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Global Equity Compensation Forum Issues for Companies with a Mid-Size to Large Employee Base

Global Equity Compensation Forum Issues for Companies with a Mid-Size to Large Employee Base. Cisco Systems A Case Study. Stock Admin Department Organization Chart. Option Grant Activity. International. Domestic. All Employees Eligible (38,000 Current) 75% Domestic 25% International

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Global Equity Compensation Forum Issues for Companies with a Mid-Size to Large Employee Base

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  1. Global Equity Compensation ForumIssues for Companies with a Mid-Size to Large Employee Base Cisco Systems A Case Study

  2. Stock Admin DepartmentOrganization Chart

  3. Option Grant Activity International Domestic • All Employees Eligible (38,000 Current) • 75% Domestic 25% International • 71 International Countries • All New Hires Receive Grant • Annual Grant Program • Promotional Grant Program

  4. Option Exercise Activity SDS/Cash Cash* SDS Exercise Type CSR Web Order Instructions

  5. Acquisition Activity

  6. ESPP Enrollment Activity Not Enrolled 18% U.S. 78% Intl 22% 51 Countries Enrolled 81% Participation Rate Geographic Location

  7. Cisco’s International Dynamics Cisco: • Has employees in 70+ countries • Offers grants to all full-time employees, with 25+ specialized grant agreements • Offers ESPP to all full-time employees, with 10 specialized enrollment agreements in all countries except China, Russia, Ukraine, and Vietnam • Withholds flat tax and more complicated date and vesting template driven withholding for 10 countries • Withholds varying levels of taxes for 450+ International Assignees

  8. International Challenges • Belgium: • 65%, or 2 out of 3 employees in Belgium declined their Ongoing Grant in 2000 • 60-day acceptance window poses automation challenges • Dexia loan facility • China: • Bonus Rights type program • Like to begin offer ESPP Bonus program • France: • Tracking nightmare • New tracking and broker facility • Israel: • Special broker facilities in place now • What we hope to accomplish in the future

  9. International Challenges • Netherlands: • Three different tax schemes – grant, vest and exercise • Russia: • New tax regime and how we hope to use it • UK & Scotland • Approved Plan Scheme grants given to all our employees up to the maximum allowable in 2000 • All Approved Scheme grants are priced at $50 and are underwater – what do we do now? • IA’s: • Hypo tax and how we withhold

  10. Systems Stock Administration Department SABRINA GOAL GAP SPA • Automated Stock Options grant feed between People Soft and Equity Edge • Automated recon between two systems • Controls over grant initiation • Reporting • Enrollment • Disposition • Contribution • Stock Option Exercises • Restricted Stock issuances • Repurchases • Electronic Acceptance and Confirmation of Stock Option Agreement • On-Line Grant Agreement GREEN Interfaces Web Reporting • Stock Option Expiration • 30 Days • 15 Days • 5 Days • Daily Thereafter • Payroll • Brokers • People Soft • Oracle GL • Between SA Systems • Immediate access • World wide reporting capability to Finance managers • Employee Stock Option and ESPP information

  11. SABRINA (Options) Withholds tax at exercise in complex situations based on programmed requirements Withholds hypo tax for IA’s from E&Y file Automated journal entries for subs we withhold for SPA (ESPP) Combines contribution and distribution information for 50+ countries into one file Converts all local currency into USD using period end G/L rates Systems

  12. SABRINA (Stock Admin Broker Interface Agent)

  13. SPA(Stock Purchase Agent) 2001 Benchmarking (ESPP Account Per SA EE) Impact on Productivity: • Web Based reporting for enrollments, withdrawals and changes, contributions, refunds, and purchase data. • Reports available on line 24/7 on a real time basis. • Automated journal entries. • Notification of transfers for employees. • Automatic feed of contributions into SA systems. • ESPP purchase will be as simple as pushing the purchase button • A true end to end solution (Enrollment, Contribution, Purchase, Disposition, Reporting). Best in Class

  14. Two Preferred Brokers handle all transactions Three year productivity gain = 263% Cisco Employee Connection View ESPP Purchases / Dispositions 38,000 Cisco Employees in 70 countries View Stock Option Information On-line Trading w/Preferred Brokers Brokers On-line S.O. Agreements/ Acceptance On-line ESPP Sales by Purchase Lot SABRINA View Stock Option Confirmations Employees On-Line ESPP Disposition Reports New Stock Administration Web-Site Financial Reporting on the Web 1.5 million ESPP shares purchased each qtr E-Mail Notifications to Employees Confirming Exercise of Options Fin Mgrs Internet-Based Stock Administration

  15. On-Line Stock Admin • Stock Admin Portal • Grant and exercise info. • ESPP purchase and • sale info. • OnLine Trading OnLine Brokerage Salomon Smith Barney UBS Paine Webber Stock Admin Self Service FAQ's

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