DEF 14A 1 d888992ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant To Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.     )

Filed by the Registrant þ

Filed by a Party other than the Registrant ¨

Check the appropriate box:

¨ Preliminary Proxy Statement

¨ Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ Definitive Proxy Statement

¨ Definitive Additional Materials

¨ Soliciting Material Pursuant to § 240.14a-12

INTEL CORPORATION

 

 

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

þ

 

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¨

 

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(2)

 

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(3)

 

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¨

 

Fee paid previously with preliminary materials:

 

¨

  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

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Table of Contents

 

LOGO


Table of Contents

LOGO

April 2, 2015

Dear Stockholder:

We look forward to your attendance via the Internet, in person, or by proxy at our 2015 Annual Stockholders’ Meeting. We will hold the meeting at 8:30 a.m. Pacific Time on Thursday, May 21, 2015. If you attend the annual meeting via the Internet at www.intc.com, you will be able to vote and submit questions during the meeting by using the control number we have provided to you (either with the notice regarding the availability of these proxy materials or with a copy of these proxy materials). You may also attend the meeting in person at Intel Corporation, Building SC-12, 3600 Juliette Lane, Santa Clara, California 95054. If you plan to attend in person, please bring proof of Intel stock ownership and government-issued photo identification, as these will be required for admission.

We also are pleased to furnish proxy materials to stockholders primarily over the Internet. On April 2, 2015, we mailed our stockholders a Notice of Internet Availability containing instructions on how to access our 2015 Proxy Statement and 2014 Annual Report and to vote online. Internet distribution of our proxy materials expedites receipt by stockholders, lowers the cost of the annual meeting, and conserves natural resources. However, if you would prefer to receive paper copies of our proxy materials, please follow the instructions included in the Notice of Internet Availability. If you received your annual meeting materials by mail, the notice of the 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 online proxy statement and annual report, both of which are available at www.intc.com/annuals.cfm.

Please refer to the proxy statement for detailed information on each of the proposals and the annual meeting. Your vote is important, and we strongly urge all stockholders to vote their shares. For most items, including the election of directors, your shares will not be voted unless you provide voting instructions via the Internet, by telephone, or by returning a proxy card or voting instruction card. We encourage you to vote promptly, even if you plan to attend the annual meeting.

Sincerely yours,

 

Andy D. Bryant

Susan L. Decker

Chairman of the Board

Independent Lead Director of the Board

INTEL CORPORATION

2200 Mission College Blvd.

Santa Clara, CA 95054-1549

(408) 765-8080


Table of Contents
LOGO   INTEL CORPORATION NOTICE OF 2015 ANNUAL STOCKHOLDERS’ MEETING

 

 

MEETING INFORMATION

 

HOW TO VOTE

 

n   Please act as soon as possible to vote your shares, even if you plan to attend the annual meeting via the Internet or in person.

 

n   If you are a beneficial stockholder, your broker will NOT be able to vote your shares with respect to the election of directors and most of the other matters presented at the meeting unless you have given your broker specific instructions to do so. We strongly encourage you to vote.

 

n   You may vote via the Internet, by telephone, or, if you have received a printed version of these proxy materials, by mail.

 

n   For more information, see “Additional Meeting Information” on page 89 of this proxy statement.

Time and Date

8:30 a.m. Pacific Time Thursday, May 21, 2015

 

Attend via Internet

Attend the annual meeting

online, including to vote

and/or submit questions,

at www.intc.com

 

Attend in Person

Intel Corporation, Building
SC-12, 3600 Juliette Lane, Santa Clara, CA 95054

 

Record Date

March 23, 2015

 

 

     
  ANNUAL MEETING AGENDA AND VOTING  
  Proposal Voting Recommendation of the Board  
  1.

Election of the 11 directors named in this proxy statement

 

FOR EACH DIRECTOR NOMINEE  
  2. Ratification of selection of Ernst & Young LLP as our independent registered FOR  
 

public accounting firm for 2015

 

 
  3.

Advisory vote to approve executive compensation

 

FOR  
  4.

Approval of Amendment and Extension of the 2006 Equity Incentive Plan

 

FOR  
  5.

Approval of Extension of the 2006 Stock Purchase Plan

 

FOR  
  Stockholder proposals  
  6.

Stockholder proposal entitled “Holy Land Principles”

 

AGAINST  
  7 Stockholder proposal on whether the Chairman of the Board should be an AGAINST  
 

independent director

 

 
  8

Stockholder proposal on whether to adopt an alternative vote counting
standard

 

AGAINST  

 

   

Attending and participating via the Internet

 

n  www.intc.com; we encourage you to access the meeting online prior to its start time.

 

n  Webcast starts at 8:30 a.m. Pacific Time.

 

n  Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.intc.com.

 

n  Stockholders may vote and submit questions while attending the meeting on the Internet.

 

n  Webcast replay will be available until December 26, 2015.

 

Attending in person

 

n  Doors open at 8:00 a.m. Pacific Time.

 

n  Meeting starts at 8:30 a.m. Pacific Time.

 

n  Proof of Intel Corporation stock ownership and government-issued photo identification will be required to attend the annual meeting.

 

n  You do not need to attend the annual meeting to vote if you submitted your proxy in advance of the annual meeting.

 

n  Security measures may include bag search, metal detector, and hand-wand search. The use of cameras is not allowed.

 

Anyone can view the annual meeting live via the Internet at www.intc.com

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held

May 21, 2015:

The Notice of 2015 Annual Stockholders’ Meeting and Proxy Statement, and the 2014 Annual Report

on Form 10-K, are available at www.intc.com/annuals.cfm


Table of Contents

CONTENTS

 

2015 PROXY STATEMENT HIGHLIGHTS          5   
PROPOSAL 1: ELECTION OF DIRECTORS          8   
Director Skills, Experience, and Background     13   
Director Tenure     14   
CORPORATE GOVERNANCE         15   
Board Responsibilities and Structure     15   
The Board’s Role in Risk Oversight at Intel     16   
The Board’s Role in Succession Planning     17   
Director Independence and Transactions Considered in Independence Determinations     17   
Corporate Governance Guidelines     20   
Director Attendance     21   
Board Committees and Charters     21   
Communications from Stockholders to Directors     23   
DIRECTOR COMPENSATION        24   
Director Compensation for Fiscal Year 2014     25   
Outstanding Equity Awards for Directors     26   
CERTAIN RELATIONSHIPS AND RELATED     
TRANSACTIONS        28   
CODE OF CONDUCT        29   
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT        30   
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC      
ACCOUNTING FIRM        32   

Ernst & Young LLP’s Fees for 2014 and 2013

    33   
REPORT OF THE AUDIT COMMITTEE        34   
PROPOSAL 3: ADVISORY VOTE TO APPROVE     
EXECUTIVE COMPENSATION        36   
COMPENSATION DISCUSSION AND ANALYSIS        37   
Executive Summary     37   

Business Performance and Pay

    37   
Stockholder Engagement and the 2014 “Say on Pay” Vote     38   
2014 Compensation of Our Listed Officers     39   

Performance and Incentive Pay for 2014

    39   

Alignment of Performance and Compensation

    40   

Intel’s Compensation Best Practices

    41   

2014 Cash Compensation

    42   

2014 Annual Equity Awards

    45   
Other Aspects of Our Executive Compensation Programs     47   

Intel’s Compensation Framework

    47   

External Competitive Consideration’s for 2014

    48   

Post-Employment Compensation Arrangements

    49   

Personal Benefits

    50   

Corporate Officer Stock Ownership Guidelines

    50   

Intel Policies Regarding Derivatives or “Short Sales”

    50   

Intel Policies Regarding Claw-Backs

    50   

Tax Deductibility

    51   
REPORT OF THE COMPENSATION COMMITTEE        52   
EXECUTIVE COMPENSATION        53   
2014 Summary Compensation Table     53   
Grants of Plan-Based Awards in Fiscal Year 2014     56   
2014 Operational Goals     57   
Stock Option Exercises and Stock Vested in Fiscal Year 2014     59   
Outstanding Equity Awards at Fiscal Year-End 2014     60   
Pension Benefits for Fiscal Year 2014     61   
Non-Qualified Deferred Compensation for Fiscal Year 2014     62   
Employment Contracts and Change in Control Arrangements     63   
Other Potential Post-Employment Payments     63   

Voluntary Termination/Retirement

    63   

Death or Disability

    64   
PROPOSAL 4: APPROVAL OF AMENDMENT AND EXTENSION OF THE 2006 EQUITY     
INCENTIVE PLAN        65   
PROPOSAL 5: APPROVAL OF EXTENSION OF      
THE 2006 STOCK PURCHASE PLAN        75   
PROPOSAL 6: STOCKHOLDER PROPOSAL      
ENTITLED “HOLY LAND PRINCIPLES”        80   
PROPOSAL 7: STOCKHOLDER PROPOSAL,      
INDEPENDENT CHAIRMAN        83   
PROPOSAL 8: STOCKHOLDER PROPOSAL,      
SIMPLE MAJORITY VOTING        86   
ADDITIONAL MEETING INFORMATION        89   
OTHER MATTERS        91   
STOCKHOLDERS SHARING THE SAME LAST     
NAME AND ADDRESS        93   
EXHIBIT A: 2006 EQUITY INCENTIVE PLAN        A-1   
EXHIBIT B: 2006 STOCK PURCHASE PLAN        B-1   
 

 

 

 

LOGO

 

 

 


Table of Contents

2015 PROXY STATEMENT HIGHLIGHTS

This summary highlights information contained elsewhere in our proxy statement and does not contain all of the information that you should consider. We encourage you to read the entire proxy statement carefully before voting.

Board Nominees

 

            COMMITTEE  MEMBERSHIPS
Name   Occupation   Independent   AC   CC   GNC   EC   FC
Charlene Barshefsky   Senior International Partner,   ¢           ¢

C

Age: 64, Director Since: 2004   Wilmer Cutler Pickering Hale and Dorr LLP                    
Aneel Bhusri   Co-Founder and CEO,   ¢            
Age: 49, Director Since: 2014   Workday, Inc.                      
Andy D. Bryant   Chairman of the Board of Directors,             ¢    
Age: 64, Director Since: 2011   Intel Corporation                      
Susan L. Decker   Principal,  

¢

LD

  ¢     ¢

Co

  ¢

C

   
Age: 52, Director Since: 2006   Deck3 Ventures, LLC                
John J. Donahoe   President and CEO,   ¢       ¢   ¢        
Age: 54, Director Since: 2009   eBay Inc.            
Reed E. Hundt   Principal,   ¢   ¢       ¢       ¢
Age: 67, Director Since: 2001   REH Advisors, LLC            
Brian M. Krzanich   CEO,             ¢    
Age: 54, Director Since: 2013   Intel Corporation                      
James D. Plummer   Professor,   ¢   ¢         ¢
Age: 70, Director Since: 2005   Stanford University                  
David S. Pottruck   Chairman and CEO,   ¢     ¢

C

    ¢    
Age: 66, Director Since: 1998   Red Eagle Ventures, Inc.                  
Frank D. Yeary   Executive Chairman,   ¢   ¢

C

        ¢
Age: 51, Director Since: 2009   CamberView Partners, LLC                  
David B. Yoffie   Professor,   ¢     ¢   ¢

Co

     
Age: 60, Director Since: 1989   Harvard Business School                  

 

LD   Independent Lead Director   AC   Audit Committee   EC   Executive Committee
C   Committee Chair   CC   Compensation Committee   FC   Finance Committee
Co   Committee Co-Chair   GNC   Corporate Governance    
      and Nominating Committee    

COMPANY PERFORMANCE DURING 2014

Year-over-Year Results

 

     

2014

($ in millions, except
per share amounts)

  

2013

($ in millions, except

per share amounts)

  

Change

(%)

Net Revenue              55,870              52,708      6%
Net Income              11,704                9,620    22%
Stock Price (high and low)1    37.67 / 23.52    25.70 / 20.23      n/a
Stock Price as of Fiscal Year-End                37.55                25.60    47%

 

1 

Based on a 52-week closing-price high and low.

 

 

 

 

LOGO

 

 

    5   


Table of Contents

2015 PROXY STATEMENT HIGHLIGHTS

 

For full year 2014, we achieved record net revenue of $55.9 billion, up 6% from 2013; operating income of $15.3 billion, up 25% from 2013; and diluted earnings per share of $2.31, up 22% from 2013. Both our PC Client Group (PCCG) and Data Center Group (DCG) businesses outperformed our expectations for the year. PCCG net revenue was up 4%, with PCCG platform unit sales up 8%, primarily on higher notebook platform unit sales. We saw robust growth in DCG, with net revenue up 18% and platform average selling prices and unit sales up 10% and 8%, respectively. Gross margin of approximately 64% was up approximately 4 percentage points from 2013, driven by lower PCCG and DCG platform unit costs, lower start-up costs, and higher PCCG and DCG platform volumes. These increases were partially offset by higher cost of sales associated with higher tablet platform unit sales and cash consideration provided to our customers associated with integrating our tablet platform.

In 2014, we started growing again across a broad range of products and markets by introducing many new product technologies across all of our businesses. We began shipping the world’s first processor on 14-nanometer (nm) process technology. Additionally, we launched the Intel® Core™ M processor family. Intel Core M processor is enabling new designs and form factors with its full core performance in both compute and graphics. We recently launched Intel® RealSense™ technology, which includes software and depth cameras that enable more natural and intuitive interaction with personal computing devices. In the wireless business, we qualified our first System-on-Chip application processor and baseband 3G solution, code-named “SoFIA.” We also exceeded our goal of 40 million tablet platform unit sales in 2014.

INVESTOR OUTREACH

Intel’s Engagement Program

Our relationship with our stockholders is an important part of our company’s success and we have a long tradition of transparency and responsiveness to stockholder perspectives.

In addition to our regular Investor Relations engagements, we hold a series of meetings every year with socially-responsible-investor groups; we also meet annually with many of our institutional stockholders to discuss our executive compensation programs and corporate governance topics. These engagement efforts with our stockholders allow us to better understand our stockholders’ priorities and perspectives, and to provide us with useful input concerning our compensation and corporate governance practices. During the last several months of 2014, and prior to the date of this proxy statement in 2015, we pursued multiple avenues for stockholder engagement, including in-person and teleconference meetings with our stockholders. No significant changes have been made to our executive compensation programs for 2015.

EXECUTIVE COMPENSATION HIGHLIGHTS FOR 2014

Intel has a long-standing commitment to pay-for-performance. We implement this commitment by providing the majority of compensation to executive officers through arrangements that are designed to hold those officers accountable for business results and reward them for consistently strong corporate performance and creation of value for our stockholders. Our executive compensation programs are periodically adjusted over time so that they support Intel’s business goals and promote both current-year and long-term profitable growth of the company.

 

n   

The majority of cash compensation is paid under our annual incentive cash plan with the annual payouts based on measures of relative financial performance, absolute financial performance, company performance relative to operational goals, and individual performance.

 

n   

Equity awards—consisting in 2014 of variable performance-based outperformance restricted stock units (OSUs) and restricted stock units (RSUs)—align compensation with the long-term interests of Intel’s stockholders by focusing our executive officers on both absolute and relative total stockholder return (TSR).

 

n   

In setting executive officer compensation, the Compensation Committee evaluates individual performance reviews of our executive officers and compensation levels in a “peer group,” which for 2014 consisted of 15 technology companies and 10 other large companies.

 

n   

Total compensation for each executive officer varies with both individual performance and Intel’s performance in achieving financial and non-financial objectives. Each executive officer’s compensation is designed to reward his or her contribution to Intel’s results.

 

 

6  

 

  2014 PROXY STATEMENT    

 


Table of Contents

2015 PROXY STATEMENT HIGHLIGHTS

 

The following table shows the 2014 total direct compensation granted by the Compensation Committee to our Chief Executive Officer (CEO), Chief Financial Officer (CFO), and three additional executive officers serving at the end of 2014.

 

Name and
Principal Position
  Salary
($)
    Non-Equity
Incentive Plan
Compensation
($)
    Stock
Awards
($)
    Total Direct
Compensation
($)
 
Brian M. Krzanich     1,000,000        3,354,400        6,658,700        11,013,100   
CEO                                
Renée J. James     850,000        2,600,400        5,660,200        9,110,600   
President                                
Andy Bryant     790,000        1,870,500        4,512,500        7,173,000   
Chairman of the Board                                
Stacy J. Smith     673,000        1,663,400        4,338,900        6,675,300   

Executive Vice President

and Chief Financial Officer

                               
William M. Holt     641,000        1,252,800        4,338,900        6,232,700   

Executive Vice President, General Manager,

Technology & Manufacturing Group

                               

CORPORATE GOVERNANCE AT INTEL

Intel understands that corporate governance practices change and evolve over time, and we seek to adopt and use practices that we believe will be of value to our stockholders and will positively aid in the governance of the company. Some of our governance practices include the following:

 

n   

Intel adopted “majority voting” in the election of directors starting in 2006.

 

n   

We do not combine the positions of CEO and Chairman of the Board.

 

n   

We have an independent Lead Director whenever our Chairman of the Board is an Intel employee.

 

n   

Our directors are limited to service on four public company boards (three boards if also serving as a CEO).

 

n   

As part of each director candidate search, our Board is committed to seeking out women and minority candidates, as well as candidates with diverse backgrounds, experiences, and skills.

 

n   

All officers and directors are subject to our long-standing policy prohibiting the hedging of Intel stock.

 

n   

Compensation claw-back provisions apply to both our annual incentive cash plan and our equity incentive plan.

 

n   

We have stock ownership guidelines for all officers and directors.

 

 

 

 

LOGO

 

 

    7   


Table of Contents

PROPOSAL 1  n  Election of Directors

 

 

LOGO

PROXY STATEMENT

 

 

INTEL CORPORATION

2200 Mission College Blvd.

Santa Clara, CA 95054-1549

 

Our Board of Directors solicits your proxy for the 2015 Annual Stockholders’ Meeting (and any postponement or adjournment of the meeting) for the matters set forth in “Annual Meeting Agenda and Voting.” We made this proxy statement available to stockholders beginning on April 2, 2015.

 

LOGO   

PROPOSAL 1

 

Election of Directors

 

Upon the recommendation of our Corporate Governance and Nominating Committee, our Board has nominated the 11 individuals listed below to serve as directors. Our nominees include nine independent directors, as defined in the rules for companies traded on The NASDAQ Global Select Market, (NASDAQ), and two Intel officers: Brian M. Krzanich, who

 

became our CEO in May 2013, and Andy D. Bryant, who currently serves as Chairman of the Board and previously served as our Executive Vice President and Chief Administrative Officer. Mr. Bryant became Chairman of the Board at the 2012 Annual Stockholders’ Meeting.

 

Each director’s term runs from the date of his or her election until our next annual stockholders’ meeting or until his or her successor (if any) is elected or appointed. If any director nominee is unable or unwilling to serve as a nominee at the time of the annual meeting, the individuals named as proxies may vote for a substitute nominee chosen by the present Board to fill the vacancy. Alternatively, the Board may reduce the size of the Board, or the proxies may vote just for the remaining nominees, leaving a vacancy that the Board may fill at a later date. However, we have no reason to believe that any of the nominees will be unwilling or unable to serve if elected as a director.

 

Our Bylaws require that a director nominee will be elected only if he or she receives a majority of the votes cast with respect to his or her election in an uncontested election (that is, the number of shares voted “for” that nominee exceeds the number of votes cast “against” that nominee). You can vote to “abstain,” but that vote will not have an effect in determining the election results. For more information, see “Additional Meeting Information, Voting at the Meeting” below. Each of our director nominees currently serves on the Board. If a nominee who currently serves 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 re-elect that 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. Within 90 days from the date that the election results were certified, the Board would act on the Corporate Governance and Nominating Committee’s recommendation and publicly disclose its decision and the rationale behind it.

 

8  

 

  2015 PROXY STATEMENT    

 


Table of Contents

PROPOSAL 1  n  Election of Directors

 

 

RECOMMENDATION OF THE BOARD

The Board recommends that you vote “FOR” the election of each of the following nominees.

 

LOGO

    

  Ambassador Charlene Barshefsky   has been a Senior International Partner at Wilmer Cutler Pickering Hale and Dorr LLP (WilmerHale), a multinational law firm in Washington, D.C., since 2001. Prior to joining the law firm, Ambassador Barshefsky served as the United States Trade Representative, the chief trade negotiator and principal trade

 

policy maker for the United States and a member of the President’s Cabinet, from 1997 to 2001, and as Acting and Deputy United States Trade Representative from 1993 to 1996. Ambassador Barshefsky is also a director of American Express Company, Estée Lauder Companies, and Starwood Hotels & Resorts Worldwide.

 

Ambassador Barshefsky brings to the Board international experience acquired prior to, during, and after her tenure as United States Trade Representative. As the chief trade negotiator for the United States, Ambassador Barshefsky headed an executive branch agency that operated worldwide in matters affecting international trade and commerce. Ambassador Barshefsky’s position as Senior International Partner at a multinational law firm brings to the Board continuing experience in dealing with foreign governments, focusing on market access and the regulation of business and investment. Through her government and private experience, Ambassador Barshefsky provides substantial expertise in doing business in China, where Intel has significant operations. As a director for other multinational companies, Ambassador Barshefsky also provides cross-board experience.

LOGO

    

  Aneel Bhusri   has been CEO at Workday, Inc., a provider of enterprise cloud applications for human resources and finance headquartered in Pleasanton, California, since May 2014. Mr. Bhusri has served as a director of Workday from 2005 to the present, as President from January 2007 to September 2009, as Co-CEO from

 

September 2009 to May 2014, and as Chairman from January 2012 to May 2014. He has also been a partner at Greylock Partners, a venture capital firm, from 1999 to 2015, and currently serves as an advisory partner. Before co-founding Workday in 2005, Mr. Bhusri held a number of leadership positions at PeopleSoft, including Senior Vice President responsible for product strategy, business development, and marketing, and vice chairman of the board. Mr. Bhusri received an MBA from Stanford University and holds bachelor’s degrees in electrical engineering and economics from Brown University. He is a Crown Fellow at the Aspen Institute.

 

Mr. Bhusri brings to the Board senior leadership, cloud computing expertise, and operational experience from his experience as CEO and chairman of an enterprise cloud applications company, his prior work in product, marketing, and business development of another human resources application company, and his role as partner of several venture capital firms. Mr. Bhusri’s more than 20 years of experience in enterprise software innovation and cloud computing will increase the Board’s depth in areas that are important to Intel’s business and in today’s connected world.

LOGO

    

  Andy D. Bryant   has been Chairman of the Board of Directors of Intel since May 2012. Mr. Bryant served as Vice Chairman of the Board of Directors of Intel from July 2011 to May 2012. Mr. Bryant joined Intel in 1981, became CFO in February 1994, and was promoted to Senior Vice President in January 1999. In December 1999, he was

 

 

 

LOGO

 

 

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Table of Contents

PROPOSAL 1  n  Election of Directors

 

 

 

promoted to Executive Vice President and his role expanded to Chief Financial and Enterprise Services Officer. In October 2007, Mr. Bryant was named Chief Administrative Officer (CAO), a position he held until January 2012. In 2009, Mr. Bryant’s responsibilities expanded to include the Technology and Manufacturing Group. Mr. Bryant serves on the board of directors of Columbia Sportswear and McKesson Corporation.

 

Mr. Bryant brings senior leadership, financial, strategic, and global expertise to the Board from his former service as CFO and CAO of Intel. Mr. Bryant has budgeting, accounting controls, and forecasting experience and expertise from his work in Intel Finance, as CFO and as CAO. Mr. Bryant has been responsible for manufacturing, human resources, information technology, and finance. Mr. Bryant has regularly attended Intel Board meetings for more than 18 years in his capacity as CFO and CAO, and has direct experience as a board member through his service on other public company boards. After evaluating the Board’s corporate governance guideline regarding retirement of corporate officers, the Board determined to re-nominate Mr. Bryant because it believes that Mr. Bryant continues to be best positioned to support the independent directors through his service as a key member and Chairman of the Board with strong leadership skills and financial experience. The Board believes that Mr. Bryant’s contributions since becoming Chairman in 2012 and his expertise and experience are invaluable to the Board in the current climate. The Board, therefore, decided to nominate Mr. Bryant for an additional term as a director and Chairman of the Board.

LOGO

    

  Susan L. Decker   has been Lead Director of Intel since May 2012. She has been a Principal of Deck3 Ventures LLC, a consulting and advisory firm in San Francisco, California, since 2009. From 2009 to 2010, she was an Entrepreneur-in-Residence at Harvard Business School. Prior to that, Ms. Decker served as President of Yahoo! Inc.,

 

a global Internet company in Sunnyvale, California, from 2007 to 2009; as Executive Vice President of the Advertiser and Publisher Group of Yahoo! from 2006 to 2007; and as Executive Vice President of Finance and Administration and CFO of Yahoo! from 2000 to 2007. Prior to joining Yahoo!, Ms. Decker was with the investment banking firm Donaldson, Lufkin & Jenrette for 14 years, most recently as the Global Director of Equity Research. Ms. Decker is also a member of the Berkshire Hathaway Inc. and Costco Wholesale Corporation boards of directors.

 

Ms. Decker’s experience as president of a global Internet company provides expertise in corporate leadership, financial management, and Internet technology. In her role as a CFO, Ms. Decker was responsible for finance, human resources, legal, and investor relations, and played a significant role in developing business strategy. This experience supports the Board in overseeing and advising on strategy and financial matters. Ms. Decker also provides brand marketing experience from her role as senior executive of Yahoo!’s Advertiser and Publisher Group. In addition, Ms. Decker’s 14 years as a financial analyst, service on audit committees of other public companies, and past service on the Financial Accounting Standards Advisory Council from 2000 to 2004 qualify her to offer valuable perspectives on Intel’s corporate planning, budgeting, and financial reporting. As a director for other multinational companies, Ms. Decker also provides cross-board experience.

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  John J. Donahoe   has been President, CEO, and director of eBay Inc., a global online marketplace in San Jose, California, since 2008. Mr. Donahoe joined eBay in 2005 as President of eBay Marketplaces, and was responsible for eBay’s global e-commerce businesses. In this role, he focused on expanding eBay’s core business,

 

which accounts for a large percentage of the company’s revenue. Prior to joining eBay, Mr. Donahoe was the Worldwide Managing Director from 2000 to 2005 for Bain &Company, a global management consulting firm based in Boston, Massachusetts, where he oversaw Bain’s 30 offices and 3,000 employees. Mr. Donahoe is a member of Nike, Inc.’s board of directors.

 

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PROPOSAL 1  n  Election of Directors

 

 

 

Mr. Donahoe brings senior leadership, strategic, and global expertise to the Board from his current position as CEO of a major Internet company and his prior work as a management consultant and leader of a global business consulting firm. In his role at eBay, Mr. Donahoe oversaw a number of strategic acquisitions, bringing business development and mergers and acquisitions (M&A) experience to the Board. Mr. Donahoe also provides technical and brand marketing expertise from his role as a leader of global e-commerce businesses.

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  Reed E. Hundt   has been a Principal of REH Advisors LLC, a strategic advice firm in Washington, D.C., since 2009, and CEO of the Coalition for Green Capital, a non-profit organization based in Washington, D.C., that designs, develops, and implements green banks at the state, federal, and international level, since 2010. From

 

1998 to 2009, Mr. Hundt was an independent advisor to McKinsey & Company, Inc., a worldwide management consulting firm in Washington, D.C., and Principal of Charles Ross Partners, LLC, a private investor and advisory service in Washington, D.C. Mr. Hundt served as Chairman of the U.S. Federal Communications Commission (FCC) from 1993 to 1997. From 1982 to 1993, Mr. Hundt was a partner with Latham & Watkins, an international law firm. Within the past five years, Mr. Hundt has served as a member of the board of directors of Infinera Corporation.

 

As an advisor to and an investor in telecommunications companies and other businesses on a worldwide basis, Mr. Hundt has significant global experience in communications technology and the communications business. Mr. Hundt also has significant government experience from his service as Chairman of the FCC, where he helped negotiate the World Trade Organization Telecommunications Agreement, which opened markets in 69 countries to competition and reduced barriers to international investment. Mr. Hundt’s legal experience enables him to provide perspective and oversight on legal and compliance matters, and his board service with numerous other companies, including on their audit committees, provides cross-board experience and financial expertise. His work with a number of ventures involved in sustainable energy and the environment provides him with a unique perspective in overseeing Intel’s environmental and sustainability initiatives.

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  Brian M. Krzanich   has been a director and CEO of Intel since May 2013. Mr. Krzanich joined Intel in 1982. He became a Corporate Vice President in May 2006, serving until 2010 as Vice President and General Manager of Assembly and Test. He was Senior Vice President and General Manager of Manufacturing and Supply Chain from

 

2010 to 2012. He was appointed Executive Vice President and Chief Operating Officer in 2012, responsible for Intel’s global manufacturing, supply chain, human resources, and information technology operations. He is also chairman of the board of directors of the Semiconductor Industry Association.

 

As our CEO and a senior executive officer with over 31 years of service with Intel, Mr. Krzanich brings to the Board significant senior leadership, manufacturing and operations, industry, technical, and global experience, as well as a unique perspective of the company. As CEO, Mr. Krzanich is directly responsible for Intel’s strategy and operations.

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  James D. Plummer   has been a Professor of Electrical Engineering at Stanford University in Stanford, California, since 1978 and was Dean of Stanford’s School of Engineering from 1999 to 2014. Dr. Plummer received his PhD in Electrical Engineering from Stanford University. Dr. Plummer has published more than 400 papers on

 

 

 

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PROPOSAL 1  n  Election of Directors

 

 

 

silicon devices and technology, has won numerous awards for his research, and is a member of the U.S. National Academy of Engineering. Dr. Plummer also directed the Stanford Nanofabrication Facility from 1994 to 2000. Dr. Plummer is a member of the board of directors of Cadence Design Systems, Inc. Within the past five years, Dr. Plummer has served as a member of the board of directors of International Rectifier Corporation.

 

As a scholar and educator in the field of integrated circuits, Dr. Plummer brings to the Board industry and technical experience directly related to Intel’s semiconductor research and development, and manufacturing. Dr. Plummer’s board service with other public companies, including on their audit committees, provides cross-board experience and financial expertise.

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  David S. Pottruck   has been Chairman and CEO of Red Eagle Ventures, Inc., a private equity firm in San Francisco, California, since 2005. Mr. Pottruck has also served as Co-Chairman of Hightower Advisors, a wealth-management company in Chicago, Illinois, since 2009 and in 2013 became Chairman. Mr. Pottruck teaches in the

 

MBA and Executive Education programs of the Wharton School of Business of the University of Pennsylvania, and serves as a Senior Fellow in the Wharton School of Business Center for Leadership and Change Management. Prior to joining Red Eagle Ventures, Inc., Mr. Pottruck had a 20-year career at Charles Schwab Corporation that included service as President, CEO, and a member of the board.

 

As the Chairman and CEO of a private equity firm, and as a former CEO of a major brokerage firm with substantial Internet operations, Mr. Pottruck brings to the Board significant senior leadership, management, operational, financial, business development, and brand management expertise.

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  Frank D. Yeary   has been Executive Chairman of CamberView Partners, LLC, a corporate advisory firm in San Francisco, California, since 2012. Mr. Yeary was Vice Chancellor of the University of California, Berkeley from 2008 to 2012, where he led and implemented major strategic and financial changes to the university’s financial

 

and operating strategy. Prior to 2008, Mr. Yeary spent nearly 25 years in the finance industry, most recently as Managing Director, Global Head of Mergers and Acquisitions and a member of the Management Committee at Citigroup Investment Banking, a financial services company. Mr. Yeary was also Chairman and co-founder of Level Money, Inc., a personal finance organization for young adults, from 2012 to 2015. Mr. Yeary is a member of the board of directors of eBay.

 

Mr. Yeary’s extensive career in investment banking and finance brings to the Board financial strategy and M&A expertise, including expertise in financial reporting and experience in assessing the efficacy of mergers and acquisitions. In addition, Mr. Yeary’s role as Vice Chancellor and as Chief Administrative Officer of a large public research university provides strategic and financial expertise.

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  David B. Yoffie   has been a Professor at Harvard University’s Graduate School of Business Administration in Boston, Massachusetts, since 1981. Dr. Yoffie also served as the Harvard Business School’s Senior Associate Dean and Chair of Executive Education from 2006 to 2012. He received a PhD from Stanford University, where he has

 

been a Visiting Scholar. Dr. Yoffie served as Chairman of the Harvard Business School Strategy department from 1997 to 2002, as Chairman of the Advanced Management Program from 1999 to 2002, and as Chair of Harvard’s Young Presidents’ Organization program from 2004 to 2012. Dr. Yoffie is a member of the board of directors of Financial Engines, Inc. and TiVo, Inc.

 

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PROPOSAL 1  n  Director Skills, Experience, and Background

 

 

 

As a scholar and educator in the field of international business administration, Dr. Yoffie brings to the Board significant global experience and knowledge of competitive strategy, technology, and international competition. Dr. Yoffie’s board service with other U.S. and non-U.S. public companies also provides cross-board experience. As our longest-serving director, Dr. Yoffie provides unique insights and perspectives on Intel’s development and strategic direction.

 

 

Director Skills, Experience, and Background

 

Intel is a large technology company engaged in research, manufacturing, and marketing on a global scale. We operate in highly competitive markets characterized by rapidly evolving technologies and exposure to business cycles. As we discuss below under “Board Committees and Charters,” the Corporate Governance and Nominating Committee is responsible for assessing with the Board the appropriate skills, experience, and background that we seek in Board members in the context of our business and the existing composition of the Board. This assessment of Board skills, experience, and background includes numerous diverse factors, such as independence; understanding of and experience in manufacturing, technology, finance, and marketing; international experience; age; and gender and ethnic diversity that reflects our Board’s commitment, as set forth under our Corporate Governance Guidelines, to actively seek women and minority candidates for the pool from which Board candidates are chosen. The committee and the Board review and assess the effectiveness of their practices for consideration of diversity in nominating director candidates. The Board then determines whether a nominee’s background, experience, personal characteristics, or skills will advance the Board’s goal of creating and sustaining a Board that can support and oversee the company’s complex activities.

 

We believe that our employees around the world drive our business, and that a diverse employee population can better understand our customers’ needs. Our success with a diverse workforce informs our views about the value of a board of directors that has a mix of skills, experiences, and backgrounds. To learn more about Intel’s commitment to diversity, see:

 

n  our Diversity web site at www.intel.com/content/www/us/en/company-overview/diversity-at-intel.html;

 

n  our Corporate Responsibility Report at www.intel.com/responsibility; and/or

 

n  our Corporate Governance Guidelines at www.intel.com/governance.

 

Listed below are the skills and experience that we consider important for our directors in light of our current business and structure. The directors’ biographies note each director’s relevant experience, qualifications, and skills relative to this list.

 

n  Senior Leadership Experience. Directors who have served in senior leadership positions are important to us, as they have the experience and perspective to analyze, shape, and oversee the execution of important operational and policy issues. These directors’ insights and guidance, and their ability to assess and respond to situations encountered in serving on our Board, may be enhanced by leadership experience at businesses or organizations that operated on a global scale, faced significant competition, or involved technology or other rapidly evolving business models.

 

n   Public Company Board Experience. Directors with public company board experience understand the dynamics and operation of a corporate board, the relationship of a board to the CEO and other management personnel, the importance of particular agenda and oversight issues, and how to oversee an ever-changing mix of strategic, operational, and compliance-related matters.

 

n  Business Development and M&A Experience. Directors with a background in business development and in M&A provide insight into developing and implementing strategies for growing our business. Useful experience in this area includes skills in assessing “make vs. buy” decisions, analyzing the “fit” of a proposed acquisition with a company’s strategy, the valuation of transactions, and assessing management’s plans for integration with existing operations.

 

n   Financial Expertise. Knowledge of financial markets, financing and funding operations, and accounting and financial reporting processes is also important. This experience assists our directors in understanding, advising on, and overseeing Intel’s capital structure, financing and investing activities, as well as our financial reporting and internal controls.

 

 

 

 

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PROPOSAL 1  n  Director Tenure

 

 

 

n  Industry and Technical Expertise. Because we are a technology, hardware, and software provider, education or experience in relevant technology is useful for understanding our research and development efforts, competing technologies, the products and processes we develop, our manufacturing and assembly and test operations, and the market segments in which we compete.

 

n  Brand Marketing Expertise. Directors with brand marketing experience can provide expertise and guidance as we seek to maintain and expand brand and product awareness and enhance our reputation.

 

n  Government Expertise. Directors who have served in government positions provide experience and insights that help us work constructively with governments around the world and address significant public policy issues, particularly as they relate to Intel’s operations and to public support for science, technology, engineering, and mathematics education.

 

n  Global/International Expertise. We are a global organization with research and development, manufacturing, assembly and test facilities, and sales and other offices in many countries. In addition, the majority of our revenue comes from sales outside the United States. Because of these factors, directors with global expertise can provide valuable business and cultural perspective regarding many important aspects of our business.

 

n  Legal Expertise. Directors with a background in law can assist the Board in fulfilling its oversight responsibilities regarding Intel’s legal and regulatory compliance and its engagement with regulatory authorities.

 

Director Tenure

 

Our directors have served an average of 9.4 years on the Board as of the record date, and six of our directors have been on the Board for less than that period of time. This mix of tenure on the Board is intended to support the view that the Board as a whole represents a “portfolio” of skills and experience and as the company’s business and environment changes, so do the perceived skills and experience that will be particularly useful for the Board as a whole.

 

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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:

 

n   

overseeing the conduct of our business and the assessment of our business and other enterprise risks to evaluate whether the business is being properly managed;

 

n   

planning for CEO succession and monitoring management’s succession planning for other executive officers;

 

n   

reviewing and approving our major financial objectives, strategic, and operating plans, and other significant actions;

 

n   

selecting the CEO, evaluating CEO performance, and determining the compensation of the CEO and other executive officers; and

 

n   

overseeing our processes for maintaining the integrity of our financial statements and other public disclosures, and our compliance with law and ethics.

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. At each Board meeting, the Board held sessions for the independent directors to meet without the Chairman and CEO present. Officers regularly attend Board meetings to present information on our business and strategy, and Board members have worldwide access to our employees outside of Board meetings. Board members are encouraged to make site visits on a worldwide basis to meet with local management; to attend Intel industry, analyst, and other major events; and to accept invitations to attend and speak at internal Intel meetings.

Board Leadership Structure. The Board has a general policy that the positions of Chairman and CEO should be held by separate individuals to aid in the Board’s oversight of management. This policy is in the Board’s published Guidelines on Significant Corporate Governance Issues, and it has been in effect since the company began operations. Sometimes the Board has chosen an independent director as Chairman, and sometimes it has chosen a senior executive as Chairman; since 1997 the Board has also elected an independent director to serve as Lead Director when the Chairman is a senior executive. Recent Chairmen have included Dr. Jane Shaw, an independent director who served as Chairman from 2009 until her retirement from the Board in May 2012; Dr. Craig R. Barrett, a former CEO of Intel, who served as Chairman from 2005 until 2009; and Dr. Andy Grove, a former CEO of Intel, who served as Chairman from 1997 until 2005.

Andy D. Bryant, the current Chairman, has served in that role since May 2012. He was first elected to the Board in 2011, when the Board designated him as Vice Chairman in anticipation of naming him Chairman in 2012 following Dr. Shaw’s retirement from the Board. In making this selection, the Board took into account that Mr. Bryant has held many positions with Intel, most recently as Executive Vice President and Chief Administrative Officer, with responsibility for the Technology and Manufacturing Group, Information Technology, Human Resources, and Finance, and previously as Intel’s Chief Financial Officer. Mr. Bryant has attended and been a participant at Board meetings for more than 18 years in his positions as CFO and CAO.

The independent directors considered whether to elect an independent director as the next Chairman but decided that Mr. Bryant would be the right choice. The Board determined that Mr. Bryant’s extensive experience at Intel and familiarity with Intel’s operations and management structure, as well as the Board’s confidence in Mr. Bryant’s guidance and ability to support the Board in fulfilling its oversight responsibilities, uniquely positioned Mr. Bryant to serve as Chairman. The independent members of the Board considered whether Mr. Bryant’s position as a senior executive officer might reduce or compromise his effectiveness as Chairman, and concluded that in their opinion this would not be the case and that his Intel experience would be of direct value to the Board during and following a period of CEO transition. The independent members of the Board are responsible for reviewing Mr. Bryant’s performance, and the Compensation Committee is responsible for determining his compensation.

 

 

 

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CORPORATE GOVERNANCE  n  The Board’s Role in Risk Oversight at Intel

 

 

Ms. Decker has served as Lead Director since May 2012. The duties and responsibilities of the Lead Director, as provided in our Bylaws and the Board’s Charter of the Lead Director, include:

 

n   

advising the Chairman as to the quality, quantity, and timeliness of the information submitted by the company’s management that is necessary or appropriate for the non-employee directors to effectively and responsibly perform their duties;

 

n   

approving the information, agenda, and meeting schedules for the Board of Directors’ and Board committee meetings;

 

n   

approving the retention of advisors and consultants who report directly to the Board;

 

n   

serving as Chairman of the Executive Committee and as Chairman or co-Chairman of the Corporate Governance and Nominating Committee of the Board of Directors;

 

n   

assisting the Board of Directors, the Board’s Corporate Governance and Nominating Committee, and the officers of the company in implementing and complying with the Board’s Guidelines on Significant Corporate Governance Issues;

 

n   

calling and presiding at meetings of the independent directors;

 

n   

serving as a liaison for consultation and direct communication with stockholders;

 

n   

developing the agendas for and serving as Chairman of the executive sessions of the Board’s independent directors and, if different, the Board’s non-employee directors;

 

n   

recommending to the Corporate Governance and Nominating Committee and to the Chairman the membership of the various Board Committees, as well as the selection of Committee chairmen; and

 

n   

serving as Chairman of the Board at meetings of the Board of Directors when the Chairman is not present.

The Board will continue to periodically assess its leadership structure and the potential advantages of having an independent Chairman.

The Board’s Role in Risk Oversight at Intel

One of the Board’s important functions is oversight of risk management at Intel. Risk is inherent in business, and the Board’s oversight, assessment, and decisions regarding risks occur in the context of and in conjunction with the other activities of the Board and its committees.

Defining Risk. The Board and management consider “risk” to be the possibility that an undesired event could occur that might adversely affect the achievement of our objectives. Risks vary in many ways, including the ability of the company to anticipate and understand the risk, the types of adverse impacts that could result if the undesired event occurs, the likelihood that an undesired event and a particular adverse impact would occur, and the ability of the company to control the risk and the potential adverse impacts. Examples of the types of risks faced by Intel include:

 

n   

macro-economic risks, such as inflation, deflation, reductions in economic growth, or recession;

 

n   

political risks, such as restrictions on access to markets, confiscatory taxation, or expropriation of assets;

 

n   

event risks, such as natural disasters; and

 

n   

business-specific risks related to strategic position, operational execution, financial structure, legal and regulatory compliance, corporate governance, and environmental stewardship.

Not all risks can be dealt with in the same way. Some risks may be readily perceived and controllable, while other risks are unknown; some risks can be avoided or mitigated by particular behavior, and some risks are unavoidable as a practical matter. In some cases, a decision may be made that a higher degree of risk may be acceptable because of a greater perceived potential for reward. Intel seeks to align its voluntary risk-taking with company strategy, and Intel understands that its projects and processes may enhance the company’s business interests by encouraging innovation and appropriate levels of risk-taking.

Risk Assessment Processes. Management is responsible for identifying risk and risk controls related to significant business activities; mapping the risks to company strategy; and developing programs and

 

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CORPORATE GOVERNANCE  n  The Board’s Role in Succession Planning

 

 

recommendations to determine the sufficiency of risk identification, the balance of potential risk to potential reward, and the appropriate manner in which to manage risk. The Board implements its risk oversight responsibilities by having management provide periodic briefing and informational sessions on the significant voluntary and involuntary risks that the company faces and how Intel is seeking to manage risk if and when appropriate. In some cases, as with risks of new technology and risks related to product acceptance, risk oversight is addressed as part of the full Board’s regular interaction with the CEO and management. In other cases, a Board committee is assigned to oversee specific risk topics. For example, the Audit Committee oversees issues related to internal control over financial reporting, the Finance Committee oversees issues related to the company’s risk tolerance in cash-management investments, and the Compensation Committee oversees risks related to compensation programs, as discussed in greater detail below. Presentations and other information for the Board and Board committees generally identify and discuss relevant risk and risk control, and Board members assess and oversee risks in their review of the related business, financial, and other activity of the company. The full Board also receives reports from management on enterprise risk management in which risk identification and risk mitigation and control are the primary topics.

Risk Assessment in Compensation Programs. The Compensation Committee oversees management’s annual assessment of the company’s compensation programs. Based on that assessment, we have concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the company. Intel management assessed the company’s executive and broad-based compensation and benefits programs on a worldwide basis to determine whether the programs’ provisions and operations create undesired or unintentional material risk. This risk assessment process takes into account numerous compensation terms and practices that Intel maintains that aid in controlling risk, including the mix of cash, equity, and near- and long-term incentive programs; the use of multi-year vesting periods for equity awards and a variety of performance criteria for incentive compensation; the claw-back provisions that apply to our annual incentive cash plan and equity plan; our stock ownership guidelines that apply broadly to executives, other senior leaders (effective 2014), and non-management directors; and the cap on the maximum equity incentive grant payouts for our top executives. This risk assessment process also included a review of program policies and practices; program analysis to identify risk and risk controls, and determinations as to the sufficiency of risk identification and risk control; the balance of potential risk to potential reward; and the significance of the programs and their risks to company strategy. Although we reviewed all significant compensation programs, we focused on programs with variable payout, in particular assessing the ability of participants to directly affect payouts, and the controls on such situations.

The Board’s Role in Succession Planning

As reflected in our Corporate Governance Guidelines, the Board’s primary responsibilities include planning for CEO succession and monitoring and advising on management’s succession planning for other executive officers. The Board’s goal is to have a long-term and continuing program for effective senior leadership development and succession. The Board also has contingency plans in place for emergencies such as the departure, death, or disability of the CEO or other executive officers. Succession at our most senior management levels last occurred in May 2013, when the Board of Directors selected Brian M. Krzanich as CEO and Renée J. James as President, effective as of the 2013 Annual Stockholders’ Meeting.

Director Independence and Transactions Considered in Independence Determinations

Director Independence. The Board has determined that each of the following non-employee directors qualifies as “independent” in accordance with the published listing requirements of NASDAQ: Ambassador Barshefsky, Mr. Bhusri, Ms. Decker, Mr. Donahoe, Mr. Hundt, Dr. Plummer, Mr. Pottruck, Mr. Yeary, and Dr. Yoffie. Because Mr. Krzanich and Mr. Bryant are employed by Intel, they do not qualify as independent.

 

 

 

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CORPORATE GOVERNANCE  n  Director Independence and Transactions Considered in Independence Determinations

 

 

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:

 

n   

The director is, or at any time during the past three years was, an employee of the company;

 

n   

The director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for Board or Board committee service);

 

n   

A family member of the director is, or at any time during the past three years was, an executive officer of the company;

 

n   

The director or a family member of the director is a partner in, a controlling stockholder of, 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 exceeded 5% of the recipient’s consolidated gross revenue for that year, or $200,000, whichever was greater (subject to certain exclusions);

 

n   

The director or a family member of the director is employed as an executive officer of an entity for which at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or

 

n   

The director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

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 U.S. Securities and Exchange Commission (SEC), as no member of the Audit Committee accepts directly or indirectly any consulting, advisory, or other compensatory fee from the company other than their director compensation, or otherwise has an affiliate relationship with the company. Similarly, the members of the Compensation Committee each qualify as independent under NASDAQ standards. Under these standards, the Board considered that none of the members of the Compensation Committee accept directly or indirectly any consulting, advisory, or other compensatory fee from the company other than their director compensation, and that none have any affiliate relationships with the company or other relationships that would impair the director’s judgment as a member of the Compensation Committee.

Transactions Considered in Independence Determinations. In making its independence determinations, the Board considered transactions that occurred since the beginning of 2012 between Intel and entities associated with the independent directors or members of their immediate families.

All of the non-employee directors qualified as “independent” 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 and NASDAQ for members of audit and compensation committees, and the special SEC and U.S. Internal Revenue Service (IRS) standards for compensation committee members. Based on this review, as required by the NASDAQ rules, the Board made a subjective determination that, based on the nature of the directors’ relationships with the entity and/or the amount involved, no relationships exist that, in the opinion of the Board, impair the directors’ independence. The Board’s independence determinations took into account the following transactions:

Business Relationships. Each of our non-employee directors or one of his or her immediate family members is, or was during the previous three fiscal years, a non-management director, trustee, advisor, or

 

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CORPORATE GOVERNANCE  n  Director Independence and Transactions Considered in Independence Determinations

 

 

executive or served in a similar position at another entity that did business with Intel at some time during those years. The business relationships were ordinary course dealings as a supplier or purchaser of goods or services; licensing or research arrangements; facility, engineering, and equipment fees; or commercial paper or similar financing arrangements in which Intel or an affiliate participated as a creditor. Payments to or from each of these entities constituted less than the greater of $200,000 or 1% of both Intel’s and the recipient’s annual revenue, respectively, in each of the past three years, except as discussed below.

 

n   

Ambassador Barshefsky is a Partner at the law firm Wilmer Cutler Pickering Hale and Dorr LLP (WilmerHale). Ambassador Barshefsky does not provide any legal services to Intel, and she does not receive any compensation from the firm that is generated by or related to our payments to the firm. Intel engages a number of law firms, and has engaged WilmerHale in various significant matters since 1997, before Ambassador Barshefsky joined either the firm or Intel’s board. Recognizing that proxy advisory firms have questioned professional advisory relationships between companies and a director’s firm, the Board carefully reviewed the nature of Intel’s engagement of WilmerHale and the services rendered, including the expertise and relevant experience of the firm, the firm’s and specific partners’ knowledge of Intel and its business and past legal engagements, and the fees paid in such engagements, and determined that Ambassador Barshefsky’s service on Intel’s Board should not impair Intel’s ability to engage WilmerHale when Intel determines such engagements to be in the best interest of Intel and its stockholders. The Board is satisfied that WilmerHale, when engaged for legal work, is chosen by Intel’s legal group on the basis of the directly relevant factors of experience, expertise, and efficiency. The fees and expenses paid WilmerHale represented less than 5% of the firm’s annual revenue in each of the past three years, and represented less than 0.1% of Intel’s revenue in each year. After considering these fees and expenses and being briefed on the policies and procedures that WilmerHale has instituted to confirm that Ambassador Barshefsky has no professional involvement or financial interest in Intel’s dealings with the firm, the Board (with Ambassador Barshefsky recused) unanimously determined that Intel’s professional engagement of WilmerHale does not impair Ambassador Barshefsky’s independence.

 

n   

Mr. Bhusri is a member of the board of directors of Cloudera, Inc. (Cloudera), a company with which Intel holds over 10% ownership interest and engages in ordinary course business transactions. The Board carefully reviewed the nature of Intel’s transactions with Cloudera, which primarily related to subscription licenses and software support services, and Mr. Bhusri’s position as a non-management director at Cloudera. The fees paid Cloudera represented less than 3% of Cloudera’s annual revenue in 2014, and represented less than 0.01% of Intel’s revenue in 2014. After considering these fees, the Board (with Mr. Bhusri recused) unanimously determined that Intel’s business transactions with Cloudera do not impair Mr. Bhusri’s independence.

 

n   

Dr. Plummer is a member of the board of directors of Cadence Design Systems (Cadence), a company with which Intel engages in ordinary course business transactions. The Board carefully reviewed the nature of Intel’s transactions with Cadence, which primarily related to electronic design automation software services, and technology contracts, and Dr. Plummer’s position as a non-management director at Cadence. The fees paid Cadence represented less than 5% of Cadence’s annual revenue in each of the past three years, and represented less than 0.15% of Intel’s revenue in each year. After considering these fees, the Board (with Dr. Plummer recused) unanimously determined that Intel’s business transactions with Cadence do not impair Dr. Plummer’s independence.

Charitable Contributions. Mr. Donahoe, Mr. Hundt, Dr. Plummer, Mr. Pottruck, Mr. Yeary, Dr. Yoffie, or one of their immediate family members is serving, or has each served during the previous three fiscal years, as an executive, professor, or other employee for one or more colleges or universities or as a director, executive, or employee of a charitable entity that received matching or other charitable contributions from Intel during those years. Charitable contributions to each of these entities (including matching and discretionary contributions by Intel and the Intel Foundation) constituted less than $120,000 in each of the past three years, as discussed below.

 

n   

Mr. Donahoe was on the Board of Trustees of Dartmouth College from 2003 until 2012. The Intel Foundation contributed less than $10,000 in each of the past three years to match Intel employee charitable contributions to Dartmouth College, amounting to less than 0.001% of Dartmouth College’s annual revenue for each of the past three years.

 

 

 

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CORPORATE GOVERNANCE  n  Corporate Governance Guidelines

 

 

 

n   

Mr. Hundt was a member of the Advisory Board for the Yale School of Management, the graduate business school of Yale University, from 1996 until 2014. The Intel Foundation contributed less than $10,000 in each of the past three years to match Intel employee charitable contributions to Yale University, amounting to less than 0.001% of Yale University’s consolidated annual revenue for each of the past three years.

 

n   

Dr. Plummer is a Professor of Electrical Engineering, and was the Dean of the School of Engineering at Stanford University from 1999 until 2014. The Intel Foundation contributed less than $20,000 in each of the past three years to match Intel employee charitable contributions to Stanford University and employee volunteer hours at Stanford under the Intel Involved Matching Grant Program. The Intel Foundation also contributed $20,000 in 2013 to support the university’s RISE (Raising Interest in Science and Engineering) Summer Internship Program for high school students and $20,000 in 2012 to support the university’s science fair competitions, amounting to less than 0.001% of Stanford’s consolidated annual revenue for each of the past three years.

 

n   

Mr. Pottruck is a Senior Fellow, Advisory Board Member, and Lecturer at the Wharton School of Business of the University of Pennsylvania. The Intel Foundation contributed less than $5,000 in each of the past three years to match Intel employee charitable contributions to the University of Pennsylvania, amounting to less than 0.001% of the University of Pennsylvania’s consolidated annual revenue for each of the past three years.

 

n   

Mr. Yeary was Vice Chancellor of the University of California, Berkeley from 2008 until 2012 and Trustee of the University of California, Berkeley Foundation from 2002 until 2012. The Intel Foundation contributed less than $11,000 in each of the past three years to match Intel employee charitable contributions to the University of California, Berkeley and the University of California, Berkeley Foundation, amounting to less than 0.001% of the aggregate annual revenue of the University of California and University of California Campus Foundations for each of those years.

 

n   

Dr. Yoffie is a Professor at Harvard Business School, the graduate business school of Harvard University. The Intel Foundation contributed less than $5,000 in each of the past three years to match Intel employee charitable contributions to Harvard University, amounting to less than 0.001% of Harvard’s consolidated annual revenue for each of the past three years.

Corporate Governance Guidelines

Intel has long maintained a set of governance guidelines, titled the Board of Directors Guidelines on Significant Corporate Governance Issues. The Corporate Governance and Nominating Committee reviews the guidelines annually and recommends amendments to the Board as appropriate. The Board oversees administration and interpretation of, and compliance with, the guidelines and may amend, waive, suspend, or repeal any of the guidelines at any time, with or without public notice subject to legal requirements, as it determines necessary or appropriate in the exercise of the Board’s judgment in its role as fiduciary.

Investors may find these guidelines on our web site at www.intel.com/governance. Among other matters, they include the following items concerning the Board:

 

n   

Independent directors may not stand for re-election after age 72.

 

n   

Directors may serve on up to three public company boards (as determined pursuant to SEC rules) in addition to Intel’s. This limitation does not apply to not-for-profit and mutual fund boards. A director who is an active CEO of a public company is limited to service on two public company boards in addition to Intel’s.

 

n   

The CEO reports to the Board at least twice a year on succession planning and management development.

 

n   

The Chairman of the Board or Lead Director manages an annual self-evaluation process for each director and for the Board as a whole.

 

n   

The Board’s policy is to 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. If Intel’s stockholders do not approve the Board’s action, 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 that the company will not issue shares of preferred stock to prevent an unsolicited merger or acquisition.

 

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CORPORATE GOVERNANCE  n  Director Attendance

 

 

Director Attendance

The Board held six regularly scheduled and four special meetings in 2014. As shown in the Board Committee chart below, committees of the Board also held a total of 25 meetings during 2014, with each committee other than the Executive Committee holding a number of regularly scheduled and special meetings. 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. Each director attended at least 75% of the meetings of the Board and each committee on which he or she served in 2014 (held during the period in which the director served), except for Mr. Donahoe, who attended less than 75% of such meetings.

Board Committees and Charters

The Board assigns responsibilities and delegates authority to its committees, and the committees regularly report on their activities and actions to the full Board. The Board has five standing committees: Audit, Compensation, Corporate Governance and Nominating, Executive, and Finance. Each committee can engage outside experts, advisors, and counsel to assist the committee in its work.

Each committee, and the position of Lead Director, has a written charter approved by the Board. We post each charter on our web site at www.intc.com/corp_docs.cfm.

The following table identifies the current committee members. As discussed above, the Board has determined that each member of the Audit, Compensation, and Corporate Governance and Nominating Committees is an independent director in accordance with NASDAQ standards.

 

Name    Audit     Compensation   Corporate
Governance
and Nominating
  Executive    Finance
Charlene Barshefsky                    ¢

Chair

Aneel Bhusri                     
Andy D. Bryant                ¢    
Susan L. Decker    ¢       ¢

Co-Chair

  ¢

Chair

   
John J. Donahoe        ¢   ¢        
Reed E. Hundt    ¢       ¢       ¢
Brian M. Krzanich                ¢    
James D. Plummer    ¢               ¢
David S. Pottruck        ¢

Chair

      ¢    
Frank D. Yeary    ¢

Chair

              ¢
David B. Yoffie        ¢   ¢

Co-Chair

       
Number of Committee Meetings Held in 2014    13   3   6   0   3

  Audit Committee  

 

n   

Assists the Board in its general oversight of our financial reporting, financial risk assessment, internal controls, and audit functions.

 

n   

Responsible for appointing and retaining our independent registered public accounting firm, managing its compensation, and overseeing its work.

The Board has determined that Ms. Decker and Mr. Yeary both qualify as “audit committee financial experts” under SEC rules and that each Audit Committee member is sufficiently proficient 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” in this proxy statement and the Audit Committee’s charter.

 

 

 

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CORPORATE GOVERNANCE  n  Board Committees and Charters

 

 

  Compensation Committee  

 

n   

Reviews and determines salaries, performance-based incentives, and other matters related to the compensation of our executive officers.

 

n   

Administers our equity plans, including reviewing and granting equity awards to our executive officers.

 

n   

Reviews and determines other compensation policies, handles many compensation-related matters, and makes recommendations to the Board and to management on employee compensation and benefit plans.

 

n   

Makes recommendations to the Board on stockholder proposals about compensation matters.

 

n   

Administers the equity incentive plan and the employee stock purchase plan.

The Compensation Committee is responsible for determining compensation for Intel executives (including our CEO and our Chairman), while the Corporate Governance and Nominating Committee recommends to the full Board 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, and can delegate to other Board members, or an officer or officers of the company, the authority to review and grant stock-based compensation for employees who are not executive officers.

The Compensation Committee retains an independent executive compensation consultant, Farient Advisors LLC, to provide input, analysis, and advice about Intel’s executive compensation philosophy, peer groups, pay positioning (by pay component and in total), compensation design, equity usage and allocation, and risk assessment under Intel’s compensation programs. Farient Advisors reports directly to the Compensation Committee and interacts with management at the committee’s direction. Farient Advisors did not perform work for Intel in 2014 except under its engagement by the Compensation Committee, and it provided the committee with a report covering factors specified in SEC rules regarding potential conflicts of interest arising from the consultant’s work. Based on this report and its discussions with Farient Advisors, the committee determined that Farient Advisors’ work in 2014 did not raise any conflicts of interest.

The CEO makes recommendations to the Compensation Committee on the base salary, annual incentive cash targets, and equity awards for all executive officers other than himself and the Chairman of the Board. These recommendations are based on his assessment of each executive officer’s performance during the year and his review of compensation surveys. For more information on the responsibilities and activities of the Compensation Committee, including the 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 (available at www.intc.com/corp_docs.cfm).

  Corporate Governance and Nominating Committee  

 

n   

Reviews matters of corporate governance and corporate responsibility, such as environmental, sustainability, workplace, political contributions, and stakeholder issues, and periodically reports on these matters to the Board.

 

n   

Annually reviews and assesses the effectiveness of the Board’s Corporate Governance Guidelines, recommends to the Board proposed revisions to the Guidelines and committee charters, and reviews the poison pill policy.

 

n   

Makes recommendations to the Board regarding the size and composition of the Board and its committees.

 

n   

Reviews all stockholder proposals and recommends actions on such proposals.

 

n   

Advises the Board on compensation for our non-employee directors.

The Corporate Governance and Nominating Committee also establishes procedures for Board nominations and recommends candidates for election to the Board. Consideration of new Board candidates typically involves a series of internal discussions, review of candidate information, and interviews with selected candidates. Board members typically suggest candidates for nomination to the Board. In 2014, one of our independent directors suggested Mr. Bhusri as a prospective Board candidate. In screening director

 

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CORPORATE GOVERNANCE  n  Communications from Stockholders to Directors

 

 

candidates, the committee considers the diversity of skills, experience, and background of the Board as a whole and, based on that analysis, determines whether it would strengthen the Board to add a director with a certain type of background, experience, personal characteristics, or skills. In particular, the committee considers factors such as independence; understanding of and experience in manufacturing, technology, finance, and marketing; international experience; age; and gender and ethnic diversity, which includes its commitment to actively seek women and minority candidates for the pool from which board candidates are chosen. In connection with this process, the committee also seeks input from Intel’s head of Global Diversity and Inclusion. In addition to candidates nominated by Board members, the committee considers candidates proposed by stockholders and evaluates them using the same criteria. A stockholder who wishes to suggest a candidate for the committee’s consideration should send the candidate’s name and qualifications to our Corporate Secretary. The Corporate Secretary’s contact information can be found in this proxy statement under the heading “Other Matters; Communicating with Us.”

  Executive Committee  

 

n   

Exercises the authority of the Board between Board meetings, except as limited by applicable law.

  Finance Committee  

 

n   

Advises the Board on capital structure decisions, including the issuance of debt and equity securities; banking arrangements, including the investment of corporate cash; and management of the corporate debt structure.

 

n   

Reviews and approves finance and other cash-management transactions.

The Finance Committee also oversees and appoints the members of the Retirement Plans Investment Policy Committee, which sets the investment policies and chooses investment managers for our U.S. retirement plans. Mr. Pottruck is chairman of the Retirement Plans Investment Policy Committee, whose other members are Intel employees and one independent member.

Communications from Stockholders to Directors

The Board recommends that stockholders initiate communications with the Board, the Chairman, or any Board committee by writing to our Corporate Secretary. You can find the address in the “Other Matters” section of this proxy statement. This process assists the Board in reviewing and responding to stockholder communications. The Board has instructed our Corporate Secretary to review correspondence directed to the Board and, at the Corporate Secretary’s discretion, to forward items that she deems to be appropriate for the Board’s consideration. The Board’s policy is that directors should endeavor to attend the annual stockholders’ meeting, and all of the then-incumbent directors other than Messrs. Donahoe and Pottruck attended the 2014 Annual Stockholders’ Meeting.

 

 

 

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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, with the majority of compensation provided in the form of equity. The Corporate Governance and Nominating Committee, consisting solely of independent directors, has the primary responsibility for reviewing director compensation and considering any changes in how we compensate our independent directors. The Board reviews the committee’s recommendations and determines the amount of director compensation.

Intel’s Legal department, our Corporate Secretary, and the Compensation and Benefits Group in the Human Resources department support the committee in recommending director compensation and creating director compensation programs. In addition, the committee can engage outside advisors, experts, and others to assist the committee. The director peer group is the same as the peer group used in 2014 to set executive compensation and consisted of 15 technology companies and 10 companies in Standard & Poor’s S&P 100 Index (S&P 100), as described in detail below under “Compensation Discussion and Analysis; External Competitive Considerations for 2014.” The committee targets cash and equity compensation at the average of the peer group.

For 2014, annual compensation for independent directors consisted of the following elements:

 

Board Fees

Cash retainer1

   $90,000(2)

Variable performance-based restricted stock units, which we refer to as “outperformance” restricted stock units (OSUs)

   Targeted value of approximately $110,000

Restricted stock units (RSUs)

   Targeted value of approximately $110,000
Committee Fees1

Audit Committee chair

   $25,000

Compensation Committee chair

   $20,000

Corporate Governance and Nominating Committee chair

   $15,000

Non-chair Audit Committee member

   $10,000

Non-chair Compensation Committee member

   $10,000
Lead Director Fee1

Additional cash retainer

   $20,000

 

1 

The cash fees are paid on a quarterly basis.

 

2 

The annual cash retainer was increased from $80,000 to $90,000 in July 2014.

The Corporate Governance and Nominating Committee reviews director compensation on an annual basis, taking into account factors such as workload and market data. In 2014 the committee recommended and the Board agreed that an increase of $10,000 in the annual retainer amount was appropriate. Intel does not pay its management directors for Board service in addition to their regular employee compensation.

 

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DIRECTOR COMPENSATION  n  Director Compensation for Fiscal Year 2014

 

 

Director Compensation for Fiscal Year 2014

The following table details the compensation of Intel’s independent directors for the 2014 fiscal year.

Director Compensation for Fiscal Year 2014 Table

 

Name   Fees Earned

or Paid in
Cash ($)

  Stock
Awards1
($)
  Change in Pension
Value and Non-Qualified
Deferred  Compensation
Earnings
($)
  All Other
Compensation2
($)
   
 
Total
($)
 
  
Charlene Barshefsky3     95,000   212,300            —         —     307,300   
Aneel Bhusri     45,000   212,300            —         —     257,300   
Susan L. Decker   140,000   212,300            —   5,000     357,300   
John J. Donahoe4             —   297,700            —         —     297,700   
Reed E. Hundt     95,000   212,300            —         —     307,300   
James D. Plummer     95,000   212,300            —   5,000     312,300   
David S. Pottruck5   115,000   212,300            —         —     327,300   
Frank D. Yeary   110,000   212,300            —   5,000     327,300   
David B. Yoffie   110,000   212,300   133,000         —     455,300   

 

1 

Consists of OSUs and RSUs valued at grant date fair values (computed in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic 718). Grant date fair value of RSUs is calculated assuming a risk-free rate of return of 0.4% and a dividend yield of 2.6%. Grant date fair value of OSUs is calculated assuming volatility of 22.6%, risk-free rate of return of 0.8%, and a dividend yield of 2.6%. For additional information, see “Director Compensation; Equity Awards” below.

 

2 

The Intel Foundation made matching charitable contributions on behalf of Ms. Decker ($5,000), Dr. Plummer ($5,000), and Mr. Yeary ($5,000).

 

3 

Ambassador Barshefsky participated in the Cash Deferral Election, under which she elected to defer her cash compensation until her retirement from the Board.

 

4 

Includes 2,615 RSUs granted to Mr. Donahoe in lieu of his annual cash retainer for the second half of 2013 and his annual cash retainer for the first half of 2014. The remainder of his cash retainer and Compensation Committee member fees for the second half of 2014 was paid in the form of RSUs in 2015.

 

5 

Includes a $10,000 committee chair fee for Mr. Pottruck’s service as chairman of the Retirement Plans Investment Policy Committee.

Fees Earned or Paid in Cash. Under the “RSU in Lieu of Cash Election” program, independent directors can elect to receive 100% of their cash compensation in the form of RSUs (but not less than 100%). This election is made year by year, and must be made in the tax year before the compensation will be earned. The Board grants these RSUs in two installments: the first in the year when the cash fees would have been paid, and the second in the following year. RSUs elected in lieu of payments in cash have the same vesting terms as the annual RSU grant to directors. Under this program, Mr. Donahoe was granted 2,615 RSUs in 2014 in lieu of cash payments of his fees earned from July 1, 2013 to June 30, 2014.

Equity Awards. Under Intel’s 2006 Equity Incentive Plan, equity awards granted to independent directors may not exceed 100,000 shares per year to each independent director. The current practice is to grant each independent director OSUs and RSUs with a market value on the grant date of approximately $220,000. The grant date fair value reported in the “Stock Awards” column in the Director Compensation for Fiscal Year 2014 table above differs from this amount because of changes in the fair value of these awards between the date they were approved and the date they were granted. In addition, the fair value of an RSU for accounting purposes is discounted for present value of dividends that are not paid on RSUs prior to vesting.

Outperformance restricted stock units (OSUs) are variable performance-based restricted stock units. On July 24, 2014, Intel granted each independent director 1,815 Director OSUs. The grant date fair value of each Director OSU grant was $107,900. Director OSUs granted in 2014 vest in full on the 36-month anniversary of the grant date if the director is still serving at that time. If a director retires from the Board

 

 

 

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DIRECTOR COMPENSATION  n  Outstanding Equity Awards for Directors

 

 

before the end of the performance period, and is either 72 or older or has at least seven years of service on Intel’s Board, he or she will be able to retain the unvested awards. The number of shares of Intel common stock that a director receives from this grant will range from 0% to 200% of the target amount, subject to the same performance payout conditions that are applicable to OSUs granted to our listed officers, as discussed below under “Compensation Discussion and Analysis; OSU Awards.” As part of the OSU program, directors receive dividend equivalents on the final shares earned and vested; the dividend equivalents will pay out in the form of additional shares.

Restricted stock units (RSUs) vest in equal annual installments over a three-year period from the grant date. On July 24, 2014, Intel granted each independent director 3,200 RSUs. The grant date fair value of each Director RSU grant was $104,400. All of the shares are payable upon retirement from the Board if a director is 72 years old or has at least seven years of service on Intel’s Board. Directors do not receive dividend equivalents on unvested RSUs.

Outstanding Equity Awards for Directors

The following table provides information on the outstanding equity awards held by the independent directors at fiscal year-end 2014, with OSUs shown at their target amount. Market value for stock units (OSUs and 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. In 2006, Intel began granting RSUs instead of stock options to independent directors. In 2009, Intel began granting OSUs to independent directors in addition to RSUs. All of the stock options in the following table are fully vested.

Outstanding Equity Awards for Directors at Fiscal Year-End 2014 Table

 

    STOCK UNITS
Name   Number of
Restricted
Stock Units
That Have
Not Vested1

(#)

  Market
Value of
Restricted
Stock Units
That Have
Not  Vested2

($)

  Number of
Outperformance
Restricted
Stock
Units
That Have
Not Vested1,3
(#)
  Market Value of
Unconverted
Outperformance
Restricted
Stock Units
That Have
Not Vested2
($)
Charlene Barshefsky     7,810   293,300   9,028   339,000
Aneel Bhusri     3,200   120,200   1,815     68,200
Susan L. Decker     7,810   293,300   9,028   339,000
John J. Donahoe   14,002   525,800   9,028   339,000
Reed E. Hundt     7,810   293,300   9,028   339,000
James D. Plummer     7,810   293,300   9,028   339,000
David S. Pottruck     7,810   293,300   9,028   339,000
Frank D. Yeary     7,810   293,300   9,028   339,000
David B. Yoffie     7,810   293,300   9,028   339,000

 

1 

Vested stock units (including RSUs and OSUs) that would have settled if they had not been part of the deferral election program are excluded from this column.

 

2 

The market value of vested RSUs and OSUs that would have settled if they had not been part of the deferral election program are excluded from this column.

 

3 

OSUs are shown at their target share amount.

Director Stock Ownership Guidelines. The Board’s stock ownership guidelines for independent directors state that each director must acquire and hold at least 15,000 shares of Intel common stock within five years of joining the Board. After each succeeding five years of Board service, they must own an additional 5,000 shares (for example, 20,000 shares after 10 years of service). Unvested OSUs, unvested RSUs, and unexercised stock options do not count toward this requirement. As of December 27, 2014, each director nominated for election at the annual meeting had satisfied these ownership guidelines.

Deferred Compensation Plan. This plan allows independent directors to defer their cash and equity compensation. Under the “Cash Deferral” program, directors may defer up to 100% of their cash

 

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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 Cash Deferral Election. 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.

The RSU deferral arrangement allows directors to defer the settlement of their vested RSUs until termination of service. This election must be all-or-nothing, 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.

Retirement. Dr. Yoffie is the only current director covered by the Board’s retirement program, which was ended in 1998. At that time, Dr. Yoffie was vested with the nine years he had served on the Board at that point. He will receive an annual benefit equal to the annual retainer fee in effect at the time of payment, to be paid beginning upon his departure from the Board. Payments will continue for nine years, or until his death, whichever is earlier. The amounts in the “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” column in the Director Compensation for Fiscal Year 2014 table represent the net actuarial change in pension value accrued under this program. Assumptions used in determining these changes include an interest rate of 3.8%, a retirement age of 65 or current age if older, the RP2014 Mortality Tables, and an annual benefit amount of $90,000.

Equipment. Intel provides each independent director a laptop computer for personal use and offers each director the use of other equipment employing Intel® technology.

Travel Expenses. Intel does not pay meeting fees. We reimburse our 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 50% matching of funds of up to $10,000 per director per year, which is the same limit for employees generally.

 

 

 

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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 a greater than 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:

 

n   

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;

 

n   

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;

 

n   

compensation to executive officers determined by the Compensation Committee;

 

n   

compensation to directors determined by the Board;

 

n   

transactions in which all security holders receive proportional benefits; and

 

n   

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 that are not included in one of the preceding 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 more 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.

Since the beginning of 2014, there were no related-person transactions under the relevant standards.

 

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CODE OF CONDUCT

Our policy is 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 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 whether there is a conflict of interest and 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. Our Code of Conduct is our code-of-ethics document. We have posted our Code of Conduct on our web site at www.intel.com/governance.

 

 

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table presents the beneficial ownership of our common stock by two beneficial owners of more than 5% of our common stock, each of our directors and listed officers, and all of our directors and executive officers as a group. This information is as of February 26, 2015, except as otherwise indicated in the notes to the table. Amounts reported under “Number of Shares of Common Stock Beneficially Owned as of February 26, 2015” include the number of shares subject to RSUs and stock options that become exercisable or vest within 60 days of February 26, 2015 (which are shown in the columns to the right). Our listed officers are the CEO, the CFO, and the three other most highly compensated executive officers in a particular year. 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.

 

Stockholder  

Number of
Shares of

Common Stock

Beneficially
Owned as of

February 26,
2015

 

Percent

of Class

 

Number of Shares

Subject to Options

Exercisable as of

February 26, 2015 or

Which Become

Exercisable Within 60

Days of This Date

 

Number of
RSUs That

Vest Within
60 Days of
February 26,
2015

BlackRock, Inc.   291,682,994(1)   6.0               —            —
The Vanguard Group, Inc.   265,541,510(2)   5.49               —            —

Directors and Executive Officers

Brian M. Krzanich, Chief Executive Officer       1,495,410   **   1,044,984     23,065
Renée J. James, President            59,499   **               —     17,705
Andy D. Bryant, Chairman of the Board       1,094,222(3)   **      520,770     15,814
Stacy J. Smith, Executive Vice President and Chief Financial Officer          574,479   **      228,213     14,866
William M. Holt, Executive Vice President, General Manager, Technology &
Manufacturing Group
           90,007   **        61,660     13,840
David B. Yoffie, Director          195,151(4)   **               —            —
David S. Pottruck, Director            94,234(5)   **               —            —
Charlene Barshefsky, Director            90,418(6)(7)   **               —            —
Susan L. Decker, Director            65,401   **               —            —
John J. Donahoe, Director            65,249(8)   **               —            —
Reed E. Hundt, Director            57,676   **               —            —
Frank D. Yeary, Director            47,265   **               —            —
James D. Plummer, Director            40,202(9)   **               —            —
Aneel Bhusri, Director                   —   **               —            —

All directors and executive officers as a group

(15 individuals)

      4,338,514   **   2,098,856   137,600

 

**

Less than 1%

 

1 

As of December 31, 2014, based on information set forth in a Schedule 13G/A filed with the SEC on February 9, 2015 by BlackRock, Inc. BlackRock, Inc.’s business address is 55 East 52nd St., New York, NY 10022.

 

2 

As of December 31, 2014, based on information set forth in a Schedule 13G filed with the SEC on February 10, 2015 by The Vanguard Group. The Vanguard Group’s business address is 100 Vanguard Blvd., Malvern, PA 19355.

 

3 

Includes 1,600 shares held by Mr. Bryant’s son, 1,000 shares held by Mr. Bryant’s daughter, and 47,383 shares held by a family trust with Mr. Bryant’s spouse as trustee. Mr. Bryant disclaims beneficial ownership of these shares. Also includes 1,148 shares held jointly with Mr. Bryant’s spouse for which Mr. Bryant shares voting and investment power.

 

4 

Includes 159,114 shares held jointly with Dr. Yoffie’s spouse for which Dr. Yoffie shares voting and investment power.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

 

 

5 

Includes 800 shares held by Mr. Pottruck’s daughter. Also 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 investment power.

 

6 

Includes 6,800 shares held jointly with Ambassador Barshefsky’s spouse for which Ambassador Barshefsky shares voting and investment power.

 

7 

Includes 17,370 deferred but vested RSUs held by Ambassador Barshefsky.

 

8 

Includes 55,984 deferred but vested RSUs held by Mr. Donahoe.

 

9 

Includes 27,835 shares held by a family trust for which Dr. Plummer shares voting and investment power.

 

 

 

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LOGO   

PROPOSAL 2:

 

Ratification of Selection of Independent Registered Public Accounting Firm

 

The Audit Committee evaluates the selection of independent auditors each year and has selected Ernst & Young LLP as our independent registered public accounting firm for the current year. Ernst & Young has served in this role since Intel was incorporated in 1968. The Audit

 

Committee concluded that many factors contribute to the continued support of Ernst & Young’s independence, such as the oversight of the Public Company Accounting Oversight Board (PCAOB) through the establishment of audit, quality, ethics, and independence standards in addition to conducting audit inspections; the mandating of reports on internal control over financial reporting; PCAOB requirements for audit partner rotation; and limitations imposed by regulation and by the Audit Committee on non-audit services provided by Ernst & Young. The Audit Committee has established, and monitors, limits on the amount of non-audit services that Intel may obtain from Ernst & Young.

 

In accordance with applicable rules on partner rotation, Ernst & Young’s primary engagement partner for our audit was changed for 2015, while Ernst & Young’s concurring/reviewing partner for our audit was most recently changed in 2014. The Audit Committee is involved in considering the selection of Ernst & Young’s primary engagement partner when there is a rotation. Under the auditor independence rules, Ernst & Young reviews its independence each year and delivers to the Audit Committee a letter addressing matters prescribed under those rules. The Audit Committee considers a number of factors in deciding whether to re-engage Ernst & Young as the independent registered public accounting firm, including the length of time the firm has served in this role and an assessment of the firm’s professional qualifications and resources. In this regard, the Audit Committee considered that Intel requires global, standardized, and well-coordinated services, not only for audit purposes, but for other non-audit services items, including statutory audits and various regulatory certification items, such as valuation support, IT consulting, and payroll services. Many of these services are provided to Intel by other multinational audit and accounting firms. A change in our independent auditor would require us to replace one or more of the multinational service providers that perform non-audit services for Intel and could significantly disrupt our business due to loss of cumulative knowledge in the service providers’ areas of expertise.

 

As a matter of good corporate governance, the Board submits the selection of the independent audit firm to our stockholders for ratification. If the selection of Ernst & Young is not ratified by a majority of the shares of common stock present or represented at the annual meeting and entitled to vote on the matter, the Audit Committee will review its future selection of an independent registered public accounting firm in light of that vote result. Even if the selection is ratified, the Audit Committee in its discretion may appoint a different registered public accounting firm at any time during the year if the committee determines that such change would be appropriate.

 

Representatives of Ernst & Young attended all meetings of the Audit Committee in 2014 except those meetings specifically related to litigation and subject to attorney-client privilege. The Audit Committee pre-approves and reviews audit and non-audit services performed by Ernst & Young as well as the fees charged by Ernst & Young for such services. In its pre-approval and review of non-audit service fees, the Audit Committee considers, among other factors, the possible effect of the performance of such services on the auditors’ independence. For additional information concerning the Audit Committee and its activities with Ernst & Young, see “Corporate Governance” and “Report of the Audit Committee” in this proxy statement. We expect that a representative of Ernst & Young will attend the annual meeting, and the representative will have an opportunity to make a statement if he or she so chooses. The representative will also be available to respond to appropriate questions from stockholders.

 

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PROPOSAL 2  n  Ratification of Selection of Independent Registered Public Accounting Firm

 

 

ERNST & YOUNG LLP’S FEES FOR 2014 AND 2013

The following table shows the fees billed by Ernst & Young for audit and other services provided for fiscal years 2014 and 2013. All figures are net of Value Added Tax and other similar taxes assessed by non-U.S. jurisdictions on the amount billed by Ernst & Young. All of the services reflected in the following fee table were approved in conformity with the Audit Committee’s pre-approval process, as described in the “Report of the Audit Committee” in this proxy statement.

 

      2014 Fees ($)        2013 Fees ($)   
Audit Services     17,800,000           17,847,000      
Audit-Related Services     959,000           953,000      
Tax Services     1,992,000           1,938,000      
All Other Services     87,000           46,000      
Total     20,838,000           20,784,000      

Audit Services. This category includes Ernst & Young’s audit of our annual financial statements and internal control over financial reporting, review of financial statements included in our Form 10-Q quarterly reports, and services that are typically provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements for those fiscal years. This category also includes statutory audits required by non-U.S. jurisdictions; consultation and advice on new accounting pronouncements, and technical advice on various accounting matters related to the consolidated financial statements or statutory financial statements that are required to be filed by non-U.S. jurisdictions; comfort letters; and consents issued in connection with SEC filings or private placement documents.

Audit-Related Services. This category consists of assurance and related services provided by Ernst & Young that are reasonably related to the performance of the audit or review of our financial statements, and are not included in the fees reported in the table above under “Audit Services.” The services for the fees disclosed under this category primarily include audits of Intel employee benefit plans.

Tax Services. This category consists of tax services provided with respect to tax consulting, tax compliance, tax audit assistance, tax planning, expatriate tax services, and transfer pricing.

All Other Services. This category consists of services provided by Ernst & Young that are not included in the category descriptions defined above under “Audit Services,” “Audit-Related Services,” or “Tax Services.”

RECOMMENDATION OF THE BOARD

The Board of Directors recommends that you vote “FOR” the ratification of the selection of Ernst & Young as our independent registered public accounting firm for 2015.

 

 

 

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REPORT OF THE AUDIT COMMITTEE

Four non-management directors comprise the Audit Committee. The Board has determined that each member of the Audit Committee is independent under the NASDAQ listing standards. The Audit Committee operates under a written charter adopted by the Board. As described more fully in its charter, the purpose of the Audit Committee is to assist the Board in its general oversight of Intel’s financial reporting, internal controls, and audit functions. Management is responsible for the preparation, presentation, and integrity of Intel’s financial statements; accounting and financial reporting principles; internal controls; and procedures designed to reasonably assure compliance with accounting standards, applicable laws, and regulations. Intel has a full-time Internal Audit department that reports to the Audit Committee and to management. This department is responsible for objectively reviewing and evaluating the adequacy, effectiveness, and quality of Intel’s system of internal controls related to, for example, the reliability and integrity of Intel’s financial information and the safeguarding of Intel’s assets.

Ernst & Young LLP, Intel’s independent registered public accounting firm, is responsible for performing an independent audit of Intel’s consolidated financial statements in accordance with generally accepted auditing standards and expressing an opinion on the effectiveness of Intel’s internal control over financial reporting. In accordance with law, the Audit Committee has ultimate authority and responsibility for selecting, compensating, evaluating, and, when appropriate, replacing Intel’s independent audit firm, and evaluates its independence. The Audit Committee has the authority to engage its own outside advisors, including experts in particular areas of accounting, as it determines appropriate, apart from counsel or advisors hired by management.

Audit Committee members are not professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management and the independent audit firm; nor can the Audit Committee certify that the independent audit firm is “independent” under applicable rules. The Audit Committee serves a Board-level oversight role in which it provides advice, counsel, and direction to management and to the auditors on the basis of the information it receives, discussions with management and the auditors, and the experience of the Audit Committee’s members in business, financial, and accounting matters.

The Audit Committee’s agenda for the year includes reviewing Intel’s financial statements, internal control over financial reporting, and audit and other matters. The Audit Committee meets each quarter with Ernst & Young, Intel’s Chief Audit Executive, and management to review Intel’s interim financial results before the publication of Intel’s quarterly earnings news releases. Management’s and the independent audit firm’s presentations to, and discussions with, the Audit Committee cover various topics and events that may have significant financial impact or are the subject of discussions between management and the independent audit firm. The Audit Committee reviews and discusses with management and the Chief Audit Executive Intel’s major financial risk exposures and the steps that management has taken to monitor and control such exposures. In accordance with law, the Audit Committee is responsible for establishing procedures for the receipt, retention, and treatment of complaints received by Intel regarding accounting, internal accounting controls, or auditing matters, including confidential, anonymous submission by Intel’s employees, received through established procedures, of any concerns regarding questionable accounting or auditing matters.

Among other matters, the Audit Committee monitors the activities and performance of Intel’s internal auditors and independent registered public accounting firm, including the audit scope, external audit fees, auditor independence matters, and the extent to which the independent audit firm can be retained to perform non-audit services.

In accordance with Audit Committee policy and the requirements of law, the Audit Committee pre-approves all services to be provided by Ernst & Young. Pre-approval includes audit services, audit-related services, tax services, and other services. In some cases, the full Audit Committee provides pre-approval for as long as a year related to a particular category of service, or a particular defined scope of work subject to a specific budget. In other cases, the chair of the Audit Committee has the delegated authority from the Audit Committee to pre-approve additional services, and the chair then communicates such pre-approvals to the full Audit Committee. The Audit Committee is responsible for overseeing the fee negotiations associated with the retention of our independent auditor. The Audit Committee believes that the continued retention of Ernst & Young as our independent auditor is in the best interests of our stockholders.

 

 

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REPORT OF THE AUDIT COMMITTEE

 

The Audit Committee has reviewed and discussed with management its assessment of and report on the effectiveness of Intel’s internal control over financial reporting as of December 27, 2014, which it made based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). The Audit Committee also has reviewed and discussed with Ernst & Young its review and report on Intel’s internal control over financial reporting. Intel published these reports in its Annual Report on Form 10-K for the year ended December 27, 2014, which Intel filed with the SEC on February 13, 2015.

The Audit Committee has reviewed and discussed the audited financial statements for fiscal year 2014 with management and Ernst & Young, and management represented to the Audit Committee that Intel’s audited financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP). In addition, the Audit Committee has discussed with Ernst & Young, and Ernst & Young represented that its presentations to the Audit Committee included, the matters required to be discussed with the independent registered public accounting firm by applicable PCAOB rules regarding “Communication with Audit Committees.” This review included a discussion with management of the quality, not merely the acceptability, of Intel’s accounting principles, the reasonableness of significant estimates and judgments, and the clarity of disclosure in Intel’s financial statements, including the disclosures related to critical accounting estimates. Intel’s independent audit firm has provided the Audit Committee with the written disclosures and the letter required by the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with the independent audit firm and management that firm’s independence.

In reliance on these reviews and discussions, and the reports of Ernst & Young, the Audit Committee has recommended to the Board, and the Board has approved, the inclusion of the audited financial statements in Intel’s Annual Report on Form 10-K for the year ended December 27, 2014.

Audit Committee

Frank D. Yeary, Chairman

Susan L. Decker

Reed E. Hundt

James D. Plummer

 

 

 

 

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LOGO

 

  

PROPOSAL 3:

 

Advisory Vote to Approve Executive Compensation

 

We are asking stockholders to approve, on an advisory basis, the compensation of Intel’s listed officers disclosed in “Compensation Discussion and Analysis,” the Summary Compensation Table and the related compensation tables, notes, and narrative in this proxy statement.

 

 

Intel has provided stockholders with an advisory “say on pay” vote on executive compensation since 2009, and in 2011 federal law made this practice mandatory for U.S. public companies. In addition, at Intel’s 2011 Annual Stockholders’ Meeting, a majority of our stockholders voted in favor of holding an advisory vote to approve executive compensation every year. The Board considered these voting results and decided to adopt a policy providing for an annual advisory stockholder vote to approve our executive compensation. We are therefore holding this year’s advisory vote in accordance with that policy and pursuant to U.S. securities laws and regulations.

 

Intel’s compensation programs are designed to support its business goals and promote short- and long-term profitable growth of the company. Intel’s equity plans are intended to align compensation with the long-term interests of our stockholders. We urge stockholders to read the “Compensation Discussion and Analysis” section of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives. We also encourage you to review the Summary Compensation Table and other related compensation tables and narratives, which provide detailed information on the compensation of our listed officers. The Board and the Compensation Committee believe that the policies and procedures described and explained in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our listed officers reported in this proxy statement has supported and contributed to the company’s recent and long-term success.

 

Although this advisory vote to approve our executive compensation is non-binding, the Compensation Committee will carefully assess the voting results. The “Compensation Discussion and Analysis” in this proxy statement discusses our stockholder engagement efforts over the past year and reflects our commitment to consult directly with stockholders to better understand any significant views expressed in the context of matters voted upon at our stockholders’ meetings.

 

Unless the Board modifies its policy on the frequency of holding “say on pay” advisory votes, the next “say on pay” advisory vote will occur in 2016.

 

RECOMMENDATION OF THE BOARD

 

The Board of Directors recommends that you vote “FOR” approval of our executive compensation on an advisory basis.

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

 

2014 LISTED OFFICERS

 

Brian M. Krzanich

 

Chief Executive Officer

 

Renée J. James

 

President

 

Andy D. Bryant

 

Chairman of the Board

 

Stacy J. Smith

 

Executive Vice President

and Chief Financial Officer

 

William M. Holt

 

Executive Vice President, General

Manager, Technology &

Manufacturing Group

 

This section of the proxy statement explains how the Compensation Committee of the Board of Directors oversees our executive compensation programs and discusses the compensation earned by Intel’s listed officers, as presented in the tables below under “Executive Compensation.”

This Compensation Discussion and Analysis is composed of four sections:

 

n   

Executive Summary — Highlights of compensation for our executive leadership team;

 

n   

Stockholder Engagement and “Say on Pay” — A discussion of the 2014 “say on pay” results;

 

n   

2014 Compensation of Our Listed Officers — Details on our executive compensation programs and the individual compensation of our listed officers; and

 

n   

Other Aspects of Our Compensation Programs — A discussion of our compensation framework, our use of peer group data, and other policies and processes related to our executive compensation programs.

Detailed compensation tables that quantify and further explain our listed officers’ compensation follow this Compensation Discussion and Analysis.

 

Executive Summary

BUSINESS PERFORMANCE AND PAY

2014 was a strong year for Intel, reflected in financial, operational, and total stockholder return (TSR) performance of the company.

 

      2014    2013    Change
Revenue    $55.9 billion    $52.7 billion    up 6%
Gross Margin    63.7%    59.8%    up 3.9 points
Operating Income    $15.3 billion    $12.3 billion    up 25%
Net Income    $11.7 billion    $9.6 billion    up 22%
Earnings Per Share    $2.31    $1.89    up 22%

For full year 2014, we achieved net revenue of $55.9 billion, up 6% from 2013, operating income of $15.3 billion, up 25% from 2013, and diluted earnings per share of $2.31, up 22% from 2013. Our PC Client Group and our Data Center Group businesses outperformed our expectations for the year. Gross margin improved by approximately 4 percentage points from 2013. The cash generation from our business remained strong, with cash from operations of $20.4 billion in 2014. In 2014, we returned $4.4 billion to stockholders through dividends and repurchased $10.8 billion of common stock through our common stock repurchase program. Our Board of Directors authorized an increase of $20 billion to the common stock repurchase program. TSR for the year ended in 2014 was 77%. Operationally, in 2014 we started growing again across a broad range of products and markets by introducing many new product technologies across all of our businesses, including commencing shipments of the world’s first processor on 14nm process technology.

 

 

 

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COMPENSATION DISCUSSION AND ANALYSIS  n  Stockholder Engagement and the 2014 “Say on Pay” Vote

 

 

Because the majority of our executive compensation is tied to performance, our listed officers all saw an increase in compensation for 2014. The annual incentive cash plan, based on the financial and operational performance for 2014, resulted in a corporate average payout of 122% of annual incentive cash target, as compared with the 2013 payout of 82% of annual incentive cash target. The increase in these payouts accounts for the majority of the year-over-year increase in compensation for our listed officers. In addition, in 2014 we ceased granting stock options to our listed officers, so that all of their equity awards are delivered in the form of variable performance-based outperformance restricted stock units (OSUs) and restricted stock units (RSUs), which align their compensation with the long-term interests of Intel’s stockholders by focusing our executive officers on both absolute and relative TSR.

Stockholder Engagement and the 2014 “Say on Pay” Vote

In 2014, the percentage of votes cast “For” our advisory “say on pay” resolution to approve our executive compensation rose to approximately 94%, up from approximately 68% in 2013. We have a program of stockholder outreach during the first quarter of each year, including 2015; this outreach occurs prior to the distribution of our annual proxy statement materials and is focused on executive compensation, stockholder proxy statement proposals, and corporate governance topics. Based on our discussions with stockholders in 2014, we believe that the increase in “say on pay” support between 2013 and 2014 was primarily the result of our increased efforts to hold executive officers accountable for business results and reward them for consistently strong corporate performance and creation of value for our stockholders. The Board believes that our 2014 “say on pay” results and the positive input received through our engagement efforts are an affirmation of the structural soundness of our executive compensation programs. During the last several months of 2014, and prior to the date of this proxy statement in 2015, we pursued multiple avenues for stockholder engagement, including in-person and teleconference meetings with our stockholders, and therefore, no significant changes have been made to the executive compensation programs for 2015 based on the 2014 “say on pay” results.

 

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COMPENSATION DISCUSSION AND ANALYSIS  n  2014 Compensation of Our Listed Officers

 

 

2014 Compensation of Our Listed Officers

PERFORMANCE AND INCENTIVE PAY FOR 2014

Intel has a long-standing commitment to pay-for-performance that we implement by providing the majority of compensation through arrangements that are designed to hold our executive officers accountable for business results and reward them for consistently strong corporate performance and creation of value for our stockholders. Our executive compensation programs are periodically adjusted over time so that they support Intel’s business goals and promote both near- and long-term profitable growth of the company. As illustrated below, approximately 90% of targeted total direct compensation for Mr. Krzanich in 2014 was performance-based, consisting of approximately 66% equity, 23% annual incentive cash, and 1% quarterly incentive cash. Only 10% of his compensation, in the form of base salary, was fixed, ensuring a strong link between his targeted total direct compensation and the company and business unit results.

 

LOGO

The majority of executive compensation for our listed officers is delivered through programs that link pay realized by executive officers with financial and operational results, and with TSR. Variable cash compensation payouts under our annual incentive cash plan were based on measures of relative financial performance, absolute financial performance, company performance relative to operational goals, and individual performance. As noted above, equity-based compensation consists of variable performance-based OSUs and RSUs, which align compensation with the long-term interests of Intel’s stockholders by focusing our listed officers on both absolute and relative TSR. As a result, total compensation for each listed officer varies with both individual performance and Intel’s performance in achieving financial and non-financial objectives. The following chart shows the allocation of the listed officers’ total direct compensation paid or granted for 2014, reflecting the extent to which their total direct compensation consists of performance-based compensation.

 

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COMPENSATION DISCUSSION AND ANALYSIS  n  2014 Compensation of Our Listed Officers

 

 

2014 INCENTIVE COMPENSATION PAYOUTS

Incentive cash payouts for 2014 were up compared with 2013, primarily due to Intel’s strong financial and operational performance. The corporate average payout percentage under the annual incentive cash plan for 2014 was 122% of the annual incentive cash target, compared with 82% in 2013. The link between our financial performance and the listed officers’ annual incentive cash plan is illustrated in the following graph, which shows how the average annual incentive cash payments have varied based on Intel’s net income results.

 

LOGO

For the January 2011 through January 2014 performance period, OSUs vested at 77.3% of target, reflecting that Intel’s TSR was below the peer group median TSR over the performance period. Total payout, including dividend equivalents accrued on earned shares as a result of our strong record in returning value to stockholders through our dividend policy, was 85.9% of target. These payouts are reported in the Stock Option Exercises and Stock Vested in Fiscal Year 2014 table on page 59.

ALIGNMENT OF PERFORMANCE AND COMPENSATION

Intel’s Compensation Committee has designed the key elements of Intel’s executive compensation programs to support what it considers to be the programs’ primary objective: the creation of sustained, long-term value for our stockholders. To achieve this objective, management must execute on our operational goals over time to deliver growth in both revenue and earnings on an absolute and relative basis. The committee believes that by establishing a strong pay-for-performance philosophy, executive compensation will be sensitive to and aligned with the long-term value that is created for stockholders.

The principal elements of our pay-for-performance philosophy include a clear and concise pay positioning strategy, a heavy emphasis on incentive-driven pay, and goals that are appropriately aligned with our business strategy (in terms of both selection and attainability), as evidenced by the following program components:

 

n   

Our pay positioning strategy generally targets the 50th to 65th percentile of our peer group for total direct compensation, given our desire to compensate our executive officers based upon performance, while fairly balancing internal pay equity considerations among executive roles. The committee also believes that in our industry, where the competition for executive talent is significant, a 50th to 65th percentile target is critical to attract, retain, and reward executive talent. However, our chief executive officer’s salary is significantly below the 50th percentile, reflecting the fact that he is relatively new to the position.

 

n   

Total executive compensation opportunities are designed so that a significant portion is variable or “at risk,” with value derived from company business performance and stock price performance over the long term.

 

n   

To further align our executive officers’ interests with those of our stockholders, the committee has structured compensation so that the proportion of variable cash and equity-based pay increases with higher levels of responsibility.

 

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COMPENSATION DISCUSSION AND ANALYSIS  n  2014 Compensation of Our Listed Officers

 

 

 

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By using financial measures such as net income growth and relative TSR, our incentive plans provide a clear and quantifiable link to the creation of long-term stockholder value.

 

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To further link the long-term interests of management and stockholders, Intel has established stock ownership guidelines that specify an amount of shares that executive officers must accumulate and hold.

In 2014, the Compensation Committee requested that Farient Advisors assess the relationship between our CEO’s compensation and long-term performance for our stockholders. In addition to conducting a number of pay-for-performance tests typically relied upon by proxy advisors, Farient Advisors used its pay-for-performance alignment model to test the alignment of our CEO’s average annualized performance-adjusted compensation (which includes salary, actual annual incentive cash payments, and the performance-adjusted value of long-term incentives) and performance, as indicated by TSR, over time. In doing so, Farient Advisors compared our CEO’s average annualized performance-adjusted compensation over successive three-year rolling periods to our compound annual TSR for the same three-year rolling periods and tested the results against the companies in our peer group (excluding Amazon, Apple, Google, Oracle, and Microsoft, which Farient Advisors determined are affected by founder CEO pay practices or are skewed by mega-grant equity awards to the CEO in a particular year resulting in an outlier situation).

As indicated by the chart below, Farient Advisors determined that there is a strong relationship between our CEO’s average annualized performance-adjusted compensation and our company’s TSR. Specifically, when our TSR is higher, our CEO performance-adjusted compensation is higher, and conversely, when our TSR is lower, our CEO performance-adjusted compensation is lower. In addition, Farient’s analysis indicated that our CEO’s average annual performance-adjusted compensation, considering our company’s size and the performance we delivered, has been and continues to be reasonable. Farient Advisors considers performance-adjusted compensation to be reasonable for companies that generally pay CEOs, on a performance-adjusted basis, below the upper boundary of a competitive pay range that Farient Advisors deems to be acceptable for the performance achieved based on a company’s size, peer group pay practices, and performance. Overall, Farient Advisors concluded that the alignment model for our company shows a strong relationship between pay and performance compared to our modified peer group, as well as companies in the S&P 500 Index.

 

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INTEL’S COMPENSATION BEST PRACTICES

Intel has long employed a number of practices that reflect the company’s compensation philosophy:

 

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Executive officers are employed at will, without employment agreements or severance payment arrangements (except as required by local law).

 

 

 

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Intel has no payment arrangements that would be triggered by a “change in control” of Intel.

 

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Intel does not provide special retirement benefits designed solely for executive officers.

 

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Intel’s performance-based compensation arrangements for executive officers use a variety of performance measures, including measuring relative performance against a peer group and granting performance-based equity awards.

 

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Intel has long maintained stock ownership requirements applicable to directors and approximately 50 senior executives, and in 2014 extended ownership guidelines to include more than 350 of our senior leaders.

 

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Intel’s policies prohibit directors, executive officers, and other senior leaders from hedging Intel stock.

 

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Intel has claw-back provisions applicable to both its annual incentive cash plan and its equity awards plan.

2014 CASH COMPENSATION

As reflected in the tables below, because our chief executive officer’s and president’s salaries and annual incentive cash targets were increased in May 2013 at the time of our management succession, those levels were maintained throughout 2014. Mr. Smith’s and Mr. Holt’s salary and incentive cash target amounts were increased to reflect their expanded responsibilities, and Mr. Bryant’s were increased to reflect his outstanding performance during the CEO selection process and subsequent CEO transition.

BASE SALARY

The table below shows the annual base salary for our listed officers in 2014, as compared with 2013.

 

Name   2014 Base Salary ($)   2013 Base Salary ($)   % Change
2014 vs. 2013
Brian M. Krzanich   1,000,000   1,000,000(1)  
Renée J. James      850,000      850,000(1)  
Andy D. Bryant      790,000        760,000     4
Stacy J. Smith      673,000        650,000     4
William M. Holt      641,000               n/a2   n/a

 

1 

These amounts reflect annualized salary effective as of May 16, 2013, and therefore differ from the actual salaries for 2013 reported in the Summary Compensation Table on page 53, which includes salaries paid prior to Mr. Krzanich and Ms. James being named chief executive officer and president, respectively.

 

2 

Mr. Holt was not a listed officer in 2013.

ANNUAL INCENTIVE CASH PLAN TARGETS AND PAYMENTS

The table below shows the target annual incentive for our listed officers under our annual incentive cash plan in 2014, as compared with 2013.

 

Name   2014 Annual
Incentive Cash
Target Amount ($)
  2013 Annual
Incentive Cash
Target Amount ($)
  % Change
2014 vs. 2013
Brian M. Krzanich   2,392,200   2,392,200(1)  
Renée J. James   2,033,300   2,033,300(1)  
Andy D. Bryant   1,452,000    1,395,000     4
Stacy J. Smith   1,293,000    1,250,000     3
William M. Holt   1,050,000               n/a2   n/a

 

1 

These amounts reflect target rates in effect as of June 2013.

 

2 

Mr. Holt was not a listed officer in 2013.

 

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COMPENSATION DISCUSSION AND ANALYSIS  n  2014 Compensation of Our Listed Officers

 

 

The amount earned under our annual incentive cash plan equals a participant’s target amount multiplied by the weighted average performance under absolute financial, relative financial, and operational components, and adjusted upward or downward based on individual performance. In 2014, we made four significant changes to this program:

 

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Weighting of the operational component of the annual incentive cash plan was increased from 33.33% to 50%. This increase reflects the Compensation Committee’s belief that operational excellence and technological leadership ultimately drive superior financial performance. We also moved from a single set of company-wide operational goals to business-unit-specific operational goals to drive a sharper focus on key strategic initiatives, increase visibility into those initiatives, and enhance accountability. Finally, we significantly reduced the number of performance goals, identifying three to four key objectives for each business unit. All of our listed officers’ annual incentive cash payments were based on an average of all business unit scorecards, with the exception of the payment for Mr. Holt, whose annual incentive cash payment was based on the performance goals established for the Technology and Manufacturing Group, which he leads.

 

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The absolute financial component was based on current-year net income growth over the prior year. Previously, current-year net income growth was compared with the average net income of the prior three years. This change increases focus on year-over-year earnings growth, and therefore may increase variability of the annual incentive cash payouts.

 

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The relative financial component was based on our annual net income growth relative to the annual net income growth for a group of 15 technology peer companies (the technology peer group), whereas in the past, relative performance was measured against average net income growth of the S&P 100 and a group of 13 technology peer companies. The Compensation Committee has the flexibility to use discretion in either including or excluding certain charges to the technology peer group’s net income results, similar to any charges that may have been included or excluded for Intel. This change increases focus on performance relative to our industry as opposed to a broader cross section of businesses.

 

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The individual performance adjustment was increased from an upward or downward adjustment of 10% to 20% based on the individual’s performance to enhance the link between individual pay and accountability.

 

 

 

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COMPENSATION DISCUSSION AND ANALYSIS  n  2014 Compensation of Our Listed Officers

 

 

Following the end of fiscal 2014, the Compensation Committee reviewed and certified the annual incentive cash plan performance results and determined the final cash payouts. The plan’s formula yielded a corporate average annual incentive cash payout of 122% of target, calculated as shown below. The awards of all listed officers except Mr. Holt are based on the corporate average, given their responsibility for the operations of the entire corporation. The committee exercised its discretion to increase Mr. Krzanich’s annual incentive cash payout by 10% to 135% of target, reflecting the company’s performance in 2014, as evidenced by our achievement of record net revenue and strong earnings growth in 2014 (see “Company Performance During 2014” on page 5 of this proxy). Mr. Holt’s annual incentive cash payout was 112% of target, based on the Technology and Manufacturing Group’s lower operational score. For more information on how the three performance components are measured and on the plan’s formula, see the discussion in “Executive Compensation; 2014 Operational Goals” on page 57 of this proxy statement.

The diagram below illustrates the calculation of the annual incentive cash plan for 2014.

 

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The absolute financial component increased from 81.0% in the 2013 calculation to 121.7% in the 2014 calculation due to the increase in 2014 net income compared with 2013 net income.

 

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The relative financial component increased from 73.8% for 2013 to 124.2% for 2014 due to the increase in Intel’s net income compared with Intel’s peer group’s weaker net income growth.

 

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For 2014, the operational performance component comprised of business-unit specific goals, and linked to performance in several key areas, including financial performance, product development, and launch roadmaps.

The following table details the annual incentive cash payments for each listed officer for 2013 and 2014, reflecting the year-over-year changes resulting from the higher annual incentive cash payout for 2014 and the changes in the annual incentive cash target amounts discussed above.

 

Name   2014 Annual Incentive
Cash Payment ($)
  2013 Annual Incentive
Cash Payment ($)
  % Change
2014 vs. 2013
Brian M. Krzanich   3,221,400   1,752,100     84
Renée J. James   2,487,400   1,394,000     78
Andy D. Bryant   1,776,300   1,139,300     56
Stacy J. Smith   1,581,800   1,020,800     55
William M. Holt   1,179,500             n/a1   n/a

 

1 

Mr. Holt was not a listed officer in 2013.

 

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COMPENSATION DISCUSSION AND ANALYSIS  n  2014 Compensation of Our Listed Officers

 

 

QUARTERLY INCENTIVE CASH PAYMENTS

The listed officers also participate in our company-wide quarterly incentive cash payments, which deliver cash compensation to employees based on Intel’s profitability. In 2014, quarterly incentive cash payments represented approximately 1% of the listed officers’ total direct compensation. Payouts are communicated as extra days of cash compensation, with executives typically receiving the same number of days of pay as other employees. We pay up to an additional two days of compensation for each performance year if Intel achieves its customer satisfaction goals. Payments earned in 2014 represented 17.8 days of compensation per employee, including our listed officers, up from 16.5 days in 2013. These totals included one day of compensation in each of 2014 and 2013 resulting from Intel’s achievement of its customer satisfaction goals.

2014 ANNUAL EQUITY AWARDS

The table below shows the annual equity award values approved by the committee for our listed officers in 2014, as compared with annual equity award values approved in 2013. In 2014, annual awards to the listed officers were composed of approximately 60% OSUs and 40% RSUs; in 2014 the committee ceased granting stock options to our executives. Amounts reported in the Summary Compensation Table and the Grants of Plan-Based Awards table on pages 53 and 56 differ from the approved values due primarily to changes in our stock price between the date the committee approved awards and the date they were actually granted. In addition, the fair value of an RSU for accounting purposes is discounted for the present value of dividends that are not paid on RSUs prior to vesting.

 

Name   2014
Approved
Value of
Annual Equity
Awards ($)
  2013
Approved
Value of
Annual Equity
Awards ($)
  % Change
2014
vs. 2013
Brian M. Krzanich   6,900,000   6,500,000     6
Renée J. James   5,865,000   5,525,000     6
Andy D. Bryant   4,680,000   4,500,000     4
Stacy J. Smith   4,500,000   4,500,000  
William M. Holt   4,500,000             n/a1   n/a

 

1 

Mr. Holt was not a listed officer in 2013.

In establishing annual equity awards for the listed officers, the Compensation Committee generally considers each officer’s individual performance in the prior year and expected future contributions. In 2013, the committee had made a deliberate decision to grant Mr. Krzanich a compensation package with a value targeted at approximately the 25th percentile for his position. This reflected the committee’s recognition that Mr. Krzanich was new to his role, and helped to create a performance-linked incentive to improve company performance in the future. The committee also set Mr. Krzanich’s annual incentive cash target amount significantly below market, in expectation of increasing these amounts and placing greater emphasis on variable cash compensation in future years.

For 2014, the committee decided to increase the compensation package for Mr. Krzanich by 4%, recognizing he had been in the role of CEO for less than a full year. Further, the committee determined that the entirety of the increase should be delivered in the form of variable performance-based RSUs. Because of increases in comparative pay levels at other companies, the compensation package for Mr. Krzanich remained at approximately the 25th percentile for his position.

Similarly, the committee increased Ms. James’ compensation by 4%, delivering the increase entirely in the form of performance-based RSUs. All components of Mr. Bryant’s compensation were increased 4%. For annual grants to Messrs. Smith and Holt, management prepared a matrix of grant values based on grade level and performance tier. Mr. Krzanich recommended and the committee approved grants at the highest performance tier for both Messrs. Smith and Holt, based on their expanded responsibilities.

 

 

 

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COMPENSATION DISCUSSION AND ANALYSIS  n  2014 Compensation of Our Listed Officers

 

 

OSU AWARDS

For 2014, approximately 60% of the total value of the listed officers’ annual equity awards were made in the form of OSUs. OSUs are variable performance-based RSUs under which the number of shares of Intel common stock received following vesting is based on Intel’s TSR performance measured against the median TSR of a peer group of companies over a three-year performance period. The committee elected to use OSUs as the primary equity vehicle for listed officers because the OSUs reflect a balance between the characteristics of stock options and those of RSUs: They are performance-based and present significant upside potential for superior stock price performance comparable to that of stock options, but they share some attributes of traditional RSUs by offering the potential for some value to the recipient even if the stock price declines over the three-year performance period.

TSR is a measure of stock price appreciation plus any dividends payable during the performance period for the OSUs. The OSUs granted in 2014 differ from those granted in 2013 in two important respects. First, the 2014 OSUs do not have a payout “floor” value, and instead can be forfeited entirely if a threshold level of performance is not achieved. Second, if Intel under-performs the technology peer group, the percentage at which the OSUs convert into shares will be reduced from 100% at a rate of 2-to-1 (a change from the 2.5-to-1 rate used prior to 2014), and if Intel outperforms the technology peer group, the percentage at which the OSUs convert into shares will be increased from 100%, at a rate of 4-to-1 (a change from the 5-to-1 rate used prior to 2014).

If Intel performs within 1% of the peer group median, 100% of the 2014 OSUs will convert into shares at target. For each percentage point by which Intel TSR falls below the peer group median, the percentage of OSUs that convert into shares will drop by 2 percentage points. For each percentage point by which Intel TSR exceeds the peer group median, the percentage of OSUs that convert into shares will increase by 4 percentage points (up to a maximum of 200%). Performance is measured over the 36 months following the grant date and OSUs convert into shares in the 37th month (generally, in February).

Additionally, there is a minimum threshold performance that must be met before any shares will be issued: If Intel’s TSR is more than 25 percentage points below the median TSR of the technology peer group, the threshold is not met, and no shares will be issued. For more information on how OSUs are earned, see the narrative following the Grants of Plan-Based Awards table in “Executive Compensation.”

The chart below illustrates the change in the OSU formula from 2013 to 2014.

 

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RSU AWARDS

For 2014, approximately 40% of the total value of the listed officers’ annual equity award was made in the form of RSUs. RSUs are intended to retain executive officers and reward them for absolute long-term stock price appreciation while providing some value to the recipient even if the stock price declines. RSUs also serve to balance the riskier nature of OSUs and provide a significant incentive to stay with the company. As with RSUs granted in 2013, awards granted to the listed officers in 2014 will vest in substantially equal quarterly increments over three years from the grant date. Quarterly vesting of RSUs helps offset the 37-month cliff vesting of the OSUs.

 

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Other Aspects of Our Executive Compensation Programs

INTEL’S COMPENSATION FRAMEWORK

The Compensation Committee determines the compensation for our executive officers. It also 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,” Farient Advisors served as the committee’s independent advisor for 2014. During 2014, Farient Advisors’ work with the Compensation Committee included advice and recommendations on:

 

n   

total compensation philosophy;

 

n   

program design, including program goals, components, and metrics;

 

n   

compensation trends in the technology sector and in the general marketplace for senior executives;

 

n   

regulatory trends;

 

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the compensation of the CEO and the other executive officers, including advice on the revision to the vesting schedules of certain special retention awards related to the CEO succession process; and

 

n   

stockholder engagement efforts.

The Compensation Committee also consults with management and Intel’s Compensation and Benefits Group regarding executive and non-executive employee compensation plans and programs, including administration of our equity incentive plans.

Executive officers do not propose or seek approval for their own compensation. The CEO makes a recommendation to the Compensation Committee on the base salary, annual incentive cash targets, and equity awards for each executive officer other than himself and the Chairman of the Board, based on his assessment of each executive officer’s performance during the year and the CEO’s review of compensation data gathered from compensation surveys. The CEO documents each executive officer’s performance during the year, detailing accomplishments, areas of strength, and areas for development. He then bases his evaluation on his knowledge of the executive officer’s performance, a self-assessment completed by the executive officer, and input from employees who report directly to the executive officer. When developing his recommendations, the CEO also reviews the compensation data gathered from compensation surveys. Intel’s Senior Vice President of Human Resources and the Compensation and Benefits Group assist the CEO in developing the executive officers’ performance reviews and reviewing market compensation data to determine the compensation recommendations.

Annual performance reviews of the CEO and of the Chairman are developed by the independent directors acting as a committee of the whole Board. 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 focused on pre-established objectives agreed upon with the Board. The independent directors meet as a group in executive sessions to prepare the review, which is completed and presented to the CEO. The Compensation Committee uses this evaluation to determine the CEO’s base salary, annual incentive cash target, and equity awards.

Performance reviews for the CEO and other executive officers consider these and other relevant topics that may vary depending on the role of the individual officer:

 

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Strategic Capability. How well does the executive officer identify and develop relevant business strategies and plans?

 

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Execution. How well does the executive officer execute strategies and plans?

 

n   

Leadership Capability. How well does the executive officer lead and develop the organization and people?

 

 

 

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EXTERNAL COMPETITIVE CONSIDERATIONS FOR 2014

To assist the Compensation Committee in its review of executive compensation for 2014, Intel’s Compensation and Benefits Group provided compensation data compiled from executive compensation surveys, as well as data gathered from annual reports and proxy statements from companies that the committee selected as a peer group for executive compensation analysis purposes. This historical compensation data was adjusted to arrive at current-year estimates for the peer group. The committee used this data to compare the compensation of our listed officers to that of the peer group.

The peer group for 2014 included the 15-company technology peer group and 10 S&P 100 companies outside the technology industry. When the peer group was created in 2007, the committee chose companies from the S&P 100 that resembled Intel in various respects, such as those that made significant investments in research and development and/or had substantial manufacturing and global operations. The committee also 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 employees and the companies that Intel uses for measuring relative financial performance for annual incentive cash payments.

For 2014, we made changes to the technology peer group. We removed Dell Inc. (because the company became a private company in late 2013) and, in order to maintain a robust peer group, we added eBay, TSMC Limited, and Western Digital Corporation, which were identified as technology peers based on their annual revenue and research and development spending as a percentage of revenue.

The table below shows information for our 2014 technology peer group and peers selected from the S&P 100:

 

Company   Reported
Fiscal Year
  Revenue
($ in billions)
  Net Income

(Loss)

($ in billions)

  Market Capitalization
on March 3, 2015
($ in billions)

Intel 2014

  12/27/14     55.9     11.7   161.47

Intel 2014 Percentile

          48%      74%        55%

Technology Peer Group

Amazon.com

  12/31/14     89.0       (0.2)   178.61

Apple Inc.

    9/27/14   182.8     39.5   753.43

Applied Materials, Inc.

  10/26/14       9.1       1.1     30.09

Cisco Systems, Inc.

    7/26/14     47.1       7.8   150.90

eBay Inc.

  12/31/14     17.9         0.05     70.49

EMC Corporation

  12/31/14     24.4       2.7     56.44

Google Inc.

  12/31/14     66.0     14.4   393.94

Hewlett-Packard Company

  10/31/14   111.4       5.0     63.37

International Business Machines Corporation

  12/31/14     92.8     12.0   159.17

Microsoft Corporation

    6/30/14     86.8     22.1   355.06

Oracle Corporation

    5/31/14     38.3     11.0   190.50

Qualcomm Incorporated

    9/28/14     26.5       8.0   117.79

Texas Instruments Incorporated

  12/31/14     13.0       2.8     61.33

TSMC Limited

  12/31/14     25.2       8.7   127.06

Western Digital Corporation

    6/27/14     15.1       1.6     24.39

S&P 100 Peer Group

AT&T Inc.

  12/31/14   132.4       6.2   178.59

The Dow Chemical Company

  12/31/14     58.2       3.8     57.02

General Electric Company

  12/31/14   148.6     15.2   259.89

Johnson & Johnson

  12/28/14     74.3     16.3   284.56

Merck & Co., Inc.

  12/31/14     42.2     11.9   165.58

Pfizer Inc.

  12/31/14     49.6       9.1   211.81

Schlumberger Limited

  12/31/14     48.6       5.4   108.29

United Parcel Service, Inc.

  12/31/14     58.2       3.0     91.61

United Technologies Corporation

  12/31/14     65.1       6.2   110.40

Verizon Communications Inc.

  12/31/14   127.1       9.6   205.90

 

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POST-EMPLOYMENT COMPENSATION ARRANGEMENTS

Intel does not provide change in control benefits to executive officers. Intel provides limited post-employment compensation arrangements to executive officers, including the listed officers, consisting of an employee-funded 401(k) savings plan, a discretionary company-funded retirement contribution plan, and a company-funded pension plan, each of which is intended to be tax-qualified and available to most U.S. employees, and a non-tax-qualified supplemental deferred compensation plan for certain highly compensated employees. The company-funded pension plan was closed to new hires starting January 1, 2011.

The Compensation Committee allows the listed officers to participate in these plans to encourage the officers to save for retirement and to assist the company in retaining the listed officers. The terms governing the retirement or deferred compensation benefits under these plans for the executive officers are the same as those available to other eligible employees in the United States. 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 retirement contribution 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.

During the second quarter of 2014, Intel communicated to employees our intent, beginning on January 1, 2015, to freeze future benefit accruals in the U.S. Intel Minimum Pension Plan to all employees at or above a specific grade level, and generally covering all highly compensated employees in the plan, including all executive officers. Starting in 2016, the impacted employees will receive discretionary employer contributions in the Intel 401(k) savings plan.

For 2014, Intel’s discretionary contribution (including allocable forfeitures) to the retirement contribution plan for eligible U.S. employees, including executive officers, and to the similar account for employees hired on or after January 1, 2011, in the 401(k) savings plan equaled 5% of eligible salary (which included annual and quarterly 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 (tax code), Intel credits the additional amount to the non-qualified deferred compensation plan. Intel invests all of its contributions to the retirement contribution plan in a diversified portfolio.

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 (see “Executive Compensation”).

The basic benefit provided by the pension plan for all eligible U.S. employees, including executive officers, is based on a formula that takes into account the employee’s final average pay and years of service as of December 31, 2014 for employees subject to the freeze of future benefit accruals. The resulting benefit is reduced by the value of the employee’s account in the retirement contribution plan calculated upon termination. The pension plan pays a benefit only to the extent that it is not fully offset by the retirement contribution plan account value. The benefit provided to some listed officers who participate in the pension plan also includes a tax-qualified arrangement that offsets amounts that otherwise would be paid under the non-qualified deferred compensation plan described above. This tax-qualified arrangement is also available to other eligible employees and does not result in an overall increase in payments otherwise due under the non-qualified deferred compensation plan. 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. Due to the values in the individual retirement contribution plan accounts, we do not expect that any listed officers will receive payments from the pension plan other than the offset to the non-qualified deferred compensation plan just described.

 

 

 

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PERSONAL BENEFITS

Intel provides very limited personal benefit perquisites to executive officers, and it does not provide permanent lodging or defray costs for personal entertainment or family travel. Intel’s company-operated aircraft hold approximately 50 passengers and are used in regularly scheduled routes between Intel’s major U.S. facility locations, and Intel bears the cost of non-commercial aircraft use on a time-share or rental basis for 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, eligibility, and cost sharing may vary by country or local market practice. Intel shares the cost of health and welfare benefits with its employees, a cost that depends on the level of benefits coverage that each employee elects. Intel’s employee loan programs are not available to its executive officers. Intel has no outstanding loans of any kind to any of its executive officers. In 2014, Intel made financial planning services available to its executive officers, including the listed officers. In addition, Intel elected to bear the cost of upgrading the home security systems for certain listed officers.

CORPORATE OFFICER STOCK OWNERSHIP GUIDELINES

Because the Compensation Committee believes in linking the interests of management and stockholders, the Board has set stock ownership guidelines for Intel’s executive officers. These guidelines specify the number of shares that Intel’s corporate officers must accumulate and hold within five years of appointment or promotion. Unvested OSUs and RSUs and unexercised stock options do not count toward satisfying these ownership guidelines. In 2014, the company decided to extend the ownership guidelines to include more than 350 of our senior leaders as well as our corporate officers.

As of December 27, 2014, each of Intel’s listed officers had satisfied these ownership guidelines, or still has time to do so.

The following table lists the specific ownership requirements.

 

Title   Minimum Number of
Shares
CEO               250,000
Executive Chairman & President               150,000
CFO               125,000
Executive Vice President               100,000
Senior Vice President                 65,000
Corporate Vice President                 35,000
Other VPs, Intel Fellows, and Senior Leaders   5,000 to 10,000

INTEL POLICIES REGARDING DERIVATIVES OR “SHORT SALES”

Intel prohibits directors, listed officers, and other senior employees from investing in any derivative securities of Intel common stock and engaging in short sales or other short-position transactions in Intel common stock. This policy does not restrict ownership of company-granted awards, such as OSUs, RSUs, employee stock options, and publicly traded convertible securities issued by Intel.

INTEL POLICIES REGARDING CLAW-BACKS

Both Intel’s 2014 Annual Performance Bonus program (formerly the 2007 Executive Officer Incentive Plan), under which annual incentive cash payments are made, and Intel’s 2006 Equity Incentive Plan include provisions for seeking the return (claw-back) from executive officers of incentive cash payments and stock sale proceeds in the event that those amounts had been inflated due to financial results that later had to be restated.

 

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COMPENSATION DISCUSSION AND ANALYSIS  n  Other Aspects of Our Executive Compensation Programs

 

 

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 (excluding the CFO). To maintain flexibility and promote simplicity in administration, compensation arrangements such as OSUs, RSUs, and annual and quarterly incentive cash payments may not satisfy the conditions of Section 162(m) of the tax code and therefore may not be deductible.

 

 

 

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REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee, which is composed solely of independent directors 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 Chief Executive Officer, Brian M. Krzanich, and our Chief Financial Officer, 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 2014 Annual Report on Form 10-K (incorporated by reference) and in this proxy statement.

Compensation Committee

David S. Pottruck, Chairman

John J. Donahoe

David B. Yoffie

 

 

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EXECUTIVE COMPENSATION

The following table lists the annual compensation for fiscal years 2014, 2013, and 2012 of our CEO, President, Chairman, CFO, and our other most highly compensated executive officer in 2014 (referred to as listed officers).

2014 Summary Compensation Table

 

Name and

Principal Position

  Year    

Salary

($)

    Bonus
($)
   

Stock
Awards

($)

    Option
Awards
($)
    Non-Equity
Incentive Plan
Compensation
($)
 

Change in
Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings

($)

  All Other
Compensation
($)
 

Total

($)

 
Brian M. Krzanich     2014        1,000,000        500        6,658,700             3,354,400     22,000   161,800     11,197,400   
Chief Executive Officer     2013        887,500               5,273,300        1,310,500      1,866,600             —   215,700     9,553,600   
      2012        700,000               12,363,700        883,500      1,800,900     12,000   115,100     15,875,200   
Renée J. James     2014        850,000        500        5,660,200             2,600,400     74,000   181,900     9,367,000   
President     2013        775,000               4,511,800        1,107,700      1,492,400             —   142,800     8,029,700   
      2012        650,000               12,363,700        883,500      1,265,100     46,000   109,000     15,317,300   
Andy D. Bryant     2014        790,000        500        4,512,500             1,870,500   267,000   102,000     7,542,500   
Chairman of the Board     2013        760,000               3,451,000        894,500      1,222,400             —   108,000     6,435,900   
      2012        760,000               3,597,200        883,500      1,416,100   109,000   161,000     6,926,800   
Stacy J. Smith     2014        673,000        500        4,338,900             1,663,400   183,000   106,300     6,965,100   
Executive Vice President     2013        650,000               3,711,000        894,500      1,093,100           —   111,000     6,459,600   
and Chief Financial Officer     2012        650,000               12,363,700        883,500      1,265,900   108,000   128,100     15,399,200   
William M. Holt1     2014        641,000        500        4,338,900             1,252,800   288,000     78,700     6,599,900   
Executive Vice President, General Manager, Technology & Manufacturing Group                                                            

 

1 

Mr. Holt was not a listed officer in 2013 or 2012.

Total Compensation. Total compensation for listed officers as reported in the Summary Compensation Table increased an average of 15.1% from 2013 to 2014, excluding Mr. Holt’s 2014 compensation, as he was not a listed officer in 2013.

Equity Awards. Under SEC rules, the values reported in the “Stock Awards” and “Option Awards” columns of the Summary Compensation Table reflect the aggregate grant date fair value, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB ASC Topic 718), of grants of stock options and stock awards to each of the listed officers in the years shown.

The grant date fair values of OSUs are provided to us by Radford, an Aon Hewitt Consulting company, using the Monte Carlo simulation valuation method. We calculate the grant date fair value of an RSU by taking the average of the high and low trading prices of Intel common stock on the grant date and reducing it by the present value of dividends expected to be paid on Intel common stock before the RSU vests, because we do not pay or accrue dividends or dividend-equivalent amounts on unvested RSUs. We calculated the grant date fair value of stock options for 2012 and 2013 using the Black-Scholes option pricing model.

The following table includes the assumptions used to calculate the aggregate grant date fair value of awards reported for 2014, 2013, and 2012 on a grant-date by grant-date basis.

 

     Assumptions
Grant Date    Volatility
(%)
   Expected
Life
(Years)
   Risk-Free
Interest
Rate

(%)

   Dividend
Yield

(%)

1/24/12    25    5.4    0.6    3.1
1/24/13    25    5.2    0.7    4.3
5/16/13    23    5.2    0.7    3.7
1/23/14    23    n/a    0.6    3.6

 

 

 

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EXECUTIVE COMPENSATION  n  2014 Summary Compensation

 

 

Non-Equity Incentive Plan Compensation. The amounts in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table include annual incentive cash payments made under the annual incentive cash plan and quarterly incentive cash payments. The allocation of payments was as follows:

 

Name      Year       Annual Incentive
Cash Payments
($)
   Quarterly
Incentive Cash
Payments
($)
   Total Incentive
Cash Payments
($)
Brian M. Krzanich     
 
 
2014
2013
2012
  
  
  
   3,221,400
1,752,100
1,692,000
   133,000
114,500
108,900
   3,354,400
1,866,600
1,800,900
Renée J. James     
 
 
2014
2013
2012
  
  
  
   2,487,400
1,394,000
1,175,000
   113,000

  98,400

  90,100

   2,600,400
1,492,400
1,265,100
Andy D. Bryant     
 
 
2014
2013
2012
  
  
  
   1,776,300
1,139,300
1,311,300
     94,200

  83,100

104,800

   1,870,500
1,222,400
1,416,100
Stacy J. Smith     
 
 
2014
2013
2012
  
  
  
   1,581,800
1,020,800
1,175,000
     81,600

  72,300

  90,900

   1,663,400
1,093,100
1,265,900
William M. Holt1      2014       1,179,500      73,300    1,252,800

 

1 

Mr. Holt was not a listed officer in 2013 or 2012.

Change in Pension Value and Non-Qualified Deferred Compensation Earnings. The actuarial present value of the benefit that the listed officers have in the tax-qualified pension plan arrangement, which offsets the non-qualified pension plan benefit, increased as of the 2014 fiscal year-end compared with the 2013 fiscal year-end value. Since the benefit is a fixed dollar amount payable at age 65, year-to-year differences in the present value of the accumulated benefit arise solely from changes in the interest rate used to calculate present value and the participant’s age approaching 65. The listed officers had an overall increase in 2014 because the interest rate used to calculate present value decreased from approximately 4.8% for 2013 to approximately 3.8% for 2014. They had an overall decrease in 2013 (reported as zero pursuant to SEC rules) because the interest rate used to calculate present value increased from approximately 3.9% for 2012 to approximately 4.8% for 2013, and they had an overall increase in 2012 because the interest rate used to calculate present value decreased from approximately 4.7% for 2011 to approximately 3.9% for 2012.

 

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EXECUTIVE COMPENSATION  n  2014 Summary Compensation

 

 

All Other Compensation. The amounts in the “All Other Compensation” column of the Summary Compensation Table include tax-qualified discretionary company contributions to the retirement contribution plan, discretionary company contributions credited under the retirement contribution component of the non-qualified deferred compensation plan, matching charitable contributions from the Intel Foundation, payments made in connection with listed officer financial planning, and payments for home security services, as detailed in the table below. Amounts included in the “Retirement Plan Contributions” column become payable only upon the earliest to occur of retirement, termination, disability, or death (receipt may be deferred following retirement or termination but no later than reaching age 70 12). Amounts included in the “Deferred Compensation Plan Contributions” column will be paid to the listed officers after a fixed period of years or upon termination of employment, in accordance with irrevocable elections made at the time that compensation is deferred.

 

Name   Year   Retirement

Plan

Contributions
($)

  Deferred

Compensation

Plan

Contributions
($)

  Financial
Planning
($)
  Home

Security
Services
($)

  Total All Other
Compensation
($)
Brian M. Krzanich   2014   13,000   132,500   16,300         —   161,800
    2013   12,800   121,200   16,700   65,000   215,700
    2012   15,000     97,600     2,500         —   115,100
Renée J. James   2014   13,000   105,900         —   63,000   181,900
    2013   12,800     89,000         —   41,000   142,800
    2012   15,000     94,000         —         —   109,000
Andy D. Bryant   2014   13,000     89,000         —         —   102,000
    2013   12,800     95,200         —         —   108,000
    2012   15,000   146,000         —         —   161,000
Stacy J. Smith   2014   13,000     76,500   16,800         —   106,300
    2013   12,800     82,300   15,900         —   111,000
    2012   15,000   107,900     5,200         —   128,100
William M. Holt1   2014   13,000     65,700         —         —     78,700

 

1 

Mr. Holt was not a listed officer in 2013 or 2012.

 

 

 

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EXECUTIVE COMPENSATION  n  Grants of Plan-Based Awards in Fiscal Year 2014

 

 

Grants of Plan-Based Awards in Fiscal Year 2014

The following table presents equity awards granted under the 2006 Equity Incentive Plan and awards granted under our annual incentive cash plan and quarterly incentive cash payments in 2014. Under SEC rules, the values reported in the “Grant Date Fair Value of Stock Awards” column reflect the grant date fair value of grants of stock awards determined under accounting standards applied by Intel, as discussed above.

Grants of Plan-Based Awards in Fiscal Year 2014 Table

 

                        Estimated Future
Payouts Under Non-
Equity Incentive Plans
    Estimated Future Payouts
Under Equity Incentive Plans1
   

All Other

Stock

Awards:

Number of

Shares of

   

Grant Date

Fair Value

 
Name   Grant
Date
    Approval
Date
    Award Type   Target
($)2
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
   

Stock or

Units (#)

   

of Stock

Awards ($)3

 

Brian M. Krzanich

    01/23/14        01/21/14      OSU                128,430        256,860          4,209,900   
    01/23/14        01/21/14      RSU                 103,690        2,448,800   
    01/23/14        01/21/14      Annual Cash     2,392,200        10,000,000               
      01/23/14        01/21/14      Quarterly Cash     133,000                                                   

Renée J. James

    01/23/14        01/21/14      OSU                109,170        218,340          3,578,600   
    01/23/14        01/21/14      RSU                 88,140        2,081,600   
    01/23/14        01/21/14      Annual Cash     2,033,300        10,000,000               
      01/23/14        01/21/14      Quarterly Cash     113,000                                                   

Andy D. Bryant

    01/23/14        01/21/14      OSU                83,870        167,740          2,749,300   
    01/23/14        01/21/14      RSU                 74,660        1,763,200   
    01/23/14        01/21/14      Annual Cash     1,452,000        10,000,000               
      01/23/14        01/21/14      Quarterly Cash     94,200                                                   

Stacy J. Smith

    01/23/14        01/21/14      OSU                80,650        161,300          2,643,700   
    01/23/14        01/21/14      RSU                 71,780        1,695,200   
    01/23/14        01/21/14      Annual Cash     1,293,000        10,000,000               
      01/23/14        01/21/14      Quarterly Cash     81,600                                                   

William M. Holt

    01/23/14        01/21/14      OSU                80,650        161,300          2,643,700   
    01/23/14        01/21/14      RSU                 71,780        1.695,200   
    01/23/14        01/21/14      Annual Cash     1,050,000        10,000,000               
      01/23/14        01/21/14      Quarterly Cash     73,300                                                   

 

1 

The “Estimated Future Payouts Under Equity Incentive Plans” columns represent the minimum, target, and maximum number of OSUs that upon converting to shares could be received by each listed officer, excluding dividend equivalents.

 

2 

Amounts reported as “Target” in the “Annual Cash” rows are the listed officer’s annual incentive cash target, and the amounts reported as “Target” in the “Quarterly Cash” rows are the listed officer’s 2014 quarterly incentive payment.

 

3 

The grant date fair value (computed in accordance with FASB ASC Topic 718) is generally the amount that Intel would expense in its financial statements over the award’s service period, but does not include a reduction for forfeitures.

OSU Awards. OSUs granted to the listed officers in 2014 have a three-year performance period from the grant date, and a 37-month vesting schedule, meaning that the performance metrics are measured over the first 36 months, and the corresponding number of shares will vest in the 37th month. The number of shares of Intel common stock to be received at vesting will range from 0% to 200% of the target amount, based on the TSR of Intel common stock measured against the median TSR of the technology peer group over a three-year period. For OSUs granted to listed officers in 2014, the percentage rates at which OSUs convert into shares are as follows: if Intel’s TSR is within 1% of the peer group’s TSR, OSUs convert into shares at target; if Intel under-performs the technology peer group, the percentage at which the OSUs convert into shares will be reduced from 100% at a rate of 2-to-1 (a 2-percentage-point reduction in units for each percentage point of under-performance), but if Intel’s TSR is more than 25 percentage points below the median TSR of the technology peer group, no shares will be issued and the OSUs will be forfeited; if Intel outperforms the technology peer group, the percentage at which the OSUs convert into shares will be increased from 100%, at a rate of 4-to-1 (a 4-percentage-point increase in units for each percentage point of over-performance), with a maximum percentage of 200%. TSR is a measure of stock price appreciation plus any dividends paid during the performance period. Dividend equivalents are based on dividends that are payable over the vesting period only on the number of shares of Intel common stock earned, and they will be paid in the form of additional shares of Intel common stock.

RSU Awards. RSUs granted to the listed officers in 2014 will vest in substantially equal quarterly increments over three years from the grant date.

 

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EXECUTIVE COMPENSATION  n  2014 Operational Goals

 

 

2014 Operational Goals

Annual Cash. Annual incentive cash payments are made under the annual incentive cash plan. The Compensation Committee sets the incentive cash target amount under the annual incentive cash plan as part of the annual performance review and compensation adjustment cycle. This incentive cash target amount is then multiplied by the annual incentive cash percentage calculated after the end of the year based on a weighted average of three corporate performance components. This plan mirrors the broad-based plan for employees, with the added feature of an individual performance adjustment. The following diagram details the weighting of the three corporate performance components.

LOGO

Each corporate performance component is targeted around a score of 100%, with a minimum score of zero. The committee may adjust Intel’s net income based on qualifying criteria selected by the committee at its sole discretion, as described in the plan. The methodology used to calculate Intel’s net income or adjusted net income (non-GAAP) for both absolute and relative financial performance is the same. Additional details on each component are provided below.

 

n   

Absolute Financial Component. The committee uses this component to reward executive officers for sustained performance. To determine absolute financial performance, Intel’s current-year net income or adjusted net income was divided by Intel’s prior year net income. The weighting of the Absolute Financial Component now represents 25% of the formula. In 2014, Intel’s net income was 21.7% higher than the prior year. This was up from the 2013 result, when net income was 19% lower than the trailing three-year average.

 

n   

Relative Financial Component. Through this component, the committee rewards executive officers for how well Intel performs compared with a broader market. To calculate Intel’s performance relative to the market comparator group, the sum of one plus the total annual net income percentage growth or adjusted total net income percentage growth for the technology peer group (excluding Intel). The weighting of the Relative Financial Component now represents 25% of the formula. In 2014, the scoring for the relative component was 124.2% for Intel’s performance relative to the market’s performance, an increase compared with the 2013 relative score of 73.8%.

 

n   

Operational Performance Component. Each year, the Compensation Committee approves operational goals and their respective success criteria for measuring operational performance. The operational goals selected by the committee are also used in the broad-based employee annual incentive cash plan and are prepared each year as part of the annual planning process for the company. Previously, we used a single company-wide set of operational performance goals for all employees. To drive focus and accountability at the business unit level, the committee approved the use of business-unit-specific operational performance goals for 2014. Each business unit scorecard consists of three to four key goals. Employees in corporate level and administrative groups, including each of our listed officers other than Mr. Holt, are paid based on the corporate average, subject to a corporate level “kicker” of 5%. Mr. Holt is paid using the results for the Technology and Manufacturing Group, which he heads. These operational goals are derived from a process for tracking and evaluating performance; however, some goals have non-quantitative measures that require some degree of subjective evaluation. The goals and success measures are defined within the first 90 days of the performance period.

 

 

 

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EXECUTIVE COMPENSATION  n  2014 Operational Goals

 

 

The operational goals typically link to performance in several key areas, including financial performance, product development and launch roadmaps, manufacturing, cost and productivity improvements, and corporate responsibility and environmental sustainability. For 2014, the committee approved a significant reduction in the number of goals compared to 2013, to improve focus on key objectives. Specific business unit operational goals are shown in the table below, along with each unit’s operational score.

2014 Operational Goal Categories

 

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EXECUTIVE COMPENSATION  n  Stock Option Exercises and Stock Vested in Fiscal Year 2014

 

 

The scoring for operational goals ranges from 0% to 125%; as noted above, specific success measures for each goal are determined within the first 90 days of the performance period. The operational goals are intended to be meaningful measures of performance for the coming year based on the data, projections, and analyses that Intel uses in its planning processes. The scores for the year, representing Intel’s achievement of the year’s operational goals, are calculated by senior management following the end of the performance period and are reviewed and approved by the Compensation Committee. Corporate kickers results are added to the operational scores and can result in scores above 125%.

Over the past five years, operational goals have scored between 90.1% and 103.1%, with an average result of 96.8%. The corporate average score on operational goals in 2014 was 122%, an increase compared with 90.1% in 2013.

Quarterly Incentive Cash Payments. Quarterly cash awards are made under a broad-based plan based on Intel’s profitability. Listed officers and other eligible employees receive a payment expressed as days of compensation based on 5% of net income divided by the current value of a worldwide day of compensation. We pay up to an additional two days of compensation for each performance year if Intel achieves its customer satisfaction goals. Because benefits are determined under a formula and the Compensation Committee does not set a target amount under the plan, under SEC rules the target amounts reported in the table above are the amounts earned in 2014.

Stock Option Exercises and Stock Vested in Fiscal Year 2014

The following table provides information on stock option exercises and vesting of RSUs and OSUs during fiscal year 2014.

 

    OPTION AWARDS     STOCK AWARDS  
Name   Grant Type   Number of
Shares
Acquired on
Exercise
(#)
    Value
Realized on
Exercise
($)
    Number of
Shares
Acquired on
Vesting
(#)
    Value
Realized on
Vesting
($)
    Total Value
Realized on
Exercise and
Vesting
($)
 
Brian M. Krzanich   Option                                   
  RSU                   154,455        4,427,400        4,247,400   
    OSU                   52,482        1,293,400        1,293,400   
Total                         206,937        5,540,800        5,540,800   
Renée J. James   Option     385,852        2,961,800                      2,961,800   
  RSU                   146,534        4,005,700        4,005,700   
    OSU                   52,482        1,293,400        1,293,400   
Total         385,852        2,961,800        199,016        5,299,100        8,260,900   
Andy D. Bryant   Option     172,020        2,268,900                      2,268,900   
  RSU                   61,669        1,843,100        1,843,100   
    OSU                   68,631        1,691,400        1,691,400   
Total         172,020        2,268,900        130,300        3,534,500        5,803,400   
Stacy J. Smith   Option     614,432        8,110,000                      8,110,000   
  RSU                   142,089        3,848,800        3,848,800   
    OSU                   68,631        1,691,400        1,691,400   
Total         614,432        8,110,000        210,720        5,540,200        13,650,200   
William M. Holt   Option     472,774        4,496,500                      4,496,500   
  RSU                   98,788        2,730,500        2,730,500   
    OSU                   52,482        1,293,400        1,293,400   
Total         472,774        4,496,500        151,270        4,023,900        8,520,400   

2011–2014 OSU Payout. In 2014, the three-year performance period ended for OSUs granted in 2011, and the committee certified the performance results. Payout was below target due to Intel’s total stockholder return (TSR) over the performance period. Intel’s TSR was 30.9%, below the 2011 Proxy Statement’s 15 technology peer group companies’ TSR of 40.0% by 9.1 percentage points. The 2011 OSUs paid out at 100% minus 2.5 percentage points for every percentage point that Intel’s TSR was below the peer group TSR. Therefore, the OSUs were converted into earned units equal to 77.3% of target and, together with dividend equivalents accrued on the shares that were earned over the 37-month vesting period, were settled at 85.9% of target and are included in the table above.

 

 

 

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Table of Contents

EXECUTIVE COMPENSATION  n  Outstanding Equity Awards at Fiscal Year-End 2014  

 

 

Outstanding Equity Awards at Fiscal Year-End 2014

The following table provides information regarding outstanding equity awards held by the listed officers as of December 27, 2014. Unless otherwise specified, options vest at a rate of 25% per year on each of the first four anniversaries of the grant date and RSUs vest quarterly over the first three years from the grant date. Market value for stock options 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 ($37.55 on December 26, 2014) and the option exercise price, and multiplying it by the number of outstanding stock options. Market value for stock awards (OSUs and 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.

 

    STOCK OPTION AWARDS     STOCK AWARDS  
Name   Grant
Date
    Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Market
Value of
Unexercised
Options
($)
    Grant
Date
    Number of
Shares or
Units of
Stock
That Have
Not Vested
(#)
    Market
Value of
Shares or
Units of
Stock
That Have
Not Vested
($)
    Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units,
or Other
Rights
That  Have Not
Vested1 (#)
    Equity
Incentive Plan
Awards: Market
or Payout Value
of Unearned
Shares, Units,
or  Other Rights
That Have Not
Vested ($)
 
Brian M.
Krzanich
    1/17/2008        41,250               19.63        1/17/2018        739,200        1/22/2010        9,250 (3)      347,300                 
    1/23/2009        41,250               12.99        1/23/2019        1,013,100        1/24/2012        298,560 (4)      11,210,900        56,680        2,128,300   
    4/16/2009        41,640               15.67        4/16/2016        911,100        1/24/2012        4,199        157,700                 
    10/30/2009        259,907               19.04        10/30/2016        4,810,900        1/24/2013        26,717        1,003,200        85,160        3,197,800   
    1/22/2010        90,310               20.30        1/22/2017        1,557,800        5/16/2013        12,416        466,200        33,050        1,241,000   
    1/22/2010               65,000 (2)      20.30        1/22/2020        1,121,300        1/23/2014        77,768        2,920,200        128,430        4,822,500   
    1/24/2011        118,785        39,595        21.09        1/24/2018        2,606,900               
    1/24/2012        101,580        101,580        26.80        1/24/2019        2,184,000               
    1/24/2013        80,645        241,935        21.06        1/24/2020        5,319,300               
      5/16/2013        33,587        100,763        24.17        5/16/2020        1,797,600                                           
Total             808,954        548,873                        22,061,200                428,910        16,105,500        303,320        11,389,600   
Renée J. James     1/22/2010          65,000 (2)      20.30        1/22/2020        1,121,300        1/22/2010        9,250 (3)      347,300                 
    1/24/2011          39,595        21.09        1/24/2018        651,700        1/24/2012        298,560 {4)      11,210,900        56,680        2,128,300   
    1/24/2012          101,580        26.80        1/24/2019        1,092,000        1/24/2012        4,199        157,700                 
    1/24/2013          241,935        21.06        1/24/2020        3,989,500        1/24/2013        26,717        1,003,200        85,160        3,197,800   
    5/16/2013          51,638        24.17        5/16/2020        690,900        5/16/2013        6,366        239,000        16,940        636,100   
                                                      1/23/2014        66,106        2,482,300        109,170        4,099,300   
Total                     499,748                        7,545,400                411,198        15,440,400        267,950        10,061,500   
Andy D. Bryant     1/24/2011        155,332        51,778        21.09        1/24/2018        3,409,000        1/24/2012        4,199        157,700        56,680        2,128,300   
    1/24/2012        101,580        101,580        26.80        1/24/2019        2,184,000        1/24/2013        26,717        1,003,200        85,160        3,197,800   
      1/24/2013        80,645        241,935        21.06        1/24/2020        5,319,300        1/23/2014        55,996        2,102,600        83,870        3,149,300   
Total             337,557        395,293                        10,912,300                86,912        3,263,500        225,710        8,475,400   
Stacy J. Smith     1/22/2010          45,000 (2)      20.30        1/22/2020        776,300        1/22/2010        6,500 (3)      244,100                 
    1/24/2011          51,778        21.09        1/24/2018        852,300        1/24/2012        298,560 (4)      11,210,900        56,680        2,128,300   
    1/24/2012          101,580        26.80        1/24/2019        1,092,000        1/24/2012        4,199        157,700                 
    1/24/2013          241,935        21.06        1/24/2020        3,989,500        1/24/2013        26,717        1,003,200        85,160        3,197,800   
                                                      1/23/2014        53,836        2,021,500        80,650        3,028,400   
Total                     440,293                        6,710,100                389,812        14,637,400        222,490        8,354,500   
William M. Holt     1/22/2010          65,000 (2)      $20.30        1/22/2020        1,121,300        1/22/2010        9,250 (3)      347,300                 
    1/24/2011          39,595        $21.09        1/24/2018        651,700        1/24/2012        149,280 (4)      5,605,500        43,070        1,617,300   
    1/24/2012        30,880        77,200        $26.80        1/24/2019        1,161,900        1/24/2012        3,191        119,800                 
    1/24/2013          201,615        $21.06        1/24/2020        3,324,600        1/24/2013        22,263        836,000        70,970        2,664,900   
                                                      1/23/2014        53,836        2,021,500        80,650        3,028,400   
Total             30,880        383,410                        6,259,500                237,820        8,930,100        194,690        7,310,600   

 

1

OSUs are shown at their target amount. The actual conversion of OSUs into Intel shares following the conclusion of the vesting period (37 months following the grant date) will range from 50% to 200% of that target amount for 2012 and 2013 OSUs and from 0% to 200% of that target amount for 2014 OSUs. The actual conversion will depend upon Intel’s TSR performance versus the TSR benchmark over the applicable three-year performance period and will include the shares from dividend equivalents that are received on the final shares earned and vested. The dividend equivalents will pay out in the form of additional shares.

 

2

Stock options become exercisable on the fifth anniversary of the grant date.

 

3

RSUs vest in full on the fifth anniversary of the grant date.

 

4

Retention RSUs have a four-year vesting schedule (20% in year two, 40% in year three, 40% in year four).

 

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Table of Contents

EXECUTIVE COMPENSATION  n  Pension Benefits for Fiscal Year 2014

 

 

Pension Benefits for Fiscal Year 2014

The following table shows the estimated present value of accumulated pension benefits for the listed officers.

 

Name      Plan Name      Number of Years of
Credited Service
(#)
     Present Value of
Accumulated Benefit1
($)
Brian M. Krzanich      Pension Plan      n/a        105,000
Renée J. James      Pension Plan      n/a        319,000
Andy D. Bryant      Pension Plan      n/a      2,097,000
Stacy J. Smith      Pension Plan      n/a        790,000
William M. Holt      Pension Plan      n/a      1,883,000

 

1 

Until distribution, these benefits are also reflected in the listed officer’s balance reported in the Non-Qualified Deferred Compensation table. The amounts of these tax-qualified pension plan arrangements are not tied to years of credited service. Upon termination, the amount that the listed officer receives under the non-qualified deferred compensation plan will be reduced by the amount received under the tax-qualified pension plan arrangement.

The U.S. Intel Minimum Pension Plan is a defined benefit plan with two components. The first component provides participants with retirement income that is determined by a pension formula based on final average compensation, Social Security-covered compensation, and length of service upon separation not to exceed 35 years. It provides pension benefits only if the annuitized value of a participant’s account balance in Intel’s tax-qualified retirement contribution plan is less than the pension plan benefit, in which case the pension plan funds a net benefit that makes up the difference. As of December 27, 2014, none of the amounts included in the table above were associated with this component. Effective January 1, 2015, compensation earned and service accruals were frozen as of December 31, 2014 in the U.S. Intel Minimum Pension Plan for all employees at or above a specific grade level, including all listed officers.

The second component is a tax-qualified pension plan arrangement under which pension benefits offset amounts that otherwise would be paid under the non-qualified deferred compensation plan described below. Employees who were participants in the non-qualified deferred compensation plan as of December 31, 2003 were able to consent to a one-time change to the non-qualified deferred compensation plan’s benefit formula. This change reduces the employee’s distribution amount from the non-qualified deferred compensation plan by the lump sum value of the employee’s tax-qualified pension plan arrangement at the time of distribution. Each participant’s pension plan arrangement was established as a fixed single life annuity amount at age 65. The annual amount of this annuity is $11,700 for Mr. Krzanich, $41,200 for Ms. James, $165,000 for Mr. Bryant, $98,500 for Mr. Smith, and $165,000 for Mr. Holt.

Each participant’s benefit was set based on a number of elements, including his or her non-qualified deferred compensation plan balance as of December 31, 2003, IRS pension rules that consider age and other factors, and limits that Intel sets for equitable administration. The benefit under this portion of the plan is frozen, and accordingly, year-to-year differences in the present value of the accumulated benefit arise solely from changes in the interest rate used to calculate present value and the participant’s age becoming closer to age 65. We calculated the present value assuming that the listed officers will remain in service until age 65, using the interest rate and other assumptions used by Intel for financial statement accounting, as reflected in Note 16 to the financial statements in our Annual Report on Form 10-K for the year ended December 27, 2014. A participant can elect to receive his or her benefit at any time following termination of employment, but not later than age 701/2. Distributions before age 55 may be subject to a 10% federal penalty tax.

 

 

 

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EXECUTIVE COMPENSATION  n  Non-Qualified Deferred Compensation for Fiscal Year 2014

 

 

Non-Qualified Deferred Compensation for Fiscal Year 2014

The following table shows the non-qualified deferred compensation activity for each listed officer during fiscal year 2014.

 

Name    Executive
Contributions
in Last
Fiscal Year1
($)
   Intel
Contributions
in Last
Fiscal Year2
($)
   Aggregate
Earnings
(Losses)
in Last
Fiscal  Year3
($)
   Aggregate

Withdrawals/

Distributions

In Last

Fiscal Year4

($)

   Aggregate
Balance
at Last Fiscal
Year-End5
($)
Brian M. Krzanich              —    121,300        56,200               —        994,000
Renée J. James      85,000      89,000        82,500               —      1,365,400
Andy D. Bryant    648,600      95,200    1,096,300               —    16,798,100
Stacy J. Smith              —      82,400      259,900    (885,100)      6,537,000
William M. Holt              —      64,400      344,900               —      6,768,800

 

1 

Amounts included in the Summary Compensation Table in the “Salary” and “Non-Equity Incentive Plan Compensation” columns for 2014.

 

2 

These amounts, which accrued during fiscal year 2014 and were credited to the participants’ accounts in 2015, are included in the Summary Compensation Table in the “All Other Compensation” column for 2014.

 

3 

These amounts are not included in the Summary Compensation Table because plan earnings were not preferential or above market.

 

4

Withdrawal and distribution amounts are not included in the Summary Compensation Table because these are payouts of prior years’ earnings and contributions.

 

5 

These amounts are as of December 27, 2014 and do not take into account the amounts in the “Intel Contributions in Last Fiscal Year” column in the table above that were accrued during fiscal year 2014 but were credited to the participants’ accounts in 2015. The following amounts are included in the fiscal year-end balance and previously were reported as compensation to the listed officers in the Summary Compensation Table for 2006 through 2013 (except for Mr. Smith, who was not a listed officer in 2006; Mr. Krzanich and Ms. James, who were not listed officers prior to 2012; and Mr. Holt, who was not a listed officer prior to 2014): Mr. Krzanich, $218,800; Ms. James, $312,500; Mr. Bryant, $6,170,000; and Mr. Smith, $4,188,900.

Intel will distribute the balances reported in the Non-Qualified Deferred Compensation table (plus any future contributions or earnings) to the listed officers in the manner that the officers have chosen under the plan’s terms. Each balance reported in the table above includes the offset amount that the employee would receive under the tax-qualified pension plan arrangement; the actual amount distributed under this plan will be reduced by the benefit under the pension plan arrangement. See the Pension Benefits table above for these amounts.

The following table summarizes the total contributions made by the participant and Intel, including gains and losses attributable to such contributions, that were previously reported (or that would have been reported had the participant been a listed officer for all years) in the Summary Compensation Table over the life of the plan. The amounts in the table are as of December 27, 2014 and do not take into account any amounts that were accrued during fiscal year 2014 but were credited to the participants’ accounts in 2015.

 

Name   Aggregate Executive Deferrals
over Life of Plan

($)

  Aggregate Intel Contributions
over Life of Plan

($)

Brian M. Krzanich

      178,000     816,000

Renée J. James

      692,700     672,700

Andy D. Bryant

  13,480,000   3,318,100

Stacy J. Smith

    5,662,200     874,800

William M. Holt

    5,717,900   1,050,900

Intel’s non-qualified deferred compensation plan allows certain highly compensated employees, including executive officers, to defer up to 50% of their salary and up to 100% of their annual incentive cash

 

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Table of Contents

EXECUTIVE COMPENSATION  n  Employment Contracts and Change in Control Arrangements

 

 

payment. Gains on equity compensation are not eligible for deferral. Intel’s contributions to the employee’s account represent the portion of Intel’s retirement contribution on eligible compensation (consisting of base salary and annual and quarterly incentive cash payments) earned in excess of the tax code covered compensation limit of $260,000 in 2014. Intel’s contributions are subject to the same vesting provisions as the retirement contribution plan. After two years of service, Intel’s contributions vest in 20% annual increments until the participant is 100% vested after six years of service. Intel’s contributions also vest in full upon death, disability, or reaching the age of 60, regardless of years of service. All the listed officers are fully vested in the value of Intel’s contributions, as they each have more than six years of service.

Employment Contracts and Change in Control Arrangements

All of Intel’s executive officers are employed at will without employment agreements (subject only to the effect of local labor laws), and we do not maintain any payment arrangements that would be triggered by a “change in control” of Intel. From time to time, we have implemented voluntary separation programs to encourage headcount reduction in particular parts of the company, and these programs have offered separation payments to departing employees. However, executive officers generally have not been eligible for any of these programs or other severance payment arrangements, nor do we generally retain executive officers following retirement on a part-time or consultancy basis.

Other Potential Post-Employment Payments

SEC rules require companies to report the amount of benefits that are triggered by termination of employment. These amounts are reported in the following tables under the headings “Accelerated Option Awards” and “Accelerated Stock Awards.” As noted above, we do not maintain arrangements for listed officers that are triggered by a change in control.

The tables below report the value of all forms of compensation that would be available to the listed officers upon the specified events, an amount that is sometimes referred to as the “walk-away” amount. This amount includes the value of vested equity awards that the listed officer is entitled to regardless of whether employment is terminated, and the value of vested deferred compensation and retirement benefits that are also reported in the tables above.

The amounts in the tables below assume that the listed officer left Intel effective December 27, 2014 and are based on the price per share of Intel common stock on the last trading day of the fiscal year ($37.55 on December 26, 2014). Amounts actually received if any of the listed officers cease to be employed will vary based on factors such as the timing during the year of any such event, the company’s stock price, the listed officer’s age, and any changes to our benefit arrangements and policies.

Voluntary Termination/Retirement

 

Name   Accelerated
Option
Awards
($)
    Accelerated
Stock
Awards
($)
    Previously
Vested
Option
Awards
($)
    Deferred
Compensation
($)
    Pension
Plan
($)
    Retirement
Contribution
Plan
($)
    401(k)
Savings Plan
($)
    Medical
Benefits1
($)
    2014
Total
($)
 
Brian M. Krzanich     2,977,000        13,958,500        13,858,500        1,126,600        247,800        1,004,200        959,100        46,500        34,178,200   
Renée J. James     2,757,800        12,284,400               1,471,400        368,500        704,000        447,800        37,500        18,071,400   
Andy D. Bryant     5,933,700        11,738,900        4,978,600        16,887,100        2,169,000        1,659,800        1,414,900        49,500        44,831,500   
Stacy J. Smith     2,728,100        10,213,300               6,613,500        826,900        690,400        561,100        39,000        21,672,300   
William M. Holt     4,806,200        10,287,900        332,000        6,834,400        1,941,000        1,574,700        1,251,900        63,000        27,091,100   

 

1 

Sheltered Employee Retirement Medical Account funds can be used to pay premiums under the medical plan of the listed officer’s choice.

 

 

 

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EXECUTIVE COMPENSATION  n  Other Potential Post-Employment Payments

 

 

Death or Disability

 

Name   Accelerated
Option
Awards
($)
    Accelerated
Stock
Awards
($)
    Previously
Vested
Option
Awards
($)
    Deferred
Compensation
($)
    Pension
Plan
($)
    Retirement
Contribution
Plan
($)
    401(k)
Savings Plan
($)
    Medical
Benefits1
($)
    2014
Total
($)
 
Brian M. Krzanich     8,202,700        27,495,100        13,858,500        1,126,600        247,800        1,004,200        959,100        46,500        52,940,500   
Renée J. James     7,545,400        25,501,900               1,471,400        368,500        704,000        447,800        37,500        36,076,500   
Andy D. Bryant     5,933,700        11,738,900        4,978,600        16,887,100        2,169,000        1,659,800        1,414,900        49,500        44,831,500   
Stacy J. Smith     6,710,100        22,991,900               6,613,500        826,900        690,400        561,100        39,000        38,432,900   
William M. Holt     5,927,500        16,240,700        332,000        6,834,400        1,941,000        1,574,700        1,251,900        63,000        34,165,200   

 

1 

Sheltered Employee Retirement Medical Account funds can be used to pay premiums under the medical plan of the listed officer’s choice.

Equity Incentive Plans. Unvested OSUs are cancelled upon termination of employment for any reason other than retirement, death, or disability. OSUs are fully vested upon retirement under the Rule of 75 or reaching the age of 60. OSUs are not settled into shares of Intel stock until after the end of the performance period, even if the holder qualifies for early vesting. RSUs and stock options are subject to retirement vesting under the rule of Age 60 or the Rule of 75, but not both. Upon retirement under the rule of Age 60, the holder receives one additional year of vesting for every five years of service. Upon retirement under the Rule of 75, when the holder’s age and years of service equal at least 75, the holder receives one additional year of vesting. Additional years of vesting means that any RSUs or stock options scheduled to vest within the number of years from the retirement date determined under the rule of Age 60 or Rule of 75 will be vested on the holder’s retirement date. Under the standard grant agreements for stock options granted under our equity incentive plans, the option holder generally has 90 days to exercise stock options that vested on or before the date that employment ends (other than for death, disability, retirement, or discharge for misconduct). The option holder’s estate may exercise vested stock options upon the holder’s death for a period of 365 days, unless the stock options’ expiration date occurs first. Similarly, the option holder may exercise vested stock options upon termination due to disability or retirement for a period of 365 days, unless the options’ expiration date occurs first. Upon disability or death, all unvested OSUs, RSUs, and stock options become 100% vested.

Non-Qualified Deferred Compensation Plan and Pension Plan. Each listed officer is fully vested in the non-qualified deferred compensation plan discussed above. If a listed officer ended employment with Intel on December 27, 2014 for any reason, the account balances set forth in the Non-Qualified Deferred Compensation table would continue to be adjusted for earnings and losses in the investment choices selected by the officer until paid, pursuant to the distribution election made by the officer. As discussed above, the actual amount payable under the non-qualified deferred compensation plan would be reduced to reflect the offset amount payable under the tax-qualified pension plan arrangement. The benefit amounts set forth in the Pension Benefits table would continue to be adjusted based on actuarial assumptions until paid to the officer. Beginning on January 1, 2015, future benefit accruals were frozen in the U.S. Intel Minimum Pension Plan for all employees at or above a specific grade level, including all listed officers.

Retirement Contribution Plan. After two years of service, Intel’s contributions vest in 20% annual increments until the participant is 100% vested after six years. Intel’s contributions vest in full upon death, disability, or reaching the age of 60, regardless of years of service. All listed officers are fully vested in the value of Intel’s contributions, as they each have more than six years of service. Eligible U.S. Intel retirees (including executive officers) receive a prorated contribution for the year in which they retire. The contribution is calculated based on eligible earnings in the year of retirement. Starting in 2016, employees impacted by the freeze of future benefit accruals in the pension plan will receive discretionary employer contributions in the Intel 401(k) savings plan, instead of the retirement contribution plan.

401(k) Savings Plan. Intel does not match the participant’s contributions to his or her 401(k) savings plan; however, starting in 2016 discretionary employer contributions for all employees above a certain grade level, including all listed officers, will be contributed in the 401(k) savings plan instead of the retirement contribution plan. Each participant is always fully vested in the value of his or her contributions under the plan. All currently listed officers will be fully vested in future employer contributions to the 401(k) savings plan, as they have more than six years of service.

 

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  2015 PROXY STATEMENT    

 


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