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Share-Based Compensation | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation | SHARE-BASED COMPENSATION Share-based compensation expense was $141 million in 2023 ($107 million and $128 million in 2022 and 2021, respectively). The related income tax benefit recognized was $88 million in 2023 ($64 million and $64 million in 2022 and 2021, respectively). The expense was primarily recorded in selling, general and administrative expenses and no share-based compensation expense was capitalized. Summary of Plans The 2021 Linde plc Long Term Incentive Plan (the “2021 Plan") was adopted by the Board of Directors and shareholders of Linde plc on July 26, 2021. The 2021 Plan permits awards of stock options, stock appreciation rights, restricted stock and restricted stock units, performance-based stock units and other equity awards to eligible officer and non-officer employees and non-employee directors of the company and its affiliates. As of December 31, 2023, 7,661,431 shares remained available for equity grants under the 2021 Plan, of which 2,452,443 shares may be granted as awards other than options or stock appreciation rights. Exercise prices for options granted under the 2021 Plan may not be less than the closing market price of the company’s ordinary shares on the date of grant and granted options may not be re-priced or exchanged without shareholder approval. Options granted under the 2021 Plan subject only to time vesting requirements may become partially exercisable after a minimum of one year after the date of grant but may not become fully exercisable until at least three years have elapsed from the date of grant, and all options have a maximum duration of ten years. In order to satisfy option exercises and other equity grants, the company may issue authorized but previously unissued shares or it may issue treasury shares. Stock Option Fair Value The company utilizes the Black-Scholes Options-Pricing Model to determine the fair value of stock options consistent with that used in prior years. Management is required to make certain assumptions with respect to selected model inputs, including anticipated changes in the underlying stock price (i.e., expected volatility) and option exercise activity (i.e., expected life). Expected volatility is based on the historical volatility of the company’s stock over the most recent period commensurate with the estimated expected life of the company’s stock options and other factors. The expected life of options granted, which represents the period of time that the options are expected to be outstanding, is based primarily on historical exercise experience. The expected dividend yield is based on the company’s most recent history and expectation of dividend payouts. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period commensurate with the estimated expected life. If factors change and result in different assumptions in future periods, the stock option expense that the company records for future grants may differ significantly from what the company has recorded in the current period. The weighted-average fair value of options granted during 2023 was $83.69 ($45.07 in 2022 and $37.80 in 2021) based on the Black-Scholes Options-Pricing model. The increase in the grant date fair value year-over-year is primarily attributable to the increase in the stock price. The following weighted-average assumptions were used to value the grants in 2023, 2022 and 2021:
Year Ended December 31, | 2023 |  | 2022 |  | 2021
Dividend yield | 1.4 | % |  | 1.7 | % |  | 1.7 | %
Volatility | 22.0 | % |  | 20.6 | % |  | 18.4 | %
Risk-free interest rate | 4.23 | % |  | 1.70 | % |  | 1.10 | %
Expected term years | 5 |  | 5 |  | 6
The following table summarizes option activity under the plans as of December 31, 2023 and changes during the period then ended (averages are calculated on a weighted basis; life in years; intrinsic value expressed in millions):
Activity | Number of Options (000’s) |  | Average Exercise Price |  | Average Remaining Life |  | Aggregate Intrinsic Value
Outstanding at January 1, 2023 | 6,720 |  |  | $ | 164.03 |  |  |  |  |
Granted | 361 |  |  | 354.16 |  |  |  |  |
Exercised | (1,225) |  |  | 137.78 |  |  |  |  |
Cancelled or expired | (31) |  |  | 311.86 |  |  |  |  |
Outstanding at December 31, 2023 | 5,825 |  |  | $ | 180.58 |  |  | 5.0 |  | $ | 1,341 |
Exercisable at December 31, 2023 | 4,926 |  |  | $ | 159.18 |  |  | 4.4 |  | $ | 1,239 |
The aggregate intrinsic value represents the difference between the company’s closing stock price of $410.71 as of December 31, 2023 and the exercise price multiplied by the number of in the money options outstanding as of that date. The total intrinsic value of stock options exercised during 2023 was $283 million ($176 million and $294 million in 2022 and 2021, respectively). Cash received from option exercises under all share-based payment arrangements for 2023 was $33 million ($36 million and $50 million in 2022 and 2021, respectively). The cash tax benefit realized from share-based compensation totaled $86 million for 2023 ($61 million and $64 million cash tax benefit in 2022 and 2021, respectively). As of December 31, 2023, $17 million of unrecognized compensation cost related to non-vested stock options is expected to be recognized over a weighted-average period of approximately 1 year. Performance-Based and Restricted Stock Unit Awards In 2023, the company granted 341,915 performance-based stock unit awards under the 2021 Plan to senior management that vest, subject to the attainment of pre-established minimum performance criteria, principally on the third anniversary of their date of grant. These awards are tied to either after tax return on capital ("ROC") performance or relative total shareholder return ("TSR") performance versus that of a blended group of companies that is comprised of the S&P 500, excluding the Financial sector, and Eurofirst 300. The actual number of shares issued in settlement of a vested award can range from zero to 200 percent of the target number of shares granted based upon the company’s attainment of specified performance targets at the end of a three-year period. Compensation expense related to these awards is recognized over the three-year performance period based on the fair value of the closing market price of the company’s ordinary shares on the date of the grant and the estimated performance that will be achieved. Compensation expense for ROC awards will be adjusted during the three-year performance period based upon the estimated performance levels that will be achieved. TSR awards are measured at their grant date fair value and not subsequently re-measured. The number of performance-based stock unit awards granted in 2023 includes an increase of 201,120 stock units to the target number of performance-based awards originally granted in 2020, as these awards achieved a higher payout factor upon completion of the three-year performance period. The weighted-average fair value of ROC awards granted in 2023 was $340.80 ($257.63 in 2022 and $241.10 in 2021). These fair values are based on the closing market price of Linde's ordinary shares on the grant date adjusted for dividends that will not be paid during the vesting period. The weighted-average fair value of TSR awards granted in 2023 was $489.33 ($301.42 in 2022 and $301.04 in 2021) and was estimated using a Monte Carlo simulation performed as of the grant date. There were 160,839 restricted stock units granted to employees by Linde during 2023. The weighted-average fair value of restricted stock units granted during 2023 was $332.69 ($260.27 in 2022 and $242.60 in 2021). These fair values are based on the closing market price of Linde's ordinary shares on the grant date adjusted for dividends that will not be paid during the vesting period. Compensation expense related to the restricted stock units is recognized over the vesting period. The following table summarizes non-vested performance-based and restricted stock unit award activity as of December 31, 2023 and changes during the period then ended (shares based on target amounts, averages are calculated on a weighted basis):
| Performance-Based |  | Restricted Stock
| Number of Shares (000’s) |  | Average Grant Date Fair Value |  | Number of Shares (000’s) |  | Average Grant Date Fair Value
Non-vested at January 1, 2023 | 583 |  |  | $ | 226.04 |  |  | 646 |  |  | $ | 190.33 |
Granted | 342 |  |  | 385.10 |  |  | 161 |  |  | 332.69 |
Vested | (340) |  |  | 174.99 |  |  | (154) |  |  | 176.06 |
Cancelled and Forfeited | (13) |  |  | 156.14 |  |  | (15) |  |  | 163.12 |
Non-vested at December 31, 2023 | 572 |  |  | $ | 281.11 |  |  | 638 |  |  | $ | 232.15 |
There are approximately 11 thousand performance-based stock units and 17 thousand restricted stock units that are non-vested at December 31, 2023 which will be settled in cash due to foreign regulatory limitations. The liability related to these grants reflects the current estimate of performance that will be achieved and the current share price. As of December 31, 2023, $48 million of unrecognized compensation cost related to performance-based awards and $42 million of unrecognized compensation cost related to the restricted stock unit awards is expected to be recognized primarily through the first quarter of 2026.

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