) to each director of the
Company who is not a current employee of the Company. There are 100 thousand shares of Class A common
stock reserved for DSU awards under the Director Plan. During the years ended December 31, 2010, 2009 and
2008, the Company granted 5 thousand, 7 thousand and 4 thousand DSUs, respectively. The fair value of the
DSUs was based on the closing stock price on the New York Stock Exchange of the Company’s Class A
common stock on the date of grant. The weighted average grant-date fair value of DSUs granted during the years
ended December 31, 2010, 2009 and 2008 was $217, $168 and $285, respectively. The DSUs vested immediately
upon grant and will be settled in shares of the Company’s Class A common stock on the fourth anniversary of the
date of grant. Accordingly, the Company recorded general and administrative expense of $1 million for the DSUs
for each of the years ended December 31, 2010, 2009 and 2008. The total income tax benefit recognized in the
income statement for DSUs was less than $1 million for each of the years ended December 31, 2010, 2009 and
2008. During the year ended December 31, 2010, there were approximately 25 thousand DSUs converted into
shares of Class A common stock. The total intrinsic value of these DSUs converted into shares of Class A
common stock was $5 million. There were no DSUs converted into shares of Class A Common stock during the
years ended December 31, 2009 and 2008.
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