This presentation covers the 10 essential steps to creating, delivering and managing an effective communication programs for any compensation or benefit programs (it actually works for just about anything).

1. DAN WALTER, President and CEO / Performensation Consulting
PAM CHERNOFF, Project Director / NCEO
2009 NCEO/Beyster Institute Employee Ownership Conference
Portland, OR : April 22-24, 2009 : Hilton Portland & Executive Tower
Ten Steps to Guaranteed
Communication Success
for Equity Plans

2. 2 2009 NCEO/Beyster Institute Employee Ownership Conference
Dan Walter, CEP, President and CEO, Performensation Consulting
Dan is the President and CEO of Performensation Consulting. With more than 14 years of experience
assisting companies with issues concerning compensation, he has experience with both management
and broad-based programs, focusing on equity-based solutions. Dan provides end-to-end solutions for
private and public companies based in both the United States and abroad.
Dan’s work with young entrepreneurial companies and established multinational companies provides
his clients with a unique perspective on compensation issues. He creates company-specific solutions
that are effective and often innovative. He also provides post-consultation support with
communications and administrative best practices to help ensure programs are working as designed.
Dan’s expertise includes equity compensation, executive programs, and talent management issues.
His experience with these programs includes: issue diagnosis, solution design, communication,
administration, and reporting. His equity compensation expertise also includes stock options, restricted
shares and units, stock appreciation rights, stock purchase, and performance-based programs.
Executive compensation experience includes benchmarking, short- and long-term incentive program
design, proxy disclosure reporting, and total reward evaluations. Dan also has strong experience in
administrative and technological best practices for compensation programs.

3. 3 2009 NCEO/Beyster Institute Employee Ownership Conference
Pam is an equity compensation project director at the National Center for Employee Ownership, where
she is the editor of The Stock Options Book, a contributing author to The Decision-Maker's Guide to
Equity Compensation, and is responsible for the content of the NCEO’s training course for the
Certified Equity Professional exams. She is also a freelance editor. Pam earned her CEP designation
in 2005.
Before joining the NCEO, Pam was copy desk chief at Pensions & Investments newspaper.
Pam Chernoff, CEP, Project Director, NCEO

4. 4 2009 NCEO/Beyster Institute Employee Ownership Conference
“The single biggest problem in
communication is the illusion that
it has taken place.”
— George Bernard Shaw

5. 5 2009 NCEO/Beyster Institute Employee Ownership Conference
Elements of Successful Communication
Common vision.
The company must provide a vision of the future that includes the participant, the company, and the shareholders. Look to
the future rather than dwelling on the past or focusing only on immediate demands.
Agreement about the overall purpose of the participant and the program.
Communications must link the purpose of the program with the purpose of the individual. Be open and set priorities and
assign tasks that are meaningful. Communicate realistic goals that help participants feel that they’re making a specific
contribution toward a valued result.
Group alignment.
People enjoy the feeling of belonging to a group. Communicate how working together as a group can benefit each and every
participant.
Responsibility to the group.
Once they have committed to goals—especially those they helped establish themselves—team members feel a strong
obligation to support the team, and not let the team down.
Sensitivity to changes.
As conditions develop and change, communications must not ignore the negative. Put downward pressures into perspective
and offer a map to the positive. Communicate even small wins as steps to reaching long-term goals.
Open discussion.
Team members should be encouraged to discuss the programs. They feel that others really listen and respect their points of
view. Focus groups can help provide insight to masked issues and hidden value.
Frequent, consistent messaging.
Communications should be a constant piece of the program. Participants should know what to expect and where to find
information. Messages should flow from one period to the next while adjusting to changing conditions.

6. 6 2009 NCEO/Beyster Institute Employee Ownership Conference
Rewards Communication and Pay Secrecy
Conducted by WorldatWork, Dow Scott, Ph.D. (Loyola University), and the Hay Group
• Communication of base salary practices
Majority of study respondents indicated that “most” (60%-80%) to “all” (80%+) of their
employees do not know or understand:
• The salary range for their own position, or
• The goals, rationale, or intent behind the way base pay increases were
distributed.
Further, 21% of study respondents reported that up to 40% of employees would not
understand the amount of the increase they would receive.
• Communication of variable pay practices
Good: 70% of respondents do tell employees their variable pay targets.
Bad: 30% either do not establish targets or don’t make a practice of
communicating them to employees.
And while a majority may communicate the variable pay targets few
appear to communicate actual payout metrics, including:
• Payout based on performance targets (only 20%), or
• Payout for each level of performance (14%).

7. 7 2009 NCEO/Beyster Institute Employee Ownership Conference
Communication Methods

8. 8 2009 NCEO/Beyster Institute Employee Ownership Conference
Know Your Audience
• How financially sophisticated is the audience?
• Do you need to explain what stock is before explaining
the program?
• At what level will you target your communications
materials?

9. 9 2009 NCEO/Beyster Institute Employee Ownership Conference
1. Define Your Objectives
• Clarify your communication goals
• Clarify your plan goals
• Determine an overriding theme
• Get buy-in from your stakeholders
• Define your milestones and keep appropriate
parties in the loop
• Put together a project plan
• Bring in experts if you do not have
sufficient time or expertise
• Understand your budget and deadlines

10. 10 2009 NCEO/Beyster Institute Employee Ownership Conference
2. Understand Your Message
• Management and HR/Comp must agree on the purpose of the plan
• Understand why specific vehicles were used
• Clearly document the goals of the program
– For participants
– For the company
– For the shareholders
• Define success and failure
• Choose no more than three or four primary
messages
– Examples
• We want to motivate performance
• We want to reward you for meeting goals
• We want you to benefit when the company is doing well

11. 11 2009 NCEO/Beyster Institute Employee Ownership Conference
3. Find Out What Your Participants Know
• Create focus groups
– Facilitate open discussion forums
– Speak in terms that participants understand
– Understand what they feel is important
• Survey your staff
– Provide interactive feedback for representative
participants
• Learn what the layer above the participants
understands
– Make sure they are on board with the program
• Create a discussion board and invite comments
– Moderate without stifling conversation
– Slow or stop discussions by providing insight quickly

12. 12 2009 NCEO/Beyster Institute Employee Ownership Conference
HEADLINE January 7, 2004
Towers Perrin Survey Finds Almost Half
of American Workers Doubt the
Credibility of Employer Communications
One out of Every Five Employees Believe Their
Organization Generally Does Not Tell Them the Truth

13. 13 2009 NCEO/Beyster Institute Employee Ownership Conference
Example 1: Too Much
The Internal Revenue Service places a $25,000 limit on the dollar value of shares that may be
purchased under an Employee Stock Purchase Plan (ESPP) for each calendar year in which an
offering is outstanding. This is not a simple contribution limit. It is a limit on the dollar value of
shares as determined by Internal Revenue Code Section 423(b)(8).
You may reach this IRS limit before the next scheduled purchase on ____ and unnecessarily
contribute funds that will need to be returned to you. The attached Purchase Status-$25,000 Limit
Statement includes pertinent information in determining if you are at risk of exceeding the IRS
limit. The number under the heading IRS LIMIT SHARES is the maximum number of shares that
you are eligible to purchase in Calendar Year _____. To determine the maximum amount of
contributions you can make into the ESPP during this purchase period, multiply the number of IRS
LIMIT SHARES by the expected purchase price. (The expected purchase price is equal to the
Subscription Value reflected on the attached statement minus a 15% discount.) The amount you
have contributed into the ESPP during this purchase period should not exceed this
number. Please refer to your most recent pay stub under the “year to date” ESPP accumulator
column or contact stock administration to find out how much money you have contributed into the
ESPP during this purchase period. (Please note that you could still exceed the IRS limit if the
stock price on the next purchase date is less than your current subscription value.)
Comment: Would you understand how much more you could contribute?

14. 14 2009 NCEO/Beyster Institute Employee Ownership Conference
Example 2: Too Little
What is the tax implication to me if I exercise my stock option to
purchase the shares (or sell the shares)?
Tax implications vary by country and sometimes by location within a
country. In the U.S., you are not taxed on any gain from any
increase in the value of stock until you exercise your stock option.
We urge you to consult your tax advisor for specific financial
advice.
Comment: It’s OK to explain the basic tax treatment. You can’t give tax
advice, but at least let participants know the basics of what to
expect.

15. 15 2009 NCEO/Beyster Institute Employee Ownership Conference
You Know Your Communications Need Help If
Your participants ask (I am not making these up):
• Whose stock will I buy on the exercise date?
• What will the stock price be on the exercise date?
• How can I exercise my underwater options? I want to minimize my
taxes.
• Can I have the kind of option where you don’t have to pay any
taxes?
• Since the stock price at the end of the year was lower than the
price I paid to exercise, can I take a capital loss for the shares I
still own?

16. 16 2009 NCEO/Beyster Institute Employee Ownership Conference
4. Research Strategy and Technology
• What is available?
– Offerings from providers
– Tools used by other areas of the company
or participant groups
– Brochures, e-mails, intranet, Internet, meetings,
Web seminars, networking sites, presentations
• What does it cost?
– Web can cost much less than paper
• What works for your type of participant?
– Online vs. paper
– Web vs. IVR
– In-person vs. remote
– Translations and international issues

17. 17 2009 NCEO/Beyster Institute Employee Ownership Conference
5. Choose Your Medium and Your Presenters
• Make a firm decision and move forward
decisively
– Face-to-face is typically best
– Provide tools for participants who work
best with numbers, words, and visual
effects
• Make sure your choice of presenters
helps convey your message
– If the message is from management,
have management do the
communications
– If the message is about coming together
as a group, consider using people from
your focus groups

18. 18 2009 NCEO/Beyster Institute Employee Ownership Conference
6. Create Your Communications
• Start at the beginning and focus on the order in which
the details make the most sense
• Tie everything back to your primary messages
• Have legal and finance check everything
• Use share and dollar amounts that are
relative to your stock and compensation levels
• Use growth rates that are reasonable
• INCLUDE DISCLAIMERS
• Run everything through a “mailroom test”
before sending it out
– Have rank and file staff go through the
communications and provide their interpretations

19. 19 2009 NCEO/Beyster Institute Employee Ownership Conference
7. Things Every Participant Should Know
• The basics of the stock market and investing
(public companies)
• How each vehicle being used works—values,
ownership, etc.
• Key features (differentiators) of the plan
• Basic income and tax consequences
• Why each compensation vehicle was used
• How they can affect results, both corporate and
personal
• How to read compensation details on a statement or Web site
• Termination rules

20. 20 2009 NCEO/Beyster Institute Employee Ownership Conference
"If you want people to change,
you have to change the way you
communicate with them."
— T.J. Larkin

21. 21 2009 NCEO/Beyster Institute Employee Ownership Conference
8. Communications Roll-out and Presentations
• Cover all affected participants as quickly as
possible
• Create urgency to increase attention
• Provide feedback forms (online and
in person) to verify understanding
• Provide a “help” resource for questions
• Follow up with additional mediums to
ensure that all participant needs are met
• Essential: Speak to the layer above the
participants to find out the general impact of
the communications

22. 22 2009 NCEO/Beyster Institute Employee Ownership Conference
9. Maintain Ongoing Updates
• Touch base at least twice a year
• If vehicles are performance-based, touch base at least
quarterly
• Keep a running journal of
communications and progress
toward goals at least quarterly
• Don’t forget the last award when
communicating the next award

23. 23 2009 NCEO/Beyster Institute Employee Ownership Conference
10. Measure Effectiveness and Adjust Accordingly
• At least twice a year:
– Revisit your focus group
– Conduct a quick survey of your participants
– Re-train the layer above the participants to
ensure they are communicating a
consistent message
• At least once a year:
– Rewrite critical sections of the communications
– Rework communications that have been
reviewed poorly by participants

24. 24 2009 NCEO/Beyster Institute Employee Ownership Conference
"Good communication is as stimulating as black coffee, and
just as hard to sleep after."
— Anne Morrow Lindbergh
"If I am to speak ten minutes, I need a week for preparation;
if fifteen minutes, three days; if half an hour, two days; if an
hour, I am ready now."
— Woodrow Wilson
"Nothing is so simple that it cannot be misunderstood."
— Freeman Teague Jr.

25. 25 2009 NCEO/Beyster Institute Employee Ownership Conference
Communicating Compensation Plans
The 10 steps to ensuring you get the most out of your programs
Dan Walter, CEP
President and CEO,
Performensation Consulting
917-734-4649
Dwalter@performensation.com
www.performensation.com
Pam Chernoff, CEP
Project director, NCEO
914-332-1868
pchernoff@nceo.org
www.nceo.org

26. Thank You