Share-Based Compensation | Note 14. Share-based Compensation Nielsen measures the cost of all share-based payments, including stock options, at fair value on the grant date and recognizes such costs within the consolidated statements of operations. Nielsen recognizes the expense of its options that cliff vest using the straight-line method. For those that vest over time, an accelerated graded vesting is used. The Company recorded $36 million, $34 million and $32 million of expense associated with share-based compensation for the years ended December 31, 2021, 2020 and 2019, respectively. The tax benefit related to the share-based compensation expense was $6 million, $5 million and $5 million for each of the respective periods. Nielsen has an equity-based, management compensation plan (“Equity Participation Plan” or “EPP”) to align compensation for certain key executives with the performance of the Company. Under this plan, certain of the Company’s executives may be granted stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and dividend equivalent rights in the shares of the Company or purchase its shares. In 2019, the Company replaced the Amended and Restated Nielsen 2010 Stock Incentive Plan (the “Prior Plan”) with the Nielsen 2019 Stock Incentive Plan (the “Stock Incentive Plan”). The Stock Incentive Plan is the source of new equity-based awards permitting the Company to grant to its key employees, directors and other service providers the following types of awards: incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, RSUs and other awards valued in whole or in part by reference to shares of Nielsen’s common stock and performance-based awards denominated in shares or cash. As of December 31, 2021, the total number of shares authorized for award of options or other equity-based awards was 10,420,826 under the Stock Incentive Plan. This includes the 7,200,000 newly authorized shares under the Stock Incentive Plan and the 3,220,826 shares reserved for issuance from the Prior Plan. Nielsen’s stock option plan activity is summarized below (the aggregate intrinsic share value outstanding was zero for all periods presented): Number of Options Weighted-Average Weighted- Stock Option Plan activity Outstanding at December 31, 2018 4,631,836 $ 43.20 3.66 Granted — — Forfeited (662,732 ) 46.31 Expired options (445,760 ) 28.09 Exercised (9,027 ) 17.44 Outstanding at December 31, 2019 3,514,317 $ 44.60 3.15 Granted — — Forfeited (160,668 ) 48.74 Expired options (463,507 ) 35.00 Exercised — — Outstanding at December 31, 2020 2,890,142 $ 45.91 2.55 Granted — — Forfeited (535,798 ) 51.52 Expired options (735,625 ) 41.92 Exercised — — Exercisable and outstanding at December 31, 2021 1,618,719 $ 45.87 2.51 During the years ended December 31, 2021, 2020 and 2019, there were no time-based only options granted and the aggregate fair value of options vested was $1 million, $3 million and $5 million, respectively. During the year ended December 31, 2021 and December 31, 2020 there were no time-based options exercised. The intrinsic value of the options exercised during the year ended December 31, 2019 was insignificant. Under the Nielsen Stock Incentive Plan, Nielsen granted 1,365,411 and 200,000 time and performance based stock options to purchase shares during the years ended December 31, 2021 and 2020, respectively. There were no time and performance based stock options granted during the year ended December 31, 2019. The weighted average grant date fair value of the awards in 2021 and 2020 were $7.69 and $3.56. The performance aspect of the award is achieved based on the performance of Nielsen’s stock price. If the performance obligations are satisfied, the award will become exercisable on the fourth anniversary date of the award, and are tied to the executives’ continuing employment. As of December 31, 2021, there was approximately $6 million of unearned share-based compensation related to performance stock options (net of estimated forfeitures) which the Company expects to record as share-based compensation over the next four years. The fair values of the granted time and performance based awards during 2021 and 2020 were estimated using the Monte Carlo simulation model with the expected volatility based on the Company’s historical volatility. For the year ended December 31, 2019, there were no time and performance-based stock options issued. The following assumptions were used for grants of time and performance based awards: Year Ended December 31, 2021 2020 Expected life (years) 5.00 5.00 Risk-free interest rate 0.89 % 0.49-1.34 % Expected dividend yield 0.92 % 1.16-1.62 % Expected volatility 37.06 % 28.99-31.40 % Weighted average volatility 37.06 % 30.20 % Activity of Nielsen’s RSUs that are ultimately payable in shares of common stock granted under the Stock Incentive Plan is summarized below: Number of Weighted-Average Fair Value RSU activity Nonvested at December 31, 2018 3,865,684 $ 29.88 Granted 2,454,871 21.46 Forfeited (692,718 ) 28.63 Vested (986,852 ) 33.60 Nonvested at December 31, 2019 4,640,985 $ 25.10 Granted 2,153,198 17.14 Forfeited (496,497 ) 22.59 Vested (2,025,318 ) 26.38 Nonvested at December 31, 2020 4,272,368 $ 20.86 Granted 1,198,743 25.68 Forfeited (1,150,836 ) 20.09 Vested (2,135,117 ) 22.70 Nonvested at December 31, 2021 2,185,157 $ 22.02 The majority of the awards granted in 2021, 2020 and 2019 will vest at a rate of 6.25% per quarter over four years. Other 2021 awards will vest at one of the following rates: 8.33% per quarter over three years, 50% per year over two years on the anniversary date of the award, or 25% per year over four years on the anniversary date of the award. Other 2020 awards will vest at one of the following rates: 25% on the first anniversary date of the award/75% on the second anniversary date of the award, 100% on the second anniversary date of the award, 100% on the third anniversary of the award, 50% per year over two years on the anniversary date of the award, or 25% per year over four years on the anniversary date of the award. The other 2019 awards will vest at one of the following rates: 25% on the first anniversary date of the award/75% on the second anniversary date of the award, 100% on the second anniversary date of the award, 12.5% per quarter over two years, or 25% per year over four years on the anniversary date of the award. As of December 31, 2021, there was approximately $17 million of unearned share-based compensation related to unvested RSUs (net of estimated forfeitures) which the Company expects to record as stock-based compensation expense over a weighted average period of 2.7 years. During the years ended December 31, 2021, 2020 and 2019, the Company granted 740,462, 724,814 and 523,508 performance restricted stock units (“PRSUs”), representing the target number of performance restricted stock subject to the award. The weighted average grant date fair value of the awards in 2021, 2020 and 2019 were $28.65, $16.08 and $24.62 per share. For the PRSUs granted in 2021, the majority of PRSUs to be earned is subject to achievement of performance goals for the three year period ending December 31, 2023. For the PRSUs granted in 2020, the total number of PRSUs to be earned is subject to achievement of performance goals for the period ending December 31, 2020. For the PRSUs granted in 2019, the total number of PRSUs to be earned is subject to achievement of cumulative performance goals for the two year period ending December 31, 2020. For the 2021 award, fifty percent of the target award was determined based on the Company’s average organic revenue growth rate and fifty percent of the award was determined based on cumulative free cash flow/EBITDA conversion. For the 2020 award, fifty percent of the target award was determined based on the Company’s revenue target and fifty percent of the award was determined based on adjusted earnings per share achievements. The Company’s revenue target was not achieved and fifty percent of the adjusted earnings per share targets were achieved. For the 2019 award, fifty percent of the target award was determined based on the Company’s revenue compounded annual growth rate achievements and fifty percent of the award was determined based on adjusted earnings per share achievements. The Company’s revenue compounded annual growth rate target was not achieved and the adjusted earnings per share targets was achieved. There is a relative total shareholder return modifier that can increase or decrease the payout. The fair value of the target awards related to relative shareholder return was based on the Monte Carlo model. In 2016, the Company implemented the Nielsen Holdings plc 2016 Employee Share Purchase Plan (the ESPP) and 2,000,000 shares were authorized for issuance under the ESPP. There were 60,634, 266,984 and 201,637 shares issued under the ESPP in 2021, 2020 and 2019, respectively. |