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Note 26 Share-based payments

Note 26 Share-based payments

The following share-based payment amounts are included in the income statements as operating costs.

FOR THE YEAR ENDED DECEMBER 31 2016   2015  

ESP

(29 ) (28 )

RSUs/PSUs

(49 ) (51 )

Other(1)

(12 ) (15 )

Total share-based payments

(90 ) (94 )

 

 

 

 

Description of the plans

ESP

The ESP is designed to encourage employees of BCE and its participating subsidiaries to own shares of BCE. Each year, employees can choose to have a certain percentage of their eligible annual earnings withheld through regular payroll deductions for the purchase of BCE common shares. In some cases, the employer also will contribute a percentage of the employee’s eligible annual earnings to the plan, up to a specified maximum. Dividends are credited to the participant’s account on each dividend payment date and are equivalent in value to the dividends paid on BCE common shares.

The BCE ESP allows employees to contribute up to 12% of their annual earnings with a maximum employer contribution of 2%.

Employer contributions to the BCE ESP plan are subject to employees holding their shares for a two-year vesting period. Dividends related to employer contributions are also subject to the two-year vesting period.

The trustee of the ESP buys BCE common shares for the participants on the open market, by private purchase or from treasury. BCE determines the method the trustee uses to buy the shares.

At December 31, 2016, 5,673,948 common shares were authorized for issuance from treasury under the BCE ESP.

The following table summarizes the status of unvested employer contributions at December 31, 2016 and 2015.

NUMBER OF ESP SHARES 2016   2015  

Unvested contributions, January 1

1,146,046   1,153,653  

Contributions(1)

600,808   645,633  

Dividends credited

49,988   53,283  

Vested

(586,309 ) (600,815 )

Forfeited

(137,321 ) (105,708 )

Unvested contributions, December 31

1,073,212   1,146,046  

 

RSUs/PSUs

RSUs/PSUs are granted to executives and other eligible employees. The value of an RSU/PSU at the grant date is equal to the value of one BCE common share. Dividends in the form of additional RSUs/PSUs are credited to the participant’s account on each dividend payment date and are equivalent in value to the dividend paid on BCE common shares. Executives and other eligible employees are granted a specific number of RSUs/PSUs for a given performance period based on their position and level of contribution. RSUs/PSUs vest fully after three years of continuous employment from the date of grant and, in certain cases, if performance objectives are met, as determined by the board of directors.

The following table summarizes outstanding RSUs/PSUs at December 31, 2016 and 2015.

NUMBER OF RSUs/PSUs 2016   2015  

Outstanding, January 1

3,333,583   3,616,967  

Granted(1)

874,888   1,005,062  

Dividends credited

137,583   157,485  

Settled

(1,321,846 ) (1,342,514 )

Forfeited

(95,510 ) (103,417 )

Outstanding, December 31

2,928,698   3,333,583  

Vested, December 31(2)

1,058,200   1,138,861  

 

DSP

The value of a deferred share is equal to the value of one BCE common share. Dividends in the form of additional deferred shares are credited to the participant’s account on each dividend payment date and are equivalent in value to the dividend paid on BCE common shares. Deferred shares vest fully after three years of continuous employment from the date of grant. The liability recorded in Trade payables and other liabilities and Other non-current liabilities in the statements of financial position and related to the deferred share plan was $37 million and $38 million at December 31, 2016 and December 31, 2015, respectively.

STOCK OPTIONS

Under BCE’s long-term incentive plans, BCE may grant options to executives to buy BCE common shares. The subscription price of a grant is based on the higher of:

  • the volume-weighted average of the trading price on the trading day immediately prior to the effective date of the grant
  • the volume-weighted average of the trading price for the last five consecutive trading days ending on the trading day immediately prior to the effective date of the grant

At December 31, 2016, 17,390,633 common shares were authorized for issuance under these plans. Options vest fully after three years of continuous employment from the date of grant. All options become exercisable when they vest and can be exercised for a period of seven years from the date of grant. Special vesting provisions may apply if:

  • there is a change in control of BCE and the option holder’s employment ends
  • the option holder is employed by a designated subsidiary of BCE and BCE’s ownership interest in that subsidiary falls below the percentage set out in the plan
The following table summarizes BCE’s outstanding stock options at December 31, 2016 and 2015.

  NOTE   2016 2015
NUMBER OF OPTIONS   WEIGHTED AVERAGE
EXERCISE PRICE ($)
 

NUMBER OF OPTIONS

  WEIGHTED AVERAGE
EXERCISE PRICE ($)
 

Outstanding, January 1

    9,666,904   $48   9,278,190   $43  

Granted

    2,968,062   $58   2,835,667   $56  

Exercised(1)

25   (2,236,891 ) $44   (2,289,677 ) $39  

Forfeited

    (155,913 ) $52   (157,276 ) $49  

Outstanding, December 31

    10,242,162   $52   9,666,904   $48  

Exercisable, December 31

    1,786,251   $42   1,174,191   $38  

 

The following table provides additional information about BCE’s stock option plans at December 31, 2016.

RANGE OF EXERCISE PRICES

STOCK OPTIONS OUTSTANDING

NUMBER

  WEIGHTED AVERAGE
REMAINING LIFE
  WEIGHTED AVERAGE
EXERCISE PRICE ($)
 
$30 –$39 353,374   1.14   $36  
$40–$49 4,216,472   3.70   $46  
$50 or more 5,672,316   5.67   $57  
  10,242,162   4.70   $52  
ASSUMPTIONS USED IN STOCK OPTION PRICING MODEL

The fair value of options granted was determined using a variation of a binomial option pricing model that takes into account factors specific to the share incentive plans, such as the vesting period. The following table shows the principal assumptions used in the valuation.

  2016  

Weighted average fair value per option granted

$2.57  

Weighted average share price

$58  

Weighted average exercise price

$58  

Dividend yield

4.7 %

Expected volatility

15 %

Risk-free interest rate

0.6 %

Expected life (years)

4.5  

Expected volatilities are based on the historical volatility of BCE’s share price. The risk-free rate used is equal to the yield available on Government of Canada bonds at the date of grant with a term equal to the expected life of the options.

DSUs

Eligible bonuses and RSUs/PSUs may be paid in the form of DSUs when executives or other eligible employees elect to or are required to participate in the plan. The value of a DSU at the issuance date is equal to the value of one BCE common share. For non-management directors, compensation is paid in DSUs until the minimum share ownership requirement is met; thereafter, at least 50% of their compensation is paid in DSUs. There are no vesting requirements relating to DSUs. Dividends in the form of additional DSUs are credited to the participant’s account on each dividend payment date and are equivalent in value to the dividends paid on BCE common shares. DSUs are settled when the holder leaves the company.

The following table summarizes the status of outstanding DSUs at December 31, 2016 and 2015.

NUMBER OF DSUs 2016   2015  

Outstanding, January 1

3,796,051   4,116,527  

Issued(1)

87,665   174,672  

Settlement of RSUs/PSUs

323,428   216,500  

Dividends credited

183,852   201,721  

Settled

(259,767 ) (913,369 )

Outstanding, December 31

4,131,229   3,796,051  

 

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