Skip to Content

(27) Share-Based Payments

SAP has granted awards under various cash-settled and equity-settled share-based payment plans to employees and executives. Most of these awards are described in detail below. SAP has further share-based payment plans not described below, which are individually and in aggregate, immaterial to our Consolidated Financial Statements.

a) Cash-Settled Share-Based Payments

SAP has made cash-settled share-based payments under the following plans: Long-Term Incentive Plan (LTI) for the Executive Board 2015 and 2016, Stock Option Plan 2010 (SOP 2010 (2010–2015 tranches)), and Restricted Stock Unit Plan including Move SAP Plan (RSU (2013–2016 tranches)).

The valuation of our outstanding cash-settled plans was based on the following parameters and assumptions:

 

Fair Value and Parameters Used at Year End 2016 for Cash-Settled Plans

    LTI Plan 2016 (2016 Tranche)   LTI Plan 2015 (2012−2015 Tranches)   SOP 2010
(2010−2015 Tranches)
  RSU
(2013−2016 Tranches)
Weighted average fair value as at 12/31/2016   €74.54   €81.10   €20.94   €81.34
Information how fair value was measured at measurement date                
Option pricing model used   Binomial   Other1)   Monte Carlo   Other1)
Share price   €82.81   €82.81   €82.81   €82.77
Risk-free interest rate (depending on maturity)   −0.76%   –0.80% to
−0.84%
  –0.51% to
−0.83%
  –0.36% to
−0.84%
Expected volatility   21.2%   NA   22.3% to 51.0%   NA
Expected dividend yield   1.45%   1.45%   1.46%   1.45%
Weighted average remaining life of awards outstanding as at 12/31/2016 (in years)   3.0   1.4   2.4   1.2

1) For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from the prevailing share price as of the valuation date.

 

 

Fair Value and Parameters Used at Year End 2015 for Cash-Settled Plans

    LTI Plan 2015 (2012−2015 Tranches)   EPP 2015 (2015 Tranche)   SOP 2010
(2010−2015 Tranches)
  RSU
(2013−2015 Tranches)
Weighted average fair value as at 12/31/2015   €71.45   €73.38   €16.06   €71.90
Information how fair value was measured at measurement date                
Option pricing model used   Other1)   Other1)   Monte Carlo   Other1)
Share price   €73.38   €73.38   €73.38   €73.24
Risk-free interest rate (depending on maturity)   –0.25% to
−0.39%
  NA   –0.03% to
−0.38%
  –0.16% to
−0.39%
Expected volatility   NA   NA   22.0% to 41.9%   NA
Expected dividend yield   1.56%   NA   1.56%   1.56%
Weighted average remaining life of options outstanding as at 12/31/2015 (in years)   1.7   0.1   3.4   1.2

1) For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from the prevailing share price as of the valuation date.

 

For SOP 2010, expected volatility of the SAP share price is based on a blend of implied volatility from traded options with corresponding lifetimes and exercise prices as well as historical volatility with the same expected life as the options granted. For LTI 2016 Plan valuation, the Peer Group Index price at year end was US$179.57; the expected dividend yield of the index of 1.24% and the expected volatility of the index of 18%, and the expected correlation of the SAP share price and the index price of 39% are based on the historical data of SAP share price and the index price.

Expected remaining life of the options reflects both the contractual term and the expected, or historical, exercise behavior. The risk-free interest rate is derived from German government bonds with a similar duration. The SAP dividend yield is based on expected future dividends.

Changes in Numbers of Outstanding Awards Under Our Cash-Settled Plans

thousands LTI 2016 Plan (2016 Tranche) LTI 2015 Plan (2012−2015 Tranches) SOP 2010
(2010−2015 Tranches)
RSU
(2013−2016 Tranches)
12/31/2014 0 591 26,282 2,228
Granted 0 277 10,866 5,125
Adjustment based upon KPI target achievement 0 109 NA 109
Exercised 0 0 −6,585 −1,337
Forfeited 0 0 −1,436 −548
12/31/2015 0 977 29,127 5,577
Granted 389 0 0 9,104
Adjustment based upon KPI target achievement 0 0 NA −66
Exercised 0 −294 −4,693 −2,659
Forfeited −12 0 −1,059 −1,055
12/31/2016 377 684 23,375 10,901
Outstanding awards exercisable as at
12/31/2015 0 0 4,120 0
12/31/2016 0 0 5,472 0
Total carrying amount (in € millions) of liabilities as at
12/31/2015 0 74 283 166
12/31/2016 7 58 385 436
Total intrinsic value of vested awards (in € millions) as at
12/31/2015 0 76 110 0
12/31/2016 2 58 154 0
Weighted average share price (in €) for share options exercised in
2015 NA NA 66.20 65.83
2016 NA 72.55 78.74 74.74
Total expense (in € millions) recognized in
2014 0 13 29 58
2015 0 28 187 193
2016 7 7 183 458

a.1) Long-Term Incentive Plan (LTI 2016 Plan)

SAP implemented a new Long-Term Incentive (LTI) 2016 Plan for members of the Executive Board in 2016. The plan is linked to the absolute performance of the SAP share and its relative performance as indicated by the SAP share price compared to a group of peer companies (Peer Group Index). A grant amount determined by the Supervisory Board is converted into virtual shares, referred to as share units, by dividing the grant amount by the SAP share price (calculated on the basis of a defined average value). The grant amount is determined by the Supervisory Board in its discretion for each financial year at a level between 80% and 120% of the contractual target amount, taking into account the achievement of the operating profit target set for the preceding financial year.

The share units granted comprise 40% retention share units and 60% performance share units (PSUs). Both types of share units have a vesting period of (approximately) four years. Each share unit that finally vests entitles its holder to a (gross) payout corresponding to the price of one SAP share after the end of the holding period, but capped at three times the SAP share price applied for the conversion of the grant amount into share units.

The number of PSUs that finally vest depends on the absolute and relative performance of the SAP share. If the increase of the SAP share price over the vesting period of the PSUs exceeds the increase of the Peer Group Index over the same period, the number of PSUs increases by a percentage equal to the outperformance expressed as percentage points. This percentage will be doubled if, in addition to the outperformance against the Peer Group Index, the SAP share price at the end of the vesting period of the PSUs is higher than the price at the start of this period. The number of vested PSUs is capped at 150% of the initial PSU allocation for that year. Conversely, if the performance of the SAP share over the vesting period of the PSUs is below the performance of the Peer Group Index, the number of PSUs will be reduced by a percentage equal to the difference expressed as percentage points. All PSUs lapse if the difference exceeds 50%. If the service contract for the Executive Board member is terminated before the end of the third year following the year in which the Share Units were granted, the share units are forfeited in whole or in part, depending on the circumstances of the relevant resignation from office or termination of the service contract.

a.2) Long-Term Incentive Plan (LTI 2015 Plan)

The LTI 2015 Plan is linked to the SAP share price performance and the achievement of two financial key performance indicators (KPIs): non-IFRS total revenue and non-IFRS operating profit, which are derived from SAP’s 2015 financial KPIs. Under this plan, virtual shares, referred to as share units, were granted to participants. Participants are paid out in cash based on the number of share units that vest. All participants in the LTI 2015 Plan were members of our Global Managing Board.

The share unit allocation process took place at the beginning of each year based on SAP’s share price after the publication of its preliminary annual results for the last financial year prior to the performance period.

At the end of a given year, the number of share units that finally vest with plan participants depends on SAP’s actual performance for the given year, and might be higher or lower than the number of share units originally granted. If performance against both KPI targets reaches at least the defined threshold of 60% (80% for 2013 tranches), the share units vest. Depending on performance, the vesting can reach a maximum of 150% of the budgeted amount. If performance against either or both of those KPI targets does not reach the defined threshold of 60% (80% for 2013 tranches), no share units vest and share units granted for that year will be forfeited. The adjustment to the threshold of those performance indicators was made to reflect our updated expectations due to the accelerated shift to the cloud. For the year 2015, the RSUs granted at the beginning of the year vested with 112.96% achievement of the KPI targets for the LTI 2015 Plan.

The share units for members of the Global Managing Board under the LTI 2015 Plan are subject to a three-year holding period before payout, which started in 2016.

The LTI 2015 Plan includes a “look-back” provision, due to the fact that this plan is based on certain KPI targets in 2015. The number of share units vested under the 2015 tranche was adjusted to reflect the overall achievement for 2015, which differed from the value represented by the number of share units vested from the 2012 to 2014 tranches. However, share units that were already fully vested in prior years did not forfeit.

The final financial effect of each tranche of the LTI 2015 Plan will depend on the number of vested share units and the SAP share price, which is set directly after the announcement of the preliminary fourth-quarter and full-year results for the last financial year of the respective three-year holding period under the LTI 2015 Plan, and thus may be significantly above or below the budgeted amounts.

a.3) SAP Stock Option Plan 2010 (SOP 2010 (2010–2015 Tranches))

Under the SAP Stock Option Plan 2010, we granted members of the Senior Leadership Team/Global Executives and employees with an exceptional rating as well as high potentials between 2010 and 2015, and only in 2010 and 2011 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 grant-base value was based on the average fair market value of one ordinary share over the five business days prior to the Executive Board resolution date.

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). Employees can exercise their virtual stock options only if they are employed by SAP; if they leave the Company, they forfeit. Executive Board members’ options are non-forfeitable once granted – if the service agreement ends in the grant year, the number of options is reduced pro rata temporis. Any options not exercised at the end of their term expire.

The exercise price is 110% of the grant base value (115% for members of the Executive Board), which is €39.03 (€40.80) for the 2010 tranche, €46.23 (€48.33) for the 2011 tranche, €49.28 for the 2012 tranche, €59.85 for the 2013 tranche, €60.96 for the 2014 tranche, and €72.18 for the 2015 tranche.

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

a.4) Restricted Stock Unit Plan Including Move SAP Plan (RSU Plan (2013–2016 Tranches))

To retain and motivate executives and certain employees, we granted RSUs representing a contingent right to receive a cash payment determined by the market value of the same number of SAP SE shares (or SAP SE American Depositary Receipts on the New York Stock Exchange) and the number of RSUs that ultimately vest. Granted RSUs will vest in different tranches, either:

  • Over a one-to-three-year service period only, or
  • Over a one-to-three-year service period and upon meeting certain key performance indicators (KPIs).

The number of RSUs that will vest under the 2016 tranche with performance-based grants was mostly contingent upon achievement of the non-IFRS operating profit performance milestones in 2016. Depending on performance, the number of RSUs vesting ranges between 0% and 200% of the number initially granted. Performance against the KPI targets was 85.13% (2015: 112.96%) in 2016. The RSUs are paid out in cash upon vesting.

b) Equity-Settled Share-Based Payments

b.1) Own SAP Plan (Own)

Under the Own SAP Plan (Own) implemented in 2016, SAP offers its employees the opportunity to purchase, monthly, SAP shares without any holding period. Each eligible employee’s investment is limited to a percentage of the employee’s monthly base salary. SAP matches the employee investment by 40% and adds a subsidy of €20 per month for non-executives. For the participation in 2016, employees receive a double matching contribution as well as a double subsidy. This plan is not open to members of the SAP Executive Board.

The number of shares purchased under this plan was 1.4 million in 2016.

b.2) Share Matching Plan (SMP)

Under the Share Matching Plan (SMP), SAP offered its employees the opportunity to purchase SAP shares at a discount of 40% between 2010 and 2015. The number of SAP shares an eligible employee could purchase through the SMP was limited to a percentage of the employee’s annual base salary. After a three-year holding period, the plan participants receive, from SAP, one free matching share for every three SAP shares acquired.

The terms for the members of the Senior Leadership Team and Global Executives were slightly different than those for the other employees. They did not receive a discount when purchasing the shares. However, after a three-year holding period, they receive two free matching SAP shares for every three SAP shares acquired. This plan was not open to members of the SAP Executive Board.

The weighted average remaining life of free matching shares outstanding is 0.9 years at year end 2016. The following table shows the parameters and assumptions used at grant date to determine the fair value of free matching shares, as well as the quantity of shares purchased and free matching shares:

 

Fair Value and Parameters at Grant Date for SMP

    2015   2014
Grant date   6/5/2015   6/4/2014
Fair value of granted awards   €62.98   €52.49
Information how fair value was measured at grant date        
Option pricing model used   Other1)   Other1)
Share price   €66.31   €55.61
Risk-free interest rate   −0.08%   0.13%
Expected dividend yield   1.67%   1.87%
Weighted average remaining life of awards outstanding at year end (in years)   1.5   0.9
Number of investment shares purchased (in thousands)   1,492   1,550

1) For these awards, the fair value is calculated by subtracting the net present value of expected future dividend payments, if any, until maturity of the respective award from the prevailing share price as of the valuation date.

 

Changes in Numbers of Outstanding Awards for Equity-Settled Plans

thousands SMP
12/31/2014 3,935
Granted 551
Exercised −2,808
Forfeited −78
12/31/2015 1,600
Granted 0
Exercised −444
Forfeited −105
12/31/2016 1,051

Recognized Expense for Equity-Settled Plans

€ millions 2016 2015 2014
Own 77 0 0
SMP 24 80 89
Others 6 7 7
Total 107 87 96

Back to top