Exhibit 10.3


 


Watson Wyatt Worldwide, Inc.


 


Performance Share Bonus Incentive Program


 


FY09


 


Summary


 


The
Performance Share Bonus Incentive Program (the Program) is a long-term bonus
program for senior executives, designed to strengthen incentives and align
behaviors to grow the business in a way that is consistent with the strategic
goals of the Company.  Incentives are
provided through grants of deferred stock units tied to a 3-year performance
period with vesting contingent upon meeting certain Company goal
thresholds.  This bonus program does not
replace the Fiscal Year End Bonus (FYEB).


 


Eligibility


 


Associates
of Watson Wyatt & Company and its Affiliates will be eligible for
nomination to participate in the Program. 
Eligible participants will be nominated and approved by the Compensation
Committee of the Board (the Committee). 
Generally, associates eligible for nomination will be high performing,
senior-level executives that have direct impact or responsibility for driving
strategy throughout the organization.  A
list of participants nominated and approved by the Committee for the
performance period beginning July 1, 2008 and ending June 30, 2011 is
attached hereto as Attachment 1.


 


Performance
Period


 


The
performance period is a 3-year period that begins on July 1, 20xx and ends
on June 30, 20xx+3.  For example,
the performance period that began on July 1, 2008 will end on June 30,
2011.  Baseline metrics are established
at the beginning of the performance period. 
At the end of the performance period, performance metrics will then be
measured.  The Company will follow its
standard process for financial reporting following the close of the fiscal
year.  Once Company financial results are
finalized (August following end of fiscal year) the final performance
metric results for the most recent performance period can be determined.


 


Grants


 


Grants
of stock (performance shares) are made under the 2001 Deferred Stock Unit
Plan for Selected Employees.  Grants
are based on the value of the cash portion of the Fiscal Year End Bonus
target.  A multiplier, which varies by
participation tier, is then applied to that value to determine the cash value
of the performance shares.  The cash value
is then converted to a number of shares of stock based on the stock market closing
price on the last day of the fiscal year prior to the grant.  For calculation purposes, band and salary
information will be based on what is in effect as of October 1 of the
first fiscal year of the performance period.


 


All
performance share grants will be made by the Committee at the beginning of each
performance period (following the fiscal year end close process).  Final grant amounts will generally be
determined by the method outlined here. 
However, the Committee, at its discretion, may adjust final grant
amounts.


 

















 


Vesting


 


The
performance shares will vest 3 years from the date of grant based on the
achievement of certain performance metrics and subject to the participant’s
continued employment on the vesting date unless waived in accordance with the
Termination Provisions herein.  Company
performance goals are established by the Committee at the beginning of each
performance period.  At the conclusion of
each performance period, Company performance metrics are measured against goals
over the same period to determine the percentage of the grant to be
awarded.  The actual award is determined
by an earnout schedule which defines performance level ranges and associated
earnout of grants.  Vested shares are
distributed to participants on or before September 15th following the end of the
performance period and the fiscal year end close.


 


Performance
Metrics and Earnout


 


The
earnout for each performance period is determined by evaluating actual Company
performance, using pre-defined metrics, for the full 3-year performance
period.  Baselines for each metric will
be established at the beginning of each performance period by the
Committee.  The baseline will be
determined by recording the metric as of the last day of the prior fiscal year
(6/30).


 


For
grants under the Program covering the performance period beginning July 1,
2008 and ending June 30, 2011, two types of financial metrics will be
used:


 


1.   Earnings Per Share (“EPS”)
Growth; and


 


2.   Revenue
Growth.


 


Earnout Schedule


 


An
earnout schedule using total growth over the 3-year performance period for
E.P.S and Revenue is shown below:


 




	
   

  	
   

  	
  47%

  	
   

  	
  100%

  	
   

  	
  135%

  	
   

  	
  170%

  
	
  E.P.S. Growth

  	
   

  	
  34%

  	
   

  	
  65%

  	
   

  	
  100%

  	
   

  	
  135%

  
	
   

  	
   

  	
  27%

  	
   

  	
  30%

  	
   

  	
  65%

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
  20%

  	
   

  	
  25%

  	
   

  	
  35%

  
	
   

  	
   

  	
   

  	
   

  	
  Revenue
  Growth

  
										






 

















 


Performance
Metrics for Performance period 7/1/2008 — 6/30/2011


 


Earnings
Per Share (E.P.S.) Growth — E.P.S. for the fiscal year before the start of the
performance period compared to E.P.S. of the 3rd year of the performance period, expressed as a
percentage.  E.P.S. is defined as fully diluted earnings per share from continuing
operations.  The E.P.S. to be used for
the fiscal year before the start of the performance period is $3.50 which
reflects fiscal 2008 fully diluted earnings per share from continuing
operations.


 


Revenue Growth — Revenue
growth is defined as the percentage change in revenue from the fiscal year
prior to the performance period of the plan to the third year of the
performance period.


 


Revenue will be defined as
the amount stated in the Form 10-K.


 


In performance periods where
acquisitions occur:


 


Revenue at the start of the
performance period (as published in the Form 10-K) will be increased by
the revenue generated by the acquired company during the annual period
preceding the acquisition. In the event
an acquisition occurs after the first day of the performance period, the
acquisition revenue from the year preceding the acquisition will be discounted,
using Watson Wyatt’s revenue growth rate, from the year preceding the
acquisition to the beginning of the performance period. In addition, the
revenue to be counted for the acquired company in the year of acquisition will
be adjusted to be representative of a full year’s revenue.  Acquisition revenue used will be as
reported in the acquired company’s published financial reports (Form 10-K).
In the event such financial reports are unavailable, revenue generated by the
acquired company will be provided by the investment bankers familiar with the
acquired company.


 


For significant foreign
operations, revenue for use in the revenue growth calculations will reflect a
constant currency exchange between the local currency and the U.S. dollar over
the 3-year measurement period.


 


Termination Provisions


 


Performance shares granted to a participant
whose employment terminates prior to the scheduled vesting date on account of
the participant’s death, or permanent disability (permanent disability to be
determined pursuant to the terms of the Company’s tax-qualified pension plan)
shall vest as if the participant remained employed through the scheduled
vesting date.  Performance shares granted
to a participant whose employment terminates prior to the scheduled vesting
date on account of retirement (determined pursuant to the terms of the Company’s
qualified pension plan) shall vest as the Committee may determine, in its sole
discretion and on a case-by-case basis. 
Performance shares granted to a participant whose employment terminates
for reasons other than death, permanent disability or retirement will not vest
and shall be forfeited; provided, however, that the Committee may determine, in
its sole discretion and on a case-by-case basis, to permit some or all of such
participant’s performance shares to vest.


 


Change
in Control or Capitalization


 


A change in control or capitalization (merger, consolidation,
reorganization, stock split, acquisition, etc.) may affect the value of
performance shares granted, earnout of vested performance shares or other
provisions of the Program.  To assure
fair and equitable treatment of participants in the event of such a change in
control or capitalization, the Committee, at its discretion, may make changes
to grants and/or vesting that is consistent with the Change in Control and
Change in Capitalization provisions described in the 2001 Deferred Stock
Unit Plan for
Selected Employees.  Under these circumstances, the Committee may
make appropriate adjustments to the number of performance shares granted for
any performance period, accelerate the vesting of any performance shares
granted, or provide for payment in cash in lieu of shares.


 

















 


Attachment 1


 


Watson Wyatt Worldwide, Inc.


 


Performance Share Bonus Incentive
Program


 




	
   

  	
   

  	
  Multiplier

  	
   

  	
  FY09

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tier One

  	
   

  	
  2.0

  	
   

  	
  ·      John
  Haley

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tier Two

  	
   

  	
  1.25

  	
   

  	
  ·       Roger
  Millay

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tier Three

  	
   

  	
  1.0

  	
   

  	
  ·      Gene Wickes 

  ·      Kevin
  Meehan 

  ·      Babloo
  Ramamurthy

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tier Four

  	
   

  	
  .75

  	
   

  	
  ·      Paul Platten 

  ·      Steve
  Mele 

  ·      Ira Kay
  

  ·      Walter
  Bardenwerper