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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
x | |||
Preliminary Proxy Statement |
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
¨ | Definitive Proxy Statement |
¨ | Definitive Additional Materials |
¨ | Soliciting Material Pursuant to §240.14a-12 | ||
HP INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x | ||||
No fee required. |
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transaction applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
Fee paid previously with preliminary materials. |
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing Party: |
(4) | Date Filed: |
Margaret C. Whitman | HP Inc. | |||
Chairman of the Board | 1501 Page Mill Road | |||
Rajiv L. Gupta Lead Independent Director | Palo Alto, CA 94304 | |||
www.hp.com |
To our Stockholders:
We are pleased to invite you to attend the annual meeting of stockholders of Hewlett-Packard Company to be heldHP Inc. on Wednesday, March 19, 2014Monday, April 4, 2016 at 2:00 p.m., local time,Pacific Time. This year’s annual meeting, like last year’s annual meeting, will again be a completely virtual meeting of stockholders, which will be conducted via live webcast. You will be able to attend the annual meeting of stockholders online and submit your questions during the meeting by visitingHP.onlineshareholdermeeting.com. You also will be able to vote your shares electronically at the Santa Clara Convention Center, 5001 Great America Parkway, Santa Clara, California.annual meeting (other than shares held through our 401(k) Plan, which must be voted prior to the meeting).
We are excited to embrace the latest technology to provide expanded access, improved communication and cost savings for our stockholders and the company. As we learned last year, hosting a virtual meeting enables increased stockholder attendance and participation from any location around the world. In addition, the online format will continue to allow us to communicate more effectively with you via a pre-meeting forum that you can enter by visitingwww.theinvestornetwork.com/forum/hpq.
Details regarding admissionhow to attend the meeting online and the business to be conducted at the annual meeting are more fully described in the accompanying Notice of Annual Meeting and Proxy Statement.
This year we are pleasedwill provide access to again be usingour proxy materials over the Internet under the U.S. Securities and Exchange Commission rule that allows companies to furnish their proxy materials over the Internet.Commission’s “notice and access” rules. As a result, we are mailing to many of our stockholders a notice instead of a paper copy of this proxy statement and our 20132015 Annual Report. The notice contains instructions on how to access those documents over the Internet. The notice also contains instructions on how each of those stockholders can receive a paper copy of our proxy materials, including this proxy statement, our 20132015 Annual Report, and a form of proxy card or voting instruction card. All stockholders who do not receive a notice, including stockholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail unless they have previously requested delivery of proxy materials electronically. Continuing to employ this distribution process will conserve natural resources and reduce the costs of printing and distributing our proxy materials.
Your vote is important. Regardless of whether you plan to attendparticipate in the annual meeting, we hope you will vote as soon as possible. You may vote by proxy over the Internet or by telephone, or, if you received paper copies of the proxy materials by mail, you may also vote by mail by following the instructions on the proxy card or voting instruction card. Voting over the Internet or by telephone, written proxy or voting instruction card will ensure your representation at the annual meeting regardless of whether you attend in person.the virtual meeting.
Thank you for your ongoing support of, and continued interest in, Hewlett-Packard Company.HP Inc.
Sincerely,
Margaret C. Whitman | ||
Chairman of the Board |
Table of Contents HP INC.
2014 ANNUAL MEETING OF STOCKHOLDERS1501 Page Mill Road
Palo Alto, California 94304
(650) 857-1501
NOTICE OF ANNUAL MEETING AND PROXY STATEMENTOF STOCKHOLDERS
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HEWLETT-PACKARD COMPANY
3000 Hanover StreetPalo Alto, California 94304(650) 857-1501
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Time and Date | 2:00 p.m., | |||
Place | ||||
Items of Business | (1) | To elect the | ||
(2) | To ratify the appointment of the independent registered public accounting firm for the fiscal year ending October 31, | |||
(3) | To | |||
(4) | To | |||
(5) | To consider such other business as may properly come before the meeting | |||
Adjournments and Postponements | Any action on the items of business described above may be considered at the annual meeting at the time and on the date specified above or at any time and date to which the annual meeting may be properly adjourned or postponed. | |||
Record Date | You are entitled to vote only if you were | |||
Virtual Meeting Admission | Stockholders of record as of February 5, 2016, will be able to | |||
materials. The annual meeting will begin promptly at 2:00 p.m., | ||||
The new online format for the annual meeting also allows us to communicate more effectively with you via a pre-meeting forum that you can enter by visitingwww.theinvestornetwork.com/forum/hpq. On our pre-meeting forum, you can submit questions in advance of the annual meeting, and also access copies of our proxy statement and annual report. | ||||
Voting | Your vote is very important. Regardless of whether you plan to attend the annual meeting, we hope you will vote as soon as possible. You may vote your shares over the Internet or via a toll-free telephone number. If you received a paper copy of a proxy or voting instruction card by mail, you may submit your proxy or voting instruction card for the annual meeting by completing, signing, dating and returning your proxy or voting instruction card in the pre-addressed envelope provided. Stockholders of record and beneficial owners will be able to vote their shares electronically at the annual meeting (other than shares held through the HP Inc. 401(k) Plan, which must be voted prior to the meeting). For specific instructions on how to vote your shares, please refer to the section entitledQuestions and Answers—Voting Informationbeginning on page |
By order of the Board of Directors,
KIM M. RIVERA
Chief Legal Officer, General Counsel
and Secretary
This notice of annual meeting and proxy statement and form of proxy are being distributed and made available on or about February 3, 2014, 2016..
Important Notice Regarding the Availability of Proxy Materials for the StockholderAnnual Meeting of Stockholders to Be Held on March 19, 2014.April 4, 2016. The definitive proxy statement and Hewlett-Packard Company's 2013HP Inc.’s 2015 Annual Report arewill be available electronically atwww.hp.com/investor/stockholdermeeting2014stockholdermeeting2016 and with your 16-digit control number atHP.onlineshareholdermeeting.com.
2016 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
The following is a summary of certain key disclosures in our proxy statement. This is only a summary, and it may not contain all of the information that is important to you. For more complete information, please review the proxy statement as well as our 20132015 Annual Report, which includes our Annual Report on Form 10-K. References to "Hewlett-Packard," "HP," "we," "us"“HP,” “we,” “us” or "our"“our” refer to Hewlett-Packard Company.HP Inc.
Meeting Information
Annual Meeting of Stockholders
Time and Date | 2:00 p.m., | |
Place | ||
Record Date |
Proposals to be Voted on and Board Voting Recommendations
Proposals | Recommendation | Votes Required | More information | |||
Election of Directors | FOR EACH NOMINEE | Majority of votes cast | Page 5 | |||
Ratification of Independent Registered Public Accounting Firm | FOR | Majority of the shares present, in person or represented by proxy, and entitled to vote | Page 27 | |||
Advisory Vote to Approve Executive Compensation | FOR | Majority of the shares present, in person or represented by proxy, and entitled to vote | Page 28 | |||
Approval of Amendment to Certificate of Incorporation to Eliminate Cumulative Voting | FOR | Majority of the outstanding shares entitled to vote | Page 29 |
Voting Your Shares
| VIA THE INTERNET www.proxyvote.com | BY MAIL Complete, sign, date and return your proxy card in the envelope provided | ||||
| BY TELEPHONE Call the phone number located on the top of your proxy card | For additional information, see Question 18 on page 93 |
Election of Directors
Board Nominees
Fiscal 2015 was a seminal year for HP Inc. On November 1, 2015, separation of Hewlett-Packard Company into two independent publicly-traded companies was completed forming Hewlett Packard Enterprise, which comprises enterprise technology infrastructure, software, services and financing businesses, and HP Inc., which comprises now former Hewlett-Packard Company’s printing and personal systems businesses. In connection with the separation, Hewlett-Packard Company changed its name to HP Inc. In addition, several of Hewlett-Packard Company’s Board members resigned at the time of the separation and eight new Board members joined HP’s Board, effective as of November 1, 2015. Key information regarding all of our 13 Board nominees is summarized in the table below:
Name | Age | HP Director Since | Committee Membership** | Principal Occupation | Independent | Other Current Public/ Company Boards | ||||||||||||
Aida M. Alvarez |
66 |
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2016 |
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— |
Chair, Latino Community Foundation |
ü |
Wal-Mart Stores, Inc. | ||||||||||
Shumeet Banerji |
56 |
|
2011 |
* |
● |
FIT |
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Founder and Partner, Condorcet, LP |
ü |
Innocoll AG | ||||||||
● | NGSR |
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Carl Bass | 58 | 2015 | ● | FIT |
| President and Chief Executive Officer, Autodesk Inc. | ü | Autodesk Inc. | ||||||||||
● | HRC |
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Robert R. Bennett | 57 | 2013 | * | ● | AC | Managing Director, Hilltop Investments, LLC | ü | Discovery Communications, Inc. | ||||||||||
● | FIT |
| Liberty Media Corporation Sprint Corporation | |||||||||||||||
Charles V. Bergh | 58 | 2015 | ● | HR |
| President and Chief Executive Officer, Levi Strauss & Co. | ü | Levi Strauss & Co. | ||||||||||
● | NGSR |
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Stacy Brown-Philpot | 40 | 2015 | ● | AC |
| Chief Operating Officer, Taskrabbit | ü | None | ||||||||||
● | NGSC |
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Stephanie A. Burns | 61 | 2015 | ● | AC |
| Former Chief Executive Officer and Chairman, Dow Corning | ü | Corning, Inc. GlaxoSmithKline plc Kellogg Company | ||||||||||
● | FIT |
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Mary Anne Citrino | 56 | 2015 | ● | AC |
| Senior Managing Director, The Blackstone Group | ü | Dollar Tree, Inc. Health Net, Inc. | ||||||||||
● | FIT | |||||||||||||||||
Rajiv L. Gupta | 70 | 2009 | * | ● | HRC |
| Chairman, Avantor Performance Materials | ü | Delphi Automotive, PLC Tyco International Ltd. The Vanguard Group | |||||||||
● | NGSR |
| Senior Advisor, New Mountain Capital, LLC | |||||||||||||||
Stacey Mobley | 70 | 2015 | ● | HRC |
| Senior Counsel and Advisor, Dickstein Shapiro, LLP | ü | International Paper Company | ||||||||||
● | NGSR |
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Subra Suresh | 59 | 2015 | ● | AC |
| President, Carnegie Mellon University | ü | Siemens, AG | ||||||||||
● | FIT |
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Dion J. Weisler | 48 | 2015 | — | President and Chief Executive Officer, HP Inc. | — | None | ||||||||||||
Margaret C. Whitman | 59 | 2011 | * | ● | FIT |
| President and Chief Executive Officer, Hewlett Packard Enterprise Co. | — | The Procter & Gamble Company Hewlett Packard Enterprise Company |
* | Includes tenure as a director of Hewlett-Packard Company. |
** | Committees Membership |
● | AC – Audit Committee |
● | FIT – Finance, Investment & Technology Committee |
● | HRC – HR and Compensation Committee |
● | NGSR – Nominating, Governance and Social Responsibility Committee |
– Member
– Chairperson
Board Composition
Governance Highlights
Governance Changes Since 2015 Annual Meeting | ü ü ü ü | We separated CEO and Chairman positions Our independent directors appointed a new Lead Independent Director We revised our corporate governance guidelines to reflect responsibilities of our new Lead Independent Director We added new talent to our Board of Directors, enhancing diversity of the Board | ||
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ü ü |
We eliminated all supermajority provisions in our charter and Bylaws Our stockholders owning 25% or more of our common stock have a right to call special meetings We do not have a poison pill or similar anti-takeover provision in place | |||
Other Governance Best Practices | ü
ü ü ü ü ü |
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Directors are elected by majority vote in uncontested director elections Directors are elected annually Each director nominee has agreed to Independent directors meet in regular executive |
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Table of ContentsExecutive Compensation Matters
Proposal No. 1—Director Nominees
The following table provides summary information about eachOur compensation program, practices and policies have been structured to reflect the commitment of the director nominees:
Name | Age | HP Director Since | Noteworthy Experience | Independent | Other Public/Investment Company Boards/ Current Affiliations | |||||
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Marc L. Andreessen | 42 | 2009 | Co-Founder, AH Capital Management, LLC, doing business as Andreessen Horowitz | Yes | eBay Inc.; Facebook, Inc. | |||||
Shumeet Banerji | 54 | 2011 | Former Senior Partner, Booz & Company | Yes | ||||||
Robert R. Bennett | 55 | 2013 | Managing Director, Hilltop Investments, LLC; former President, Discovery Holding Company | Yes | Demand Media, Inc.*; Discovery Communications, Inc.; Liberty Media Corporation; Sprint Corporation | |||||
Rajiv L. Gupta | 68 | 2009 | Chairman, Avantor Performance Materials, and Senior Advisor, New Mountain Capital, LLC; former Chairman and Chief Executive Officer, Rohm and Haas Company | Yes | Delphi Automotive, PLC; Tyco International Ltd.; The Vanguard Group | |||||
Raymond J. Lane | 67 | 2010 | Partner Emeritus, Kleiner Perkins Caufield & Byers | No | ||||||
Ann M. Livermore | 55 | 2011 | Former Executive Vice President, Enterprise Business, Hewlett-Packard Company | No | United Parcel Service, Inc. | |||||
Raymond E. Ozzie | 58 | 2013 | Chief Executive Officer, Talko, Inc.; former Chief Software Architect, Microsoft Corporation | Yes | ||||||
Gary M. Reiner | 59 | 2011 | Operating Partner, General Atlantic; former Senior Vice President and Chief Information Officer, General Electric Company | Yes | Citigroup Inc. | |||||
Patricia F. Russo | 61 | 2011 | Former Chief Executive Officer, Alcatel-Lucent | Yes | Alcoa, Inc.; General Motors Company; Merck &��Co., Inc.; KKR Management LLC | |||||
James A. Skinner | 69 | 2013 | Non-Executive Chairman, Walgreen Co.; former Vice Chairman and Chief Executive Officer, McDonald's Corporation | Yes | Illinois Tool Works Inc. | |||||
Margaret C. Whitman | 57 | 2011 | President and Chief Executive Officer, Hewlett-Packard Company | No | The Procter & Gamble Company | |||||
Ralph V. Whitworth | 58 | 2011 | Principal, Relational Investors LLC | Yes |
Proposal No. 2—Ratification of Independent Registered Public Accounting Firm
We are asking our stockholders to ratify the selection of Ernst & Young LLP ("EY") as our independent registered public accounting firm for fiscal 2014. Set forth below is a summary of EY's fees for services provided in fiscal 2013 and 2012:
| 2013 | 2012 | ||||
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| In millions | |||||
Audit Fees | $ | 34.9 | $ | 30.6 | ||
Audit-Related Fees | 13.8 | 14.8 | ||||
Tax Fees | 5.0 | 3.2 | ||||
All Other Fees | 0.8 | 2.2 | ||||
| | | | | | |
Total | $ | 54.5 | $ | 50.8 | ||
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Proposal No. 3—Advisory Vote on Executive Compensation
Our Board of Directors (the "Board"“Board”) and HR and Compensation Committee of the Board are committed(the “HRC Committee”) to excellence in corporate governance, and to executive compensation programsreward short- and long-term performance that align the interests of our executives with those of our stockholders. To fulfill this mission, we have a pay-for-performance philosophy that forms the foundation for all decisions regarding compensation. Our compensation programs have been structured to balance near-term results with long-term success, enable us to attract, retain, focus, and reward our executive team for deliveringdrives stockholder value. The table below summarizes key elements of our fiscal 20132015 compensation programs relative to this philosophy.
ALIGNMENT WITH STOCKHOLDERS | |||||
Pay-for-Performance | Compensation-Related Governance | ||||
• The majority of target total directcompensation for executives isperformance-based as well asequity-based to align their rewards with stockholder value | • We generallydo not enter into individual executive compensation agreements | ||||
• Total direct compensation istargeted at or near the marketmedian | • Wedevote significant time to management succession planning and leadership development efforts | ||||
• Actual realized total direct compensation andpay positioning is designed to fluctuate with, and becommensurate with, actual annual and long-term performance | • We maintain amarket-aligned severance policy for executives that doesnot have automaticsingle-trigger equity vesting upon a change in control | ||||
• Incentive awards are heavily dependent upon our stock performance, and are measured againstobjective financial metrics | • The | ||||
• Our compensation programsdo not encourage imprudent risk-taking | |||||
• We maintainstock ownership guidelines for executive officers and non-employee directors | |||||
• We balance growth and return objectives, top and bottom line objectives, and | •
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• A significant portion of our long-term incentives are delivered in the form of | • We conduct a robuststockholder outreach program throughout the year | ||||
• We provideno U.S. supplemental defined benefit pensions | • Wedisclose our corporate performance goals and achievements relative to these goals | ||||
•
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We validate ourpay-for-performance relationship on an annual basis | |||||
The Compensation Discussion and Analysis portion of this proxy statement contains a detailed description of our executive compensation philosophy and programs, the compensation decisions the HR and CompensationHRC Committee has made under those programs and the factors considered in making those decisions, focusing on the compensation of our named executive officers ("NEOs"(“NEOs”) for fiscal 2013, who were:
Table of Contents2015.
We believe that we have created a compensation program deserving of stockholder support. Accordingly, we are asking for stockholder approval of the compensation of our NEOs as disclosed in this proxy statement.
Proposal No. 4—Stockholder Proposal Related to the Formation of a Human Rights Committee
PROPOSAL NO. 1
The Board recommends a vote AGAINST a stockholder proposal seeking to have us establish a Human Rights CommitteeELECTION OF DIRECTORS
Our Bylaws fix the current number of directors at 13. On the Board. We believerecommendation of the Nominating, Governance and Social Responsibility (“NGSR”) Committee, the Board has nominated the 13 persons named below for election as directors this year, each to serve for a one-year term or until the director’s successor is elected and qualified.
Identifying and Evaluating Candidates for Directors
The NGSR Committee uses a variety of methods for identifying and evaluating nominees for director. The NGSR Committee, in consultation with the Chairman, regularly assesses the appropriate size of the Board already appropriately and effectively overseeswhether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the NGSR Committee considers various potential candidates for director. Candidates may come to the attention of the NGSR Committee through current Board members, professional search firms, stockholders or other persons. Identified candidates are evaluated at regular or special meetings of the NGSR Committee and may be considered at any point during the year. As described above, the NGSR considers properly submitted stockholder recommendations of candidates for the Board to be included in our policiesproxy statement. Following verification of the stockholder status of individuals proposing candidates, recommendations are considered collectively by the NGSR Committee at a regularly scheduled meeting, which is generally the first or second meeting prior to the issuance of the proxy statement for our annual meeting. If any materials are provided by a stockholder in connection with the nomination of a director candidate, such materials are forwarded to the NGSR Committee. The NGSR Committee also reviews materials provided by professional search firms and efforts relatingother parties in connection with a nominee who is not proposed by a stockholder. In evaluating such nominations, the NGSR Committee seeks to human rights, soachieve a balance of knowledge, experience and capability on the establishment of an additional committee to overseeBoard. The NGSR Committee evaluates nominees recommended by stockholders using the same policiescriteria as it uses to evaluate all other candidates.
We engage a professional search firm on an ongoing basis to identify and practicesassist the NGSR Committee in identifying, evaluating and conducting due diligence on potential director nominees.
The policy of the NGSR Committee is unnecessaryto consider properly submitted stockholder recommendations of candidates for membership on the Board as described above under “Identifying and would notEvaluating Candidates for Directors.” In evaluating such recommendations, the NGSR Committee seeks to achieve a balance of knowledge, experience and capability on the Board and to address the membership criteria set forth below. Any stockholder recommendations submitted for consideration by the NGSR Committee should include verification of the stockholder status of the person submitting the recommendation and the recommended candidate’s name and qualifications for Board membership and should be addressed to:
Corporate Secretary
HP Inc.
1501 Page Mill Road
Palo Alto, California 94304
Fax: 650-275-9138
In addition, our Bylaws permit stockholders to nominate directors for consideration at an annual stockholder meeting and, under certain circumstances, to include their nominees in the bestHP proxy
statement. For a description of the process for nominating directors in accordance with our Bylaws, see “Questions and Answers—Stockholder Proposals, Director Nominations and Related Bylaw Provisions—How may I recommend individuals to serve as directors and what is the deadline for a director recommendation?”
Director Nominees and Director Nominees’ Experience and Qualifications
The Board annually reviews the appropriate skills and characteristics required of directors in the context of the current composition of the Board, our operating requirements and the long-term interests of our stockholders. The Board believes that its members should possess a variety of skills, professional experience and backgrounds in order to effectively oversee our business. In addition, the Board believes that each director should possess certain attributes, as reflected in the Board membership criteria described below.
Our Corporate Governance Guidelines contain the current Board membership criteria that apply to nominees recommended for a position on the Board. Under those criteria, members of the Board should:
ü | have the highest professional and personal ethics and values, consistent with our long-standing values and standards; | |
ü | have broad experience at the policy-making level in business, government, education, technology or public service; | |
ü | be committed to enhancing stockholder value and must represent the interests of all of our stockholders; and | |
ü | have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience (which means that directors’ service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties). |
1. Why am I receiving these materials?
We have made these materials availableIn addition, the NGSR Committee takes into account a potential director’s ability to you over the Internet or delivered paper copies of these materials to you by mail in connection with our annual meeting of stockholders, which will take place on Wednesday, March 19, 2014. As a stockholder, you are invited to attend the annual meeting and to vote on the items of business described in this proxy statement. This proxy statement includes information that we are required to provide to you under the rules of the U.S. Securities and Exchange Commission (the "SEC") and that is designed to assist you in voting your shares. See Questions 15 and 16 below for information regarding how you can vote your shares in person at the annual meeting or by proxy (without attending the annual meeting).
2. What is included in the proxy materials?
The proxy materials include:
If you received a paper copy of these materials by mail, the proxy materials also include a proxy card or a voting instruction card for the annual meeting. If you received a notice of the Internet availability of the proxy materials instead of a paper copy of the proxy materials, see Questions 15 and 16 below for information regarding how you can vote your shares.
3. What information is contained in this proxy statement?
The information in this proxy statement relatescontribute to the proposals to be voteddiversity of background and experience represented on at the annual meeting, the voting process, the Board, and it reviews its effectiveness in balancing these considerations when assessing the composition of the Board. Although the Board committees, the compensation of our directors and certain executive officers for fiscal 2013uses these and other required information.criteria as appropriate to evaluate potential nominees, it has no stated minimum criteria for nominees.
4. Why did I receive a notice inThe Board believes that all the mail regarding the Internet availability of the proxy materials instead of a paper copy of the full set of proxy materials?
This year, wenominees named below are pleased to be again using the SEC rule that allows companies to furnish their proxy materials over the Internet. As a result, we are mailing to many of our stockholders a notice of the Internet availability of the proxy materials instead of a paper copy of the proxy materials. All stockholders receiving the notice willhighly qualified and have the ability to accessskills and experience required for effective service on the proxy materials over the InternetBoard. Each director biography below describes each director’s qualifications and request to receive a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be foundrelevant experience in the notice of the Internet availability of the proxy materials. In addition, the notice contains instructions on how you may request to access proxy materials in printed form by mail or electronically on an ongoing basis.
5. Why didn't I receive a notice in the mail about the Internet availability of the proxy materials?
We are providing some of our stockholders, including stockholders who have previously requested to receive paper copies of the proxy materialsmore detail and some of our stockholders who are living outside of the United States, with paper copies of the proxy materials instead of a notice of the Internet availability of the proxy materials.
In addition, we are providing notice of the Internet availability of the proxy materials by e-mail to those stockholders who have previously elected delivery of the proxy materials electronically. Those stockholders should have received an e-mail containing a linksummarizes key qualifications, skills, and attributes most relevant to the website where those materials are available and a linkdecision to the proxy voting website.
6. How can I access the proxy materials over the Internet?
Your notice of the Internet availability of the proxy materials, proxy card or voting instruction card will contain instructionsnominate candidates to serve on how to:
Our proxy materials are also available on our website atwww.hp.com/investor/stockholdermeeting2014.
Your notice of the Internet availability of the proxy materials, proxy card or voting instruction card will contain instructions on how you may request to access proxy materials electronically on an ongoing basis. Choosing to access your future proxy materials electronically will help us conserve natural resources and reduce the costs of distributing our proxy materials. If you choose to access future proxy materials electronically, you will receive an e-mail with instructions containing a link to the website where those materials are available and a link to the proxy voting website. Your election to access proxy materials by e-mail will remain in effect until you terminate it.
7. How may I obtain a paper copy of the proxy materials?
Stockholders receiving a notice of the Internet availability of the proxy materials will find instructions about how to obtain a paper copy of the proxy materials on their notice. Stockholders receiving notice of the Internet availability of the proxy materials by e-mail will find instructions about how to obtain a paper copy of the proxy materials as part of that e-mail. All stockholders who do not receive a notice or an e-mail will receive a paper copy of the proxy materials by mail.
8. I share an address with another stockholder, and we received only one paper copy of the proxy materials or notice of the Internet availability of the proxy materials. How may I obtain an additional copy?
If you share an address with another stockholder, you may receive only one paper copy of the proxy materials or notice of the Internet availability of the proxy materials, as applicable, unless you have provided contrary instructions. If you wish to receive a separate set of the proxy materials or notice of the Internet availability of the proxy materials now, please request the additional copy by contacting Innisfree M&A Incorporated ("Innisfree") at:
(877) 750-5838 (U.S. and Canada)(412) 232-3651 (International)E-mail: info@innisfreema.com
A separate set of proxy materials or notice of the Internet availability of the proxy materials, as applicable, will be sent promptly following receipt of your request.
If you are a stockholder of record and wish to receive a separate set of proxy materials or notice of the Internet availability of the proxy materials, as applicable, in the future, please contact our transfer agent. See Question 23 below.
If you are the beneficial owner of shares held through a broker, trustee or other nominee and you wish to receive a separate set of proxy materials or notice of the Internet availability of the proxy materials, as applicable, in the future, please call Broadridge Financial Solutions, Inc. at:
(800) 542-1061
All stockholders also may write to HP at the address below to request a separate set of proxy materials or notice of the Internet availability of the proxy materials, as applicable:
NASDAQ OMXPrint and Distribution Ctr.325 Donald Lynch BlvdMarlborough, MA 01752
9. What should I do if I receive more than one notice or e-mail about the Internet availability of the proxy materials or more than one paper copy of the proxy materials?
You may receive more than one notice, more than one e-mail or more than one paper copy of the proxy materials, including multiple paper copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate notice, a separate e-mail or a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you may receive more than one notice, more than one e-mail or more than one proxy card. To vote all of your shares by proxy, you must complete, sign, date and return each proxy card and voting instruction card that you receive and vote over the Internet the shares represented by each notice and e-mail that you receive (unless you have requested and received a proxy card or voting instruction card for the shares represented by one or more of those notices or e-mails).
10. How may I obtain a copy of HP's 2013 Form 10-K and other financial information?
Stockholders may request a free copy of our 2013 Annual Report, which includes our 2013 Form 10-K, from:
NASDAQ OMXPrint and Distribution Ctr.325 Donald Lynch BlvdMarlborough, MA 01752
www.hp.com/investor/informationrequest
Alternatively, stockholders can access the 2013 Annual Report on HP's Investor Relations website at:
www.hp.com/investor/home
We also will furnish any exhibit to the 2013 Form 10-K if specifically requested.
11. What proposals will be voted on at the annual meeting?
Stockholders will vote on four proposals at the annual meeting:
We also will consider any other business that properly comes before the annual meeting. See Question 27 below.Directors.
12. How does the Board recommend that I vote?
Our Board recommends that you vote your shares FOR eachAll of the nominees have indicated to us that they will be available to serve as directors. In the event that any nominee should become unavailable, the proxy holders, Dion J. Weisler, Catherine A. Lesjak and Kim M. Rivera, will vote for election toa nominee or nominees designated by the Board, FOR the ratification of the appointment ofBoard.
There are no family relationships among our independent registered public accounting firm, FOR the advisory approval of the compensation of our named executive officers and AGAINST the stockholder proposal.
13. What is the difference between holding shares as a stockholder of record and as a beneficial owner?directors.
Most of our stockholders hold their shares through a broker, trustee or
Our Board recommends a vote FOR the election to the Board of all of the following nominees: |
Independent Director | Qualifications: | |||
Aida M. Alvarez Age 66 Director since 2015 HP Board Committees: N/A | CURRENT ROLE • Chair, Latino Community Foundation CURRENT PUBLIC COMPANY BOARDS • HP • Wal-Mart Stores, Inc. PRIOR PUBLIC COMPANY BOARDS • MUFG Americas Holdings Corporation | PRIOR BUSINESS AND OTHER EXPERIENCE • Administrator, U.S. Small Business Administration (1997–2001) • Director, Office of Federal Housing Enterprise Oversight (1993–1997) • Vice President, First Boston Corporation and Bear Stearns & Co. (prior to 1993) | ||
OTHER KEY QUALIFICATIONS Ms. Alvarez brings to the Board a wealth of expertise in media, public affairs, finance and government given her executive roles at government agencies, her leadership at a prominent philanthropic organization and her career as a prominent journalist. The Board also benefits from Ms. Alvarez’s knowledge of investment banking and finance. | ||||
Independent Director | Qualifications: | |||
Shumeet Banerji Age 56 Director since 2011* HP Board Committees: FIT NGSR, Chair | CURRENT ROLE • Co-founder and Partner of Condorcet, LP, an advisory and investment firm that specializes in developing early stage companies (since 2013) CURRENT PUBLIC COMPANY BOARDS • HP • Innocoll AG PRIOR PUBLIC COMPANY BOARDS • None | PRIOR BUSINESS AND OTHER EXPERIENCE • Senior Partner, Booz & Company, a consulting company (May 2012–March 2013) • Chief Executive Officer, Booz & Company (July 2008–May 2012) • President of the Worldwide Commercial Business, Booz Allen Hamilton (February 2008–July 2008) • Managing Director, Europe, Booz Allen Hamilton (2007–2008) • Managing Director, United Kingdom, Booz Allen Hamilton (2003–2007) • Faculty, University of Chicago Graduate School of Business | ||
OTHER KEY QUALIFICATIONS Mr. Banerji brings to the Board a robust understanding of the issues facing companies and governments in both mature and emerging markets around the world through his two decades of work with Booz & Company. In particular, Mr. Banerji has valuable experience in addressing a variety of complex issues ranging from corporate strategy, organizational structure, governance, transformational change, operational performance improvement and merger integration. |
Independent Director | Qualifications: | |||
Carl Bass Age 58 Director since 2015 HP Board Committees: FIT HRC | CURRENT ROLE • President and Chief Executive Officer, Autodesk Inc. (“Autodesk”), a software company (since May 2006) CURRENT PUBLIC COMPANY BOARDS • HP • Autodesk PRIOR PUBLIC COMPANY BOARDS • McAfee, Inc. • E2open, Inc. | PRIOR BUSINESS AND OTHER EXPERIENCE • Interim Chief Financial Officer, Autodesk (August 2014–November 2014; August 2008-April 2009) • Chief Operating Officer, Autodesk (2001-2006) • Chief Strategy Officer and Chief Executive Officer, Buzzsaw.com (1999-2001) | ||
OTHER KEY QUALIFICATIONS Mr. Bass brings to the Board decades of experience in the technology industry and has spent nearly two decades in management roles within Autodesk. His leadership experience brings valuable insight into the operational, strategic, and information technology issues specific to the technology sector. | ||||
Independent Director | Qualifications: | |||
Robert R. Bennett Age 57 Director since 2013* HP Board Committees: Audit FIT, Chair | CURRENT ROLE • Managing Director, Hilltop Investments, LLC, a private investment company (since 2005) CURRENT PUBLIC COMPANY BOARDS • HP • Discovery Communications, Inc. • Liberty Media Corporation • Sprint Corporation PRIOR PUBLIC COMPANY BOARDS • Demand Media, Inc. • Discovery Holding Company • Liberty Interactive Corporation • Sprint Nextel Corporation | PRIOR BUSINESS AND OTHER EXPERIENCE • President of Discovery Holding Company, a media and entertainment company (2005–2008) • President and Chief Executive Officer of Liberty Media Corporation (now Liberty Interactive Corporation), a video and on-line commerce company | ||
OTHER KEY QUALIFICATIONS Mr. Bennett brings to the Board in-depth knowledge of the media and telecommunications industry and his knowledge of the capital markets and other financial and operational matters from his experience as the president and chief executive officer of another public company, which allows him to provide an important perspective to the Board’s discussions on financial and operational issues. Mr. Bennett also has an in-depth understanding of finance and has held various financial management positions during the course of his career. He also contributes valuable insight to the Board due to his experience serving on the boards of both public and private companies. |
Independent Director | Qualifications: | |||
Charles V. Bergh Age 58 Director since 2015 HP Board Committees: HRC NGSR | CURRENT ROLE • President, Chief Executive Officer and Director of Levi Strauss & Co., an apparel/retail company (since September 2011) CURRENT PUBLIC COMPANY BOARDS • HP • Levi Strauss & Co. PRIOR PUBLIC COMPANY BOARDS • VF Corporation | PRIOR BUSINESS AND OTHER EXPERIENCE • Group President, Global Male Grooming, Procter & Gamble Co., a consumer goods company (2009–September 2011) • In 28 years at Procter & Gamble, Mr. Bergh served in a variety of executive roles, including managing business in multiple regions worldwide | ||
OTHER KEY QUALIFICATIONS Mr. Bergh brings to the Board extensive experience in executive leadership at large global companies and international business management. From his more than 30 years at Levi Strauss and Proctor & Gamble, Mr. Bergh has a strong operational and strategic background with significant experience in brand management. He also brings public company governance experience as a board member and chair of boards and board committees of other public and private companies. | ||||
Independent Director | Qualifications: | |||
Stacy Brown-Philpot Age 40 Director since 2015 HP Board Committees: Audit NGSR | CURRENT ROLE • Chief Operating Officer, Taskrabbit, an online labor interface company (since January 2013) CURRENT PUBLIC COMPANY BOARDS • HP PRIOR PUBLIC COMPANY BOARDS • None | PRIOR BUSINESS AND OTHER EXPERIENCE • Entrepreneur-in-Residence, Google Ventures, the venture capital investment arm of Google, Inc., a technology company (May 2012–December 2012) • Senior Director of Global Consumer Operations, Google (2010–May 2012) • Prior to 2010, Ms. Brown-Philpot served in a variety of directorial positions at Google • Prior to joining Google in 2003, Ms. Brown-Philpot served as a senior analyst and senior associate at the financial firms Goldman Sachs and PwC | ||
OTHER KEY QUALIFICATIONS Ms. Brown-Philpot brings to the Board extensive operational, analytical, financial, and strategic experience. In addition to her current role leading operations at Taskrabbit, Ms. Brown-Philpot’s decade of experience leading various operations at Google and her prior financial experience from her roles at Goldman Sachs and PwC provide unique operational and financial expertise to the Board. |
Independent Director | Qualifications: | |||
Stephanie A. Burns Age 61 Director since 2015 HP Board Committees: Audit FIT | CURRENT ROLE • Director CURRENT PUBLIC COMPANY BOARDS • HP • Corning, Inc. • GlaxoSmithKline plc • Kellogg Company PRIOR PUBLIC COMPANY BOARDS • Dow Corning | PRIOR BUSINESS AND OTHER EXPERIENCE • Chief Executive Officer, Dow Corning, a silicon-based manufacturing company (2004–May 2011) • President, Dow Corning (2003–November 2010) Executive Vice President, Dow Corning (2000–2003) | ||
OTHER KEY QUALIFICATIONS Dr. Burns has more than 30 years of global innovation and business leadership experience and brings significant expertise in scientific research, product development, issues management, science and technology leadership, and business management to the Board. Dr. Burns also brings public company governance experience to the Board as a member of boards and board committees of other public companies. | ||||
Independent Director | Qualifications: | |||
Mary Anne Citrino Age 56 Director since 2015 HP Board Committees: Audit, Chair FIT | CURRENT ROLE • Senior Advisor and former Senior Managing Director, The Blackstone Group, an investment firm (since 2004) CURRENT PUBLIC COMPANY BOARDS • HP • Dollar Tree, Inc. • Health Net, Inc. PRIOR PUBLIC COMPANY BOARDS • None | PRIOR BUSINESS AND OTHER EXPERIENCE • Managing Director, Global Head of Consumer Products Investment Banking Group, and Co-head of Health Care Services Investment Banking, Morgan Stanley (1986-2004) | ||
OTHER KEY QUALIFICATIONS Ms. Citrino’s more than 30-year career as an investment banker provides the Board with substantial knowledge regarding business operations strategy, as well as valuable financial and investment expertise. She also brings public company governance experience as a member of boards and board committees of other public companies. | ||||
Lead Independent Director | Qualifications: | |||
Rajiv L. Gupta Age 70 Director since 2009* HP Board Committees: HRC, Chair NGSR | CURRENT ROLE • Chairman, Avantor Performance Materials, a manufacturer of chemistries and materials (since August 2011) | PRIOR BUSINESS AND OTHER EXPERIENCE • Chairman and Chief Executive Officer, Rohm and Haas Company, a worldwide producer of specialty materials (1999–April 2009) |
• Senior Advisor, New Mountain Capital, LLC, a private equity firm (since July 2009) CURRENT PUBLIC COMPANY BOARDS • HP • Delphi Automotive PLC • Tyco International Ltd. • The Vanguard Group PRIOR PUBLIC COMPANY BOARDS • None | • Vice Chairman, Rohm and Haas Company (1998 –1999) • Director of the Electronic Materials business, Rohm and Haas Company (1996–1999) Vice President and Regional Director of the Asia Pacific Region, Rohm and Haas Company (1993–1998) | |||
OTHER KEY QUALIFICATIONS Mr. Gupta brings to the Board extensive experience in executive leadership at a large global company, international management, and venture capital investment. From his nearly ten years as Chairman and Chief Executive Officer of Rohm and Haas, Mr. Gupta has a strong operational and strategic background with significant experience in manufacturing and sales. He also brings public company governance experience as a member and chair of boards and board committees of other public and private companies. | ||||
Independent Director | Qualifications: | |||
Stacey Mobley Age 70 Director since 2015 HP Board Committees: HRC NGSR | CURRENT ROLE • Senior Counsel and Advisor, Dickstein Shapiro, LLP, a law firm (since 2008) CURRENT PUBLIC COMPANY BOARDS • HP • International Paper Company PRIOR PUBLIC COMPANY BOARDS • None | PRIOR BUSINESS AND OTHER EXPERIENCE • Thirty-five years of experience at E.I. du Pont de Nemours and Company (“DuPont”), a chemical company (1973–2008) serving in a variety of leadership roles including Senior Vice President, Chief Administrative Officer and General Counsel | ||
OTHER KEY QUALIFICATIONS Mr. Mobley’s more than 35 years of legal and senior management experience at DuPont brings a deep understanding of governance, regulations and risk management. He also brings public company governance experience as a member of boards and board committees of other public and private companies. | ||||
Independent Director | Qualifications: | |||
Subra Suresh Age 59 Director since 2015 HP Board Committees: Audit FIT | CURRENT ROLE • President, Carnegie Mellon University (since July 2013) CURRENT PUBLIC COMPANY BOARDS • HP | PRIOR BUSINESS AND OTHER EXPERIENCE • Director, National Science Foundation, a federal agency charged with advancing science and engineering research and education (October 2010–March 2013) |
PRIOR PUBLIC COMPANY BOARDS • None OTHER BOARDS • Battelle Memorial Institute, a nonprofit applied science and technology development company • Science & Technology Innovation Council Advisory Board of Siemens, AG | • Dean, School of Engineering, and the Vannevar Bush Professor of Engineering, Massachusetts Institute of Technology (2007–2010) | |||
OTHER KEY QUALIFICATIONS Mr. Suresh’s experience as the president of a prominent research university and his experience leading new entrepreneurship, innovations and creativity efforts brings the Board valuable insights with respect to strategic opportunities and a robust understanding of the organizational, scientific and technological requirements of ongoing innovation. | ||||
President, Chief Executive Officer and Director | Qualifications: | |||
Dion J. Weisler Age 48 Director since 2015 HP Board Committees: N/A | CURRENT ROLE • President and Chief Executive Officer, HP (since November 1, 2015) CURRENT PUBLIC COMPANY BOARDS • HP PRIOR PUBLIC COMPANY BOARDS • None | PRIOR BUSINESS AND OTHER EXPERIENCE • Executive Vice President, the Printing and Personal Systems Group, Hewlett-Packard Company (June 2013–November 2015) • Senior Vice President and Managing Director, Printing and Personal Systems, Asia Pacific and Japan, Hewlett-Packard Company (January 2012– June 2013) • Vice President and Chief Operating Officer, the Product and Mobile Internet Digital Home Groups, Lenovo Group Ltd., a technology company (January 2008–December 2011) | ||
OTHER KEY QUALIFICATIONS Mr. Weisler’s international business and leadership experience provide the Board with an enhanced global perspective. Mr. Weisler’s more than 25 years of experience in the information & technology industry and his position as HP’s Chief Executive Officer provide the Board with valuable industry insight and expertise. | ||||
Chairman of the Board | Qualifications: | |||
Margaret C. Whitman Age 59 Chairman since 2011* HP Board Committees: FIT | CURRENT ROLE • President and Chief Executive Officer, Hewlett Packard Enterprise Co. (since November 1, 2015) | PRIOR BUSINESS AND OTHER EXPERIENCE • President and Chief Executive Officer, Hewlett-Packard Company (September 2011–November 2015) |
CURRENT PUBLIC COMPANY BOARDS • HP • Hewlett Packard Enterprise Company • Procter & Gamble Co. PRIOR PUBLIC COMPANY BOARDS • Zipcar, Inc. | • Strategic Advisor, Kleiner Perkins Caufield & Byers, a private equity firm (March 2011–September 2011) • President and Chief Executive Officer, eBay Inc. (1998–2008) • Prior to joining eBay, Ms. Whitman held executive-level positions at Hasbro Inc., FTD, Inc., The Stride Rite Corporation, The Walt Disney Company, and Bain & Company | |||
OTHER KEY QUALIFICATIONS Ms. Whitman brings to the Board unique experience in developing transformative business models, building global brands and driving sustained growth and expansion through her ten years as President and Chief Executive Officer of eBay and unique knowledge of HP through her four years as President and Chief Executive Officer of Hewlett-Packard Company. From her previous executive positions with other large public companies, she also brings strong operational and strategic expertise. In addition, Ms. Whitman brings public company governance experience having previously served as a member of boards and board committees of other public companies, including as Chairman of Hewlett-Packard Company. |
* | Includes service on the Board of Directors of Hewlett-Packard Company. |
Each director nominee ratherwho receives more “FOR” votes than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.
14. Who is entitled to vote and how many shares can I vote?
Each holder of“AGAINST” votes representing shares of HP common stock issued and outstanding as of the close of business on January 21, 2014, the record date for the annual meeting, is entitled to cast one vote per share on all items being voted upon at the annual meeting. You may vote all shares owned by you as of this time, including (1) shares held directly in your name as the stockholder of record, including shares purchased through our Dividend Reinvestment Plan and employee stock purchase plans, and shares held through our Direct Registration Service; and (2) shares held for you as the beneficial owner through a broker, trustee or other nominee.
On the record date, HP had approximately 1,902,452,591 shares of common stock issued and outstanding.
15. How can I vote my shares in person at the annual meeting?
Shares held in your name as the stockholder of record may be voted in person at the annual meeting. Shares for which you are the beneficial owner but not the stockholder of record may be voted in person at the annual meeting only if you obtain a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the annual meeting, we recommend that you also vote by proxy as described below so that your vote will be counted if you later decide not to attend the meeting.
16. How can I vote my shares without attending the annual meeting?
Whether you hold shares directly as the stockholder of record or through a broker, trustee or other nominee as the beneficial owner, you may direct how your shares are voted without attending the annual meeting. There are three ways to vote by proxy:
17. What is the deadline for voting my shares?
If you hold shares as the stockholder of record, or through the Hewlett-Packard Company 2011 Employee Stock Purchase Plan (the "ESPP"), your vote by proxy must be received before the polls close at the annual meeting.
If you hold shares in the Hewlett-Packard Company 401(k) Plan (the "HP 401(k) Plan"), your voting instructions must be received by 11:59 p.m., Eastern time, on March 16, 2014 for the trustee to vote your shares.
If you are the beneficial owner of shares held through a broker, trustee or other nominee, please follow the voting instructions provided by your broker, trustee or nominee.
18. May I change my vote or revoke my proxy?
You may change your vote or revoke your proxy at any time prior to the vote at the annual meeting, except that any change to your voting instructions for shares held in the HP 401(k) Plan must be provided by 11:59 p.m., Eastern time, on March 16, 2014 as described above.
If you are the stockholder of record, you may change your vote by: (1) granting a new proxy bearing a later date (which automatically revokes the earlier proxy); (2) providing a written notice of revocation to the Corporate Secretary at the address below in Question 31 prior to your shares being voted; or (3) attending the annual meeting and voting in person. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically make that request. For shares you hold beneficially in the name of a broker, trustee or other nominee, you may change your vote by submitting new voting instructions to your broker, trustee or nominee, or, if you have obtained a legal proxy from your broker or nominee giving you the right to vote your shares, by attending the meeting and voting in person.
19. Is my vote confidential?
Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed, either within HP or to third parties, except: (1) as necessary to meet applicable legal requirements; (2) to allow for the tabulation of votes and certification of the vote; and (3) to facilitate a successful proxy solicitation. Occasionally, stockholders provide on their proxy card written comments, which are then forwarded to management.
20. How are votes counted, and what affect do abstentions and broker non-votes have on the proposals?
In the election of directors, you may vote "FOR," "AGAINST" or "ABSTAIN" with respect to each of the nominees. If you elect to abstain in the election of directors, the abstention will not impact the election of directors. In tabulating the voting results for the election of directors, only "FOR" and "AGAINST" votes are counted. You also may cumulate your votes as described in Question 22 below.
For the other items of business, you may vote "FOR," "AGAINST" or "ABSTAIN." For these other items of business, if you elect to abstain, the abstention will have the same effect as an "AGAINST" vote.
If you are the beneficial owner of shares held in the name of a broker, trustee or other nominee and do not provide that broker, trustee or other nominee with voting instructions, your shares may constitute "broker non-votes." Generally, broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. Under the rules of the New York Stock Exchange, brokers, trustees or other nominees may generally vote on routine matters but cannot vote on non-routine matters. Only Proposal No. 2 (ratifying the appointment of the independent registered public accounting firm) is considered a routine matter. The other proposals are not considered routine matters, and without your instructions, your broker cannot vote your shares. In tabulating the voting results for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal. Thus, broker non-votes will not affect the outcome of any matter being voted on at the meeting.
If you provide specific instructions with regard to certain items, your shares will be voted as you instruct on such items. If you vote by proxy card or voting instruction card and sign the card without giving specific instructions, your shares will be voted in accordance with the recommendations of the Board (FOR all of our nominees to the Board, FOR ratification of the appointment of our
independent registered public accounting firm, FOR the approval of the compensation of our named executive officers, and AGAINST the stockholder proposal).
For any shares you hold in the HP 401(k) Plan, if your voting instructions are not received by 11:59 p.m., Eastern time, on March 16, 2014, your shares will be voted in proportion to the way the shares held by the other HP 401(k) Plan participants are voted, except as may be otherwise required by law.
21. What is the voting requirement to approve each of the proposals?
In the election of directors, each director will be elected by the vote of the majority of votes cast with respect to that director nominee. A majority of votes cast means that the number of votes cast for a nominee's election must exceed the number of votes cast against such nominee's election. Each nominee receiving more votes "for" his or her election than votes "against" his or her election will be elected. Approval of each of the other proposals requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote on that proposalbe voted at the annual meeting.meeting will be elected.
22. If you sign your proxy or voting instruction card but do not give instructions with respect to voting for directors, your shares will be voted by Dion J. Weisler, Catherine A. Lesjak and Kim M. Rivera, as proxy holders. If you wish to give specific instructions with respect to voting for directors, you may do so by indicating your instructions on your proxy or voting instruction card.
Currently, you may cumulate your votes in favor of one or more of the director nominees. If you wish to cumulate your votes, you will need to indicate explicitly your intent to cumulate your votes among the 13 persons who will be voted upon at the annual meeting. See “Questions and Answers—Voting Information—Is cumulative voting permitted for the election of directors?
In the election of directors, you may choose” for further information about how to cumulate your vote. Cumulative voting applies only to the election of directors and allows you to allocate among the director nominees, as you see fit, the total number of votes equal to the number of director positions to be filled multiplied by the number of shares you hold. For example, if you own 100 shares of stock and there are 12 directors to be elected at the annual meeting, you may allocate 1,200 "FOR" votes (12 times 100) among as few or as many of the 12 nominees to be voted on at the annual meeting as you choose. You may not cumulate your votes against a nominee.
If you are a stockholder of record and choose to cumulate your votes, you will need to submit a proxy card or, if you vote in person at the annual meeting, you will need to submit a ballot and make an explicit statement of your intent to cumulate your votes, either by so indicating in writing on the proxy card or by indicating in writing on your ballot when voting at the annual meeting. If you hold shares beneficially through a broker, trustee or other nominee and wish to cumulate votes, you should contact your broker, trustee or nominee.
If you vote by proxy card or voting instruction card and sign your card with no further instructions, Margaret C. Whitman,votes. Dion J. Weisler, Catherine A. Lesjak and John F. Schultz,Kim M. Rivera, as proxy holders, mayreserve the right to cumulate votes and cast yoursuch votes in favor of the election of some or all of the applicable nominees in their sole discretion, except that none of youra stockholder’s votes will not be cast for anya nominee as to whom you vote againstsuch stockholder instructs that such votes be cast “AGAINST” or abstain from voting.“ABSTAIN.”
23. What if IDirector Election Voting Standard and Resignation Policy
We have questions for our transfer agent?
Please contact our transfer agent, at the phoneadopted a policy whereby any incumbent director nominee who receives a greater number or address listed below, with questions concerning stock certificates, dividend checks, transfer of ownership or other matters pertaining to your stock account.
Wells Fargo Bank, N.A.Shareowner Services1110 Centre Pointe Curve, Suite 101Mendota Heights, MN 55120-4100(800) 286-5977 (U.S. and Canada)(651) 453-2122 (International)
A dividend reinvestment and stock purchase program is also available through our transfer agent. For information about this program, please contact our transfer agent as follows:
Wells Fargo Bank, N.A.Shareowner Services1110 Centre Pointe Curve, Suite 101Mendota Heights, MN 55120-4100(800) 286-5977 (U.S. and Canada)(651) 453-2122 (International)
24. How can I attend the annual meeting?
You are entitled to attend the annual meeting only if you were an HP stockholder or joint holder as of the close of business on January 21, 2014 or if you hold a valid proxy for the annual meeting. You must present photo identification for admittance. If you are a stockholder of record or hold your shares through the HP 401(k) Plan or the ESPP, your name will be verified against the list of stockholders of record or plan participants on the record date prior to your admission to the annual meeting. If you are not a stockholder of record but hold shares through a broker, trustee or nominee, you must provide proof of beneficial ownership on the record date, such as your most recent account statement prior to January 21, 2014 or other similar evidence of ownership.
If you do not provide photo identification or comply with the other procedures outlined above, you will not be admitted to the annual meeting.
The meeting will begin promptly at 2:00 p.m., local time. Check-in will begin at 12:30 p.m., local time, and you should allow ample time for the check-in procedures.
25. How many shares must be present or represented to conduct business at the annual meeting?
The quorum requirement for holding the annual meeting and transacting business is that holders of a majority of shares of HP common stock entitled to vote must be present in person or represented by proxy. Both abstentions and broker non-votes described previously in Question 20 are counted for the purpose of determining the presence of a quorum.
26. What if a quorum is not present at the annual meeting?
If a quorum is not present at the scheduled time of the annual meeting, then either the chairman of the Annual Meeting or the stockholders by vote the holders of a majority of the stock present in person or represented by proxy at the annual meeting are authorized by our Bylaws to adjourn the annual meeting until a quorum is present or represented.
27. What happens if additional matters are presented at the annual meeting?
Other than the four items of business described in this proxy statement, we are not aware of any other business to be acted upon at the annual meeting. If you grant a proxy, the persons named as proxy holders, Margaret C. Whitman, Catherine A. Lesjak and John F. Schultz, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any reason any of the nominees named in this proxy statement is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board.
28. Who will serve as inspector of elections?
The inspector of elections will be a representative from an independent firm, IVS Associates, Inc.
29. Where can I find the voting results of the annual meeting?
We intend to announce preliminary voting results at the annual meeting and publish final results in a Current Report on Form 8-K to be filed with the SEC within four business days of the annual meeting.
30. Who will bear the cost of soliciting votes for the annual meeting?
HP is making this solicitation and will pay the entire cost of preparing, assembling, printing, mailing and distributing the notices and these proxy materials and soliciting votes. In addition to the mailing of the notices and these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities. We also have hired Innisfree to assist us in the distribution of proxy materials and the solicitation of votes described above. We“AGAINST” his or her election than votes “FOR” such election will pay Innisfree a base fee of $20,000 plus customary costs and expenses for these services. We have agreed to indemnify Innisfree against certain liabilities arising out oftender his or in connection with these services. We also will reimburse brokerage houses and other custodians, nominees and fiduciaries for forwarding proxy and solicitation materials to stockholders.
Stockholder Proposals, Director Nominations and Related Bylaw Provisions
31. What is the deadline to propose actions (other than director nominations) for consideration at next year's annual meeting of stockholders?
You may submit proposals for consideration at future stockholder meetings. For a stockholder proposal to be considered for inclusion in our proxy statement for the annual meeting next year, the Corporate Secretary must receive the written proposal at our principal executive offices no later than October 6, 2014. Such proposals also must comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:
Corporate SecretaryHewlett-Packard Company3000 Hanover StreetPalo Alto, California 94304Fax: (650) 857-4837
For a stockholder proposal that is not intended to be included in our proxy statement for next year's annual meeting under Rule 14a-8, the stockholder must provide the information required by our Bylaws and give timely notice to the Corporate Secretary in accordance with our Bylaws, which, in general, require that the notice be received by the Corporate Secretary:
If the date of the stockholder meeting is moved more than 30 days before or 60 days after the anniversary of our annual meeting for the prior year, then notice of a stockholder proposal that is not
intended to be included in our proxy statement under Rule 14a-8 must be received no earlier than the close of business 120 days prior to the meeting and not later than the close of business on the later of the following two dates:
Deadlines for the nomination of director candidates are discussed in Question 33 below.
32. How may I recommend individuals to serve as directors and what is the deadline for a director recommendation?
You may recommend director candidatesher resignation for consideration by the Nominating, Governance and Social ResponsibilityNGSR Committee. Any such recommendations should include verification of the stockholder status of the person submitting the recommendation and the nominee's name and qualifications for Board membership and should be directed to the Corporate Secretary at the address of our principal executive offices set forth in Question 31 above. See "Proposal No. 1—Election of Directors—Director Nominee Experience and Qualifications" for more information regarding our Board membership criteria.
A stockholder may send a recommended director candidate's name and informationThe NGSR Committee will recommend to the Board at any time. Generally,the action to be taken with respect to such proposed candidates are considered at the first or second Board meeting prior to the issuanceoffer of the proxy statement for our annual meeting.
33. How may I nominate individuals to serve as directors and what are the deadlines for a director nomination?resignation.
Our Bylaws permit stockholders to nominate directors for consideration at an annual meeting. To nominate a director for consideration at an annual meeting, a nominating stockholder must provide the information required by our Bylaws and give timely notice of the nomination to the Corporate Secretary in accordance with our Bylaws, and each nominee must meet the qualifications required by our Bylaws. To nominate a director for consideration at next year's annual meeting, in general the notice must be received by the Corporate Secretary between the close of business on November 19, 2014 and the close of business on December 19, 2014, unless the annual meeting is moved by more than 30 days before or 60 days after the anniversary of the prior year's annual meeting, in which case the deadline will be as described in Question 31 above.
In addition, our Bylaws provide that under certain circumstances, a stockholder or group of stockholders may include director candidates that they have nominated in our annual meeting proxy statement. These proxy access provisions of our Bylaws provide, among other things, that a stockholder or group of up to twenty stockholders seeking to include director candidates in our annual meeting proxy statement must own 3% or more of HP's outstanding common stock continuously for at least the previous three years. The number of stockholder-nominated candidates appearing in any annual meeting proxy statement cannot exceed 20% of the number of directors then serving on the Board. If 20% is not a whole number, the maximum number of stockholder-nominated candidates would be the closest whole number below 20%. Based on the current Board size of 12 directors, the maximum number of proxy access candidates that we would be required to include in our proxy materials for an annual meeting is two. Nominees submitted under the proxy access procedures that are later withdrawn or are included in the proxy materials as Board-nominated candidates will be counted in determining whether the 20% maximum has been reached. If the number of stockholder-nominated candidates exceeds 20%, each nominating stockholder or group of stockholders may select one nominee for inclusion in our proxy materials until the maximum number is reached. The order of selection would be
determined by the amount (largest to smallest) of shares of HP common stock held by each nominating stockholder or group of stockholders. The nominating stockholder or group of stockholders also must deliver the information required by our Bylaws, and each nominee must meet the qualifications required by our Bylaws. Requests to include stockholder-nominated candidates in our proxy materials for next year's annual meeting must be received by the Corporate Secretary:
34. How may I obtain a copy of the provisions of our Bylaws regarding stockholder proposals and director nominations?
You may contact the Corporate Secretary at our principal executive offices for a copy of the relevant Bylaws provisions regarding the requirements for making stockholder proposals and nominating director candidates. Our Bylaws also are available on our website atwww.hp.com/hpinfo/investor/bylaws.
35. Who can help answer my questions?
If you have any questions about the annual meeting or how to vote or revoke your proxy, you should contact our proxy solicitor:
Innisfree M&A Incorporated501 Madison Avenue, 20th FloorNew York, New York 10022Stockholders: (877) 750-5838 (U.S. and Canada)(412) 232-3651 (International)Banks and brokers (call collect):(212) 750-5833
Corporate Governance Highlights
We are committed to implementing and following high standards of corporate governance, which we believe are important to the success of our business, creating stockholder value and maintaining our integrity in the marketplace.
We believe that effective corporate governance should include regular, constructive conversations with our stockholders. Over the past year, the Board has continued to engage with stockholders both directly and through the ongoing video interview series. The Board has also sought and encouraged feedback from stockholders about our corporate governance practices by conducting additional stockholder outreach and engagement throughout the year. Our annual corporate governance investor outreach cycle is described below.
Corporate Governance Highlights
As mentioned above, fiscal 2015 was a seminal year for HP Inc. On November 1, 2015, Hewlett-Packard Company separated into two independent publicly-traded companies: Hewlett Packard Enterprise and HP Inc. Stockholder input has been valuable as we progressed through the separation process and continue to evolve ournow-HP Inc.’s corporate governance policies and practices. Our Board and our management are committed to continued active engagement with our stockholders throughout the year and taking that feedback into account as we continue to evolve those policies and practices. The following examples highlight the variety of changes we have recently made during the past year to strengthen our corporate governance policies and practices:
ü | Added New Board Talent and Enhanced the Diversity of our Board | We have added nine new directors to our Board of Directors, four of whom are women. For details, see page 2 of this proxy statement. | ||
ü | Separated our CEO and Chairman Roles | In connection with the separation, the Board has separated CEO and Chairman roles: Meg Whitman was appointed our Chairman and Dion J. Weisler was appointed our President and CEO. For details, see page 17 of this proxy statement. | ||
ü | Appointed a New Lead Independent Director and Enhanced the Lead Independent Director Role | We appointed Rajiv L. Gupta as our new Lead Independent Director. In connection with this appointment, the Board revised our Corporate Governance Guidelines to further enhance our Lead Independent Director’s responsibilities. For details, see page 17 of this proxy statement. |
Added New Board Talent.Director Independence
Our Corporate Governance Guidelines provide that a substantial majority of the Board using selection criteriawill consist of independent directors and that the Board can include no more than three directors who are not independent directors. These standards are available on our website atwww.hp.com/investor/director_standards. Our director independence standards generally reflect the NYSE corporate governance listing standards. In addition, each member of the Audit Committee meets the heightened independence standards required for audit committee members under the applicable listing and SEC standards and each member of the HRC Committee meets the heightened independence standards required for compensation committee members under the applicable listing standards, SEC standards and tax standards.
Under our Corporate Governance Guidelines, a director will not be considered independent in the following circumstances:
ü | The director is, or has been within the last three years, an employee of HP, or an immediate family member of the director is, or has been within the last three years, an executive officer of HP. | |
ü | The director has been employed as an executive officer of HP, its subsidiaries or affiliates within the last five years. | |
ü | The director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $100,000 in direct compensation from HP, other than compensation for Board service, compensation received by a director’s immediate family member for service as a non-executive employee of HP, and pension or other forms of deferred compensation for prior service with HP that is not contingent on continued service. | |
ü | (A) The director or an immediate family member is a current partner of the firm that is our internal or external auditor; (B) the director is a current employee of such a firm; (C) the director has an immediate family member who is a current employee of such a firm and who participates in the firm’s audit, assurance or tax compliance (but not tax planning) practice; or (D) the director or an immediate family member was within the last three years (but is no longer) a partner or employee of such a firm and personally worked on our audit within that time. | |
ü | The director or an immediate family member is, or has been in the past three years, employed as an executive officer of another company where any of our present executive officers at the same time serves or has served on that company’s compensation committee. | |
ü | The director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, HP for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues. | |
ü | The director is affiliated with a charitable organization that receives significant contributions from HP. | |
ü | The director has a personal services contract with HP or an executive officer of HP. |
For these purposes, an “immediate family member” includes a director’s spouse, parents, step-parents, children, step-children, siblings, mother-in-law, father-in-law, sons-in-law, daughters-in-law, brothers-in-law, sisters-in-law, and any person (other than tenants or employees) who shares the director’s home.
In determining independence, the Board reviews whether directors have any material relationship with HP. An independent director must not have any material relationship with HP, either directly or as high professionala partner, stockholder or officer of an organization that has a relationship with HP, nor any relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In assessing the materiality of a director’s relationship to HP, the Board considers all relevant facts and personal ethicscircumstances, including consideration of the issues from the director’s standpoint and values consistentfrom the perspective of the persons or organizations with our longstanding valueswhich the director has an affiliation, and is guided by the standards broad policy-making experienceset forth above.
In making its independence determinations, the Board considered transactions occurring since the beginning of fiscal 2013 between HP and a commitmententities associated with the independent directors or their immediate family members. In addition to enhancing stockholder value to identify director candidates. In Julythe transactions described below under “—Fiscal 2015 Related Person Transactions,” if any, the Board’s independence determinations included consideration of the following transactions:
Current and Former Directors
Each of Mr. Andreessen and Mr. Banerji, or one of their immediate family members, serves or has served as a non-employee director, trustee or advisory board member for one or more
charitable institutions to which HP has made charitable contributions during the previous three fiscal years. Contributions by HP (including employee-matching contributions and discretionary contributions by HP) to each charitable institution other than Stanford Hospital and Clinics did not exceed $100,000 in any of the previous three fiscal years. Since the beginning of fiscal 2013, contributions by HP (including employee-matching contributions and discretionary contributions by HP) to Stanford Hospital and Clinics totaled approximately $13,620,000. |
As a result of this review, the Board has determined the transactions described above and below under “—Fiscal 2015 Related Person Transactions,” if any, would not interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. The Board has also determined that, with the exception of Messrs. Lane and Weisler and Ms. Livermore and Ms. Whitman, (i) each of the current non-employee directors, including Ms. Alvarez, Mr. Banerji, Mr. Bass, Mr. Bennett, Mr. Bergh, Ms. Brown-Philpot, Ms. Burns, Ms. Citrino, Mr. Gupta, Mr. Mobley and Mr. Suresh and (ii) each of the former non-employee directors, who served during any portion of fiscal 2015, including Mr. Andreessen, Mr. Kleinfeld, Mr. Ozzie, brings significant experienceMr. Reiner, Ms. Russo, Mr. Skinner, and each of the members of the Audit Committee, the HRC Committee and the NGSR Committee, has (or had) no material relationship with HP (either directly or as a partner, stockholder or officer of an organization that has a relationship with HP) and is independent within the meaning of NYSE and our director independence standards. The Board has determined that:
In connection with the separation of Hewlett-Packard Company into two companies, our Board has reevaluated the Board’s leadership structure and determined that it would be in the technology industrybest interests of the Company and its stockholders to separate the Chairman of the Board as we continue our efforts at innovation.
threshold in our Bylaws for stockholders to amend certain sections of our Bylaws with a lower majority of outstanding shares voting threshold. Neither our Bylaws nor our charter require a greater than a majority vote on any matter put to a vote of stockholders.
The Board is committed to continuing its active engagement with stockholders, and evaluating and improving our corporate governance policies and practices. During 2014, the Board is planning to:
We maintain a code of business conduct and ethics for directors, officers and employees, known as our Standards of Business Conduct. We also have adopted Corporate Governance Guidelines, which, in conjunction with our Certificate of Incorporation, Bylaws and respective charters of the Board committees, form the framework for our governance. All of these documents are available atwww.hp.com/investor/corpgovernance/highlights for review, downloading and printing. We will post on this website any amendments to the Standards of Business Conduct or waivers of the Standards of Business Conduct for directors and executive officers. Stockholders may request free printed copies of our Certificate of Incorporation, Bylaws, Standards of Business Conduct, Corporate Governance Guidelines and charters of the committees of the Board by contacting:
Hewlett-Packard CompanyAttention: Investor Relations3000 Hanover StreetPalo Alto, California 94304(866) 869-5335www.hp.com/investor/home
The Board is currently led by Ralph V. WhitworthHewlett-Packard Company’s former Chief Executive Officer, Margaret C. Whitman as the non-executive Chairman of the Board. Because Ms. Whitman is not independent due to her serving as Hewlett-Packard Company’s Chief Executive Officer, the independent directors of the Board on an interim basis. This reflectshave appointed Rajiv L. Gupta to serve as our Lead Independent Director of the Board's preferred governance structure of a separate Chairman and CEO, but the Board's leadership structure may vary in the future as circumstances warrant.Board. The Board believes that this structure best servesappointment of a Lead Independent Director ensures that HP benefits from effective oversight by its independent directors.
Our non-executive Chairman and Lead Independent Director have the interestsfollowing responsibilities, as detailed in the Board’s Corporate Governance Guidelines:
Duties & Responsibilities | ||
Non-Executive Chairman | Lead Independent Director | |
• oversees the planning of the annual Board of Directors calendar | • presides at all meetings of the Board of Directors at which the Chairman is not present | |
• in consultation with the CEO, the Lead Independent Director and the other directors, schedules and sets the agenda for meetings of the Board of Directors and chairs and leads the discussion at such meetings | • has the authority to call meetings of the independent directors and schedules, sets the agenda for and presides at executive sessions of the independent directors | |
• chairs HP’s annual meetings of stockholders | • serves as a liaison between the Chairman and the independent directors | |
• is available in appropriate circumstances to speak on behalf of the Board of Directors | • approves information sent to the Board of Directors | |
• provides guidance and oversight to management | • approves Board of Directors meeting agendas and schedules to assure that there is sufficient time to cover all agenda items | |
• helps with the formulation and implementation of HP’s strategic plan | • assists the Chairs of the Board committees in preparing agendas for the respective committee meetings | |
• serves as the Board liaison to management | • is available for consultation and direct communication with major stockholders upon request | |
• work with the HR and Compensation Committee to coordinate the annual performance evaluation of the CEO | ||
• work with the NGSR Committee to oversee the Board of Directors and committee evaluations and recommend changes to improve the Board of Directors, the committees and individual director effectiveness | ||
• perform such other functions and responsibilities as set forth in the Corporate Governance Guidelines or as requested by the Board of Directors from time to time |
The Board, with the assistance of stockholders because it allows our CEO to focus primarily on our business strategy and operations, while leveraging the experience of the Chairman. In connection with Mr. Whitworth's designation as an independent, non-executive Chairman
committees of the Board as discussed below, reviews and oversees our enterprise risk management (“ERM”) program, which is an enterprise-wide program designed to enable effective and efficient identification of, and management visibility into, critical enterprise risks and to facilitate the incorporation of risk considerations into decision making. The ERM program was established to clearly define risk management roles and responsibilities, bring together senior management to discuss risk, promote visibility and constructive dialogue around risk at the senior management and Board levels and facilitate appropriate risk response strategies. Under the ERM program, management develops a holistic portfolio of our enterprise risks by facilitating business and function risk assessments, performing targeted risk assessments and incorporating information regarding specific categories of risk gathered from various internal HP organizations. Management then develops risk response plans for risks categorized as needing management focus and response and monitors other identified risk focus areas. Management provides regular reports on an interim basis, the risk portfolio and risk response efforts to senior management and to the Audit Committee.
The Board eliminated the role of Lead Independent Director effective April 4, 2013. Rajiv L. Gupta served as Lead Independent Director from November 2011 until April 2013, and he continues to serve as a memberoversees management’s implementation of the Board.
The Chairman presides at all meetings of the Board,ERM program, including at executive sessions of the independent directors. The Chairman, with the CEOreviewing our enterprise risk portfolio and in consultation with the other directors, schedules and sets the agenda for meetings of the Board. The Chairman oversees the planning of the annual Board calendar, approves information sentevaluating management’s approach to the Board and assists the Chairs of theaddressing identified risks. Various Board committees in preparing agendasalso have responsibilities for oversight of risk management that supplement the respective committee meetings. In addition, the Chairman provides guidance and oversight to management, helps with the formulation and implementation of our strategic plans and actsERM program as the Board's liaison to management. The Chairman also has the authority to call additional executive sessions of the independent directors and to encourage direct dialogue between all directors and management. The Chairman also chairs our annual meeting of stockholders, is available to speak on behalf of the Board in limited circumstances, and performs such other functions and responsibilities as set forth in our Corporate Governance Guidelines or as requested by the Board from time to time.follows:
BOARD:
ü Stays Informed of Our Risk Profile
ü Considers Risk In Connection with Strategic Planning and Other Matters
Audit | Finance, Technology | HR and Compensation | Nominating, Governance and Social Responsibility | |||||||||||||
ü Risk oversight | ü Financial risks | ü Compensation risks and practices | ü | Risks associated with governance structure and processes |
Board StructureCommittees and Committee Composition
In July 2013, the Board approved an amendment to our Bylaws increasing the number of directors on the Board from nine to 12. As of the date of this proxy statement, the Board has 1213 directors and the following fivefour standing committees: (1) Audit;Audit Committee; (2) Finance, Investment and Investment;Technology Committee; (3) HRHRC Committee; and Compensation (the "HRC Committee"); (4) Nominating, Governance and Social Responsibility (the "NGSR Committee"); and (5) Technology.NGSR Committee. The current committee membership the number of meetings held during the last fiscal year and the function of each of these standing committees are described below. Each of the standing committees operates under a written charter adopted by the Board. All of the committee charters are available on our website atwww.hp.com/investor/board_charters. The Board and each of the committees hashave the authority to retain, terminate and receive appropriate funding from us for outside advisors as the Board and/or each committee deems necessary.
Current Committees Memberships* | ||||||||
Name | Audit | Finance, Investment and Technology Committee | HR and Compensation | Nominating, Governance and Social Responsibility | ||||
Independent Directors | ||||||||
Aida M. Alvarez | ||||||||
Shumeet Banerji | ||||||||
Carl Bass | ||||||||
Robert R. Bennett | ||||||||
Charles V. Bergh | ||||||||
Stacy Brown-Philpot | ||||||||
Stephanie A. Burns | ||||||||
Mary Anne Citrino | ||||||||
Rajiv L. Gupta | ||||||||
Stacey Mobley | ||||||||
Subra Suresh | ||||||||
Other Directors | ||||||||
Dion J. Weisler | ||||||||
Margaret C. Whitman |
* | Committee memberships |
— Member
— Chairperson
— Audit Committee “financial expert”
During fiscal 2013,2015 and prior to Hewlett-Packard Company’s separation into two companies, the Board held nine16 meetings, sixseven of which included executive sessions. Each incumbent director serving during fiscal 20132015 attended at least 75% of the aggregate of all Board and applicable committee meetings held during the period that he or she served as a director.
Table During fiscal 2015, we had the following five standing committees, which held the number of Contentsmeetings indicated in parenthesis during fiscal 2015: Audit Committee (15); Finance and Investment Committee (11); Technology Committee (8); HRC Committee (10); and NGSR Committee (16).
Directors are encouraged to attendparticipate in our annual meeting of stockholders. Of the 11 then-current directors, nine attended theAt our last annual meeting on March 18, 2015, 11 of stockholders, all of whom were standing for election at thatour then-current directors attended the meeting.
| ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
Name of Director | Audit | Finance and Investment | HR and Compensation | Nominating, Governance and Social Responsibility | Technology | |||||
Non-Employee Directors | ||||||||||
Marc L. Andreessen | Member | * | * | Chair | ||||||
Shumeet Banerji | Member | Member | Member | |||||||
Robert R. Bennett(1) | Member | Member | ||||||||
Rajiv L. Gupta(2) | Chair | Member | ||||||||
Raymond J. Lane(3) | Member | Member | ||||||||
Raymond E. Ozzie(4) | Member | Member | ||||||||
Gary M. Reiner | * | * | Chair | Member | ||||||
Patricia F. Russo | Chair | Member | * | |||||||
James A. Skinner(5) | Member | Member | Member | |||||||
Ralph V. Whitworth(6) | Chair | Member | Member | |||||||
Employee Directors | ||||||||||
Ann M. Livermore | Member | Member | ||||||||
Margaret C. Whitman | ||||||||||
Former Directors | ||||||||||
John H. Hammergren(7) | * | * | ||||||||
G. Kennedy Thompson(7) | * | * | * | |||||||
Number of Meetings in Fiscal 2013 | 14 | 7 | 8 | 11 | 5 |
Audit Committee
We have an Audit Committee established in accordance with Section 3(a)(58)(A)the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”). The Audit Committee represents and assists the Board in fulfilling its responsibilities for overseeing our financial reporting processes and the audit of our financial statements, including the integritystatements. Specific duties and responsibilities of our financial statements, our compliance with legal and regulatory requirements, the qualifications, independence and performance of the independent registered public accounting firm, the performance of our internal audit function, and risk assessment and risk management. The Audit Committee is directly responsible for appointing, overseeing the work of, and evaluating and determining the compensation of the independent registered public accounting firm. The Audit Committee also, among other things, prepares the Audit Committee report for inclusion in the annual proxy statement; annually reviews its charter and performance; reviews and approves the scope of the annual audit, the audit fee and the financial statements; reviews our disclosure controls and procedures, internal controls, information security policies, internal audit function, and corporate policies with respect to financial information and earnings guidance; reviews regulatory and accounting initiatives and off-balance sheet structures; oversees our compliance programs with respect to legal and regulatory requirements; oversees investigations into complaints concerning the federal securities laws; and reviews risks facing HP and management's approach to addressing these risks, including significant risks or exposures relating to litigation andinclude, among other proceedings and regulatory matters that may have a significant impact on our financial statements, and discusses policies with respect to risk assessment and risk management. The Audit Committee works closely with management as well asthings:
Independent Registered Public Accounting Firm | ü | appointing, overseeing the work of, evaluating and compensating the independent registered public accounting firm; | ||
ü | discussing with the public accounting firm relationships with HP and its independence; | |||
ü | overseeing the rotation of the independent registered public accounting firm’s lead audit and concurring partners at least once every five years and the rotation of other audit partners at least once every seven years in accordance with SEC regulations; and | |||
ü | determining whether to retain or, if appropriate, terminate the independent registered public accounting firm.
| |||
Audit and Non-Audit Services; Financial Statements; Audit Report | ü | reviewing and approving the scope of the annual audit, the audit fee and the financial statements; | ||
ü | preparing the Audit Committee report for inclusion in the annual proxy statement; and | |||
ü | overseeing our financial reporting processes and the audit of our financial statements, including the integrity of our financial statements. | |||
Disclosure Controls; Internal Controls & Procedures; Legal Compliance | ü | reviewing our disclosure controls and procedures, internal controls, information security policies, internal audit function, and corporate policies with respect to financial information and earnings guidance; and | ||
ü | overseeing compliance with legal and regulatory requirements. | |||
Risk Oversight | ü | reviewing risks facing HP and management’s approach to addressing these risks, including significant risks or exposures relating to litigation and other proceedings and regulatory matters that may have a significant impact on our financial statements; and | ||
ü | discussing policies with respect to risk assessment and risk management and overseeing our compliance programs with respect to legal and regulatory requirements. | |||
Related Party Transactions | ü | overseeing relevant related party transactions governed by applicable accounting standards (other than related-person transactions addressed by the NGSR committee). | ||
Annual Review/Evaluation | ü | annually reviewing the Committee’s charter and performance. |
The Board determined that each of Mr. Gupta,Ms. Citrino, chair of the Audit Committee and each of other Audit Committee members Mr. Banerji, Mr.(Mr. Bennett, Ms. Brown-Philpot, Ms. Burns and Mr. SkinnerSuresh) is independent within the meaning of the New York Stock Exchange ("NYSE"(“NYSE”) and SEC standards of independence for directors and audit committee members and has satisfied the NYSE financial literacy requirements. The Board also determined that each of Mr. Bennett, Ms. Burns, Ms. Citrino and Mr. Suresh is an “audit committee financial expert” as defined by the SEC rules.
The Board has also determined that each of Mr. Gupta, who served as chair of the Audit Committee during fiscal 2015, and each of Mr. Banerji and Mr. Skinner, who served as Audit Committee members during fiscal 2015, was independent within the meaning of the New York Stock Exchange (“NYSE”) and SEC standards of independence for directors and audit committee members and has satisfied the NYSE financial literacy requirements. The Board also determined that each of them iswas an "audit“audit committee financial expert"expert” during fiscal 2015 as defined by the SEC rules.
The report of the Audit Committee is included on page 98.87.
Finance, Investment and InvestmentTechnology Committee
The Finance and Investment Committee provides oversight to the finance and investment functions of HP. The Finance and Investment Committee’s responsibilities and duties include, among other things:
Treasury Matters | ü | reviewing or overseeing significant treasury matters such as capital structure and allocation strategy, derivative policy, global liquidity, fixed income investments, borrowings, currency exposure, dividend policy, share issuances and repurchases, and capital spending. | ||
M&A Transactions & Strategic Alliances | ü | assisting the Board in evaluating investment, acquisition, enterprise services, joint venture and divestiture transactions in which we engage as part of our business strategy from time to time and reporting and making recommendations to the Board as to scope, direction, quality, investment levels and execution of such transactions; | ||
ü | evaluating and revising our approval policies with respect to such transactions; | |||
ü | overseeing our integration planning and execution and the financial results of such transactions after integration; | |||
ü | evaluating the execution, financial results and integration of our completed transactions; and | |||
ü | overseeing and approving our strategic alliances. | |||
Capitalization; Debt & Obligations; Swaps | ü | reviewing our financial services’ capitalization and operations, including residual and credit management, risk concentration, and return on invested capital; | ||
ü | overseeing our loans and loan guarantees of third-party debt and obligations; and | |||
ü | annually reviewing and approving certain swaps and other derivative transactions. | |||
Technology Strategies & Guidance | ü | making recommendations to the Board as to scope, direction, quality, investment levels and execution of our technology strategies; | ||
ü | overseeing the execution of technology strategies formulated by management; and | |||
ü | providing guidance on technology as it may pertain to, among other things, market entry and exit, investments, mergers, acquisitions and divestitures, new business divisions and spin-offs, research and development investments, and key competitor and partnership strategies. |
Nominating, Governance and Social Responsibility Committee
The NGSR Committee reviews or oversees, significant treasury matters such as capital structure and allocation strategy, derivative policy, global liquidity, fixed income investments, borrowings, currency exposure, dividend policy, share issuancesrepresents and repurchases, and capital spending; oversees our loans and loan guarantees of third-party debt and obligations; reviews our Financial Services' capitalization and operations, including residual and credit management, risk concentration, and return on invested capital; and reviews the activities of our Investor Relations department. The Finance and Investment Committee also assists the Board (and management, as applicable) in evaluating investment, acquisition, enterprise services, joint venturefulfilling its responsibilities relating to, our corporate governance, director nominations and divestiture transactions in which we engage as part of our business strategy from timeelections, HP’s policies and programs relating to time and reports and makes recommendations to the Board as to scope, direction, quality, investment levels and execution of such transactions; evaluates and revises our approval policies with respect to such transactions; oversees our integration planning and execution and the financial results of such transactions after integration; evaluates the execution, financial results and integration of our completed transactions; annually review and approve certain swapsglobal citizenship and other derivative transactions;legal, regulatory and overseescompliance matters relating to current and approves our strategic alliances.
Tableemerging political, environmental, global citizenship and public policy trends. Specific duties and responsibilities of Contentsthe NGSR Committee include, among other things:
Board Matters | ü | developing and recommending to the Board the criteria for identifying and evaluating director candidates and periodically reviewing these criteria; | ||
ü | identifying and recommending candidates to be nominated for election as directors at our annual meeting, consistent with criteria approved by the Board; | |||
ü | annually assessing the size, structure, functioning and composition of the Board and recommending assignments of directors to Board committees and chairs of Board committees; | |||
ü | identifying and recruiting new directors, establishing procedures for the consideration of director candidates recommended by stockholders and considering candidates proposed by stockholders; | |||
ü | assessing the qualifications, contributions and independence of directors in determining whether to recommend them for election or reelection to the Board; and | |||
ü | periodically reviewing the Board’s leadership structure, recommending changes to the Board as appropriate, and making a recommendation to the independent directors regarding the appointment of the Lead Independent Director. | |||
HP Governing Documents & Corporate Governance Guidelines & Other Policies | ü | developing and regularly reviewing corporate governance principles, including our Corporate Governance Guidelines; | ||
ü | reviewing proposed changes to our Certificate of Incorporation, Bylaws and Board committee charters; and | |||
ü | establishing policies and procedures for the review and approval of related-person transactions and conflicts of interest, including the reviewing and approving all potential “related-person transactions” as defined under SEC rules. | |||
Stockholder Rights | ü | assessing and making recommendations regarding stockholder rights plans or other stockholder protections, as appropriate; and | ||
ü | reviewing stockholder proposals and recommending Board responses. | |||
Public Policy Trends & Issues | ü | identifying, evaluating and monitoring social, political and environmental trends, issues, concerns, legislative proposals and regulatory developments that could significantly affect the public affairs of HP; and | ||
ü | reviewing, assessing, reporting and providing guidance to management and the full Board relating to activities, policies and programs with respect to public policy matters and policies and programs relating to global citizenship, as applicable. |
Annual Review/Evaluation | ü | annually reviewing the Committee’s charter and performance; | ||
ü | overseeing the annual self-evaluation of the Board and its committees; and | |||
ü | overseeing the annual evaluation of the CEO in conjunction with the HRC Committee and, with input from all Board members and the HRC Committee’s evaluation of senior management. |
The Board determined that each of Mr. Banerji, who currently serves as chair of the NGSR Committee, Mr. Bergh, Mr. Gupta, Mr. Mobley and Ms. Brown-Philpot (who are the current NGSR Committee members) is independent within the meaning of the NYSE director independence standards. The Board also determined that each of Mr. Reiner, who served as chair of the NGSR Committee during fiscal 2015, Mr. Kleinfeld and Mr. Russo (who were NGSR Committee members during fiscal 2015 ) was independent within the meaning of the NYSE director independence standards.
HR and Compensation Committee
The HRC Committee discharges the Board'sBoard’s responsibilities relating to the compensation of our executives and directors; reviewsdirectors and approves the Compensation Discussion and Analysis required by the SEC for inclusion in the annual proxy statement; provides general oversight of our total rewards compensation structure; reviewsstructure, including our equity compensation plans and provides guidance on our human resources programs; and retains and approves retention terms of the HRC Committee's compensation consultants and other compensation experts. Other specificbenefits programs. Specific duties and responsibilities of the HRC Committee include, reviewing senior management selection and overseeing succession planning, including reviewing the leadership development process; reviewing and approving objectives relevant to executive officer compensation and evaluating performance and determining the compensation of executive officers in accordance with those objectives; approving severance arrangements andamong other applicable agreements and policies for executive officers; overseeing our equity and incentive compensation plans; overseeing non-equity-based benefit plans and approving any changes to such plans involving a material financial commitment by HP; monitoring workforce management programs; establishing compensation policies and practices for service on the Board and its committees, including annually reviewing the appropriate level of director compensation and recommending to the Board any changes to that compensation; adopting and monitoring compliance with stock ownership guidelines and policies for directors and executive officers; annually assessing whether the work of compensation consultants has raised any conflict of interest; and annually evaluating its performance and its charter. The HRC Committee may create a subcommittee consisting of one or more of its members and may delegate any of its duties and responsibilities to such subcommittee, unless otherwise prohibited by applicable laws or listing standards. In addition, the HRC Committee may delegate any of its duties and responsibilities, including the administration of equity incentive or employee benefit plans, to one or more of its members, to one or more other directors, or to one or more other persons, unless otherwise prohibited by applicable laws or listing standards.things:
Executive Compensation, Stock Ownership and Performance Reviews | ü | recommending all elements of the CEO’s compensation to the independent members of the Board; | ||
ü | reviewing and approving objectives relevant to other executive officer compensation and evaluating performance and determining the compensation of other executive officers in accordance with those objectives; | |||
ü | approving severance arrangements and other applicable agreements and policies for executive officers; and | |||
ü | adopting and monitoring compliance with stock ownership guidelines and policies for executive officers. | |||
Equity Compensation Plans, Incentive Plans and Other Employee Benefit Plans | ü | overseeing non-equity-based benefit plans and approving any changes to such plans involving a material financial commitment by HP; and | ||
ü | monitoring the effectiveness of non-equity based benefit plan offerings, including but not limited to non-qualified deferred compensation, fringe benefits and any perquisites, in particular those pertaining to Section 16 Officers, and approving any material new employee benefit plan or change to an existing plan that creates a material financial commitment by HP. | |||
Director Compensation & Stock Ownership | ü | establishing compensation policies and practices for service on the Board and its committees, including annually reviewing the appropriate level of director compensation and recommending to the Board any changes to that compensation; and | ||
ü | adopting and monitoring compliance with stock ownership guidelines and policies for directors. | |||
Executive Succession Planning & Leadership Development | ü | reviewing senior management selection and overseeing succession planning, including reviewing the leadership development process. |
Compensation Consultants | ü | assessing the independence of all advisors (whether retained by the Committee or management) that provide advice to the Committee, in accordance with applicable listing standards; and | ||
ü | annually assessing whether the work of compensation consultants has raised any conflict of interest. | |||
Risk Assessment; Other Disclosure | ü | overseeing, approving, and evaluating HP’s overall human resources and compensation structure, policies and programs, and assessing whether these establish appropriate incentives and leadership development opportunities for management and other employees, and confirming they do not encourage risk taking that is reasonably likely to have a material adverse effect on HP; | ||
ü | reviewing and discussing with management the Compensation Discussion and Analysis and performing other reviews and analyses and making additional disclosures as required of compensation committees by the rules of the SEC or applicable exchange listing requirements; and | |||
ü | reviewing the results of stockholder advisory votes on HP’s executive compensation program and recommending to the Board or the Nominating, Governance and Social Responsibility Committee how to respond to such votes. | |||
Annual Review/Evaluation | ü | annually evaluating Committee’s performance and its charter. |
The Board determined that each of Ms. Russo,Mr. Gupta, who currently serves as chair of the HRC Committee, Mr. Bass, Mr. Bergh and theMr. Mobley (who are current HRC Committee Members, Mr. Banerji, Mr. Skinner and Mr. Whitworth,members) is independent within the meaning of the NYSE standards of independence for directors and compensation committee members. The Board also determined that each of Ms. Russo, who served as chair of the HRC Committee during fiscal 2015, and each of the HRC Committee members during fiscal 2015 (Mr. Gupta and Mr. Skinner) was independent within the meaning of the NYSE standards of independence for directors and compensation committee members.
Compensation Committee Interlocks and Insider Participation
Ms. Russo and Messrs. Gupta and Skinner served on our HRC Committee during fiscal 2015. No person who served as a member of the HRC Committee during fiscal 20132015 was or is an officer or employee of HP. During fiscal 2013,2015, none of our executive officers served on the board of directors or on the compensation committee of any other entity, any officers of which served either on our Board or on our HRC Committee.
Nominating, Governance and Social Responsibility Committee
The NGSR Committee identifies and recommends candidates to be nominated for election as directors at our annual meeting, consistent with criteria approved by the Board; develops and regularly reviews corporate governance principles, including our Corporate Governance Guidelines and related policies, for approval by the Board; oversees the organization of the Board to discharge the Board's duties and responsibilities properly and efficiently; and sees that proper attention is given and effective responses are made to stockholder concerns regarding corporate governance matters. Other specific duties and responsibilities of the NGSR Committee include annually assessing the size and composition of the Board, including developing and reviewing director qualifications for approval by the Board; identifying and recruiting new directors and considering candidates proposed by stockholders; recommending assignments of directors to Board committees; conducting a review of director independence and financial literacy and expertise of Audit Committee members; and overseeing director orientation and continuing education. The NGSR Committee also reviews proposed changes to
our Certificate of Incorporation, Bylaws and Board committee charters; assesses and makes recommendations regarding stockholder rights plans or other stockholder protections, as appropriate; establishes policies and procedures for the review and approval of related-person transactions and conflicts of interest, including the review and approval of all potential "related-person transactions" as defined under SEC rules; reviews and approves the designation of any employee directors or executive officers for purposes of Section 16 of the Exchange Act (the "Section 16 officers") standing for election for outside for-profit boards of directors; reviews stockholder proposals and recommends Board responses; oversees the annual self-evaluation of the Board and its committees; oversees the annual evaluation of the CEO conducted by Chairman, in conjunction with the HRC Committee, with input from all Board members; oversees the HRC Committee's evaluation of senior management; and reviews requests for indemnification under our Bylaws. In addition, the NGSR Committee identifies, evaluates and monitors social, political and environmental trends, issues, concerns, legislative proposals and regulatory developments that could significantly affect the public affairs of HP; reviews, assesses, reports and provides guidance to management and the full Board relating to activities, policies and programs with respect to public policy matters; may review, assess, report and provide guidance to management the Board regarding our policies and programs relating to global citizenship (which includes, among other things, human rights, privacy, sustainability and corporate social responsibility) and the impact of our operations on employees, customers, suppliers, partners and communities worldwide, as well as review our annual Global Citizenship Report; and oversees the HP Political Action Committee and the policies relating to, and the manner in which we conduct, our government affairs activities.
Technology Committee
The Technology Committee assesses the health of our technology strategies and the scope and quality of our intellectual property. The Technology Committee makes recommendations to the Board as to scope, direction, quality, investment levels and execution of our technology strategies; oversees the execution of technology strategies formulated by management; provides guidance on technology as it may pertain to, among other things, market entry and exit, investments, mergers, acquisitions and divestitures, new business divisions and spin-offs, research and development investments, and key competitor and partnership strategies; and reviews and makes recommendations on proposed investment, acquisition, joint venture and divestiture transactions with a value of at least $200 million that involve technology pursuant to our mergers and acquisitions approval policies.
The Board, with the assistance of committees of the Board as discussed below, reviews and oversees our enterprise risk management ("ERM") program, which is an enterprise-wide program designed to enable effective and efficient identification of and management visibility into critical enterprise risks and to facilitate the incorporation of risk considerations into decision making. The ERM program was established to clearly define risk management roles and responsibilities, to bring together senior management to discuss risk, promote visibility and constructive dialogue around risk at the senior management and Board levels, and to facilitate appropriate risk response strategies. Under the ERM program, management develops a holistic portfolio of our enterprise risks by facilitating business and function risk assessments, performing targeted risk assessments, and incorporating information regarding specific categories of risk gathered from various internal HP organizations. Management then develops risk response plans for risks categorized as needing management focus and response and monitors other identified risk focus areas. Management provides regular reports on the risk portfolio and risk response efforts to senior management and to the Audit Committee.
The Board oversees management's implementation of the ERM program, including reviewing our enterprise risk portfolio and evaluating management's approach to addressing identified risks. Various other committees of the Board also have responsibilities for oversight of risk management that supplement the ERM program. For example, the HRC Committee considers the risks associated with our compensation policies and practices as discussed below, the Finance and Investment Committee is responsible for overseeing financial risks, and the NGSR Committee oversees risks associated with our governance structure and processes. The Board is kept informed of its committees' risk oversight and related activities primarily through reports of the committee chairmen to the full Board. In addition, the Audit Committee escalates issues relating to risk oversight to the full Board as appropriate to keep the Board appropriately informed of developments that could affect our risk profile or other aspects of our business. The Board also considers specific risk topics in connection with strategic planning and other matters.
Compensation Risk Assessment
During fiscal 2013,2015, we undertook a review of our material compensation processes, policies and programs for all employees and determined that our compensation programs and practices are not reasonably likely to have a material adverse effect on HP. In conducting this assessment, we reviewed our compensation risk infrastructure, including our material plans, our risk control systems and governance structure, the design and oversight of our compensation programs and the developments, improvements and other changes made to those programs since fiscal 2012,2014, and presented a summary of the findings to the HRC Committee. Overall, we believe that our programs generally contain aan appropriate balance of fixed and variable features and short- and long-term incentives, as well as complementary metrics and reasonable, performance-based goals with linear payout curves under most plans. We believe that these factors, combined with effective Board and management oversight, operate to mitigate risk and reduce the likelihood of employees engaging in excessive risk-taking behavior with respect to the compensation-related aspects of their jobs.
Director Independence
Executive Sessions
Our Corporate Governance Guidelines provide that a substantial majority of the Board will consist of independent directors and that the Board can include no more than three directors who are not independent directors. These standards are available on our website atwww.hp.com/investor/director_standards. Our director independence standards reflect the NYSE corporate governance listing standards. In addition, each member of the Audit Committee meets the heightened independence standards required for audit committee members under the applicable listing standards and each member of the HRC Committee meets the heightened independence standards required for compensation committee members under the applicable listing standards.
Under our Corporate Governance Guidelines, a director will not be considered independent in the following circumstances:
direct compensation from HP, other than compensation for Board service, compensation received by a director's immediate family member for service as a
non-executive employee of HP, and pension or other forms of deferred compensation for prior service with HP that is not contingent on continued service.
For these purposes, an "immediate family member" includes a director's spouse, parents, step-parents, children, step-children, siblings, mother-in-law, father-in-law, sons-in-law, daughters-in-law, brothers-in-law, sisters-in-law, and any person (other than tenants or employees) who shares the director's home.
In determining independence, the Board reviews whether directors have any material relationship with HP. An independent director must not have any material relationship with HP, either directly or as a partner, stockholder or officer of an organization that has a relationship with HP, nor any relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In assessing the materiality of a director's relationship to HP, the Board considers all relevant facts and circumstances, including consideration of the issues from the director's standpoint and from the perspective of the persons or organizations with which the director has an affiliation, and is guided by the standards set forth above.
In making its independence determinations, the Board considered transactions occurring since the beginning of fiscal 2011 between HP and entities associated with the independent directors or their immediate family members. The Board's independence determinations included consideration of the following transactions:
amount received in each fiscal year by HP from each company, did not, in any of the previous three fiscal years, exceed the greater of $1 million or 2% of the recipient's consolidated gross revenues.
As a result of this review, the Board has determined the transactions described above would not reasonably impair the director's ability to act in our stockholders' best interest. The Board has also determined that, with the exception of Mr. Lane, each current non-employee director, including Mr. Andreessen, Mr. Banerji, Mr. Bennett, Mr. Gupta, Mr. Ozzie, Mr. Reiner, Ms. Russo, Mr. Skinner and Mr. Whitworth, and each of the members of the Audit Committee, the HRC Committee and the NGSR Committee, has no material relationship with HP (either directly or as a partner, stockholder or officer of an organization that has a relationship with HP) and is independent within the meaning of our director independence standards. In addition, the Board has determined that Mr. Hammergren and Mr. Thompson, each of whom served on the Board during fiscal 2013, were independent directors. The Board has determined that Mr. Lane is not independent because of his former role as executive Chairman, Ms. Livermore is not independent because she is an employee of HP and was an executive officer of HP within the last five fiscal years, and Ms. Whitman is not independent because of her status as our current President and CEO.
During fiscal 2013,2015, the directors met in executive session sixseven times of which five included an additional executive session of the non-management directors and at least one included an additional executive session of only the independent directors. Mr. Gupta, who was serving as Lead Independent Director, scheduled and chaired each executive session held prior to April 4, 2013. In connection with the designation of Mr. Whitworth as anAs lead independent non-executive Chairman of the Board, the Board eliminated the role of Lead Independent Director effective April 4, 2013. Thereafter, Mr. Whitworthdirector, Ms. Russo scheduled and chaired each executive session held during the remainder of fiscal 2013.2015. Any independent director may request that an additional executive session be scheduled.
Stockholder Recommendations
The policy of the NGSR Committee is to consider properly submitted stockholder recommendations of candidates for membership on the Board as described below under "Identifying
and Evaluating Candidates for Directors." In evaluating such recommendations, the NGSR Committee seeks to achieve a balance of knowledge, experience and capability on the Board and to address the membership criteria set forth below under "Proposal No. 1 Proposals to be Voted on—Election of Directors—Director Nominee Experience and Qualifications." Any stockholder recommendations submitted for consideration by the NGSR Committee should include verification of the stockholder status of the person submitting the recommendation and the recommended candidate's name and qualifications for Board membership and should be addressed to:
Corporate SecretaryHewlett-Packard Company3000 Hanover StreetPalo Alto, California 94304Fax: (650) 857-4837
Stockholder Nominations
In addition, our Bylaws permit stockholders to nominate directors for consideration at an annual stockholder meeting and, under certain circumstances, to include their nominees in the HP proxy statement. For a description of the process for nominating directors in accordance with our Bylaws, see "Questions and Answers—Stockholder Proposals, Director Nominations and Related Bylaw Provisions—How may I recommend individuals to serve as directors and what is the deadline for a director recommendation?"
Identifying and Evaluating Candidates for Directors
The NGSR Committee uses a variety of methods for identifying and evaluating nominees for director. The NGSR Committee, in consultation with the Chairman, regularly assesses the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the NGSR Committee considers various potential candidates for director. Candidates may come to the attention of the NGSR Committee through current Board members, professional search firms, stockholders or other persons. Identified candidates are evaluated at regular or special meetings of the NGSR Committee and may be considered at any point during the year. As described above, the NGSR considers properly submitted stockholder recommendations of candidates for the Board to be included in our proxy statement. Following verification of the stockholder status of individuals proposing candidates, recommendations are considered collectively by the NGSR Committee at a regularly scheduled meeting, which is generally the first or second meeting prior to the issuance of the proxy statement for our annual meeting. If any materials are provided by a stockholder in connection with the nomination of a director candidate, such materials are forwarded to the NGSR Committee. The NGSR Committee also reviews materials provided by professional search firms and other parties in connection with a nominee who is not proposed by a stockholder. In evaluating such nominations, the NGSR Committee seeks to achieve a balance of knowledge, experience and capability on the Board.
We engage a professional search firm on an ongoing basis to identify and assist the NGSR Committee in identifying, evaluating and conducting due diligence on potential director nominees. The three directors who joined the Board since the last annual meeting of stockholders, Mr. Bennett was identified by a stockholder, Mr. Ozzie was identified by a director and Mr. Skinner was identified by a professional search firm.
Board Policy Regarding Voting for Directors
Our Bylaws provide for a majority vote standard in the election of directors, meaning that, for a nominee to be elected, the number of shares voted "for" the nominee must exceed the votes cast "against" the nominee's election. In addition, we have adopted a policy whereby any incumbent director nominee who receives a greater number of votes "against" his or her election than votes "for" such election will tender his or her resignation for consideration by the NGSR Committee. The NGSR Committee will recommend to the Board the action to be taken with respect to such offer of resignation.
Individuals may communicate with the Board by contacting:
Secretary to the Board of Directors3000 Hanover Street, MS 1050
1501 Page Mill Road
Palo Alto, California 94304
e-mail: bod@hp.com
All directors have access to this correspondence. In accordance with instructions from the Board, the Secretary to the Board reviews all correspondence, organizes the communications for review by the Board and posts communications to the full Board or to individual directors, as appropriate. Our independent directors have requested that certain items that are unrelated to the Board'sBoard’s duties, such as spam, junk mail, mass mailings, solicitations, resumes and job inquiries, not be posted.
Communications that are intended specifically for the Chairman of the Board, the Lead Independent Director, other independent directors or the non-employee directors should be sent to the e-mail address or street address noted above, to the attention of the Chairman of the Board.
TableRATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of Contentsthe Board has appointed, and as a matter of good corporate governance, is requesting ratification by the stockholders of Ernst & Young LLP as the independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending October 31, 2016. During fiscal 2015, Ernst & Young LLP served as our independent registered public accounting firm and also provided certain other audit-related and tax services. See “Principal Accounting Fees and Services” and “Report of the Audit Committee of the Board of Directors” below. Representatives of Ernst & Young LLP are expected to participate in the annual meeting, where they will be available to respond to appropriate questions and, if they desire, to make a statement.
Vote Required
Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the 2016 fiscal year requires the affirmative vote of a majority of the shares of HP common stock present in person or represented by proxy and entitled to be voted at the annual meeting. If the appointment is not ratified, the Board will consider whether it should select another independent registered public accounting firm.
Recommendation of the Board of Directors
Our Board recommends a vote FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the 2016 fiscal year.
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
In accordance with SEC rules, our stockholders are being asked to approve, on an advisory or non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement.
Our Board and the HRC Committee are committed to excellence in corporate governance and to executive compensation programs that align the interests of our executives with those of our stockholders. To fulfill this mission, we have a pay-for-performance philosophy that forms the foundation for decisions regarding compensation. Our compensation programs have been structured to balance near-term results with long-term success, and enable us to attract, retain, focus, and reward our executive team for delivering stockholder value. Please refer to “Executive Compensation—Compensation Discussion and Analysis—Executive Summary” for an overview of the compensation of our named executive officers.
Our Board and the HRC Committee believe that we have created a compensation program that is tied to performance, aligns with stockholder interests and merits stockholder support. Accordingly, we are asking for stockholder approval of the compensation of our named executive officers as disclosed in this proxy statement in the Compensation Discussion and Analysis, the compensation tables and the narrative discussion following the compensation tables.
Although this vote is non-binding, the Board and the HRC Committee value the views of our stockholders and will review the voting results. If there are significant negative votes, we will take steps to understand those concerns that influenced the vote, and consider them in making future decisions about executive compensation. We currently conduct annual advisory votes on executive compensation, and we expect to conduct the next advisory vote at our 2017 annual meeting of stockholders.
Vote Required
The affirmative vote of a majority of the shares of HP common stock present in person or represented by proxy and entitled to be voted on the proposal at the annual meeting is required for advisory approval of this proposal.
Recommendation of the Board of Directors
Our Board recommends a vote FOR the approval of the compensation of our named executive officers, including the Compensation Discussion and Analysis, the compensation tables and narrative discussion following such compensation tables, and the other related disclosures in this proxy statement.
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION TO ELIMINATE CUMULATIVE VOTING
The Board is proposing, for approval by our stockholders, an amendment to HP Inc.’s Certificate of Incorporation to eliminate cumulative voting in director elections.
Summary of Amendment
Under Delaware law, stockholders do not have the right to vote their shares cumulatively in any election of directors unless a company’s certificate of incorporation provides otherwise. Article VII of our Certificate of Incorporation currently expressly authorizes cumulative voting in all director elections. Cumulative voting enables a stockholder to concentrate his or her voting power by allocating to one candidate a number of votes equal to the number of directors to be elected, multiplied by the number of shares held by that stockholder, or to distribute those votes among two or more candidates. Consequently, a stockholder or group of stockholders holding a relatively small number of shares may be able to elect one or more directors by cumulating votes.
As amended, Article VII would eliminate cumulative voting in all elections of directors. The text of Article VII, as proposed to be amended, would read as follows (additions are indicated by underlining and deletions are indicated by strikeouts):
ARTICLE VII
At the election of directors of the Corporation, eachNo holder of stock of any class or series shall be entitled to cumulative voting rights as totheany election of directorsof the Corporation to be elected by each class or series in accordance with the provisions of Section 2.14 of the General Corporation Law of the State of Delaware.
Reasons for Amendment
The Board has determined that it is in the best interests of HP Inc. and its stockholders to eliminate cumulative voting in all director elections for the following reasons:
• | Annual Elections. Coupled with the annual election of directors, cumulative voting increases the chances that a minority stockholder could take disruptive actions in opposition to the wishes of the holders of a majority of the shares voting. |
• | Majority Voting. The Board has determined that cumulative voting is incompatible, and fundamentally at odds, with a majority vote standard because it allows relatively small stockholders to elect directors who are not supported by a majority of the Company’s stockholder base. The Company and the Board believe that each director should represent the interests of all stockholders rather than the interests of a minority stockholder or a special constituency and that cumulative voting could lead to directors having improper incentives. |
• | Proxy Access. When combined with the proxy access right which our stockholders have under our Bylaws, cumulative voting could produce adverse consequences. Cumulative voting increases the risk that minority stockholders with a small economic interest in the company could take advantage of the proxy access right to elect directors who are unsupported by a large percentage of the stockholders. Minority stockholders with special interests and goals inconsistent with those of the majority of stockholders could use the proxy access right coupled with cumulative voting to elect a director whose interests are in accord with the minority group responsible for his or her election, rather than with HP Inc. and all of its stockholders. The election of such directors could result in partisanship and discord on the Board and may impair the ability of the Board to act in the best interests of HP Inc. and all of its stockholders. |
• | Prevailing Practice. A system of one vote per share for each nominee is the prevailing election standard among large U.S. public companies, favored by a substantial majority of the companies in the S&P 500 and the Fortune 500. Very few publicly-traded companies continue to provide for cumulative voting in their governing documents. |
Accordingly, the Board views this Proposal No. 4 as an appropriate balancing measure in light of the annual elections of HP Inc.’s directors, the majority voting standard and proxy access provisions included in HP Inc.’s Bylaws. On February , 2016, the Board adopted a resolution approving and declaring advisable the proposed amendment to the Certificate of Incorporation and recommending that stockholders also approve the proposed amendment. If stockholders approve this Proposal No. 4, the amendment to the Certificate of Incorporation will become effective upon the filing of a certificate of amendment with the Delaware Secretary of State, which we anticipate doing as soon as practicable following stockholder approval.
Vote Required
Approval of the amendment to the Certificate of Incorporation to eliminate cumulative voting requires the affirmative vote of a majority of the outstanding shares of HP Inc. common stock entitled to be voted on the proposal at the annual meeting.
Recommendation of the Board of Directors
Our Board recommends a vote FOR approval of the amendment to the Certificate of Incorporation.
DIRECTOR COMPENSATION AND STOCK OWNERSHIP GUIDELINES
Employee directors do not receive any separate compensation for their Board activities. Non-employee director compensation is determined annually by the Board acting on the recommendation of the HRC Committee. In formulating its recommendation, the HRC Committee considers market data for our peer group and input from the third-party compensation consultant retained by the HRC Committee regarding market practices for director compensation. In fiscal 2013,2015, non-employee directors received the compensation described below.
Each non-employee director serving during fiscal 20132015 was entitled to receive an annual cash retainer of $100,000. Non-employee directors may elect to defer up to 50% of their annual cash retainer, and, inretainer. In lieu of the annual cash retainer, non-employee directors may elect to receive an equivalent amountvalue of securities.equity either entirely in restricted stock units (“RSUs”) or in equal values of RSUs and stock options.
Each non-employee director was also entitled to receivereceived an annual equity retainer of $175,000 for service during fiscal 2013.2015. Under special circumstances, the annual equity retainer may be paid in cash. No annual equity retainer was paid in cash during fiscal 2015. Typically, the annual equity retainer is paid at the election of the director either entirely in restricted stock units ("RSUs")RSUs or in equal amountsvalues of RSUs and stock options. Non-employee directors may elect to defer all or a portion of any RSUs received as an annual equity retainer; however, non-employee directors may not defer any stock options received as an annual equity retainer. The number of shares subject to the RSU awards is determined based on the fair market value of our stock on the grant date, and the number of shares subject to the stock option awards is determined as of the grant date based on a Black-Scholes-Merton option pricing formula. Non-employee directors are entitled to receive dividend equivalent units with respect to RSUs.RSUs, but not stock options. RSUs and stock options generally vest after one year from the date of grant. In addition, non-employee directors may elect to defer the settlement of all or a portion of any RSUs received in lieu of the annual cash retainer as part of the director compensation program; however, non-employee directors may not defer the settlement of any stock options received.
In fiscal 2015, the Board approved an annual retainer for the lead independent director in the amount of $35,000. In addition to the annual cash and equity retainers, the lead independent director and non-employee directors who served as chairs of standing committees during fiscal 20132015 received a retainer for such service in the amount of $20,000service. The Board also approved annual chair retainers as follows:
Each non-employee director also receives $2,000 for Board meetings attended in excess of ten meetings per Board term (which begins in March and ends the following February), and $2,000 for each committee meeting attended in excess of a total of ten meetings of each committee per Board term.
Non-employee directors are reimbursed for their expenses in connection with attending Board meetings (including expenses related to spouses when spouses are invited to attend Board events), and non-employee directors may use the company aircraft for travel to and from Board meetings and other company events. Each non-employee director also is eligible to participate in the product matching portion of the HP Employee Giving Program under which each non-employee director may contribute up to $100,000 worth of our products each year to a qualified charity by paying 25% of the list price of those products, with HP contributing the remaining cost.
Fiscal The following table provides information on compensation for directors who served during fiscal Name Marc L. Andreessen Shumeet Banerji Robert R. Bennett Rajiv L. Gupta Klaus Kleinfeld Raymond J. Lane Ann M. Livermore(4) Raymond E. Ozzie Gary M. Reiner Patricia F. Russo James A. Skinner Margaret C. Whitman(5)20132015 Director Compensation2013:2015: Fees Earned or
Paid in Cash(1)
($) Stock Awards(2)
($) Option
Awards(2)
($) All Other
Compensation(3)
($) Total
($) 22,990 274,998 — 49,780 347,768 4,000 274,998 — — 278,998 132,990 175,002 — — 307,992 142,983 87,501 87,502 24,601 342,587 43,219 137,516 137,500 — 318,235 10,000 274,998 — — 284,998 — — — — — 110,000 175,002 — — 285,002 30,990 137,516 137,500 — 306,005 170,962 175,002 — — 345,963 18,000 137,516 137,500 293,015 — — — — — (1) For purposes of determining director compensation, the term of office for directors begins in March and ends the following February, which does not coincide with our November through October fiscal year. Cash amounts included in the table above represent the portion of the annual retainers, committee chair fees, Lead Independent Director fees, non-executive Chairman of the Board fees and additional meeting fees earned with respect to service during fiscal 2015. See “Additional Information about Fees Earned or Paid in Cash in Fiscal 2015” below. (2) Represents the grant date fair value of stock options and stock awards granted in fiscal 2015 calculated in accordance with applicable accounting standards relating to share-based payment awards. For awards of RSUs, that amount is calculated by multiplying the closing price of HP’s stock on the date of grant by the number of units awarded. For option awards, that amount is calculated by multiplying the Black-Scholes-Merton value determined as of the date of grant by the number of options awarded. For information on the assumptions used to calculate the value of the stock awards, refer to Note 5 to our Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended October 31, 2015, as filed with the SEC on December 16, 2015. See “Additional Information about Non-Employee Director Equity Awards” below. (3) Amounts in this column represent the cost to HP of product donations made on behalf of non-employee directors. (4) Ms. Livermore was an employee of HP during fiscal 2015 and in that capacity performed various tasks and worked on special projects, including acting as an advisor and providing executive support to the CEO. Accordingly, Ms. Livermore did not receive any separate compensation for her Board service. However, Ms. Livermore was paid $850,033 in base salary, received bonuses totaling $1,062,500, received an increase in actuarial value of pension benefits during fiscal 2015 of $275,697 and received other compensation totaling $43,969 with respect to her employment with HP during fiscal 2015. Ms. Livermore also participated in HP’s benefit programs during fiscal 2015. (5) Ms. Whitman served as President and CEO of HP throughout fiscal 2015. Accordingly, she did not receive any compensation for her Board service.
Name | Fees Earned or Paid in Cash(1) ($) | Stock Awards(2) ($) | Option Awards(2) ($) | All Other Compensation(3) ($) | Total ($) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Marc L. Andreessen | 10,000 | 275,020 | — | — | 285,020 | ||||||||||
Shumeet Banerji | 2,000 | 275,020 | — | 798 | 277,818 | ||||||||||
Robert R. Bennett(4) | 29,863 | 109,818 | — | — | 139,681 | ||||||||||
Rajiv L. Gupta | 136,730 | 87,517 | 87,641 | 33,098 | 344,986 | ||||||||||
Raymond J. Lane(5) | — | 275,020 | — | — | 275,020 | ||||||||||
Ann M. Livermore(6) | — | — | — | — | — | ||||||||||
Raymond E. Ozzie(4) | 29,863 | 109,818 | — | — | 139,681 | ||||||||||
Gary M. Reiner | 11,708 | 137,510 | 137,719 | — | 286,937 | ||||||||||
Patricia F. Russo | 115,000 | 175,014 | — | — | 290,014 | ||||||||||
James A. Skinner(4) | 29,863 | 109,818 | — | — | 139,681 | ||||||||||
Margaret C. Whitman(7) | — | — | — | — | — | ||||||||||
Ralph V. Whitworth | 107,708 | 175,014 | — | — | 282,722 | ||||||||||
John H. Hammergren(8) | 4,292 | 18,100 | — | 21,831 | 44,223 | ||||||||||
G. Kennedy Thompson(8) | 12,585 | 18,100 | — | — | 30,685 |
Additional Information about Fees Earned or Paid in Cash in Fiscal 2013
2015
The following table provides additional information about fees earned or paid in cash to non-employee directors in fiscal 2013:2015:
Name | Annual Retainers(1) ($) | Committee Chair/ Lead Independent Director Fees(2) ($) | Additional Meeting Fees(3) ($) | Total ($) | ||||||||||||
Marc L. Andreessen | — | 14,990 | 8,000 | 22,990 | ||||||||||||
Shumeet Banerji | — | — | 4,000 | 4,000 | ||||||||||||
Robert R. Bennett | 100,000 | 14,990 | 18,000 | 132,990 | ||||||||||||
Rajiv L. Gupta | 100,000 | 24,983 | 18,000 | 142,983 | ||||||||||||
Klaus Kleinfeld | 33,219 | — | 10,000 | 43,210 | ||||||||||||
Raymond J. Lane | — | — | 10,000 | 10,000 | ||||||||||||
Raymond E. Ozzie | 100,000 | — | 10,000 | 110,000 | ||||||||||||
Gary M. Reiner | — | 14,990 | 16,000 | 30,990 | ||||||||||||
Patricia F. Russo | 100,000 | 54,962 | 16,000 | 170,962 | ||||||||||||
James A. Skinner | — | — | 18,000 | 18,000 |
(1) | The term of office for directors begins in March and ends the following February, which does not coincide with HP’s November through October fiscal year. The dollar amounts shown include cash annual retainers earned for service during the last four months of the March 2014 through February 2015 Board term and cash annual retainers earned for service during the first eight months of the March 2015 through February 2016 Board term. |
(2) | Committee chair fees are calculated based on service during each Board term. The dollar amounts shown include such fees earned for service during the last four months of the March 2014 through February 2015 Board term and fees earned for service during the first eight months of the March 2015 through February 2016 Board term. |
(3) | Additional meeting fees are calculated based on the number of designated Board meetings and the number of committee meetings attended during each Board term. The dollar amounts shown include additional meeting fees earned for meetings attended during the last four months of the March 2014 through February 2015 Board term and additional meeting fees earned for meetings attended during the first eight months of the March 2015 through February 2016 Board term. |
Name | Annual Retainers(1) ($) | Committee Chair/ Lead Independent Director Fees(2) ($) | Additional Meeting Fees(3) ($) | Total ($) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Marc L. Andreessen | — | 10,000 | — | 10,000 | ||||||||
Shumeet Banerji | — | — | 2,000 | 2,000 | ||||||||
Robert R. Bennett(4) | 29,863 | — | — | 29,863 | ||||||||
Rajiv L. Gupta(5) | 100,000 | 30,730 | 6,000 | 136,730 | ||||||||
Raymond J. Lane | — | — | — | — | ||||||||
Raymond E. Ozzie(4) | 29,863 | — | — | 29,863 | ||||||||
Gary M. Reiner(6) | — | 5,708 | 6,000 | 11,708 | ||||||||
Patricia F. Russo | 100,000 | 15,000 | — | 115,000 | ||||||||
James A. Skinner(4) | 29,863 | — | — | 29,863 | ||||||||
Ralph V. Whitworth(7) | 100,000 | 5,708 | 2,000 | 107,708 | ||||||||
John H. Hammergren(8) | — | 4,292 | — | 4,292 | ||||||||
G. Kennedy Thompson(9) | — | 8,585 | 4,000 | 12,585 |
Additional Information about Non-Employee Director Equity Awards
The following table provides additional information about non-employee director equity awards, including the stock awards and option awards made to non-employee directors during fiscal
2013, 2015, the grant date fair value of each of those awards and the number of stock awards and option awards outstanding as of the end of fiscal 2013:
2015:
Name | Stock Awards Granted During Fiscal 2013 (#) | Option Awards Granted During Fiscal 2013 (#) | Grant Date Fair Value of Stock and Option Awards Granted During Fiscal 2013(1) ($) | Stock Awards Outstanding at Fiscal Year End(2) (#) | Option Awards Outstanding at Fiscal Year End (#) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Marc L. Andreessen | 13,918 | — | 275,020 | 25,793 | (3) | — | |||||||||
Shumeet Banerji | 13,918 | — | 275,020 | 14,093 | — | ||||||||||
Robert R. Bennett | 4,174 | — | 109,818 | 4,203 | — | ||||||||||
Rajiv L. Gupta | 4,429 | 18,773 | 175,158 | 4,485 | 48,296 | ||||||||||
Raymond J. Lane | 13,918 | — | 275,020 | 14,093 | 200,000 | ||||||||||
Raymond E. Ozzie | 4,174 | — | 109,818 | 4,203 | — | ||||||||||
Gary M. Reiner | 6,959 | 29,500 | 275,229 | 7,047 | 66,187 | ||||||||||
Patricia F. Russo | 8,857 | — | 175,014 | 8,969 | — | ||||||||||
James A. Skinner | 4,174 | — | 109,818 | 4,203 | — | ||||||||||
Ralph V. Whitworth | 8,857 | — | 175,014 | 8,969 | — | ||||||||||
John H. Hammergren | 916 | — | 18,100 | — | 45,780 | ||||||||||
G. Kennedy Thompson | 916 | — | 18,100 | — | 8,364 |
Name | Stock Awards Granted During Fiscal 2015 (#) | Option Awards Granted During Fiscal 2015 (#) | Grant Date Fair Value of Stock and Option Awards Granted During Fiscal 2015(1) ($) | Stock Awards Outstanding at Fiscal Year End(2) (#) | Option Awards Outstanding at Fiscal Year End (#) | |||||||||||||||
Marc L. Andreessen | 8,231 | — | 274,998 | 44,004 | — | |||||||||||||||
Shumeet Banerji | 8,231 | — | 274,998 | 8,331 | — | |||||||||||||||
Robert R. Bennett | 5,238 | — | 175,002 | 5,302 | — | |||||||||||||||
Rajiv L. Gupta | 2,619 | 12,447 | 175,003 | 2,651 | 72,287 | |||||||||||||||
Klaus Kleinfeld | 4,116 | 19,559 | 275,015 | 4,166 | 19,559 | |||||||||||||||
Raymond J. Lane | 8,231 | — | 274,998 | 8,331 | 200,000 | |||||||||||||||
Raymond E. Ozzie | 5,238 | — | 175,002 | 5,302 | — | |||||||||||||||
Gary M. Reiner | 4,116 | 19,559 | 275,015 | 4,166 | 103,886 | |||||||||||||||
Patricia F. Russo | 5,238 | — | 175,002 | 20,272 | — | |||||||||||||||
James A. Skinner | 4,116 | 19,559 | 275,015 | 4,166 | 37,699 |
(1) | Represents the grant date fair value of stock and option awards granted in fiscal 2015 calculated in accordance with applicable accounting standards. For awards of RSUs, that number is calculated by multiplying the closing price of HP’s stock on the date of grant by the number of units awarded. For option awards, that amount is calculated by multiplying the Black-Scholes-Merton value determined as of the date of grant by the number of options awarded. |
(2) | Includes dividend equivalent units paid with respect to outstanding awards of RSUs during fiscal 2015. |
Non-Employee Director Stock Ownership Guidelines
Under our stock ownership guidelines, non-employee directors are required to accumulate within five years of election to the Board shares of HP'sHP’s stock equal in value to at least five times the amount of their annual cash retainer. Shares counted toward these guidelines include any shares held by the director directly or indirectly, including deferred vested awards.
All non-employee directors with more than five years of service have met our stock ownership guidelines and all non-employee directors with less than five years of service have either met or are expectedon track to meet thoseour stock ownership guidelines followingwithin the vesting of outstanding equity awards during the first half of fiscal 2014,required time based on current trading prices of HP'sHP’s stock. See "Common“Common Stock Ownership of Certain Beneficial Owners and Management."
PROPOSAL NO. 1ELECTION OF DIRECTORS
”
Our Bylaws fix the current number of directors at 12. On the recommendation of the NGSR Committee, the Board has nominated the 12 persons named below for election as directors this year, each to serve for a one-year term or until the director's successor is elected and qualified.
Director Nominee Experience and Qualifications
The Board annually reviews the appropriate skills and characteristics required of directors in the context of the current composition of the Board, our operating requirements and the long-term interests of our stockholders. The Board believes that its members should possess a variety of skills, professional experience and backgrounds in order to effectively oversee our business. In addition, the Board believes that each director should possess certain attributes, as reflected in the Board membership criteria described below.
Our Corporate Governance Guidelines contain the current Board membership criteria that apply to nominees recommended for a position on the Board. Under those criteria, members of the Board should have the highest professional and personal ethics and values, consistent with our longstanding values and standards. They should have broad experience at the policy-making level in business, government, education, technology or public service. They should be committed to enhancing stockholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties. Each director must represent the interests of all of our stockholders. Although the Board uses these and other criteria as appropriate to evaluate potential nominees, it has no stated minimum criteria for nominees.
The Board believes that all the nominees named below are highly qualified and have the skills and experience required for effective service on the Board. The nominees' individual biographies below contain information about their experience, qualifications and skills that led the Board to nominate them.
All of the nominees have indicated to us that they will be available to serve as directors. In the event that any nominee should become unavailable, the proxy holders, Margaret C. Whitman, Catherine A. Lesjak and John F. Schultz, will vote for a nominee or nominees designated by the Board.
There are no family relationships among our executive officers and directors.
Our Board recommends a vote FOR the election to the Board of the each of the following nominees.
Each director nominee who receives more "FOR" votes than "AGAINST" votes representing shares of HP common stock present in person or represented by proxy and entitled to be voted at the annual meeting will be elected.
If you sign your proxy or voting instruction card but do not give instructions with respect to voting for directors, your shares will be voted by Margaret C. Whitman, Catherine A. Lesjak and John F. Schultz, as proxy holders. If you wish to give specific instructions with respect to voting for directors, you may do so by indicating your instructions on your proxy or voting instruction card.
You may cumulate your votes in favor of one or more of the director nominees. If you wish to cumulate your votes, you will need to indicate explicitly your intent to cumulate your votes among the 12 persons who will be voted upon at the annual meeting. See "Questions and Answers—Voting Information—Is cumulative voting permitted for the election of directors?" for further information about how to cumulate your votes. Margaret C. Whitman, Catherine A. Lesjak and John F. Schultz, as proxy holders, reserve the right to cumulate votes and cast such votes in favor of the election of some or all of the applicable nominees in their sole discretion, except that a stockholder's votes will not be cast for a nominee as to whom such stockholder instructs that such votes be cast "AGAINST" or "ABSTAIN."
If an incumbent director nominee receives a greater number of votes "AGAINST" his or her election than votes "FOR" such election, he or she is required to tender his or her resignation for consideration by the NGSR Committee in accordance with Section V of our Corporate Governance Guidelines and as described under "Corporate Governance—Board Policy Regarding Voting for Directors."
PROPOSAL NO. 2RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has appointed, and as a matter of good corporate governance, is requesting ratification by the stockholders of Ernst & Young LLP as the independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending October 31, 2014. During fiscal 2013, Ernst & Young LLP served as our independent registered public accounting firm and also provided certain other audit-related and tax services. See "Principal Accounting Fees and Services" on page 97 and "Report of the Audit Committee of the Board of Directors" on page 98. Representatives of Ernst & Young LLP are expected to attend the annual meeting, where they will be available to respond to appropriate questions and, if they desire, to make a statement.
Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the 2014 fiscal year requires the affirmative vote of a majority of the shares of HP common stock present in person or represented by proxy and entitled to be voted at the annual meeting. If the appointment is not ratified, the Board will consider whether it should select another independent registered public accounting firm.
Recommendation of the Board of Directors
Our Board recommends a vote FOR the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the 2014 fiscal year.
PROPOSAL NO. 3ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
In accordance with SEC rules, our stockholders are being asked to approve, on an advisory or non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement.
Our Board and the HRC Committee are committed to excellence in corporate governance and to executive compensation programs that align the interests of our executives with those of our stockholders. To fulfill this mission, we have a pay-for-performance philosophy that forms the foundation for decisions regarding compensation. Our compensation programs have been structured to balance near-term results with long-term success, and enable us to attract, retain, focus, and reward our executive team for delivering stockholder value. Please refer to "Executive Compensation—Compensation Discussion and Analysis—Executive Summary" for an overview of the compensation of our named executive officers.
Our Board and the HRC Committee believe that we have created a compensation program that aligns with stockholder interests and merits stockholder support. Accordingly, we are asking for stockholder approval of the compensation of our named executive officers as disclosed in this proxy statement in the Compensation Discussion and Analysis, the compensation tables and the narrative discussion following the compensation tables.
Although this vote is non-binding, the Board and the HRC Committee value the views of our stockholders and will review the voting results. If there are significant negative notes, we will take steps to understand those concerns that influenced the vote, and consider them in making future decisions about executive compensation. We currently conduct annual advisory votes on executive compensation, and we expect to conduct the next advisory vote at our 2015 annual meeting of stockholders.
The affirmative vote of a majority of the shares of HP common stock present in person or represented by proxy and entitled to be voted on the proposal at the annual meeting is required for advisory approval of this proposal.
Recommendation of the Board of Directors
Our Board recommends a vote FOR the approval of the compensation of our named executive officers, including the Compensation Discussion and Analysis, the compensation tables and narrative discussion following such compensation tables, and the other related disclosures in this proxy statement.
PROPOSAL NO. 4STOCKHOLDER PROPOSAL RELATED TO THE FORMATION OF A HUMAN RIGHTS COMMITTEE
We received a stockholder proposal from Harrington Investments, Inc. The proponent has requested we include the proposal and supporting statement in this proxy statement, and, if properly presented, the proposal will be voted on at the annual meeting. We will provide the proponent's address and the number of shares that it beneficially owns upon oral or written request of any stockholder. The stockholder proposal and supporting statement are quoted verbatim in italics below.
HP does not support the adoption of the resolution proposed below and asks stockholders to consider HP's response, which follows the stockholder proposal.
RESOLVED: To amend Article IV of the By-Laws, by inserting after Section 4.3, a new Section 4.4.
4.4. Board Committee on Human Rights. There is established a Board Committee on Human Rights, to review the implications of company policies, above and beyond matters of legal compliance, for the human rights of individuals in the U.S. and worldwide, including assessing the impacts of company operations and supply chains on resources and public welfare in host communities.
The Board of Directors is authorized, by resolution, in its discretion and consistent with these By-Laws, the Articles of Incorporation and applicable law to: (1) select the members of the Board Committee on Human Rights, (2) provide said committee with funds for operating expenses, (3) adopt a charter to govern said Committee's operations, (4) empower said Committee to solicit public input and to issue periodic reports to shareholders and the public, at reasonable expense and excluding confidential information, including but not limited to an annual report on the findings of the Board Committee, and (5) any other measures within the Board's discretion consistent with these By-Laws and applicable law. Nothing herein shall restrict the power of the Board of Directors to manage the business and affairs of the company. The Board Committee on Human Rights shall not incur any costs to the company except as authorized by the Board of Directors.
SUPPORTING STATEMENT
Our company has become embroiled in public controversies regarding the human rights implications of products, services and corporate supply chains. Issues which typically arise for companies in our sector include labor rights, technology utilized to identify and monitor labor and human rights advocates, and technology utilized by the police and military to identify and control the movement of ethnic populations with advanced biometric identification systems. For example, in reports in the media, our company has been alleged to:
1Who Profits Research Project, Technologies of Control: The Case of Hewlett Packard (The Coalition of Women for Peace, 2011).
While our company has signed voluntary protocols regarding human rights, such statements are not part of the company's bylaws.
The proposed by-law would establish a separate Board Committee on Human Rights, which would elevate board level oversight and governance regarding human rights issues raised by the company's activities and policies and provide a vehicle to fulfill the Board's fiduciary responsibilities.
2Silver, Vernon. "H-P Computers Underpin Syria Surveillance." Bloomberg, November 18, 2011.http://www.bloomberg.com/news/2011-11-18/hewlett-packard-computers-underpin-syria-electonic-surveillance-project.html
3Chao, Loretta. "Cisco Poised to Help China Keep an Eye on Its Citizens." The Wall Street Journal. July 5, 2011.http://online.wsj.com/article/SB10001424052702304778304576377141077267316.html
BOARD STATEMENT IN OPPOSITION TO STOCKHOLDER PROPOSAL
The Board recommends a vote against this proposal because it is unnecessary and not in the best interest of stockholders.
HP's existing governance framework already includes Board-level and executive-level committees that are responsible for human rights issues. The NGSR Committee1 is responsible for overseeing, making recommendations, and reporting to the full Board with respect to HP's policies regarding corporate social responsibility and global corporate citizenship, including human rights, as described under "Corporate Governance—Board Structure and Committee Composition—NGSR Committee." HP also has a Global Citizenship Council composed of internal human rights experts and senior leaders that represent major functions at HP that have the potential to impact human rights. This council provides governance and oversight of HP's Global Human Rights Policy, and its members collaborate with external human rights organizations and experts to inform HP's human rights-related policies and strategy. The Global Citizenship Council, which meets quarterly, reports to the NGSR Committee and provides updates to that committee at least annually. Accordingly, the Board believes that the creation of an additional Board committee to oversee the same HP policies and efforts is unnecessary.
In addition, the Board believes that the proposal is unduly prescriptive and not in the best interests of stockholders. The Board is in the best position to determine the most effective governance structure to oversee HP's human rights policies and initiatives. As a binding proposal, the proposal deprives the Board of the flexibility it needs to address its responsibilities in the manner in which it believes it can do so most effectively in the interest of stockholders.
Respect for universal human rights is and will continue to be a fundamental principle in the way that HP conducts its business. HP already has a global human rights program that promotes the respect of human rights in all of HP's business practices and a robust legal and regulatory compliance program in place to comply with applicable laws and regulations. HP has recently enhanced its existing human rights policies and practices. For example, in October 2011, HP expanded its Global Human Rights Policy to go beyond labor and employment concerns and include other human rights priorities such as privacy and freedom of expression. HP also has a Supplier Code of Conduct, which requires that human rights principles be upheld throughout HP's global supply chain. In addition, in August 2011, HP designated a pan-HP Human Rights Program Manager responsible for implementing due diligence aligned with the UN Guiding Principles on Business and Human Rights. This includes due diligence of HP's efforts to ensure HP's business practices are aligned with HP's Global Human Rights Policy. The Manager is sponsored by the NGSR of the Board.
HP's existing policies and practices relating to human rights are already consistent with internationally recognized human rights principles and are shaped and influenced by external human rights experts and organizations. For example, pursuant to its Global Human Rights Policy, HP upholds and respects human rights principles reflected in the UN Universal Declaration of Human Rights, the UN Global Compact, and the UN Guiding Principles on Business and Human Rights. Moreover, HP is a member of the Global Business Initiative on Human Rights and the Business for Social Responsibility Human Rights Working Group, which are advised by human rights experts. Additionally, specific functional areas at HP, such as our Privacy Office and Supply Chain Responsibility teams, are members of external organizations such as Social Accountability International and The Global Social Compliance
1In January 2014, the Board approved changing the name of this committee from the "Nominating and Governance Committee" to the "Nominating, Governance and Social Responsibility Committee", among other amendments to this committee's charter.
Programme, which have multi-stakeholder governance bodies that include human rights experts. HP is also a long-standing signatory of the UN Global Compact.
HP issues periodic reports to stockholders and the public that provide transparency around its human rights activities through an annual Global Citizenship Report. The Global Citizenship Report addresses HP's human rights efforts generally as well as more specific areas including supply chain responsibility, corporate ethics and privacy.
For the foregoing reasons, the Board believes that establishing an additional Board committee is unnecessary and would not be in the best interest of stockholders. Accordingly, the Board recommends that you vote AGAINST this proposal.
Approval of this stockholder proposal requires the affirmative vote of a majority of the shares of HP common stock present in person or represented by proxy and entitled to be voted on the proposal at the annual meeting.
Recommendation of the Board of Directors
Our Board recommends a vote AGAINST this proposal.
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 31, 20132015 concerning beneficial ownership by:
The information provided in the table is based on our records, information filed with the SEC and information provided to HP, except where otherwise noted.
The number of shares beneficially owned by each entity or individual is determined under SEC rules, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the entity or individual has sole or shared voting or investment power and also any shares that the entity or individual has the right to acquire as of March 1, 2014February 29, 2016 (60 days after December 31, 2013)2015) through the exercise of any stock options, through the vestingvesting/settlement of RSUs payable in shares, or upon the exercise of other rights. Beneficial ownership excludes options or other rights vesting after March 1, 2014February 29, 2016 and any RSUs vestingvesting/settling, as applicable, on or before March 1, 2014February 29, 2016 that may be payable in cash or shares at HP'sHP’s election. Unless otherwise indicated, each person has sole voting and investment power (or shares such powerspower with his or her spouse) with respect to the shares set forth in the following table.
BENEFICIAL OWNERSHIP TABLE Name of Beneficial Owner Dodge & Cox(1) BlackRock, Inc.(2) The Vanguard Group(3) Aida M. Alvarez Shumeet Banerji Carl Bass Robert R. Bennett Charles V. Bergh Stacy Brown-Philpot Stephanie A. Burns Mary Anne Citrino Rajiv L. Gupta(4) Stacey Mobley Subra Suresh Margaret C. Whitman(5) Dion J. Weisler(6) Catherine A. Lesjak(7) Tracy S. Keogh(8) Antonio F. Neri(9) All current executive officers and directors as a group (20 persons)(10) Shares of
Common Stock
Beneficially Owned Percent of
Common Stock
Outstanding 187,467,799 10.61 % 100,332,640 5.68 % 98,044,605 5.55 % — * 27,238 * — �� * 9,844 * — * — * — * — * 165,606 * — * — * 5,994,196 * 680,732 * 952,905 * 780,894 * 436,233 * 8,534,213 * * Represents holdings of less than 1% based on 1,766,399,930 shares of our common stock outstanding as of December 31, 2015. (1) Based on the most recently available Schedule 13G/A filed with the SEC on August 28, 2015 by Dodge & Cox. According to its Schedule 13G, Dodge & Cox reported having sole voting power over 180,535,840 shares, shared voting power over no shares, sole dispositive power over 187,467,799 shares and shared dispositive power over no shares. The securities reported on the Schedule 13G are beneficially owned by clients of Dodge & Cox, which clients may include investment companies registered under the Investment Company Act of 1940 and other managed accounts, and which clients have the right to receive or the power to direct the receipt of dividends from, and the proceeds from the sale of, HP’s stock. The Schedule 13G contained information as of July 31, 2015 and may not reflect current holdings of HP’s stock. The address of Dodge & Cox is 555 California Street, 40th Floor, San Francisco, CA 94104. (2) Based on the most recently available Schedule 13G/A filed with the SEC on January 26, 2016 by BlackRock, Inc. According to its Schedule 13G, BlackRock, Inc. reported having sole voting power over 83,978,677 shares, shared voting power over 74,845 shares, sole dispositive power over 100,257,795 shares and shared dispositive power over 74,845 shares. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. (3) Based on the most recently available Schedule 13G filed by the Vanguard Group on February 10, 2015. According to its Schedule 13G, BlackRock, Inc. reported having sole voting power over 3,220,971 shares, shared voting power over no shares, sole dispositive power over 94,995,158 shares, and shared dispositive power over 3,049,447 shares. The Schedule 13G contained information as of December 31, 2014 and may not reflect current holdings of HP’s stock. The address for the Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355. (4) Includes 59,840 shares that Mr. Gupta has the right to acquire by exercise of stock options.
(5) | Includes 66 shares held by Ms. Whitman indirectly through a trust and 5,541,022 shares that Ms. Whitman has the right to acquire by exercise of stock options. |
(6) | Includes 594,714 shares that Mr. Weisler has the right to acquire by exercise of stock options. |
(7) | Includes 306 shares held by Ms. Lesjak’s spouse, 29,549 shares held by Ms. Lesjak jointly with Ms. Lesjak’s spouse and 842,077 shares that Ms. Lesjak has the right to acquire by exercise of stock options. |
(8) | Includes 667,312 shares that Ms. Keogh has the right to acquire by exercise of stock options. |
(9) | Includes 431,297 shares that Mr. Neri has the right to acquire by exercise of options. |
(10) | Includes 7,681,094 shares that current executive officers and directors have the right to acquire. |
Name of Beneficial Owner | Shares of Common Stock Beneficially Owned | Percent of Common Stock Outstanding | ||||
---|---|---|---|---|---|---|
Dodge & Cox(1) | 156,597,738 | 8.0% | ||||
BlackRock, Inc.(2) | 118,017,997 | 6.1% | ||||
State Street Corporation(3) | 106,224,728 | 5.5% | ||||
Marc L. Andreessen(4) | 26,172 | * | ||||
Shumeet Banerji | 18,468 | * | ||||
Robert R. Bennett | 0 | * | ||||
Rajiv L. Gupta(5) | 47,971 | * | ||||
Raymond J. Lane(6) | 381,725 | * | ||||
Ann M. Livermore(7) | 658,562 | * | ||||
Raymond E. Ozzie | 0 | * | ||||
Gary M. Reiner(8) | 45,922 | * | ||||
Patricia F. Russo | 11,752 | * | ||||
James A. Skinner | 0 | * | ||||
Margaret C. Whitman(9) | 316,091 | * | ||||
Ralph V. Whitworth(10) | 29,844,059 | 1.6% | ||||
Catherine A. Lesjak(11) | 176,663 | * | ||||
William L. Veghte(12) | 177,123 | * | ||||
Dion J. Weisler(13) | 78,699 | * | ||||
Michael G. Nefkens(14) | 102,205 | * | ||||
R. Todd Bradley(15) | 328,968 | * | ||||
All current executive officers and directors as a group (22 persons)(16) | 32,158,316 | 1.9% |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive officers and holders of more than 10% of HP'sHP’s stock to file reports with the SEC regarding their ownership and changes in ownership of our securities. Based upon our examination of the copies of Forms 3, 4, and 5, and amendments thereto furnished to us and the written representations of our directors, executive officers and 10% stockholders, we believe that, during fiscal 2013,2015, our directors, executive officers and 10% stockholders complied with all Section 16(a) filing requirements, except that, due to technical issues with his filer codes that resulted in a delay, Mr. Reiner filed a late Form 4 on April 24, 2013 reflecting his ownership of 5,780 RSUs that vested on April 20, 2013.requirements.
RELATED PERSON TRANSACTIONS POLICIES AND PROCEDURES
We have adopted a written policy for approval of transactions between us and our directors, director nominees, executive officers, beneficial owners of more than 5% of HP'sHP’s stock, and their respective immediate family members where the amount involved in the transaction exceeds or is expected to exceed $100,000 in a single calendar year.
The policy provides that the NGSR Committee reviews certain transactions subject to the policy and decides whether or not to approve or ratify those transactions. In doing so, the NGSR Committee determines whether the transaction is in the best interests of HP. In making that determination, the NGSR Committee takes into account, among other factors it deems appropriate:
ü | the extent of the related person’s interest in the transaction; | |
ü | whether the transaction is on terms generally available to an unaffiliated third party under the same or similar circumstances; | |
ü | the benefits to HP; | |
ü | the impact or potential impact on a director’s independence in the event the related party is a director, an immediate family member of a director or an entity in which a director is a partner, 10% stockholder or executive officer; | |
ü | the availability of other sources for comparable products or services; and | |
ü | the terms of the transaction. |
The NGSR Committee has delegated authority to the chair of the NGSR Committee to pre-approve or ratify transactions where the aggregate amount involved is expected to be less than $1 million. A summary of any new transactions pre-approved by the chair is provided to the full NGSR Committee for its review at each of the NGSR Committee'sCommittee’s regularly scheduled meetings.
The NGSR Committee has adopted standing pre-approvals under the policy for limited transactions with related persons. Pre-approved transactions include:
ü | compensation of executive officers that is excluded from reporting under SEC rules where the HRC Committee approved (or recommended that the Board approve) such compensation; | |
ü | director compensation; | |
ü | transactions with another company with a value that does not exceed the greater of $1 million or 2% of the other company’s annual revenues, where the related person has an interest only as an employee (other than executive officer), director or beneficial holder of less than 10% of the other company’s shares; | |
ü | transactions with another company with a value that does not exceed the greater of $1 million or 2% of the other company’s annual revenues, where the related person has an interest only as an employee (other than executive officer), director or beneficial holder of less than 10% of the other company’s shares; | |
ü | contributions to a charity in an amount that does not exceed $1 million or 2% of the charity’s annual receipts, where the related person has an interest only as an employee (other than executive officer) or director; and | |
ü | transactions where all stockholders receive proportional benefits. |
A summary of new transactions covered by the standing pre-approvals relating to other companies (as described in paragraphs 3 and 4 aboveabove) is provided to the NGSR Committee for its review in connection with that committee'scommittee’s regularly scheduled meetings.
Fiscal 20132015 Related Person Transactions
We enter into commercial transactions with many entities for which our executive officers or directors serve as directors and/or executive officers in the ordinary course of our business. All of those transactions were pre-approved transactions as defined above, except for transactions with Booz & Company and McKesson Corporation,Alcoa Inc., which were ratified by the NGSR Committee. Director Shumeet Banerji served as a Senior Partner of Booz & Company and former director John H. Hammergren served asMr. Kleinfeld was Chairman and Chief Executive Officer of McKesson CorporationAlcoa Inc. during fiscal 2013.2015. HP considers these transactions to have been at arm's-lengtharm’s-length and does not believe that either Mr. Banerji or Mr. HammergrenKleinfeld had a material direct or indirect interest in any of such commercial transactions.
Compensation Discussion and Analysis
As discussed elsewhere in this proxy statement, effective November 1, 2015, Hewlett-Packard Company separated into two independent, publicly traded companies: HP Inc., which comprises now former Hewlett-Packard Company’s printing and personal systems businesses and Hewlett Packard Enterprise, which comprises now former Hewlett-Packard Company’s enterprise technology infrastructure, software, services and financing businesses. Accordingly, references to “HP” and the “company” in this proxy statement refer to Hewlett-Packard Company with respect to events occurring on or prior to October 31, 2015 and to HP Inc. with respect to events occurring after October 31, 2015. Similarly, references to “Board” and “HRC Committee” in this proxy statement refer to Hewlett-Packard Company’s Board of Directors or Hewlett-Packard Company’s HR and Compensation Committee with respect to actions taken on or prior to October 31, 2015 and to the HP Inc. Board and HP Inc. HRC Committee with respect to actions taken after October 31, 2015.
This Compensation Discussion and Analysis contains a detailed description of our executive compensation philosophy and programs, the compensation decisions the HP HRC Committee has made under those programs, and the considerations in making those decisions. This Compensation Discussion and Analysis focuses on the compensation of our named executive officers ("NEOs")Our NEOs for fiscal 2013, who were:2015, and their designated titles at HP Inc. or Hewlett Packard Enterprise, as applicable, following the separation, are as follows:
Business Overview and Performance
Prior to the separation and throughout fiscal 2015, HP iswas a leading global provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses, and large enterprises, including customers in the government, health and education sectors. We offerHP offered one of the IT industry'sindustry’s broadest portfolios of products and services that brings together infrastructure, software, and services through innovation to enableand enables our customers to create value and solve business problems, and we are the leader or among the leaders in most of the markets in which we compete. We also have a trusted brand that is supported by a culture of innovation and strong connections with our customers, partners and employees.problems.
We areHP was organized aroundinto seven business segments, includingsegments: Personal Systems, Printing, the Enterprise Group (EG), Enterprise Services (ES), Software, HP Financial Services (HPFS), and Corporate Investments. Following the separation, HP Inc. is comprised of Personal Systems, Printing, and Corporate Investments and Hewlett Packard Enterprise is comprised of EG, ES, Software, HPFS, and Corporate Investments.
In fiscal 2012, we launched a five-year turnaround plan. The focus in fiscal 2012 was to stabilize our business, identify and define key challenges, develop crisp business strategies, and streamline and improve operations. Our focus in fiscal 2013 was to "fix“fix and rebuild,"” to strengthen our foundation for “recovery and our continued effortsexpansion” in fiscal 20132014 and beyond. In fiscal 2014, we increased investment in research and development, strengthened our product portfolio, and improved our customer and partner experience, building a strong foundation for separating the company. In fiscal 2015, our focus was on executing the separation while continuing to drive the business forward. Our continued efforts resulted in the following strategic accomplishments:accomplishments during fiscal 2015:
In addition to our significant strategic accomplishments, we delivered on several key financial goals. However, overall, our financial progress continued to be mixed given the nature of our turnaround plan and the disruptive changes taking place in our industry and in our business and a challenging global macro-environment. Ourmacroeconomic and foreign currency environment, our fiscal 2013 annual incentive plan2015 financial results were mixed and included:
HP Inc. began fiscal 2016 with a renewed culture, energy and
We expect fiscal 2014 to be a year of "recovery and expansion." While we will continue to streamline our business, we also look forward to pursuing key growth opportunities for our businesses. In addition, we expect to see certain investments start paying off.
Executive Compensation Philosophy Our • The majority of target total directcompensation for executives isperformance-based as well asequity-based to align their rewards with stockholder value • We generallydo not enter into individual executive compensation agreements • Total direct compensation istargeted at or near the marketmedian • Wedevote significant time to management succession planning and leadership development efforts • Actual realized total direct compensation andpay positioning is designed to fluctuate with, and becommensurate with, actual annual and long-term performance • We maintain amarket-aligned severance policy for executives that doesnot have automaticsingle-trigger equity vesting upon a change in control • Incentive awards are heavily dependent upon our stock performance, and are measured againstobjective financial metrics • The HRC Committee utilizes anindependentcompensation consultant • Our compensation programsdo not encourage imprudent risk-taking • We maintainstock ownership guidelines for executive officers and non-employee directors • We balance growth and return objectives, top and bottom line objectives, and • • A significant portion of our long-term incentives are delivered in the form of • We conduct a robuststockholder outreach program throughout the year • We provideno U.S. supplemental defined benefit pensions • Wedisclose our corporate performance goals and achievements relative to these goals • We validate ourpay-for-performance relationship on an annual basis Components of Compensation Our primary focus in compensating executives is on the longer-term and performance-based elements of compensation. The table below shows our pay components, along with the role and • Fixed portion of annual cash • Value of role in competitive • Value of role to the company • Skills and performance of • Variable portion of annual cash • Focus executives on annual • Target awards based on • Actual awards based on • • • PARSUs • Other, as needed • Reinforce need for long-term • Align interests of executives and • Encourage equity ownership • Encourage retention • Target awards based on • Actual value relative to target All Other: • Benefits • Perquisites • Severance • Support the health and security • Enhance executive productivity • Competitive marketplace • Level of executive • Standards of good governance • Desire to Role of the HRC Committee and its Advisors The HRC Committee oversees and provides strategic direction to management regarding all aspects of our pay program for senior executives. It makes recommendations regarding the During fiscal management proposals presented to the HRC Committee related to executive compensation, and works with the HRC Committee to validate and strengthen the pay-for-performance relationship and alignment with stockholders. Pursuant to SEC rules the HRC Committee has assessed the independence of Farient and Dentons, and concluded each is independent and that no conflict of interest exists that would prevent Farient or Dentons from independently The HRC Committee met Role of Management and the On an annual basis, management considers market competitiveness, business results, experience and individual performance in evaluating NEO compensation. The During fiscal Each year, the HRC Committee reviews the compensation of our Section 16 officers and compares it to that of executives in similar positions with our peer group companies. The HRC Committee finds this information useful in evaluating whether our pay practices are current and competitive. This process starts with the selection of The two primary screening Boardcompensation program, practices and policies have been structured to reflect the HRC Committee are committedBoard’s commitment to excellence in corporate governance, and to executive compensation programsreward short- and long-term performance that align the interests of our executives with those of our stockholders. To fulfill this mission, we have a pay-for-performance philosophy that forms the foundation for decisions regarding compensation. Our compensation programs have been structured to balance near-term results with long-term success, enabling us to attract, retain, focus, and reward our executive team for deliveringdrives stockholder value. The table below summarizes key elements of our fiscal 20132015 compensation programs relative to this philosophy.ALIGNMENT WITH STOCKHOLDERS Pay-for-Performance Corporate Governance of our market which that we believelink either directly or indirectlyto the creation of value for our stockholders. In addition, 25% of our target annual bonus isincentives are contingent upon the achievement of qualitative objectives that we believe will contribute to our long-term success short- andshort-and long-term objectives to reward for overall performance that does not over-emphasize a singular focus Our compensation programs Wedo not encourage imprudent risk-takingprohibit executive officers and directors from engaging in any form ofhedging transaction, from holding HP securities in margin accounts andpledging as collateral for loans in a manner that could create compensation-related risk for the Companyperformance-contingent stock optionsPCSOs ("PCSOs"), which vest only if sustained stock price appreciation is achieved, andPARSUs, which vest only upon the achievement of two- and three-yearRTSR andROIC objectives We provideno special or supplemental pension benefits •We conduct a robuststockholder outreach program throughout the year • the determination factors for determining each pay component.Pay Component Role Determination Factors Base Salary
income
marketplace
individual compared to the
market as well as others in the
companyAnnual Bonus
Incentive (i.e., Pay-for-Results Plan ("PfRPlan") Plan)
income
objectives that support the
long-term strategy and creation
of value
competitive marketplace and
level of executive
experience
actual performance against annual
corporate, business unit, and/or
and individual goalsLong-Term Incentives•PCSOs
Long-term Incentives:Restricted PCSOs/Stock Units ("RSUs")
OptionsPerformance-Based RestrictedUnits ("PRUs")
RSUs
sustained performance and
completion of turnaround
stockholders, reflecting the
time-horizon and risk to
investors
competitive marketplace, level of
executive, and skills and
performance of executive
based on actual performance against
corporate goals and/orand stock
price performanceBenefits/Perquisites/
Protection
of our executives, and their
ability to save on a tax-deferred
basis de-emphasizeemphasize performance-based payRelationship Between CEO Pay and Performance The HRC Committee regularly assesses the potential pay-for-performance relationships inherent in our pay programs. The table below shows various definitions of pay that can be used in conducting such an assessment:Rationale/Pay ComponentTargetRealizedRealizableRationale for use of definition •Represents intended value of compensation•Treats options and other equity as though it were currency •Recognizes that there is no assurance that this pay opportunity will be earned until it is actually earned•Represents income earned •Matches time horizon of compensation with performance•Recognizes that unexercised options and unvested awards have inherent potential valueSalary• Actual salary in fiscal year earnedAnnual Bonus •Target bonus for fiscal year • Actual bonus in fiscal year earnedPCSOs/Stock Options •# of stock options granted multiplied by the Black-Scholes-Merton value on grant date •# of stock options exercised multiplied by the intrinsic value at time of exercise •# of options outstanding multiplied by the Black-Scholes-Merton value at end of fiscal 2013 (including PCSOs for which performance goals have been met and taking into account the in-the-money or out-of-the money status of the option and the tail value)RSUs •# of RSUs granted multiplied by the grant date price •# of RSUs vested multiplied by the price at the time of vesting •# of RSUs outstanding multiplied by the price at end of fiscal 2013PRUs •# of target PRUs granted multiplied by the grant date fair value •# of PRUs vested multiplied by the price at the time of vesting •# of PRUs outstanding for which performance goals have been met multiplied by the price at end of fiscal 2013All Other• Actual value of all other compensation as reported The left-hand chart below shows Ms. Whitman's average annual pay since she joined HP as our CEO in September 2011 and is calculated as Target compensation, Realized compensation, andRealizable compensation. The right-hand chart below shows Total Shareholder Return ("TSR") from the date of Ms. Whitman's inception as CEO to the end of fiscal 2013 and TSR for fiscal 2013.3-Year Average Total CompensationBy Pay Definition, FY11 - FY13 ($ millions)Annualized Total Shareholder ReturnFrom CEO Inception and for Fiscal 2013 The charts above demonstrate a robust relationship between CEO pay and performance since:•The pay mix is highly variable (98%) and equity-oriented (88%);•Our stock price over the recent year reflects our turnaround results;•Average annual Realizable pay is reasonable relative to our performance. As of the end of fiscal 2013, Realizable pay was 91% of the target value, including equity for which the performance goals have been met; and•The compensation package has considerable holding power since Realized compensation is only 7% of target, indicating that a significant amount of granted compensation still needs to vest through time and performance.
Oversight and Authority over Executive CompensationCEO'sCEO’s compensation to the independent members of the Board for approval, and it reviews and approves the compensation of the remaining Section 16 officers. Each HRC Committee member is an independent non-employee director with significant experience in executive compensation matters. The HRC Committee employs its own independent compensation consultant, as well as its own independent legal counsel.2013,2015, the HRC Committee selected a new independent compensation consultant, Farient Advisors LLC ("Farient"). The HRC Committee continued to retain Farient Advisors LLC (“Farient”) as its independent compensation consultant and Dentons US LLP ("Dentons"(“Dentons”) as its independent legal counsel. Farient provides analyses and recommendations that inform the HRC Committee'sCommittee’s decisions, evaluates market pay data and competitive-position benchmarking, compiled by management's consultants, provides analysis and input on performance measures and goals, provides analysis and input on program structure, provides updates on market trends and the regulatory environment as it relates to executive compensation, reviews variousrepresentingproviding service to the HRC Committee. Neither Farient nor Dentons performs other services for HP, and neither will do so without the prior consent of the HRC Committee chair. Both Dentons and Farient meet with the HRC Committee chair and the HRC Committee outside the presence of management.eightten times in fiscal 2013,2015, and sixseven of these meetings included an executive session. The HRC Committee'sCommittee’s independent advisors participated in most of the meetings and, when requested by the HRC Committee chair, in the preparatory meetings and the executive sessions.Chief Executive OfficerCEO in Setting Executive CompensationExecutive Vice President,Chief Human Resources Officer and other members of our human resources organization, together with members of our finance organization and Office of the General Counsel,legal organizations, work with the CEO to design and develop compensation programs, to recommend changes to existing plans and programs applicable to NEOs and other senior executives, to recommendas well as financial and other targets to be achieved under those programs, to prepare analyses of financial data, peer comparisons and other briefing materials to assist the HRC Committee in making its decisions, and ultimately, to implement the decisions of the HRC Committee. During fiscal 2013,2015, management continued to engage Meridian Compensation Partners, LLC ("Meridian"(“Meridian”) as their compensation consultant. The HRC Committee consideredtook into consideration that Meridian provided executive compensation-related services to management when it evaluated theany information and analyses provided by Meridian.Meridian, all of which were also reviewed by Farient.2013,2015, Ms. Whitman reviewed our fiscal 2013 compensation programs and provided input to the HRC Committee regarding performance metrics and the setting of appropriate performance targets. Ms. Whitman also recommended management business objectives ("MBOs")MBOs for the NEOs and the other senior executives who report directly to her. In addition, Ms. Whitman provided input to the HRC Committee with respect to modifying the compensation programs for fiscal 2014 so as to promote the alignment of those programs with our strategic direction, as approved by the Board. All modifications to the compensation programs were assessed by Farient on behalf of the HRC Committee, and discussed and approved by the HRC Committee. While Ms. Whitman is subject to the same financial performance goals as the executives who lead global functions and Ms. Whitman'sWhitman’s MBOs and compensation are established by the HRC Committee in executive session and recommended to the independent members of the Board for approval; Ms. Whitman is not involved in the approval of her own performance goals or compensation.approval.
Use of Comparative Compensation Data and Compensation Philosophyan appropriatethe relevant group of peer companies for comparison purposes. The HRC Committee continues to use a "rules-based"“rules-based” approach for objectively determining our executive compensation peer group. Under thisFor fiscal 2015, the approach the peer group companies for fiscal 2013was streamlined and used two primary screening criteria to develop a pool of potential peers that were determined using fivesubject to further consideration based on additional factors.criteria:criteria were:•Current market capitalization greater than $25 billion;•Revenuerevenue in excess of $30 billion25% of HP’s revenue for technology companies and $50 billionbetween 50% and 250% of HP’s revenue for companies in other industries;•In the S&P 500 Index, the Dow Jones 30 Index and/or the Dow Jones Global Titans Index;•In industry-specific categories andstaples;staples.
Additional factors considered included: business similarities, companies that generally use U.S. compensation practices, global and
Thedevelopment spending as a percent of revenue, screenpeers of peers, competition for technology companies was increased from $15 billion to $30 billion for fiscal 2013 in order to more closely approximate our scale.talent, and ISS and Glass Lewis peer selections.
The HRC Committee believes that use of this rules-based methodology continues to produce anresults in the appropriate peer group for comparison purposes, as well as a group that is large and diverse enough so that the addition or elimination of any one company does not alter the overall analysis.
As a result of the screening process, weAccenture plc and QUALCOMM Incorporated were added two companies, Caterpillarto, and Dell Inc. and PepsiCo, Inc., towas removed from, the fiscal 20132015 peer group. While EMC Corporation did not pass the revenue screen for technology companies, the HRC Committee decided to retain EMC Corporation in the peer group for relevance and consistency.
The peer group for fiscal 20132015 consisted of the following companies:
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Verizon Communications | ||||||||
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International Business Machines Corporation | 92.8 | |||||||
The Boeing Company | 90.8 | |||||||
The Procter & Gamble Company | ||||||||
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Represents fiscal 2014 reported revenue, except fiscal 2015 reported revenue is provided for Apple, HP, Microsoft, Procter & Gamble, Cisco Systems, Oracle and Qualcomm. |
In reviewing comparative pay data from these companies against pay for our Section 16 officers, the HRC Committee evaluated some data using regression analysis to adjust for size differences between our company and the peer group companies. In addition, we excluded particular data points of certain companies if they were anomalous and not representative of market practices.
As inIn fiscal 2012, in fiscal 20132015 the HRC Committee continued to set target compensation levels generally at or near the market median, (althoughalthough in some cases higher for attraction and retention purposes).purposes. As will be discussed in detail in the fiscal 2016 proxy statement, a new peer group appropriate for the post-separation company was approved for fiscal 2016.
Process for Setting and Awarding Executive Compensation
A broad range of facts and circumstances is considered in setting our overall executive compensation levels. Among the factors considered for our executives generally, and for the NEOs in
particular, are market competitiveness, internal equity and individual performance. The weight given to each factor may differ from year to year, is not formulaic and may differ among individual NEOs in any given year. For example, when we recruit externally, market competitiveness, experience and the circumstances unique to a particular candidate may weigh more heavily in the compensation analysis. In contrast, when determining year-over-year compensation for current NEOs, internal equity and individual performance may factor more heavily in the analysis.
Because such a large percentage of NEO pay is performance-based, the HRC Committee spends significant time determining the appropriate financial targetsgoals for our annual- and long-term incentive pay plans. In general, management makes an initial recommendation for the financial targets,goals, which is then reviewedassessed by Farient, and discussed and approved by the HRC Committee and its independent advisors.Committee. Major factors considered in setting targetsgoals for each fiscal year are business results from the most recently completed fiscal year, segment-level strategic plans, macroeconomic factors, competitive performance results and goals, conditions or goals specific to a particular business segment and strategic initiatives. To permit eligible compensation to qualify as "performance-based compensation"“performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"“Code”), the HRC Committee sets the overall funding target for the "umbrella"“umbrella” structure for the annual bonuses,incentives, and sets performance goals for annual incentives and equity awards within the first 90 days of the fiscal year.
Following the close of the fiscal year, the HRC Committee reviews actual financial results and MBO resultsperformance against the targetsgoals set by the HRC Committee under our incentive compensation plans for that year, with payouts under the plans generally determined by reference to performance against the established targets.goals. The HRC Committee meets in executive session to review the MBO results for the CEO and to determine a recommendation for her annual cash incentive award to be approved by the independent members of the Board.
In setting incentive compensation for the NEOs, the HRC Committee generally does not consider the effect of past changes in stock price or expected payouts or earnings under other plans. In addition, incentive compensation decisions are made without regard to length of service or prior awards. For example, NEOs with longer service at HP or who are eligible for retirement do not receive greater or lesser awards, or larger or smaller target amounts, in a given year compared to NEOs with shorter service or who are not eligible for retirement.
Determination of Fiscal 20132015 Executive Compensation
Under our Total Rewards Program, executive compensation consists of the following elements:of: base salary, annual incentive pay,incentives, long-term incentive pay,incentives, benefits and perquisites.
TableFiscal 2015 Compensation Highlights
Prior to the separation, the HP Board and the HP HRC Committee regularly explored ways to improve our executive compensation program, whose philosophy continues with our Board and HRC Committee following the separation. In making changes for fiscal 2015, the HP HRC Committee considered the evolution of Contentsour turnaround, our current business needs and strategy, and the anticipated impact of the separation. The objectives were to encourage strong performance from our executives, pay commensurately with the performance delivered, and align the interests of our executives with those of our stockholders and reflect our stockholders’ perspectives and input. While many elements of the fiscal 2015 executive compensation program remained consistent with prior years, some changes were made:
2015 Base Salary
Consistent with our philosophy of tying pay to performance, our executives receive a relatively small percentage of their overall compensation in the form of base salary. Consistent with the practice of our peer group companies, theThe NEOs are paid an amount in the form of base salary sufficient to attract qualified executive talent and maintain a stable management team. The HRC Committee aims to have executive base salaries set at or near the market median for comparable positions and comprise 10% to 20% of the NEOs'NEOs’ overall compensation, which is consistent with the practice of our peer group companies.
The HRC Committee usuallytypically establishes executive base salaries at the beginning of the fiscal year. In November 2012, based on their performance and anticipated future contributions, and
When Ms. Whitman joined HP as CEO, the Board established an initial salary of $1 per year, reflecting the company’s plan for a turnaround. For fiscal 2014, considering the stage of our planned turnaround, the Board decided it would be appropriate to begin paying Ms. Whitman a salary consistent with the median of our peer group. Accordingly, Ms. Whitman received a salary of $1.5 million for fiscal 2014, and the Board made no changes to this salary level for fiscal 2015. The Board maintains a total CEO target compensation package that approximates the competitive median of our market data, theand is consistent with our pay positioning strategy and pay-for-performance philosophy.
The HRC Committee increased Ms. Lesjak's, Mr. Veghte's, and Mr. Bradley'sdid not change the salaries from $825,000 to $835,000, from $750,000 to $850,000, and from $850,000 to $935,000, respectively, which brought their base salaries closer to the median base salary of the peer group for their positions. In addition, the HRC Committee approved the following increasesother NEOs in recognition of increased position responsibilities and market pay levels: from $600,000 to $700,000 for Mr. Nefkens upon his promotion to Executive Vice President, Enterprise Services on December 1, 2012; from $565,121 to $775,000 for Mr. Weisler upon his promotion to Executive Vice President, Printing and Personal Systems Group on June 18, 2013; and from $850,000 to $935,000 for Mr. Veghte upon his becoming Executive Vice President, the Enterprise Group on August 21, 2013. Ms. Whitman's salary remained at $1 for fiscal 2013.2015.
2015 Annual Incentive PayIncentives
Pay-for-Results (PfR)PfR Plan Structure
The NEOs are eligible to receiveearn an annual incentive pay under the PfR Plan. For fiscal 2013,2015, the HRC Committee again established an "umbrella"“umbrella” formula for the maximum bonus and then exercised negative discretion in setting actual bonuses. Under the umbrella formula, each Section 16 Officerofficer was allocated a pro rata share of 0.75% of net earnings based on his or her target annual incentive award, subject to a maximum bonus of 350%250% of the NEO’s target bonus, subject toand the maximum $10 million cap under the PfR Plan, with a potential pro rata reduction if the allocated bonus amounts exceeded the overall funding limit. The financial metric used to determine overall funding limit for the PfR Plan for Section 16 officers for purposes of Section 162(m) of the Code was 0.75% of net earnings, increased from 0.5% of net earnings in fiscal 2012. The increase in the funding limit was made to permit the maximum annual incentives for each of the NEOs to be eligible to qualify as performance-based compensation under Section 162(m) of the Code, in light of the increased potential awards for fiscal 2013 due to the addition of the Return on Invested Capital ("ROIC") performance goal.Plan. Below this umbrella funding structure, actual payouts were determined based upon financial metrics and MBOs established by the HRC Committee for Section 16 officers who report to the CEO and by the independent members of the Board for the CEO.
For fiscal 2013,2015, the funding metric used to determine deductibility under Section 162(m) of the Code was approved, as required, within the first 90 days of the fiscal year. After the end of the fiscal year, the actual funding based on this metric was certified, and it exceeded the maximum potential bonus for the combined covered officers.
The target annual incentive awards for the CEO and other NEOs for fiscal 20132015 were set at $3 million200% of salary for the CEO and 125% of salary for the other NEOs. NEOs, with a maximum of 250% of target.
The performance metrics approved by the HRC Committee imputed a competitive salary of $1.5 million and competitive bonus target of 200% of salary to set the CEO PfR target award level.
Consistentaligned with our intention to focus business leaders more directly on the financial performance of their own businesses, thebusinesses. The fiscal 2015 annual incentive structure for fiscal 2013 under the PfR Plan was revised to include new metrics and weightings. For fiscal 2013, the performance metrics approved by
the HRC Committeeplan consisted of three core financial metrics (i.e., revenue, net earnings/profit, and free cash flow as a percentage of revenue) and, as a fourth metric, MBOs, with each metric weighted equally at 25% of the target award value.
For fiscal 2013, the HRC Committee also approved an additional incentive opportunity for performance with respect to ROIC improvement and TSR. ROIC improvement had to be achieved above the stretch target for any additional payout to occur. This additional incentive opportunity could increase the annual cash incentive by 20% to 40%, resulting in a total maximum opportunity of 350% of target bonus and with any incremental amount to be paid one year later to enable retention of participating executives. TSR had to exceed the median of the S&P 500 for any payment above 250% of target bonus. The TSR requirement was implemented in response to stockholder outreach meetings and proxy advisors regarding the desire for a relative performance metric. The HRC Committee believed that the additional incentive opportunity and resulting total annual cash incentive opportunity was appropriate in light of the significant challenges being faced by HP, as well as the difficulty of achieving or exceeding the performance goals.
Fiscal 2015 Annual Incentive Plan | ||||||||||
Corporate or Business Unit (“BU”) Goals | ||||||||||
Key Design Elements | Revenue(1) ($ in billions) | Net Earnings/ Profit ($ in billions) | Free Cash Flow as a % | MBOs | % Payout(3) | |||||
Weight: | 25% | 25% | 25% | 25% | ||||||
Linkage: | ||||||||||
Global Function Executives(4) | Corporate | Corporate | Corporate | Individual | ||||||
Business Unit (“BU”) Executives(5) | BU | BU | Corporate | Individual | ||||||
Corporate Performance Goals: | ||||||||||
Maximum | N/A | — | — | Various | 250% | |||||
Target | $111.3 | $8.3 | 7.2% | Various | 100% | |||||
Threshold | — | — | — | Various | 0% |
The 2013 incentive plan structure is shown in the chart below:
Fiscal 2013 Annual Incentive Plan | ||||||||||
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| Corporate or Business Unit ("BU") Goals | |||||||||
| | | ||||||||
Key Design Elements | Revenue(1) (In billions) | Net Profit (In billions) | Free Cash Flow as a % of Revenue | MBOs | % Payout(2) | |||||
Weight: | 25% | 25% | 25% | 25% | ||||||
Linkage: | ||||||||||
Global Function Executives | Corporate | Corporate | Corporate | Individual | ||||||
BU Executives | BU | BU | Corporate | Individual | ||||||
Corporate Performance Goals: | ||||||||||
Maximum | — | — | — | Various | 250% | |||||
Target | $117.9 | $8.3 | 6.3% | Various | 100% | |||||
Threshold | — | — | — | Various | 0% | |||||
(1) | For revenue above target, weight is moved to net earnings/profit if net earnings/profit is also above target; otherwise, it is capped at target. |
(2) | Maximum funding for corporate free cash flow as a percentage of revenue is capped at 150% of target if corporate net earnings/profit achievement was below target and is capped at 100% of target if corporate net earnings/profit achievement was below threshold. If corporate net earnings achievement was above target, the maximum funding level is 250% of target. |
(3) | Interpolate for performance between discrete points. |
(4) | The Global Function Executives include Ms. Whitman, Ms. Lesjak, and Ms. Keogh. |
(5) | The BU Executives include Mr. Weisler and Mr. Neri. |
The specific metrics, their linkage to corporate/business unit results, and the weighting that was placed on each were chosen because the HRC Committee believed that:
The definition of and rationale for each of the financial performance metrics that was used is described in greater detail below:
Fiscal 2015 PfR | |||||||||
Financial | |||||||||
Performance
| Definition | Rationale for Metric | |||||||
Corporate Revenue | Net revenue as reported in | Reflects top line financial performance, which | |||||||
Business Revenue(2) | Business net revenue as reported in HP’s Annual Report on Form 10-K for fiscal 2015 | ||||||||
Corporate Net Earnings | Non-GAAP net earnings, as defined and reported in | Reflects bottom line financial performance, which | |||||||
Business Net Profit (“BNP”)(2) | Business owned net profit, excluding bonus net of income tax | ||||||||
Corporate Free Cash Flow | Cash flow from operations less net capital expenditures (gross purchases less retirements) divided by net revenue (expressed as a percentage of revenue) | Reflects efficiency of cash management practices, including working capital and capital expenditures |
(1) | While we report our financial results in accordance with generally accepted accounting principles (“GAAP”), our financial performance targets and results under our incentive plans are sometimes based on non-GAAP financial measures. The financial results, whether GAAP or non-GAAP, may be further adjusted as permitted by those plans and approved by the HRC Committee. We review GAAP to non-GAAP adjustments and any other adjustments with the HRC Committee to ensure performance takes into account the way the goals were set and executive accountability for performance. These metrics and the related performance targets are relevant only to our executive compensation program and should not be used or applied in other contexts. |
(2) | For fiscal 2015, PfR Plan payments for Mr. Weisler and Mr. Neri were determined partly based on the Business Revenue and BNP for their respective business units, and partly on Corporate |
(3) | ||||
GAAP diluted net earnings. |
HP's management in its financial and operational decision making. HP further believes that providing this additional non-GAAP information helps investors understand HP's operating performance and evaluate the efficacy of the methodology and information used by management to evaluate and measure such performance. This additional non-GAAP information is not intended to be considered in isolation or as a substitute for GAAP diluted net earnings.
At its November 20132015 meeting, the HRC Committee reviewed and certified performance against the financial metrics as follows:
Fiscal 2013 PfR Plan Performance Against Financial Metrics(1) | ||||||||
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| | Corporate | ||||||
| | |||||||
Metric | Weight(2) | Target ($ billion) | Result ($ billion) | Annual Cash Incentive Payout | ||||
Corporate Revenue | 25.0% | $117.9 | $112.3 | 19.6% | ||||
Corporate Net Earnings | 25.0% | $8.3 | $7.8 | 20.1% | ||||
Corporate Free Cash Flow (% of revenue) | 25.0% | 6.3% | 8.1% | 62.5% | ||||
Total | 75.0% | — | — | 102.3% | ||||
With respect to the ROIC improvement incentive award, the HRC Committee certified that the ROIC improvement was below the stretch goal, which led to a ROIC award adjustment of 0%.
Fiscal 2015 PfR Plan Performance Against Financial Metrics(1) | ||||||||
Metric | Weight(2) | Target ($ in billions) | Result ($ in billions) | Percentage of Target Annual Incentive Funded | ||||
Corporate Revenue | 25.0% | $111.3 | Below threshold | 0% | ||||
Corporate Net Earnings | 25.0% | $8.3 | $8.0 | 19.3% | ||||
Corporate Free Cash Flow (% of revenue) | 25.0% | 7.2% | Below threshold | 0% | ||||
Total | 75.0% | — | — | 19.3% |
(1) | Ms. Whitman, Ms. Lesjak, and Ms. Keogh received PfR Plan payments based on corporate financial metrics. Mr. Weisler received a PfR Plan payment based upon Printing and Personal Systems Group Revenue and BNP, and Corporate Free Cash Flow. Mr. Neri received a PfR Plan payment based on Enterprise Group Business Revenue and BNP, and Corporate Free Cash Flow. Financial results have been adjusted to exclude the impact of foreign currency fluctuations, within the funding level of the umbrella plan, based on HRC Committee discretion. After careful consideration, the HRC Committee determined that adjustment would be appropriate considering the magnitude and speed of foreign currency changes occurring after the goals had been set, and the feasibility of managerial action to counter such changes within the fiscal year. This increased the total payout from 0% to 19.3% with respect to the financial metrics used for Ms. Whitman, Ms. Lesjak, and Ms. Keogh, and increased the total payout from 19.4 % to 48% with respect to the financial metrics for Mr. Neri. The action resulted in no adjustment for Mr. Weisler, whose payout with respect to the financial metrics remained at 0%. |
(2) | The financial metrics were equally weighted to account for 75% of the target annual incentive. |
With respect to performance against the MBOs, the independent members of the HP Board evaluated the CEO'sCEO’s performance during an executive session held in December 2013.November 2015. The evaluation included an analysis of Ms. Whitman'sWhitman’s performance against all of her MBOs, which included, but were not limited to: leading the effective separation of HP, delivering 2015 financials considering currency headwinds, delivering 2016 budgets and 3-year plans for Hewlett Packard Enterprise and HP Inc. as two separate companies, delivering new Hewlett Packard Enterprise strategy, helping update HP Inc. strategy, ensuring business groups make appropriate progress on their turnarounds, building business group capability and confidence for the future, and continuing to execute the turnaround plan; achieving cost reduction and optimization program objectives; making the new operating model work and implementing operational scorecards; further refining our strategy and vision, and improving strategy and planning processes and execution; shifting the CEO's focus from internal to external; advancing our capabilitiesmake progress in cloud, security, big data and mobility; optimizing HP Labs; and improving employee engagement with special focus on vice presidents.Cloud. After conducting a thorough review of Ms. Whitman'sWhitman’s performance, the independent members of the HP Board determined that Ms. Whitman'sWhitman’s MBO performance had been achieved above target. Ms. Whitman'sWhitman’s accomplishments included:
As CEO of HP, Labs; and
The CEOMs. Whitman evaluated the performance of each of the other Section 16 officers and presented the results of those evaluations to theHP’s HRC Committee at its November 2013October 2015 meeting. The evaluations included an analysis of the officers’ performance against all of their MBOs. The HP HRC Committee concurred in the CEO'sCEO’s assessment of the degree of attainment of the MBOs of the other Section 16 officers. The evaluations included an analysis of the officers' performance against all of their MBOs. The results of these evaluations and selected MBOs for the other NEOs are summarized below.
Ms. Lesjak. The HP HRC Committee determined that Ms. Lesjak'sLesjak’s MBO performance had been achieved above target. Her MBOs included, but were not limited to: achieving cost reductionShe drove one of the most complex financial process and optimization program objectives; improvingsystems separations in corporate history while meeting all financial control, reporting and regulatory obligations. She executed and led all aspects of the finance organization's operating model; strengthening investor relations; effectively implementing businessseparation work including the split of numerous legal entities in a timely manner while minimizing foreign tax exposure, effectuating IP division, and finance scorecardsprotecting and our overall financial strategy; delivering on successionseparating all assets and talent development plans; and improving employee engagement scores.liabilities.
Mr. Veghte.Weisler. The HP HRC Committee determined that Mr. Veghte's MBO performance had been achieved at target for both of his roles in fiscal 2013—as Chief Operating and Strategy officer for HP and as head of the Enterprise Group. His MBOs included, but were not limited to: helping refine and communicate our strategy to customers, partners, and employees; delivering clear cloud and go-to-market strategies; improving the strategy organization's operating model; effectively implementing scorecards; and delivering on the Enterprise Group's financial plan.
Mr. Weisler. The HRC Committee determined that Mr. Weisler'sWeisler’s MBO performance had been achieved above target. His MBOs included, but were not limited to: achievingHe delivered significant cost reductionstructure improvements in Printing despite currency headwinds, led the expansion of immersive computing to commercial segments, advanced HP strategy in new areas, improved customer and optimization program objectives; conducting a comprehensive assessmentpartner scores and relationships, and successfully managed the separation and establishment of the Printing and Personal Systems Group and executing improvements; delivering a high-quality Printing and Personal Systems Group business plan and budget for fiscal 2014; improving customer, partner, and employee communications; and completing meaningful talent evaluation, development, and succession plans.HP Inc.
Mr. Nefkens.Neri. The HP HRC Committee determined that Mr. Nefkens'Neri’s MBO performance had been achieved significantly above target. His MBOs included, but were not limited to: improving profitability onHe orchestrated a significant turnaround in the Enterprise Group, accelerated growth in 3Par, returned Technical Services to growth, helped restructure commercial interest in China, successfully integrated Aruba and strengthened his leadership team in key accounts; achieving cost reduction and optimization program and Lean (Six Sigma) objectives; building a strong leadership team; improving customer satisfaction; and increasingroles.
Ms. Keogh. The HP HRC Committee determine that Ms. Keogh’s MBO performance had been achieved above target. While continuing to increase employee engagement scores.and leadership succession across the Company, she acted as a catalyst and driver for one of the largest and most complex global business separations to date. She also drove a rigorous recruitment process for the new board directors of both companies, and created two of the most diverse boards in the technology industry.
Mr. Bradley. Mr. Bradley changed roles in fiscal 2013 and the HRC Committee agreed with the CEO's recommendation that he not receive an annual incentive award on MBO performance.
Based on the findings of these performance evaluations, the HP HRC Committee (and, in the case of the CEO, the independent members of the HP Board) certifiedevaluated performance against the non-financial metrics for the NEOs as follows:
Fiscal 2015 PfR Plan Performance Against Non-Financial Metrics (MBOs) | ||||||
Named Executive Officer | Actual Performance as a Percentage of Target (%) | Weight (%) | Percentage of Target Annual Incentive Funded (%) | |||
Margaret C. Whitman | 250 | 25 | 62.5 | |||
Catherine A. Lesjak | 250 | 25 | 62.5 | |||
Dion J. Weisler | 150 | 25 | 37.5 | |||
Antonio F. Neri | 175 | 25 | 43.8 | |||
Tracy S. Keogh | 250 | 25 | 62.5 |
Fiscal 2013 PfR Plan Performance Against Non-Financial Metrics (MBOs) | ||||||
---|---|---|---|---|---|---|
Named Executive Officer | Actual Performance as a Percentage of Target Performance (%) | Weight(1) (%) | Annual Cash Incentive (%) | |||
Margaret C. Whitman | 120 | 25 | 30.0 | |||
Catherine A. Lesjak | 120 | 25 | 30.0 | |||
William L. Veghte | 100 | 25 | 25.0 | |||
Dion J. Weisler | 120 | 25 | 30.0 | |||
Michael G. Nefkens | 150 | 25 | 37.5 | |||
R. Todd Bradley | — | 25 | — | |||
Based on the level of performance described above on both the financial and non-financial metrics for fiscal 2013,2015, the payouts to the NEOs under the PfR Plan were as follows:
Fiscal 2013 PfR Plan Annual Cash Incentive Payout | ||||||||
---|---|---|---|---|---|---|---|---|
| Percentage of Target Annual Cash Incentive Funded | Final Annual Cash Incentive Payout | ||||||
| ||||||||
Named Executive Officer | Financial Metrics (%) | Non-Financial Metrics (%) | As % of Target Annual Cash Incentive (%) | Payout ($) | ||||
Margaret C. Whitman | 102.3 | 30.0 | 132.3 | 3,970,000* | ||||
Catherine A. Lesjak | 102.3 | 30.0 | 132.3 | 1,380,469 | ||||
William L. Veghte | 102.3 | 25.0 | 127.3 | 1,378,773 | ||||
Dion J. Weisler | 75.0 | 30.0 | 105.0 | 697,380 | ||||
Michael G. Nefkens | 111.5 | 37.5 | 149.0 | 1,288,668 | ||||
R. Todd Bradley | 72.4 | 0.0 | 72.4 | 846,662 | ||||
Fiscal 2015 PfR Plan Annual Incentive Payout | ||||||||||||||||
Percentage of Target Annual Incentive Funded | Total Annual Incentive Payout | |||||||||||||||
Named Executive Officer | Financial (%) | Non-Financial (%) | As % of Target Annual Incentive (%) | Payout ($) | ||||||||||||
Margaret C. Whitman | 19.3 | 62.5 | 81.8 | 2,453,262 | ||||||||||||
Catherine A. Lesjak | 19.3 | 62.5 | 81.8 | 868,864 | ||||||||||||
Dion J. Weisler | 0 | 37.5 | 37.5 | 386,719 | ||||||||||||
Antonio F. Neri | 48.0 | 43.8 | 91.8 | 831,709 | ||||||||||||
Tracy S. Keogh | 19.3 | 62.5 | 81.8 | 715,535 |
Fiscal 2013 Long-Term Incentive CompensationIncentives
At the beginning of fiscal 2013, theThe HRC Committee established a total long-term incentive target value for each NEO except for Mr. Weisler. Ofin early fiscal 2015 that amount, 70% was awarded40% weighted in the form of PCSOs, 30% weighted in the form of PARSUs and 30% was awardedweighted in the form of time-based RSUs. The high proportion of performance-based awards reflects our primary emphasis on performance-driven compensation.pay-for-performance philosophy. The time-based awards facilitatehelp retention, and are linked to stockholder value and ownership, which isare also an important goalgoals of our executive compensation program. Because Mr. Weisler was a senior vice president in November 2013, 50% of his LTI award was awarded in the form of performance-based awards and 50% was awarded in the form of time-based RSUs, consistent with other senior vice presidents.
2013 Performance-Contingent Stock Options
The 2013 PCSO award has an eight-year term and vests upon two conditions being met: (1) a stock price appreciation condition; and (2) a continued service condition. Specifically, 50% of the PCSO award vesting is contingent upon our stock price increasing by at least 20% over the grant date stock price for at least 20 consecutive trading days within four years from the date of grant and the recipient's service to HP continuing for at least two years from the date of grant. The remaining 50% of the PCSO award vesting is contingent upon our stock price increasing by at least 40% over the grant date stock price for at least 20 consecutive trading days within four years from the date of grant and the recipient's service to HP continuing for at least three years from the date of grant.
In establishing the stock price appreciation conditions, the HRC Committee believed that having the stock price remain at or above those levels for at least 20 consecutive trading days would be indicative of a sustained increase in value to stockholders. In addition, the HRC Committee believed that setting the stock price appreciation levels at 20% and 40% represents a significant "stretch" achievement, particularly considering the impact of our dividend yield, generating a reasonable return to stockholders. As of the end of fiscal 2013, both performance conditions have been met on the fiscal 2013 PCSO awards. For additional information, please see "Executive Compensation—Grants of Plan-Based Awards in Fiscal 2013."
2013 Restricted Stock Units2015 PCSOs
The 2013 RSU award vests ratably on an annual basis over three years. Three year vesting is common in our industry and corresponds to the time frame of our turnaround efforts.
For more information on grants of RSUs to the NEOs during fiscal 2013, see "Executive Compensation—Grants of Plan-Based Awards in Fiscal 2013."
Performance-Based Restricted Units Granted in Fiscal 2011 and 2012
No PRUs were granted in fiscal 2013; however, PRUs were granted in fiscal 2011 and 2012 for which fiscal 2013 is part of the performance period. Each PRU award reflects a target number of shares that may be issued to the award recipient at the end of each three-year performance period (i.e., fiscal 2011 to fiscal 2013, and fiscal 2012 to fiscal 2014). At the end of each fiscal year, the HRC
Committee certifies performance against the applicable performance targets, and units representing the level of achievement during that fiscal year are "banked" for potential payout at the end of the three-year performance period. The HRC Committee determines the actual number of shares the recipient receives at the end of the three-year period based on results achieved versus performance targets over the performance period. The actual number of shares a recipient receives ranges from zero to two times the target number of shares depending on performance during the three-year period.
We used "cash flow from operations as a percentage of revenue" as a financial performance metric for the PRUs granted in fiscal 2011 and 2012. Cash flow goals are set at the beginning of each fiscal year in each plan cycle, and performance is reviewed at the end of each fiscal year. A percentage of between zero and 200% is applied to one-third of a participant's cash flow target award each year to determine the number of units to be credited for that year based upon the extent to which the cash flow performance goal was achieved. If we do not achieve a threshold level of cash flow performance for the year, no units are credited for that year. The HRC Committee retained a one-year cash flow performance period in fiscal 2012 because establishing suitable cash flow goals for a longer performance period would have been difficult given the many uncertainties faced by our business.
The PRU awards granted in fiscal 2011 also included a relative TSR performance metric, which required our total shareholder return relative to the S&P 500 over the three-year performance period to be at least at the 25th percentile in order for there to be any payout. As a result, even if annual cash flow goals were achieved or exceeded in each of the three years of the performance period, there would be no payouts if our total stockholder return was in the bottom quartile of the S&P 500 companies over the performance period. HP's TSR performance over the three-year performance period applicable to the PRU awards granted in fiscal 2011 was below the 25th percentile, which resulted in a TSR modifier of 0% for those awards. As a result, as shown in the table below, even though units had been credited each year during the performance period based on cash flow performance, no shares were released to any participant (including the four current NEOs who were granted such awards) with respect to those awards.
The PRU awards granted in fiscal 2012 are not subject to a TSR modifier and therefore the HRC Committee established revenue growth as a new performance metric for fiscal 2012 PRU awards, given the connection between that metric and our long-term success. The HRC Committee also weighted cash flow from operations as a percentage of revenue at 70% and revenue growth at 30% for the fiscal 2012 PRU awards.
For PRU awards granted in fiscal 2012, recipients were credited with a weighted average of 115.0% attributable to fiscal 2013 performance. PRU awards granted in fiscal 2012 have a three-year performance period and so the final number of units paid out in shares will depend on fiscal 2014 performance.
For PRU awards granted in fiscal 2011, recipients were each credited with 132.2% of the units attributable to fiscal 2013 cash flow performance. However, due to TSR performance over the three-year period, none of these awards vested, and all were cancelled.
The actual performance for outstanding PRU awards as of the end of fiscal 2013 is summarized in the tables below:
| ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash Flow From Operations as a Percentage of Revenue(1) | Revenue Growth | | | ||||||||||||||
| | | ||||||||||||||||
| FY11 | FY12 | FY13 | FY14 | FY12 | FY13 | FY14 | TSR Modifier | Award Payout | |||||||||
FY11 Award | Achievement at 88.2% | Achievement at 35.4% | Achievement at 132.2% | N/A | N/A | N/A | N/A | 0% | 0% | |||||||||
FY12 Award | — | Achievement at 17.0% | Achievement at 164.3% | —(2) | Achievement at 56.8% | Achievement at 0.0% | —(2) | N/A | —(2) | |||||||||
Special Incremental Performance-Based Unit Awards
At its July 2010 meeting, the HRC Committee approved awards of special incremental performance-based restricted units ("SIPRUs") for certain executives, including Ms. Lesjak and Mr. Bradley. Under the terms of the SIPRU awards, 40% of the units would have been earned if we met our annual earnings per share ("EPS") goals for each year in the two-year period covering fiscal 2011 and fiscal 2012 ("Segment 1"), and if our TSR performance for the same period had been at or above the 50th percentile; the remaining 60% of the units would have been earned if we had met the EPS goal for fiscal 2013, and our TSR had been above the 50th percentile at the end of the entire three-year period of the award ("Segment 2"). Any units "banked" due to EPS performance during Segment 1 or Segment 2 would have been cancelled if TSR performance was below the 50th percentile of the S&P 500 for the 24- or 36-month period, respectively. However, units could have been earned based on TSR performance during a period even if no units were earned or "banked" based on EPS performance during that segment.
At its November 2013 meeting, the HRC Committee reviewed our actual EPS for fiscal 2013 and determined that performance was below threshold. In addition, the HRC Committee reviewed our TSR performance through the three-year period and determined it was below the 50th percentile of the S&P 500. As a result, no units were banked or earned under this program.
Special Retention Restricted Stock Unit Awards
In June 2011, the HRC Committee granted special retention awards of restricted stock units ("SRRSUs") to key members of the executive team, including Ms. Lesjak and Mr. Bradley, upon the recommendation of the then-current CEO. The awards were intended to provide both performance and retention incentives and will vest after four years with accelerated vesting possible in years three and four upon the attainment of certain stock price increases, which have not been achieved to date.
Salary Increases, Bonus Target Increases, and Special Performance-equity Grants in Connection with Role Changes for select NEOs
Messrs. Nefkens, Veghte and Weisler assumed new EVP roles during fiscal 2013. Each received a salary increase upon assuming his new role, and Messrs. Nefkens and Weisler each received an increase in their annual incentive target opportunity to 125% of eligible earnings, which is consistent with other EVPs. Mr. Nefkens received a regular, annual equity award upon his promotion in December 2012. In recognition of their assuming new and increased roles and responsibilities, Messrs. Veghte and Weisler received the following one-time, special equity awards:
| | Grant Date Fair Value | | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
| Grant Date | RSU | PCSO | Total | ||||||||
William L. Veghte | 9/18/2013 | $ | 1,800,019 | $ | 5,020,367 | $ | 6,820,386 | |||||
Dion J. Weisler | 8/1/2013 | $ | 1,050,013 | $ | 3,060,050 | $ | 4,110,063 |
Except for Mr. Veghte's PCSO award, the special equity awards include the same service and stock price appreciation conditions as described above for fiscal 2013 annual equity grants. Mr. Veghte's special PCSO award is divided into three equal tranches that must meet certain conditions to vest. For Mr. Veghte's special PCSO award to vest, both a stock price appreciation condition and a continued service condition must be satisfied. For the first third of his special PCSO award to vest, our stock price must increase by at least 20% over the grant date stock price for at least 20 consecutive trading days within four years from the date of grant and Mr. Veghte's service must continue for at least one year from the date of grant. For the second third of his award to vest, our stock price must increase by at least 20% over the grant date stock price for at least 20 consecutive trading days within four years from the date of grant and Mr. Veghte's service must continue for at least two years from the date of grant. For the remaining third of his award to vest, our stock price must increase by at least 40% over the grant date stock price for at least 20 consecutive trading days within four years from the date of grant and Mr. Veghte's service must continue for at least three years from the date of grant. If the stock price appreciation conditions have not been met by the fourth anniversary of the grant date, the options will be forfeited.
The HRC Committee determined that the value of these one-time, special awards should be considered to be spread out over their three-year vesting period, and to be considered part of fiscal 2014, 2015 and 2016 pay.
In addition, Mr. Veghte received a special three-year incentive opportunity linked to the profitability performance of the Enterprise Group over fiscal 2014, 2015 and 2016. Similar to Mr. Veghte's special PCSO award described above, the HRC Committee determined that the value of this special three-year bonus should be considered to be spread out over the three-year performance period, and to be considered part of fiscal 2014, 2015 and 2016 pay.
The special equity award and three-year incentive opportunity for Mr. Veghte reflected not only his new and increased role and responsibilities, and his critical role in the Enterprise Group, but
also reflected a one-time retention grant to counter an offer for a leadership role at an external company.
Upon his promotion to EVP, and in support of our turnaround effort, Mr. Nefkens received a special, one-time RSU award opportunity linked to the profitability of Enterprise Services in lieu of his continued participation in a similar cash incentive program for senior vice presidents. Under the program, Mr. Nefkens could receive an award if ES-owned operating profit ("OOP") exceeded target, with a maximum award of $2.625 million if OOP exceeded target by $300 million, with straight line interpolation between target and maximum. At its November 2013 meeting, the HRC Committee reviewed and approved an Enterprise Services' OOP result of $49 million above target and a resulting RSU award of $428,750 to be granted to Mr. Nefkens in December 2013. This RSU award will vest 50% on the first anniversary of the grant date and 50% on the second anniversary of the grant date subject to his continued employment.
Fiscal 2014 Compensation Programs
The Board and the HRC Committee regularly explore ways in which our executive compensation program can be improved. We engage with our stockholders to elicit their feedback, and we take this feedback very seriously. In 2013, 76% of shares voted were voted in favor of our "say-on-pay" proposal. In response to this vote, we had numerous discussions with institutional investors to determine the key factors contributing to their vote and how we could improve the program for 2014. In addition, in making changes for 2014 we considered the evolution of our turnaround, the industry, and our current business needs in order to maintain a program that encourages strong performance from our executives, pays commensurately with the performance delivered, and aligns their interests with those of our stockholders. While many elements of the 2013 executive compensation program will remain in 2014, changes for fiscal 2014 include:
The HRC Committee has determined that these changes would be appropriate based on an analysis conducted by Farient that showed that the newthis vesting structure will on average require returns commensurate with the competitive environment as well as with the 2013 PCSO requirements, and considering that a three-tranche vs. two-tranche format will encourage more evenconsistent stockholder value creation over time. Moreover,time while maintaining comparable stock increase requirements to prior designs. In contrast to the PCSOs granted in fiscal 2014, in response to stockholder feedback, the HRC Committee determined that thedid not include a seven-year relative TSR measure is more appropriate for a long-term than a short-term plan because itvesting alternative. The PCSOs will encourage long-term value creation. The HRC Committee also concluded that the PCSOs should be earnedforfeited if we outperform the market over the longer-term (i.e., seven years), coupled with the executive satisfying the seven-year service requirement. If neither the stock price goals norare not attained in the TSR performance goal has been met by the seventh anniversaryapplicable time periods.
As of the grant date, the PCSOs will be forfeited.
2015 PARSUs
The PARSUs have two- and a three-year performance periods that began at the start of fiscal 2015 and continue through the end of fiscal 2016 and 2017, respectively. Under this program, 50% of the PARSUs will be(including dividend equivalent units) are eligible for vesting based on performance over two years with continued service, and 50% of the PARSUs will beare eligible for vesting based on performance over three years with continued service. The two- and three-year awards eligible for two-year vesting will be 50% contingent upon our two-year Relative TSR ("RTSR") and 50% contingent on our ROIC performance, and similarly, the awards eligible
for three-year vesting will be 50% contingent upon our three-yearare equally weighted between RTSR and 50% contingent on our ROIC performance. This structure is depicted in the chart below.
2014-2016 PARSUs | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|
| | | Relative TSR vs. S&P 500 | Payout | ||||||
Key Design Elements | ROIC vs. Internal Goals | | | | ||||||
Weights | 25% | 25% | 25% | 25% | % of | |||||
Performance/Vesting Periods(1) | 2 years | 3 years | 2 years | 3 years | Target(2) | |||||
Performance Levels: | ||||||||||
Max | To be disclosed after the end of the performance periods | > 90th percentile 70th percentile 50th percentile 25th percentile < 25th percentile | 200% 150% 100% 50% 0% | |||||||
2015-2017 PARSUs | ||||||||||
Key Design Elements | ROIC vs. Internal Goals | Relative TSR vs. S&P 500 | Payout | |||||||
Weight | 25% | 25% | 25% | 25% | % of Target(2) | |||||
Performance/Vesting Periods(1) | 2 years | 3 years | 2 years | 3 years | ||||||
Performance Levels: Max > Target Target Threshold < Threshold | Target to be disclosed after the end of the performance periods only, out of concern for competitive harm | > 90th percentile 70th percentile 50th percentile 25th percentile < 25th percentile | 200% 150% 100% 50% 0% |
(1) | Performance measurement and vesting occur at the end of the two- and three-year periods, subject to continued service. |
(2) | Interpolate for performance between discrete points. |
Internal ROIC goals were set after consideration of historical performance, internal budgets, external expectations, and peer group performance.
The PARSUs were structured to vest 50% over two and 50% over three years because this time horizon is consistent with our turnaround plan. Relative TSR was chosen as a performance measure because it is a direct measure of stockholder value, and complements the absolute measure of stock price growth inherent in the PCSOs. ROIC was chosen because it measures capital efficiency, which is a key driver of stockholder value.
For more information on grants of PARSUs to the NEOs during fiscal 2015, see “Executive Compensation—Grants of Plan-Based Awards in Fiscal 2015.”
2015 RSUs
2015 RSUs and related dividend equivalent units vest ratably on an annual basis over three years from the grant date. Three year vesting is common in our industry and supports executive retention and stockholder alignment.
For more information on grants of RSUs to the NEOs during fiscal 2015, see “Executive Compensation—Grants of Plan-Based Awards in Fiscal 2015.”
Special Retention RSUs
In June 2011, the HRC Committee granted special retention awards of restricted stock units (“SRRSUs”) to key members of the executive team, including Ms. Lesjak, upon the recommendation of the then-current CEO. The awards were intended to provide both performance and retention incentives and vest after four years with accelerated vesting possible upon the attainment of certain stock price increases. The SRRSUs vested in June 2015.
Separation-Related Equity Award Amendments
In connection with the separation of HP into two separate companies, the HRC Committee approved accelerated vesting for awards that were otherwise scheduled to vest between September 18,
2015 and December 31, 2015, truncating the performance period for the fiscal 2014 PARSUs, and settlement of equity awards as described below in order to: enable employees to become HP shareholders with respect to equity awards substantially earned based on service with HP and HP’s performance through the time of the separation; acknowledge that PARSU performance goals set for HP would no longer be relevant post-separation, and that over 73% of the fiscal 2014 PARSU performance period had been completed; and ensure that employees who would otherwise vest in awards during the equity administration systems blackout period, before and after the separation, could exercise options and receive vested shares in a timely manner.
On July 29, 2015 the HRC Committee approved amendments to certain outstanding long-term incentive awards. These amendments affected most outstanding awards that were originally scheduled to vest between September 18, 2015 and December 31, 2015, including such awards held by HP’s NEOs. The amendments provided for the accelerated vesting on September 17, 2015, of any time-based RSUs and related accrued dividend equivalent shares, stock options, PCSOs, or SARs that were otherwise scheduled to vest between September 18, 2015 and December 31, 2015. Vesting was accelerated for such PCSOs only to the extent that the underlying performance conditions had been satisfied by September 16, 2015. RSUs and related accrued dividend equivalent shares held by U.S. employees who qualified for retirement treatment (i.e., those who have attained age 55 with 15 years of qualifying service), including Ms. Lesjak, were settled as originally scheduled in order to comply with Section 409A of the Code.
Prior to July 31, 2015, the HRC Committee determined to end the performance period for outstanding PARSUs at the end of the last fiscal quarter before separation (i.e., on July 31, 2015) because it allowed accurate measurement of the performance results as of that date and would allow the amounts earned in respect of such equity awards to reflect solely the pre-separation performance of HP. Accordingly, the HRC Committee amended the fiscal 2014 PARSUs (those granted in December 2013) to provide that vesting and settlement with respect to 50% of the target units and accrued dividend equivalent shares subject to each award that were scheduled to vest in October 2015 (i.e., that portion near the end of the second year of a two-year performance period) were accelerated to September 17, 2015 (based on relative TSR and ROIC performance as of July 31, 2015); and the remaining target units that were scheduled to vest in October 2016 (i.e., those near the end of the second year of a three-year performance period) were converted to time-vested RSUs (based on relative TSR and ROIC performance as of July 31, 2015), and will vest on the original vesting date, October 31, 2016, subject to continued employment through such date. For the fiscal 2014 PARSUs granted to Ms. Lesjak, 50% of the target units subject to such award were settled on October 1, 2015 (based on relative TSR and ROIC performance as of July 31, 2015) in order to comply with Section 409A of the Code due to her retirement eligibility; and the remaining target units were converted to RSUs on the same basis and subject to the same vesting conditions as for other Section 16 officers.
The fiscal 2014 PARSUs were subject to equally weighted RTSR and ROIC performance goals. The actual performance achievement as a percent of target for the fiscal 2014 PARSUs as of July 31, 2015 is summarized in the table below:
Fiscal 2014 PARSUs(1) | ||||||||||||||||||||||||||||
Segment | ROIC vs. Internal Goals(2) (% of target earned) | Relative TSR vs. S&P 500(3) (% of target earned) | Percent of Target or Converted to | |||||||||||||||||||||||||
Fiscal 2014 | Fiscal 2015 | Fiscal 2016 | Average | Fiscal 2014- Fiscal 2015 | Fiscal 2014- Fiscal 2016 | |||||||||||||||||||||||
Segment 1 (50%) | 95.4% | 54.9% | — | 75.2 | % | 109.0 | % | — | 92.1 | % | ||||||||||||||||||
Segment 2 (50%) | 95.4% | 54.9% | N/A | 75.2 | % | 109.0 | % | N/A | 92.1 | % |
(1) | As noted above, the fiscal 2014 PARSUs performance period was truncated based on performance as of July 31, 2015. The fiscal 2015 result was annualized from three to four quarters. |
(2) | For fiscal 2014 and fiscal 2015, the ROIC target was 11.0% and the actual results were 10.9% and 9.7%, respectively. |
(3) | For the truncated performance period from November 1, 2013 to July 31, 2015, HP’s relative TSR performance was at the 53rd percentile of the S&P 500. The target was the 50th percentile as disclosed in the fiscal 2014 proxy. This is the same as for 2015 PARSUs. |
Awards that were originally scheduled to vest after December 31, 2015 are generally expected to continue to vest in accordance with the original terms of such grants.
Treatment of HP Equity Following the Separation
Half of Ms. Whitman’s HP stock options that were vested immediately prior to the separation were converted into HP Inc. stock options, and half of Ms. Whitman’s HP stock options that were vested immediately prior to the separation were converted into Hewlett Packard Enterprise stock options. The exercise price, and number of shares of HP Inc. common stock or Hewlett Packard Enterprise common stock, as applicable, were determined in a manner intended to preserve the aggregate intrinsic value of the HP stock options as measured immediately before and immediately after the separation, subject to rounding. The adjusted awards are otherwise subject to the same terms and conditions that applied to the original HP stock options immediately prior to the separation. The reasons for the treatment of her outstanding and vested stock options include: Ms. Whitman’s continued leadership obligations in both companies as CEO of Hewlett Packard Enterprise and Chairman of HP Inc., Ms. Whitman has not exercised any vested options during her tenure as HP’s CEO and any HP options exercises on her part leading up to separation would be viewed very negatively by investors and employees, as well as her significant contributions over the past 4 years in establishing both companies. Ms. Whitman’s stock options that were unvested immediately prior to the separation as well as her other outstanding equity awards were treated the same way as HP equity awards held by individuals that would become employees or directors of Hewlett Packard Enterprise following the separation, as described below.
Other than as discussed above with respect to Ms. Whitman’s vested HP stock options, equity awards held by individuals that would become employees or directors of Hewlett Packard Enterprise
following the separation, including the NEOs, as applicable, were converted into equity awards, with respect to Hewlett Packard Enterprise common stock. The exercise price of (in the case of stock options or SARs), and number of shares subject to, each such award was adjusted in a manner intended to preserve the aggregate intrinsic value of the original HP awards as measured immediately before and immediately after the separation, subject to rounding. The adjusted awards are otherwise subject to the same terms and conditions that applied to the original HP awards immediately prior to the separation, except that, for PCSOs, the performance requirements were adjusted to relate to the price of Hewlett Packard Enterprise common stock in a manner that preserves the original ratio of stock price hurdle to exercise price, and except as provided above for fiscal 2014 PARSUs, the performance conditions applicable to such awards were adjusted to relate to Hewlett Packard Enterprise for the remainder of the performance period.
Other than as discussed above with respect to Ms. Whitman’s vested HP stock options, equity awards held by individuals that would remain employees or directors of HP Inc. (other than Ms. Whitman) following the separation, including the NEOs, as applicable, or who were former employees or directors of HP as of the separation, continue to relate to HP common stock, provided that the exercise price of (for stock options or SARs), and number of shares subject to, each such award was adjusted in a manner intended to preserve the aggregate intrinsic value of the original HP award as measured immediately before and immediately after the separation, subject to rounding. The adjusted awards are otherwise subject to the same terms and conditions that applied to the original HP award immediately prior to the separation, except that for PCSOs, the performance requirements will be adjusted in a manner that preserves the original ratio of stock price hurdle to exercise price, and for fiscal 2015 PARSUs granted in December 2014, the performance conditions applicable to such awards were adjusted to relate to HP Inc. for the remainder of the performance period.
Relationship between CEO Pay and Performance
The HRC Committee regularly assesses the potential pay-for-performance relationships inherent in our pay programs. The table below shows various definitions of pay that can be used in conducting such an assessment:
Rationale/Pay Component | Target | Realized | Realizable | |||
Rationale for use of definition | • Represents intended value of compensation • Treats options and other equity as though it were currency based on accounting value (grant date fair value) | • Recognizes that there is no assurance that this pay opportunity will be earned until it is actually earned • Represents income earned | • Matches time horizon of compensation with performance • Recognizes that unexercised options and unvested awards have inherent potential value | |||
Base Salary | • Actual salary in fiscal year earned | |||||
Annual Incentive (PfR Plan) | • Amount that would be earned for fiscal year if goals were achieved at 100% | • Actual bonus in fiscal year earned | ||||
PCSOs | • # of PSCOs granted multiplied by the grant date fair value | • # of PCSOs exercised multiplied by the intrinsic value at time of exercise | • # of PCSOs outstanding for which performance goals have been met multiplied by the Black-Scholes-Merton value at end of fiscal 2015 | |||
RSUs | • # of RSUs granted multiplied by the grant date price | • # of RSUs vested multiplied by the price at the time of vesting | • # of RSUs outstanding multiplied by the price at end of fiscal 2015 | |||
PARSUs/PRUs * | • # of target PARSUs granted multiplied by the grant date fair value | • # of PARSUs/PRUs vested multiplied by the price at the time of vesting | • # of PARSUs outstanding for which performance goals have been met multiplied by the price at end of fiscal 2015 (no such PARSUs were outstanding at the end of fiscal 2015) | |||
All Other | • Actual value of all other compensation as reported |
* | Performance restricted stock units (PRUs) were last granted in fiscal 2012, paid out at the beginning of fiscal 2015, and are included in realized compensation only for fiscal 2015. They were included in target and realizable compensation in the fiscal 2014 proxy. |
The first chart below shows Ms. Whitman’s three-year average annual pay for fiscal 2013-2015 calculated as target compensation, realized compensation, and realizable compensation. The second chart below shows annualized total stockholder return (“TSR”) for fiscal 2013-2015, fiscal 2014-2015, and fiscal 2015.
3-Year Average Total Compensation
By Pay Definition, Fiscal 2013-2015 ($ in millions)
* | The Board set CEO target total direct compensation (salary, target annual incentive, and long-term incentive value) at $17.5 million for fiscal 2015. The numbers shown here are three-year averages, and include additional “All Other Compensation” and the actual grant date fair value of equity as determined after the grant for financial reporting purposes. |
Annualized Total Stockholder Return
The charts above demonstrate a strong relationship between our CEO’s pay and performance over the past three years since:
Fiscal 2016 Compensation Program
The Board and the HRC Committee regularly identify and evaluate ways to improve our executive compensation program. We engage with our stockholders to elicit their feedback, and we take this feedback very seriously. In 2015, our “say-on-pay” proposal was approved by 95% of the voted
shares. We did not make any specific program changes for 2016 because of this support and determined that it would be appropriate to maintain the same overall program structure for 2016.
However, as we plan to discuss in further detail in the fiscal 2016 proxy statement, we made the following changes that we believe are in our stockholders’ interests and appropriate to the characteristics and business strategy of the post-separation company:
In fiscal 2016, the HRC Committee plans to continue to carefully review HP’s talent needs, and compensation programs and actions to:
Launch Grants
As will also be discussed in further detail in the fiscal 2016 proxy statement, the HRC Committee approved a launch grant program pursuant to which selective equity grants would be made in connection with the separation to key talent, including the NEOs. The HRC Committee determined that such a program was integral for the retention and continuity of leadership at a critical time for both companies and that the launch grants would strengthen alignment with stockholders’ interests. The launch grants to the NEOs were made on November 2, 2015, and were granted 50% in PCSOs and 50% in RSUs, vesting ratably over three years (contingent on achievement of performance conditions for the PCSOs), and subject to continued employment at each vesting date.
Benefits
We do not provide our executives, including the NEOs, with special or supplemental U.S. defined benefit pension or health benefits. Our NEOs receive health and welfare benefits (including retiree medical benefits, if eligibility conditions are met) under the same programs and subject to the same eligibility requirements that apply to our employees generally.
Benefits under all U.S. pension plans were frozen effective December 31, 2007. Benefits under the EDS Pension Plan ceased upon HP’s acquisition of EDS in 2009. As a result, no NEO or any other HP employee accrued a benefit under any HP U.S. defined benefit pension plan during fiscal 2013.2015. The amounts reported as an increase in pension benefits are for those NEOs who previously accrued a benefit in an HPa defined benefit pension plan prior to 2008,the cessation of accruals and reflect changes in actuarial values only, not additional benefit accruals.
The NEOs, along with other HP executives who earn base pay or an annual cash incentive in excess of certain federal tax law limits of the Internal Revenue Service (the “IRS”), are eligible to participate in the HP
Executive Deferred Compensation Plan (the "EDCP"“EDCP”). This plan is maintained to permit executives to defer some of their compensation in order to also defer taxation on such amounts. This is a standard benefit plan also offered by most of our peer group companies. The EDCP permits deferral of base pay in excess of the amount taken into account under the qualified HP 401(k) Plan ($255,000265,000 in fiscal 2013)2015) and up to 95% of the annual cash incentive payable under the PfR Plan. In addition, we make a 4% matching contribution to the plan on base pay contributions in excess of Internal Revenue Service ("IRS") limits.IRS limits up to a maximum of two times that limit. This is the same percentage as that which those executives are eligible to receive under the HP 401(k) Plan. In effect, the EDCP permits these executives and all employees to receive a 401(k)-type matching contribution on a portion of base-pay deferrals in excess of IRS limits. Amounts deferred or matched under the EDCP are credited with investment earnings based on investment options selected by the
participant from among mutual and proprietary funds available to employees under the HP 401(k) Plan. No amounts earn above-market returns.
Consistent with its practice of not providing any special or supplemental executive defined benefit programs, including arrangements that would otherwise provide special benefits to the family of a deceased executive, in 2011 the HRC Committee adopted a policy that, unless approved by our stockholders pursuant to an advisory vote, we will not enter into a new plan, program or agreement or modify an existing plan, program or agreement with a Section 16 officer that provides for payments, grants or awards following the death of the officer in the form of unearned salary or unearned annual cash incentives, accelerated vesting or the continuation in force of unvested equity grants, awards of ungranted equity, perquisites, and other payments or awards made in lieu of compensation, except to the extent that such payments, grants or awards are provided or made available to our employees generally.
Broad-based Changes to Equity Provisions
In fiscal 2015, the HP HRC Committee approved three changes to equity provisions for all employees generally:
Perquisites
Consistent with the practices of many of our peer group companies, we provide a small number of perquisites to our senior executives, including the NEOs, as discussed below.
We provide our NEOs with financial counseling services to assist them in obtaining professional financial advice, which is a common benefit among our peer group companies.companies, for convenience and to increase the understanding and effectiveness of our executive compensation program.
Due to our global presence, we maintain a certain number of corporate aircraft. Personal use of these aircraft by the CEO and some of her direct reports, including all of the NEOs, is permitted, subject to availability. The CEO may use HP aircraft for personal purposes in her own discretion and, at times, is advised to use HP aircraft for personal travel for security reasons. ECExecutive Council members may use HP aircraft for personal purposes, if available and approved by the CEO. The CEO and ECExecutive Council members are taxed on the value of this usage according to IRS rules. There is no tax gross-up paid on the income attributable to this value. In fiscal 2012, Ms. Whitman entered into a "time-sharing agreement"“time-sharing agreement” with HP, under which she reimburses us for costs incurred in connection with certain personal travel on corporate aircraft.aircraft above a certain amount.
Following a global risk management review commissioned by the Audit Committee, of the Board, security systems were installed at the personal residences of some of our executives, including the NEOs. These protections are provided due to the range of security issues that may be encountered by key executives of any large, multinational corporation.
Prior to October 2015, Mr. Weisler’s home location was Singapore and he was on international assignment in Palo Alto, California. In connection with his appointment as CEO of HP Inc. effective at the separation, Mr. Weisler relocated to Palo Alto in October 2015. While on international assignment, Mr. Weisler had been receiving certain benefits, including tax equalization benefits, under the executive mobility program. In lieu of relocation benefits under the executive mobility program, Mr. Weisler received a relocation bonus of $2.4 million in fiscal 2015 in connection with his permanent move to Palo Alto, which along with immigration and tax services benefits of up to $60,000 in fiscal 2016, was intended to cover all costs incurred by Mr. Weisler related to the relocation.
Severance Plan for Executive Officers
OurIn fiscal 2015 our Section 16 officers (including all of the NEOs) arewere covered by the HP Severance Plan for Executive Officers (the "SPEO"(“SPEO”), which is intended to protect HP and its stakeholders,stockholders, and provide a level of transition assistance in the event of an involuntary termination of employment. Under the SPEO, participants who incur an involuntary termination, not for cause, and who execute a full release of claims following such termination, which release has not been revoked or attempted to be revoked, are eligible to receive severance benefits in an amount determined as a multiple of base pay, andplus the average of the actual annual cash incentives paid for the preceding three years. In the case of the NEOs, the multiplier is 1.5. In the case of the CEO, the multiplier would have been 2.0 under the terms of the SPEO, but Ms. Whitman elected to be eligible for the same multiplier as the other NEOs. In all cases, this benefit will not exceed 2.99 times the sum of the executive'sexecutive’s base pay plus target annual cash incentive as in effect immediately prior to the termination of employment.
Although the majority of compensation for our executives is performance-based and largely contingent upon achievement of financial goals, the HRC Committee continues to believe that the SPEO provides important protection to the Section 16 officers and is appropriate for the attraction and retention of executive talent. In addition, we find it more equitable to offer severance benefits based on a standard formula for the Section 16 officers because severance often serves as a bridge when employment is involuntarily terminated, and should therefore not be affected by other, longer-term accumulations. As a result, and consistent with the practice of our peer group companies, other compensation decisions are not generally based on the existence of this severance protection.
In addition to the cash benefit, SPEO participants are eligible to receive (1) a pro-rata annual cash incentive for the year of termination based on actual performance results, inat the discretion of the HRC Committee, (2) pro-rata vesting of unvested equity awards, if the executive has worked at least 25% of the applicable service vesting period and only if any applicable performance conditions have been satisfied, and (3) for payment of a lump sum health benefitlump-sum health-benefit stipend of an amount equal to 18 months'months’ COBRA premiums for continued group medical coverage for the executive and his or her eligible dependents, to the extent those premiums exceed 18 times the monthly premiums for active employees in the same plan with the same level of coverage as of the date of termination. Consistent with general market practice, the HRC Committee amended the SPEO, effective November 1, 2015, to provide that for purposes of pro-rata equity vesting, there is no longer a periodrequirement that the executive has worked at least 25% of 18 months.the applicable service vesting period. This avoids situations that might be affected by the “cliff nature” of the previous design. In addition, the pro-rated vesting provision by itself acknowledges situations where termination occurs shortly after an award.
Benefits in the Event of a Change in Control
We doUntil November 1, 2015, we did not generally provide specific change in control benefits to our executive officers. While the Board or the HRC Committee does havehad broad discretion to accelerate vesting of all stock and stock option awards upon a change in control, accelerated vesting iswas not automatic. This approach allowsallowed the Board or the HRC Committee to decide whether to vest equity after taking into consideration the facts and circumstances of a given transaction. As a result, the NEOs could become fully vested in their outstanding equity awards upon a change in control only if the Board or the HRC Committee affirmatively acts to accelerate vesting.
Effective November 1, 2015, HRC Committee approved the Severance and Long-term Incentive Change in Control Plan for Executive Officers (the “Change in Control Plan”). Absent change in control, the new plan provides for the same benefits as the SPEO. In addition, anthe Change in Control Plan provides for full vesting of outstanding stock options, RSUs, PCSOs, and PARSUs upon involuntary termination of employment followingnot for cause or voluntary termination for good reason (as defined in the plan) within 24 months after a change in control of HP could qualify as "involuntary termination,(“double trigger”), and in situations where equity awards are not for cause" withinassumed by the meaningsurviving corporation (a “modified double trigger”). The Change in Control Plan further provides that under a double trigger, PARSUs will vest based on target performance, whereas under a modified double trigger, PARSUs will vest based upon the greater of the SPEO. This eventnumber of PARSUs that would triggervest based on actual performance and the same levelnumber of benefits as though the termination occurred absent a change in control.PARSUs that would vest pro-rata based upon target performance.
In the fall of 2010, the HRC Committee entered into a letter agreement with Ms. Lesjak relating to her employment with HP, which concluded on December 15, 2013. That letter agreement included, among other things, certain protections for Ms. Lesjak in the event of a change in control of HP during the three-year term of the agreement. The HRC Committee believedapproved the Change in Control Plan as it determined that including those provisions was appropriate given the context of changes in our leadership at that time.
Employment Offer Letterproviding for Margaret C. Whitman as Presidentdouble trigger and CEO
The terms of the offer letter under which Ms. Whitman was elected Presidentmodified double trigger equity acceleration is consistent with market practice, will provide clarity to prospective and CEO provided for her to receive an initial base salary of $1 per year, a fiscal 2012 target annual cash incentive under the PfR Plan of $2.4 million, with a maximum fiscal 2012 annual cash incentive opportunity equal to 2.5 times target, subject to the satisfaction of the same performance conditions applicable to other participants in the PfR Plan,current executives and a grant of an option to purchase 1,900,000 shares of our stock. The option vests in accordance with the vesting schedule and performance criteria described below:
The option is subject to substantially the same terms and conditions as apply to options granted to other executives under the 2004 Plan except (i) if Ms. Whitman's employment is involuntarily terminated without cause by HP, then Ms. Whitman will forfeit all unvested shares subject to performance- based vesting, receive pro-rata accelerated vesting of all unvested shares subject to time-based vesting,help attract and retain the right to exercise the option with respect to vested shares during the one-year period following her termination (or until the original expiration date of the option, if earlier), and (ii) any accelerated vesting of the option following Ms. Whitman's death or disability will apply only to shares subject to time-based vesting with any unvested shares subject to performance-based vesting being forfeited. In addition, Ms. Whitman is entitled to receive severance benefits payable under the SPEO at the rate applicable to an EVP rather than the rate applicable to the CEO (that is, using a 1.5x multiple of base pay plus annual cash incentive, rather than the 2.0x multiplier otherwise applicable to the CEO under the SPEO).talent.
Other Compensation-Related Matters
Succession Planning
Among the HRC Committee'sCommittee’s responsibilities described in its charter is to oversee succession planning and leadership development. The Board plans for succession of the CEO and annually reviews senior management selection and succession planning that is undertaken by the HRC Committee. As part of this process, the independent directors annually review the HRC Committee'sCommittee’s recommended candidates for senior management positions to see that qualified candidates are available for all positions and that development plans are being utilized to strengthen the skills and qualifications of the candidates. The criteria used when assessing the qualifications of potential CEO successors include, among others, strategic vision and leadership, operational excellence, financial management, executive officer leadership development, ability to motivate employees, and an ability to develop an effective working relationship with the Board.
In fiscal 2013,2015, with the separation in focus, the HRC Committee conducted a full executive talent review of all EC members, focusing specificallyproposed candidates for executive leadership positions. The focus was on EC member succession plans with an emphasis on CEO succession. In connection withensuring that review, the HRC Committee identified three potential successors to the CEO and created development plansboth companies were set up for all three individuals.
In conjunctionsuccess with the EC member talent review, management also reviewednecessary level of public company leadership experience and potential successors for the top 119 roles across HP. future needs of the organization.
In connection with that review, we concluded that "ready now"addition, as part of the organization design and talent selection process to staff both companies, management reviewed selection recommendations below the senior leadership level, considering skill sets, performance, potential successors existand diversity.
Finally, the Board and Chief Human Resources Officer conducted a rigorous process to recruit and select highly qualified board directors for approximately two-thirdseach company, and helped create two of those roles, which represents an increasethe most diverse boards in the level of readiness of our talent compared to previous years. We created development plans for the potential successors who were identified as being ready in one to two years or three to five years. We also continued tracking development plans for roles at the vice president level or above. In addition, we expanded our executive talent review process to include all vice presidents and
Table of Contentstechnology industry.
director-level employees, as well as critical roles beyond the top 119 roles. By the end of fiscal 2013, we had greater visibility into our talent pool down to the director level, and, in fiscal 2014, we will use that data to build the succession plans for the next tier of critical roles.
Stock Ownership Guidelines
Our stock ownership guidelines are designed to increase executives' equity stakes in HP and to align executives'executives’ interests more closely with those of stockholders.stockholders and mitigate compensation-related risk for HP. The current guidelines provide that, within five years of assuming a designated position, the CEO should attain an investment position in our stock equal to seven times her base salary and all other EVPs should attain an investment position equal to five times their base salary. Since the CEO salary was initially set at $1, we have used an imputed salary of $1.5 million, which is a competitive salary for a CEO in our peer group, to calculate Ms. Whitman's ownership requirement, thereby requiring her to hold shares with a value equal to at least $10.5 million within five years of joining HP.salaries. Shares counted toward these guidelines include any shares held by the executive directly or through a broker, shares held through the HP 401(k) Plan, shares held as restricted stock, shares underlying time-vested RSUs, and shares underlying vested but unexercised stock options (50% of the in-the-money value of such options is used for this calculation). NEOs subject to this ownership guideline (thatMs. Lesjak is thosethe only NEO who havehas been in a role covered roleby our stock ownership guidelines for over five or more years) areyears and she is in compliance with its requirements.the stock ownership guidelines. In addition, our other NEOs were on track for compliance within the required time or held the required investment position in our stock as of the end of fiscal 2015.
The HRC Committee has adopted a policy prohibiting our executive officers from engaging in any form of hedging transaction (derivatives, equity swaps, forwards, etc.) including, among other things, short sales transactionand transactions involving publicly traded options. In addition, with limited exceptions, our executive officers are prohibited from holding HP securities in margin accounts and from pledging HP securities as collateral for loans. We believe that these policies further align our executives'executives’ interests with those of our stockholders.
Accounting and Tax Effects
The impact of accounting treatment is considered in developing and implementing our compensation programs, including the accounting treatment as it applies to amounts awarded or paid to our executives.
The impact of federal tax laws on our compensation programs is also considered, including the deductibility of compensation paid to the NEOs, as limited by Section 162(m) of the Code. Most of ourOur compensation programs areprogram is designed with the intention that compensation paid thereunder willin various forms may be eligible to qualify for deductibility under Section 162(m), but to preserve flexibility in administering compensation programs, not all amounts paid under all of our compensation programs necessarily qualifythere may be exceptions for deductibility.administrative or other reasons with a strong business justification.
Policy on Recovery of Annual Cash Incentive in Event of Financial Restatement
In fiscal 2006, the Board adopted a "clawback"“clawback” policy that permits the Board to recover certain annual cash incentives from senior executives whose fraud or misconduct resulted in a significant restatement of financial results. The policy allows for the recovery of annual cash incentives paid at or above target from those senior executives whose fraud or misconduct resulted in the restatement where the annual cash incentives would have been lower absent the fraud or misconduct, to the extent permitted by applicable law.
In addition, Additionally, our incentive plan document allows for the recoupment of performance-based annual incentives and long-term incentives consistent with applicable law and the clawback policy. Also, in fiscal 2013,2014, we added a provision to our incentive plan documentequity grant agreements to allow forclarify that they are subject to the recoupment of annual cash incentive and long-term incentive awards consistent with applicable law and the "clawback"clawback policy.
HR and CompensationHRC Committee Report on Executive Compensation
The HR and CompensationHRC Committee of the Board of HP has reviewed and discussed with management this Compensation Discussion and Analysis. Based on this review and discussion, it has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and in the Annual Report on Form 10-K of HP filed for the fiscal year ended October 31, 2013.2015.
HR and CompensationHRC Committee of the Board of Directors
Patricia F. Russo,Charles V. Bergh
Carl Bass
Rajiv L. Gupta, Chair
Stacey Mobley
The following table sets forth information concerning the compensation of our CEO, our chief financial officer, our three other most highly compensated executive officers serving during fiscal 2013 and one HP employee who served as an executive officer during fiscal 2013, but who was no longer serving as such on the last day of fiscal 2013.2015.
Name and Principal Position | Year | Salary(1) ($) | Bonus(2) ($) | Stock Awards(3) ($) | Option Awards(4) ($) | Non-Equity Incentive Plan Compensation(5) ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(7) ($) | All Other Compensation(8) ($) | Total ($) | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Margaret C. Whitman | 2013 | 1 | — | 4,394,475 | 12,713,433 | 260,000 | (6) | — | 275,334 | 17,643,243 | ||||||||||||||||
President and Chief | 2012 | 1 | — | 7,040,076 | 6,414,249 | 1,686,915 | — | 220,901 | 15,362,142 | |||||||||||||||||
Executive Officer | 2011 | 1 | — | — | 16,146,331 | — | — | 372,598 | 16,518,930 | |||||||||||||||||
Catherine A. Lesjak | 2013 | 835,032 | — | 1,500,002 | 4,460,404 | 1,380,469 | — | 40,600 | 8,216,507 | |||||||||||||||||
Executive Vice President | 2012 | 825,011 | — | 2,478,698 | 2,308,503 | 570,166 | 480,404 | 40,670 | 6,703,452 | |||||||||||||||||
and Chief Financial Officer | 2011 | 825,000 | — | 9,310,408 | — | 679,143 | 89,920 | 101,507 | 11,005,978 | |||||||||||||||||
William L. Veghte | 2013 | 866,776 | 1,083,470 | 3,450,021 | 9,926,810 | 295,303 | — | 22,469 | 15,644,849 | |||||||||||||||||
Executive Vice President and General Manager, Enterprise Group | ||||||||||||||||||||||||||
Dion J. Weisler | 2013 | 647,478 | 2,302,598 | 1,603,213 | 3,473,722 | 33,208 | — | 1,089,993 | 9,150,212 | |||||||||||||||||
Executive Vice President, Printing and Personal Systems Group | ||||||||||||||||||||||||||
Michael G. Nefkens | 2013 | 691,693 | — | 1,050,017 | 3,332,493 | 1,288,668 | — | 2,663,130 | 9,026,001 | |||||||||||||||||
Executive Vice President, | ||||||||||||||||||||||||||
Enterprise Services | ||||||||||||||||||||||||||
R. Todd Bradley(9) | 2013 | 935,036 | — | 1,875,002 | 5,575,504 | 846,662 | 235 | 66,281 | 9,298,720 | |||||||||||||||||
Former Executive Vice | 2012 | 850,011 | — | 2,974,443 | 2,770,206 | 640,569 | 251 | 127,125 | 7,362,605 | |||||||||||||||||
President, Printing and | 2011 | 850,000 | — | 9,271,624 | — | 464,457 | 273 | 105,447 | 10,691,801 | |||||||||||||||||
Personal Systems Group |
Name and Principal Position | Year | Salary(1) ($) | Bonus(2) ($) | Stock Awards(3)(4) ($) | Option Awards(5) ($) | Non-Equity Incentive Plan Compensation(6) ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings(8) ($) | All Other Compensation(9) ($) | Total ($) | |||||||||||||||||||||||||||
Margaret C. Whitman | 2015 | 1,500,058 | — | 7,771,200 | 5,113,585 | 2,453,262 | — | 297,441 | 17,135,546 | |||||||||||||||||||||||||||
President and Chief Executive Officer | 2014 | 1,500,058 | — | 8,147,637 | 5,355,075 | 4,314,000 | — | 295,394 | 19,612,164 | |||||||||||||||||||||||||||
2013 | 1 | — | 4,394,475 | 12,713,433 | 260,000 | (7) | — | 275,334 | 17,643,243 | |||||||||||||||||||||||||||
Catherine A. Lesjak | 2015 | 850,033 | — | 3,287,819 | 2,163,437 | 868,864 | 95,650 | 51,862 | 7,317,665 | |||||||||||||||||||||||||||
Executive Vice President and Chief Financial Officer | 2014 | 850,033 | — | 3,447,082 | 2,265,610 | 1,421,392 | 356,262 | 33,137 | 8,373,516 | |||||||||||||||||||||||||||
2013 | 835,032 | — | 1,500,002 | 4,460,404 | 1,380,469 | — | 40,600 | 8,216,507 | ||||||||||||||||||||||||||||
Dion J. Weisler | 2015 | 774,999 | — | 3,286,543 | 2,163,437 | 386,719 | — | 12,116,370 | 18,728,068 | |||||||||||||||||||||||||||
Executive Vice President, Printing and Personal Systems Group | 2014 | 831,251 | — | 3,133,726 | 2,059,650 | 1,722,400 | — | 5,765,765 | 13,512,792 | |||||||||||||||||||||||||||
2013 | 647,478 | 2,302,598 | 1,603,213 | 3,473,722 | 33,208 | — | 1,089,993 | 9,150,212 | ||||||||||||||||||||||||||||
Antonio F. Neri | 2015 | 725,028 | 1,500,000 | 1,999,993 | 1,264,048 | 831,709 | 8,338 | 262,489 | 6,591,605 | |||||||||||||||||||||||||||
Executive Vice President and General Manager, Enterprise Group | ||||||||||||||||||||||||||||||||||||
Tracy S. Keogh | 2015 | 700,027 | — | 3,793,332 | 1,180,059 | 715,535 | — | 55,847 | 6,444,800 | |||||||||||||||||||||||||||
Executive Vice President, Human Resources | ||||||||||||||||||||||||||||||||||||
(1) | Amounts shown represent base salary earned or paid during the fiscal year, as described under “Compensation Discussion and Analysis—Analysis of Elements of Fiscal 2015 Executive Compensation—Base Pay.” The fiscal 2015 salary amount for Mr. Weisler above reflects the conversion of Mr. Weisler’s salary from Singaporean dollars to U.S. dollars using the currency exchange rate in effect at the time of each payment to Mr. Weisler. |
(2) | The fiscal 2015 bonus amount for Mr. Neri represents a signing bonus for an internal employment offer he received in fiscal 2014. Mr. Neri became a Section 16 Officer on August 1, 2015. The fiscal 2013 bonus amount for Mr. Weisler represents the second installment of a signing bonus of $1,552,869 paid under the terms of his employment offer letter, a retention bonus of $85,557 and a guaranteed portion of $664,172 of his annual incentive bonus payable under the PfR Plan. |
(3) | The grant date fair value of all stock awards has been calculated in accordance with applicable accounting standards. In the case of RSUs, the value is determined by multiplying the number of units granted by the closing price of our stock on the grant date. For PARSUs awarded in fiscal 2015, amounts shown reflect the grant date fair value of the PARSUs for the two- and three-year performance periods beginning with fiscal 2015 based on the probable outcome of performance conditions related to these PARSUs at the grant date. For PARSUs awarded in fiscal 2014, amounts shown reflect the grant date fair value of the PARSUs for the two- and three-year performance periods beginning with fiscal 2014 based on the probable outcome of performance conditions related to these PARSUs at the grant date. The 2014 and 2015 PARSUs include both market-related (TSR) and internal (ROIC) performance goals as described under the “Compensation Discussion and Analysis–Fiscal 2015 Long-term Incentive Compensation.” Consistent with the applicable accounting standards, the grant date fair value of the market-related TSR component has been determined using a Monte Carlo simulation model. The table below sets forth the grant date fair value for the PARSUs granted in fiscal 2015: |
Name | Probable Outcome of Performance Conditions Grant Date Fair Value ($) * | Maximum Outcome of Performance Conditions Grant Date Fair Value ($) | Market-related Component Grant Date Fair Value ($) ** | |||||||||
Margaret C. Whitman | 1,703,056 | 3,406,111 | 2,134,973 | |||||||||
Catherine A. Lesjak | 720,525 | 1,441,050 | 903,260 | |||||||||
Dion J. Weisler | 720,525 | 1,441,050 | 903,260 | |||||||||
Antonio F. Neri | — | — | — | |||||||||
Tracy S. Keogh | 393,027 | 786,054 | 492,657 |
* | Amounts shown represent the grant date fair value of the PARSUs subject to the internal ROIC performance goal (i) based on the probable or target outcome as of the date the goals were set and (ii) based on achieving the maximum level of performance for the two- and three-year performance periods beginning in fiscal 2015. The grant date fair value of the ROIC goal component of the PARSUs awarded on December 10, 2014 was $37.36 per unit, which was the closing share price of our common stock on December 10, 2014. |
** | Amounts shown represent the grant date fair value of PARSUs subject to the market-related TSR goal component of the PARSUs, for which expense recognition is not subject to probable or maximum outcome assumptions. The weighted-average grant date fair value of the market-related TSR goal component of the PARSUs awarded on December 10, 2014 was $46.84 per unit, which was determined using a Monte Carlo simulation model. The significant assumptions used in this simulation model were a volatility rate of 33.59%, a risk-free interest rate of 0.97%, and a dividend yield rate of 1.7%. |
(4) | In connection with the separation of Hewlett Packard Enterprise from HP Inc., Segment 1 of fiscal year 2014 PARSUs were vested and settled during fiscal year 2015 (based on relative TSR and ROIC performance as of July 31, 2015). Please see sectionSeparation-Related Equity Award Amendmentsof the Compensation Discussion and Analysis for additional information, including rationale. This settlement resulted in incremental compensation cost that is reflected in this column and is shown in the table below. The incremental cost of $1.0171 per TSR Segment 1 target unit was determined using a Monte Carlo simulation model. The significant assumptions used in this simulation were a volatility rate of 24.82%, a risk-free interest rate of 0.43% and a dividend yield rate of 2.32% |
Name | Incremental Compensation Cost ($) | |||
Margaret C. Whitman | 33,161 | |||
Catherine A. Lesjak | 14,030 | |||
Dion J. Weisler | 12,754 | |||
Antonio F. Neri | — | |||
Tracy S. Keogh | 7,653 |
(5) | The grant date fair value of PCSO awards is calculated using a combination of a Monte Carlo simulation model and a lattice model as these awards contain market conditions. For information on the assumptions used to calculate the fair value of the awards, refer to Note 5 to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended October 31, 2015, as filed with the SEC on December 16, 2015. |
(6) | Amounts shown represent payouts under the PfR Plan (amounts earned during the applicable fiscal year but paid after the end of that fiscal year). |
(7) | Based on the previously established fiscal 2013 financial metrics and MBOs under the PfR Plan, the independent directors of the Board determined that Ms. Whitman’s bonus for fiscal 2013 was approximately $3,970,000, or 132.3% of target, reflecting outstanding performance for the year. This reflected the Board’s recognition of Ms. Whitman’s performance on behalf of HP, and the members’ assessment that her performance in fiscal 2013 was above target. In 2013, the HRC established a target compensation level for Ms. Whitman aligned with the market median. This amount included a target LTI award of $13.4 million. Due to timing delays with the grant that were necessary to accommodate stock plan share limits and the associated stock price changes during those delays, and higher-than-planned financial valuations of the grant, the aggregate grant date fair value of the LTI award was $17.11 million or $3.71 million higher than the established target LTI. Accordingly, the independent directors determined it was in the best interest of HP and its stockholders to offset this higher financial LTI valuation by the cash bonus otherwise payable to Ms. Whitman under the PfR Plan, resulting in Ms. Whitman receiving $3,710,000 of her $3,970,000 bonus through LTI grant value, and $260,000 in cash payment. This is reflected in the amount above. |
(8) | Amounts shown represent the increase in the actuarial present value of NEO pension benefits during the applicable fiscal year. There is no amount shown for NEOs in a year where there has been a decrease in the actuarial present value of pension benefits, which occurred for Ms. Lesjak due to an increase in the discount rates used to determine these present values as of October 31, 2013 compared to those used as of October 31, 2012. As described in more detail under “Narrative to the Fiscal 2015 Pension Benefits Table” below, pension accruals have ceased for all NEOs, and NEOs hired after the dates that pension accruals ceased are not eligible to participate in any such pension plan. Although due to his current participation in the International Retirement Guarantee, Mr. Neri could accrue additional benefits if he were |
transferred at HPE’s request to another country, since this has not happened, there are no additional pension accruals for any NEOs. Accordingly, the amounts reported for the NEOs do not reflect additional accruals but reflect the passage of one more year from the prior present value calculation and changes in other actuarial assumptions. The assumptions used in calculating the changes in pension benefits are described in footnote (2) to the “Fiscal 2015 Pension Benefits Table” below. No HP Inc. or Hewlett Packard Enterprise plan provides for above-market earnings on deferred compensation amounts, so the amounts reported in this column do not reflect any such earnings. |
(9) | The amounts shown are detailed in the “All Other Compensation Table” below. |
Fiscal 2013 Executive Compensation—Base Pay." The fiscal 2013 salary amount for Mr. Weisler above reflects the conversion of Mr. Weisler's salary from Singaporean dollars to U.S. dollars using the currency exchange rate in effect at the time of each payment to Mr. Weisler.
Fiscal 2013 All Other Compensation Table
The following table provides additional information about the amounts that appear in the "All“All Other Compensation"Compensation” column in the Summary“Summary Compensation TableTable” above:
Name | 401(k) Company Match(1) ($) | NQDC Company Match(2) ($) | Mobility Program(3) ($) | Security Services/ Systems(4) ($) | Legal Fees ($) | Severance Payments ($) | Personal Aircraft Usage(5) ($) | Tax Benefit(6) ($) | Miscellaneous(7) ($) | Total AOC ($) | ||||||||||||||||||||||||||||||
Margaret C. Whitman | 10,600 | — | — | 719 | — | — | 268,122 | — | 18,000 | 297,441 | ||||||||||||||||||||||||||||||
Catherine A. Lesjak | 10,600 | 9,600 | — | 12,662 | — | — | — | — | 19,000 | 51,862 | ||||||||||||||||||||||||||||||
Dion J. Weisler | 1,227 | — | 2,957,219 | 24,476 | — | — | 1,464 | 9,104,044 | 27,940 | 12,116,370 | ||||||||||||||||||||||||||||||
Antonio F. Neri | 7,950 | — | 140,057 | — | — | — | 1,729 | 101,100 | 11,653 | 262,489 | ||||||||||||||||||||||||||||||
Tracy S. Keogh | 10,267 | 10,400 | 10,693 | 1,285 | — | — | 5,202 | — | 18,000 | 55,847 |
(1) | Represents matching contributions made under the HP 401(k) Plan. |
(2) | Represents matching contributions credited during fiscal 2015 under the HP Executive Deferred Compensation Plan with respect to the 2014 calendar year of that plan. |
(3) | For Mr. Neri and Ms. Keogh represents benefits provided under our domestic executive mobility program. Mr. Neri relocated from Houston, Texas to Palo Alto, California in November 2014 and Ms. Keogh relocated from Deerfield, Illinois to Palo Alto, California in April 2011. For Mr. Weisler, represents benefits provided under our executive mobility program related to his international assignment of $557,219, and a relocation bonus in lieu of mobility program benefits in the amount of $2.4 million for his permanent relocation from Singapore to Palo Alto, California. Until October 2015, Mr. Weisler’s home location was Singapore and Mr. Weisler was on assignment in Palo Alto, California. In October 2015, Mr. Weisler permanently moved to Palo Alto. |
(4) | Represents home security services provided to the NEOs. Although security systems were installed at our request, consistent with SEC guidance, the expense is reported here as a perquisite due to the fact that there is an incidental personal benefit. |
(5) | Represents the value of personal usage of HP corporate aircraft. For purposes of reporting the value of such personal usage in this table, we use data provided by an outside firm to calculate the hourly cost of operating each type of aircraft. These costs include the cost of fuel, maintenance, landing and parking fees, crew, catering and supplies. For trips by NEOs that involve mixed personal and business usage, we include the incremental cost of such personal usage (i.e., the excess of the cost of the actual trip over the cost of a hypothetical trip without the personal usage). For income tax purposes, the amounts included in NEO income are calculated based on the standard industry fare level valuation method. No tax gross-ups are provided for this imputed income. |
(6) | In connection with his international assignment from Singapore to Palo Alto, Mr. Weisler was eligible for a tax equalization benefit under our executive mobility program. This benefit is |
designed to equalize the income and social taxes paid by Mr. Weisler so that his total income and social tax costs related to any earnings from HP while on international assignment was no more than the amount he would have paid had all of the earnings been taxable solely pursuant to Singapore income and social tax laws. After fiscal 2015, Mr. Weisler is not eligible for additional tax equalization benefits, but due to timing there may be an assignment related trailing tax impact in fiscal 2016. For Mr. Neri the amount represents tax assistance benefits provided under the domestic executive mobility program. |
Name | 401(k) Company Match(1) ($) | NQDC Company Match(2) ($) | Mobility Program(3) ($) | Security Services/ Systems(4) ($) | Legal Fees ($) | Severance Payments ($) | Personal Aircraft Usage(5) ($) | Tax Gross- Up(6) ($) | Miscellaneous(7) ($) | Total AOC ($) | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Margaret C. Whitman | — | — | — | 1,769 | — | — | 254,162 | — | 19,403 | 275,334 | |||||||||||||||||||
Catherine A. Lesjak | 10,193 | 10,000 | — | 2,407 | — | — | — | — | 18,000 | 40,600 | |||||||||||||||||||
William L. Veghte | 7,650 | — | — | — | — | — | 2,034 | — | 12,785 | 22,469 | |||||||||||||||||||
Dion J. Weisler | — | — | 387,560 | 8,699 | — | — | 3,464 | 628,485 | 61,785 | 1,089,993 | |||||||||||||||||||
Michael G. Nefkens | 7,650 | — | 1,907,807 | — | — | — | 2,565 | 745,108 | — | 2,663,130 | |||||||||||||||||||
R. Todd Bradley | 10,200 | 10,000 | — | 9,624 | — | — | 11,754 | — | 24,703 | 66,281 |
(7) | Includes amounts paid either directly to the executives or on their behalf for financial counseling, as follows: Ms. Whitman: $18,000; Ms. Lesjak: $18,000; Mr. Weisler: $18,000; Ms. Keogh: $18,000; and Mr. Neri: $10,125. In addition, includes the following: an employer charitable donation match of $1,000 for Ms. Lesjak, $1,528 of imputed income with respect to attendance at an HP event by a personal guest for Mr. Neri, and $9,940 of required contributions to Singapore’s Central Provident Fund, a social security savings plan, for Mr. Weisler. |
Narrative to the Summary Compensation Table
The amounts reported in the Summary“Summary Compensation Table,” including base pay, annual and LTI award amounts, benefits and perquisites, are described more fully under "Compensation“Compensation Discussion and Analysis."
The amounts reported in "Non-Equity“Non-Equity Incentive Plan Compensation"Compensation” column include amounts earned in fiscal 20132015 by each of the NEOs under the PfR Plan. The narrative description of the remaining information in the Summary“Summary Compensation TableTable” is provided in the narrative to the other compensation tables.
Grants of Plan-Based Awards in Fiscal 2013
2015
The following table provides information on awards granted under the PfR Plan for fiscal 20132015 and awards of RSUs, PCSOs, and non-qualified stock options ("NQs")PARSUs granted as part of fiscal 20132015 long-term incentive compensation:
Estimated Future Payouts |
Estimated Future Payouts | All Other Stock Awards: Number of Shares of Stock or Units(4)(5) (#) | All Other Option Awards: Number of Securities Underlying Options(6) (#) | All Other Option Awards: Exercise or Base Price of Option Awards ($) | Grant- Date Fair Value of Stock and Option Awards(7) ($) | |||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||
Margaret C. Whitman | ||||||||||||||||||||||||||||||||||||||||||||
PfR | 30,000 | 3,000,000 | 7,500,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
RSU | 12/10/2014 | — | — | — | — | — | — | 104,390 | — | — | 3,900,010 | |||||||||||||||||||||||||||||||||
PCSO | 12/10/2014 | — | — | — | — | 605,158 | — | — | — | 37.36 | 5,113,585 | |||||||||||||||||||||||||||||||||
PARSU | 12/10/2014 | — | — | — | 45,585 | 91,170 | 182,340 | — | — | — | 3,838,028 | |||||||||||||||||||||||||||||||||
PARSU Modification | 12/11/2013 | — | — | — | — | — | — | 32,603 | — | — | 33,161 | |||||||||||||||||||||||||||||||||
Catherine A. Lesjak | ||||||||||||||||||||||||||||||||||||||||||||
PfR | 10,625 | 1,062,500 | 2,656,250 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
RSU | 12/10/2014 | — | — | — | — | — | — | 44,165 | — | — | 1,650,004 | |||||||||||||||||||||||||||||||||
PCSO | 12/10/2014 | — | — | — | — | 256,028 | — | — | — | 37.36 | 2,163,437 | |||||||||||||||||||||||||||||||||
PARSU | 12/10/2014 | — | — | — | 19,286 | 38,572 | 77,144 | — | — | — | 1,623,785 | |||||||||||||||||||||||||||||||||
PARSU Modification | 12/11/2013 | — | — | — | — | — | — | 13,794 | — | — | 14,030 | |||||||||||||||||||||||||||||||||
Dion J. Weisler | ||||||||||||||||||||||||||||||||||||||||||||
PfR | 10,313 | 1,031,250 | 2,578,125 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
RSU | 12/10/2014 | — | — | — | — | — | — | 44,165 | — | — | 1,650,004 | |||||||||||||||||||||||||||||||||
PCSO | 12/10/2014 | — | — | — | — | 256,028 | — | — | — | 37.36 | 2,163,437 | |||||||||||||||||||||||||||||||||
PARSU | 12/10/2014 | — | — | — | 19,286 | 38,572 | 77,144 | — | — | — | 1,623,785 | |||||||||||||||||||||||||||||||||
PARSU Modification | 12/11/2013 | — | — | — | — | — | — | 12,540 | — | — | 12,754 | |||||||||||||||||||||||||||||||||
Antonio F. Neri | ||||||||||||||||||||||||||||||||||||||||||||
PfR | 9,063 | 906,250 | 2,265,625 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
RSU | 12/10/2014 | — | — | — | — | — | — | 53,533 | — | — | 1,999,993 | |||||||||||||||||||||||||||||||||
Stock Options | 12/10/2014 | — | — | — | — | — | — | — | 160,616 | 37.36 | 1,264,048 | |||||||||||||||||||||||||||||||||
Tracy S. Keogh | ||||||||||||||||||||||||||||||||||||||||||||
PfR | 8,750 | 875,000 | 2,187,500 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
RSU | 12/10/2014 | — | — | — | — | — | — | 53,533 | — | — | 1,999,993 | |||||||||||||||||||||||||||||||||
RSU | 12/10/2014 | — | — | — | — | — | — | 24,090 | — | — | 900,002 | |||||||||||||||||||||||||||||||||
PCSO | 12/10/2014 | — | — | — | — | 139,652 | — | — | — | 37.36 | 1,180,059 | |||||||||||||||||||||||||||||||||
PARSU | 12/10/2014 | — | — | — | 10,520 | 21,039 | 42,078 | — | — | — | 885,684 | |||||||||||||||||||||||||||||||||
PARSU Modification | 12/11/2013 | — | — | — | — | — | — | 7,524 | — | — | 7,653 |
(1) | Amounts represent the range of possible cash payouts for fiscal 2015 awards under the PfR Plan. |
(2) | PCSO awards vest as follows: one third of the PCSO award will vest upon continued service of one year and our closing stock price is at least 10% over the grant date stock price for at least 20 consecutive trading days within two years from the date of grant; one third will vest upon continued service for two years and our closing stock price is at least 20% over the grant date stock price for at least 20 consecutive trading days within three years from the date of grant; and one third will vest upon continued service of three years and our closing stock price is at least 30% over the grant date stock price for at least 20 consecutive trading days within four years from the date of grant. All PCSO awards have an eight-year term. |
(3) | PARSU award amounts represent the range of shares that may be released at the end of the two- and three-year performance periods applicable to the PARSU award assuming achievement of threshold, target and maximum performance. PARSUs vest as follows: 50% of the PARSUs are eligible for vesting based on performance over two years with continued service, and 50% of the PARSUs are eligible for vesting based on performance over three years with continued service. The awards eligible |
for two-year vesting are 50% contingent upon our two-year RTSR and 50% contingent on our ROIC performance, and similarly, the awards eligible for three-year vesting are 50% contingent upon our three-year RTSR and 50% contingent on our ROIC performance. If our RTSR and ROIC performance is below threshold for the performance period, no shares will be released for the applicable segment. For additional details, see the discussion of PARSU awards under “Compensation Discussion and Analysis—Determination of Fiscal 2015 Executive Compensation—Fiscal 2015 Long-Term Incentive Compensation—2015 Performance-Adjusted Restricted Stock Units.” |
(4) | RSUs vest as to one-third of the units on each of the first three anniversaries of the grant date, subject to continued service, except Ms. Keogh’s RSU grant valued at $1,999,993 vests as to one-fourth of the units on each of the first four anniversaries of the grant date, subject to continued service. |
(5) | In connection with the separation of Hewlett Packard Enterprise from HP Inc., the HRC committee approved amendments to certain outstanding long-term incentive awards including the PARSUs that were granted on December 11, 2013 (fiscal 2014) and labeled PARSU Modification in this table. For PARSU Modification, these values represent the number of target units associated with the incremental compensation cost of accelerating vesting of Segment 1, fiscal 2014 PARSUs to September 17, 2015. For additional information, see section “Separation-Related Equity Award Amendments”of the Compensation Discussion and Analysis. |
(6) | Stock option awards vest as to one-third of the shares on each of the first, second and third anniversaries of the date of grant. |
(7) | See footnote (3) to the “Summary Compensation Table” for a description of the method used to determine the grant date fair value of stock awards. For PARSU Modification, values represent the incremental compensation cost of accelerating Segment 1, fiscal 2014 PARSUs to September 17, 2015. |
| | | | | | | | | All Other Option Awards: Exercise or Base Price of Option Awards ($) | | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units(3) (#) | | ||||||||||||||||||||
| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | Grant Date Fair Value of Stock and Option Awards(4) ($) | |||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||
Margaret C. Whitman | |||||||||||||||||||||||||||||
PfR | 11/1/2012 | 30,000 | 3,000,000 | 10,500,000 | — | — | — | — | — | — | |||||||||||||||||||
PCSO | 12/6/2012 | — | — | — | — | 1,500,000 | — | — | 13.83 | 6,609,357 | |||||||||||||||||||
RSU | 1/2/2013 | — | — | — | — | — | — | 287,057 | — | 4,311,596 | |||||||||||||||||||
PCSO | 1/2/2013 | — | — | — | — | 1,212,943 | — | — | 15.02 | 6,104,076 | |||||||||||||||||||
RSU | 3/20/2013 | — | — | — | — | — | — | 3,616 | — | 82,879 | |||||||||||||||||||
Catherine A. Lesjak | |||||||||||||||||||||||||||||
PfR | 11/1/2012 | 10,438 | 1,043,750 | 3,653,125 | — | — | — | — | — | — | |||||||||||||||||||
RSU | 12/6/2012 | — | — | — | — | — | — | 108,460 | — | 1,500,002 | |||||||||||||||||||
PCSO | 12/6/2012 | — | — | — | — | 1,012,293 | — | — | 13.83 | 4,460,404 | |||||||||||||||||||
William L. Veghte | |||||||||||||||||||||||||||||
PfR | 11/1/2012 | 10,625 | 1,062,500 | 3,718,750 | — | — | — | — | — | — | |||||||||||||||||||
RSU | 12/6/2012 | — | — | — | — | — | — | 119,306 | — | 1,650,002 | |||||||||||||||||||
PCSO | 12/6/2012 | — | — | — | — | 1,113,522 | — | — | 13.83 | 4,906,443 | |||||||||||||||||||
RSU | 9/18/2013 | — | — | — | — | — | — | 82,494 | — | 1,800,019 | |||||||||||||||||||
PCSO | 9/18/2013 | — | — | — | — | 769,936 | — | — | 21.82 | 5,020,367 | |||||||||||||||||||
Dion J. Weisler | |||||||||||||||||||||||||||||
PfR | 11/1/2012 | 4,348 | 434,803 | 1,521,811 | — | — | — | — | — | — | |||||||||||||||||||
RSU | 12/6/2012 | — | — | — | — | — | — | 40,000 | — | 553,200 | |||||||||||||||||||
NQ | 12/6/2012 | — | — | — | — | 120,000 | — | — | 13.83 | 413,672 | |||||||||||||||||||
RSU | 8/1/2013 | — | — | — | — | — | — | 40,031 | — | 1,050,013 | |||||||||||||||||||
PCSO | 8/1/2013 | — | — | — | — | 373,618 | — | — | 26.23 | 3,060,050 | |||||||||||||||||||
Michael G. Nefkens | |||||||||||||||||||||||||||||
PfR | 11/1/2012 | 7,500 | 750,000 | 2,625,000 | — | — | — | — | — | — | |||||||||||||||||||
RSU | 1/16/2013 | — | — | — | — | — | — | 61,012 | — | 1,050,017 | |||||||||||||||||||
PCSO | 1/16/2013 | — | — | — | — | 569,437 | — | — | 17.21 | 3,332,493 | |||||||||||||||||||
R. Todd Bradley | |||||||||||||||||||||||||||||
PfR | 11/1/2012 | 11,688 | 1,168,750 | 4,090,625 | — | — | — | — | — | — | |||||||||||||||||||
RSU | 12/6/2012 | — | — | — | — | — | — | 135,575 | — | 1,875,002 | |||||||||||||||||||
PCSO | 12/6/2012 | — | — | — | — | 1,265,366 | — | — | 13.83 | 5,575,504 |
Outstanding Equity Awards at 20132015 Fiscal Year-End
The following table provides information on stock and option awards held by the NEOs as of October 31, 2013:2015:
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options(2) (#) | Option Exercise Price(3) ($) | Option Expiration Date(4) | Number of Shares or Units of Stock That Have Not Vested(5)(6) (#) | Market Value of Shares or Units of Stock That Have Not Vested(7) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(8) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(7) ($) | |||||||||||||||||||||||||||
Margaret C. Whitman | 1,900,000 | — | — | 23.59 | 9/27/2019 | 184,928 | 4,985,659 | 93,117 | 2,510,434 | |||||||||||||||||||||||||||
636,847 | — | — | 26.38 | 12/14/2019 | — | — | — | — | ||||||||||||||||||||||||||||
1,500,000 | — | — | 13.83 | 12/6/2020 | — | — | — | — | ||||||||||||||||||||||||||||
1,212,943 | — | — | 15.02 | 1/2/2021 | — | — | — | — | ||||||||||||||||||||||||||||
393,996 | — | 196,998 | 26.99 | 12/11/2021 | — | — | — | — | ||||||||||||||||||||||||||||
— | — | 605,158 | 37.36 | 12/10/2022 | — | — | — | — | ||||||||||||||||||||||||||||
Catherine A. Lesjak | — | — | 109,730 | 27.34 | 12/12/2019 | 152,524 | 4,112,047 | 39,396 | 1,062,116 | |||||||||||||||||||||||||||
306,147 | — | — | 13.83 | 12/6/2020 | — | — | — | — | ||||||||||||||||||||||||||||
83,345 | — | 83,346 | 26.99 | 12/11/2021 | — | — | — | — | ||||||||||||||||||||||||||||
— | — | 256,028 | 37.36 | 12/10/2022 | — | — | — | — | ||||||||||||||||||||||||||||
Dion J. Weisler | — | 12,500 | — | 27.15 | 1/19/2020 | 87,341 | 2,354,713 | 39,396 | 1,062,116 | |||||||||||||||||||||||||||
186,809 | — | 186,809 | 26.23 | 8/1/2021 | — | — | — | — | ||||||||||||||||||||||||||||
75,769 | — | 75,769 | 26.99 | 12/11/2021 | — | — | — | — | ||||||||||||||||||||||||||||
— | — | 256,028 | 37.36 | 12/10/2022 | — | — | — | — | ||||||||||||||||||||||||||||
Antonio F. Neri | 5,000 | — | — | 48.45 | 4/21/2016 | 64,026 | 1,726,141 | — | — | |||||||||||||||||||||||||||
2,500 | — | — | 33.44 | 12/1/2016 | — | — | — | — | ||||||||||||||||||||||||||||
16,300 | — | — | 23.59 | 9/27/2019 | — | — | — | — | ||||||||||||||||||||||||||||
16,500 | — | — | 28.41 | 12/7/2019 | — | — | — | — | ||||||||||||||||||||||||||||
107,142 | — | — | 13.83 | 12/6/2020 | — | — | — | — | ||||||||||||||||||||||||||||
38,826 | 19,413 | — | 26.99 | 12/11/2021 | — | — | — | — | ||||||||||||||||||||||||||||
53,538 | 107,078 | — | 37.36 | 12/10/2022 | — | — | — | — | ||||||||||||||||||||||||||||
Tracy S. Keogh | — | — | 54,865 | 27.34 | 12/12/2019 | 83,383 | 2,248,006 | 21,488 | 579,316 | |||||||||||||||||||||||||||
263,196 | — | — | 13.83 | 12/6/2020 | — | — | — | — | ||||||||||||||||||||||||||||
45,461 | — | 45,462 | 26.99 | 12/11/2021 | — | — | — | — | ||||||||||||||||||||||||||||
— | — | 139,652 | 37.36 | 12/10/2022 | — | — | — | — |
(1) | The 12,500 share option held by Mr. Weisler fully vests with continued service as to 12,500 of the shares on the fourth anniversary of January 19, 2012, the date of the grant. The 19,413 share option held by Mr. Neri fully vests with continued service as to 19,413 of the shares on the third anniversary of December 11, 2013, the date of the grant. The 107,078 share option held by Mr. Neri vests with continued service as to 53,539 of the shares on each of the second and third anniversaries of December 10, 2014, the date of the grant. |
(2) | Option awards in this column vest upon satisfaction of certain stock price performance conditions of the FY12 annual PCSOs granted on December 12, 2011, and subject to continued service or as to one-third of the shares on each of the first, second, and third anniversaries of December 11, 2013 and December 10, 2014, the date of grant, or upon later satisfaction of certain stock price performance conditions, and subject to continued service in each case except for the following: |
| Option Awards | Stock Awards | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options(2) (#) | Option Exercise Price(3) ($) | Option Expiration Date(4) | Number of Shares or Units of Stock That Have Not Vested(5) (#) | Market Value of Shares or Units of Stock That Have Not Vested(6) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(7) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(6) ($) | |||||||||||||||||
Margaret C. Whitman | 200,000 | 100,000 | 1,600,000 | 23.59 | 9/27/2019 | 407,754 | 9,936,965 | 172,622 | 4,206,798 | |||||||||||||||||
— | — | 636,847 | 26.38 | 12/14/2019 | — | — | — | — | ||||||||||||||||||
— | — | 1,500,000 | 13.83 | 12/6/2020 | — | — | — | — | ||||||||||||||||||
— | — | 1,212,943 | 15.02 | 1/2/2021 | — | — | — | — | ||||||||||||||||||
Catherine A. Lesjak | 35,000 | — | — | 31.50 | 1/23/2014 | 240,610 | 5,863,666 | 59,486 | 1,449,674 | |||||||||||||||||
100,000 | — | — | 42.27 | 1/18/2015 | — | — | — | — | ||||||||||||||||||
— | — | 219,459 | 27.34 | 12/12/2019 | — | — | — | — | ||||||||||||||||||
— | — | 1,012,293 | 13.83 | 12/6/2020 | — | — | — | — | ||||||||||||||||||
William L. Veghte | 30,000 | 10,000 | — | 47.00 | 5/19/2018 | 243,558 | 5,935,508 | 59,486 | 1,449,674 | |||||||||||||||||
— | — | 219,459 | 27.34 | 12/12/2019 | — | — | — | — | ||||||||||||||||||
— | — | 1,113,522 | 13.83 | 12/6/2020 | — | — | — | — | ||||||||||||||||||
— | — | 769,936 | 21.82 | 9/18/2021 | — | — | — | — | ||||||||||||||||||
Dion J. Weisler | 12,500 | 37,500 | — | 27.15 | 1/19/2020 | 116,328 | 2,834,913 | — | — | |||||||||||||||||
— | — | 120,000 | 13.83 | 12/6/2020 | — | — | — | — | ||||||||||||||||||
— | — | 373,618 | 26.23 | 8/1/2021 | — | — | — | — | ||||||||||||||||||
Michael G. Nefkens | 28,000 | 14,000 | — | 23.59 | 9/27/2019 | 88,997 | 2,168,857 | 5,693 | 138,738 | |||||||||||||||||
7,000 | 14,000 | — | 28.41 | 12/7/2019 | — | — | — | — | ||||||||||||||||||
— | — | 569,437 | 17.21 | 1/16/2021 | — | — | — | — | ||||||||||||||||||
R. Todd Bradley | 200,000 | — | — | 42.27 | 1/18/2015 | 306,395 | 7,466,846 | 71,384 | 1,739,628 | |||||||||||||||||
— | — | 263,351 | 27.34 | 12/12/2019 | — | — | — | — | ||||||||||||||||||
— | — | 1,265,366 | 13.83 | 12/6/2020 | — | — | — | — |
prior to the achievement of the stock price performance conditions, the share option will vest pro-rata based on the number of months served during the first 36 months following the grant date; |
(3) | Option exercise prices are the fair market value of our stock on the grant date. |
(4) | All options have an eight-year term. |
(5) | The amounts in this column include shares underlying dividend equivalent units granted with respect to outstanding stock awards through October 31, 2015. The release dates and release amounts for all unvested stock awards are as follows, assuming continued employment and satisfaction of any applicable financial performance conditions: |
(6) | The amounts in this column also include fiscal year 2014 PARSUs that were scheduled to vest in October 2016 and were converted to RSUs (see section “Separation-Related Equity Award Amendments” of the Compensation Discussion and Analysis for more information). The release date and release amounts are as follows, assuming continued employment and satisfaction of any applicable financial performance conditions: |
(7) | Value calculated based on the $26.96 closing price of our stock on October 31, 2015. |
(8) | The amounts in this column include the amounts of PARSUs granted in fiscal 2015 plus accrued dividend equivalent shares. The shares are reported at target, but actual payout will be on achievement of performance goals at the end of the two- and three-year performance periods. |
Option Exercises and Stock Vested in Fiscal 2013
2015
The following table provides information about options exercised and stock awards vested for the NEOs during the fiscal year ended October 31, 2013:2015:
Option Awards | Stock Awards(1) | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise(2) ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(3) ($) | ||||||||||||
Margaret C. Whitman | — | — | 454,376 | 14,852,119 | ||||||||||||
Catherine A. Lesjak | 899,220 | 17,213,726 | 197,554 | 6,547,833 | ||||||||||||
Dion J. Weisler | 168,268 | 2,430,193 | 136,693 | 4,374,697 | ||||||||||||
Antonio F. Neri | 53,571 | 1,320,525 | 83,262 | 2,680,328 | ||||||||||||
Tracy S. Keogh | 363,522 | 6,668,699 | 130,836 | 4,303,765 |
(1) | Includes PARSUs, RSUs and accrued dividend equivalent shares. |
(2) | Represents the amounts realized based on the difference between the market price of HP stock on the date of grant and the exercise price. |
(3) | Represents the amounts realized based on the fair market value of our stock on the vesting date for PARSUs, RSUs and accrued dividend equivalent shares. Fair market value is determined based on the closing price of our stock on the applicable vesting date. |
| Option Awards | Stock Awards(1) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(2) ($) | ||||||||
Margaret C. Whitman | — | — | 54,399 | 802,385 | ||||||||
Catherine A. Lesjak | — | — | 43,451 | 622,203 | ||||||||
William L. Veghte | — | — | 50,505 | 902,145 | ||||||||
Dion J. Weisler | — | — | 17,155 | 293,522 | ||||||||
Michael G. Nefkens | — | — | 31,926 | 609,531 | ||||||||
R. Todd Bradley | — | — | 40,872 | 587,071 |
Fiscal 20132015 Pension Benefits Table
The following table provides information about the present value of accumulated pension benefits payable to each NEO:
Name | Plan Name(1) | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit(2) ($) | Payments During Last Fiscal Year ($) | ||||||||||
Margaret C. Whitman(3) | — | — | — | — | ||||||||||
Catherine A. Lesjak | RP | 21.3 | 336,721 | — | ||||||||||
EBP | 21.3 | 2,316,067 | — | |||||||||||
Dion J. Weisler(3) | — | — | — | — | ||||||||||
Antonio F. Neri | Nederland Plan | 3.2 | 52,923 | — | ||||||||||
RP | 6.8 | 69,802 | — | |||||||||||
EBP | 6.8 | 20,138 | — | |||||||||||
IRG | 19.5 | 81,039 | — | |||||||||||
Tracy S. Keogh(3) | — | — | — | — |
(1) | The “RP” and the “EBP” are the qualified HP Retirement Plan and the nonqualified HP Excess Benefit Plan, respectively. All benefits are frozen under these plans. The RP has been merged into the HP Inc. Pension Plan (formerly known as the Hewlett-Packard Company Pension Plan). Mr. Neri also participates in Stichting Pensioenfonds HP Nederland (Nederland Plan) and International Retirement Guarantee (IRG). |
(2) | The present value of accumulated benefits is shown at the age 65 unreduced retirement age for the RP and the EBP using the assumptions under Accounting Standards Codification (ASC) Topic715-30 Defined Benefit Plans—Pension for the 2015 fiscal year-end measurement (as of October 31, 2015). The present value is based on a discount rate of 4.43% for the RP and 3.32% for the EBP, lump sum interest rates of 1.69% for the first five years, 4.11% for the next 15 years and 5.07% thereafter, and applicable mortality for lump sums and the RP-2014 White-Collar Table Projected Generationally with MP-2015 for annuity payment forms. As of October 31, 2014 (the prior measurement date), the ASC Topic715-30 assumptions included a discount rate of 4.39% for the RP and 3.34% for the EBP, lump sum interest rates of 1.40% for the first five years, 3.98% for the next 15 years and 5.04% thereafter, and applicable mortality and the RP-2014 White-Collar Table Projected Generationally with MP-2014 for annuity payment forms. Mr. Neri participated in a Hewlett-Packard pension plan while employed in the Netherlands. The present value for this plan is based on a discount rate of 2.47% and mortality in accordance with the AG forecast table 2014. As of October 31, 2014, the assumptions included a discount rate of 2.77% and mortality in accordance with the AG forecast table 2014. The earliest unreduced retirement age in the Dutch pension plan is age 67. Due to his company requested transfer from the Netherlands to the US, Mr. Neri is also covered under the International Retirement Guarantee or IRG. The present value of IRG benefits is based on a discount rate of 3.55%, lump sum interest rates of 1.69% for the first five years, 4.11% for the next 15 years and 5.07% thereafter, and applicable mortality. As of October 31, 2014, the assumptions included a discount rate of 3.47%, lump sum interest rates of 1.40% for the first five years, 3.98% for the next 15 years and 5.04% thereafter, and applicable mortality. The earliest unreduced retirement age for the IRG based on Mr. Neri’s employment history is age 65. |
(3) | Ms. Whitman, Mr. Weisler and Ms. Keogh are not eligible to receive benefits under any defined benefit pension plan because we ceased benefit accruals under all of ourU.S.-qualified defined benefit pension plans prior to the commencement of their employment with HP. |
Name | Plan Name(1) | Number of Years of Credited Service (#) | Present Value of Accumulated Benefit(2) ($) | Payments During Last Fiscal Year ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Margaret C. Whitman(3) | — | — | — | — | |||||||
— | — | — | — | ||||||||
Catherine A. Lesjak | RP | 21.3 | 271,616 | — | |||||||
EBP | 21.3 | 1,929,260 | — | ||||||||
William L. Veghte(3) | — | — | — | — | |||||||
— | — | — | — | ||||||||
Dion J. Weisler(3) | — | — | — | — | |||||||
— | — | — | — | ||||||||
Michael G. Nefkens | EDS RP | 7.5 | 217,052 | — | |||||||
Restoration Plan | 7.5 | 248,337 | — | ||||||||
R. Todd Bradley | CAPP | 0.6 | 12,270 | — | |||||||
CARP | 0.6 | 8,432 | — |
Narrative to the Fiscal 20132015 Pension Benefits Table
No NEO currently accrues a benefit under any qualified ornon-qualified defined benefit pension plan because we ceased benefit accruals in all of ourU.S.-qualified defined benefit pension plans (and theirnon-qualified plan counterparts) in prior years. Benefits previously accrued by the NEOs under HP pension plans are payable to them following termination of employment, subject to the terms of the applicable plan.
As a result of the separation of Hewlett Packard Enterprise from HP Inc. as of November 1, 2015, all employees of both companies have been considered in the pension table for the period ending October 31, 2015. Additionally, pension plans that have become Hewlett Packard Enterprise plans as of November 1, 2015 which cover the NEOs also are considered. In future years, only employees of HP Inc. with benefits under plans maintained by HP Inc. will be considered in this disclosure. The RP, EBP, EDS RP and Restoration Plan are remaining with HP Inc. Mr. Neri is an Hewlett Packard Enterprise employee so will not appear in future pension benefit disclosures for HP Inc. Mr. Neri will be considered a terminated vested participant in the RP and EBP, but since the separation of the companies is not deemed a separation from service, his EBP benefit will not become payable until he terminates employment with Hewlett Packard Enterprise. Ms. Lesjak, Mr. Weisler, and Ms. Keogh are HP Inc. employees.
Terms of the HP Retirement Plan
Ms. Lesjak and Mr. Neri earned benefits under the RP and the EBP based on her pay and service prior to 2008. The RP is a traditional defined benefit plan that provided a benefit based on years of service and the participant's "highestparticipant’s “highest average pay rate,"” reduced by a portion of Social Security earnings. "Highest“Highest average pay rate"rate” was determined based on the 20 consecutive fiscal quarters when pay was the highest. Pay for this purpose included base pay and bonus, subject to applicable IRS limits. Benefits under the RP may be taken in one of several different annuity forms or in an actuarially equivalent lump sum. Benefits calculated under the RP are offset by the value of benefits earned under the HP Deferred Profit Sharing Plan (the "DPSP"“DPSP”) before November 1, 1993. Together, the RP and the DPSP constitute a "floor-offset"“floor-offset” arrangement for periods before November 1, 1993.
Benefits not payable from the RP and the DPSP due to IRS limits are paid from the nonqualified EBP under which benefits are unfunded and unsecured. When an EBP participant terminates employment, the benefit liability is transferred to the EDCP, where an account is established for the participant. That account is then credited with hypothetical investment earnings (gains or losses) based upon the investment election made by participants from among investment options similar to those offered under the HP 401(k) Plan. There is no formula that would result inabove-market earnings or payment of a preferential interest rate on this benefit.
At the time of distribution, amounts representing EBP benefits are paid from the EDCP in a lump sum or installment form, according topre-existing elections made by those participants, except that participants with a small benefit or who have not qualified for retirement status (age 55 with at least 15 years of service) are paid their EBP benefit in January of the year following their termination, subject to any delay required by Section 409A of the Code.
Terms of the HP Cash Account PensionNederland Plan
Prior to 2006, Mr. BradleyNeri earned benefits under the CAPP, which is a cash balance plan that provides pension benefits determined by reference to a hypothetical account balance.
Prior to this plan being frozen, participants received "pay credits" equal to 4% of basebenefit based on his final pay credited quarterly to their accounts and "interest credits" credited daily. Currently, participants who have not taken a distribution receive interest credits at the rate equal to the one-year rate for Treasury securities plus 1%; the "interest credit" rate is adjusted annually. Benefits under the CAPP may be taken in one of several different annuity forms or in a lump sum equal to the hypothetical account balance.
Prior to 2006, Mr. Bradley also received pay and interest credits to a hypothetical account balance established for CARP participants on base pay in excess of certain IRS limits at the same rates as had been credited under the CAPP. Benefits under the CARP are unfunded and unsecured. Upon termination of employment, a CARP participant is paid his or her account balance in the form of a lump sum in January of the year following termination, subject to any delay required by Section 409A of the Code.
Terms of the EDS Retirement Plan
Prior to joining us from EDS in 2009, Mr. Nefkens earned benefits under the EDS RP, which is a cash balance plan that provides pension benefits determined by reference to a hypothetical account balance.
Prior to this plan being frozen, participants received "pay credits" which varied with age and years of service (points)while employed by Hewlett-Packard in the Netherlands. The pension plan considers a pensionable base which is salary less an offset; the offset reflects the Social Security benefits which do not vary with pay levels and differed for pay above and below2015 was €12,642. The annual accrual that was provided when Mr. Neri participated was 1.75% of his final pensionable base. There is also a 70% spouse’s benefit provided upon his death while receiving retirement payments. The benefit under the taxable wage base. Currently, participantsDutch pension plan is subject to an annual conditional indexation. In 2014, with Dutch law changes to extend unreduced retirement ages, all previously accrued benefits were converted to a pension commencing at age 67.
Terms of the IRG
Employees who have not taken a distribution receive interest creditstransferred internationally at the rate equalCompany’s request prior to 2000 were put into an international umbrella plan. This plan determines the 30 year Treasury bond yield plus 0.5% but not less than 5%;country of guarantee which is generally the "interest credit" ratecountry in which an employee has spent the longest portion of his Hewlett-Packard career. For Mr. Neri, the country of guarantee is adjusted annually. Benefits are availablecurrently the US. The IRG determines the present value of a full career benefit for Mr. Neri under the US plan terms and US Social Security (since the US is his country of guarantee) then offsets the present value of the retirement benefits from plans and Social insurance systems in several different annuity formsthe countries in which are calculated athe earned retirement age (age 65 or age 55 or older with combined age and service equal to 70 or more) by dividing the hypothetical account balance by 120 to determine a monthly benefit. This resulting monthlybenefits for his total period of Hewlett-Packard employment. The net benefit value is payable over the participant's lifetime with annual cost-of-living increases beginning at age 62 which are based on the annual CPI but not higher than 3% or the monthly benefit can be converted to actuarially equivalent optional forms of annuity payment. These optional forms can include cost-of-living increases or higher level amounts; the hypothetical account balance is not available as a lumpsingle sum except for small amountsas soon as practicable after termination or to the beneficiary of the participant upon his or her death before commencement.retirement. This is a nonqualified retirement plan.
Prior to joining us from EDS in 2009, Mr. Nefkens also received pay and interest credits to a hypothetical account balance under the Restoration Plan established for EDS RP participants on pay in excess of certain IRS limits at the same rates as had been credited under the EDS RP. Benefits under the Restoration Plan are unfunded and unsecured. Upon retirement eligibility, a Restoration Plan participant commences his or her benefit, subject to any delay required by Section 409A of the Code.
We do not sponsor any other supplemental defined benefit pension plans or special retiree medical benefit plans for executive officers.
Fiscal 2013 Nonqualified2015 Non-qualified Deferred Compensation Table
The following table provides information about contributions, earnings, withdrawals, distributions, and balances under the EDCP:
Name | Executive Contributions in Last FY(1) ($) | Registrant Contributions in Last FY(2) ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions(3) ($) | Aggregate Balance at FY End(4) ($) | |||||||||||||||
Margaret C. Whitman | — | — | — | — | — | |||||||||||||||
Catherine A. Lesjak | 14,100 | 9,600 | 163,142 | (2,594,438 | ) | 3,361,662 | ||||||||||||||
Dion J. Weisler(5) | — | — | — | — | — | |||||||||||||||
Antonio F. Neri | — | — | — | — | — | |||||||||||||||
Tracy S. Keogh | 587,225 | 10,400 | 26,728 | — | 1,603,218 |
Name | Executive Contributions in Last FY(1) ($) | Registrant Contributions in Last FY(2) ($) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions(3) ($) | Aggregate Balance at FYE ($) | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Margaret C. Whitman | — | — | — | — | — | ||||||||||
Catherine A. Lesjak | 1,680 | 10,000 | 1,411,600 | (254,197 | ) | 5,778,161 | |||||||||
William L. Veghte(4) | 20,000 | — | 1,063 | — | 21,063 | ||||||||||
Dion J. Weisler(5) | — | — | — | — | — | ||||||||||
Michael G. Nefkens | — | — | — | — | — | ||||||||||
R. Todd Bradley | 22,000 | 10,000 | 66,364 | — | 550,483 |
(1) | The amounts reported here as “Executive Contributions” and “Registrant Contributions” are reported as compensation to such NEO in the “Summary Compensation Table” above. |
(2) | The contributions reported here as “Registrant Contributions” were made in fiscal 2015 with respect to calendar year 2014 participant base-pay deferrals. During fiscal 2015, the NEOs were eligible to receive a 4% matching contribution on base-pay deferrals that exceeded the IRS limit that applies to the qualified HP 401(k) Plan up to a maximum of two times that limit. |
(3) | The distributions reported here were made pursuant to participant elections made prior to the time that the amounts were deferred in accordance with plan rules. |
(4) | Of these balances, the following amounts were reported as compensation to such NEO in the Summary Compensation Table in prior proxy statements: Ms. Lesjak $2,594,438. The information reported in this footnote is provided to clarify the extent to which amounts payable as deferred compensation represent compensation reported in our prior proxy statements, rather than additional earned compensation. |
(5) | Mr. Weisler was paid through our payroll in Singapore and thus, was not eligible to participate until his permanent move to Palo Alto in October 2015. |
Narrative to the Fiscal 2013 Nonqualified2015 Non-qualified Deferred Compensation Table
HP sponsors the EDCP, a nonqualifiednon-qualified deferred compensation plan that permits eligible U.S. employees to defer base pay in excess of the amount taken into account under the qualified HP 401(k) Plan and bonus amounts of up to 95% of the annual incentive bonus payable under the PfR Plan. In addition, a matching contribution is available under the plan to eligible employees. The matching contribution applies to base-pay deferrals on compensation above the IRS limit that applies to the qualified HP 401(k) Plan up to a maximum of two times that compensation limit (for fiscal 20132015 matching contributions, on calendar year 20122014 base pay from $250,000$260,000 to $500,000)$520,000). During fiscal 2013,2015, the NEOs were eligible for a matching contribution of up to 4%. on base pay contributions in excess of the IRS limit up to a maximum of two times that limit.
Upon becoming eligible for participation, employees must specify the amount of base pay and/or the percentage of bonus to be deferred, as well as the time and form of payment. If termination of employment occurs before retirement (defined as at least age 55 with 15 years of service), distribution is made in the form of a lump sum in January of the year following the year of termination, subject to any delay required under Section 409A of the Code. At retirement (or earlier, if properly elected), benefits are paid according to the distribution election made by the participant at the time of the deferral election subject to any delay required under Section 409A of the Code. No withdrawals are permitted prior to the previously elected distribution date, other than "hardship"“hardship” withdrawals as permitted by applicable law.
Amounts deferred or credited under the EDCP are credited with hypothetical investment earnings based on participant investment elections made from among the investment options available under the HP 401(k) Plan. Accounts maintained for participants under the EDCP are not held in trust, and all such accounts are subject to the claims of general creditors of HP. No amounts are credited with above-market earnings.
Potential Payments Upon Termination or Change in Control
The amounts in the following table assume that the NEOsestimate potential payments due if an NEO had terminated employment with HP employment effective October 31, 2013. The closing price2015 under each of our stock was $24.37 on that date.the circumstances specified below. These amounts are in addition to benefits generally available to U.S. employees upon termination of employment, such as distributions from the retirement plans and the HP 401(k) Plan and payment of accrued vacation.
| | | | Long-Term Incentive Programs(3) | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Termination Scenario | Total(1) ($) | Severance(2) ($) | Stock Options ($) | Restricted Stock ($) | PRU Program ($) | |||||||||||
Margaret C. Whitman | Voluntary/For Cause | — | — | — | — | — | |||||||||||
Disability | 39,381,752 | — | 27,229,017 | 9,670,382 | 2,482,353 | ||||||||||||
Retirement | — | — | — | — | — | ||||||||||||
Death | 33,054,081 | — | 27,229,017 | 3,342,711 | 2,482,353 | ||||||||||||
Not for Cause | 7,278,658 | 1,460,188 | 12,999 | 3,323,118 | 2,482,353 | ||||||||||||
Change in Control | 43,814,385 | 1,460,188 | 28,477,017 | 9,670,382 | 4,206,798 | ||||||||||||
Catherine A. Lesjak | Voluntary/For Cause | — | — | — | — | — | |||||||||||
Disability | 17,149,599 | — | 10,669,568 | 5,624,620 | 855,411 | ||||||||||||
Retirement | — | — | — | — | — | ||||||||||||
Death | 14,003,944 | — | 10,669,568 | 2,478,965 | 855,411 | ||||||||||||
Not for Cause | 21,383,924 | 3,640,062 | 10,669,568 | 5,624,620 | 1,449,674 | ||||||||||||
Change in Control | 21,383,924 | 3,640,062 | 10,669,568 | 5,624,620 | 1,449,674 | ||||||||||||
William L. Veghte | Voluntary/For Cause | — | — | — | — | — | |||||||||||
Disability | 20,364,517 | — | 13,699,859 | 5,809,247 | 855,411 | ||||||||||||
Retirement | — | — | — | — | — | ||||||||||||
Death | 15,963,929 | — | 13,699,859 | 1,408,659 | 855,411 | ||||||||||||
Not for Cause | 5,159,506 | 3,007,124 | — | 1,296,971 | 855,411 | ||||||||||||
Change in Control | 23,965,904 | 3,007,124 | 13,699,859 | 5,809,247 | 1,449,674 | ||||||||||||
Dion J. Weisler | Voluntary/For Cause | — | — | — | — | — | |||||||||||
Disability | 4,027,505 | — | 1,264,800 | 2,762,705 | — | ||||||||||||
Retirement | — | — | — | — | — | ||||||||||||
Death | 1,982,472 | — | 1,264,800 | 717,672 | — | ||||||||||||
Not for Cause | 3,051,314 | 2,028,480 | 386,460 | 636,374 | — | ||||||||||||
Change in Control | 6,055,985 | 2,028,480 | 1,264,800 | 2,762,705 | — | ||||||||||||
Michael G. Nefkens | Voluntary/For Cause | — | — | — | — | — | |||||||||||
Disability | 6,285,898 | — | 4,088,089 | 2,115,950 | 81,859 | ||||||||||||
Retirement | — | — | — | — | — | ||||||||||||
Death | 4,802,959 | — | 4,088,089 | 633,011 | 81,859 | ||||||||||||
Not for Cause | 2,757,012 | 2,040,322 | 1,820 | 633,011 | 81,859 | ||||||||||||
Change in Control | 8,383,099 | 2,040,322 | 4,088,089 | 2,115,950 | 138,738 | ||||||||||||
R. Todd Bradley | Voluntary/For Cause | — | — | — | — | — | |||||||||||
Disability | 21,523,840 | — | 13,336,958 | 7,160,369 | 1,026,513 | ||||||||||||
Retirement | — | — | — | — | — | ||||||||||||
Death | 17,546,973 | — | 13,336,958 | 3,183,502 | 1,026,513 | ||||||||||||
Not for Cause | 6,573,010 | 2,362,995 | — | 3,183,502 | 1,026,513 | ||||||||||||
Change in Control | 24,599,950 | 2,362,995 | 13,336,958 | 7,160,369 | 1,739,628 |
Long-Term Incentive Programs(3) | ||||||||||||||||||||||
Name | Termination Scenario | Total(1) ($) | Severance(2) ($) | Stock Options ($) | RSUs ($) | PARSUs ($) | ||||||||||||||||
Margaret C. Whitman | Voluntary/For Cause | — | — | — | — | — | ||||||||||||||||
Disability | 6,031,724 | — | — | 4,985,676 | 1,046,048 | |||||||||||||||||
Retirement | — | — | — | — | — | |||||||||||||||||
Death | 2,203,242 | — | — | 1,157,194 | 1,046,048 | |||||||||||||||||
Not for Cause | 7,966,873 | 5,763,631 | — | 1,157,194 | 1,046,048 | |||||||||||||||||
Change in Control | 13,259,769 | 5,763,631 | — | 4,985,676 | 2,510,462 | |||||||||||||||||
Catherine A. Lesjak(4) | Voluntary/For Cause | 4,554,614 | — | — | 4,112,065 | 442,549 | ||||||||||||||||
Disability | 4,554,614 | — | — | 4,112,065 | 442,549 | |||||||||||||||||
Retirement | 4,554,614 | — | — | 4,112,065 | 442,549 | |||||||||||||||||
Death | 2,772,801 | — | — | 2,330,252 | 442,549 | |||||||||||||||||
Not for Cause | 7,689,180 | 3,134,566 | — | 4,112,065 | 442,549 | |||||||||||||||||
Change in Control | 8,308,748 | 3,134,566 | — | 4,112,065 | 1,062,117 | |||||||||||||||||
Dion J. Weisler | Voluntary/For Cause | — | — | — | — | — | ||||||||||||||||
Disability | 2,933,640 | — | 136,371 | 2,354,720 | 442,549 | |||||||||||||||||
Retirement | — | — | — | — | — | |||||||||||||||||
Death | 1,112,276 | — | 136,371 | 533,357 | 442,549 | |||||||||||||||||
Not for Cause | 3,708,074 | 2,663,983 | 68,185 | 533,357 | 442,549 | |||||||||||||||||
Change in Control | 6,217,191 | 2,663,983 | 136,371 | 2,354,720 | 1,062,117 | |||||||||||||||||
Antonio F. Neri | Voluntary/For Cause | — | — | — | — | — | ||||||||||||||||
Disability | 1,726,137 | — | — | 1,726,137 | — | |||||||||||||||||
Retirement | — | — | — | — | — | |||||||||||||||||
Death | 121,235 | — | — | 121,235 | — | |||||||||||||||||
Not for Cause | 2,355,043 | 2,233,808 | — | 121,235 | — | |||||||||||||||||
Change in Control | 3,959,945 | 2,233,808 | — | 1,726,137 | — | |||||||||||||||||
Tracy S. Keogh | Voluntary/For Cause | — | — | — | — | — | ||||||||||||||||
Disability | 2,489,461 | — | — | 2,248,034 | 241,427 | |||||||||||||||||
Retirement | — | — | — | — | — | |||||||||||||||||
Death | 504,234 | — | — | 262,807 | 241,427 | |||||||||||||||||
Not for Cause | 3,203,392 | 2,700,244 | — | 261,721 | 241,427 | |||||||||||||||||
Change in Control | 5,527,649 | 2,700,244 | — | 2,248,034 | 579,371 |
(1) | Total does not include amounts earned or benefits accumulated due to continued service by the NEO through October 31, 2015, including vested stock options, PCSOs, RSUs, PARSUs, accrued retirement benefits, and vested balances in the EDCP, as those amounts are detailed in the preceding tables. Total also does not include amounts the NEO was eligible to receive under the annual PfR Plan with respect to fiscal 2015 performance. |
HP Severance Plan for Executive Officers An executive will be deemed to have incurred a qualifying termination for purposes of the SPEO if he or she is involuntarily terminated without cause and executes a full release of claims in a form satisfactory to HP promptly following termination. For purposes of the SPEO, Narrative to the Potential Payments Upon Termination or Change in Control Table This narrative reflects plans and provisions in effect as of October 31, 2015. Please see the Compensation Discussion and Analysis for changes effective after fiscal 2015. Voluntary or In general, an NEO who remained employed through October 31, (2) For Ms. Whitman, the amounts reported represent the cash benefits payable under the SPEO pursuant to Ms. Whitman’s employment offer letter, which provides that Ms. Whitman is entitled to receive severance benefits payable under the SPEO at the rate applicable to an EVP rather than the rate applicable to the CEO (that is, using a 1.5x multiple of base pay plus annual incentive, rather than the 2.0x multiplier otherwise applicable to the CEO under the SPEO). For the other NEOs, the amounts reported are the cash benefits payable in the event of a qualifying termination under the SPEO. (3) On an involuntary termination not for cause, covered executives receive pro-rata vesting on unvested equity awards, so long as they have worked at least 25% of the longer of the applicable vesting or performance period, as discussed under “Executive Compensation—Compensation Discussion and Analysis—Severance Plan for Executive Officers.” Pro-rata vesting of PARSUs based on actual performance also applies in the event of a termination due to retirement, death or disability for all grant recipients. To calculate the value of unvested PARSUs for purposes of this table, target performance is used since results will not be certified until the end of the two- and three-year performance periods. Full vesting of unvested PCSOs applies in the event of a termination due to death or disability for all grant recipients. PCSOs vest pro-rata in the event of a termination due to retirement. With respect to the treatment of equity in the event of a change in control of HP, the information reported assumes that the Board or the HRC Committee would exercise its discretion to accelerate vesting of equity awards in the case of “not for cause” terminations. (4) As of the end of fiscal 2015, Ms. Lesjak is retirement eligible (after age 55 with at least 15 years of qualifying service). In the event that Ms. Lesjak retires, she would receive retirement equity treatment under the long-term incentive programs. "cause"“cause” means an executive'sexecutive’s material neglect (other than as a result of illness or disability) of his or her duties or responsibilities to HP or conduct (including action or failure to act) that is not in the best interest of, or is injurious to, HP. The material terms of the SPEO are described under "Executive“Executive Compensation—Compensation Discussion and Analysis—Severance Plan for Executive Officers."”"For Cause"“For Cause” Termination20132015 (the last day of the fiscal year) but voluntarily terminated employment immediately thereafter, or was terminated immediately thereafter as a "for cause"“for cause” termination, would be eligible (1) to receive his or her annual incentive amount earned for fiscal 20132015 under the PfR Plan (subject to any discretionary downward adjustment or elimination by the HRC Committee prior to actual payment)payment, and to any applicable clawback policy), (2) to exercise his or her vested stock options on or before the last day of employment,up to three months following termination, (3) to receive a distribution of vested amounts deferred or credited under the EDCP, and (4) to receive a distribution of his or her vested benefits, if any, under the HP 401(k) and pension plans. An NEO who terminated employment before October 31, 2013,2015, either voluntarily or in a "for cause"“for cause” termination, would generally not have been eligible to receive any amount under the PfR Plan with respect to the fiscal year in which
the termination occurred, except that the HRC Committee has the discretion to make payment of prorated bonus amounts to individuals on leave of absence or in non-pay status, as well as in connection with certain voluntary severance incentives, workforce reductions and similar programs.
"“Not for Cause"Cause” Termination
A "not“not for cause"cause” termination of an NEO who remained employed through October 31, 2015 and was terminated immediately thereafter would qualify the NEO for the amounts described above under a "voluntary"“voluntary” termination andin addition to benefits under the SPEO if the NEO signs the required release of claims in favor of HP.
In addition to the cash severance benefits and pro-rata equity awards payable under the SPEO, the NEO would be eligible to exercise vested stock options up to one year after termination and receive distributions of vested, accrued benefits from HP deferred compensation and pension plans.
Termination Following a Change in Control
In the event of a change in control of HP, the Board is authorized (but not required) to accelerate the vesting of stock options and to release restrictions on awards issued under HP stock plans. In addition, Ms. Lesjak was covered at the end of fiscal 2013 by an agreement which provided her with certain additional protections in the event of a change in control. That agreement expired on December 15, 2013. For the purposes of this table, the amounts reported for each NEO in the rows marked "Change“Change in Control"Control” assume that the Board would exercise its discretion in this manner, resulting in fully accelerated vesting of stock options and a release of all restrictions on all stock-based awards. In addition, an executive terminated on October 31, 20132015 following a change in control would be eligible for benefits under the SPEO, as described above.
Death or Disability Terminations
An NEO who continued in employment through October 31, 2015 whose employment is terminated immediately thereafter due to death or disability would be eligible (1) to receive his or her full annual incentive amount earned for fiscal 2015 under the PfR Plan determined by HP in its sole discretion, (2) to receive a distribution of vested amounts deferred or credited under the EDCP, and (3) to receive a distribution of his or her vested benefits under the HP 401(k) and pension plans.
Upon termination due to death or disability, equity awards held by the NEO may vest in full or in part. If termination is due to disability, stock options, RSUs, and PCSOs will vest in full, subject to satisfaction of applicable performance conditions, and must be exercised within three years of termination or by the original expiration date, if earlier; PARSUs will vest at the end of the applicable performance period as to a prorated number of shares based on the number of whole calendar months worked during the performance period and subject to actual performance. If termination is due to the NEO’s death, stock options and PCSOs will vest in full and must be exercised within one year of termination or by the original expiration date, if earlier; RSUs will vest as to a prorated number of shares based on the number of whole calendar months worked during the total vesting period and PARSUs will vest at the end of the applicable performance period as to a prorated number of shares based on the number of whole calendar months worked during the performance period and subject to actual performance. Please see section“Broad-based Changes to Equity Provisions”of the Compensation Discussion and Analysis for changes made for fiscal 2016.
HP Severance Policy for Senior Executives
Under the HP Severance Policy for Senior Executives adopted by the Board in July 2003 (the "HP“HP Severance Policy"Policy”), HP will seek stockholder approval for future severance agreements, if any, with certain senior executives that provide specified benefits in an amount exceeding 2.99 times the sum of the executive'sexecutive’s current annual base salary plus annual target cash bonus, in each case as in effect immediately prior to the time of such executive'sexecutive’s termination. Individuals subject to this policy consist of the Section 16 officers designated by the Board. In implementing this policy, the Board may elect to seek stockholder approval after the material terms of the relevant severance agreement are agreed upon.
For purposes of determining the amounts subject to the HP Severance Policy, benefits subject to the limit generally include cash separation payments that directly relate to extraordinary benefits that are not available to groups of employees other than the Section 16 officers upon termination of employment. Benefits that have been earned or accrued, as well as prorated bonuses, accelerated stock or option vesting and other benefits that are consistent with our practices applicable to employees other than the Section 16 officers, are not counted against the limit. Specifically, benefits subject to the HP Severance Policy include: (a) separation payments based on a multiplier of salary plus target bonus, or cash amounts payable for the uncompleted portion of employment agreements; (b) any gross-up payments made in connection with severance, retirement or similar payments, including any gross-up payments with respect to excess parachute payments under Section 280G of the Code; (c) the value of any service period credited to a Section 16 officer in excess of the period of service actually provided by such Section 16 officer for purposes of any employee benefit plan; (d) the value of benefits and perquisites that are inconsistent with our practices applicable to one or more groups of employees in addition to, or other than, the Section 16 officers ("(“Company Practices"Practices”); and (e) the value of any accelerated vesting of any stock options, stock appreciation rights, restricted stock or long-term cash incentives that is inconsistent with Company Practices. The following benefits are not subject to the HP Severance Policy, either because they have been previously earned or accrued by the employee or because they are consistent with Company Practices: (i) compensation and benefits earned, accrued, deferred or otherwise provided for employment services rendered on or prior to the date of
termination of employment pursuant to bonus, retirement, deferred compensation or other benefit plans (e.g., 401(k) Plan distributions, payments pursuant to retirement plans, distributions under deferred compensation plans or payments for accrued benefits such as unused vacation days), and any amounts earned with respect to such compensation and benefits in accordance with the terms of the applicable plan; (ii) payments of prorated portions of bonuses or prorated long-term incentive payments that are consistent with Company Practices; (iii) acceleration of the vesting of stock options, stock appreciation rights, restricted stock, RSUs or long-term cash incentives that is consistent with Company Practices; (iv) payments or benefits required to be provided by law; and (v) benefits and perquisites provided in accordance with the terms of any benefit plan, program or arrangement sponsored by HP or its affiliates that are consistent with Company Practices.
For purposes of the HP Severance Policy, future severance agreements include any severance agreements or employment agreements containing severance provisions that we may enter into after the adoption of the HP Severance Policy by the Board, as well as agreements renewing, modifying or extending such agreements. Future severance agreements do not include retirement plans, deferred compensation plans, early retirement plans, workforce restructuring plans, retention plans in connection with extraordinary transactions or similar plans or agreements entered into in connection with any of the foregoing, provided that such plans or agreements are applicable to one or more groups of employees in addition to the Section 16 officers.
HP Retirement Arrangements
Upon retirement immediately after October 31, 2015, on or after age 55 with at least 15 years of qualifying service, HP employees in the United States receive full vesting of time-based options granted under our stock plans with a three-year post-termination exercise period. PCSOs will receive prorated vesting if the stock price appreciation conditions are met and may vest on a prorated basis post-termination to the end of the performance period, subject to stock price appreciation conditions and certain post-employment restrictions. Restricted stock and RSUs granted prior to November 1, 2011 continue to vest in accordance with their normal vesting schedule, subject to certain post-employment restrictions, and all restrictions on restricted stock and RSUs granted on or after November 1, 2011 lapse upon retirement. Awards under the PARSU and PRU Program,programs, if any, are paid on a prorated basis to participants at the end of the performance period based on actual results, and bonuses, if any, under the PfR Plan may be paid in prorated amounts at the discretion of management based on actual results. In
accordance with Section 409A of the Code, certain amounts payable upon retirement of (or other termination by)termination) of the NEOs and other key employees will not be paid out for at least six months following termination of employment.
�� We sponsor two retiree medical programs in the United States, one of which provides subsidized coverage for eligible participants based on years of service. Eligibility for this program requires that participants have been employed by HP before January 1, 2003 and have met other age and service requirements. None of our NEOs are eligible or can become eligible for this program.
The other U.S. retiree medical program we sponsor provides eligible retirees with access to coverage at group rates only, with no direct subsidy provided by HP. As of the end of fiscal 2013, Catherine A.2015, Ms. Lesjak wasis eligible to retire under this program. All of the other NEOs could be eligible for this program if they retire from HP on or after age 55 with at least ten years of qualifying service or 80 age plus service points. In addition, beginning at age 45, eligible U.S. employees may participate in the HP Retirement Medical Savings Account Plan (the "RMSA"“RMSA”), under which certain participants are eligible to receive HP matching credits of up to $1,200 per year, beginning at age 45, up to a lifetime maximum of $12,000, which can be used to cover the cost of such retiree medical coverage (or other qualifying medical expenses) if the employee retires from HP on or after age 55 with at least ten years of qualifying service or 80 age plus service points. Ms. Lesjak isand Mr. Neri are the only NEONEOs eligible for the HP matching credits under the RMSA.
Please see section“Broad-based Changes to Equity Provisions”of the Compensation Discussion and Analysis for changes made for fiscal 2016.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes our equity compensation plan information as of October 31, 2013.2015.
Plan Category | Common shares to be issued upon exercise of outstanding options, warrants and rights(1) | Weighted- average exercise price of outstanding options, warrants and rights(2) | Common shares available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by HP stockholders
|
| 58,283,938
| (3)
| $
| 26.5614
|
|
| 215,948,945
| (4)
| |||
Equity compensation plans not approved by HP stockholders | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | 58,283,938 | $ | 26.5614 | 215,948,945 | ||||||||
|
|
|
|
|
|
(1) | This column does not reflect awards of options and RSUs assumed in acquisitions where the plans governing the awards were not available for future awards as of October 31, 2015. As of October 31, 2015, individual awards of options and RSUs to purchase a total of 2,248,305 shares were outstanding pursuant to awards assumed in connection with acquisitions and granted under such plans at a weighted-average exercise price of options of $16.2281. |
(2) | This column does not reflect the exercise price of shares underlying the assumed options referred to in footnote (1) to this table or the purchase price of shares to be purchased pursuant to the ESPP or the legacy HP Employee Stock Purchase Plan (the “Legacy ESPP”). In addition, the weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding awards of RSUs, PRUs and PARSUs, which have no exercise price. |
(3) | Includes awards of options and RSUs outstanding under the ESPP, the 2004 Plan and the HP 2000 Stock Plan. Also includes awards of RSUs representing 5,808,722 shares that may be issued under the 2004 Plan. Each PRU award reflects a target number of shares that may be issued to the award recipient. HP determines the actual number of shares the recipient receives at the end of a three-year performance period based on results achieved versus company performance goals and stockholder return relative to the market. The actual number of shares that a grant recipient receives at the end of the period may range from 0% to 200% of the target number of shares. |
(4) | Includes (i) 129,885,124 shares available for future issuance under the 2004 Plan; (ii) 81,971,830 shares available for future issuance under the ESPP; (iii) 2,725,611 shares available for future issuances under the Legacy ESPP, a plan under which employee stock purchases are no longer made; and (iv) 1,366,380 shares are reserved for issuance under our Service Anniversary Stock Plan, a plan under which awards are no longer granted. Taking into account these adjustments, 211,856,954 shares were available for future grants as of October 31, 2015. |
Plan Category | Common shares to be issued upon exercise of outstanding options, warrants and rights(1) | Weighted-average exercise price of outstanding options, warrants and rights(2) | Common shares available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
| (a) | (b) | (c) | |||||||
Equity compensation plans approved by HP stockholders | 105,535,089 | (3) | $ | 27.3309 | 300,983,929 | (4) | ||||
Equity compensation plans not approved by HP stockholders | — | — | — | |||||||
| | | | | | | | | | |
Totals | 105,535,089 | $ | 27.3309 | 300,983,929 | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
PRINCIPAL ACCOUNTING FEES AND SERVICES
The Audit Committee has appointed Ernst & Young LLP ("EY") as our independent registered public accounting firm for the fiscal year ending October 31, 2014. Stockholders are being asked to ratify the appointment of EY at the annual meeting pursuant to Proposal No. 2. Representatives of EY are expected to be present at the annual meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.
Fees Incurred by HP for Ernst & Young LLP
The following table shows the fees paid or accrued by HP for audit and other services provided by EYErnst & Young LLP (“EY”) for fiscal 20132015 and 2012.
| 2013 | 2012 | ||||
---|---|---|---|---|---|---|
| In millions | |||||
Audit Fees(1) | $ | 34.9 | $ | 30.6 | ||
Audit-Related Fees(2) | 13.8 | 14.8 | ||||
Tax Fees(3) | 5.0 | 3.2 | ||||
All Other Fees(4) | 0.8 | 2.2 | ||||
| | | | | | |
Total | $ | 54.5 | $ | 50.8 | ||
| | | | | | |
| | | | | | |
The Audit Committee has approved all of the fees above.2014.
2015 | 2014 | |||||||
In millions | ||||||||
Audit Fees(1) | $ | 65.7 | $ | 30.0 | ||||
Audit-Related Fees(2) | 21.9 | 15.1 | ||||||
Tax Fees(3) | 21.0 | 6.0 | ||||||
All Other Fees(4) | 4.1 | 0.1 | ||||||
|
|
|
| |||||
Total | $ | 112.7 | $ | 51.2 | ||||
|
|
|
|
(1) | Audit fees represent fees for professional services provided in connection with the audit of our financial statements and review of our quarterly financial statements and audit services provided in connection with other statutory or regulatory filings. Audit fees for fiscal 2015 included fees for audit services provided in connection with the separation of Hewlett-Packard Company into two independent publicly-traded companies, Hewlett Packard Enterprise Company and HP Inc. |
(2) | Audit-related fees consisted primarily of service organization control examinations and other attestation services of $9.0 million and $11.9 million for fiscal 2015 and fiscal 2014, respectively. For fiscal 2015 and fiscal 2014, audit-related fees also included accounting consultations, employee benefit plan audits and merger and acquisition due diligence of $12.9 million and $3.6 million, respectively. |
(3) | Tax fees consisted primarily of tax advice and tax planning fees of $18.8 million and $3.5 million for fiscal 2015 and fiscal 2014, respectively. For fiscal 2015 and fiscal 2014, tax fees also included tax compliance fees of $1.2 million and $1.4 million, respectively. |
(4) | For fiscal 2015 and 2014, all other fees included primarily advisory service fees. |
Pre-Approval of Audit and Non-Audit Services Policy
The Audit Committee has delegated to the chair of the Audit Committee the authority to pre-approve audit-related and non-audit services not prohibited by law to be performed by our independent registered public accounting firm and associated fees up to a maximum for any one service of $250,000, provided that the chair shall report any decisions to pre-approve services and fees to the full Audit Committee at its next regular meeting.
Audit fees represent fees for professional services provided in connection with the audit of our financial statements and review of our quarterly financial statements and audit services provided in connection with other statutory or regulatory filings.
REPORT OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
The Audit Committee represents and assists the Board in fulfilling its responsibilities for general oversight of the integrity of HP'sHP’s financial statements, HP'sHP’s compliance with legal and regulatory requirements, the independent registered public accounting firm'sfirm’s qualifications and independence, the performance of HP'sHP’s internal audit function and independent registered public accounting firm, and risk assessment and risk management. The Audit Committee manages HP'sHP’s relationship with its independent registered public accounting firm (which reports directly to the Audit Committee). The Audit Committee has the authority to obtain advice and assistance from outside legal, accounting or other advisors as the Audit Committee deems necessary to carry out its duties and receives appropriate funding, as determined by the Audit Committee, from HP for such advice and assistance.
HP'sHP’s management is primarily responsible for HP'sHP’s internal control and financial reporting process. HP'sHP’s independent registered public accounting firm, Ernst & Young LLP, is responsible for performing an independent audit of HP'sHP’s consolidated financial statements and issuing opinions on the conformity of those audited financial statements with United States generally accepted accounting principles and the effectiveness of HP'sHP’s internal control over financial reporting. The Audit Committee monitors HP'sHP’s financial reporting process and reports to the Board on its findings.
In this context, the Audit Committee hereby reports as follows:
1. | The Audit Committee has reviewed and discussed the audited financial statements with HP’s management. |
2. | The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed under the rules adopted by the Public Company Accounting Oversight Board (“PCAOB”). |
3. | The Audit Committee has received from the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence and has discussed with the independent registered public accounting firm its independence. |
4. | Based on the review and discussions referred to in paragraphs (1) through (3) above, the Audit Committee recommended to the Board, and the Board has approved, that the audited financial statements be included in HP’s Annual Report on Form 10-K for the fiscal year ended October 31, 2015, for filing with the Securities and Exchange Commission. |
The undersigned members of the Audit Committee have submitted this Report to the Board of Directors.
AUDIT COMMITTEE
Mary Anne Citrino, Chair
Robert R. Bennett
Stacy Brown-Philpot
Stephanie A. Burns
Subra Suresh
1. | Why am I receiving these materials? |
We have made these materials available to you or delivered paper copies to you by mail in connection with our annual meeting of stockholders, which will take place online on Monday, April 4, 2016. As a stockholder, you are invited to participate in the annual meeting via live webcast and vote on the business items described in this proxy statement. This proxy statement includes information that we are required to provide to you under U.S. Securities and Exchange Commission (the “SEC”) rules and that is designed to assist you in voting your shares. See Questions 17 and 18 below for information regarding how you can vote your shares at the annual meeting or by proxy (without attending the annual meeting).
2. | What is included in the proxy materials? |
The proxy materials include:
If you received a paper copy of these materials by mail, the proxy materials also include a proxy card or a voting instruction card for the annual meeting. If you received a notice of the Internet availability of the proxy materials instead of a paper copy of the proxy materials, see Questions 17 and 18 below for information regarding how you can vote your shares.
3. | What information is contained in this proxy statement? |
The information in this proxy statement relates to the proposals to be voted on at the annual meeting, the voting process, the Board and Board committees, the compensation of our directors and certain executive officers for fiscal 2015 and other required information.
4. | Why did I receive a notice in the mail regarding the Internet availability of the proxy materials instead of a paper copy of the full set of proxy materials? |
This year, we will again be using the SEC rule that allows companies to furnish their proxy materials over the Internet. As a result, we are mailing to many of our stockholders a notice of the Internet availability of the proxy materials instead of a paper copy of the proxy materials. All stockholders receiving the notice will have the ability to access the proxy materials over the Internet and request to receive a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the notice of the Internet availability of the proxy materials. In addition, the notice contains instructions on how you may request access to proxy materials in printed form by mail or electronically on an ongoing basis.
5. | Why didn’t I receive a notice in the mail about the Internet availability of the proxy materials? |
We are providing some of our stockholders, including stockholders who have previously requested to receive paper copies of the proxy materials and some of our stockholders who are living outside of the United States, with paper copies of the proxy materials instead of a notice of the Internet availability of the proxy materials.
In addition, we are providing proxy materials or notice of the Internet availability of the proxy materials by e-mail to those stockholders who have previously elected delivery of the proxy materials or notice electronically. Those stockholders should receive an e-mail containing a link to the website where those materials are available and a link to the proxy voting website.
6. | How can I access the proxy materials over the Internet? |
Your notice of the Internet availability of the proxy materials, proxy card or voting instruction card will contain instructions on how to:
Our proxy materials are also available on our website atHP.onlineshareholdermeeting.com and our proxy materials will be available during the voting period onwww.proxyvote.com.
Your notice of the Internet availability of the proxy materials, proxy card or voting instruction card will contain instructions on how you may request access to proxy materials electronically on an ongoing basis. Choosing to access your future proxy materials electronically will help us conserve natural resources and reduce the costs of distributing our proxy materials. If you choose to access future proxy materials electronically, you will receive an e-mail with instructions containing a link to the website where those materials are available and a link to the proxy voting website. Your election to access proxy materials by e-mail will remain in effect until you terminate it.
7. | How may I obtain a paper copy of the proxy materials? |
Stockholders receiving a notice of the Internet availability of the proxy materials will find instructions about how to obtain a paper copy of the proxy materials on their notice. Stockholders receiving notice of the Internet availability of the proxy materials by e-mail will find instructions about how to obtain a paper copy of the proxy materials as part of that e-mail. All stockholders who do not receive a notice or an e-mail will receive a paper copy of the proxy materials by mail.
8. | I share an address with another stockholder, and we received only one paper copy of the proxy materials or notice of the Internet availability of the proxy materials. How may I obtain an additional copy? |
If you share an address with another stockholder, you may receive only one paper copy of the proxy materials or notice of the Internet availability of the proxy materials, as applicable, unless you have provided contrary instructions. If you are a beneficial owner and wish to receive a separate set of proxy materials or notice of the Internet availability of the proxy materials now, please request the additional copy by contacting your individual broker. If you wish to receive a separate set of the proxy materials or notice of the Internet availability of the proxy materials now, please request the additional copy by contacting Broadridge Financial Solutions, Inc. (“Broadridge”) at:
By Internet:www.proxyvote.com
By telephone: 1-800-579-1639
By e-mail:sendmaterial@proxyvote.com
If you request a separate set of the proxy materials or notice of Internet availability of the proxy materials by e-mail, please be sure to include your control number in the subject line. A separate set of proxy materials or notice of the Internet availability of the proxy materials, as applicable, will be sent promptly following receipt of your request.
If you are a stockholder of record and wish to receive a separate set of proxy materials or notice of the Internet availability of the proxy materials, as applicable, in the future, please contact our transfer agent. See Question 22 below.
If you are the beneficial owner of shares held through a broker, trustee or other nominee and you wish to receive a separate set of proxy materials or notice of the Internet availability of the proxy materials, as applicable, in the future, please call Broadridge at:
1-866-540-7095
All stockholders also may write to HP at the address below to request a separate set of proxy materials or notice of the Internet availability of the proxy materials, as applicable:
NASDAQ
Print and Distribution Services
325 Donald Lynch Blvd, Suite 120
Marlborough, MA 01752-4724
9. | I share an address with another stockholder, and we received more than one paper copy of the proxy materials or notice of the Internet availability of the proxy materials. How do we obtain a single copy in the future? |
Stockholders of record sharing an address who are receiving multiple copies of the proxy materials or notice of the Internet availability of the proxy materials, as applicable, and who wish to receive a single copy of such materials in the future may contact our transfer agent. See Question 22 below.
Beneficial owners of shares held through a broker, trustee or other nominee sharing an address who are receiving multiple copies of the proxy materials or notice of the Internet availability of the proxy materials, as applicable, and who wish to receive a single copy of such materials in the future may contact Broadridge at:
1-866-540-7095
10. | What should I do if I receive more than one notice or e-mail about the Internet availability of the proxy materials or more than one paper copy of the proxy materials? |
You may receive more than one notice, more than one e-mail or more than one paper copy of the proxy materials, including multiple paper copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate notice, a separate e-mail or a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you may receive more than one notice, more than one e-mail or more than one proxy card. To vote all of your shares by proxy, you must complete, sign, date and return each proxy card and voting instruction card that you receive and vote over the Internet the shares represented by each notice and e-mail that you receive (unless you have requested and received a proxy card or voting instruction card for the shares represented by one or more of those notices or e-mails).
11. | How may I obtain a copy of HP’s 2015 Form 10-K and other financial information? |
Stockholders may request a free copy of our 2015 Annual Report, which includes our 2015 Form 10-K, from:
NASDAQ
Print and Distribution Services
325 Donald Lynch Blvd, Suite 120
Marlborough, MA 01752-4724
www.hp.com/investor/informationrequest
Alternatively, stockholders can access the 2015 Annual Report on HP’s Investor Relations website at:
www.hp.com/investor/home
We also will furnish any exhibit to the 2015 Form 10-K if specifically requested.
12. | What proposals will be voted at the meeting? How does the Board recommend that I vote and what is the voting requirement for each of the proposals? |
Proposals | Board Recommendation | Votes Required | Effect of Abstentions | Effect of Broker Non-Votes | ||||
Election of Directors | FOR EACH NOMINEE | Majority of votes cast | None | None | ||||
Ratification of Independent Registered Public Accounting Firm | FOR | Majority of the shares present, in person or represented by proxy, and entitled to vote | Same as “AGAINST” | No BrokerNon-Votes (Routine Matter) | ||||
Advisory Vote to Approve Executive Compensation | FOR | Majority of the shares present, in person or represented by proxy, and entitled to vote | Same as “AGAINST” | None | ||||
Approval of Amendment to Certificate of Incorporation to Eliminate Cumulative Voting | FOR | Majority of the outstanding shares entitled to vote | Same as “AGAINST” | Same as “AGAINST” |
We also will consider any other business that properly comes before the annual meeting. See Question 29 below.
13. | What are broker non-votes? |
If you are the beneficial owner of shares held in the name of a broker, trustee or other nominee and do not provide that broker, trustee or other nominee with voting instructions, your shares may constitute “broker non-votes.” Generally, broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. Under the rules of the New York Stock Exchange, brokers, trustees or other nominees may generally vote on routine matters but cannot vote on non-routine matters. Only Proposal No. 2 (ratifying the appointment of the independent registered public accounting firm) is considered a routine matter. The other proposals are not considered routine matters, and without your instructions, your broker cannot vote your shares. In tabulating the voting results for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal, but are considered “outstanding” for purposes of Proposal No. 4.
If you provide specific instructions with regard to certain items, your shares will be voted as you instruct on such items. If you vote by proxy card or voting instruction card and sign the card without giving specific instructions, your shares will be voted in accordance with the recommendations of the Board (FOR all of our nominees to the Board, FOR ratification of the appointment of our independent registered public accounting firm, FOR the approval of the compensation of our named executive officers, and FOR the approval of the amendment to the Certificate of Incorporation to eliminate cumulative voting).
For any shares you hold in the HP 401(k) Plan, if your voting instructions are not received by 11:59 p.m., Eastern Time, on March 30, 2016, your shares will be voted in proportion to the way the shares held by the other HP 401(k) Plan participants are voted, except as may be otherwise required by law.
14. | Is cumulative voting permitted for the election of directors? |
Currently, in the election of directors, you may choose to cumulate your vote. Cumulative voting applies only to the election of directors and allows you to allocate among the director nominees, as you see fit, the total number of votes equal to the number of director positions to be filled multiplied by the number of shares you hold. For example, if you own 100 shares of stock and there are 13 directors to be elected at the annual meeting, you may allocate 1,300 “FOR” votes (13 times 100) among as few or as many of the 13 nominees to be voted on at the annual meeting as you choose. You may not cumulate your votes against a nominee. Note that at this meeting, we are seeking your approval of the amendment to the Certificate of Incorporation to eliminate cumulative voting. For details, see “Proposal No. 4—Approval of Amendment to Certificate of Incorporation to Eliminate Cumulative Voting.”
If you are a stockholder of record and choose to cumulate your votes, you will need to submit a proxy card and make an explicit statement of your intent to cumulate your votes by so indicating in writing on the proxy card. If you hold shares beneficially through a broker, trustee or other nominee and wish to cumulate votes, you should contact your broker, trustee or nominee. You will not be able to cumulate your votes if you vote electronically during the annual meeting; thus, if you wish to cumulate your votes, you should vote prior to the annual meeting.
If you vote by proxy card or voting instruction card and sign your card with no further instructions, Dion J. Weisler, Catherine A. Lesjak and Kim M. Rivera, as proxy holders, may cumulate and cast your votes in favor of the election of some or all of the applicable nominees in their sole discretion, except that none of your votes will be cast for any nominee as to whom you vote against or abstain from voting.
15. | What is the difference between holding shares as a stockholder of record and as a beneficial owner? |
Most of our stockholders hold their shares through a broker, trustee or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.
16. | Who is entitled to vote and how many shares can I vote? |
Each holder of shares of HP common stock issued and outstanding as of the close of business on February 5, 2016, the record date for the annual meeting, is entitled to cast one vote per share on all items being voted upon at the annual meeting. You may vote all shares owned by you as of this time, including (1) shares held directly in your name as the stockholder of record, including shares purchased
through our dividend reinvestment program and employee stock purchase plans, and shares held through our Direct Registration Service; and (2) shares held for you as the beneficial owner through a broker, trustee or other nominee.
On the record date, HP had approximately 1,726,657,616 shares of common stock issued and outstanding.
17. | How can I vote my shares during the annual meeting? |
This year’s annual meeting will be held entirely online to allow greater participation. Stockholders may participate in the annual meeting by visiting the following website:
HP.onlineshareholdermeeting.com
To participate in the annual meeting, you will need the 16-digit control number included on your notice of Internet availability of the proxy materials, on your proxy card or on the instructions that accompanied your proxy materials.
Shares held in your name as the stockholder of record may be voted electronically during the annual meeting. Shares for which you are the beneficial owner but not the stockholder of record also may be voted electronically during the annual meeting, except that shares held in the HP 401(k) Plan cannot be voted electronically during the annual meeting. If you hold shares in the HP 401(k) Plan, your voting instructions must be received by 11:59 p.m., Eastern Time, on March 30, 2016 for the trustee to vote your shares. However, holders of shares in the HP 401(k) Plan will still be able to view the annual meeting webcast and ask questions during the annual meeting.
Note that you will not be able to cumulate your votes if you vote electronically during the annual meeting; thus, if you wish to cumulate your votes, you should vote prior to the annual meeting. See Question 14 above for additional information on cumulative voting.
Even if you plan to participate in the annual meeting online, we recommend that you also vote by proxy as described below so that your vote will be counted if you later decide not to participate in the annual meeting.
18. | How can I vote my shares without participating in the annual meeting? |
Whether you hold shares directly as the stockholder of record or through a broker, trustee or other nominee as the beneficial owner, you may direct how your shares are voted without participating in the annual meeting. There are three ways to vote by proxy:
| VIA THE INTERNET Stockholders who have received a notice of the Internet availability of the proxy materials by | |
| BY TELEPHONE Stockholders of record who live in the United States or Canada may submit proxies by telephone by calling 1-800-690-6903 and following the instructions. Stockholders of record who have received a notice of the Internet availability of the proxy materials by mail must have the control number that appears on their notice available when voting. Stockholders of record who received notice of the Internet availability of the proxy materials by e-mail must |
have the control number included in the e-mail available when voting. Stockholders of record who have received a proxy card by mail must have the control number that appears on their proxy card available when voting. Most stockholders who are beneficial owners of their shares living in the United States or Canada and who have received a voting instruction card by mail may vote by phone by calling the number specified on the voting instruction card provided by their broker, trustee or nominee. Those stockholders should check the voting instruction card for telephone voting availability. | ||
| BY MAIL Stockholders who have received a paper copy of a proxy card or voting instruction card by mail may submit proxies by completing, signing and dating their proxy card or voting instruction card and mailing it in the accompanying pre-addressed envelope. | |
19. | What is the deadline for voting my shares? |
If you hold shares as the stockholder of record, or through HP’s 2011 Employee Stock Purchase Plan (the “ESPP”), your vote by proxy must be received before the polls close during the annual meeting.
If you hold shares in the HP 401(k) Plan, your voting instructions must be received by 11:59 p.m., Eastern Time, on March 30, 2016 for the trustee to vote your shares.
If you are the beneficial owner of shares held through a broker, trustee or other nominee, please follow the voting instructions provided by your broker, trustee or nominee.
20. | May I change my vote or revoke my proxy? |
You may change your vote or revoke your proxy at any time prior to the vote during the annual meeting, except that any change to your voting instructions for shares held in the HP 401(k) Plan must be provided by 11:59 p.m., Eastern Time, on March 30, 2016 as described above.
If you are the stockholder of record, you may change your vote by: (1) granting a new proxy bearing a later date (which automatically revokes the earlier proxy); (2) providing a written notice of revocation to the Corporate Secretary at the address below in Question 33 prior to your shares being voted; or (3) participating in the annual meeting and voting your shares electronically during the annual meeting. Participation in the annual meeting will not cause your previously granted proxy to be revoked unless you specifically make that request. For shares you hold beneficially in the name of a broker, trustee or other nominee, you may change your vote by submitting new voting instructions to your broker, trustee or nominee, or by participating in the meeting and electronically voting your shares during the meeting (except that shares held in the HP 401(k) Plan cannot be voted electronically at the annual meeting).
21. | Is my vote confidential? |
Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed, either within HP or to third parties, except: (1) as necessary to meet applicable legal requirements; (2) to allow for the tabulation of votes and certification of the votes; and (3) to facilitate a successful proxy solicitation. Occasionally, stockholders provide on their proxy card written comments, which are then forwarded to management.
22. | What if I have questions for our transfer agent? |
Please contact our transfer agent, at the phone number or address listed below, with questions concerning stock certificates, dividend checks, transfer of ownership or other matters pertaining to your stock account.
Wells Fargo Bank, N.A.
Shareowner Services
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120-4100
1-800-286-5977 (U.S. and Canada)
1-651-453-2122 (International)
A dividend reinvestment and stock purchase program is also available through our transfer agent. For information about this program, please contact our transfer agent as follows:
Wells Fargo Bank, N.A.
Shareowner Services
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120-4100
1-800-286-5977 (U.S. and Canada)
1-651-453-2122 (International)
23. | How can I attend the annual meeting? |
This year’s annual meeting will be a completely virtual meeting of stockholders, which will be conducted via live webcast. You are entitled to participate in the annual meeting only if you were an HP stockholder or joint holder as of the close of business on February 5, 2016 or if you hold a valid proxy for the annual meeting.
You will be able to attend the annual meeting of stockholders online and submit your questions during the meeting by visitingHP.onlineshareholdermeeting.com. You also will be able to vote your shares electronically at the annual meeting (other than shares held through the HP 401(k) Plan, which must be voted prior to the meeting).
To participate in the annual meeting, you will need the 16-digit control number included on your notice of Internet availability of the proxy materials, on your proxy card or on the instructions that accompanied your proxy materials.
The meeting webcast will begin promptly at 2:00 p.m., Pacific Time. We encourage you to access the meeting prior to the start time. Online check-in will begin at 1:30 p.m., Pacific Time, and you should allow ample time for the check-in procedures.
24. | What is the pre-meeting forum and how can I access it? |
The new online format for the annual meeting will allow us to communicate more effectively with you via a pre-meeting forum that you can enter by visitingwww.theinvestornetwork.com/forum/hpq.
On our pre-meeting forum, you can submit questions in advance of the annual meeting, and also access copies of our proxy statement and annual report.
25. | Why a virtual meeting? |
We are excited to embrace the latest technology to provide expanded access, improved communication and cost savings for our stockholders and the company. Hosting a virtual meeting will enable increased stockholder attendance and participation since stockholders can participate from any location around the world.
You will be able to attend the annual meeting of stockholders online and submit your questions during the meeting by visitingHP.onlineshareholdermeeting.com. You also will be able to vote your shares electronically at the annual meeting (other than shares held through the HP 401(k) Plan, which must be voted prior to the meeting).
26. | What if during the check-in time or during the meeting I have technical difficulties or trouble accessing the virtual meeting website? |
We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call:
1-855-449-0991 (Toll-free)
1-720-378-5962 (Toll line)
27. | How many shares must be present or represented to conduct business at the annual meeting? |
The quorum requirement for holding the annual meeting and transacting business is that holders of a majority of shares of HP common stock entitled to vote must be present in person or represented by proxy. Both abstentions and broker non-votes described previously in Question 13 above are counted for the purpose of determining the presence of a quorum.
28. | What if a quorum is not present at the annual meeting? |
If a quorum is not present at the scheduled time of the annual meeting, then either the chairman of the annual meeting or the stockholders by vote of the holders of a majority of the stock present in person or represented by proxy at the annual meeting are authorized by our Bylaws to adjourn the annual meeting until a quorum is present or represented.
29. | What happens if additional matters are presented at the annual meeting? |
Other than the four items of business described in this proxy statement, we are not aware of any other business to be acted upon at the annual meeting. If you grant a proxy, the persons named as proxy holders, Dion J. Weisler, Catherine A. Lesjak and Kim M. Rivera, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any reason any of the nominees named in this proxy statement is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board.
30. | Who will serve as inspector of elections? |
The inspector of elections will be a representative from an independent firm, Broadridge.
31. | Where can I find the voting results of the annual meeting? |
We intend to announce preliminary voting results at the annual meeting and publish final results in a Current Report on Form 8-K to be filed with the SEC within four business days of the annual meeting.
32. | Who will bear the cost of soliciting votes for the annual meeting? |
HP is making this solicitation and will pay the entire cost of preparing, assembling, printing, mailing and distributing the notices and these proxy materials and soliciting votes. In addition to the
mailing of the notices and these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities. We also have hired Innisfree M&A Incorporated (“Innisfree”) to assist us in the solicitation of votes described above. We will pay Innisfree a base fee of $20,000 plus customary costs and expenses for these services. We have agreed to indemnify Innisfree against certain liabilities arising out of or in connection with these services. We also will reimburse brokerage houses and other custodians, nominees and fiduciaries for forwarding proxy and solicitation materials to stockholders.
Stockholder Proposals, Director Nominations and Related Bylaw Provisions |
33. | What is the deadline to propose actions (other than director nominations) for consideration at next year’s annual meeting of stockholders? |
You may submit proposals for consideration at future stockholder meetings. For a stockholder proposal to be considered for inclusion in our proxy statement for the annual meeting next year, the Corporate Secretary must receive the written proposal at our principal executive offices no later than October , 2016. Such proposals also must comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:
Corporate Secretary
HP Inc.
1501 Page Mill Road
Palo Alto, California 94304
Fax: 650-275-9138
For a stockholder proposal that is not intended to be included in our proxy statement for next year’s annual meeting under Rule 14a-8, the stockholder must provide the information required by our Bylaws and give timely notice to the Corporate Secretary in accordance with our Bylaws, which, in general, require that the notice be received by the Corporate Secretary:
If the date of the stockholder meeting is moved more than 30 days before or 60 days after the anniversary of our annual meeting for the prior year, then notice of a stockholder proposal that is not intended to be included in our proxy statement under Rule 14a-8 must be received no earlier than the close of business 120 days prior to the meeting and not later than the close of business on the later of the following two dates:
Deadlines for the nomination of director candidates are discussed in Question 35 below.
34. | How may I recommend individuals to serve as directors and what is the deadline for a director recommendation? |
You may recommend director candidates for consideration by the NGSR Committee. Any such recommendations should include verification of the stockholder status of the person submitting the
recommendation and the nominee’s name and qualifications for Board membership and should be directed to the Corporate Secretary at the address of our principal executive offices set forth in Question 33 above. See “Proposal No. 1—Election of Directors—Director Nominees and Director Nominees’ Experience and Qualifications” for more information regarding our Board membership criteria.
A stockholder may send a recommended director candidate’s name and information to the Board at any time. Generally, such proposed candidates are considered at the first or second Board meeting prior to the issuance of the proxy statement for our annual meeting.
35. | How may I nominate individuals to serve as directors and what are the deadlines for a director nomination? |
Our Bylaws permit stockholders to nominate directors for consideration at an annual meeting. To nominate a director for consideration at an annual meeting, a nominating stockholder must provide the information required by our Bylaws and give timely notice of the nomination to the Corporate Secretary in accordance with our Bylaws, and each nominee must meet the qualifications required by our Bylaws. To nominate a director for consideration at next year’s annual meeting, in general the notice must be received by the Corporate Secretary between the close of business on December 5, 2016 and the close of business on January 4, 2017, unless the annual meeting is moved by more than 30 days before or 60 days after the anniversary of the prior year’s annual meeting, in which case the deadline will be as described in Question 33 above.
In addition, our Bylaws provide that under certain circumstances, a stockholder or group of stockholders may include director candidates that they have nominated in our annual meeting proxy statement. These proxy access provisions of our Bylaws provide, among other things, that a stockholder or group of up to twenty stockholders seeking to include director candidates in our annual meeting proxy statement must own 3% or more of HP’s outstanding common stock continuously for at least the previous three years. The number of stockholder-nominated candidates appearing in any annual meeting proxy statement cannot exceed 20% of the number of directors then serving on the Board. If 20% is not a whole number, the maximum number of stockholder-nominated candidates would be the closest whole number below 20%. Based on the current Board size of 12 directors, the maximum number of proxy access candidates that we would be required to include in our proxy materials for an annual meeting is two. Nominees submitted under the proxy access procedures that are later withdrawn or are included in the proxy materials as Board-nominated candidates will be counted in determining whether the 20% maximum has been reached. If the number of stockholder-nominated candidates exceeds 20%, each nominating stockholder or group of stockholders may select one nominee for inclusion in our proxy materials until the maximum number is reached. The order of selection would be determined by the amount (largest to smallest) of shares of HP common stock held by each nominating stockholder or group of stockholders. The nominating stockholder or group of stockholders also must deliver the information required by our Bylaws, and each nominee must meet the qualifications required by our Bylaws. Requests to include stockholder-nominated candidates in our proxy materials for next year’s annual meeting must be received by the Corporate Secretary:
36. | How may I obtain a copy of the provisions of our Bylaws regarding stockholder proposals and director nominations? |
You may contact the Corporate Secretary at our principal executive offices for a copy of the relevant Bylaws provisions regarding the requirements for making stockholder proposals and nominating
director candidates. Our Bylaws also are available on our website athttp://h30261.www3.hp.com/governance/certificate-of-incorporation-and-bylaws.aspx.
37. | Who can help answer my questions? |
If you have any questions about the annual meeting or how to vote or revoke your proxy, you should contact our proxy solicitor:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Stockholders: (877) 750-5838 (U.S. and Canada)
(412) 232-3651 (International)
Banks and brokers (call collect):
(212) 750-5833
We know of no other matters to be submitted to the stockholders at the annual meeting. If any other matters properly come before the stockholders at the annual meeting, it is the intention of the persons named on the proxy to vote the shares represented thereby on such matters in accordance with their best judgment.
IMPORTANT INFORMATION CONCERNING THE HP ANNUAL MEETING
| Meeting begins: 2:00 p.m., |
• | You will be able to attend the annual meeting of stockholders online and submit your questions during the meeting by visitingHP.onlineshareholdermeeting.com. You also will be able to vote your shares electronically at the annual meeting (other than shares held through our 401(k) Plan, which must be voted prior to the meeting). |
• | Visit our pre-meeting stockholder forum atwww.theinvestornetwork.com/forum/hpq in advance of the annual meeting where you can submit questions to management and also access copies of our proxy statement and annual report. |
THANK YOU FOR YOUR INTEREST AND SUPPORT—YOUR VOTE IS IMPORTANT!
Directions
Annual Meeting | ||
Annual meeting online | HP.onlineshareholdermeeting.com | |
Proxy materials | www.hp.com/investor/stockholdermeeting2016 | |
Board of Directors | ||
HP Board | http://h30261.www3.hp.com/governance/board-members.aspx | |
Board committees | http://h30261.www3.hp.com/governance/hp-board-committee-composition.aspx | |
Audit Committee Charter | http://h30261.www3.hp.com/~/media/Files/H/HP-IR/documents/others/hp-inc-audit-committee-charter.pdf | |
Finance, Investment and Technology Committee Charter | http://h30261.www3.hp.com/~/media/Files/H/HP-IR/documents/others/hp-inc-finance-investment-and-technology-committee-charter.pdf | |
HR and Compensation Committee Charter | http://h30261.www3.hp.com/~/media/Files/H/HP-IR/documents/others/hp-inc-hr-and-compensation-committee-charter.pdf | |
Nominating, Governance and Social Responsibility Committee Charter | http://h30261.www3.hp.com/~/media/Files/H/HP-IR/documents/others/hp-inc-nominating-governance-and-social-responsibility-committee-charter.pdf | |
Director independence | http://h30261.www3.hp.com/governance/director-independence.aspx | |
Governance Documents | ||
Bylaws | http://h30261.www3.hp.com/governance/certificate-of-incorporation-and-bylaws.aspx | |
Certificate of Incorporation | http://h30261.www3.hp.com/governance/certificate-of-incorporation-and-bylaws.aspx | |
Standards of Business Conduct | http://h30261.www3.hp.com/governance/standards-of-business-conduct.aspx | |
Corporate Governance Guidelines | http://h30261.www3.hp.com/governance/corporate-governance-guidelines.aspx |
HP INC.
1501 PAGE MILL ROAD
PALO ALTO, CA 94304
VOTE BY INTERNET
Before The Meeting - Go to www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go to HP.onlineshareholdermeeting.com
You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until
11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
M81321-P58696
KEEP THIS PORTION FOR YOUR RECORDS
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
DETACH AND RETURN THIS PORTION ONLY
HP INC.
The Board of Directors recommends you vote FOR
the following proposals:
1. To elect the 13 directors named in this proxy statement
Nominees:
For Against Abstain
1a. Aida Alvarez
1b. Shumeet Banerji
For Against Abstain
1c. Carl Bass
1d. Robert R. Bennett
1e. Charles V. Bergh
1f. Stacy Brown-Philpot
1g. Stephanie Burns
1h. Mary Anne Citrino
1i. Rajiv L. Gupta
1j. Stacey Mobley
1k. Subra Suresh
1l. Dion Weisler
1m. Margaret C. Whitman
The Board of Directors recommends you vote FOR
the following proposals:
2. To ratify the appointment of the independent registered public accounting firm for the fiscal year ending October 31, 2016
3. To approve, on an advisory basis, the company’s
executive compensation
HP Inc.’s proxy holders reserve the right to cumulate
votes and cast such votes in favor of the election of some or all of the applicable director nominees in their sole discretion. If you want to cumulate your votes, please mark here and write in your instructions on the reverse side.
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
4. To approve an amendment to the Santa Clara Convention Center, 5001 Great America Parkway, Santa Clara, California
From San Francisco:certificate of incorporation to eliminate cumulative voting
5. To consider such other business as may properly
come before the meeting
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The 2016 Notice and Proxy Statement and 2015 Annual Report With Form 10-K are available at Great America Parkway.
M81322-P58696
HP INC.
Annual Meeting of Stockholders
April 4, 2016 2:00 PM Pacific Time
This proxy is solicited by the Board of Directors
The Convention Center is located at Great America Parkwayundersigned hereby appoints Dion Weisler, Catherine A. Lesjak and Tasman Avenue.
From San Jose:
From Oakland:
(If you noted cumulative voting instructions above, please check the Convention Center garage is free.
4AA5-0662ENWContinued and to be signed on reverse side
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