Share-based Compensation (Long-term Incentive Component).

Members of the Board of Directors receive share options as a form of compensation with a long-term incentive effect. The number of share options granted is no longer based on individual, contractually fixed amounts; the number is now calculated on the basis of the planned ratio of long-term incentive components to the member’s target annual income. In accordance with the requirements of the Act on the Appropriateness of Management Board Compensation (Gesetz zur Angemessenheit der Vorstandsvergütung – VorstAG), the vesting period for share options is four years. Please refer to note [20] in the Notes to the Group financial statements for full details about the range of exercise prices, the remaining term of the respective options, the average exercise price of the share options during the exercise period, as well as the conditions of option grant and exercise associated with the share-based payment programs.

In addition to the performance target stipulated for other beneficiaries under the program (exercise price per share equals the initial value plus 12%), a further condition applies to the exercise of share options held by members of the Board of Directors and has an impact on the long-term incentive component. The number of share options of the annual tranche granted to members of the Board of Directors is calculated at the start in such a way that a member can only achieve the full amount from this component of the overall compensation package, i.e., 100% of the planned sum from the long-term incentive component, if the share appreciates in value (total shareholder return) by an average of 6% per year over the entire four-year term of the share option. Share performance is calculated in terms of movements in the share price and the dividend (dividend yield). Once the number of share options has been calculated in this way, it can no longer be changed.

If share performance is below an annual average of 6% over the entire four-year vesting period for the share option, this will produce a lower figure for this component of the member’s compensation package. If share performance is above an annual average of 6% over the entire four-year vesting period for the share option, this will produce a higher figure for this component of the member’s compensation package. The contracts of members of the Board of Directors contain appropriate provisions to ensure that the amount actually received by a member in respect of the long-term incentive component does not unduly exceed the planned compensation from this component of the overall package. A subsequent adjustment is possible if three times the amount of a board member’s planned annual compensation is exceeded when viewed over a five-year period.

On this basis, the figures relating to each member of the Board of Directors from long-term incentive components are as follows:

 

 

 

 

 

 

 

Black-Scholes-Merton option pricing model

 

Amount of target annual income attributable to long-term incentive component1)

Number of share options

Value per share option2)

Total value of compensation component with long-term incentive effect2)

1)

Target value in €.

2)

in €, on date granted.

3)

Member of the Board of Directors since March 1, 2016.

Eckard Heidloff

700,000.00

92,422

8.84

817,010.48

Dr. Jürgen Wunram

500,000.00

66,016

8.84

583,581.44

Olaf Heyden

430,000.00

56,774

8.84

501,882.16

Dr. Ulrich Näher3)

430,000.00

56,774

8.84

501,882.16

Total

2,060,000.00

271,986

 

2,404,356.24

The total value of the share options at the date of granting was determined by means of the Black-Scholes-Merton options pricing model. Thus, the reported value of share-based compensation is merely to be seen as an amount derived from mathematical calculations. Whether the share-based compensation components associated with the current 2013 to 2016 programs result in a payment, and if so, to what extent, will depend on the future performance of the Company’s share price and the stock market price applicable during the exercise period.

The table below details the share options held as at September 30, 2016, by each member of the Board of Directors under each share-based payment program:

 

 

 

 

 

Units

 

2016

2015

2014

2013

Total

1)

Member of the Board of Directors since March 1, 2016.

2)

Share options from 2015 were granted prior to appointment as member of the Board of Directors.

Eckard Heidloff

92,422

111,793

87,364

127,398

418,977

Dr. Jürgen Wunram

66,016

79,852

62,403

90,999

299,270

Olaf Heyden

56,774

55,897

43,682

0

156,353

Dr. Ulrich Näher1) 2)

56,774

55,897

0

0

112,671

Total

271,986

303,439

193,449

218,397

987,271

The share options held as of September 30, 2016, are not exercisable at the end of the reporting period.

On March 30, 2016, the four-year vesting period for the 2012 share option program came to an end. The exercise price, having accounted for dividends, was €40.74. In accordance with the new provisions to be applied for the purpose of determining the relevant market price and adjusting the exercise period for the 2012 tranche, as agreed in the form of a resolution passed by the Annual General Meeting on January 25, 2016, under items 9 c) and 9 d) on the agenda, the relevant market price was determined on the basis of the unweighted average of the market price of the stock within the Xetra trading system of the Frankfurter Stock Exchange in the closing auction of the ten exchange trading days immediately subsequent to the announcement of the outcome on March 29, 2016, of the successful takeover bid by Diebold Inc. This price was calculated as €53.12. The associated gain per option is €12.38.

In total, the Board of Directors exercised 209,333 share options; of this total, 122,111 share options were attributable to Eckard Heidloff and 87,222 to Dr. Jürgen Wunram. The settlement of options was effected by means of a cash settlement.

The personnel expenses recognized in connection with the share-based payment programs from 2013 to 2016 are distributed among the board members as follows:

 

 

 

2015/2016

2014/2015

1)

Member of the Board of Directors since March 1, 2016.

Eckard Heidloff

3,693,174.91

724,583.92

Dr. Jürgen Wunram

2,637,989.65

517,560.71

Olaf Heyden

771,922.94

123,080.81

Dr. Ulrich Näher1)

435,706.06

0.00

Total

7,538,793.56

1,365,225.44

The increase in personnel expenses recognized is the result of a decision taken at the end of the third quarter to settle current share option programs by means of a cash settlement rather than in the form of shares. At the same time, the fair value of the respective obligations was re-measured and accounted for as an expense item.