Annual Report 2010 - Enel.com

43. Stock incentive plans
Between 2000 and 2008, Enel implemented stock incentive
plans (stock option plans and restricted share units
plans) each year in order to give the Enel Group – in line
with international business practice and the leading Italian
listed companies – a means for fostering management
motivation and loyalty, strengthening a sense of corporate
team spirit in our key personnel, and ensuring their
enduring and constant effort to create value, thus creating
a convergence of interests between shareholders and
management.
The remainder of this section describes the features of the
stock incentive plans adopted by Enel and still in place in
2010.
2008 stock option plan
The 2008 plan provides for the grant of personal, nontransferable
inter vivos options to subscribe a corresponding
number of newly issued ordinary Enel shares to senior
managers selected by the Board of Directors. The main
features of the 2008 plan are discussed below.
Beneficiaries
The beneficiaries of the plan – who include the CEO of
Enel is his capacity as General Manager – comprise the
small number of managers who represent the first reporting
line of top management. The head of the Infrastructure
and Networks Division does not participate but
has received other incentives linked to specific objectives
regarding the Division’s business area. The exclusion was
motivated by the obligation for Enel – connected with the
full liberalization of the electricity sector as from July 1,
2007 – to implement administrative and accounting unbundling
so as to separate the activities included in the
Infrastructure and Networks Division from those of the
Group’s other business areas.
The beneficiaries have been divided into two brackets (the
first includes only the CEO of Enel in his capacity as General
Manager) and the basic number of options granted to
each has been determined on the basis of their gross annual
compensation and the strategic importance of their
positions, as well as the price of Enel shares at the start of
the period covered by the plan (January 2, 2008).
Exercise conditions
236 Enel Annual Report 2010 Consolidated financial statements
The right to subscribe the shares was subordinate to the
condition that the executives concerned remain employed
within the Group, with a few exceptions (such as, for example,
termination of employment because of retirement
or permanent invalidity, exit from the Group of the company
at which the executive is employed, and succession)
specifically governed by the Regulations.
The vesting of the options is subject to achievement of
two operational objectives, both calculated on a consolidated,
three-year basis: (i) earnings per share (EPS, equal
to Group net income divided by the number of Enel shares
in circulation) for the 2008-2010 period, determined on
the basis of the amounts specified in the budgets for those
years and (ii) the return on average capital employed
(ROACE, equal to the ratio between operating income and
average net capital employed) for the 2008-2010 period,
also determined on the basis of the amounts specified in
the budgets for those years. Depending on the degree to
which the objectives are achieved, the number of options
that can actually be exercised by each beneficiary is determined
on the basis of a performance scale established by
the Enel Board of Directors and may vary up or down with
respect to the basic option grant by a percentage amount
of between 0% and 120%.
Exercise procedures
Once achievement of the operational objectives has been
verified, the options can be exercised as from the third
year after the grant year and up to the sixth year as from
the grant year. The options can be exercised at any time,
with the exception of two blocking periods lasting about
one month before the approval of the draft annual financial
statements of Enel SpA and the half-year report by the
Board of Directors.
Strike price
The strike price was originally set at €8.075, equal to the
reference price for Enel shares observed on the electronic
stock exchange of Borsa Italiana on January 2, 2008. The
strike price was modified by the Board of Directors on July
9, 2009 – which set it at €7.118 – in order to take account