Stock-Based Compensation
Stock-Based Compensation Plans
Under plans approved by our stockholders, we are authorized to grant key employees stock-based incentive awards, including options to purchase common stock, stock appreciation rights, RSUs, PSUs or other stock units.
At December 31, 2025, inclusive of the shares reserved for outstanding RSUs and PSUs, we had approximately 7.1 million shares reserved for issuance under the plans. At December 31, 2025, we had no outstanding options to purchase common stock and have not issued stock options to employees since 2012. At December 31, 2025, approximately 4.3 million of the shares reserved for issuance remained available for grant under our stock-based compensation plans. We issue new shares when restrictions on RSUs and PSUs have been satisfied. The minimum vesting period under our equity compensation plan for employees generally is one year, although most RSUs granted annually to executives and other key employees vest over three years. Award agreements may provide for vesting periods between one and three years and in certain circumstances less than one year, pro-rated vesting periods or vesting following termination of employment in the case of death, disability, divestiture, retirement, change of control or layoff. The maximum term of any award is 10 years.
During 2025, 2024 and 2023, we recorded noncash stock-based compensation expense totaling $304 million, $277 million and $265 million, which is included as a component of other unallocated, net on our consolidated statements of earnings. The net impact to earnings for the respective years was $240 million, $219 million and $209 million.
As of December 31, 2025, we had $349 million of unrecognized compensation cost related to nonvested awards, which is expected to be recognized over a weighted average period of 1.8 years. We had no stock options outstanding or exercised during 2025, 2024, or 2023, and accordingly received zero cash from option exercises in those three years. In addition, our income tax liabilities for 2025, 2024 and 2023 were reduced by $70 million, $67 million and $78 million due to recognized tax benefits on stock-based compensation arrangements.
Restricted Stock Units
The following table summarizes activity related to nonvested RSUs: | | | | | | | | | | | | | | | | | | | | |
| | Number
of RSUs
(In thousands) | | Weighted Average
Grant-Date Fair
Value Per Share |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Nonvested at December 31, 2024 | | 982 | | | | $ | 434.01 | | |
| Granted | | 982 | | | | 437.95 | | |
| Vested | | (516) | | | | 415.73 | | |
| Forfeited | | (83) | | | | 442.15 | | |
| Nonvested at December 31, 2025 | | 1,365 | | | | $ | 443.26 | | |
| | | | | | |
In 2025, we granted certain employees approximately 0.9 million RSUs with a weighted average grant-date fair value of $437.95 per RSU. The grant-date fair value of these RSUs is equal to the closing market price of our common stock on the grant date less a discount to reflect the delay in payment of dividend-equivalent cash payments that are made only upon vesting, which occurs at least one year from the grant date and most often occurs three years from the grant date.
Performance Stock Units
In 2025, we granted certain employees PSUs with an aggregate target award of approximately 0.1 million shares of our common stock. The PSUs generally vest three years from the grant date based on continuous service, with the number of shares earned (0% to 200% of the target award) depending upon the extent to which we achieve certain financial and market performance targets measured over the period from January 1, 2025 through December 31, 2027. About half of the PSUs were valued at a weighted average grant-date fair value of $439.42 per PSU in a manner similar to RSUs mentioned above as the financial targets are based on our operating results. The remaining PSUs were valued at a weighted-average grant-date fair value of $453.06 per PSU using a Monte Carlo model as the performance target is related to our total shareholder return relative to our peer group. We recognize the grant-date fair value of these awards, less estimated forfeitures, as compensation expense ratably over the vesting period.