31. Share compensation plans

Employee share purchase plan

LafargeHolcim has an employee share ownership plan for all employees of Swiss subsidiaries and some executives from Group companies. This plan entitles employees to acquire a limited amount of discounted LafargeHolcim Ltd shares generally at 70 percent of the market value based on the prior-month average share price. The shares cannot be sold for a period of two years from the date of purchase. The total expense arising from this plan amounted to CHF 0.9 million in 2015 (2014: CHF 5.2 million).

Share plan for management of Group companies

For the year 2015 and before, part of the variable, performance-related compensation for management of Group companies is paid in LafargeHolcim Ltd shares, which are granted based on the market price of the share in the following year. The shares cannot be sold by the employee for the next three years. The total expense arising from this share plan amounted to CHF 7.9 million in 2015 (2014: CHF 5.6 million). There will be no new grants under this plan in the future.

Senior management share plans

For the year 2015 and before, part of the variable, performance-related compensation of senior management is paid in LafargeHolcim Ltd shares, which are granted based on the market price of the share in the following year. The shares cannot be sold nor pledged by the employee for the next five years. The total expense arising from these share plans amounted to CHF 3.2 million in 2015 (2014: CHF 2.2 million). There will be no new grants under these plans in the future.

Share option plans

For the year 2015 and before, two types of share options are granted to senior management of the Group: the ones, which are granted as part of the annual variable compensation and those, that are allotted to the Executive Committee upon appointment. In both cases, each option represents the right to acquire one registered share of LafargeHolcim Ltd at the market price of the shares at the date of grant. There will be no new grants under these plans in the future.

The contractual term of the first type of option plan is eight years, with immediate vesting but exercise restrictions for a period of three years following the grant date.

The contractual term of the second type of option plan is twelve years and the options have a vesting period (service-related only) of nine years from the date of grant, with sale and pledge restrictions.

The Group has no legal or constructive obligation to repurchase or settle the options in cash.

Performance share plan

LafargeHolcim set up a performance share plan in December 2015. Performance shares and/or market value options are granted to executives, senior management and other employees for their contribution to the continuing success of the business. These shares and options will be delivered after a three-year vesting period following the grant date and are subject to performance conditions.

Performance shares

610,167 performance shares were granted in 2015 under the performance share plan. These shares are subject to a three year vesting period. 427,117 shares are subject to internal performance conditions and the fair value per share is CHF 49.12. 183,050 shares are subject to an external performance condition, based on the Total Shareholder Return. This external condition was included in the fair value per share with CHF 14.35 using a Monte Carlo simulation.

Liquidity mechanism for remaining rights under the Lafarge long term incentive plans

The Lafarge long term incentive plans consisted in stock options (granted up to 2012) and performance share (granted up to 2014) plans, all subject to performance conditions. All Lafarge stock options are vested, while some performance shares granted in 2012, 2013 and 2014 are still under vesting period (vesting period was 3 or 4 years). Performance conditions include internal conditions and a market condition related to Total Shareholder Return. The market condition is included in the fair value of each granted instrument. The total expense arising from these plans amounted to CHF 4 million based on the fair value at the date of the merger.

Following the success of its public exchange offer on Lafarge S.A. and the completion of the subsequent squeeze-out of Lafarge S.A. shares on October 23, 2015, LafargeHolcim has proposed a liquidity mechanism for:

  • Lafarge S.A. shares that may be issued following the exercise on or after the date of the squeeze-out of stock options that have been allocated pursuant to th e Lafarge stock option plans; or
  • Lafarge S.A. shares that may be definitively allotted on or after the squeeze-out in accordance with the Lafarge performance share plans

Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:

 

Weighted average exercise price1

Number1 2015

Number1 2014

1

Adjusted to reflect former share splits and/or capital increases and/or scrip dividend.

2

These options will not be delivered before the end of the 3-year vesting period and are subject to the level of achievement of performance conditions.

3

These options were granted under the Lafarge stock option plans. The figures presented in this table are based on the closing exchange rate and the actual exchange ratio of 0.945.

January 1

CHF

64.83

1,159,468

1,461,609

Granted and vested (individual component of variable compensation)

CHF

66.04

192,303

99,532

Granted and vested (single allotment)

 

 

 

33,550

Granted and under vesting period2

CHF

50.19

747,136

0

Increase due to liquidity mechanism3

CHF

81.09

3,076,385

0

Forfeited

CHF

64.81

101,217

0

Exercised

CHF

44.22

109,272

182,490

Lapsed

CHF

71.14

866,786

252,733

December 31

CHF

73.72

4,098,017

1,159,468

Of which exercisable at the end of the year

 

 

2,790,893

511,239

Share options outstanding at the end of the year have the following expiry dates and give the right to acquire one registered share of LafargeHolcim Ltd at the exercise prices as listed below:

Option grant date

Expiry date

Exercise price1

Number1 2015

Number1 2014

1

Adjusted to reflect former share splits and/or capital increases and/or scrip dividend

2

Due to trade restrictions in 2008, the expiry date of the annual options granted for the years 2003 to 2005 has been extended by one year.

3

These options were granted under the Lafarge stock-option plans. The figures presented in this table are based on the closing exchange rate and the actual exchange ratio of 0.945.

2004

20162

CHF

63.50

15,550

23,550

2007

2015

CHF

125.34

0

49,674

2008

2016

CHF

99.32

71,083

71,083

2008

2020

CHF

62.95

33,550

33,550

2009

2017

CHF

35.47

70,502

153,482

2010

2018

CHF

67.66

95,557

99,493

2010

2022

CHF

70.30

33,550

33,550

2010

2022

CHF

76.10

33,550

33,550

2011

2019

CHF

63.40

113,957

113,957

2011

2023

CHF

66.35

0

67,100

2012

2020

CHF

54.85

165,538

179,894

2012

2024

CHF

61.90

0

33,550

2013

2021

CHF

67.40

122,770

122,770

2013

2025

CHF

64.65

11,183

11,183

2014

2022

CHF

64.40

99,532

99,532

2014

2026

CHF

64.40

33,550

33,550

2015 (20063)

2016

CHF

91.24

617,525

0

2015 (20073)

2017

CHF

119.71

418,551

0

2015 (20083)

2018

CHF

103.95

551,892

0

2015 (20093)

2019

CHF

33.22

103,545

0

2015 (20103)

2020

CHF

55.44

199,480

0

2015 (20113)

2020

CHF

48.09

149,617

0

2015 (20123)

2020

CHF

38.91

218,096

0

2015

2023

CHF

66.85

144,970

0

2015

2023

CHF

63.55

47,333

0

2015

2025

CHF

50.19

747,136

0

Total

 

 

 

4,098,017

1,159,468

The Group estimated the fair value of the options granted in 2015, in respect of the share option plans and performance share plan previously described, based on the following assumptions:

 

Performance share plan

Share option plans

1

Adjusted to reflect the scrip dividend.

Share Price

49.12

68.65

72.05

Exercise Price

50.19

63.551

66.851

Assumed/expected dividend yield

1.75%

1.89%

1.80%

Expected volatility of stock

27.41%

23.30%

27.99%

Risk-free interest rate

–0.44%

–0.50%

–0.35%

Expected life of the options (years)

8

6

6

Fair value of the options has been determined using the Black-Scholes model.

All shares granted under these plans are either purchased from the market or derived from treasury shares. The total personnel expense arising from the granting of options based on the individual component of variable compensation amounted to CHF 1.5 million in 2015 (2014: CHF 2.0 million).