Employee Incentive Plans
ALTANA Equity Performance (AEP)
Since 2010, ALTANA has offered a long-term incentive plan for key members of the management every year. These programs always begin on January 1 and have a term of four years. 22. Employee Incentive Plans 114 Notes to Consolidated Financial Statements The incentive plans provide for the issuance of so-called ALTANA Equity Performance Awards (AEP rights). These are debt instruments issued by ALTANA AG whose value develops similar to the virtual value of ALTANA’s shareholders’ equity. At the beginning of each incentive plan a preliminary number of AEP rights, so-called AEP Awards, is granted to the key management members. The number of AEP Awards finally granted at the end of the plan depends on the development of the target value of the AEP rights up to the end of the plan’s term. The maximum number is limited to 150 % of preliminarily granted AEP Awards. The awards will be settled at the determined value at the end of the particular plan’s term. The payment is limited to a maximum of 250 % of the value of the preliminary awards granted.
The precondition for participating in the incentive plans is an initial personal investment in AEP rights, which is determined based on the key management category to which the beneficiary belongs. The participant must hold the initial personal investments for the entire duration of the plan. These AEP rights are subject to the same performance as the AEP Awards, however their increase in value is limited to a maximum 20 % per year.
On December 31, 2014, at the end of the term of the AEP Tranche 2011, 22,155 AEP Awards were finally allocated which resulted in payments of € 5.6 million to beneficiaries in 2015.
The following table provides the main parameters of the incentive plan:
Total expenses recognized for all plans amounted to € 9.6 million and € 4.8 million in 2015 and 2014, respectively. The provisions amounted to € 11.5 million and € 8.0 million, as of December 31, 2015 and 2014, respectively. The total initial personal investment made by the key management personnel, which is reported in other liabilities, was measured at € 5.0 million and € 4.1 million as of December 31, 2015 and 2014 (see note 26).
ALTANA Profit Participation (APP)
At the end of 2010 ALTANA initiated an incentive plan for employees not eligible for the AEP plan. This incentive plan allows for annual purchases of ALTANA Profit Participation Rights (APPR).
The APPRs are debt instruments issued by ALTANA AG with a minimum term of four years. A basic interest rate of 3 % per year of the debt instrument is granted as well as an additional bonus interest rate if applicable. This bonus interest represents 150 % of the relative ALTANA Value Added. The latter corresponds to the excess return on capital employed (ROCE) generated by ALTANA in the respective financial year over the average cost of capital. Additionally, subscribers of APPRs were granted a one-time earnings-related country-specific payment.
As of December 31, 2015 and 2014, respectively, € 18.3 million and € 14.7 million were recognized in other liabilities for the APPRs issued in 2015 and previous years. In 2015 and 2014, the one-time payment and the interest incurred resulted in an expense of € 1.5 million and € 1.2 million, respectively, which was recognized in personnel expenses.