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	2017		2016
ESP	(28	)	(29	)
RSUs/PSUs	(44	)	(49	)
Other ⁽¹⁾	(9	)	(12	)
Total share-based payments	(81	)	(90	)

(1) Includes DSP, DSUs and stock options.

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 and related dividends are subject to employees holding their shares for a 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, 2017, 5,591,566 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, 2017 and 2016.



NUMBER OF ESP SHARES	2017		2016
Unvested contributions, January 1	1,073,212		1,146,046
Contributions⁽¹⁾	610,657		600,808
Dividends credited	49,299		49,988
Vested	(553,837	)	(586,309	)
Forfeited	(140,301	)	(137,321	)
Unvested contributions, December 31	1,039,030		1,073,212


(1)	The weighted average fair value of the shares contributed was $60 and $59 in 2017 and 2016, respectively.

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, 2017 and 2016.



NUMBER OF RSUs /PSUs	2017		2016
Outstanding, January 1	2,928,698		3,333,583
Granted⁽¹⁾	879,626		874,888
Dividends credited	132,402		137,583
Settled	(1,096,403	)	(1,321,846	)
Forfeited	(103,931	)	(95,510	)
Outstanding, December 31	2,740,392		2,928,698
Vested, December 31⁽²⁾	985,382		1,058,200


(1)	The weighted average fair value of the RSUs/PSUs granted was $58 in 2017 and 2016.


(2)	The RSUs/PSUs vested on December 31, 2017 were fully settled in February 2018 with BCE common shares and/or DSUs.

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 related to the DSP is recorded in Trade payables and other liabilities in the statements of financial position and was $30 million and $37 million at December 31, 2017 and 2016, respectively.

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, 2017 and 2016.



NUMBER OF DSUs	2017		2016
Outstanding, January 1	4,131,229		3,796,051
Issued⁽¹⁾	69,742		87,665
Settlement of RSUs/PSUs	101,066		323,428
Dividends credited	203,442		183,852
Settled	(195,951	)	(259,767	)
Outstanding, December 31	4,309,528		4,131,229


(1)	The weighted average fair value of the DSUs issued was $59 in 2017 and 2016.

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, 2017, 14,586,683 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.

The following table summarizes BCE’s outstanding stock options at December 31, 2017 and 2016.



		2017			2016
	NOTE	NUMBER OF OPTIONS		WEIGHTED AVERAGE EXERCISE PRICE ($)	NUMBER OF OPTIONS		WEIGHTED AVERAGE EXERCISE PRICE ($)
Outstanding, January 1		10,242,162		52	9,666,904		48
Granted		3,043,448		59	2,968,062		58
Exercised⁽¹⁾	25	(2,555,863	)	45	(2,236,891	)	44
Forfeited		(239,498	)	58	(155,913	)	52
Outstanding, December 31		10,490,249		55	10,242,162		52
Exercisable, December 31		2,013,983		45	1,786,251		42


(1)	The weighted average share price for options exercised was $60 and $59 in 2017 and 2016, respectively.

The following table provides additional information about BCE’s stock option plans at December 31, 2017.



	STOCK OPTIONS OUTSTANDING
RANGE OF EXERCISE PRICES	NUMBER	WEIGHTED AVERAGE REMAINING LIFE (YEARS)	WEIGHTED AVERAGE EXERCISE PRICE ($)
$30–$39	35,408	0.14	36
$40-$49	1,978,575	2.54	46
$50-$59	8,377,818	5.19	58
$60 & above	98,448	5.84	61
	10,490,249	4.68	55

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.



	2017
Weighted average fair value per option granted	$1.97
Weighted average share price	$58
Weighted average exercise price	$59
Dividend yield	5	%
Expected volatility	13	%
Risk-free interest rate	1	%
Expected life (years)	4

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.