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 11 Board members, comprised of two women and nine men. Nine 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 July 2013, the Board of Directors elected William D. Green to the Board. In April 2014, Windle B. Priem did not stand for re-election at our 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 Joe Tucci serve as our Chairman and CEO, and David N. Strohm, an independent Director, serve 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 providing governance and oversight. The Lead Director has significant responsibilities, including:
- Presiding at executive sessions of the independent Directors and meetings of the Board at which the Chairman is not present
- Acting as a liaison between the independent Directors and the Chairman
- Having the authority to call meetings of the independent Directors
- Approving information sent to the Board
- Approving meeting agendas and schedules for the Board
- If requested by major shareholders, being available for consultation and direct communication
In addition, each of the Board’s key committees – the Audit Committee, Governance Committee, and Compensation 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.
Board Membership Criteria
The Board believes that its members, collectively, should possess a variety of skills and experience in order to oversee our business 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 addition, the Board has determined that it is important to have individuals with the following skills and experiences:
- Domain 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 experiencewith 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.
The Governance Committee, together with the Lead Director, oversees an annual evaluation process 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
- Each Director prepares an individual self-evaluation
After these evaluations are complete, the Board and each committee discuss the results, as applicable, and, if necessary, develop action plans. The Lead Director also meets with each Director to discuss the individual self-evaluations and any issues regarding Board performance.
At least once a year, the Governance Committee evaluates the size and composition of the Board to assess 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.
Identifying Potential Director Candidates
The Governance Committee identifies Board candidates through numerous sources, including recommendations from Directors, executive officers, and EMC shareholders, as well as professional search firms. 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 provided in a timely manner, 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 2014 Annual Meeting of Shareholders.
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. During the past few years, a new Director has joined the Board approximately every 12-18 months. This cadence has proven effective in allowing sufficient time for new Director orientation as well as adjustments in boardroom dynamics.
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 2014 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. Some goals set for senior managers are 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 2013 executive compensation programs is set forth in EMC’s Proxy Statement for the 2014 Annual Meeting of Shareholders.
Contacting the Board
To enable 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 2013, members of EMC management dialogued and met with stakeholders on a variety of topics. To learn more, visit Stakeholder Engagement.
EMC has a tiered structure of management and oversight of our sustainability practices. At the highest level, the Governance Committee, as specified in its charter, is responsible for overseeing our sustainability efforts. The Governance Committee meets regularly with the Chief Sustainability Officer throughout the year.
In 2013, EMC launched an Executive Sustainability Council (ESC) to ensure our sustainability strategy and objectives are aligned with and integrated into our overall corporate strategy. The ESC consists of senior leaders, including:
- Chief Accounting Officer
- EVP and General Counsel
- EVP of Human Resources
- President, Products & Marketing
- SVP and Chief Technology Officer
- President of the Data Protection & Availability Division
- President of the Enterprise and Mid-Range Systems Division
- SVP of Global Product Operations
- SVP and Chief Risk Officer
- Chief Security Officer
Working with the Chief Sustainability Officer, the ESC meets three to four times a year, reviewing and approving overarching strategy, messaging, and corporate sustainability goals, as well as considering stakeholder feedback.
At an operational level, EMC also receives input from the Sustainability Leadership Council (SLC), formerly known as the Green Business Leadership team. Drawn from 20 different business units and functions, the SLC shares ideas and practices, aligns programs, and drives sustainability throughout our worldwide businesses.