Chrysler 2009 Annual Report Download - page 82

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INCENTIVE PLANS BASED
ON FINANCIAL INSTRUMENTS
Fiat S.p.A. has established incentive plans based on financial instruments for more than 900 Group employees, in Italy and abroad, whose activities and
leadership have a significant impact on the Group.
Five plans are currently in place, approved by Fiat S.p.A. between 2002 and 2009, which in certain cases allow shares to be purchased at a predetermined
price (stock options) and in other cases provide for the granting of Fiat ordinary shares (stock grants).
In addition, the subsidiaries CNH Global N.V. and Ferrari S.p.A. have stock option and/or stock grant plans based on their 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 characteristics of incentive plans based on financial instruments issued by Fiat S.p.A.
These plans were established to incentivize individuals in key positions toward the achievement of Company and Group performance targets and align those
incentive plans to the long-term value created for shareholders. The level of commitment is further strengthened where, as has generally been the practice
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.
Plan beneficiaries are selected using objective criteria which take into account the impact of their role on business objectives. The number of options/shares
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 for each option exercised at a
predetermined price.
The options are subject to a predetermined exercise period beginning from the vesting date until the plan expiry date.
For all stock option 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 is payable in
cash at the moment of exercise.
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 commencing 1 June 2008. As of 1 June
2008, he also acquired the right to exercise the remaining 3,560,000 options, having achieved the profitability targets established for the reference period.
At the Annual General Meeting held on 27 March 2009, Shareholders approved a number of amendments proposed by the Board of Directors, which
determined that it was significantly in the Group’s interests to restore the retention capability of the Plan given the change in conditions in the real economy
and financial markets and the particularly uncertain period being faced by the automotive sector globally. More specifically, the amendments relate to the
reintroduction of a vesting period, solely conditional on Mr. Marchionne remaining in office, which shall render the options unexercisable until 31 December
2010 and extend the exercise period through to 1 January 2016, with all other conditions of the plan remaining unchanged.
REPORT ON
OPERATIONS
INCENTIVE PLANS
BASED ON
FINANCIAL
INSTRUMENTS