A resolution of the Spanish Supreme Court in June 2008 states that the profits for the exercise of share options by an employee must be considered as part of his/her salary. In particular the amount to be considered as salary for the purposes of the calculation of the severance payment will be the difference between the market price of the shares of the relevant company on the exercise date and the exercise price of the share options.

Additionally, the Supreme Court states that the profits obtained by the employee as a consequence of the share option schemes remunerate a certain period of time, which depends on the terms of the relevant share option schemes. Accordingly, only the part of the profits for the exercise of the options which remunerates the last 12 months of service of the employee should be taken into account for the calculation of the severance payment.

One controversial issue in this judgment is the fact that the court is factoring into the severance payment the benefit obtained from the exercise of options which took place after the termination of employment (two days after) – this was on the basis that the scheme allowed for this to happen. One could argue with the court that in terms of the benefit obtained, this should be calculated on the basis of the difference between the exercise price and the market price on the date of vesting of the shares, and not on the date of exercise.