Executive compensation

2015 Summary compensation table narrative

2015 Summary compensation table narrative

Salary (column (c))

Amounts shown in the salary column reflect the salary amount paid to each named executive officer during 2015.

Bonus (column (d))

No bonuses were awarded to the named executive officers in either 2014 or 2015. Dr. Kelly received patent issuance and invention achievement awards in 2013. All employees are eligible for these awards. Payments under the IBM Annual Incentive Program are included under column (g) (Non-Equity Incentive Plan Compensation).

 

Stock awards total (column (e))

The amounts shown are the aggregate grant date fair values of Performance Share Units (PSUs) and Retention Restricted Stock Units (RRSUs) granted in each fiscal year shown, computed in accordance with accounting guidance (excluding any risk of forfeiture as per SEC regulations). The values shown for the PSU awards are calculated at the Target number, as described below. The values shown for the PSUs and RRSUs reflect an adjustment for the exclusion of dividend equivalents.

 

Performance share units (PSUs)

The following describes the material terms and conditions of PSUs as reported in the column titled Stock Awards (column (e)) in the 2015 Summary Compensation Table and in the 2015 Grants of Plan-Based Awards Table under the heading Estimated Future Payouts Under Equity Incentive Plan Awards (columns (f), (g) and (h)).

 

General terms

 

Vesting and payout calculations

Threshold Number:

– The Threshold number of PSUs (listed in column (f) of the 2015 Grants of Plan-Based Awards Table) is 25% of the Target number.

– The Threshold number of PSUs will be earned for achievement of 70% of both business objectives (operating earnings per share and free cash flow).

– If only the cumulative operating earnings per share target is met at the Threshold level (and the free cash flow target is not met), the number of PSUs earned would be 70% of the Threshold number.

– If only the cumulative free cash flow target is met at the Threshold level (and the operating earnings per share target is not met), the number of PSUs earned would be 30% of the Threshold number.

 

Target number:

– The Target number of PSUs (listed in column (g) of the 2015 Grants of Plan-Based Awards Table) will be earned if 100% of the objectives are achieved.

 

Maximum number:

– The Maximum number of PSUs (listed in column (h) of the 2015 Grants of Plan-Based Awards Table) is 150% of the Target number.

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

Restricted stock units (RSUs)

RSUs may include RRSUs. In 2015, RRSUs were granted to all named executive officers, excluding Mrs. Rometty. RRSUs granted in previous years to any named executive officer and outstanding at the end of 2015 are included in the 2015 Outstanding Equity Awards at Fiscal Year-End Table. In addition, the column titled Stock Awards in the 2015 Option Exercises and Stock Vested Table includes previously-granted RRSUs.

 

General terms

 

Vesting and payout

 

Option awards (column (f))

 

Non-equity incentive plan compensation (column (g))

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

 

General terms

 

Payout range

 

Vesting and payout

 

Change in retention plan value (column (h))

 

Change in pension value (column (h))

Nonqualified deferred compensation earnings (column (h))

 

All other compensation (column (i))

Amounts in this column represent the following as applicable:

 

Tax reimbursements

 

IBM Contributions to Defined Contribution Plans

 

Life and travel accident insurance premiums

 

Perquisites

The following describes perquisites (and their aggregate incremental cost calculations) provided to the named executive officers in 2015.

 

Personal financial planning

In 2015, IBM offered financial planning services with coverage generally up to $15,000 annually for senior U.S. executives, including each named executive officer.

 

Personal travel on company aircraft

General Information

 

Aggregate incremental cost calculation

 

Ground transportation

General information

 

Aggregate incremental cost calculation

 

Personal security

General information

 

Aggregate incremental cost calculation

 

Annual executive physical

 

Family travel and attendance at company-related events

 

International assignments

 

Other personal expenses

2015 Summary compensation table

 

Name And
Principal
Position
(a)
Year
(b)

Salary
($)
(c)
Bonus
($)
(d)
Stock Awards(1)
($)
(e)
Option Awards(2)
($)
(f)
Non-Equity
Incentive Plan
Compensation
($)
(g)
Change In
Retention
Plan
Value(3)
($)
(h)
Change In
Pension
Value(4)
($)
(h)
Nonqualified
Deferred
Compensation
Earnings(5)
($)
(h)
All Other
Compensation(6)(7)
($)
(i)
Total(8)
($)
(j)
V.M. Rometty Chairman, President and CEO
2015  $1,550,000  $0  $12,905,329  $0  $4,500,000  $0  $0  $0  $866,621  $19,821,950 
2014  1,500,000  12,460,409  3,600,000  295,985  1,106,740  381,991  19,345,125 
2013  1,500,000  11,703,869  761,808  13,965,677 
M.J. Schroeter(9) Senior VP and CFO
2015  692,500 11,425,266  881,100  N/A  1,295  112,191  13,112,352 
2014  660,000 3,616,006  747,600  N/A  8,481  80,812  5,112,899 
M.D. Rhodin(9)(10) Senior VP, IBM Watson Business Development
2015  630,000  11,425,266 728,800  8,690  2,766,099  15,558,855 
B.A. van Kralingen(9) Senior VP, IBM Global Business Services
2015  665,000  11,425,266  637,700  2,202  2,089,103  14,819,271 
J.E. Kelly III(10) Senior VP, IBM Cognitive Solutions & IBM Research
2015  675,500  11,887,195 850,500  42,393  184,207  13,639,795 
2014  638,000  3,909,248  791,100  1,043,296 92,989  96,193  6,570,826 
2013  625,000  850  4,941,039  128,016  5,694,905 

(1) Amounts in this column reflect the total Performance Share Units (PSUs) and Retention Restricted Stock Units (RRSUs).

Amounts reflect the aggregate grant date fair values of PSU awards at the Target number (described in the 2015 Summary Compensation Table Narrative), calculated in accordance with accounting guidance; these amounts reflect an adjustment for the exclusion of dividend equivalents. At the Maximum number, these values for Mrs. Rometty would be: 2015: $19,357,994; 2014: $18,690,613; 2013: $17,555,803; for Mr. Schroeter: 2015: $6,549,863; 2014: $5,424,009; for Mr. Rhodin: 2015: $6,549,863; for Mrs. van Kralingen: 2015: $6,549,863; and for Dr. Kelly: 2015: $7,277,472; 2014: $5,863,960; 2013: $7,411,656.

Amounts also reflect the aggregate grant date fair values of RRSUs granted to Mr. Schroeter, Mr. Rhodin, Mrs. van Kralingen and Dr. Kelly in 2015, calculated in accordance with accounting guidance; these amounts reflect an adjustment for the exclusion of dividend equivalents. For assumptions used in determining the fair value of stock awards, see Note R (Stock-Based Compensation) to IBM’s 2015 Consolidated Financial Statements.

(2) There were no option awards granted to any of the named executive officers in the years shown in the 2015 Summary Compensation Table.

(3) Assumptions can be found immediately after the 2015 Retention Plan Table. Although accruals under the Retention Plan stopped on December 31, 2007, changes in Retention Plan Value can occur based on changes to participants’ ages and actuarial assumptions. For 2014 and 2015, Change in Retention Plan Value for the eligible named executive officers was due to their age, changes in the discount rate, interest crediting rate, and mortality table. For 2015, the change in Retention Plan Value for the eligible named executive officers resulted in the following negative amounts: for Mrs. Rometty: $(18,082); for Mr. Rhodin: $(47,311); for Mrs. van Kralingen $(19,917); and for Dr. Kelly $(584,946). For 2013, the negative change in Retention Plan Value was primarily due to increases in the discount rate and the interest crediting rate which resulted in the following negative amounts: for Mrs. Rometty: $(130,705) and for Dr. Kelly: $(602,593).

(4) Assumptions can be found immediately after the 2015 Pension Benefits Table. Although accruals under the IBM Personal Pension Plan stopped on December 31, 2007, changes in Pension Value can occur based on changes to participants’ ages and actuarial assumptions. For 2014 and 2015, Change in Pension Value for the named executive officers was due to their age, changes in the discount rate, interest crediting rate, and mortality table. For 2015, the change in Pension Value for the named executive officer resulted in the following negative amount for Mrs. Rometty: $(118,735). For 2013, the negative change in Pension Value was due to increases in the discount rate and the interest crediting rate which resulted in the following negative amounts: for Mrs. Rometty: $(499,471) and for Dr. Kelly: $(17,511).

(5) IBM does not provide above-market or preferential earnings on deferred compensation. See the 2015 Nonqualified Deferred Compensation Narrative for information about deferred compensation.

(6) Amounts in this column include the following for 2015: for Mrs. Rometty: tax reimbursements of $32,610 and IBM contributions to defined contribution plans of $515,000; for Mr. Schroeter: IBM contributions to defined contribution plans of $86,406; for Mr. Rhodin: tax reimbursements of $2,571,856 and IBM contributions to defined contribution plans of $100,960; for Mrs. van Kralingen: tax reimbursements of $1,930,083 and IBM contributions to defined contribution plans of $102,760; and for Dr. Kelly: IBM contributions to defined contribution plans of $117,328.

(7) Amounts in this column also include the following perquisites for 2015: for Mrs. Rometty: personal financial planning, personal travel on Company aircraft of $248,827, ground transportation, personal security, annual executive physical, family attendance at business-related events, and other personal expenses; for Mr. Schroeter: personal financial planning, ground transportation, personal security, annual executive physical, family attendance at business-related events, and other personal expenses; for Mr. Rhodin: personal financial planning, personal travel on Company aircraft of $52,639, ground transportation, annual executive physical, family attendance at business-related events, international assignments, and other personal expenses; for Mrs. van Kralingen: personal financial planning, personal travel on Company aircraft, ground transportation, family attendance at business-related events, international assignments, and other personal expenses; and for Dr. Kelly: personal financial planning, personal travel on Company aircraft of $49,568, ground transportation, personal security, family attendance at business-related events, and other personal expenses. See the 2015 Summary Compensation Table Narrative for a description and information about the aggregate incremental cost calculations for perquisites.

(8) Amounts in this column reflect the total of the following columns: Salary, Bonus, Stock Awards, Option Awards, Non-Equity Incentive Plan Compensation, Change in Retention Plan Value, Change in Pension Value, Nonqualified Deferred Compensation Earnings and All Other Compensation.

(9) Mr. Schroeter was not a named executive officer in IBM’s 2014 Proxy Statement. Therefore, this table does not provide 2013 data for him. Mr. Rhodin and Mrs. van Kralingen were not named executive officers in IBM’s 2014 and 2015 Proxy Statements; therefore, this table does not provide 2013 and 2014 data for them.

(10) As of January 2016, Mr. Rhodin assumed the role of Senior Vice President, IBM Watson Business Development. As of February 2016, Dr. Kelly assumed the role of Senior Vice President, IBM Cognitive Solutions & IBM Research.