WATSON WYATT COLLATERAL 2006

Watson Wyatt Worldwide—As Global Director 2007

Global Work Attitudes Report—cover and spread

4 | 2007 Global WorkAttitudes Report

Employee Engagement — A Global Perspective

Financial Impact of EngagementWatson Wyatt’s WorkAttitudes studies confirm that employee engagement continues to be a key driver of organizational success. By linking employee attitudes to year-over-year financial and productivity data, the research shows that organizations that focus on increasing engagement can expect to reap the benefit of a more productive workforce and see higher financial returns (Figure 1).

Regional Differences: Engagement Driven by Variations in Line of SightWhile the impact of an engaged workforce is evident, levels of engagement differ around the world. All regions have levels of engagement above 60% favorable. European countries show the strongest level of engagement — with an average favorable response of 73%. In fact, employees in each of the 11 countries that comprise the WorkEurope report have more favorable responses to engagement items than employees in the Asia-Pacific, Canada or U.S. regions.

Commitment levels are fairly consistent around the world; therefore, variations in engagement levels are being driven by differences in line of sight (Figure 2).

Figure 1 | Engagement is strongly related to financial success

$1,751$875$350234High

ProductivityMarketPremium

5-YearTRS

EngagementLevel

$1,517$758$303170Low

In this and subsequent figures, high represents the top 25% and low represents the bottom 25% in terms of employee engagement.

Figure 2 | Overall Engagement Levels Vary — Largely Due to Differences In Line of Sight

USA

Commitment

Line of sight

Engagement

58%65%

56%57%

68%80%

64%75%

62%73%

60%66%

Europe Canada Asia-Pacific*Engagement is the average percentage favorable on responses to the items within the engagement score for that region.

2007-US-02298_GWA Survey Report v1.indd 4 12/10/07 5:33:50 PM

watsonwyatt.com | 5

The Value of International BenchmarksInternational benchmarks on employee attitudes show variations and consistencies across countries and around the world. They put company-specific survey data into the appropriate context for taking action.

Country-specific and international norms offer valuable insights for developing programs that drive employee engagement. Such benchmarks provide a useful framework for interpreting an organization’s employee opinion survey.

Around the World, Engagement Drivers Are Similar …Although the WorkAttitudes studies found differences in levels of engagement around the world, the top drivers of engagement in the Asia-Pacific, Canadian, European and U.S. regions are very similar. These common drivers of engagement are: Communication, Compensation and Benefits, Customer Focus and Strategic Direction and Leadership.This provides some guidance to organizations that manage a global workforce. (See sidebar on Watson Wyatt’s Global WorkAttitudes for the comprehensive list of areas of engagement studied.)

… but Employee Perceptions of Those Drivers VaryThere is, however, a lot of room for improvement on these drivers of engagement. While across all four regions Customer Focus is generally perceived favorably, Communication as well as Compensation and Benefits are not. Perceptions of Strategic Direction and Leadership are highest in Europe, followed by Canada and the United States, and lowest in the Asia-Pacific region. Figure 4 details where there are opportunities for companies to improve these engagement drivers.

Figure 3 | Globally, engagement drivers are similar

Asia-Pacific Canada Europe USA

#1 Driver of Engagement Customer Focus Strategic Direction Strategic Direction Customer Focus and Leadership and Leadership

#2 Driver of Engagement Compensation Compensation Communication Strategic Direction and Benefits and Benefits and Leadership

#3 Driver of Engagement Communication Communication Customer Focus Compensation and Benefits

Figure 4 | There is Room For Improvement

Asia-Pacific Canada Europe USA

#1 Driver of Engagement Customer Focus Strategic Direction Strategic Direction Customer Focus and Leadership and Leadership

#2 Driver of Engagement Compensation Compensation Communication Strategic Direction and Benefits and Benefits and Leadership

#3 Driver of Engagement Communication Communication Customer Focus Compensation and Benefits

55% and below favorable 55% to 65% favorable 65% and higher favorable


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Driving Employee Engagement in a Global Workforce

2007

Global WorkAttitudes Report



Global Report Study—cover and spread

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ConclusionIn David Mamet’s 1992 film Glengarry Glen Ross, one of the characters describes the current sales contest at a small, bleak, underperforming sales office. “First prize is a Cadillac Eldorado, second prize is a set of steak knives, third prize is … you’re fired.” Although life at real companies tends

n Encourage salespeople to think strategically about how they spend their time. Sales professionals must close the deal, in either the short or the long term, rather than invest time in pure relationship building.

n Build territories based on deliberate allocation of accounts and/or recognition of territory potential. Geographic focus alone is not enough.

Figure 1 | Asian life distribution by banks, 2005 (estimated)

n Offer competitive levels of variable pay. Sales professionals need upside opportunity.

n Get the sales force excited about the quality and innovation of its products and services. If salespeople are passionate about the product, they will more effectively convey this to their customers.

n Help individual salespeople understand the contribution they can make to company success. Link their activities to sales success and subsequent rewards.

n Manage sales professionals in ways that are appropriate to their roles. Hunters and farmers, for example, require different approaches.

Managing a sales force is about creating a win-win-win proposition—for the customer,

to be less dramatic, managing sales professionals can take on an extreme air of “make-it or break-it” just like that contest. Organizations that do it right drive off in the proverbial new car. Other companies get smaller, less inspiring prizes. Companies that do poorly limp along until they go out of business or are acquired by others.

The most well-respected and successful organizations find ways to maximize the performance of their sales teams. We find that these companies:

n Convince people to spend less time on administrative activities. Two or three more hours each week in front of high-potential customers can make a real difference in revenues and profitability.

watsonwyatt.com | ��

the company and the sales professional. Companies that enable their salespeople to succeed will be able to take the proverbial drive in the Eldorado… straight to the bank. Those that do not will be left with the steak knives.

The most well-respected and successful organizations find ways to maximize the performance of their sales teams. We find that these companies:

n Convince people to spend less time on administrative activities. Two or three more hours each week in front of high-potential customers can make a real difference in revenues and profitability.

n Encourage salespeople to think strategically about how they spend their time. Sales professionals must close the deal, in either the short or the long term, rather than invest time in pure relationship building.

n Build territories based on deliberate allocation of accounts and/or recognition of territory potential. Geographic focus alone is not enough.

n Offer competitive levels of variable pay. Sales professionals need upside opportunity.

n Get the sales force excited about the quality and innovation of its products and services. If salespeople are passionate about the product, they will more effectively convey this to their customers.

n Help individual salespeople understand the contribution they can make to company success. Link their activities to sales success and subsequent rewards.

n Manage sales professionals in ways that are appropriate to their roles. Hunters and farmers, for example, require different approaches. Hunters and farmers, for example, require different.

Managing a sales force is about creating a win-win-win proposition—for the customer,

the company and the sales professional.

Companies that enable their salespeople

to succeed will be able to take the proverbial

drive in the Eldorado… straight to the bank.

Those that do not will be left with the steak

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Driving profitablesales growth

2006–2007 Report on sales effectiveness


Global White Paper—cover and spread

2 | Best Practice Investment Governance

Previously published research has demonstrated that good governance is required to be effective in the com-petitive and complex environment of institutional fund management. Some prior research references include:

■ Fortune and Folly3 written in 1992 by two anthropologists (O’Barr and Conley) who suggested that funds were not managed for fi nancial effi ciency, but more for convenience or relationships with outside managers and the avoidance of risks from these relationships

■ Pension Revolution: A Solution to the Pensions Crisis,4 in whichKeith Ambachtsheer demonstrated a “governance shortfall” (the return foregone due to internal governance and management problems) between good and bad governance of 100 to 200 basis points per year in his database of funds

Governance ChallengesWhile governance is typically thought of as a constraint, the Clark/Urwin research suggests it can be developed to meet higher performance ambitions.

The best-practice research carried out by Clark and Urwin (see note2) cherry-picked 10 funds from around the world that had built excellent reputations for governance and had delivered strong performance. The research drew from

highly detailed qualitative discussions on how these funds operated, what they considered as “success” and what had made them successful.

The funds required that certain confi dentialities be observed to achieve the candor the research required. They were comprised of six pension funds, two endowments and two sovereign funds located in North America (fi ve funds), Europe (three funds) and Asia-Pacifi c (two funds). They ranged in size from around $5 billion to $100 billion.

Their success was built on their strengths in dealing with fi ve big challenges, as described below.

(1) Risk managementDecisions on how much risk to take in a fund and the management of that risk is critical to long-term value creation in a pension fund.

Taking risk effectively requires good governance to set strategy and monitor and control progress. Given that the investment world is dynamic and competitive, those governance resources need to be able to adapt to change in order to secure a competitive advantage.

(2) Focus on appropriate time horizonThe differences between short-term and long-term investing are signifi cant.5 Most institutional funds have a long-term investment mission. The governance challenge is generally to manage to the long-term plan but be resilient to the short-term pressures that build up from time to time.

Best-practice funds had built up a balance around these issues.

The governance challenge is

generally to manage to the

long-term plan but be resilient

to the short-term pressures that

build up from time to time.

watsonwyatt.com | 3

(3) Innovation capabilityThe concept of “early mover advantage” is well-known in the corporate world. In the context of investment markets, it relates to successfully identifying and accessing markets and asset classes early in the cycle, ahead of the crowd.

Funds investing in newer, less popular asset classes, newer strategies or newer managers face many challenges. This places signifi cant demands on governance, notably in part from the challenge of peer pressure.

(4) Alignment with a clear missionInstitutional funds have diffi culty with their mission. A particular complication for pension funds is their shared purpose. The role of a pension fund is to produce value propositions for both members and sponsors, but sometimes it is diffi cult to satisfy both needs. A clear statement of goals is an important step to building alignment between the parties, so that the appropriate investment risk profi le and strategy can be identifi ed.

Best-practice funds tend to have not only a clear primary objective, but also a number of defi ned secondary objectives that enable all parties to match operational goals with the mission.

(5) Managing agentsIn general, pension funds are not resourced to manage all of their activities in-house, and consequently employ agents in both advice and delegated roles. This exposes them to the risk that the goals of the agents do not align with those of the pension fund.6

Governance is critical to monitor and control these misalignments, particularly with a large line-up of managers. Best-practice funds are experts in managing these agents and building good alignment.

Core Attributes of Best PracticeThe Clark/Urwin study identifi ed 12 governance-related factors common among leading-edge funds. Six of these could be regarded as being within the reach of most funds, and are shown in Figure 1.

A clear missionAs noted above, well-governed funds have a clearly defi ned set of goals, to which stakeholders are committed. The board and their staff understand what they are trying to achieve and how their strategy fi ts with these goals.

Effective focusing of timeIn most circumstances, funds work within a constrained governance budget. Given these limitations, well-governed funds focus their resources to maximize the cost/benefi t trade-off. Generally, less time could be spent on the lower impact area of monitoring managers, leaving more time to devote to asset allocation decisions where the impact is greater.

Core Best-Practice Factors

Coherence Mission Clarity Clarity of the mission and the commitment of stakeholders to the mission statement

Effective Focusing of Time

Resourcing each element in the investment process with an appropriate budget considering impact and required capabilities

People Leadership Leadership, being evident at the board/Investment Committee (IC) level, with the key role being the IC chairperson

Process Strong Beliefs Strong investment beliefs commanding fund-wide support that align with the goals and inform all investment decision making

Risk Budget Framework

Frame the investment process by reference to a risk budget aligned to goals and incorporate an accurate view of alpha and beta

Fit-for-Purpose Manager Line-Up

The effective use of external managers, governed by clear mandates, aligned to goals, selected on fi t-for-purpose criteria

Figure 1 | Global Best Practice – Core Attributes

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Going from good to great

No matter how much you have

achieved, you will always be merely

good relative to what you can become.

Greatness is an inherent dynamic

process, not an end point. Jim Collins

In Short…The links between good governance and good performance seem reasonably obvious (see Building Blocks1). What is less obvious is what describes “good governance” or even “great governance.” In this paper, we consider the key attributes of global best practice in governance, summarizing the fi ndings from a recent academic paper2 written by Gordon L. Clark of Oxford University and Roger Urwin of Watson Wyatt.

Governance – A Quick ReminderIn institutional investment, “governance” describes the system of decision making and oversight used to invest the assets of a fund. The responsibility for this role lies with trustees or other types of fi duciaries who are faced with high-level issues (where they will typically take responsibility) and more detailed implementation actions (where they are more likely to delegate to others, and the fi duciaries’ role becomes monitoring those actions).

Investment governance, therefore, employs skills, resources and processes to create value for institutional funds.


Global Survey Report—cover and spread

� | Multinational Pension Governance Survey Report

Designing Programs to Increase Sales Growth and Overall Firm Performance

The majority of multinationals see pension programs as a primary tool for recruiting and retaining key talent. Yet along with the wish to vary pension benefits across jurisdictions is a

desire for an efficient common gover-nance framework. More than three-quarters of our survey respondents consider this crucial — despite the difficulties associated with different managements, cultures and regula-tions. This movement toward greater global governance has been driven in large part by a greater focus on the risks within defined benefit plans. Nevertheless, while the trend toward global pension governance is more

marked among companies with DB plans, it is by no means limited to them; the perception that governance is critically important remains high even at organizations with only DC plans.

The recent heightened focus on risk and governance has led many multinationals to review and change their global governance procedures:

n 53 percent have reviewed their global gover-nance procedures in the last three years.

n The vast majority of these (83 percent) sub-sequently changed their procedures.

n 65 percent of respondents say the changes have largely met expectations, yet those with only DB plans were more satisfied (80 percent) than those with a mixture of DB and DC plans (68 percent) or those with only DC plans (38 percent).

The greater satisfaction among DB plan spon-sors is partially explained by the fact that, in these data, global governance reviews of DC plans have been a more recent phenomenon, so there has been less time for any advan-tages to become apparent. Second, DC plans are typically smaller and less mature than DB plans; therefore, the gains from governance may be less pronounced. Third, since the investment risk remains with the plan sponsor in DB plans, there is a greater potential benefit from governance in this case.

What is driving these changes to pension gov-ernance? The main driver is concern about risk — more than two-thirds of respondents say this influenced their decision to change (Figure 1). The next most important factors are a focus on best practices and regulatory pressures. Cost pressures are not typically a leading factor, though they have led to changes in governance by about one-quarter of the corporations. Even though the forces were found to be similar across the globe, risk is a more prominent driver for DB firms, and an evaluation of best practices is more important among DC firms.

Global Pension Governance

watsonwyatt.com | �

Figure 1 | Influences Behind Recent Global Governance Reviews

Concern over risks from governance issues

An evaluation of best practice

Regulatory pressures (e.g., Sarbanes-Oxley, Myners, etc.)

Changes in broader corporate philosophy/policy

Cost/competitive pressures

Changes in company structure

Changes in accounting standards

Other

23.6%

21.8%

10.9%

0 20 40 60 80

27.3%

30.9%

38.2%

43.6%

69.1%

Note – More than one response allowed. Percentages sum to more than 100%.

What influenced your decision to change your global pension governance procedures?

What changes are resulting from this move toward global pension governance?

n Global committees for managing pension plans are now either established (39 percent) or planned (15 percent).

n The prevalence of global committees has increased significantly from 2002, when less than 15 percent of the companies sur-veyed had them.

n 78 percent of respondents say they have a good understanding of their pension costs around the world, and 67 percent say they have a good understanding of the risks associated with their pen-sion plan.

n Multinationals that recently reviewed their global pension gov-ernance are more likely to report higher understanding, and this tendency is greater where employers have had more time to make the changes in their pension plans.

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Multinational Pension Governance

2007Survey Report


Global Journal—cover and spread

What is private equity?

Investing in private equity, once a minority pursuit for institutional investors, is becoming mainstream. The newspapers are full of bid rumours, countless conferences debate its influence, and investors are allocating more and more capital. This article is written as a gentle introduction to a world where the inhabitants often seem to speak a different language.

Some definitionsPrivate equity embraces a broad range of disciplines and strategies. Media coverage tends to fixate on the activities of the ‘mega buyout’ firms, generally because they are buying/selling companies familiar to journalists. But there are a multitude of private equity activities out there – Figure 1 highlights the main areas.

We should emphasise, though, that private equity is not an area where tight definitions are helpful. Different firms will have hugely differentiated strategies that may not fit neatly into the boxes below. Some private equity firms will focus on just one sector within the buyout arena, others will focus on firms in financial distress. In venture capital, many firms will have an IT focus, others a healthcare bias. In the interests of keeping things simple, we will attempt loose definitions of the two main areas

n Venture capital – providing finance to companies that are forming or were recently formed, often with a new technology to exploit, but with little or no revenue/profits.

n Buyout – the purchase of an established business with mature cashflows.

� | Private equity explained

Figure 1 | Main areas of private equity activities

Seed Early stage

Company size increases... risk reduces

Late stage Growth buyout Mid-market Large buyout Mega buyout

Venture capital Buyout

Figure 2 gives an indication of the amount of capital that has been allocated to buyout and venture over the past decade. What is clear is that the total capital employed has experienced fast growth over the past three years and that buyout activity has been driving the majority of the growth.

Why invest in private equity?Private equity is not straightforward and some of the challenges are highlighted below. So why have investors allocated more and more money to this activity? It is conventional to offer two primary motives


Return potentialThere are common arguments advanced as to why private-equity owned businesses might outperform their public counterparts

n leverage – private equity firms usually have more debt and as such, are ‘riskier’ than public companies

n long-term strategies – it is said that private companies do not ‘suffer’ quarterly shareholder scrutiny and are therefore free to pursue long-term strategic investments even if it temporarily reduces operating income

n alignment of interests – most private-equity owned businesses are run by management who are highly incentivised to maximise shareholder returns – the level of incentives is not always available to management of public companies

n activism – private equity owners are able to influence company strategy and management teams more easily than the generally disparate groups of public equity owners.

There are valid points to each of these arguments and we would contend that private equity companies are likely to deliver better gross shareholder returns than public companies – leverage alone could lead to this conclusion. However, the evidence for whether investors in aggregate can benefit from these higher returns is very mixed. It seems safest to say that, after deducting private equity managers’ fees, the return to the average investor in private equity is likely to be similar to the return they would otherwise receive in public markets. So why get involved? The answer lies in Figure 3 overleaf.

Figure 2 | Capital allocated to buyout and venture over past decade

Source: Goldman Sachs, Thomson Financial, Somerset Capital Limited, Prequin

Venture Buyouts

$17$28

$43

$80

$158

$64

$12$17

$31 $33$43$42

$63

$91

$78

$106

$81

$62 $58$65

$145

$204

0

50

100

150

200

250

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

$ bil

lion

n diversification – the stampede into ‘alternatives’, as institutional investors have sought to diversify their public (quoted) equity risk, has included increased allocations to private equity

n return potential – private equity, it is hoped, will outperform public markets.

Diversification?The diversification argument is, in our view, quite weak. Private equity is certainly equity and therefore a high correlation to public markets is a reasonable expectation. The accounting protocols in private equity may give some ‘smoothing’ (no-one is valuing your companies every day) but the true economic values of privately held firms are driven largely by the same factors that influence quoted equity. So in our opinion, the main reason for investing in this area is return.


Global Report—cover and spread

10 | 2007/2008 Report on Sales Effectiveness and Compensation

Account Managers

An extra hour spent on the right activities drives increased salesWhat is an hour of selling worth? Unlike NBDs for whom the value of an hour is determined both by what they do and with whom they spend it, AMs do not control with whom they spend time selling. As such the value of their time is driven by their activities.

In Figure 9, we see the value of an hour spent by an AM on certain key activities. Figure 10 shows that:

n Top performers spend 35 percent more time identifying needs and developing solutions than other AMs. The AM typically has the most direct customer contact for all actively managed accounts. As a result, top perform-ers spend time identifying and developing

solutions to meet the needs of customers to generate additional sales opportunities.

n Top performers spend 12 percent more time developing proposals. Once needs have been identified and a solution formulated, the AM develops a proposal identifying specific products, services and associated costs.

n Top performers spend 9 percent more timeon routine business planning. Top-performing AMs partner with the customer to forecast business requirements and plan the best ap-proach to tackle the required investment(s). This joint planning increases the AM’s ability to provide services to the customer, which enables the best resources to be assigned to an account to deepen the relationship and grow the account over time.

Maximizing the value of selling time increases quota attainmentThe difference in selling time between top- performing and other AMs is relatively small — less than an hour a week. However, successful AMs spend more of their selling time identifying needs and developing solutions, converting those solutions into proposals and then closing the sale. They spend notably less time main-taining accounts, demonstrating products and entertaining customers (Figure 10).

Successful account managers spend more selling time identifying needs and developing solutions, converting those solutions into proposals and then closing the sale.

2007-US-0217 Sales Effectiveness v5.indd 10 11/7/07 12:53:13 PM

watsonwyatt.com | 11

Figure 9 | High-Value Activities for AMs Drive Increased Sales

Value of an hour by quota size

$3,501$1,751$875$350234Sales administration

$10M$5M$2.5M$1MHours/yearActivities

$3,034$1,517$758$303170Needs identification & solution development

$2,776$1,388$694$27888Developing proposals

$5,139$2,570$1,285$514107Routine business planning

$2,474$1,237$619$24789Travel

Sales and Nonsales Activities

Figure 10 | Top-Performing AMs Maximize Selling Time Through Specific High-Value Activities

Other AMs(hours/year)

229 170 35%Needs identification and solution development

Sales and nonsales activities

201 151 34%Prospecting — creating and pursuing leads

87 75 16%Lead qualification

93 83 12%Proposal development

156 176 -11%Product demonstration

232 215 8%Closing — winning, negotiating and contracting

271 333 -19%Account maintenance — ongoing postsale service and activities

68 89 -24%Customer entertainment

1,338 1,292 4%Total selling time

114 104 9%Routine business planning

153 162 -5%Professional development

190 206 -8%Sales administration

86 91 -6%Travel

119 145 -18%Nonsales administration

662Total nonselling time 708 -6%

Top performers(hours/year)

Difference


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Maximizing Sales Growth and Performance

2007/2008 Report on Sales Effectiveness and Compensation



Global Annual Survey Report—cover and spread

� | 12th Annual National Business Group on Health/Watson Wyatt Survey Report 2007

In general, employers are establishing and maintaining a consistent cost-sharing relation-ship with employees. Although the number of employers that plan to absorb health plan cost increases decreased slightly, to 35 percent in 2007, the number of employers planning to significantly increase premium contributions, co-pays and deductibles held steady (Figure 2).

Use of CDHPs GrowingThe number of companies offering a CDHP to their employees grew to 38 percent, up from 33 percent last year. Although employer adoption of CDHPs slowed in 2007 (Figure 3), the use of HSAs remains strong. Forty percent of employers either offer or plan to offer an HSA, and 26 percent offer or plan to offer health reimbursement accounts (HRAs) (Figure 4).

Figure 2 | Employers maintain existing cost-sharing relationship with employees

Absorb cost increases

Increase co-pays and coinsurance

Increase premium contributions

Increase deductibles

n 2005 n 2006 n 2007

42%35%

41%

24%25%

32%

21%20%

34%

28%

22%22%

Year of adoption

Perc

enta

ge o

f em

ploy

ers

offe

ring

CDHP

s

2%5%

11%

21%

33%

38%

0%

10%

20%

30%

40%

50%

200720062005200420032002

Figure 3 | More employers adopt CDHPs


Participation in health management programs

Smoker status

Management of risk levels

Participation in weight management programs

n 2006 n 2007

Figure 4 | CDHPs with account-based options growing in use

CDHP with HSA

CDHP with HRA

Contribute funds to an HSA

HDHP with no account

Total replacement CDHP

n In place now n Planned for 2008

6%20%

11%15%

5% 4%

2%9%

25% 15% (40%)

(26%)

(26%)

(11%)

(9%)

PREMIUM DIFFERENTIALS. The percentage of employers offering premium differentials based on employee participation in health management programs has risen to 28 percent, up significantly from 2006. In addition, some employers are now offering these differentials based on participation in weight management programs.

16%

28%

n/a

24%

8%12%

n/a9%

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2007 Dashboard for Success: How Best Performers Do It

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12th Annual National Business Group on Health/ Watson Wyatt Survey Report


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Loss reserve, funding and aLLocation n risk management programs n captives mergers and acquisitions n Workers compensation n LiabiLity n property n automotive n Warranty

there’s a better way to manage property and casualty risk.

Watson Wyatt is your trusted advisor on people and financial issues, including property and casualty risk. Based on our independent technical and strategic expertise, we provide practical and scalable solutions that meet your needs — from reviewing your workers compensation program to forming or managing a captive.

our u.s. team has more than 20 years of experience providing insurance actuarial and risk management services and is part of a global practice of more than 350 specialists.

watsonwyatt.com

2007_US_0111 WW_IFS Ad_23JUN07 R1 1 7/26/07 11:39:26 AM


Ad campaign—full page, vertical and horizontal half-page ads

For more information, call John Sample at 000/000-0000 or Jane Q. Sample at 000/000-0000.

watsonwyatt.com

Trusted business partner to the world’s leading organizationsConsulting in: ■ Employee Benefi ts ■ Human Capital ■ Insurance & Financial Services ■ Technology & Administration Solutions


watsonwyatt.com

Trusted business partner to the world’s leading organizations

Consulting in: ■ Employee Benefi ts ■ Human Capital ■ Insurance & Financial Services ■ Technology & Administration Solutions

Trusted business partner to the world’s leading organizations

Consulting in: ■ Employee Benefi ts ■ Human Capital ■ Insurance & Financial Services ■ Technology & Administration Solutions


watsonwyatt.com


Ad campaign

Visit us at booth #204 at the 2007 SOA Annual Meeting

View a demonstration of our VIPitech software — a pioneering system designed to push the boundaries of fi nancial modeling

watsonwyatt.com

Watson Wyatt is a market leader in using predictive modeling in the insurance industry. Our Pretium software coupled with more than 10 years of global consulting experience allows us to deliver new ideas and methods that can improve your profi tability and customer retention.

Our latest release of Pretium incorporates industry-leading predictive modeling techniques in a more intuitive, fl exible and effi cient environment. From data preparation and model fi tting to geographic spatial analysis and price optimization techniques, Pretium enables you to perform extensive analyses quickly and easily.

For more information on Pretium or our consulting services, call Claudine Modlin at 805/496-4431 or Gaetan Veilleux at 206/812-7232.

Financial Management and Reporting ■ Risk Management ■ Mergers and Acquisitions ■ ReservingPredictive Modeling ■ Pricing ■ Underwriting and Claim Review ■ Software

We see through complexity

watsonwyatt.com


For more information, please contact our San Francisco offi ce at 415/733-4100 or our Santa Clara offi ce at 408/919-1120.

watsonwyatt.com


For more information, please contact our San Francisco offi ce at 415/733-4100 or our Santa Clara offi ce at 408/919-1120.

watsonwyatt.com

For more information on VIPitech, call Suzanne Voorhees at 610/232-0406.

Financial Management and Reporting ■ Risk and Value Services ■ Strategy and Product Development Mergers and Acquisitions Support ■ Software

Revolutionizing fi nancial modeling

Watson Wyatt’s VIPitech is a revolutionary fi nancial modeling tool that seamlessly handles all of your fi nancial and actuarial analyses. With a proven track record around the world, our software is ready to challenge the U.S. insurance market, bringing the fl exibility, speed and transparency you’ve been looking for. From simple statutory valuations and product pricing to complex fi nancial reporting and risk management applications, VIPitech’s robust design delivers.

VIPitech is supported by the market knowledge and technical and actuarial expertise of our U.S. consultants who are part of a global team of more than 350 specialists.


Book cover design with accompanying promotional pieces

Above, the shipping label for the book, which was sent out in a silver poly-bag.

At left, a comp of the invitation to the book signing event.

About the Authors

Ira T. Kay, Ph.D., global practice director of executive compensation consulting at Watson Wyatt Worldwide, headquartered in Washington, D.C., is a nationally recognized expert on executive compensa-tion. He has helped U.S. public, private, and interna-tional companies develop annual and long-term incen-tive plans to increase shareholder value. Dr. Kay has written and spoken extensively on executive compen-sation issues and conducted research on executive pay, stock ownership, and stock options. He is coauthor of the book The Human Capital Edge and is the author of CEO Pay and Shareholder Value: Helping the U.S. Win the Global Economic War and Value at the Top: Solutions to the Executive Compensation Crisis. Dr. Kay has published articles in the Harvard Business Review, McKinsey Quarterly, Journal of Deferred Compensation and Across the Board. He has also presented analysis of executive compensation issues before the Federal Reserve Board, the Securities and Exchange Commis-sion, the Financial Accounting Standards Board, and a U.S. Senate subcommittee. He is frequently quoted in the major business press and speaks globally on executive compensation issues.

Steven Van Putten is the east division practice leader of Watson Wyatt’s executive compensation consulting practice. He focuses primarily on advising compensation committees and senior management on executive and director compensation matters. Mr. Van Putten has written and spoken on executive and incentive compensation, and specializes in the design and development of annual and long-term incentive programs that drive business strategy and support organizational objectives. He is also an expert on FAS 123(R) and its implications for stock-based incentives.

Printed in the United States of America

Myths and Realities of Executive Pay

The executive pay model used widely in the United States is essential to both the continued success of companies and to the U.S. economy itself. The successful application of this model, which is built on the foundation of pay for performance, has helped create an economic juggernaut, resulting in trillions of dollars of wealth for shareholders and substantial income and net worth for millions of corporate employees and their families. High executive pay simply re� ects the strong demand for the top talent and can be evaluated only with consideration of the performance that leads to high pay. Yet, myths of a failed model still abound, perpetuated by occasional excesses, recent corporate scandals and controversy over the use of stock options.

This book documents the realities of executive com-pensation by investigating the extent to which the pay-for-performance model governs executive pay lev-els. It also assesses the relative success of this model in creating value for shareholders and robust job growth for U.S. employees and provides detailed, real-world guidance for designing and executing e� ective execu-tive compensation plans. Based on extensive empirical research and decades of direct experience in the � eld, Myths and Realities of Executive Pay settles the debate about executive compensation and the role it plays in the broader U.S. economy.

M Y T H S

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Praise for Myths and Realities of Executive Pay“Kay and Van Putten have aptly titled their new book. Unfortunately, the public in general has little understanding about executive compensation and in many cases the information in the public press is confusing and inaccurate. Myths and Realities of Executive Pay is a clear road map to the new realities. It is must reading for CEOs, HR executives and board members of public companies.”

— Former Senator Warren Rudman, chairman of the compensation committee at Boston Scienti� c Corp., former chairman of the compensation committee at Raytheon Company, and former member of the compensation committee at The Chubb Corp.

“In an environment in which U.S. CEOs and boards are heavily criticized for governance and executive pay practices, Kay and Van Putten present the other side of the story. Many of those practices in the United States encourage and lead to shareholder value creation and productivity increases rather than executive enrichment at the expense of shareholders and others.”

— Steven Kaplan, Neubauer family professor of entrepreneurship and � nance, University of Chicago

“A very timely review of the key issues confronting corporations in devising and implementing executive compensation programs. The very experienced and highly regarded authors o� er very well thought out, and some unique, solutions. This is must reading for compensation committee members and HR executives.”

— Martin Lipton, founding partner of Wachtell, Lipton, Rosen & Katz

“Written by one of the country’s leading compensation consultants, this book is a signi� cant addition to the debate on executive pay. Ira Kay’s defense of current pay practices should be read by anyone seeking to assess whether these practices are well designed to serve the interests of investors.”

— Lucian Bebchuk, Friedman Professor of Law, Economics, and Finance at Harvard Law School, and coauthor of Pay without Performance: The Unful� lled Promise of Executive Compensation Cambridge

About the Authors

Ira T. Kay, Ph.D., global practice director of executive compensation consulting at Watson Wyatt Worldwide, headquartered in Washington, D.C., is a nationally recognized expert on executive compensa-tion. He has helped U.S. public, private, and interna-tional companies develop annual and long-term incen-tive plans to increase shareholder value. Dr. Kay has written and spoken extensively on executive compen-sation issues and conducted research on executive pay, stock ownership, and stock options. He is coauthor of the book The Human Capital Edge and is the author of CEO Pay and Shareholder Value: Helping the U.S. Win the Global Economic War and Value at the Top: Solutions to the Executive Compensation Crisis. Dr. Kay has published articles in the Harvard Business Review, McKinsey Quarterly, Journal of Deferred Compensation and Across the Board. He has also presented analysis of executive compensation issues before the Federal Reserve Board, the Securities and Exchange Commis-sion, the Financial Accounting Standards Board, and a U.S. Senate subcommittee. He is frequently quoted in the major business press and speaks globally on executive compensation issues.

Steven Van Putten is the east division practice leader of Watson Wyatt’s executive compensation consulting practice. He focuses primarily on advising compensation committees and senior management on executive and director compensation matters. Mr. Van Putten has written and spoken on executive and incentive compensation, and specializes in the design and development of annual and long-term incentive programs that drive business strategy and support organizational objectives. He is also an expert on FAS 123(R) and its implications for stock-based incentives.

Printed in the United States of America

Myths and Realities of Executive Pay

The executive pay model used widely in the United States is essential to both the continued success of companies and to the U.S. economy itself. The successful application of this model, which is built on the foundation of pay for performance, has helped create an economic juggernaut, resulting in trillions of dollars of wealth for shareholders and substantial income and net worth for millions of corporate employees and their families. High executive pay simply re� ects the strong demand for the top talent and can be evaluated only with consideration of the performance that leads to high pay. Yet, myths of a failed model still abound, perpetuated by occasional excesses, recent corporate scandals and controversy over the use of stock options.

This book documents the realities of executive com-pensation by investigating the extent to which the pay-for-performance model governs executive pay lev-els. It also assesses the relative success of this model in creating value for shareholders and robust job growth for U.S. employees and provides detailed, real-world guidance for designing and executing e� ective execu-tive compensation plans. Based on extensive empirical research and decades of direct experience in the � eld, Myths and Realities of Executive Pay settles the debate about executive compensation and the role it plays in the broader U.S. economy.

M Y T H S

R E A L I T I E S


MY

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S R

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KA

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Praise for Myths and Realities of Executive Pay“Kay and Van Putten have aptly titled their new book. Unfortunately, the public in general has little understanding about executive compensation and in many cases the information in the public press is confusing and inaccurate. Myths and Realities of Executive Pay is a clear road map to the new realities. It is must reading for CEOs, HR executives and board members of public companies.”

— Former Senator Warren Rudman, chairman of the compensation committee at Boston Scienti� c Corp., former chairman of the compensation committee at Raytheon Company, and former member of the compensation committee at The Chubb Corp.

“In an environment in which U.S. CEOs and boards are heavily criticized for governance and executive pay practices, Kay and Van Putten present the other side of the story. Many of those practices in the United States encourage and lead to shareholder value creation and productivity increases rather than executive enrichment at the expense of shareholders and others.”

— Steven Kaplan, Neubauer family professor of entrepreneurship and � nance, University of Chicago

“A very timely review of the key issues confronting corporations in devising and implementing executive compensation programs. The very experienced and highly regarded authors o� er very well thought out, and some unique, solutions. This is must reading for compensation committee members and HR executives.”

— Martin Lipton, founding partner of Wachtell, Lipton, Rosen & Katz

“Written by one of the country’s leading compensation consultants, this book is a signi� cant addition to the debate on executive pay. Ira Kay’s defense of current pay practices should be read by anyone seeking to assess whether these practices are well designed to serve the interests of investors.”

— Lucian Bebchuk, Friedman Professor of Law, Economics, and Finance at Harvard Law School, and coauthor of Pay without Performance: The Unful� lled Promise of Executive Compensation Cambridge

Lorem ipsum dolor sit amet, Consectetuer adipiscing elit. Pellentesque libero. Cras sed enim. Quisque sed mauris ac eros interdum vehicula.

Month, 00, 200X00:00am – 00:00pmNulla vehicula. Morbi egestas, nulla vitae pretium ullamcorper, nisi sapien imperdiet felis, semper hendrerit ipsum orci at lacus. Nullam risus dui, blandit nec, semper nec, elementum non, dolor.

Etiam tristique quam non turpis. Maecenas dignissim.

10% 20% 30% 10% 20% 30%

Corporate logo colors(PMS 340 to be used on logo only)

ApprovedWatson Wyatt

color palettein Pantone ®

SystemColors

Accent color should be used only at 100% PMS 187. Do not screen!

Myths and Realitiesof Executive Pay

A complete guide to understanding

the governance of executive

compensation and pay practices.

Above, full cover spread to include flaps, spine, with front and back covers


Trade show booth exhibit design

10% 20% 30% 10% 20% 30%

Corporate logo colors(PMS 340 to be used on logo only)

ApprovedWatson Wyatt

color palettein Pantone ®

SystemColors

Accent color should be used only at 100% PMS 187. Do not screen!

36”

Footprint of existing trade show poster.Prior to designing this display, Wyatson Wyatt Worldwide

only used a color poster which was mounted onto an easel.I wanted to expand the brand identity into a display

that was more visible and purposeful than a color poster.

Option 1 Option 2 Option 3

92.5”

72”

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relationships | define | us

Loss and expense accrualsStrategic risk financingProgram reviewVendor performanceMerger and acquisition supportCaptivesLitigation supportWarranty

Actuarial and Risk Management Services

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Documents

WATSON WYATT COLLATERAL 2006