Issues Related to Global Executive Plans

1. Issues Related to Global Executive Plans Siobhan Hurley, PricewaterhouseCoopers LLP Steve Brown, Accenture 5 November 2001, NCEO Global Equity Compensation Forum

2. Case Study Design and Implementation of Share Plans at Accenture

3. Agenda • General background on Accenture and how Company determined its equity compensation philosophy • Discussion of country specific issues that Accenture faced as a result of equity compensation philosophy • Key regulatory issues that Accenture faced and how resolved

4. Accenture Background Large multi-national company was implementing equity plans for the first time in conjunction with IPO Change in corporate structure generated a need for new compensation structure -- Transitioning from partnership to corporation Highly mobile global workforce Operating in 46 countries 75,000 employees; 2,500 partners IPO put a tight deadline on implementation 2 key and distinct groups to satisfy: Executives (i.e.“partners”) and employees The Plans needed to offer maximum flexibility to satisfy both groups

5. Accenture Share Plans • 3 Plans Implemented: • Stock Option Plan • Employee Stock Purchase Plan • Restricted Share Units (RSU’s) • Promise to deliver Accenture shares at no cost to employee at a specified future date • No voting or dividend rights until shares delivered

6. Accenture Objectives • Implement all plans in all countries wherever legally possible • Encourage long-term ownership for partners • Celebrate the IPO and encourage ownership by employees • Flexibility to make plans attractive to executives as well as broader employee base

7. Accenture Plan Design Stock Options: • Stock option grants limited to managers and above • One-time grants at IPO • Possibility of future grants upon promotion or being hired • Significant future grants anticipated upon promotion to “partner” ESPP: • ESPP designed to offer broad, ongoing participation to employees • Excludes partners Restricted Share Units: (RSU’s): • Generally one-time celebratory grants at IPO • Designed to offer broad participation (Provided to all employees) • Also provided to key executives (I.e. newly promoted, high performing partners)

8. Accenture Plan Design Key Distinctions between Executives (“partners”) and employees: • Options: • 4 year vesting for employees • 5 year vesting for partners • RSU’s: • 100% vested for employees at IPO • Share delivery at 18 and 36 months from IPO for employees • Generally 5 year vesting for partners with Share deliver spread over 8 years

9. Plan Implementation • Now that decision of which plans to offer and to whom had been made, Accenture needed to make this happen globally • Objective of providing flexibility and satisfying different groups necessitated creativity in some jurisdictions • Other jurisdictions posed regulatory problems

10. Netherlands – Stock Options • Traditionally, tax is due at vesting of stock options • Recent legislation allows employees to choose to defer taxation until exercise • However, social tax is still due at vesting and possibility of any deemed discount to be taxed at vesting; corporate deduction can also be an issue • Some companies are seeking rulings to allow only full cashless exercise; • With ruling, Dutch tax authorities treat award as cash compensation, not under stock option rules; entire spread is taxed at exercise • Problem: reconciling desire of some employees to hold shares with administrative issues

11. Netherlands – Solution for Stock Options • Decision: Offer employees a choice of Stock Option grants

12. Netherlands – RSU’s • RSUs would be taxed at time of RSU grant (generally IPO date), as they are fully vested at grant, rather than at receipt of actual shares • Broad-based nature of RSUs - tax at grant could make the awards a burden for the employees rather than something positive • Failure to present alternatives to employees could create problems with Works Council • Company wanted to make certain they could achieve their aim of allowing all employees to participate in IPO but keep the grant as flexible as possible

13. Netherlands – Solution for RSU’s • Decision: Offer employees a choice of RSU grants

14. Switzerland • Generally, tax is due at grant • Taxation can be shifted to exercise if certain conditions are met: • Option life is greater than 10 years • Vesting period is greater than 5 years • Option cannot be objectively valued at grant

15. Switzerland -- Solution • 2 plans offered -- employees have choice • Standard grant with 10 year life -- tax at grant • Amended grant with 10 year + 1 month life -- tax at exercise • Employees choose before grant • Allows employees with funds and ability to take risk the opportunity to pay tax at grant • One of 8 partners and 5 of 95 employees who received options chose tax at grant

16. Japan • Securities filing requirements are complex and can be time consuming • Number and value of anticipated option grants upon IPO meant full securities filing (Form 7) would be necessary • Time involved in preparing and translating audited financial statements meant it was unlikely filing would be completed prior to IPO • Accenture was faced with the possibility that if grants may not be able to take advantage of IPO price

17. Japan -- Solution • Establish a trust to which the options are granted—Ninni Kumiai (the NK) • Company grants options to the NK indicating optionee’s name and number of options • NK is viewed as single holder of options – full Form 7 not necessary • When NK is dissolved, options are distributed to optionees under original terms and conditions

18. Regulatory Issues Faced by Accenture • Primarily exchange control issues, although securities regulations also were a factor • Post IPO implementation of ESPP meant more time to complete exchange control filings; not the case for securities filing in Japan • Accenture been successful in offering ESPP in “unusual” locations—Brazil, India, South Africa • Looking at possibilities for China and Russia

19. China • Lack of regulations and responsible authority on stock plans means there are numerous discrepancies on what is permissible • Exchange controls are strict; previously thought to include ownership of foreign shares • Currently, it is believed ownership of shares is OK, but still difficult to remit funds • Accenture decided to proceed with implementation of options and RSUs; employees generally must do a sell to cover or cashless exercise • ESPP– Cash-based alternatives available

20. India • Exchange control restrictions -- annual remittances greater than $20,000 require Reserve Bank of India (RBI) approval • All plans were extended to employees, but local entity must monitor compliance with $20,000 limit for ESPP • Generally, sell to cover and cashless exercise are necessary for options • In order to secure most favorable tax treatment, a change to the RSU plan was necessary • RSU recipients must pay a nominal purchase price when they receive the shares

21. India New Guidelines • Exchange controls were not the only difficulty faced in India • Confusing guidelines published by the Securities and Exchange Board of India (SEBI) meant taxation of plans was unclear • Conflicting information made full implementation difficult—plans were rolled out, but caveated that tax treatment could change • New Central Government guidelines published October 5, 2001 • Clarified that plans of foreign parent companies are eligible for preferential tax treatment (tax at sale) – retroactive to April 2000

22. Brazil • Exchange controls make implementation difficult • Remittance abroad of more than $20,000 per year requires Central Bank of Brazil (CBB) approval • Company can make remittances on behalf of employees below that amount, but must report details to the CBB • Funds remitted by employees for ESPP are tracked and monitored by the company to ensure that $20,000 annual limit is not exceeded

23. South Africa • Exchange control restrictions make stock plans difficult to implement • Accenture opted to file for exchange control approval in order to extend stock plans to the fullest extent possible • Employees can participate in all 3 Accenture plans • Any remittance of funds as part of participation counts against employees lifetime investment allowance of RND 750,000 • All exercise methods available (exercise and hold, sell to cover, full same-day-sale) as long as investment allowance is respected

24. Closing Comments and Questions • Strategy is important for global plans – need to understand what the company’s objectives are in order to make the best decisions when faced with country specific challenges • Companies may need to offer choices in some countries in order to provide the flexibility to satisfy both executives and broader employee population • There are alternatives and solutions for problems with exchange controls and securities filings