| Improved Revenue Growth ProfileIn 2023, IBM delivered $61.9B in revenue, $11.2B of free cash flow, and generated $13.9B in cash from operations.
| | | | | | Revenue Generation Revenue year-to-year growth figures at constant currency.(1) | In 2022, IBM delivered $60.5B in revenue, and generated $10.4B cash from operations
| | | | | | Revenue Acceleration and Cash Generation
Strong revenue growth year-to-year, delivering above IBM’s mid-single digit model. Generated $9.3 billion of consolidated Free Cash Flow(1)
| |
Optimized Portfolio Positioned to 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 revenue is recurring, with a high-value mix | |
| 20222023 Revenue Mix | | | 20222023 Recurring Revenue Mix | | | | | | Increased revenue mix due to higher growth Software and Consulting Software revenue +12%grew 5% year-to-year Hybrid Platform & Solutions +9%+5% year-to-year, including Red Hat +17%+9% year-to-year Consulting revenue +15%grew 6% year-to-year Broad-based growth across all business lines and geographies reflecting the strength of our consulting expertise and offerings | | | | | | 65%67% of recurring revenue now comes from high-growth Software
Hybrid Platform & Solutions exited 20222023 with over $13$14 billion in Annual Recurring Revenue(1) | |
Revenue year-to-year growth figures at constant currency.(1) Strategic Capital Allocation | Completed 89 acquisitions in 20222023 for $2B$5B, and invested nearly $7B in RD&E | | | | Returned $5.9B$6B to stockholders through dividends in 20222023 | | | | Ended 20222023 with $8.8B$13.5B in cash
and marketable securities,
up over $1B $4.6B year-to-year | |
(1)
Non-GAAP financial metrics. See Appendix A for information on how we calculate these performance metrics. (2)
Year-to-Year revenue growth % includes incremental sales to Kyndryl (post-separation, through October 2022) of ~1 point and ~4 points for 2021 and 2022, respectively. Note: In an effort to provide additional and useful information regarding IBM’s financial results and other financial information as determined by generally accepted accounting principles (GAAP), this Compensation Discussion and Analysis and Proxy Statement contains certain non-GAAP financial measures, including operating earnings per share, free cash flow, consolidated operating cash flow, and revenue growth rates adjusted for currency. Amounts are presented on a continuing operations basis unless otherwise noted. For reconciliation and rationale for management’s use of this non-GAAP information, refer to Appendix A — “Non-GAAPNon-GAAP Financial Information and Reconciliations.” 3220232024 Notice of Annual Meeting & Proxy Statement | 20222023 Compensation Discussion and Analysis33
Our compensation strategy, with significant pay at risk, supports the drivers of IBM’s high value business model. For 2022,2023, at target, approximately 77% of Mr. Krishna’s pay remained at risk and subject to attainment of rigorous performance goals. | For 20222023 performance, the Board approved an annual incentive payment of $3,480,000$3,510,000 for Mr. Krishna, which was 116%117% of target. The payout reflects a 100% Individual Contribution Factor (ICF) and the Annual Incentive Program (AIP) pool funding at 116%117%. | | | | |
In making this award in line with the Company’s incentive score, the Committee also considered Mr. Krishna’s overall performance against his objectives, which included strong free cash flow generation, sustainable revenue generation (at constant currency), and the continued optimization of the Company’s portfolio, with an increased mix of higher growth software and consulting revenue. In addition, the Committee considered hisMr. Krishna’s personal leadership in AI and quantum computing, improving diversity representation including continued improvement in diverse executive representation,driving IBM’s high performance culture, as well as continued best in class employee engagement. Payouts in both the annual and long-term programs reflect rigorous performance goals. | Feedback from Our Investors Continues to Inform the Committee | | | •
IBM once again offered year-round robust engagement to our stockholders, reaching out to over 125 institutions and reached out to hundreds of thousands of individual registered and beneficial owners representingleading up to the 2023 Annual Meeting and then offering off-season engagement to stockholders owning more than 57% of the shares that voted on Say on Pay in 2022.2023. •
Our stockholder discussions and formal 20222023 Say on Pay vote reaffirmed investor support of our pay practices. | |
2023342024 Notice of Annual Meeting & Proxy Statement | 20222023 Compensation Discussion and Analysis33
Section 1: Executive Compensation Program Design and Results Trust and personal responsibility in all relationships — relationships with clients, partners, communities, fellow IBMers, and investors — is a core value at IBM. As a part of maintaining this trust, we well understand the need for our investors — not only professional fund managers and institutional investor groups, but also millions of individual investors — to know how and why compensation decisions are made. | | To that end, IBM’s executive compensation practices are designed specifically to meet five key objectives: | | | | | •
Align the interests of IBM’s leaders 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; •
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. | | |
The specific elements of IBM’s current U.S. executive compensation programs are: | Type | | | Component | | | Key Characteristics | |
| | Current Year Performance | | | | Salary | | | Salary is a market-competitive, fixed level of compensation. | | | | Annual Incentive Program (AIP) | | | At target, annual incentive provides a market-competitive total cash opportunity. Actual annual incentive payments are funded by business performance against financial metrics and distributed based on annual performance scores, with top performers typically earning the greatest payouts and the lowest performers earning no incentive payouts. | | | | | Long-Term Incentive | | | | Performance Share Units (PSUs) | | | Equity awards are typically granted annually and may consist of PSUs, RSUs, and Stock Options. EquityAnnual equity grants are based on competitive positioning and vary based on individual talent factors. Lower performers do not receive equity grants.
For PSUs, the number of units granted can be increased or decreased at the end of the three-year performance period based on IBM’s performance against predetermined targets. In addition,targets and a relative performance metric applies to all PSU awards. The final number of PSUs earned can be increased or decreased based on IBM’s Return on Invested Capital (ROIC) performance relative to S&P indices.metric.
| | | | Restricted Stock Units (RSUs) | | | RSUs vest over time; typically ratably over 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 | | | | Stock-Based Grants & Cash Awards | | | 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 Retention Restricted Stock Units (RRSUs), retention PSUs (RPSUs), or cash for certain executives. 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 it is earned. | | | | Other Compensation | | | | 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. | | |
Other compensation elements include perquisites, which are used on a limited basis to ensure safety and productivity of executives, and retirement benefits. Full Career Performance: Retention, Pension, and Savings: Periodically, awards may be made in the form of Retention Restricted Stock Units (RRSUs) or cash awards to help retain certain executives. Vesting of RRSUs typically range from two to five years and cash awards have a clawback if an executive leaves IBM before it is earned. Eligible U.S. employees may participate in post-employment savings plans such as the IBM 401(k) Plus Plan, and a non-qualified deferred compensation plan. Effective January 1, 2024 the Company also provided a new cash balance retirement benefit in the IBM Personal Pension Plan to all eligible employees equal to 5% of eligible pay. In light of this change, the Company match and automatic contributions in the 401(k) Plan ended December 31, 2023; and effective January 1, 2024 employer contributions in the non-qualified deferred compensation savings plan moved to a consistent 5% matching contribution for all eligible employees. 3420232024 Notice of Annual Meeting & Proxy Statement | 20222023 Compensation Discussion and Analysis35
Our Incentive Compensation Design Supports our Business Strategy Our senior executive pay is heavily weighted to IBM’s performance through the annual and long-term incentive programs. Each year, the Committee ensures that these programs are closely aligned to the Company’s financial and strategic objectives and are appropriately balanced. Targets are set at challenging levels and are consistent with IBM’s financial model shared with investors for 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. 20222023 Metrics and Weightings
| | Annual Incentive Program (AIP) | | | | | Revenue | | | | Operating Cash Flow* | | | | | | | | | Measures total revenue performance across the portfolio of business | | | | | | | | Measures our ability to reinvest and return value to shareholders | | | | | Diversity Modifier: Affirms management’s commitment to diverse representation in our workforce that reflects the labor pool demographics of the communities in which we operate. | | |
| | Performance Share Unit (PSU) Program(1) | | | | | Revenue | | | | Operating EPS* | | | | Free Cash Flow* | | | | | | | | | Measures revenue performance over three years | | | | | | | | Measures operating profitability on a per share basis over three years | | | | | | | | Measures our ability to reinvest and return value to shareholders over three years | | | | | Performance adjusted by a relative Return on Invested Capital Modifier. | | |
*
Non-GAAP financial metrics. See Appendix A for information on how we calculate these performance metrics. Note: (1)
For PSU performance periods that began prior to 2021,period 2020-2022, the metrics included were Operating EPS at 70%, Free Cash Flow at 30%, and the ROIC Modifier. IBM shares its financial model each year with investors in the context of its long-term strategy. To provide further transparency, into the rigor of our goal setting process, IBM discloses the performance attainment against financial targets for the most recent performance period, for both the Annual Incentive Program and the Performance Share Unit Program. 2023 Notice of Annual Meeting & Proxy Statement | 2022 Compensation Discussion and Analysis 35
2022 Annual Incentive Program
How It Works IBM sets business objectives at the beginning of each year, which are approved by the Board of Directors. The Compensation Committee and the Board of Directors review IBM’s annual business objectives and set the metrics and weightings for the annual incentive program to reflect current business priorities.(AIP). These objectives translate to financial targets for IBM and for each business unit for purposes of determining the target funding of the AIP. Performance against business objectivesthe targets determines the actual total funding pool for the year, which can vary from 0% to 200% of total target incentives for all executives. At the end of the year, performance for IBM is assessed against these predetermined financial targets, which are updated to remove any impact of currency movement or the change in tax rates, compared to plan.rates. The financial targets may be adjusted up or down for extraordinary events if recommended by the Chairman and CEO and approved by the Compensation Committee. For example, adjustments are usually made for large acquisitions and divestitures. The diversity modifier affirms management’s commitment to improving diverse representation ofin our workforce that reflects the labor pool demographics of the communities in which we operate. A diverse workforce and an inclusive work environment fuel both innovation and creativity. The diversity modifier creates a common mechanism to align leaders with our commitment to creating an inclusive environment for all. This modifier can result in a 5 point reduction, no impact, or 5 point increase to the AIP scoring. In 2022,2023, the modifier was based on the improvementour progress in creating and developing a diverse executive population. Executive representation for executiveof women globally, andas well as Black and Hispanic executives in the United States.States, changed by +1.1 points, -0.2 points and +0.6 points, respectively for the year. In 2023, these results mean that the modifier did not increase or decrease the AIP scoring. Finally, the Chairman and CEO can recommend an adjustment, up or down, based on factors beyond IBM’s financial performance; this includes, for example, client experience, market share, growthresearch and diversityinnovation, and inclusionculture and engagement. Taking such matters into account for 2023, the Compensation Committee approved an upward adjustment to the score of ten points reflecting progress in AI and quantum computing, IBM’s workforce. For 2022, no qualitative adjustment was made.high performance culture, and employee engagement. The Compensation Committee reviews the financial scoring, diversity modifier, and proposed qualitative adjustments, and approves the final AIP funding level. 362024 Notice of Annual Meeting & Proxy Statement | 2023 Compensation Discussion and Analysis
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 incentive. Payouts at this level are rare and only possible when IBM’s performance has also been exceptional. The AIP, which covers approximately 4,000 IBM executives, includes this individual cap at three times the individual target to allow for differentiated pay for performance. For the Chairman and CEO, the cap is two times target. 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 generally paid on or before MarchApril 15 of the year following the end of such period. This incentive design ensures payouts are aligned to IBM’s overall business performance and diversity goals while also ensuring individual executive accountability for specific business objectives. 20222023 AIP Payout Results
Based on full year financial performance against IBMof revenue and operating cash flow, the weighted incentiveIBM pool funding score 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 the incentive score.117. (1)
Based on AIP payout table; results that exceededthe 2023 leveraged score resulted in 98% for Revenue and 116% for Operating Cash Flow; for Revenue, threshold attainment is 80% with a 50% payout, target attainment and payout is 100% of, maximum attainment is 110% with a 200% payout; for Operating Cash Flow, threshold attainment is 70% with a 70% payout, target for each metric yieldattainment and payout is 100%, maximum attainment is 120% with a higher Incentive Score.200% payout. (2)
Operating Cash Flow is a non-GAAP financial metric. See Appendix A for information on how we calculate this performance metric. 362023 Notice of Annual Meeting & Proxy Statement | 2022 Compensation Discussion and Analysis
Performance Share Unit Program The Performance Share Unit (PSU) metrics for the 2020-20222021-2023 performance period were Revenue, Operating EPS, and Free Cash Flow. TargetsFinancial targets are established at the beginning of each three-year performance period. These targets are based on IBM’s financial model, as shared with investors, and the Board-approved annual budget. business objectives.
As discussed in prior years, in connection with the separation of Kyndryl in 2021, the Committee approved adjustments to the 2021-2023 PSU program targets in December 2021. The Committee’s longstanding practice is that the Company’s share repurchase activities have no effect on executive compensation. Actual operatingOperating EPS results and the target are adjusted to remove the impact of any difference between the actual share count and the budgetedtargeted share count, while simultaneously ensuring that executive compensation targets are normalizedcount. Revenue is adjusted for any planned buybacks that are incorporated into the Operating EPS target.fluctuations in foreign currency rates in all three years. Additionally, the scoring for the PSU Program may also take into accountconsider extraordinary events. For the 2020-20222021-2023 performance period, 2022 and 2023 results were adjusted to exclude the impact of exiting our business in Russia in 2022.Russia. At the end of each three-year performance period, the Compensation Committee approves the determination of actual performance relative to pre-established financial targets and the number of PSUs are adjusted up or down from 0% to 150% of targets, based on the approved actual performance. In addition, the PSU Program has a Relative Return on Invested Capital (ROIC) modifier.modifier. 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. There is no qualitative adjustment to the PSU program score. 2024 Notice of Annual Meeting & Proxy Statement | 2023 Compensation Discussion and Analysis 37
The PSU score is calculated as a weighted average of results against targets for Revenue (40%), Operating EPS (30%) and Free Cash Flow (30%). The calculation for the 2021-2023 performance period is shown in the table below. For the 2021-2023 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. Relative ROIC Modifier
| | | | 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. | |
(1)
Based on PSU payout table.levels displayed below. (2)
Non-GAAP financial metric. See Appendix A for information on how we calculate this performance metric. (3)
2021-2023 Revenue result is calculated using historical 2021 consolidated revenue, including ten months of Kyndryl discontinued operations revenue, and 2022 and 2023 revenue as reported, adjusted for fluctuations in foreign currency and impacts of separating business in Russia. (4)
Non-GAAP financial metrics. 2021-2023 Operating EPS 3-year cumulative performanceresult is calculated based on 2020 and 2021 historical as reported amounts adjusted to include discontinued operations. Operating EPS excludes certain separation related charges in 2021 and includes immaterial share adjustments in 2021all three years. For 2022 and 2022. For 2022,2023, both Operating EPS and Free Cash Flow were adjusted to exclude the impact of separating business in Russia. Free Cash Flow amounts are on a consolidated basis, which includes activity from discontinued operations. See Appendix A for GAAP to Non-GAAPnon-GAAP reconciliation. 2021-2023 PSUs: Threshold, Target, and Max Attainment % and Payout %: | | | | Threshold | | | Target | | | Max | | | Financial Metrics | | | Attainment % / Payout % | | | Attainment % / Payout % | | | Attainment % / Payout % | | | Revenue (40%) | | | 70% / 25% | | | 100% / 100% | | | 120% / 150% | | | Operating EPS (30%)(1) | | | 70% / 25% | | | 100% / 100% | | | 120% / 150% | | | Free Cash Flow (30%)(1) | | | 70% / 25% | | | 100% / 100% | | | 120% / 150% | |
Impact of Significant One-Time Events(1)
Non-GAAP financial metrics. See Appendix A for information on the Open PSU Performance Periodshow we calculate these performance metrics. As discussed in prior years, in connection with
Note: For PSU performance period 2020-2022, the separation of Kyndryl in 2021, the Committee determined that the targets for the 2020-2022 and 2021-2023 PSU programsmetrics included were no longer reflective of the Company’s strategic direction and growth objectives as communicated to stockholders prior to the announced plan to separate Kyndryl. In February 2021, the Committee approved an adjustment to the 2020-2022 PSU program targets to incorporate the planned impact of the 2021 separation of Kyndryl, including one-time transaction-related cash charges associated with the separation, and actions taken to enable the separation of Kyndryl and IBM’s growth. Following the separation of Kyndryl on November 3, 2021 into its own publicly traded company with approximately $19 billion in revenue prior to separating from IBM, a final target adjustment was made for the 2020-2022 and 2021-2023 PSU programs. The final adjustment was made to incorporate the impact of separating Kyndryl, including the early separation of Kyndryl two months ahead of schedule. As a result of the adjustments made for the Kyndryl separation and actions taken to enable IBM’s growth strategy, Operating EPS andat 70%, Free Cash Flow targets forat 30%, and the 2020-2022 PSU program are lower than those for the 2019-2021 PSU program. Consistent with the Company’s long-standing practice of setting rigorous performance plans, cumulative targets for both plans remain higher than comparable metrics shared with investors on October 4, 2021.ROIC Modifier. 2023382024 Notice of Annual Meeting & Proxy Statement | 20222023 Compensation Discussion and Analysis37
Section 2: Compensation Program Governance Stockholder Engagement Provided Important Feedback for the Committee IBM continually reviews and enhances 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. | Which Stockholders were Engaged | | | Who Engaged from IBM | | | In 2023, IBM once again offered year-round robust engagement to our stockholders, reaching out to over 125 institutions and hundreds of thousands of individual registered and beneficial owners leading up to the 2023 Annual Meeting and then offering off-season engagement to stockholders owning more than 57% of the shares that voted on Say on Pay in 2023. | | | The Company continued its enhanced engagement practices in 2023. IBM’s Chairman and CEO, Lead Director, and members of IBM’s senior management participated in this engagement program. | |
In 2022, IBM once again offered engagement to over 125 institutional investors. Further, our process includes outreach to hundreds of thousands of individual registered and beneficial owners, who represent a majority of our retail base. The Company continued its enhanced engagement practices in 2022. IBM’s Chairman and CEO, Lead Director, and members of IBM’s senior management participated in this engagement program. Overall, the Company offered to engage with investors representing more than 57% of the shares that voted on Say on Pay at the 2022 Annual Meeting.This in-depth engagement process provides valuable feedback to the Compensation Committee on an ongoing basis. Overall, our stockholders continue to support the Company’s compensation programs and practices. We heard from stockholders that they are strongly supportive of the overall design of the program, which focuses on long-term financial performance that drives stockholder value. Still, the Committee and the Board review and consider all of the investor feedback in making decisions relating to the design of our executive compensation programs. For example, the following changes occurred in 2022: •
The Company’s Peer Group was updated to increase the weighting of peers in the technology industry, reflect IBM’s increased orientation as a hybrid cloud and AI company, and align the Peer Group with the size and scope of IBM following the separation of Kyndryl.
•
Stock Options were introduced as part of the overall equity pay mix for executives, to ensure a portion of equity does not generate value unless IBM’s stock price increases over the price when granted.
•
The diversity modifier continued as part of IBM’s Annual Incentive Program in 2022, with disclosure of the underlying results for both 2021 and 2022 included in the Annual Incentive Program section of each year’s respective Proxy as well as IBM’s annual ESG report.
Compensation Practices Overall, IBM’s compensation policies and decisions, explained in detail in this Compensation Discussion and Analysis, continue to be focused on long-term financial performance to drive stockholder value. The table below highlights practices that IBM embraces in support of strong governance practices. | | | What We Do | | | | | | What 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, 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 | |
3820232024 Notice of Annual Meeting & Proxy Statement | 20222023 Compensation Discussion and Analysis39
Personal Stake in IBM’s Future through Stock Ownership Requirements Investors 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, Vice Chairman, and Senior Vice Presidents (SVPs). Within 5 years of hire or promotion, each is required to own a minimum number of IBM shares or equivalents that is equal to a multiple of salary at the time of hire, promotion, or election as an Executive Officer. The minimum multiple of salary required is in excess of standard market practice. Stock Ownership Requirements | | | | Ownership Requirements as a Multiple of Salary | | | | | Ownership Requirements as a Multiple of Salary | | | NEO Name | | | IBM Minimum Requirement | | | Median Peer Group Minimum Requirement | | | | | IBM Minimum Requirement | | | Median Peer Group Minimum Requirement | | | A. Krishna | | | 10 | | | 7 | | CEO | | | 10 | | | 7 | | | J.J. Kavanaugh | | | 7 | | | 4 | | Other NEOs | | | 7 | | | 4 | | | G. Cohn | | | 7 | | | 4 | | | | T. Rosamilia | | | 7 | | | 4 | | | | M.H. Browdy | | | 7 | | | 4 | | |
Mr. Krishna owns common stock and stock-based holdings above his ownership requirement (over 2035 times his base salary) as of December 31, 2022.2023. More information on Mr. Krishna’s holdings can be found in the Common Stock and Stock-Based Holdings of Directors and Executive Officers Table. As a group, the Chairman and CEO, Vice Chairman and SVPs, inclusive of the NEOs, owned shares or equivalents valued at over $110$155 million as of December 31, 2022;2023; as of that date, this group held, on average, over 79 times their base salary, and are all on track to reachmeet or exceed their ownership goal within 5 years of hire or promotion. The following table illustrates which equity holdings count towards stock ownership requirements: | | | What Counts | | | | | | What Does Not Count | | | | | | | | | | | •
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 | | | | | | | | •
Unvested equity awards | •
Unexercised stock options | | | | |
Stock Ownership Continues Beyond Retirement Finally, our programs are designed to ensure alignment with IBM’s long-term interests past the retirement date for our Chairman and CEO, Vice Chairman and SVPs. 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. For example, shares for Mr. Krishna that remained restricted and subject to performance of IBM represent more than 100% of his share ownership requirement as of December 31, 2022;2023, assuming future performance at target. 2023 Notice of Annual Meeting & Proxy Statement | 2022 Compensation Discussion and Analysis 39
Compensation Committee Consultant The Committee enters into a consulting agreement with its outside compensation consultant on an annual basis. In 2022,2023, the Committee retained Semler Brossy Consulting Group, LLC (Semler Brossy) as its compensation consultant to advise the Committee on market practices and specific IBM policies and programs. Semler Brossy reports directly to the Compensation Committee Chair 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 determined that there is no conflict of interest with regard to Semler Brossy. How Compensation Decisions are Made At any level, compensation reflects an employee’s value to the business — market value of skills, individual contribution and business results. To be sure we appropriately assess the value of senior executives, IBM follows an evaluation process, described here in some detail: 402024 Notice of Annual Meeting & Proxy Statement | 2023 Compensation Discussion and Analysis
1. Making Annual Performance Commitments All IBM employees, including the Chairman and CEO, Vice Chairman and SVPs, develop goals, both qualitative and quantitative, that they seek to achieve in a particular year in support of the business. The Board of Directors reviews and approves the Chairman and CEO’s performance goals 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. 2. Determining Annual Incentive Payouts Evaluation of Chairman and CEO Results by the Compensation Committee The Chair of the Compensation Committee works directly with the Committee’s compensation consultant to provide a decision-making framework for use by the Committee in determining annual incentive payouts 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 the year and 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. Evaluation of Vice Chairman and SVP Results by the Chairman and CEO and the Compensation Committee Executives work with their managers throughout the year to update their own results against their stated goals. The self-assessments of the Vice Chairman and SVPs are reviewed by the Senior Vice President of Human Resources and the Chairman and CEO, who evaluate the information. Following this in-depth review and taking into account the Company incentive score, the Chairman and CEO makes compensation recommendations to the Compensation Committee based on an evaluation of the Vice Chairman and each SVP’s performance for the year, and the Committee decides whether to approve or adjust the Chairman and CEO’s recommendations for the Vice Chairman and SVPs. The Committee then presents the compensation decisions for the Chief Financial Officer to the independent members of the IBM Board of Directors for ratification. 402023 Notice of Annual Meeting & Proxy Statement | 2022 Compensation Discussion and Analysis
3. Setting Competitive Target Pay Approach to Benchmarking IBM participates in several executive compensation surveys that provide general trend information and details on levels of salary, target annual incentives and long-term incentives, the relative mix of short- and long-term incentives, and mix of cash and stock-based pay. Given the battle for talent that exists in our industry, the benchmark companies that are used by the Compensation Committee to guide its decision making have included a broad range of key information technology companies, to help us identify trends in the industry. We also include companies outside our industry, with stature, size, and complexity that approximate our own, in recognition of the flow of executive talent 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. For 20222023 and 20232024 compensation decisions, the Committee utilized the following benchmark group criteria: •
Companies in the technology industry with revenue that exceeds $10 billion, plus •
Additional companies in other industries, with revenue that exceeds $30 billion, and that have a global complexity similar to IBM, and whose business strategy results in substantial competition for senior leadership talent. For both 20222023 and 20232024 compensation decisions, the Committee approved the following benchmark group using the criteria above, which achieves a balance between prominent technology competitors and large-scale companies of similar size of IBM, and accurately represents IBM’s competition for senior leadership talent. In consideration of size and complexity, IBM’s philosophy is to generally target the 50th percentile of the market for cash and total compensation. Benchmark Group: | Accenture | | | Boeing | | | Microsoft | | | UPS | | | Adobe | | | Cisco Systems | | | Oracle | | | Verizon | | | Alphabet | | | General Electric | | | PepsiCo | | | Visa | | | Amazon.com | | | Hewlett Packard Enterprise | | | Qualcomm | | | VMware(1) | | | AT&T | | | Honeywell | | | Raytheon | | | | | | Bank of America | | | Intel | | | Salesforce | | | | |
(1)
VMware was acquired by Broadcom in November 2023. 2024 Notice of Annual Meeting & Proxy Statement | 2023 Compensation Discussion and Analysis 41
Approach to Determining Individual Compensation For individual compensation decisions, the benchmark information is used together with an internal view of individual performance relative to other executives and recognizing that the skills and experience of our senior executives are highly sought after by other companies and, in particular, by IBM’s competitors. Because factors such as performance and retention, as well as size and complexity of the job role, are considered when compensation decisions are made, the cash and total compensation for an individual named executive officer may be higher or lower than the target reference point of the broader benchmark group. Evaluation of Chairman and CEO Target Pay by the Compensation Committee The Chair of the Compensation Committee works directly with the Committee’s compensation consultant to provide a decision-making framework for use by the Committee in setting target compensation opportunities for the Chairman and CEO. The independent members of the IBM Board of Directors review and provide final approval. Evaluation of Vice Chairman and SVP Target Pay by the Chairman and CEO and the Compensation Committee The Chairman and CEO makes compensation recommendations on the Vice Chairman and SVPs’ target compensation to the Compensation Committee. The Committee evaluates all of the factors considered by the Chairman and 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 of separation of employment or retirement. The Committee decides whether to approve or adjust the Chairman and CEO’s recommendations for the Vice Chairman and SVPs. The Committee then presents the compensation decisions for the Chief Financial Officer to the independent members of the IBM Board of Directors for ratification. 2023422024 Notice of Annual Meeting & Proxy Statement | 20222023 Compensation Discussion and Analysis41
Section 3: Compensation Decisions for the Chairman and CEO and Named Executive Officers 2023 Annual Incentive Payment Decision for the Chairman and CEO | | 2022 Annual Incentive Decision for the Chairman and CEO
| | | | | For 20222023 performance, the Board approved an annual incentive payment of $3,480,000,$3,510,000, which represented 116%117% of Mr. Krishna’s target opportunity and was in line with the Company incentive score. | | | | | In addition to overall IBM 20222023 revenue performance of $60.5$61.9 billion and $10.4$13.9 billion cash from operations, the Compensation Committee noted the following achievements for Mr. Krishna, which have positioned IBM for sustained growth going forward: | | |
BUSINESS RESULTS | | | | Business ResultsPORTFOLIO AND INVESTMENT | | •
Software revenue grew 5% year-to-year and Consulting revenue grew 15%6% year-to-year at constant currency*, and Software revenue grew 12% at constant currency*, including approximately 6 points from incremental external sales to Kyndryl •
Recurring revenue represents about 50% of IBMContinued shift toward higher growth revenue, with Hybrid Platform & Solutions Annual Recurring Revenue* over $13 billion exiting 2022~75% of revenue now in Software and Consulting
•
Delivered consolidated freeFree cash flow* generation of $9.3 billion, with a cash realization of$11.2B (+$1.9B year over 100%
•
Ended 2022 with $8.8 billion in cash and marketable securities, up over $1 billion year-to-year
Portfolio and Investment
•
Closed 8 strategic acquisitions in 2022, focused on strengthening our hybrid cloud capabilities in Software and Consultingyear)
| | | | Leadership•
Closed 9 strategic acquisitions in Innovation2023 and invested $7B in Research, Development, & Engineering, focused on expanding Hybrid Cloud and AI capabilities •
Deployed Osprey 433-Qubit Quantum system, significantly expanding the volume capabilities of the platformSustainable revenue growth for third consecutive year
| |
Societal ImpactLEADERSHIP IN INNOVATION | | | | SOCIETAL IMPACT | | | | TALENT DEVELOPMENT AND LEADERSHIP | | •
Delivered AI capabilities across the IBM technology stack through watsonx •
Significant progress toward our goal of reducingExtended IBM’s quantum-centric supercomputing
| | | | •
Reduced IBM’s operational greenhouse gas emissions by 63%, with a goal of 65% by 2025 with a 61% reduction to date •
ExpandedCentralized governance for data, privacy programand AI in a single Integrated Governance Program, creating a consolidated, company-wide view enhancing regulatory compliance and time to add AI impact assessments in response to new AI regulationsmarket
Talent Development and Leadership
•
Focused hiring, development, and sales investments to fuel growth
| •
Improved diversity across US Black, US Hispanic, and global Women executives
| | | •
Continued best in class employee engagement | •
Growth in expertise levels for key skills (AI, Cloud, Security) | |
| | 20232024 Compensation Decisions for the Chairman and CEO
| | | | | For 2023,2024, the independent members of the Board made no changes to Mr. Krishna’s base salary, orwhich has not changed since he became CEO in April 2020. Mr. Krishna’s target annual incentive which was just below the median target cash compensation of the 2023 benchmark group. Heincreased to $3.5 million and he was granted an annual long-term incentive award valued at $17.0 million, which is the first increase since$20 million. Mr. Krishna became CEO in 2020,Krishna’s target cash and total compensation are in line with the median of the 20232024 benchmark group. ThisMr. Krishna’s long-term incentive grant is comprised of 60% 2023-20252024-2026 Performance Share Units, 20% Restricted Stock Units, and 20% Stock Options. For 2023, 77%2024, 78% 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. | | |
*
Non-GAAP financial metrics.metric. See Appendix A for information on how we calculate these performance metrics. 4220232024 Notice of Annual Meeting & Proxy Statement | 20222023 Compensation Discussion and Analysis43
20222023 Annual Incentive Decisions for Mr. Kavanaugh, Mr. Cohn,Thomas, Mr. Rosamilia,Cohn, and Ms. Browdy
The Compensation Committee also made decisions for the following named executive officers (NEOs), based on overall corporate performance as described in the Business Highlights and Executive Summary and an assessment of their individual contributions, manysome of which are summarized below: | JamesJAMES J. KavanaughKAVANAUGH | | | Senior Vice President, Finance & Operations and Chief Financial Officer | | | Optimized portfolio and drove productivity initiatives generating margin expansion in 2023. Achieved over $1.5 billion dollars in annual run-rate savings, with a path to deliver at least $3 billion in annual run-rate savings by the end of 2024. | | | Delivered free cash flow* of $11.2 billion, up $1.9 billion year-to-year, which enabled returning $6 billion to stockholders through dividends and investing over $5 billion to acquire 9 companies in 2023. | | | Attracted new investors to IBM through strong engagement with shareholders; including one-on-one interactions, group functions, and participation in conferences. | |
Exceeded mid-single digit revenue growth objective by delivering 12% growth at constant currency*, including approximately 4 points from incremental external sales to Kyndryl.
Optimized portfolio and expanded operating pre-tax margin* by 250 basis points, generating $9.3 billion in consolidated free cash flow*, which grew $2.8 billion year-to-year.
Returned $6 billion to stockholders and invested over $2 billion to acquire eight companies while reducing debt by approximately $1 billion in 2022.
| Gary CohnROBERT D. THOMAS | | | Senior Vice President, Software & Chief Commercial Officer | | | Delivered 5% Software revenue growth, increasing client demand for watsonx and growing our AI footprint. | | | Bolstered Software portfolio through investment in skills and innovation, including launching watsonx and driving strategic M&A. | | | Continued transformation in go-to-market model to infuse more technical and experiential selling, leveraging expanded ecosystem and strategic partnerships. | |
| GARY COHN | | | Vice Chairman | |
Expanded IBM’s public/private partnerships, resulting in additional revenue and broader reach.
Developed senior relationships to expand IBM’s presence and brand awareness with strategic clients.
Participated in discussions with US and foreign government leaders, media and in other public events to advance IBM’s technology point of view.
| Tom RosamiliaContributed to increased revenue and reach by leveraging IBM’s public and private partnerships. | | | Senior Vice PresidentExpanded IBM’s presence and brand awareness with strategic clients by deepening senior relationships. | | | Served as a spokesperson in discussions with global government leaders, media, and at public events to further advance IBM’s technology point of view. | |
Grew Software revenue 12% at constant currency, with growth through all 4 quarters in 2022.
Increased the availability of our software as a service (SaaS) product portfolio across multiple cloud hyperscalers.
Delivered organic innovation across the product portfolio and added significant value through strategic acquisitions.
| MichelleMICHELLE H. BrowdyBROWDY | | | Senior Vice President and General Counsel | | | Provided legal and regulatory support for IBM’s growth initiatives globally, including supporting the company’s AI agenda at the research, regulatory and field level. | | | Continued to enhance IBM’s cybersecurity, privacy, data governance and AI ethics posture as regulatory focus on these issues continued to heighten around the world. | | | Focused on talent development globally to ensure availability of world class legal and regulatory skills to support IBM’s growth initiatives across geographies and business lines. | |
Provided legal and regulatory support for IBM’s growth initiatives globally, including driving substantial change in support of IBM’s Ecosystem transformation.
Government and Regulatory Affairs team helped support passage of the CHIPS Act and the EU Digital Markets Act, and ensured the orderly wind-down of the IBM Russia business.
Continued to enhance IBM’s cybersecurity, privacy, data governance and AI ethics posture as regulatory focus on these issues continued to heighten around the world.
*
Non-GAAP financial metrics.metric. See Appendix A for information on how we calculate these performance metrics. 2023442024 Notice of Annual Meeting & Proxy Statement | 20222023 Compensation Discussion and Analysis43
Following the process outlined above and based on business and individual performance, the Compensation Committee approved the 20222023 annual incentive payouts below for these NEOs: | Name | | | 20222023 Annual Incentive Payouts | (1) | | | J.J. Kavanaugh | | | $1,665,7601,730,430 | | | R.D. Thomas | | | 1,552,500 | | | G. Cohn | | | 1,832,800 | | | T. Rosamilia | | | 1,218,0601,848,600 | | | M.H. Browdy | | | 1,466,2401,516,800 | |
(1)
The named executive officers each had an incentive target equal to 135% of their salary for 2022.2023. 20232024 Compensation Decisions for Mr. Kavanaugh, Mr. Cohn,Thomas, Mr. RosamiliaCohn, and Ms. Browdy
The Committee also approved the following compensation elements for 2023:2024: base salary, annual incentive target, Performance Share Unit (PSU), Restricted Stock Unit (RSU) and Stock Option grants under the Long-Term Performance Plan. For Long-Term Incentive Plan grants, the mix of equity vehicles is 60% PSUs, 20% RSUs and 20% 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 the right balance relative to peers with which we compete for talent. For 2023,2024, based on the compensation decisions detailed below at target, approximately 73%75% of the NEOs’ (excluding the Chairman and CEO) pay is at risk. NEO 20232024 PAY MIX For 2024, 75% of the NEOs’ (excluding the Chairman and CEO) annual total target compensation is at risk. | | | | 2023 Cash(1) | | | 2023 Long-Term Incentive Awards(2) | | | 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 | | | | T. Rosamilia(3) | | | | | 894,000 | | | | | | 1,206,000 | | | | | | — | | | | | | — | | | | | | — | | | | M.H. Browdy | | | | | 936,000 | | | | | | 1,264,000 | | | | | | 3,780,000 | | | | | | 1,260,000 | | | | | | 1,260,000 | | |
| | | | 2024 Cash | | | 2024 Long-Term Incentive Awards(2) | | | Name | | | Salary Rate(1) | | | Annual Incentive Target | | | Performance Share Units | | | Restricted Stock Units | | | Stock Options | | | J.J. Kavanaugh | | | $1,170,000 | | | | $ | 1,580,000 | | | | | $ | 6,150,000 | | | | | $ | 2,050,000 | | | | | $ | 2,050,000 | | | | R.D. Thomas | | | 1,064,000 | | | | | 1,436,000 | | | | | | 5,700,000 | | | | | | 1,900,000 | | | | | | 1,900,000 | | | | G. Cohn | | | 1,170,000 | | | | | 1,580,000 | | | | | | 4,800,000 | | | | | | 1,600,000 | | | | | | 1,600,000 | | | | M.H. Browdy | | | 936,000 | | | | | 1,264,000 | | | | | | 3,780,000 | | | | | | 1,260,000 | | | | | | 1,260,000 | | |
(1)
Salary increases for the Named Executive Officers, if applicable, will be effective April 1, 2023.2024. (2)
PSUs, RSUs and Stock Options will bewere granted on February 21, 20232024 to the named executive officers, including the Chairman and the CEO. The actual number of units granted on this date will beare determined by dividing the value shown above by the average of IBM’s closing stock price for the 30 active trading days prior to the date of grant. The actual number of Stock Options granted on this date will beare 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 .16670.20 (to reflect the discounted value of Stock Options compared to full value awards). The performance period for the PSUs ends December 31, 2025,2026, and the award will pay out in February 2026.2027. RSUs and Stock Options will vest 25% per year on each anniversary of the date of grant.
(3)
Mr. Rosamilia will retire by June 30, 2023.
4420232024 Notice of Annual Meeting & Proxy Statement | 20222023 Compensation Discussion and Analysis45
Section 4: Additional Information Compensation Program as itIt Relates to Risk IBM management, the Compensation Committee and the Committee’s outside consultant review IBM’s compensation policies and practices, with a focus on incentive programs, to ensure that they do not encourage excessive risk taking. This review includes the cash incentive programs and the long-term incentive plans that cover executives and employees. Based on this comprehensive review, we concluded that our compensation program doesprograms do not encourage excessive risk taking for the following reasons: •
Our programs appropriately balance short- and long-term incentives, with approximately 72%75% of 20232024 annual total target compensation provided in equity for the Chairman and CEO, Vice Chairman, and SVPs as a group provided in equity.group. •
Our executive compensation program pays for performance against financial targets that are set to be challenging to motivate a high degree of business performance, with an emphasis on longer-term financial success and prudent risk management. •
Our incentive plans include a profit metric as a component of performance to promote disciplined progress toward financial goals. None of IBM’s incentive plans areis based solely on signings or revenue targets, which mitigates the risk of employees focusing exclusively on the short term. •
Qualitative factors beyond the quantitative financial metrics are a key consideration in the determination of individual executive compensation payments. How our executives achieve their financial results, integrate across lines of business and demonstrate leadership consistent with IBM values are key to individual compensation decisions. •
As explained in the 2023 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. •
Our stock ownership guidelines require that the Chairman and CEO, Vice Chairman, and each SVP hold a significant amount of IBM equity to further align their interests with stockholders over the long term. •
IBM has adopted a policy that requires a clawback of cash incentive payments in the event thatincentive-based compensation paid to an executive officer’s conduct leads toofficer if there is a restatement of IBM’s financial results.results that would have affected the amount of incentive-based compensation, regardless of whether the executive officer’s conduct lead to the restatement. Likewise, IBM’s equity plan has a clawback provision under which awards may be cancelled and certain gains repaid if a senioran 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. We are confident that our compensation program is aligned with the interests of our stockholders, rewards for performance and represents strong executive compensation governance practices. Equity Award Practices Under IBM’s long-standing practices and policies, all equity awards are approved before or on the date of grant. The exercise price of at-the-money Stock 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 as specified by the Compensation Committee. The approval process specifies the individual receiving the grant, the number of units or the value of the award, the exercise price or formula for determining the exercise price, if different from the average of the high and low market price of IBM common stock on the New York Stock Exchange on the grant date, and the date of grant. In the case of planned grant value, the number of shares granted are determined by dividing the planned value by the average of IBM’s closing stock price for the 30 active trading days prior to the date of grant for PSUs and RSUs. For Stock Options, the average IBM closing stock price is further adjusted by an option valuation factor to reflect the discounted value of Stock Options compared to full value awards. As with all compensation decisions, the independent members of the Board approve all equity awards for the Chairman and CEO, and ratify all equity awards for the Chief Financial Officer. In addition, all equity awards for the Vice Chairman and each SVP are approved by the Compensation Committee. All equity awards for employees other than the Chairman and CEO, Vice Chairman and SVPs are approved by the Chairman and CEO, Vice Chairman and SVPs 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. Equity awards granted as part of annual total compensation for senior leaders and other employees are made on specific cycle dates scheduled in 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 of the award. IBM does not have any plans, programs or agreements that would provide any payments to any of the named executive officers upon a change in control of IBM, a change in the named executive officer’s responsibilities or a constructive termination of the named executive officer. 2023462024 Notice of Annual Meeting & Proxy Statement | 20222023 Compensation Discussion and Analysis45
Ethical Conduct Every executive is held accountable to comply with IBM’s high ethical standards: IBM’s Values, including “Trust and Personal Responsibility in All 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. An executive’s compensation, including annual cash incentive payments, is tied to compliance with these standards; compliance is also a condition of IBM employment for each executive. IBM’s equity plans and agreements have a clawback provision — awards may be cancelled and certain gains repaid if an executive 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. In addition, approximately 1,7001,500 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 after leaving IBM. The Committee has also implemented the followingadopted, in accordance with SEC and NYSE requirements, a policy for the clawback of cash incentive paymentsto claw back incentive-based compensation from executive officers in the event an executive officer’s conduct leads toof a restatement of IBM’s financial results: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. | |
Hedging and Pledging Practices IBM has two seniormultiple corporate leadership teams:teams, including the Performance Team and the Acceleration Team. The Performance Team consists of approximately 85 of our most senior leaders who run IBM business units and geographies and includes the Chairman and CEO, Vice Chairman, and each 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. IBM does not allow any member of the IBM Board of Directors or any member of the Acceleration Team,its corporate leadership teams, including any named executive officer, to hedge the economic risk of their ownership of any IBM securities, which includes entering into any derivative transaction on IBM stock (e.g., any short-sale, prepaid variable forward contract, 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. Tax Considerations Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended, limits deductibility of compensation in excess of $1 million paid to IBM’s covered employees. A “covered employee”,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 Act), a deduction was available for performance-based compensation. Transition rules allow a deduction for performance-based compensation paid pursuant to a contract in effect as of November 2, 2017, that is not materially modified after such date. Although the tax deduction for performance-based compensation has been eliminated for awards after November 2, 2017, IBM continues to believe that a strong link between pay and performance is critical to align executive and stockholder interests. IBM and the Committee will continue to ensure that a significant portion of pay for our Vice Chairman and SVPs, including the Chairman and CEO, is at risk and subject to the attainment of performance goals. 4620232024 Notice of Annual Meeting & Proxy Statement | 20222023 Compensation Discussion and Analysis47
20222023 Summary Compensation Table and Related Narrative
20222023 Summary Compensation Table
| Name and Principal Position | | | | | | | | | | | | Stock | | Option | | Non-Equity Incentive Plan | | Change in Retention | | Change in Pension | | Nonqualified Deferred Compensation | | All Other | | | | | | | Name and Principal Position | | | | | | | | | | | | Stock | | Option | | Non-Equity Incentive Plan | | 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) | (a) | | Salary | (1) | | Bonus | (2) | | Awards | (3) | | Awards | (4) | | Compensation | (5) | | Value | (6) | | Earnings | (7) | | Compensation | (8)(9) | | Total | (10) | | Year (b) | | ($) (c) | | ($) (d) | | ($) (e) | | ($) (f) | | ($) (g) | | ($) (h) | | ($) (h) | | ($) (h) | | ($) (i) | | ($) (j) | | Year (b) | | ($) (c) | | ($) (d) | | ($) (e) | | ($) (f) | | ($) (g) | | ($) (h) | | ($) (h) | | ($) (i) | | ($) (j) | | | A. Krishna, Chairman and CEO | | 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 | | | 2023 | | | $ | 1,500,000 | | | | $ | 0 | | | | $ | 11,483,809 | | | $3,339,560 | | $3,510,000 | | | $ | 23,183 | | | | $ | 0 | | | $541,874 | | | $ | 20,398,426 | | | | 2021 | | | | 1,500,000 | | | | | 0 | | | | $ | 12,605,507 | | | 0 | | $2,940,000 | | N/A | | | | 0 | | | | | 0 | | | 505,452 | | | | 17,550,959 | | | 2022 | | | | 1,500,000 | | | | | 0 | | | | | 8,927,701 | | | 2,033,636 | | 3,480,000 | | | | 0 | | | | | 0 | | | 638,738 | | | | 16,580,075 | | | | 2020 | | | | 1,352,591 | | | | | 0 | | | | $ | 13,159,118 | | | 0 | | $2,181,000 | | N/A | | | | 42,806 | | | | | 0 | | | 274,167 | | | | 17,009,682 | | | 2021 | | | | 1,500,000 | | | | | 0 | | | | | 12,605,507 | | | 0 | | 2,940,000 | | | | 0 | | | | | 0 | | | 505,452 | | | | 17,550,959 | | | | J.J. Kavanaugh, Senior VP and CFO | | J.J. Kavanaugh, Senior VP, F&O 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 | | | 2023 | | | $ | 1,088,000 | | | | $ | 0 | | | | $ | 6,704,515 | | | $1,949,711 | | $1,730,430 | | | $ | 15,264 | | | | $ | 0 | | | $203,369 | | | $ | 11,691,289 | | | | 2021 | | | | 968,000 | | | | | 0 | | | | | 7,563,384 | | | 0 | | 1,437,700 | | 0 | | | | 0 | | | | | 0 | | | 200,534 | | | | 10,169,618 | | | 2022 | | | | 1,040,000 | | | | | 0 | | | | | 5,843,669 | | | 1,331,106 | | 1,665,760 | | | | 19,187 | | | | | 0 | | | 233,263 | | | | 10,132,985 | | | | 2020 | | | | 899,000 | | | | | 0 | | | | | 7,416,931 | | | 0 | | 1,176,300 | | 94,229 | | | | 0 | | | | | 0 | | | 159,836 | | | | 9,746,296 | | | 2021 | | | | 968,000 | | | | | 0 | | | | | 7,563,384 | | | 0 | | 1,437,700 | | | | 0 | | | | | 0 | | | 200,534 | | | | 10,169,618 | | | | G. Cohn, Vice Chairman(12) | | R.D. Thomas, Senior VP and Software Chief Commercial Officer(11) | | | 2022 | | | $ | 1,170,000 | | | | $ | 0 | | | | $ | 4,707,418 | | | $1,072,289 | | $1,832,800 | | N/A | | | | N/A | | | | $ | 0 | | | $169,418 | | | $ | 8,951,925 | | | 2023 | | | $ | 994,750 | | | | $ | 0 | | | | $ | 5,843,417 | | | $1,699,249 | | $1,552,500 | | | $ | 3,170 | | | | $ | 0 | | | $241,228 | | | $ | 10,334,314 | | | | 2021 | | | | 1,170,000 | | | | | 1,000,000 | | | | | 6,180,787 | | | 0 | | 1,548,400 | | N/A | | | | N/A | | | | | 0 | | | 2,417 | | | | 9,901,604 | | | G. Cohn, Vice Chairman | | | T. Rosamilia, Senior Vice President (12) | | 2023 | | | $ | 1,170,000 | | | | $ | 0 | | | | $ | 4,897,686 | | | $1,424,239 | | $1,848,600 | | | | N/A | | | | $ | 0 | | | $196,565 | | | $ | 9,537,090 | | | | 2022 | | | $ | 878,000 | | | | $ | 0 | | | | $ | 4,220,391 | | | $ 961,361 | | $1,218,060 | | $ 0 | | | $ | 0 | | | | $ | 0 | | | $384,606 | | | $ | 7,662,418 | | | 2022 | | | | 1,170,000 | | | | | 0 | | | | | 4,707,418 | | | 1,072,289 | | 1,832,800 | | | | N/A | | | | | 0 | | | 169,418 | | | | 8,951,925 | | | | 2021 | | | | 830,000 | | | | | 0 | | | | | 5,959,005 | | | 0 | | 1,064,000 | | 0 | | | | 0 | | | | | 0 | | | 250,119 | | | | 8,103,124 | | | 2021 | | | | 1,170,000 | | | | | 1,000,000 | | | | | 6,180,787 | | | 0 | | 1,548,400 | | | | N/A | | | | | 0 | | | 2,417 | | | | 9,901,604 | | | | M.H. Browdy, Senior VP and General Counsel | | 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 | | | 2023 | | | $ | 936,000 | | | | $ | 0 | | | | $ | 4,255,907 | | | $1,237,603 | | $1,516,800 | | | | N/A | | | | $ | 0 | | | $157,847 | | | $ | 8,104,157 | | | | 2021 | | | | 894,000 | | | | | 0 | | | | | 4,354,627 | | | 0 | | 1,266,300 | | N/A | | | | N/A | | | | | 0 | | | 135,930 | | | | 6,650,857 | | | 2022 | | | | 925,500 | | | | | 0 | | | | | 3,246,447 | | | 739,505 | | 1,466,240 | | | | N/A | | | | | 0 | | | 147,753 | | | | 6,525,445 | | | | 2020 | | | | 830,000 | | | | | 0 | | | | | 4,211,031 | | | 0 | | 1,109,520 | | N/A | | | | N/A | | | | | 0 | | | 124,112 | | | | 6,274,663 | | | 2021 | | | | 894,000 | | | | | 0 | | | | | 4,354,627 | | | 0 | | 1,266,300 | | | | N/A | | | | | 0 | | | 135,930 | | | | 6,650,857 | | |
Note: For assumptions used in determining the fair value of stock and option awards, see Note A (Significant Accounting Policies — Stock-Based Compensation) and Note U (Stock-Based Compensation) to IBM’s 20222023 Consolidated Financial Statements. (1)
Amounts in this column reflect the actual salary amount paid to each named executive officer during 2022.2023. (2)
Mr. Cohn’s offer letter included a cash sign-on payment; $1,000,000 of that was paid on December 31, 2021. (3)
Amounts in this column reflect the total Performance Share Units (PSUs) and Restricted Stock Units (RSUs). Amounts include the aggregate grant date fair values of PSUs at the Target number as described below, calculated in accordance with accounting guidance; these amounts reflect an adjustment for the exclusion of dividend equivalents. 2020–2022 PSUs (for subsequent years, the metrics and weightings were updated as disclosed in Section 1 of the Compensation Discussion and Analysis, but the Threshold, Target, and Max Attainment % and Payout %s remain the same 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% | |
* Note: The Relative ROIC modifier may further modify the final payout up or down by up to 20 points, based on IBM’s ROIC performance relative to broader market indices. (See the “Performance Share Unit Program” description in Section 1 of the Compensation Discussion and Analysis for additional detail on the ROIC Modifier). As a result, the total maximum number of PSUs earned could be up to 170% of the Target number.
At the Maximum number, these values for Mr. Krishna would be: 2023: $14,641,833; 2022: $11,382,727; 2021: $13,928,980; 2020: $14,540,788; for Mr. Kavanaugh: 2023: $8,548,269; 2022: $7,450,586; 2021: $8,357,494; 2020: $8,195,713;for Mr. Thomas: 2023: $7,450,269; for Mr. Cohn: 2023: $6,244,427; 2022: $6,001,912; 2021: $6,829,751; for Mr. Rosamilia: 2022: $5,380,999; 2021: $6,584,652; for Ms. Browdy: 2023: $5,426,231; 2022: $4,139,173; 2021: $4,811,810; 2020: $4,653,236.$4,811,810. Amounts also include the aggregate grant date fair values of RSUsRSU grants, if applicable, calculated in accordance with accounting guidance; these amounts reflect an adjustment for the exclusion of dividend equivalents. (4)
This column reflects the grant date fair value of stock option grants, if applicable, calculated in accordance with accounting guidance. (5)
Amounts in this column include payments under IBM’s Annual Incentive Program (AIP). All, in which all named executive officers participate in this program.participate. The performance period is the fiscal year (January 1 through December 31, 2022)2023). Mr. Krishna’s target was 200% of his base salary rate. All other named executive officers had an annual target of 135% of their 20222023 salary rate. See column (c) ofIn the 20222023 Grants of Plan-Based Awards Table, see column (c) for the Threshold payout ($0), column (d) for the targetTarget payout, and column (e) for the maximumMaximum payout. (6)
See the 2022 Retention Plan Narrative for a full descriptionAlthough accruals under each of the Retention Plan. Assumptions can be found immediately afterPlan and the 2022IBM Personal Pension Benefits Table. Although accruals under the Retention Plan stopped on December 31, 2007, changesfor 2021, 2022 and 2023, change in Retention Plan Value can occur based on changes to participants’ ages and actuarial assumptions. For 2020, 2021 and 2022, Change in Retention PlanPension 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 2022 for Mr. Kavanaugh ($169,948) and Mr. Rosamilia ($409,856) and 2021 for Mr.Kavanaugh ($17,604) and Mr. Rosamilia ($121,275).
(7)
See the 2022 Pension Benefits Narrative for a full description of the Pension Plan. Assumptions can be found immediately after the 20222023 Pension Benefits Table. Although accruals underMr. Kavanaugh is the IBM Personal Pensiononly eligible named executive officer in the Retention Plan stopped on December 31, 2007, changesand the change in Pension Value can occur based on changes to participants’ ages and actuarial assumptions. For 2020, 2021 and 2022, Change in PensionRetention Plan Value for the named executive officers was due to their age,
his benefit resulted in negative amounts in 2023 Notice of Annual Meeting & Proxy Statement | ($8,528), 2022 Summary Compensation Table($169,948), and Related Narrative 47
changes in the discount rate, interest crediting rate, and mortality table.2021 ($17,604). The change in Pension Value for the named executive officers resulted in the following negative amounts: 2022 for Mr. Krishna ($51,317); and Mr. Rosamilia ($114,465); 2021 for Mr. Krishna ($5,861), and Mr. Kavanaugh ($4,072) and Mr. Rosamilia ($10,820); and 2020 for Mr. Kavanaugh ($9,281).
(8)(7)
IBM does not provide above-market or preferential earnings on deferred compensation. See the 20222023 Nonqualified Deferred Compensation Narrative for information about deferred compensation. (9)(8)
Amounts in this column include the following for 2022:2023: for Mr. Krishna: tax reimbursements of $36,286$43,561 and IBM contributions to defined contribution plans of $355,200;$398,400; for Mr. Kavanaugh: IBM contributions to defined contribution plans of $120,356; for Mr. Thomas: tax reimbursements of $13,154$38,037 and IBM contributions to defined contribution plans of $198,066;$149,594; 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;$180,168; and for Ms. Browdy: IBM contributions to defined contribution plans of $131,508.$144,134. For 2021 and 2022, the amounts in this column include Travel Accident Insurance and Group Life Insurance; such amounts are not included for 2023 because the Travel Accident Insurance and Group Life Insurance are available to all employees and does not discriminate in favor of executive officers. See the 20222023 Summary Compensation Table Narrative below for a description and information about these items. (10)(9)
Amounts in this column also include the following perquisites for 2022:2023: for Mr. Krishna: personal financial planning, ground transportation, family attendance at business-related events, personal travel on company aircraft of $188,199,$46,299, and other personal expenses; for Mr. Kavanaugh: personal financial planning, annual executive physical, family attendance at business-related events, and other personal expenses; for Mr. Rosamilia: personal financial planning, ground transportation, personal security, annual executive physical, family attendance at business-related events of $28,554, personal travel on company aircraft of $135,839,$66,056; for Mr. Thomas: ground transportation, family attendance at business related events of $29,311, personal travel on company aircraft, and other personal expenses; for Mr. Cohn: personal travel on company aircraft, family attendance at business related events, and other personal expenses; and for Ms. Browdy: personal financial planning, ground transportation, and other personal expenses. See the 20222023 Summary Compensation Table Narrative below for a description and information about the aggregate incremental cost calculations for perquisites. (11)(10)
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. (12)(11)
Mr. Cohn and Mr. Rosamilia wereThomas was not a named executive officersofficer in the 20212022 or 2023 Proxy Statement; therefore, 20202021 and 2022 data isare excluded for them. Mr. Cohn was hired on December 28, 2020. Mr. Rosamilia will retire from the Company by June 30, 2023.him. 2022482024 Notice of Annual Meeting & Proxy Statement | 2023 Summary Compensation Table and Related Narrative
2023 Summary Compensation Table Narrative — All Other Compensation (Column (i)) Amounts in this column represent the following as applicable: Tax Reimbursements •
Amounts represent payments thatPayments by IBM has made to the named executive officers to cover taxes incurred by them for certain business-related taxable expenses.
•
These expenses, for a named executive officerwhich may include: 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).
IBM Contributions to Defined Contribution Plans •
Amounts represent IBM matching and automatic contributions to the individual accounts for each named executive officer under IBM’s 401(k) Plus and Excess 401(k) PlusSavings Plans.
•
Under IBM’s 401(k) Plus Plan, eligible participants can receive matching contributions, ranging from 2 to 6%, up to a percentage of eligible compensation (subject to Internal Revenue Code compensation limits), depending on a person’s date of hire and 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 2022, Messrs. Krishna, Kavanaugh and Rosamilia are eligible to receive matching contributions up to 6% of eligible pay. Mr. Cohn and Ms. Browdy are eligible for up to 5% matching contributions. The automatic contribution percentage was 2% for Messrs. Krishna, Kavanaugh, and Rosamilia; and 1% for Mr. Cohn and Ms. Browdy.
•
Under IBM’s Excess 401(k) Plus Plan, IBM makes matching contributions and automatic 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. The matching and automatic contributions for the Excess 401(k) Plus Plan for each named executive officer are the same percentages as described for the IBM 401(k) Plus Plan above.
•
See the 20222023 Nonqualified Deferred Compensation Narrative for additional details on the nonqualified deferred compensation plan.
Life and Travel Accident Insurance Premiums
•
Amounts represent insurance premiums paid by IBM on behalf of the named executive officers.
•
These executive officers are covered by life insurance policies under the same terms as other U.S. full-time regular employees.
•
Life insurance for executives hired by IBM U.S. before January 1, 2004, including Messrs. Krishna, Kavanaugh and Rosamilia, is two times salary plus annual incentive program target, with a maximum coverage amount of $2,000,000. Life insurance for executives hired by IBM U.S. on or after January 1, 2004, including Mr. Cohn and Ms. Browdy, is one times salary plus annual incentive program target, with a maximum coverage of $1,000,000.
•
In addition, IBM provides Travel Accident Insurance for most employees in connection with business travel. Travel Accident Insurance for all eligible employees and executives is up to five times salary plus annual incentive target with a maximum coverage amount of $15,000,000.
Perquisites The following describes perquisites (and their aggregate incremental cost calculations) provided to the named executive officers in 2022.2023. Personal Financial Planning In 2022,2023, IBM offered financial planning services with coverage generally up to $15,000 annually for senior U.S. executives, including each named executive officer. Personal Travel on Company Aircraft General Information •
Amounts represent the aggregate incremental cost to IBM for travel not directly related to IBM business. •
IBM’s security practices provide that all air travel by the Chairman and CEO, including personal travel, be on Company aircraft. IBM’s security practices for air travel are consistent
482023 Notice of Annual Meeting & Proxy Statement | 2022 Summary Compensation Table and Related Narrative
with best practices as assessed by independent third partythird-party security experts. •
The aggregate incremental cost for Mr. Krishna’s personal travel, is included in column (i) of the 2022 Summary Compensation Table. These amounts also include theincluding any aggregate incremental cost if any, of travel by their family members or other guests on both business and non-business occasions.occasions, is included in column (i) of the 2023 Summary Compensation Table. •
Additionally, personal travel or commutation in 20222023 on Company aircraft by named executive officers other than Mr. Krishna, and the aggregate incremental cost, if any, of travel by the officer’s family or other guests when accompanying the officer on both business and non-business occasions is also included. •
Also, from time to time, named executive officers who are members of the boards of directors of certain other companies and non-profit organizations travel on Company aircraft to those outside board meetings. These amounts may include travel related to participation on these outside boards. •
Any aircraft travel by named executive officers for an annual executive physical under the corporate wellness program is included in these amounts. Aggregate Incremental Cost Calculation •
The aggregate incremental cost for the use of Company aircraft for personal travel, including travel to outside boards, is calculated by multiplying the hourly variable maintenance cost rate for the specific aircraft by the number of flight hours used, plus the actual costs for fuel, parking, landing fees, crew expenses and catering. •
The maintenance rate for each aircraft is periodically reviewed by IBM’s flight operations team and adjusted as necessary to reflect changes in costs. •
The aggregate incremental cost includes deadhead flights (i.e., empty flights to and from the IBM hangar or any other location). •
The aggregate incremental cost for any charter flights is the full cost to IBM of the charter. Ground Transportation General Information •
IBM’s security practices provide that the Chairman and CEO be driven to and from work by IBM personnel in a car leased by IBM or by an authorized car service.
•
In addition, under IBM’s security practices, Additionally, the Chairman and CEO and his family may use a Company-leased car with an IBM driver or an authorized car service for non-business occasions. Further, the family of the Chairman and CEO may use a Company-leased car with an IBM driver or an authorized car service on non-business occasions or when accompanying them on business occasions.
•
Other named executive officers may use a Company-leased car with an IBM driver or an authorized car service for business-related transportation, and travel to outside board meetings and an annual executive physical under IBM’s corporate wellness program. Family members and other guests may accompany these named executive officers in a Company-leased car with an IBM driver or an authorized car service on these occasions. •
Amounts reflect the aggregate incremental cost, if any, for the above-referenced items. Aggregate Incremental Cost Calculation •
For the Company-leased car with an IBM driver, incremental 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. •
For an authorized car service, the incremental cost is the full cost to IBM for such service. Personal Security General Information •
Under IBM’s security practices, IBM provides security personnel for the Chairman and CEO on certain non-business occasions, and for his family on certain business and non-business occasions, or when accompanying them on business occasions. •
Amounts include the aggregate incremental cost, if any, of security personnel for those occasions. •
In addition, amounts also include the cost of home security systems and monitoring for the Chairman and CEO, and any other named executive officers, if applicable. 2024 Notice of Annual Meeting & Proxy Statement | 2023 Summary Compensation Table and Related Narrative 49
Aggregate Incremental Cost Calculation •
The aggregate incremental cost for security personnel is the cost of any commercial airfare to and from the destination, hotels, meals, car services, and salary and travel expenses of any additional subcontracted personnel if needed. •
The aggregate incremental cost for installation, maintenance, and monitoring services for home security systems reflects the full cost to IBM for these items. Annual Executive Physical •
Amounts represent any payments by IBM coversfor the cost of an annual executive physical for the named executive officers under IBM’s corporate wellness program.
•
Amounts represent any payments by IBM for the named executive officers under this program, if applicable.
Family Travel and Attendance at Business-Related Events •
Business-related events attended by the named executive officers and their family members may include meetings, dinners, and receptions with IBM’s clients, executive management or board members.
•
Amounts represent the aggregate incremental cost, if any, of travel and/or meals and entertainment for the family members of the named executive officers to attend business-related events.events, such as meetings, dinners, and receptions with IBM’s clients, executive management, or board members. Other Personal Expenses •
Amounts represent the cost of meals and lodging for the named executive officers who traveled for their annual executive physical under IBM’s corporate wellness program. •
Amounts also include expenses associated with participation on outside boards other than those disclosed as Personal Travel on Company Aircraft and Ground Transportation. •
Amounts also include items relating to business events and administrative charges incurred by executives. 2023502024 Notice of Annual Meeting & Proxy Statement | 20222023 Summary Compensation Table and Related Narrative49
20222023 Grants of Plan-Based Awards Table
| Name (a) Type of Award(1) | | Grant Date (b) | | Compensation Committee Approval Date | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts 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 | | Name (a) Type of Award(1) | | Grant Date (b) | | Compensation Committee Approval Date | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | Estimated Future Payouts Under Equity Incentive PlanAwards(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)
| | 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)
| | A. Krishna | | A. Krishna | | | AIP | | | | N/A | | | | | 1/31/2022 | | | | | 0 | | | | | 3,000,000 | | | | | 6,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | AIP | | | | N/A | | | | | 1/30/2023 | | | | $ | 0 | | | | $ | 3,000,000 | | | | $ | 6,000,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSU | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | 15,491 | | | | | 61,963 | | | | | 105,337 | | | | | | | | | | | | | | | | | | | | | | | | $ | 6,695,722 | | | PSU | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | 18,369 | | | | | 73,476 | | | | | 124,909 | | | | | | | | | | | | | | | | | | | | | | | | $ | 8,612,857 | | | | RSU | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 20,655 | | | | | | | | | | | | | | | | | | | $ | 2,231,979 | | | RSU | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 24,492 | | | | | | | | | | | | | | | | | | | | 2,870,952 | | | | SO | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 144,537 | | | | $ | 124.51 | | | | $ | 124.35 | | | | $ | 2,033,636 | | | SO | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 146,923 | | | | $ | 133.00 | | | | $ | 131.71 | | | | | 3,339,560 | | | | J.J. Kavanaugh | | J.J. Kavanaugh | | | AIP | | | | N/A | | | | | 1/31/2022 | | | | | 0 | | | | | 1,436,000 | | | | | 4,308,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | AIP | | | | N/A | | | | | 1/30/2023 | | | | | 0 | | | | | 1,479,000 | | | | | 4,437,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSU | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | 10,140 | | | | | 40,558 | | | | | 68,949 | | | | | | | | | | | | | | | | | | | | | | | | $ | 4,382,697 | | | PSU | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | 10,724 | | | | | 42,897 | | | | | 72,925 | | | | | | | | | | | | | | | | | | | | | | | | | 5,028,386 | | | | RSU | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 13,520 | | | | | | | | | | | | | | | | | | | $ | 1,460,971 | | | RSU | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 14,299 | | | | | | | | | | | | | | | | | | | | 1,676,129 | | | | SO | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 94,606 | | | | $ | 124.51 | | | | $ | 124.35 | | | | $ | 1,331,106 | | | SO | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 85,777 | | | | | 133.00 | | | | | 131.71 | | | | | 1,949,711 | | | | G. Cohn | | R.D. Thomas | | | AIP | | | | N/A | | | | | 1/31/2022 | | | | | 0 | | | | | 1,580,000 | | | | | 4,740,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | AIP | | | | N/A | | | | | 1/30/2023 | | | | | 0 | | | | | 1,350,000 | | | | | 4,050,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSU | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | 8,168 | | | | | 32,672 | | | | | 55,542 | | | | | | | | | | | | | | | | | | | | | | | | $ | 3,530,536 | | | PSU | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | 9,347 | | | | | 37,387 | | | | | 63,558 | | | | | | | | | | | | | | | | | | | | | | | | | 4,382,504 | | | | RSU | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 10,891 | | | | | | | | | | | | | | | | | | | $ | 1,176,881 | | | RSU | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 12,463 | | | | | | | | | | | | | | | | | | | | 1,460,913 | | | | SO | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 76,211 | | | | $ | 124.51 | | | | $ | 124.35 | | | | $ | 1,072,289 | | | SO | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 74,758 | | | | | 133.00 | | | | | 131.71 | | | | | 1,699,249 | | | | T. Rosamilia | | G. Cohn | | | AIP | | | | N/A | | | | | 1/31/2022 | | | | | 0 | | | | | 1,206,000 | | | | | 3,618,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | AIP | | | | N/A | | | | | 1/30/2023 | | | | | 0 | | | | | 1,580,000 | | | | | 4,740,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSU | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | 7,323 | | | | | 29,292 | | | | | 49,796 | | | | | | | | | | | | | | | | | | | | | | | | $ | 3,165,294 | | | PSU | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | 7,834 | | | | | 31,336 | | | | | 53,271 | | | | | | | | | | | | | | | | | | | | | | | | | 3,673,206 | | | | RSU | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 9,764 | | | | | | | | | | | | | | | | | | | $ | 1,055,098 | | | RSU | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 10,446 | | | | | | | | | | | | | | | | | | | | 1,224,480 | | | | SO | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 68,327 | | | | $ | 124.51 | | | | $ | 124.35 | | | | $ | 961,361 | | | SO | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 62,659 | | | | | 133.00 | | | | | 131.71 | | | | | 1,424,239 | | | | M.H. Browdy | | M.H. Browdy | | | AIP | | | | N/A | | | | | 1/31/2022 | | | | | 0 | | | | | 1,264,000 | | | | | 3,792,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | AIP | | | | N/A | | | | | 1/30/2023 | | | | | 0 | | | | | 1,264,000 | | | | | 3,792,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PSU | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | 5,633 | | | | | 22,532 | | | | | 38,304 | | | | | | | | | | | | | | | | | | | | | | | | $ | 2,434,808 | | | PSU | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | 6,808 | | | | | 27,230 | | | | | 46,291 | | | | | | | | | | | | | | | | | | | | | | | | | 3,191,901 | | | | RSU | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,511 | | | | | | | | | | | | | | | | | | | $ | 811,639 | | | RSU | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 9,077 | | | | | | | | | | | | | | | | | | | | 1,064,006 | | | | SO | | | | 2/21/2022 | | | | | 1/31/2022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 52,559 | | | | $ | 124.51 | | | | $ | 124.35 | | | | $ | 739,505 | | | SO | | | | 2/21/2023 | | | | | 1/30/2023 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 54,448 | | | | | 133.00 | | | | | 131.71 | | | | | 1,237,603 | | |
(1)
Type of Award: AIP = Annual Incentive Program PSU = Performance Share Unit RSU = Restricted Stock Unit SO = Stock Option Each of these awards was granted under IBM’s 1999 Long-Term Performance Plan (LTPP). See the 20222023 Summary Compensation Table for additional information on these types of awards. (2)
PSU awards will be adjusted based on performance and paid in February 2025.2026. (3)
The first tranche of the RSU awards and SO awards vestvested 25% on February 21, 2023, February 21, 2024,2024. The remaining tranches will vest February 21, 2025, February 21, 2026, and February 21, 2026,2027, 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 20222023 Potential Payments Upon Termination Narrative for a description of these eligibility requirements. (4)
All SOs have an exercise price equal to the average of the high and low prices of IBM common stock on the New York Stock Exchange (NYSE) as of the grant date. (5)
The amounts in this column reflect the aggregate grant date fair values of PSU, RSU, and SO awards calculated in accordance with accounting guidance. The values shown for the PSU awards are based on the Target number, as described in the 20222023 Summary Compensation Table. The values shown for the PSUs, RSUs, and RSUsSO awards reflect an adjustment for the exclusion of dividend equivalents. 5020232024 Notice of Annual Meeting & Proxy Statement | 20222023 Grants of Plan-Based Awards Table51
20222023 Outstanding Equity Awards at Fiscal Year-End Table and Related Narrative
Option Awards (Columns (b) – (f)) General Terms •
In accordance with IBM’s Long-Term Performance Plan (LTPP), the exercise price of stock options is not less than the average of the high and low prices of IBM common stock on the New York Stock Exchange (NYSE) on the date of grant. •
Options generally expire ten years after the date of grant.
•
The option recipient must remain employed by IBM through each vesting date in order to receive any potential payout value, unless they meet certain requirements to be eligible for continued vesting.
•
IBM has not granted any option awards that are Equity Incentive Plan Awards. Stock Awards (Columns (g) – (j)) Number of Shares or Units of Stock That Have Not Vested (Column (g)) The amounts in this column are the number of RSUs or RRSUs that were outstanding as of December 31, 2022.2023. Market Value of Shares or Units of Stock That Have Not Vested (Column (h)) The amounts in this column are the value of the RSU or 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 20222023 fiscal year ($140.89)163.55). Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (Column (i)) The amounts in this column are the number of PSUs or RPSUs that were outstanding as of December 31, 2022.2023. Performance Share Units and retention Performance Share Units
•
Amounts in column (i) reflect the Target number for each PSU and RPSU award. •
The performance criteria for IBM PSUs and RPSUs is based on cumulative three-year rolling targets. Therefore, measuring annual performance against these targets is not meaningful. •
See Section 1 of the 20222023 Compensation Discussion and Analysis, as well as the 20222023 Summary Compensation Table, for a detailed description of the PSU program, and RPSUs, including payout calculations. •
The table below provides the payout levels for all outstanding PSU and RPSU awards for each of the named executive officers. 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). 20222023 Outstanding PSU and RPSU Award Payout Levels
| Name | | Grant Date | | Threshold | | Target | | Maximum | | Name | | Grant Date | | Threshold | | Target | | Maximum | | | A. Krishna | | | | 12/17/2019 | | | | | 73,029 | | | | | 91,286 | | | | | 109,543 | | | A. Krishna | | | | 02/21/2022 | | | | | 15,491 | | | | | 61,963 | | | | | 105,337 | | | | | | | | 06/08/2021 | | | | | 15,980 | | | | | 63,918 | | | | | 108,661 | | | | | | | 02/21/2023 | | | | | 18,369 | | | | | 73,476 | | | | | 124,909 | | | | | | | | 02/21/2022 | | | | | 15,491 | | | | | 61,963 | | | | | 105,337 | | | J.J. Kavanaugh | | | | 02/21/2022 | | | | | 10,140 | | | | | 40,558 | | | | | 68,949 | | | | J.J. Kavanaugh | | | | 06/08/2021 | | | | | 9,588 | | | | | 38,351 | | | | | 65,197 | | | | | | | 02/21/2023 | | | | | 10,724 | | | | | 42,897 | | | | | 72,925 | | | | | | | | 02/21/2022 | | | | | 10,140 | | | | | 40,558 | | | | | 68,949 | | | R.D. Thomas | | | | 02/21/2022 | | | | | 7,886 | | | | | 31,545 | | | | | 53,627 | | | | G. Cohn | | | | 01/04/2021 | | | | | 4,748 | | | | | 18,990 | | | | | 32,283 | | | | | | | 02/21/2023 | | | | | 9,347 | | | | | 37,387 | | | | | 63,558 | | | | | | | | 02/21/2022 | | | | | 8,168 | | | | | 32,672 | | | | | 55,542 | | | G. Cohn | | | | 02/21/2022 | | | | | 8,168 | | | | | 32,672 | | | | | 55,542 | | | | T. Rosamilia | | | | 06/08/2021 | | | | | 7,554 | | | | | 30,216 | | | | | 51,367 | | | | | | | 02/21/2023 | | | | | 7,834 | | | | | 31,336 | | | | | 53,271 | | | | | | | | 02/21/2022 | | | | | 7,323 | | | | | 29,292 | | | | | 49,796 | | | M.H. Browdy | | | | 02/21/2022 | | | | | 5,633 | | | | | 22,532 | | | | | 38,304 | | | | M.H. Browdy | | | | 06/08/2021 | | | | | 5,520 | | | | | 22,081 | | | | | 37,538 | | | | | | | 02/21/2023 | | | | | 6,808 | | | | | 27,230 | | | | | 46,291 | | | | | | | | 02/21/2022 | | | | | 5,633 | | | | | 22,532 | | | | | 38,304 | | | |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (Column (j)) The amounts in this column are the values of PSU and RPSU awards disclosed in column (i), 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 20222023 fiscal year ($140.89)163.55). 2023522024 Notice of Annual Meeting & Proxy Statement | 20222023 Outstanding Equity Awards at Fiscal Year-End Table and Related Narrative51
20222023 Outstanding Equity Awards at Fiscal Year-End Table
| | | Option Awards | | Stock Awards | | | | Option Awards | | Stock Awards | | | | | Number of Securities Underlying Unexercised Options | | | Number of Securities Underlying Unexercised Options (#) | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned | | Option Exercise | | Option | | | | | | | | | | | | Number of Shares or Units of Stock That Have | | Market Value of Shares or Units of Stock That Have | | | | | | | | | | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have | | | | Number of Securities Underlying Unexercised Options | | | Number of Securities Underlying Options (#) | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned | | Option Exercise | | Option | | | | | | | | | | | | Number of Shares or Units That Have | | Market Value of Shares or Units That Have | | | | | | | | | | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have | | | Name | | (#) | | | Options | | Price | (2) | | Expiration | | | | | | | | | | | | Not Vested | (3) | | Not Vested | (4) | | | | | | | | | | | | Not Vested | (5) | | Not Vested | (4) | Name | | (#) | | | Options | | Price | (2) | | Expiration | | | | | | | | | | | | Not Vested | (3) | | Not Vested | (4) | | | | | | | | | | | | Not Vested | (5) | | Not Vested | (4) | | (a) | | Exercisable | | Unexercisable | (1) | | (#) | | ($) | | Date | | Type of | | Grant | | (#) | | ($) | | Type of | | Grant | | (#) | | ($) | | (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) | | Grant Date | | (b) | | (c) | | (d) | | (e) | | (f) | | Award | | Date | | (g) | | (h) | | Award | | Date | | (i) | | (j) | | | A. Krishna | | | | 0 | | | | | 144,537 | | | | | N/A | | | | $ | 124.51 | | | | | 02/20/2032 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | A. Krishna | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RRSU | | | | | 12/11/18 | | | 33,328 | | | $ | 4,695,582 | | | | | RPSU | | | | | 12/17/19 | | | 91,286 | | | $ | 12,861,285 | | | 02/21/22 | | | | 36,134 | | | | | 108,403 | | | | | N/A | | | | $ | 124.51 | | | | | 02/20/32 | | | | | RSU | | | | | 06/08/20 | | | 10,091 | | | $ | 1,650,383 | | | | | PSU | | | | | 02/21/22 | | | 61,963 | | | $ | 10,134,049 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 06/07/19 | | | 4,022 | | | | 566,660 | | | | | PSU | | | | | 06/08/21 | | | 63,918 | | | | 9,005,407 | | | 02/21/23 | | | | 0 | | | | | 146,923 | | | | | N/A | | | | | 133.00 | | | | | 02/20/33 | | | | | RSU | | | | | 06/08/21 | | | 17,210 | | | | 2,814,696 | | | | | PSU | | | | | 02/21/23 | | | 73,476 | | | | 12,017,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 06/08/20 | | | 20,182 | | | | 2,843,442 | | | | | PSU | | | | | 02/21/22 | | | 61,963 | | | | 8,729,967 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 02/21/22 | | | 15,492 | | | | 2,533,717 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 06/08/21 | | | 25,814 | | | | 3,636,934 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 02/21/23 | | | 24,492 | | | | 4,005,667 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 02/21/22 | | | 20,655 | | | | 2,910,083 | | | | | | | | | | | | | | | | | | | | Total | | | | 36,134 | | | | | 255,326 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 67,285 | | | $ | 11,004,463 | | | | | | | | | | | | | 135,439 | | | $ | 22,151,049 | | | | Total | | | | 0 | | | | | 144,537 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 104,001 | | | $ | 14,652,701 | | | | | | | | | | | | | 217,167 | | | $ | 30,596,659 | | | J.J. Kavanaugh | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | J.J. Kavanaugh | | | | 94,606 | | | | | N/A | | | | $ | 124.51 | | | | | 02/20/2032 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 02/21/22 | | | | 23,651 | | | | | 70,955 | | | | | N/A | | | | $ | 124.51 | | | | | 02/20/32 | | | | | RSU | | | | | 06/08/20 | | | 5,688 | | | $ | 930,272 | | | | | PSU | | | | | 02/21/22 | | | 40,558 | | | $ | 6,633,261 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 06/07/19 | | | 3,889 | | | $ | 547,921 | | | | | PSU | | | | | 06/08/21 | | | 38,351 | | | $ | 5,403,272 | | | 02/21/23 | | | | 0 | | | | | 85,777 | | | | | N/A | | | | | 133.00 | | | | | 02/20/33 | | | | | RSU | | | | | 06/08/21 | | | 10,326 | | | | 1,688,817 | | | | | PSU | | | | | 02/21/23 | | | 42,897 | | | | 7,015,804 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 06/08/20 | | | 11,376 | | | | 1,602,765 | | | | | PSU | | | | | 02/21/22 | | | 40,558 | | | | 5,714,217 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 02/21/22 | | | 10,140 | | | | 1,658,397 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 06/08/21 | | | 15,489 | | | | 2,182,245 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 02/21/23 | | | 14,299 | | | | 2,338,601 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 02/21/22 | | | 13,520 | | | | 1,904,833 | | | | | | | | | | | | | | | | | | | | Total | | | | 23,651 | | | | | 156,732 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 40,453 | | | $ | 6,616,087 | | | | | | | | | | | | | 83,455 | | | $ | 13,649,065 | | | | Total | | | | 0 | | | | | 94,606 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 44,274 | | | $ | 6,237,764 | | | | | | | | | | | | | 78,909 | | | $ | 11,117,489 | | | R.D. Thomas | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | G. Cohn | | | | | | | | | 76,211 | | | | | N/A | | | | $ | 124.51 | | | | | 02/20/2032 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 02/21/22 | | | | 18,395 | | | | | 55,188 | | | | | N/A | | | | $ | 124.51 | | | | | 02/20/32 | | | | | RRSU | | | | | 02/11/20 | | | 36,782 | | | $ | 6,015,696 | | | | | PSU | | | | | 02/21/22 | | | 31,545 | | | $ | 5,159,185 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RRSU | | | | | 12/28/20 | | | 23,151 | | | $ | 3,261,744 | | | | | PSU | | | | | 01/04/21 | | | 18,990 | | | $ | 2,675,501 | | | 02/21/23 | | | | 0 | | | | | 74,758 | | | | | N/A | | | | | 133.00 | | | | | 02/20/33 | | | | | RSU | | | | | 06/08/20 | | | 3,673 | | | | 600,719 | | | | | PSU | | | | | 02/21/23 | | | 37,387 | | | | 6,114,644 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 01/04/21 | | | 15,339 | | | | 2,161,112 | | | | | PSU | | | | | 02/21/22 | | | 32,672 | | | | 4,603,158 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 06/08/21 | | | 6,885 | | | | 1,126,042 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 02/21/22 | | | 10,891 | | | | 1,534,433 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 02/21/22 | | | 7,887 | | | | 1,289,919 | | | | | | | | | | | | | | | | | | | | | Total | | | | 0 | | | | | 76,211 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 49,381 | | | $ | 6,957,289 | | | | | | | | | | | | | 51,662 | | | $ | 7,278,659 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 02/21/23 | | | 12,463 | | | | 2,038,324 | | | | | | | | | | | | | | | | | | | | | T. Rosamilia | | | | 68,327 | | | | | N/A | | | | $ | 124.51 | | | | | 02/20/2032 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | | 18,395 | | | | | 129,946 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 67,690 | | | $ | 11,070,700 | | | | | | | | | | | | | 68,932 | | | $ | 11,273,829 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 06/07/19 | | | 3,889 | | | $ | 547,921 | | | | | PSU | | | | | 06/08/21 | | | 30,216 | | | $ | 4,257,132 | | | G. Cohn | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 06/08/20 | | | 8,807 | | | | 1,240,818 | | | | | PSU | | | | | 02/21/22 | | | 29,292 | | | | 4,126,950 | | | 02/21/22 | | | | 19,052 | | | | | 57,159 | | | | | N/A | | | | $ | 124.51 | | | | | 02/20/32 | | | | | RSU | | | | | 01/04/21 | | | 10,226 | | | $ | 1,672,462 | | | | | PSU | | | | | 02/21/22 | | | 32,672 | | | $ | 5,343,506 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 06/08/21 | | | 12,204 | | | | 1,719,422 | | | | | | | | | | | | | | | | | | | | 02/21/23 | | | | 0 | | | | | 62,659 | | | | | N/A | | | | | 133.00 | | | | | 02/20/33 | | | | | RSU | | | | | 02/21/22 | | | 8,169 | | | | 1,336,040 | | | | | PSU | | | | | 02/21/23 | | | 31,336 | | | | 5,125,003 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 02/21/22 | | | 9,764 | | | | 1,375,650 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 02/21/23 | | | 10,446 | | | | 1,708,443 | | | | | | | | | | | | | | | | | | | | | Total | | | | 0 | | | | | 68,327 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 34,664 | | | $ | 4,883,811 | | | | | | | | | | | | | 59,508 | | | $ | 8,384,082 | | | Total | | | | 19,052 | | | | | 119,818 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 28,841 | | | $ | 4,716,945 | | | | | | | | | | | | | 64,008 | | | $ | 10,468,509 | | | | M.H. Browdy | | | | 52,559 | | | | | N/A | | | | $ | 124.51 | | | | | 02/20/2032 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | M.H. Browdy | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 06/07/19 | | | 2,884 | | | $ | 406,327 | | | | | PSU | | | | | 06/08/21 | | | 22,081 | | | $ | 3,110,992 | | | 02/21/22 | | | | 13,139 | | | | | 39,420 | | | | | N/A | | | | $ | 124.51 | | | | | 02/20/32 | | | | | RSU | | | | | 06/08/20 | | | 3,231 | | | $ | 528,430 | | | | | PSU | | | | | 02/21/22 | | | 22,532 | | | $ | 3,685,109 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 06/08/20 | | | 6,460 | | | | 910,149 | | | | | PSU | | | | | 02/21/22 | | | 22,532 | | | | 3,174,534 | | | 02/21/23 | | | | 0 | | | | | 54,448 | | | | | N/A | | | | | 133.00 | | | | | 02/20/33 | | | | | RSU | | | | | 06/08/21 | | | 5,945 | | | | 972,305 | | | | | PSU | | | | | 02/21/23 | | | 27,230 | | | | 4,453,467 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 06/08/21 | | | 8,918 | | | | 1,256,457 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 02/21/22 | | | 5,634 | | | | 921,441 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 02/21/22 | | | 7,511 | | | | 1,058,225 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | RSU | | | | | 02/21/23 | | | 9,077 | | | | 1,484,543 | | | | | | | | | | | | | | | | | | | | | Total | | | | 0 | | | | | 52,559 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 25,773 | | | $ | 3,631,158 | | | | | | | | | | | | | 44,613 | | | $ | 6,285,526 | | | Total | | | | 13,139 | | | | | 93,868 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 23,887 | | | $ | 3,906,719 | | | | | | | | | | | | | 49,762 | | | $ | 8,138,576 | | |
Type of Award: PSU = Performance Share Unit RPSU = Retention Performance Share Unit
RSU = Restricted Stock Unit RRSU = Retention Restricted Stock Unit (1)
The stock option awards granted vest 25% per year on the first through fourth anniversaries of the respective grant dates.dates, provided the individual remains employed through each vesting date, unless they meet certain requirements to be eligible for continued vesting. (2)
The exercise prices shown in this column are equal to the high and low prices of IBM common stock on the New York Stock Exchange as of the grant date. (3)
The amounts shown in column (g) of the 20222023 Outstanding Equity Awards at Fiscal Year-End Table are unvested RSU and RRSU awards. See the 20222023 Compensation Discussion and Analysis and the 20222023 Summary Compensation Table for additional information on these types of awards. Mr. Krishna’s and Mr. Cohn’sThomas’ RRSU awards vestaward vests on the anniversary of the grant date in 2023 according to the vesting schedule in the table below,2024 and 2025 provided they arehe is an employee of IBM on each vesting date. The Vesting Schedule for Unvested RSUs table below shows the vesting schedules for these outstanding awards. In 2019, 2020, 2021, 2022, and 2021,2023, each named executive officer other than Mr. Cohn received RSU awards that vest 25% per year on the first through the fourth anniversaries of the grant date (Mr. Cohn was hired at the end of 2020, so his RSU granted in January 2021 vests 25% per year on the first through the fourth anniversaries of the grant date). In 2022 each named executive officer received RSU awards that vest 25% per year on the first through the fourth anniversaries of the grant date. (4)
Values in these columns are 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 20222023 fiscal year ($140.89)163.55). (5)
The amounts shown in column (i) of the 20222023 Outstanding Equity Awards at Fiscal Year-End Table are PSU and RPSU awards that have not yet vested. See the 20222023 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 Named Executive Officers are paid out in February following the end of the respective performance period. 5220232024 Notice of Annual Meeting & Proxy Statement | 20222023 Outstanding Equity Awards at Fiscal Year-End Table and Related Narrative53
Vesting Schedule for Unvested RSUs and RRSUs
| | | | | | | | | | | | | | | | Vesting Schedule | | | Name | | | Type of Award | | | Grant Date | | | 2023 | | | 2024 | | | 2025 | | | 2026 | | | A. Krishna | | | | | 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 | | | | J.J. Kavanaugh | | | | | 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 | | | | G. Cohn | | | | | 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 | | | | T. Rosamilia | | | | | 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 | | | | M.H. Browdy | | | | | 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 for Unvested PSUs and RPSUs
| | | | | | | | | | Vesting Schedule | | | Name | | | Grant Date | | | Dec-2023 | | | Dec-2024 | | | A. Krishna | | | | | 12/17/2019 | | | | | | 91,286 | | | | | | | | | | | | | | | 06/08/2021 | | | | | | 63,918 | | | | | | | | | | | | | | | 02/21/2022 | | | | | | | | | | | | 61,963 | | | | J.J. Kavanaugh | | | | | 06/08/2021 | | | | | | 38,351 | | | | | | | | | | 02/21/2022 | | | | | | | | | | | | 40,558 | | | | G. Cohn | | | | | 01/04/2021 | | | | | | 18,990 | | | | | | | | | | | | | | | 02/21/2022 | | | | | | | | | | | | 32,672 | | | | T. Rosamilia | | | | | 06/08/2021 | | | | | | 30,216 | | | | | | | | | | | | | | | 02/21/2022 | | | | | | | | | | | | 29,292 | | | | M.H. Browdy | | | | | 06/08/2021 | | | | | | 22,081 | | | | | | | | | | | | | | | 02/21/2022 | | | | | | | | | | | | 22,532 | | |
20222023 Option Exercises and Stock Vested Table
| | | Option Awards | | Stock Awards(1) | | | | Option Awards | | Stock Awards(1) | | | 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 ($) (e) | | Name (a) | | Number of Shares Acquired on Exercise (#) (b) | | Value Realized on Exercise ($) (c) | | Number of Shares Acquired on Vesting (#) (d) | | Value Realized on Vesting ($) (e) | | | A. Krishna | | | | 0 | | | | $ | 0 | | | | | 196,477 | | | | $ | 27,919,807 | | | A. Krishna | | | | 0 | | | | $ | 0 | | | | | 206,185 | | | | $ | 32,883,416 | | | | J.J. Kavanaugh | | | | 0 | | | | | 0 | | | | | 45,165 | | | | | 6,372,901 | | | J.J. Kavanaugh | | | | 0 | | | | | 0 | | | | | 50,335 | | | | | 7,701,524 | | | | G. Cohn | | | | 0 | | | | | 0 | | | | | 40,617 | | | | | 5,721,214 | | | R.D. Thomas | | | | 0 | | | | | 0 | | | | | 43,649 | | | | | 6,509,506 | | | | T. Rosamilia | | | | 0 | | | | | 0 | | | | | 36,725 | | | | | 5,182,916 | | | G. Cohn | | | | 0 | | | | | 0 | | | | | 46,938 | | | | | 7,489,153 | | | | M.H. Browdy | | | | 0 | | | | | 0 | | | | | 26,820 | | | | | 3,785,050 | | | M.H. Browdy | | | | 0 | | | | | 0 | | | | | 29,511 | | | | | 4,504,848 | | |
(1)
Amounts shown in these columns reflect PSU, RPSU, RSU, and RRSU awards that vested during 2022.2023. The PSU and RPSU award for the 2020-20222021-2023 performance period vested on December 31, 2022,2023, and paid out to each named executive officer on February 1, 2023;2024; 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 ($140.89)163.55). See the Compensation Discussion and Analysis and the 20222023 Summary Compensation Table for details on these types of awards.
Pay Ratio54
The ratio of the CEO’s annual total compensation to that of the median employee’s annual total compensation is 271:1. This ratio is based on annual total compensation of $16,580,075 for the CEO (as reported in the Summary Compensation Table) and $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 on that date; all foreign currencies were converted to U.S. dollars.
20232024 Notice of Annual Meeting & Proxy Statement | 20222023 Outstanding Equity Awards at Fiscal Year-End Table and Related Narrative53
20222023 Retention Plan Narrative
General Description and Purpose During the mid-1990s, IBM faced challenges that many thought put its very existence at risk. Some key leaders were recruited away from IBM at this time and a retention plan, formally called the “IBM Supplemental Executive Retention Plan” (Retention Plan), was created to help retain the caliber of senior leaders needed to turn IBM around, preserve its long-term viability and position it for growth in the future. The Retention Plan is a nonqualified deferred compensation plan, which is unfunded, that provides for payment of an annual benefit if the participant satisfies the age, service, pay, and job level requirements. The Retention Plan is a U.S. Plan and eligibility is based on U.S. employment. Mr. Kavanaugh is eligible for a Retention Plan benefit. The Retention Plan was closed to new participants effective May 1, 2004, and future accruals under the Retention Plan stopped on December 31, 2007. A participant’s Retention Plan benefit does not consider pay earned or service performed after such date, 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. The Retention Plan is discussed in its own section instead of in the Pension Benefits section, and the amounts below are separately presented in the 2022 Retention Plan Table and are not included in the 2022 Pension Benefits Table.
The 2022 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. Mr. Kavanaugh and Mr. Rosamilia are eligible for a benefit under the Retention Plan. Mr. Krishna, Mr. Cohn and Ms. Browdy are not eligible for a benefit under the Retention Plan.
Description of Retention Plan
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The Retention Plan provides for payment of an annual benefit as long as the participant satisfies the age, service, pay, and job level requirements.
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Effective July 1, 1999, IBM amended the Retention Plan was amended to provide a new benefit formula, but allowed participants who met certain age, service, and pay level conditions as of June 30, 1999 to continue to earn benefits under the prior formula if the prior formula provides a greater benefit.
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Retention Plan benefits are subject to forfeiture and rescission if an executive is terminated for cause or engages in competitive or other activity detrimental to IBM during or following employment. The Retention Plan is separately presented in the 2023 Retention Plan Table and is not included in the 2023 Pension Benefits Table.
Material Terms and Conditions: 1995 Retention Plan •
The benefits provided under the Retention Plan benefit for Mr. Kavanaugh areis determined under the Retention Plan formula in effect prior to the July 1, 1999 amendment (1995 Retention Plan). •
Benefits are available under the 1995 Retention Plan only if at the time a participant terminates employment, becomes disabled or dies on or after meetingseparates from service they meet the early retirement age and service requirement, holds an executive-level position immediately prior to termination or death,separation from service, and has final average pay of at least $160,000 immediately prior to termination, disability or death.$160,000. •
The benefit provided under the 1995 Retention Plan is payable only as an annuity beginning on the first day of the
month following termination of employment (subject to a six-month delay for “specified employees” as required under Section 409A of the Internal Revenue Code).
•
While Mr. Kavanaugh’s benefit is determined under the 1995 Retention Plan, he was partially grandfathered under this formula which means that his accruals stopped December 31, 2003 and the threshold to determine his benefit is $233,400 instead of $311,400 for fully grandfathered participants. If Mr. Kavanaugh terminates employment on or after age 60, his Retention Plan benefit expressed as an annual single life annuity is equal to: •
If the participant terminates employment before age 60, the annual single life annuity resulting from the sum of the amounts specified in (1) through (4) is reduced as specified in the Retention Plan. For example, if a participant terminates at age 59, the benefit is reduced by 3%, at age 58, by 7%, and at age 57, by 11%.
•
The benefit of a participant in the 1995 Retention Plan will not be less than the benefit that would be provided if the participant were in the 1999 Retention Plan, as described in the next subsection.
Material Terms and Conditions: 1999 Retention Plan
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The benefits provided under the Retention Plan to Mr. Rosamilia are determined under the Retention Plan formula in effect on and after the July 1, 1999 amendment (1999 Retention Plan).
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Benefits are available under the 1999 Retention Plan if a participant holds an executive-level position immediately prior to termination or death, has final average pay in excess of $405,400 on both January 1, 2007 and immediately prior to termination or death, and either:
—
Terminates employment for any reason other than cause or dies, in each case after attaining age 60 and completing at least five years of service; or
—
Terminates employment for any reason other than cause or dies, in each case after attaining age 55 and completing at least 15 years of service and either becomes disabled (as determined under IBM’s long-term disability plan), or if approved by the Board in the case of the two highest
542023 Notice of Annual Meeting & Proxy Statement | 2022 Retention Plan Narrative
paid officers (and if approved by the Compensation Committee and the chairman and chief executive officer in the case of any other officer of IBM).
•
If the participant terminates employment after attaining age 60 and completing at least five years of service, the 1999 Retention Plan benefit expressed as an annual single life annuity is equal to:
•
In no event will the sum of the amounts in (1) and (2) exceed 65% times final average pay times a fraction (no greater than 1), the numerator of which is the participant’s years of service and the denominator of which is 35.
•
A participant who terminates employment after attaining age 55, but prior to attaining age 60, who completes at least 15 years of service, and who receives Compensation Committee and chairman and chief executive officer approval (or Board approval in the case of the two highest paid officers) as described above, will receive a reduced single life annuity. The reduced single life annuity will be determined by reducing the sum of the amounts specified in (1) and (2) by 0.5% for each month that the benefit commencement date precedes age 60.
Compensation Elements Included in Calculations •
The definitions of eligible final average pay and eligible compensation for purposes of the Retention Plan have the same meanings as under the Pension Credit Formula in the IBM Personal Pension Plan.
Funding
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The Retention Plan is unfunded and maintained as a book reserve (notional) account.
•
No funds are set aside in a trust or otherwise; participants in the Retention Plan are general unsecured creditors of IBM regarding the payment of their Retention Plan benefits.
Policy Regarding Extra Years of Credited Service •
Generally, a participant’s years of credited service for benefits are based on the years an employee participated in the IBM Personal Pension Plan through December 31, 2007, the date accrual of future benefits stopped. Available Forms of Payment •
A participant’s benefit is only payable in the form of an annuity with monthly benefit payments beginning on the first day of the month following termination of employmentseparation from service (subject to a six-month delay for “specified employees” as required under Section 409A of the Internal Revenue
Code)tax law). Lump sum payments are not available under the Retention Plan.
•
A participant may elect to receive his or her benefit in the form of a single life annuity or in certain other actuarially equivalent forms of payment.
Annual Retention Plan Benefit •
The annual Retention Plan benefit that was earned as of December 31, 2007 and that is payable as a single life annuity beginning at the earliest unreduced retirement age (as defined in the next subsection) for each eligible named executive officerMr. Kavanaugh is detailed in the table below. | Name | | Annual Retention Plan Benefit at Earliest Unreduced Retirement Age | | Name | | Annual Retention Plan Benefit at Earliest Unreduced Retirement Age | | | J.J. Kavanaugh | | | $ | 11,785 | | | J.J. Kavanaugh | | | $ | 10,097 | | | | T. Rosamilia | | | | 84,832 | | | |
Present Value of Accumulated Benefit •
The present value of accumulated benefit shown in the 20222023 Retention Plan Table below is the value as of December 31, 20222023 of the annual Retention Plan benefit that was earned as of December 31, 2007. •
The earliest unreduced retirement age is the earliest age an eligible named executive officer may start receiving the Retention Plan benefit without a reduction for early commencement. As of December 31, 2022, Mr. Rosamilia reached the earliest unreduced retirement age. Because Mr. Kavanaugh did not attain age 60 by December 31, 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 assumptionsage are described immediately following the 20222023 Pension Benefits Table.
20222023 Retention Plan Table
| | | | | Number of Years Credited | | Present Value of Accumulated | | Payments During Last | | | | | | Number of Years Credited | | Present Value of Accumulated | | Payments During Last | | | | | | | Service | (1) | | Benefit | (2) | | Fiscal Year | | | | | | Service | (1) | | Benefit | (2) | | Fiscal Year | | | Name (a) | | Plan Name (b) | | (#) (c) | | ($) (d) | | ($) (e) | | Name (a) | | Plan Name (b) | | (#) (c) | | ($) (d) | | ($) (e) | | | J.J. Kavanaugh | | Retention Plan | | | | 12 | | | | $ | 139,638 | | | | $ | 0 | | | J.J. Kavanaugh | | Retention Plan | | | | 12 | | | | $ | 131,110 | | | | $ | 0 | | | | T. Rosamilia | | Retention Plan | | | | 25 | | | | | 1,174,429 | | | | | 0 | | | |
(1)
Reflects years of credited service as of December 31, 2007, which was the date accruals under the Retention Plan stopped. Each of the eligible named executive officers in this table2007. Mr. Kavanaugh has 1516 additional years of service with IBM after that date. (2)
While the accruals under the Retention Plan stopped on December 31, 2007, the value of the Retention Plan benefit for the eligible named executive officers will continue to change based on their ages, the assumptions used to calculate the present value of the accumulated benefit, and the benefit that would be provided under the IBM Personal Pension Plan. For assumptions used to calculate the present value, see the “Assumptions used to determine present value as of December 31, 2022 for each eligible named executive officer”2023” immediately following the 20222023 Pension Benefits table.
20232024 Notice of Annual Meeting & Proxy Statement | 20222023 Retention Plan Narrative55
20222023 Pension Benefits Narrative
The 20222023 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. As of December 31, 2023 Messrs. Krishna, Kavanaugh and Rosamilia haveThomas had pension benefits under the U.S. defined benefit pension plan. Neither Mr. Cohn nor Ms. Browdy have a benefit under any IBM defined benefit pension plan. U.S. Qualified Plan and Nonqualified Plan Descriptions — General The IBM Personal Pension Plan consists of a tax-qualified plan and a non-tax qualified plan. Effective January 1, 2008, the non-tax qualified plan was renamed the IBM Excess Personal Pension Plan and is referred to herein as the Nonqualified Plan, and the tax-qualified plan is referred to as the Qualified Plan. The combined plan is referred to herein as the IBM Personal Pension Plan. Effective January 1, 2005, the IBM Personal Pension Plan was closed to new participants. Plan Description •
Effective July 1, 1999, IBM amended the IBM Personal Pension Plan to provide a new benefit formula, but allowed participants who met certain age and service conditions as of June 30, 1999, to elect to continue to earn benefits under the prior formulas, including the Pension Credit Formula.
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Accrual of future benefits under the IBM Personal Pension Plan stopped on December 31, 2007. Accordingly, a participant’s pension benefit does not consider pay earned and service credited after such date.
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The Qualified Plan provides funded, tax-qualified benefits up to the limits on compensation and benefits under the Internal Revenue Code. •
The Nonqualified Plan provides unfunded, nonqualified benefits in excess of the limits on compensation. •
Accrual of future benefits under the IBM Personal Pension Plan stopped on December 31, 2007, and a participant’s pension benefit does not consider pay earned and service credited after such date. IBM U.S. Personal Pension Plan (Qualified Plan) Purpose of the Qualified Plan •
The Qualified Plan was designed to provide tax-qualified pension benefits that arewere generally available to all U.S. regular employees.
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The cessation of accruals under the Qualified Plan and the continued IBM contributions under the tax-qualified defined contribution plan, the IBM 401(k) Plus Plan, reflects IBM’s desire to provide appropriate benefits for its employees, consistent with the changing needs of IBM’s workforce and the changing nature of retirement benefits provided by IBM’s current competition.
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The benefits under the Qualified Plan are determined either under the Pension Credit Formula (for those who met certain eligibility criteria in 1999) or the Personal Pension Account described below. TheAs 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 IBM Personal Pension Plan.formula. Material Terms and Conditions: Personal Pension Account Formula under the Qualified Plan •
Messrs. Krishna’s, Kavanaugh’s, and Rosamilia’sThomas’s benefit under the Qualified Plan is determined under the Personal Pension Account formula, which is a cash balance formula. •
According to the terms of the Qualified Plan, underUnder the Personal Pension Account formula prior to 2008, the eligible named executive officers above receive pay credits and interest credits to their respective Personal Pension Accounts. The pay credits for a year were equal to 5% of the eligible named executive officers’ eligible compensation 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:either 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.
Compensation Elements Included in Calculations •
Prior to 2008, eligible compensation was generally equal to the total amount that is included in income including: —
Salary; —
Recurring payments under any form of variable compensation plan (excluding Stock Options and other equity awards); and —
Amounts deducted from salary and variable compensation under IBM’s Internal Revenue Code Section 125 plan (cafeteria plan), and amounts deferred under IBM’s 401(k) Plus Plan and Excess 401(k) Plus Plan. •
Equity compensation — Stock Options, RSUs, RRSUs, and PSUs — was excluded from eligible compensation.
•
Compensation for a year was limited to the compensation limit under the Internal Revenue Code. For 2007,Code, which for the last year that benefits accrued under the Qualified Plan, the compensation limit was $225,000. In addition, benefits provided under the Qualified Plan may not exceed an annual benefit limit under the Internal Revenue Code (which in 20222023 was $245,000$265,000 payable as an annual single life annuity beginning at normal retirement age). Qualified Plan Funding
•
Benefits under the Qualified Plan are funded by an irrevocable tax-exempt trust.
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Participant’s benefits under the Qualified Plan are payable from the assets held by the tax-exempt trust.
562023 Notice of Annual Meeting & Proxy Statement | 2022 Pension Benefits Narrative
Policy Regarding Extra Years of Credited Service •
Generally, a participant’sThe years of credited service are based only on the years an employee participates in the Qualified Plan.
•
The years of credited service for the eligible named executive officers are based only on their service whilewas eligible for participation in the Qualified Plan.Plan, through December 31, 2007.
IBM U.S. Excess Personal Pension Plan (Nonqualified Plan) Purpose of the Nonqualified Plan •
The Nonqualified Plan provides Qualified Plan participants with benefits that may not be provided under the Qualified Plan because of the tax limits on eligible compensation. •
The benefit provided to a participant is payable following a separation from service from IBM (subject to the six-month delay for “specified employees” as required under Section 409A of the Internal Revenue Code)tax law). Material Terms and Conditions of the Nonqualified Plan •
The Nonqualified Plan provides a benefit that is equal to the benefit that would be provided under the Qualified Plan if the compensation and benefit limits did not apply minus the benefit actually provided under the Qualified Plan disregarding the benefit limits. Nonqualified Plan Funding
•
The Nonqualified Plan is unfunded and maintained as a book reserve (notional) account.
•562024 Notice of Annual Meeting & Proxy Statement | 2023 Pension Benefits Narrative
No funds are set aside in a trust or otherwise; participants in the Nonqualified Plan are general unsecured creditors of IBM with respect to the payment of their Nonqualified Plan benefits.
Policy Regarding Extra Years of Credited Service •
The years of credited service for the eligible named executive officers are based only on their service whilethe years an employee was eligible for participation in the Qualified Plan. Because accruals under the Nonqualified Plan stopped on December 31, 2007, service performed after such date is not counted. Available Forms of Payment Personal Pension Account
•
Under the terms of the Qualified Plan, the entire benefit may be paid as a lump sum. •
Messrs. Krishna, Kavanaugh, and RosamiliaThomas have elected to receive their Nonqualified Plan benefit in a lump sum immediately following separation from service. •
The maximum lump sum amount that the eligible named executive officers could have elected to receive under the
Qualified Plan and Nonqualified Plan, as of January 1, 20232024 if they had a separation from service from IBM on December 31, 20222023 was equal to: | 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 | | |
| Name | | | Maximum Lump Sum | | | Qualified Plan | | | Nonqualified Plan | | | Total Available Lump Sum | | | A. Krishna | | | | $ | 224,528 | | | | | $ | 87,850 | | | | | $ | 332,378 | | | | J.J. Kavanaugh | | | | | 118,148 | | | | | | 81,412 | | | | | | 269,560 | | | | R.D. Thomas | | | | | 92,471 | | | | | | 272 | | | | | | 92,743 | | |
•
A participant may elect to receive his or her entire benefit, or the portion of the benefit that is not paid as a lump sum, in the form of a single life annuity or in certain other actuarially equivalent forms of payment. Annual Pension Benefits •
The annual pension benefit that was earned as of December 31, 2007, and that is payable as a single life annuity beginning at normal retirement age for each of the eligible named executive officers is below. Because Messrs. Krishna, Kavanaugh, and RosamiliaThomas will receive a lump sum payment for their Nonqualified Plan benefits, no amount is represented for them in the Nonqualified Plan column below:
| Name | | | Annual Pension Benefit at Normal Retirement Age | | Name | | | Annual Pension Benefit at Normal Retirement Age | | | Qualified Plan | | Nonqualified Plan | | Total Benefit | | | Qualified Plan | | Nonqualified Plan | | Total Benefit | | | A. Krishna | | | $ | 23,347 | | | | | N/A | | | | $ | 23,347 | | | A. Krishna | | | $ | 24,891 | | | | | N/A | | | | $ | 24,891 | | | | J.J. Kavanaugh | | | | 21,043 | | | | | N/A | | | | | 21,043 | | | J.J. Kavanaugh | | | | 21,962 | | | | | N/A | | | | | 21,962 | | | | T. Rosamilia | | | | 34,552 | | | | | N/A | | | | | 34,552 | | | R.D. Thomas | | | | 14,605 | | | | | N/A | | | | | 14,605 | | |
Present Value of Accumulated Benefit •
The present value of accumulated benefit is the value as of December 31, 20222023 of the annual pension benefit that was earned as of December 31, 2007. •
The annual pension benefit is the benefit that is payable for the named executive officer’s life beginning at his normal retirement age. •
The normal retirement age is defined as the later of age 65 or the completion of one year of service. •
Certain assumptions were used to determine the present value of accumulated benefits. Those assumptions are described immediately following the 20222023 Pension Benefits Table. 20232024 Notice of Annual Meeting & Proxy Statement | 20222023 Pension Benefits Narrative 57
20222023 Pension Benefits Table
As noted in the General Description and Purpose to the 20222023 Retention Plan Narrative, the 20222023 Pension Benefits Table does not include amounts reflected in the 20222023 Retention Plan Table. | | | | | Number of Years | | Present Value of | | Payments During | | | | | | Number of Years | | Present Value of | | Payments During | | | | | | | Credited Service | (1) | | Accumulated Benefit | (2) | | Last Fiscal Year | | | | | | Credited Service | (1) | | Accumulated Benefit | | Last Fiscal Year | | | Name (a) | | Plan Name (b) | | (#) (c) | | ($) (d) | | ($) (e) | | Name (a) | | Plan Name (b) | | (#) (c) | | ($) (d) | | ($) (e) | | | A. Krishna | | Qualified Plan | | | | 17 | | | $227,829 | | | $ | 0 | | | A. Krishna | | Qualified Plan | | | | 17 | | | $245,597 | | | $ | 0 | | | | | | Nonqualified Plan | | | | | | | 80,671 | | | | 0 | | | | | Nonqualified Plan | | | | | | | 86,086 | | | | 0 | | | | | | Total Benefit | | | | | | | $308,500 | | | $ | 0 | | | | | Total Benefit | | | | | | | $331,683 | | | $ | 0 | | | | J.J. Kavanaugh | | Qualified Plan | | | | 12 | | | $169,254 | | | $ | 0 | | | J.J. Kavanaugh | | Qualified Plan | | | | 12 | | | $180,497 | | | $ | 0 | | | | | | Nonqualified Plan | | | | | | | 72,392 | | | | 0 | | | | | Nonqualified Plan | | | | | | | 76,413 | | | | 0 | | | | | | Total Benefit | | | | | | | $241,646 | | | $ | 0 | | | | | Total Benefit | | | | | | | $256,910 | | | $ | 0 | | | | T. Rosamilia | | Qualified Plan | | | | 25 | | | $377,922 | | | $ | 0 | | | R.D. Thomas | | Qualified Plan | | | | 9 | | | $80,293 | | | $ | 0 | | | | | | Nonqualified Plan | | | | | | | 144,977 | | | | 0 | | | | | Nonqualified Plan | | | | | | | 232 | | | | 0 | | | | | | Total Benefit | | | | | | | $522,899 | | | $ | 0 | | | | | Total Benefit | | | | | | | $80,525 | | | $ | 0 | | |
(1)
Reflects years of credited service as of December 31, 2007, which was the date accruals under the Qualified Plan and the Nonqualified Plan stopped.2007. Each of the named executive officers in this table has 1516 additional years of service with IBM after that date.
(2)
While the accruals under the Qualified Plan and the Nonqualified Plan stopped on December 31, 2007, the value of the Qualified Plan and Nonqualified Plan benefits for the eligible named executive officers will continue to change based on their ages, annuity conversion rates, and the assumptions used to calculate the present value of the accumulated benefit.
Assumptions to determine present value as of December 31, 20222023 for each eligible named executive officer: •
Measurement date: December 31, 20222023 •
Interest rate for present value: 5.3%5.00% •
To determine Personal Pension Account benefit: —
Interest crediting rate: 4.9%6.4% for 20232024 and 4.40%3.80% for 20242025 and after —
Interest rate to convert Personal Pension Account balance to single life annuity: 4.4567%5.6000% for years 1 – 5, 5.2367%1-5, 5.7733% for years 6 – 20,6-20, and 5.1467%5.7267% for year 21 and after —
Mortality table to convert Personal Pension Account balance to single life annuity is 20232024 Pension Protection Act Optional Combined Unisex Table •
Mortality (pre-commencement): None •
Mortality (post-commencement): —
Base Table: Modified PRI-2012 White Collar sex-distinct tables for retirees adjusted by a factor of 0.762 with improvement from 2012 to December 31, 2022.2023. —
Improvement Scale: A modified Scale MP-2021 projection table. •
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 compensation history as of December 31, 2007 •
In the case of the qualified Personal Pension Account formula, the benefit is payable as a 90% lump sum/10% annuity for Messrs. Krishna, and Kavanaugh, and a 50% lump
sum/50% annuity for Mr. Rosamilia,Thomas beginning on the first day of the month following a separation from service from IBM. The Excess Plan’s Personal Pension Plan Account formula benefit for Messrs. Krishna, Kavanaugh and RosamiliaThomas is payable as a lump sum. The six-month delay under the Nonqualified 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 separation from service from IBM Assumptions to determine present value as of December 31, 2021:2022: •
The column titled Change in Pension Value in the 20222023 Summary Compensation Table quantifies the change in the present value of the pension benefit from December 31, 20212022 to December 31, 20222023 •
To determine the present value of the pension benefit as of December 31, 2021,2022, the same assumptions that are described above to determine the present value as of December 31, 20222023 were used, except (1) a 2.6%5.3% interest rate, Modified RP-2014PRI-2012 White Collar sex-distinct annuitant table with adjustments to 2006 by backing out MP-2014 improvement and further adjusting the mortality ratestables for retirees adjusted by a factor of 1.016, and Modified MP-2021 improvement scale, and0.762 (2) to determine the Personal Pension Account benefit, the following were used: —
Interest crediting rate: 1.1%4.90% for 20222023 and 4.40% for 2024 after —
Interest rate to convert Personal Pension Account balance to single life annuity: 0.7433%4.4567% for years 1 — 5, 2.5967%1-5, 5.2367% for years 6 — 20,6-20, and 3.1133%5.1467% for year 21 and after —
Mortality table for Personal Pension Account balance conversion: 20222023 Pension Protection Act Optional Combined Unisex Table 5820232024 Notice of Annual Meeting & Proxy Statement | 20222023 Pension Benefits Narrative
20222023 Nonqualified Deferred Compensation Narrative
IBM Excess 401(k) Plus Plan — U.S. General Description and Purpose •
Effective January 1, 2008, the IBM Executive Deferred Compensation Plan (EDCP) was amended and renamed the IBM Excess 401(k) Plus Plan. IBM employees, including the named executive officers, who are eligible to participate in the IBM 401(k) Plus Plan and whose eligible pay is expected to exceed the Internal Revenue Code compensation limit for the applicable plan year are eligible to participate in the Excess 401(k) Plus Plan. The purpose of the Excess 401(k) Plus Plan is to provide eligible employees with the opportunity to save for retirement on a tax-deferred basis and provide benefits that would be provided under the qualified IBM 401(k) Plus Plan if the compensation limits did not apply.
•
The 2022 Nonqualified Deferred Compensation Table shows Eligibility is based on those 401(k) participants whose eligible pay is expected to exceed the employee deferrals (executive contributions), IBM match (registrant contributions), automatic contributions (registrant contributions), and investment gain or loss (aggregate earnings)Internal Revenue Code compensation limit for each named executive officer during 2022.
•
The table also shows the total balance that each named executive officer has accumulated over all the years he or she has participated in the plan.applicable plan year.
•
Account balances in the Excess 401(k) Plus Plan are comprised of cash amounts that were deferred by the participant or contributed by IBM (Basic Account), and all deferred shares, comprised of shares that were deferred by the participant (Deferred IBM Shares). Generally, amounts deferred and vested prior to January 1, 2005 are not subject to Section 409A of the Internal Revenue Code, while amounts deferred and vested on and after January 1, 2005 are subject to Section 409A of the Internal Revenue Code. •
The Excess 401(k) Plus Plan is an unfunded plan and a participant’s account balance is not paid to, and cannot be accessed by, the participants until afteronly payable once a separationparticipant separates from service fromwith IBM. •
With respect toCertain IBM matching and automatic contributions madeare subject to a participant’s account after March 31, 2010,forfeiture or recission if a participant is terminated for cause or engages in competitive or other activity that is detrimental to IBM (including but not limited to competitive business activity, disclosure of confidentialduring or following employment.
•
Effective January 1, 2024, the IBM information or solicitation of401(k) Plus Plan was renamed the IBM clients or employees),401(k) Plan and the Excess 401(k) Plus Plan allows for clawback of any such contributions made inwas renamed the 12- month period prior to such detrimental activity through separation of employment.IBM Excess Savings Plan. Compensation Eligible for Deferral under Excess 401(k) Plus Plan •
An eligible employeeParticipants may elect to defer up to 80% of salary and eligible performance pay, which includes annual incentive program payments.
•
In both cases, the Internal Revenue Code requires the deferral elections to be made before the calendar year in which the compensation is earned.
Deferred IBM Shares •
Prior to January 1, 2008, under the EDCP, any executive including non-U.S. executives, could have elected to defer receipt of shares of IBM stock that otherwise would be paid
as a result of the vesting of certain restricted stock unit awards granted on or before December 31, 2007, under IBM’s Long-Term Performance Plan (LTPP). Such deferral occurred when the awards vested. •
In addition, in accordance with Internal Revenue Service rules, an executive could have also elected to defer receipt of shares of IBM stock that otherwise would be paid on or before February 1, 2008, as a result of the vesting of Performance Share Unit (PSU) awards under IBM’s LTPP. •
There are no outstanding deferral elections that would result in any future deferral of stock.
•
Dividend equivalents on Deferred IBM Shares are paid in cash at the same rate and on the same date as the dividends paid to IBM stockholders and are contributed to the Basic Account. Excess 401(k) Plus Plan Funding
•
The Excess 401(k) Plus Plan is unfunded and maintained as a book reserve (notional) account.
•
No funds are set aside in a trust or otherwise; participants in the plan are general unsecured creditors of IBM for payment of their Excess 401(k) Plus Plan accounts.
IBM Matching Contributions •
Through December 31, 2023, IBM creditscredited matching contributions each pay period to the Basic Account of each eligible participant who defersdeferred salary or eligible performance pay under the Excess 401(k) Plus Plan. •
The matching contributions equal the percentage of the sum of: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. 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 arewere 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, arewere eligible for up to 5% matching contributions. Mr. Krishna, Mr. Kavanaugh, and Mr. Rosamilia areThomas were eligible for a 6% matching contribution. Mr. Cohn and Ms. Browdy arewere 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. IBM Automatic Contributions •
Effective January 1, 2008,Through December 31, 2023 IBM creditscredited automatic contributions each pay period to the Basic Account of each eligible participant.
•
The automatic contributions equal 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. The automatic contribution percentage for a participant is the participant’s automatic
2023 Notice of Annual Meeting & Proxy Statement | 2022 Nonqualified Deferred Compensation Narrative 59
contribution percentage under the IBM 401(k) Plus Plan. Generally, the percentage is 2% or 4% if the participant was hired or rehired by IBM U.S. before January 1, 2005 (dependingbased on thea participant’s pensionretirement plan eligibility onas of December 31, 2007), or 1% if the participant was2007. In addition, for participants hired or rehired by IBM U.S. on or after January 1, 2005, and completesthey must complete one year of service.service to be eligible. For purposes of calculating the automatic contributions under the IBM 401(k) Plus Plan, the participant’s eligible pay excludes the amount the participant elects to defer under the Excess 401(k) Plus Plan. The automatic contribution percentage is;was: 2% for Messrs. Krishna, Kavanaugh and Rosamilia;Thomas; and 1% for Mr. Cohn and Ms. Browdy. •
For 2022, matching contributions and automatic contributions are made once annually at the end of the year. In order to receive such IBM contributions each year, a participant must have completed the service requirement, and must be employed on December 15 of the plan year. However, if a participant separates from service (including going on long-term disability) prior to December 15, and the participant has:
—
At least 30 years of service;
—
At least 15 years of service and is at least age 55;
—
At least 5 years of service and is at least age 62; or
—
At least 1 year of service and is at least age 65;
or, 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.
Effective January 1, 2023, matching contributions and automatic contributions are made each pay period for participants who have met the service requirement and are otherwise eligible for IBM contributions.
IBM Transition Credits
•
Effective for the period of January 1, 2008 through June 30, 2009, IBM credited transition credits to an eligible 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. Under the terms of the IBM 401(k) Plus Plan, Messrs. Krishna, Kavanaugh and Rosamilia were eligible to receive transition credits.
Earnings Measures •
A participant’s contributions to the Basic Account are adjusted for earnings and losses, until it has been completely distributed, based on investment choices selected by the participant. •
IBM does not pay guaranteed, above-market or preferential earnings in the Excess 401(k) Plus Plan. •
The available investment choices are the same as the primary investment choices available under the IBM 401(k) Plus Plan, which are as follows (with 2022 annual rates of return indicated for each):
—
Target Retirement 2020 Fund (-15.13%)
—
Target Retirement 2025 Fund (-15.90%)
—
Target Retirement 2030 Fund (-16.64%)
—
Target Retirement 2035 Fund (-17.38%)
—
Target Retirement 2040 Fund (-18.17%)
—
Target Retirement 2045 Fund (-18.60%)
—
Target Retirement 2050 Fund (-18.72%)
—
Target Retirement 2055 Fund (-18.70%)
—
Target Retirement 2060 Fund (-18.66%)
—
Target Retirement 2065 Fund (-18.62%)
—
Income Plus Fund (-14.63%)
—
Conservative Fund (-15.73%)
—
Moderate Fund (-17.08%)
—
Aggressive Fund (-18.60%)
—
Interest Income Fund (2.31%)
—
Inflation Protected Bond Fund (-11.77%)
—
Total Bond Market Fund (-13.28%)
—
High Yield & Emerging Markets Bond Fund (-11.47%)
—
Total Stock Market Index Fund (-19.46%)
—
Total International Stock Market Index Fund (-15.75%)
—
Global Real Estate Stock Index Fund (-25.64%)
—
Long-Term Corporate Bond Fund (-25.17%)
—
Large Company Index Fund (-18.12%)
—
Large-Cap Value Index Fund (-7.56%)
—
Large-Cap Growth Index Fund (-29.15%)
—
Small/Mid-Cap Stock Index Fund (-25.30%)
—
Small-Cap Value Index Fund (-14.45%)
—
Small-Cap Growth Index Fund (-26.25%)
—
European Stock Index Fund (-14.64%)
—
Pacific Stock Index Fund (-13.27%)
—
Emerging Markets Stock Index Fund (-17.74%)
—
Real Estate Investment Trust Index Fund (-24.53%)
—
International Real Estate Index Fund (-27.63%)
—
includes the IBM Stock Fund (10.61%)*
*
Performance includes dividend equivalent reinvestmentFund.
•
A participant may change the investment selections for new payroll deferrals as frequently as each semi-monthly pay cycle and may change investment selections for existing account balances daily, subject to excessive trading restrictions. •
Effective January 1, 2008, the IBM match under the Excess 401(k) Plus Plan is notionally invested in the investment options in the same manner participant contributions are notionally invested. 2024 Notice of Annual Meeting & Proxy Statement | 2023 Nonqualified Deferred Compensation Narrative 59
•
Because Deferred IBM Shares are credited, maintained, and ultimately distributed only as shares of IBM’s common stock, they may not be transferred to any other investment choice at any time. •
On a quarterly basis, dividend equivalents are credited to a participant’s account with respect to all or a portion of such account that is deemed to be invested in the IBM Stock Fund at the same rate as dividends to IBM stockholders.
602023 Notice of Annual Meeting & Proxy Statement | 2022 Nonqualified Deferred Compensation Narrative
•
Aggregate earnings on Deferred IBM Shares during the last fiscal year, as reported in column (d) of the 20222023 Nonqualified Deferred Compensation Table are calculated as the change in the price of IBM’s common stock between December 31, 20212022, and December 31, 20222023, for all Deferred IBM Shares. •
Aggregate earnings reflect an $8 quarterly administrative fee. Payouts, Withdrawals, and Other Distributions •
No payouts, withdrawals or other distributions from the Basic Account are permitted prior to a separation from service from IBM. •
At termination, the balance in an eligible executive’s Basic Account that was deferred prior to January 1, 2005, is paid to the executive in an immediate lump sum unless: (a) the balance exceeds $25,000; and (b) the executive satisfies the following age and service criteria: —
At least age 55 with 15 years of service; —
At least age 62 with 5 years of service; —
At least age 65 with 1 year of service; —
Any age with at least 30 years of service, provided that, as of June 30, 1999, the executive had at least 25 years of service or was at least age 40 with 10 years of service; or —
Commencing benefits under the IBM Long-Term Disability Plan. •
As of December 31, 2022,2023, Messrs. Krishna Kavanaugh and RosamiliaKavanaugh had satisfied the age and service criteria. •
If the participant has satisfied the age, service, and account balance criteria at termination, but has not made a valid advance election of another form of distribution, the amount of the participant’s Basic Account that was deferred prior to January 1, 2005, is paid in a lump sum in February of the year following separation. •
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:
1.
Lump sum upon termination; 2.
Lump sum in February of the year following termination; or 3.
Annual installments (beginning February 1 of the year following termination) for a number of years (between two and ten) elected by the participant. •
The participant’s Basic Account with respect to amounts deferred on or after January 1, 2005, may be distributed in the following forms as elected by the participant: 1.
Lump sum upon separation; 2.
Lump sum in February of the year following separation; or 3.
Annual installments (beginning February 1 of the year following separation) for a number of years (between two and ten) elected by the participant. However, if the participant has elected annual installments and the total balance of the participant’s Basic Account upon a separation from service from IBM is less than 50% of the applicable Internal Revenue Code compensation limit (in 2022,2023, 50% of this limit was $152,500)$165,000), the amounts deferred on or after January 1, 2005 are distributed in a lump sum on the date installments would have otherwise begun. •
Distribution elections may be changed in advance of separation, in accordance with Internal Revenue Code rules. •
Distribution elections apply to both the Basic Account and the Deferred Shares Account. Further, within the Basic Account and the Deferred Shares Account, different distribution elections are permitted to be made for the amounts that were deferred before January 1, 2005, and the amounts that were deferred on or after January 1, 2005. •
At December 31, 2022, the named executive officers had the following distribution elections on file:
—
Mr. Krishna — Lump sum paid in February of the year following separation for pre-2005 amounts, and immediate lump sum for post-2004 amounts.
—
Mr. Kavanaugh — 2 annual installments for pre-2005 amounts, and lump sum in February of the year following separation for post-2004 amounts.
—
Mr. Cohn — 10 annual installments for all amounts.
—
Mr. Rosamilia — lump sum in February of the year following separation for all amounts.
—
Ms. Browdy — immediate lump sum following separation for all amounts.
•
Deferred IBM Shares are distributed only in the form of shares of IBM’s common stock.
•
These distribution rules are subject to Section 409A of the Internal Revenue Code, including, for example, the rule that a “specified employee” may not receive a distribution of post-2004 deferrals until at least six months following a separation from service from IBM. All named executive officers were “specified employees” under Section 409A at the end of the last fiscal year. 2023602024 Notice of Annual Meeting & Proxy Statement | 20222023 Nonqualified Deferred Compensation Narrative61
20222023 Nonqualified Deferred Compensation Table
| | | | | Executive Contributions | | | | Registrant Contributions | | Aggregate Earnings in | | Aggregate Withdrawal/ | | Aggregate Balance at | | | | | | 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) | | | | | in Last FY | (1) | | | | in Last FY | (2) | | Last FY | (3) | | Distributions | | Last FYE | (4) | | Name (a) | | Plan | | ($) (b) | | | | ($) (c) | | ($) (d) | | ($) (e) | | ($) (f) | | Name (a) | | Plan | | ($) (b) | | | | ($) (c) | | ($) (d) | | ($) (e) | | ($) (f) | | | A. Krishna | | Basic Account | | | $ | 248,100 | | | Match | | | $ | 248,100 | | | | $ | (242,875) | | | | $ | 0 | | | | $ | 6,512,707 | | | A. Krishna | | Basic Account | | | $ | 279,000 | | | Match | | | $ | 279,000 | | | | $ | 764,356 | | | | $ | 0 | | | | $ | 7,928,063 | | | | | | | | | | | | | Automatic | | | | 82,700 | | | | | | | | | | | | | | | | | | | | | | | | | | | Automatic | | | | 93,000 | | | | | | | | | | | | | | | | | | | | | Deferred IBM Shares | | | | 0 | | | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | Deferred IBM Shares | | | | 0 | | | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | | Total | | | $ | 248,100 | | | | | | $ | 330,800 | | | | $ | (242,875) | | | | $ | 0 | | | | $ | 6,512,707 | | | | | Total | | | $ | 279,000 | | | | | | $ | 372,000 | | | | $ | 764,356 | | | | $ | 0 | | | | $ | 7,928,063 | | | | J.J. Kavanaugh | | Basic Account | | | $ | 260,000 | | | Match | | | $ | 130,362 | | | | $ | (1,113,187) | | | | $ | 0 | | | | $ | 6,226,839 | | | J.J. Kavanaugh | | Basic Account | | | $ | 45,481 | | | Match | | | $ | 45,481 | | | | $ | 1,599,006 | | | | $ | 0 | | | | $ | 7,965,280 | | | | | | | | | | | | | Automatic | | | | 43,454 | | | | | | | | | | | | | | | | | | | | | | | | | | | Automatic | | | | 48,475 | | | | | | | | | | | | | | | | | | | | | Deferred IBM Shares | | | | 0 | | | | | | | 0 | | | | | 1,077 | | | | | 0 | | | | | 20,992 | | | | | Deferred IBM Shares | | | | 0 | | | | | | | 0 | | | | | 3,376 | | | | | 0 | | | | | 24,369 | | | | | | Total | | | $ | 260,000 | | | | | | $ | 173,816 | | | | $ | (1,112,110) | | | | $ | 0 | | | | $ | 6,247,831 | | | | | Total | | | $ | 45,481 | | | | | | $ | 93,956 | | | | $ | 1,602,382 | | | | $ | 0 | | | | $ | 7,989,649 | | | | G. Cohn | | Basic Account | | | $ | 920,750 | | | Match | | | $ | 120,670 | | | | $ | (43,741) | | | | $ | 0 | | | | $ | 1,022,293 | | | R.D. Thomas | | Basic Account | | | $ | 81,893 | | | Match | | | $ | 81,893 | | | | $ | 165,799 | | | | | | | | | $ | 1,250,762 | | | | | | | | | | | | | Automatic | | | | 24,134 | | | | | | | | | | | | | | | | | | | | | | | | | | | Automatic | | | | 41,300 | | | | | | | | | | | | | | | | | | | | | Deferred IBM Shares | | | | 0 | | | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | Deferred IBM Shares | | | | 0 | | | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | | Total | | | $ | 920,750 | | | | | | $ | 144,804 | | | | $ | (43,741) | | | | $ | 0 | | | | $ | 1,022,293 | | | | | Total | | | $ | 81,893 | | | | | | $ | 123,193 | | | | $ | 165,799 | | | | $ | 0 | | | | $ | 1,250,762 | | | | T. Rosamilia | | Basic Account | | | $ | 98,220 | | | Match | | | $ | 98,220 | | | | $ | 370,561 | | | | $ | 0 | | | | $ | 4,895,928 | | | G. Cohn | | Basic Account | | | $ | 1,466,240 | | | Match | | | $ | 133,640 | | | | $ | 436,883 | | | | $ | 0 | | | | $ | 3,085,784 | | | | | | | | | | | | | Automatic | | | | 32,740 | | | | | | | | | | | | | | | | | | | | | | | | | | | Automatic | | | | 26,728 | | | | | | | | | | | | | | | | | | | | | Deferred IBM Shares | | | | 0 | | | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | Deferred IBM Shares | | | | 0 | | | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | | Total | | | $ | 98,220 | | | | | | $ | 130,960 | | | | $ | 370,561 | | | | $ | 0 | | | | $ | 4,895,928 | | | | | Total | | | $ | 1,466,240 | | | | | | $ | 160,368 | | | | $ | 436,883 | | | | $ | 0 | | | | $ | 3,085,784 | | | | M.H. Browdy | | Basic Account | | | $ | 94,340 | | | Match | | | $ | 94,340 | | | | $ | 90,154 | | | | $ | 0 | | | | $ | 2,092,459 | | | M.H. Browdy | | Basic Account | | | $ | 103,612 | | | Match | | | $ | 103,612 | | | | $ | 180,156 | | | | $ | 0 | | | | $ | 2,500,562 | | | | | | | | | | | | | Automatic | | | | 18,868 | | | | | | | | | | | | | | | | | | | | | | | | | | | Automatic | | | | 20,722 | | | | | | | | | | | | | | | | | | | | | Deferred IBM Shares | | | | 0 | | | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | Deferred IBM Shares | | | | 0 | | | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | | Total | | | $ | 94,340 | | | | | | $ | 113,208 | | | | $ | 90,154 | | | | $ | 0 | | | | $ | 2,092,459 | | | | | Total | | | $ | 103,612 | | | | | | $ | 124,334 | | | | $ | 180,156 | | | | $ | 0 | | | | $ | 2,500,562 | | |
(1)
A portion of the amount reported in this column (b) for each named executive officer’s Basic Account is included within the amount reported as salary for that officer in column (c) of the 20222023 Summary Compensation Table. These amounts are: $71,700$70,200 for Mr. Krishna; $260,000$45,480 for Mr. Kavanaugh; $920,750$39,885 for Mr. Thomas; $0 for Mr. Cohn; $34,380 for Mr. Rosamilia; and $31,025$30,300 for Ms. Browdy. (2)
For each of the named executive officers, the entire amount reported in this column (c) is included within the amount reported in column (i) of the 20222023 Summary Compensation Table. The amounts reported as IBM contributions to defined contribution plans in footnote 98 to the 20222023 Summary Compensation Table are larger because the amounts reported in that footnote also include IBM’s contributions to the IBM 401(k) Plus Plan. (3)
None of the amounts reported in this column (d) are reported in column (h) of the 20222023 Summary Compensation Table because IBM does not pay above-market or preferential earnings on deferred compensation. (4)
Amounts reported in this column (f) for each named executive officer include amounts previously reported in IBM’s Summary Compensation Table in previous years when earned if that officer’s compensation was required to be disclosed in a previous year. Amounts previously reported in such years include previously earned, but deferred, salary, and incentive and IBM matching and automatic contributions. This total reflects the cumulative value of each named executive officer’s deferrals, IBM contributions and investment experience, including an $8 quarterly administrative fee. 6220232024 Notice of Annual Meeting & Proxy Statement | 20222023 Nonqualified Deferred Compensation Narrative61
20222023 Potential Payments Upon Termination Narrative
Introduction IBM does not have any plans, programs, or agreements under which payments to any of the named executive officers are triggered by a change of control of IBM, a change in the named executive officer’s responsibilities or a constructive termination of the named executive officer. The only payments or benefits that would be provided by IBM to a named executive officer following a termination of employment would be provided under the terms of IBM’s existing compensation and benefit programs (as described below). The 20222023 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. As explained below, certain of these payments and benefits are enhanced by or dependent upon the named executive officer’s attainment of certain age and service criteria at termination. Additionally, certain payments or benefits are not available following a termination for cause and/or may be subject to forfeiture and clawback if the named executive officer engages in certain activity that is detrimental to IBM (including but not limitedIBM. In addition, performance pay paid to competitive business activity, disclosure of confidential IBM information or solicitation of IBM clients or employees).executive officers, including each named executive officer, are subject to repayment under IBM’s recovery policy. This 20222023 Potential Payments Upon Termination Narrative and the 20222023 Potential Payments Upon Termination Table do not reflect payments that would be provided to each named executive officer under (i) the Qualified Plan; (ii) the Nonqualified Plan; (iii) the IBM 401(k) Plus Plan orPlan; (iv) the IBM Individual Separation Allowance PlanPlan; or (v) with respect to retiree medical or life insurance benefits, 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. Qualified Plan amounts and Nonqualified Plan amounts are not reflected in the 2022 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 2022 Pension Benefits Table.
The 2022 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 20222023 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. Annual Incentive Program (AIP) •
The AIP may provide a lump sum, cash payment in MarchApril of the year following resignation, retirement or involuntary termination without cause. An AIP payment may not be paid if an executive engages in activity that is detrimental to IBM. •
This payment is not triggered by termination; the existence and amount of any AIP payment is determined under the terms of the AIP applicable to all executives eligible to participate,executives, who are employed through December 31 of the previous year. •
AIP payments to executive officers are subject to clawback as described in Section 4 of the 2022 Compensation Discussion and Analysis.clawback. •
For purposes of the 20222023 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 2023.April 2024.
IBM Long-Term Performance Plans (LTPP) •
The named executive officers have certain outstanding equity grants under the LTPP including: —
Stock Options; —
Restricted Stock Units (RSUs); —
Retention Restricted Stock Units (RRSUs); and/or —
Performance Share Units (PSUs) or retention Performance Share Units (RPSUs). •
The LTPP and/or the named executive officers’ equity award agreements contain the following terms: —
Generally, unvested Stock Options, RSUs, RRSUs, PSUs and RPSUs are cancelled upon termination; and —
Vested Stock Options may be exercised only for 90 days following termination. •
Payment of these awards is not triggered by termination of employment (because the awards would become payable under the terms of the LTPP if the named executive officer continued employment), but if he or she resigns, retires or is involuntarily terminated without cause after attaining age 55 with at least 15 years of service, the following terms apply: —
Vested Stock Options continue to be exercisable for the remainder of their ten-year term; and —
IBM prorates a portion of unvested PSU awards to continue to vest under their original vesting schedules. •
If an executive dies, outstanding 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. •
If an executive becomes disabled, outstanding Stock Options, RSUs and RRSUs would continue to vest under their original vesting schedules, and outstanding PSUs and
2023 Notice of Annual Meeting & Proxy Statement | 2022 Potential Payments Upon Termination Narrative 63
RPSUs would remain outstanding and continue to vest under their original vesting schedules.
•
In cases other than death or disability, certain executives may be eligible for continued vesting of these awards after separation. —
To ensure that the interests of the members of the Performance Team are aligned with IBM’s long-term interests as these leaders approach retirement, these executives, including the named executive officers, may be eligible to receive payouts of their full unvested PSU and RSU awards upon termination, and effective for Stock Options granted after 2021, unvested Stock Options may continue to vest upon termination, if the following criteria are met for our named executive officers:met: •
The executive is on the Performance Team at the time of departure; •
For RSU awards and Stock Options, at least one year has passed since the award grant date; and for PSU awards, at least one year has passed in the performance period; 622024 Notice of Annual Meeting & Proxy Statement | 2023 Potential Payments Upon Termination Narrative
•
The executive has reached age 55 with 15 years of service at the time of departure; and •
The payout has been approved by appropriate senior management, the Compensation Committee, or the Board, in their discretion. —
The Chairman and CEO is also eligible for the payouts described upon termination, but instead must reach age 60 with 15 years of service, and the payout must be approved by the Board, in its discretion. —
Payouts of PSU awards after termination as described above will be made in February after the end of the three-year performance period based on the 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. •
The 20222023 Potential Payments Upon Termination Table assumes the following: —
Amounts shown include the payout of the 20202021 PSU awards calculated using the actual performance achieved for the 2020-20222021-2023 performance period and the 20222023 fiscal year-end closing price of $140.89 for$163.55 or IBM common stock; and —
Outstanding 20212022 and 20222023 PSU awards were not included because there is no guarantee of payment on these awards as they are subject to meeting threshold performance criteria. —
Amounts shown include the value of 2019, 2020, 2021 and 20212022 RSU awards and 2022 Stock Options, if the required retirement criteria is met, at the fiscal year-end closing price of $140.89$163.55 for IBM common stock because the one-year service requirement from grant has been completed; and —
Outstanding 20222023 RSU awards and Option awardsStock Options are not included because the required service of at least one year since the award date of grant has not been completed. •
LTPP awards for executive officers are subject to forfeiture and rescission if an executive is terminated for cause or engages in activity that is detrimental to IBM prior to or within 12 months following 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. In addition, PSU payouts to executive officers are subject to clawback as described in Section 4 of the 2023 Compensation Discussion and Analysis. IBM Supplemental Executive Retention Plan (Retention Plan) •
Payments under the Retention Plan are triggered by resignation, retirement, or involuntary termination without cause after attainment of eligibility criteria. •
Eligibility criteria are described in the 20222023 Retention Plan Narrative. •
Retention Plan payments are paid as an annuity beginning on the first day of the month following termination of employment (subject to a six-month delay for “specified employees” as required under Section 409A of the Internal Revenue Code). •
At termination, the executive chooses either a single life annuity or an actuarially equivalent joint and survivor annuity. •
The 20222023 Potential Payments Upon Termination Table reflects the annual amount payable as a single life annuity. •
This table does not reflect the following provisions that would apply in accordance with Section 409A of the Internal Revenue Code: —
The payment would be delayed six months following termination; and —
Amounts not paid during the delay would be paid (with interest) in July 2023.2024. •
Retention Plan payments are subject to forfeiture and rescission if an executive is terminated for cause or engages in activity that is detrimental to IBM at any time prior to or following commencement of Retention Plan payments. IBM Excess 401(k) Plus Plan •
As described in the 20222023 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. •
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. •
The 20222023 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.
642023 Notice of Annual Meeting & Proxy Statement | 2022 Potential Payments Upon Termination Narrative
•
Estimated payments were calculated using the aggregate account balance as of the last business day of the fiscal year end, without assumptions for the following between such date and the distribution date(s): —
Investment gains and losses on the Basic Account (including dividend equivalent reinvestment for the IBM Stock Fund); and —
Fluctuations in the market price of IBM stock for Deferred IBM Shares. •
The tables do not reflect: —
That payment of amounts deferred after December 31, 2004 (and the associated earnings) are subject to a six-month delay for “specified employees” as required under Section 409A of the Internal Revenue Code; or —
Any other restriction on such payments imposed by the requirements of Section 409A of the Internal Revenue Code.
Retiree Medical and Life Insurance
General Description
Benefits under IBM’s retiree medical and life insurance programs are triggered by a named executive officer’s retirement, as described below. IBM maintains the Retiree Benefits Plan, the Future Health Account, Access to Group Health Care Coverage and the Retiree Group Life Insurance Plan. Eligibility for a particular program is dependent upon date of U.S. hire, age, and years of service at termination. Future coverage under such programs remains subject to IBM’s right to amend or terminate the plans at any time. The named executive officers would not have been eligible for the Retiree Benefits Plan following a separation from service on the last business day of the fiscal year end because they had not met the eligibility requirements.
IBM Future Health Account (FHA)
•
Amounts credited by IBM to a hypothetical account may be used to offset the cost of eligible medical, dental, and vision insurance coverage for former employees and their eligible dependents.
•
Generally, all regular full-time or part-time U.S. IBM employees who meet the following criteria are eligible to use amounts from the account for these purposes:
—
Hired before January 1, 2004;
—
Not within five years of earliest retirement eligibility under the prior IBM Retirement Plan on June 30, 1999; and
—
At termination they have attained 30 years of service (regardless of age) and were eligible for an opening balance on July 1, 1999, or have attained at least age 55 with 15 years of service. An employee was eligible for an opening balance on July 1, 1999 if the employee was at least age 40 and completed at least one year of service on June 30, 1999.
•
Messrs. Krishna, Kavanaugh, and Rosamilia would have been eligible for this benefit following a separation from service on the last business day of the fiscal year end.
Access to Group Health Care Coverage
•
Eligible employees may purchase retiree health care coverage under an IBM-sponsored retiree medical option. The cost of this coverage is paid solely by the employee, but the coverage is priced at IBM retiree group rates.
•
Generally, all regular full-time or part-time U.S. IBM employees who meet the following criteria are eligible to purchase such coverage:
—
Hired on or after January 1, 2004, and meet the following age and service requirements at separation from service:
•
At least age 55, with at least five years of service; and either
•
The employee’s age and years of service equal 65; or
•
Withdrawal-eligible for the Future Health Account and the funds in the account have been fully depleted.
—
Hired prior to January 1, 2004 but are not eligible for either the IBM Retiree Benefits Plan or the Future Health Account, and at separation of service employee is at least age 55 or later, and the employee’s age and years of service equal at least 65.
•
Ms. Browdy would have been eligible for this benefit following a separation from service on the last business day of the fiscal year end.
•
Mr. Cohn 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.
IBM Retiree Group Life Insurance
•
Employees who retire on or after January 1, 2016 will have the option to purchase life insurance at preferred rates, paid solely at their expense.
20232024 Notice of Annual Meeting & Proxy Statement | 20222023 Potential Payments Upon Termination Narrative 6563
20222023 Potential Payments uponUpon Termination Table
| | | | | | | | | | LTPP | | | | | | | Nonqualified Deferred Compensation Excess 401(k)(6) | | | | | | | | | | | LTPP | | | | | | | Nonqualified Deferred Compensation Excess 401(k)(6) | | | | | | | Annual Incentive | | Stock | | Stock | | Retention | | Basic | | Deferred IBM | | | | | | Annual Incentive | | Stock | | Stock | | Retention | | Basic | | Deferred IBM | | | | | Termination | | Program | (2) | | Options | (3) | | Awards | (4) | | Plan | (5) | | Account | | Shares | | | | Termination | | Program | (2) | | Options | (3) | | Awards | (4) | | Plan | (5) | | Account | | Shares | | | Name | | Scenario | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | Name | | Scenario | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | | A. Krishna | | Termination(1) | | | $ | 3,480,000 | | | $0 | | | $ | 26,394,896 | | | | | N/A | | | | $ | 6,512,707(7) | | | | $ | 0(7) | | | A. Krishna | | Termination(1) | | | $ | 3,510,000 | | | | $ | 5,642,724 | | | | $ | 30,709,784 | | | | | N/A | | | | $ | 7,928,063(7) | | | | $ | 0 | | | | | | For Cause | | | | 0 | | | 0 | | | | 0 | | | | | N/A | | | | | 6,181,907(7) | | | | | 0(7) | | | | | For Cause | | | | 0 | | | | | 0 | | | | | 0 | | | | | N/A | | | | | 7,556,063 (7) | | | | | 0 | | | | J.J. Kavanaugh | | Termination(1) | | | | 1,665,760 | | | 0 | | | | 8,202,193 | | | | | 11,592 | | | | | 5,819,898(8) | | | | | 20,992(8) | | | J.J. Kavanaugh | | Termination(1) | | | | 1,730,430 | | | | | 3,693,418 | | | | | 9,546,250 | | | | $ | 10,503 | | | | | 7,473,182 (8) | | | | | 24,369(8) | | | | | | For Cause | | | | 0 | | | 0 | | | | 0 | | | | | 0 | | | | | 5,646,082(8) | | | | | 20,992(8) | | | | | For Cause | | | | 0 | | | | | 0 | | | | | 0 | | | | | 0 | | | | | 7,379,226 (8) | | | | | 24,369(8) | | | | G. Cohn | | Termination(1) | | | | 1,832,800 | | | 0 | | | | 1,147,690 | | | | | N/A | | | | | 102,229(9) | | | | | 0 | | | R.D. Thomas | | Termination(1) | | | | 1,552,500 | | | | | 718,141 | | | | | 3,512,563 | | | | | N/A | | | | | 1,250,762(9) | | | | | 0 | | | | | | For Cause | | | | 0 | | | 0 | | | | 0 | | | | | N/A | | | | | 87,749(9) | | | | | 0 | | | | | For Cause | | | | 0 | | | | | 0 | | | | | 0 | | | | | N/A | | | | | 1,127,569 (9) | | | | | 0 | | | | T. Rosamilia | | Termination(1) | | | | 1,218,060 | | | 0 | | | | 6,503,764 | | | | | 84,832 | | | | | 4,895,928(10) | | | | | 0 | | | G. Cohn | | Termination(1) | | | | 1,848,600 | | | | | 743,790 | | | | | 2,608,950 | | | | | N/A | | | | | 308,578(10) | | | | | 0 | | | | | | For Cause | | | | 0 | | | 0 | | | | 0 | | | | | 0 | | | | | 4,764,968(10) | | | | | 0 | | | | | For Cause | | | | 0 | | | | | 0 | | | | | 0 | | | | | N/A | | | | | 148,210 (10) | | | | | 0 | | | | M.H. Browdy | | Termination(1) | | | | 1,466,240 | | | 0 | | | | 4,769,690 | | | | | N/A | | | | | 2,092,459(11) | | | | | 0 | | | M.H. Browdy | | Termination(1) | | | | 1,516,800 | | | | | 2,051,903 | | | | | 5,455,701 | | | | | N/A | | | | | 2,500,562(11) | | | | | 0 | | | | | | For Cause | | | | 0 | | | 0 | | | | 0 | | | | | N/A | | | | | 1,979,251(11) | | | | | 0 | | | | | For Cause | | | | 0 | | | | | 0 | | | | | 0 | | | | | N/A | | | | | 2,376,228 (11) | | | | | 0 | | |
(1)
Termination generally includes the following separation scenarios: resignation, retirement, and involuntary termination without cause (in all cases, assuming the executive is not entering into competitive or other activity detrimental to IBM). (2)
Assumes 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 2023.April 2024. (3)
Assumes each named executive officer exercised all vested, in-the-moneyWhile unvested 2022 Stock Options are included if required requirement criteria are met and assuming exercise at $140.89 (the fiscal year-end closing price$163.55, unvested 2023 Stock Options are not included because the required service of IBM common stock).at least one year since the award date of grant had not been completed.
(4)
Assumes IBM released each named executive officer’s PSU award, granted in 20202021 according to its policy, for the three-year performance period ending December 31, 2022.2023. 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 2019, 2020, 2021 and 20212022 RSU awards are included if required retirement criteria is met, 20222023 RSU awards are not included because the required service of at least one year since the award date of grant hashad not been completed. (5)
Reflects the Retention Plan benefit payable for eligible named executive officers as an immediate annual single life annuity. See the IBM Supplemental Executive Retention Plan section above for more details. (6)
Estimated payments to each named executive officer were calculated using the aggregate account balance as of the last business day of the fiscal year end.end, and are based on their distribution elections under the plan. See the IBM Excess 401(k) Plus Plan section above for more details. (7)
The amount deferred prior to January 1, 2005 is payable in a lump sum in February 2023.2024. The amount deferred on or after January 1, 2005 is payable in a lump sum immediately following separation. Deferred shares are paid as shares of IBM 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. See column (c) in 20222023 Nonqualified Deferred Compensation Table. (8)
Sum of the approximate annual amount of Basic Account deferred prior to January 1, 2005 payable for 2 years starting in February 20232024 ($406,941)516,466) and the amount of the Basic Account deferred on or after January 1, 2005 payable in a lump sum in February 20232024 ($5,412,957)6,956,716). 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.terms. See column (c) in 20222023 Nonqualified Deferred Compensation Table. (9)
Payable in an immediate lump sum following separation. 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 20222023 Nonqualified Deferred Compensation Table. (10)
Payable in a lump sum10 annual installments starting in February 2023.2024. 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 20222023 Nonqualified Deferred Compensation Table. (11)
Payable in an immediate lump sum following separation. 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 20222023 Nonqualified Deferred Compensation Table. Pay Ratio The ratio of the CEO’s annual total compensation to that of the median employee’s annual total compensation is 312:1. This ratio is based on annual total compensation of $20,398,426 for the CEO (as reported in the Summary Compensation Table) and $65,463 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 on that date; all foreign currencies were converted to U.S. dollars. 642024 Notice of Annual Meeting & Proxy Statement | 2023 Potential Payments Upon Termination Narrative
Pay Versus Performance | Year (a) | | | Summary Compensation Total for the Principal Executive Officer (“PEO”) | | Compensation Actually Paid to the PEO | | Summary Compensation Total for the Principal Executive Officer (“PEO”) | | Compensation Actually Paid to the PEO | | Average Summary Compensation Table Total for Non-PEO Named Executive Officers (“NEO”s) | | Average Compensation Actually Paid to Non-PEO NEOs | | | Value of Initial Fixed td00 Investment Based on: | | | | | Total Shareholder Return | | Peer Group Total Shareholder Return | | Net 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 | | | | Year (a) | | | | Summary Compensation Total for the Principal Executive Officer (“PEO”) | | Compensation Actually Paid to the PEO | | Summary Compensation Total for the Principal Executive Officer (“PEO”) | | Compensation Actually Paid to the PEO | | Average Summary Compensation Table Total for Non-PEO Named Executive Officers (“Non-PEO NEOs”) | | Average Compensation Actually Paid to Non-PEO NEOs | | | Value of Initial Fixed td00 Investment Based on: | | | | | Total Shareholder Return | | Peer Group Total Shareholder Return | | Net Income (in $M) | | 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) | 2023 | | | | $ | 20,398,426 | | | | $ | 32,769,352 | | | | | N/A | | | | | N/A | | | | $ | 9,916,713 | | | | $ | 14,444,039 | | | | $ | 156 | | | | $ | 167 | | | | $ | 7,502 | | | | $ | 61,860 | | | 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 | | |
(1)
Mr. Krishna was the PEO for all threefour years in the table. AmountsFor 2023, amounts deducted from the PEO’s Summary Compensation Table (“SCT”) total to calculate Compensation Actually Paid (“CAP”) to the PEO for the years 2022, 2021 and 2020, respectively, include ($10,961,337), ($12,605,507), and ($13,159,118)14,823,369) for the date of grant fair value of stock awards and stock options, as well as ($42,806)23,183) for the Change in Retention PlanPension Value in 2020.2023. Amounts added to (or subtracted from) the PEO’s SCT total for the years 2022, 2021 and 2020, respectively2023 also include: $14,225,360, $11,384,777 and $12,175,943$19,555,003 for the fair value of stock awards and stock options that were granted in the year2023 and remainwhich remained outstanding at the end of the year; $2,501,683, $5,024,645 and ($1,508,093) for the change in fair
662023 Notice of Annual Meeting & Proxy Statement | 2022 Potential Payments Upon Termination Narrative
value of stock awards that were granted in prior years and still outstanding at the end of each respective year; and $1,589,226, 2,444,027 and ($478,392)2023; $2,859,266 for the change in fair value of stock awards and stock options that were granted in prior years and which remained outstanding at the end of 2023; and $4,803,209 for the change in fair value of stock awards and stock options that were granted in prior years and vested during each respective year.in 2023.
(2)
Ms. Rometty was the PEO throughfrom April 5, 2020 (when she became Executive Chairman), and then retired through her retirement from IBM on December 31, 2020. Amounts subtracted from the SCT total to calculate CAP to the PEO include ($12,728,348) for the date of grant fair value of stock awards in 2020, as well as ($1,600,931) for the changes in Pension and Retention Plan Values in 2020. Amounts added to (or subtracted from) the SCT for 2020 also include: $11,607,652 for the fair value of stock awards that were granted in the year and remain outstanding at the end of the year; ($1,509,067), for the change in fair value during the year of stock awards that were granted in prior years and still outstanding at the end of the year; and ($1,053,068) for the change in fair value of stock awards that were granted in prior years and vested during the year. (3)
ForThe Non-PEO NEOs were, for 2023, Mr. Kavanaugh, Mr. Thomas, Mr. Cohn, and Ms. Browdy; for 2021 and 2022, Mr. Kavanaugh, Mr. Cohn, Mr. Rosamilia and Ms. Browdy were the Non-PEO NEOs. ForBrowdy; and for 2020, Mr. Kavanaugh, Ms. Browdy, Mr. James Whitehurst, and Dr. John Kelly were the Non-PEO NEOs.Kelly. Amounts subtracted from the average SCT totals for the Non-PEO NEOs (“Average SCT totalNon-PEO SCT”) to calculate Average CAP to the Non-PEO NEOs (“Average Non-PEO CAP”) for the years 2022, 2021 and 2020, respectively,2023 include ($5,530,546), ($6,014,451), and ($10,018,860)7,003,082) for the average value at the date of grant fair value of stock awards and stock options granted in 2023 as well as ($4,797) and ($175,943)4,609) for the average ChangesChange in Pension and Retention Plan Values in 2022 and 2020 respectively.2023. Amounts added to (or subtracted from) the Average Non-PEO SCT to calculate Average Non-PEO CAP for the years 2022, 2021 and 2020, respectively2023 also include: $7,177,407, $5,512,871 and $9,340,129$8,878,110 for the average fair value of stock awards and stock options that were granted in the year2023 and remainwhich remained outstanding at the end of the year; $487,843, 406,744 and ($752,872)2023; $1,670,606 for the average change in fair value of stock awards that were granted in prior years and stillwhich remained outstanding at the end of each respective year; $48,801, 504,9702023; and ($805,021)$625,723 for the average change in fair value of stock awards that were granted in prior years and vested during each respective year; and in 2020, $293,646 for the average dollar value of dividends payable on stock awards during 2020 (related to Mr. Whitehurst’s Restricted Stock Awards assumed upon the acquisition of Red Hat).2023.
(4)
Peer Group Total Shareholder return is calculated based on IBM’s Proxy Peer Group that was disclosed in the Compensation, Discussion & Analysis section of IBM’s Proxy Statement for each respective year shown in the table, weighted based on the Peer Group’s Market Capitalization as of December 31, 2019. Due to Broadcom’s acquisition of VMware in November 2023, Total Shareholder Return for VMware is as of November 2023. As disclosed in IBM’s 2022 Proxy Statement, the Company updated its Peer Group in 2022 to increase the weighting of peers in the technology industry, reflect IBM’s increased orientation as a hybrid cloud and AI company, and align the 2022 Peer Group with the size and scope of IBM following the separation of Kyndryl on November 3, 2021. If IBM used the 2021 Peer Group in 2022, the cumulative Total Shareholder Return from 12/31/2019 to 12/31/2022 would have been $129 (compared to $115 for the current2022 Peer Group) and if the 2021 Peer Group was used in 2023, the cumulative Total Shareholder Return from 12/31/2019 to 12/31/2023 would have been $182 (compared to $167 for the 2023 Peer Group). (5)
Net Income in 2021 and 2020 includes the Managed Infrastructure business, which separated from IBM on November 3, 2021 as Kyndryl. Net Income from Continuing Operations, which would have excluded thisthe Managed Infrastructure business, would have been $4,712 million and $3,932 million for 2021 and 2020, respectively. Net Income in 2022 included a one-time, non-cash pension settlement charge of approximately $4.4 billion, net of tax. (6)
IBM Revenue metric reflects Revenue from Continuing Operations to provide for consistent comparison before and after the separation of the Managed Infrastructure business as Kyndryl on November 3, 2021.
(7)
FairThe fair value of stock awards and stock options included in Compensation Actually paidCAP to the PEO and Average Compensation paid to the NEOsNon-PEO CAP are calculated at the required measurement dates, consistent with the approach used to value the awards at the grant date as described in IBM’s Annual Report. Any changes to stock award fair values from the grant date (for current year grants) and from prior year-end (for prior year grants) are based on IBM’s updated stock price at the respective measurement dates (less the present value of foregone dividends), and updatedthe performance metric scoring projections (if applicable). at the respective measurement dates. Changes to stock option fair values are based on the updatedIBM’s stock price at the respective measurement dates, in addition to an updated expected option term, volatility of the company’s stock over the updated expected option term, expected dividend yield, and risk-free rate assumptions. For each of 2022 and 2023, the year-end stock option fair value increased meaningfully from the fair value on the grant date, primarily driven by an increase in IBM’s stock price, and, for 2022, an
increase in the risk-free interest rate to approximately 4% at year-end from approximately 2% on the grant date. 2024 Notice of Annual Meeting & Proxy Statement | Pay Versus Performance 65
Relationship between Compensation Actually Paid disclosed in the Pay Versus Performance table, and other table elements Compensation Actually Paid (“CAP”)Both CAP to Mr. Krishna and cumulative total shareholder return were both higherincreased over the prior year in each of 2023, 2022 and 2021, relative to 2020.2021. As there were no changes to Mr. Krishna’s base salary, target annual incentive, or target equity grant planned value since Mr. Krishna became CEO in April 2020 through 2022, the increase in PEO CAP was largely the result of the increase in IBM’s stock price over that same time period. In addition to IBM’s stock price increase from 2022 to 2023, the PEO CAP increase in 2023 also resulted from the increase in Mr. Krishna’s 2023 target equity grant, which was in line with the median of the 2023 benchmark group. The average Non-PEO NEO CAP was relatively flat overincrease in each of 2022 and 2023 is also largely the reported period,result of IBM’s increased stock price in each of those years. The average non-PEO CAP decreased in 2021, primarily because of the change in Non-PEO NEOs in 2021 compared to 2020.
The increase in IBM’s stock price that largely contributed to the increased PEO CAP also drove the increase in IBM’s Total Shareholder Return (“TSR”) in 2023, 2022 and in 2021. At the end of the three-year period, IBM’s cumulative TSR ended higher than the cumulative TSR of IBM’s 2022 Peer Group. While the TSR increased over the three-yearfour-year period, the average non-PEO NEO CAP was relatively flatdecreased in 2021 for the reasons noted above. IBM’s Revenue from Continuing Operations increased in 2023, 2022 and 2021 and was directionally aligned with PEO CAP for the reported period. Net Income also increased from 2020 toin 2023 and 2021, directionally in line with the PEO CAP. Net Income in 2022, which included a one-time non-cash pension settlement charge of $4.4 billion (net of tax), decreased in 2022. Without this charge, 2022 Net Income would have increased from 2021 to 2022 as well. Average NEO CAP was relatively flat for the reasons noted above. Tabular List of IBM’s most important metrics that link Compensation Actually Paid to the PEO and other NEOs We consider the list below to be IBM’s most important metrics that link compensation paidCAP to our Named Executive Officers to IBM’s performance, as they are the key metrics that determine the payout of IBM’s Annual Incentive PlanProgram and Performance Stock Units. | | Revenue | | | | | | | | Operating Cash Flow | | | | | | | Diversity | | | | | | Operating EPS | | | | | | | | Free Cash Flow | | | | | | ROIC | | | | |
2023662024 Notice of Annual Meeting & Proxy Statement | Pay Versus Performance67
Report of the Audit Committee of the Board of Directors The Audit Committee hereby reports as follows: 1.
Management has the primary responsibility for the financial statements and the reporting process, including the system of internal accounting controls. The Audit Committee, in its oversight role, has reviewed and discussed the audited financial statements with IBM’s management. 2.
The Audit Committee has discussed with IBM’s internal auditors and IBM’s independent registered public accounting firm the overall scope of, and plans for, their respective audits. The Audit Committee has met with the internal auditors and independent registered public accounting firm, separately and together, with and without management present, to discuss IBM’s financial reporting process and internal accounting controls in addition to other matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB). 3.
The Audit Committee has received the written disclosures and the letter from PricewaterhouseCoopers LLP (PwC) required by applicable requirements of the PCAOB regarding PwC’s communications with the Audit Committee concerning independence, and has discussed with PwC its independence. 4.
The Audit Committee has an established charter outlining the practices it follows. The charter is available on IBM’s website at http://www.ibm.com/investor/att/pdf/auditcomcharter.pdf. 5.
IBM’s Audit Committee has policies and procedures that require the pre-approval by the Audit Committee of all fees paid to, and all services performed by, IBM’s independent registered public accounting firm. At the beginning of each year, the Audit Committee approves the proposed services, including the nature, type, and scope of service contemplated and the related fees, to be rendered by the firm during the year. In addition, pursuant to authority delegated by the Audit Committee, the Audit Committee chair may approve engagements that are outside the scope of the services and fees approved by the Audit Committee, which are later presented to the Committee. For each category of proposed service, the independent registered public accounting firm is required to confirm that the provision of such services does not impair its independence. Pursuant to the Sarbanes-Oxley Act of 2002, the fees and services provided as noted in the table below were authorized and approved by the Audit Committee in compliance with the pre-approval policies and procedures described herein. 6.
Based on the review and discussions referred to in paragraphs (1) through (5) above, the Audit Committee recommended to the Board of Directors of IBM, and the Board has approved, that the audited financial statements be included in IBM’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022,2023, for filing with the Securities and Exchange Commission. P.R. Voser (chair) D.N. Farr M.J. Howard F.W. McNabb III 682023 Notice of Annual Meeting & Proxy Statement | Report of the Audit Committee of the Board of Directors
Set forth below are the fees for services provided to IBM by its independent registered public accounting firm, PricewaterhouseCoopers LLP (PwC) for the fiscal periods indicated. | (Dollars in millions) | | 2022 | | 2021 | | (Dollars in millions) | | 2023 | | 2022 | | | Audit Fees | | | $ | 48.9 | | | | $ | 53.7 | | | Audit Fees | | | $ | 49.9 | | | | $ | 48.9 | | | | Audit Related Fees | | | | 21.3 | | | | | 48.8 | | | Audit Related Fees | | | | 22.5 | | | | | 21.3 | | | | Tax Fees | | | | 0.8 | | | | | 1.2 | | | Tax Fees | | | | 0.9 | | | | | 0.8 | | | | All Other Fees | | | | 0.6 | | | | | 0.7 | | | All Other Fees | | | | 0.8 | | | | | 0.6 | | | | Total | | | $ | 71.6 | | | | $ | 104.4 | | | Total | | | $ | 74.1 | | | | $ | 71.6 | | |
Description of Services Audit Fees: comprise fees for professional services necessary to perform an audit or review in accordance with the standards of the Public Company Accounting Oversight Board, including services rendered for the audit of IBM’s annual financial statements (including services incurred with rendering an opinion under Section 404 of the Sarbanes-Oxley Act of 2002) and review of quarterly financial statements. Also includes fees for services that are normally incurred in connection with statutory and regulatory filings or engagements, such as comfort letters, statutory audits, attest services, consents, and review of documents filed with the SEC. Audit-Related Fees: comprise fees for services that are reasonably related to the performance of the audit or review of IBM’s financial statements, including the support of business acquisition and divestiture activities, independent assessments for service organization control reports, and audit and review of IBM’s retirement and other benefit-related programs. For 2023 and 2022, these services included approximately $16 million, respectively, for independent assessments for service organization control reports. For 2021, these services included approximately $28 million for independent assessments for service organization control reports and approximately $15 million associated with the spin-off of IBM’s managed infrastructure services business. Tax Fees: comprise fees for tax compliance, tax planning and tax advice. Corporate tax services encompass a variety of permissible services, including technical tax advice related to U.S. international tax matters; assistance with foreign income and withholding tax matters; assistance with sales tax, value-added tax and equivalent tax-related matters in local jurisdictions; preparation of reports to comply with local tax authority transfer pricing documentation requirements; and assistance with tax audits. All Other Fees: comprise fees primarily in connection with technical accounting and other software licenses, training services, certain benchmarking work, and other permissible advisory services, including general information services. 20232024 Notice of Annual Meeting & Proxy Statement | Report of the Audit and Non-Audit FeesCommittee of the Board of Directors 6967
2. Ratification of Appointment of Independent Registered Public Accounting Firm IBM’s Audit Committee is directly responsible for the appointment, compensation (including advance approval of audit and non-audit fees), retention and oversight of the independent registered public accounting firm that audits IBM’s consolidated financial statements and its internal controls over financial reporting. In accordance with its charter, the Audit Committee has selected the firm of PricewaterhouseCoopers LLP (PwC), an independent registered public accounting firm, to be IBM’s auditors for the year 2023.2024. 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 2022.2023. Independent Auditor Engagement The Audit Committee annually reviews PwC’s independence and performance in deciding whether to retain PwC or engage a different independent auditor. Prior to the selection of the independent auditor, the Committee considers many factors, including: •
PwC’s capability and expertise in addressing and advising on the breadth and complexity of IBM’s global operations; •
PwC’s independence and tenure as IBM’s auditor; •
PwC’s strong performance on the IBM audit, including the extent and quality of PwC’s communications with the Audit Committee and the results of an internal, worldwide survey of PwC’s service and quality; •
Analysis of known litigation or regulatory proceedings involving PwC; •
Public Company Accounting Oversight Board reports (PCAOB); reports; •
Appropriateness of PwC’s fees for audit and non-audit services; and •
PwC’s reputation for integrity and competence in the fields of accounting and auditing. Auditor Independence Controls The Audit Committee and IBM management have robust policies and procedures in place to monitor and verify PwC’s independence from IBM on a continual basis. These policies and procedures include: •
Private meetings between the Audit Committee and PwC throughout the year; •
Annual evaluation by the Audit Committee; •
Pre-approval by the Audit Committee of non-audit services; •
Lead engagement partner rotation at least every 5 years; the Audit Committee selects a new lead audit engagement partner after a rigorous process, including candidate interviews; •
Concurring audit partner rotation at least every 5 years; •
Auxiliary engagement partner rotation at least every 7 years; •
Hiring restrictions for PwC employees at IBM; and •
Internal quality reviews by, or of, PwC, including the performance of procedures to monitor and assess PwC’s independence from its audit clients, as well as the results of peer reviews by other public accounting firms and PCAOB inspections. Accountability to Stockholders •
PwC’s representative will be present at the annual meeting and will have an opportunity to make a statement and be available to respond to appropriate questions. Benefits of Long-Tenured Auditor PwC has been the independent auditor of IBM since 1958. From 1923 until 1958, the independent auditors of IBM were firms that were ultimately acquired by PwC. The Audit Committee believes that having a long-tenured auditor is in the best interests of IBM and its stockholders in consideration of the following: •
Institutional knowledge and deep expertise necessary for a large, multinational company with IBM’s breadth of global operations and business; •
Higher audit quality developed through experience with more than 250 annual statutory audits in almost 100 countries; and •
No onboarding or educating a new auditor, which would require a significant time commitment and expense, and distract from management’s focus on operational execution, financial reporting and internal controls. | | | | THE IBM BOARD OF DIRECTORS AND THE AUDIT COMMITTEE RECOMMEND A VOTE FOR THIS PROPOSAL. | |
706820232024 Notice of Annual Meeting & Proxy Statement | Ratification of Appointment of Independent Registered Public Accounting Firm
3. Advisory Vote on Executive Compensation (Say (Say on Pay)
IBM is asking that you APPROVE the compensation of the named executive officers as disclosed in this Proxy Statement. IBM delivered $60.5$61.9 billion in revenue and $10.4$13.9 billion cash from operations. Revenue growthincreased for the third consecutive year, growing 3% at constant currency(1) accelerated, growing at 11.6% year-to-year, including approximately 4 points from incremental sales to Kyndryl.. The Company’s portfolio mix reinforces our high value business model, with 73%approximately 75% of revenue coming from our higher growth businesses of Software and Consulting. Overall, about 50% of IBM’s revenue is recurring, with 65%67% of that recurring revenue coming from Software. The Company also returned $5.9$6 billion to stockholders through dividends, and ended the year with $8.8$13.5 billion in cash and marketable securities (up over $1$4.6 billion year-to-year). These results reflect the significant actions we have taken to strategically position IBM for high-value, sustainable growth. In 2022,2023, we once again engaged in a robust program to gather investor feedback. IBM’s CEOChairman and Chairman,CEO, and independent Lead Director, participated in this engagement along with members of IBM’s senior management. The CompanyIBM once again offered to engage with investors representing more than 57% of the shares that voted on Say on Pay at the 2022its 2023 Annual Meeting. Through our discussions with investors and our formal Say on Pay vote results, investors reaffirmed their support for the Company’s compensation policies and programs, which focus on long-term financial performance that drives stockholder value. In the context of investor feedback, pay decisions continued to be made based on our financial performance relative to our goals, while taking into consideration the significant reshaping of IBM’s portfolio as a hybrid cloud and AI Company.company. The Company’s performance metrics that were revamped in 2021 to reinforce the strategic focus on sustainable revenue growth and strong cash generation were maintained for the 2022 Annual Incentive Program and the 2022-2024
Performance Share Unit program. In addition, beginning in 2022, stock options were introduced as part of the overall equity pay mix for IBM executives, to ensure a portion of their equity does not generate value unless IBM’s stock price increases.
IBM’s named executive officers are identified in the 20222023 Summary Compensation Table, and pages 31-6732-66 describe the compensation of these officers. In 2023,2024, approximately 77%78% of target pay for the Chairman and CEO, and 73%75% of target pay for the other named executive officers, is at risk and subject to rigorous performance targets and stock price growth. The rigor of these targets is evident in the payouts. For 20222023 performance, the Board approved an annual incentive payment of $3.48$3.51 million for Mr. Krishna, which was 116%117% of target and in line with the Company annual incentive score. ThisIn making this award, is based onthe Committee also considered Mr. Krishna’s overall performance against his objectives, which included strong free cash flow generation, sustainable revenue generation (at constant currency), and the continued optimization of the Company’s portfolio, with an increased mix of higher growth software and consulting revenue. In addition, the Committee considered Mr. Krishna’s personal leadership in optimizing the Company’s portfolio, accelerating IBM’s revenue growth; driving the ongoing improvement in IBM’s diverse leadership representation; industry-leading innovationAI and research in quantum computing, and AI; anddriving IBM’s high performance culture, as well as continued best in class employee engagement. For the reasons expressed above and discussed in the Compensation Discussion and Analysis, the Executive Compensation and Management Resources Committee and the IBM Board of Directors believe that our compensation policies and programs are aligned with the interests of our stockholders and designed to reward for performance. We are therefore requesting your nonbinding vote on the following resolution: “Resolved, that the compensation of the Company’s named executive officers as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the executive compensation tables and the narrative discussion, is approved.” (1)
Non-GAAP financial metric. See Appendix A for information on how we calculate this performance metric. | | | | THE IBM BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL. | |
Note: The Company is providing this advisory vote as required pursuant to Section 14A of the Securities Exchange Act (15 U.S.C. 78n-1). The stockholder vote will not be binding on the Company or the Board, and it will not be construed as overruling any decision by the Company or the Board or creating or implying any change to, or additional, fiduciary duties for the Company or the Board. 20232024 Notice of Annual Meeting & Proxy Statement | Advisory Vote on Executive Compensation (Say on Pay)7169
4. Advisory Vote Regarding the Frequency of the Advisory Vote on Executive Compensation
IBM is requesting your nonbinding vote on whether an advisory vote to approve the compensation of its named executive officers as disclosed in the Proxy Statement (Say on Pay) should take place every three years, every two years or every year.
Currently, a Say on Pay proposal is provided to IBM stockholders every year. Recognizing stockholder expectations and market practice, the Board believes that holding a Say on Pay vote every year is appropriate.
VOTING RECOMMENDATION
The IBM Board of Directors recommends that an advisory vote on Say on Pay be held every year.
| | | | THE IBM BOARD OF DIRECTORS RECOMMENDS THAT AN ADVISORY VOTE ON SAY ON PAY BE HELD EVERY YEAR.
| |
Note: IBM is providing this advisory vote as required pursuant to Section 14A of the Securities Exchange Act (15 U.S.C. 78n-1). The stockholder vote will not be binding on IBM or the Board, and it will not be construed as overruling any decision by IBM or the Board or creating or implying any change to, or additional, fiduciary duties for IBM or the Board.
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Stockholder Proposals Some of the following stockholder proposals contain assertions about IBM that we believe are incorrect. We have not attempted to refute all of these inaccuracies. Your Board of Directors opposes the following fourfive proposals for the reasons stated after each proposal. 5. Stockholder Proposal to Have an Independent Board Chairman
Management has been advised that Kenneth Steiner, 14 Stoner Ave., Great Neck, NY 11021, the owner of at least 100 shares of IBM stock, intends to submit the following proposal at the meeting:
Proposal 5 — Independent Board Chairman
Shareholders request that the Board of Directors adopt an enduring policy, and amend the governing documents as necessary in order that 2 separate people hold the office of the Chairman and the office of the CEO as follows:
Whenever possible, the Chairman of the Board shall be an Independent Director.
The Board has the discretion to select a Temporary Chairman of the Board who is not an Independent Director to serve while the Board is seeking an Independent Chairman of the Board.
Although it is a best practice to adopt this policy soon this policy could be phased in when there is a contract renewal for our current CEO or for the next CEO transition.
This proposal topic won 52% support at Boeing and 54% support at Baxter International. Boeing then adopted this proposal topic in June 2020. The roles of Chairman and CEO are fundamentally different and should be held by 2 directors, a CEO and a Chairman who is completely independent of the CEO and our company.
A lead director is thus no substitute for an independent board chairman. With the current CEO serving as Chair this means giving up a substantial check and balance safeguard that can only occur with an independent Board Chairman. A lead director cannot call a special shareholder meeting. A CEO/Chairman can overrule a lead director’s input.
A lead director can delegate many details of his lead director duties to management and then simply rubber-stamp it. Management has not explained how shareholders can be sure of what goes on in regard to lead director delegation.
Perhaps there should be a rule against a person who has been a CEO and a Chairman being named as Lead Director. Mr. Alex Gorsky, IBM Lead Director has years in the simultaneous positions of being a CEO and Chairman. Past and present holders of both roles would seem to have a special bond which is inconsistent with the oversight role of a Lead Director. There is clearly a need for a change because the IBM stock price was at $156 five years ago.
This proposal topic won 41% shareholder support at the 2021 IBM annual meeting. This 41% support could represent more than 51% support from the shares that have access to unbiased proxy voting advice. IBM management resistance to this proposal topic may be getting a free ride on the backs of small shareholders who do not have access to unbiased proxy voting advice. For a large company IBM seems to have a greater than usual percentage of small shareholders who do not have access to unbiased proxy voting advice.
The increased complexities of companies of more than $100 Billion in market capitalization, like IBM, demand that 2 persons fill the 2 most important jobs in the company — CEO and Chairman.
Please vote yes:
Independent Board Chairman — Proposal 5
2023 Notice of Annual Meeting & Proxy Statement | Stockholder Proposals 73
| | | | YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
| | | 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. | | | An essential part of our current leadership structure is the independent Lead Director position. The Company’s Lead Director role is robust and ensures effective independent oversight at all times. After a rigorous review by the Directors and Corporate Governance Committee and the Board, the Lead Director is elected by the independent members of the Board on an annual basis. The Lead Director has the following robust and meaningful responsibilities serving to ensure a strong, independent, and active Board by enhancing the contributions of IBM’s independent directors. In particular, the Lead Director:
•
presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors, which are held at every meeting of the Board;
•
serves as liaison between the Chairman and the independent directors;
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approves information sent to the Board;
•
in collaboration with the Chairman, creates and 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, for consultation and direct communication.
| | | In addition to these core responsibilities, the Lead 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;
•
occasionally attending meetings of each of the Board’s committees; and
•
overseeing the Board’s annual evaluation process, including conducting individual interviews with each IBM director and the Chairman.
| | | IBM’s current leadership structure is optimal for the Company at this time. | | | The Directors and Corporate Governance Committee and the Board continuously evaluate the appropriate leadership structure for IBM. After its most recent review, in consideration of the strength of its independent Board and corporate governance practices, the full Board has determined that the existing board leadership structure of having a management director serve as Chairman, alongside a robust and independent Lead Director, best serves the needs of the Company and the stockholders at this time. Among other factors, the Board considered and evaluated:
•
the importance of consistent, unified leadership to execute and oversee the Company’s strategy;
•
the strength of Mr. Krishna’s vision for the Company and the quality of his leadership;
•
the strong and highly independent composition of the Board;
•
the views and feedback heard from our investors through our ongoing engagement program throughout the years expressing support for IBM’s leadership structure; and
•
the meaningful and robust responsibilities of the independent Lead Director, as discussed above.
| | | 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. | |
742023 Notice of Annual Meeting & Proxy Statement | Stockholder Proposals
| 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. | |
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6.4. Stockholder Proposal Requesting a Public Report on Lobbying Activities
Management has been advised that John Chevedden, 2215 Nelson Ave., No. 205, Redondo Beach, CA 90278, the owner of at least 25 shares of IBM stock, intends to submit the following proposal at the meeting:meeting, which is co-sponsored by Reynders McVeigh Capital Management: Proposal 64 — Transparency in Lobbying Whereas, full disclosure of IBM’s lobbying activities and expenditures is needed to assess whether IBM’s lobbying is consistent with IBM’s expressed goals and stockholder interests. Resolved the, IBM stockholders of IBM request the preparation of a report, updated annually, disclosing: 1.
Company policy and procedures governing lobbying, both direct and indirect, and grassroots lobbying communications. 2.
Payments by IBM used for (a) direct or indirect lobbying or (b) grassroots lobbying communications, in each case including the amount of the payment and the recipient. 3.
Description of management’s decision-making process and the Board’s oversight for making payments described above. For purposes of this proposal, a “grassroots lobbying communication” is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. “Indirect lobbying” is lobbying engaged in by a trade association or other organization of which IBM is a member. Both “direct and indirect lobbying” and “grassroots lobbying communications” include efforts at the local, state and federal levels. The report shall be presented to the Audit Committee and posted on IBM’s website. Supporting Statement IBM spent $61$67 million from 2010-20212010-2022 on federal lobbying. This does not include state lobbying, expenditures, where IBM lobbied in at least 2027 states in 20212022 and spent over $810,000$935,000 on lobbying in California from 2010-2021.2010-2022. IBM also lobbies abroad, spending between €1,750,000 — 1,999,999€1,750,000-1,999,999 on lobbying in Europe for 2021. CompaniesIBM deserves credit for refraining from making political contributions. But companies can give unlimited amounts to third party groups that spend millions on lobbying and often undisclosed grassroots activity, and theseactivity. These groups may be spending “at least double what’s publicly reported.”1 Unlike many of its peers, IBM fails to disclose its third-party payments to trade associations and social welfare organizations, or the amounts used for lobbying, to stockholders.
IBM belongs to the Business Roundtable and US Chamber Commerce, which together have spent over $2.1$2.2 billion on federal lobbying since 1998. IBM’s lack of disclosure presents reputational risk when its lobbying contradicts company public positions. For example, IBM believes in addressing climate change, yet the Business Roundtable lobbied against the Inflation Reduction Act2 and the Chamber reportedly has been a “central actor” in dissuading climate legislation over a two-decade period.3 IBM has attracted scrutiny for avoiding federal income taxes,4 as the Business Roundtable has lobbied against a new minimum corporate tax.5 And while IBM does not belong to the controversial American Legislative Exchange Council, which is attacking “woke capitalism,”“woke” investing,26 it is represented by its trade association, with the Chamber sitting on its Private Enterprise Advisory Council. IBM’s lack of disclosure presents reputational risk when its lobbying contradicts company public positions. IBM believes in addressing climate change, yet the Business Roundtable lobbied against the Inflation Reduction Act3 and the Chamber opposed the Paris climate accord. IBM is committed to diversity and inclusion, yet the Chamber lobbied against protecting voting rights.4
And while IBM has attracted scrutiny for avoiding federal income taxes,5 the Business Roundtable has lobbied against raising coproate taxes to fund health care, education and safety net programs.6 Reputational damage stemming from these misalignments could harm stockholder value.
Last year, this proposal exceeded 48% support at IBM. Thus, I urge IBM to expand its lobbying disclosure. 1
https://theintercept.com/2019/08/06/business-group-spending-on-lobbying-in-washington-is-at-least-double-whats-publicly-reported/. 2
https://www.exposedbycmd.org/www.theguardian.com/environment/2022/07/27/abandoning-free-market-and-libertv-principles-alec-takes-on-woke-capitalism-bodily-autonomy-and-more- at-its-annual-meeting/.aug/19/top-us-business-lobby-group-climate-action-business-roundtable. 3
https://www.theguardian.com/environment/2022/aug/19/top-us-business-lobby-group-climate-action-business-roundtable.www.washingtonpost.com/politics/2023/08/02/climate-group-pushes-big-tech-exit-nations-largest-business-lobby/. 4
https://www.cnn.com/2021/04/21/business/voting-rights-chamber-of-commerce/index.html.www.axios.com/2019/12/16/fortune-500-companies-corporate-income-tax. 5
https://www.aljazeera.com/opinions/2021/6/30/what-to-make-of-the-historic-g7-tax-deal; https://itep.org/corporate-tax-avoidance-in-the-first-year-of-the-trump-tax-law/www.washingtonpost.com/business/2023/08/14/biden-corporate-tax/. 6
https://www.washingtonpost.com/us-policy/2021/08/31/business-lobbying-democrats-reconciliation/.www.wbur.org/hereandnow/2023/03/22/esg-investing-fossil-fuels. 767020232024 Notice of Annual Meeting & Proxy Statement | Stockholder Proposals
| | | | YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL. | | | 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. Last year, IBM stockholders rejected an identical proposal. 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 20222023 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 3938 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 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:(https://admin.blogs.pre.ibm.event.ibm.com/www.ibm.com/policy/philosophy-governance/philosophy-and-governance-new/). Further, | | | Based on stockholder feedback, IBM has further enhanced its disclosure by identifying those trade organizations that are directly engaged in U.S. lobbying through annual payments of $50,000 or higher. Moreover, 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,In addition to this, 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. | |
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| 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. | |
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7.5. Stockholder Proposal Requesting a Public Report on Congruency in China Business Operations and ESG Activities
Management has been advised that National Center for Public Policy Research, 2005 Massachusetts Ave. NW, Washington, DC 20036, the owner of at least 3513 shares of IBM stock, intends to submit the following proposal at the meeting: Congruency Proposal Resolved: Shareholders request that the Board of Directors commission and publish a third-party review within the next year (at reasonable cost, omitting proprietary information) of whether the Company’s activities and expenditures related to doing 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 risks presented by any misaligned activities and expenditures and the Company’s plans, if any, to mitigate these risks, such as detailing its plans to shift these activities and expenditures to less repressive and hostile regimes. Supporting Statement: IBM’s 20212022 ESG report touts its alleged environmental and ethical impacts.1 It advertises the company’sCompany’s goals of reducing pollution and reaching net-zero greenhouse gas emissions by 2030, as well as policies and practices that it says prioritize qualities such as ethics and accountability.2 The ESG report also highlights the company’sCompany’s commitment to human rights and its Human Rights Statement of Principles.3 But nothing about doing business in China, which is controlled by the dictatorial and inhumaneoppressive Chinese Communist Party (CCP), does anything to further these ideals. For starters, China is the world’s largest emitter of greenhouse gases, emitting more greenhouse gases than the entire U.S. and the developed world combined.4 Exceeding more than 27 percent of the world’s total global emissions, China’s emissions have more than tripled over the last three decades.5
Furthermore, the Chinese governmentChina has an abhorrent human rights record. Its abuses against the Uyghurs and other ethnic minorities in Xinjiang has sparked outrage, as evidence of forced labor programs, forced sterilizations, and torture at the hands of the CCP are undeniable.6 Chinese authorities also amplifyA report by the magnitudeOffice of trafficking crimes in the countryUnited Nations High Commissioner for Human Rights into Xinjiang concluded that “serious human rights violations” against the Uyghur and “other predominantly Muslim communities” have been committed by perpetrating genocide and using emerging technologies to carry out discriminatory surveillance and ethno-racial profiling measures designed to subjugate and exploit minority populations.the country.7 This poor human rights record makes China’s increasingly aggressive stance toward Taiwan even more alaiming, as it makes claimsU.S. Customs and Border Protection, the agency responsible for enforcing the U.S.’s Uyghur Forced Labor Prevention Act (UFLPA), has detained nearly $2 billion in goods under the UFLPA since June 2022.8 The largest amount of sovereignty overgoods seized under the island. It has recently sent warplanes towardsUFLPA comes from the territory’s air defense zone, and has called for Taiwan’s “reunification”electronics industry, with China, stoking fears and geopolitical instability.2,529 shipments detained. Nearly half of all shipments detained (44 percent) have been denied.89
IBM nonetheless conducts a significant amount of business in China. In fact, accordingAccording to reports, IBM facilitates the Chinese regime’s mass surveillance against its own citizens.program.910 Indeed, IBMIt also conducts business in China despite itChina leading the world in greenhouse gas emissions and committing genocide against ethnic minorities — actions that run directly counter to everything that IBM’s ESG report says the company stands for. As such,Therefore, it is critical that the Board commission and publish a third-party review that includes experts who are fully aware of the dangers that China poses to the U.S. and its allies around the world, including its military-civil fusion strategy1011 and environmental and human rights abuses, to ensure that IBM’s actions as a company live up to its words. 1
https://www.ibm.com/impact/files/reports-policies/2021/IBM_2021_ESG_Report.pdf2022/IBM_2022_ESG_Report_and_Addendum.pdf 2
Id. 3
https://www.ibm.com/ibm/responsibility/ibm_humanrightsprinciples.html 4
https://www.cnbc.com/2021/11/01/india-targets-2070-for-net-zero-emissions-china-makes-no-new commitments.html;india-targets-2070-for-net-zero-emissions-china-makes-no-new-commitments.html; https://www.cnbc.com/2021/05/06/chinas-greenhouse-gas-emissions-exceed-us-developed-world-report.html; https://rhg.com/research/chinas-emissions-surpass-developed-countries/ 5
https://www.cnbc.com/2021/05/06/chinas-greenhouse-gas-emissions-exceed-us-developed-world-report.html; https://rhg.com/research/chinas-emissions-surpass-developed-countries/ 6
https://www.state.gov/forced-labor-in-chinas-xinjiang-region/; https://www.bbc.com/news/world-asia-china-59595952; https://www.state.gov/wp-content/uploads/2022/07/Forced-Labor-The-Hidden-Cost-of-Chinas-Belt-and-Road-Initiative.pdf 7
https://www.state.gov/wp-content/uploads/2022/08/22-00757-TIP-REPORT_072822-inaccessible.pdfwww.ohchr.org/sites/default/files/documents/countries/2022-08-31/22-08-31-final-assesment.pdf 8
https://www.foxnews.com/politics/chinese-aggression-taiwan-testing-us-resolve-afghanistan-withdrawal-experts; https://www.npr.org/2021/10/09/1044714406/xi-jinping-china-taiwan-peaceful-reunification; https://abcnews.go.com/lnternational/wireStory/taiwans-tsai-backing-chinese-aggression-92041196www.cbp.gov/newsroom/stats/trade/uyghur-forced-labor-prevention-act-statistics 9
https://www.top1Ovpn.com/www.cbp.gov/newsroom/stats/trade/uyghur-forced-labor-prevention-act-statistics 10
https://www.top10vpn.com/research/huawei-china-surveillance-state/; https://theintercept.com/2019/07/11/china-surveillance-google-ibm-semptian/ 1011
https://www.state.gov/wp-content/uploads/2020/05/What-is-MCF-One-Pager.pdf 2023722024 Notice of Annual Meeting & Proxy Statement | Stockholder Proposals79
| | | | YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL. | | | TheThis Board believes adoption of this proposal is unnecessary and would not provide additional useful information to the Company’s stockholders. This proposal was overwhelmingly rejected by IBM stockholders in 2023 with more than 90% of stockholders voting AGAINST. | | | 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 executiveexecute 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 addition to the above, IBM has robust processes in place to ensure that our technology is not used in ways that would conflict with our values, our commitment to uphold basic human rights and freedoms, and our long-standing focus on responsible stewardship of powerful innovations. These robust processes are underpinned by our longstanding values relating to ethics and responsible business practices as well as our Principles for Trust and Transparency and include: •
Annual employee certification to the IBM Business Conduct Guidelines; •
IBM’s AI Ethics Board, which supports a centralized governance, review, and decision-making process for IBM ethics policies, practices, communications, research, products and services; and •
Technology ethics training programs provided to IBM business partners. | | | 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. | |
6. Stockholder Proposal Requesting a Right to Act by Written Consent Management has been advised that Kenneth Steiner, 14 Stoner Ave., Great Neck, NY 11021, the owner of at least 100 shares of IBM stock, intends to submit the following proposal at the meeting: Proposal 6 — Shareholder Right to Act by Written Consent Shareholders request that our board of directors undertake such steps as may be necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. This includes shareholder ability to initiate any appropriate topic for written consent. Technically 25% of all IBM shares outstanding can call for a special shareholder meeting but unfortunately this translates into 40% of the shares that cast ballots at the annual meeting because many IBM shareholders do not vote. It would be hopeless to expect that the shares that do not have time to vote would have the time for the bureaucratic requirements to call for a special shareholder meeting. This proposal topic won 42%-support at the 2020 IBM annual meeting. 802024 Notice of Annual Meeting & Proxy Statement | Stockholder Proposals 73
The 42%-support was all the more impressive because it takes much more IBM shareholder conviction of the merits of a proposal to support a shareholder proposal, and thereby reject the Board of Director’s position, than to simply go along with the Board’s position. Written consent can also have the safeguard that all shareholders are given notice. Taking action by written consent in place of a meeting is a means shareholders can use to raise important matters outside the normal annual meeting cycle like the election of a new director. For instance Mr. Andrew Liveris, who chaired the IBM governance committee, was rejected by 22% of shares in 2023 when a 5% rejection is often the norm for well-performing directors. A shareholder right to act by written consent could give IBM directors more of an incentive to improve their performance. The IBM Board of course said it preferred a special shareholder meeting to written consent. With the widespread use of online shareholder meetings the IBM Board could take control and allow only one shareholder to speak at an online special meeting. It is also appropriate that the corporate governance of IBM be improved with this proposal given that IBM stock has been in decline for more than a decade from its $200 price in 2013. Please vote yes: Shareholder Right to Act by Written Consent — Proposal 6 | | | | YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL. | | | Your Board of Directors believes that action by written consent without prior notice to all stockholders is not in the best interest of stockholders and recommends a vote AGAINST this proposal. | | | This proposal has been repeatedly rejected by IBM stockholders, most recently in 2021. This year’s version of the proposal once again inaccurately describes the number of shares required to call a special meeting of the stockholders of IBM. IBM’s corporate governance provisions call for a threshold of 25% of stockholders to call a special meeting, not 40% of shares that cast ballots at the annual meeting. The Company’s by-laws plainly state that “Special meetings of the stockholders, unless otherwise provided by law, may be called at any time by the Chairman of the Board or by the Board, and shall be called by the Board upon written request delivered to the Secretary of the Corporation by the holder(s) with the power to vote and dispose of at least 25% of the outstanding shares of the Corporation” (emphasis added). The Board recommends a vote against this proposal. | | | IBM has long demonstrated its commitment to sound principles of corporate governance, working to ensure that its practices protect and further the interests of its stockholders. In addition to stockholders’ right to call a special meeting, IBM has: •
a proxy access by-law provision; •
annual election of directors by majority vote; •
the right to remove directors without cause; •
no supermajority provisions in our charter documents; •
annually-enhanced proxy disclosure that gives stockholders extensive insight into the Board’s oversight of management; and •
best-in-class, year-round engagement with our stockholders. | | | IBM’s current practices also guarantee that notice and an opportunity to be heard precede stockholder votes, enabling meaningful discourse to occur before important decisions are made affecting your Company. In contrast, this proposal would enable the owners of a bare majority of shares to act by voting in favor of their own proposed action, without a meeting and without ever providing notice to other stockholders or IBM. The Board of Directors believes that the adoption of this proposal would not be in the best interests of its stockholders. | | | Currently, any matter that IBM or its stockholders wishes to present for a stockholder vote must be noticed in advance and presented at a meeting of stockholders. This transparency and fairness allows all stockholders to consider, discuss, and vote on pending stockholder actions. In contrast, the written consent proposal at issue would permit a small group of stockholders (including those who accumulate a short-term voting position through the borrowing of shares) with no fiduciary duties to other stockholders to initiate action with no prior notice either to other stockholders or to the Company, thus preventing all stockholders from having an opportunity to deliberate in an open and transparent manner, and to consider arguments for and against any action, including IBM’s position. Permitting stockholder action by written consent could also lead to substantial confusion and disruption for stockholders, with potentially multiple, even conflicting, written consents being solicited by multiple stockholder groups. For these reasons, the Board does not believe that such a written consent right is an appropriate corporate governance model for a widely-held public company like IBM. | |
742024 Notice of Annual Meeting & Proxy Statement | Stockholder Proposals
| In sum, the Board concludes that adoption of this proposal is unnecessary for the following reasons: •
IBM’s long demonstrated history of commitment to high standards of corporate governance and accountability; •
The belief that holding meetings with proper notice whereby all stockholders may deliberate and discuss the proposed actions, receive and consider the Company’s position, and then vote their shares is the most transparent and fair way for stockholders to take action; •
The safeguards around the ability to act by a special or annual meeting both promote and protect stockholders’ interests; and •
As described in this Proxy Statement, the Company has an established process by which stockholders may communicate directly with IBM’s Board or non-management directors throughout the year on any topics of interest to stockholders. | | | Conclusion | | | The Board views the proposal calling for action by written consent without prior notice to all stockholders as unnecessary and not in the best interests of its stockholders. | | | THEREFORE, THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL. | |
8.7. Stockholder Proposal Requesting a Public Report on Harassment and Discrimination Prevention EffortsClimate Lobbying
Management has been advised that Jay Stanley Weisfeld Trust, P.O. Box 158, Rochester, VT 05767,James McRitchie, 9295 Yorkship Court, Elk Grove, CA 95758, the owner of at least 15015 shares of IBM stock, intends to submit the following proposal at the meeting: Independent review of effectiveness of company efforts to prevent harassment and discriminationProposal 7 — Report Climate Lobbying Alignment
Whereas:Resolved
Concerns have been raised about International Business Machines’ (“IBM”) workplace practices. These have included gender, race and age discrimination allegations.
Given the severity of the allegations, investors and other stakeholders may have reduced confidence in the Company’s statements that “IBM has been a leader in corporate diversity and inclusion for decades and is deeply committed to fostering a healthy, safe, and productive work environment for all lBMers.”1
Indicating a possible discomfort with the Company’s use of concealment clauses, 64.7 percent of IBM’s investors supported a 2022 shareholder resolution which requested that IBM’s Board of Directors release a public report assessing the potential risks to the Company associated with its use of concealment clauses in the context of harassment, discrimination and other unlawful acts”.2 Concealment clauses are defined as 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 discrimination.
IBM utilizes concealment clauses within a patchwork of state and federal laws. In September 2022, the U.S. Senate unanimously passed “The Speak Out Act” which would limit non-disclosure agreements when sexual harassment is claimed.3 California and Washington already prohibit agreements that prevent employees from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination.
Given that IBM continues to use concealment clauses “in settlements of lawsuits, or as part of voluntarily agreed exit agreements,”4 shareholders are unable to assess the breadth of discrimination and related risks within the Company. This practice is not used by Alphabet5, Apple6, Microsoft7, or Salesforce8, among others.
Resolved:
: Shareholders request the Board of Directors commission an independent reviewInternational Business Machines (“IBM” or “Company”) annually analyze and report to shareholders (at reasonable cost, omitting proprietary information) on whether and how IBM is aligning its lobbying and policy influence activities and positions, both direct and indirect (through trade associations, coalitions, alliances, and other organizations) with its target of net-zero emissions 2030, including the effectivenessactivities and outcomespositions analyzed, the criteria used to assess alignment, and involvement of stakeholders, if any, in the analytical process. In evaluating the degree of alignment between the Company’s efforts to prevent harassmentemissions goals and discrimination against its protected classeslobbying, IBM should consider not only its policy positions and those of employees, and issueorganizations of which it is a public report summarizingmember but also the findings.actual lobbying activities, such as legislative comment submissions. The proponent believes this request is consistent with investor expectations described in the Global Standard on Responsible Climate Lobbying,1 a valuable resource for implementation. Supporting Statement:Statement: In its discretion,The United Nations Framework Convention on Climate Change asserts that greenhouse gas emissions must decline 45 percent from 2010 by 2030 to limit global warming to 1.5 degrees Celsius. If that goal is not met, even more rapid reductions, at greater cost, will be required to compensate for the Board may wishslow start on the path to consider including in the report disclosures such as:global net- zero emissions.2
•
IBM has publicly committed to achieving net-zero emissions by 2030, supports the total numberParis Agreement’s goals, and aggregate costs associatedbelieves that all society sectors must participate in climate change solutions.3 However, IBM does not describe its direct and indirect federal or state lobbying efforts to engage in climate-related policy issues. Corporate lobbying inconsistent with disputes settled by the Company relatedParis Agreement and companies’ net zero targets presents increasingly material risks to harassment or discrimination in the previous three years;companies and their shareholders.
•
IBM has disclosed that it spent over $25 million since 2018 on federal lobbying. This does not include certain undisclosed state lobbying expenditures. IBM provides direct links on its public policy website to where it files quarterly lobbying activity and expenditure reports. Enhancing this by reporting how the total number of pending harassment or discrimination complaints the Company is seeking to resolve through internal processes, arbitration or litigation;company’s lobbying activities align with its net-zero targets would fill critical disclosure gaps for shareholders.
•
Even with the total numberrecent passage of the Inflation Reduction Act, critical gaps remain between the United States’ Nationally Determined Contributions and aggregate costs associatednecessary climate action. Companies like IBM have an essential role in enabling policymakers to close these gaps, given the increasingly material risks they face with contracts that include exit or other agreements where concealment clauses that restrict discussions of harassment or discrimination are present,delays in emissions reductions.
•
an estimateOf particular concern are trade associations that say they speak for business but too often present forceful obstacles to addressing climate change. IBM is a member of trade associations, such as the number of claims which may be madeBusiness Roundtable, engaging with largely negative climate policy positions. Although IBM states that it will share its dissenting views with trade associations in public should existing non-disclosure or arbitration agreements be made null by changing legislation.when it helps the policy debate, stockholders have yet to see such disclosure on climate policy. Shareholders discount hypocritical companies.
The report should not include the names or details of settlements without consent and should be prepared at a reasonable cost and omit any information that is proprietary, privileged, or violative of contractual obligations.Add Value: Vote For Proposal 7
1
https://sec.report/Document/0001104659-22-031075/climate-lobbying.com 2
https://www.sec.gov/ix?doc=/Archives/edgar/data/0000051143/000110465922053570/tm2213945d1_8k.htmunfccc.int/news/updated-ndc-synthesis-report-worrying-trends-confirmed 3
https://spectrumnews1.com/oh/cincinnati/news/2022/10/03/u-s--senate-passes-bill-limiting-ndas
4
https://sec.report/Document/0001104659-22-031075/
5
https://www.sec.gov/Archives/edgar/data/1652044/000130817922000262/lgoog2022_def14a.htm
6
https://www.sec.gov/Archives/edgar/data/320193/000119312522003583/d222670ddef14a.htm
7
https://blogs.microsoft.com/on-the-issues/2022/06/08/microsoft-announces-four-new-employee-workforce-initiatives/
8
https://www.salesforce.com/news/stories/salesforce-extends-workplace-protections-in-ca-sb331-bill-to-all-u-s-employees/www.ibm.com/about/environment/energy-climate
20232024 Notice of Annual Meeting & Proxy Statement | Stockholder Proposals 8175
| | | | YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL. | | | The Board has reviewed and considered this proposal and determined that it is unnecessary given IBM’s history on environmental matters, current disclosures and would not provide additional useful information to the Company’s stockholders.policies. | | | IBM Has Already Issued a Report Responsive to the ConcernsLong History of This ProposalActively Addressing Environmental Matters | | | Proponent asserts that “shareholders are unableFor the past three decades, IBM has been actively addressing environmental concerns. When it comes to assessclimate change, IBM has demonstrable leadership and results. In 1994, IBM began to voluntarily disclose carbon dioxide emissions associated with IBM’s consumption of energy and has done so every year since. In 2000, IBM established its first carbon dioxide emissions goal and is now working on its fifth successive goal, with factual achievement every step of the breadthway. In 2001, IBM made its first purchase of discriminationrenewable electricity and related risks withinhas continued ever since. In 2007, IBM published a formal position on climate change calling for meaningful action on a global basis to stabilize the Company” becauseatmospheric concentration of greenhouse gases. In 2015, IBM uses “concealment clauses.” The same proponent submitted Stockholder Proposal 6 at IBM’s 2022 Annual Meetingstood by this statement when it supported the Paris Agreement and reaffirmed its support in 2017. In 2019, IBM once again demonstrated its commitment to combating climate change by becoming a Founding Member of Stockholders requestingthe Climate Leadership Council and supporting its bipartisan plan for a report assessingcarbon tax with 100% of the potential risksnet proceeds returned to citizens as a carbon dividend. Furthermore, IBM from the use of concealment clauses in the context of harassment, discriminationhas been recognized with numerous awards for its climate leadership. Most recently, for example, IBM was named to Forbes Top 100 Net Zero Leaders 2023 and other unlawful acts. That proposal passedUSA Today America’s Climate Leaders 2023. | | | IBM Already Publicly Discloses its Climate Policy and consistent with the Company’s history, IBM committed to publishing a responsive report.Positions | | | However,IBM’s public policy advocacy spans a range of issues relevant to our business, clients, stockholders, employees, communities and other stakeholders. We engage policymakers and leaders globally to promote ideas that can help spur growth and innovation with new technologies or address societal challenges, such as building a skilled and diverse workforce. We do this by developing innovative policy ideas that are aligned with national agendas, through building trusted relationships with government leaders, and through partnerships with academia and civil society. With regards to environmental matters, IBM is committed to addressing climate change through the proponent submittedcompany’s energy conservation and climate protection programs. IBM’s climate change policy and positions are already publicly available at our website and in our annual Impact Report: (https://www.ibm.com/about/environment/energy-climate).
| | | As an example of our public disclosure of our climate change policy and positions, IBM publicly endorsed the plan outlined by the Climate Leadership Council that would put a tax on carbon dioxide emissions, with the proceeds of that tax — a “carbon dividend” — to be returned to citizens. We did this new stockholder proposalbecause we are convinced this represents the most realistic and appropriate opportunity to get a majority of people to agree on a public policy towards carbon emissions that is mindful of both the environment and the economy. This plan would put in place strong economic incentives for IBM’s 2023 Annual Meeting of Stockholders energy companies to reduce carbon emissions and for energy consumers to reduce their own energy consumption. More information on this topic is available at our website (beforehttps://www.ibm.com/policy/climate-change/ IBM completed its internal risk assessment and published its report.). | | | IBM has since published a robust public report describing that: (1) IBM has clear policies, proceduresAlready Provides Robust Disclosure on its Lobbying Activities 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.it is Recognized for its Transparency by Independent Third Parties | | | As such,IBM already discloses robust information with regards to its lobbying activities. In fact, IBM consistently receives high ratings from independent analysts of corporate practices on lobbying and political spending, including the limitedCenter for Political Accountability and Transparency International UK. In its latest report, the Center for Political Accountability’s 2023 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 such provisions does not pose an inappropriate riskcorporate assets to theinfluence elections and as one of only 38 companies that prohibit both trade associations and non-profits from using 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 environmentcontributions for all IBMers.election-related purposes. | | | The additional, prescriptive annual report requested by the proponent focused on a single issue is unnecessary given the extent of IBM’s existing lobbying disclosures: (https://www.ibm.com/policy/philosophy-and-governance-new/). For example, IBM’s disclosures already identify those trade organizations that IBM Has Clear Policies, Procedures,is a member of and Practicesare directly engaged in PlaceU.S. lobbying through annual payments of $50,000 or higher. Moreover, the website also provides direct links to Protectwhere IBM regularly files periodic reports with the Secretary of the U.S. Senate and Support IBMers •
the Clerk of the U.S. House of Representatives. These reports detail IBM’s U.S. federal lobbying activities (including environmental) and expenditures (including expenditures for “indirect lobbying” via trade associations, as required by law). The reports further display the European Union Transparency Register, which details IBM’s lobbying activities and expenditures with European Union institutions. Furthermore, IBM has a rich history of leadership in diversityfiles reports with state and inclusion
•
IBM does not tolerate discrimination or harassment and has clear policies, procedures and practices relating to the prevention of harassment or bullying in the workplace
•
IBM does have extensive training, including mandatory training and recertification on Business Conduct Guidelines, anti-discrimination and anti-harassment
•
IBM does foster an inclusive workplace,municipal governments where IBMers are supported by Allyship resources and over 200 Business Resource Groups globallyrequired.
•
IBM does have clear communication channels where employees may understand their options, discuss concerns, and take action
•
IBM does promptly and thoroughly review all reports of unlawful or unethical conduct, including non-inclusive behavior
•
IBM does not tolerate threats or acts of retaliation against employees for reporting non-inclusive behavior
| | | IBM Does Not Require Concealment Clauses and IBMers are Free to Discuss the Terms and Conditions of their Employment
•
IBM does not require employees to agree to arbitration as a condition of employment in the U.S.
•
IBM does not preclude IBMers from discussing the terms and conditions of their employment or their own experiences with non-inclusive behavior
•
IBM uses confidentiality provisions in post-employment agreements in limited circumstances only where mutually agreed by the parties and legally permitted
•
IBM does not prevent IBMers from filing claims with or participating in investigations conducted by the Equal Employment Opportunity Commission or otherwise reporting to a government agency
| | | IBM has Strong Board Oversight of Risk Related to Harassment, Discrimination, and Other Unlawful Acts
•
The Executive Compensation and Management Resources Committee of the IBM Board of Directors oversees IBM’s human capital management and diversity and inclusion programs
•
The Directors and Corporate Governance Committee of the IBM Board of Directors reviews and considers IBM’s position and practices on significant public policy issues
•
The Audit Committee of the IBM Board of Directors oversees implementation of and compliance with the Business Conduct Guidelines through employee education and certification. The Audit Committee also receives and discusses reports from IBM’s Chief Trust and Compliance Officer relating to investigations, including any trends on employment-related matters such as harassment and discrimination
•
Employees may directly contact IBM’s independent directors through email or mail with concerns
| |
822023 Notice of Annual Meeting & Proxy Statement | Stockholder Proposals
| Conclusion | | | For the reasons described above, the Board has determined thatbelieves the adoption of this proposal is unnecessary and would not provide additional useful information to the Company’s stockholders. Therefore, the Board believes adoption of this proposal istherefore not in the best interests of the Company and its stockholders. | | | THEREFORE, THE BOARD RECOMMENDS A VOTE AGAINST THIS PROPOSAL. | |
2023762024 Notice of Annual Meeting & Proxy Statement | Stockholder Proposals
8. Stockholder Proposal Requesting the Adoption of Greenhouse Gas Emissions Targets Management has been advised that Green Century Capital Management, Inc., on behalf of the Green Century Equity Fund, 114 State St. Suite 200, Boston, Massachusetts 02109, the owner of at least 150 shares of IBM stock, intends to submit the following proposal at the meeting: Target to Reduce Full Operational and Value Chain Greenhouse Gas Emissions Whereas: Climate change is creating systemic risks to the economy, and immediate, sharp emissions reduction is required of all market sectors and industries.1 Publicly traded corporations both contribute emissions that augment climate change and are subject to multiple risks created by climate change. Lack of comprehensive efforts to curtail emissions threatens investor value, particularly for diversified holders, for whom climate change poses an undiversifiable and unhedgeable risk.2 In response to this systemic risk, more than 6,000 companies, representing a broad range of industries, have set or committed to set science-based greenhouse gas reduction targets covering their Scopes 1-3 emissions aligned with a 1.5 degrees Celsius scenario with the Science Based Targets initiative (SBTi). SBTi provides third-party validation of corporate targets. IBM has declined to set comparably comprehensive targets or seek third-party validation for its existing targets, raising concerns about the credibility of its commitments. Rather, it has adopted a 2030 net zero target narrowly focused on its operational emissions and a single category of Scope 3 emissions. Of the emissions IBM discloses for 2022, its target covers only half of its carbon footprint. Meanwhile, Company peers Accenture, Microsoft, Hewlett Packard Enterprise, Salesforce, and SAP have set or committed to set near-term science-based 1.5 degree Celsius-aligned targets with SBTi inclusive of their full Scopes 1-3 emissions. Additionally, Accenture, Hewlett Packard Enterprise, and Microsoft, have committed to set ambitious long-term 1.5 degree Celsius-aligned net-zero by 2050 targets, vetted by SBTi. IBM’s opposition to setting an emissions reduction target verified by a third party creates business and reputational risks. For example, the Company markets and sells end-to-end sustainability solutions including cloud-based software, Envizi ESG Suite, which helps customers calculate and report Scope 3 emissions, and it notes in a Wall Street Journal ad that, “Companies need tools that can help them do detailed carbon accounting…”3 However, in its recent CDP climate report, IBM chooses not to disclose a number of Scope 3 emissions categories indicating that there is no reliable data for reporting the emissions, controverting its stated capabilities of providing detailed carbon accounting. Further, IBM describes Envizi as valuable for customers reporting greenhouse gas emissions data to CDP, or who have committed to the SBTi. Regrettably, IBM disparages SBTi in its 2022 CDP climate report as “a self-appointed arbiter for judging a company’s goals,” undermining the value of its own services. Resolved: Shareholders request that IBM adopt independently verified short-, medium- and long-term science-based greenhouse gas emissions reduction targets, inclusive of emissions from its full value chain, in order to achieve net zero emissions by 2050 in line with the Paris Agreement’s goal of limiting global temperature rise to 1.5 degrees Celsius. | | | | YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL. | | | This proposal is unnecessarily prescriptive and does not properly consider IBM’s well-known disclosures, policies and practices in this area. Accordingly, the Board recommends AGAINST this proposal since it is unnecessary and not in the best interest of the Company and its stockholders. | | | IBM Has a Long History of Actively Addressing Environmental Matters | | | For the past three decades, IBM has been actively addressing environmental concerns. When it comes to climate change, IBM has demonstrable leadership and results. In 1994, IBM began to voluntarily disclose carbon dioxide emissions associated with IBM’s consumption of energy and has done so every year since. In 2000, IBM established its first carbon dioxide emissions goal and is now working on its fifth successive goal, with factual achievement every step of the way. In 2001, IBM made its first purchase of renewable electricity and has continued ever since. In 2007, IBM published a formal position on climate change calling for meaningful action on a global basis to stabilize the atmospheric concentration of greenhouse gases. In 2015, IBM stood by this statement when it supported the Paris Agreement and reaffirmed its support in 2017. In 2019, IBM once again demonstrated its | |
1
https://report.ipcc.ch/ar6wg3/pdf/IPCC_AR6_WGIII_FinalDraft_FullReport.pdf 2
https://www.unepfi.org/fileadmin/documents/universal_ownership_full.pdf. Pg4. 3
https://partners.wsj.com/ibm/tackling-tough-business-challenges-together/making-sustainability-goals-achievable-with-the-help-of-data/ 2024 Notice of Annual Meeting & Proxy Statement | Stockholder Proposals 8377
| commitment to combating climate change by becoming a Founding Member of the Climate Leadership Council and supporting its bipartisan plan for a carbon tax with 100% of the net proceeds returned to citizens as a carbon dividend. Furthermore, IBM has been recognized with numerous awards for its climate leadership. Most recently, for example, IBM was named to Forbes Top 100 Net Zero Leaders 2023 and USA Today America’s Climate Leaders 2023. | | | IBM’s Climate Change Goals Are Transparent, Authentic and Factually Based on Science | | | Since its first carbon dioxide emissions reduction goal in 2000, IBM’s climate goals have always been transparent, authentic, and, most importantly, based on science. Currently, IBM has 11 voluntary goals pertaining to climate change, including goals for greenhouse gas (GHG) emissions reduction and net zero. These goals are aligned with the scientific recommendations of the United Nations Intergovernmental Panel on Climate Change (IPCC). We establish near-term targets to promote action and accountability and to promote our long-term objectives. | | | We believe that demonstrable and factual results are what matter most and, for this reason, we avoid opaque representations of achievement. For example, one of IBM’s goals is to reduce the company’s operational GHG emissions by 65% by 2025 against base year 2010, adjusted for acquisitions and divestitures. As reported in our 2022 Impact Report, as of year-end 2022, IBM had already achieved a 63.3% reduction. This achievement was, and will continue to be, evaluated by an independent third party that reviewed GHG emissions and associated data from the activities under IBM’s operational control. It is also worth noting that the 63.3% reduction exceeds the annual rate of reduction recommended by the United Nations IPCC, which in its “Special Report: 1.5 C°” indicated that anthropogenic carbon dioxide emissions must decrease 45% between 2010 and 2030 to limit Earth’s warming to 1.5 degrees Celsius above pre-industrial levels. This translates to an annual rate of reduction of 2.25%, while IBM’s goal achieves a rate of reduction of 4.3% per year. Further, we do not include the purchase of nature-based carbon offsets to comprise any emissions reduction. | | | IBM’s Climate Change Goals Already Include Our Value Chain | | | Scope 3 GHG emissions are the direct emissions of numerous other entities with whom a company interacts. These entities include, for example, all suppliers around the world across all tiers (from the origin of a raw material to a finished product to its disposition), all of a company’s customers, and all of a company’s employees as those employees commute to a workplace. These entities are collectively referred to as a company’s “value chain.” Under a voluntary accounting standard named the Greenhouse Gas Protocol, the direct emissions of all the entities described above are also allocated and assigned to the company in question as that company’s indirect, estimated Scope 3 emissions. As such, these estimated emissions are typically counted multiple times. | | | Determining Scope 3 emissions in a factual manner across a company’s value chain can be extremely challenging due to a lack of access to primary source data across multiple entities. That is why the majority are estimates of considerable uncertainty. Nevertheless, estimates can help inform where emissions occur in a macro sense across a broad market economy. For this reason, IBM reports in Scope 3 categories where it has relevant data to make estimates, and we offer software and solutions to help interested clients as well. | | | IBM believes real reductions of emissions are directly and demonstrably achieved when the organization generating the emission takes action to do so. That is why we are committed to achieve net-zero operational GHG emissions by 2030 that includes our Scope 1 and Scope 2 emissions, as well as Scope 3 emissions associated with IBM’s electricity consumption (which we control) at co-location data centers. IBM does not, however, include in its operational goals estimates of its global suppliers’ and global clients’ emissions (Scope 3) that it does not control. Rather than commit to purchase carbon offsets or credits every year to offset these emissions, IBM believes it is much more impactful to invest in emerging solutions for climate change like the IBM Research Division’s work to accelerate the discovery of new materials for carbon removal; IBM’s Environment Intelligence Suite software for the complex modeling of potential climate impacts; IBM’s Envizi software for energy and greenhouse gas emissions management; and IBM’s philanthropic Sustainability Accelerator program. | | | At the same time, we remain closely engaged with our suppliers and clients. Since 2010, IBM has required all of its first-tier suppliers to implement an environmental management system, measure and set goals to reduce their GHG emissions, and publicly disclose their results. Building upon these requirements, in April 2021, IBM enhanced its supplier engagement by establishing a new goal requiring key suppliers in emissions-intensive business sectors to set a goal to reduce their Scope 1 and Scope 2 emissions that is aligned with scientific recommendations from the IPCC to limit Earth’s warming to 1.5°C above pre-industrial levels. We also convene an annual Sustainability Leadership Symposium with our suppliers, during which they share innovations and best practices. In addition, we continue to design products and solutions with the environment in mind, as we have done since 1991. For example, IBM servers such as the z16 have been exemplars of energy efficiency, yet we sustain a goal to continually reduce the power consumption per unit of work delivered by our future servers from one generation to the next. We further invest in research and develop solutions with demonstrable environmental benefits to help our clients transform their operations for environmental sustainability. | | | Conclusion | | | There is no one size fits all approach for addressing climate change. For the reasons described above, the Board believes the adoption of this prescriptive 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. | |
782024 Notice of Annual Meeting & Proxy Statement | Stockholder Proposals
Frequently Asked Questions 1.
What is a “stockholder of record”? A stockholder of record or registered stockholder (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 of your shares is usually your bank, broker or other intermediary. If you are not a record owner, please understand that IBM does not know that you are a stockholder, or how many shares you own. 2.
I want to attend the 20232024 Annual Meeting. What procedures must I follow? The Annual Meeting will be conducted virtually. All stockholders will be able to attend the Annual Meeting via webcast by entering the 16-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 www.virtualshareholdermeeting.com/IBM2023IBM2024 (Annual Meeting Website). If you do not have a control number, you will be able to register as a guest; however, you will not be able to vote or submit questions before or during the meeting. No recording of the Annual Meeting is allowed, including audio and video recording. 3.
What can I do if I need technical assistance during the Annual Meeting? If you encounter any difficulties accessing the Annual Meeting webcast, please call the technical support number that will be posted on the Annual Meeting Website log-in page. 4.
Are there rules of conduct for the Annual Meeting? Yes, the rules of conduct for the Annual Meeting will be available on the Annual Meeting Website on the date of the Annual Meeting. The rules of conduct will provide information on regarding the rules and procedures for participating in the Annual Meeting. 5.
What is the “record date” for the Annual Meeting? February 24, 2023.March 1, 2024.
6.
Which IBM shares will be entitled to vote at the Annual Meeting? IBM’s common stock ($0.20 par value capital stock) is the only class of security entitled to vote at the Annual Meeting. Each 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. 7.
Which IBM shares are included in the proxy card? For 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. For stockholders who are participants in the IBM Stock Fund investment alternative under the IBM 401(k) Plus Plan: The card serves as a voting instruction to the Trustee of the plan for IBM shares held in the IBM Stock Fund as of the record date. For holders in street name: You will receive a voting instruction form directly from your bank, broker or other intermediary containing instructions on how you can direct your record holder to vote your shares. Contact your bank, broker or other intermediary if you have any questions regarding your IBM stock holdings as of the record date. 8.
May I vote my shares in person at the Annual Meeting? Yes. However, we encourage you to vote by proxy card, the Internet or by telephone even if you plan to attend the meeting. To vote during the Annual Meeting, log into the Annual Meeting Website with your 16-digit control number (found on your Notice of Internet Availability of Proxy Materials, your proxy card, or your instructions that accompanied your proxy materials). 9.
Can I vote my shares without attending the Annual Meeting? Yes. Whether or not you attend the meeting, we encourage you to vote your shares promptly. For 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 Notice of Internet Availability of Proxy Materials, follow the instructions on how to access the proxy materials and vote online. You can also vote your shares over the Internet, or by calling a designated telephone number. These Internet and telephone voting procedures are designed to authenticate your identity in order to allow you to provide your voting instructions, and to confirm that your instructions have been recorded properly. The procedures that have been put in place are consistent with the requirements of applicable law. Specific instructions for stockholders of record who wish to use the Internet or telephone voting procedures are set forth on the proxy card. For participants in the IBM Stock Fund investment alternative under the IBM 401(k) Plus Plan: In order to have the Trustee vote your shares as you direct, you must timely furnish your voting instructions over the Internet or by telephone by 11:59 p.m. EDTET on April 23, 2023,28, 2024, 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 11:59 p.m. EDTET on April 23, 2023,28, 2024, 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. For holders in street name: 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. 8420232024 Notice of Annual Meeting & Proxy Statement | Frequently Asked Questions79
10.
May I change or revoke my proxy? For 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. For holders in street name: Yes. You must follow the specific voting directions provided to you by your bank, broker or other intermediary to change or revoke any instructions you have already provided to your bank, broker or other intermediary. 11.
How can I contact IBM’s transfer agent? Contact our transfer agent either by writing Computershare Trust Company, N.A., P.O. Box 43078, Providence, RI 02940-3078, or by telephoning 888-IBM-6700 (outside the United States, Canada, and Puerto Rico 781-575-2727). 12.
Other than the items in the proxy statement, what other items of business will be addressed at the Annual Meeting? Management knows of no other matters that may be properly presented at the meeting. If other proper matters are introduced at the meeting, the individuals named as proxies on the proxy card are also authorized to vote upon those matters utilizing their own discretion. 13.
During the question period at the Annual Meeting, what topics will be discussed? This part of the meeting is for stockholders to ask questions to the Chairman about Company matters. It is not the appropriate forum to raise personal grievances. 14.
How can I ask questions during the Annual Meeting? Stockholders of record may submit questions either before (by going to www.proxyvote.com) or during the meeting (by going to the Annual Meeting Website) and logging in using your 16-digit control number and following the instructions to submit a question. Additionally, each year IBM provides a portal through which stockholders may submit questions in advance of the Annual Meeting. To submit a question via the IBM portal, please visit https://www.ibm.com/investor/services/annual-meeting-of-stockholders. If you do not have a control number, you will be able to register for the Annual Meeting as a guest; however, you will not be able to vote or submit questions on the Annual Meeting Website before or during the meeting. 15.
Who tabulates the votes? Votes are counted by employees of Broadridge Corporate Issuer Solutions, Inc., IBM’s tabulator, and certified by the Inspectors of Election, (who are employees of First Coast Results, Inc.). 16.
I understand that a “quorum” of stockholders is required in order for IBM to transact business at the Annual Meeting. What constitutes a quorum? A majority of all “outstanding” shares of common stock having voting power, in person or represented by proxy and entitled to vote, constitutes a quorum for the transaction of business at the meeting. 17.
How many shares of IBM stock are “outstanding”? As of February 10, 2023,9, 2024, there were 907,105,611916,744,848 shares of common stock outstanding and entitled to be voted. 18.
What is the voting requirement for electing IBM’s directors? To be elected in an uncontested election, each director must receive a majority of the votes cast. In a contested election, a nominee receiving a plurality of the votes cast at such election shall be elected. 19.
What is “broker discretionary voting”? This refers to the NYSE rule allowing brokers to vote their customers’ shares on certain “routine” matters in the Proxy Statement at the brokers’ discretion when they have not received timely voting instructions from their customers. The NYSE rules on broker discretionary voting prohibit banks, brokers, and other intermediaries from voting uninstructed shares on certain matters, including the election of directors. Therefore, if you hold your stock in street name and you do not 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. 20.
Are abstentions and broker non-votes counted as votes cast? No. Under the laws of New York State, IBM’s state of incorporation, “votes cast” at a meeting of stockholders by the holders of shares entitled to vote are determinative of the outcome of the matter subject to vote. Abstentions and broker non-votes will not be considered “votes cast” based on current New York State law requirements and IBM’s certificate of incorporation and by-laws. 21.
Assuming there is a proper quorum of shares represented at the Annual Meeting, how many shares are required to approve the proposals being voted upon in this proxy statement? The table below reflects the vote required in accordance with the laws of New York State: | Proposal | | | Vote Required | | | Do abstentions count as votes cast? | | | Is broker discretionary voting allowed? | | | Election of Directors | | | Majority of votes cast | | | No | | | No | | | Ratification of Appointment of PricewaterhouseCoopers LLP | | | Majority of votes cast | | | No | | | Yes | | | Advisory Vote on Executive Compensation* | | | Majority of votes cast | | | No | | | No | | | Frequency of the Advisory Vote on Executive Compensation* | | | Majority of votes cast | | | No | | | No | | | Stockholder Proposals* | | | Majority of votes cast | | | No | | | No | |
*
Advisory and non-binding 22.
Where can I find the voting results of the Annual Meeting? IBM intends to publish the final voting results on its website and will disclose the final voting results on a Form 8-K shortly after the Annual Meeting. 23.
Will my votes be confidential? Yes. All stockholder meeting proxies, ballots, and tabulations that identify individual stockholders are kept confidential and are not available for examination. In addition, the identity or the vote of any stockholder is not disclosed except as required by law. 2023802024 Notice of Annual Meeting & Proxy Statement | Frequently Asked Questions85
24.
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 at https://www.ibm.com/investor/help/consent-for-materials-online and follow the instructions to enroll. 25.
How do I submit a proposal for inclusion in IBM’s 20242025 proxy materials? Stockholder proposals may be submitted for IBM’s 20242025 proxy materials after the 20232024 Annual Meeting and must be received at our corporate headquarters no later than November 7, 2023.11, 2024. 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. Management carefully considers all proposals and suggestions from stockholders. When adoption is clearly in the best interest of IBM and stockholders, and can be accomplished without stockholder approval, the proposal is implemented without inclusion in the Proxy Statement. Examples of stockholder proposals and suggestions that have been adopted over the years include stockholder ratification of the appointment of an independent registered public accounting firm, improved procedures involving dividend checks and stockholder publications, and changes or additions to the proxy materials concerning matters like abstentions from voting, appointment of alternative proxy, inclusion of a table of contents, proponent disclosure and secrecy of stockholder voting. 26.
How do I submit an item of business for the 20242025 Annual Meeting? Stockholders who intend to present an item of business at the 20242025 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 8, 202312, 2024 and no later than November 7, 2023,11, 2024, as set forth more fully in, and in compliance with, IBM’s by-laws. 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.March 1, 2025. 27.
I did not receive a copy of the Annual Report. How can I get one? Stockholders of record who did not receive an IBM Annual Report or who previously elected not to receive one for a specific account may request that IBM mail its Annual Report to that account by writing to our transfer agent, Computershare Trust Company, N.A. (address and phone number in Question 11 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.
What is “householding” and does IBM do this? Householding is a procedure approved by the SEC under which stockholders who have the same address and last name and do not participate in electronic delivery of proxy materials will receive only one copy of a company’s proxy statement and annual report from a company, bank, broker or other intermediary, unless one or more of these stockholders notifies the company, bank, broker or other intermediary that they wish to continue to receive individual copies. At the present time, IBM does not “household” for any of our stockholders of record. However, as explained below, your bank, broker or other intermediary may be householding your account if you hold your shares in street name. 29.
If I am a holder in street name, how may I obtain a separate set of proxy materials? If you hold shares in street name, your bank, broker or other intermediary may be delivering only one copy of our Proxy Statement and the IBM Annual Report to multiple stockholders of the same household who share the same address, and may continue to do so, unless your bank, broker or other intermediary has received contrary instructions from one or more of the affected stockholders in the household. If you are such a beneficial holder, contact your bank, broker or other intermediary directly in order to receive a separate set of our proxy materials. 30.
Members of our household own IBM shares through a number of different brokerage firms. Will we continue to receive multiple sets of materials? Yes. If you and others sharing a single address hold IBM shares through multiple brokers, you will continue to receive at least one set of proxy materials from each broker. 31.
I received a noticeNotice of internet availabilityInternet Availability of proxy materials.Proxy Materials. What does this mean? Consistent with common practice and in accordance with SEC rules, IBM is distributing proxy materials to some stockholders over the Internet by sending a Notice of Internet Availability of Proxy Materials that explains how to access our proxy materials and vote online. If you received a notice and would like a printed copy of the proxy materials (including the Annual Report, Proxy Statement and a proxy card in the case 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. 32.
I previously consented to receive electronic delivery of my proxy materials. Can you send me a hard copy of these proxy materials? For 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 11 above). For holders in street name: You must contact your bank, broker or other intermediary to receive copies of these materials. 33.
Who is making this proxy solicitation and approximately how much will these solicitation activities cost? Solicitation of proxies is being made by IBM through the mail, in person and by telecommunications. The cost of this solicitation will be borne by IBM. In addition, management has retained Innisfree M&A Incorporated, to assist in soliciting proxies for a fee of approximately $50,000, plus reasonable out-of-pocket expenses. Frank Sedlarcik Vice President and Secretary March 6, 202311, 2024 8620232024 Notice of Annual Meeting & Proxy Statement | Frequently Asked Questions81
Appendix A — Non-GAAP Financial Information and Reconciliations The rationale for management’s use of non-GAAP information in the Compensation Discussion and Analysis and Proxy Statement is as follows: Operating (non-GAAP) Earnings Per Share and Related Income Statement Items In an effort to provide better transparency into the operational results of the business, supplementally, 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, certain impacts from the Kyndryl separation and their related tax impacts. Due to the unique, non-recurring nature of the enactment of the U.S. Tax Cuts and Jobs Act (U.S. tax reform), the company characterizes the one-time provisional charge recorded in the fourth quarter of 2017 and adjustments to that charge as non-operating. Adjustments primarily include true-ups, accounting elections and any changes to regulations, laws, and 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. TheseIn 2022, these charges primarily relaterelated to any net gains or losses on the Kyndryl common stock and the related cash-settled swap with a third-party financial institution, which arewere recorded in other (income) and expense in the Consolidated Income Statement. Kyndryl separation chargesAs of November 2, 2022, the company no longer held an ownership interest in 2021 also include applicable employee awards and tax impacts related to the separation.Kyndryl. 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, tax charges related to acquisition 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 significantly impacted by the size, type and frequency of the company’s acquisitions. Given its unique and temporary nature, management has also characterized as non-operating expense, the mark-to-market impact on the foreign exchange call option contracts to economically hedge the foreign currency exposure related to the purchase price of the company’s announced acquisition of StreamSets and webMethods from Software AG. The mark-to-market impact is recorded in other (income) and expense in the Consolidated Income Statement and reflects the fair value changes in the derivative contracts. All other spending for acquired companies is included in both earnings from continuing operations and in operating (non-GAAP) earnings. For retirement-related costs, the company characterizes certain items as operating and others as non-operating, consistent with GAAP. The company includes defined benefit plan and nonpension postretirement benefit plan service costs, multi-employer plan costs and the cost of defined contribution plans in operating earnings. Non-operating retirement-related costs 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 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 the company considers these costs to be outside of the operational performance of the business. Overall, the 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 the company’s pension plans; improves visibility to management decisions and their impacts on operational performance; enables better comparison to peer companies; and allows the company to provide a long-term strategic view of the business going forward. In 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 the company’s management and measurement system. Free Cash Flow/Operating Cash Flow The company uses free cash flow as a measure to evaluate its operating results, plan stockholdershareholder return levels and 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. The company defines consolidated free cash flow as consolidated net cash from operating activities less the change in Financing receivables and net capital expenditures, including the investment in software. A key objective of the Financing business is to generate strong returns on equity, and our Financing receivables are the basis for that growth. Accordingly, management considers Financing receivables as a profit-generating investment, not as working capital that should be minimized for efficiency. Therefore, management presents both free cash flow and net cash from operating activities that excludesexclude the effect of Financing receivables. Free cash flow realization is calculated by dividing consolidated free cash flow over Operating (non-GAAP) net income. Constant Currency When the company refers to 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 822024 Notice of Annual Meeting & Proxy Statement | Appendix A — Non-GAAP Financial Information and Reconciliations
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. 2023 Notice of Annual Meeting & Proxy Statement | Appendix A — Non-GAAP Financial Information and Reconciliations87
Return on Invested Capital (ROIC) For the 2020-20222021-2023 performance period, ROIC equals consolidated net operating profits after tax (consolidated GAAP net income plus after-tax interest expense) excluding the settlement charge resulting from the U.S. pension risk transfer, divided by the sum of the average debt and average total stockholders’ equity over the period, excluding goodwill associated with the Red Hat acquisition.acquisition in years 2021 and 2022. In September 2022, IBM transferred $16 billion of its defined benefit pension obligations and related plan assets to two insurers. A non-cash settlement charge of $4.4 billion net of tax related to this transfer was excluded given its unique and non-recurring nature. Due to the significant nature of the Red Hat acquisition, the Company utilizes a computation of ROIC excluding goodwill associated with the acquisition. The goodwill that was generated is primarily attributable to the assembled workforce of Red Hat and the increased synergies expected to be achieved over time from the integration of Red Hat products into the Company’s various integrated solutions. Key performance metrics are used to monitor the performance of the business and are viewed as useful decision-making information for management and stockholders, including: Annual Recurring Revenue (ARR) ARR is a key performance metric management uses to assess the health and growth trajectory of the Hybrid Platform & Solutions business within IBM Software. ARR is calculated by estimating the current quarter’s recurring, committed value for certain types of active contracts as of the period-end date and then multiplying that value by four. This value is based on each arrangement’s contract value and start date, mitigating fluctuations during the contract term, and includes the following consumption models: (1) software subscription agreements, including committed term licenses, (2) as-a-service arrangements such as SaaS and PaaS (3) maintenance and support contracts, and (4) security managed services contracts. ARR should be viewed independently of revenue as this performance metric and its inputs may not represent the amount of revenue recognized in the period and therefore is not intended to represent current period revenue or revenue that will be recognized in future periods. ARR is calculated at estimated constant currency. The tables below provide reconciliations of the Company’s income statement results as reported under GAAP to its operating earnings presentation, which is a non-GAAP measure. | ($ 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) | | ($ in millions except per share amount) For the year ended December 31, 2023 | | GAAP | | Acquisition- Related Adjustments | | Retirement- Related Adjustments | | Tax Reform Impacts | | Kyndryl Related Impacts | | Operating (Non-GAAP) | | | Adjustments* | | Gross Profit | | | $ | 34,300 | | | | $ | 631 | | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | 34,931 | | | | Gross Profit | | | $ | 32,687 | | | | $ | 682 | | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | 33,370 | | | Gross Profit Margin | | | | 55.4% | | | | | 1.0Pts | | | | | —Pts | | | | | —Pts | | | | | —Pts | | | | | 56.5% | | | | Gross Profit Margin | | | | 54.0% | | | | | 1.1Pts | | | | | —Pts | | | | | —Pts | | | | | —Pts | | | | | 55.1% | | | S,G&A | | | $ | 19,003 | | | | $ | (1,039) | | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | 17,964 | | | | S,G&A | | | $ | 18,609 | | | | $ | (1,080) | | | | $ | — | | | | $ | — | | | | $ | — | | | | $ | 17,529 | | | Other (Income) & Expense* | | | | (914) | | | | | 10 | | | | | 39 | | | | | — | | | | | — | | | | | (866) | | | | Other (Income) & Expense | | | | 5,803 | | | | | (3) | | | | | (6,548) | | | | | — | | | | | (351) | | | | | (1,099) | | | Total Expense & Other (Income) | | | | 25,610 | | | | | (1,029) | | | | | 39 | | | | | — | | | | | — | | | | | 24,620 | | | | Total Expense & Other (Income) | | | | 31,531 | | | | | (1,083) | | | | | (6,548) | | | | | — | | | | | (351) | | | | | 23,549 | | | Pre-tax Income from Continuing Operations | | | | 8,690 | | | | | 1,660 | | | | | (39) | | | | | — | | | | | — | | | | | 10,311 | | | | Pre-tax Income from Continuing Operations | | | | 1,156 | | | | | 1,765 | | | | | 6,548 | | | | | — | | | | | 351 | | | | | 9,821 | | | Pre-tax Income Margin from Continuing Operations | | | | 14.0% | | | | | 2.7Pts | | | | | (0.1)Pts | | | | | —Pts | | | | | —Pts | | | | | 16.7% | | | | Pre-tax Income Margin from Continuing Operations | | | | 1.9% | | | | | 2.9Pts | | | | | 10.8Pts | | | | | —Pts | | | | | 0.6Pts | | | | | 16.2% | | | Provision for/(benefit from) Income Taxes** | | | $ | 1,176 | | | | $ | 368 | | | | $ | (8) | | | | $ | (95) | | | | $ | — | | | | $ | 1,441 | | | | Provision for/(benefit from) Income Taxes** | | | $ | (626) | | | | $ | 436 | | | | $ | 1,615 | | | | $ | 70 | | | | $ | — | | | | $ | 1,495 | | | Effective Tax Rate | | | | 13.5% | | | | | 1.4Pts | | | | | 0.0Pts | | | | | (0.9)Pts | | | | | —Pts | | | | | 14.0% | | | | Effective Tax Rate | | | | (54.2)% | | | | | 14.2Pts | | | | | 52.6Pts | | | | | 0.7Pts | | | | | 1.9Pts | | | | | 15.2% | | | Income from Continuing Operations | | | $ | 7,514 | | | | $ | 1,292 | | | | $ | (30) | | | | $ | 95 | | | | $ | — | | | | $ | 8,870 | | | | Income from Continuing Operations | | | $ | 1,783 | | | | $ | 1,329 | | | | $ | 4,933 | | | | $ | (70) | | | | $ | 351 | | | | $ | 8,326 | | | Income Margin from Continuing Operations | | | | 12.1% | | | | | 2.1Pts | | | | | 0.0Pts | | | | | 0.2Pts | | | | | —Pts | | | | | 14.3% | | | | Income Margin from Continuing Operations | | | | 2.9% | | | | | 2.2Pts | | | | | 8.1Pts | | | | | (0.1)Pts | | | | | 0.6Pts | | | | | 13.8% | | | Diluted Earnings Per Share: Continuing Operations | | | $ | 8.15 | | | | $ | 1.40 | | | | $ | (0.03) | | | | $ | 0.10 | | | | $ | — | | | | $ | 9.62 | | | | Diluted Earnings Per Share: Continuing Operations | | | $ | 1.95 | | | | $ | 1.46 | | | | $ | 5.41 | | | | $ | (0.08) | | | | $ | 0.38 | | | | $ | 9.13 | | | |
*
Acquisition-Related Adjustments includes a gain of $12 million on foreign exchange call option contracts related to the company’s planned acquisition of StreamSets and webMethods from Software AG. **
The tax impact on operating (non-GAAP) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income which employs an annual effective tax rate method to the results. 2024 Notice of Annual Meeting & Proxy Statement | Appendix A — Non-GAAP Financial Information and Reconciliations83
| ($ in millions except per share amount) For the year ended December 31, 2022 | | | GAAP | | | Acquisition- Related Adjustments | | | Retirement- Related Adjustments* | | | Tax Reform Impacts | | | Kyndryl Related Impacts | | | Operating (Non-GAAP) | | | 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 | | | | | $ | 0 | | | | | $ | 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 | | |
*
Includes a one-time, non-cash, pre-tax pension settlement charge of $5.9 billion ($4.4 billion after tax). **
The tax impact on operating (non-GAAP) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income which employs an annual effective tax rate method to the results. 882023 Notice of Annual Meeting & Proxy Statement | Appendix A — Non-GAAP Financial Information and Reconciliations
| ($ 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 | | |
*
The tax impact on operating (non-GAAP) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income which employs an annual effective tax rate method to the results.
| ($ 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* | | |
*
Includes a $1.5 billion pre-tax charge for structural actions in the fourth quarter resulting in an impact of ($1.33) to diluted earnings per share from continuing operations and diluted operating (non-GAAP) earnings per share.
**
The tax impact on operating (non-GAAP) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income which employs an annual effective tax rate method to the results. 2023842024 Notice of Annual Meeting & Proxy Statement | Appendix A — Non-GAAP Financial Information and Reconciliations89
The table below provides a reconciliation of cash flows which is presented on a consolidated basis, including activity from discontinued operations related to the separation of Kyndryl. Free cash flow and operating cash flow are non-GAAP measures. | ($ in billions) For the year ended December 31: | | 2022 | | 2021 | | 2020 | | ($ in billions) For the year ended December 31: | | 2023 | | 2022* | | 2021 | | | Net cash from operating activities per GAAP* | | | $ | 10.4 | | | | $ | 12.8 | | | | $ | 18.2 | | | Net cash from operating activities per GAAP** | | | $ | 13.9 | | | | $ | 10.4 | | | | $ | 12.8 | | | | Less: the change in Financing receivables | | | | (0.7) | | | | | 3.9 | | | | | 4.3 | | | Less: the change in Financing receivables | | | | 1.2 | | | | | (0.7) | | | | | 3.9 | | | | Net cash from operating activities, excluding Financing receivables | | | | 11.2 | | | | | 8.9 | | | | | 13.8 | | | Net cash from operating activities, excluding Financing receivables | | | | 12.7 | | | | | 11.2 | | | | | 8.9 | | | | Capital expenditures, net | | | | (1.9) | | | | | (2.4) | | | | | (3.0) | | | Capital expenditures, net | | | | (1.5) | | | | | (1.9) | | | | | (2.4) | | | | Free Cash Flow | | | | 9.3 | | | | | 6.5** | | | | | 10.8 | | | Free Cash Flow+ | | | | 11.2 | | | | | 9.3 | | | | | 6.5 | | | | Acquisitions | | | | (2.3) | | | | | (3.3) | | | | | (0.3) | | | Acquisitions | | | | (5.1) | | | | | (2.3) | | | | | (3.3) | | | | Divestitures | | | | 1.3 | | | | | 0.1 | | | | | 0.5 | | | Divestitures | | | | (0.0) | | | | | 1.3 | | | | | 0.1 | | | | Dividends | | | | (5.9) | | | | | (5.9) | | | | | (5.8) | | | Dividends | | | | (6.0) | | | | | (5.9) | | | | | (5.9) | | | | Non-Financing Debt | | | | 1.9 | | | | | (1.2) | | | | | 0.2 | | | Non-Financing Debt | | | | 5.5 | | | | | 1.9 | | | | | (1.2) | | | | Other (includes Financing receivables and Financing debt) + | | | | (2.9) | | | | | (3.0) | | | | | (0.1) | | | Other (includes Financing receivables and Financing debt)++ | | | | (1.0) | | | | | (2.9) | | | | | (3.0) | | | | Change in cash, cash equivalents and short-term marketable securities | | | $ | 1.3 | | | | $ | (6.7)++ | | | | $ | 5.3 | | | Change in cash, cash equivalents and short-term marketable securities | | | $ | 4.6 | | | | $ | 1.3 | | | | $ | (6.7) | | |
*
Includes immaterial cash flows from discontinued operation. **
2021 includes cash flows of discontinued operations of $1.6 billion and $4.4 billion in 2021 and 2020, respectively. **+
Includes2021 includes cash impacts of approximately $1.4 billion for Kyndryl-related structural actions and separation charges.
+
Prior years were recast to conform to 2022 presentation.
++
Includes2021 includes the distribution from Kyndryl of $0.9 billion.
The tables below provide reconciliation of revenue growth rates presented on a continuing operations basis and as reported under GAAP to revenue adjusting for constant currency (@CC), which is a non-GAAP measure. | | | | 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)% | | |
| | | | 2023 | | | | | | GAAP | | | @CC | | | Reconciliation of Revenue Growth Rates: | | | | | | | | | | | | | | | Software | | | | | 5% | | | | | | 5% | | | | Hybrid Platform & Solutions | | | | | 5% | | | | | | 5% | | | | Red Hat | | | | | 9% | | | | | | 9% | | | | Consulting | | | | | 5% | | | | | | 6% | | |
| | | | GAAP | | | @CC | | | Reconciliation of Total Revenue Growth Rates: | | | | | | | | | | | | | | | 2023 | | | | | 2.2% | | | | | | 2.9% | | | | 2022 | | | | | 5.5% | | | | | | 11.6% | | | | 2021 | | | | | 3.9% | | | | | | 2.7% | | |
9020232024 Notice of Annual Meeting & Proxy Statement | Appendix A — Non-GAAP Financial Information and Reconciliations85
INTERNATIONAL BUSINESS MACHINES CORPORATION1CORPORATION 1 NEW ORCHARD RD, MD 325ARMONK, NY 10504 SCAN TOVIEWTO VIEW MATERIALS & VOTE VOTEVOTEVOTE BY INTERNETBefore The Meeting - Go to www.proxyvote.com or scan the QR Barcode aboveUse the Internet to transmit your voting instructions and for electronic delivery of information.Voteinformation. Vote by 11:59 p.m. Eastern Time on April 24, 2023,29, 2024, for shares held directly and by11:by 11:59 p.m. Eastern Time on April 23, 2023,28, 2024, for shares held in the 401(k) Plus Plan. Have yourproxyyour proxy card in hand when you access the website and follow the instructions to obtain your recordsandrecords and to create an electronic Voting Instruction Form.During The Meeting - Go to www.virtualshareholdermeeting.com/IBM2023YouIBM2024You may attend the meeting via the Internet and vote during the meeting. Have the informationthatinformation that is printed in the box marked by the arrow available and 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.Easternp.m. Eastern Time on April 24, 2023,29, 2024, for shares held directly and by 11:59 p.m. Eastern Time onApril 23, 2023,on April 28, 2024, for shares held in the 401(k) Plus Plan. Have your proxy card in hand when youcall,you call, and then follow the instructions.VOTE BY MAILMark, sign and date your proxy card and return it in the postage-paid envelope we haveprovidedhave provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood,NY 11717. If you vote by telephone or Internet, please DO NOT mail back this Proxy Card. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D96424-P83309 KEEPV28926-P04943KEEP THIS PORTION FOR YOUR RECORDS THISRECORDSTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. INTERNATIONALDATED.DETACH AND RETURN THIS PORTION ONLYINTERNATIONAL BUSINESS MACHINES CORPORATION IBM'sCORPORATIONIBM's Directors recommend a vote FOR each director (please mark your vote for each director separately). 1. Election.1.Election of Directors for a Term of One Year Nominees:For Against Abstain1a.Marianne C. Brown!!!1b.Thomas Buberl!!!1c.David N. Farr!!!1d.Alex Gorsky!!!1e.Michelle J. Howard!!!1f.Arvind Krishna!!!1g.Andrew N. Liveris!!!1h.F. William McNabb III!!!1i.Michael Miebach!!!1j.Martha E. Pollack!!!1k.Peter R. Voser!!!1l.Frederick H. Waddell!!!1m.Alfred W. Zollar!!! IBM's Directors recommend a vote FOR proposals 2 and 3. 2. Ratification3.2.Ratification of Appointment of Independent RegisteredPublicRegistered Public Accounting Firm 3. Advisory Vote on Executive Compensation IBM's Directors recommend a vote for 1 YEARfor proposal 4.4. Advisory Vote Regarding the Frequency of theAdvisory3.Advisory Vote on Executive Compensation IBM's Directors recommend a vote AGAINST proposals5,proposals 4, 5, 6, 7 and 8. 5. Stockholder Proposal to Have an Independent BoardChairman7. Stockholder8.4.Stockholder Proposal Requesting a Public Report onCongruencyon Lobbying Activities 5.Stockholder Proposal Requesting a Public Report on Congruency in China Business Operations and ESGActivities8. StockholderESG Activities 6.Stockholder Proposal Requesting a Right to Act by Written Consent 7.Stockholder Proposal Requesting a Public Report onHarassment and Discrimination Prevention Effortson Climate Lobbying 8.Stockholder Proposal Requesting the Adoption of Greenhouse Gas Emissions Targets For Against Abstain! ! !! ! !For Against Abstain! ! !! ! !! ! !! ! !! ! ! Please sign exactly as your name appears hereon, date, and return in the enclosed envelope. If acting as executor, administrator, trustee, guardian, etc., youshouldyou should so indicate when signing. If the signer is a corporation, please sign the full corporate name by duly authorized officer. If shares are held jointly, eachstockholdereach stockholder named should sign. Signaturesign.Signature [PLEASE SIGN WITHIN BOX] Date SignatureDateSignature (Joint Owners)Date 1a. Thomas Buberl 1b. David N. Farr 1c. Alex Gorsky 1d. Michelle J. Howard 1e. Arvind Krishna 1f. Andrew N. Liveris 1g. F. William McNabb III 1h. Martha E. Pollack 1i. Joseph R. Swedish 1j. Peter R. Voser 1k. Frederick H. Waddell 1l. Alfred W. Zollar
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:The Notice of Meeting, Proxy Statement and Annual Report are available at www.ibm.com/investor/material Internationalmaterial/ or www.proxyvote.com.V28927-P04943International Business Machines CorporationAnnual Meeting of StockholdersThis proxy is solicited by the Board of DirectorsArvind Krishna, James J. Kavanaugh, Michelle H. Browdy and 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/IBM2023via www.virtualshareholdermeeting.com/IBM2024 at 10:1:00 a.m.p.m. Eastern Time on Tuesday, April 25, 2023,30, 2024, or any adjournment or postponement thereof.THE PROXIES WILL VOTE USING THE DIRECTIONS PROVIDED ON THE REVERSE SIDE OF THIS CARD. IF YOU SIGN AND RETURN THISRETURNTHIS 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 THE 20232024 ANNUAL MEETING AND PROXY STATEMENT.THIS CARD WILL ALSO BE USED TO PROVIDE VOTING INSTRUCTIONS TO THE TRUSTEE FOR ANY SHARES OF COMMON STOCK OFSTOCKOF 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 20232024 ANNUAL MEETING AND PROXY STATEMENT.UNLESS YOU USE THE INTERNET OR THE TELEPHONE TO VOTE THESE SHARES, YOU MUST SIGN AND RETURN THIS PROXY FOR THESE SHARES TO BE VOTED.ContinuedVOTED. Continued and to be signed on reverse side
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