8-KLeadership ChangesExhibits & Filings

CISCO SYSTEMS, INC. 8-K Report, Executive Changes (Nov 19, 2007)

Filed November 19, 2007For Securities:CSCO

Summary

Cisco Systems, Inc. (CSCO) filed an 8-K on November 19, 2007, reporting on key shareholder-approved changes to its executive compensation plans. The primary focus is the amendment and extension of the 2005 Stock Incentive Plan (SIP) and the approval of the new Executive Incentive Plan (EIP). For the SIP, shareholders approved an extension of the plan by five years to 2012 and reserved an additional 209 million shares for issuance, bringing the total to 559 million. Notably, the plan was modified to count stock grants/units issued as 2.5 shares from the reserved pool, increasing the potential dilution for existing shareholders. The SIP also now allows forfeited shares from previous plans to be re-granted and permits non-employee directors to elect stock units in lieu of cash retainers. The newly approved EIP is designed to provide cash bonus payments to officers and key employees based on pre-established performance goals. These goals can be tied to a broad range of financial and operational metrics, with a maximum payout of $10 million per participant per performance period. These changes reflect Cisco's strategy to align executive compensation with long-term company performance and shareholder value.

Key Highlights

  • 1Shareholder approval of the amendment and extension of the 2005 Stock Incentive Plan (SIP) until the 2012 Annual Meeting.
  • 2Addition of 209 million shares to the SIP, increasing the total reserve to 559 million shares.
  • 3New SIP provision: each stock grant or unit vests as 2.5 shares from the reserved pool, potentially increasing dilution.
  • 4Forfeited shares from prior incentive plans are now available for grant under the extended SIP.
  • 5Non-employee directors can elect to receive stock units instead of cash retainers under the SIP.
  • 6Approval of a new Executive Incentive Plan (EIP) for cash bonuses to officers and key employees.
  • 7EIP performance goals are tied to a wide array of company financial and operational metrics, with a maximum payout of $10 million per participant per period.

Frequently Asked Questions

The 8-K filing reports on shareholder approval of significant amendments to Cisco's executive compensation plans, specifically the extension and modification of the 2005 Stock Incentive Plan (SIP) and the adoption of a new Executive Incentive Plan (EIP).

The SIP was amended so that each share issued as a stock grant or unit will count as 2.5 shares against the total reserved pool. This effectively reduces the number of shares available for future grants compared to a 1:1 ratio, potentially increasing the overall dilution to existing shareholders over time.

The EIP is designed to provide cash bonus payments to eligible officers and key employees. These bonuses are contingent upon achieving pre-established performance goals, which can be based on various financial and operational metrics of the company, with a cap of $10 million per participant per performance period.

Yes, under the amended 2005 Stock Incentive Plan, non-employee directors now have the option to elect to receive stock units in lieu of their annual cash retainers, in addition to the existing right to elect stock grants.