Hewlett-Packard (HPQ)

Use of Comparative Compensation Data

        Each year, the Committee reviews the compensation of HP's Section 16 officers and compares it to that of HP's peer group companies. This process starts with the selection of an appropriate group of peer companies for comparison purposes. In 2008 the Committee adopted a "rules-based" method for determining the executive compensation peer group and refined this approach in 2009 by reducing the market capitalization level primarily to reflect changes in the economy. Under this approach, the peer group companies are determined using six screening levels: (1) current market capitalization greater than $17 billion (down from $25 billion in 2008); (2) revenue in excess of $10 billion for technology companies and $50 billion for companies in other industries; (3) inclusion in the S&P 500 Index, the Dow Jones 30 Index and/or the Dow Jones Global Titans Index; (4) inclusion in industry-specific categories of information technology, industrials, materials, telecommunications services, consumer discretionary and consumer staples; (5) the global scope and complexity of the company's business; and (6) in the case of companies used for comparison of CEO pay, a lack of anomalous pay practices (typically companies with a founder as CEO). The Committee believes that use of this methodology produces the appropriate peer group for comparison, as well as a group that is large and diverse enough so that the addition or elimination of any one company does not alter the overall analysis.

        Under this six-level screening approach, the peer group used by the Committee during fiscal 2009 for executive compensation comparison purposes included all of the companies included in the prior year's peer group, as well as one new company. In addition, one company was retained in the peer group for year-over-year consistency, even though that company's market capitalization did not exceed

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the $17 billion threshold at the time that the peer group was determined. The full list of companies is as follows:

        Following its determination of the executive compensation peer group, management presents the Committee with its analysis of executive officer pay. This analysis is then discussed and reviewed by the Committee with its independent advisors. The Committee finds comparative data useful in setting and adjusting executive compensation. In general, the aim is to set target compensation levels at or near the 75^th percentile, with an opportunity to earn greater rewards for the achievement of superior business results.

Use of Comparative Compensation Data

        During each fiscal year, management presents the Committee with an analysis of the compensation of Section 16 officers compared to that of HP's peer companies. This analysis is then discussed and reviewed by the Committee with its independent advisors. The Committee finds comparative data useful in setting and adjusting executive compensation. In general, the aim is to set target compensation levels between market median and the 75^th percentile, with an opportunity to earn above-market rewards for the achievement of superior business results. In the case of NEOs who head significant business segments, the Committee has determined that setting and paying target compensation above this range is justified due to the relative size and complexity of HP and its business segments, including the fact that some business segments exceed the size of some of HP's peer group companies.

        Based on a recommendation from management, with input from the Committee's independent consultant, the Committee decided to adopt a new "rules-based" method for determining the executive compensation peer group beginning in fiscal 2008. Under this approach, the peer group companies will be determined each year using five screening levels: (1) current market capitalization greater than $25 billion; (2) revenue in excess of $10 billion for technology companies and $45 billion for companies in other industries; (3) inclusion in the S&P 500 Index, the Dow Jones Industrial Average and/or the Dow Jones Global Titans 50 Index; (4) inclusion in industry-specific categories of information technology, industrials, materials, telecommunications services, consumer discretionary and consumer staples; and (5) global scope and complexity of the company's business. The Committee believes that use of this methodology for determining the peer group will limit the need to review particular components of the peer group each year for the appropriateness of their continued inclusion in the group. In addition, the peer group that results from this screening method should be large and diverse enough that the addition or elimination of any one company will not alter the overall analysis.

        Under this five-level screening approach, the peer group used by the Committee during fiscal 2008 for executive compensation comparison purposes included a majority of the companies included in last

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year's peer group, as well as four new companies, namely ConocoPhillips, Johnson & Johnson, Dow Chemical and Google. The full list of companies is as follows:

*

Represents fiscal 2007 reported revenue, except fiscal 2008 reported revenue is provided for Apple, Cisco Systems, Microsoft, Procter & Gamble and HP.