Global Equity Compensation Forum Issues for Companies with a Mid-Size to Large Employee Base Cisco Systems A Case Study 1
Stock Admin Department Organization Chart 2
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 3
Option Exercise Activity SDS/Cash* SDS Exercise Type CSR Web Order Instructions 4
Acquisition Activity 5
ESPP Enrollment Activity Not Enrolled 18% U. S. 78% Intl 22% 51 Countries Enrolled 81% Participation Rate Geographic Location 6
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 7
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 8
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 9
Systems Stock Administration Department SABRINA • Stock Option Exercises • Restricted Stock issuances • Repurchases GOAL • Electronic Acceptance and Confirmation of Stock Option Agreement • On-Line Grant Agreement GAP • Automated Stock Options grant feed between People Soft and Equity Edge • Automated recon between two systems SPA • Reporting • Enrollment • Disposition • Contribution • Controls over grant initiation Web Reporting GREEN Interfaces • Immediate access • Stock Option Expiration • Payroll • World wide reporting • 30 Days • Brokers capability to Finance managers • 15 Days • People Soft • 5 Days • Oracle GL • Daily Thereafter • Between SA Systems • Employee Stock Option and ESPP information 10
Systems SABRINA (Options) SPA (ESPP) • Withholds tax at exercise in complex situations based on programmed requirements • Combines contribution and distribution information for 50+ countries into one file • Withholds hypo tax for IA’s from E&Y file • Automated journal entries for subs we withhold for • Converts all local currency into USD using period end G/L rates 11
SABRINA (Stock Admin Broker Interface Agent) 12
SPA (Stock Purchase Agent) 2001 Benchmarking (ESPP Account Per SA EE) s Be t in s las C 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). 13
Internet-Based Stock Administration Three year productivity gain = 263% co Cis in 00 s 38, 0 loyee es i p Em ountr 70 c Cisco Employee Connection ers Brok ns o rred refe ansacti P Two e all tr l hand View ESPP Purchases / Dispositions View Stock Option Information On-line Trading w/Preferred Brokers On-line S. O. Agreements/ Acceptance Brokers On-line ESPP Sales by Purchase Lot Employees View Stock Option Confirmations On-Line ESPP Disposition Reports SABRINA New Stock Administration Web-Site Financial Reporting on the Web Fin Mgrs E-Mail Notifications to Employees Confirming Exercise of Options 1. ES 5 mill P io pu P sha n rc re eac hase s hq d tr 14
On-Line Stock Admin Portal • Grant and exercise info. • ESPP purchase and sale info. • On. Line Trading Stock Admin Self Service FAQ's On. Line Brokerage Salomon Smith Barney UBS Paine Webber 15
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