Equity Incentive Plan

Proposal 3

Approval of the 2019 Equity Incentive Plan

The Board recommends a vote FOR the approval of the 2019 Equity Incentive Plan.

We are asking stockholders to approve The Allstate Corporation 2019 Equity Incentive Plan (the “Plan”), which amends and restates the 2013 Equity Incentive Plan to increase the number of shares available for grant under the Plan by 13.4 million and make certain other changes described in this Proposal. On the recommendation of the compensation and succession committee (the “committee” as referenced throughout Proposal 3), the Board approved the Plan and recommends approval by stockholders. The Plan is an important part of the pay-for-performance compensation program and the increase in the authorized number of shares available for grant by 13.4 million permits the Company to continue the program. The Board considers equity compensation to be a significant component of total compensation for Allstate’s officers and other employees, and believes that a combination of short and long-term incentives is essential to maintain a competitive compensation program and to attract, reward and retain top talent.

HIGHLIGHTS OF THE PROGRAM

  • Minimum vesting provisions. Awards made under the Plan have a one-year minimum vesting provision.
  • No discounted awards. Awards that have an exercise price or base value cannot be granted with an exercise price or base value less than the fair market value on the grant date.
  • No evergreen provision. There is no evergreen feature under which the shares authorized for issuance under the Plan can be automatically replenished.
  • No repricing or exchange of stock options or stock appreciation rights. The Plan does not permit repricing of options or stock appreciation rights (“SARs”) or the exchange of underwater options or SARs for cash or other awards without stockholder approval, except in certain corporate transactions or a change in control.
  • Double-trigger vesting. A change in control of the Company does not, by itself, trigger vesting of awards under the Plan. Any continued, assumed, or substituted awards will retain vesting and other terms, except that vesting may occur if employment is terminated by Allstate other than for cause, death or disability or if a participant in the Change in Control Severance Plan (“CIC Plan”) terminates for good reason, during the two years following the change in control (the occurrence of the “double trigger”).
  • No liberal share recycling. The Plan contains responsible share recycling provisions. Any shares surrendered or withheld to satisfy tax withholding on awards or to pay the exercise price of any option will not be added back (recycled) to the Plan.
    The Plan also provides that the gross number of SARs exercised or settled, and not just the net shares issued, will count against the aggregate limit that may be issued under the Plan.
  • Dividend payouts. No dividends or dividend equivalents on unvested awards will be paid until those awards are earned and vested. No dividend equivalents will be paid with respect to stock options or SARs.
  • Material amendments that require stockholder approval. Material changes, including increasing the number of shares authorized for issuance, materially modifying participation requirements, and changing the restrictions on repricing, require stockholder approval.
  • Administered by an independent committee. The Plan is administered by an independent committee, and is benchmarked against Allstate’s peers with the assistance of an independent compensation consultant.
  • Historical equity award practices are appropriate. Allstate’s three-year average share usage rate and dilution percentages demonstrate a prudent use of shares and are in line with the benchmarks used by major proxy advisory firms and institutional investors.
  • Strong equity award practices. Allstate’s equity awards are subject to clawback in certain circumstances set forth on page 78 and Allstate’s officers are subject to stringent stock ownership requirements described on pages 46-47.

Additional Shares to be Authorized Under the Plan

Equity compensation is a significant component of the total compensation of officers and other employees. The Plan supports this overall compensation strategy by providing a means for granting equity awards to attract and retain talent. The committee and the Board approved an increase in the number of shares of common stock authorized under the Plan of 13,400,000 shares. If the increase in the number of authorized shares is approved by stockholders, the Plan will terminate at the time the shares authorized thereunder are exhausted.

Factors Considered

The Board and committee are mindful of their responsibility to shareholders in granting equity-based awards. In setting the number of proposed additional shares issuable under the Plan, the committee and the Board considered a number of factors, including:

  • Shares currently available for issuance and how long the shares available (both currently and assuming the approval by stockholders of this Proposal 3) are expected to last.
  • Historical equity award granting practices, including the three-year average share usage rate (commonly referred to as burn rate).
  • Total potential dilution (commonly referred to as overhang).

Shares Currently Available for Issuance. As of March 1, 2019, we had 332,925,208 shares of common stock issued and outstanding (not including treasury shares) and 9,925,716 shares of common stock were available for future awards under the Plan, assuming performance stock awards at target (7,349,139 with such awards at maximum). The committee and the Board considered that the shares currently available for issuance may not be sufficient to cover future equity awards in the near term if material fluctuations in our stock price or material changes from historical granting practices occur. As of March 1, 2019, the proposed 13,400,000 additional shares would represent approximately 4.0% of the issued and outstanding shares of common stock, and, assuming the approval by stockholders of this Proposal 3, the aggregate of approximately 23,325,716 shares available under the Plan would represent approximately 7.0% of the issued and outstanding shares of common stock. The proposed additional shares, together with shares currently available, are expected to be sufficient, based on historical granting practices and the recent trading price of the common stock, to cover awards for approximately three years.

Equity Award Granting Practices and Share Usage. In setting and recommending to stockholders the increase in the number of shares authorized, the committee and the Board considered historic share usage and resulting burn rate as reflected in the table below. The 3-year average burn rate of 0.94% is lower than the industry thresholds established by certain major proxy advisory firms and institutional investors.

  2016 Fiscal Year 2017 Fiscal Year 2018 Fiscal Year
Total Shares Granted During Fiscal Year(1) 3.9M 3.4M 3.0M
Basic Weighted Average Common Stock Outstanding 372.8M 362.0M 347.8M
Burn Rate(2) 1.04% 0.93% 0.86%
  1. Includes the number of options and full value awards (restricted stock units and performance stock awards) granted for each year.
  2. Burn rate is calculated by dividing the total number of all awards granted to participants in each calendar year by the total common shares outstanding as of December 31st of the respective year.

Total Potential Dilution. The committee and Board considered the potential stockholder dilution represented by outstanding employee equity awards and shares available for future grants. Basic dilution is calculated as shown below.

Total Potential Dilution
(or Overhang)
= (shares currently available under the Plan) + (shares to be issued on exercise or conversion of outstanding equity awards under the Plan) + (additional shares proposed to be authorized under the Plan)
Total number of issued and outstanding shares of common stock (excluding treasury shares)

Prior to any additional shares authorized under the Plan, total potential dilution is 7.8% as of March 1st, 2019. By adding the 13,400,000 shares proposed to be authorized under the Plan, total potential dilution increases to 11.8% which is lower than the industry thresholds established by major proxy advisory firms and institutional investors.

Other Key Features of the Plan

The Plan, as approved by the committee and the Board, makes certain changes to the 2013 plan, intended to reflect compensation and governance best practices or to conform the terms to current practice, including:

  • 162(m) Provisions: Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), allowed performance-based compensation that met certain requirements to be tax deductible, regardless of amount, prior to the Tax Cuts and Jobs Act of 2017 (the “Tax Legislation”). This qualified performance-based compensation exception was repealed as part of the Tax Legislation. We have amended certain provisions of the Plan that were required for awards to qualify as performance-based compensation under the 162(m) exception prior to the effective date of the relevant repeal provisions under the Tax Legislation for awards granted on a going forward basis. Certain awards granted prior to November 2, 2017, may be eligible for grandfathered treatment under the Tax Legislation and may be subject to certain limited transition relief.

    Because of the importance of linking pay and performance, the Company continues to grant performance stock awards, subject to performance conditions.

  • Double Trigger Change in Control Vesting: Although awards previously granted under the Plan had double-trigger vesting provisions, the Plan has been revised to allow only double-trigger acceleration of the vesting, exercisability of, or the lapse of restrictions or deemed satisfaction of performance goals for awards that continue after a change in control.

Summary of 2019 Equity Incentive Plan

The following is a summary of the material features of the Plan. This summary is qualified in its entirety by reference to Appendix D, which contains the complete text of the Plan.

Administration

The Plan provides that the committee or another committee appointed by the Board consisting solely of two or more non-employee members of the Board will administer the Plan. Because the committee is currently performing administration duties, throughout the following discussion we refer to the administrator as the committee. The committee has full and final authority and discretion under the Plan to determine eligibility and types and terms of awards and to interpret and administer the Plan. In 2008 the Board delegated to the equity award committee, consisting of the person who at any time holds the office of CEO provided such person is an Allstate director, the authority to grant restricted stock units and nonqualified stock options to eligible employees who are not subject to Section 16 of the Securities Exchange Act of 1934, in certain new hire situations, in connection with promotions, and to recognize key contributions that occur between regularly scheduled committee meetings. This authority was extended to performance stock awards in 2016.

Prohibition on Repricing and Buy-Outs of Options and Stock Appreciation Rights

Without stockholder approval, the committee may not amend outstanding options or SARs to reduce the exercise price or base value of the award, cancel options or SARs in exchange for other awards or options or SARs with an exercise price or base value that is less than the exercise price or base value of the original options or SARs, or cancel options or SARs when the exercise price or base value exceeds the fair market value of shares of common stock in exchange for either cash or other securities, except in connection with a change in control or a corporate transaction involving Allstate, including, for example, a stock dividend, stock split, spin off, rights offering, recapitalization through a large, nonrecurring cash dividend, or other transaction or event described in the Plan’s award adjustment provisions.

Eligibility

Awards may be made to any of our employees or employees of any of our subsidiaries, approximately 46,700 people, who are on the payroll system of Allstate or any of its subsidiaries and who are not covered by a collective bargaining agreement, including 12 executive officers of Allstate. Independent contractors, consultants or any employees of an employment, consulting or temporary agency, or of any entity other than the Company or one of its subsidiaries, are not eligible to participate in the Plan. In determining which employees will receive awards, the committee will consider such factors as it deems relevant to promote the purposes of the Plan. In 2019, we anticipate that approximately 1,000 employees, including 12 executive officers, will receive awards under the Plan.

Types of Awards

Awards may be in the form of stock options, SARs, unrestricted stock, restricted stock, restricted stock units, performance units, performance stock, and other awards including the payment of stock in lieu of cash under other incentive or bonus programs or otherwise and payment of cash based on attainment of performance goals. Share-based awards relate to shares of common stock. To date, only nonqualified stock options, restricted stock, restricted stock units, and performance stock have been granted under the Plan.

Stock Options

The Plan permits the committee to grant nonqualified options and incentive stock options. To date, only nonqualified options have been granted under the Plan. Subject to the limits in the Plan, the committee has discretion to determine the number of options to be awarded and the terms and conditions of the awards. Each award is evidenced by an agreement that specifies the number of shares subject to the award, the exercise price, the option term and exercise periods, the vesting schedule, and other terms the committee may deem appropriate such as provisions relating to a change in control and vesting and forfeiture upon a participant’s termination of employment. No dividend equivalents may be provided with respect to options.

The option exercise price may not be less than the fair market value of a share of common stock on the grant date, and the option term may not exceed ten years. Options may be exercised by delivery of a notice of intent to purchase a specific number of shares. Payment may be made in cash or its equivalent, by tendering previously acquired shares of common stock, by share withholding, by means of a broker-assisted cashless exercise, or any combination of the foregoing.

Options may not be granted with a reload feature, which entitles the option holder to receive additional options when exercising options by tendering shares. The committee may not reprice any options without stockholder approval, including the cancellation of options in exchange for options with a lower exercise price or for cash or other securities (other than in connection with certain corporate transactions involving Allstate or a change in control). 

Unrestricted Stock, Restricted Stock, and Restricted Stock Units

The committee may also award restricted and unrestricted shares of common stock and restricted stock units. Subject to the limits in the Plan, the committee has discretion to determine the number of shares or units to be awarded and the terms and conditions of the awards. The right to vest or receive distributions or payments with respect to restricted stock and restricted stock unit awards may be conditioned upon attainment of performance goals or continued service. Each award is evidenced by an agreement that specifies the number of shares or units being awarded, any restrictions or vesting conditions, any applicable performance goals, and other terms the committee may deem appropriate such as provisions relating to a change in control and a participant’s termination of employment.

Restricted stock units may be settled in shares of common stock or cash of equal value, or a combination of stock and cash.

During the restricted period, except pursuant to a domestic relations order or as otherwise determined by the committee, restricted stock and restricted stock units may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated. Employees holding restricted stock may exercise full voting rights with respect to those shares during the restriction period and, subject to the committee’s right to determine otherwise at the time of grant, will receive regular cash dividends on restricted stock held during the restricted period after vesting. The committee may include dividend equivalent rights on awards of restricted stock units, any dividend equivalents to be paid following vesting. With respect to any restricted stock or restricted stock unit awards with performance-based vesting, any dividends or dividend equivalent rights based on the performance-based vesting of such awards are only paid to the participant upon satisfaction of the performance-based vesting conditions.

Performance Units and Performance Stock

The committee may also award performance units and performance stock awards. Subject to the limits in the Plan, the committee has discretion to determine the number of performance units and performance stock awards to be awarded and the terms and conditions of the awards, including the applicable performance period and specific performance goals. The value of performance stock is based on the fair market value of a share of common stock. The value of a performance unit is determined in the discretion of the committee at the time of grant. The extent to which the performance goals are met during the performance periods established by the committee will determine the number and/or value of performance units or performance stock that will be paid to employees. Payment of the value of earned performance units or performance stock after the end of the performance period will be made in cash or stock having an aggregate fair market value equal to the value of the performance units or performance stock at the end of the performance period, or a combination of stock and cash. The awards may be granted subject to such other restrictions and terms as the committee determines. Each award is evidenced by an agreement that specifies the number of shares or units being awarded, any restrictions or vesting conditions, the performance goals, and any other terms the committee may deem appropriate such as provisions relating to a change in control and dividend equivalent rights. To date, no performance units have been granted under the Plan. Any dividends or dividend equivalent rights under such awards are paid to the participant only if the applicable performance goals are achieved.

Stock Appreciation Rights

The Plan permits the committee to grant SARs. To date, no SARs have been granted under the Plan. Subject to the limits in the Plan, the committee has discretion to determine the number of SARs to be awarded and the terms and conditions of the awards. Each award is evidenced by an agreement that specifies the number of shares subject to the award, the base value of the award, the award’s term and exercise periods, the vesting schedule, and other terms the committee may deem appropriate such as provisions relating to a change in control and vesting and forfeiture upon a participant’s termination of employment. A SAR’s base value may not be less than the fair market value of a share of common stock on the grant date, and a stock appreciation right’s term may not exceed ten years. No dividend equivalents may be provided with respect to SARs.

SARs may be granted alone or in tandem with options or in any combination of these forms. Upon exercise of a SAR, an employee will receive payment in an amount equal to the product of the excess of the fair market value of a share of common stock on the date of exercise over the base value multiplied by the number of shares with respect to which the SAR is exercised. The committee may not reduce the base value of a SAR without stockholder approval, including canceling a SAR in exchange for an award with a lower base value or for cash or other securities (other than in connection with certain corporate transactions involving Allstate or a change in control).

Other Awards

The committee may grant other awards that may include the payment of stock in lieu of cash, including cash payable under other incentive or bonus programs, and the payment of cash based on attainment of performance goals established by the committee. None of these other awards have been granted to date under the Plan.

Performance Goals

Certain awards under the Plan may be based on achievement of performance goals. These goals are established by the committee and may be based on one or more of the following measures or such other measures as established by the committee: sales, revenues, premiums, financial product sales, earnings per share, book value, stockholder return and/or value, funds from operations, operating income, gross income, net income, combined ratio, underwriting income, cash flow, return on equity, return on capital, return on assets, values of assets, market share, net earnings, earnings before interest, operating ratios, expenses, stock price, customer satisfaction, customer retention, customer loyalty, strategic business criteria based on meeting specified revenue goals, market penetration goals, investment performance goals, business expansion goals or cost targets, accomplishment of mergers, acquisitions, dispositions, or similar extraordinary business transactions, profit returns and margins, financial return ratios, market performance, and/or risk-based capital goals or returns. Performance goals may be measured solely on a corporate, subsidiary, business unit, or other grouping basis, or a combination thereof, and may be before or after tax. Performance goals may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure.

Deferral

The committee may, in its sole discretion, permit a participant to defer the receipt of the payment of cash or the delivery of stock that would otherwise be due to such participant under the Plan. If any such deferral election is permitted, the committee will establish rules and procedures for the deferrals consistent with Section 409A of the Code, to the extent applicable.

Equity Incentive Plans of Foreign Subsidiaries

The committee may authorize the adoption of sub-plans of the Plan, including as the committee deems necessary or desirable to comply with the laws of, or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose residents may be granted awards. In such case, such foreign sub-plans will have such terms and provisions as the committee permits not inconsistent with the provisions of the Plan and which may be more restrictive than those contained in the Plan. Awards granted under such foreign sub-plans are governed by the terms of the Plan except to the extent the provisions of the foreign sub-plans are more restrictive than the terms of the Plan, in which case such terms of the foreign sub-plans control.

Fungible Pool

Each share issued pursuant to an option or SAR (and, if granted before May 19, 2009, any other form of award) will reduce the number of shares available under the Plan by one share, and each share issued pursuant to awards granted on or after May 19, 2009, other than options and SARs, will reduce the number of shares available by 2.1 shares. Shares of stock underlying awards that are lapsed or forfeited, that are expired or canceled, that are settled in cash, or that are otherwise settled without delivery of shares of stock will not be treated as having been issued under the Plan. Shares that are used to pay the exercise price for an option or base value for a SAR and shares withheld to pay taxes will be treated as having been issued under the Plan. With respect to stock-settled SARs, the full number of shares underlying the exercised portion of the SAR will be treated as having been issued under the Plan (regardless of the number of shares actually used to settle the SAR upon exercise).

Limits on Awards

No more than 5,500,000 shares may be issued pursuant to incentive stock options. The Plan also contains the following per-participant limitations on awards intended to qualify as performance-based compensation under Internal Revenue Code Section 162(m) as in effect prior to the Tax Legislation granted under the Plan:

  • The total number of shares of stock with respect to which options or SARs may be granted in any calendar year to any participant may not exceed 4,000,000 shares.
  • The total number of shares of qualified restricted stock or qualified restricted stock units that may be granted in any calendar year to any participant may not exceed 3,000,000 shares or units, as the case may be.
  • The total number of shares of performance stock that may be granted in any calendar year to any participant may not exceed 4,000,000 shares, and the maximum amount payable pursuant to performance units granted in any one calendar year to any participant may not exceed $10,000,000.
  • The total number of shares of stock granted pursuant to other awards in any calendar year to any participant may not exceed 4,000,000 shares.
  • The total cash award that may be paid pursuant to other awards granted in any one calendar year to any participant may not exceed $10,000,000.
  • The aggregate value of cash dividends (other than large, nonrecurring cash dividends) or dividend equivalents that a participant may receive in any calendar year may not exceed $11,500,000.

Minimum Vesting

NEW Awards under the Plan are subject to a minimum one-year vesting period, except in connection with death, disability, retirement, termination of employment without cause or a change in control, and except that the committee may grant awards that do not satisfy the minimum vesting period relating to an aggregate of 5% or fewer of the aggregate number of shares of stock authorized for issuance under the Plan.

Elective Share Withholding

A participant may irrevocably elect to have shares withheld with a fair market value in an amount required to satisfy the minimum federal, state, and local tax withholding requirements upon the exercise of an option or stock appreciation right, the vesting of an award, or any other taxable event in respect to an award granted under the Plan, or such other limitations as will not cause adverse accounting consequences or cost, except as otherwise specifically provided in any award agreement with respect to a participant subject to tax withholding in any foreign jurisdiction in which there is no minimum statutory withholding rates.

Limits on Transferability

In general, awards are not assignable or transferable other than by will or the laws of descent and distribution. Vested nonqualified options may be transferred to certain family members or to a trust, foundation, or any other entity meeting certain ownership requirements. However, in no event may a transfer be made for consideration and no option or SAR maybe transferred to a third party financial institution.

Forfeitability

Unless otherwise provided by the committee or in an award agreement, if a participant has a termination of employment, all awards will terminate and be forfeited on the date of such termination of employment. Typically, the committee has prescribed that, subject to exceptions for death, disability, and retirement, an employee will forfeit all unexercised vested options three months after termination of employment, and all other unvested awards will terminate and be forfeited on the date of an employee’s termination of employment or failure to achieve specific performance goals (unless the committee determines otherwise).

Clawback

In the event of a restatement of our financial results to correct a material error or inaccuracy resulting in whole or in part from the fraud or intentional misconduct of an officer who is subject to Section 16 of the Securities Exchange Act of 1934, to the extent permitted by applicable law, we may take such actions as we determine to be appropriate to recover compensation provided to such officer under the Plan, including without limitation cancellation of outstanding awards or recovery of all or a portion of any gain realized upon vesting, settlement, or exercise of an award or recovery of all or a portion of any proceeds resulting from any disposition of shares received pursuant to an award. While the 2013 plan included non-solicitation and non-competition covenants and related clawback or award cancellation provisions for violation of these covenants, these provisions have been removed from the Plan; however, award agreements continue to contain these provisions.

Adjustments for Certain Events

The committee will make proportional adjustments to the maximum number of shares of common stock that may be delivered under the Plan and to outstanding awards to reflect stock dividends, stock splits, spin-offs, rights offerings, recapitalizations, mergers, consolidations, reorganizations, liquidations, or similar events.

Change in Control

The committee may provide in any award agreement for provisions relating to a change in control (as defined in the Plan), including, the acceleration of the exercisability of, or the lapse of restrictions or deemed satisfaction of performance goals with respect to, any outstanding awards; provided, however, that, with respect to any award that is continued, assumed or substituted with a substantially equivalent award in connection with a change in control, in addition to any conditions provided for in the award agreement, any acceleration of the vesting, exercisability of, or the lapse of restrictions or deemed satisfaction of performance goals with respect to any outstanding awards in connection with a change in control may occur only if during the post-change period (as defined in the Plan), (i) the participant has a termination of employment initiated by the Company or any of its subsidiaries other than for “cause” (as defined in the award agreement), death or disability or (ii) the participant is a participant in the CIC Plan and the participant’s termination of employment is initiated by the participant for “good reason” (as defined in the CIC Plan).

Amendment, Modification, and Termination of the Plan

The Board may amend, alter, suspend, or terminate the Plan at any time and in any respect, provided that no amendment will (1) increase the total number of shares of common stock that can be issued under the Plan, (2) materially modify the requirements for participation in the Plan, or (3) materially increase the benefits accruing to employees under the Plan, unless in each instance the amendment is approved by our stockholders. No amendment, modification, or termination of the Plan may materially affect in an adverse way any award then outstanding under the Plan, without an employee’s written consent, unless otherwise provided in the Plan or required by applicable law.

Duration of the Plan

The Plan will remain in effect until the shares are exhausted or until such earlier time as the Board may determine.

Federal Income Tax Consequences

The following is a general summary of the United States federal income tax consequences related to awards that have been or may be granted under the Plan. The federal tax laws may change, and the federal, state, and local tax consequences for any employee will depend upon his or her individual circumstances. This summary does not address all potential tax consequences related to awards, such as estate and gift taxes, foreign taxes, and state and local taxes.

Nonqualified Stock Options

Generally, an employee will not have any taxable income, and we are not entitled to any deduction on the grant of a nonqualified stock option. Upon the exercise of a nonqualified stock option (or, generally, upon the exercise of an incentive stock option followed by a disqualifying disposition, described below), the employee recognizes ordinary income equal to the excess of the fair market value of the shares acquired over the option exercise price, if any, on the date of exercise. We are generally entitled to a deduction equal to the compensation taxable to the employee as ordinary income, except to the extent such deduction is limited by applicable provisions of the Internal Revenue Code. Any such income is also considered wages and, as such, is subject to income, Social Security, and Medicare taxes. If an employee disposes of shares of common stock acquired upon exercise of a nonqualified stock option in a taxable transaction, the employee will recognize capital gain or loss in an amount equal to the difference between the employee’s basis in the shares sold and the total amount realized upon disposition.

Incentive Stock Options

Generally, an employee does not recognize taxable income on the grant or exercise of an incentive stock option, and no federal income, Social Security, or Medicare taxes will be withheld upon such grant or exercise. However, the excess of the fair market value on the exercise date over the option exercise price is included in alternative minimum taxable income and thus may trigger alternative minimum tax.

Upon the disposition of shares of common stock acquired on exercise of an incentive stock option more than one year after the exercise date, and more than two years after the grant date, the employee will normally recognize a capital gain or loss, as the case may be. This gain or loss is measured by the difference between the common stock’s sale price and the exercise price. We will not be entitled to a tax deduction on the grant or exercise of an incentive stock option or on the disposition of common stock acquired upon the exercise of an incentive stock option.

If, however, an employee disposes of the shares of common stock acquired upon the exercise of an incentive stock option either before the one-year period after exercise, or before the two-year period after the grant date, the difference between the exercise price of such shares and the lesser of (i) the fair market value of the shares on the date of exercise or (ii) the sale price will constitute compensation taxable to the employee as ordinary income. We are generally allowed a corresponding tax deduction equal to the amount of the compensation taxable to the employee. If the sale price of common stock exceeds the fair market value on the exercise date, the excess will be taxable to the employee as capital gain. We are not allowed a deduction with respect to any such capital gain recognized by the employee.

Use of Common Stock to Pay Option Exercise Price of Nonqualified Option

If an employee delivers previously acquired common stock in payment of all or part of the option exercise price of a nonqualified stock option, there will be no recognition of taxable income or loss of any appreciation or depreciation in value of the tendered common stock. The employee’s tax basis in, and capital gain holding period for, the tendered stock carries over to an equal number of the option shares received. The fair market value of the shares received in excess of the tendered shares constitutes compensation taxable to the employee as ordinary income. We may be entitled to a tax deduction equal to the compensation income recognized by the employee.

Use of Common Stock to Pay Option Exercise Price of Incentive Stock Option

If an employee delivers previously acquired common stock in payment of all or part of the incentive stock option exercise price (other than stock acquired on exercise and not held for the required holding periods), the employee will not recognize as taxable income or loss any appreciation or depreciation in the value of the tendered stock after its acquisition date. The employee’s tax basis in, and capital gain holding period for, the tendered stock carries over to an equal number of the option shares received. Shares received in excess of the tendered shares have a tax basis equal to the amount paid, if any, in excess of the tendered shares, and such shares’ holding period will begin on the date of exercise.

If an employee delivers previously acquired common stock that was acquired upon the exercise of an incentive stock option that was not held for the required holding periods, ordinary income will be recognized by the employee, and we will generally be entitled to a corresponding compensation deduction. The employee’s basis in the shares received in exchange for the tendered shares will be increased by the amount of ordinary income recognized.

Stock Appreciation Rights

An employee will not have any taxable income on the grant of SARs. Upon the exercise of SARs, the employee recognizes ordinary income equal to the fair market value of the shares and cash received. We will be entitled to a corresponding compensation deduction. Any such ordinary income is also considered wages and, as such, is subject to income, Social Security, and Medicare taxes. If SARs are settled in shares of common stock, then upon a subsequent disposition of such shares the employee will recognize capital gain or loss in an amount equal to the difference between the employee’s basis in the shares sold and the total amount realized upon disposition.

Unrestricted Stock and Restricted Stock Awards

Generally, an employee will not have any taxable income on the grant of restricted stock, and we will not be entitled to a deduction at the time of grant. When shares of restricted stock are no longer subject to a substantial risk of forfeiture, the employee will recognize ordinary income in an amount equal to the fair market value of the shares, less the amount paid, if any, for the shares. Alternatively, an employee may elect to be taxed at the time of grant, in which case the employee will recognize ordinary income on the grant date equal to the fair market value of the shares on the grant date. In either case, we will generally be entitled to a deduction in an amount equal to the ordinary income recognized by the employee. With respect to unrestricted stock, an employee will recognize ordinary income at the time of grant in an amount equal to the fair market value of the stock on that date, and we will generally be entitled to a deduction in the same amount. Compensation with respect to restricted stock and unrestricted stock is subject to income, Social Security, and Medicare taxes. Upon the disposition of any shares acquired pursuant to an unrestricted stock or restricted stock award, any gain or loss, based on the difference between the employee’s basis in the shares sold and the total amount realized upon disposition, will be taxed as capital gain or loss.

Restricted Stock Units, Performance Units, and Performance Stock Awards

An employee will not have any taxable income on the grant of restricted stock units, performance units, or performance stock. Upon the delivery of shares or payment of cash with respect to restricted stock units, performance units, or performance stock, the employee generally will be required to include as ordinary income in the year of receipt an amount equal to the cash received and/or the fair market value of shares of stock received, and we will be entitled to a deduction in an amount equal to the same amount. Compensation with respect to restricted stock units, performance units, and performance stock is subject to income, Social Security, and Medicare taxes. If shares of common stock are received in settlement of any restricted stock units, performance units, or performance stock award, then upon a subsequent disposition of such shares the employee will recognize capital gain or loss in an amount equal to the difference between the employee’s basis in the shares sold and the total amount realized upon disposition.

Internal Revenue Code Section 409A

Certain awards under the Plan, depending in part on the specific terms and conditions of such awards, may be considered “non-qualified deferred compensation” subject to the requirements of Internal Revenue Code section 409A, which regulates deferred compensation arrangements. If the terms of such awards do not meet the requirements of Internal Revenue Code section 409A, this may result in an additional 20% tax obligation, plus penalties and interest for such participant.

Other Information

Total Outstanding Equity Awards. Since the inception of the equity incentive plan in 2001, stockholders have approved the issuance of up to 90,230,000 shares, in addition to 6,815,597 unused shares that were available for awards under a previously terminated plan. The table below lists the total shares authorized under the equity plans as of March 1, 2019.

Total Shares Authorized under the Equity Plans as of March 1, 2019
Total shares authorized under Equity Plans 97,045,597(1)
Shares issued under the Plan 68,788,896(2)
Shares needed for outstanding awards 18,330,985
Plan authorized shares needed for restricted stock units (RSUs) that have not yet converted to common stock 1,727,999(2)
Unexercised stock options to purchase shares of common stock 14,026,410
Plan authorized shares needed for performance stock awards (PSAs) that have not vested and converted to common stock 2,576,576(2)
  1. Includes 6,815,597 unused shares that were available for awards under a previously terminated plan.
  2. RSUs and PSAs granted after 2009 are deducted at a flexible share ratio of 2.1 to 1 from the authorized share pool.

Authorized but unissued shares or treasury shares may be used to provide common stock for awards. On March 1, 2019, the closing price of our common stock as reported on the New York Stock Exchange was $95.01.

New Plan Benefits Resulting From Approval of Plan

It is not possible at this time to determine the benefits or amounts of awards that will be made in the future as a result of the increased number of shares of common stock authorized and the other revised provisions of the Plan.

Options Granted Under the Existing Plan

Since the initial approval of the Plan in 2001 through March 1, 2019, the following number of stock options have been granted to the individuals and groups described in the table. No other options have been granted to any other individuals or groups under the Plan.

Name and Position
Number of
Options Granted(1)
Named Executive Officers
 
Thomas J. Wilson (Chair, President, and CEO)
5,648,550
Mario Rizzo (Executive Vice President and CFO)
201,524
John E. Dugenske (Executive Vice President and Chief Investment and
Corporate Strategy Officer of Allstate Insurance Company)
171,772
Glenn T. Shapiro (President, Allstate Personal Lines of Allstate Insurance Company)
202,417
Steven E. Shebik (Vice Chair)
911,980
All current executive officers as a group(2)
9,566,615
All Directors (who are not executive officers) as a group
0
Nominees for Director
0
All other employees, including all current officers who are not executive officers, as a group
73,345,579
  1. Reflects options granted since 2001 for Messrs. Wilson, Rizzo, and Shebik, 2017 for Mr. Dugenske, and 2016 for Mr. Shapiro.
  2. All current reporting officers under Section 16(a) of the Securities and Exchange Act of 1934, as amended, which includes the Named Executives.

Equity Compensation Plan Information

The following table includes information as of December 31, 2018, with respect to The Allstate Corporation’s equity compensation plans:

Securities Authorized for Issuance Under Equity Compensation Plans
Plan Category Number of Securities to
be Issued upon Exercise
of Outstanding Options,
Warrants, and Rights
(a)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants, and Rights
(b)
Number of Securities
Remaining Available for
Future Issuance under
Equity Compensation
Plans (Excluding Securities
Reflected in Column (a))
(c)
Equity Compensation Plans Approved by Security Holders(1) 15,015,769(2) $65.82 12,645,317(3)
Total 15,015,769(2) $65.82 12,645,317(3)
  1. Consists of the 2013 Equity Incentive Plan, which amended and restated the 2009 Equity Incentive Plan; the 2017 Equity Compensation Plan for Non-Employee Directors; the 2006 Equity Compensation Plan for Non-Employee Directors; and the Equity Incentive Plan for Non-Employee Directors (the equity plan for non-employee directors prior to 2006). The Company does not maintain any equity compensation plans not approved by stockholders.
  2. As of December 31, 2018, 957,056 RSUs and 2,328,244 PSAs were outstanding. The weighted-average exercise price of outstanding options, warrants, and rights does not take into account RSUs and PSAs, which have no exercise price. PSAs are reported at the maximum potential amount awarded for incomplete performance periods and the amount earned for the 2016 PSA grant, reduced for forfeitures. For incomplete performance periods, the actual number of shares earned may be less and are based upon measures achieved at the end of the three-year performance period for those PSAs granted in 2017 and 2018.
  3. Includes 12,278,616 shares that may be issued in the form of stock options, unrestricted stock, restricted stock, restricted stock units, SARs, performance units, performance stock, and stock in lieu of cash under the 2013 Equity Incentive Plan; and 366,701 shares that may be issued in the form of stock options, unrestricted stock, restricted stock, restricted stock units, and stock in lieu of cash compensation under the 2017 Equity Compensation Plan for Non-Employee Directors.

The entire text of the Plan is set forth in Appendix D.