BP 2007 Annual Report Download - page 200

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11 Share-based payments continued
Plans for senior employees
Medium Term Performance Plan (MTPP) (2005 onwards)
An equity-settled incentive share plan for senior employees driven by two performance measures over a three-year performance period. The award of
shares is determined by comparing BP’s TSR against the other oil majors and, additionally, by comparing free cash flow (FCF) against a threshold
established for the period. For a small group of particularly senior employees, only the TSR measure is applicable in determining the award. The
number of shares awarded is increased to take account of the net dividends that would have been received during the performance period, assuming
that such dividends had been reinvested. With regard to leaver provisions, the general rule is that leaving employment during the performance period
will preclude an award of shares. However, special arrangements apply where the participant leaves for a qualifying reason and employment ceases
after completion of the first year of the performance period. The current policy of the company, which is reflected in the terms of the MTPP, is that
senior employees subject to the plan should meet a minimum shareholding requirement.
Long Term Performance Plan (LTPP) (pre-2005)
An equity-settled incentive share plan for senior employees driven by three performance measures over a three-year performance period. The primary
measure is BP’s SHRAM versus that of the companies within the FTSE All World Oil & Gas Index. This accounts for nearly two-thirds of the potential
total award, with the remainder being assessed on BP’s relative ROACE and EPS growth compared with the other oil majors. Shares are awarded at
the end of the performance period and are then subject to a three-year retention period. With regard to leaver provisions, the general rule is that
leaving during the performance period will preclude an award of shares. However, special arrangements apply where the participant leaves for a
qualifying reason and employment ceases after completion of the first year of the performance period. This plan was replaced by the MTPP for
2005 onwards.
Deferred Annual Bonus Plan (DAB)
An equity-settled restricted share plan for senior employees. The award value is equal to 50% of the annual cash bonus awarded for the preceding
performance year (the ‘performance period’). The shares are restricted for a period of three years (the ‘restriction period’). Shares accrue dividends
during the restriction period and these are reinvested. With regard to leaver provisions, if a participant ceases to be employed by BP prior to the end of
the performance period, the general rule is that this will preclude an award of shares. However, special arrangements apply where the participant
leaves for a qualifying reason. Similarly, if a participant ceases to be employed by BP prior to the end of the restriction period, the general rule is that
the restricted shares will be forfeited. Special arrangements apply where the participant leaves for a qualifying reason.
Performance Share Plan (PSP)
An equity-settled restricted share plan for senior professionals and team leaders. The award takes into account the recipient’s performance in the prior
calendar year (the ‘performance period’). Shares, provided initially as share units, are restricted for a period of three years (the ‘restriction period’).
Share units accrue notional dividends during the restriction period and these are reinvested. At the end of the restriction period additional units may be
awarded based on BP’s TSR performance against the other oil majors. At award, share units are converted into shares. With regard to leaver
provisions, the general rule is that leaving during the performance period will preclude an award of share units. If a participant ceases to be employed
by BP prior to the end of the restriction period, the general rule is that share units will lapse. Special arrangements apply where the participant leaves
for a qualifying reason.
Restricted Share Plan (RSP)
An equity-settled restricted share plan used predominantly for senior employees in special circumstances (such as recruitment and retention). There
are no performance conditions but the shares are subject to a three-year restriction period. During the restriction period, shares accrue dividends,
which are reinvested. With regard to leaver provisions, the general rule is that ceasing employment during the restriction period will result in the forfeit
of shares. However, special arrangements apply where the participant leaves for a qualifying reason.
BP Share Option Plan (BPSOP)
An equity-settled share option plan that applies to certain categories of employees. Participants are granted share options with an exercise price no
lower than market price of a share immediately preceding the date of grant. There are no performance conditions and the options are exercisable
between the third and 10th anniversaries of the grant date. The general rule is that the options will lapse if the participant leaves employment before
the end of the third calendar year from the date of grant (and that vested options are exercisable within 3
/
1
2
years from the date of leaving). However,
special arrangements apply where the participant leaves for a qualifying reason and employment ceases after the end of the calendar year of the date
of grant. From 2007, share options no longer form a regular element of our incentive plans.
Savings and matching plans
BP ShareSave Plan
A savings-related share option plan, under which employees save on a monthly basis, over a three- or five-year period, towards the purchase of shares
at a fixed price determined when the option is granted. This price is usually set at a 20% discount to the market price at the time of grant. The option
must be exercised within six months of maturity of the savings contract; otherwise it lapses. The plan is run in the UK and options are granted
annually, usually in June. Participants leaving for a qualifying reason will have six months in which to use their savings to exercise their options on a
pro-rated basis.
BP ShareMatch Plans
Matching share plans, under which BP matches employees’ own contributions of shares up to a predetermined limit. The plans are run in the UK and
in over 70 other countries. The UK plan is run on a monthly basis with shares being held in trust for five years before they can be released free of any
income tax and national insurance liability. In other countries, the plan is run on an annual basis with shares being held in trust for three years. The plan
is operated on a cash basis in those countries where there are regulatory restrictions preventing the holding of BP shares. When the employee leaves
BP, all shares must be removed from trust and units under the plan operated on a cash basis must be encashed.