DSM Integrated Annual Report 2020

27 Share-based compensation

The DSM Stock Incentive Plan provides rules for the grant of Restricted Share Units (RSU) and Performance Share Units (PSU) to eligible employees. Any grant of share units will be conducted on the last trading day at the Amsterdam Stock Exchange in March.

The number of share units to be granted is based on the face value of the DSM share. The grant value (depending on job level) to eligible employees will be divided by the average share price in January. As a result, the number of share units to be granted annually will fluctuate with the share price development. The grant concerns the maximum number of Restricted Share Units (RSUs) and Performance Share Units (PSUs) that may vest.

RSUs and PSUs are subject to a vesting period of 3 years starting at the grant date. Vesting of RSUs is subject to continued employment until the vesting date (‘time vesting’). In addition, vesting of PSUs is also subject to the achievement of predefined performance targets at the end of the vesting period. The PSUs granted in 2020 are subject to the realization of four equally weighted goals:

Non-vested share units will be forfeited. If employment is terminated prior to the vesting date, specific rules regarding vesting and forfeitures apply.

Prior to 2017, stock options were granted to eligible executives. Stock options have a term of 8 years and are subject to a vesting period of 3 years. All outstanding stock options are vested.

Share units and stock options are settled by delivery of DSM shares.

Overview of stock options1

 

 

Outstanding at 31 Dec. 2019

 

In 2020

 

Outstanding at 31 Dec. 2020

 

Fair value on grant date (€)

 

Exercise price (€)

 

Expiry date

Year of grant

 

 

Exercised

 

Average price (€)

 

Forfeited / expired

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2012

 

15,375

 

(15,375)

 

112.15

 

-

 

-

 

6.88

 

40.90

 

15 May 2020

2013

 

153,350

 

(68,100)

 

129.80

 

-

 

85,250

 

9.23

 

48.91

 

7 May 2021

2014

 

215,280

 

(77,655)

 

122.76

 

-

 

137,625

 

10.66

 

52.00

 

9 May 2022

2015

 

524,225

 

(211,825)

 

119.03

 

-

 

312,400

 

9.89

 

50.98

 

5 May 2023

2016

 

734,150

 

(202,505)

 

119.93

 

-

 

531,645

 

9.36

 

52.57

 

3 May 2024

2020 Total

 

1,642,380

 

(575,460)

 

120.94

 

-

 

1,066,920

 

 

 

 

 

 

Of which vested

 

1,642,380

 

 

 

 

 

 

 

1,066,920

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

at 31 Dec. 2018

 

 

 

 

 

 

 

at 31 Dec. 2019

 

 

 

 

 

 

2019 Total

 

4,249,980

 

(2,558,600)

 

101.48

 

(49,000)

 

1,642,380

 

 

 

 

 

 

Of which vested

 

2,250,605

 

 

 

 

 

 

 

1,642,380

 

 

 

 

 

 

1

This table also forms part of the Remuneration report 2020 as included in the Supervisory Board Report.

Overview of share units1

 

 

Outstanding at 31 Dec. 2019

 

In 2020

 

Outstanding at 31 Dec. 2020

 

Share price at date of grant (€)

 

Expiry date

Year of issue

 

 

Granted

 

Vested

 

Forfeited / expired2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2017

 

325,000

 

-

 

(291,654)

 

(33,346)

 

-

 

67.33

 

5 May 2020

2018

 

243,410

 

-

 

(18,932)

 

(21,339)

 

203,139

 

80.04

 

31 Mar 2021

2019

 

317,233

 

-

 

(20,511)

 

(28,788)

 

267,934

 

97.74

 

31 Mar 2022

2020

 

-

 

232,714

 

(5,000)

 

(8,436)

 

219,278

 

103.50

 

31 Mar 2023

2020 Total

 

885,643

 

232,714

 

(336,097)

 

(91,909)

 

690,351

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

at 31 Dec. 2018

 

 

 

 

 

 

 

at 31 Dec. 2019

 

 

 

 

2019 Total

 

652,120

 

328,088

 

(50,749)

 

(43,816)

 

885,643

 

 

 

 

1

This table also forms part of the Remuneration report 2020 as included in the Supervisory Board Report.

2

Restricted and Performance Share Units may partly vest upon termination of employment in connection with, for example, divestments, retirement or early retirement.

Certain employees in the Netherlands are entitled to employee stock options, to be granted on the first day on which the DSM stock is quoted ex-dividend following the Annual General Meeting of Shareholders. The opening price of the DSM stock on that day is the exercise price of such stock options. Employee stock options can immediately be exercised and have a term of five years.

Overview of stock options for employees1

 

 

Outstanding at 31 Dec. 2019

 

In 2020

 

Outstanding at 31 Dec. 2020

 

Fair value on grant date (€)

 

Exercise price (€)

 

Exercise period until

Year of grant

 

 

Granted

 

Exercised

 

Average price (€)

 

Forfeited / expired

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

8,985

 

-

 

(6,690)

 

111.57

 

(2,295)

 

-

 

4.50

 

50.98

 

May 2020

2016

 

47,780

 

-

 

(21,700)

 

126.47

 

(4,035)

 

22,045

 

4.38

 

52.57

 

May 2021

2017

 

83,205

 

-

 

(34,085)

 

129.96

 

(1,670)

 

47,450

 

6.14

 

67.33

 

May 2022

2018

 

181,570

 

-

 

(83,885)

 

130.00

 

(1,350)

 

96,335

 

8.50

 

85.00

 

May 2023

2019

 

316,270

 

-

 

(149,960)

 

130.01

 

(2,910)

 

163,400

 

8.88

 

98.00

 

May 2024

2020

 

-

 

190,630

 

(71,205)

 

135.97

 

(1,535)

 

117,890

 

10.26

 

112.00

 

May 2025

2020 Total

 

637,810

 

190,630

 

(367,525)

 

130.61

 

(13,795)

 

447,120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

at 31 Dec. 2018

 

 

 

 

 

 

 

 

 

at 31 Dec. 2019

 

 

 

 

 

 

2019 Total

 

784,995

 

482,600

 

(609,675)

 

104.43

 

(20,110)

 

637,810

 

 

 

 

 

 

Measurement of fair value

The costs of share units are measured by reference to the fair value of the DSM share at the date on which the share units are granted, ex-dividend as the share units do not accumulate dividend during the three-year vesting period.

The costs of option plans are measured by reference to the fair value of the options at the date on which the options are granted. The fair value is determined using the Black-Scholes model, taking into account market conditions linked to the price of the DSM share. Stock-price volatility is determined on the basis of historical volatilities of the DSM share price measured each month over a period equal to the expected option life. The costs of these options are recognized in the income statement (Employee benefit costs).

Assumptions determining fair value

The following assumptions were used to determine the fair value at grant date.

Plan assumptions

 

 

2020

 

2019

 

 

 

 

 

Share units

 

 

 

 

Risk-free rate

 

-0.69%

 

-0.57%

Expected share life in years

 

3

 

3

Nominal share life in years

 

3

 

3

Share price in €

 

103.50

 

97.74

Expected dividend in €

 

7.20

 

6.90

Fair value of share granted in €

 

96.30

 

90.84

 

 

 

 

 

Employee options

 

 

 

 

Risk-free rate

 

-0.74%

 

-0.59%

Expected option life in years

 

2.5

 

2.5

Nominal option life in years

 

5

 

5

Share price in €

 

112.10

 

98.00

Exercise price in €

 

112.10

 

98.00

Volatility

 

20.0%

 

20.0%

Expected dividend

 

2.14%

 

2.35%

Fair value of option granted in €

 

10.26

 

8.88

An amount of €29 million is included in the costs for wages and salaries for share-based compensation (2019: €34 million). The following table specifies the share-based compensation.

Share-based compensation

 

 

2020

 

2019

 

 

 

 

 

Employee stock options

 

2

 

4

Share units

 

19

 

22

Performance shares

 

8

 

8

Total expense

 

29

 

34

Capital employed
The total of the carrying amount of intangible assets and property, plant and equipment, inventories, trade receivables and other receivables, less trade payables, other current liabilities, investment grants and customer funding.
EEI
Energy Efficiency Improvement
Energy

Primary energy is energy that has not yet been subjected to a human engineered conversion process. It is the energy contained in unprocessed fuels.

Final (consumed) energy is the energy that is consumed by end-users. The difference between primary energy and final consumed energy is caused by the conversion process between the two as well as any transmission losses.

Greenhouse gas emissions (GHG)

Scope 1: Direct GHG emissions
Direct GHG emissions occur from sources that are owned or controlled by the company (i.e., emissions from combustion in owned or controlled boilers, furnaces, vehicles, etc.).

Scope 2: Indirect GHG emissions
Indirect GHG emissions relate to the generation of purchased energy (i.e., electricity, heat or cooling) consumed by the company. Purchased energy is defined as energy that is purchased or otherwise brought into the organizational boundary of the company. Scope 2 emissions physically occur at the facility where the energy is generated.

Scope 3: Value chain emissions
Scope 3 emissions are all indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.

Location-based emissions
Reflects the average GHG emissions intensity of grids on which electricity consumption occurs (using mostly national grid-average emission factor data). Corresponding emission factor: in most cases, the country emission factor.

Market-based emissions
Reflects GHG emissions from electricity supplies that companies have purposely chosen (or their lack of choice) and contracted. Corresponding emission factors:

  • Supplier specific emission factor (provided by the supplier)
  • Residual emission factor (country-based grid factor, corrected for allocated purchased electricity from renewable resources)
Return on capital employed (ROCE)
Adjusted operating profit from continuing operations as a percentage of average capital employed.
Total shareholder return (TSR)
Total shareholder return is capital gain plus dividend paid.