ALI-ABA Course of Study Executive Compensation: Strategy, Design, and Implementation. June 21-22, 2007 New York, New York TABLE OF CONTENTS PROGRAM

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1 PROGRAM ALI-ABA Course of Study Executive Compensation: Strategy, Design, and Implementation FACULTY PARTICIPANTS FACULTY BIOGRAPHIES STUDY MATERIAL June 21-22, 2007 New York, New York TABLE OF CONTENTS 1. Overview of Executive Compensation and Director Compensation Practices and Trends By Steven E. Hall Page ix 2. Executive Compensation: Strategy, Design and Implementation 13 By Scott P. Spector Table of Contents 14 Study Material Nonqualified Deferred Compensation: Transition to Final Regulations 113 By Elizabeth E. Drigotas, Daniel L. Hogans, William C. Schmidt, and Max J. Schwartz Table of Contents 114 Introduction 115 Study Material Deferred Compensation: A Road Map to Compliance by Year-End By Max J. Schwartz 5. What Does Accounting Bring to the Table? By Nick Bubnovich and Steve Seelig 6. Executive Compensation Litigation 203 By John L. Utz Table of Contents 205 Study Material 209 Tell the Truth! 317 Nonqualified Plan Disputes: The Importance of Process, Precedent and Intent 319 Option Exercise Following Termination of Employment: Employment Agreement Which Conflicts with Option Agreement 321 Changing Stock Plan Administrators: Handling the Transition 323 Disclosure of Executive Misconduct: Defamation and Contract Claims 326 Stock Options: The Power of the Plan Document 328 xi xiii vii

2 Termination Without Cause? Written Notice Requirement Saves Employer Severance Pay 330 Arbitration of Executive Disputes: Benefit Eligibility 332 CEOs Beware: Don't Overreach in Comp Negotiations 334 Forfeiture of Nonqualified Benefits for Violating Noncompete: Burden of Proof 336 Implied Right to Reduce Deferred Compensation for Bad Behavior 337 Stock Options: Blackout Necessary Under Securities Laws 340 Executive Compensation and Bankruptcy: Retention Payemnt Rules 342 Mouse-Proofing Noncompetes Compensation Decisions in : The Good, the Bad, and the Ugly By Brian T. Foley The SEC's New Disclosure Rules At Work 367 By Mark A. Borges and Ronald O. Mueller Study Material 369 Exhibit A: General Electric Company Compensation Discussion and Analysis 371 Exhibit B: Caterpillar Inc. Compensation Discussion and Analysis 381 Exhibit C: Temple-Inland Inc. Compensation Discussion and Analysis 396 Exhibit D: AT&T Inc. Board Compensation Committee Report 407 Exhibit E: Kellogg Company Summary Compensation Table 410 Exhibit F: Bank of America Corporation "Alternative" Summary Compensation Table (from Compensation Discussion and Analysis) 415 Exhibit G: The Dow Chemical Company "Alternative" Summary Compensation Table (from Compensation Discussion and Analysis) 417 Exhibit H: EMC Corporation "Alternative" Summary Compensation Table (from Compensation Discussion and Analysis) 419 Exhibit I: ConocoPhillips "Alternative" Summary Compensation Table (from Compensation Discussion and Analysis) 420 Exhibit J: Akamai Technologies Inc. Grants of Plan-Based Awards Table 422 Exhibit K: Staples Inc. Outstanding Equity Awards at Fiscal Year-End Table 424 Exhibit L: Pfizer Inc. Pension Benefits Table Morgan Stanley Investment Management Proxy Voting Policy and Procedures By Kenneth Bertsch 455 viii

3 ALI-ABA Course of Study Executive Compensation: Strategy, Design, and Implementation June 21-22, 2007 New York, New York PROGRAM Thursday, June 21, :00 a.m. Registration and Continental Breakfast VIDEO WEBCAST SEGMENT A 9:00 a.m. Overview of Executive Compensation and Director Compensation Practices and Trends Mr. Hall 9:45 a.m. Section 409A Revisited: How Have the Final Regulations Answered Our Questions; How Do We Fix Non-Compliant Arrangements This Year (In Particular, Options); Planning for 2008 When Transition Relief Expires Ms. Drigotas and Messrs. Hogans, Schmidt, and Schwartz 10:45 a.m. Networking Break 11:00 a.m. Section 409A Revisited (continued) 12:00 noon Questions and Answers 12:30 p.m. Lunch Break VIDEO WEBCAST SEGMENT B 2:00 p.m. IRS Executive Compensation Audits (and What To Do with Failed ISOs) Ms. Fernandez 2:45 p.m. New Merger and Acquisition Issues for Executive Compensation Practitioners: What Is Management Getting in Private Equity Deals? Mss. Baker and Jones 3:30 p.m. Networking Break 3:45 p.m. Executive Compensation Accounting Issues: What DO the Accountants Bring to the Compensation Table? Messrs. Bubnovich and Seelig 4:30 p.m. Questions and Answers 5:00 p.m. Adjournment for the Day Friday, June 22, :30 a.m. Continental Breakfast VIDEO WEBCAST SEGMENT C 9:00 a.m. Executive Compensation Litigation Mr.Utz 9:45 a.m. Compensation Decisions in : The Good, the Bad, and the Ugly Mr. Foley 10:30 a.m. Networking Break 10:45 a.m. SEC s New Disclosure Rules at Work Messrs. Borges and Mueller and Ms. Krauskopf 12:00 noon Questions and Answers 12:30 p.m. Lunch Break ix

4 VIDEO WEBCAST SEGMENT D 2:00 p.m. SEC s New Disclosure Rules at Work (continued) 2:45 p.m. New Disclosure Rules, from the Public and Investor Points of View Mr. Bertsch 3:30 p.m. Networking Break 3:45 p.m. Option Backdating and Ethics: Who Is Responsible, and Who Could Have Prevented It? Messrs. Pomerantz and Spector 4:45 p.m. Questions and Answers 5:00 p.m. Adjournment Total 60-minute hours of instruction: 12, including one hour of ethics x

5 ALI-ABA Course of Study Executive Compensation: Strategy, Design, and Implementation June 21-22, 2007 New York, New York PLANNING CHAIRS Max J. Schwartz, Esquire Sullivan & Cromwell LLP 125 Broad Street New York, NY Scott P. Spector, Esquire Fenwick & West LLP 801 California Street Mountain View, CA FACULTY Pamela Baker, Esquire Sonnenschein Nath & Rosenthal LLP Suite 8000, Sears Tower 233 South Wacker Drive Chicago, IL Mr. Kenneth Bertsch Morgan Stanley & Company, Inc. 34th Floor 1221 Avenue of The Americas New York, NY Mark A. Borges, Esquire Principal Washington Resource Group Mercer Human Resources Consulting LLC Suite rd Street, NW Washington, DC Mr. Nick Bubnovich Watson Wyatt Worldwide Suite North Wacker Drive Chicago, IL Elizabeth E. Drigotas, Esquire Deloitte Tax LLP Suite th Street Washington, DC Cate L. Fernandez, Esquire Chief, Executive Compensation Branch Office of the Associate Chief Counsel Division Counsel (TEGE) Internal Revenue Service Room Constitution Avenue, NW Washington, DC Mr. Brian T. Foley, Managing Director Brian Foley & Company, Inc. Suite North Broadway White Plains, NY Mr. Steven E. Hall, Managing Director Steven Hall & Partners, LLC 6th Floor 645 Fifth Avenue New York, NY xi

6 Daniel L. Hogans, Esquire Attorney-Advisor, Office of Tax Policy U.S. Department of the Treasury Room Pennsylvania Avenue, NW Washington, DC Julie H. Jones, Esquire Ropes & Gray LLP One International Place Boston, MA Anne Krauskopf, Esquire Senior Special Counsel Division of Corporation Finance U.S. Securities and Exchange Commission 100 F Street, NE Washington, DC Ronald O. Mueller, Esquire Gibson, Dunn & Crutcher LLP Suite Connecticut Avenue, NW Washington, DC Jay L. Pomerantz, Esquire Fenwick & West LLP Silicon Valley Center 801 California Street Mountain View, CA William C. Schmidt, Esquire Senior Counsel Office of Division Associate Chief Counsel Tax Exempt and Government Entities Executive Compensation Branch Internal Revenue Service Room 4016 CC:TEGE:EB:EC 1111 Constitution Avenue, NW Washington, DC Steven A. Seelig, Esquire Executive Compensation Counsel Watson Wyatt Worldwide 901 North Glebe Road Arlington, VA John L. Utz, Esquire Utz, Miller & Kuhn, LLC Suite West 132nd Street Overland Park, KS xii

7 ALI-ABA Course of Study Executive Compensation: Strategy, Design, and Implementation FACULTY BIOGRAPHIES PLANNING CHAIRS Max J. Schwartz, New York, New York Sullivan & Cromwell LLP B.A., Institut D Etudes Politiques; J.D., University of Michigan Memberships: New York State Bar Association (Member, Executive Committee of the Tax Section and Co-Chair of the Employee Benefits Committee); American Bar Association, Tax Section, Corporate Banking and Business Law Section; Charter Member of The American College of Employee Benefits Counsel, Inc.; Employee Benefits Advisory Committee for the Practising Law Institute. Scott P. Spector, Mountain View, California Fenwick & West LLP B.A., J.D., Tulane University; LL.M., (Taxation) New York University Memberships: American Bar Association (Employee Benefits Section; SEC Section 16 Task Force; Subcommittee on Executive Compensation; Chair, Federal Securities Regulation of the Committee on Employee Benefits; Chairman, Executive Compensation subsection of Business Law Section) FACULTY Pamela Baker, Chicago, Illinois Sonnenschein Nath & Rosenthal LLP A.B., Smith College; J.D., University of Wisconsin at Madison Memberships: Chicago Bar Association (Member, Employee Benefits Committee, 1978-; Chairman, ; Federal Taxation Committee, 1980-; Executive Council, ); Illinois State Bar Association (Member, 1988-; Chair, Employee Benefits Section Council, ); American Bar Association (Vice Chair, Employee Benefits Committee, Taxation Section, , Chair-elect, , Chair, ; Chairman, Federal and State Securities Regulation Subcommittee of Employee Benefits Committee, ; Member: Joint Committee on Employee Benefits, 1991-; Sections on: Real Property, Probate and Trust Law; Taxation; Business Law) Publications: Executive Compensation in Mergers and Acquisitions (Part 1), 39 THE PRACTICAL LAWYER No. 475, 1993; Executive Compensation in Mergers and Acquisitions (Part 2), 39 THE PRACTICAL LAWYER No. 545, A Simple Approach to Pension Planning, 83 ILLINOIS BAR JOURNAL 37, 1995; New New New Rule 16b-3, 4 ERISA AND BENEFITS LAW JOURNAL 248, 1996 Charter fellow, American College of Employee Benefits Counsel xiii

8 Kenneth Bertsch, New York, New York Morgan Stanley & Company, Inc. Mark A. Borges, Washington, D.C. Mercer Human Resources Consulting LLC B.A., Humboldt State University; J.D., Santa Clara; LLM, New York University Former Special Counsel, Office of Rulemaking, Division of Corporation Finance, U.S. Securities and Exchange Commission; General Counsel, ShareData, Inc. Law clerk, Honorable Marion T. Bennett, U.S. Court of Claims, Washington, D.C. Nick Bubnovich, Chicago, Illinois Watson Wyatt Worldwide B.A., Hanover College; J.D., University of Georgia Author, Impact of New Rules on Stock Options, Journal of Compensation and Benefits, October 2000 Editor and principal author, Deloitte s Human Capital Advisory Services EXECUTIVE COMPENSATION NEWSLETTER Elizabeth E. Drigotas, Washington, D.C. Principal, Compensation and Benefits, Deloitte Tax LLP A.B., Bowdoin College J.D., University of North Carolina Former Attorney-Advisor, Office of Benefits Tax Counsel, United States Treasury Department Member, American Bar Association Section of Taxation (Employee Benefits Committee) Catherine (Cate) Livingston Fernandez, Washington, D.C. Branch Chief, Office of the Associate Chief Counsel/Division Counsel (TEGE), Internal Revenue Service B.A., Swarthmore College; J.D. University of Pittsburgh Brian T. Foley, White Plains, New York Managing Director, Brian Foley & Company, Inc. J.D., Columbia Law School; LL.M. (Taxation), New York Law School Steven E. Hall, New York, New York Managing Director, Steven Hall & Partners, LLC B.A., SUNY at Stoneybrook; M.B.A., Hofstra University Member, National Association of Corporate Directors Publications: Restoring Pay for Performance, DIRECTORSHIP MAGAZINE, Summer 2004; Redesigning Options, ACA News, May 2000 Previous Affiliations: President, Pearl Meyer & Partners; Handy Associates; Ernst & Young xiv

9 Daniel L. Hogans, Washington, D.C. Attorney-Adviser, Office of Tax Policy, U.S. Department of the Treasury B.S., George Mason University; M.S. (Accounting), University of Virginia; J.D., College of William and Mary (Marshall-Wythe School of Law) Julie H. Jones, Boston, Massachusetts Ropes & Gray LLP B.A., Wellesley College, 1991; J.D., Cornell Law School, 1994 Memberships & Affiliations: Massachusetts Bar Association; Boston Bar Association; American Bar Association (Committee on Federal Regulation of Securities, Business Law Section) Anne M. Krauskopf, Washington, D.C. Senior Special Counsel to the Chief Counsel, Division of Corporation Finance, U.S. Securities and Exchange Commission B.A., Brown University; J.D., Catholic University of America Awards: Chairman's Award for Excellence, Regulatory Simplification Award, and Capital Markets Award Ronald O. Mueller, Washington, D.C. Gibson, Dunn & Crutcher LLP B.A., Vanderbilt University; J.D., Columbia University Government and Public Service: Securities and Exchange Commission (Counsel to Commissioner Edward H. Fleischman, ) Memberships: American Bar Association (Section of Business Law: Subcommittee on Employee Benefits and Executive Compensation, Committee on Federal Regulation of Securities); District of Columbia Bar Association; American Society of Corporate Secretaries Publications Include: The Risks of Expressing 'Comfort' with Analysts' Estimates, INSIGHTS (July 1998); The Perils of Presstek: The SEC Addresses Entanglement and Adoption of Analysts' Reports, INSIGHTS (Mar. 1998), MD&A Emerges from the Cocoon: The SEC's Case Against Caterpillar, Inc., INSIGHTS (May 1992); A PRACTICAL GUIDE TO SECTION 16 (Contributing Author) (Prentice Hall); A PRACTICAL GUIDE TO SEC PROXY AND COMPENSATION RULES (Contributing Author) (Prentice Hall); SECURITIES IN THE ELECTRONIC AGE (Contributing Author) (Glasser LegalWorks); FEDERAL SECURITIES EXCHANGE ACT OF 1934, INSIDER REPORTING AND SHORT-SWING TRADING (Contributing Author) (Matthew Bender) Jay L. Pomerantz, Mountain View, California Fenwick & West LLP B.A., University of California, Santa Cruz, 1981; J.D., Stanford Law School, J.D., 1991 William C. Schmidt, Washington, D.C. Senior Counsel, Office of Division Counsel/Associate Chief Counsel, Tax Exempt and Government Entities (Executive Compensation Branch), Internal Revenue Service J.D., University of Virginia Memberships: District of Columbia Bar; Illinois State Bar; Virginia State Bar Previous Affiliation: Partner, Hogan & Hartson LLP, xv

10 Steven A. Seelig, Arlington, Virginia Executive Compensation Counsel, Watson Wyatt Worldwide John L. Utz, Overland Park, Kansas Utz Miller & Kuhn LLC A.B., University of Missouri; M.S. (Mathematics), J.D., University of Illinois Adjunct Professor, University of Kansas School of Law (1996) Government and Public Service: Internal Revenue Service Mid-States Key District Employee Plans/Exempt Organizations Council ( ; Chair, 2000) Fellow, American College of Employee Benefits Counsel Memberships: American Bar Association (Section of Labor and Employment Law: Co- Chair, Subcommittee on Welfare Benefit Plans, ; Chair, Task Force on Multiple Employer Welfare Arrangements, Employee Benefits Committee, 1994; Chair, Subcommittee on Reporting and Disclosure, Employee Benefits Committee, ) (Torts and Insurance Practice Section: Vice-Chair, Employee Benefits Law Committee, ) (Section of Taxation, Employee Benefits Committee: Chair, Subcommittee on Pension Legislation, and ; Co-Chair, Subcommittee on Litigation, ; Chair, Task Force on Current IRS Revenue Rulings, ; Subcommittee on Distributions, ); Missouri Bar Association (Employee Benefits Committee; Chair, Agricultural Law Committee, ); Kansas City Metropolitan Bar Association (Chair, Employee Benefits Committee, 1992); Employee Benefits Institute of Kansas City, Inc. (Chair, 1987; Board of Directors, ) Publications include:: NONSTATUTORY STOCK OPTIONS (BNA TAX MANAGEMENT PORTFOLIO NO D); RESTRICTED PROPERTY C SECTION 83 (BNA TAX MANAGEMENT PORTFOLIO NO. 384C3D); EMPLOYEE BENEFITS LAW (Contributing Author for Main Volume; Senior Editor for Annual Supplements (ABA Section of Labor and Employment Law); THE TAX PAYER RELIEF ACT OF 1997 (Co- Reporter) (ABA and ALI-ABA); MISSOURI FARM LAW (Editor) (Missouri Bar, 2d Ed., 1993); Litigation, Chapter 17 of EXECUTIVE COMPENSATION (BNA, 2002 & Supp.);Option Exercise Following Termination of Employment: Employment Agreement which Conflicts with Option Agreement, THE NASPP ADVISOR (Nov.- Dec. 2005); Nonqualified Plan Disputes: The Importance of Process, Precedent and Intent, THE STOCK PLAN ADVISOR (Mar.-Apr. 2005); Covenants Not to Compete, J. DEFERRED COMP. (Summer 2002); Executive Compensation and Severance Pay Litigation, J. DEFERRED COMP. (Part I, Spring 2001; Part II, Summer 2001); Reasonable Compensation: When Is There an Issue, 11 BENEFITS L.J. 57 (SPRING 1998); Split-dollar Life Insurance: Is It Still Viable?, 4 ERISA & BENEFITS L.J. 227 (1996); State Taxation of Former Residents' Pensions, 3 PENSION PLAN ADMINISTRATOR 7 (November 1996); JOURNAL OF DEFERRED COMPENSATION (Editorial Advisory Board); JOURNAL OF PENSION PLANNING & COMPLIANCE (Editorial Advisory Board) xvi