William R. McDermott
ServiceNowAbout William R. McDermott
William R. “Bill” McDermott is Chairman of the Board (since October 2022) and Chief Executive Officer (since November 2019) of ServiceNow; he has served on the Board since 2019 and is 63 years old . He studied Business Management at Dowling College, earned an MBA from Northwestern University’s Kellogg School of Management, and completed Wharton’s Executive Development Program . Under his leadership, ServiceNow delivered FY2023 total revenue of $8.97B (+Y/Y growth), with 28% non-GAAP operating margin and $2.73B in free cash flow (30% margin) . TSR since he became CEO has significantly outperformed peers and the S&P 500, and the pay-versus-performance table shows the value of a $100 initial investment in NOW rising to $195 (2020), $230 (2021), $138 (2022), and $250 (2023) .
Past Roles
| Organization | Role | Years | Strategic impact |
|---|---|---|---|
| ServiceNow | Chairman of the Board | Oct 2022–Present | Combined Chair/CEO provides unified strategic vision with Lead Independent Director oversight |
| ServiceNow | Chief Executive Officer | Nov 2019–Present | Led scaling of growth and profitability; TSR outperformance vs peers and S&P 500 |
| ServiceNow | President | Nov 2019–Jan 2023 | Senior operating leadership during transition to CEO |
| SAP SE | Chief Executive Officer | May 2014–Oct 2019 | Executive-level leadership of multinational enterprise software provider |
| SAP SE | Co-Chief Executive Officer | 2010–2014 | Co-led executive board and global operations |
| SAP SE | Executive Board Member | 2010–Oct 2019 | Executive governance and strategy |
| SAP America | Chief Executive Officer | 2002–2010 | Led North America business |
| Siebel Systems | EVP, WW Sales & Operations | 2001–2002 | Global sales operations |
| Gartner | President | 2000–2001 | Senior leadership in tech research |
External Roles
| Organization | Role | Status/Years | Notes |
|---|---|---|---|
| Zoom Video Communications | Director | Current | Current public directorship |
| Fisker Inc. | Director | Past 5 years | Past public directorship |
| Under Armour, Inc. | Director | Past 5 years | Past public directorship |
| ANSYS, Inc. | Director | Past 5 years | Past public directorship |
| SecureWorks Corp. | Director | Past 5 years | Past public directorship |
Fixed Compensation
| Metric | 2023 | 2024 |
|---|---|---|
| Base Salary ($) | 1,350,000 | 1,350,000 |
| Target Bonus (% of Salary) | 200% | 200% |
| Target Bonus ($) | 2,700,000 | 2,700,000 |
| Target Equity Award Value ($) | 30,000,000 | 30,000,000 |
Performance Compensation
Annual Cash Incentive – Design and Outcomes (Year-specific)
| Metric | Weight | Target | Actual Achievement | Payout Funding |
|---|---|---|---|---|
| NNACV (2023) | 60% | $1,841M | 112.6% | 118.9% total payout |
| Non-GAAP Subscription Revenues (2023) | 20% | $8,500M | 131.5% | 118.9% total payout |
| Non-GAAP Operating Margin (2023) | 20% | 25%–27% | 125.3% | 118.9% total payout |
| NNACV (2024) | 70% | $2,146M | 99.0% | 99.3% total payout |
| Non-GAAP Operating Margin (2024) | 30% | 28%–30% | 100.0% | 99.3% total payout |
| CEO Annual Cash Incentive | 2023 | 2024 |
|---|---|---|
| Actual Payout ($) | 3,152,642 | 2,681,100 |
Long-Term Incentives – PRSUs and RSUs
2023 PRSUs (one-year performance + three-year rTSR modifier; time-vesting through Feb 17, 2026):
| Metric | Target Shares | Actual Eligible Shares (pre-rTSR) | Payout |
|---|---|---|---|
| PRSUs | 53,244 | 57,930 | 108.8% |
2024 PRSUs (transitional: 1/3 two-year, 2/3 three-year performance; rTSR modifier):
| Metric | Threshold | Target | Maximum | rTSR Modifier |
|---|---|---|---|---|
| Non-GAAP Subscription Revenues (2-year) | 98.8% → 50% | 100% → 100% | 102.8% → 200% | 80th pct → 120%; 55th → 100%; 40th → 80% |
| Non-GAAP Subscription Revenues (3-year) | 97.7% → 50% | 100% → 100% | 105.3% → 200% | Same as above |
2023 RSU Grants (quarterly vest over 4 years):
| Award | Shares | Vesting |
|---|---|---|
| RSUs | 13,311 | Quarterly over 4 years (first 6.25% on May 17, 2023) |
2024 RSU Grants (back-loaded: 3-year vest; 10% year 1; 45% years 2 & 3):
| Award | Target Value ($) | Shares | Vesting |
|---|---|---|---|
| RSUs | 12,000,000 | 15,586 | 10% year 1; 45% in each of years 2 & 3 |
2024 Grants of Plan-Based Awards (CEO):
| Grant Date | Award Type | Target/Max Shares | Grant Date Fair Value ($) |
|---|---|---|---|
| Feb 15, 2024 | PRSUs | 23,379 target; 46,758 max | 19,303,187 |
| Feb 15, 2024 | RSUs | 15,586 | 12,157,080 |
Equity Ownership & Alignment
| Item | Detail |
|---|---|
| Total beneficial ownership | 417,548 shares (<1% of SO) |
| Breakdown | 406,053 options exercisable within 60 days; 4,881 shares via trust; 6,614 shares direct |
| Options outstanding (selected) | 128,517 @ $266.31 exp. 11/18/2029; 208,152 exercisable and 346,925 unexercisable @ $697.76 exp. 10/29/2031 |
| Unvested/uneared equity (selected) | Multiple RSU/PRSU tranches outstanding; e.g., 20,276 RSUs (MV $21.49M) and 23,379 unearned PRSUs (MV $24.78M) as of 12/31/2024 |
| Stock ownership guidelines | CEO: 3x base salary; others 1x; compliance achieved by required parties |
| Hedging/pledging | Prohibited by policy; no margin purchases or pledging; hedging transactions banned |
Employment Terms
| Provision | Pre-2025 Employment Agreement | On/After Jan 1, 2025 Severance Policy |
|---|---|---|
| Term | Initial 5-year term from Oct 21, 2019; auto-renews for 1-year terms thereafter | Severance governed by company policy |
| Non-CIC termination (CEO) | 12 months base; Actual Bonus; 12 months COBRA; 15 months vest acceleration for RSUs; additional acceleration for equity that would vest in 15 months (excluding 2021 PSO); performance condition roll-forward on New-Hire Option if achieved within two years | 12 months base; Actual Bonus; 12 months COBRA; 15 months acceleration for RSUs; PRSUs pro-rated for service and additional 15-month vesting based on actual performance |
| CIC termination (double trigger window: 3 months before to 12 months after) | 24 months base; 100% Target Bonus; 18 months COBRA; full acceleration of New-Hire RSU and New-Hire Option (subject to performance condition); acceleration of PRSUs to date based on metric achievement and rTSR; excludes 2021 PSO and future PRSUs unless otherwise specified | 24 months base plus 200% Target Bonus; 24 months COBRA; full acceleration of unvested RSUs and PRSUs based on actual performance |
| Change-in-control treatment (awards not assumed) | New-Hire RSU and New-Hire Option accelerate in full immediately prior to CIC (subject to performance condition); other unvested equity per award agreements | As above, under Severance Policy; PRSUs accelerated based on actual performance |
| Clawback | SEC/NYSE-compliant clawback (Oct 2, 2023) plus misconduct-based recoupment; SOX 304 applies to CEO/CFO | |
| Tax gross-ups | No Section 280G gross-ups provided |
Board Governance
| Item | Detail |
|---|---|
| Roles | Combined Chairman & CEO; Board reviews leadership structure at least annually |
| Committees | CEO/Chair has no committee assignments; all Board committees composed entirely of independent directors |
| Lead Independent Director | Susan L. Bostrom (since May 2024); responsibilities include presiding over executive sessions, agenda approval, CEO evaluation, succession, and shareholder outreach |
| Executive sessions | Regularly scheduled sessions of non-employee directors; LID presides |
| Meetings & attendance (2024) | 8 Board meetings; Audit 5; Compensation 7; Governance 4; each director attended ≥75% of meetings on which they served |
| Committee chairs (2025) | Audit: Teresa Briggs; Compensation: Susan L. Bostrom; Governance: Anita M. Sands |
| Director compensation | Non-employee director cash retainers and RSUs; CEO does not receive separate director compensation |
Compensation Structure Analysis
- Year-over-year CEO target compensation kept flat for 2024 versus 2023 (base, bonus target, equity), reflecting shareholder feedback; program shifts emphasized increased PRSU performance period and elimination of metric overlap between annual bonus and PRSUs .
- 2024 annual cash incentive metrics tightened to NNACV (70%) and non-GAAP operating margin (30%), with an 85% NNACV hurdle; payout at 99.3% indicates performance near target and disciplined margin execution .
- 2024 LTIP increased PRSU proportion (60%) and lengthened performance measurement (two- and three-year periods) with rTSR modifier, enhancing long-term alignment; RSU vesting back-loaded increases retention but can create back-half vesting-driven selling cadence .
- No hedging/pledging permitted; clawback in place; no 280G tax gross-ups—shareholder-friendly governance features .
Performance & Track Record
| Metric | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|
| Value of $100 investment – NOW TSR ($) | 195 | 230 | 138 | 250 |
| Summary Comp Table – CEO Total ($) | 25,124,056 | 165,802,037 | 38,502,528 | 37,606,244 |
| Net Income ($MM) | 119 | 230 | 325 | 1,731 |
| Non-GAAP Subscription Revenues ($MM) | 4,280 | 5,627 | 7,056 | 8,634 |
Additional company outcomes (FY2023): total revenue $8.97B; non-GAAP operating margin 28%; free cash flow $2.73B; FCF margin 30% .
Director Compensation (for context; CEO receives none)
| Cash Retainers (2024) | Amount ($) |
|---|---|
| Board Annual Retainer | 40,000 |
| Lead Independent Director Retainer | 50,000 |
| Audit Chair / Member | 40,000 / 15,000 |
| Compensation Chair / Member | 25,000 / 15,000 |
| Governance Chair / Member | 20,000 / 10,000 |
| Annual Director RSU (grant-date fair value) | 325,000; 1-year vest; accelerates on CIC |
Equity Ownership & Insider Selling Pressure Indicators
- Back-loaded RSUs (45% vesting in each of years 2 and 3) and multi-year PRSUs can cluster vesting events, potentially increasing liquidity events in mid/late vesting windows; CEO had multiple tranches outstanding as of 12/31/2024 with significant market value .
- Options outstanding include in-the-money tranches (e.g., $266.31 exercise price) that are fully vested before 2029 expiry, which can create opportunistic exercise timing; the higher-strike 2031 options include unexercisable tranches, governing future exercise cadence .
- Hedging/pledging prohibitions reduce forced selling risk from collateral calls; stock ownership guidelines reinforce alignment .
Employment & Change-in-Control Economics
- Automatic one-year renewals following the initial five-year term provide continuity with flexible exit mechanics .
- CIC double trigger updated in 2025 to increase bonus multiple (200% of target vs. 100% pre-2025) and to require actual performance for PRSU acceleration—tightens alignment while increasing certainty of severance value .
- Non-CIC severance shifts to actual performance-based PRSU treatment and standardized RSU acceleration—reducing windfalls while maintaining retention economics .
Board Service History and Dual-Role Implications
- McDermott: Director since 2019; Chairman since October 2022; not a member of Board committees .
- Board mitigations for combined Chair/CEO: empowered Lead Independent Director (Susan L. Bostrom), independent committees, regular executive sessions, majority voting standard, proxy access, and robust shareholder engagement .
- Attendance and committee activity support effective oversight (8 Board meetings; Audit 5; Compensation 7; Governance 4; ≥75% attendance for all directors) .
Investment Implications
- Alignment: The 2024 LTIP redesign (longer PRSU performance period; rTSR modifier; removal of metric overlap) and strict clawback/hedging policies point to improved pay-for-performance alignment and reduced governance risk .
- Retention risk: Back-loaded RSU vesting and multi-year PRSUs increase retention stickiness, but concentrated vest dates may create episodic selling pressure; monitor vesting calendars and 10b5-1 plans around major vest cliffs .
- CIC/Severance: 2025 policy increases CIC cash payout and codifies performance-based equity acceleration—raises potential change-in-control costs but conditions equity on actual performance, balancing shareholder protection .
- Performance momentum: TSR outperformance, strong subscription revenue growth, durable renewal rates, and margin discipline underpin confidence in execution under McDermott; ongoing monitoring of NNACV and margin targets is key for near-term variable pay signals .