Director Compensation

The general policy of the Board is that compensation for independent directors should be a mix of cash and equity-based compensation, with the majority of compensation being provided in the form of equity-based compensation. Intel does not pay management directors for Board service in addition to their regular employee compensation. The Corporate Governance and Nominating Committee, consisting solely of independent directors, has the primary responsibility for reviewing and considering any revisions to director compensation. The Board reviews the committee's recommendations and determines the amount of director compensation.

Intel's Legal department, Corporate Secretary, and Compensation and Benefits Group in the Human Resources department support the committee in recommending director compensation and creating director compensation programs. In addition, the committee can engage the services of outside advisers, experts, and others to assist the committee. During 2009, the committee did not use an outside adviser to aid in setting director compensation.

To assist the committee in its annual review of director compensation, Intel's Compensation and Benefits Group provides director compensation data compiled from the annual reports and proxy statements of companies that the Board uses as its "peer group" for determining director compensation. Based on the recommendation of our Compensation and Benefits Group, the director peer group was revised in 2009. The director peer group now aligns with the peer group used to set executive pay and consists of 15 technology companies and 10 companies within the Standard & Poor's S&P 100* Index, described in detail below under "Compensation Discussion and Analysis; External Competitive Considerations." The committee targets cash and equity compensation at the median of the peer group.

After reviewing the revised peer group director compensation data in June 2009, the committee 1) set pay for the new non-executive Chairman of the Board, 2) increased the value of the annual equity award from $145,000 to $175,000, since the previous level of compensation was deemed below the market median, and 3) changed the equity grant vehicle from 100% restricted stock units (RSUs) to 50% RSUs and 50% outperformance stock units (OSUs) in order to more closely align with the equity package that Intel executives receive. The OSU program is more thoroughly discussed below under "Compensation Discussion and Analysis."

Non-employee director compensation consists of the following elements:

annual cash retainer of $75,000
annual RSU grant with a grant date fair value of approximately $87,500
annual OSU grant with a grant date fair value of approximately $87,500
Audit Committee chair annual fee of $20,000
all other Committee chair annual fees of $10,000 per committee
non-chair Audit Committee member annual fee of $10,000
non-executive Chairman of the Board annual cash retainer of $212,500 and an annual equity award with a market value of approximately $212,500, with the value delivered 50% in RSUs and 50% in OSUs