DEF 14A 1 d648184ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

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INTEL CORPORATION

 

 

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intel 50 2019 PROXY STATEMENT DO WONDERFUL NOTICE OF ANNUAL STOCKHOLDERS' MEETING


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Intel was built with a purpose: to ponder what might be possible—to imagine, question, and then do wonderful things in pursuit of a better future. Our 50th anniversary is an important moment for us to honor our heritage and accomplishments of the past while celebrating how we’re creating a bright future for Intel today and a better world tomorrow. 1968 – A new venture Robert Noyce and Gordon Moore leave Fairchild Semiconductor and incorporate their new venture as N M Electronics. Soon after, they purchase the rights to use the Intel name from a company called Intelco. 1971 – IPO and 4004 Intel goes public at $23.50 per share, raising $6.8 million, and launches the world’s first commercially available microprocessor, the 4004. 1979 – Fortune 500 Intel debuts on the Fortune 500 at position 486, and Fortune names Intel one of 10 “Business Triumphs of the Seventies.” 1985 – Focus on microprocessors Intel exits the DRAM business that was fundamental to its early success to concentrate on microprocessors. 1988 – Intel Foundation Established With a commitment to improving lives around the world, the Intel Foundation invests in science, technology, engineering, and mathematics (STEM) programs, provides disaster relief, and amplifies the impact of employee donations and volunteerism. 1993 – Pentium® Processor Arrives A Fortune cover story heralds Intel’s powerful new processor as the leading player in “The New Computer Revolution.” 1968 Intel is founded. Intel at 50 Innovation platform for a new era Artificial Intelligence 5G Networks Autonomous driving


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1999 – Joining the Dow Intel is added to the Dow Jones Industrial Average stock market index. 2003 – Thinner, lighter laptops Intel® Centrino® processor technology brings high performance, longer battery life, and integrated wireless LAN capability to a new generation of laptops. 2008 – leading in Green Power Intel becomes the largest voluntary corporate purchaser of green power in the U.S., and continues to increase its investment in subsequent years, with 100% of its U.S. and European power coming from renewable sources by 2018. 2018 Transforming from PC to data-centric. 2068 The future is what we make it. 2011 – a new dimension in Transistors Intel’s 3-D Tri-Gate transistors represent a fundamental departure from the flat transistors that have powered everyday devices for years, boosting computing performance to new levels. 2015 – transforming for data-centric era Intel acquires Altera, signals transformation for growth in data-driven markets like AI and autonomous driving. 2018 – Advancing diversity and inclusion Intel’s U.S. workforce reflects the percent of women and underrepresented minorities available in the U.S. skilled labor market. Data-rich world Intel’s impact on the world has been felt through a progression of tech waves, including the personal computer, the Internet, and cloud computing. The next and even more profound digital transformation is the integration of computing into virtually every human activity. Computing is about to become infinitely more diverse. It will evolve into new form factors and adapt to extreme cost and environmental constraints. It will power experiences informed by data that are always-on, always-learning, and able to excel at specialized tasks. With our manufacturing and engineering expertise, we continue to deliver the products and technologies that are the foundation for the world’s innovation.

 


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LETTER FROM YOUR CHAIRMAN

 

2018 was Intel’s 50th anniversary, a milestone year and the most profitable in Intel’s history. As reflected in the preceding pages, our history has been marked by our constant drive to advance technology to do wonderful things in pursuit of a better future. Intel is in the midst of a significant strategic evolution from a PC-centric to a data-centric company, delivering products that play critical roles in processing, storing, analyzing, and sharing data. The client computing business is healthy and an important source of profits. We believe that the strategic investments we have made in a product portfolio spanning the cloud to edge computing, including in new and growing opportunities such as memory, autonomous driving, and 5G, will help create new value for Intel. Intel is building the foundation for technology’s data-driven future.

 

 

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“It has been a remarkable progression from our early beginnings as a start-up in memory to our leadership in personal computing and now to our evolution to a data-centric company generating annual revenue of more than $70 billion.”

—Andy D. Bryant,

Chairman of the Board

ENVIRONMENTAL, SOCIAL AND GOVERNANCE LEADERSHIP

 

Our Board believes that Intel’s focus on corporate governance and corporate responsibility creates value for the company, our stockholders, and other stakeholders by identifying ways for technology to benefit the environment and society while also helping us mitigate risks, reduce costs, protect brand value, and identify market opportunities. With the Board’s oversight, we have embedded corporate responsibility and sustainability considerations into our corporate strategy, compensation, disclosure, and long-term goals to maintain and advance sustainable stockholder value. We set ambitious goals for Intel and make strategic investments to advance progress in the areas of diversity and inclusion, environmental sustainability, supply chain responsibility, and social impact, and collaborate with others to achieve positive societal impact on key issues—from proactively addressing climate and water risk, to working to eliminate risks of forced and bonded labor. To reinforce and align our executives to these goals, a portion of the operational performance component of our annual incentive cash program is tied to key corporate responsibility goals.

This proxy statement discusses many of our corporate responsibility and corporate governance perspectives and achievements, but I want to highlight a few that particularly reflect our values and culture.

ATTRACTING AND RETAINING THE BEST TALENT

We seek to attract and retain talented and engaged employees who can deliver their workplace best every day. This means making Intel a rewarding place to work, a company which our employees are proud to be a part of, and an environment where we promote diversity and inclusion. In 2018, we met our goal to achieve full representation of women and underrepresented minorities in our U.S. workforce, two years ahead of schedule. With approximately 85% of our 107,400 employees working in technical roles, our success depends on employees understanding how their work contributes to the company’s overall strategy. We use a variety of channels to facilitate open and direct communication, including open forums with executives; quarterly Organizational Health Polls; and engagement through more than 30 different employee resource groups, including the Women at Intel Network, the Network of Intel African American Employees, the Intel Latino Network, and others.

FOCUS ON SUSTAINABILITY

We are committed to transparency and performance improvement in environmental sustainability and have established public goals regarding, among other things,

 


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reducing our greenhouse gas emissions, investing in renewable energy, conserving water, and reducing waste generation. We focus on reducing our own direct climate “footprint”—the emissions resulting from our own operations, our supply chain, and the marketing and use of our products. We also focus on increasing our “handprint”—the ways in which our technology can help others reduce their footprints. In addition, we collaborate with others to drive industry-wide improvements and policy change. We carry this focus to our supply chain as well, actively collaborating with others and leading industry initiatives on key issues such as advancing responsible minerals sourcing, addressing risks of forced and bonded labor, and improving transparency around climate and water impacts in the global electronics supply chain.

STOCKHOLDER AND STAKEHOLDER ENGAGEMENT

 

Engagement with our stockholders is an important part of our Board’s corporate governance commitment. 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 team reports to the Board on investor feedback and emerging governance issues throughout the year, allowing the Board to better understand our stockholders’ priorities and perspectives and to incorporate them into the Board’s business and strategy decisions. We also engage with many other stakeholders throughout the year on a range of corporate responsibility issues. Over the past year, based on feedback from our stockholders, we enhanced our proxy statement disclosure regarding our directors’ skills, expertise, and background through the addition of a comprehensive Board Matrix. As a result of feedback received through our engagement program, we also worked to enhance integration of environmental, sustainability, and governance disclosures into our SEC reporting documents, and to align human capital and climate risk disclosures with external frameworks.

OUR NEW CEO

 

On January 30, 2019, our Board named Bob Swan to be Chief Executive Officer, based on the Board’s conclusion after a thorough search that Bob is the right leader to drive Intel into its next era of growth. Important factors in the Board’s decision included Bob’s performance as our Chief Financial Officer since joining Intel in 2016 and while serving as interim Chief Executive Officer; his knowledge of the business; his command of our growth strategy; and the respect he has earned from our customers, our stockholders, and his colleagues. I am confident that he is the right executive to lead Intel as we enter our next 50 years.

ATTENDING THE ANNUAL STOCKHOLDERS’ MEETING

 

We look forward to your attendance virtually via the Internet, or by proxy at the 2019 Annual Stockholders’ Meeting. We will hold the meeting at 8:30 a.m. Pacific Time on Thursday, May 16, 2019. You may attend, vote, and submit questions during the annual meeting via the Internet at https://intel.onlineshareholdermeeting.com.

While our Annual Stockholders’ Meeting is only one of the forums in our year-round engagement with stockholders, it is an important one. 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, while saving the company’s and investors’ time and money and reducing our environmental impact. Our virtual Annual Stockholders’ Meeting also enables non-stockholders to view our meeting. As in past years, stockholders can submit questions ahead of or during the meeting through the designated websites. We continue to work with industry groups and our stockholders to enhance our virtual Annual Stockholders’ Meeting and welcome your suggestions on how we can continue to make it more effective and efficient.

OUR NEXT 50 YEARS

 

The rest of the Board and I are extremely proud of this company, all it has accomplished in the last 50 years, and how we are positioned for the future. It has been a remarkable progression from our early beginnings as a start-up in memory to our leadership in personal computing and now to our evolution to a data-centric company generating annual revenue of more than $70 billion. As we look ahead to our next 50 years, there will be significant opportunities to apply Intel’s technology and the passion and expertise of our talented people to help solve the world’s greatest challenges in a smart, connected, and data-centric world.

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

Sincerely,

 

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ANDY D. BRYANT

Chairman of the Board

 

INTEL CORPORATION

2200 Mission College Blvd.

Santa Clara, CA 95054-1549

(408) 765-8080

 

 


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 INTEL CORPORATION NOTICE OF 2019 ANNUAL STOCKHOLDERS’ MEETING

 


 

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ARTIFICIAL INTELLIGENCE 5G NETWORKS AUTONOMOUS DRIVING DATA-RICH WORLD

DATE

  

TIME

  

RECORD DATE

 

THURSDAY, MAY 16, 2019

  

 

8:30 A.M. PACIFIC TIME

  

 

MARCH 18, 2019

 

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HOW TO VOTE

 

Please act as soon as possible to vote your shares, even if you plan to attend the annual meeting online. 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 106 of this proxy statement.

    

 

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ONLINE Vote online at www.proxyvote.com.

You may also attend the annual meeting online, including to vote and/or submit questions, at https://intel.onlineshareholdermeeting.com.

 

BY PHONE Vote by phone by calling the applicable number.

For stockholders of record: (800) 690-6903

For beneficial stockholders: (800) 454-8683

 

BY MAIL If you have received a printed version of these proxy materials, you may vote by mail.

ATTEND THE MEETING

LOGISTICS

 

 

Attend the annual meeting online, including to vote and/or submit questions, at https://intel.onlineshareholdermeeting.com.

 

 

The annual meeting will begin at approximately 8:30 a.m. Pacific Time, with log-in beginning at 8:15 a.m., on Thursday, May 16, 2019.

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.

IF YOU CANNOT ATTEND, FOLLOWING THE MEETING:

 

 

A replay of our annual meeting webcast will be available at our Investor Relations website at https://www.intel.com for at least one year.

 

 

A list of answers to investors’ questions received before and during the annual meeting will be available at the same website.

 

MANAGEMENT PROPOSALS

  

VOTING

    RECOMMENDATION    

OF THE BOARD

1.  Election of the 10 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 2019

   FOR

3.  Advisory vote to approve executive compensation of our listed officers

   FOR

4.  Approval of amendment and restatement of the 2006 Equity Incentive Plan

   FOR

STOCKHOLDER PROPOSALS

  

 

5.  Stockholder proposal on whether to allow stockholders to act by written consent, if properly presented

   AGAINST

6.  Stockholder proposal requesting a report on the risks associated with emerging public policies addressing the gender pay gap, if properly presented

   AGAINST

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

   AGAINST

IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD MAY 16, 2019: THE NOTICE OF 2019 ANNUAL STOCKHOLDERS’ MEETING AND PROXY STATEMENT AND THE 2018 ANNUAL REPORT ON FORM 10-K ARE AVAILABLE AT WWW.INTC.COM/ANNUALS.CFM

 



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 TABLE OF CONTENTS

 


 

4    Letter from Your Chairman         

INDEX OF FREQUENTLY
REQUESTED INFORMATION

8    Proxy Statement Highlights     
     BOARD OF DIRECTORS MATTERS                  
16    Proposal 1: Election of Directors          55     

Auditor Fees

22   

Director Skills, Experience, and Background

         52     

Beneficial Ownership Table

25   

Board Diversity and Refreshment

         25     

Board Evaluations

    

CORPORATE GOVERNANCE MATTERS

         26     

Board Leadership

26   

Board Leadership Structure

         93     

Burn Rate

32   

Board Responsibilities and Committees

         89     

CEO Pay Ratio

36   

Investor Engagement

         61     

CEO Transition

39    Our Capital          77     

Claw-Back Policies

46    Director Compensation          51     

Code of Conduct

52    Security Ownership of Certain Beneficial Owners and Management          34     

Compensation Consultant

     AUDIT COMMITTEE MATTERS          31     

Corp. Gov. Guidelines

54    Proposal 2: Ratification of Selection of Independent Auditor          38     

Corporate Responsibility

56    Report of the Audit Committee          32     

Director Attendance

     LISTED OFFICER COMPENSATION MATTERS          29     

Director Independence

58    Proposal 3: Advisory Vote to Approve Executive Compensation          17     

Director Biographies

59    Compensation Discussion and Analysis          24     

Director Skills Matrix

63    2018 Compensation of Our Listed Officers          25     

Director Tenure

73    Intel’s Compensation Framework          60     

Financial Performance

78    Report of the Compensation Committee          42     

Human Capital

79    Summary Compensation Table          31     

ISG Framework

82    Grants of Plan-Based Awards          26     

Lead Director Duties

83    Stock Option Exercises and Stock Vested          59     

Listed Officers for 2018

84    Outstanding Equity Awards          61     

Pay-for-Performance

85    Pension Benefits          74      Peer Group
86   

Non-Qualified Compensation

         76     

Perks

87   

Other Potential Post-Employment Payments

         67     

Realizable Pay

    

ADDITIONAL COMPENSATION MATTERS

         50     

Related Party Transactions

89   

CEO Pay Ratio

         27     

Risk Oversight

90
  

Proposal 4: Amendment and Restatement of the 2006 Equity Incentive Plan

         77     

Stock Ownership Guidelines

    

STOCKHOLDER PROPOSALS

         12     

Strategy Update

99   

Proposal 5: Written Consent

         32      Succession Planning
101   

Proposal 6: Gender Pay Equality

         77      Tax Deductibility
103   

Proposal 7: Advisory Vote on Political Contributions

         
    

ADDITIONAL MEETING INFORMATION

         
106   

Online Meeting

         
106   

Meeting Admission

         
106   

Vote Before or During the Meeting

         
    

OTHER MATTERS

          







 

  Information in Proxy Statement
Highlights—A Year in Review
(page 10), Proxy Statement
Highlights—Business Overview
(page 11), and Our Capital
(pages 39-45) is reproduced from our
Annual Report on Form 10-K and
speaks as of February 1, 2019, the
date we filed our Form 10-K.

109    Section 16(a) Reporting Compliance     
109   

2020 Stockholder Proposals or Nominations

    
111   

Communicating with Us

    
A-1   

Appendix A: Non-GAAP Financial Measures

    
B-1    Appendix B: Amended and Restated 2006 Equity Incentive Plan     
            

 


 

 

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  2019 PROXY STATEMENT         Table of Contents        


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INTRODUCTION TO OUR BUSINESS 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. OUR VISION is if it is smart and connected, it is best with Intel. OUR COMMITMENT to corporate responsibility and Sustainability leadership is deeply integrated throughout our business. We are a world leader in the design and manufacturing of essential technologies that power the cloud and an networking, data storage, and communications solutions to increasingly smart, connected world. We offer computing, a broad set of customers spanning multiple industries. In1968, Intel was incorporated in California (reincorporated in Delaware in 1989), in what became known as Silicon Valley, and our technology has been at the heart of computing breakthroughs ever since. We're now in the midst of a corporate transformation as we grow beyond our traditional PC and server businesses into data-rich markets addressing the explosive demands to process, analyze, store, and transfer data. The transformation is well underway, with our data-centric businesses representing an increasing share of our overall revenue. Our vision is to build a smart and connected world that runs on Intel(R) solutions. This vision is supported by our commitment to corporate responsibility, our relentless pursuit of Moore's Law, and the talent of our amazing employees. Don't be encumbered by history. Go off and do something wonderful. Bob Noyce, Intel Co-Founder Proxy Statement Highlights 2019 PROXY STATEMENT


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 OVERVIEW OF THE BOARD

 


 

For the 2019 Annual Stockholders’ Meeting, our Board recommends the following 10 director nominees listed below. Our Board considers numerous factors when assessing the qualifications for each Board nominee, such as alignment with the Company’s future strategic direction; independence; understanding of and experience in manufacturing, technology, finance, and marketing; international experience; mix of ages; and gender and ethnic diversity. In this regard, our Board is committed to actively seeking women and minority director candidates for consideration.

 

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Independent Directors, 8 of 10

 

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ANEEL BHUSRI

Age: 53 Director Since: 2014

Committees: CGN*, EC*

LEAD DIRECTOR

 

 

REED E. HUNDT

Age: 71 Director Since: 2001

Committees: AC, CC, EC

 

OMAR ISHRAK

Age: 63 Director Since: 2017

Committees: CC*, FC

 

RISA LAVIZZO-MOUREY

Age: 64 Director Since: 2018

Committees: CGN

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TSU-JAE KING LIU

Age: 55 Director Since: 2016

Committees: AC, FC

 

 

GREGORY D. SMITH

Age: 52 Director Since: 2017

Committees: AC*, FC

 

ANDREW WILSON

Age: 44 Director Since: 2017

Committees: CC, FC*

 

FRANK D. YEARY

Age: 55 Director Since: 2009

Committees: AC, CGN*

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Non-Independent Directors, 2 of 10

 

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“We celebrated our 50th

anniversary with record

financial results and

achievement of our diversity

and inclusion milestones.”

 

—Andy D. Bryant,

Chairman

ROBERT (“BOB”) H. SWAN

Age: 58 Director Since: 2019

Committees: EC

CEO

 

ANDY D. BRYANT

Age: 68 Director Since: 2011

Committees: EC

CHAIRMAN

 

AC  Audit Committee

 

CC  Compensation Committee

 

CGN  Corporate Governance
& Nominating Committee

 

EC  Executive Committee

 

FC   Finance Committee

*  Committee Chair/Co-Chair

 

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5.1 YRS average tenure of director nominees 20% of director nominees are women 40% of director nominees are ethnically diverse

 


 

 

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  2019 PROXY STATEMENT         Proxy Statement Highlights    9


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 A YEAR IN REVIEW

 


 

Five years ago, we set out a strategy to transform from a PC-centric to a data-centric company. Our 2018 results serve as a strong proof point that our strategy is working and our transformation is well underway. We achieved record revenue and earnings per share (EPS), driven by strong business performance, continued operating leverage, and a lower tax rate. Revenue from our data-centric businesses collectively increased by double digits. Our PC-centric business grew above our expectations and continued to be a source of profit, cash flow, scale, and intellectual property (IP). While we have had delays in implementing our 10 nanometer (nm) manufacturing process technology, we have continued to innovate in our 14nm products, introducing leadership products that deliver more value to our customers. We’ve expanded beyond PC and server businesses with significant growth in adjacent products, and gained share in an expanded $300 billion total addressable market (TAM)1. Our employees are executing to our strategy by developing compelling technology and delivering innovative products to our customers, enabling strong financial growth.

 

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“The investments in
technology and talent we have
made in our transformation
to a data-centric company
position Intel to serve a
broader set of customers in an
expanded market for silicon.”

 

— Bob Swan,
Intel Chief
Executive Officer

                                   

REVENUE

   

OPERATING INCOME

   

DILUTED EPS

 

 

 

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$70.8B

 

        

$23.3B

 

   

$24.5B

 

   

$4.48

 

   

$4.58

 

GAAP

   

GAAP

   

non-GAAP2

   

GAAP

   

non-GAAP2

Revenue up $8.1B or 13% from 2017; data-centric up 18% and PC-centric up 9%

   

Operating income up $5.3B or 29% from 2017

 

   

Operating income up $4.9B or 25% from 2017

 

   

Diluted EPS up $2.49 or 126% from 2017

   

Diluted EPS up $1.11 or 32% from 2017

Strong growth with record revenue across the business.

   

Top-line growth and continued operating margin leverage while investing in key opportunities such as artificial intelligence (AI) and autonomous driving.

 

   

Demand for high-performance products, adjacency growth, disciplined spending focus, and lower tax rate from Tax Reform3.

       

GOAL

   

GOAL

   

GOAL

Achieve at least low double-digit growth of data-centric businesses and limit PC-centric business decline to low single digits.

 

   

Grow non-GAAP operating income faster than revenue.

   

Grow non-GAAP diluted EPS faster than non-GAAP operating income.

RESULT   LOGO   ACHIEVED

 
   

RESULT   LOGO   ACHIEVED

 
   

RESULT   LOGO   ACHIEVED

 

Exceeded our goal on both fronts with 18% data-centric businesses growth and 9% PC-centric business growth. Total revenue was approximately $6.0 billion higher than our expectation at the beginning of 2018.

   

On a non-GAAP basis, operating income grew faster than revenue two years in a row. From 2017 to 2018, non-GAAP operating income grew 25%, compared to 13% revenue growth.

    On a non-GAAP basis, diluted EPS grew faster than operating income two years in a row. From 2017 to 2018, non-GAAP diluted EPS grew 32%, compared to 25% non-GAAP operating income growth.

PC-CENTRIC $B DATA-CENTRIC $B $26.5 $28.8$33.8$59.4 $62.8$70.82016 2017 2018$13.1$1GAAP $B NON-GAAP $B 8.1$16.7 $23.3$19.7$24.52016 2017 2018$2.12 $1.99$4.48GAAP NON-GAAP$2.72$3.46$4.582016 2017 2018$32.9 $34.0 $37.0

 

1

Source: Intel calculated 2022 TAM derived from industry analyst reports.

2

See “Non-GAAP Financial Measures” in Appendix A.

3

Tax Reform refers to the U.S. Tax Cuts and Jobs Act enacted in December 2017.

 


 

10   Proxy Statement Highlights           2019 PROXY STATEMENT  

 

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Table of Contents

  BUSINESS OVERVIEW

 


 

DATA-CENTRIC BUSINESSES EXPAND WITH NEW OPPORTUNITIES

 

Our data-centric businesses have grown significantly over the last two years. To extend the momentum of this growth, we continue to offer innovative new products that provide higher performance and better value for our customers. We expect that our leadership products such as the second generation Intel® Xeon® Scalable processors and Intel® Stratix®10 SX FPGA will further advance our opportunity in AI and help our customers process and analyze the flood of data implicit in big bets.

 

  

PC-CENTRIC BUSINESS THRIVES

 

Our focus on product segmentation, innovation, and performance in PCs continued. To extend product leadership and deliver more value to customers, we launched our 9th generation Intel® Core i9 processors, which target the growing gaming market segment.

 

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Intel xeon platinum insideIntelaiIntel core i9 9th gen

 

BIG BETS MAKE PROGRESS

 

  

BOB SWAN OUR NEW CEO

 

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Memory autonomous 5g

  

Our big bets are memory, autonomous driving, and 5G, and we have made progress on all fronts to expand and compete in the data-centric world. We are shipping Intel® Optane DC persistent memory for data centers. We also announced our first 5G new radio (NR) multi-mode modem for 2019 and our plan to commercialize Mobility-as-a-Service (MaaS) with autonomous vehicles through a joint venture starting 2019.

 

  

On January 30, 2019, our Board of Directors appointed Bob Swan as our Chief Executive Officer, the seventh CEO in Intel’s 50-year history. Mr. Swan joined Intel as our Chief Financial Officer in October 2016.

 

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WE ARE PROUD OF OUR HERITAGE

 

 

Fifty years ago, Robert Noyce and Gordon Moore founded Intel. In honor of our golden anniversary, we are embracing Noyce’s inspiring challenge, “Don’t be encumbered by history. Go off and do something wonderful.” We celebrated our heritage and the wonderful things we are doing to create a bright future for Intel and the world. Two years ahead of schedule, we announced that we have achieved our goal of a U.S. workforce that reflects the diversity of the available skilled labor market.

 

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  2019 PROXY STATEMENT         Proxy Statement Highlights    11


Table of Contents

 OUR STRATEGY

 


 

We are in the midst of one of the most significant transformations in our corporate history. Over the last five years, we’ve made key investments and decisions to enter data-rich markets and deploy our IP and manufacturing technologies to redefine and expand our target market. We have evolved from a PC-centric company with a server business, to a data-centric company with an expanding portfolio of technology solutions that address customer needs across platform, storage, connectivity, and software. This transformation is evidenced by our 2018 revenue, of which roughly half was earned from data-centric businesses, and the expansion of our TAM, which we last estimated at more than $300 billion1.   

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Customer experiences cloud & data center accelerant customer expresses make the worlds best semiconductors lead the ai & autonomous revolution be the leading end to end platform provider for the new data world relentless focus on operational excellence & efficiency continue to hire, develop, and retain the best, most diverse, and inclusive talent technologies connectivity thinks & devices

Our customers are looking for solutions that can process, analyze, store, and transfer data—turning it into actionable insights, amazing experiences, and competitive advantages. The Intel® architecture platform provides the foundation for new solutions that take advantage of this growth of data.

MAKE THE WORLD’S BEST SEMICONDUCTORS

 

 

We make significant investments and innovations in our silicon manufacturing technologies and platforms. Our proprietary technologies make it possible to integrate products and platforms that address evolving customer needs and expand the markets we serve. Our innovation strategy includes investments in advanced manufacturing processes and packaging, architecture, interconnects, and embedded security features, as part of our efforts to be the leading end-to-end platform provider.

LEAD THE AI AND AUTONOMOUS REVOLUTION

 

 

We are positioned to be a driving force of the AI and autonomous revolution. By striving to build the world’s best AI platform, our strategy is to meet the needs of our most innovative customers, to advance and accelerate the AI industry’s open software stacks, to deliver the best AI products, and to seed and drive the AI ecosystem. Mobileye’s EyeQ* family of SoCs is already the automobile industry’s leading solution for advanced driver assistance systems, and Mobileye is building on that leadership.

BE THE LEADING END-TO-END PLATFORM PROVIDER FOR THE NEW DATA WORLD

 

 

Growth in processing power and breakthroughs in connectivity, storage, memory, and algorithms have led to a new era of data-centric computing. We have an unparalleled product portfolio that spans the entire data-centric market and we are inventing new solutions in the highest growth areas by investing across six engineering pillars: advanced manufacturing processes and packaging; new architectures to speed up specialized tasks like AI and graphics; super-fast memory; interconnects; embedded security features; and common software to unify and simplify programming for developers across our compute roadmap.

RELENTLESS FOCUS ON OPERATIONAL EXCELLENCE AND EFFICIENCY

 

 

Underlying our transformation to a data-centric company is a relentless focus on operational excellence and efficiency. This focus includes the elimination of lower growth investments and activities, and the simplification and automation of routine processes and activities. Operational excellence helps us fund the expansion of our TAM through big-bet investments such as memory, 5G technology, and autonomous driving.

CONTINUE TO HIRE, DEVELOP, AND RETAIN THE BEST, MOST DIVERSE AND INCLUSIVE TALENT

 

 

At the core of our organization are highly skilled, diverse, and talented people capable of accelerating, as one team, in everything we do. Our rich and powerful culture sets a solid foundation based upon 50 years of invention; product leadership; purposeful leadership in corporate governance practices; and partnership with suppliers, customers, regulators, and local communities in the development and deployment of sustainable business practices. We are proud of our past and inspired by our employees who are rising to the challenge to transform our methods, focus, and values in a way that helps each person achieve their personal best in delighting our customers with compelling products, winning in dynamic and competitive markets, and making a positive impact on our communities.

 

1

Source: Intel calculated 2022 TAM derived from industry analyst reports and internal estimates.

 


 

12   Proxy Statement Highlights           2019 PROXY STATEMENT  

 

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 OUR CAPITAL

 


 

In line with the International Integrated Reporting Framework’s six capitals concept, we have outlined how we deploy capital to execute our transformation strategy in ways that reflect our corporate values, delight our customers, and create value for our stockholders. Our six capitals are summarized here, with more detail in the “Corporate Governance; Our Capital” section of this proxy statement, and further description in our 2018 Annual Report on Form 10-K.

 

Our commitment to corporate responsibility creates value for Intel and our stockholders by helping us mitigate risks, reduce costs, build brand value, and identify new market opportunities. We set ambitious goals for our company and make strategic investments to advance progress in the areas of environmental sustainability, supply chain responsibility, diversity and inclusion, and social impact that benefit the environment and society.

 

We empower and invest in attracting and retaining talented employees who enable the development of solutions and enhance our intellectual and manufactured capital. Our effective utilization of natural resources and focus on corporate responsibility result in trusted relationships that support the growth of our business. Through these activities, we strive to develop the world’s best semiconductors, deliver great customer experiences, efficiently manage our supply chain, improve the communities in which we operate, and, ultimately, generate financial capital that is reinvested in our business and returned to stockholders.

  

 

 

Natural financial intellectual manufactured human social and relationship capital inputs value creation

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DRIVERS        STRATEGY    VALUE

 

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Cash flow and capital allocation strategy

 

  

 

Leverage financial capital to invest in the business, acquire and integrate strategic investments, and provide returns to stockholders in the forms of dividends and share repurchases.

 

  

 

We strategically invest financial capital to create value for our stockholders. Over the last five years, we:

- Generated $113 billion cash from operating activities;

- Generated $59 billion in free cash flow1; and

- Returned $55 billion to stockholders.

 

 

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Research and development (R&D) and IP rights

 

  

 

Invest significantly in R&D to ensure our process and product technologies compete successfully as we pursue our strategy to make the world’s best semiconductors and realize new data-centric opportunities.

 

  

 

We develop IP for our platforms to enable next-generation products, create synergies across our businesses, provide a higher return as we expand into new markets, and establish and support our brands.

 

 

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Capital assets and strategic supply chain investments

 

  

 

Invest timely and at a level sufficient to meet customer demand for current technologies and prepare for future technologies.

 

  

 

Our world-wide manufacturing scope and scale enable innovations to provide our customers and consumers with a broad range of leading-edge products in high volume.

 

 

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Employees and culture

 

  

 

Develop the talent needed to keep the company at the forefront of innovation and create a diverse, inclusive, and safe workplace.

 

  

 

We attract and retain talented and engaged employees who can deliver their workplace best every day and who create the intellectual capital we rely on to develop and advance our technologies and manufacturing.

 

 

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Supply chain responsibility and positive social impact

 

  

 

Build trusted relationships for both Intel and our stakeholders, including local communities, governments, suppliers, customers, and employees.

 

  

 

We collaborate on programs to empower underserved communities through education and technology, and on initiatives to advance accountability and capabilities across our global supply chain, including advancing respect for human rights.

 

 

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Resource efficiency

 

  

 

Continually strive to reduce our environmental footprint through efficient and responsible use of natural resources and materials used to create our products.

 

  

 

Our proactive efforts help us mitigate climate and water risk, achieve efficiencies, lower costs, and position us to respond to the needs and expectations of our stakeholders.

 

 

1 

See “Non-GAAP Financial Measures” in Appendix A.

 


 

 

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  2019 PROXY STATEMENT         Proxy Statement Highlights    13


Table of Contents

  INVESTOR ENGAGEMENT

 


 

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, in consultation with our Board, thoughtfully adopts and applies developing practices in a manner that best supports our business and our culture. As discussed further under “Investor Engagement” on page 36, 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.

 

 

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SUMMER Review annual meeting results, determine any next step actions, and prioritize post-annual meeting investor engagement focus areas Hold post-annual meeting investor meetings and report to the Board and Corporate Governance and Nominating Committee FALL WINTER Incorporate input from investor meetings into annual meeting planning and enhance governance practices and disclosures when warranted Conduct pre-annual meeting investor meetings to answer questions and obtain investor feedback on proxy matters SPRING ANNUAL STOCKHOLDERS' MEETING

INVESTOR ENGAGEMENT DIALOGUE

 

 

Below is a summary of the feedback we received through our 2018 investor engagement program and how we responded.

 

 

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BOARD LEADERSHIP We heard that our current structure (separate chairman and CEO) works well We responded by maintaining our current structure through our recent leadership transition BOARD DIVERSITY We heard that our board diversity disclosures could be improved We responded by breaking out separately the board's gender and ethnic diversity in this proxy statement ESG DISCLOSURES We heard that our Environmental, Social, and Governance (ESG) disclosures are best-in-class but could be enhanced in key areas We responded by working to align human capital and climate risk disclosures with external reporting frameworks EXECUTIVE COMPENSATION We heard that our long-term financial performance should factor more significantly into payouts We responded by adding a three-year EPS performance metric to our performance-based restricted stock units EQUITY PLANS We heard that our equity plans should be approved on a less frequent basis We responded by moving from a biennial to a triennial approval cycle starting after this year SPECIAL MEETINGS We heard that our current threshold for calling a special We responded by lowering the stock ownership threshold from 25% to 15% meeting of stockholders may be too high

 


 

14   Proxy Statement Highlights           2019 PROXY STATEMENT  

 

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Table of Contents

  EXECUTIVE COMPENSATION HIGHLIGHTS

 


 

PAY-FOR-PERFORMANCE COMMITMENT

 

 

Intel has a long-standing commitment to pay-for-performance. We compensate 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 reviewed and, when appropriate, adjusted to ensure that they continue to support Intel’s business goals and promote both current-year and long-term profitable growth of the company. There were no significant changes to the structure of our executive compensation programs for 2018.

 

   

The majority of cash compensation for our executive officers, as a group, may be earned 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 2018 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). For 2018, 80% of the annual equity award value granted to executive officers was comprised of OSUs.

 

   

In setting executive officer compensation, the Compensation Committee considers various factors including the individual performance reviews of our executive officers, scope of the executive officer’s role and responsibilities, and the compensation levels in a “peer group.” For 2018, 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.

 

CEO TARGET PERFORMANCE AND INCENTIVE PAY MIX

 

        

 

The following chart1 illustrates that approximately 93% of the 2018 total direct compensation granted by the Compensation Committee to our CEO Bob Swan in his position as interim CEO and Executive Vice President, Chief Financial Officer consisted of compensation elements that vary the level of payout based on company and individual performance, and therefore are considered “at risk.”

 

1  Does not include Mr. Swan’s (i) $1,000,000 third installment of his 2016 sign-on award, (ii) $1,500,000 cash bonus award for 2018 performance as interim CEO, (iii) “Change in Pension Value and Non-Qualified Deferred Compensation Earnings,” and (iv) “All Other Compensation” as reported in the Summary Compensation Table on page 79.

 

  

 

 

 

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80% 93% at risk pay 7% 13% Equity awards base salary non-equity incentive compensation

 

 

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  2019 PROXY STATEMENT         Proxy Statement Highlights    15


Table of Contents

 

 

 PROXY STATEMENT

 

 

 

INTEL CORPORATION

2200 Mission College Blvd.

Santa Clara, CA 95054-1549

 

Our Board of Directors solicits your proxy for the 2019 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 3, 2019.

 

 

  PROPOSAL 1

ELECTION OF DIRECTORS

Upon the recommendation of our Corporate Governance and Nominating Committee, our Board has nominated the 10 individuals listed below to serve as directors. Our nominees include eight independent directors, as defined in the rules for companies traded on the Nasdaq Global Select Market* (Nasdaq), and two Intel officers: Robert H. Swan, who became our Chief Executive Officer in January 2019, 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, and Aneel Bhusri became the independent Lead Director of the Board in May 2017.

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 votes cast “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 Before or 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 the Board of Directors Guidelines on Significant Corporate Governance Issues (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 instead. 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.

 

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RECOMMENDATION OF THE BOARD

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

 

 

 

 

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ANEEL BHUSRI

 

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LEAD DIRECTOR

 

AGE: 53

 

DIRECTOR SINCE: 2014

 

OTHER CURRENT

PUBLIC BOARDS:

Workday, Inc.

 

COMMITTEES:

Corporate Governance and

Nominating (Co-Chair),

Executive (Chair)

 

  

 

EXPERIENCE

 

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 was also 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 worked for PeopleSoft from 1993 to 1999, holding a number of leadership positions, including Senior Vice President responsible for product strategy, business development, and marketing, and served as vice chairman of the board from 1999 to 2004. He served on the board of directors of Pure Storage, Inc. from 2010 to 2018. 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.

 

SKILLS & EXPERTISE

 

Mr. Bhusri brings to the Board senior leadership, cloud computing expertise, human capital, and business development 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, including the identification and development of emerging technologies.

 

ANDY D. BRYANT

 

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CHAIRMAN

 

AGE: 68

 

DIRECTOR SINCE: 2011

 

OTHER CURRENT

PUBLIC BOARDS:

Columbia Sportswear Company

 

COMMITTEES:

Executive

  

 

EXPERIENCE

 

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 (CFO) 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. He served on the board of directors of McKesson Corporation from 2008 to 2018. Mr. Bryant currently serves on the board of directors of Columbia Sportswear Company.

 

SKILLS & EXPERTISE

 

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. In his role leading the Technology and Manufacturing Group, Mr. Bryant was responsible for manufacturing, human resources, information technology, and finance, and gained experience in emerging technologies and business models. 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 Guidelines regarding retirement of corporate officers and our Bylaw provision limiting the tenure of our Board Chairman, the Board determined to waive those provisions and 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 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 continue to provide important leadership continuity, particularly to help support our new CEO during a time of substantial business transformation. Mr. Bryant has informed the Board that, if he is re-elected to the Board at the 2019 Annual Stockholders’ Meeting, he would not expect to stand for re-election again at the 2020 Annual Stockholders’ Meeting.

 

 

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REED E. HUNDT

 

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AGE: 71

 

DIRECTOR SINCE: 2001

 

COMMITTEES:

Audit, Compensation,

Executive

 

  

 

EXPERIENCE

 

Reed E. Hundt has been a Principal of REH Advisors, LLC, a strategic advice firm in Washington, D.C., since 2009; 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; and CEO of Making Every Vote Count, a non-profit dedicated to electoral reform, since 2018. 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.

 

SKILLS & EXPERTISE

 

As an advisor to and an investor in telecommunications companies and other businesses on a worldwide basis, Mr. Hundt brings to the Board significant global experience in communications technology and the telecommunications industry. 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 Inteliquent, Inc., Ligado Networks LLC, SmartSky Networks, LLC, and The Climate Reality Project, where he is on the audit committee, provides cross-board experience and financial expertise. As Chairman and CEO of Making Every Vote Count, Mr. Hundt brings senior leadership experience to the Board. His work with a number of ventures involved in sustainable energy and the environment, including as founder and CEO of Coalition for Green Capital, an incubator of local clean energy finance organizations called green banks, provides him with a unique leadership perspective in developing new business models and overseeing Intel’s environmental and sustainability initiatives.

 

OMAR ISHRAK

 

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AGE: 63

 

DIRECTOR SINCE: 2017

 

OTHER CURRENT

PUBLIC BOARDS:

Medtronic plc

 

COMMITTEES:

Compensation (Chair),

Finance

  

 

EXPERIENCE

 

Dr. Omar Ishrak has been Chairman and CEO of Medtronic plc, a global medical technology company, since 2011. Prior to joining Medtronic, Dr. Ishrak served as President and CEO of GE Healthcare Systems, a comprehensive provider of medical imaging and diagnostic technology and a division of GE Healthcare, from 2009 to 2011. Dr. Ishrak was President and CEO of GE Healthcare Clinical Systems from 2005 to 2008 and President and CEO of GE Healthcare Ultrasound. Dr. 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 U.S. in a global context. Dr. Ishrak received his bachelor of science degree and PhD in Electrical Engineering from the University of London, King’s College.

 

SKILLS & EXPERTISE

 

Dr. 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. From his role at Medtronic, Dr. Ishrak has extensive experience identifying and developing emerging technologies and has overseen a number of strategic acquisitions, enabling him to bring business development and mergers and acquisitions (M&A) experience to the Board. Dr. Ishrak also provides technical, human capital, and brand marketing expertise from his role as a leader of a global medical technology company.

 

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RISA LAVIZZO-MOUREY

 

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AGE: 64

 

DIRECTOR SINCE: 2018

 

OTHER CURRENT

PUBLIC BOARDS:

General Electric Company

and Hess Corporation

 

COMMITTEES:

Corporate Governance

and Nominating

 

  

 

EXPERIENCE

 

Dr. Risa Lavizzo-Mourey has been the Robert Wood Johnson Foundation PIK Professor of Population Health and Health Equity at the University of Pennsylvania in Philadelphia, Pennsylvania, since 2018. Dr. Lavizzo-Mourey was President and Chief Executive Officer of the Robert Wood Johnson Foundation, the nation’s largest healthcare-focused philanthropic organization, based in Princeton, New Jersey, from 2003 to 2017, and Senior Vice President of that organization from 2001 to 2003. She previously held various appointments at the University of Pennsylvania Medical School, including Sylvan Eisman Professor of Medicine and Health Care Systems from 1995 to 2001, Director of the Institute on Aging from 1994 to 2002, and Chief of Geriatric Medicine from 1986 to 1992. Dr. Lavizzo-Mourey also held several government positions, including Deputy Administrator of the Agency for Health Care Research and Quality from 1992 to 1994, Co-Chair of the White House Health Care Reform Task Force from 1993 to 1994, and membership on a number of federal advisory committees. She received her MD from Harvard Medical School and MBA from the Wharton School of Business of the University of Pennsylvania. Dr. Lavizzo-Mourey serves on the board of directors of General Electric Company and Hess Corporation. She is also a member of the National Academy of Medicine, American Academy of Arts and Sciences, and The American Philosophical Society.

 

SKILLS & EXPERTISE

 

Dr. Lavizzo-Mourey brings senior leadership, strategy, and human capital and talent development expertise to the Board from her leadership of the largest public health philanthropy in the U.S. for almost 15 years and, before that, serving for 15 years as a distinguished professor and administrator at the University of Pennsylvania. She also brings to the Board government experience from her various government appointments. Dr. Lavizzo-Mourey’s board service with other public companies also provides cross-board experience.

 

TSU-JAE KING LIU

 

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AGE: 55

 

DIRECTOR SINCE: 2016

 

COMMITTEES:

Audit, Finance

  

 

EXPERIENCE

 

Dr. Tsu-Jae King Liu has served as Dean and Roy W. Carlson Professor of Engineering in the College of Engineering at the University of California, Berkeley (UC Berkeley) since 2018. She previously held a distinguished professorship endowed by Taiwan Semiconductor Manufacturing Company, Ltd. (TSMC) in the Department of Electrical Engineering and Computer Sciences at UC Berkeley from July 2014 to July 2018. Dr. Liu has also served as Vice Provost, Academic and Space Planning, and Senior International Officer at UC Berkeley from October 2016 to June 2018. Dr. Liu has over 20 years of experience in higher education in a range of faculty and administrative roles, including Associate Dean for Academic Planning and Development, College of Engineering in 2016, Chair of the Department of Electrical Engineering and Computer Sciences from July 2014 to June 2016, and Associate Dean for Research in the College of Engineering from 2008 to 2012. Her achievements in teaching and research have been recognized by a number of awards, most recently by her induction into the Silicon Valley Engineering Hall of Fame. Dr. Liu was Co-founder and President of Progressant Technologies, a start-up company that developed negative differential resistance transistor technology, from May 2000 to October 2004. She served on the board of the Center for Advancing Women in Technology from October 2014 to May 2016. Dr. Liu received her bachelor of science, master’s degree, and PhD in Electrical Engineering from Stanford University.

 

SKILLS & EXPERTISE

 

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 semiconductor device research and development, and manufacturing. As a co-founder of Progressant Technologies, which was later acquired by Synopsys, Inc., and while serving on technical advisory boards for multiple start-up companies, Dr. Liu gained business development experience. Her inventions and contributions to the fin-shaped field-effect transistor design, dubbed “FinFET,” have given Dr. Liu extensive experience in emerging technologies. She also brings global and international experience to the Board with her work on establishing strategic international partnerships and agreements for UC Berkeley.

 

 

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GREGORY D. SMITH

 

LOGO

 

AGE: 52

 

DIRECTOR SINCE: 2017

 

COMMITTEES:

Audit (Chair), Finance

 

  

 

EXPERIENCE

 

Gregory D. Smith has been CFO since 2012 and Executive Vice President, Enterprise Performance and Strategy since 2017 at The Boeing Company (Boeing), the world’s largest aerospace company. In his roles at Boeing, Mr. Smith is responsible for the company’s overall financial and strategic management, including the company’s financial reporting, long-range business planning, and program management. Additionally, he oversees Business Operations, Controller, Corporate Development, Strategy, Treasury, and other corporate functions and enterprise projects with the overall goal of accelerating innovation and driving market-based affordability efforts across the company. He also leads Boeing Capital Corporation, the company’s global financing arm. Mr. Smith’s portfolio also includes executing the company’s three business unit strategy with the launch of Boeing Global Services in July 2017, the One Boeing integration of the company’s organizations and initiatives, and assisting the chairman and CEO in setting enterprise goals and developing the senior leadership team. Mr. Smith previously served at Boeing as CFO, Executive Vice President, Corporate Development and Strategy from February 2015 to June 2017; Executive Vice President, CFO 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 and 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.

 

SKILLS & EXPERTISE

 

Mr. Smith brings to the Board senior leadership, financial, strategic, operational, human capital, and global expertise from his experience as Executive Vice President, Enterprise Performance and Strategy of the world’s largest aerospace company. He has experience with 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 from his work as Boeing’s CFO. Mr. Smith also brings substantial international and business development experience to the Board from his enterprise performance and strategy role at Boeing. Mr. Smith’s portfolio also includes Boeing HorizonX, the venture capital arm of Boeing that focuses on identifying start-ups developing emerging technologies and launching disruptive markets and businesses. 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.

 

ROBERT (“BOB”) H.

SWAN

 

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CEO

 

AGE: 58

 

DIRECTOR SINCE: 2019

 

OTHER CURRENT

PUBLIC BOARDS:

eBay Inc.

 

COMMITTEES:

Executive

  

 

EXPERIENCE

 

Robert H. Swan has been a director and CEO of Intel since January 2019. Mr. Swan served as the interim CEO and Executive Vice President, CFO of Intel from June 2018 to January 2019, and previously served as Executive Vice President, CFO since joining Intel in October 2016. In his capacity as CFO, he oversaw Intel’s global finance organization—including finance, accounting and reporting, tax, treasury, internal audit, and investor relations—IT, Intel Capital, and the Corporate Strategy Office. Prior to joining Intel, Mr. Swan served as an Operating Partner at General Atlantic LLC, a private equity firm, from September 2015 to September 2016. He served as Senior Vice President, Finance and CFO of eBay Inc., a multinational e-commerce company, from March 2006 to July 2015. Previously, Mr. Swan served as Executive Vice President, CFO of Electronic Data Systems Corporation, Executive Vice President, CFO of TRW Inc., as well as CFO, Chief Operating Officer, and CEO of Webvan Group, Inc. Mr. Swan began his career in 1985 at General Electric, serving for 15 years in numerous senior finance roles. Mr. Swan also serves as a member of the board of directors of eBay Inc. and previously served on the board of directors of Applied Materials, Inc. from 2009 to 2016.

 

SKILLS & EXPERTISE

 

As our CEO and former CFO, Mr. Swan brings significant senior leadership, global experience, financial and human capital experience, business development and M&A experience to the Board from his position as former CFO of Intel’s global finance organization. Mr. Swan has gained extensive financial and mergers and acquisitions (M&A) experience from serving as CFO for several international companies with complex business environments, including the nine years he spent at eBay where he oversaw the eBay-PayPal split. As CEO and former CFO of Intel, he has direct knowledge and experience in business development, strategy, and growth. Mr. Swan also brings human capital expertise from his various senior leadership roles where he worked to attract and retain top talent.

 

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ANDREW WILSON

 

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AGE: 44

 

DIRECTOR SINCE: 2017

 

OTHER CURRENT

PUBLIC BOARDS:

Electronic Arts Inc.

 

COMMITTEES:

Compensation,

Finance (Chair)

 

  

 

EXPERIENCE

 

Andrew Wilson is the CEO of Electronic Arts Inc. (EA), a global leader in digital interactive entertainment. He joined EA in May 2000. He has served as the CEO and a director of EA since September 2013. During his tenure as CEO, EA has launched groundbreaking new games and services, reached record player engagement levels across its global franchises, and transformed into one of the world’s leading digital entertainment companies. Prior to his appointment as CEO, Mr. Wilson held several leadership positions at EA, including Executive Vice President of EA SPORTS and Origin where he oversaw all aspects of the EA SPORTS business and development, as well as EA’s digital PC service from 2011 to 2013. Mr. Wilson serves as chairman of the board for the World Surf League. He is also a member of the United Nations HeForShe IMPACT 10x10x10, a group of 10 global CEOs, 10 heads of state and 10 university presidents committed to being change agents to advance gender equality.

 

SKILLS & EXPERTISE

 

Mr. Wilson brings senior leadership, international, human capital, and emerging technologies and business models experience to the Board from his position as CEO of a global digital entertainment company. In addition, Mr. Wilson’s 17-plus years of experience in a variety of leadership positions at EA provides the Board significant sales, marketing and brand management experience, and industry and technical experience.

 

FRANK D. YEARY

 

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AGE: 55

 

DIRECTOR SINCE: 2009

 

OTHER CURRENT

PUBLIC BOARDS:

PayPal Holdings, Inc.

 

COMMITTEES:

Audit, Corporate

Governance and

Nominating (Co-Chair)

  

 

EXPERIENCE

 

Frank D. Yeary has been Managing Member of Darwin Capital Advisors LLC, a private investment firm based in San Francisco, California, since October 2018, and previously served as Principal at the firm from 2012 to 2018. Mr. Yeary served as Executive Chairman of CamberView Partners, LLC, an advisory firm in San Francisco, California providing corporate governance and stockholder engagement advice to public companies, from 2012 to 2018. From 2008 to 2012, Mr. Yeary was Vice Chancellor of UC Berkeley, where he oversaw 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. 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 Holdings, Inc.

 

SKILLS & EXPERTISE

 

Mr. Yeary’s extensive career in investment banking and finance brings to the Board financial strategy and global M&A expertise, including expertise in financial reporting and experience in assessing the efficacy of mergers and acquisitions with international companies on a global scale, and experience attracting and retaining strong senior leaders. Mr. Yeary’s role as Vice Chancellor and as CAO of a large public research university provides strategic and financial expertise and his service on the board of PayPal and his past service as a member of the board of eBay provides the Board with insight into best practices in corporate governance and stockholder engagement. In addition, as co-founder of Level Money, Mr. Yeary has first-hand experience identifying and developing business models.

 

 

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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; mix of ages; and gender and ethnic diversity. The Board then determines whether a nominee’s background, experience, personal characteristics, and skills will advance the Board’s goal of creating and sustaining a Board with a diversity of perspectives and viewpoints that can support and oversee the company’s complex activities. Our Board is committed to actively seeking 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 because 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.

GLOBAL/INTERNATIONAL EXPERIENCE

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 U.S. Because of these factors, directors with global experience can provide valuable business and cultural perspective regarding many important aspects of our business.

INDUSTRY AND IT/TECHNICAL EXPERIENCE

Because we design and manufacture technology, hardware, and software that powers the cloud, education or experience in relevant technology is useful for understanding our R&D efforts, competing technologies, the products and processes we develop, our manufacturing and assembly and test operations, and the market segments in which we compete.

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.

HUMAN CAPITAL EXPERIENCE

Because the market for senior technology leaders is extremely competitive, experience attracting and retaining top talent, particularly in high-demand areas such as cloud computing, AI, graphics processing units, virtual reality, and autonomous driving, can be an important skill for the Board to have.

OPERATING AND MANUFACTURING EXPERIENCE

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

SALES, MARKETING, AND BRAND MANAGEMENT EXPERIENCE

Directors with sales, marketing, and brand management experience can provide expertise and guidance as we seek to grow sales and enhance our brand.

EMERGING TECHNOLOGIES AND BUSINESS MODELS EXPERIENCE

Emerging technologies and business models can rapidly disrupt even the most well-thought-out strategy, particularly for technology companies. Directors who have experience identifying and developing emerging technologies and business models can be valuable assets to the Board.

 

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BUSINESS DEVELOPMENT AND M&A EXPERIENCE

Directors with a background in business development and 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, valuing transactions, and assessing management’s plans for integration with existing operations.

GOVERNMENT, LEGAL, AND REGULATORY EXPERIENCE

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. 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.

PUBLIC COMPANY BOARD EXPERIENCE

Directors with public company board experience understand the dynamics and operation of a corporate board, the relationship of a public company board to the CEO and other senior management personnel, the legal and regulatory landscape in which public companies must operate, the importance of particular agenda and oversight issues, and how to oversee an ever-changing mix of strategic, operational, and compliance-related matters.

BACKGROUND

Representation of a mix of ages, gender, ethnic, geographic, cultural, or other perspectives expand the Board’s understanding of the needs and viewpoints of our customers, partners, employees, governments, stockholders, and other stakeholders worldwide.

 

 

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BOARD MATRIX

 

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

 

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Board matrix skills & expertise experience bhusri Bryant hundt ishrak lavizzo-mourey liu smith swan Wilson yeary senior leadership global/international industry and it/technical financial expertise human capital operating and manufacturing sales, marketing, and brand management emerging technologies and business models business development and M&A government, legal, and regulatory public company board background tenure/age/gender years on the board age gender race/ethnicity/nationality African American/black Asian/south Asian white/Caucasian Hispanic/Latino native American born outside of the u.s. tenure age gender ethnic diversity 5.1 yrs average tenure of director nominees 58 yrs average age of director nominees 20% of director nominees are women 40% of director nominees are ethnically diverse 0-4 years 5-9 years 10+ years <54 years 54-64 years 65+ years women men people of color Caucasian

 

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INDEPENDENT DIRECTOR TENURE

 

The Board believes that a mix of long- and short-tenured directors promotes an appropriate balance of views and insights and allows the Board as a whole to benefit from the historical and institutional knowledge that longer-tenured directors possess and the fresh perspectives contributed by newer directors. Our Corporate Governance Guidelines provide that, as an alternative to term limits, the Board seeks to maintain an average tenure of 10 years or less for the independent directors as a group.

 

If each independent director nominee is elected to the Board, after the 2019 Annual Stockholders’ Meeting, our independent directors will have served an average of 5.3 years on the Board, and six out of eight of our independent directors will have been on the Board for less than that period of time. Overall, our Board, including both independent and employee directors, will have an average tenure of 5.1 years. We believe that this mix of tenure on the Board represents a diversified “portfolio” of new perspectives and deep institutional knowledge.

  

 

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TENURE 1 2 5 5.3 YRS average tenure of independent director nominees 0-4 Years 5-9 Years 10+ Years

BOARD DIVERSITY AND REFRESHMENT

 

Our Board is committed to actively seeking women and minority director candidates for consideration. Representation of gender, ethnic, geographic, cultural, or other diverse perspectives expands the Board’s understanding of the needs and viewpoints of our customers, partners, employees, governments, and other stakeholders worldwide. As part of our ongoing commitment to creating a balanced Board with diverse viewpoints and deep industry expertise, we regularly add new directors to infuse new ideas and fresh perspectives in the boardroom.

 

Our directors reflect diverse perspectives, including a complementary mix of skills, experience, and backgrounds that we believe are paramount to our ability to represent your interests as stockholders. In the last three years, five new independent directors have been elected or appointed to the Board. If each director nominee is elected to the Board, after the 2019 Annual Stockholders’ Meeting, the majority of the Board would be gender, ethnically, and nationality diverse.

  

 

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BOARD DIVERSITY 4 6 60% of director nominees are gender, ethnically and nationality diverse Diverse Directors Non-Diverse Directors

Intel is committed to focusing on Board diversity through engagement with key partners. In 2018, Intel joined the Thirty Percent Coalition, which focuses on strategies to increase female representation on corporate boards. For 2019, the coalition has added a specific focus on women of color. Through our partnerships, we aim to not only increase the available talent for our Board, but to also support increased female board representation across our industry.

BOARD EVALUATIONS

We are committed to providing transparency to our Board and committee evaluation process. The Chairman of the Board or the independent Lead Director leads the Board’s self-evaluation process, which requires each director to complete a comprehensive evaluation of the performance of both the Board as a whole and, to the extent applicable, the committees on which the director serves. The results of the directors’ evaluations, supplemented with third-party data, provide the Chairman or the independent Lead Director with valuable insight regarding areas where the Board believes it functions effectively and, more importantly, areas where the Board believes it can improve. Based on the input generated by its own members, our Board can adapt and evolve to meet new opportunities as they arise and to continue its critical work in safeguarding the interests of our stakeholders through effective corporate governance. For example, input generated by Board members in recent years has focused, among other things, on the composition of our Board, which has encouraged and informed our recent Board refreshment efforts.

 

 

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 CORPORATE GOVERNANCE

 


 

BOARD LEADERSHIP STRUCTURE

Chairman of the Board: Andy D. Bryant

Chief Executive Officer: Robert (“Bob”) H. Swan

Independent Lead Director: Aneel Bhusri

Board Leadership Structure. We separate the roles of Board Chairman and CEO to aid in the Board’s oversight of management. This policy is embodied in the Board’s published Corporate Governance Guidelines, and has been in effect since the company began operations.

Andy D. Bryant has served as Board Chairman since May 2012. Mr. Bryant has never served as CEO of Intel. 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.

Chairman Responsibilities. Although Mr. Bryant is an executive of Intel, he and our CEO, Robert (“Bob”) H. Swan, each report directly to the Board and have different responsibilities. Mr. Swan, 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 ensuring that the Board receives timely information about important aspects of and developments affecting the company, serving as a resource for and advisor 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 waive the director retirement provisions in our Corporate Governance Guidelines to extend Mr. Bryant’s service as a corporate officer and director beyond age 65, and to waive the provision of our Bylaws that limits the tenure of the Chairman to no more than two three-year terms, extending Mr. Bryant’s term for one more year as Chairman through the 2020 Annual Stockholders’ Meeting. In light of Mr. Bryant’s contributions to the Board and his extensive expertise and experience, the independent directors believe that he provides important leadership continuity as Intel undergoes our CEO transition (as described in “Compensation Discussion and Analysis; Executive Summary; CEO Transition” of this proxy statement) and that he will help support our new CEO during a time of substantial business transformation. Mr. Bryant has informed the Board that, if he is re-elected to the Board at the 2019 Annual Stockholders’ Meeting, he would not expect to stand for re-election again at the 2020 Annual Stockholders’ Meeting.

Lead Director Responsibilities. Following his unanimous election by the independent directors, Aneel Bhusri has served as independent Lead Director since May 2017. 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 Corporate Governance Guidelines;

 

 

approving the information, agenda, and meeting schedules for Board 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;

 


 

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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 chairs; and

 

 

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

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 or cybersecurity incidents; and

 

 

business-specific risks related to strategy and competition, product demand, global operations, manufacturing, cybersecurity and privacy, intellectual property, litigation and regulatory compliance, corporate responsibility and sustainability (including climate risk), and corporate governance risks.

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.

 

 

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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

 

For most enterprise risk management issues, such as cybersecurity risks, the Board receives regular and detailed reports from management or the appropriate Board committee regarding its review of issues. 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.

 

 

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COMMITTEES AUDIT FINANCE COMPENSATION Oversee issues related to financial reporting, financial risk, assessment, internal controls, audit functions, and major operational risk issues Oversees issues related to the company's risk tolerancein 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 to 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

 

 

 

 

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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: Mr. Bhusri, Mr. Hundt, Dr. Ishrak, Dr. Lavizzo-Mourey, Dr. Liu, Mr. Smith, Mr. Wilson, and Mr. Yeary. Because Mr. Swan and Mr. Bryant are employed by Intel, they do not qualify as independent. David Pottruck and David Yoffie, who served as directors until the 2018 Annual Stockholders’ Meeting, were each determined to be independent during the time they served on the Board. Ambassador Charlene Barshefsky, who served as a director until the 2018 Annual Stockholders’ Meeting, was determined to be independent until December 31, 2017. Mr. Krzanich, who served as director until June 20, 2018, did not qualify as independent because he was employed by Intel.

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;

 

 

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 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 and considered transactions that occurred since the beginning of 2016 between Intel and entities associated with the independent directors or members of their immediate families. 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

 

 

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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.

 

 

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 to Workday represented less than 2.5% of Workday’s annual revenue in each of the past three years, and represented less than 0.06% 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.

 

 

Until December 2016, Mr. Bhusri was a member of the board of directors of Cloudera, Inc., (Cloudera) a company with which Intel holds over 5% 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 to Cloudera represented less than 3.6% of Cloudera’s annual revenue in 2016, and represented less than 0.02% of Intel’s revenue. 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.

Charitable Contributions. Dr. Lavizzo-Mourey, Dr. Liu, 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.

 

 

Dr. Liu is Dean and Roy W. Carlson Professor of Engineering in the College of Engineering at UC Berkeley. The Intel Foundation contributed less than $65,100 in each of the past three years to match Intel employee charitable contributions to UC Berkeley, amounting to less than 0.003% of UC Berkeley’s consolidated annual revenue for each of the past three years.

 

 

Dr. Lavizzo-Mourey is Robert Wood Johnson Foundation PIK Professor of Population Health and Health Equity at the University of Pennsylvania. The Intel Foundation contributed less than $28,000 in each of the past three years to match Intel employee charitable contributions to the University of Pennsylvania, amounting to less than 0.003% of the University of Pennsylvania’s consolidated annual revenue for each of the past three years.

 

 

Dr. Lavizzo-Mourey is a member of the Board of Regents of the Smithsonian Institution. The Intel Foundation contributed less than $3,300 in each of the past three years to match Intel employee charitable contributions to the Smithsonian Institution, amounting to less than 0.002% of the Smithsonian Institution’s consolidated annual revenue for each of the past three years.

 

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CORPORATE GOVERNANCE GUIDELINES

Intel has long maintained a set of Corporate Governance Guidelines. The Corporate Governance and Nominating Committee reviews the guidelines periodically 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.

These guidelines, which investors may find on our website at www.intel.com/governance, along with our other corporate governance practices, compare favorably under the Investor Stewardship Group’s (ISG) Corporate Governance Framework for U.S. Listed Companies, as shown in the table below.

 

  ISG PRINCIPLE    INTEL PRACTICE

Principle 1

Boards are accountable to stockholders

  

  All directors are elected annually

 

  Majority voting in uncontested director elections

 

  Proxy access with market terms (3% for three years, up to 20% of the Board)

 

  Annual Chairman’s letter in proxy statement that describes the Board’s activities over the past year

Principle 2

Stockholders should be entitled to voting rights in proportion to their economic interest

  

  No dual-class share structure

 

  Each stockholder is entitled to one vote per share

Principle 3

Boards should be responsive to stockholders and be proactive in order to understand their perspectives

  

  Management met with investors owning 35% of shares outstanding in 2018

 

  Engagement topics included Board leadership structure; Board diversity; issues concerning environmental, social, and governance (ESG) matters; executive compensation; and stockholder-called special meetings

 

  The Board has made a number of changes in response to investor feedback, including:

 

•  enhancing the integration of ESG disclosure into our Form 10-K and proxy statement;

 

•  working on aligning human capital and climate risk disclosures with external frameworks;

 

•  adding three-year EPS as a performance metric for performance-based RSUs; and

 

•  proactively lowering the stockholder special meeting threshold to 15% from 25%

Principle 4

Boards should have a strong, independent leadership structure

  

  Executive Chairman, separate from CEO

 

  Strong independent Lead Director with clearly defined duties that are disclosed to stockholders

 

  Board considers appropriateness of its leadership structure at least annually

 

  Independent committee chairs

 

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

Principle 5

Boards should adopt structures and practices that enhance their effectiveness

  

  80% of the Board is independent

 

  40% of the Board is ethnically diverse, 20% of the Board is gender diverse, and we have a policy of seeking out women and minority candidates, as well as candidates with diverse backgrounds, experiences, and skills, as part of each Board search

 

  Annual Board and individual director self-evaluations

 

  Active Board refreshment, with 70% refreshment in last five years, and seek to cap average director tenure at 10 years

 

  Limits on outside boards, with no director permitted to serve on more than four public company boards (including Intel)

 

  No restrictions on directors’ access to management or employees

 

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

Principle 6

Boards should develop management incentive structures that are aligned with the long-term strategy of the company

  

  Executive compensation program received over 94% support in 2018

 

  Compensation Committee annually reviews and approves incentive program design, goals, and objectives for alignment with compensation and business strategies

 

  Annual and long-term incentive programs are designed to reward financial and operational performance that furthers short- and long-term strategic objectives

 

 

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DIRECTOR ATTENDANCE

The Board held six regularly scheduled meetings and 11 special meetings in 2018. As shown in the Board Committee chart below, standing committees of the Board collectively held a total of 31 meetings during 2018, with each 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 2018 (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 Mr. Wilson, attended the 2018 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 senior executives;

 

 

reviewing and approving our major financial objectives, strategy, 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 in executive session 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.

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 senior executives. 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. In connection with the CEO transition process that commenced in 2018, the Board formed a special committee, chaired by an independent director, which met more than 20 times during 2018 and 2019 as part of its oversight and leadership of the process to identify the candidate with the appropriate skills, vision, and experience to lead Intel into the future.

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 website at www.intc.com/committees-charters.

 

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

 

Name

   Audit    Compensation    Corporate
Governance
and
Nominating
   Executive    Finance

Aneel Bhusri1

             Co-Chair    Chair     

Andy D. Bryant2

                      

Reed E. Hundt

                  

Omar Ishrak

        Chair             

Risa Lavizzo-Mourey3

                      

Tsu-Jae King Liu

                    

Gregory D. Smith

   Chair                  

Robert (“Bob”) H. Swan

                      

Andrew Wilson

                     Chair

Frank D. Yeary

           Co-Chair          

Number of Committee Meetings Held in 2018

   12    10    6    2    1

 

1 

Lead Director.

2 

Chairman of the Board.

3 

It is expected that at the conclusion of the 2019 Annual Stockholders’ Meeting, Dr. Lavizzo-Mourey will join the Compensation Committee.

AUDIT COMMITTEE

 

 

 

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

 

 

Appoints and retains our independent registered public accounting firm, managing its compensation, and overseeing its work.

 

 

Reviews and discusses with management our company’s major financial, product security, and cybersecurity risk exposures and the steps management has taken to monitor and control such exposures.

 

 

Receives periodic reports from the Global Director of Ethics and Legal Compliance on the operation and effectiveness of the company’s corporate compliance program.

 

 

Oversees compliance with our company’s Code of Conduct.

During the past year, the Audit Committee’s oversight focused on, among other things, key financial reporting matters, critical accounting estimates, ethical and legal compliance, and enterprise risk management, including cybersecurity and product security. The Board has determined that Mr. Yeary and Mr. Smith each 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 approves the performance measures and goals for 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.

 

 

Administers Intel’s equity incentive plans.

 

 

Reviews Intel’s programs and practices related to executive workforce diversity and the administration of executive compensation programs in a non-discriminatory manner.

 

 

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During the past year, the Compensation Committee’s oversight focused on, among other things, compensation program strategy and design, CEO transition pay, human capital management, leadership development, and the impact of recent tax law changes on our pay practices. The Compensation Committee is responsible for determining compensation for Intel executives (including our CEO and our Chairman of the Board), 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 engaged Pay Governance as its independent executive compensation consultant in June 2018. Prior to that, it had retained Farient Advisors LLC (Farient). The consultant provides 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. The consultant reports directly to the Compensation Committee and interacts with management at the committee’s direction. Neither Farient nor Pay Governance performed work for Intel in 2018 except under its respective engagement by the Compensation Committee. The Compensation Committee made assessments of its compensation consultants under factors set forth in the SEC rules and concluded that each of Farient and Pay Governance was independent, and that the firms’ work in 2018 for the Compensation Committee 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, competitive market data, and criticality of each role. 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

 

 

 

Identifies, evaluates, and recruits individuals to become Board members.

 

 

Reviews matters of corporate governance and corporate responsibility, such as environmental, sustainability, human capital, 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 stockholder proposals and recommends actions on such proposals.

 

 

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

 

 

Reviews and assesses our stockholder engagement process, and reviews stockholder feedback and works with the Board and management to address.

During the past year, the Corporate Governance and Nominating Committee’s oversight focused on, among other things, board composition and disclosure, director recruitment, corporate political contributions, Intel’s Corporate Responsibility Report and trends (including climate change, human capital and workplace, and human rights issues), and investor outreach and feedback. 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 2018, the Board retained and paid fees to a third-party search firm to assist the Corporate Governance and Nominating Committee in the processes of identifying and evaluating potential Board candidates, consistent with the committee’s criteria.

 

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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; senior leadership experience; international experience; mix of ages; 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.

FINANCE COMMITTEE

 

 

 

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

 

 

Reviews and approves finance and other cash-management transactions.

 

 

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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 2018, our integrated outreach team led by our Investor Relations group, Corporate Responsibility office, and the Corporate Secretary’s office, met to discuss a wide variety of issues with investors representing an aggregate of at least 50% of our outstanding shares. We believe that our approach to engaging openly with our investors on topics such as financial issues, corporate governance, executive compensation, 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 integrated outreach team 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 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.

The feedback we receive from stockholders and stakeholder groups through these activities is communicated to the Corporate Governance and Nominating Committee on a regular basis throughout the year, and to our full Board once a year. After careful review, our Corporate Governance and Nominating Committee recommends to the Board whether enhancements to our company’s policies and practices are required to meet stockholder expectations relating to new issues or emerging trends.

Below is a summary of the feedback we received through our 2018 investor engagement program and how we responded.

 

WHAT WE HEARD FROM INVESTORS    HOW WE RESPONDED
Board leadership structure    Current structure (executive chairman and independent lead director) works well   

  Determined to maintain current structure

  Extended Mr. Bryant’s term to provide leadership continuity during CEO transition

Board diversity    Would like to see more disclosure around board diversity   

  Separately broke out gender and ethnic diversity of our board members in this proxy statement

Environmental, Social, and Governance (ESG) matters   

View our ESG disclosure as best-in-class, but we should consider enhancements in key focus

areas for 2019: human capital and climate change risk

  

  Enhanced integration of ESG disclosure into our Form 10-K and proxy statement

  Continued working on aligning human capital and climate risk disclosures with external frameworks

Executive compensation    Would like to see a long-term financial performance metric in our compensation program   

  Added three-year EPS as a performance metric (along with total stockholder return (TSR)) for performance-based RSUs

Equity plans    Prefer a less frequent stockholder approval cycle for our plans   

  Determined to submit equity plans to a stockholder vote triennially instead of biennially starting after this year

Stockholder special meetings    Current ownership threshold for calling a meeting may be too high in light of recent trends   

  Proactively lowered threshold from 25% to 15%

 

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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.

 

 

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 CORPORATE RESPONSIBILITY

 


 

Our commitment to corporate responsibility and sustainability—built on a strong foundation of transparency, governance, and ethics—creates value for Intel and our stockholders by helping us mitigate risks, reduce costs, build brand value, and identify new market opportunities. We set ambitious goals for our company and make strategic investments to advance progress in the areas of environmental sustainability, supply chain responsibility, diversity and inclusion, and social impact that benefit the environment and society. Through our technology, we enable more people to harness the power of data to help address society’s most complex issues—from climate change and energy efficiency, to economic empowerment and human rights.

We established formal board-level oversight responsibility for corporate responsibility in 2003 and, since 2008, have linked a portion of employee and executive pay to corporate responsibility factors. A foundational element of our approach to corporate responsibility is our commitment to transparency. For more information on how our focus on corporate responsibility creates value for Intel and our stockholders, see the “Our Capital” section of this proxy statement and our most recent Corporate Responsibility Report.

 

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  OUR CAPITAL

 


 

In line with the International Integrated Reporting Council’s six capitals concept, we have outlined how we deploy capital to execute our transformation strategy in ways that reflect our corporate values, delight our customers, and create value for our stockholders.

LOGO   FINANCIAL CAPITAL

Our financial capital allocation strategy focuses on building stockholder value. We do this by first investing in ourselves and growing our capabilities. We then look to supplement and strengthen our capabilities through acquisitions and strategic investments. And finally, we provide the return realized by these investments to our stockholders.

            CASH FROM OPERATING ACTIVITIES $B            

 

 

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$20.4 $10.3 $10.1 2014 $19.0 $11.7 $7.3 2015 2016 $21.8 $12.2 $9.6 $22.1 $10.3 $11.8 2017 $29.4 $14.3 $15.2 2018 Capital Investment Free Cash Flow1

OUR FINANCIAL CAPITAL ALLOCATION DECISIONS ARE DRIVEN BY THREE PRIORITIES

 

INVEST IN THE BUSINESS

Our first priority is to invest in R&D and capital spending to strengthen our competitive position. We shifted our R&D focus as we transformed to a data-centric company, while efficiently maintaining our investment at approximately 20% of revenue. Our capital investment in logic (silicon wafer manufacturing of our platform products) and memory both increased in 2018 as we looked to improve supply of platform products and continued to ramp production capacity in our memory fab (Fab 68). We obtained customer prepayments of over $1.6 billion in 2018 and $1.1 billion in 2017, which helped to offset our investment in memory.

 

ACQUIRE AND INTEGRATE

Our second financial capital allocation priority is to invest in companies around the world that will complement our strategic objectives and stimulate growth of data-centric opportunities. We look for acquisitions that further leverage and strengthen our capital and R&D investments. In 2018, we completed various small acquisitions, while leveraging Altera and Movidius to partner with customers and expand the markets we serve. Mobileye achieved record revenue, various design wins, and announced the ability to retrofit existing vehicles to deliver full autonomy. Intel Capital investments also support our strategic objectives.

 

RETURN CASH TO STOCKHOLDERS

Our third financial capital allocation priority is to return cash to stockholders. We achieve this through our dividend and share repurchase programs. During 2018, we paid $5.5 billion in dividends and increased our quarterly cash dividends by 10% from 2017. We also repurchased $10.7 billion in shares, up from 2017, and have reduced the level of diluted shares outstanding over time.

 

 

Dividends Per

Share

     

 7%

CAGR

  Diluted Shares
Outstanding

 

(in Millions)

              
2018    $1.20       4,701
2017    $1.0775       4,835
2016    $1.04       4,875
        
 

 

  R&D AND CAPITAL INVESTMENTS $B  

 

 

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$21.6 $19.5 $22.3 $24.8 $28.7 2014 2015 2016 2017 2018 R&D Logic Memory

                     ACQUISITIONS                    

 

 

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8 8 $15.5 $14.5 12 3 5 $0.9 $0.9 $0.2 2014 2015 2016 2017 2018 # of Acquisitions Total Spend $B

      CASH TO STOCKHOLDERS $B      

 

 

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$4.4 $10.8 $4.6 $4.9 $5.1 $5.5 $3.0 $2.6 $5.1 $3.6 $5.5 $10.7 2014 2015 2016 2017 2018 Buyback Dividend

 

 

1 See “Non-GAAP Financial Measures” in Appendix A.

 


 

 

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LOGO   INTELLECTUAL CAPITAL

RESEARCH AND DEVELOPMENT

Every year we make a significant investment in R&D, as it is a critical factor in achieving our strategic objectives to make the world’s best semiconductors, lead the AI and autonomous revolution, and provide leading end-to-end platform solutions. Successful R&D efforts can lead to new products and technologies, or improvements to existing ones, which we seek to protect through our IP rights. We may augment our R&D initiatives by investing in or acquiring companies or entering into R&D agreements with other companies, as well as by directly purchasing or licensing technology.

We have increased our investments in R&D in each of the last five years and intensified our focus on key priorities in product technology while exiting non-core businesses, such as our divestiture of Wind River Systems, Inc. (Wind River) during 2018.

 

PRODUCT TECHNOLOGY

We are focusing our R&D activities on six areas of engineering to advance our product capabilities. Our goal is to improve user experiences and value at the pace of Moore’s Law through advances in performance, power, cost, connectivity, security features, form factor, and other features with each new generation of products.

 

Process technology. While development of next-generation manufacturing processes remains a critical and fundamental area of research, we are also pursuing innovations in packaging technology to enable new approaches to chip design. In 2018, we announced a new 3D packaging technology called “Foveros” that allows for stacking of logic chips, enabling products where input/output (I/O), static random-access memory (SRAM), and power delivery circuits can be fabricated in a base die and high-performance logic “chiplets” can be stacked on top. Together with our Embedded Multi-die Interconnect Bridge (EMIB) technology, advanced packaging allows for new hybrid chip designs that can “mix and match” different technology IP blocks, which may be manufactured on different process nodes, into a single system-in-package, enabling new design flexibility and new device form factors.   

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Stacked Chiplets Base Chiplet base Chiplet "Foveros" 3D packaging technology

Architecture. We are designing products for four major computing architectures—scalar (CPU products), vector (graphics processing unit (GPU) products), matrix (AI accelerator products), and spatial (field-programmable gate array (FPGA) products)—as we move toward a model of providing multiple “xPU” compute platforms for a more diverse era of computing. In 2018, we announced “Sunny Cove,” our next-generation CPU microarchitecture, with architectural extensions designed for special-purpose computing tasks such as AI and cryptography, among other features. We are also continuing development on our first discrete GPU.

Memory. With our Intel® 3D NAND and Intel® Optane™ technologies, we are developing products to disrupt the memory and storage hierarchy. We are shipping our Intel® Optane™ DC Persistent Memory, which combines memory-like performance with the larger capacity and persistence of storage, bringing more data closer to the CPU to help improve processing of big data sets like those used in AI and large databases. Our QLC 3D NAND technology allows users to move more data from hard disks to solid-state drives (SSDs), giving them faster access to their data.

Interconnect. We have a broad portfolio of interconnect solutions, ranging from silicon to the data center to wireless. Our silicon photonics technology integrates lasers into silicon to create high-speed optical connections that can help remove networking bottlenecks in the data center. We are driving the 5G transition by offering products that communications service providers use to transform their networks for 5G, as well as through development of 5G modems.

Security technologies. We have made significant investments in security technologies, and built-in security features are integrated into our design process and roadmap. In the first half of 2018, we created the Intel Product Assurance and Security Group to serve as a center for security research across our products and businesses, not only to address the security issues of today, but also to monitor the evolving threat landscape and seek to continuously improve our product security in the years ahead.

Software. Software plays a critical role in unlocking the performance potential of our hardware products. Our vision is to unify our software abstractions across all of our xPU platforms. We are developing a project called OneAPI to simplify programming for developers across our CPU, GPU, FPGA, AI and other accelerator products, providing a unified portfolio of developer tools for mapping software to the hardware that can best accelerate the code.

IP RIGHTS

We own and develop significant IP and related IP rights around the world that relate to our products, services, R&D, and other activities and assets. Our IP portfolio includes patents, copyrights, trade secrets, trademarks, maskwork, and other rights. We actively seek to protect our global IP rights and to deter unauthorized use of our IP and other assets. For a detailed discussion of our IP rights, see “Intellectual Property Rights and Licensing” in our 2018 Annual Report on Form 10-K.

 

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LOGO   MANUFACTURED CAPITAL

We are an integrated device manufacturer (IDM). Unlike many other semiconductor companies, we primarily design and manufacture our products in our own manufacturing facilities. We see our in-house manufacturing as one of our most critical forms of capital and an important advantage.

 

MANUFACTURING PROCESS TECHNOLOGY

We continue to develop new generations of manufacturing process technology as we seek to realize the benefits from Moore’s Law, a law of economics predicted by Intel’s co-founder Gordon Moore more than 50 years ago. Realizing Moore’s Law results in economic benefits as we are able to either reduce a chip’s cost as we shrink its size or increase functionality and performance of a chip while maintaining the same cost with higher density. This makes possible the innovation of new products with higher performance while balancing power efficiency, cost, and size to meet customers’ needs.

As of the end of 2018, our platform products were manufactured on 300mm wafers, with the majority manufactured using our 14nm process node, and we are currently ramping our next-generation 10nm process node. We have lengthened our utilization of our 14nm process to meet an annual cadence of product introductions while developing 10nm process technology. Over the course of our 14nm process generation, we have achieved significant product performance improvement. We expect the same trend of utilizing a process node for multiple waves of products to continue as we ramp 10nm.

With our 10nm process technology, we are striving for an aggressive density improvement target, beyond the density scaling we delivered with 14nm. We have experienced challenges associated with 10nm development and implementation, and announced in 2018 that volume production on our 10nm products would be delayed from the second half of 2018 into 2019. We made good progress on improving 10nm yields in 2018, and we continue to expect volume client systems on retail shelves for the 2019 holiday season, with data center products to follow in 2020.

FACTORY NETWORK AND SUPPLY CHAIN

 

The map marks our manufacturing facilities and their primary functions, as well as the countries where we have a significant R&D or sales and marketing presence.

 

Approximately half of our wafer manufacturing is conducted within the U.S. We incur factory start-up costs as we ramp our facilities for new process technologies. We continued to ramp the 10nm process node in our Oregon and Israel locations and to expand our memory fab, Fab 68. Memory investments represented approximately 20% of total capital spending for 2018.

 

 

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Oregon 10nm, 22nm Arizona 14nm, 22nm New Mexico 32nm, 45nm Ireland 14nm Israel 10 nm, 22mn Chengdu Malaysia Vietnam Dalian Memory Fab Intel Worldwide Headquarters Santa Clare, California Wafer Fabs Assembly and Test Intel Presence

Our manufacturing facilities are primarily used for silicon wafer manufacturing of our platform and memory products. These facilities are built following a “copy exactly” methodology, whereby new process technologies are transferred identically from a central development fab to each manufacturing facility. This enables fast ramp of the operation as well as better quality control. These wafer fabs operate in a network of manufacturing facilities integrated as one factory to provide the most flexible supply capacity, allowing us to better analyze our production costs and adapt to changes in capacity needs.

We use a multi-source strategy for our memory business to enable a robust and flexible supply chain. Throughout 2018, we increased the memory capacity in Fab 68, where we ramped 3D NAND production. In addition, we have a supplemental supply agreement with Micron Technology, Inc. (Micron), as well as capacity from our joint venture, IM Flash Technologies, LLC (IMFT) factory in Lehi, Utah. In January 2019, Micron called our interest in IMFT. The IMFT agreement provides for supply for up to one year after the close of the transaction.

We use third-party foundries to manufacture wafers for certain components and leverage subcontractors to augment capacity to perform assembly and test in addition to our in-house manufacturing, primarily for chipsets and adjacent products.

 

 

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LOGO   HUMAN CAPITAL

 

 

Given the highly technical nature of our business, our success depends on our ability to attract and retain talented and skilled employees to create the technology of the future and delight our customers. Our global workforce of 107,400 is highly educated, with approximately 85% of our people working in technical roles. We invest in creating a diverse, inclusive, and safe work environment where our employees can deliver their workplace best every day. This environment fosters a rich and powerful culture that allows us to make a profound impact on the world.

 

All employees are responsible for upholding the Intel Values, Intel Code of Conduct, and Intel Global Human Rights Principles, which form the foundation of our policies and practices. We also place value on providing a wide range of opportunities to support the ongoing career development of employees. For over a decade, we have tracked and publicly reported on key human capital metrics, including workforce demographics, diversity and inclusion data, turnover, and training data.

  LOGO   

“In 2018, we met our U.S. diversity and inclusion goal—two years ahead of schedule. We are proud of our progress but not satisfied. We view diversity and inclusion as a business imperative that drives innovation and future growth. Every voice matters.”

 

—Barbara Whye, Intel’s Chief Diversity and Inclusion Officer and Vice President of Human Resources

DIVERSITY AND INCLUSION

 

Building an inclusive workforce, industry, and ecosystem is critical to helping us drive our business forward. We committed $300 million to advance diversity and inclusion in our workforce and in the technology industry, and met our goal to achieve full representation of women and underrepresented minorities in our U.S. workforce in 2018—two years ahead of schedule. We have a long-standing commitment to inclusive workplace policies. For example, to help ensure employee concerns are openly and transparently resolved, Intel does not seek arbitration of sexual harassment and other employment claims.

 

GROWTH AND DEVELOPMENT

 

We invest significant resources to develop the talent needed to keep the company at the forefront of innovation and make Intel an employer of choice. We deliver training annually and provide rotational assignment opportunities. During 2017 and 2018, we trained our managers in inclusive management practices. Over the past five years, our undesired voluntary turnover rate has been below 5%.

  

 

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20% 3% 48% 29% United States Asia Pacific Europe, Middle East, Africa Latin America and Canada 2018 Employees by region

 

COMMUNICATION AND ENGAGEMENT

Our success depends on employees understanding how their work contributes to the company’s overall strategy. We use a variety of channels to facilitate open and direct communication, including open forums with executives; quarterly Organizational Health Polls; and engagement through more than 30 different employee resource groups, including the Women at Intel Network, the Network of Intel African American Employees, the Intel Latino Network, and others.

COMPENSATION AND BENEFITS

We strive to provide pay, benefits, and services that help meet the varying needs of our employees. Our generous total rewards package includes market-competitive pay, broad-based stock grants and bonuses, a popular Employee Stock Purchase Plan, healthcare and retirement benefits, paid time off, flexible work schedules, sabbaticals, fertility assistance, and on-site services. For more than a decade, we’ve performed an annual compensation analysis in the U.S. to ensure pay equity by gender and race/ethnicity. In 2018, we began globalizing our analytics and recently announced that we’ve achieved gender pay equity globally.

HEALTH, SAFETY, AND WELLNESS

Our ultimate goal is to achieve zero serious injuries through continued investment in and focus on our core safety programs and injury-reduction initiatives. We provide access to a variety of innovative, flexible, and convenient employee health and wellness programs, including on-site health centers.

 

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LOGO   SOCIAL AND RELATIONSHIP CAPITAL

We are committed to operating with transparency, and through open and direct communication, we work to develop trusted relationships with all stakeholders, including employees, customers, suppliers, governments, and communities. We also empower our employees to give back to the communities where we operate and engage them in corporate responsibility and sustainability initiatives. Our commitment to stakeholder collaboration and investments in social impact initiatives, including support of the United Nations Sustainable Development Goals, has resulted in our reputation as a leading corporate citizen, which has created value for Intel in terms of social license to operate and a positive operating environment. Each year, we receive third-party recognitions for our corporate responsibility leadership and ethical business practices. In 2018, recognitions included the Fortune 2018 Change the World List, Ethisphere’s World’s Most Ethical Companies, and Forbes/Just Capital’s America’s Most “Just” Companies.

ECONOMIC IMPACT

The health of our company and local economies depend on continued investments in innovation. We provide high-skill, high-paying jobs at Intel sites around the world and also impact economies through our R&D ecosystem spending, sourcing activities, consumer spending by our employees, and tax revenue. Many of these are manufacturing and R&D jobs located in our own domestic and international factories. In addition, we make sizable capital investments and provide leadership in public-private partnerships to spur economic growth and innovation.

SOCIAL IMPACT

We are at the forefront of new technologies—such as AI, autonomous driving, and 5G wireless broadband—that are increasingly being used to empower individuals, companies, and governments around the world to solve major societal challenges. Simultaneously, we are empowering people through education and advancing social impact initiatives, helping us build trust with key external stakeholders and support the interests of our employees. Through the Intel® She Will Connect program, we have collaborated with global and local partners to empower millions of women and girls through technology skills training. Our employees actively share their expertise and skills through technology-related volunteer initiatives, and over the past 10 years have contributed more than 10 million hours of service in the communities where we operate. In celebration of our 50th anniversary, we set a goal to have 50,000 employees donate 1 million volunteer hours during 2018. We exceeded the goal with more than 68,000 employees contributing approximately 1.5 million hours.

SUPPLY CHAIN RESPONSIBILITY

Actively managing our supply chain creates business value for Intel and our customers by helping us reduce risks, improve product quality, achieve environmental and social goals, and raise the overall performance of our suppliers. Over the past five years, we have completed more than 500 supplier audits using the Responsible Business Alliance Code of Conduct standard and have expanded training and capacity-building programs with our suppliers. We actively collaborate with others and lead industry initiatives on key issues such as advancing responsible minerals sourcing, addressing risks of forced and bonded labor, and improving transparency around climate and water impacts in the global electronics supply chain. We also continue to work toward our goal of reaching $1 billion in annual spending with diverse-owned suppliers by 2020, and are investing in programs to create new career pathways into the technology industry.

LOGO   NATURAL CAPITAL

Driving to the lowest environmental footprint possible helps us achieve efficiency, lower costs, and respond to the needs of our customers and community stakeholders. 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 focus on building energy efficiency into our products to help our customers lower their own emissions and energy costs. We also collaborate with policymakers and other stakeholders to identify opportunities to apply technology to environmental challenges such as climate change and water conservation.

CLIMATE AND ENERGY

We focus on reducing our own direct climate “footprint” and over the past two decades have reduced our direct emissions and electricity generated emissions. We also continue to be one of the largest voluntary corporate purchasers of green power. Since 2012, we have invested more than $200 million in energy conservation projects in our global operations, resulting in cumulative savings of more than 4 billion kilowatt hours and cost savings of approximately $500 million through the end of 2018. We also

 

 

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focus on increasing our “handprint”—the ways in which Intel technologies can help others reduce their footprints—and collaborate on shaping public policy responses to climate change, both at the international level and in the countries and regions where we operate.

GREENER BUILDINGS

Our engineers have long incorporated green design standards and concepts into the new construction and renovation of our facilities. We continue to be on track to meet our goal to design all new buildings to a minimum Leadership in Energy and Environmental Design* (LEED*) Gold certification, and to date have achieved LEED certification for more than 17 million square feet, or approximately 26% of our total operational space. The Internet of Things is also expanding opportunities in the area of green buildings, including smart building energy management systems. Working with ecosystem partners, we are advancing solutions in this area, as well as incorporating these technologies into our own green building strategies. For example, one of our newest buildings, an office building in Bangalore, India that received LEED Platinum certification, is equipped with more than 9,000 sensors and has 50% lower energy demand compared to most traditional office buildings in the area.

WASTE MANAGEMENT AND RECYCLING

In each of the past five years, we have recycled more than 84% of the non-hazardous waste generated in our global operations and continue to work toward our 2020 goals of recycling 90% of our non-hazardous waste and sending zero hazardous waste to landfills. Our aim is to continue to invest in reducing the amount of waste we generate while increasing the amount recycled.

WATER STEWARDSHIP

Water is essential to the semiconductor manufacturing process. We use ultrapure water to remove impurities from our silicon wafers, and we use industrial and reclaimed water to run our manufacturing facility systems. Over the last two decades, our sustainable water management efforts and partnerships have enabled us to conserve billions of gallons of water and we return approximately 80% of our water back to our communities. In 2018, we continued to make progress toward our goal to restore 100% of our global water use by 2025 through funding collaborative community-based projects that will restore water in amounts equivalent to what our business consumes.

SUPPLIER ENVIRONMENTAL IMPACT

We also partner with our suppliers to manage their environmental impact, which in turn reduces our own environmental impact, lowers supply chain risk, and can decrease costs. In 2018, we again attained a Leadership “A” rating on Supplier Engagement from CDP (formerly, the Carbon Disclosure Project, which evaluates global companies on their environmental disclosure) for our work to encourage our suppliers to increase the level of transparency on their climate and water footprints.

 

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STOCKHOLDER RETURN

Through attention to constant improvement, we strive for our capital to work together in a manner consistent with our focus on long-term value creation. Long-term total stockholder return provides one measure of value creation, though we also consider other indicators of success for our deployment of capital, such as diversity advancement for our human capital. The stock performance graph and table that follow compare the cumulative TSR on Intel’s common stock with the cumulative total return of the Dow Jones U.S. Technology Index*, the Standard & Poor’s 100 Stock Index (S&P 100 Index*), the Standard & Poor’s 500 Stock Index (S&P 500 Index*), the Standard & Poor’s 500 IT Stock Index (S&P 500 IT Index*), and the PHLX Semiconductor Sector Index (SOX Index*)1 for the five years ended December 29, 2018. The cumulative returns shown on the graph are based on Intel’s fiscal year.

Comparison of Five-Year Cumulative Return for Intel,

the Dow Jones U.S. Technology Index, S&P 100 Index, S&P 500 Index, S&P 500 IT Index, and SOX Index

 

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$300 $250 $200 $150 $100 2013 2014 2015 2016 2017 2018 Intel Corporation Dow Jones U.S. Technology Index S&P 100 Index S&P 500 Index S&P 500 IT Index SOX Index

 

Years Ended

   Dec 28,
2013
     Dec 27,
2014
     Dec 26,
2015
     Dec 31,
2016
     Dec 30,
2017
     Dec 29,
2018
 

Intel Corporation

   $ 100      $ 151      $ 145      $ 156      $ 204      $ 211  

Dow Jones U.S. Technology Index

   $ 100      $ 123      $ 126      $ 143      $ 196      $ 193  

S&P 100 Index

   $ 100      $ 114      $ 117      $ 129      $ 157      $ 150  

S&P 500 Index

   $ 100      $ 116      $ 117      $ 130      $ 158      $ 150  

S&P 500 IT Index

   $ 100      $ 123      $ 128      $ 145      $ 201      $ 199  

SOX Index

   $ 100      $ 133      $ 131      $ 179      $ 252      $ 235  

 

1

The graph and table assume that $100 was invested on the last day of trading for the fiscal year ended December 28, 2013 in Intel’s common stock, the Dow Jones U.S. Technology Index, S&P 100 Index, S&P 500 Index, S&P 500 IT Index, and SOX Index, and that all dividends were reinvested. The Dow Jones U.S. Technology Index was presented as a comparison in the 2017 Form 10-K stock performance graph as a peer index. We have added three indices that we consider more representative than the Dow Jones U.S. Technology Index: the S&P 100 Index, which includes a more diversified group of companies across major industrial sectors; the S&P 500 IT Index, which represents large capitalization IT industry performance; and the SOX Index, which more precisely represents overall semiconductor industry performance.

 

 

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 DIRECTOR COMPENSATION

 


 

The general policy of the Board is that compensation for non-employee 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 non-employee 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 considered by the Compensation Committee in setting executive compensation for 2018 and consisted of 15 technology companies and 10 companies in the S&P 100 Index, as described in detail below under “Compensation Discussion and Analysis; External Competitive Considerations for 2018.” The committee targets cash and equity compensation at the median of the director peer group.

For 2018, annual compensation for non-employee 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

Executive Committee chair

   $10,000

Finance Committee chair

  

$15,000

Non-chair Audit Committee member

   $15,000

Non-chair Compensation Committee member

   $10,000

Lead Director Fee1

     

Additional cash retainer

   $40,000

 

  1

Paid on a quarterly basis.

The Corporate Governance and Nominating Committee reviews director compensation on an annual basis, considering factors such as workload and market data. Intel does not pay its management directors for Board service in addition to their regular employee compensation. After his appointment as Chairman of the Board, Mr. Bryant has continued to participate in the compensation programs that apply to other executive officers, and his compensation is determined by the Board’s Compensation Committee.

 


 

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DIRECTOR COMPENSATION FOR FISCAL YEAR 2018

The following table details the compensation of Intel’s non-employee directors for the 2018 fiscal year.

DIRECTOR COMPENSATION FOR FISCAL YEAR 2018 TABLE

 

Name

  

Fees Earned

or Paid in

Cash ($)

  

Stock

Awards1

($)

  

Change in
Pension

Value and
Non-Qualified

Deferred

Compensation

Earnings

($)

  

All Other

Compensation2

($)

  

Total

($)

Charlene Barshefsky3

     52,500                             52,500  

Aneel Bhusri4

            369,300                      369,300  

Reed E. Hundt

     115,000        221,000               5,000        341,000  

Omar Ishrak

     110,000        221,000                      331,000  

Risa Lavizzo-Mourey5

            182,500               5,000        187,500  

Tsu-Jae King Liu

     105,000        221,000               5,000        331,000  

David S. Pottruck3

     55,000        221,000               5,000        281,000  

Gregory D. Smith

     131,250        221,000               2,000        354,250  

Andrew Wilson

     101,250        221,000                      322,250  

Frank D. Yeary6

     125,000        221,000                      346,000  

David B. Yoffie3,7

     95,000        221,000        47,000        5,000        368,000  

 

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 1.6% and a dividend yield of 2.4%. Grant date fair value of OSUs is calculated assuming volatility of 22.4%, risk-free rate of return of 2.3%, and a dividend yield of 2.5%. For additional information, see “Director Compensation; Equity Awards” below. Assumptions apply to all stock awards with the exception of those granted to Dr. Lavizzo-Mourey, who received awards in May 2018. She received prorated fees and stock awards to reflect a partial year of service. Those stock awards have the same vesting schedule as the annual awards granted to the other non-employee directors for 2018.

2 

The Intel Foundation made matching charitable contributions on behalf of Mr. Hundt ($5,000), Dr. Lavizzo-Mourey ($5,000), Dr. Liu ($5,000), Mr. Pottruck ($5,000), Mr. Smith ($2,000), and Dr. Yoffie ($5,000). Directors’ charitable contributions to schools and universities that meet the guidelines of Intel’s employee charitable matching gift program are eligible for matching funds.

3 

Because Mr. Pottruck and Dr. Yoffie retired from the Board in May 2018, all RSUs and OSUs granted to them in 2018 were canceled upon their retirement in accordance with their terms. Ambassador Barshefsky also retired from the Board in May 2018 and was not granted RSUs or OSUs in 2018.

4 

Includes 3,150 RSUs granted to Mr. Bhusri in 2018 in lieu of his annual cash retainer for 2017. Mr. Bhusri’s annual cash retainer, Lead Director fee, and committee chair/co-chair fees for 2018 were paid in the form of RSUs granted in 2019.

5 

Stock awards granted to Dr. Lavizzo-Mourey 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 2.4% and a dividend yield of 2.3%. Grant date fair value of OSUs is calculated assuming volatility of 23.8%, risk-free rate of return of 2.6%, and a dividend yield of 2.3%. Dr. Lavizzo-Mourey’s annual cash retainer for 2018 was paid in the form of RSUs granted in 2019.

6 

Mr. Yeary participated in the Cash Deferral Election, under which he elected to defer his cash compensation until his retirement from the Board.

7 

Dr. Yoffie was the only director covered by the Board’s retirement program, which ended in 1998. Dr. Yoffie was vested with the nine years he had served on the Board through that date. 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 2018 table represent the net actuarial change in pension value accrued under this program. Assumptions used in determining these changes include an interest rate of 4.4%, current age, 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, non-employee 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 generally 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 2018, Mr. Bhusri was granted 3,150 RSUs in lieu of cash earned from January 1, 2017 to December 31, 2017.

Annual Equity Awards. Each non-employee director received annual grants of OSUs and RSUs with a combined target value on the grant date of approximately $220,000, with the exception of Dr. Lavizzo-Mourey, whose awards were each granted with a prorated combined market value on the grant date of approximately $183,300. The grant date fair value reported in the “Stock Awards” column in the Director Compensation for Fiscal Year 2018 table above differs from these amounts because of changes in

 

 

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the fair value of these awards between the date they were approved and the date they were granted. In addition, the fair value of an RSU for accounting purposes is discounted for present value of dividends that are not paid on RSUs prior to vesting.

Outperformance restricted stock units (OSUs) are variable performance-based restricted stock units. On January 30, 2018, Intel granted OSUs with a target amount of 2,102 shares to each non-employee director, with the exception of Dr. Lavizzo-Mourey, who was elected to the Board in March 2018. Dr. Lavizzo-Mourey was granted OSUs with a target amount of 1,422 shares on May 1, 2018. The grant date fair value of each director OSU grant was $106,600, with the exception of OSU grants to Dr. Lavizzo-Mourey, which had a grant date fair value of $93,400. Director OSUs granted in 2018 (including to Dr. Lavizzo-Mourey) vest in full on the 37-month anniversary of February 1, 2018 if the director is still serving at that time. In the event that a director both retires from the Board (at a time when he or she is either age 72 or older or has at least seven years of service on the Board) before the vesting date, and was re-elected to the Board at the next annual stockholders’ meeting following the grant of the OSUs, he or she will be able to retain the unvested awards; otherwise, if a director ceases to be a director before the next annual stockholders’ meeting, he or she will forfeit 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.” Directors will not receive dividend equivalents on unvested OSUs granted in 2018.

Restricted stock units (RSUs) generally vest in equal annual installments over a three-year period from the grant date. On January 30, 2018, Intel granted each non-employee director 2,431 RSUs, with the exception of Dr. Lavizzo-Mourey, who was granted 1,778 shares on May 1, 2018. All director RSUs granted in 2018 (including to Dr. Lavizzo-Mourey) vest in equal annual installments over a three-year period beginning January 30, 2018. The grant date fair value of each director RSU grant was $114,400, with the exception of the RSU grant to Dr. Lavizzo-Mourey, which had a grant date fair value of $89,100. 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, provided that he or she was re-elected to the Board at the next annual stockholders’ meeting following the grant of the RSUs. Directors do not receive dividend equivalents on unvested RSUs.

2019 Changes. Beginning in 2019, the Board changed the annual equity grants to non-employee directors to align with the market and eliminated the grant of OSUs while maintaining the total target value of the equity grants (approximately $220,000). Pay Governance assisted the Corporate Governance and Nominating Committee’s review of the directors’ 2019 compensation and provided benchmarking data in support of the changes made by the Board. Annual equity grants are now in the form of 100% RSUs, and the grant and vesting of the RSUs align with the intended service on the Board, from election at the annual stockholders’ meeting to the date that is the earlier of the one-year anniversary of the grant date or the date immediately prior to the next annual stockholders’ meeting. Upon retirement following the grant date, the director will be able to retain the unvested awards. Directors will not receive dividend equivalents on unvested RSUs.

Deferred Compensation Program. This program allows non-employee 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 and OSUs except the terms of OSUs granted prior to 2017 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 elected to defer his or her OSUs granted prior to 2017, 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.

 

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OUTSTANDING EQUITY AWARDS FOR DIRECTORS

The following table provides information on the outstanding equity awards held at fiscal year-end 2018 by the non-employee directors who served during fiscal 2018, 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 2018 TABLE

 

     STOCK UNITS

Name

  

Unvested
RSUs1

(#)

  

Market Value of

Unvested RSUs2

($)

  

Unvested
OSUs1,3

(#)

  

Market Value of

Unvested OSUs2,3

($)

Charlene Barshefsky4

                   5,155        255,900  

Aneel Bhusri

     11,422        534,000        7,257        354,200  

Reed E. Hundt

     5,644        263,900        7,257        354,200  

Omar Ishrak

     4,120        192,600        4,799        224,400  

Risa Lavizzo-Mourey

     1,778        83,100        1,422        66,500  

Tsu-Jae King Liu

     4,942        231,000        5,990        286,700  

David S. Pottruck4

                   5,155        255,900  

Gregory D. Smith

     1,556        72,700                

Andrew Wilson

     3,629        169,700        3,634        169,900  

Frank D. Yeary

     5,644        263,900        7,257        354,200  

David B. Yoffie4

                   5,155        255,900  

 

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 

On February 25, 2019, 14,852 shares vested with respect to the 2016 OSU grant with an actual value of $53.24 per share of Intel common stock on the payout date (directors other than Dr. Ishrak, Dr. Lavizzo-Mourey, Mr. Smith, and Mr. Wilson received payouts of the 2016 OSU grant).

4 

Ambassador Barshefsky, Mr. Pottruck, and Mr. Yoffie left the Board in May 2018. RSUs and OSUs granted to them prior to 2018 became vested under applicable retirement vesting terms, but the OSUs included in this table, with the exception of the OSUs granted in 2016 that settled in February 2019, have not yet been settled and remain outstanding, as the applicable performance periods for calculating the final OSU payouts have not yet ended.

Non-Employee Director Stock Ownership Guidelines. Intel’s stock ownership guidelines state that each non-employee 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 OSUs and RSUs count toward this requirement once they vest. As of December 29, 2018, each non-employee director nominee had met these ownership guidelines or still had time to do so.

Equipment. Intel provides each non-employee 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.

 

 

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  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 


 

The Board’s Audit Committee is responsible for review, approval, or ratification of “related-person transactions” involving Intel or its subsidiaries and related persons. Under SEC rules, a related person is a director, officer, nominee for director since the beginning of the previous fiscal year, or a greater than 5% beneficial owner of the company at the time of the applicable transaction, 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 2018, there were no related-person transactions under the relevant standards.

 


 

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  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 all 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 website at www.intel.com. We intend to disclose future amendments to certain portions of the Code of Conduct or waivers of such provisions granted to executive officers and directors on our website within four business days following the date of such amendment or waiver.

 


 

 

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 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 March 3, 2019, except as otherwise indicated in the notes to the table. Amounts reported under “Number of Shares of Common Stock Beneficially Owned as of March 3, 2019” include the number of shares subject to RSUs and stock options that become exercisable or vest within 60 days of such date (which are shown in the columns to the right). Our listed officers are the five 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
March 3, 2019
   Percent
of Class
  

Number of Shares
Subject to Options
Exercisable as of
March 3, 2019
or Which

Become Exercisable
Within 60 Days of
This Date

  

Number of RSUs
That Vest Within

60 Days
of March 3, 2019

The Vanguard Group, Inc.

     364,198,708 (1)        7.97                    
       

BlackRock, Inc.

     301,601,975 (2)        6.60                    
       

Directors and Listed Officers

                                   
       

Andy D. Bryant, Chairman of the Board

     459,767 (3)        **                    —        13,928  
       

Brian M. Krzanich, Former Chief Executive Officer

     253,590 (4)        **                
       

Robert H. Swan, Chief Executive Officer (Prior Interim CEO and Executive Vice President, CFO)

     158,549 (5)        **               12,345  
       

Venkata Renduchintala, Group President, Technology, Systems Architecture & Client Group, and Chief Engineering Officer

     123,565        **               8,721  
       

Steven R. Rodgers, Executive Vice President and General Counsel

     92,025        **               18,715  
       

Navin Shenoy, Executive Vice President and

General Manager, Data Center Group

     76,718        **               26,291  
       

Frank D. Yeary, Director

     73,631 (6)        **               2,613  
       

Reed E. Hundt, Director

     57,013        **               2,613  
       

Aneel Bhusri, Director

     27,121 (7)        **                
       

Tsu-Jae King Liu, Director

     5,408        **                
       

Omar Ishrak, Director

     2,935        **                
       

Gregory D. Smith, Director

     2,910 (8)        **                
       

Andrew Wilson, Director

     2,009 (9)        **                
       

Risa Lavizzo-Mourey, Director

     593        **                
       

All directors and executive officers as a group

(14 individuals)

     1,096,112 (10)        **               90,918  
       

** Less than 1%

  1 

As of December 31, 2018, based on information set forth in a Schedule 13G filed with the SEC on February 13, 2019 by The Vanguard Group (Vanguard). Vanguard’s business address is 100 Vanguard Blvd., Malvern, PA 19355. Represents (i) 357,948,017 shares for which Vanguard has sole dispositive power, (ii) 6,250,691 shares for which Vanguard has shared dispositive power, (iii) 5,322,821 shares for which Vanguard has sole voting power, and (iv) 1,037,619 shares for which Vanguard has shared voting power.

  2 

As of December 31, 2018, based on information set forth in a Schedule 13G/A filed with the SEC on February 4, 2019 by BlackRock, Inc. (BlackRock). BlackRock’s business address is 55 East 52nd St., New York, NY 10055. Represents (i) 301,601,975 shares for which BlackRock has sole dispositive power, (ii) no shares for which BlackRock has shared dispositive power, (iii) 257,074,836 shares for which BlackRock has sole voting power, and (iv) no shares for which BlackRock has shared voting power.

  3 

Includes 1,148 shares held jointly with Mr. Bryant’s spouse for which Mr. Bryant shares voting and investment power.

  4 

Represents Mr. Krzanich’s holdings, including the number of shares subject to RSUs and stock options that became exercisable or vested within 60 days, as of June 20, 2018, his last date of employment.

  5 

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

  6 

Includes 52,548 shares held in family trust for which Mr. Yeary shares voting and investment power.

 


 

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  7 

Includes 19,999 deferred but vested RSUs held by Mr. Bhusri.

  8 

Includes 410 shares held in a revocable trust by Mr. Smith’s spouse. Also includes 811 deferred but vested RSUs held by Mr. Smith.

  9 

Includes 811 deferred but vested RSUs held by Mr. Wilson.

  10 

Excludes Mr. Krzanich as he ceased to be an executive officer as of June 20, 2018. Includes Mr. Todd Underwood, who was an executive officer as of March 3, 2019.

 

 

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 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 (Ernst & Young) as our independent registered public accounting firm for the current year. Ernst & Young has served in this role since Intel was incorporated in 1968. Representatives of Ernst & Young attended all meetings of the Audit Committee in 2018 except those meetings specifically related to litigation and subject to attorney-client privilege.

Independence of Ernst & Young. 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. 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.

Regular Rotation of Primary Engagement Partner. In accordance with applicable rules on partner rotation, Ernst & Young’s primary engagement partner for our audit was changed in 2015, while Ernst & Young’s concurring/reviewing partner for our audit was most recently changed in 2019. The Audit Committee is involved in considering the selection of Ernst & Young’s primary engagement partner when there is a rotation.

Pre-Approval Policies. 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.

Factors Considered in Deciding to Re-Engage Ernst & Young. 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.

Why We Are Asking Stockholders to Ratify Our Selection of Ernst & Young. 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.

Ernst & Young Expected to Attend Annual Meeting. 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.

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.

 


 

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ERNST & YOUNG LLP’S FEES FOR 2018 AND 2017

The following table shows the fees billed by Ernst & Young for audit and other services provided for fiscal years 2018 and 2017. 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.

 

      2018 Fees
($)
   2017 Fees
($)

Audit Services

     16,470,000        26,059,000  

Audit-Related Services

     1,016,000        1,031,000  

Tax Services

     1,798,000        1,944,000  

All Other Services

     90,000        90,000  

Total

     19,374,000        29,124,000  

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 any permitted services provided by Ernst & Young that are not included in the category descriptions defined above under “Audit Services,” “Audit-Related Services,” or “Tax Services” and includes other regulatory requirements such as Conflict Minerals reporting.

 

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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 2019.

 

 

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  REPORT OF THE AUDIT COMMITTEE

 


 

During 2018, 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 Responsibilities. 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, and the company’s ethical standards. 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.

Independent Auditor Responsibilities. 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 applicable 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.

Committee Responsibilities. 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 members in business, financial, and accounting matters.

Committee Oversight of Financial Reporting. 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 applicable 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 submissions by Intel’s employees, received through established procedures, of any concerns regarding questionable accounting or auditing matters.

Committee Oversight of Internal Auditor and Independent Audit Firm. 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 legal requirements, 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 Audit Committee has delegated authority to its chair 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 audit firm. The Audit Committee believes that the continued retention of Ernst & Young as our independent audit firm is in the best interests of our stockholders.

Committee Oversight of Internal Control Over Financial Reporting. The Audit Committee has reviewed and discussed with management, our management’s assessment of and report on the effectiveness of Intel’s internal control over financial reporting as of December 29, 2018, which it made based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). The Audit Committee also has reviewed and discussed with Ernst & Young its review and report on Intel’s internal control over financial reporting. Intel published these reports in its Annual Report on Form 10-K for the year ended December 29, 2018, which Intel filed with the SEC on February 1, 2019.

 


 

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Required Committee Discussions and Communications. The Audit Committee has reviewed and discussed the audited financial statements for fiscal year 2018 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.

Recommendation. 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 29, 2018.

Audit Committee

Greg Smith, Chairman

Frank D. Yeary

Reed E. Hundt

Tsu-Jae King Liu

 

 

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  PROPOSAL 3

 


 

ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION OF OUR LISTED OFFICERS

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.

As a matter of good corporate governance, in 2009 Intel voluntarily began to provide stockholders with an advisory “say on pay” vote on executive compensation. Beginning in 2011, Section 14A of the Securities Exchange Act of 1934, as amended, made this practice mandatory for U.S. public companies. In addition, at Intel’s 2017 Annual Stockholders’ Meeting, a majority of our stockholders voted in favor of holding an advisory vote to approve the executive compensation of our listed officers every year. The Board considered these voting results and decided to adopt (and maintain) 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 the executive compensation of our listed officers 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 annual 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 at the 2020 Annual Stockholders’ Meeting.

 

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RECOMMENDATION OF THE BOARD

The Board of Directors recommends that you vote “FOR” approval of the executive compensation of Intel’s listed officers on an advisory basis.

 

 

 

 


 

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  COMPENSATION DISCUSSION AND ANALYSIS

 


 

 

2018 LISTED OFFICERS

 

Robert (“Bob”) H. Swan

Chief Executive Officer (effective January 30, 2019) (Interim Chief Executive Officer and Executive Vice President, Chief Financial Officer)

 

Steven R. Rodgers

Executive Vice President

General Counsel

 

Dr. Venkata S.M. (“Murthy”)

Renduchintala

Executive Vice President

Group President, Technology, Systems Architecture and Client Group, and Chief Engineering Officer

 

Navin Shenoy

Executive Vice President

General Manager, Data Center Group

 

Brian M. Krzanich

Former Chief Executive Officer

 

 

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 listed officers;

 

  Investor Engagement and the 2018 “Say on Pay” Vote—A discussion of the 2018 “say on pay” results;

 

  2018 Compensation of Our Listed Officers—Details on our executive compensation programs and the individual compensation of our listed officers; and

 

  Other Aspects of Our Executive 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.

The roles of our 2018 listed officers have changed since the beginning of 2018. On June 20, 2018, Brian M. Krzanich resigned as Chief Executive Officer (CEO) of Intel and a member of the Board of Directors. Our Board of Directors on the same day appointed Chief Financial Officer (CFO) Robert H. Swan interim CEO. In May 2018, Steven R. Rodgers was appointed an executive officer of Intel. On January 30, 2019, our Board of Directors appointed Mr. Swan Intel’s CEO.

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

 

 

 

EXECUTIVE SUMMARY

2018 was a year of challenges, transition, and ultimately great financial success for Intel, as demonstrated by the achievement of our revenue growth, operating income growth, and EPS growth goals for the year. During the second half of 2018, we began a leadership transition with the promotion of Mr. Swan to the interim CEO role, and he and our leadership team continued our strategic transformation. Mr. Swan led Intel through a successful year in 2018, and on January 30, 2019 was appointed our permanent CEO and a member of the Board of Directors.

 


 

 

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LISTED OFFICER PAY OVERVIEW

 

Intel’s executive compensation programs are designed to complement and implement our growth strategy. The table below shows our pay elements and the purposes they serve:

 

PURPOSE   PAY ELEMENT
       
         BASE PAY      

    SHORT-TERM CASH INCENTIVES    

(ANNUAL AND QUARTERLY)

 

    LONG-TERM EQUITY AWARDS    

(PSU AND RSU)

      BENEFITS    
       

Motivating and rewarding performance that builds value for stockholders

           
       

Providing total compensation designed to attract and retain the best talent in the industry

       
       

Maintaining competitive compensation and benefits to support our executives, allowing them to maximize attention and optimize time in pursuit of building stockholder value

           
       

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

           
       

Paying fairly and equitably irrespective of gender and race    

       

Our executive compensation programs continue to be tied to the company’s financial performance, support our commitment to good compensation governance, and provide market-based opportunities to attract, retain, and motivate our executives in an intensely competitive market for qualified talent.

BUSINESS PERFORMANCE AND PAY

 

 

2018 was another record year for Intel and shows we have made progress on our strategy to transform from a PC-centric company to a data-centric company. We achieved record revenue and earnings per share (EPS) in 2018, driven by strong business performance, continued operating leverage, and a lower tax rate. Revenue from our data-centric businesses collectively increased by double digits. Our PC-centric business grew above our expectations and continued to be a source of profit, cash flow, scale, and intellectual property (IP). While we have had delays in implementing our 10 nanometer (nm) manufacturing process technology, we have continued to innovate in our 14nm products, introducing leadership products that deliver more value to our customers. We’ve expanded beyond PC and server businesses with significant growth in adjacent products, and gained share in an expanded $300 billion TAM1. Our employees are executing to our strategy by developing compelling technology and delivering innovative products to our customers, enabling strong financial growth.     

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REVENUE +13%
 

 

Results shown below are our reported GAAP results except as noted.

 

      2018    2017    Change

Revenue

   $70.8 billion    $62.8 billion    13%

Gross Margin

   61.7%    62.3%    down 0.6 pts

Operating Income

   $23.3 billion    $18.1 billion    29%

Adjusted Net Income2

   $20.8 billion    $15.0 billion    38%

Earnings Per Share

   $4.48    $1.99    126%

2018 VS. 2017

In 2018, revenue was a record high of $70.8 billion, up $8.1 billion, or 13%, from 2017. The increase in revenue was primarily driven by strong performance across our data-centric businesses, which collectively grew 18% year over year and made up nearly half of our total revenue in 2018. Our recently acquired Mobileye business had revenue of $698 million. Our PC-centric business grew 9%, above our expectations, due to PC TAM1 growth and demand for our leadership products. The increase in 2018 revenue was partially offset by the loss of revenue from businesses that were divested, specifically $534 million from the divestiture of the

 

1 

Source: Intel calculated 2022 Total Addressable Market (TAM) and PC TAM derived from industry analyst reports.

2 

See “Non-GAAP Financial Measures” in Appendix A.

 

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Intel Security Group (ISecG) and approximately $165 million from the divestiture of Wind River. Operating income and diluted EPS were both up from 2017. For key highlights of the results of our operations, see “A Year in Review” within the Proxy Statement Highlights. We adjusted net income to exclude the one-time charge related to Tax Reform for purposes of incentive compensation, as we believe it facilitates a better evaluation of our current operating performance against prior periods and our peers.

PAY-FOR-PERFORMANCE

Our executive compensation programs are structured to provide strong pay-for-performance alignment and reflect our strong 2018 performance:

 

 

The annual incentive cash payout under the executive officers’ 2014 Annual Performance Bonus Plan (Executive Incentive Cash Plan), based on the financial and operational performance for 2018, resulted in a corporate average payout of 107% of the annual incentive cash target for most of the listed officers and 118% of target for Mr. Shenoy, who oversees the Data Center Group (DCG) and is subject to the DCG business unit goals.

 

 

The quarterly incentive cash payout under the company-wide quarterly cash incentive program, based on Intel’s 2018 quarterly profitability, resulted in 26.8 days of compensation for each of our executive officers in 2018.

 

 

Under the 2015 program granting performance-based restricted stock units (referred to as “OSUs” or “outperformance stock units” and beginning in 2019, referred to as “PSUs” or “performance stock units”), which was based on the company’s three-year TSR relative to the median three-year TSR of our 15-company technology peer group, the 2015 OSU grants resulted in a 2018 payout of 113.5% of target and, together with dividend equivalents accrued on the shares that were earned over the 37-month vesting period, were settled at 121.9% of target. Intel’s three-year TSR was 46.6%, whereas the median three-year TSR of our 15-company technology peer group was 43.2%.

Pay Governance determined that there was a strong alignment between our CEOs’ three-year realizable pay and our TSR relative to peers as indicated in the chart below. Specifically, for the 2016-2018 period, our CEOs’ three-year realizable pay was at the 44th percentile of our peer group and our three-year TSR (+14% annualized) was at the 51st percentile.

 

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CEO TARGET PERFORMANCE

AND INCENTIVE PAY MIX1

 

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CEO REALIZABLE PAY RANK VS. 3-YEAR ANNUALIZED TSR PERFORMANCE RANK (AS OF 12/31/18) 100% Below median pay & above median performance 75% RANK Intel PERCENTILE 50% TSR 3-YEAR 25% Above median pay & below median performance 0% 0% 25% 50% 75% 100% 3-YEAR REALIZABLE PAY PERCENTILE RANK 7% 13% Equity Awards 93% Base Salary at risk pay Non-Equity Incentive 80% Compensation

 

1  Does not include Mr. Swan’s (i) $1,000,000 third installment of his 2016 sign-on award, (ii) $1,500,000 cash bonus award for 2018 performance as interim CEO, (iii) “Change in Pension Value and Non-Qualified Deferred Compensation Earnings,” and (iv) “All Other Compensation” as reported in the Summary Compensation Table on page 79.

CEO TRANSITION

 

In June 2018, Mr. Krzanich resigned from the company as CEO and as a member of the Board. The Board then appointed Mr. Swan, our CFO at the time, as interim CEO and CFO. In January 2019, the Board appointed Mr. Swan as our CEO and appointed Todd M. Underwood as our interim CFO. The following is a summary of the compensation decisions in connection with the CEO transition.

Mr. Krzanich

In connection with his resignation, Mr. Krzanich did not receive any severance benefits and forfeited a total of 58,372 RSUs (18,281 of these RSUs were from his 2017 grant and 40,091 of these RSUs were from his 2018 grant), and the Compensation Committee determined that Mr. Krzanich would receive no annual incentive cash payout for 2018 under the Executive Incentive Cash Plan. Mr. Krzanich was retirement eligible (since May 2009) at the time of his resignation under the pre-existing terms of our equity plan and applicable equity grant agreements and, as a result, vesting of certain of Mr. Krzanich’s outstanding equity awards, which consisted of 87,430 RSUs and 668,274 OSU shares, accelerated pursuant to the pre-existing terms and conditions of our

 

 

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equity plan and his grant agreements. For his OSU shares, Mr. Krzanich remained eligible to receive a payout based on actual performance of the applicable performance goals at the end of the respective performance period. Payout may range from 0% to 200% of the target amount.

Mr. Swan

Interim CEO Compensation. Mr. Swan was appointed interim CEO in June 2018. In connection with his appointment and to bring his compensation in line with his position, in August 2018, the committee granted Mr. Swan a special equity award with a target aggregate value of approximately $3,270,000, allocated approximately 50% in the form of time-based RSUs and 50% in the form of OSUs. The RSUs vest quarterly over a three-year period from the grant date, and the OSUs vest in February 2021 based on Intel’s relative TSR performance from June 20, 2018 to February 1, 2021, the performance period for the OSUs. This equity award includes special provisions in the event of Mr. Swan’s termination of employment by the company without cause or by him for good reason. In January 2019, the committee also determined to award Mr. Swan an additional $1,500,000 cash bonus in recognition of his leadership and performance in 2018.

In connection with his continued role as interim CEO through January 29, 2019, the committee approved in January 2019 the grant of an additional special equity award with a target aggregate value of approximately $1,200,000, allocated approximately 50% in the form of time-based RSUs and 50% in the form of performance stock units (PSUs). The RSUs vest quarterly over a three-year period from the grant date, and the PSUs vest in January 2022 based on Intel’s EPS and relative TSR performance during the three-year performance period. This equity award includes special provisions in the event of Mr. Swan’s termination of employment by the company without cause or by him for good reason. The cash bonus of $1,500,000 awarded for 2018 performance and equity award granted in 2018 and 2019 also were intended to normalize his compensation opportunity with compensation that would have been provided to a sitting CEO.

CEO Compensation. In January 2019, the Board appointed Mr. Swan as our CEO effective as of January 30, 2019, and adjusted his annual compensation opportunity to be competitive with compensation opportunities of the CEOs in our peer group. His base salary increased to $1,250,000, and he will be eligible for an annual incentive cash bonus with a target amount of $3,437,500 under the Executive Incentive Cash Plan and a quarterly incentive cash bonus under Intel’s broad-based quarterly bonus program. He received a grant of annual equity awards with a target aggregate grant date value of approximately $15,500,000, composed of approximately 80% PSUs and 20% time-based RSUs, by value. The PSUs will vest in January 2022 based on Intel’s earnings per share and relative TSR performance during the three-year performance period, and the RSUs will vest quarterly over a three-year period from the grant date.

In addition to the annual equity grant described above, Mr. Swan was granted certain strategic growth equity awards in connection with his appointment as CEO that are all at-risk pay. These included performance-based stock units (Promotional PSUs) with a target amount of 450,000 shares, which will be earned based on the appreciation of Intel’s closing stock price over a five-year period following the grant date. The maximum number of Intel shares that may be earned under such Promotional PSUs is 900,000 shares. In addition, Mr. Swan was granted a performance-based stock option to purchase 1,800,000 Intel shares, which will vest annually over a four-year period from the grant date. The option will become exercisable only if, during the five-year period following the grant date, Intel’s closing stock price trades at 30% or more above the closing stock price on the grant date for 30 consecutive trading days. If this performance vesting term is not achieved by the fifth anniversary of the grant date, the option will expire and be canceled.

He received an additional grant of performance-based stock units with a target grant date value of approximately $13,000,000 (Cash Incentive-Related PSUs). On each of the second and third anniversaries of the grant date, subject to Mr. Swan’s continued employment with Intel through the applicable date, 50% of the target number of such Cash Incentive-Related PSUs will vest, subject to an adjustment up or down of up to 25% of the target shares based on Intel’s average corporate plan multiplier under the Executive Incentive Cash Plan over the two- or three-year vesting period, as applicable. However, the payout for these PSUs will be zero if the average corporate plan multiplier is below 50%. If Mr. Swan’s employment is terminated by the company without cause or by him for good reason, all of the then-unvested Cash Incentive-Related PSUs will vest.

2019 Special Performance-Based Equity Awards

In March 2019, the committee approved special performance-based equity awards to Dr. Renduchintala and Mr. Shenoy. They each received a grant of performance-based restricted stock units (Performance PSUs) for a target amount of 150,000 shares and performance-based stock options to purchase 600,000 shares (Performance Options). The terms of these awards are substantially similar to the terms of Mr. Swan’s Promotional PSUs and performance-based stock options detailed above.

These special performance-based equity awards serve to both align the incentive opportunities of our key leaders and Mr. Swan to further promote stockholders’ long-term interests and retain the executives during this period of transformation. The Board and our CEO are focused on keeping the leadership team in place, highly engaged and motivated, and continuing Intel’s significant achievements and success. The Board and our CEO recognize the current highly competitive market for strong leadership talent

 

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and endeavor to retain top talent to further contribute to stockholder value creation. The Performance PSUs will be earned based on the appreciation of Intel’s closing stock price over the same five-year period as Mr. Swan’s Promotional PSUs. The maximum number of Intel shares that may be earned under such Performance PSUs is 300,000 for each of Dr. Renduchintala and Mr. Shenoy. The Performance Options will vest annually over a substantially similar four-year period as Mr. Swan’s performance-based stock option. The Performance Options will become exercisable only if, during the same five-year period as Mr. Swan’s option, Intel’s closing stock price trades at 30% or more above the closing stock price on the date Mr. Swan’s options were granted for 30 consecutive trading days. If this performance vesting term is not achieved by the same fifth anniversary as Mr. Swan’s option, the Performance Options will expire and be canceled. The Performance PSUs and Performance Options are at-risk pay.

2019 COMPENSATION PROGRAM CHANGES

 

The Compensation Committee approved changes to our executive compensation programs for 2019 in late 2018 and early 2019 in response to stockholder feedback, to strengthen our pay-for-performance linkage, and provide better alignment with technology industry practices.

 

 

Peer Group. Our 2018 compensation peer group consisted of technology and S&P 100 companies. The new 2019 peer group has been modified to focus exclusively on technology companies, as we primarily compete for talent with other technology companies.

 

 

PSU Performance Metric. EPS has been added as a second performance metric to our PSU program in addition to relative TSR as measured against the median three-year TSR of the S&P 500 IT index. The addition of EPS as a metric directly ties the PSUs to Intel’s financial performance, creates greater line of sight for our executives, diversifies the incentive metrics to create balanced motivation, and reinforces long-term alignment with stockholders.

 

 

PSU Retirement Provision. Beginning in 2019, the retirement provision for PSUs, which previously provided for full acceleration of vesting upon retirement, have been revised to provide for pro-rated vesting at retirement for new employees. For existing employees, a minimum of one year of service during the PSU performance period is required for full vesting; otherwise pro-rated vesting applies. These changes provide better alignment with technology peer practices and increased retention of key talent.

 

 

Executive Incentive Cash Plan Death, Disability, and Retirement Provisions. Beginning in 2019, provisions related to death, disability, and retirement were established under the Executive Incentive Cash Plan that mirror the provisions under the broad-based annual incentive cash program, except the committee retains discretion in each instance to reduce the payment amount. These changes provide better alignment with technology peer practices.

INVESTOR ENGAGEMENT AND THE 2018 “SAY ON PAY” VOTE

In 2018, we received over 94% support for our “say on pay” vote, similar to the prior year. We have a robust year-round stockholder engagement program, which is discussed above in detail in the “Investor Engagement” section of this proxy statement. In the first quarter of each year (including in 2018), our 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 such discussions with stockholders, we believe that stockholders’ “say on pay” support in 2018 was primarily the result of our 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 2018 “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 2018, and prior to the date of this proxy statement in 2019, we pursued multiple avenues for additional investor engagement, including in-person and teleconference meetings with our stockholders. There were no significant changes to the structure of our executive compensation programs for 2018 (consistent with our strong 2018 “say on pay” results), but in response to our stockholder feedback, we made some changes to our programs for 2019 as described above.

2018 COMPENSATION OF OUR LISTED OFFICERS

PERFORMANCE AND INCENTIVE PAY FOR 2018

 

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.

 

 

The competition for executive talent in the technology sector is significant. While the technology talent market has been very competitive for a number of years, our transformation to a data-centric company has resulted in new sources of competition for talent. In addition to continuing to compete for talent against other successful, established technology companies, we increasingly compete with a wide range of smaller, high-growth companies focused on emerging technologies. The

 

 

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Compensation Committee believes that a competitive total compensation target is critical to attract, retain, and reward the executive talent crucial to driving value for 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 substantial majority of executive pay is variable or “at risk,” based primarily on specific financial metrics or 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 and stock price measures such as net income growth and 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 a number of shares that executive officers must accumulate and hold.

ELEMENTS OF COMPENSATION

 

The following highlights the elements of our executive compensation programs:

Equity. 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 is primarily in the form of OSUs that vest based on Intel’s TSR as measured against the S&P 500 IT Index over a three-year period, driving a focus on delivering a superior return for stockholders. The remainder is in the form of time-based RSUs, which are effective at facilitating stock ownership and retention. Additionally, listed officers are subject to robust stock ownership requirements that further reinforce alignment with stockholders over the long term.

Cash. The next largest portion of a listed officer’s compensation is the annual incentive cash payout under the Executive Incentive Cash Plan, which is based on a combination of annual company-wide financial goals, company and business unit performance relative to operational goals, and individual performance. The alignment of 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 listed officers and other executives. The remaining components of our listed officers’ total direct compensation consists of a competitive base salary and quarterly incentive cash payout under the company-wide quarterly incentive cash program, which is based on company-wide financial performance.

Benefits. In addition to the elements of total direct compensation (salary, quarterly and annual incentive cash payments, and long-term stock-based compensation), we provide a competitive benefits package that includes health care, retirement benefits, 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.

We believe that the sum of these components provides highly motivational incentives that link the pay of our executive officers to the performance of our company and enables Intel to attract and retain the very best talent in a highly competitive market.

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 here, approximately 93% of targeted total direct compensation for Mr. Swan, our then-interim CEO, in 2018 was “at risk,” consisting of approximately 80% equity and 13% incentive cash. Only 7% of his compensation, in the form of base salary, was fixed, ensuring a strong link between his targeted total direct compensation and business results.

  

 

CEO TARGET PERFORMANCE AND INCENTIVE PAY MIX1

 

 

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13% Equity Awards 93% Base Salary at risk pay Non-Equity Incentive 80% Compensation 7%

  

 

1  Does not include (i) the $1,000,000 third installment of his 2016 sign-on award, (ii) the $1,500,000 cash bonus award for 2018 performance as interim CEO, (iii) “Change in Pension Value and Non-Qualified Deferred Compensation Earnings,” and (iv) “All Other Compensation” as reported in the Summary Compensation Table on page 79.

 

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LISTED OFFICERS’ 2018 ACTUAL TOTAL DIRECT COMPENSATION MIX

 

The majority of executive compensation for our listed officers is delivered through programs that link pay realized by executives with financial and operational results, and with TSR. Variable cash compensation payouts under our Executive Incentive Cash Plan were based on measures of absolute and relative financial performance, company performance relative to operational goals, and individual performance.

The bar chart below shows the components of 2018 total direct compensation for each listed officer, as a percentage of the total. For most of our listed officers, this is composed of: base salary; actual quarterly and annual incentive cash payments; and RSUs and target OSUs granted in the year.

TOTAL DIRECT COMPENSATION CHART—LISTED OFFICERS

 

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% Total Direct Compensation 0 20 40 60 80 100 6% 16% 23% 55% 5% 13% 40% 42% 8% 27% 14% 51% 8% 20% 15% 57% 5% 20% 75%Robert H. Swan1 Steven R. Rodgers Venkata Renduchintala Navin Shenoy Brian M. Krzanich2 Salary Incentive Cash RSUs OSUs

 

1 

Excludes Mr. Swan’s third installment of 2016 sign-on bonus and $1.5 million cash bonus payment for 2018 performance as interim CEO.

2 

Mr. Krzanich resigned in June 2018.

OTHER ELEMENTS OF PAY FOR 2018

 

Our listed officers’ compensation for 2018 reflects a number of event-driven compensation arrangements. For Mr. Swan, a portion of his 2018 compensation was comprised of the third installment of his new-hire sign-on cash awards originally awarded in part to offset compensation forgone when he separated from his prior employer to join Intel in 2016. Additionally, Mr. Swan’s 2018 compensation includes a cash bonus award in recognition of his leadership and performance in 2018. Mr. Rodgers’ 2018 compensation includes a special equity award to reflect his increased responsibilities in 2018 overseeing Human Resources and China.

 

 

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2018 INCENTIVE COMPENSATION PAYOUTS

 

INCENTIVE CASH COMPENSATION

The corporate average payout percentage under the annual incentive cash plan for 2018 was 107% of the annual incentive cash target, compared to 116% in 2017. For 2018 and 2017, the Compensation Committee decided to use net income, as adjusted for the one-time tax impacts from the recognition of provisional estimates associated with the December 22, 2017 enactment of the U.S. Tax Cuts and Jobs Act (Tax Reform), for purposes of facilitating a better comparison of our 2018 and 2017 operating performance to that of prior years. Intel’s adjusted net income was up from the previous year, and was supported by strong performance under the operational measures. The link between our financial performance and the listed officers’ annual incentive cash payouts under the Executive Incentive Cash Plan is illustrated in the following chart, which shows how the average annual incentive cash payments have varied based on Intel’s net income, and for 2018 and 2017 adjusted net income, results. For 2018, average annual incentive cash payments declined, primarily due to Mr. Krzanich not receiving any 2018 annual incentive cash payment.

NET INCOME PERFORMANCE VS. INCENTIVE CASH PAY

 

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$20,759 $20,000 $5 $16,000 $4 $15,045 $12,942 $12,000 $11,704 $11,420 $3 $2.53 $11,005 $2.30 $10,316 $9,620 $2.15 $2.27 $1.86 $1.67 $8,000 $1.56 $2 $1.45 $4,000 $1 $0 $0.0 2011 2012 2013 2014 2015 2016 20171 20181 Net Income in Millions Listed officer average annual incentive cash payout in millions

 

1 

Adjusted net income was used for 2018 and 2017.

The chart above also shows our GAAP net income results for each year, except with respect to fiscal 2018 and 2017 results, which are adjusted net income and exclude the one-time tax impacts from Tax Reform. See the reconciliation of this non-GAAP measure to the comparable GAAP measure in Appendix A of this proxy statement.

INCENTIVE EQUITY COMPENSATION

For the January 2015 through January 2018 performance period, OSUs vested at 113.5%, reflecting that Intel’s TSR was 3.4 percentage points above the peer group median TSR over the performance period. The total payout, including dividend equivalents accrued on earned shares, was 121.9% of target. These payouts are reported in the Stock Option Exercises and Stock Vested in Fiscal Year 2018 table on page 83.

 

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ALIGNMENT OF PRINCIPAL ELEMENTS OF PAY-FOR-PERFORMANCE

 

In 2018, the Compensation Committee requested that Pay Governance, the Compensation Committee’s independent consultant, assess the alignment between our CEOs’ compensation outcomes and long-term performance for our stockholders. Pay Governance used a “realizable” pay-for-performance alignment model and used the 2018 peer group that was in effect at the time. This realizable pay model used Mr. Krzanich’s 2016 and 2017 pay, and Mr. Swan’s 2018 pay, over the most recently disclosed three-year period (2016-2018). Realizable pay reflects the actual operating and stock price performance for the companies, using future estimates of performance share payouts. Thus, Pay Governance believes that realizable pay is a better metric for evaluating stockholder alignment than using the pay opportunity values that are shown in the Summary Compensation Table and other tables set forth later in the proxy statement. The peer group assessment for comparability requires the use of the most recent proxy statements available.

Pay Governance defines “realizable pay” and “performance” as follows:

 

PAY COMPONENT    REALIZABLE PAY AND PERFORMANCE

Base salary

   Actual paid in most recent three-year period disclosed

Annual Bonus

   Actual paid in most recent three-year period disclosed

Performance Shares

   Value of all shares granted and earned during most recent three-year period disclosed; if not yet earned, use estimated payouts disclosed in proxy, otherwise assume target; valued at 12/31/18 (stock price of $46.93 for Intel)

Stock Options/Stock Appreciation Rights

   Gains (intrinsic value) on all options granted during most recent three-year period disclosed; valued at 12/31/18

Restricted Stock/RSUs

   Value of all shares granted during most recent three-year period disclosed; valued at 12/31/18

Performance

   Three-year TSR as of 12/31/18

As indicated by the chart below, Pay Governance determined that there was a strong alignment between our CEOs’ three-year realizable pay and our company’s TSR relative to peers. Specifically, for the 2016-2018 period, our CEOs’ three-year realizable pay was at the 44th percentile of our peer group and our three-year TSR (>14% annualized) was at the 51st percentile. Overall, Pay Governance concluded that our executive compensation program facilitates and demonstrates alignment between pay and performance compared to our peers. The Compensation Committee developed the performance-based structure of our new CEO’s pay program to optimize the alignment of future realizable pay with performance.

 

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CEO REALIZABLE PAY RANK VS. 3-YEAR ANNUALIZED TSR PERFORMANCE RANK (AS OF 12/31/18) 100% Below median pay & above median performance 75% RANK Intel PERCENTILE 50% TSR YEAR 3 - 25% Above median pay & below median performance 0% 0% 25% 50% 75% 100% 3-YEAR REALIZABLE PAY PERCENTILE RANK

 

 

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INTEL’S EXECUTIVE COMPENSATION BEST PRACTICES

 

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

 

WHAT WE DO              WHAT WE DON’T DO
 

•  We have performance-based compensation that uses a variety of performance measures and performance periods

 

•  We have a substantial majority of executive pay at risk, based on a mix of absolute and relative financial and stock price performance metrics

 

•  We have robust stock ownership guidelines for all executive officers

 

•  We have a claw-back policy that applies to our annual incentive cash plan and equity incentive plan

 

•  We conduct an annual say-on-pay vote and a triennial vote on our equity compensation plan

 

•  We impose limits on maximum incentive payouts

      

  No change in control compensation arrangements or excise tax gross-ups

 

  No tax gross-ups for executive officers (except for business expenses such as relocation and housing costs)

 

  No hedging or pledging of Intel stock by executives or directors

 

  No special retirement plans exclusively for executive officers

 

  No liberal share recycling under the equity incentive plan

 

  No repricing or exchange of underwater options without stockholder approval

Our strong governance practices extend beyond our executive compensation program. With respect to our company-wide compensation and human capital management practices, we focus on an inclusive culture and fair pay. We also perform an annual compensation review to assess whether the programs’ provisions and operation create undesired or unintentional material risk.

2018 CASH COMPENSATION

 

In January of each year, as part of the Compensation Committee’s regular annual compensation planning, the 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 2018, for each listed officer, as well as the target and actual annual incentive cash payments for 2018. In recognition of their individual achievements in 2018 and their strong leadership during the CEO transition, the Compensation Committee determined to apply a 20% individual performance-based adjustment to the annual incentive cash performance results for each of our listed officers other than Mr. Krzanich. These changes are summarized in the tables that follow.

Mr. Swan. The committee decided to increase Mr. Swan’s base salary by 6% to $898,450 and to increase Mr. Swan’s annual incentive cash target by 8% to $1,617,000 in January 2018 in connection with his role as CFO of Intel. The committee determined that this adjustment was appropriate because of the critical role that Mr. Swan plays in developing and implementing Intel’s business strategy and helping to drive the company’s financial performance. Mr. Swan did not receive a subsequent increase in his base salary to reflect his role as interim CEO. Mr. Swan’s actual annual incentive cash payment for 2018 was $2,075,400 as a result of strong corporate financial performance and a 20% individual performance-based adjustment. Mr. Swan also received an additional cash bonus payout of $1,500,000 in recognition of his outstanding leadership and performance during his tenure as interim CEO in 2018 while also serving as our CFO. Mr. Swan also received a cash payout of $1,000,000 in 2018, the third installment of his sign-on award, made to him in part to offset compensation forgone when he separated from his prior employer to join Intel in 2016.

Mr. Rodgers. In May 2018, Mr. Rodgers was appointed an executive officer. At the time of his promotion, Mr. Rodgers’ base salary was $800,000 and his annual incentive cash target was $1,440,000. His actual annual incentive cash payment for 2018 was $1,848,000 as a result of strong corporate financial performance and a 20% individual performance-based adjustment.

Dr. Renduchintala. The committee increased Dr. Renduchintala’s base salary by 6% to $1,008,378 and increased his annual incentive cash target by 6% to $2,353,000 in January 2018. Dr. Renduchintala’s actual annual incentive cash payment for 2018 was $3,019,600, up 17%, as a result of strong corporate financial performance and a 20% individual performance-based adjustment.

Mr. Shenoy. The committee increased Mr. Shenoy’s base salary by 6% to $792,750 and his annual incentive target was increased by 6% to $1,308,000 in January 2018. Mr. Shenoy’s actual incentive cash payment for 2018 was $1,857,400, reflecting the growth in our DCG business, strong corporate financial performance, and a 20% individual performance-based adjustment.

 

 

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Mr. Krzanich. The committee increased Mr. Krzanich’s base salary by 5% to $1,450,000 and increased his annual incentive cash target by 7% to $3,837,000 in January 2018. The committee determined that these adjustments were appropriate in light of Mr. Krzanich’s exceptional individual performance throughout 2017 and after a review of relevant market data. In connection with Mr. Krzanich’s resignation, the committee determined that he would not receive an annual incentive cash payment under the Executive Incentive Cash Plan for 2018.

BASE SALARY

The table below shows the ending annualized base salary for our listed officers for 2018, as compared with 2017, with the exception of Mr. Rodgers, who was not a listed officer in 2017.

 

Name

   2018 Base Salary ($)    2017 Base Salary ($)    % Change
2018 vs. 2017

Robert H. Swan

     898,450        850,000        6%  

Steven R. Rodgers

     800,000        n/a        n/a  

Venkata Renduchintala

     1,008,378        954,000        6%  

Navin Shenoy

     792,750        750,000        6%  

Brian M. Krzanich

     1,450,000        1,380,000        5%  

ANNUAL INCENTIVE CASH

The table below shows the ending target annual incentive for our listed officers under our Executive Incentive Cash Plan in 2018, as compared with 2017, with the exception of Mr. Rodgers, who was not a listed officer in 2017.

 

Name

   2018
Annual Incentive
Cash Target Amount
($)
   2017
Annual Incentive
Cash Target Amount
($)
  

% Change

2018 vs. 2017

Robert H. Swan

     1,617,000        1,500,200        8%  

Steven R. Rodgers

     1,440,000        n/a        n/a  

Venkata Renduchintala

     2,353,000        2,226,100        6%  

Navin Shenoy

     1,308,000        1,237,500        6%  

Brian M. Krzanich

     3,837,000        3,600,100        7%  

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). The Compensation Committee assigned a 50% weighting to operational performance because it views operational excellence and technological leadership as ultimately driving superior financial performance.

 

 

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The table below details each component, describes the factors affecting 2018 payouts, and illustrates the calculation of the annual incentive cash payout for 2018.

 

COMPONENT   MEASURES   PURPOSE   2018 CALCULATION   COMPARISON TO 2017    2018 RESULTS 

Absolute Financial Performance

(25% Weighting)

  Reflects year-over-year growth of Intel’s net income or adjusted net income   Rewards executive officers for sustained performance  

2018 adjusted net income (in millions) divided by 2017 adjusted net income (in millions)

 

$20,759/ =

$15,045

  Intel’s 2018 adjusted net income was 38% higher than in 2017, resulting in a score of 138% for this component, whereas Intel’s 2017 adjusted net income was 46% higher than the prior year   138%

Relative Financial Performance

(25% Weighting)

  Reflects Intel’s year-over-year net income or adjusted net income growth compared with the net income or adjusted net income growth of technology peer companies   Rewards executive officers for how well Intel’s year-over-year net income or adjusted net income growth performs compared with the broader technology market  

2018 Intel adjusted net income growth divided by 2018 peer group average adjusted net income growth

 

138%/ =

128%

  2018 relative adjusted net income growth was a decrease compared with the 2017 relative score of 122%   108%

Operational Performance

(50% Weighting)

  Reflects specific operational goals that the committee approves for each business unit   Rewards executive officers for achieving meaningful measures of performance based on performance in key areas by driving focus and accountability at each of the 10 business unit levels  

Corporate-level and administrative group employees, including each of our listed officers other than Mr. Shenoy, are paid based on average of 10 business units’ scores, subject to any adjustment for performance against corporate-level diversity and inclusion goal (focused on hiring and retaining diverse talent—not achieved)

 

Mr. Shenoy’s payout is based on results of Data Center Group, which he led in 2018

 

2018 average corporate score on operational goals was lower than the 2017 average corporate score of 97%

 

2018 DCG score on operational goals increased compared with the 2017 DCG operational score of 83%

 

Corporate Average: 91%

 

DCG: 113%

Payout Results

 

Corporate Average Payout (as a percentage of target): (138% x 25%) + (108% x 25%) + (91% x 50%) = 107%

 

Data Center Group Payout (as a percentage of target): (138% x 25%) + (108% x 25%) + (113% x 50%) = 118%

In applying the net income tests for both the absolute and relative financial components, the Compensation Committee may adjust Intel’s net income based on criteria determined by the committee, as described in the plan. For 2018 and 2017, the committee excluded tax impacts of the Tax Reform to peer companies from their net income results.

 

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Over the past five years, corporate average operational goals have scored between 91% and 122%, with an average result of 103%, reflecting strong accomplishments in the Data Center Group, Programmable Solutions Group, Client Computing Group, and Internet of Things Group.

The following table details the annual incentive cash payments for each listed officer for 2018 and 2017 (except for Mr. Rodgers, who was not a listed officer in 2017), reflecting the year-over-year changes.

 

Name

   2018 Annual Incentive
Cash Payment ($)
   2017 Annual Incentive
Cash Payment ($)
  

% Change

2018 vs. 2017

Robert H. Swan1

     2,075,400        2,080,200         

Steven R. Rodgers

     1,848,000        n/a        n/a  

Venkata Renduchintala

     3,019,600        2,574,800        17%  

Navin Shenoy

     1,857,400        1,132,000        64%  

Brian M. Krzanich2

            4,992,200        n/a  

 

1

Mr. Swan’s year-over-year change slightly decreased because the payout percentage was less in 2018 and he was one of the few listed officers to receive a 20% individual performance-based adjustment in 2017, which resulted in his 2017 annual incentive cash payment being proportionately higher than those of the other listed officers.

2. 

Mr. Krzanich resigned in June 2018, and the Compensation Committee determined that he would not receive an annual incentive cash payment under the Executive Incentive Cash Plan for 2018.

QUARTERLY INCENTIVE CASH PAYMENTS

The listed officers also participate in our company-wide quarterly incentive cash program, which delivers cash compensation to employees based on Intel’s profitability. In 2018, 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 other employees. Payments earned in 2018 represented 26.8 days of compensation for each of our listed officers, up from 20.3 days in 2017.

2018 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. The committee made the following equity grants for each listed officer in 2018, a summary of which is shown in the table on page 72.

Mr. Swan. Mr. Swan was granted an annual equity award with an approved target grant date value of approximately $8,000,000 in January 2018. The award was split such that 80% of the grant value was in the form of OSUs and 20% was in the form of RSUs. In connection with his appointment as interim CEO, in August 2018, he also was granted a special equity award with a target grant date value of approximately $3,270,000 allocated approximately 50% in the form of RSUs and 50% in the form of OSUs.

Mr. Rodgers. Mr. Rodgers was granted an annual equity award with an approved target grant date value of approximately $8,000,000 in January 2018, which was prior to his designation as an executive officer of the company. The award was split such that 80% of the grant value was in the form of OSUs and 20% was in the form of RSUs. In January 2018, he was also granted a special equity award with a target grant date value of approximately $4,000,000 in RSUs to reflect his increased responsibilities overseeing Human Resources and China.

Dr. Renduchintala. Dr. Renduchintala was granted an annual equity award with an approved target grant date value of approximately $8,000,000 in January 2018, a 21% increase over the previous year. The target award amount was aligned to the market for his role and was split such that 80% of the grant value was in the form of OSUs and 20% was in the form of RSUs.

Mr. Shenoy. Mr. Shenoy was granted an annual equity award with an approved target grant date value of approximately $7,560,000 in January 2018. The award was split such that 80% of the grant value was in the form of OSUs and 20% was in the form of RSUs.

Mr. Krzanich. Mr. Krzanich was granted an annual equity award with an approved target grant date value of approximately $15,550,000 in January 2018, a 15% increase over the previous year. The committee determined to increase his annual equity award in recognition of Mr. Krzanich’s individual performance in 2017 and to bring his target total direct compensation fully in line with the market median range for his role. The target annual equity award was split such that 80% of the grant value was in the form of OSUs and 20% was in the form of RSUs. In connection with his resignation in June 2018, Mr. Krzanich forfeited a total of 58,372 RSUs (40,091 of these RSUs were from his January 2018 RSU grant), but because he was retirement eligible under the terms of our equity plan and applicable grant agreements, the vesting of 22,909 RSUs accelerated from his January 2018 grant and he remained eligible to receive a payout of his 2018 OSU grant based on actual achievement of the applicable performance goals at the end of the performance period.

 

 

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The table below shows the annual equity award values approved by the committee for our listed officers in 2018, as compared with annual equity award values approved in 2017. As discussed previously, in 2018, annual awards to the listed officers were composed of approximately 80% OSUs and 20% RSUs by target award amount. Amounts reported in the Summary Compensation Table and the Grants of Plan-Based Awards in Fiscal Year 2018 table on pages 79 and 82 differ marginally from these values due primarily to changes in the fair value of the awards 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

   2018 Approved Value
of Annual
Equity Awards ($)
   2017 Approved Value
of Annual
Equity Awards ($)
  

% Change

2018 vs. 2017

Robert H. Swan

     8,000,000        6,500,000        23%  

Steven R. Rodgers1

     8,000,000        n/a        n/a  

Venkata Renduchintala

     8,000,000        6,600,000        21%  

Navin Shenoy2

     7,560,000        5,545,600        36%  

Brian M. Krzanich

     15,550,000        13,500,000        15%  

 

1 

Mr. Rodgers’ 2017 annual equity award is not included in the table above as he was not a listed officer prior to 2018. Also, the table excludes Mr. Rodgers’ 2018 special equity awards.

2

This table excludes Mr. Shenoy’s 2017 retention award, but includes Mr. Shenoy’s 2017 promotional award.

OSU AWARDS

OSUs are variable performance-based RSUs under which the number of shares of Intel common stock earned is based on Intel’s relative TSR performance over a three-year period. For the 2018 OSU grant, the committee decided to retain the design for the 2017 OSU award. Intel’s TSR performance during the 36-month period starting from the grant date will be measured against the S&P 500 IT Index. We measure TSR based on stock price appreciation plus any dividends payable during the performance period.

Performance is measured over the 36 months following the grant date, and OSUs convert into shares in the 37th month (usually, in February). For more information on how OSUs are earned, see the narrative following the Grants of Plan-Based Awards in Fiscal Year 2018 table in “Executive Compensation.”

In 2019, the committee made changes to the OSU award design. First, the name of the awards was changed from OSUs to performance stock units or PSUs. Second, in addition to the relative TSR performance measure, EPS was added such that the payout is equally weighted between the two performance measures. Third, performance is measured over 36 months beginning with the first day of the fiscal year of the grant date, and PSUs convert into shares in the 37th month after the committee’s certification (usually, in January).

RSU AWARDS

Currently targeted at 20% of annual long-term incentive award opportunities, RSUs generally make up a limited portion of compensation opportunities for our executive officers. These awards are intended to support our efforts to provide competitive compensation packages to retain executive officers and to reward them for absolute long-term stock price appreciation while providing some protection to the recipient even if the stock price declines. RSUs also serve to balance the performance-based nature of OSUs, facilitate stock ownership, and provide a significant incentive to stay with the company. As with RSUs granted in 2017, awards granted to the listed officers in 2018 will vest in substantially equal quarterly increments over three years from the grant date. Quarterly vesting of RSUs helps offset the risks inherent in the all-or-nothing 37-month cliff vesting of the OSUs.

 

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OTHER ASPECTS OF OUR EXECUTIVE COMPENSATION PROGRAMS

INTEL’S COMPENSATION FRAMEWORK

 

The Compensation Committee determines the compensation for our executive officers. It also designs executive officer compensation programs and reviews and determines all components of each executive officer’s compensation. As discussed above under “Corporate Governance; Compensation Committee,” Pay Governance has served as the committee’s independent advisor since June 2018. Prior to that, Farient was the committee’s independent advisor. During 2018, the consultants’ 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

 

 

investor 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 Chief Human Resources Officer 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 non-employee directors acting as a committee of the whole Board. For the CEO’s review, formal input is received from the non-employee directors, the Chairman, and senior management. The CEO also submits a self-assessment focused on pre-established objectives agreed upon with the Board. The non-employee 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 2018

 

To assist the Compensation Committee in its review of executive compensation in early 2018, 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. The historical compensation data was adjusted to arrive at current-year estimates for the peer group. The committee used this data to compare the compensation of our listed officers to that of the peer group.

The peer group for 2018 included our 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

 

 

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various respects, such as those that made significant investments in R&D 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.

For 2018, we have made changes to the technology peer group and the S&P 100 companies outside the technology industry. We removed Texas Instruments Incorporated and we added Broadcom, Inc. to our technology peer group. We removed DowDupont Inc. and United Parcel Service, Inc., and added The Boeing Company and Honeywell International Inc. to our S&P 100 companies peer group.

The table below shows information for our 2018 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 1, 2019

($ in billions)

Intel 2018

     12/29/2018        70.8        21.1        239.69  

Intel 2018 Percentile

              59%        89%        67%  

Technology Peer Group

 

Alphabet Inc.

     12/31/2018        136.8        30.7        796.07  

Amazon.com Inc.

     12/31/2018        232.9        10.1        821.16  

Apple Inc.

     9/30/2018        265.6        59.5        825.03  

Applied Materials, Inc.

     10/29/2018        17.2        3.3        36.61  

Broadcom, Inc.

     11/4/2018        20.8        12.6        108.04  

Cisco Systems, Inc.

     7/29/2018        49.3        0.1        226.31  

Facebook Inc.

     12/31/2018        55.8        22.1        463.15  

Hewlett Packard Enterprise Co

     10/31/2018        30.9        1.9        22.55  

HP Inc.

     10/31/2018        58.5        5.3        30.06  

International Business Machines Corporation

     12/31/2018        79.6        8.7        123.87  

Micron Technology Inc.

     8/31/2018        30.3        14.1        46.61  

Microsoft Corporation

     6/30/2018        110.4        16.6        863.35  

Oracle Corporation

     5/31/2018        39.8        3.8        188.45  

Qualcomm Incorporated

     9/24/2018        22.7        (4.9      65.60  

TSMC Limited

     12/31/2018        33.7        11.5        203.26  

S&P 100 Peer Group

 

AT&T Inc.

     12/31/2018        170.8        20.0        224.51  

The Boeing Company

     12/31/2018        101.1        10.5        248.94  

General Electric Company

     12/31/2018        121.6        (22.4      89.40  

Honeywell International, Inc.

     12/31/2018        41.8        6.8        113.53  

Johnson & Johnson

     12/31/2018        81.6        15.3        368.45  

Merck & Co., Inc.

     12/31/2018        42.3        6.2        210.76  

Pfizer Inc.

     12/31/2018        53.6        11.1        251.49  

Schlumberger Limited

     12/31/2018        32.8        2.2        62.63  

United Technologies Corporation

     12/31/2018        66.5        5.3        108.38  

Verizon Communications Inc.

     12/31/2018        130.9        16.0        235.36  

 

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For 2019, the committee reviewed the peer group methodology for relevance using a variety of factors, including market capitalization, revenue, business relevance, and talent movement, and decided to move to a pure technology peer group. The peer group being used for 2019 compensation decisions includes most of the 15 technology companies above with the following changes:

 

 

Removed TSMC Limited (because it is a non-U.S. headquartered company) and Micron Technology Inc. and Hewlett Packard Enterprise Co (because both scored low on the list of criteria used by the committee for benchmarking executive compensation); and

 

 

Added Netflix, Inc., NVIDIA Corporation, and Texas Instruments Incorporated (because they all scored high on the criteria list).

These changes were made based on the committee’s determination that there has been an increase in the number of technology companies with which we compete for talent, and that we should benchmark our executive compensation against a pure technology peer group. This required us to broaden the market capitalization and revenue factors originally set for 2017. As a result of these changes, Texas Instruments Incorporated was added back to the peer group for 2019.

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. To attract and retain the best talent in the technology sector, we have provided for time-limited, post-employment separation benefits to two listed officers in their offer letters, as described more fully below under “Other Agreements” in this proxy statement. These benefits have now expired.

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, death, and disability acceleration provisions for equity awards.

Starting January 1, 2011, the company-funded pension plan was closed to new hires. 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 post-employment compensation 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 U.S.

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 2018, 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. Since January 1, 2015, plan assets contributed for U.S. participants and discretionary employer contributions have been participant-directed.

Our equity awards have the following post-employment provisions:

 

 

Unvested OSUs are canceled upon termination of employment for any reason other than retirement, death, or disability. OSUs are fully vested upon retirement under the Rule of 75, when the holder’s age and years of service equal at least 75, or reaching the age of 60. OSUs are not settled into shares of Intel stock until after the end of the performance period, even if the holder qualifies for early vesting.

 

 

RSUs are subject to retirement vesting under the rule of Age 60 or the Rule of 75, but not both. Upon retirement under the rule of Age 60, the holder receives one additional year of vesting for every five years of service. Upon retirement under the Rule of 75, the holder receives one additional year of vesting. Additional years of vesting means that any RSUs scheduled to vest within

 

 

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the number of years from the retirement date determined under the rule of Age 60 or Rule of 75 will be vested on the holder’s retirement date.

 

 

Upon disability or death, all unvested OSUs and RSUs become 100% vested.

 

 

For details on the 2019 changes to the PSU retirement provisions, see “Compensation Discussion and Analysis; Executive Summary; 2019 Compensation Program Changes” on page 63 of this proxy statement.

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 2018, Intel offered the listed officers certain financial planning services, health evaluations, and certain transportation costs. In addition, in 2018, our Board of Directors determined to maintain the personal security for Mr. Krzanich 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. Following a law enforcement investigation of threats of violence and stalking of Mr. Rodgers in retaliation for performing his duties to the company in late 2016, and upon advice of an independent security contractor, and prior to Mr. Rodgers becoming an executive officer, the company determined it was in its interest to request that Mr. Rodgers move to a more secure residence under an arrangement that is cost neutral to Mr. Rodgers in comparison to his previous residence. As a result, Mr. Rodgers is receiving a housing benefit represented by the difference between cost to Intel of a residence that it owns and leases to Mr. Rodgers, less rent paid by Mr. Rodgers. 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 as well as their safety and the safety of their families. 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 tailored, including providing enhanced security for certain individuals in response to specific incidents and threats; not providing enhanced security for all executive officers generally; and ensuring that the Board, comprised solely of independent directors, authorizes continuation of each arrangement (with no executive officer participating in the decision to approve enhanced security measures for himself or herself). In 2016, 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 arrangements for our officers as appropriate. In connection with hiring Dr. Renduchintala to join Intel in 2016, the committee approved providing relocation assistance and certain travel benefits, reflective of the competitive market for executives in the technology industry. Finally, Mr. Shenoy received tax equalization benefits in 2017 in connection with his expatriate assignment at our Hong Kong facility; these tax benefits are customarily provided to our employees on international assignments. Other than the perquisites listed above, Intel does not provide perquisites to its executive officers.

OTHER AGREEMENTS

 

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, Dr. Renduchintala was eligible to receive a supplemental bonus in the event that his annual incentive cash payment was less than $2,100,000 for 2016-2018 due to the company’s performance. Given that his annual bonus has paid out higher, no such supplemental bonus was payable in 2016, 2017, or 2018. Likewise, Dr. Renduchintala is eligible for an annual equity grant with a grant date value of at least $6,000,000; as in 2016 and 2017, Dr. Renduchintala received an annual equity grant with a target grant date value of more than $6,000,000 in 2018. 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 certain commuting and travel benefits, including a car and driver for commuting purposes, to optimize his time. Finally, in the event that his employment was terminated by Intel within the first three years of employment for any reason other than cause (as defined in the offer letter), Dr. Renduchintala would have been eligible for a severance payment, the value of which would have declined in quarterly increments over the three-year period, subject to his execution and delivery of an effective release of claims in favor of Intel. His eligibility for these severance payments has expired.

Pursuant to his 2016 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 the event that his employment had been terminated by Intel within the first two years of employment for any reason other than cause (as defined in the offer letter), Mr. Swan would have been 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. His eligibility for these severance payments has expired. In connection with his appointment as CEO in January 2019, the company entered into an offer letter with Mr. Swan. Details of the terms of his compensation are provided in “Compensation Discussion and Analysis; Executive Summary; CEO Transition” on page 61 of this proxy statement.

Pursuant to a 10-year lease agreement, Mr. Rodgers leases from Intel a residence that it owns for which Mr. Rodgers pays $4,805 a month for rent to Intel. The residence has a fair rental value of $26,500, with a lease differential amount of $21,695 per month.

 

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Under the lease agreement, Mr. Rodgers may purchase the residence during the term of the lease for its fair market value or may purchase the residence at Intel’s cost at the end of the lease.

LISTED OFFICER STOCK OWNERSHIP GUIDELINES

 

Because the Compensation Committee believes in linking the interests of management and stockholders, the Board has set stock ownership guidelines for Intel’s executive officers. These guidelines specify the number of shares that Intel’s executive 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 29, 2018, each of Intel’s listed officers had either satisfied these ownership guidelines or still had time to do so. The following table lists the specific ownership requirements for the listed officers.

 

Title

  

Minimum Number of

Shares

CEO

     250,000  

Executive Chairman

     150,000  

CFO

     125,000  

Executive Vice President

     100,000  

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 Executive Cash Plan, under which annual incentive cash payments are made, and Intel’s 2006 Equity Incentive Plan, under which annual incentive equity awards are made, 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. In addition, the 2006 Equity Incentive Plan 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

 

Prior to December 22, 2017, when the Tax Reform was signed into law, Section 162(m) of the Internal Revenue Code generally disallowed a tax deduction to publicly held companies for compensation that did not qualify as performance-based that was paid to certain executive officers in excess of $1 million per officer in any year. To maintain flexibility and promote simplicity in administration, compensation arrangements with our listed officers—such as OSUs, RSUs, and annual and quarterly incentive cash payments—were not required to satisfy the conditions of Section 162(m) required for such arrangements to be considered “qualified performance-based” compensation, and therefore may not be deductible.

Under the Tax Reform, the tax deduction disallowance rules under section 162(m) changed beginning in 2018, so that compensation earned by our listed officers in excess of $1 million in any year generally will not be deductible.

 

 

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  2019 PROXY STATEMENT         Compensation Discussion and Analysis    77


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, Robert H. Swan, and our interim Chief Financial Officer, Todd M. Underwood. 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 2018 Annual Report on Form 10-K (incorpora