Clarifying The Discussion

The Problem… The way in which companies reward and recognize executives, employees and channel partners is under attack due to some high- visibility gaffes by a few companies who have accepted government bailout money. Some are calling for a complete ban on performance incentives, others are demanding that government-assisted companies be subject to more stringent controls on their expenses related to travel and rewards. spirited – but unproductive. The arguments are different things! We believe the problem is we are talking about © 2009 All Rights Reserved 2 www.i2i-align.com

Each of us thinks we’re right – and we probably are – for the thing we’re talking about. But there is no common starting point. Everyone is jumping into the conversation from different points and at different levels. We need to clarify the argument in order to have a productive discussion. © 2009 All Rights Reserved 3 www.i2i-align.com

Low Signal to Noise Ratio The “noise” pinging around the web from the established media, bloggers and citizen journalists about incentive travel, junkets, meetings, boondoggles, pay incentives and other “excesses” of corporate greed have drowned out the real “signal” concerning these business practices. © 2009 All Rights Reserved 4 www.i2i-align.com

Amplify Our hope is that this presentation will decrease the noise, amplify the signal and help frame further intelligent discussion surrounding this issue. © 2009 All Rights Reserved 5 www.i2i-align.com

The Different Signals… 1 Signal Executive Compensation (Stock, Cash Bonuses, Salary) 2 Signal Executive Travel (Private Jet, Retreats, Meetings) 3 Business Meetings Signal (Employee, Channel Partner, Customer) © 2009 All Rights Reserved 9 www.i2i-align.com

The Different Signals… 1 Signal Executive Compensation (Stock, Cash Bonuses, Salary) 2 Signal Executive Travel (Private Jet, Retreats, Meetings) 3 Business Meetings Signal (Employee, Channel Partner, Customer) 4 Non-Cash Incentive Awards Signal (Employee, Channel Partner, Customer) © 2009 All Rights Reserved 10 www.i2i-align.com

The Different Channels… Companies Taking The noise is increased by the fact that we have to Bailout Money 2 channels – each with similar – (but listen to different) – signals concerning these business practices. Companies NOT Taking Bailout Money In order to simplify the discussion – we strive to apply the same thinking to both channels – when we really shouldn’t. © 2009 All Rights Reserved 12 www.i2i-align.com

def⋅i⋅ni⋅tions [def-uh-nish-uhns] – noun Income, including stock options, grants, etc. any cash Executive Compensation bonuses based on company and individual (Stock, Cash Bonuses, Salary) performance metrics and guaranteed salary. Travel policies associated with ongoing business travel – to and from customers, locations, plants, Executive Travel offices, etc. Meetings designed to help facilitate (Private Jet, Retreats, Meetings) business planning and solving business issues . Meetings designed to educate and inform. Invitation- Business Meetings based. Attendance determined by benefit attained at the meeting and the impact attendance will have on (Employee, Channel Partner, Customer) business performance. Non-cash awards earned or awarded within a Non-Cash Incentives defined program. These would include the most (Employee, Channel Partner, Customer) widely used awards - group travel, individual travel, merchandise, and debit card deposits. © 2009 All Rights Reserved 16 www.i2i-align.com

Different Needs… In one case, private shareholders own the company – In the other case we ALL own the company. When we (the government) own the company – we have a say in what they do. When the stockholders own the company they have a say in how the company is run. © 2009 All Rights Reserved 18 www.i2i-align.com

First , The Easy One… Companies that have not taken, and probably won’t need, government bailout money – have their stockholders to answer to. Companies NOT Taking Bailout Money Government involvement over and above what is already mandated is not needed, wanted, or in our best interest. In the majority of the cases the “invisible hand” will determine how these companies apply of each of the four signals defined. From executive pay, to consumer and employee incentives – the government has no place in decisions for these companies. The stock price and the market will determine their effectiveness. One HUGE Caveat: None of the above will work if the company and its leadership believe the government will bail them out! © 2009 All Rights Reserved 20 www.i2i-align.com

Now The Really, Really, Tough Ones… For companies that are accepting Companies Taking bailout funds from the government Bailout Money the discussion isn’t as easy as saying – let the market handle it. Each of the signals defined have different impact and require different approaches. Our opinion follows… © 2009 All Rights Reserved 21 www.i2i-align.com

The Tough Ones…* Companies Taking Bailout Money Executive Compensation (Stock, Cash Bonuses, Salary) The Government (me and you) – as well as the other stockholders – absolutely have the right to manage, have input on and approve pay packages for executives at companies in which we now own stock. These arrangements must be completely transparent. Understand, however, the challenges faced by these companies are enormous and will require very experienced and talented executives to navigate. If we seriously restrict the kind of executives these companies can hire, we may jeopardize their ability to meet these challenges and - ultimately - our investment. * Based on the definitions provided. © 2009 All Rights Reserved 22 www.i2i-align.com

The Tough Ones…* Companies Taking Bailout Money Executive Travel (Private Jet, Retreats, Meetings) Again, as stockholders we have the right to manage this expense at companies. Face-to-face meetings and retreats are still relevant and necessary. As stockholders in these companies we should demand that the leadership teams take advantage of new technologies and options that could reduce this cost. If a company is accepting bailout money – we should have transparency on these expenses. There is little marginal value of a 4-Star Resort versus a well- equipped 2-Star Hotel for these meetings. Work should be work. * Based on the definitions provided. © 2009 All Rights Reserved 23 www.i2i-align.com

The Tough Ones…* Companies Taking Bailout Money Business Meetings (Employee, Channel Partner, Customer) We have the right to manage these expenses – but we can’t get caught up in the little things and severely hamper a company’s ability to communicate and inform their audiences. Eliminating these expenses is not the answer. If we restrict this activity we put our investment at risk. Our goal is to increase the value of our investment – and knowledge transfer/training, etc., are critical to help these bailed out companies regain their footing. Again, transparency with respect to expenses should be required. * Based on the definitions provided. © 2009 All Rights Reserved 24 www.i2i-align.com

The Tough Ones…* Companies Taking Bailout Money Incentive – Travel and Other Non-Cash Awards (Employee, Channel Partner, Customer) Based on our definitions (non-cash awards), these expenses are proven tactics that increase a company’s business competitiveness by reducing turnover, increasing sales and revenue and decreasing costs. To eliminate these expenses across-the-board will ensure our already substantial investment in these companies is wasted. It is our responsibility to allow access to all reasonable and sound business tactics to protect our investment. Without these options – these companies will be at a competitive disadvantage. * Based on the definitions provided. © 2009 All Rights Reserved 25 www.i2i-align.com

Net-Net… Now that we are unwitting investors in failed companies… we can... Limit their ability to rebound – and limit the upside of our forced  investment and the overall economic recovery Allow them to engage their employees, partners and customers  – with our active oversight – and enhance our investment As always – we have a choice. Let’s just stop arguing about different things and focus on what we need to do to move this thing forward! Thanks for allowing us to siphon off some of your valuable time. We hope this presentation – if nothing else – allows some of us to have intelligent and successful discussions surrounding some important economic questions that affect us all. © 2009 All Rights Reserved 26 www.i2i-align.com

Author The presentation was prepared by Paul Hebert , Managing Director of i2i– an influence consultancy i2i helps companies align the behavior of their employees, channel partners and consumers with the goals and objectives of the company. Using a combination of motivation theory, behavioral economics and social psychology, i2i can have profound impact on a company’s results. Paul is widely considered an expert on motivation and incentives and authors the highly rated blog Incentive Intelligence. Paul has had whitepapers and articles published in HRM Magazine, is a contributing author on the Fistful Of Talent blog, is a monthly columnist for Incentive Magazine, and was recently cited in USA TODAY as an expert on the subject of this presentation. Relevant Links: USA TODAY Article: February 27, 2009 – “Posh trips for jobs well-done are fading away” http://www.usatoday.com/money/companies/management/2009-02-26-travel-incentives-cut_N.htm Incentive Intelligence Blog: http://incentive-intelligence.typepad.com/ Fistful of Talent Blog: http://www.fistfuloftalent.com/ Listing of Incentive Magazine Articles: http:/incentive-intelligence.typepad.com/incentive_intelligence/article-authored-by-incen.html Company Website: http://www.i2i-align.com © 2009 All Rights Reserved 27 www.i2i-align.com

Clarifying The Discussion

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