James J. Kavanaugh
Senior Vice President, Finance & Operations and Chief Financial Officer at 
INTERNATIONAL BUSINESS MACHINES
INTERNATIONAL BUSINESS MACHINESExecutive
About James J. Kavanaugh
James J. Kavanaugh is IBM’s Senior Vice President, Finance & Operations and Chief Financial Officer (CFO), appointed in January 2018 after serving as SVP, Transformation & Operations and previously IBM’s Controller; he joined IBM in 1996 after AT&T, and holds an MBA from The Ohio State University and a BS from the University of Dayton . Age 58; currently also a director of T‑Mobile US (board service initiated in 2023) . Under his finance leadership, IBM delivered 2024 revenue of $62.8B (+1% GAAP, +3% constant currency), 57% gross margin, 18% operating PTI margin, $13.4B cash from operations and $12.7B free cash flow; IBM’s 2024 total shareholder return was ~40% (vs S&P +25%) .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| IBM | CFO; SVP Finance & Operations | 2018–present | Aligns finance strategy to hybrid cloud/AI; oversees accounting, FP&A, tax, IR, strategy, corp dev, treasury; leads IBM Financing |
| IBM | SVP, Transformation & Operations | 2015–2018 | Redesign operating model; drive AI-led, data-driven processes across CIO, Data Office, Enterprise Ops & Services |
| IBM | Controller | 2008–2015 | Company forecasting, measurements; global finance governance |
| IBM | VP Finance roles (Worldwide Sales & Distribution; Americas; EMEA) | 1996–2008 | Strategic and operational financial management across global geographies |
| AT&T Corporation | CFO, Americas Global Services | Pre‑1996 | Regional CFO; led finance for services division |
External Roles
| Organization | Role | Years | Notes |
|---|---|---|---|
| T‑Mobile US, Inc. | Director | 2023–present | Appointed July 17, 2023 |
Fixed Compensation
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Base Salary ($) | 1,040,000 | 1,088,000 | 1,151,500 |
| Target Bonus (% of Salary) | 135% | 135% | 135% |
| Annual Incentive Paid ($) | 1,665,760 | 1,730,430 | 1,738,000 |
| All Other Compensation ($) | 233,263 | 203,369 | 170,435 |
| Total Compensation ($) | 10,132,985 | 11,691,289 | 13,009,403 |
| 2025 Target Cash & Equity Mix (Granted Feb 18, 2025) | Amount ($) |
|---|---|
| Salary Rate | 1,277,000 |
| Annual Incentive Target | 1,723,000 |
| PSUs (2025–2027 performance period) | 7,200,000 |
| RSUs | 2,400,000 |
| Stock Options | 2,400,000 |
Performance Compensation
| 2024 Equity Grants (Feb 21, 2024) | Grant Date | Units/Value | Vesting | Key Terms |
|---|---|---|---|---|
| PSUs | 2/21/2024 | Target 34,523 units; Grant-date fair value $5,699,402 | Performance period 1/1/2024–12/31/2026; Pays Feb 2027 | PSU metrics: Revenue 40%, Operating EPS 30%, Free Cash Flow 30%; ROIC relative modifier ±20 points vs S&P 500 IT median |
| RSUs | 2/21/2024 | 11,508 units; Grant-date fair value $1,899,856 | 25% per year on each anniversary: 2/21/2025, 2/21/2026, 2/21/2027, 2/21/2028 (continued vesting if retirement criteria met) | |
| Stock Options | 2/21/2024 | 57,538 options; Exercise price $180.87; Fair value $2,306,123 | 25% per year on 2/21/2025–2028; 10-year term; expires 2/20/2034 |
| Outstanding Awards (selected prior grants) | Exercise Price | Expiration | Unexercised (exercisable/unexercisable) | Notes |
|---|---|---|---|---|
| Options 2/21/2022 | $124.51 | 2/20/2032 | 47,303 / 47,303 | Standard 4-year ratable vesting |
| Options 2/21/2023 | $133.00 | 2/20/2033 | 21,444 / 64,333 | Standard 4-year ratable vesting |
| AIP Program Metrics (2024) | Weighting | Result | Pool Funding |
|---|---|---|---|
| Revenue (currency-adjusted) | 50% | Leveraged score 97% | |
| Operating Cash Flow (non‑GAAP) | 50% | Leveraged score 104% | |
| AIP Modifier (Talent & Inclusion) | N/A | No impact for 2024 | Final AIP pool funding score 110 |
| 2022–2024 PSU Program Outcome | Metric | Attainment Bands | Final Score |
|---|---|---|---|
| Revenue / Op EPS / FCF (non‑GAAP) | Threshold 70%→25% payout; Target 100%→100%; Max 120%→150% | Adjusted for FX and Russia exit | 93 (ROIC modifier = 0) |
| 2024 Vested Shares and Realized Value | Options Exercised | Shares Vested (PSU/RSU/RRSU) | Value on Vesting ($) |
|---|---|---|---|
| Kavanaugh | 0 | 55,524 | 11,391,061 |
Equity Ownership & Alignment
| Ownership (as of Dec 31, 2024) | Common Stock | Stock-based Holdings | Acquirable in 60 days | Shared Voting/Investment | Value at FY End ($) |
|---|---|---|---|---|---|
| James J. Kavanaugh | 124,223 | 168,695 | 69,311 | Includes 11,061 shared | 27,307,887 |
- Stock ownership guidelines: CEO 10× salary; other NEOs (incl. CFO) 7× salary; what counts: owned shares, IBM Stock Fund holdings, deferred shares; unvested awards and unexercised options do not count .
- Compliance: As a group, Chairman/CEO, Vice Chairman and SVPs held >$187M and averaged >11× salary; all on track to meet/exceed ownership goals within 5 years of hire/promotion .
- Hedging/pledging: Prohibited for directors and corporate leadership; no IBM securities may be hedged or pledged; equity plan and Excess Savings Plan include clawback features .
- Pledging status: Proxy footnote indicates none of the reported shares are pledged; standard brokerage accounts may include non‑negotiable set‑offs .
Employment Terms
| Provision | Detail |
|---|---|
| Change-of-control | IBM has no individual severance or change‑in‑control agreements for executive officers; no excise tax gross‑ups; no accelerated vesting of equity awards for executive officers . |
| Non‑compete / Non‑solicit | ~1,600 key executives (including NEOs) have 12‑month non‑compete and non‑solicit agreements post‑employment . |
| Clawbacks | Incentive comp clawed back upon restatement; equity awards may be cancelled and gains repaid for detrimental activity; Excess Savings Plan allows clawback of certain IBM contributions for detrimental activity . |
| AIP Post‑Termination | Lump sum AIP paid in April following year‑end; may be prorated upon retirement; subject to clawback; assumes employment through Dec 31 of performance year . |
| Equity Post‑Termination | Generally unvested LTPP awards cancel on termination; continued vesting may apply upon retirement if criteria met; PSUs pay in shares after performance period end . |
| Pension & Retention | CFO eligible for U.S. pension and a closed Supplemental Executive Retention Plan; annual retention annuity at earliest unreduced retirement age: $11,330; 2024 Retention Plan PV: $145,288; Pension annual benefit: $23,336; Pension PV total: $286,819 . |
| Perquisites | 2024 perqs include personal financial planning, ground transportation, annual executive physical, family attendance at business events, personal travel on company aircraft ($72,281), and other personal expenses . |
| Potential Payments Upon Termination (illustrative, if terminated last business day FY2024) | AIP ($) | Stock Options ($) | Stock Awards ($) | Retention Plan ($) | Excess Savings Basic ($) | Deferred IBM Shares ($) |
|---|---|---|---|---|---|---|
| Kavanaugh | 1,738,000 | 16,465,861 | 13,270,478 | 11,711 | 10,100,261 | 32,755 |
Compensation Structure vs Performance Metrics
- Annual cash incentive: Driven by IBM revenue and operating cash flow with levered scoring; 2024 pool funding score 110, with qualitative +10 adjustment for innovation and TSR; CFO’s AIP target = 135% of salary; payout $1,738,000 .
- Long‑term equity: PSU metrics explicitly tied to Revenue, Operating EPS, Free Cash Flow over 3 years, plus ROIC relative modifier; options and RSUs vest ratably over 4 years, aligning with sustained performance .
- Stock ownership alignment: 7× salary guideline for other NEOs; robust clawbacks; no hedging/pledging .
Vesting Schedules and Insider Selling Pressure
- Scheduled vesting: 2024 grants vest 25% annually each February 21 from 2025 to 2028 for RSUs and options; PSUs pay in Feb 2027 (for 2024–2026 period) .
- 2024 realized: 55,524 shares vested (PSUs/RSUs/RRSUs), with $11,391,061 value realized; 0 options exercised in 2024 .
- Outstanding unexercised options from prior grants: 2/21/2022 ($124.51, exp. 2/20/2032) and 2/21/2023 ($133.00, exp. 2/20/2033) maintain staggered, ratable vesting schedule .
Equity Ownership Alignment and Pledging
- Holdings: 124,223 common shares; 168,695 stock-based holdings; 69,311 acquirable within 60 days; includes 11,061 shares with shared voting/investment; value $27.3M at FY end .
- Policy: Prohibits hedging/pledging; strong ownership guidelines; comprehensive clawbacks .
Performance & Track Record
- 2024 execution: Delivered $12.7B FCF (+$1.5B YoY), enabled $6.1B dividends; drove ~120 bps operating PTI margin expansion via productivity; run‑rate savings >$3.5B .
- Investor engagement: Attracted new investors; IBM TSR ~40% in 2024 .
- Pay vs performance: 2024 say‑on‑pay approval 92.2% .
Compensation Peer Group & Governance
- Peer group methodology: Large technology companies (> $10B revenue) plus scaled non‑tech (> $30B revenue); targeted median positioning with higher equity at risk; peer list and updates (removed VMware, GE; added Broadcom, Elevance Health) .
- Ownership and governance: High ownership multiples; independent compensation consultant (Semler Brossy); robust board oversight .
Risk Indicators & Red Flags
- No excise tax gross‑ups; no change‑in‑control agreements; no option repricing; no hedging/pledging allowed — mitigates key governance risks .
- Clawbacks across incentive and equity programs; non‑compete/non‑solicit enforceability post‑employment .
- Related party transactions oversight policy; none flagged specific to Kavanaugh in proxy .
Expertise & Qualifications
- Finance and operations leadership across IBM global geographies; prior AT&T CFO (Americas Global Services) .
- Education: MBA (Ohio State), BS (University of Dayton) .
Investment Implications
- High alignment to long‑term performance: Majority of compensation at risk via PSUs/options with three‑year metrics tied to revenue, EPS, and FCF, plus ROIC relative modifier — positive signal for FCF discipline and margin expansion .
- Low forced selling/pledging risk: Prohibition on hedging/pledging and staggered vesting schedule reduces near‑term selling pressure; 2024 showed vesting but no option exercises .
- Retention risk moderate: Strong equity mix (75% at risk for NEOs; 2025), ownership guidelines, and non‑compete/non‑solicit provisions support retention; absence of change‑in‑control protections limits windfalls .
- Trading signals: Watch quarterly vesting dates (Feb 21) for routine RSU/option vesting; monitor PSU payout windows (Feb) and potential 10b5‑1 activity; AIP and PSU metrics indicate focus on sustained revenue growth and FCF — constructive for valuation if targets maintained .