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

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Presentation on theme: "1 Cisco Systems A Case Study Global Equity Compensation Forum Issues for Companies with a Mid-Size to Large Employee Base."— Presentation transcript:

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

2 2 Stock Admin Department Organization Chart

3 3 Option Grant Activity Domestic International 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 4 Option Exercise Activity SDS Cash* SDS/Cash CSR Web Exercise Type Order Instructions

5 5 Acquisition Activity

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

7 7 Cisco’s International Dynamics Cisco: Has employees in 70+ countriesHas employees in 70+ countries Offers grants to all full-time employees, with 25+ specialized grant agreementsOffers 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 VietnamOffers 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 countriesWithholds flat tax and more complicated date and vesting template driven withholding for 10 countries Withholds varying levels of taxes for 450+ International AssigneesWithholds varying levels of taxes for 450+ International Assignees

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

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

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

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

12 12 SABRINA (Stock Admin Broker Interface Agent)

13 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 14 Internet-Based Stock Administration Two Preferred Brokers handle all transactions 38,000 Cisco Employees in 70 countries 1.5 million ESPP shares purchased each qtr Three year productivity gain = 263% Cisco Employee Connection View ESPP Purchases / Dispositions View Stock Option Information Employees On-Line ESPP Disposition Reports New Stock Administration Web-Site Financial Reporting on the Web Fin Mgrs Notifications to Employees Confirming Exercise of Options SABRINA On-line Trading w/Preferred Brokers On-line S.O. Agreements/ Acceptance On-line ESPP Sales by Purchase Lot View Stock Option Confirmations Brokers

15 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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