Pearson European Employee Forum - Oct 09

Sharing in Pearson

Gabbi StoppShare Plans Manager

[email protected]

Agenda

• What are shares & how are they valued?• Shares: a very brief history• The first employee share plans• WorldWide Save For Shares

– Why do we offer WWSFS?– How WWSFS works, from launch to maturity

• ShareStore & selling shares• Challenges & solutions• Any questions?

What are shares & how are they valued?

• A ‘share’ represents a fragment of a company’s value• Each share has a nominal value when first issued• The total number of shares in issue, multiplied by their

nominal value, forms the company’s ‘share capital’– E.g. Pearson shares have a nominal value of 25p each

• Once a share has been issued, it can then be traded at it’s (higher) market value or ‘share price’

• The market value reflects people’s opinions of the company’s current and future trading prospects– E.g. Pearson shares are currently trading at around 775p

• The ‘market’ is formed of analysts, shareholders, stockbrokers…

Shares: a very brief history

• ‘Shares’ in English companies have been traded for more than 400 years

• The Royal Exchange was founded in 1565 by Sir Thomas Gresham, with Queen Elizabeth I’s patronage, as a meeting place for London’s merchants

• Stockbrokers were thrown out of the Royal Exchange in 1698 for ‘rowdiness…and rude manners’

• Shares were then traded in the alleyways and coffee houses of late 17th century London

• Image of coffee house

The London Stock Exchange

• In 1761 a club of 150 brokers was formed to trade shares, also known as ‘stocks’

• The London Stock Exchange was formally established in 1801, only members could trade on the exchange

• In 1972 Queen Elizabeth II opened the Exchange’s then new 26-storey office building

• In 1973 the first female members were admitted to the London Stock Exchange

• The ‘Big Bang’ in 1986 abolished minimum commission rates, and trading moved from face-to-face ‘open outcry’ to electronic and computerised dealing

The first employee share plans…• A few entrepreneurial, socially-minded mill owners at the

time of the Industrial Revolution offered the first employee share plans, in the form of profit-sharing

• Wide-ranging public share ownership, and the share plans that followed, didn’t really take off in the UK for another century though…

• Taxpayer-owned companies were privatised by the Conservative government from the late 1970s through to the mid 1990s e.g. British Gas, British Telecom, British Rail

• Govt. introduced the ‘Save As You Earn’ share plan legislation in 1980

• Pearson first offered SAYE to employees in 1981• WorldWide Save For Shares was

launched in 1998

Why do we offer WWSFS?

Employee share ownership reflects our core values:• Brave• Imaginative• Decent

‘…We want everyone in Pearson to have a chance to own a part of their company. One of the ways you can do that is by joining our Save for Shares Plan. It gives you a chance to set aside money and to buy shares at favourable rates at the end of your savings period if you choose, or withdraw at any time and get your money back…’

How does WWSFS work?

• Tax-approved UK, French & Irish share options• Unapproved international share options• Unapproved international stock appreciation rights • Set monthly savings amount, in local currency• 3, 4 (France only), 5 and 7 (UK only) year savings terms• No employee service period required in order to join – must

be employed during invitation period and on date of grant• Offered annually to 15,000 employees in 60+ countries• Network of 120+ local plan coordinators• Website & materials translated into 17 languages

www.shareinpearson.com

WWSFS lifecycle: launch

Key actions at plan launch time, usually April:• E-mails, posters and letters to eligible employees & local

plan coordinators• Website open for applications for 3 weeks• Employees choose how much to save & how long to save

for• Savings accounts opened for employees• Monthly pay deductions set up

WWSFS lifecycle: saving

• Savings deducted from pay each month

• Savings usually held locally, in local currency

• More complex for mobile employees transferring to/from businesses in different countries

• Savings complete once all monthly deductions have been made, and savings term is completed

WWSFS lifecycle: maturity

Key actions at plan maturity, usually August:• Information sent to participating employees at the end of

June, via coordinators• Choices:

– cashless or full exercise, – keep or sell shares, – savings repayment

ShareStore• Shares held safely and

securely in electronic format – no certificates

• View shares online via www.shareview.co.uk

• Dividends reinvested into additional shares

• Deal through your local plan coordinator – quarterly or on request

• Sales proceeds through your Payroll

WWSFS: challenges & solutions

• SAYE started out as a UK plan initially…it has evolved as our global employee population has expanded

• Interest rates – variable in different countries, all mostly low currently

• Currency exchange rates – again, variable but not within our control

• Languages – we translate our websiteinto 17 different languages!

• Time zones – the website is available 24/7

…any questions?

[email protected]

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