Unilever 2005 Annual Report Download - page 135

132 Unilever Annual Report and Accounts 2005
Notes to the consolidated accounts
Unilever Group
31 Share-based compensation plans
As at 31 December 2005, the Group had a number of share-based compensation plans:
(i) All-Employee Option Plans
Local All-Employee Option Plans have been set up in 16 countries to enhance employee involvement with Unilever and its performance by
providing a potential financial benefit linked to the Unilever share price. There are no individual performance targets to be met. The plans
permit participation by all permanent employees in the country where the relevant plan applies.
(ii) Executive Option Plans
The Executive Option Plans were introduced in 1985 to reward key employees throughout the world for their contribution to the enhancement
of the Group’s longer-term future and their commitment to the Group over a sustained period. The grant is dependent on performance of the
Group and the individual.
(iii) Global Performance Share Plan
Introduced in 2005, under this plan managers can be awarded conditional shares which will vest three years later at a level between 0% and
150% - 200% depending on Unilever’s achievement of set targets for Underlying Sales Growth and Free Cash Flow over the three year
performance period.
(iv) Share Matching Plans
If managers invest part of their annual bonus in Unilever shares, the company will match this with the same number of shares on the condition
that they keep all shares for an agreed number of years and will still be employed by Unilever on the vesting date.
(v) TSR Long-Term Incentive Plan
This plan was introduced in 2001 and, depending on the TSR ranking (see page 25) of Unilever in comparison with its peer group, it will
potentially award top executives on the vesting date three years later with between 0% and 200% of the original conditional award.
(vi) North America Performance Share Programme
A long-term incentive plan for North American managers, awarding Unilever shares if company and personal performance targets are met over
a three-year period.
(vii) Restricted Share Plan
Restricted shares can be awarded to a select number of executives for special performance. After the agreed number of years the awards will
vest provided the executive is still employed by Unilever at that time.
(viii) Other plans
A cash-settled share-based retention plan was introduced in 2004 for a number of key executives.
Unilever will not grant share options in total in respect of Executive Option Plans for more than 5% of its issued ordinary capital, and for all
Plans together, for more than 10% of its issued ordinary capital. The Board does not apportion these limits to each plan separately.
In recent years we have met the obligations under our share option and award plans by purchasing shares in advance and transferring them,
in return for the exercise price, to Directors and employees as the options are exercised or the awards vest.
The numbers in this note include those for Executive Directors shown in the report of the Remuneration Committee on pages 53 to 69 and
those for key management personnel shown in note 33 on pages 142 and 143. No awards were made to Executive Directors in 2005 and 2004
under the North America Performance Share Programme, the Restricted Share Plan or the cash-settled share-based retention plan. Non-
Executive Directors do not participate in any of the share-based compensation plans.
The economic fair value of the awards is calculated using an option pricing model (usually an adjusted Black-Scholes or multinomial model) and
the resulting cost is recognised as remuneration cost amortised over the vesting period of the grant. The actual remuneration cost charged in
each period is shown below:
€ million € million
2005 2004
All-Employee Option Plans 13 17
Executive Option Plans 63 105
Global Performance Share Plan 15 –
Share Matching Plans 14 21
TSR Long-Term Incentive Plan 10 9
North America Performance Share Programme 63 64
Restricted Share Plan 2–
Other Plans 12 2
192 218
Disclosures, including a description of the method and significant assumptions used to estimate the fair values of options and the weighted
average information, are given below for each type of plan, on a combined basis.