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Stock-Based Compensation | 3 Months Ended
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Mar. 31, 2024
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation The Company’s stock-based compensation includes stock options, restricted stock units (“RSUs”) and grants of contingent shares that are earned based on achieving targeted levels of total shareholder return ("TSR"). All current grants of stock options, RSUs and contingent shares are made under the PPG Industries, Inc. Amended and Restated Omnibus Incentive Plan (“PPG Amended Omnibus Plan”), which was amended and restated effective April 21, 2016.
| Three Months Ended March 31 |  |
($ in millions) | 2024 |  | 2023 |  |  |  |
Stock-based compensation expense | $12 |  |  | $17 |  |  |  |  |
Income tax benefit recognized | $2 |  |  | $4 |  |  |  |  |
Grants of stock-based compensation during the three months ended March 31, 2024 and 2023 were as follows:
| Three Months Ended March 31
| 2024 |  | 2023
| Shares |  | Fair Value |  | Shares |  | Fair Value
Stock options | 426,939 |  |  | $43.83 |  |  | 410,001 |  |  | $38.55 |
Restricted stock units | 207,370 |  |  | $137.83 |  |  | 248,949 |  |  | $124.44 |
Contingent shares (a) | 51,543 |  |  | $142.65 |  |  | 52,389 |  |  | $129.03 |
(a)The number of contingent shares represents the target value of the award. Stock options are generally exercisable 36 months after being granted and have a maximum term of 10 years. Compensation expense for stock options is recorded over the vesting period based on the fair value on the date of grant. The fair value of the stock options granted during the three months ended March 31, 2024 was calculated with the following weighted average assumptions:
Weighted average exercise price | $142.65
Risk-free interest rate | 4.3 | %
Expected life of option in years | 6.5
Expected dividend yield | 1.7 | %
Expected volatility | 28.4 | %
The risk-free interest rate is determined by using the U.S. Treasury yield curve at the date of the grant and using a maturity equal to the expected life of the option. The expected life of options is calculated using the average of the vesting term and the maximum term, as prescribed by accounting guidance on the use of the simplified method for determining the expected term of an employee share option. The expected dividend yield and volatility are based on historical stock prices and dividend amounts over past time periods equal in length to the expected life of the options. Time-based RSUs generally vest over the three-year period following the date of grant, unless forfeited, and will be paid out in the form of stock, cash or a combination of both at the Company’s discretion at the end of the vesting period. Performance-based RSUs vest based on achieving specific annual performance targets for adjusted earnings per share growth and cash flow return on capital over the three calendar year-end periods following the date of grant. Unless forfeited, the performance-based RSUs will be paid out in the form of stock, cash or a combination of both at the Company’s discretion at the end of the three-year performance period if PPG meets the performance targets. The amount paid upon vesting of performance-based RSUs may range from 0% to 200% of the original grant, based upon the level of adjusted earnings per share growth achieved and frequency with which the annual cash flow return on capital performance target is met over the three calendar year periods comprising the vesting period. Performance against the earnings per share growth and the cash flow return on capital target is calculated annually, and the annual payout for each goal is weighted equally over the three-year period. The Company also provides grants of contingent shares to selected key executives that may be earned based on PPG's TSR over the three-year period following the date of grant. Contingent share grants (referred to as “TSR awards”) are made annually and are paid out at the end of each three-year period based on the Company’s stock performance. Performance is measured by determining the percentile rank of the total shareholder return of PPG common stock in relation to the TSR of the S&P 500 Index for the three-year period following the date of grant. This comparison group represents the entire S&P 500 Index as it existed at the beginning of the performance period, excluding any companies that were removed from the index because they ceased to be publicly traded. The payment of awards following the three-year award period is based on performance achieved in accordance with the scale set forth in the plan agreement and may range from 0% to 200% of the initial grant. A payout of 100% is earned if target performance is achieved. Contingent share awards earn dividend equivalents for the award period, which are paid to participants or credited to the participants’ deferred compensation plan accounts with the award payout at the end of the period based on the actual number of contingent shares that are earned. Any payments made at the end of the award period may be in the form of stock, cash or a combination of both. The TSR awards are classified as liability awards, and compensation expense is recognized over the three-year award period based on the fair value of the awards (giving consideration to the Company’s percentile rank of TSR) remeasured in each reporting period until settlement of the awards.

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