BP 2010 Annual Report Download - page 216

Notesonnancialstatements
41.Share-basedpayments
Effect of share-based payment transactions on the group’s result and nancial position
 $million
 2010 2009 2008
Totalexpenserecognizedforequity-settledshare-basedpaymenttransactions    577 506 524
Total(credit)expenserecognizedforcash-settledshare-basedpaymenttransactions    (1) 15 (16)
Totalexpenserecognizedforshare-basedpaymenttransactions     576  521 508
Closingbalanceofliabilityforcash-settledshare-basedpaymenttransactions    16  32 21
Totalintrinsicvalueforvestedcash-settledshare-basedpayments     1 7 2
   
Foreaseofpresentation,optionandshareholdingsdetailedinthetableswithinthisnotearestatedasUKordinaryshareequivalentsinUSdollars.
USemployeesaregrantedAmericanDepositaryShares(ADSs)oroptionsoverthecompany’sADSs(oneADSisequivalenttosixordinaryshares).The
share-basedpaymentplansthatexistedduringtheyeararedetailedbelow.Allplansareongoingunlessotherwisestated.
Plans for executive directors
ExecutiveDirectors’IncentivePlan(EDIP)–shareelement
Anequity-settledincentiveplanforexecutivedirectorswithathree-yearperformanceperiod.Forshareplanperformanceperiods2008-2010the
awardofsharesisdeterminedbycomparingBP’stotalshareholderreturn(TSR)againsttheotheroilmajors(ExxonMobil,Shell,TotalandChevron).
Fortheperformanceperiod2009-2011theawardofsharesisdetermined50%onTSRversusacompetitorgroupofoilmajors(whichinthisperiod
alsoincludedConocoPhillips)and50%onabalancedscorecard(BSC)ofthreeunderlyingperformancemeasuresversusthesamecompetitor
group.Fortheperiod2010-2012theawardofsharesisdeterminedonethirdonTSRversusacompetitorgroupofoilmajors(identicaltothe
2009-2011plangroup)andtwothirdsonaBSCofthreeunderlyingperformancefactors.Aftertheperformanceperiod,thesharesthatvest(netof
tax)arethensubjecttoathree-yearretentionperiod.Thedirectors’remunerationreportonpages112to121includesfulldetailsoftheplan.
ExecutiveDirectors’IncentivePlan(EDIP)–deferredmatchingshareelement
FollowingtherenewaloftheEDIPatthe2010AnnualGeneralMeeting,adeferredmatchingshareelementisinplacerequiringamandatoryonethirdof
directors’annualbonustobedeferredintosharesforthreeyears.Thesharesarematchedbythecompanyonaone-for-onebasis.Vestingofbothdeferred
andmatchingsharesiscontingentonanassessmentofsafetyandenvironmentalsustainabilityoverthethree-yeardeferralperiodandadirectormay
voluntarilydeferanadditionalonethirdofbonusintosharesonthesameterms.
ExecutiveDirectors’IncentivePlan(EDIP)–shareoptionelement
Anequity-settledshareoptionplanforexecutivedirectorsthatpermitsoptionstobegrantedatanexercisepricenolowerthanthemarketpriceofashare
onthedatethattheoptionisgranted.Theoptionsareexercisableuptotheseventhanniversaryofthegrantdateandthelastgrantsweremadein2004.
From2005onwardstheremunerationcommittee’spolicyisnottomakefurthergrantsofshareoptionstoexecutivedirectors.
Plans for senior employees
Thegroupoperatesanumberofequity-settledshareplansunderwhichshareunitsaregrantedtoitsseniorleadersandcertainemployees.These
planstypicallyhaveathree-yearperformanceorrestrictedperiodduringwhichtheunitsaccruenetnotionaldividendswhicharetreatedashaving
beenreinvested.Leavingemploymentduringthethree-yearperiodwillnormallyprecludetheconversionofunitsintoshares,butspecial
arrangementsapplywheretheparticipantleavesforaqualifyingreason.
GrantsaresettledincashwhereparticipantsarelocatedinacountrywhoseregulatoryenvironmentprohibitstheholdingofBPshares.
Performanceunitplans
Thenumberofunitsgrantedismadebyreferencetolevelofseniorityoftheemployees.Thenumberofunitsconvertedtosharesisdeterminedby
referencetoperformancemeasuresoverthethree-yearperformanceperiod.ThemainperformancemeasureusedisBP’sTSRcomparedagainsttheother
oilmajors.Inaddition,freecashow(FCF)isusedasaperformancemeasureforoneoftheperformanceplans.Plansincludedinthiscategoryarethe
CompetitivePerformancePlan(CPP),theMediumTermPerformancePlan(MTPP)and,inpart,thePerformanceSharePlan(PSP).
Restrictedshareunitplans
ShareunitgrantsunderBP’srestrictedplanstypicallytakeintoaccounttheemployee’sperformanceineitherthecurrentortheprioryear,trackrecordof
delivery,businessandleadershipskillsandlong-termpotential.Onerestrictedshareunitplanusedinspecialcircumstancesforsenioremployees,suchas
recruitmentandretention,normallyhasnoperformanceconditions.PlansincludedinthiscategoryaretheExecutivePerformancePlan(EPP),theRestricted
SharePlan(RSP),theDeferredAnnualBonusPlan(DAB)and,inpart,thePerformanceSharePlan(PSP).
BPShareOptionPlan(BPSOP)
Shareoptionswithanexercisepriceequivalenttothemarketpriceofashareimmediatelyprecedingthedateofgrantweregrantedtoparticipants
annuallyuntil2006.Therewerenoperformanceconditionsandtheoptionsareexercisablebetweenthethirdandtenthanniversariesofthegrantdate.
Savings and matching plans
BPShareSavePlan
Thisisasavings-relatedshareoptionplanunderwhichemployeessaveonamonthlybasis,overathree-orve-yearperiod,towardsthepurchase
ofsharesataxed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.
214BPAnnualReportandForm20-F2010