Wells Fargo 2009 Annual Report Download - page 165

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Note 18: Common Stock and Stock Plans
Common Stock
The following table presents our reserved, issued and
authorized shares of common stock at December 31, 2009.
Number of shares
Dividend reinvestment and
common stock purchase plans 6,085,410
Director plans 957,615
Stock plans (1) 551,231,665
Convertible securities and warrants 176,097,156
Total shares reserved 734,371,846
Shares issued 5,245,971,422
Shares not reserved 19,656,732
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. We measure the cost of employee services
received in exchange for an award of equity instruments,
such as stock options, restricted share rights (RSRs) or
performance shares, 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 $221 million in 2009, $174 million
in 2008 and $129 million in 2007 with a related recognized
tax benefit of $83 million, $65 million and $49 million for
the same years, respectively. Stock option expense is based
on the fair value of the awards at the date of grant.
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 replace-
ment 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.
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 may be entitled
to receive cash payments or additional RSRs equal to the
cash dividends that would have been paid had the RSRs
been issued and outstanding shares of common stock. RSRs
granted as dividend equivalents are subject to the same
vesting schedule and conditions as the underlying RSRs.
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
2009 or 2008.
In 2009, a target amount of 949,000 performance shares
were granted with a fair value of $27.09 per share. The holder
of each performance share may receive one share of our com-
mon stock at vesting in the first quarter of 2013. The final
number of performance shares that will be granted is subject
to the achievement of specified performance criteria over a
three-year period ending December 31, 2012, and has a cap of
150% of the target amount of performance shares. Performance
shares continue to vest after retirement according to the orig-
inal vesting schedule subject to satisfying the performance
criteria and other vesting conditions. Total compensation
expense for performance shares was $21 million in 2009.
A portion of annual bonus awards recognized during 2009
that are normally paid in cash will be paid in our common
stock as part of our agreement with the U.S. Treasury to repay
our participation in the TARP Capital Purchase Program
(CPP). The fair value of the stock that will be issued is about
$50 million and there are no vesting conditions or other
restrictions on the stock.