8-KLeadership Changes

CISCO SYSTEMS, INC. 8-K Report, Executive Changes (Sep 4, 2009)

Filed September 4, 2009For Securities:CSCO

Summary

This Form 8-K filing from Cisco Systems, Inc. (CSCO) reports on discretionary incentive payments awarded to its named executive officers for the fiscal year 2009. The Compensation and Management Development Committee approved these payments, acknowledging the company's solid financial performance amidst economic challenges and the officers' contributions to operational excellence and profitability. Notably, these awards are significantly lower than those granted in fiscal year 2008. Crucially, Cisco did not meet its minimum pre-established financial performance goals under the Executive Incentive Plan (EIP) for fiscal year 2009. Consequently, no bonuses were paid under the EIP to the named executive officers. The reported discretionary payments were authorized independently of any formal bonus or incentive plan for the fiscal year. One executive, Robert W. Lloyd, received an award under the non-executive officer portion of the EIP, as he transitioned into an executive officer role later in the year.

Key Highlights

  • 1Discretionary incentive payments were awarded to key executives for fiscal year 2009, with amounts significantly lower than the prior year.
  • 2Cisco Systems did not meet its minimum pre-established financial performance goals for the Executive Incentive Plan (EIP) in fiscal year 2009.
  • 3No bonuses were paid to named executive officers under the EIP due to failure to meet performance targets.
  • 4The awarded incentive payments were discretionary and authorized independently of any formal bonus or incentive plans for FY2009.
  • 5John T. Chambers, CEO, received $2,031,000 in discretionary incentive payment.
  • 6The committee cited the company's solid financial performance during challenging economic times and executive contributions to operational excellence and profitability as reasons for the awards.

Frequently Asked Questions

The incentive payments reported were discretionary awards made by the Compensation and Management Development Committee. These were separate from the Executive Incentive Plan (EIP) under which bonuses are tied to specific financial performance goals. Since Cisco did not meet the EIP goals, no EIP bonuses were paid. The discretionary payments were acknowledged for the executives' roles in driving operational excellence and profitability, despite the broader company performance not meeting the EIP thresholds.

These payments are described as 'year-end discretionary incentive payments.' They were specifically authorized by the Compensation and Management Development Committee independent of any cash incentive or bonus plan for fiscal year 2009, especially since the company did not meet the performance criteria for its standard Executive Incentive Plan (EIP).

The filing explicitly states that these awards 'are significantly lower than the cash incentive payments to each individual for the Company’s 2008 fiscal year.' While specific 2008 figures are not provided in this 8-K, the phrasing indicates a substantial decrease in executive incentive compensation for FY2009.

It means that Cisco Systems, Inc. did not achieve the specific financial targets set at the beginning of the fiscal year under its Executive Incentive Plan (EIP). This typically affects bonus payouts tied directly to those metrics. In this case, it resulted in no bonuses being paid to the named executive officers under that specific plan.