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Manpower฀2006฀Annual฀Report ฀ 47
Notes฀to฀Consolidated฀Financial฀Statements฀
Performance฀Share฀Units
In฀2005,฀we฀amended฀our฀2003฀Plan฀to฀permit฀the฀grant฀of฀performance฀share฀units.฀Vesting฀of฀units฀occurs฀at฀the฀end฀of฀the฀
performance฀period,฀generally฀three฀years,฀except฀in฀the฀case฀of฀death,฀disability฀or฀termination฀of฀employment.฀A฀payout฀฀
multiple฀is฀applied฀to฀the฀units฀awarded฀based฀on฀the฀performance฀criteria฀determined฀by฀the฀Executive฀Compensation฀
Committee฀of฀the฀Board฀of฀Directors.฀The฀performance฀criteria฀for฀performance฀share฀units฀granted฀in฀February฀2006฀was฀average฀
Operating฀Profit฀Margin฀growth.฀The฀vested฀units฀are฀settled฀in฀shares฀of฀our฀common฀stock.฀Holders฀of฀performance฀share฀
units฀do฀not฀receive฀dividends฀during฀the฀performance฀period.฀Accordingly,฀the฀fair฀value฀of฀these฀units฀is฀the฀quoted฀market฀
value฀of฀our฀stock฀on฀the฀date฀of฀the฀grant.
The฀Target฀Awards฀for฀the฀2006-2008฀performance฀period฀are฀based฀on฀average฀Operating฀Profit฀Margin฀growth฀over฀the฀฀
performance฀period.฀In฀the฀event฀this฀measure฀exceeds฀the฀target,฀an฀additional฀number฀of฀shares฀up฀to฀175%฀of฀the฀Target฀
Award฀may฀be฀granted.฀In฀the฀event฀this฀measure฀falls฀below฀the฀target฀performance฀level,฀a฀reduced฀number฀of฀shares฀as฀few฀
as฀the฀Threshold฀Award,฀which฀is฀equal฀to฀25%฀of฀the฀Target฀Award,฀may฀be฀granted.฀If฀Operating฀Profit฀Margin฀falls฀below฀the฀
threshold฀performance฀level,฀no฀shares฀will฀be฀granted.
The฀following฀table฀summarizes฀the฀performance฀share฀unit฀activity฀for฀the฀year฀ended฀December฀31,฀2006:
Share฀Units
Outstanding,฀January฀1,฀2006 –
฀ Granted 210,875
฀ Forfeited (17,500)
Outstanding,฀December฀31,฀2006 193,375
Threshold฀Award 30,125
Target฀Award 120,500
Outstanding฀Award 210,875
We฀recognize฀compensation฀expense฀when฀it฀becomes฀probable฀that฀the฀performance฀criteria฀specified฀in฀the฀award฀will฀be฀
achieved.฀The฀compensation฀expense฀is฀recognized฀over฀the฀performance฀period฀and฀is฀recorded฀in฀Selling฀and฀Administrative฀
Expenses.฀We฀currently฀believe฀the฀average฀Operating฀Profit฀Margin฀growth฀for฀the฀2006-2008฀performance฀period฀will฀likely฀
exceed฀the฀target฀performance฀level;฀accordingly,฀we฀recognized฀compensation฀expense฀of฀$3.4฀related฀to฀this฀performance฀
period฀in฀2006.
Other฀Stock฀Plans
Under฀the฀1990฀Employee฀Stock฀Purchase฀Plan,฀designated฀employees฀meeting฀certain฀service฀requirements฀may฀purchase฀
shares฀of฀our฀common฀stock฀through฀payroll฀deductions.฀These฀shares฀may฀be฀purchased฀at฀the฀lesser฀of฀85%฀of฀their฀fair฀฀
market฀value฀at฀the฀beginning฀or฀end฀of฀each฀year.
The฀fair฀value฀of฀each฀share฀purchased฀under฀the฀plan฀is฀estimated฀using฀the฀Black-Scholes฀option-pricing฀model฀and฀the฀฀
following฀weighted-average฀assumptions:
Year฀Ended฀December฀31 2006 2005 2004
Average฀risk-free฀interest฀rate 4.4% 2.8% 1.7%
Expected฀dividend฀yield 1.1% 0.9% 0.5%
Expected฀volatility 30.0% 30.0% 39.8%
Expected฀term฀(years) 1.0 1.0 1.0
These฀assumptions฀are฀determined฀using฀the฀same฀methodology฀applied฀in฀determining฀the฀assumptions฀used฀in฀calculating฀
the฀fair฀value฀of฀our฀stock฀options.
We฀have฀recognized฀expense฀of฀$2.6฀for฀shares฀purchased฀under฀the฀plan฀in฀2006.฀