DEF 14A 1 d835759ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

SCHEDULE 14A INFORMATION

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Exchange Act of 1934 (Amendment No.     )

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Preliminary Proxy Statement

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Definitive Proxy Statement

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INTEL CORPORATION

 

 

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2020 proxy statement notice of annual stockholders' meeting


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INVESTOR Engagement we heard you speak to see how we responded to your feedback, see page xxx. Total contacted 48.1% 0/s total engaged 38.9% 0/s director engaged 28.0% 0/s We are proud of our long-standing and robust investor engagement program. Our integrated outreach team, led by our investor relation group, corporate responsibility office, and the corporate secretary's office, engages proactively with our stockholders, maintaining a two-way, year-round governance calendar as shown [here][in this graphics. During 2019, our engagement program addressed corporate governance best practices, our executive compensation program, our Board's operation and experience, and our commitment to addressing environmental and social responsibility issues that are critical to our business. Through direct participation in our engagement efforts and through briefings form our engagement teams, our directors are able to monitor developments in corporate governance and social responsibility and benefit from our stockholders' perspectives on these topics. In consultation with our board, we seek to thoughtfully adopt and apply developing practices in a manner that best supports our business and our culture. SUMMER Review annual meeting results to determine appropriate next steps, and prioritize post-annual meeting investor engagement focus areas FALL Hold post-annual meeting investor meetings to solicit feedback and report to the Board and Corporate Governance and Nominating Committee WINTER Incorporate input from investor meetings into annual meeting planning and enhance governance and compensation practices and disclosures when warranted SPRING Conduct pre-annual meeting investor meetings to answer questions and understand investor views on proxy matters ANNUAL STOCKHOLDERS' MEETING Additional detail on specific topics and initiatives we have adopted is discussed under "Investor Engagement" September 30, 2019on page XX.


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LETTER FROM YOUR CHAIRMAN

 

DEAR STOCKHOLDER,

 

Our strategic evolution to capitalize on the exponential growth of data and help customers unleash its potential with technology to process, store, and move more data, faster, is transforming many aspects of our company. It is particularly important that our leadership and our culture reflect and support this transformation, and we have made great progress to provide a solid foundation for our growth and leadership in this new era. This strategic evolution has driven change throughout the company, while the core fundamental principles of our operations and values remain unchanged. Key among those are our commitment to our stockholders and our recognition that leadership on environmental, social, and governance issues makes us a stronger company and enables us to create value for our community.

FRESH BOARD PERSPECTIVES

 

 

Since the beginning of 2017, we have welcomed six new independent directors to the Board, each of whom brings extensive experience and fresh perspectives to enrich Board dialogue and enhance the Board’s ability to continue effectively overseeing the business. Our Board reflects a diverse set of perspectives, skills, and experiences to position our company for the future.

 

 

“At Intel, a key question that is front and center in the boardroom is how our decisions impact our stockholders. As a result, we find it incredibly important to ensure that we have a meaningful dialogue with our investors throughout the year so we can get their feedback on important matters affecting Intel. This is particularly true in a year when our investors express dissatisfaction with some aspect of our practices, as they did through last year’s “say on pay” vote. Following this vote, I made it a priority on behalf of the board to engage directly with investors to better understand the reasons for their vote. Following meetings with investors representing 28% of our stock, I discussed your feedback with the board and have worked with management to incorporate it into our practices and disclosures.”

—Omar Ishrak

Independent Chairman

In keeping with our strong commitment to independent Board oversight, we have long separated the roles of Board Chairman and CEO. Returning to our past practice of having an independent director serve as Board Chairman, it was my honor to be elected Board Chairman in January 2020. Our immediate past Chairman, Andy Bryant, will be retiring from the Board as of the 2020 Annual Meeting. Over the past 39 years, Andy has served Intel in a number of crucial roles. He has led with integrity and an abiding focus on delivering results with the best interests of Intel and our stakeholders in mind. On behalf of myself, the rest of the Board and the broader Intel family, I thank and congratulate Andy for his service. Much of what Intel has become in its first 50 years is due in no small part to his enduring commitment to the company, its employees and its stockholders.

FULLY ALIGNED EXECUTIVE MANAGEMENT TEAM

 

 

As we continue our work to shape the future of technology, we believe our leadership team must be committed to and have a stake in that future. During the course of 2019, we made three key changes to our management leadership team. In January 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. To complement Bob’s unique talents and to empower Intel’s executive leaders to drive transformative change and improve execution, in April 2019, the Board appointed George Davis as our Chief Financial Officer and in June 2019 the Board appointed Sandra Rivera as our new Chief People Officer. Both George and Sandra lead critical aspects of Intel’s long-term strategy to power a data-centric world, while remaining committed to the fundamental principles that have guided Intel through its first half-century. The Board is confident that these changes have strengthened and reinvigorated our management team and have positioned Intel for sustainable success as we continue our evolution.

CULTURAL EVOLUTION ACROSS THE ENTERPRISE

 

 

The Board understands the importance of corporate culture and firmly believes that a strong culture allows Intel to attract and retain talented and engaged employees who can deliver their best every day and who create the intellectual capital the company relies on to develop and advance our technologies and manufacturing. As we continue our strategic transformation, the Board and our management team are fully committed to evolving our corporate culture in order to capitalize on our massive market opportunity in Intel’s history and to fulfill Intel’s purpose of creating world-changing technology that enriches the lives of every person on earth.

 

 

 

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 LETTER FROM YOUR CHAIRMAN CONTINUED

 

Like our broader strategic transformation, the transformation of our corporate culture will be a multi-year journey. Intel must be customer obsessed to deliver every aspect of our business to the highest quality, act fearlessly as “One Intel” and create an inclusive environment that welcomes truth and transparency. This cultural evolution will touch everything from the way employees work together, serve our customers and make decisions, to how we reward performance, promote our employees and enable our workplace with technology.

In 2019, we took significant steps in support of this cultural evolution. We replaced our legacy performance management system with one based on the principles driving our ongoing strategic transformation, and under the leadership of our new Chief People Officer, we are actively cultivating new employee processes and programs to promote sustainable growth and dynamic employee engagement. We also revised our annual incentive cash program for 2020 to embrace a “One Intel” approach, under which employees’ bonuses depend on our successes across the company, and not just based on individual business group achievements. Through the efforts of our Compensation Committee, the Board holds our management leaders accountable for making meaningful progress in support of our cultural evolution, which is critical in pursuit of an expanded market opportunity, fueled by data. The Board believes this will help make us even more nimble and proactive in order to compete in new markets, anticipate emerging demands and drive success.

LONGSTANDING COMMITMENT TO STOCKHOLDER ENGAGEMENT

 

 

Intel remains committed to year-round and meaningful engagement with our stockholders. Our integrated stockholder 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 then reports to the Board on investor feedback and emerging governance issues, allowing the Board to better understand our stockholders’ priorities and perspectives and to incorporate them into the Board’s business and strategy decisions. Over the past year, we solicited feedback on and had robust discussions with stockholders regarding the best way to incentivize our management team and discussed other important issues, including Board leadership structure, Board oversight of key ESG matters and initiatives and Intel’s corporate responsibility performance and disclosures. In addition to the engagement conducted by our integrated outreach team, I personally had discussions with investors representing 28% of our stock to ensure that our deliberations in the boardroom were being informed by direct feedback in addition to the helpful insights gained through our outreach team’s engagements. These discussions prove

truly valuable to the Board and I look forward to our continued engagement with Intel stockholders and other stakeholders over the coming year.

CONTINUED ENVIRONMENTAL, SOCIAL AND GOVERNANCE LEADERSHIP

 

 

Intel has a long history of leadership in corporate governance and corporate responsibility of setting ambitious goals for our company, leading industry and multi-stakeholder initiatives, and collaborating with others to apply our technology to solve global challenges. Our integrated approach enables us to mitigate risks, reduce costs, protect brand value, and identify market opportunities, in turn creating value for Intel, our stockholders and the communities we serve. Under the Board’s oversight, we have embedded corporate responsibility and sustainability considerations into our corporate strategy, compensation, disclosure, and long-term goals. To reinforce and align our executives to these goals, since 2008 a portion of the operational performance component of our annual incentive cash program has been tied to key corporate responsibility goals within our executive and employee compensation, including inclusion and environmental metrics.

I would like to briefly highlight two of our corporate responsibility and corporate governance efforts that I feel particularly reflect Intel’s long-standing values, and I encourage you to carefully review this proxy statement as it discusses many of our other key initiatives in greater detail.

MANAGING HUMAN CAPITAL FOR SUCCESS

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. In order to attract, retain, and grow talented and engaged employees who can deliver their best work every day, we invest significant resources to making Intel a rewarding place to work, creating a company which our employees are proud to be a part of, and fostering an environment where we promote diversity and inclusion. 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, and all the initiatives and tracking are regularly shared with the Board. 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, and in 2019, we continued to advance transparency in our pay and representation data by publicly releasing our 2017 and 2018 EEO-1 survey pay data. However, we know there is still more that we can do to cultivate and empower our talented workforce. With approximately 90% of our employees working in technical

 

 


 

 

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 LETTER FROM YOUR CHAIRMAN CONTINUED

 

roles, our success depends on them 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; semiannual employee experience surveys; and engagement through more than 30 employee resource groups, including the Women at Intel Network, the Network of Intel African American Employees, the Intel Latino Network, and many others.

 

 

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FOCUS ON SUSTAINABILITY AND CLIMATE IMPACT

Our commitment to environmental sustainability began over 50 years ago with our co-founder Gordon Moore. And as we look ahead to the future, our ambitions and the need for industry leadership have never been greater to continuously improve energy efficiency, reduce emissions, and conserve resources throughout our operations and beyond. We are committed to transparency and performance improvement in environmental sustainability and have established public goals regarding, among other things, reducing our greenhouse gas emissions, investing in renewable energy, conserving water, and reducing waste generation. We continue to invest in reducing our own direct climate “footprint”—the emissions resulting from our own operations, our supply chain, and the marketing and use of our products, and we also collaborate with our customers and others to increase our “handprint”—the ways in which our technology can help others reduce their environmental impact. We leverage the experience gleaned from our longstanding sustainability efforts and collaborate with others to drive industry-wide improvements and policy change. And 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 human rights issues including forced and bonded labor, and improving transparency around climate and water impacts in the global electronics supply chain.

The Board receives regular updates on our progress on our performance and our corporate responsibility goals. We are proud of what our company has accomplished to date—but as we look toward the next decade, we know that even greater leadership will be required. We look forward to sharing our new 2030 corporate responsibility goals later this year, enabling Intel to continue our leadership and to collaborate with others to achieve wider global impact.

MAKING THE RIGHT INVESTMENTS FOR THE FUTURE

 

 

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 AI, autonomous driving and the intelligent edge, and 5G, will continue to create new value for Intel, our stockholders, and other stakeholders.

In 2020, we will continue to support our executive leaders to make the necessary investments in R&D to deliver leadership products in both our core and emerging businesses. Importantly, capital expenditures will be applied to increase the manufacturing capacity and accelerate the pace of process node introductions.

As we continue our evolution as a company, 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. The Board, the management team, and our employees welcome these challenges, and appreciate your continued support.

On behalf of Board, I thank you for choosing to invest in Intel and for entrusting us to help lead the company into this new and exciting phase of our evolution.

Sincerely,

 

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OMAR ISHRAK

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 2020 ANNUAL STOCKHOLDERS’ MEETING

 

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DATE    TIME    RECORD DATE

 

THURSDAY, MAY 14, 2020

  

 

8:30 A.M. PACIFIC TIME

  

 

MARCH 16, 2020

 

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 112.

  

VOTE          LOGO      LOGO      LOGO

 

ONLINE at www.proxyvote.com

You may also attend the annual meeting online, including to vote and/or submit questions,
at www.virtualshareholdermeeting.com/Intel20.

 

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.

ATTEND THE MEETING

LOGISTICS

 

   

Attend the annual meeting online, including to vote and/or submit questions, at www.virtualshareholdermeeting.com/Intel20.

 

 

   

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 14, 2020.

 

 

ASKING QUESTIONS

 

  You may submit questions for the meeting in advance at www.proxyvote.com.

 

  You may submit live questions during the meeting
at www.virtualshareholdermeeting.com/Intel20.

 

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 and remain 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.

      

Scan this code to your phone to receive all of the meeting details:

 

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MANAGEMENT PROPOSALS

  

 

VOTING

    RECOMMENDATION    

OF THE BOARD

1.  Election of the nine 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 2020

  

 

FOR

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

   FOR

4.  Approval of amendment and restatement of the 2006 Employee Stock Purchase Plan

   FOR

STOCKHOLDER PROPOSALS

  

 

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

   AGAINST

6.  Stockholder proposal requesting a report on the global median gender/racial pay gap, if properly presented at the meeting

   AGAINST

IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD MAY 14, 2020:

THE NOTICE OF 2020 ANNUAL STOCKHOLDERS’ MEETING AND PROXY STATEMENT AND THE 2019 ANNUAL REPORT ON FORM 10-K ARE AVAILABLE AT WWW.INTC.COM/ANNUALS.CFM

 

 

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Table of Contents

 

 TABLE OF CONTENTS

 

 

  3

 

 

LETTER FROM YOUR CHAIRMAN

         

  6

 

NOTICE OF 2020 ANNUAL STOCKHOLDERS’ MEETING

         

  8

 

PROXY STATEMENT HIGHLIGHTS

      

 

INDEX OF FREQUENTLY
REQUESTED INFORMATION

 

  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

      

26

  

Board Evaluations

 

  CORPORATE GOVERNANCE MATTERS

      

27

  

Board Leadership

  27

 

Board Leadership Structure

      

102

  

CEO Pay Ratio

  33

 

Board Responsibilities and Committees

      

87

  

Clawback Policies

  37

 

Investor Engagement

      

51

  

Code of Conduct

  40

 

OUR CAPITAL

      

35

  

Compensation Consultant

  47

 

DIRECTOR COMPENSATION

      

32

  

Corp. Gov. Guidelines

  52

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      

39

  

Corporate Responsibility

 

  AUDIT COMMITTEE MATTERS

      

60

  

Cultural Transformation

  54

 

PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR

      

33

  

Director Attendance

  56

 

REPORT OF THE AUDIT COMMITTEE

      

30

  

Director Independence

 

  LISTED OFFICER COMPENSATION MATTERS

      

17

  

Director Biographies

  58

 

PROPOSAL 3: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

      

24

  

Director Skills Matrix

  59

 

COMPENSATION DISCUSSION AND ANALYSIS

      

25

  

Director Tenure

  59

 

Executive Summary

      

66

  

Financial Performance

  68

 

2019 Compensation of Our Listed Officers

      

43

  

Human Capital

  83

 

Other Aspects of Our Executive Compensation Programs

      

38

  

Investor Responsiveness

  88

 

REPORT OF THE COMPENSATION COMMITTEE

      

32

  

ISG Framework

  89

 

EXECUTIVE COMPENSATION

      

60

  

Leadership Transformation

  89

 

Summary Compensation Table

      

59

  

Listed Officers for 2019

  93

 

Grants of Plan-Based Awards

      

73

  

Pay-for-Performance

  95

 

Stock Option Exercises and Stock Vested

      

84

  

Peer Group

  96

 

Outstanding Equity Awards

      

86

  

Perks

  97

 

Pension Benefits

      

50

  

Related Party Transactions

  98

 

Non-Qualified Deferred Compensation

      

28

  

Risk Oversight

  100

 

Other Potential Post-Employment Payments

      

86

  

Stock Ownership Guidelines

 

  ADDITIONAL COMPENSATION MATTERS

      

14

  

Strategy Update

  102

 

CEO PAY RATIO

      

71

  

Strategic Growth Equity Awards

  103

 

PROPOSAL 4: AMENDMENT AND RESTATEMENT OF THE 2006 EMPLOYEE STOCK PURCHASE PLAN

      

33

  

Succession Planning

 

  STOCKHOLDER PROPOSALS

      

87

 

  

Tax Deductibility

 

  108

 

Proposal 5: Written Consent

         

  110

 

Proposal 6: Gender/Racial Pay Gap

         

 

  ADDITIONAL MEETING INFORMATION

         

  112

 

Online Meeting

      

  Information in Proxy
Statement Highlights—
Introduction to Our Business
(page 8), A Year in Review
(page 12), Business Overview
(page 13), Our Strategy (page
14), and Our Capital
(pages 40-46) is reproduced
from our 2019 Annual Report
on Form 10-K and speaks as
of January 24, 2020, the date
we filed our Form 10-K.

 

  112

 

Meeting Admission

    

  112

 

Vote Before or During the Meeting

    

 

  OTHER MATTERS

    

  115

 

Delinquent Section 16(a) Reports

    

  115

 

2021 Stockholder Proposals or Nominations

    

  117

 

Communicating with Us

    

  A-1

 

APPENDIX A: NON-GAAP FINANCIAL MEASURES

    

  B-1

 

APPENDIX B: AMENDED AND RESTATED 2006 EMPLOYEE STOCK PURCHASE PLAN

    
      

 

 

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   LOGO

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 purpose we create world-changing technology that enriches the lives of every person on earth. Our commitment to corporate responsibility and sustainability leadership is deeply integrated throughout our business. Intel was founded in 1968 and our technology has been at the heart of computing breakthroughs ever since. More than 50 years later, we are a world leader in the design and manufacturing of essential technologies that power the cloud and an increasingly smart, connected world. Intel is transforming from a PC-centric company to a data-centric company, with workload-optimized solutions designed to help a broad set of customers process, move, and store ever-increasing amounts of data. This exponential growth of data is reshaping computing and expanding our opportunity. We are investing to lead data-driven technology inflections that position us to play a bigger role in the success of our customers. These include: the rise of AI, the transformation of networks, the intelligent edge1 emerging with the Internet of Things, and autonomous driving. Intel's ambitions have never been greater: to create world-changing technology that enriches the lives of every person on earth. Our commitment to corporate responsibility and to creating an inclusive environment to support the talent of our amazing people supports our ambitions and makes us stronger. When every employee has a voice and a sense of belonging, Intel can be more innovative, agile, and competitive. "We are at a key inflection point with the exponential growth of data creating massive demand for semiconductors. Cloud workloads are diversifying, networks are transforming, and more computing performance is moving to the edge. We have been on a multi-year journey to reposition the company's portfolio to take advantage of this industry catalyst. Today, we have the product and technology leadership that uniquely positions us to capitalize on these trends, and we are investing in the IP required to help our customers win the inflections of the future." -Bob Swan, Chief Executive Officer 1 Intel's definition is included in "Key Terms" within the Financial Statements and Supplemental Details in our Annual Report on Form 10-K.


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 OVERVIEW OF THE BOARD

 

For the 2020 Annual Stockholders’ Meeting, our Board recommends the following nine 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; senior leadership experience; international experience; mix of ages; and gender, racial, geographic and ethnic diversity. In this regard, our Board is committed to actively seeking women and minority director candidates for consideration.

 

 

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Non-Independent Directors Nominee, 1 of [9] Independent Directors, [8] of [9] ROBERT ("bob") H. SWAN Age: 59 Director Since: 2019 Committees: EC CEO OMAR ISHRAK Age: 64 Director Since: 2017 Committees: CC, CGN*, EC* INDEPENDENT CHAIRMAN 33% of director nominees are women JAMES J. GOETZ Age: 54 Director Since: 2019 Committees: ALYSSA HENRY Age: 49 Director Since: 2020 Committees: 33% of director nominees are ethnically diverse RISA LAVIZZO-MOUREY Age: 65 Director Since: 2018 Committees: CC, CGN TSU-JAE KING LIU Age: 56 Director Since: 2016 Committees: AC, FC* 3.0 YRS average tenure of director nominees GREGORY D. SMITH Age: 53 Director Since: 2017 Committees: AC*, FC ANDREW WILSON Age: 45 Director Since: 2017 Committees: CC*, FC FRANK D. YEARY Age: 56 Director Since: 2009 Committees: AC, CGN*

 

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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Effective after the conclusion of Intel’s 2020 Annual Stockholders’ Meeting, provided he/she is re-elected to the Board by stockholders at the meeting.

 

 

 

 

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 BOARD RESPONSIVENESS TO INVESTORS IN 2019

 

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. Following a disappointing “say on pay” vote in 2019, which received approximately 60% support, we undertook extensive engagement efforts to better understand the reasons for how our investors voted, as well as to obtain their views on other key corporate governance and disclosure matters, and to determine how best to respond.

 

 

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Who we met with 48.1% 38.9% 28.0% of shares contacted for engagement of shares engaged with overall of shares engaged by Chairman of the Board An integrated outreach team Corporate Legal + Executive Compensation + Corporate Responsibility + Investor Relations What we discussed Our business Our ESG practices >50 Leadership transition Strategy execution Cultural transformation Financial performance Strategic growth awards Board composition Risk oversight ESG disclosures separate investor meetings throughout the year How we responded Board Composition Added more disclosure on future director recruitment priorities See page XX Board Oversight Added more disclosure on board's oversight of cultural transformation See page XX ESG Disclosures Added more disclosure on how we integrate ESG goals into our pay programs See page XX Continuing to work to align disclosures with SASB/TCFD Strategic Growth Equity Awards Added more disclosure on rationale for awards See page XX Added that the Compensation Committee has no intention to grant additional one-time equity awards to any current executive officers Annual Bonus Plan Added more disclosure on business group operational See page XX Where to find more info See "Investor Engagement" on page XX and "Investor Engagement and the 2019 'Say on Pay' Vote" on page XX

 

*

Environmental, Social, and Governance (ESG); Sustainability Accounting Standards Board (SASB); and Taskforce on Climate-Related Financial Disclosures (TCFD).

 

 

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 EXECUTIVE COMPENSATION SUMMARY

 

Intel’s executive compensation programs are designed to incentivize the implementation of our growth strategy. There are three key drivers of our executive compensation programs: 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).

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.

LISTED OFFICER PAY OVERVIEW

 

 

 

PAY ELEMENT    PURPOSE     

 

  

PERFORMANCE

PERIOD

  

PERFORMANCE

METRICS

    

 

     
BASE SALARY    Designed to be market-competitive and attract and retain talent        ANNUAL           
     

ANNUAL

CASH BONUS

   Incentivize achievement of Intel’s short-term financial and operational objectives        ANNUAL       

  Net income growth (25%)

  Relative net income growth vs. tech peers (25%)

  Operational goals (50%)

   
     

QUARTERLY

CASH BONUS

   Company-wide program that rewards quarterly profitability based on Intel’s net income relative to company compensation costs        QUARTER       

  Company profitability

   
     

RESTRICTED

STOCK UNITS

   Facilitates stock ownership, executive retention, and stockholder alignment        THREE YEARS       

  Stock price appreciation

   
     

PERFORMANCE

STOCK UNITS

  

Designed to reward

long-term profitability, long-term performance relative to peers,

and alignment with stockholders

     THREE YEARS       

  Relative TSR vs. S&P 500 IT Index (50%)

  Cumulative EPS growth compared to a target (50%)

 

LEADERSHIP TRANSFORMATION

 

 

As described in last year’s proxy statement and discussed extensively with our stockholders both leading up to and following our 2019 Annual Stockholders’ Meeting, following a rigorous and extensive search both internally and externally and after strong performance as interim Chief Executive Officer (CEO), Mr. Swan was appointed our permanent CEO and a member of the Board of Directors in January 2019, with the mandate to carry forward our strategic transformation from a PC-centric to a data-centric company. Following Mr. Swan’s appointment as CEO, we have since appointed a new Chief Financial Officer and a new Chief People Officer, and promoted the head of our largest business group, Client Computing Group.

The Board approved certain promotion- and new hire-related compensation arrangements to facilitate this significant and impactful change in the management team. The Board is confident that our management team is the right group to position the company for continued strong, sustainable growth through this critical time of change. To support successful leadership transitions in 2018 and 2019, the Compensation Committee designed compensation programs that incentivize our executives to deliver on the full potential of our ongoing transformation. For more information regarding our 2019 pay decisions, please see the “Compensation Discussion & Analysis” on page 59.

 

 

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 A YEAR IN REVIEW

 

Our transformation to a data-centric company continued in 2019, and we experienced strong demand and reached critical product milestones. We achieved record revenue of $72.0 billion, 48% of which was from our data-centric businesses. We invested $13.4 billion in R&D while reducing our spending to 27% of revenue. Additionally, we made capital investments of $16.2 billion, generated $33.1 billion cash from operations and $16.9 billion of free cash flow1, and returned $5.6 billion in dividends to stockholders. We continue to focus on improving supply and supporting our customers’ growth. We increased our wafer capacity during 2019; however, we did not see a commensurate increase in client CPU unit volume as wafer capacity was largely consumed by increases in modem and chipset volumes, and unit die sizes.

 

Our 10nm manufacturing process entered full production as we launched our first products from this advanced technology. We are accelerating the pace of process node introductions and moving back to a 2- to 2.5-year cadence. We are on track to deliver our first 7nm-based product, a discrete GPU, at the end of 2021. 5G continues to be a strategic priority, and our exit from the 5G smartphone modem business is enabling us to increase the focus of our 5G efforts on the opportunity to modernize network and edge infrastructure.

  

 

 

LOGO

 

“We achieved record revenue for the fourth consecutive year, exercised discipline to drive spending efficiencies, and returned capital to our stockholders. Our results reflect a relentless commitment to improve execution that benefits our customers and increases shareholder value.”

 

— George Davis, Chief Financial Officer

                                                 

REVENUE

   

OPERATING INCOME

   

DILUTED EPS

   

CASH FLOWS

   PC-CENTRIC $B

   DATA-CENTRIC $B

       GAAP $B      NON-GAAP $B        GAAP      NON-GAAP    

   OPERATING CASH FLOW $B

   FREE CASH FLOW1 $B

 

 

 

LOGO

 

   

 

 

 

LOGO

 

   

 

 

 

LOGO

 

   

 

 

 

LOGO

 

           

$72.0B

 

        

$22.0B

 

   

$23.8B

 

   

$4.71

 

   

$4.87

 

   

$33.1B

 

   

$16.9B

 

GAAP

   

GAAP

   

non-GAAP1

   

GAAP

   

non-GAAP1

   

GAAP

   

non-GAAP1

Revenue up 2% from 2018; Data-centric up 3% and PC-centric flat

   

Operating income down $1.3B or 5% from 2018; 2019 operating margin at 31%

 

   

Operating income down $797M or 3% from 2018; 2019 operating margin at 33%

 

   

Diluted EPS up $0.23 or 5% from 2018

   

Diluted EPS up $0.29 or 6% from 2018

   

Operating cash flow up $3.7B or 13%; operating cash flow to net income at 157%

   

Free cash flow up $2.7B or 19%; free cash flow to non-GAAP net income at 78%

High-performance product sales in the second half of 2019, partially offset by NAND pricing pressure and decrease in platform2 unit sales

   

Lower gross margin from decrease in NAND market pricing and lower platform unit sales, partially offset by platform ASP strength

 

   

Lower shares outstanding and platform ASP strength, partially offset by a decrease in platform unit sales and lower NAND market pricing

   

Working capital changes driven by tax and other assets and liabilities, partially offset by lower memory prepayments and inventory build

           

GOAL (2019 - 2021)

   

GOAL (2019 - 2021)

   

GOAL (2019 - 2021)

   

GOAL (2019 - 2021)

Low single-digit growth over the next three years to $76B-$78B; data-centric businesses high single-digit growth and PC-centric business approximately flat to slightly down

 

   

Keep non-GAAP operating margin roughly flat at approximately 32% over the next three years

   

Grow non-GAAP diluted EPS in line with revenue over the next three years

   

Achieve free cash flow of approximately 80% of non-GAAP net income by 2021

Progress

   

Progress

   

Progress

   

Progress

Revenue grew 2% from 2018 to 2019, to $72.0B

   

Non-GAAP operating margin was 33% in 2019

   

Non-GAAP diluted EPS grew 6% from 2018 to 2019; revenue grew 2% over the same period

   

Free cash flow was 78% of non-GAAP net income

1

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

2 

See “Our Products” within MD&A in our 2019 Annual Report on Form 10-K.

 

 

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 BUSINESS OVERVIEW

 

DATA-CENTRIC BUSINESSES EXPAND WITH NEW OPPORTUNITIES

Data-Centric Portfolio Launch

We introduced a portfolio of data-centric solutions consisting of 2nd generation Intel® Xeon® Scalable processors, Intel® Optane DC memory and storage solutions, and software and platform technologies optimized to help our customers extract more value from their data. Our latest data center solutions target a wide range of use cases within cloud computing, network infrastructure, and intelligent edge applications, and support high-growth workloads, including AI and 5G.

 

LOGO

 

LOGO    

 

 

 

10nm FPGAs Shipping

 

LOGO

We began shipping engineering samples of Intel® Agilex FPGAs to customers. The 10nm-based FPGAs are used by our customers to develop advanced solutions for networking, 5G, and accelerated data analytics. The Intel® Agilex FPGA family leverages heterogeneous 3D SiP technology to deliver higher performance or higher power efficiency.

Habana Labs Acquisition

We acquired Habana Labs Ltd., an Israel-based developer of programmable deep learning accelerators for the data center, for approximately $1.7 billion. Habana’s AI processors provide data scientists and developers with accelerator hardware that improves processing performance and reduces power consumption. Habana’s Gaudi* AI training processor is currently sampling with select hyperscale customers. Large-node training systems based on Gaudi* are expected to deliver up to four times increase in throughput versus systems built with the equivalent number of GPUs. The acquisition strengthens our AI portfolio and accelerates our efforts in the nascent, fast-growing AI silicon market.

 

BIG BETS UPDATE

We aim to be at the forefront of the constant technological change in our industry. We will evaluate new and existing big bets based on the following criteria: the “bet” is leading the edge of a technology inflection, it plays a significant role in our customers’ success, and it offers a clear path to profitability and attractive returns. Currently, our big bets are memory, autonomous driving, and 5G.

We exited 5G smartphone modem business to increase the focus of our 5G efforts on the broader opportunity to modernize network and edge infrastructure.

 

LOGO

 

  We continue to make progress in memory and autonomous driving. We launched Intel® Optane DC persistent memory for the data center and continue to take steps to improve NAND profitability. Mobileye’s EyeQ*5, the vision central computer performing sensor fusion for fully autonomous driving, is operational in Mobileye’s autonomous test vehicles.

PC-CENTRIC BUSINESS INNOVATES

10nm-based 10th Generation Intel® Core Shipping

We started shipping our 10nm-based 10th generation Intel® Core processors, previously referred to as Ice Lake. Our 10th generation Intel® Core processor silicon will enable the first wave of PCs with instructions for AI, includes an all-new CPU Core architecture and Gen 11 graphics engine, and is the first client CPU to integrate Wi-Fi 6 and Thunderbolt 3 connectivity modules.

 

LOGO

Project Athena Innovation Program

 

LOGO

Project Athena is a new multi-year innovation program to help the PC ecosystem create advanced laptops that meet ambitious key experience indicators in performance, responsiveness, battery life, form factor, and AI. The first laptops verified through the innovation program became

available in 2019, identified by the visual marker “Engineered for Mobile Performance.”

 

LOGO

“While process and CPU leadership remain fundamentally important, an extraordinary rate of innovation is required across a combination of foundational building blocks, including architecture, memory, interconnect, security, and software, to take full advantage of the opportunities created by the explosion of data.”

Dr. Venkata (Murthy) M. Renduchintala, Group President of the Technology, Systems Architecture and Client Group and Chief Engineering Officer

 

 

 

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 OUR STRATEGY

 

Data has become a driving force in society. Our customers are asking for solutions to turn data into actionable insights, amazing experiences, and operational efficiencies. Intel platforms provide the foundation for these solutions because we have developed a portfolio of data-centric technologies that span the data center to the edge, enabling us to play a differentiated and growing role in the success of our customers.

MAKE THE WORLD’S BEST SEMICONDUCTORS

 

 

Moore’s Law, a law of economics predicted by Intel’s co-founder Gordon Moore more than 50 years ago, continues to be a strategic priority and differentiator. 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. However, making the best semiconductors requires more than just the best manufacturing process technologies.

LEAD TECHNOLOGY INFLECTIONS

 

 

Our strategic intent is to lead in key technology inflections that are fundamentally changing computing and communications. The most important drivers of change we see today are AI, the transformation of networks spearheaded by the transition to 5G, and the rise of the intelligent edge. We see a future where Intel® technologies enable our customers to move faster, store more, and process everything—from large complex applications in the cloud, to autonomous cars and small low-power devices on the edge.

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

 

 

Customers look to Intel for our end-to-end capability to deliver solutions that enable customers to move faster, store more, and process everything. We continue to make investments in optimizing our Intel® Xeon® processors in response to our customers’ need for high-performance computing. We continue to develop innovative memory and storage solutions, including Intel® QLC 3D NAND Technology and Intel® Optane memory, to provide data center products that are optimized to deliver world-class performance and drive lower total cost of ownership for cloud workloads. Our advancements in FPGAs enable efficient management of the changing demands of next-generation data centers and accelerate the performance of emerging applications.

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. These efforts also extend to our product design processes, where we are striving to reduce the complexity of our designs to improve our efficiency and enhance quality. These improvements enable us to achieve scale in our core operations, providing a stable and cost-effective platform to support additional investments in the design, development, and delivery of new products. Operational excellence helps us fund the expansion of our TAM through big-bet investments.

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. We are proud of our past and inspired by how our employees are rising to the challenge to evolve our culture. Inclusion is the foundation of this evolution and runs through each of our culture attributes.

Our culture attributes reinforce:

 

         

CUSTOMER OBSESSED:

 

Our customer’s

success is our

success. We

listen, learn, and

anticipate our

customers’ needs

to deliver on their

ambitions.

   

ONE INTEL:

 

We are

stronger

together and

commit to team

over individual

success.

 

FEARLESS:

 

We are bold

and innovative.

We take risks,

fail fast, and

learn from

mistakes.

 

TRUTH AND TRANSPARENCY:

 

We are

committed to

being open and

honest while

bringing clarity

to complex

challenges.

 

INCLUSION:

 

We strive to

build a culture

of belonging

and welcome differences,

knowing it

makes us better.

 

QUALITY:

 

Our goal is to deliver quality products and services that our customers and partners can always rely on.

 

 

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 OUR CAPITAL

 

In line with the International Integrated Reporting Framework’s six capitals concept, we have outlined how we deploy various forms of capital to execute our strategy in a way that seeks to reflect our corporate values, help our customers succeed, and create value for our stockholders. Our six capitals are summarized here, with more detail in the “Our Capital” section of this proxy statement, and further description on our 2019 Annual Report on Form 10-K.

 

     
CAPITAL    STRATEGY    VALUE

FINANCIAL

 

LOGO

 

  

 

Leverage cash flow to invest in ourselves and grow our capabilities, supplement and strengthen our capabilities through acquisitions and strategic investments, and provide returns to stockholders.

 

  

 

We strategically invest financial capital to create long-term value and provide returns to our stockholders in the form of dividends and buybacks.

 

INTELLECTUAL

 

 

LOGO

 

  

 

Invest significantly in R&D and IP to ensure our process and product technologies are competitive in our strategic pursuit of making the world’s best semiconductors and realizing 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.

 

MANUFACTURING

 

 

LOGO

 

  

 

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

 

  

 

Our manufacturing scope and scale enables innovations to provide our customers and consumers with a broad range of leading-edge products.

 

HUMAN

 

 

LOGO

 

  

 

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

 

  

 

We attract and retain talented employees who enable the development of solutions and enhance the intellectual and manufacturing capital critical to helping our customers win the technology inflections of the future.

 

SOCIAL

AND RELATIONSHIP

 

 

LOGO

 

  

 

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

 

  

 

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

 

NATURAL

 

 

LOGO

 

  

 

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 impacts, achieve efficiencies and lower costs, and position us to respond to the expectations of our stakeholders.

 

 

VALUE WE CREATE

 

Each of our six forms of capital plays a critical role in our long-term value creation. We consider numerous indicators in determining the success of our capital deployment in creating value. The graphic highlights the value created up to and in 2019.

 

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

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 PROXY STATEMENT

 

 

INTEL CORPORATION

2200 Mission College Blvd.

Santa Clara, CA 95054-1549

Our Board of Directors solicits your proxy for the 2020 Annual Stockholders’ Meeting (and any postponement or adjournment of the meeting) for the matters set forth in the “Notice of 2020 Annual Stockholders’ Meeting.” We made this proxy statement available to stockholders beginning on March 31, 2020.

 

 

 PROPOSAL 1

ELECTION OF DIRECTORS

Upon the recommendation of our Corporate Governance and Nominating Committee, our Board has nominated the nine 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 one Intel officer: Robert H. Swan, who became our Chief Executive Officer in January 2019. Omar Ishrak, previously the Board’s independent Lead Director, became the independent Chairman of the Board in January 2020.

Each of our director nominees currently serves on the Board and was elected to a one-year term at the 2019 Annual Stockholders’ Meeting, except for James J. Goetz and Alyssa Henry, who were appointed to the Board in November 2019 and January 2020, respectively. Andy D. Bryant, previously Chairman of the Board and Executive Vice President, and Reed E. Hundt are not standing for re-election at the annual meeting. In addition, since the 2019 Annual Stockholders’ Meeting, Aneel Bhusri retired from the Board and similarly is not standing for re-election at the meeting.

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” on page 112. 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 Amended and Restated Bylaws (Bylaws) and the Amended and Restated 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.

For each of the nine director nominees standing for election, the following pages set forth certain biographical information, including a description of their principal occupation, business experience, and the primary qualifications, attributes and skills (represented by the icons below) that the Corporate Governance and Nominating Committee considered in recommending them as director nominees, as well as the Board committees on which each director nominee will serve as of the 2020 Annual Stockholders’ Meeting.

 

 

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     LOGO  

RECOMMENDATION OF THE BOARD

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

Senior leadership experience global/international experience industry and it/technical experience financial experience human capital experience operating and manufacturing experience sales marketing and brand management experience emerging technologies and business models experience business development and m&a experience cybersecurity/information security government, legal, and regulatory public company board

 

 

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LOGO

 

  

 

JAMES J. GOETZ

 

 

AGE: 54  DIRECTOR SINCE: 2019  OTHER CURRENT PUBLIC BOARDS: Palo Alto Networks  COMMITTEES: Corporate Governance and Nominating*, Finance*

  

 

SKILLS & EXPERTISE:

 

 

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

EXPERIENCE

James J. Goetz has served as a partner of Sequoia Capital, a venture capital firm, since June 2004. Prior to joining Sequoia, Mr. Goetz co-founded VitalSigns Software, a software design, development, and strategy company, where he assembled and led the team that pioneered end-user performance management. Prior to VitalSigns, he was Vice President of Network Management for Bay Networks. Mr. Goetz previously served on the boards of directors of Barracuda Networks Inc., a data security and storage company from 2009 to 2017; Nimble Storage Inc., a data storage company, from 2007 to 2017; Jive Software Inc., a provider of social business software, from 2007 to 2015; and Ruckus Wireless Inc., a manufacturer of wireless (Wi-Fi) networking equipment, from 2012 to 2015, among others. Mr. Goetz holds a bachelor of science degree in electrical engineering from the University of Cincinnati and a master of science degree in electrical engineering from Stanford University. Mr. Goetz currently serves on the boards of several privately held companies. Mr. Goetz also serves as a member of the board of directors of Palo Alto Networks Inc., a network security solution company, since April 2005.

SKILLS & EXPERTISE

Mr. Goetz brings to the Board senior leadership, industry and information technology (IT), emerging technologies, business development, and cybersecurity experience from his experience as a partner of a venture capital firm, where he focuses on cloud, mobile, and enterprise technology investments, as well as providing guidance and counsel to a wide variety of internet and technology companies, and his prior work in networks, data security and storage, software, and manufacturing through various senior roles and other board experiences. Mr. Goetz’s experience with internet and technology companies brings depth to the Board in areas that are important to Intel’s business as it moves from a PC-centric to data-centric company.

 

 

LOGO

 

  

 

ALYSSA HENRY

 

 

AGE: 49  DIRECTOR SINCE: 2020

COMMITTEES: Audit*, Compensation*

  

 

SKILLS & EXPERTISE:

 

 

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

EXPERIENCE

Alyssa Henry has served as Seller Lead for Square, Inc., a provider of software, hardware and financial services for small businesses and individuals, since 2014. She oversees global engineering, product management, design, sales, marketing, partnerships and support for Square’s seller-facing software and financial services products. Prior to Square, she served in various positions with Amazon.com, Inc. from 2006 to 2014, including as Vice President of Amazon Web Services Storage Services, where she led services including Amazon S3, Amazon EBS and Amazon Lambda; and as Amazon’s director of software development for ordering, with responsibility for Amazon’s ordering workflow software and databases. Before Amazon, Ms. Henry spent 12 years at Microsoft Corporation working on databases and data access technologies in a variety of engineering, program management and product unit management roles. Ms. Henry started her career as a developer in the financial services industry. Ms. Henry holds a bachelor of science degree in applied science with a specialization in computing from the University of California, Los Angeles. She has served as a member of the board of directors of Unity Technologies, a privately held video game software development company, since December 2018.

SKILLS & EXPERTISE

Ms. Henry brings senior leadership, industry and IT, emerging technologies and business models, and information security expertise to the Board from her executive experience at a mobile payment process company, including overseeing its expansion into other technology services for small businesses, and by her leadership of the software development segment of a multinational technology company that focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence. Ms. Henry’s more than 25 years of experience in software engineering and development of database and storage technologies is particularly useful to the Board as Intel moves from a PC-centric to data-centric company.

 

*

Effective after the conclusion of Intel’s 2020 Annual Stockholders’ Meeting, provided he/she is re-elected to the Board by stockholders at the meeting, Mr. Goetz will join the Corporate Governance and Nominating Committee and Finance Committee; Ms. Henry will join the Audit Committee and Compensation Committee; and Messrs. Smith and Wilson will join the Executive Committee.

 

 

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LOGO

 

  

 

OMAR ISHRAK

Independent Chairman

 

 

AGE: 64  DIRECTOR SINCE: 2017  OTHER CURRENT PUBLIC BOARDS: Medtronic plc  COMMITTEES: Compensation, Corporate Governance and Nominating (Co-Chair), Executive (Chair)

  

 

SKILLS & EXPERTISE:

 

 

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

EXPERIENCE

Dr. Omar Ishrak has been Chairman and CEO of Medtronic plc, a global medical technology company, since 2011. Effective as of April 26, 2020, Dr. Ishrak will retire as CEO, become Executive Chairman, and continue to serve as Chairman of the Board of Medtronic. 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 and BMD from 1995 to 2004. 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 United States (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, operating and manufacturing, and international expertise to the Board from his position as Chairman and CEO of Medtronic 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 held various product development and engineering positions at Philips Ultrasound. 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

 

 

AGE: 65  DIRECTOR SINCE: 2018  OTHER CURRENT PUBLIC BOARDS: General Electric Company and Hess Corporation  COMMITTEES: Compensation, Corporate Governance and Nominating

  

 

SKILLS & EXPERTISE:

 

 

 

LOGO    LOGO    LOGO    LOGO

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 CEO 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 has 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 member of 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.

 

 

Dr. Lavizzo-Mourey will not be standing for re-election at Hess Corporation.

 

 

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TSU-JAE KING LIU

 

 

AGE: 56  DIRECTOR SINCE: 2016

COMMITTEES: Audit, Finance (Chair)

  

 

SKILLS & EXPERTISE:

 

 

 

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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

 

 

AGE: 53  DIRECTOR SINCE: 2017

COMMITTEES: Audit (Chair), Finance, Executive*

  

 

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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 M&A 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 identifies and invests in start-ups that are developing emerging technologies and businesses in markets such as cybersecurity, AI and machine learning, and autonomous systems among others. 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.

 

 

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ROBERT (“BOB”) H. SWAN

CEO

 

 

AGE: 59  DIRECTOR SINCE: 2019  OTHER CURRENT PUBLIC BOARDS:

eBay Inc.   COMMITTEES: Executive

  

 

SKILLS & EXPERTISE:

 

 

 

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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 also 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., and as CFO, Chief Operating Officer, and CEO of Webvan Group, Inc. Mr. Swan began his career in 1985 at General Electric (GE), 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, and AppDynamics from 2016 to 2017.

SKILLS & EXPERTISE

As our CEO and former CFO of Intel’s global finance organization, Mr. Swan brings significant senior leadership, global, industry, financial, human capital, operating experience, business development and M&A experience to the Board. Mr. Swan has gained extensive financial, operating and manufacturing, emerging technologies, M&A, and information security experience from serving as CFO for several international companies with complex business environments, including the 15 years at GE and 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 and technical experience from his various senior leadership roles and board directorships.

 

*

Effective after the conclusion of Intel’s 2020 Annual Stockholders’ Meeting, provided he/she is re-elected to the Board by stockholders at the meeting, Mr. Goetz will join the Corporate Governance and Nominating Committee and Finance Committee; Ms. Henry will join the Audit Committee and Compensation Committee; and Messrs. Smith and Wilson will join the Executive Committee.

 

 

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ANDREW WILSON

 

 

AGE: 45  DIRECTOR SINCE: 2017  OTHER CURRENT PUBLIC BOARDS:

Electronic Arts Inc.   COMMITTEES: Compensation (Chair), Finance, Executive*

  

 

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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 and director of a global, digital entertainment company. In addition, Mr. Wilson’s 20 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.

 

 

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FRANK D. YEARY

 

 

AGE: 56  DIRECTOR SINCE: 2009  OTHER CURRENT PUBLIC BOARDS:

PayPal Holdings, Inc.  COMMITTEES: Audit, Corporate Governance and Nominating (Co-Chair)

  

 

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Frank D. Yeary has been Principal of Darwin Capital Advisors LLC, a private investment firm based in Phoenix, Arizona, since 2012. 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 2012 to 2015, Mr. Yeary was Co-founder and Chairman of Level Money, Inc., a financial services company. From 2008 to 2012, Mr. Yeary was Vice Chancellor of UC Berkeley, and also Interim Chief Accounting Officer (CAO) from 2010 to 2011, 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 M&A with international companies on a global scale, and experience attracting and retaining strong senior leaders. Mr. Yeary’s experience as Executive Chairman of CamberView partners and his service on the board of PayPal and his past service as a board member of eBay provides insight into matters relating to corporate governance, shareholder engagement and board best practices. As Vice Chancellor and CAO of a large public research university, Mr. Yeary gained extensive strategic and financial expertise. In addition, as co-founder of Level Money, Mr. Yeary has first-hand experience identifying and developing business models.

 

*

Effective after the conclusion of Intel’s 2020 Annual Stockholders’ Meeting, provided he/she is re-elected to the Board by stockholders at the meeting, Mr. Goetz will join the Corporate Governance and Nominating Committee and Finance Committee; Ms. Henry will join the Audit Committee and Compensation Committee; and Messrs. Smith and Wilson will join the Executive Committee.

 

 

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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 diverse factors, such as independence; understanding of and experience in manufacturing, technology, finance, and marketing; senior leadership experience; international experience; mix of ages; and gender, racial, geographic 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 these practices for 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.

 

 

 

 

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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.

 

 

 

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GLOBAL/INTERNATIONAL EXPERIENCE

We are a global organization with R&D, 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.

 

 

 

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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.

 

 

 

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FINANCIAL EXPERTISE

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

 

 

 

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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 possess. In addition, evolving our culture is critical to delivering on our growth strategy and for continuing to attract and retain top talent, so directors with experience overseeing and helping to shape an organization’s culture are a valuable asset to the Board.

 

 

 

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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.

 

 

 

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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.

 

 

 

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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 with 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.

 

 

 

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CYBERSECURITY/INFORMATION SECURITY

Directors who have experience managing cybersecurity and information security risks or who understand the cybersecurity threat landscape can provide valuable knowledge and guidance to the Board in its oversight of the company’s cybersecurity risks.

 

 

 

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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.

 

 

 

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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.

 

 

 

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BACKGROUND

Members representing a mix of ages, genders, ethnicities, geographies, cultures, and 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 10+ Years

 

 

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INDEPENDENT DIRECTOR TENURE

 

The Board generally 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 2020 Annual Stockholders’ Meeting, our independent directors will have served an average of 3.3 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 3.0 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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BOARD DIVERSITY AND REFRESHMENT

 

Our Board is committed to actively seeking women and minority director candidates for consideration. In 2014, the Board formally adopted its commitment to actively seek women and minority candidates for the pool from which board candidates are chosen. In connection with this process, the Governance Committee also seeks input from Intel’s head of Global Diversity and Inclusion. 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 four years, seven new independent directors have been elected or appointed to the Board, three of whom have been women. If each director nominee is elected to the Board, after the 2020 Annual Stockholders’ Meeting, the majority of the Board would be diverse based on directors’ gender, ethnicity, and/or nationality.

 

Our Board is focused on combining the right mix of skills, experience and perspectives to support Intel’s future strategic direction, including its transformation from a PC-centric to data-centric company. For example, we have recently prioritized cybersecurity, information security and other database technology skills in our director recruitment efforts, as reflected by the recent additions of James J. Goetz and Alyssa Henry to our Board. In addition, recognizing the importance of the Board’s role in overseeing human capital risks as Intel undergoes a cultural transformation, over the past few years we have also added directors with human capital management experience. Intel is committed to focusing on Board diversity more broadly through engagement with key partners. In 2018, Intel joined the Thirty Percent Coalition (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.

  

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BOARD EVALUATIONS

We are committed to providing transparency about our Board and committee evaluation process. Our Chairman of the Board leads the Board’s self-evaluation process. Each director completes a comprehensive questionnaire evaluating the performance of the Board as a whole, the committees on which the director serves, the director’s own performance, and the performance of each of the director’s peers on the Board. The directors’ responses are aggregated and anonymized to encourage the directors to respond candidly and to maintain the confidentiality of their responses. The Chairman summarizes the directors’ responses about the performance of the Board as a whole and the committees and shares his findings with the Board. The annual evaluation process provides the Board with valuable insight regarding areas where the Board believes it functions effectively and, more importantly, areas where the Board believes it can improve. 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: Omar Ishrak

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

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. At times, the Chairman has been a former executive of the company and has served as a full-time executive officer, as was the case with Andy Bryant, who served as Executive Chairman until January 2020 and will not be standing for re-election at the annual meeting. In advance of Mr. Bryant stepping down, the Board considered the advisability of next electing an independent director as non-executive Chairman, and in January 2020 elected Dr. Ishrak, an independent director, as Chairman of the Board. Dr. Ishrak has worked closely with Mr. Bryant over the past several months to ensure a smooth transition of Board leadership and continued attention to thoughtful oversight of key matters.

The Board believes that there may be advantages to having an independent chairman, including by helping to facilitate relations between the Board, the CEO, and other senior management, assist the Board in reaching consensus on particular strategies and policies, and foster robust evaluation processes, and by efficiently allocating oversight responsibilities between the independent directors and management. Intel’s Board will consist of eight independent directors and the CEO as of the annual meeting.

Chairman Responsibilities. Our CEO has primary responsibility for the operational leadership and strategic direction of Intel, while our independent Chairman facilitates our Board’s oversight of management, promotes communication between management and our Board, engages with stockholders, and leads our Board’s consideration of key governance matters. As independent Chairman, and not a full-time executive officer of Intel (in contrast to the prior Board chairman), Dr. Ishrak’s responsibilities include:

 

 

presiding over all meetings of the Board;

 

 

developing the schedule and agenda for Board meetings in consultation with the CEO, Corporate Secretary, and other members of the Board;

 

 

assessing 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;

 

 

calling and presiding over meetings of the independent directors;

 

 

working with the Corporate Governance and Nominating Committee to evaluate potential director candidates, determine the membership of the various Board committees, and select committee chairs;

 

 

managing the Board’s process for annual director self-assessment and evaluation of the Board and of the CEO;

 

 

serving as principal liaison between the Board and the CEO;

 

 

presiding over all meetings of stockholders; and

 

 

serving as the Board’s 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.

 

 

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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, public health crises or cybersecurity incidents; and

 

 

business-specific risks related to strategy and competition, product demand, global operations, manufacturing, cybersecurity and privacy, intellectual property protection and theft, 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

 

 

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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 the 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. Audit Committee Oversees issues related to financial reporting, internal controls, audit functions, and major financial, product security, and cybersecurity risk exposures Finance Committee Oversees issues related to financial risk management, including the company's risk tolerance in cash-management investments Compensation Committee Oversees management of risks related to 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, and human capital management Corporate Governance and Nominating Committee Oversees issues related to risks arising from the company's environmental, social and governance practices as well as corporate responsibility and sustainability initiatives and performance 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. Goetz, Ms. Henry, Mr. Hundt, Dr. Ishrak, Dr. Lavizzo-Mourey, Dr. Liu, Mr. Smith, Mr. Wilson, and Mr. Yeary. Because Mr. Swan is employed by Intel, he does not qualify as independent. Aneel Bhusri, who served as a director until November 1, 2019, was determined to be independent during the time he served on the Board. Mr. Bryant, who is not standing for re-election, did not qualify as independent because of his former employment 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) and Nasdaq, 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 SEC and 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 2017 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 who is, or was during the previous three fiscal years, a non-management director, trustee, advisor, or executive or served in a similar position at another entity that did business with Intel at some time during those years. The business relationships were ordinary course dealings as a supplier or purchaser of goods or services; licensing or research arrangements; facility, engineering, and equipment fees; or commercial paper or similar financing arrangements in which Intel or an affiliate participated as a creditor. Payments to or from each of these entities constituted less than the greater of $200,000 or 1% of each of Intel’s and the recipient’s annual revenue, respectively, in each of the past three years, except as discussed below.

 

 

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

 

 

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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 0.07% 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.

 

 

Ms. Henry is a member of the board of directors of Unity Technologies (Unity), a company with which Intel engages in ordinary course business transactions. The Board carefully reviewed the nature of Intel’s transactions with Unity, which primarily related to software subscription services and related services, and Ms. Henry’s position as a non-management director at Unity. The fees paid to Unity represented less than 2.1% of Unity’s estimated annual revenue in each of the past three years, and represented less than 0.01% of Intel’s revenue in each year. After considering these fees, the Board (with Ms. Henry recused) unanimously determined that Intel’s business transactions with Unity do not impair Ms. Henry’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 the greater of $120,000 or 1% of the recipient’s annual revenues 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 $59,500 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 0.0001% 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, and in 2019, Intel entered into a sponsorship agreement with the Smithsonian Institution, amounting to less than 0.78% of the Smithsonian Institution’s consolidated annual revenue for 2019.

 

 

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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 38.9% of shares outstanding in 2019

 

  Engagement topics included Board leadership structure; Board diversity; issues concerning 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, proxy statement, and Corporate Responsibility Report;

 

•  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

  

 

  Independent Chairman, separate from CEO

 

  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

  

 

  88.9% of the director nominees are independent

 

  33% of the director nominees are ethnically diverse, 33% of the director nominees are 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 committee self-evaluations

 

  Active Board refreshment, with seven new directors joining since 2017, 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

  

 

  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 six special meetings in 2019. As shown in the Board Committee chart below, standing committees of the Board collectively held a total of 30 meetings during 2019, 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 2019 (held during the period in which the director served), and on average directors attended 97% of Board and committee meetings. The Board’s policy is that directors should endeavor to attend the annual stockholders’ meeting, and eight out of 10 of the then-incumbent directors (other than Mr. Hundt and Mr. Wilson) attended the 2019 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 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 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 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 of March 16, 2020. 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

Andy D. Bryant

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James J. Goetz1

Alyssa Henry2

Reed E. Hundt

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Omar Ishrak*

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Risa Lavizzo-Mourey

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Tsu-Jae King Liu

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Gregory D. Smith3

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Robert (“Bob”) H. Swan

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Andrew Wilson3

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Frank D. Yeary

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Number of Committee Meetings Held in 2019

9

11

7

1

2

 

*

Chairman

Chair/Co-Chair

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Member

1 

Mr. Goetz will join the Corporate Governance and Nominating Committee and Finance Committee effective after the conclusion of the 2020 Annual Stockholders’ Meeting.

2 

Ms. Henry will join the Audit Committee and Compensation Committee effective after the conclusion of the 2020 Annual Stockholders’ Meeting.

3 

Messrs. Smith and Wilson will join the Executive Committee effective after the conclusion of the 2020 Annual Stockholders’ Meeting.

AUDIT COMMITTEE

 

Current membership: Gregory D. Smith (Chair), Tsu-Jae King Liu, and Frank D. Yeary

 

 

Assists the Board in its general oversight of our financial reporting, 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, no less than annually, 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 qualify 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

 

Current membership: Andrew Wilson (Chair), Reed E. Hundt, Omar Ishrak, and Risa Lavizzo-Mourey

 

 

Reviews, recommends, and approves salaries, bonuses, 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.

 

 

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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.

 

 

Oversees the company’s strategies, initiatives and programs with respect to the company’s culture; talent recruitment, development and retention; employee engagement, diversity and inclusion; and management development and succession planning for the company’s CEO and selected senior leaders.

During the past year, the Compensation Committee’s oversight focused on, among other things, compensation program strategy and design, CEO and CFO transition pay, human capital management, succession planning, and leadership development. 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 Compensia as its independent executive compensation consultant in July 2019. Prior to that, it had retained Pay Governance. 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 Compensia nor Pay Governance performed work for Intel in 2019 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’s rules and concluded that each of Compensia and Pay Governance was independent, and that the firms’ work in 2019 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. These recommendations are based on his assessment of each executive officer’s performance during the year and his review of, among other things, 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

 

Current membership: Omar Ishrak (Co-Chair), Frank D. Yeary (Co-Chair), and Risa Lavizzo-Mourey

 

 

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

 

 

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

 

 

Periodically 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.

 

 

Periodically reviews and assesses our stockholder engagement process, and reviews and reports stockholder feedback to the Board 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, Intel’s Corporate Responsibility Report and trends (including environmental

 

 

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sustainability, climate risk, human capital, human rights issues, and political accountability), 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 2019, 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. Our new director nominees, James J. Goetz and Alyssa Henry, were initially recommended to the Corporate Governance and Nominating Committee by a former director and a third-party search firm, respectively.

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, cybersecurity/information security, finance, and marketing; senior leadership experience; international experience; age; and gender, racial, geographic 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

 

Current membership: Omar Ishrak (Chair), Andy D. Bryant, Reed E. Hundt, and Robert (“Bob”) H. Swan

 

 

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

FINANCE COMMITTEE

 

Current membership: Tsu-Jae King Liu (Chair), Gregory D. Smith and Andrew Wilson

 

 

Assist the Board in its oversight of global treasury activities; derivatives transactions; financial risk management; off-balance sheet arrangements; mergers, acquisitions, divestitures and strategic investments; capital structure and capital allocation strategy; financing requirements; capital expenditures; dividends; stock repurchase authorizations; investor relations activities; insurance and self-insurance programs; and retirement plans.

 

 

Annually reviews and approves on behalf of the company and its subsidiaries the company’s decisions to enter into swaps that are exempt from mandatory exchange execution and clearing pursuant to the Commodity Exchange Act “end-user” and “treasury affiliate” exceptions.

 

 

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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 2019, our integrated outreach team led by our Investor Relations group, Corporate Responsibility office, Executive Compensation team, and the Corporate Secretary’s office, met to discuss a wide variety of issues with investors representing an aggregate of almost 40% 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 focused on environmental, social and governance performance and disclosure. 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. We actively engage with our stockholders on a year-round basis and integrate the information we learn through these activities into our governance calendar, as reflected below.

INVESTOR ENGAGEMENT CYCLE

 

 

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

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.

 

 

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Total Contacted Total Engaged Director Engaged

 

 

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Below is a summary of the feedback we received through our 2019 investor engagement program and how we responded.

 

WHAT WE HEARD FROM INVESTORS    OUR PERSPECTIVE / HOW WE RESPONDED

 

Board composition: would like to see more disclosure around our priorities for future director recruitment

  

 

  We formally adopted the Rooney Rule (ensuring diverse candidates in the pool as part of each Board search) to promote diversity in 2014 and remain committed to maintaining gender, ethnic, geographic, cultural, and other diverse perspectives on our Board

  In 2018, Intel joined the Thirty Percent Coalition (Coalition), which focuses on strategies to increase female representation on corporate boards, and in 2019, the Coalition has added a specific focus on women of color

  We provide substantial disclosure around the composition of our current Board and the skill sets we consider important for our directors to have as well as our process for identifying and evaluating potential director candidates

  Based on investor feedback, this year we have added more information to our proxy statement about our priorities for future director recruitment, which includes ESG oversight experience and diversity (see “Board Diversity and Refreshment” on page 25)

 

ESG disclosure and governance: continue to view our ESG disclosures as best-in-class, but would like to see more disclosure around how our board oversees ESG, including with respect to human capital management and culture

  

 

  We have worked, and are continuing to work, to integrate our ESG and SEC reporting and align our ESG disclosures with external frameworks such as SASB and TCFD

  We established formal board-level oversight responsibility for corporate responsibility in 2003. Our independent Corporate Governance and Nominating Committee is primarily responsible for these matters, with additional environmental, social and governance matters reviewed by other committees (e.g. the Compensation Committee is responsible for oversight of human capital issues and the Audit Committee is responsible for oversight of our corporate ethics and compliance program)

  Based on investor feedback, this year we have added more information to our proxy statement about our Board processes for overseeing ESG (see “Corporate Responsibility” on page 39) and to our Corporate Responsibility Report about the connection between our ESG program and our strategy and value creation

 

Specific ESG topics: would like to see more information about how we manage climate and water risks; human capital, pay equity and inclusion; and technology-related ethics and human rights issues

  

 

  We are in the process of completing our 2020 corporate responsibility goals and working to develop new goals for 2030 that we plan to announce soon following further engagement with our stakeholders on these issues

  We are working to evaluate emerging issues related to technology and developing appropriate management and oversight processes

  Based on investor feedback, this year we have added more information to our Corporate Responsibility Report about our approach to climate change and human capital management, and we began publishing additional information on our gender and racial pay equity

 

ESG and pay: would like to see more disclosure around how we integrate ESG into our compensation programs

  

 

  We are committed to corporate responsibility and sustainability and, as part of that commitment, since 2008 we have linked a portion of employee and executive pay to corporate responsibility factors

  Based on investor feedback, this year we have added more information to our proxy statement about this linkage, including explaining how these goals factor into compensation decisions and identifying the specific ESG goals we use for our executives (see “Impact of ESG Metrics” on page 78)

 

For a discussion of additional feedback we received on our executive compensation program,

see “Investor Engagement and the 2019 ‘Say on Pay’ Vote” on page 63.

 

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. This year, we arrive at an important milestone in our journey as we finalize our 2020 corporate responsibility goals and launch new 2030 goals and aspirations for the next decade. We are proud of the results we have achieved to date—but as we look toward the next decade we know that even greater leadership will be required. We look forward to sharing our new 2030 goals later this year, enabling Intel to continue our leadership and to collaborate with others to achieve wider global impact.

A foundational element of our approach to corporate responsibility is our commitment to transparency, and we regularly evaluate the effectiveness of our reporting on our ESG reporting based on review of external reporting frameworks and direct feedback from our stockholders and other stakeholders. For more information on how our focus on corporate responsibility creates value for Intel and our stockholders, see the ”Our Capital” section on page 40 and in our 2019 Annual Report on Form 10-K, as well as 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 have returned approximately 90% of free cash flow to investors over the past five years and expect to return approximately 100% in 2020.

            CASH FROM OPERATING ACTIVITIES $B            

 

 

 

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

OUR FINANCIAL CAPITAL ALLOCATION DECISIONS ARE DRIVEN BY THREE PRIORITIES

 

INVEST IN THE BUSINESS

Our first allocation priority is to invest in R&D and capital spending to strengthen our competitive position. We shifted our R&D focus as we began a transformation to a data-centric company, while efficiently maintaining our investment at approximately 20% of revenue. We invested record levels of capital in logic (primarily platform wafer manufacturing) during the last two years to expand our capacity. With that investment, we increased our 14nm wafer capacity while also ramping 10nm production. We expect to further increase our PC client supply on both process nodes in 2020.

ACQUIRE AND INTEGRATE

Our second 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 leverage and strengthen our capital and R&D investments. In 2019, we completed various acquisitions, including Habana Labs and Barefoot Networks, to expand our product offerings and the markets we serve. We take action when investments do not meet our criteria, and in 2019 we divested the majority of our 5G smartphone modem business for this reason.

RETURN CASH TO STOCKHOLDERS

Our third allocation priority is to return cash to stockholders. We achieve this through our dividend and share repurchase programs. During 2019, we paid $5.6 billion in dividends and repurchased $13.6 billion in shares, up from 2018. In October 2019, we announced that we expect to repurchase $20.0 billion in shares over the next 15 to 18 months. Our approach has reduced diluted shares outstanding over time.

 

Dividends Per

Share

     

 8%

CAGR

  Diluted Shares
Outstanding

 

(in Millions)

              
2019    $1.26       4,473
2018    $1.20       4,701
2017    $1.0775       4,835
        

 

 

 

  R&D AND CAPITAL INVESTMENTS $B  

 

 

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                     ACQUISITIONS                    

 

 

LOGO

      CASH TO STOCKHOLDERS $B      

 

 

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Table of Contents

LOGO   INTELLECTUAL CAPITAL

RESEARCH AND DEVELOPMENT

R&D is a critical factor in achieving our strategic objectives to make the world’s best semiconductors, to lead technology inflections, and to 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 through the following methods: acquiring or investing in companies, entering into R&D agreements, and directly purchasing or licensing technology.

 

PRODUCT TECHNOLOGY

Every year we make significant investments in R&D and we have intensified our focus on six engineering pillars to advance our product capabilities. Our objective is to improve user experiences and value through advances in performance, power, cost, connectivity, security, form factor, and other features with each new generation of products. We are also focused on reducing our design complexity to improve our efficiency, including a significant reduction of design rules for future process nodes.

Process. Development of next-generation manufacturing processes remains a critical and fundamental pillar. We announced that we are planning multiple waves of 10nm process, progressively increasing transistor performance. We also announced advances in our nextgeneration 2.5D (EMIB) and 3D (Foveros) packaging technology which will enable us to mix and match chips made on different processes into a single SiP, enabling new design flexibility and new device form factors. The Intel 10nm product era is underway, as we began shipping our new 10th generation Intel® Core™ processors, previously referred to as Ice Lake.

Architecture. We are designing products for four major computing architectures—CPU, GPU, AI accelerator, and FPGA products—as we move toward a model of providing multiple “xPU” compute platforms for a more diverse era of computing. We shipped the 10th generation Intel® Core™ processors with our next-generation CPU microarchitecture, which has architectural extensions designed for special-purpose computing tasks such as AI and cryptography, among other features. These processors also include the next generation of graphics microarchitecture, with performance and feature upgrades. We also continue to make progress on the development of our first discrete GPU.

Memory. With our Intel® 3D NAND technology and Intel® Optane™ technology, we are developing products to disrupt the memory and storage hierarchy. The 4th generation of Intel®-based SSDs are scheduled to launch in 2020 with 144-layer QLC memory technology. These SSDs are also Intel’s first NAND memory technology created independently by Intel since the conclusion of our partnership with Micron Technology, Inc. (Micron). The 2nd generation Intel® Optane™ SSDs for data centers are scheduled to start shipping samples in 2020, and are designed to deliver three times the throughput while reducing application latency by four times. In addition, the second-generation Intel® Optane™ DC persistent memory is expected to achieve PRQ in 2020, and is designed for use with our future Intel® Xeon® CPUs.

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 announced two initiatives to help influence the industry—USB4 and CXL. USB4 advances the speed and capability for interconnect in client platforms. CXL, an open interconnect technology, creates a high-speed, low latency interconnect between the CPU and accelerators, such as GPUs, FPGAs, and networking.

Security. We continue to make significant investments in security technologies. We created the Intel Security Architecture and Technologies Group to serve as a center for security architecture across our products to design world-class product security architecture for the years ahead.

Software. The performance potential of our hardware products is unlocked with software. Our vision is to unify our software abstractions across all our xPU platforms. We are developing a project called oneAPI to simplify programming for developers across our CPU, GPU, FPGA, AI accelerator, 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 support our products, services, R&D, and other activities and assets. Our IP portfolio includes patents, copyrights, trade secrets, trademarks, mask work, 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 2019 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, and we see our in-house manufacturing as an important advantage. We continue to develop new generations of manufacturing process technology as we seek to realize the benefits from Moore’s Law. 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. Our ability to optimize and apply our manufacturing expertise to deliver more advanced, differentiated products is foundational to our current and future success.

We improved our 10nm factory production, yield, and volume during 2019, and launched 10th-generation Intel® Core™ processors, our first 10nm volume product, and Intel® Agilex™, our first 10nm FPGA. We expect to deliver initial production shipments of our first 10nm-based Intel® Xeon® Scalable product, Ice Lake, in the latter part of 2020.

We are on track to deliver our first 7nm-based product, a data center-focused discrete GPU, at the end of 2021. We are approaching next-generation process nodes with a focus on striking an optimal balance between schedule, performance, power, and cost and will continue to drive intra-node advancement.

NETWORK AND SUPPLY CHAIN

We previously announced multiple manufacturing site expansions with multi-year construction activities that began in 2019. In addition to expanding our own manufacturing capability, we are increasing our use of foundries to enable our differentiated manufacturing to produce more CPU products. 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. As we considered the estimated $300 billion TAM1 opportunity ahead of us, it was imperative that we prepare our global manufacturing network to be responsive to changes in demand. However, despite increasing 14nm wafer capacity, we did not see a commensurate increase in client CPU unit volume as wafer capacity was largely consumed by increases in modem and chipset volumes, and unit die sizes. Our focus on capacity expansion and meeting customer expectations is critical as we move into 2020.

 

We have nine manufacturing sites—six are wafer fabrication and three are assembly/test facilities. The map marks our manufacturing sites and the countries where we have a significant R&D or sales and marketing presence.

 

The majority of our logic wafer manufacturing is conducted in the U.S. We incur factory start-up costs as we ramp facilities for new process technologies. We ramped the 10nm process node in Oregon and Israel in 2019, and began production in Arizona in our 2020 fiscal year. We also expanded our memory facilities in Dalian, China.

   LOGO

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.

In 2019, we ramped 96-layer 3D NAND technology and prepared to begin manufacturing our 144-layer 3D NAND technology in 2020 in our facility in Dalian, China. The next generation of Intel® Optane™ technology and SSDs are being developed in New Mexico following the sale of our non-controlling interest in IMFT to Micron on October 31, 2019. We will continue to purchase product manufactured by Micron at the IMFT facility under established supply agreements.

1 Source: Intel calculated 2024 TAM derived from industry analyst reports.

 

 

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LOGO   HUMAN CAPITAL

 

 

Evolving our culture is critical to delivering on our growth strategy and for continuing to attract and retain top talent needed to support our transformation to a data-centric company. We have an amazing legacy of innovation and a powerful culture, yet our ambitions have grown. Together, we are evolving our culture to build an even brighter future. Our global workforce of 110,800 is highly educated, with approximately 90% 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.

 

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. 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.

 

    

 

“Tapping into the richness of our diverse workforce is key to driving future growth. Intel will continue to be transparent about our progress and our challenges, so we can partner with our customers and ecosystem to find better solutions together.”

 

—Sandra Rivera, Executive Vice President and Chief People Officer

DIVERSITY AND INCLUSION

To shape the future of technology, we must be representative of that future. A diverse and inclusive workforce is a business imperative and key to our long-term success. We committed $300 million to advance diversity and inclusion in our workforce and in the technology industry. We achieved our goal of full representation in our U.S. workforce two years ahead of schedule, meaning our workforce now reflects the percentage of women and underrepresented minorities available in the skilled labor market in the U.S. This achievement was the result of a comprehensive strategy that considered hiring, retention, and progression. Though we are proud of what we have accomplished to advance diversity in our workforce, we still have work to do, including beyond the walls of Intel. We took action by joining 11 other companies to fund an initiative to double the number of women of color graduating with computing degrees in the U.S. by 2025. We also continue to look for and implement partnerships and programs to increase retention and advancement of women and underrepresented populations within our workplace. The breakout of employees by gender provides our current global gender diversity.

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, an Employee Stock Purchase Plan, healthcare and retirement benefits, paid time off and family leave, parent reintegration, fertility assistance, flexible work schedules, sabbaticals, and on-site services. In 2019, we announced that we achieved gender pay equity globally by closing the gap in average pay between employees of different genders in the same or similar roles after accounting for legitimate business factors that can explain differences, such as performance, time at grade level, and tenure. We also continued to advance transparency in our pay and representation data by publicly releasing our 2017 and 2018 EEO-1 survey pay data mandated by the U.S. Equal Employment Opportunity Commission. The results reflected representation gaps and point to work that lies ahead. However, due to our diversity and inclusion efforts, there is promising growth of our junior female and underrepresented talent from which our future leadership will be drawn. Our challenge now is to create an environment that better helps our female and underrepresented employees develop and progress in their careers, while also ensuring we are expanding our hiring and retention of diverse talent at more senior, higher-paying positions.

 

GROWTH AND DEVELOPMENT

 

We invest significant resources to develop the talent needed to remain at the forefront of innovation and make Intel an employer of choice. We deliver training annually and provide rotational assignment opportunities. We launched a new performance management system to support our culture evolution and increase focus on continuous learning and development. Over the past five years, our undesired voluntary turnover rate has been at or below 5%.

 

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; employee experience surveys; 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.

   LOGO

HEALTH, SAFETY, AND WELLNESS

We are committed to the safety of our employees, customers, and communities, from operations to product development to supplier partnerships. 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 health and wellness programs, including on-site health centers.

 

 

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LOGO   SOCIAL AND RELATIONSHIP CAPITAL

We are committed to developing trusted relationships, giving back to our communities, and engaging in corporate responsibility and sustainability initiatives. Collaboration with stakeholders and investments in social impact initiatives, like the United Nations Sustainable Development Goals, led to our reputation as a leading corporate citizen and creates value in the form of consistent stakeholder support.

ECONOMIC, SOCIAL, AND HUMAN RIGHTS IMPACT

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

We are at the forefront of new technologies 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 to create new career pathways into the technology industry, helping us build trust with key external stakeholders and support the interests of our employees. Our employees actively share their expertise and skills through volunteer initiatives, and contributed 1 million hours of service in the communities where we operate in 2019.

We are committed to maintaining and improving processes to avoid human rights violations related to our operations, supply chain, and products. While we do not always know nor can we control what products our customers create or the applications end-users may develop, we do not support or tolerate our products being used to violate human rights. Where we become aware of a concern that Intel products are being used by a business partner in connection with abuses of human rights, we will restrict or cease business with the third party until and unless we have high confidence that Intel’s products are not being used to violate human rights.

SUPPLY CHAIN RESPONSIBILITY

We have robust programs to educate and engage suppliers that support our global manufacturing operations to drive responsible and sustainable practices throughout the supply chain. Actively managing our supply chain creates business value for Intel and our customers by helping to reduce risk, improve product quality, achieve environmental and social goals, and raise the overall performance of our suppliers. Over the past five years, we completed more than 600 supplier audits using the Responsible Business Alliance Code of Conduct standard. We actively collaborate with other companies and lead industry initiatives on key issues such as advancing responsible minerals sourcing, improving transparency around climate and water impacts in the global electronics supply chain, and addressing risks of forced and bonded labor. Our commitment to building a diverse and inclusive workforce extends to the expectations we set for our suppliers—a diverse supply chain supports greater innovation and value for our business. We continue working toward our 2020 goal of reaching $1.0 billion in annual spending with diverse-owned suppliers. We also announced the “Intel Rule” to help improve diversity in the legal profession: Beginning in 2021, we will not retain or use outside law firms in the U.S. that are average or below average on diversity for their equity partners. We are applying a similar rule to firms used by our tax department, including non-legal firms.

 

 

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LOGO   NATURAL CAPITAL

Driving to the lowest environmental footprint possible helps us achieve efficiency, lower costs, and respond to the needs of our

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. Since 2012, we have invested more than $200 million in energy conservation projects in our global operations, resulting in cumulative savings of more than 4.5 billion kWh and cost savings of more than $500 million. In addition to conserving energy, we invest in green power and on-site alternative energy projects that provide power directly to our buildings and design all new buildings to LEED* standards. In 2019, we opened a LEED Platinum building in Israel with sensors that monitor lighting, temperature, ventilation, parking, and other building services and systems that enable and foster smart innovation. It also employs stormwater runoff collection and injection wells to avoid groundwater runoff. We also focus on increasing our “handprint”—the ways in which Intel technologies can help others reduce their footprints, including Internet of Things solutions that enable intelligence in machines, buildings, supply chains, and factories, and make electrical grids smarter, safer, and more efficient.

We are leveraging a leading framework developed by TCFD to communicate our approach to climate governance, strategy, risk management, and metrics and targets. In terms of governance and strategy, we follow an integrated approach to addressing climate change, with multiple teams responsible for managing climate-related activities, initiatives, and policies, including manufacturing and operations, government and public affairs, supply chain, and product teams. Strategies and progress toward goals are reviewed with senior executives and the Board’s Corporate Governance and Nominating Committee. We describe our overall risk management processes within this proxy statement, and we describe our climate-related risks and opportunities in our annual Corporate Responsibility Report, the Intel Climate Change Policy, and “Risk Factors” in our 2019 Annual Report on From 10-K. Regarding metrics and goals, for two decades we have set aggressive GHG reduction goals, including our 2020 goal to reduce our direct GHG emissions by 10% on a per-unit basis from 2010 levels, which we are on track to achieve. Additional detail on our proactive efforts to address climate change is included in our Corporate Responsibility Report, as well as our CDP Climate Change Survey, both available on our website1.

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 over the last decade we have returned approximately 80% of our water back to our communities. We continue to work toward our goal to restore 100% of our global water use by 2025, with more than 20 projects funded in collaboration with environmental and community partners through the end of 2019. We expect to restore approximately 1.5 billion gallons of water each year to local watersheds once these projects are complete.

CIRCULAR ECONOMY AND WASTE MANAGEMENT

We have long been committed to waste management, recycling, and circular economy strategies that enable the recovery and productive re-use of waste streams. We achieved our 2020 goal of recycling 90% of our non-hazardous waste ahead of schedule. We continue to work toward our 2020 goal of 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 and identifying re-use solutions that reduce costs and environmental impact.

 

1 

The contents of our website and our Corporate Responsibility Report, Climate Change Policy, and CDP Climate Change Survey are referenced for general information only and are not incorporated by reference in this proxy statement.

 

 

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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 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 28, 2019. The cumulative returns shown on the graph are based on Intel’s fiscal year.

Comparison of Five-Year Cumulative Return for

Intel, S&P 100 Index, S&P 500 Index, S&P 500 IT Index, and SOX Index

 

 

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Note: This proxy statement corrects the plotting of the dollar values for years 2015-2018 in the graph from our Form 10-K filed January 24, 2020. The Form 10-K provided the correct dollar values in the table below but inadvertently plotted different values for those years in the graph.

 

Years Ended

Dec 27,

2014

Dec 26,

2015

Dec 31,

2016

Dec 30,

2017

Dec 29,

2018

Dec 28,

2019

Intel Corporation

$

100

$

96

$

103

$

135

$

140

$

184

S&P 100 Index

$

100

$

102

$

113

$

137

$

131

$

175

S&P 500 Index

$

100

$

101

$

112

$

136

$

129

$

172

S&P 500 IT Index

$

100

$

104

$

118

$

163

$

161

$

246

SOX Index

$

100

$

99

$

135

$

190

$

177

$

293

 

1

The graph and table assume that $100 was invested on the last day of trading for the fiscal year ended December 27, 2014 in Intel’s common stock, S&P 100 Index, S&P 500 Index, S&P 500 IT Index, and PHLX Semiconductor Sector Index (SOX), and that all dividends were reinvested.

 

 

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Table of Contents

   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 2019 and consisted of 15 technology companies as described in detail below under “Compensation Discussion and Analysis; External Competitive Considerations for 2019.” The committee targets cash and equity compensation at the median of the director peer group.

For 2019, annual compensation for non-employee directors consisted of the following elements:

 

Board Fees

     

Cash retainer1

  

$90,000

Restricted stock units (RSUs)

  

Targeted value of approximately $220,000

Committee Fees1

     

Audit Committee chair

  

$35,000

Compensation Committee chair

  

$25,000

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, which was paid to Mr. Bhusri and Dr. Ishrak during their respective time as Lead Director.

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. Since their appointment as directors, Messrs. Bryant and Swan have continued to participate in the compensation programs that apply to other executive officers, and their compensation is determined by the Board’s Compensation Committee.

 

 

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DIRECTOR COMPENSATION FOR FISCAL YEAR 2019

The following table details the compensation of Intel’s non-employee directors for the 2019 fiscal year.

DIRECTOR COMPENSATION FOR FISCAL YEAR 2019 TABLE

 

Name

Fees Earned

or Paid in

Cash ($)

Stock

Awards1

($)

All Other

Compensation2

($)

Total

($)

Aneel Bhusri3

 

160,000

 

348,300

 

 

508,300

James J. Goetz4

 

22,500

 

 

 

22,500

Reed E. Hundt

 

107,500

 

194,600

 

                 10,000

 

312,100

Omar Ishrak

 

127,500

 

194,600

 

 

322,100

Risa Lavizzo-Mourey5

 

 

281,000

 

9,000

 

290,000

Tsu-Jae King Liu

 

116,300

 

194,600

 

 

310,900

Gregory D. Smith

 

125,000

 

194,600

 

10,000

 

329,600

Andrew Wilson

 

121,300

 

194,600

 

 

315,900

Frank D. Yeary6

 

125,000

 

194,600

 

 

319,600

 

1

Consists of RSU grant date fair values computed in accordance with the Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718) and assuming a risk-free rate of return of 2.4.% and a dividend yield of 2.3.%. For additional information, see “RSUs in Lieu of Fees” and “Annual Equity Awards” below.

2

The Intel Foundation made matching charitable contributions on behalf of Mr. Hundt ($10,000), Dr. Lavizzo-Mourey ($9,000), and Mr. Smith ($10,000), Directors’ charitable contributions to schools and universities that meet the guidelines of Intel’s employee charitable matching gift program are eligible for matching funds.

3 

Includes 3,355 RSUs granted to Mr. Bhusri in January 2019 in lieu of his Lead Director fee and committee chair/co-chair fees for 2018, with the grant date fair value computed in accordance with ASC Topic 718 and assuming a risk-free rate of return of 2.5% and a dividend yield of 2.7%.

4 

Mr. Goetz joined the Board on November 13, 2019, and was granted 2,080 RSUs on May 13, 2020, with the grant date fair value computed in accordance with ASC Topic 718 and assuming a risk-free rate of return of 1.6% and a dividend yield of 2.0%.

5 

Includes 1,887 RSU granted to Dr. Lavizzo-Mourey in January 2019 in lieu of her annual cash retainer for 2018, with the grant date fair value computed in accordance with ASC Topic 718 and assuming a risk-free rate of return of 2.5% and a dividend yield of 2.7%.

6 

Mr. Yeary elected to defer his 2019 annual cash compensation until his retirement from the Board.

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.

Annual Equity Awards. Each non-employee director received annual grants of RSUs with a target value on the grant date of approximately $220,000. 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. The grant date 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 of the next annual stockholders’ meeting. All RSU shares are payable upon retirement from the Board if a director is 72 years old or has at least seven years of service on the Board. Directors 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 allowed directors to defer the settlement of their vested RSUs and OSUs until termination of service. Directors can elect to defer only RSUs beginning in 2019. 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 2019 by the non-employee directors who served during fiscal 2019, with OSUs shown at their target amount unless otherwise specified. 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 unless otherwise specified.

OUTSTANDING EQUITY AWARDS FOR DIRECTORS AT FISCAL YEAR-END 2019 TABLE

 

  STOCK UNITS

 

Name

 

Unvested
RSUs1

(#)

Market Value of

Unvested RSUs2

($)

Unvested
OSUs1,3

(#)

Market Value of

Unvested OSUs2,3

($)

Aneel Bhusri

 

 

 

 

James J. Goetz

 

 

 

 

Reed E. Hundt

 

6,872

 

412,900

 

4,025

 

234,688

Omar Ishrak

 

6,724

 

404,000

 

3,921

 

228,825

Risa Lavizzo-Mourey

 

7,331

 

440,400

 

1,422

 

85,434

Tsu-Jae King Liu

 

6,872

 

412,900

 

4,025

 

234,688

Gregory D. Smith

 

7,535

 

452,700

 

3,921

 

228,825

Andrew Wilson

 

7,289

 

437,900

 

3,135

 

184,518

Frank D. Yeary

 

6,872

 

412,900

 

4,025

 

234,688

 

1

Vested but deferred awards are excluded from this column. Awards in this column may vest and become payable upon the director’s retirement from the Board, depending on the director’s age or length of service. OSUs granted in 2017 are shown at their actual payout amount and value (average of high and low stock prices) of $56.37 as of March 2, 2020. There are no dividend equivalent payments with the OSUs granted after 2016.

2

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

3

On March 2, 2020, the 2017 OSU award resulted in a payout of shares to Mr. Hundt (1,923), Dr. Ishrak (1,819), Dr. Liu (1,923), Mr. Smith (1,819) and Mr. Wilson (1,033), with an actual value of $56.37 per share of Intel common stock on the payout date. Mr. Goetz and Dr. Lavizzo-Mourey did not receive the 2017 OSU award as they were not directors at that time, and Mr. Yeary had deferred receipt of his 2017 OSU shares (1,923).

Non-Employee Director Stock Ownership Guidelines. Intel’s stock ownership guidelines state that each non-employee director must acquire and hold at least five times (5x) the annual cash retainer amount within five years of joining the Board. 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 28, 2019, 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 2019, there were no related-person transactions under the relevant standards.

 

 

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   CODE OF CONDUCT

 

Our Code of Conduct applies to our non-employee 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 in the Corporate Governance section of 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, 2020, 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, 2020” 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 executive officers and one former executive officer 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, 2020    
   Percent
    of Class    
   Number of Shares
Subject to Options
Exercisable as of
March 3, 2020
or Which
    Become Exercisable    
Within 60 Days of
This Date
  

Number of RSUs
    That Vest Within    
60 Days

of March 3, 2020

 

The Vanguard Group, Inc.

 

    

 

 

 

 

361,022,662

 

 

1 

 

 
    

 

 

 

 

8.43

 

 

 

                     

 

BlackRock, Inc.

 

    

 

 

 

 

302,731,966

 

 

2 

 

 
    

 

 

 

 

7.07

 

 

 

                     

 

Directors and Listed Officers

 

                                           

 

Andy D. Bryant, Director and Executive Advisor

 

    

 

 

 

 

423,718

 

 

3 

 

 
    

 

 

 

 

**

 

 

 

 

    

 

 

 

 

            —

 

 

 

    

 

 

 

 

12,318

 

 

 

 

Robert H. Swan, Chief Executive Officer

 

    

 

 

 

 

294,304

 

 

4 

 

 
    

 

 

 

 

**

 

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

13,597

 

 

 

 

James J. Goetz, Director

 

    

 

 

 

 

172,720

 

 

 

    

 

 

 

 

**

 

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

Dr. Venkata S.M. Renduchintala, Group President, Client and IoT Businesses and System Architecture Group, Chief Engineering Officer

 

    

 

 

 

 

 

150,243

 

 

    

 

 

 

**

 

 

    

 

 

 

 

    

 

 

 

7,902

 

 

Gregory M. Bryant, General Manager, Client Computing Group

 

    

 

 

 

 

 

100,098

 

 

5 

 
    

 

 

 

 

 

**

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

7,755

 

 

 

Navin Shenoy, Executive Vice President, General Manager, Data Platforms Group

 

    

 

 

 

 

 

94,126

 

 

    

 

 

 

 

 

**

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

8,347

 

 

 

Frank D. Yeary, Director

 

    

 

 

 

 

54,990

 

 

7 

 

 
    

 

 

 

 

**

 

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

5,069

 

 

 

 

Reed E. Hundt, Director

 

    

 

 

 

 

53,195

 

 

 

    

 

 

 

 

**

 

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

5,069

 

 

 

 

George S. Davis, Executive Vice President, Chief Financial Officer

 

    

 

 

 

 

 

50,419

 

 

6 

 
    

 

 

 

 

 

**

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

17,262

 

 

 

Todd M. Underwood, Former Interim Chief Financial Officer

 

    

 

 

 

 

 

21,940

 

 

    

 

 

 

 

 

**

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

16,283

 

 

Alyssa Henry, Director

    

 

15,400

    

 

**

 

    

 

    

 

Tsu-Jae King Liu, Director

    

 

9,134

    

 

**

 

    

 

    

 

Omar Ishrak, Chairman of the Board

    

 

6,409

    

 

**

 

    

 

    

 

 

Gregory D. Smith, Director

 

    

 

 

 

 

6,384

 

 

8 

 

 
    

 

 

 

 

**

 

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

Andrew Wilson, Director

 

    

 

 

 

 

4,451

 

 

9 

 

 
    

 

 

 

 

**

 

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

Risa Lavizzo-Mourey, Director

 

    

 

 

 

 

3,072

 

 

10 

 

 
    

 

 

 

 

**

 

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

 

 

 

All directors and executive officers as a group (16 individuals)

 

    

 

 

 

 

 

1,569,735

 

 

11 

 
    

 

 

 

 

 

**

 

 

 

    

 

 

 

 

 

 

 

    

 

 

 

 

 

84,230

 

 

** Less than 1%

1

As of December 31, 2019, based on information set forth in a Schedule 13G/A filed with the SEC on February 12, 2020 by The Vanguard Group (Vanguard). Vanguard’s business address is 100 Vanguard Blvd., Malvern, PA 19355. Represents (i) 353,707,614 shares for which Vanguard has sole dispositive power, (ii) 7,315,048 shares for which Vanguard has shared dispositive power, (iii) 6,487,143 shares for which Vanguard has sole voting power, and (iv) 1,229,472 shares for which Vanguard has shared voting power.

2

As of December 31, 2019, based on information set forth in a Schedule 13G/A filed with the SEC on February 5, 2020 by BlackRock, Inc. (BlackRock). BlackRock’s business address is 55 East 52nd St., New York, NY 10055. Represents (i) 302,731,966 shares for which BlackRock has sole dispositive power, (ii) no shares for which BlackRock has shared dispositive power, (iii) 253,687,688 shares for which BlackRock has sole voting power, and (iv) no shares for which BlackRock has shared voting power.

 


 

 

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3

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

4 

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

5 

Includes 35 shares held jointly with Mr. Bryant’s children for which Mr. Bryant shares voting and investment power.

6

Includes 1,540 shares held in family trust for which Mr. Davis shares voting and investment power.

7

Includes 46,195 held in family trust for which Mr. Yeary shares voting and investment power and 1,923 deferred but vested RSUs held by Mr. Yeary.

8

Includes 410 shares held in a revocable trust by Mr. Smith’s spouse. Also includes 1,621 deferred but vested RSUs held by Mr. Smith.

9

Includes 1,621 deferred but vested RSUs held by Mr. Wilson.

10

Includes 1,887 deferred but vested RSUs held by Dr. Lavizzo-Mourey.

11

Excludes Mr. Underwood who ceased to be an executive officer on April 2, 2019, and includes Mr. Andy Bryant as a Director.

 

 

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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 2019 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 by 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 2020, 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 2019 AND 2018

The following table shows the fees billed by Ernst & Young for audit and other services provided for fiscal years 2019 and 2018. 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.

 

     

2019 ($)

  

2018 ($)

Audit Fees

  

 

16,524,000

 

  

 

16,470,000

 

Audit-Related Fees

  

 

1,028,000

 

  

 

1,016,000

 

Tax Fees

  

 

955,000

 

  

 

1,798,000

 

All Other Fees

  

 

90,000

 

  

 

90,000

 

Total

  

 

18,597,000

 

  

 

19,374,000

 

Audit Fees. 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 Fees. 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 Fees.” The services for the fees disclosed under this category primarily include audits of Intel employee benefit plans.

Tax Fees. 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 Fees. This category consists of any permitted services provided by Ernst & Young that are not included in the category descriptions defined above under “Audit Fees,” “Audit-Related Fees,” or “Tax Fees” 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 fiscal year 2020.

 

 

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   REPORT OF THE AUDIT COMMITTEE

 

During 2019, only 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 helps establish the appropriate “tone at the top” and 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 (including the use of any non-GAAP measures) 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 (including, for example, implementation of new accounting standards). 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 28, 2019, 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 28, 2019, which Intel filed with the SEC on January 24, 2020.

 


 

 

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Required Committee Discussions and Communications. The Audit Committee has reviewed and discussed the audited financial statements for fiscal year 2019 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. This review included a discussion with management and Ernst & Young 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 and critical audit matters. 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 2019 Annual Report on Form 10-K for the year ended December 28, 2019.

Audit Committee

Greg D. Smith, Chairman

Frank D. Yeary

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 2021 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

 

 

2019 LISTED OFFICERS

 

Robert (“Bob”) H. Swan

Chief Executive Officer (effective January 30, 2019)

 

George S. Davis

Executive Vice President

Chief Financial Officer (effective April 3, 2019)

 

Todd M. Underwood

Corporate Vice President Chief Financial Officer, Client Computing Group (Former Interim Chief Financial Officer from February 1, 2019 through April 2, 2019)

 

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 Platforms Group

 

Gregory M. Bryant

Executive Vice President

General Manager, Client Computing Group (effective September 12, 2019)

 

 

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 three sections:

 

  Executive Summary—Key elements of compensation for our listed officers, including a discussion of our multi-year transformation, 2019 “say on pay” results, and robust investor engagement efforts;

 

  2019 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 practices related to our executive compensation programs.

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

 

 

EXECUTIVE SUMMARY

Intel is in the middle of one of the most significant transformations in our history, moving from a PC-centric company to a data-centric company. The exponential growth of data is reshaping computing and expanding our opportunity, and we are evolving our strategy, culture, and leadership to successfully execute this transition.

 

 

STRATEGIC

TRANSFORMATION

 

   

 

CULTURAL

TRANSFORMATION

 

   

 

LEADERSHIP

TRANSFORMATION

 

 

 

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STRATEGIC TRANSFORMATION

 

As Intel continues its transformation from a PC-centric company with a server business to a data-centric company, our opportunity and our ambitions have never been greater, and we are actively investing to lead data-driven technology inflections that position us to play a bigger role in the success of our customers.

This transformation continued in 2019 with record financial performance, strong demand, and achievement of critical product milestones. In 2019, 48% of our revenue came from our data-centric businesses. The opportunity ahead is the largest in our history, and we have an unparalleled array of assets to pursue it. We expect the data-centric business to continue driving an increasing percentage of our revenues going forward.

OUR LONG-TERM STRATEGY

 

Make the world’s best semiconductors. Moore’s Law, a law of economics predicted by Intel’s co-founder Gordon Moore more than 50 years ago, continues to be a strategic priority and differentiator.

 

 

Lead technology inflections. Our strategic intent is to lead in key technology inflections that are fundamentally changing computing and communications.

 

 

Be the leading end-to-end platform provider for the new data world. Customers look to Intel for our end-to-end capability to deliver solutions that enable customers to move faster, store more, and process everything.

 

 

Relentless focus on operational excellence and efficiency. Operational excellence helps us fund the expansion of our TAM through big-bet investments.

 

 

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.

CULTURAL TRANSFORMATION

 

Competing to win in the huge data-centric opportunity means we need to play offense, and we are fully committed to evolving our culture to ensure that our employees are equipped to rise to this challenge as we continue our transformation.

This cultural evolution touches everything, from the way we work together, serve our customers, and make decisions, to how we reward performance, promote our people, and enable our workplace with technology. In 2019, we identified the cultural attributes and resulting behaviors required for our evolution, including a “One Intel” mindset shift that will increase value to our customers by removing the barriers that limit collaboration across teams. Our leaders generated awareness of these attributes throughout the company as a way to enable improved execution. We replaced our 40-year-old performance management system with a new structure that enforces individual accountability and promotes innovation, problem solving, and collaboration. We are increasing our ability to differentiate top performers and are actively encouraging new ways of thinking that support our culture evolution and increase focus on promoting thoughtful risk-taking. The Compensation Committee is responsible for overseeing culture and human capital, and our leaders are being held accountable by the Board for making meaningful progress on evolving our culture.

LEADERSHIP TRANSFORMATION

 

Since the launch of our strategic transformation, we have made significant changes in our leadership team to position the company for continued strong, sustainable growth through this critical time of change.

Following a rigorous and extensive CEO search both internally and externally and after strong performance as interim Chief Executive Officer (CEO), Mr. Swan was appointed Intel’s permanent CEO and a member of the Board of Directors in January 2019, with the mandate to carry forward our strategic transformation from a PC-centric to a data-centric company. His commitment to, and ability to immediately embrace and advance, our strategic transformation plan were important factors in the Board’s selection of Mr. Swan as our CEO.

In addition to the appointment of Mr. Swan as our CEO, we have made a number of additional leadership changes to support our strategic transformation:

 

 

Concurrent with Mr. Swan’s appointment as CEO, the Board appointed Todd M. Underwood, our then Vice President of Finance and Director of Corporate Planning and Reporting, as our interim Chief Financial Officer (CFO).

 

 

In April 2019, the Board appointed George S. Davis as our CFO, and Mr. Underwood returned to his prior role. Accordingly, Mr. Underwood is a listed officer for 2019 due to his service as interim CFO, but he is not a current Intel executive officer.

 

 

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In June 2019, the Board appointed Sandra L. Rivera as our Chief People Officer to lead our cultural transformation.

 

 

In September 2019, Gregory M. Bryant was promoted to Executive Vice President, General Manager, Client Computing Group (CCG) and became an Intel executive officer. CCG is Intel’s largest business group, generating 52% of our revenue in 2019.

The Board is confident that our management team is the right group to position the company for continued strong, sustainable growth through this critical time of change. To support successful leadership transitions in 2018 and 2019, the Compensation Committee designed compensation programs that incentivize our executives to deliver on the full potential of our ongoing transformation.

STRATEGIC GROWTH EQUITY AWARDS FOR LEADERSHIP TEAM

 

As described in last year’s proxy statement and discussed extensively with our stockholders both leading up to and following our 2019 Annual Stockholders’ Meeting, as one of the key ways to incentivize management to deliver on the full potential of our business transformation, the Compensation Committee granted Mr. Swan and other executives the Strategic Growth Equity Awards.

Background. In early 2019, when considering the potential awards to facilitate Intel’s five-year strategy and incentivize our new CEO, the Compensation Committee recognized that this was a pivotal moment for the company. We were at a unique juncture with the departure of our former CEO and were facing a challenging business environment brought about by our entrance into new markets and threats to our current market position. Our extensive CEO search process demonstrated to the Compensation Committee and our Board the intense demand and competition for capable leaders in our industry, while reinforcing both the strength and capabilities of our existing senior executive team and the importance of consistency and commitment through our strategic transformation. With Mr. Swan’s appointment as CEO , the Compensation Committee wanted to underscore the importance of our five-year strategy by directly basing his and other critical leaders’ long-term incentive compensation on its success in creating long-term stockholder value. As part of the strategic plan to lead key technology inflections, the company made significant investments in areas such as autonomous driving, artificial intelligence, and 5G network transformation. At this key moment, the Compensation Committee developed a targeted set of Strategic Growth Equity Awards to incentivize and align management to realize the Board’s strategic plan in a way that creates meaningful and long-term value for our stockholders. The five-year performance period chosen by the Compensation Committee for these awards aligns with Intel’s five-year strategic plan. The Compensation Committee believed the magnitude of the awards to our CEO was commensurate with, and appropriate for, the size and complexity of Intel’s businesses and the magnitude of the ambitious task of delivering on the full potential of our ongoing transformation (which is one of the most significant business transformations in Intel’s history), as seen below in the increase in the market capitalization required to realize the value of these awards at threshold, target, and maximum opportunities.

Award Structure and Performance Alignment. The Strategic Growth Equity Awards, comprising performance-based stock options (Performance Options) and performance-based restricted stock units (Performance Units), make long-term value creation for stockholders an absolute prerequisite of any payout. The awards only pay out if stockholders see a strong and sustained increase in our stock price.

The Compensation Committee established rigorous vesting standards that are conditioned on our stock price performance and took into account both our historic trading stock price and the near-term challenges that the strategic transformation entails:

 

 

threshold vesting for Performance Units requires 30% stock price appreciation, representing a stock price higher than Intel’s stock price at any time during the preceding 17 years and a $66 billion increase in market capitalization; the Performance Options are only exercisable if this threshold condition is met within five years;

 

 

target vesting for Performance Units requires 50% stock price appreciation, representing a stock price just shy of Intel’s all-time high and a $110 billion increase in market capitalization; and

 

 

maximum vesting for Performance Units requires stock price growth of 100%, representing a stock price significantly above Intel’s all-time highest stock price and significantly above Intel’s stock price performance over the prior five years, and a $220 billion increase in market capitalization.

 

 

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Stock Price Performance and Growth Goals

The Compensation Committee discussed extensively the use of other performance metrics, but ultimately determined that stock price growth was the most appropriate criteria for assessing Intel’s performance for purposes of the Strategic Growth Equity Awards, as well as the most complementary to our existing executive compensation programs that already utilize absolute and relative net income growth, relative total stockholder return (TSR), earnings per share (EPS), and operational performance metrics.

While the market has responded favorably to our performance during 2019, our Compensation Committee recognized that our leaders must continue to execute and perform in order to generate and maintain long-term value for our stockholders. Accordingly, the awards contain multiple restrictions intended to ensure a long-term focus and mitigate incentives for short-term risk-taking, including multi-year vesting schedules and a cap and forfeiture requirement if the threshold stock price goal is not maintained. Detailed information on the Strategic Growth Equity Awards can be found below in “2019 Compensation of Our Listed Officers; Strategic Growth Equity Awards” on page 71 of this proxy statement.

The Compensation Committee views these awards as a one-time supplement to our regular compensation program and has no intention to grant additional one-time equity awards to any of our current executive officers.

ADDITIONAL 2019 CEO TRANSITION-RELATED COMPENSATION DECISIONS

 

As described in last year’s proxy statement, the Compensation Committee granted Mr. Swan additional performance-based restricted stock units (Cash Incentive-Related PSUs) as part of his promotional CEO compensation package. These awards vest based on the extent to which performance goals under our annual executive incentive cash plan are achieved over a two- and three-year period.

 

 

 

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CEO PERFORMANCE AWARD PORTFOLIO Purpose Cash Incentive Related PSUs 2-3 years Strategic Growth performance units 5 years Strategic Growth stock options up to 10 years Delivery of short-term operational & financial goals that facilitate long-term growth Portfolio encourages continued focus across different time horizons, with vesting subject to achievement of strong share price growth through Intels transformation, with robust safeguards to mitigate short-term risk-taking

The Compensation Committee wanted to provide that Mr. Swan’s promotional equity awards were fully at risk, performance-based, and balanced between intermediate and long-term performance periods: (i) Performance Units linked to stock price specific goals with a five-year performance period, (ii) Performance Options with a stock price vesting and exercisability condition that must be met within five years and have growth potential up to 10 years, and (iii) Cash Incentive-Related PSUs linked to our ongoing financial and operating performance as measured over a two- and three-year period. All these awards are subject to forfeiture if threshold performance conditions are not achieved.

Given the unique nature of these awards, particularly the Strategic Growth Equity Awards that tie significant compensation to significant creation of value over the next five years, the Compensation Committee also deemed it advisable and in the company’s best interests to grant regular annual equity awards to Mr. Swan and our other listed officers to avoid creating an “all or nothing” compensation structure that could promote excessive risk-taking and create retention risks at a pivotal time for the company. Mr. Swan’s annual total direct compensation, which includes these annual equity grants, is targeted to be at market median.

Additional details of Mr. Swan’s promotional equity awards can be found below in “2019 Compensation of Our Listed Officers; Promotion and New Hire Compensation” on page 69.

INVESTOR ENGAGEMENT AND THE 2019 “SAY ON PAY” VOTE

 

 

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Total Contacted Total Engaged Director Engaged

In 2019, we received approximately 60% support for our “say on pay” vote. Prior to the 2019 Annual Stockholders’ Meeting and during the second half of 2019, we pursued multiple avenues for additional investor engagement, including in-person and teleconference meetings with our major stockholders. Our engagement team included representatives from our Compensation & Benefits, Governance, Investor Relations, Corporate Responsibility, and Legal teams. In total, we contacted stockholders holding 48.1% of our outstanding stock and held meetings with stockholders representing 38.9% of our outstanding stock, over the course of 50 engagements. During these meetings, we discussed a variety of topics including our 2019 executive compensation decisions and 2019 “say on pay” vote. Dr. Ishrak, who previously chaired the Compensation Committee and is now chairman of the Board, joined engagement conversations with stockholders representing 28.0% of our outstanding stock.

The Board was concerned about last year’s “say on pay” vote, and a significant portion of our 2019 stockholder engagement program was dedicated to discussing and soliciting feedback on our executive compensation philosophy, strategy, and practices. The feedback we received regarding the overall structure of our executive compensation program was overwhelmingly positive.

 

 

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Based on our discussions with stockholders, we believe that the low vote primarily reflected a desire for additional detail on the rationale for the Strategic Growth Equity Awards for Mr. Swan in 2019 and concern about their size.

Due to the timing of Mr. Swan’s awards, which occurred just before the 2019 proxy statement was published, we believe many stockholders treated the “say on pay” vote as a referendum on Mr. Swan’s awards and our 2019 compensation decisions. In hindsight, even though our 2019 proxy statement was focused on 2018 compensation decisions, we would have provided more detail on the rationale for these awards and 2019 decisions last year. As discussed in this section, the Compensation Committee views these awards as a one-time event that reflected our unique circumstances in 2019, including the CEO transition, business transformation, and the critical importance of having a highly motivated and engaged management team execute our strategic plan.

The table below summarizes the questions and concerns raised by our stockholders and how our Compensation Committee has addressed these matters.

 

WHAT WE HEARD FROM INVESTORS    OUR PERSPECTIVE / HOW WE RESPONDED
   
Magnitude of Strategic Growth Equity Awards:   Some investors were concerned with the magnitude of the CEO’s awards, in some cases viewing the amount as too high for an internal candidate   

We have provided enhanced disclosure of factors considered by the Compensation Committee that impacted magnitude of the awards (see “Strategic Growth Equity Awards” below)

 

  The Compensation Committee determined to provide Mr. Swan with a heavily performance-based compensation package to incentivize execution of Intel’s long-term strategic goals while remaining competitive with the compensation opportunities of the CEOs in our peer group

 

  The awards are 100% performance-based and contingent on achieving ambitious performance milestones—the target goal for the Performance Units is near Intel’s all-time stock price high (requiring a $110 billion increase in market capitalization) and maximum payouts for the Performance Units require performance significantly above our all-time high (requiring a $220 billion increase in market capitalization)—and the awards will be forfeited if certain sustained stock price growth thresholds are not achieved

 

  The Compensation Committee believed the magnitude of the awards to our CEO was commensurate with, and appropriate for, the size and complexity of Intel’s businesses and the magnitude of the ambitious task of delivering on the full potential of our ongoing transformation, which is one of the most significant business transformations in Intel’s history

   
Structure of Strategic
Growth Equity Awards:
  Some investors were concerned with the structure of these awards, particularly the use of absolute stock price growth as the metric   

We have provided enhanced disclosure of the Compensation Committee’s process for determining the award structure (see “Strategic Growth Equity Awards” below)

 

  The threshold level of performance necessary for any amounts to be earned is stock price appreciation equivalent to a $66 billion increase in Intel’s market capitalization (and a $110 billion increase to earn target payout under the Performance Units)

 

  The five-year performance period reflects the anticipated timeframe of the challenges facing Intel as it advances its strategic transformation

 

  Using significant stock price growth as a performance metric incentivizes management to focus on long-term stockholder value creation and mitigates undue bias toward near-term financial or operational consequences

 

Our regular compensation program incentivizes relative performance; an absolute metric ensures these additional compensation opportunities are only realized if stockholders realize substantial absolute returns

 

 

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WHAT WE HEARD FROM INVESTORS    OUR PERSPECTIVE / HOW WE RESPONDED
   
Future Granting of
Special Equity Awards:
  Investors asked if we intend to grant any future special equity awards outside of our regular compensation program    The Compensation Committee views special equity awards as a one-time supplement to our regular compensation program and has no intention to grant additional one-time equity awards to any of our current executive officers. Our CEO’s annual total direct compensation, which includes annual equity grants, is targeted to be at market median
   

 

Our regular executive compensation program:

 

 

Investors view our executive pay practices as best-in-class, but would like to see more information on the operational goals in our annual bonus plan, including details on the linkage to ESG metrics

  

 

We have historically provided substantial disclosure about our annual bonus plan design and operation, including: metrics, their purpose, their weightings, calculations showing the actual performance against the metrics, comparison against the prior year’s performance, and, for operational goals, average business group score

 

We have provided more information about the 2019 business group operational metrics while balancing the exclusion of any competitively harmful information (see “Annual Incentive Cash Compensation” below). We also provided more information on the ESG metrics included in the annual bonus plan

   
Share buybacks and our executive compensation program:  

Investors would like to understand how share buybacks are addressed in our executive compensation program

   Any forecasted share buybacks are taken into account when our earnings per share (EPS) goals are set. In addition, the Compensation Committee may adjust the evaluation of the EPS performance metric under the PSU awards to take into account unplanned, unusual, or extraordinary events, including but not limited to share buybacks significantly above or below the forecasts.

For a discussion of additional feedback we received on our ESG practices and other matters,

see “Investor Engagement ” on page 37.

LISTED OFFICER PAY OVERVIEW

 

Our executive compensation programs continue to be tied to the company’s financial and operational 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.

There are three key drivers of our executive compensation programs: 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).

The following table lists the pay elements of our programs and the purpose they serve:

 

PAY ELEMENT    PURPOSE    PERFORMANCE PERIOD    PERFORMANCE METRIC
     

Base Salary

   Designed to be market-competitive and attract and retain talent    Annual   
     

Annual Cash Bonus

   Incentivize achievement of Intel’s short-term financial and operational objectives    Fiscal Year   

  Year-Over-Year Net Income Growth (25%)

  Relative Net Income Growth vs. Tech 15 peers (25%)

  Operational goals (50%)

     

Quarterly Cash Bonus

   Company-wide program that rewards quarterly profitability based on Intel’s net income relative to company compensation costs    Quarter   

  5% of Quarterly Net Income divided by Intel’s worldwide cost of a day’s pay

     

Restricted Stock Units

   Facilitates stock ownership, executive retention, and stockholder alignment   

Three-Year Period with

Quarterly Vesting

  

  Stock Price Appreciation

     

Performance Stock Units

   Designed to reward long-term profitability, long-term performance relative to peers, and alignment with stockholders    Three-Year Period   

  Relative TSR vs. S&P 500 IT Index (50%)

  Cumulative EPS Growth compared to a target (50%)

 

 

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BUSINESS PERFORMANCE AND PAY

 

2019 was another record year for Intel as we continued our transformation from a PC-centric company to a data-centric company. We achieved record revenue and earnings per share while reaching critical product milestones. Solid results in our PC business continued, and our data-centric businesses contributed 48% of our overall revenue. We continue to focus on improving supply and supporting our customers’ growth, investing record levels of capital in 2018 and 2019. Our 10nm manufacturing process entered full production as we launched our first 10nm products, and we are accelerating the pace of our node introductions. We have also continued to innovate in our 14nm node, introducing leadership products that deliver more value to customers. Our employees are executing to our strategy by developing compelling technology and delivering innovative products to our customers. Crucially, our growth strategy enabled us to continue to gain share in an estimated $300B TAM.1

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

 

  2019 2018 Change

Revenue

$72.0 billion

$70.8 billion

2%

Gross Margin

58.6%

61.7%

down 3.2 pts

Operating Income

$22.0 billion

$23.3 billion

(5)%

Net Income or Adjusted Net Income2

$21.0 billion

$20.8 billion

1%

Earnings Per Share

$4.71

$4.48

5%

2019 VS. 2018

In 2019, revenue was a record high of $72.0 billion, up 2% from 2018. The increase in revenue was primarily driven by strong performance across our data-centric businesses, which collectively grew 3% year-over-year and made up nearly half of our total revenue in 2019. For key highlights of the results of our operations, see ”Proxy Statement Highlights; A Year in Review” on page 12.

 

1

Source: Intel calculated 2024 Total Addressable Market (TAM) and PC TAM derived from industry analyst reports.

2 

For 2018, Net Income was adjusted to exclude the one-time charge related to Tax Reform for purposes of incentive compensation, See “Non-GAAP Financial Measures” in Appendix A.

PAYOUTS FOR 2019 PERFORMANCE

Our executive compensation programs are structured to provide strong pay-for-performance alignment and what we paid to our listed officers for 2019 reflects our solid 2019 performance. The outperformance stock units that completed their performance period in 2019 vested below target due to our relative TSR under-performance over the three-year performance period.

 

PAY ELEMENT    2019 RESULTS    PERFORMANCE SUMMARY
 

Annual Cash Bonus

(Corporate Average Payout)

   104.3%    Other than Messrs Shenoy and Bryant, the listed officers received the corporate average payout, including our CEO. Mr. Shenoy, who oversees the Data Platforms Group and is subject to its business group goals, received a payout of 103.6% of his target, while Mr. Bryant, who oversees the Client Computing Group, received a payout of 114.4% of his target.
 

Quarterly Cash Bonus

(Payout reflected as days of eligible pay)

   24.6 days    Based on the company’s 2019 quarterly profitability, our listed officers received the same amount of days payout as all Intel employees
 

Outperformance Stock Units Granted in 2016 (Payout as a percentage of target OSUs granted)

   81.7%    Payout at 81.7% of target. Intel’s three-year TSR was 65.1%, which was 12.1 percentage points below the median of our 15-company technology peer group

 

 

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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. The peer group that we used for benchmarking and as the comparator group for the annual incentive cash plan for executive officers (Executive Incentive Cash Plan) was modified to focus exclusively on technology companies, as we primarily compete for talent with other technology companies. Previously, our compensation peer group consisted of technology and S&P 100 companies.

 

 

PSU Performance Metric. EPS was added as a second performance metric to our performance stock unit (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, was revised to provide for pro-rated vesting at retirement for new employees. For existing employees, a minimum of one-year 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 increase retention of key talent.

 

 

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

2020 COMPENSATION PROGRAM CHANGES

 

In addition to the actions taken in response to stockholder feedback described above, the Compensation Committee approved the changes outlined below to our executive compensation programs in January 2020 to strengthen our pay-for-performance linkage, provide better alignment with technology peer industry practices, and continue our leadership in environmental, social, and governance (ESG) issues.

 

 

Adopted New Executive Annual Performance Bonus Plan. In January 2020, the Board adopted the Intel Corporation Executive Annual Performance Bonus Plan, which replaces the 2014 Annual Performance Bonus Plan that is referred to in this proxy statement as the Executive Incentive Cash Plan. The new plan provides the Compensation Committee with an enhanced ability to determine, on an annual basis, the performance criteria and goals that most closely align with Intel’s strategic objectives and the economic environment in which Intel operates, and also provides the Compensation Committee with the ability to better take into account feedback from stockholders in setting these criteria and goals. The maximum annual bonus payable under the new plan to any one executive for any performance period will not exceed 300% of the target incentive bonus opportunity set by the Compensation Committee. Previously, the maximum payout for any one individual was $10,000,000. The Compensation Committee continues to have the right to reduce executive officers’ cash bonus payments under the Plan by any amount on the basis of such considerations as the Compensation Committee in its sole discretion determines.

 

 

Executive Annual Performance Bonus Plan Design: The Compensation Committee changed the annual bonus program for 2020 to encourage the continued execution of our strategic and cultural transformation. The weighting of the three performance metrics will change to: year-over-year net income growth (33%), relative net income growth (33%), and “One Intel” operation goals (33%). Previously the operational goals were business-group specific. We will now have “One Intel” operational goals that apply across all business groups and fall into five categories: manufacturing leadership, product execution, growth, culture, and financial commitments. Within each of the five key categories, there are another 3-5 specific and objective measures. We also have additional goals tied to ESG metrics, described below, that can increase payouts if achieved. We intend to describe our performance against these measures in greater detail in next year’s proxy statement.

 

 

ESG Metrics. As in prior years, the Compensation Committee will continue to include ESG-related metrics in our Executive Annual Performance Bonus Plan, including diversity, inclusion, and the employee experience. For 2020, we also are introducing environmental goals related to climate change and water stewardship.

 

 

Peer Group. For 2020, the Compensation Committee made one change to the peer group for executive compensation benchmarking, replacing Netflix with Dell Technologies as it had recently become a publicly traded company. The replacement was made because of Dell’s closer alignment to Intel both in terms of business and compensation practices.

 

 

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INTEL’S EXECUTIVE COMPENSATION BEST PRACTICES

 

Intel has long employed a number of practices that reflect our commitment to good compensation governance:

 

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 clawback policies that apply to our annual incentive cash plan and equity incentive plan and can be triggered by either a financial restatement or certain detrimental conduct

 

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

 

•  We impose limits on maximum incentive payouts

 

•  We incorporate relevant ESG metrics in our executive compensation programs

 

      

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

 

  No perquisite-related tax gross-ups for executive officers (except for company-wide benefits 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

 

  No excessive executive perquisites

Our strong governance practices extend beyond our executive compensation programs. With respect to our company-wide compensation and human capital management practices, we focus on continuing to build an inclusive culture and advancing fair pay. In 2019, we announced that we achieved gender pay equity globally by closing the gap in average pay between employees of different genders in the same or similar roles after accounting for legitimate business factors that can explain differences, such as performance, time in grade level, and tenure. We also continued to advance transparency in our pay and representation data. Finally, we also perform an annual review of our compensation programs to assess whether the programs’ provisions and operation create undesired or unintentional material risk.

2019 COMPENSATION OF OUR LISTED OFFICERS

PAY PHILOSOPHY AND ELEMENTS OF COMPENSATION

 

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 fierce. 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 Compensation Committee believes that a competitive target total compensation opportunity 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 Compensation Committee has structured compensation so that the proportion of variable cash and equity-based pay increases with higher levels of responsibility.

 

 

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

Our executive compensation pay elements include base salary, annual cash bonus, quarterly cash bonus, and equity awards consisting of RSUs and PSUs. Details of each of these pay elements are provided below in “2019 Cash Compensation” and “2019 Equity Incentives.”

Benefits. We also 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.

PROMOTION AND NEW HIRE COMPENSATION

 

CEO Compensation. Mr. Swan’s compensation for 2019 as reported in the 2019 Summary Compensation Table on page 89 consists of three elements:

 

 

equity awards granted in 2019 for Mr. Swan’s service as Intel’s interim CEO through January 29, 2019;

 

 

annual compensation paid to Mr. Swan for his service as our permanent CEO during 2019; and

 

 

promotional compensation awarded in connection with Mr. Swan being named CEO in January 2019.

Mr. Swan’s 2019 equity awards for service as interim CEO had a target aggregate grant date value of approximately $1,200,000, consisting of approximately 50% PSUs and 50% RSUs by value. The RSUs vest on a quarterly basis over a three-year period from the grant date, and the PSUs will vest in January 2022 based on Intel’s earnings per share growth and total stockholder return performance relative to the technology peer group during the PSUs’ three-year performance period. In the event Mr. Swan’s employment is terminated by the company without cause or by him for good reason, the vesting of the RSUs will be eligible for acceleration, and Mr. Swan will be eligible to retain the unvested PSUs.

As disclosed in last year’s proxy statement, in connection with his appointment as CEO in January 2019, the company entered into an offer letter with Mr. Swan. Pursuant to the offer letter, Mr. Swan’s target total direct compensation is positioned at the market median:

 

 

His base salary was set to $1,250,000.

 

 

His annual incentive cash bonus was set with a target amount of 275% of his base salary ($3,437,500) and he is eligible for a quarterly incentive cash bonus.

 

 

His annual equity awards for 2019 had a target aggregate grant date value of approximately $15,500,000, consisting of approximately 80% PSUs and 20% RSUs by value.

These annual compensation arrangements are discussed in greater detail below, under “2019 Cash Compensation” and “2019 Equity Incentives.”

The largest component of Mr. Swan’s 2019 compensation consists of equity awards granted in connection with his appointment as Intel’s permanent CEO. As discussed above, in selecting a new CEO, the Board conducted a rigorous and extensive search both internally and externally and gave careful consideration to hiring an external candidate. Through this process, the Board gained in-the-field insights into the highly competitive market for qualified executive talent and to the compensation package that would be necessary to attract and retain a capable chief executive for the company. After careful consideration, including an evaluation of Mr. Swan’s strong performance as interim CEO and confidence in his commitment to pursue and ability to lead our strategic transformation, the Board determined that Mr. Swan was the right candidate to serve as our next CEO.

When determining the appropriate compensation and incentives for Mr. Swan, the Compensation Committee took into account the compensation levels that it had seen would be necessary to attract an external candidate. The Compensation Committee recognized that, in the past, Intel had followed a practice of setting its new chief executive officers’ compensation at below-median levels. But the Compensation Committee recognized that, to an equal or even greater extent than with an external candidate, the Board expected immediate performance from Mr. Swan. In fact, Mr. Swan’s ability to immediately continue carrying forward Intel’s strategic transformation was one of the key reasons the Board selected him as Intel’s next CEO. The Compensation Committee also recognized, as discussed above, the near-term challenges that the strategic transformation entails. The Compensation Committee considered the size and complexity of Intel’s businesses in order to align pay and performance and to incentivize Mr. Swan to steer Intel through one of the most significant business transformations in its history.

 

 

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Accordingly, the Compensation Committee determined it best to provide Mr. Swan a portfolio of promotional equity awards consisting solely of performance-based equity awards that are subject to forfeiture if threshold performance conditions are not achieved: (i) 450,000 Performance Units linked to specific stock price target goals over a five-year performance period, (ii) 1,800,000 Performance Options with a stock price vesting and exercisability requirement that must be met within five years and have growth potential up to 10 years, and (iii) Cash Incentive-Related PSUs linked to our ongoing financial and operating performance as measured over a two- and three-year period. Details on the Strategic Growth Equity Awards are provided below in “Strategic Growth Equity Awards.” The Cash Incentive-Related PSU award had a target grant date value of approximately $13,000,000, and vests based on the extent to which financial and operational performance goals under Intel’s annual executive incentive cash plan are achieved over a two- and three-year period. As with the Strategic Growth Equity Awards, this award is at risk and performance based, but the Compensation Committee determined that the award should cover a three-year performance period to balance the longer-term periods under the Strategic Growth Equity Awards. On each of the second and third anniversaries of the grant 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 payout percentage under the executive incentive cash plan over the two- or three-year vesting period and subject to Mr. Swan’s continued employment with Intel through the applicable date. However, the payout for these PSUs will be zero if the average payout percentage 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.

 

 

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CEO PERFORMANCE AWARD PORTFOLIO Purpose Cash Incentive-Related PSUs 2-3 years Delivery of short-term operational & financial goals that facilities long-term growth Strategic Growth Performance Units 5 years Portfolio encourages continued focus across different time horizons, with vesting subject to achievement of strong share price growth through Intels transformation, with robust safeguards to mitigate short-term risk taking Strategic Growth Stock Options Up to 10 years

Based upon the experience of our Board members and outside advisors, the Compensation Committee believed that it has created a fair, competitive, stockholder-oriented, and highly motivational compensation package for Mr. Swan that will encourage him to take Intel to the next level in our continuing transformation. Intel’s business achievements and stock price performance during 2019 reinforce this strategy.

CFO Compensation. In connection with his appointment as CFO in April 2019, the company entered into an offer letter with Mr. Davis. Pursuant to his offer letter, Mr. Davis was granted RSUs with a target grant date value of approximately $10,000,000, vesting on a quarterly basis over a three-year period from the grant date, in order to make Mr. Davis whole for certain unvested equity awards that he forfeited upon his departure from his prior employer in order to join Intel. Mr. Davis also is entitled to a cash hiring bonus of $4,000,000, payable in three installments: the first payment of $2,000,000 was paid within 30 days following April 3, 2019, the second payment of $1,000,000 to be made on April 3, 2020, and the final payment of $1,000,000 to be made on April 3, 2021. In the event his employment is terminated by the company without cause or he resigns for good reason within the approximately three-year period after April 3, 2019, Mr. Davis will be entitled to receive any unpaid portion of his hiring bonus as well as a severance payment, the value of which declines from $10,000,000 by 1/12th each quarter over such three-year period, subject to his execution of an effective release of claims in favor of Intel. Mr. Davis was also granted Strategic Growth Equity Awards (150,000 Performance Units and 600,000 Performance Options) on similar terms as Mr. Swan.

Interim CFO Compensation. In April 2019, to compensate Mr. Underwood for his role as interim CFO from February 2019 to April 2019, the Compensation Committee granted him equity awards with a target aggregate grant date value of approximately $800,000, granted in the form of approximately 50% RSUs and 50% PSUs by value. The RSUs vest on a quarterly basis over a three-year period from the grant date, and the PSUs will vest in January 2022 based on Intel’s earnings per share growth and total stockholder return performance relative to the technology peer group during the PSUs’ three-year performance period. If Mr. Underwood’s employment is terminated without cause by the company or by him for good reason, the vesting of the RSUs will be eligible for acceleration, and Mr. Underwood will be eligible to retain the unvested PSUs.

 

 

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Promotion Compensation. In September 2019, Messrs. Bryant and Underwood were promoted to their current roles. In connection with such promotions, Mr. Bryant received an RSU award with a target grant date value of approximately $1,000,000, and Mr. Underwood received an RSU award with a target grant date value of approximately $1,327,000. These RSUs vest on a quarterly basis over a three-year period from the grant date.

STRATEGIC GROWTH EQUITY AWARDS

 

 

Background. As described in last year’s proxy statement and discussed extensively with our stockholders both leading up to and following our 2019 Annual Stockholders’ Meeting, the Strategic Growth Equity Awards granted in early 2019 were developed in connection with Mr. Swan’s appointment as our CEO and designed to reward for ambitious achievements in performance. In designing the Strategic Growth Equity Awards for Mr. Swan, the Compensation Committee considered the fierce competition for talented executives in the technology sector, the data of new CEO packages among our peers, and Mr. Swan’s performance as interim CEO. Importantly, the Compensation Committee wanted to provide that Mr. Swan’s promotional equity awards were fully at risk, performance-based and balanced between intermediate and long-term performance periods. The Compensation Committee believed the magnitude of the awards to our CEO was commensurate with, and appropriate for, the size and complexity of Intel’s businesses and the ambitious task of delivering on the full potential of our ongoing transformation, as seen below in the increases in market capitalization required to realize the value of these awards at threshold, target, and maximum opportunities.

Recognizing that this was an uncertain time for our leaders, with a new CEO coming on board in the middle of a massive transformation and the need to build a cohesive management team, awards were granted to other key leadership members on substantially the same terms and conditions as those granted to Mr. Swan to ensure that the leadership team was motivated, engaged, coordinated, and provided with a performance compensation package commensurate with the task of transforming Intel over the next five years. In granting these awards, the Compensation Committee also recognized the importance of a stable leadership team in the highly competitive market for strong technology leadership talent and the numerous competitors seeking to hire away Intel talent and accordingly established awards with a value designed to retain these key players during our strategic transformation. As with Mr. Swan’s awards, Strategic Growth Equity Awards to other executives are all 100% at risk and performance-based.

Award Structure and Performance Alignment. The stock price targets were selected based on a range of factors including competitive practices and a desire to drive significant increases in stockholder value through setting challenging goals over the next five years. These targets are ambitious and are intended to reinforce the significance of our ongoing transformation. Long-term value creation for stockholders is an absolute prerequisite for any payout.

The Compensation Committee established rigorous vesting standards that are conditioned on our stock price performance and take into account both our historic trading stock price and the near-term challenges that the strategic transformation entails:

 

 

threshold vesting for Performance Units requires 30% stock price appreciation, representing a stock price higher than Intel’s stock price at any time during the preceding 17 years and a $66 billion increase in market capitalization; the Performance Options are only exercisable if this threshold condition is met within five years;

 

 

target vesting for Performance Units requires 50% stock price appreciation, representing a stock price just shy of Intel’s all-time high and a $110 billion increase in market capitalization; and

 

 

maximum vesting for Performance Units requires stock price growth of 100%, representing a stock price significantly above Intel’s all-time highest stock price and significantly above Intel’s stock price performance over the prior five years, and a $220 billion increase in market capitalization.

The Strategic Growth Equity Awards are comprised of an approximately equal mix (by value) of Performance Units and Performance Options and are structured to drive achievement of strong share price growth through Intel’s transformation over the next five years. The Compensation Committee discussed extensively the use of other performance metrics, but ultimately determined that stock price growth was the most appropriate criteria for assessing Intel’s performance for purposes of the Strategic Growth Equity Awards, as well as the most complementary to our existing executive compensation programs that already utilize net income, relative TSR, EPS, and operational performance metrics. The Compensation Committee wanted to ensure that our CEO is both highly motivated and retained to implement our strategy and create significant value for our stockholders. The Compensation Committee believed that the Strategic Growth Equity Awards served these objectives for if we successfully implement our strategy, create innovative products, and continue to play an expanded role in our customers’ success over the long-term, then our stockholders (including employee stockholders) and Mr. Swan will be rewarded.

The Strategic Growth Equity Awards contain multiple restrictions intended to ensure long-term focus and mitigate incentives for short-term risk-taking, including multi-year vesting schedules and a cap and forfeiture requirement if the stock price goals are not maintained for at least 30 consecutive trading days.

 

 

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The following table shows the Strategic Growth Equity Awards approved by the Compensation Committee for our listed officers:

 

Name

Target Performance
Units Granted
Grant Date Fair
Value of
Performance Units1
Performance Options
Granted
Grant Date Fair Value of
Performance Options 1

Robert Swan

 

450,000

$

16,663,500

 

1,800,000

$

17,100,000

George Davis

 

150,000

$

8,251,500

 

600,000

$

6,798,000

Todd Underwood

 

22,500

$

1,222,900

 

90,000

$

1,010,700

Venkata Renduchintala

 

150,000

$

7,545,000

 

600,000

$

6,780,000