UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.   )

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

☐

Preliminary Proxy Statement

​

☐

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

​

☒

Definitive Proxy Statement

​

☐

Definitive Additional Materials

​

☐

Soliciting Material under §240.14a-12

​

(Name of Registrant as Specified In Its Charter)

   

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

☒

No fee required

​

☐

Fee paid previously with preliminary materials

​

☐

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

​

Dear Cisco Stockholders:

On behalf of the Board of Directors, I would like to thank you for your investment and trust in Cisco as we work to successfully execute on our strategy, make progress on our transformation, and drive long-term value creation.

Fiscal 2023 was a phenomenal year for Cisco, and I’m incredibly proud of the contributions of our teams. We saw revenue growth of 11% year over year, the highest growth rate we have delivered in over a decade. For the full fiscal year, we also had record revenue, earnings per share, and operating cash flow. In response to feedback from investors, we committed to expanding operating leverage as well as increasing stockholder returns over the long-term through maintaining the current rate of share repurchases and growing our cash dividend. I invite you to read more about our record financial performance in our 2023 Annual Report.

We remain committed to engaging with our stockholders to gain valuable input on our strategy, compensation, sustainability, and governance practices. In fiscal 2023, the Investor Relations team and I engaged with stockholders representing approximately 40% of Cisco’s shares outstanding. Based on our stockholders’ feedback, we have enhanced our disclosures on executive compensation tied to ESG and ARR in addition to providing more enriched content in our proxy statement.
 

At Cisco, guided by our Purpose to Power an Inclusive Future for All, we have continued to innovate to help deliver on our customers’ desired outcomes and to help solve some of the most pressing issues faced by people, society, and the planet. I am particularly proud of the strides we have made in developing the Cisco Silicon One family of chips. These chips are designed to deliver greater networking performance, support artificial intelligence (AI) use cases, and help deliver significant power savings while helping our customers on their own journey to reduce greenhouse gas emissions. Please visit our ESG Reporting Hub at  https://www.cisco.com/c/m/en_us/about/csr/esg-hub.html to learn more about this and our other sustainability initiatives.

Cisco’s Board of Directors recognizes that being a sustainable business is essential for success and in fiscal 2023 our Board formed a new Environmental, Social, and Public Policy Committee. This committee has oversight of Cisco’s initiatives, policies, programs, and strategies tied to environmental sustainability and other key corporate social responsibility and public policy matters.

It is a tremendous honor to lead this company and to serve as Chair of the Board. I look forward to your participation in our 2023 Annual Meeting of Stockholders and I encourage you to vote your shares by proxy and submit your questions ahead of this meeting.

Sincerely,

Charles H. Robbins
Chair and Chief Executive Officer

October 12, 2023

You are cordially invited to participate in the Annual Meeting of Stockholders of Cisco Systems, Inc.,
which will be held online on Wednesday, December 6, 2023 at 8:00 a.m. Pacific Time.

Details of the business to be conducted at the annual meeting are given in the Notice of Annual Meeting of Stockholders and the
Proxy Statement. You will find a Proxy Summary starting on the first page of the Proxy Statement.

Items of Business

■

To elect to Cisco’s Board of Directors the following nine nominees presented by the Board: Wesley G. Bush, Michael D. Capellas, Mark Garrett, John D. Harris II, Dr. Kristina M. Johnson, Sarah Rae Murphy, Charles H. Robbins, Daniel H. Schulman, and Marianna Tessel

​

■

To approve the amendment and restatement of the Cisco Systems, Inc. 2005 Stock Incentive Plan (“2005 Stock Incentive Plan”)

​

■

To vote on a non-binding advisory resolution to approve executive compensation

​

■

To vote on a non-binding advisory proposal on the frequency of holding future votes regarding executive compensation

​

■

To ratify the appointment of PricewaterhouseCoopers LLP as Cisco’s independent registered public accounting firm for the fiscal year ending July 27, 2024

​

■

To vote upon a proposal submitted by stockholders, if properly presented at the annual meeting

​

■

To act upon such other matters as may properly come before the annual meeting or any adjournments or postponements

​

Virtual Annual Meeting

■

We are pleased to provide stockholders with the opportunity to participate in the annual meeting online to facilitate stockholder attendance and to provide a consistent experience to all stockholders regardless of location.

​

■

To participate in the virtual only annual meeting, including to vote, submit questions, and view the list of registered stockholders as of the record date during the meeting, stockholders should go to the meeting website at www.virtualshareholdermeeting.com/CSCO2023, enter the 16-digit control number found on your proxy card, voting instruction form, or Notice Regarding the Availability of Proxy Materials, and follow the instructions on the website.

​

■

If your voting instruction form or Notice Regarding the Availability of Proxy Materials does not indicate that you may vote those shares through the www.virtualshareholdermeeting.com/CSCO2023 website and it does not include a 16-digit control number, you should contact your bank, broker, or other nominee to obtain a “legal proxy” in order to be able to attend, participate in, and vote at the annual meeting.

​

■

The proponent of the stockholder proposal included in this Proxy Statement will be able to call in live through a dedicated line to ensure their ability to present their proposal.

​

■

Additional information regarding the virtual annual meeting can be found in the “Other Important Information About the Meeting” section on page 89.

​

Proxy Voting

Whether or not you participate in the annual meeting, it is important that your shares be part of the voting process. Please refer to the section entitled “Other Important Information About the Meeting” on page 89 of the Proxy Statement for a detailed description of how to vote in advance of the meeting.

Mailing Address of Corporate Headquarters

170 West Tasman Drive, San Jose, California 95134

By Order of the Board of Directors

Evan Sloves,
Secretary

October 12, 2023

​

​

​

​

​

​

​

​

​

​

​

​

   

   

   

​	Proxy Summary	​	​	​	​	1	​	​
​	Governance and Board Matters	​	​	​	​	5	​	​
​	Corporate Governance	​	​	​	​	5	​	​
​	Policies, Guidelines, and Practices	​	​	​	​	5	​	​
​	Our Purpose to Power an Inclusive Future for All	​	​	​	​	6	​	​
​	Public Policy Engagements	​	​	​	​	6	​	​
​	Stockholder Engagement	​	​	​	​	6	​	​
​	Board of Directors	​	​	​	​	7	​	​
​	Board Leadership Structure	​	​	​	​	7	​	​
​	Board Committees and Meetings	​	​	​	​	8	​	​
​	Board’s Role in Strategy	​	​	​	​	12	​	​
​	Board’s Role in Risk Oversight	​	​	​	​	12	​	​
​	Director Nominee Qualifications, Skills and Attributes	​	​	​	​	13	​	​
​	Board Performance Evaluation Process	​	​	​	​	13	​	​
​	Board Refreshment	​	​	​	​	14	​	​
​	Stockholder Communications with the Board	​	​	​	​	15	​	​
​	Proposal No. 1 – Election of Directors	​	​	​	​	16	​	​
​	Business Experience and Qualifications of Nominees	​	​	​	​	16	​	​
​	Board Composition	​	​	​	​	21	​	​
​	Independent Directors	​	​	​	​	22	​	​
​	Director Compensation	​	​	​	​	23	​	​
​	Compensation Committee Matters	​	​	​	​	27	​	​
​	Proposal No. 2 – Approval of the Amendment and Restatement of the 2005 Stock Incentive Plan	​	​	​	​	27	​	​
​	Proposal No. 3 – Advisory Vote to Approve Executive Compensation	​	​	​	​	37	​	​
​	Proposal No. 4 – Advisory Vote on the Frequency of Holding Future Votes Regarding Executive Compensation	​	​	​	​	39	​	​

​	Executive Compensation	​	​	​	​	40	​	​
​	Compensation Discussion and Analysis	​	​	​	​	40	​	​
​	Compensation Committee Report	​	​	​	​	61	​	​
​	Fiscal 2023 Compensation Tables	​	​	​	​	62	​	​
​	Summary Compensation Table	​	​	​	​	62	​	​
​	Grants of Plan-Based Awards –  Fiscal 2023	​	​	​	​	66	​	​
​	Outstanding Equity Awards at Fiscal 2023 Year-End	​	​	​	​	68	​	​
​	Option Exercises and Stock Vested –  Fiscal 2023	​	​	​	​	70	​	​
​	Nonqualified Deferred Compensation –  Fiscal 2023​	​	​	​	​	71	​	​
​	Potential Payments upon Termination or Change in Control	​	​	​	​	73	​	​
​	Potential Payments – Accelerated Equity Awards	​	​	​	​	73	​	​
​	CEO Pay Ratio	​	​	​	​	74	​	​
​	Pay Versus Performance	​	​	​	​	75	​	​
​	Ownership of Securities	​	​	​	​	80	​	​
​	Audit Committee Matters	​	​	​	​	82	​	​
​	Proposal No. 5 – Ratification of Independent Registered Public Accounting Firm	​	​	​	​	82	​	​
​	Audit Committee Report	​	​	​	​	84	​	​
​	Certain Relationships and Transactions with Related Persons	​	​	​	​	85	​	​
​	Stockholder Proposal	​	​	​	​	86	​	​
​	Proposal No. 6 – Stockholder Proposal	​	​	​	​	86	​	​
​	Other Important Information About the Meeting	​	​	​	​	89	​	​

 

​

​

​

​

​

​

​

​

​

​

​

​

These proxy materials are provided in connection with the solicitation of proxies by the Board of Directors of Cisco Systems, Inc., a Delaware corporation, for the Annual Meeting of Stockholders to be held on December 6, 2023, and at any adjournments or postponements of such meeting. These proxy materials were first sent on or about October 17, 2023 to stockholders entitled to vote at the annual meeting.

This summary highlights selected information about the items to be voted on at the annual meeting and information contained elsewhere in this Proxy Statement. This summary does not contain all the information that you should consider in deciding how to vote, and you should read the entire Proxy Statement carefully before voting. For more complete information about these topics, please review our Annual Report on Form 10-K and the entire Proxy Statement. The information contained on cisco.com or any other website referred to is provided for reference only and is not incorporated by reference into this Proxy Statement.

Participating in the Annual Meeting

 

​

​

​

​

​

​

​

​

​

​

​

​

Annual Meeting Proposals

Business Overview

Cisco designs and sells a broad range of technologies that power the Internet. We are integrating our product portfolios across networking, security, collaboration, applications and the cloud to create highly secure, intelligent platforms for our customers’ digital businesses. These platforms are designed to help our customers manage more users, devices and things connecting to their networks. This will enable us to provide customers with a highly secure, intelligent platform for their digital business.

As our customers add billions of new connections to their enterprises, and as more applications move to a multicloud environment, the network becomes even more critical. Our customers are navigating change at an unprecedented pace. In this dynamic environment, we believe their priorities are to transform infrastructure, secure the enterprise, power hybrid work, reimagine applications, and drive toward sustainability.

Governance and Board Highlights

Cisco’s Board is composed of skilled and diverse directors. The Board has established robust corporate governance practices and policies. In particular, the Board believes strongly in the value of an independent board of directors. Cisco has established a Lead Independent Director role with broad authority and responsibility, which is currently held by Mr. Capellas. See the “Governance and Board Matters” section in this Proxy Statement for more information, including:

■

Our corporate governance policies, guidelines, and practices and where you can find key information regarding our corporate governance initiatives;

​

■

Our balanced Board leadership structure and qualifications, including a robust Lead Independent Director role;

​

■

Our environmental, social, and governance (“ESG”) initiatives related to Cisco’s Purpose to Power an Inclusive Future for All; and

​

■

Our fiscal 2023 stockholder engagement program where we engaged with stockholders representing approximately 40% of outstanding shares, including 79% of our top 30 stockholders.

​

 

Board of Directors Highlights

 

​

​

​

​

​

​

​

​

​

​

​

​

Executive Compensation Highlights

Consistent with our business model transformation to meet the evolving needs of our customers and increasing the amount of subscription offerings that we provide, we incorporated a product annual recurring revenue (“ARR”) performance metric into our fiscal 2023 executive compensation program to better align our program with our transforming business model. Additionally, our pay-for-performance philosophy underscores our commitment to sound compensation and governance practices. For fiscal 2023, we continued to incorporate a team performance factor into our variable cash incentive plan, the Executive Incentive Plan (“EIP”), which was scored based on the executive leadership team’s joint execution with respect to our overall ESG strategy, including specific goals on environmental and social matters.

 

​

​

​

​

​

​

​

​

​

​

​

​

Corporate Governance

Policies, Guidelines, and Practices

Cisco is committed to stockholder-friendly corporate governance. The Board has adopted clear corporate policies that promote excellence in corporate governance. We have adopted policies, guidelines, and practices that are consistent with our commitment to transparency and best-in-class practices, as well as to ensure compliance with the rules and regulations of the Securities and Exchange Commission (“SEC”), the listing requirements of The Nasdaq Stock Market LLC (“Nasdaq”), and applicable corporate governance requirements. Key information regarding our corporate governance initiatives can be found in the Governance section of our Investor Relations website at investor.cisco.com which also includes our corporate governance guidelines, our Code of Business Conduct (“COBC”), and the charter for each Board committee.

 

​

​

​

​

​

​

​

​

​

​

​

​

Our Purpose to Power an Inclusive Future for All

For decades, Cisco has been evolving and expanding the way it positively impacts people and the planet, and we are driven by our Purpose to Power an Inclusive Future for All. Cisco believes that technology, when thoughtfully and strategically applied, can help address inequities; bring positive, lasting change to people’s lives and communities; and benefit the planet. To help fulfill our Purpose, Cisco leverages its technology and catalyzes its networks, partners, and people to make a positive impact in communities worldwide and for the planet. We know we can achieve so much more when we work in partnership with those aligned with our values and purpose.

Our Purpose reporting describes our commitments, goals, progress, and impact for ESG topics that are significant to Cisco and our stakeholders. Today, our commitment to our Purpose starts at the top with our Board and senior leadership and it is embedded throughout the organization. Our Purpose governance structure is designed this way to help ensure we prioritize the right issues as a company, and that we stay on track with our commitments.

Our People, Policy, and Purpose organization leads our social investment programs and champions our commitment to ESG performance and transparency. Within this organization, there is a core reporting team which engages with stakeholders, leads ESG assessments, and stewards reporting activities. Our reporting is aligned with standards set by the Global Reporting Initiative, Sustainability Accounting Standards Board, the Task Force on Climate-related Financial Disclosures, and the UN Sustainable Development Goals.

The Environmental, Social, and Public Policy Committee of the Board oversees Cisco’s initiatives, policies, programs, and strategies concerning environmental sustainability and other key corporate social responsibility and public policy matters. The Compensation Committee of the Board oversees the development and implementation of Cisco’s practices, strategies, and policies used for recruiting, managing, and developing employees (i.e., human capital management). These practices, strategies, and policies focus on diversity and inclusion, workplace environment and safety, and corporate culture. In addition, the full Board receives updates on Cisco’s overall Purpose strategy, including ESG matters, from management.

Each year, we report progress toward Cisco’s enterprise goals in our annual Cisco Purpose Report. Cisco set its first greenhouse gas (“GHG”) emissions reduction goal in 2006, and since then, we have continued to set other goals to engage employees, reduce environmental impacts in our supply chain, and benefit communities. For more information relating to Cisco’s Purpose and to review our progress on our goals, see our ESG Reporting Hub at https://csr.cisco.com. The latest Purpose Report is available on our Investor Relations website at investor.cisco.com. Our website, ESG Reporting Hub and related supplemental information are not incorporated by reference into this Proxy Statement.

Public Policy Engagements

Information about our public policy engagement approach, including our policy priorities, our limitations relating to public policy-related activities, and the manner in which we disclose our public policy efforts (including annual payments to trade associations and political action committee contributions), is disclosed on our public website at https://www.cisco.com/c/en/us/about/government-affairs.html. In part as a result of proactive engagement with our stockholders, we regularly review and update this web page.

Stockholder Engagement

At Cisco, we recognize the importance of regular and transparent communication with our stockholders. Each year, we continually engage with a significant portion of stockholders that include our top institutional investors. In fiscal 2023, Cisco engaged in outreach with investors representing approximately 59% of shares outstanding at the end of the fiscal year, and of those investors, our Chair and Chief Executive Officer (“CEO”), the chair of our Compensation Committee, Secretary, and Investor Relations team held meetings, conference calls and/or corresponded with investors representing approximately 40% of our outstanding shares at the end of the fiscal year, including 79% of our 30 largest stockholders. We engaged with these stockholders on a variety of topics, including our business and long-term strategy, corporate governance and risk management practices, board leadership and refreshment, diversity, corporate responsibility initiatives (including ESG matters), our executive compensation program, and other matters of stockholder interest.

 

​

​

​

​

​

​

​

​

​

​

​

​

Board of Directors

Our Board is committed to strong corporate governance structures and practices that help Cisco build long-term stockholder value. Our Board believes strongly in the value of an independent board of directors and has established a Lead Independent Director role with broad authority and responsibility, as described further below. Additionally, our Board is composed of skilled and diverse directors.

Board Leadership Structure

Board Independence

Our Board believes strongly in the value of an independent board of directors. Other than Mr. Robbins, our CEO, all members of our Board are independent. Independent board members have consistently comprised over 75% of the members of our Board. Additionally, all members of our Board committees, including the Audit Committee, the Compensation Committee and the Nomination and Governance Committee, are independent. The independent members of the Board also meet regularly during executive sessions of the Board without management present, and the Lead Independent Director chairs those sessions. Mr. Capellas currently serves as Lead Independent Director, and Mr. Robbins currently serves as Board Chair and CEO.

Board Chair

The Board believes it should maintain flexibility to determine the Board leadership structure from time to time. Our policies do not preclude our CEO from also serving as Board Chair. For instance, Mr. Robbins, our CEO, currently serves as Board Chair. The Board believes our current leadership structure, which includes a strong Lead Independent Director, provides appropriate balance and currently is in the best interest of Cisco and our stockholders. The broad authority and oversight given to the Lead Independent Director role, as described in detail below, helps ensure a strong independent and active Board. Additionally, Mr. Robbins’ demonstrated leadership during his tenure at Cisco, and his ability to speak as both Board Chair and CEO, provides a strong unified leadership for Cisco.

Lead Independent Director

The Lead Independent Director is elected by and from the independent directors. Each term of service for the Lead Independent Director position is one year, and the Lead Independent Director has the following responsibilities:

■

Authority to call meetings of the independent directors

​

■

Presides at all meetings of the Board at which the Board Chair is not present, including executive sessions of the independent directors (during which Cisco’s strategy is reviewed and other topics are discussed)

​

■

Serves as principal liaison between the independent directors and the Chair and CEO

​

■

Communicates from time to time with the Chair and CEO and disseminates information to the rest of the Board as appropriate

​

■

Provides leadership to the Board if circumstances arise in which the role of the Board Chair may be, or may be perceived to be, in conflict

​

■

Reviews and approves agendas, meeting schedules to assure that there is sufficient time for discussion of all agenda items, and information provided to the Board (including the quality, quantity, and timeliness of such information)

​

■

Being available, as appropriate, for consultation and direct communication with major stockholders and other stakeholders

​

■

Presides over the annual performance evaluation of the Board, including the performance evaluation of each Board committee and individual Board members

​

■

Facilitates the Board’s performance evaluation of the CEO in conjunction with the Compensation Committee

​

In connection with Mr. Capellas’ appointment as Lead Independent Director, the Board considered his demonstrated leadership during his tenure as a member of the Board, and also his leadership during his tenure as chair of the Nomination and Governance Committee, the Acquisition Committee, and the Finance Committee and believes his ability to act as a strong Lead Independent Director provides balance in Cisco’s leadership structure and is in the best interest of Cisco and its stockholders.

 

​

​

​

​

​

​

​

​

​

​

​

​

Board Committees and Meetings

Cisco has five standing committees: the Audit Committee, the Compensation Committee, the Nomination and Governance Committee, the Acquisition Committee, and the Environmental, Social, and Public Policy Committee. Each of these committees has a written charter approved by the Board. A copy of each charter can be found on the “Committees” web page, which is located in the Corporate Governance section of our Investor Relations website at investor.cisco.com.

During fiscal 2023, the Board held 5 meetings. During this period, all of the incumbent directors attended at least 75% of the aggregate of the total number of meetings of the Board and the committees of the Board on which each such director served, during the period for which such director served. Cisco’s directors are strongly encouraged to attend the annual meeting. All of Cisco’s directors who were then serving on the Board attended last year’s annual meeting.

Responsibilities and Duties Include:

■

Directly responsible for the appointment, determination of the compensation for, retention, and oversight of the performance of the independent registered public accounting firm

​

■

Reviews the financial information which will be provided to stockholders and others, including the quarterly and year-end financial results

​

■

Reviews the system of internal controls which management and the Board have established

​

■

Reviews the financial and risk management policies (including cybersecurity and data protection, insurance, currency, interest rate and equity risk management policies and programs)

​

■

Reviews policies and programs for addressing cybersecurity and data protection

​

■

Oversees accounting and financial reporting processes and the audits of Cisco’s financial statements

​

■

Pre-approves audit and permissible non-audit services provided by the independent registered public accounting firm

​

■

Reviews the hiring policies for any employees or former employees of the independent registered public accounting firm

​

■

Oversees and reviews related party transactions

​

■

Establishes procedures for the receipt, retention, and treatment of complaints received by Cisco regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters

​

■

Reviews annually the responsibilities and activities for the prior and upcoming fiscal year of each of our internal audit and compliance functions

​

■

Meets separately in periodic executive sessions with each of management, the head of our internal audit function, and the independent registered public accounting firm

​

■

Reviews and approves the global investment policy

​

■

Reviews Cisco’s capital structure and capital allocation strategy, including dividends and the stock repurchase program

​

■

Reports to the Board on a regular basis on the major events covered by the Audit Committee and makes recommendations to the Board and management concerning these matters

​

Composition of the Committee

■

Each member of this committee has been determined by the Board to be an “audit committee financial expert” as defined in Item 407(d) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)

​

■

Each member of this committee is an independent director and meets each of the other requirements for audit committee members under applicable Nasdaq listing standards

​

 

​

​

​

​

​

​

​

​

​

​

​

​

Responsibilities and Duties Include:

■

Reviews, annually, and approves corporate goals and objectives relevant to executive compensation and evaluate performance in light of those goals

​

■

Reviews and approves our compensation to executive officers

​

■

Approves any perquisites, cash payments and other compensation and benefit arrangements to executive officers

​

■

Review matters related to management performance, compensation and succession planning, including review and approval of CEO succession planning

​

■

Reviews and oversees the development and implementation of our practices, strategies, and policies used for recruiting, managing, and developing employees (i.e., human capital management)

​

■

Review annually and approve our compensation strategy to help ensure that it promotes stockholder interests and supports our strategic and tactical objectives and that it provides appropriate rewards and incentives for management and employees, including review of compensation-related risk management

​

Composition of the Committee

■

Each member of this committee is an independent director under applicable Nasdaq listing standards, including the additional independence requirements specific to compensation committee membership

​

■

Each member of this committee is a “non-employee director” as defined in Rule 16b-3 under the Exchange Act

​

Executive Compensation

For fiscal 2023, the Compensation Committee performed the above oversight responsibilities and duties by, among other things, conducting an evaluation of the design of our executive compensation program, in light of our risk management policies and programs. For additional information regarding the Compensation Committee’s risk management review, see the “Executive Compensation Governance Components” section of the Compensation Discussion and Analysis (“CD&A”).

The Compensation Committee has the exclusive authority and responsibility to determine all aspects of executive compensation packages for executive officers. During fiscal 2023, the Compensation Committee retained Exequity LLP (“Exequity”) as its independent compensation consultant to help the Compensation Committee establish and implement its compensation philosophy, to evaluate compensation proposals recommended by management, and to provide advice and recommendations on competitive market practices and specific compensation decisions for executive officers. The Compensation Committee retains and does not delegate any of its exclusive power to determine all matters of executive compensation and benefits, although the CEO and the People and Communities organization present compensation and benefit proposals to the Compensation Committee. Exequity worked directly with the Compensation Committee (and not on behalf of management) to assist the Compensation Committee in satisfying its responsibilities and did not undertake projects for management except at the request of the Compensation Committee chair and in the capacity of the Compensation Committee’s agent. During fiscal 2023, Exequity performed no other consulting or other services for Cisco management and did not undertake any projects for management. For additional description of the Compensation Committee’s processes and procedures for consideration and determination of executive officer compensation, see the “Compensation Committee Matters – Executive Compensation – CD&A” section in this Proxy Statement.

 

​

​

​

​

​

​

​

​

​

​

​

​

Compensation Committee Interlocks and Insider Participation

The members of the Compensation Committee during fiscal 2023 were: Roderick C. McGeary (Chair), Wesley G. Bush and Dr. Kristina M. Johnson for all of fiscal 2023; John D. Harris II beginning December 2022; and Brenton L. Saunders until February 2023. No member of the Compensation Committee was, at any time during fiscal 2023 or at any other time, an officer or employee of Cisco, and no member of this committee had any relationship with Cisco requiring disclosure under Item 404 of Regulation S-K under the Exchange Act. No executive officer of Cisco has served on the board of directors or compensation committee of any other entity that has or has had one or more executive officers who served as a member of the Compensation Committee during fiscal 2023.

Responsibilities and Duties Include:

■

Oversees, reviews, and makes periodic recommendations concerning our corporate governance policies

​

■

Reviews and assesses director independence

​

■

Makes recommendations regarding the size, structure and composition of the Board and its committees

​

■

Oversees the annual Board performance evaluation process

​

■

Recommends candidates for election to the Board

​

■

Reviews and recommends compensation for non-employee members of the Board

​

Composition of the Committee

■

Each member of this committee is an independent director under applicable Nasdaq listing standards

​

Director Compensation

Cisco’s director compensation program is designed to attract and retain highly qualified non-employee directors and to address the time, effort, expertise, and accountability required of active board membership. In connection with reviewing and recommending compensation for non-employee directors, the Nomination and Governance Committee retained Exequity as its independent compensation consultant during fiscal 2023. The Nomination and Governance Committee makes recommendations to the Board regarding compensation for non-employee directors using a process similar to the one used by the Compensation Committee for determining compensation for Cisco’s executive officers. Generally, the Nomination and Governance Committee annually reviews the market practice for non-employee director compensation for companies in Cisco’s Peer Group (as defined in the CD&A) in consultation with its independent compensation consultant and assesses whether the total compensation of our non-employee directors and each element of our non-employee director compensation program continues to be competitive with the market for qualified directors, incorporates best practices and aligns the interests of our non-employee directors with the long-term interests of our stockholders.

Director Nominations

Stockholders may recommend a director nominee to Cisco’s Nomination and Governance Committee. In recommending candidates for election to the Board, the Nomination and Governance Committee considers nominees recommended by directors, officers, employees, stockholders and others, using the same criteria to evaluate all candidates. The Nomination and Governance Committee reviews each candidate’s qualifications, including whether a candidate possesses any of the specific qualities and skills desirable in certain members of the Board. Evaluations of candidates generally involve a review of background materials, internal discussions, and interviews with selected candidates as appropriate. The Nomination and Governance Committee may engage consultants or third-party search firms to assist in identifying and evaluating potential nominees. Upon selection of a qualified candidate, the Nomination and Governance Committee recommends the candidate for consideration by the full Board.

 

​

​

​

​

​

​

​

​

​

​

​

​

For more detailed information on how to recommend a prospective nominee for the Nomination and Governance Committee’s consideration or to submit a nominee for inclusion in Cisco’s proxy materials pursuant to the proxy access provisions of Cisco’s bylaws, see the “Other Important Information About the Meeting – Stockholder Proposals and Nominations for 2024 Annual Meeting of Stockholders” section.

Responsibilities and Duties Include:

■

Reviews acquisition strategies with management and investigates acquisition candidates

​

■

Recommends acquisition strategies and candidates to the Board

​

■

Reviews and approves certain acquisitions and investment transactions and makes recommendations to the Board

​

Responsibilities and Duties Include:

■

Reviews and discusses with management, and brings to the attention of the Board, the initiatives, policies, programs, and strategies, including related goals and commitments, relating to environmental sustainability and other CSR and public policy matters

​

■

Reviews and discusses with management and brings to the attention of the Board, as appropriate, the legislative, regulatory, and public policy developments and trends that could affect our business activities, performance, and reputation

​

■

Reviews, as necessary or appropriate, the non-financial public reporting with respect to environmental sustainability and other corporate social responsibility (“CSR”) and public policy matters, including the annual Purpose Report

​

■

Reviews the outcomes of the Cisco Foundation and Cisco’s charitable giving, and reviews the policies and guidelines for Cisco’s charitable programs

​

 

​

​

​

​

​

​

​

​

​

​

​

​

Board’s Role in Strategy

One of the Board’s key responsibilities is overseeing management’s formulation and execution of Cisco’s strategy. Throughout the year, our CEO, the executive leadership team, and other leaders from across the organization provide detailed business and strategy updates to the Board. During these reviews, the Board engages with the executive leadership team and other business leaders regarding various topics, including business strategy and initiatives, capital allocation, portfolio updates, the competitive landscape, talent and culture (including inclusion and diversity), other matters affecting our long-term strategy (including our environmental impact and human rights implications of Cisco product development and sales), and regulatory developments. Additionally, on an annual basis, the Board reviews and approves Cisco’s financial plan. The Lead Independent Director chairs regularly scheduled executive sessions of the independent directors, without Cisco management present, during which Cisco’s business strategy is reviewed and other topics are discussed.

Board’s Role in Risk Oversight

We believe that risk is inherent in innovation and the pursuit of long-term growth opportunities. Our management is responsible for day-to-day risk management activities. The Board, acting directly and through its committees, is responsible for the oversight of our risk management. With the oversight of the Board, our management team has implemented practices, processes and programs designed to help manage the risks to which we are exposed in our business and to align risk-taking appropriately with our efforts to increase stockholder value.

Our management team has implemented an enterprise risk management (“ERM”) program designed to work across the organization to identify, evaluate, govern and manage risks, as well as our response to those risks. This risk assessment process considers the time horizons of identified risks, such that the management of significant risks can be prioritized, in part, based on the timeframe of such risks. Our internal audit function manages the enterprise ERM program and performs an annual risk assessment which is utilized by the ERM program, which is informed by industry trends, benchmarking and third-party professionals. The structure of the ERM program includes both an ERM operating committee that focuses on risk management-related topics, and an ERM executive committee consisting of members of management, including our Chief Legal Officer who is also our Chief Compliance Officer and reports directly to the CEO. The ERM operating committee conducts global risk reviews and provides regular updates to the ERM executive committee.

The Audit Committee, which oversees our financial and risk management policies, including risk management policies and programs related to cybersecurity and data protection, currency, interest rate, equity, and insurance risk, receives regular reports on ERM from the chair of the ERM operating committee. Additionally, the Audit Committee receives regular reports on cybersecurity from senior management on a quarterly basis and receives a detailed presentation from our Chief Security and Trust Officer two or more times per year. As part of its responsibilities and duties, the Audit Committee reviews our policies and programs for addressing data protection, including both privacy and security, including with respect to (a) our products and services, (b) the servers, data centers and cloud-based solutions on which Cisco’s and third-party data is stored or processed (including servers, data centers and cloud-based solutions operated by third parties on which we rely), and (c) the cloud-based services provided to, by or enabled by Cisco. The Audit Committee provides updates to the Board on such review. The Audit Committee also oversees Cisco’s investment policy and certain other activities of our treasury function.

As part of the overall risk oversight framework, other committees of the Board also oversee certain categories of risk associated with their respective areas of responsibility. For example, the Compensation Committee oversees compensation-related risk management, as discussed in the “Governance and Board Matters – Corporate Governance – Board of Directors – Board Committees and Meetings – Compensation and Management Development Committee” and “Compensation Committee Matters – Executive Compensation – CD&A” sections in this Proxy Statement.

Each committee reports regularly to the full Board on its activities. In addition, the Board participates in regular discussions with our executive management on many core subjects, including strategy, operations, information systems, finance, legal and public policy matters, in which risk oversight is an inherent element. The Board believes the leadership structure described in the “Governance and Board Matters – Corporate Governance – Board of Directors – Board Leadership Structure” section facilitates the Board’s oversight of risk management because it allows the Board, with leadership from the Lead Independent Director and working through its committees, including the independent Audit Committee, to proactively participate in the oversight of management’s actions.

 

​

​

​

​

​

​

​

​

​

​

​

​

Director Nominee Qualifications, Skills and Attributes

The table below summarizes key qualifications, skills and attributes most relevant to the decision to nominate our director candidates to serve on the Board. A mark indicates a specific area of focus or experience on which the Board relies most. The lack of a mark does not mean the director nominee does not possess that qualification or skill. Each director nominee biography in “Governance and Board Matters – Proposal No. 1 – Election of Directors” below describes each nominee’s qualifications and relevant experience in more detail.

Board Performance Evaluation Process

The Board recognizes that a robust and constructive performance evaluation process is an essential component of Board effectiveness. As such, the Board conducts an annual performance evaluation that is intended to determine whether the Board, each of its committees, and individual Board members are functioning effectively, and to provide them with an opportunity to reflect upon and improve processes and effectiveness. The Nomination and Governance Committee oversees this annual process, which is led by the Lead Independent Director. As part of this process, the Lead Independent Director, along with outside counsel, conducts one-on-one discussions with each Board member and certain members of management to obtain their assessment of the effectiveness and performance of the Board and individual Board members. A summary of the results of this process is presented to the Nomination and Governance Committee identifying any themes or issues that have emerged. The results are then reported to the full Board, which considers the results and ways in which Board processes and effectiveness may be enhanced. Each committee also conducts its own evaluation.

 

​

​

​

​

​

​

​

​

​

​

​

​

Board Refreshment

We regularly evaluate the need for Board refreshment. The Nomination and Governance Committee and the Board are focused on identifying individuals whose skills and experiences will enable them to make meaningful contributions to the shaping of Cisco’s business strategy. In October 2023, the Board appointed Daniel H. Schulman as a director upon the recommendation of the Nomination and Governance Committee. For more information on the skills and experience of Mr. Schulman, see “Governance and Board Matters – Proposal No. 1 – Election of Directors.”

As part of its consideration of director succession, the Nomination and Governance Committee from time-to-time reviews, including when considering potential candidates, the appropriate skills and characteristics required of Board members such as diversity of business experience, viewpoints and personal background, and diversity of skills in technology, finance, marketing, international business, financial reporting and other areas that are expected to contribute to an effective Board. In evaluating potential candidates for the Board, the Nomination and Governance Committee considers these factors in the light of the specific needs of the Board at that time. Additionally, due to the global and complex nature of our business, the Board believes it is important to include individuals with diversity of race, ethnicity, gender, sexual orientation, age, education, cultural background, and professional experiences, and those factors are considered in evaluating board candidates in order to provide practical insights and diverse perspectives.

Cisco’s corporate governance guidelines provide that any non-employee director who has served for a total of 20 years of service will not be re-nominated for election at the next annual meeting of stockholders, absent special circumstances. Further, the corporate governance guidelines provide that the Board will take into consideration the age of any current or prospective Board member whose age would be 72 or older when elected, re-elected, or appointed to the Board and, before nominating or appointing such Board member, the Board will make an affirmative determination that it is in the best interests of Cisco and its stockholders for that individual to serve on the Board. The average tenure of the director nominees is approximately 5.6 years.

The Nomination and Governance Committee and the Board will regularly evaluate the key qualifications, skills and attributes required in order to effectively refresh the Board with engaged and dynamic leaders with a proven business track record who will bring fresh perspectives to the Board while maintaining the productive working dynamics and collegiality of the Board. The brief biographical description of each nominee set forth in the “Governance and Board Matters – Proposal No. 1 – Election of Directors – Business Experience and Qualifications of Nominees” section and the matrix set forth in “Governance and Board Matters – Corporate Governance – Board of Directors – Director Nominee Qualifications, Skills and Attributes” section above include the primary individual experience, qualifications, attributes, and skills of each of our directors that led to the conclusion that each director should serve as a member of the Board at this time.

 

​

​

​

​

​

​

​

​

​

​

​

​

Stockholder Communications with the Board

Stockholders may communicate with our Board through Cisco’s Secretary by sending an email to bod@cisco.com, or by writing to the following address:

Board of Directors
c/o Evan Sloves, Secretary
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134

Stockholders also may communicate with the Board’s Compensation Committee through Cisco’s Secretary by sending an email to compensationcommittee@cisco.com, or by writing to the following address:

Compensation and Management Development Committee
c/o Evan Sloves, Secretary
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134

Cisco’s Secretary will forward all correspondence to the Board or the Compensation Committee, except for spam, junk mail, mass mailings, product or service complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate material. Cisco’s Secretary may forward certain correspondence, such as product-related inquiries, elsewhere within Cisco for review and possible response.

 

​

​

​

​

​

​

​

​

​

​

​

​

Proposal No. 1 – Election of Directors

The names of persons who are nominees for director and their current positions and offices with Cisco are set forth in the table below. The proxy holders intend to vote all proxies received by them for the nominees listed below unless otherwise instructed. Each of the current directors, other than M. Michele Burns, Roderick C. McGeary and Dr. Lisa T. Su, has been nominated for election by the Board upon recommendation by the Nomination and Governance Committee and has decided to stand for election.

Ms. Burns, Mr. McGeary, and Dr. Su each notified Cisco and the Board of their respective decision not to stand for re-election at the 2023 Annual Meeting. Ms. Burns, Mr. McGeary and Dr. Su intend to serve on the Board of Directors through the date of the 2023 Annual Meeting. The authorized number of directors is presently twelve, and in connection with the election of directors at the annual meeting the authorized number of directors is being reduced to nine.

The Board appointed Daniel H. Schulman to the Board in October 2023 upon recommendation of the Nomination and Governance Committee. Mr. Schulman was brought to the attention of the Nomination and Governance Committee as a potential candidate by a third-party search firm.

Business Experience and Qualifications of Nominees

 

​

​

​

​

​

​

​

​

​

​

​

​

 

​

​

​

​

​

​

​

​

​

​

​

​

 

​

​

​

​

​

​

​

​

​

​

​

​

 

​

​

​

​

​

​

​

​

​

​

​

​

 

Board Composition

Due to the global and complex nature of our business, the Board believes it is important to consider diversity of race, ethnicity, gender, sexual orientation, age, education, cultural background, and professional experiences in evaluating board candidates in order to provide practical insights and diverse perspectives.

Below is an overview of our director nominee composition.

 

​

​

​

​

​

​

​

​

​

​

​

​

Board Diversity Matrix (As of October 12, 2023)​

​

*

African American or Black, and Alaskan Native or Native American

​

Cisco’s Board Diversity Matrix for fiscal 2022 was disclosed in its Proxy Statement filed with the SEC on October 18, 2022.

Independent Directors

Upon recommendation of the Nomination and Governance Committee, the Board has affirmatively determined that each member of the Board other than Mr. Robbins is independent under the criteria established by Nasdaq for director independence. All members of our Audit, Compensation, and Nomination and Governance committees are independent directors. In addition, upon recommendation of the Nomination and Governance Committee, the Board has determined that the members of the Audit Committee and the members of the Compensation Committee meet the additional independence criteria required for membership on those committees under applicable Nasdaq listing standards.

The Nasdaq criteria includes a subjective test and various objective standards, such as the director is not an employee of Cisco. Mr. Robbins is deemed not independent because he is a Cisco employee. The subjective test under Nasdaq criteria for director independence requires that each independent director not have a relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The subjective evaluation of director independence by the Board was made in the context of the objective standards referenced above. In making its independence determinations, the Board generally considers commercial, financial services, charitable, and other transactions, as well as other relationships between Cisco and each director and nominee and his or her family members and affiliated entities. For example, the Nomination and Governance Committee reviewed, for each independent director and nominee, transactions between Cisco and other organizations where such directors serve as executive officers or directors, none of which exceeded 1% of the recipient’s annual revenues during the relevant periods, except as described below.

For each of the independent directors, the Board determined based on the recommendation of the Nomination and Governance Committee that none of the transactions or other relationships exceeded Nasdaq objective standards and none would otherwise interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making this determination, the Board considered certain relationships that did not exceed Nasdaq objective standards but were identified by the Nomination and Governance Committee for further consideration under the subjective test. The Board determined that none of these relationships would interfere with the exercise of independent judgment by the director in carrying out their responsibilities as a director.

 

​

​

​

​

​

​

​

​

​

​

​

​

The following is a description of the relationships in which a director serves as an outside board member of other companies and in which payments by or to Cisco exceeded 1% of the recipient’s annual revenues:

■

Mr. Capellas and Mr. Harris are members of the board of directors of Flex Ltd. (“Flex”). Cisco has ordinary course commercial relationships with Flex. Payments by Cisco to Flex exceeded 1% of the annual revenues of Flex in each of Cisco’s past three fiscal years.

​

■

Mr. Schulman is a member of the board of directors of Verizon Communications, Inc. (“Verizon”). Verizon has ordinary course commercial relationships with Cisco. Payments by Verizon to Cisco exceeded 1% of the annual revenues of Cisco in each of Cisco’s past two fiscal years.

​

Director Compensation

This section provides information regarding the compensation policies for non-employee directors and amounts paid and equity awards granted to these directors in fiscal 2023. Non-employee directors typically do not receive forms of remuneration or benefits other than those described below but are reimbursed for their expenses in attending meetings and other board-related activities. Cisco’s non-employee director compensation policy is designed to provide the appropriate amount and form of compensation to our non-employee directors.

Director Compensation Highlights

■

Retainer fees for committee service differentiated based on workload

​

■

Emphasis on equity in the overall compensation mix

​

■

Full-value equity grants under a fixed-value annual grant policy with immediate vesting

​

■

Robust stock ownership guidelines set at five times the annual cash retainer to support stockholder alignment

​

■

Flexible deferral provisions to facilitate stock ownership

​

■

Governance limit of  $800,000 on the total value of cash and equity compensation that may be paid or granted to a non-employee director each fiscal year allows Cisco to stay within reasonable boundaries of what the market requires

​

■

Each non-employee director is eligible to participate in Cisco’s charitable matching gifts program to the same extent as all Cisco employees. The maximum match amount currently under this program is $25,000 each calendar year and additional $10,000 matches are available for disaster response campaigns.

​

Fiscal 2023 Cash Compensation

Our non-employee director cash compensation during fiscal 2023 consisted of the following:

■

Annual retainer of  $80,000 for each non-employee director

​

■

Additional annual retainer fee of  $60,000 for serving as Lead Independent Director

​

■

Additional annual retainer fee of  $30,000 for serving as chair of the Audit Committee

​

■

Additional annual retainer fee of  $20,000 for serving as chair of the Compensation Committee or as chair of the Nomination and Governance Committee

​

■

Additional annual retainer fee of  $15,000 for serving as chair of the Acquisition Committee or as chair of the Environmental, Social, and Public Policy Committee

​

■

Additional annual retainer fees for serving as a member of a Board committee:

​

□

$32,000 for serving as a member of the Audit Committee

​

□

$16,000 for serving as a member of the Compensation Committee, the Acquisition Committee or the Environmental, Social, and Public Policy Committee

​

□

$12,000 for serving as a member of the Nomination and Governance Committee

​

■

These cash fees are paid in quarterly installments in arrears

​

A non-employee director may, in lieu of any retainer paid in connection with service on the Board or any committee of the Board, or other cash fees, elect to receive fully vested shares of Cisco common stock, fully vested deferred stock units or a deferred cash payment under the Cisco Systems, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”). Dividend equivalents accrue on fully vested deferred stock units and are subject to the same

 

​

​

​

​

​

​

​

​

​

​

​

​

conditions and restrictions as the deferred stock units to which they attach and will settle in shares after the non-employee director leaves the board. The annual retainers are pro-rated for non-employee directors who are appointed after an annual meeting. Retainers paid in quarterly installments are pro-rated for non-employee directors who join or leave the Board or a committee during the quarterly period based on the portion of the period for which they have served.

Fiscal 2023 Equity Compensation

Non-employee directors receive annual grants under the 2005 Stock Incentive Plan pursuant to an equity grant policy. The 2005 Stock Incentive Plan currently provides that grants to any non-employee director may not exceed 50,000 shares for any fiscal year.

The Board’s policy regarding equity grants for non-employee directors provides for the following:

■

An initial equity grant for new non-employee directors consisting of fully vested shares of Cisco common stock with a fair value equal to a pro rata portion of  $245,000 based on the portion of the year of the new non-employee director’s board service.

​

■

An annual equity grant for elected non-employee directors consisting of fully vested shares of Cisco common stock with a fair value equal to $245,000.

​

A non-employee director may elect to receive his or her initial and annual grants in the form of fully vested deferred stock units that are settled in shares after the non-employee director leaves the Board. Dividend equivalents accrue on the fully vested deferred stock units and are subject to the same conditions and restrictions as the deferred stock units to which they attach and will settle in shares after the non-employee director leaves the Board.

Fiscal 2023 Total Director Compensation

The following table provides information as to compensation earned by our non-employee directors during fiscal 2023.

Director Compensation

(1) The amounts in the “Stock Awards” column represent the aggregate grant date fair values, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation – Stock Compensation (“FASB ASC Topic 718”), of the shares issued pursuant to the 2005 Stock Incentive Plan.

Each non-employee director who had served as a non-employee director prior to the 2022 Annual Meeting and who was elected at the 2022 Annual Meeting received 5,001 fully vested shares on December 8, 2022. Mr. Bush, Mr. Saunders, Dr. Su and Ms. Tessel each elected to receive their annual equity award in the form of fully vested deferred stock units.

 

​

​

​

​

​

​

​

​

​

​

​

​

In connection with her appointment to the board on August 24, 2022, Ms. Murphy received an initial pro-rated equity award of 1,532 fully vested shares.

None of the non-employee directors held any unvested stock awards as of July 29, 2023. No stock options were outstanding or awarded to non-employee directors in fiscal 2023.

(2) Represents the non-employee director’s match under Cisco’s charitable matching gifts program.

(3) Includes the value of fully vested shares of Cisco common stock received in lieu of the non-employee director’s regular cash retainer, additional retainer paid in connection with service on Board committees, or other cash fees, based on the fair market value of the shares on the date any such retainers or cash fees would otherwise have been paid. Based on their prior elections, Mr. Bush, Dr. Johnson, Dr. Su and Ms. Tessel each received deferred stock units with a value of $120,901, $30,205, $105,537 and $104,925, respectively, based on the closing share price of Cisco common stock on the date any such retainers or cash fees would otherwise have been paid.

(4) Mr. Saunders resigned from the Board effective February 21, 2023.​

(5) Mr. Schulman was appointed to the Board after the completion of fiscal 2023 and did not receive any compensation for fiscal 2023.

Non-Employee Director Stock Ownership

Our corporate governance guidelines include stock ownership guidelines for non-employee directors. The stock ownership guidelines call for each non-employee director to own shares of Cisco’s common stock having a value equal to at least five times the non-employee director’s regular annual cash retainer, with a five-year period from the date of his or her appointment to attain that ownership level. To facilitate share ownership, in lieu of all or a specified portion of their regular annual cash retainer, any retainer paid in connection with service on any committee of the Board or other cash fees, non-employee directors may elect to receive fully vested shares of Cisco common stock or fully vested deferred stock units that would be settled in shares after the non-employee director leaves the Board, based on the fair market value of the shares on the date any such cash retainer or fee would otherwise be paid. Any shares (or shares subject to deferred stock units) received in lieu of any portion of a cash retainer or fee do not count against the limit on the total number of shares that may be granted to a non-employee director during any fiscal year. The shares issued are granted under the 2005 Stock Incentive Plan.

For information on non-employee director elections to receive fully vested shares (or shares subject to deferred stock units) in lieu of cash with respect to fiscal 2023 cash retainers or fees, please see the table above entitled “Director Compensation” and the accompanying footnotes.

Fiscal 2024 Director Compensation

Using the approach described above under “Board of Directors – Board Committees and Meetings – Director Compensation,” the Nomination and Governance Committee conducted its annual review of the non-employee director compensation program for fiscal 2024 in consultation with its independent compensation consultant, Exequity. In connection with this review, the Nomination and Governance Committee, having been advised by Exequity, recommended modifications to compensation for non-employee directors in order to better align compensation with Cisco’s Peer Group and maintain the competitive positioning of overall compensation relative to the market. On May 24, 2023, upon the Nomination and Governance Committee’s recommendation, the Board of Directors approved the following changes to our non-employee director compensation program, effective on the date of the 2023 Annual Meeting:

■

The annual cash retainer fee for non-employee directors was increased from $80,000 to $105,000

​

■

The additional annual retainer fee for serving as Lead Independent Director was increased from $60,000 to $75,000

​

There were no other significant changes to the terms of the compensation for non-employee directors, including no changes to vesting, proration and deferral.

 

​

​

​

​

​

​

​

​

​

​

​

​

Vote Required

Cisco’s bylaws and corporate governance guidelines provide for a majority voting standard in uncontested elections of directors. The affirmative vote of the holders of a majority of the votes properly cast at the meeting at which a quorum is present is required to elect each of the nine nominees for director, meaning the number of shares cast “for” a nominee’s election exceeds the number of  “against” votes cast against that nominee. The required quorum for a meeting of Cisco stockholders is a majority of the outstanding shares of common stock. Abstentions and broker non-votes are not counted as votes cast for or against such nominee, and stockholders may not cumulate votes in the election of directors.

In the event any nominee is unable or declines to serve as a director at the time of the meeting, the proxies will be voted for any nominee, if any, who may be designated by the Board to fill the vacancy. As of the date of this Proxy Statement, the Board is not aware that any nominee is unable or will decline to serve as a director. If a nominee who currently serves as a director is not re-elected, Delaware law provides that the director would continue to serve on the Board as a “holdover director.” Under our bylaws and corporate governance guidelines, an incumbent director who fails to receive the required majority vote to be re-elected in an uncontested election shall tender his or her resignation to the Board to be effective on the earlier of 90 days following the certification of the election results or the date on which the Board selects a person to fill the office held by that director.

Recommendation of the Board of Directors

The Board of Directors recommends that the stockholders vote FOR the election of each of the nominees listed herein.

 

​

​

​

​

​

​

​

​

​

​

​

​

Proposal No. 2 – Approval of the Amendment and Restatement of the 2005 Stock Incentive Plan

Cisco is requesting that stockholders approve, in its entirety, the Cisco Systems, Inc. 2005 Stock Incentive Plan as amended and restated by the Board of Directors, subject to stockholder approval (as amended and restated, the “Amended Stock Plan”). If our stockholders do not approval this proposal, then the Amended Stock Plan will not become effective. A summary of the Amended Stock Plan follows.

General

The Amended Stock Plan that is being submitted to our stockholders for approval increases the number of shares authorized for issuance under the 2005 Stock Incentive Plan by 80,575,000 shares to 870,550,000 shares. Except for this increase, the terms of the 2005 Stock Incentive Plan will remain unchanged. After the amendment and restatement, the Amended Stock Plan will continue to contain the following important corporate governance features:

■

No Repricing or Buyout of Underwater Options or Stock Appreciation Rights. Prohibits stock option and stock appreciation right repricing or other exchanges for cash or equity compensation without stockholder consent.

​

■

No Discounted Options and Stock Appreciation Rights. Requires stock options and stock appreciation rights to be granted with an exercise price equal to at least the fair market value of our common stock on the date of the award is granted.

​

■

No Evergreen Provision. Avoids the use of  “evergreen” share reserve increases and instead requires stockholder approval to increase the share reserve.

​

■

No Liberal Share Counting. Prohibits the reuse of shares withheld or delivered to satisfy the exercise price of an option or SAR or to satisfy tax withholding requirements.

​

■

No Single Trigger Change in Control. Awards do not accelerate upon a change in control unless the acquiring company does not assume or replace the award.

​

■

Prohibition on Payment of Dividends and Dividend Equivalents on Unvested Awards. Prohibits the payment or settlement of dividends or dividend equivalents with respect to any award until the underlying shares or units vest.

​

■

Limit on non-employee director awards. The aggregate value of all compensation paid or granted, as applicable, to any individual for service as a non-employee director of our Board with respect to any fiscal year, including awards granted under the 2005 Stock Incentive Plan and cash fees paid by us to such non-employee director, will not exceed $800,000 in total value.

​

■

No Automatic Grants. The 2005 Stock Incentive Plan does not provide for automatic grants to any participant.

​

■

No Tax Gross-ups. The 2005 Stock Incentive Plan does not provide for any tax gross-ups.

​

■

Maximum Term of Options/SARs. The maximum term for options and stock appreciation rights issued under the 2005 Stock Incentive Plan is ten years.

​

■

No Transferability. Awards generally may not be transferred, except by will or the laws of descent and distribution, unless provided in the applicable award agreement.

​

Request for Additional Shares, Dilution and Overhang

In order to give Cisco the flexibility to responsibly address its future equity compensation needs, Cisco is requesting that stockholders approve the Amended Stock Plan, which increases the number of shares authorized for issuance

 

​

​

​

​

​

​

​

​

​

​

​

​

under the plan by 80.575 million shares. As of July 29, 2023, there were approximately 124 million shares available for grant under the 2005 Stock Incentive Plan. The 2005 Stock Incentive Plan contains a fungible share reserve feature. Under this feature, a distinction is made between the number of shares in the reserve attributable to (i) stock options and stock appreciation rights and (ii) “full value” awards (i.e., stock grants and stock units). Currently, shares granted pursuant to full value awards are counted against authorized shares under the 2005 Stock Incentive Plan on a 1.5-to-1 ratio, the fungible share ratio.

Recent annual grant levels for the preceding three fiscal years have averaged at approximately 58 million full value shares (or approximately 87 million shares counted against authorized shares) for an average annual burn rate of approximately 1.40%. The “burn rate” is the ratio of the number of shares underlying awards, including performance-based awards valued at 100% of target, granted under the 2005 Stock Incentive Plan during a fiscal year to the number of Cisco’s weighted average common shares outstanding for the corresponding fiscal year.

A total of 350 million shares were originally authorized under the 2005 Stock Incentive Plan in 2005, an additional 209 million shares were authorized in 2007, an additional 135 million shares were authorized in 2013, and an additional 95.975 million shares were authorized in 2020.

Set forth below is the number of shares available for issuance pursuant to outstanding and future equity awards under all stock incentive plans as of July 29, 2023:

Note: As of July 29, 2023, Cisco had under the Amended Stock Plan no outstanding options, approximately 120 million shares subject to outstanding RSUs, and approximately six million shares subject to outstanding PRSUs based on an assumed maximum performance, unless performance is otherwise known. As of July 29, 2023, Cisco had under assumed stock plans 1,155 shares subject to outstanding RSUs and approximately 356 thousand shares subject to outstanding options with a weighted average exercise price of  $6.48 per share and a weighted average life of 4.4 years.

The above total of 249 million shares represents an overhang of approximately 6% based on outstanding common shares as of July 29, 2023. If this amendment and restatement is approved, the additional 80.575 million shares available for issuance under the Amended Stock Plan would increase the overhang to 8%. Cisco calculates “overhang” as the total of  (a) shares underlying outstanding awards plus shares available for issuance under future equity awards, divided by (b) the total number of shares outstanding, shares underlying outstanding awards and shares available for issuance under future equity awards. As of September 1, 2023, the fair market value (as defined in the Amended Stock Plan) of a share of Cisco common stock was $57.84.

When considering the number of additional shares to add to the Amended Stock Plan, the Compensation Committee reviewed, among other things, the potential dilution to Cisco’s current stockholders as measured by burn rate and overhang, projected future share usage and estimated future award forfeitures. The projected future usage of shares for long-term incentive awards under the Amended Stock Plan was reviewed under scenarios based on a variety of assumptions. Based on these assumptions, the 80.575 million shares to be added to the Amended Stock Plan pursuant to this amendment and restatement, in combination with the remaining authorized shares and shares added back to the plan from forfeitures of awards granted under the Amended Stock Plan, is expected to satisfy Cisco’s equity compensation needs through at least the 2025 Annual Meeting. However, while this forecast is based on current assumptions, there can be no guarantee that future events, including changes in future business conditions and Cisco’s stock price, will not require Cisco to grant equity awards more rapidly or slowly than currently expected. The Compensation Committee is committed to effectively managing the number of shares reserved for issuance under the Amended Stock Plan while minimizing stockholder dilution.

 

​

​

​

​

​

​

​

​

​

​

​

​

Material Features of the Amended Stock Plan

The following is a summary of the material features of the Amended Stock Plan. This summary does not purport to be a complete description of all of the provisions of the Amended Stock Plan and is qualified in its entirety by the Amended Stock Plan. A copy of the Amended Stock Plan has been filed with the SEC with this Proxy Statement and will be sent to stockholders free of charge upon written request to Cisco Systems, Inc., Attention: Investor Relations, 170 West Tasman Drive, San Jose, California 95134.

Purpose of the Amended Stock Plan

The purpose of the Amended Stock Plan is to promote the long-term success of Cisco and the creation of stockholder value by offering employees, consultants and board members an opportunity to share in such long-term success by acquiring a proprietary interest in Cisco. The Amended Stock Plan seeks to achieve this purpose by providing for discretionary long-term incentive awards in the form of stock units, incentive stock options or nonstatutory stock options, stock grants, and stock appreciation rights (“SARs”).

Share Reserve

The shares issuable under the Amended Stock Plan are authorized but unissued shares of Cisco common stock. The aggregate number of shares reserved for awards under the Amended Stock Plan must not exceed 870,550,000 shares, subject to adjustment in the event of a capitalization event as described below in “Capitalization Adjustments.”

If awards issued under the Amended Stock Plan are forfeited or terminated for any reason before being exercised or settled, then the shares underlying such awards, plus the number of additional shares, if any, that counted against shares available for issuance under the Amended Stock Plan at the time of grant as a result of the application of the fungible share ratio described above, will become available again for issuance under the Amended Stock Plan. SARs will be counted in full against the number of shares available for issuance under the Amended Stock Plan regardless of the number of shares issued upon settlement of the SARs. In the event that withholding tax liabilities arising from an award other than a stock option or SAR are satisfied by the withholding of shares by Cisco, then the shares so withheld, plus the number of additional shares, if any, that counted against the shares available for issuance under the Amended Stock Plan in respect thereof at the time of grant, will again be available for issuance under the Amended Stock Plan. Shares withheld by Cisco to satisfy any tax withholding obligation with respect to a stock option or SAR will not be added to the shares available for issuance under the Amended Stock Plan. Further, shares that are exchanged by a participant or withheld by Cisco as full or partial payment in connection with the exercise or settlement of a stock option or SAR will not be available for subsequent awards under the Amended Stock Plan and shares repurchased on the open market with the proceeds of an option exercise will not be made available again for issuance under the Amended Stock Plan.

The following table provides certain information regarding the share reserve of the Amended Stock Plan:

 

​

​

​

​

​

​

​

​

​

​

​

​

Note: As of July 29, 2023, Cisco had under the Amended Stock Plan no outstanding options, approximately 120 million shares subject to outstanding RSUs and approximately six million shares subject to outstanding PRSUs based on an assumed maximum performance, unless performance is otherwise known.

Plan Limits

No participant in the Amended Stock Plan may be granted awards during any fiscal year in excess of any of the following limits: options covering in excess of 5,000,000 shares; SARs covering in excess of 5,000,000 shares; or stock grants or stock units in the aggregate covering in excess of 5,000,000 shares. The maximum value of stock awards granted during a single fiscal year under the Amended Stock Plan, taken together with any cash fees paid during such fiscal year for services on the Board of Directors, will not exceed $800,000 in total value for any non-employee director, calculating the value of any such awards based on the grant date fair value of such awards under applicable financial accounting standards. Such limit includes the value of any stock awards that are received in lieu of payment of all or a portion of the non-employee director’s regular annual retainer, additional retainer paid in connection with service on any committee of the Board of Directors, or other cash fees. For the avoidance of doubt, neither awards granted or compensation paid to a non-employee director for services rendered as an employee or consultant of Cisco nor any amounts paid to a non-employee director as a reimbursement of an expense will count against the foregoing limitation.

Administration

Under the terms of the Amended Stock Plan, the Board of Directors or a committee appointed by the Board of Directors has the authority to administer the Amended Stock Plan (the “Plan Administrator”). The Compensation Committee has been designated as the Plan Administrator. The Board of Directors may, however, at any time terminate the functions of the Compensation Committee and reassume all powers and authority previously delegated to the Compensation Committee.

Subject to the terms of the Amended Stock Plan, the Plan Administrator, among other things, determines the recipients, dates of grant, the numbers and types of stock awards to be granted and the terms and conditions of such stock awards. Notwithstanding the foregoing, only the full Board of Directors may grant and administer awards under the Amended Stock Plan to non-employee directors.

Eligibility and Types of Awards under the Amended Stock Plan

The Amended Stock Plan permits the granting of stock units, stock options, stock grants, and SARs by the Plan Administrator as further described below. Employees (including employee directors and executive officers) and consultants of Cisco and its subsidiaries and affiliates and non-employee directors of Cisco are eligible to participate in the Amended Stock Plan. Accordingly, each non-employee member of the Board of Directors and each executive officer has an interest in Proposal No. 2. As of July 29, 2023, approximately 84,900 employees (including executive officers) are eligible to participate in the Amended Stock Plan. All non-employee directors (11 persons) are eligible to participate in the Amended Stock Plan.

■

Stock Units

​

The Plan Administrator may award stock units under the Amended Stock Plan. Participants are not required to pay any consideration to Cisco at the time of grant of a stock unit. The number of shares covered by each stock unit award will be determined by the Plan Administrator.

The Plan Administrator may provide for time-based vesting or vesting upon satisfaction of performance goals, or both, and/or other conditions. Unless a deferral election is made, when the participant satisfies the vesting conditions of the stock unit award, Cisco will pay the participant cash or shares of Cisco common stock or any combination of both to settle the vested stock units. Conversion of the stock units into cash may be based on the average of the fair market value of a share of Cisco common stock over a series of trading days or on other methods. The holders of stock units have no voting rights. Awards may be granted with or without dividend equivalents, which, prior to distribution, are subject to the same terms and conditions (including, without limitation, any forfeiture conditions) as the stock units to which they relate. Any dividend equivalents awarded with respect to stock units will be settled only if, when and to the extent such stock units vest and are settled. Dividend equivalents payable with respect to stock units that do not vest will be forfeited. Currently, dividend equivalents are only credited on vested deferred stock units.

 

​

​

​

​

​

​

​

​

​

​

​

​

■

Stock Options

​

The Plan Administrator may grant nonstatutory stock options or incentive stock options under the Amended Stock Plan. However, the Plan Administrator does not have the authority to grant stock options that automatically provide for the grant of new stock options upon their exercise. The number of shares covered by each stock option granted to a participant will be determined by the Plan Administrator.

The Plan Administrator may provide for time-based vesting or vesting upon satisfaction of performance goals, or both, and/or other conditions. The stock option exercise price is established by the Plan Administrator and must be at least 100% of the per share fair market value (110% for incentive stock option grants to 10% stockholders) of Cisco common stock on the date of grant. Repricing of stock options is prohibited unless stockholder approval is obtained. The maximum term for stock options may not exceed ten years from the date of grant, but the Plan Administrator may provide for earlier expiration. Since fiscal 2009, the Plan Administrator has determined that stock options granted will expire seven years after the date of grant. Unless otherwise provided by the Plan Administrator, unvested stock options will expire upon termination of the participant’s service with Cisco and vested stock options will expire three months following a termination for any reason other than death, disability, or cause; eighteen months following a termination for death or disability; and immediately following a termination for cause. Stock options may not be granted with rights to dividends or dividend equivalents.

Under the Amended Stock Plan, the stock option exercise price must be paid at the time the shares are purchased. Consistent with applicable laws, regulations and rules, payment of the exercise price of a stock option may be made in cash, (including by check, wire transfer or similar means), by cashless exercise, by surrendering or attesting to previously acquired shares of Cisco common stock, or by any other legal consideration.

■

Stock Grants

​

The Plan Administrator may award stock grants under the Amended Stock Plan. Except for non-employee directors, stock grants are not typically awarded to employees. At the time of the stock grant, participants may be required to pay cash or other legal consideration approved by the Plan Administrator, but the Amended Stock Plan does not establish a minimum purchase price for shares awarded as stock grants. Stock grants are comprised of shares of Cisco common stock. The number of shares associated with each stock grant will be determined by the Plan Administrator.

The Plan Administrator may provide for time-based vesting or vesting upon satisfaction of performance goals, or both, and/or other conditions. When the stock grant award conditions are satisfied, then the participant is vested in the shares and has complete ownership of the shares. The holder of a stock grant awarded under the Amended Stock Plan will have the same voting, dividend and other rights as Cisco’s other stockholders, except that in the case of any unvested shares, the holder will not be entitled to any dividends and other distributions paid or distributed by Cisco on the equivalent number of vested shares. Notwithstanding the foregoing, at the Plan Administrator’s discretion, the holder of unvested shares may be credited with such dividends and other distributions, provided that such dividends and other distributions will be distributed to the holder only if, when and to the extent such shares vest. The value of dividends and other distributions payable or distributable with respect to any shares that do not vest shall be forfeited.

■

Stock Appreciation Rights

​

The Plan Administrator may grant SARs under the Amended Stock Plan. However, the Plan Administrator does not have the authority to grant SARs that automatically provide for the grant of new SARs upon their exercise. The number of shares covered by each SAR will be determined by the Plan Administrator.

The Plan Administrator may provide for time-based vesting or vesting upon satisfaction of performance goals and/or other conditions. The SAR exercise price is established by the Plan Administrator and must be at least 100% of the per share fair market value of Cisco common stock on the date of grant. Repricing of SARs is prohibited unless stockholder approval is obtained. SARs may not be granted with rights to dividends or dividend equivalents.

The maximum term for SARs may not exceed ten years from the date of grant, but the Plan Administrator may provide for earlier expiration. Unless otherwise provided by the Plan Administrator, unvested SARs expire upon termination of the participant’s service with Cisco and vested SARs expire three months following a termination for any reason other than death, disability, or cause; eighteen months following a termination for death or disability;

 

​

​

​

​

​

​

​

​

​

​

​

​

and immediately following a termination for cause. Upon exercise of a SAR, the participant receives payment from Cisco in an amount determined by multiplying (a) the difference between (i) the fair market value of a share on the date of exercise and (ii) the exercise price times (b) the number of shares with respect to which the SAR is exercised. SARs may be paid in cash, shares of Cisco common stock or any combination of both, as determined by the Plan Administrator.

Performance Conditions

Awards under the Amended Stock Plan may be made subject to performance conditions as well as time-vesting conditions. Such performance conditions may be based on an objective formula or standard, which include one or more of the following factors, whether or not calculated in accordance with GAAP, and any objectively verifiable adjustment(s) thereto permitted and pre-established by the Plan Administrator: (i) operating income, operating cash flow and operating expense; (ii) earnings before interest, taxes, depreciation and amortization; (iii) earnings; (iv) cash flow; (v) market share; (vi) sales; (vii) revenue; (viii) profits before interest and taxes; (ix) expenses; (x) cost of goods sold; (xi) profit/loss or profit margin; (xii) working capital; (xiii) return on capital, equity or assets; (xiv) earnings per share; (xv) economic value added; (xvi) stock price; (xvii) price/earnings ratio; (xviii) debt or debt-to-equity; (xix) accounts receivable; (xx) write-offs; (xxi) cash; (xxii) assets; (xxiii) liquidity; (xxiv) operations; (xxv) intellectual property (e.g., patents); (xxvi) product development; (xxvii) regulatory activity; (xxviii) manufacturing, production or inventory; (xxix) mergers and acquisitions or divestitures; (xxx) financings; (xxxi) customer satisfaction; (xxxii) total stockholder return; and/or (xxxiii) any other performance factor selected by the Plan Administrator, each with respect to Cisco and/or one or more of its affiliates or operating units.

Capitalization Events

In the event of a subdivision of the outstanding shares of Cisco common stock, a declaration of a dividend payable in shares, a declaration of a dividend payable in a form other than shares in an amount that has a material effect on the price of shares, a combination or consolidation of the outstanding shares (by reclassification or otherwise) into a lesser number of shares, a recapitalization, a spin-off or a similar occurrence, the Plan Administrator will make appropriate adjustments to the number of shares and kind of shares or securities issuable under the Amended Stock Plan (on both an aggregate and per-participant basis) and under each outstanding award, to the award limits as described above in “Plan Limits”, and to the exercise price of outstanding options and SARs.

Corporate Transactions

In the event that Cisco is acquired by merger or asset sale or consolidated into another entity, outstanding awards will be subject to the applicable agreement of merger, sale of assets or reorganization. Such agreement may provide, without limitation, for the assumption or substitution of outstanding options, SARs, or stock units by the surviving corporation or its parent, for the assumption of outstanding stock grants by the surviving corporation or its parent, for the replacement of outstanding options, SARs, and stock units with a cash incentive program of the surviving corporation which preserves the spread existing on the unvested portions of such outstanding awards at the time of the transaction and provides for subsequent payout in accordance with the same vesting provisions applicable to those awards, for accelerated vesting of outstanding awards, or for the cancellation of outstanding options, SARs, and stock units, with or without consideration, in all cases without the consent of the participant.

Vesting Acceleration

Unless otherwise provided in the applicable award agreement, outstanding stock options, SARs, and stock units will vest and, if applicable, become immediately exercisable in full in the event that Cisco is acquired by merger or asset sale or consolidated into another entity, unless such awards are assumed, substituted or replaced by the acquiring entity (or in the case of outstanding stock grants, the related stock grant agreements are assumed). The Plan Administrator may also provide, at the time of grant of such awards or any time thereafter, that such awards will vest in full and, if applicable, become immediately exercisable in the event that Cisco is acquired by merger or asset sale, or consolidated into another entity, or in the event there is a hostile takeover of Cisco, whether through a tender or exchange offer for more than 35% of Cisco’s outstanding voting securities which the Board of Directors does not recommend the stockholders accept, or a change in the majority of the members of the Board of Directors as a result of one or more contested elections for board membership. In addition, Cisco currently has a vesting acceleration policy for outstanding and unvested equity awards up to a specified limit upon the death or terminal illness of an employee.

 

​

​

​

​

​

​

​

​

​

​

​

​

Dissolution

To the extent not previously exercised or settled, stock units, options, and SARs will terminate immediately prior to the dissolution or liquidation of Cisco.

Amendment and Termination

The Board of Directors may amend the Amended Stock Plan at any time and for any reason, provided that any such amendment will be subject to stockholder approval to the extent stockholder approval is required by applicable laws, regulations, or rules. The Board of Directors may terminate the Amended Stock Plan at any time and for any reason, and the Amended Stock Plan will terminate at the 2030 Annual Meeting unless re-adopted or extended by the stockholders prior to or on such date. The termination or amendment of the Amended Stock Plan will not impair the rights or obligations of any participant under any award previously made under the Amended Stock Plan without the participant’s consent, unless such modification is necessary or desirable to comply with any applicable law, regulation or rule.

New Plan Benefits

The Amended Stock Plan does not provide for set benefits or amounts of awards and we have not approved any awards that are conditioned on stockholder approval of the Amended Stock Plan. However, as discussed in further detail in the “Director Compensation” section, each of our current non-employee directors who is a director nominee is entitled to receive a grant of fully vested shares every year on the date of our annual meeting with a grant date fair value of  $245,000. As of the date of the 2023 Annual Meeting, such awards will be granted under the Amended Stock Plan if the Amended Stock Plan is approved.

The following table summarizes the aggregate value of the shares that our current non-employee directors as a group, who are director nominees at the 2023 Annual Meeting, will receive if they are elected at the 2023 Annual Meeting. It also highlights the fact that none of our executive officers (including our named executive officers) or employees will receive any set benefits or awards that are conditioned upon stockholder approval of the Amended Stock Plan. All other future awards to directors, executive officers, employees and consultants of Cisco under the Amended Stock Plan are discretionary and cannot be determined at this time.

(1) The amount reflects the standard equity award of  $245,000 that is expected to be granted to each non-employee director, who is a director nominee at the 2023 Annual Meeting, under the Amended Stock Plan. See the “Director Compensation” section for more information.

(2) Number of shares will not be determinable until the grant date.

 

​

​

​

​

​

​

​

​

​

​

​

​

Historical Plan Benefits

The following table sets forth, for each of the individuals and groups indicated, the number of shares subject to stock options granted under the 2005 Stock Incentive Plan since the 2005 Stock Incentive Plan became effective through July 29, 2023. No stock options have been granted under the 2005 Stock Incentive Plan to any associate of any of our directors (including nominees) or executive officers. No person received 5% or more of the total stock options granted under the 2005 Stock Incentive Plan since its inception.

(1) Mr. Robbins is also a nominee for election as a director.

(2) Includes historical stock options granted to two current non-employee directors who are not director nominees at the 2023 Annual Meeting. There were no historical stock options granted to any other non-employee director nominee.

U.S. Federal Income Tax Consequences

The following is a brief summary of the federal income tax consequences applicable to awards granted under the Amended Stock Plan based on federal income tax laws in effect on the date of this Proxy Statement.

This summary is not intended to be exhaustive and does not address all matters that may be relevant to a particular participant based on his or her specific circumstances. The summary expressly does not discuss the income tax laws of any state, municipality, or non-U.S. taxing jurisdiction, or the gift, estate, excise (including the rules applicable to deferred compensation under Code Section 409A), or other tax laws other than federal income tax law. The following is not intended or written to be used, and cannot be used, for the purposes of avoiding taxpayer penalties. Because individual circumstances may vary, Cisco advises all participants to consult their own tax advisors concerning the tax implications of awards granted under the Amended Stock Plan.

A recipient of a stock option or SAR will not have taxable income upon the grant of the stock option or SAR. For nonstatutory stock options and SARs, the participant will recognize ordinary income upon exercise in an amount equal to the difference between the fair market value of the shares and the exercise price on the date of exercise. Any gain or loss recognized upon any later disposition of the shares generally will be a capital gain or loss.

The acquisition of shares upon exercise of an incentive stock option will not result in any taxable income to the participant, except, possibly, for purposes of the alternative minimum tax. The gain or loss recognized by the participant on a later sale or other disposition of such shares will either be long-term capital gain or loss or ordinary income, depending upon whether the participant holds the shares for the legally-required period (currently more than two years from the date of grant and more one year from the date of exercise). If the shares are not held for the legally-required period, the participant will recognize ordinary income equal to the lesser of  (i) the difference between the fair market value of the shares on the date of exercise and the exercise price, or (ii) the difference between the sales price and the exercise price. Any additional gain recognized on the sale generally will be a capital gain.

 

​

​

​

​

​

​

​

​

​

​

​

​

For stock grant awards, unless vested or the participant elects under Code Section 83(b) to be taxed at the time of grant, the participant will not have taxable income upon the grant, but upon vesting will recognize ordinary income equal to the fair market value of the shares at the time of vesting less the amount paid for such shares (if any). Any gain or loss recognized upon any later disposition of the shares generally will be a capital gain or loss.

A participant is not deemed to receive any taxable income at the time an award of stock units is granted. When vested stock units (and dividend equivalents, if any) are settled and distributed, the participant will recognize ordinary income equal to the amount of cash and/or the fair market value of shares received less the amount paid for such stock units (if any).

At the discretion of the Plan Administrator, the Amended Stock Plan allows a participant to satisfy his or her tax withholding requirements under federal and state tax laws in connection with the exercise or receipt of an award by electing to have shares withheld, and/or by delivering or attesting to Cisco already-owned shares of Cisco common stock.

If the participant is an employee or former employee, the amount the participant recognizes as ordinary income in connection with an award is subject to withholding taxes (generally not applicable to incentive stock options) and Cisco is generally allowed a tax deduction equal to the amount of ordinary income recognized by the participant.

Equity Compensation Plan Information

The following table provides information as of July 29, 2023 with respect to the shares of Cisco common stock that may be issued under existing equity compensation plans. The category “Equity compensation plans approved by security holders” in the table below consists of the 2005 Stock Incentive Plan and the Cisco Systems, Inc. Employee Stock Purchase Plan (the “Purchase Plan”).

(1) Excludes purchase rights accruing as of July 29, 2023 under the Purchase Plan.

(2) Includes 120,303,275 shares subject to outstanding RSUs and 4,797,963 shares issuable under outstanding PRSUs based on an assumed target performance, unless performance is otherwise known.

(3) Includes shares available for future issuance under the Purchase Plan. As of July 29, 2023, as reported in Cisco’s 2023 Annual Report on Form 10-K, an aggregate of 87,713,932 shares of common stock were available for future issuance under the Purchase Plan, including shares subject to purchase during the current purchase period. Under the 2005 Stock Incentive Plan, each share issued as a stock grant (or pursuant to the vesting of a stock unit) will reduce the share reserve by 1.5 shares. Further, each share issued upon the settlement of a dividend equivalent will reduce the shares reserved by 1.5 shares. Under the 2005 Stock Incentive Plan, non-employee directors may also elect to receive fully vested shares of common stock (or RSUs that would be settled in shares after the non-employee director left the Board) in lieu of all or a specified portion of their regular cash retainer, additional retainer paid in connection with service on any committee, or other cash fees based on the fair market value of the shares on the date any cash retainer or fee would otherwise be paid.

(4) Excludes options, warrants and other equity rights assumed by Cisco in connection with mergers and acquisitions. As of July 29, 2023, a total of 356,464 shares of common stock were issuable upon exercise of outstanding options and 1,155 shares were issuable upon the vesting of RSUs under those other assumed arrangements. The weighted average exercise price of those outstanding options is $6.48 per share. No additional awards may be granted under those assumed arrangements.

(5) As of July 29, 2023, 123,749,428 shares and 87,713,932 shares were available for future issuance under the 2005 Stock Incentive Plan and the Purchase Plan, respectively, as reported in Cisco’s 2023 Annual Report on Form 10-K.

 

​

​

​

​

​

​

​

​

​

​

​

​

Vote Required

The affirmative vote of the holders of a majority of the votes properly cast (for the avoidance of doubt, abstentions and broker non-votes are not counted as votes cast for or against such matter) is required for approval of this proposal.

Recommendation of the Board of Directors

The Board of Directors recommends that the stockholders vote FOR the approval of the amendment and restatement of the 2005 Stock Incentive Plan.

 

​

​

​

​

​

​

​

​

​

​

​

​

Proposal No. 3 – Advisory Vote to Approve Executive Compensation

Under Section 14A of the Exchange Act, Cisco stockholders are entitled to cast an advisory vote to approve the compensation of Cisco’s named executive officers, known as a “Say on Pay” vote. The stockholder vote is an advisory vote only and is not binding on Cisco or its Board of Directors. Although the vote is non-binding, the Board and the Compensation Committee value the opinions of our stockholders and will consider the outcome of the vote when making future compensation decisions for our named executive officers.

The core of Cisco’s executive compensation philosophy and practice continues to align real pay delivery with performance. Cisco’s executive officers are compensated in a manner consistent with Cisco’s business strategy, competitive practice, sound corporate governance principles, and stockholder interests and concerns. We believe our compensation program is strongly aligned with the long-term interests of our stockholders. We urge you to read the CD&A, the compensation tables, and the narrative discussion set forth on pages 40 to 79 for additional details on Cisco’s executive compensation program. Below are a few highlights of our pay-for-performance philosophy.

Fiscal 2023 Pay and Performance

Fiscal 2023 was a milestone year for Cisco with record performance, solid customer demand, increased market share, and innovation in key areas like AI, security, and cloud. In fiscal 2023, we delivered double-digit growth in total revenue and strong profitability in a challenging environment. We set several new records for the company including total revenue, net income, earnings per share (“EPS”), operating cash flow, annualized recurring revenue (“ARR”), and remaining performance obligations (“RPO”). We also continued to make progress in the transformation of our business model, delivering increased software and subscriptions.

Our fiscal 2023 incentive plan financial results were as follows:

■

Revenue1 11% above fiscal 2022

​

■

Operating Income1 11% above fiscal 2022

​

■

Operating Cash Flow 50% above fiscal 2022

​

■

EPS1 14% above fiscal 2022

​

■

Product ARR1 10% above fiscal 2022

​

1 Revenue and Operating Income as determined pursuant to the EIP, EPS as determined pursuant to the fiscal 2023 PRSUs and pursuant to the Compensation Committee’s exercise of negative discretion as described in the CD&A below, and product ARR as determined pursuant to the transformational PRSUs, as set forth in the CD&A below.

Long-term incentives continue to be the largest element of named executive officer compensation, consistent with market practice. For Cisco’s CEO, approximately 60% of long-term grant value is comprised of performance shares earned for achievement against rigorous goals for operating cash flow, EPS, and relative total stockholder return (“TSR”) performance measured over three years. For Cisco’s other named executive officers, approximately 50% of long-term grant value is comprised of performance shares earned for achievement against the same goals of operating cash flow, EPS, and relative TSR performance measured over the same three-year period. Our PRSUs for fiscal 2021 – 2023 were earned at 89.8% of target as operating cash flow and EPS performance were at 108.7% of target over the three-year period, while relative TSR for the three-year period was below the target performance level, reflecting the rigor applied to the Compensation Committee’s goal setting.

After evaluating a range of potential long-term incentive designs and in order to incentivize the key drivers of Cisco’s business transformation, at the beginning of fiscal 2023, the Compensation Committee granted one-time PRSUs using a three-year performance period, with three annually set goals, and a new performance metric, product ARR, which is designed to drive our future growth and profitability by incentivizing product ARR growth over the performance period. The Compensation Committee determined that product ARR growth correlates with the success of Cisco’s business transformation strategy. These one-time PRSUs have three-year cliff vesting (with no vesting upon retirement or other termination except in the event of a named executive officer’s death or terminal illness) and were designed to retain our executive talent in a very competitive market to enable them to work to

 

​

​

​

​

​

​

​

​

​

​

​

​

deliver results against the rigorous product ARR performance goals and increase stockholder value through the successful transformation of the business.

We believe our compensation structure and its resulting realizable pay for executive officers demonstrates Cisco’s strong commitment to aligning real pay delivery with performance.

At the annual meeting, we are asking stockholders to vote on the following advisory resolution:

RESOLVED, that the stockholders approve the compensation of Cisco’s named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules, including the CD&A, the compensation tables and narrative discussion.

Vote Required

The affirmative vote of the holders of a majority of the votes properly cast (for the avoidance of doubt, abstentions and broker non-votes are not counted as votes cast for or against such matter) is required for approval, on an advisory basis, of this proposal. Under our policy of providing for an annual advisory vote on executive compensation, we expect that our next advisory vote to approve the compensation of Cisco’s named executive officers will be at our 2024 Annual Meeting of Stockholders.

Recommendation of the Board of Directors

The Board of Directors recommends that the stockholders vote FOR approval of the non-binding advisory resolution to approve executive compensation.

 

​

​

​

​

​

​

​

​

​

​

​

​

Proposal No. 4 – Advisory Vote on the Frequency of Holding Future Votes Regarding Executive Compensation

Under Section 14A of the Exchange Act, at least every six years Cisco stockholders are entitled to cast an advisory vote to indicate the frequency with which we should hold future non-binding votes to approve executive compensation, or to abstain from voting. Our stockholders last voted on such a resolution in 2017 with the majority voting for a frequency of every year (1 year).

We are once again requesting your non-binding vote to determine whether the frequency of the vote to approve the compensation of our named executive officers should be every 1 year, 2 years or 3 years. The Board of Directors and the Compensation Committee believe that annual advisory votes will allow the Compensation Committee, management, and our stockholders to continue to engage in a timely, open and meaningful dialogue regarding our executive compensation philosophy, policies and practices.

Vote Required

The advisory vote regarding the frequency of the stockholder vote described in this proposal will be determined by a plurality of the votes cast. The frequency – “1 Year,” “2 Years” or “3 Years” – receiving the highest number of affirmative votes will be determined to be the preferred frequency of holding future non-binding votes to approve executive compensation. Abstentions and broker non-votes are not counted and will have no effect on this proposal.

Recommendation of the Board of Directors

The Board of Directors recommends a vote for a frequency of every year (1 YEAR) for holding future non-binding votes to approve executive compensation.

 

​

​

​

​

​

​

​

​

​

​

​

​

Executive Compensation

Compensation Discussion and Analysis

Introduction

The following discussion describes Cisco’s compensation program for its named executive officers. Cisco’s named executive officers for fiscal 2023 are our CEO, our Chief Financial Officer (“CFO”), and our three most highly compensated executive officers (other than the CEO and CFO) who were serving as executive officers at the end of fiscal 2023.

The named executive officers are:

Our fiscal 2023 performance has continued to prove the strength of our people, the scale, resilience, and agility of our business, and continued demand for our technology. Guided by our strategic plan and purpose-led culture, we are focused on meeting the changing needs of our customers by harnessing competitive advantages that are essential to our future growth. We prioritized our strategic growth by helping our customers transform infrastructure, secure the enterprise, power hybrid work, reimagine applications, and drive toward sustainability. The following are performance and compensation highlights for fiscal 2023.

Executive Summary

Company Performance

Fiscal 2023 was a milestone year for Cisco with record performance, solid customer demand, increased market share, and innovation in key areas like AI, security, and cloud. In fiscal 2023, we delivered double-digit growth in total revenue and strong profitability in a challenging environment. We set several new records for the company including total revenue, net income, EPS, operating cash flow, ARR, and RPO. We also continued to make progress in the transformation of our business model delivering increased software and subscriptions.

Our fiscal 2023 incentive plan financial results were as follows:

■

Revenue1 11% above fiscal 2022

​

■

Operating Income1 11% above fiscal 2022

​

■

Operating Cash Flow 50% above fiscal 2022

​

■

EPS1 14% above fiscal 2022

​

■

Product ARR1 10% above fiscal 2022

​

1 Revenue and Operating Income as determined pursuant to the EIP, EPS as determined pursuant to the fiscal 2023 PRSUs and pursuant to the Compensation Committee’s exercise of negative discretion as described below, and product ARR as determined pursuant to the transformational PRSUs, in each case as set forth below.

 

​

​

​

​

​

​

​

​

​

​

​

​

Our strategy to transform our business model continues to resonate with customers as they digitize their organizations. In fiscal 2023, total subscription revenue increased 10%. RPO continued to grow strongly and exceeded $34 billion, reflecting the strength of our portfolio of software and services. We are also focused on the entire customer lifecycle to drive expansion and renewals. We continue to make strategic investments in innovation to capitalize on significant growth opportunities, expanding addressable markets and driving our competitive differentiation while positioning Cisco for long-term growth and stockholder value creation.

Stockholder Returns

We maintained our historical practice of paying cash dividends and making share repurchases. We returned $10.6 billion to stockholders in fiscal 2023 consisting of:

■

$4.3 billion in share repurchases

​

■

$6.3 billion in cash dividends

​

As of the end of fiscal 2023, our 1-year and 3-year TSR1 increased 19% and 23%, respectively.

1 TSR represents cumulative stock price change with dividends reinvested. 1-year and 3-year TSR are measured based on the fiscal year periods ending July 29, 2023.

Strong Say-On-Pay Support

Last year’s say-on-pay proposal was approved by approximately 89% of stockholder votes. We continued to engage with stockholders to consider enhancements to our compensation program in fiscal 2023. Consistent with feedback we received from stockholders to increase the emphasis on operating goals that drive long-term growth, for fiscal 2023, we changed our long-term incentive program such that the financial performance goal multiplier will have an increased impact on the number of fiscal 2023 PRSUs that are earned and the relative TSR performance goal for the fiscal 2023 PRSUs will have a reduced impact, modifying the financial performance goal multiplier higher or lower by no more than 20% rather than operate as a separate multiplier as was the case for PRSUs granted in fiscal 2021 and 2022. Other than this change, as a result of our say-on-pay vote, the Compensation Committee retained its general approach to executive compensation and continued to apply the same general pay-for-performance principles and philosophy as in prior fiscal years.

Annual Executive Incentive Plan

Our revenue and operating income under the EIP resulted in a company performance factor (“CPF”) of 1.80 for fiscal 2023, up from 0.58 in fiscal 2022, reflecting above target achievement of financial performance goals. The Compensation Committee set the fiscal 2023 targets for revenue and operating income 6% and 2% above fiscal 2022 performance, respectively, as measured under the EIP.

2021-2023 PRSU Plan

The payout under our three-year PRSU plan for fiscal 2021-2023 was 89.8% of target (versus 44.3% for fiscal 2020-2022), representing achievement of 108.7% of our cash flow and EPS goals and 71% for the goal of TSR relative to the component companies of the S&P 500 Index over the three-year period based on Cisco’s TSR at the end of the performance period at the 36th percentile.

 

​

​

​

​

​

​

​

​

​

​

​

​