Waste Management 2007 Annual Report Download - page 132

market value as of the date of the grant, expired no later than ten years from the date of grant and vested ratably over
a four or five-year period.
Since May 2004, all stock-based compensation awards described herein have been made under the Company’s
2004 Stock Incentive Plan, which authorizes the issuance of a maximum of 34 million shares of our common stock.
Upon adoption by the Management Development and Compensation Committee of the Board of Directors and the
approval by the stockholders of the 2004 Stock Incentive Plan at the 2004 Annual Meeting of stockholders, all of the
Company’s other stock-based incentive plans were terminated, with the exception of the 2000 Broad-Based
Employee Plan. The Broad-Based Employee Plan was not required to be approved by stockholders, as no executive
officers of the Company may receive any grants under the plan. However, only approximately 100,000 shares
remain available for issuance under that plan. We currently utilize treasury shares to meet the needs of our equity-
based compensation programs under the 2004 Stock Incentive Plan and to settle outstanding awards granted
pursuant to previous incentive plans.
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. As discussed above, 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. Stock option grants in connection with new hires and promotions were replaced with
grants of restricted stock units.
Restricted stock units — During the year ended December 31, 2007, we granted approximately 324,000
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
granted in 2007 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
2007 2006 2005
Years Ended December 31,
Unvested, Beginning of year .......... 1,279 $30.63 767 $29.04 80 $29.60
Granted ......................... 324 $37.28 755 $31.82 762 $28.97
Vested(a) ........................ (376) $37.30 (214) $29.11 (7) $28.97
Forfeited ........................ (103) $31.63 (29) $30.85 (68) $28.97
Unvested, End of year .............. 1,124 $32.71 1,279 $30.63 767 $29.04
97
WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)