Novo Nordisk Annual Report 2021
Contents Introducing Novo Nordisk
Strategic Aspirations
Key risks Management
Consolidated statements
Additional information
Novo Nordisk Annual Report 2021 76
Section 5
Other disclosures
5.1 Share-based payment schemes
Share-based payment expensed in the income statement
DKK million
2021
2020
2019
Restricted stock units to employees
189
189
48
Long-term share-based incentive
programme (Management Board)1
234
162
86
Long-term share-based incentive
programme (management group
below Management Board)
598
436
195
Shares allocated to individual
employees
19
36
34
Share-based payment expensed in
the income statement
1,040
823
363
1. In 2021, Novo Nordisk introduced a new share-based compensation programme with
terms, which amortises the grant date valuation over three years (2018, 2019 and
2020 were amortised over four years). The 2021 expense includes amortisation of the
2018, 2019, 2020 and 2021 programmes.
Restricted stock units to employees
In appreciation of the efforts of employees during recent years, as of 1
August 2019, all employees in the company were offered 75 restricted
stock units. A restricted stock unit gives the holder the right to receive one
Novo Nordisk B share free of charge in February 2023, subject to continued
employment. The cost of the DKK 660 million programme is amortised over
the vesting period.
Long-term share-based incentive programme
Management Board
On 1 February 2022, the Board of Directors approved an interim allocation
of 0.5 million Novo Nordisk B shares to the members of the Management
Board for the 2021 financial year. The number of shares is periodically
estimated based on long-term incentive performance. The final number
of shares allocated for the 2021 programme is decided at the end of
the performance period in 2023. The value at launch of the programme
(adjusted for expected dividends) was DKK 223 million. The cost of the 2021
programme is amortised over the vesting period of 2021-2023 at an annual
amount of DKK 74 million. The maximum share allocation cannot exceed 26
months' base salary for the CEO, 19.5 months' base salary for executive vice
presidents and up to 15.6 months' base salary for senior vice presidents.
Financial targets are set by the Board for a three-year period, while every
year the Board sets the non-financial targets, the first time in February 2021
for the year 2021.
The grant date of the programme was February 2021, and the share
price used for the determining the grant date fair value of the award
was the average share price (DKK 450) for Novo Nordisk B shares on
Nasdaq Copenhagen in the period 3-17 February 2021, adjusted for the
expected dividend. Based on the split of participants when the share
allocation was decided, 45% of the allocated shares will be allocated to
members of Executive Management and 55% to other members of the
Management Board.
The shares allocated for 2018 were released to the individual participants
subsequent to approval of the 2021 Annual Report by the Board of Directors
and after the announcement of the 2021 full-year financial results on 2
February 2022. The shares allocated correspond to a value at launch of the
programme of DKK 115 million, expensed over the vesting period of 2018-2021.
The number of shares to be transferred (0.5 million shares) is higher than the
original number of shares allocated, as the average sales growth in the three-
year vesting period was above the maximum performance target set by the
Board and consequently, the number of shares increased by 30%.
All restricted stock units and shares allocated to Management are hedged by
treasury shares.
Management group below the Management Board
The management group below the Management Board has a share-based
incentive programme with similar performance criteria. For 2021, a total of
1.6 million shares have currently been allocated to this group, corresponding
to a value at launch of the programme (adjusted for expected dividends) of
DKK 649 million. The number of shares is periodically estimated based on
long-term incentive performance. The final number of shares allocated for
the 2021 programme is decided at the end of the performance period in
2023. The cost of the 2021 programme is amortised over the vesting period
of 2021-2023 at an annual amount of DKK 216 million. Financial target are
set by the Board for a three-year period, while every year the Board sets the
non-financial targets, the first time in February 2021 for the year 2021.
The shares allocated for 2018 were released to the individual participants
subsequent to approval of the 2021 Annual Report by the Board of Directors
and after the announcement of the 2021 full-year financial results on 2
February 2022. The shares allocated correspond to a value at launch of
the programme of DKK 312 million amortised over the period 2018-2021.
The number of shares to be transferred (1.2 million shares) is higher than
the original number of shares allocated, as the average sales growth in the
three-year vesting period was above the maximum performance target set
by the Board and consequently the number of shares increased by 30%.
Accounting policies
Share-based compensation
Novo Nordisk operates equity-settled, share-based compensation plans.
The fair value of the employee services received in exchange for the grant of
shares is recognised as an expense and allocated over the vesting period.
The total amount to be expensed over the performance and vesting
period is determined by reference to the fair value of the shares granted,
excluding the impact of any non-market vesting conditions. The fair value
is fixed at the grant date, and adjusted for expected dividends during the
vesting period. Non-market vesting conditions are included in assumptions
about the number of shares that are expected to vest. At the end of each
reporting period, Novo Nordisk revises its estimates of the number of shares
expected to vest. Novo Nordisk recognises the impact of the revision of the
original estimates, if any, in the income statement and in a corresponding
adjustment to equity (change in proceeds) over the remaining vesting
period. Adjustments relating to prior years are included in the income
statement in the year of adjustment.View entire presentation