HERSHEY COHSY
HERSHEY CO Stock Compensation Disclosure
STOCK COMPENSATION PLANS
Share-based grants for compensation and incentive purposes are made pursuant to the Equity and Incentive Compensation Plan (“EICP”). The EICP provides for grants of one or more of the following stock-based compensation awards to employees, non-employee directors, and certain service providers upon whom the successful conduct of our business is dependent:
•Non-qualified stock options (“stock options”);
•Performance stock units (“PSUs”) and performance stock;
•Stock appreciation rights;
•Restricted stock units (“RSUs”) and restricted stock; and
•Other stock-based awards.
As of December 31, 2025, 68.5 million shares were authorized and approved by our stockholders for grants under the EICP. The EICP also provides for the deferral of stock-based compensation awards by participants if approved by the Compensation and Human Capital Committee of our Board and if in accordance with an applicable deferred compensation plan of the Company. Currently, the Compensation and Human Capital Committee has authorized the deferral of PSU and RSU awards by certain eligible employees under the Company’s Deferred Compensation Plan. Our Board has authorized our non-employee directors to defer any portion of their cash retainer, committee chair fees and RSUs awarded that they elect to convert into deferred stock units under our Directors’ Compensation Plan.
At the time stock options are exercised or PSUs and RSUs become payable, Common Stock is issued from our accumulated treasury shares. Dividend equivalents are credited on RSUs on the same date and at the same rate as dividends paid on our Common Stock. Dividend equivalents are charged to retained earnings and included in accrued liabilities until paid.
Awards to employees eligible for retirement prior to the award becoming fully vested are amortized to expense over the period through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn the award. In addition, historical data is used to estimate forfeiture rates and record share-based compensation expense only for those awards that are expected to vest.
For the periods presented, compensation expense for all types of stock-based compensation programs and the related income tax benefit recognized were as follows:
| For the years ended December 31, | 2025 | 2024 | 2023 | |||||||||||||||||
Pre-tax compensation expense | $ | 65,460 | $ | 44,414 | $ | 81,021 | ||||||||||||||
| Related income tax benefit | 17,870 | 5,418 | 11,910 | |||||||||||||||||
Compensation expenses for stock compensation plans are primarily included in SM&A expense. As of December 31, 2025, total stock-based compensation expense related to non-vested awards not yet recognized was $86,660 and the weighted-average period over which this amount is expected to be recognized was approximately 1.9 years.
Stock Options
The exercise price of each stock option awarded under the EICP equals the closing price of our Common Stock on the New York Stock Exchange on the date of grant. Each stock option has a maximum term of 10 years. Grants of stock options provide for pro-rated vesting, typically over a four-year period. Expense for stock options is based on grant date fair value and recognized on a straight-line method over the vesting period, net of estimated forfeitures.
A summary of activity relating to grants of stock options for the year ended December 31, 2025 is as follows:
| Stock Options | Shares | Weighted-Average Exercise Price (per share) | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||
Outstanding at beginning of the period | 579,834 | $106.73 | 2.7 years | |||||||||||
| Granted | 5,165 | $164.16 | ||||||||||||
Exercised | (213,231) | $101.60 | ||||||||||||
| Forfeited | (1,475) | $164.16 | ||||||||||||
| Expired | (1,733) | $99.90 | ||||||||||||
Outstanding as of December 31, 2025 | 368,560 | $110.30 | 2.2 years | $ | 26,832 | |||||||||
Options exercisable as of December 31, 2025 | 359,411 | $108.12 | 2.0 years | $ | 26,766 | |||||||||
The weighted-average fair value of options granted was $33.91, $45.95 and $57.65 per share in 2025, 2024 and 2023, respectively. The fair value was estimated on the date of grant using a Black-Scholes option-pricing model and the following weighted-average assumptions:
| For the years ended December 31, | 2025 | 2024 | 2023 | |||||||||||||||||
Dividend yields | 3.0 | % | 2.0 | % | 1.7 | % | ||||||||||||||
| Expected volatility | 22.3 | % | 21.3 | % | 20.9 | % | ||||||||||||||
Risk-free interest rates | 4.2 | % | 4.3 | % | 4.1 | % | ||||||||||||||
| Expected term in years | 6.3 | 6.3 | 6.3 | |||||||||||||||||
•“Dividend yields” means the sum of dividends declared for the four most recent quarterly periods, divided by the average price of our Common Stock for the comparable periods;
•“Expected volatility” means the historical volatility of our Common Stock over the expected term of each grant;
•“Risk-free interest rates” means the U.S. Treasury yield curve rate in effect at the time of grant for periods within the contractual life of the stock option; and
•“Expected term” means the period of time that stock options granted are expected to be outstanding based on historical data.
The total intrinsic value of options exercised was $15,991, $14,018 and $35,474 in 2025, 2024 and 2023, respectively.
As of December 31, 2025, there was $398 of total unrecognized compensation expense related to non-vested stock option awards granted under the EICP, which we expect to recognize over a weighted-average period of 1.1 years.
The following table summarizes information about stock options outstanding as of December 31, 2025:
| Options Outstanding | Options Exercisable | |||||||||||||||||||||||||||||||
| Range of Exercise Prices | Number Outstanding as of 12/31/25 | Weighted-Average Remaining Contractual Life in Years | Weighted-Average Exercise Price | Number Exercisable as of 12/31/25 | Weighted-Average Exercise Price | |||||||||||||||||||||||||||
$60.68 - $99.90 | 231,296 | 1.8 | $98.61 | 231,296 | $98.61 | |||||||||||||||||||||||||||
$99.91 - $107.95 | 84,818 | 1.2 | $107.91 | 84,818 | $107.91 | |||||||||||||||||||||||||||
$107.96 - $240.90 | 52,446 | 5.3 | $165.72 | 43,297 | $159.33 | |||||||||||||||||||||||||||
$60.68 - $240.90 | 368,560 | 2.2 | $110.30 | 359,411 | $108.12 | |||||||||||||||||||||||||||
Performance Stock Units and Restricted Stock Units
Under the EICP, we grant PSUs to selected executives and other key employees. Vesting is contingent upon the achievement of certain performance objectives. We grant PSUs over three-year performance cycles. If we meet targets for financial measures at the end of the applicable three-year performance cycle, we award a resulting number of shares of our Common Stock to the participants. The number of shares may be increased to the maximum or reduced to the minimum threshold based on the results of these performance metrics in accordance with the terms established at the time of the award.
For PSUs granted, the target award is a combination of a market-based total shareholder return and performance-based components. For market-based condition components, market volatility and other factors are taken into consideration in determining the grant date fair value and the related compensation expense is recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided. For performance-based condition components, we estimate the probability that the performance conditions will be achieved each quarter and adjust compensation expenses accordingly. The performance scores of PSUs granted in 2025, 2024, and 2023 can range from 0% to 250% of the targeted amounts.
We recognize the compensation expense associated with PSUs ratably over the three-year term. Compensation expense is based on the grant date fair value because the grants can only be settled in shares of our Common Stock. The grant date fair value of PSUs is determined based on the Monte Carlo simulation model for the market-based total shareholder return component and the closing market price of the Company’s Common Stock on the date of grant for performance-based components.
In 2025, 2024 and 2023, we awarded RSUs to certain executive officers and other key employees under the EICP. We also awarded RSUs quarterly to non-employee directors.
We recognize the compensation expense associated with employee RSUs over a specified award vesting period based on the grant date fair value of our Common Stock. We recognize expense for employee RSUs based on the straight-line method. The compensation expense associated with non-employee director RSUs is recognized ratably over the vesting period, net of estimated forfeitures.
A summary of activity relating to grants of PSUs and RSUs for the period ended December 31, 2025 is as follows:
| Performance Stock Units and Restricted Stock Units | Number of units | Weighted-average grant date fair value for equity awards (per unit) | ||||||||||||
Outstanding at beginning of year | 538,803 | $204.65 | ||||||||||||
Granted | 665,478 | $169.55 | ||||||||||||
| Performance assumption change (1) | 301,365 | $237.31 | ||||||||||||
Vested | (345,608) | $204.89 | ||||||||||||
Forfeited | (121,144) | $195.34 | ||||||||||||
Outstanding at end of year | 1,038,893 | $192.64 | ||||||||||||
(1)Reflects the net number of PSUs above and below target levels based on the performance metrics.
The following table sets forth information about the fair value of the PSUs and RSUs granted for potential future distribution to employees and non-employee directors. In addition, the table provides weighted average assumptions used to determine the fair value of the market-based total shareholder return component using the Monte Carlo simulation model on the date of grant.
| For the years ended December 31, | 2025 | 2024 | 2023 | |||||||||||||||||
Units granted | 665,478 | 392,046 | 341,374 | |||||||||||||||||
Weighted-average fair value at date of grant | $ | 169.55 | $ | 194.43 | $ | 241.41 | ||||||||||||||
Monte Carlo simulation assumptions: | ||||||||||||||||||||
Estimated values | $ | 110.81 | $ | 84.13 | $ | 118.90 | ||||||||||||||
Dividend yields | 3.2 | % | 2.8 | % | 1.7 | % | ||||||||||||||
Expected volatility | 22.2 | % | 18.5 | % | 19.2 | % | ||||||||||||||
•“Estimated values” means the fair value for the market-based total shareholder return component of each PSU at the date of grant using a Monte Carlo simulation model;
•“Dividend yields” means the sum of dividends declared for the four most recently quarterly periods, divided by the average price of our Common Stock for the comparable periods;
•“Expected volatility” means the historical volatility of our Common Stock over the expected term of each grant.
The fair value of shares vested totaled $58,635, $96,946 and $106,243 in 2025, 2024 and 2023, respectively.
Deferred PSUs, deferred RSUs, and deferred stock units representing directors’ fees totaled 241,384 units as of December 31, 2025. Each unit is equivalent to one share of the Company’s Common Stock.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 17, 2023 | |
| 2021 | Feb 18, 2022 | |
| 2020 | Feb 17, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 21, 2017 | |
| 2015 | Feb 26, 2016 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.