STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

NOTE 13. STOCK-BASED COMPENSATION

Stock-based compensation granted includes stock options, performance stock awards, restricted stock awards and deferred directors’ compensation. Stock-based compensation expense (benefit) was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	($ in millions)
Stock-based compensation	$	6.7	$	5.8	$	19.5	$	20.0
Mark-to-market adjustments	(2.3)		(2.0)		(2.4)		(10.5)
Total expense	$	4.4	$	3.8	$	17.1	$	9.5

The fair value of each stock option granted, which typically vests ratably over three years, but not less than one year, was estimated on the date of grant, using the Black-Scholes option-pricing model with the following weighted-average assumptions:


Grant date	2023			2022
Dividend yield	1.32		%	1.60		%
Risk-free interest rate	4.07		%	1.93		%
Expected volatility of Olin common stock	47		%	48		%
Expected life (years)	7.0			7.0
Weighted-average grant fair value (per option)	$	28.74		$	21.18
Weighted-average exercise price	$	60.55		$	49.71
Options granted	562,124			742,100

Dividend yield was based on our current dividend yield as of the option grant date. Risk-free interest rate was based on zero coupon U.S. Treasury securities rates for the expected life of the options. Expected volatility was based on our historical stock price movements, as we believe that historical experience is the best available indicator of the expected volatility. Expected life of the option grant was based on historical exercise and cancellation patterns, as we believe that historical experience is the best estimate for future exercise patterns.

Performance share awards are denominated in shares of our stock and are paid half in cash and half in stock. Payouts for performance share awards are based on two criteria: (1) 50% of the award is based on Olin’s total shareholder returns (TSR) over the applicable three-year performance cycle in relation to the TSR over the same period among a portfolio of public companies which are selected in concert with outside compensation consultants and (2) 50% of the award is based on Olin’s net income over the applicable three-year performance cycle in relation to the net income goal for such period as set by the compensation committee of Olin’s board of directors. The expense associated with performance shares is recorded based on our estimate of our performance relative to the respective target. If an employee leaves the company before the end of the performance cycle, the performance shares may be prorated based on the number of months of the performance cycle worked and are settled in cash instead of half in cash and half in stock when the three-year performance cycle is completed.

The fair value of each performance share award based on net income was estimated on the date of grant, using the current stock price. The fair value of each performance share award based on TSR was estimated on the date of grant, using a Monte Carlo simulation model with the following weighted average assumptions:


Grant date	2023			2022
Risk-free interest rate	4.46		%	1.74		%
Expected volatility of Olin common stock	52		%	59		%
Expected average volatility of peer companies	42		%	47		%
Average correlation coefficient of peer companies	0.51			0.51
Expected life (years)	3.0			3.0
Grant date fair value (TSR based award)	$	86.98		$	64.13
Grant date fair value (net income based award)	$	60.55		$	49.71
Awards granted	161,474			184,000

Risk-free interest rate was based on zero coupon U.S. Treasury securities rates for the expected life of the performance stock awards. Expected volatility of Olin common stock and peer companies was based on historical stock price movements, as we believe that historical experience is the best available indicator of the expected volatility. The average correlation coefficient of peer companies was determined based on historical trends of Olin’s common stock price compared to the peer companies. Expected life of the performance share award grant was based on historical exercise and cancellation patterns, as we believe that historical experience is the best estimate of future exercise patterns.