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:
- Relative Total Shareholder Return (TSR) performance versus a peer group
- Return on Capital Employed (ROCE) growth
- Energy Efficiency Improvement (EEI)
- Greenhouse Gas Emissions (GHGE) reduction
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.
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Outstanding at 31 Dec. 2019 |
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In 2020 |
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Outstanding at 31 Dec. 2020 |
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Fair value on grant date (€) |
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Exercise price (€) |
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Expiry date |
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Year of grant |
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Exercised |
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Average price (€) |
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Forfeited / expired |
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2012 |
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15,375 |
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(15,375) |
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112.15 |
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- |
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- |
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6.88 |
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40.90 |
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15 May 2020 |
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2013 |
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153,350 |
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(68,100) |
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129.80 |
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- |
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85,250 |
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9.23 |
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48.91 |
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7 May 2021 |
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2014 |
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215,280 |
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(77,655) |
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122.76 |
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- |
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137,625 |
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10.66 |
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52.00 |
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9 May 2022 |
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2015 |
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524,225 |
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(211,825) |
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119.03 |
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- |
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312,400 |
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9.89 |
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50.98 |
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5 May 2023 |
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2016 |
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734,150 |
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(202,505) |
|
119.93 |
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- |
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531,645 |
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9.36 |
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52.57 |
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3 May 2024 |
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2020 Total |
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1,642,380 |
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(575,460) |
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120.94 |
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- |
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1,066,920 |
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Of which vested |
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1,642,380 |
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1,066,920 |
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at 31 Dec. 2018 |
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at 31 Dec. 2019 |
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2019 Total |
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4,249,980 |
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(2,558,600) |
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101.48 |
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(49,000) |
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1,642,380 |
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Of which vested |
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2,250,605 |
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1,642,380 |
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Outstanding at 31 Dec. 2019 |
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In 2020 |
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Outstanding at 31 Dec. 2020 |
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Share price at date of grant (€) |
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Expiry date |
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Year of issue |
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Granted |
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Vested |
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Forfeited / expired2 |
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2017 |
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325,000 |
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- |
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(291,654) |
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(33,346) |
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- |
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67.33 |
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5 May 2020 |
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2018 |
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243,410 |
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- |
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(18,932) |
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(21,339) |
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203,139 |
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80.04 |
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31 Mar 2021 |
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2019 |
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317,233 |
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- |
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(20,511) |
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(28,788) |
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267,934 |
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97.74 |
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31 Mar 2022 |
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2020 |
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- |
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232,714 |
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(5,000) |
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(8,436) |
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219,278 |
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103.50 |
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31 Mar 2023 |
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2020 Total |
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885,643 |
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232,714 |
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(336,097) |
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(91,909) |
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690,351 |
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at 31 Dec. 2018 |
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at 31 Dec. 2019 |
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2019 Total |
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652,120 |
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328,088 |
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(50,749) |
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(43,816) |
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885,643 |
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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.
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Outstanding at 31 Dec. 2019 |
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In 2020 |
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Outstanding at 31 Dec. 2020 |
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Fair value on grant date (€) |
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Exercise price (€) |
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Exercise period until |
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Year of grant |
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Granted |
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Exercised |
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Average price (€) |
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Forfeited / expired |
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2015 |
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8,985 |
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- |
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(6,690) |
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111.57 |
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(2,295) |
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- |
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4.50 |
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50.98 |
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May 2020 |
2016 |
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47,780 |
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- |
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(21,700) |
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126.47 |
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(4,035) |
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22,045 |
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4.38 |
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52.57 |
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May 2021 |
2017 |
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83,205 |
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- |
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(34,085) |
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129.96 |
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(1,670) |
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47,450 |
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6.14 |
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67.33 |
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May 2022 |
2018 |
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181,570 |
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- |
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(83,885) |
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130.00 |
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(1,350) |
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96,335 |
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8.50 |
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85.00 |
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May 2023 |
2019 |
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316,270 |
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- |
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(149,960) |
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130.01 |
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(2,910) |
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163,400 |
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8.88 |
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98.00 |
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May 2024 |
2020 |
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- |
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190,630 |
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(71,205) |
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135.97 |
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(1,535) |
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117,890 |
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10.26 |
|
112.00 |
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May 2025 |
2020 Total |
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637,810 |
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190,630 |
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(367,525) |
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130.61 |
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(13,795) |
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447,120 |
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at 31 Dec. 2018 |
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at 31 Dec. 2019 |
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2019 Total |
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784,995 |
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482,600 |
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(609,675) |
|
104.43 |
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(20,110) |
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637,810 |
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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.
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2020 |
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2019 |
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Share units |
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Risk-free rate |
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-0.69% |
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-0.57% |
Expected share life in years |
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3 |
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3 |
Nominal share life in years |
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3 |
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3 |
Share price in € |
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103.50 |
|
97.74 |
Expected dividend in € |
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7.20 |
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6.90 |
Fair value of share granted in € |
|
96.30 |
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90.84 |
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Employee options |
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Risk-free rate |
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-0.74% |
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-0.59% |
Expected option life in years |
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2.5 |
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2.5 |
Nominal option life in years |
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5 |
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5 |
Share price in € |
|
112.10 |
|
98.00 |
Exercise price in € |
|
112.10 |
|
98.00 |
Volatility |
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20.0% |
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20.0% |
Expected dividend |
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2.14% |
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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.
|
|
2020 |
|
2019 |
|
|
|
|
|
Employee stock options |
|
2 |
|
4 |
Share units |
|
19 |
|
22 |
Performance shares |
|
8 |
|
8 |
Total expense |
|
29 |
|
34 |
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.
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)