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Share ownership obligations of the Group’s senior managers
In 2002, the Board of Directors decided that the members of the Group’s Executive Committee should hold the following average minimum number of Société Générale shares:
Number of shares
Chairman 8,500
Chief Executive Officer 4,500
Other members of the Executive Committee 2,500
The shares may be held directly or indirectly via the Company’s employee share ownership plan. Those members of the Executive Committee who do not currently fulfill these conditions must rectify matters upon exercising their stock options.
At December 31, 2005, the members of the Executive Committee held a total of over 180,000 shares, representing an average of over 20,000 shares per member.
STOCK OPTION PLANS AND FREE SHARES
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General policy
Following the approval of the General Meeting in 2005, the Board of Directors may allocate shares to the chief executive officers and senior managers of the Group on top of any options to purchase or subscribe to Société Générale shares. Furthermore, since 2005, the attribution of these financial instruments is booked under Personnel expenses in the Company’s financial statements.
At the proposal of the Compensation Committee, the Board has defined the following policy.
The awarding of stock options and free Société Générale shares is intended to motivate, secure the loyalty of and reward three categories of employee. The first category comprises executives who have made a significant contribution to the Group’s results with respect to their responsibilities. The second category is made up of high-potential executives, whose expertise is highly sought-after on the labor market. The third category is aimed at executives whose work has proved remarkably valuable for the Company.
As the awarding of stock options or free shares to personnel is henceforth booked as an expense for the Company in accordance with IFRS 2, the Board of Directors has defined a policy that factors in said expenses when determining any benefits to be awarded and has decided to combine the two instruments together. Chief executive officers shall only be awarded stock
options. The members of the Executive Committee, Management Committee and other senior managers shall be allocated both stock options and free shares in varying amounts according to their level of responsibility, with the number of options decreasing proportionately. Other non-senior managers shall be allocated shares only, primarily to replace the options formerly allocated under the terms of the previous policy.
In general, these stock options are vested for a period of seven years and are exercisable after three years. Moreover, the exercise of said options is subject to the beneficiary holding a valid employment contract on the date that the options are exercised. Since the 2000 plan, in view of the tax regime in force in France, beneficiaries resident for tax purposes in France may not transfer the shares received upon exercising their options until the fourth year following the exercise date.
As regards the attribution of free shares, their acquisition shall become definitive after three years and in two stages (50% after 2 years and 50% after 3 years of working for the Société Générale Group). In accordance with French legislation, shares may not be transferred for a period of two years following their final acquisition.
At the proposal of the Compensation Committee, the Board of Directors decided in 2003 that each year it would examine the appropriateness of implementing a stock option or share plan, to be approved, as appropriate, during its meeting in January.
2005 Plan
On January 13, 2005, following a proposal made by the Compensation Committee, the Board of Directors awarded new stock options. The members of the Executive Committee were awarded almost the same number of options as under the previous plan.
In all, 4,040,000 options were awarded to 1,767 Group senior managers including the chief executive officers (and including the 250,000 options awarded to executives at TCW), representing 0.90% of the share capital. The strike price of these options was set at EUR 75.00, representing no discount on the rounded average market price of the Société Générale share during the twenty trading days preceding the meeting of the Board of Directors. Of the 1,767 beneficiaries, 861 (49%) were attributed options for the first time, 436 (25%) were managers under the age of thirty-five, 1,094 (62%) were aged between 35 and 55 and 237 (13%) were over 55 years of age. 407 (23%) beneficiaries were women, with subsidiary employees accounting for almost 43% of all beneficiaries.
2006 Plan
At the proposal of the Compensation Committee, the Board of Directors, at its meeting of January 18, 2006, approved the new allocation of stock options and attributed free shares to certain members of personnel in application of the 11th resolution of the General Meeting of May 9, 2005. This new system was intended to complement or replace the allocation of stock options.
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For the 257 principal beneficiaries, half of said allocation was subject to them meeting minimal profitability targets, namely that the average ROE over the vesting period remain above 15%.
As regards stock options, 1,536,149 options were allocated to 1,065 managers, chief executive officers included, representing 0.36% of the share capital. The strike price of these options was set at EUR 105.65, representing no discount on the rounded average market price of the Société Générale share during the twenty trading days preceding the meeting of the Board of Directors. Of the 1,065 beneficiaries, 166 (16%) were managers under the age of thirty-five, 712 (67%) were aged between 35 and 55 and 187 (17%) were over 55 years of age. 187 (17%) beneficiaries were women, with subsidiary employees accounting for almost 45% of all beneficiaries.
As regards free shares, 720,346 shares were allocated to 2,059 Group senior managers, representing 0.17% of the share capital.
Of the 2,059 beneficiaries, 523 (26%) were managers under the age of thirty-five, 1,283 (62%) were aged between 35 and 55 and 252 (12%) were over 55 years of age. 527 (26%) beneficiaries were women, with subsidiary employees accounting for almost 31% of all beneficiaries.
All told, shares or options were allocated to 2,586 Group senior managers, 1,275 (49%) of these beneficiaries received awards for the first time.
INFORMATION ON STOCK OPTION PLANS INTRODUCED AFTER THE END OF THE FISCAL YEAR
Options vested
Date of award
Options Strike price
Number of beneficiaries
Number of options
Options exercisable as of
Shares transferable
as of
Expiry date of options
Unit value (*)
January 18, 2006 EUR 105.65 1,065 1,536,149 Jan. 18, 2009 Jan. 18, 2013 Jan. 17, 2013 16.63
o.w. Executive Committee 9 462,579
(*) Value used to determine the expense recognized under IFRS2, calculated using a binomial model on the date the stock option is awarded, taking into account trends in exercising options noted at Société Générale.
INFORMATION ON THE ALLOCATION OF FREE SHARES AFTER THE END OF THE FISCAL YEAR
Options vested
Date of award
Number of beneficiaries
Number of shares
Definitive acquisition
as of
Shares transferable as of
January 18, 2006 2,059 360,173 Jan. 1, 2008 Jan. 1, 2010
January 18, 2006 2,059 360,173 Jan. 1, 2009 Jan. 1, 2011
o.w. Executive Committee 6 8,650
SOCIÉTÉ GÉNÉRALE STOCK OPTION PLANS, AT DECEMBER 31, 2005
(with details of options awarded to Group senior management in office at the time of their allocation) Options vested
Date of award
Strike price
Number of beneficiaries
Number of options
Options exercisable as
of
Shares transferable as
of
Expiry date of
options 1998 1999
Jun. 24, 1998 EUR 45.35 541 1,953,200 24/06/03 24/06/03 23/06/05 0 0
o.w. Management 25 451 200 0 0
Sept. 8, 1999 EUR 48.50 714 3,502,400 08/09/02 08/09/04 07/08/06 0
o.w. Executive Committee 9 502,000 0
Aug. 2, 2000 EUR 51.00 1,477 2,268,000 02/08/03 02/08/05 01/08/07
o.w. Executive Committee _ 0
Jan. 12, 2001 EUR 66.00 258 3,116,500 12/01/04 12/01/05 11/01/08
o.w. Executive Committee 9 743,500
Jan. 16, 2002 EUR 62.50 1,092 3,543,977 16/01/05 16/01/06 15/01/09
o.w. Executive Committee 9 313,000
Apr. 22, 2003 EUR 52.00 1,235 3,891,579 22/04/06 22/04/07 21/04/10
o.w. Executive Committee 9 331,000
Jan. 14, 2004 EUR 70.00 1,550 3,788,300 14/01/07 14/01/08 14/01/11
o.w. Executive Committee 9 469,250
Jan. 13, 2005 EUR 75.00 1,767 4,040,000 13/01/08 13/01/09 13/01/12
o.w. Executive Committee 9 468,500
TOTAL 26,103,956 0 0
o.w. Management 3,278,450 0 0
N.B. In 1998 and 2001, the awards were made in the form of stock subscription options. In 1999, 2000 and from 2002 to 2005, they were stock purchase options.
The strike price corresponds to the average opening market price of the Société Générale share during the twenty trading days preceding the Board of Directors’ meeting at which it was decided to award the options, with a 20% discount for options vested in 2000.
(*) Value used to determine the expense recognized under IFRS2, calculated using a binomial model on the date the stock option is awarded, taking into account trends in exercising options noted at Société Générale.
OPTIONS HELD BY THE CHIEF EXECUTIVE OFFICERS AT DECEMBER 31, 2005
Date of award
Strike price
Jun. 24, 1998 45.35
Sept. 8, 1999 48.50
Jan. 12, 2001 66.00
Jan. 16, 2002 62.50
Apr. 22, 2003 52.00
Jan. 14, 2004 70.00
Jan. 13, 2005 75.00
Jan. 18, 2006 105.65
Numbers of options awarded
Options exercised in 2005 Chairman
104,000 57,000
160,000 87,000
250,000 112,200
90,000 0
109,000 0
120,000 0
120,000 0
120,000 0
Numbers of options awarded
Options exercised in 2005 Chief Executive Officer
52,000 52,000
90,000 90,000
137,500 0
50,000 0
60,000 0
66,000 0
66,000 0
66,000 0
Options exercised
2000 2001 2002 2003 2004 2005
Options cancelled
Options outstanding at
end-2005
Unit value IFRS 2 (*)
Potential dilutive effect
32,800 11,200 600 428,631 920,951 454,414 104,604 0
22,000 0 0 81,200 212,280 125,720
11,200 8,400 13,150 92,505 1,043,085 1,451,741 220,200 662,119
0 0 0 32,000 79,650 314,850
0 0 0 8,754 72,896 1,144,504 286,320 755,526
0 0 0 0 0 0
0 0 44,250 1,117,434 210,000 1,744,816 0.40%
0 0 0 261,500
0 0 180 460,095 279,486 2,804,216 17.33
0 0 0 28,500
0 0 1,500 141,048 3,749,031 13.23
0 0 0
0 0 63,950 3,724,350 14.92
0 0
0 35,051 4,004,949 12.82
0
44,000 19,600 13,750 529,890 2,081,362 4,629,688 1,340,659 17,445,007 0.40%
22,000 0 0 113,200 291,930 730,570
Stock options granted to and exercised by the ten employees who are not chief executive officers and who were awarded the largest number of stock options:
Number of options
Weighted average price
Options granted in 2005
by a Group company 358,000 75.00
Options exercised in 2005
on the stock of a Group company 445,450 60.52
SOCIÉTÉ GÉNÉRALE STOCK OPTIONS GRANTED TO EMPLOYEES
PLAN
TOTAL OF 10 LARGEST OPTIONS AWARDS PER PLAN
1998 140,000
1999 272,000
2000 22,000
2001 476,000
2002 251,375
2003 308,125
2004 354,000
2005 358,000