Chrysler 2008 Annual Report Download - page 62

Stock Option Plans
Report on Operations Stock Options Plans 61
Plan beneficiaries are selected using objective criteria which
take into account the impact of their role on business
objectives. The number of options actually granted is
determined on the basis of individual leadership qualities.
The stock option plans established by Fiat S.p.A. grant
beneficiaries the option to purchase one Fiat ordinary share at
a predetermined price (the strike price) for each option
exercised. Transactions are settled by delivery of shares. The
options are subject to a predetermined exercise period
beginning with the vesting date until the plan’s expiry date.
For all plans, the strike price is based on the average daily
market price for the month prior to the grant date and may be
subject to adjustment as a result of transactions affecting the
Company’s share capital, with any adjustment factor being
determined by the AIAF. The exercise price must be paid in
cash upon purchase of the underlying shares.
Terms and conditions common to the plans established for
Group managers between 2000 and 2002 are as follows:
in the event of termination of the employment relationship or
if, as the result of a disposal of the employing company, the
employer ceases to be part of the Group, any options not yet
vested are cancelled, while those already vested may be
exercised within thirty days of the termination or disposal;
in keeping with Italian tax law, options are exercisable three
years after the grant and for the following five years. All plans
allow for the options to become gradually exercisable over
time;
exercise of the options is not subject to specific conditions.
On 26 July 2004, the Board of Directors granted Sergio
Marchionne, as variable compensation for his role as Chief
Executive Officer, options to purchase 10,670,000 Fiat S.p.A.
ordinary shares at a price of €6.583 per share, exercisable from
1 June 2008 to 1 January 2011. In each of the first three years
following the grant date, Mr. Marchionne accrued the right to
purchase a maximum of 2,370,000 shares per year
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Fiat S.p.A. has established Stock Option Plans for more than
900 Group employees, in Italy and abroad, whose activities
and position of leadership have a significant impact on the
Group.
There are currently seven stock option plans, approved by Fiat
S.p.A. between 2001 and 2008, which grant options for the
purchase of Fiat ordinary shares. One plan was established
exclusively for the Chief Executive Officer of Fiat S.p.A., one
for the Chief Executive Officer jointly with other Group
managers, one exclusively for the former Chairman of Fiat
S.p.A. (Paolo Fresco, who was in office until 28 February 2003),
and four other plans for Group managers.
In addition, the subsidiary companies CNH Global N.V. and
Ferrari S.p.A. have stock option plans in place which grant
options to purchase their respective ordinary shares. Ferrari
S.p.A. granted options for 184,000 Ferrari shares to its
Chairman, Luca Cordero di Montezemolo. Mr. Montezemolo
still holds 80,000 of those options to purchase an equivalent
number of newly issued shares, subject to Ferrari shares being
listed, at a price of €175 per share and exercisable until 31
December 2010. Other companies had, prior to coming under
the Group’s control, approved cash-settled share-based
payment plans referred to as Stock Appreciation Rights (SARs).
Following is a description of the principal features of the Plans
established by Fiat S.p.A.
The stock option plans were established to incentivize
individuals in key positions in the achievement of performance
targets for the Company and the Group, aligning that incentive
to the long-term value created for Shareholders. The level of
commitment is further strengthened where, as has been the
case since 2004, vesting is subject to achievement of specific
profitability targets during the reference period.
At the same time, motivating management by granting
instruments which reflect the Company’s market value
contributes to the alignment of management’s interests with
those of shareholders, promoting management’s sense of
identification with the Group and significantly enhancing
retention.