Our Corporate Governance Guidelines provide a framework for the effective governance of EMC. The Guidelines address many areas, including selection criteria for Board members, Lead Director responsibilities, selection and evaluation of the CEO, management succession planning, and assessment of Board performance.
EMC recognizes that corporate governance is only as strong as the board of directors behind it. We are fortunate to have a highly experienced, well-informed, and fully engaged Board.
We currently have 12 Board members, comprised of one woman and 11 men. Ten Directors are independent as defined in our Categorical Standards of Independence and the listing standards of the New York Stock Exchange. We require each Board member to stand for election annually, and have adopted a majority vote standard for the election of directors. In January 2015, EMC appointed José E. Almeida and Donald J. Carty to the Board of Directors. In February 2015, the independent directors designated William D. Green as the Board’s independent Lead Director. Gail Deegan did not stand for re-election at the 2015 Annual Meeting of Shareholders.
The EMC Board of Directors has established five standing committees:
- Audit Committee
- Corporate Governance and Nominating Committee (the “Governance Committee”)
- Finance Committee
- Leadership and Compensation Committee (the “Compensation Committee”)
- Mergers and Acquisitions Committee
The Audit, Governance, and Compensation Committees consist entirely of independent directors.
We believe that strong, independent board leadership is a critical aspect of effective corporate governance, and that such independent leadership can be achieved in several ways. Our Bylaws and Corporate Governance Guidelines permit the roles of Chairman and CEO to be filled by the same or different individuals. This provides the Board with the flexibility to determine whether the two roles should be combined or separated based upon our needs and the Board’s assessment of its leadership from time to time.
The Board reviews the structure of its leadership on an annual basis and determines each year whether it is best for the Company that the Chairman role be combined or separated from the CEO role and whether the Chairman should be an independent director. Among other things, the Board considers:
- the Company’s strategic positioning;
- the Company’s challenges;
- industry dynamics;
- the experience of the then current CEO;
- the qualifications of directors who could serve as Chairman; and
- any relevant legislative or regulatory developments.
The Board believes that EMC and its shareholders are best served at this time by having Joseph M. Tucci serve as our Chairman and CEO, and William D. Green, an independent director, serve as our Lead Director. Mr. Green has substantial experience leading a large public corporation, governance expertise from serving as chairman and a member of other company boards and committees, and a deep understanding of the IT industry. In addition, Mr. Green’s proven ability to assert independent leadership while working collaboratively with other directors, his ability to solicit, balance and build consensus around different points of view, and the respect he has garnered among our Board members will enable him to serve effectively as our Lead Director.
The Board believes a Lead Director is an integral part of our Board structure and facilitates the effective performance of the Board in its role of governance and oversight. Our Lead Director has significant responsibilities, which are set forth in EMC’s Corporate Governance Guidelines. These include:
- Presiding at the meetings of the Board at which the Chairman is not present, including the executive sessions of the non-management directors and independent directors, establishing the agendas for such executive sessions and providing appropriate feedback to the CEO regarding these meetings
- Acting as a liaison between the independent directors and the Chairman
- Facilitating discussions among the independent directors on key issues and concerns outside of Board meetings
- Having the authority to call meetings of the independent directors
- Approving information sent to the Board, including providing for the quality, quantity and timeliness of the flow of information from management that is necessary for the independent directors to effectively and responsibly perform their duties
- Approving meeting agendas for the Board
- Approving meeting schedules to assure that there is sufficient time for discussion of all agenda items
- In collaboration with the Compensation Committee, approving CEO goals, evaluating CEO performance, setting CEO compensation levels and reviewing CEO succession planning
- In collaboration with the Governance Committee, making recommendations to the Board regarding committee members and chairs and overseeing the performance evaluations of the Board, each of the applicable committees and the individual directors
- In collaboration with the Chairman, recommending to the Board the retention of consultants who report directly to the Board
- If requested by major shareholders, ensuring that he or she is available for consultation and direct communication
- Performing such other duties as may be requested from time to time by the Board as a whole or by the independent directors
In addition, each of the Board’s key committees – the Audit Committee, Compensation Committee, and Governance Committee – is comprised entirely of independent directors. As a result, oversight of key matters, such as the integrity of EMC’s financial statements, the nomination of directors and evaluation of the Board and its committees, and executive compensation, is entrusted exclusively to independent directors. Finally, the Board meets in executive session without the CEO in connection with each regularly scheduled Board meeting.
The active involvement of the independent directors, combined with the qualifications and significant responsibilities of our Lead Director, promote strong, independent oversight of EMC’s management and affairs.
For more information on the Board’s annual review of its leadership structure, see EMC’s Proxy Statement for the 2015 Annual Meeting of Shareholders.
Board Membership Criteria
The Board believes that its members, collectively, should possess diverse and complementary skills and experience in order to oversee our business and evaluate management strategy effectively. In addition, the Board believes that each director should possess certain attributes, as reflected in the Board’s membership criteria described below. Accordingly, the Board and the Governance Committee consider the qualifications of directors and director candidates individually and in the broader context of the Board’s overall composition and dynamics and EMC’s current and future needs.
The Governance Committee is responsible for reviewing, assessing and recommending Board membership criteria to the Board for approval. The criteria, which are set forth in the Governance Committee’s charter, include judgment, integrity, diversity, prior experience, the interplay of the nominee’s experience with the experience of other Board members, the extent to which the nominee would be desirable as a member of any committees of the Board, and the candidate’s willingness to devote substantial time and effort to Board responsibilities. The Governance Committee also considers service on other public company boards as this provides directors with a deeper understanding of the role and responsibilities of boards and insight into matters being handled by our Board.
In 2015, the Board amended the Governance Committee’s charter to state explicitly the Board’s commitment to actively identify and recruit diverse candidates, including women and minority candidates, as part of the search process for Board members.
In addition, the Board has determined that it is important to have individuals with the following skills and experiences:
- Industry expertise, including a deep understanding of the information technology industry and the disruptive impact of new technology, or another industry that has undergone rapid growth or transformational change, to assess EMC’s strategy and long-term business plan to take advantage of the opportunities ahead.
- Functional expertise in areas such as finance and accounting, talent management or marketing to support the Company’s business development and growth as well as the Board’s required committees.
- International expertise, including experience attained through key leadership or management roles in a global business or responsibility for non-U.S. operations, which is important given EMC’s growth in markets around the world.
- Operational experience with a business of significant scale and complexity or in an industry with continual structural change to understand the competitive dynamics of our business strategy and execution and key business processes as well as the leadership requirements and organizational dynamics driven by rapid change.
In identifying director candidates, the Governance Committee may establish other specific skills and experience that it believes the Board should seek in order to maintain a balanced and effective Board.
At least once a year, the Governance Committee assesses the skills and experience of Board members, and compares them with those skills that might prove valuable in the future, giving consideration to the changing circumstances of the Company and the then current Board membership. This assessment enables the Board to consider whether the skills and experience described above continue to be appropriate as the Company’s needs evolve over time, the effectiveness of the Board membership criteria, and whether the Board should seek individuals with specific areas of expertise in the future. To facilitate this process, from time to time, the Governance Committee may use a critical skills matrix.
Each year, the Governance Committee, together with the Lead Director, oversees an annual evaluation process. The evaluations help inform the Governance Committee’s discussions regarding Board succession planning and refreshment, and complement the Governance Committee’s evaluation of the size and composition of the Board. The process, as described in more detail in the chart below, is as follows
- Each director evaluates the Board as a whole;
- Each member of the standing committees of the Board of Directors evaluates the committees on which he or she serves; and
- Each director prepares an individual self-evaluation.
After these evaluations are complete, the results are discussed by the Board and each committee, as applicable, and changes in practices or procedures are considered as necessary. The Lead Director meets with each director to discuss the individual self-evaluations and Board performance. To the extent possible, these one-on-one meetings are scheduled as in-person meetings. Among other topics, the Lead Director discusses with each director the individual’s role, the individual’s performance, committee service, and the individual’s willingness to continue serving on the Board. The Chairman discusses the Lead Director’s self-evaluation with the Lead Director, and the Governance Committee considers the Lead Director’s performance.
In 2014, this three-tier process generated robust comments and discussion at all levels of the Board, including with respect to Board refreshment and Board processes. The self-assessments also led, along with other considerations, to several changes in committee memberships, as indicated in the table below. These changes reflected the Board’s focus on director succession planning and independent oversight.
|Committee||Rotated On||Rotated Off|
|Corporate Governance and Nominating||
|Leadership and Compensation||
|Mergers and Acquisitions||
A summary of the Board’s evaluation process in 2014 is set forth below.
|All members of the Board||
|All members of each committee||
The Board is focused on ensuring it has individuals with the right skills and experience to exercise independent judgment in overseeing our business. Accordingly, the Board pays careful attention to succession planning and refreshment for members of the Board. The Board’s process reflects both a deliberate search for specific skills and experiences, as needed, as well as opportunistic additions when high-caliber individuals become available. This practice has become a foundation of our Board’s effectiveness and, very importantly, keeps our Board energized with valuable expertise and additional perspectives.
The Board also considers the tenure of its members when evaluating its composition and nominees for election. The Board believes that varied lengths of service provide an effective balance of experience from longer-serving directors and fresh perspectives from newer directors. The average tenure of our Board members is 7.8 years and the average tenure of the independent members of our Board is 5.6 years.
Identifying Potential Director Candidates
The Governance Committee identifies Board candidates through numerous sources, including recommendations from directors, executive officers, and shareholders of EMC, as well as professional search firms retained from time to time to assist in identifying Board candidates. The Governance Committee seeks to identify those individuals most qualified to serve as Board members and considers many factors with regard to each candidate, including those described above. New candidates are interviewed by members of the Governance Committee and other Board members.
EMC shareholders may recommend individuals to the Governance Committee for consideration as potential director candidates by submitting their names and appropriate background and biographical information to the Governance Committee, 176 South Street, Hopkinton, MA 01748. Assuming the appropriate information is timely provided, the Governance Committee will consider these candidates in substantially the same manner as it considers other Board candidates it identifies. EMC shareholders may also nominate director candidates by following the advance notice provisions of EMC’s Bylaws as described in EMC’s Proxy Statement for the 2015 Annual Meeting of Shareholders.
Director and Executive Compensation
Non-employee directors receive cash fees and equity awards for their service. The director compensation program emphasizes equity incentives, as they serve to align the interests of our directors with those of our shareholders. For more information, see EMC’s Proxy Statement for the 2015 Annual Meeting of Shareholders.
Our executive compensation programs are based on strong pay-for-performance practices that require the attainment of challenging goals designed to drive profitable revenue growth and market share gains. We believe achievement of these goals will create long-term shareholder value. Members of our executive leadership team were eligible to receive semi-annual cash bonuses contingent upon achievement of a number of shared and individual performance goals under the 2014 Executive Management by Objectives Plan. The Compensation Committee assigned shared goals to the executive leadership team, including a goal to increase employee engagement. Senior managers also had goals related to sustainability, including goals for innovation, customer satisfaction, and talent management as well as execution of sustainability initiatives in areas for which they have substantial responsibility. In addition, our governance structure for hardware and software products includes sustainability criteria that senior managers and executives are accountable for as part of the successful release of these products.
A detailed description of our 2014 executive compensation programs is set forth in EMC’s Proxy Statement for the 2015 Annual Meeting of Shareholders.
Contacting the Board
To facilitate open communications, we provide various means for shareholders and other interested parties to contact the non-management directors, the Audit Committee, and the Compensation Committee. The Board strives to provide clear, candid, and timely responses to any substantive communication it receives. To build constructive, informed relationships with shareholders and encourage transparency and accountability, directors may also be available for dialogue with shareholders from time to time, as appropriate, and the Lead Director is available for consultation and direct communication if requested by major shareholders. During 2014, members of EMC’s Board of Directors and management dialogued and met with stakeholders on a variety of topics. To learn more, visit Stakeholder Engagement.