Re-Thinking ESPP 2009 ESPP Survey

1. Re-Thinking ESPP 2009 ESPP Survey Emily Cervino, CEP, Certified Equity Professional Institute Loren Rodgers, National Center for Employee Ownership

2. What and When? • Comprehensive ESPP survey • Trends in plan design • Compensation costs • Run Rate • Overall satisfaction • June and July 2009

3. Why Now? • Lack of data on design and participation rates • Economic conditions drive re-evaluation of equity compensation • Equity tools that escape underwater deserve attention

4. Back to Basics – ESPP Considerations • Guaranteed appreciation • Cash inflow • Engaged employees • Non-excessive • Low compensation costs

5. Who? • 412 issuing companies • 486 companies reported by service providers • Revenue • Over $1B – 46% • $500M to $1B – 15% • $100M to $500M – 22% • Under $100M – 17% • Industries • Technology – 33% • Financial Services – 20% • Manufacturing – 15% • Other – 32%

6. At a Glance • 87% of plans are qualified under Section 423 • 50% of plans have a 6 month offering • 22% have a 3 month offering • 14% have a 24 month offering • 7% have a monthly offering • 74% have discount of 11% to 15% • 15% have a discount of 1% to 5% • 6% offer no discount • 62% use a look-back feature • 18% made changes to their plans in the prior 12 months • Most common changes • 4.1% reduced the length of the offering period • 3.5% eliminated the look-back

7. Overall Satisfaction • Two thirds are pleased with plans • 35% - “excellent use of corporate resources” • Only 5% - “not worth the investment” • Plan changes • 82% made no plan changes in last 12 months • 84% expect no changes in next 12 months.

8. Plan Design and Satisfaction • Discounts • Higher discount rates = twice as likely to be highly satisfied • Lookbacks • 46% of companies with lookbacks call their plan an “excellent investment” • 17% of companies without lookback call their plan an “excellent investment” • Offering Length • Longer offering periods = greater satisfaction • No companies with offering periods of 12 months or longer were dissatisfied

9. Big Bang. Small Buck.ESPPs as a percent of total compensation

10. Run Rate

11. Percent of Total Equity Shares

12. Big vs. Small (revenue) • Large companies (with over $1 billion in revenue ) • Less likely to have Section 423 plans • Less likely to have a lookback feature • Less likely to have an additional limit • Offering period • Less likely to have a 6 month period • More likely to have a 3 month period • No differences • Changes made to plans in past 12 months • Changes expected in next 12 months • Run rates similar

13. Big vs. Small (U.S. work force)

14. Sector Differences • Technology companies • More likely to offer large discount than manufacturing or financial • Heavily weighted towards longer offering periods • 15% of them have periods of three months or less. • More than half of financial companies have short offering • More satisfied with their plans • None reported plans were “not worth it” • Nearly half call their ESPP “an excellent investment.” • Manufacturing least satisfied with their plans

15. Conventional Wisdom (Conveniently Backed by Data!)

16. Share Reserves • 88% have shares to last through 2010 • 50% have additional plan limits • Shares depleted • 5.3% expect to run out in 2009 • 6.8% expect to run out in 2010

17. Changes Considered for 2009 • 84% of companies are not planning changes

18. For more information • A comprehensive report of survey results • $75 for NCEO members, CEPs, and CEP candidates • $150 for others. • The underlying data • $250 for members, CEPs, and candidates • $500 for others. • Data and report • $300 for members, CEPs, and candidates • $600 for others. • www.nceo.org/espp

19. Thank You to Our Survey Supporters • E*TRADE Financial • Fidelity Stock Plan Services • Stock & Option Solutions • Transcentive, a Computershare company

20. Questions? • Emily Cervino, CEP ecervino@scu.edu 408-551-1833 www.scu.edu/business/cepi/ • Loren Rodgers LRodgers@nceo.org 510-208-1307 www.nceo.org