DEF 14A 1 d312067ddef14a.htm DEF 14A DEF 14A
Table of Contents

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

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))

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):

 

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

 

Title of each class of securities to which transaction applies:

 

(2)

 

Aggregate number of securities to which transaction applies:

 

(3)

 

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

(4)

 

Proposed maximum aggregate value of transaction:

 

(5)

 

Total fee paid:

 

 

 

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.

 

(1)

 

Amount Previously Paid:

 

(2)

 

Form, Schedule or Registration Statement No.:

 

(3)

 

Filing Party:

 

(4)

 

Date Filed:

 


Table of Contents

 

LOGO

 

 

 

LOGO


Table of Contents

LOGO

April 6, 2017

Dear Stockholder,

Intel’s business model is evolving from a PC company to one that powers the infrastructure for an increasingly smart and connected world. We are proud to be recognized around the world for pushing the boundaries of computing. A different company than we were five years ago, we continue to adapt to maximize long-term value for stockholders.

The world leader in computing innovation, Intel makes amazing experiences possible for every person. As an integral part of that leadership, corporate governance is fundamental to the company and its success. Intel’s Board of Directors provides independent guidance on our corporate strategy, and our many activities that provide Intel with a solid foundation for sustainable stockholder value. To that end, our Board’s efforts have included overseeing the smooth transitions in our senior leadership, building upon our leadership in corporate governance and stockholder engagement, and continuing our commitment to pay-for-performance. Further, we have embedded corporate responsibility and sustainability into our strategy, management systems, and long-term goals. We believe that this integrated approach creates long-term value for Intel as well as our stockholders, customers, and society.

CORPORATE GOVERNANCE PRACTICES

Our Board strives to be a leader in corporate governance, continuing to raise the bar year after year in consultation with our stockholders. Intel was one of the first companies to adopt majority voting in the election of directors in early 2006. In 2009, several years before it was required by law, we provided our stockholders an advisory vote on our executive compensation programs. And in early 2016, Intel adopted “proxy access,” providing stockholders who have held 3% of our stock for at least three years the ability to include director nominees in our proxy statement.

An Active and Engaged Board

Our Board engages in active discussion and oversight of the strategy behind Intel’s actions, including the process of capturing opportunities and leading with innovation while balancing possible risks with returns for stockholders. Many of the Board’s strategic conversations in 2016 focused on how best to allocate resources for long-term stockholder value. We are building on our strong position in client computing and are investing for growth in the data center, the Internet of Things market segments, and disruptive differentiated memory technology. The company has made progress in allocating more resources to growing and emerging businesses, seeking to expand market opportunities in areas such as memory and autonomous driving while continuing to invest in areas that extend our leadership in “Moore’s Law”. In March 2017, we announced that we entered into a definitive agreement to acquire Mobileye N.V., a global leader in the development of computer vision and machine learning, data analysis, localization and mapping for advanced driver assistance systems and autonomous driving.

With an eye to Intel’s future, the Board regularly reviews its practices and composition to make sure it has the necessary breadth and diversity skills and experience. That is why, in 2016, we added a new Board member, Dr. Tsu-Jae King Liu, with nearly 20 years of experience in higher education in a range of faculty and administrative roles, bringing to the Board industry and technical experience. In 2017, we added two additional new Board members, Messrs. Omar Ishrak and Gregory D. Smith, who each brings a depth of leadership experience at innovative, global companies.

Stockholder Dialogue

Our relationship with our stockholders is an important part of our Board’s corporate governance commitment. We have a long tradition of dialogue, transparency, and responsiveness to stockholder perspectives. Our integrated outreach team meets with a broad base of investors throughout the year to discuss corporate governance, executive compensation, corporate responsibility practices, and other matters of importance. Our engagement model ensures that the Board and management consider the issues that matter most to our stockholders and enables us to address them proactively.


Table of Contents

Continued Commitment to Pay-for-Performance

Intel has consistently demonstrated its commitment to an executive compensation program that is aligned with long-term stockholder value. Our compensation arrangements are designed to hold executive officers accountable for business results and reward them for consistently delivering strong corporate performance and value creation. Aligned with our commitment to pay-for-performance, for the past 10 years, approximately 90% of our listed executive officers’ target compensation each year has been performance-based. We also have a claw-back policy that reinforces our pay-for-performance philosophy and rigorous stock ownership guidelines consistent with our focus on long-term value creation.

Leadership in Corporate Responsibility and Sustainability

Our Board believes that Intel’s focus on corporate responsibility creates value for the company and our stakeholders; identifying ways for technology and expertise to benefit the environment and society, while also helping mitigate risks, reduce costs, protect brand value, and identify market opportunities. Our approach is built on a strong foundation of ethics, governance, and transparency, and we are committed to driving improvements in environmental sustainability, supply chain responsibility, diversity and inclusion, and social impact. To that end, Intel has established public goals regarding, among other things, protecting the environment, reducing our greenhouse gas emissions, investing in renewable energy, and improving the diversity of our workforce.

We are committed to advancing supply chain responsibility, creating value by reducing risk, improving product quality, and raising the overall performance of our suppliers. Our efforts are designed to protect vulnerable workers throughout the global supply chain and include setting clear supplier expectations, investing in assessments, audits, and capability-building programs, and collectively addressing issues through our leadership in the Electronic Industry Citizenship Coalition (EICC). We have also led the industry on the conflict minerals issue and have worked extensively since 2008 to put in place processes and systems to develop ethical sourcing of tin, tantalum, tungsten, and gold for Intel and to prevent profits from the sale of those minerals from funding conflict in the Democratic Republic of the Congo (DRC) and adjoining countries. Since 2013, we have manufactured microprocessors that are DRC conflict-free for tin, tantalum, tungsten, and gold. We continue our work to establish responsible mineral supply chains for our company as well as our industry.

Embracing Technology

Intel has for years been a leader in the use of technology to improve and broaden stockholder communications. This has made it possible for more people to have direct access to information sooner, while saving the company and investors time and money. As physical attendance at meetings has dwindled, web participation has grown significantly, and has proven to be substantially more popular and effective at enabling stockholder participation. With the technology well established, this year we are pleased again to be able to provide a completely virtual Annual Stockholders’ Meeting. Stockholders can submit questions ahead of the meeting through the online portal and during the meeting while attending the annual meeting online. Our virtual meeting also enables us to provide non-stockholders the opportunity to watch our meeting.

On a final note, John J. Donahoe, our independent Lead Director, announced that he will not stand for re-election, and James D. Plummer will retire from our Board as of our 2017 Annual Stockholders’ Meeting. Our Board would like to thank Messrs. Donahoe and Plummer for their years of dedicated service. Mr. Donahoe continues to serve as Lead Director until the 2017 Annual Stockholders’ Meeting. The Board has elected Aneel Bhusri to be the new independent Lead Director of the Board following the 2017 Annual Stockholders’ Meeting.

On behalf of our Board of Directors, thank you for your continued investment in Intel. We appreciate the opportunity to serve Intel on your behalf.

 

 

  

LOGO

 

Andy D. Bryant

Chairman 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 2017 ANNUAL STOCKHOLDERS’ MEETING  

 

     
     LOGO  

 

DATE:

Thursday,

May 18, 2017

 

 

TIME:

8:30 a.m.

Pacific Time

 

 

RECORD DATE:

March 20, 2017

     

HOW TO VOTE

Please act as soon as possible to vote your shares, even if you plan to attend the annual meeting via the Internet. 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 during the meeting unless you have given your broker specific instructions to do so. We strongly encourage you to vote. You may vote via the Internet, by telephone, or, if you have received a printed version of these proxy materials, by mail. For more information, see “Additional Meeting Information” on page 89 of this proxy statement.

 

LOGO   LOGO   LOGO

ATTEND THE MEETING

  Attend the annual meeting online, including to vote and/or submit questions, at https://intel.onlineshareholdermeeting.com.
  Log-in for the annual meeting will begin at 8:15 a.m. Pacific Time on Thursday, May 18, 2017.

ASKING QUESTIONS

  You may submit questions for the meeting in advance at www.proxyvote.com.
  You may submit live questions during the meeting at https://intel.onlineshareholdermeeting.com.

ANNUAL MEETING PROPOSALS AND VOTING RECOMMENDATIONS

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 public accounting firm for 2017    FOR

3.

  Advisory vote to approve executive compensation    FOR

4.

  Approval of amendment and restatement of the 2006 Equity Incentive Plan    FOR

5.

  Advisory vote on the frequency of holding future advisory votes to approve executive compensation    ONE YEAR

Stockholder proposals

    

6.

  Stockholder proposal requesting an annual advisory vote on political contributions, if properly presented    AGAINST

7.

 

Stockholder proposal requesting that votes counted on stockholder proposals exclude abstentions, if properly presented

   AGAINST

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held May 18, 2017:

The Notice of 2017 Annual Stockholders’ Meeting and Proxy Statement and the 2016 Annual Report on Form 10-K,

are available at www.intc.com/annuals.cfm.


Table of Contents

CONTENTS

 

2017 PROXY STATEMENT HIGHLIGHTS         7  

 

PROPOSAL 1: ELECTION OF DIRECTORS        11  

 

Director Skills, Experience, and Background

    16  

 

CORPORATE RESPONSIBILITY AND     

 

INVESTOR ENGAGEMENT        18  

 

CORPORATE GOVERNANCE        19  

 

Board Responsibilities and Structure     19  
The Board’s Role in Risk Oversight at Intel     20  
The Board’s Role in Succession Planning     21  
Director Independence and Transactions Considered in Independence Determinations     21  

Director Tenure

    24  
Corporate Governance Guidelines     24  
Director Attendance     25  
Board Responsibilities and Committees     25  
Communications from Stockholders to Directors     28  

 

DIRECTOR COMPENSATION        29  

 

Director Compensation for Fiscal Year 2016     30  
Outstanding Equity Awards for Directors     32  

 

CERTAIN RELATIONSHIPS AND RELATED     

 

TRANSACTIONS        33  

 

CODE OF CONDUCT        33  

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT        34  

 

PROPOSAL 2: RATIFICATION OF SELECTION
OF INDEPENDENT REGISTERED PUBLIC 
   

 

ACCOUNTING FIRM        36  

 

Ernst & Young LLP’s Fees for 2016 and 2015

    37  

 

REPORT OF THE AUDIT COMMITTEE        38  

 

PROPOSAL 3: ADVISORY VOTE TO APPROVE     

 

EXECUTIVE COMPENSATION        40  

 

COMPENSATION DISCUSSION AND ANALYSIS        41  

 

Executive Summary     41  

Listed Officer Pay

    41  

Business Performance and Pay

    42  
Stockholder Engagement and the 2016 “Say-on-Pay” Vote     43  
2016 Compensation of Our Listed Officers     44  

Performance and Incentive Pay for 2016

    44  

Alignment of Principle Elements of Pay-for-Performance

    47  

Intel’s Compensation Best Practices

    48  

2016 Cash Compensation

    48  

2016 Annual Equity Awards

    52  
Other Aspects of Our Executive Compensation Programs     54  

Intel’s Compensation Framework

    54  

External Competitive Considerations for 2016

    54  

Post-Employment Compensation Arrangements

    55  

Personal Benefits

    56  

Other Agreements

    56  

Corporate Officer Stock Ownership Guidelines

    57  

Intel Policies Regarding Derivatives or “Short Sales”

    57  

Intel Policies Regarding Claw-Backs

    57  

Tax Deductibility

    57  

 

REPORT OF THE COMPENSATION COMMITTEE        58  

 

EXECUTIVE COMPENSATION        59  

 

2016 Summary Compensation Table     59  
Grants of Plan-Based Awards in Fiscal Year 2016     62  
2016 Operational Goals     63  
Stock Option Exercises and Stock Vested in Fiscal Year 2016     65  
Outstanding Equity Awards at Fiscal Year-End 2016     66  
Pension Benefits for Fiscal Year 2016     67  
Non-Qualified Deferred Compensation for Fiscal Year 2016     68  
Employment Contracts and Change in Control Arrangements     69  
Other Potential Post-Employment Payments     69  

Voluntary Termination/Retirement

    69  

Death or Disability

    70  

 

PROPOSAL 4: APPROVAL OF AMENDMENT    

 

AND RESTATEMENT OF THE 2006 EQUITY    

 

INCENTIVE PLAN        72  

 

PROPOSAL 5: ADVISORY VOTE ON FREQUENCY     

 

OF HOLDING FUTURE ADVISORY VOTES TO     

 

APPROVE EXECUTIVE COMPENSATION        82  

 

STOCKHOLDER PROPOSALS        83  

 

PROPOSAL 6: STOCKHOLDER PROPOSAL     

 

REQUESTING AN ANNUAL ADVISORY VOTE     

 

ON POLITICAL CONTRIBUTIONS        83  

 

PROPOSAL 7: STOCKHOLDER PROPOSAL     

 

REQUESTING THAT VOTES COUNTED ON     

 

STOCKHOLDER PROPOSALS EXCLUDE     

 

ABSTENTIONS        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  
 

 

 

 

LOGO

 

 

 


Table of Contents

2017 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.

CURRENT DIRECTORS AND BOARD NOMINEES

            COMMITTEE MEMBERSHIPS
NAME   OCCUPATION   INDEPENDENT   AC   CC   GNC   EC   FC

Charlene Barshefsky

 

Age: 66, Director Since: 2004

  Senior International Partner, Wilmer Cutler Pickering Hale and Dorr LLP                     LOGO

Aneel Bhusri

 

Age: 51, Director Since: 2014

  Co-Founder and CEO,
Workday, Inc.
            LOGO        

Andy D. Bryant

 

Age: 66, Director Since: 2011

  Chairman of the Board of Directors,
Intel Corporation
                  LOGO    

John J. Donahoe1

 

Age: 56, Director Since: 2009

  Chairman of the Board,
PayPal Holdings, Inc.
            LOGO   LOGO    

Reed E. Hundt

 

Age: 69, Director Since: 2001

  Principal,
REH Advisors, LLC
    LOGO   LOGO            

Omar Ishrak

 

Age: 61, Director Since: 2017

  Chairman and CEO,
Medtronic plc
                     

Brian M. Krzanich

 

Age: 56, Director Since: 2013

  CEO,
Intel Corporation
                  LOGO    

Tsu-Jae King Liu

 

Age: 53, Director Since: 2016

  Professor,
University of California, Berkeley
    LOGO                

James D. Plummer1

 

Age: 72, Director Since: 2005

  Professor,
Stanford University
    LOGO               LOGO

David S. Pottruck

 

Age: 68, Director Since: 1998

  Chairman and CEO,
Red Eagle Ventures, Inc.
        LOGO       LOGO    

Gregory D. Smith

 

Age: 50, Director Since: 2017

  CFO, EVP, Corporate Development & Strategy, The Boeing Company                      

Frank D. Yeary

 

Age: 53, Director Since: 2009

  Executive Chairman,
CamberView Partners, LLC
    LOGO               LOGO

David B. Yoffie

 

Age: 62, Director Since: 1989

  Professor,
Harvard Business School
        LOGO   LOGO        

1 John J. Donahoe is not standing for re-election, and James D. Plummer is retiring from the Board of Directors. Messrs. Donahoe and Plummer’s terms expire at the 2017 Annual Stockholders’ Meeting.

 

AC    Audit Committee   GNC    Corporate Governance and Nominating Committee   EC    Executive Committee   LOGO    Committee Member
CC    Compensation Committee        FC    Finance Committee   LOGO    Committee Chair / Co-Chair

Company Performance During 2016

YEAR-OVER-YEAR RESULTS

 

   

2016

($ IN MILLIONS, EXCEPT
PER SHARE AMOUNTS)

 

2015

($ IN MILLIONS, EXCEPT
PER SHARE AMOUNTS)

     CHANGE
(%)
Net Revenue   59,387   55,355      7%
Net Income   10,316   11,420      (10)%
Stock Price (high and low)1   38.10 / 28.22   37.18 / 25.87      n/a
Stock Price as of Fiscal Year-End   36.27   34.98      4%

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

 



 

 

 

LOGO

 

 

    7  


Table of Contents

2017 PROXY STATEMENT HIGHLIGHTS

 

Company Strategy

We are a world leader in the design and manufacturing of essential products and technologies that power the cloud and an increasingly smart, connected world. Intel delivers computer, networking, and communications platforms to a broad set of customers. We are expanding the boundaries of technology through our relentless pursuit of Moore’s Law and computing breakthroughs that make amazing experiences possible.

Our vision is that if it is smart and connected, it is best with Intel. As a result, our strategy is to drive a “Virtuous Cycle of Growth” that enables the expansion of the data center as well as the proliferation of smart, connected things and devices, while continuing to fuel technology with the economics of Moore’s Law.

People are experiencing a dramatic shift in their relationship to technology as things and devices become connected to each other and the cloud, merging our digital and physical worlds. Computing is becoming pervasive everywhere and in everything. The Virtuous Cycle of Growth leverages Intel’s core assets to power the cloud and drive the increasingly smart and connected world.

Virtuous Cycle of Growth

 

LOGO

Our businesses across the cloud and data center, through things and devices, are accelerated by memory and field-programmable gate array (FPGA) technologies—all of which are bound together by connectivity and enhanced by the economics of Moore’s Law. We further transform these technologies to deliver compelling user experiences.

 



 

8  

 

  2017 PROXY STATEMENT    

 


Table of Contents

2017 PROXY STATEMENT HIGHLIGHTS

 

Investor Outreach

We have a robust investor engagement program. Our integrated outreach team, led by our Investor Relations group, Corporate Responsibility office, and the Corporate Secretary’s office, engages proactively with our stockholders, monitors developments in corporate governance and social responsibility, and thoughtfully adopts and applies developing practices in a manner that best supports our business and our culture. As discussed further under “Corporate Responsibility and Investor Engagement” on page 18, we actively engage with our stockholders in a number of forums on a year-round basis and integrate the information we learn through these activities into our governance calendar, as reflected below.

 

LOGO

Executive Compensation Highlights for 2016

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 so they support Intel’s business goals and promote both current-year and long-term profitable growth of the company, although no significant changes were made to our executive compensation programs for 2016.

 

 

The majority of cash compensation to our executive officers 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.

 

 

Equity awards—consisting in 2016 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).

 

In setting executive officer compensation, the Compensation Committee evaluates the individual performance reviews of our executive officers and the compensation levels in a “peer group”; for 2016 the peer group consisted of 15 technology companies and 10 other large companies.

 

 

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.

 

 



 

 

 

LOGO

 

 

    9  


Table of Contents

2017 PROXY STATEMENT HIGHLIGHTS

 

The following chart illustrates that approximately 92% of the 2016 total direct compensation granted by the Compensation Committee to our Chief Executive Officer (CEO) was in programs that vary the level of payout based on company and individual performance, or “at risk.”

 

LOGO

 

1 

Does not include “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” or “All Other Compensation” as included in the Summary Compensation Table on page 59.

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:

 

   
LOGO WHAT WE DO   LOGO  WHAT WE DON’T DO
 

   Proxy access for stockholders

 

   No plurality voting for directors in uncontested elections

 

   Strong independent Lead Director

 

   No combined CEO and Chairman

 

   Actively seek diverse board candidates

 

   No supermajority voting requirements

 

   Claw-back policy that applies to our annual incentive cash plan and equity incentive plan

 

 

   No change in control compensation arrangements

 

   Rigorous stock ownership guidelines for all officers and directors

 

   No hedging of Intel stock is allowed by executives or directors

 

   Annual Say-on-Pay vote and biennial vote on equity compensation plan

 

   No adoption of a “poison pill” unless approved or ratified by stockholders

 

   Permit stockholders to call special meetings

   

 



 

10  

 

  2017 PROXY STATEMENT    

 


Table of Contents

PROPOSAL 1    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 2017 Annual Stockholders’ Meeting (and any postponement or adjournment of the meeting) for the matters set forth in “Annual Meeting Proposals and Voting Recommendations.” We made this proxy statement available to stockholders beginning on April 6, 2017.

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 Chief Executive Officer 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. In May 2016, John J. Donahoe became the independent Lead Director of the Board and will serve in that role until the 2017 Annual Stockholders’ Meeting. After the 2017 Annual Stockholders’ Meeting, Aneel Bhusri will serve as the independent Lead Director of the Board.

Each director’s term runs from the date of his or her election until our next annual stockholders’ meeting and 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 During 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.

 

 

 

LOGO

 

 

    11  


Table of Contents

PROPOSAL 1    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  

 

AGE:  

66  

 

DIRECTOR SINCE:  

2004  

 

OTHER CURRENT  

PUBLIC BOARDS:  

American Express Company   and Estée Lauder Companies  

   

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 the American Express Company and the Estée Lauder Companies. Within the past five years, Ambassador Barshefsky has served on the board of 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  

 

AGE:  

51  

DIRECTOR SINCE:  

2014  

 

OTHER CURRENT  

PUBLIC BOARDS:  

Workday, Inc.  

   

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 brings depth to the Board in areas that are important to Intel’s business and in today’s connected world.

 

12  

 

  2017 PROXY STATEMENT    

 


Table of Contents

PROPOSAL 1    Election of Directors

 

 

LOGO

Andy D. Bryant  

 

AGE:  

66  

 

DIRECTOR SINCE:  

2011  

 

OTHER CURRENT  

PUBLIC BOARDS:  

Columbia Sportswear and  

McKesson Corporation  

   

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 Chief Financial Officer in February 1994, and was promoted to Senior Vice President in January 1999. In December 1999, he was 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

Reed E. Hundt  

 

AGE:  

69  

 

DIRECTOR SINCE:  

2001  

   

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 LLP, an international law firm. Mr. Hundt currently provides advisory services to Covington & Burling LLP, an international law firm. Mr. Hundt served as a member of the board of directors of Infinera Corporation from 2007 to 2010.

 

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.

 

 

 

LOGO

 

 

    13  


Table of Contents

PROPOSAL 1    Election of Directors

 

 

LOGO

Omar Ishrak  

 

AGE:  

61  

 

DIRECTOR SINCE:  

2017  

 

OTHER CURRENT  

PUBLIC BOARDS:  

Medtronic plc  

   

Omar Ishrak has been Chairman and Chief Executive Officer of Medtronic plc, a global medical technology company, since 2011. Prior to joining Medtronic, Mr. Ishrak served as President and Chief Executive Officer of GE Healthcare Systems, a comprehensive provider of medical imaging and diagnostic technology and a division of GE Healthcare, from 2009 to 2011. Before that, Mr. Ishrak was President and Chief Executive Officer of GE Healthcare Clinical Systems from 2005 to 2008 and President and Chief Executive Officer of GE Healthcare Ultrasound and BMD from 1995 to 2004. Mr. Ishrak is a member of the Board of Trustees of the Asia Society, a leading educational organization dedicated to promoting mutual understanding and strengthening partnerships among peoples, leaders and institutions of Asia and the United States in a global context.

 

Mr. Ishrak brings senior leadership, strategic and global expertise to the Board from his current position as CEO and his long history of success as a global executive in the medical technology industry. In his role at Medtronic, Mr. Ishrak has overseen a number of strategic acquisitions, bringing business development and mergers and acquisitions (M&A) experience to the Board. Mr. Ishrak has experience developing, introducing and scaling innovative business models to create and grow markets, and has extensive knowledge and understanding of emerging markets and customer needs. In addition, he provides technical and brand marketing expertise from his role as a leader of a global medical technology company.

   

LOGO

Brian M. Krzanich  

 

AGE:  

56  

 

DIRECTOR SINCE:  

2013  

 

OTHER CURRENT  

PUBLIC BOARDS:  

Deere & Company  

   

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. Mr. Krzanich is a member of Deere & Company’s board of directors.

 

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.

   

LOGO

Tsu-Jae King Liu  

 

AGE:  

53  

 

DIRECTOR SINCE:  

2016  

   

Dr. Tsu-Jae King Liu holds a distinguished professorship endowed by TSMC in the Department of Electrical Engineering and Computer Sciences at the University of California, Berkeley. Dr. Liu also serves as Vice Provost, Academic and Space Planning, at U.C. Berkeley, and she previously served as Associate Dean for Academic Planning and Development, College of Engineering, and Chair of the Department of Electrical Engineering and Computer Sciences. Dr. Liu has nearly 20 years of experience in higher education in a range of faculty and administrative roles, including as Associate Dean for Research in the College of Engineering. Her achievements in teaching and research have been recognized by a number of awards, most recently the Semiconductor Industry Association University Research Award. Dr. Liu served on the board of the Center for Advancing Women in Technology from October 2014 to May 2016. She received her B.S., M.S., and PhD degrees in Electrical Engineering from Stanford University.

 

As a scholar and educator in the field of nanometer-scale logic and memory devices, including advanced materials, process technology, and devices for energy-efficient electronics, Dr. Liu brings to the Board industry and technical experience directly related to Intel’s memory research and development, and manufacturing.

 

14  

 

  2017 PROXY STATEMENT    

 


Table of Contents

PROPOSAL 1    Election of Directors

 

 

LOGO

David S. Pottruck  

 

AGE:  

68  

 

DIRECTOR SINCE:  

1998  

   

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. Mr. Pottruck has been elected to become a director of GSV Capital effective May 31, 2017.

 

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.

   

LOGO

Gregory D. Smith  

 

AGE:  

50  

 

DIRECTOR SINCE:  

2017  

   

Gregory D. Smith has been CFO, Executive Vice President, Corporate Development and Strategy at The Boeing Company, the world’s largest aerospace company, since February 2015. Mr. Smith is responsible for overall financial management of the company, its financial reporting and transparency, and for multiple corporate functions including Controller, Treasury, Investor Relations, Tax and long-range planning. He also oversees Boeing Capital Corporation, the company’s global financing arm. Additionally, Mr. Smith leads the organization that analyzes the marketplace and shapes Boeing’s strategies, which includes guiding the company’s corporate development function, with responsibility for mergers and acquisitions. Mr. Smith previously served at Boeing as Executive Vice President, Chief Financial Officer from February 2012 to February 2015; Vice President of Finance and Corporate Controller from February 2010 to February 2012; and Vice President of Financial Planning & Analysis from June 2008 to February 2010. Prior to that, he served for four years as Vice President of Global Investor Relations at Raytheon Company.

 

Mr. Smith brings to the Board senior leadership, financial, strategic, operational, and global expertise. He has budgeting, accounting controls, internal audit, financial forecasting, strategic financial planning and analysis, capital commitment planning, competitive analysis and benchmarking, investor relations, and mergers and acquisitions experience from his work as Boeing’s CFO. Mr. Smith also brings substantial international experience to the Board. He has continuing experience in dealing with foreign governments, including on issues related to market access and the regulation of business and investment. Mr. Smith also brings operational experience to the Board, having held a number of leadership roles at Boeing in supply chain, factory operations and program management.

   

LOGO

Frank D. Yeary  

 

AGE:  

53  

 

DIRECTOR SINCE:  

2009  

 

OTHER CURRENT  

PUBLIC BOARDS:  

PayPal Holdings, Inc.  

   

Frank D. Yeary has been Executive Chairman of CamberView Partners, LLC, an advisory firm in San Francisco, California that provides proactive corporate governance and stockholder engagement advice, 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. Within the past five years, Mr. Yeary has served as a member of the board of directors of eBay. Mr. Yeary is a member of the board of directors of PayPal.

 

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. Mr. Yeary also provides the Board with insight into best practices in corporate governance and stockholder engagement.

 

 

 

LOGO

 

 

    15  


Table of Contents

PROPOSAL 1    Election of Directors

 

 

LOGO

David B. Yoffie  

 

AGE:  

62  

 

DIRECTOR SINCE:  

1989  

 

OTHER CURRENT  

PUBLIC BOARD:  

Financial Engines, Inc.  

   

Dr. 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. Within the past five years, Dr. Yoffie has served on the board of TiVo, Inc.

 

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.

Mr. Donahoe is not standing for re-election, and Dr. Plummer will retire from the Board as of the 2017 Annual Stockholders’ Meeting after eight and eleven years of valuable service, respectively.

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 includes numerous factors such as independence; understanding of and experience in manufacturing, technology, finance, and marketing; international experience; age; and gender and ethnic diversity. 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. Our Board is committed to actively seeking quality women and minority director candidates for consideration. As set forth in our Corporate Governance Guidelines, the committee and the Board periodically review and assess the effectiveness of their practices used in considering potential director candidates.

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.

 

 

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.

 

 

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.

 

 

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.

 

 

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.

 

 

Industry and IT/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.

 

16  

 

  2017 PROXY STATEMENT    

 


Table of Contents

PROPOSAL 1    Director Skills, Experience, and Background

 

 

 

 

Operational and Manufacturing Expertise. Because we are a leader in the design and manufacturing of advanced integrated digital technology platforms, understanding and experience with manufacturing and other operational processes is a valuable asset to the Board.

 

 

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.

 

 

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.

 

 

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.

 

 

Legal/Regulatory 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.

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

Director Skills Matrix

 

     Barshefsky   Bhusri   Bryant   Hundt   Ishrak   Krzanich   Liu   Pottruck   Smith   Yeary   Yoffie

 

Senior leadership experience

     

 

 

 

     

 

 

 

     

 

           

 

Public company board experience

 

 

 

 

 

 

 

 

 

 

 

 

 

     

 

     

 

 

 

 

Business development and M&A expertise

     

 

     

 

 

 

             

 

 

 

   

 

Financial expertise

 

         

 

                 

 

 

 

 

 

   

 

Independent Director

 

 

 

 

 

     

 

 

 

     

 

 

 

 

 

 

 

 

 

 

Industry and IT/Technical expertise

 

     

 

 

 

 

 

     

 

 

 

             

 

 

Operational and Manufacturing expertise

         

 

     

 

 

 

         

 

       

 

Brand marketing expertise

 

                 

 

         

 

           

 

Government expertise

 

 

 

         

 

                           

 

Global/International expertise

 

 

 

     

 

 

 

 

 

 

 

         

 

     

 

 

Legal/Regulatory expertise

 

 

 

         

 

                           

 

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:

 

 

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

 

 

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

 

 

our Corporate Governance Guidelines at www.intc.com/policies-and-guidelines.

 

 

 

LOGO

 

 

    17  


Table of Contents

CORPORATE RESPONSIBILITY AND INVESTOR ENGAGEMENT

Corporate Responsibility

We have a long history of leadership in corporate responsibility, and set ambitious goals and drive improvements in four key focus areas.

Environmental Sustainability. We are committed to environmental sustainability and take a leadership position in promoting voluntary environmental initiatives by working proactively with governments, environmental groups, and industry. In order to minimize the environmental impact of our global manufacturing operations, we invest in conservation projects and set company-wide environmental targets, seeking to drive reductions in greenhouse gas emissions, energy use, water use, and waste generation. We believe that technology will be fundamental to finding solutions to the world’s environmental challenges, and we are joining forces with others to find and promote ways that technology can be used as a tool to address climate change and water conservation.

Supply Chain Responsibility. We are committed to advancing supply chain responsibility, as we believe this creates value by reducing risk, improving product quality, and raising the overall performance of our suppliers. Our efforts include setting clear supplier expectations, investing in assessments, audits and capability-building programs, and collectively addressing issues through our leadership in the Electronics Industry Citizenship Coalition (EICC). We have also led the industry on the “conflict minerals” issue to prevent profits from the sale of tantalum, tin, tungsten, and gold from funding conflict in the Democratic Republic of the Congo (DRC) and adjoining countries. Since 2013, we have manufactured microprocessors that are DRC conflict-free for tantalum, tin, tungsten, and gold.

Diversity and Inclusion. Diversity and inclusion are integral parts of our corporate strategy and vision. We believe that investing in training, diversity, benefits programs, and education helps us to attract and retain a talented workforce. In 2015, Intel set a goal to achieve full representation of women and underrepresented minorities in our U.S. workforce by 2020, reflecting talent available in the marketplace. We committed $300 million to support this goal and accelerate diversity and inclusion not just at Intel but across the technology industry at large.

Social Impact. Intel and the Intel Foundation, a charitable organization, advance social impact initiatives and collaborative engagements to empower the next generation of innovators and expand economic opportunity for young people around the world through programs that increase access to technology skills and provide hands-on innovation experiences.

For more information about corporate responsibility efforts, please refer to our Corporate Responsibility Report available on Intel’s web site.

Investor Engagement

Our relationship with our stockholders is an important part of our company’s success and we have a long tradition of engaging with our stockholders and obtaining their perspectives. During 2016, our integrated outreach team led by our Investor Relations group, Corporate Responsibility office, and the Corporate Secretary’s office, met with investors on a wide variety of issues. We believe that our approach to engaging openly with our investors on topics such as financial issues, corporate governance, and corporate responsibility drives increased corporate accountability, improves decision making and ultimately creates long-term value. We are committed to:

 

 

Accountability. Drive and support leading corporate governance and Board practices to ensure oversight, accountability, and good decision making.

 

 

Transparency. Maintain high levels of transparency on a range of financial, governance, and corporate responsibility issues to build trust and sustain two-way dialogue that supports our business success.

 

 

Engagement. Proactively engage with stockholders and stakeholder groups in dialogue on a range of topics to identify emerging trends and issues to inform our thinking and approach.

In addition to our regular Investor Relations engagements, we hold a series of meetings every year with many of our institutional stockholders and with socially responsible investor groups. We pursue multiple avenues for stockholder engagement, including in-person and teleconference meetings with our stockholders, participating at various conferences, and issuing periodic reports on our activities. Through these activities, we discuss and receive input, provide additional information, and address questions on our corporate strategy, executive compensation programs, corporate governance and other topics of interest to our stockholders, such as our corporate responsibility activities as discussed above. These engagement efforts with our stockholders allow us to better understand our stockholders’ priorities and perspectives, and provide us with useful input concerning our corporate strategy and our compensation and corporate governance practices.

 

18  

 

  2017 PROXY STATEMENT    

 


Table of Contents

CORPORATE GOVERNANCE

Board Leadership Structure

Chairman of the Board: Andy D. Bryant

Chief Executive Officer: Brian M. Krzanich

Independent Lead Director: John J. Donahoe

Board Leadership Structure. We separate the roles of Board Chairman and CEO in order to aid in the Board’s oversight of management. This policy is embodied in the Board’s published Guidelines on Significant Corporate Governance Issues (also referred to in this proxy statement as our Corporate Governance Guidelines), and has been in effect since the company began operations.

Our current Board Chairman, Andy D. Bryant, has served in the role since May 2012. Mr. Bryant has never served as CEO. The independent directors selected Mr. Bryant to serve as Chairman because they 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 fulfill the Chairman’s responsibilities.

Although Mr. Bryant is an executive of Intel, he and our CEO, Mr. Krzanich, each report directly to the Board and have different responsibilities. Mr. Krzanich, as Intel’s CEO, develops, reports to the Board on, and oversees implementation of, our business strategy, and is responsible for leading the company and managing its operations. As Chairman, Mr. Bryant serves as the liaison between the Board and management. Working with the Board’s independent Lead Director and with our CEO, Mr. Bryant helps to develop the Board’s meeting agendas and leads Board meetings so that they are both productive and efficient. His responsibilities include making sure that the Board receives timely information about important aspects of and developments affecting the company, serving as a resource for and adviser to senior management, and supporting the Board oversight of the company’s risk management, compliance and other governance functions.

The independent directors unanimously elected to approve an extension for Mr. Bryant to continue to serve as a corporate officer and director beyond age 65, notwithstanding the provisions of the company’s Corporate Governance Guidelines. The independent directors approved this extension in order to provide the company with leadership continuity.

In May 2016, the independent directors unanimously elected Mr. Donahoe to the position of independent Lead Director and he will continue to serve in that role until the date of the 2017 Annual Stockholders’ Meeting. After the 2017 Annual Stockholders’ Meeting, Mr. Bhusri will serve as the independent Lead Director. The duties and responsibilities of the independent Lead Director, as provided in our Bylaws and the Board’s Charter of the Lead Director, include:

 

 

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

 

 

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;

 

 

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;

 

 

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;

 

 

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;

 

 

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

 

 

calling and presiding at meetings of the independent directors;

 

 

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

 

 

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

 

 

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

 

 

 

LOGO

 

 

    19  


Table of Contents

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

 

 

The independent directors periodically assess the Board’s leadership structure and will continue to evaluate and implement the leadership structure that they conclude most effectively supports the Board in fulfilling its responsibilities.

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:

 

 

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

 

 

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

 

 

event risks, such as natural disasters; and

 

 

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.

 

20  

 

  2017 PROXY STATEMENT    

 


Table of Contents

CORPORATE GOVERNANCE    The Board’s Role in Succession Planning

 

 

Risk Assessment Responsibilities and Processes

 

THE BOARD

 

The full Board has primary responsibility for risk oversight. The Board executes its oversight duties through:

 

   Assigning specific oversight duties to the Board committees

 

    Periodic briefing and informational sessions by management on:

 

• The types of risks the company faces

 

• Enterprise risk management: risk identification, mitigation, and control

 

In some cases, such as risks regarding new technology and product acceptance, risk oversight is addressed as part of the full Board’s regular oversight of strategic planning

 

             
  COMMITTEES  
             
                         
AUDIT
COMMITTEE
      FINANCE
COMMITTEE
      COMPENSATION
COMMITTEE
     

Oversees issues related to internal control over financial reporting

   

Oversees issues related to the company’s risk tolerance in cash-management investments

 

   

Oversees issues related to risk in the company’s compensation programs, including our conclusion that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the company

 

MANAGEMENT

Management is primarily responsible for:

 

      Identifying risk and risk controls related to significant business activities

 

      Mapping the risks to company strategy

 

      Developing programs and 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  

With respect to the risk assessment of the company’s compensation programs, management is primarily responsible for:

 

      Reviewing all significant compensation programs, focusing on programs with variable payouts  

 

      Assessing the company’s executive and broad-based compensation and benefits programs to determine whether the programs’ provisions and operation create undesired or unintentional material risk. The risk assessment process:  

 

    Includes a review of compensation program policies and practices, risk identification and control procedures, the balance of risk reward, and the significance and risks posed by compensation programs on the company’s overall strategy  

 

    Takes into account compensation terms and practices that aid in controlling risk, including the compensation mix, payment periods, claw-back provisions, and stock ownership guidelines  
 

 

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.

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, Mr. Donahoe, Mr. Hundt, Mr. Ishrak, Dr. Liu, Dr. Plummer, Mr. Pottruck, Mr. Smith, Mr. Yeary, and Dr. Yoffie. Because Mr. Krzanich and Mr. Bryant are employed by Intel, they do not qualify as independent. Susan L. Decker, who served as a director until the 2016 Annual Stockholders’ Meeting, was determined to be independent during the time she served on the Board.

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:

 

 

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

 

 

 

LOGO

 

 

    21  


Table of Contents

CORPORATE GOVERNANCE    Director Independence and Transactions Considered in Independence Determinations

 

 

 

 

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);

 

 

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

 

 

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);

 

 

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

 

 

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 the 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 2014 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 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 each of Intel’s and the recipient’s annual revenue, respectively, in each of the past three years, except as discussed below.

 

 

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

 

22  

 

  2017 PROXY STATEMENT    

 


Table of Contents

CORPORATE GOVERNANCE    Director Independence and Transactions Considered in Independence Determinations

 

 

 

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 to 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.

 

 

Mr. Bhusri is CEO and director of Workday, Inc. (Workday), a company with which Intel engages in ordinary course business transactions. The Board carefully reviewed the nature of Intel’s transactions with Workday, which primarily related to human resource management solutions contract and software subscription services, and Mr. Bhusri’s position as CEO and executive director at Workday. The fees paid Workday represented less than 2% of Workday’s annual revenue in each of the past two years, and represented less than .03% of Intel’s revenue in each year. After considering these fees, the Board (with Mr. Bhusri recused) unanimously determined that Intel’s business transactions with Workday do not impair Mr. Bhusri’s independence.

 

 

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 3.6% of Cloudera’s annual revenue in each of the past three years, and represented less than 0.02% of Intel’s revenue in each year. 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.

 

 

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 5.4% of Cadence’s annual revenue in each of the past three years, and represented less than 0.2% 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. Hundt, Dr. Plummer, Mr. Pottruck, 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.

 

 

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 $5,000 in 2014 to match Intel employee charitable contributions to Yale University, amounting to less than 0.001% of Yale University’s consolidated annual revenue for 2014.

 

 

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.

 

 

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 $15,000 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.

 

 

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 2014 and 2015 to match Intel employee charitable contributions to Harvard University, amounting to less than 0.001% of Harvard’s consolidated annual revenue for each year.

 

 

 

LOGO

 

 

    23  


Table of Contents

CORPORATE GOVERNANCE    Director Tenure

 

 

Director Tenure

If each of the nominees are elected to the Board, after the 2017 Annual Stockholders’ Meeting our directors will have served an average of 8.8 years on the Board, and seven of our directors have been on the Board for less than that period of time. Additionally, the Board will have four non-employee directors with less than five years of experience and five non-employee directors with more than five years of experience. This mix of tenure on the Board is intended to support the view that the Board as a whole represents a “portfolio” of new perspectives and the deep institutional knowledge of longer-tenured directors.

 

LOGO

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, which address, among other matters, the following Board practices:

 

   
LOGO WHAT WE DO   LOGO  WHAT WE DON’T DO
 

   Separate Chair and CEO positions and appoint either independent Lead Director or independent Chair

 

   No director may serve on more than three other U.S. public company boards (two, if also serving as a CEO)

 

   Annual self-evaluations for individual directors and the Board as a whole

 

   No independent director is expected to stand for re-election after age 72 without prior Board approval

 

   Independent directors meet in executive session at least three times a year

 

   No restrictions on directors’ access to management or employees

 

   Seek out women and minority candidates as well as candidates with diverse backgrounds, experiences and skills as part of each Board search

   

 

24  

 

  2017 PROXY STATEMENT    

 


Table of Contents

CORPORATE GOVERNANCE    Director Attendance

 

 

Director Attendance

The Board held six regularly scheduled meetings and five special meetings in 2016. As shown in the Board Committee chart below, committees of the Board also held a total of 22 meetings during 2016, with the Finance Committee holding a regularly scheduled meeting and each other 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. Each director attended at least 75% of the meetings of the Board and each committee on which he or she served in 2016 (held during the period in which the director served). The Board’s policy is that directors should endeavor to attend the annual stockholders’ meeting, and all of the then-incumbent directors other than Ambassador Barshefsky and Mr. Pottruck attended the 2016 Annual Stockholders’ Meeting.

Board Responsibilities and Committees

Board Responsibilities. The Board oversees, counsels, and directs management in the long-term interests of the company and our stockholders. The Board’s responsibilities include:

 

 

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;

 

 

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

 

 

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

 

 

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

 

 

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, time is reserved 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 Committees. 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 Lead Director, has a written charter approved by the Board. We post each charter in the Corporate Governance section of our web site at www.intc.com/committees-charters.

 

 

 

LOGO

 

 

    25  


Table of Contents

CORPORATE GOVERNANCE    Board Responsibilities and Committees

 

 

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.

 

   
    COMMITTEE MEMBERSHIPS
NAME   AUDIT   COMPENSATION  

CORPORATE

GOVERNANCE

AND NOMINATING

  EXECUTIVE   FINANCE
           
Charlene Barshefsky                   LOGO
           
Aneel Bhusri          

 

LOGO

       
           
Andy D. Bryant               LOGO    
           
John J. Donahoe1           LOGO   LOGO    
           
Reed E. Hundt   LOGO   LOGO            
           
Omar Ishrak                    
           
Brian M. Krzanich               LOGO    
           
Tsu-Jae King Liu   LOGO                
           
James D. Plummer1   LOGO               LOGO
           
David S. Pottruck       LOGO       LOGO    
           
Gregory D. Smith                    
           
Frank D. Yeary   LOGO               LOGO
           
David B. Yoffie       LOGO   LOGO        
Number of Committee Meetings Held in 2016   8   5   5   3   1

LOGO Committee Member         LOGO Committee Chair / Co-Chair

 

1 John J. Donahoe is not standing for re-election, and James D. Plummer is retiring from the Board of Directors. Messrs. Donahoe’s and Plummer’s terms expire at the 2017 Annual Stockholders’ Meeting.

AUDIT COMMITTEE

 

 

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

 

 

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

The Board has determined that Mr. Yeary qualifies as an “audit committee financial expert” 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.

COMPENSATION COMMITTEE

 

 

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

 

 

Reviews and grants equity awards to our executive officers.

 

 

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.

 

26  

 

  2017 PROXY STATEMENT    

 


Table of Contents

CORPORATE GOVERNANCE    Board Responsibilities and Committees

 

 

 

 

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

 

 

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 (Farient), to provide input, analysis, and advice about Intel’s executive compensation philosophy, peer groups, pay positioning (by pay component and in total) relative to peer companies, compensation design, equity usage and allocation, and risk assessment under Intel’s compensation programs. Farient reports directly to the Compensation Committee and interacts with management at the committee’s direction. Farient did not perform work for Intel in 2016 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, the committee determined that Farient’s work in 2016 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/committees-charters).

CORPORATE GOVERNANCE AND NOMINATING COMMITTEE

 

 

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.

 

 

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.

 

 

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

 

 

Reviews all stockholder proposals and recommends actions on such proposals.

 

 

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 addition to candidates identified 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.” During 2016, the Board retained and paid fees to a third-party search firm to assist in the processes of identifying and evaluating potential Board candidates, consistent with the committee’s criteria.

In screening director candidates, regardless of whether they are identified by current Board members, stockholders or third-party search firms, 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.

EXECUTIVE COMMITTEE

 

 

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

 

 

 

LOGO

 

 

    27  


Table of Contents

CORPORATE GOVERNANCE    Communications from Stockholders to Directors

 

 

FINANCE

 

 

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

 

 

Reviews and approves finance and other cash-management transactions.

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.

 

28  

 

  2017 PROXY STATEMENT    

 


Table of Contents

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 2016 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 2016.” The committee targets cash and equity compensation at the average of the peer group.

For 2016, annual compensation for independent directors consisted of the following elements:

 

Board Fees

Cash retainer1

   $90,000

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

   $30,000

Compensation Committee chair

   $20,000

Corporate Governance and Nominating Committee chair

   $20,000

Non-chair Audit Committee member

   $15,000

Non-chair Compensation Committee member

   $10,000
Lead Director Fee

Additional cash retainer

   $40,000

 

1 

The cash fees are paid on a quarterly basis.

The Corporate Governance and Nominating Committee reviews director compensation on an annual basis, taking into account factors such as workload and market data. Intel does not pay its management directors for Board service in addition to their regular employee compensation.

 

 

 

LOGO

 

 

    29  


Table of Contents

DIRECTOR COMPENSATION    Director Compensation for Fiscal Year 2016

 

 

Director Compensation for Fiscal Year 2016

The following table details the compensation of Intel’s independent directors for the 2016 fiscal year.

Director Compensation for Fiscal Year 2016 Table

 

Name    Fees Earned or
Paid in

Cash ($)

   Stock Awards1,2

($)

  Change in

Pension Value

and Non-Qualified

Deferred
Compensation

Earnings

($)

   All Other

Compensation3

($)

    

Total

($)

 

 

Charlene Barshefsky4    100,000    212,200          —      5,000      317,200  
Aneel Bhusri5             —    296,100          —           —      296,100  
Susan L. Decker6      87,500             —          —           —      87,500  
John J. Donahoe7             —    305,400          —           —      305,400  
Reed E. Hundt    110,825    212,200          —           —      323,025  
Tsu-Jae King Liu8      50,000    106,000          —           —      156,000  
James D. Plummer    105,000    212,200          —      5,000      322,200  
David S. Pottruck9    112,500    212,200          —    10,000      334,700  
Frank D. Yeary    120,000    212,200          —    10,000      342,200  
David B. Yoffie10    120,000    212,200   11,000           —      343,200  

 

1 

Consists of OSUs and RSUs valued at grant date fair values (computed in accordance with the Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718). Grant date fair value of RSUs is calculated assuming a risk-free rate of return of 0.8% and a dividend yield of 3.5%. Grant date fair value of OSUs is calculated assuming volatility of 22.9%, risk-free rate of return of 1.2%, and a dividend yield of 3.5%. For additional information, see “Director Compensation; Equity Awards” below. Assumptions apply to all stock awards with the exception of those granted to Dr. Liu, who received her awards in July when she was elected to the Board.

 

2 

Stock awards granted to Dr. Liu consist of OSUs and RSUs valued at grant date fair values (computed in accordance with ASC Topic 718). Grant date fair value of RSUs is calculated assuming a risk-free rate of return of 0.7% and a dividend yield of 3.0%. Grant date fair value of OSUs is calculated assuming volatility of 23.7%, risk-free rate of return of 0.9%, and a dividend yield of 3.0%.

 

3 

The Intel Foundation made matching charitable contributions on behalf of Ambassador Barshefsky ($5,000), Dr. Plummer ($5,000), Mr. Pottruck ($10,000), and Mr. Yeary ($10,000). Directors’ charitable contributions to schools and universities that meet the guidelines of Intel’s employee charitable matching gift program are eligible for matching funds.

 

4 

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

 

5 

Includes 3,010 RSUs granted to Mr. Bhusri in lieu of his annual cash retainer for 2015 (which were paid in 2016). Mr. Bhusri’s annual cash retainer and Compensation Committee member fees for 2016 were paid in the form of RSUs in 2017.

 

6 

Ms. Decker retired from the Board in May 2016.

 

7 

Includes 3,345 RSUs granted to Mr. Donahoe in lieu of his annual cash retainer for 2015 (which were paid in 2016). Mr. Donahoe’s annual cash retainer and Compensation Committee member fees for 2016 were paid in the form of RSUs in 2017.

 

8 

As Dr. Liu was elected to the Board in July 2016, she received prorated fees and stock awards to reflect her partial year of service. Her stock awards have the same vesting schedule as the annual awards granted to the other independent directors for 2016.

 

9 

Includes a $2,500 committee chair fee for Mr. Pottruck’s service as chairman of the Retirement Plans Investment Policy Committee for the first quarter of 2016.

 

10 

Dr. Yoffie is the only current director covered by the Board’s retirement program, which 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 2016 table represent the net actuarial change in pension value accrued under this program. Assumptions used in determining these changes include an interest rate of approximately 4.3%, a retirement age of 65 or current age if older, the RP2014 Mortality Tables, and an annual benefit amount of $90,000.

RSUs in Lieu of Fees. Under the “RSUs 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%). RSUs elected in lieu of payments in cash have the same vesting terms as the annual RSU grant to directors. This election is made year by year, and must be made in the tax year before the compensation will be earned. Under this program, in January 2016, Mr. Bhusri was granted 3,010 RSUs in lieu of cash and Mr. Donahoe was granted 3,345 RSUs in lieu of cash for their fees earned from January 1, 2015 to December 31, 2015.

Annual Equity Awards. Each independent director received annual grants of OSUs and RSUs with a combined market value on the grant date of approximately $220,000, with the exception of Dr. Liu, whose awards were granted with a prorated combined market value on the grant date of approximately $110,000 to reflect her partial year of service. The grant date fair value reported in the “Stock Awards” column in the Director Compensation for Fiscal Year 2016 table above differs from these amounts 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.

 

30  

 

  2017 PROXY STATEMENT    

 


Table of Contents

DIRECTOR COMPENSATION    Director Compensation for Fiscal Year 2016

 

 

Outperformance restricted stock units (OSUs) are variable performance-based restricted stock units. On January 25, 2016, Intel granted OSUs with a target amount of 2,820 shares to each independent director, with the exception of Dr. Liu, who was elected to the Board in July 2016. Dr. Liu was granted OSUs with a target amount of 1,270 shares on July 27, 2016. The grant date fair value of each director OSU grant was $109,700, with the exception of Dr. Liu’s OSU grant, which had a grant date fair value of $54,200. Director OSUs granted in 2016 (including Dr. Liu’s) vest in full on the 37-month anniversary of January 25, 2016 if the director is still serving at that time. If a director retires from the Board before the vesting date, and is either 72 or older or has at least seven years of service on the 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.” For the OSUs granted in 2016, directors receive dividend equivalents on the final shares earned and vested; the dividend equivalents will pay out upon vesting in the form of additional shares.

Restricted stock units (RSUs) generally vest in equal annual installments over a three-year period from the grant date. On January 25, 2016, Intel granted each independent director 3,680 RSUs, with the exception of Dr. Liu, who was granted 1,575 RSUs on July 27, 2016. All director RSUs granted in 2016 (including Dr. Liu’s) vest in equal annual installments over a three-year period from January 25, 2016. The grant date fair value of each director RSU grant was $102,500, with the exception of Dr. Liu’s RSU grant, which had a grant date fair value of $51,800. All RSU shares are payable upon retirement from the Board if a director is 72 years old or has at least seven years of service on the Board. Directors do not receive dividend equivalents on unvested RSUs.

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 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 program. 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 equity deferral program allows directors to defer the settlement of their vested RSUs and OSUs until termination of service. Directors can elect to defer only RSUs, only OSUs, or both, but the election must be all-or-nothing with respect to the type of equity award, applying to all RSUs, all OSUs, or all equity awards granted during the year, as applicable. Directors do not receive dividends on deferred RSUs. The terms of OSUs generally provide that directors receive dividend equivalents on the final shares earned and vested, payable upon vesting in the form of additional shares. If a director elects to defer his or her OSUs, the settlement of these dividend equivalent shares will also be deferred along with the vested OSU shares, but further dividends are not earned or payable on any shares during the deferral period between vesting and settlement.

 

 

 

LOGO

 

 

    31  


Table of Contents

DIRECTOR COMPENSATION    Outstanding Equity Awards for Directors

 

 

Outstanding Equity Awards for Directors

The following table provides information on the outstanding equity awards held by the independent directors at fiscal year-end 2016, with OSUs shown at their target amount. Market value is determined by multiplying the number of shares by the closing price of Intel common stock on NASDAQ on the last trading day of the fiscal year.

Outstanding Equity Awards for Directors at Fiscal Year-End 2016 Table

 

     STOCK UNITS
Name    Unvested
RSUs1
(#)
   Market
Value of

Unvested
RSUs2

($)

   Unvested
OSUs1

(#)

   Market Value of

Unvested
OSUs2

($)

Charlene Barshefsky      6,743    244,569    6,855    248,631
Aneel Bhusri      9,753    353,741    6,855    248,631
Susan L. Decker3            —              —    4,035    146,349
John J. Donahoe    11,866    430,380    6,855    248,631
Reed E. Hundt      6,743    244,569    6,855    248,631
Tsu-Jae King Liu      1,575      57,125    1,270      46,063
James D. Plummer      6,743    244,569    6,855    248,631
David S. Pottruck      6,743    244,569    6,855    248,631
Frank D. Yeary      6,743    244,569    6,855    248,631
David B. Yoffie      6,743    244,569    6,855    248,631

 

1 

Vested but deferred awards are excluded from this column. Awards in this column may vest and become payable, or may be retained by the director, upon the director’s retirement from the Board, depending on the director’s age or length of service.

 

2 

The market value of vested but deferred awards is excluded from this column.

 

3 

Ms. Decker retired in May 2016 and her RSUs and OSUs became available to her under retirement eligibility guidelines, but her OSU’s are still outstanding as they have not yet completed their performance period for calculating the final OSU payout.

Independent Director Stock Ownership Guidelines. Intel’s stock ownership guidelines state that each independent 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 and unvested RSUs do not count toward this requirement. Deferred RSUs count toward this requirement once they vest. As of December 31, 2016, each independent director nominee had met these ownership guidelines or still had time to do so.

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.

 

32  

 

  2017 PROXY STATEMENT    

 


Table of Contents

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:

 

 

any transaction with another company for which a related person’s only relationship is as an employee (other than an executive officer), director, or beneficial owner of less than 10% of that company’s shares, if the amount involved does not exceed the greater of $1 million or 2% of that company’s total annual revenue;

 

 

any charitable contribution, grant, or endowment by Intel or the Intel Foundation to a charitable organization, foundation, or university for which a related person’s only relationship is as an employee (other than an executive officer) or a director, if the amount involved does not exceed the lesser of $1 million or 2% of the charitable organization’s total annual receipts, or any matching contribution, grant, or endowment by the Intel Foundation;

 

 

compensation to executive officers determined by the Compensation Committee;

 

 

compensation to directors determined by the Board;

 

 

transactions in which all security holders receive proportional benefits; and

 

 

banking-related services involving a bank depository of funds, transfer agent, registrar, trustee under a trust indenture, or similar service.

Intel personnel in the Legal and Finance departments review transactions involving related persons 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 2016, there were no related-person transactions under the relevant standards.

CODE OF CONDUCT

Our Code of Conduct applies to our directors with respect to their Intel-related activities, as well as to our executive officers and other employees. We expect our directors, executives and other employees to avoid any activity that is or has the appearance of being a conflict of interest with Intel. This includes not engaging in activities that compete with or are adverse to Intel, or that interfere with the proper performance of duties or responsibilities to Intel, and not using confidential company information, company assets, or their position at Intel for personal gain in violation of our policy.

Directors and executive officers must inform us of any situation that may be perceived as a conflict of interest with Intel, and the Board oversees the resolution of any potential conflicts. The Board oversees resolution of any conflict or apparent conflict involving a director or executive officer, and may enlist the Legal Department to determine whether a conflict exists, and if so, how to resolve it. 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. Our Code of Conduct is posted on our web site at www.intel.com.

 

 

 

LOGO

 

 

    33  


Table of Contents

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table presents the beneficial ownership of our common stock by 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 27, 2017, except as otherwise indicated in the notes to the table. Amounts reported under “Number of Shares of Common Stock Beneficially Owned as of February 27, 2017” include the number of shares subject to RSUs and stock options that become exercisable or vest within 60 days of February 27, 2017 (which are shown in the columns to the right). Our listed officers are the eight current and former executive officers identified below in the “Compensation Discussion and Analysis” section of this proxy statement.

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 27, 2017
    Percent of Class    

Number of Shares

Subject to Options

Exercisable as of

February 27, 2017

or Which Become

Exercisable Within
60 Days of This Date

   

Number of RSUs
That Vest Within

60 Days of

February 27, 2017

 
The Vanguard Group, Inc.     315,121,111 (1)      6.6                  
BlackRock, Inc.     297,831,677 (2)      6.3                  

Directors and Executive Officers

 

Brian M. Krzanich, Chief Executive Officer     1,293,994       **       732,752       22,463  
Stacy J. Smith, Executive Vice President, Manufacturing, Operations and Sales     734,983               414,403       10,556  
Andy D. Bryant, Chairman of the Board     519,199 (3)      **             7,282  
Diane Bryant, Executive Vice President, General Manager, Data Center Group     365,737       **       249,300       9,052  
Gregory R. Pearson, Senior Vice President, General Manager, Sales and Marketing Group     219,153 (4)      **       29,570       75,705  
William M. Holt, former Executive Vice President, General Manager, Technology and Manufacturing Group     114,674 (5)      **       92,540        
Dr. Venkata (Murthy) Renduchintala, Executive Vice President and President, Client and IoT Businesses and System Architecture Group     30,808       **             29,272  
Robert H. Swan, Executive Vice President, Chief Financial Officer     3,364 (6)      **              
David B. Yoffie, Director     211,628 (7)      **             7,498  
David S. Pottruck Director     120,711 (8)      **             7,498  
Charlene Barshefsky, Director     116,895 (9)      **             7,498  
John J. Donahoe, Director     106,301 (10)      **             14,731  
Frank D. Yeary, Director     77,271 (11)      **             7,498  
Reed E. Hundt, Director     75,653       **             7,498  
James D. Plummer, Director     55,901 (12)      **             7,498  
Aneel Bhusri, Director     6,361 (13)      **              
Tsu-Jae King Liu, Director     525       **              
Omar Ishrak, Director     435 (14)      **              
Gregory D. Smith, Director     410 (15)      **              
All directors and executive officers as a group (17 individuals)16     3,720,176       **       1,396,455       138,344  

 

**

Less than 1%

 

1 

As of December 31, 2016, based on information set forth in a Schedule 13G filed with the SEC on February 9, 2017 by The Vanguard Group. The Vanguard Group’s business address is 100 Vanguard Blvd., Malvern, PA 19355.

 

2 

As of December 31, 2016, based on information set forth in a Schedule 13G/A filed with the SEC on January 24, 2017 by BlackRock, Inc. BlackRock, Inc.’s business address is 55 East 52nd St., New York, NY 10055.

 

34  

 

  2017 PROXY STATEMENT    

 


Table of Contents

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

 

 

3 

Includes 1,600 shares held by Mr. Bryant’s son and 1,000 shares held by Mr. Bryant’s daughter. 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 

Represents Mr. Pearson’s holdings as of his last reportable Form 4. Mr. Pearson ceased being a Section 16 officer on September 30, 2016.

 

5 

Represents Mr. Holt’s holdings, including the number of shares subject to RSUs and stock options that became exercisable or vested within 60 days, as of June 23, 2016, his last date of employment.

 

6 

Includes 3,364 shares held in family trust for which Mr. Swan shares voting and investment power.

 

7 

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

 

8 

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.

 

9 

Includes 17,370 deferred but vested RSUs held by Ambassador Barshefsky. Also includes 6,800 shares held jointly with Ambassador Barshefsky’s spouse for which Ambassador Barshefsky shares voting and investment power.

 

10 

Includes 82,305 deferred but vested RSUs held by Mr. Donahoe.

 

11 

Includes 67,548 shares held in a family trust for which Mr. Yeary shares voting and investment power.

 

12 

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

 

13 

Includes 4,228 deferred but vested RSUs held by Mr. Bhusri.

 

14 

Mr. Ishrak became a director on March 21, 2017.

 

15 

Mr. Smith became a director on March 23, 2017. Includes 410 shares held in a revocable trust by Mr. Smith’s spouse.

 

16 

Excludes Mr. Holt as he was not an executive officer as of June 23, 2016. Also excludes Mr. Pearson as he ceased to be a Section 16 officer as of September 30, 2016.

 

 

 

LOGO

 

 

    35  


Table of Contents

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 during 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 2016 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.

 

36  

 

  2017 PROXY STATEMENT    

 


Table of Contents

PROPOSAL 2    Ratification of Selection of Independent Registered Public Accounting Firm

 

 

ERNST & YOUNG LLP’S FEES FOR 2016 AND 2015

The following table shows the fees billed by Ernst & Young for audit and other services provided for fiscal years 2016 and 2015. 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.

 

         2016 Fees ($)          2015 Fees ($)  
Audit Services        21,871,000          19,400,000  
Audit-Related Services        1,123,000          1,015,000  
Tax Services        2,127,000          1,672,000  
All Other Services        90,000          82,000  
Total        25,211,000          22,169,000  

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 2017.

 

 

 

LOGO

 

 

    37  


Table of Contents

REPORT OF THE AUDIT COMMITTEE

During 2016, four non-management directors comprised the Audit Committee. The Board 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.

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 31, 2016, 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

 



 

38  

 

  2017 PROXY STATEMENT    

 


Table of Contents

REPORT OF THE AUDIT COMMITTEE

 

control over financial reporting. Intel published these reports in its Annual Report on Form 10-K for the year ended December 31, 2016, which Intel filed with the SEC on February 17, 2017.

The Audit Committee has reviewed and discussed the audited financial statements for fiscal year 2016 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 31, 2016.

Audit Committee

Frank D. Yeary, Chairman

Reed E. Hundt

Tsu-Jae King Liu

James D. Plummer

 



 

 

 

LOGO

 

 

    39  


Table of Contents

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 2018.

RECOMMENDATION OF THE BOARD

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

 

40  

 

  2017 PROXY STATEMENT    

 


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

 

 

2016 LISTED OFFICERS

 

Brian M. Krzanich

 

Chief Executive Officer

 

Andy D. Bryant

 

Chairman of the Board

 

Robert H. Swan

 

Executive Vice President

and Chief Financial Officer

 

Stacy J. Smith

 

Executive Vice President

Manufacturing, Operations and Sales

 

Dr. Venkata S.M. (“Murthy”) Renduchintala

 

Executive Vice President

President, Client and Internet of Things (IoT)

Businesses and System Architecture Group

 

Diane M. Bryant

 

Executive Vice President

General Manager, Data Center Group

 

William M. Holt

 

Former Executive Vice President, General

Manager, Technology and Manufacturing Group

 

Gregory R. Pearson

 

Senior Vice President

General Manager, Sales and Marketing 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:

 

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

 

  Stockholder Engagement and “Say on Pay” — A discussion of the 2016 “say on pay” results;

 

  2016 Compensation of Our Listed Officers — Details on our executive compensation programs and the individual compensation of our listed officers; and

 

  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.

 

Our 2016 listed officers reflect our evolving business. As we leverage our core assets to pursue new opportunities and fuel the Virtuous Cycle of Growth, we are hiring and developing new talent and new competencies. After serving as our chief financial officer since 2007, Mr. Smith in 2016 assumed responsibility for overseeing manufacturing, operations and sales. We recruited Mr. Swan and Dr. Renduchintala from other companies to provide new perspectives. After 42 years of service at Intel, Mr. Holt retired in June 2016, while Mr. Pearson continues to support Intel’s sales and marketing group but ceased to serve as an executive officer during the year.

 

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

Executive Summary

LISTED OFFICER PAY

Intel’s executive compensation program is designed to complement our strategy to drive a Virtuous Cycle of Growth by:

 

 

aligning the interests of executives with those of stockholders;

 

 

incentivizing executives to drive business performance over both the short and long term;

 

 

providing total compensation necessary to attract and retain the best talent in the industry; and

 

 

maintaining competitive benefits to support the executive, allowing the executive to maximize attention and optimize time in order to focus efforts in pursuit of building stockholder value.

The majority of compensation for Intel’s listed officers, approximately two-thirds, is delivered in the form of stock-based compensation, designed to create long-term alignment with our stockholders. This stock compensation is primarily in the form of performance stock units that vest based on Intel’s total shareholder return as measured against peers over a three-year period, driving a focus on delivering a superior return for stockholders. Additionally, listed officers are subject to significant stock ownership requirements that further reinforce the alignment with stockholders over the long term.

 

 

 

LOGO

 

 

    41  


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    Executive Summary

 

 

The next largest portion of a listed officer’s compensation is the annual incentive cash payout, which is based on a combination of annual company-wide financial goals and specific business unit objectives. Focusing our listed officers on annual financial and operational goals incentivizes the achievement of results that should ultimately drive stockholder value creation, and further enhances the link between pay and performance for our executives. The remaining component of our listed officers’ total direct compensation consists of a competitive base salary. In addition to the elements of total direct compensation (salary, annual incentive cash and long-term stock-based compensation), we provide a competitive benefits package that includes health care, retirement funding, financial planning, life insurance, and other programs that are designed to allow executives to maximize time and attention on activities designed to increase stockholder value.

The sum of these components enables Intel to attract and retain the very best talent. For example, we have recently experienced significant leadership changes, including hiring two of our listed officers from outside Intel within the past 18 months, retaining our former chief financial officer as he moved into a new senior executive role leading sales, manufacturing, and operations, and supporting our chairman as he transitioned to a role focused primarily on supporting and guiding the Board as Chairman and reducing his day-to-day involvement with management and business operational matters. These leadership changes, especially those for our newly hired listed officers, have resulted in certain event-driven compensation arrangements that are not typically elements of our executive compensation program at Intel, but which are common practices in the competitive technology sector used to attract outside senior leaders. We expect that these leadership changes, together with other business initiatives, will bring new perspectives from both external and internal viewpoints, that will help accelerate our transformation from a PC company to a cloud and smart, connected device company.

BUSINESS PERFORMANCE AND PAY

We are building on our strong position in client computing and are investing for growth in the data center, Internet of Things market segments, and disruptive differentiated memory technology. In order to accelerate our transformation from a PC-centric company to powering the cloud and the connected world, in second quarter 2016, we announced the 2016 Restructuring Program, which is on track to reduce our headcount, generate savings and increase the proximity among our employees, including our executives. We are reallocating these savings to our growth segments and are continuing to invest in areas that extend our leadership in Moore’s Law and expand market opportunities such as memory and autonomous driving. Our steady financial performance demonstrates a strategy that is working and providing a solid foundation for growth.

 

        2016      2015      Change
Revenue      $59.4 billion      $55.4 billion      7%
Gross Margin      60.9%      62.6%      (1.7)%
Operating Income      $12.9 billion      $14.0 billion      (8)%
Net Income      $10.3 billion      $11.4 billion      (10)%
Earnings Per Share      $2.12      $2.33      (9)%

We ended 2016 in a strong position — the fourth quarter of 2016 had record revenue growth of $16.4 billion, up 10% on a year-to-year basis. We continue to see our business evolve as we execute on our strategy to leverage the Virtuous Cycle of Growth.

Our business results for 2016 included the following:

 

 

Record revenue of $59.4 billion in 2016, up $4.0 billion, or up 7% from 2015. The increase was driven by the inclusion of the Programmable Solutions Group and growth in the Data Center Group, Client Computing Group, and Internet of Things Group. Net income for 2016 was $10.3 billion.

 

 

Gross margin dollars were $36.2 billion, up $1.5 billion from 2015. Gross margin of 60.9% was down 1.7% from 2015.

 

 

Research and development (R&D) and marketing, general and administrative (MG&A) spending totaled $21.1 billion, up 5% from a year ago. R&D and MG&A were 35.6% of revenue, down approximately one point from 2015.

 

 

Earnings per share of $2.12 were down 21 cents, or down 9% from a year ago.

 

 

Record cash flow from operations in 2016 was approximately $21.8 billion.

 

 

Returned cash to stockholders by paying $4.9 billion in dividends and repurchasing $2.6 billion in stock.

 

42  

 

  2017 PROXY STATEMENT    

 


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    Stockholder Engagement and the 2016 “Say on Pay” Vote

 

 

The annual incentive cash plan, based on the financial and operational performance for 2016, resulted in a corporate average payout of 101% of annual incentive cash target, as compared with the 2015 payout of 94% of target.

Stockholder Engagement and the 2016 “Say on Pay” Vote

In 2016, the percentage of votes cast “For” our advisory “say on pay” resolution to approve our executive compensation was approximately 96%, similar to our 2015 vote. We have a program of stockholder outreach beginning the first quarter of each year, including 2016; 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 2016, we believe that stockholders’ “say on pay” support in 2016 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 2016 “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 2016, and prior to the date of this proxy statement in 2017, we pursued multiple avenues for stockholder engagement, including in-person and teleconference meetings with our stockholders. No significant changes have been made to the structure of our executive compensation programs in light of our 2016 “say on pay” results—our annual and long-term incentive programs remain substantially the same for 2017.

 

 

 

 

LOGO

 

 

    43  


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    2016 Compensation of Our Listed Officers

 

 

2016 Compensation of Our Listed Officers

PERFORMANCE AND INCENTIVE PAY FOR 2016

The principal elements of our pay-for-performance philosophy include a competitive 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.

 

 

In the technology sector the competition for executive talent is significant. The Compensation Committee believes that a competitive total compensation target is critical to attract, retain, and reward the executive talent crucial to driving value for the stockholders. To that end, total compensation is designed to be competitive with a peer group of companies all vying for the top technical talent in the world. Adjustments to each individual’s pay position take into account our desire to compensate our executive officers based upon performance, while fairly balancing internal and external pay equity considerations among executive roles.

 

 

Total direct compensation opportunities are designed so that the majority of pay is variable or “at risk,” with value derived from company business performance and stock price performance over the long term.

 

 

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.

 

 

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

 

 

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.

CEO COMPENSATION MIX:

Our executive compensation programs are periodically refined so that they support Intel’s business goals and promote both near- and long-term profitable growth of the company. As illustrated below, approximately 92% of targeted total direct compensation for Mr. Krzanich in 2016 was “at risk,” consisting of approximately 70% equity and 22% incentive cash. Only 8% of his compensation, in the form of base salary, was fixed, ensuring a strong link between his targeted total direct compensation and business results.

 

LOGO

 

1

Does not include “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” or “All Other Compensation” as reported in the Summary Compensation Table on page 59.

 

 

44  

 

  2017 PROXY STATEMENT    

 


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    2016 Compensation of Our Listed Officers

 

 

LISTED OFFICERS’ TOTAL DIRECT COMPENSATION MIX:

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 absolute and relative financial performance, company performance relative to operational goals, and individual performance.

The two sets of bar charts below show the components of total direct compensation for each listed officer, as a percentage of the total. For most of our listed officers (the first chart), this is comprised of: base salary; annual cash incentives; restricted stock units (RSUs) and outperformance-based restricted stock units (OSUs) granted in the year. For our two newly hired listed officers (the second chart), these same elements are illustrated along with sign-on cash awards and new-hire RSUs, which are elements beyond our standard annual compensation programs and which offset in part the value foregone by each officer in separating from his prior employer to join Intel.

 

         LOGO

 

LOGO

 

 

 

LOGO

 

 

    45  


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    2016 Compensation of Our Listed Officers

 

 

OTHER ELEMENTS OF PAY FOR 2016

Our listed officers’ compensation for 2016 reflects a number of event-driven compensation arrangements. For both Mr. Swan and Dr. Renduchintala, significant portions of their 2016 compensation were provided to offset the value of compensation forfeited or forgone when they separated from their prior employers and to reflect the competitive market for executives in the technology sector: they each were granted new-hire RSUs in 2016 that were designed to offset in part the value of stock awards they forfeited by separating from their prior employers to join Intel; and they both received sign-on cash awards from Intel that took into account previously granted cash awards that were likewise forfeited or foregone in connection with their resignations. A portion of Mr. Holt’s 2016 compensation relates to broad-based retirement payments and benefits he received under our 2016 Restructuring Program in connection with his retirement. Finally, in January 2016, Ms. Bryant received the last installment payout of a cash-based retention award granted her in 2013, prior to when she became an executive officer.

2016 INCENTIVE COMPENSATION PAYOUTS

INCENTIVE CASH COMPENSATION

The corporate average payout percentage under the annual incentive cash plan for 2016 was 101% of the annual incentive cash target, compared with 94% in 2015. Intel’s net income results were down slightly from the previous year, which were offset by stronger performance under the operational scores. Despite the higher corporate average payout percentage, average annual incentive cash payouts for our listed officers in 2016 were down due to lower average target amounts for our listed officers under our annual incentive cash plan in 2016, as compared with 2015. 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

 

1

Average annual incentive reflects annualized amounts for listed officers who were not employed for the full year (Messrs. Swan and Holt) and while the chart above shows our GAAP net income for each year, annual incentive in 2010 was based on non-GAAP net income that excluded certain charges recorded in the fourth quarter of 2010, primarily due to a design issue with the Intel® 6 Series Express Chipset family and the related tax impacts of those charges.

 

46  

 

  2017 PROXY STATEMENT    

 


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    2016 Compensation of Our Listed Officers

 

 

INCENTIVE EQUITY COMPENSATION

For the January 2013 through January 2016 performance period, OSUs vested at 92.8%, reflecting that Intel’s TSR was 2.9 percentage points 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 102.2% of target. These payouts are reported in the Stock Option Exercises and Stock Vested in Fiscal Year 2016 table on page 65.

ALIGNMENT OF PRINCIPAL ELEMENTS OF PAY-FOR-PERFORMANCE

In 2016, the Compensation Committee requested that Farient 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 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 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 Alphabet, Amazon, Apple, Facebook and Oracle, which Farient 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 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 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 deems to be acceptable for the performance achieved based on a company’s size and performance. Based on the alignment model, Farient concluded that our company shows a strong relationship between pay and performance compared to our peers.

 

 

LOGO

 

 

 

 

LOGO

 

 

    47  


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    2016 Compensation of Our Listed Officers

 

 

INTEL’S COMPENSATION BEST PRACTICES

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

 

   
LOGO WHAT WE DO   LOGO  WHAT WE DON’T DO
 

   Performance-based compensation that uses a variety of performance measures and performance periods

 

   No change in control arrangements

 

   Robust stock ownership guidelines for all executive officers

 

   No tax gross-ups (except for business expenses such as relocation costs)

 

   Claw-back policy that applies to our annual incentive cash plan and equity incentive plan

 

   No special retirement benefits exclusively for executive officers

 

   Annual stockholder say-on-pay vote and biennial vote on equity compensation plan

 

   No hedging of our stock for executives and directors

 

   Independent Compensation Committee and independent compensation consultant

 

   No liberal share recycling under the equity incentive plan

 

   Annual compensation review and risk assessment

 

   No employment agreements (outside of the new hire context)

 

   Limit on maximum incentive payouts

 

   No repricing or exchange of underwater options without stockholder approval

2016 CASH COMPENSATION

In January of each year, the Compensation Committee conducts a robust review of external market data, individual and company performance and management recommendations and makes adjustments to compensation accordingly. In connection with that review, the committee made the following cash compensation changes for 2016, for each listed officer, a summary of which is shown in the tables below.

Mr. Krzanich. The committee increased Mr. Krzanich’s base salary by 14% to $1,250,000 and made no change to his annual incentive cash target of $3,500,000. These determinations bring Mr. Krzanich fully in line with the market median for the CEO position and represent the culmination of a three-year plan designed to bring Mr. Krzanich’s compensation to market median over time as he became more seasoned in his role as CEO (when Mr. Krzanich first assumed the role, his pay was set at the 25th percentile of the competitive market). Mr. Krzanich’s actual annual incentive cash payment for 2016 was $3,546,700, up 7% from the previous year, as a result of stronger corporate business performance.

Mr. Bryant. To reflect the transition in Mr. Bryant’s role towards focusing primarily on supporting and guiding the Board as Chairman and reducing his day-to-day involvement with management and business operational matters, the committee reduced Mr. Bryant’s base salary by 37% to $500,000 and reduced his annual incentive cash target by 35% to $943,000. Mr. Bryant’s actual annual incentive cash payout for 2016 was $1,170,500, down 15% from the previous year, despite stronger corporate business performance, as a result of Mr. Bryant’s reduced annual incentive target commensurate with the reduction of his employment-related activities.

Mr. Swan. Mr. Swan was hired in October 2016, and the committee determined his cash compensation for 2016 as part of his recruitment and hiring process, which consists of a base salary of $850,000 and an annual incentive cash target of $1,122,000. Mr. Swan’s actual annual incentive cash payment for 2016 was $284,200 based on strong corporate business performance, but pro-rated to reflect his being in the role for a partial year in 2016. Mr. Swan also received a cash payout of $2,750,000 in 2016, the first of three installments of his sign-on award, made to him in part to offset compensation forgone when he separated from his prior employer to join Intel. The two remaining installments will be paid in 2017 and 2018, on the first and second anniversaries of his hire date at Intel.

 

48  

 

  2017 PROXY STATEMENT    

 


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    2016 Compensation of Our Listed Officers

 

 

Mr. Smith. The committee increased Mr. Smith’s base salary by 3% to $800,000 and made no change to his annual incentive cash target of $1,800,000. The increase to Mr. Smith’s base salary was commensurate with the move in the market in 2016 for his role as the then CFO of Intel. Mr. Smith’s actual annual incentive cash payment for 2016 was $1,824,000, up 7% from the previous year, as a result of stronger corporate business performance.

Dr. Renduchintala. Dr. Renduchintala was hired in November 2015, and the committee established his cash compensation for 2016 as part of his recruitment and hiring process, which consists of a base salary of $900,000 and an annual incentive cash target of $2,100,000. Dr. Renduchintala’s actual annual incentive cash payment for 2016 was $2,128,000, as a result of strong corporate business performance. Dr. Renduchintala also received a cash payout of $2,700,000 in 2016, the second of three installments of his sign-on award, made to him in part to offset the cash compensation forgone when he separated from his prior employer to join Intel. The remaining installment will be paid in 2017, on the second anniversary of his hire date with Intel.

Ms. Bryant. During 2016, Ms. Bryant was promoted from Senior Vice President to Executive Vice President, and she was appointed as an executive officer. At the time of her promotion, Ms. Bryant’s base salary was adjusted to $650,000 and her annual incentive cash target was adjusted to $1,050,000. Ms. Bryant’s actual annual incentive cash payment for 2016 was $882,100, which reflects a proration of her award based on different incentive target levels of a Senior Vice President and an Executive Vice President. Finally, Ms. Bryant received $400,000 under a cash-based retention award granted to her in 2013, prior to when she became an executive officer.

Mr. Holt. The committee increased Mr. Holt’s base salary by 4% to $675,000 and increased his annual incentive cash target by 1% to $1,095,000. The increases to Mr. Holt’s base salary and annual incentive cash target were commensurate with the move in the market in 2016 for his role. Mr. Holt’s actual annual incentive cash payout for 2016 was $574,900, which reflects the strong Technical Manufacturing Group business unit performance and proration for a partial year of service due to his retirement in accordance with the generally applicable terms of our annual incentive cash plan. Finally, Mr. Holt received a $1,120,000 retirement payment under the same program and formula available as all employees who elected to retire under our 2016 Restructuring Program.

Mr. Pearson. The committee adjusted Mr. Pearson’s base salary to $545,000 and his annual incentive cash target to $690,000. Mr. Pearson’s actual annual incentive cash payment for 2016 was $664,700, as a result of Sales and Marketing Group business unit performance below target.

BASE SALARY

The table below shows the ending annualized base salary for our listed officers for 2016, as compared with 2015, with the exceptions of Mr. Swan, Dr. Renduchintala, Ms. Bryant, and Mr. Pearson, who were not listed officers in 2015.

 

Name      2016 Base Salary ($)        2015 Base Salary ($)        % Change
2016 vs. 2015
Brian M. Krzanich        1,250,000          1,100,000        14%
Andy D. Bryant        500,000          790,000        (37)%
Robert H. Swan        850,000          n/a        n/a
Stacy J. Smith        800,000          775,000          3%
Venkata (Murthy) Renduchintala        900,000          n/a        n/a
Diane M. Bryant        650,000          n/a        n/a
William M. Holt        675,000          650,000          4%
Gregory R. Pearson        545,000          n/a        n/a

 

 

 

LOGO

 

 

    49  


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    2016 Compensation of Our Listed Officers

 

 

ANNUAL INCENTIVE CASH PLAN TARGETS AND PAYMENTS

The table below shows the ending target annual incentive for our listed officers under our annual incentive cash plan in 2016, as compared with 2015, with the exceptions of Mr. Swan, Dr. Renduchintala, Ms. Bryant, and Mr. Pearson, who were not listed officers in 2015.

 

Name  

2016 Annual Incentive

Cash Target Amount ($)

 

2015 Annual Incentive

Cash Target Amount ($)

  % Change
2016 vs. 2015
Brian M. Krzanich   3,500,000   3,500,000  
Andy D. Bryant      943,000   1,452,000   (35)%
Robert H. Swan   1,122,000   n/a   n/a
Stacy J. Smith   1,800,000   1,800,000  
Venkata (Murthy) Renduchintala   2,100,000   n/a   n/a
Diane M. Bryant   1,050,000   n/a   n/a
William M. Holt   1,095,000   1,081,500     1%
Gregory R. Pearson      690,000   n/a   n/a

 

 

LOGO

The annual incentive cash payout percentage that can be earned is based on a weighted average of three corporate performance components: an absolute financial component (25% weighting), a relative financial component (25% weighting), and an operational performance component (50% weighting). The Compensation Committee assigned a 50% weighting to operational performance because it views operational excellence and technological leadership as ultimately driving superior financial performance. Operational performance for business unit leaders is based on business-unit-specific goals in order to drive a sharper focus on key strategic initiatives, increase visibility into those initiatives, and enhance accountability. Generally, for corporate level officers, operational performance is based on the average of 10 business units’ scores that may be adjusted by our CEO at his discretion, as permitted under the annual incentive cash plan. Officers who lead a business unit receive the operational score for their business unit. In 2016, none of the listed officers benefited from any discretionary adjustments by our CEO. All operational performance goals are subject to adjustment based on corporate-level goals that for 2016 related to hiring and retaining of ‘diverse’ (women and under-represented minorities) talent, as well as the reduction of cycle time and number of iterations between product design and production. Following the end of fiscal year 2016, the Compensation Committee reviewed and certified the annual incentive cash plan performance results and determined the final cash payouts. Payouts may be adjusted upward or downward based on individual performance, but the committee did not make any such adjustments for the listed officers for 2016.

For 2016, the plan’s formula yielded an annual incentive cash payout of 101% of target, calculated as shown below, reflecting stronger performance under the operational scores for all listed officers, other than Ms. Bryant, Mr. Holt, and Mr. Pearson, based on the corporate average performance on the operational components. Achievement scores for the operational goals are derived from a process for tracking and evaluating performance; while some goals are quantitative, some goals have non-quantitative measures that require a degree of subjective evaluation. Over the past five years, corporate average operational goals have scored between 90% and 122%, with an average result of 103%, and for 2016 the corporate average operational goal achievement was higher than the overall payout percentage, reflecting strong accomplishments in the Client Computing Group, Intel Security Group, and Programmable

 

50  

 

  2017 PROXY STATEMENT    

 


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    2016 Compensation of Our Listed Officers

 

 

Solutions Group. Ms. Bryant’s award is based on the performance goals established for the Data Center Group, which she leads; her annual incentive cash payout was 97% of target, based on the Data Center Group’s performance. Likewise, Mr. Pearson’s award is based on the performance goals established for the Sales and Marketing Group. Mr. Pearson’s annual incentive cash payout was 96% of target, based on the Sales and Marketing Group’s performance. Mr. Holt’s award is based on the operational performance goals established for the Technology and Manufacturing Group, which he led until his retirement; his annual incentive cash payout was 105% of target, and prorated to reflect his retirement, per the generally applicable terms of our annual incentive cash plan.

For more information on how the three performance components are measured and on the plan’s formula, see the discussion in “Executive Compensation; Grants of Plan-Based Awards in Fiscal Year 2016; 2016 Operational Goals; Annual Incentive Cash” on page 63 of this proxy statement.

The table below illustrates the calculation of the annual incentive cash payout for 2016 and describes the factors affecting 2016 payouts.

Annual Incentive Cash Calculation (in millions)

 

Absolute Financial Performance

  25%   

2016 Intel net income $10,316 ÷ 2015 Intel net income $11,420 =

 

Intel’s net income declined to $10,316 in 2016, compared with $11,420 in 2015.

  90%

Relative Financial Performance

  25%   

2016 Intel net income growth 90% ÷ 2016 peer group net income growth 103% =

 

Intel’s net income declined 10% year-over-year, compared with 3% net income growth for the technology peer group, yielding a score of 88% for 2016, compared to 95.8% for 2015.

  88%

Operational Financial Performance

  50%   

Operational performance corporate average =

 

For 2016, business-unit specific goals were linked to performance in several key areas, including financial performance, product development, and launch roadmaps. Individual business unit results ranged from 77% to 133% in 2016. The corporate average operational performance was 113%, compared with 92% achievement in 2015. Achievement of corporate-level goals added 13% to all operational scores.

  113%

PAYOUT (as a percentage of target)                                                                 (90% x 25%) + (88% x 25%) + (113% x 50%) =

  101%

The following table details the annual incentive cash payments for each listed officer for 2015 and 2016 (except Mr. Swan, Dr. Renduchintala, Ms. Bryant, and Mr. Pearson, who were not listed officers in 2015) reflecting the year-over-year changes resulting from the higher annual incentive cash payout for 2016 and the changes in the annual incentive cash target amounts discussed above. The reduction in Mr. Bryant’s annual incentive cash payment reflects the change in his duties towards a more Board-focused orientation. The reduction in Mr. Holt’s annual incentive cash payment is reflective of proration due to his retirement, per the standard terms of our annual incentive cash plan.

 

Name   

2016 Annual Incentive

Cash Payment ($)

    

2015 Annual Incentive

Cash Payment ($)

       % Change
2016 vs. 2015
 
Brian M. Krzanich      3,546,700        3,301,700          7
Andy D. Bryant      1,170,500        1,369,700          (15 )% 
Robert H. Swan1, 2      284,200        n/a          n/a  
Stacy J. Smith      1,824,000        1,698,000          7
Venkata (Murthy) Renduchintala1      2,128,000        n/a          n/a  
Diane M. Bryant1      882,100        n/a          n/a  
William M. Holt2      574,900        1,013,000          (43 )% 
Gregory R. Pearson1      664,700        n/a          n/a  

 

1

Mr. Swan, Dr. Renduchintala, Ms. Bryant, and Mr. Pearson were not listed officers in 2015.

2 

Mr. Swan was hired in October 2016 and Mr. Holt retired in June 2016. The 2016 Annual Incentive Cash Payments for Mr. Swan and Mr. Holt represent their pro-rated Annual Incentive Cash Payment based on employment start date and retirement date, respectively.

 

 

 

LOGO

 

 

    51  


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    2016 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 2016, 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 the company’s employees. However, with respect to the second and third quarters of 2016, executive officers, including the listed officers, received smaller quarterly incentive cash payments relative to other company employees. The payouts of the executive officers were based on profitability results inclusive of restructuring charges related to our 2016 Restructuring Program, whereas those of other company employees excluded these charges. We pay up to an additional two days of compensation for each performance year if Intel achieves its customer satisfaction goals. Payments earned in 2016 represented 17.8 days of compensation per employee generally, and 15.5 days of compensation for each of our listed officers (down from 16.5 days in 2015). The payouts included two days of compensation for 2016 and one day of compensation for 2015 resulting from Intel’s achievement of its customer satisfaction goals.

2016 ANNUAL EQUITY AWARDS

In January of each year, the Compensation Committee conducts a robust review of external market data, individual and company performance, expected future contributions, and management recommendations and makes annual equity grants accordingly. In 2016, the committee made the following equity grants for each listed officer, a summary of which is shown in the table below.

Mr. Krzanich. Mr. Krzanich was granted equity awards in the amount of $12,000,000, a 20% increase over the previous year. The award is in line with completing the movement of Mr. Krzanich’s total compensation to the median of the market and is split such that 60% of the grant value is in OSUs and 40% is in RSUs.

Mr. Bryant. Mr. Bryant was granted equity awards in the amount of $2,175,000, a 54% decrease from the previous year. The award reflects the change in his role as Chairman of the Board towards a more Board-focused orientation, and the award is split such that 50% of the grant value is in the form of OSUs and 50% is in RSUs, the same allocation as the independent members of the Board of Directors receive annually as part of their compensation.

Mr. Swan. Mr. Swan was not granted an annual equity award for 2016, but in connection with his hiring in October 2016, he was granted RSUs in the amount of $9,500,000, made in part to offset the value of equity awards forfeited when he separated from his prior employer.

Mr. Smith. Mr. Smith was granted equity awards in the amount of $4,725,000, a 5% increase over the previous year. The increase in award value of the previous year is in line with the market movement for Executive Vice Presidents, and is split such that 60% of the grant value is in OSUs and 40% is in RSUs.

Dr. Renduchintala. Dr. Renduchintala was granted equity awards in the amount of $6,000,000, which the committee established at the time of negotiating his offer to join Intel in late 2015. This award is split such that 60% of the grant value is in OSUs and 40% is in RSUs. In addition to his annual equity award grant, Dr. Renduchintala was granted an RSU award with a grant value of $8,100,000, made in part to offset the value of equity awards forfeited when he separated from his prior employer; this grant was made in January 2016—the first available opportunity to make an equity grant following his hire date.

Ms. Bryant. Ms. Bryant was granted equity awards in the amount of $3,975,000, split such that 60% of the grant value is in OSUs and 40% is in RSUs. In addition to her annual equity award grant, the committee approved a grant of RSUs to Ms. Bryant in recognition of her promotion to Executive Vice President in May 2016, with a grant value of $500,000.

Mr. Holt. Mr. Holt was granted equity awards in the amount of $3,950,000, a 5% increase over the previous year. The increase in award value is in line with the market movement for Executive Vice Presidents, and is split such that 60% of the grant value is in OSUs and 40% is in RSUs.

Mr. Pearson. Mr. Pearson was granted equity awards in the amount of $3,300,000, and split such that 60% of the grant value is in OSUs and 40% is in RSUs.

 

 

52  

 

  2017 PROXY STATEMENT    

 


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    2016 Compensation of Our Listed Officers

 

 

The table below shows the annual equity award values approved by the committee for our listed officers in 2016, as compared with annual equity award values approved in 2015. In 2016, annual awards to the listed officers were composed of approximately 60% OSUs and 40% RSUs by approved value excluding the new-hire grants. Amounts reported in the Summary Compensation Table and the Grants of Plan-Based Awards in Fiscal Year 2016 table on pages 59 and 62 differ marginally 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   

2016 Approved Value of

Annual Equity Awards ($)

    

2015 Approved Value of

Annual Equity Awards ($)

      

% Change

2016 vs. 2015

Brian M. Krzanich      12,000,000        10,000,000        20%
Andy D. Bryant      2,175,000        4,680,000        (54)%
Robert H. Swan1      9,500,000        n/a        n/a
Stacy J. Smith      4,725,000        4,500,000          5%
Venkata (Murthy) Renduchintala1      14,100,000        n/a        n/a
Diane M. Bryant1      4,475,000        n/a        n/a
William M. Holt      3,950,000        3,750,000          5%
Gregory R. Pearson1      3,300,000        n/a        n/a

 

1

Mr. Swan, Dr. Renduchintala, Ms. Bryant, and Mr. Pearson were not listed officers in 2015.

OSU AWARDS

For 2016, approximately 60% of the total value of the listed officers’ annual equity awards, excluding the new-hire grants and the Chairman’s grants, was 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 technology peer group of companies over a three-year performance period. TSR is a measure of stock price appreciation plus any dividends payable during the performance period for the OSUs. The committee elected to use OSUs as the primary equity vehicle for listed officers because the OSUs are performance-based and present significant upside potential for superior relative stock price performance, which accounts for industry cyclicality, but also offers the potential for some value to the recipient even if the stock price declines over the three-year performance period; this limits the excessive risk-taking that may be encouraged by highly leveraged performance awards.

Performance is measured over the 36 months following the grant date and OSUs convert into shares in the 37th month (usually, 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 in Fiscal Year 2016 table in “Executive Compensation.”

RSU AWARDS

For 2016, approximately 40% of the total value of the listed officers’ annual grant of equity awards, excluding the new-hire grants and the Chairman’s grants, 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 2015, awards granted to the listed officers in 2016 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.

 

 

 

LOGO

 

 

    53  


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    Other Aspects of Our Executive Compensation Programs

 

 

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 served as the committee’s independent advisor for 2016. During 2016, Farient’s work with the committee included advice and recommendations on:

 

 

total compensation philosophy;

 

 

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

 

 

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

 

 

regulatory trends;

 

 

compensation of the CEO and the other executive officers; and

 

 

stockholder engagement efforts.

The 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 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. 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:

 

 

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

 

 

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

 

 

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

EXTERNAL COMPETITIVE CONSIDERATIONS FOR 2016

To assist the Compensation Committee in its review of executive compensation for 2016, Farient, in conjunction with 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. These historical compensation data were adjusted to arrive at current-year estimates for the peer group. The committee used these data to compare the compensation of our listed officers to that of the peer group.

The peer group for 2016 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 with three-year averages for revenue that 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.

 

54  

 

  2017 PROXY STATEMENT    

 


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    Other Aspects of Our Executive Compensation Programs

 

 

For 2016, we have made changes to the technology peer group. We retained both companies resulting from the HP spin-off (i.e., both HP Inc. and HP Enterprise) and we added Facebook, Inc. and Micron Technology, Inc. We removed eBay Inc. (because the spin-off of PayPal left the remaining company too small to be appropriately comparable to Intel’s size), Western Digital (because it was determined that Micron is more appropriately comparable to Intel’s business model), and EMC (because it was acquired by Dell Inc.).

The table below shows information for our 2016 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, 2017

($ in billions)


 

 

 

Intel 2016

     12/31/2016        59.4        10.3       169.74  

Intel 2016 Percentile

              60%        64%       45%  

Technology Peer Group

 

Alphabet Inc.

     12/31/2016        90.3        19.5       580.13  

Amazon.com

     12/31/2016        136.0        2.4       405.54  

Apple Inc.

     9/24/2016        215.6        45.7       733.36  

Applied Materials, Inc.

     10/30/2016        10.8        1.7       39.81  

Cisco Systems, Inc.

     7/30/2016        49.2        10.7       171.72  

Facebook

     12/31/2016        27.6        10.2       396.42  

Hewlett Packard Enterprise Company1

     10/31/2016        50.1        3.2       38.33  

HP Inc.1

     10/31/2016        48.2        2.5       29.38  

International Business Machines Corporation

     12/31/2016        79.9        11.9       169.83  

Micron Technology Inc.

     8/31/2016        12.4        (0.3     28.19  

Microsoft Corporation

     6/30/2016        85.3        16.7       496.49  

Oracle Corporation

     5/31/2016        37.0        8.9       175.13  

Qualcomm Incorporated

     9/25/2016        23.5        5.7       83.36  

Texas Instruments Incorporated

     12/31/2016        13.4        3.6       77.83  

TSMC Limited2

     12/31/2016        29.4        10.4       155.06  

S&P 100 Peer Group

 

AT&T Inc.

     12/31/2016        163.8        13.0       258.01  

The Dow Chemical Company

     12/31/2016        48.1        4.3       76.75  

General Electric Company

     12/31/2016        123.7        8.8       262.79  

Johnson & Johnson

     1/1/2017        71.9        16.5       335.89  

Merck & Co., Inc.

     12/31/2016        39.8        3.9       182.80  

Pfizer Inc.

     12/31/2016        52.8        7.2       205.46  

Schlumberger Limited

     12/31/2016        27.8        (1.7     112.51  

United Parcel Service, Inc.

     12/31/2016        60.9        3.4       92.16  

United Technologies Corporation

     12/31/2016        57.2        5.0       90.53  

Verizon Communications Inc.

     12/31/2016        126.0        13.1       204.20  

 

1 

HP Enterprise and HP Inc. were excluded from the 2016 annual incentive cash calculation for measuring relative financial performance due to the lack of historical comparability.

2

Data set forth for TSMC Limited is based on unaudited financial information.

POST-EMPLOYMENT COMPENSATION ARRANGEMENTS

Intel does not provide change in control benefits to executive officers, and generally provides limited post-employment compensation arrangements to executive officers. In order to attract and retain the best talent in the technology sector, we have provided for time-limited, post-employment separation benefits to two newly hired listed officers in their offer letters, as described more fully below under “Other Agreements.”

Likewise, Mr. Holt was eligible to participate in the retirement component of our 2016 Restructuring Program, and received the broad-based retirement benefits made available to other retirement-eligible employees in connection with his retirement. Mr. Holt’s 2016 Restructuring Program retirement benefits included a retirement payment equal to one year of base pay and annual incentive cash target, up to two years of health care assistance (including six months of premium support contributions under our retiree medical plan) and one year of financial planning assistance; in order to receive these retirement benefits under our 2016 Restructuring Program, Mr. Holt executed a release of claims in favor of Intel.

 

 

 

 

LOGO

 

 

    55  


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    Other Aspects of Our Executive Compensation Programs

 

 

The limited post-employment compensation arrangements made generally available to our executives, including the listed officers, consist of:

 

 

a 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;

 

 

a non-tax-qualified supplemental deferred compensation plan for certain highly compensated employees; and

 

 

retirement acceleration provisions for equity awards.

The company-funded pension plan was closed to new hires starting January 1, 2011. Effective January 1, 2015, future benefit accruals were frozen for all employees at or above a specific grade level, including all listed officers.

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 listed officers are the same as those available to other eligible employees in the United States.

Intel does not make matching contributions based on the amount of employee contributions under any of these plans. Instead, Intel’s contribution consists of a discretionary cash contribution determined annually by the committee for listed officers, and by the CEO for other employees. These contribution percentages have historically been the same for listed officers and other employees but are made to different plans depending on employee grade level and start date.

For 2016, Intel’s discretionary contribution (including allocable forfeitures) for eligible U.S. employees, including listed officers, in the applicable 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 (the tax code), Intel credits the additional amount to the non-qualified deferred compensation plan. Effective January 1, 2015, plan assets contributed for U.S. participants and discretionary employer contributions are participant-directed.

PERSONAL BENEFITS

Intel provides perquisites to executive officers when the Compensation Committee determines that such arrangements are appropriate and consistent with Intel’s business objectives. In 2016, Intel offered the listed officers certain financial planning services and physical examinations. In addition, in 2016, our Board of Directors determined to enhance the personal security for our CEO and certain other listed officers in response to specific Intel-related incidents and threats against those officers and, in some cases, members of their families. We do not consider these additional security measures to be a personal benefit for our listed officers, but rather appropriate expenses for the benefit of Intel that arise out of our executives’ employment responsibilities and that are necessary to their job performance and personal safety. In determining to authorize these arrangements and expenses, the Board and committee followed a robust process, including reviewing and discussing analyses and recommendations from a leading security firm and law enforcement agencies. The Board and committee have taken specific steps to ensure that such measures are appropriately targeted, including providing enhanced security only in response to specific incidents and threats; not providing enhanced security for all executive officers generally; and ensuring that the committee, comprised solely of independent directors, authorizes each arrangement (with no executive officer participating in the decision to approve enhanced security measures for himself or herself). Further, the Board and committee instituted a process for periodic oversight of the nature and cost of security measures and will discontinue, adjust, or enhance security as appropriate. In connection with hiring Dr. Renduchintala to join Intel, the committee approved providing relocation assistance and certain travel benefits, reflecting the competitive market for executives in the technology industry. Other than the perquisites listed above, Intel does not provide perquisites to its executive officers.

OTHER AGREEMENTS

As discussed above, to accelerate our transformation from a PC company to a cloud and smart, connected device company, we have made two significant outside hires in the past 18 months: Dr. Renduchintala, to lead our Client and IoT Businesses and System Architecture Group, and Mr. Swan as our new Chief Financial Officer. In order to offset the value of compensation forgone or forfeited when they separated from their prior employers and reflecting the competitive market for executives in the technology sector, we have provided certain additional benefits in their offers.

Pursuant to his offer letter, Dr. Renduchintala was eligible to receive a sign-on cash award and an equity award in part to offset the value he lost by leaving his prior employer. In addition, for 2016, and for each of 2017 and 2018, Dr. Renduchintala is eligible to receive a supplemental bonus in the event that his annual incentive cash payment is less than $2,100,000 in each year due to the company’s performance; no supplemental bonus was payable in respect of 2016. Likewise, for each of 2016, 2017, and 2018,

 

56  

 

  2017 PROXY STATEMENT    

 


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS    Other Aspects of Our Executive Compensation Programs

 

 

Dr. Renduchintala is eligible for an annual equity grant with a grant date value of at least $6,000,000. Under his offer letter, Dr. Renduchintala was eligible for our standard relocation benefits in connection with his move to the San Francisco Bay Area, as well as coverage of commuting and travel costs between his home in Southern California and Intel’s headquarters in Santa Clara until the completion of the move; to optimize his time, Dr. Renduchintala is eligible for certain travel benefits, including a car and driver for commuting purposes. Finally, in the event that his employment is terminated by Intel within the first three years of employment for any reason other than cause (as defined in the offer letter), Dr. Renduchintala is eligible for a severance payment, the value of which declines in quarterly increments over the three-year period, subject to his execution and delivery of an effective release of claims in favor of Intel.

Pursuant to his offer letter, Mr. Swan was provided certain benefits in part to offset the value he lost by leaving his prior employer, consisting of a sign-on cash award in the aggregate amount of $5,500,000 payable in three installments from 2016 through 2018, and a new-hire RSU with a grant value of $9,500,000. In terms of our annual and long-term incentive plans, Mr. Swan’s offer letter provides that he is eligible for a target payout of $1,122,000 under Intel’s annual incentive cash plan, with the 2016 payout prorated for his actual period of service. Finally, in the event that his employment is terminated by Intel within the first two years of employment for any reason other than cause (as defined in the offer letter), Mr. Swan is eligible to receive the then-unpaid portion of his sign-on award, subject to his execution and delivery of an effective release of claims in favor of Intel.

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 and other senior 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.

As of December 31, 2016, each of Intel’s listed officers had satisfied these ownership guidelines, or still had 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 2016 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. The 2006 Equity Incentive Plan in addition provides that the Compensation Committee must first determine that the applicable executive officer engaged in conduct contributing to the reason for the restatement.

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.

 

 

 

LOGO

 

 

    57  


Table of Contents

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, Robert H. Swan. 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 2016 Annual Report on Form 10-K (incorporated by reference) and in this proxy statement.

Compensation Committee

David S. Pottruck, Chairman

Reed E. Hundt

David B. Yoffie

 



 

58  

 

  2017 PROXY STATEMENT    

 


Table of Contents

EXECUTIVE COMPENSATION

The following table lists the annual compensation for fiscal years 2016, 2015, and 2014 of our CEO, Chairman, CFO, and our other most highly compensated officers in 2016, including two who were not serving as executive officers as of the end of 2016 (referred to as our listed officers).

2016 Summary Compensation Table

 

Name and Principal Position   Year     Salary
($)
    Bonus
($)
    Stock
Awards
($)
    Non-Equity
Incentive Plan
Compensation
($)
    Change in
Pension
Value and
Non-Qualified
Deferred
Compensation
Earnings
($)1
    All Other
Compensation
($)
    Total
($)
 
Brian M. Krzanich     2016       1,250,000             11,710,600       3,699,200       3,000       2,416,200       19,079,000  
Chief Executive Officer     2015       1,100,000             9,799,000       3,454,700             279,800       14,633,500  
      2014       1,000,000       500       6,658,700       3,354,400       22,000       161,800       11,197,400  
Andy D. Bryant     2016       611,800             2,111,000       1,227,800       92,000       106,400       4,149,000  
Chairman of the Board     2015       790,000             4,585,700       1,456,000             132,800       6,964,500  
      2014       790,000       500       4,512,500       1,870,500       267,000       102,000       7,542,500  
Robert H. Swan2     2016       194,800       2,750,000       8,947,200       313,900             7,000       12,212,900  
Executive Vice President and Chief Financial Officer                                                                
Stacy J. Smith     2016       800,000             4,611,000       1,912,400       21,000       463,500       7,807,900  
Executive Vice President,     2015       775,000             4,388,900       1,790,800             139,600       7,094,300  
Manufacturing, Operations and Sales     2014       673,000       500       4,338,900       1,663,400       183,000       106,300       6,965,100  
Venkata (Murthy) Renduchintala2     2016       900,000       2,700,000       13,500,600       2,228,400             1,118,700       20,447,700  

Executive Vice President,

President, Client and IoT Businesses and System Architecture Group

                                                               
Diane M. Bryant2     2016       618,700       400,000       4,354,900       942,800       2,000       101,700       6,420,100  
Executive Vice President, General Manager, Data Center Group                                                                
William M. Holt3     2016       327,300             3,854,700       593,100             1,229,800       6,004,900  
Former Executive Vice President,     2015       650,000             3,675,000       1,081,400       25,000       95,000       5,526,400  
General Manager, Technology and Manufacturing Group     2014       641,000       500       4,338,900       1,252,800       288,000       78,700       6,599,900  
Gregory R. Pearson2     2016       545,000             3,220,600       713,600       7,000       60,900       4,547,100  
Senior Vice President, General Manager, Sales and Marketing Group                                                                

 

1 

In 2015, the following listed officers had a loss in pension value of the following amounts: Mr. Bryant ($18,000) and Mr. Smith ($7,000). Mr. Krzanich’s pension value did not change. Mr. Holt took a distribution in 2016 and had no outstanding benefit at year-end.

 

2 

Mr. Swan, Dr. Renduchintala, Ms. Bryant, and Mr. Pearson were not listed officers prior to 2016. Mr. Swan was hired in October 2016.

 

3 

Mr. Holt retired from the company in June 2016.

Bonus. Mr. Swan and Dr. Renduchintala received sign-on cash awards made in part to offset cash compensation forgone when they separated from their prior employers to join Intel. Ms. Bryant received the last installment payment under a cash-based retention award granted to her in 2013, prior to when she became an executive officer.

Equity Awards. Under SEC rules, the values reported in the “Stock Awards” column 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 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.

 

 

 

LOGO

 

 

    59  


Table of Contents

EXECUTIVE COMPENSATION    2016 Summary Compensation

 

 

The following table includes the assumptions used to calculate the aggregate grant date fair value of awards reported for 2016, 2015, and 2014 on a grant-date by grant-date basis.

 

     Assumptions
Grant Date    Volatility    Expected

Life

(Years)

   Risk-Free

Interest

Rate

   Dividend

Yield

1/23/2014    23%    n/a    0.6%    3.6%
1/23/2015    27%    n/a    0.7%    2.6%
7/22/2015      n/a    n/a    0.6%    3.4%
1/25/2016    23%    n/a    1.0%    3.5%
7/27/2016      n/a    n/a    0.7%    3.0%
10/25/2016      n/a    n/a    0.8%    3.0%

Non-Equity Incentive Plan Compensation. The amounts in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table include 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       

2016

2015

2014

 

 

 

   3,546,700

3,301,700

3,221,400

   152,500

153,000

133,000

   3,699,200

3,454,700

3,354,400

Andy D. Bryant       

2016

2015

2014

 

 

 

   1,170,500

1,369,700

1,776,300

     57,300

  86,300

  94,200

   1,227,800

1,456,000

1,870,500

Robert H. Swan        2016         284,200      29,700       313,900

Stacy J. Smith

      

2016

2015

2014

 

 

 

   1,824,000

1,698,000

1,581,800

     88,400

  92,800

  81,600

   1,912,400

1,790,800

1,663,400

Venkata (Murthy) Renduchintala        2016      2,128,000    100,400    2,228,400
Diane M. Bryant        2016         882,100      60,700       942,800

William M. Holt

      

2016

2015

2014

 

 

 

      574,900

1,013,000

1,179,500

     18,200

  68,400

  73,300

      593,100

1,081,400

1,252,800

Gregory R. Pearson        2016         664,700      48,900       713,600

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 2016 fiscal year-end compared with the 2015 fiscal year-end value. Since the benefit is a fixed dollar amount payable at the assumed retirement age of 65, year-to-year differences in the present value of the accumulated benefit arise mainly 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 2016 because the lump-sum conversion rate used to convert an annuity into a lump-sum benefit decreased from 2015 to 2016. This was partially offset by the increase to the interest rate used to calculate present value increased from approximately 4.0% for 2015 to approximately 4.3% for 2016.

 

60  

 

  2017 PROXY STATEMENT    

 


Table of Contents

EXECUTIVE COMPENSATION    2016 Summary Compensation

 

 

All Other Compensation. The amounts in the “All Other Compensation” column of the Summary Compensation Table include tax-qualified discretionary company contributions credited under the retirement contribution component of the 401(k) savings plan, discretionary company contributions credited under the retirement contribution component of the non-qualified deferred compensation plan, and payments for perquisites, as detailed in the table below. Perquisites for 2016 include financial planning and eligibility for health evaluations, company-provided transportation (including commuting and relocation services for Dr. Renduchintala), and residential security costs.

 

Name       Year           Retirement    

Plan

Contributions1

($)

  Deferred

  Compensation  

Plan

Contributions2

($)

  Tax
Gross-
Ups3

      ($)      

   Retirement 

Benefits4

($)

  Financial
Planning and
Physicals

($)

  Company-
Provided
Transportation5

($)

  Residential
Security5

($)

Brian M. Krzanich   2016   13,300   221,300           —                 —   25,700   22,200   275,200
  2015   13,300   210,100           —                 —   16,800           —  
    2014   13,000   132,500           —                 —   16,300           —    
Andy D. Bryant   2016   13,300     89,100           —                 —     4,000           —  
  2015   13,300   119,500           —                 —           —           —  
    2014   13,000     89,000           —                 —           —           —    
Robert H. Swan   2016           —             —           —                 —     7,000           —    
Stacy J. Smith   2016   13,300   115,800           —                 —   24,500           —  
  2015   13,300   109,000           —                 —   17,300           —  
    2014   13,000     76,500           —                 —   16,800           —    
Venkata (Murthy) Renduchintala   2016           —             —   32,800                 —     7,000   56,400     77,700
Diane M. Bryant   2016   13,300     55,900           —                 —   24,500     8,000    
William M. Holt   2016   13,300     55,900           —   1,156,600     4,000           —  
  2015   13,300     81,700           —                 —           —           —  
    2014   13,000     65,700           —                 —           —           —    
Gregory R. Pearson   2016   13,300     43,700           —                 —     3,900           —    

 

1 

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 1/2).

 

2 

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 in the calendar year before the calendar year in which that compensation is deferred.

 

3 

Amounts represent equalization payments to Dr. Renduchintala to offset taxes imposed on his relocation benefits, consistent with the company-wide policy for relocation costs.

 

4 

Amounts represent retirement payments and benefits for Mr. Holt under broad-based Intel programs in connection with his retirement.

 

5 

For company-provided aircraft, the amount reported represents the cost per flight hour of the aircraft less amounts reimbursed by the listed officer. For other company-provided transportation costs and residential security costs, the amount reported represents the cost to Intel or, with respect to arrangements that are utilized both in business and non-business contexts, an allocation of the cost to Intel of such arrangements.

The “All Other Compensation” column of the Summary Compensation Table also includes, in addition to the amounts above, personal security arrangements for Mr. Krzanich in the amount of $1,858,500, for Mr. Smith in the amount of $309,900, and for Dr. Renduchintala in the amount of $944,800. We do not consider these measures to be a personal benefit for our listed officers, but instead appropriate expenses for the benefit of Intel that arise out of our executives’ employment responsibilities and that are necessary to their job performance. In determining to authorize these non-standard arrangements and expenses, the Board and Compensation Committee has evaluated the need to respond to specific Intel-related incidents and threats, and has reviewed recommendations from a leading security firm and law enforcement agencies. As with security provided when our officers attend public events and business travel-related security that is provided when appropriate, Intel monitors these arrangements and adjusts them as circumstances warrant. In addition, the Board and committee instituted a process for periodic oversight of the nature and cost of security measures and will discontinue, adjust, or enhance security as appropriate.

 

 

 

LOGO

 

 

    61  


Table of Contents

EXECUTIVE COMPENSATION    Grants of Plan-Based Awards in Fiscal Year 2016

 

 

Grants of Plan-Based Awards in Fiscal Year 2016

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 2016. 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 2016 Table

 

                       

Estimated Future

Payouts under Non-

Equity Incentive Plans

   

Estimated Future Payouts

under Equity Incentive Plans1

   

All Other

Stock

Awards:

Number of

Shares of
Stock or

Units (#)

 

   

Grant Date

Fair Value

of Stock

Awards ($)3

 

 
Name  

Grant

Date

   

Approval

Date

    Award Type  

Target

($)2

   

Maximum

($)

   

Threshold

(#)

   

Target

(#)

   

Maximum

(#)

     

Brian M. Krzanich

    1/25/2016       1/21/2016     OSU                           184,570       369,140               7,179,800  
    1/25/2016       1/21/2016     RSU               160,580       4,530,800  
    1/25/2016       1/21/2016     Annual Cash     3,500,000       10,000,000            
      1/25/2016       1/21/2016     Quarterly Cash     152,500                                                  

Andy D. Bryant

    1/25/2016       1/21/2016     OSU               27,880       55,760         1,084,500  
    1/25/2016       1/21/2016     RSU               36,380       1,026,500  
    1/25/2016       1/21/2016     Annual Cash     943,000       10,000,000            
      1/25/2016       1/21/2016     Quarterly Cash     57,300                                                  

Robert H. Swan

    10/25/2016       9/12/2016     RSU               270,420       8,947,200  
    10/25/2016       9/12/2016     Annual Cash     1,122,000       10,000,000            
      10/25/2016       9/12/2016     Quarterly Cash     29,700                                                  

Stacy J. Smith

    1/25/2016       1/21/2016     OSU               72,670       145,340         2,826,900  
    1/25/2016       1/21/2016     RSU               63,230       1,784,100  
    1/25/2016       1/21/2016     Annual Cash     1,800,000       10,000,000            
      1/25/2016       1/21/2016     Quarterly Cash     88,400                                                  
Venkata (Murthy) Renduchintala     1/25/2016       1/21/2016     OSU               92,280       184,560         3,589,700  
    1/25/2016       1/21/2016     RSU               351,260       9,910,900  
    1/25/2016       1/21/2016     Annual Cash     2,100,000       10,000,000            
      1/25/2016       1/21/2016     Quarterly Cash     100,400                                                  

Diane M. Bryant

    1/25/2016       1/21/2016     OSU               61,140       122,280         2,378,300  
    1/25/2016       1/21/2016     RSU               53,190       1,500,800  
    7/27/2016       5/18/2016     RSU               14,300       475,800  
    1/25/2016       1/21/2016     Annual Cash     1,050,000       10,000,000            
      1/25/2016       1/21/2016     Quarterly Cash     60,700                                                  

William M. Holt

    1/25/2016       1/21/2016     OSU               60,750       121,500         2,363,200  
    1/25/2016       1/21/2016     RSU               52,860       1,491,500  
    1/25/2016       1/21/2016     Annual Cash     1,095,000       10,000,000            
      1/25/2016       1/21/2016     Quarterly Cash     18,200                                                  

Gregory R.

Pearson

    1/25/2016       1/21/2016     OSU               50,760       101,520         1,974,600  
    1/25/2016       1/21/2016     RSU               44,160       1,246,000  
    1/25/2016       1/21/2016     Annual Cash     690,000       10,000,000            
      1/25/2016       1/21/2016     Quarterly Cash     48,900                                                  

 

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 2016 quarterly incentive payment. Actual 2016 annual incentive cash payments are reported under the heading “Non-Equity Incentive Plan Compensation” above.

 

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. This does not represent the actual value that may be realized by a listed officer upon vesting of the award.

 

62  

 

  2017 PROXY STATEMENT    

 


Table of Contents

EXECUTIVE COMPENSATION    2016 Operational Goals

 

 

OSU Awards. OSUs granted to the listed officers in 2016 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 2016, 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. For the OSUs granted in 2016, listed officers receive dividend equivalents based on dividends payable over the vesting period on the number of shares of Intel common stock earned and vested. The dividend equivalents will be paid upon vesting in the form of additional shares of Intel common stock.

RSU Awards. RSUs granted to the listed officers in 2016, with the exception of Robert Swan’s RSUs, will vest in substantially equal quarterly increments over three years from the grant date. The RSUs granted to Mr. Swan when he was hired will vest annually over three years from the grant date.

2016 Operational Goals

Annual Incentive Cash. Early in the year, the Compensation Committee sets each listed officer’s incentive cash target amount as part of the annual performance review and compensation adjustment cycle. After the end of the year, the incentive cash target amount is multiplied by the annual incentive cash payout percentage, which is based on a weighted average of three corporate performance components; an absolute financial component (25% weighting), a relative financial component (25% weighting), and an operational performance component (50% weighting).

Each corporate performance component is targeted around a score of 100%, with a minimum score of zero. Additional details on each component are provided below. This plan mirrors the broad-based plan for employees, with the added feature that the payout may be adjusted for individual performance.