Mark Borges continues to amaze in his daily dissections of recent proxy comp disclosures in his “The Compensation Disclosure Blog.” Here is his take on Intel’s just-filed proxy statement: This year’s Intel proxy statement is a model of proactive, comprehensive disclosure. Take, for example, Andy Grove’s cover letter to shareholders. In it, he addresses two significant issues that affect proxy voting; one new – the debate over plurality voting for directors, and one no-so-new — broker voting on compensation plans:

“Your Intel stockholder vote is more important than ever in 2005. Each share of our stock that you own represents one vote. If you do not vote your shares, you will not have a say in the important issues to be voted on at the annual meeting. The 10 nominees receiving the most votes “for” election will be elected as directors; and to pass, each other proposal included in this year’s proxy statement will require a majority of votes present or represented at the annual meeting. Many of our stockholders do not vote, so the stockholders who do vote influence the outcome of the election in greater proportion than their percentage ownership of the company. In addition, banks and brokers that have not received voting instructions from their clients cannot vote on their clients’ behalf on “non-routine” proposals, such as approval of amendment and extension of the 2004 Equity Incentive Plan and the Executive Officer Incentive Plan, which further reduces the number of votes cast.”

Without getting bogged down in legal jargon, this paragraph provides a brilliantly concise and understandable explanation of why shareholder voting is important — and the potential consequences of failing to vote.

My main focus the first time through the proxy statement is on this year’s Board Compensation Committee Report. It includes many noteworthy items, including:

– A description of the Compensation Committee’s authority to engage, and actual retention of, compensation consultants. The Committee notes that, while it retained a consultant for two of the past three years, it did not do so in 2004 in connection with its work on 2005 executive compensation. The report goes on to say that the Committee is undertaking a study during 2005 of Intel’s executive compensation philosophy and design, and expects to engage outside experts to assist in this work.

– Disclosure that Intel’s employees, including its executive officers, are employed “at will” and do not have employment agreements, severance payment arrangements or payment arrangements that would be triggered by a corporate change in control.

– A statement that the Committee’s review of the company’s executive compensation programs and practices includes an analysis, for each executive, of all elements of compensation, consisting of base and variable cash compensation; stock option grants; retirement programs; and health and welfare benefits. The Committee compares these compensation components separately and in the aggregate to the compensation of Intel’s peer group companies.

– A statement identifying and reaffirming the company’s key strategic compensation design priorities: pay-for-performance, employee retention, cost management, egalitarian treatment of employees, alignment with shareholders’ interests, and continued focus on corporate governance.

– A description of the Committee’s consideration of internal pay consistency with Intel’s 100 most-highly paid employees in setting executive officer salaries and incentive baselines. The company monitors this data to ensure that executive officer compensation is not increasing at rates significantly beyond that of Intel’s other highly valued employees.

– A statement that, in setting executive compensation for 2005, the Committee reviewed the total remuneration that each executive officer could potentially receive in each of the next 10 years, under scenarios of continuing employment with the company or upon retirement from the company. (For these purposes, “total remuneration” included all aspects of an executive officer’s future cash-convertible benefits, total cash compensation (base salary plus incentive) from continuing employment, the future value of stock options under varying stock price growth assumptions (as well as, if applicable, the impact of accelerated vesting upon retirement), the value of any deferred compensation and profit sharing retirement benefits, and the value of health care benefits.)

– An indication that the company, long known as a stock option stalwart, is considering the use of performance stock, as well as other equity vehicles, as part of its long-term incentive program. The Report also discloses that, in 2004, approximately 99% of the company’s stock option grants went to employees other than its top six most highly-compensated executive officers, and that, for the period 2000 to 2004, only 1.2% of all option grants went to its top five most highly compensated executive officers (top six for 2004).

– A statement reaffirming the company’s egalitarian culture:

“Intel’s officers are not entitled to operate under different standards than other employees. Intel does not provide its officers with reserved parking spaces or separate dining or other facilities, nor does Intel have programs for providing personal-benefit perquisites to officers, such as permanent lodging or defraying the cost of personal entertainment or family travel. Intel’s office-building layouts are cubicle-based for all employees, including officers. Company-provided air travel for Intel’s officers is for business purposes only: Intel’s company-owned aircraft each hold approximately 40 passengers and are used in regularly scheduled shuttle routes between Intel’s major U.S. facility locations, and Intel’s use of non-commercial aircraft on a time-share or rental basis is limited to appropriate business-only travel. Intel’s health care, insurance and other welfare and employee-benefit programs are the same for all eligible employees, including Intel’s officers. Intel’s loan programs, although modest in nature, are not available to Intel’s executive officers. Intel has no outstanding loans of any kind to any of its executive officers, and since 2002, federal law has prohibited Intel from making any new loans to its executive officers. Intel expects its officers to be role models under its Corporate Business Principles, which are applicable to all employees, and Intel’s officers are not entitled to operate under lesser standards.”

The Report finishes with a statement professing the Committee’s belief that Intel’s pay-for-performance executive compensation program sets the standard for best-in-class executive compensation practices. The same can be said for its BCCR.

PCAOB Proposes Standard on Reporting for Elimination of Material Weaknesses

Yesterday, the PCAOB proposed a standard regarding how to report the elimination of a material weakness. Here is the related press release and the 42-page proposal.

Ten Years of Cybersecurities Law

Hard to believe that the Web is a decade old! Come hear me, John Stark from the SEC’s Enforcement Division and other cyberlaw enthusiasts at the “Cybersecurities Law Conference – 10th Anniversary of Cybersecurities Law” next Friday in Toledo. The conference is free!