annual report - FIAT SpA

SHARE-BASED INCENTIVE PLANS
Fiat S.p.A. has established share-based incentive plans for more than 900 Group employees, in Italy and abroad,
whose activities and leadership have a significant impact on the Group.
The incentive plans currently in place, approved by Fiat S.p.A. between 2004 and 2010, offer Fiat ordinary shares for
purchase at a predetermined price (stock options) or grant Fiat ordinary shares (stock grants). Following the demerger
of activities from Fiat S.p.A. to Fiat Industrial S.p.A., those plans were amended to ensure they fulfill the objectives for
which they were adopted, even subsequent to the Demerger. Those entitled to stock options or stock grants will,
therefore, receive one ordinary Fiat share and one ordinary Fiat Industrial share for each right they hold, with the option
exercise price (for stock option plans) and the free grant of shares (for the stock grant plan) remaining unchanged.
In addition, the subsidiary CNH Global N.V. has existing stock option and/or stock grant plans based on its ordinary
shares, while the stock option plan established by Ferrari S.p.A. for its Chairman Luca Cordero di Montezemolo expired
at the end of 2010. Prior to coming under the Group's control, other subsidiaries had approved cash-settled sharebased
payment plans referred to as Stock Appreciation Rights (SARs).
Following is a description of the principal characteristics of the incentive plans based on Fiat S.p.A. shares.
These plans were established to incentivize individuals in key positions toward the achievement of Company and
Group performance targets and align those incentive plans to the long-term value created for shareholders. The level of
commitment is further strengthened where, as has generally been the practice since 2004, vesting is subject to
achievement of specific profitability targets during the reference period.
At the same time, incentivizing management through instruments that reflect the Company’s market value contributes
to the alignment of their interests with those of shareholders, promoting their sense of identification with the Group and
significantly enhancing retention.
Plan beneficiaries are selected using objective criteria that take into account the impact of their role on business
objectives. The number of options/shares actually granted is determined on the basis of individual leadership qualities.
The stock option plans established by Fiat S.p.A. grant beneficiaries the option to purchase one Fiat ordinary share for
each option exercised at a predetermined price. As stated above, under the amendments made pursuant to the
Demerger, beneficiaries have the option to purchase one Fiat ordinary share and one Fiat Industrial ordinary share.
The options are subject to a predetermined exercise period beginning from the vesting date until the plan expiry date.
For all stock option plans, the exercise price is based on the average daily market price for the month prior to the grant
date and may be subject to adjustment as a result of transactions affecting the Company’s share capital, with any
adjustment factor being determined by the AIAF. The exercise price is payable in cash at the moment of exercise.
On 26 July 2004, the Board of Directors granted Sergio Marchionne, as a part of his variable compensation as Chief
Executive Officer, options to purchase 10,670,000 Fiat S.p.A. ordinary shares at a price of €6.583 per share,
exercisable from 1 June 2008 to 1 January 2011. In each of the first three years following the grant date, the CEO
acquired the right to purchase, beginning 1 June 2008, a maximum of 2,370,000 shares annually. As of 1 June 2008,
he also acquired the right to exercise, effective from that date, the remaining options on 3,560,000 shares as a result of
predetermined performance objectives for the reference period having been met. At the Annual General Meeting on 27
March 2009, Shareholders approved a number of amendments proposed by the Board of Directors, which determined
that it was significantly in the Group’s interests to restore the retention capability of the Plan given the change in
conditions in the real economy and financial markets and the particularly uncertain period being faced by the
automotive sector globally. More specifically, a new vesting period was introduced, conditional solely on Mr.
Marchionne remaining in office, which rendered the options unexercisable until 31 December 2010 and extended the
exercise period through to 1 January 2016, with all other conditions of the plan remaining unchanged.
On 3 November 2006, the Fiat S.p.A. Board of Directors approved (subject to the final approval of Shareholders at the
General Meeting of 5 April 2007) an eight-year stock option plan, which provided certain managers of the Group and
the Fiat S.p.A. Chief Executive Officer with the right to purchase a set number of Fiat S.p.A. ordinary shares at the fixed
price of €13.37 per share. In particular, the 10,000,000 options granted to employees and the 5,000,000 options
granted to the Chief Executive Officer had a vesting period of four years, with a quarter of the number vesting each
year, were subject to achieving certain pre-determined profitability targets (Non-Market Conditions or “NMC”) in the
reference period and were exercisable from the date on which the 2010 Financial statements are approved. The
remaining 5,000,000 options granted to the Chief Executive Officer of Fiat S.p.A. also had a vesting period of four
years with a quarter of the number vesting each year and are exercisable from November 2010. Exercise of the options
was also subject to specific restrictions regarding the duration of the employment relationship or the continuation of the
position held. The Board also exercised its powers under Article 2443 of the Civil Code to issue new shares, in service
of the incentive plan, to employees of the Company and/or its subsidiaries up to 1% of share capital or a maximum of
Report on Operations Share-based incentive plans
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