kick-off meeting: the midwest chapter of the …...kick-off meeting: the midwest chapter of the...
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Kick-Off Meeting:The Midwest Chapter of
The Global Equity Organization
March 18, 2005
Abbott LaboratoriesGardner Carton & Douglas LLP
McDonald’s CorporationMellon Human Resources
and Investor SolutionsMotorola, Inc.
Pentair, Inc.PriceWaterhouseCoopers LLP
The Procter & Gamble Company
Sponsored by:
Agenda...............................................................................................................A
PowerPoint Presentations....................................................................................B
Speakers’ Biographies..........................................................................................C
GEO Midwest Chapter Kickoff Event
March 18, 2005
Table of Contents
Tab
Agenda
8:30 am - 8:45 am ........................................................ GEO Board Member Welcome
8:45 am - 9:15 am ........................................................ Key Note Speaker: Jenny Ostendorf,.................................................................................... The Procter & Gamble Company
9:15 am - 10:00 am ...................................................... Gauging the Return on Investment of.................................................................................... Your Equity Plans
10:00 am - 10:15 am .................................................... Break
10:15 am - 11:00 am .................................................... Now That Sarbanes-Oxley is Behind Us:.................................................................................... — What’s Next?
11:00 am - 12:00 pm .................................................... Panel Discussion: Global Response to.................................................................................... Option Expensing
12:00 pm - 12:15 pm .................................................... Chapter Brainstorming
Welcome to GEO’s Midwest Chapter Meeting
March 18, 2005
We will begin shortly
AGENDA
• GEO Board Member Welcome• Key Note Speaker: Jenny Ostendorf, The Procter & Gamble
Company• Gauging the Return on Investment of Your Equity Plans• Now that Sarbanes-Oxley is Behind Us – What’s Next?• Panel Discussion: Global Response to Option Expensing• Chapter Brainstorming
Global Equity at Procter & GambleThe Challenge and the Reward
Jenny OstendorfAssociate Director, Global Executive Compensation
The Procter & Gamble Company
P&G’s Origins
• Founded in 1837 when William Procter & James Gamble started making and selling soap and candles in Cincinnati
• Our Corporate tradition is rooted in the principles of personal integrity, respect for the individual, and doing what’s right for the long-term success of the business
• P&G has a long history grounded in the importance of employee ownership – profit sharing began in 1887
Procter
Gamble
P&G Today
• 2004 revenues exceeded $51Bn with 16 billion dollar brands
• P&G markets 300 products in more than 160 countries, employing nearly 100,000
P&G’s Principles and Values
Our Principles
• We Show Respect for All Individuals
• The Interests of The Company and The Individual Are Inseparable
• We Are Strategically Focused in Our Work
• Innovation Is The Cornerstone of Our Success
• We Are Externally Focused• We Value Personal Mastery• We Seek to Be The Best• Mutual Interdependency Is
a Way of Life
Worldwide Operations
Algeria, 2001 Greece, 1960 Portugal, 1989Argentina, 1991 Guatemala, 1985 Puerto Rico, 1947Australia, 1985 Honduras, 1985 Romania, 1994Austria, 1966 Hong Kong, 1969 Russia, 1991Azerbaijan, 1998 Hungary, 1991 Saudi Arabia, 1957Bangladesh, 1995 India, 1985 Serbia and Montenegro, 1996Belarus, 1995 Indonesia, 1970 Singapore, 1969Belgium, 1955 Ireland, 1980 Slovakia, 1993Bolivia, 1997 Israel, 2001 Slovenia, 1996Bosnia and Herzegovina, 1998 Italy, 1956 South Africa, 1994Brazil, 1988 Japan, 1973 South Korea, 1988Bulgaria, 1994 Kazakhstan, 1996 Spain, 1968Canada, 1915 Kenya, 1985 Sri Lanka, 199Caribbean Islands, 1986 Latvia, 1995 Sweden, 1969Chile, 1983 Lebanon, 1959 Switzerland, 1953China, 1988 Luxembourg, 2003 Taiwan, 1984Colombia, 1982 Malaysia, 1969 Thailand, 1985Costa Rica, 1995 Mexico, 1948 Turkey, 1987Croatia, 1996 Morocco, 1958 Ukraine, 1993Czech Republic, 1991 Netherlands, 1964 United Arab Emirates, 2001Denmark, 1992 New Zealand, 1985 United Kingdom, 1930Egypt, 1986 Nicaragua, 1985 United States, 1837El Salvador, 1988 Nigeria, 1992 Venezuela, 1950Estonia, 1995 Norway, 1993 Vietnam, 1994Finland, 1971 Pakistan, 1989 Yemen, 1995Former Yugoslav Panama, 2000Republic of Macedonia, 1998 Peru, 1956France, 1954 Philippines, 1935Germany, 1960 Poland, 1991
P&G Global Equity Programs
• International Stock Ownership Plan (ISOP)• One Share Program• Future Shares Stock Options• Recognition Shares Stock Options• Key Manager Stock Options
International Stock Ownership Plan (ISOP)
• Launched in 1992• Pioneer in seeking widespread employee
ownership outside home country• Payroll deductions to purchase Company stock –
outside the US only• Employee may contribute up to 10% of current
salary• Contributions up to 5% are matched 50% by the
Company• 79% of eligible employees participate – 40,000
participants in over 60 countries
Equity to All Employees
• Late 1990s, Chairman and CEO John Pepper was focused on increasing employee ownership
• Introduced “one share” program where each employee who was not currently a shareholder was granted one share of stock
• Introduced Future Shares program – global stock option program for all full time new hires globally –1998-2003
• Introduced Global Recognition Shares program –stock options granted for superior performance -1999
P&G’s Key Manager Stock Option Program
• First plan approved by shareholders in 1951 • P&G originally had a global stock option program based
on the US competitive market applied globally• Participation in the program grew from 1,500 in 1995 to
10,000 participants in 70 countries in 2000• Most employees exercise after seven years• Approximately 140 million shares outstanding
In 2003, P&G conducted a study to assess its global LTI approach
• Surveyed local market LTI practices in 36 countries – extensive, first of its kind global survey
• Understand potential changes in competitor practicesØ EligibilityØ ValueØ Award form
In 2003, P&G conducted a study to assess its global LTI approach (cont’d)
• Re-evaluate LTI program design in light of:Ø Competitive market positioning and trendsØ Business and talent needsØ Compensation principlesØ Eventual expensing of stock optionsØ Need to ensure appropriate share usage
Learnings About and Modifications to Key Manager Stock Options
• Modified LTI awards to more closely match local competition (rather than base off of US market)
• Reduced recipient population• Decided to continue using “vanilla” stock options,
rather than moving to other equity or non-equity award forms – assures recipients continue to have a stake in the success of the Company
Challenges with Global Equity
• Why do we put up with these challenges?• World governments react to real or perceived
company misbehavior• Global companies are constantly adjusting while
trying to maintain competitiveness• Must rely on and pay for knowledgeable assistance
to stay ahead
Global Equity – The Reward
• Stock options have a high value to our employees• In return, our employees reward us with their care
and concern for the business as owners and stakeholders
• We might not get the chance to conference call on everything from Italian financial intermediaries to the Saudi Arabian Capital Market Authority!
Global Equity – The Reward
To quote our Chairman and CEO AG Lafley:“We inspire P&G’ers, by being in touch – listening, appreciating, anticipating and responding to the needs of those we serve.” It is in the spirit of staying in touch with our employees that we understand the value of providing equity globally.
Questions?
Thank you for your participation
Gauging the Return on Investment of Your Equity Plans
Lynn JoyPrincipal, Executive Compensation Services
Douglas WilsonDirector, Executive Compensation Services
Mellon Human Resources and Investor Solutions
Session Speakers
• Lynn Joy• Principal, Executive Compensation Services• 312-846-3672• [email protected]
• Douglas Wilson• Director, Executive Compensation Services• 312-846-3460• [email protected]
Purpose: To discuss the challenges of capturing the value that equity incentive programs (EIP) deliver and
managing those programs for maximum effect.
• Now that all vehicles carry an expense, EIP costs will be another financial statement line item that needs to be monitored, justified, and managed
• There are no magic bullets – the intangible/theoretical nature of EIP benefits and costs require creative thinking around measurement and benchmarking
• The key to maximizing ROI may not be the changes to the equity grants themselves but the supporting programs wrapped around them
Today’s discussion session is to brainstorm ideasor at least start the conversation
For the companies in the room, EIP expense would have reduced basic EPS by an average of $0.10 (8%) last year
and $0.11 (12%) over the past three years• In addition to the accounting charges for the use of equity, companies
face other costs, some hard (i.e., involve cash) and some soft:
• The true financial impact of EIP is greater than the value shown above. For most companies, EIP expenses are material enough to require close management
Hard• Stock plan administration and
brokerage fees• Legal fees, filing fees• Communications/business
literacy/value creation programs
Soft• Manager time for grant
recommendations• Employee benefits center
questions• Regulatory filings, documentation• Foregone opportunities
1 Source: Responding to Mandatory Option Expensing; June 2004 Flash Survey, Mellon HR&IS
Non-Exempts Exempt Individual
Contributors
Other Executives
Directors/Managers
Perc
ent o
f Com
pani
es
Percent of Companies that Would Make Currently Eligible EmployeeGroups Ineligible in Response to a Charge for Stock Options1
Top 5 Executives
45%
7%2%
67%
33%
0% 0%0%
20%
60%
High TechnologyGeneral Industry
40%
80%
3% 0% 0%
We have already seen that companies generally intend to manage EIP costs down based on survey responses
to stock option expensing
Looking to accounting, there are two typical methods of measuring “return”, both of which get at value for money;
can they be applied?
Method Cost Recovery Asset Realization
Description •Ratio of annual program costs to related annual benefits
•Ratio of net benefits to the historical cost of long-term investment made to generate the net benefits
Formula Benefits – ExpenseOriginal Investment
ExpenseBenefit
Benefit - ExpenseBenefit
or
Accounting Equivalent
•Cost ratio
•Margins – gross, operating, profit
•Return on Assets (ROA), Return on Invested Capital (ROIC), Return on Equity (ROE), Asset Turnover
Focus •Expenditure management
•Cash/expense
•Recapture of invested dollars
•Value
Dynamic •Short-term, annual
•Expenditures only have annual impact
•Long-term, multi-year
•Two types of expenditures – annual and enduring (asset)
The primary difficulty lies in capturing “benefits” in a defensible, financial manner; “hard” expenses can be
reasonably and objectively measured
• Direct causal financial relationships are difficult, if not impossible to captureØ Hard to separate EIP impact from other incentive plans, strategic initiatives,
and/or market noise
• There is a timing issue – current year grants are to generate future shareholder gains (timeframe?)
• Qualitative aspects are hard to measure objectively; at some point, qualitative performance should convert to financial performance
• Note, the use of performance-based equity grants simplifies measurement; the grant/earning basis defines and measures performance
Measuring “investment” is not bad either; there are objective, external values that can be captured
• Cumulative compensation grant value
• Cumulative accounting grant value
• Cumulative historical market cap granted (shareholder transfer approach)
• Company assets, invested capital, or equity
Accounting concept: any estimate is, by definition, arbitrary and subject to measurement error; at some point,
“precision” costs more than it’s worth
• What do we care about?Ø Benefit to the shareholderØ Delivery against design objectivesØ Risk managementØ Governance
• Are we doing our job if we provide circumstantial evidence that the programs are delivering above their cost?
Accounting concept: any estimate is, by definition, arbitrary and subject to measurement error; at some point,
“precision” costs more than it’s worth (cont’d)
• Are there other reward issues that suffer from the same characteristics for which there are answers that we could apply to this situation?ØPension accounting?
To start the discussion, here are some ideas
Idea #1 – Change Rates and Sharing Ratios
• Concept: For annual incentive plans, companies look at the value delivered in incentive as a % of the financial results to see if the direction and rate of change appear valid; answers the shareholder value alignment question
• Solution: Compare the intrinsic value of EIP grants to corporate market capØ Change percentage – monitor over time to see if the rate of change
in each is (1) in the same direction, (2) in the magnitude that makes sense given the programs and their objectives
Ø Sharing ratio – look at the ratio of intrinsic value to market cap over time could indicate program alignment with shareholder value.
Idea #2 – Value Realization
• Concept: Test to see if grant values are being realized; answers the paydelivery question
• Solution: For any past EIP grant year, compare the grant value to the ultimate gains derived from the plans over a fixed period. For example, compare the cumulative grant values to the aggregate of:Ø Full value shares (e.g., restricted stock): the FMV on the date of
vestingØ Appreciation vehicles (e.g., stock options): the value realized on
exercise or the in-the-money value as of the date of measurement
Idea #3 – Stock Ownership
• Concept: Test to see if the value of stock ownership by employees is commensurate with the grants they have been given and the movement of the stock price; answers the question of whether stock ownership is increasing or goals are being achieved
• Solution: Annually, (1) review stock ownership for each proxy executive and average ownership by executive/employee level, both as a % of salary and as the # of units; (2) review the percentage of shares retained from stock option exercises and restricted stock vesting to an estimate of the net possible.
Idea #4 – Risk Management Review
• Concept: Risk adjusted rate of return; use an annual review to assess the risks around executive exposure to company stock price and, therefore, what the returns of the EIP need to be to overcome the risk
• Solution: Review the degree to which a senior executive’s wealth is tied to the Company’s stock price (leverage ratio) across all reward programsØ Is it enough to align the executive with shareholder interests?Ø Is it so much that the executive becomes more/less risk averse?Ø To what degree is the executive’s investment in the company
leveraged/encumbered/pledged?Ø Is the executive’s stock price exposure hedged?Ø What are the inherent behavioral risks of each EIP and how are those risks
mitigated/addressed?
Are stock communications and business literacy programs like annual maintenance for operating sites – a
necessary expenditure to keep the asset working?
• Two quotes to consider:Ø “Stock does not come with instructions on how to create value”1
Ø “My stock options are like scratch-and-win tickets”2
• With the movement to full value stock programs, employees experience the joys and pains of being a shareholder, but do not know how their day-to-day actions translate to share price
1 Richard Ericson, Towers Perrin2 An employee comment collected on a survey of employee rewards
Certain qualitative aspects will affect EIP ROI calculations within each organization
• Demographics and its affect on cash needs and risk tolerance
• Culture: team vs. individual, entrepreneurial vs. safety net, social norms and values
• Legislation and regulation: securities law, tax law, regulations
• Practical economic and financial considerations: e.g., currency value
Questions?
Thank you for your participation.
Now that Sarbanes Oxley is Behind Us -What’s Next?
Mary K. Samsa Chair of International Employee Benefits Practice
Marla B. AndersonAssociate
Gardner Carton & Douglas LLP191 N. Wacker Drive
Chicago, Illinois [email protected] and [email protected]
AGENDA
• Code Section 409A• Litigation in Equity-Based Compensation Area• Securities Laws• Tax Laws
Code Section 409Aand
Its Impact on Equity-Based Compensation
Defining a “Nonqualified Deferred Compensation Plan” for Section 409A
• Included within definitionØ Stock Options and Stock Appreciation Rights (SARs)
where the exercise price is less than FMV on the date of grant
Ø Phantom Stock Plans and Restricted Stock Units (RSUs) to the extent they provide a deferral of compensation
• Excluded from definitionØ ISOs and NQSOs with exercise price of at least FMV and
ESPPs
Defining What Constitutes a Section 409A “Deferral of Compensation”
• There is a “deferral of compensation” ifØ The employee has a legally binding right during
a taxable year to the compensationØ The compensation has not been actually or
constructively received and included in gross income, and
Ø Pursuant to the terms of the plan, the compensation will be payable to the employee in a later year
Defining What Constitutes a Section 409A “Deferral of Compensation” (cont’d)
• There is no “deferral of compensation” whenØ compensation can be unilaterally reduced by the
employer, orØ compensation is merely paid after the last day of the
employee’s taxable year based on employer’s customary payroll practice, or
Ø the plan requires that payment be made by the later of 2-1/2 months from end of (i) the employee’s taxable year or (ii) the employer’s taxable year (the short term deferral exception)
Defining What Constitutes a Section 409A “Deferral of Compensation” (cont’d)
• Property received by an employee from a plan does not constitute a “deferral of compensation” merely because such propertyØ is not includible in income (under Code Section 83) in
the year of receipt by reason of the property being nontransferable and subject to a substantial risk of forfeiture, or
Ø is includible in income solely due to a Code Section 83(b) election
Defining What Constitutes a Section 409A “Deferral of Compensation” (cont’d)
• Under Code Section 83, income inclusion (equal to the value of the property) typically follows the lapse of the substantial risk of forfeiture so Section 83 transfer arrangements are generally not subject to Section 409AØ For example, restricted stock would be exempt from
Section 409A rules
Defining What Constitutes a Section 409A“Deferral of Compensation” (cont’d)
• The Code Section 83 exception applies only to transfers of restricted property, it does not apply to an unfunded, unsecured promise to pay in the futureØ For example, Restricted Stock Units (RSUs) which
promise to deliver shares at some future date do not fall within the restricted property exception
• So long at the RSU provisions are drafted to provide that delivery of shares will be made immediately or within 2½months after the year in which the substantial risk of forfeiture lapses (i.e. vesting occurs), it would meet the short-term deferral exception
Defining What Constitutes a Section 409A “Deferral of Compensation” (cont’d)
• From a practical standpoint, to avoid a “deferral of compensation” with respect to Stock OptionsØ the exercise price cannot be or become less than the
FMV at grant (which means it must be granted at a defined price), and
Ø the Stock Options must be granted with no ability to defer compensation (e.g., no tandem SARs subject to Section 409A)
Defining What Constitutes a Section 409A“Deferral of Compensation” (cont’d)
• Stock Appreciation Rights provide for a “deferral of compensation” unlessØ exercise price can never be less than FMV at grantØ stock subject to the SAR is publicly-tradedØ SAR can only be settled in the traded stock, andØ there is no feature for the deferral of compensation
other than the deferral of recognition of income upon exercise
Defining What Constitutes a Section 409A“Deferral of Compensation” (cont’d)
• SARs granted under a program in effect on or before October 3, 2004 where Ø the exercise price can never be less than FMV at grant,
andØ there is no feature for deferral of compensation other
than the deferral of recognition of income until exercise of right
may, until further guidance is issued by the IRS, be settled in stock or cash and will be exempt from Section 409A
Summary of Key ChangesMade Under Code Section 409A
• Restrictions on timing of initial and subsequent deferral elections
• Restrictions on distributions• Prohibition against an acceleration of benefits• Restrictions on funding arrangements• New reporting requirements
Restrictions on Initial Deferral ElectionsUnder Code Section 409A
• What is the requirement for equity awards subject to Section 409A?Ø Waiting for IRS guidance
• Query: How can an election be made ahead of time for something which is not guaranteed to be granted?
Ø Likely will need to make an election relating to any “deferral” component within a certain time period of date of grant (potentially special 30 day election period will apply)
Restrictions on Initial Deferral Elections Under Code Section 409A (cont’d)
• Initial deferral election must specify the time (and form, if applicable) of the distribution unless specified by planØ Plan may allow for election of different form of payment
upon different distribution events
Restrictions on Subsequent Deferral Elections Under Code Section 409A
• Subsequent election to delay (or change form of payment, if applicable) permitted, only if plan requires that:Ø Subsequent election may not take effect for 12 monthsØ In the case of an election to delay payment (i.e.,
exercise), first payment date must be 5 years after initial payment date (not applicable to death, disability or unforeseeable emergency)
Ø Subsequent election to delay a payment must be made at least 12 months before scheduled payment date
Restrictions on DistributionsUnder Code Section 409A
• Plan must provide that “distributions” may not occur earlier than:Ø separation from serviceØ deathØ disability – specific definitionØ a specific time or pursuant to a fixed scheduleØ a change in controlØ an unforeseeable emergency
• Plan termination not a distribution event• “Distribution” in this context will mean the
settlement of the equity award
Restrictions on DistributionsUnder Code Section 409A (cont’d)
• Distributions to “key employees” (as defined under the top-heavy rules) of a publicly-traded corporation may not be made for 6 months following separation from service
“Change in Control”For Purposes of Section 409A
• Rules are complicated with fine nuancesØ 50% change in total FMV or total voting powerØ effective “Change in Control” if during a 12-month
period there is 35% or more change in total voting power or majority of board of directors is replaced, or
Ø 40% change in total gross FMV of all assets
“Change in Control”For Purposes of Section 409A (cont’d)
• Why do we care about “Changes in Control?”Ø Trigger event in which payout is permitted under Section
409A
“Change in Control”For Purposes of Section 409A (cont’d)
• Occurrence of event triggering “Change in Control” must be objectively determinable Ø Certification of occurrence must be merely ministerial
with no discretionary authority• Rules have built-in discretion for corporations to
terminate a deferred compensation plan within 12 months following a “Change in Control”Ø Provides flexibility to analyze decisions regarding the
plan after “Change in Control” has occurred
“Change in Control”For Purposes of Section 409A (cont’d)
• In determining if a “Change in Control” has occurred, the event must relate to aØ corporation for whom the participant is performing
services at the time of the “Change in Control”Ø corporation that is liable for the payment of the deferred
compensation, orØ majority shareholder of one of the above two corporations
(e.g., a parent company or holding corporation) –application of Section 318(a) attribution rules
TRANSITION GUIDANCEEffective Date of Deferral
• Section 409A is effective for amounts deferred on or after January 1, 2005
• Amounts are considered deferred before January 1, 2005 if:Ø Employee has a legally binding right to be paid the
amount, andØ The right to the amount is earned and vested
TRANSITION GUIDANCEComputing Grandfathered Amounts
• Equity-Based Compensation PlansØ deemed to equal the amount of any payment available to
the participant on December 31, 2004 (or would be available if immediately exercisable) to the extent earned and vested on December 31, 2004
Ø exclude any exercise price or other amount paid by participant
TRANSITION GUIDANCEMaterial Modifications
• A plan is “materially modified” for purposes of Section 409A ifØ benefit or right existing on October 3, 2004 is enhanced,
orØ new benefit or right is added after October 3, 2004
TRANSITION GUIDANCEMaterial Modifications (cont’d)
• A benefit enhancement or addition is a material modification whether it occurs pursuant to an amendment to the plan or the employer’s exercise of discretion under the terms of the planØ even if the enhanced or added benefit would be
permitted under Section 409A, enhancing or adding the benefit will constitute a material modification
Ø reducing an existing benefit is not a material modification
TRANSITION GUIDANCEMaterial Modifications (cont’d)
• Amendment of a plan to bring it into compliance with the provisions of Section 409A will not be treated as a material modificationØ Relevant if keeping pre-2005 deferrals and post-2004
deferrals in same plan. This means that you do not ungrandfather the pre-2005 deferrals.
TRANSITION GUIDANCEMaterial Modifications (cont’d)
• It is not a material modification for Ø a participant to exercise a right permitted
under the plan that was in effect on October 3, 2004
Ø an employer to exercise discretion over the time and manner of payment of a benefit so long as such discretion is provided under the terms of the plan as of October 3, 2004
TRANSITION GUIDANCEMaterial Modifications (cont’d)
• It is not a material modification to amend an arrangement toØ stop future deferrals under the arrangement (e.g., a
freeze amendment), orØ terminate the arrangement and distribute the
amounts of deferred compensation (for inclusion in taxable income in the year of termination)
• Any amendment to terminate a plan and distribute the deferred amounts must occur on or before December 31, 2005
TRANSITION GUIDANCEMaterial Modifications (cont’d)
• Pre-2005 Stock Options and SARs that are subject to Section 409A (because unvested as of December 31, 2004 with a deferral feature or discount) can be cancelled and reissued (without the deferral feature or discount) on or before December 31, 2005 to pull them out of the scope of Section 409AØ Most common example is discounted Stock Option
reissued to eliminate the discountØ Before undertaking, companies should weigh the
economic benefit which may be lost against the potential tax benefit which will be gained
TRANSITION GUIDANCEMaterial Modifications (cont’d)
• Cancellation and reissuance of pre-2005 Stock Options and SARs to eliminate deferral feature will not be a material modification
• The cancellation and reissuance rule only applies ifØ the number of shares which are the basis for the new
Stock Option or SAR correspond directly to the number of shares subject to the original Stock Option or SAR, and
Ø the new Stock Option or SAR provides no new or additional benefit to the participant
TRANSITION GUIDANCEMaterial Modifications (cont’d)
• It will not be a material modification (or an impermissible change in form or timing of a payment) to amend pre-2005 Stock Options and SARs to provide for fixed payment terms (i.e., no discretion by participant as to when to exercise) or to permit participants to elect fixed payment termsØ Any such amendment or election must be made on
or before December 31, 2005Ø Fixed payouts will eliminate flexibility normally
afforded to participants under Stock Options and SARs
TRANSITION GUIDANCEGood Faith Compliance
• No plan will be treated as violating Section 409A if the plan is Ø operated in good faith compliance with the
provisions of Section 409A and IRS Notice 2005-1 during calendar year 2005, and
Ø amended on or before December 31, 2005 to conform to the provisions of Section 409A with respect to amounts subject to Section 409A
TRANSITION GUIDANCEGood Faith Compliance (cont’d)
• Good faith compliance exists ifØ the plan is operated in accordance with the terms of IRS
Notice 2005-1, andØ to the extent an issue is not addressed in IRS Notice
2005-1, a good faith, reasonable interpretation of Section 409A is made
• Grandfathered amounts can continue to operate under “old” rules without violation of good faith standard
Effect of NoncomplianceUnder Code Section 409A
• Penalties imposed if plan “at any time during a taxable year” fails to incorporate the required plan amendments or to operate in accordance with new requirements, unless plan is subject to a substantial risk of forfeiture
• Penalties only apply to participants to whom failure relatesØ Failure to incorporate required plan language would
impact all participants
Effect of Noncompliance Under Code Section 409A (cont’d)
• Participants will be taxed on deferrals during the current taxable year and all preceding taxable years plusØ interest at the underpayment rate + 1%, and Ø additional tax of 20% of taxable amount
Litigation in theEquity-Based Compensation Area
Increase in Litigation OverEquity-Based Compensation
• It’s a good time to start reviewing award agreement languageØ Attempt to refine “boilerplate” to capture as many issues
as possibleØ May need to adjust language by country depending on
magnitude of the issue for a particular company
Increase in Litigation OverEquity-Based Compensation (cont’d)
• US litigationØ Olander v. Compass Bank, 5th Circuit
• Beginning in 1994, stock option agreements contained noncompetition clause – limited employee’s ability to associate with interests perceived to be adverse to Compass
• 2 year restriction following termination of employment• Enforceability of the noncompete was a precondition
for the stock option to remain in effect – if noncompete held invalid, all profit from stock sale had to be returned to company
Increase in Litigation OverEquity-Based Compensation (cont’d)
Ø Restoration/clawback provision• “Employee specifically recognizes and affirms that [the
aforementioned covenants are] material and important terms of this Agreement, and Employee further agrees that should all or any part or application of subdivisions (b) or (c) of Section 8 of this Agreement be held or found invalid or unenforceable for anyreason whatsoever by a court of competent jurisdiction in an action between Employee and the Company, [Compass] shall be entitled to receive…from Employee all Common Stock held by the Employee…If Employee has sold…[Compass] shall be entitled to receive from Employee the difference between the Option Price…and the fair market value of the Common Stock”
Increase in Litigation OverEquity-Based Compensation (cont’d)
Ø Court held noncompete provisions invalidØ Because invalid, Compass demanded return of
profits based on restoration/clawback provisionØ 5th Circuit agreed and Olander ordered to pay
restoration to CompassØ Employers may want to consider including
similar language if desired or warrantedØ However, some states such as California would
potentially invalidate such a provision
Increase in Litigation OverEquity-Based Compensation (cont’d)
• European LitigationØ Denmark: recent litigation spurred Danish government to
issue new law that applies to equity grants made on and after July 1, 2004
• Danish High Court had ruled that an employee who is terminated will, depending on the circumstances of the termination, be entitled to retain a prorated amount of unvestedstock options held at the time of termination
• This would apply regardless of any forfeiture provisions in the award agreement
Increase in Litigation OverEquity-Based Compensation (cont’d)
• Danish IssuesØ Employee initiates termination of employment
• Whether there is continued entitlement to the equity awards willbe governed by terms of the award agreement
• Exception: If termination is due to retirement, illness or material breach by employer
Ø Employer initiates termination of employment• Employee does not forfeit unvested equity awards (regardless of
language of award agreement)• Can continue to exercise all equity awards as if still employed• Entitled to proportionate grant for year of termination (Yikes!)• Exception: If termination due to material breach by employee
Increase in Litigation OverEquity-Based Compensation (cont’d)
• Danish Issues (cont’d)Ø Duty to Inform – Fundamental Terms in Danish
• Date of award• Conditions for entitlement to award• Exercise period (or rules governing exercise period)• Exercise price (or rules governing exercise price)• Employee’s rights in the event of termination of employment• Financial aspects of participation in the award plan
Increase in Litigation OverEquity-Based Compensation (cont’d)
• European Litigation (cont’d)Ø Spain: recent case law has focused on two problems:
• Stock options and severance payments• Potential exercise of stock options after the termination of
employment
Increase in Litigation OverEquity-Based Compensation (cont’d)
• Spanish IssuesØ Last two years have seen courts ruling that exercise of
nontransferable stock options within last 12 months of employment may be deemed to be salary
• Would require that these amounts then be taken into consideration when calculating severance or redundancy payments in the event of termination of employment (particularlyin unfair termination)
• Benefit may be subject to social taxes• If no exercise has taken place, no benefit for the employee and
no impact on the calculation of severance or redundancy payments
Increase in Litigation OverEquity-Based Compensation (cont’d)
• Spanish Issue (cont’d)Ø Regardless of the terms of the award agreement, if an
employee is unfairly terminated, Supreme Court of Justice has said employee can exercise outstanding options as if he or she were retired, dead or disabled
Ø Spanish courts are splitting on the enforceability of this issue
Ø Potential language which could be used : “For the avoidance of doubt, the benefits granted to you under the Plan are not a contractual entitlement and will not be taken into consideration in calculating severance pay or damages in any action.”
Securities Law in theEquity-Based Compensation Area
US Securities Laws – A Refresher
• Accelerated Form 8-K disclosure for executive officersØ For any executive officer, equity award is reportable
unless immaterial in amount or significance (awards to named executive officers always deemed significant)
• Exception: If equity plan and substantially similar award agreement disclosing all material terms has been previously reported, then personal award agreement does not have to be reported unless personal agreement is necessary for an investor’s understanding of that individual’s compensation
• Even if equity award is not reportable for Form 8-K purposes, executive still required to file a Form 4 within 2 business days
Ø Applies to US as well as non-US executive officers
US Securities Laws
• HR 913 (Broad-Based Stock Option Transparency Act) introduced on February 17, 2005Ø Attempts to delay for 3 years the implementation of FAS
123 (standard for expensing stock options)• FAS 123 generally effective as of June 15, 2005
Ø Would require SEC to implement enhanced minimum disclosures for employee stock options
• “Plain-English” discussion of diluting effect of stock option grant• Summary of stock options granted to top 5 HCEs
Ø Would prohibit application of any new stock option accounting standards during that 3 year time period
EU Prospectus Directive
• Purpose: To improve market efficiency across the EU by enabling companies to issue a single approved prospectus in respect of an offer of securities to the public in any EU member state without the need to obtain separate approvals from each EU member in which that offer is made
EU Prospectus Directive (cont’d)
• Impact on non-European companiesØ Key issue of how to fix “Home Member State”Ø In general, a non-European company’s “Home Member
State” is the EU member state in which the non-European company first offers its securities to the public after December 31, 2003
Ø Once a Home Member State has been fixed, every time the non-European company issues securities into any EU member state it must comply with the requirements of its Home Member State regardless of the EU member state in which the offer is made
EU Prospectus Directive (cont’d)
• Impact on non-European companies (cont’d)Ø Important to ensure that a company does not choose EU
member state in which legal requirements are going to be overly burdensome in respect of all future or planned offering of securities in the EU
Tax Law in theEquity-Based Compensation Area
Revised Commentary onOECD Model Tax Convention
• OECD: Organization for Economic Co-operation and DevelopmentØ In September 2004, OECD issued a series of
recommendationsØ Designed to achieve common interpretation of how tax
treaties should apply with respect to employees who receive equity grants as part of their remuneration
Revised Commentary onOECD Model Tax Convention (cont’d)
• Main revisions include:Ø Relief from double taxation should be granted by the
residence country even if it taxes the employment benefit derived from stock options in a year that is different from the source country
Ø The moment of exercise should be the dividing line between the employment benefit and any capital gain
Ø When employment services are provided in more than one state, the employment benefit derived from a specific country should be determined based on the # of days during which employed in that country
Revised Commentary onOECD Model Tax Convention (cont’d)
• Revisions to the Commentary on the Model Convention will likely influence tax law changesØ Ireland: Pending legislation intends to impose income
tax on gains arising on the exercise of an option by an individual who was an Irish tax resident at the date of exercise, but not a tax resident at the date of grant
Ø Netherlands: Finally eliminated the extrinsic/intrinsic value concept
• Stock options will now be taxed 100% at the time of exercise (regardless of any intrinsic value)
Ø More changes are expected to come
Questions?
Thank you for your participation.
What is the Global Response to Stock Option Expensing,
and Other Equity Plan Issues
Andrew KatsoudasSenior Manager, Human Resources Services
PricewaterhouseCoopers LLP
PwC 2005 Global Equity Incentives Survey
• Between September and November, 2004, 131 companies completed PricewaterhouseCoopers Global Equity Incentives Survey (GEIS).
• This year’s Survey contains data relating to equity and incentive compensation programs offered to executives and “rank and file” employees in 27 countries worldwide, up from 23 countries in our 2003 Report.
Company and Participant Information
Participants by Industry Cluster
Consumer Industrial
Products & Services56.1%
Technology, InfoComm &
Entertainment34.1%
Financial Services
9.8%
Over $5B44.3%
$501MM-5B32.8%
$0-500MM22.9%
Company and Participant Information
Participants by Revenue
Over 30,000 FTE34.1%
1-5,000 FTE56.1%
5,001-30,000 FTE9.8%
Company and Participant Information
Participants by Employee Size
Company and Participant Information
Number participating companies that have employees in each country:
AmericasCanada - 99Mexico - 77United States - 126
Asia-PacificAustralia - 88China - 89Hong Kong - 78India - 66Japan - 87Singapore - 86South Africa - 51South Korea - 55Taiwan - 65Thailand - 59
EuropeAustria - 58Belgium - 77Denmark - 57Finland - 55France - 98Germany - 101Ireland - 65Italy - 86Netherlands - 87Norway - 56Spain - 80Sweden - 70Switzerland - 80United Kingdom - 121
Plan Design - International
Have you modified your equity/stock-based compensation plan(s) in any way, specifically for grants in other countries?
Adjust grants on a case-by-case
basis37.3%
Adjust grant levels to local cost o f living
41.2%
Don't know21.6%
Don't know6.2%
Yes45.7%
No48.1%
Plan Design – Participation & Appreciation
Are costs of global plans worth the benefits?
Yes53.0%
Undecided/ Don't know
33.0%
No14.0%
2003 Results 2004 Results
Yes57.4%
Undecided/ Don't know
29.5%
No13.2%
Plan Design – International
What were the reasons for offering stock-based plans to your international employees*?
9.8%
13.6%
15.9%
53.8%
69.7%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Other/ Don't know
Match offers made by domestic competitors
Match offers made by non-local competitors
Offer our employees the opportunity to becomeshareholders
Create a uniform global equity comp benefit for allexecs
*International employees are those who are located in a country other than where corporate headquarters are located.
Plan Design – International
Is your company planning on increasing or decreasing the number of foreign affiliates that participate in equity/stock-based compensation in near future?
2005 ResultsAll Industries
2003 Results
Increase14.0%
No Change 79%
Decrease7.0%
Don't know12.9%
Increase10.6%
No Change 63%
Decrease13.6%
Don't know7.7%
No change76.9%
Increase7.7%Decrease
7.7%
Financial Services
Don't know25.0%
No change50.0%
Increase8.3%
Decrease16.7%
High Tech
Don't know8.3%
No change75.0%
Increase8.3%
Decrease8.3%
Pharma
No change87.5%
Decrease12.5%
Plan Design – International
Don't know12.9%
Increase10.6%
No Change 63%
Decrease13.6%
2005 ResultsAll industries
Energy
Yes20.2%Undecided/
Don't know30.3%
No 49.5%
All industries
New Developments - Expensing
Is your company in favor of the proposed expensing stock options rules? Yes
36.4%
Don't know36.4%
No 27.3%
Energy
Yes45.5%
No 45.5%
Undecided/Don't
know9.1%
Pharma
Yes14.3%
Undecided/Don't
know42.9% No
42.9%
2005 Results
Financial Services
Do not know22.8%
No impact9.9%
Continue same plans, same
levels 10.9%
Continue same plans, cut aw ards56.4%
New Developments - Expensing
• What do you think the impact of mandatory stock options expensing will be to your company?
New Developments - Expensing
• What is the impact of expensing on your stock option plan?
4.6%
18.5%
24.1%
25.9%
28.7%
38.0%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Eliminate some/all plans
No action
Reduce grant levels
Explore alternatives
Switch to other plan
Not sure/ Don't know
New Developments - Expensing
• Please select the plan features you are considering:
Please note that this Survey was conducted before the American Jobs Creation Act of 2004 was enacted. Under this act, deferred compensation arrangements, including RSUs and discounted stock options, may carry higher tax exposure for US participants.
2.9%
2.9%
2.9%
14.3%
17.0%
22.9%
37.1%
40.0%
48.6%
0 0.1 0.2 0.3 0.4 0.5 0.6
Phantom stock/units
Discounted stock options
Capped stock options
Cash settled SAR
Other/ Don't know
Stock settled SAR
Restricted stock
RSU
Performance-based equity/stock
New Developments - Expensing
• Select staff level that will have their grants reduced after expensing:
32.0%
16.0%
6.0%
6.0%
4.0%
8.0%
18.0%
10.0%
0 0.05 0.1 0.15 0.2 0.25 0.3 0.35
Other /Don’t know
All Staff
Sales, Technical &Professional Staff
Sales, Technical, ProfStaff & M anagers
Sales Staff & M anagers
M anagers
VPs, Directors, M iddleM anagers
Senior M anagement
Plan Design - Challenges
• The most challenging aspect of offering global equity/ stock plan (one choice allowed):
29.5%
14.4%
9.8%
6.8%
37.1%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Other/ Don't know
Global grant guidelines
Communications
Administration
Compliance
Compliance and Tax Planning
• The most challenging compliance country (one choice allowed):
Does not include “Don’t know” responses (35)
1.2%1.2%1.2%1.2%1.2%1.2%
2.4%2.4%2.4%
4.7%7.1%
8.2%8.2%8.2%
10.6%
14.1%12.9%
0% 5% 10% 15% 20%
CanadaDenmark
Hong KongNorw ay
SingaporeSw eden
GermanyItaly
Sw itzerlandAustralia
FranceBelgium
ChinaJapan
NetherlandsUSUK
Compliance and Tax Planning
• Which of the following is the more important priority to your company?
2.3%
7.6%
11.4%
11.4%
66.7%
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7
Tax efficiency for employees
Have not considered tax efficiencies
Tax efficiency for company
Don’t know
Tax eff iciency for employees & company
Compliance and Tax Planning
• Does your company currently chargeback the costs affiliated with your equity /stock-based compensation plan(s)?
No52.3%
Yes47.7%
Compliance and Tax Planning
• Average percentage of companies that charge back the costs of equity plans:
11.1%
19.6%
23.1%
27.0%
27.3%
44.4%
51.1%
0% 10% 20% 30% 40% 50% 60%
SARs
ESPP
Options
Phantom
PS/PSU
PO
RS/RSU
Similar data is available for each country and each plan type.
Questions?
Thank you for your participation.
Brainstorming Sessions
• What do you want out of a GEO Chapter meeting?Ø Peer networkingØ Legal and accounting updatesØ Other
• What format do you want for Chapter meetings?Ø LectureØ Panel DiscussionsØ Interactive (Roundtable)Ø Case StudiesØ Other
Brainstorming Sessions
• Frequency of Chapter meetings?Ø Quarterly, semi-annual, annual
• Duration of Chapter meeting to make is useful?Ø Half day, full day, other?
• Would any other organization’s meeting “bump” our meeting?
Thank you for your participation.
John P. Anderson Senior Director, Executive Compensation McDonald’s Corporation
John P. Anderson is the Senior Director of Executive Compensation for the McDonald’s Corporation. He has worked for McDonald’s for over 23 years. He is currently responsible for executive compensation design, serves as liaison to the Compensation Committee of the Board of Directors pertaining to executive compensation and benefits programs, and works with McDonald’s Ventures on compensation and benefits issues. Prior to McDonald’s, Mr. Anderson worked for: Kraft Inc. where he was Manager Compensation and Benefits for their Retail Foods Group; Sybra Inc. where he was VP-Personnel and Training; and prior to that, Quaker Oats Co. and Western Electric where held various compensation positions. Mr. Anderson is a member of the Conference Board Council on Executive Compensation and World at Work. He holds a BA in business and sociology from Carthage College and a MSIR from Loyola University of Chicago. He is married and has three children.
Marla B. Anderson Associate, HR Law Gardner Carton & Douglas LLP
Marla B. Anderson is an associate in the Employee Benefits Group of the HR Law Department of Gardner Carton & Douglas LLP. She focuses her practice on advising both for-profit and tax-exempt employers regarding a variety of matters related to employee benefits and ERISA, such as tax-qualified retirement plans (including pension plans, employee stock ownership plans and 401(k) plans), nonqualified plans, and executive compensation. Ms. Anderson also has experience advising clients with respect to issues relating to international employee benefits, fiduciary duties, health and welfare benefits and employee benefit issues arising in corporate transactions. She has prepared plan correction submissions and assisted in the negotiation of closing agreements with the Internal Revenue Service. In addition, she assists clients with inquiries conducted by the Department of Labor and the Pension Benefit Guaranty Corporation. She is also a member of the Steering Committee for development and continuing sponsorship of HR/Hospital Advisory Board (co-sponsored by Deloitte) for senior HR executives in tax-exempt health care systems. Ms. Anderson first joined Gardner Carton & Douglas LLP in January 2000 and recently rejoined the firm in January 2003. Her prior experience includes work as a paralegal in the employee benefits practice group at McDermott, Will & Emery and as a Manager in the Employee Benefits Tax Group at Deloitte & Touche LLP. She has been working in the employee benefits field since 1994. Ms. Anderson earned a Juris Doctor degree, cum laude, from Loyola University Chicago School of Law in 2000, where she also earned a Certificate in Health Law. She received her bachelor’s degree from Dartmouth College in 1993, graduating with dual degrees in English and Anthropology. Ms. Anderson is admitted to practice in Illinois and the United States District Court for the Northern District of Illinois. Ms. Anderson is a member of the Global Equity Organization, the ESOP Association, and the American, Illinois and Chicago Bar Associations.
Andy Brown Director, Executive Compensation Abbott Laboratories
Andy Brown is the Director of Executive Compensation at Abbott Laboratories. He has 15 years of experience in design, development, administration and communication of executive compensation programs, qualified retirement programs and non-qualified deferred compensation programs. Mr. Brown’s career began in the benefits consulting group for Deloitte & Touche where he was responsible for administration of defined contribution retirement plans including trust account valuation. His responsibilities also included base wage and compensation analysis work. Mr. Brown’s consulting responsibilities continued to increase through positions at Aon Consulting and Coopers & Lybrand, including retirement plan design, government compliance, and client management for outsourcing relationships. In 1996, he moved to the corporate side at Bell & Howell Corporation, where his major responsibilities included deferred compensation, executive compensation, and board compensation. Mr. Brown joined Abbott in 2001, and currently has responsibility for executive compensation programs including base, bonus, long-term incentives and deferred compensation for officers. In addition to the officer programs, other responsibilities include Abbott's stock option program, non-officer deferred compensation program, and board of directors' pay.
Jay Feece, CCP, CPA Senior Compensation Consultant Motorola
Jay Feece, CCP, CPA is a Senior Compensation Consultant in the Executive Rewards organization at Motorola in Schaumburg, Illinois. He has been working in the Compensation field for 12 years and has been with Motorola for the past six years. Mr. Feece has been in executive compensation at Motorola for the past three years and, among other responsibilities, is currently the Motorola equity pay practices leader.
Lynn A. Joy Principal, Executive Compensation Consulting Mellon Human Resources and Investor Solutions
Lynn Joy has been consulting with clients on executive compensation for the last 16 years. Her clients range from large publicly-traded organizations to privately-held middle market companies to U.S. subsidiaries of non-U.S. parents. She is a CPA by background and therefore concentrates on executive pay as it supports the business strategy and focuses executive behavior. While primarily an incentive design expert, her client experiences cover a broad spectrum from truly understanding competitive pay data and its implications to increasing the ROI of total executive pay through effective communication. By providing technically sound, creative, and economically responsible advice, she helps clients explore the possibilities before arriving at a solution that makes the most sense for their situation.
Andrew Katsoudas Senior Manager, Human Resources Services PricewaterhouseCoopers LLP
Andrew Katsoudas is a Senior Manager of the Human Resources Services consulting practice of PricewaterhouseCoopers. He consults on all aspects of executive compensation analysis and design, and specializes in accounting, legal, and tax issues affecting compensation programs.
Mr. Katsoudas’s work includes extensive experience in the areas of global equity plan design, and implementation; employment contracts; stock-based long-term incentives (including the design and implementation of private company and pre-IPO programs); and change in control and severance. He also has experience in issues associated with merger and acquisitions, initial public offerings, spin-offs, and other corporate restructurings.
Mr. Katsoudas is the author of “Regulating the Use of Stock for Compensation Purposes,” published in the ACA Journal, Spring 1998, and “Stock Law,” published in the WorldatWork Journal in the second quarter of 2001.
Mr. Katsoudas received a Juris Doctor degree, cum laude, from Loyola University Chicago School of Law, and his Bachelors of Business Administration degree in Economics, magna cum laude, from Loyola University of Chicago.
Dennis Kudla, CCP Division Vice President, Compensation Abbott Laboratories
Dennis Kudla, CCP is Division Vice President, Compensation for Abbott Laboratories, a diversified global health care company with 2004 worldwide sales of nearly $20 billion. Headquartered in North Chicago, Illinois, Abbott has over 60,000 employees and is focused on advancing patient care by developing innovative solutions in pharmaceuticals, diagnostics, medical devices, and nutritionals. Abbott has a global manufacturing, distribution and sales presence in over 130 countries. Mr. Kudla is responsible for developing, communicating, and administering Abbott’s non-employee director, executive and employee compensation programs including all base salary, annual and long term incentives, deferred compensation and executive benefit programs. He has been with Abbott since 1994. Prior to joining Abbott, Mr. Kudla spent over seven years as the Director of Compensation for Waste Management, Inc., the world’s largest environmental company, where he was responsible for designing, administering, and coordinating all compensation programs for the family of operating companies that comprised Waste Management, Inc. Mr. Kudla spent 15 years in various Compensation, Benefit and Human Resources positions for the American Hospital Association, Jones & Laughlin, and Interlake Steel Companies, and in the Industrial Engineering and Human Resources divisions of what is today Lucent Technologies, a manufacturer of telephone and electronic communications equipment. Mr. Kudla holds a Bachelors degree from Northern Illinois University, is certified as a Compensation Professional by World at Work, is Chair of the Conference Board’s Executive Compensation Management Council, sits on the Organization Resources Counselors Inc.’s Pharmaceutical Advisory Committee, is past Secretary and Treasurer of the Board of Directors of the Chicago Compensation Association and has been a frequent speaker for World at Work, National Association of Stock Plan Professionals, Chicago Compensation Association and various other professional, compensation and human resources groups.
Stephanie Maxam Director, Total Rewards Pentair, Inc.
Stephanie Maxam is Director, Total Rewards for Pentair, Inc. In her role she is responsible for all compensation, benefits, and indirect rewards programs for Pentair, Inc. domestically, as well as policy setting on a global basis. Prior to coming to Pentair, she was Director of the International Assignment Services Practice for Deloitte & Touche, Minneapolis, where she was instrumental in building a broad IAS practice, serving multinational clients in many industry segments. Ms. Maxam has served multinational companies as an international human resource, and compensation and benefits consultant, as well as in industry, for her entire career. She has made presentations dealing with international assignment program management optimization, global equity planning and design, and establishing a global workforce at the Society for Human Resource Management, the National Association of Stock Plan Professionals, and other professional services firm conferences. She is currently a member of the Human Resource Policy Association, the National Foreign Trade Council, the Global Equity Organization, and the National Association of Stock Plan Professionals. Ms. Maxam holds a Bachelor of Science degree in Accounting from the University of Minnesota, Minneapolis.
Jennifer R. Ostendorf, CCP Associate Director, Global Executive Compensation The Procter & Gamble Company
Jennifer R. Ostendorf, CCP is Associate Director, Global Executive Compensation at The Procter & Gamble Company’s world headquarters. Ms. Ostendorf’s current responsibilities include the design and delivery of executive compensation and equity awards to employees in more than 70 countries globally. She has worked in human resources for more than 20 years, specializing in compensation and human resources information systems. Before joining P&G in 1992, she worked for Cincinnati Children’s Hospital and Burke Marketing Services.
Mary K. Samsa Partner, HR Law Gardner Carton & Douglas LLP
Mary K. Samsa is a Partner in the Employee Benefits Practice of the Chicago office of Gardner Carton & Douglas. Her primary practice is in executive compensation addressing (i) change in control issues, (ii) nonqualified deferred compensation arrangements (for both taxable entities and tax-exempt entities), (iii) executive employment agreements (for both taxable entities and tax-exempt entities), (iv) equity compensation alternatives, (v) executive security devises, (vi) Code Section 162 (m), and (vii) golden parachutes.
She has also developed significant expertise in international employee benefits in (i) extending nonqualified deferred compensation arrangements overseas, (ii) analyzing split-pay arrangements for executives to ensure continue participation in US benefit plans while working in foreign locations, (iii) designing foreign deferred compensation plans and/or other alternative equity arrangements which attempt to mirror the stock benefits provided to US ESOP employees, and (iv) integrating on a global basis employee benefit plans (including pension plans as well as medical/dental/life/disability plans) acquired and /or disposed of as a result of a merger and/or acquisition. She also focuses her practice in the areas of qualified retirement plans (such as 401(k) and pension plans) and employee stock ownership plans.
Ms. Samsa joined the firm in February, 2000. Prior to joining GCD, Ms. Samsa worked for Baker & McKenzie as an international employee benefits attorney for 3 years and for Barnes & Thornburg for 1 year.
Ms. Samsa is also a certified public accountant. Prior to attending law school, she worked as a tax accountant for the public accounting firm of Laventhol & Horwath and is well-versed in financial statement analysis and preparation. During law school, she worked as a tax researcher and planner for Amoco Corporation’s Tax Department in developing tax strategies for the company’s numerous acquisitions and divestitures.
Ms. Samsa received her Bachelor of Science in Accountancy from the University of Illinois, Champaign/Urbana in May, 1988 after graduating Magna cum Laude. She is a Certified Public Accountant since 1988. She received her Masters of Science in Taxation (MST) from the DePaul University College of Commerce in July, 1992. Ms. Samsa then graduated with High Honors from the DePaul University College of Law in 1996.
Ms. Samsa is a published author and editor of a book regarding the tax ramifications (domestically and internationally) of extending equity-based compensation plans to employees and nonemployees. She is a member of the American Bar Association as well as the Illinois State Bar Association.
Douglas Wilson, CA Director, Executive Compensation Mellon Human Resources and Investor Solutions
Douglas Wilson, CA is a Director for executive and Board of Director compensation in the Chicago office of Mellon Human Resources and Investor Solutions, specializing in corporate strategy execution and shareholder value delivery programs. Mr. Wilson also consults on the executive compensation aspects of M&A based on his prior work in the financial and special services group of a Big Four accounting firm.
He has worked in national and international settings in both a consulting and a corporate capacity, and has “hands on” experience on program implementation and administration.
Mr. Wilson is currently working with clients to improve the efficacy of their executive programs by better aligning broad employee compensation, particularly sales incentives, with executive pay programs and corporate strategy.