Wells Fargo 2007 Annual Report Download - page 114

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Dividend Reinvestment and Common Stock Purchase Plans
Participants in our dividend reinvestment and common stock
direct purchase plans may purchase shares of our common
stock at fair market value by reinvesting dividends and/or
making optional cash payments, under the plan’s terms.
Employee Stock Plans
We offer the stock-based employee compensation plans
described below. Effective January 1, 2006, we adopted
FAS 123(R), Share-Based Payment, using the “modified
prospective” transition method. FAS 123(R) requires that
we measure the cost of employee services received in
exchange for an award of equity instruments, such as stock
options or restricted share rights (RSRs), based on the fair
value of the award on the grant date. The cost is normally
recognized in our income statement over the vesting period
of the award; awards with graded vesting are expensed on a
straight-line method. Awards to retirement-eligible employees
are subject to immediate expensing upon grant. Total stock
option compensation expense was $129 million in 2007 and
$134 million in 2006, with a related recognized tax benefit
of $49 million and $50 million for the same years, respectively.
Stock option expense is based on the fair value of the awards
at the date of grant. Prior to January 1, 2006, we did not
record any compensation expense for stock options.
LONG-TERM INCENTIVE COMPENSATION PLAN Our Long-Term
Incentive Compensation Plan provides for awards of incentive
and nonqualified stock options, stock appreciation rights,
restricted shares, RSRs, performance awards and stock
awards without restrictions. Options must have an exercise
price at or above fair market value (as defined in the plan)
of the stock at the date of grant (except for substitute or
replacement options granted in connection with mergers or
other acquisitions) and a term of no more than 10 years.
Except for options granted in 2004 and 2005, which generally
vested in full upon grant, options generally become exercisable
over three years beginning on the first anniversary of the
date of grant. Except as otherwise permitted under the plan,
if employment is ended for reasons other than retirement,
permanent disability or death, the option period is reduced
or the options are canceled.
Options granted prior to 2004 may include the right to
acquire a “reload” stock option. If an option contains the
reload feature and if a participant pays all or part of the
exercise price of the option with shares of stock purchased in
the market or held by the participant for at least six months
and, in either case, not used in a similar transaction in the
last six months, upon exercise of the option, the participant
is granted a new option to purchase, at the fair market value
of the stock as of the date of the reload, the number of
shares of stock equal to the sum of the number of shares
used in payment of the exercise price and a number of shares
with respect to related statutory minimum withholding
taxes. Reload grants are fully vested upon grant and are
expensed immediately under FAS 123(R) beginning in 2006.
The total number of shares of common stock available
for grant under the plan at December 31, 2007, was
145,278,124.
Holders of RSRs are entitled to the related shares of
common stock at no cost generally over three to five years
after the RSRs were granted. Holders of RSRs granted prior
to July 2007 may be entitled to receive cash payments equal
to the cash dividends that would have been paid had the
RSRs been issued and outstanding shares of common stock.
Except in limited circumstances, RSRs are canceled when
employment ends.
The compensation expense for RSRs equals the quoted
market price of the related stock at the date of grant and is
accrued over the vesting period. Total compensation expense
for RSRs was not significant in 2007 or 2006.
For various acquisitions and mergers, we converted
employee and director stock options of acquired or merged
companies into stock options to purchase our common stock
based on the terms of the original stock option plan and the
agreed-upon exchange ratio.
PARTNERSHARES PLAN In 1996, we adopted the PartnerShares®
Stock Option Plan, a broad-based employee stock option
plan. It covers full- and part-time employees who generally
were not included in the long-term incentive compensation
plan described above. The total number of shares of
common stock authorized for issuance under the plan since
inception through December 31, 2007, was 108,000,000,
including 10,285,112 shares available for grant at
December 31, 2007. No options have been granted under
the plan since 2002, and as a result of action taken by the
Board of Directors on January 22, 2008, no future awards
will be granted under the plan. The exercise date of options
granted under the PartnerShares Plan is the earlier of (1) five
years after the date of grant or (2) when the quoted market
price of the stock reaches a predetermined price. These
options generally expire 10 years after the date of grant.
Because the exercise price of each PartnerShares Plan grant
has been equal to or higher than the quoted market price of
our common stock at the date of grant, we did not recognize
any compensation expense in 2005 and prior years. In
2006, under FAS 123(R), we began to recognize expense
related to these grants, based on the remaining vesting
period. All of our PartnerShares Plan grants were fully
vested as of December 31, 2007.
Director Plan
We provide a stock award to non-employee directors as
part of their annual retainer under our Directors Stock
Compensation and Deferred Plan. We also provide annual
grants of options to purchase common stock to each non-
employee director elected or re-elected at the annual meeting
of stockholders. The options can be exercised after six
months and through the tenth anniversary of the grant date.