PRE 14A 1 f50679prpre14a.htm PRELIMINARY PROXY STATEMENT pre14a
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SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant þ
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  Definitive Proxy Statement       (as permitted by Rule 14a-6(e)(2))
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  Definitive Additional Materials        
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  Soliciting Material under Rule 14a-12        
INTEL CORPORATION
(Name of the Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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INTEL CORPORATION
2200 Mission College Blvd.
Santa Clara, CA 95054-1549
(408) 765-8080
 
(INTEL LOGO)
 
April 3, 2009
 
Dear Stockholder:
 
We look forward to your attendance in person, virtually via the Internet, or by proxy at the 2009 Annual Stockholders’ Meeting. We will hold the meeting at 8:30 a.m. Pacific Time on Wednesday, May 20, 2009 at Intel Corporation, Building SC-12, 3600 Juliette Lane, Santa Clara, California 95054. One of the steps we have taken this year to reduce operating expenses is to hold the meeting at an Intel building rather than at a rented facility, and only stockholders will be allowed to attend the meeting in person. In addition, unlike prior years, there will be no food service at the meeting. We are offering a live webcast of the annual meeting for our stockholders at www.intc.com where you will be able to vote electronically and submit questions during the meeting.
 
We also are pleased to be furnishing proxy materials to stockholders primarily over the Internet. We believe that this process expedites stockholders’ receipt of proxy materials, significantly lowers the costs of our annual meeting, and conserves natural resources. On April 3, 2009, we mailed our stockholders a notice containing instructions on how to access our 2009 Proxy Statement and 2008 Annual Report and vote online. The notice also included instructions on how you can receive a paper copy of your annual meeting materials, including the notice of annual meeting, proxy statement, and proxy card. If you received your annual meeting materials by mail, the notice of annual meeting, proxy statement, and proxy card from our Board of Directors were enclosed. If you received your annual meeting materials via e-mail, the e-mail contained voting instructions and links to the annual report and the proxy statement on the Internet, both of which are available at www.intel.com/intel/annualreports.
 
At this year’s annual meeting, the agenda includes the following items:
 
     
Agenda Item
  Board Recommendation
Election of Directors
  FOR
Ratification of Ernst & Young LLP as our independent registered public accounting firm
  FOR
Amendment and extension of the 2006 Equity Incentive Plan
  FOR
Approval of an employee stock option exchange program
  FOR
Advisory vote on executive compensation
  FOR
Stockholder proposal: Cumulative voting
  AGAINST
Stockholder proposal: [to come]
  AGAINST
 
Please refer to the proxy statement for detailed information on each of the proposals and the annual meeting. Your Intel stockholder vote is important, and we strongly urge you to cast your vote.
 
If you are a stockholder of record, meaning that you hold shares directly with Computershare Investor Services, LLC (“registered holders”), the inspector of elections will have your name on a list, and you will be able to gain entry with a form of government-issued photo identification, such as a driver’s license, state-issued ID card, or passport. Stockholders holding stock in brokerage accounts (“street name” or “beneficial holders”) will need to bring a copy of a brokerage statement reflecting their stock ownership as of the record date.
 
Sincerely yours,
 
Craig R. Barrett
Chairman of the Board


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(INTEL LOGO)
 
INTEL CORPORATION
2200 Mission College Blvd.
Santa Clara, California 95054-1549
 
 
NOTICE OF 2009 ANNUAL STOCKHOLDERS’ MEETING
 
 
TIME AND DATE 8:30 a.m. Pacific Time on Wednesday, May 20, 2009
 
PLACE Intel Corporation, Building SC-12, 3600 Juliette Lane, Santa Clara, CA 95054
 
INTERNET Attend the annual meeting online, including submitting questions, at www.intc.com
 
AGENDA
     • Elect a Board of Directors
 
     • Ratify Ernst & Young LLP as our independent registered public accounting firm
 
     • Amend and extend the 2006 Equity Incentive Plan
 
     • Approve an employee stock option exchange program
 
     • Hold an advisory vote on executive compensation
 
     • Act on stockholder proposals, if properly presented at the meeting
 
     • Transact other business that may properly come before the annual meeting
(including adjournments and postponements)
 
RECORD DATE March 23, 2009
 
MEETING ADMISSION You are entitled to attend the annual meeting only if you were an Intel stockholder as of the close of business on March 23, 2009 or hold a valid proxy for the annual meeting. You should be prepared to present photo identification for admittance. In addition, if you are a stockholder of record, your ownership as of the record date will be verified prior to admittance into the meeting. If you are not a stockholder of record but hold shares through a broker, trustee, or nominee, you must provide proof of beneficial ownership as of the record date, such as an account statement or similar evidence of ownership. If you do not provide photo identification and comply with the other procedures outlined above, you will not be admitted to the annual meeting, but can attend the meeting via the webcast available at www.intc.com.
 
VOTING Please vote as soon as possible to record your vote promptly, even if you plan to attend the annual meeting in person or on the Internet. You have three options for submitting your vote before the annual meeting:
 
     • Internet
 
     • Phone
 
     • Mail
 
By Order of the Board of Directors
 
Cary I. Klafter
Corporate Secretary
 
Santa Clara, California
April 3, 2009


 

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INTERNET AVAILABILITY OF PROXY MATERIALS
 
We are furnishing proxy materials to our stockholders primarily via the Internet. On April 3, 2009, we mailed to our stockholders a Notice of Internet Availability containing instructions on how to access our proxy materials, including our proxy statement and our annual report. The Notice of Internet Availability also instructs you on how to access your proxy card to be able to vote through the Internet or by telephone. Other stockholders, in accordance with their prior requests, have received e-mail notification of how to access our proxy materials and vote via the Internet, or have been mailed paper copies of our proxy materials and a proxy card or voting form.
 
Internet distribution of our proxy materials is designed to expedite receipt by stockholders, lower the cost of the annual meeting, and conserve natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via e-mail unless you elect otherwise.
 
ATTENDING THE ANNUAL MEETING
 
     
Attending in person
  Attending and participating via the Internet
•  Doors open at 8:00 a.m. Pacific Time
 
•   www.intc.com
•  Meeting starts at 8:30 a.m. Pacific Time
 
•   Webcast starts at 8:30 a.m. Pacific Time
•  Proof of Intel Corporation stock ownership will be required to attend the annual meeting
 
•   Stockholders may vote and submit questions while attending the meeting on the Internet
•  You do not need to attend the annual meeting to vote if you submitted your proxy in advance of the annual meeting
 
•   Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.intc.com
•  Security measures may include bag search, metal detector, and hand-wand search
 
•   Anyone can view the annual meeting live via the Internet at www.intc.com
•  The use of cameras is not allowed
 
•   Webcast replay available until June 20, 2009
 
QUESTIONS
 
For questions regarding Contact
 
Annual meeting Intel Investor Relations, (408) 765-1480
 
Stock ownership Computershare Investor Services, LLC
www.computershare.com/contactus
(800) 298-0146 (within the U.S. and Canada) or
(312) 360-5123 (outside the U.S. and Canada)
 
Voting D. F. King & Co., Inc.
(800) 967-7921 (within the U.S. and Canada) or
(212) 269-5550 (outside the U.S. and Canada)


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(INTEL LOGO)
INTEL CORPORATION
2200 Mission College Blvd.
Santa Clara, CA 95054-1549
 
 
 
 
Our Board of Directors solicits your proxy for the 2009 Annual Stockholders’ Meeting and at any postponement or adjournment of the meeting for the purposes set forth in “Notice of Annual Stockholders’ Meeting.” The 2009 Annual Stockholders’ Meeting will be held at 8:30 a.m. Pacific Time on Wednesday, May 20, 2009 at Intel Corporation, Building SC-12, 3600 Juliette Lane, Santa Clara, CA 95054 and on the Internet at www.intc.com. We made this proxy statement available to stockholders beginning on April 3, 2009.
 
 
Record Date March 23, 2009
 
Quorum Majority of shares outstanding on the record date must be present in person or by proxy
 
Shares Outstanding [x] shares of common stock outstanding as of March 23, 2009
 
Voting by Proxy Internet, phone, or mail
 
Voting at the Meeting Stockholders can vote in person or via the Internet during the meeting. Stockholders of record will be on a list held by the inspector of elections. Beneficial holders must obtain a proxy from their brokerage firm, bank, or other stockholder of record and present it to the inspector of elections with their ballot. Stockholders attending via the Internet will need to follow the instructions at www.intc.com in order to vote or submit questions at the meeting. Voting in person or via the Internet by a stockholder will replace any previous votes submitted by proxy.
 
Polls Close 9:30 a.m. Pacific Time on May 20, 2009
 
Changing Your Vote Stockholders of record may revoke their proxy at any time before the polls close by submitting a later-dated vote in person or electronically at the annual meeting, via the Internet, by telephone, by mail, or by delivering instructions to our Corporate Secretary before the annual meeting. If you hold shares through a bank or brokerage firm, you may revoke any prior voting instructions by contacting that firm.
 
Votes Required to Adopt Proposals Each share of our common stock outstanding on the record date is entitled to one vote on each of the 11 director nominees and one vote on each other matter. To be elected, directors must receive a majority of the votes cast (the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee). Approval of each of the other matters on the agenda requires the affirmative vote of the majority of the shares of common stock present or represented by proxy.
 
Effect of Abstentions and Broker Non-Votes Shares not present at the meeting and shares voting “abstain” have no effect on the election of directors. For each of the other proposals, abstentions have the same effect as negative votes. Broker non-votes (shares held by brokers that do not have discretionary authority to vote on a matter and have not received voting instructions from their clients) have no effect.
 
Voting Instructions If you complete and submit your proxy voting instructions, the persons named as proxies will follow your instructions. If you submit proxy voting instructions but do not direct how to vote on each item, the persons named as proxies will vote as the Board recommends on each proposal. The persons named as proxies will vote on any other matters properly presented at the annual meeting in accordance with their best judgment. We have published rules about when to submit agenda items for the annual meeting, and we have not received timely notice of any other matters that may be properly presented for voting at the annual meeting.
 
Voting Results We will announce preliminary results at the annual meeting. We will report final results at www.intc.com and in our Form 10-Q for the second quarter of 2009.
 


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PROPOSAL 1: ELECTION OF DIRECTORS
 
Our nominees for the election of directors at the annual meeting include 10 independent directors, as defined in the applicable rules for companies traded on The NASDAQ Global Select Market* (NASDAQ), and our Chief Executive Officer (CEO). Stockholders elect all directors annually. At the recommendation of our Corporate Governance and Nominating Committee, our Board has selected the nominees listed below to serve as directors for the one-year term beginning at our annual meeting on May 20, 2009 or until their successors, if any, are elected or appointed.
 
Unless you direct otherwise through your proxy voting instructions, the persons named as proxies will vote all proxies received “for” the election of each nominee named in this section. If any director nominee is unable or unwilling to serve as a nominee at the time of the annual meeting, the persons named as proxies may vote for a substitute nominee chosen by the present Board to fill the vacancy. In the alternative, the proxies may vote just for the remaining nominees, leaving a vacancy that may be filled at a later date by the Board. Alternatively, the Board may reduce the size of the Board. We have no reason to believe that any of the nominees will be unwilling or unable to serve if elected as a director.
 
Intel’s Bylaws require that in order to be elected, a director nominee must receive a majority of the votes cast with respect to such nominee in uncontested elections (the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee). Each of our director nominees is currently serving on the Board. If a nominee who is currently serving as a director is not re-elected, Delaware law provides that the director would continue to serve on the Board as a “holdover director.” Under our Bylaws and Corporate Governance Guidelines, each director submits an advance, contingent, irrevocable resignation that the Board may accept if stockholders do not elect the director. In that situation, our Corporate Governance and Nominating Committee would make a recommendation to the Board about whether to accept or reject the resignation, or whether to take other action. The Board would act on the Corporate Governance and Nominating Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date that the election results were certified.
 
Director Changes in 2008 and 2009. In May 2008, D. James Guzy retired at age 72 in accordance with the Board’s retirement age policy. In January 2009, Dr. Craig R. Barrett, Chairman of the Board, announced his intention to retire as Chairman and member of the Board in May 2009 at the annual stockholders’ meeting. Dr. Jane E. Shaw, if re-elected, will become the new Chairman of the Board beginning in May 2009. In March 2009, Carol A. Bartz resigned as a member of the Board in connection with her taking a new job as CEO of Yahoo! Inc., and the Board elected Mr. John J. Donahoe and Mr. Frank D. Yeary to the Board.
 
The Board recommends that you vote “FOR” the election of each of the following nominees.
 
 
Ambassador Charlene Barshefsky, age 58
   •   Intel Board member since 2004
   •   2001 – present, Senior International Partner at
Wilmer Cutler Pickering Hale and Dorr LLP, multinational law firm, Washington, D.C.
   •   1997 – 2001, United States Trade Representative, chief trade negotiator, and principal trade policy maker for the United States, and a member of the President’s cabinet
   •   Member of American Express Company, Estée Lauder Companies, and Starwood Hotels & Resorts Worldwide Boards of Directors
 
Susan L. Decker, age 46
   •   Intel Board member since 2006
   •   2007 – 2009, President of Yahoo! Inc., global
Internet company, Sunnyvale, California
   •   2006 – 2007, Executive Vice President of the Advertiser and Publisher Group of Yahoo! Inc.
   •   2000 – 2007, Executive Vice President of Finance and Administration, and Chief Financial Officer of Yahoo! Inc.
   •   Member of Berkshire Hathaway Inc. and Costco Wholesale Corporation Boards of Directors
 
John J. Donahoe, age 49
   •   Intel Board member since 2009
   •   2008 – present, President and Chief Executive Officer of eBay, Inc., online marketplace, San Jose, California
   •   2005 – 2008, President of eBay Marketplaces
   •   2000 – 2005, Worldwide Managing Director, Bain & Company
 
Reed E. Hundt, age 61
   •   Intel Board member since 2001
   •   1998 – present, Principal of Charles Ross Partners, LLC, private investor and advisory service, Washington, D.C.
   •   1998 – present, independent adviser to
McKinsey & Company, Inc., worldwide
management consulting firm, Washington, D.C.
   •   1993 – 1997, Chairman of Federal Communications Commission
   •   Member of Data Domain, Inc. and Infinera Corporation Boards of Directors


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Paul S. Otellini, age 58
   •   Intel Board member since 2002
   •   2005 – present, President and Chief Executive Officer of Intel Corporation
   •   2002 – 2005, President and Chief Operating Officer
   •   Member of Google, Inc. Board of Directors
   •   Joined Intel 1974
 
James D. Plummer, age 64
   •   Intel Board member since 2005
   •   1999 – present, Dean of the School of Engineering at Stanford University, Stanford, California
   •   1978 – present, Professor of Electrical Engineering at Stanford University
   •   Member of National Academy of Engineering
   •   Member of International Rectifier Corporation and Leadis Technology, Inc. Boards of Directors
 
David S. Pottruck, age 60
   •   Intel Board member since 1998
   •   2005 – present, Chairman and Chief Executive Officer of Red Eagle Ventures, Inc., private equity firm, San Francisco, California
   •   2004 – present, Senior Fellow at Wharton School of Business Center for Leadership and Change Management
   •   2005 – 2008, Chairman of Eos Airlines
   •   1984 – 2004, served in various capacities at The Charles Schwab Corporation, including President, Chief Executive Officer, and member of the Board of Directors
 
Jane E. Shaw, age 70
   •   Intel Board member since 1993
   •   1998 – 2005, Chairman and Chief Executive Officer of Aerogen, Inc., specialty medical device company, Mountain View, California
   •   Member of McKesson Corporation Board of Directors
 
John L. Thornton, age 55
   •   Intel Board member since 2003
   •   2003 – present, Professor and Director of Global Leadership at Tsinghua University, Beijing, China
   •   1981 – 2003, served in various capacities at Goldman Sachs Group, Inc., including President, Co-Chief Operating Officer, and member of the Board of Directors
   •   Member of HSBC Holdings plc, China Unicom (Hong Kong) Limited, Ford Motor Company, and News Corporation Boards of Directors
 
Frank D. Yeary, age 45
   •   Intel Board member since 2009
   •   2008 – present, Vice Chancellor, University of California, Berkeley, California
   •   2004 – 2008, Managing Director, Global Head of Mergers and Acquisitions, Citigroup Investment Banking
 
David B. Yoffie, age 54
   •   Intel Board member since 1989
   •   1993 – present, Professor of International Business Administration, Harvard Business School,
Cambridge, Massachusetts
   •   1981 – present, member of Harvard University faculty

 
 
CORPORATE GOVERNANCE
 
Board Responsibilities and Structure
 
The Board oversees, counsels, and directs management in the long-term interests of the company and our stockholders. The Board’s responsibilities include:
 
  •   selecting and evaluating the performance of the CEO and other senior executives;
 
  •   planning for succession with respect to the position of CEO and monitoring management’s succession planning for other senior executives;
 
  •   reviewing and approving our major financial objectives and strategic and operating plans and other significant actions;
 
  •   overseeing the conduct of our business and the assessment of our business risks to evaluate whether the business is being properly managed; and
 
  •   overseeing the processes for maintaining our integrity with regard to our financial statements and other public disclosures, and compliance with law and ethics.
 
The Board believes that different people should hold the positions of Chairman of the Board and CEO to aid in the Board’s oversight of management. In May 2008, the Board designated Dr. Shaw as our Lead Independent Director. We anticipate that Dr. Shaw will become Chairman of the Board beginning in May 2009. The duties of non-executive Chairman of the Board include:
 
  •   presiding over all meetings of the Board;
 
  •   preparing the agenda for Board meetings with the Corporate Secretary and in consultation with the CEO and other members of the Board;


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  •   calling and presiding over meetings of the independent directors;
 
  •   managing the Board’s process for annual director self-assessment and evaluation of the Board; and
 
  •   presiding over all meetings of stockholders.
 
The Board and its committees met throughout the year on a set schedule, held special meetings, and acted by written consent from time to time as appropriate. The Board held four regularly scheduled sessions for the independent directors to meet without management present, and the Lead Independent Director led those sessions in 2008. Dr. Shaw will lead these sessions in her capacity as Chairman of the Board following the annual meeting. Board members have access to all of our employees outside of Board meetings, and the Board has a program that encourages each director to visit different Intel sites and events worldwide on a regular basis and meet with local management at those sites and events.
 
Board Committees and Charters
 
The Board delegates various responsibilities and authority to different Board committees. Committees regularly report on their activities and actions to the full Board. The Board currently has, and appoints the members of, standing Audit, Compensation, Corporate Governance and Nominating, Executive, and Finance Committees. The Board has determined that each member of the Audit, Compensation, Corporate Governance and Nominating, and Finance Committees is an independent director in accordance with NASDAQ standards.
 
Each of the Board committees has a written charter approved by the Board, and each committee conducts an annual evaluation of the committee’s performance. We post each charter and the charter describing the position of Lead Independent Director on our web site at www.intel.com/intel/finance/corp_docs.htm. Each committee can engage outside experts, advisers, and counsel to assist the committee in its work. The following table identifies the current committee members.
                               
                  Corporate
           
                  Governance
           
Name     Audit     Compensation     and Nominating     Executive     Finance
Craig R. Barrett
                      ü      
Charlene Barshefsky
                            ü
Susan L. Decker
    ü           ü            
John J. Donahoe
    ü                        
Reed E. Hundt
          Chair     ü            
Paul S. Otellini
                      ü      
James D. Plummer
    ü                       ü
David S. Pottruck
          ü                 ü
Jane E. Shaw
    Chair                 Chair     ü
John L. Thornton
          ü     ü            
Frank D. Yeary
    ü                        
David B. Yoffie
          ü     Chair            
Number of Committee Meetings Held in 2008
    7     3     4     4     3
                               
 
Audit Committee. The Audit Committee assists the Board in its general oversight of our financial reporting, financial risk assessment, internal controls, and audit functions, and is responsible for the appointment, retention, compensation, and oversight of the work of our independent registered public accounting firm. The Board has determined that each member of the Audit Committee, with the exception of Dr. Plummer, meets the U.S. Security and Exchange Commission (SEC) qualifications to be an “audit committee financial expert,” including meeting the relevant definition of an “independent director.” The Board determined that each Audit Committee member has sufficient knowledge in reading and understanding the company’s financial statements to serve on the Audit Committee. The responsibilities and activities of the Audit Committee are described in detail in “Report of the Audit Committee” and the Audit Committee’s charter.
 
Compensation Committee. The Compensation Committee has authority for reviewing and determining salaries, performance-based incentives, and other matters related to the compensation of our executive officers, and administering our stock option plans, including reviewing and granting stock options to our executive officers. The Compensation Committee also reviews and determines various other compensation policies and matters, including making


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recommendations to the Board and to management related to employee compensation and benefit plans, making recommendations to the Board on stockholder proposals related to compensation matters, and administering the employee stock purchase plan.
 
The Compensation Committee is responsible for executive compensation, and the Corporate Governance and Nominating Committee recommends the compensation for non-employee directors.
 
The Compensation Committee can designate one or more of its members to perform duties on its behalf, subject to reporting to or ratification by the Compensation Committee.
 
Since 2005, the Compensation Committee has engaged the services of Professor Brian Hall of the Harvard Business School to advise the committee with respect to executive compensation philosophy, cash and equity incentive design, the amount of cash and equity compensation awarded, and committee process. The Compensation Committee selected Professor Hall, and he reports directly to the Compensation Committee and interacts with management at the direction of the Compensation Committee. Professor Hall has not performed work for Intel other than pursuant to his engagement by the committee.
 
During 2008, Professor Hall’s work with the Compensation Committee included:
 
  •   advice and recommendations on the cash and equity compensation programs and instruments;
 
  •   advice on an employee stock option exchange program (see Proposal 4); and
 
  •   recommendations for Chairman and CEO compensation.
 
The Compensation Committee has continued to engage Professor Hall in 2009 to advise it with regard to executive compensation programs, review and analysis of compensation data, and related matters.
 
The CEO makes a recommendation to the Compensation Committee on the base salary, annual incentive cash baselines, and equity awards for each executive officer other than himself, based on his assessment of each executive officer’s performance during the year and his review of compensation data gathered from compensation surveys. For more information on the responsibilities and activities of the Compensation Committee, including the committee’s processes for determining executive compensation, see “Compensation Discussion and Analysis,” “Report of the Compensation Committee,” and “Executive Compensation” in this proxy statement, and the Compensation Committee’s charter.
 
Corporate Governance and Nominating Committee. The Corporate Governance and Nominating Committee reviews and reports to the Board on a periodic basis with regard to matters of corporate governance and corporate responsibility, such as environmental, sustainability, workplace, and stakeholder issues. The committee also reviews and assesses the effectiveness of the Board’s Corporate Governance Guidelines, makes recommendations to the Board regarding proposed revisions to the Guidelines and committee charters, reviews the policy related to the implementation of a “poison pill,” and makes recommendations to the Board regarding the size and composition of the Board and its committees. In addition, the committee makes recommendations to the Board regarding the agendas for our annual meetings, reviews stockholder proposals, makes recommendations to the Board for action on such proposals, and reviews and makes recommendations concerning compensation for our non-employee directors. The Corporate Governance and Nominating Committee’s charter describes the responsibilities and activities of the committee in detail.
 
The Corporate Governance and Nominating Committee is responsible for reviewing with the Board, from time to time, the appropriate skills and characteristics required of Board members in the context of the current makeup of the Board. This assessment includes issues of diversity in numerous factors such as age; understanding of and experience in manufacturing, technology, finance, and marketing; and international experience and culture. The committee reviews these factors, and others considered useful by the committee, in the context of an assessment of the perceived needs of the Board at a particular point in time. As a result, the priorities and emphasis of the committee and of the Board may change from time to time to take into account changes in business and other trends, as well as the portfolio of skills and experience of current and prospective Board members. The committee establishes procedures for the nomination process and recommends candidates for election to the Board.
 
Consideration of new Board candidates typically involves a series of internal discussions, review of information concerning candidates, and interviews with selected candidates. Board members typically suggest candidates for nomination to the Board. In 2008, we employed a professional search firm in connection with seeking Board candidates; however, neither of our new directors was identified by this search firm. Our CEO first suggested Mr. Donahoe as a prospective Board candidate, and one of our independent directors suggested Mr. Yeary. The committee considers candidates proposed by stockholders and evaluates them using the same criteria as for other candidates. A stockholder


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seeking to suggest a prospective nominee for the committee’s consideration should submit the candidate’s name and qualifications to our Corporate Secretary. The Corporate Secretary’s contact information can be found in “Other Matters; Communicating with Us.”
 
Executive Committee. The Executive Committee may exercise the authority of the Board between Board meetings, except to the extent that the Board has delegated authority to another committee or to other persons, and except as limited by applicable law.
 
Finance Committee. The Finance Committee reviews and recommends matters related to our capital structure, including the issuance of debt and equity securities; banking arrangements, including the investment of corporate cash; and management of the corporate debt structure. In addition, the Finance Committee reviews and approves finance and other cash management transactions. The Finance Committee appoints the members of, and oversees, the Retirement Plans Investment Policy Committee, which sets the investment policy and chooses investment managers for the company’s domestic profit sharing and retirement plans. Mr. Pottruck is chairman of the Retirement Plans Investment Policy Committee, whose other members are Intel employees.
 
Attendance at Board, Committee, and Annual Stockholders’ Meetings. The Board held six meetings in 2008. We expect each director to attend every meeting of the Board and the committees on which he or she serves as well as the annual stockholders’ meeting. In 2008, each director attended the 2008 Annual Stockholders’ Meeting, with the exception of Dr. Shaw. All directors attended at least 75% of the meetings of the Board and the committees on which they served in 2008.
 
Director Independence. Each of the non-employee directors qualifies as “independent” in accordance with the published listing requirements of NASDAQ: Ambassador Barshefsky, Ms. Decker, Mr. Donahoe, Mr. Hundt, Dr. Plummer, Mr. Pottruck, Dr. Shaw, Mr. Thornton, Mr. Yeary, and Dr. Yoffie. Because Mr. Otellini is employed by Intel, he does not qualify as independent.
 
The NASDAQ rules have objective tests and a subjective test for determining who is an “independent director.” Under the objective tests, a director cannot be considered independent if he or she:
 
  •   is an employee of the company; or
 
  •   is a partner in, or an executive officer of, an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year.
 
The subjective test states that an independent director must be a person who lacks a relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Board has not established categorical standards or guidelines to make these subjective determinations, but considers all relevant facts and circumstances.
 
In addition to the Board-level standards for director independence, the directors who serve on the Audit Committee each satisfy standards established by the SEC providing that to qualify as “independent” for the purposes of membership on that committee, members of audit committees may not accept directly or indirectly any consulting, advisory, or other compensatory fee from the company other than their director compensation.
 
Transactions Considered in Independence Determinations. In making its independence determinations, the Board considered transactions occurring since the beginning of 2006 between Intel and entities associated with the independent directors or members of their immediate family. All identified transactions that appear to relate to Intel and a family member of, or entity with a known connection to, a director are presented to the Board for consideration.
 
None of the non-employee directors was disqualified from “independent” status under the objective tests. In making its subjective determination that each non-employee director is independent, the Board reviewed and discussed additional information provided by the directors and the company with regard to each director’s business and personal activities as they may relate to Intel and Intel’s management. The Board considered the transactions in the context of the NASDAQ objective standards, the special standards established by the SEC for members of audit committees, and the SEC and U.S. Internal Revenue Service (IRS) standards for compensation committee members. Based on all of the foregoing, as required by NASDAQ rules, the Board made a subjective determination that, because of the nature of the director’s relationship with the entity and/or the amount involved, no relationships exist that, in the opinion of the Board, would impair the director’s independence. The Board’s independence determinations included reviewing the following transactions.


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Ambassador Barshefsky is a partner at the law firm of Wilmer Cutler Pickering Hale and Dorr LLP. Intel paid this firm less than 1% of this firm’s revenue in 2008, 2007, and 2006 for professional services. Ambassador Barshefsky does not provide any legal services to Intel, and she does not receive any compensation related to our payments to this firm. Ambassador Barshefsky’s husband is an officer of American Honda Motor Co., Inc. (which is wholly owned by Honda Motor Co., Ltd.). Intel and the Intel Foundation participated in loans to Honda Finance Corp., a subsidiary of Honda Motor Co., Ltd., in 2006, 2007, and 2008 by purchasing short-term debt instruments as part of our cash management portfolio.
 
Ms. Decker, Mr. Donahoe, Mr. Hundt, Dr. Plummer, Mr. Pottruck, Dr. Shaw, Mr. Thornton, Mr. Yeary, Dr. Yoffie, or one of their immediate family members have each served as a trustee, director, employee, or advisory board member for one or more colleges or universities. Intel has a variety of dealings with these institutions, including:
 
  •   sponsored research and technology licenses;
 
  •   charitable contributions (matching and discretionary);
 
  •   fellowships and scholarships;
 
  •   facility, engineering, and equipment fees; and
 
  •   payments for training, event hosting, and organizational participation or membership dues.
 
Payments to each of these institutions (including discretionary contributions by Intel and the Intel Foundation) constituted less than the greater of $200,000 or 1% of that institution’s 2008 annual revenue.
 
With the exception of Mr. Donahoe, Mr. Pottruck, Mr. Yeary, and Dr. Yoffie, each of our non-employee directors is, or was during the previous three fiscal years, a non-management director of another company that did business with Intel at some time during those years. These business relationships were as a supplier or purchaser of goods or services, licensing or research arrangements, or financing arrangements in which Intel or the Intel Foundation participated as a creditor.
 
Code of Conduct. It is our policy that all employees must avoid any activity that is or has the appearance of being hostile, adverse, or competitive with Intel, or that interferes with the proper performance of their duties, responsibilities, or loyalty to Intel. Our Code of Conduct contains these policies and applies to our directors (with respect to their Intel-related activities), executive officers, and other employees.
 
Each director and executive officer must inform our Board when confronted with any situation that may be perceived as a conflict of interest with Intel, even if the person does not believe that the situation would violate our Code of Conduct. If in a particular circumstance the Board concludes that there is or may be a perceived conflict of interest, the Board will instruct our Legal department to work with our relevant business units to determine if there is a conflict of interest and, if there is, how the conflict should be resolved.
 
Any waivers of these conflict rules with regard to a director or an executive officer require the prior approval of the Board or the Audit Committee. Our Code of Conduct is our code-of-ethics document. We have posted our Code of Conduct on our web site at www.intc.com under the “Corporate Governance & Ethics” section.
 
Communications from Stockholders to Directors. The Board recommends that stockholders initiate communications with the Board, the Chairman, or any committee of the Board in writing to the attention of our Corporate Secretary at the address set forth in “Other Matters; Communicating with Us.” This process will assist the Board in reviewing and responding to stockholder communications in an appropriate manner. The Board has instructed our Corporate Secretary to review such correspondence and, at his discretion, not to forward items if he deems them to be of a commercial or frivolous nature or otherwise inappropriate for the Board’s consideration.


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Corporate Governance Guidelines. The Board has adopted a set of Corporate Governance Guidelines. The Corporate Governance and Nominating Committee is responsible for overseeing the Guidelines and annually reviews them and makes recommendations to the Board concerning corporate governance matters. The Board may amend, waive, suspend, or repeal any of the Guidelines at any time, with or without public notice, as it determines necessary or appropriate in the exercise of the Board’s judgment or fiduciary duties.
 
We have posted the Guidelines on our web site at www.intc.com under the “Corporate Governance & Ethics” section. Among other matters, the Guidelines include the following items concerning the Board:
 
  •   Independent directors may not stand for re-election after age 72, and management directors, other than former CEOs, may not stand for re-election after age 65. Corporate officers may continue as such no later than age 65.
 
  •   Directors are limited to service on four public company boards, including Intel’s but excluding not-for-profit and mutual fund boards. If the director serves as an active CEO of a public company, the director is limited to service on three public company boards, including Intel’s.
 
  •   The CEO reports at least annually to the Board on succession planning and management development.
 
  •   The Chairman of the Board manages a process whereby the Board and its members are subject to annual evaluation and self-assessment.
 
  •   The Board will obtain stockholder approval before adopting any poison pill. If the Board later repeals this policy and adopts a poison pill without prior stockholder approval, the Board will submit the poison pill to an advisory vote by Intel’s stockholders within 12 months from the date that the Board adopts the poison pill. If the company’s stockholders fail to approve the poison pill, the Board may elect to terminate, retain, or modify the poison pill in the exercise of its fiduciary responsibilities.
 
In addition, the Board has adopted a policy committing not to issue shares of preferred stock to prevent an unsolicited merger or acquisition.


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DIRECTOR COMPENSATION
 
The general policy of the Board is that compensation for independent directors should be a mix of cash and equity-based compensation. Intel does not pay management directors for Board service in addition to their regular employee compensation. The Corporate Governance and Nominating Committee, which consists solely of independent directors, has the primary responsibility for reviewing and considering any revisions to director compensation. The Board reviews the committee’s recommendations and determines the amount of director compensation.
 
Intel’s Legal department, Corporate Secretary, and Compensation and Benefits Group in the Human Resources department support the committee in setting director compensation and creating director compensation programs. In addition, the committee can engage the services of outside advisers, experts, and others to assist the committee. During 2008, the committee did not use an outside adviser to aid in setting director compensation.
 
To assist the committee in its annual review of director compensation, Intel’s Compensation and Benefits Group provides director compensation data compiled from the annual reports and proxy statements of companies that the Board uses as its “peer group” for determining director compensation. The director peer group consists of companies within the Standard & Poor’s 100 Index (S&P 100) and technology companies generally considered comparable to Intel. The committee targets cash and equity compensation at the median of the peer group. The director peer group consists of the following companies:
 
                                         
                              Market
 
                              Capitalization on
 
      Reported
      Revenue
      Net Income (Loss)
      March 3, 2009
 
Company     Fiscal Year       ($ in billions)       ($ in billions)       ($ in billions)  
American International Group Inc. 
      12/31/08         11.1         (99.3 )       1.2  
Bank of America Corporation
      12/31/08         72.8         4.0         18.3  
Chevron Corporation
      12/31/08         273.0         23.9         117.3  
Cisco Systems Inc. 
      7/26/08         39.5         8.1         84.0  
Dell Inc. 
      2/1/08         61.1         2.9         17.8  
Hewlett-Packard Company
      10/31/08         118.4         8.3         67.9  
International Business Machines Corporation
      12/31/08         103.6         12.3         117.8  
Johnson & Johnson
      12/28/08         63.7         12.9         131.8  
JP Morgan Chase & Co. 
      12/31/08         67.3         5.6         78.4  
Microsoft Corporation
      6/30/08         60.4         17.7         141.2  
Motorola, Inc. 
      12/31/08         30.1         (4.2 )       7.5  
The Procter & Gamble Company
      6/30/08         83.5         12.1         136.7  
Texas Instruments Incorporated
      12/31/08         12.5         1.9         18.1  
Wal-Mart Stores, Inc. 
      1/31/08         374.5         12.7         185.9  
Intel 2008
      12/27/08         37.6         5.3         68.3  
Intel 2008 Peer Group Percentile Rank
                21st         37th         38th   
                                         
 
After reviewing peer group director compensation data in June 2008, the committee did not recommend any changes to director compensation, as the current level of compensation was deemed competitive. The Board followed the recommendation of the committee and determined that no changes would be made to non-employee director compensation in 2008. The Board recognizes that the market capitalization for many of the peer group companies has changed significantly since June 2008, and the Board will review the composition of the peer group again in 2009.


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Non-employee director compensation consists of the following elements:
 
  •   annual cash retainer of $75,000
 
  •   annual restricted stock unit (RSU) grant with a market value of approximately $145,000
 
  •   Audit Committee chair annual fee of $20,000
 
  •   all other committee chair annual fees of $10,000 per committee
 
  •   non-chair Audit Committee member annual fee of $10,000
 
  •   Lead Independent Director annual RSU grant with a market value of approximately $30,000
 
The following table details the total compensation of Intel’s non-employee directors for the year ended December 27, 2008.
 
Director Summary Compensation for Fiscal Year 2008
 
                                                   
                  Change in Pension Value
           
      Fees Earned
          and Non-Qualified
    All
     
      or Paid
    Stock
    Deferred Compensation
    Other
     
      in Cash
    Awards
    Earnings
    Compensation
    Total
Name     ($)     ($)(1)     ($)(2)     ($)(3)     ($)
Charlene Barshefsky(4)
      75,000         117,200                         192,200  
                                                   
Carol A. Bartz(5)
      85,000         41,400                         126,400  
                                                   
Susan L. Decker
      75,000         89,600                         164,600  
                                                   
D. James Guzy(6)
      47,500                                 47,500  
                                                   
Reed E. Hundt(7)
      85,000         261,100                         346,100  
                                                   
James D. Plummer
      85,000         112,600                 20,000         217,600  
                                                   
David S. Pottruck
      95,000         137,800                         232,800  
                                                   
Jane E. Shaw
      100,000         166,300                         266,300  
                                                   
John L. Thornton
      75,000         122,100                 10,000         207,100  
                                                   
David B. Yoffie
      90,000         137,800                 10,000         237,800  
                                                   
Total
      812,500         1,185,900                 40,000         2,038,400  
                                                   
(1)  Grant date fair value of RSUs granted in 2008: $137,800 for each director other than Ms. Bartz ($206,800), who received a prorated grant for the 2008 compensation cycle upon joining the Board in 2008, and Dr. Shaw ($166,300), who received an additional grant as Lead Independent Director for 2008. Because awards to Mr. Hundt, Mr. Pottruck, Dr. Shaw, and Dr. Yoffie would accelerate in full upon their retirement under the terms of the awards, we recognized all of the compensation expense associated with their 2008 RSUs at the time of grant.
 
(2)  The following directors had a loss in pension value of the following amounts: Mr. Guzy ($41,000), Dr. Shaw ($5,000), and Dr. Yoffie ($13,000).
 
(3)  Intel Foundation made matching charitable contributions on behalf of Dr. Plummer ($10,000 for charitable contributions that he made in 2007 were matched in January 2008, and another $10,000 matching contribution was made for his 2008 contributions), Mr. Thornton ($10,000), and Dr. Yoffie ($10,000).
 
(4)  Ambassador Barshefsky received 3,455 RSUs on July 17, 2008. This grant was in lieu of one-half of her 2007 and 2008 annual cash retainers. She will receive the other half of her 2008 retainer in the form of RSUs in July 2009. These shares vest in equal annual installments over three years.
 
(5)  Ms. Bartz retired from the Board effective March 2009.
 
(6)  Mr. Guzy retired from the Board effective May 2008.
 
(7)  In 2008, Mr. Hundt became eligible for full vesting of all his shares upon retirement from the Board.


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Fees Earned or Paid in Cash. Directors receive cash fees in quarterly installments and forfeit unpaid portions of cash upon termination, retirement, disability, or death. The following table provides a breakdown of fees earned or paid in cash.
 
                                         
      Annual
    Committee Chair
    Audit Committee
     
      Retainers
    Fees
    Member Fees
    Total
Name     ($)     ($)     ($)     ($)
Charlene Barshefsky
      75,000                         75,000  
                                         
Carol A. Bartz
      75,000                 10,000         85,000  
                                         
Susan L. Decker
      75,000                         75,000  
                                         
D. James Guzy
      37,500         5,000         5,000         47,500  
                                         
Reed E. Hundt
      75,000         10,000                 85,000  
                                         
James D. Plummer
      75,000                 10,000         85,000  
                                         
David S. Pottruck
      75,000         10,000 (1)       10,000         95,000  
                                         
Jane E. Shaw
      75,000         25,000                 100,000  
                                         
John L. Thornton
      75,000                         75,000  
                                         
David B. Yoffie
      75,000         15,000                 90,000  
                                         
  (1) Mr. Pottruck chairs the Retirement Plans Investment Policy Committee.
 
Under the “RSU in Lieu of Cash Election” program, directors can elect annually to receive all of their cash compensation in the form of RSUs. This election must be either 100% or 0%, and must be made in the tax year prior to receiving compensation. The Board grants RSUs elected in lieu of cash on the same grant date and with the same vesting terms as the annual RSU grant to directors. Ambassador Barshefsky participated in this program in 2008.
 
Equity Awards. In accordance with Intel’s 2006 Equity Incentive Plan, equity grants to non-employee directors may not exceed 30,000 shares per director per year. The current practice is to grant each non-employee director RSUs each July with a market value of the underlying shares on the grant date of approximately $145,000 and that vest in equal annual installments over a three-year period from the grant date. On July 17, 2008, Intel granted each independent director 6,675 RSUs; the closing price of Intel’s common stock was $21.99 on that date. The Board awarded Dr. Shaw an additional 1,380 RSUs for her service as Lead Independent Director for 2008. Vesting of all shares accelerates upon retirement from the Board if a director is 72 years of age or has at least seven years of service on Intel’s Board. Directors do not receive dividends on unvested RSUs.
 
The amounts included in the “Stock Awards” column in the Director Summary Compensation table reflect the dollar amounts recognized for financial statement reporting purposes for the fiscal year ended December 27, 2008 in accordance with Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123(R)), excluding forfeitures. The “Stock Awards” column generally includes amounts from awards granted in 2008, 2007, and 2006, except as indicated in footnote 1 to the Director Summary Compensation table. The following table includes the assumptions used in the calculation of these amounts.
 
             
      Assumptions
      Risk-Free
     
      Interest
    Dividend
Grant
    Rate
    Yield
Date     (%)     (%)
7/21/06
    5.2     2.3
1/18/07
    5.0     2.2
7/19/07
    5.0     1.8
1/17/08
    2.8     2.6
7/17/08
    2.3     2.6
             


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The following table provides information on the outstanding equity awards for non-employee directors at fiscal year-end. Intel previously granted stock options to non-employee directors, but beginning in 2006, Intel began granting RSUs instead of stock options. Market value for option awards is calculated by taking the difference between the closing price of Intel common stock on NASDAQ on the last trading day of the fiscal year ($14.18 on December 26, 2008) and the option exercise price and multiplying it by the number of exercisable options. Market value for stock awards (consisting solely of RSUs) is determined by multiplying the number of shares by the closing price of Intel common stock on NASDAQ on the last trading day of the fiscal year.
 
Outstanding Equity Awards for Directors at Fiscal Year-End 2008
 
                                                                                 
      Option Awards     Stock Awards
            Number of
                            Number of
    Market Value of
            Securities
                            Shares or
    Shares or
            Underlying
    Option
          Market
          Units of Stock
    Units of Stock
            Unexercised
    Exercise
    Option
    Value of
          That Have
    That Have
      Grant
    Options
    Price
    Expiration
    Unexercised
    Grant
    Not Vested
    Not Vested
Name     Date     (#) Exercisable     ($)     Date     Options ($)     Date     (#)     ($)
Charlene Barshefsky
      5/19/04         15,000         27.53         5/19/11                 7/21/06         2,824         40,000  
        7/20/05         19,000         27.15         7/20/12                 7/19/07         4,827         68,400  
        1/21/04         5,000         32.06         1/21/14                 7/17/08         10,130         143,600  
                                                                                 
Total
                39,000                                               17,781         252,000  
                                                                                 
Carol A. Bartz
                                                    1/17/08         3,695         52,400  
                                                          7/17/08         6,675         94,700  
                                                                                 
Total
                                                              10,370         147,100  
                                                                                 
Susan L. Decker
                                                    1/18/07         2,337         33,100  
                                                          7/19/07         3,837         54,400  
                                                          7/17/08         6,675         94,700  
                                                                                 
Total
                                                              12,849         182,200  
                                                                                 
D. James Guzy(1)
      5/19/99         15,000         29.39         5/19/09                                    
        5/17/00         15,000         61.45         5/20/09                                        
        5/23/01         15,000         29.41         5/20/09                                        
        5/22/02         15,000         29.19         5/20/09                                        
        5/21/03         15,000         18.73         5/20/09                                        
        5/19/04         15,000         27.53         5/20/09                                        
        7/20/05         19,000         27.15         5/20/09                                        
                                                                                 
Total
                109,000                                                        
                                                                                 
Reed E. Hundt
      5/19/04         15,000         27.53         5/19/11                 7/21/06         2,824         40,000  
        5/24/01         35,000         28.76         5/24/11                 7/19/07         3,837         54,400  
        5/22/02         15,000         29.19         5/22/12                 7/17/08         6,675         94,700  
        7/20/05         19,000         27.15         7/20/12                                        
        5/21/03         15,000         18.73         5/21/13                                        
                                                                                 
Total
                99,000                                               13,336         189,100  
                                                                                 
James D. Plummer
      7/20/05         15,000         27.15         7/20/12                 7/21/06         2,824         40,000  
                                                          7/19/07         3,837         54,400  
                                                          7/17/08         6,675         94,700  
                                                                                 
Total
                15,000                                               13,336         189,100  
                                                                                 
David S. Pottruck
      1/26/99         20,000         33.58         1/26/09                 7/21/06         2,824         40,000  
        5/19/99         15,000         29.39         5/19/09                 7/19/07         3,837         54,400  
        5/17/00         15,000         61.45         5/17/10                 7/17/08         6,675         94,700  
        5/19/04         15,000         27.53         5/19/11                                        
        5/23/01         15,000         29.41         5/23/11                                        
        5/22/02         15,000         29.19         5/22/12                                        
        7/20/05         19,000         27.15         7/20/12                                        
        5/21/03         15,000         18.73         5/21/13                                        
                                                                                 
Total
                129,000                                               13,336         189,100  
                                                                                 


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      Option Awards     Stock Awards
            Number of
                            Number of
    Market Value of
            Securities
                            Shares or
    Shares or
            Underlying
    Option
          Market
          Units of Stock
    Units of Stock
            Unexercised
    Exercise
    Option
    Value of
          That Have
    That Have
      Grant
    Options
    Price
    Expiration
    Unexercised
    Grant
    Not Vested
    Not Vested
Name     Date     (#) Exercisable     ($)     Date     Options ($)     Date     (#)     ($)
Jane E. Shaw
      5/19/99         15,000         29.39         5/19/09                 7/21/06         2,824         40,000  
        5/17/00         15,000         61.45         5/17/10                 7/19/07         3,837         54,400  
        5/19/04         15,000         27.53         5/19/11                 7/17/08         8,055         114,200  
        5/23/01         15,000         29.41         5/23/11                                        
        5/22/02         15,000         29.19         5/22/12                                        
        7/20/05         19,000         27.15         7/20/12                                        
        5/21/03         15,000         18.73         5/21/13                                        
                                                                                 
Total
                109,000                                               14,716         208,600  
                                                                                 
John L. Thornton
      5/19/04         15,000         27.53         5/19/11                 7/21/06         2,824         40,000  
        7/20/05         19,000         27.15         7/20/12                 7/19/07         3,837         54,400  
        7/23/03         12,500         24.58         7/23/13                 7/17/08         6,675         94,700  
                                                                                 
Total
                46,500                                               13,336         189,100  
                                                                                 
David B. Yoffie
      5/19/99         15,000         29.39         5/19/09                 7/21/06         3,407         48,300  
        5/17/00         15,000         61.45         5/17/10                 7/19/07         4,630         65,700  
        5/19/04         15,000         27.53         5/19/11                 7/17/08         6,675         94,700  
        5/23/01         15,000         29.41         5/23/11                                        
        5/22/02         15,000         29.19         5/22/12                                        
        7/20/05         19,000         27.15         7/20/12                                        
        5/21/03         15,000         18.73         5/21/13                                        
                                                                                 
Total
                109,000                                               14,712         208,700  
                                                                                 
(1)  Mr. Guzy retired from the Board effective May 2008; however, the information shown in this table is as of fiscal year-end.
 
Director Stock Ownership Guidelines. The Board has established stock ownership guidelines for the non-employee directors. Within five years of joining the Board, the director must acquire and hold at least 15,000 shares of Intel common stock. After each succeeding five years of Board service, non-employee directors must own an additional 5,000 shares (for example, 20,000 shares after 10 years of service). Unexercised stock options and unvested RSUs do not count toward this requirement. As of December 27, 2008, with the exception of Mr. Thornton (who is expected to be compliant with these ownership guidelines by the end of 2009), each director had either satisfied these ownership guidelines or had time remaining to do so.
 
Deferred Compensation. Intel has a deferred compensation plan that allows non-employee directors to defer their cash and equity compensation. The Cash Deferral Election allows participants to defer up to 100% of their cash compensation and receive an investment return on the deferred funds as if the funds were invested in Intel common stock. Participants receive credit for reinvestment of dividends under this option. Plan participants must elect irrevocably to receive the deferred funds either in a lump sum or in equal annual installments over five or 10 years, and to begin receiving distributions either at retirement or at a future date not less than 24 months from the election date. This deferred cash compensation is an unsecured obligation for Intel. None of the directors chose the Cash Deferral Election with respect to their 2008 fees. The RSU Deferral Election allows directors to defer their RSUs until termination of service. This election must be either 100% or 0% and applies to all RSUs granted during the year. Deferred RSUs count toward Intel’s stock ownership guidelines once they vest. Directors do not receive dividends on deferred RSUs. Ambassador Barshefsky and Dr. Shaw participated in the RSU Deferral Election program in 2008.
 
Retirement. In 1998, the Board ended its retirement program for independent directors. Mr. Guzy, Dr. Shaw, and Dr. Yoffie, who were serving at that time, were vested with the number of years served. They will receive an annual benefit equal to the annual retainer fee in effect at the time of payment, to be paid beginning upon the director’s departure from the Board. The payments will continue for the lesser of the number of years served as a non-employee director through 1998 or the life of the director. The amounts in the “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” column in the Director Summary Compensation table represent the actuarial increase in pension value accrued under this program. Assumptions used in determining these increases include a discount rate of 6.7%, a retirement age of 65 or current age if older, RP2000 Mortality table projected to 2008, and an annual benefit amount of $75,000.

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Travel Expenses. Intel does not pay meeting fees. We reimburse the directors for their travel and related expenses in connection with attending Board meetings and Board-related activities, such as Intel site visits and sponsored events, as well as continuing education programs.
 
Charitable Matching. Directors’ charitable contributions to schools and universities that meet the guidelines of Intel’s employee charitable matching gift program are eligible for matching funds of up to $10,000 per director per year, which is the same limit for employees generally.
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table presents the beneficial ownership of our common stock as of February 23, 2009 by each of our directors and listed officers and all of our directors and executive officers as a group. Amounts reported under “Number of Shares of Common Stock Beneficially Owned as of February 23, 2009” include the number of shares subject to stock options and RSUs that become exercisable or vest within 60 days of February 23, 2009 (which are shown in the columns to the right). Our listed officers are the CEO, Chief Financial Officer (CFO), and three other most highly compensated executive officers in a particular year. To our knowledge, none of our stockholders owns more than 5% of our common stock. Except as otherwise indicated and subject to applicable community property laws, each owner has sole voting and investment power with respect to the securities listed.
 
                                         
                  Number of Shares
     
                  Subject to Options
     
                  Exercisable as of
     
      Number of Shares of
          February 23, 2009 or
     
      Common Stock
          Which Become
    Number of RSUs That
      Beneficially Owned as of
    Percent
    Exercisable Within 60
    Vest Within 60 Days
Stockholder     February 23, 2009     of Class     Days of This Date     of February 23, 2009
Craig R. Barrett, Director and Chairman of the Board
      6,249,619 (1)       **         2,939,696         10,640  
                                         
Paul S. Otellini, Director, President,
and Chief Executive Officer
      4,162,805 (2)       **         3,374,586         40,000  
                                         
Sean M. Maloney, Executive Vice President, General Manager, Sales and Marketing Group, and Chief Sales and Marketing Officer
      2,501,464 (3)       **         2,328,383         22,875  
                                         
Andy D. Bryant, Executive Vice President, Finance and Enterprise Services, and Chief Administrative Officer
      2,203,312 (4)       **         1,965,204         22,875  
                                         
David Perlmutter, Executive Vice President and General Manager, Mobility Group
      768,593         **         698,340         22,125  
                                         
Stacy J. Smith, Vice President and Chief Financial Officer
      397,351         **         367,940         15,875  
                                         
Jane E. Shaw, Director
      281,893 (5)       **         109,000          
                                         
David B. Yoffie, Director
      259,528         **         109,000          
                                         
David S. Pottruck, Director
      139,552 (6)       **         109,000          
                                         
Reed E. Hundt, Director
      126,564         **         99,000          
                                         
Charlene Barshefsky, Director
      56,823 (7)       **         39,000          
                                         
John L. Thornton, Director
      54,064         **         46,500          
                                         
James D. Plummer, Director
      25,564         **         15,000          
                                         
Carol A. Bartz, Director
      7,997 (8)       **                  
                                         
Susan L. Decker, Director
      4,254         **                  
                                         
John J. Donahoe, Director
              **                  
                                         
Frank D. Yeary, Director
              **                  
                                         
All directors and executive officers as a group (23 individuals)
      23,305,878         **         17,407,681         228,515  
                                         


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 **  Less than 1%.
 
(1)  Includes 100,000 shares owned by a private charitable foundation for which Dr. Barrett shares voting authority.
 
(2)  Includes 1,404 shares held by Mr. Otellini’s spouse, and Mr. Otellini disclaims beneficial ownership of these shares.
 
(3)  Includes 4,000 shares held by Mr. Maloney’s spouse, and Mr. Maloney disclaims beneficial ownership of these shares.
 
(4)  Includes 1,600 shares held by Mr. Bryant’s son and 1,000 shares held by Mr. Bryant’s daughter, and Mr. Bryant disclaims beneficial ownership of these shares.
 
(5)  Includes 167,248 shares held by a family trust for which Dr. Shaw shares voting and disposition authority.
 
(6)  Includes 800 shares held by Mr. Pottruck’s daughter. Includes a total of 13,400 shares held in two separate annuity trusts for the benefit of Mr. Pottruck’s brother for which Mr. Pottruck shares voting and disposition authority.
 
(7)  Includes 6,800 shares held jointly with Ambassador Barshefsky’s spouse for which Ambassador Barshefsky shares voting and disposition authority.
 
(8)  Includes 6,766 shares held by a family trust for which Ms. Bartz has sole voting and disposition authority.
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
The Board’s Audit Committee is responsible for review, approval, or ratification of “related-person transactions” involving Intel or its subsidiaries and related persons. Under SEC rules, a related person is a director, officer, nominee for director, or 5% stockholder of the company since the beginning of the previous fiscal year, and their immediate family members. Intel has adopted written policies and procedures that apply to any transaction or series of transactions in which the company or a subsidiary is a participant, the amount involved exceeds $120,000, and a related person has a direct or indirect material interest.
 
The Audit Committee has determined that, barring additional facts or circumstances, a related person does not have a direct or indirect material interest in the following categories of transactions:
 
  •   any transaction with another company for which a related person’s only relationship is as an employee (other than an executive officer), director, or beneficial owner of less than 10% of that company’s shares, if the amount involved does not exceed the greater of $1 million or 2% of that company’s total annual revenue;
 
  •   any charitable contribution, grant, or endowment by Intel or the Intel Foundation to a charitable organization, foundation, or university for which a related person’s only relationship is as an employee (other than an executive officer) or a director, if the amount involved does not exceed the lesser of $1 million or 2% of the charitable organization’s total annual receipts, or any matching contribution, grant, or endowment by the Intel Foundation;
 
  •   compensation to executive officers determined by the Compensation Committee;
 
  •   compensation to directors determined by the Board;
 
  •   transactions in which all security holders receive proportional benefits; and
 
  •   banking-related services involving a bank depository of funds, transfer agent, registrar, trustee under a trust indenture, or similar service.
 
Intel personnel in the Legal and Finance departments review transactions involving related persons who are not included in one of the above categories. If they determine that a related person could have a significant interest in such a transaction, the transaction is forwarded to the Audit Committee for review. The Audit Committee determines whether the related person has a material interest in a transaction and may approve, ratify, rescind, or take other action with respect to the transaction in its discretion. The Audit Committee reviews all material facts related to the transaction and takes into account, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances; the extent of the related person’s interest in the transaction; and, if applicable, the availability of other sources of comparable products or services.
 
In 2008, there was one related-person transaction under the relevant standards: Intel employed an industrial engineer who for a portion of the year was the brother-in-law of Robert J. Baker, an executive officer. Mr. Baker’s former brother-in-law received total cash compensation of $129,200. The Audit Committee reviewed and ratified this transaction.


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COMPENSATION DISCUSSION AND ANALYSIS
 
The Compensation Committee of the Board of Directors determines the compensation for our executive officers. The committee considers, adopts, reviews, and revises executive officer compensation plans, programs, and guidelines, and reviews and determines all components of each executive officer’s compensation. As discussed above under “Corporate Governance; Compensation Committee,” Professor Brian Hall of the Harvard Business School serves as the committee’s outside adviser. The committee also consults with management regarding non-executive employee compensation plans and programs, including administering our equity incentive plans.
 
This section of the proxy statement explains how our executive compensation programs are designed and operate with respect to our listed officers (the CEO, CFO, and three other most highly compensated executive officers in a particular year). The “Executive Compensation” section presents compensation earned by the listed officers in 2008, 2007, and 2006.
 
Executive Summary
 
Intel’s compensation programs are designed to support our business goals and promote both short- and long-term profitable growth of the company. Intel’s equity plans are designed to ensure that executive compensation programs and practices are aligned with the long-term interests of Intel’s stockholders. Total compensation of each individual varies with individual performance and Intel’s performance in achieving financial and non-financial objectives.
 
The committee and Intel’s management believe that compensation should help recruit, retain, and motivate the employees that the company will depend on for current and future success. The committee and Intel’s management also believe that the proportion of at-risk, performance-based compensation should rise as an employee’s level of responsibility increases. Intel’s compensation philosophy is reflected in the following key design priorities that govern compensation decisions:
 
  •   alignment with stockholders’ interests;
 
  •   pay for performance;
 
  •   balance among performance objectives and horizons;
 
  •   employee recruitment, retention, and motivation;
 
  •   cost and dilution management; and
 
  •   egalitarianism.
 
Intel employees, including executive officers, are employed at will, without employment agreements, severance payment arrangements (except as required by local law), or payment arrangements that would be triggered by a “change in control” of Intel. Retirement plan programs are broad-based; Intel does not provide special retirement plans or benefits solely for executive officers.
 
The committee believes that the majority of the executive officers’ total compensation should consist of equity awards, which are longer term incentive compensation, rather than cash, which is primarily tied to shorter-term performance. We use the following descriptive categories in this “Compensation Discussion and Analysis” section:
 
  •   Total cash compensation refers to base salary plus performance-based cash compensation.
 
  •   Performance-based cash compensation includes annual and semiannual incentive cash payments.
 
  •   Equity awards include stock options and RSUs, both of which may be granted as annual or long-term awards with time-based vesting.
 
  •   Performance-based compensation refers to performance-based cash compensation and equity awards (with time-based vesting).
 
  •   Total compensation refers to base salary, performance-based cash compensation, and equity awards (note that this formulation differs from that in the Summary Compensation table).


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Compensation for the executive officers, as well as the majority of Intel’s employees located in the United States, consists of the elements identified in the following table.
 
 
             
Compensation Element     Objective     Key Features
Base Salaries
    To provide a minimum, fixed level of cash compensation for the executive officers     Targeted at the 25th percentile of our peer group on average, since we strive to have the majority of executive officer pay at risk and tied to company performance

Adjustments are based on an individual’s current and expected future performance, internal equity, and pay relative to the market
             
Performance-Based Cash Compensation     To encourage and reward executive officers’ contributions in producing strong financial and operational results     Annual incentive cash payments are based on a formula that includes relative and absolute net income growth, company performance relative to operational goals, and an individual performance adjustment based on meeting individual goals

Semiannual incentive cash payments are based on pretax margin or net income, plus customer satisfaction goals

Total cash compensation is targeted at the 65th percentile of the peer group’s total on average (actual percentile will vary based on annual performance)
             
Equity Awards     To retain executive officers and align their interests with those of stockholders     Targeted at the 65th percentile of our peer group’s total long-term incentive compensation on average when an executive officer receives annual and long-term equity grants

Majority of listed officers’ total compensation comes in the form of stock options that return actual value to the executive officer only to the extent that our stock price appreciates

Annual equity awards generally vest in 25% annual installments over four years

Long-term equity awards generally vest in full on the fifth anniversary of the grant date
             
Stock Purchase Plan     To encourage executive officer stock ownership, further aligning their interests with those of stockholders     Broad-based program under which employees, including executive officers, can purchase up to $25,000 in market value of Intel stock annually at a 15% discount to the market price
             
Profit Sharing Retirement Plan     To provide a minimum level of retirement income for the executive officers     Broad-based plan under which Intel makes profit sharing contributions (a percentage of eligible salary and performance-based cash) up to the tax code limit

Intel’s contributions vest in 20% annual increments after two years of service, completely vesting after six years
             


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Compensation Element     Objective     Key Features
Deferred Compensation Plan     To provide retirement savings in a tax-efficient manner     Any profit sharing contributions made on eligible earnings in excess of the tax code limit of $230,000 are added to the executive officer’s deferred compensation account

Executive officers can elect to defer up to 50% of their base salaries and 100% of their annual incentive cash payments

Balances in the deferred compensation plan are unfunded obligations of Intel. The balances are adjusted on the basis of notional investment returns; returns are not set or guaranteed by Intel.
             
 
In 2008, net revenue declined slightly and net income declined 24% compared to 2007. The revenue decline was largely the result of a weak fourth quarter, during which the global economy slowed, demand declined dramatically, and inventory was contracted across the supply chain. The revenue decline from the third quarter of 2008 to the fourth quarter of 2008 was only the second time in the last 20 years that our fourth-quarter revenue fell below our third-quarter revenue. Intel’s stock price declined significantly in 2008.
 
2008 Financial and Stock Performance and Their Effects on Compensation
 
                               
      2008
    2007
     
      ($ in millions, except
    ($ in millions, except
    Change
      per share amounts)     per share amounts)     (%)
Net Revenue
      37,586         38,334         (2 )
Net Income
      5,292         6,976         (24 )
Stock Price per Share as of Fiscal Year-End
      14.18         26.76         (47 )
                               
 
                                         
      Q1
    Q2
    Q3
    Q4
      ($ in millions,
    ($ in millions,
    ($ in millions,
    ($ in millions,
      except change %)     except change %)     except change %)     except change %)
Net Revenue
                                       
2008
      9,673         9,470         10,217         8,226  
2007
      8,852         8,680         10,090         10,712  
Change (%)
      9         9         1         (23 )
Net Income
                                       
2008
      1,443         1,601         2,014         234  
2007
      1,636         1,278         1,791         2,271  
Change (%)
      (12 )       25         12         (90 )
                                         

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As a result of our compensation programs that align the interests of executives with those of stockholders, Intel’s financial and stock performance directly impacted our listed officers’ compensation. The multiplier used under our Executive Officer Incentive Plan to determine the amount of annual incentive cash payments, which is determined by financial and operational performance, fell approximately 24%, resulting in performance-based cash compensation declining both on an absolute basis and as a multiple of base salary. Intel’s stock price decline impacted listed officers by lowering the value of RSUs granted to them in 2008 and previous years, and resulted in all of the stock options held by the listed officers (and substantially all options held by employees) being underwater (meaning the option exercise prices exceeded the market price of Intel stock) as of the end of 2008.
 
The effect of the declines in the value of equity awards was mitigated in part by increases designed to bring target compensation to desired peer group levels that were made by the committee at the beginning of 2008. Given Intel’s financial performance in 2008 as well as uncertainty in the global economic environment, the committee elected to keep base salaries and annual incentive cash baselines flat for all listed officers for 2009. In addition, the committee made changes to our equity compensation programs for listed officers, as described in “Changes to Equity Incentive Programs for 2009” below.
 
Determining Executive Compensation
 
In determining base salary, annual incentive cash baselines, and equity awards, the committee uses the executive officers’ current level of compensation as the starting point. The committee bases any adjustments to those levels primarily on benchmarking to peer companies and the individual’s performance. Secondary considerations in determining the level of compensation include internal pay equity and wealth accumulation. The committee has discretion to set compensation at levels that may be higher or lower than peer group target percentiles.
 
Benchmarking
 
To assist the committee in its review of executive compensation, Intel’s Compensation and Benefits Group provides compensation data compiled from executive compensation surveys, as well as data gathered from annual reports and proxy statements from companies that the committee selects as a “peer group” for executive compensation analysis purposes. This historical compensation data is then adjusted in order to arrive at current-year estimates for the peer group. The committee uses this data to compare the compensation of our executive officers to the peer group, targeting the 25th percentile for base salaries and the 65th percentile for total cash compensation on average. The committee’s goal for equity compensation is that the combination of annual and long-term equity awards will approximate the 65th percentile of the peer group’s long-term incentive compensation on average. Since the executive officers have the highest levels of responsibility for the company’s overall performance, the committee believes that these officers are in the best positions to influence the company’s performance, and accordingly should have the vast majority of their total compensation tied to performance. Professor Hall, the committee’s independent adviser, and Intel’s Compensation and Benefits Group review this data with the committee.


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The peer group includes 15 technology companies and 10 companies outside the technology industry from the S&P 100. When the peer group was created in 2007, the committee chose companies that resembled Intel in various respects, such as those that made large investments in research and development and had significant manufacturing and global operations. In addition, the committee selected companies whose three-year averages for revenue, net income, and market capitalization approximated Intel’s. The peer group includes companies with which Intel competes for talent and matches the peer group that Intel uses for measuring relative financial performance for annual incentive cash payments.
 
The peer group consists of the following companies:
 
                                         
      Reported
    Revenue
    Net Income (Loss)
    Market Capitalization on
Company     Fiscal Year     ($ in billions)     ($ in billions)     March 3, 2009 ($ in billions)
Advanced Micro Devices, Inc. 
      12/27/08         5.8         (3.1 )       1.3  
Apple Inc. 
      9/27/08         32.5         4.8         78.7  
Applied Materials, Inc. 
      10/26/08         8.1         1.0         11.8  
AT&T Corporation
      12/31/08         124.0         12.9         133.6  
Cisco Systems, Inc. 
      7/26/08         39.5         8.1         84.0  
Dell Inc. 
      2/1/08         61.1         2.9         17.8  
The Dow Chemical Company
      12/31/08         57.5         0.6         6.4  
EMC Corporation
      12/31/08         14.9         1.3         20.4  
General Electric Company
      12/31/08         182.5         17.4         74.0  
Google Inc. 
      12/31/08         21.8         4.2         102.6  
Hewlett-Packard Company
      10/31/08         118.4         8.3         67.9  
International Business Machines Corporation
      12/31/08         103.6         12.3         117.8  
Johnson & Johnson
      12/28/08         63.7         12.9         131.8  
Merck & Co., Inc. 
      12/31/08         23.9         7.8         48.7  
Microsoft Corporation
      6/30/08         60.4         17.7         141.2  
Motorola, Inc. 
      12/31/08         30.1         (4.2 )       7.5  
Oracle Corporation
      5/31/08         22.4         5.5         75.7  
Pfizer Inc. 
      12/31/08         48.3         8.1         80.0  
Qualcomm Incorporated
      9/28/08         11.1         3.2         55.2  
Texas Instruments Incorporated
      12/31/08         12.5         1.9         18.1  
Tyco International Ltd. 
      9/26/08         20.2         1.6         9.0  
United Parcel Service, Inc. 
      12/31/08         51.5         3.0         38.3  
United Technologies Corporation
      12/31/08         58.7         4.7         36.3  
Verizon Communications Inc. 
      12/31/08         97.4         6.4         77.6  
Yahoo! Inc. 
      12/31/08         7.2         0.4         17.4  
Intel 2008
      12/27/08         37.6         5.3         68.3  
Intel 2008 Peer Group Percentile Rank
                48th         57th         54th   
                                         


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Individual Performance Reviews
 
The CEO documents each executive officer’s performance during the year, detailing accomplishments, areas of strength, and areas for development. The CEO bases his evaluation on his knowledge of each executive officer’s performance, an individual self-assessment completed by each executive officer, and feedback provided by each executive officer’s direct reports. The CEO also reviews the compensation data gathered from the compensation surveys and makes a recommendation to the committee on base salary, annual incentive cash baseline, and equity awards for each executive officer other than himself and the Chairman. Intel’s Director of Human Resources and the Compensation and Benefits Group assist the CEO in developing the executive officers’ performance reviews and reviewing the market compensation data to determine the compensation recommendations. Executive officers do not propose or seek approval for their own compensation.
 
The CEO’s annual performance review is developed by the independent directors acting as a committee of the whole Board, chaired by the Lead Independent Director. For the CEO’s review, formal input is received from the independent directors, the Chairman, and senior management. The CEO also submits a self-assessment. The independent directors meet as a group in executive session to prepare the review, which is completed and presented to the CEO. This evaluation is used by the committee to determine the CEO’s base salary, annual incentive cash baseline, and equity awards. For 2008, a similar process was followed in determining the Chairman’s base salary, annual incentive cash baseline, and equity awards.
 
Internal Pay Equity
 
The committee reviews the compensation of executive officers against the compensation of the top 100 highest paid employees at Intel to monitor internal pay equity. The committee does not use fixed ratios when conducting this analysis, but our CEO’s total compensation has typically been 1.5 to 3 times the total compensation paid to each of our executive vice presidents.
 
Wealth Accumulation Analysis
 
The committee reviews the value of each element of compensation that the executive officer could potentially receive over the next 10 years, under scenarios of continuing employment, termination, and retirement. For this review, total remuneration includes all aspects of the executive officer’s total cash compensation from continuing employment, the future value of equity awards under varying stock price assumptions (and including, as applicable, the impact of accelerated vesting upon retirement), the value of any deferred compensation, and profit sharing retirement benefits. The goal of the analysis is to allow the committee to see how each element of compensation interacts with the other elements and to see how current compensation decisions may affect future wealth accumulation. To date, the amount of past compensation, including amounts realized or realizable from prior equity awards, has generally not been a significant factor in the committee’s considerations.
 
2008 Compensation Determinations
 
In the first quarter of 2008, the committee established base salaries, set the annual incentive cash baselines and operational goals under the Executive Officer Incentive Plan, and determined the equity awards for executive officers. Following the end of the year, the committee approved the calculation of the multiplier to be used in making annual incentive cash payments based on the Executive Officer Incentive Plan formula, determined any individual performance adjustments under the plan, and approved profit sharing contributions to the retirement plan.
 
In 2006, the committee determined that Intel’s compensation levels should be increased because its programs were set at a level significantly below the compensation levels of its peers. To address this situation, the committee began a three-year program, ending in 2008, to increase cash and equity compensation to reach the target percentiles, and mirrors a general effort to increase compensation for employees. Thus, while annual incentive payouts for the listed officers declined for 2008, both on an absolute basis and as a multiple of salary as a result of the dramatic shift in the business environment during the fourth quarter of 2008, the effect of those declines was mitigated by increases to the annual incentive cash baselines designed to bring target compensation to the desired peer group levels.


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Mr. Otellini’s 2008 Compensation
 
In 2008, the committee elected to increase Mr. Otellini’s base salary by 30% and annual incentive cash baseline by 40%. Both elements were increased in light of peer data indicating that his cash compensation was significantly below the target percentiles set by the committee. Mr. Otellini’s base salary was increased less than his annual incentive cash baseline in an effort to increase the proportion of at-risk, performance-based compensation. Based on market data, the committee believes that Mr. Otellini’s base salary for 2008 was still below the 25th percentile. Although the committee increased Mr. Otellini’s base salary and annual incentive cash baseline in 2008, Mr. Otellini’s total cash compensation increased by only 3% because of decreased financial and operating performance in 2008. Based on grant date fair value, Mr. Otellini received a 20% increase in the value of his annual equity awards in 2008 compared to 2007, although the number of options and RSUs granted was flat compared to 2007. The grant date fair value of Mr. Otellini’s long-term RSU award was 24% lower than the grant date fair value of the long-term option award that he received in 2007. The net effect of these changes was that Mr. Otellini’s total compensation remained relatively flat in 2008 compared to 2007. The committee believes that his total compensation was below the 65th percentile because his annual incentive cash payments were below target due to Intel’s financial and operating performance.
 
                               
      2008
    2007
    Change
      ($)     ($)     (%)
Base Salary
      1,000,000         770,000         30  
Annual Incentive Cash Payments
      3,873,300         3,964,200         (2 )
Total Cash Compensation
      4,873,300         4,734,200         3  
Annual Equity Awards (based on grant date fair value)
      4,337,400         3,614,400         20  
Long-Term Equity Awards (based on grant date fair value)
      2,887,500         3,793,500         (24 )
Total Compensation
      12,098,200         12,142,100         0  
                               
 
Mr. Smith’s 2008 Compensation
 
Mr. Smith was named CFO in October 2007. The committee determined Mr. Smith’s compensation in 2008 for the first time. Considering the CFO’s increased responsibilities, the committee determined to increase Mr. Smith’s base salary for 2008 by 35%, annual incentive cash baseline by 24%, and grant date fair value of his annual equity award by 58% in an effort to provide more market-competitive pay. Based on market data, the committee believes that Mr. Smith’s base salary for 2008 was significantly below the 25th percentile for CFOs in our peer group. Mr. Smith’s total cash compensation increased 2% in 2008, and his total cash compensation was significantly below the 65th percentile. In 2008, Mr. Smith was also granted a long-term stock option to purchase 45,000 shares and 6,500 long-term RSUs. Primarily because of the increases in his base salary and annual equity awards, Mr. Smith’s total compensation increased 26% for 2008. The committee believes that his total compensation was significantly below the 65th percentile. In 2008, the committee compensated Mr. Smith at levels below the 65th percentile for total compensation due to his relatively short tenure as CFO.
 
                               
      2008
    2007
    Change
      ($)     ($)(1)     (%)
Base Salary
      425,000         314,400         35  
Annual Incentive Cash Payments
      871,500         962,200         (9 )
Total Cash Compensation
      1,296,500         1,276,600         2  
Annual Equity Awards (based on grant date fair value)
      2,051,000         1,299,800         58  
Long-Term Equity Awards (based on grant date fair value)
      415,500         399,500         4  
Total Compensation
      3,763,000         2,975,900         26  
                               
(1) In 2008, Mr. Smith received a retroactive payment related to his promotion in 2007. We have added $9,400 to the amount reported for him in 2007 for “Base Salary,” and $9,200 for “Annual Incentive Cash Payments.”


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Mr. Bryant’s 2008 Compensation
 
In 2008, the committee elected to increase Mr. Bryant’s base salary by 10% and annual incentive cash baseline by 7% in an effort to provide more market competitive pay. Based on market data, the committee believes that Mr. Bryant’s base salary for 2008 was below the 25th percentile for chief administrative officers and CFOs in our peer group. Mr. Bryant’s total cash compensation decreased 15% in 2008, due to annual incentive cash payments that were lower than target because of Intel’s decreased financial and operating performance, resulting in his total cash compensation being below the 65th percentile. Based on grant date fair value, Mr. Bryant received a 38% increase in the value of his annual equity awards in 2008 compared to 2007, in line with our target for market competitiveness for annual equity grants. Primarily because of the increases in his base salary and annual equity awards, Mr. Bryant’s total compensation increased 10% for 2008. The committee believes that his total compensation was significantly below the 65th percentile because his annual incentive cash payments were below target due to Intel’s financial and operating performance.
 
                               
      2008
    2007
    Change
      ($)     ($)     (%)
Base Salary
      500,000         455,000         10  
Annual Incentive Cash Payments
      1,311,000         1,673,400         (22 )
Total Cash Compensation
      1,811,000         2,128,400         (15 )
Annual Equity Awards (based on grant date fair value)
      2,623,200         1,903,200         38  
Long-Term Equity Awards (based on grant date fair value)
                       
Total Compensation
      4,434,200         4,031,600         10  
                               
 
Mr. Maloney’s 2008 Compensation
 
In 2008, the committee elected to increase Mr. Maloney’s base salary by 28% and annual incentive cash baseline by 7%. Based on market data, the committee believes that Mr. Maloney’s base salary for 2008 was close to the 50th percentile for sales and marketing executives in our peer group. Although Mr. Maloney’s total cash compensation decreased 14% in 2008, the committee believes that his total cash compensation remained significantly above the 65th percentile for sales and marketing executives in our peer group. In 2008, the committee compensated Mr. Maloney above the 65th percentile for total cash compensation in an effort to maintain internal equity with other executive vice presidents, reflecting the significance of the position at Intel and his responsibilities. Based on grant date fair value, Mr. Maloney received a 38% increase in the value of his annual equity awards in 2008 compared to 2007, in line with our target for market competitiveness and with grants to other executive vice presidents. In 2008, Mr. Maloney was also granted a long-term stock option to purchase 82,500 shares and 11,750 long-term RSUs. Primarily because of increases in annual equity awards and base salary, Mr. Maloney’s total compensation increased 11% for 2008. The committee believes that his total compensation was significantly above the 65th percentile for sales and marketing executives in our peer group but in line with Intel’s other executive vice presidents.
 
                               
      2008
    2007
    Change
      ($)     ($)     (%)
Base Salary
      500,000         390,000         28  
Annual Incentive Cash Payments
      1,113,300         1,493,900         (25 )
Total Cash Compensation
      1,613,300         1,883,900         (14 )
Annual Equity Awards (based on grant date fair value)
      2,623,200         1,903,200         38  
Long-Term Equity Awards (based on grant date fair value)
      759,000         729,300         4  
Total Compensation
      4,995,500         4,516,400         11  
                               


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Table of Contents

Mr. Perlmutter’s 2008 Compensation
 
In 2008, the committee elected to increase Mr. Perlmutter’s base salary by 25% and annual incentive cash baseline by 14%. Based on market data, the committee believes that Mr. Perlmutter’s base salary for 2008 was below the 25th percentile. Although Mr. Perlmutter’s total cash compensation decreased 9% in 2008, the committee believes that his total cash compensation was slightly above the 65th percentile for sector heads in our peer group. Based on grant date fair value, Mr. Perlmutter received a 38% increase in the value of his annual equity awards in 2008 compared to 2007, in line with our target for market competitiveness and with grants to other executive vice presidents. In 2008, Mr. Perlmutter was also granted a long-term stock option to purchase 52,500 shares and 5,000 long-term RSUs. Primarily because of the increases in his annual equity awards and base salary, Mr. Perlmutter’s total compensation increased 15% for 2008. The committee believes that Mr. Perlmutter’s total compensation was below the 65th percentile. In 2008, the committee compensated Mr. Perlmutter at levels below the target percentile for total compensation because his annual incentive cash payments were below target due to Intel’s financial and operating performance.
 
                               
      2008
    2007
    Change
      ($)(1)     ($)(1)     (%)
Base Salary
      446,100         357,200         25  
Annual Incentive Cash Payments
      1,021,100         1,255,200         (19 )
Total Cash Compensation
      1,467,200         1,612,400         (9 )
Annual Equity Awards (based on grant date fair value)
      2,623,200         1,903,200         38  
Long-Term Equity Awards (based on grant date fair value)
      440,200         417,800         5  
Total Compensation
      4,530,600         3,933,400         15  
                               
(1) Mr. Perlmutter receives his cash compensation in Israeli shekels. The amounts reported above in “Base Salary” and “Annual Incentive Cash Payments” for 2008 were converted to U.S. dollars at a rate of 3.87 shekels per dollar, calculated as of December 26, 2008 (3.94 shekels per dollar for 2007, calculated as of December 29, 2007).
 
Elements of Compensation
 
Base Salary
 
When the committee determines the executive officers’ base salaries during the first quarter of the year, the committee takes into account each officer’s role and level of responsibility at the company as well as individual performance for the prior year. In general, executive officers with the highest level of responsibility have the lowest percentage of their compensation fixed as base salary and the highest percentage of their compensation at risk. The committee believes that the 25th percentile is an appropriate target for base salaries because the committee strives to have performance-based compensation constitute a substantial majority of executive officers’ total compensation. Base salary represents a small percentage of total cash compensation (26% in 2008) and total compensation (9% in 2008) for the listed officers as set forth in the Summary Compensation table.
 
Performance-Based Compensation
 
Intel’s pay-for-performance programs include performance-based cash compensation that rewards strong financial performance, and equity awards that reward stock price appreciation. Annual and semiannual incentive cash payments are determined primarily by Intel’s annual financial results and are not linked to Intel’s stock price performance. The committee believes that targeting total cash compensation at the 65th percentile is appropriate because of the high proportion of cash compensation that is variable, at risk, and tied to Intel’s financial performance relative to the peer group. In 2008, performance-based compensation accounted for 87% of the total compensation for listed officers, as set forth in the Summary Compensation table. A high percentage of total compensation was performance-based cash (27% in 2008), with the majority of total compensation in the form of equity awards (60% in 2008).


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Annual Incentive Cash Payments
 
Net income is the key financial component of Intel’s incentive cash programs, and in 2008 net income decreased 24% compared to 2007. Primarily because of this result, annual incentive cash payments to listed officers decreased 12% in 2008.
 
Annual incentive cash payments are made under the Executive Officer Incentive Plan. This plan mirrors the broad-based plan for employees, with the added feature of an individual performance adjustment. The annual incentive cash payment cannot be increased beyond the maximum limits calculated each year under the formula and cannot in any event exceed $10 million for any individual. The following illustration shows the Executive Officer Incentive Plan formula.
 
(Formula Graphic)
 
As shown above, the sum of the three corporate performance components determines the Executive Officer Incentive Plan multiplier; the details of each component are described in the narrative following the Grants of Plan-Based Awards table in “Executive Compensation.” We expect the multiplier calculated under the plan to typically range between 2 and 4 (but it may be higher or lower depending on the output of the formula), with a target multiplier of approximately 3. The committee has the ability to apply subjective, discretionary criteria to determine the individual performance adjustment percentage. The committee elected to use net income as the financial performance metric to reward executive officers for growing absolute and relative financial performance, as it is independent of factors such as stock price movements and stock buybacks that affect earnings per share. For more information on corporate performance components, see the Grants of Plan-Based Awards table in “Executive Compensation.”
 
Following the end of 2008, the committee determined the annual incentive cash payments in accordance with the plan’s formula. The 2008 financial results yielded a multiplier of 2.66, calculated as follows:
 
                                     
Absolute Financial Component
                             
($ in millions)     Relative Financial Component     Operational Component       Points       EOIP Multiplier   
                                     
$5,292
    (1 + (–24.1%))
      Architecture/Platforms         23.75            
$6,557(1)
    (1 + (–10.5%))       Manufacturing/Technology         29.00            
              Customer Orientation         27.25            
              Growth and Execution         20.50            
              Total         100.5/100            
                                     
0.807
    0.848                 1.005           2.66  
                                     
(1) With the requirement in 2006 to include the impact of stock-based compensation in generally accepted accounting principles, the 2005 net income number includes the impact of stock-based compensation to ensure consistency in measuring net income growth. Additionally, the 2005 net income number excludes the additional tax expense of $250 million related to the decision to repatriate non-U.S. earnings under the American Jobs Creation Act of 2004.
 
In 2008, Intel’s net income decreased more than the market average, Intel’s net income was 19.3% lower than the trailing three-year average, and Intel scored 100.5% on operational goals, down from 107.1% in 2007. No individual performance adjustments were made under the Executive Officer Incentive Plan in 2008.


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The following graph illustrates how the amount of the average annual and semiannual incentive cash payments to listed officers varies with changes to Intel’s net income.
 
(Bar Chart)
 
Semiannual Incentive Cash Payments. Intel’s executive officers participate in a company-wide, semiannual incentive cash plan that calculates payouts based on Intel’s corporate profitability, which links compensation to financial performance. Payouts are communicated as a number of extra days of compensation, with executive officers receiving the same number of extra days as other employees. Plan payments earned in 2008 totaled 15.2 days of compensation per employee, down from 17.3 days in 2007. This total included two days of compensation resulting from Intel’s achievement of its customer satisfaction goals in 2008. In 2008, 2007, and 2006, semiannual incentive cash payments represented 5% or less of listed officers’ total performance-based cash compensation.
 
Equity Incentive Plans
 
The committee and management believe that equity compensation is a critical component of a total compensation package that helps Intel recruit, retain, and motivate the employees needed for the present and future success of the company. Most equity grants occur on an annual basis in connection with the annual performance review and compensation adjustment cycle. For all employees, including executive officers, Intel uses pre-established quarterly dates for the formal granting of equity awards during the year. With limited exceptions, these dates typically occur shortly after publication of Intel’s quarterly earnings releases.
 
In 2006, Intel began granting employees RSUs in addition to stock options. Stock options provide actual economic value to the holder if the price of Intel stock has increased from the grant date at the time the option is exercised. In contrast, RSUs have economic value when they vest, so that they have some retention value even if the stock price declines or stays flat. Stock options motivate executive officers by providing more potential upside. RSUs align executive officers with stockholders and balance our compensation program design, as they take into account both upside and downside risk in our stock price.
 
The use of RSUs also assists in maintaining the Board’s long-term goal that equity grants result in an average annual dilution rate that does not exceed 2%. Because the grant date fair value of each RSU that we grant is greater than the grant date fair value of each stock option, employees on average receive fewer RSUs now than stock options in the past. In 2007, the committee approved management’s recommendation to increase the RSU mix for all employees, including moving almost all executive officers from an 80/20 split to a 70/30 split. The committee and Mr. Otellini believed that increasing the use of RSUs would help with retention and make Intel’s compensation package more competitive with the companies in the peer group.
 
For Intel’s executive officers, the committee grants a combination of annual equity grants with grant date fair values targeted to be below the 50th percentile of the peer group on average, and long-term equity grants, which in combination with the annual grants are intended to approximate the 65th percentile of the peer group. Annual stock options and RSUs typically vest in 25% annual increments beginning one year from the date of grant, while long-term grants generally have a five-year cliff-vesting schedule, meaning that 100% of the grant vests on the fifth anniversary of the date that the grants are awarded.


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In 2008, based on Professor Hall’s recommendation, Mr. Otellini was granted stock options with exercise windows that can extend beyond retirement. Mr. Otellini’s 2008 grant provides that upon his retirement from Intel at age 60 or older, the exercise window for the options would be the full remaining life of the award. Because of Mr. Otellini’s years of service, any unvested portion of the option would vest in full upon his retirement from Intel at age 60 or older, which is consistent with the standard term for retirement for awards granted under the 2006 Equity Incentive Plan. The stock options have a seven-year life and will expire in 2015. Additionally, Mr. Otellini was granted a long-term RSU award in 2008. Instead of the typical five-year cliff-vesting award, Mr. Otellini’s long-term award vests over four years in equal annual installments beginning in 2012, as long as he remains employed by Intel. Should Mr. Otellini retire from Intel in 2011 and before the award otherwise begins to vest in 2012, the vesting schedule of this award would be adjusted to begin on his retirement date. In that circumstance, 25% of Mr. Otellini’s award would vest on his retirement date, and the award would continue to vest in 25% increments over the next three years. Mr. Otellini, like our other executive officers, is employed at will without an employment contract; as a result, he does not have a set retirement date. The committee included the extended exercise window in the 2008 grant because it believed that the provision would better ensure that the grant provided the appropriate long-term alignment with stockholders. The decisions of a CEO affect the company’s performance beyond retirement, and the exercise provisions will give Mr. Otellini the opportunity to realize the benefit of actions taken today with a long-term view.
 
The committee determines the amount of annual equity grants and long-term grants based on its subjective consideration of factors such as relative job scope, expected future contributions to the growth and development of the company, and the competitiveness of grants relative to the peer group. When evaluating future contributions, the committee projects the value of the executive officer’s future performance based on the officer’s expected career development. The equity grants are meant to motivate the executive officer to stay at Intel and deliver the expected future performance.
 
Because equity compensation is more complicated than cash compensation, there are a number of ways to present the costs to Intel and the benefits to the listed officers resulting from Intel’s equity compensation program. The following graphs and table present five different views of Intel’s equity compensation program. The first two graphs are based on the reporting of share-based compensation expense in Intel’s financial statements. The table following these graphs shows some of the key metrics (dilution, burn rate, and overhang) that the committee and Intel’s management use to measure how effectively Intel manages its equity compensation program. The third and fourth graphs show how the economic value that the listed officer receives from equity compensation varies with changes to Intel’s stock price by showing the listed officers’ realized and unrealized gains and losses.
 
The following graph shows the SFAS No. 123(R) expense that Intel incurred during each year for financial statement purposes for grants to listed officers. The amount of expense that Intel incurs each year is related to a portion of many years’ worth of equity awards. For example, expense related to annual stock options granted in April 2008 would typically be incurred as the award vests, with expense in 2008, 2009, 2010, 2011, and the beginning of 2012. SFAS No. 123(R) expense for the listed officers increased 12% in 2008 compared to 2007, primarily because of an increase in SFAS No. 123(R) expense related to grants of RSUs.
 
(Bar Chart)


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The graph below shows the expense for awards granted to listed officers during each year for financial statement purposes. The grant date fair value of annual and long-term equity awards granted to listed officers in January and April 2008 will be incurred over the service period as the awards vest in 2009, 2010, 2011, 2012, and 2013.
 
(Bar Chart)
 
While the two graphs above focus on how our equity compensation program impacts our financial statements, there are other key metrics that the committee and Intel’s management use to determine the costs to stockholders of Intel’s equity compensation program. The following table shows how these metrics have changed over the past three years. We define the metrics as follows:
 
  •   Dilution is total equity awards granted (less cancellations) divided by shares outstanding at the beginning of the year.
 
  •   Burn rate is similar to dilution, but does not take cancellations into account.
 
  •   Overhang is equity awards outstanding but not exercised, plus equity awards available to be granted, divided by total shares outstanding at the end of the year.
 
                               
      2008
    2007
    2006
      (%)     (%)     (%)
Percentage of Equity-Based Awards Granted to Listed Officers
      3.8         4.6         1.6  
Dilution
      0.1                 0.2  
Burn Rate
      1.0         1.0         1.4  
Overhang
      15.3         16.2         17.8  
                               
 
By policy, the committee limits grants to listed officers to no more than 5% of the total equity awards granted in any one year. The dilution, burn rate, and overhang amounts reported above are for all equity awards, not just those awarded to listed officers. The goal of the committee and Intel’s management is to limit total annual dilution to less than 2%.
 
While the graphs and table above show some of the costs of Intel’s equity compensation program, the next two graphs show the economic benefit of equity compensation to the listed officers. Additionally, the graphs show how the value of the listed officers’ equity awards is directly affected by changes in the price of Intel common stock. The price of Intel common stock decreased 47% from the beginning of the fiscal year to year-end. This decrease in stock price translated into an unrealized loss of $47.2 million for the listed officers and illustrates the performance-based nature of Intel’s equity compensation program. Currently, none of the stock option awards that were granted in 2008 have any economic value. To promote comparability from year to year, the Unrealized Gain/Loss on Equity Awards graph includes only awards that were outstanding at both the beginning and the end of the fiscal year (awards that were granted or that were exercised or settled during the year are excluded).
 


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(Bar Chart)
 
The Realized Gains graph below shows the aggregate value of the stock options that were exercised and RSUs that vested for the listed officers for each of the past three years. This graph shows the gains that the listed officers actually received from their equity awards, while the Unrealized Gain/Loss on Equity Awards graph shows unrealized gains (losses) measured as of the end of each fiscal year (which may or may not ever be realized).
 
(Bar Chart)
 
Changes to Equity Incentive Programs for 2009
 
Replacing Annual Stock Option and RSU Grants with Outperformance Stock Units
 
Beginning with the equity awards that will be granted in 2009, the committee will award senior officers (a group of 21 people) outperformance stock units (OSUs) as their primary equity awards. OSUs are performance-based RSUs. The number of shares of Intel common stock that an employee receives will range from 33% to 200% of the target amount. The performance period is three years, and the performance metric to be used is total stockholder return (TSR). TSR is measured against the 15 technology companies included in our peer group for determining executive compensation averaged with the companies included in the S&P 100. TSR is a measure of stock price appreciation plus any dividends paid during the performance period. If Intel underperforms the peer group, the number of units earned will be reduced from the 100% target amount at a rate of two to one (two-percentage-point reduction in units for each percentage point of underperformance), with a minimum of 33% of units earned. If Intel outperforms the peer group, the number of units earned will be increased from the 100% target amount at a rate of three to one (three-percentage-point increase in units for each percentage point of over-performance), with a maximum of 200% units earned. The grants vest in full three years and one month from the grant date, which is one month after the end of the performance period. At the end of the performance period, the earned units will convert to Intel common stock, and dividend equivalents will be paid in the form of Intel common stock at a rate equal to the dividends that would have been paid over the performance period on the number of shares awarded at the end of the performance period.
 
This planned change to Intel’s equity incentive design serves a number of purposes. First and foremost, because OSUs deliver value in the form of Intel common stock, it focuses the leadership team on ensuring the long-term viability of the enterprise. Secondly, due to the relative performance metric, this design provides an incentive to outperform the composite index over the three-year performance cycle. By utilizing full shares, this program is typically less dilutive than stock

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options while providing alignment with stockholders. Finally, the payout range of 33% to 200% of target moderates unnecessary risk taking while still providing an incentive to outperform the composite index over a multi-year period.
 
Additional Investment Grants for 2009 and 2010
 
In 2009, most Intel employees will receive an “Investment Grant” in addition to their regular equity grant. The current economic environment, while trying, offers a significant opportunity for Intel to distinguish itself from competitors and to position the company to emerge stronger as the economy recovers. The Investment Grants are intended to focus employees at this critical inflection point on creating sustained increases in our stock price as the macro-economic climate improves. It should also be noted that while this grant is incremental to normal annual equity grants, there will be significant cost savings realized in 2009 as a result of compensation program reductions, including no salary increases, a reduction in company contributions to the retirement savings plan (from 7% to 6%), and a reduction to the employee stock purchase program (capping employee contributions at 5% rather than 10% of eligible compensation). The Investment Grants for executive officers will be in the form of stock options. In 2010, we expect to make an additional Investment Grant with similar total value. The committee anticipates that the size of the Investment Grant will be approximately 50% of the value of the listed officers’ annual equity awards. These grants will vest equally over four years from the grant date and have a seven-year term. Our CEO will not receive an Investment Grant.
 
Risk Analysis of Intel’s Performance-Based Compensation Plans
 
The Compensation Committee believes that although the majority of compensation provided to our executive officers is performance-based, our executive compensation programs do not encourage excessive and unnecessary risk taking. The design of these compensation programs encourages Intel’s executive officers to remain focused on both the short- and long-term operational and financial goals of the company in several key respects. For example, while annual stock option and RSU awards vest 25% each year, long-term option and RSU awards vest after five years, which encourages officers to focus on sustained stock price appreciation. Similarly, in our Executive Officer Incentive Plan, the relative component measures Intel’s financial performance against its peers for the previous year, while the absolute component measures Intel’s current-year financial performance against the previous three years, which encourages the officers to focus on improving financial performance over a period of years.
 
Post-Employment Compensation Arrangements
 
Retirement Plans. Intel provides limited post-employment compensation arrangements to listed officers, consisting of an employee-funded 401(k) savings plan, a discretionary company-funded profit sharing retirement plan, and a company-funded pension plan, each of which is tax-qualified and available to substantially all U.S. employees; and a non-tax-qualified supplemental deferred compensation plan for highly compensated employees.
 
The committee allows for the participation of the executive officers in these plans to encourage the officers to save for retirement and to assist the company in retaining the officers. The deferred compensation plan is intended to promote retention by giving employees an opportunity to save in a tax-efficient manner. The terms governing the retirement benefits under these plans for the executive officers are the same as those available for other eligible employees in the U.S. Each plan other than the pension plan results in individual participant balances that reflect a combination of amounts contributed by the company or deferred by the employee, amounts invested at the direction of either the company or the employee, and the continuing reinvestment of returns until the accounts are distributed.
 
Intel does not make matching contributions based on the amount of employee contributions under any of these plans. The profit sharing retirement plan consists of a discretionary cash contribution determined annually by the committee for executive officers, and by the CEO for other employees. These contribution percentages have historically been the same for executive officers and other employees. For 2008, Intel’s discretionary contribution (including allocable forfeitures) to the profit sharing retirement plan for all eligible U.S. employees, including executive officers, equaled 6% of eligible salary (which included annual and semiannual incentive cash payments as applicable). To the extent that the amount of the contribution is limited by the Internal Revenue Code of 1986, as amended (the tax code), Intel credits the additional amount to the non-qualified deferred compensation plan. Intel invests all of its contributions to the profit sharing retirement plan in a diversified portfolio.


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Because the listed officers do not receive preferential or above-market rates of return under the deferred compensation plan, earnings under the plan are not included in the Summary Compensation table, but are included in the Non-Qualified Deferred Compensation table. The investment options available under the non-qualified plan are the same investment options that are available in the 401(k) savings plan.
 
The benefit provided to listed officers who participate in the pension plan consists of a tax-qualified arrangement that offsets amounts that otherwise would be paid under the non-qualified deferred compensation plan described above. Each participant’s tax-qualified amount in this arrangement was established based on a number of elements, including the participant’s non-qualified deferred compensation plan balance as of December 31, 2003, IRS pension rules that take into consideration age and other factors, and limits set by Intel for equitable administration.
 
Other Compensation Policies
 
Personal Benefits. The committee supports the goal of management to maintain an egalitarian culture in its facilities and operations. Intel’s executive officers are not entitled to operate under different standards than other employees. Intel does not have programs for providing personal benefit perquisites to executive officers, such as permanent lodging or defraying the cost of personal entertainment or family travel. The company provides air and other travel for Intel’s executive officers for business purposes only. Intel’s company-operated aircraft hold approximately 40 passengers and are used in regularly scheduled routes between Intel’s major U.S. facility locations, and Intel’s use of non-commercial aircraft on a time-share or rental basis is limited to appropriate business-only travel. Intel’s health care, insurance, and other welfare and employee benefit programs are essentially the same for all eligible employees, including executive officers, although the details of the programs may vary by country. Intel shares the cost of health and welfare benefits with its employees, a cost that is dependent on the level of benefits coverage that each employee elects. Intel’s employee loan programs are not available to Intel’s executive officers. Intel has no outstanding loans of any kind to any of its executive officers.
 
Stock Ownership Guidelines. Because the committee believes in linking the interests of management and stockholders, the Board has set stock ownership guidelines for Intel’s executive officers. The ownership guidelines specify a number of shares that Intel’s executive officers must accumulate and hold within five years of appointment or promotion as an executive officer. The following table lists the specific share requirements. Stock options and unvested RSUs do not count toward satisfying these ownership guidelines. Each of our listed officers had either satisfied these ownership guidelines or had time remaining to do so as of December 27, 2008.
 
                                         
      CEO     CFO     Executive Vice President     Senior Vice President
Minimum Number of Shares
      250,000         125,000         100,000         65,000  
                                         
 
Intel Policies Regarding Claw-Backs. Intel’s 2007 Executive Officer Incentive Plan and 2006 Equity Incentive Plan include standards for seeking the return (claw-back) from executive officers of incentive cash payments and stock sale proceeds in the event that they had been inflated due to financial results that later had to be restated. The 2007 Executive Officer Incentive Plan and 2006 Equity Incentive Plan were approved by stockholders and were included in the 2007 Proxy Statement for the 2007 annual meeting, which can be found at www.intel.com/intel/annualreports. The 2006 Equity Incentive Plan as proposed to be amended is included as Exhibit A of this proxy statement.
 
Tax Deductibility. Section 162(m) of the tax code places a limit of $1 million on the amount of compensation that Intel may deduct in any one year with respect to its CEO and each of the next three most highly compensated executive officers (not including the CFO). Certain performance-based compensation approved by stockholders is not subject to this deduction limit. Intel structured its 2006 Equity Incentive Plan with the intention that stock options awarded under this plan would qualify for tax deductibility. However, in order to maintain flexibility and promote simplicity in the administration of these arrangements, other compensation such as RSUs and payments under the 2007 Executive Officer Incentive Plan are not designed to qualify for tax deductibility.


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REPORT OF THE COMPENSATION COMMITTEE
 
The Compensation Committee, which is composed solely of independent members of the Board of Directors, assists the Board in fulfilling its responsibilities with regard to compensation matters, and is responsible under its charter for determining the compensation of Intel’s executive officers. The Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” section of this proxy statement with management, including our CEO, Paul S. Otellini, and our CFO, Stacy J. Smith. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the “Compensation Discussion and Analysis” section be included in Intel’s 2008 Annual Report on Form 10-K (incorporated by reference) and in this proxy statement.
 
Compensation Committee
Reed E. Hundt, Chairman
David S. Pottruck
John L. Thornton
David B. Yoffie
 
EXECUTIVE COMPENSATION
 
The following table lists the annual compensation for the fiscal years 2008, 2007, and 2006 of our CEO, CFO, and our three other most highly compensated executive officers in 2008 (referred to as listed officers).
 
Summary Compensation
 
                                                                                 
                                    Change in
           
                                    Pension
           
                                    Value and
           
                              Non-Equity
    Non-Qualified
           
                              Incentive
    Deferred
    All
     
                  Stock
    Option
    Plan
    Compensation
    Other
     
Name and
          Salary
    Awards
    Awards
    Compensation
    Earnings
    Compensation
    Total
Principal Position     Year     ($)     ($)     ($)     ($)     ($)     ($)     ($)
Paul S. Otellini
      2008         1,000,000         1,893,300         5,646,400         3,873,300                 309,600 (1)       12,722,600  
President
      2007         770,000         595,100         6,034,700         3,964,200                 178,000         11,542,000  
Chief Executive Officer
      2006         700,000         352,000         6,699,000         1,772,700         46,000         236,700         9,806,400  
                                                                                 
Stacy J. Smith
      2008         425,000         313,900         843,300         871,500                 88,500 (1)       2,542,200  
Vice President
      2007 (2)       314,400         135,600         548,500         962,200                 261,700 (3)       2,222,400  
Chief Financial Officer
      2006         235,000         22,300         485,100         430,200         11,000         57,000         1,240,600  
                                                                                 
Andy D. Bryant
      2008         500,000         688,200         2,872,800         1,311,000                 130,900         5,502,900  
Executive Vice President,
      2007         455,000         357,700         3,124,500         1,673,400                 114,000         5,724,600  
Finance and Enterprise Services
      2006         355,000         117,300         4,888,000         1,178,500         49,000         148,200         6,736,000  
Chief Administrative Officer
                                                                               
                                                                                 
Sean M. Maloney
      2008         500,000         698,100         2,827,600         1,113,300                 120,100         5,259,100  
Executive Vice President
      2007         390,000         429,000         3,207,200         1,493,900                 98,300         5,618,400  
Chief Sales and Marketing Officer       2006         290,000         87,100         4,678,400         1,019,000         7,000         127,200         6,208,700  
                                                                                 
David Perlmutter(4)
      2008         446,100         655,900         2,009,800         1,021,100         280,400         311,000         4,724,300  
Executive Vice President
      2007         357,200         379,700         1,619,600         1,255,200         300,700         393,700         4,306,100  
General Manager,
      2006         258,500         106,600         1,753,700         680,300         206,100         190,300         3,195,500  
Mobility Group
                                                                               
                                                                                 
Total
      2008         2,871,100         4,249,400         14,199,900         8,190,200         280,400         960,100         30,751,100  
        2007         2,286,600         1,897,100         14,534,500         9,348,900         300,700         1,045,700         29,413,500  
        2006         1,838,500         685,300         18,504,200         5,080,700         319,100         759,400         27,187,200