Morgan Stanley 2010 Annual Report Download - page 229

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
compensation with awards made in the form of stock options generally having an exercise price not less than the
fair value of the Company’s common stock on the date of grant. Such stock option awards generally become
exercisable over a three-year period and expire 10 years from the date of grant, subject to accelerated expiration
upon termination of employment. Stock option awards have vesting, restriction and cancellation provisions that
are generally similar to those in deferred stock awards. No options were granted during 2010, 2009, fiscal 2008
or the one month ended December 31, 2008.
The Company’s expected option life has been determined based upon historical experience. The expected stock
price volatility assumption was determined using the implied volatility of exchange-traded options in accordance
with accounting guidance for share-based payments. The risk-free interest rate was determined based on the
yields available on U.S. Treasury zero-coupon issues.
The following table sets forth activity relating to the Company’s stock options (number of options in millions):
2010
Number of
Options
Weighted
Average
Exercise Price
Options outstanding at beginning of period ................................... 82 $51.29
Canceled .............................................................. (15) $55.52
Options outstanding at end of period(1) ...................................... 67 $50.35
Options exercisable at end of period ......................................... 67 $50.28
(1) At December 31, 2010, 67 million awards with a weighted average exercise price of $50.32 were vested or expected to vest.
The total intrinsic value of stock options exercised during fiscal 2008 was $211 million. There were no stock
options exercised during 2010, 2009 or the one month ended December 31, 2008.
At December 31, 2010, the intrinsic value of in-the-money exercisable stock options was not material.
The following table presents information relating to the Company’s stock options outstanding at December 31,
2010 (number of options outstanding data in millions):
At December 31, 2010 Options Outstanding Options Exercisable
Range of Exercise Prices
Number
Outstanding
Weighted Average
Exercise Price
Average
Remaining Life
(Years)
Number
Exercisable
Weighted Average
Exercise Price
Average
Remaining
Life (Years)
$28.00 – $39.99 .... 11 $36.22 2.0 11 $36.22 2.0
$40.00 – $49.99 .... 33 47.26 2.3 33 47.26 2.3
$50.00 – $59.99 .... 11 55.45 0.3 11 55.45 0.3
$60.00 – $76.99 .... 12 66.72 5.9 12 66.72 5.8
Total ............. 67 67
Performance-Based Stock Unit Awards. In 2010, the Company granted 2 million PSUs to senior executives.
These PSUs will vest and convert to shares of common stock in 2013 only if the Company satisfies
predetermined performance and market goals over the three-year performance period that began on January 1,
2010 and ends on December 31, 2012. Under the terms of the grant, the number of PSUs that will actually vest
and convert to shares will be based on the extent to which the Company achieves the specified performance goals
during the performance period. Performance-based stock unit awards have vesting, restriction and cancellation
provisions that are generally similar to those in deferred stock awards.
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