At December 31, 2021, 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 $131 million in 2021 (2020 – $170 million; 2019 – $133 million) and the total tax benefit related to these plans was $29 million in 2021 (2020 – $42 million; 2019 – $33 million).

Options issued prior to the share split described in Item 8. Financial Statements and Supplementary Data, Note 1 Summary of significant accounting policies now each provide rights over five shares. For consistency, all number of options presented herein are calculated and shown on the basis of the number of shares subject to the options. The following table summarizes information related to the stock option plan as at December 31, 2021:


	Options outstanding			Non-vested options
	Number of options	Weighted-average exercise price		Number of options	Weighted-average grant date fair value
Outstanding, January 1, 2021	6,936,830	$	45.04	3,885,385	$	11.68
Granted	1,346,358	$	87.51	1,346,358	$	19.06
Exercised	(723,276)	$	35.20	N/A	N/A
Vested	N/A	N/A		(1,315,036)	$	11.83
Forfeited	(167,724)	$	54.54	(167,724)	$	12.23

Outstanding, December 31, 2021	7,392,188	$	53.36	3,748,983	$	14.25
Vested or expected to vest at December 31, 2021(1)	7,340,397	$	53.21	N/A	N/A
Exercisable, December 31, 2021	3,643,205	$	41.64	N/A	N/A

The following table provides the number of stock options outstanding and exercisable as at December 31, 2021 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, 2021 at the Company’s closing stock price of $90.98.


	Options outstanding						Options exercisable
Range of exercise prices	Number 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)
$15.14 - $38.17	1,420,600	2.7	$	30.14	$	86	1,420,600	$	30.14	$	87
$38.18 - $46.65	2,013,630	2.4	$	40.86	$	101	1,032,160	$	42.64	$	50
$46.66 - $68.74	2,167,180	4.1	$	55.55	$	77	1,082,960	$	52.89	$	41
$68.75 - $103.98	1,790,778	5.9	$	83.21	$	14	107,485	$	70.48	$	2
Total(1)	7,392,188	3.8	$	53.36	$	278	3,643,205	$	41.64	$	180

(1) As at December 31, 2021, the total number of in-the-money stock options outstanding was 7,373,880 with a weighted-average exercise price of $53.26. The weighted-average years to expiration of exercisable stock options is 3.1 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. Under the fair value method, the fair value of the stock options at grant date was approximately $26 million for options issued in 2021 (2020 – $15 million; 2019 – $14 million). The weighted-average fair value assumptions were approximately:


	2021			2020			2019
Expected option life (years)(1)	4.75			4.75			5.00
Risk-free interest rate(2)	0.53		%	1.28		%	2.22		%
Expected stock price volatility(3)	27.14		%	23.14		%	25.04		%
Expected annual dividends per share(4)	$	0.760		$	0.664		$	0.524
Expected forfeiture rate(5)	2.62		%	4.41		%	6.05		%
Weighted-average grant date fair value of options granted during the year	$	19.06		$	13.80		$	12.74

(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.

In 2021, the expense for stock options (regular and performance) was $23 million (2020 – $16 million; 2019 – $14 million). At December 31, 2021, there was $16 million of total unrecognized compensation related to stock options which is expected to be recognized over a weighted-average period of approximately 0.9 years.

During 2021, the Company issued 431,430 PSUs with a grant date fair value of approximately $37 million and 12,694 PDSUs with a grant date fair value, including value of expected future matching units, of approximately $1 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 2021 is January 1, 2021 to December 31, 2023, 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 489,990 PSUs and 50,145 PDSUs issued in 2020 is January 1, 2020 to December 31, 2022, 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 period for 668,405 PSUs issued in 2019 was January 1, 2019 to December 31, 2021, and the performance factors for these PSUs were ROIC, TSR compared to the S&P/TSX 60 Index, and TSR compared to Class I Railways. The resulting estimated payout on these awards was 200% on 630,129 total outstanding awards representing a total fair value of $116 million at December 31, 2021, calculated using the Company's average share price of the last 30 trading days preceding December 31, 2021. The performance factors for the remaining 2,895 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 626,400 PSUs issued in 2018 was January 1, 2018 to December 31, 2020, and the performance factors 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 200% of the

outstanding units multiplied by the Company's average share price calculated using the last 30 trading days preceding December 31, 2020. In the first quarter of 2021, payouts occurred on 570,056 total outstanding awards, including dividends reinvested, totalling $98 million. The performance factors for the remaining 184,875 PSUs were annual revenue for the fiscal year 2020, diluted earnings per share for the fiscal year 2020, and share price appreciation. The resulting payout was 125% of the outstanding units multiplied by the Company's average share price calculated using the last 30 trading days preceding the vesting dates. In the second half of 2021, payouts occurred on 173,456 total outstanding awards, including the 2,895 units issued in 2019 and dividends reinvested, totalling $21 million.


	2021	2020
Outstanding, January 1	1,909,345	2,015,680
Granted	444,124	540,135
Units in lieu of dividends	14,668	19,215
Settled	(743,512)	(606,125)
Forfeited	(46,844)	(59,560)
Outstanding, December 31	1,577,781	1,909,345

In 2021, the expense for PSUs and PDSUs was $91 million (2020 – $121 million; 2019 – $89 million). At December 31, 2021, there was $35 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.

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.

During 2021, the Company granted 70,112 DSUs with a grant date fair value of approximately $6 million. In 2021, the expense for DSUs was $6 million (2020 – $21 million; 2019 – $20 million). At December 31, 2021, there was $1 million of total unrecognized compensation related to DSUs which is expected to be recognized over a weighted-average period of approximately 1.0 year.

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.