Radford Surveys + Consulting
Q4 2005 Quarterly Summary of Industry Trends
Technology Edition
Introduction - Q4 2005
Welcome to the technology industry edition of Radford Surveys Quarterly Summary of Industry Trends
(QSIT) Report for the fourth quarter of 2005. This report contains data from 575 companies that
participate in the Benchmark and/or Executive Surveys. Ongoing access to complete quarterly results and
survey trends is limited to companies submitting input.
This quarter’s publication contains data collected between October 3 and November 18, 2005, in an online
questionnaire. Data is validated for completeness and reasonableness through rules embedded in the data
collection form. The data is further reviewed, analyzed and screened to ensure proper data integrity prior
to publication.
The survey covers four recurring topics:
Base Salary Increase Analysis
Expense Controls
Hiring Environment
Program Design Modifications
In this quarter's Hot Topic section, we report on Change in Control provisions. This subject is often
considered at the time of a merger or acquisition but is worthy of planning and review on a periodic basis.
The presentation of base salary increase activity includes two sets of data.
The format of the top half of pages 6-8 indicates the merit increase, promotion/adjustment, and
overall increase figures.
The bottom portion of each page includes separate calculations that reflect the figures reported as
merit budget numbers by companies that do not budget or report separate promotion/adjustment
activity. While the results are not significantly different, they provide insight into the number of
companies that budget only for merit activity. The “overall increases only” section looks at data
from companies that cannot separate merit and promotion/adjustment activity. These companies
do not report the same number for both merit and overall; rather, they report overall figures only.
These bottom calculations are subsets of the calculations reported on the top of each page.
We appreciate your ongoing participation in this survey. Your participation during each quarterly data
collection cycle helps us follow and identify trends across a consistent and large sampling of technology
companies.
If you have any questions about the survey, please e-mail news@radford.com.
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
1
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Table of Contents - Q4 2005
Executive Summary
Section One:
Section Two:
3
Base Salary Increase Analysis
Pay Administration
4
Compensation Administration Changes
5
Executive Employees
6
Exempt Employees
7
Nonexempt Employees
8
Base Salary Increase Analysis
9
Expense Controls
Expense Control Measures
10
Section Three: Hiring and Turnover
Hiring Sentiment
11
Hiring Practices and Turnover
12
Section Four: Program Design Modifications
Cash Incentives
Section Five:
Section Six:
13
Equity Programs
Equity/LTI Program Design and Strategy Readiness for FAS 123(R)
14
Equity/LTI Vehicles in Use
15
Use of Restricted Stock
16
Stock Options
17-20
Employee Stock Purchase Plans (ESPP)
21-22
Hot Topic - Change in Control Provisions
23-27
Section Seven: Participant Profile
Industry
28
U.S. Headcount/Revenue
29
Region
30
Appendix A:
Participant List
Appendix B:
Using This Report
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
A1-A7
B1
2
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Executive Summary - Q4 2005
The overall performance of the U.S. economy surprised many this quarter. Growth was solid despite
hurricane damage in the Gulf Coast region and high oil prices. Stocks finished November near 52-week
highs.
Gross Domestic Product (GDP) in the third quarter grew by 4.3 percent in the last year, compared
to 3.3 percent in the final report for Q2.
Despite hurricane-related job displacement in the South, national unemployment was 5.0 percent
and 221,000 new jobs were created in November. These figures are consistent with average
monthly figures released throughout much of the year.
In December, the Federal Reserve raised interest rates one-quarter of one percent for the
thirteenth meeting in a row. With the Fed Funds rate at 4.25 percent, the end of rate hikes may be
approaching.
Volatile oil prices remain a concern. While gas prices fell, home heating bills rose. Car sales fell,
prompting calls for plant closures at Ford and GM.
The semiconductor industry book-to-bill bellwether indicator stood at 0.95 in October, an increase
during the last quarter.
Key findings from this quarter’s survey include:
Salary increase budgets for exempt employees ticked up to 3.7 percent this year, with projections
approaching four percent for higher funding levels in 2006. Other employee groups show similar
trends. (See pages 6–8 for survey totals; breakouts by industry and region are available on the
QSIT website.)
While two out of three companies are holding budgets firm next year, those making a change are
twice as likely to raise pay increase budgets than drop them. (See page 9 for details.)
Despite hiring measures increasing quarterly (page 12), expense controls - especially layoffs remain present (page 10).
Attrition, especially voluntary turnover, continues to climb. A voluntary turnover rate over 15
percent in the software industry during the past year presents challenges for staff growth and
retention of intellectual capital. The rate of attrition is much lower in the computer peripheral and
medical device industries (page 12).
Restricted stock programs are in place now at more than 76 percent of companies. Companies
expanding the use of restricted stock are often limiting their eligibility (pages 14–16) while most
companies still offer stock options (pages 17-20).
Change in Control is a murky topic for many HR professionals. Two-thirds of survey participants
provided program details as a benchmark for plan review. (See pages 23–27 for details and e-mail
news@radford.com if consulting advice in this area would benefit your company.)
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
3
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section One: Base Salary Increase Analysis - Q4 2005
Pay Administration
Fiscal Year Distribution
More companies have a calendar fiscal year (January start) than all the other months combined. This
quarter’s data collection period ended in late November. Throughout the report, keep in mind that the last
fiscal year reflects actions from calendar 2004 for most companies.
FISCAL YEAR DISTRIBUTION
300
331
250
Number of Companies
200
150
100
72
54
50
23
37
7
8
10
May
Jun
5
7
Aug
Sep
13
8
Nov
Dec
0
Jan
Feb
Mar
Apr
Jul
Oct
Focal vs. Anniversary Programs
The number of companies using focal base
pay administration programs remains
around 90 percent. This system allows for
easier budget tracking than anniversary
systems that typically call for pay reviews
one year after employees join the
company or start in their position.
Exempt
Focal
Nonexempt
89%
87%
Anniversary
7%
8%
Informal System
5%
6%
SALARY ADMINISTRATION
Focal vs. Anniversary
Programs
Responding
Companies
Exempt
Focal
Exempt
509
Anniversary
38
Informal System
28
Nonexempt
Nonexempt
Focal
498
Anniversary
45
Informal System
32
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
0.00
25.00
4
50.00
75.00
Percent of Companies
100.00
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section One: Base Salary Increase Analysis - Q4 2005
Compensation Administration Changes
The majority of companies, 85 percent, did not make any changes to their compensation practices during
the past 12 months. For those companies that did make a change, they limited the number of employees
receiving a salary increase or devoted a supplemental budget to a small group of employees.
Responding
Companies
Percent of
Companies
469
84.8%
Limited the percentage of employees receiving salary increase
28
5.1%
Devoted supplemental budget to small group of employees
30
5.4%
Issued lump sum cash payment in lieu of salary increase
16
2.9%
Shifted merit funds to variable pay target bonus
11
2.0%
Moved from anniversary to focal review system
17
3.1%
Moved from focal to anniversary review system
4
0.7%
Higher salary level
13
2.4%
Lower salary level
4
0.7%
Higher total cash compensation level
5
0.9%
Lower total cash compensation level
1
0.2%
Compensation Administration
No Changes
Compensation Delivery Changes
Compensation Philosophy Changes
Changed targeted competitive position to ...
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
5
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section One: Base Salary Increase Analysis - Q4 2005
Executive Employees
Executive pay increase budgets have remained relatively stable, trending slightly upward for two years.
Next year’s executive merit budgets seems to indicate a third year of a roughly four percent increase.
Actual spending remains consistently above planned levels among companies giving increases.
Executive
Merit (all)
Promotion/Adjustment
Overall Increases Combined
%
Co Count
%
Co Count
%
Co Count
Budget (Undiluted)
3.7%
314
1.1%
161
4.2%
403
Budget (Diluted)
3.3%
352
0.8%
216
3.8%
444
Actual (Undiluted)
4.1%
306
1.4%
143
4.7%
402
Actual (Diluted)
3.6%
355
1.0%
198
4.2%
453
Budget (Undiluted)
3.7%
307
1.1%
167
4.3%
400
Budget (Diluted)
3.5%
333
0.9%
213
4.0%
428
Actual (Undiluted)
4.1%
241
1.6%
107
4.6%
313
Actual (Diluted)
3.5%
284
1.0%
159
4.0%
360
3.9%
223
1.2%
113
4.4%
303
Last Fiscal Year
Current Fiscal Year
Next Fiscal Year
Budget (Undiluted)
Executive
Merit (only)
%
Co Count
Budget (Undiluted)
3.8%
155
Budget (Diluted)
3.1%
Actual (Undiluted)
Actual (Diluted)
Executive
Overall Increases (only)
%
Co Count
Budget (Undiluted)
4.0%
87
192
Budget (Diluted)
2.7%
128
4.2%
167
Actual (Undiluted)
4.6%
92
3.3%
212
Actual (Diluted)
3.0%
143
Budget (Undiluted)
3.7%
143
Budget (Undiluted)
4.1%
90
Budget (Diluted)
3.2%
167
Budget (Diluted)
3.1%
118
Actual (Undiluted)
4.2%
138
Actual (Undiluted)
4.3%
68
Actual (Diluted)
3.2%
178
Actual (Diluted)
2.5%
115
3.9%
111
Budget (Undiluted)
4.1%
79
Last Fiscal Year
Current Fiscal Year
Next Fiscal Year
Budget (Undiluted)
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
6
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section One: Base Salary Increase Analysis - Q4 2005
Exempt Employees
The current year budget for exempt merit increases is 3.7 percent. Next year indicates a slight rise to 3.9
percent. Companies that budget promotions/adjustments separately report slightly higher overall increase
spending plans/activity.
Exempt
Promotion/Adjustment
Merit (all)
Overall Increases Combined
%
Co Count
%
Co Count
%
Co Count
Budget (Undiluted)
3.6%
402
1.0%
221
4.1%
500
Budget (Diluted)
3.4%
418
0.9%
263
3.9%
516
Actual (Undiluted)
3.8%
403
1.2%
248
4.3%
517
Actual (Diluted)
3.6%
426
1.1%
275
4.2%
535
Budget (Undiluted)
3.7%
375
1.1%
225
4.2%
481
Budget (Diluted)
3.6%
388
0.9%
254
4.1%
493
Actual (Undiluted)
3.8%
306
1.2%
176
4.4%
393
Actual (Diluted)
3.6%
326
1.1%
205
4.2%
411
3.9%
289
1.2%
161
4.4%
381
Last Fiscal Year
Current Fiscal Year
Next Fiscal Year
Budget (Undiluted)
Exempt
Merit (only)
%
Co Count
Budget (Undiluted)
3.6%
184
Budget (Diluted)
3.3%
Actual (Undiluted)
Actual (Diluted)
Exempt
Overall Increases (only)
%
Co Count
Budget (Undiluted)
3.9%
95
199
Budget (Diluted)
3.3%
111
3.8%
165
Actual (Undiluted)
4.2%
104
3.4%
182
Actual (Diluted)
3.6%
122
Budget (Undiluted)
3.7%
153
Budget (Undiluted)
3.9%
103
Budget (Diluted)
3.4%
164
Budget (Diluted)
3.5%
115
Actual (Undiluted)
3.8%
136
Actual (Undiluted)
4.2%
81
Actual (Diluted)
3.4%
151
Actual (Diluted)
3.4%
99
3.8%
129
Budget (Undiluted)
4.1%
91
Last Fiscal Year
Current Fiscal Year
Next Fiscal Year
Budget (Undiluted)
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
7
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section One: Base Salary Increase Analysis - Q4 2005
Nonexempt Employees
Among the different employee groups, stability is the key to pay increase budgets. Nonexempt pay
increase budgets have been increasing about 0.1 percent for each of the last two years. They are on track
to increase next year by 0.2 percent, the same uptick reported in exempt employee budgets.
Nonexempt
Merit (all)
Promotion/Adjustment
Overall Increases Combined
%
Co Count
%
Co Count
%
Co Count
Budget (Undiluted)
3.6%
399
1.0%
214
4.0%
498
Budget (Diluted)
3.4%
417
0.8%
259
3.9%
517
Actual (Undiluted)
3.6%
393
1.1%
230
4.1%
502
Actual (Diluted)
3.4%
423
1.0%
267
3.9%
532
Budget (Undiluted)
3.6%
371
1.0%
219
4.1%
478
Budget (Diluted)
3.5%
386
0.9%
251
4.0%
492
Actual (Undiluted)
3.7%
298
1.2%
159
4.2%
382
Actual (Diluted)
3.4%
324
0.9%
196
3.9%
405
3.8%
287
1.2%
156
4.3%
378
Last Fiscal Year
Current Fiscal Year
Next Fiscal Year
Budget (Undiluted)
Nonexempt
Merit (only)
%
Co Count
Budget (Undiluted)
3.6%
187
Budget (Diluted)
3.3%
Actual (Undiluted)
Actual (Diluted)
Nonexempt
Overall Increases (only)
%
Co Count
Budget (Undiluted)
3.8%
97
205
Budget (Diluted)
3.2%
116
3.6%
171
Actual (Undiluted)
3.8%
101
3.1%
196
Actual (Diluted)
2.9%
131
Budget (Undiluted)
3.6%
155
Budget (Undiluted)
3.8%
104
Budget (Diluted)
3.4%
168
Budget (Diluted)
3.4%
118
Actual (Undiluted)
3.7%
145
Actual (Undiluted)
4.1%
78
Actual (Diluted)
3.2%
165
Actual (Diluted)
3.2%
101
3.8%
131
Budget (Undiluted)
4.0%
91
Last Fiscal Year
Current Fiscal Year
Next Fiscal Year
Budget (Undiluted)
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
8
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section One: Base Salary Increase Analysis - Q4 2005
Base Salary Increase Analysis
Nearly two-thirds of companies reporting salary increase budgets for both the current fiscal year and next
fiscal year intend to keep their spending level the same next year. Of the remaining one-third, the
number of companies increasing their budgets outnumbers decliners two-to-one. Regardless of direction,
the magnitude of the change is basically the same.
Current and next fiscal year
budget comparison*
No Change
Budget Decreases
Budget Increases
Avg Change
Co Count
Co Count
Avg Change
Co Count
Executive
-0.8%
28
106
0.9%
58
Exempt
-0.8%
35
147
0.8%
73
Nonexempt
-0.8%
32
145
0.8%
75
*Limited to companies reporting increase budgets in both years and next year start date within the next six months
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
9
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Two: Expense Controls - Q4 2005
Expense Control Measures
Almost 25 percent of companies reported some recent action to control payroll costs. Throughout the
year, the most prevalent action to control costs has been through a layoff/reduction in workforce, followed
by salary freezes or salary increase delays. Despite positive reports in the economy overall, individual
company actions often reflect the need to meet immediate or short-term goals through expense controls.
Responding
Companies
Percent of
Companies
427
74.3%
65
11.3%
3
0.5%
Plant/Office Shutdown
19
3.3%
Mandatory Time Off
35
6.1%
Reduction in Temporary Workforce
48
8.3%
Layoff/Reduction in Force
120
20.9%
Responding Companies
575
Measures Used in Last Three Months
None
Pay Freeze - During Current Fiscal Year
Salary Reduction - All Employees
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
10
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Three: Hiring and Turnover - Q4 2005
Hiring Sentiment
The QSIT hiring sentiment measures respondents’ expressed degree of concern regarding the availability
and quality of candidates for technology-focused and general positions. Respondents complete sentences
using options in each factor, generating the responses shown in the pie charts below.
CANDIDATES
SKILLS
Too many
Enough
Too few
JOBS
Outstanding
Adequate
Inferior
TECH
New
Replacement
TECH
5%
TECH
3%
38%
49%
52%
46%
58%
GENERAL
51%
GENERAL
GENERAL
4%
8%
39%
39%
44%
56%
53%
58%
The number of companies reporting “too few” candidates for tech jobs continues to rise, reaching 58
percent. A year ago, just 41 percent of companies had “too few” applicants for technical jobs.
TECHNICAL POSITION HIRING
GENERAL HIRING
We have too few applicants of outstanding
quality for new jobs.
23%
We have enough applicants of adequate
quality for replacement jobs.
27%
We have too few applicants of outstanding
quality for replacement jobs.
19%
We have enough applicants of adequate
quality for new jobs.
16%
We have enough applicants of adequate
quality for replacement jobs.
17%
We have too few applicants of outstanding
quality for new jobs.
14%
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
11
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Three: Hiring and Turnover - Q4 2005
Hiring Practices
The trend toward normal hiring continues with 38 percent of companies reporting normal hiring practices.
In Q4 2004, slightly fewer than 28 percent of firms displayed this level of confidence in the employment
outlook.
Responding
Companies
Percent of
Companies
5
0.9%
Replacements only
17
3.0%
Critical hires only
67
11.7%
Both replacements and critical hires
268
46.6%
Normal hiring
218
37.9%
Responding Companies
575
Current Hiring Practices
Hiring freeze in place
Turnover: October 1, 2004 to September 30, 2005
In tandem with growth in hiring, turnover continues to rise. Based on the data for the year ending
September 30, average companies are experiencing overall turnover at an annual rate of 20 percent and
voluntary turnover of more than 12 percent.
Category
Overall Turnover
Voluntary Turnover
Co Count
Average
Co Count
Average
Capital Equipment
27
18.1%
27
9.9%
Computer Peripherals
28
15.6%
25
8.8%
Medical/Scientific/Test Instruments
17
11.7%
16
8.6%
Semiconductor
77
16.4%
70
9.7%
122
24.2%
117
15.4%
Telecom/Network Products - Services
75
22.0%
73
13.4%
Other High Technology
95
20.5%
89
13.0%
6
26.4%
6
17.7%
447
20.3%
423
12.6%
Software/Internet/e-Commerce
Non-High Technology (IT Departments)
All Companies
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
12
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Four: Program Design Modifications - Q4 2005
Cash Incentives
This quarter we look at the full calendar year. The report shows that the vast majority of companies are
not changing their cash incentive programs. Those doing so are most often tweaking plan focus by
modifying performance measures. When companies change reward targets, they more often expand,
rather than reduce, the financial reward opportunity extended to employees.
Jan 1, 2005 - Jun 30, 2005
7.5%
No plan
Jul 1, 2005 - Dec 31, 2005
7%
15.5%
1.7%
14.6%
1.6%
New plan
No changes
Changes made
Cash Incentives
76.9%
75.3%
Jan 1, 2005 - Jun 30, 2005
Jul 1, 2005 - Dec 31, 2005
%
Co Count
%
Co Count
15.5%
89
14.6%
84
1.7%
10
1.6%
9
75.3%
433
76.9%
442
7.5%
43
7.0%
40
Increased target incentive
1.7%
10
1.6%
9
Decreased target incentive
0.5%
3
0.5%
3
Increased participation eligibility
1.9%
11
0.9%
5
Decreased participation eligibility
0.5%
3
0.5%
3
Changed performance measures
4.7%
27
3.3%
19
Other
0.5%
3
1.0%
6
No plan
New plan
No changes
Changes made
Changes to existing plan
Responding Companies
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
575
13
575
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Five: Equity Programs - Q4 2005
Equity/Long-Term Incentive (LTI) Program Design
This edition of QSIT retained the same equity questions as last quarter's survey to combine recently
reached decisions with those reported previously. The purpose of this section is to the capture overall
direction and nature of changes implemented in response to FAS 123(R), regardless of specific
implementation date.
Due to the potentially significant impact of FAS 123(R) on reported profitability, companies are reviewing
their current equity-based compensation programs to a) confirm that current plans will essentially
continue "as is," b) make potentially significant changes in current plan design and methods of operation,
or c) implement alternative strategies, including the use of new equity or long-term incentive vehicles.
NOTE: The responses in this section of the report are limited to public companies.
Equity Strategy Readiness for FAS 123(R)
The percentage of companies finalizing their approach for FAS 123(R) reporting increased by 10 percent
this quarter, but approximately one-third of companies still say they have not reached a decision as to
how to respond to its imminent requirements.
Percent of
Companies
Responding
Companies
37.7%
123
7.4%
24
No decision has been made, but we are actively reviewing
the issues and are close to making a final recommendation.
18.4%
60
No decision has been made at this time. We are not prepared to
forecast what direction we may pursue.
36.5%
119
Percent of Companies
A decision has been made and approved by the Board of Directors.
It has already been implemented or will be implemented in the next
six months.
A decision has been recommended but is still pending executive
and/or Board approval. We know what changes will be made.
326
Responding Companies
NOTE: Companies that checked the fourth choice above ("No decision has been made at this time") are
excluded from the data presented on pages 15 through 20.
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
14
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Five: Equity Programs - Q4 2005
Equity/LTI Vehicles in Use
The charts below show the LTI vehicles in use in companies across various stages of decision approval.
Regardless of status, the intent to retain use of stock options to some degree is clear. Restricted stock is
clearly becoming the option replacement tool of choice. Increases in Stock-Settled Stock Appreciation
Rights (SARs) and long-term cash awards are also noteworthy.
Companies where decisions are made or recommended
Percent of Companies
Before Changes
After Changes
% of Cos
Co Count
% of Cos
Co Count
Stock Options
98.0%
144
83.7%
123
Restricted Stock (RS) or Restricted Stock Units (RSU)
- without performance contingencies
- with performance contingencies
43.5%
36.1%
15.0%
64
53
22
82.3%
61.9%
40.1%
121
91
59
2.0%
3
6.8%
10
11.6%
17
19.0%
28
0.0%
0
0.7%
1
Stock-Settled Stock Appreciation Rights (SARs)
Long-Term Incentive Cash Plan
Other
Responding Companies
147
147
Companies with ideas but not a final decision
Percent of Companies
Before Changes
After Changes
% of Cos
Co Count
% of Cos
Co Count
100.0%
60
93.3%
56
36.7%
31.7%
8.3%
22
19
5
63.3%
50.0%
31.7%
38
30
19
Stock-Settled Stock Appreciation Rights (SARs)
1.7%
1
13.3%
8
Long-Term Incentive Cash Plan
3.3%
2
11.7%
7
Other
0.0%
0
1.7%
1
Stock Options
Restricted Stock (RS) or Restricted Stock Units (RSU)
- without performance contingencies
- with performance contingencies
Responding Companies
60
60
Companies with decisions made and ideas but no final decision combined
Percent of Companies
Before Changes
After Changes
% of Cos
Co Count
% of Cos
Co Count
Stock Options
98.6%
204
86.5%
179
Restricted Stock (RS) or Restricted Stock Units (RSU)
- without performance contingencies
- with performance contingencies
41.5%
34.8%
13.0%
86
72
27
76.8%
58.5%
37.7%
159
121
78
Stock-Settled Stock Appreciation Rights (SARs)
1.9%
4
8.7%
18
Long-Term Incentive Cash Plan
9.2%
19
16.9%
35
Other
0.0%
0
1.0%
2
Responding Companies
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
207
15
207
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Five: Equity Programs - Q4 2005
Use of Restricted Stock
The chart below reveals the percentage of companies that indicate current or expected use of restricted
stock for at least some employees in each indicated job category. Not surprisingly, every company that
intends to use restricted stock will give some to executives. The prevalence of restricted stock grants
decline dramatically at lower levels of the organization. The use of restricted stock among support
employees provides a retention vehicle and true value, especially where the line-of-sight ability to
influence stock price appreciation is absent. Strict dilution objectives require strategic use of rewards,
focused on key contributors.
Percent of Companies
Decision made
Ideas not final
Combined
% of Cos
Co Count
% of Cos
Co Count
% of Cos
Co Count
100.0%
121
100.0%
38
100.0%
159
Management
66.9%
81
68.4%
26
67.3%
107
Professional Individual Contributors
47.1%
57
42.1%
16
45.9%
73
Support Individual Contributors
19.0%
23
21.1%
8
19.5%
31
Executives (VP and above)
Responding Companies
121
38
159
Use of Restricted Stock Compared to Stock Options
The use of restricted stock or stock units seems to be a growing alternative to stock options. Fourteen
percent of companies reported dropping options, up from 10 percent last quarter, in favor of restricted
stock or stock units. Of those companies still using options, survey results suggest fewer employees will
be receiving options and those options will consist of smaller grants.
Percent of Companies
Decision made
Ideas not final
Combined
% of Cos
Co Count
% of Cos
Co Count
% of Cos
Co Count
Companies providing RS or RSU in addition to
current stock option program
21.5%
26
23.7%
9
22.0%
35
Companies providing RS or RSU, while
simultaneously reducing stock option grant
activity
61.2%
74
73.7%
28
64.2%
102
Companies providing RS or RSU and
eliminating any further stock option grants at
this time
17.4%
21
2.6%
1
13.8%
22
Responding Companies
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
121
38
16
159
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Five: Equity Programs - Q4 2005
STOCK OPTIONS
Specific responses to FAS 123(R) in connection with stock options
New-Hire Options
The use of stock options for new hires at current levels will remain unchanged at more than 31 percent of
responding companies. Many companies will be decreasing the size and eligibility for new hire grants.
Percent of Companies
Decision made
Ideas not final
Combined
% of Cos
Co Count
% of Cos
Co Count
% of Cos
Co Count
We are not making major changes in the
number of employees receiving options or the
size of option grants
29.3%
43
36.7%
22
31.4%
65
We are decreasing both the number of
employees receiving options and the size of
grants
19.7%
29
26.7%
16
21.7%
45
We are decreasing the number of employees
receiving options, but not the size of grants
9.5%
14
10.0%
6
9.7%
20
We are decreasing the size of grants, but not
the number of employees receiving options
11.6%
17
10.0%
6
11.1%
23
We are moving towards a mix of stock vehicles
(including some stock options)
11.6%
17
13.3%
8
12.1%
25
We are moving away from options entirely to
other equity vehicles (such as Stock
Appreciation Rights)
18.4%
27
3.3%
2
14.0%
29
Responding Companies
147
60
207
Ongoing Options
More companies are making changes to ongoing option plans than to new-hire plans. A wider application
of alternative tools appears to be available for continuing employees (such as restricted shares). Almost
17 percent of companies report planned use of a mix of stock vehicles for ongoing awards, compared to 12
percent of companies applying them to new hires.
Percent of Companies
Decision made
Ideas not final
Combined
% of Cos
Co Count
% of Cos
Co Count
% of Cos
Co Count
We are not making major changes in the
number of employees receiving options or the
size of option grants
19.7%
29
21.7%
13
20.3%
42
We are decreasing both the number of
employees receiving options and the size of
grants
25.2%
37
33.3%
20
27.5%
57
We are decreasing the number of employees
receiving options, but not the size of grants
11.6%
17
11.7%
7
11.6%
24
We are decreasing the size of grants, but not
the number of employees receiving options
8.2%
12
11.7%
7
9.2%
19
We are moving towards a mix of stock vehicles
(including some stock options)
16.3%
24
18.3%
11
16.9%
35
We are moving away from options entirely to
other equity vehicles (such as Stock
Appreciation Rights)
19.0%
28
3.3%
2
14.5%
30
Responding Companies
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
147
60
17
207
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Five: Equity Programs - Q4 2005
Percentage of employees at each level listed below targeted to or typically receiving new hire or
ongoing option grants during the year
The tables below show the degree to which reductions in stock option granting practices will likely
translate into participation rates. For example, among professional individual contributor recipients of
stock options, 73.1 percent of employees typically received new hire options before changes in plan
design; 60.0 percent will likely receive after changes take place. Among companies with ongoing option
granting practices, the decline is from 64.0 percent to 49.2 percent of employees receiving. The second
table omits companies in which no employees in a category receive options.
Answers are limited to companies using stock options as part of their long-term incentive compensation
program both before and after changes in response to FAS 123(R).
Answers include companies that have made a decision, recommended a decision, or are close to making a
recommendation and answered both "Before" and "After" for a job category.
Note: For new hire option grants, the percent equals the number of new hires at that level during the year
who receive new hire option grants as a percentage of all new hires at the level during the year.
For ongoing option grants, the percent equals employees at that level who receive ongoing option grants
during the year as a percentage of all employees at the level during the year.
Average Percent of Employees
Includes Zero Percent
New Hire Options
Before Changes
Ongoing Options
After Changes
Before Changes
After Changes
% of Emp Co Count % of Emp Co Count % of Emp Co Count % of Emp Co Count
Executives (VP and above)
98.2%
110
96.1%
110
95.4%
118
92.6%
118
Management
83.3%
103
74.7%
103
79.1%
111
67.1%
111
Professional Individual Contributors
73.1%
101
60.0%
101
64.0%
107
49.2%
107
Support Individual Contributors
60.9%
94
41.8%
94
50.6%
97
33.8%
97
All Employees
77.5%
87
66.1%
87
65.2%
85
51.2%
85
Responding Companies
Average Percent of Employees
Excludes Zero Percent
125
125
128
After Changes
Before Changes
New Hire Options
Before Changes
128
Ongoing Options
After Changes
% of Emp Co Count % of Emp Co Count % of Emp Co Count % of Emp Co Count
Executives (VP and above)
98.2%
108
97.9%
108
97.0%
115
95.0%
115
Management
87.6%
95
81.0%
95
82.4%
104
71.6%
104
Professional Individual Contributors
81.4%
86
70.4%
86
69.2%
96
54.9%
96
Support Individual Contributors
89.1%
49
80.2%
49
73.5%
55
59.6%
55
All Employees
81.9%
81
71.0%
81
69.9%
79
55.1%
79
Responding Companies
122
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
122
18
124
124
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Five: Equity Programs - Q4 2005
Average percent decrease in the number of shares typically granted to an employee at each
level
The tables below reveal the magnitude of grant size reductions. For example, the ongoing option grants
to executives in the second table (which excludes companies not making changes) shows a 33 percent
decrease. That figure means that a grant of 40,000 shares before implementation of changes will be
27,000 shares in the future. Lower-level employees will experience similar reductions.
Answers are limited to companies indicating a decrease in the size of options awarded to employees who
are not eliminating options altogether for the level (e.g., 100% decrease excluded).
Answers include companies that have made a decision, recommended a decision, or are close to making a
recommendation.
Average Percent Decrease in Number of Shares
Includes Zero Percent
New Hire Options
Ongoing Options
% Decrease
Co Count
% Decrease
Co Count
Executives (VP and above)
15.2%
41
21.3%
51
Management
28.4%
45
30.0%
49
Professional Individual Contributors
33.4%
44
35.2%
48
Support Individual Contributors
25.5%
29
27.6%
32
Responding Companies
Average Percent Decrease in Number of Shares
Excludes Zero Percent
47
54
New Hire Options
Ongoing Options
% Decrease
Co Count
% Decrease
Co Count
Executives (VP and above)
28.4%
22
32.9%
33
Management
32.0%
40
32.0%
46
Professional Individual Contributors
35.0%
42
36.0%
47
Support Individual Contributors
32.2%
23
33.9%
26
Responding Companies
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
45
19
53
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Five: Equity Programs - Q4 2005
Frequency of use of specific alternatives to make up for lost stock options
Among companies decreasing participation in stock option plans or reducing the size of option grants, the
majority of firms do not intend to offer any replacement compensation. Where compensation is offered,
the use of other equity vehicles (generally through restricted stock) is more frequently suggested than
increasing cash incentives or benefits.
# Companies
No make-up will be provided
71
Other equity/LTI vehicles will be used
19
Larger base salary increase budgets
1
Expand participation in annual cash incentive plans
8
Increase annual cash incentive targets
6
Increase retirement benefits (e.g., 401(k) match)
4
Increase health & welfare benefits
2
2
Other
Responding Companies
105
Those who are retaining stock options are considering other ways to limit their cost. Reducing the size of
options is one alternative; other cost containment methods include shortening the option vesting period
and option term. Both actions serve to reduce the period of time during which expense accrues.
Accelerating the vesting of underwater options remains a viable option for some companies.
# Companies
Extend the frequency with which ongoing options are
typically granted to the same employee (e.g., from every
12 months to every 18-24 months)
16
Shorten the vesting period
22
Shorten the option term
23
Accelerate the vesting of all underwater options
17
Accelerate the vesting of some, but not all, underwater
options
17
Implement a buy-back or exchange program for some or
all underwater options
9
Other
7
Responding Companies
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
89
20
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Five: Equity Programs - Q4 2005
Employee Stock Purchase Plans (ESPP)
Offered at 76 percent of respondents, ESPPs remain a favored program among technology companies. In
response to FAS 123(R), fewer than one company in four reports taking action to change or drop its ESPP.
Companies with an ESPP (prior to any changes in response to FAS 123(R))
Percent of
Companies
Responding
Companies
Yes
76.4%
249
No
23.9%
78
Typical plan design (prior to any changes)
Percent of Employees
Typical percent of eligible employees participating
Average
50.2%
75th percentile
69.5%
50th percentile
50.0%
25th percentile
30.0%
Responding Companies
230
Percent of
Companies
Responding
Companies
97.9%
228
2.1%
5
Percent of
Companies
Responding
Companies
0.4%
1
32.6%
77
13 – 23 months
0.4%
1
12 months
8.1%
19
7 – 11 months
0.0%
0
36.4%
86
6.8%
16
15.3%
36
Purchase price discount
15%
< 15%
Months in “look-back” period
More than 24 months
24 months
6 months
1 – 5 months
0 months (no look-back)
Responding Companies
236
Response to FAS 123(R) in connection with ESPP
Percent of
Companies
Responding
Companies
34.9%
87
2.8%
7
Keeping ESPP “as is”, making no changes
41.8%
104
Making adjustments to the ESPP
20.5%
Still reviewing options, no decision made
Eliminating ESPP entirely
Responding Companies
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
51
249
21
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Five: Equity Programs - Q4 2005
Adjustments being made to ESPP
The most prevalent change companies are making to their ESPP is the elimination of the look-back period,
as reported by 32 companies. Half as many companies report reducing the discount to the safe-harbor
five percent discount.
# Companies
Discount
A) Reduce the discount to 5% (safe harbor)
16
B) Reduce the discount, but higher than 5%
3
C) Eliminate the discount
0
# Companies
"Look-Back" Period
D) Shorten the look-back period
9
E) Eliminate the look-back period
32
New length of look-back period
12 months
6 months
3 months
0 months
24 months
Former length of look-back period
1
6
0
7
12 months
N/A
1
1
5
6 months
N/A
N/A
0
20
1
7
1
32
Responding Companies
# Companies
Other changes
F) Shorten the purchase/offer period
4
G) Revise the purchase limit
4
H) Limit participation (e.g., waiting period for new employees)
1
I) Other
3
# Companies
Combinations of discount/look-back adjustments
A only: Reduce discount to 5%
5
B only: Reduce discount, but still >5%
0
C only: Eliminate discount
0
D only: Shorten look-back
8
E only: Eliminate look-back
19
A+D: Reduce discount to 5%, and shorten look-back
1
A+E: Reduce discount to 5%, and eliminate look-back
10
B+D: Reduce discount, but still >5%, and shorten look-back
0
B+E: Reduce discount, but still >5%, and eliminate look-back
3
C+D: Eliminate discount and shorten look-back
0
C+E: Eliminate discount and eliminate look-back
0
Responding Companies
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
46
22
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Six: Hot Topic - Q4 2005
Change in Control Provisions in Stock Plan Documents
Change in Control (CIC) provisions, also known as golden parachutes, have primarily been used to protect
the compensation of executives when certain events (triggers) occur. Some general reasons for CIC
provisions were to protect the executive’s compensation in the event of a hostile takeover, or to keep the
executive from leaving during a change in control event.
The following section provides data on the impact of CIC provisions as they relate to stock options.
Perhaps because of challenges gathering data, approximately one-third of companies reported no
knowledge of company provisions. Among those able to provide data, far and away the most common
trigger is a merger, consolidation and/or reorganization.
Companies with Change in Control provisions
Companies with Change in
Control provisions
Co Count
% of Total
Yes
155
27.0%
No
226
39.3%
Unsure
194
33.7%
Responding Companies
575
Yes: 27%
Unsure: 33.7%
No: 39.3%
Events that qualify as a Change in Control trigger
Co Count
Merger, consolidation or reorganization
144
Sale of all or substantially all assets
102
Dissolution or liquidation
63
Stock acquisition by person of entity (typically >20%)
67
Change in BOD
5
Responding Companies
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
153
23
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Six: Hot Topic - Q4 2005
Option vesting accelerations for Change in Control
The tables below highlight some plan design features for option vesting acceleration initiated by a Change
in Control. An overwhelming number of CIC provisions contain some form of stock option vesting
acceleration. Accelerating is typically triggered by a single event.
Companies accelerating option vesting for Change in Control
Co Count
% of Total
Yes, unless assumed
73
47.1%
Yes, whether or not assumed
57
36.8%
No
25
16.1%
Responding Companies
155
Trigger of option vesting acceleration
Co Count
Single Trigger (Change in Control event)
98
63.6%
Double Trigger (Change in Control and a second event)
56
36.4%
Responding Companies
% of Total
154
% of unvested shares accelerated for Change in Control
Percentage
Average
87.2%
75th
100.0%
50th
100.0%
25th
100.0%
Responding Companies
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
116
24
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Six: Hot Topic - Q4 2005
Change in Control Provisions in Employment Agreements or Stated Company Policy
While CIC provisions are normally associated with executives, some companies extend them to directors,
managers, and individual contributors. Qualified non-executives are typically key to the operations and/or
product development. Again, the main trigger for CIC provisions in employment agreements is a merger,
consolidation and/or reorganization.
Companies with Change in Control provisions
Companies with Change in
Control provisions
Co Count
In some employment agreements
% of Total
148
25.7%
24
4.2%
None
218
37.9%
Unsure
190
33.0%
Responding Companies
575
In specific company policy
In some agreements: 25.7%
Unsure: 33%
In specific policy: 4.2%
None: 37.9%
Events that qualify as a Change in Control trigger
Co Count
Merger, consolidation or reorganization
154
Sale of all or substantially all assets
115
Dissolution or liquidation
62
Stock acquisition by person of entity (typically >20%)
67
Change in BOD
5
Responding Companies
162
Employee level covered by agreements/policy
Co Count
CEO
166
Vice Presidents
146
Directors
59
Managers
48
Individual Contributors
48
Responding Companies
166
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
25
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Six: Hot Topic - Q4 2005
Change in Control Compensation Provisions
The tables below presents data on base salary, bonus and option vesting acceleration as it relates to CIC
provisions for various job levels. We present the type of compensation covered by CIC provisions and
whether a single or double trigger is a determining factor. Also presented is the average percent of
annual salary paid, percent of target bonus paid, and percent of unvested shares that are accelerated as a
result of the change in control.
Salary Provisions
Trigger
Salary
% of annual salary paid
Single
Double
Yes
No
Average
50th
Co Count
CEO
58
66
111
27
168.3%
150.0%
96
Vice Presidents
49
60
95
29
130.7%
100.0%
85
Directors
16
15
20
48
78.5%
66.5%
11
Managers
13
13
16
47
27.0%
17.0%
6
Individual Contributors
14
12
16
47
30.7%
13.5%
7
Responding Companies
67
73
113
57
Single
Double
Yes
No
Average
50th
Co Count
CEO
58
66
99
27
152.3%
100.0%
78
Vice Presidents
49
60
81
29
129.7%
100.0%
63
Directors
16
15
16
42
125.0%
125.0%
5
Managers
13
13
13
41
100.0%
1
Individual Contributors
14
12
11
41
100.0%
2
Responding Companies
67
73
99
51
Bonus Provisions
Stock Option Vesting
Acceleration Provisions
Trigger
Bonus
Trigger
% of annual bonus paid
Vesting Acceleration
% of unvested shares accelerated
Single
Double
Yes
No
Average
50th
Co Count
CEO
54
45
111
17
92.6%
100.0%
100
Vice Presidents
42
45
102
14
90.3%
100.0%
89
Directors
15
10
25
32
90.9%
100.0%
22
Managers
13
6
20
32
91.2%
100.0%
17
Individual Contributors
14
6
21
31
91.7%
100.0%
18
Responding Companies
58
51
114
42
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
26
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Six: Hot Topic - Q4 2005
Change in Control: Benefits and Outplacement Assistance
As expected, executives receive benefits continuation more often and for a longer period of time following
a CIC event than do non-executives. On the other hand, approximately 50 percent of executives with
continued benefits do not receive outplacement assistance. Furthermore, companies are evenly split
between providing benefits and salary continuation for the same period of time.
Benefits
Outplacement
Yes
No
Avg Months
Yes
No
Avg Months
CEO
88
43
21
45
86
10
Vice Presidents
77
41
15
44
77
8
Directors
14
46
8
19
55
5
Managers
9
46
3
16
57
3
Individual Contributors
10
47
3
16
56
2
Responding Companies
90
65
77
49
94
29
Period of benefit continuation matches
period of salary continuation
Co Count
% of Total
Yes
58
49.6%
No
59
50.4%
Responding Companies
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
117
27
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Seven: Participant Profile - Q4 2005
A total of 575 companies responded to the survey in time for inclusion in the report for Q4 2005.
Industry
Participants cover a wide range of industries. Software, telecommunications/networking and
semiconductor companies represented more than half of respondents. Salary increase activity is displayed
by industry in the spreadsheets accompanying this report.
Responding
Companies
Industry
% of Total
Capital Equipment
30
5.2%
Computer Peripherals
36
6.3%
Medical/Scientific/Test Instruments
21
3.7%
Semiconductor
88
15.3%
159
27.7%
94
16.3%
135
23.5%
12
2.1%
Software/Internet/e-Commerce
Telecom/Network Products - Services
Other High Technology*
Non-High Technology (IT Departments)
Total Responding Companies
575
*Note: The industry category labeled "Other High Tech" is a combination of several industries, including
Aerospace/Defense Electronics, Biotechnology, Professional Services, Pharmaceutical and Other High Tech.
PARTICIPANTS BY INDUSTRY
Non-High Technology (IT Departments): 2.1%
Capital Equipment: 5.2%
Computer Peripherals: 6.3%
Medical/Scientific/Test Instruments: 3.7%
Other High Technology*: 23.5%
Semiconductor: 15.3%
Telecom/Network Products - Services: 16.3%
Software/Internet/e-Commerce: 27.7%
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
28
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Seven: Participant Profile - Q4 2005
U.S. Headcount
Participating companies represent a balanced array of different organization sizes. The number of
employees includes full-time regular employees working in the United States and excludes temporary and
contract employees.
# Employees
Responding
Companies
More than 5,000: 11.5%
% of Total
Fewer than 200
138
24.0%
200 - 499
127
22.1%
500 - 999
92
16.0%
1,000 - 2,499
96
16.7%
2,500 - 5,000
56
9.7%
More than 5,000
66
11.5%
Total Responding Companies
Fewer than 200: 24%
2,500 - 5,000: 9.7%
1,000 - 2,499: 16.7%
200 - 499: 22.1%
575
500 - 999: 16%
Revenue
Revenue categories are shown based upon last complete fiscal year results. Survey participation reflects
that approximately 10 percent of companies now exceed five billion dollars in annual revenue. However,
participation covers the spectrum, with about 17 percent reporting less than 40 million in revenue last
year.
Revenue
Less than $40M*
Responding
Companies
$5.0B+: 9.7%
% of Total
98
17.0%
$40 - 199.9M
150
26.1%
$200 - 499.9M
114
19.8%
$500M - 1.49B
99
17.2%
$1.5 - 4.9B
58
10.1%
$5.0B+
56
9.7%
Total Responding Companies
Less than $40M*: 17%
$1.5 - 4.9B: 10.1%
$500M - 1.49B: 17.2%
575
$40 - 199.9M: 26.1%
$200 - 499.9M: 19.8%
*M=Million, B=Billion
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
29
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Section Seven: Participant Profile - Q4 2005
Region
The accompanying spreadsheet contains detailed survey results for each of the nine regions listed below.
These designations indicate the prevalent location for reported operations. While the plurality of
participating companies is headquartered in Northern California, Benchmark Survey incumbent
compensation data reflects greater dispersion of employees working throughout the United States.
Responding
Companies
Region
% of Total
NORTHERN CALIFORNIA
241
41.9%
SOUTHERN CALIFORNIA
66
11.5%
PACIFIC NORTHWEST
39
6.8%
NORTHEAST STATES
68
11.8%
MID-ATLANTIC STATES
38
6.6%
SOUTHEAST STATES
28
4.9%
MOUNTAIN STATES
16
2.8%
SOUTHWEST STATES
47
8.2%
CENTRAL STATES/MIDWEST
32
5.6%
Total Responding Companies
575
PARTICIPANTS BY REGION
50
42
40
Percent
30
20
12
12
10
7
8
7
5
6
3
0
N-CA
S-CA
NW
NE
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
M-ATL
SE
30
MTN
SW
MW
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Appendix A: Participant List - Q4 2005
3PARDATA
APPLERA
@ROAD
APPLIED MATERIALS
ABBOTT DIABETES CARE
APPLIED SIGNAL TECHNOLOGY
ACTEL
AQUANTIVE
ACTIVANT SOLUTIONS
ARCSIGHT
ACTIVE POWER
AREVA T&D
ACTUATE
ARIBA
ACXIOM
ARM
ADAPTEC
ASML
ADAPTIS
ASPECT MEDICAL SYSTEMS
ADC
ATHEROS COMMUNICATIONS
ADIC
ATI TECHNOLOGIES
ADOBE SYSTEMS
ATMI
ADP
ATOS ORIGIN
ADVANCED ENERGY IND
ATTACHMATE
ADVANCED MICRO DEVICES
AVAYA
ADVENT SOFTWARE
AVICI SYSTEMS
AEROFLEX COLORADO SPRINGS
AVID TECHNOLOGY
AFFYMETRIX
AVIDYNE
AGERE SYSTEMS
AXA ROSENBERG
AGILENT TECHNOLOGIES
BAE SYSTEMS INFORMATION TECHNOLOGY
AIRGO NETWORKS
BAE SYSTEMS- NATIONAL SECURITY SOLUTIONS
AKAMAI TECHNOLOGIES
BANK OF THE WEST
ALASKA COMMUNICATIONS SYSTEMS
BEA SYSTEMS
ALCATEL USA
BELL MICROPRODUCTS
ALIGN TECHNOLOGY
BI
ALL COVERED
BIGBAND NETWORKS
ALLEGRO MICROSYSTEMS
BLACK BOX NETWORK SERVICES
ALLIANCE DATA SYSTEMS
BOC EDWARDS
ALLIED TELESYN
BOOKHAM TECHNOLOGY
ALLTEL
BOSE
ALPHA & OMEGA SEMICONDUCTOR
BRITESTREAM NETWORKS
ALPS ELECTRIC
BROADLANE
ALTERA
BROCADE COMMUNICATIONS SYSTEMS
AMAZON.COM
BROOKS AUTOMATION
AMCC
BUSINESS OBJECTS
AMDOCS
BYTEMOBILE
AMERICA ONLINE
C-COR
AMERICAN POWER CONVERSION
CABLE & WIRELESS
AMPEX DATA SYSTEMS
CABOT MICROELECTRONICS
AMPRO COMPUTERS
CADENCE DESIGN SYSTEMS
AMX
CAE
ANALOG DEVICES
CAFEPRESS.COM
ANRITSU
CALIX
APPLE COMPUTER
CAMBRIDGE SILICON RADIO
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
A1
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Appendix A: Participant List - Q4 2005
CAMSTAR SYSTEMS
D&E COMMUNICATIONS
CANON DEVELOPMENT AMERICAS
DEALERTRACK
CAPCOM USA
DELL
CAPTIVA SOFTWARE
DELTA DESIGN
CARREKER
DELTA PRODUCTS
CASPIAN
DEMANDTEC
CATAPULT COMMUNICATIONS
DENDRITE INTERNATIONAL
CELERITY
DICARTA
CELESTICA-CO
DICTAPHONE
CENTILLIUM COMMUNICATIONS
DIGI INTERNATIONAL
CENTURY TEL
DIGIMARC
CERNER
DIONEX
CGI-AMS
DIRECTV
CHARLES SCHWAB SW DIV
DNS ELECTRONICS
CHECKFREE
DORADO
CIENA
DOT HILL SYSTEMS
CIRRUS LOGIC
DPIX
CISCO SYSTEMS
DRUGSTORE.COM
CITI FINANCIAL
DST SYSTEMS OF CALIFORNIA
CITRIX SYSTEMS
DUPONT DISPLAYS
CLARITY VISUAL SYSTEMS
DYNAMICS RESEARCH
CLONTECH
E*TRADE GROUP
CLOUDMARK
E2OPEN
COGNOS
EBARA TECHNOLOGIES
COHERENT
EBAY
COINSTAR
ECI TELECOM DATA NETWORKING DIVISION
COMPUTER SCIENCES
ECLIPSE AVIATION
COMVERSE
ELECTRO SCIENTIFIC INDUSTRIES
CONEXANT SYSTEMS
ELECTRONIC ARTS
CONTINUOUS COMPUTING
ELECTRONIC DATA SYSTEMS
CONVERGYS
ELECTRONICS FOR IMAGING
CORILLIAN
ELGAR ELECTRONICS
CREATIVE LABS
EMC
CREDENCE SYSTEMS
EMERSON PROCESS MANAGEMENT
CREE
EMPIRIX
CRITICAL PATH
EMS TECHNOLOGIES
CROSSWALK
EMULEX
CRYSTAL TECHNOLOGY
ENDEVCO
CSG SYSTEMS
ENDWAVE
CUBIC CORPORATION
ENTERASYS NETWORKS
CURTISS WRIGHT CONTROLS
ENTRIQ
CYBERSOURCE
EPICOR SOFTWARE
CYMER
EPSON AMERICA
CYPRESS SEMICONDUCTOR
EPSON ELECTRONICS AMERICA - SJ
CYTOKINETICS
EPSON PORTLAND
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
A2
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Appendix A: Participant List - Q4 2005
ESRI
HOMESTORE
EVANS & SUTHERLAND
HOWARD HUGHES MEDICAL
EVAULT
HUGHES NETWORK SYSTEMS
EVI TECHNOLOGY
HUTCHINSON TECHNOLOGY
EXAR
HYNIX SEMICONDUCTOR AMERICA
EXPERIAN
HYPERION SOLUTIONS
EXPONENT
I2 TECHNOLOGIES
F5 NETWORKS
IKANOS COMMUNICATIONS
FAIRCHILD SEMICONDUCTOR
INCODE WIRELESS
FILENET
INFINEON TECHNOLOGIES
FILTRONIC SAGE LABORATORIES
INFINERA
FIOS
INFOCUS
FORMFACTOR
INFOSPACE
FOUNDRY NETWORKS
INPUT/OUTPUT
FRANKLIN TEMPLETON INVESTMENTS
INTEGRETEL
FREESCALE SEMICONDUCTOR
INTEGRIS
FREMONT INVESTMENT & LOAN
INTEL
FSI INTERNATIONAL
INTELLISYNC
FUJI XEROX PALO ALTO LABORATORY
INTERNATIONAL GAME TECH
FUJITSU AMERICA
INTERNET SECURITY SYSTEMS
GAP
INTERPUBLIC GROUP OF COMPANIES GLOBAL INFO SVCS
GATAN
INTERSIL
GEAC ENTERPRISE SOLUTIONS
INTERWOVEN
GEMPLUS
INTUIT
GENENCOR INTERNATIONAL
INVENSYS
GENENTECH
IOMEGA
GENERAL ATOMICS
IOVATION
GENERAL DYNAMICS
IRIDEX
GENERAL DYNAMICS C4 SYSTEMS
JANUS CAPITAL GROUP
GENERAL DYNAMICS NETWORK SYSTEMS
JAZZ SEMICONDUCTOR
GENERAL DYNAMICS-AIS
JDS UNIPHASE
GENESIS MICROCHIP
JSR MICRO
GLENAYRE ELECTRONICS
JUNIPER NETWORKS
GLOBAL CROSSING
KAISER PERMANENTE-KPIT
GLOBALSTAR
KASPICK & COMPANY LLC
GOOGLE
KINETIC SYSTEMS
GSI GROUP
KINETO WIRELESS
GTECH
KLA-TENCOR
HARMONIC
KODAK GRAPHIC COMMUNICATIONS
HARRIS
KODAK IMAGING NETWORK
HEADWAY TECHNOLOGIES
KOKUSAI SEMICONDUCTOR EQUIPMENT
HEWLETT PACKARD
KOMAG
HI/FN
KRONOS
HITACHI AMERICA
KYOCERA WIRELESS
HITACHI COMPUTER PROD-OK
KYPHON
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
A3
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Appendix A: Participant List - Q4 2005
L-3 COMM RANDTRON
MITRETEK SYSTEMS
L-3 COMM-NARDA MICRO
MITSUBISHI DIGITAL ELECTRONICS AMERICA
L-3 TITAN
MKS-CN
LAM RESEARCH
MOLECULAR DEVICES-UNION CITY
LATTICE SEMICONDUCTOR
MOLECULAR IMPRINTS
LAWRENCE LIVERMORE NAT'L LAB
MOTOROLA
LAWSON SOFTWARE
MSC.SOFTWARE
LECROY PROTOCOL SOLUTIONS GROUP
MULTIMEDIA GAMES
LEFTHAND NETWORKS
MVC
LEXAR MEDIA
MYSQL
LEXMARK INTERNATIONAL
NATIONAL INSTRUMENTS
LIFESCAN
NATIONAL SEMICONDUCTOR
LIGHTBRIDGE
NAVIMEDIX
LOCKHEED MARTIN
NDC / JOHNSON & JOHNSON
LOGITECH
NEC AMERICA
LOOPNET
NEC ELECTRONICS AMERICA
LSI LOGIC
NEKTAR THERAPEUTICS
LUCASFILM LTD
NEOFORMA
LUMEDX
NEOPOST
LUMENIS
NETIQ
LUMILEDS LIGHTING
NETMANAGE
LYCOS
NETRATINGS
MACGREGOR
NETSUITE
MAQUET
NETWORK APPLIANCE
MARCONI NORTH AMERICA
NETWORK GENERAL
MARVELL SEMICONDUCTOR
NEWPORT
MATRIX ONE
NEXTEL PARTNERS
MAVENT
NEXTIRAONE
MAXTOR
NII HOLDINGS
MCAFEE
NIKON PRECISION
MCI
NORTEL
MCKESSON
NORTHROP GRUMMAN - MISSION SYSTEMS
MEDTRONIC
NORTHROP GRUMMAN ES-DSD
MEGAPATH NETWORK
NOVARIANT
MENTOR GRAPHICS
NOVELLUS SYSTEMS
METAVANTE
NP PHOTONICS
MICREL SEMICONDUCTOR
NUVERA FUEL CELLS
MICRO FOCUS
NVIDIA
MICROCHIP TECHNOLOGY
O2 MICRO
MICROMUSE
OCE NORTH AMERICA
MICROSEMI
OKI AMERICA
MICROSOFT
OKI DATA
MIDWEST RESEARCH INSTITUTE
OLYMPUS AMERICA
MINDSPEED TECHNOLOGIES
OMIDYAR NETWORK SERVICES LLC
MISYS BANKING SYSTEMS
OMNEON VIDEO NETWORKS
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
A4
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Appendix A: Participant List - Q4 2005
OMNIVISION TECHNOLOGIES
QUALCOMM
OMX TECHNOLOGY (US)
QUANTUM
ON COMMAND
QUELLOS GROUP
ON SEMICONDUCTOR
QUEST SOFTWARE
OOCL - SOFTWARE DEV CTR
QUICKLOGIC
OPEN SOLUTIONS
QUINTILES
OPEN TV
QWEST COMMUNICATIONS
OPENWAVE
RACAL INSTRUMENTS
OPERON BIOTECHNOLOGIES
RADIANT SYSTEMS
OPTICAL SOLUTIONS
RADIX TECHNOLOGIES
ORACLE USA
RADVISION
ORBITAL SCIENCES
RCN
ORTHODYNE ELECTRONICS
REALNETWORKS
OVERSEE.NET
RED HAT
PALM
REDBACK NETWORKS
PAN AM SAT
RENESAS TECHNOLOGY AMERICA
PANDUIT
RESEARCH IN MOTION
PARAMIT
RESMED
PDF SOLUTIONS
REUTERS LTD
PEERLESS SYSTEMS
REYNOLDS & REYNOLDS
PEMSTAR
RF MICRO DEVICES
PEREGRINE SYSTEMS
RHEODYNE
PERICOM SEMICONDUCTOR
RICOH ELECTRONICS
PEROT SYSTEMS
RISK MANAGEMENT SOLUTIONS
PHILIPS ELECTRONICS N.A.
ROCHE PALO ALTO LLC
PHILIPS SEMICONDUCTORS
ROHM ELECTRONICS USA
PHOENIX TECHNOLOGIES
SABRE HOLDINGS
PHOTON DYNAMICS
SAFLINK
PHOTRONICS
SALESFORCE.COM
PILLAR DATA SYSTEMS
SAMSUNG AUSTIN SEMICONDUCTOR L.P.
PIXELWORKS
SAMSUNG SEMICONDUCTOR
PLANAR SYSTEMS
SAMSUNG TELECOM AMERICA
PLANTRONICS
SANDIA NATIONAL LABS
PLEXUS
SANMINA
POLYCOM
SANTA CLARA UNIVERSITY
PORTAL SOFTWARE
SAP AMERICA
POSTINI
SARATOGA SYSTEMS
PREMIER RETAIL NETWORKS
SAS
PRINTRONIX
SAVVIS COMMUNICATIONS
PROCLARITY
SBS TECHNOLOGIES
PROGRESS SOFTWARE
SCANSOFT
PROVIDE COMMERCE
SCHNEIDER AUTOMATION
PSC
SCIENCE APPLICATIONS INTERNATIONAL
QLOGIC
SCIENTIFIC LEARNING
QSENT
SCIENTIFIC TECHNOLOGIES
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
A5
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Appendix A: Participant List - Q4 2005
SCIENTIFIC-ATLANTA
SUNRISE TELECOM
SEAGATE TECHNOLOGY
SUPERCONDUCTOR TECH
SECURE COMPUTING
SUPERTEX
SEMATECH
SUREWEST COMMUNICATIONS
SEMTECH
SWIFT
SENSUS METERING SYSTEMS
SYBASE
SERENA SOFTWARE
SYMANTEC
SEROLOGICALS
SYNAPTICS
SHORETEL
SYNGENTA SEEDS
SHUTTERFLY
SYNNEX
SIEMENS CORP RESEARCH
SYNOPSYS
SIEMENS CORPORATION
TDK ELECTRONICS
SIERRA WIRELESS AMERICA
TEKELEC
SIGMA DESIGNS
TEKTRONIX
SIGMATEL
TELCORDIA TECHNOLOGIES
SILICON STORAGE TECHNOLOGY
TELEPHIA
SIRENZA MICRODEVICES
TELLABS
SIRF TECHNOLOGY
TELLME NETWORKS
SKF CONDITION MONITORING
TERADYNE
SKYWORKS SOLUTIONS
TERAYON COMMUNICATION SYSTEMS
SNOCAP
TEXAS INSTRUMENTS
SOFTWARE AG
THALES
SOLECTRON
THE MATHWORKS
SONICWALL
THE MITRE CORPORATION
SONOSITE
THERMA - WAVE
SONY ELECTRONICS
TIBCO SOFTWARE
SONY ERICSSON MOBILE COMMUNICATIONS USA
TIVO
SPACE SYSTEMS/LORAL
TOKYO ELECTRON US HOLDINGS
SPARTON
TOMOTHERAPY
SPIRENT COMMUNICATIONS-NJ
TOSHIBA AMERICA BUSINESS SOLUTIONS
SPRINT NEXTEL
TOSHIBA AMERICA MEDICAL SYSTEM
SPSS
TOSHIBA AMERICA-ELECTRONIC COMPONENTS
SRI INTERNATIONAL
TRANSMETA
ST JUDE MEDICAL
TRANSWITCH
STANFORD UNIVERSITY
TRIMBLE NAVIGATION
STANLEY ASSOCIATES
TRINTECH
STATS CHIPPAC
TRIQUINT SEMICONDUCTOR
STMICROELECTRONICS
TRUEPOSITION
STRATEGIC TECHNOLOGIES
TSMC NORTH AMERICA
STRATEX NETWORKS
TYCO ELECTRONICS
STRATUS TECHNOLOGIES
TYCO HEALTHCARE
SUMCO USA PHOENIX
UBISOFT
SUMTOTAL SYSTEMS
UGS
SUN MICROSYSTEMS
ULTRATECH
SUNGARD
UNDERWRITERS LABS
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
A6
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Appendix A: Participant List - Q4 2005
UNITED ONLINE
VALLENT
VARIAN MEDICAL SYSTEMS
VARIAN SEMICONDUCTOR EQUIPMENT
VEECO INSTRUMENTS
VERIO
VERISPAN LLC
VERIZON COMMUNICATIONS
VERIZON WIRELESS
VERTEX
VIA TECHNOLOGIES
VIASAT
VIGNETTE
VIRAGE LOGIC
VISA INTERNATIONAL
VITESSE SEMICONDUCTOR
VIVENDI UNIVERSAL GAMES
VOLTERRA
WAFERTECH
WALT DISNEY INTERNET GROUP
WATCHGUARD TECHNOLOGIES
WEBSENSE
WINBOND ELECTRONICS CORP
WIND RIVER SYSTEMS
WIRELESS GENERATION
WJ COMMUNICATIONS
WOLFE ENGINEERING
XEROX INTERNATIONAL PARTNERS
XICOM TECHNOLOGY
XILINX
XO COMMUNICATIONS
YAHOO!
YOUBET.COM
ZEBRA TECHNOLOGIES
ZORAN
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
A7
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
Appendix B: Using This Report - Q4 2005
The QSIT gathers a wide range of information on compensation increase budgets and practices.
To maximize the value of this report to participants, we use overall totals to show responses to practices
topics and the salary increase results. For detailed analysis, we provide a separate spreadsheet containing
salary increase data for specific industry and region categories.
Definitions:
Pay Increase Types
Merit increases are defined as money set aside (budgeted) or given (actual) in the form of salary
increases based on individual performance and contribution to the organization. This is the most
typical manner in which technology companies award salary increases.
Promotional increases are provided to employees who take on greater responsibilities (typically
in a job with a higher target pay level or salary range midpoint). Adjustment increases are
provided to reduce inequities. These actions can be taken to resolve internal issues, based on
hiring/organization change, or external equity, based on comparison of employee pay to rates paid
in the labor market. Where companies budget or can calculate payments of these types, we report
the data.
Overall increases combine merit plus promotion/adjustment increases for companies that break
them out, and also include companies that lump these increases together (can’t break them out)
plus companies that grant merit increases only.
Take note that throughout this report the sum of the merit budget figure plus the
promotion/adjustment figure is not the same as the overall increases combined figure. This
variation occurs because not every company with a merit budget has a promotion/adjustment
budget. In other words, a company with an average size merit budget does not always have the
average size promotion/adjustment budget.
Fiscal Year
Answers represent three time periods: Last Fiscal Year, Current Fiscal Year, and Next Fiscal Year. Data is
classified by year according to the month of data collection. For example, a company with a calendar
fiscal year (January start) reporting data in January 2005 submits data for Last Fiscal Year based on
calendar year 2004. The Current Fiscal Year is calendar 2005. Since the Next Fiscal Year is calendar year
2006, and data cannot be reported with certainty, Next Fiscal Year data analysis is limited to companies
with a fiscal year start date within the next six months.
QUARTERLY SUMMARY OF INDUSTRY TRENDS SURVEY - TECHNOLOGY EDITION
Copyright 2005, Aon Consulting, Inc.
B1
RADFORD SURVEYS + CONSULTING
Unauthorized Reproduction or Distribution Prohibited
www.aon.com
RADFORD
SURVEYS + CONSULTING
www.radford.com
San Jose
San Francisco
San Diego
Seattle
Chicago
Boston
New York
London
Hong Kong