foundation for Ciscos CSR processes by the very nature of its composition with

Foundation for ciscos csr processes by the very

This preview shows page 7 - 10 out of 13 pages.

foundation for Cisco’s CSR processes by the very nature of its composition, with over 80% of its members acting as outside & independent parties. This structure is cemented in Cisco’s policy regarding the makeup of the board, which sets that it must float between 8-15 members at any
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8 CISCO SYSTEMS INC. given time as well as requiring that a majority (51%) of the board must be comprised of independent directors. The tenure of the members is also a factor when electing members. Currently, (4) members fall in the 0-7-year range, (4) in the 8-14-year range, and (4) with more than 15 years on the board. It is also noteworthy to mention that previously, the role of chairman and CEO were split to avoid any pitfalls that would arise in terms of conflicting priorities that each role would be responsible for. That changed with the promotion of Chuck Robbins who serves as both chairman and CEO, largely due to his long record with company, over 20 years. This was done to satisfy a need for a singular vision to make the necessary changes to prepare for the rapidly changing technological advances that have challenged much of Silicon Valley and other IT (information technology) companies. Cisco’s philosophy on CEO compensation is designed to not only attract and keep a viable candidate, but it is also meant to motivate that individual to perform at a level beneficial to both executive and shareholder. This is done by setting the majority of performance-based equity incentives at 58%, base salary at 7%, variable cash incentive awards at 15% which are also performance based, and all other time-based equity incentive awards at 20% (Cisco, 2017, p. 12). Compensation for named executive officers (NEOs) follows a similar structure with slight variations but more importantly features the addition of a strict “no golden parachute” policy, which eliminates lucrative severance packages, as well as implementing a “no perks” policy that has few exceptions. External Environment Some of the challenges facing Cisco can be categorized into four major categories: cloud computing, cyber-attacks, trade wars/tariffs, and the demand for constant innovation. Since Cisco traditionally followed a traditional business model of manufacturing tangible goods and selling them to consumer since the 80s, that model has had to undergo a major change recently given the
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9 CISCO SYSTEMS INC. rise of cloud computing, which effectively renders the concept of owning tangible network infrastructure hardware obsolete. The company has had to make shift to how they deliver their services and products to customer who may not initially realize the value of their specific technology. This means that have had to embrace cloud computing themselves and develop that sector of their business either by expanding their capabilities organically (internally) or through the method of acquiring other companies (externally) that have perhaps been more specialized in those areas and have developed their technology quicker. This can be seen in the 2012
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