Stock options and performance shares
In order to take into account the impact of the Airgas acquisition and its financing, the principle was adopted:. The absolute TSR objective remains unchanged as compared to the previous plans, i. The objective with regard to the relative part of TSR is based on the average of the two indexes.
Any grant for a performance lower than the average of the two indexes is impossible. The rate of achievement of the performance conditions will be recorded by the Board at the time of its adoption of the financial statements for the financial year. The precise objective set for EPS will be made public ex post , at the close of the Board meeting determining the rate of achievement of the performance conditions. The limits set by the Board of Directors for are identical to those for and are as follows:.
They are applicable to the grants as follows:. Changes in the principles The Board decided to continue the policy initiated in aimed at giving preference to performance shares rather than stock options in the volumes granted. If the underlying stock increases in value, the option becomes more valuable. If the underlying stock decreases below the 'grant' price or stays the same in value as the 'grant' price, then the option becomes worthless.
They provide employees the right, but not the obligation, to purchase shares of their employer's stock at a certain price for a certain period of time. Options are usually granted at the current market price of the stock and last for up to 10 years. To encourage employees to stick around and help the company grow, options typically carry a four to five year vesting period, but each company sets its own parameters.
Advantages Disadvantages Allows a company to share ownership with the employees. Used to align the interests of the employees with those of the company. In a down market, because they quickly become valueless Dilution of ownership Overstatement of operating income Nonqualified Stock Options Grants the option to buy stock at a fixed price for a fixed exercise period; gains from grant to exercise taxed at income-tax rates Advantages Disadvantages Aligns executive and shareholder interests.
Company receives tax deduction. No charge to earnings. Dilutes EPS Executive investment is required May incent short-term stock-price manipulation Restricted Stock Outright grant of shares to executives with restrictions to sale, transfer, or pledging; shares forfeited if executive terminates employment; value of shares as restrictions lapse taxed as ordinary income Advantages Disadvantages Aligns executive and shareholder interests.
No executive investment required. If stock appreciates after grant, company's tax deduction exceeds fixed charge to earnings. Difficulty in setting performance targets. When do Stock options work best? Appropriate for small companies where future growth is expected. For publicly owned companies who want to offer some degree of company ownership to employees.
What are important considerations when implementing Stock Options? How much stock a company be willing to sell. Who will receive the options. How many options are available to be sold in the future.
Is this a permanent part of the benefit plan or just an incentive. Web links on Stock Options? Allows a company to share ownership with the employees.
In a down market, because they quickly become valueless Dilution of ownership Overstatement of operating income. Aligns executive and shareholder interests.