The West Pharmaceutical Services, Inc. 2016 Omnibus Incentive Compensation Plan (the “2016 Plan”) provides for the granting of stock options, stock appreciation rights, restricted stock awards and performance awards to employees and non-employee directors. A committee of the Board of Directors determines the terms and conditions of awards to be granted. Vesting requirements vary by award. At December 31, 2023, there were 1,434,547 shares remaining in the 2016 Plan for future grants.

Stock options and stock appreciation rights reduce the number of shares available by one share for each award granted. All other awards under the 2016 Plan will reduce the total number of shares available for grant by an amount equal to 2.5 times the number of shares awarded. If awards made under previous plans would entitle a plan participant to an amount of West stock in excess of the target amount, the additional shares (up to a maximum threshold amount) will be distributed under the 2016 Plan.


($ in millions)	2023		2022		2021
Stock option and appreciation rights	$	11.3	$	5.6	$	12.5
Performance share units, stock-settled	5.5		15.6		17.6
Performance share units, cash-settled	0.3		(0.1)		1.0
Performance share units, dividend equivalents	0.1		0.1		0.2
Employee stock purchase plan	1.3		1.3		1.4
Deferred compensation plans and restricted share awards	4.8		1.2		4.8
Total stock-based compensation expense	$	23.3	$	23.7	$	37.5

The Company estimates expected forfeitures. The amount of unrecognized compensation expense for all non-vested awards as of December 31, 2023 was $28.2 million, which is expected to be recognized over a weighted average period of 1.6 years.

Stock options granted to employees vest in equal increments. All awards expire 10 years from the date of grant. Upon the exercise of stock options, shares are issued in exchange for the exercise price of the options.


(in millions, except per share data)			2023
Options outstanding, January 1			1.9
Granted			0.1
Exercised			(0.6)
Forfeited			0.0
Options outstanding, December 31			1.4

Options vested and expected to vest, December 31			1.4
Options vested and exercisable, December 31			1.1


Weighted Average Exercise Price	2023
Options outstanding, January 1	$	118.72
Granted	306.97
Exercised	80.18
Forfeited	289.70
Options outstanding, December 31	$	145.40

Options vested and expected to vest, December 31	$	143.46
Options vested and exercisable, December 31	$	105.08

The fair value of the options was estimated on the date of grant using a Black-Scholes option valuation model that used the following weighted average assumptions in 2023, 2022 and 2021: a risk-free interest rate of 4.1%, 1.8%, and 0.8%, respectively; stock volatility of 29.8%, 25.1%, and 23.9%, respectively; and dividend yields of 0.3%, 0.2%, and 0.3%, respectively. Stock volatility is estimated based on historical data and the impact from expected future trends. Expected lives, which are based on prior experience, averaged 5.7 years for 2023 and 5.6 years for 2022 and 2021. The weighted average grant date fair value of options granted in 2023, 2022 and 2021 was $108.95, $96.43 and $64.51, respectively. Stock option expense is recognized over the vesting period, net of forfeitures.

For the years ended December 31, 2023, 2022 and 2021, the intrinsic value of options exercised was $151.0 million, $60.1 million and $147.3 million, respectively. The grant date fair value of options vested during those same periods was $8.6 million, $8.8 million and $8.3 million, respectively.

Stock appreciation rights (“SARs”) granted to eligible international employees vest in equal annual increments over 4 years of continuous service. All awards expire 10 years from the date of grant. The fair value of each cash-settled SAR is adjusted at the end of each reporting period, with the resulting change reflected in expense. As of December 31, 2023, SARs outstanding were 15,407, all of which were cash-settled. Upon exercise of a cash-settled SAR, the employee receives cash for the difference between the grant date price and the fair market value of the Company’s stock on the date of exercise. As a result of the cash settlement feature, cash-settled SARs are recorded within other long-term liabilities.


			2023
SARs outstanding, January 1			20,402
Granted			228
Exercised			(4,646)
Forfeited			(577)
SARs outstanding, December 31			15,407

SARs vested and expected to vest, December 31			15,407
SARs vested and exercisable, December 31			14,355


Weighted Average Exercise Price	2023
SARs outstanding, January 1	$	97.28
Granted	306.68
Exercised	67.89
Forfeited	287.26
SARs outstanding, December 31	$	102.12

SARs vested and expected to vest, December 31	$	102.12
SARs vested and exercisable, December 31	$	89.44

In addition to stock options and SAR awards, we grant performance share unit (“PSU”) awards to eligible employees. These awards are earned based on the Company’s performance against pre-established targets, including annual growth rate of revenue and return on invested capital, over a specified performance period. Depending on the achievement of the targets, recipients of stock-settled PSU awards are entitled to receive a certain number of shares of common stock, whereas recipients of cash-settled PSU awards are entitled to receive a payment in cash per unit based on the fair market value of a share of our common stock at the end of the performance period.


	2023
Non-vested stock-settled PSU awards, January 1	112,553
Granted at target level	37,736
Adjustments above/(below) target	47,154
Vested and converted	(93,902)
Forfeited	(5,100)
Non-vested stock-settled PSU awards, December 31	98,441

Weighted Average Fair Value	2023
Non-vested stock-settled PSU awards, January 1	$	278.38
Granted at target level	306.97
Adjustments above/(below) target	181.31
Vested and converted	306.68
Forfeited	317.85
Non-vested stock-settled PSU awards, December 31	$	334.03

Shares earned under PSU awards may vary from 0% to 200% of an employee’s targeted award. The fair value of stock-settled PSU awards is based on the market price of our stock at the grant date and is recognized as expense over the performance period, adjusted for estimated target outcomes and net of forfeitures. The weighted average grant date fair value of stock-settled PSU awards granted during the years 2023, 2022 and 2021 was $306.97, $362.40 and $333.58, respectively. Including forfeiture and target achievement expectations, we expect that the stock-settled PSU awards will convert to 36,080 shares to be issued over an average remaining term of one year.

The fair value of cash-settled PSU awards is also based on the market price of our stock at the grant date. These awards are revalued at the end of each quarter based on changes in our stock price. As a result of the cash settlement feature, cash-settled PSU awards are recorded within other long-term liabilities.


			2023
Non-vested cash-settled PSU awards, January 1			890
Granted at target level			82
Adjustments above/(below) target			591
Vested and converted			(1,181)
Forfeited			(178)
Non-vested cash-settled PSU awards, December 31			204


Weighted Average Fair Value	2023
Non-vested cash-settled PSU awards, January 1	$	242.29
Granted at target level	306.68
Adjustments above/(below) target	191.43
Vested and converted	306.68
Forfeited	310.52
Non-vested cash-settled PSU awards, December 31	$	355.74

We also offer an Employee Stock Purchase Plan (“ESPP”), which provides for the sale of our common stock to eligible employees at 85% of the current market price on the last trading day of each quarterly offering period. Payroll deductions are limited to 25% of the employee’s base salary, not to exceed $25,000 in any one calendar year. In addition, employees may not buy more than 2,000 shares during any offering period (8,000 shares per year). Purchases under the ESPP were 23,955 shares, 27,894 shares and 27,016 shares for the years 2023, 2022 and 2021, respectively. At December 31, 2023, there were 3,714,353 shares available for issuance under the ESPP.

Our deferred compensation plans include a Non-Qualified Deferred Compensation Plan for Non-Employee Directors, under which non-employee directors may defer all or part of their annual cash or stock retainers. The deferred fees may be credited to a stock-equivalent account. Amounts credited to this account are converted into deferred stock units based on the fair market value of one share of our common stock on the last day of the quarter. For deferred stock units ultimately paid in cash, a liability is calculated at an amount determined by multiplying the number of units by the fair market value of our common stock at the end of each reporting period. In addition, annual stock awards are granted on the date of our annual meeting and are distributed in shares of common stock at the next annual meeting, unless deferred. In 2023, we granted 6,160 deferred stock awards, with a weighted grant date fair value of $357.00. In 2022, we granted 4,827 deferred stock awards, with a grant date fair value of $300.78.

In addition, during 2023, we granted 8,343 restricted share awards at a weighted grant-date fair value of $314.06 per share to employees under the 2016 Plan. During 2022, we granted 9,648 restricted share awards at a weighted grant-date fair value of $310.52 per share to employees under the 2016 Plan. During 2021, we granted 6,002 restricted share awards at a weighted grant-date fair value of $312.41 per share to employees under the 2016 Plan. The fair value of these awards is based on the market price of our stock at the grant date and is recognized as expense over the vesting period.