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 Count Less than 0.5% 0.5% to 1% Over 1% All companies20255%21%24% Revenue under $100 million3557%26%17% Revenue $100 to $500 million5250%23%27% Revenue $500m to $1 billion2959%14%28% Revenue over $1 billion8357%20%23% Technology7638%25%37% Financial, Insur., RE3974%18%8% Manufacturing3367%6%27% Domestic4665%20%15% International15652%22%26%

10. Run Rate Count 0.1% or less 0.1% to 0.5% 0.5% to 1% Over 1% All companies18821%40%12%27% Revenue under $100 million3123%42%6%29% Revenue $100 to $500 million5212%46%17%25% Revenue $500m to $1 billion2528%24%12%36% Revenue over $1 billion7725%42%10%23% Technology8112%44%22%21% Financial, Insur., RE2832%43%4%21% Manufacturing2524%36%4%36% Domestic3938%36%18%8% International14917%41%29%13%

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) U.S. Employees 1,000 or Fewer 5,000 or More % with lookback 75%45% % with 3- or 1-month offering periods 15%45% % with ESPP cost under 0.5% of payroll 47%63% % with hourly participation over 30% 42%16% % with managers participation over 30% 62%44%

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. Falling Participation Rising Participation All companies43%26% Small discount54%12% Large discount39%31% Short offering period42%17% 6-month offering period43%28% Long offering period38% No lookback47%16% Lookback40%33% 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