Incentive Plans (Note)

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement, Additional Disclosure [Abstract]

International Paper currently has an Incentive Compensation Plan (ICP). The ICP authorizes grants of restricted stock, restricted or deferred stock units, performance awards payable in cash or stock upon the attainment of specified performance goals, dividend equivalents, stock options, stock

appreciation rights, other stock-based awards, and cash-based awards at the discretion of the Management Development and Compensation Committee of the Board of Directors (the "Committee") that administers the ICP. Additionally, restricted stock, which may be deferred into RSU’s, may be awarded under a Restricted Stock and Deferred Compensation Plan for Non-Employee Directors.

PERFORMANCE SHARE PLAN

Under the Performance Share Plan ("PSP"), contingent awards of International Paper common stock are granted by the Committee. The PSP awards are earned over a three-year period. PSP awards are earned based on the achievement of defined performance of Return on Invested Capital ("ROIC") measured against our internal benchmark and ranking of Total Shareholder Return ("TSR") compared to the TSR peer group of companies. The 2019-2021, 2020-2022 and 2021-2023 Awards are weighted 50% ROIC and 50% TSR for all participants. The ROIC component of the PSP awards is valued at the closing stock price on the day prior to the grant date. As the ROIC component contains a performance condition, compensation expense, net of estimated forfeitures, is recorded over the requisite service period based on the most probable number of awards expected to vest. The TSR component of the PSP awards is valued using a Monte Carlo simulation as the TSR component contains a market condition. The Monte Carlo simulation estimates the fair value of the TSR component based on the expected term of the award, a risk-free rate, expected dividends, and the expected volatility for the Company and its competitors. The expected term is estimated based on the vesting period of the awards, the risk-free rate is based on the yield on U.S. Treasury securities matching the vesting period, and the volatility is based on the Company’s historical volatility over the expected term. PSP grants are made in performance-based restricted stock units.

The following table sets forth the assumptions used to determine compensation cost for the market condition component of the PSP plan:


			Twelve Months Ended December 31, 2021
Expected volatility			24.36% - 36.92%
Risk-free interest rate			0.17% - 2.44%

The following summarizes PSP activity for the three years ended December 31, 2021:


	Share/Units	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2018	5,766,477	$38.79
Granted	2,353,613	43.49
Shares issued	(2,367,135)	36.79
Forfeited	(238,227)	50.64
Outstanding at December 31, 2019	5,514,728	41.14
Granted	2,171,385	49.15
Shares issued	(1,221,950)	51.70
Forfeited	(844,138)	51.70
Outstanding at December 31, 2020	5,620,025	40.36
Granted	2,316,295	45.24
Shares issued	(994,052)	63.54
Forfeited	(1,016,126)	57.55
Outstanding at December 31, 2021	5,926,142	$35.43

RESTRICTED STOCK AWARD PROGRAMS

The service-based Restricted Stock Award program ("RSA"), designed for recruitment, retention and special recognition purposes, provides for awards of restricted stock to key employees.

The following summarizes the activity of the RSA program for the three years ended December 31, 2021:


	Shares	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2018	132,111	$50.17
Granted	87,910	43.70
Shares issued	(52,021)	48.90
Forfeited	(7,300)	45.10
Outstanding at December 31, 2019	160,700	47.27
Granted	82,228	40.12
Shares issued	(83,053)	44.25
Forfeited	(33,800)	46.43
Outstanding at December 31, 2020	126,075	44.83
Granted	85,098	50.90
Shares issued	(85,768)	45.59
Forfeited	(21,636)	45.52
Outstanding at December 31, 2021	103,769	$49.03

At December 31, 2021, 2020 and 2019 a total of 7.7 million, 8.5 million and 9.8 million shares, respectively, were available for grant under the ICP.

Stock-based compensation expense and related income tax benefits were as follows:


In millions	2021		2020		2019
Total stock-based compensation expense (included in selling and administrative expense)	$	130	$	72	$	130
Income tax benefits related to stock-based compensation	13		17		30

At December 31, 2021, $84 million of compensation cost, net of estimated forfeitures, related to unvested restricted performance shares, executive continuity awards and restricted stock attributable to future performance had not yet been recognized. This amount will be recognized in expense over a weighted-average period of 1.7 years.