26. Share-Based Compensation

Share-Based Compensation Expense

Reflected in the Consolidated Statements of Comprehensive Income within Operating, Selling and General expense are the following share-based compensation amounts:

($ millions)	2020		2019

Equity-settled plans	32		50

Cash-settled plans	(28	)	274

Total share-based compensation expense	4		324

Liability Recognized for Share-Based Compensation

Reflected in the Consolidated Balance Sheets within accounts payable and accrued liabilities and other long-term liabilities are the following fair value amounts for the company's cash-settled plans:

($ millions)	December 31 2020	December 31 2019

Current liability	117	242

Long-term liability (note 22)	143	289

Total Liability	260	531

The intrinsic value of the vested awards at December 31, 2020 was $149 million (December 31, 2019 – $300 million).

Stock Option Plans

Suncor grants stock option awards as a form of retention and incentive compensation.

Stock options granted by the company provide the holder with the right to purchase common shares at the market price on the grant date, subject to fulfilling vesting terms. Options granted have a seven-year life, vest annually over a three-year period and are accounted for as equity-settled awards.

The weighted average fair value of options granted during the period and the weighted average assumptions used in their determination are as noted below:

	2020	2019

Annual dividend per share (dollars)	1.10	1.68

Risk-free interest rate	1.35%	1.78%

Expected life	5 years	5 years

Expected volatility	24%	26%

Weighted average fair value per option (dollars)	4.51	6.61

The expected life is based on historical stock option exercise data and current expectations. The expected volatility considers the historical volatility in the price of Suncor's common shares over a period similar to the life of the options, and is indicative of future trends.

The following table presents a summary of the activity related to Suncor's stock option plans:

	2020			2019

	Number (thousands)		Weighted Average Exercise Price ($)	Number (thousands)		Weighted Average Exercise Price ($)

Outstanding, beginning of year	33 882		39.70	28 935		38.25

Granted	6 341		38.95	7 756		42.96

Exercised as options for common shares	(804	)	35.73	(2 688	)	33.37

Forfeited/expired	(1 046	)	39.91	(121	)	42.57

Outstanding, end of year	38 373		39.65	33 882		39.70

Exercisable, end of year	26 943		39.10	21 535		37.86

For the options outstanding at December 31, 2020, the exercise price ranges and weighted average remaining contractual lives are shown below:

	Outstanding			Exercisable

Exercise Prices ($)	Number (thousands)	Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price ($)	Number (thousands)	Weighted Average Exercise Price ($)

23.28-24.99	51	6	23.28	—	—

30.00-34.99	5 130	2	30.23	5 130	30.23

35.00-39.99	12 484	3	38.40	6 663	37.82

40.00-44.99	20 527	4	42.71	15 030	42.60

45.00-49.99	53	5	48.06	35	48.07

50.00-54.27	128	5	52.39	85	52.39

Total	38 373	4	39.65	26 943	39.10

Common shares authorized for issuance by the Board of Directors that remain available for the granting of future options:

(thousands)	2020	2019

	8 999	14 295

Share Unit Plans

Suncor grants share units as a form of retention and incentive compensation. Share unit plans are accounted for as cash-settled awards.

(a) Performance Share Units (PSUs)

A PSU is a time-vested award entitling employees to receive varying degrees of cash (0% – 200% of the company's share price at time of vesting) contingent upon Suncor's total shareholder return (stock price appreciation and dividend income) relative to a peer group of companies. Cash payments for awards granted in 2020 and onwards are contingent upon Suncor's total shareholder return and annual return on capital employed performance. PSUs vest approximately three years after the grant date.

(b) Restricted Share Units (RSUs)

A RSU is a time-vested award entitling employees to receive cash calculated based on an average of the company's share price leading up to vesting. RSUs vest approximately three years after the grant date.

A DSU is redeemable for cash or a common share for a period of time after a unitholder ceases employment or Board membership. The DSU Plan is limited to executives and members of the Board of Directors. Members of the Board of Directors receive an annual grant of DSUs as part of their compensation and may elect to receive their fees in cash only or in increments of 50% or 100% allocated to DSUs. Executives may elect to receive their annual incentive bonus in cash only or in increments of 25%, 50%, 75% or 100% allocated to DSUs.

The following table presents a summary of the activity related to Suncor's share unit plans:

(thousands)		PSU		RSU		DSU

Outstanding, December 31, 2018		2 197		14 592		1 305

	Granted	1 212		4 861		200

	Redeemed for cash	(1 210	)	(5 577	)	(217	)

	Forfeited/expired	(6	)	(274	)	(1	)

Outstanding, December 31, 2019		2 193		13 602		1 287

	Granted	1 232		6 567		289

	Redeemed for cash	(1 086	)	(4 707	)	(191	)

	Forfeited/expired	(54	)	(367	)	—

Outstanding, December 31, 2020		2 285		15 095		1 385

Stock Appreciation Rights (SARs)

A SAR entitles the holder to receive a cash payment equal to the difference between the stated exercise price and the market price of the company's common shares on the date the SAR is exercised, and is accounted for as a cash-settled award.

SARs have a seven-year life and vest annually over a three-year period.

The following table presents a summary of the activity related to Suncor's SARs plan:

	2020			2019

	Number (thousands)		Weighted Average Exercise Price ($)	Number (thousands)		Weighted Average Exercise Price ($)

Outstanding, beginning of year	385		39.83	363		38.60

Granted	132		37.41	112		42.95

Exercised	(7	)	36.38	(44	)	34.53

Forfeited/expired	(1	)	39.08	(46	)	42.85

Outstanding, end of year	509		39.25	385		39.83

Exercisable, end of year	307		39.09	223		37.62