GOOD DATA GONE BAD Slide 1 The National Association of Stock Plan Professionals

Speakers Paula Woodman, Director, Client Services, Charles Schwab & Co. Nicole Dmitruchina, Financial Reporting Specialist, EASi Steve Madeira, VP of Operations, EASi Marianne Snook, SOS Jim Vincent, CEP (Moderator) Manager, Consulting Services – E*TRADE Slide 2 The National Association of Stock Plan Professionals

Why this panel? Why now? Background on each speaker’s perspective Data issues are NOT seasonal! With the economy in flux, companies may be Downsizing Considering other vendors Hiring in cheaper, less experienced help All contribute to potential data issues down the road Slide 3 The National Association of Stock Plan Professionals

Impact of “Bad” Data Report errors – some may require assistance of your vendor to understand impact Incorrect shares available for grant Brokerage participants may be allowed to exercise shares they are not entitled to exercise Incorrect reporting to brokerage participants Incorrect information appears in participant accounts on their brokerage site Slide 4 The National Association of Stock Plan Professionals

Impact of “Bad” Data Incorrect/missing disposition or tax reporting (for ISO/NQ data confusion) Incorrect information displayed on financial reports Some data issues may result in system performance issues Slide 5 The National Association of Stock Plan Professionals

Common Causes Mergers & acquisitions Repricings Exchanges (especially options to restricted stock) Stock splits (especially reverse) 409A tender offers (fixing “back-dated” options) Improper table set-up (e.g., Tax Table) Conversion from one vendor to another Past stock administrators Inserting data in back-end through scripts Slide 6

The National Association of Stock Plan Professionals Common Causes Consultants Granting ISOs to non-U.S. participants Partially canceling grants Changing Account IDs Layoffs and rehires Forgetting to process valuations for option grants Improperly deleting records Slide 7

System Transition/Outsourcing Recordkeeping data review and clean up items most commonly seen when making a change: Missing data  Participant information  Tax rates and or jurisdictions  Missing term dates Bad or inaccurate data  Grant or transaction information  Vesting information  Plan rules  Share balances Historical data  All data needs to be as accurate as possible Slide 8 The National Association of Stock Plan Professionals

Transition/Outsourcing (continued) Be willing to accept change Identify current workarounds to determine how to be use new system/provider Data flow make work differently Plan for major events if at all possible Historical data: Identify major events Communication is key Identify project manager and department contacts Audit thoroughly during implementation Slide 9 The National Association of Stock Plan Professionals

Corporate Actions & Events What should you watch out for when preparing and what lessons have we learned from our multiple experiences in these areas: Mergers and Acquisitions  Define what history you will need to keep  Define how you will identify plans, participants, grants, etc.  Can your recordkeeping system support your needs  How and who will communicate to employees. Very detailed information  Work closely with all contacts (stock admin, broker, TA) at other company Slide 10 The National Association of Stock Plan Professionals

Actions & Events (continued) Option exchanges/Tender offers  Define the population offered the exchange  Analyze pros/cons from employees’ and company’s perspective  Identify what data will be provided and to who  How and who will communicate to participants  Can you do this or will you need vendor  Understand all of the rules around the type of offer  Accounting/Tax effects of modifying awards Slide 11 The National Association of Stock Plan Professionals

Performance Shares What have we seen and what should you know about issuing and administering: Understand how they will work and how will you administer  Who will receive them?  How will they be measured?  How will you educate the participants?  How will you inform the participant of achievement or lack of Identify what your systems can support  Issuance and Vesting  Reporting  Probability tracking  Accounting impact Slide 12 The National Association of Stock Plan Professionals

Identifying “Bad” Data Spring cleaning – make time for it Be VERY familiar with your database Watch for information that doesn’t look right on reports If you have a stock administration team, then have well documented procedures for auditing data periodically Audit data after consultant covers stock administration Have a second set of eyes look at the information Sometimes the errors are not obvious and others can help you find it Slide 13 The National Association of Stock Plan Professionals

Identifying “Bad” Data Run audit and validation reports Search database for missing, inconsistent or illogical transactions and print a summary of each transaction Sorted by severity and by message Documentation for the report shows: Error message language What may be causing the issue How severe the issue is Reports that may be impacted by issue Steps for correcting the issue Slide 14

The National Association of Stock Plan Professionals Identifying “Bad” Data Issues that might not be found by audit/data check/validation reports Non-alphanumeric or unexpected values in grant Number field (e.g., “-”) Lost links between Parent and Child grants from old cancel/ regrants Slide 15

The National Association of Stock Plan Professionals Common Errors Grant date is after cancel date Missing FMVs Shares exercised exceed shares granted Option exercise after vest cancel date Vest dates are out of order Release date before grant date or after expire date Zero shares granted Disposition shares exceed shares exercised DDs for non-ISO records Slide 16

The National Association of Stock Plan Professionals Fixing “Bad” Data Get management approval before “fixing” any data Manual correction Export data, fix it and then re-import If data issues cannot be fixed by you and they are preventing system from running properly, get help Consultants Peers in Equity Compensation Slide 17

Auditing Data Tools Run Data Check/audit/validation reports often (especially after each import) Best Practices Have a centralized person auditing entire database for the entire company Carefully monitor import activity Run appropriate audit report after each import – don’t assume everything is complete or correct Slide 18 The National Association of Stock Plan Professionals

Auditing Data Have audit processes well documented Once identified, fix issue as soon as possible Especially during implementation or when there are changes in stock administration If not fixing an issue, document the reason why Slide 19 The National Association of Stock Plan Professionals

Good Data Gone Bad Paula Woodman, Director, Client Services, Charles Schwab & Co. Nicole Dmitruchina, Financial Reporting Specialist, EASi Steve Madeira, VP of Operations, EASi Marianne Snook, SOS Jim Vincent, Manager - Consulting Services – E*TRADE