INTERNATIONAL PAPER CO /NEW/IP
INTERNATIONAL PAPER CO /NEW/ Stock Compensation Disclosure
INCENTIVE PLANS
On February 13, 2024, the Company's Board of Directors, upon recommendation of the Management Development
and Compensation Committee (the "MDCC"), authorized adoption of a 2024 Long-Term Incentive Compensation
Plan (the "2024 LTICP") to replace the 2009 Amended and Restated Incentive Compensation Plan (the "2009
Plan"). The 2024 LTICP became effective following approval by shareholders at the May 13, 2024 annual meeting
and replaced the 2009 Plan. The 2024 LTICP authorized up to 9,250,000 shares of our Class A common stock, par
value $1.00 per share, available for future grants in the form of restricted stock, restricted or deferred stock units,
performance awards payable in cash or stock upon the attainment of specified performance goals, dividend
equivalents, options, stock appreciation rights, other stock-based awards and cash-based awards at the discretion
of the Committee. Shares for which payment is in cash, including the shares withheld to cover associate payroll
taxes, as well as shares that expire, terminate, or are canceled or forfeited, may be awarded or granted again under
the LTICP. The LTICP is administered by the Committee.
Additionally, non-employee members of our Board of Directors receive grants of restricted stock for RSUs, under
the Company's Restricted Stock and Deferred Compensation Plan for Non-Employee Directors, a subplan of the
2024 LTICP.
Performance Stock Units
PSU awards are earned over a three-year period based on the achievement of pre-established performance goals.
The 2023-2025 and 2024-2026 Awards are weighted at 50% Return on Invested Capital ("ROIC") and 50% relative
Total Shareholder Return ("TSR") for all participants. The 2025-2027 Awards are weighted 100% relative TSR for all
participants. The ROIC component of the PSU awards is valued at the 20-trading day average closing price
immediately prior to the grant date. As the ROIC component contains a performance condition, compensation
expense, net of estimated forfeitures, is recorded over the requisite service period based on the most probable
number of awards expected to vest. The TSR component of the PSU awards is valued using the same methodology
as the RSUs but then adjusted using a factor derived from a Monte Carlo simulation as the TSR component
contains a market condition. The Monte Carlo simulation estimates the fair value of the TSR component based on
the expected term of the award, a risk-free rate, expected dividends, and the expected volatility for the Company
and its competitors. The expected term is estimated based on the vesting period of the awards, the risk-free rate is
based on the yield on U.S. Treasury securities matching the vesting period, and the volatility is based on the
Company’s historical volatility over the expected term. PSUs are payable in cash or shares at the Company's
discretion.
Restricted Stock Units
Time-based RSU awards granted under the LTIP are expected to vest in three equal installments commencing on
February 1st following the first anniversary of the grant date over a 3-year service period, subject to forfeiture and
transfer restrictions. RSUs are payable in cash or shares at the Company’s discretion.
Generally, the requisite service period is the vesting period. In the case of retirement (eligibility for which is based on
the associate's age and years of service as provided in the relevant award agreement), awards vest pro-rata based
on length of service during the award period, subject to continued employment and paid upon termination.
Dividend equivalents are generally accrued on PSUs and RSUs outstanding as of the record date. These dividend
equivalents are paid only on PSUs and RSUs that ultimately vest.
RSU’s granted to non-employee directors vest annually and are restricted through January 1 following the year in
which the non-employee director terminates service as a non-employee director. RSUs awarded to non-employee
directors settle in cash.
Restricted Stock
Restricted stock granted to non-employee directors vests annually following the one-year period beginning on the
date of the Annual Meeting of Shareowners and ending on the last business day immediately preceding the next
Annual Meeting of Shareowners. Restricted stock awarded to non-employee directors settle in shares.
The following table sets forth the assumptions used to determine compensation cost for the market condition
component of the LTIP plan:
Twelve Months Ended December 31, 2025 | |
Expected volatility | 27.09% - 37.11% |
Risk-free interest rate | 3.65% - 4.79% |
The following summarizes LTIP activity for the three years ended December 31, 2025:
Share/Units | Weighted Average Grant Date Fair Value | |
Outstanding at December 31, 2022 | 5,312,480 | $38.01 |
Granted - LTIP PSU | 1,619,481 | 37.78 |
Granted - LTIP RSU | 1,411,042 | 34.63 |
Shares issued - LTIP PSU | (972,563) | 40.44 |
Shares issued - LTIP RSU | (15,161) | 34.63 |
Forfeited | (1,234,328) | 45.38 |
Outstanding at December 31, 2023 | 6,120,951 | 35.31 |
Granted - LTIP PSU | 2,039,725 | 35.28 |
Granted - LTIP RSU | 1,414,316 | 36.15 |
Shares issued - LTIP PSU | (851,962) | 53.32 |
Shares issued - LTIP RSU | (446,582) | 34.63 |
Shares issued - LTIP RSU | (8,060) | 36.15 |
Forfeited | (1,350,063) | 45.58 |
Outstanding at December 31, 2024 | 6,918,325 | 31.29 |
Granted - LTIP PSU | 1,077,442 | 66.41 |
Granted - LTIP RSU | 928,481 | 54.16 |
Shares issued - LTIP PSU | (1,603,095) | 50.88 |
Shares issued - LTIP RSU | (958,536) | 36.02 |
Forfeited | (949,441) | 45.37 |
Outstanding at December 31, 2025 | 5,413,176 | $43.18 |
RECOGNITION AWARD PROGRAM
The Recognition Award Program ("RA Program") is time-based and designed for recruitment, retention and special
recognition purposes. It provides for awards of RSUs to key employees.
The following summarizes the activity of the RA Program for the three years ended December 31, 2025:
Shares | Weighted Average Grant Date Fair Value | |
Outstanding at December 31, 2022 | 126,392 | $46.88 |
Granted | 123,454 | 35.51 |
Shares issued | (81,629) | 45.40 |
Forfeited | (11,643) | 39.77 |
Outstanding at December 31, 2023 | 156,574 | 39.22 |
Granted | 115,200 | 43.26 |
Shares issued | (85,236) | 37.53 |
Forfeited | (6,700) | 38.30 |
Outstanding at December 31, 2024 | 179,838 | 42.64 |
Granted | 308,863 | 53.74 |
Shares issued | (124,004) | 47.39 |
Forfeited | (17,962) | 48.05 |
Outstanding at December 31, 2025 | 346,735 | $49.31 |
At December 31, 2025, 2024 and 2023 a total of 7.1 million, 9.1 million and 5.5 million shares, respectively, were
available for grant under the LTICP.
Stock-based compensation expense and related income tax benefits were as follows:
In millions | 2025 | 2024 | 2023 |
Total stock-based compensation expense (included in selling and administrative expense) | $93 | $77 | $53 |
Income tax benefits related to stock-based compensation | 35 | 13 | 11 |
At December 31, 2025, $70 million of compensation cost, net of estimated forfeitures, related to unvested restricted
stock unit awards, performance stock unit awards and restricted stock attributable to future performance had not yet
been recognized. This amount will be recognized in expense over a weighted-average period of 1.5 years.
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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.