Stock Based Compensation

12 Months Ended

Dec. 31, 2023

6. Stock-Based Compensation

In 2022, OGE Energy adopted, and its shareholders approved, the 2022 Stock Incentive Plan. The 2022 Stock Incentive Plan replaced the 2013 Stock Incentive Plan, and no further awards will be granted under the 2013 Stock Incentive Plan. Under the 2022 Stock Incentive Plan, restricted stock, restricted stock units, stock options, stock appreciation rights and performance units may be

granted to officers, directors and other key employees of OGE Energy and its subsidiaries, including OG&E. OGE Energy has authorized the issuance of up to 8,417,755 shares under the 2022 Stock Incentive Plan.

The following table presents the Registrants' pre-tax compensation expense and related income tax benefit for the years ended December 31, 2023, 2022 and 2021 related to performance units and restricted stock units for the Registrants' employees.


	OGE Energy						OG&E
Year Ended December 31 (In millions)	2023		2022		2021		2023		2022		2021
Performance units	$	9.3	$	7.2	$	7.5	$	2.2	$	2.2	$	1.8
Restricted stock units		3.8		2.5		2.3		0.9		0.7		0.4
Total compensation expense	$	13.1	$	9.7	$	9.8	$	3.1	$	2.9	$	2.2
Income tax benefit	$	3.2	$	2.3	$	2.5	$	0.7	$	0.7	$	0.6

During the year ended December 31, 2021, 154,523 shares of treasury stock were used to satisfy payouts of earned performance units and restricted stock unit grants to the Registrants' employees pursuant to OGE Energy's 2013 Stock Incentive Plan.

During the year ended December 31, 2022, OGE Energy issued 27,278 shares of new common stock pursuant to OGE Energy's 2013 Stock Incentive Plan and issued an immaterial amount of treasury stock to satisfy payouts of restricted stock unit grants to the Registrants' employees.

During the year ended December 31, 2023, OGE Energy issued 82,321 shares of new common stock pursuant to OGE Energy's 2013 Stock Incentive Plan and issued 2,371 shares of treasury stock to satisfy payouts of earned performance units and restricted stock unit grants to the Registrants' employees.

Performance Units

Under the Stock Incentive Plan, OGE Energy has issued performance units which represent the value of one share of OGE Energy's common stock. The performance units provide for accelerated vesting if there is a change in control (as defined in the Stock Incentive Plan). Each performance unit is subject to forfeiture if the recipient terminates employment with OGE Energy or a subsidiary prior to the end of the primarily three-year award cycle for any reason other than death, disability or retirement. In the event of death, disability or retirement, a participant will receive a prorated payment based on such participant's number of full months of service during the award cycle, further adjusted based on the achievement of the performance goals during the award cycle. The Registrants estimate expected forfeitures in accounting for performance unit compensation expense.

The performance units granted are contingently awarded and will be payable in shares of OGE Energy's common stock subject to the condition that the number of performance units, if any, earned by the employees upon the expiration of a primarily three-year award cycle (i.e., three-year cliff vesting period) is dependent on OGE Energy's total shareholder return ranking relative to a peer group of companies. These performance units are classified as equity in the balance sheets. If there is no or only a partial payout for the performance units at the end of the award cycle, the unearned performance units are cancelled. Payout requires approval of the Compensation Committee of OGE Energy's Board of Directors. Payouts, if any, are all made in common stock and are considered made when the payout is approved by the Compensation Committee.

The fair value of the performance units was estimated on the grant date using a lattice-based valuation model that factors in information, including the expected dividend yield, expected price volatility, risk-free interest rate and the probable outcome of the market condition, over the expected life of the performance units. Compensation expense for the performance units is a fixed amount determined at the grant date fair value and is recognized over the primarily three-year award cycle regardless of whether performance units are awarded at the end of the award cycle. Dividends are accrued on a quarterly basis pending achievement of payout criteria and are included in the fair value calculations. Expected price volatility is based on the historical volatility of OGE Energy's common stock for the past three years and is simulated using the Geometric Brownian Motion process. The risk-free interest rate for the performance unit grants is based on the three-year U.S. Treasury yield curve in effect at the time of the grant. The expected life of the units is based on the non-vested period since inception of the award cycle. There are no post-vesting restrictions related to OGE Energy's performance units. The following table presents the number of performance units granted and the assumptions used to calculate the grant date fair value of the performance units.


	OGE Energy									OG&E
	2023			2022			2021			2023			2022			2021
Number of units granted		213,442			216,437			249,909			65,069			60,923			68,720
Fair value of units granted	$	43.74		$	41.10		$	38.14		$	43.74		$	41.10		$	38.14
Expected dividend yield		4.2	%		4.8	%		4.7	%		4.2	%		4.8	%		4.7	%
Expected price volatility		31.0	%		29.0	%		29.0	%		31.0	%		29.0	%		29.0	%
Risk-free interest rate		4.47	%		1.71	%		0.22	%		4.47	%		1.71	%		0.22	%
Expected life of units (in years)		2.85			2.85			2.84			2.85			2.85			2.85

Restricted Stock Units

Under the Stock Incentive Plan, OGE Energy has issued restricted stock units to certain existing non-officer employees as well as other executives upon hire to attract and retain individuals to be competitive in the marketplace. The restricted stock units vest primarily in a three-year award cycle (i.e., three-year cliff vesting period). Prior to vesting, each restricted stock unit is subject to forfeiture if the recipient ceases to render substantial services to OGE Energy or a subsidiary. These restricted stock units may not be sold, assigned, transferred or pledged and are subject to a risk of forfeiture.

The fair value of the restricted stock units was based on the closing market price of OGE Energy's common stock on the grant date. Compensation expense for the restricted stock units is a fixed amount determined at the grant date fair value and is recognized as services are rendered by employees over a primarily three-year vesting period. Also, for those restricted stock units that vest in one-third annual increments over a three-year cycle, OGE Energy treats its restricted stock units as multiple separate awards by recording compensation expense separately for each tranche whereby a substantial portion of the expense is recognized in the earlier years in the requisite service period.

Dividends will only be paid on restricted stock unit awards that vest; therefore, only the present value of dividends expected to vest are included in the fair value calculations. The expected life of the restricted stock units is based on the non-vested period since inception of the primarily three-year award cycle. There are no post-vesting restrictions related to OGE Energy's restricted stock units. The following table presents the number of restricted stock units granted and the grant date fair value.


	OGE Energy						OG&E
	2023		2022		2021		2023		2022		2021
Restricted stock units granted		114,926		116,539		89,197		35,034		32,804		22,911
Fair value of restricted stock units granted	$	37.52	$	35.72	$	31.11	$	37.52	$	35.72	$	30.91

Performance Units and Restricted Stock Units Activity

The following tables present a summary of the activity for the Registrants' performance units and restricted stock units for the year ended December 31, 2023. The table designated as "OGE Energy" below includes the OG&E standalone activity, as OGE Energy represents consolidated results.


OGE Energy	Performance Units						Restricted Stock Units
(Dollars in millions)	Number of Units				Aggregate Intrinsic Value		Number of Shares			Aggregate Intrinsic Value
Units/shares outstanding at 12/31/22		608,375						189,483
Granted		213,442		(A)				114,926
Converted		(161,690	)	(B)	$	3.7	N/A
Vested	N/A							(76,664	)	$	2.7
Forfeited		(8,009	)					(4,599	)
Units/shares outstanding at 12/31/23		652,118			$	28.8		223,146		$	7.8
Units/shares fully vested at 12/31/23		234,672		(C)	$	12.7	N/A			N/A


OG&E	Performance Units						Restricted Stock Units
(Dollars in millions)	Number of Units				Aggregate Intrinsic Value		Number of Shares				Aggregate Intrinsic Value
Units/shares outstanding at 12/31/22		170,623						52,759
Granted		65,069		(A)				35,034
Converted		(44,550	)	(B)	$	1.0	N/A
Vested	N/A							(20,265	)		$	0.7
Forfeited		(5,889	)					(2,725	)
Employee migration		(1,416	)	(D)				(559	)	(D)
Units/shares outstanding at 12/31/23		183,837			$	8.0		64,244			$	2.2
Units/shares fully vested at 12/31/23		63,506		(C)	$	3.4	N/A				N/A

(A)

For performance units, this represents the target number of performance units granted. Actual number of performance units earned, if any, is dependent upon performance and may range from zero percent to 200 percent of the target.

(B)

These amounts represent performance units that vested at December 31, 2022, which were settled in February 2023.

(C)

These amounts represent performance units that vested at December 31, 2023. Actual expected amounts to be paid out in 2024 will differ based on the percentage at which the performance metric was met and are dependent upon Compensation Committee approval.

(D)

Due to certain employees transferring between OG&E and OGE Energy.

The following tables present a summary of the activity for the Registrants' non-vested performance units and restricted stock units for the year ended December 31, 2023. The table designated as "OGE Energy" below includes the OG&E standalone activity, as OGE Energy represents consolidated results.


OGE Energy	Performance Units						Restricted Stock Units
	Number of Units				Weighted-Average Grant Date Fair Value		Number of Shares			Weighted-Average Grant Date Fair Value
Units/shares non-vested at 12/31/22		446,685			$	39.53		189,483		$	33.75
Granted		213,442		(A)	$	43.74		114,926		$	37.52
Vested		(234,672	)		$	38.14		(76,664	)	$	30.95
Forfeited		(8,009	)		$	40.66		(4,599	)	$	34.52
Units/shares non-vested at 12/31/23		417,446			$	42.44		223,146		$	36.64


OG&E	Performance Units						Restricted Stock Units
	Number of Units				Weighted-Average Grant Date Fair Value		Number of Shares				Weighted-Average Grant Date Fair Value
Units/shares non-vested at 12/31/22		126,073			$	39.53		52,759			$	33.78
Granted		65,069		(A)	$	43.74		35,034			$	37.52
Vested		(63,506	)		$	38.14		(20,265	)		$	30.91
Forfeited		(5,889	)		$	40.92		(2,725	)		$	35.17
Employee migration		(1,416	)	(B)	$	38.36		(559	)	(B)	$	32.25
Units/shares non-vested at 12/31/23		120,331			$	42.49		64,244			$	36.68

(A)

(B)

Due to certain employees transferring between OG&E and OGE Energy.

Fair Value of Vested Performance Units and Restricted Stock Units

The following table presents a summary of the Registrants' fair value for vested performance units and restricted stock units.


	OGE Energy						OG&E
Year Ended December 31 (In millions)	2023		2022		2021		2023		2022		2021
Performance units	$	9.0	$	6.2	$	8.1	$	2.4	$	1.7	$	2.3
Restricted stock units	$	2.4	$	2.1	$	2.2	$	0.6	$	0.5	$	0.5

Unrecognized Compensation Cost

The following table presents a summary of the Registrants' unrecognized compensation cost for non-vested performance units and restricted stock units and the weighted-average periods over which the compensation cost is expected to be recognized.


	OGE Energy				OG&E
December 31, 2023	Unrecognized Compensation Cost (In millions)		Weighted Average to be Recognized (In years)		Unrecognized Compensation Cost (In millions)		Weighted Average to be Recognized (In years)
Performance units	$	8.3		1.68	$	2.4		1.70
Restricted stock units		3.6		1.67		1.1		1.69
Total unrecognized compensation cost	$	11.9			$	3.5