2015 Director compensation narrative
Annual Retainer: In 2015, non-management directors received an annual retainer of $300,000. Chairs of the Directors and Corporate Governance Committee and the Executive Compensation and Management Resources Committee received an additional annual retainer of $20,000 and the chair of the Audit Committee received an additional annual retainer of $25,000. The retainer for the Presiding Director position is a total of $50,000, inclusive of any committee chair retainer received. For 2015, Mr. Eskew, the Presiding Director and the chair of the Audit Committee, received $25,000 for the Presiding Director role and $25,000 for the Audit Committee chair role.
Under the IBM Deferred Compensation and Equity Award Plan (DCEAP), 60% of the total annual retainer is required to be deferred and paid in Promised Fee Shares (PFS). Each PFS is equal in value to one share of IBM’s common stock. When a cash dividend is paid on IBM’s common stock, each director’s PFS account is credited with additional PFS reflecting a dividend equivalent payment. With respect to the payment of the remaining 40% of the annual retainer, directors may elect one or any combination of the following: (a) deferral into PFS, (b) deferral into an interest-bearing cash account, and/or (c) receipt of cash payments on a quarterly basis during service as a Board member. IBM does not pay abovemarket or preferential earnings on compensation deferred by directors. Under the IBM Board Corporate Governance Guidelines, within five years of initial election to the Board, non-management directors are expected to have stock-based holdings in IBM equal in value to five times the annual retainer initially payable to such director. Stock-based holdings mean (i) IBM shares owned personally or by members of the immediate family sharing the same household, and (ii) DCEAP PFS. Stock-based holdings do not include unexercised options.
Payout under the DCEAP: Upon a director’s retirement or other completion of service as a director (a) all amounts deferred as PFS are payable, at the director’s choice, in either cash and/or shares of IBM’s common stock, and (b) amounts deferred into the interest-bearing cash account are payable in cash. Payouts may be made in either (a) a lump sum payment as soon as practicable after the date on which the director ceases to be a member of the Board, (b) a lump sum payment paid in February of the calendar year immediately following the calendar year in which the director ceases to be a member of the Board, or (c) between two and ten annual installments, each paid beginning in February following the calendar year in which the director ceases to be a member of the Board. If a director elects to receive PFS in cash, the payout of PFS is valued using the closing price of IBM common stock on the NYSE as follows: for payouts made in an immediate lump sum, IBM stock will be valued on the date on which the director ceases to be a member of the Board and for lump sum payments made in February of the calendar year immediately following the calendar year of separation or for installment payouts, IBM common stock will be valued on the last business day of the January preceding such February payment.
Termination of IBM Non-Employee Directors Stock Option Plan (DSOP): Prior to January 1, 2007, non-management directors who had been elected or reelected as a member of the Board as of the adjournment of the Annual Meeting of Stockholders received, on the first day of the month following such meeting, an annual grant of options to purchase 4,000 shares of IBM common stock. The exercise price of the options was the average of the high and low sales prices of IBM common stock on the NYSE on the date of grant. Each option has a term of ten years and became exercisable in four equal installments commencing on the first anniversary of the date of grant and continuing for the three successive anniversaries thereafter. All options granted under the DSOP have vested. Effective January 1, 2007, the DSOP was terminated. Therefore, the 2015 Director Compensation Table does not include any option awards. However, the table below entitled “Aggregate Number of Option Awards Outstanding for Each Director at Fiscal Year-End” reflects any options outstanding under the DSOP as of year-end 2015.
IBM’s Matching Grants Program: Non-management directors are eligible to participate in IBM’s Matching Grants Program on the same basis as IBM’s employees based in the United States. Under this program, IBM will provide specified matches in cash or equipment in connection with a director’s eligible contributions to approved educational institutions, medical facilities and cultural or environmental institutions. IBM matches eligible contributions in cash on a 1-to-1 basis and in equipment on a 2-to-1 basis. Each director is eligible for a Company match on total gifts up to $10,000 per calendar year. Amounts shown in the 2015 Director Compensation Table for matching grants may be in excess of $10,000 because such amounts include Company contributions on gifts that were made by directors in previous years.
2015 Director compensation table
Fees Earned or Paid in Cash (column (b)): Amounts shown in this column reflect the annual retainer paid to each director as described above. A director receives a pro- rated amount of the annual retainer for service on the Board and, if applicable, as Presiding Director or a committee chair, based on the portion of the year the director served.
All Other Compensation (column (c)): Amounts shown in this column represent:
|Fees Earned or
Paid in Cash ($)
|W.J. McNerney, Jr.||300,000||59,381||359,381|
Ms. Olayan joined the Board in January 2016 and Mr. Fields joined the Board in March 2016; therefore, they are not included in the table above.
(1) Amounts in this column include the following: for Mr. Belda: $60,578 of dividend equivalent payments on PFS; for Dr. Brody: $70,566 of dividend equivalent payments on PFS; for Mr. Chenault: $118,202 of dividend equivalent payments on PFS; for Mr. Eskew: $96,926 of dividend equivalent payments on PFS; for Mr. Farr: $14,526 of dividend equivalent payments on PFS and $10,000 contributed by IBM under the Matching Grants Program; for Dr. Jackson: $86,616 of dividend equivalent payments on PFS; for Mr. Liveris: $40,709 of dividend equivalent payments on PFS; for Mr. McNerney: $44,265 of dividend equivalent payments on PFS and $15,000 contributed by IBM under the Matching Grants Program; for Mr. Owens: $70,225 of dividend equivalent payments on PFS; for Ms. Spero: $96,151 of dividend equivalent payments on PFS; for Mr. Taurel: $115,217 of dividend equivalent payments on PFS.
Aggregate number of option awards outstanding for each director at fiscal year-end
As described above, until the termination of the DSOP effective January 1, 2007, non-management directors received an annual grant of options to purchase 4,000 shares of IBM common stock. All options in the following table are fully exercisable. Because Dr. Brody, Messrs. Belda, Farr, Fields, Gorsky, Liveris, McNerney, Voser and Ms. Olayan joined the Board after the termination of the DSOP, they did not receive any options and therefore are not included in the following table. In addition, Dr. Jackson and Mr. Owens had no options outstanding at the end of 2015; therefore, they are not included in the table.
(This information reflects the 2016 Proxy Statement.)