Stock Options and Other Share-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock Options and Other Share-Based Compensation

Compensation expense for stock options for 2021, 2020 and 2019 was $60 ($47 after tax), $94 ($74 after tax) and $81 ($64 after tax), respectively. In addition, compensation expense for stock appreciation rights, restricted stock, performance shares and restricted stock units was $701 ($554 after tax), $96 ($76 after tax) and $313 ($266 after tax) for 2021, 2020 and 2019, respectively. No significant stock-based compensation cost was capitalized at December 31, 2021, or December 31, 2020.

Cash received in payment for option exercises under all share-based payment arrangements for 2021, 2020 and 2019 was $1,274, $226 and $1,090, respectively. Actual tax benefits realized for the tax deductions from option exercises were $(15), $8 and $43 for 2021, 2020 and 2019, respectively.

Cash paid to settle performance shares, restricted stock units and stock appreciation rights was $163, $95 and $119 for 2021, 2020 and 2019, respectively. Cash paid in 2021 included $4 million for Noble awards paid under change-in-control plan provisions.

Awards under the Chevron Long-Term Incentive Plan (LTIP) may take the form of, but are not limited to, stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares and nonstock grants. From April 2004 through May 2023, no more than 260 million shares may be issued under the LTIP. For awards issued on or after May 29, 2013, no more than 50 million of those shares may be in a form other than a stock option, stock appreciation right or award requiring full payment for shares by the award recipient. For the major types of awards issued before January 1, 2017, the contractual terms vary between three years for the performance shares and restricted stock units, and 10 years for the stock options and stock appreciation rights. For awards issued after January 1, 2017, contractual terms vary between three years for the performance shares and special restricted stock units, five years for standard restricted stock units and 10 years for the stock options and stock appreciation rights. Forfeitures for performance shares, restricted stock units, and stock appreciation rights are recognized as they occur. Forfeitures for stock options are estimated using historical forfeiture data dating back to 1990.

Noble Share-Based Plans (Noble Plans) When Chevron acquired Noble in October 2020, outstanding stock options granted under various Noble Plans were exchanged for Chevron options. These awards retained the same provision as the original Noble Plans. Awards issued may be exercised for up to five years after termination of employment, depending upon the termination type, or the original expiration date, whichever is earlier. Other awards issued under the Noble Plans included restricted stock awards, restricted stock units, and performance shares, which retained the same provisions as the original Noble Plans. Upon termination of employment due to change-in-control, all unvested awards issued under the Noble Plans, including stock options, restricted stock awards, restricted stock units and performance shares become vested on the termination date. If not exercised, awards will expire between 2022 and 2029.

Fair Value and Assumptions The fair market values of stock options and stock appreciation rights granted in 2021, 2020 and 2019 were measured on the date of grant using the Black-Scholes option-pricing model, with the following weighted-average assumptions:


	Year ended December 31
	2021			2020			2019
Expected term in years1	6.8			6.6			6.6
Volatility2	31.1		%	20.8		%	20.5		%
Risk-free interest rate based on zero coupon U.S. treasury note	0.71		%	1.5		%	2.6		%
Dividend yield	6.0		%	4.0		%	3.8		%
Weighted-average fair value per option granted	$	12.22		$	13.00		$	15.82

1 Expected term is based on historical exercise and post-vesting cancellation data.

2 Volatility rate is based on historical stock prices over an appropriate period, generally equal to the expected term.

A summary of option activity during 2021 is presented below:


	Shares (Thousands)	Weighted-Average Exercise Price			Averaged Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2021	90,150		$	108.17
Granted	6,948		$	88.20
Exercised	(12,831)		$	99.64
Forfeited	(6,868)		$	102.61
Outstanding at December 31, 2021	77,399		$	108.10	4.17		$	1,020
Exercisable at December 31, 2021	66,499		$	109.80	3.45		$	806

The total intrinsic value (i.e., the difference between the exercise price and the market price) of options exercised during 2021, 2020 and 2019 was $152, $92 and $516, respectively. During this period, the company continued its practice of issuing treasury shares upon exercise of these awards.

As of December 31, 2021, there was $57 of total unrecognized before-tax compensation cost related to nonvested share-based compensation arrangements granted under the plan. That cost is expected to be recognized over a weighted-average period of 1.7 years.

At January 1, 2021, the number of LTIP performance shares outstanding was equivalent to 4,434,797 shares. During 2021, 2,219,379 performance shares were granted, 1,378,766 shares vested with cash proceeds distributed to recipients and 252,345 shares were forfeited. At December 31, 2021, there were 5,023,065 performance shares outstanding that are payable in cash. The fair value of the liability recorded for these instruments was $683 and was measured using the Monte Carlo simulation method.

At January 1, 2021, the number of restricted stock units outstanding was equivalent to 3,303,933 shares. During 2021, 1,381,433 restricted stock units were granted, 111,831 units vested with cash proceeds distributed to recipients and 186,898 units were forfeited. At December 31, 2021, there were 4,386,637 restricted stock units outstanding that are payable in cash. The fair value of the liability recorded for the vested portion of these instruments was $381, valued at the stock price as of December 31, 2021. In addition, outstanding stock appreciation rights that were granted under LTIP totaled approximately 3.4 million equivalent shares as of December 31, 2021. The fair value of the liability recorded for the vested portion of these instruments was $75.