18. Stock-Based Compensation

The components of stock-based compensation expense are as follows:

Stock Award and Incentive Plan. Pursuant to the BlackRock, Inc. Second Amended and Restated 1999 Stock Award and Incentive Plan (the “Award Plan”), options to purchase shares of the Company’s common stock at an exercise price not less than the market value of BlackRock’s common stock on the date of grant in the form of stock options, restricted stock or RSUs may be granted to employees and nonemployee directors. A maximum of 41,500,000 shares of common stock were authorized for issuance under the Award Plan. Of this amount, 5,190,152 shares remain available for future awards at December 31, 2021. Upon exercise of employee stock options, the issuance of restricted stock or the vesting of RSUs, the Company issues shares out of treasury to the extent available.

Restricted Stock and RSUs. Pursuant to the Award Plan, restricted stock grants and RSUs may be granted to certain employees. Substantially all restricted stock and RSUs vest over periods ranging from one to three years and are expensed using the straight-line method over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards. Restricted stock and RSUs are not considered participating securities for purposes of calculating EPS as the dividend equivalents are subject to forfeiture prior to vesting of the award.

Restricted stock and RSU activity for 2021 is summarized below.

The Company values restricted stock and RSUs at their grant-date fair value as measured by BlackRock’s common stock price. The total fair market value of RSUs/restricted stock granted to employees during 2021, 2020 and 2019 was $664 million, $517 million and $508 million, respectively. The total grant-date fair market value of RSUs/restricted stock converted to common stock during 2021, 2020 and 2019 was $391 million, $421 million and $398 million, respectively.

RSUs/restricted stock granted in connection with annual incentive compensation under the Award Plan primarily related to the following:

In addition, the Company also granted RSUs of 168,504, 71,531 and 174,752 during 2021, 2020 and 2019, respectively, with varying vesting periods.

At December 31, 2021, the intrinsic value of outstanding RSUs was $2.0 billion, reflecting a closing stock price of $915.56.

At December 31, 2021, total unrecognized stock-based compensation expense related to unvested RSUs was $472 million. The unrecognized compensation cost is expected to be recognized over the remaining weighted-average period of 1.0 years.

In January 2022, the Company granted under the Award Plan:

Performance-Based RSUs.  Pursuant to the Award Plan, performance-based RSUs may be granted to certain employees. Each performance-based award consists of a “base” number of RSUs granted to the employee. The number of shares that an employee ultimately receives at vesting will be equal to the base number of performance-based RSUs granted, multiplied by a predetermined percentage determined in accordance with the level of attainment of Company performance measures during the performance period and could be higher or lower than the original RSU grant. Performance-based RSUs are not considered participating securities as the dividend equivalents are subject to forfeiture prior to vesting of the award.

In the first quarter of 2021, 2020 and 2019, the Company granted 162,029, 238,478 and 283,014, respectively, performance-based RSUs to certain employees that cliff vest 100% on January 31, 2024, 2023 and 2022, respectively. These awards are amortized over a service period of three years. In January 2021, the Company granted 4,545 additional RSUs to certain employees based on the attainment of Company performance measures during the performance period.

Performance-based RSU activity for 2021 is summarized below.

The Company initially values performance-based RSUs at their grant-date fair value as measured by BlackRock’s common stock price. The total grant-date fair market value of performance-based RSUs granted to employees during 2021, 2020 and 2019 was $122 million, $139 million and $117 million, respectively.

At December 31, 2021, the intrinsic value of outstanding performance-based RSUs was $612 million reflecting a closing stock price of $915.56.

At December 31, 2021, total unrecognized stock-based compensation expense related to unvested performance-based awards was $169 million. The unrecognized compensation cost is expected to be recognized over the remaining weighted-average period of 1.0 year.

In January 2022, the Company granted 143,846 performance-based RSUs to certain employees that cliff vest 100% on January 31, 2025. These awards are amortized over a service period of three years. The number of shares distributed at vesting could be higher or lower than the original grant based on the level of attainment of predetermined Company performance measures.

Performance-based Stock Options. Pursuant to the Award Plan, performance-based stock options may be granted to certain employees.  Vesting of the performance-based stock options is contingent upon the achievement of obtaining 125% of BlackRock’s grant-date stock price within five years from the grant date and the attainment of Company performance measures during the four-year performance period. If both hurdles are achieved, the award will vest in three equal installments at the end of 2022, 2023 and 2024, respectively. Both hurdles were achieved at December 31, 2021. Vested options can then be exercised up to nine years following the grant date. At December 31, 2021, the weighted average remaining life of the awards is approximately 4.9 years. The awards are generally forfeited if the employee leaves the Company before the respective vesting date. The expense for each tranche is amortized over the respective requisite service period. The Company assumes the performance condition will be achieved. If such condition is not met, no compensation cost is recognized and any recognized compensation cost is reversed. Stock option activity for 2021 is summarized below.

The options have a strike price of $513.50, which was the closing price of the shares on the grant date. The grant-date fair value of the awards issued in 2017 was $208 million and was estimated using a Monte Carlo simulation with an embedded lattice model using the assumptions included in the following table:

The expected term was derived using a Monte Carlo simulation with the embedded lattice model and represents the period of time that options granted are expected to be outstanding. The expected stock volatility was based upon an average of historical stock price fluctuations of BlackRock’s common stock and an implied volatility at the grant date. The dividend yield was calculated as the most recent quarterly dividend divided by the average three-month stock price as of the grant date. The risk-free interest rate is based on the US Treasury Constant Maturities yield curve at date of grant.

At December 31, 2021, total unrecognized stock-based compensation expense related to unvested performance-based stock options was $49 million. The unrecognized compensation cost is expected to be recognized over the remaining weighted-average period of 1.9 years.

Employee Stock Purchase Plan (“ESPP”). The ESPP allows eligible employees to purchase the Company’s common stock at 95% of the fair market value on the last day of each three-month offering period. The Company does not record compensation expense related to employees purchasing shares under the ESPP.