8-KLeadership ChangesCorporate ChangesOther Events+1

CISCO SYSTEMS, INC. 8-K Report, Executive Changes (Mar 23, 2007)

Filed March 23, 2007For Securities:CSCO

Summary

Cisco Systems, Inc. (CSCO) filed an 8-K on March 23, 2007, detailing two significant corporate governance changes. Firstly, the company appointed Michael K. Powell, former FCC Chairman, to its Board of Directors. Mr. Powell will receive standard compensation for non-employee directors, including an annual retainer, committee meeting fees, and an initial stock option grant of 50,000 shares vesting over four years. Secondly, Cisco amended its Bylaws to adopt a majority voting standard for uncontested director elections, replacing the previous plurality standard. Under the new rules, a director nominee needs a majority of votes cast to be elected. If an incumbent director fails to receive majority support in an uncontested election, they must offer their resignation, which the Board will review. These changes aim to enhance corporate governance and shareholder accountability.

Key Highlights

  • 1Appointment of Michael K. Powell, former FCC Chairman, to Cisco's Board of Directors.
  • 2Mr. Powell receives standard non-employee director compensation, including a $75,000 annual retainer and a 50,000 share stock option grant.
  • 3Cisco adopted a new nonqualified deferred compensation plan, the "Cisco Systems, Inc. Deferred Compensation Plan," effective June 25, 2007.
  • 4The new deferred compensation plan will allow eligible management employees to defer base salary, commissions, and/or bonuses, compliant with Section 409A of the Internal Revenue Code.
  • 5Cisco amended its Bylaws to implement a majority voting standard for uncontested director elections.
  • 6Under the new standard, directors must receive at least a majority of votes cast to be elected in uncontested situations.
  • 7An incumbent director failing to achieve a majority vote in an uncontested election must tender their resignation.

Frequently Asked Questions

Michael K. Powell is the former chairman of the Federal Communications Commission (FCC). His appointment to Cisco's Board of Directors, effective March 22, 2007, likely brings valuable regulatory and leadership experience to the company's governance.

Mr. Powell will receive Cisco's standard compensation for non-employee directors. This includes a pro rata annual retainer of $75,000, potential committee meeting fees of $2,000 per meeting, and an initial stock option grant for 50,000 shares, which vests over four years and is immediately exercisable.

The new deferred compensation plan, effective June 25, 2007, is designed to allow eligible management employees, including named executive officers, to defer a portion of their base salary, commissions, and/or bonuses. This plan mirrors aspects of Cisco's 401(k) plan but without the statutory deferral limits, and is compliant with Section 409A of the Internal Revenue Code.

The adoption of a majority voting standard for uncontested director elections means that a nominee must receive more 'for' votes than 'against' votes to be elected. This strengthens shareholder voice and accountability, as directors who fail to secure majority support in uncontested elections are required to offer their resignation, providing a mechanism for the Board to address a lack of confidence from shareholders.