As the regulatory constraints related to the increase in capital did not permit the annual grants to be made in September, it was therefore at its meeting on November 29, 2016 that the Board of Directors of L’Air Liquide adopted the 2016 performance share and stock option plans which are aimed, above and beyond incentive and mandatory profit sharing, at associating employees to a greater extent with the company’s performance.
The Board decided to continue the policy initiated in 2015 aimed at giving preference to performance shares rather than stock options in the volumes granted. Thus, for employees who up until now had received a mixed grant, the weight of performance shares has increased considerably as compared to that of options and, for many of them, performance shares have completely replaced stock options.
In the case of the executive officers, the Board decided that the grant of performance shares and stock options and its changes over time will from now on be evaluated in terms of the IFRS value (and no longer the volumes granted), for all recurring stock option and performance share plans combined, with the percentage of performance shares predominating in the total value granted.
On the basis of these principles, the Board of Directors made the following grants at its meeting on November 29, 2016:
The Board granted options to subscribe for shares in the Company in accordance with the following terms:
The exercise price is €93 (corresponding to the average of the opening trading prices for the Air Liquide share during the twenty trading sessions prior to the date of the Board of Directors’ meeting, rounded down to the nearest euro).
|Volume||IFRS value1||% of share capital|
|Benoît Potier||60,000 options||€619,440||0.015%|
In total, it granted 143,240 options to subscribe for shares, representing 0.037% of the share capital in terms of the number of shares, to 243 beneficiaries, representing 0.36% of the workforce.
Subject to the performance conditions that apply to both the performance share and stock option plans (defined below), the provisions of the 2016 Plan Regulations are essentially unchanged as compared to those of the 2015 Plan (term of the Plan: 10 years; lock-up period of 4 years; definition of a condition of continued employment/presence in the Group at the time of exercise of the options).
The Board awarded performance shares in accordance with the following terms:
|Volume||IFRS value2||% of share capital|
|Benoît Potier||17,800 performance shares||€1,275,281||0.005%|
In total, it therefore awarded 426,346 performance shares representing 0.11% of the share capital to 1,955 beneficiaries, representing 2.87% of the workforce.
Subject to the performance conditions that apply to both the performance share and stock option plans (defined below), the provisions of the 2016 “France” and “World” Performance Share Plan Regulations are essentially identical to those of the 2015 Plans and in particular:
On a combined basis, all 2016 Performance Share and Stock Option Plans combined, the grants decided by the Board on November 29, 2016 are as follows:
|Volume||IFRS value1, 2||% of share capital|
|Benoît Potier||60,000 stock options
17,800 performance shares
|Total number of performance shares/performance share equivalents||474,093|
|% of share capital||0.15%|
|Number of beneficiaries||1,981|
|% of workforce||2.9%|
All the stock options and performance shares granted to any beneficiary within the scope of the November 29, 2016 Plans are subject to the following performance conditions that apply to both the Stock Option and Performance Share Plans. These conditions were adopted by the Board of Directors on February 15, 2016 and amended as communicated on March 24, 2016 in order to take account of the remarks made by certain shareholders.
The number of stock options that may be exercised out of the total number of stock options granted and the number of performance shares definitively awarded within the scope of the 2016 Plans will therefore depend:
(i) For 65% of the stock options/performance shares granted, on the rate of achievement of an objective, set by the Board, consisting of the average of the annual rates of growth in Group undiluted net earnings per share excluding foreign exchange impact and excluding exceptional items (“Recurring EPS”) for financial years 2016, 2017 and 2018. At the objective set, the grant is 100% then decreases on a straight-line basis to zero if there is no growth in EPS. In order to take into account the impact of the Airgas acquisition and its financing, the principle was adopted:
(ii) For 35% of the stock options/performance shares granted:
For 50% of the stock options/performance shares referred to in sub-paragraph (ii): on an objective of Total Shareholder Return set by the Board, defined as the average annual growth rate of an investment in Air Liquide shares for financial years 2016, 2017 and 2018 (“AL TSR”). The absolute TSR objective remains unchanged as compared to the previous plans, i.e. +8% as already published. At the objective set, the grant is 100% then decreases on a straight-line basis, to a lower limit which remains significantly higher than the rate of return on capital.
For 50% of the stock options/performance shares referred to in sub-paragraph (ii): on the rate of Total Shareholder Return from an investment in Air Liquide shares, reinvested dividends – sourced from Bloomberg (“B TSR”), compared to a reference index made up of:
The objective with regard to the relative part of TSR is based on the average of the two indexes. The rate of achievement of the performance conditions will be 0% if Air Liquide TSR is lower than the average of the two indexes, 50% if it is equal to the average of the two indexes and 100% if it is more than 3% higher than the average of the two indexes, on the basis of a straight-line change. Any grant for a performance lower than the average of the two indexes is impossible.
In sum, the applicable performance conditions are as follows:
|Of which 50%||Of which 50%|
|Performance conditions||Average of annual growth rates in recurring Earnings per Share excluding foreign exchange impact and exceptional items for the period 2016/2017/2018||Total Shareholder Return, defined as the average annual growth rate of an investment in Air Liquide shares over 3 financial years||Total Shareholder Return vs. 2 benchmarks as follows:
½ CAC 40 – ½ peers over 3 financial years
|Objective||Level of growth set within a range of +6% to + 10% per annum (the precise level will be communicated ex post)
Has increased as compared to +5% previously
|Total Shareholder Return of 8%||
|Achievement of performance conditions||This information will be published in 2019.|
The rate of achievement of the performance conditions will be recorded by the Board at the time of its adoption of the financial statements for the 2018 financial year. The absolute TSR objective is communicated ex ante for the November 29, 2016 Plans. The precise objective set for EPS will be made public ex post, at the close of the Board meeting determining the rate of achievement of the performance conditions. The result achieved and the percentage of performance shares that vest/options that are exercisable will also be communicated.
Within the scope of the sub-limits authorized by the Annual Shareholders’ Meeting for 38 months, and most recently by the Combined Shareholders’ Meeting of May 12, 2016 (18th and 19th resolutions), the Board of Directors sets lower annual limits for grants to the executive officers, expressed (i) as a percentage of the capital and (ii) as a multiple of their remuneration, in accordance with the recommendations of the AFEP/MEDEF Code.
The limits set by the Board of Directors for 2016 are identical to those for 2015 and are as follows:
For all the executive officers:
The specific rules applicable to the executive officers defined at the time of the grant under the 2015 Plans were restated by the Board on November 29, 2016. They are applicable to the 2016 grants as follows:
These obligations are in line with the recommendations of the AFEP/MEDEF Code of November 24, 2016.