Chrysler 2007 Annual Report Download - page 59

Stock Option Plans
Report on Operations Stock Option Plans58
Fiat S.p.A. has approved stock option plans offered to over 900
employees at Group companies inside and outside Italy whose
roles have a significant impact on activities and leadership.
There are currently nine stock option plans resolved by Fiat
S.p.A. between 2000 and 2007 whereby the beneficiaries are
entitled to the purchase of ordinary Fiat shares. One of these
plans is made available exclusively to the Chief Executive
Officer of Fiat S.p.A., one is made available jointly to the Chief
Executive Officer and managers of the Group, three are made
available exclusively to the former Chairman of Fiat S.p.A., Mr.
Paolo Fresco, in office until February 28 2003, and another four
plans are made available to Group managers.
Furthermore, certain subsidiaries approved stock option plans
that grant the right to purchase ordinary shares of those
subsidiaries. These include Ferrari S.p.A., which had granted its
Chairman, Mr. Luca Cordero di Montezemolo, options for the
purchase of 184,000 Ferrari shares. Of these, 80,000 options
linked to an equal number of newly-issued shares remain
unexercised and may be subscribed, at a price of 175 euros per
share and until December 31, 2010, upon placement of Ferrari
shares on the stock market. Certain subsidiaries approved,
when they were not under control of the Fiat Group, cash-
settled share-based payment plans defined Stock Appreciation
Rights (SAR).
Below is a description of the main features of the Plans issued
by Fiat S.p.A.
The stock option plans were adopted in view of further
strengthening the involvement of the persons who hold key
positions in pursuing objectives relating to the Company’s and
Group’s operating performance. In the long term, these plans
give these individuals an economic incentive linked to
improvements in the value of the Company for stockholders.
Their involvement is further increased when, as in the case of
the 2004 plan and, partially, the 2006 plan, vesting of the
options is subject to the achievement of specific profitability
targets in the reference period.
At the same time, the motivation of management through the
granting of financial instruments reflecting the Company’s
market value contributes to develop confidence in the
Company’s growth, by aligning the interests of management
with those of stockholders and promoting management’s
identification with the Group, with significant effects in terms
of retention.
The recipients were identified, on the basis of objective
criteria, by considering the impact of each role on business
objectives, while the number of options to be granted was
determined according to individual leadership qualities.
The stock option plans approved by Fiat S.p.A. provide its
recipients with the right to purchase one Fiat ordinary share for
each exercised option at a fixed price (strike price). The
transaction is settled through physical delivery of the shares.
These rights are exercisable over a limited period of time from
the vesting date to the expiry date of the plan.
With regard to all plans, the exercise price of the options was
determined on the basis of the average stock market price for
the month preceding the option grant and it can vary as a
result of transactions affecting the Company’s capital stock
through the use of the adjustment factor determined by the
Aiaf. The price must be paid in cash upon the purchase of the
underlying shares.
Regulations of plans granted in the 2000-2002 period to Group
managers share the following common features:
■if employment is terminated or an employee’s relationship
with the Group is severed as a result of the disposal of the
employing company, options that have not yet vested become
null and void. Conversely, vested options may be exercised
within 30 days from the date of termination;
■consistently with Italian tax laws and regulations on the
issue, the options are exercisable starting three years after
they have been granted and for the following five years; each
plan envisages that the granted options can be exercised on a
staggered basis;
■exercise of the options is not subject to specific conditions.
On July 26, 2004, the Board of Directors granted to Mr. Sergio
Marchionne, as a part of his compensation as Chief Executive
Officer, options for the purchase of 10,670,000 Fiat S.p.A.
ordinary shares at the price of 6.583 euros, exercisable from
June 1, 2008 to January 1, 2011. In each of the first three years
following the grant date, Mr. Marchionne accrues the right to