DEF 14A 1 d284185ddef14a.htm NOTICE & PROXY STATEMENT <![CDATA[Notice & Proxy Statement]]>
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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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EMC Corporation

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LOGO

March 21, 2012

Dear Shareholder:

We cordially invite you to attend our 2012 Annual Meeting of Shareholders, which will be held on Tuesday, May 1, 2012, at 10:00 a.m., E.D.T., at EMC’s facility at 176 South Street, Hopkinton, Massachusetts. A map with directions to the meeting is on the last page of the attached Proxy Statement.

At the meeting you are being asked to vote on the following matters:

 

  1. Election of the ten members listed in the attached Proxy Statement to the Board of Directors,

 

  2. Ratification of the selection by the Audit Committee of EMC’s independent auditors, as described in the attached Proxy Statement, and

 

  3. Advisory approval of our executive compensation, as described in the attached Proxy Statement.

Your Board of Directors recommends that you vote FOR each of these proposals. You should carefully read the attached Proxy Statement which contains detailed information about each of these proposals.

If you plan to join us at the meeting, please go to www.emc.com/annualmeeting2012 to complete the registration form. The deadline for registration is April 24, 2012. All shareholders who attend the meeting will be required to present valid government-issued picture identification, such as a driver’s license or passport. Check-in will begin at 9:00 a.m., E.D.T.

Following completion of the scheduled business, we will report on EMC’s operations and answer questions. We hope that you will be able to join us on May 1st.

Very truly yours,

 

LOGO

JOSEPH M. TUCCI

Chairman, President and Chief Executive Officer

 

 

 

 

 

YOUR VOTE IS IMPORTANT

Whether or not you plan to attend the meeting, please vote as soon as possible. Under New York Stock Exchange rules, your broker will NOT be able to vote your shares on proposals 1 or 3 unless they receive specific instructions from you. We strongly encourage you to vote.

We encourage you to vote by Internet. It is convenient for you and saves us significant postage and processing costs. For specific instructions on how to vote your shares, please refer to the section entitled “Questions and Answers about the Annual Meeting and Voting” beginning on page 69 of the attached Proxy Statement.


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EMC CORPORATION

NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS

May 1, 2012

To the Shareholders:

The Annual Meeting of Shareholders of EMC Corporation, a Massachusetts corporation, will be held at EMC’s facility at 176 South Street, Hopkinton, Massachusetts, on Tuesday, May 1, 2012, at 10:00 a.m., E.D.T., for the following purposes:

 

  1. Election of the ten members listed in the attached Proxy Statement to the Board of Directors.

 

  2. Ratification of the selection by the Audit Committee of PricewaterhouseCoopers LLP as EMC’s independent auditors for the fiscal year ending December 31, 2012, as described in the attached Proxy Statement.

 

  3. Advisory approval of our executive compensation, as described in the attached Proxy Statement.

 

  4. Transaction of any and all other business that may properly come before the meeting or any adjournments or postponements of the meeting.

All shareholders of record at the close of business on March 1, 2012 are entitled to notice of and to vote at the meeting and any adjournments or postponements of the meeting. We are making these proxy materials available to you on or about March 21, 2012 on the Internet or by delivering printed versions of these materials to you by mail.

Your vote is important. Whether or not you plan to attend the meeting, please vote as soon as possible. We encourage you to vote by Internet. It is convenient for you and saves us significant postage and processing costs. If you previously elected to access the 2012 Proxy Statement and Annual Report on Form 10-K for 2011 electronically, you must vote your proxy over the Internet. Otherwise, you may vote your shares via a toll-free telephone number or over the Internet. Additionally, if you received a proxy card or voting instruction form by mail, you may submit your proxy card or voting instruction form for the 2012 Annual Meeting by completing, signing, dating and returning your proxy card or voting instruction form in the pre-addressed envelope provided. For specific instructions on how to vote your shares, please refer to the section entitled “Questions and Answers about the Annual Meeting and Voting” beginning on page 69 of the attached Proxy Statement.

EMC’s Annual Report on Form 10-K for 2011 accompanies this Notice.

By order of the Board of Directors

 

LOGO

PAUL T. DACIER

Executive Vice President,

General Counsel and Assistant Secretary

March 21, 2012

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 1, 2012: The Annual Report on Form 10-K for 2011 and 2012 Proxy Statement are available at www.proxyvote.com.


Table of Contents

Proxy Statement for the

Annual Meeting of Shareholders of

EMC CORPORATION

To Be Held on Tuesday, May 1, 2012

TABLE OF CONTENTS

 

     Page  

Summary Information

     1   

Proposal 1 Election of Directors

     5   

Proposal 2 Ratification of Selection of Independent Auditors

     13   

Proposal 3 Advisory Approval of Executive Compensation

     14   

Corporate Governance

     16   

Board Independence and Committees

     22   

Security Ownership of Certain Beneficial Owners and Management

     26   

Leadership and Compensation Committee Report

     27   

Compensation Discussion and Analysis

     28   

Executive Summary

     28   

Named Executive Officers

     32   

Objectives of EMC’s Executive Compensation Program

     32   

Elements of EMC’s Executive Compensation Program

     32   

Compensation of Executive Officers

     48   

Summary Compensation Table

     48   

Grants of Plan-Based Awards

     50   

Outstanding Equity Awards at Fiscal Year-End

     52   

Option Exercises and Stock Vested

     56   

Pension Benefits

     56   

Nonqualified Deferred Compensation

     56   

Potential Payments upon Termination or Change in Control

     57   

Director Compensation

     62   

Review and Approval of Transactions with Related Persons

     65   

Certain Transactions

     65   

Audit Committee Report

     66   

Rule 14a-8 Shareholder Proposals for EMC’s 2013 Proxy Statement

     67   

Business and Nominations for EMC’s 2013 Annual Meeting

     67   

Section 16(a) Beneficial Ownership Reporting Compliance

     67   

Householding

     67   

Questions and Answers about the Annual Meeting and Voting

     69   

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Proxy Statement contains forward-looking statements, within the meaning of the Federal securities laws, about our business and prospects. The forward-looking statements do not include the potential impact of any mergers, acquisitions, divestitures, securities offerings or business combinations that may be announced or closed after the date hereof. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “plans,” “intends,” “expects,” “goals” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Our future results may differ materially from our past results and from those projected in the forward-looking statements due to various uncertainties and risks, including, but not limited to, those described in Item 1A of Part I (Risk Factors) of our Annual Report on Form 10-K for 2011. The forward-looking statements speak only as of the date of this Proxy Statement and undue reliance should not be placed on these statements. We disclaim any obligation to update any forward-looking statements contained herein after the date of this Proxy Statement.


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SUMMARY INFORMATION

This summary highlights information contained elsewhere in this Proxy Statement. For more complete information about these topics, please review the Company’s Annual Report on Form 10-K and the entire Proxy Statement.

2011 Business Results

EMC’s vision is to be the undisputed leader in enabling Hybrid Cloud Computing. To make this vision a reality, we have made strategic investments over the years to build our portfolio of information storage, virtualization, information protection, information security, and information management, analytics and intelligence technologies, products and services. As a result, we now have what we believe to be the deepest knowledge, broadest product portfolio and strongest partnerships in the IT industry to help customers accelerate their journey to the cloud and realize the benefits of delivering IT as a Service.

We firmly believe our vision and strategy are on target. Customers find our vision compelling and our offerings attractive. Our demonstrated ability to sustain profitable growth year after year has produced a track record that few large, technology companies can match.

In 2011, we successfully executed what we call our financial triple play: simultaneously gaining market share, reinvesting substantially in our business and delivering improved profitability. Furthermore, in 2011, we achieved all-time record revenue, profit and free cash flow, as set forth in the table below:

 

     2011 ($)    % Growth from 2010  

Revenue

   20.0 billion      18

Non-GAAP Net Income*

   3.4 billion      24

Non-GAAP Earnings Per Share*

   1.51      20

Free Cash Flow*

   4.4 billion      29

 

  * A reconciliation of our GAAP to non-GAAP results can be found in Exhibit B to this Proxy Statement.

Annual Meeting of Shareholders

 

•   Date and Time:        

   May 1, 2012 at 10:00 a.m., E.D.T.

•   Place:

   EMC Corporation
   176 South Street
   Hopkinton, MA 01748

•   Record Date:        

   March 1, 2012

•   Voting:

   Shareholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and each of the other proposals.

•   Attendance:

   All shareholders may attend the meeting.

Meeting Agenda and Voting Recommendations

 

Agenda Item

  

Board Recommendation

  

Page

Election of 10 directors

   FOR EACH NOMINEE    5

Ratification of selection of PricewaterhouseCoopers LLP as our independent auditors

   FOR   

13

Advisory approval of our executive compensation

   FOR   

14

 

 

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Director Nominees

We are asking you to vote “for” all of the director nominees listed below. All directors attended at least 90% of the Board meetings and committee meetings on which he or she sits. Set forth below is summary information about each director nominee.

 

Nominee

   Age      Director
Since
    

Principal Occupation

  

Committee Membership

Michael W. Brown

     66         2005       Former Vice President and Chief Financial Officer of Microsoft Corporation   

•     Audit

•     Finance (chair)

•     Leadership and Compensation

•     Mergers and Acquisitions

Randolph L. Cowen

     61         2009       Former co-Chief Administrative Officer of The Goldman Sachs Group, Inc.   

•     Leadership and Compensation

•     Mergers and Acquisitions

Gail Deegan

     65         2002       Former Executive Vice President and Chief Financial Officer of Houghton Mifflin Company   

•     Audit (chair)

•     Corporate Governance and Nominating

James S. DiStasio

     64         2010       Former Senior Vice Chairman and Americas Chief Operating Officer of Ernst & Young LLP   

•     Audit

John R. Egan

     54         1992       Managing Partner and General Partner of Egan-Managed Capital   

•     Finance

•     Mergers and Acquisitions (chair)

Edmund F. Kelly

     66         2007       Chairman of Liberty Mutual Group   

•     Finance

Windle B. Priem

     74         2001       Former President and Chief Executive Officer of Korn/Ferry International   

•     Audit

•     Corporate Governance and Nominating

•     Leadership and Compensation (chair)

Paul Sagan

     53         2007       President and Chief Executive Officer of Akamai Technologies, Inc.   

•     Mergers and Acquisitions

David N. Strohm

     63         2003       Venture Partner of Greylock Partners   

•     Corporate Governance and Nominating (chair)

•     Leadership and Compensation

•     Mergers and Acquisitions

Joseph M. Tucci

     64         2001       Chairman, President and Chief Executive Officer of EMC Corporation   

•     Finance

•     Mergers and Acquisitions

Corporate Governance Highlights

 

•   Substantial majority of independent directors (8 of 10)

•   Annual election of directors

•   Majority vote for directors

•   Independent Lead Director

•   Board oversight of risk management

•   Succession planning at all levels, including for Board and CEO

•   No supermajority voting requirements

  

•   Long-standing shareholder engagement program

•   Annual Board, committee and individual director self-assessments

•   Executive sessions of non-management directors

•   Continuing director education

•   Executive and director stock ownership guidelines

•   Board oversight of sustainability program

•   Board oversight and disclosure of political spending

 

 

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Auditors

As a matter of good corporate governance, we are asking you to ratify the selection by the Audit Committee of PricewaterhouseCoopers LLP (“PWC”) as our independent auditors for 2012. The following table summarizes the fees PWC billed us for 2011 and 2010.

 

     Audit Fees ($)      Audit-Related Fees ($)      Tax Fees ($)      All Other Fees ($)  

2011

     6,659,588         334,500         3,118,337         255,539   

2010

     6,406,252         314,500         3,374,901         —     

Advisory Approval of Our Executive Compensation

We are asking for your advisory approval of the compensation of our Named Executive Officers. While this vote is advisory, and not binding on us, the Leadership and Compensation Committee will consider your views when determining executive compensation in the future. At our May 2011 annual meeting, shareholders expressed strong support for our executive compensation program, with over 98% of votes cast voting in favor of the proposal.

Pay-for-Performance Philosophy

Our executive compensation programs are based on strong pay-for-performance practices that require achievement of challenging goals designed to drive profitable revenue growth and market share gains. We believe achievement of these goals will create long-term shareholder value.

2011 Executive Compensation Program

The Leadership and Compensation Committee approved an executive compensation program for 2011 that implements our pay-for-performance philosophy. The primary elements of our executive compensation program are base salary, cash bonuses and equity incentives.

As discussed above, EMC achieved superior financial performance in 2011 and the Named Executive Officers achieved 102.1%, 103.7% and 110.6% of the challenging revenue, non-GAAP earnings per share and free cash flow targets established by the Leadership and Compensation Committee, respectively. In 2011, the Named Executive Officers received the following cash compensation:

 

Name

   Base Salary ($)      Cash Bonus ($)      Total ($)  

Joseph M. Tucci*

     1,000,000         2,140,869         3,140,869   

David I. Goulden

     600,000         1,044,200         1,644,200   

Patrick P. Gelsinger

     600,000         912,481         1,512,481   

William J. Teuber, Jr.

     700,000         912,481         1,612,481   

Howard D. Elias

     600,000         912,481         1,512,481   

 

  * Mr. Tucci’s base salary and target cash bonus have not increased since 2001.

In addition, based on achievement of the 2011 revenue and earnings per share performance targets established by the Leadership and Compensation Committee, a portion of the performance-based equity awards granted in August 2010 vested in February 2012 and the remaining portion is eligible to vest over the next few years:

 

Name

   2010 Performance Stock Units     2010 Performance Stock Options  
   # of Units Granted      % Eligible to Vest     # of Options Granted      % Eligible to Vest  

Joseph M. Tucci

     210,000         100     105,000         100

David I. Goulden

     72,000         100     36,000         100

Patrick P. Gelsinger

     72,000         100     36,000         100

William J. Teuber, Jr.

     72,000         100     36,000         100

Howard D. Elias

     72,000         100     36,000         100

 

 

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A significant majority of the equity awards granted to our executive officers in 2011 are performance-based awards and will vest only if the Company achieves challenging revenue and/or earnings per share goals. All or a portion of these awards will be forfeited if the performance goals are not met.

Other Compensation Highlights

 

•    Annual “say on pay” vote

 

•    No pension or supplemental retirement benefits for executive officers

 

•    Clawback policy applicable to all employees for cash and equity incentive compensation

 

•    Strong executive stock holding guidelines

 

•    “Double trigger” change in control agreements

 

•    Independent compensation consultant

  

•    Compensation Committee oversight of risks associated with compensation policies and practices

 

•    No excise tax gross-ups

 

•    No hedging of Company stock

 

•    No discounted options

 

•    No option repricings without shareholder approval

 

•    No excessive perquisites for executives

2013 Annual Meeting

 

•    Deadline for shareholder proposals for inclusion in the proxy statement:

   November 21, 2012

•    Deadline for business and nominations for director:

   December 27, 2012 – January 26, 2013

 

 

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PROPOSAL 1

ELECTION OF DIRECTORS

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF

EACH OF THE NOMINEES LISTED BELOW

Under EMC’s Bylaws, the Board of Directors may determine the total number of directors to be elected at any annual meeting of shareholders or special meeting in lieu of an annual meeting. The Board of Directors has fixed at 10 the total number of directors. On the recommendation of the Corporate Governance and Nominating Committee (the “Governance Committee”), the Board of Directors has nominated the persons named below for election as directors at this Annual Meeting, each to serve for a one-year term or until the director’s successor is elected and qualified.

Director and Nominee Experience and Qualifications

The Board believes that its members, collectively, should possess a variety of skills and experience in order to oversee our business effectively. In addition, the Board believes that each director should possess certain attributes, as reflected in the Board’s membership criteria described below. Accordingly, the Board and the Governance Committee consider the qualifications of directors and director candidates individually and in the broader context of the Board’s overall composition and dynamics and EMC’s current and future needs.

Board Membership Criteria. The Governance Committee is responsible for reviewing, assessing and recommending Board membership criteria to the Board for approval. The criteria, which are set forth in the Governance Committee’s charter, include judgment, integrity, diversity, prior experience, the interplay of the nominee’s experience with the experience of other Board members, the extent to which the nominee would be desirable as a member of any committees of the Board, and the candidate’s willingness to devote substantial time and effort to Board responsibilities.

In addition, the Board has determined that it is important to have individuals with the following skills and experiences:

 

   

Technology expertise, including a deep understanding of the information technology industry and the disruptive impact of new technology, to assess EMC’s strategy and long-term business plan which may include the acquisition of businesses that have complementary and/or game-changing technologies, products or services.

 

   

Operational experience with a business of significant scale and complexity to understand the competitive dynamics of our business strategy and execution.

 

   

International expertise, which is important given EMC’s growth in markets around the world.

 

   

Expertise in complex financial and accounting matters in order to evaluate our financial statements, capital structure and business plans.

 

   

Talent management experience to help us attract, motivate and retain world-class individuals.

 

   

Service on other public company boards, which provides directors with corporate governance experience, a deep understanding of the role and responsibilities of the Board of Directors and insight into matters being handled by our Board.

In identifying director candidates, the Governance Committee may establish other specific skills and experience that it believes the Board should seek in order to maintain a balanced and effective Board.

At least once a year, the Governance Committee evaluates the size and composition of the Board to assess the skills and experience of Board members, and compares them with those skills that might prove valuable in the future, giving consideration to the changing circumstances of the Company and the then current Board membership. This assessment enables the Board to consider whether the skills and experience described above continue to be appropriate as the Company’s needs evolve over time.

 

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  Proposal 1 – Election of Directors (continued)

 

 

Identifying Potential Director Candidates. The Governance Committee identifies Board candidates through numerous sources, including recommendations from directors, executive officers and shareholders of EMC as well as professional search firms. The Governance Committee seeks to identify those individuals most qualified to serve as Board members and considers many factors with regard to each candidate, including those described above. New candidates are interviewed by members of the Governance Committee and other Board members.

For more information on our director selection process, see “Corporate Governance – Succession Planning – Board Succession” on page 18 of this Proxy Statement.

Director Nominees. In considering incumbent directors for renomination and evaluating director candidates, the Board and the Governance Committee consider a variety of factors. These include each nominee’s independence, personal and professional accomplishments, and experience in light of the needs of the Company. For incumbent directors, the factors also include contributions to the Board. The Board believes that all the current nominees are highly qualified and have the skills and experience required for effective service on our Board. The directors’ individual biographies below contain information about their experience, qualifications and skills that led the Board to nominate them.

Each nominee has agreed to be named in this Proxy Statement and to serve if elected. Should any nominee be unable to serve or for good cause will not serve as a director, the proxy holders will vote for such other person as the Board may recommend.

All of the directors were previously elected by the shareholders.

The affirmative vote of a majority of votes properly cast on this proposal at the Annual Meeting is required for the election of directors.

NOMINEES TO SERVE AS DIRECTORS

Michael W. Brown, 66

 

   

Director Since: August 2005

 

   

Other Current Public Company Boards:

 

  ¡    

VMware, Inc. (EMC holds approximately 80% economic interest in VMware)

  ¡ Chair of the Audit Committee
  ¡ Compensation and Corporate Governance Committee

 

  ¡    

Insperity, Inc.

  ¡ Finance, Risk Management and Audit Committee
  ¡ Nominating and Corporate Governance Committee

 

  ¡    

Stifel Financial Corp. (continuing director from Thomas Weisel Partners Group)

  ¡ Risk Management/Corporate Governance Committee

 

   

Business Experience:

 

  ¡    

Microsoft Corporation, a manufacturer of software products for computing devices

  ¡ Vice President and Chief Financial Officer (August 1994 until his retirement in July 1997)
  ¡ Vice President, Finance (April 1993 to August 1994)
  ¡ Treasurer (January 1990 to April 1993)
  ¡ Joined Microsoft in December 1989

 

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  Proposal 1 – Election of Directors (continued)

 

 

  ¡    

Chairman of the NASDAQ Stock Market board of directors

 

  ¡    

Past governor of the National Association of Securities Dealers

 

  ¡    

Various positions at Deloitte & Touche LLP over 18 years

 

   

Education: Bachelor’s degree in Economics from the University of Washington

 

   

Qualifications and Skills: Mr. Brown brings to the Board substantial financial expertise that includes extensive knowledge of the complex financial and operational issues facing large companies, and a deep understanding of accounting principles and financial reporting rules and regulations. He acquired this knowledge in the course of serving as the CFO of a global technology company, working with a major international accounting and consulting firm for 18 years, and serving as a member of the audit committees of other public company boards. Through those and other senior management positions, as Chairman of NASDAQ and as a past governor of the NASD, Mr. Brown has demonstrated his leadership and business acumen.

Randolph L. Cowen, 61

 

   

Director Since: January 2009

 

   

Business Experience:

 

  ¡    

The Goldman Sachs Group, Inc., a global investment, banking, securities and investment management firm

  ¡ Co-Chief Administrative Officer (October 2007 until his retirement in November 2008)
  ¡ Global Head of Technology and Operations (September 2004 to November 2008)
  ¡ Chief Information Officer (October 2001 to October 2007)
  ¡ Joined Goldman Sachs in 1982

 

   

Education: Bachelor’s degree in History with a minor in Mathematics from Michigan State University

 

   

Qualifications and Skills: With more than 28 years of experience managing IT and making the technology infrastructure purchasing decisions at a global financial services firm, Mr. Cowen brings to the Board extensive knowledge about technology and defining and implementing IT strategy. As a former customer of EMC, he has in-depth knowledge of our products and services. In addition, through various senior management positions, Mr. Cowen has demonstrated leadership skills and gained significant business operations experience.

Gail Deegan, 65

 

   

Director Since: July 2002

 

   

Other Current Public Company Boards:

 

  ¡    

iRobot Corporation

  ¡ Audit Committee

 

   

Former Public Company Boards (within the past 5 years):

 

  ¡    

TJX Companies, Inc.

  ¡ Chair of the Audit Committee
  ¡ Finance Committee

 

   

Business Experience:

 

  ¡    

Executive Vice President and Chief Financial Officer, Houghton Mifflin Company, a publishing company (February 1996 until her retirement in September 2001)

 

7


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  Proposal 1 – Election of Directors (continued)

 

 

  ¡    

Senior Vice President of Regulatory and Government Affairs, NYNEX New England (February 1995 to February 1996)

 

  ¡    

Vice President and Chief Financial Officer, New England Telephone (November 1991 to January 1995)

 

  ¡    

Eastern Enterprises

  ¡ Senior Vice President, Chief Financial Officer and Chief Administrative Officer (February 1990 to May 1991)
  ¡ Senior Vice President, Chief Financial Officer and Treasurer (1988 to January 1990)

 

   

Education:

 

  ¡    

Bachelor’s degree in Elementary Education from The College of Saint Rose

 

  ¡    

Master’s degree in History from Ohio State University

 

  ¡    

MBA from Simmons College School of Management

 

   

Qualifications and Skills: Ms. Deegan is an experienced financial leader who has served as the CFO of three companies in different industries. Ms. Deegan has extensive experience with financial accounting matters for complex global organizations as well as substantial experience overseeing the financial reporting processes of large public companies. Ms. Deegan also gained operational and talent management experience from serving on the executive staff of these companies. In addition, Ms. Deegan’s service on another public company board provides her with valuable experience.

James S. DiStasio, 64

 

   

Director Since: March 2010

 

   

Other Current Public Company Boards:

 

  ¡    

NSTAR

  ¡ Board of Trustees
  ¡ Audit, Finance and Risk Management Committee
  ¡ Executive Personnel Committee

 

   

Business Experience:

 

  ¡    

Ernst & Young LLP, a professional services organization

  ¡ Senior Vice Chairman and Americas Chief Operating Officer (January 2003 until his retirement in January 2007)
  ¡ Elected as a partner in 1977
  ¡ Various management positions at Ernst & Young over 38 years

 

   

Education: Bachelor’s degree in Accounting from the University of Illinois

 

   

Qualifications and Skills: Mr. DiStasio brings to the Board extensive financial, accounting and consulting expertise, including a deep understanding of accounting principles and financial reporting rules and regulations, acquired over the course of his 38-year career at one of the world’s leading assurance, tax, transaction and advisory services firms. He has significant experience overseeing, from an independent auditor’s perspective, the financial reporting processes of large public companies in a variety of industries with a global presence. Through his leadership roles at E&Y, including as COO of the Americas, Mr. DiStasio gained substantial management and operational experience. In addition, Mr. DiStasio’s service on another public company board provides him with valuable experience.

 

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  Proposal 1 – Election of Directors (continued)

 

 

John R. Egan, 54

 

   

Director Since: May 1992

 

   

Other Current Public Company Boards:

 

  ¡    

VMware, Inc. (EMC holds approximately 80% economic interest in VMware)

  ¡ Chair of the Mergers and Acquisitions Committee

 

  ¡    

NetScout Systems, Inc.

  ¡ Chair of the Nominating and Governance Committee
  ¡ Audit Committee

 

   

Business Experience:

 

  ¡    

Managing partner and general partner, Egan-Managed Capital, a venture capital firm (since October 1998)

 

  ¡    

EMC Corporation

  ¡ Executive Vice President, Products and Offerings (May 1997 to September 1998)
  ¡ Executive Vice President, Sales and Marketing (January 1992 to June 1996)
  ¡ Various executive positions, including Executive Vice President, Operations and Executive Vice President, International Sales (October 1986 to January 1992)
  ¡ Resigned as an executive officer in September 1998 and as an employee in July 2002

 

   

Education: Bachelor’s degree in Marketing and Computer Science from Boston College

 

   

Qualifications and Skills: Mr. Egan has spent his entire career in the IT industry. His broad experience ranges from venture capital investments in early-stage technology companies to extensive sales and marketing experience, to executive leadership and management roles. Mr. Egan brings to the Board business acumen, substantial operational experience, and expertise in corporate strategy development, as well as a deep understanding of EMC’s people and products acquired over many years of involvement with the Company. In addition, Mr. Egan’s service on other public company boards provides him with valuable experience.

Edmund F. Kelly, 66

 

   

Director Since: August 2007

 

   

Other Current Public Company Boards:

 

  ¡    

The Bank of New York Mellon Corporation (continuing director from Mellon Financial Corporation)

  ¡ Human Resources and Compensation Committee
  ¡ Risk Committee

 

   

Business Experience:

 

  ¡    

Liberty Mutual Group, a diversified global insurer and the nation’s third-largest property and casualty insurer

  ¡ Chairman (since 2000)
  ¡ Chief Executive Officer (1998 to June 2011)
  ¡ President (1992 to June 2010)

 

   

Education:

 

  ¡    

Bachelor’s degree in Mathematics from Queen’s University in Belfast, Ireland

 

  ¡    

Ph.D. in Mathematics from the Massachusetts Institute of Technology

 

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Table of Contents

  Proposal 1 – Election of Directors (continued)

 

 

   

Qualifications and Skills: As the Chairman of a Fortune 100 company, Mr. Kelly brings to the Board a wealth of complex management, worldwide operational and financial expertise. He also brings in-depth knowledge of the opportunities and challenges facing global companies. In addition, Mr. Kelly’s service on another public company board provides him with valuable experience.

Windle B. Priem, 74

 

   

Director Since: December 2001

 

   

Business Experience:

 

  ¡    

Korn/Ferry International, a premier global provider of talent management solutions

  ¡ Vice Chairman (July 2001 until his retirement in December 2003)
  ¡ President and Chief Executive Officer (December 1998 to June 2001)
  ¡ Chief Operating Officer (May 1997 to December 1998)
  ¡ Various other positions from 1976 to 1997
  ¡ Director (June 1992 to November 2002)

 

   

Education:

 

  ¡    

Bachelor’s degree in Mechanical Engineering from Worcester Polytechnic Institute

 

  ¡    

MBA from Babson College

 

   

Qualifications and Skills: With more than 35 years of experience working with organizations and management structures, compensation, recruiting and succession planning, Mr. Priem brings to the Board a wealth of knowledge in talent management and executive compensation. While President and CEO of Korn/Ferry International, Mr. Priem conducted more than one hundred high profile executive searches for major global companies and led its successful initial public offering in 1999. Mr. Priem has significant operating experience and proven business acumen working with senior executives on a global basis. In addition, he served for three years as an officer in the U.S. Navy.

Paul Sagan, 53

 

   

Director Since: December 2007

 

   

Other Current Public Company Boards:

 

  ¡    

Akamai Technologies, Inc.

 

  ¡    

iRobot Corporation

  ¡ Chair of the Nominating and Corporate Governance Committee

 

   

Former Public Company Boards (within the past 5 years):

 

  ¡    

Dow Jones & Company

 

   

Business Experience:

 

  ¡    

Akamai Technologies, Inc., a provider of services for accelerating the delivery of content and applications over the Internet

  ¡ Chief Executive Officer (since April 2005)
  ¡ President (since October 2011 and May 1999 to September 2010)
  ¡ Joined in October 1998 as Vice President and Chief Operating Officer

 

  ¡    

Member of the President’s National Security Telecommunications Advisory Committee (appointed by President Barack Obama in December 2010)

 

   

Education: Northwestern University’s Medill School of Journalism

 

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  Proposal 1 – Election of Directors (continued)

 

 

   

Qualifications and Skills: As the President and CEO of a fast-growing, industry-leading S&P 500 company, Mr. Sagan has significant experience leading a complex, international technology enterprise, extensive knowledge of internet-based technologies and business acumen. During his career, Mr. Sagan has led visionary technology and media companies and consulted with the World Economic Forum. In addition, Mr. Sagan’s service on other public company boards provides him with valuable experience.

David N. Strohm, 63

 

   

Director Since: October 2003 and Lead Director since January 2006

 

   

Other Current Public Company Boards:

 

  ¡    

VMware, Inc. (EMC holds approximately 80% economic interest in VMware)

  ¡ Chair of the Compensation and Corporate Governance Committee
  ¡ Mergers and Acquisitions Committee

 

  ¡    

Imperva, Inc.

  ¡ Audit Committee

 

   

Former Public Company Boards (within the past 5 years):

 

  ¡    

Successfactors, Inc.

  ¡ Chairperson of the Board
  ¡ Chair of the Nominating and Corporate Governance Committee
  ¡ Chair of the Compensation Committee

 

   

Business Experience:

 

  ¡    

Greylock Partners, a venture capital firm

  ¡ Venture Partner (since January 2001)
  ¡ General Partner (1980 to 2001)
  ¡ General Partner of several partnerships formed by Greylock

 

   

Education:

 

  ¡    

Bachelor’s degree from Dartmouth College

 

  ¡    

MBA from Harvard Business School

 

   

Qualifications and Skills: Mr. Strohm has 30 years of experience as an early-stage venture capital investor, principally in the information technology industry. He has been a primary investor, and served in board leadership roles, in several companies which have grown to become publicly-traded. This experience has provided him with a deep understanding of the IT industry, and the drivers of structural change and high-growth opportunities in IT. He has also gained significant experience overseeing corporate strategy, assessing operating plans, and evaluating and developing business leaders. His service as board chair, lead director, and committee chair for several public companies has given him a broad experience base for serving as our Lead Director.

Joseph M. Tucci, 64

 

   

Director Since: January 2001 and Chairman of the Board since January 2006

 

   

Other Current Public Company Boards:

 

  ¡    

VMware, Inc. (EMC holds approximately 80% economic interest in VMware)

  ¡ Chairman of the Board of Directors
  ¡ Mergers and Acquisitions Committee

 

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  Proposal 1 – Election of Directors (continued)

 

 

  ¡    

Paychex, Inc.

  ¡ Lead Independent Director
  ¡ Chairman of the Governance and Compensation Committee

 

   

Business Experience:

 

  ¡    

EMC Corporation

  ¡ Chief Executive Officer (since January 2001)
  ¡ President (since January 2000)
  ¡ Chief Operating Officer (January 2000 to January 2001)

 

  ¡    

Deputy Chief Executive Officer, Getronics N.V., an information technology services company (June 1999 through December 1999)

 

  ¡    

Chairman of the Board and Chief Executive Officer, Wang Global, an information technology services company (December 1993 to June 1999)

 

   

Education:

 

  ¡    

Bachelor’s degree in Marketing from Manhattan College

 

  ¡    

MS in Business Policy from Columbia University

 

   

Qualifications and Skills: During his tenure at EMC, Mr. Tucci has led EMC through a period of dramatic transformation and revitalization, continued market share gains and sustained revenue growth. Mr. Tucci has spent more than 40 years in the technology industry in senior roles at large, complex and global technology companies. Mr. Tucci’s deep knowledge of all aspects of our business, combined with his drive for innovation and excellence, position him well to serve as our Chairman and CEO. In addition, Mr. Tucci’s service on other public company boards provides him with valuable experience.

 

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PROPOSAL 2

RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 2

EMC is asking shareholders to ratify the selection by the Audit Committee of PricewaterhouseCoopers LLP (“PWC”) as our independent auditors for the fiscal year ending December 31, 2012. The affirmative vote of a majority of votes properly cast on this proposal at the Annual Meeting is required to ratify such selection.

Although ratification by the shareholders is not required by law, the Board of Directors has determined that it is desirable to request approval of this selection by the shareholders as a matter of good corporate governance. In the event the shareholders fail to ratify the appointment of PWC, the Audit Committee will consider this factor when making any determinations regarding PWC.

Pre-Approval of Audit and Non-Audit Services

During 2011, the Audit Committee pre-approved all audit, review and attest services performed by PWC.

In accordance with the Audit Committee’s Pre-Approval Policy, the Audit Committee pre-approves specified non-audit services up to an aggregate dollar amount and approves on an engagement by engagement basis any individual engagement in excess of $200,000. The Audit Committee has delegated to its Chair the authority to pre-approve any specific non-audit service which was not previously pre-approved by the Audit Committee, provided that any decisions of the Chair to pre-approve non-audit services shall be presented to the Audit Committee at its next scheduled meeting. During 2011, the Audit Committee pre-approved all non-audit services in accordance with the policy set forth above.

The following table summarizes the fees PWC, our independent auditor, billed to us for each of the last two fiscal years.

 

     Audit Fees1
($)
     Audit-Related
Fees2, 3

($)
     Tax Fees3, 4
($)
     All Other
Fees
($)
 

2011

     6,659,588         334,500         3,118,337         255,539 5 

2010

     6,406,252         314,500         3,374,901           

 

  1 

Includes services for the audit of our financial statements and internal control over financial reporting, the review of the interim financial statements included in our quarterly reports on Form 10-Q and other professional services provided in connection with statutory and regulatory filings or engagements.

  2 

Includes employee benefit plan compliance, acquisition-related support and other technical, financial reporting and compliance services.

  3 

EMC engages PWC to perform audit-related and tax services where it believes there are efficiencies to using its independent auditors, who are familiar with EMC’s processes and procedures.

  4 

Includes tax compliance and tax consulting services in 2011 and 2010.

  5 

Includes consulting services performed by a company acquired by PWC in 2011.

Amounts in the table above do not include the fees PWC billed to VMware, Inc.

EMC expects that representatives of PWC will be present at the Annual Meeting and will be given the opportunity to make a statement if they desire to do so and to respond to appropriate questions.

 

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PROPOSAL 3

ADVISORY APPROVAL OF EXECUTIVE COMPENSATION

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 3

EMC is asking shareholders for their advisory approval of the compensation of our Named Executive Officers, as disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and the related compensation tables, notes and narrative in this Proxy Statement, in accordance with Section 14A of the Securities Exchange Act of 1934, as amended. While this vote is advisory, and not binding on us, the Compensation Committee will consider your views when determining executive compensation in the future.

Pay-for-Performance Philosophy

As discussed in the “Compensation Discussion and Analysis” section of this Proxy Statement, our executive compensation programs are based on strong pay-for-performance practices that require achievement of challenging goals – goals that will drive us to achieve profitable revenue growth and market share gains, while expanding the global market opportunity for our product, technology and services portfolio, and ultimately leading to long-term shareholder value.

Business Results

Our ability to sustain profitable growth year after year has produced a track record that few large, technology companies can match. From 2007 through 2011, EMC’s revenue has grown at a compound annual rate of 11% and non-GAAP earnings per share (“EPS”) has grown at a compound annual rate of 14%.

Furthermore, in 2011, we achieved all-time record revenue, profit and free cash flow:

 

     2011 ($)    % Growth from 2010  

Revenue

   20.0 billion      18

Non-GAAP Net Income*

   3.4 billion      24

Non-GAAP EPS*

   1.51      20

Free Cash Flow*

   4.4 billion      29

 

  * A reconciliation of our GAAP to non-GAAP results can be found in Exhibit B to this Proxy Statement.

2011 Executive Compensation Program

The Compensation Committee approved an executive compensation program for 2011 that implements our pay-for-performance philosophy. The primary elements of our executive compensation program are base salary, cash bonuses and equity incentives.

 

   

Base salary is used to compensate our executive officers for performing their day-to-day responsibilities. Base salary represents approximately 9% of our CEO’s total compensation opportunity and on average, approximately 7% of our other Named Executive Officers’ total compensation opportunity.

 

   

Cash bonuses are used to drive the achievement of specified corporate, business unit, individual, strategic, operational and financial performance goals. Our executive officers will receive bonuses only if they achieve challenging performance goals set by the Compensation Committee, with limits on the amount of compensation that can be earned for any year. Cash bonuses represent approximately 13% of our CEO’s total compensation opportunity and on average, approximately 8% of our other Named Executive Officers’ total compensation opportunity.

 

   

Equity incentives are used to drive the achievement of EMC’s long-term strategic goals and align the executives’ interests with those of EMC shareholders. Equity incentives represent the significant majority of our Named Executive Officers’ total compensation opportunity.

 

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  Proposal 3 – Advisory Approval of Executive Compensation (continued)

 

 

The Compensation Committee believes our executive compensation program has been effective in incenting the achievement of outstanding financial performance and positive returns to shareholders. As discussed above, EMC achieved superior financial performance in 2011 and the Named Executive Officers achieved 102.1%, 103.7% and 110.6% of the challenging revenue, non-GAAP EPS and free cash flow targets established by the Compensation Committee, respectively. In 2011, the Named Executive Officers received the following cash compensation:

 

Name

   Base Salary ($)      Cash Bonus ($)      Total ($)  

Joseph M. Tucci*

     1,000,000         2,140,869         3,140,869   

David I. Goulden

     600,000         1,044,200         1,644,200   

Patrick P. Gelsinger

     600,000         912,481         1,512,481   

William J. Teuber, Jr.

     700,000         912,481         1,612,481   

Howard D. Elias

     600,000         912,481         1,512,481   

 

  * Mr. Tucci’s base salary and target cash bonus have not increased since 2001.

In addition, based on achievement of the 2011 revenue and EPS performance targets established by the Compensation Committee, a portion of the performance-based equity awards granted in August 2010 vested in February 2012 and the remaining portion is eligible to vest over the next few years.

A significant majority of the equity awards granted to our executive officers in 2011 are performance-based awards and will vest only if the Company achieves challenging revenue and/or EPS goals. All or a portion of these awards will be forfeited if the performance goals are not met. If the performance goals are achieved and such awards become eligible to vest, they do so over a number of years following achievement of these goals. These performance-based awards include restricted stock units granted to select members of our senior management team that will vest only if a three-year cumulative revenue goal is achieved. As in prior years, we also granted time-based equity awards that vest over a four- to five-year period to promote retention.

Other highlights of our executive compensation program include:

 

   

Annual “say on pay” vote

   

No pension or supplemental retirement benefits for executive officers

   

Clawback policy applicable to all employees for cash and equity incentive compensation

   

Strong executive stock ownership guidelines

   

Strong executive stock holding guidelines

   

CEO succession planning

   

“Double trigger” change in control agreements

   

Independent compensation consultant

   

Compensation Committee oversight of risks associated with compensation policies and practices

   

No excise tax gross-ups

   

No hedging of Company stock

   

No discounted options

   

No option repricings without shareholder approval

   

No excessive perquisites for executives

 

 

For more information on our executive compensation program, see “Compensation Discussion and Analysis” and “Compensation of Executive Officers” beginning on pages 28 and 48, respectively, of this Proxy Statement.

 

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CORPORATE GOVERNANCE

EMC is committed to good corporate governance, which we believe helps us to sustain our success and build long-term value for our shareholders. For many years, we have had in place Corporate Governance Guidelines which provide a framework for the effective governance of EMC. The Governance Committee reviews these guidelines at least annually and, as appropriate, recommends changes to the Board of Directors for approval. We also have written charters for the Board of Directors’ standing committees (Audit, Finance, Governance, Leadership and Compensation, and Mergers and Acquisitions), as well as Business Conduct Guidelines applicable to all directors, officers and employees. Information about EMC’s corporate governance practices and copies of the Corporate Governance Guidelines, committee charters and Business Conduct Guidelines are available at www.emc.com/about/investor-relations/governance/corporate-governance.htm. EMC posts additional information on its website from time to time as the Board makes changes to EMC’s corporate governance practices.

The Board of Directors has implemented corporate governance practices that it believes are both in the best interests of EMC and its shareholders as well as compliant with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and the listing standards of the New York Stock Exchange (the “NYSE”). The Board reviews these practices on an ongoing basis. Highlights of our corporate governance practices include:

 

   

Board Leadership Structure. Our Bylaws and Corporate Governance Guidelines permit the roles of Chairman and Chief Executive Officer to be filled by the same or different individuals. This allows the Board flexibility to determine whether the two roles should be combined or separated based upon our needs and the Board’s assessment of its leadership from time to time. The Board and the Governance Committee review the structure of Board and EMC leadership as part of the succession planning process on an ongoing basis.

The Board believes that EMC and its shareholders are best served at this time by having Joseph M. Tucci serve as our Chairman and CEO, and David N. Strohm, an independent director, serve as our Lead Director. Combining the roles of Chairman and CEO makes clear that we have a single leader who is directly accountable to the Board and, through the Board, to our shareholders. It establishes one voice who speaks for the Company to customers, employees, shareholders and other stakeholders. This structure reinforces Mr. Tucci’s overall responsibility for the Company’s business and strategy, under the oversight and subject to the review of the Board. It strengthens the Board and the Board’s decision-making process because Mr. Tucci, who has first-hand knowledge of our operations and the major issues facing EMC, chairs the Board meetings where the Board discusses strategic and business issues. This structure also enables Mr. Tucci to act as the key link between the Board and other members of management. Finally, the combined roles facilitate an efficient Board process.

Our Corporate Governance Guidelines provide that if the Chairman is not an independent director, then the independent directors will select a Lead Director. The Board believes that a Lead Director is an integral part of our Board structure and facilitates the effective performance of the Board in its role of providing governance and oversight. Mr. Strohm has been our Lead Director since January 2006. Mr. Strohm brings to the role considerable skills and experience, as described in “Election of Directors.” In addition, Mr. Strohm is Chair of our Governance Committee, which affords him increased engagement with Board governance and composition. He has significant responsibilities, which are set forth in EMC’s Corporate Governance Guidelines, and include:

 

  ¡  

Presiding at the meetings of the Board at which the Chairman is not present, including the executive sessions of the non-management directors (as defined in the listing standards of the NYSE) and independent directors, establishing the agendas for such executive sessions and providing appropriate feedback to the CEO regarding these meetings;

 

  ¡  

Acting as a liaison between the independent directors and the Chairman;

 

  ¡  

Facilitating discussions among the independent directors on key issues and concerns outside of Board meetings;

 

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  Corporate Governance (continued)

 

 

  ¡  

Having the authority to call meetings of the independent directors;

 

  ¡  

In collaboration with the Chairman, setting an appropriate schedule of and standing agenda for Board meetings, as well as preparing agendas for Board meetings;

 

  ¡  

In collaboration with the Chairman, providing for the quality, quantity and timeliness of the flow of information from management to the Board that is necessary for the independent directors to effectively and responsibly perform their duties;

 

  ¡  

In collaboration with the Leadership and Compensation Committee, approving CEO goals, evaluating CEO performance, setting CEO compensation levels and reviewing CEO succession planning; and

 

  ¡  

In collaboration with the Governance Committee, making recommendations to the Board regarding committee members and chairs and overseeing the performance evaluations of the Board, each of the applicable committees and the individual directors.

Annually, the independent directors consider the role and designation of the Lead Director.

In evaluating its leadership structure, the Board also considered that a substantial majority of our Board is comprised of independent directors and the Audit, Governance, and Leadership and Compensation Committees consist entirely of independent directors. The active involvement of the independent directors, combined with the qualifications and significant responsibilities of our Lead Director, promote strong, independent oversight of EMC’s management and affairs.

 

   

Risk Oversight. The Board of Directors is responsible for overseeing risk management at the Company. The Board regularly considers our risk profile when reviewing our overall business plan and strategy and when making decisions impacting the Company.

The Governance Committee is responsible for overseeing the Board’s execution of its risk management oversight responsibility. The management risk committee, comprised of the Chief Financial Officer and the General Counsel, monitors and manages EMC’s enterprise risk management program and reports directly to the Governance Committee and the Board of Directors.

Compensation Risk. The Leadership and Compensation Committee oversees the design and implementation of and the incentives and risks associated with our compensation policies and practices. In 2011, the Committee evaluated our executive compensation program across the following categories: compensation mix, including the relative weightings of our executive officers’ base salaries, cash incentive bonus opportunities and long-term equity incentives; long-term incentive plan design; short-term incentive plan design; performance metrics; the relationship between performance and payout, including maximum payouts; stock ownership guidelines; stock holding guidelines; change in control agreements; and compensation recovery policy. The Committee considered several factors that mitigate risk in the executive compensation program, including the following:

 

  ¡  

Less than 20% of each executive officer’s total annual compensation is provided through the cash bonus plans. These plans contain limits on the amount of compensation that can be earned for any year. Moreover, EMC incents executives through multiple cash bonus plans and multiple performance targets that are weighted differently under each plan.

 

  ¡  

The majority of EMC’s executive compensation opportunity is provided in the form of a well-balanced portfolio of equity awards with multiple performance targets that are weighted differently under each type of award, multi-year vesting schedules of up to five years and deferred vesting subject to continued employment with EMC to provide strong incentives for sustained performance and sustained shareholder value.

 

  ¡  

For many years, EMC has been committed to pay-for-performance. In line with this philosophy, the Committee grants equity awards with performance elements to focus executive officers on achieving

 

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  Corporate Governance (continued)

 

 

  strategic, operational and financial goals that will lead to long-term shareholder value and encourage our executive officers to take a long-term view of the business.

 

  ¡  

The financial targets used in the compensation program align with the Board-approved operating plan for the Company.

 

  ¡  

EMC has strong stock ownership guidelines which help align the interests of our executive officers with shareholders’ interests in the long-term performance of EMC stock.

 

  ¡  

EMC has strong stock holding guidelines under which each executive officer must hold throughout the year at least 75% of his or her total equity holdings (measured as of January 1). In addition, each executive officer may sell only a limited number of shares each quarter.

 

  ¡  

EMC has a long-standing clawback policy with recovery of cash and equity incentive compensation applicable to all EMC employees.

 

  ¡  

EMC does not permit any employees to “hedge” ownership of EMC securities.

 

  ¡  

EMC’s change in control agreements provide severance payments and vesting of equity awards only on a “double trigger” basis.

 

  ¡  

The compensation consultant for the Committee only provides services for the Committee and is not permitted to provide any services to the Company unless pre-approved by the Committee.

 

  ¡  

The Committee has final authority in administering the executive compensation plans and determining achievement of the financial metrics under the plans.

The management risk committee also reviewed the compensation plans and programs for employees that could have a material impact on EMC. These plans and programs included those with significant financial incentives and a large number of participants, including all executive incentive plans. The management risk committee considered whether any of these plans or programs may encourage inappropriate risk-taking; whether any plan may give rise to risks that are reasonably likely to have a material adverse effect on the Company; and whether it would recommend any changes to the plans. The management risk committee also considered any risk-mitigating controls, such as our clawback policy and stock ownership and holding guidelines. The management risk committee presented its conclusions for review by the Leadership and Compensation Committee.

Other Risks. In addition, each of the other standing committees of the Board regularly assesses risk in connection with executing their responsibilities. The Audit Committee discusses with management EMC’s major financial risks and exposures and the steps management has taken to monitor and control such risks and exposures, including our policies with respect to risk assessment and risk management. The Mergers and Acquisitions Committee considers risks in connection with acquisitions, divestitures and investments. The Finance Committee considers risks in connection with matters related to the Company’s capital structure, stock repurchase program and investment management policy.

All of the committees report regularly to the Board of Directors on their activities. For more information, please see “Board Independence and Committees – Committees of the Board” beginning on page 23 of this Proxy Statement.

 

   

Succession Planning. We engage in succession planning at all levels of the Company.

Board Succession. The Governance Committee regularly evaluates the size and composition of the Board, giving consideration to evolving skills, perspective and experience needed on the Board to perform its governance role and provide oversight as the challenges facing the Company change over time. The Governance Committee and the Board of Directors regularly consider succession plans for membership of the Board committees and committee chairs as well as the needs of the Board on an ongoing basis.

 

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  Corporate Governance (continued)

 

 

CEO Succession. The Board and the Leadership and Compensation Committee are both engaged in CEO succession planning on an ongoing basis. They regularly review CEO succession in plenary session and executive session. This includes regular review of both long- and short-term CEO succession plans, consideration of candidates, review and monitoring of the career development of potential successors, and consideration of the Company’s needs in light of its strategic direction. The Board also ensures that it has exposure to senior officers who have the potential to succeed the CEO and other senior management positions.

Organization and Talent Review. In addition to CEO succession planning, we have a robust organization and talent review process to identify capabilities, opportunities and the readiness of high-potential employees.

 

  ¡  

Each year, every member of the executive leadership team meets with the CEO and the Executive Vice President, Human Resources, to assess the prior year’s talent management actions; consider the strategy and goals of each executive’s group in the context of EMC’s overall strategy; analyze each group’s structure and identify any gaps; develop a plan for each group by identifying the roles, responsibilities, priorities and actions needed to drive success in the coming year; and based on the plan, develop a strategy to build talent, including an assessment of bench strength, management of high-potential employees and alignment of the succession plan to EMC’s business strategy.

 

  ¡  

The Leadership and Compensation Committee reviews in detail the results of the annual organization and talent review and also engages in talent management and succession planning discussions throughout the year.

 

  ¡  

The CEO discusses EMC’s annual organization and talent review with the Board of Directors. The Board also regularly discusses succession planning throughout the year.

 

   

Annual Election of Directors. Each director is required to stand for election annually.

 

   

Majority Vote for Directors. A majority vote standard, as described in our Bylaws, applies to the election of directors. In addition, our Corporate Governance Guidelines require any incumbent nominee for director, other than in a Contested Election Meeting (as defined in our Bylaws), who does not receive more votes cast “for” his or her election than cast “against” his or her election to promptly tender his or her resignation. The Governance Committee will assess the appropriateness of the director continuing to serve and recommend to the Board the action to be taken regarding a tendered resignation. Set forth below are procedures of the Board and Governance Committee to be used if such majority vote policy is triggered:

 

  ¡  

In considering whether it is appropriate for a nominee to continue to serve as a director, the Governance Committee will act promptly and consider all factors deemed relevant, including any known reasons why shareholders voted “against” the director, the length of service and qualifications of the director in question, the director’s contributions to EMC, the director’s particular area of expertise or experience, and compliance with listing standards;

 

  ¡  

The Board will act on the Governance Committee’s recommendation promptly, but in any event not later than 90 days following the certification of the shareholder vote. The Board will consider the factors considered by the Governance Committee and any other factors it deems relevant. Board action may include acceptance of the tendered resignation, adoption of measures designed to address the issues underlying the “against” votes for such director or rejection of the tendered resignation. Following the Board’s decision, EMC will promptly disclose the Board’s decision and process (including, if applicable, the reasons for rejecting the tendered resignation) in a periodic or current report filed with the SEC;

 

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  Corporate Governance (continued)

 

 

  ¡  

If a director’s resignation is accepted by the Board, the Board will determine whether to fill such vacancy or to reduce the size of the Board; and

 

  ¡  

The process described above of determining whether or not to accept a tendered resignation will be managed by the independent directors. Further, any director who tenders his or her resignation pursuant to EMC’s majority vote policy will not participate in the Governance Committee recommendation or Board consideration regarding whether or not to accept the tendered resignation. If a majority of the members of the Governance Committee receive more votes cast “against” than “for” at the same election, then the independent directors who are on the Board who did not receive such votes will consider the tendered resignations.

 

   

Board Self-Assessments. The Governance Committee, together with the Lead Director, oversees an annual evaluation process as follows:

 

  ¡  

Each director evaluates the Board as a whole;

 

  ¡  

Each member of the standing committees of the Board of Directors evaluates the committees on which he or she serves; and

 

  ¡  

Each director prepares an individual self-evaluation.

After these evaluations are complete, the results are discussed by the Board and each committee and with each individual director, as applicable, and, if necessary, action plans are developed.

 

   

Executive Sessions of Non-Management Directors. The non-management directors meet in executive session in connection with each regularly scheduled Board meeting, and the independent directors meet in executive session at least once each year. The Lead Director acts as presiding director for such executive sessions.

 

   

Shareholder Communications. To enable open communications, EMC provides various means for shareholders and other interested parties to contact the non-management directors, the Audit Committee and the Leadership and Compensation Committee (see “Board Independence and Committees – Communications with the Board” below). The Board strives to provide clear, candid and timely responses to any substantive communication it receives. In order to build constructive, informed relationships with shareholders and encourage transparency and accountability, directors may also be available for dialogue with shareholders from time to time, as appropriate. During 2011, members of the Board and EMC management dialogued and met with stakeholders on a variety of topics. In addition to these communications, it is the Board’s policy in accordance with our Corporate Governance Guidelines to provide a response to any shareholder proposal that receives a majority vote.

 

   

Director Orientation and Continuing Education. The Board believes that director education is integral to Board and committee performance and effectiveness. The Board’s director orientation program emphasizes EMC’s business and strategic plans, and includes site visits, presentations and meetings with management. Directors are also expected to participate in continuing educational programs in order to maintain the necessary level of expertise to perform their responsibilities as directors.

 

   

Director Stock Ownership Guidelines. The Board believes that non-management directors should hold a significant equity interest in EMC. We have had director stock ownership guidelines in place for many years. Under these guidelines, each non-management director is expected to own, within three years after becoming a director, shares of EMC common stock with a value equal to five times the annual Board retainer, excluding any committee retainers or fees. As of March 1, 2012, all of the non-management directors are in compliance with these guidelines. We also have executive stock ownership guidelines –

  for more information, please see “Compensation Discussion and Analysis – Stock Ownership Guidelines” on page 45 of this Proxy Statement.

 

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  Corporate Governance (continued)

 

 

   

Sustainability. The Governance Committee is responsible for overseeing EMC’s sustainability program which focuses on four key areas: promoting environmental stewardship, building an inclusive global workforce, providing access to education and strengthening corporate governance. We believe that integrating environmental, social and financial considerations in our business strategy and decisions is integral to growing the success of EMC, and benefits our shareholders, employees, customers, suppliers and communities. By developing sustainable business practices throughout EMC and helping our customers optimize their data centers and their businesses, we create competitive advantage, build trust and pave the way for continued long-term corporate success. For more information, please see www.emc.com/about/sustainability/index.htm.

 

   

Political Contributions. The Governance Committee oversees our political spending activity. Our corporate political contributions and membership dues we pay to major U.S. trade associations and the percentage of such dues that is used for political spending are disclosed on our website. For more information, please see www.emc.com/about/sustainability/governance-integrity/ethics.htm.

 

   

Simple Majority Vote. There are no supermajority voting requirements in our Articles of Organization or Bylaws.

 

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BOARD INDEPENDENCE AND COMMITTEES

The Board has a substantial majority of directors who are independent under the NYSE’s director independence standards and EMC’s Categorical Standards of Independence.

EMC has adopted Categorical Standards of Independence, which are available at www.emc.com/about/investor-relations/governance/corporate-governance.htm and are also attached as Exhibit A to this Proxy Statement, to assist it in assessing director independence. Pursuant to these standards, the Board broadly considers all relevant facts and circumstances in its determination of independence of all Board members (including any relationships set forth in this Proxy Statement under the heading “Certain Transactions”). EMC’s Board of Directors has affirmatively determined that the following directors (and former director) have no direct or indirect material relationship with EMC, and therefore are independent under our Categorical Standards and the NYSE listing standards: Michael W. Brown, Randolph L. Cowen, Michael J. Cronin, Gail Deegan, James S. DiStasio, Edmund F. Kelly, Windle B. Priem, Paul Sagan and David N. Strohm. Mr. Cronin passed away in April 2011.

In determining that the above-mentioned directors are independent, the Board considered transactions during 2011 between EMC and Liberty Mutual Group (where Mr. Kelly is Chairman), and between EMC and Akamai Technologies, Inc. (where Mr. Sagan is President and CEO), and determined that the amount of business fell below the thresholds in EMC’s Categorical Standards of Independence. These transactions include purchases and sales of goods and services in the ordinary course of business that were less than 0.1% of each company’s annual revenues, including a small amount of insurance coverage in EMC’s professional liability insurance program provided by Liberty Mutual. The Board considered transactions during 2011 between EMC and companies, universities, hospitals and other organizations with which Messrs. Brown, Cowen, DiStasio, Kelly, Priem, Sagan and Strohm, and Ms. Deegan, are affiliated as directors, trustees or members of an advisory board and determined that these relationships were not material. The Board considered that EMC made donations to charities with which Messrs. Cowen, Kelly and Priem are affiliated as directors or trustees, and determined that the amount of the donations fell below the thresholds in EMC’s Categorical Standards of Independence.

Board Meetings

During the fiscal year ended December 31, 2011, EMC’s Board of Directors held 11 meetings. All directors attended at least 90% of the Board meetings and committee meetings which were held during the period in which he or she was a director of EMC and in which he or she was a member of such committees.

Attendance at Annual Meeting of Shareholders

EMC’s Corporate Governance Guidelines provide that each director is expected to attend the Annual Meeting of Shareholders. All but one of the then current directors attended the 2011 Annual Meeting of Shareholders.

 

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  Board Independence and Committees (continued)

 

 

Committees of the Board

The Board of Directors has established five standing committees: the Audit Committee, the Governance Committee, the Finance Committee, the Leadership and Compensation Committee, and the Mergers and Acquisitions Committee. The Audit, Compensation, and Governance Committees consist entirely of independent directors, and members of the Audit Committee meet additional, heightened independence criteria applicable to audit committee members under the NYSE listing standards. Generally, a director is a member of no more than two required committees. Each committee operates pursuant to a written charter that is available on our website at www.emc.com/about/investor-relations/governance/corporate-governance.htm. The membership of each committee is listed below.

 

   

Audit

  

Corporate Governance
and Nominating

 

Finance

 

Leadership and
Compensation

 

Mergers and
Acquisitions

Michael W. Brown

  X      Chair   X   X

Randolph L. Cowen

         X   X

Gail Deegan

  Chair    X      

James S. DiStasio

  X         

John R. Egan

       X     Chair

Edmund F. Kelly

       X    

Windle B. Priem

  X    X     Chair  

Paul Sagan

           X

David N. Strohm

     Chair     X   X

Joseph M. Tucci

       X     X

•    Audit Committee: This committee reviews with management and EMC’s auditors EMC’s financial statements, the accounting principles applied in their preparation, the scope of the audit, any issues raised by the auditors regarding EMC’s financial statements and its accounting controls and procedures, EMC’s risk assessment and risk management policies, EMC’s worldwide corporate compliance program, the independence of EMC’s auditors, EMC’s internal controls, EMC’s policy pertaining to related person transactions, the other matters as set forth in its charter, and such other matters as the committee deems appropriate. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of EMC’s independent auditors for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for EMC and pre-approves all such audit, review or attest engagements. The Audit Committee also pre-approves non-audit services to be performed by its independent auditors in accordance with the committee’s pre-approval policy.

The Board of Directors has determined, in accordance with the rules of the SEC, that each of Ms. Deegan and Messrs. Brown, DiStasio and Priem is an “audit committee financial expert.”

During 2011, senior members of EMC’s financial and legal management participated in each of the Audit Committee’s regularly scheduled meetings. During the course of the year, the Audit Committee had separate executive sessions with EMC’s General Counsel (who is also our chief compliance officer), independent auditors and internal auditors at which candid discussions regarding legal matters, our corporate compliance program, financial reporting, internal controls and accounting systems and processes took place. The Audit Committee discussed with EMC’s internal and independent auditors the overall scope and plans for their respective audits. The Audit Committee also met on a regular basis without members of management or the Company’s independent auditors.

The Audit Committee has reviewed with senior members of management EMC’s policies and practices regarding risk assessment and risk management. The Audit Committee has also reviewed the adequacy and effectiveness of EMC’s legal, regulatory and ethical compliance programs, including our Business Conduct Guidelines.

 

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  Board Independence and Committees (continued)

 

 

•    Corporate Governance and Nominating Committee: This committee oversees and advises the Board on corporate governance matters and assists the Board in identifying and recommending qualified Board candidates. The Governance Committee also reviews and makes recommendations to the Board on the size and composition of the Board, standards to be applied by the Board in making independence determinations, assignments to committees of the Board and resignations of directors, when appropriate. The Governance Committee oversees the evaluation of the Board, the committees and individual directors and monitors possible conflicts of interest of directors and senior executives. In addition, the Governance Committee oversees the Board’s execution of its risk management oversight responsibility, including receiving reports from the management risk committee, and oversees and makes recommendations to the Board regarding shareholder proposals and sustainability matters.

EMC shareholders may recommend individuals to the Governance Committee for consideration as potential director candidates by submitting their names and appropriate background and biographical information to the Governance Committee, 176 South Street, Hopkinton, MA 01748. Assuming that the appropriate information has been timely provided, the Governance Committee will consider these candidates substantially in the same manner as it considers other Board candidates it identifies. EMC shareholders may also nominate director candidates by following the advance notice provisions of EMC’s Bylaws as described under “Business and Nominations for EMC’s 2013 Annual Meeting” on page 67 of this Proxy Statement.

•    Finance Committee: This committee oversees and reviews with management matters related to the enhancement of the capital structure of EMC and its subsidiaries, including the issuance and restructuring of EMC’s equity and debt, issuance of our subsidiaries’ equity (including the equity of VMware, Inc. (“VMware”)), the redemption of any of EMC’s bonds or convertible notes which may be outstanding from time to time, EMC’s investment management policy, any common stock repurchase or VMware Class A common stock purchase programs which may exist from time to time, and EMC’s dividend policy.

•    Leadership and Compensation Committee: This committee sets EMC’s executive compensation philosophy and objectives, recommends compensation for non-employee directors, sets the compensation of the Chairman and CEO, reviews and approves the goals and objectives relevant to the compensation of the Chairman and CEO and evaluates his performance, including his performance relative to his respective goals and objectives as well as his overall performance. The Compensation Committee also reviews and approves the compensation of EMC’s other executive officers, oversees the incentives and risks associated with the Company’s compensation policies and practices, and oversees regulatory compliance of compensation matters. For more information on compensation risk oversight, please see “Corporate Governance – Risk Oversight” on page 17 of this Proxy Statement. The Compensation Committee annually reviews EMC’s equity plans, approves grants under EMC’s equity plans and has the authority to administer and interpret the provisions of EMC’s equity, deferred compensation, 401(k) and other plans. The Compensation Committee also oversees and reports to the Board on succession planning for the CEO and other senior management positions.

The Compensation Committee has engaged Towers Watson & Co. (“Towers Watson”) as its compensation consultant. Towers Watson works at the direction of the Compensation Committee and reports directly to the Compensation Committee. For more information, please see “Compensation Discussion and Analysis – Role of Compensation Consultant” on page 46 of this Proxy Statement.

The Compensation Committee may incorporate certain metrics which are part of EMC’s operating plan into the compensation program for EMC’s executive officers. In this regard, the Board of Directors is involved in setting executive compensation. Subject to compensation parameters approved by the Compensation Committee, our CEO and CFO set the performance goals under our business unit incentive compensation plans. These goals are aligned with EMC’s operating plan. In addition, our CEO, subject to compensation parameters approved by the Compensation Committee, approves the individual performance goals under our Executive Management by Objectives Plan for our executive officers. Our CEO also presents recommendations regarding the compensation of our executive officers to the Compensation Committee for approval. The Executive Vice President, Human Resources, assists our CEO and CFO in performing their compensation-related responsibilities and also assists the Compensation Committee in fulfilling its functions.

 

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  Board Independence and Committees (continued)

 

 

For more information on the Compensation Committee’s responsibilities and our compensation program, please see “Corporate Governance” and “Compensation Discussion and Analysis” beginning on pages 16 and 28, respectively, of this Proxy Statement.

Compensation Committee Interlocks and Insider Participation

None of the Leadership and Compensation Committee members has ever been an officer or employee of EMC. None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has an executive officer serving as a member of our Board or Leadership and Compensation Committee.

•    Mergers and Acquisitions Committee: This committee reviews and approves (or recommends that the Board approve) potential acquisitions, divestitures and investments. The Mergers and Acquisitions Committee also evaluates the execution, financial results and integration of completed acquisition transactions.

Communications with the Board

EMC shareholders and all other interested parties can report concerns or complaints about EMC’s accounting, internal accounting controls, auditing or financial matters directly to the Audit Committee. Questions or concerns about compensation matters can be sent directly to the Leadership and Compensation Committee. Communications can also be sent directly to the non-management directors. Information on how to contact the Audit Committee, the Leadership and Compensation Committee and the non-management directors is set forth below and at www.emc.com/about/investor-relations/governance/contact-board.htm. For more information on the Board’s engagement with shareholders, please see “Corporate Governance – Shareholder Communications” on page 20 of this Proxy Statement.

 

Audit Committee   Leadership and Compensation Committee   Non-Management Directors

By mail:

c/o Alertline

PMB 3767

13950 Ballantyne Corporate Place

Charlotte, NC 28277

 

By mail:

c/o Alertline

PMB 3767

13950 Ballantyne Corporate Place

Charlotte, NC 28277

 

By mail:

c/o Alertline

PMB 3767

13950 Ballantyne Corporate Place

Charlotte, NC 28277

By e-mail:

AuditCommitteeChairman@emc.com

 

By e-mail:

CompensationCommitteeChairman@emc.com

 

By e-mail:

nonmngtdirectors@emc.com

Communications received electronically will be accessed directly by, and communications received by mail will be forwarded directly to, the Audit Committee and the Leadership and Compensation Committee, as appropriate. Communications addressed to the non-management directors will be accessed directly by or forwarded directly to the Governance Committee. The committees will forward these communications to other directors, members of EMC management or such other persons as they deem appropriate. The committees or, if appropriate, EMC management, will respond in a timely manner to any substantive communications from a shareholder or an interested party.

 

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SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information about the beneficial ownership of common stock owned on March 1, 2012 (i) by each person who is known by EMC to own beneficially more than 5% of the common stock, (ii) by each of EMC’s directors and nominees for director, (iii) by each of the Named Executive Officers (as defined below) and (iv) by all directors and executive officers of EMC as a group.

 

Name of Beneficial Owner

   Number of Shares
Beneficially Owned1
    Percent of
Outstanding  Shares

BlackRock, Inc.

     107,877,095 2    5.19%

Michael W. Brown3, 4*

     100,000      **

Randolph L. Cowen4, 5*

     40,000      **

Gail Deegan4, 6*

     158,500      **

James S. DiStasio4, 7*

     20,000      **

John R. Egan4, 8*

     1,529,209      **

Howard D. Elias4, 9

     856,618      **

Patrick P. Gelsinger4, 10

     399,718      **

David I. Goulden4, 11

     1,296,017      **

Edmund F. Kelly4, 12*

     70,000      **

Windle B. Priem4, 13*

     190,000      **

Paul Sagan4, 14*

     60,000      **

David N. Strohm4, 15*

     360,001      **

William J. Teuber, Jr.4, 16

     1,018,479      **

Joseph M. Tucci4, 17*

     2,568,179      **

All directors and executive officers as a group (20 persons)18

     10,629,511      **

 

  * Nominee for director
** Less than 1%
1

Except as otherwise noted, all persons have sole voting and investment power of their shares. All amounts shown in this column include shares obtainable upon exercise of stock options currently exercisable or exercisable within 60 days of the date of this table.

2 

Based solely on the Schedule 13G filed by BlackRock, Inc. with the SEC on February 9, 2012. The Schedule 13G provides that BlackRock, Inc. beneficially owns in the aggregate 107,877,095 shares of common stock and that it has sole power to vote or direct the voting of 107,877,095 of such shares and to dispose or direct the disposition of 107,877,095 of such shares.

3 

Mr. Brown is deemed to own 50,000 of these shares by virtue of options to purchase these shares.

4 

Does not include restricted stock units held by the following individuals: Mr. Brown (8,700); Mr. Cowen (8,700); Ms. Deegan (8,700); Mr. DiStasio (8,700); Mr. Egan (8,700); Mr. Elias (507,455); Mr. Gelsinger (750,455); Mr. Goulden (507,455); Mr. Kelly (8,700); Mr. Priem (8,700); Mr. Sagan (8,700); Mr. Strohm (8,700); Mr. Teuber (303,784); and Mr. Tucci (780,512). The restricted stock units held by Messrs. Brown, Cowen, DiStasio, Egan, Kelly, Priem, Sagan and Strohm and Ms. Deegan will vest on May 4, 2012.

5 

Mr. Cowen is deemed to own 20,000 of these shares by virtue of options to purchase these shares.

6 

Ms. Deegan is deemed to own 90,000 of these shares by virtue of options to purchase these shares.

7 

Mr. DiStasio is deemed to own 10,000 of these shares by virtue of options to purchase these shares.

8 

Mr. Egan is deemed to own 130,000 of these shares by virtue of options to purchase these shares.

9 

Mr. Elias is deemed to own 647,989 of these shares by virtue of options to purchase these shares.

10

Mr. Gelsinger is deemed to own 213,800 of these shares by virtue of options to purchase these shares.

11

Mr. Goulden is deemed to own 1,080,334 of these shares by virtue of options to purchase these shares.

12 

Mr. Kelly is deemed to own 30,000 of these shares by virtue of options to purchase these shares.

13 

Mr. Priem is deemed to own 10,000 of these shares by virtue of options to purchase these shares.

14 

Mr. Sagan is deemed to own 30,000 of these shares by virtue of options to purchase these shares.

15 

Mr. Strohm is deemed to own 90,000 of these shares by virtue of options to purchase these shares.

16 

Mr. Teuber is deemed to own 567,987 of these shares by virtue of options to purchase these shares.

17 

Mr. Tucci is deemed to own 1,554,502 of these shares by virtue of options to purchase these shares.

18 

Includes 5,787,922 shares of common stock beneficially owned by all executive officers and directors as a group by virtue of options to purchase these shares. Excludes shares as to which such individuals have disclaimed beneficial ownership. Excludes 4,552,399 restricted stock units held by all executive officers and directors as a group.

The address of all persons listed above, other than BlackRock, Inc., is c/o EMC Corporation, 176 South Street, Hopkinton, MA 01748. The address of BlackRock, Inc. is 40 East 52nd Street, New York, NY 10022.

 

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LEADERSHIP AND COMPENSATION COMMITTEE REPORT

The Leadership and Compensation Committee of EMC has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Leadership and Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

LEADERSHIP AND COMPENSATION COMMITTEE

Windle B. Priem, Chair

Michael W. Brown

Randolph L. Cowen

David N. Strohm

 

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Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Our executive compensation program is designed to hold people accountable for results over the long term and reward them for consistently strong execution.

Pay-for-Performance Philosophy

In keeping with our results-driven culture, the Compensation Committee expects our executives to deliver superior performance in a sustained fashion. As a result, a substantial portion of our executives’ overall compensation is tied to performance. The Compensation Committee links their compensation to the attainment of challenging goals that will drive EMC to achieve profitable revenue growth and market share gains, while expanding the global market opportunity for our product, technology and services portfolio.

Equity is a key component of our compensation program. We believe strongly that equity awards serve to align the interests of our executives with those of our shareholders. We use many forms of equity to motivate our executives. The Compensation Committee considers strategic, operational and financial goals and multi-year vesting to create incentives for our executives to sustain performance over the long term as well as to encourage retention.

Business Results

EMC’s vision is to be the undisputed leader in enabling Hybrid Cloud Computing. To make this vision a reality, we have made strategic investments over the years to build our portfolio of information storage, virtualization, information protection, information security, and information management, analytics and intelligence technologies, products and services. As a result, we now have what we believe to be the deepest knowledge, broadest product portfolio and strongest partnerships in the IT industry to help customers accelerate their journey to the cloud and realize the benefits of delivering IT as a Service.

We firmly believe our vision and strategy are on target. Customers find our vision compelling and our offerings attractive. Our ability to sustain profitable growth year after year has produced a track record that few large, technology companies can match. As demonstrated in the table below, from 2007 to 2011, EMC’s revenue and non-GAAP earnings per share (“EPS”) grew at a double-digit compound annual rate (“CAGR”).

Revenue and Non-GAAP EPS Growth

 

LOGO

 

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  Compensation Discussion and Analysis (continued)

 

 

In 2011, we successfully executed what we call our financial triple play: simultaneously gaining market share, reinvesting substantially in our business and delivering improved profitability. Furthermore, in 2011, we achieved all-time record revenue, profit and free cash flow:

 

     2011 ($)    % Growth from 2010

Revenue

   20.0 billion    18%

Non-GAAP Net Income*

   3.4 billion    24%

Non-GAAP Earnings Per Share*

   1.51    20%

Free Cash Flow*

   4.4 billion    29%

 

  * A reconciliation of our GAAP to non-GAAP results can be found in Exhibit B to this Proxy Statement.

Our record of achievement is the direct result of our seasoned and adaptable executive team, our ability to attract, develop and retain highly-skilled and dedicated people, and the thorough engagement of the Board’s well-informed and independent Compensation Committee, which is committed to pay-for-performance.

2011 Executive Compensation Program

The Compensation Committee approved an executive compensation program for 2011 that implements our pay-for-performance philosophy.

The primary elements of our executive compensation program are base salary, cash bonuses and equity incentives. In determining the compensation of our Named Executive Officers (as defined below), the Compensation Committee evaluates, among other things:

 

   

EMC’s performance or the performance of the business unit or function for which the individual is responsible;

 

   

the individual’s responsibilities, experience and performance;

 

   

compensation previously paid or awarded to the individual; and

 

   

competitive market conditions.

For our cash incentive plans, the Board and the Compensation Committee approved revenue, profitability and cash flow goals, as well as qualitative goals to complete strategic and operational priorities, because they believe that solid performance in these areas will lead to long-term shareholder value.

As discussed above, EMC achieved superior financial performance in 2011 and the Named Executive Officers achieved 102.1%, 103.7% and 110.6% of the challenging revenue, non-GAAP EPS and free cash flow targets established by the Compensation Committee, respectively. However, despite our strong performance in 2011, the Compensation Committee exercised its discretion under the 2011 Corporate Incentive Plan to reduce bonus payments by 7% to include the impact of EMC’s actual expenditures incurred in 2011 related to a sophisticated cyber attack on our RSA division, which were excluded from our 2011 non-GAAP results. Accordingly, the Named Executive Officers received the following cash bonus incentive compensation in 2011:

 

Name

  Corporate Incentive
Plan
    Executive
Management by
Objectives Plan
    Information Storage
Incentive Plan
  Total Payout  
  Target
($)
    Actual
($)
    Target
($)
    Actual
($)
    Target
($)
  Actual
($)
  Target
($)
    Actual
($)
 

Joseph M. Tucci

    1,152,000        1,866,240        288,000        274,629      n/a   n/a     1,440,000        2,140,869   

David I. Goulden

    560,000        907,200        140,000        137,000      n/a   n/a     700,000        1,044,200   

Patrick P. Gelsinger

    350,000        567,000        140,000        137,000      210,000   208,481     700,000        912,481   

William J. Teuber, Jr.

    350,000        567,000        140,000        137,000      210,000   208,481     700,000        912,481   

Howard D. Elias

    350,000        567,000        140,000        137,000      210,000   208,481     700,000        912,481   

 

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Table of Contents

  Compensation Discussion and Analysis (continued)

 

 

Set forth below is a summary of the total cash compensation paid to the Named Executive Officers in 2011:

 

Name

   Base Salary ($)      Cash Bonus ($)      Total ($)  

Joseph M. Tucci

     1,000,000         2,140,869         3,140,869   

David I. Goulden

     600,000         1,044,200         1,644,200   

Patrick P. Gelsinger

     600,000         912,481         1,512,481   

William J. Teuber, Jr.

     700,000         912,481         1,612,481   

Howard D. Elias

     600,000         912,481         1,512,481   

In addition, based on achievement of the 2011 revenue and EPS performance targets established by the Compensation Committee, a portion of the performance-based equity awards granted in August 2010 vested in February 2012 and the remaining portion is eligible to vest over the next few years:

 

Name

   2010 Performance Stock Units     2010 Performance Stock Options  
   # of Units Granted      % Eligible to Vest*     # of Options Granted      % Eligible to Vest**  

Joseph M. Tucci

     210,000         100     105,000         100

David I. Goulden

     72,000         100     36,000         100

Patrick P. Gelsinger

     72,000         100     36,000         100

William J. Teuber, Jr.

     72,000         100     36,000         100

Howard D. Elias

     72,000         100     36,000         100

 

  * One-third of these units vested on February 2, 2012. Subject to the executive officer’s continued employment with EMC, one-half of the remaining units will vest in each of 2013 and 2014.
** One-fourth of these options vested on February 2, 2012. Subject to the executive officer’s continued employment with EMC, one-third of the remaining options will vest in each of 2013, 2014 and 2015.

A significant majority of the equity awards granted to our executive officers in 2011 are performance-based awards and will vest only if the Company achieves challenging revenue and/or EPS goals. All or a portion of these awards will be forfeited if the performance goals are not met. If the performance goals are achieved and such awards become eligible to vest, they do so over a number of years following achievement of these goals. These performance-based awards include restricted stock units granted to select members of our senior management team that will vest only if a three-year cumulative revenue goal is achieved (the “2011 LTIP stock units”). As in prior years, we also granted time-based equity awards that vest over a four- to five-year period to promote retention. The Named Executive Officers received the following equity awards in 2011:

 

Name

   Performance
Stock Units
     Performance
Stock Options
     Time-Based
Stock Units
     Time-Based
Stock Options
     2011  LTIP
Stock
Units
 

Joseph M. Tucci

     183,307         92,424         122,205         61,616           

David I. Goulden

     61,103         30,808         40,735         20,539         239,617   

Patrick P. Gelsinger

     61,103         30,808         140,735         20,539         239,617   

William J. Teuber, Jr.

     81,470         41,078         54,314         27,385           

Howard D. Elias

     61,103         30,808         40,735         20,539         239,617   

Consideration of 2011 Advisory Vote on Executive Compensation

At our May 2011 annual meeting, shareholders expressed strong support for our executive compensation program, with over 98% of votes cast voting in favor of the proposal. When designing our 2012 executive compensation program, the Compensation Committee considered, among other things: the 2011 vote results; comments received during our active shareholder engagement following the 2011 annual meeting, including feedback on our compensation program; regulatory changes; evolving compensation practices; the economic environment; and our financial and operational performance.

After careful consideration, the Compensation Committee determined to retain the core design of our executive compensation program for 2012, and enhance our program with the grant of the 2011 LTIP stock units.

 

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  Compensation Discussion and Analysis (continued)

 

 

Other Compensation Practices

The Compensation Committee reviews our executive compensation program on an ongoing basis. In addition to our pay-for-performance philosophy, highlights of our executive compensation program include:

 

   

Annual Advisory Vote to Approve Executive Compensation. We will ask shareholders for advisory approval of our executive compensation every year.

 

   

No Pension or SERPs. We do not provide our executive officers with a defined benefit pension plan, any supplemental executive retirement plans or retiree health benefits. Generally, all EMC employees, including the executive officers, may participate in our 401(k) plan.

 

   

Compensation Recovery Policy. We have a long-standing clawback policy applicable to all employees that allows us to recoup previously paid cash and equity incentive compensation.

 

   

Stock Ownership Guidelines. We have rigorous stock ownership guidelines to further align our executive officers’ interests with those of our shareholders, including a guideline of 650,000 shares for our CEO. As of March 1, 2012, the Named Executive Officers are all in compliance with their respective guidelines.

 

   

Stock Holding Guidelines. We have strong stock holding guidelines under which each executive officer must hold throughout the year at least 75% of his or her total equity holdings (measured as of January 1). In addition, each executive officer may sell only a limited number of shares each quarter.

 

   

Succession Planning. The Board and the Compensation Committee regularly review our CEO succession plan (both long- and short-term plans), consider candidates, review and monitor the career development of potential successors, and consider the Company’s needs in light of its strategic direction.

 

   

Change in Control Agreements. Our change in control agreements provide severance payments and accelerated vesting of equity awards only on a “double trigger” basis.

 

   

No Tax Gross-Ups. Tax gross-ups are not provided to our executive officers for personal expenses or in the event of a change in control.

 

   

Shareholder Engagement. We have a long-standing shareholder outreach program in which we dialogue on numerous topics, including executive compensation matters.

 

   

Accessible Leadership and Compensation Committee. To encourage and facilitate dialogue between our shareholders and the Compensation Committee about our executive compensation policies and practices, we have established direct lines of communication for our shareholders to the Compensation Committee, including a direct e-mail address.

 

   

Independent Compensation Consultant. The Compensation Committee’s compensation consultant provides services only for the Compensation Committee and is not permitted to provide any services to the Company unless pre-approved by the Compensation Committee.

 

   

Risk Oversight. The Compensation Committee oversees and evaluates the design and implementation of the incentives and risks associated with our compensation policies and practices.

 

   

No Hedging, Option Repricings or Discounted Options. We do not permit hedging of Company stock, option repricings without shareholder approval, or the issuance of discounted stock options.

The Compensation Committee believes that the actions described above clearly demonstrate the Company’s commitment to and consistent execution of an effective pay-for-performance executive compensation program. For more information, please see the discussion below.

 

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Named Executive Officers

The executive officers who appear in the Summary Compensation Table for 2011 are:

 

Name

  

Title

Joseph M. Tucci

   Chairman, President and Chief Executive Officer

David I. Goulden

   Executive Vice President and Chief Financial Officer

Patrick P. Gelsinger

   President and Chief Operating Officer, EMC Information Infrastructure Products

William J. Teuber, Jr.

   Vice Chairman

Howard D. Elias

   President and Chief Operating Officer, EMC Information Infrastructure and Cloud Services

These individuals are referred to collectively in this Proxy Statement as the “Named Executive Officers.”

Objectives of EMC’s Executive Compensation Program

The objectives of EMC’s executive compensation program are to:

 

   

motivate executives to achieve EMC’s strategic, operational and financial goals;

   

reward superior performance;

   

attract and retain exceptional executives; and

   

align the interests of executives and EMC shareholders.

These objectives are discussed below for each element of EMC’s executive compensation program.

Elements of EMC’s Executive Compensation Program

The primary elements of EMC’s executive compensation program are base salary, cash bonuses and equity incentives.

When designing the executive compensation program, the Compensation Committee gives significant weight to cash and equity incentives, which reflects the Compensation Committee’s belief that a large portion of executive compensation should be performance-based. This compensation is performance-based because payment and/or vesting are tied to the achievement of individual and/or corporate performance goals. In addition, with respect to the equity awards, the value to the recipient fluctuates with the price of our common stock. The Compensation Committee believes that the equity incentives are particularly significant because they drive the achievement of EMC’s long-term strategic goals and align the executives’ interests with those of EMC shareholders, while the cash bonuses drive the achievement of shorter-term performance goals that impact the accomplishment of EMC’s long-term strategic objectives.

 

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Set forth below is a summary of the relative weights given to each component of the 2011 compensation opportunities for Mr. Tucci and the other Named Executive Officers.

CEO

 

LOGO

Other NEOs*

 

              LOGO

 

  * Reflects average compensation.
** Includes the 2011 LTIP stock units, which are described beginning on page 41 of this Proxy Statement.

For purposes of determining the percentages shown above for the annual compensation opportunities of the Named Executive Officers, it is assumed that cash bonuses will be earned at target levels, stock options have a value determined by an option pricing model and restricted stock units have a value equal to the underlying value of the stock on the date the grant was approved. Since these awards have both upside opportunities and downside risk, these percentages may not reflect the actual amounts realized.

 

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Base Salary

In general, the base salary of each of the Named Executive Officers is determined by evaluating the executive officer’s responsibilities, experience and impact on EMC’s results and the salaries paid to executive officers in comparable positions by our peer group. We use base salary to compensate our executive officers for performing their day-to-day responsibilities. Base salary adjustments are considered annually and take into account changes in the executive officer’s responsibilities and performance and the current competitive marketplace and economy.

The Named Executive Officers’ 2011 and 2012 base salaries are set forth below:

 

Name

   2011 Base Salary
($)
     2012 Base Salary
($)
 

Joseph M. Tucci*

     1,000,000         1,000,000   

David I. Goulden

     600,000         600,000   

Patrick P. Gelsinger

     600,000         600,000   

William J. Teuber, Jr.

     700,000         700,000   

Howard D. Elias    

     600,000         600,000   

 

  * Mr. Tucci’s base salary has not increased since 2001.

Cash Bonus Plans

More than 75% of our employees, including the Named Executive Officers, participate in our cash bonus plans under which the payment of bonuses is contingent upon the achievement of pre-determined performance goals. Our cash bonus plans are designed to motivate our executive officers and other employees to achieve specified corporate, business unit, individual, strategic, operational and financial performance goals.

Each year, the Compensation Committee approves each Named Executive Officer’s cash bonus opportunity. In determining the cash bonus opportunity, the Compensation Committee considers a number of factors, including EMC’s performance, the individual’s performance and the performance of the business unit or function for which the individual is responsible, the individual’s experience, similar compensation opportunities that may be payable to similarly situated executives internally and externally, changes in the competitive marketplace and the economy, and the other elements of compensation payable by EMC to the individual.

The Named Executive Officers’ 2011 and 2012 total target annual bonus opportunities are set forth below:

 

Name

   2011 Total Target Annual
Bonus Opportunity

($)
     2012 Total Target Annual
Bonus Opportunity

($)
 

Joseph M. Tucci*

     1,440,000         1,440,000   

David I. Goulden

     700,000         700,000   

Patrick P. Gelsinger

     700,000         700,000   

William J. Teuber, Jr.

     700,000         700,000   

Howard D. Elias

     700,000         700,000   

 

  * Mr. Tucci’s total target annual bonus opportunity has not increased since 2001.

2011 Cash Bonus Plans

For 2011, the Compensation Committee approved three cash bonus plans in which the Named Executive Officers were eligible to participate: the Corporate Incentive Plan, the Executive Management by Objectives Plan and the Information Storage Incentive Plan. The Corporate Incentive Plan is intended to incent the achievement of financial metrics for the Company that are aligned with the annual operating plan set by the Board. The Executive Management by Objectives Plan is intended to incent the achievement of strategic and operational goals. The Information Storage Incentive Plan is intended to incent the achievement of the financial metrics for our Information Storage business that are aligned with the annual operating plan set by the Board.

 

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The Compensation Committee determined that the vast majority of the bonus opportunity for Messrs. Tucci and Goulden should be allocated to the Corporate Incentive Plan since, in their respective roles, they have responsibility for, and a significant impact on, EMC’s overall corporate performance and achievement of long-term objectives, and the remaining portion of their respective bonus opportunity should be allocated to the Executive Management by Objectives Plan to focus on the achievement of various strategic and operational goals. For Messrs. Gelsinger, Teuber and Elias, the Compensation Committee determined that 50% of their target bonus opportunity should be allocated to the Corporate Incentive Plan since they influence EMC’s overall corporate performance, 30% of their target bonus opportunity should be allocated to the Information Storage Incentive Plan since they have a significant impact on EMC’s Information Storage business, and the remainder of their target bonus opportunity should be allocated to the Executive Management by Objectives Plan.

The annual target bonus opportunity for each of the bonus plans in which the Named Executive Officers participated in 2011 is set forth below.

 

Name

   Corporate
Incentive Plan
($)
     Executive Management
by Objectives Plan

($)
     Information Storage
Incentive Plan

($)
 

Joseph M. Tucci

     1,152,000         288,000         n/a   

David I. Goulden

     560,000         140,000         n/a   

Patrick P. Gelsinger

     350,000         140,000         210,000   

William J. Teuber, Jr.

     350,000         140,000         210,000   

Howard D. Elias

     350,000         140,000         210,000   

2011 Corporate Incentive Plan

The 2011 Corporate Incentive Plan is an annual incentive plan under which EMC executives, including our Named Executive Officers, are eligible to receive cash bonuses contingent upon EMC’s attainment of revenue, EPS and free cash flow targets, with 30% of the opportunity based on revenue, 50% based on EPS and 20% based on free cash flow. The Compensation Committee selected these financial metrics because in its judgment they represent the primary metrics on which the Named Executive Officers should focus to drive EMC’s strategic plan and shareholder value. EPS was given the greatest weighting under the 2011 Corporate Incentive Plan to emphasize profitable growth and because the Compensation Committee believes that increases in EPS will lead to greater long-term shareholder value. EPS and free cash flow were calculated on a non-GAAP basis. EMC’s management uses these non-GAAP financial measures in their financial and operating decision-making because management believes they reflect EMC’s ongoing business in a manner that allows meaningful period-to-period comparisons.

Plan participants were provided with the opportunity to earn up to 40% of their annual target bonus on the achievement of both revenue and EPS targets set by the Compensation Committee for the first half of 2011. The opportunity to receive a first half payment was provided to incent strong revenue growth and profitability during the first half of the year. The plan design provided no payment for the free cash flow component for the first half of 2011 because the Compensation Committee determined that we could not assess whether a full year free cash flow target would be achieved after only six months given the large number of factors that could impact free cash flow in the second half of 2011.

The 2011 Corporate Incentive Plan funds at 100% of target upon the achievement of the performance target for each of the three metrics. Although, generally, participants were not entitled to a bonus unless the performance threshold for each metric was achieved, the Compensation Committee had discretion under the plan to award up to 50% of the annual target opportunity for performance below that threshold. In addition, the plan provided that the Compensation Committee could exercise negative discretion to reduce payments. The maximum bonus opportunity under the plan was equal to 200% of a participant’s target bonus opportunity.

 

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The elements of the 2011 Corporate Incentive Plan are set forth below:

 

Performance Goal

   Threshold
(50% Payout)
($)
     Target
(100% Payout)
($)
     Maximum
(200% Payout)
($)
     Component
Weighting
    Achievement/
Plan Payout
($)
 

Revenue (billions)

     18.40         19.60         20.30         30     20.0/133

Non-GAAP EPS*

     1.33         1.46         1.52         50     1.51/178 %** 

Non-GAAP free cash flow (billions)*

     3.64         4.00         4.18         20     4.4/200

 

  * For purposes of calculating achievement of the EPS target, the impact of restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization, an RSA special charge and gain on strategic investments for 2011 were excluded. For purposes of calculating achievement of the free cash flow target, free cash flow was defined as net cash provided by operating activities less additions to property, plant and equipment and capitalized software development costs. A reconciliation of our GAAP to non-GAAP results can be found in Exhibit B to this Proxy Statement.
** These numbers reflect actual achievement before application of the Compensation Committee’s negative discretion as discussed below.

The Compensation Committee exercised negative discretion, as permitted by the plan, to reduce the payout for the non-GAAP EPS achievement to include the impact of EMC’s actual expenditures incurred in 2011 related to a sophisticated cyber attack on our RSA division, which were excluded from our 2011 non-GAAP results. This reduced the payout for the EPS component under the plan from 178% to 164%. As a result, each 2011 Corporate Incentive Plan participant’s bonus was paid at 162% of target instead of 169% of target. The actual payouts for the Named Executive Officers under the 2011 Corporate Incentive Plan were $1,866,240 for Mr. Tucci, $907,200 for Mr. Goulden and $567,000 for each of Messrs. Gelsinger, Teuber and Elias.

2011 Executive Management by Objectives Plan

The Management by Objectives Plan is an annual incentive plan in which many EMC employees are eligible to participate. In 2011, our executive officers were eligible to receive semi-annual cash bonuses contingent upon (i) corporate achievement of semi-annual funding goals and (ii) achievement of a number of shared and individual semi-annual performance goals (the “Executive MBO”). The primary purpose of the Executive MBO is to focus our executive officers on the completion of strategic and operational priorities, thereby leading to greater long-term shareholder value.

For each half of 2011, the Compensation Committee assigned seven shared goals to the executive officers, including the Named Executive Officers, with 90% of the semi-annual payment tied to the achievement of these shared goals. In addition, each executive officer was assigned an individual goal, with 10% of the semi-annual payment tied to achievement of the individual goal. The Compensation Committee assigned an individual goal to Mr. Tucci, and Mr. Tucci assigned individual goals to each of the other Named Executive Officers based on their respective job responsibilities. Each of the shared goals and individual goals were specific and measurable.

At the close of each half of 2011, the Compensation Committee or Mr. Tucci, as applicable, determined whether the applicable semi-annual goals had been achieved.

Funding for the first half and second half Executive MBO goals was dependent upon achievement of semi-annual corporate revenue and profit targets. For each half-year period, the Executive MBO is funded at 100% if both of the applicable targets are met and at 80% if one or both of these targets is not achieved.

Payment of the Executive MBO bonuses was a function of the achievement of (i) each of the first half and second half funding goals, (ii) the shared performance goals, and (iii) the respective individual goals. Given our corporate financial performance in the first and second halves of 2011, the semi-annual revenue and profit funding goals were satisfied, and consequently, the Executive MBO was funded at 100% in each half of 2011.

 

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A general description of the goals assigned to the Named Executive Officers under the Executive MBO in 2011 is set forth below:

Shared Goals

 

Executive Officers    Description

    All Named Executive Officers

  

•    Pursue mid-tier storage growth strategy

•    Expand global market opportunity

•    Leverage partnerships for cloud strategy execution

•    Drive implementation of Big Data strategy

•    Execute talent management initiatives

 

Individual Goals

 

Executive Officer    Description

Joseph M. Tucci

  

•    Continue to focus on succession planning initiatives

•    Talent management and organizational alignment

 

David I. Goulden

  

•    Drive cost efficiency initiatives

•    Consolidate cloud IT strategy

 

Patrick P. Gelsinger

  

•    Strengthen partnership coordination on cloud initiatives

•    Drive leadership initiatives in Big Data

 

William J. Teuber, Jr.

  

•    Implement mid-tier storage strategic initiatives

•    Drive international growth strategy

 

Howard D. Elias

  

•    Strengthen partnership coordination on cloud initiatives

•    Implement mid-tier storage strategic initiatives

 

Although achievement of the shared and individual Executive MBO goals for each of the Named Executive Officers required significant effort, the Compensation Committee expected that the goals would be attainable by the Named Executive Officers and, historically, a significant percentage of the Executive MBO goals from year to year have been achieved. In 2011, the Named Executive Officers’ achievement of their respective goals ranged from 95% to 98%. The actual payouts under the Executive MBO in 2011 were $274,629 for Mr. Tucci and $137,000 for each of Messrs. Goulden, Gelsinger, Teuber and Elias.

2011 Information Storage Incentive Plan

The 2011 Information Storage Incentive Plan is an annual incentive plan under which Messrs. Gelsinger, Teuber and Elias were eligible to receive cash bonuses since they have a significant impact on EMC’s Information Storage business. Bonuses under the plan were tied to the Information Storage business’ 2011 operating income, excluding restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and the net impact of capitalized software development costs and related amortization (“Cash EBIT”). The Compensation Committee selected revenue and Cash EBIT as performance metrics under the plan since they are important drivers of our Information Storage business and shareholder value. The bonus opportunity under the plan for Messrs. Gelsinger, Teuber and Elias was equally weighted between the Information Storage business’ revenue and Cash EBIT because the Compensation Committee believes Messrs. Gelsinger’s, Teuber’s and Elias’ efforts have a relatively equal impact on the achievement of each metric.

 

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Messrs. Gelsinger, Teuber and Elias had the opportunity to earn up to 200% of their annual incentive target under the plan if both the 2011 revenue and Cash EBIT targets for the Information Storage business were exceeded. In order to encourage consistent execution throughout the year, Messrs. Gelsinger, Teuber and Elias were also eligible to receive up to 25% of their target annual bonus opportunity on a quarterly basis if the quarterly targets set by Messrs. Tucci and Goulden were achieved. The quarterly revenue and Cash EBIT targets were aligned with the annual operating plan set by the Board. Although, generally, participants were not entitled to a bonus for the quarter unless threshold performance was achieved, Mr. Tucci had discretion under the plan to award up to 12.5% of their target annual bonus opportunity for the quarter for performance below that threshold.

The elements of the 2011 Information Storage Incentive Plan are set forth below:

 

Performance Goal

   Threshold
(50%  Payout)
($)
     Target
(100% Payout)
($)
     Maximum
(200%  Payout)
($)
     Component
Weighting
    Achievement/
Plan Payout

($)
 

Revenue (billions)

     12.51         14.40         14.94         50     14.36/98.6

Non-GAAP Cash EBIT (billions)*

     3.68         4.05         4.34         50     4.24/100

 

* Cash EBIT was calculated on a non-GAAP basis. A reconciliation of our GAAP to non-GAAP results can be found in Exhibit B to this Proxy Statement.

The actual payout under the 2011 Information Storage Incentive Plan for each of Messrs. Gelsinger, Teuber and Elias was $208,481.

2012 Cash Bonus Plans

For 2012, the Compensation Committee approved a cash bonus program for the Named Executive Officers similar to the 2011 cash bonus program. The table below sets forth the annual target bonus opportunity in each of the bonus plans in which our Named Executive Officers are participating in 2012. The allocation of the 2012 annual target bonus opportunity among the cash bonus plans is the same as in 2011.

 

Name

   Corporate
Incentive  Plan
($)
     Executive Management
by Objectives Plan

($)
     Information Storage
Incentive Plan

($)
 

Joseph M. Tucci

     1,152,000         288,000         n/a   

David I. Goulden

     560,000         140,000         n/a   

Patrick P. Gelsinger

     350,000         140,000         210,000   

William J. Teuber, Jr.

     350,000         140,000         210,000   

Howard D. Elias

     350,000         140,000         210,000   

A description of our 2012 cash bonus plans is set forth below.

2012 Corporate Incentive Plan

The 2012 Corporate Incentive Plan has the same plan design as the 2011 Corporate Incentive Plan. Bonuses under the 2012 Corporate Incentive Plan will be based upon the achievement of 2012 revenue, non-GAAP EPS and non-GAAP free cash flow targets. In determining the performance goals under the 2012 Corporate Incentive Plan, the Compensation Committee adopted aggressive revenue, EPS and free cash flow goals, evidencing our continued commitment to pay-for-performance. The targets under the 2012 Corporate Incentive Plan have increased substantially from 2011 and require our executives to drive strong growth in revenue, EPS and free cash flow in 2012.

 

Performance Goal

   2012 Target
(100% Payout)
($)
     % Increase from
2011 Achievement
    Component
Weighting
 

Revenue (billions)

     22.00         10.0     30

Non-GAAP EPS

     1.70         12.6     50

Non-GAAP free cash flow (billions)

     4.90         10.7     20

 

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The revenue and non-GAAP EPS performance targets are the same as the annual outlook for 2012 revenue and non-GAAP EPS that we provided in early 2012. The impact of restructuring and acquisition-related charges, stock-based compensation expense, intangible asset amortization and certain unanticipated events will be excluded for purposes of calculating achievement against the EPS target. Free cash flow will be calculated as net cash provided by operating activities less additions to property, plant and equipment and capitalized software development costs.

These targets and goals are disclosed in the limited context of EMC’s 2012 Corporate Incentive Plan and should not be understood to be statements of management’s expectations or estimates of results. EMC specifically cautions investors not to apply these statements to other contexts.

2012 Executive Management by Objectives Plan

The 2012 Executive MBO has the same plan design as the 2011 Executive MBO. The shared and individual goals for the Named Executive Officers reflect continuing execution of our strategic and operational priorities.

2012 Information Storage Incentive Plan

The 2012 Information Storage Incentive Plan has the same plan design as the 2011 Information Storage Incentive Plan. Bonuses under the 2012 plan will be tied to the Information Storage business’ 2012 revenue and Cash EBIT.

Equity Incentives

EMC believes strongly that equity awards align the interests of its employees with those of its shareholders. EMC grants equity incentive awards:

 

   

to motivate our employees, including the Named Executive Officers, to achieve EMC’s financial goals;

   

to tie a portion of the compensation of our employees, including the Named Executive Officers, to the value of our common stock; and

   

to promote retention through the use of multi-year vesting schedules.

Under the Amended and Restated 2003 Stock Plan (the “2003 Stock Plan”), EMC grants stock options, restricted stock awards and restricted stock unit awards to provide employees with a mixed equity portfolio and to increase employee retention. In establishing criteria for the type of equity awards to be granted to the Named Executive Officers, the number of shares subject to those awards and the terms and conditions of those awards, the Compensation Committee takes into account the duties and responsibilities of the individual, individual performance, previous equity awards made to such individual and the value of those awards, and awards made to individuals in similar positions at our peer group companies.

In demonstration of our commitment to pay-for-performance, we have made performance equity awards a key component of our executive compensation program. Accordingly, the Compensation Committee grants at least 50% of the total number of shares awarded to our executive officers in any fiscal year as performance-based, subject to exceptions in very limited circumstances such as to achieve retention or new hire objectives. All or a portion of these awards will be forfeited if the performance goals are not met.

In 2011, as in prior years, equity awards represented a significant portion of the total compensation awarded to our Named Executive Officers in order to tie a substantial portion of the executive officers’ compensation to long-term shareholder value. For the Named Executive Officers, a significant majority of their 2011 equity awards are performance-based awards and the remaining are time-based awards.

 

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The equity awards granted to the Named Executive Officers in 2011 are set forth below:

 

Name

   Performance
Stock Units
     Performance
Stock Options
     Time-Based
Stock Units
     Time-Based
Stock Options
     2011 LTIP
Stock Units
 

Joseph M. Tucci

     183,307         92,424         122,205         61,616           

David I. Goulden

     61,103         30,808         40,735         20,539         239,617   

Patrick P. Gelsinger

     61,103         30,808         140,735         20,539         239,617   

William J. Teuber, Jr.

     81,470         41,078         54,314         27,385           

Howard D. Elias

     61,103         30,808         40,735         20,539         239,617   

Set forth below is a description of the outstanding equity incentive awards that we have granted to the Named Executive Officers.

Performance-Based Equity Awards

2010 Performance Stock Units and Options. In August 2010, the Compensation Committee granted performance stock units and performance stock options to our executive officers, including the Named Executive Officers, which were eligible to vest only if 2011 revenue and EPS targets were achieved. We refer to these grants as the “2010 performance stock units” and the “2010 performance stock options.” The vesting of 40% of these awards was tied to our 2011 revenue results and the vesting of 60% of these awards was tied to our 2011 EPS results. The Compensation Committee selected these financial metrics because in its judgment they represent two important metrics on which the Named Executive Officers should focus to drive EMC’s strategic plan and shareholder value. EPS was given the greater weighting to emphasize profitable growth and because the Compensation Committee believes that increases in EPS will lead to greater long-term shareholder value.

The Compensation Committee believes that to sustain long-term shareholder value it is important that our executives are properly incented to help guide our Company through any type of business climate, including any unexpected industry-wide economic downturn. Therefore, the Compensation Committee determined that even if the revenue and EPS thresholds were not achieved, a lesser number of the 2010 performance awards should be eligible to vest as long as EMC achieved strong revenue and EPS growth in 2011 relative to our peer group. If EMC’s revenue growth ranked among the top one-third of the peer group, then 50% of the 2010 performance awards tied to revenue growth would be eligible to vest and if EMC’s revenue growth ranked in the top half of the peer group, then 25% of these performance awards would be eligible to vest. Similarly, if EMC’s EPS growth ranked among the top one-third of the peer group, then 50% of the 2010 performance awards tied to EPS growth would be eligible to vest and if EMC’s EPS growth ranked in the top half of the peer group, then 25% of these performance awards would be eligible to vest.

We granted 210,000, 72,000, 72,000, 72,000 and 72,000 2010 performance stock units to Messrs. Tucci, Goulden, Gelsinger, Teuber and Elias, respectively. We granted 105,000, 36,000, 36,000, 36,000 and 36,000 2010 performance stock options to Messrs. Tucci, Goulden, Gelsinger, Teuber and Elias, respectively.

The revenue and EPS goals for the 2010 performance awards, which aligned to the revenue and EPS goals under the 2011 Corporate Incentive Plan, and the achievement against the goals, are summarized below:

 

Performance Goal

   Threshold
($)
     Target
($)
     Component
Weighting
    Achievement
($)
     % of Shares
Eligible to Vest
 

Revenue (billions)

     18.38         19.60         40     20.0         100

Non-GAAP EPS*

     1.33         1.46         60     1.51         100

 

* EPS was calculated on a non-GAAP basis. The achievement of the EPS target was calculated in the same manner as provided under the 2011 Corporate Incentive Plan. A reconciliation of our GAAP to non-GAAP results can be found in Exhibit B to this Proxy Statement.

Given our strong results in 2011, 100% of the 2010 performance stock units became eligible to vest, with one-third of these units vesting on February 2, 2012. Subject to the executive officer’s continued employment with EMC, one-half of the remaining 2010 performance stock units will vest in each of 2013 and 2014. Similarly,

 

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100% of the 2010 performance stock options became eligible to vest, with one-fourth of these options vesting on February 2, 2012. Subject to continued employment with EMC, one-third of the remaining 2010 performance stock options will vest in each of 2013, 2014 and 2015. The Compensation Committee provided for three- and four-year vesting to encourage retention.

2011 Performance Stock Units and Options. In August 2011, the Compensation Committee granted similar performance stock units and performance stock options to our executive officers, including the Named Executive Officers. These awards are eligible to vest only if we achieve 2012 revenue and EPS targets. These awards have the same plan design as the 2010 performance stock units and 2010 performance stock options.

2011 Long-Term Incentive Plan Stock Units. In August 2011, the Compensation Committee granted restricted stock units to select members of EMC’s senior management team, including Messrs. Goulden, Gelsinger and Elias, which vest only if a three-year cumulative revenue goal is achieved. We refer to these grants as the “2011 LTIP stock units.” The 2011 LTIP stock units promote long-term alignment with EMC’s business plan, require sustained performance and provide a multi-year retention incentive through a period of leadership transition.

The 2011 LTIP stock units will vest in two equal installments in 2015 and 2016, but only if EMC achieves at least a threshold cumulative revenue goal over fiscal years 2012 through 2014. The number of 2011 LTIP stock units that vest depends on the percentage of achievement of the cumulative revenue target. If cumulative revenue equals or exceeds:

 

   

94.6% of the performance target, then 60% of the 2011 LTIP stock units will be eligible to vest (30% in each of 2015 and 2016); this represents a threshold level of performance, below which all the 2011 LTIP stock units will be forfeited, subject to the relative peer group vesting provisions below;

   

97.3% of the performance target, then 85% of the 2011 LTIP stock units will be eligible to vest (42.5% in each of 2015 and 2016); or

   

100% of the performance target, then 100% of the 2011 LTIP stock units will be eligible to vest (50% in each of 2015 and 2016).

The following chart shows the number of 2011 LTIP stock units that will be eligible to vest based on achievement of at least threshold performance:

 

Name

   Threshold # of 2011 LTIP
Stock Units Eligible to Vest
if 94.6% of Target Achieved
     # of 2011 LTIP Stock
Units Eligible to Vest
if 97.3%  of Target Achieved
     Maximum # of 2011 LTIP
Stock Units Eligible to Vest  if
100% of Target Achieved
 

David I. Goulden

     143,770         203,674         239,617   

Patrick P. Gelsinger

     143,770         203,674         239,617   

Howard D. Elias

     143,770         203,674         239,617   

The Compensation Committee believes that the three-year cumulative revenue goal is rigorous and that EMC must demonstrate superior revenue growth in order for the 2011 LTIP stock units to vest. EMC will provide retrospective disclosure regarding the three-year cumulative revenue target in 2015 and will also provide an update on the likelihood of achievement of the revenue target in EMC’s 2013 Proxy Statement.

To encourage continued focus on achieving our long-term strategic goals without regard to global economic conditions, the Compensation Committee determined that even if the three-year cumulative revenue threshold was not achieved, a lesser number of the 2011 LTIP stock units should be eligible to vest as long as EMC achieves strong revenue growth relative to our peer group. Therefore, if the three-year cumulative revenue threshold is not achieved, but EMC’s three-year cumulative revenue growth is at least 10% higher than the median ranking of the three-year revenue growth of our peer group, then 50% of the 2011 LTIP stock units will be eligible to vest (25% in each of 2015 and 2016).

The performance-based equity awards granted to the Named Executive Officers in August 2011 are not reflected in the Summary Compensation Table on page 48 of this Proxy Statement as 2011 compensation

 

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because under applicable accounting rules, performance equity awards are not valued until the performance targets are established. The performance targets for these awards were established in February 2012. However, for purposes of determining the overall compensation for the Named Executive Officers for 2012, the Compensation Committee considered the value of these awards as of the date the awards were granted. For more information, please see “Compensation of Executive Officers – Summary Compensation Table” on page 48 of this Proxy Statement.

Time-Based Equity Awards

Recognizing that a very large portion of our executive officers’ compensation is at risk, the Compensation Committee determined to grant time-based stock units and stock options to promote retention. Accordingly, in August 2011, in addition to performance stock unit and performance stock option awards, our executive officers were granted time-based stock units and time-based stock options. The time-based stock units vest at the rate of 25% per year on each of the first four anniversaries of the grant date, subject to the executive officer’s continued employment with EMC. The time-based stock options vest at the rate of 20% per year on each of the first five anniversaries of the grant date, subject to the executive officer’s continued employment with EMC.

In February 2011, Mr. Gelsinger received 100,000 restricted stock units which vest ratably over four years. The Compensation Committee granted these equity awards as a retention incentive for Mr. Gelsinger.

Equity Grant Guidelines

As is the case for all of our equity awards and in accordance with our equity grant guidelines, stock options are usually granted by the Compensation Committee at regularly scheduled meetings. If the meeting is held on a business day, the grant date is such business day and the price is the closing price of our common stock on such date. If the meeting is not held on a business day, the grant date is the next business day and the price is the closing price of our common stock on such date. If the meeting is held during the “quiet period” preceding our earnings announcement, the grant date is the first business day that the “quiet period” ends, and the price is the closing price of our common stock on such date.

Retirement and Deferred Compensation Benefits

EMC does not provide the Named Executive Officers with a defined benefit pension plan or any supplemental executive retirement plans, nor does EMC provide the Named Executive Officers with retiree health benefits. EMC employees, including the Named Executive Officers, may participate in a 401(k) plan. The 401(k) plan is provided to all employees as a standard benefit offering, designed to assist employees with retirement savings in a tax-advantaged manner. The plan provides for a matching contribution of 6% of the employee’s contribution, up to a maximum of $3,000 per year. The Company match vests pro rata over the participant’s first three years of service. EMC makes a matching contribution to the 401(k) plan to attract and retain employees and because it provides an additional incentive for employees to save for retirement.

EMC also maintains a nonqualified deferred compensation plan pursuant to which designated managerial or highly compensated employees, including the Named Executive Officers, may elect to defer the receipt of a portion of the base salaries and/or cash bonuses they would otherwise have received when earned. EMC does not make any matching or other contributions under this plan. The nonqualified deferred compensation plan was adopted in order to give participants, including the Named Executive Officers, the ability to defer receipt of certain income to a later date, which may be an attractive tax planning feature, the availability of which assists in the attraction and retention of executive talent. Deferrals are adjusted for earnings and losses in the plan’s investment funds, which are substantially similar to the investment options available under the 401(k) plan. For more information on EMC’s deferred compensation plan, please see “Compensation of Executive Officers – Nonqualified Deferred Compensation” beginning on page 56 of this Proxy Statement.

 

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Perquisites

The Named Executive Officers receive limited perquisites as described below. The perquisites we provide represent a small fraction of the total compensation of each Named Executive Officer. The value of the perquisites we provide are generally taxable to the Named Executive Officers and the incremental cost to EMC of providing these perquisites is reflected in the Summary Compensation Table.

Tax and financial planning services and executive physicals are provided because the Compensation Committee believes they allow the Named Executive Officers to focus more of their time and attention on their employment and promote the well-being of the Named Executive Officers.

Personal use of EMC-owned aircraft is limited to our Chief Executive Officer and, on rare occasions, other Named Executive Officers. Limited personal use of EMC-owned aircraft is permitted to reduce these executives’ travel time and to allow them to devote more time to work duties.

EMC does not provide tax gross-ups to our Named Executive Officers or any other executive officers for perquisites or personal expenses (other than with respect to reimbursement of relocation expenses which is available to all employees).

The Compensation Committee periodically reviews the perquisites that it provides, including the cost to EMC of providing such perquisites, and believes that the perquisites provided are reasonable and appropriate. For more information on perquisites provided to the Named Executive Officers, please see the “All Other Compensation Table” on page 49 of this Proxy Statement.

Post-Termination Compensation

In addition to retirement and deferred compensation benefits described above, EMC has arrangements with the Named Executive Officers that may provide them with compensation following termination of employment for the reasons discussed below.

Change in Control Agreements

Change in control agreements benefit a corporation in the event of a change in control or a potential change in control by promoting stability during a potentially uncertain period and allowing executives who are parties to such agreements to focus on continuing business operations and the success of a potential business combination rather than seeking alternative employment. The Board believes that it is in EMC’s best interest to have change in control agreements with the Named Executive Officers. EMC’s change in control agreements provide the executives with cash severance payments, equity award acceleration and certain other benefits in the event that their employment is terminated in connection with a change in control or potential change in control (known as “double trigger” benefits), which payments and benefits are described in more detail under “Compensation of Executive Officers – Potential Payments upon Termination or Change in Control” beginning on page 57 of this Proxy Statement. The change in control agreements provide these benefits only if there is both (i) a change in control (or potential change in control) of EMC and (ii) the executive’s employment is terminated by EMC (or any successor) without cause or if the executive terminates his or her employment for good reason, in each case within 24 months following a change in control (or during a potential change in control period). We refer to such a termination of employment as a “qualifying termination.”

No excise tax gross-up is provided for any severance or other benefits paid under EMC’s change in control agreements with the Named Executive Officers.

The determination of the appropriate level of payments and benefits to provide in the event of a qualifying termination involved the consideration of a number of factors. The Board considered that a Named Executive Officer, who is more likely to lose his or her job in connection with a change in control than other employees, may require more time than other employees in order to secure an appropriate new position and, unless that

 

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executive was provided with change in control benefits, may be motivated to start a job search early in connection with a change in control to the detriment of EMC. The Compensation Committee reviewed peer practices and market trends, and determined that the level of change in control benefits provided to the Named Executive Officers is consistent with the level provided to executive officers of other public companies of similar size to EMC. Based on these considerations, we believe that the terms of the agreements are reasonable and provide an incentive for our Named Executive Officers to remain with EMC. In addition, by not providing severance payments, accelerated vesting of certain equity awards or other benefits unless both a change in control (or potential change in control) has occurred and an executive has a qualifying termination, we believe that an acquiror will be better able to retain EMC’s management team following a change in control.

The Compensation Committee annually reviews the reasonableness and appropriateness of the terms and conditions of EMC’s change in control agreements and the benefits payable thereunder.

For more information on potential payments and benefits under the change in control agreements, please see “Compensation of Executive Officers – Potential Payments upon Termination or Change in Control” beginning on page 57 of this Proxy Statement.

Other Arrangements

Except in limited circumstances, such as where an employment agreement is assumed as part of a corporate transaction, EMC typically does not enter into employment agreements. However, the Board and the Compensation Committee believe it is in the best interests of the Company to ensure the continuity of Mr. Tucci’s leadership and have entered into an employment arrangement with him to continue as the Company’s Chief Executive Officer until at least December 31, 2013. Under this arrangement, Mr. Tucci will be entitled to limited severance benefits upon termination of employment, other than in connection with a change in control, the amount of which the Board and the Compensation Committee determined was appropriate for Mr. Tucci given his many years of service to EMC. For more information on this arrangement, please see “Compensation of Executive Officers – Potential Payments upon Termination or Change in Control – Termination of Employment without Cause” on page 57 of this Proxy Statement.

In addition to the employment arrangement with Mr. Tucci, at the time of Mr. Goulden’s hire in April 2002, EMC agreed to provide him with limited severance benefits in the context of the overall negotiations regarding the terms and conditions of his employment and as an inducement for him to leave his former employer. For more information on this arrangement, please see “Compensation of Executive Officers – Potential Payments upon Termination or Change in Control – Termination of Employment without Cause” beginning on page 57 of this Proxy Statement.

The Named Executive Officers are entitled to certain benefits upon a termination due to death, disability or retirement. For more detail regarding these arrangements, please see “Compensation of Executive Officers – Potential Payments upon Termination or Change in Control” beginning on page 57 of this Proxy Statement.

Tax Deductibility

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation greater than $1 million paid for any fiscal year to the corporation’s chief executive officer and certain other executive officers as of the end of any fiscal year. However, performance-based compensation is not subject to the $1 million deduction limit if certain requirements are met. The Compensation Committee considered the impact of Section 162(m) when designing EMC’s cash bonus and equity programs and determined that EMC’s interests were best served by not restricting the Compensation Committee’s discretion and flexibility in designing the compensation programs, even if such programs may result in certain non-deductible compensation expenses. Notwithstanding our general philosophy of maintaining flexibility in designing our programs, all of the stock options and performance-contingent stock units granted to the Named Executive Officers in 2010 and 2011, as well as the 2011 LTIP stock units, are designed to qualify as performance-based compensation that is exempt from the deductibility limits imposed by Section 162(m).

 

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Stock Ownership Guidelines

To align the interests of our executive officers with those of our shareholders, we believe that they should hold a significant equity interest in EMC. We have had stock ownership guidelines in place for many years. The current stock ownership guidelines for the Named Executive Officers are:

 

Name

   Stock Ownership Guideline  

Joseph M. Tucci

     650,000   

David I. Goulden

     187,500   

Patrick P. Gelsinger

     187,500   

William J. Teuber, Jr.

     250,000   

Howard D. Elias

     187,500   

New executive officers have three years to reach compliance with the guidelines. Unexercised stock options, unvested shares of restricted stock and unvested restricted stock units are not counted for purposes of determining whether these guidelines are met. The Compensation Committee periodically reviews the holdings of executive officers for compliance with these guidelines. As of March 1, 2012, all of the Named Executive Officers are in compliance with these guidelines.

Stock Holding Guidelines

Our executive officers are subject to stock holding guidelines as well. Like the stock ownership guidelines, these guidelines are intended to align the interests of our executive officers with those of our shareholders by requiring the executive officers to retain a meaningful percentage of their equity holdings in EMC. The executive officers are required to hold throughout the year at least 75% of his or her total equity holdings (measured as of January 1), and may sell only a limited number of shares during a limited window each quarter after meeting the terms of our stock ownership guidelines, our insider trading policy, our securities trading policy and our pre-clearance policy.

Internal Pay Equity

Mr. Tucci is provided with a greater compensation opportunity than our other Named Executive Officers because as our Chief Executive Officer he has primary oversight for EMC’s overall corporate performance, including the development of our vision and strategic direction, establishing EMC as a market leader with innovative products and services, expanding EMC’s position in the market, and maintaining and building relationships with customers, suppliers, employees, shareholders and other stakeholders. In setting Mr. Tucci’s compensation levels, the Compensation Committee also considered his experience as a proven leader and the competitive market conditions for chief executive officers.

In February 2011, we granted a retention incentive award to Mr. Gelsinger, and, in August 2011, we granted 2011 LTIP stock unit awards to Messrs. Goulden, Gelsinger and Elias. There are no other material differences in the compensation opportunities for Messrs. Goulden, Gelsinger, Teuber and Elias. For descriptions of Mr. Gelsinger’s February 2011 incentive award and the 2011 LTIP stock units, please see “Elements of EMC’s Executive Compensation Program – Equity Incentives” beginning on page 39 of this Proxy Statement.

Hedging Policy

EMC policies do not permit any employees, including the Named Executive Officers, to “hedge” ownership by engaging in short sales or trading in any options contracts involving EMC securities.

 

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Compensation Recovery Policies

We have an incentive compensation clawback policy under which EMC will require reimbursement of any cash or equity incentive compensation paid where payment was predicated on financial results that were subject to a significant restatement and the individual engaged in fraud or willful misconduct that caused or partially caused the restatement. The policy applies to all EMC employees, including the Named Executive Officers, and allows recovery of incentive compensation in the event of a significant restatement where appropriate. In addition, EMC equity plans have for many years contained provisions that allow EMC to cancel outstanding equity awards or “clawback” the value of awards recently realized if a Named Executive Officer or other senior employee engages in activity detrimental to EMC, such as failing to comply with EMC’s Key Employee Agreement, including the non-competition and non-solicitation provisions, engaging in any activity that results in the employee’s termination for cause, or being convicted of a crime.

Role of Compensation Consultant

The Compensation Committee is directly responsible for the appointment, compensation and oversight of its compensation consultant. In 2011, the Compensation Committee engaged Towers Watson to serve as its compensation consultant. Towers Watson works at the direction of the Compensation Committee and reports directly to the Compensation Committee.

During 2011, Towers Watson assisted the Compensation Committee in performing pay-for-performance analyses. In addition, Towers Watson assisted the Compensation Committee in reviewing, among other things, executive compensation practices, trends and competitive practices, and change in control and other termination scenarios.

The Compensation Committee has a policy that provides that its compensation consultant will only provide services to the Compensation Committee and is prohibited from providing any other services to EMC, unless such services are pre-approved by the Compensation Committee. For 2011, the Compensation Committee pre-approved all fees paid to Towers Watson. The following table summarizes the fees paid for services that Towers Watson provided to the Compensation Committee for each of the last two fiscal years.

 

     Fees for services to
Compensation Committee
($)
     Fees for services to EMC
($)
     Fees for other  services1
($)
 

2011

     143,364         0         89,469 2 

2010

     197,512         0         101,000 2 

 

1 

Includes services that involve only broad-based non-discriminatory plans or the provision of information that is not customized for EMC or is customized based on parameters that are not developed by Towers Watson.

2 

These amounts reflect the fees associated with EMC’s purchase of global broad-based surveys from Towers Watson.

Peer Group

The Compensation Committee, with the assistance of its compensation consultant, reviews compensation from published technology industry surveys and from EMC’s peer group companies for purposes of comparing EMC’s executive compensation program with market practices and in order to inform the Compensation Committee’s decisions regarding EMC’s executive compensation program. The Compensation Committee does not target or benchmark compensation to any particular percentile of compensation paid by other companies, but rather considers comparator compensation as one factor in making its compensation decisions. Other factors include EMC’s performance and an individual’s contribution, experience and potential. After taking these factors into account, the Compensation Committee exercises its judgment in making compensation decisions. We believe that this approach gives EMC the flexibility to make compensation decisions based upon all of the facts and circumstances.

 

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For 2011, EMC’s peer group consisted of 17 companies:

 

• Accenture plc

  

• Dell Inc.

  

• NetApp, Inc.

• Adobe Systems Incorporated

  

• eBay Inc.

  

• Oracle Corporation

• Advanced Micro Devices, Inc.

  

• Hewlett-Packard Company

  

• Seagate Technology

• CA, Inc.

  

• Intel Corporation

  

• Symantec Corporation

• Cisco Systems, Inc.

• Computer Sciences Corporation

  

• International Business Machines Corporation

• Microsoft Corporation

  

• Xerox Corporation

Our 2012 peer group is the same as our 2011 peer group.

To select the peer group companies, we used the five step process described below.

 

Step

  

Screen

  

Rationale

1

  

Publicly traded and industry-related companies, including companies in the following industries:

 

• Software & Services

• Technology Hardware & Equipment

• Semiconductors & Semiconductor Equipment

  

• Privately held or recently acquired companies are eliminated

 

• Any publicly traded U.S. companies that are not required to disclose information on executive compensation pay levels and practices are excluded

 

2

   U.S. headquartered companies with global operations   

• Companies headquartered outside the U.S. are eliminated due to potential differences in executive pay structure

 

3

  

Size of the companies

 

• .25X to 4X that of EMC’s market capitalization and revenue

  

• Companies not comparable in revenue and market capitalization are eliminated due to differences in executive pay levels

 

4

  

Business match and financial performance comparators

 

• Total shareholder return

• Net income growth

• Revenue growth

  

• Companies with low degree of business overlap are eliminated

 

• Focus on comparators with strong financial performance

5

   Degree of talent overlap   

• Top sources for recruiting talent without regard to any of the screening criteria above

 

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COMPENSATION OF EXECUTIVE OFFICERS

Summary Compensation Table

The table below summarizes the compensation information for the Named Executive Officers for the fiscal year ended December 31, 2011.

The amounts shown in the Stock Awards and Option Awards columns reflect the grant date fair value of equity awards for 2011 and prior years, not the actual amounts paid to or that may be realized by the Named Executive Officers.

 

Name and

Principal Position

  Year     Salary
($)
    Bonus
($)
    Stock
Awards1

($)
    Option
Awards1
($)
    Non-Equity
Incentive Plan
Compensation2

($)
    Change in
Pension

Value and
Nonqualified
Deferred
Compensation
Earnings

($)
    All Other
Compensation3

($)
    Total
($)
 

Joseph M. Tucci

Chairman, President and Chief Executive Officer

    2011        1,000,000        0        8,408,713        1,557,752        2,140,869 4      0        131,523        13,238,857   
    2010        1,000,000        0        7,355,900        1,337,077        2,592,000        0        151,184        12,436,161   
    2009        872,308        0        5,995,800        962,085        1,068,420        0        149,150        9,047,763   

David I. Goulden

Executive Vice President and Chief Financial Officer

    2011        600,000        0        2,853,844        529,522        1,044,200 5      0        31,754        5,059,320   
    2010        600,000        0        2,628,930        402,422        1,256,500        0        17,997        4,905,849   
    2009        523,391        0        2,047,260        263,357        572,368        0        14,902        3,421,278   

Patrick P. Gelsinger

    2011        600,000        0        5,400,844        529,522        912,481 6      0        23,271        7,466,118   

President and Chief Operating

    2010        600,000        0        982,560        152,946        1,232,414        0        28,828        2,996,748   

Officer, EMC Information Infrastructure Products

    2009        182,308        325,000        8,235,000        2,659,881        175,000        0        132,633        11,709,822   

William J. Teuber, Jr.

Vice Chairman

    2011        700,000        0        3,193,863        582,807        912,481 6      0        12,357        5,401,507   
    2010        700,000        0        2,628,930        402,422        1,219,289        0        21,384        4,972,025   
    2009        609,673        0        2,176,860        301,025        655,684        0        8,870        3,752,112   

Howard D. Elias

    2011        600,000        0        2,853,844        529,522        912,481 6      0        22,593        4,918,440   

President and Chief Operating

    2010        600,000        0        2,628,930        402,422        1,233,796        0        25,936        4,891,084   

Officer, EMC Information Infrastructure and Cloud Services

    2009        523,391        0        2,047,260        263,357        549,419        0        15,020        3,398,447   

 

1 

Amounts represent the grant date fair value for stock awards and stock options in 2011, 2010 and 2009 in accordance with FASB ASC Topic 718. Performance-contingent equity grant amounts assume target shares issued, which also represent the maximum number of shares issuable under such grants. Assumptions used in the calculation of these amounts for awards in 2011, 2010 and 2009 are included in Note P to EMC’s audited financial statements for fiscal year ended December 31, 2011 included in EMC’s Annual Report on Form 10-K filed with the SEC on February 24, 2012. Historically, we have granted performance-based equity awards in the year prior to the applicable performance year, and approved the specific performance goals for such awards during the first quarter of the performance year, at which time the award is given a grant date fair value for accounting purposes. Because we are required to disclose compensation in the table in accordance with applicable accounting rules, the value of the performance-based equity awards granted to our Named Executive Officers in one year is reflected in the table as compensation for the following year. In contrast, the value of the time-based equity awards granted to our Named Executive Officers is reflected in the table as compensation in the year of grant. As an example, the value of the time-based equity awards Mr. Tucci was granted in 2010 is reflected in his 2010 equity award compensation, but the value of the performance-based equity awards he was granted in 2010 is reflected in his 2011 equity award compensation.

2

Amounts include incentive compensation earned for the fiscal year ended December 31, 2011. These amounts consist of compensation earned under EMC’s cash bonus plans, which are described on pages 34 to 38 of this Proxy Statement. Also includes amounts earned by Messrs. Goulden and Gelsinger, but deferred under EMC’s Deferred Compensation Retirement Plan.

3 

Please see the “All Other Compensation Table” below.

4 

Amount represents payments of $1,866,240 pursuant to the 2011 Corporate Incentive Plan and $274,629 pursuant to the 2011 Executive MBO.

5 

Amount represents payments of $907,200 pursuant to the 2011 Corporate Incentive Plan and $137,000 pursuant to the 2011 Executive MBO.

6 

Amount represents payments of $567,000 pursuant to the 2011 Corporate Incentive Plan, $137,000 pursuant to the 2011 Executive MBO and $208,481 pursuant to the 2011 Information Storage Incentive Plan.

 

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  Compensation of Executive Officers (continued)

 

 

All Other Compensation Table

The following table summarizes the information included in the All Other Compensation column in the Summary Compensation Table.

 

Name

   Air  Travel1
($)
     Tax and
Financial
Planning
($)
     Other
($)
    Matching
401(k) Plan
Contributions2
($)
     Total
($)
 

Joseph M. Tucci

     110,136         15,000         3,387 3      3,000         131,523   

David I. Goulden

     8,455         10,000         10,299 4      3,000         31,754   

Patrick P. Gelsinger

     0         15,000         5,271 5      3,000         23,271   

William J. Teuber, Jr.

     0         9,357         0        3,000         12,357   

Howard D. Elias

     0         10,000         9,593 6      3,000         22,593   

 

1 

All aircraft use by Named Executive Officers is documented and categorized as business, personal or mixed use depending on the purpose of a flight. The purpose of a flight is determined based upon a review and analysis of flight data, the Named Executive Officer’s itinerary and other relevant information. A flight is categorized as mixed use if it includes both personal and business aspects. Personal use of EMC-owned aircraft is valued based on the aggregate incremental cost to EMC determined on a per flight basis and includes the cost of fuel used, the hourly cost of aircraft maintenance, landing fees, trip-related hangar and parking costs, and crew-related costs. The incremental cost does not include “deadhead” flights (e.g., a flight on which no passenger was on board); if included, the incremental cost would increase by $12,075 for Mr. Tucci. There were no “deadhead” flights attributable to Mr. Goulden. (Deadhead flights are categorized as business or personal based on the purpose of the immediately preceding or following flight leg, as appropriate.)

2

Amounts represent a 6% matching contribution on eligible compensation paid each pay period, up to a maximum of $750 per quarter, made under the EMC 401(k) Savings Plan for 2011.

3 

Amount represents the cost of an annual executive physical.

4 

Amount represents the cost of spousal attendance at EMC events of $2,371, the cost of an annual executive physical of $3,722 and a reimbursement under an EMC travel rebate program of $4,206.

5 

Amount represents the cost of spousal attendance at EMC events.

6 

Amount represents the cost of spousal attendance at EMC events of $6,014 and the cost of an annual executive physical of $3,579.

 

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  Compensation of Executive Officers (continued)

 

 

Grants of Plan-Based Awards

The following table sets forth information concerning non-equity incentive plan grants, equity incentive plan grants and all other stock awards and option awards granted to the Named Executive Officers in the fiscal year ended December 31, 2011. Our non-equity incentive plans consist of the bonus plans that are described on pages 34 to 38 of this Proxy Statement, our equity incentive plans consist of the performance stock unit and performance stock option awards that are described on pages 39 to 42 of this Proxy Statement and our other stock awards and option awards consist of the time-based stock unit and stock option awards that are described on page 42 of this Proxy Statement. There can be no assurance that the Grant Date Fair Value of Stock and Option Awards will ever be realized.

 

Name

  Type of
Award1
      Award
Date3
  Estimated Future Payouts Under
Non-Equity Incentive

Plan Awards
         Estimated Future Payouts
Under Equity Incentive Plan
Awards
    All
Other
Stock
Awards:
Number
of
Shares
of Stock
or Units
(#)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options

(#)
    Exercise
or Base
Price of
Option
Awards
($/Sh)
    Grant
Date Fair
Value of
Stock and
Option
Awards5
 
    Grant
Date
    Threshold
($)
    Target
($)
    Maximum
($)
         Threshold
(#)
    Target
(#)
    Maximum
(#)
         

Joseph M. Tucci

  CIP   N/A   N/A     576,000        1,152,000        2,304,000 6          0        0        0       0       0       0       0   
  MBO   N/A   N/A     0        288,000        288,000 7          0        0        0       0       0       0       0   
  PC-RSU   2/2/20112   8/3/20104     0        0        0            52,500        210,000        210,000 9      0       0       0       5,348,700 10 
  PC-SO   2/2/20112   8/3/20104     0        0        0            26,250        105,000        105,000 11      0       0       20.47        1,078,165 10 
  RSU   8/3/2011   N/A     0        0        0            0        0        0        122,205 12      0       0       3,060,013   
  SO   8/3/2011   N/A     0        0        0            0        0        0        0       61,616 13      25.04        479,587   
 

David I. Goulden

  CIP   N/A   N/A     280,000        560,000        1,120,000 6          0       0        0       0       0       0       0   
  MBO   N/A   N/A     0        140,000        140,000 7          0       0        0       0       0       0       0   
  PC-RSU   2/2/20112   8/3/20104     0        0       0           18,000        72,000        72,000 9      0       0       0       1,833,840 10 
  PC-SO   2/2/20112   8/3/20104     0        0       0           9,000        36,000        36,000 11      0       0       20.47        369,657 10 
  RSU   8/3/2011   N/A     0        0       0           0       0        0       40,735 12      0       0       1,020,004   
  SO   8/3/2011   N/A     0        0       0            0       0        0       0       20,539 13      25.04        159,865   
 

Patrick P. Gelsinger

  CIP   N/A   N/A     175,000        350,000        700,000 6         0       0       0       0       0       0       0   
  MBO   N/A   N/A     0        140,000        140,000 7         0       0       0       0       0       0       0   
  INF STOR   N/A   N/A     105,000        210,000        420,000 8         0       0       0       0       0       0       0   
  RSU   2/2/2011   N/A     0        0        0            0       0        0       100,000 14      0       0       2,547,000   
  PC-RSU   2/2/20112   8/3/20104     0        0        0           18,000        72,000        72,000 9      0       0       0       1,833,840 10 
  PC-SO   2/2/20112   8/3/20104     0        0        0           9,000        36,000        36,000 11      0       0       20.47        369,657 10 
  RSU   8/3/2011   N/A     0        0        0           0        0        0        40,735 12      0       0       1,020,004   
  SO   8/3/2011   N/A     0        0        0           0        0        0        0       20,539 13      25.04        159,865   
 

William J. Teuber, Jr.

  CIP   N/A   N/A     175,000        350,000        700,000 6         0        0        0        0       0       0       0   
  MBO   N/A   N/A     0        140,000        140,000 7         0        0        0        0       0       0       0   
  INF STOR   N/A   N/A     105,000        210,000        420,000 8         0        0        0        0       0       0       0   
  PC-RSU   2/2/20112   8/3/20104     0        0        0           18,000        72,000        72,000 9      0       0       0       1,833,840 10 
  PC-SO   2/2/20112   8/3/20104     0        0        0           9,000        36,000        36,000 11      0       0       20.47        369,657 10 
  RSU   8/3/2011   N/A     0        0        0           0        0        0        54,314 12      0       0       1,360,023   
  SO   8/3/2011   N/A     0        0        0           0        0        0        0       27,385 13      25.04        213,151   
 

Howard D. Elias

  CIP   N/A   N/A     175,000        350,000        700,000 6          0        0        0        0       0       0       0   
  MBO   N/A   N/A     0        140,000        140,000 7          0        0        0        0       0       0       0   
  INF STOR   N/A   N/A     105,000        210,000        420,000 8         0        0        0        0       0       0       0   
  PC-RSU   2/2/20112   8/3/20104     0        0        0           18,000        72,000        72,000 9      0       0       0       1,833,840 10 
  PC-SO   2/2/20112   8/3/20104     0        0        0           9,000        36,000        36,000 11      0       0       20.47        369,657 10 
  RSU   8/3/2011   N/A     0        0        0           0        0        0        40,735 12      0       0       1,020,004   
  SO   8/3/2011   N/A     0        0        0           0        0        0        0       20,539 13      25.04        159,865   

 

1 

Type of Award:

CIP = 2011 Corporate Incentive Plan

MBO = 2011 Executive Management by Objectives Plan

INF STOR = 2011 Information Storage Incentive Plan

PC-RSU = Performance Stock Units

PC-SO = Performance Stock Options

RSU = Time-Based Stock Units

SO = Time-Based Stock Options

For more information on all of these awards, please see pages 34 to 38 and 39 to 42 of this Proxy Statement.

2 

On February 2, 2011, the Compensation Committee approved the specific performance targets associated with this award, which was originally granted by the Compensation Committee on August 3, 2010. Please see footnote 3 below for additional information. From an accounting perspective, the grant date for this award is February 2, 2011, the date on which the performance targets were approved.

 

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Table of Contents

  Compensation of Executive Officers (continued)

 

 

3 

This column has been added to reflect the date that the Compensation Committee approved all material terms of each grant of performance stock units and performance stock options, other than the specific performance targets, which were approved at a later date.

4 

On August 3, 2010, the Compensation Committee approved all the material terms of the award except for the performance targets, which were approved on February 2, 2011.

5 

Represents the grant date fair value of each of these awards calculated in accordance with FASB ASC Topic 718.

6 

The amounts shown in the threshold, target and maximum columns reflect the minimum, target and maximum amounts, respectively, payable under the 2011 Corporate Incentive Plan. The threshold payment is 50% of the target payment and the maximum payment is 200% of the target payment.

7 

The amounts shown in the target and maximum columns reflect the amounts that will be paid if all the performance goals under the MBO for the year are achieved and if the plan is fully funded for the year.

8 

The amounts shown in the threshold, target and maximum columns reflect the minimum, target and maximum amounts, respectively, payable under the 2011 Information Storage Incentive Plan. The threshold payment is 50% of the target payment and the maximum payment is 200% of the target payment.

9

The amounts shown in the target and maximum columns reflect the number of performance stock units that are eligible to vest commencing in 2012 subject to the achievement of 2011 performance goals. The amount shown in the threshold column reflects the number of performance stock units that are eligible to vest commencing in 2012 if threshold targets are achieved. The threshold number of performance stock units is 25% of the target number of performance stock units. 100% of these performance units became eligible to vest in February 2012, and one-third vested on February 2, 2012 and one-half of the remaining units will vest on each of February 1, 2013 and 2014.

10

Grant date fair value was calculated using the closing price of the common stock on February 2, 2011, the date on which the performance targets were approved by the Compensation Committee. Amount assumes the target number of shares is issued. The target number of shares and the maximum number of shares issuable under the grant are the same.

11

The amounts shown in the target and maximum columns reflect the number of performance stock options that are eligible to vest commencing in 2012 subject to the achievement of 2011 performance goals. The amount shown in the threshold column reflects the number of performance stock options that are eligible to vest commencing in 2012 if threshold targets are achieved. The threshold number of performance stock options is 25% of the target number of performance stock options. 100% of these performance options became eligible to vest in February 2012, and one-fourth vested on February 2, 2012 and one-third of the remaining options will vest on each of February 1, 2013, 2014 and 2015.

12

25% of these units will vest on each of August 3, 2012, 2013, 2014 and 2015.

13

20% of these options will vest on each of August 3, 2012, 2013, 2014, 2015 and 2016.

14

25% of these units will vest on each of February 2, 2012, 2013, 2014 and 2015.

 

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Table of Contents

  Compensation of Executive Officers (continued)

 

 

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information concerning stock options and stock awards held by the Named Executive Officers as of December 31, 2011. The market and payout values for unvested stock awards are calculated based on a market value of $21.54 per share (the closing market price of EMC’s common stock on December 30, 2011) multiplied by the number of shares subject to the award.

 

    Option Awards1     Stock Awards  

Name

  Number of
Securities
Underlying
Unexercised
Options

(#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options

(#)
Unexercisable
    Equity
Incentive

Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options2

(#)
    Option
Exercise
Price

($)
    Option
Expiration
Date3
    Number
of
Shares
or Units
of Stock
Held
That
Have
Not

Vested
(#)
    Market
Value of
Shares

or Units
of Stock
Held

That
Have
Not
Vested
($)
    Equity
Incentive

Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested

(#)
    Equity
Incentive

Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested

($)
 

Joseph M. Tucci

    0        0       92,424        25.04        8/3/2021        845,975 4      18,222,302        183,307 5      3,948,433   
    0        61,616 6      0        25.04        8/3/2021           
    0        105,000 7      0        20.47        8/3/2020           
    14,000        56,000 8      0        20.47        8/3/2020           
    37,500        112,500 9      0        15.31        8/4/2019           
    40,000        60,000 10      0        15.31        8/4/2019           
    79,892        79,894 11      0        15.18        8/20/2018           
    72,000        48,000 12      0        15.18        8/20/2018           
    700,000        0       0        14.49        7/22/2015           
    507,413        0       0        12.85        10/28/2014           

David I. Goulden

    0        0       30,808        25.04        8/3/2021        323,460 13      6,967,328        300,720 14      6,477,509   
    0        20,539 6      0        25.04        8/3/2021           
    0        36,000 7      0        20.47        8/3/2020           
    4,800        19,200 8      0        20.47        8/3/2020           
    10,500        31,500 9      0        15.31        8/4/2019           
    11,200        16,800 10      0        15.31        8/4/2019           
    21,304        21,305 11      0        15.18        8/20/2018           
    19,200        12,800 12      0        15.18        8/20/2018           
    23,489        23,488 15      0        19.11        11/28/2017           
    25,600        6,400 16      0        19.11        11/28/2017           
    400,000        0       0        14.49        7/22/2015           
    215,000        0       0        12.85        10/28/2014           
    382,345        0       0        13.18        10/23/2013           

Patrick P. Gelsinger

    0        0       30,808        25.04        8/3/2021        498,735 17      10,742,752        300,720 14      6,477,509   
    0        20,539 6      0        25.04        8/3/2021           
    0        36,000 7      0        20.47        8/3/2020           
    4,800        19,200 8      0        20.47        8/3/2020           
    200,000        300,000 18      0        16.47        10/30/2019           

William J. Teuber, Jr.

    0        0       41,078        25.04        8/3/2021        346,504 19      7,463,696        81,470 5      1,754,864   
    0        27,385 6      0        25.04        8/3/2021           
    0        36,000 7      0        20.47        8/3/2020           
    4,800        19,200 8      0        20.47        8/3/2020           
    10,500        31,500 9      0        15.31        8/4/2019           
    11,200        16,800 10      0        15.31        8/4/2019           
    27,962        27,963