IBM International Business Machines Corp

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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International Business Machines Corporation

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Armonk, New York
March 6, 2023

Dear Fellow Stockholders:

 

 

Armonk, New York
March 6, 2023

A Message from our Lead Director:

 

 

 

 

2023 Notice of Annual Meeting
and Proxy Statement

​	1.	​	​	Election of directors proposed by IBM’s Board of Directors for a term of one year, as set forth in this Proxy Statement.	​
​	2.	​	​	Ratification of the appointment of PricewaterhouseCoopers LLP as IBM’s independent registered public accounting firm.	​
​	3.	​	​	Advisory vote on executive compensation.	​
​	4.	​	​	Advisory vote regarding the frequency of the advisory vote on executive compensation.	​
​	5.	​	​	Four stockholder proposals, if properly presented at the meeting.	​

Frank Sedlarcik
Vice President and Secretary

​	​				​
​	Date:	​	​	April 25, 2023	​
​	Time:	​	​	10 a.m. Eastern Time	​
​	Virtual Meeting Site:	​	​	www.virtualshareholdermeeting.com/IBM2023	​

​	To express our appreciation for your participation, IBM will make a $1 charitable donation to Water.org on behalf of every stockholder account that votes this year.				​
​					​
​	Water.org empowers people in need with lasting access to safe water and sanitation, giving women hope, children health and families a bright future				​

The proxy materials, including this Proxy Statement, the IBM 2022 Annual Report, which includes the consolidated financial statements, and the proxy card, or the notice of Internet availability of proxy materials, as applicable, are being distributed beginning on or about March 6, 2023 to all stockholders entitled to vote.

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on April 25, 2023: the Proxy Statement and the Annual Report to Stockholders are available at www.ibm.com/investor/material/.

Websites throughout this Proxy Statement are provided for reference only. Websites referred to herein are not incorporated by reference into this Proxy Statement.

 

Proxy Summary

Voting MattersStockholders will be asked to vote on the following matters at the Annual Meeting:

Governance Highlights

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2023 Notice of Annual Meeting & Proxy Statement   |   Proxy Summary3
 

 

Optimal Mix of Skills and Experience of Director Nominees

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Integrated Approach to Stockholder Engagement

Stockholder feedback is integral to the Board’s decision-making process and informs the Company’s policies, practices and disclosures. IBM customizes its engagements by aligning discussion topics with stockholders’ areas of interest, ensuring that stockholders have an opportunity for an open dialogue with the Company to provide feedback. It is essential to IBM’s Board and senior management that stockholders are afforded a chance to provide their thoughts on topics of interest. This year, the topics stockholders expressed interest in learning more about included: IBM’s consolidated ESG report, IBM Impact; the diversity modifier added to IBM’s Annual Incentive Program; policies and practices regarding director overboarding; and IBM’s response to the majority supported stockholder proposal at our 2022 Annual Meeting.

2023 Notice of Annual Meeting & Proxy Statement   |   Proxy Summary5
 

 

Business Highlights

In 2022, IBM continued to take meaningful actions to strengthen its position as a leader in hybrid cloud and AI. IBM delivered revenue growth above its mid-single digit model and solid cash generation, fueling business investments and stockholder returns through dividends.

​	What We Do				​
​		​	​	Tie a significant portion of pay to Company performance	​
​		​	​	Mitigate risk taking by emphasizing long-term equity incentives, placing caps on potential payments, and maintaining robust clawback provisions	​
​		​	​	Require significant share ownership by the Chairman and CEO, Vice Chairman and Senior Vice Presidents	​
​		​	​	Utilize noncompetition and nonsolicitation agreements for senior executives	​
​		​	​	Remove impact of share repurchase on executive incentives	​
​	​	​	​	​	​

​	What We Don’t Do				​
​		​	​	No individual severance or change-in-control agreements for executive officers	​
​		​	​	No excise tax gross-ups for executive officers	​
​		​	​	No dividend equivalents on unearned RSUs/PSUs	​
​		​	​	No hedging/pledging of IBM stock	​
​		​	​	No stock option repricing, exchanges or stock options granted below market value	​
​		​	​	No guaranteed incentive payouts for executive officers	​
​		​	​	No accelerated vesting of equity awards for executive officers	​
​		​	​	No above-market returns on deferred compensation plans	​

62023 Notice of Annual Meeting & Proxy Statement   |   Proxy Summary
 

 

IBM Board of Directors

Overview

IBM’s Board of Directors is responsible for supervision of the overall affairs of IBM. Following the Annual Meeting in 2023, the Board will consist of 12 directors. In between annual meetings, the Board has the authority under the by-laws to increase or decrease the size of the Board and to fill vacancies.

Director Selection Process

The Directors and Corporate Governance Committee is responsible for leading the search for qualified individuals for election as directors to ensure the Board has the optimal mix of skills, expertise, experience, and diversity of backgrounds. The Committee recommends candidates to the full Board for election.

The Board believes that the following core attributes are key to ensuring the continued vitality of the Board and excellence in the execution of its duties:

2023 Notice of Annual Meeting & Proxy Statement   |   IBM Board of Directors7
 

 

Director Skills and Qualifications

The IBM Board is composed of a diverse group of members, all leaders in their respective fields. All current directors have leadership experience at major domestic and international organizations with operations inside and outside the United States, at academic or research institutions, or in government. Directors also have deep industry expertise as leaders of organizations within some of the Company’s most important client industries and constituencies.

The Directors and Corporate Governance Committee and the Board believe that the above-mentioned attributes, along with the leadership skills and other experiences of the Board members described below, provide IBM with the perspectives and judgment necessary to guide IBM’s strategies and oversee their execution.

82023 Notice of Annual Meeting & Proxy Statement   |   IBM Board of Directors
 

 

The following client industries provide a snapshot into the many key and diverse industries in which our directors have relevant experience. Many of our directors have experience in multiple client industries.

2023 Notice of Annual Meeting & Proxy Statement   |   IBM Board of Directors9
 

 

1. Election of Directors for a Term of One Year

The Board proposes the election of the following director nominees for a term of one year. Below is information about each nominee, including biographical data for at least the past five years. If one or more of these nominees become unavailable to accept a nomination or election as a director, the individuals named as proxies on the proxy card will vote the shares that they represent for the election of such other persons as the Board may recommend, unless the Board reduces the number of directors.

 

 

 

 

 

 

Board Committee Refreshment

On at least an annual basis, the Directors and Corporate Governance Committee reviews committee assignments and discusses whether rotation of committee members and committee chairs is appropriate to introduce fresh perspectives and to broaden and diversify the views and experiences represented on the Board’s committees. In 2022, the Board rotated several committee positions. Admiral Howard rotated from the Directors and Corporate Governance Committee to the Audit Committee, Mr. Liveris rotated from the Executive Compensation and Management Resources Committee and became the chair of the Directors and Corporate Governance Committee, Mr. Waddell rotated from the chair of the Directors and Corporate Governance Committee and became the chair of the Executive Compensation and Management Resources Committee, and Mr. Voser became the chair of the Audit Committee. In addition, Mr. Gorsky became Lead Director. In 2023, Mr. Gorsky rotated off the Executive Compensation and Management Resources Committee. As independent Lead Director, this provides Mr. Gorsky with additional opportunities to participate in meetings of all Board committees.

 

 

Compensation Committee Interlocks and Insider Participation: None

Messrs. Gorsky, Swedish, and Waddell and Dr. Pollack each served as members of the Executive Compensation and Management Resources Committee in 2022. All members of the Committee were independent directors, and no member was an employee or former employee of IBM. During 2022, none of our executive officers served on the compensation committee or board of directors of another entity whose executive officer served on our Executive Compensation and Management Resources Committee or Board. Therefore, there is no relationship that requires disclosure as a compensation committee interlock.

 

Corporate Governance

IBM’s Corporate Governance Principles

IBM’s Board of Directors has long adhered to governance principles designed to ensure the continued vitality of the Board and excellence in the execution of its duties. For more than 25 years, the Board has had in place a set of governance guidelines reflecting these principles, including the Board’s policy of requiring a majority of the Board to be comprised of independent directors, the importance of equity compensation to align the interests of directors and stockholders, and the practice of regularly scheduled executive sessions, including sessions of non-management directors without members of management led by IBM’s independent Lead Director. The IBM Board Corporate Governance Guidelines reflect IBM’s principles on corporate governance matters. These guidelines are available at https://www.ibm.com/investor/att/pdf/IBM-Board-Corporate-Governance-Guidelines.pdf.

IBM also has a code of ethics for directors, executive officers, and employees. The Business Conduct Guidelines are available on our website at https://www.ibm.com/investor/att/pdf/IBM_Business_Conduct_Guidelines.pdf. Any amendment to, or waiver of, the Business Conduct Guidelines that applies to one of our directors or executive officers may be made only by the Board or a Board committee, and would be disclosed on IBM’s website.

The process by which stockholders and other interested parties may communicate with the Board or non-management directors of IBM is available at https://www.ibm.com/investor/governance/contact-the-board.

Independent Board

The independence criteria established by the Board in accordance with NYSE requirements and used by the Directors and Corporate Governance Committee and the Board in their assessment of the independence of directors is available at https://www.ibm.com/investor/att/pdf/Independence_Standards.pdf.

Applying those standards to IBM’s non-management director nominees, including those directors not standing for election, as well as a former director who served during 2022, the Committee and the Board have determined that each of the following has met the independence standards: T. Buberl, M.L. Eskew, D.N. Farr, A. Gorsky, M.J. Howard, A.N. Liveris, F.W. McNabb III, M.E. Pollack, J.R. Swedish, P.R. Voser, F.H. Waddell, and A.W. Zollar.

Director Attendance

In 2022, the Board held 9 meetings and the committees collectively met 19 times. The Board and the Directors and Corporate Governance Committee recognize the importance of director attendance at Board and committee meetings. In 2022:

•

Overall attendance at Board and committee meetings was over 96%; and

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•

Attendance was at least 75% for each director.

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In addition, each director attended IBM’s 2022 Annual Meeting of Stockholders. IBM’s policy with regard to Board members’ attendance at annual meetings of stockholders is available at https://www.ibm.com/investor/governance/director-attendance-at-annual-meeting-of-stockholders.

2023 Notice of Annual Meeting & Proxy Statement   |   Corporate Governance 19
 

 

Independent Leadership Structure

The Directors and Corporate Governance Committee is responsible for the continuing review of the governance structure of the Board, and for recommending to the Board those structures and practices best suited to IBM and its stockholders. The Committee and the Board recognize that different structures may be appropriate under different circumstances.

Mr. Krishna serves as IBM’s Chairman and CEO and Mr. Gorsky serves as IBM’s independent Lead Director, a structure that the Directors and Corporate Governance Committee and the full Board believe is currently in the best interests of IBM and its stockholders. 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.

A strong, independent Lead Director with clearly defined duties and responsibilities further enhances the contributions of IBM’s independent directors, which have been and continue to be substantial. Mr. Gorsky has significant global business, technology, leadership, and oversight experience as the former chairman and chief executive officer of Johnson & Johnson. Given Mr. Gorsky’s extensive experience leading a global business similar in size and complexity to that of IBM, he plays a pivotal role as independent Lead Director in administering the Board’s risk oversight responsibility.

202023 Notice of Annual Meeting & Proxy Statement   |   Corporate Governance
 

 

Board Evaluation Process

IBM’s independent Lead Director oversees a comprehensive, multi-part process for the Board’s ongoing self-evaluation to ensure that the Board is operating effectively and that its processes reflect best practices. This process ensures that the full Board and each committee conduct an assessment of their performance and solicit feedback for enhancement and improvement. From time to time, this process includes a third-party review of the Board’s process and evaluation criteria.

The Lead Director leads the Board in conducting an annual self-evaluation to review the effectiveness of the Board and its committees. In this comprehensive review, the self-evaluation focuses on:

Each committee also performs a self-evaluation in executive session on an annual basis. The Audit Committee’s evaluation, for example, includes individual, one-on-one interviews between IBM’s internal Chief Auditor and each member of the Committee.

The Lead Director, together with the Chairman, interviews each IBM director individually to obtain his or her candid assessment of director performance, Board dynamics and the effectiveness of the Board and its committees.

The Lead Director shares insights from each of these meetings with the full Board.

The Board meets in executive session to discuss the results of the evaluation and any other issues that the directors may want to raise.

Self-evaluation items requiring follow-up and execution are monitored on an ongoing basis by the Board, each of the committees, and by IBM management. While this formal self-evaluation is conducted on an annual basis, the evaluation process is an ongoing process throughout the year. At each meeting, the Chairman actively solicits feedback from each individual director and directors continuously share their perspectives, feedback, and suggestions throughout the year.

2023 Notice of Annual Meeting & Proxy Statement   |   Corporate Governance 21
 

 

Strategy Oversight

The Board actively oversees IBM’s long-term business strategy and is actively engaged in ensuring that IBM’s culture reflects its longstanding commitment to integrity, compliance, and inclusion. The Board is continuously engaged with management on these topics. For example, each year, the Board:

Risk Oversight

At IBM, we believe that innovation and leadership are impossible without taking risks. We also recognize that imprudent acceptance of risk or the failure to appropriately identify and mitigate risk could be destructive to stockholder value. Our risk professionals rigorously analyze both enterprise and emerging risks, incorporating both internal and external perspectives and data analytics into a comprehensive annual enterprise risk review. This approach is leveraged by management in monthly emerging risk reviews, to proactively identify and respond to changes in the business environment. IBM’s comprehensive annual enterprise risk review is also discussed with both the Audit Committee and full Board.

Risk assessment is integral to the Board’s strategic planning and in the analysis of transactions and other matters presented to the Board, including capital expenditures, acquisitions, divestitures and other portfolio actions, and operational and financial matters. In addition to the annual enterprise risk reviews, IBM’s risk professionals, including the Chief Risk Officer, work closely with senior management to integrate risk assessment into Board and committee briefings on topics of strategic importance. The Board and the Audit Committee also receive reports from IBM’s Chief Trust and Compliance Officer (CTCO) on compliance related matters. The CTCO reports to the Senior Vice President and General Counsel with dotted line reporting to the Audit Committee, and holds a private session with members of the Audit Committee at every meeting.

The Board’s role in risk oversight of IBM is consistent with IBM’s leadership structure, with the CEO and other members of senior management having responsibility for assessing and managing IBM’s risk exposure, and the Board and its committees providing oversight in connection with those efforts. Our risk oversight framework also aligns with our disclosure controls and procedures. For example, IBM’s quarterly and annual financial statements and related disclosures are reviewed by its disclosure committee, comprised of senior management including IBM’s Controller, Chief Auditor, General Counsel, Chief Trust and Compliance Officer, and others, all of whom participate in the risk assessment practices described above. The CEO and CFO then receive a report from the disclosure committee and external auditor before the financial statements are reviewed with the Audit Committee and Board, approved, and then filed.

222023 Notice of Annual Meeting & Proxy Statement   |   Corporate Governance
 

 

2023 Notice of Annual Meeting & Proxy Statement   |   Director Compensation23
 

 

(1)

Amounts in this column include the following: for Mr. Buberl: $36,193 of dividend equivalent payments on PFS; for Mr. Eskew: $79,146 of dividend equivalent payments on PFS and $10,000 contributed by the Company under the Matching Grants Program; for Mr. Farr: $103,105 of dividend equivalent payments on PFS; for Mr. Gorsky: $142,552 of dividend equivalent payments on PFS; for Admiral Howard: $52,819 of dividend equivalent payments on PFS; for Mr. Liveris: $202,937 of dividend equivalent payments on PFS; for Mr. McNabb: $46,591 of dividend equivalent payments on PFS; for Dr. Pollack: $60,233 of dividend equivalent payments on PFS; for Mr. Swedish: $59,672 of dividend equivalent payments on PFS; for Mr. Voser: $133,903 of dividend equivalent payments on PFS; for Mr. Waddell: $86,637 of dividend equivalent payments on PFS and $10,000 contributed by the Company under Matching Grants Program; and for Mr. Zollar: $9,240 of dividend equivalent payments on PFS.

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(2)

Mr. Eskew’s term on the Board ended April 2022.

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Fees Earned or Paid in Cash (column (b)): Amounts shown in this column reflect the annual retainer paid to each director as described above. A director receives a prorated amount of the annual retainer for service on the Board and, if applicable, as Lead Director or a committee chair, based on the portion of the year for which the director served.

All Other Compensation (column (c)): Amounts shown in this column represent:

•

Dividend equivalent payments on PFS accounts under the DCEAP as described above.

​

•

Group life insurance premiums paid by IBM on behalf of the directors.

​

•

Value of the contributions made by IBM under IBM’s Matching Grants Program as described above.

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Delinquent Section 16(a) Reports: None

IBM believes that all reports for IBM’s executive officers and directors that were required to be filed under Section 16 of the Securities Exchange Act of 1934 in 2022 were timely filed.

Insurance and Indemnification

IBM has renewed its directors and officers indemnification insurance coverage. This insurance covers directors and officers individually where exposures exist other than those for which IBM is able to provide indemnification. This coverage runs from June 30, 2022 through June 30, 2023, at a total cost of approximately $6.7 million. The primary carrier is AXA/XL Specialty Insurance Company.

242023 Notice of Annual Meeting & Proxy Statement   |   Director Compensation
 

 

Ownership of Securities

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Common Stock and Stock-based Holdings of Directors and Executive Officers

The following table sets forth the beneficial ownership of shares of IBM’s common stock as of December 31, 2022, by IBM’s current directors and nominees, the executive officers named in the 2022 Summary Compensation Table, and such directors and all of IBM’s executive officers as of December 31, 2022, as a group. Also shown are shares over which the named person could have acquired voting power or investment power within 60 days after December 31, 2022. Voting power includes the power to direct the voting of shares held, and investment power includes the power to direct the disposition of shares held.

IBM’s current non-management directors had beneficial ownership of a total of 196,700 shares of common stock and DCEAP shares as of December 31, 2022. In the aggregate, these shares were valued at more than $27 million as of December 31, 2022, or an average of more than $2.5 million for each of IBM’s non-management directors as of December 31, 2022.

(1)

This column is comprised of shares of IBM common stock beneficially owned by the named person. Unless otherwise noted, voting power and investment power in the shares are exercisable solely by the named person, and none of the shares are pledged as security by the named person. Standard brokerage accounts may include nonnegotiable provisions regarding set-offs or similar rights. This column includes 188,389 shares in which voting and investment power are shared. The directors and officers included in the table disclaim beneficial ownership of shares beneficially owned by family members who reside in their households. The shares are reported in such cases on the presumption that the individual may share voting and/or investment power because of the family relationship. The shares reported in this column do not include 6,165 shares held by the IBM Personal Pension Plan Trust Fund, over which the members of the IBM Retirement Plans Committee, a management committee presently consisting of certain executive officers of the Company, have voting power, as well as the right to acquire investment power by withdrawing authority now delegated to various investment managers.

​

(2)

For executive officers, this column is comprised of the shares shown in the “Common Stock” column and, as applicable, all restricted stock units including retention restricted stock units, officer contributions into the IBM Stock Fund under the IBM Excess 401(k) Plus Plan, and Company contributions into the IBM Stock Fund under the Excess 401(k) Plus Plan. Some of these restricted stock units may have been deferred under the Excess 401(k) Plus Plan in accordance with elections made prior to January 1, 2008, and they will be distributed to the executive officers after termination of employment as described in the 2022 Nonqualified Deferred Compensation Narrative.

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(3)

For executive officers, this column is comprised of (i) shares that can be purchased under an IBM stock option plan within 60 days after December 31, 2022, and (ii) RSU awards that vest within 60 days after December 31, 2022. For Ms. Browdy, Mr. Cohn, Mr. Kavanaugh, Mr. Krishna, and Mr. Rosamilia, shares in this column are from IBM restricted stock awards which will vest within 60 days after December 31, 2022.

​

(4)

Promised Fee Shares earned and accrued under the IBM Deferred Compensation and Equity Award Plan (DCEAP) as of December 31, 2022, including dividend equivalents credited with respect to such shares. Upon a director’s retirement, these shares are payable in cash or stock at the director’s choice (see 2022 Director Compensation Narrative for additional information).

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(5)

Values in this column are calculated by multiplying the number of shares shown in the “Common Stock” column plus the “Directors’ DCEAP Shares” column by the closing price of IBM common stock on the New York Stock Exchange on the last business day of the 2022 fiscal year ($140.89).

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(6)

Includes 450 shares in which voting and investment power are shared.

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(7)

Includes 15,174 shares in which voting and investment power are shared.

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(8)

Includes 167,503 shares in which voting and investment power are shared.

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(9)

Voting and investment power are shared.

​

(10)

The total of these three columns represents less than 1% of IBM’s outstanding shares, and no individual’s beneficial holdings totaled more than 1/100 of 1% of IBM’s outstanding shares.

​

262023 Notice of Annual Meeting & Proxy Statement   |   Ownership of Securities
 

 

ESG at IBM

IBM is committed to developing policies and practices that prioritize ethics, trust, transparency, and accountability. For over a century, IBM has earned the trust of our clients by responsibly managing their data. We have worked to earn the trust of our stakeholders by ushering powerful new technologies into the world, responsibly and with purpose. As leaders in the tech sector, we believe it is our responsibility to contribute to diverse, global efforts that shape standards and best practices.

Putting our Principles of Trust and Transparency into Practice

IBM’s Principles for Trust and Transparency are the core principles that guide our handling of client data and insights, and the responsible development and deployment of new technologies. This philosophy applies to our approach to AI: we aim to create and offer trusted technology that can augment, not replace, human decision-making. Properly calibrated, AI can assist humans in making fairer choices, countering human biases, and promoting inclusivity. IBM recognized early on that articulating these principles around the responsible deployment of AI technologies was critical — backed by a strong commitment of putting words into practice. Our practice includes training, education, playbooks, tools and methodologies of AI ethics to be taken into account in the design, development, delivery and operational lifecycle of IBM products and across the IBM enterprise. In 2022 we continued to advocate for technology ethics with the Rome Call for AI Ethics, the Notre Dame-IBM Tech Ethics Lab, and through publication on our points of view on facial recognition and mitigating bias in AI. Additionally, we share technology solutions with the open-source community, including several toolkits, designed to promote trustworthy AI.

Our AI Ethics Board, which is comprised of a cross-disciplinary team of senior IBM leaders, co-chaired by IBM’s Chief Privacy Officer and IBM’s AI Ethics Global Leader, reports to the highest level of the company, and works with experts throughout our business to address our most complicated questions. We regularly share our AI Ethics Board governance process with clients and others outside of IBM so that we can collectively advance the responsible use of technology. Continuous collaboration with governments, companies, and other organizations has helped us as we embed privacy, tech ethics, and security into our operations.