2018 Director compensation narrative
Annual Retainer: In 2018, non-management directors received an annual retainer of $325,000. Chairs of the Directors and Corporate Governance Committee and the Executive Compensation and Management Resources Committee each received an additional annual retainer of $20,000 and the chair of the Audit Committee received an additional annual retainer of $30,000. The additional retainer for the Lead Director position is $30,000.
Under the IBM Deferred Compensation and Equity Award Plan (DCEAP), 60% of the total annual retainer is required to be deferred and paid in Promised Fee Shares (PFS). Each PFS is equal in value to one share of IBM’s common stock. When a cash dividend is paid on IBM’s common stock, each director’s PFS account is credited with additional PFS reflecting a dividend equivalent payment. With respect to the payment of the remaining 40% of the annual retainer, directors may elect one or any combination of the following: (a) deferral into PFS, (b) deferral into an interest-bearing cash account, and/or (c) receipt of cash payments on a quarterly basis during service as a Board member. IBM does not pay above-market or preferential earnings on compensation deferred by directors.
Stock Ownership Guidelines: Under the IBM Board Corporate Governance Guidelines, within five years of initial election to the Board, non-management directors are expected to have stock-based holdings in IBM equal in value to eight times the equity portion of the annual retainer initially payable to such director. Stock-based holdings mean (i) IBM shares owned personally or by members of immediate family sharing the same household, and (ii) DCEAP PFS. Stock-based holdings do not include unexercised options.
Our stock ownership guidelines remain the strongest in our peer group.
Payout under the DCEAP: Upon a director’s retirement or other completion of service as a director (a) all amounts deferred as PFS are payable, at the director’s choice, in cash and/or shares of IBM’s common stock, and (b) amounts deferred into the interest-bearing cash account are payable in cash. Payouts may be made in any of (a) a lump sum payment as soon as practicable after the date on which the director ceases to be a member of the Board, (b) a lump sum payment paid in February of the calendar year immediately following the calendar year in which the director ceases to be a member of the Board, or (c) between two and ten annual installments, paid beginning in February following the calendar year in which the director ceases to be a member of the Board. If a director elects to receive PFS in cash, the payout of PFS is valued using the closing price of IBM common stock on the NYSE as follows: for payouts made in an immediate lump sum, IBM stock will be valued on the date on which the director ceases to be a member of the Board; for lump sum payments made in February of the calendar year immediately following the calendar year of separation or for installment payouts, IBM common stock will be valued on the last business day of the January preceding such February payment.
IBM’s Matching Grants Program: In 2018, non-management directors were eligible to participate in IBM’s Matching Grants Program on the same basis as IBM’s employees based in the U.S. Under this program, IBM matched a director’s eligible contributions in cash on a 1-to-1 basis to approved educational institutions, medical facilities and cultural or environmental institutions. Each director was also eligible for a Company match on total gifts up to $10,000 per calendar year. Amounts shown in the Director Compensation Table for matching grants may be in excess of $10,000 because such amounts include Company contributions on gifts that were made by directors in previous years.
Director Compensation Consultant: The Committee retains Semler Brossy Consulting Group, LLC (Semler Brossy) to assess trends and developments in director compensation practices and to compare IBM’s practices against them. The Committee uses the analysis prepared by the consultant as part of its periodic review of IBM’s director compensation practices. Other than services provided to IBM’s Directors and Corporate Governance Committee and IBM’s Executive Compensation and Management Resources Committee, Semler Brossy does not perform any other work for IBM. The Committee determined that Semler Brossy is free of conflicts of interest.
2018 Director compensation table
|Fees Earned or
Paid in Cash ($)
|Kenneth I. Chenault||$325,000||$202,632||$527,632|
|Michael L. Eskew||385,000||179,701||564,701|
|David N. Farr||325,000||53,490||378,490|
|Shirley Ann Jackson||345,000||166,422||511,422|
|Andrew N. Liveris||325,000||95,261||420,261|
|W. James McNerney, Jr.(3)||102,917||72,806||175,723|
|Hutham S. Olayan||325,000||30,324||355,324|
|James W. Owens||325,000||127,667||452,667|
|Joseph R. Swedish||325,000||4,519||329,519|
|Peter R. Voser||325,000||44,001||369,001|
|Frederick H. Waddell||325,000||7,449||332,449|
(1) Amounts in this column include the following: for Mr. Chenault: $202,507 of dividend equivalent payments on PFS; for Mr. Eskew: $179,576 of dividend equivalent payments on PFS; for Mr. Farr: $43,365 of dividend equivalent payments on PFS and $10,000 contributed by the Company under the Matching Grants Program; for Mr. Gorsky: $47,382 of dividend equivalent payments on PFS; for Dr. Jackson: $161,298 of dividend equivalent payments on PFS; for Mr. Liveris: $95,136 of dividend equivalent payments on PFS; for Mr. McNerney: $62,764 of dividend equivalent payments on PFS and $10,000 contributed by the Company under the Matching Grants Program; for Ms. Olayan: $30,200 of dividend equivalent payments on PFS; for Mr. Owens: $127,542 of dividend equivalent payments on PFS; for Mr. Taurel: $200,927 of dividend equivalent payments on PFS; and for Mr. Voser: $43,876 of dividend equivalent payments on PFS.
(2) After Mr. Fields’s term on the Board ended in April 2018, Mr. Fields was paid $631,145 of earned compensation and dividend reinvestments, which had been previously deferred under the DCEAP since his election to the Board in 2016.
(3) After Mr. McNerney’s term on the Board ended in April 2018, Mr. McNerney was paid $1,083,221 of earned compensation and dividend reinvestments, which had been previously deferred under the DCEAP since his election to the Board in 2009. Mr. McNerney elected to defer payment of 8,738 shares.
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 Lead Director or a committee chair, based on the portion of the year for which the director served.
All Other Compensation (column (c)): Amounts shown in this column represent:
- Dividend equivalent payments on PFS accounts under the DCEAP as described above.
- Group Life Insurance premiums paid by IBM on behalf of the directors.
- Value of the contributions made by IBM under IBM’s Matching Grants Program as described above
(This information reflects the 2019 Proxy Statement.)