SHERWIN WILLIAMS COSHW
SHERWIN WILLIAMS CO Stock Compensation Disclosure
STOCK-BASED COMPENSATION
At the Annual Meeting of Shareholders on April 16, 2025, the Company’s shareholders approved The Sherwin-Williams Company 2025 Equity and Incentive Compensation Plan (the 2025 Plan). The 2025 Plan became effective as of the approval date and replaced The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan (Amended and Restated as of October 13, 2023), The Sherwin-Williams Company 2006 Stock Plan for Nonemployee Directors and The Sherwin-Williams Company 2007 Executive Annual Performance Bonus Plan (Amended and Restated as of October 13, 2023). The 2025 Plan authorizes the Board of Directors, or a committee of the Board of Directors, to issue or transfer up to the aggregate of 21,969,555 shares of common stock, plus any shares relating to awards that expire, are forfeited or canceled. The Company will issue new shares upon exercise of option rights (options) and vesting of restricted stock units (RSUs). The 2025 Plan permits the granting of options, appreciation rights, restricted stock, RSUs, performance shares and performance units to eligible employees and members of the Board of Directors who are not employees of the Company. Shares available for future grants under the 2025 Plan were 21,067,821 at December 31, 2025.
Now replaced, The Sherwin-Williams Company 2006 Equity and Performance Incentive Plan and The Sherwin-Williams Company 2006 Stock Plan for Nonemployee Directors (collectively, the 2006 Plans) authorized the Board of Directors, or a committee of the Board of Directors, to issue or transfer up to an aggregate of 71,100,000 and 600,000 shares of common stock, plus any shares relating to awards that expired, were forfeited or canceled to eligible employees and members of the Board of Directors who are not employees of the Company, respectively. While the Company issued shares upon exercise of options and vesting of RSUs, the 2006 Plans permitted the granting of options, appreciation rights, restricted stock, RSUs, performance shares and performance units to eligible employees and options, appreciation rights, restricted stock and RSUs to nonemployee directors. At December 31, 2025, no appreciation rights, performance shares or performance units had been granted to eligible employees and no options or appreciation rights had been granted to nonemployee directors. No further grants may be made under the 2006 Plans and all rights granted remain to their terms.
At December 31, 2025, the Company had total unrecognized stock-based compensation expense of $173.5 million that is expected to be recognized over a weighted-average period of 1.06 years.
| 2025 | 2024 | 2023 | |||||||||||||||
| Stock-based compensation expense | $ | 123.5 | $ | 138.1 | $ | 115.9 | |||||||||||
| Income tax benefit recognized | 30.4 | 34.1 | 28.6 | ||||||||||||||
Excess tax benefits from share-based payments are recognized as an income tax benefit in the Statements of Consolidated Income when options are exercised and RSUs vest. For the years ended December 31, 2025, 2024 and 2023, the Company’s excess tax benefit from options exercised and RSUs vested reduced the income tax provision by $50.1 million, $73.0 million and $35.7 million, respectively.
Options
The fair value of the Company’s options was estimated at the date of grant using a Black-Scholes-Merton option-pricing model with the following weighted-average assumptions for all options granted:
| 2025 | 2024 | 2023 | |||||||||||||||
| Risk-free interest rate | 3.65 | % | 3.93 | % | 4.57 | % | |||||||||||
| Expected life of options | 5.02 years | 5.02 years | 5.02 years | ||||||||||||||
| Expected dividend yield of stock | .83 | % | .83 | % | .94 | % | |||||||||||
| Expected volatility of stock | 25.9 | % | 27.5 | % | 29.3 | % | |||||||||||
The risk-free interest rate is based upon the U.S. Treasury yield curve at the time of grant. The expected life of options was calculated using a scenario analysis model. Historical data was used to aggregate the holding period from actual exercises, post-vesting cancellations and hypothetical assumed exercises on all outstanding options. The expected dividend yield of stock is the Company’s best estimate of the expected future dividend yield. Expected volatility of stock was calculated using historical and implied volatilities.
Grants of non-qualified and incentive stock options have been awarded to certain officers and key employees under the 2006 and 2025 Plans. The options generally become exercisable to the extent of one-third of the optioned shares for each full year following the date of grant and generally expire ten years after the date of grant. Unrecognized compensation expense with respect to options granted to eligible employees amounted to $124.1 million at December 31, 2025. The unrecognized compensation expense is being amortized on a straight-line basis over the three-year vesting period, net of estimated forfeitures based on historical activity, and is expected to be recognized over a weighted-average period of 1.11 years.
The following table summarizes the Company’s option activity:
| Optioned Shares | Weighted Average Exercise Price Per Share | Aggregate Intrinsic Value | Weighted Average Remaining Term (in Years) | ||||||||||||||||||||
Outstanding at January 1, 2025 | 7,934,866 | $ | 209.39 | $ | 1,074.4 | 5.69 | |||||||||||||||||
| Granted | 997,620 | 333.33 | |||||||||||||||||||||
| Exercised | (1,104,640) | 129.38 | |||||||||||||||||||||
| Forfeited | (62,897) | 314.19 | |||||||||||||||||||||
Outstanding at December 31, 2025 | 7,764,949 | 235.79 | $ | 744.0 | 5.71 | ||||||||||||||||||
Exercisable at December 31, 2025 | 5,867,455 | $ | 204.28 | $ | 719.3 | 4.61 | |||||||||||||||||
The following table summarizes fair value and intrinsic value information for option activity:
| 2025 | 2024 | 2023 | |||||||||||||||
| Weighted average grant date fair value per share | $ | 90.83 | $ | 109.05 | $ | 77.08 | |||||||||||
| Total fair value of options vested | 78.6 | 66.8 | 61.3 | ||||||||||||||
| Total intrinsic value of options exercised | 247.7 | 402.7 | 170.6 | ||||||||||||||
RSUs
The fair value of each RSU is equal to the market value of a share of the Company’s stock on the grant date. Grants of time-based RSUs, which generally require three years of continuous employment from the date of grant before vesting and receiving the stock without restriction, have been awarded to certain officers and key employees under the 2006 and 2025 Plans. The February 2025, 2024 and 2023 grants of performance-based RSUs vest at the end of a three-year period based on the Company’s achievement of specified financial and operating performance goals relating to earnings per share and return on net assets employed.
Unrecognized compensation expense with respect to grants of RSUs to eligible employees amounted to $47.4 million at December 31, 2025. The unrecognized compensation expense is being amortized on a straight-line basis over the vesting period and is expected to be recognized over a weighted-average period of 0.85 years.
Grants of RSUs have been awarded to nonemployee directors under the 2006 and 2025 Plans. These grants generally vest and stock is received without restriction to the extent of one-third of the RSUs for each year following the date of grant. Unrecognized compensation expense with respect to grants of RSUs to nonemployee directors amounted to $2.0 million at December 31, 2025. The unrecognized compensation expense is being amortized on a straight-line basis over the three-year vesting period and is expected to be recognized over a weighted-average period of 0.90 years.
The following table summarizes the Company’s RSU activity:
| Number of RSUs | Weighted Average Grant Date Fair Value Per Share | Aggregate Intrinsic Value | Weighted Average Remaining Term (in Years) | ||||||||||||||||||||
Outstanding at January 1, 2025 | 433,014 | $ | 265.03 | $ | 147.2 | 1.18 | |||||||||||||||||
| Granted | 189,326 | 354.05 | |||||||||||||||||||||
| Vested | (176,018) | 272.28 | |||||||||||||||||||||
| Forfeited | (5,323) | 264.51 | |||||||||||||||||||||
Outstanding at December 31, 2025 | 440,999 | $ | 288.21 | $ | 142.9 | 0.97 | |||||||||||||||||
The following table summarizes the fair value and intrinsic value information for RSU activity:
| 2025 | 2024 | 2023 | |||||||||||||||
| Weighted average grant date fair value per share | $ | 354.05 | $ | 305.50 | $ | 232.22 | |||||||||||
| Intrinsic value of RSUs vested during year | 62.4 | 38.4 | 68.5 | ||||||||||||||
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.