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STOCK-BASED INCENTIVE PLANS | 12 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
STOCK-BASED INCENTIVE PLANS |
NOTE 15 - STOCK-BASED INCENTIVE PLANS
Occidental issues stock-based awards to employees in accordance with the terms of the Plan, as amended and restated. An aggregate of 133 million shares of Occidental common stock were authorized for issuance and approximately 16.0 million shares had been reserved for issuance for employee awards through December 31, 2021. As of December 31, 2021, approximately 68.7 million shares were available for grants of future awards. The plan requires each share covered by an award (other than options) to be counted as if three shares were issued in determining the number of shares that are available for future awards. Accordingly, the number of shares available for future awards may be less than 68.7 million depending on the type of award granted, and shares available for future awards may increase by the number of shares that are forfeited, canceled, or correspond to the portion of any stock-based awards settled in cash, including awards that were issued under a previous plan that remain outstanding. Current outstanding awards include RSUs, stock options, CROCEI awards and TSRI awards. During 2021, non-employee directors were granted awards for 88,802 shares of common stock. Compensation expense for these awards was measured using the closing quoted market price of Occidental’s common stock on the grant date and was fully recognized at that time. Occidental incurred expenses of $287 million, $202 million and $208 million related to stock-based incentive plans in the years ended December 31, 2021, 2020, and 2019, respectively. The income tax benefit associated with this expense was $60 million, $42 million and $43 million in the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, unrecognized compensation expense for all unvested stock-based incentive awards was $225 million. This expense is expected to be recognized over a weighted-average period of 1.7 years. Occidental accounts for forfeitures as they occur. RESTRICTED STOCK UNITS Certain employees are awarded the right to receive RSUs, some of which have performance criteria, and are in the form of, or equivalent in value to, actual shares of Occidental common stock. Depending on their terms, RSUs may be settled in stock or may be cash settled liabilities. These awards vest from one to three years following the grant date. For certain RSUs, dividend equivalents are paid during the vesting period (Term). CASH-SETTLED RSU LIABILITY AWARDS The weighted-average, grant-date fair values of cash-settled RSUs granted in 2021, 2020 and 2019 were $25.83, $40.86 and $42.62 per share, respectively. Cash-settled RSUs resulted in payments of $4 million, $3 million and $4 million, during the years ended December 31, 2021, 2020 and 2019, respectively. STOCK-SETTLED RESTRICTED STOCK UNIT EQUITY AWARDS The weighted-average, grant-date fair values of the stock-settled RSUs granted in 2021, 2020, and 2019 were $25.45, $41.60 and $58.73, respectively. The fair value of RSUs settled in shares during the years ended December 31, 2021, 2020 and 2019 was $70 million, $62 million and $148 million, respectively. A summary of changes in Occidental’s unvested cash- and stock-settled RSUs during the year ended December 31, 2021, is presented below:
|  | Cash-Settled |  | Stock-Settled
thousands, except fair values |  | RSUs |  | Weighted-Average Grant-Date Fair Value |  | RSUs |  | Weighted-Average Grant-Date Fair Value
Unvested as of January 1 |  | 5,457 |  |  |  | $ | 42.41 |  |  | 5,856 |  |  |  | $ | 50.21 |
Granted |  | 190 |  |  |  | $ | 25.83 |  |  | 5,773 |  |  |  | $ | 25.45 |
Vested (a) |  | (166) |  |  |  | $ | 56.36 |  |  | (2,750) |  |  |  | $ | 53.27 |
Forfeitures |  | (106) |  |  |  | $ | 40.08 |  |  | (290) |  |  |  | $ | 35.07 |
Unvested as of December 31 |  | 5,375 |  |  |  | $ | 41.44 |  |  | 8,589 |  |  |  | $ | 33.10 |
(a)Presented at the target payouts. Stock-settled RSU weighted-average payout at vesting was 95% of the target, resulting in the issuance of approximately 2,605,000 shares of Occidental common stock. Cash-settled RSUs do not have performance criteria. TOTAL SHAREHOLDER RETURN INCENTIVE AWARDS Certain executives are awarded TSRIs that vest at the end of a three-year period following the grant date. Payout is based upon Occidental’s absolute total shareholder return and performance relative to its peers. TSRIs have payouts that range from 0% to 200% of the target award and settle in stock once certified. Dividend equivalents for TSRIs are accumulated and paid upon certification of the award. The fair value of TSRIs settled in shares during the years ended December 31, 2021, 2020 and 2019 was $4 million, $9 million and $4 million, respectively. The fair values of TSRIs are initially determined on the grant date using a Monte Carlo simulation model based on Occidental’s assumptions, noted in the following table, and the volatility from corresponding peer group companies. The expected life is based on the Term. The risk-free interest rate is the implied yield available on zero coupon Treasury notes at the time of grant with a remaining term equal to the Term. The dividend yield is the expected annual dividend yield over the Term, expressed as a percentage of the stock price on the grant date. Estimates of fair value may not accurately predict the value ultimately realized by the employees who receive the awards, and the ultimate value may not be indicative of the reasonableness of the original estimates of fair value made by Occidental. The grant-date assumptions used in the Monte Carlo simulation models for the estimated payout level of TSRIs were as follows:
|  | TSRIs
|  | 2021 |  | 2020 |  | 2019
Assumptions used: |  |  |  |  |  |
Risk-free interest rate |  | 0.2% |  | 1.4% |  | 2.5%
Volatility factor |  | 75% |  | 26% |  | 22%
Expected life (years) |  | 2.88 |  | 3 |  | 3
Grant-date fair value of underlying Occidental common stock |  | $ | 25.39 |  | $ | 41.60 |  | $ | 67.19
A summary of changes in Occidental’s unvested TSRIs during the year ended December 31, 2021 is presented below:
|  | TSRIs
thousands, except fair values |  | Awards |  | Weighted-Average Grant-Date Fair Value of Occidental Stock
Unvested as of January 1 |  | 1,534 |  |  |  | $ | 58.02 |
Granted |  | 665 |  |  |  | $ | 25.39 |
Vested (a) |  | (420) |  |  |  | $ | 69.87 |
Forfeitures |  | (10) |  |  |  | $ | 25.39 |
Unvested as of December 31 |  | 1,769 |  |  |  | $ | 43.12 |
(a)Presented at the target payouts. The weighted-average payout at vesting was 34% of the target, resulting in the issuance of approximately 145,000 shares of Occidental common stock. STOCK OPTIONS Certain employees are granted options that vest over three years, expire on the tenth anniversary of the grant date, and settle in stock. Exercise prices of the options were equal to the quoted market value of Occidental’s stock on the grant date. These options had a grant date fair value of $12.72, as estimated by the Black Scholes model. The inputs to this model are presented below:
|  | Options
|  | 2021 |
Assumptions used: |  |  |
Risk-free interest rate |  | 0.7% |
Volatility factor |  | 55% |
Expected life (years) |  | 6.00 |
Dividend yield |  | 0.16% |
Grant-date fair value of underlying Occidental common stock |  | $ | 25.39 |
A summary of Occidental’s outstanding stock options as of December 31, 2021 and changes during the year ended December 31, 2021 is presented below:
|  | Vested |  | Unvested
thousands, except fair values |  | Options | Weighted Average Strike Price |  | Options | Weighted Average Strike Price
January 1 |  | 1,326 |  | $ | 55.38 |  |  | 1,900 |  | $ | 40.03 |
Granted |  | — |  | $ | — |  |  | 440 |  | $ | 25.39 |
Vested |  | 910 |  | $ | 40.03 |  |  | (910) |  | $ | 40.03 |
December 31 |  | 2,236 |  | $ | 49.13 |  |  | 1,430 |  | $ | 35.52 |
No options were exercised during the years ended December 31, 2021, 2020 and 2019. As of December 31, 2021, the remaining life of fully vested options was 6.9 years. CASH RETURN ON CAPITAL EMPLOYED INCENTIVE AWARDS Certain executives are awarded CROCEI awards that vest at the end of a three-year period if performance targets based on CROCE are met. These awards are settled in stock upon certification of the performance target, with payouts that range from 0% to 200% of the target award. Dividend equivalents are accumulated and paid upon certification of the award. A summary of changes in Occidental’s unvested CROCEI during the year ended December 31, 2021 is presented below:
|  | CROCEI
thousands, except fair values |  | Awards |  | Weighted-Average Grant-Date Fair Value of Occidental Stock
Unvested as of January 1 |  | 197 |  |  |  | $ | 41.60 |
Granted |  | 221 |  |  |  | $ | 25.39 |
Unvested as of December 31 |  | 418 |  |  |  | $ | 33.03 |

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