Wells Fargo 2008 Annual Report Download - page 148

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Note 19: Common Stock and Stock Plans
Common Stock
The following table presents our reserved, issued and
authorized shares of common stock at December 31, 2008.
Number of shares
Dividend reinvestment and
common stock purchase plans 6,194,500
Director plans 969,075
Stock plans (1) 761,273,606
Total shares reserved 768,437,181
Shares issued 4,363,921,429
Shares not reserved 867,641,390
Total shares authorized 6,000,000,000
(1) Includes employee option, restricted shares and restricted share rights, 401(k),
profit sharing and compensation deferral plans.
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 $174 million in 2008, $129 million
in 2007 and $134 million in 2006, with a related recognized
tax benefit of $65 million, $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 PLANS 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 exercise
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.
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 2008 or 2007.
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. In addition, we converted
restricted stock awards into awards that entitle holders
to our stock after the vesting conditions are met. Holders
receive cash dividends on outstanding awards if provided
in the original award.
The total number of shares of common stock available for
grant under the plans at December 31, 2008, was 235 million.
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. 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