The Company has two stock-based compensation plans: the Discover Financial Services Omnibus Incentive Plan (“Omnibus Plan”) and the Discover Financial Services Directors’ Compensation Plan (“Directors’ Compensation Plan”).

The Omnibus Plan, which is stockholder-approved, provides for the award of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance stock units (“PSUs”) and other stock-based and/or cash awards (collectively, “awards”). Currently, the Company does not have any stock options, stock appreciation rights or restricted stock outstanding. Effective May 11, 2023, the Discover Financial Services Amended and Restated 2014 Omnibus Incentive Plan (the “2014 Omnibus Plan”) was replaced with the Discover Financial Services 2023 Omnibus Incentive Plan (the “2023 Omnibus Plan”). Subject to adjustments for certain transactions in the 2023 Omnibus Plan, the total number of shares that may be granted is 18 million shares reduced by the number of shares granted under the 2014 Omnibus Plan. Shares granted under the Omnibus Plan may be the following: (i) authorized but unissued shares and (ii) treasury shares that the Company acquires in the open market, in private transactions or otherwise.

The Directors’ Compensation Plan, which is stockholder-approved, permits the grant of RSUs to non-employee directors. Under the Directors’ Compensation Plan, the Company may issue awards of up to a total of 1 million shares of common stock to non-employee directors. Shares of stock that are issuable pursuant to the awards granted under the Directors’ Compensation Plan may be one of the following: authorized but unissued shares, treasury shares or shares that the Company acquires in the open market. Annual awards for eligible directors are calculated by dividing $170,000 by the fair market value of a share of stock on the date of grant and are subject to a restriction period whereby 100% of such units shall vest in full on the earlier of the one year anniversary of the date of grant or immediately prior to the first annual meeting of shareholders following the date of grant. RSUs include the right to receive dividend equivalents in the same amount and at the same time as dividends paid to all Company common shareholders.

The following table details the compensation cost, net of forfeitures (dollars in millions):


	For the Years Ended December 31,
	2023		2022		2021
RSUs	$	69	$	58	$	46
PSUs(1)	5		31		57
Total stock-based compensation expense	$	74	$	89	$	103

Income tax benefit	$	18	$	16	$	15

(1)Total PSU expense for the year ended December 31, 2021, includes an incremental $1 million, representing a modification to the 2019 PSU award. The nature of the modification was to adjust the payout to compensate for the 2020 current expected credit loss (“CECL”) adoption impact on earnings per share (“EPS”).

The following table sets forth the activity related to vested and unvested RSUs:


	Number of Units	Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
RSUs at December 31, 2022	1,938,283		$	190
Granted	728,993
Conversions to common stock	(626,780)
Forfeited	(96,379)
RSUs at December 31, 2023	1,944,117	0.85	$	219
Vested and convertible RSUs at December 31, 2023	664,962	0.00	$	75

The following table sets forth the activity related to unvested RSUs:


	Number of Units	Weighted-Average Grant-Date Fair Value
Unvested RSUs at December 31, 20221)	1,059,683	$	107.47
Granted	728,993	$	104.20
Vested	(534,603)	$	103.95
Forfeited	(96,379)	$	109.43
Unvested RSUs at December 31, 2023(1)	1,157,694	$	106.87

Compensation cost associated with RSUs is determined based on the number of units granted and the fair value on the date of grant. The fair value is amortized on a straight-line basis, net of estimated forfeitures, over the requisite service period for each separately vesting tranche of the award. The requisite service period is generally the vesting period.

The following table summarizes the total intrinsic value of the RSUs converted to common stock and the total grant-date fair value of RSUs vested (dollars in millions, except weighted-average grant-date fair value amounts):


	For the Years Ended December 31,
	2023		2022		2021
Intrinsic value of RSUs converted to common stock	$	68	$	59	$	62
Grant-date fair value of RSUs vested	$	56	$	41	$	47
Weighted-average grant-date fair value of RSUs granted	$	104.20	$	116.50	$	101.47

RSUs provide for accelerated vesting if there is a change in control or upon certain terminations (as defined in the Omnibus Plan or the award certificate). RSUs include the right to receive dividend equivalents in the same amount and at the same time as dividends paid to all Company common shareholders.

The following table sets forth the activity related to vested and unvested PSUs:


	Number of Units	Weighted-Average Grant-Date Fair Value		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
PSUs at December 31, 2022(1)	716,472	$	99.21		$	70
Granted	384,085	$	110.70
Conversions to common stock	(406,543)	$	85.34
Forfeited	(113,337)	$	109.55
PSUs at December 31, 2023(1)(2)(3)(4)	580,677	$	108.56	0.98	$	65

(2) Includes 227,082 PSUs granted in 2021 that are earned based on the Company’s cumulative EPS as measured over the three-year performance period, which ended December 31, 2023, and are subject to the requisite service period, which ended February 1, 2024.

(3) Includes 187,128 PSUs granted in 2022 that are earned based on the Company’s cumulative EPS as measured over the three-year performance period, which ends December 31, 2024, and are subject to the requisite service period, which ends February 1, 2025.

(4) Includes 166,467 PSUs granted in 2023 that may be earned based on the Company’s cumulative EPS as measured over the three-year performance period, which ends December 31, 2025, and are subject to the requisite service period, which ends February 1, 2026.

Compensation cost associated with PSUs is determined based on the number of instruments granted, the fair value on the date of grant and the performance factor. The fair value is amortized on a straight-line basis, net of estimated forfeitures, over the requisite service period. Each PSU outstanding at December 31, 2023, is a restricted stock instrument that is subject to additional conditions and constitutes a contingent and unsecured promise by the Company to pay up to 1.5 shares per unit of the Company’s common stock on the conversion date for the PSU, contingent on the number of PSUs to be issued. PSUs have a performance period of three years and a vesting period of three years. The requisite service period of an award having both performance and service conditions is the longest of the explicit, implicit and derived service periods.

The following table summarizes the total intrinsic value of the PSUs converted to common stock and the total grant-date fair value of PSUs vested (dollars in millions, except weighted-average grant-date fair value amounts):


	For the Years Ended December 31,
	2023		2022		2021
Intrinsic value of PSUs converted to common stock	$	47	$	29	$	15
Grant-date fair value of PSUs vested	$	35	$	17	$	18
Weighted-average grant-date fair value of PSUs granted	$	110.70	$	124.01	$	94.21

PSUs provide for accelerated vesting if there is a change in control or upon certain terminations (as defined in the Omnibus Plan or the award certificate). PSUs include the right to receive dividend equivalents, which will accumulate and pay out in cash if and when the underlying shares are issued.