Notes to the consolidated financial statements
131
32 Share-based compensation
GRO program
Ahold at a glance
Business review
Governance
Financials
Ahold
Annual Report 2015
In 2015, Ahold's share-based compensation program consisted of a conditional share grant program called Global Reward Opportunity (GRO). Total 2015 GRO share-based compensation expenses were €47 million
(2014: €43 million). Ahold's share-based compensation programs are equity-settled.
The fair value of the shares granted under the GRO program in 2015 at grant date was €59 million, of which €5 million related to Management Board members. This fair value is expensed over the vesting period of the
grants adjusted for expected annual forfeitures of 5% (2014: 5%), excluding Management Board members. For the share-based compensation expenses allocable to the individual Management Board members, see Note 31.
Main characteristics
Under the 2006-2012 GRO program, Ahold shares were granted through a mid-term (three-year) and a long-term (five-year) program. The number of shares granted depended on the at-target value, the annual incentive
multiplier of the preceding year and the average share price for six months preceding the date of the grant. For participants other than the Management Board members, the mid-term component of the program contained a
matching share feature. For every five shares a participant holds for an additional two years after the vesting date, the participant will receive one additional share.
The shares were granted on the day after the annual General Meeting of Shareholders and vest on the day after the publication of Ahold's full-year results in the third year (three-year programs) or fifth year (five-year programs)
after the grant, provided the participant is still employed by Ahold. Shares granted to Management Board members vest on the day after the annual General Meeting of Shareholders in the third year (mid-term component)
or fifth year (long-term component) after the grant, subject to continued employment. Management Board members are not allowed to sell their shares within a period of five years from the grant date, except to finance tax
payable at the date of vesting.
Under the 2006-2012 GRO program, the shares granted through the long-term component are subject to a performance condition. The number of shares that will ultimately vest depends on Ahold's performance compared to
11 other retail companies (refer to the Remuneration section for the composition of the peer group), measured over a five-year period using Total Shareholder Return (TSR), which is the sum of share price growth and dividends
paid. The table below indicates the percentage of conditional shares that could vest based on the ranking of Ahold within the peer group:
2006-2012 GRO program rank
1
2
3
4
5
6
7
8
9
10
11
12
Management Board
150%
130%
110%
90%
70%
50%
25%
0%
0%
0%
0%
0%
Other participants
150%
135%
120%
105%
90%
75%
60%
45%
30%
15%
7.5%
0%
A revised GRO program was introduced as of the 2013 grant. Under the revised GRO program, shares are granted through a three-year program. The program consists of three components: one with a performance
hurdle at grant (conditional share grant) and two components with a performance hurdle at vesting (performance share grants). The size of the conditional share grant is subject to the Executive Incentive Plan Multiplier of the
preceding year for Management Board members and for other employees. Half of the performance share grant is linked to a three-year return on capital (RoC) target. Dependent on RoC performance, the number of shares
that eventually vest can range between 0% and a maximum of 150% of the number of shares granted. For the other half of the performance share grant, the performance at vesting is measured using the TSR ranking. The table
below indicates the percentage of shares with a TSR performance measure under the revised GRO program (2013, 2014 and 2015 GRO program) that could vest based on the ranking of Ahold within the peer group:
2013-2015 GRO program rank
1
2
3
4
5
6
7
8
9
10
11
12
Vice President and up
175%
150%
125%
100%
75%
50%
0%
0%
0%
0%
0%
0%
Other participants
150%
135%
120%
105%
90%
75%
60%
45%
30%
15%
7.5%
0%
As of the end of 2015, Ahold held the third position with respect to the 2011 share grant, the second position for the 2012 grant, the fourth position for the 2013 grant, the third position for the 2014 grant and the third position
for the 2015 grant. For the 2011 share grant, Ahold's final TSR ranking was in the third position (110% for Management Board members and 120% for other participants) and for the 2013 grant, it was in the fourth position
(100% for Vice President and up and 105% for other participants). The positions with respect to the 2012, 2014 and 2015 share grants are not an indication of Ahold's final ranking at the end of the performance periods, nor
do they provide any information related to the vesting of shares.
At the end of each reporting period, Ahold revises its estimates of the number of shares that are expected to vest based on the non-market vesting conditions (RoC performance). Ahold recognizes the impact of the revision to
original estimates, if any, in the income statement, with a corresponding adjustment to equity. For the 2013 grant, the final percentage of shares dependent on RoC performance that will vest in 2016 is 60% (2014 estimate:
51%). At the end of 2015, the revised estimate of the number of shares in the 2014 grant that will vest in 2017 dependent on RoC performance, is 90%. The estimate for the 2015 grant is that 100% of the shares dependent
on RoC performance will vest in 2018.
