Waste Management 2008 Annual Report Download - page 132
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Please find page 132 of the 2008 Waste Management annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.As a result of both the changes in accounting required by SFAS No. 123(R) for share-based payments and a
desire to design our long-term incentive plans in a manner that creates a stronger link to operating and market
performance, the Management Development and Compensation Committee approved a substantial change in the
form of awards that we grant. Through December 31, 2004, stock option awards were the primary form of equity-
based compensation. Beginning in 2005, annual stock option grants were eliminated and, for key members of our
management and operations personnel, replaced with grants of restricted stock units and performance share units.
The Management Development and Compensation Committee subsequently determined that the equity-based
compensation granted to the Company’s senior leadership should all be linked to the Company’s financial
performance. Accordingly, beginning with the 2008 annual equity grant, the awards granted to the Company’s
senior leadership team are 100% performance share units. The Company also grants restricted stock units to
employees working on key initiatives and in connection with new hires and promotions.
Restricted stock units — During the year ended December 31, 2008, we granted approximately 359,000
restricted stock units. Restricted stock units provide award recipients with dividend equivalents during the vesting
period, but the units may not be voted or sold until time-based vesting restrictions have lapsed. Restricted stock units
granted prior to 2007 vest ratably over a four-year period. In 2007, the Management Development and Compen-
sation Committee changed the terms of the restricted stock units granted to provide for three-year cliff vesting.
Unvested units are subject to forfeiture in the event of voluntary or for-cause termination. Restricted stock units are
subject to pro-rata vesting upon an employee’s retirement or involuntary termination other than for cause and
become immediately vested in the event of an employee’s death or disability.
Compensation expense associated with restricted stock units is measured based on the grant-date fair value of
our common stock and is recognized on a straight-line basis over the required employment period, which is
generally the vesting period. Compensation expense is only recognized for those awards that we expect to vest,
which we estimate based upon an assessment of current period and historical forfeitures.
A summary of our restricted stock units is presented in the table below (units in thousands):
Units
Weighted
Average
Fair
Value Units
Weighted
Average
Fair
Value Units
Weighted
Average
Fair
Value
2008 2007 2006
Years Ended December 31,
Unvested, Beginning of year ......... 1,124 $32.58 1,279 $30.63 767 $29.04
Granted ........................ 359 $33.33 324 $37.28 755 $31.82
Vested(a) ....................... (338) $30.41 (376) $30.43 (214) $29.11
Forfeited........................ (24) $33.22 (103) $30.94 (29) $30.85
Unvested, End of year .............. 1,121 $33.46 1,124 $32.58 1,279 $30.63
(a) The total fair market value of the shares issued upon the vesting of restricted stock units during the years ended
December 31, 2008, 2007 and 2006 was $11 million, $14 million and $7 million, respectively.
Performance share units — During the year ended December 31, 2008, we granted approximately 1,169,000
performance share units. The performance share units are payable in shares of common stock based on the
achievement of certain financial measures, after the end of a three-year performance period. At the end of the three-
year period, the number of shares awarded can range from 0% to 200% of the targeted amount. Performance share
units have no voting rights and performance share units granted prior to 2007 received no dividend equivalents
during the required performance period. Beginning in 2007, dividend equivalents are paid out in cash based on
actual performance at the end of the awards’ performance period. Performance share units are payable to an
employee (or his beneficiary) upon death or disability as if that employee had remained employed until the end of
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)