Executive compensation

Summary compensation table

2014 Summary compensation table narrative

Salary (column (c))

Amounts shown in the salary column reflect the salary amount paid to each named executive officer during 2014.

Bonus (column (d))

No bonuses were awarded to the named executive officers in 2014, other than Mr. Keverian. Mr. Keverian received a sign-on bonus as part of his new hire compensation. Mr. 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), Restricted Stock Units (RSUs) 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, RSUs 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 Performance Share Units (column (e)) in the 2014 Summary Compensation Table and in the 2014 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 2014 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 2014 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 2014 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 2014, RSUs were granted to Mr. Keverian as part of his new hire compensation; no other RSUs were granted to the named executive officers. RRSUs granted in previous years to any named executive officer and outstanding at the end of 2014 are included in the 2014 Outstanding Equity Awards at Fiscal Year-End Table. In addition, the column titled Stock Awards in the 2014 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

Company 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 2014.

Personal financial planning

In 2014, 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

Personal use of company autos

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

Other personal expenses

2014 Summary compensation table

 

Name And Principal Position
(a)
Year
(b)
Salary
($)
(c)
Bonus
($)
(d)
Performance Share Units(1)
($)
(e)
Restricted Stock Units(2)
($)
(e)
Stock Awards
Total(3)
($)
(e)
Option
Awards
Total(4)
($)
(f)
Non-Equity
Incentive Plan
Compensation
($)
(g)
Change In
Retention
Plan
Value(5)
($)
(h)
Change In
Pension
Value(6)
($)
(h)
Nonqualified
Deferred
Compensation
Earnings(7)
($)
(h)
All Other
Compensation(8)(9)
($)
(i)
Total(10)
($)
(j)
V.M. Rometty
Chairman, President and CEO
2014 $1,500,000 $0 $12,460,409 $0 $12,460,409 $0 $3,600,000 $295,985 $1,106,740 $0 $381,991 $19,345,125
2013 1,500,000 0 11,703,869 0 11,703,869 0 0 0 0 0 761,808 13,965,677
2012 1,500,000 0 9,259,000 0 9,259,000 0 3,915,000 181,656 641,346 0 687,725 16,184,727
M.J. Schroeter (11)
Senior VP and CFO
2014 660,000 0 3,616,006 0 3,616,006 0 747,600 N/A 8,481 0 80,812 5,112,899
                         
                         
K.M. Keverian (11)
Senior VP, Corporate Strategy
2014 450,000 500,000 2,897,601 4,190,813 7,088,414 0 510,300 N/A N/A 0 1,011,731 9,560,445
                         
                         
S.A. Mills
Executive VP, Software and Systems
2014 730,500 0 4,886,428 0 4,886,428 0 703,500 328,713 1,525,970 0 94,941 8,270,052
2013 716,000 0 4,661,284 0 4,661,284 0 0 0 0 0 214,146 5,591,430
2012 716,000 0 4,629,500 4,135,911 8,765,411 0 987,360 136,953 976,530 0 211,912 11,794,166
J.E. Kelly III(11)
Senior VP, Solutions Portfolio & Research
2014 638,000 0 3,909,248 0 3,909,248 0 791,100 1,043,296 92,989 0 96,193 6,570,826
2013 625,000 850 4,941,039 0 4,941,039 0 0 0 0 0 128,016 5,694,905
                         

(1) The amounts in this column reflect the aggregate grant date fair values of Performance Share Unit (PSU) awards at the Target number (described in the 2014 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: 2014: $18,690,613; 2013: $17,555,803; 2012: $13,888,500; for Mr. Schroeter: 2014: $5,424,009; for Mr. Keverian: 2014: $4,346,402; for Mr. Mills: 2014: $7,329,642; 2013: $6,991,926; 2012: $6,944,250; and for Mr. Kelly: 2014: $5,863,960; 2013: $7,411,656.

(2) The amounts in these columns reflect the aggregate grant date fair values of Restricted Stock Units (RSUs) granted to Mr. Keverian as part of his new hire compensation, and Retention Restricted Stock Units (RRSUs) granted to Mr. Mills in 2012, calculated in accordance with accounting guidance; these amounts reflect an adjustment for the exclusion of dividend equivalents.

(3) The amounts in this column reflect the total of the previous two columns (Performance Share Units and Restricted Stock Units). For assumptions used in determining the fair value of stock awards, see Note R (Stock-Based Compensation) to the Company’s 2014 Consolidated Financial Statements.

(4) There were no option awards granted to the named executive officers in the years shown in the 2014 Summary Compensation Table.

(5) Assumptions used to calculate these amounts can be found immediately after the 2014 Retention Plan Table. Even though 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, Change in Retention Plan Value for the eligible named executive officers is due to their age, changes in the discount rate and interest crediting rate, and a new mortality table. 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); for Mr. Mills: $(513,849); and for Mr. Kelly: $(602,593).

(6) Assumptions used to calculate these amounts can be found immediately after the 2014 Pension Benefits Table. Even though 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, Change in Pension Value for the eligible named executive officers is due to their age, changes in the discount rate and interest crediting rate, and a new mortality table. 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); for Mr. Mills: $(509,879); and for Mr. Kelly: $(17,511).

(7) IBM does not provide above-market or preferential earnings on deferred compensation. See the 2014 Nonqualified Deferred Compensation Narrative for information about deferred compensation.

(8) Amounts in this column include the following for 2014: for Mrs. Rometty: tax reimbursements of $30,785 and Company contributions to defined contribution plans of $150,000; for Mr. Schroeter: Company contributions to defined contribution plans of $55,333; for Mr. Keverian: Company contributions to defined contribution plans of $1,000,000; for Mr. Mills: Company contributions to defined contribution plans of $73,050; and for Mr. Kelly: Company contributions to defined contribution plans of $51,040.

(9) Amounts in this column also include the following perquisites for 2014: for Mrs. Rometty: personal financial planning, personal travel on Company aircraft of $164,060, personal use of Company autos, annual executive physical, family attendance at Company-related events, and other personal expenses; for Mr. Schroeter: personal financial planning, personal security, annual executive physical, family attendance at Company-related events, and other personal expenses; for Mr. Keverian: personal financial planning and family attendance at Company-related events; for Mr. Mills: personal financial planning, personal travel on Company aircraft, personal security, family attendance at Company-related events, and other personal expenses; and for Mr. Kelly: personal financial planning, personal travel on Company aircraft of $35,213, and family attendance at Company-related events. See the 2014 Summary Compensation Table Narrative for a description and information about the aggregate incremental cost calculations for perquisites.

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

(11) Mr. Keverian was hired effective April 1, 2014. His annual salary rate is $600,000. The amount reflected in column (c) reflects the actual amount earned in 2014. Mr. Schroeter and Mr. Keverian were not named executive officers in the Company’s 2013 and 2014 Proxy Statements. Therefore, this table does not provide 2012 and 2013 data for them. Mr. Kelly was not a named executive officer in the Company’s 2013 Proxy Statement; therefore, this table does not provide 2012 data for him.