DEF 14A 1 d46027ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

 

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International Business Machines Corporation

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Armonk, New York

March 8, 2021

Dear Fellow Stockholders:

 

 

 

On behalf of the IBM Board of Directors, you are cordially invited to attend the Annual Meeting of Stockholders on Tuesday, April 27, 2021.

EMERGING STRONGER

As our clients accelerate their digital transformation journeys as a result of the global pandemic, your Company is well positioned to lead in the era that lies on the other side of this crisis.

Since I became your CEO last April, we have increased our focus on helping our clients on the two major transformational journeys they are on: hybrid cloud and AI. In 2020, we announced the separation of our managed infrastructure services business, closed seven strategic acquisitions and launched new industry clouds for banking and telecommunications. And we rapidly expanded our global ecosystem of partners and transformed our go-to-market strategy to better align with our hybrid cloud and AI strategy.

I am confident that these decisive moves for future growth will help ensure that your Company exits this turbulent period stronger.

ENGAGING WITH OUR STOCKHOLDERS

In 2020, we continued to build on our relationships with you, our stockholders. Each year, we seek to engage with investors that own more than half of the shares that voted at the Annual Meeting. I participated in this year’s outreach efforts along with our Executive Chairman Ginni Rometty, our independent Lead Director Mike Eskew and members of our senior management. The information we receive from you during our year-round engagement is integral to the Board’s decision-making process. Your views help inform our Company’s policies, practices and disclosures. As reflected within this Proxy Statement, results of our recent stockholder engagement efforts have led to enhancements in many areas, including:

 

  Redesigned executive compensation performance metrics that emphasize revenue growth

 

  Continued focus on environmental, social and governance (ESG) with increased reporting, as well as a diversity modifier added to the executive compensation program to reinforce continued improvement

 

  Continued focus on Board diversity

 

  Enhanced disclosure of Board oversight practices

ACTING WITH ENVIRONMENTAL AND SOCIAL RESPONSIBILITY

We know that you, our stockholders, and all of our stakeholders, including clients, employees, suppliers and the communities in which we work, are increasingly focused on environmental, social and governance matters. And you should know that we are too. Corporate social responsibility has been a hallmark of IBM’s culture for more than a century and with the events of 2020, it is more important than ever.

This year, we took bold, decisive steps to lead in these areas as we enter 2021. As you will see in this Proxy Statement:

 

  We have committed to the disclosure of additional diversity and inclusion data, including the disclosure of EEO-1 data in 2022 after the separation of the managed infrastructure services business is complete.

 

  We supported passage of anti-hate crime legislation.

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  We mobilized IBM and IBMers to help in the global battle against COVID-19, with numerous initiatives, including spearheading the COVID-19 High Performance Computing Consortium with the White House Office of Science and Technology Policy and U.S. Department of Energy to provide access to the world’s most powerful high-performance computing resources in support of COVID-19 research.

 

  We set a new goal to reach net zero greenhouse gas emissions by 2030 and updated our goals regarding renewable electricity and greenhouse gas emissions to reflect our strong progress.

 

  We provided stakeholders with comparable ESG data by reporting under the Sustainability Accounting Standards Board (SASB) framework.

Our long-standing values have served IBM for decades. As the world continues to battle a global public health crisis, we are committed to building upon our strong legacy of responsible stewardship.

I am proud of the work IBMers have done to reshape our future as a hybrid cloud and AI platform company and help our clients build the digital capabilities they need to thrive. Your Company is well positioned to emerge from this period stronger.

On behalf of the Board of Directors, thank you for your continued investment and support of IBM.

Very truly yours,

 

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Arvind Krishna

Chairman of the Board

 

 


 

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Armonk, New York

March 8, 2021

A Message from our Lead Director:

 

 

 

2020 was an eventful year for our Company, its stakeholders and the world. As IBM’s independent Lead Director, I am pleased to report to you that as we enter 2021, IBM is well positioned for success as the leading hybrid cloud and AI company. Let me share my perspective on our work over the past year and highlight how the Board continues its efforts to ensure effective oversight of your Company.

 

Navigating COVID-19. As the pandemic hit, the health and safety of IBMers was top priority for the Company. 95% of the IBM workforce transitioned to a work-from-home environment almost immediately and helped to ensure the world’s mission critical systems continued to operate. The Board and each of the Committees also continued to meet regularly throughout the year, often virtually, with over 99% attendance. And in April 2020, we held IBM’s first-ever virtual Annual Stockholders Meeting.

 

Oversight of Corporate Strategy. Our Board believes that engaged oversight of Company strategy is essential to the Company’s creation of long-term sustainable value. Throughout 2020, we were actively engaged as IBM accelerated its hybrid cloud and AI strategy. In October, the Board approved the announcement of the separation of the managed infrastructure services business. And as we enter 2021, we remain focused on the growth of IBM and the successful spin of what will become the world’s leading managed infrastructure provider, NewCo.

 

World-Class Succession Planning. At IBM, 2020 began with the succession of our Chief Executive Officer. In January, we announced that Arvind Krishna would become IBM’s 10th Chief Executive Officer, effective in April. In December, with the retirement of Ginni Rometty as Executive Chairman, the independent directors of the Board unanimously elected Arvind to the Chairman position effective January 1, 2021. As you will see spelled out further within this Proxy Statement, we believe that combining the CEO and Chairman role at this time, to serve along with a robust and independent Lead Director, best serves the needs of the Company and the stockholders.

 

Independent Board Leadership. An essential component of the Board leadership structure is independent leadership. As IBM’s independent Lead Director, I am responsible for helping ensure that the Board exercises prudent judgment, independent from the management team of the Company. I perform many duties, as described within this Proxy Statement, to ensure independent and effective oversight.

 

Award Winning Stockholder Engagement. A key component of the Board’s decision-making process is the input we receive from you, IBM’s owners. In 2020, we continued our best-in-class engagement program, meeting with numerous stockholders on matters ranging from Company strategy to board and governance to diversity and inclusion initiatives

  

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and environmental goals. As the independent Lead Director, I once again participated in this year’s outreach efforts along with our Executive Chairman, CEO and members of senior management. All the feedback was shared with the Board and incorporated into discussions and decisions related to proxy disclosure, as highlighted on page 5 of this Proxy Statement.

 

Commitment to Sustainability and an Ethical Business Culture. IBM has pursued the highest standards of corporate responsibility for more than a century, and the Board is actively engaged in overseeing the Company’s sustainability efforts. Based on feedback from you, in 2020 the Board formally adopted a policy stating that the Company will produce a report annually assessing IBM’s diversity, equity and inclusion efforts starting this year, and we agreed that IBM will begin to publish EEO-1 data in 2022. As we enter 2021, IBM also continues its decades-long commitment to addressing environmental issues with new goals, including net zero greenhouse gas emissions by 2030. And, as you will see in this Proxy Statement, we have added a new “Environmental and Social Responsibility” section to provide transparency that we believe our stockholders are seeking.

 

Your Board believes that an ongoing commitment to good corporate governance enhances stockholder value, particularly over the long term.

 

We appreciate your investment in IBM and hope that you vote at our Annual Meeting on April 27, 2021.

 

Very truly yours,

 

 

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Michael L. Eskew

Lead Director

 


 

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Table of Contents

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Table of Contents

 

 

 

2021 Notice of Annual Meeting and Proxy Statement      1  
Proxy Summary      2  

Integrated Approach to Stockholder Engagement

     5  
IBM Board of Directors      7  
1. Election of Directors for a Term of One Year      10  
Governance and the Board      16  

Committees of the Board

     16  

Certain Transactions and Relationships

     18  

Corporate Governance

     19  

Director Compensation

     23  

Delinquent Section 16(a) Reports

     24  

Insurance and Indemnification

     24  

Ownership of Securities

     25  
Environmental and Social Responsibility      27  
2020 Executive Compensation      31  

Report of the Executive Compensation and Management Resources Committee of the Board of  Directors

     31  

2020 Compensation Discussion and Analysis

     32  

2020 Summary Compensation Table and Related Narrative

     49  

2020 Grants of Plan-Based Awards Table

     54  

2020 Outstanding Equity Awards at Fiscal Year-End  Table and Related Narrative

     55  

2020 Retention Plan Narrative

     58  

2020 Pension Benefits Narrative

     61  

2020 Nonqualified Deferred
Compensation Narrative

     65  

2020 Potential Payments Upon
Termination Narrative

     69  
  Report of the Audit Committee of the
Board of Directors
     73    
 

Audit and Non-Audit Fees

     73    
  2. Ratification of Appointment of Independent Registered Public Accounting Firm      74    
  3. Management Proposal on Advisory Vote on Executive Compensation (Say on Pay)      75    
  4. Stockholder Proposal to Have an Independent Board Chairman      76    
  5. Stockholder Proposal on the Right to Act by Written Consent      78    
  6. Stockholder Proposal Requesting the Company Publish Annually a Report Assessing its Diversity, Equity and Inclusion Efforts      80    
  Frequently Asked Questions      82    
  Appendix A – Non-GAAP Financial Information and Reconciliations      85    
      
      
 
  ESG HIGHLIGHTS

 

 
 
 

At IBM, trust and corporate responsibility are integral to

our business - and our ESG efforts are reflected throughout this Proxy Statement. Key topics include:

 

 

 
   
 

Governance Highlights

     2    
   
 

Board Diversity

     4    
   
 

Stockholder Engagement

     5    
   
 

Climate Change Risk

     22    
   
 

Environmental and Social Responsibility

     27    
   
 

Protecting the Environment

     27    
   
 

Responding to COVID-19

     28    
   
 

Supporting the IBMer

     28    
   
 

Operating with Trust and Transparency

     29    
   
 

Responsibly Advocating Public Policy

 

    

 

30

 

 

 

 
 
 

 



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2021 Notice of Annual Meeting

and Proxy Statement

 

 

 

Items of Business:

 

The Annual Meeting of Stockholders of International Business Machines Corporation will be held on Tuesday, April 27, 2021 at 10 a.m. Eastern Time in a virtual format. The items of business are:

 

1. Election of directors proposed by IBM’s Board of Directors for a term of one year, as set forth in this Proxy Statement.

 

2. Ratification of the appointment of PricewaterhouseCoopers LLP as IBM’s independent registered public accounting firm.

 

3. Advisory vote on executive compensation.

 

4. Three stockholder proposals, if properly presented at the meeting.

 

These items are more fully described in the following pages, which are a part of this Notice.

 

Stockholders of record can vote their shares by using the Internet or the telephone. Instructions for using these convenient services are set forth on the proxy card or the notice of Internet availability of proxy materials. If you received your materials by mail, you also may vote your shares by marking your votes on the enclosed proxy card, signing and dating it, and mailing it in the enclosed envelope. If you will need special assistance at the meeting because of a disability, please contact the Office of the Secretary, International Business Machines Corporation, 1 New Orchard Road, Armonk, NY 10504.

 

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Frank Sedlarcik

Vice President and Secretary

 

            
 

 

Date:

 

 

April 27, 2021

 

Time:

 

10 a.m. Eastern Time

 

 

Virtual
Meeting
Site:

 

 

www.virtualshareholdermeeting.com/
IBM2021

 

 

    

 
 

 

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Your vote is important.           

 

Please vote by following the instructions on your proxy card or voting instruction form.

 

 

 

    

 
 

 

To express our appreciation for your
participation, IBM will make a $1 charitable
donation to Girls Who Code on behalf of every
stockholder account that votes this year.

   

 

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Girls Who Code is
closing the gender
gap in technology
and changing the
image of what a
programmer looks
like and does.

                
                
                
                
                
                
       
                
                
       
                
                
                
       
                
                
       
                
                
       
                
                
                
       
                
                
       
                
       
                
                
                
       
                

The proxy materials, including this Proxy Statement, the IBM 2020 Annual Report, which includes the consolidated financial statements, and the proxy card, or the notice of Internet availability of proxy materials, as applicable, are being distributed beginning on or about March 8, 2021 to all stockholders entitled to vote.

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on April 27, 2021: the Proxy Statement and the Annual Report to Stockholders are available at www.ibm.com/investor/material/.

Websites throughout this Proxy Statement are provided for reference only. Websites referred to herein are not incorporated by reference into this Proxy Statement.

 


 

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2021 Notice of Annual Meeting & Proxy Statement   1


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Proxy Summary

 

 

Voting Matters    Stockholders will be asked to vote on the following matters at the Annual Meeting:

 

Items of Business

   Board’s recommendation            Where to find details

1.  Election of 12 Directors

  

FOR all nominees

  

P. 10-15

2.  Ratification of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm

  

FOR

  

P. 74

3.  Advisory Vote on Executive Compensation

  

FOR

  

P. 75

4.  Stockholder Proposal to have an Independent Board Chairman

  

AGAINST

  

P. 76-77

5.  Stockholder Proposal on the Right to Act by Written Consent

  

AGAINST

  

P. 78-79

6.  Stockholder Proposal Requesting the Company Publish Annually a Report Assessing its Diversity, Equity and Inclusion Efforts

  

FOR

  

P. 80-81

 

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What’s new?

 

 

We continue to enhance our governance, compensation, and sustainability practices and disclosures. Among many other items, since last year, IBM has:

 

  Executed a world-class Chairman and CEO succession process

 

  Redesigned the metrics of our 2021 Executive Compensation Programs to emphasize revenue, aligning compensation with IBM’s strategic focus on delivering sustainable growth as a leading hybrid cloud and AI company

 

  Added diversity modifier to executive Annual Incentive Program metrics to reinforce continued improvement

 

  Set new goal to reach net zero greenhouse gas emissions by 2030 and updated our goals regarding renewable electricity and greenhouse gas emissions to reflect our strong progress in these areas

 

  Provided stakeholders with comparable ESG data by reporting under the Sustainability Accounting Standards Board (SASB) framework

 

  Committed to disclosure of additional diversity and inclusion data

 

  Created a new Environmental and Social Responsibility section in this Proxy Statement

 

Governance Highlights (PAGE 7)

 

Effective Board leadership, independent oversight and strong corporate governance

 

  Independent Lead Director with robust and well-defined responsibilities

 

  Executive session led by independent Lead Director at each Board meeting

 

  Proactive Board and Committee refreshment with focus on optimal mix of skills and experience

 

  Annual review of the Board leadership structure

 

  Confidential voting

  

Stockholder rights and accountability

 

  Annual election of all directors

 

  Majority voting for directors in uncontested elections

 

  Stockholder special meeting right

 

  Proxy access

 

  No stockholder rights plan

 

  No supermajority voting provisions

 

  Robust year-round stockholder engagement process

 

  Signatory of Commonsense Principles 2.0

 

  Endorser of Investor Stewardship Group Principles

 

  Signatory to the Business Roundtable Statement on the Purpose of a Corporation

 

  Stockholder right to remove directors      NEW

 


 

 

 

2   2021 Notice of Annual Meeting & Proxy Statement    |    Proxy Summary


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IBM Board of Directors (PAGE 10)

Director Nominees

IBM’s Board is composed of a diverse, experienced group of global thought, business, and academic leaders.

 

Director

   Age      Primary Occupation   Director
Since
  Committee
Memberships
  Audit
Committee
Financial
Expert
 

Thomas Buberl

     47      Chief Executive Officer, AXA S.A.   2020       LOGO        LOGO         LOGO         LOGO          LOGO    

Michael L. Eskew

Lead Director

  

 

 

 

71

 

 

  

Retired Chairman and Chief Executive Officer,

United Parcel Service, Inc.

 

 

2005  

 

 

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David N. Farr

     66      Chairman, Emerson Electric Co.   2012     LOGO   LOGO   LOGO   LOGO     LOGO  

 

Alex Gorsky

  

 

 

 

60

 

 

  

Chairman and Chief Executive Officer,

Johnson & Johnson

 

 

2014  

 

 

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Michelle J. Howard

     60      Retired Admiral, United States Navy   2019     LOGO   LOGO   LOGO   LOGO     LOGO  

Arvind Krishna

     58      Chairman and Chief Executive Officer, IBM   2020       LOGO       LOGO       LOGO       LOGO       LOGO  

 

Andrew N. Liveris

  

 

 

 

66

 

 

  

Retired Chairman and Chief Executive Officer,

The Dow Chemical Company

 

 

2010  

 

 

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F. William McNabb III

  

 

 

 

63

 

 

  

Retired Chairman and Chief Executive Officer,

The Vanguard Group, Inc.

 

 

2019  

 

 

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Martha E. Pollack

     62      President, Cornell University   2019     LOGO   LOGO   LOGO   LOGO     LOGO  

 

Joseph R. Swedish

  

 

 

 

69

 

 

   Retired Chairman, President and Chief Executive Officer, Anthem, Inc.  

 

2017  

 

 

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Peter R. Voser

  

 

 

 

62

 

 

   Retired Chief Executive Officer, Royal Dutch Shell plc and Chairman, ABB Ltd.  

 

2015  

 

 

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Frederick H. Waddell

  

 

 

 

67

 

 

  

Retired Chairman and Chief Executive Officer,

Northern Trust Corporation

 

 

2017  

 

 

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Number of meetings held in 2020  

 

 

 

10

 

 

4

 

 

5

 

 

0

       

 

Audit:

 

   

 

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Directors and Corporate Governance:

 

   

 

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Executive Compensation and Management Resources:

 

   

 

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Executive:

 

   

 

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Audit Committee Financial Expert:

 

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2021 Notice of Annual Meeting & Proxy Statement    |    Proxy Summary   3


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Optimal Mix of Skills and Experience of Director Nominees

IBM’s directors collaboratively contribute significant experience in the areas most relevant to overseeing the Company’s business and strategy.

The skills and experience of our board include, but is not limited to:

 

  Industry leaders with deep executive and oversight experience;

 

  Global operational experience to oversee a business of IBM’s scale, scope, and complexity;

 

  Technology, cybersecurity and digital transformation experience;

 

  Key insight into IBM’s regulatory environment; and

 

  Diversity of backgrounds and experiences
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Public Company Board

                 9 of 12  

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Organizational Leadership and Management

               12 of 12

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Global Business Operations

               10 of 12

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Finance/Public Company CFO

                 6 of 12

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Technology, Cybersecurity or Digital

               12 of 12

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Government/Public Policy

                12 of 12

 

 

Board of Directors Snapshot

 

              

Board Refreshment in      
the Past 4 Years

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>50%

 

    

Director Nominee         Independence

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92%

 

              
              

2020 Board and
Committee Meetings    

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28

 

    

2020 Board and Committee Meeting         Attendance

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>99%

 

Strong Board Diversity

The Board includes directors who have a deep understanding of our business and members who bring new skills and fresh perspectives. We have a deliberate mix of age and tenure on the Board, which reflects our commitment to ongoing and proactive Board refreshment.

 

Gender and Ethnic Diversity   Tenure of Director Nominees

 

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4   2021 Notice of Annual Meeting & Proxy Statement    |    Proxy Summary


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  Integrated Approach to Stockholder Engagement

 

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IBM’s Award Winning Year-Round Engagement Process

 

 

    Engaging with     Stockholders

 

  

Offer in-season engagement to stockholders owning, in the aggregate, a majority of shares that vote each year

 

In 2020, engaged with 70% of institutional investors and >250,000 retail investors leading up to the Annual Meeting

  

 

Off-Season engagement offered to stockholders owning, in the aggregate, more than 50% of shares that vote each year and met with many that voted at the 2020 Annual Meeting

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Robust Conversations

 

  

 


IBM customizes its engagements by aligning discussion topics with stockholders’ areas of interest, including:

 

  

  Business

  Strategy and

  Finance

  

      Board and

      Corporate

      Governance

  

       Human Capital

       Management

       and Executive

       Compensation

          Corporate Social        Responsibility and        Environmental        Affairs        AI Ethics
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Enhancing Practices

 

  



Stockholder feedback is integrated into boardroom discussions and helps to inform the Board’s decisions and the Company’s practices and disclosures

 

To encourage stockholder participation in the Annual Meeting, IBM made a $300,000 charitable donation to Jobs for the Future in 2020 by donating $1 on behalf of every stockholder account that voted in 2020

 

 

 

 

 

Outcomes of Stockholder Engagement

 

BOARD AND GOVERNANCE

 

  Continued focus on Board diversity with 2 women directors and 2 ethnically diverse directors added in the last 3 years

 

  Active Board refreshment with more than 50% of the Board added in the last 4 years

 

  Executed world-class Chairman and CEO succession
process

 

  Enhanced disclosure of Board oversight practices

 

 

EXECUTIVE COMPENSATION

 

  2021 executive compensation performance metrics redesigned to emphasize revenue growth

 

  Added diversity modifier to executive Annual Incentive Program metrics

 

  New CEO Target Incentive at 200% of base, in line with the market

ESG REPORTING AND HUMAN CAPITAL MANAGEMENT

 

  Provided stakeholders with comparable ESG data by reporting under the Sustainability Accounting Standards Board (SASB) framework

 

  Board formally adopted a policy committing the Company to report annually on the effectiveness of our diversity and inclusion programs; the first report will be published in the second quarter of 2021

 

  Commitment to publish EEO-1 data in 2022 after the completion of the Company’s spin-off of its managed infrastructure services business

 

 


 

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Business Highlights

In 2020, IBM took substantial actions to focus on hybrid cloud and AI capabilities and redefine itself as a platform-centric company positioned to drive sustainable growth. The Company expanded gross profit margin in the year, generated strong free cash flow realization, and reshaped the portfolio, including the announcement to separate the managed infrastructure services business into a new market-leading public company.

2020 Performance Highlights

 

 

Revenue

$73.6B

 

 

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Grew Cloud revenues to over $25 billion with strong double-digit growth year over year, now comprising 34% of total IBM revenue

 

Expanded our hybrid cloud platform to over 2,800 clients and 260 Global Business Services (GBS) engagements

 

Red Hat delivered strong double-digit normalized (non-GAAP) revenue growth driven by subscription bookings. Backlog grew over 20% at actual rates exceeding $5 billion for the first time

 

Announced strategic acquisitions across Cloud and Cognitive Software and GBS focused on expanding our hybrid cloud and AI capabilities

 
        

 

Gross Profit Margin

48.3%

 

 

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Expanded full year GAAP gross margin 100 basis points and non-GAAP operating gross margin 130 basis points, reflecting a continued shift to higher value businesses and improved services productivity

 

    

   

 

Net Income from Continuing Operations

$5.5B

 

 

 

LOGO

 

 

 

 

Generated $5.5 billion in GAAP net income and non-GAAP operating net income of $7.8 billion, including a $2.0 billion pre-tax charge for structural actions in 4Q

 
        

 

Cash from Operations

$18.2B

 

 

 

LOGO

 

 

 

GAAP cash from operations of over $18 billion was up $3.4 billion year over year driven by strong cash management and actions taken to optimize our financing portfolio

 

Generated free cash flow of about $11 billion with realization well above 100%

 

Increased the dividend for the 25th consecutive year, returning $5.8 billion to stockholders

 

Compensation Highlights (PAGE 32)

Our compensation strategy supports IBM’s high value business model

 

 

 

What We Do

 

  

 

 

What We Don’t Do

 

LOGO   Tie a significant portion of pay to Company performance

 

LOGO   Mitigate risk taking by emphasizing long-term equity incentives, placing caps on potential payments, and maintaining robust clawback provisions

 

LOGO   Require significant share ownership by the Chairman and CEO, President, Vice Chairman, Executive Vice President and Senior Vice Presidents

 

LOGO   Utilize noncompetition and nonsolicitation agreements for senior executives

 

LOGO   Remove impact of share repurchase on executive incentives

 

  

 

LOGO   No individual severance or change-in-control agreements for executive officers

 

LOGO   No excise tax gross-ups for executive officers

 

LOGO   No dividend equivalents on unearned RSUs/PSUs

 

LOGO   No hedging/pledging of IBM stock

 

LOGO   No stock option repricing, exchanges or options granted below market value

 

LOGO   No guaranteed incentive payouts for executive officers

 

LOGO   No accelerated vesting of equity awards for executive officers

 

LOGO   No above-market returns on deferred compensation plans

 

 

 


 

 

 

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Table of Contents

IBM Board of Directors

 

 

Overview

IBM’s Board of Directors is responsible for supervision of the overall affairs of IBM. Following the Annual Meeting in 2021, the Board will consist of 12 directors. In between annual meetings, the Board has the authority under the by-laws to increase or decrease the size of the Board and to fill vacancies.

Director Selection Process

The Directors and Corporate Governance Committee is responsible for leading the search for qualified individuals for election as directors to ensure the Board has the optimal mix of skills, expertise, experience, and diversity of backgrounds. The Committee recommends candidates to the full Board for election.

 

The Board believes that the following core attributes are key to ensuring the continued vitality of the Board and excellence in the execution of its duties:

 

LOGO          LOGO          LOGO

diversity of background,

including gender, ethnicity,

talents and perspectives

        

experience as a leader of a

business, firm or institution

         mature and practical judgment
                       
                 
LOGO          LOGO          LOGO

the ability to comprehend and

analyze complex matters, including digital innovation

        

effective interpersonal and

communication skills

         strong character and integrity

 

 

 

The Committee and the Board identify candidates through a variety of means, including:

   

  recommendations from members of the Committee and the full Board

 

  information the Committee requests from the Secretary of IBM

  

  suggestions from IBM management

 

  a third-party search firm, from time to time

 


 

LOGO

 

 

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Table of Contents

LOGO

Director Skills and Qualifications

The IBM Board is composed of a diverse group of members, all leaders in their respective fields. All current directors have leadership experience at major domestic and international organizations with operations inside and outside the United States, at academic or research institutions, or in government. Directors also have deep industry expertise as leaders of organizations within some of the Company’s most important client industries and constituencies.

 

 

 

Building the Right Board for IBM: Key Director Attributes

 

  

 

LOGO

    

 

LOGO

    

 

LOGO

 
  

Business Operation, Innovation, Transformation and Digital Experience

 

100% of IBM Directors have led complex organizations

 

For over a century, IBM has continuously reinvented itself to help its clients move from one era to the next. The ability to comprehend and analyze complex matters, including technology, is key to the IBM Board’s oversight of the Company’s innovation and digital transformation. All IBM directors have led large organizations, crucial experience for understanding and overseeing the scale, scope, and complexity of IBM’s business.

    

Industry Expertise

 

Director-wide industry experience includes:

 

 Information Technology

 Financial Services and Insurance

 Healthcare

 Pharmaceuticals

 Energy

 Chemicals

 Transport and Logistics

 Manufacturing

 Private Equity

 Research and Development

 Government

 

IBM uniquely combines innovative technology with deep industry expertise, underpinned by security, trust, and responsible stewardship. IBM’s directors have experience leading organizations in a variety of industries that enhance the Board’s knowledge. Their perspectives on contemporary business issues and experience running data-intensive organizations are an asset to the Company and to our stockholders.

 

    

Diverse and Global Perspective

 

Every IBM Director has
international experience

 

IBM conducts business around the globe. Our business success is derived from an understanding of diverse business environments and economic conditions and a broad perspective on global business opportunities. The Board’s diversity and international experience is crucial for IBM, which operates in more than 175 countries around the world.

 
    

The Directors and Corporate Governance Committee and the Board believe that the above-mentioned attributes, along with the leadership skills and other experiences of the Board members described below, provide IBM with the perspectives and judgment necessary to guide IBM’s strategies and oversee their execution.

 

 


 

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Table of Contents

IBM BOARD OF DIRECTORS – EXPERIENCE AND SKILLS OF DIRECTOR NOMINEES

 

 

 

Director

 

Client

Industry
Expertise

 

Organizational
Leadership

and
Management

 

U.S.

Business
Operations

  Global
Business
Operations
  CFO   Specific Risk
Oversight/Risk
Management
Exposure
  Technology,
Cybersecurity
or Digital
  Academia  

Government/

Regulatory,
Business
Associations or
Public Policy

 

Public

Board

 

Gender/

Ethnic

    Diversity    

 

Thomas Buberl

 

 

LOGO

 

  LOGO   LOGO   LOGO       LOGO   LOGO       LOGO   LOGO    

 

Michael L. Eskew

 

 

LOGO

 

  LOGO   LOGO   LOGO       LOGO   LOGO       LOGO   LOGO    

 

David N. Farr

 

 

LOGO

 

  LOGO   LOGO   LOGO       LOGO   LOGO       LOGO   LOGO    

 

Alex Gorsky

 

 

LOGO

 

  LOGO   LOGO   LOGO       LOGO   LOGO       LOGO   LOGO    

 

Michelle J. Howard

 

 

LOGO

 

  LOGO               LOGO   LOGO   LOGO   LOGO       LOGO

 

Arvind Krishna

 

 

LOGO

 

  LOGO   LOGO   LOGO       LOGO   LOGO       LOGO       LOGO

 

Andrew N. Liveris

 

 

LOGO

 

  LOGO   LOGO   LOGO       LOGO   LOGO       LOGO   LOGO    

 

F. William McNabb III    

 

 

LOGO

 

  LOGO   LOGO   LOGO       LOGO   LOGO       LOGO   LOGO    

 

Martha E. Pollack

  LOGO   LOGO               LOGO   LOGO   LOGO   LOGO       LOGO

 

Joseph R. Swedish

 

 

LOGO

 

  LOGO   LOGO   LOGO       LOGO   LOGO       LOGO   LOGO    

Peter R. Voser

 

 

LOGO

  LOGO   LOGO   LOGO   LOGO   LOGO   LOGO       LOGO   LOGO    

 

Frederick H. Waddell

 

 

LOGO

 

  LOGO   LOGO   LOGO       LOGO   LOGO       LOGO   LOGO    

 

The following client industries provide a snapshot into the many key and diverse industries in which our directors have relevant experience. Many of our directors have experience in multiple client industries.              LOGO

 

 


 

LOGO

 

 

2021 Notice of Annual Meeting & Proxy Statement    |    IBM Board of Directors   9


Table of Contents

LOGO

1. Election of Directors for a Term of One Year

 

 

The Board proposes the election of the following director nominees for a term of one year. Below is information about each nominee, including biographical data for at least the past five years. If one or more of these nominees become unavailable to accept a nomination or election as a director, the individuals named as proxies on the proxy card will vote the shares that they represent for the election of such other persons as the Board may recommend, unless the Board reduces the number of directors.

Sidney Taurel is not a nominee for election, and his term on the Board will end in April. We are very grateful to him for his many valuable contributions and will miss his participation.

 

   

LOGO

 

Thomas Buberl

Chief Executive Officer, AXA S.A., a multinational insurance firm

 

Director since: 2020

 

Age: 47

 

Committees:

 

LOGO   Directors and Corporate Governance

 

Qualifications

 

  Global business experience as chief executive officer of AXA S.A.

 

  Affiliation with leading business and public policy associations (member of the Climate Finance Leadership Initiative and former chair of Pan-European Insurance Forum)

 

  Acknowledged leader in digital transformation

 

  Outside board experience as a member of the supervisory board of Bertelsmann SE & Co. KGaA

Relevant experience

Mr. Buberl, 47, joined Winterthur in 2005, which became a subsidiary of AXA in 2006. In 2008, he joined Zurich Insurance Group as chief executive officer for Switzerland. Mr. Buberl

returned to AXA in 2012 as chief executive officer for AXA Konzern AG (Germany) and he became a member of AXA’s executive committee. In 2015, Mr. Buberl became the chief executive officer of AXA’s health business and a member of AXA’s group management committee. Mr. Buberl was additionally appointed chief executive officer of AXA’s global business line for life and savings and deputy chief executive officer of AXA in early 2016. He was named chief executive officer and joined the board of directors of AXA in September 2016. He is a member of the supervisory board of Bertelsmann, a member of the Climate Finance Leadership Initiative and the former chair of the Pan-European Insurance Forum. Additionally, during the past five years, he was a director of AXA Equitable Holdings, Inc., a former subsidiary of AXA S.A.

 

 

   
LOGO  

Michael L. Eskew

Retired Chairman and Chief Executive Officer, United Parcel Service, Inc., a provider of specialized transportation and logistics services

 

Director since: 2005

 

Age: 71

 

Committees:

 

LOGO   Audit (Chair)

 

LOGO   Executive

 

 

Qualifications

 

  Global business and technology experience as chairman and chief executive officer of United Parcel Service, Inc.

 

  Outside board experience as a director of Allstate Corporation, Eli Lilly and Company and 3M Company

 

  Chairman of a charitable organization

 

Relevant experience

Mr. Eskew, 71, is IBM’s independent Lead Director. Mr. Eskew joined United Parcel Service in 1972. He was named corporate vice president for industrial engineering in 1994, group vice president for engineering in 1996, executive vice president in 1999, vice chairman in 2000, and he was chairman and chief executive officer from 2002 until his retirement at the end of 2007. Mr. Eskew remained on the board of United Parcel Service until the end of 2014. He is a director of Allstate Corporation, Eli Lilly and Company and 3M Company. In addition, he is chairman of the Annie E. Casey Foundation.

 
 

 


 

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Table of Contents
   
LOGO  

David N. Farr

Chairman, Emerson Electric Co., a diversified manufacturing and technology company

 

Director since: 2012

 

Age: 66

 

Committees:

 

LOGO   Audit

 

 

Qualifications

 

  Global business and technology experience as chairman and chief executive officer of Emerson Electric Co.

 

  Affiliation with leading business and public policy associations (director of the U.S.-China Business Council)

 

  Outside board experience as former director of Delphi Corporation

Relevant experience

Mr. Farr, 66, joined Emerson in 1981 and subsequently held various executive positions. He was named senior executive vice president and chief operating officer in 1999, chief executive officer in 2000 and chairman and chief executive officer in 2004. Mr. Farr was named chairman, president and chief executive officer in 2005 and chairman and chief executive officer in 2010. In 2021, Mr. Farr announced his retirement as Chief Executive Officer and will remain Chairman of Emerson until May 2021. He is currently a member of the Executive Committee and the former chairman of the National Association of Manufacturers and is currently a director of the U.S.-China Business Council.

 

 

   
LOGO  

Alex Gorsky

Chairman and Chief Executive Officer, Johnson & Johnson, a global healthcare products company

 

Director since: 2014

 

Age: 60

 

Committees:

 

LOGO   Executive Compensation and Management Resources (Chair)

 

LOGO   Executive

 

 

Qualifications

 

  Global business and technology experience as chairman and chief executive officer of Johnson & Johnson

 

  Affiliation with leading business and public policy associations (member of the Business Roundtable and The Business Council)

 

  Experience as a university trustee

Relevant experience

Mr. Gorsky, 60, joined Johnson & Johnson in 1988. In 2003, he was named company group chairman of the Johnson & Johnson pharmaceutical business in Europe, the Middle East and Africa. Mr. Gorsky left Johnson & Johnson in 2004 to join the Novartis Pharmaceuticals Corporation, where he served as head of the company’s pharmaceutical business in North America.

Mr. Gorsky returned to Johnson & Johnson in 2008 as company group chairman for Ethicon. In early 2009, he was appointed worldwide chairman of the Surgical Care Group and member of the executive committee. In September 2009, he was appointed worldwide chairman of the Medical Devices and Diagnostics Group. Mr. Gorsky became vice chairman of the executive committee in January 2011. He was named chief executive officer and joined the board of directors in April 2012, and was named chairman in December 2012. Mr. Gorsky is a member of the Business Roundtable’s Board of Directors and Chairman of its Corporate Governance Committee. Mr. Gorsky also serves on the boards of the Travis Manion Foundation, the National Academy Foundation and the Wharton Board of Advisors.

 

 

 

 


 

LOGO

 

 

2021 Notice of Annual Meeting & Proxy Statement    |    Election of Directors   11


Table of Contents

LOGO

 
LOGO  

 

 

Michelle Howard

Retired Admiral, United States Navy

 

Director since: 2019

 

Age: 60

 

Committees:

 

LOGO   Directors and Corporate Governance

 

Qualifications

 

  Leadership and policy experience as the U.S. Navy’s first woman four-star admiral

 

  Operational experience as commander of U.S. Naval Forces in Europe and Africa

 

  Global operations and technology experience as Vice Chief of Naval Operations, with focus on cybersecurity and information technology in the digital age

 

  Leadership and teaching positions in government and academia

Relevant experience

Admiral Michelle J. Howard, 60, is a retired United States Navy officer. Admiral Howard began serving in the United States Navy in 1982, after graduating from the U.S. Naval Academy. During her 35 years of service, she led sailors and marines as, at various times, the Commander of a ship, an Expeditionary Strike Group, a Task Force, and a Naval theater. In 1999, she became the first African American woman to command a ship in the United States Navy. In 2014, she was the first woman to

become a four-star admiral in the U.S. Navy and the first woman and African American to be appointed to the position of Vice Chief of Naval Operations, the second-highest ranking uniformed officer in the branch. Responsible for the Navy’s day-to-day operations, she focused on cyber culture and information security in the digital age, as well as gender integration. In 2016, Admiral Howard was appointed by the President to serve as commander of U.S. Naval Forces in Europe and Africa and the Allied Joint Forces Command in Naples, Italy, making her the first woman four-star admiral to command operational forces. She retired from the Navy in 2017.

Admiral Howard’s distinguished career in national defense has included both at-sea and ashore posts, placing her in key leadership positions within the areas of engineering, operations, and strategic planning, and policy. Admiral Howard is a graduate of the U.S. Naval Academy and the U.S. Army Command and General Staff College. She was the J.B. and Maurice C. Shapiro Professor of International Affairs at the Elliott School of International Affairs at George Washington University from 2018 to 2020, where she taught in the areas of cybersecurity and international policy.

 

 

   
LOGO  

Arvind Krishna

Chairman and Chief Executive Officer, IBM

 

Director since: 2020

 

Age: 58

 

Committees:

 

LOGO   Executive (Chair)

 

 

Qualifications

 

  Global business and organizational leadership experience as chairman and chief executive officer of IBM

 

  Research experience as Director of IBM Research and a computer scientist with expertise in key IBM technologies such as artificial intelligence, cloud, quantum computing and blockchain

 

  Technology experience as general manager of IBM’s Systems and Technology group and Senior Vice President for IBM’s Cloud and Cognitive Software

 

Relevant experience

Arvind Krishna, 58, became the chief executive officer of IBM, and a member of the Board of Directors in April 2020. He was elected chairman of the Board of Directors in December 2020. Mr. Krishna joined IBM in 1990. Mr. Krishna led the IBM Cloud and Cognitive Software business unit from 2017 to April 2020 and was a principal architect of the acquisition of Red Hat, the largest acquisition in the Company’s history. Mr. Krishna also served as the director of IBM’s Research division from 2015 to 2020. Previously, he was general manager of IBM’s Systems and Technology Group, IBM’s development and manufacturing organization. Prior to that, he built and led many of IBM’s data-related businesses. He has an undergraduate degree from the Indian Institute of Technology, Kanpur, and a PhD. in electrical engineering from the University of Illinois at Urbana-Champaign.

 

 

 

 


 

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Table of Contents
   
  LOGO    

Andrew N. Liveris

Retired Chairman and Chief Executive Officer, The Dow Chemical Company, a materials, polymer, chemicals, and biological sciences enterprise

 

Director since: 2010

 

Age: 66

 

Committees:

 

LOGO   Executive  Compensation and Management  Resources

 

Qualifications

 

  Global business and technology experience as the former chairman, president and chief executive officer of The Dow Chemical Company and executive chairman of DowDuPont Inc.

 

  U.S. and international government service (member of the President’s Task Force on Apprenticeship Expansion, former chairman of the President’s American Manufacturing Committee member of the Australian government’s Industry Growth Centres Advisory Committee and Thailand’s Board of Investment)

 

  Affiliation with leading business and public policy associations (former executive committee member, former chairman of The Business Council, and former vice chairman of the executive committee of the Business Roundtable)

 

  Experience as a university trustee

Relevant experience

Mr. Liveris, 66, joined Dow in 1976 and subsequently held various executive positions, including vice president of specialty

chemicals from 1998 to 2000, business group president for performance chemicals from 2000 to 2003, and president and chief operating officer from 2003 to 2004. Mr. Liveris was named president and chief executive officer of Dow in 2004 and chairman in 2006. In 2016, he transitioned the president role and continued as chairman and chief executive officer of Dow until late 2017, when he transitioned to the position of executive chairman of DowDuPont, a position he held until his retirement in July 2018. Mr. Liveris is a director of WorleyParsons, Saudi Aramco and NOVONIX Limited. Additionally, Mr. Liveris has served as a member of the President’s Export Council and as chairman of the President’s American Manufacturing Committee. Mr. Liveris is a former Executive Committee member of The Business Council, the former chairman of The Business Council and the former vice chairman of the Executive Committee of the Business Roundtable. Mr. Liveris is also a trustee of the Minderoo Foundation of Australia, and The King Abdullah University of Science and Technology (KAUST), and is a former trustee of the California Institute of Technology and the United States Council for International Business.

 

 

   
  LOGO    

Frederick William McNabb, III

Retired Chairman and Chief Executive Officer, The Vanguard Group, Inc., one of the world’s largest investment management companies

 

Director since: 2019

 

Age: 63

 

Committees:

 

LOGO   Audit

 

Qualifications

 

  Global business and technology experience as chairman and chief executive officer of The Vanguard Group, Inc.

 

  Outside board experience as a director of UnitedHealth Group

 

  Member of several advisory boards at academic institutions

Relevant experience

Mr. McNabb, 63, served as chairman of The Vanguard Group, Inc. from 2008 until his retirement in 2018 and served as chief executive officer from 2008 to 2017. He joined Vanguard in 1986. In 2010, he became chairman of the board of directors and the board of trustees of the Vanguard group of investment companies.

Earlier in his career, Mr. McNabb led each of Vanguard’s client facing business divisions. Mr. McNabb served as the vice-chairman of the Investment Company Institute’s Board of Governors and served as its chairman from 2013 to 2016. He is a director of UnitedHealth Group and serves as a member of its audit committee. He is also a director of Axiom. Mr. McNabb is chairman of the board of the Zoological Society of Philadelphia and chairman of Ernst & Young’s Independent Audit Quality Committee. Mr. McNabb also serves on the Wharton Leadership Advisory Board, the Dartmouth Athletic Advisory Board, the Advisory Board of the Ira M. Millstein Center for Global Markets and Corporate Ownership at Columbia University and is also a board member of CECP: The CEO Force for Good.

 

 

 

 


 

LOGO

 

 

2021 Notice of Annual Meeting & Proxy Statement    |    Election of Directors   13


Table of Contents

LOGO

   
  LOGO    

Martha E. Pollack

President, Cornell University, a leading research university that creates new technologies and achieves fundamental breakthroughs in understanding and improving lives around the world

 

Director since: 2019

 

Age: 62

 

Committees:

 

LOGO   Executive  Compensation  and Management  Resources

 

 

Qualifications

 

  Organizational leadership, management and risk oversight, and management experience as president of Cornell University

 

  Research experience as a computer scientist with expertise in artificial intelligence as a professor of computer science, information science, and linguistics

 

  U.S. Government service as a former member of the advisory committee for the National Science Foundation’s Computer and Information Science and Engineering Division

 

  Healthcare experience as a former member of the Board of Directors of the University of Michigan Hospitals and Health Center, and as a member (ex officio) of the board of overseers of Weill Cornell Medicine

 

  Technology experience as a fellow of the Association for Computing Machinery, a former president of the Association for the Advancement of Artificial Intelligence, a former board member of the Computing Research Association, and a former member of the technical staff in the Artificial Intelligence Center at SRI International

Relevant experience

Dr. Pollack, 62, is the president of Cornell University and a professor of computer science, information science and linguistics. She took office in 2017. From 2000 to 2017, Dr. Pollack held various positions at the University of Michigan with increasing responsibility, including dean of the School of Information, vice provost for academic and budgetary affairs, and finally, provost and executive vice president for academic affairs. Dr. Pollack is a fellow of the American Association for the Advancement of Science, the Association for Computing Machinery and the Association for the Advancement of Artificial Intelligence. Dr. Pollack has served as editor-in-chief of the Journal of Artificial Intelligence Research, a former president of the Association for the Advancement of Artificial Intelligence, a former member of the technical staff in the Artificial Intelligence Center at SRI International, a former member of the advisory committee for the National Science Foundation’s Computer and Information Science and Engineering Division, and a former member of the board of directors of the Computing Research Association. Dr. Pollack also served on the Steering Committee of the Jacobs Technion-Cornell Institute, the academic partnership between Cornell and Technion-Israel Institute of Technology at Cornell Tech.

 

 

   
LOGO  

Joseph R. Swedish

Retired Chairman, President and Chief Executive Officer, Anthem, Inc., a leading health benefits provider

 

Director since: 2017

 

Age: 69

 

Committees:

 

LOGO   Executive Compensation and  Management  Resources

 

 

Qualifications

 

  Global business and technology experience as executive chairman, president, and chief executive officer of Anthem, Inc.

 

  Affiliation with leading business and public policy associations (former member of the Business Roundtable and graduate member of The Business Council)

 

  Outside board and technology experience as a director of CDW Corporation

 

  Experience as the chairman of a university oversight board

Relevant experience

Mr. Swedish, 69, joined Anthem in 2013 as chief executive officer and was named chairman of Anthem’s board in 2015. He was the chairman, chief executive officer and president until late 2017 when he retired and became the executive chairman, a position he held until his retirement in May 2018.

Prior to joining Anthem, he was the division president of Hospital Corporation of America from 1993 to 1998, president and chief executive officer of Centura Health from 1999 to 2004 and then served as president and chief executive officer of Trinity Health Corporation from 2004 to 2013. Mr. Swedish became a director of Mesoblast Limited in 2018 and was named its chairman in March 2019. He is also a director of Centrexion Therapeutics. He also served as a director of the Blue Cross Blue Shield Association, the National Institute for Health Care Management, the Central Indiana Corporate Partnership, Inc. and as a member of the Business Roundtable. Mr. Swedish is currently a member and past chairman of the Board of Visitors of Duke University’s Fuqua School of Business and was the past chairman of America’s Health Insurance Plans. He is a graduate member of The Business Council and a past member of the Duke Margolis External Advisory Board. He is also a director of CDW Corporation. Mr. Swedish also serves as Co-Founder and Partner at Concord Health Partners, a private equity firm focused on strategic investing in healthcare portfolio companies.

 

 

 

 


 

14   2021 Notice of Annual Meeting & Proxy Statement    |    Election of Directors


Table of Contents
   
 
LOGO
 
 

Peter R. Voser

Retired Chief Executive Officer, Royal Dutch Shell plc, a global group of energy and petrochemical companies; Chairman, ABB Ltd., a global group of power and automation companies

 

Director since: 2015

 

Age: 62

 

Committees:

 

LOGO   Audit

 

Qualifications

 

  Global business and technology experience as chairman of ABB Ltd. and chief executive officer of Royal Dutch Shell plc
  Affiliation with leading business and public policy associations (former member of the European Round Table of Industrialists and a former member of The Business Council)
  Outside board experience as a director of Temasek

Relevant experience

Mr. Voser, 62, joined Shell in 1982 and held a variety of finance and business roles including chief financial officer of Oil Products. In 2002, he joined the Asea Brown Boveri (ABB) Group of Companies as chief financial officer and a member of

the ABB Group executive committee. Mr. Voser returned to Shell in 2004, becoming a managing director of The Shell Transport and Trading Company, p.l.c. and chief financial officer of the Royal Dutch/Shell Group. He was appointed chief executive officer of Royal Dutch Shell plc in 2009 and held that position until his retirement in late 2013. Mr. Voser was named chairman of ABB Ltd. in 2015 and was the interim chief executive officer from April 2019 until February 2020. He is a director of Temasek, as well as Group Chairman of the Board of PSA International Pte Ltd, Singapore, a Temasek subsidiary. Mr. Voser is also active in a number of international and bilateral organizations. Additionally, from 2011 until 2019, he was a director of Roche Holding Limited.

 

 

   
  LOGO    

Frederick H. Waddell

Retired Chairman and Chief Executive Officer, Northern Trust Corporation, a financial services company

 

Director since: 2017

Age: 67

Committees:

 

LOGO   Directors and Corporate Governance (Chair)

 

LOGO   Executive

 

 

Qualifications

 

  Global business and technology experience as chairman and chief executive officer of Northern Trust Corporation

 

  Outside board experience as a director of AbbVie Inc.

 

  Experience as a university trustee

Relevant experience

Mr. Waddell, 67, joined Northern Trust Corporation in 1975 and served as the chairman of the board from November 2009 until his retirement in January 2019. He previously served as chief executive officer from 2008 through 2017, as president from 2006 through 2011 and again from October to December 2016, and as chief operating officer from 2006 to 2008. Additionally, Mr. Waddell is a member of the Board of Trustees of Northwestern University and a director of AbbVie Inc.

 

 

 

 

 

     LOGO     

 

THE BOARD RECOMMENDS YOU VOTE FOR EACH OF

THE NOMINEES INTRODUCED ABOVE.

 

 


 

LOGO

 

 

2021 Notice of Annual Meeting & Proxy Statement    |    Election of Directors   15


Table of Contents

LOGO

Governance and the Board

 

 

Committees of the Board

Members of the Audit Committee, Directors and Corporate Governance Committee, and the Executive Compensation and Management Resources Committee are non-management directors who, in the opinion of the Board, satisfy the independence criteria established by the Board, and the standards of the Securities and Exchange Commission (SEC) and the New York Stock Exchange (NYSE).

 

  LOGO LOGO LOGO LOGO

Director

Audit

Directors and

Corporate Governance

Executive Compensation

and Management Resources

Executive

Thomas Buberl

LOGO

Michael L. Eskew

        Chair                      LOGO             

David N. Farr

LOGO

Alex Gorsky

        Chair         LOGO

Michelle J. Howard

             LOGO             

Arvind Krishna

Chair

Andrew N. Liveris

LOGO

F. William McNabb III

LOGO

Martha E. Pollack

LOGO

Joseph R. Swedish

LOGO

Peter R. Voser

LOGO

Frederick H. Waddell

Chair LOGO

Board Committee Refreshment

On at least an annual basis, the Directors and Corporate Governance Committee reviews committee assignments and discusses whether rotation of Committee members and Committee Chairs is appropriate to introduce fresh perspectives and to broaden and diversify the views and experiences represented on the Board’s Committees.

 

 

Executive Committee  

 

  

LOGO

 

 

LOGO

 

 

  

The Executive Committee is empowered to act for the full Board in intervals between Board meetings, with the exception of certain matters that by law may not be delegated. The Committee meets as necessary, and all actions by the Committee are reported at the next Board of Directors meeting. The Committee did not meet in 2020.

 

Members: Arvind Krishna (Chair)                    Number of meetings in 2020: 0

                  Michael L. Eskew

                  Alex Gorsky

                  Frederick H. Waddell

 

 

 

 

 


 

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Table of Contents

 

Audit Committee  

 

  

LOGO

 

 

LOGO

 

Members:

 

Michael L. Eskew

(Chair)

David N. Farr

F. William McNabb III

Peter R. Voser

 

Audit Committee Financial Experts:

 

Michael L. Eskew

David N. Farr

F. William McNabb III

Peter R. Voser

 

Number of meetings in 2020: 10

 

  

Key Responsibilities:

 

The Audit Committee is responsible for reviewing reports of IBM’s financial results, audit results, internal controls, and adherence to IBM’s Business Conduct Guidelines in compliance with applicable laws and regulations, including federal procurement requirements. Concurrent with that responsibility, set out more fully in the Charter, the Audit Committee performs many other functions, including:

 

  
  

   selecting the independent registered public accounting firm and reviewing its selection with the Board;

 

   annually preapproving the proposed services to be provided by the accounting firm during the year;

  

   reviewing the procedures of the independent registered public accounting firm for ensuring its independence with respect to the services performed for IBM; and

 

   meeting with management prior to each quarterly earnings release.

  
  

 

The Audit Committee chair, pursuant to authority delegated by the Audit Committee, may approve engagements with the independent registered public accounting firm that are outside the scope of the services and fees approved by the Committee, which are later presented to the Committee.

 

The Board has determined that each member of the Committee qualifies as an Audit Committee Financial Expert as defined by the rules of the SEC.

 

Charter: http://www.ibm.com/investor/att/pdf/auditcomcharter.pdf

 

 

 

  

 

 

Directors and Corporate Governance Committee

 

  

   LOGO

 

LOGO

 

Members:

 

Frederick H. Waddell (Chair)

Thomas Buberl
Michelle Howard

 

Number of meetings in 2020: 4

  

Key Responsibilities:

 

The Directors and Corporate Governance Committee is devoted primarily to the continuing review and articulation of the governance structure and practices of the Board. Concurrent with that responsibility, set out more fully in the Charter, the Directors and Corporate Governance Committee performs many other functions, including:

 

  
  

  recommending qualified candidates to the Board for election as directors of IBM, including the slate of directors that the Board proposes for annual election by stockholders at the Annual Meeting, and planning for future Board and Committee refreshment actions;

 

  advising and making recommendations to the Board on all matters concerning directorship practices, and on the function and duties of the committees of the Board;

 

  making recommendations to the Board on compensation for non-management directors;

  

  reviewing and considering IBM’s position and practices on significant public policy issues, such as protection of the environment, corporate social responsibility, sustainability, and philanthropic contributions; and

 

  reviewing and considering stockholder proposals, including those dealing with issues of public and social interest.

  
  

 

As discussed above, the Committee is responsible for recommending qualified candidates to the Board for election as directors of IBM. The Committee recommends candidates based on their business or professional experience, the diversity of their background (including gender and ethnic diversity), and their talents and perspectives.

 

Charter: https://www.ibm.com/investor/att/pdf/IBM-Directors-and-Corporate-Governance-Committee-Charter.pdf

 

  

 


 

LOGO

 

 

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LOGO

 

Executive Compensation and Management Resources Committee

 

  

   LOGO

 

LOGO

 

Members:

 

Alex Gorsky (Chair)

Andrew Liveris

Martha Pollack

Joseph Swedish

 

Number of meetings in 2020: 5

  

Key Responsibilities:

 

The Executive Compensation and Management Resources Committee has responsibility for defining and articulating IBM’s overall executive compensation philosophy, and administering and approving all elements of compensation for elected corporate officers. Concurrent with that responsibility, set out more fully in the Charter, the Executive Compensation and Management Resources Committee performs many other functions, including:

 

  

  reviewing and approving the corporate goals
and objectives relevant to the Chairman and CEO’s compensation, evaluating performance in light of those goals and objectives and, together with the other independent directors, determining and approving the Chairman and CEO’s compensation based on this evaluation;

 

  reviewing IBM’s human capital management, diversity and inclusion and other management resources programs, including overseeing, along with the full Board, the succession-planning process of the CEO and other senior management positions;

 

  approving, by direct action or through delegation, participation in and all awards, grants, and related actions under IBM’s various equity plans;

 

  managing the operation and administration of the IBM Supplemental Executive Retention Plan;

 

  reviewing the compensation structure for IBM’s officers and providing oversight of management’s decisions regarding performance and compensation of other employees; and

 

  monitoring compliance with stock ownership guidelines.

  
  

 

The Committee reports to stockholders as required by the SEC (see 2020 Report of the Executive Compensation and Management Resources Committee of the Board of Directors in this Proxy Statement).

 

Members of the Committee are not eligible to participate in any of the plans or programs that the Committee administers.

 

Charter: https://www.ibm.com/investor/att/pdf/Executive_Compensation_and_Management_Resources_ Committee_Charter.pdf

 

  

Compensation Committee Interlocks and Insider Participation: None

Messrs. Gorsky, Liveris, and Swedish and Dr. Pollack each served as members of the Executive Compensation and Management Resources Committee in 2020. All members of the Committee were independent directors, and no member was an employee or former employee of IBM. During 2020, none of our executive officers served on the compensation committee or board of directors of another entity whose executive officer served on our Executive Compensation and Management Resources Committee or Board. Therefore, there is no relationship that requires disclosure as a Compensation Committee interlock.

Certain Transactions and Relationships

Under IBM’s written related person transactions policy, information about transactions involving related persons is assessed by the independent directors on IBM’s Board. Related persons include IBM directors and executive officers, as well as immediate family members of directors and officers, and beneficial owners of more than five percent of IBM’s common stock. If the determination is made that a related person has a material interest in any IBM transaction, then IBM’s independent directors would review, approve or ratify it, and the transaction would be required to be disclosed in accordance with the SEC rules. If the related person at issue is a director of IBM, or a family member of a director, then that director would not participate in those discussions. In general, IBM is of the view that the following transactions with related persons are not significant to investors because they take place under IBM’s standard policies and procedures: the sale or purchase of products or services in the ordinary course of business and on an arm’s-length basis; the employment by IBM where the compensation and other terms of employment are determined on a basis consistent with IBM’s human resources policies; and any grants or contributions made by IBM under one of its grant programs and in accordance with IBM’s corporate contributions guidelines.

From time to time, IBM may have employees who are related to our executive officers or directors. Mr. Eskew’s son is a former employee of IBM. He was an executive of IBM (not an executive officer) until January 2021. In addition, a daughter of Mr. R. F. Del Bene (Vice President and Controller) and a brother of Dr. J.E. Kelly III (former Executive Vice President, who retired from IBM on December 31, 2020), are also employed by IBM in non-executive positions. None of the above-referenced family member employees were or are executive officers of IBM. Each employee mentioned above received compensation in 2020 between $120,000 and $650,000. Additionally, in 2020, each of the above-mentioned family members received an equity grant. The compensation, equity grant and other terms of employment of each of the family member employees noted above are determined on a basis consistent with IBM’s human resources policies.

 

 


 

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Corporate Governance

IBM’s Corporate Governance Principles

IBM’s Board of Directors has long adhered to governance principles designed to ensure the continued vitality of the Board and excellence in the execution of its duties. For more than 25 years, the Board has had in place a set of governance guidelines reflecting these principles, including the Board’s policy of requiring a majority of the Board to be comprised of independent directors, the importance of equity compensation to align the interests of directors and stockholders, and the practice of regularly scheduled executive sessions, including sessions of non-management directors without members of management. The IBM Board Corporate Governance Guidelines reflect IBM’s principles on corporate governance matters. These guidelines are available at https://www.ibm.com/investor/att/pdf/IBM-Board-Corporate-Governance-Guidelines.pdf.

IBM also has a code of ethics for directors, executive officers, and employees. The Business Conduct Guidelines are available on our website at https://www.ibm.com/investor/att/pdf/2021_Business_Conduct_Guidelines.pdf. Any amendment to, or waiver of, the Business Conduct Guidelines that applies to one of our directors or executive officers may be made only by the Board or a Board committee, and would be disclosed on IBM’s website.

The process by which stockholders and other interested parties may communicate with the Board or non-management directors of IBM is available at https://www.ibm.com/investor/governance/contact-the-board.

Independent Board

 

Under the IBM Board Corporate Governance Guidelines, the Directors and Corporate Governance Committee and the full Board annually review the financial and other relationships between the independent directors and IBM as part of the assessment of director independence. The Directors and Corporate Governance Committee makes recommendations to the Board about the independence of non-management directors, and the Board determines whether those directors are independent. In addition to this annual assessment, director independence is monitored by the Directors and Corporate Governance Committee and the full Board on an ongoing basis.   LOGO

The independence criteria established by the Board in accordance with NYSE requirements and used by the Directors and Corporate Governance Committee and the Board in their assessment of the independence of directors is available at https://www.ibm.com/investor/att/pdf/Independence_Standards.pdf.

Applying those standards to IBM’s non-management director nominees, including those directors not standing for election, as well as a former director who served during 2020, the Committee and the Board have determined that each of the following has met the independence standards: T. Buberl, M.L. Eskew, D.N. Farr, A. Gorsky, M.J. Howard, S.A. Jackson, A.N. Liveris, F.W. McNabb III, M.E. Pollack, J.R. Swedish, S. Taurel, P.R. Voser and F.H. Waddell.

Mr. Eskew’s son is a former employee of IBM in a non-executive officer role. He was hired over a year before Mr. Eskew joined IBM’s Board and his compensation and other terms of employment were determined on a basis consistent with IBM’s human resources policies. Based on the foregoing, the Board has determined that this relationship does not preclude a finding of independence for Mr. Eskew.

Director Attendance

In 2020, the Board held nine meetings and the committees collectively met 19 times. The Board and the Directors and Corporate Governance Committee recognize the importance of director attendance at Board and committee meetings. In 2020:

 

  Overall attendance at Board and committee meetings was over 99%; and

 

  Attendance was at least 75% for each director.

In addition, each director attended IBM’s 2020 Annual Meeting of Stockholders. IBM’s policy with regard to Board members’ attendance at annual meetings of stockholders is available at https://www.ibm.com/investor/governance/director-attendance-at-

annual-meeting-of-stockholders.

 


 

LOGO

 

 

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LOGO

Independent Leadership Structure

The Directors and Corporate Governance Committee is responsible for the continuing review of the governance structure of the Board, and for recommending to the Board those structures and practices best suited to IBM and its stockholders. The Committee and the Board recognize that different structures may be appropriate under different circumstances.

In connection with the retirement of Executive Chairman Ginni Rometty, the Board determined that the optimal structure for the Company and its stockholders at this time was having CEO Arvind Krishna serve as Chairman, alongside a robust and independent Lead Director. Among other factors, the Board considered and evaluated: the importance of consistent, unified leadership to execute and oversee the Company’s strategy; the strength of Mr. Krishna’s vision for the Company and the quality of his leadership; the strong and highly independent composition of the Board; the views and feedback heard from our investors through our ongoing engagement program throughout the years expressing support for IBM’s leadership structure; and the meaningful and robust responsibilities of the independent Lead Director. A strong, independent Lead Director with clearly defined duties and responsibilities further enhances the contributions of IBM’s independent directors, which have been and continue to be substantial. Mr. Eskew, the Lead Director, has significant global business, technology, leadership, and oversight experience as the former chairman and chief executive officer of United Parcel Service, Inc.

 

 

The Board strongly believes that its leadership structure strikes the right balance of allowing our Chairman and CEO to promote a clear, unified vision for the Company’s strategy, providing the leadership critical for effectively and efficiently implementing the actions needed to ensure strong performance over the long term, while ensuring robust, independent oversight by the Board and Lead Director.

 

 

        

 

 

Role of the Lead Director

 

 

 

 

 

Mr. Eskew, the Lead Director, has the following core responsibilities:

 

LOGO   preside at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors, which are held at every Board meeting;

 

LOGO   serve as liaison between the Chairman and the independent directors;

 

LOGO   approve information sent to the Board;

 

LOGO   approve meeting agendas for the Board;

 

LOGO   approve meeting schedules in collaboration with the Chairman to ensure there is sufficient time for discussion of all agenda items;

 

LOGO   authority to call meetings of the independent directors; and

 

LOGO   if requested by major stockholders, ensure that he is available, as necessary after discussions with the Chairman and Chief Executive Officer, for consultation and direct communication.

 

    

 

 

In addition to these core responsibilities, the Lead Director engages in other regular activities, including:

 

LOGO   one-on-one debriefs with the Chairman after each meeting;

 

LOGO   analyze CEO performance in Executive Session in conjunction with the Executive Compensation and Management Resources Committee chair;

 

LOGO   review feedback from the Board and committee evaluation process, working with the Directors and Corporate Governance Committee chair on enhancements to Board processes and practices;

 

LOGO   spend time with senior management outside of Board meetings to ensure a deep understanding of the business and strategy of the Company; and

 

LOGO   attend Directors and Corporate Governance and Executive Compensation and Management Resources Committee meetings in addition to the committee he chairs.

 

        
        

 

   

 

The full Board reviews our leadership structure at least annually to ensure the allocation of responsibilities remains appropriate.

 

Executive Sessions

Regularly scheduled executive sessions, including sessions of independent directors without members of management, chaired by the Lead Director, are held at each Board meeting. Additionally, executive sessions of the independent directors are led by the Chairs of the Directors and Corporate Governance, Executive Compensation and Management Resources, and Audit Committees, respectively, at least once per year.

 

 


 

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Board Evaluation Process

IBM’s Board utilizes a comprehensive, multi-part process for its ongoing self-evaluation to ensure that the Board is operating effectively and that its processes reflect best practices. From time to time, this process includes a third-party review of the Board’s process and evaluation criteria. Each year, IBM’s Directors and Corporate Governance Committee oversees the evaluation process to ensure that the full Board and each committee conduct an assessment of their performance and solicit feedback for enhancement and improvement.

 

 

 

1  

 

 

The Board conducts an annual self-evaluation to review the effectiveness of the Board and its committees, led by the Chair of the Directors and Corporate Governance Committee. In this comprehensive review, the self-evaluation focuses on:

   
   
   

 The composition and performance of the Board,
including the size, mix of skills and experience and
director refreshment practices;

 

  

 

 The promotion of rigorous decision making by
the Board and the committees;

 

 The effectiveness of the Board and committee
evaluation processes; and

 

 The overall functioning of the Board and its
committees.

 

 

 

   
   

 The quality and scope of the materials distributed in
advance of meetings;

   
   

 

 The Board’s access to Company executives and
operations;

 

   
      

 

2  

 

 

 

Each committee also performs a self-evaluation in executive session on an annual basis.

 

   
   

 

The Audit Committee’s evaluation, for example, includes individual, one-on-one interviews between IBM’s internal Chief Auditor and each member of the Committee.

 

   
      

 

3  

 

 

 

The Chairman holds individual, one-on-one interviews with each IBM director to obtain his or her candid assessment of director performance, Board dynamics and the effectiveness of the Board and its committees.

   
     
      

 

4  

 

 

 

The Chairman shares insights from each of these meetings with the Lead Director, the Chair of the Directors and Corporate Governance Committee, and the full Board.

   
     
      

 

5  

 

 

 

The Board meets in executive session to discuss the results of the evaluation and any other issues that the directors may want to raise.

   
     
      

 

6  

 

 

 

Self-evaluation items requiring follow-up and execution are monitored on an ongoing basis by the Board, each of the committees, and by IBM management. While this formal self-evaluation is conducted on an annual basis, the evaluation process is an ongoing process throughout the year. At each meeting, the Chairman actively solicits feedback from each individual director and directors continuously share their perspectives, feedback, and suggestions throughout the year.

   

 

    

   

Succession Planning

IBM has long been recognized for its leadership and talent development. One of the Board’s most important responsibilities is to ensure that IBM has the appropriate management to execute the Company’s long-term strategy. To fulfill this responsibility, the full Board meets regularly to actively review and plan the succession of the CEO and other senior management positions.

 

 

In succession planning, the Board discusses:

 

  Succession process and timeline

 

  Profile and candidate assessments, both internal and external, for the CEO and other senior leadership positions

  

  Leadership pipeline and development plans for the next generation of senior leadership

 

  Diversity, inclusion, and Company culture

 

The Executive Compensation and Management Resources Committee also regularly reviews succession planning and the Company’s management resources programs, overseeing a broad range of human capital management topics, including diversity and inclusion.

 

 


 

LOGO

 

 

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LOGO

Strategy Oversight

The Board actively oversees IBM’s long-term business strategy and is actively engaged in ensuring that IBM’s culture reflects its longstanding commitment to integrity, compliance, and inclusion. The Board is continuously engaged with management on these topics. For example, each year, the Board:

 

LOGO   LOGO        LOGO        LOGO     
     

Holds a two-day strategy session, including presentations from, and engagement with, many senior executives across the Company

  Routinely engages with senior management on critical business matters that tie to IBM’s overall strategy  

Periodically travels to key IBM facilities to obtain a first-hand look at the Company’s operations

 

Regularly meets with the next generation of leadership to ensure the pipeline remains diverse and inclusive

 

 

Risk Oversight

At IBM, we believe that innovation and leadership are impossible without taking risks. We also recognize that imprudent acceptance of risk or the failure to appropriately identify and mitigate risk could be destructive to stockholder value.

In addition, an overall review of risk is inherent in the Board’s consideration of IBM’s long-term strategies and in the transactions and other matters presented to the Board, including capital expenditures, acquisitions, divestitures and other portfolio actions, and operational and financial matters. The Board’s role in risk oversight of IBM is consistent with IBM’s leadership structure, with the CEO and other members of senior management having responsibility for assessing and managing IBM’s risk exposure, and the Board and its committees providing oversight in connection with those efforts.

 

LOGO

 

 

LOGO

 

Cybersecurity is a critical part of risk management at IBM. To more effectively address cybersecurity threats, IBM leverages a multi-layered approach. IBM has a dedicated Chief Information Security Officer (CISO) whose team is responsible for leading enterprise-wide information security strategy, policy, standards, architecture, and processes. The CISO leads IBM’s Enterprise and Technology Security (ETS) organization, which works across all of the organizations within the Company to protect IBM, its brand, and its clients against cybersecurity risks.

 

Both the Board and the Audit Committee each receive regular updates from senior management, including the CISO and cybersecurity experts in areas such as threat intelligence, major cyber risk areas, emerging global policies and regulations, cybersecurity technologies and best practices, and cybersecurity incidents.

 

LOGO

 

 

Climate change is a serious concern that warrants meaningful action on a global basis. IBM considers risks as identified by the Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD) in its risk management process. IBM senior management assesses the significance of environmental and climate-related risks. In addition, they manage these risks and provide regular updates to the Board and to the Directors and Corporate Governance Committee. Furthermore, IBM has established internal objectives and targets for energy conservation, procurement of renewable energy, carbon dioxide (CO2) emissions reduction and other key environmental performance indicators. Performance against these objectives and targets is routinely monitored, and results are reviewed annually by the Board’s Directors and Corporate Governance Committee. Details on IBM’s performance against key environmental performance indicators can be found in our annual IBM and the Environment Report.

 

 


 

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Director Compensation

Annual Retainer: In 2020, non-management directors received an annual retainer of $325,000. Chairs of the Directors and Corporate Governance Committee and the Executive Compensation and Management Resources Committee each received an additional annual retainer of $20,000 and the chair of the Audit Committee received an additional annual retainer of $30,000. The additional retainer for the Lead Director position is $40,000.

Under the IBM Deferred Compensation and Equity Award Plan (DCEAP), 60% of the total annual retainer is required to be deferred and paid in Promised Fee Shares (PFS). Each PFS is equal in value to one share of IBM’s common stock. When a cash dividend is paid on IBM’s common stock, each director’s PFS account is credited with additional PFS reflecting a dividend equivalent payment. With respect to the payment of the remaining 40% of the annual retainer, directors may elect one or any combination of the following: (a) deferral into PFS, (b) deferral into an interest-bearing cash account, and/or (c) receipt of cash payments on a quarterly basis during service as a Board member. IBM does not pay above-market or preferential earnings on compensation deferred by directors.

Stock Ownership Guidelines: Under the IBM Board Corporate Governance Guidelines, within five years of initial election to the Board, non-management directors are expected to have stock-based holdings in IBM equal in value to eight times the equity portion of the annual retainer initially payable to such director. Stock-based holdings mean (i) IBM shares owned personally or by members of immediate family sharing the same household, and (ii) DCEAP PFS. Stock-based holdings do not include unexercised options.

Our stock ownership guidelines remain the strongest in our peer group.

Payout under the DCEAP: Upon a director’s retirement or other completion of service as a director (a) all amounts deferred as PFS are payable, at the director’s choice, in cash and/or shares of IBM’s common stock, and (b) amounts deferred into the interest-bearing cash account are payable in cash. Payouts may be made in any of (a) a lump sum payment as soon as practicable after the date on which the director ceases to be a member of the Board, (b) a lump sum payment paid in February of the calendar year immediately following the calendar year in which the director ceases to be a member of the Board, or (c) between two and ten annual installments, paid beginning in February following the calendar year in which the director ceases to be a member of the Board. If a director elects to receive PFS in cash, the payout of PFS is valued using the closing price of IBM common stock on the NYSE as follows: for payouts made in an immediate lump sum, IBM stock will be valued on the date on which the director ceases to be a member of the Board; for lump sum payments made in February of the calendar year immediately following the calendar year of separation or for installment payouts, IBM common stock will be valued on the last business day of the January preceding such February payment.

IBM’s Matching Grants Program: In 2020, non-management directors were eligible to participate in IBM’s Matching Grants Program on the same basis as IBM’s employees based in the U.S. Under this program, IBM matched a director’s eligible contributions in cash on a 1-to-1 basis to approved educational institutions, medical facilities and cultural or environmental institutions. Each director was also eligible for a Company match on total gifts up to $10,000 per calendar year. Amounts shown in the Director Compensation Table for matching grants may be in excess of $10,000 because such amounts include Company contributions on gifts that were made by directors in previous years.

Director Compensation Consultant: The Committee retains Semler Brossy Consulting Group, LLC (Semler Brossy) to assess trends and developments in director compensation practices and to compare IBM’s practices against them. The Committee uses the analysis prepared by the consultant as part of its periodic review of IBM’s director compensation practices. Other than services provided to IBM’s Directors and Corporate Governance Committee and IBM’s Executive Compensation and Management Resources Committee, Semler Brossy does not perform any other work for IBM. The Committee determined that Semler Brossy is free of conflicts of interest.

 


 

LOGO

 

 

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LOGO

2020 Director Compensation Table

 

Name

(a)

    

Fees Earned or

Paid in Cash ($)

(b)

 

 

 

    

All Other

Compensation ($)

(c)

 

 

(1) 

   

Total ($)

(d)

 

 

Thomas Buberl(2)

  

 

                                         219,375

 

  

 

                                             2,691

 

 

 

                                         222,066

 

Michael L. Eskew

  

 

395,000

 

  

 

246,667

 

 

 

641,667

 

David N. Farr

  

 

325,000

 

  

 

70,051

 

 

 

395,051

 

Alex Gorsky

  

 

345,000

 

  

 

89,629

 

 

 

434,629

 

Michelle J. Howard

  

 

325,000

 

  

 

18,097

 

 

 

343,097

 

Shirley Ann Jackson(3)

  

 

113,083

 

  

 

57,223

 

 

 

170,306

 

Andrew N. Liveris

  

 

325,000

 

  

 

143,032

 

 

 

468,032

 

F. William McNabb III

  

 

325,000

 

  

 

9,772

 

 

 

334,772

 

Martha E. Pollack

  

 

325,000

 

  

 

21,418

 

 

 

356,418

 

Joseph R. Swedish

  

 

325,000

 

  

 

32,663

 

 

 

357,663

 

Sidney Taurel

  

 

325,000

 

  

 

272,839

 

 

 

597,839

 

Peter R. Voser

  

 

325,000

 

  

 

83,990

 

 

 

408,990

 

Frederick H. Waddell

  

 

341,667

 

  

 

47,137

 

 

 

388,804

 

 

(1)

Amounts in this column include the following: for Mr. Eskew: $246,591 of dividend equivalent payments on PFS; for Mr. Farr: $69,975 of dividend equivalent payments on PFS; for Mr. Gorsky: $89,554 of dividend equivalent payments on PFS; for Admiral Howard $18,021 of dividend equivalent payments on PFS; for Dr. Jackson: $52,197 of dividend equivalent payments on PFS; for Mr. Liveris: $142,956 of dividend equivalent payments on PFS; for Dr. Pollack: $21,343 of dividend equivalent payments on PFS and $10,000 contributed by the Company under Matching Grants Program; for Mr. Swedish: $25,088 of dividend equivalent payments on PFS; for Mr. Taurel: $265,263 of dividend equivalent payments on PFS; for Mr. Voser: $83,914 of dividend equivalent payments on PFS; and for Mr. Waddell: $42,061 of dividend equivalent payments on PFS.

 

(2)

Mr. Buberl joined the Board in April 2020.

 

(3)

Dr. Jackson’s term on the Board ended April 2020.

Fees Earned or Paid in Cash (column (b)): Amounts shown in this column reflect the annual retainer paid to each director as described above. A director receives a prorated amount of the annual retainer for service on the Board and, if applicable, as Lead Director or a committee chair, based on the portion of the year for which the director served.

All Other Compensation (column (c)): Amounts shown in this column represent:

 

  Dividend equivalent payments on PFS accounts under the DCEAP as described above.

 

  Group Life Insurance premiums paid by IBM on behalf of the directors.

 

  Value of the contributions made by IBM under IBM’s Matching Grants Program as described above.

Delinquent Section 16(a) Reports

IBM believes that all reports for IBM’s executive officers and directors that were required to be filed under Section 16 of the Securities Exchange Act of 1934 in 2020 were timely filed, except that one Form 4 to report a transaction under the IBM Excess 401(k) Plus Plan for each of Messrs. James J. Kavanaugh and Kenneth M. Keverian were filed late due to an unintentional administrative error.

Insurance and Indemnification

IBM has renewed its directors and officers indemnification insurance coverage. This insurance covers directors and officers individually where exposures exist other than those for which IBM is able to provide indemnification. This coverage runs from June 30, 2020 through June 30, 2021, at a total cost of approximately $7.9 million. The primary carrier is XL Specialty Insurance Company.

 

 


 

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Ownership of Securities

Security Ownership of Certain Beneficial Owners

The following sets forth information as to any person known to IBM to be the beneficial owner of more than five percent of IBM’s common stock as of December 31, 2020.

 

Name and address

  

Number of Shares

Beneficially Owned

       Percent of Class  

The Vanguard Group(1)

  

 

73,806,391

 

    

 

8.28%

 

100 Vanguard Boulevard

       

Malvern, PA 19355

                   

BlackRock Inc.(2)

  

 

62,271,273

 

    

 

7.0%

 

55 East 52nd Street

       

New York, NY 10055

                   

State Street Corporation(3)

  

 

51,957,682

 

    

 

5.83%

 

State Street Financial Center

       

One Lincoln Street

       

Boston, MA 02111

                   

 

(1)

Based on the Schedule 13G filed with the Securities and Exchange Commission on February 10, 2021 by The Vanguard Group and certain subsidiaries (Vanguard). Vanguard reported that it does not have sole voting power over any shares, and has shared voting power over 1,453,904 shares, sole dispositive power over 69,861,037 shares, and shared dispositive power over 3,945,354 shares. The Schedule 13G does not identify any shares with respect to which there is a right to acquire beneficial ownership. The Schedule 13G states that the shares were acquired and are held in the ordinary course of business and were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of IBM.

 

(2)

Based on the Schedule 13G filed with the Securities and Exchange Commission on January 29, 2021 by BlackRock, Inc. and certain subsidiaries (BlackRock). BlackRock reported that it had sole voting power over 53,281,831 shares and sole dispositive power over all shares beneficially owned. The Schedule 13G does not identify any shares with respect to which there is a right to acquire beneficial ownership. The Schedule 13G states that the shares were acquired and are held in the ordinary course of business and were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of IBM.

 

(3)

Based on the Schedule 13G filed with the Securities and Exchange Commission on February 12, 2021 by State Street Corporation and certain subsidiaries (State Street). State Street reported that it does not have shared voting power over any shares, shared dispositive power over 42,096,957 shares, does not have sole dispositive power over any shares, and shared dispositive power over 51,941,856 shares. The Schedule 13G does not identify any shares with respect to which there is a right to acquire beneficial ownership. The Schedule 13G states that the shares were acquired and are held in the ordinary course of business and were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of IBM.

 


 

LOGO

 

 

2021 Notice of Annual Meeting & Proxy Statement    |    Ownership of Securities   25


Table of Contents

LOGO

Common Stock and Stock-based Holdings of Directors and Executive Officers

The following table sets forth the beneficial ownership of shares of IBM’s common stock as of December 31, 2020, by IBM’s current directors and nominees, the executive officers named in the 2020 Summary Compensation Table, and such directors and all of IBM’s executive officers as of December 31, 2020, as a group. Also shown are shares over which the named person could have acquired voting power or investment power within 60 days after December 31, 2020. Voting power includes the power to direct the voting of shares held, and investment power includes the power to direct the disposition of shares held.

IBM’s current non-management directors had beneficial ownership of a total of 241,715 shares of common stock and DCEAP shares as of December 31, 2020, an increase of 15% year to year. In the aggregate, these shares were valued at more than $30 million as of December 31, 2020, or an average of more than $2.5 million for each of IBM’s non-management directors as of December 31, 2020.

 

Name

     Common Stock(1)         
Stock-based
Holdings
 
(2) 
    

 

Acquirable within 60 days

 

      

Value of

Common Stock

shares at

Fiscal Year End

($)

 

 

 

 

(5) 

      

Options

And RSUs

 

(3) 

      

Directors’

DCEAP Shares

 

(4) 

Michelle H. Browdy

  

 

70,310

 

    

 

100,953

 

    

 

0

 

    

 

N/A

 

    

 

8,850,623

 

Thomas Buberl

  

 

0

 

    

 

0

 

    

 

0

 

    

 

1,805

 

    

 

227,213

 

Michael L. Eskew

  

 

0

 

    

 

0

 

    

 

0

 

    

 

41,161

 

    

 

5,181,347

 

David N. Farr

  

 

7,508

(6) 

    

 

7,508

 

    

 

0

 

    

 

12,108

 

    

 

2,469,262

 

Alex Gorsky

  

 

4,232

 

    

 

4,232

 

    

 

0

 

    

 

15,987

 

    

 

2,545,168

 

Michelle J. Howard

  

 

0

 

    

 

0

 

    

 

0

 

    

 

4,367

 

    

 

549,718

 

James J. Kavanaugh

  

 

77,591

(7) 

    

 

126,430

 

    

 

0

 

    

 

N/A

 

    

 

9,767,155

 

John E. Kelly III

  

 

73,792

(8) 

    

 

131,682

 

    

 

0

 

    

 

N/A

 

    

 

9,288,937

 

Arvind Krishna

  

 

86,186

(9) 

    

 

249,303

 

    

 

0

 

    

 

N/A

 

    

 

10,849,094

 

Andrew N. Liveris

  

 

2,655

 

    

 

2,655

 

    

 

0

 

    

 

24,357

 

    

 

3,400,271

 

F. William McNabb III

  

 

9,250

 

    

 

9,250

 

    

 

0

 

    

 

3,214

 

    

 

1,568,968

 

Martha E. Pollack

  

 

0

 

    

 

0

 

    

 

0

 

    

 

5,062

 

    

 

637,205

 

Virginia M. Rometty

  

 

334,817

 

    

 

448,714

 

    

 

1,500,000

 

    

 

N/A

 

    

 

42,146,764

 

Joseph R. Swedish

  

 

5,261

(10) 

    

 

5,261

 

    

 

0

 

    

 

4,986

 

    

 

1,289,892

 

Sidney Taurel

  

 

28,798

 

    

 

28,798

 

    

 

0

 

    

 

43,763

 

    

 

9,133,979

 

Peter R. Voser

  

 

0

 

    

 

0

 

    

 

0

 

    

 

14,990

 

    

 

1,886,941

 

Frederick H. Waddell

  

 

3,763

 

    

 

3,763

 

    

 

0

 

    

 

8,448

 

    

 

1,537,121

 

Jim Whitehurst

  

 

148,606

 

    

 

436,852

 

    

 

4,990

 

    

 

N/A

 

    

 

18,706,523

 

Directors and executive officers as a group

  

 

891,108

(11) 

    

 

1,672,661

 

    

 

1,504,990

(11) 

    

 

180,248

(11) 

          

 

(1)

This column is comprised of shares of IBM common stock beneficially owned by the named person. Unless otherwise noted, voting power and investment power in the shares are exercisable solely by the named person, and none of the shares are pledged as security by the named person. Standard brokerage accounts may include nonnegotiable provisions regarding set-offs or similar rights. This column includes 135,267 shares in which voting and investment power are shared. The directors and officers included in the table disclaim beneficial ownership of shares beneficially owned by family members who reside in their households. The shares are reported in such cases on the presumption that the individual may share voting and/or investment power because of the family relationship. The shares reported in this column do not include 44,160 shares held by the IBM Personal Pension Plan Trust Fund, over which the members of the IBM Retirement Plans Committee, a management committee presently consisting of certain executive officers of the Company, have voting power, as well as the right to acquire investment power by withdrawing authority now delegated to various investment managers.

 

(2)

For executive officers, this column is comprised of the shares shown in the “Common Stock” column and, as applicable, all restricted stock units including retention restricted stock units, a retention performance share unit award, officer contributions into the IBM Stock Fund under the IBM Excess 401(k) Plus Plan, and Company contributions into the IBM Stock Fund under the Excess 401(k) Plus Plan. Some of these restricted stock units may have been deferred under the Excess 401(k) Plus Plan in accordance with elections made prior to January 1, 2008, and they will be distributed to the executive officers after termination of employment as described in the 2020 Nonqualified Deferred Compensation Narrative.

 

(3)

For executive officers, this column is comprised of (i) shares that can be purchased under an IBM stock option plan within 60 days after December 31, 2020, and (ii) RSU awards that vest within 60 days after December 31, 2020. For Mrs. Rometty, shares in this column are from a premium-priced option grant that can be purchased pursuant to an IBM stock option plan within 60 days after December 31, 2020. For Mr. Whitehurst, shares in this column are from a Red Hat restricted stock award that was converted pursuant to the Red Hat merger agreement into an IBM restricted stock award which will vest within 60 days after December 31, 2020.

 

(4)

Promised Fee Shares earned and accrued under the IBM Deferred Compensation and Equity Award Plan (DCEAP) as of December 31, 2020, including dividend equivalents credited with respect to such shares. Upon a director’s retirement, these shares are payable in cash or stock at the director’s choice (see 2020 Director Compensation Narrative for additional information).

 

(5)

Values in this column are calculated by multiplying the number of shares shown in the “Common Stock” column plus the “Directors’ DCEAP Shares” column by the closing price of IBM stock on the last business day of the 2020 fiscal year ($125.88).

 

(6)

Includes 450 shares in which voting and investment power are shared.

 

(7)

Includes 15,174 shares in which voting and investment power are shared.

 

(8)

Includes 49,128 shares in which voting and investment power are shared.

 

(9)

Includes 65,253 shares in which voting and investment power are shared.

 

(10)

Voting and investment power are shared.

 

(11)

The total of these three columns represents less than 1% of IBM’s outstanding shares, and no individual’s beneficial holdings totaled more than 1/4 of 1% of IBM’s outstanding shares.

 

 


 

26   2021 Notice of Annual Meeting & Proxy Statement    |    Ownership of Securities


Table of Contents

Environmental and Social Responsibility

 

 

Corporate social responsibility has been a hallmark of IBM’s culture for over 100 years. With oversight from the Board, we have long embraced a corporate philosophy that is inclusive of all our stakeholders – from our customers, employees, suppliers and stockholders, to our communities and the world around us. Each of those stakeholders is increasingly focused on environmental, social and governance, or “ESG,” practices and how they impact the Company and society. Our world-class governance practices are set out above in this Proxy Statement. In addition, IBM’s leadership in environmental and social responsibility is an integral part of our long-term performance strategy, and we continue to take bold actions that build upon our legacy of responsible stewardship.

We encourage stockholders to read our annual Corporate Responsibility Report which provides deep insight into all of our ESG initiatives and more, including a mapping of key ESG metrics to SASB, and is available at: https://www.ibm.org/responsibility/reports. Based on feedback from our investor outreach, below we also provide some examples reflecting how we are:

 

  Working to protect our environment for future generations.

 

  Managing the historic challenges presented by COVID-19.

 

  Embracing a diverse and inclusive workforce.

 

  Being a responsible steward of technology.

 

  Advocating for responsible public policy positions.

Protecting the Environment

In 2021, following record progress toward our renewable electricity and greenhouse gas emissions goals, IBM set next generation goals to continue our leadership in sustainability. Notably, IBM now aims to reach net zero greenhouse gas emissions by 2030.

 

LOGO

 

 

For the past 30 consecutive years, IBM has voluntarily published its IBM and the Environment Report providing detailed information on our environmental programs and performance. IBM’s uninterrupted annual publication of this report since 1990 is unsurpassed across our industry. The most recent IBM and the Environment Report is available at https://www.ibm.com/ibm/environment/annual/reporting.shtml. You can also review IBM’s comprehensive contributions to the U.N. Sustainable Development Goals at https://files.ibm.org/responsibility/thought-leadership/pdfs/IBM_and_the_UN_Sustainable_Development_Goals.pdf.

 

 


 

LOGO

 

 

2021 Notice of Annual Meeting & Proxy Statement    |    Environmental and Social Responsibility   27


Table of Contents

LOGO

Responding to COVID-19

The COVID-19 pandemic has brought challenges unlike any seen in the modern world. Our response has been guided by four principles: (1) employee, client and community health is top priority; (2) our plan and response must be data-driven and evidence-based; (3) we will comply with all government requirements; and (4) focus on business continuity and maintaining critical operations. At the outset, IBM immediately mobilized to move nearly all of our ~350,000 employees to work remotely within two weeks and established resources for maintaining employee engagement, productivity and emotional support. We also assembled our resources and brought together the right communities of experts, including clients, governments, scientists, developers, partners, academic institutions, health agencies and IBMers, to work together and manage through the COVID-19 outbreak by doing what IBM does best: applying data, knowledge, computing power and insights to solve difficult problems.

 

 

Supporting our Communities During the Pandemic

 

 

 Spearheaded the COVID-19 High Performance Computing Consortium with the White House Office of Science and Technology Policy and the U.S. Department of Energy to provide access to the world’s most powerful high-performance computing resources in support of COVID-19 research

 

 Committed $200M in technology, services, and money to COVID-19 response efforts including to aid healthcare scientists, researchers, and educators

 

 Created precise incident mapping

 

 Raised funds for first responders and hospital workers

 

 Provided 300,000 New York students with equipment they need for online lessons

 

Supporting the IBMer

At IBM, our global workforce is highly skilled, reflective of the work we do for our clients’ digital transformations and in support of their mission-critical operations. We are passionately dedicated to our employees’ professional growth and personal well-being, investing in resources to help IBMers develop their skills and leadership potential, and building on IBM’s legacy of leading the market in welcoming and supporting a diverse, inclusive workforce.

 

 

Talent and Culture

 

 

 

Diversity and Inclusion

 

 

 

Health and Safety

 

 

  IBM offers a compelling value proposition to employees: IBMers develop innovative technologies including Cloud, AI, quantum computing and cybersecurity, for clients whose businesses the world relies on

 

  9 out of 10 IBMers have acquired strategic skills with IBMers completing more than 80 hours of learning per person in 2020

 

  Hundreds of thousands of IBMers globally participate in our annual engagement survey, with workforce engagement up more than 2 points year to year

 

  Every IBM manager and leader has access to their team and organization engagement levels along with actionable data-driven insights

 

  Attrition levels in 2020 were below the prior 5-year average

 

 

  We seek to ensure IBMers from diverse backgrounds are engaged, feel supported to be their authentic selves, build skills, and achieve their greatest potential

 

  IBM’s Board of Directors recently adopted a policy to commit IBM to annually publish a report assessing the Company’s diversity, equity and inclusion efforts and programs

 

  9 out of 10 IBMers say they can be their authentic selves at work

 

  More than 33% IBMers identify as women

 

  Engagement was up year to year for women, Black and Hispanic IBMers

 

  IBM has had an equal pay policy since 1935; we have conducted statistical pay equity analysis for decades, and in 2020 this included all countries where we have employees

 

 

 

  We have a long-standing commitment to the health, safety and well-being of our employees

 

  Early in the course of the COVID-19 outbreak, we restricted travel, cancelled meetings and events, and prepared nearly 95% of our workforce to work from home

 

  Our robust case management system manages COVID-19 exposures

 

  Our comprehensive playbook on workplace health and safety measures will allow locations to reopen when pandemic conditions improve

 

  Employees are supported with 24/7 access to IBM’s world-class Health and Safety team for questions and concerns, education and bidirectional, timely and targeted communications

 

 


 

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Table of Contents

IBM continues to invest in skills and
re-skilling to make the digital era more inclusive

 

 

  P-TECH, our high school to career model focuses on students of color and educationally underserved students; P-TECH now spans 243 schools and 600 industry partners across 28 countries

 

  IBM’s “returnship” and apprenticeship programs create opportunities for hundreds of new IBMers

 

  Open P-TECH, our platform providing free online learning for students ages 14-20 on emerging technologies and professional competencies, has more than 224,000 users

 

  SkillsBuild, our platform providing free online learning for adults in need of skilling and reskilling, now serves more than 122,000 users globally

 

The IBM Board’s Commitment to Diversity and Inclusion

The IBM Board of Directors strongly believes that much of the future success of IBM depends on the caliber of its talent and the full engagement and inclusion of IBMers in the workplace. A diverse and inclusive workplace leads to greater innovation, agility, performance and engagement, enabling both business growth and societal impact. In furtherance of this mission, and in response to engagement with our stockholders, the IBM Board formally adopted a policy committing the Company to report annually on the effectiveness of our diversity and inclusion programs. IBM will publish a diversity and inclusion report in the second quarter of 2021. Furthermore, we have committed to publish EEO-1 data in 2022 after the completion of the Company’s spin-off of its managed infrastructure services business.

 

LOGO  

 

 

IBM’s Be Equal employee pledge campaign champions diversity and inclusion for everyone, driving systemic, sustainable improvement for people in every community. Since its launch in 2019, tens of thousands of individuals worldwide have pledged their commitment to equal representation.

 

  

 

 Be Vocal

 Be Plural

 Be Active

 Be Supportive

 Be Progressive

 

Operating with Trust and Transparency

For more than 100 years, IBM has continuously strived for responsible innovation capable of bringing benefits to everyone and not just a few. This philosophy is also applied to artificial intelligence: we aim to create and offer reliable technology that can augment, not replace, human decision-making. Properly calibrated, AI can assist humans in making fairer choices, countering human biases, and promoting inclusivity. IBM recognized early that clearly articulating principles around the ethical deployment of AI technologies was critical — backed by a strong commitment to putting words into practice. Our commitment is represented by our long-standing values, our Trust and Transparency Principles, and several recent developments: IBM signed the Vatican’s Rome Call for AI Ethics, created the Notre Dame-IBM Technology Ethics Lab, published our Points of View on Facial Recognition and the Precision Regulation of AI, donated our AI Explainability 360 Toolkit as an open source resource, and contributed to the EU High-Level Expert Group’s Guidelines for Trustworthy AI.

While continuing to collaborate with governments, companies and other organizations, we also embraced the need for an internal governance framework and process to evaluate opportunities based on well-defined guidance around privacy and security. We established an internal AI Ethics Board to work with experts through our business to centralize the assessment of more complicated questions. The board is comprised of a cross-disciplinary team of senior IBMers, co-chaired by IBM’s Chief Privacy Officer and AI Ethics Global Leader, and reports to the highest levels of the Company.

 

 

The Purpose of AI

 

 

 

    Data Insights and Ownership    

 

 

 

    Transparency and Explainability    

 

     

 

LOGO

 

 

 

LOGO

 

 

 

LOGO

 

The purpose of AI is to augment human intelligence. At IBM, we believe AI should make all of us better at our jobs, and that the benefits of the AI era should touch the many.

 

Data and insights belong to their creator. IBM clients’ data is their data, and their insights are their insights.

 

New technology, including AI systems, must be transparent and explainable. Technology companies must be clear about who trains their AI systems, what data was used in that training and, most importantly, what went into their algorithms’ recommendations.

 

 


 

LOGO

 

 

2021 Notice of Annual Meeting & Proxy Statement    |    Environmental and Social Responsibility   29


Table of Contents

LOGO

Responsibly Advocating Public Policy

IBM’s Government and Regulatory Affairs team engages in worldwide policy advocacy to drive growth and innovation in the digital economy.

IBM has never had a political action committee (PAC), makes no political donations, and has always been committed to meaningful management, oversight, and accurate reporting of our engagement with government officials. To be clear, these policies do not put IBM at a disadvantage — instead, they empower us to promote meaningful policies that are good for business, employees, and all our stakeholders. Over the past year, while America’s democratic institutions were tested and many of IBM’s corporate peers contemplated suspending financial contributions to certain elected officials, we faced no such quandary. Consistent with our long-held principles, IBM was able to stay focused on substantive policy issues.

 

   

 

     LOGO     

 

 

 

Political Contributions: In 1968, former IBM CEO Thomas Watson Jr. said a company “should not try to function as a political organization in any way.” IBM continues to live by this philosophy to this day. We have a long-standing policy not to make contributions of any kind (money, employee time, goods or services), directly or indirectly, to political parties or candidates, including through intermediary organizations, such as PACs, campaign funds, or trade or industry associations. This policy applies equally in all countries and across all levels of government, even where such contributions are permitted by law. In short, IBM engages in policy, not politics.

 

 

 

IBM does not have a PAC and does not engage in independent expenditures or electioneering communications as defined by law.

 

        

 

     LOGO     

 

 

 

Lobbying: IBM’s Government and Regulatory Affairs team is committed to advancing common sense public policies that benefit our business and communities. We seek to build trust in technology through precision regulation, a modernized digital infrastructure, promoting justice and equality for all citizens, and leveraging science and technology for good, including in the global fight against COVID-19. All IBM lobbying activities, including by third parties on behalf of IBM, require the prior approval of the IBM Office of Government and Regulatory Affairs and must comply with applicable law and IBM’s Business Conduct Guidelines.

 

IBM files periodic reports with the Secretary of the U.S. Senate and the Clerk of the U.S. House of Representatives detailing its U.S. federal lobbying activities and expenditures, with U.S. state and municipal governments, where required, and with the European Union Transparency Register.

        

 

     LOGO     

 

 

Trade Associations: IBM joins trade and industry associations that add value to IBM, its stockholders and employees. These groups have many members from a wide variety of industries, and cover broad sets of public policy and industry issues. Although IBM works to make our voice heard, there may be occasions where our views on an issue differ from those of a particular association.

 

We perform comprehensive due diligence on all of our trade associations to confirm they are reputable and have no history of malfeasance. Company policy prohibits them from using any IBM funds to engage in political expenditures, and we implement robust procedures to ensure they comply.

 

The IBM Board of Directors, as part of its oversight function, periodically receives reports from senior management relating to IBM’s policies and practices regarding governmental relations, public policy, and any associated expenditures.

 

IBM’s senior management, under the leadership of IBM Government and Regulatory Affairs, closely monitors and coordinates all public policy advocacy efforts, as well as any lobbying activities.

 

 

 

IBM is proud to report that the Center for Political Accountability’s 2020 Report on Corporate Political Disclosure and Accountability gave IBM a score of 98.6 out of 100, naming IBM a trendsetter in Political Disclosure and Accountability and recognizing IBM as one of only 26 companies that prohibit trade associations and non-profits from using Company contributions for election-related purposes.

 

 

 

Advocating on Social Justice

 

 

Police Reform

 

Advocating for new federal rules that hold police more accountable for misconduct

 

 

Responsible Use of Technology

 

Condemning the contributions of technology to discrimination or racial injustice

 

 

Broadening Opportunities

 

Providing training and education for in-demand skills, to expand economic opportunity for communities of color

 

 

 

LGBT+ Rights

 

Fighting for LGBT+ workplace equality since 1984, when IBM first included sexual orientation in its equal opportunity policy

 

 

 

Immigration Reform

 

Standing with Dreamers and protecting the vital role that immigrants have always played in this country

 

 

 

IBM’s policies and practices with regard to public policy matters, including lobbying activities and expenditures, are available on its website: https://www.ibm.com/policy/government-regulatory-affairs/philosophy-governance/.

 

 


 

30   2021 Notice of Annual Meeting & Proxy Statement    |    Environmental and Social Responsibility


Table of Contents

 

2020 Executive Compensation

 

 

Message to Stockholders

 

 

Report of the Executive Compensation and

Management Resources Committee of the Board of Directors

Set out below is the Compensation Discussion and Analysis, which is a discussion of IBM’s executive compensation programs and policies written from the perspective of how we and management view and use such programs and policies. Given the Committee’s role in providing oversight to the design of those programs and policies, and in making specific compensation decisions for senior executives using those programs and policies, the Committee participated in the preparation of the Compensation Discussion and Analysis, reviewing successive drafts of the document and discussing those with management. The Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement. We join with management in welcoming readers to examine our pay practices and in affirming the commitment of these pay practices to the long-term interests of stockholders.

Alex Gorsky (chair)

Andrew N. Liveris

Joseph R. Swedish

Martha E. Pollack

 


 

LOGO

 

 

2021 Notice of Annual Meeting & Proxy Statement    |    2020 Executive Compensation   31


Table of Contents

 

LOGO

2020 Compensation Discussion and Analysis

Executive Summary

Compensation information is disclosed in this Proxy statement for both Mr. Krishna and Mrs. Rometty. Mr. Krishna succeeded Mrs. Rometty as Chief Executive Officer on April 6, 2020. He assumed the Chairman’s role beginning January 1, 2021. Mrs. Rometty was Executive Chairman until December 31, 2020, when she retired from the Company.

IBM’s Strategic Pivot to Growth

Over the last several years, IBM has built the foundation to capitalize on the $1 trillion hybrid cloud market opportunity, accelerated with the 2019 acquisition of Red Hat that established IBM as the market-leading hybrid cloud platform. In 2020, IBM took further decisive action to redefine the future of the company and create value through focus. In October 2020, the Company announced the spin-off of the managed infrastructure services business, which will immediately be the market leader at twice the size of its nearest competitor.

As discussed with investors, the pending spin-off will enable IBM to focus on delivering sustainable growth as a hybrid cloud and AI company. This also represents a shift in the Company’s business model where the majority of revenue will now come from software and solutions, enabling accelerated revenue growth post separation. To realize this strategy, IBM is undertaking a number of actions associated with the spin-off and the growth of the hybrid cloud business. These include structural and transaction-related actions enabling the separation and ongoing competitiveness of the managed infrastructure services business, as well as increased reinvestment in the hybrid cloud platform. The Company plans to increase investment in innovation, skills expertise and ecosystems including targeted acquisitions to accelerate IBM’s hybrid cloud platform growth strategy.

To reinforce the strategic shift, we revamped our executive compensation programs to ensure alignment with IBM’s growth strategy and investor expectations. The following comprehensive changes have been made to support this growth prioritization:

 

  The 2021 Annual Incentive Program has been updated to include two metrics, Total IBM Revenue and Operating Cash Flow, each at equal weight. The equal weighting of both metrics emphasizes the revenue growth and cash generation necessary to support increased investment and stockholder return.

 

  The Long-term Incentive Plan has been updated to introduce Total IBM Revenue at a 40% weighting along with a corresponding reduction to the Operating EPS metric from 70% to 30%, while maintaining Free Cash Flow at a 30% weight. This design change places further emphasis on revenue growth as the key driver for the Company’s success over the long-term.

 

  Throughout IBM’s 110-year history, diversity and inclusion has been intrinsic to our corporate culture. The company believes growth and success can only be achieved by fostering a climate that values and seeks out diversity. In order to affirm management’s commitment to improving a diverse representation of our workforce, a modifier will be introduced to the Annual Incentive Program, providing a potential positive or negative adjustment to the AIP score depending on progress in diversity representation.

 

  Given the importance of the next two years on executing the Company’s strategic shift to growth, on February 23, 2021 the Committee approved changes to the 2019-2021 and 2020-2022 Performance Share Unit targets incorporating the impact of the planned 2021 spin-off of the managed infrastructure services business, along with actions taken to enable the separation of NewCo and enable IBM’s growth strategy under current market conditions. Consistent with the Company’s long-standing practice of setting rigorous performance plans, cumulative targets for both plans remain higher than comparable metrics shared with investors on January 21, 2021.

The impacts of these significant strategic decisions on the Company’s executive compensation programs are discussed in the following Compensation Discussion and Analysis.

 


 

 

 

32   2021 Notice of Annual Meeting & Proxy Statement    |    2020 Compensation Discussion and Analysis


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In 2020, IBM delivered $73.6B in revenue, with a 48.3% gross profit margin, and generated $18.2B cash from operations.

 

Hybrid Cloud Platform Performance

 

IBM Cloud Revenue

Over $25B total Cloud revenue, more than doubling since 2015, and now making up over 34% of IBM revenue.

 

LOGO

Red Hat Growth

Red Hat continued its momentum, with strong double-digit revenue growth(1).

 

 

LOGO

 

 

Year-to-Year Gross Margin

Expanded gross margin, with continued shift to higher value and improved services productivity.

 

LOGO

Establishing two Market-Leading Companies

Announced separation of the managed infrastructure services business into a new $19B* market-leading public company.

 

LOGO

 

 

Strong Cash Generation And Strategic Capital Allocation

 

Generated $10.8B
Free Cash Flow(1), with
196% realization(2)
   

Return on

Invested Capital (ROIC)

14.5%(1, 3)

   

 

Returned $5.8B to
stockholders;
reduced debt by ~$11.5B
since June 2019 peak

 

 

(1)

Non-GAAP financial metrics. See Appendix A for information on how we calculate these performance metrics.

 

(2)

143% excluding $2B charge for 4Q 2020 structural action. See Appendix A for information on how we calculate this performance metric.

 

(3)

ROIC equals net operating profits after tax (GAAP net income from continuing operations plus after-tax interest expense) divided by the sum of the average debt and average total stockholders’ equity. It is computed excluding current period U.S. Tax reform charges and goodwill associated with the Red Hat acquisition.

Note: In an effort to provide additional and useful information regarding IBM’s financial results and other financial information as determined by generally accepted accounting principles (GAAP), this Compensation Discussion and Analysis and Proxy Statement contains certain non-GAAP financial measures on a continuing operations basis, including operating earnings per share, free cash flow, operating cash flow, operating net income from continuing operations, revenue for Red Hat normalized for historical comparability, revenue growth rates adjusted for currency, revenue adjusted for divested businesses and currency, and ROIC. For reconciliation and rationale for management’s use of this non-GAAP information, refer to Appendix A — “Non-GAAP Financial Information and Reconciliations.”

 


 

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LOGO

Our compensation strategy, with significant pay at risk, supports the drivers of IBM’s high value business model.

For 2020, at target, 65% of Mr. Krishna’s pay effective April 6, 2020 (when he became CEO) was at risk and subject to attainment of rigorous performance goals.

 

For 2020 performance, the Board approved an annual incentive payment of $2,181,000 for Mr. Krishna, 85% of target. The payout reflects a 100% Individual Contribution Factor (ICF) and the Annual Incentive Program (AIP) pool funding at 85%.

 

LOGO

  LOGO


In making this award in line with the Company’s incentive score, the Committee also considered Mr. Krishna’s overall performance against his objectives, which included positioning the Company for sustainable growth as a hybrid cloud and AI company by announcing the spin-off of the Company’s managed infrastructure business. In addition, the Committee considered his personal leadership in continuing IBM’s leadership in quantum computing, increasing diversity representation across all areas, and record employee engagement in a challenging environment.

Payouts in both the annual and long-term programs reflect rigorous performance goals.

 

LOGO

 

 

Feedback from Our Investors Continues to Inform the Committee

 

 IBM once again engaged with over 100 institutions and reached out to hundreds of thousands of individual registered and beneficial owners, representing more than 50% of the shares that voted on Say on Pay in 2020.

 

 Our stockholder discussions and formal 2020 Say on Pay vote reaffirmed investor support of our pay practices.

 

 


 

 

 

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Section 1: Executive Compensation Program Design and Results

Trust and personal responsibility in all relationships — relationships with clients, partners, communities, fellow IBMers, and investors — is a core value at IBM. As a part of maintaining this trust, we well understand the need for our investors — not only professional fund managers and institutional investor groups, but also millions of individual investors — to know how and why compensation decisions are made.

 

 

To that end, IBM’s executive compensation practices are designed specifically to meet five key objectives:

 

 Align the interests of IBM’s leaders with those of our investors by varying compensation based on both long-term and annual business results and delivering a large portion of the total pay opportunity in IBM stock;

 

 Balance rewards for both short-term results and the long-term strategic decisions needed to ensure sustained business performance over time;

  

 Attract and retain the highly qualified senior leaders needed to drive a global enterprise to succeed in today’s highly competitive marketplace;

 

 Motivate our leaders to deliver a high degree of business performance without encouraging excessive risk taking; and

 

 Differentiate rewards to reflect individual and team performance.

 

The specific elements of IBM’s U.S. executive compensation programs are:

 

Type

  Component      Key Characteristics
   

Current Year Performance

  Salary  

Salary is a market-competitive, fixed level of compensation.

  Annual Incentive Program (AIP)  

At target, annual incentive provides a market-competitive total cash opportunity. Actual annual incentive payments are funded by business performance against financial metrics and distributed based on annual performance scores, with top performers typically earning the greatest payouts and the lowest performers earning no incentive payouts.

   

Long-Term Incentive

  Performance Share Units (PSUs)  

Equity awards are typically granted annually and may consist of PSUs and RSUs. Equity grants are based on competitive positioning and vary based on individual talent factors. Lower performers do not receive equity grants.

 

For PSUs, the number of units granted can be increased or decreased at the end of the three-year performance period based on IBM’s performance against predetermined targets.

 

In addition, a relative performance metric applies to all PSU awards. The final number of PSUs earned can be increased or decreased based on IBM’s Return on Invested Capital (ROIC) performance relative to S&P indices.

 

 

  Restricted Stock Units (RSUs)  

 

RSUs vest over time; typically ratably over four years.

   

Retention

  Stock-Based Grants & Cash Awards  

Periodically, the Compensation Committee and/or the Chairman and CEO reviews outstanding stock-based awards for key executives. Depending on individual performance and the competitive environment for senior executive leadership talent, awards may be made in the form of Retention Restricted Stock Units (RRSUs), retention PSUs (RPSUs), premium-priced stock options or cash for certain executives. RRSU and RPSU vesting periods typically may range from two to five years. In addition to time-based vesting, RPSUs include a relative ROIC performance metric (consistent with standard PSUs) for some or all of a given award. Cash awards have a clawback if an executive leaves IBM before it is earned.

   

Other Compensation  

  Perquisites and Other Benefits  

Perquisites are intended to ensure safety and productivity of executives. Perquisites include such things as annual executive physicals, transportation, financial planning, and personal security.

   

Post Employment

 

 

Savings Plan

 

U.S. employees may participate in the IBM 401(k) Plus Plan by saving a portion of their pay in the plan, and eligible employees may also participate in a non-qualified deferred compensation savings plan, which enables participants to save a portion of their eligible pay in excess of IRS limits for 401(k) plans. The Company provides matching and automatic contributions for both of these plans.

 

Named Executive Officers (NEOs) may have legacy participation in closed retention and retirement plans, for which future accruals ceased as of December 31, 2007.

 

A full description of the Retention, Pension, and Non-Qualified Deferred Compensation plans is provided in this Proxy Statement, beginning with the 2020 Retention Plan Narrative.

 

 

Non-qualified Savings Plan

 

 

 

Pension Plans (closed)

 

 

 

Supplemental Executive Retention Plan (closed)

 

     

 


 

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LOGO

Our Incentive Compensation Design Supports our Business Strategy

Our senior executive pay is heavily weighted to IBM’s performance through the annual and long-term incentive programs. Each year, the Committee ensures that these programs are closely aligned to the Company’s financial and strategic objectives and are appropriately balanced. Targets are set at challenging levels and are consistent with IBM’s financial model shared with investors for that year. As part of IBM’s ongoing management system, targets are evaluated to ensure they do not encourage an inappropriate amount of risk taking.

For performance-based programs ending in 2020, IBM measured performance across six key financial metrics:

 

    

 

IBM Revenue (20%)

 

 

LOGO

  

Measures total IBM revenue performance across the IBM portfolio of business

 

AIP    

 

  

 

Operating Net Income (40%)

 

 

LOGO

  

Measures our profit and operational success

    

 

Operating Cash Flow* (40%)

 

 

LOGO

  

Important measure of our ability to reinvest and return value to stockholders

    

 

Operating EPS (70%)

 

 

LOGO

  

Measures operating profitability on a per share basis

PSU    

    Program        

  

 

Free Cash Flow (30%)

 

 

LOGO

  

 

Important measure of our ability to reinvest and return value to stockholders over multiple years

 

    

 

ROIC Modifier

(beginning in 2018)

 

 

LOGO

  

 

Reaffirms high value business model through a negative adjustment for ROIC below S&P 500 median, and a positive adjustment for ROIC above both the S&P 500 and S&P IT medians

IBM shares its financial model each year with investors in the context of its long-term strategy. To provide transparency into the rigor of our goal setting process, IBM discloses the performance attainment against targets for the most recent performance period, for both the Annual Incentive Program and the Performance Share Unit Program.

AIP and PSU Design Updates Beginning in 2021

To reinforce the strategic shift of the Company’s business model announced in October 2020, when IBM announced the spin-off of the Company’s managed infrastructure services business, and to support the focus on delivering sustainable revenue growth and free cash flow as a hybrid cloud and AI company, the Committee revamped the performance metrics in our executive compensation programs as follows:

2021 Metrics and Weightings

 

    

 

IBM Revenue (50%)

 

 

LOGO

  

Increased focus on total IBM revenue performance across the IBM portfolio of business (weighting increased from 20%)

 

AIP    

 

  

 

Operating Cash Flow* (50%)

 

 

LOGO

  

Increased focus on our ability to reinvest and return value to stockholders (weighting increased from 40%)

    

 

Diversity Modifier

New in 2021

 

 

LOGO

  

Reinforces senior management’s focus on improving a diverse representation of our workforce

    

 

IBM Revenue (40%)

New in 2021

 

 

LOGO

  

Reinforces focus on cumulative IBM revenue performance over multiple years

PSU    

    Program        

  

 

Operating EPS (30%)

 

 

LOGO

  

Measures operating profitability on a per share basis (weighting reduced from 70%)

  

 

Free Cash Flow (30%)

 

 

LOGO

  

 

Continues to be an important measure of our ability to reinvest and return value to stockholders over multiple years (weighting maintained)

 

    

 

ROIC Modifier

 

 

LOGO

  

 

Reaffirms high value business model through a negative adjustment for ROIC below S&P 500 median, and a positive adjustment for ROIC above both the S&P 500 and S&P IT medians

 

*Net

Cash from Operating Activities, excluding Global Financing receivables.

 

 


 

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2020 Annual Incentive Program

How It Works

IBM sets business objectives at the beginning of each year, which are approved by the Board of Directors. The Compensation Committee and the Board of Directors review IBM’s annual business objectives and set the metrics and weightings for the annual program to reflect current business priorities. These objectives translate to targets for IBM and for each business unit for purposes of determining the target funding of the AIP.

Performance against business objectives determines the actual total funding pool for the year, which can vary from 0% to 200% of total target incentives for all executives. At the end of the year, performance for IBM is assessed against these predetermined financial targets, which are updated to remove any impact of currency movement or the change in tax rates, compared to plan.

The financial targets may be adjusted up or down for extraordinary events if recommended by the Chairman and CEO and approved by the Compensation Committee. For example, adjustments are usually made for large acquisitions and divestitures. For 2020, the target was adjusted to exclude the impact of the $2.0 billion pre-tax charges for structural actions in the fourth quarter to simplify and optimize our operating model in support of the announcement we made in our strategic update in October. While the COVID-19 global pandemic had a significant impact on 2020 results, no adjustment was made to scoring due to COVID-19. The Committee determined that this approach best reflected the stockholder experience in 2020. In addition, the Chairman and CEO can recommend an adjustment, up or down, based on factors beyond IBM’s financial performance; for example, client experience, market share growth and diversity and inclusion of IBM’s workforce. Although IBM made improvements in several non-financial areas in 2020, including record diversity across all representation groups, the Chairman and CEO did not recommend any qualitative increase on the score given overall results in a challenging 2020 business environment.

The Compensation Committee reviews the financial scoring and qualitative adjustments and approves the AIP funding level.

Once the total pool funding level has been approved, payouts for each executive are calculated using an Individual Contribution Factor (ICF). The ICF is determined by evaluating individual performance against predetermined business objectives. As a result, a lower-performing executive will receive as little as zero payout and the most exceptional performers (excluding the Chairman and CEO) are capped at three times their individual target incentive (payouts at this level are rare and only possible when IBM’s performance has also been exceptional). The AIP, which covers approximately 5,000 IBM executives, includes this individual cap at three times the individual target to ensure differentiated pay for performance. For the Chairman and CEO, the cap is two times target. An executive generally must be employed by IBM at the end of the performance period in order to be eligible to receive an AIP payout. At the discretion of appropriate senior management, the Compensation Committee, or the Board, an executive may receive a prorated payout of AIP upon retirement. AIP payouts earned during the performance period are generally paid on or before March 15 of the year following the end of such period.

 

LOGO

This incentive design ensures payouts are aligned to IBM’s overall business performance while also ensuring individual executive accountability for specific business objectives.

2020 AIP Payout Results

Based on full year financial performance against total IBM revenue, operating net income, and operating cash flow, the weighted incentive score was 85.

 

LOGO

 

 

(1)

Based on AIP payout table.

 

(2)

Non-GAAP financial metrics. See Appendix A for information on how we calculate these performance metrics.

Performance Share Unit Program

The Performance Share Unit (PSU) metrics for the 2018–2020 performance period were Operating EPS and Free Cash Flow, unchanged from previous years.

 


 

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LOGO

Targets are established at the beginning of each three-year performance period. Both Operating EPS and Free Cash Flow cumulative three-year targets for the 2018-2020 performance period exceeded those cumulative three-year targets for the previous performance period (2017-2019). These targets are based on IBM’s financial model, as shared with investors, and the Board-approved annual budget. The Committee’s longstanding practice is that the Company’s share repurchase activities have no effect on executive compensation. Actual operating EPS results are adjusted to remove the impact of any difference between the actual share count and the budgeted share count, while simultaneously ensuring that executive compensation targets are normalized for any planned buybacks that are incorporated into the Operating EPS target. Additionally, the scoring for the PSU Program takes into account extraordinary events. For the 2018-2020 performance period, results are adjusted to exclude the impact of the Red Hat acquisition. This approach is consistent with the adjustment made to the previous performance period (2017-2019). For 2018-2020, results were also adjusted to exclude the impact of the $2.0 billion pre-tax charges for structural actions in the fourth quarter to simplify and optimize our operating model in support of the announcement we made in our strategic update in October. While the COVID-19 global pandemic had a significant impact on the 2018-2020 results, there was no adjustment made to scoring due to COVID-19. The Committee determined that this approach best reflected the stockholder experience in 2020.

At the end of each three-year performance period, the Compensation Committee approves the determination of actual performance relative to pre-established targets, and the number of PSUs are adjusted up or down from 0% to 150% of targets, based on the approved actual performance.

In addition, beginning with the 2018-2020 PSU Program, a Relative Return on Invested Capital (ROIC) modifier was added to the PSU program. The modifier is based on IBM’s ROIC performance over the three-year performance period, relative to the S&P 500 Index (excluding financial services companies due to lack of comparability) and the S&P Information Technology Index. This modifier reduces the score up to 20 points when performance falls below the S&P 500 Index median, and increases the score up to 20 points when IBM exceeds the median performance of both the S&P 500 Index and the S&P Information Technology Index. The modifier has no impact when IBM’s ROIC performance falls between the S&P 500 Index median and the S&P Information Technology Index median. There is no qualitative adjustment to the PSU program score.

RELATIVE ROIC MODIFIER

 

 

 

LOGO

The PSU score is calculated as a weighted average of results against targets for Operating EPS (70%) and Free Cash Flow (30%). The calculation for the 2018-2020 performance period is shown in the table below. For the 2018-2020 performance period, the ROIC modifier was zero. While IBM ROIC was at the 68th percentile of the S&P 500 Index (excluding financial services), it did not exceed the median of S&P Information Technology Index.

 

LOGO

 

 

(1)

Based on PSU payout table.

 

(2)

Non-GAAP financial metrics. See Appendix A for GAAP to Non-GAAP reconciliation.

 

  

Targets and scoring exclude the impact of the Red Hat acquisition and the $2B charge for Q4 2020 structural actions.

Impact of Significant One-Time Events on the Open PSU Performance Periods

As previously disclosed, in connection with the July 9, 2019 closing of the Red Hat acquisition, the 2019-2021 PSU program targets incorporate Red Hat performance. The target updates resulted in an increase to the Free Cash Flow target and a reduction to the Operating EPS target, almost entirely driven by a non-cash purchase accounting adjustment to deferred revenue required by US GAAP. The updated targets were higher than external guidance shared with stockholders at IBM’s Investor Briefing on August 2, 2019.

Cumulative three-year EPS and Cash Flow targets for the 2019-2021 and 2020-2022 Performance Share Unit (PSU) programs were set prior to the announcement of the planned 2021 spin-off of the managed infrastructure services business and related actions. IBM’s PSU programs consist of operational financial metrics that were substantially impacted by this significant unplanned event.

 

 


 

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For the 2019-2021 and 2020-2022 PSU programs, the Committee determined that the targets for these two outstanding PSU programs were no longer reflective of the company’s strategic direction and growth objectives as communicated to stockholders over the past year. The Committee approved an adjustment reducing the targets for the 2019-2021 and 2020-2022 PSU programs, incorporating the planned 2021 spin-off of the managed infrastructure services business including one-time transaction-related cash charges associated with the spin, and actions taken to enable the separation of NewCo and IBM’s growth strategy under current market conditions. The resulting targets remain rigorous and will continue to appropriately incent management in an important period. Consistent with the Company’s long-standing practice of setting rigorous performance plans, cumulative targets for both plans remain higher than comparable metrics shared with investors on January 21, 2021.

Unique Compensation Arrangements for James Whitehurst

In Mr. Whitehurst’s prior role as Chief Executive Officer of Red Hat, a portion of his 2020 compensation includes payments provided as a result of his participation in the following Red Hat compensation and benefit programs, as well as acquisition related agreements between IBM and Mr. Whitehurst, all of which existed prior to the close of the Red Hat acquisition on July 9, 2019.

Restricted Stock Awards

Mr. Whitehurst’s unvested Red Hat equity awards were converted into Restricted Stock Awards (RSAs) to receive IBM stock upon close of the Red Hat acquisition, at the same rate of conversion that was used to convert all of Red Hat’s outstanding stock into IBM stock.

Cash-Based Retention

As disclosed in the Merger Proxy Statement filed by Red Hat, Inc. with the SEC on December 12, 2018, in connection with the merger agreement between Red Hat and IBM, Mr. Whitehurst entered into a retention arrangement with IBM providing that Mr. Whitehurst shall be entitled to a $6M retention cash payment, with $2M paid on each of the 1st, 2nd, and 3rd anniversaries of the closing of the merger, respectively, subject to continued employment by IBM and accomplishment of key milestones for each of the three years.

The Committee approved the first $2M payment for Mr. Whitehurst in July 2020, in connection with the first anniversary of the closing of the merger. This payment was based on Mr. Whitehurst’s accomplishment of financial goals in delivering Red Hat revenue, pre-tax income and free cash flow, as well as increasing the number of clients utilizing IBM or Red Hat cloud container offerings, expanding Red Hat’s strategic partnerships, and successfully retaining key Red Hat talent in the first year following the closing of the merger.

Red Hat Annual Cash Bonus

Upon the close of the Red Hat acquisition, IBM adopted Red Hat’s Annual Cash Bonus Plan (ACB Plan) for Red Hat’s fiscal year 2020 (i.e., March 1, 2019 to February 29, 2020). As CEO of Red Hat, Mr. Whitehurst participated in this ACB Plan. Red Hat’s ACB Plan allowed for payouts from 0% - 200% of target incentive, based on accomplishment of Red Hat’s fiscal year financial performance (75% of payout) and performance against individual goals (25% of payout). For fiscal 2020, financial performance metrics included Red Hat’s Total Revenue, Cash from Operations, and Non-GAAP operating margin*, which were each weighted equally during this period.

Based on 166% achievement of the Plan’s financial performance metrics and 105% of Mr. Whitehurst’s individual goals, the Committee approved a payment of $2,487,375, or 150.75% of Mr. Whitehurst’s target bonus for this time period. A pro-rata portion of his total payment is included in the 2020 Summary Compensation Table, to reflect the amount earned for January and February of 2020. Effective March 1, 2020, Mr. Whitehurst became a participant of IBM’s Annual Incentive Program and was no longer a participant of Red Hat’s ACB Plan.

*Non-GAAP financial metric. See Appendix A for information on how we calculate this performance metric.

New for 2020: Mr. Whitehurst’s retention Performance Share Unit (RPSU) Award

In 2020, the Committee approved an RPSU grant of $15M in planned value for Mr. Whitehurst, which was awarded on March 2, 2020, prior to undertaking his role as IBM President. The RPSU was awarded as consideration for signing an IBM Non-Competition agreement (NCA). This NCA is broader than the non-competition provisions Mr. Whitehurst agreed to in connection with the acquisition of Red Hat, which limited competition within the then-existing scope of Red Hat’s business. The IBM NCA covers the scope of IBM’s business footprint, and aligns his NCA terms and conditions with other IBM leaders.

One-third of the RPSU will vest and pay out on July 31, 2021, with no additional performance criteria. Two-thirds of the RPSU will vest and pay out on July 31, 2023; the number of units that pay out for this portion of the award is subject to the following performance criteria:

 

  The relative ROIC modifier (previously described) that applies to PSUs for the 2020-2022 performance period may also modify the number of units paid for this portion of the award up or down by up to 20 points, based on IBM’s ROIC performance relative to broader market indices.

 

  As a result, the minimum number earned for this portion of the RPSU could be as low as 80% of target, and the maximum number earned could be up to 120% of target.

 


 

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LOGO

Section 2: Compensation Program Governance

Stockholder Engagement

IBM continually reviews and enhances its corporate governance and executive compensation programs. As part of this review, it is IBM’s longstanding practice to meet with a significant number of our largest investors during both the proxy season and the off-season, to solicit their feedback on a variety of topics.

In 2020, IBM once again engaged with over 100 institutional investors. Further, our process includes outreach to hundreds of thousands of individual registered and beneficial owners, who represent a majority of our retail base. The Company continued its enhanced engagement practices in 2020. IBM’s CEO, Executive Chairman, Lead Director, and members of IBM’s senior management participated in this engagement program. Overall, the Company offered to engage with investors representing more than 50% of the shares that voted on Say on Pay at the 2020 Annual Meeting. This in-depth engagement process provides valuable feedback to the Compensation Committee on an ongoing basis.

Overall, our stockholders continue to support the Company’s compensation programs and practices. We heard from stockholders that they are strongly supportive of the overall design of the program, which focuses on long-term financial performance that drives stockholder value. Still, the Committee and the Board review and consider all of the investor feedback in making decisions relating to the design of our executive compensation programs. For example, the following changes occurred in 2020 and 2021:

 

  The mix of pay in Mr. Krishna’s new compensation package as Chief Executive Officer, including his Target Incentive at 200% of base pay, was aligned to the market.

 

  The new AIP and PSU Program metrics and weighting introduced for 2021 reinforces the longer-term strategic shift in the Company’s business model announced in October 2020.

 

  In addition, the new Diversity modifier added to the 2021 AIP reinforces the Company’s focus on continued improvement in the diverse representation of the Company’s workforce.

 

  Given the importance of the next two years on executing the Company’s strategic shift to growth, and investors’ focus on ensuring senior leaders’ compensation payouts are aligned with driving further growth, the Committee approved changes to financial targets for the 2019-2021 and 2020-2022 PSU Program, which incorporate the planned 2021 spin-off of the managed infrastructure services business, as well as actions taken to enable the successful separation of NewCo and IBM’s growth strategy.

Compensation Practices

Overall, IBM’s compensation policies and decisions, explained in detail in this Compensation Discussion and Analysis, continue to be focused on long-term financial performance to drive stockholder value.

The table below highlights practices that IBM embraces in support of strong governance practices.

 

 

What We Do

 

 

 

What We Don’t Do

 

 

LOGO   Tie a significant portion of pay to Company performance

 

LOGO   Mitigate risk taking by emphasizing long-term equity incentives, placing caps on potential payments, and maintaining robust clawback provisions

 

LOGO   Require significant share ownership by the Chairman and CEO, Vice Chairman, President, Executive Vice President and Senior Vice Presidents

 

LOGO   Utilize noncompetition and nonsolicitation agreements for senior executives

 

LOGO   Remove impact of share repurchase on executive incentives

 

LOGO   No individual severance or change-in-control agreements for executive officers

 

LOGO   No excise tax gross-ups for executive officers

 

LOGO   No dividend equivalents on unearned RSUs/PSUs

 

LOGO   No hedging/pledging of IBM stock

 

LOGO   No stock option repricing, exchanges or options granted below market value

 

LOGO   No guaranteed incentive payouts for executive officers

 

LOGO   No accelerated payment of equity awards for executive officers

 

LOGO   No above-market returns on deferred compensation plans

 

 

 

 


 

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Personal Stake in IBM’s Future through Stock Ownership Requirements

Investors want the leaders of their companies to act like owners. That alignment, we believe, works best when senior leaders have meaningful portions of their personal holdings invested in the stock of their company. This is why IBM sets significant stock ownership requirements for IBM’s Chairman and CEO, President, Executive Vice President (EVP) and Senior Vice Presidents (SVPs). Within 5 years of hire or promotion, each is required to own a minimum number of IBM shares or equivalents that is equal to a multiple of salary at the time of hire or promotion. The minimum multiple of salary required is in excess of standard market practice

Stock Ownership Requirements

 

 

 

Ownership Requirements as a Multiple of Salary

 

NEO Name

 

    IBM Minimum Requirement    

 

 

    Median Peer Group Minimum Requirement    

 

A. Krishna

10

6-7

V.M. Rometty

10

6-7

J.J. Kavanaugh

7

4

J.M. Whitehurst

7

4

J.E. Kelly III

7

4

M.H. Browdy

7

4

In less than a year as CEO, Mr. Krishna owns common stock and stock-based holdings near his ownership requirement (about 9 times his base salary) as of December 31, 2020. Mrs. Rometty still owned common stock and stock-based holdings with a value of more than 30 times her base salary upon her retirement on December 31, 2020. More information on Mr. Krishna’s and Mrs. Rometty’s holdings can be found in the Common Stock and Stock-Based Holdings of Directors and Executive Officers Table. As a group, the CEO, Executive Chairman, President, EVP and SVPs owned shares or equivalents valued at over $160 million as of December 31, 2020; in fact, as of that date, this group held, on average, more than 9 times their base salary.

The following table illustrates which equity holdings count towards stock ownership requirements:

 

      
   

What Counts

  

What Does Not Count

LOGO   IBM shares owned personally or by members of the
officer’s immediate family sharing the same household

 

LOGO   Holdings in the IBM Stock Fund of the 401(k) Plus Plan
and the Excess 401(k) Plus Plan

 

LOGO   Shares of IBM stock deferred under the Excess 401(k) Plus Plan

 

  

LOGO   Unvested equity awards, including PSUs, RPSUs, RSUs, and RRSUs

 

LOGO   Unexercised stock options

Stock Ownership Continues Beyond Retirement

Finally, our programs are designed to ensure alignment with IBM’s long-term interests past the retirement date for our CEO, Executive Chairman, President, EVP and SVPs. Share price performance and long-term goal achievement continue to impact the Long-Term Incentive Plan for these retired executives for at least two and a half years post retirement. For example, shares for Mrs. Rometty that remained restricted and subject to performance of IBM represent more than 2 times her share ownership requirement as of her December 31, 2020 retirement date; assuming future performance at target.

Compensation Committee Consultant

The Committee enters into a consulting agreement with its outside compensation consultant on an annual basis. In 2020, the Committee retained Semler Brossy Consulting Group, LLC (Semler Brossy) as its compensation consultant to advise the Committee on market practices and specific IBM policies and programs. Semler Brossy reports directly to the Compensation Committee Chairman and takes direction from the Committee. The consultant’s work for the Committee includes data analyses, market assessments and preparation of related reports. From time to time, the Committee seeks the views of the consultant on items such as incentive program design and market practices. The work done by Semler Brossy for the Committee is documented in a formal agreement which is executed by the consultant and the Committee. Semler Brossy does not perform any other work for IBM, other than services provided to IBM’s Directors and Corporate Governance Committee. The Committee determined that there is no conflict of interest with regard to Semler Brossy.

 


 

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LOGO

How Compensation Decisions are Made

At any level, compensation reflects an employee’s value to the business — market value of skills, individual contribution and business results. To be sure we appropriately assess the value of senior executives, IBM follows an evaluation process, described here in some detail:

1. Making Annual Performance Commitments

All IBM employees, including the CEO, Executive Chairman, President, EVP and SVPs, develop goals, both qualitative and quantitative, that they seek to achieve in a particular year in support of the business. The Board of Directors reviews and approves the CEO’s and the Executive Chairman’s performance goals and formally reviews progress and outcomes. As part of this process, many factors are considered, including an understanding of the business risks associated with the performance goals.

2. Determining Annual Incentive Payouts

Evaluation of CEO and Executive Chairman Results by the Compensation Committee

The Chair of the Compensation Committee works directly with the Committee’s compensation consultant to provide a decision-making framework for use by the Committee in determining annual incentive payouts for both the CEO and the Executive Chairman. This framework considers the CEO’s and the Chairman’s self-assessment of performance against commitments in the year, both qualitative and quantitative, and also considers progress against strategic objectives, an analysis of IBM’s total performance over the year and the overall Company incentive score. The Committee considers all of this information in developing its recommendations, which are then presented to the independent members of the IBM Board of Directors for further review, discussion, and final approval.

Evaluation of President, EVP and SVP Results by the CEO and the Compensation Committee

Executives work with their managers throughout the year to update their own results against their stated goals. The self-assessments of the President, EVP and SVPs are reviewed by the Senior Vice President of Human Resources (SVP HR) and the CEO, who evaluate the information.

Following this in-depth review and taking into account the Company incentive score, the CEO makes compensation recommendations to the Compensation Committee based on an evaluation of the President, EVP and each SVP’s performance for the year, and the Committee decides whether to approve or adjust the CEO’s recommendations for the President, EVP and SVPs. The Committee then presents the compensation decisions for the Chief Financial Officer to the independent members of the IBM Board of Directors for ratification.

3. Setting Competitive Target Pay

Approach to Benchmarking

IBM participates in several executive compensation surveys that provide general trend information and details on levels of salary, target annual incentives and long-term incentives, the relative mix of short- and long-term incentives, and mix of cash and stock-based pay. Given the battle for talent that exists in our industry, the benchmark companies that are used by the Compensation Committee to guide its decision making have included a broad range of key information technology companies, to help us identify trends in the industry. We also include companies outside our industry, with stature, size, and complexity that approximate our own, in recognition of the flow of executive talent in and out of IBM from other industries. The surveys and benchmark data are supplemented by input from the Compensation Committee’s outside consultant on factors such as recent market trends. The Committee reviews and approves this list annually.

The Compensation Committee re-examined the benchmark group for 2020 and determined that companies which meet the following criteria should be included in the 2020 benchmark group:

 

  Companies in the technology industry with revenue that exceeds $15 billion, plus

 

  Additional companies (up to two per industry if available) in industries other than technology, with revenue that exceeds $40 billion and that have a global complexity similar to IBM, and whose business strategy results in substantial competition for senior leadership talent.

For 2020 compensation decisions, the Committee approved the following benchmark group using the criteria above.

 

 


 

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2020 BENCHMARK GROUP:

 

 

 

Accenture

  Caterpillar   General Electric  

Oracle

Alphabet

  Chevron   Hewlett Packard Enterprise  

PepsiCo

Amazon.com

  Cisco Systems   HP Inc.  

Pfizer

Apple

  Dow   Intel  

United Technologies

AT&T

  ExxonMobil   Johnson & Johnson  

UPS

Boeing

  Ford   Microsoft  

Verizon

 

For 2021 compensation decisions, the Committee approved the following benchmark group, which they believe is a better balance between prominent technology competitors and large-scale companies, and more accurately represents IBM’s competition for senior leadership talent. The data from compensation surveys and related sources form the primary external view of the market. In consideration of size and complexity, IBM’s philosophy is to generally target the 50th percentile of the market for cash and total compensation.

2021 BENCHMARK GROUP:

 

 

 

Accenture

  Boeing   Johnson & Johnson  

Salesforce

Alphabet

  Cisco Systems   Microsoft  

United Technologies

Amazon.com

  Dow   Oracle  

UPS

Apple

  General Electric   PepsiCo  

Verizon

AT&T

  Hewlett Packard Enterprise   Pfizer  

Bank of America

 

  Intel   Qualcomm  

Approach to Determining Individual Compensation

For individual compensation decisions, the benchmark information is used together with an internal view of individual performance relative to other executives and recognizing that the skills and experience of our senior executives are highly sought after by other companies and, in particular, by IBM’s competitors. Because factors such as performance and retention, as well as size and complexity of the job role, are considered when compensation decisions are made, the cash and total compensation for an individual named executive officer may be higher or lower than the target reference point of the broader benchmark group.

Evaluation of CEO and Executive Chairman Target Pay by the Compensation Committee

The Chair of the Compensation Committee works directly with the Committee’s compensation consultant to provide a decision-making framework for use by the Committee in setting target compensation opportunities for both the CEO and Executive Chairman. The independent members of the IBM Board of Directors review and provide final approval.

Evaluation of President/EVP/SVP Target Pay by the CEO and the Compensation Committee

The CEO makes compensation recommendations on the President’s, EVP’s and SVPs’ target compensation to the Compensation Committee. The Committee evaluates all of the factors considered by the CEO and reviews compensation summaries that tally the dollar value of all compensation and related programs, including salary, annual incentive, long-term compensation, deferred compensation, retention payments and pension benefits. These summaries provide the Committee with an understanding of how their decisions affect other compensation elements, and the impact of separation of employment or retirement. The Committee decides whether to approve or adjust the CEO’s recommendations for the President, EVP and SVPs. The Committee then presents the compensation decisions for the Chief Financial Officer to the independent members of the IBM Board of Directors for ratification.

 


 

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Section 3: Compensation Decisions for the CEO, Executive Chairman, and Named Executive Officers

 

 

2020 Annual Incentive Decision for the CEO

 
For 2020 performance, the Board approved an annual incentive payment of $2,181,000, which represented 85% of Mr. Krishna’s target opportunity and was in line with the Company incentive score.
 
In addition to overall IBM 2020 revenue performance of $73.6 billion and pre-tax income of $4.6 billion, the Compensation Committee noted the following achievements for Mr. Krishna, which have positioned IBM for sustained growth going forward:
   

Business Results

 

 IBM Hybrid Cloud revenue grew to over $25B, now 34% of IBM and growing 20% at constant currency, excluding divestitures*.

 

 Red Hat revenue growth of 18% at constant currency normalized for historical comparability*.

 

 IBM Z grew at 1% at constant currency*.

 

Portfolio and Investment

 

 Announced acceleration of IBM’s Hybrid Cloud growth strategy to drive sustainable mid-single digit revenue growth, including the separation of the managed infrastructure services business into a new $19B** market-leading public company.

 

 Expanded our Hybrid Cloud platform to over 2,800 clients and 260 GBS engagements.

 

 Closed 7 strategic acquisitions across Cloud and Cognitive Software and GBS, focused on expanding Hybrid Cloud and AI capabilities.

 

Leadership in the Enterprise

 

 Continued advanced leadership in quantum computing; deployed 65 qubit system. Total of 14 new systems deployed, of which 13 are quantum volume 32 or higher.

 

Societal Impact

 

 AI Ethics Board delivered real-time guidance in response to COVID-19 and social justice use cases in emerging areas.

 

 Increased the P-Tech 6-year high school concept reach with 243 schools across 28 countries, this innovative education model enables low income students entry to high-paying tech jobs without a college degree. Launched the Open P-Tech learning platform, which now has 130,000 users.

 

Talent Development and Leadership

 

 Increased strategic skill depth by 42% year-to-year.

 

 Continued strengthening of the inclusive IBM culture, with representation up year-to-year across all areas.

 

 Record employee engagement continued in a challenging environment, up over 2 points year-to-year.

 

 

 

2021 Compensation Decisions for the CEO

 

For 2021, the independent members of the Board made no changes to Mr. Krishna’s base salary or target annual incentive. He was granted an annual long-term incentive award valued at $13.75M. This grant comprised 65% of 2021-2023 Performance Share Units and 35% of Restricted Stock Units. For 2021, 65% of Mr. Krishna’s annual total target compensation is tied to performance-based incentives.

 

 

*

Non-GAAP financial metrics. See Appendix A for information on how we calculate these performance metrics.

 

**

Trailing twelve months revenue through June 30, 2020, adjusted to reflect estimated historical sales between IBM and NewCo.

Compensation for the Executive Chairman

Mrs. Rometty’s bonus for 2020 was $4.25M, which represents 85% of her target bonus for the year and is in line with the Company incentive score. The Committee considered Mrs. Rometty’s efforts in ensuring a successful transition to Mr. Krishna throughout 2020 in recommending this bonus. Key accomplishments included:

 

  Mentored CEO on Board matters and transitioned key government, client and investor relationships.

 

  Led the Board, including continued Board refreshment with the naming of one new director. Average Board tenure is now 6 years (below S&P 500 average of 8 years).

 

  Continued to represent IBM as a leading voice on policy matters and in forums such as the Business Round Table, Business Council, China Development Forum, Singapore Advisory Board, Business Executives for National Security, and France Tech for Good.

As disclosed by the Company in December 2020, the Board approved certain arrangements in connection with Mrs. Rometty’s retirement from the Company effective December 31, 2020. The arrangements approved by the Board included a post-retirement consulting arrangement for a three-year period following her retirement for services that the Company may ask her to provide from time to time, as an independent contractor. The fee for such services would be $20,000 per day for each day she provides 4 or more hours of services, and $10,000 for each day that she provides less than four hours. To help facilitate these services, the Board also agreed to provide continued use of IBM office space and an IBM assistant during this three-year consulting arrangement.

 

 


 

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2020 Annual Incentive Decisions for Mr. Kavanaugh, Mr. Whitehurst, Dr. Kelly, and Ms. Browdy

The Compensation Committee also made decisions for the following named executive officers (NEOs), based on overall corporate performance as described in the Business Highlights and Executive Summary and an assessment of their individual contributions, many of which are summarized below:

 

James J. Kavanaugh

 

Senior Vice President and Chief Financial Officer

    

Achieved over $14B year-end cash balance by generating $10.8B in free cash flow*, with 196% realization of GAAP Net Income, taking prudent funding actions while reducing overall debt, and leading efforts to optimize IBM’s financing portfolio.

Announced the acceleration of IBM’s Hybrid Cloud growth strategy to drive sustainable mid-single digit revenue growth, including the separation of the managed infrastructure services business into a new $19B** market leading public company.

In response to the global pandemic, transitioned IBM’s global workforce of ~350k employees to remote work, ensuring continuity of IBM business.

 

James M. Whitehurst

 

President

    

Drove portfolio optimization and expansion, with 67% of investment focused in growth offerings.

Led cross-IBM growth through ecosystem and increased ecosystem commitment with GSIs Cloud Paks.

Continued acceleration of Red Hat acquisition and synergy, delivering year-to-year revenue growth and over 2,800 Hybrid Cloud platform clients.

 

John E. Kelly III

 

Executive Vice President

    

Achieved #1 patent position for 28th consecutive year, with over 9,100 patents in 2020.

Co-led IBM COVID-19 Task Force; ensured continuity of business while protecting all employees worldwide.

Built world class Privacy and Ethics team, and established a robust AI governance framework, including an AI Ethics Board.

 

Michelle H. Browdy

 

Senior Vice President and General Counsel

    

Responsible for legal and regulatory support worldwide for all aspects of the spin-off of the Company’s managed infrastructure services business.

Continued to enhance IBM’s cybersecurity and privacy posture globally, providing legal, security and policy support and driving compliance with new global privacy regulations.

Published 30th Annual Environmental Report and continued to drive ESG leadership.

*Non-GAAP financial metric. See Appendix A for information on how we calculate this performance metric.

 

**Trailing

twelve months revenue through June 30, 2020, adjusted to reflect estimated historical sales between IBM and NewCo.

 


 

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Following the process outlined above and based on business and individual performance, the Compensation Committee approved the 2020 annual incentive payouts below for these NEOs:

 

Name

   2020 Annual Incentive Payouts(1)

J.J. Kavanaugh

  

$1,176,300

J.M. Whitehurst(2)

  

1,455,813

J.E. Kelly III(3)

  

820,400

M.H. Browdy

  

1,109,520

 

 

(1)

The named executive officers other than Mr. Whitehurst each had an incentive target equal to 135% of their salary for 2020. Mr. Whitehurst had an incentive target of 150% of his prorated salary from March 1, 2020 – December 31, 2020.

 

(2)

Mr. Whitehurst’s payment also includes the prorated portion of Red Hat’s Annual Cash Bonus earned for January 1, 2020 – February 29, 2020, in addition to his prorated AIP earned for March 1, 2020 – December 31, 2020.

 

(3)

Dr. Kelly retired from the Company on December 31, 2020.

2021 Compensation Decisions for Mr. Kavanaugh, Mr. Whitehurst, and Ms. Browdy

The Committee also approved the following compensation elements for 2021: base salary, annual incentive target, Performance Share Unit (PSU) and Restricted Stock Unit (RSU) grants under the Long-Term Performance Plan. For Long-Term Incentive Plan grants, the mix of vehicles is 65% PSUs and 35% RSUs, which aligns with market practice. This mix provides competitive pay, while at the same time ensuring a strong link between pay and performance, and creates the right balance relative to peers with which we compete for talent. For 2021, based on the compensation decisions detailed below at target, 63% of the NEOs’ (excluding the Chairman and CEO) pay is at risk.

 

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63% of the NEOs’ (excluding the Chairman and CEO) annual total target compensation is at risk

 

  

 

    

 

    

2021 Cash(1)

           

2021 Long-Term Incentive Awards(2)

Name

  

Salary Rate

    

Annual Incentive Target

            

Performance Share Units

    

Restricted Stock Units

J.J. Kavanaugh

  

 

$968,000

 

  

 

$1,307,000

 

           

 

$5,362,500

 

  

$2,887,500

J.M. Whitehurst

  

 

1,200,000

 

  

 

1,800,000

 

           

 

7,150,000

 

  

3,850,000

M.H. Browdy

  

 

894,000

 

  

 

1,206,000

 

           

 

3,087,500

 

  

1,662,500

 

 

(1)

Mr. Kavanaugh, Mr. Whitehurst, and Ms. Browdy did not receive an increase to their Salary or Annual Incentive Target in 2021.

 

(2)

PSUs and RSUs will be granted, if applicable, on June 8, 2021 to the named executive officers, including the Chairman and the CEO. The actual number of units granted on this date will be determined by dividing the value shown above by the average of IBM’s closing stock price for the 30 active trading days prior to the date of grant. The performance period for the PSUs ends December 31, 2023, and the award will pay out in February 2024. The restricted stock units will vest 25% per year on each anniversary of the date of grant.

 

  

Note: Annual PSU and RSU grant excludes a special one-time retention PSU grant for Jim Whitehurst on March 2, 2020, prior to him becoming President of IBM.

 

 


 

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Section 4: Additional Information

Compensation Program as it Relates to Risk

IBM management, the Compensation Committee and the Committee’s outside consultant review IBM’s compensation policies and practices, with a focus on incentive programs, to ensure that they do not encourage excessive risk taking. This review includes the cash incentive programs and the long-term incentive plans that cover executives and employees. Based on this comprehensive review, we concluded that our compensation program does not encourage excessive risk taking for the following reasons:

 

  Our programs appropriately balance short- and long-term incentives, with approximately 74% of 2021 annual total target compensation for the Chairman and CEO, President, and SVPs as a group provided in equity.

 

  Our executive compensation program pays for performance against financial targets that are set to be challenging to motivate a high degree of business performance, with an emphasis on longer-term financial success and prudent risk management.

 

  Our incentive plans include a profit metric as a component of performance to promote disciplined progress toward financial goals. None of IBM’s incentive plans are based solely on signings or revenue targets, which mitigates the risk of employees focusing exclusively on the short term.

 

  Qualitative factors beyond the quantitative financial metrics are a key consideration in the determination of individual executive compensation payments. How our executives achieve their financial results, integrate across lines of business and demonstrate leadership consistent with IBM values are key to individual compensation decisions.

 

  As explained in the 2020 Potential Payments Upon Termination Narrative, we further strengthened our retirement policies on equity grants for our senior leaders beginning in 2009 to ensure that the long-term interests of IBM continue to be the focus, even as these executives approach retirement.

 

  Our stock ownership guidelines require that the Chairman, CEO, President, EVP, and each SVP hold a significant amount of IBM equity to further align their interests with stockholders over the long term.

 

  IBM has a policy that requires a clawback of cash incentive payments in the event that an executive officer’s conduct leads to a restatement of IBM’s financial results. Likewise, IBM’s equity plan has a clawback provision which states that awards may be cancelled and certain gains repaid if a senior executive engages in activity that is detrimental to IBM. To further reinforce our commitment to ethical conduct, the IBM Excess 401(k) Plus Plan allows the clawback of certain IBM contributions if a participant engages in activity that is detrimental to IBM.

We are confident that our compensation program is aligned with the interests of our stockholders, rewards for performance and represents strong executive compensation governance practices.

Equity Award Practices

Under IBM’s long-standing practices and policies, all equity awards are approved before or on the date of grant. The exercise price of at-the-money stock options is the average of the high and low market price on the date of grant or, in the case of premium-priced stock options, for example, 10% above that average, or as specified by the Compensation Committee.

The approval process specifies the individual receiving the grant, the number of units or the value of the award, the exercise price or formula for determining the exercise price, and the date of grant. In the case of planned grant value, the number of shares granted are determined by dividing the planned value by the average of IBM’s closing stock price for the 30 active trading days prior to the date of grant.

As with all compensation decisions, the independent members of the Board approve all equity awards for the Chairman and CEO, and ratify all equity awards for the Chief Financial Officer. In addition, all equity awards for the President, the EVP, and each SVP are approved by the Compensation Committee. All equity awards for employees other than the Chairman, CEO, President, EVP and SVPs are approved by the CEO, the EVP and SVPs pursuant to a series of delegations that were approved by the Compensation Committee, and the grants made pursuant to these delegations are reviewed periodically with the Committee.

Equity awards granted as part of annual total compensation for senior leaders and other employees are made on specific cycle dates scheduled in advance. IBM’s policy for new hires and promotions requires approval of any awards before or on the grant date of the award.

IBM does not have any plans, programs or agreements that would provide any payments to any of the named executive officers upon a change in control of IBM, a change in the named executive officer’s responsibilities or a constructive termination of the named executive officer.

 


 

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Ethical Conduct

Every executive is held accountable to comply with IBM’s high ethical standards: IBM’s Values, including “Trust and Personal Responsibility in all Relationships,” and IBM’s Business Conduct Guidelines. This responsibility is reflected in each executive’s performance goals, and is reinforced through each executive’s annual certification to the IBM Business Conduct Guidelines.

An executive’s compensation, including annual cash incentive payments, is tied to compliance with these standards; compliance is also a condition of IBM employment for each executive.

IBM’s equity plans and agreements have a clawback provision — awards may be cancelled and certain gains repaid if an executive engages in activity that is detrimental to IBM, such as violating IBM’s Business Conduct Guidelines, disclosing confidential information or performing services for a competitor. To further reinforce our commitment to ethical conduct, the Excess 401(k) Plus Plan allows the clawback of certain IBM contributions if a participant engages in activity that is detrimental to IBM.

In addition, approximately 2,100 of our key executives (including each of the named executive officers) have agreed to a noncompetition, nonsolicitation agreement that prevents them from working for certain competitors within 12 months of leaving IBM or soliciting employees after leaving IBM.

The Committee has also implemented the following policy for the clawback of cash incentive payments in the event an executive officer’s conduct leads to a restatement of IBM’s financial results:

 

To the extent permitted by governing law, IBM will seek to recoup any bonus or incentive paid to any executive officer if: (i) the amount of such payment was based on the achievement of certain financial results that were subsequently the subject of a restatement; (ii) the Board determines that such officer engaged in misconduct that resulted in the obligation to restate; and (iii) a lower payment would have been made to the officer based upon the restated financial results.

Hedging and Pledging Practices

IBM has two senior leadership teams: the Performance Team and the Acceleration Team. The Performance Team consists of approximately 65 of our senior leaders who run IBM business units and geographies and includes the Chairman and CEO, President, EVP, and each SVP. The team is accountable for business performance and the development of cross-unit strategies. The Acceleration Team, which includes all members of the Performance Team, consists of a select group of approximately 350 executives. This team is charged with accelerating IBM’s growth through leadership initiatives to engage their teams and promote innovation, speed, and simplicity in service of our clients.

IBM does not allow any member of the IBM Board of Directors or any member of the Acceleration Team, including any named executive officer, to hedge the economic risk of their ownership of any IBM securities, which includes entering into any derivative transaction on IBM stock (e.g., any short-sale, prepaid variable forward contract, equity swap, collars, exchange funds) or to pledge any IBM securities at any time, which includes having IBM stock in a margin account or using IBM stock as collateral for a loan. Further, IBM does not allow any employee granted equity awards through the IBM Long-Term Incentive Plan to hedge or pledge those securities.

Tax Considerations

Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended, limits deductibility of compensation in excess of $1 million paid to IBM’s covered employees. Until the Tax Cut and Jobs Act was signed into law on December 22, 2017, performance-based compensation was deductible, even if it caused the covered employee to have compensation in excess of $1 million. The Tax Cut and Jobs Act eliminated this performance-based compensation deduction going forward, but provided limited transition relief for compensation paid pursuant to a contract in effect as of November 2, 2017 that is not materially modified after such date. This means that certain outstanding performance-based compensation may continue to be deductible under Section 162(m), but that all compensation after November 2, 2017, will be subject to the $1 million cap on deductibility. IBM will seek deductions for compensation under the transition relief consistent with applicable law. The Tax Cut and Jobs Act also expanded who a covered employee is under Section 162(m). Effective for 2017 and thereafter, a covered employee under Section 162(m) is the CEO, the CFO (who previously was not included) and each of the other three highest-paid executive officers.

Although this tax deduction for performance-based compensation has been eliminated for awards after November 2, 2017, IBM continues to believe that a strong link between pay and performance is critical to align executive and stockholder interests. IBM and the Committee will continue to ensure that a significant portion of pay for our EVP and SVPs, including the Chairman and CEO, is at risk and subject to the attainment of performance goals.

 

 


 

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2020 Summary Compensation Table and Related Narrative

 

Salary (Column (c))

Amounts shown in the salary column reflect the salary amount paid to each named executive officer during 2020.

 

  Salaries for Mr. Krishna and Mr. Whitehurst increased effective April 6, 2020, upon assuming their new roles as CEO and President, respectively. Mrs. Rometty did not receive a salary increase in the years shown. 2020 salary increases for the other named executive officers, if applicable, took effect on July 1, 2020.

Bonus (Column (d))

As described in Section 1 of the 2020 Compensation Discussion and Analysis, during 2020, Mr. Whitehurst received the first of three potential annual retention payments under a retention arrangement entered into between Mr. Whitehurst and IBM prior to the close of the Red Hat acquisition. No bonuses were awarded to the other named executive officers in the years shown in the 2020 Summary Compensation Table.

Stock Awards (Column (e))

The amounts shown are the aggregate grant date fair values of Performance Share Units (PSUs), retention Performance Share Units (RPSUs), and Restricted Stock Units (RSUs) granted in each fiscal year shown, computed in accordance with accounting guidance (excluding any risk of forfeiture as per SEC regulations). One unit is equivalent to one share of IBM common stock. The values shown for the PSUs and RPSUs are calculated at the Target number, as described below. Values reflect an adjustment for the exclusion of dividend equivalents.

Performance Share Units (PSUs)

The following describes the material terms and conditions of PSUs as reported in the column titled Stock Awards (column (e)) in the 2020 Summary Compensation Table and in the 2020 Grants of Plan-Based Awards Table under the heading Estimated Future Payouts Under Equity Incentive Plan Awards (columns (f), (g) and (h)).

General Terms

 

  Performance targets are typically set at the beginning of the three-year performance period and are approved by the Compensation Committee (for example, targets for the 2018–2020 performance period were set for cumulative three-year attainment in operating earnings per share and free cash flow in the beginning of 2018).

 

  At the end of the three-year performance period, the Compensation Committee approves the determination of actual performance relative to pre-established targets, and the number of PSUs is adjusted up or down based on the approved actual performance. The number of PSUs that pay out may be modified further based on IBM’s Return on Invested Capital (ROIC) performance relative to broader market indices.

 

  PSUs granted to U.S. executives vest on December 31 of the end of the performance period. Payout for all PSUs is in the February following the end of the performance period.

Vesting and Payout Calculations

 

  The performance period for the awards granted in 2020 is January 1, 2020 through December 31, 2022, and the awards will pay out in February 2023. PSU awards granted in 2020 will be adjusted for performance, as described below.

 

  Outstanding PSUs are typically cancelled if the executive’s employment is terminated. See the 2020 Potential Payments Upon Termination Narrative for information on payout of unvested PSUs upon certain terminations.

 

  Payout will not be made for performance below the thresholds, as described below.

 

  See Section 1 of the 2020 Compensation Discussion and Analysis for more information on the PSU program.

Threshold Number (listed in column (f) of the 2020 Grants of Plan Based Awards Table):

 

 

The Threshold Number of PSUs is 25% of the Target number.

 

 

The Threshold Number of PSUs will be earned for achievement of the Threshold Level performance for both business objectives (operating earnings per share and free cash flow), which is 70% of the target for each objective.

 

 

If either business objective is below 70% of the target, the Threshold Number of PSUs would be reduced by the relative weighting of that objective (e.g., 70% for operating earnings per share , or 30% for free cash flow).

Target Number (listed in column (g) of the 2020 Grants of Plan-Based Awards Table):

 

 

The Target number of PSUs will be earned if 100% of the target for both business objectives are achieved.

Maximum Number (listed in column (h) of the 2020 Grants of Plan-Based Awards Table):

 

 

The Maximum number of PSUs earned based on business objectives is 150% of the Target number.

 

 

The Maximum number of PSUs will be earned for achieving 120% of the target for both business objectives.

The relative ROIC modifier may modify the payout up or down by up to 20 points, based on IBM’s ROIC performance relative to broader market indices. As a result, the total Maximum number of PSUs earned could be up to 170% of the Target number.

Retention Performance Share Unit Grant (RPSUs)

As described in Section 1 of the Compensation Discussion and Analysis, Mr. Whitehurst was awarded an RPSU grant on March 2, 2020, prior to undertaking his role as IBM President. The key RPSU terms of this award is consistent with PSU awards described above, with the exception of the following unique terms.

Vesting and Payout – RPSUs that vest on July 31, 2021

 

 

One-third of Mr. Whitehurst’s RPSU award will vest and pay out on July 31, 2021, with no additional performance criteria required (listed in column (i) of the 2020 Grants of Plan based awards table).

 

 


 

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Vesting and Payout – RPSUs that vest on July 31, 2023

 

  Two-thirds of Mr. Whitehurst’s RPSU award will vest and pay out on July 31, 2023 (payout at target is listed in column (g) of the 2020 Grants of Plan Based Awards Table). The final units paid may be adjusted up or down by up to 20 points based on IBM’s relative ROIC modifier for the 2020-2022 performance period (described above).

 

  As a result, the total Minimum number of these RPSUs earned could be 80% of the RPSUs granted (listed in column (f) of the 2020 Grants of Plan based awards table), and the total Maximum number of these RPSUs earned could be up to 120% of the RPSUs granted (listed in column (h) of the 2020 Grants of Plan based awards table).

Restricted Stock Units (RSUs)

RSUs may include RRSUs. In 2020, no RRSUs were granted to named executive officers.

Vesting and Payout

 

  RSUs fully vest in four years, with 25% vesting each year.

 

  Payout of RSUs at each vesting date is typically contingent on the recipient remaining employed by IBM through that vesting date. See the 2020 Potential Payments Upon Termination Narrative for information on payout of unvested RSUs upon certain terminations.

 

  All deferred shares, comprised of shares that were deferred by the participant (Deferred IBM Shares), in the 2020 Nonqualified Deferred Compensation Table may include certain previously-granted RRSUs. Since 2008, executives may not elect to defer payment of RSUs.

Non-Equity Incentive Plan Compensation (Column (g))

Amounts in this column include payments under IBM’s Annual Incentive Program (AIP).

 

  All named executive officers participate in this program. The performance period is the fiscal year (January 1 through December 31).

 

  Mr. Krishna had an annual target of 135% of his salary rate when he was an SVP, prorated for the first three months of 2020. His annual target increased to 200% of his salary rate effective April 2020 (upon becoming CEO), which was prorated for the remaining nine months of 2020. The payout reflects amounts earned toward his prorated targets as SVP and as CEO, respectively. Mrs. Rometty had a target of $5 million for 2020.

 

  Mr. Whitehurst, who began participating in AIP on March 1, 2020, had a target of 150% of his prorated salary from March 1, 2020 – December 31, 2020. See column (d) of the 2020 Grants of Plan-Based Awards Table for the target payout.

 

  The other named executive officers had targets of 135% of their salary rate for 2020. See column (d) of the 2020 Grants of Plan-Based Awards Table for the target payout.
  Threshold payout (column (c) of the 2020 Grants of Plan-Based Awards Table) for each named executive officer is $0.

 

  Maximum payout (column (e) of the 2020 Grants of Plan-Based Awards Table) for the CEO and the Executive Chairman is two times the target.

 

  Maximum payout for each of the other named executive officers is three times the target.

See Section 1 of the 2020 Compensation Discussion and Analysis for more information on performance targets, vesting and payout of the AIP.

Mr. Whitehurst’s payment for January and February 2020

 

  Amounts in this column for Mr. Whitehurst also include a prorated payment from Red Hat’s Annual Cash Bonus Plan for January and February 2020. See Section 1 of the Compensation Discussion and Analysis for additional details.

Change in Retention Plan Value (Column (h))

 

  Amounts in the column titled Change in Retention Plan Value represent the annual change in Retention Plan Value from December 31, 2019 to December 31, 2020. Messrs. Krishna and Whitehurst, and Ms. Browdy do not have a benefit under the Retention Plan.

 

  See the 2020 Retention Plan Narrative for a description of the Retention Plan.

Change in Pension Value (Column (h))

 

  Amounts in the column titled Change in Pension Value represent the annual change in Pension Value from December 31, 2019 to December 31, 2020 for each eligible named executive officer. Neither Mr. Whitehurst nor Ms. Browdy have a benefit under any IBM defined benefit pension plan.

 

  See the 2020 Pension Benefits Narrative for a description of the applicable defined benefit pension plan.

Nonqualified Deferred Compensation Earnings (Column (h))

 

  IBM does not pay above-market or preferential earnings on nonqualified deferred compensation.

All Other Compensation (Column (i))

Amounts in this column represent the following as applicable:

Tax Reimbursements

 

  Amounts represent payments that IBM has made to the named executive officers to cover taxes incurred by them for certain business-related taxable expenses.

 

  These expenses for a named executive officer may include: cost of family travel to and attendance at business-related events, business-related local lodging and incidental expenses, certain relocation costs in accordance with IBM’s US relocation policy, and business-related ground transportation expenses (see Ground Transportation below).
 
 

 


 

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IBM Contributions to Defined Contribution Plans

 

  Amounts represent IBM matching and automatic contributions to the individual accounts for each named executive officer under IBM’s 401(k) Plus and Excess 401(k) Plus Plans. Mr. Whitehurst’s amount also includes a $785 matching contribution in accordance with the terms of Red Hat, Inc.’s 401(k) Plan. This plan was generally available to all of Red Hat, Inc.’s employees.

 

  Under IBM’s 401(k) Plus Plan, eligible participants can receive matching contributions, ranging from 2 to 6%, up to a percentage of eligible compensation (subject to Internal Revenue Code compensation limits), depending on a person’s date of hire and job role. In addition, for all eligible participants, IBM makes automatic contributions, ranging from 1% to 4%, equal to a certain percentage of eligible compensation (subject to Internal Revenue Code compensation limits), which generally depends on the participant’s pension plan eligibility on December 31, 2007. In 2020, Mr. Krishna, Mrs. Rometty, Mr. Kavanaugh and Dr. Kelly are eligible to receive matching contributions up to 6% of eligible pay. Mr. Whitehurst and Ms. Browdy are eligible for up to 5% matching contributions. The automatic contribution percentage was 4% for Mrs. Rometty; 2% for Mr. Krishna, Mr. Kavanaugh, and Dr. Kelly; and 1% for Mr. Whitehurst and Ms. Browdy.

 

  Under IBM’s Excess 401(k) Plus Plan, IBM makes matching contributions and automatic contributions equal to a percentage of the sum of (i) the amount the participant elects to defer under the Excess 401(k) Plus Plan, and (ii) the participant’s eligible compensation after reaching the Internal Revenue Code compensation limits. The matching and automatic contributions for the Excess 401(k) Plus Plan for each named executive officer are the same percentages as described for the IBM 401(k) Plus Plan above.

 

  See the 2020 Nonqualified Deferred Compensation Narrative for additional details on the nonqualified deferred compensation plan.

Life and Travel Accident Insurance Premiums

 

  Amounts represent insurance premiums paid by IBM on behalf of the named executive officers.

 

  These executive officers are covered by life insurance policies under the same terms as other U.S. full-time regular employees.

 

  Life insurance for executives hired by IBM U.S. before January 1, 2004, including Mr. Krishna, Mrs. Rometty, Mr. Kavanaugh and Dr. Kelly, is two times salary plus annual incentive program target, with a maximum coverage amount of $2,000,000. Life insurance for executives hired by IBM U.S. on or after January 1, 2004, including Ms. Browdy, is one times salary plus annual incentive program target, with a maximum coverage of $1,000,000. Mr. Whitehurst elected to waive his life insurance coverage in excess of $50,000.

 

  In addition, IBM provides Travel Accident Insurance for most employees in connection with business travel. Travel Accident Insurance for all eligible employees and executives is up to five times salary plus annual incentive target with a maximum coverage amount of $15,000,000.

Perquisites

The following describes perquisites (and their aggregate incremental cost calculations) provided to the named executive officers in 2020.

Personal Financial Planning

In 2020, IBM offered financial planning services with coverage generally up to $15,000 annually for senior U.S. executives, including each named executive officer.

Personal Travel on Company Aircraft

General Information

 

  Amounts represent the aggregate incremental cost to IBM for travel not directly related to IBM business.

 

  IBM’s security practices provide that all air travel by the CEO and the Executive Chairman, including personal travel, be on Company aircraft. IBM’s security practices for air travel are consistent with best practices as assessed by independent third party security experts.

 

  The aggregate incremental cost for Mrs. Rometty’s personal travel is included in column (i) of the 2020 Summary Compensation Table. These amounts also include the aggregate incremental cost, if any, of travel by their family members or other guests on both business and non-business occasions. For 2020, Mr. Krishna did not incur any incremental cost for personal air travel.

 

  Additionally, personal travel or commutation in 2020 on Company aircraft by named executive officers other than Mr. Krishna or Mrs. Rometty, and the aggregate incremental cost, if any, of travel by the officer’s family or other guests when accompanying the officer on both business and non-business occasions is also included.

 

  Also, from time to time, named executive officers who are members of the boards of directors of certain other companies and non-profit organizations travel on Company aircraft to those outside board meetings. These amounts may include travel related to participation on these outside boards.

 

  Any aircraft travel by named executive officers for an annual executive physical under the corporate wellness program is included in these amounts.

Aggregate Incremental Cost Calculation

 

  The aggregate incremental cost for the use of Company aircraft for personal travel, including travel to outside boards, is calculated by multiplying the hourly variable maintenance cost rate for the specific aircraft by the number of flight hours used, plus the actual costs for fuel, parking, landing fees, crew expenses and catering.

 

  The maintenance rate for each aircraft is periodically reviewed by IBM’s flight operations team and adjusted as necessary to reflect changes in costs.

 

  The aggregate incremental cost includes deadhead flights (i.e., empty flights to and from the IBM hangar or any other location).

 

  The aggregate incremental cost for any charter flights is the full cost to IBM of the charter.
 

 


 

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Ground Transportation

General Information

 

  IBM’s security practices provide that the CEO and the Executive Chairman be driven to and from work by IBM personnel in a car leased by IBM or by an authorized car service.

 

  In addition, under IBM’s security practices, the CEO and the Executive Chairman may use a Company-leased car with an IBM driver or an authorized car service for non-business occasions. Further, the family of the CEO and the Executive Chairman may use a Company-leased car with an IBM driver or an authorized car service on non-business occasions or when accompanying them on business occasions.

 

  Other named executive officers may use a Company-leased car with an IBM driver or an authorized car service for business-related transportation, travel to outside board meetings, and an annual executive physical under IBM’s corporate wellness program. Family members and other guests may accompany these named executive officers in a Company-leased car with an IBM driver or an authorized car service on these occasions.

 

  Amounts reflect the aggregate incremental cost, if any, for the above-referenced items.

Aggregate Incremental Cost Calculation

 

  For the Company-leased car with an IBM driver, incremental cost is calculated by multiplying the variable rate by the applicable driving time. The variable rate includes a driver’s salary and overtime payments, plus a cost per mile calculation based on fuel and maintenance expense.

 

  For an authorized car service, the incremental cost is the full cost to IBM for such service.

Personal Security

General Information

 

  Under IBM’s security practices, IBM provides security personnel for the CEO and the Executive Chairman on certain non-business occasions, and for their families on certain non-business occasions, or when accompanying them on business occasions.

 

  Amounts include the aggregate incremental cost, if any, of security personnel for those occasions.

 

  In addition, amounts also include the cost of home security systems and monitoring for the CEO, Executive Chairman, and any other named executive officers, if applicable.

Aggregate Incremental Cost Calculation

 

  The aggregate incremental cost for security personnel is the cost of any commercial airfare to and from the destination, hotels, meals, car services, and salary and travel expenses of any additional subcontracted personnel if needed.

 

  The aggregate incremental cost for installation, maintenance, and monitoring services for home security systems reflects the full cost to IBM for these items.

Annual Executive Physical

 

  IBM covers the cost of an annual executive physical for the named executive officers under IBM’s corporate wellness program.

 

  Amounts represent any payments by IBM for the named executive officers under this program, if applicable.

Family Travel and Attendance at Business-Related Events

 

  Business-related events attended by the named executive officers and their family members may include meetings, dinners, and receptions with IBM’s clients, executive management or board members.

 

  Amounts represent the aggregate incremental cost, if any, of travel and/or meals and entertainment for the family members of the named executive officers to attend business-related events.

Relocation Expenses

 

  Amounts represent any payments that IBM has made to, or on behalf of, a named executive officer for relocation related expenses in accordance with IBM’s standard US domestic relocation policy.

Other Personal Expenses

 

  Amounts represent the cost of meals and lodging for the named executive officers who traveled for their annual executive physical under IBM’s corporate wellness program.

 

  Amounts also include expenses associated with participation on outside boards other than those disclosed as Personal Travel on Company Aircraft and Ground Transportation.

 

  Amounts also include items relating to business events, retirement related items, and administrative charges incurred by executives.

 

 
 

 


 

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2020 SUMMARY COMPENSATION TABLE

 

 

 

Name and

Principal

Position

(a)

Year

(b)

   

Salary

($)

(c)

 

 

 

   

Bonus

($)

(d)

 

 

 

   

Stock

Awards

($)

(e)

 

(1) 

 

 

   

Option
Awards

($)

(f)

 
(2)  

 

 

   

Non-Equity

Incentive Plan

Compensation

($)

(g)

 

 

 

 

 

   

Change in

Retention

Plan Value

($)

(h)

 

 

(3) 

 

 

   

Change in

Pension

Value

($)

(h)

 

 

(4) 

 

 

   

Nonqualified

Deferred

Compensation

Earnings

($)

(h)

 

 

 

(5) 

 

 

   

All Other

Compensation

($)

(i)

 

(6)(7) 

 

 

   

Total

($)

(j)

(8) 

 

 

 

 

A. Krishna, CEO(9)

 

2020

  $ 1,352,591       $0     $ 13,159,118       $0       $2,181,000       N/A     $ 42,806       $0       $274,167     $ 17,009,682  

 

 

V.M. Rometty, Executive Chairman(10)

 

2020

  $ 1,600,000       $0     $ 12,728,348       $0       $4,250,000       $100,604       $1,500,327       $0       $883,314     $ 21,062,593  

2019

    1,600,000       0       11,610,046       0       5,000,000       109,106       967,778       0       873,935       20,160,865  

2018

    1,600,000       0       10,801,392       0       4,050,000       0       0       0       1,100,826       17,552,218  

 

 

J.J. Kavanaugh, Senior VP and CFO

 

2020

  $ 899,000       $0     $ 7,416,931       $0       $1,176,300       $94,229       $0       $0       $159,836     $ 9,746,296  

2019

    787,500       0       5,063,127       0       1,064,000       83,877       11,804       0       129,884       7,140,192  

2018

    713,000       0       4,263,851       0       814,050       0       23,343       0       82,901       5,897,145  

 

 

J.M. Whitehurst, President(9)(11)

 

2020

  $ 1,173,864       $2,000,000     $ 22,418,228       $0       $1,455,813       N/A       N/A       $0       $130,562     $ 27,178,467  

 

 

J.E. Kelly III, Executive Vice President(12)

 

2020

  $ 868,000       $0     $ 6,029,248       $0       $820,400       $376,478       $233,063       $0       $129,314     $ 8,456,503  

2019

    868,000       0       5,237,677       0       703,200       677,321       53,005       0       184,864       7,724,067  

2018

    860,000       0       4,629,243       0       644,600       0       55,273       0       226,336       6,415,452  

 

 

M.H. Browdy, Senior VP and General Counsel(9)

 

2020

  $ 830,000       $0     $ 4,211,031       $0       $1,109,520       N/A       N/A       $0       $124,112     $ 6,274,663  

2019

    744,500       0       3,753,766       0       982,300       N/A       N/A       0       107,504       5,588,070  

 

 

 

Note: For assumptions used in determining the fair value of stock and option awards, see Note A (Significant Accounting Policies - Stock-Based Compensation) to IBM’s 2020 Consolidated Financial Statements.

 

(1)

Amounts in this column reflect the total Performance Share Units (PSUs), retention Performance Share Units (RPSUs), and Restricted Stock Units (RSUs).