Smurfit Westrock plcSW
Smurfit Westrock plc Stock Compensation Disclosure
17. Share-based Compensation
Share-based compensation expense relates primarily to awards granted under the Deferred Bonus Plan (“DBP”) and the Performance
Share Plan (“PSP”) as well as Performance Share Units (“PSUs”) and Restricted Stock Units (“RSUs”). Share-based compensation
expense recognized in the Consolidated Statements of Operations is as follows:
Years ended December 31, | |||||
2025 | 2024 | 2023 | |||
Deferred Bonus Plan | $15 | $24 | $29 | ||
Performance Share Plan | 61 | 65 | 35 | ||
Performance Share Units | 11 | 2 | — | ||
Restricted Stock Units | 50 | 109 | — | ||
Total share-based compensation expense | $137 | $200 | $64 | ||
Income tax benefit related to share-based compensation expense | $12 | $15 | $— | ||
Social charges relating to equity settled share-based payments for the years ended December 31, 2025, 2024 and 2023, were
$2 million, $6 million and $2 million, respectively.
The following note disclosure details the legacy Smurfit Kappa plans (the Deferred Bonus Plan and the Performance Share Plan), the
conversion of the legacy Westrock RSU and PSU awards due to the Combination and also the Smurfit Westrock 2024 Long Term
Incentive Plan (“LTIP”).
Deferred Bonus Plan
The DBP is a legacy Smurfit Kappa plan. No new awards were issued under the DBP from 2025 onwards. The number of shares
awarded under the DBP during the years ended December 31, 2024 and 2023, were 651,648 and 764,182, respectively.
During the years ended December 31, 2025, 2024 and 2023, 586,113, 523,972, and 483,801 shares vested having a fair value of
$32 million, $21 million, and $18 million, respectively.
As of December 31, 2025, the unrecognized compensation expense related to the DBP was $12 million, which will be recognized over
the remaining weighted average vesting period of 1.2 years.
Performance Share Plan
The PSP is a legacy Smurfit Kappa plan. No new awards were issued under the PSP during 2025. The number of shares awarded
under the PSP during the years ended December 31, 2024 and 2023 were 1,700,922, and 2,003,416, respectively.
During the years ended December 31, 2025, 2024 and 2023, 1,414,298, 742,163 and 1,322,030 shares vested having a fair value of
$77 million, $30 million and $50 million, respectively.
As of December 31, 2025, the unrecognized compensation expense related to the PSP was $33 million, which will be recognized over
the remaining weighted average vesting period of 1.1 years.
Modification of Performance Share Plan Awards due to the Combination
In connection with the Combination, certain outstanding PSP awards were modified, including the conversion of Smurfit Kappa
awards into Smurfit Westrock awards and changes to performance and vesting conditions. As a result, modification accounting was
required for certain awards under ASC 718, “Compensation—Stock Compensation”. These modifications were accounted for as Type
1 probable-to-probable modifications. The total incremental fair value associated with these modifications was $106 million. Certain
of the modified awards remain outstanding as of December 31, 2025.
Long-Term Incentive Plan
On July 5, 2024, immediately prior to the Combination, the Board adopted the LTIP, pursuant to which Smurfit Westrock plc may
grant RSUs, PSUs, stock options, including incentive stock options, stock appreciation rights, share awards, which may be subject to
performance-based and/or time-based vesting conditions, and cash bonus incentives to eligible employees (including Named
Executive Officers), directors and consultants/independent contractors. The key purpose of the LTIP is to retain key executives and to
align the interests of our executives with the achievement of sustainable long-term growth and performance.
The LTIP authorizes granting of 26,000,000 shares to employees. As of December 31, 2025, there were 21,464,470 shares available to
be granted under this plan, assuming the PSUs previously granted vest at maximum.
Performance Share Units granted under the LTIP
During the year, the Company granted PSUs under the LTIP. Awards will vest after a -year performance period to the extent to
which the performance conditions have been met. The performance targets assigned to the PSU awards are set by the Smurfit
Westrock Compensation Committee on the granting of awards at the start of each -year cycle.
For the PSU awards granted in 2025, the actual number of shares that will vest under the PSU is dependent on the performance
conditions of the Company’s Cumulative Adjusted Earnings per Share (“EPS”), Average Return on Capital Employed (“ROCE”) and
Total Shareholder Return relative to a peer group (“rTSR”) measured over a -year performance period. Participants can earn
between 0% and 200% based on the achievement of these performance conditions. PSU performance conditions will be reviewed at
the end of the -year performance period and the PSU shares awarded will vest depending upon the extent to which these
performance conditions have been satisfied and the participants’ continued service through to the vesting date.
For PSU awards granted in 2024, the performance period for these awards began on July 8, 2024, and ends on December 31, 2026.
The number of shares that will ultimately vest are based on a rTSR condition, where a participant can earn between 0% and 200%.
The table below summarizes the changes in the PSUs for the year ended December 31, 2025:
Number of shares | Weighted average grant date fair value | ||
Outstanding at January 1 | 232,422 | $50.07 | |
Granted | 1,636,530 | 45.67 | |
Forfeited | (93,321) | 41.87 | |
Vested | (233) | 45.64 | |
Outstanding at December 31 | 1,775,398 | $46.21 |
The fair values assigned to the EPS and ROCE components of the PSU awards are equivalent to the closing price of the Company’s
shares on the grant date. The fair value assigned to the portion of awards which are subject to rTSR performance was calculated as of
the grant date using the Monte Carlo simulation model. The grant date fair value for the rTSR portion of the awards was $48.77 for
2025 (year ended December 31, 2024: $50.07). The Monte Carlo simulation takes into account peer group total shareholder return and
volatilities together with the following assumptions:
2025 | 2024 | ||
Risk-free interest rate | 3.9% | 3.7% | |
Expected volatility | 28.8% | 33.7% | |
Expected term (years) | 2.8 | 2.4 |
For the awards granted in 2025, the expected volatility rate applied by the Company was based on a blended volatility that used
implied volatility and the historical adjusted daily stock prices that were time weighted based on post-acquisition prices of Smurfit
Westrock and a Company selected peer group. For a term of 0.68 years, the volatility of Smurfit Westrock was used. The term of 0.68
years was calculated as the time from the transaction date (July 5, 2024) to the grant date. For the remaining term of 2.12 years, a
volatility calculation was used based on the implied volatility as of the valuation date of March 11, 2025 and the historical adjusted
daily stock prices using the selected peer group companies for the 2.12 years prior to July 5, 2024.
For the awards granted in 2024, in order to account for the Combination, the expected volatility rate applied was based on a blended
volatility that used historical adjusted daily stock prices that were time weighted based on pre- and post-acquisition prices of Smurfit
Kappa, WestRock, and Smurfit Westrock. For a term of 0.08 years, historical volatility of Smurfit Westrock was used (which was
calculated as the time from the transaction date of July 5, 2024, to the grant date of August 2, 2024). For the remaining term of 2.33
years, a market capitalization weighted volatility was used for Smurfit Kappa and WestRock as of the transaction date.
For the awards granted in 2025 and 2024, the risk-free interest rate is based on the U.S. Treasury Rate Yield Curve, adjusted to
approximate zero coupon yields using the “bootstrap” technique, over a period equal to the expected term.
During the year ended December 31, 2024, no shares vested.
As of December 31, 2025, unrecognized compensation expense related to the awards was $27 million, which will be recognized over
the remaining weighted average vesting period of 2.0 years.
Restricted Stock Units
As part of the Combination described in "Note 2. Acquisitions", the Company replaced outstanding legacy WestRock RSUs and PSUs
held by current employees with Smurfit Westrock RSUs and a cash award equal to $5.00 per share, with all replacement awards
retaining their original vesting conditions. WestRock director RSUs vested immediately upon the change in control and were settled in
July 2024.
During the year, the Company granted RSUs under the LTIP. Awards will vest after a 3-year service period subject to the participants’
continued service through to the vesting date.
The table below summarizes the changes in the RSUs granted under the LTIP and legacy WestRock RSU and PSU awards converted
to Smurfit Westrock RSU awards during the year ended December 31, 2025:
Number of shares | Weighted average grant date fair value | ||
Outstanding at January 1 | 3,711,962 | $46.87 | |
Granted | 1,099,826 | 43.64 | |
Forfeited | (124,051) | 45.57 | |
Vested | (1,821,776) | 46.75 | |
Outstanding at December 31 | 2,865,961 | $45.72 |
During the years ended December 31, 2025 and 2024, 1,821,776 and 1,695,195 shares vested, respectively having a fair value of
$92 million and $75 million, respectively. As of December 31, 2025 unrecognized compensation expense related to the awards was
$42 million which will be recognized over the remaining weighted average vesting period of 1.8 years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 7, 2025 | |
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.