At December 31, 2023, the Company had several stock-based compensation plans including a stock options plan, various cash-settled liability plans, and an employee share purchase plan. These plans resulted in an expense of $122 million in 2023 (2022 – $113 million; 2021 – $131 million) and the total tax benefit related to these plans was $27 million in 2023 (2022 – $26 million; 2021 – $29 million).


	Options outstanding			Non-vested options
	Number of stock options	Weighted-average exercise price		Number of stock options	Weighted-average grant date fair value
Outstanding, January 1, 2023	7,353,133	$	61.69	2,597,008	$	18.09
Granted	856,332	$	105.13	856,332	$	29.79
Exercised	(1,634,730)	$	42.13	N/A	N/A
Vested	N/A	N/A		(1,047,434)	$	16.66
Forfeited	(102,803)	$	92.84	(102,803)	$	23.08

Outstanding, December 31, 2023	6,471,932	$	71.03	2,303,103	$	22.87
Vested or expected to vest at December 31, 2023(1)	6,428,547	$	70.83	N/A	N/A
Exercisable, December 31, 2023	4,168,829	$	58.20	N/A	N/A

(1) As at December 31, 2023, the weighted-average remaining term of vested or expected to vest options was 3.3 years with an aggregate intrinsic value of $219 million.

The following table provides the number of stock options outstanding and exercisable as at December 31, 2023 by range of exercise price and their related intrinsic aggregate value, and for stock 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, 2023 at the Company’s closing stock price of $104.84.


	Options outstanding						Options exercisable
Range of exercise prices	Number of stock options	Weighted-average years to expiration	Weighted-average exercise price		Aggregate intrinsic value (millions)		Number of stock options	Weighted-average exercise price		Aggregate intrinsic value (millions)
$30.94 - $50.19	1,693,436	1.2	$	40.04	$	110	1,693,436	$	40.04	$	110
$50.20 - $70.36	1,395,999	2.3	$	58.53	$	65	1,284,814	$	57.53	$	61
$70.37 - $94.27	1,610,826	4.0	$	82.99	$	35	822,618	$	80.20	$	20
$94.28 - $109.01	1,771,671	5.3	$	99.62	$	9	367,961	$	94.94	$	4
Total(1)	6,471,932	3.3	$	71.03	$	219	4,168,829	$	58.20	$	195

(1) As at December 31, 2023, the total number of in-the-money stock options outstanding was 5,787,281 with a weighted-average exercise price of $66.96. The weighted-average years to expiration of exercisable stock options is 2.3 years.

Pursuant to the plan, stock options may be exercised upon vesting, which is between 12 and 48 months after the grant date, and expire seven years from the grant date. The grant date fair value of the stock options granted in 2023 was $26 million (2022 – $16 million; 2021 – $26 million). The following table provides assumptions used to determine the fair values of stock option awards, and the weighted-average grant date fair values for units granted in 2023, 2022 and 2021:


	2023			2022			2021
Expected option life (years)(1)	4.75			4.75			4.75
Risk-free interest rate(2)	3.35		%	1.62		%	0.53		%
Expected stock price volatility(3)	28.44		%	26.85		%	27.14		%
Expected annual dividends per share(4)	$	0.76		$	0.76		$	0.76
Expected forfeiture rate(5)	3.18		%	3.01		%	2.62		%
Weighted-average grant date fair value of options granted during the year	$	29.79		$	21.33		$	19.06

(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.

(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.

In 2023, the expense for stock options was $25 million (2022 – $23 million; 2021 – $23 million). At December 31, 2023, there was $9 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.

During 2023, the Company issued 891,411 PSUs with a grant date fair value of $96 million and 26,333 PDSUs with a grant date fair value, including the fair value of expected future matching units, of $3 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 three to four years after the grant date, contingent on the Company’s performance ("performance factor"). Vested PSUs are settled in cash. Vested PDSUs are converted into DSUs pursuant to the DSU plan, are eligible for a 25% company match if the employee has not exceeded their share ownership requirements, and are settled in cash only when the holder ceases their employment with the Company.

The performance period for 544,175 PSUs and all PDSUs granted in 2023 is January 1, 2023 to December 31, 2025, and the performance factors are Free Cash Flow ("FCF"), Total Shareholder Return ("TSR") compared to the S&P/TSX 60 Index, and TSR compared to the S&P 500 Industrials Index. The performance period for the other 347,236 PSUs granted in 2023 is April 28, 2023 to December 1, 2026 and the performance factors are annualized earnings before interest, tax, depreciation, and amortization ("EBITDA"), and TSR compared to Class I railways.

The performance period for all of the 415,660 PSUs and 13,506 PDSUs granted in 2022 is January 1, 2022 to December 31, 2024, and the performance factors are FCF, Adjusted net debt to Adjusted EBITDA Modifier, TSR compared to the S&P/TSX 60 Index, and TSR compared to the S&P 500 Industrials Index.

The performance period for all of the 431,430 PSUs and 12,694 PDSUs granted in 2021 was January 1, 2021 to December 31, 2023, and the performance factors were Return on Invested Capital ("ROIC"), TSR compared to the S&P/TSX 60 Index, and TSR compared to Class I railways. The estimated payout on these awards is 135% on 399,372 PSUs (including expected dividends reinvested) and 11,372 PDSUs (including expected dividends reinvested and matching units) outstanding, representing fair values of $54 million and $2 million, respectively, as at December 31, 2023, calculated based on the Company's average common share price of the last 30 trading days preceding December 31, 2023.

The performance period for all of the 489,990 PSUs and 50,145 PDSUs granted in 2020 was January 1, 2020 to December 31, 2022, and the performance factors were ROIC, TSR compared to the S&P/TSX 60 Index, and TSR compared to Class I railways. The resulting payout was 180% of the outstanding units multiplied by the Company's average common share price calculated based on the last 30 trading days preceding December 31, 2022. In the first quarter of 2023, payouts were $87 million on 459,358 PSUs, including dividends reinvested. The 45,058 PDSUs that vested on December 31, 2022, with a fair value of $11 million, including dividends reinvested and matching units, will be paid out in future reporting periods pursuant to the DSU plan (as described above).


	2023	2022
Outstanding, January 1	1,336,358	1,577,781
Granted	917,744	429,166
Issued in lieu of dividends	10,845	11,207
Settled	(460,667)	(637,073)
PDSUs converted into DSUs	(45,058)	—
Forfeited	(80,669)	(44,723)
Outstanding, December 31	1,678,553	1,336,358

In 2023, the expense for PSUs and PDSUs was $78 million (2022 – $69 million; 2021 – $91 million). At December 31, 2023, there was $67 million of total unrecognized compensation related to these awards, which is expected to be recognized over a weighted-average period of approximately 1.9 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 common 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.


	2023	2022
Outstanding, January 1	744,530	841,333
Granted	85,750	60,262
PDSUs converted into DSUs	81,533	—
Issued in lieu of dividends	5,685	6,510
Settled	(15,935)	(162,319)
Forfeited	(1,745)	(1,256)
Outstanding, December 31	899,818	744,530

During 2023, the Company granted 81,533 DSUs with a grant date fair value of approximately $9 million. In 2023, the expense for DSUs was $10 million (2022 – $10 million; 2021 – $6 million). At December 31, 2023, there was $1 million of total unrecognized compensation related to DSUs, which is expected to be recognized over a weighted-average period of approximately 1.9 years.

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.