WESTLAKE CORPWLK
WESTLAKE CORP Stock Compensation Disclosure
Stock-Based Compensation
Under the Westlake Corporation 2013 Omnibus Incentive Plan (as amended and restated in 2023, the "2013 Plan"), all employees and non-employee directors of the Company, as well as certain individuals who have agreed to become the Company's employees, are eligible for awards. Shares of common stock may be issued as authorized in the 2013 Plan. At the discretion of the administrator of the 2013 Plan, employees and non-employee directors may be granted awards in the form of stock options, stock appreciation rights, stock awards, restricted stock units or cash awards (any of which may be a performance award). Outstanding stock option awards have a 10-year term and vest ratably on an annual basis over a three-year period. Outstanding restricted stock units and performance stock units vest at the end of a to five-year period. In accordance with accounting guidance related to share-based payments, stock-based compensation expense for all stock-based compensation awards is based on estimated grant-date fair value. The Company recognizes these stock-based compensation costs net of a forfeiture rate and on a straight-line basis over the requisite service period of the award for only those shares expected to vest. For the years ended December 31, 2025, 2024 and 2023, the total recognized stock-based compensation expense related to equity awards issued under the 2013 Plan was $42, $41 and $40, respectively.
Option activity and changes during the year ended December 31, 2025 were as follows:
| Options | Weighted Average Exercise Price | Weighted Average Remaining Term (Years) | Aggregate Intrinsic Value | |||||||||||||||||||||||
| Outstanding at December 31, 2024 | 1,088,507 | $ | 96.31 | |||||||||||||||||||||||
| Granted | 260,834 | 110.15 | ||||||||||||||||||||||||
| Exercised | (85,492) | 45.06 | ||||||||||||||||||||||||
| Cancelled | (48,592) | 120.57 | ||||||||||||||||||||||||
| Outstanding at December 31, 2025 | 1,215,257 | $ | 101.91 | 6.0 | $ | 2 | ||||||||||||||||||||
| Exercisable at December 31, 2025 | 829,130 | $ | 93.10 | 4.7 | $ | 2 | ||||||||||||||||||||
For options outstanding at December 31, 2025, the options had the following range of exercise prices:
| Range of Prices | Options Outstanding | Weighted Average Remaining Contractual Life (Years) | ||||||||||||
$44.42 - $65.81 | 242,037 | 3.1 | ||||||||||||
$79.83 - $86.54 | 219,531 | 4.3 | ||||||||||||
$107.75 - $108.12 | 208,932 | 5.0 | ||||||||||||
$110.15 - $110.15 | 233,222 | 9.1 | ||||||||||||
$122.65 - $144.49 | 311,535 | 7.6 | ||||||||||||
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company's closing stock price on the last trading day of the year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2025. This amount changes based on the fair market value of the Company's common stock. For the years ended December 31, 2025, 2024 and 2023, the total intrinsic value of options exercised was $3, $9 and $34, respectively.
As of December 31, 2025, $9 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 1.7 years. Income tax benefits of $1, $2 and $4 were realized from the exercise of stock options during the years ended December 31, 2025, 2024 and 2023, respectively.
The Company used the Black-Scholes option pricing model to value its options. The table below presents the weighted average value and assumptions used in determining each option's fair value. Volatility was calculated using historical trends of the Company's common stock price.
| Stock Option Grants | ||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Weighted average fair value | $ | 36.52 | $ | 52.17 | $ | 44.91 | ||||||||||||||
| Risk-free interest rate | 4.3 | % | 4.3 | % | 4.0 | % | ||||||||||||||
| Expected life in years | 5 | 5 | 5 | |||||||||||||||||
| Expected volatility | 37.3 | % | 38.4 | % | 39.1 | % | ||||||||||||||
| Expected dividend yield | 1.9 | % | 1.2 | % | 1.1 | % | ||||||||||||||
Non-vested restricted stock units as of December 31, 2025 and changes during the year ended December 31, 2025 were as follows:
| Number of Units | Weighted Average Grant Date Fair Value | |||||||||||||
| Nov-vested at December 31, 2024 | 591,204 | $ | 121.70 | |||||||||||
| Granted | 290,064 | 104.31 | ||||||||||||
| Vested | (210,522) | 104.57 | ||||||||||||
| Forfeited | (63,299) | 120.30 | ||||||||||||
| Nov-vested at December 31, 2025 | 607,447 | $ | 119.35 | |||||||||||
As of December 31, 2025, there was $32 of unrecognized stock-based compensation expense related to non-vested restricted stock units. This cost is expected to be recognized over a weighted-average period of 1.8 years. The total fair value of restricted stock units that vested during the years ended December 31, 2025, 2024 and 2023 was $23, $30 and $28, respectively.
Performance stock unit payout is based on the greater of the average annual economic-value added results for the Company (equal to net operating profit after tax less a capital charge based upon the weighted average cost of capital) and relative total shareholder return as compared to a peer group of companies. The units have payouts that range from zero to 200 percent of the target award.
Non-vested performance stock units as of December 31, 2025 and changes during the year ended December 31, 2025 were as follows:
| Number of Units | Weighted Average Grant Date Fair Value | |||||||||||||
| Nov-vested at December 31, 2024 | 186,482 | $ | 166.47 | |||||||||||
| Granted | 86,723 | 118.12 | ||||||||||||
| Vested | (61,314) | 147.98 | ||||||||||||
| Forfeited | (19,782) | 149.67 | ||||||||||||
| Nov-vested at December 31, 2025 | 192,109 | $ | 152.27 | |||||||||||
As of December 31, 2025, there was $12 of unrecognized stock-based compensation expense related to non-vested performance stock units. This cost is expected to be recognized over a weighted-average period of 1.7 years. The total fair value of performance stock units that vested during the years ended December 31, 2025, 2024 and 2023 was $7, $10 and $13, respectively.
The Company used a Monte Carlo simulation model to value the performance stock units on the grant date. The expected term is based on the three-year performance period. The table below presents the assumptions used in determining grant date fair value. Volatility was calculated using historical trends of the Company's common stock price.
| Performance Stock Units | ||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Risk-free interest rate | 4.2 | % | 4.5 | % | 4.4 | % | ||||||||||||||
| Expected life in years | 2.86 | 2.88 | 2.87 | |||||||||||||||||
| Expected volatility of Westlake Corporation common stock | 31.6 | % | 33.8 | % | 40.8 | % | ||||||||||||||
| Expected volatility of peer companies | 24.7% - 53.2% | 25.9% - 46.4% | 26.6% - 53.2% | |||||||||||||||||
| Average correlation coefficient of peer companies | 0.58 | 0.60 | 0.61 | |||||||||||||||||
| Grant date fair value | $ | 118.12 | $ | 183.39 | $ | 167.76 | ||||||||||||||
Westlake Chemical Partners LP Awards
The Company's wholly-owned subsidiary and the general partner of Westlake Partners, Westlake Chemical Partners GP LLC ("Westlake Partners GP"), maintains a unit-based compensation plan for directors and employees of Westlake Partners GP and Westlake Partners.
The Westlake Partners 2014 Long-term Incentive Plan ("Westlake Partners 2014 Plan") permits various types of equity awards including but not limited to grants of phantom units and restricted units. Awards granted under the Westlake Partners 2014 Plan may be settled with Westlake Partners units or in cash or a combination thereof. Compensation expense for these awards was not material to the Company's consolidated financial statements for the years ended December 31, 2025, 2024 and 2023.
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.