Hewlett-Packard (HPQ)

HP's Total Rewards Program

        Compensation and benefits for employees at all levels of HP, including for the named executive officers listed in the Summary Compensation Table on page 55 (the "NEOs"), are determined in the context of HP's Total Rewards Program. The Total Rewards Program includes base pay, annual variable pay, long-term incentive pay, benefits and perquisites. Overall, the Total Rewards Program aims to foster a high-performance culture at all levels and to provide an opportunity for employees to earn significant rewards if HP achieves strong financial results.

        While the elements of the Total Rewards Program are intended to motivate and encourage employees at all levels of HP to drive performance and achieve superior results for stockholders, there is a different emphasis on certain elements of the Total Rewards Program based on an employee's position and ability to impact HP's financial results. Within the Total Rewards Program, the percentage of performance-based pay, or at-risk pay, increases with job responsibility. Among HP's peer group companies, HP executives have a higher percentage of performance-based pay, which generally means smaller bonuses and lower overall compensation in years of low performance and higher bonuses and long-term incentive payouts in years of exceptional performance, reflective of the performance achieved.

HP's Total Rewards Program

        Compensation and benefits for all employees at all levels of HP, including for the named executive officers listed in the Summary Compensation Table on page 44 (the "NEOs"), are determined in the context of HP's Total Rewards Program. Overall, the Total Rewards Program aims to foster a high-performance culture at all levels and to provide an opportunity for employees to earn significant rewards if HP achieves strong financial results. While there is a different emphasis on certain elements of the Total Rewards Program based on an employee's position and ability to impact HP's financial results, Total Rewards at all levels of HP are intended to motivate and encourage employees to drive performance and achieve superior results for stockholders.

        Among HP's executive peer group companies, HP executives have a higher percentage of "variable pay" or pay at risk, which means smaller bonuses and lower overall compensation in years of low performance and higher bonuses and long-term incentive payouts in years of exceptional performance, reflective of the performance achieved.

HP's Total Rewards Program

        Compensation and benefits for employees at all levels of HP are determined in the context of HP's Total Rewards program. The tenets of this program are:

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HP's success depends on rewarding talented employees who can achieve exceptional results



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HP uses variable pay programs to reward strong and consistent company and individual performance



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HP expects managers to differentiate rewards based on results



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HP provides opportunities for employees to be stockholders



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Total Rewards are competitive within relevant markets and can be differentiated by business, function and job classification

The elements of Total Rewards include (1) base pay; (2) variable pay; (3) rewards and recognition programs; (4) equity; and (5) benefits. The components of Total Rewards are depicted in the diagram below.

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        Decision making regarding employee compensation at all levels of HP, including executive officers, is made within the framework of this Total Rewards philosophy. Specifically with respect to executive officers, the Committee hopes to achieve a Total Rewards package for HP executives that is closely tied to both individual and corporate performance, as well as aligned with the interests of stockholders.

        The components of Total Rewards are viewed holistically, but with a different emphasis on certain elements based on an employee's position and ability to impact HP results. At the executive officer level, HP's Total Rewards is structured so that more than two-thirds of targeted Total Rewards is "at risk" and variable depending upon HP's results. In contrast, a much smaller percentage of total compensation is at risk for most employees below the executive level.

        The programs that make up the Total Rewards components are reviewed from time to time, and adjustments may be made based upon both internal and external factors. The Committee provides direction to management when changes to the programs are being considered. The Committee considers overall competitiveness and peer group measures, among other factors, in providing guidance.