In May 2006, the Company granted the following awards under the Mastercard Incorporated 2006 Long Term Incentive Plan, which was amended and restated as of June 5, 2012 (the “LTIP”). The LTIP is a stockholder-approved plan that permits the grant of various types of equity awards to employees. The Company has granted Options, RSUs and PSUs under the LTIP. The Company uses the straight-line method of attribution for expensing all equity awards. Compensation expense is recorded net of estimated forfeitures, with estimates adjusted as appropriate.

There are approximately 116 million shares of Class A common stock authorized for equity awards under the LTIP. Although the LTIP permits the issuance of shares of Class B common stock, no such shares have been authorized for issuance. Shares issued as a result of Option exercises and the conversions of RSUs and PSUs were funded primarily with the issuance of new shares of Class A common stock.

Options expire ten years from the date of grant and vest ratably over four years. For Options granted, a participant’s unvested awards are forfeited upon termination. In the event a participant terminates employment due to disability or retirement more than seven months after receiving the award, however, the participant retains all of their awards without providing additional service to the Company. Retirement eligibility is dependent upon age and years of service. Compensation expense is recognized over the vesting period as stated in the LTIP.

The fair value of each Option is estimated on the date of grant using a Black-Scholes option pricing model. The following table presents the weighted-average assumptions used in the valuation and the resulting weighted-average fair value per Option granted for the years ended December 31:


	2021			2020			2019
Risk-free rate of return	0.9		%	1.0		%	2.6		%
Expected term (in years)	6.00			6.00			6.00
Expected volatility	26.1		%	19.3		%	19.6		%
Expected dividend yield	0.5		%	0.6		%	0.6		%
Weighted-average fair value per Option granted	$	91.70		$	80.92		$	53.09

The risk-free rate of return was based on the U.S. Treasury yield curve in effect on the date of grant. The expected term and the expected volatility were based on historical Mastercard information. The expected dividend yields were based on the Company’s expected annual dividend rate on the date of grant.


	Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in millions)			(in years)	(in millions)
Outstanding at January 1, 2021	5.7	$	137
Granted	0.3	$	363
Exercised	(0.6)	$	96
Forfeited/expired	—	$	259
Outstanding at December 31, 2021	5.4	$	152	5.3	$	1,109
Exercisable at December 31, 2021	4.2	$	122	4.6	$	986
Options vested and expected to vest at December 31, 2021	5.3	$	152	5.3	$	1,109

As of December 31, 2021, there was $26 million of total unrecognized compensation cost related to non-vested Options. The cost is expected to be recognized over a weighted-average period of 1.9 years.

For RSUs granted on or after March 1, 2020, the awards generally vest ratably over four years. For RSUs granted before March 1, 2020, the awards generally vest after three years. A participant’s unvested awards are forfeited upon termination of employment. In the event of termination due to job elimination (as defined by the Company), however, a participant will retain a pro-rata portion of the unvested awards for services performed through the date of termination. In the event a participant terminates employment due to disability or retirement more than seven months after receiving the award, the participant retains all of their awards without providing additional service to the Company. Compensation expense is recognized over the shorter of the vesting periods stated in the LTIP or the date the individual becomes eligible to retire but not less than seven months.


	Units	Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value
	(in millions)			(in millions)
Outstanding at January 1, 2021	2.5	$	231
Granted	0.8	$	358
Converted	(1.0)	$	199
Forfeited	(0.1)	$	282
Outstanding at December 31, 2021	2.2	$	291	$	781
RSUs expected to vest at December 31, 2021	2.1	$	289	$	751

The fair value of each RSU is the closing stock price on the New York Stock Exchange of the Company’s Class A common stock on the date of grant, adjusted for the exclusion of dividend equivalents. Upon vesting, a portion of the RSU award may be withheld to satisfy the minimum statutory withholding taxes. The remaining RSUs will be settled in shares of the Company’s Class A common stock after the vesting period. As of December 31, 2021, there was $283 million of total unrecognized compensation cost related to non-vested RSUs. The cost is expected to be recognized over a weighted-average period of 2.6 years.

PSUs vest after three years, however, awards granted on or after March 1, 2019 are subject to a mandatory one-year post-vest hold. A participant’s unvested awards are forfeited upon termination of employment. In the event of termination due to job elimination (as defined by the Company), however, a participant will retain a pro-rata portion of the unvested awards for services performed through the date of termination. In the event a participant terminates employment due to disability or retirement more than seven months after receiving the award, the participant retains all of their awards without providing additional service to the Company.


	Units	Weighted-Average Grant-Date Fair Value		Aggregate Intrinsic Value
	(in millions)			(in millions)
Outstanding at January 1, 2021	0.4	$	259
Granted	0.2	$	385
Converted	(0.1)	$	226
Other	(0.1)	$	231
Outstanding at December 31, 2021	0.4	$	334	$	128
PSUs expected to vest at December 31, 2021	0.4	$	334	$	128

Since 2013, PSUs containing performance and market conditions have been issued. Performance measures used to determine the actual number of shares that vest after three years include net revenue growth, EPS growth and relative total shareholder return (“TSR”). Relative TSR is considered a market condition, while net revenue and EPS growth are considered performance conditions. The Monte Carlo simulation valuation model is used to determine the grant-date fair value.

Compensation expense for PSUs is recognized over the requisite service period, or the date the individual becomes eligible to retire but not less than seven months, if it is probable that the performance target will be achieved and subsequently adjusted if the probability assessment changes. During the year ended December 31, 2020, performance targets related to PSU awards granted in 2018 (“2018 PSU Awards”) were adjusted to exclude certain pandemic-related financial impacts deemed outside of the Company’s control. The adjustment during the year ended December 31, 2020 required the Company to apply modification accounting to the 2018 PSU Awards which had an immaterial impact on compensation expense. As of December 31, 2021, there was $34 million of total unrecognized compensation cost related to non-vested PSUs. The cost is expected to be recognized over a weighted-average period of 1.5 years.


	2021		2020		2019
	(in millions, except weighted-average fair value)
Share-based compensation expense: Options, RSUs and PSUs	$	273	$	254	$	250
Income tax benefit recognized for equity awards	57		53		53
Income tax benefit realized related to Options exercised	36		68		69

Options:
Total intrinsic value of Options exercised	169		317		317
RSUs:
Weighted-average grant-date fair value of awards granted	358		288		226
Total intrinsic value of RSUs converted into shares of Class A common stock	360		330		394
PSUs:
Weighted-average grant-date fair value of awards granted	385		291		231
Total intrinsic value of PSUs converted into shares of Class A common stock	32		92		85