Sallie Mae 2007 Annual Report Download - page 180

14. Stock-Based Compensation Plans and Arrangements
The Company has various stock-based compensation plans which provide for grants of stock, stock
options, restricted stock, and restricted stock units. The Company also makes grants of stock-based awards
under individually negotiated arrangements.
The SLM Corporation Incentive Plan (the “Incentive Plan”) was approved by shareholders in 2004 and
amended in 2005 and 2006. A total of 17.7 million shares are authorized to be issued from this plan. Upon
approval of the Incentive Plan, the Company discontinued the Employee Stock Option Plan (the “ESOP”) and
Management Incentive Plan (the “MIP”). Shares available for future issuance under the ESOP and MIP were
canceled; however, terms of outstanding grants remain unchanged. Also, commitments made to certain option
holders to receive replacement options under the MIP will be honored.
Awards under the Incentive Plan may be in the form of stock, stock options, restricted stock and restricted
stock units.
The Company also maintains the Employee Stock Purchase Plan (the “ESPP”).
Stock-based compensation is granted to non-employee directors of the Company under the shareholder-
approved Directors Stock Plan. A total of 9.3 million shares are authorized to be issued from this plan and
awards may be in the form of stock and stock options. The Company’s non-employee directors are considered
employees under the provisions of SFAS No. 123(R). The shares issued under the Incentive Plan, the Directors
Stock Plan and the ESPP may be either shares reacquired by the Company or shares that are authorized but
unissued.
An amount equal to dividends payable on the Company’s common stock (“dividend equivalents”) is
credited on “full value” stock-based compensation awards, which are nonvested restricted stock and restricted
stock units, and on share amounts credited under deferred compensation arrangements. Dividend equivalents
are not credited on stock option awards.
The total stock-based compensation cost recognized in the consolidated statements of income for the
years ended December 31, 2007 and 2006 was $75 million and $81 million, respectively. The related income
tax benefit for the years ended December 31, 2007 and 2006 was $28 million and $30 million, respectively.
As of December 31, 2007, there was $19 million of total unrecognized compensation cost related to stock-
based compensation programs, which is expected to be recognized over a weighted average period of 1.1 years.
Stock Options
Under the Incentive Plan, ESOP and MIP, the maximum term for stock options is 10 years and the
exercise price must be equal to or greater than the market price of SLM common stock on the date of grant.
Stock options granted to officers and management employees under the plans generally vest upon the
Company’s common stock price reaching a closing price equal to or greater than 20 percent above the fair
market value of the common stock on the date of grant for five days, but no earlier than 12 months from the
grant date. Stock options granted to the chief executive officer have included more difficult price vesting
targets. In any event, all price vested options vest upon the eighth anniversary of their grant date. Options
granted to rank-and-file employees are time-vested with the grants vesting one-half in 18 months from their
grant date and the second one-half vesting 36 months from their grant date.
F-59
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts, unless otherwise stated)