☒ ☐ 6, 2023 make an impact. Business: www.virtualshareholdermeeting.com/IBM2023 Matters Items of Business Board’s recommendation 1. Nominees Audit Committee Director Age Primary Occupation Director Since Committee Memberships Financial Expert Kenneth I. Chenault 66 Retired Chairman and Chief Executive Officer, American Express Company 1998 Michael L. Eskew Presiding Director 68 Retired Chairman and Chief Executive Officer, United Parcel Service, Inc. 2005 David N. Farr 63 Chairman and Chief Executive Officer, Emerson Electric Co. 2012 Alex Gorsky 57 Chairman and Chief Executive Officer, Johnson & Johnson 2014 Shirley Ann Jackson 71 President, Rensselaer Polytechnic Institute 2005 Andrew N. Liveris 63 Executive Chairman, DowDuPont Inc. and Chairman and Chief Executive Officer, The Dow Chemical Company 2010 Hutham S. Olayan 64 Vice Chairman, The Olayan Group 2016 James W. Owens 72 Retired Chairman and Chief Executive Officer, Caterpillar Inc. 2006 Virginia M. Rometty 60 Chairman, President and Chief Executive Officer, IBM 2012 Joseph R. Swedish 66 Executive Chairman and Past President and Chief Executive Officer, Anthem, Inc. 2017 Sidney Taurel 69 Chairman Emeritus, Eli Lilly and Company Chairman, Pearson plc 2001 Peter R. Voser 59 Retired Chief Executive Officer, Royal Dutch Shell plc Chairman, ABB Ltd. 2015 Frederick H. Waddell 64 Chairman and Retired Chief Executive Officer, Northern Trust Corporation 2017 Director Nominees Directors Company’s most important client industries and constituencies. companies; Chairman, ABB Ltd., a global group of power and automation companies Joseph R. Swedish Peter R. Voser Certain Transactions and Relationships $40,000. Fees Earned or All Other Name Paid in Cash ($) Compensation ($) Total ($) (a) (b) (c)(1) (d) Kenneth I. Chenault $ 300,000 $ 173,358 $ 473,358 Michael L. Eskew 350,000 150,355 500,355 David N. Farr 300,000 42,668 342,668 Mark Fields 300,000 13,895 313,895 Alex Gorsky 300,000 31,621 331,621 Shirley Ann Jackson 320,000 139,943 459,943 Andrew N. Liveris 300,000 80,254 380,254 W. James McNerney, Jr. 300,000 84,755 384,755 Hutham S. Olayan 300,000 15,922 315,922 James W. Owens 300,000 109,863 409,863 Joan E. Spero(2) 95,833 69,861 165,694 Joseph R. Swedish(3) 51,667 20 51,687 Sidney Taurel 320,000 180,902 500,902 Peter R. Voser 300,000 28,418 328,418 Frederick H. Waddell(3) 51,667 20 51,687 2022. Number of Shares Name and address Beneficially Owned Percent of Class The Vanguard Group(1) 63,708,222 6.88 % 100 Vanguard Boulevard Malvern, PA 19355 BlackRock, Inc.(2) 57,755,152 6.2 % 55 East 52nd Street New York, NY 10022 State Street Corporation(3) 51,885,463 5.60 % State Street Financial Center One Lincoln Street Boston, MA 02111 Acquirable within 60 days Value of and/or Directors’ Name Common Stock(1) Stock-based Options Directors’ DCEAP Shares at Kenneth I. Chenault 8,268 (6) 8,268 0 31,292 $ 6,069,295 Erich Clementi 31,425 83,064 0 N/A 4,821,224 Michael L. Eskew 0 0 0 27,503 4,219,510 David N. Farr 4,908 4,908 0 6,383 1,732,265 Mark Fields 400 400 0 3,613 615,674 Alex Gorsky 0 0 0 6,690 1,026,380 Shirley Ann Jackson 0 0 0 24,706 3,790,395 James J. Kavanaugh 34,260 (7) 68,191 5,320 N/A 5,256,169 John E. Kelly III 83,467 (8) 146,222 0 N/A 12,805,507 Andrew N. Liveris 0 0 0 14,263 2,188,229 W. James McNerney, Jr. 0 0 0 15,045 2,308,204 Hutham S. Olayan 0 0 0 3,965 608,310 James W. Owens 5,000 (9) 5,000 0 19,403 3,743,908 Virginia M. Rometty 205,858 301,417 0 N/A 31,582,734 Martin J. Schroeter 41,954 98,724 0 N/A 6,436,583 Joseph R. Swedish(10) 1,261 (9) 1,261 0 202 224,453 Sidney Taurel 19,487 19,487 0 30,991 7,744,335 Peter R. Voser 0 0 0 6,134 941,078 Frederick H. Waddell(10) 0 0 0 337 51,703 Directors and executive officers as a group 506,027 (11) 906,384 5,320 (11) 190,526 (11) 2022. For Ms. Browdy, Mr. Cohn, Mr. Kavanaugh, Mr. Krishna, and Mr. Rosamilia, shares in this column are from IBM restricted stock awards which will vest within 60 days after December 31, 2022. 2022, respectively. and Results Component Current Year Salary Performance Share Units (PSUs) Stock-Based Grants & Cash Awards Other Compensation Current Approach: Multiple of Total Target New Approach: Multiple of Salary NEO Name IBM Minimum Requirement IBM Minimum Requirement Median Peer Group Minimum V.M. Rometty 3 10 6 M.J. Schroeter 3 7 3–4 J.E. Kelly III 3 7 3–4 E. Clementi 3 7 3–4 J.J. Kavanaugh 3 7 3–4 2021, the metrics included Operating EPS at 70%, Free IBM shares its financial model each year with investors in the context of its long-term strategy. Financial Metrics 2017 2017 Weight Resulting Incentive +/- Qualitative = Final Score Strategic Imperatives Revenue $ 36.5B 99% 20% 100 0 100 Operating Net Income** $ 12.9B 91% 40% Operating Cash Flow** $ 16.3B 101% 40% Once the total pool funding level has been approved, payouts for each executive are calculated using an Individual Contribution Factor (ICF). The ICF is determined by evaluating individual performance against predetermined business objectives. As a result, a lower-performing executive will receive as little as zero payout and the most exceptional performers (excluding the Chairman and CEO) are capped at three times their individual target Flow. adjusted to exclude the impact of exiting our business in Russia in 2022. Operating Free Cash 2015–2017 Performance Period EPS** Flow** 3 Year Cumulative Performance $ 42.31 $ 37.7B % Attainment 84% 93% Incentive Score 60 83 Weighting 70% 30% Final Score 67 Results by the Compensation Committee The self-assessments of the information. Chairman and SVPs. The Committee IBM, and whose business strategy results in substantial competition for senior leadership talent. Determining Individual Compensation Name 2017 Annual Incentive Payouts M.J. Schroeter $ 1,181,000 J.E. Kelly III 861,000 E. Clementi 869,840 J.J. Kavanaugh 919,000 Ms. Browdy 2018 Cash(1) 2018 Long-Term Incentive Awards(2) Name Salary Rate Annual Incentive Target Performance Share Units Restricted Stock Units M.J. Schroeter $ 936,000 $ 1,264,000 $ 3,900,000 $ 2,100,000 J.E. Kelly III 868,000 1,172,000 3,705,000 1,995,000 E. Clementi 777,000 1,048,000 3,575,000 1,925,000 J.J. Kavanaugh 745,000 1,005,000 3,412,500 1,837,500 full value awards. award. Tax Considerations total Performance Share Units (PSUs) and Restricted Stock RSUs accordance with accounting guidance. 2022, Change in Retention Plan Value Change in Pension Value, Nonqualified Deferred Compensation Earnings 2022 Summary Compensation Table Narrative — All Other Compensation plan. 2022. accompanying the officer on both business and non-business occasions is also included. Name and Nonqualified Non-Equity Change in Change in Stock Option All Other Salary Bonus Total(8) V.M. Rometty, Chairman, President and CEO 2017 $ 1,600,000 $ 0 $ 10,428,720 $ 0 $ 5,100,000 $ 79,951 $ 494,882 $ 0 $ 891,797 $ 18,595,350 2016 1,600,000 0 12,822,238 12,094,414 4,950,000 87,660 300,605 0 840,782 32,695,699 2015 1,550,000 0 12,905,329 0 4,500,000 0 0 0 866,621 19,821,950 M.J. Schroeter, Senior VP and CFO(9) 2017 $ 828,500 $ 0 $ 4,312,687 $ 0 $ 1,181,000 N/A $ 11,436 $ 0 $ 138,538 $ 6,472,162 2016 754,000 0 4,820,379 0 1,046,430 N/A 6,227 0 173,159 6,800,195 2015 692,500 0 11,425,266 0 881,100 N/A 1,295 0 112,191 13,112,352 J.E. Kelly III, Senior VP, IBM Cognitive Solutions & IBM Research 2017 $ 830,500 $ 0 $ 4,312,687 $ 0 $ 861,000 $ 127,911 $ 70,056 $ 0 $ 240,339 $ 6,442,493 2016 754,500 0 5,302,514 0 927,350 0 66,423 0 240,583 7,291,370 2015 675,500 0 11,887,195 0 850,500 0 42,393 0 184,207 13,639,795 E. Clementi, Senior VP, IBM Global Markets(9)(10) 2017 $ 754,500 $ 0 $ 4,312,687 $ 0 $ 869,840 N/A N/A $ 0 $ 227,742 $ 6,164,769 2016 703,500 0 5,302,514 0 889,200 N/A N/A 0 144,440 7,039,654 J.J. Kavanaugh, Senior VP, Finance and Operations(9)(10) 2017 $ 649,000 $ 0 $ 3,136,575 $ 0 $ 919,000 $ 11,766 $ 33,651 $ 0 $ 119,808 $ 4,869,800 All Other All Other Stock Option Grant Awards: Awards: Exercise Closing Date Estimated Future Payouts Number of Number of or Base Price Fair Value of Estimated Future Payouts Under Equity Incentive Shares Securities Price of on the Stock and Name Compensation Under Non-Equity Incentive Plan Awards Plan Awards(2) of Stock Underlying Option NYSE on Option (a) Committee Threshold Target Maximum Threshold Target Maximum or Units(3) Options Awards the Date Awards(4) Type of Grant Date Approval ($) ($) ($) (#) (#) (#) (#) (#) ($/Sh) of Grant ($) Award(1) (b) Date (c) (d) (e) (f) (g) (h) (i) (j) (k) ($/Sh) (l) V.M. Rometty AIP N/A 01/31/2017 0 5,000,000 15,000,000 PSU 06/08/2017 01/31/2017 12,350 49,400 74,100 6,778,668 RSU 06/08/2017 01/31/2017 26,600 3,650,052 M.J. Schroeter AIP N/A 01/31/2017 0 1,181,000 3,543,000 PSU 06/08/2017 01/31/2017 5,107 20,429 30,644 2,803,267 RSU 06/08/2017 01/31/2017 11,000 1,509,420 J.E. Kelly III AIP N/A 01/31/2017 0 1,148,000 3,444,000 PSU 06/08/2017 01/31/2017 5,107 20,429 30,644 2,803,267 RSU 06/08/2017 01/31/2017 11,000 1,509,420 E. Clementi AIP N/A 01/31/2017 0 1,048,000 3,144,000 PSU 06/08/2017 01/31/2017 5,107 20,429 30,644 2,803,267 RSU 06/08/2017 01/31/2017 11,000 1,509,420 J.J. Kavanaugh AIP N/A 01/31/2017 0 919,000 2,757,000 PSU 06/08/2017 01/31/2017 3,715 14,858 22,287 2,038,815 RSU 06/08/2017 01/31/2017 8,000 1,097,760 2025. requirements. 2022. 2022. Name Grant Date Threshold Target Maximum V.M. Rometty 06/08/2016 14,905 59,621 89,432 06/08/2017 12,350 49,400 74,100 M.J. Schroeter 06/08/2016 5,604 22,414 33,621 06/08/2017 5,107 20,429 30,644 J.E. Kelly III 06/08/2016 6,164 24,656 36,984 06/08/2017 5,107 20,429 30,644 E. Clementi 06/08/2016 6,164 24,656 36,984 06/08/2017 5,107 20,429 30,644 J.J. Kavanaugh 06/08/2016 3,923 15,690 23,535 06/08/2017 3,715 14,858 22,287 and RPSU Award Payout Levels Vesting Schedule Name Type of Award Grant Date 2018 2019 2020 2021 2022 V.M. Rometty RSU 06/08/2016 8,026 8,026 8,026 RSU 06/08/2017 6,650 6,650 6,650 6,650 M.J. Schroeter RRSU 02/02/2015 25,158 RSU 06/08/2016 3,017 3,017 3,018 RSU 06/08/2017 2,750 2,750 2,750 2,750 J.E. Kelly III RRSU 12/30/2015 13,980 13,981 RSU 06/08/2016 3,319 3,319 3,319 RSU 06/08/2017 2,750 2,750 2,750 2,750 E. Clementi RRSU 02/02/2015 12,579 RSU 06/08/2016 3,319 3,319 3,319 RSU 06/08/2017 2,750 2,750 2,750 2,750 J.J. Kavanaugh RRSU 02/01/2013 5,320 RRSU 01/02/2014 8,772 RSU 06/08/2016 2,112 2,112 2,113 RSU 06/08/2017 2,000 2,000 2,000 2,000 Name Dec-2023 Option Awards Stock Awards(1) Number of Value Number of Value Shares Realized Shares Realized Acquired on on Acquired on on Exercise Exercise Vesting Vesting Name (#) ($) (#) ($) (a) (b) (c) (d) (e) V.M. Rometty 0 0 64,425 $ 9,871,603 M.J. Schroeter 678 48,684 52,208 8,530,617 J.E. Kelly III 0 0 52,483 8,064,117 E. Clementi 0 0 32,860 5,298,304 J.J. Kavanaugh 559 42,209 22,771 3,486,234 awards. Plan. Material Terms and Conditions: 1999 Retention Plan Name Annual Retention Plan Benefit at V.M. Rometty $ 101,008 J.E. Kelly III 594,917 J.J. Kavanaugh 16,007 Number of Present Payments Years Value of During Credited Accumulated Last Service(1) Benefit(2) Fiscal Year Name Plan Name (#) ($) ($) (a) (b) (c) (d) (e) V.M. Rometty Retention Plan 26 $ 1,739,925 $ 0 J.E. Kelly III Retention Plan 27 9,060,974 0 J.J. Kavanaugh Retention Plan 12 202,937 0 Narrative IBM Personal Pension Plan. for that year. The interest credits are based on the annual interest rate on one-year Treasury Constant Maturities plus 1%. Further, the eligible named executive officers may receive their benefit under the Personal Pension Account formula at any time following termination of employment, but may not defer the commencement of the benefit later than normal retirement age. If the eligible named executive officers’ benefit begins to be paid before normal retirement age, it will be reduced when compared to the benefit that would commence at normal retirement age. The eligible named executive officers may receive their benefit in the following forms: a lump sum equal to the Personal Pension Account balance, an annuity that is actuarially equivalent to the Personal Pension Account balance, or both a partial lump sum and a reduced annuity. Maximum Lump Sum Name Qualified Nonqualified Total Available V.M. Rometty $ 493,391 N/A $ 493,391 M.J. Schroeter 63,185 21,530 84,715 J.E. Kelly III 454,963 989,328 1,444,291 J.J. Kavanaugh 161,218 69,759 230,977 Annual Pension Benefit at Normal Retirement Age Name Qualified Nonqualified Total Benefit V.M. Rometty $ 82,083 $ 342,761 $ 424,844 M.J. Schroeter 5,923 N/A 5,923 J.E. Kelly III 33,326 N/A 33,326 J.J. Kavanaugh 15,475 N/A 15,475 Name Plan Name Number of Years Present Value of Payments During V.M. Rometty Qualified Plan 26 $ 1,095,989 $ 0 Nonqualified Plan 4,576,589 0 Total Benefit $ 5,672,578 $ 0 M.J. Schroeter Qualified Plan 4 $ 57,325 $ 0 Nonqualified Plan 18,988 0 Total Benefit $ 76,313 $ 0 J.E. Kelly III Qualified Plan 27 $ 459,385 $ 0 Nonqualified Plan 977,063 0 Total Benefit $ 1,436,448 $ 0 J.J. Kavanaugh Qualified Plan 12 $ 140,390 $ 0 Nonqualified Plan 60,275 0 Total Benefit $ 200,665 $ 0 , the Excess 401(k) Plus Plan allows for clawback of any such contributions made in the 12- month period prior to such detrimental activity through separation of employment. stockholders, and are contributed to the Basic Account. participant’s Basic Account for those employees who were receiving transition credits in their Personal Pension Account under the Qualified Plan as of December 31, 2007. Annual Meeting & Proxy Statement | Executive Registrant Aggregate Aggregate Aggregate Name ($) ($) ($) ($) ($) (a) Plan (b) (c) (d) (e) (f) V.M. Rometty Basic Account $ 376,800 Match $ 376,800 $ 592,368 $ 0 $ 13,128,950 Automatic 251,200 Deferred IBM Shares 0 0 (350,753 ) 0 4,281,032 Total $ 376,800 $ 628,000 $ 241,615 $ 0 $ 17,409,982 M.J. Schroeter Basic Account $ 98,996 Match $ 80,247 $ (57,262 ) $ 0 $ 2,155,717 Automatic 16,049 Deferred IBM Shares 0 0 0 0 0 Total $ 98,996 $ 96,296 $ (57,262 ) $ 0 $ 2,155,717 J.E. Kelly III Basic Account $ 497,305 Match $ 89,271 $ 1,144,969 $ 0 $ 12,472,472 Automatic 29,757 Deferred IBM Shares 0 0 (40,727 ) 0 497,081 Total $ 497,305 $ 119,028 $ 1,104,242 $ 0 $ 12,969,553 E. Clementi Basic Account $ 735,585 Match $ 68,685 $ (65,556 ) $ 0 $ 4,571,516 Automatic 13,737 Deferred IBM Shares 0 0 0 0 0 Supplementary Plan(5) 0 0 50,609 0 1,898,466 Total $ 735,585 $ 82,422 $ (14,947 ) $ 0 $ 6,469,982 J.J. Kavanaugh Basic Account $ 129,800 Match $ 72,720 $ 402,936 $ 0 $ 3,504,483 Automatic 24,240 Deferred IBM Shares 0 0 (1,873 ) 0 22,860 Total $ 129,800 $ 96,960 $ 401,063 $ 0 $ 3,527,343 Cohn; $34,380 for Mr. Rosamilia; and $31,025 for Ms. Browdy. 2023. age 55 with at least 15 years of service, the following terms apply: Nonqualified Deferred Compensation LTPP Excess 401(k)(6) Name Termination Annual Incentive Stock Stock Retention Basic Deferred IBM Italy Pension Replacement V.M. Rometty Termination(1) $ 5,100,000 $ 0 $ 12,346,781 $ 101,008 $ 1,312,895 (7) $ 428,103 (7) N/A N/A For Cause 0 0 0 0 1,312,895 (7) 428,103 (7) N/A N/A M.J. Schroeter Termination(1) 1,181,000 0 2,927,714 N/A 2,155,717 (8) 0 N/A N/A For Cause 0 0 0 N/A 2,155,717 (8) 0 N/A N/A J.E. Kelly III Termination(1) 861,000 0 4,780,567 594,917 5,062,849 (9) 497,081 (9) N/A N/A For Cause 0 0 0 0 5,062,849 (9) 497,081 (9) N/A N/A E. Clementi Termination(1) 869,840 0 4,129,913 N/A 457,152 (10) 0 1,898,466 (11) 732,050 (12) For Cause 0 0 0 N/A 457,152 (10) 0 1,898,466 (11) 732,050 (12) J.J. Kavanaugh Termination(1) 919,000 0 1,951,809 0 3,209,918 (13) 22,860 (13) N/A N/A For Cause 0 0 0 0 3,209,918 (13) 22,860 (13) N/A N/A 2023. . att/pdf/auditcomcharter.pdf Report of the Audit Committee of the Board of Directors (Dollars in millions) 2017 2016 Audit Fees $ 48.1 $ 49.9 Audit-Related Fees 28.5 28.2 Tax Fees 4.2 7.8 All Other Fees 0.5 0.5 Total $ 81.3 $ 86.4 reports and approximately $15 million associated with the spin-off of IBM’s managed infrastructure services business. 2022. high-value, sustainable growth. research in quantum computing and AI; and continued best in class employee engagement. making payments described above. sitting on its Private Enterprise Advisory Council. Congruency in China Business Operations and ESG Activities Requesting a Public Report on Harassment and Discrimination Prevention Efforts Annual Meeting? Annual Meeting? Annual Meeting? Annual Meeting? instruct your bank, broker or other intermediary how to vote in the election of directors, no votes will be cast on your behalf. It is important that you cast your vote. cast? Proposal Election of Directors Annual Meeting? materials? 2024 Annual Meeting? The ($ in millions except per share amount) GAAP Acquisition- Retirement- Tax Operating Gross Profit $ 36,227 $ 449 $ 799 — $ 37,475 Gross Profit Margin 45.8 % 0.6 Pts 1.0 Pts — 47.4 % S,G&A 20,107 (509 ) (472 ) — 19,126 R,D&E 5,787 — (197 ) — 5,590 Other (Income) & Expense (216 ) (39 ) — — (255 ) Total Expense & Other (Income) 24,827 (548 ) (669 ) — 23,609 Pre-tax Income from Continuing Operations 11,400 997 1,468 — 13,866 Pre-tax Income Margin from Continuing Operations 14.4 % 1.3 Pts 1.9 Pts — 17.5 % Provision for Income Taxes* 5,642 279 485 (5,475 ) 931 Effective Tax Rate 49.5 % -1.5 Pts -1.7 Pts -39.5 Pts 6.7 % Income from Continuing Operations 5,758 718 983 5,475 12,935 Income Margin from Continuing Operations 7.3 % 0.9 Pts 1.2 Pts 6.9 Pts 16.3 % Diluted Earnings Per Share: Continuing Operations $ 6.14 $ 0.77 $ 1.05 $ 5.84 $ 13.80 ($ in millions except per share amount) GAAP Acquisition- Retirement- Operating Gross Profit $ 38,294 $ 494 $ 316 $ 39,104 Gross Profit Margin 47.9 % 0.6 Pts 0.4 Pts 48.9 % S,G&A 21,069 (501 ) (253 ) 20,315 R,D&E 5,751 — (29 ) 5,722 Other (Income) & Expense 145 (7 ) — 138 Total Expense & Other (Income) 25,964 (508 ) (282 ) 25,174 Pre-tax Income from Continuing Operations 12,330 1,003 598 13,931 Pre-tax Income Margin from Continuing Operations 15.4 % 1.3 Pts 0.7 Pts 17.4 % Provision for Income Taxes* 449 268 183 900 Effective Tax Rate 3.6 % 1.7 Pts 1.2 Pts 6.5 % Income from Continuing Operations 11,881 735 415 13,031 Income Margin from Continuing Operations 14.9 % 0.9 Pts 0.5 Pts 16.3 % Diluted Earnings Per Share: Continuing Operations $ 12.39 $ 0.77 $ 0.43 $ 13.59 ($ in millions except per share amount) GAAP Acquisition- Retirement- Operating Gross Profit $ 40,684 $ 373 $ 469 $ 41,526 Gross Profit Margin 49.8 % 0.5 Pts 0.6 Pts 50.8 % S,G&A 20,430 (324 ) (533 ) 19,573 R,D&E 5,247 — (48 ) 5,200 Other (Income) & Expense (724 ) (5 ) — (729 ) Total Expense & Other (Income) 24,740 (330 ) (581 ) 23,830 Pre-tax Income from Continuing Operations 15,945 703 1,050 17,697 Pre-tax Income Margin from Continuing Operations 19.5 % 0.9 Pts 1.3 Pts 21.6 % Provision for Income Taxes* 2,581 141 316 3,037 Effective Tax Rate 16.2 % 0.2 Pts 0.9 Pts 17.2 % Income from Continuing Operations 13,364 562 734 14,659 Income Margin from Continuing Operations 16.3 % 0.7 Pts 0.9 Pts 17.9 % Diluted Earnings Per Share: Continuing Operations $ 13.60 $ 0.57 $ 0.75 $ 14.92 income which employs an annual effective tax rate method to the results. ($ in billions) 2017 2016 2015 Net Cash from Operating Activities per GAAP $ 16.7 $ 17.1 * $ 17.3 * Less: the Change in Global Financing Receivables 0.4 1.7 0.2 Net Cash from Operating Activities, Excluding Global Financing Receivables 16.3 15.4 * 17.1 * Capital Expenditures, Net (3.3 ) (3.7 ) (3.8 ) Free Cash Flow 13.0 11.7 * 13.3 * Acquisitions (0.5 ) (5.7 ) (3.3 ) Divestitures (0.2 ) (0.5 ) (0.4 ) Share Repurchase (4.3 ) (3.5 ) (4.6 ) Common Stock Repurchases for Tax Withholdings (0.2 ) (0.1 )* (0.2 )* Dividends (5.5 ) (5.3 ) (4.9 ) Non-Global Financing Debt 1.1 1.3 (0.1 ) Other (includes Global Financing Receivables and Global Financing Debt) 0.7 2.3 0.0 Change in Cash, Cash Equivalents and Short-Term Marketable Securities $ 4.1 $ 0.3 $ (0.3 ) FCF as Percent of Income from Continuing Operations 226 %** 98 %* 100 %*
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )xoooxooPursuantunder §240.14a-12§240.14a-12International Business Machines Corporation(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.o 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:oFee paid previously with preliminary materials.oCheck 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:Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.
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March 12, 201824, 2018 at 10 a.m., at25, 2023.Hyatt Regency Milwaukeepast year, we took decisive steps to build a stronger IBM and helped our clients turn business challenges into opportunities. The market recognizes hybrid cloud and AI as the two most transformational technologies of our time and, for clients, they serve as fundamental sources of competitive advantage. Our consulting teams have brought these technologies to life for our clients to accelerate their digital transformations and enterprise automation journeys. We also continued a steady pace of acquisitions to bolster our portfolio, delivered innovations in Milwaukee, Wisconsin.Our Boardinfrastructure, strengthened our software portfolio, streamlined our go-to-market strategy, and expanded our ecosystem of partners.![[MISSING IMAGE: ph_arvindkrishnaletter-bw.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ph_arvindkrishnaletter-bw.jpg)
relationshipsprograms we have built with stockholders. In 2017,established globally to provide wider access to critical skills and training. This focus on inclusivity extends across our business.continued our long-standing practice of engaging with stockholders to hear their perspective and feedback. Since the 2017 Annual Meeting, our Independent Presiding Director, the chairs of the Executive Compensation and Management Resources Committee and Directors and Corporate Governance Committee, as well as members of IBM management, including myself, have met with investors that own more than half of the shares that voted atapproach the Annual Meeting last year. During these meetings, we discussed IBM’s strategy, corporate governance, board composition and refreshment, executive compensation practices, and our corporate responsibility and sustainability leadership. Through these conversations with our investors, we gained invaluable insight into our investors’ perspectives on matters of critical importance. We very much appreciate the time our investors spent with us, and the thoughtful feedback we received.The refreshed look of this year’s Proxy reflects the feedback we took from our stockholder outreach. You will also notice that this year, in continuationStockholders, I am incredibly proud of the Board’s active refreshment practice, Joseph R. Swedish, executive chairman and past president and chief executive officer of Anthem, Inc. and Frederick H. Waddell, chairman and retired chief executive officer of Northern Trust Corporation, joined our Board. Mr. Swedish and Mr. Waddell bring expertise in healthcare and financial services, respectively, two industries that are importantprogress IBMers have achieved to advance our business, help our clients thrive and long-term strategy for value creation. With these additions, our Board continues to reflect and refine the skills, as well as diversity of thought, experience and background, that are necessary to oversee and support our strategy over the long term.![[MISSING IMAGE: sg_arvindkri-bw.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/sg_arvindkri-bw.jpg)
Chairman of the Board
March 6, 2023![[MISSING IMAGE: ph_alexgorskyletter-bw.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ph_alexgorskyletter-bw.jpg)
is important and I encourage you to vote your shares.
at our Annual Meeting on April 25, 2023.Very truly yours,
Virginia M. RomettyChairman of the Board
Very truly yours,![[MISSING IMAGE: sg_alexgorsky-bw.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/sg_alexgorsky-bw.jpg)
Lead Director 1 Proxy Summary 2 2 5 7 Item of Business 1.
Election of Directors for a Term of One Year9 10 Governance and the Board 16 16 16 1822 18 19 23 24 25 24 25 2022 Executive Compensation 27 31 27 31 28 32 44 47 49 50 50 51 53 54 56 59 64 63 66 ESG HIGHLIGHTS At IBM, trust and corporate responsibility are integral to our business — and our ESG efforts are reflected throughout this Proxy Statement. Key topics include: 83 ![[MISSING IMAGE: color-margin.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/color-margin.jpg)
business:24, 201825, 2023 at 10 a.m., at the Hyatt Regency Milwaukee, 333 West Kilbourn Avenue, Milwaukee, Wisconsin 53203. Eastern Time in a virtual format. The items of business are:1. Election of directors proposed by IBM’s Board of Directors for a term of one year, as set forth in this Proxy Statement.2. Ratification of the appointment of PricewaterhouseCoopers LLP as IBM’s independent registered public accounting firm.3. Advisory Vote on Executive Compensation.4. Three stockholder proposals if properly presented at the meeting. 1. Election of directors proposed by IBM’s Board of Directors for a term of one year, as set forth in this Proxy Statement. 2. Ratification of the appointment of PricewaterhouseCoopers LLP as IBM’s independent registered public accounting firm. 3. Advisory vote on executive compensation. 4. Advisory vote regarding the frequency of the advisory vote on executive compensation. 5. Four stockholder proposals, if properly presented at the meeting. atfor the meeting because of a disability, please contact the Office of the Secretary, International Business Machines Corporation, 1 New Orchard Road, Armonk, NY 10504.![[MISSING IMAGE: sg_franksedlarcik-bw.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/sg_franksedlarcik-bw.jpg)
Vice President and Secretary
Christina M. MontgomeryDate: April 25, 2023 Vice President and SecretaryTime: 10 a.m. Eastern Time Virtual
Meeting
Site:Date:April 24, 2018Time:10 a.m.Place:Hyatt Regency Milwaukee333 West Kilbourn AvenueMilwaukee, WI 53203 This To express our appreciation for your
participation, IBM will make a $1 charitable
donation to Water.org on behalf of every
stockholder account that votes this year. ![[MISSING IMAGE: ig_waterorg-bw.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ig_waterorg-bw.gif)
Water.org empowers people in need with lasting access to safe water and sanitation, giving women hope, children health and families a bright future 12, 20186, 2023 to all stockholders entitled to vote. The IBM 2017 Annual Report, which includes consolidated financial statements, is being provided with this Proxy Statement.24, 2018: The25, 2023: the Proxy Statement and the Annual Report to Stockholders are available at www.ibm.com/investor/material/.mattersBoard’s Where to find details Item of Businessrecommendationmore information1. Election of thirteen directors FOR all nominees pp. 9–15P. 10-15 2. Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firmIndependent Registered Public Accounting Firm FORFOR p. 69 P. 70 3. Advisory Vote on Executive Compensation FORFOR pp. 70– P. 71 4. Stockholder Proposal Advisory Vote Regarding the Frequency of the Advisory Vote on Lobbying DisclosureExecutive Compensation AGAINSTEVERY YEAR pp. 72–73 P. 72 5. Stockholder Proposal on Shareholder Ability to Call a Special Shareholder Meeting5. AGAINST pp. 73–746. Stockholder Proposal to Have an Independent Board Chairman AGAINSTAGAINST pp. 74–75 P. 73-75 6. Stockholder Proposal Requesting a Public Report on Lobbying Activities AGAINST P. 76-78 7. Stockholder Proposal Requesting a Public Report on Congruency in China Business Operations and ESG Activities AGAINST P. 79-80 8. Stockholder Proposal Requesting a Public Report on Harassment and Discrimination Prevention Efforts AGAINST P. 81-83 
ThisWhat’s new? Proxy Statement has been designed to helpenhanced Board self-evaluation processstockholders better understand our Board, governance and compensation practices. You will find increased graphics and headers to illuminateconsolidated ESG report, in April 2022content. We hope you find the new format and ourcontinued dedication to transparency helpful.Board’s role in risk oversight
Governance Highlightsnominees (PAGE 7)businessacademic leaders. All of our directors are independent except for Virginia Rometty, IBM’s CEO.
Director Age Primary Occupation Director
Since Committee
Memberships Audit
Committee
Financial
Expert Thomas Buberl 49 Chief Executive Officer, AXA S.A. 2020 ![[MISSING IMAGE: ic_audit-bw.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_audit-bw.gif)
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David N. Farr 68 Retired Chairman and Chief Executive Officer, Emerson Electric Co. 2012 ![[MISSING IMAGE: ic_audit-pn.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_audit-pn.gif)
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Alex Gorsky 62 Former Chairman and Chief Executive Officer, Johnson & Johnson 2014 ![[MISSING IMAGE: ic_execut-pn.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_execut-pn.gif)
Michelle J. Howard 62 Retired Admiral, United States Navy 2019 Arvind Krishna 60 Chairman and Chief Executive Officer, IBM 2020 Andrew N. Liveris 68 Retired Chairman and Chief Executive Officer, The Dow Chemical Company 2010 F. William McNabb III 65 Retired Chairman and Chief Executive Officer, The Vanguard Group, Inc. 2019 Martha E. Pollack 64 President, Cornell University 2019 ![[MISSING IMAGE: ic_compnsat-pn.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_compnsat-pn.gif)
Joseph R. Swedish 71 Retired Chairman, President and Chief Executive Officer, Anthem, Inc. 2017 Peter R. Voser 64 Retired Chief Executive Officer, Royal Dutch Shell plc, and Chairman, ABB Ltd. 2015 Frederick H. Waddell 69 Retired Chairman and Chief Executive Officer, Northern Trust Corporation 2017 Alfred W. Zollar 68 Executive Advisor, Siris Capital Group, LLC 2021 Number of meetings held in 2022 10 4 5 0 Audit:
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Directors &and Corporate Governance:
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Executive Compensation &and Management Resources:
Executive:
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Executive: ![[MISSING IMAGE: ic_execut-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_execut-pn.jpg)
Audit Committee Financial Expert: 
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DiversityskillsAnnual Meeting & Proxy Statement | Proxy Summary3experienceExperience of director nomineescollectivelycollaboratively contribute significant experience in the areas most relevant to overseeing the Company’s business and strategy.
The skills and experience of our Board include, but is not limited to:Tenure of director nominees·![[MISSING IMAGE: tb_skills-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/tb_skills-pn.jpg)
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represents a deliberate mix of membersincludes directors who have a deep understanding of our business and members who bring new skills and fresh perspectives.· Mix We have a deliberate mix of newage and tenured directors reflectingtenure on the Board, which reflects our commitment to ongoing and proactive Board refreshment.
Governance highlights (PAGE 18)Effective![[MISSING IMAGE: pc_independ-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/pc_independ-pn.jpg)
Robust Engagement and Dialogue leadership and independent oversight· Lead independent Presiding Director with robust and well-defined responsibilities· Executive session led by independent Presiding Director at each Board meeting· Focussenior management that stockholders are afforded a chance to provide their thoughts on proactive Board refreshmentOverviewtopics of interest. This year, the topics stockholders expressed interest in learning more about included: IBM’s corporate governance·consolidated ESG report, election of all directors· Majority voting for directors in uncontested elections· Stockholder special meeting right· No stockholder rights plan· Robust stockholder engagement process· Proxy access NEW
Stockholder engagement highlightsStockholder engagement is a core IBM value that is a significant part of our ongoing review of our corporate governance and executive compensation programs. To that end, our investor outreach program is a year-round process that includes discussion of IBM’s business and long-term strategy, executive compensation programsIncentive Program; policies and practices corporate governance,regarding director overboarding; and corporate responsibility and sustainability. These discussions ensure thatIBM’s response to the majority supported stockholder proposal at our stockholders understand our key decisions and that we understand their priorities and concerns.· Every year, we reach out to over 100of our largest investors, representing more than 70%of our institutional ownership.· Our process also includes outreach to more than 250,000registered and beneficial stockholders, which represent a majority of our retail stockholder base.· Since the 20172022 Annual Meeting, representatives from senior management and the Board have met with investors that own, in the aggregate, more than 55%of the shares that voted on Say on Pay at the 2017 Annual Meeting.Here is a summary of what we learned during those meetings, and how we responded.
What we heardHow we responded ![[MISSING IMAGE: pc_offseason57-pn.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/pc_offseason57-pn.gif)
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Topics and Outcomes of Engagement Stockholders expressed support for a proxy access by-law in line with current market terms· In December 2017, the Company adopted a proxy access by-law allowing a stockholder, or a group of up to 20 stockholders, that has owned at least 3% of
COMPENSATION outstanding common stock for at least three years, to nominate, and include in the Company’s annual meeting proxy materials, directors constituting the greater of two individuals or 20% of the BoardIncreased disclosure of our robust Board oversight and other Board practices· This Proxy Statement includes more insight into existing Board oversight processes and practices, including, for example, the robust processes our Board follows for succession planning and Board evaluation
Some stockholders preferred increased transparency around achievement of incentive goals· Included disclosure of performance against goals in both the Annual Incentive Program and Long-TermPerformance Share Unit metrics that were established in 2021PlanProgram” section of this Proxy Statement
GOVERNANCE provide increased transparencythe stockholder proposal on the Company’s use of concealment clauses, which can be found at: https://www.ibm.com/impact/pdf/Concealment%20Clause%20Report.pdf ESG REPORTING AND THE ENVIRONMENT rigorSustainability Accounting Standards Board (SASB) frameworkthe linkage of those goals to our business strategyachieve net zero operational greenhouse gas emissions by 2030 ![[MISSING IMAGE: tb_perform-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/tb_perform-pn.jpg)
What We Do Some stockholders expressed![[MISSING IMAGE: ic_whatwedocheck-pn.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_whatwedocheck-pn.gif)
Tie a preference that a relative metric, such as return on invested capital (ROIC), be included in the Long-Term Incentive Plansignificant portion of pay to Company performance· Adopted a relative ROIC modifier beginning with Performance Share Units (PSUs) granted in 2018, which may increase or decrease the number of shares paid out based on IBM’s relative ROIC performance
Increased information regarding our strong sustainability leadership· IBM publishes a comprehensive Corporate Responsibility Report, and in June, IBM published its 27th consecutive annual Corporate Environmental Report; we have provided links to these reports in this Proxy Statement
General preference for simplicity and clarity in our Proxy Statement· We have included this proxy summary to provide the reader with the highlights of the entire Proxy Statement· The rest of the Proxy Statement has been redesigned to enhance readability and clarity of disclosureBusiness highlightsIBM is at the forefront of enterprise technology market opportunities. We have laid a strong foundation for the cognitive era.2017 Performance Highlights
Returned IBM to revenue growth in fourth quarter of 2017, led by:· Sustained Systems momentum across a revitalized portfolio with the new Z14, Storage products and Power Linux· Cloud revenues of $17Band an as-a-service exit run-rate of $10B· Security revenue over $3B, leveraging our leadership position in the enterprise Mitigate risk taking by emphasizing long-term equity incentives, placing caps on potential payments, and maintaining robust clawback provisions 
Improved trajectory in gross margins through Require significant share ownership by the year, impacted on the full year by continued investment to scale the IBM Cloud, as well as services portfolio dynamicsChairman and CEO, Vice Chairman and Senior Vice Presidents Utilize noncompetition and nonsolicitation agreements for senior executives 
Generated over $11Bin GAAP pre-tax income (operating non-GAAP PTI Remove impact of $13.9B) reflecting ongoing efficiency in operating expenses and monetization of Intellectual Property produced by our investments in research and developmentshare repurchase on executive incentives What We Don’t Do 
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GAAP cash from operations No individual severance or change-in-control agreements for executive officers No excise tax gross-ups for executive officers No dividend equivalents on unearned RSUs/PSUs No hedging/pledging of nearly $17B, down ($0.4B) year-to-year primarily driven by less cash sourced from global financing receivablesDelivered free cash flowIBM stock No stock option repricing, exchanges or stock options granted below market value No guaranteed incentive payouts for executive officers No accelerated vesting of $13Bwith a realization rate of 116%(excluding the one-time tax charge of $5.5B), returning nearly $10Bto stockholders in the form of dividends and share repurchasesequity awards for executive officers No above-market returns on deferred compensation plans To assist it in carrying out its duties, the Board has delegated certain authority to several committees. Following the Annual Meeting in 2018,2023, the Board will consist of 13 directors, all of whom are independent except for Mrs. Rometty, IBM’s Chairman and CEO.12 directors. In the interim between Annual Meetings,annual meetings, the Board has the authority under the by-laws to increase or decrease the size of the Board and to fill vacancies.rightoptimal mix of skills, expertise, experience, and background.diversity of backgrounds. The Committee recommends candidates to the full Board for election.· experience as a leader![[MISSING IMAGE: tb_direct-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/tb_direct-pn.jpg)
The Committee and the Board identify candidates through a variety of means, including: a business, firm or institution;· mature and practical judgment;· the ability to comprehend and analyze complex matters;· effective interpersonal and communication skills; and· strong character and integrity.The Committee and theAnnual Meeting & Proxy Statement | also focus on ensuring that the Board reflects a diversity of backgrounds (including gender and ethnicity), talents and perspectives.The Committee and Board identifies candidates through a variety of means, including:· information the Committee requests from the Secretary of IBM;· recommendations from members of the Committee and the Board;· suggestions from IBM management; and· a third-party search firm, from time to time.Any formal invitation to a director candidate is authorized by the full Board. The Committee also considers candidates recommended by stockholders. Stockholders wishing to recommend director candidates for consideration by the Committee may do so by writing to the Secretary of IBM, giving the recommended candidate’s name, biographical data and qualifications.of the current directors have leadership experience at major domestic and international companiesorganizations with operations inside and outside the United States, or at academic or research institutions, or in government. Directors also have deep industry expertise as well as experience on other companies’ boards, which provides an understandingleaders of different business processes, challenges and strategies. Further, IBM’s directors have other experience that makes them valuable membersorganizations within some of the Board, such as public policy or regulatory experience that provides insight into issues faced by the Company.![[MISSING IMAGE: fc_building-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/fc_building-pn.jpg)
BOARDBoard of DirectorsDirector Director Experience Thomas
Buberl David N.
Farr Alex
Gorsky Michelle J.
Howard Arvind
Krishna Andrew N.
Liveris F. William
McNabb III Martha E.
Pollack Joseph R.
Swedish Peter R.
Voser Frederick H.
Waddell Alfred W.
Zollar Current DirectorClient Industry Expertise Company orAcademicLeadership U.S.BusinessOperations![[MISSING IMAGE: ic_finance-pn.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_finance-pn.gif)
GlobalBusinessOperations![[MISSING IMAGE: ic_manufect-pn.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_manufect-pn.gif)
CFO Specific RiskOversight/RiskManagementExposure![[MISSING IMAGE: ic_health-pn.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_health-pn.gif)
Technology,Cybersecurity,or Digital![[MISSING IMAGE: ic_govern-pn.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_govern-pn.gif)
Healthcare Research/Academia![[MISSING IMAGE: ic_inform-pn.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_inform-pn.gif)
Government/Regulatory,BusinessAssociations orPublic Policy![[MISSING IMAGE: ic_chemical-pn.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_chemical-pn.gif)
PublicBoard Gender/Ethnic Diversity ![[MISSING IMAGE: ic_research-pn.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_research-pn.gif)
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Kenneth I. ChenaultOrganizational Leadership
and Management
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Michael L. EskewGlobal Operations David N. FarrCFO Alex Gorsky
Risk Management Exposure Shirley Ann JacksonTechnology, Cybersecurity
or Digital Andrew N. LiverisAcademia Hutham S. Olayan
Business Associations
or Public Policy James W. OwensPublic Board Virginia M. RomettyGender Identity Male Female Male Female Male Male Male Male Joseph R. SwedishRace and/or Ethnicity Black/African American Black/African American Sidney TaurelBorn Outside the U.S. ![[MISSING IMAGE: ic_health-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_health-pn.jpg)
Healthcare ![[MISSING IMAGE: ic_manufect-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_manufect-pn.jpg)
Manufacturing Peter R. Voser![[MISSING IMAGE: ic_energy-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_energy-pn.jpg)
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Information Technology Frederick H. Waddell![[MISSING IMAGE: ic_govern-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_govern-pn.jpg)
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Research & Development ![[MISSING IMAGE: ic_finance-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_finance-pn.jpg)
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Chemicals directors of IBMdirector nominees for a term of one year. Below is information about each nominee, including biographical data for at least the past five years. If one or more of these nominees become unavailable to accept a nomination or election as a director, the individuals named as proxies on the proxy card will vote the shares that they represent for the election of such other persons as the Board may recommend, unless the Board reduces the number of directors.
THE BOARD RECOMMENDS YOU VOTE FOR EACH OF THE NOMINEES INTRODUCED BELOW.
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Kenneth I. ChenaultRetired Chairman and American Express Company, AXA S.A., a financial services companyQUALIFICATIONS·multinational insurance firm Directors and Corporate Governance technology and information management experience as chairman and chief executive officer of American Express Company·U.S. Government service (former member of the President’s Council on Jobs and Competitiveness)·Affiliation with leading business and public policy association (member of the executive committee of the Business Roundtable)·Experience as a university trustee·Outside board experience as a director of The Procter & Gamble Company and Facebook, Inc.Mr. Chenault, 66, joined American Express in 1981 and was named president of the U.S. division of American Express Travel Related Services Company, Inc. in 1993, vice chairman of American Express Company in 1995, president and chief operating officer in 1997 and chairman and chief executive officer of AXA S.A.2001,digital transformationpositionmember of the supervisory board of Bertelsmann VerwaltungsGesellschaftheld until his retirementjoined Zurich Insurance2018. Mr. Chenault now serves as Chairman2016. He was named chief executive officer and Managing Directorjoined the board of General Catalyst Partners, a venture capital firm.directors of AXA in September 2016. He is a directormember of The Procter & Gamble Company and Facebook, Inc.
Michael L. EskewRetired Chairman and Chief Executive Officer, United Parcel Service, Inc., a provider of specialized transportation and logistics servicesCommittees:
Audit (chair); 
ExecutiveQUALIFICATIONS·Global business and technology experience as chairman and chief executive officer of United Parcel Service, Inc.·Outside board experience as a director of Allstate Corporation, Eli Lilly and Company and 3M Company·Chairman of a charitable organizationMr. Eskew, 68, is IBM’s independent Presiding Director. Mr. Eskew joined United Parcel Service in 1972. He was named corporate vice president for industrial engineering in 1994, group vice president for engineering in 1996, executive vice president in 1999, vice chairman in 2000, and he was chairman and chief executive officer from 2002 until his retirement at the end of 2007. Mr. Eskew remained on thesupervisory board of United Parcel Service untilBertelsmann, a member of the endClimate Finance Leadership Initiative and the former chair of 2014. He isthe Pan-European Insurance Forum. Additionally, during the past five years, he was a director of Allstate Corporation, Eli Lilly and Company and 3M Company. In addition, he is chairmanAXA Equitable Holdings, Inc., a former subsidiary of the Annie E. Casey Foundation.
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Committees: Audit QUALIFICATIONS·Global business and technology experience as chairman and chief executive officer of Emerson Electric Co.·Affiliation with leading business and public policy association (director of the US-China Business Council)·Outside board experience as former director of Delphi Corporation 63,68, joined Emerson in 1981 and subsequently held various executive positions. He was named senior executive vice president and chief operating officer in 1999, chief executive officer in 2000 and chairman and chief executive officer in 2004. Mr. Farr was named chairman, president and chief executive officer in 2005 and chairman and chief executive officer in 2010.2010, positions he held until his retirement in 2021. He is the former chairman of the National Association of Manufacturers and is a former director of the US-ChinaU.S.-China Business Council.
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Committees: 
Executive Compensation & Management ResourcesQUALIFICATIONS·Global business and technology experience as chairman and chief executive officer of Johnson & Johnson·Affiliation with leading business and public policy associations (member of the Business Roundtable and The Business Council)·Experience as a university trustee 57,62, is the former chairman and chief executive officer of Johnson & Johnson, and one of just seven leaders to have served in the dual role of chairman and chief executive officer since the company was listed on the New York Stock Exchange in 1944. He joined Johnson & Johnson in 1988. In 2001, he was appointed president of1988 as a sales representative with Janssen Pharmaceutical Inc., and inPharmaceutica.Group. Mr. GorskyGroup, and became vice chairman of the executive committee in January 2011. He was named chief executive officer and joined the board of directors in April 2012, and was named chairman of the board of directors in December 2012. Mr. Gorsky is a memberremained chief executive officer until he transitioned to executive chairman at the end of the Business Roundtable’s Board of Directors and Chairman of its Corporate Governance Committee. Mr. Gorsky also serves2021. He currently sits on the boards of Apple, JPMorgan Chase and NewYork-Presbyterian Hospital, and the Travis Manion Foundation, Congressional Medaland serves on the Wharton School of Honor Foundation, the National Academy FoundationUniversity of Pennsylvania Board of Advisors. ![[MISSING IMAGE: ph_michellejhoward-bwlr.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ph_michellejhoward-bwlr.jpg)
Audit Wharton BoardfirstOverseers.
Shirley Ann JacksonPresident, Rensselaer Polytechnic Institute, a leading science and technology university that brings technological innovation to the marketplaceCommittees: 
Directors & Corporate Governance (chair); 
ExecutiveQUALIFICATIONS·Leadership and technology experience as president of Rensselaer Polytechnic Institute·Industry and research experience as a theoretical physicist at the former AT&T Bell Laboratories·U.S. Government service (former chairman of the U.S. Nuclear Regulatory Commission and co-chair of the President’s Intelligence Advisory Board, former member of the International Security Advisory Board to the United States Secretary of State, and the President’s Council of Advisors on Science and Technology)·Regulatory experience (former member of the board of governors of the Financial Industry Regulatory Authority (FINRA))·Affiliation with leading business and public policy associations (member of the Council on Foreign Relations and former university vice chair of the Council on Competitiveness)·Outside board experience as a director of FedEx Corporation, Medtronic plc and Public Service Enterprise Group Incorporated·Leadership and teaching positions at a research universityDr. Jackson, 71,Vice Chief of Naval Operations, the second-highest ranking uniformed officer in the branch. Responsible for the Navy’s day-to-day operations, she focused on cyber culture and information security in the digital age, as well as gender integration, in addition to oversight of a multi-billion dollar budget and the establishment of an auditing framework. In 2016, Admiral Howard was appointed by the President to serve as commander of U.S. Naval Forces in Europe and Africa and the Allied Joint Forces Command in Naples, Italy, making her the first woman four-star admiral to command operational forces. She retired from the Navy in 2017. Admiral Howard’s distinguished career in national defense has included both at-sea and ashore posts, placing her in key leadership positions within the areas of engineering, operations, and strategic planning and policy. Admiral Howard is a theoretical physicist at the former AT&T Bell Laboratories from 1976 to 1991, professor of theoretical physicsat Rutgers University from 1991 to 1995, and chairmangraduate of the U.S. Nuclear Regulatory CommissionNaval Academy and the U.S. Army Command and General Staff College. She was the J.B. and Maurice C. Shapiro Professor of International Affairs at the Elliott School of International Affairs at George Washington University from 1995 until2018 to 2020, where she assumed her current positiontaught in the areas of presidentcybersecurity and international policy. In 2022, she was appointed by the President to the Board of Rensselaer Polytechnic InstituteVisitors of the U.S. Naval Academy. ![[MISSING IMAGE: ph_arvindkrishna-bw.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ph_arvindkrishna-bw.jpg)
Executive (Chair) 1999. Dr. Jackson iskey IBM technologies such as artificial intelligence, cloud and quantum computingFedEx Corporation, Medtronic plc, and Public Service Enterprise Group Incorporated. She has been co-chairthe Federal Reserve Bank of New YorkPresident’s Intelligence Advisory Boardchief executive officer of IBM, and a member of the International Security Advisory Board to the United States Secretary of State. Dr. Jackson is a fellow of the Royal Academy of Engineering (U.K.), the American Academy of Arts and Sciences, and a member of the National Academy of Engineering and the American Philosophical Society. Dr. Jackson is a recipient of the National Medal of Science, the highest awardDirectors in science and engineering awarded by the U.S. Government. Dr. Jackson is a board member of the Council on Foreign Relations. She is a Regent Emerita and former Vice-ChairApril 2020. He was elected chairman of the Board of RegentsDirectors in December 2020. Mr. Krishna joined IBM in 1990. Mr. Krishna led the IBM Cloud and Cognitive Software business unit from 2017 to April 2020 and was a principal architect of the Smithsonian Institution, a past presidentacquisition of Red Hat, the American Association forlargest acquisition in the Advancement of Sciences, and an honorary trustee of the Brookings Institution. Additionally, during the past five years, sheCompany’s history. Mr. Krishna also served as the director of IBM’s Research division from 2015 to 2020. Previously, he was general manager of IBM’s Systems and Technology Group, IBM’s development and manufacturing organization. Prior to that, he built and led many of IBM’s data-related businesses. In 2022, he became a director of Marathon Oilthe Federal Reserve Bank of New York. He is also a director of Northrop Grumman Corporation.
He has an undergraduate degree from the Indian Institute of Technology, Kanpur, and a PhD. in electrical engineering from the University of Illinois at Urbana-Champaign.
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Executive Chairman, DowDuPont Inc. and Executive Compensation & Management ResourcesQUALIFICATIONS·Global business Directors and technology experience as chairman, president and chief executive officer of The Dow Chemical Company and executive chairman of DowDuPont Inc.·U.S. and international government service (former chairman of the President’s American Manufacturing Committee, member of the President’s Task Force on Apprenticeship Expansion, member of the Australian government’s Industry Growth Centres Advisory Committee and Thailand’s Board of Investment)·Affiliation with leading business and public policy associations (vice chairman of the executive committee of the Business Roundtable and executive committee member and former chairman of The Business Council)·Experience as a university trustee Executive 63,68, joined Dow in 1976 and subsequently held various executive positions including vice president of specialty chemicals from 1998 to 2000, business group president for performance chemicals from 2000 to 2003, and president and chief operating officer from 2003 to 2004. Mr. Liveris wasbefore being named president and chief executive officer of Dow in 2004 and chairman in 2006.DowDuPont.DowDuPont, a position he held until his retirement in July 2018. Mr. Liveris servedis a director of Worley, Saudi Aramco, NOVONIX Limited and chairman of the board of Lucid Motors. Mr. Liveris is stepping down as chairman of the President’s American Manufacturing Committee and now servesLucid Motors in April; he also will step down as a director in another public company within the next 12 months. Additionally, Mr. Liveris is a former Executive Committee member of The Business Council, the President’s Task Force on Apprenticeship Expansion. Mr. Liveris also serves asformer chairman of The Business Council and the former vice chairman of the Executive Committee of the Business Roundtable, and as an Executive Committee member and former chairman of The Business Council.Roundtable. Mr. Liveris is also a trustee of the Minderoo Foundation of Australia, and The King Abdullah University of Science and Technology (KAUST), and is a former trustee of the California Institute of Technology and the United States Council for International Business (USCIB).
Hutham S. OlayanVice Chairman, The Olayan Group, a private family-owned multinational enterprise that is a diversified global investor and an operator of industrial and commercial businesses in the Middle EastCommittees: 
Directors & Corporate GovernanceQUALIFICATIONS·Global business experience as vice chairman, The Olayan Group and President and Chief Executive Officer, Olayan America·Affiliation with leading business and public policy associations (member of the Council on Foreign Relations, the Peterson Institute for International Economics and the Carnegie Middle East Center)·Outside board experience as a director of Morgan Stanley·Experience as a university trusteeMs. Olayan, 64, has been a principal and director of Olayan Investments Company Establishment, the parent company of The Olayan Group, since 1981. Prior to assuming the role of vice chairman in January 2018, she served as president and chief executive officer of Olayan America, heading The Olayan Group’s investment activities in the Americas for more than thirty years. Ms. Olayan is a director of Morgan Stanley. She has previously served as a director of Thermo Electron Corporation. SheBusiness. He is also a memberthe president of the Executive Advisory BoardBrisbane 2032 Olympic and Paralympic Games Organizing Committee.General Atlantic. She serves on the boardsAnnual Meeting & Proxy Statement | Election of the MasterCard Foundation, the Memorial Sloan-Kettering Cancer Center and the Peterson Institute for International Economics. Ms. Olayan is also a member of the Council on Foreign Relations and international advisory bodies affiliated with the Belfer Center for Science and International Affairs of Harvard University and the Carnegie Middle East Center.
Directors
James W. Owens![[MISSING IMAGE: ph_fwilliammcnabb-bwlr.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ph_fwilliammcnabb-bwlr.jpg)
CaterpillarThe Vanguard Group, Inc., a manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbinesCommittees: AuditQUALIFICATIONS·Global business experience as chairman and chief executive officer of Caterpillar Inc.·Experience as a former senior advisor at KKR & Co. L.P., a global asset management company·U.S. Government service (former memberone of the President’s Economic Recovery Advisory Board)·Affiliation with leading business and public policy associations (chairman of the executive committee of the Peterson Institute for International Economics, former director of the Council on Foreign Relations and former chairman of The Business Council)·Outside board experience as a director of Alcoa Inc. and Morgan Stanley·Experience as a university trustee Audit Mr. Owens, 72, joined Caterpillar in 1972 as a corporate economistsubsequently held various management positions, including chief financial officer. He was named group president in 1995 and vice chairman in 2003. Mr. Owens servedtechnology experience as chairman and chief executive officer of CaterpillarThe Vanguard Group, Inc.20042008 until his retirement in 2010.2018 and served as chief executive officer from 2008 to 2017. He joined Vanguard in 1986. In 2010, he became chairman of the board of directors and the board of trustees of the Vanguard group of investment companies.Alcoa Inc.UnitedHealth Group and Morgan Stanley.serves as the chair of its audit committee. He is also a director of Axiom. Mr. OwensMcNabb is chairman of the executive committee of the Peterson Institute for International Economics, former chairman of the board of trusteesthe Zoological Society of Philadelphia, chairman of the USRowing Foundation, and former chairman of Ernst & Young’s Independent Audit Quality Committee. Mr. McNabb also serves on the Wharton Leadership Advisory Board, the Advisory Board of the Ira M. Millstein Center for Global Markets and Corporate Ownership at North Carolina StateColumbia University and is also a board member of CECP: The CEO Force for Good. ![[MISSING IMAGE: ph_marthaepollack-bwlr.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ph_marthaepollack-bwlr.jpg)
Executive Compensation and Management Resources President’s Economic Recovery Advisory Board.American Academy of Arts & Sciences.
Virginia M. RomettyChairman, President and Chief Executive Officer, IBMCommittees: Executive (chair)QUALIFICATIONS·Global business and technology experience as chairman, president and chief executive officer of IBM·Affiliation with leading business and public policy associations (member of the Business Roundtable, the Council on Foreign Relations and the Peterson Institute for International Economics)·U.S. Government service (former member of the President’s Export Council)·Experience as a university trusteeMrs. Rometty, 60, joined IBM in 1981. She was elected senior vice president of Global Business Services in 2005, senior vice president of Sales and Distribution in 2009, senior vice president and group executive of Sales, Marketing and Strategy in 2010, president and chief executive officer of IBM in early 2012 and chairman in late 2012. She is a member of the Business Roundtable, the Council on Foreign Relations, the Board of Trustees of Northwestern University and the Board of Overseers and Managers of Memorial Sloan-Kettering Cancer Center, and formerly served on the President’s Export Council.![[MISSING IMAGE: ph_josephrswedish-bwlr.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ph_josephrswedish-bwlr.jpg)
Executive and Past President and Chief Executive Officer, Anthem, Inc., a leading health benefits providerCommittees: 
Directors & Corporate GovernanceQUALIFICATIONS·Global business Executive Compensation and technology experience as executive chairman, president and chief executive officer of Anthem, Inc.·Affiliation with leading business and public policy associations (former member of the Business Roundtable and graduate member of The Business Council)·Outside board and technology experience as a director of CDW Corporation·Experience as the chairman of a university oversight board 66,71, joined Anthem in 2013 as chief executive officer and was named chairman of Anthem’s board in 2015. He was the chairman, chief executive officer and president until late 2017 when he retired and became the executive chairman. chairman, a position he held until his retirement in May 2018.serves asa member and past chairman of the Board of Visitors of Duke University’s Fuqua School of Business and as a directorwas the past chairman of America’s Health Insurance Plans (past chairman).Plans. He is a graduate member of The Business Council and a past member of the Duke Margolis External Advisory Board. He isMr. Swedish also serves as Co-Founder and Partner at Concord Health Partners, a director of CDW Corporation and Proteus Digital Health, Inc.private equity firm focused on strategic investing in healthcare portfolio companies.
Sidney TaurelChairman Emeritus, Eli Lilly and Company, a pharmaceutical companyChairman, Pearson plc, a provider of digital education products and servicesCommittees: 
Executive Compensation & Management Resources (chair); 
ExecutiveQUALIFICATIONS·Global business experience as chairman of Pearson plc and chairman and chief executive officer of Eli Lilly and Company·Private equity management and investment banking experience as former senior advisor of Capital Royalty L.P. and senior advisor of Moelis & Company·U.S. Government service (former member of the Homeland Security Advisory Council, the President’s Export Council and the Advisory Committee for Trade Policy and Negotiations)·Affiliation with leading business association (graduate member of The Business Council)·Outside board experience as a director of McGraw Hill Financial, Inc.·Member of a university oversight boardMr. Taurel, 69, joined Eli Lilly in 1971 and held management positions in the company’s operations in South America and Europe. He was named president of Eli Lilly International Corporation in 1986, executive vice president of the Pharmaceutical Division in 1991, executive vice president of Eli Lilly and Company in 1993, and president and chief operating officer in 1996. He was named chief executive officer of Eli Lilly and Company in 1998 and chairman in 1999. Mr. Taurel retired as chief executive officer in early 2008 and as chairman in late 2008. He became chairman of Pearson plc in 2016. He is also a member of the Board of Overseers of the Columbia Business School, a graduate member of The Business Council and a trustee of the Indianapolis Museum of Art. Additionally, during the past five years, he was a director of McGraw Hill Financial, Inc.![[MISSING IMAGE: ph_peterrvoser-bwlr.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ph_peterrvoser-bwlr.jpg)
companies Audit QUALIFICATIONS·Global business and technology experience as chairman of ABB Ltd. and chief executive officer of Royal Dutch Shell plc·Affiliation with leading business and public policy associations (former member of the European Round Table of Industrialists and a former member of The Business Council)·Outside board experience as a director of Roche Holding Limited and Temasek Executive 59,64, joined Shell in 1982 and held a variety of finance and business roles including chief financial officer of Oil Products. In 2002, he joined the Asea Brown Boveri (ABB)2015.2015 and was the interim chief executive officer from April 2019 until February 2020. He is a director of Roche HoldingTemasek Holdings (Private) Limited, and Temasek.as well as Group Chairman of the Board of PSA International Pte Ltd, Singapore, a Temasek subsidiary. Mr. Voser is also active in a number of international and bilateral organizations. Additionally, from 2011 until 2019, he was a director of Roche Holding Limited.
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Retired Chief Executive Officer, Northern Trust Corporation, a financial services companyDirectors & Corporate GovernanceQUALIFICATIONS·Global business Executive Compensation and technology experience as chairman and chief executive officer of the Northern Trust Corporation·Outside board experience as a director of AbbVie Inc.·Experience as a university trustee Executive 64,69, joined Northern Trust Corporation in 1975 and has served as the chairman of the board sincefrom November 2009.2009Mark Fields ![[MISSING IMAGE: ph_alfredwzollar-bw.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ph_alfredwzollar-bw.jpg)
Directors and Corporate Governance W. James McNerney, Jr. are not nominees for election,leadership experience as an executive partner and their terms onexecutive advisor at Siris Capital GroupBoard will endNational Society of Black Engineers. Mr. Zollar retired from IBM in April 2018.
2011 following a 34-year career during which he held a variety of senior management positions in IBM’s systems and software groups.Board ![[MISSING IMAGE: ic_voteforcheck-pn.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_voteforcheck-pn.gif)
Director
Audit
Directors &Corporate Governance
Executive Compensation &Management Resources
Executive Michael L. EskewDirector Chair Audit Directors and
Corporate Governance
Executive Compensation
and Management Resources Executive Thomas Buberl David N. Farr Mark Fields*Alex Gorsky Alex GorskyMichelle J. Howard Shirley Ann JacksonArvind Krishna Chair Chair Andrew N. Liveris W. James McNerney, Jr.*F. William McNabb III Hutham S. OlayanMartha E. Pollack James W. OwensVirginia M. RomettyChair Sidney TaurelChair Chair Frederick H. Waddell Chair Alfred W. Zollar *As noted above, Mr. Fields and Mr. McNerney are not nominees for election, and their terms on the Board will end in April 2018.Audit CommitteeMEMBERS: Michael Eskew (Chair), David Farr, James Owens and Peter VoserNUMBER OF MEETINGS IN 2017: 6AUDIT COMMITTEE FINANCIAL EXPERTS: Michael Eskew, David Farr, James Owens and Peter VoserCharter: http://www.ibm.com/investor/governance/audit-committee-charter.htmlThe Audit Committee is responsible for reviewing reports of IBM’s financial results, audit results, internal controls and adherence to IBM’s Business Conduct Guidelines in compliance with applicable laws and regulations, including federal procurement requirements. Concurrent with that responsibility, set out more fully in the Charter, the Audit Committee performs many other functions, including:·selecting the independent registered public accounting firm and reviewing its selection with the Board;·annually preapproving the proposed services to be provided by the accounting firm during the year; and·reviewing the procedures of the independent registered public accounting firm for ensuring its independence with respect to the services performed for IBM.The Audit Committee chair, pursuant to authority delegated by the Audit Committee, may approve engagements with the independent registered public accounting firm that are outside the scope of the services and fees approved by the Committee, which are later presented to the Committee.The Board has determined that each member of the Committee qualifies asRefreshmentDirectors and Corporate Governance CommitteeMEMBERS: Shirley Ann Jackson (Chair), Mark Fields, Hutham Olayan, Joseph Swedish, Frederick WaddellNUMBER OF MEETINGS IN 2017: 5Charter: http://www.ibm.com/investor/governance/director-and-corporate-governance.htmlThe Directors and Corporate Governance Committee is devoted primarily to the continuing review and articulation of the governance structure of the Board. Concurrent with that responsibility, set out more fully in the Charter,annual basis, the Directors and Corporate Governance Committee performs many other functions, including:·recommending qualified candidatesreviews committee assignments and discusses whether rotation of committee members and committee chairs is appropriate to introduce fresh perspectives and to broaden and diversify the views and experiences represented on the Board’s committees. In 2022, the Board rotated several committee positions. Admiral Howard rotated from the Directors and Corporate Governance Committee to the Board for election as directors of IBM, includingAudit Committee, Mr. Liveris rotated from the slate of directors that the Board proposes for annual election by stockholders at the Annual Meeting;·advising and making recommendations to the Board on all matters concerning directorship practices, and on the function and duties of the committees of the Board;·making recommendations to the Board on compensation for non-management directors;·reviewing and considering IBM’s position and practices on significant issues of corporate public responsibility, such as workforce diversity, protection of the environment, and philanthropic contributions; and·reviewing and considering stockholder proposals, including those dealing with issues of public and social interest.As discussed above, the Committee is responsible for recommending qualified candidates to the Board for election as directors of IBM. The Committee recommends candidates based on their business or professional experience, the diversity of their background (including gender and ethnic diversity), and their talents and perspectives.Executive Compensation and Management Resources CommitteeMEMBERS: Sidney Taurel (Chair), Alex Gorsky, Andrew Liveris, James McNerneyNUMBER OF MEETINGS IN 2017: 5Charter: http://www.ibm.com/investor/governance/executive-compensation-and-management-resources.htmlThe Executive Compensation and Management Resources Committee has responsibility for defining and articulating IBM’s overall executive compensation philosophy, and administering and approving all elements of compensation for elected corporate officers. Concurrent with that responsibility, set out more fully inbecame the Charter, the Compensation Committee performs many other functions, including:·reviewing and approving the corporate goals and objectives relevant to the Chairman and CEO’s compensation, evaluating her performance in light of those goals and objectives, and, together with the other independent directors, determining and approving the Chairman and CEO’s compensation based on this evaluation;·reviewing IBM’s management resources programs, including overseeing, along with the full Board, the succession-planning processchair of the CEODirectors and other senior management positions;·approving, by direct action or through delegation, participation in and all awards, grants, and related actions under IBM’s various equity plans;·reviewing changes in IBM’s pension plans primarily affecting corporate officers;·managingCorporate Governance Committee, Mr. Waddell rotated from the operation and administrationchair of the IBM Supplemental Executive Retention Plan;·reviewingDirectors and Corporate Governance Committee and became the compensation structure for IBM’s officers and providing oversight of management’s decisions regarding performance and compensation of other employees; and·monitoring compliance with stock ownership guidelines.The Committee reports to stockholders as required by the SEC (see 2017 Reportchair of the Executive Compensation and Management Resources Committee, and Mr. Voser became the chair of the Audit Committee. In addition, Mr. Gorsky became Lead Director. In 2023, Mr. Gorsky rotated off the Executive Compensation and Management Resources Committee. As independent Lead Director, this provides Mr. Gorsky with additional opportunities to participate in meetings of all Board committees. The Executive Committee is empowered to act for the full Board in intervals between Board meetings, with the exception of certain matters that by law may not be delegated. The Committee meets as necessary, and all actions by the Committee are reported at the next Board of Directors meeting. The Committee did not meet in 2022. Members:
(Chair)
David N. Farr
Michelle J. Howard
F. William McNabb III
Financial Experts:
Michelle J. Howard
F. William McNabb III
Peter R. Voser
(Chair)
Thomas Buberl
Alfred W. Zollar
2022: 4
https://www.ibm.com/investor/att/pdf/IBM-Directors-and-Corporate-Governance-Committee-Charter.pdf of Directors below).Members of the Committee are not eligible to participate in any of the plans or programs that the Committee administers.
(Chair)
Martha E. Pollack
Joseph R. Swedish Liveris, McNerneySwedish, and TaurelWaddell and Dr. Pollack each served as members of the Executive Compensation and Management Resources Committee in 2017.2022. All members of the Committee were independent directors, and no member was an employee or former employee of IBM. During 2017,2022, none of our executive officers served on the compensation committee or board of directors of another entity whose executive officer served on our Executive Compensation and Management Resources Committee or Board. Therefore, there is no relationship that requires disclosure as a Compensation Committeecompensation committee interlock.Executive CommitteeMEMBERS: Virginia M. Rometty (Chair), Michael L. Eskew, Shirley Ann Jackson, Sidney TaurelNUMBER OF MEETINGS IN 2017: 0The Executive Committee is empowered to act for the full Board in intervals between Board meetings, with the exception of certain matters that by law may not be delegated. The Committee meets as necessary, and all actions by the Committee are reported at the next Board of Directors meeting. The Committee did not meet in 2017.IBM’s Corporate Governance PrinciplesIBM’s Board of Directors has long adhered to governance principles designed to assure the continued vitality of the Board and excellence in the execution of its duties. Since 1994, the Board has had in place a set of governance guidelines reflecting these principles, including the Board’s policy of requiring a majority of the Board to be comprised of independent directors, the importance of equity compensation to align the interests of directors and stockholders, and regularly scheduled executive sessions, including sessions of non-management directors without members of management. The IBM Board Corporate Governance Guidelines reflect IBM’s principles on corporate governance matters. These guidelines are available at https://www.ibm.com/investor/governance/corporate-governance-guidelines.html.IBM also has a code of ethics for directors, executive officers, and employees. The Business Conduct Guidelines are available on our website at https://www.ibm.com/investor/att/pdf/BCG_English_Accessible_2018.pdf. Any amendment to, or waiver of, the Business Conduct Guidelines that applies to one of our directors or executive officers may be made only by the Board or a Board committee, and would be disclosed on IBM’s website.The process by which stockholders and other interested parties may communicate with the Board or non-management directors of IBM is available at http://www.ibm.com/investor/governance/contact-the-board.html.Independent BoardUnder the IBM Board Corporate Governance Guidelines, the Directors and Corporate Governance Committee and the full Board annually review the financial and other relationships between the non-management directors and IBM as part of the annual assessment of director independence. The Directors and Corporate Governance Committee makes recommendations to the Board about the independence of non-management directors, and the Board determines whether those directors are independent. Although there is an annual assessment of director independence, independence is monitored by the Directors and Corporate Governance Committee and the full Board on an ongoing basis.The independence criteria established by the Board in accordance with New York Stock Exchange (NYSE) requirements and used by the Directors and Corporate Governance Committee and the Board in their assessment of the independence of directors is available at http://www.ibm.com/investor/governance/director-independence-standards.html.Applying those standards for the non-management directors in 2017, including those not standing for election, the Committee and the Board have determined that each of the following directors has met the independence standards: K.I. Chenault, M.L. Eskew, D.N. Farr, M. Fields, A. Gorsky, S.A. Jackson, A.N. Liveris, W.J. McNerney, Jr., H.S. Olayan, J.W. Owens, J.E. Spero, J.R. Swedish, S. Taurel, P.R. Voser and F.H. Waddell. Mr. Eskew’s son is employed by IBM and is not an executive officer. He was hired over a year before Mr. Eskew joined IBM’s Board, and his compensation and other terms of employment are determined on a basis consistent with IBM’s human resources policies. Based on the foregoing, the Board has determined that this relationship does not preclude a finding of independence for Mr. Eskew.Independent Leadership StructureThe Directors and Corporate Governance Committee is responsible for the continuing review of the governance structure of the Board, and for recommending to the Board those structures and practices best suited to IBM and its stockholders. The Committee and the Board recognize that different structures may be appropriate under different circumstances. Mrs. Rometty serves as IBM’s Chairman and CEO and Mr. Eskew serves as Presiding Director, IBM’s lead independent director, a structure that the Directors and Corporate Governance Committee and the full Board believe is currently in the best interests of IBM and its stockholders. A strong, independent Presiding Director with clearly defined duties and responsibilities further enhances the contributions of IBM’s independent directors, which have been and continue to be substantial. Mr. Eskew, the Presiding Director, has significant global business, technology, leadership and oversight experience as the former chairman and chief executive officer of United Parcel Service, Inc.The Presiding Director has the following responsibilities:·preside at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors;·serve as liaison between the Chairman and the independent directors;·approve information sent to the Board;·approve meeting agendas for the Board;·approve meeting schedules to assure that there is sufficient time for discussion of all agenda items;·have authority to call meetings of the independent directors; and·if requested by major stockholders, ensure that he is available, as necessary after discussions with the Chairman and Chief Executive Officer, for consultation and direct communication.In addition to these core responsibilities, the Presiding Director engages in other regular activities, including:·one-on-one debriefs with the Chairman after each meeting;·spending time with senior management outside of Board meetings to ensure a deep understanding of the business and strategy of the Company; and·attending certain other committee meetings in addition to the committee he chairs.In 2018, following each of their self-assessments and annual reviews, the Directors and Corporate Governance Committee and the Board as a whole continue to believe that this leadership structure provides IBM with the benefits of combining the leadership role of Chairman and CEO, while also recognizing the unique strengths and capabilities of IBM’s Board members, and that Mr. Eskew should continue to serve as the Presiding Director.Director AttendanceIn 2017, the Board held nine meetings and the committees collectively met 16 times. The Board and the Directors and Corporate Governance Committee recognize the importance of director attendance at Board and committee meetings. In 2017:·Overall attendance at Board and committee meetings was over 96%; and·Attendance was at least 75% for each director.Information about Board attendance at IBM’s 2017 Annual Meeting of Stockholders and IBM’s policy with regard to Board members’ attendance at annual meetings of stockholders is available at http://www.ibm.com/investor/governance/director-attendance-at-annual-meeting.html.Executive SessionRegularly scheduled executive sessions, including sessions of non-management directors without members of management, chaired by the Presiding Director, are held at each Board meeting. Additionally, executive sessions of the non-management directors are led by the Chairs of the Directors and Corporate Governance and Executive Compensation & Resources Committees, respectively, at least once per year.Board Evaluation ProcessIBM’s Board utilizes a comprehensive, multi-part process for its ongoing self-evaluation to ensure that the Board is operating effectively and that its processes reflect best practices.1The Board conducts an annual self-evaluation to review the effectiveness of the Board and its committees. In this comprehensive review, the self-evaluation focuses on:·The composition and performance of the Board, including the size, mix of skills and director refreshment practices;·The quality and scope of the materials distributed in advance of meetings;·The Board’s access to Company executives and operations;·The promotion of rigorous decision making by the Board and the committees; and·The overall functioning of the Board and its committees.2Each committee also performs a self-evaluation in executive session on an annual basis.·The Audit Committee’s evaluation, for example, includes individual, one-on-one interviews with IBM’s internal General Auditor and each member of the Committee.3Each year, the Chairman and CEO holds individual, one-on-one interviews with each IBM director to obtain his or her candid assessment of director performance, Board dynamics and the effectiveness of the Board and its committees.4The Chairman shares insights from these meetings with the Presiding Director and the full Board.5Self-evaluation items requiring follow-up and execution are monitored on an ongoing basis by the Board, each of the committees, and by IBM management. While this formal self-evaluation is conducted on an annual basis, directors share perspectives, feedback, and suggestions continuously throughout the year.Succession PlanningIBM has long been recognized for its leadership development. As part of this, one of the Board’s most important responsibilities is to ensure that IBM has the appropriate management to execute the Company’s long-term strategy. To fulfill this responsibility, the full Board meets at least annually to actively review and plan the succession of the CEO and other senior management positions.During these reviews, at least annually, the Board discusses:·Succession process and timeline;·Profile and candidate assessments, both internal and external, as appropriate, for CEO and other senior leadership positions;·Leadership pipeline and development plans for the next generation of senior leadership; and·Diversity, inclusion and Company culture.The Executive Compensation and Management Resources Committee also regularly reviews succession planning and the Company’s management resources programs.Stockholder Rights and AccountabilityAt IBM, we routinely evaluate our governance practices to maintain strong Board and management accountability, and to promote stockholder rights through transparent policies that enhance investor and public trust. We believe that sound corporate governance is critical to achieving business success and serves the best interests of our stockholders.Highlights of our commitment to stockholder rights include:·Annual election of all Directors·Majority voting for Directors·Stockholder ability to call Special Meetings·Proxy access rights to stockholders owning at least 3% of outstanding shares for 3 years NEW·Robust stockholder engagement program·No stockholder rights plan or poison pill provisions·No supermajority voting provisions·Confidential votingStrategy OversightThe Board actively oversees IBM’s long-term business strategy, and is continuously engaged with management on this topic. For example, each year, the Board holds a two-day strategy session, which includes presentations from many senior executives across the Company’s business units. Additionally, at Board meetings, the Board routinely receives presentations from senior management on critical business matters that tie to the Company’s overall strategy. In addition, the Board periodically travels to key IBM facilities, both domestically and internationally, to obtain a first-hand look at the Company’s operations in strategically important business units and geographic areas. Furthermore, the Board regularly meets with IBMers who represent the next generation of leadership at the Company to ensure that the Company’s leadership pipeline remains diverse and inclusive, and is linked to its long-term strategy.Risk OversightIn recent years, much attention has been given to the subject of risk and how companies assess and manage risks acrossthe enterprise. At IBM, we believe that innovation and leadership are impossible without taking risks. We also recognize that imprudent acceptance of risk or the failure to appropriately identify and mitigate risks could be destructive to stockholder value.In addition, an overall review of risk is inherent in the Board’s consideration of IBM’s long-term strategies and in the transactions and other matters presented to the Board, including capital expenditures, acquisitions and divestitures, and financial matters. The Board’s role in risk oversight of IBM is consistent with IBM’s leadership structure, with the CEO and other members of senior management having responsibility for assessing and managing IBM’s risk exposure, and the Board and its committees providing oversight in connection with those efforts.The Board is responsible for overseeing management in the execution of its responsibilities and for assessing IBM’s approach to risk management. The Board exercises these responsibilities periodically as part of its meetings and also through the Board’s three committees, each of which examines various components of enterprise risk as part of their responsibilities.The Audit Committee periodically reviews IBM’s enterprise management framework, including IBM’s enterprise risk management processes.The Executive Compensation and Management Resources Committee is responsible for assessing risks relating to IBM’s compensation programs, as well as IBM’s evolving demands for skilled workers.The Directors and Corporate Governance Committee oversees risks associated with government and industry regulations, as well as environmental and other societal and governance matters.Senior management is responsible for assessing and managing IBM’s various exposures to risk on a day-to-day basis, including the creation of appropriate risk management programs and policies. IBM has developed a consistent, systemic and integrated approach to risk management, including the enterprise risk management framework, to help determine how best to identify, manage and mitigate significant risks throughout IBM. Management regularly reports to the Board and the committees on a variety of risks.CybersecurityCybersecurity is a critical part of risk management at IBM. The Board’s cybersecurity oversight includes reporting from senior management and cybersecurity experts in areas such as rapidly evolving cybersecurity threats, cybersecurity technologies and solutions deployed internally and with IBM clients, major cyber risk areas and policies and procedures to address those risks, cybersecurity incidents, and updates from the IBM Security business. The Board and Audit Committee each receive regular updates.Political Contributions and LobbyingIBM is committed to meaningful management, oversight, and accurate reporting with respect to our engagement with government officials, and we consistently seek to provide our stockholders with relevant data regarding our public policy engagement.Further, IBM:
does not have a PAC (Political Action Committee),does not engage in independent or electioneering communications as defined by law, anddoes not provide any financial support to political parties or candidates, directly or indirectly.The IBM Board of Directors, as part of its oversight function, periodically receives reports from senior management relating to IBM’s policies and practices regarding governmental relations, public policy and any associated expenditures.IBM’s Senior Management, specifically the IBM Office of Government and Regulatory Affairs, closely monitors all public policy advocacy efforts, as well as any lobbying activities.IBM’s policies and practices with regard to public policy matters, including lobbying activities and expenditures, are available on its website: http://www.ibm.com/investor/governance/public-policy-matters.html.Insurance and IndemnificationIBM has renewed its directors and officers indemnification insurance coverage. This insurance covers directors and officers individually where exposures exist other than those for which IBM is able to provide indemnification. This coverage runs from June 30, 2017 through June 30, 2018, at a total cost of approximately $4.9 million. The primary carrier is XL Specialty Insurance Company.As noted in the discussion above on “Corporate Governance — Independent Board,” Mr. Eskew’s son is employed by IBM. He is an executive of IBM (not an executive officer). In addition, a brother-in-law of Mrs. V.M. Rometty (Chairman and CEO) and the wifeA daughter of Mr. R.F. Del Bene (Vice(General Manager, IBM Technology Lifecycle Services, and former Vice President and Controller) are employed as executives of IBM. A daughter of Mr. Del Bene and a brother of Dr. J.E. Kelly III (Senior Vice President, IBM Cognitive Solutions and IBM Research) are alsois employed by IBM in a non-executive positions. None of the above-referenced family member employees areposition, and is not an executive officersofficer of IBM. EachThe employee mentioned above received compensation in 20172022 between $120,000 and $900,000. Additionally, in 2017, the above-referenced family members of Mrs. Rometty and Mr. Eskew, as well as the wife of Mr. Del Bene, each received equity grants.$290,000. The compensation equity grants and other terms of employment of each of the family member employeesemployee noted above areis determined on a basis consistent with IBM’s human resources policies.2017 Under the IBM Board Corporate Governance Guidelines, the Directors and Corporate Governance Committee and the full Board annually review the financial and other relationships between the independent directors and IBM as part of the assessment of director independence. The Directors and Corporate Governance Committee makes recommendations to the Board about the independence of non-management directors, and the Board determines whether those directors are independent. In addition to this annual assessment, director independence is monitored by the Directors and Corporate Governance Committee and the full Board on an ongoing basis. ![[MISSING IMAGE: pc_director-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/pc_director-pn.jpg)
The Board strongly believes that each company’s circumstances dictate its optimal leadership structure, and the current leadership structure strikes the right balance of allowing our Chairman and CEO to promote a clear, unified vision for the Company’s strategy, providing the leadership critical for effectively and efficiently implementing the actions needed to ensure strong performance over the long term, while ensuring robust, independent oversight by the Board and Lead Director. Responsibilities and Actions of the Lead Director The Board reviews our leadership structure at least annually to ensure the optimal structure for the strategy and oversight of the Company. Regularly scheduled executive sessions, including sessions of independent directors without members of management, chaired by the independent Lead Director, are held at each Board meeting. ![[MISSING IMAGE: ic_one-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_one-pn.jpg)
Full Board Self-Evaluation ![[MISSING IMAGE: ic_two-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_two-pn.jpg)
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Results Discussion ![[MISSING IMAGE: ic_six-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_six-pn.jpg)
Follow-ups In succession planning, the Board discusses: The Executive Compensation and Management Resources Committee also regularly reviews succession planning and the Company’s management resources programs, overseeing a broad range of human capital management topics, including diversity and inclusion. ![[MISSING IMAGE: tb_strategy-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/tb_strategy-pn.jpg)
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2017,2022, non-management directors received an annual retainer of $300,000.$325,000. Chairs of each of the Directors and Corporate Governance Committee and the Executive Compensation and Management Resources Committee each received an additional annual retainer of $20,000 and the chair of the Audit Committee received an additional annual retainer of $25,000.$30,000. The additional retainer for the PresidingLead Director position is a total of $50,000, inclusive of any committee chair retainer received. For 2017, Mr. Eskew, the Presiding Director and the chair of the Audit Committee, received $25,000 for the Presiding Director role and $25,000 for the Audit Committee chair role. cash dividend is paid on IBM’s common stock, each director’s PFS account is credited with additional PFS reflecting a dividend equivalent payment. With respect to the payment of the remaining 40% of the annual retainer, directors may elect one or any combination of the following: (a) deferral into PFS, (b) deferral into an interest-bearing cash account, and/or (c) receipt of cash payments on a quarterly basis during service as a Board member. IBM does not pay above-market or preferential earnings on compensation deferred by directors.For 2017, under Under the IBM Board Corporate Governance Guidelines, within five years of initial election to the Board, non-management directors are expected to have stock-based holdings in IBM equal in value to five times the annual retainer initially payable to such director. Stock-based holdings mean (i) IBM shares owned personally or by members of the immediate family sharing the same household, and (ii) DCEAP PFS. Stock-based holdings do not include unexercised options.Beginning in 2018, within five years of initial election to the Board, non-management directors are expected to have stock-based holdings in IBM equal in value to eight times the equity portion of the annual retainer initially payable to such director. The overall threshold remains consistentStock-based holdings mean (i) IBM shares owned personally or by members of immediate family sharing the same household, and with this change, our(ii) DCEAP PFS. Stock-based holdings do not include unexercised stock options. will remain the strongest in our peer group.eitherany of (a) a lump sum payment as soon as practicable after the date on which the director ceases to be a member of the Board, (b) a lump sum payment paid in February of the calendar year immediately following the calendar year in which the director ceases to be a member of the Board, or (c) between two and ten annual installments, paid beginning in February following the calendar year in which the director ceases to be a member of the Board. If a director elects to receive PFS in cash, the payout of PFS is valued using the closing price of IBM common stock on the NYSE as follows: for payouts made in an immediate lump sum, IBM common stock will be valued on the first day after the date on which the director ceases to be a member of the Board; for lump sum payments made in February of the calendar year immediately following the calendar year of separation or for installment payouts, IBM common stock will be valued on the last business day of the January preceding such February payment.Non-management In 2022, non-management directors arewere eligible to participate in IBM’s Matching Grants Program on the same basis as IBM’s employees based in the United States.U.S. Under this program, IBM will matchmatched a director’s eligible contributions in cash on a 1-to-1 basis to approved educational institutions, medical facilities and cultural or environmental institutions. Each director iswas eligible for a Company match on total gifts up to $10,000 per calendar year. Amounts shown in the Director Compensation Table for matching grants may be in excess of $10,000 because such amounts include Company contributions on gifts that were made by directors in previous years.retainedretains Semler Brossy Consulting Group, LLC (Semler Brossy) in July 2017 to assess trends and developments in director compensation practices and to compare IBM’s practices against them. The Committee uses the analysis prepared by the consultant as part of its periodic review of IBM’s director compensation practices. Other than services provided to IBM’s Directors and Corporate Governance Committee and IBM’s Executive Compensation and Management Resources Committee, Semler Brossy does not perform any other work for IBM. The Committee determined that Semler Brossy is free of conflicts of interest. The Committee previously retained Frederic W. Cook2017 Name Fees Earned or
Paid in Cash ($) All Other
Compensation ($) Total ($) (a) (b) (c) (1) (d) Thomas Buberl 325,000 36,268 361,268 92,917 89,171 182,088 David N. Farr 325,000 103,181 428,181 Alex Gorsky 361,667 142,627 504,294 Michelle J. Howard 325,000 52,894 377,894 Andrew N. Liveris 341,667 203,012 544,679 F. William McNabb III 325,000 46,666 371,666 Martha E. Pollack 325,000 60,308 385,309 Joseph R. Swedish 325,000 59,747 384,747 Peter R. Voser 350,000 133,979 483,979 Frederick H. Waddell 345,000 96,712 441,713 Alfred W. Zollar 325,000 9,240 334,241
Chenault: $173,236Buberl: $36,193 of dividend equivalent payments on PFS; for Mr. Eskew: $150,234 of dividend equivalent payments on PFS; for Mr. Farr: $32,547$79,146 of dividend equivalent payments on PFS and $10,000 contributed by the Company under the Matching Grants Program; for Mr. Fields: $13,773Farr: $103,105 of dividend equivalent payments on PFS; for Mr. Gorsky: $31,499$142,552 of dividend equivalent payments on PFS; for Dr. Jackson: $134,821Admiral Howard: $52,819 of dividend equivalent payments on PFS; for Mr. Liveris: $75,132$202,937 of dividend equivalent payments on PFS; for Mr. McNerney: $79,633McNabb: $46,591 of dividend equivalent payments on PFS; for Ms. Olayan: $15,800Dr. Pollack: $60,233 of dividend equivalent payments on PFS; for Mr. Owens: $104,741Swedish: $59,672 of dividend equivalent payments on PFS; for Ms. Spero: $59,780Mr. Voser: $133,903 of dividend equivalent payments on PFS; for Mr. Waddell: $86,637 of dividend equivalent payments on PFS and $10,000 contributed by the Company under the Matching Grants Program; and for Mr. Taurel: $171,030Zollar: $9,240 of dividend equivalent payments on PFS; and for PFS.Voser: $28,296 of dividend equivalent payments on PFS.(2)After Ms. Spero’sEskew’s term on the Board ended in April 2017, Ms. Spero was paid $2,914,625 of earned compensation and dividend reinvestments which had been previously deferred under the DCEAP since her election to the Board in 2004. Ms. Spero elected to defer payment of 6,089 shares.(3)Mr. Swedish and Mr. Waddell joined the Board in October 2017.pro-ratedprorated amount of the annual retainer for service on the Board and, if applicable, as PresidingLead Director or a committee chair, based on the portion of the year for which the director served.··Life Insurancelife insurance premiums paid by IBM on behalf of the directors.·
2017. Name and address Number of Shares
Beneficially Owned Percent of Class
100 Vanguard Boulevard
Malvern, PA 19355 80,144,196 8.86%
55 East 52nd Street
New York, NY 10055 72,337,762 8.0%
State Street Financial Center
One Lincoln Street
Boston, MA 02111 53,576,165 5.93%
20182023 by The Vanguard Group and certain subsidiaries (Vanguard). Vanguard reported that it haddoes not have sole voting power over 1,228,539any shares, has shared voting power over 203,5271,273,052 shares, sole dispositive power over 62,307,27076,392,974 shares, and shared dispositive power over 1,400,9523,751,222 shares. The Schedule 13G does not identify any shares with respect to which there is a right to acquire beneficial ownership. The Schedule 13G states that the shares were acquired and are held in the ordinary course of business and were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of IBM.8, 20183, 2023 by BlackRock, Inc. and certain subsidiaries (BlackRock). BlackRock reported that it hadhas sole voting power over 49,564,81865,351,316 shares, does not have shared voting power over any shares, and sole dispositive power over all shares beneficially owned. The Schedule 13G does not identify any shares with respect to which there is a right to acquire beneficial ownership. The Schedule 13G states that the shares were acquired and are held in the ordinary course of business and were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of IBM.14, 201810, 2023 by State Street Corporation and certain subsidiaries (State Street). State Street reported that it haddoes not have sole voting power over any shares, has shared voting andpower over 42,508,791 shares, has shared dispositive power over all53,447,207 shares, beneficially owned.and does not have sole dispositive power over any shares. The Schedule 13G does not identify any shares with respect to which there is a right to acquire beneficial ownership. The Schedule 13G states that the shares were acquired and are held in the ordinary course of business and were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of IBM.
Stock-BasedStock-based Holdings of Directors and Executive Officers20172022, by IBM’s current directors and nominees, the executive officers named in the 20172022 Summary Compensation Table, and such directors and all of IBM’s executive officers as of December 31, 20172022, as a group. Also shown are shares over which the named person could have acquired voting power or investment power within 60 days after December 31, 2017.2022. Voting power includes the power to direct the voting of shares held, and investment power includes the power to direct the disposition of shares held. and nominees had beneficial ownership of a total of 229,851196,700 shares andof common stock of IBM and DCEAP shares as of December 31, 2017.2022. In the aggregate, these shares were valued at more than $35$27 million as of December 31, 2017,2022, or an average of more than $2.5 million for each of IBM’s non-management directors.
Common Stock
Holdings(2)
and RSUs(3)
DCEAP Shares(4)
Fiscal Year End ($)(5) Acquirable within 60 days Value of
Common Stock
shares at
Fiscal Year End Common Stock-based Stock Options And Directors’
DCEAP Name Stock (1) Holdings (2) RSUs (3) Shares (4) ($) (5) Michelle H. Browdy 103,913 134,142 15,016 N/A 14,640,303 Thomas Buberl 0 0 0 7,198 1,014,126 Gary Cohn 32,552 81,933 26,887 N/A 4,586,251 David N. Farr 8,508 (6) 8,508 0 17,040 3,599,458 Alex Gorsky 4,445 4,445 0 24,005 4,008,321 Michelle J. Howard 144 144 0 9,642 1,378,750 James J. Kavanaugh 112,968(7) 166,783 27,031 N/A 15,916,062 Arvind Krishna 205,578(8) 327,326 41,297 N/A 28,963,884 Andrew N. Liveris 2,655 2,655 0 33,348 5,072,463 F. William McNabb III 9,250 9,250 0 8,823 2,546,305 Martha E. Pollack 0 0 0 10,955 1,543,450 Thomas W. Rosamilia 36,189 96,410 19,522 N/A 5,098,668 Joseph R. Swedish 5,261(9) 5,261 0 10,868 2,272,415 Peter R. Voser 0 0 0 22,602 3,184,396 Frederick H. Waddell 3,763 3,763 0 15,177 2,668,457 Alfred W. Zollar 0 0 0 2,973 418,866 Directors and executive officers as a group 551,424 (10) 917,618 159,744(10) 162,631(10)
55,629188,389 shares in which voting and investment power are shared. The directors and officers included in the table disclaim beneficial ownership of shares beneficially owned by family members who reside in their households. The shares are reported in such cases on the presumption that the individual may share voting and/or investment power because of the family relationship. The shares reported in this column do not include 93,2276,165 shares held by the IBM Personal Pension Plan Trust Fund, over which the members of the IBM Retirement Plans Committee, a management committee presently consisting of certain executive officers of IBM,the Company, have voting power, as well as the right to acquire investment power by withdrawing authority now delegated to various investment managers.20172022 Nonqualified Deferred Compensation Narrative.2017.2017,2022, including dividend equivalents credited with respect to such shares. Upon a director’s retirement, these shares are payable in cash or stock at the director’s choice (see 20172022 Director Compensation Narrative for additional information).20172022 fiscal year ($153.42)140.89).1,619450 shares in which voting and investment power are shared.25,639167,503 shares in which voting and investment power are shared.Mr. Swedish and Mr. Waddell joined the Board in October 2017.(11)10100 of 1% of IBM’s outstanding shares.
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Diversity and Inclusion Our diversity practices have resulted in a year-over-year increase of representation for women globally and Black and Hispanic employees in the U.S. Thousands of IBMers have completed training to become certified allies who actively promote and progress equity and inclusion for the advancement and benefit of people different from themselves Talent and Culture IBM offers a compelling value proposition to employees: IBMers develop innovative technologies including Hybrid Cloud, AI, quantum computing and cybersecurity, for clients whose businesses the world relies on IBMers worldwide have confidential, 24/7 access to critical mental health support through employee assistance programs, other mental health resources and trainings Hundreds of thousands of IBMers globally participate in our annual engagement survey, and our industry-leading talent practices enable more than 8 in 10 IBMers to be engaged IBM managers and leaders have access to their team and organization engagement levels along with actionable data-driven insights Community Development IBM has pledged to skill 30 million people by 2030, preparing them for in-demand jobs Learners participating in our skilling programs earn digital badges and certifications widely recognized by the labor market ![[MISSING IMAGE: ic_environmentalimpact-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_environmentalimpact-pn.jpg)
Environmental Highlights Held first annual Supplier Sustainability Leadership Forum in 2022 focused on energy efficiency Enabling Our Clients and Communities ![[MISSING IMAGE: ic_politic-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_politic-pn.jpg)
Political Contributions IBM engages in policy, not politics. In 1968, former IBM CEO Thomas Watson Jr. said a company “should not try to function as a political organization in any way.” IBM continues to live by this philosophy to this day. We have a long-standing policy not to make contributions of any kind (money, employee time, goods or services), directly or indirectly, to political parties or candidates, including through intermediary organizations, such as PACs, campaign funds, or trade or industry associations. This policy applies equally in all countries and across all levels of government. Our approach to advocacy is also grounded in a commitment to preserve and strengthen trust in civic institutions and, to that end, we have partnered with other leading companies and the University of Michigan’s Erb Institute to build and advance a set of principles to promote Corporate Political Responsibility (CPR). By sharing the merit of our non-giving advocacy strategy and deepening business engagement with the CPR principles, we work to increase transparency in the ways that corporations advocate on public policy issues. IBM does not have a PAC and does not engage in independent expenditures or electioneering communications as defined by law. ![[MISSING IMAGE: ic_lobbying-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_lobbying-pn.jpg)
Lobbying IBM’s Government and Regulatory Affairs team is committed to advancing common sense public policies that benefit our business and communities. We seek to build trust in technology through precision regulation, a modernized digital infrastructure, promoting justice and equality for all citizens, and leveraging science and technology for good. All IBM lobbying activities, including by third parties on behalf of IBM, require the prior approval of the IBM Office of Government and Regulatory Affairs and must comply with applicable law and IBM’s Business Conduct Guidelines. IBM files periodic reports with the Secretary of the U.S. Senate and the Clerk of the U.S. House of Representatives detailing its U.S. federal lobbying activities and expenditures, with U.S. state and municipal governments, where required, and with the European Union Transparency Register. ![[MISSING IMAGE: ic_trade-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_trade-pn.jpg)
Trade Associations IBM joins trade and industry associations that add value to IBM, its stockholders and employees. These groups have many members from a wide variety of industries, and cover broad sets of public policy and industry issues. Although IBM works to make our voice heard, there may be occasions where our views on an issue differ from those of a particular association. We perform comprehensive due diligence on all of our trade associations to confirm they are reputable and have no history of malfeasance. Company policy prohibits them from using any IBM funds to engage in political expenditures, and we implement robust procedures to ensure they comply. IBM is proud to report that the Center for Political Accountability’s 2022 Report on Corporate Political Disclosure and Accountability gave IBM a score of 98.6 out of 100, naming IBM as one of only 20 companies that fully prohibit the use of corporate assets to influence elections and as one of only 39 companies that prohibit both trade associations and non-profits from using Company contributions for election-related purposes. policiesprograms and programs,policies, the Committee participated in the preparation of the Compensation Discussion and Analysis, reviewing successive drafts of the document and discussing those with management. The Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.Alex GorskyAndrew N. LiverisW. James McNerney, Jr.Sidney Taurel 2017Executive SummaryIBM’s financial model is designed to deliver profitablethrough the creation of compelling value for our clients. Over the last several years, the Company has embarked on a multi-year transformation to ensure this financial model delivers for our investors. By prioritizing investments with strong returns, we continue to focus on generating high value for our shareholders, employees and clients while aggressively investing to accelerate our transformation.In 2017, IBM delivered $79.1B in revenue with a 46% gross profit margin, and generated $16.7B cash from operations.Since 2015, we invested $37B, reshaping our business profile with nearly 60% directed toward high Strategic Imperatives.year-to-year, delivering above IBM’s mid-single digit model. Generated $9.3 billion of consolidated Free Cash Flow(1)![[MISSING IMAGE: bc_yearoveryearrevgrowth-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/bc_yearoveryearrevgrowth-pn.jpg)
Revenue from our Strategic Imperatives of cloud, analytics, mobile, social and security has reached a critical mass in 2017, growing to $36.5B, led by growth in cloud and security.STRATEGIC IMPERATIVES REVENUEGrew 14% compounded, increasing from 27%Optimized Portfolio Positioned to 46% Deliver High Value Recurring Revenue Acceleration IBM continues to strengthen and reinforce its position in delivering high-value, differentiated technology to its clients About 50% of IBM Revenuerevenue is recurring, with a high-value mix CLOUD REVENUEGrew 34% compounded, more than doubling in sizeSECURITY REVENUEGrew 23% compounded, nearly doubling in size2022 Recurring Revenue Mix 
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Over the past three years, Completed 8 acquisitions
in 2022 for $2B Returned $5.9B to stockholders
through dividends in 2022 Ended 2022 with $8.8B in cash
and marketable securities,
up over $1B year-to-year have worked to aggressively transform, while returning nearly 75% of free cash flow to shareholders.FREE CASH FLOW USE
* Based on GAAP from continuing operations, ROIC equals net operating profits after tax (net income plus after tax interest expense) divided by the sum of the average debt and average total stockholders’ equity.Our compensation strategy supports IBM’s high value business modelFor 2017, at target, 69%of Mrs. Rometty’s pay was at risk and subject to attainment of specificcalculate these performance goals:
For 2017 performance, the Board approved an annual incentive payment of $5.1 million for Mrs. Rometty, 102% of target. The payout level reflects a successful multi-year transformation with a return tometrics.in 4Q 2017, a remix% includes incremental sales to Kyndryl (post-separation, through October 2022) of the business portfolio,~1 point and recognition of the Company as the enterprise leader in artificial intelligence solutions, cloud services, security, blockchain,~4 points for 2021 and quantum computing. The Executive Compensation and Management Resources Committee (the Compensation Committee) also noted significant personal leadership of the CEO in infusing new executive talent into the Company and developing next generation leaders. In addition, she set the standards for workplace inclusion, for responsible stewardship of data and artificial intelligence, and for “new collar” work and training programs on a global basis. Taking into consideration the actual salary, annual incentive payout, vested restricted stock units and long-term incentive award for the period 2015—2017, Mrs. Rometty earned 81% of her annual total target compensation in 2017.The tables below illustrate how Mrs. Rometty’s pay at risk has affected her realized pay, compared to her target pay, in each of the past 3 years. These payouts reflect the multi-year business transformation, rigorous target setting and the strong link between pay and performance.CEO TOTAL ACTUAL VS. TARGET COMPENSATIONValues in Millions ($)
For 2018, the independent members of the Board made no change to Mrs. Rometty’s base salary, target annual incentive or annual long-term incentive award value, relative to 2017.containcontains certain non-GAAP financial measures, on a continuing operations basis, including operating earnings per share, free cash flow, consolidated operating pre-tax income fromcash flow, and revenue growth rates adjusted for currency. Amounts are presented on a continuing operations and operating income from continuing operations.basis unless otherwise noted. For reconciliation and rationale for management’s use of this non-GAAP information, refer to Appendix A — “Non-GAAP Financial Information and Reconciliations”.
Reconciliations.”Stockholder EngagementIBM continually reviewsenhances its corporate governance and executiveAnalysisprograms. As part of this review, it is IBM’s longstanding practice to meetstrategy, with a significant number of our largest investors during each proxy season, to solicit their feedback on a variety of topics. In 2017, IBM once again engaged with over 100 institutional investors. Further, our process includes outreach to hundreds of thousands of individual retail and registered stockholders, which represent a majority of our retail base.In addition to our normal, extensive outreach,pay at risk, supports the Company enhanced its engagement practices in 2017. We engaged in a robust program to gather feedback from investors following the 2017 annual advisory vote on executive compensation (Say on Pay). IBM’s Presiding Director, the Chair of the Executive Compensation and Management Resources Committee, and membersdrivers of IBM’s senior management participated in a significant portionhigh value business model.this engagement program. Overall, the Company met with investors representing more than 55%Mr. Krishna’s pay remained at risk and subject to attainment of the shares that voted on Say on Pay at the 2017 Annual Meeting.This enhanced, in-depth engagement process provided valuable feedback to the Compensation Committee. Overall, our stockholders continue to be supportive of the Company’s compensation program and practices. Specifically, our stockholders are strongly supportive of the overall design of the program, which focuses on long-term financialrigorous performance that drives stockholder value. Still, the Committee and the Board reviewed and considered all of the feedback heard from investors in making decisions relating to the executive compensation programs. The following table summarizes the items raised by our investors and the changes we made to our executive compensation program in response.What we heardCompensation Committee’s ResponseOn Disclosure Transparency· General preferencesimplicityMr. Krishna, which was 116% of target. The payout reflects a 100% Individual Contribution Factor (ICF) and clarity in the disclosure of the executive compensation program· Redesigned the proxy to enhance readability and clarity of the disclosure· Some preferred increased transparency around achievement of incentive goals· Provided additional context on the linkage between our business strategy and executive compensation program· Included disclosure of performance against goals in both the Annual Incentive Program (AIP) pool funding at 116%.![[MISSING IMAGE: fc_indicon-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/fc_indicon-pn.jpg)
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Feedback from Our Investors Continues to Inform the Committee Long-Term Incentive Planreached out to provide increased transparency intohundreds of thousands of individual registered and beneficial owners, representing more than 57% of the rigorshares that voted on Say on Pay in 2022.goals and the linkage of those goals to our business strategypay practices. On One-Time Grants· Many disfavored IBM’s one-time grant in 2016· The Board granted the 2016 CEO premium-priced stock option grant during a critical juncture in the Company’s transformation· The options, which are priced in four tranches up to 25% above the grant price, are not exercisable until 2019· No one-time awards have been granted to the Chairman and CEO or other Named Executive Officers (NEOs) in more than 2 yearsOn Pay Program Design· Overall, supportive of IBM’s rigorous pay program and did not want to see any major changes to the fundamental design· Reduced Annual Incentive Program maximum opportunity for the Chairman and CEO to two times target to align with market practice· The maximum Annual Incentive Program payout opportunity of three times target is at the high end of market practice for the CEO· Included a relative ROIC modifier, beginning with PSUs granted in 2018, which may add or subtract the number of shares paid out based on IBM’s relative ROIC performance· Some preferred that a relative metric, such as Return on Invested Capital (ROIC), be included in the long-term compensation plan· Described stock ownership guidelines as a multiple of base salary. IBM’s ownership requirements themselves have not changed and remain at the high end of its peer group· Some requested increased clarity around stock ownership guidelines To that end, IBM’s executive compensation practices are designed specifically to meet five key objectives:·EnsureTo that end, IBM’s executive compensation practices are designed specifically to meet five key objectives: are closely aligned with those of our investors by varying compensation based on both long-term and annual business results and delivering a large portion of the total pay opportunity in IBM stock;·· ·· TypeType Component Key Characteristics
Performance Salary Salary is a market-competitive, fixed level of compensationcompensation. At target, annual incentive provides a market-competitive total cash opportunity. Actual annual incentive payments are drivenfunded by business performance against financial metrics and individualdistributed based on annual performance scores, with top performers typically earning the greatest payouts and the lowest performers earning no incentive payouts. Beginning in 2018, the Committee reduced the maximum payout opportunity for the Chairman and CEO to 2X salary, while the individual maximum payout opportunity remains at 3X salary for all other executives. Long-Term
Incentive Long-Term IncentiveAnnual Stock-Based Grants madegranted annually and may be made inconsist of PSUs, RSUs, or a combination thereof.and Stock Options. Equity grants are based on the level of the executivecompetitive positioning and thevary based on individual performance.talent factors. Lower performers do not receive equity grants.is adjustedcan be increased or decreased at the end of the three-year performance period based on IBM’s performance against predetermined targets for operating earnings per share and free cash flow. Beginning with the 2018targets.2020 performance period, the Committee added a modifier that could adjust theall PSU awards. The final number of PSUs earned can be increased or decreased based on IBM’s relative Return on Invested Capital (ROIC) performance. performance relative to S&P indices. Restricted Stock Units (RSUs) RSUs vest over time; typically ratably over one to four years. Stock Options (Options) Stock Options vest over time; typically ratably over four years. The exercise price is at least the value of the IBM stock price on the date of grant, and will be exercisable for up to 10 years from the date of grant. Retention Retention Periodically, the Compensation Committee and/or the Chairman and CEO reviews outstanding stock-based awards for key executives. Depending on individual performance and the competitive environment for senior executive leadership talent, awards may be made in the form of restricted stock units, premium-priced stock optionsRetention Restricted Stock Units (RRSUs), retention PSUs (RPSUs), or cash for certain executives. Retention Restricted Stock Unit (RRSU)RRSU and RPSU vesting periods typically range from two to five years. In addition to time-based vesting, RPSUs include a relative ROIC performance metric (consistent with standard PSUs). Cash awards have a clawback if an executive leaves IBM before a specified date. Premium-priced stock options may have varying exercise prices.it is earned. Supplemental Executive Retention Plan(closed)In 1995, IBM created a plan to help retain, for their full careers, the caliber of senior leaders needed to turn IBM around, preserve its long-term viability, and position it for growth in the future. To discourage these leaders from joining competitors, their benefits under this retention plan would be forfeited if they left IBM prior to age 60. Because its original purpose had been met, the plan was closed to new participants in 2004. Future accruals under the plan stopped on December 31, 2007.Pension & Savings PlansPension Plans(closed)In the U.S., future accruals under the pension plans stopped on December 31, 2007. The amount of the pension benefit under these plans is based on pay and service and is determined by the same formulas for executives and non-executives.Savings PlanThe money that U.S. executives save through the IBM 401(k) Plus Plan, as for all U.S. employees, is eligible for Company matching and automatic contributions. The 401(k) Plus Plan is the only tax-qualified retirement program available to IBM’s U.S. employees for future deferrals and employer contributions.Deferred Savings PlanIBM has a nonqualified deferred compensation plan established in accordance with U.S. Department of Labor and Internal Revenue Service guidelines to enable employees to defer compensation in excess of limits applicable to 401(k) plans. Employees are eligible for Company matching and automatic contributions similar to the 401(k) Plus Plan. Perquisites and Other Benefits Perquisites are intended to ensure safety and productivity of executives. Perquisites include such things as annual executive physicals, transportation, financial planning, and personal security. Post
Employment Savings Plan U.S. employees may participate in the IBM 401(k) Plus Plan by saving a portion of their pay in the plan, and eligible employees may also participate in a non-qualified deferred compensation savings plan, which enables participants to save a portion of their eligible pay in excess of IRS limits for 401(k) plans. The Company provides matching and automatic contributions for both of these plans. Non-qualified Savings Plan Pension Plans (closed) Named Executive Officers (NEOs) may have legacy participation in closed retention and retirement plans, for which future accruals ceased as of December 31, 2007. Supplemental Executive
Retention Plan (closed) A full description of the Retention, Pension, and Non-Qualified Deferred Compensation plans is provided in this Proxy Statement, beginning with the 2022 Retention Plan Narrative. Compensation GovernanceOverall, IBM’s compensation policies and decisions, explained in detail in this342023 Notice of Annual Meeting & Proxy Statement | 2022 Compensation Discussion and Analysis continuebe focused onIBM’s performance through the annual and long-term financial performance to drive stockholder value.The table below highlights practicesincentive programs. Each year, the Committee ensures that IBM embraces in support of our pay-for-performance philosophy:What We DoWhat We Don’t Do
Tie a significant portion of pay to Company performance Mitigate risk taking by emphasizing long-term equity incentives, placing caps on potential payments, and maintaining robust clawback provisions Require significant share ownership by the Chairman and CEO and Senior Vice Presidents Utilize noncompetition and nonsolicitation agreements
No individual severance or change-in-control agreements for executive officers No excise tax gross-ups No dividend equivalents on unearned RSUs/PSUs No hedging/pledging of IBM stock No stock option repricing, exchanges or options granted below market value No guaranteed incentive payouts No accelerated vesting of equity awards for executive officers No above-market returns on deferred compensation plansSenior Leadership Team — Personal Stake in IBM’s Future through Stock Ownership RequirementsInvestors want the leaders of their companies to act like owners. That alignment, we believe, works best when senior leaders have meaningful portions of their personal holdings invested in the stock of their company. This is why IBM sets significant stock ownership requirements for IBM’s Chairman and CEO and Senior Vice Presidents. The following table illustrates which equity holdings count towards stock ownership requirements:What CountsWhat Does Not Count IBM shares owned personally or by members of the immediate family sharing the same household Holdings in the IBM Stock Fund of the 401(k) Plus Plan and the Excess 401(k) Plus Plan Unvested equity awards, including PSUs, RSUs and RRSUs Unexercised stock options Shares of IBM stock deferred under the Excess 401(k) Plus PlanStock Ownership RequirementsThe Chairman and CEO and Senior Vice Presidents are all required to own IBM shares or equivalents in excess of standard market practice within 5 years of hire or promotion. While we have historically expressed our stock ownership requirements as a multiple of target total cash compensation, we are now describing them as a multiple of salary to align with market practice. This does not change the amount of shares required to be held, but we believe it will clarify the stock ownership requirements we have for our NEOs.
Salary and Non-Stock Compensation
RequirementMrs. Rometty owns common stock and stock-based holdings equal in value to 24 times her base salary, more than 2 times the required holdings, based on both the current and new approach to disclosure as of December 31, 2017. More information on Mrs. Rometty’s holdings can be found in Common Stock and Stock-Based Holdings of Directors and Executive Officers. As a group, the Chairman and CEO and Senior Vice Presidents owned shares or equivalents valued at over $120 million as of December 31, 2017; in fact, as of that date, this group held, on average, more than 10 times their base salary.Stock Ownership Continues Beyond RetirementFinally, ourthese programs are designedclosely aligned to ensure alignment with IBM’s long-term interests past the retirement date for our Chairman and CEO and Senior Vice Presidents. Share price performance and long-term goal achievement continue to impact the Long-Term Incentive Plan for these retired executives for at least two and a half years post retirement. Shares for Mrs. Rometty that remain restricted and subject to post-retirement performance of IBM represent 1.6 times her share ownership requirement as of December 31, 2017, and assuming future performance at target.Setting Performance Targets for Incentive CompensationCompensation of our senior leaders is linked with IBM’s performance against core business metrics. These metrics and their weightings are aligned with IBM’sCompany’s financial and strategic objectives and are designed to appropriately balance short- and long-term goals.balanced. Targets are set for both the annual and long-term incentive programs at aggressivechallenging levels each year. These targets, individually and together, are designed to be challenging to attain and are consistent with ourIBM’s financial model shared with investors eachfor that year. As part of IBM’s ongoing management system, targets are evaluated to ensure they do not encourage an inappropriate amount of risk taking.![[MISSING IMAGE: fc_metrweig-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/fc_metrweig-pn.jpg)
2017, IBM continuedPSU performance periods that began prior to measure five key financial metrics:AIPStrategic ImperativesRevenueSupports portfolio shift into a cognitive solutions and cloud platform company that will deliver the highest value opportunities for our clients and stockholdersOperating Net IncomeMeasures our profit and operational successOperating Cash Flow*Important measure of our ability to reinvest and return value to stockholdersPSUProgramOperating EPSMeasures operating profitability on a per share basis Cash FlowImportant measure of our ability to reinvest and return value to stockholders over multiple years*Net Cash from Operating Activities, excluding Global Financing receivables.Based on feedback from recent meetings withTo provide transparency into the rigor of our investors, and to increase our transparency further, beginning this year,goal setting process, IBM is disclosingdiscloses the performance attainment against targets for the most recent performance period, for both the Annual Incentive Program and the Performance Share Unit Program.Annual Incentive Program. AIP.effective tax raterates, compared to plan. The metrics and weightings for 2017 and 2018, along with IBM’s results compared to financial targets for 2017, are listed below.This adjustment can be either up or down. For example, adjustments are usually made for large divestituresacquisitions and acquisitions.divestitures.addition,2022, the modifier was based on the improvement in representation for executive women globally, and Black and Hispanic executives in the United States.performance,performance; for example, client experience, market share growth and workforce development. Taking such matters into account for 2017,diversity and inclusion of IBM’s workforce. For 2022, no suchqualitative adjustment was made.Annual Incentive Programfinal AIP funding level.
Results
% Attainment
Score*
Adjustment* Based on AIP payout table.** Non-GAAP financial metrics. See Appendix A for information on how we calculate these performance metrics.incentive (payoutsincentive. Payouts at this level are rare and only possible when IBM’s performance has also been exceptional).exceptional. The Annual Incentive Program,AIP, which covers approximately 5,0004,000 IBM executives, includes this individual cap at three times the individual target to ensureallow for differentiated pay for performance. The Compensation Committee reviewed this plan featureFor the Chairman and determined common market practice forCEO, the CEOcap is a cap of two times target. Therefore, beginningAn executive generally must be employed by IBM at the end of the performance period in 2018,order to be eligible to receive an AIP payout. At the discretion of appropriate senior management, the Compensation Committee, has setor the ChairmanBoard, an executive may receive a prorated payout of AIP upon retirement. AIP payouts earned during the performance period are generally paid on or before March 15 of the year following the end of such period.CEO’s maximumdiversity goals while also ensuring individual executive accountability for specific business objectives.paymentscore was 116. For 2022, there was no additional adjustment based on the diversity modifier. While executive representation of women globally, as well as Black and Hispanic executives in the United States, improved by 0.3 points, 0.7 points and 0.3 points, respectively in 2022, this improvement did not result in an increase to two times the incentive score.![[MISSING IMAGE: tb_aippayout-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/tb_aippayout-pn.jpg)
amount. Since becoming CEO, Mrs. Rometty’s incentive payments have ranged from 0% to 108%for each metric yield a higher Incentive Score.target.
Annual Meeting & Proxy Statement | 2022 Compensation Discussion and Analysis2015–20172020-2022 performance period were Operating EPS and Free Cash Flow, unchanged from previous years.To formalize this practice, for Performance Share awards starting in 2016 and thereafter, actualActual operating EPS results are adjusted to remove the impact of any difference between the actual share count and the budgeted share count, while simultaneously ensuring that executive compensation targets are normalized for any planned buybacks that are incorporated into the Operating EPS target. Additionally, the scoring for the Performance Share UnitPSU Program takesmay also take into account extraordinary events. For the 2015–20172020-2022 performance period, thereresults were no such events.Performance Share Units isPSUs are adjusted up or down from 0% to 150%, of targets, based on the approved actual performance. There is no discretionary adjustment toprogram score.The PSU score is calculated asProgram has a weighted average of results against targets for Operating EPS (70%) and Free Cash Flow (30%). The calculation is demonstrated in the table below, using the 2015–2017 performance period.** Non-GAAP financial metrics. See Appendix A for information on how we calculate these performance metrics. 2015–2016 free cash flow results as originally reported, prior to restatement for adoption of FASB guidance on stock-based compensation in 2017.The graph below, which provides PSU payout history since 2014, demonstrates the rigor of our long-term performance goals.PERFORMANCE SHARE UNIT PAYOUTS
Starting with the 2018–2020 PSU Program, a has been added to the program design.. The modifier is based on IBM’s ROIC performance over the three-year performance period, relative to the S&P 500 Index (excluding financial services companies due to lack of comparability) and the S&P Information Technology Index. This modifier reduces the score up to 20 points when performance falls below the S&P 500 Index median, and increases the score up to 20 points when IBM exceeds the median performance of both the S&P 500 Index and the S&P Information Technology Index. The modifier has no impact when IBM’s ROIC performance falls between the S&P 500 Index median and the S&P Information Technology Index median. The following graph illustrates how the modifier can affectThere is no qualitative adjustment to the PSU program score. In the event the weighted final ![[MISSING IMAGE: fc_relaroi-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/fc_relaroi-pn.jpg)
The PSU score is calculated as a weighted average of results against targets for Operating EPS (70%) and Free Cash Flow (30%). The calculation for the 2020-2022 performance period is shown in the table below. For the 2020-2022 performance period, the ROIC modifier was 0%. While IBM ROIC exceeded the median of the S&P 500 Index (excluding financial services), it did not exceed the median of the S&P Information Technology Index. ![[MISSING IMAGE: tb_perfperi-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/tb_perfperi-pn.jpg)
is 0,were adjusted to exclude the ROIC modifier would not apply.RELATIVE ROIC MODIFIER
HowCompensation Program GovernanceWhyenhances its corporate governance and executive compensation programs. As part of this review, it is IBM’s longstanding practice to meet with a significant number of our largest investors during both the proxy season and the off-season, to solicit their feedback on a variety of topics. What We Do Tie a significant portion of pay to Company performance Mitigate risk taking by emphasizing long-term equity incentives, placing caps on potential payments, and maintaining robust clawback provisions Require significant share ownership by the Chairman and CEO, Vice Chairman and Senior Vice Presidents Utilize noncompetition and nonsolicitation agreements for senior executives Remove impact of share repurchase on executive incentives What We Don’t Do No individual severance or change-in-control agreements for executive officers No excise tax gross-ups for executive officers No dividend equivalents on unearned RSUs/PSUs No hedging/pledging of IBM stock No stock option repricing, exchanges or stock options granted below market value No guaranteed incentive payouts for executive officers No accelerated vesting of equity awards for executive officers No above-market returns on deferred compensation plans Ownership Requirements as a Multiple of Salary NEO Name IBM Minimum Requirement Median Peer Group Minimum Requirement A. Krishna 10 7 J.J. Kavanaugh 7 4 G. Cohn 7 4 T. Rosamilia 7 4 M.H. Browdy 7 4 What Counts IBM shares owned personally or by members of the
officer’s immediate family sharing the same household Holdings in the IBM Stock Fund of the 401(k) Plus Plan
and the Excess 401(k) Plus Plan Shares of IBM stock deferred under the Excess 401(k) Plus Plan What Does Not Count Unvested equity awards Unexercised stock options Areare MadeSenior Vice Presidents,SVPs, develop goals, both qualitative and quantitative, that they seek to achieve in a particular year in support of the business. Beginning in 2016, IBM adopted a more nimbleThe Board of Directors reviews and real-time approach to managing employee performance. Employee’s performance goals are discussed with each individual’s manager regularly and updated as necessary throughoutapproves the year. The Chairman and CEO’s performance goals are reviewed directly by the Board of Directors.and formally reviews progress and outcomes. As part of this process, many factors are considered, including an understanding of the business risks associated with the performance goals.Compensation for theAnnual Incentive Payouts— Research, Recommendations and Reviewplan payouts and setting target compensation opportunities for the Chairman and CEO. This framework considers the Chairman and CEO’s self-assessment of performance against commitments in the year, both qualitative and quantitative, and also considers progress against strategic objectives, an analysis of IBM’s total performance over a multi-year period, a competitive benchmark analysis,the year and other relevant information.the overall Company incentive score. The Committee considers all of this information in developing its recommendations, which are then presented to the independent members of the IBM Board of Directors for further review, discussion, and final approval.3. Determining Compensation for SeniorPresidentsEvaluation ofChairman and SVP Results by the Chairman and CEOEmployees at all levels, including executives, and the Compensation Committeeevaluateupdate their own results against their stated goals.Senior Vice PresidentsChairman and SVPs are reviewed by the Senior Vice President of Human Resources (SVP HR) and the Chairman and CEO, who evaluate the information, along with the following:· Comparisons to market compensation levels for cash compensation and total direct compensation;· Potential for future roles within IBM; and· Total compensation levels relative to internal peers before and after any recommendations.in consultation withtaking into account the SVP HR,Company incentive score, the Chairman and CEO makes compensation recommendations to the Compensation Committee based on an evaluation of the Vice Chairman and each Senior Vice President’sSVP’s performance and expectations for the coming year.Evaluation of Results byyear, and the Compensation CommitteeThe Compensation Committee decides whether to approve or adjust the Chairman and CEO’s recommendations for the Senior Vice Presidents.evaluates allthen presents the compensation decisions for the Chief Financial Officer to the independent members of the factors considered by the ChairmanIBM Board of Directors for ratification.CEO and reviews compensation summaries that tally the dollar value of all compensation and related programs, including salary, annual incentive, long-term compensation, deferred compensation, retention payments and pension benefits. These summaries provide the Committee with an understanding of how their decisions affect other compensation elements and the impact that separation of employment or retirement will have.4. EnsuringAnalysis — fact that competition for senior managementflow of executive talent is not limited to our industry.in and out of IBM from other industries. The surveys and benchmark data are supplemented by input from the Compensation Committee’s outside consultant on factors such as recent market trends. The Committee reviews and approves this list annually.The CompensationFor 2022 and 2023 compensation decisions, the Committee re-examinedutilized the following benchmark group for 2017 and determined that companies which meet the following criteria should be included in the 2017 benchmark group:·criteria:$15$10 billion, plus·(up to two per industry if available) in industries other than technology,industries, with revenue that exceeds $40$30 billion, and that have a global complexity similar to IBM.2017both 2022 and 2023 compensation decisions, the Committee approved the following benchmark group using the criteria above, which achieves a balance between prominent technology competitors and reflecting changes in the corporate structurelarge-scale companies of certain competitors.2017 BENCHMARK GROUP:AccentureDow ChemicalOracleAlphabetExxonMobilPepsiCoAmazon.comFordPfizerAppleGeneral ElectricUnited TechnologiesAT&THewlett Packard EnterpriseUPSBoeingHP Inc.VerizonCaterpillarIntelXerox (removed from 2018 group)ChevronJohnson & JohnsonCisco SystemsMicrosoftFor 2018 compensation decisions, the Committee approved the same benchmark group with one change. Xerox was removed from the 2018 benchmark group given recent changes in its corporate structure.The data from compensation surveyssimilar size of IBM, and related sources form the primary external view of the market.accurately represents IBM’s competition for senior leadership talent. In consideration of size and complexity, IBM’s philosophy is to generally target the 50th50 Owing Accenture Boeing Microsoft UPS Adobe Cisco Systems Oracle Verizon Alphabet General Electric PepsiCo Visa Amazon.com Hewlett Packard Enterprise Qualcomm VMware AT&T Honeywell Raytheon Bank of America Intel Salesforce the size and scope of our business overall, some roles are compared to a size-adjusted market rate.relevantbroader benchmark group.5. Consultantenters into a consulting agreementworks directly with its outside compensation consultant on an annual basis. In July 2017, the Committee retained Semler Brossy Consulting Group, LLC (Semler Brossy) as itsCommittee’s compensation consultant to adviseprovide a decision-making framework for use by the Committee on market practices and specific IBM policies and programs. Semler Brossy reports directly to the Compensation Committee Chairman and takes direction from the Committee. The consultant’s work for the Committee includes data analyses, market assessments and preparation of related reports. From time to time, the Committee seeks the views of the consultant on items such as incentive program design and market practices. The work done by Semler Brossy for the Committee is documented in a formal agreement which is executed by the consultant and the Committee. Semler Brossy does not perform any other work for IBM, other than services provided to IBM’s Directors and Corporate Governance Committee. The Committee previously retained Frederic W. Cook & Co., Inc. (FW Cook). The Committee determined that there is no conflict of interest with regard to either Semler Brossy or FW Cook.The Compensation Committee made recommendations for Mrs. Rometty’s 2017 and 2018setting target compensation following the process and using the pay components described above.2017 Annual Incentive Decisionopportunities for the Chairman and CEOFor 2017 performance,CEO. The independent members of the IBM Board approved anof Directors review and provide final approval.paymentlong-term compensation, deferred compensation, retention payments and pension benefits. These summaries provide the Committee with an understanding of $5.1 millionhow their decisions affect other compensation elements, and the impact of separation of employment or retirement. The Committee decides whether to approve or adjust the Chairman and CEO’s recommendations for Mrs. Rometty, which represented 102% of her target opportunity.In additionthe Vice Chairman and SVPs. The Committee then presents the compensation decisions for the Chief Financial Officer to overall IBM 2017 revenue performance of $79.1B and pre-tax income of $11.4B, the Compensation Committee noted the following achievements for Mrs. Rometty, all of which are clear sign postsindependent members of the successful business portfolio shift:· Achieved critical mass with IBM’s Strategic Imperatives— cloud, analytics, mobile, socialIBM Board of Directors for ratification.security. Grew revenue to $36.5 billion and represented 46% of IBM’s total revenue.· Strengthened Watson as the premier AI platform for business.Continued to extend the reach of Watson on the IBM Cloud to clients, developers, partners and users, touching one billion people in 2017.· Solidified the IBM Cloud as a global leader for enterprise,with $17 billion in revenue and exited the fourth quarter with an as-a-service annual run rate of more than $10 billion.· Continued to modernize our enduring Systems platforms.IBM Z delivered the highest shipped MIPS (millions of instructions per second) in history, demonstrating strong demand for the world’s first system capable of pervasive encryption with no performance degradation. Storage revenue grew every quarter in 2017 for the first time since 2010 and Power systems returned to growth in 4Q with the introduction of Power 9.· Established IBM as the clear leader in quantum computing.Created the world’s first 50 qubit system and launched Q Network on the IBM Cloud which made quantum capabilities available to more than 70,000 users for experimentation and testing.· Achieved global leadership in blockchain.Established blockchain projects with hundreds of clients, including collaborating on 35 active blockchain networks with clients such as Walmart, Maersk and The Depository Trust & Clearing Corporation (DTCC).· Repositioned IBM Services to capitalize on market trends.Returned consulting business to growth in the second half of 2017, but fell short of growth objectives for the year. Grew total services backlog for the year, with an improved trajectory entering into 2018.· Led the world for the 25th consecutive year in U.S. patents earned,set a new record with more than 9,000 patents. Nearly half of those patents were in new areas such as AI, cloud, security, blockchain, and quantum computing that will power the business for years to come.· Drove significant business productivitythrough continued global support transformation, automation and the deployment of cognitive solutions across IBM. Positioned IBM for future growth by realigning workforce skills with the new portfolio and strengthening all levels of management.· Continued to enhance the all inclusive culture of IBM.Improved executive representation in both female and under represented minorities.Finally, the payout took into consideration Mrs. Rometty’s outstanding personal leadership in infusing new executive talent across the Company, developing the next generation of leaders, and assuming industry leadership on several key issues, including setting new global standards for data responsibility and stewardship and preparing the future workforce for “new collar” work.2018Analysis For 2018, the independent members of the Board made no change to Mrs. Rometty’s base salary or target annual incentive, and reduced the maximum potential payout for her annual incentive from 3X target to 2X target, to align more closely with common market practice. She was granted an annual long-term incentive award valued at $13.3 million, flat compared to the prior two years. This grant is comprised 65% of 2018–2020 Performance Share Units and 35% of Restricted Stock Units. For 2018, 69% of Mrs. Rometty’s annual total target compensation is tied to performance-based incentives.2017 Annual Incentive Decisions for Mr. Schroeter, Dr. Kelly, Mr. Clementi and Mr. KavanaughThe Compensation Committee also made decisions for the following named executive officers, noting overall corporate performance as described in the Business Highlights andNamed Executive Summary and the following key points:Martin J. SchroeterSenior Vice President and Chief Financial Officer*· Drove continued transformation and strong return to shareholders, expanded Operating PTI margins*Officers For 2022 performance, the Board approved an annual incentive payment of $3,480,000, which represented 116% of Mr. Krishna’s target opportunity and was in line with the Company incentive score. In addition to overall IBM 2022 revenue performance of $60.5 billion and $10.4 billion cash from operations, the Compensation Committee noted the following achievements for Mr. Krishna, which have positioned IBM for sustained growth going forward: For 2023, the independent members of the Board made no changes to Mr. Krishna’s base salary or target annual incentive, which was just below the median target cash compensation of the 2023 benchmark group. He was granted an annual long-term incentive award valued at $17.0 million, which is the first increase since Mr. Krishna became CEO in 2020, and in line with the median of the 2023 benchmark group. This grant is comprised of 60% 2023-2025 Performance Share Units, 20% Restricted Stock Units, and 20% Stock Options. For 2023, 77% of Mr. Krishna’s annual total target compensation is at risk and subject to attainment of rigorous performance goals and IBM’s stock price performance. , grew free cash flow (excluding Global Financing receivables)** and maintained strong ROIC.· Returned $9.8 billion — about 75% of free cash flow — to shareholders, including an increase to the dividend for the 22nd consecutive year.· Grew IBM Global Financing assets by double digits year to year, while increasing return on equity to 33%.John E. Kelly IIISenior Vice President, IBM Cognitive Solutions & IBM Research· Strengthened Watson as the premier AI platform for business, touching one billion people in 2017.· Grew IBM Security to over $3B of revenue, up 55% YTY.· Achieved #1 in patents for the 25th consecutive year, setting a new record of more than 9,000 patents. Nearly half of those patents were in new areas such as AI, cloud, security, blockchain and quantum computing that will power the business for years to come.· Missed full year profit objective for Cognitive Solutions.Erich ClementiSenior Vice President, IBM Global Markets*· Maintained IBM’s global leadership in enterprise cloud with all of the top ten global banks, nine of the top ten retailers and eight of the top ten airlines as IBM Cloud as-a-Service clients.· Enabled IBM to deliver $36.5 billion of Strategic Imperatives revenue, up 11%, with strong contributions from IBM’s two biggest geographic markets.· Returned North America, IBM’s biggest geographic market, to revenue growth in 4Q, but missed full year growth objective.James J. KavanaughSenior Vice President, Finance and Operations*· Drove significant productivity savings through work redesign and the deployment of cognitive solutions across IBM’s internal operations.· Strengthened IBM as a top-tier IT provider through initiatives to transform and enhance the client experience.· Drove cognitive throughout IBM’s internal operations, making IBM the showcase of a cognitive enterprise.* In January 2018, Mr. Schroeter became Senior Vice President, IBM Global Markets, Mr. Clementi became Senior Vice President, IBM Global Integrated Accounts, and Mr. Kavanaugh became Senior Vice President and Chief Financial Officer.** Non-GAAP financial metrics. See Appendix A for information on how we calculate these performance metrics.
James J. Kavanaugh Senior Vice President and Chief Financial Officer Gary Cohn Vice Chairman Tom Rosamilia Senior Vice President Michelle H. Browdy Senior Vice President and General Counsel 20172022 annual incentive payouts below for these named executive officers:Taking into consideration the actual salary, annual incentive payout, vested restricted stock units and long-term incentive award for the period 2015–2017, theseNEOs: Name 2022 Annual Incentive Payouts (1) J.J. Kavanaugh $1,665,760 G. Cohn 1,832,800 T. Rosamilia 1,218,060 M.H. Browdy 1,466,240 earned from 76%–81%each had an incentive target equal to 135% of their annual total target compensation in 2017.2018salary for 2022.Schroeter, Dr. Kelly,Kavanaugh, Mr. ClementiCohn, Mr. Rosamilia and Mr. Kavanaugh2018:2023: base salary, annual incentive target, Performance Share Unit (PSU) and, Restricted Stock Unit (RSU) and Stock Option grants under the Long-Term Performance Plan. For Long-Term Incentive Plan grants, beginning in 2016, the mix of vehicles is now set at 65%60% PSUs, 20% RSUs and 35% RSUs, to align better20% Stock Options, which aligns with market practice. This mix provides competitive pay, while at the same time ensuring a strong link between pay and performance, and creates a betterthe right balance relative to peers with which we compete for talent. For 2018,2023, based on the compensation decisions detailed below at target, 63%approximately 73% of the NEOs’ (excluding the Chairman and CEO) pay is at risk.
63% of the NEOs’, excluding the Chairman and CEO, annual total target compensation is at risk.
NEO 2023 PAY MIX![[MISSING IMAGE: pc_neo2022-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/pc_neo2022-pn.jpg)
Name Salary Rate Annual Incentive
Target Performance
Share Units Restricted
Stock Units Stock Options J.J. Kavanaugh $ 1,096,000 $ 1,479,000 $ 5,955,000 $ 1,985,000 $ 1,985,000 G. Cohn 1,170,000 1,580,000 4,350,000 1,450,000 1,450,000 894,000 1,206,000 — — — M.H. Browdy 936,000 1,264,000 3,780,000 1,260,000 1,260,000 For Mr. Schroeter, Dr. Kelly, Mr. Clementi and Mr. Kavanaugh2018 salary ratesNamed Executive Officers, if applicable, will be effective JulyApril 1, 20182023.the 2018 annual incentive targets were effective January 1, 2018.(2) PSUs and RSUsStock Options will be granted on June 8, 2018February 21, 2023 to the named executive officers, including the Chairman and the CEO. The actual number of units granted on this date will be determined by dividing the value shown above by a predetermined, formulaic planningthe average of IBM’s closing stock price for the second quarter 2018.30 active trading days prior to the date of grant. The actual number of Stock Options granted on this date will be determined by dividing the value shown by the product of (1) the average of IBM’s closing stock price for the 30 active trading days prior to the date of grant and (2) an option valuation factor of .1667 (to reflect the discounted value of Stock Options compared to full value awards). The performance period for the PSUs ends December 31, 2020,2025, and the award will pay out in February 2021. The restricted stock units2026. RSUs and Stock Options will vest 25% per year on each anniversary of the date of grant.
3:4: Additional Informationall executives and employees. Based on this comprehensive review, we concluded that our compensation program does not encourage excessive risk taking for the following reasons:·71%72% of 20182023 annual total target compensation for the Chairman and CEO, Vice Chairman, and Senior Vice PresidentsSVPs as a group provided in equity.·· significant component of performance to promote disciplined progress toward financial goals. None of IBM’s incentive plans are based solely on signings or revenue targets, which mitigates the risk of employees focusing exclusively on the short term.··20172023 Potential Payments Upon Termination Narrative, we further strengthened our retirement policies on equity grants for our senior leaders beginning in 2009 to ensure that the long-term interests of IBM continue to be the focus, even as these executives approach retirement.·Senior Vice PresidentSVP hold a significant amount of IBM equity to further align their interests with stockholders over the long term.· states that awards may be cancelled and certain gains repaid if an employeea senior executive engages in activity that is detrimental to IBM. To further reinforce our commitment to ethical conduct, the IBM Excess 401(k) Plus Plan allows the clawback of certain IBM contributions if a participant engages in activity that is detrimental to IBM.stock optionsStock Options is the average of the high and low market price of IBM common stock on the New York Stock Exchange on the date of grant or, in the case of premium-priced stock options, for example, 10% above that average, or as specified by the Compensation Committee.predetermined, formulaic planningaverage of IBM’s closing stock price in effect for the quarter. IBM’s planning30 active trading days prior to the date of grant for PSUs and RSUs. For Stock Options, the average IBM closing stock price is computed each quarter using a consistent statistical forecasting procedure based on historical IBM stock price data. IBM usesfurther adjusted by an option valuation factor to reflect the quarterly planning pricediscounted value of Stock Options compared to aid in establishing the overall size of the equity plan and to give more consistency across equity grants made at different points in the quarter.Seniorthe Vice PresidentsChairman and each SVP are approved by the Compensation Committee. All equity awards for employees other than the Chairman and CEO, Vice Chairman and Senior Vice PresidentsSVPs are approved by the Chairman and CEO, Vice Chairman and Senior Vice PresidentsSVPs pursuant to a series of delegations that were approved by the Compensation Committee, and the grants made pursuant to these delegations are reviewed periodically with the Committee.advance.advance, typically February 21st or the previous business day (if the 21st does not fall on a business day). For Officers, the February grant date is scheduled within one month of the Compensation Committee’s approval of any applicable equity awards (at the end of January). IBM’s policy for new hires and promotions requires approval of any awards before or on the grant date which is typically the date of the promotion or hire.allAll Relationships,” and IBM’s Business Conduct Guidelines. This responsibility is reflected in each executive’s performance goals, and is reinforced through each executive’s annual certification to the IBM Business Conduct Guidelines.employeeexecutive engages in activity that is detrimental to IBM, such as violating IBM’s Business Conduct Guidelines, disclosing confidential information or performing services for a competitor. To further reinforce our commitment to ethical conduct, the Excess 401(k) Plus Plan allows the clawback of certain IBM contributions if a participant engages in activity that is detrimental to IBM.2,0001,700 of our key executives (including each of the named executive officers) have agreed to a noncompetition, nonsolicitation agreement that prevents them from working for certain competitors within 12 months of leaving IBM or soliciting employees within two years ofafter leaving IBM.To the extent permitted by governing law, IBM will seek to recoup any bonus or incentive paid to any executive officer if: (i) the amount of such payment was based on the achievement of certain financial results that were subsequently the subject of a restatement; (ii) the Board determines that such officer engaged in misconduct that resulted in the obligation to restate, and (iii) a lower payment would have been made to the officer based upon the restated financial results. To the extent permitted by governing law, IBM will seek to recoup any bonus or incentive paid to any executive officer if: (i) the amount of such payment was based on the achievement of certain financial results that were subsequently the subject of a restatement; (ii) the Board determines that such officer engaged in misconduct that resulted in the obligation to restate; and (iii) a lower payment would have been made to the officer based upon the restated financial results. Team, formerly the Growth and Transformation Team. The Performance Team consists of approximately 7085 of our senior leaders who run IBM business units and geographies and includes the Chairman and CEO, Vice Chairman, and each Senior Vice President.SVP. The team is accountable for business performance and the development of cross-unit strategies. The Acceleration Team, which includes all members of the Performance Team, consists of a select group of approximately 350 executives. This team is charged with accelerating IBM’s growth through leadership initiatives to engage their teams and promote innovation, speed, and simplicity in service of our clients.option, collar). Further, IBM does not allow any member of the Acceleration Teamcontract, equity swap, collars, exchange funds) or to pledge any IBM securities at any time, which includes having IBM stock in a margin account or using IBM stock as collateral for a loan. Further, IBM does not allow any employee granted equity awards through the IBM Long-Term Incentive Plan to hedge or pledge those securities.UntilA “covered employee”, under Section 162(m) as amended, is the CEO, the CFO, the three highest paid executive officers, and any other individual who was a covered employee of the Company for the preceding tax years beginning after December 31, 2016. Prior to 2018 (before the Tax Cut and Jobs ActAct), a deduction was signed into law on December 22, 2017,available for performance-based compensation was deductible, even if it caused the covered employee to have compensation in excess of $1 million. The Tax Cut and Jobs Act eliminated thiscompensation. Transition rules allow a deduction for performance-based compensation deduction going forward, but provided limited transition relief for compensation paid pursuant to a contract in effect as of November 2, 2017, that is not materially modified after such date. This means that certain outstanding performance-based compensation may continue to be deductible under Section 162(m), but that all compensation after November 2, 2017, will be subject to $1 million cap on deductibility. IBM will seek deductions for compensation under the transition relief consistent with applicable law. The Tax Cut and Jobs Act also expanded who a covered employee is under Section 162(m). Effective for 2017, a covered employee under Section 162(m) is the CEO, the CFO (who previously was not included) and each of the other three highest-paid executive officers.Based on applicable tax regulations in effect prior to the Tax Cut and Jobs Act, for the performance-based compensation exception, taxable compensation derived from certain stock appreciation rights and from the exercise of stock options by Senior Vice Presidents under IBM’s Long-Term Performance Plans should qualify as performance-based. The IBM Excess 401(k) Plus Plan permits an executive officer who is subject to Section 162(m) and whose salary and incentive compensation is above $1 million to defer payment of a sufficient amount of the salary and incentive compensation to bring it below the Section 162(m) limit. In 1999, IBM’s stockholders approved the terms under which IBM’s annual and long-term performance incentive awards should qualify as performance-based. In 2014, as required by the Internal Revenue Code, the stockholders approved the material terms of the performance criteria under which long-term performance incentive awards should qualify as performance-based. These terms did not preclude the Committee from making any payments or granting any awards, whether or not such payments or awards qualify for tax deductibility under Section 162(m), which may have been appropriate to retain and motivate key executives.Although this tax deduction for performance-based compensation has been eliminated for awards after November 2, 2017, IBM believescontinues to believe that a strong link between pay and performance is critical to align executive and shareholderstockholder interests. Going forward, IBM and the Committee will continue to ensure that a significant portion of pay for our Senior Vice Presidents,Chairman and SVPs, including the Chairman and CEO, is at risk and subject to the attainment of performance goals.2017 Name and
Principal
Position Stock Option Non-Equity
Incentive Plan Change in
Retention Change in
Pension Nonqualified
Deferred
Compensation All Other (a) Salary (1) Bonus (2) Awards (3) Awards (4) Compensation (5) Plan Value (6) Value (7) Earnings (8) Compensation (9)(10) Total (11) Year
(b) ($)
(c) ($)
(d) ($)
(e) ($)
(f) ($)
(g) ($)
(h) ($)
(h) ($)
(h) ($)
(i) ($)
(j) A. Krishna, Chairman and CEO 2022 $ 1,500,000 $ 0 $ 8,927,701 $2,033,636 $3,480,000 N/A $ 0 $ 0 $638,738 $ 16,580,075 2021 1,500,000 0 $ 12,605,507 0 $2,940,000 N/A 0 0 505,452 17,550,959 2020 1,352,591 0 $ 13,159,118 0 $2,181,000 N/A 42,806 0 274,167 17,009,682 J.J. Kavanaugh, Senior VP and CFO 2022 $ 1,040,000 $ 0 $ 5,843,669 $1,331,106 $1,665,760 $ 0 $ 19,187 $ 0 $233,263 $ 10,132,985 2021 968,000 0 7,563,384 0 1,437,700 0 0 0 200,534 10,169,618 2020 899,000 0 7,416,931 0 1,176,300 94,229 0 0 159,836 9,746,296 2022 $ 1,170,000 $ 0 $ 4,707,418 $1,072,289 $1,832,800 N/A N/A $ 0 $169,418 $ 8,951,925 2021 1,170,000 1,000,000 6,180,787 0 1,548,400 N/A N/A 0 2,417 9,901,604 2022 $ 878,000 $ 0 $ 4,220,391 $ 961,361 $1,218,060 $ 0 $ 0 $ 0 $384,606 $ 7,662,418 2021 830,000 0 5,959,005 0 1,064,000 0 0 0 250,119 8,103,124 M.H. Browdy, Senior VP and General Counsel 2022 $ 925,500 $ 0 $ 3,246,447 $ 739,505 $1,466,240 N/A N/A $ 0 $147,753 $ 6,525,445 2021 894,000 0 4,354,627 0 1,266,300 N/A N/A 0 135,930 6,650,857 2020 830,000 0 4,211,031 0 1,109,520 N/A N/A 0 124,112 6,274,663 shown in the salarythis column reflect the actual salary amount paid to each named executive officer during 2017.· IBM reviews salaries for each named executive officer annually during2022.common review cycle. Mrs. Rometty’s salary ratecash sign-on payment; $1,000,000 of that was effective July 1, 2016. The salary rates forpaid on December 31, 2021.other named executive officers took effect on July 1, 2017.Bonus (Column (d))No bonuses were awarded to the named executive officers in the years shown in the 2017 Summary Compensation Table. Payments under the IBM Annual Incentive Program are included under column (g) (Non-Equity Incentive Plan Compensation).Awards (Column (e))The amounts shown areUnits (RSUs).Performance Share Units (PSUs), Restricted Stock Units (RSUs) and Retention Restricted Stock Units (RRSUs) granted in each fiscal year shown, computed in accordance with accounting guidance (excluding any risk of forfeiture as per SEC regulations). The values shown for the PSUs are calculated at the Target number as described below. The values shown for the PSUs, RSUs and RRSUsbelow, calculated in accordance with accounting guidance; these amounts reflect an adjustment for the exclusion of dividend equivalents.Performance Share Units (PSUs)The following describesmaterial termsmetrics and conditions of PSUsweightings were updated as reporteddisclosed in the column titled Stock Awards (column (e)) in the 2017 Summary Compensation Table and in the 2017 Grants of Plan-Based Awards Table under the heading Estimated Future Payouts Under Equity Incentive Plan Awards (columns (f), (g) and (h)).General Terms· One PSU is equivalent in value to one share of IBM common stock.· Executive officers are awarded a number of PSUs during the first yearSection 1 of the three-year performance period. PSUs are generally paid out in IBM common stock afterCompensation Discussion and Analysis, but the three-year performance period.· Performance targets are set atThreshold, Target, and Max Attainment % and Payout %s remain the beginning ofsame for each metric) Threshold Target Max* Metrics Attainment % / Payout % Attainment % / Payout % Attainment % / Payout % Operating EPS (70%) 70% / 25% 100% / 100% 120% / 150% Free Cash Flow (30%) 70% / 25% 100% / 100% 120% / 150% three-year performance period and approved by the Compensation Committee (for example, targets for the 2015–2017 performance period were set for cumulative three-year attainment in operating earnings per share and free cash flow in the beginning of 2015).· At the end of the three-year performance period, the Compensation Committee approves the determination of actual performance relative to pre-established targets, and the number of PSUs is adjustedfinal payout up or down based on the approved actual performance. Beginning with the 2018–2020 performance period, the number of PSUs that pay out may be modified furtherby up to 20 points, based on IBM’s ROIC performance relative to broader market indices. For more information about this ROIC modifier, please refer to(See the description of our Performance“Performance Share Unit ProgramProgram” description in Section 1 of the 2017 Compensation Discussion and Analysis.· PSUs granted to U.S. executives vest on December 31 of the end of the performance period. Payout for all PSUs is in the February following the end of the performance period.· There are no dividends or dividend equivalents paid on PSUs.Vesting and Payout Calculations· The performance period for the awards granted in 2017 is January 1, 2017 through December 31, 2019, and the awards will pay out in February 2020. PSU awards granted in 2017 will be adjusted for performance, as described below.· Outstanding PSUs are typically cancelled if the executive’s employment is terminated. See the 2017 Potential Payments Upon Termination Narrative for information on payout of unvested PSUs upon certain terminations.· Payout will not be made for performance below the thresholds, as described below.· See Section 1 of the 2017 Compensation Discussion and Analysis for informationadditional detail on performance targets for the PSU program.Threshold Number (listed in column (f) ofROIC Modifier). As a result, the 2017 Grants of Plan Based Awards Table):– The Threshold number of PSUs is 25% of the Target number.– The Threshold number of PSUs will be earned for achievement of 70% of both business objectives (operating earnings per share and free cash flow).– If only the cumulative operating earnings per share target is met at the Threshold level (and the free cash flow target is not met), thetotal maximum number of PSUs earned wouldcould be 70% of the Threshold number.– If only the cumulative free cash flow target is met at the Threshold level (and the operating earnings per share target is not met), the number of PSUs earned would be 30% of the Threshold number.Target Number (listed in column (g) of the 2017 Grants of Plan-Based Awards Table):– The Target number of PSUs will be earned if 100% of the objectives are achieved.Maximum Number (listed in column (h) of the 2017 Grants of Plan-Based Awards Table):– The Maximum number of PSUs is 150%up to 170% of the Target number.– ThePSUs will be earned for achieving 120% of both business objectives.Restricted Stock Units (RSUs)may include RRSUs. In 2017, RSUs, but not RRSUs, were granted to all named executive officers. RRSUs grantedgrants, if applicable, calculated inprevious years to any named executive officer and outstanding at the end of 2017 are included in the 2017 Outstanding Equity Awards at Fiscal Year-End Table.General Terms·One RSU or RRSU is equivalent in value to one share of IBM common stock. RSUs and RRSUs are generally paid out in IBM common stock at vesting.·Dividend equivalents are not paid on RSUs or RRSUs granted on or after January 1, 2008.Vesting and Payout·RSUs typically fully vest in four years, accordance with 25% vesting each year.·RRSUs typically fully vest in a two to five year period. These awards are typically given to select senior executivesaccounting guidance; these amounts reflect an adjustment for the purposeexclusion of providing additionaldividend equivalents.to retain the executive through the vesting date.·Payout of RSUs and RRSUs at each vesting date is typically contingent on the recipient remaining employed by IBM through that vesting date. See the 2017 Potential Payments Upon Termination Narrative for information on payout of unvested RSUs upon certain terminations.·All deferred shares, comprised of shares that were deferred by the participant (Deferred IBM Shares),stock option grants, if applicable, calculated in the 2017 Nonqualified Deferred Compensation Table may include certain previously-granted RRSUs. Executives have not been allowed to defer payment of RSUs.Option Awards (Column (f))There were no option awards granted to the named executive officers in the years shown in the 2017 Summary Compensation Table, except for Mrs. Rometty. On January 26, 2016, Mrs. Rometty was granted a one-time award of 1.5 million nonqualified stock options that vest three years from the date of grant, is exercisable in four equal tranches at premium prices of 105%, 110%, 115% and 125% of the average of the high and low prices of IBM common stock on the date of grant, and expires 10 years from the date of grant.Non-Equity Incentive Plan Compensation (Column (g))representinclude payments under IBM’s Annual Incentive Program (AIP).General Terms·All named executive officers participate in this program. The performance period is the fiscal year (January 1 through December 31)31, 2022).·See Section 1 Mr. Krishna’s target was 200% of the 2017 Compensation Discussion and Analysis for information on performance targets for AIP.Payout Range·Mrs. Rometty had a target of $5 million for 2017. Thehis base salary rate. All other named executive officers had targetsan annual target of 135% of their 2022 salary rate for 2017.rate. See column (d)(c) of the 20172022 Grants of Plan-Based Awards Table for the target payout.·Threshold payout ($0), column (d) for each named executive officer is $0 (seethe target payout, and column (c)(e) for the maximum payout.2017 Grants of Plan-Based Awards Table).·Maximum payout for each named executive officer is three timesRetention Plan. Assumptions can be found immediately after the target (see column (e) of2022 Pension Benefits Table. Although accruals under the 2017 Grants of Plan-Based Awards Table). BeginningRetention Plan stopped on December 31, 2007, changes in 2018, maximum payout opportunity for only the ChairmanRetention Plan Value can occur based on changes to participants’ ages and CEO is reduced to two times the target.Vestingactuarial assumptions. For 2020, 2021 and Payout·In addition to performance against corporate-wide and business unit goals, which determine the funding pool for the year, individual performance against commitments set at the beginning of the year determine payout amounts.·An executive generally must be employed by IBM at the end of the performance period in order to be eligible to receive an AIP payout. At the discretion of appropriate senior management, the Compensation Committee, or the Board, an executive may receive a prorated payout of AIP upon retirement.·AIP payouts earned during the performance period are paid on or before March 15 of the year following the end of such period.(Column (h))·For Mrs. Rometty, Dr. Kellyfor the eligible named executive officers was due to their age, changes in the discount rate, interest crediting rate, and mortality table. The change in Retention Plan Value for the eligible named executive officers resulted in negative amounts in 2022 for Mr. Kavanaugh ($169,948) and Mr. Kavanaugh, amountsRosamilia ($409,856) and 2021 for Mr.Kavanaugh ($17,604) and Mr. Rosamilia ($121,275).titledinclude the following for 2022: for Mr. Krishna: tax reimbursements of $36,286 and IBM contributions to defined contribution plans of $355,200; for Mr. Kavanaugh: tax reimbursements of $13,154 and IBM contributions to defined contribution plans of $198,066; for Mr. Cohn: IBM contributions to defined contribution plans of $163,104; for Mr. Rosamilia: tax reimbursements of $37,854, IBM contributions to defined contribution plans of $155,360; and for Ms. Browdy: IBM contributions to defined contribution plans of $131,508. See the 2022 Summary Compensation Table Narrative below for a description and information about these items.represent the annual change in Retention Plan Value from December 31, 2016 to December 31, 2017. Messrs. Schroeter and Clementi do not have a benefit under the Retention Plan.·See the 2017 Retention Plan Narrative for a description of the Retention Plan.(Column (h))· Amounts in the column titled Change in Pension Value represent the annual change in Pension Value from December 31, 2016 to December 31, 2017 for each eligible named executive officer.·See the 2017 Pension Benefits Narrative for a description of the applicable defined benefit pension plan. Mr. Clementi does not have a benefit under any IBM defined benefit pension plan.(Column (h))·IBM doesand All Other Compensation. pay above-market or preferential earnings on nonqualified deferred compensation.·See the 2017 Nonqualified Deferred Compensation Narrative for a description of the nonqualified deferred compensation plans in which the named executive officers participate.
(Column(Column (i))·· tax equalization payments related to international assignments, cost of family travel to and attendance at business-related events, business-related local lodging and incidental expenses, and business-related ground transportation expenses (see Ground Transportation below).·officer.·officer under IBM’s 401(k) Plus and Excess 401(k) Plus Plans.hired or rehired by IBM U.S. before January 1, 2005, including Mrs. Rometty, Dr. Kelly and Mr. Kavanaugh, are eligible tocan receive matching contributions, ranging from 2 to 6%, up to 6%a percentage of eligible compensation. Participants hired or rehired by IBM U.S.compensation (subject to Internal Revenue Code compensation limits), depending on or after January 1, 2005, including Messrs. Schroetera person’s date of hire and Clementi, who complete the plan’s service requirement, are generally eligible for up to 5% matching contributions. A participant’s hire/rehire date is measured by a participant’s most recent U.S. hire date. Mr. Schroeter rejoined IBM U.S. in 2011 after working for IBM Australia from April 1, 2005 to June 30, 2011. Mr. Clementi joined IBM U.S. in 2009 after working for IBM Italy since 1984.job role. In addition, for all eligible participants, IBM makes automatic contributions, ranging from 1% to 4%, equal to a certain percentage of eligible compensation (subject to Internal Revenue Code compensation limits), which generally depends on the participant’s pension plan eligibility on December 31, 2007. In 2017, the automatic contribution percentage was 4% for Mrs. Rometty; 2% for Dr. Kelly2022, Messrs. Krishna, Kavanaugh and Mr. Kavanaugh; and 1% for Messrs. Schroeter and Clementi.·Under IBM’s Excess 401(k) Plus Plan, IBM makes matching contributions equal to a percentage of the sum of (i) the amount the participant elects to defer under the Excess 401(k) Plus Plan, and (ii) the participant’s eligible compensation after reaching the Internal Revenue Code compensation limits. Participants hired or rehired by IBM U.S. before January 1, 2005, including Mrs. Rometty, Dr. Kelly and Mr. Kavanaugh,Rosamilia are eligible to receive matching contributions up to 6% of eligible compensation. Participants hired or rehired by IBM U.S. on or after January 1, 2005, including Messrs. Schroeterpay. Mr. Cohn and Clementi, who complete the plan’s service requirement,Ms. Browdy are eligible for up to 5% matching contributions. In addition,The automatic contribution percentage was 2% for all eligible participants,Messrs. Krishna, Kavanaugh, and Rosamilia; and 1% for Mr. Cohn and Ms. Browdy.contribution percentage generally depends on the participant’s pension plan eligibility on December 31, 2007, and in 2017, the automatic contribution percentage was 4%contributions for Mrs. Rometty; 2% for Dr. Kelly and Mr. Kavanaugh; and 1% for Messrs. Schroeter and Clementi.·For purposes of calculating the matching contribution and the automatic contribution under the 401(k) Plus Plan, the participant’s eligible compensation excludes the amount the participant elects to defer under the Excess 401(k) Plus Plan.·Plan for each named executive officer are the same percentages as described for the IBM 401(k) Plus Plan above.20172022 Nonqualified Deferred Compensation Narrative for additional details on the nonqualified deferred compensation plans.··· or rehired by IBM U.S. before January 1, 2004, including Mrs. Rometty, Dr. KellyMessrs. Krishna, Kavanaugh and Mr. Kavanaugh,Rosamilia, is two times salary plus annual incentive program target, with a maximum coverage amount of $2,000,000. Life insurance for executives hired or rehired by IBM U.S. on or after January 1, 2004, including Messrs. SchroeterMr. Cohn and Clementi,Ms. Browdy, is one times salary plus annual incentive program target, with a maximum coverage of $1,000,000.·2017.2017,2022, IBM offered financial planning services with coverage generally up to $15,000 annually for senior U.S. executives, including each named executive officer.··Mrs. Rometty’sMr. Krishna’s personal travel is included in column (i) of the 20172022 Summary Compensation Table. These amounts also include the aggregate incremental cost, if any, of travel by hertheir family members or other guests on both business and non-business occasions.·20172022 on Company aircraft by named executive officers other than Mrs. Rometty,Mr. Krishna, and the aggregate incremental cost, if any, of travel by the officer’s family or other guests when········the Chairman and CEOthem on business occasions.· other than the Chairman and CEO in a Company-leased car with an IBM driver or an authorized car service on these occasions.··The incremental cost foror an authorized car service for commutation and non-business eventsincremental cost is calculated by multiplying the variable rate by the applicable driving time. The variable rate includes a driver’s salary and overtime payments, plus a cost per mile calculation based on fuel and maintenance expense.·The incremental cost for·thehis family of the Chairman and CEO on certain non-business occasions, or when accompanying herthem on business occasions.··········· home office equipment, items relating to business events and administrative charges incurred by executives.
2017 SUMMARY COMPENSATION TABLE
Principal
Position
(a)
Year
(b)
Deferred
Compensation
Earnings(5)
($)
(h)
Incentive Plan
Compensation
($)
(g)
Retention
Plan Value(3)
($)
(h)
Pension
Value(4)
($)
(h)
Awards(1)
($)
(e)
Awards(2)
($)
(f)
Compensation(6)(7)
($)
(i)
($)
(c)
($)
(d)
($)
(j)Note: For assumptions used in determining the fair valuestock and option awards, see Note R (Stock-Based Compensation) to IBM’s 2017 Consolidated Financial Statements.(1)Amounts in this column reflect the total Performance Share Units (PSUs), Restricted Stock Units (RSUs), and Retention Restricted Stock Units (RRSUs). RRSUs were not awarded in 2016 or 2017.Amounts include the aggregate grant date fair values of PSUs at the Target number (described in the 2017Annual Meeting & Proxy Statement | Narrative), calculatedin accordance with accounting guidance; these amounts reflect an adjustment for the exclusionand Related Narrative 49dividend equivalents. At the Maximum number, these values forMrs. Rometty would be: 2017: $10,168,002; 2016: $12,501,699; 2015: $19,357,994; for Mr. Schroeter: 2017: $4,204,970; 2016: $4,699,880; 2015: $6,549,863; forDr. Kelly: 2017: $4,204,970; 2016: $5,169,993; 2015: $7,277,472; for Mr. Clementi: 2017: $4,204,970; 2016: $5,169,993; and for Mr. Kavanaugh: 2017: $3,058,222.Amounts also include the aggregate grant date fair values of RSUs and RRSUs granted to Mrs. Rometty, Mr. Schroeter, Dr. Kelly, Mr. Clementi and Mr. Kavanaugh, if applicable, calculated in accordance with accounting guidance; these amounts reflect an adjustment for the exclusion of dividend equivalents.(2)There were no option awards granted to any of the named executive officers in the years shown in the 2017 Summary CompensationPlan-Based Awards Table except for Mrs. Rometty. In 2016, Mrs. Rometty was granted a one-time award of 1.5 million nonqualified stock options that vest three years from the date of grant, are exercisable in four equal tranches at premium prices of 105%, 110%, 115%, and 125% of the average of the high and low prices of IBM common stock on the date of grant.(3)Assumptions can be found immediately after the 2017 Retention Plan Table. Although accruals under the Retention Plan stopped on December 31, 2007, changes in Retention Plan Value can occur based on changes to participants’ ages and actuarial assumptions. For 2015, 2016 and 2017, Change in Retention Plan Value for the eligible named executive officers was due to their age, changes in the discount rate, interest crediting rate, and mortality table. The change in Retention Plan Value for the eligible named executive officers resulted in negative amounts in 2016 for Dr. Kelly $(7,649), and negative amounts in 2015 for Mrs. Rometty $(18,082) and for Dr. Kelly $(584,946).(4)Assumptions can be found immediately after the 2017 Pension Benefits Table. Although accruals under the IBM Personal Pension Plan stopped on December 31, 2007, changes in Pension Value can occur based on changes to participants’ ages and actuarial assumptions. For 2015, 2016 and 2017, Change in Pension Value for the named executive officers was due to their age, changes in the discount rate, interest crediting rate, and mortality table. For 2015, the change in Pension Value for the named executive officers resulted in the following negative amount for Mrs. Rometty: $(118,735).(5)IBM does not provide above-market or preferential earnings on deferred compensation. See the 2017 Nonqualified Deferred Compensation Narrative for information about deferred compensation.(6)Amounts in this column include the following for 2017: Mrs. Rometty: tax reimbursements of $21,833 and IBM contributions to defined contribution plans of $655,000; for Mr. Schroeter: IBM contributions to defined contribution plans of $112,496; for Dr. Kelly: tax reimbursements of $10,620 and IBM contributions to defined contribution plans of $140,628; for Mr. Clementi: tax reimbursements of $25,407 and IBM contributions to defined contribution plans of $98,622; and for Mr. Kavanaugh: IBM contributions to defined contribution plans of $114,700.(7)Amounts in this column also include the following perquisites for 2017: for Mrs. Rometty: personal financial planning, personal travel on Company aircraft of $177,491, ground transportation, personal security, annual executive physical, family attendance at business-related events, and other personal expenses; for Mr. Schroeter: personal financial planning, personal security, annual executive physical, family attendance at business-related events, and other personal expenses; for Dr. Kelly: personal financial planning, personal travel on Company aircraft of $67,269, ground transportation, personal security, annual executive physical, family attendance at business-related events, and other personal expenses; for Mr. Clementi: personal financial planning, personal travel on Company aircraft of $33,087, ground transportation, annual executive physical, family attendance at business-related events, and other personal expenses. See the 2017 Summary Compensation Table Narrative for a description and information about the aggregate incremental cost calculations for perquisites.(8)Amounts in this column reflect the total of the following columns: Salary, Bonus, Stock Awards, Option Awards, Non-Equity Incentive Plan Compensation, Change in Retention Plan Value, Change in Pension Value, Nonqualified Deferred Compensation Earnings and All Other Compensation.(9)In January 2018, Mr. Schroeter became Senior VP, IBM Global Markets, Mr. Clementi became Senior VP, IBM Global Integrated Accounts, and Mr. Kavanaugh became Senior VP and CFO.(10) Mr. Clementi was not a named executive officer in IBM’s 2016 Proxy Statement; therefore, this table does not provide 2015 data for him. Mr. Kavanaugh was not a named executive officer in IBM’s 2016 or 2017 Proxy Statements; therefore, this table does not provide 2015 or 2016 data for him.
(a)
Type of
Award(1) Grant Date
(b) Compensation
Committee
Approval
Date Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards
Under Equity
Incentive Plan Awards(2) All Other
Stock
Awards:
Number of
shares
of Stock All Other
Option
Awards:
Number of
Securities
Underlying Exercise
or Base
Price of
Option Closing
Price
on the
NYSE on
the Date
of Grant
($/Sh) Grant Date
Fair Value
of Stock
and
Option Threshold
($)
(c) Target
($)
(d) Maximum
($)
(e) Threshold
(#)
(f) Target
(#)
(g) Maximum
(#)
(h) or Units
(#)
(i)(3) Options
(#)
(j)(3) Awards
($/Sh)
(k)(4) Awards
($)
(l)(5) AIP N/A 1/31/2022 0 3,000,000 6,000,000 PSU 2/21/2022 1/31/2022 15,491 61,963 105,337 $ 6,695,722 RSU 2/21/2022 1/31/2022 20,655 $ 2,231,979 SO 2/21/2022 1/31/2022 144,537 $ 124.51 $ 124.35 $ 2,033,636 J.J. Kavanaugh AIP N/A 1/31/2022 0 1,436,000 4,308,000 PSU 2/21/2022 1/31/2022 10,140 40,558 68,949 $ 4,382,697 RSU 2/21/2022 1/31/2022 13,520 $ 1,460,971 SO 2/21/2022 1/31/2022 94,606 $ 124.51 $ 124.35 $ 1,331,106 AIP N/A 1/31/2022 0 1,580,000 4,740,000 PSU 2/21/2022 1/31/2022 8,168 32,672 55,542 $ 3,530,536 RSU 2/21/2022 1/31/2022 10,891 $ 1,176,881 SO 2/21/2022 1/31/2022 76,211 $ 124.51 $ 124.35 $ 1,072,289 AIP N/A 1/31/2022 0 1,206,000 3,618,000 PSU 2/21/2022 1/31/2022 7,323 29,292 49,796 $ 3,165,294 RSU 2/21/2022 1/31/2022 9,764 $ 1,055,098 SO 2/21/2022 1/31/2022 68,327 $ 124.51 $ 124.35 $ 961,361 AIP N/A 1/31/2022 0 1,264,000 3,792,000 PSU 2/21/2022 1/31/2022 5,633 22,532 38,304 $ 2,434,808 RSU 2/21/2022 1/31/2022 7,511 $ 811,639 SO 2/21/2022 1/31/2022 52,559 $ 124.51 $ 124.35 $ 739,505
2017 GRANTS OF PLAN- BASED AWARDS TABLE(1)Type of Award:Plan.Plan (LTPP). See the 20172022 Summary Compensation Table Narrative for additional information on these types of awards.2020.June 8, 2018, June 8, 2019, June 8, 2020,February 21, 2023, February 21, 2024, February 21, 2025, and June 8, 2021,February 21, 2026, provided that in each case, the named executive officer is an employee of IBM as of those dates unless they meet certain requirements to be eligible for continued vesting (see 2017vesting. See 2022 Potential Payments Upon Termination Narrative for a description of these eligibility requirements).RSUSO awards calculated in accordance with accounting guidance. The values shown for the PSU awards are based on the Target number, as described in the 20172022 Summary Compensation Table Narrative.Table. The values shown for the PSUs and RSUs reflect an adjustment for the exclusion of dividend equivalents.
2017(Columns(Columns (b)–(f))···value.·value, unless they meet certain requirements to be eligible for continued vesting.Premium-priced options– Historically, the exercise price has been equal to 110% of the average of the high and low prices of IBM common stock on the NYSE on the date of grant and these options vested in four equal increments on the first four anniversaries of the grant date.– The one-time premium-priced award granted to Mrs. Rometty on January 26, 2016 is exercisable in four equal tranches at premium prices of 105%, 110%, 115% and 125% of the average of the high and low prices of IBM common stock on the NYSE on the date of grant and will vest three years from the date of grant and expires 10 years from the date of grant.(Columns(Columns (g)–(j))(Column(Column (g))andor RRSUs that were outstanding as of December 31, 2017.(Column(Column (h))andor RRSU awards disclosed in column (g), calculated by multiplying the number of units by the closing price of IBM common stock on the New York Stock Exchange on the last business day of the 20172022 fiscal year ($153.42)140.89).(Column(Column (i))2017.· and retention Performance Share Units·IBM’s PSU programIBM PSUs and RPSUs is based on cumulative three-year rolling targets. Therefore, measuring annual performance against these targets is not meaningful.·20172022 Compensation Discussion and Analysis, as well as the 20172022 Summary Compensation Table, Narrative, for a detailed description of the PSU program and RPSUs, including payout calculations.·2017 OUTSTANDING A Maximum number of PSUs earned is 170% of the Target number based on business objectives (inclusive of an additional 20 points based on the relative ROIC modifier for the relevant performance period). A Maximum number of RPSUs earned is 120% (inclusive of an additional 20 points based on the relative ROIC modifier for the relevant performance period).AWARD PAYOUT LEVELS Name Grant Date Threshold Target Maximum A. Krishna 12/17/2019 73,029 91,286 109,543 06/08/2021 15,980 63,918 108,661 02/21/2022 15,491 61,963 105,337 J.J. Kavanaugh 06/08/2021 9,588 38,351 65,197 02/21/2022 10,140 40,558 68,949 G. Cohn 01/04/2021 4,748 18,990 32,283 02/21/2022 8,168 32,672 55,542 T. Rosamilia 06/08/2021 7,554 30,216 51,367 02/21/2022 7,323 29,292 49,796 M.H. Browdy 06/08/2021 5,520 22,081 37,538 02/21/2022 5,633 22,532 38,304 (Column(Column (j))20172022 fiscal year ($153.42)140.89).2017 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END Option Awards Stock Awards Number of
Securities
Underlying
Unexercised
Options Number of
Securities
Underlying
Unexercised
Options
(#) Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned Option
Exercise Option Number
of Shares
or Units
of Stock
That Have Market Value
of Shares
or Units
of Stock
That Have Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units
or Other
Rights
That Have Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights
That Have Name (#) Options Price (2) Expiration Not Vested (3) Not Vested (4) Not Vested (5) Not Vested (4) (a) Exercisable Unexercisable (1) (#) ($) Date Type of Grant (#) ($) Type of Grant (#) ($) Grant Date (b) (c) (d) (e) (f) Award Date (g) (h) Award Date (i) (j) 0 144,537 N/A $ 124.51 02/20/2032 RRSU 12/11/18 33,328 $ 4,695,582 RPSU 12/17/19 91,286 $ 12,861,285 RSU 06/07/19 4,022 566,660 PSU 06/08/21 63,918 9,005,407 RSU 06/08/20 20,182 2,843,442 PSU 02/21/22 61,963 8,729,967 RSU 06/08/21 25,814 3,636,934 RSU 02/21/22 20,655 2,910,083 Total 0 144,537 104,001 $ 14,652,701 217,167 $ 30,596,659 94,606 N/A $ 124.51 02/20/2032 RSU 06/07/19 3,889 $ 547,921 PSU 06/08/21 38,351 $ 5,403,272 RSU 06/08/20 11,376 1,602,765 PSU 02/21/22 40,558 5,714,217 RSU 06/08/21 15,489 2,182,245 RSU 02/21/22 13,520 1,904,833 Total 0 94,606 44,274 $ 6,237,764 78,909 $ 11,117,489 76,211 N/A $ 124.51 02/20/2032 RRSU 12/28/20 23,151 $ 3,261,744 PSU 01/04/21 18,990 $ 2,675,501 RSU 01/04/21 15,339 2,161,112 PSU 02/21/22 32,672 4,603,158 RSU 02/21/22 10,891 1,534,433 Total 0 76,211 49,381 $ 6,957,289 51,662 $ 7,278,659 68,327 N/A $ 124.51 02/20/2032 RSU 06/07/19 3,889 $ 547,921 PSU 06/08/21 30,216 $ 4,257,132 RSU 06/08/20 8,807 1,240,818 PSU 02/21/22 29,292 4,126,950 RSU 06/08/21 12,204 1,719,422 RSU 02/21/22 9,764 1,375,650 Total 0 68,327 34,664 $ 4,883,811 59,508 $ 8,384,082 52,559 N/A $ 124.51 02/20/2032 RSU 06/07/19 2,884 $ 406,327 PSU 06/08/21 22,081 $ 3,110,992 RSU 06/08/20 6,460 910,149 PSU 02/21/22 22,532 3,174,534 RSU 06/08/21 8,918 1,256,457 RSU 02/21/22 7,511 1,058,225 Total 0 52,559 25,773 $ 3,631,158 44,613 $ 6,285,526 for Mrs. Rometty’s premium-priced optionsshown in this column are equal to 105%, 110%, 115% and 125% of the average high and low prices of IBM common stock on the NYSE onNew York Stock Exchange as of the date of grant.(2)grant date.20172022 Outstanding Equity Awards at Fiscal Year-End Table are unvested RSU and RRSU awards that have not yet vested.awards. See the 20172022 Compensation Discussion and Analysis and the 2022 Summary Compensation Table Narrative for additional information on these types of awards. Mr. Krishna’s and Mr. Cohn’s RRSU awards vest on the anniversary of the grant date in 2023 according to the vesting schedule in the table below, provided they are an employee of IBM on each vesting date. The Vesting Schedule for Unvested RSUs and RRSUs table below shows the vesting schedules for these outstanding awards. The remaining unvested portionIn 2019, 2020 and 2021, each named executive officer other than Mr. Cohn received RSU awards that vest 25% per year on the first through the fourth anniversaries of Mr. Schroeter’s and Mr. Clementi’s 2015 RRSU award will fully vestthe grant date (Mr. Cohn was hired at the end of 2020, so his RSU granted in January 2021 vests 25% per year on February 2, 2019, provided that in each case, they are employeesthe first through the fourth anniversaries of IBM as of that date. The remaining unvested portion of Dr. Kelly’s 2015 RRSU award vests 50% on December 30, 2018 and 50% on December 30, 2019, provided that in each case, he is an employee of IBM as of those dates. The remaining unvested portion of Mr. Kavanaugh’s 2013 RRSU award fully vested on February 1, 2018 and the remaining unvested portion of Mr. Kavanaugh’s 2014 RRSU award will fully vest on January 2, 2019, provided that he is an employee of IBM as of that date.grant date). In 2016 and 2017,2022 each named executive officer received RSU awards that vest 25% per year on the first through the fourth anniversaries of the grant date.(3)20172022 fiscal year ($153.42)140.89).(4)20172022 Outstanding Equity Awards at Fiscal Year-End Table are PSU and RPSU awards that have not yet vested. See the 20172022 Compensation Discussion and Analysis and the Summary Compensation Table Narrative for additional information on PSU and RPSU awards. The Vesting Schedule for Unvested PSUs and RPSUs table below shows the vesting schedules for these outstanding PSU and RPSU awards (reflecting Target payout),. PSUs and RPSUs for all of whichNamed Executive Officers are paid out in February following the end of the respective performance period.
VESTING SCHEDULE FOR UNVESTEDANDand RRSUsVESTING SCHEDULE FOR UNVESTED Vesting Schedule Name Type of Award Grant Date 2023 2024 2025 2026 RRSU 12/11/2018 33,328 RSU 06/07/2019 4,022 RSU 06/08/2020 10,091 10,091 RSU 06/08/2021 8,604 8,604 8,606 RSU 02/21/2022 5,163 5,163 5,163 5,166 RSU 06/07/2019 3,889 RSU 06/08/2020 5,688 5,688 RSU 06/08/2021 5,163 5,163 5,163 RSU 02/21/2022 3,380 3,380 3,380 3,380 RRSU 12/28/2020 23,151 RSU 01/04/2021 5,113 5,112 5,114 RSU 02/21/2022 2,722 2,722 2,722 2,725 RSU 06/07/2019 3,889 RSU 06/08/2020 4,403 4,404 RSU 06/08/2021 4,068 4,068 4,068 RSU 02/21/2022 2,441 2,441 2,441 2,441 RSU 06/07/2019 2,884 RSU 06/08/2020 3,229 3,231 RSU 06/08/2021 2,973 2,972 2,973 RSU 02/21/2022 1,877 1,877 1,877 1,880 Vesting Schedule Name Grant Date Dec-2018Dec-2019Dec-2024 V.M. RomettyA. Krishna 06/08/2016 59,621 12/17/2019 91,286 06/08/ 20172021 49,400 63,918 02/21/2022 61,963 M.J. SchroeterJ.J. Kavanaugh 06/08/ 20162021 22,414 38,351 06/08/2017 20,429 40,558 G. Cohn 01/04/2021 18,990 J.E. Kelly III 06/08/2016 24,656 02/21/2022 32,672 T. Rosamilia 06/08/ 20172021 20,429 30,216 02/21/2022 29,292 E. ClementiM.H. Browdy 06/08/ 20162021 24,656 22,081 06/08/2017 20,429 J.J. Kavanaugh 06/08/2016 15,690 06/08/201714,858 2017 OPTION EXERCISES AND STOCK VESTED TABLE Option Awards Name
(a) Number of
Shares
Acquired
on Exercise
(#)
(b) Value
Realized
on Exercise
($)
(c) Number of
Shares
Acquired
on Vesting
(#)
(d) Value
Realized
on Vesting
($)
(e) A. Krishna 0 $ 0 196,477 $ 27,919,807 J.J. Kavanaugh 0 0 45,165 6,372,901 G. Cohn 0 0 40,617 5,721,214 T. Rosamilia 0 0 36,725 5,182,916 M.H. Browdy 0 0 26,820 3,785,050 2017.2022. The PSU and RPSU award for the 2015–20172020-2022 performance period vested on December 31, 2017,2022, and paid out to each named executive officer on February 1, 2018;2023; the value of this PSU award was determined by multiplying the number of shares by the closing price of IBM common stock on the vesting date.date ($140.89). See the 2017Compensation Discussion and Analysis and the 2022 Summary Compensation Table Narrative for details on these types of rewards.341:271:1. This ratio is based on annual total compensation of $18,595,350$16,580,075 for the CEO (as reported in the Summary Compensation Table) and $54,491$61,242 for the median employee. The base salary for the median employee was $45,197. The median employee used for the pay ratio disclosure was determined as of October 1, 2021 using annual base pay for IBM employees as of October 1, 2017;on that date; all foreign currencies were converted to U.S. dollars. For purposesdetermining our median employee, approximately 17,000 employees* (which represents less than 5% of IBM’s total employees) were excluded either because they became IBM employees in connection with certain acquisitions who maintain separate terms of employment (some of which closed prior to 2017), or were employed by a limited number of subsidiaries that maintain separate terms of employment. The Company believes that this calculation is a reasonable estimate of the pay ratio.* Certain employees from Aperto, Blue Express Computer Engineering Technology Company, BNP Paribas Partners for Innovation, Bluewolf, Cloudigo, exc.io, EXA Corporation, GesNext, Ingenieria De Software Avanzado, Innovative Solutions for Finance, Information Technology Nostrum, Iru Ederra XXI, ISM Canada, IT Now, KTS, Promontory, Proxxi, SI Solutions, SoftINSA, SoftLayer, Truven, Value Transformation Services,Annual Meeting & Proxy Statement | Wedoit Sociedad Tecnologias De la Information.
Related Narrative 532017an additional form of retention compensation was created for certain IBM U.S. leaders. The plan, formally called the “IBM Supplemental Executive Retention Plan” (Retention Plan), began in 1995 during a particularly trying time in IBM’s history when it faced challenges that many thought put its very existence at risk. Some key leaders were recruited away from IBM duringat this time. In this environment, IBMtime and a retention plan, formally called the “IBM Supplemental Executive Retention Plan” (Retention Plan), was created this new plan to help retain for full careers the caliber of senior leaders needed to turn IBM around, preserve its long-term viability and position it for growth in the future.Because its original purpose had been met, thewill not be replaced by any other plan. Futurefuture accruals under the Retention Plan stopped on December 31, 2007, therefore, a2007. A participant’s Retention Plan benefit does not consider pay earned or service performed after such date.Paymentsdate, and payments accrue based on age and service and are typically payable only after age 60, as a way to encourage senior leaders to continue working for IBM past the age when many others at IBM choose to retire.Even though the Retention Plan provides for the payment of specified benefits after retirement, given the nature of this program as a retention vehicle, thesection. As a consequence,section, and the amounts reflected below are separately presented in the 20172022 Retention Plan Table and are not included in the 20172022 Pension Benefits Table.20172022 Retention Plan Table shows each eligible named executive officer’s number of years of credited service, present value of accumulated benefit and payments during the last fiscal year under the Retention Plan. The Retention Plan is a U.S. Plan and eligibility is based on U.S. employment. Mrs. Rometty, Dr. KellyMr. Kavanaugh and Mr. KavanaughRosamilia are eligible for a benefit under the Retention Plan. Mr. Schroeter isKrishna, Mr. Cohn and Ms. Browdy are not eligible for a Retention Plan benefit because he did not meet all of the eligibility criteria. Specifically, he did not continuously remain on the U.S. payroll, as he worked for IBM Australia from April 1, 2005 through June 30, 2011. Mr. Clementi began U.S. employment afterunder the Retention Plan was closed.···· Dr. Kelly and Mr. Kavanaugh are determined under the Retention Plan formula in effect prior to the July 1, 1999 amendment (1995 Retention Plan).···the participantMr. Kavanaugh terminates employment on or after age 60, the 1995his Retention Plan benefit expressed as an annual single life annuity is equal to:
·![[MISSING IMAGE: tb_20retpla-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/tb_20retpla-pn.jpg)
·
·Mrs. RomettyMr. Rosamilia are determined under the Retention Plan formula in effect on and after the July 1, 1999 amendment (1999 Retention Plan).·– – ·
·![[MISSING IMAGE: tb_partic-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/tb_partic-pn.jpg)
········
Earliest Unreduced Retirement Age Name Annual Retention Plan Benefit at
Earliest Unreduced Retirement Age J.J. Kavanaugh $ 11,785 T. Rosamilia 84,832 ·20172022 Retention Plan Table below is the value as of December 31, 20172022 of the annual Retention Plan benefit that was earned as of December 31, 2007.·2017, Mrs. Rometty and Dr. Kelly had2022, Mr. Rosamilia reached the earliest unreduced retirement age. Because Mr. Kavanaugh did not attain age 60 by December 31, 2017,2022, the earliest unreduced retirement age is his age on the first day of the month that coincides with or next follows the attainment of age 60.
·Certain assumptions were used to determine the present value of the annual accumulated Retention Plan benefit that is payable beginning at the earliest unreduced retirement age. Those assumptions are described immediately following the 20172022 Pension Benefits Table.Table.2017 RETENTION PLAN TABLE Number of
Years
Credited Present
Value of
Accumulated Payments
During
Last Service (1) Benefit (2) Fiscal Year Name
(a) Plan Name
(b) (#)
(c) ($)
(d) ($)
(e) J.J. Kavanaugh Retention Plan 12 $ 139,638 $ 0 T. Rosamilia Retention Plan 25 1,174,429 0
1015 additional years of service with IBM after that date.Assumptions For assumptions used to determine present value for each eligible named executive officer, as of December 31, 2017:·Measurement date: December 31, 2017·Interest rate for present value: 3.4%·To determine Personal Pension Account benefit:–Interest crediting rate: 2.3% for 2018 and after–Interest rate to convert Personal Pension Account balance to single life annuity: 1.98% for years 1–5, 3.5867% for years 6–20, and 4.3267% for year 21 and after–Mortality table to convert Personal Pension Account balance to single life annuity is 2018 Personal Pension Account Optional Combined Unisex Table·Mortality (pre-commencement): None·Mortality (post-commencement):–Base Table: Modified RP-2014 White Collar sex-distinct annuitant tables with adjustment to 2011 by backing out MP-2014 improvement and further adjusting the mortality rates at each age (averaging approximately 1.06)–Improvement Scale: A modified Scale MP-2017 projection table with projected improvements starting in 2011 for healthy mortality. The modified table is based on the RPEC 2014 v2017 model, with the same 20 year diagonal convergence period and 10 year horizontal convergence period and underlying weighting percentages for the age/period and year-of-birth cohort periods. The long-term improvement rates are 0.75% up to age 85, linearly decreasing to 0.0% at age 115·Withdrawal rates: None·Retirement rates: None prior to Assumed Retirement Age·Normal Retirement Age: Age 60 for Retention Plan, Age 65 for IBM Personal Pension Plan·Assumed Retirement Age: Later of Age 60 for Retention Plan, Age 65 for IBM Personal Pension Plan, or current age·Accumulated benefit is calculated based on credited service and final average pay as of December 31, 2007·Offset for benefit payable under the IBM Personal Pension Plan is determined based on the single life annuity that would be payable under the plan beginning on the first day of the month following the assumed termination of employment·Present value iscalculate the present value, ofsee the single life annuity payable at assumed retirement age beginning on the first day of the month following the assumed termination of employment. The six-month delay under the Retention Plan for “specified employees” as required under Section 409A of the Internal Revenue Code was disregarded for this purpose·All results shown are estimates only; actual benefits will be based on precise credited service and compensation history, which will be determined at termination of employmentAssumptions“Assumptions used to determine present value as of December 31, 2016:·The column titled Change in2022 for each eligible named executive officer” immediately following the 2022 Pension Benefits table.Value in the 2017 Summary Compensation Table quantifies the change in the present value of the Retention Plan benefit from December 31, 2016 to December 31, 2017·To determine the present value of the Retention Plan benefit as of December 31, 2016, the same assumptions that are described above to determine present value as of December 31, 2017 were used, except (1) a 3.8% interest rate and the Modified MP-2016 improvement scale, and (2) to determine the Personal Pension Account benefit, the following were used:–Interest crediting rate: 1.6% for 2017 and after–Interest rate to convert Personal Pension Account balance to annual single life annuity: 1.4767% for years 1–5, 3.3533% for years 6–20, and 4.29% for year 21 and after·Mortality table for Personal Pension Account balance conversion: 2017 Personal Pension Account Optional Combined Unisex Table201720172022 Pension Benefits Tables show the number of years of credited service, present value of accumulated benefit and payments during the last fiscal year for each eligible named executive officer under the IBM U.S. defined benefit pension plan. Mrs. Rometty, Mr. Schroeter, Dr. Kelly,Messrs. Krishna, Kavanaugh and Mr. KavanaughRosamilia have pension benefits under the U.S. defined benefit pension plan, andplan. Neither Mr. Clementi does notCohn nor Ms. Browdy have a benefit under any IBM defined benefit pension plan.···· (Qualified
(Qualified Plan)··Material Terms and Conditions: Pension Credit Formula under the Qualified Plan·for Mrs. Rometty are determined under the Pension Credit Formula. Mrs. Rometty satisfied the eligibility requirements for the Pension Credit Formula in 1999.· The Pension Credit Formula is a pension equity formula that provides annual benefits based on a participant’s total point value divided by an annuity conversion factor.· The total point value is equal to total base points times final average pay plus total excess points times final average pay in excess of Social Security Covered Compensation.· For purposes of the Pension Credit Formula, final average pay is equal to average compensation over the final five years of employment or the highest consecutive five calendar years of compensation, whichever is greater, prior to 2008.· The annuity conversion factor is pre-determined according to the IBM Personal Pension Plan document.· Prior to 2008, participants earned points as follows: 0.16 base points each year until a 4.25 base point cap was reached, and 0.03 excess points each year until a 0.75 excess point cap was reached.· The total point value is converted to an annuity at the benefit commencement date based on pre-determined annuity conversion factors.· A participant may receive his or her benefit immediately following termination of employment, or may defer benefit payments until any time between early retirement age and normal retirement age.· Early retirement age is defined as:– Any age with 30 years of service;– Age 55 with 15 years of service; or– Age 62 with five years of service.· As of December 31, 2017, Mrs. Rometty had attained early retirement age.· Under the Pension Credit Formula, a participant who terminates employment and whose pension benefit commences before his or her normal retirement age will receive smaller monthly annuity payments than if his or her benefit commences at normal retirement age.· Instead of receiving his or her entire benefiteither under the Pension Credit Formula as an annuity, a participant may elect to receive a portion(for those who met certain eligibility criteria in 1999) or the Personal Pension Account described below. The named executive officers’ benefits under the Qualified Plan are determined under the Personal Pension Account formula and therefore this disclosure will only address the material terms of such formula under the benefit as an unsubsidized lump sum. The lump sum amount is based on the benefit the participant earned before January 1, 2000.· Mr. Schroeter’s, Dr. Kelly’sMr. Kavanaugh’sRosamilia’s benefit under the Qualified Plan is determined under the Personal Pension Account formula, which is a cash balance formula.··– – stock optionsStock Options and other equity awards); and– ·– stock options,— Stock Options, RSUs, RRSUs, and PSUs –— was excluded from eligible compensation.·20172022 was $215,000$245,000 payable as an annual single life annuity beginning at normal retirement age).·· A participant’s·· In 2005, Mr. Schroeter left IBM U.S. and became an executive of IBM Australia, and therefore, Mr. Schroeter’s years of credited service for benefit calculations in the 2017 Pension Benefits Table are based only on his service with IBM U.S. Because accruals under the Qualified Plan stopped on December 31, 2007, service performed after such date is not counted for any named executive officer.······Pension Credit Formula· A portion of the benefit that is available to Mrs. Rometty under the Qualified Plan may be paid as a lump sum. The portion is determined on the benefit that was earned before January 1, 2000.· The benefit available to Mrs. Rometty under the Nonqualified Plan may only be paid as an annuity.·· Under the terms of the Nonqualified Plan, Mr. Schroeter’s entire Nonqualified Plan benefit must be paid as a mandatory lump sum. Dr. KellyMr. KavanaughRosamilia have elected to receive their Nonqualified Plan benefit in a lump sum immediately following separation from service.·
the 20182023 if they had a separation from service from IBM on December 31, 20172022 was equal to:
Plan
Plan
Lump Sum· Name Maximum Lump Sum Qualified
Plan Nonqualified
Plan Total Available
Lump Sum A. Krishna $ 233,107 $ 83,746 $ 316,853 J.J. Kavanaugh 179,360 77,609 256,969 T. Rosamilia 362,784 148,155 510,939 ·Mr. Schroeter, Dr. KellyMessrs. Krishna, Kavanaugh, and Mr. KavanaughRosamilia will receive a lump sum payment for their Nonqualified Plan benefits, no amount is represented for them in the Nonqualified Plan column below:
Plan
Plan Name Annual Pension Benefit at Normal
Retirement Age Qualified
Plan Nonqualified
Plan Total Benefit A. Krishna $ 23,347 N/A $ 23,347 J.J. Kavanaugh 21,043 N/A 21,043 T. Rosamilia 34,552 N/A 34,552 ·20172022 of the annual pension benefit that was earned as of December 31, 2007.·or her normal retirement age.··20172022 Pension Benefits Table.2017 PENSION BENEFITS 20172022 Retention Plan Narrative, the 20172022 Pension Benefits Table does not include amounts reflected in the 20172022 Retention Plan Table.
(a)
(b)
Credited Service (1)
(#)
(c)
Accumulated Benefit(2)
($)
(d)
Last Fiscal Year
($)
(e) Number of Years Present Value of Payments During Credited Service (1) Accumulated Benefit (2) Last Fiscal Year Name
(a) Plan Name
(b) (#)
(c) ($)
(d) ($)
(e) A. Krishna Qualified Plan 17 $227,829 $ 0 Nonqualified Plan 80,671 0 Total Benefit $308,500 $ 0 J.J. Kavanaugh Qualified Plan 12 $169,254 $ 0 Nonqualified Plan 72,392 0 Total Benefit $241,646 $ 0 T. Rosamilia Qualified Plan 25 $377,922 $ 0 Nonqualified Plan 144,977 0 Total Benefit $522,899 $ 0
ten15 additional years of service with IBM after that date.
20172022 for each eligible named executive officer:·2017·20223.4%·5.3%– 2.3%4.9% for 20182023 and 4.40% for 2024 and after– 1.98%4.4567% for years 1–1 – 5, 3.5867%5.2367% for years 6–6 – 20, and 4.3267%5.1467% for year 21 and after– 2018 Personal2023 Pension AccountProtection Act Optional Combined Unisex Table··– RP-2014PRI-2012 White Collar sex-distinct annuitant tables for retirees adjusted by a factor of 0.762 with adjustmentimprovement from 2012 to 2011 by backing out MP-2014 improvement and further adjusting the mortality rates at each age (averaging approximately 1.06)– December 31, 2022.MP-2017MP-2021 projection table starting in 2011 for healthy mortality. The modified table is based on the RPEC 2014 v 2017 model, with the same 20 year diagonal convergence period and 10 year horizontal convergence period and underlying weighting percentages for the age/period and year-of-birth cohort periods. The long-term improvement rates are 0.75% up to age 85, linearly decreasing to 0.0% at age 115·table.····· Benefit payable as a single life annuity inPension Credit Formula and lump sum in the case of thequalified Personal Pension Account Formulaformula, the benefit is payable as a 90% lump sum/10% annuity for Messrs. Krishna and Kavanaugh, and a 50% lump· The Pension Credit Formula conversion factor is based on age at December 31, 2007 and commencement at age 65·2016:·2021:20172022 Summary Compensation Table quantifies the change in the present value of the pension benefit from December 31, 20162021 to December 31, 2017·20222016,2021, the same assumptions that are described above to determine the present value as of December 31, 20172022 were used, except (1) a (1) 3.8%2.6% interest rate, Modified RP-2014 White Collar sex-distinct annuitant table with adjustments to 2006 by backing out MP-2014 improvement and further adjusting the mortality rates by a factor of 1.016, and Modified MP-2016MP-2021 improvement scale, and (2) to determine the Personal Pension Account benefit, the following were used:– 1.6%1.1% for 20172022 and after– 1.4767%0.7433% for years 1–1 — 5, 3.3533%2.5967% for years 6-20,6 — 20, and 4.29%3.1133% for year 21 and after– 2017 Personal2022 Pension AccountProtection Act Optional Combined Unisex Table2017·401 (k)401(k) Plus Plan if the compensation limits did not apply.·20172022 Nonqualified Deferred Compensation Table shows the employee deferrals (executive contributions), IBM match (registrant contributions), automatic contributions (registrant contributions), discretionary awards (registrant contributions) and investment gain or loss (aggregate earnings) for each named executive officer during 2017.·2022.·
·The Excess 401(k) Plus Plan balance is not paid to, and cannot be accessed by, the participants until after a separation from service from IBM.· The Excess 401(k) Plus Plan allows the clawback ofandor solicitation of IBM clients or employees).······stockholders.····401 (k)401(k) Plus Plan; and (ii) the participant’s eligible compensation after reaching the Internal Revenue Code compensation limits. The maximum matching contribution percentage for a participant is the same as the participant’s percentage under the IBM 401(k) Plus Plan. Generally, participants hired or rehired by IBM U.S. before January 1, 2005, are eligible for up to 6% matching contributions; generally, participants hired or rehired by IBM U.S. on or after January 1, 2005 and who complete one year of service, are eligible for up to 5% matching contributions. Mrs. Rometty, Dr. Kelly,Mr. Krishna, Mr. Kavanaugh, and Mr. KavanaughRosamilia are eligible for a 6% matching contributioncontribution. Mr. Cohn and Messrs. Schroeter and ClementiMs. Browdy are eligible for a 5% matching contribution. Effective January 1, 2016, the matching contributions equal the sum of: (i) a participant’s match rate times the amount the participant elects to defer under the Excess 401(k) Plus Plan; and (ii) the participant’s match rate times the eligible compensation after reaching the Internal Revenue Code compensation limits.··401 (k)401(k) Plus Plan; and (ii) the participant’s eligible compensation after reaching the Internal Revenue Code compensation limits. The automatic contribution percentage for a participant is the participant’s automaticis 4% for Mrs. Rometty;is; 2% for Dr. KellyMessrs. Krishna, Kavanaugh and Mr. Kavanaugh;Rosamilia; and 1% for each of Messrs. SchroeterMr. Cohn and Clementi.· MatchingMs. Browdy.– – – – effective July 1, 2016, if a participant dies prior to December 15 in a given year, then the participant will be eligible to receive such IBM contributions as soon as practicable following separation from service.·According toUnder the terms of the IBM 401(k) Plus Plan, Dr. KellyMessrs. Krishna, Kavanaugh and Mr. KavanaughRosamilia were eligible to receive transition credits.···20172022 annual rates of return indicated for each):– Target Retirement 2010 Fund (8.52%)– Target Retirement 2015 Fund (10.29%)–(12.31%(-15.13%)–(14.46%(-15.90%)–(16.63%(-16.64%)–(17.88%(-17.38%)–(18.14%(-18.17%)–(18.15%(-18.60%)–(18.13%(-18.72%)–(18.17%(-18.70%)–(7.28%(-14.63%)–(10.88%(-15.73%)–(13.53%(-17.08%)–(18.13%(-18.60%)–(3.00%(2.31%)–(3.05%(-11.77%)–(3.52%(-13.28%)–(10.99%(-11.47%)–(21.17%(-19.46%)–(28.28%(-15.75%)–(4.96%(-24.53%)– Global Real Estate Index Fund (9.09%)–(18.93%(-27.63%)– Long-Term Corporate Bond Fund (12.30%)– Large Company Index Fund (21.82%)– Large-Cap Value Index Fund (13.68%)– Large-Cap Growth Index Fund (30.18%)– Small/Mid-Cap Stock Index Fund (18.16%)– Small-Cap Value Index Fund (7.96%)– Small-Cap Growth Index Fund (22.39%)– European Stock Index Fund (26.29%)– Pacific Stock Index Fund (25.08%)– Emerging Markets Stock Index Fund (31.44%)–(-4.02%(10.61%)*
·····20172022 Nonqualified Deferred Compensation Table, are calculated as the change in the price of IBM’s common stock between December 31, 20162021 and December 31, 20172022 for all Deferred IBM Shares that were contributed prior to 2017.·Shares.··– – – – – ·2017, Mrs. Rometty2022, Messrs. Krishna, Kavanaugh and Dr. KellyRosamilia had satisfied the age and service criteria. Although Mr. Clementi also satisfied the age and service criteria, he does not have a pre-2005 account balance under the Excess 401(k) Plus Plan.·
·If the participant has satisfied the age, service, and account balance criteria at termination and has made a valid advance election, the amount of the participant’s Basic Account that was deferred prior to January 1, 2005 is paid as elected by the participant from among the following choices:·2017,2022, 50% of this limit was $135,000)$152,500), the amounts deferred on or after January 1, 2005 are distributed in a lump sum on the date installments would have otherwise begun.···2017,2022, the named executive officers had the following distribution elections on file:– Mrs. Rometty –amounts– amounts.Schroeter –Rosamilia — lump sum in February of the year following separation for all amounts– Dr. Kelly –amounts. in February of the year following separation for pre-2005 amounts, and 10 annual installments for post-2004 amounts– Mr. Clementi – 10 annual installments for all amounts– Mr. Kavanaugh – 2 annual installments for pre-2005 amounts, and lump sum in the February of the year following separation for post-2004 amounts.··IBM Italy Pension FundGeneral Description· Mr. Clementi was an employeeIBM Italy prior to his U.S. employment, which commenced January 1, 2009. While an employee of IBM Italy and an Italian citizen, Mr. Clementi is eligible for a pension under the social security system as required by law, and sponsored by the Italian government. IBM made legally required contributions to the social security system (INPS) on behalf of Mr. Clementi through December 31, 2008.· In addition to contributions to INPS, IBM Italy offers a supplementary plan, “Fondo Pensione Dirigenti IBM” (the “Supplementary Plan”) to its executive population, which provides additional pension benefits that exceed those provided by the social security system. The Supplementary Plan is a separate qualified legal entity under Italian law and is a defined contribution plan.· Generally, all executives employed by IBM Italy are eligible to participate in the Supplementary Plan. Participation is voluntary, and an executive must elect to participate in the Supplementary Plan.Eligible for Deferral into the Supplementary Plan· Eligible executives can choose to participate in the Supplementary Plan in two ways: (i) by irrevocably transferring severance pay legally required to be set aside; or (ii) making contributions that are based on the participant’s pay (ranges from 2.5% for pay up to €46,123 to 7.3% for pay over €87,633).· Participants may also elect to make further voluntary monthly contributions to the Supplementary Plan.Employer Contributions· For all participants, IBM Italy makes contributions to the Supplementary Plan on a monthly basis equal to a set amount that varies based on salary (2.5% to 5.48% of salary); provided that the employer contribution does not exceed 5.5% of the entire gross pay and that it is not less than the amount established under the applicable collective agreement (€4,800).Earnings Measures· Participants choose to invest their account in one of three investment alternatives: the Insurance Fund, the Bond Securities Fund or the Share Fund. The default alternative is the Insurance Fund, which guarantees a minimum percentage return on capital depending on operating results (currently 2.0% annually calculated on the paid, consolidated capital as of January 1, 2013).· Participants may change their investment election for new contributions at any time, and may change their allocations among the investment alternatives once each year.62Narrative · The Bond Securities Fund and the Share Fund do not provide any guaranteed return.· The 2017 annual rates of return for the three investment options are as follows:– Insurance Fund (2.74%)– Bond Securities Fund (1.26%)– Share Fund (7.75%)Payouts, Withdrawals and Other Distributions· Participants are eligible (but are not required) to take a distribution after reaching pensionable age as set forth under law and have participated in the Supplementary Plan for at least five years.· Participants may receive their benefit as an annuity or as a combination of an annuity and partial lump sum payment — which lump sum payment shall not exceed 50%. Due to his hire date, Mr. Clementi may choose to take his entire benefit in a lump sum payment. Distribution elections are made at the time of retirement.· Any annuities paid from the Supplementary Plan are calculated in accordance with the Supplementary Plan regulations for converting plan accounts to annuities.· If the participant dies before accessing the benefits, the individual’s heirs or designated beneficiaries shall receive his account.· A participant can request an advance of his account under the following circumstances: (i) at any time, up to 75%, to cover health care costs in the event of a serious illness affecting the participant or his spouse or dependents; (ii) up to 75% for the purchase of his, or his children’s, primary residence or for maintenance to the residence, once a participant has participated for at least eight years; and (iii) up to a maximum of 30% for other purposes, once a participant has participated for at least eight years.2017 NONQUALIFIED DEFERRED COMPENSATION TABLE
Contributions
in Last FY(1)
Contributions
in Last FY(2)
Earnings in
Last FY(3)
Withdrawal/
Distributions
Balance at
Last FYE(4) Executive
Contributions Registrant
Contributions Aggregate
Earnings in Aggregate
Withdrawal/ Aggregate
Balance at in Last FY (1) in Last FY (2) Last FY (3) Distributions Last FYE (4) Name
(a) Plan ($)
(b) ($)
(c) ($)
(d) ($)
(e) ($)
(f) A. Krishna Basic Account $ 248,100 Match $ 248,100 $ (242,875) $ 0 $ 6,512,707 Automatic 82,700 Deferred IBM Shares 0 0 0 0 0 Total $ 248,100 $ 330,800 $ (242,875) $ 0 $ 6,512,707 J.J. Kavanaugh Basic Account $ 260,000 Match $ 130,362 $ (1,113,187) $ 0 $ 6,226,839 Automatic 43,454 Deferred IBM Shares 0 0 1,077 0 20,992 Total $ 260,000 $ 173,816 $ (1,112,110) $ 0 $ 6,247,831 G. Cohn Basic Account $ 920,750 Match $ 120,670 $ (43,741) $ 0 $ 1,022,293 Automatic 24,134 Deferred IBM Shares 0 0 0 0 0 Total $ 920,750 $ 144,804 $ (43,741) $ 0 $ 1,022,293 T. Rosamilia Basic Account $ 98,220 Match $ 98,220 $ 370,561 $ 0 $ 4,895,928 Automatic 32,740 Deferred IBM Shares 0 0 0 0 0 Total $ 98,220 $ 130,960 $ 370,561 $ 0 $ 4,895,928 M.H. Browdy Basic Account $ 94,340 Match $ 94,340 $ 90,154 $ 0 $ 2,092,459 Automatic 18,868 Deferred IBM Shares 0 0 0 0 0 Total $ 94,340 $ 113,208 $ 90,154 $ 0 $ 2,092,459 20172022 Summary Compensation Table. These amounts are: $79,800 for Mrs. Rometty; $36,210$71,700 for Mr. Schroeter; $33,630 for Dr. Kelly; $24,225Krishna; $260,000 for Mr. Clementi; and $129,800Kavanaugh; $920,750 for Mr. Kavanaugh.20172022 Summary Compensation Table. The amounts reported as IBM contributions to defined contribution plans in footnote 69 to the 20172022 Summary Compensation Table are larger because the amounts reported in that footnote also include IBM’s contributions to the IBM 401(k) Plus Plan.20172022 Summary Compensation Table because IBM does not pay above-market or preferential earnings on deferred compensation.(5)Amounts disclosed asDecember 31, 2017 were €42,157 and €1,581,396, respectively, and the exchange rate from euros to U.S. dollars was 1.2005.
Annual Meeting & Proxy Statement | 2022 Nonqualified Deferred Compensation Narrative2017 However, Mr. Clementi will be eligible for a payment upon termination pursuant to his IBM U.S. offer letter. This payment represents a one-time replacement payment to compensate Mr. Clementi for the retirement benefits that he would have continued to earn as an employee of IBM Italy.In order to become eligible for a payment under his offer letter, Mr. Clementi had to complete five years of service following January 1, 2009. After completing such service Mr. Clementi’s payment is equal to $500,000, plus, for each year that Mr. Clementi works beyond January 1, 2014, the amount payable is increased by 10% for a maximum period of five years (through January 1, 2019). payment shall be made in a lump sum no later than the end of the year after Mr. Clementi separates from service with IBM.The 20172022 Potential Payments Upon Termination Table that follows this narrative reports such payments and benefits for each named executive officer assuming termination on the last business day of the fiscal year end.andor solicitation of IBM clients or employees).20172022 Potential Payments Upon Termination Narrative and the 20172022 Potential Payments Upon Termination Table do not reflect payments that would be provided to each named executive officer under the IBM 401(k) Plus Plan or the IBM Individual Separation Allowance Plan following termination of employment on the last business day of the fiscal year end because these plans are generally available to all U.S. regular employees similarly situated in age, years of service and date of hire and do not discriminate in favor of executive officers.20172022 Potential Payments Upon Termination Table. Previously, these amounts were available under one plan, the IBM Personal Pension Plan, which was generally available to all U.S. regular employees similarly situated in years of service and dates of hire and did not discriminate in favor of executive officers. For amounts payable under the Qualified and Nonqualified Plans, see the 20172022 Pension Benefits Table.20172022 Potential Payments Upon Termination Table also does not quantify the value of retiree medical and life insurance benefits, if any, that would be provided to each named executive officer following such termination of employment because these benefits are generally available to all U.S. regular employees similarly situated in age, years of service and date of hire and do not discriminate in favor of executive officers; however, the named executive officers’ eligibility for such benefits is described below. The 20172022 Potential Payments Upon Termination Table does not contain a total column because the Retention Plan payment is paid as an annuity, not a lump sum. Therefore, a total column would not provide any meaningful disclosure.···34 of the 20172022 Compensation Discussion and Analysis.·20172022 Potential Payments Upon Termination Table below, it is assumed that the AIP payment made to each named executive officer following termination of employment on the last business day of the fiscal year end would have been the same as the actual payment made in March 2018.·– – – – ·– stock options,Stock Options, RSUs, RRSUs, PSUs and PSUsRPSUs are cancelled upon termination; and– stock optionsStock Options may be exercised only for 90 days following termination.·– stock optionsStock Options continue to be exercisable for the remainder of their ten-year term if approved by the Board, Compensation Committee or other appropriate management;term; and– ·stock options,Stock Options, RSU awards and RRSU awards would vest immediately, and outstanding PSU and RPSU awards would remain outstanding and continue to vest under their original vesting schedules.·stock options, RSU awardsStock Options, RSUs and RRSU awardsRRSUs would continue to vest under their original vesting schedules, and outstanding PSU awardsPSUs and· Beginning with PSU and RSU awards granted in 2009, in– met:·met for our named executive officers:···– except shebut instead must have reachedreach age 60 with 15 years of service, and the payout must be approved by the Board, in its discretion.– and only ifbased on the performance goals are met.final program score. Payouts of RSU awards after termination, as described above, will be made in accordance with the original vesting schedule.· Unvested Stock Options will continue to vest and vested Stock Options (including those that vest after termination of employment) will be exercisable for the remainder of the original contractual term of the Stock Option.20172022 Potential Payments Upon Termination Table assumes the following:– 20152020 PSU awards calculated using the actual performance achieved for the 2015–20172020-2022 performance period and the 20172022 fiscal year-end closing price of $153.42$140.89 for IBM common stock; and– 20162021 and 20172022 PSU awards were not included because there is no guarantee of payment on these awards as they are subject to meeting threshold performance criteria.– 20162019, 2020 and 2021 RSU awards, if the required retirement criteria is met, at the fiscal year-end closing price of $153.42$140.89 for IBM common stock because the one-year service requirement from grant has been completed; and– 20172022 RSU and Option awards are not included because the required service of at least one year since the award date of grant has not been completed.·payment.release, exercise or payment (or within 36 months for RRSU awards). LTPP awards for executive officers also contain a covenant that the recipient will not solicit IBM clients for a period of one year or employees for a period of two years following termination of employment.··20172022 Retention Plan Narrative.···20172022 Potential Payments Upon Termination Table reflects the annual amount payable as a single life annuity.·– – 2018.·2023.·20172022 Nonqualified Deferred Compensation Narrative, payment of the named executive officers’ Excess 401(k) Plus Plan accounts (Basic Accounts and any Deferred IBM Shares) is triggered by resignation, retirement or involuntary termination.
· Under the terms of the LTPP, Deferred IBM Shares are subject to rescission if the named executive officer participates in activity that is detrimental to IBM within 12 months following the release date.·With respect to IBM matching and automatic contributions made to a participant’s account after March 31, 2010, if a participant engages in activity that is detrimental to IBM, the Excess 401(k) Plus Plan allows the clawback of such IBM contributions made during the 12-month period prior to the detrimental activity through the date of termination.·20172022 Potential Payments Upon Termination Table indicates the estimated amount and the time and form of payment, determined by either the executive’s distribution election in effect, if any, or the plan’s default distribution provision.·– – ·– – IBM Italy Pension Fund· As described in the 2017 Nonqualified Deferred Compensation Narrative, payment to Mr. Clementi of his benefits under the Supplementary Plan is triggered by resignation, retirement or involuntary termination.· Estimated payment reflects a lump sum of the aggregate account balance as of the last business day of the fiscal year end, without assumptions for any investment gains or losses between such date and distribution.··– – – · Mrs. RomettyDr. KellyRosamilia would have been eligible for this benefit following a separation from service on the last business day of the fiscal year end.· Mr. Kavanaugh would not have been eligible for this benefit following a separation from service on the last business day of the fiscal year end because he had not met the eligibility requirement noted above.··– ···– · Mr. Clementi
·Mr. SchroeterCohn would not have been eligible for this benefit following a separation from service on the last business day of the fiscal year end because he had not met the eligibility requirement noted above.·2017 POTENTIAL PAYMENTS UPON TERMINATION
Scenario
Program(2)
($)
Options(3)
($)
Awards(4)
($)
Plan (5)
($)
Account
($)
Shares
($)
Fund
($)
Payment
($) LTPP
Excess 401(k)(6) Annual Incentive Stock Stock Retention Basic Deferred IBM Termination Program (2) Options (3) Awards (4) Plan (5) Account Shares Name Scenario ($) ($) ($) ($) ($) ($) A. Krishna $ 3,480,000 $0 $ 26,394,896 N/A $ 6,512,707(7) $ 0(7) For Cause 0 0 0 N/A 6,181,907(7) 0(7) J.J. Kavanaugh 1,665,760 0 8,202,193 11,592 5,819,898(8) 20,992(8) For Cause 0 0 0 0 5,646,082(8) 20,992(8) G. Cohn 1,832,800 0 1,147,690 N/A 102,229(9) 0 For Cause 0 0 0 N/A 87,749(9) 0 T. Rosamilia 1,218,060 0 6,503,764 84,832 4,895,928(10) 0 For Cause 0 0 0 0 4,764,968(10) 0 M.H. Browdy 1,466,240 0 4,769,690 N/A 2,092,459(11) 0 For Cause 0 0 0 N/A 1,979,251(11) 0 2018.optionsStock Options at $153.42$140.89 (the fiscal year-end closing price of IBM common stock on the NYSE)stock).20152020 according to its policy, for the three-year performance period ending December 31, 2017.2022. PSU awards are adjusted for performance and released in shares of IBM common stock (with any fractional shares rounded to the nearest whole share) in February in the year following the end of the performance period. While outstanding 20162019, 2020 and 2021 RSU awards are included if required retirement criteria is met, 20172022 RSU awards are not included because the required service of at least one year since the award date of grant has not been completed.Approximate annual payable for 10 years starting in February 2018. Deferred IBM Shares are paid as shares of IBM common stock.(8)Payable in a lump sum in February 2018.(9)Sum of the amount of Basic Account deferred prior to January 1, 2005 is payable in a lump sum in February 2018 ($4,239,557) and the approximate annual2023. The amount of the Basic Account deferred on or after January 1, 2005 is payable for 10 years starting in February 2018 ($823,292).a lump sum immediately following separation. Deferred IBM Sharesshares are paid as shares of IBM common stock.(10)Approximate annual amount payable for 10 years starting For Cause, the termination payment from the Basic Account is reduced to reflect forfeiture of Match and Automatic Contribution made during the last 12 months under plan terms. See column (c) in February 2018.(11)Amount represents a lump sum payment of the aggregate balance as of December 31, 2017. Under the terms of the plan, Mr. Clementi does not have to make a distribution election until retirement. He can choose to receive his benefit as an annuity, a lump sum, or a combination of an annuity and lump sum. See the 20172022 Nonqualified Deferred Compensation Narrative for more information.(12)See the 2017 Potential Payments Upon Termination Narrative for more information.(13)Table.20182023 ($294,565)406,941) and the amount of the Basic Account deferred on or after January 1, 2005 payable in a lump sum in February 20182023 ($2,915,353)5,412,957). Deferred shares are paid as shares of IBM common stock. For Cause, the termination payment from the Basic Account is reduced to reflect forfeiture of Match and Automatic Contribution made during the last 12 months under plan terms; the forfeiture causes a decrease in the payout of amounts that were deferred on or after January 1, 2005. See column (c) in 2022 Nonqualified Deferred Compensation Table.
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Executive
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to the PEO Summary
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NEOs Value of Initial Fixed $100
Investment Based on: Total
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Income
(in $M) IBM
Revenue
(in $M) (b) (1) (c) (1)( 7) (b) (2) (c) (2)( 7) (d) (3) (e) (3)( 7) (f) (g) (4) (h) (5) (i) (6) 2022 $ 16,580,075 $ 23,935,007 N/A N/A $ 8,318,193 $ 10,496,901 $ 128 $ 115 $ 1,639 $ 60,530 2021 17,550,959 23,798,901 N/A N/A 8,706,301 9,116,435 115 179 5,743 57,350 2020 17,009,682 13,997,217 $ 21,062,593 $ 15,778,831 12,913,982 10,795,062 99 132 5,590 55,179 Revenue Operating Cash Flow Diversity Operating EPS Free Cash Flow ROIC statement on Auditing Standards No. 1301, Communications with Audit Committees, as adopted byapplicable requirements of the Public Company Accounting Oversight Board (PCAOB), as may be modified or supplemented.at: at http://www.ibm.com/investor/governance/audit-committee-charter.html.2017,2022, for filing with the Securities and Exchange Commission.M.L. Eskew
D.N. Farr
M.J. Howard
F.W. McNabb IIID.N. Farr | J.W. Owens | P.R. Voser (Dollars in millions) 2022 2021 Audit Fees $ 48.9 $ 53.7 Audit Related Fees 21.3 48.8 Tax Fees 0.8 1.2 All Other Fees 0.6 0.7 Total $ 71.6 $ 104.4 2017,2022, these services included approximately $19$16 million for independent assessments for service organization control reports. For 2016,2021, these services included approximately $18$28 million for independent assessments for service organization control reports.2018.2023. With the endorsement of the Board of Directors, the Audit Committee believes that this selection is in the best interests of IBM and its stockholders and, therefore, recommends to stockholders that they ratify that appointment. PwC served in this capacity for the year 2017.·····reports;·reports (PCAOB);·············
69Over the last several years, IBM has prioritized investments in our high growth strategic imperatives, while ensuring we deliver value to our investors. In 2017, of $79.1B and pre-tax income of $11.4B. IBM returned$10.4 billion cash from operations. Revenue growth at constant currency(1) accelerated, growing at 11.6% year-to-year, including approximately 4 points from incremental sales to revenue growth in the 4th quarter of 2017, with revenue fromKyndryl. The Company’s portfolio mix reinforces our strategic imperatives reaching a critical mass at 46% of overall IBM revenue, or $36.5B. IBM is now established as the leading enterprise provider of cloud platforms and cognitive solutions, with security at the core. We achieved this performance while continuing to return cash to shareholders — in 2017, we raised our dividend for the 22nd consecutive year, and nearly 75% of free cash flow has been returned to shareholders over the past three years. Our compensation strategy supports IBM’s high value business model.As discussed in the Compensation Discussionmodel, with 73% of revenue coming from our higher growth businesses of Software and Analysis, IBM’s executive compensation programs are designed to:· Ensure that the interestsConsulting. Overall, about 50% of IBM’s leaders are closely alignedrevenue is recurring, with those65% of our investors by varying compensation based on both long-termthat recurring revenue coming from Software. The Company also returned $5.9 billion to stockholders through dividends, and annual businessended the year with $8.8 billion in cash and marketable securities (up over $1 billion year-to-year).and delivering a large portion ofreflect the total pay opportunity insignificant actions we have taken to strategically position IBM stock;· Balance rewards for both short-term results and the long-term strategic decisions needed to ensure sustained business performance over time;· Attract and retain the highly qualified senior leaders needed to drive a global enterprise to succeed in today’s highly competitive marketplace;· Motivate our leaders to deliver a high degree of business performance without encouraging excessive risk taking; and· Differentiate rewards to reflect individual and team performance.addition to the Company’s normal, extensive outreach to Stockholders, IBM enhanced its engagement practices in 2017. We2022, we once again engaged in a robust program to gather feedback from investors following the 2017 annual advisory vote on executive compensation (Say on Pay). IBM directors, including itsinvestor feedback. IBM’s CEO and Chairman, and independent PresidingLead Director, and the Chair of the Executive Compensation and Management Resources Committee, participated in this engagement along with members of IBM’s senior management in a significant portion of this engagement.management. The Company metoffered to engage with investors representing more than 55%57% of the shares that voted on Say on Pay at the 20172022 Annual Meeting.Overall, Through our stockholders continue to be supportive ofdiscussions with investors and our formal Say on Pay vote results, investors reaffirmed their support for the Company’s compensation programpolicies and practices,programs, which focus on long-term financial performance that drives stockholder value. Therefore,Company has continued its standard compensation program and structures. Nonetheless, the Committee and the Board reviewed and considered allcontext of investor feedback, and made the following key updates designed to further strengthen IBM’s pay for performance design and enhance our transparency:· Increased transparency into the rigor of our goal setting process by disclosing performance attainment relative to goals, for both the Annual Incentive Program and Performance Share Unit Program· Beginning in 2018, added a relative metric as a modifier to the Performance Share Unit payout formula, in the form of Relative Return on Invested Capital vs. IT peers and the broader S&P 500· Reduced the maximum incentive payment opportunity for the Chairman and CEO to two times target (from three times target) to align more closely with common market practice· Added clarity around stock ownership requirements by describing them as a multiple of base salary, which does not reduce the shares requireddecisions continued to be held, and remains at the high end of our peer groupIBM’s named executive officers are identified in the 2017 Summary Compensation Table, and pages 27–67 describe the compensation of these officers. 69% of target pay for the Chairman and CEO, and 63% of target pay for the other Named Executive Officers, is at risk and subject to rigorous performance targets. The rigor of these targets is evident in the payouts. For 2017, Mrs. Rometty earned 81% of her total target compensation. Over the longer term, the past 3 years, Mrs. Rometty has earned an average of 63% of her total target compensation.CEO TOTAL ACTUAL VS. TARGET COMPENSATIONValues in Millions ($)
Pay decisions were made in the context ofbased on our financial performance relative to our goals, while taking into consideration the transformationsignificant reshaping of IBM’s portfolio as a hybrid cloud and AI Company.the steps taken to strengthen IBM’s position for the future.theseour compensation policies and practicesprograms are aligned with the interests of our stockholders and designed to reward for performance.
A VOTEFOR THIS PROPOSAL. 4.Walden Asset Management, One Beacon Street, Boston, MA 02108,Kenneth Steiner, 14 Stoner Ave., Great Neck, NY 11021, the beneficial owner of over $2,000 in market valueat least 100 shares of IBM shares, together with multiple co-filers, whose names, addresses and beneficial holdings are available on request,stock, intends to submit the following proposal at the meeting:![[MISSING IMAGE: ic_shareholder-bw.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_shareholder-bw.jpg)
Independent Board Chairman — Proposal 5 ![[MISSING IMAGE: ic_voteagainstbox-bw.gif]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/ic_voteagainstbox-bw.gif)
The Board’s flexibility to determine the appropriate Board leadership structure is essential. One of the most important tasks undertaken by a board is to select the leadership of the board and the company. In order to execute this critical function most effectively and in the best interests of the stockholders, a board must maintain the flexibility to determine the appropriate leadership in light of the circumstances at a given time. Because one size does not fit all situations, your Board has altered its structure at various times in response to the particular circumstances at that time. For example, your Board split the Chairman and CEO roles during the last two CEO transitions to ensure a seamless and successful leadership transition. The transitions have served as a model for public company succession planning. Limiting the candidate pool as suggested by the proponent will inhibit the ability of the Board to exercise its fiduciary obligation to identify the best leadership for IBM. The Company’s Lead Director role is robust and ensures effective independent oversight at all times. IBM’s current leadership structure is optimal for the Company at this time. The Board strongly believes that this current structure strikes the right balance of allowing our Chairman to promote a clear, unified vision for the Company’s strategy and to provide the leadership critical for effectively and efficiently implementing the actions needed to ensure strong performance over the long term, while ensuring robust, independent oversight by the Board and Lead Director. IBM’s strong, independent Board and commitment to good corporate governance adds further support to the Board leadership structure. Continued enhancement of the Lead Director position is just one example of IBM’s ongoing commitment to strong corporate governance. Independent directors comprise over 90% of the Board and 100% of the Audit, Directors and Corporate Governance, and Executive Compensation and Management Resources Committees. After each regularly scheduled Board meeting, both the full Board and the independent directors of the Board meet in executive session, with the independent directors’ session chaired by the Lead Director. In contrast to the exemplary performance and quality of the IBM Board over the years, the proponent provides no evidence demonstrating that the proposal would result in enhanced oversight, let alone increased value for IBM stockholders. Additionally, this proposal has been rejected by a majority of stockholder votes each time it has been voted on by IBM stockholders, most recently last year. In light of this lack of empirical support, IBM’s strong and independent Board, the Lead Director’s robust responsibilities and, most importantly, the support of our structure by our stockholders, this stockholder proposal is both inappropriate and unnecessary. We believe that stockholders benefit when the Board can select the best candidates to run IBM at a given time. THEREFORE, THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL. we believe in full disclosure of our company’s direct and indirectIBM’s lobbying activities and expenditures to assess whether ourIBM’s lobbying is consistent with IBM’s expressed goals and instockholder interests.best interests of shareholders.IBM spent approximately $24.4 million from 2012–2016 on federal lobbying (Senate reports). This total does not include expenditures to influence legislation in states and provides limited information regarding lobbying conducted by third parties.Resolved, the shareholdersstockholders of IBM request the preparation of a report, updated annually, and disclosing:the decision makingmanagement’s decision-making process and the Board’s oversight by management and Board for lobbying expenditures.anya trade association or other organization of which IBM is a member.or other relevant oversight committees and posted on IBM’s website.We commend for its thoughtful policy regarding political spending and the electoral process prohibiting political contributions with company funds. We believe IBM should also establish high standards for evaluating and disclosing company participation and spending in the legislative process through lobbying as well.IBMspent $61 million from 2010-2021 on federal lobbying. This does not include state lobbying expenditures, where IBM lobbied in at least 20 states in 2021 and spent over $810,000 on lobbying in California from 2010-2021. IBM also lobbies abroad, spending between €1,750,000 — 1,999,999 on lobbying in Europe for 2021.memberships in, orthird-party payments to trade associations and social welfare organizations, or the portions of these paymentsamounts used for lobbying. In contrast, competitors Microsoft, Xeroxlobbying to stockholders. Intel publicly disclose their indirect lobbying expenditures through their trade associations.IBM sits on the board of the US Chamber of Commerce, which together have spent over $2.1 billion on federal lobbying since 1998 spent approximately $1.4 billion dollars on lobbying.1998. And while IBM does not disclosebelong to the controversial American Legislative Exchange Council, which is attacking “woke capitalism,”payments nor the portion used for lobbying.statement onlack of disclosure presents reputational risk when its lobbying contradicts company public positions. IBM believes in addressing climate change, policy states that “IBM recognizes climate change is a serious concern that warrants meaningful action on a global basis to stabilize the atmospheric concentration of greenhouse gases (GHGs).” In contrast, the Chamber has publicly attacked the EPA and sued to stop climate change solutions.IBM is also a member ofyet the Business Roundtable an organization with approximately 200 CEOs as members. The BRT is leading an attacklobbied against shareholder rights to file resolutions. Yetthe Inflation Reduction Actjustifiably proud of its record of engaging shareholders in constructive conversation.IBM’s paymentscommitted to diversity and inclusion, yet the BRT & Chamber helplobbied against protecting voting rights.such attacks.This resolution received 26.54% vote in 2017. Wehealth care, education and safety net programs.public disclosurelobbying disclosure.
at-its-annual-meeting/.
YOUR BOARD This proposal does not properly consider IBM’s well-known disclosures, policies and practices in this area, or the consistent independent third-party recognition of IBM as a leader in lobbying and political spending disclosure. Accordingly, the Board recommends against this Proposal since it is unnecessary and therefore not in the best interests of the Company and its stockholders. Independent Third Parties Consistently Recognize IBM as a Leader in Lobbying and Political Spending Disclosure IBM consistently receives high ratings from independent analysts of corporate practices on lobbying and political spending, including the Center for Political Accountability and Transparency International UK. In fact, the Center for Political Accountability’s 2022 Report on Corporate Political Disclosure and Accountability gave IBM a score of 98.6 out of 100, naming IBM as one of only 20 companies that fully prohibit the use of corporate assets to influence elections and as one of only 39 companies that prohibit both trade associations and non-profits from using Company contributions for election-related purposes. IBM Already Provides the Disclosure Requested by This Proposal This proposal requests additional disclosure of IBM’s policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications. It also requests disclosure of IBM’s lobbying activities and expenditures, including payments made by IBM for lobbying activities. IBM already provides the disclosure requested on the Company’s public policy website (https://admin.blogs.pre.ibm.event.ibm.com/policy/philosophy-governance/). Further, on IBM’s public policy website the Company provides direct links to where it regularly files periodic reports with the Secretary of the U.S. Senate and the Clerk of the U.S. House of Representatives detailing its U.S. federal lobbying activities and expenditures (including expenditures for “indirect lobbying” via trade associations, as required by law), as well as with the European Union Transparency Register detailing its lobbying activities and expenditures with European Union institutions. Further, IBM files reports with state and municipal governments, where required. Finally, this proposal requests a description of management’s decision-making process and the Board’s oversight of lobbying activities and expenditures. The Company provides this information on IBM’s public policy website. IBM has established clear oversight over such activities and expenditures through numerous written corporate policies, instructions, and guidelines, all of which are available on IBM’s public policy website. To be clear, IBM’s public policy advocacy spans a range of issues relevant to our business, clients, stockholders, employees, communities and other stakeholders. We engage leaders worldwide to promote ideas that can help spur growth and innovation with new technologies, or address societal changes, such as building a skilled and diverse workforce. IBM has always been committed to meaningful management, oversight, and accurate reporting with respect to our public policy engagement, including with respect to trade associations, and we consistently seek to provide our stockholders with relevant data regarding our public policy engagement. IBM Does Not Make Political Contributions of Any Kind We have a long-standing policy not to make contributions of any kind (money, employee time, goods or services), directly or indirectly, to political parties or candidates, including through intermediary organizations, such as political action committees, campaign funds, or trade or industry associations. IBM’s Lobbying Activities Support Growth and Innovation in the Digital Economy and Comply with All Applicable Laws All IBM lobbying activities, including by third parties on behalf of IBM, require the prior approval of the IBM Office of Government and Regulatory Affairs — a globally integrated function providing public policy and government relations expertise in support of IBM’s business operations worldwide — and must comply with applicable law and IBM’s Business Conduct Guidelines. IBM also complies fully with U.S. state and local lobbying disclosure laws, which vary by jurisdiction, but which do, in most cases, require lobbyists to register and disclose their lobbying activities. IBM Prohibits Trade Associations from Using IBM Funds to Engage in Political Expenditures IBM joins trade and industry associations that add value to IBM, its stockholders and employees. Although IBM works to make our voice heard, there may be occasions where our views on an issue differ from those of a particular association. On these occasions, IBM regularly shares its dissenting views within its trade associations and, when helpful to the policy debate, in public fora. We perform comprehensive due diligence on all of our trade associations to confirm they are reputable and have no history of malfeasance. Company policy prohibits them from using any IBM funds to engage in political expenditures, and we implement robust procedures to ensure they comply. lobbying activities and expenditures. IBM already discloses lobbying activities and expenditures, including expenditures made through trade associations, as required by law. Furthermore, IBM has established clear oversight over such activities and expenditures through numerous written corporate policies, instructions and guidelines. This proposal does not appear to properly consider IBM’s well-known policies and practices in this area, and the Board recommends against this proposal.IBM’s policy on Lobbying is set forth in the IBM Business Conduct Guidelines under the section entitled “Lobbying,” and is published by the Company on its website at:https://www.ibm.com/investor/att/pdf/BCG_English_Accessible_2018.pdfSpecifically, the IBM Business Conduct Guidelines provide that all lobbying activities, including lobbying activities by third parties on behalfAnnual Meeting & Proxy Statement | The Board and Management Exercise Strong Oversight of Public Policy Efforts As part of the Board’s oversight function, the Company’s management periodically reports to its Board about IBM’s policies and practices in connection with governmental relations, public policy and related expenditures. IBM’s senior management, under the leadership of IBM Government and Regulatory Affairs, closely monitors and coordinates all public policy advocacy efforts, as well as lobbying activities. Conclusion For the reasons described above, the Board believes the adoption of this proposal is unnecessary and therefore not in the best interests of the Company and its stockholders. THEREFORE, THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL. IBM and grassroots lobbying, require the prior approval of IBM’s Government and Regulatory Affairs office — a globally integrated function providing public policy and government relations expertise in support of IBM’s business operations worldwide. All IBM employees are required to comply with these guidelines. The IBM Government and Regulatory Affairs office works to advocate the public policy interests of IBM and its stockholders and employees with governments around the world.The Company provides disclosure on its website about its key public policy positions as well as its policies and practices with regard to public policy matters, including trade and industry associations and lobbying activities and expenditures. Seehttp://www.ibm.com/investor/governance/public-policy-matters.html and https://www.ibm.com/blogs/policyFurther, IBM’s U.S. federal lobbying reports disclose in extensive detail all issues lobbied and total U.S. federal lobbying expenditures made by IBM. Contrary to the proposal’s supporting statement, IBM’s total reported U.S. federal lobbying expenditures do, in fact, include expenditures for “indirect lobbying” via trade associations, as required by law. These reports are available for public review athttp://disclosures.house.gov/ld/ldsearch.aspxIBM also complies fully with U.S. state and local lobbying disclosure laws, which vary by jurisdiction, but which do, in most cases, require lobbyists to register and disclose their lobbying activities. Finally, IBM periodically reports to its Board of Directors about IBM’s policies and practices in connection with governmental relations, public policy and related expenditures.Given all of the foregoing, the Board views the proposal as unnecessary. THEREFORE, THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL.5.Annual Meeting & Proxy Statement | Shareholder Ability to Call a Special Shareholder MeetingJohn Chevedden, 2215 NelsonNational Center for Public Policy Research, 2005 Massachusetts Ave., No. 205, Redondo Beach, CA 90278, NW, Washington, DC 20036, the owner of at least 2535 shares of IBM stock, intends to submit the following proposal at the meeting:Resolved, Shareowners ask our boardtakedoing business in China align with its ESG commitments, including its Human Rights Statement of Principles. The Board of Directors should report on how it addresses the steps necessary (unilaterallyrisks presented by any misaligned activities and expenditures and the Company’s plans, if possible)any, to amend our bylaws and each appropriate governing document to give holders in the aggregate of 10% of our outstanding common stock the power to call a special shareowner meeting. In other words this proposal asks for adoption of the most shareholder-friendly version of the shareholder right to call a special meeting as permitted by Delaware law. This proposal does not impact our board’s current power to call a special meeting.This proposal topic won more than 70%-support at Edwards Lifesciences and SunEdison in 2013. A shareholder right to call a special meeting and to act by written consent and are 2 complimentary ways (written consent completely lacking at IBM) to bring an important matter to the attention of both management and shareholders outside the annual meeting cyclemitigate these risks, such as detailing its plans to shift these activities and expenditures to less repressive and hostile regimes.electioncompany’s goals of directors. More than 100 Fortune 500 companies provide for shareholders to call special meetingsreducing pollution and to actreaching net-zero greenhouse gas emissions by written consent.This proposal is of particular importance to IBM shareholders because IBM shareholders completely lack the ability to act by written consent and do not have the full right to call a special meeting that is available under Delaware law. And this is at a time when IBM stock is slumping.If shareholders had a more complete right to call a special meeting2030, as called for in this proposal shareholders would have a greater ability to engage our Board to improve the qualifications of our directors since a special meeting can be called in regard to the election of directors.Sadly IBM had a rooster of directors with no skin in the game. In 2017 it was reported that 8 of 13 IBM directors owned no IBM stock: Alex Gorsky, Andrew Liveris, Hutham Olayan, Joan Spero, Michael Eskew, Peter Voser, Shirley Jackson and Walter McNerney. If our stock slumps further these 8 directors can just smile and collect their $400,000 for perhaps 400 hours of work.Kenneth Chenault and Sidney Taurel had 19 or 16 years long-tenure. Long-tenure can impair the independence of a director no matter how well qualified. Michael Eskew and Shirley Jackson were potentially distracted directors with work on 4 boards. And then Michael Eskew was given Lead Director duties. The 4 directors in this paragraph received our highest negative votes in 2017.Any claim that a shareholder right to call a special meeting can be costly – may be largely moot. When shareholders have a good reason to call a special meeting – our board should be able to take positive responding action to make a special meeting unnecessary.Please vote to improve shareholder oversight of our company:Shareholder Ability to Call a Special Shareholder Meeting – Proposal 5
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.The Board believes that the adoption of this proposal is unnecessary because of its existing special meeting by-law provision. The current provision, which allows stockholders owning at least 25% of IBM’s shares to call a special meeting, can be found in Article II, Section 3 of IBM’s by-laws athttps://www.ibm.com/investor/governance/by-laws.html.The current 25% threshold is consistent with market practice and already accurately reflects the preference of IBM’s stockholders. At IBM’s 2010 and 2017 Annual Meetings, the same proponent presented this same proposal seeking to lower the 25% threshold to 10%. On both occasions, a majority of the votes cast voted against lowering the threshold, clearly demonstrating the stockholders’ support for the 25% threshold.Lowering the threshold to 10% would allow special interest groups with small minority ownership interests to potentially cause disruption and substantial costs to be incurred by the other 90% of stockholders. Further, a lower threshold is not necessary in light of IBM’s history of strong governanceas policies and practices that it says prioritize qualities such as ethics and accountability.2 The ESG report also highlights the company’s commitment to human rights and its Human Rights Statement of Principles.3lead independent Presiding Directormilitary-civil fusion strategy10 and existing procedures giving stockholders the abilityenvironmental and human rights abuses, to communicate with the Board.Therefore, the Board believesensure that the proponent’s proposal is counterproductiveIBM’s actions as a company live up to IBM’s already well-respected corporate governance practices. Additionally, this same proposal has already been reviewed and rejected by a majorityits words.the votes cast at two prior annual meetings. As IBM has an existing by-law permitting stockholders to call special meetings, and this same proposal to lower the threshold failed to receive majority support each time it has been presented, the Board believes that this proposal is unnecessary. THEREFORE, THE IBM BOARDAnnual Meeting & Proxy Statement | Stockholder Proposals 79 The Board believes adoption of this proposal is unnecessary and would not provide additional useful information to the Company’s stockholders. IBM adheres to the law across all of the countries where we do business, including government controls on the export and use of certain technologies. Further, IBM complies with all laws related to human rights and forced labor, including the US Uyghur Forced Labor Prevention Act and similar rules proposed by the European Commission. Globally, IBM practices the highest level of social, environmental and ethical responsibility in our global supply chains and we expect the same level of due diligence from our suppliers. The company was a founding member of the Responsible Business Alliance (RBA), a nonprofit industry group that helps its members continuously develop and executive the highest level of ethical standards in global supply chains. IBM requires our first-tier suppliers of hardware, software, and services to adhere to the RBA Code of Conduct, which contains provisions on labor, health and safety, environmental requirements, ethics, and management systems. We apply the same requirement across IBM’s own operations. And our suppliers must establish goals, disclose results, cascade IBM’s requirements to their next-tier suppliers, and more. In conclusion, we see no conflict between IBM’s business activities in China, which accounts for only a small fraction of IBM’s total global revenue, and our commitments to corporate responsibility. Conclusion For the reasons described above, the Board believes the adoption of this proposal is unnecessary and not in the best interests of the Company and its stockholders. THEREFORE, THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL. to Have an Independent Board ChairmanKenneth Steiner, 14 Stoner Avenue, 2M, Great Neck, NY 11021,Jay Stanley Weisfeld Trust, P.O. Box 158, Rochester, VT 05767, the owner of at least 500150 shares of IBM stock, intends to submit the following proposal at the meeting:Shareholders request our
to prevent harassment and discriminationadoptthe Company associated with its use of concealment clauses in the context of harassment, discrimination and other unlawful acts”.2 Concealment clauses are defined as policy,employment or post-employment agreements, such as arbitration or non-disclosure agreements, that IBM asks employees or contractors to sign which would limit their ability to discuss unlawful acts in the workplace, including harassment and amend our governing documentsdiscrimination.necessary,harassment or discrimination.require henceforth thatuse concealment clauses “in settlements of lawsuits, or as part of voluntarily agreed exit agreements,”4 shareholders are unable to assess the Chairbreadth of discrimination and related risks within the Company. This practice is not used by Alphabet5, Apple6, Microsoft7, or Salesforce8, among others.whenever possible, to becommission an independent memberreview of the Board. The Board would haveeffectiveness and outcomes of the discretionCompany’s efforts to phase in this policy forprevent harassment and discrimination against its protected classes of employees, and issue a public report summarizing the next CEO transition, implemented so it does not violate any existing agreement.Iffindings.determinesmay wish to consider including in the report disclosures such as:a Chairman who was independent when selected is no longer independent, the Board shall select a new Chairman who satisfies the requirementsinclude exit or other agreements where concealment clauses that restrict discussions of harassment or discrimination are present,policy withinnumber of claims which may be made public, should existing non-disclosure or arbitration agreements be made null by changing legislation.amountcost and omit any information that is proprietary, privileged, or violative of time. Compliance with this policy is waived if no independent director is available and willing to serve as Chairman. This proposal requests that all the necessary steps be taken to accomplish the above.Caterpillar is an examplecontractual obligations.a company recently changing course and naming an independent board chairman. Caterpillar had strongly opposed a shareholder proposal for an independent board chairman as recently as its June 2016 annual meeting. Wells Fargo also changed course and named an independent board chairman in October 2016.It was reported that 53% of the StandardAnnual Meeting & Poors 1,500 firms separate these 2 positions (2015 report). This proposal topic won 50%-plus support at 5 major U.S. companies in 2013 including 73%-support at NetflixAn independent board chairman would have more time to cure weaknesses in our board members after 2018. David Farr and Joan Spero were tainted by a bankruptcy at another company where they served. Kenneth Chenault had 19-years long tenure and received our highest negative votes – as much as 5-times as many negative votes as other IBM directors. Sidney Taurel had 16-years tenure. Long-tenure can impair the independence of a director no mater how qualified. Independence is all-important for a director.In response to this proposal top management could name one step it took to advance shareholder oversight of our company in 2017.
Proxy Statement | Stockholder Proposals 81The fact that our Lead Director cannot call a special shareholder meeting may be a red flag that our Board does not believe in a strong lead director to counter-balance the powerful dual role of our current CEO.Please vote to enhance oversight of our CEO:Independent Board Chairman — Proposal 6
The Board has considered this proposal and determined that it is unnecessary and would not provide additional useful information to the Company’s stockholders. IBM Has Already Issued a Report Responsive to the Concerns of This Proposal Proponent asserts that “shareholders are unable to assess the breadth of discrimination and related risks within the Company” because IBM uses “concealment clauses.” The same proponent submitted Stockholder Proposal 6 at IBM’s 2022 Annual Meeting of Stockholders requesting a report assessing the potential risks to IBM from the use of concealment clauses in the context of harassment, discrimination and other unlawful acts. That proposal passed and consistent with the Company’s history, IBM committed to publishing a responsive report. IBM has since published a robust public report describing that: (1) IBM has clear policies, procedures and practices to protect and support IBMers; (2) IBM does not require concealment clauses and IBMers are free to discuss the terms and conditions of their employment; and (3) IBM has strong Board oversight of risk related to harassment, discrimination, and other unlawful acts. As such, the limited use of such provisions does not pose an inappropriate risk to the Company and any risk is balanced with IBM’s culture of transparency and inclusiveness, as well as its deep commitment to fostering a healthy, safe and productive work environment for all IBMers. Conclusion For the reasons described above, the Board has determined that the proposal is unnecessary and would not provide additional useful information to the Company’s stockholders. Therefore, the Board believes adoption of this proposal is not in the best interests of the Company and its stockholders. THEREFORE, THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL. Onethe most important tasks undertaken by a board is to select the leadership of the board and the company. In order to do that job most effectively and in the best interests of the stockholders, a board should have the flexibility to combine or split the Chairman and CEO roles. Because one size does not fit all situations, your Board has altered its structure at various times depending upon the particular circumstances. For example, your Board split the Chairman and CEO roles during previous CEO transitions. These seamless and successful leadership transitions have served as a model for public company succession planning. We already have independent board leadership in the form of our Presiding Director, IBM’s lead independent director. We do not believe that requiring these roles always be split, or that the Chairman always be a non-management director, is in the best interest of IBM, and we recommend a vote against the proposal.There is little doubt that selection of IBM’s Chairman and CEO is one of the most important functions for the Board. The responsibility is taken seriously by your Board, a diverse group of leaders in their fields, including current and former Chairmen and CEOs of Fortune 500 companies and leaders of major academic and philanthropic institutions. The Board is uniquely positioned to see the opportunities and challenges IBM faces, and to test personally the candidates for the Chairman and CEO positions over time, in order to select the leadership needed for IBM for the long term. Limiting the candidate pool as suggested by the proponent will do nothing to enhance the ability of the Board to exercise its fiduciary obligation to identify the best leadership for IBM.IBM already has an independent director holding the position of Presiding Director. The Presiding Director is elected by the independent members of the Board, with the following robust and meaningful responsibilities that serve to enhance the contributions of IBM’s independent directors. The Presiding Director:· presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors,· serves as liaison between the Chairman and the independent directors,· approves information sent to the Board,· approves meeting agendas for the Board,· approves meeting schedules to assure that there is sufficient time for discussion of all agenda items,· has authority to call meetings of the independent directors, and· if requested by major stockholders, ensures that he or she is available, as necessary after discussions with the Chairman and Chief Executive Officer, for consultation and direct communication.In addition to these core responsibilities, the Presiding Director engages in other regular activities including:· one-on-one debriefs with the Chairman after each meeting;· spending time with senior management outside of Board meetings to ensure a deep understanding of the business and strategy of the Company; and· attending certain other committee meetings in addition to the committee he chairs.The Presiding Director position is just the latest example of IBM’s continued commitment to strong corporate governance. Independent directors comprise more than 93% of the Board and 100% of the Audit, Directors and Corporate Governance and Executive Compensation and Management Resources Committees. After each regularly scheduled Board meeting, both the full Board and the non-management directors of the Board meet in executive session, with the non-management directors’ session led by the independent Presiding Director.In addition, the Board has a history of proactively responding to stockholder issues, such as implementing proxy access, a majority voting policy for director elections and granting stockholders owning at least 25% of the outstanding shares of the Company the power to call a special meeting of stockholders. In contrast to the exemplary performance and quality of the IBM Board over the years, the proponent provides no evidence demonstrating that separating the roles of Chairman and CEO at IBM would result in increased value for IBM stockholders. In light of this total lack of empirical support, IBM’s strong and independent Board, and IBM’s Presiding Director structure, this stockholder proposal is both inappropriate and unnecessary.We believe that stockholders benefit when the Board can select the best candidates to run IBM at a given time. THEREFORE, THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
Annual Meeting & Proxy Statement | Stockholder Proposals 83(“record owner”)(record owner) is a stockholder whose ownership of IBM common stock is reflected directly on the books and records of our transfer agent, Computershare Trust Company, N.A. If you hold IBM stock through a bank, broker or other intermediary, you are not a stockholder of record. Instead, you hold your stock in “street name,” and the “record owner”record owner of your shares is usually your bank, broker or other intermediary. If you are not a registered stockholder,record owner, please understand that IBM does not know that you are a stockholder, or how many shares you own.annual meeting.2023 Annual Meeting. What procedures must I follow?Admission to theon a first-come, first-served basis, and an admission ticket and picture identificationconducted virtually. All stockholders will be requiredable to enterattend the meeting. Any individual arriving without an admission ticket will not be admitted toAnnual Meeting via webcast by entering the meeting unless it can be verified that the individual is an IBM stockholder as of the record date for the meeting.For stockholders of record that received a Proxy Statement by mail: An admission ticket is attached to the proxy card sent with this Proxy Statement.For stockholders of record that received a Notice of Internet Availability of Proxy Materials: Please follow the instructions provided16-digit control number included on the Notice of Internet Availability of Proxy Materials, on your proxy card, or on the instructions that accompanied your proxy materials at request an admission ticket.For holders in street name: Stockholders holding IBM stock in bank or brokerage accounts can obtain an admission ticket in advance by sending a written request, along with proof of stock ownership (suchregister as a brokerage statement) to our transfer agent, Computershare Trust Company, N.A., P.O. Box 505005, Louisville, KY 40233-5005. Ifguest; however, you hold your shares in street name and you wish to vote those shares at the meeting, you must also request a “legal proxy” directly from your bank, broker or other intermediary well in advance of the meeting and bring it to the meeting. Contact your bank, broker or other intermediary for specific information on how to obtain a legal proxy in order to attend and vote your shares at the meeting.3.Are there specific restrictions on attending the annual meeting, and whatI can bring with me into the meeting?This is a meeting for stockholders, and security at the meeting is very important. You will be asked to walk through an electronic screening device before entering the meeting hall. In addition, cameras, cell phones, recording equipment and electronic devices will not be permittedable to be brought intovote or submit questions before or during the meeting.annual meeting?23, 2018.5.24, 2023.annual meeting?stockholder of record owner and each stockholder who holds stock in street name at the close of business as of the record date is entitled to one vote for each share held at the meeting, or any adjournment or postponement.6.stockholders of record: record owners:The proxy card covers the number of shares to be voted in your account as of the record date, including any shares held for participants in the Computershare CIP (the Direct Stock Purchase and Dividend Reinvestment Plan) and the IBM Employees Stock Purchase Plans.7.annual meeting?For stockholders of record: Annual Meeting?If you wish to give a proxy to someone other thanTo vote during the individuals named as proxiesAnnual Meeting, log into the Annual Meeting Website with your 16-digit control number (found on theyour Notice of Internet Availability of Proxy Materials, your proxy card, you may replace the names appearing on theor your instructions that accompanied your proxy card with the name of some other person, sign the card and give the proxy card to that person for use at the meeting.For holders in street name: Yes, but in order to do so you will first have to ask your bank, broker or other intermediary to furnish you with a legal proxy. You will need to bring the legal proxy with you to the meeting, and hand it in with a signed ballot that you can request at the meeting. You will not be able to vote your shares at the meeting without a legal proxy and a signed ballot.
9.8.Can I vote my shares without attending the annual meeting?stockholders of record: record owners:Your shares cannot be voted unless a signed proxy card is returned, shares are voted using the Internet or the telephone, or other specific arrangements are made to have your shares represented at the meeting. You are encouraged to specify your choices by checking the appropriate boxes on the proxy card. Shares will be voted following your written instructions. However, it is not necessary to check any boxes if you wish to vote in accordance with the Board of Directors’ recommendations; in that case, merely sign, date, and return the proxy card in the enclosed envelope, or if you received noticeNotice of Internet availabilityAvailability of proxy materials,Proxy Materials, follow the instructions on how to access the proxy materials and vote online.12:01 a.m.11:59 p.m. EDT on April 23, 2018,2023, or otherwise ensure that your card is signed, returned, and received by such time and date. If instructions are not received over the Internet or by telephone by 12:01 a.m.11:59 p.m. EDT on April 23, 2018,2023, or if the signed card is not returned and received by such time and date, the IBM shares in the IBM Stock Fund under the IBM 401(k) Plus Plan will be voted by the Trustee in proportion to the shares for which the Trustee timely receives voting instructions, provided the Trustee determines such vote is consistent with its fiduciary duties under the Employee Retirement Income Security Act of 1974, as amended.You If you are not voting your shares in person at the Annual Meeting, you must timely deliver your voting instructions to your respective bank, broker or other intermediary, following the specific instructions that have been provided to you by your bank, broker or other intermediary.9.stockholders of record:record owners: Yes. A proxy may be revoked at any time prior to the voting at the meeting by submitting a later-dated proxy (including a proxy via the Internet or by telephone) or by giving timely written notice of revocation to the Secretary of IBM.10.505005, Louisville, KY 40233-5005,43078, Providence, RI 02940-3078, or by telephoning 888-IBM-6700 (outside the United States, Canada, and Puerto Rico 781-575-2727).11.annual meeting?12.annual meeting,Annual Meeting, what topics will be discussed?13.annual meeting.Annual Meeting. What constitutes a quorum?14.9, 2018,10, 2023, there were 921,167,894907,105,611 shares of common stock outstanding and entitled to be voted.15.16.17.cast?18.meeting,Annual Meeting, how many shares are required to approve the proposals being voted upon in this proxy statement?Do abstentions
RequiredDo
abstentions
count as
votes cast? Is broker
discretionary
voting
allowed? Votecount asdiscretionaryProposalrequiredvotes cast?voting allowed? Majority of
votes cast NoNo No Ratification of Appointment of PricewaterhouseCoopers LLP Majority of
votes cast NoNo Yes Management Proposal on Advisory Vote on Executive Compensation* Majority of
votes cast NoNo No Frequency of the Advisory Vote on Executive Compensation* Majority of
votes cast No No Stockholder Proposals* Majority of
votes cast NoNo No
19.Who tabulates the votes?Votes are counted by employees of Computershare Trust Company, N.A., IBM’s transfer agent and registrar, and certified by the Inspectors of Election (who are employees of IVS Associates, Inc.).20.annual meeting?21.22.20192024 proxy material?20192024 proxy materialmaterials after the 20182023 Annual Meeting and must be received at our corporate headquarters no later than November 12, 2018.7, 2023. Proposals should be sent via registered, certified or express mail to: Office of the Secretary, International Business Machines Corporation, 1 New Orchard Road, Mail Drop 301, Armonk, NY 10504.23.2019 annual meeting?20192024 Annual Meeting of Stockholders (other than a proposal submitted for inclusion in IBM’s Proxy Statement), including nominations for election to the Board of Directors pursuant to the Company’s proxy access by-law provision, must provide notice of such business to IBM’s Secretary no earlier than October 13, 20188, 2023 and no later than November 12, 2018,7, 2023, as set forth more fully in, and in compliance with, IBM’s by-laws.24. In addition, to comply with universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must also provide the additional information required by Rule 14a-19 under the Securities Exchange Act of 1934 by no later than February 25, 2024.annual report.Annual Report. How can I get one?1011 above). If you are not a stockholder of record and did not receive an Annual Report from your bank, broker or other intermediary, you must contact your bank, broker or other intermediary directly.
28.25.What is “householding” and does IBM do this?26.27.28.stockholders of record owners, or a voting instruction form in the case of stockholders holding shares in street name), please follow the instructions included in your notice.29.I received my proxy materials in hard copy. How may I arrange to receive them electronically?To enroll for electronic delivery, go to our Investor Relations website athttp://www.ibm.com/investor/ and select “Stockholder services,” scroll down to “Consent for materials online,” click on either “if you own stock directly in your name” or “if you own stock beneficially through a brokerage account,” and follow the instructions to enroll.30.stockholders of record: record owners:We will deliver promptly, upon written or oral request, a separate copy of these proxy materials. Contact our transfer agent, Computershare Trust Company, N.A. (address and phone number in Question 1011 above).31.Morrow Sodali LLC,Innisfree M&A Incorporated, to assist in soliciting proxies for a fee of approximately $45,000,$50,000, plus reasonable out-of-pocket expenses.
Christina M. MontgomeryIBMsupplementally, the company separates business results into operating and non-operating categories. Operating earnings from continuing operations is a non-GAAP measure that excludes the effects of certain acquisition-related charges, intangible asset amortization, expense resulting from basis differences on equity method investments, retirement-related costs, discontinued operationscertain impacts from the Kyndryl separation and their related tax impacts. ForDue to the fourth-quarter and full-year 2017, operating (non-GAAP) earnings also excludes a one-time charge associated withunique, non-recurring nature of the enactment of the U.S. Tax Cuts and Jobs Act (U.S. tax reform duereform), the company characterizes the one-time provisional charge recorded in the fourth quarter of 2017 and adjustments to itsthat charge as non-operating. Adjustments primarily include true-ups, accounting elections and any changes to regulations, laws, audit adjustments that affect the recorded one-time charge. Management characterizes direct and incremental charges incurred related to the Kyndryl separation as non-operating given their unique and non-recurring nature. These charges primarily relate to any net gains or losses on the Kyndryl common stock and the related cash-settled swap with a third-party financial institution, which are recorded in other (income) and expense in the Consolidated Income Statement. Kyndryl separation charges in 2021 also include applicable employee awards and tax impacts related to the separation. For acquisitions, operating (non-GAAP) earnings exclude the amortization of purchased intangible assets and acquisition-related charges such as in-process research and development, transaction costs, applicable retention, restructuring and related expenses, and tax charges related to acquisition integration.integration and pre-closing charges, such as financing costs. These charges are excluded as they may be inconsistent in amount and timing from period to period and are dependent onsignificantly impacted by the size, type and frequency of IBM’sthe company’s acquisitions. All other spending for acquired companies is included in both earnings from continuing operations and in operating (non-GAAP) earnings. For retirement-related costs, IBMthe company characterizes certain items as operating and others as non-operating. IBMnon-operating, consistent with GAAP. The company includes defined benefit plan and nonpension postretirement benefit plan service cost, amortization of prior service costcosts, multi-employer plan costs and the cost of defined contribution plans in operating earnings. Non-operating retirement-related cost includescosts include defined benefit plan and nonpension postretirement benefit plan amortization of prior service costs, interest cost, expected return on plan assets, amortized actuarial gains/losses, the impacts of any plan curtailments/settlements including the one-time, non-cash, pre-tax settlement charge of $5.9 billion ($4.4 billion, net of tax) in the third quarter of 2022 and multi-employer plan costs, pension insolvency costs and other costs. Non-operating retirement-related costs are primarily related to changes in pension plan assets and liabilities which are tied to financial market performance, and IBMthe company considers these costs to be outside of the operational performance of the business.IBMthe company believes that supplementally providing investors with a view of operating earnings as described above provides increased transparency and clarity into both the operational results of the business and the performance of IBM’sthe company’s pension plans; improves visibility to management decisions and their impacts on operational performance; enables better comparison to peer companies; and allows IBMthe company to provide a long-term strategic view of the business going forward. IBM’sIn addition, these non-GAAP measures provide a perspective consistent with areas of interest the company routinely receives from investors and analysts. The company’s reportable segment financial results reflect pre-tax operating earnings from continuing operations, consistent with IBM’sthe company’s management and measurement system.IBMshare repurchasestockholder return levels, strategic investments and assess its ability and need to incur and service debt. Free cash flow and operating cash flow are presented on a consolidated basis, including activity from discontinued operations. The entire free cash flow amount is not necessarily available for discretionary expenditures. IBMThe company defines consolidated free cash flow as consolidated net cash from operating activities less the change in Global Financing receivables and net capital expenditures, including the investment in software. A key objective of the Global Financing business is to generate strong returns on equity, and increasingour Financing receivables isare the basis for that growth. Accordingly, management considers Global Financing receivables as a profit-generating investment, not as working capital that should be minimized for efficiency. Therefore, management includes presentations ofpresents both free cash flow and net cash from operating activities that excludeexcludes the effect of Global Financing receivables. Free cash flow guidancerealization is derived using an estimate of profit, working capital and operationalcalculated by dividing consolidated free cash outflows. Since IBM views Global Financing receivables as a profit-generating investment which it seeksflow over Operating (non-GAAP) net income.maximize,growth rates at constant currency or adjusts such growth rates for currency, it is done so that certain financial results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of its business performance. Financial results adjusted for currency are calculated by translating current period activity in local currency using the comparable prior year period’s currency conversion rate. This approach is used for countries where the functional currency is the local currency. Generally, when the dollar either strengthens or weakens against other currencies, the growth at constant currency rates or adjusting for currency will be higher or lower than growth reported at actual exchange rates.considered when formulating guidance for free cash flow. As a result, IBM doesrepresent the amount of revenue recognized in the period and therefore is not estimate a GAAP Net Cash from Operations expectation metric.intended to represent current period revenue or revenue that will be recognized in future periods. ARR is calculated at estimated constant currency.tabletables below provides a reconciliationprovide reconciliations of the Company’s income statement results as reported under GAAP to its operating earnings presentation, which is a non-GAAP measure.
For the year ended December 31, 2017
Related
Adjustments
Related
Adjustments
One-Time
Charge(1)
(Non-GAAP) ($ in millions except per share amount)
For the year ended December 31, 2022 GAAP Acquisition-
Related
Adjustments Retirement-
Related Tax
Reform
Impacts Kyndryl
Related
Impacts Operating
(Non-GAAP) Adjustments* Gross Profit $ 32,687 $ 682 $ — $ — $ — $ 33,370 Gross Profit Margin 54.0% 1.1Pts —Pts —Pts —Pts 55.1% S,G&A $ 18,609 $ (1,080) $ — $ — $ — $ 17,529 Other (Income) & Expense 5,803 (3) (6,548) — (351) (1,099) Total Expense & Other (Income) 31,531 (1,083) (6,548) — (351) 23,549 Pre-tax Income from Continuing Operations 1,156 1,765 6,548 — 351 9,821 Pre-tax Income Margin from Continuing Operations 1.9% 2.9Pts 10.8Pts —Pts 0.6Pts 16.2% Provision for/(benefit from) Income Taxes** $ (626) $ 436 $ 1,615 $ 70 $ — $ 1,495 Effective Tax Rate (54.2)% 14.2Pts 52.6Pts 0.7Pts 1.9Pts 15.2% Income from Continuing Operations $ 1,783 $ 1,329 $ 4,933 $ (70) $ 351 $ 8,326 Income Margin from Continuing Operations 2.9% 2.2Pts 8.1Pts (0.1)Pts 0.6Pts 13.8% Diluted Earnings Per Share: Continuing Operations $ 1.95 $ 1.46 $ 5.41 $ (0.08) $ 0.38 $ 9.13
(1) Operating (non-GAAP) earnings excludes$5.5$5.9 billion associated with the enactment of U.S. tax reform due to its unique non-recurring nature.
For the year ended December 31, 2016
Related
Adjustments
Related
Adjustments
(Non-GAAP)
For the year ended December 31, 2015
Related
Adjustments
Related
Adjustments
(Non-GAAP)* The tax impact on operating (non-GAAP) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income. ($ in millions except per share amount)
For the year ended December 31, 2021 GAAP Acquisition-
Related
Adjustments Retirement-
Related
Adjustments Tax
Reform
Impacts Kyndryl
Related
Impacts Operating
(Non-GAAP) Gross Profit $ 31,486 $ 719 $ — $ — $ — $ 32,205 Gross Profit Margin 54.9% 1.3Pts —Pts —Pts —Pts 56.2% S,G&A $ 18,745 $ (1,160) $ — $ — $ (8) $ 17,577 Other (Income) & Expense 873 (2) (1,282) — 126 (285) Total Expense & Other (Income) 26,649 (1,162) (1,282) — 118 24,324 Pre-tax Income from Continuing Operations 4,837 1,881 1,282 — (118) 7,881 Pre-tax Income Margin from Continuing Operations 8.4% 3.3Pts 2.2Pts —Pts (0.2)Pts 13.7% Provision for Income Taxes* $ 124 $ 457 $ 251 $ (89) $ (37) $ 706 Effective Tax Rate 2.6% 5.2Pts 2.8Pts (1.1)Pts (0.4)Pts 9.0% Income from Continuing Operations $ 4,712 $ 1,424 $ 1,031 $ 89 $ (81) $ 7,174 Income Margin from Continuing Operations 8.2% 2.5Pts 1.8Pts 0.2Pts (0.1)Pts 12.5% Diluted Earnings Per Share: Continuing Operations $ 5.21 $ 1.57 $ 1.14 $ 0.10 $ (0.09) $ 7.93 ($ in millions except per share amount)
For the year ended December 31, 2020 GAAP Acquisition-
Related
Adjustments Retirement-
Related
Adjustments Tax
Reform
Impacts Kyndryl
Related
Impacts Operating
(Non-GAAP) Gross Profit $ 30,865 $ 726 $ — $ — $ — $ 31,591 Gross Profit Margin 55.9% 1.3Pts —Pts —Pts —Pts 57.3% S,G&A $ 20,561* $ (1,117) — — $ — $ 19,445* Other (Income) & Expense 802 (2) (1,073) — — (273) Total Expense & Other (Income) 28,293* (1,119) (1,073) — — 26,101* Pre-tax Income from Continuing Operations 2,572* 1,845 1,073 — — 5,490* Pre-tax Income Margin from Continuing Operations 4.7% 3.3Pts 1.9Pts —Pts —Pts 9.9% Provision for /(benefit from) Income Taxes** $ (1,360) $ 411 $ 208 $ 110 $ — $ (630) Effective Tax Rate (52.9)% 25.3Pts 14.1Pts 2.0Pts —Pts (11.5)% Income from Continuing Operations $ 3,932* $ 1,434 $ 864 $ (110) $ — $ 6,120* Income Margin from Continuing Operations 7.1% 2.6Pts 1.6Pts (0.2)Pts —Pts 11.1% Diluted Earnings Per Share: Continuing Operations $ 4.38* $ 1.60 $ 0.96 $ (0.12) $ — $ 6.82* IBM’s net cash flows which is presented on a consolidated basis, including activity from discontinued operations related to the separation of Kyndryl. Free cash flow and operating activitiescash flow are non-GAAP measures. ($ in billions)
For the year ended December 31: 2022 2021 2020 Net cash from operating activities per GAAP* $ 10.4 $ 12.8 $ 18.2 Less: the change in Financing receivables (0.7) 3.9 4.3 Net cash from operating activities, excluding Financing receivables 11.2 8.9 13.8 Capital expenditures, net (1.9) (2.4) (3.0) Free Cash Flow 9.3 6.5** 10.8 Acquisitions (2.3) (3.3) (0.3) Divestitures 1.3 0.1 0.5 Dividends (5.9) (5.9) (5.8) Non-Financing Debt 1.9 (1.2) 0.2 Other (includes Financing receivables and Financing debt) + (2.9) (3.0) (0.1) Change in cash, cash equivalents and short-term marketable securities $ 1.3 $ (6.7)++ $ 5.3 its free cash flow,revenue adjusting for constant currency (@CC), which is a non-GAAP measure.
For the year ended December 31, 2022 GAAP @CC Reconciliation of Revenue Growth Rates: Software 7% 12% Hybrid Platform & Solutions 5% 9% Red Hat 13% 17% Consulting 7% 15% GAAP @CC Reconciliation of Total IBM Revenue Growth Rates: 2022 5.5% 11.6% 2021 3.9% 2.7% 2020 (4.4)% (4.5)% * Reclassified to reflect adoptionthe FASB guidance on stock-based compensation of $0.1 billionAnnual Meeting & Proxy Statement | Appendix A — Non-GAAP Financial Information and $0.2 billion for the years ended December 31, 2016 and 2015, respectively.** 116% excluding the one-time charge of $5.5 billion associated with the enactment of U.S. tax reform in 2017.
ReconciliationsCorporate Responsibility & Sustainability at IBM·Under the guidance and supervision of the Board, IBM pursues the highest standards of corporate responsibility and sustainability, from how we support, protect and empower our employees, to how we work with our clients, to how we govern the Company and connect to our communities.·Our corporate responsibility efforts reflect our expansive footprint and span environmental leadership, social responsibility, innovation and a culture of ethics and integrity that promotes transparency.·For the past 27 consecutive years, IBM has voluntarily published a Corporate Environmental Report providing detailed information on our environmental programs and performance. IBM’s uninterrupted annual publication of this report since 1990 is unsurpassed across our industry.Corporate Citizenship·Created the P-TECH 9-14 school model – a pioneering education reform model to provide young people with the skills required for “New Collar” jobs; 120 schools around the world anticipated by the fall of 2018·Introduced Teacher Advisor with Watson – a groundbreaking effort to strengthen teacher instruction through cognitive computing with nearly 10,000 teachers registered in the first 6 months of public availability·More than 4,000 IBMers have served in IBM Corporate Service Corps, delivering $70M of expertise to communities in 40 countries·IBMers have contributed nearly 21 million volunteer hours since 2003·Recognition includes: CR Magazine 100 Best Corporate Citizens; Forbes Just 100 America’s Best Corporate Citizens; Fortune Change the World list; Points of Light The Civic 50Supporting the IBMer·From our in-house platform using cognitive computing to meet IBMers’ professional education needs to an exemplary well-being management system, IBM supports, protects and empowers its employees· Expansive family leave provides new birth mothers with up to 20 weeks of paid leave and 12 weeks for fathers, partners and adoptive parents· 2018 Catalyst Award for leadership in building a workplace that values diversity and inclusion· U.S. Business Leadership Network 2017 Employer of the Year for People with Disabilities· Working Mother Media 2017 Top Ten Company for Working Mothers· Victory Media 2018 Military Friendly Employer of the Year· Perfect score on the Human Rights Campaign’s Corporate Equality Index for 15 consecutive years ![[MISSING IMAGE: lg_fscmixnew-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/lg_fscmixnew-pn.jpg)
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Environment·Demonstrably committed to environmental leadership for over four decades·IBM’s Green Horizon initiative harnesses the power of cognitive computing and the Internet of Things (IoT) to help fight air pollution in China; research collaborations with governments in India and South Africa are also leveraging this technology to combat air pollution·In 1997, became the 1st major company to achieve a single global registration to the ISO 14001 standard for Environmental Management Systems; 2017 marks 20 years of execution·1st and only company to win the Climate Leadership Award (from The Climate Registry and the Center for Climate and Energy Solutions) 6 times in the program’s 7-year tenure·More than 40% of electricity consumed during 2016 came from renewable sources·Over 38% reduction in CO2 emissions since 2005Supply Chain·With about 11,000 supplier locations worldwide, our upstream focus on social and environmental responsibility has far-reaching positive impacts·Recognized leader with nearly 50 years of growing the diversity of our supply chain·Endorses the Responsible Business Alliance (RBA) Code of Conduct for its global operations and requires direct suppliers to comply with this code·Collaborates with industry groups to drive supply chain improvements in areas such as worker well-being and responsible sourcing of minerals![[MISSING IMAGE: lg_soyinkibm-pn.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/lg_soyinkibm-pn.jpg)
IBM’s corporate responsibility report, which![[MISSING IMAGE: px_proxy01pg01-bw.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/px_proxy01pg01-bw.jpg)
at https://www.ibm.com/ibm/responsibility/, gives a comprehensive look at all of these initiatives, as well as informationand follow the instructions.VOTE BY PHONE - 1-800-690-6903Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m.Eastern Time on other Company-wide sustainability programsApril 24, 2023, for shares held directly and practices. Our Corporate Environmental Report, publishedby 11:59 p.m. Eastern Time onApril 23, 2023, for shares held in June 2017, is available at https://www.ibm.com/ibm/environment/annual/reporting.shtml.Let’s putsmartto work.
MMMMMMMMMMMM . Admission Ticket MMMMMMMMMMMMMMM C123456789 000004 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE______________ SACKPACK_____________ Electronic Voting Instructions Instead of mailingthe 401(k) Plus Plan. Have your proxy you may choose one ofcard in hand when youcall, and then follow the two voting methods outlined belowinstructions.VOTE BY MAILMark, sign and date your proxy card and return it in the postage-paid envelope we haveprovided or return it to vote.Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood,NY 11717. If you vote by telephone or the Internet, please DO NOT mail back this proxy card. MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 Vote by Internet • Log on to: www.ibm.com/investor/vote Vote by telephone • Within USA, US territories & Canada, call toll-free 1-800-652-VOTE (8683) on a touch tone telephone. There is NO CHARGE to you for the call. • Outside USA, US territories & Canada, call 1-781-575-2300 on a touch tone telephone. Standard rates will apply. • Follow the instructions provided by the recorded message. Mark your votes with an X as shown in this example. Please do not write outside the designated areas. 1234 5678 9012 345 q IF YOU HAVE NOT VOTED VIA THE INTERNETProxy Card. TO VOTE, MARK BLOCKS BELOW IN BLUE OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACHBLACK INK AS FOLLOWS: D96424-P83309 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q PROXY/VOTING INSTRUCTION CARD SIGNED PROXIES RETURNED WITHOUT SPECIFIC VOTING DIRECTIONS WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. + Abstain IBM’sDATED. INTERNATIONAL BUSINESS MACHINES CORPORATION IBM's Directors recommend a vote FOR each director (please mark your vote for each director separately). 1. Election of Directors for a Term of One Year For Against Abstain For Against Abstain For Against Abstain For Against 01 - K. I. Chenault 02 - M. L. Eskew 03 - D. N. Farr 04 - A. Gorsky 05 - S. A. Jackson 06 - A. N. Liveris 07 - H. S. Olayan 08 - J. W. Owens 09 - V. M. Rometty 10 - J. R. Swedish 11 - S. Taurel 12 - P. R. Voser 13 - F. H. Waddell IBM’sIBM's Directors recommend a vote FOR Proposalsproposals 2 and 3. For Against Abstain ForAgainst Abstain 2. Ratification of Appointment of Independent Registered PublicRegisteredPublic Accounting Firm 3. Advisory Vote on Executive Compensation IBM’sIBM's Directors recommend a vote for 1 YEARfor proposal 4.4. Advisory Vote Regarding the Frequency of theAdvisory Vote on Executive Compensation IBM's Directors recommend a vote AGAINST Proposals 4, 5proposals5, 6, 7 and 6. ForAgainst Abstain ForAgainst Abstain 4. Stockholder Proposal on Lobbying Disclosure8. 5. Stockholder Proposal on Shareholder Ability to Call a Special Shareholder Meeting 6. Stockholder Proposal to Have an IndependMent BoarMd ChairmMan MMMM C 1234567890 J N T 1 6 4 7 1 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 1 U P X 3 6 002CSP0080 02QPSE MMMMMMMMM C B A X IMPORTANT ANNUAL MEETING INFORMATION
. Annual Meeting Admission Ticket This is your admission ticket![[MISSING IMAGE: px_proxy01pg02-bw.jpg]](https://capedge.com/proxy/DEF 14A/0001104659-23-029014/px_proxy01pg02-bw.jpg)
Stockholders to be held on Tuesday, April 24, 2018, at 10 a.m. at the Hyatt Regency Milwaukee, 333 West Kilbourn Avenue, Milwaukee, WI 53203. Stockholders must have a ticket for admission to the meeting. This ticketStockholdersThis proxy is issued to the stockholder whose name appears on it and is non-transferable. PLEASE DETACH AND PRESENT THIS TICKET AND PHOTO IDENTIFICATION FOR ADMISSION TO THE ANNUAL MEETING. CAMERAS, CELLULAR PHONES, RECORDING EQUIPMENT AND OTHER ELECTRONIC DEVICES WILL NOT BE PERMITTED AT THE MEETING. Dear IBM Stockholder: Your vote is important. Please read both sides of the attached 2018 IBM Proxy/Voting Instruction Card. You can vote your shares through the Internet, by telephone, or by marking, signing and returning your card. If you vote through the Internet or by telephone, there is no need to mail your card. You are invited to attend the Annual Meeting of Stockholders on Tuesday, April 24, 2018, at 10 a.m. at the Hyatt Regency Milwaukee, 333 West Kilbourn Avenue, Milwaukee, WI 53203. If you plan to attend the Annual Meeting, you should either mark the box provided below on the proxy card, or signify your intention to attend when you access the Internet or telephone voting system. We urge you to vote your shares. Thank you very much for your cooperation and continued loyalty as an IBM Stockholder. Christina M. Montgomery Vice President and Secretary q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy Solicitedsolicited by the Board of Directors for the Annual Meeting of Stockholders — April 24, 2018 Virginia M. Rometty,DirectorsArvind Krishna, James J. Kavanaugh, Michelle H. Browdy and Christina M. Montgomery,Frank Sedlarcik, or any of them with the power of substitution, are hereby appointed Proxies of the undersigned to vote all common stock of International Business Machines Corporation owned on the record date by the + undersigned at the Annual Meeting of Stockholders to be held virtually viawww.virtualshareholdermeeting.com/IBM2023 at the Hyatt Regency Milwaukee, 333 West Kilbourn Avenue, Milwaukee, WI 53203, at 1010:00 a.m. Eastern Time on Tuesday, April 24, 2018,25, 2023, or any adjournment or postponement thereof. THEthereof.THE PROXIES WILL VOTE USING THE DIRECTIONS PROVIDED ON THE REVERSE SIDE OF THIS CARD. IF YOU SIGN AND RETURN THIS PROXY, BUT DO NOT PROVIDE SPECIFIC DIRECTION WITH RESPECT TO A VOTING ITEM, THIS PROXY WILL BE VOTED WITH RESPECT TO SUCH ITEM AS RECOMMENDED BY THE BOARD OF DIRECTORS. THE PROXIES ARE ALSO AUTHORIZED TO VOTE UPON ALL OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF, UTILIZING THEIR OWN DISCRETION AS SET FORTH IN THE NOTICE OF 2018THE 2023 ANNUAL MEETING AND PROXY STATEMENT. THISSTATEMENT.THIS CARD WILL ALSO BE USED TO PROVIDE VOTING INSTRUCTIONS TO THE TRUSTEE FOR ANY SHARES OF COMMON STOCK OF INTERNATIONAL BUSINESS MACHINES CORPORATION HELD IN THE IBM STOCK FUND INVESTMENT ALTERNATIVE UNDER THE IBM 401(k) PLUS PLAN ON THE RECORD DATE, AS SET FORTH IN THE NOTICE OF 20182023 ANNUAL MEETING AND PROXY STATEMENT. UNLESSSTATEMENT.UNLESS YOU USE THE INTERNET OR THE TELEPHONE TO VOTE YOURTHESE SHARES, YOU MUST SIGN AND RETURN THIS PROXY IN ORDER FOR YOURTHESE SHARES TO BE VOTED. (Shares willVOTED.Continued and to be voted as directed if this card is: 1. signed and returned or 2. shares are voted over the Internet or by telephone or 3. other specific arrangements are made to have the shares represented at the meeting.) Please date and sign below, and return this card in the enclosed envelope, or you may vote by using the Internet or telephone. Date (mm/dd/yyyy) — Please print date below. Signature(s) — Please keep signature(s) within the box. + IF VOTING BY MAIL, YOU MUST DATE, SIGN AND RETURN THIS CARD. D Mark the box if you plan to attend the Annual Meeting.
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