SESSION 9.1

Credit Suisse - a Case Study Innovative Compensation Solutionsfor a Challenging Environment

Philip Halliday – Head Global Executive CompensationMarcelo Victoria – Employee Share Ownership Service

Credit Suisse - a Case Study Innovative Compensation Solutions

for a Challenging Environment

Presented by: Philip Halliday – Head Global Executive Compensation Marcelo Victoria – Employee Share Ownership Service

Contents

Introduction

Design Influencers

2009 Plans

2008 Plans

Implementation & Administration

Summary & Key Challenges

Introduction - Credit Suisse Group

•  Credit Suisse Group is a world-leading financial services company, advising clients in all aspects of finance, around the world, around the clock

•  We pursue a client-focused integrated bank strategy, focusing on complex client needs and value-adding businesses, leveraging the global expertise of our three divisions, Private Banking, Investment Banking and Asset Management

•  Key Facts •  Headquarters: Zurich, Switzerland •  Year of Foundation: 1856 •  Principal Business Areas: Private Banking, Investment Banking and Asset

Management •  Employees: 47,400 in over 50 countries

•  Presenter Backgrounds •  Philip Halliday – Head Global Executive Compensation •  Marcelo Victoria – Employee Share Ownership Service

Introduction - Credit Suisse Compensation Schemes

•  Credit Suisse strives to actively respond to the rapid changes in the compensation landscape for financial services

•  We have dedicated significant resources towards the design of innovative yet responsible compensation schemes

•  Design and administration of plans has been developed in-house •  Multi-divisional teams selected to provide appropriate compensation plan designs •  Internal control functions support Compensation Plans throughout the design

process •  All programs are fully administered internally at Credit Suisse – interaction

between HR Compensation teams and Employee Share Ownership Service (“ESOS”)

Design Influencers

Risk Alignment

Long-Term Performanc

e

Independent Governance

Pay Transparenc

y

CEBS European Banks

(EU) FSA

UK Financial Firms

FINMA Swiss Financial

Firms US Treasury & Congress

US Financial Firms/ TARP recipients

Key Regulators

Shareholder Views on

Pay

CS Employees CS Business Strategy

Market / Talent

Design Challenges

•  Balance of plan features between the need to properly motivate and retain existing talent, attract best candidates against the need to apply a responsible approach to compensation that is acceptable to shareholders and compliant with Regulatory requirements

•  Compensation plan needs to encourage the right employee behaviour – plan needs to be in the interests of the overall organisation but employees must feel that they can individually influence the outcome

•  Divisional consistency – programs need to be applied to all divisions

•  Global organisation requires compensation plans that can be operated across teams based in multiple jurisdictions – legal and tax obstacles

•  Accounting and Treasury impact

•  Administration complexities and costs

•  Pragmatically address local tax optimizations

Recent Compensation Programs at Credit Suisse Options and share awards

Highly leveraged Performance Incentive Plan ('PIP I') and share awards

Relatively strong leveraged Performance Incentive Plan ('PIP II') and share awards

Broadly distributed, moderately leveraged Incentive Share Unit plan (ISU)

Granted since 2007

Granted 2006

Granted 2005

Up to 2003

Bank-wide program reflects the integrated bank

Exceptional contribution to structural and strategic realignment/integration

Restructuring/management changes, particularly in IB

Standard industry instruments

Incentive Share Units as main delivery tool Partner Asset Facility linked to illiquid assets* Cash Retention Awards (deferral, "claw-back")

Granted 2008/2009

Risk transfer to Investment Banking and restricted cash to increase shareholder alignment

Adjustable Performance Plan for MDs and Ds Scaled Incentive Share Units for MDs and Ds Traditional Incentive Share Units for VPs

Announced 2009

Cash based “bonus malus” system allowing for "claw back" (APP) and share based long term incentive plan linked to Group results (SISU)

A track record of responsibility and innovation in compensation

*Investment Banking Division only

Compensation: Proactive approach to address developments in 2009

April FSB issues principles for sound practices in compensation

September FSB issues standards for implementation

November FINMA issues new circular on remuneration schemes

Key regulatory requirement: •  Variable compensation pools should be

based on long-term economic performance

•  Risk assessment to be included in compensation decisions

•  40 – 60% of variable compensation should be deferred

•  Deferral should be ≥ three years

Adjustments at Credit Suisse: •  Increase consideration of risk and cost of

capital •  Strengthen compensation governance by

involving Risk Management •  Optimize mix of compensation •  Increase deferrals for Managing Directors

and Directors and "add claw" back features to foster prudent risk taking

New compensation design 2009 for Managing Directors and Directors

Fix: Salary •  Increase base salaries if required to

better recognize responsibility of the role performed

•  Designed to avoid excessive risk taking

•  Variable: •  Adjustable Performance Plan (APP) •  Cash based “bonus malus” system •  50% of total deferred compensation •  Vesting and payout over 3 years •  Payout subject to adjustment upwards or

downwards (“claw back”), subject to various criteria

Variable: Cash •  No deferrals or restrictions after payment •  The higher total compensation, the lower

the proportion of unrestricted cash •  Cap for unrestricted cash

•  Variable: •  Scaled Incentive Share Units (SISU) •  Share based long term incentive plan •  50% of total deferred compensation •  Vesting and payout over 4 years •  Additional shares, if any, after 4 years

subject to average share price AND average RoE of CSG over 4 years

Def

erre

d C

ompe

nsat

ion

Cas

h C

ompe

nsat

ion

An upwards adjustment occurs when: •  Business Cluster (sub-divisions of the front office divisions Private Banking, Investment

Banking and Asset Management) reports a Positive Contribution AND •  Credit Suisse Group AG reports a positive Return on Equity A negative adjustment occurs when: •  Business Cluster (CSG for Support employees) reports a Loss

Positive (+) ROE

Negative (-) ROE

Positive (+) Contribution

Positive (+) ROE

Adjustment No Adjustment

Negative (-) Contribution

Negative (-) Business Cluster

Adjustment

Negative (-) Business Cluster

Adjustment

Bank ROE

Bus

ines

s Pe

rfor

man

ce

Adjustable Performance Plan Award

Scaled Incentive Share Unit – basic structure

1 share unit

Share options

Additional Shares

0.25 shares

Unit valued with CSG share price at grant. One unit equals one

share.

In addition, share options bought for 25% of

CSG share price to allow for additional shares.

Year 0

Year 1 Year 2 Year 3 Year 4

Number of additional shares depend on number of share options initially bought and 2 step adjustment, based on 4 year - Avg share price compared to grant (share price multiplier) - Avg RoE of CSG (RoE multiplier). With these adjustments, number of additional shares can also be ≤1.

Grant Vesting

Compared to traditional ISU, strengthened shareholder alignment as vesting increased by one year and additional link to average RoE of CSG over vesting period

0.25 shares

0.25 shares

0.25 shares

Scaled Incentive Share Unit (SISUs) – add'l share (1/2) •  One SISU delivers one share over a four year period •  Each SISU may also deliver Additional Shares depending on the four year average

•  STEP 1: CSG share price performance •  STEP 2: CSG RoE

•  Additional shares are determined from the share performance as follows: •  At the time of grant, a leverage factor is established based on the number of options that could

be purchased for 25% of the CSG share price at grant (assumed in the following to be 1.5) •  The four year average share price is compared to the share price at the date of grant •  The gain, if any, is adjusted by the leverage factor to determine the total value due before ROE

adjustment

•  The RoE adjustment is then applied: •  The four year average RoE is calculated - for SISUs granted in January 2010 this will be the

average of the RoE for the four calendar years 2010-2013 •  The scalar applicable for the average RoE is determined from a pre set table •  The RoE scalar is applied to the value of Additional Shares determined from the share price,

resulting in a potential upward or downward adjustment, to determine the final value due

•  The final value due is delivered in CSG shares – the final value is divided by the share price at the end of the four year period to determine the number of Additional Shares

Step 1

Step 2

Scaled Incentive Share Units – additional share (2/2)

•  Depending on the future business performance, the value of the additional shares can be higher or lower than under the current ISU plan which continues to be offered to the VPs and below Alignment of compensation with risk and future performance

•  Key features of the RoE scalar include the following: •  RoE Scalar to deliver a scalar of 1x at four year average baseline target RoE •  RoE above target leads to scalar of >1x, i.e. positive adjustment •  RoE below target leads to scalar of <1x, i.e. negative adjustment

Scaled Incentive Share Unit payout illustrative example Assumptions (all numbers in CHF): Initial Share Price = 50; 4 year avg. share price = 80; Final share price 4th year = CHF110

Shift in compensation structure to strengthen sustainability

Previous Structure

Bonus

Cash

Salary

Perf

orm

ance

and

Ris

k B

ased

Fi

xed

Incentive Share Units

(ISU)

Total Compensation

Total Compensation

Salary (Adjusted)

Variable

Cash

Adjustable Performance Plan (3 years) / (25%)*

Scaled Incentive Share Units (SISU) (4 years) / (25%)*

Future State

Perf

orm

ance

Bas

ed

Fixe d

  Control functions generally with a higher salary portion

  The higher the total compensation/ risk potential, the lower the part of the salary, the higher the part of deferred compensation (a 30/70 split possible for top compensation levels)

  Aligns compensation with sustainable long term performance and increases risk awareness

  Ensures symmetry between compensation and future performance and risk taking of the company

  Staggered payout scheme over three / four years smoothes payout levels between good and less good years

(40%)

(60%)

(50%)*

(100%)

Percentages represent average numbers across the entire

population of Managing Directors and Directors

*Percentage in relation to variable compensation pool

Credit Suisse Executive Compensation

2008 Plans

2008 PAF Award Summary

Background •  Credit Suisse Group announced in December 2008 a plan to issue PAF Awards to

Managing Directors and Directors in IB as a majority of their variable compensation for 2008.

•  PAF Awards are linked to a portfolio of assets that originated in CS’s Investment Banking department

•  The notional value of the Reference Portfolio was based on the fair market value of the assets in the Reference Portfolio on December 31, 2008, and those assets will remain static throughout the contractual term of the award or until liquidated.

•  The Reference Assets consist of a variety of financial instruments.

•  The PAF holders participate in the gains and losses on the Reference Assets.

•  Results in transferring a significant portion of risk positions associated with the Reference Portfolio to the employees and removed from CS’s risk-weighted assets, resulting in a reduction in capital usage

•  CS dedicated substantial internal resources to structure the PAF vehicle correctly

2008 PAF Award Summary

Key features of the PAF Award: •  Vesting:

-  66.7% of the awards were vested on grant and 33.3% vested on 31 March 2009

•  Payments: -  Interest payable on the PAF Awards by Credit Suisse semi-annually from December 31,

2008 through December 31, 2016, regardless of the performance of the portfolio -  During 2014, 2015, and 2016, 20% of the initial PAF Awards will be paid subject to no

decline in value of the total pool of assets -  Final distribution, including any return on the portfolio, paid following maturity on

December 31, 2016 -  The Final Scheduled Settlement Payment will be made, if at all, during 2017 net of

cumulative semi annual interest payments

•  Restrictive Covenants -  Non-compete and non-solicit expire over three years from grant date

2008 Cash Retention Award (CRA)

•  Restricted cash-based component of variable compensation •  Recipients:

-  MDs across all divisions, all Directors in IB and, to the extent cash bonus in excess of CHF 300,000, Directors in Private Banking, Asset Management and Shared Services

Award Summary: -  Paid in Q1 2009; “vests” prorated over 2-years -  Unvested amounts to be repaid if a "claw back" event occurs:

  voluntary termination   Termination for cause   engaging in restricted activities

  other detrimental activities

2008 Cash Retention Award

•  Laws of local jurisdictions had to be reviewed to ensure compliance •  "Claw back" not enforceable in all jurisdictions.

•  Other issues to consider: •  change of control or other transactions (consider asset sales vs.

stock sales) •  eligibility for qualified and non-qualified deferred compensation

programs •  setoff provisions •  governing law

Implementation & Administration

Credit Suisse Employee Share Ownership Service

•  Credit Suisse's share plan service is based out of Zurich and provides high quality share plan administration solutions for primarily Swiss based clients

•  We are focused on smaller executive plans providing best of breed services to both the internal corporate contacts and the plan participants

•  Our unique integration with our global banking platform allows us to leverage the existing banking processes and focus more energy on the client's share plan needs

•  Generally every client has one specialized Credit Suisse account manager that deals with both participants needs and the corporate plan set up

•  Credit Suisse provides very customizable processes for all grant types, but with rigorous tranche accounting as the basis for record keeping

•  Employee Share Ownership Service currently supports all CS internal plans for Swiss participants and will migrate international employees over the next 18 months

Share Plan Record Keeping & Settlement Brokers

Core Compensation

Bonus Pools

Employee Bonus

Allocation

Bonus Payment

Mix

Deferred Cash

Cash Bonus Payment (Payroll)

Executive Compensation Share Admin

MyEquity Plan Setup

Dividend Equivalents Award

Allocations / Record Keeping

Pre Release Elections Taxes

Release & Settlement Payroll

CS Omnibus CH Brokerage Share Award

& Comp Sheet

Plan Design

Terminations Currency Hedge

  HR Compensation   ESOS Service

Monthly Detailed Activity Interface

Exec Comp Plan Setup

Dat

a In

terfa

ce /

Rep

ortin

g

Payroll

Deferred Comp Accounting

Data Consolidation

Reporting

Award Allocation Vesting & Est.

Early Retirement

Option Exercises Straight Through

Confirms & Statements

Treasury

USA Brokerage

CS Single CIF CH Brokerage

Confirms & Statements

Plan Administration Integrated with CS Online Banking

•  Participants use standard CS internet banking access with integrated share plan info

•  Cash accounts are supported in most jurisdictions

•  All custody processes including statements & confirms are produced via standard bank applications

•  User friendly interface for plan administration provides full access to plan details and reporting

IN CLOSING

 Compensation has always been properly recognized as a critical component of our organization

 Credit Suisse has long recognized that our success depends on attracting, retaining and motivating exceptional talent, and aligning the long-term interests of our people with those of the Bank and our shareholders.

 Our compensation structure links the delivery of compensation, with prudent risk-taking, the Bank’s financial performance and long-term value creation.

 Credit Suisse is committed to paying our people in a way that is competitive and responsive to the changing industry and regulatory realities – and ensures they have ample opportunities to benefit from their contribution to our business and financial success.

 Our compensation structure strikes the right balance between the long-term interests of employees, our shareholders and the broader society and, in doing so, strengthens Credit Suisse’s position as a global financial leader.

 We have an established track record of innovative and responsible plan design with first class Plan Administration and Management resources

Questions?

Thank You

Disclaimer

This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof. Local law or regulation may restrict the distribution into certain jurisdictions. This report may not be reproduced either in whole or in part, without the written permission of Credit Suisse. Copyright © 2009 Credit Suisse Group and/or its affiliates. All rights reserved.