Executive compensation

2016 Summary compensation table narrative

2016 Summary compensation table narrative

Salary (column (c))

Amounts shown in the salary column reflect the salary amount paid to each named executive officer during 2016.

Bonus (column (d))

No bonuses were awarded to the named executive officers in the years shown in the 2016 Summary Compensation Table. Payments under the IBM Annual Incentive Program are included under column (g) (Non-Equity Incentive Plan Compensation).

 

Stock awards (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 PSUs 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 Stock Awards (column (e)) in the 2016 Summary Compensation Table and in the 2016 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 2016 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 2016 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 2016 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 2016, RSUs, but not RRSUs, were granted to all named executive officers. RRSUs granted in previous years to any named executive officer and outstanding at the end of 2016 are included in the 2016 Outstanding Equity Awards at Fiscal Year-End Table.

 

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 2016.

 

Personal financial planning

In 2016, 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

  • Amounts represent the cost of meals and lodging for the Amounts also include expenses associated with participation on outside boards other than those disclosed as Personal Travel on Company Aircraft and Ground Transportation. Amounts represent the cost of meals and lodging for the Amounts also include home office equipment, items relating to business events and administrative charges incurred by executives.

2016 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
2016 $1,600,000 $0 $12,822,238 $12,094,414 $4,950,000 $87,660 $300,605 $0 $840,782 $32,695,699
2015  1,550,000  12,905,329  4,500,000  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 
M.J. Schroeter Senior VP and CFO
2016 754,000 0 4,820,379 0 1,046,430 N/A 6,227 0 173,159 6,800,195
2015  692,500 0 11,425,266  0 881,100  N/A 1,295 0 112,191 13,112,352
2014  660,000 0 3,616,006  0 747,600  N/A 8,481 0 80,812 5,112,899
M. Jetter(9) Senior VP, Global Technology Services
2016 650,000 4,338,523 901,890 N/A 520,799 2,100,391 8,511,603
J.E. Kelly III Senior VP, IBM Cognitive Solutions & IBM Research
2016 754,500 0 5,302,514 0 927,350 0 66,423 0 240,583 7,291,370
2015  675,500 0 11,887,195 0 850,500 0 42,393 0 184,207 13,639,795
2014  638,000 0 3,909,248 0 791,100 1,043,296 92,989 0 96,193 6,570,826
E. Clementi(9) Senior VP, IBM Global Markets
2016 703,500 5,302,514 889,200 N/A N/A 144,440 7,039,654

Note: For assumptions used in determining the fair value of stock and option awards, see Note R (Stock-Based Compensation) to IBM’s 2016 Consolidated Financial Statements.

(1) Amounts in this column reflect the total Performance Share Units (PSUs), Restricted Stock Units (RSUs) and Retention Restricted Stock Units (RRSUs). RRSUs were not awarded in 2016. Amounts include the aggregate grant date fair values of PSUs at the Target number (described in the 2016 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: 2016: $19,233,357; 2015: $19,357,994; 2014: $18,690,613; for Mr. Schroeter: 2016: $4,699,880; 2015: $6,549,863; 2014: $5,424,009; for Mr. Jetter: 2016: $4,229,976; for Dr. Kelly: 2016: $5,169,993; 2015: $7,277,472; 2014: $5,863,960; and for Mr. Clementi: 2016: $5,169,993. Amounts also include the aggregate grant date fair values of RSUs and RRSUs granted to Mrs. Rometty, Mr. Schroeter, Mr. Jetter, Dr. Kelly and Mr. Clementi, if applicable, calculated in accordance with accounting guidance; these amounts reflect an adjustment for the exclusion of dividend equivalents.

(2) There were no option awards granted to any of the named executive officers in the years shown in the 2016 Summary Compensation Table, except for Mrs. Rometty. In 2016, Mrs. Rometty was granted a one-time award of 1.5 million nonqualified stock options that vest three years from the date of grant, are exercisable in four equal tranches at premium prices of 105%, 110%, 115% and 125% of the average of the high and low prices of IBM common stock on the date of grant.

(3) Assumptions can be found immediately after the 2016 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, 2015 and 2016, 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); and for Dr. Kelly $(584,946). For Mr. Jetter, the Change in Pension Value was €495,197 and the exchange rate was 1.0517.

(4) Assumptions can be found immediately after the 2016 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, 2015 and 2016, Change in Pension 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 Pension Value for the eligible named executive officers resulted in the following negative amount for Mrs. Rometty: $(118,735).

(5) IBM does not provide above-market or preferential earnings on deferred compensation. See the 2016 Nonqualified Deferred Compensation Narrative for information about deferred compensation.

(6) Amounts in this column include the following for 2016: for Mrs. Rometty: tax reimbursements of $32,678 and IBM contributions to defined contribution plans of $610,000; for Mr. Schroeter: tax reimbursements of $27,462 and IBM contributions to defined contribution plans of $98,106; for Mr. Jetter: tax reimbursements of $1,923,164 and IBM contributions to defined contribution plans of $74,567; for Dr. Kelly: tax reimbursements of $13,828 and IBM contributions to defined contribution plans of $128,400; and for Mr. Clementi: tax reimbursements of $5,572 and IBM contributions to defined contribution plans of $92,497.

(7) Amounts in this column also include the following perquisites for 2016: for Mrs. Rometty: personal financial planning, personal travel on Company aircraft of $147,898, ground transportation, personal security, annual executive physical, family attendance at business-related events, and other personal expenses; for Mr. Schroeter: personal financial planning, personal security, annual executive physical, family attendance at business-related events, and other personal expenses; for Mr. Jetter: personal financial planning, personal travel on Company aircraft of $23,519, ground transportation, annual executive physical, family attendance at business-related events of $31,518, international assignments, and other personal expenses; for Dr. Kelly: personal financial planning, personal travel on Company aircraft of $74,567, ground transportation, personal security, annual executive physical, family attendance at business-related events, and other personal expenses; and for Mr. Clementi: personal financial planning, personal travel on Company aircraft, ground transportation, annual executive physical, family attendance at business-related events, and other personal expenses. See the 2016 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. Jetter and Mr. Clementi were not named executive officers in IBM’s 2015 and 2016 Proxy Statements; therefore, this table does not provide 2014 and 2015 data for them.