PPL CorpPPL
PPL Corp Stock Compensation Disclosure
(PPL and PPL Electric)
Under the SIP and the ICPKE (together, the Plans), restricted shares of PPL common stock, restricted stock units, performance units and stock options may be granted to officers and other key employees of PPL, PPL Electric and other affiliated companies. Awards under the Plans are made by the Compensation Committee of the PPL Board of Directors, in the case of the SIP, and by the PPL Corporate Leadership Council (CLC), in the case of the ICPKE.
The following table details the award limits under each of the Plans.
| Total Plan | Annual Grant Limit Total As % of Outstanding | Annual Grant | Annual Grant Limit For Individual Participants - Performance Based Awards | |||||||||||||||||||||||||||||
| Award Limit | PPL Common Stock On First Day of | Limit Options | For awards denominated in | For awards denominated in | ||||||||||||||||||||||||||||
| Plan | (Shares) | Each Calendar Year | (Shares) | shares (Shares) | cash (in dollars) | |||||||||||||||||||||||||||
| SIP | 15,000,000 | 2,000,000 | 750,000 | $ | 15,000,000 | |||||||||||||||||||||||||||
| ICPKE | 14,199,796 | 2 | % | 3,000,000 | ||||||||||||||||||||||||||||
Any portion of these awards that has not been granted may be carried over and used in any subsequent year. If any award lapses, the rights of the participant terminate, or, with respect to certain awards, is forfeited, and the shares of PPL common stock underlying such an award are again available for grant. Shares delivered under the Plans may be in the form of authorized
and unissued PPL common stock, common stock held in treasury by PPL or PPL common stock purchased on the open market (including private purchases) in accordance with applicable securities laws.
Restricted Stock Units
Restricted stock units represent the right to receive shares of PPL common stock in the future, generally three years after the date of grant, in an amount based on the fair value of PPL common stock on the date of grant.
Under the SIP, each restricted stock unit entitles the grant recipient to accrue additional restricted stock units equal to the amount of quarterly dividends paid on PPL stock. These additional restricted stock units are deferred and payable in shares of PPL common stock at the end of the restriction period. Dividend equivalents on restricted stock unit awards granted under the ICPKE are currently paid in cash when dividends are declared by PPL.
The fair value of restricted stock units granted is recognized on a straight-line basis over the restriction period or through the date at which the employee reaches retirement eligibility. The fair value of restricted stock units granted to retirement-eligible employees is recognized as compensation expense immediately upon the date of grant. Recipients of restricted stock units granted under the ICPKE may also be granted the right to receive dividend equivalents through the end of the restriction period or until the award is forfeited. Restricted stock units are subject to forfeiture or accelerated payout under the plan provisions for termination, retirement, disability and death of employees. Restrictions lapse on restricted stock units fully, in certain situations, as defined by each of the Plans.
The weighted-average grant date fair value of restricted stock units granted was:
| 2022 | 2021 | 2020 | |||||||||||||||
| PPL | $ | 27.52 | $ | 28.00 | $ | 35.30 | |||||||||||
| PPL Electric | 26.66 | 27.96 | 35.37 | ||||||||||||||
Restricted stock unit activity for 2022 was:
| Restricted Shares/Units | Weighted- Average Grant Date Fair Value Per Share | ||||||||||
| PPL | |||||||||||
| Nonvested, beginning of period | 1,004,583 | $ | 31.19 | ||||||||
| Granted | 620,708 | 27.52 | |||||||||
| Vested | (427,095) | 31.55 | |||||||||
| Forfeited | (15,779) | 29.61 | |||||||||
| Nonvested, end of period | 1,182,417 | 29.16 | |||||||||
| PPL Electric | |||||||||||
| Nonvested, beginning of period | 131,287 | $ | 31.50 | ||||||||
| Transfer between registrants | (30,353) | 30.03 | |||||||||
| Granted | 51,832 | 26.66 | |||||||||
| Vested | (41,233) | 32.19 | |||||||||
| Forfeited | (1,747) | 32.19 | |||||||||
| Nonvested, end of period | 109,786 | 28.91 | |||||||||
Substantially all restricted stock unit awards are expected to vest.
The total fair value of restricted stock units vesting for the years ended December 31 was:
| 2022 | 2021 | 2020 | |||||||||||||||
| PPL | $ | 12 | $ | 8 | $ | 19 | |||||||||||
| PPL Electric | 1 | 1 | 3 | ||||||||||||||
Performance Units - Total Shareowner Return
Performance units based on relative Total Shareowner Return (TSR) are intended to encourage and reward future corporate performance. Performance units represent a target number of shares (Target Award) of PPL's common stock that the recipient would receive upon PPL's attainment of the applicable performance goal. Performance is determined based on TSR during a -year performance period. At the end of the period, payout is determined by comparing PPL's performance to the TSR of the companies included in the PHLX Utility Sector Index. Awards are payable on a graduated basis based on thresholds that measure PPL's performance relative to peers that comprise the applicable index on which each year's awards are measured. Awards can be paid up to 200% of the Target Award or forfeited with no payout if performance is below a minimum established performance threshold. Dividends payable during the performance cycle accumulate and are converted into additional performance units and are payable in shares of PPL common stock upon completion of the performance period based on the Compensation Committee's determination of achievement of the performance goals. Under the plan provisions, TSR performance units are subject to forfeiture upon termination of employment other than retirement, one year or more from commencement of the performance period, disability or death of an employee.
The fair value of TSR performance units granted to retirement-eligible employees is recognized as compensation expense on a straight-line basis over a -year period, the minimum vesting period required for an employee to be entitled to payout of the awards with no proration. For employees who are not retirement-eligible, compensation expense is recognized over the shorter of the -year performance period or the period until the employee is retirement-eligible, with a minimum vesting and recognition period of -year. If an employee retires before the one-year vesting period, the performance units are forfeited. Performance units vest on a pro rata basis, in certain situations, as defined by each of the Plans.
The fair value of each performance unit granted was estimated using a Monte Carlo pricing model that considers stock beta, a risk-free interest rate, expected stock volatility and expected life. The stock beta was calculated comparing the risk of the individual securities to the average risk of the companies in the index group. The risk-free interest rate reflects the yield on a U.S. Treasury bond commensurate with the expected life of the performance unit. Volatility over the expected term of the performance unit is calculated using daily stock price observations for PPL and all companies in the index group and is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL and the companies in the index group. PPL uses a mix of historic and implied volatility to value awards.
The weighted-average assumptions used in the model were:
| 2022 | 2021 | 2020 | |||||||||||||||
| Expected stock volatility | 22.79% | 27.81% | 15.64% | ||||||||||||||
| Expected life | 3 years | 3 years | 3 years | ||||||||||||||
The weighted-average grant date fair value of TSR performance units granted was:
| 2022 | 2021 | 2020 | |||||||||||||||
| PPL | $ | 34.27 | $ | 32.44 | $ | 37.63 | |||||||||||
| PPL Electric | 34.42 | 32.92 | 38.64 | ||||||||||||||
TSR performance unit activity for 2022 was:
| TSR Performance Units | Weighted- Average Grant Date Fair Value Per Share | ||||||||||
| PPL | |||||||||||
| Nonvested, beginning of period | 633,773 | $ | 34.68 | ||||||||
| Granted | 298,795 | 34.27 | |||||||||
| Forfeited (a) | (245,861) | 35.48 | |||||||||
| Nonvested, end of period | 686,707 | 34.21 | |||||||||
| TSR Performance Units | Weighted- Average Grant Date Fair Value Per Share | ||||||||||
| PPL Electric | |||||||||||
| Nonvested, beginning of period | 15,354 | $ | 34.36 | ||||||||
| Granted | 14,238 | 34.42 | |||||||||
| Forfeited (a) | (3,113) | 35.58 | |||||||||
| Nonvested, end of period | 26,479 | 34.25 | |||||||||
(a)Primarily related to the forfeiture of 2019 domestic performance units as performance during the period was below the minimum established performance threshold, which resulted in no payout.
For the year ended December 31, 2021, $2 million of TSR performance units vested. All awards vested were associated with the sale of the U.K. utility business. See Note 9 for additional information on the sale of the U.K. utility business. No TSR performance units vested for the years ended December 31, 2022 and 2020. Amounts for PPL Electric are insignificant.
Performance Units - Return on Equity
In 2017, PPL changed its executive compensation mix to add performance units based on achievement of a corporate Return on Equity (ROE). ROE performance units were intended to further align compensation with the company’s strategy and reward for future corporate performance. The Compensation Committee, eliminated the use of ROE performance units due to changes in its long-term incentive mix beginning in January 2022.
Payout of these performance units will be based on the calculated average of the annual corporate ROE for each year of the -year performance period for PPL Corporation. In light of the transformational nature of the sale of the U.K. utility business in 2021, PPL’s ROE-based performance units issued for 2021 were based on a one-year performance period from January 1, 2021 to December 31, 2021; however, these units retained the three year vesting schedule and other characteristics. ROE performance units represent a target number of shares (Target Award) of PPL's common stock that the recipient would receive upon PPL's attainment of the applicable ROE performance goal. ROE performance units can be paid up to 200% of the Target Award or forfeited with no payout if performance is below a minimum established performance threshold. Dividends payable during the performance cycle accumulate and are converted into additional performance units and are payable in shares of PPL common stock upon completion of the performance period based on the Compensation Committee's determination of achievement of the performance goals. Under the plan provisions, these performance units are subject to forfeiture upon termination of employment other than retirement, disability or death of an employee.
The fair value of each ROE performance unit is based on the closing price of PPL Common Stock on the date of grant. The fair value of ROE performance units is recognized on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value awards granted to retirement-eligible employees is recognized as compensation expense immediately upon the date of grant. As these awards are based on performance conditions, the level of attainment is monitored each reporting period and compensation expense is adjusted based on the expected attainment level.
The weighted-average grant date fair value of ROE performance units granted was:
| 2022 | 2021 | 2020 | |||||||||||||||
| PPL | $ | 30.81 | $ | 30.08 | $ | 34.95 | |||||||||||
| PPL Electric | 30.70 | 29.39 | 35.59 | ||||||||||||||
ROE performance unit activity for 2022 was:
| ROE Performance Unit | Weighted- Average Grant Date Fair Value Per Share | ||||||||||
| PPL | |||||||||||
| Nonvested, beginning of period | 722,353 | $ | 31.28 | ||||||||
| Granted (a) | 257,199 | 30.81 | |||||||||
| Vested | (470,182) | 30.76 | |||||||||
| Nonvested, end of period | 509,370 | 31.53 | |||||||||
| PPL Electric | |||||||||||
| Nonvested, beginning of period | 15,354 | $ | 30.27 | ||||||||
| Granted (a) | 3,663 | 30.70 | |||||||||
| Vested | (6,311) | 30.78 | |||||||||
| Nonvested, end of period | 12,706 | 30.14 | |||||||||
(a)Represents attainment updates to the 2019 awards that paid out at 200% of target, as well as dividend equivalents that accumulated on outstanding 2020 and 2021 awards.
The total fair value of ROE performance units vesting for the years ended December 31 was:
| 2022 | 2021 | 2020 | |||||||||||||||
| PPL | $ | 12 | $ | 16 | $ | 8 | |||||||||||
| PPL Electric | — | — | 1 | ||||||||||||||
Performance Units - Earnings Growth
Beginning in 2022, PPL changed its executive compensation mix to add performance units based on achievement of corporate earnings growth (EG) metrics. EG performance units are intended to further align executive compensation with the company’s future strategy.
Payout of these performance units will be based on the earnings growth above the projected midpoint of ongoing earnings for the -year performance period for PPL Corporation. EG performance units represent a target number of shares (Target Award) of PPL's common stock that the recipient would receive upon PPL's attainment of the applicable EG performance goal. EG performance units can be paid up to 200% of the Target Award or forfeited with no payout if performance is below a minimum established performance threshold. Dividends payable during the performance cycle accumulate and are converted into additional performance units and are payable in shares of PPL common stock upon completion of the performance period based on the Compensation Committee's determination of achievement of the performance goals. Under the plan provisions, these performance units are subject to forfeiture upon termination of employment other than retirement, disability or death of an employee.
The fair value of each EG performance unit is based on the closing price of PPL Common Stock on the date of grant. The fair value of EG performance units is recognized on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value awards granted to retirement-eligible employees is recognized as compensation expense immediately upon the date of grant. As these awards are based on performance conditions, the level of attainment is monitored each reporting period and compensation expense is adjusted based on the expected attainment level.
The weighted-average grant date fair value of EG performance units granted was:
| 2022 | |||||
| PPL | $ | 29.29 | |||
| PPL Electric | 29.35 | ||||
EG performance unit activity for 2022 was:
| EG Performance Unit | Weighted- Average Grant Date Fair Value Per Share | ||||||||||
| PPL | |||||||||||
| Nonvested, beginning of period | — | $ | — | ||||||||
| Granted | 141,880 | 29.29 | |||||||||
| Nonvested, end of period | 141,880 | 29.29 | |||||||||
| PPL Electric | |||||||||||
| Nonvested, beginning of period | — | $ | — | ||||||||
| Granted | 6,888 | 29.35 | |||||||||
| Nonvested, end of period | 6,888 | 29.35 | |||||||||
Performance Units - Environmental, Social and Governance
Beginning in 2022, PPL changed its executive compensation mix to add performance units based on environmental, social and governance (ESG) metrics. ESG performance units are tied to climate-related performance and intended to further align executive compensation with the company’s future strategy.
Payout of these performance units will be based on the attainment of reductions in company vehicle emissions and building energy use, as well as the retirement of Mill Creek Unit 1, a coal-fired generating facility in Kentucky. ESG performance units can be paid up to 200% of the Target Award or forfeited with no payout if performance is below a minimum established performance threshold. Dividends payable during the performance cycle accumulate and are converted into additional performance units and are payable in shares of PPL common stock upon completion of the performance period based on the Compensation Committee's determination of achievement of the performance goals. Under the plan provisions, these performance units are subject to forfeiture upon termination of employment other than retirement, disability or death of an employee.
The fair value of each ESG performance unit is based on the closing price of PPL Common Stock on the date of grant. The fair value of ESG performance units is recognized on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value awards granted to retirement-eligible employees is recognized as compensation expense immediately upon the date of grant. As these awards are based on performance conditions, the level of attainment is monitored each reporting period and compensation expense is adjusted based on the expected attainment level.
The weighted-average grant date fair value of ESG performance units granted was:
| 2022 | |||||
| PPL | $ | 29.29 | |||
| PPL Electric | 29.35 | ||||
ESG performance unit activity for 2022 was:
| ESG Performance Unit | Weighted- Average Grant Date Fair Value Per Share | ||||||||||
| PPL | |||||||||||
| Nonvested, beginning of period | — | $ | — | ||||||||
| Granted | 141,880 | 29.29 | |||||||||
| Nonvested, end of period | 141,880 | 29.29 | |||||||||
| PPL Electric | |||||||||||
| Nonvested, beginning of period | — | $ | — | ||||||||
| Granted | 6,888 | 29.35 | |||||||||
| Nonvested, end of period | 6,888 | 29.35 | |||||||||
Stock Options
PPL's Compensation, Governance and Nominating Committee, now known as the Compensation Committee, eliminated the use of stock options due to changes in its long-term incentive mix beginning in January 2014.
Under the Plans, stock options had been granted with an option exercise price per share not less than the fair value of PPL's common stock on the date of grant. Options outstanding at December 31, 2022, are fully vested. All options expire no later than 10 years from the grant date. The options become exercisable immediately in certain situations, as defined by each of the Plans.
Stock option activity for 2022 was:
| Number of Options | Weighted Average Exercise Price Per Share | Weighted- Average Remaining Contractual Term (years) | Aggregate Total Intrinsic Value | ||||||||||||||||||||
| PPL | |||||||||||||||||||||||
| Outstanding at beginning of period | 766,002 | $ | 26.57 | ||||||||||||||||||||
| Exercised | (594,450) | 26.44 | |||||||||||||||||||||
| Outstanding and exercisable at end of period | 171,552 | 27.04 | 0.1 | $ | — | ||||||||||||||||||
For 2022, 2021 and 2020, PPL received $18 million, $10 million and $8 million in cash from stock options exercised. The total intrinsic value of stock options exercised was insignificant in each of those years. The related income tax benefits realized were not significant.
Compensation Expense
Compensation expense for restricted stock, restricted stock units, performance units and stock options accounted for as equity awards was:
| 2022 | 2021 | 2020 | |||||||||||||||
| PPL | $ | 36 | $ | 34 | $ | 28 | |||||||||||
| PPL Electric | 2 | 11 | 10 | ||||||||||||||
The income tax benefit related to above compensation expense was as follows:
| 2022 | 2021 | 2020 | |||||||||||||||
| PPL | $ | 10 | $ | 10 | $ | 8 | |||||||||||
| PPL Electric | 1 | 3 | 3 | ||||||||||||||
At December 31, 2022, unrecognized compensation expense related to nonvested stock awards was:
| Unrecognized Compensation Expense | Weighted- Average Period for Recognition | ||||||||||
| PPL | $ | 23 | 1.8 | ||||||||
| PPL Electric | 2 | 1.8 | |||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2022 | Feb 17, 2023 | Showing above |
| 2019 | Feb 14, 2020 | |
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.