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Stock-Based Compensation
 12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation Stock-based compensationAt December 31, 2020, the Company had several stock-based compensation plans including stock option plans, various cash-settled liability plans, and an employee share purchase plan. These plans resulted in an expense of $170 million in 2020 (2019 – $133 million; 2018 – $75 million).
A. Stock option plan
The following table summarizes the Company’s stock option plan as at December 31, 2020:
Options outstandingNon-vested options
Number of
options		Weighted-average
exercise price		Number of
options		Weighted-average
grant date
fair value
Outstanding, January 1, 20201,416,346 $199.12 761,784 $53.54 
Granted217,240 $344.04 217,240 $69.00 
Exercised(232,034)$162.87 N/AN/A
VestedN/AN/A(188,108)$50.91 
Forfeited(13,839)$271.75 (13,839)$58.29 
Expired(347)$168.84 N/AN/A
Outstanding, December 31, 20201,387,366 $225.20 777,077 $58.40 
Vested or expected to vest at December 31, 2020(1)
1,366,649 $223.98 N/AN/A
Exercisable, December 31, 2020610,289 $177.65 N/AN/A
(1) As at December 31, 2020, the weighted-average remaining term of vested or expected to vest options was 4.5 years with an aggregate intrinsic value of $297 million.

The following table provides the number of stock options outstanding and exercisable as at December 31, 2020 by range of exercise price and their related intrinsic aggregate value, and for options outstanding, the weighted-average years to expiration. The table also provides the aggregate intrinsic value for in-the-money stock options, which represents the amount that would have been received by option holders had they exercised their options on December 31, 2020 at the Company’s closing stock price of $441.53.
Options outstandingOptions exercisable
Range of exercise pricesNumber of
options		Weighted-average
years to
expiration		Weighted-average
exercise
price		Aggregate
intrinsic
value
(millions)		Number of
options		Weighted-average
exercise
price		Aggregate
intrinsic
value
(millions)
$65.06 - $188.78342,773 3.4$141.26 $103 342,773 $141.26 $103 
$188.79 - $214.58327,811 3.1$196.82 $80 109,375 $203.83 $26 
$214.59 - $261.88394,953 4.4$244.17 $78 134,845 $232.54 $28 
$261.89 - $411.37321,829 5.8$320.21 $39 23,296 $272.56 $4 
Total(1)
1,387,366 4.2$225.20 $300 610,289 $177.65 $161 
(1) As at December 31, 2020, the total number of in-the-money stock options outstanding was 1,387,366 with a weighted-average exercise price of $225.20. The weighted-average years to expiration of exercisable stock options is 3.6 years.

Pursuant to the employee plan, options may be exercised upon vesting, which is between 12 months and 48 months after the grant date, and will expire after seven years. Certain stock options granted in 2019 and 2018 vest upon the achievement of specific performance criteria. Under the fair value method, the fair value of the stock options at grant date was approximately $15 million for options issued in 2020 (2019 – $14 million; 2018 – $16 million). The weighted-average fair value assumptions were approximately:
202020192018
Expected option life (years)(1)
4.755.005.00
Risk-free interest rate(2)
1.28 %2.22 %2.22 %
Expected stock price volatility(3)
23.14 %25.04 %24.81 %
Expected annual dividends per share(4)
$3.3200 $2.6191 $2.3854 
Expected forfeiture rate(5)
4.41 %6.05 %4.70 %
Weighted-average grant date fair value of options granted during the year$69.00 $63.69 $55.63 
(1) Represents the period of time that awards are expected to be outstanding. Historical data on exercise behaviour or, when available, specific expectations regarding future exercise behaviour were used to estimate the expected life of the option.
(2) Based on the implied yield available on zero-coupon government issues with an equivalent term commensurate with the expected term of the option.
(3) Based on the historical volatility of the Company’s stock price over a period commensurate with the expected term of the option.
(4) Determined by the current annual dividend at the time of grant. The Company does not employ different dividend yields throughout the contractual term of the option. On July 21, 2020, the Company announced an increase in its quarterly dividend to $0.9500 per share, representing $3.8000 on an annual basis.
(5) The Company estimates forfeitures based on past experience. The rate is monitored on a periodic basis.

In 2020, the expense for stock options (regular and performance) was $16 million (2019 – $14 million; 2018 – $10 million). At December 31, 2020, there was $12 million of total unrecognized compensation related to stock options which is expected to be recognized over a weighted-average period of approximately 1.1 years.

The total fair value of shares vested for the stock option plan during 2020 was $10 million (2019 – $8 million; 2018 – $11 million).

The following table provides information related to all options exercised in the stock option plan during the years ended December 31:
(in millions of Canadian dollars)202020192018
Total intrinsic value$52 $63 $17 
Cash received by the Company upon exercise of options52 26 24 

B. Other share-based plans
Performance share unit plans
During 2020, the Company issued 97,998 PSUs with a grant date fair value of approximately $34 million and 10,029 PDSUs with a grant date fair value, including value of expected future matching units, of approximately $4 million. PSUs and PDSUs attract dividend equivalents in the form of additional units, based on dividends paid on the Company's Common Shares, and vest approximately three years after the grant date contingent upon CP’s performance ("performance factor"). The fair value of these PSUs and PDSUs is measured periodically until settlement using closing share price on the date of measurement. The fair value of units that are probable of vesting based on forecasted performance factors over the three-year performance period is recognized as expense in the Consolidated Statements of Income. Vested PSUs are settled in cash. Vested PDSUs are settled in cash pursuant to the DSU plan and are eligible for a 25% match if the holder has not exceeded their share ownership requirements, and are paid out only when the holder ceases their employment with CP.

The performance period for PSUs and PDSUs issued in 2020 is January 1, 2020 to December 31, 2022, and the performance factors are Return on Invested Capital ("ROIC"), Total Shareholder Return ("TSR") compared to the S&P/TSX 60 Index, and TSR compared to Class I railways.

The performance period for 133,681 PSUs issued in 2019 is January 1, 2019 to December 31, 2021, and the performance factors for these PSUs are ROIC, TSR compared to the S&P/TSX 60 Index, and TSR compared to Class I railways. The performance factors for the remaining 579 PSUs are annual revenue for the fiscal year 2020, diluted earnings per share for the fiscal year 2020, and share price appreciation.

The performance period for 125,280 PSUs issued in 2018 is January 1, 2018 to December 31, 2020, and the performance factors for these PSUs were ROIC, TSR compared to the S&P/TSX Capped Industrial Index, and TSR compared to the S&P 1500 Road and Rail Index. The resulting estimated payout on these awards was 200% on 113,769 total outstanding awards representing a total fair value of $98 million at December 31, 2020, calculated using the Company's average share price of the last 30 trading days preceding December 31, 2020. The performance factors for the remaining 36,975 PSUs were annual revenue for the fiscal year 2020, diluted earnings per share for the fiscal year 2020, and share price appreciation.

The performance period for PSUs issued in 2017 was January 1, 2017 to December 31, 2019, and the performance factors for these PSUs were ROIC, TSR compared to the S&P/TSX Capped Industrial Index, and TSR compared to the S&P 1500 Road and Rail Index. The resulting payout was 193% of the outstanding units multiplied by the Company's average share price calculated using the last 30 trading days preceding December 31, 2019. In the first quarter of 2020, payouts occurred on the total outstanding awards, including dividends reinvested, totalling $76 million on 121,225 outstanding awards.
The following table summarizes information related to the Company’s PSUs and PDSUs as at December 31:
20202019
Outstanding, January 1403,136 395,048 
Granted108,027 134,260 
Units, in lieu of dividends3,843 4,032 
Settled(121,225)(117,228)
Forfeited(11,912)(12,976)
Outstanding, December 31381,869 403,136 

In 2020, the expense for PSUs and PDSUs was $121 million (2019 – $89 million; 2018 – $54 million). At December 31, 2020, there was $51 million of total unrecognized compensation related to these awards which is expected to be recognized over a weighted-average period of approximately 1.4 years.

Deferred share unit plan
The Company established the DSU plan as a means to compensate and assist in attaining share ownership targets set for certain key employees and Directors. A DSU entitles the holder to receive, upon redemption, a cash payment equivalent to the Company's average share price using the 10 trading days prior to redemption. DSUs vest over various periods of up to 36 months and are only redeemable for a specified period after employment is terminated.

Senior managers may elect to receive DSUs in lieu of annual bonus cash payments in the bonus deferral program. In addition, senior managers will be granted a 25% company match of DSUs when deferring cash to DSUs to meet ownership targets. The election to receive eligible payments in DSUs is no longer available to a participant when the value of the participant’s DSUs is sufficient to meet the Company’s stock ownership guidelines. Senior managers have five years to meet their ownership targets.

The expense for DSUs is recognized over the vesting period for both the initial subscription price and the change in value between reporting periods.

The following table summarizes information related to the DSUs as at December 31:
20202019
Outstanding, January 1161,219 152,760 
Granted19,041 19,912 
Units, in lieu of dividends1,511 1,608 
Settled(26,788)(12,110)
Forfeited(172)(951)
Outstanding, December 31154,811 161,219 

During 2020, the Company granted 19,041 DSUs with a grant date fair value of approximately $7 million. In 2020, the expense for DSUs was $21 million (2019 – $20 million expense; 2018 – $4 million expense). At December 31, 2020, there was $1 million of total unrecognized compensation related to DSUs which is expected to be recognized over a weighted-average period of approximately 1.3 years.

Summary of share-based liabilities paid
The following table summarizes the total share-based liabilities paid for each of the years ended December 31:
(in millions of Canadian dollars)202020192018
Plan
PSUs$76 $54 $30 
DSUs9 4 6 
Other1 — 1 
Total$86 $58 $37 
C. Employee share purchase plan
The Company has an employee share purchase plan whereby both employee and the Company contributions are used to purchase shares on the open market for employees. The Company’s contributions are expensed over the one year vesting period. Under the plan, the Company matches $1 for every $3 contributed by employees up to a maximum employee contribution of 6% of annual salary.
The total number of shares purchased in 2020 on behalf of participants, including the Company's contributions, was 115,344 (2019 – 137,942; 2018 – 118,865). In 2020, the Company’s contributions totalled $9 million (2019 – $8 million; 2018 – $6 million) and the related expense was $7 million (2019 – $6 million; 2018 – $5 million)