Coca Cola 2014 Annual Report Download - page 109

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For awards prior to January 1, 2008, under the 1983 Restricted Stock Award Plan, participants are reimbursed by our Company for
income taxes imposed on the award, but not for taxes generated by the reimbursement payment. The 1983 Restricted Stock Award
Plan has been amended to eliminate this tax reimbursement for awards after January 1, 2008. The shares are subject to certain transfer
restrictions and may be forfeited if a participant leaves our Company for reasons other than retirement, disability or death, absent a
change in control of our Company.
Performance Share Unit Awards
In 2003, the Company established a program to grant performance share units under The Coca-Cola Company 1989 Restricted
Stock Award Plan to executives. In 2008, the Company expanded the program to award a mix of stock options and performance
share units to a broader group of eligible employees. Performance share units under The Coca-Cola Company 1989 Restricted Stock
Award Plan require achievement of certain performance criteria, which are predefined by the Compensation Committee of the
Board of Directors at the time of grant. The primary performance criteria used is compound annual growth in economic profit over
a predefined performance period, which is generally three years. The compound annual growth in economic profit, which is adjusted
for certain items, is approved and certified by the Audit Committee of the Board of Directors. The purpose of these adjustments is
to ensure a consistent year to year comparison of the specific performance criteria. Economic profit is our net operating profit after
tax less the cost of the capital used in our business. In the event the certified results equal the predefined performance criteria, the
Company will grant the number of restricted shares or share units equal to the target award in the underlying performance share unit
agreements. In the event the certified results exceed the predefined performance criteria, additional restricted shares or share units
up to the maximum award may be granted. In the event the certified results fall below the predefined performance criteria, a reduced
number of restricted shares or share units may be granted. If the certified results fall below the threshold award performance level,
no restricted shares or share units will be granted. The restricted shares or share units granted under this program are then generally
subject to a holding period before the restricted shares or share units are released. For performance share units granted before 2008,
this holding period was generally two years. For performance share units granted in 2008 and after, this holding period is generally one
year. Restrictions on such shares or share units lapse at the end of the holding period. Performance share units generally do not pay
dividends or allow voting rights during the performance period. For awards granted prior to 2011, participants generally are entitled to
dividends or dividend equivalents once the performance criteria have been certified and the restricted shares or share units have been
issued. For awards granted in 2011 and later, participants generally are entitled to receive dividends or dividend equivalents once the
shares have been released. Accordingly, the fair value of the performance share units is the quoted market value of the Company stock
on the grant date less the present value of the expected dividends not received during the relevant period. For certain performance
share units granted beginning in 2014, the Company includes a relative TSR modifier to determine the number of restricted shares or
share units earned at the end of the performance period. For these awards, the number of restricted shares or share units earned based
on the certified achievement of the predefined performance criteria will be reduced or increased if total shareowner return over the
performance period relative to a predefined compensation comparator group of companies falls outside of a defined range. The fair
value of performance share units that include the TSR modifier is determined using a Monte Carlo valuation model.
In the period it becomes probable that the minimum performance criteria specified in the plan will be achieved, we recognize expense
for the proportionate share of the total fair value of the performance share units related to the vesting period that has already lapsed
for the shares expected to vest and be released. The remaining fair value of the shares expected to vest and be released is expensed on
a straight-line basis over the balance of the vesting period. In the event the Company determines it is no longer probable that we will
achieve the minimum performance criteria specified in the plan, we reverse all of the previously recognized compensation expense in
the period such a determination is made.
Performance share units are generally settled in stock, except for certain circumstances such as death or disability, in which case
former employees or their beneficiaries are provided a cash equivalent payment. As of December 31, 2014, performance share units of
6,017,000, 5,608,000 and 5,801,000 were outstanding for the 2012–2014, 2013–2015 and 2014–2016 performance periods, respectively,
based on the target award amounts in the performance share unit agreements.