Morgan Stanley 2009 Annual Report Download - page 206

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
As a result of the DFS Spin-off effective June 30, 2007, all outstanding options to purchase the Company’s
common stock held by employees of DFS were canceled and replaced with options to purchase DFS common
stock. Outstanding options to purchase Morgan Stanley common stock held by directors and employees who
remained with the Company after the DFS Spin-off were adjusted to preserve the intrinsic value of the awards
immediately prior to the spin-off using an adjustment ratio based on the Morgan Stanley closing market stock
price immediately prior to the spin-off date and the beginning market stock price at the date of the spin-off.
Additional compensation cost recognized as a result of this modification was not material.
Similarly, restricted stock units awarded pursuant to equity incentive plans and held by employees of DFS were
canceled and replaced with restricted units of DFS stock. Outstanding restricted stock units held by Morgan
Stanley directors and employees who remained with the Company after the DFS Spin-off were adjusted by
multiplying the number of shares by an adjustment ratio in order to account for the impact of the spin-off on the
value of the Company’s shares at the time the spin-off was completed. No additional compensation cost was
recognized as a result of this modification. Cash paid to the holders of deferred shares in lieu of fractional shares
was not material.
Deferred Stock Awards. The Company has made deferred stock awards pursuant to several equity-based
compensation plans. The plans provide for the deferral of a portion of certain key employees’ discretionary
compensation with awards made in the form of restricted common stock or in the right to receive unrestricted
shares of common stock in the future (“restricted stock units”). Awards under these plans are generally subject to
vesting over time contingent upon continued employment and to restrictions on sale, transfer or assignment until
the end of a specified period, generally two to three years from date of grant. All or a portion of an award may be
canceled if employment is terminated before the end of the relevant restriction period. All or a portion of a vested
award also may be canceled in certain limited situations, including termination for cause during the relevant
restriction period. Recipients of deferred stock awards generally have voting rights and receive dividend
equivalents.
The following table sets forth activity relating to the Company’s vested and unvested restricted stock units (share
data in millions):
2009
One Month Ended
December 31, 2008
Number
of Shares
Weighted Average
Grant Date
Fair Value
Number
of Shares
Weighted Average
Grant Date
Fair Value
Restricted stock units at beginning of period ........ 101 $42.86 74 $50.57
Granted ..................................... 11 26.30 28 16.81
Conversions to common stock .................... (5) 48.88 — —
Canceled .................................... (7) 38.77 (1) 47.61
Restricted stock units at end of period(1) ........... 100 $40.88 101 $42.86
(1) As of December 31, 2009 and December 31, 2008, approximately 93 million and 92 million restricted stock units, respectively, with a
weighted average grant date fair value of $41.56 and $43.36, respectively, were vested or expected to vest.
The weighted average price for restricted stock units granted during fiscal 2008 and fiscal 2007 was $48.71 and
$66.68 (adjusted to reflect the impact of the DFS Spin-off), respectively. As of December 31, 2009 and
December 31, 2008, the weighted-average remaining term until delivery for the Company’s outstanding
restricted stock units was approximately 1.5 years and 2.2 years, respectively.
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