Stock-Based Compensation Plans

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION PLANS

Stock Options

Beginning January 1, 2022, the Corporation no longer grants stock options. Existing options to purchase common shares of the Corporation are exercisable for a period of 10 years from the grant date, expire no later than three years after the death or retirement of the optionee, and vest evenly over a four-year period on each anniversary of the grant date. Compensation expense related to stock options was measured at the grant date using the Black-Scholes fair value option-pricing model with each grant amortized to compensation expense evenly over the four-year vesting period, with the offsetting entry to additional paid-in capital. Fortis satisfies stock option exercises by issuing common shares from treasury. Upon exercise, proceeds are credited to capital stock at the option prices and the fair value of the options, as previously recognized, is reclassified from additional paid-in capital to capital stock.

As at December 31, 2023, the Corporation had 1.9 million stock options outstanding (2022 - 2.3 million) with a weighted average exercise price of $48.12 (2022 - $47.72). There were 1.6 million options vested as of December 31, 2023 (2022 – 1.5 million) with a weighted average exercise price of $47.19 (2022 - $44.86).

In 2023, 0.3 million stock options were exercised (2022 - 1 million) for cash proceeds of $13 million (2022 - $26 million) and an intrinsic value realized by employees of $6 million (2022 - $9 million).

DSU Plan

Directors of the Corporation who are not officers are eligible for grants of DSUs representing the equity portion of their annual compensation. Directors can further elect to receive credit for their quarterly cash retainer in a notional account of DSUs in lieu of cash. The Corporation may also determine that special circumstances justify the grant of additional DSUs to a director.

Each DSU vests at the grant date, has an underlying value equivalent to that of one common share of the Corporation, is entitled to commensurate notional common share dividends, and is settled in cash.

The following table summarizes information related to DSUs.


	2023	2022
Number of units (thousands)
Beginning of year	224	183
Granted	40	33
Notional dividends reinvested	10	8
Paid out	(33)	—
End of year	241	224

The accrued liability has been recognized at the respective December 31st VWAP (Note 3) and included in other liabilities (Note 16). The accrued liability, compensation expense and cash payout were not material for 2023 or 2022.

PSU Plans

Senior management of the Corporation and its subsidiaries, and all ITC employees, are eligible for grants of PSUs representing a component of their long-term compensation.

Each PSU vests over a three-year period, has an underlying value equivalent to that of one common share of the Corporation, is entitled to commensurate notional common share dividends, and is settled in cash. At the end of the three-year vesting period, cash payouts are the product of: (i) the number of units vested; (ii) the VWAP of the Corporation's common shares for the five trading days prior to the vesting date; and (iii) a payout percentage that may range from 0% to 200%.

The payout percentage is based on the Corporation's performance over the three-year vesting period, mainly determined by: (i) the Corporation's total shareholder return as compared to a predefined peer group of companies; and (ii) the Corporation's cumulative EPS, or for subsidiaries the company's cumulative net income, as compared to the target established at the time of the grant. Beginning with the 2022 PSU grant, the Corporation's Scope 1 carbon reduction performance as compared to target has been included in the payout percentage, and the 2023 PSU grant included a payout modifier based on the achievement of diversity, equity and inclusion goals.

The following table summarizes information related to PSUs.


	2023	2022
Number of units (thousands)
Beginning of year	1,790	1,898
Granted	722	580
Notional dividends reinvested	66	58
Paid out	(606)	(712)
Cancelled/forfeited	(30)	(34)
End of year	1,942	1,790

Additional information ($ millions)
Compensation expense recognized	45	25
Compensation expense unrecognized (1)	28	24
Cash payout	46	66
Accrued liability as at December 31 (2)	90	90
Aggregate intrinsic value as at December 31 (3)	118	114

(1) Relates to unvested PSUs and is expected to be recognized over a weighted average period of two years

(2) Recognized at the respective December 31st VWAP and included in accounts payable and other current liabilities and in other liabilities (Notes 13 and 16)

(3) Relates to outstanding PSUs and reflects a weighted average contractual life of one year

RSU Plans

Senior management of the Corporation and its subsidiaries, and all ITC employees, are eligible for grants of RSUs representing a component of their long-term compensation.

Each RSU vests over a three-year period, has an underlying value equivalent to that of one common share of the Corporation, is entitled to commensurate notional common share dividends, and is settled in cash or common shares of the Corporation.

The following table summarizes information related to RSUs.


	2023	2022
Number of units (thousands)
Beginning of year	977	1,060
Granted	416	331
Notional dividends reinvested	35	29
Paid out	(323)	(410)
Cancelled/forfeited	(26)	(33)
End of year	1,079	977

Additional information ($ millions)
Compensation expense recognized	21	16
Compensation expense unrecognized (1)	17	16
Cash payout	17	25
Accrued liability as at December 31 (2)	42	40
Aggregate intrinsic value as at December 31 (3)	59	56

(1) Relates to unvested RSUs and is expected to be recognized over a weighted average period of two years

(2) Recognized at the respective December 31st VWAP and included in accounts payable and other current liabilities and in long-term other liabilities (Notes 13 and 16)

(3) Relates to outstanding RSUs and reflects a weighted average contractual life of one year