SAP Stock

Stock-Based Compensation

SAP's most important assets are its employees, whose innovation and entrepreneurial thinking will drive our continued success. The Share Matching Plan 2010 (SMP 2010), the Virtual Stock Option Plan 2010, the SOP Performance Plan 2009, the Virtual Stock Option Plan 2007 (SAP SOP 2007), the SAP 2000 Long Term Incentive Plan (LTI 2000 Plan), the replaced Business Objects awards, the Employee Discounted Stock Purchase Plan (EDSP) and the replaced Sybase RSA awards, which complement the existing compensation system, are examples of how SAP offers additional incentives for employees, managers, and top performers. Our incentive plans are well-balanced, transparent, and focused on the long term. These aspects help ensure that SAP remains an attractive employer now and in the future for qualified, ambitious new recruits as well as for experienced industry professionals.

A.Cash-Settled Share-Based Payment Plans
1. Stock Option Plan 2010
2. SAP Stock Option Plan 2007 (SAP SOP 2007)
3. SOP Performance Plan 2009 (SAP SOP 2009)
4. Business Objects Cash-Settled Awards Replacing Pre-Acquisition Business Objects Awards
    (BO Rights)
B. Equity-Settled Share-Based Payment Plans
1. Employee Discounted Stock Purchase Programs (EDSP)
2. Share Matching Plan 2010 (SMP 2010)
3. Long Term Incentive 2000 Plan (SAP LTI 2000 Plan)

1. Stock Option Plan 2010

Under the SAP Stock Option Plan 2010, we grant to members of the Senior Leadership Team, to SAP’s Top Rewards (employees with an exceptional rating) and to members of the Executive Board cash-based virtual stock options, the value of which depends on the multi-year performance of the SAP share.

The awards granted in 2010 had a grant-base value of €35.48, which is based on the average fair market value of one common share over the five3 business days prior to the Board resolution date. SAP granted 4.8 million virtual Stock Options to employees and 0.6 million virtual Stock Options to members of the Executive Board.

The virtual stock options granted under the SOP 2010 give the employees the right to receive a certain amount of money by exercising the options under the terms and conditions of this plan. After a three-year vesting period (four years for members of the Executive Board), the plan provides for 11 predetermined exercise dates every calendar year (one date per month except in April) until the rights lapse six years after the grant date (seven years for members of the Executive Board).

The exercise price is 110% of the grant base value (115% for members of the Executive Board) (€39.03 and €40.80 respectively per option for the 2010 grant)

Monetary benefits will be capped at 100% of the exercise price (150% for members of the Executive Board).

Basic Accounting Principles in Connection with the SAP SOP 2007 Plan

According to International Financial Reporting Standards (IFRS) accounting rules, compensation expenses related to rights are recorded over the vesting period (3 and 4 years respectively) and fair value is revised at every reporting date until the last payment occurs.

2. SAP Stock Option Plan 2007 (SAP SOP 2007)

Grants 2007 and 2008

Under the SAP Stock Option Plan 2007, we granted in 2007 and 2008 to top executives and top performers cash-based virtual stock options, the value of which was dependent on the multi-year performance of the SAP share.

The virtual stock options granted under the SOP give the employees the right to receive a certain amount of money by exercising the options under the terms and conditions of this plan. After a vesting period of two years, the plan provides for 11 predetermined exercise dates every calendar year (one date per month except in April) until the rights lapse five years after the grant date.

The exercise price is 110% of the grant base value, which is derived from the average fair market value of one common share over the 20 business days following the announcement date of the Company’s preliminary results for the preceding fiscal year. The awards granted in 2008 and 2007 have a grant-base value of €32.69 and €35.71, respectively. Under this plan, SAP granted 7.0 million Virtual Stock Options in 2007 and 8.7 million in 2008.

Monetary benefits under the SOP are capped at 100% of the exercise price (€39.28 for options granted in 2007, and €35.96 for options granted in 2008).

Basic Accounting Principles in Connection with the SAP SOP 2007 Plan

According to IFRS accounting rules, compensation expenses related to rights are recorded over the vesting period. SAP purchased various call options to hedge certain anticipated cash flow exposure relating to the SAP SOP 2007 Plan. The call options have been structured to replicate the payouts required, if any, under the terms of the rights. Through the hedging program the change in fair value of the stock appreciation rights offsets the compensation expense on the options recognized.

3. SOP Performance Plan 2009 (SAP SOP 2009)

Under the SOP Performance Plan 2009, we granted to top executives and top performers cash-based virtual stock options, the value of which depends on the multi-year performance of the SAP share relative to an industry-specific share price index, the Tech Peer Group Index (Tech PGI), which includes ten public competitors in the technology industry.

Under the SOP Performance Plan 2009, we granted to top executives and top performers cash-based virtual stock options, the value of which depends on the multi-year performance of the SAP share relative to an industry-specific share price index, the Tech Peer Group Index (Tech PGI), which includes ten public competitors in the technology industry.

Monetary benefits are capped at 110% of the exercise price (€30.80).

Basic Accounting Principles in Connection with the Incentive Plan 2010

According to IFRS accounting rules, compensation expense related to rights is recorded over the vesting period (two years) and fair value is revised at every reporting date until the last payment occurs.

4. Business Objects cash-settled awards based on former Business Objects option and Restricted Stock Unit plans

Prior to being acquired by SAP, the employees of Business Objects companies were granted equity awards giving rights to Business Objects shares. Following the Business Objects acquisition and the squeeze out on February 18, 2008, the Business Objects shares were no longer publicly traded. Therefore, SAP implemented mechanisms to allow the employees to cash out their equity awards, either by receiving cash instead of Business Objects shares (cash payment mechanism or CPM) or by receiving Business Objects shares that they subsequently sell to SAP (liquidity agreement mechanism or LAM). The implementation of CPM and LAM resulted in substance in a conversion of the 5.1 million equity awards outstanding at February 18, 2008 to an equal number of cash-settled share-based payment awards (replacing awards) to replace the stock options and Restricted Stock Units (RSUs) granted to them by Business Objects prior to SAP's acquisition of Business Objects (replaced awards).

The replaced awards comprised the following categories of awards:

  • Stock options with a four-year monthly graded vesting schedule from grant date, subject to a minimum of one year of continued service with the Company. The contractual terms range from seven to ten years. The exercise price for one subcategory of the awards was equal to 100% of the closing price of the Business Objects stock as reported on the Eurolist by Euronext on the last trading day prior to the option grant date; for the other subcategory of awards the exercise price was 100% of the average of the opening share price as reported on such market over the 20 trading days immediately preceding the historical grant date.
  • International RSUs were subject to a three-year graded vesting schedule. These rights were provided free of charge to the employees (no exercise price).
  • French RSUs had a two-year vesting period followed by a two-year holding period. These rights were also provided to the employees free of charge (no exercise price).

The replacing awards closely mirror the terms of the replaced awards (including conditions such as exercise price and vesting) except that:

  • The replaced awards were planned to be settled by issuing equity instruments whereas the replacing awards are settled in cash either via the CPM or via the LAM mechanism.
  • The replaced awards were indexed to Business Objects' share price whereas the replacing awards are indexed to SAP's stock price as follows: SAP's offering price for Business Objects shares during the tender offer (€42.00) is divided by SAP AG's share price at the tender offer closing date (€32.28) and the result is multiplied by the weighted average SAP share closing price during the 20 trading days preceding the exercise or disposition date.

In countries where the CPM applies, the benefit resulting from the stock option exercise or the RSU vesting is usually paid directly to the employees by SAP.

In countries where the LAM applies, an equity settlement was retained but supplemented by the LAM. In these cases, the employees continue to receive shares of Business Objects upon stock options exercise and RSU vesting and have a put option on these shares to resell the shares to SAP France within three months from the exercise or vesting date, except for some stock options exercise subject to French tax law, for which the put option period is two years and three months. SAP has a call option on these shares during 30 days after the end of the put option period.

Basic Accounting Principles in Connection with Business Objects replacing awards

Both under the CPM and the LAM mechanism, these awards are accounted for as a cash-settled award under IFRS 2 because the obligation to the employee will ultimately be settled in cash only. Any change in fair value is booked through stock-based compensation expense in operating income.

 
Additional Information

More details about SAP's stock option programs are available in the agendas of the annual general meetings.

General Meeting of Shareholders

Want to learn more? Contact SAP Investor Relations.

Save
Share