ITEM 11. EXECUTIVE COMPENSATION.
Compensation Discussion and Analysis
Named Executive Officers
This Compensation Discussion and Analysis section discusses the compensation policies and programs for our Chief Executive Officer, our Chief Financial Officer, and our three next most highly paid executive officers during our fiscal year ended September 30, 2022 (“fiscal year 2022”), as determined under the rules of the SEC. We refer to this group of executive officers as our “Named Executive Officers.” For fiscal year 2022, our Named Executive Officers were:
• Liam K. Griffin, Chairman, Chief Executive Officer and President;
• Kris Sennesael, Senior Vice President and Chief Financial Officer;
• Reza Kasnavi, Senior Vice President, Technology and Manufacturing;
• Carlos S. Bori, Senior Vice President, Sales and Marketing; and
• Robert J. Terry, Senior Vice President, General Counsel and Secretary.
Engagement with Stockholders Regarding Executive Compensation
In evaluating and establishing our executive compensation policies and programs, our Compensation Committee values and actively considers the opinions expressed by our stockholders through the “say-on-pay” advisory vote at each annual stockholder meeting, as well as through our ongoing stockholder engagement efforts. At our 2022 Annual Meeting of Stockholders, approximately 86% of the votes cast approved our “say-on-pay” proposal. We interpreted this as stockholders generally approving our compensation policies and determinations for our fiscal year ended October 1, 2021 (“fiscal year 2021”) and that they were generally pleased with the updates the Compensation Committee had made for fiscal year 2022, in part after considering input from stockholders following our 2021 Annual Meeting of Stockholders.
Following the 2022 Annual Meeting and through November 2022, we engaged in formal stockholder outreach, soliciting feedback from approximately 20 institutional stockholders representing approximately 41% of the Company’s shares outstanding. Our Company management held subsequent engagement meetings with stockholders representing approximately 7% of the Company’s shares outstanding. Stockholders representing approximately 29% of the Company’s shares outstanding responded to the outreach, either with written feedback or declining the invitation to meet.
During these conversations, institutional stockholders expressed approval of the Company’s strategy, performance, and management. In addition, they indicated support for the Company’s compensation policies and plan designs. After considering this input from our stockholders, as well as evaluating practices related to executive compensation by public companies generally, and our peer group specifically, our Compensation Committee determined that in general, the Company’s existing executive compensation policies and plan designs remained appropriate and in the best interests of the Company and its stockholders.
Approach for Determining Form and Amounts of Compensation
The Compensation Committee, which is composed solely of independent directors within the meaning of applicable Nasdaq Rules and non-employee directors within the meaning of Rule 16b-3 under the Exchange Act, is responsible for determining all components and amounts of compensation to be paid to our Named Executive Officers, as well as any other executive officers or employees who report directly to the Chief Executive Officer.
The Compensation Committee sets compensation for the Named Executive Officers, including base salary, short-term incentives, and long-term stock-based incentives, at levels generally intended to be competitive with the compensation of comparable executives in semiconductor companies with which we compete for executive talent and to link the compensation of our Named Executive Officers to improvements in the Company’s financial performance and increases in stockholder value.
Compensation Program Objectives
The objectives of our executive compensation program are to attract, retain, and motivate highly qualified executives to operate our business, and to link the compensation of those executives to improvements in the Company’s financial performance and increases in stockholder value. Accordingly, the Compensation Committee’s goals in establishing our executive compensation program include:
•ensuring that our executive compensation program is competitive with a group of companies in the semiconductor industry with which we compete for executive talent;
•providing a base salary that serves as the foundation of a compensation package that attracts and retains the executive talent needed to achieve our business objectives;
•providing short-term variable compensation that motivates executives and rewards them for achieving Company financial performance targets;
•providing long-term stock-based compensation that aligns the interest of our executives with stockholders by rewarding them for long-term increases in stockholder value; and
•ensuring that our executive compensation program is perceived as fundamentally fair to our employees.
Retention of Compensation Consultant
The Compensation Committee has engaged Aon/Radford Consulting (“Aon/Radford”) to assist in determining the components and amount of executive compensation. Aon/Radford reports directly to the Compensation Committee, through its chairman, and the Compensation Committee retains the right to terminate or replace the consultant at any time. The Compensation Committee has considered the relationships that Aon/Radford has with the Company, the members of the Compensation Committee and our executive officers, as well as the policies that Aon/Radford has in place to maintain its independence and objectivity, and has determined that Aon/Radford’s work for the Compensation Committee has not raised any conflicts of interest. Company management also purchases published compensation and benefits surveys from Aon/Radford, and on occasion engages certain affiliates of Aon/Radford in various jurisdictions for services unrelated to executive compensation and benefits, engagements for which the Company’s management has not sought the Compensation Committee’s approval. The fees paid to Aon/Radford and its affiliates in fiscal year 2022 for these surveys and additional services did not exceed $120,000.
Use of Comparator Group Data
The Compensation Committee annually compares the components and amounts of compensation that we provide to our Chief Executive Officer and each of the other Named Executive Officers with “Comparator Group” data for each position and uses this comparison data to help inform its review and determination of base salaries, short-term incentives, and long-term stock-based compensation awards, as discussed in further detail below under “Components of Compensation.” For fiscal year 2022, the Compensation Committee approved Comparator Group data consisting of a 50/50 blend of (i) Aon/Radford survey data of semiconductor companies (where sufficient data was not available in the Aon/Radford semiconductor survey data for a given executive position, the Comparator Group data also included survey data regarding high-technology companies), and (ii) data from the group of 15 publicly traded semiconductor companies listed below. The peer group includes many business competitors, as well as certain larger semiconductor companies with which we compete for executive talent.
For the Company’s fiscal year 2022 compensation program, we made adjustments to our peer group from the prior fiscal year to improve comparability, in part in response to stockholder feedback. Specifically, we removed Applied Materials, Broadcom, and NVIDIA, all of which were significantly larger than the Company, as measured by multiple factors including market capitalization and annual revenue, and added Western Digital and NXP Semiconductors, both of which were more comparable in size to the Company.
| | | | | | | | | | | |
Peer Group for Fiscal Year 2022 Compensation (“FY22 Peer Group”) |
Advanced Micro Devices | Marvell Technology | NXP Semiconductors | Texas Instruments |
Analog Devices | Maxim Integrated Products | ON Semiconductor | Western Digital |
KLA Corporation | Microchip Technology | Qorvo | Xilinx |
Lam Research | Micron Technology | QUALCOMM | |
The Compensation Committee generally seeks to make decisions regarding each Named Executive Officer’s compensation that are competitive within the Comparator Group, with consideration given to the executive’s role, responsibility, performance, and length of service. After reviewing the Comparator Group data and considering the input of Aon/Radford, the Compensation Committee established (and the full Board was advised of) the base salary, short-term incentive target, and stock-based compensation for each Named Executive Officer for fiscal year 2022. Aon/Radford advised the Compensation Committee that such components of executive compensation for fiscal year 2022 were competitive for chief executive officers and other executive officers at companies of similar size and complexity in the semiconductor industry.
In determining the compensation of our Chief Executive Officer for fiscal year 2022, the Compensation Committee focused on (i) competitive levels of compensation for chief executive officers who are leading a company of similar size and complexity, (ii) the importance of retaining and incentivizing a chief executive officer with the strategic, financial, and leadership skills necessary to ensure our continued growth and success, (iii) our Chief Executive Officer’s role relative to the other Named Executive Officers, (iv) input from the full Board on our Chief Executive Officer’s performance, and (v) the length of our Chief Executive Officer’s service to the Company. Our Chief Executive Officer was not present during the voting or deliberations of the Compensation Committee concerning his compensation.
The Compensation Committee considered the recommendations of the Chief Executive Officer regarding the compensation of the other Named Executive Officers and each of his other direct reports. These recommendations were based on an assessment of each individual’s responsibilities, experience, performance, and contribution to the Company’s performance, and also took into account internal factors such as scope of role and level in the organization, in addition to external factors such as the current environment for attracting and retaining executives.
Components of Compensation
The key elements of compensation for our Named Executive Officers are base salary, short-term incentives, long-term stock-based incentives, and health and welfare benefits. For fiscal year 2022, the Compensation Committee sought to make decisions that would result in each Named Executive Officer’s target total direct compensation being competitive within the Comparator Group, with consideration given to the executive’s role, responsibility, performance, and length of service.
Base Salary
The Compensation Committee determines a competitive base salary for each executive officer using the Comparator Group data and input provided by Aon/Radford. In order to provide flexibility in consideration of differences in individual executives’ scope of responsibilities, length of service, and performance, the Compensation Committee did not target a specific percentile of the Comparator Group for executive officer salaries; however, the salaries of the executive officers were generally near the median of the Comparator Group.
The base salary increases for fiscal year 2022 for each Named Executive Officer, as reflected in the table below, were based on the market-based salary adjustments recommended by Aon/Radford as well as recommendations by the Chief Executive Officer (for Named Executive Officers other than himself).
| | | | | | | | | | | |
| FY2022 Base Salary ($) | FY2021 Base Salary ($) | Increase (%) |
Liam K. Griffin | 1,130,000 | 1,075,000 | 5.1% |
Kris Sennesael | 588,000 | 560,000 | 5.0% |
Reza Kasnavi (1) | 557,000 | 525,000 | 6.1% |
Carlos S. Bori | 520,000 | 475,000 | 9.5% |
Robert J. Terry | 522,000 | 492,000 | 6.1% |
(1) Mr. Kasnavi was not a Named Executive Officer prior to fiscal year 2022. |
Short-Term Incentives
Overview
Our short-term incentive compensation plan for executive officers is established annually by the Compensation Committee and is intended to motivate and reward executives by tying a significant portion of their total cash compensation to the Company’s achievement of pre-established performance goals that are generally one year or less in duration. The Compensation Committee believes that pre-established performance goals under the Company’s short-term incentive compensation plan for executive officers should generally be measured over a one-year performance period. Beginning with the Company’s fiscal year ended October 2, 2020 (“fiscal year 2020”) and continuing to the present, the Compensation Committee has established annual short-term compensation incentive plans with two six-month performance periods as a result of significant market uncertainties.
With respect to the Fiscal Year 2022 Executive Incentive Plan (the “Incentive Plan”) adopted by the Compensation Committee on December 15, 2021, the Compensation Committee determined that in light of continued uncertainties resulting from geopolitical concerns and global supply chain challenges affecting the Company and its customers, which made forecasting difficult, semi-annual performance periods would be appropriate for fiscal year 2022. Nevertheless, when the Compensation Committee set the performance goals for the second half of fiscal year 2022 in May 2022, it adopted the performance goals discussed when the Incentive Plan was first implemented in December 2021. The Compensation Committee has committed to returning to one-year performance periods for the short-term compensation incentive plan as soon as it determines that market conditions would allow the establishment of meaningful full-year performance goals.
Incentive Opportunities
For each executive officer, short-term incentive compensation at the “target” level is designed to be near the median short-term incentive compensation of the Comparator Group. After reviewing Comparator Group data, the Compensation Committee determined that the target incentive under the Incentive Plan, as a percentage of base salary, for each of the Named Executive Officers should not be changed, as compared to the target incentives under the prior year’s short-term incentive plan.
The following table shows the range of short-term incentive compensation that each Named Executive Officer could earn in fiscal year 2022 as a percentage of such executive officer’s annual base salary.
| | | | | | | | | | | |
| Threshold | Target | Maximum |
Chief Executive Officer | 80% | 160% | 320% |
Chief Financial Officer | 50% | 100% | 200% |
Other Executive Officers | 40% | 80% | 160% |
Performance Goals
In December 2021 and May 2022, the Compensation Committee established performance goals for the applicable semi-annual performance period, with each executive eligible to earn up to half of his or her annual short-term incentive compensation with respect to each six-month period. Under the Incentive Plan, any unearned amounts with respect to the first performance period were to be forfeited and could not be earned later based on performance during the second performance period or full-year performance. Payments under the Incentive Plan were based on achieving revenue and non-GAAP operating income performance goals, each of which was weighted at 50% for each respective performance period. The non-GAAP operating income performance goal is based on the Company’s publicly disclosed non-GAAP operating income1 after accounting for any incentive award payments, including those to be made under the Incentive Plan.
The target level performance goals were established by the Compensation Committee under the Incentive Plan after reviewing the Company’s historical operating results and growth rates as well as the Company’s expected future results relative to peers and were designed to require significant effort and operational success on the part of our executives and the Company. The maximum level performance goals established by the Compensation Committee have historically been difficult to achieve and are designed to represent outstanding performance that the Compensation Committee believes should be rewarded.
As discussed above, for the second half of fiscal year 2022, the Compensation Committee adopted the performance goals discussed when the Incentive Plan was first implemented in December 2021. The Compensation Committee made this decision despite expectations for revenue and non-GAAP operating income during the second half of fiscal year 2022 that were lower than the Company’s original operating plan. This resulted in the performance goals being even more difficult to achieve.
The performance goals established under the Incentive Plan for fiscal year 2022 were as follows:
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| Revenue | Non-GAAP Operating Income |
(in millions) | 1st Half | 2nd Half | 1st Half | 2nd Half |
Threshold | $2,485 | $2,515 | $927 | $948 |
Target | $2,715 | $2,750 | $1,027 | $1,053 |
Maximum | $2,790 | $2,830 | $1,062 | $1,088 |
The Incentive Plan stipulated that payouts to executives following the end of the fiscal year, under either of the metrics, were conditioned upon the Company achieving full-year non-GAAP operating income of $1.1 billion.
1 Non-GAAP operating income typically excludes from GAAP operating income the following: share-based compensation expense, acquisition-related expenses, amortization of acquisition-related intangibles, settlements, gains, losses, and impairments and restructuring-related charges.
Calculation of Incentive Plan Payments
Under the Incentive Plan, upon completion of the first six months of the fiscal year, the Compensation Committee determined the extent to which the Company’s performance goals for the first performance period were attained, reviewed the CEO’s recommended payouts under the Incentive Plan, and approved the awards to be made under the Incentive Plan with respect to the first performance period. Upon completion of the fiscal year, the Compensation Committee completed the same process with respect to the second performance period. Payments with respect to the first performance period were capped at 100% of the first half target level attributable to the applicable metric, with amounts over the target level held back and paid after the end of the fiscal year upon certification that the Company had achieved its nominal level of non-GAAP operating income for the fiscal year.
Achievement under the performance goals at the “threshold,” “target,” or “maximum” level corresponds to payment under the Incentive Plan at the “threshold,” “target,” or “maximum” percentage, as applicable, with such percentage multiplied by the executive’s base salary for the six-month period and then multiplied by the weighting assigned to that performance goal. The payout for achievement under the performance goals between either the “threshold” and “target” levels or the “target” and “maximum” levels would be based on linear interpolation between the two relevant amounts.
Each executive’s payment under the Incentive Plan is calculated by evaluating achievement of each performance goal individually, determining the portion of the total eligible incentive payment earned with respect to each such performance goal, and totaling the resulting amounts. The Compensation Committee retained the discretion to make payments, upon consideration of recommendations by the Chief Executive Officer, even if the threshold performance goals were not met or if the nominal level of non-GAAP operating income was not met, or to make payments in excess of the maximum level if the Company’s performance exceeded the maximum performance goals. While the Compensation Committee believed it was appropriate to retain this discretion in order to make short-term incentive compensation awards in appropriate extraordinary circumstances, no such adjustments were actually made.
Fiscal Year Results
For the first half of fiscal year 2022, the Company’s revenue and non-GAAP operating income achieved were $2,846 million and $1,077 million, respectively, resulting in a short-term compensation award for each Named Executive Officer with respect to such performance period equal to his or her maximum payment level, or 200% of the target payment level. A payment of the target amount was made to each Named Executive Officer in May 2022, with the remainder held back for potential payment following the completion of the fiscal year. For the second half of fiscal year 2022, the Company’s revenue and non-GAAP operating income achieved were $2,640 million and $968 million, respectively, resulting in a short-term compensation award for each Named Executive Officer with respect to such performance period equal to 68% of the target payment level. In November 2022, upon certifying that the nominal level of non-GAAP operating income had been achieved for the fiscal year, the Compensation Committee approved payment of the short-term incentive achieved with respect to the second performance period as well as payment of the remaining portion of the short-term incentive achieved with respect to the first performance period, which had been held back. The Compensation Committee did not exercise discretion, either upward or downward, to executives’ payments under the Incentive Plan.
The following table shows the Company’s achievement under the Incentive Plan:
| | | | | | | | | | | | | | |
| Revenue | Non-GAAP Operating Income |
(in millions) | 1st Half | 2nd Half | 1st Half | 2nd Half |
Threshold | $2,485 | $2,515 | $927 | $948 |
Target | $2,715 | $2,750 | $1,027 | $1,053 |
Maximum | $2,790 | $2,830 | $1,062 | $1,088 |
Achieved | $2,846 | $2,640 | $1,077 | $968 |
Long-Term Stock-Based Compensation
Overview
The Compensation Committee generally makes long-term stock-based compensation awards to executive officers on an annual basis. Long-term stock-based compensation awards are intended to align the interests of our executive officers with those of our stockholders and to reward our executive officers for increases in stockholder value over periods of time greater than one year. It is the Company’s practice to make stock-based compensation awards to executive officers in November of each year at a prescheduled Compensation Committee meeting. For fiscal year 2022, the Compensation Committee made an annual stock-based compensation award to each of the Named Executive Officers on November 10, 2021, at a regularly scheduled Compensation Committee meeting.
Fiscal Year 2022 Stock-Based Compensation Awards
In making annual stock-based compensation awards to executive officers for fiscal year 2022, the Compensation Committee first reviewed the Comparator Group grant data by executive position. The Compensation Committee used that data to inform its determination of a target dollar value for the long-term stock-based award for each executive officer, as set forth in the table below, targeting awards for fiscal year 2022 that were competitive within the Comparator Group. Each executive officer was granted a performance share award (“PSA”) and a restricted stock unit (“RSU”) award equivalent to 60% and 40%, respectively, of the dollar value of the executive’s fiscal year 2022 stock-based award, calculating the number of shares subject to each award using the fair market value of the Company’s common stock on the date of such award and an assumption that the Company would achieve the “target” level of performance required to earn the PSA. The Compensation Committee’s rationale for awarding PSAs is to further align the executive’s interests with those of our stockholders by using equity awards that will vest only if the Company achieves pre-established performance goals, and we believe the Compensation Committee’s decision to award a portion of the PSAs subject to metrics measured over a multi-year performance period more closely aligns the executive’s interests with those of our stockholders.
| | | | | | | | | | | |
Name | Value of FY22 Stock-Based Award (1) | Number of Shares Subject to PSAs, at Target (2) | Number of Shares Subject to RSUs (2) |
Liam K. Griffin | $12,750,000 | 47,720 | 31,813 |
Kris Sennesael | $4,025,000 | 15,064 | 10,043 |
Reza Kasnavi | $3,910,000 | 14,634 | 9,756 |
Carlos S. Bori | $3,910,000 | 14,634 | 9,756 |
Robert J. Terry | $3,220,000 | 12,051 | 8,034 |
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(1) The grant date fair values of these stock-based awards as disclosed further below in the “Summary Compensation Table” and the “Grants of Plan-Based Awards Table” differ from the values stated above due to the grant date fair value of the PSAs being computed using a Monte Carlo simulation to value the portion of the award related to TSR percentile ranking, in accordance with the provisions of ASC 718.
(2) Reflects the dollar value of the award, divided by $160.31 per share, which was the closing price of the Company’s common stock on the Nasdaq Global Select Market on November 10, 2021.
After setting award levels by position and evaluating our business needs for the attraction and retention of executives and employees as well as internal and external circumstances impacting the Company and its employees, the Compensation Committee also reviewed the Comparator Group data to set the aggregate number of shares of the Company’s common stock that would be made available for annual equity awards to eligible non-executive employees of the Company, as a percentage of the total number of the outstanding shares of the Company’s common stock.
FY22 PSAs
The PSAs granted on November 10, 2021 (the “FY22 PSAs”), have both “performance” and “continued employment” conditions that must be met in order for the executive to receive shares underlying the award.
The “performance” condition of the FY22 PSAs compares the Company’s performance under three distinct metrics during the applicable performance period against a range of pre-established targets, as follows:
| | | | | | | | | | | |
| Percentage of Aggregate Target Level Shares | Performance Period | Vesting |
Target Level Shares with Respect to Emerging Revenue Growth Metric (1) | 25% | Fiscal Year 2022 | 100% at the End of Year Two |
Target Level Shares with Respect to EBITDA Margin Percentile Ranking Metric (2) | 25% | Fiscal Years 2022- 2023 | 100% at the End of Year Two |
Target Level Shares with Respect to TSR Percentile Ranking Metric (3) | 50% | Fiscal Years 2022–2024 | 100% at the End of Year Three |
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(1) The emerging revenue growth metric measures the Company’s year-over-year revenue growth in certain key product categories, each of which represents an identified longer-term growth market for the Company.
(2) The EBITDA margin percentile ranking metric measures the Company’s EBITDA margin achieved relative to the companies in our FY22 Peer Group during a two-year performance period comprising the Company’s fiscal years 2022 and 2023. For purposes of the EBITDA margin percentile ranking metric, EBITDA margin is calculated by dividing EBITDA by revenue for the applicable period, where EBITDA is defined as non-GAAP operating income, plus depreciation and amortization, for the applicable period. With respect to the Company and each FY22 Peer Group company, EBITDA and revenue are calculated based on publicly reported financial information for the applicable period (which for the FY22 Peer Group companies consists of the eight-quarter period that ends closest to, but not later than, October 1, 2023).2 When calculating the Company’s EBITDA margin, the impact of any acquisition or disposition occurring within the performance period is excluded if the revenue attributable to such acquisition or disposition exceeds $50 million during such period.
(3) The TSR percentile ranking metric measures the Company’s percentile ranking achieved with respect to its peer group. The peer group for purposes of the TSR percentile ranking metric includes each of the companies in the Philadelphia Semiconductor Index as of November 10, 2021 but excludes any such company that during the three-year performance period is acquired by or merged with (or enters into an agreement to be acquired by or merged with) another entity. For purposes of the PSA award, TSR for the Company and for each company in the peer group is calculated using a starting price and ending price, which consist of the average of the closing prices for each trading day during the sixty (60) consecutive calendar days ending on, and including, the last trading day before the measurement period begins and the last trading day of the measurement period, respectively, assuming dividend reinvestment and adjusting for stock splits, as applicable.
The semiconductor industry generally and, in particular, many of the markets into which the Company sells its connectivity products, are characterized by constant and rapid technological change, continuous product evolution, and short product life cycles, including annual product refreshes in some cases. Recognizing that a significant driver of long-term growth is our ability to identify and execute on emerging revenue growth opportunities, the Compensation Committee retained emerging revenue growth as a key metric and determined that 25% of the target value under the FY22 PSAs should continue to be measured based on a one-year performance period. Specifically, the Compensation Committee retained emerging revenue growth as a one-year metric appropriate for focusing our management team on long-term value creation, given that revenue growth over the next several years is highly dependent on executing in certain product categories that have higher growth potential. In light of stockholder feedback following the 2021 Annual Meeting of Stockholders, the Compensation Committee determined that shares
2 When calculating the EBITDA margin percentile ranking, the performance of a company in the FY22 Peer Group will be included if during the performance period such company in the FY22 Peer Group publicly reports quarterly financial results for at least six consecutive quarters out of the eight applicable quarters.
earned pursuant to the emerging revenue growth metric would not vest until the two-year anniversary of the grant date.
For the FY22 PSAs, the Compensation Committee determined, in part in response to stockholder feedback, to replace the one-year design win metric used in PSAs granted in fiscal years 2020 and 2021 with a two-year EBITDA margin percentile ranking metric that measures our performance relative to our FY22 Peer Group. The previously used design win metric measured our success in achieving specific product design wins with a key customer that were governed by contractual confidentiality obligations, so we could not publicly disclose threshold, target and maximum performance goals for that metric. The EBITDA margin percentile ranking metric provides enhanced transparency because the threshold, target and maximum performance goals can be clearly disclosed. To incentivize above-median performance, the Compensation Committee set the target percentile for the EBITDA margin percentile ranking metric at the 55th percentile of our FY22 Peer Group.
As in prior years, the remaining half of the target value under the FY22 PSAs was based on three-year TSR percentile ranking, which the Compensation Committee believed provides an appropriate balance to the one-year and two-year measurement periods.
The specific pre-established performance goals under the emerging revenue growth, EBITDA margin percentile ranking and TSR percentile ranking metrics are as follows: | | | | | | | | | | | |
Company Metric | Threshold | Target | Maximum |
1-year Emerging Revenue Growth (%) | 2.5% | 10.0% | 20.0% |
2-year EBITDA Margin Percentile Ranking | 25th | 55th | 75th |
3-year TSR Percentile Ranking | 25th | 55th | 90th |
As with the Incentive Plan, the pre-established targets under the FY22 PSAs were established by the Compensation Committee after reviewing the Company’s historical operating results and growth rates as well as the Company’s expected future results relative to peers and were designed to require significant effort and operational success on the part of our executives and the Company:
•Emerging Revenue Growth Metric: The target level was set at 10%, representing above-market annual growth, the maximum level was set at 20%, which the Compensation Committee believed represented outstanding performance that would be difficult to achieve, and the threshold level was set at 2.5% as a result of continued market uncertainties related to the COVID-19 pandemic. The threshold, target and maximum levels vary year to year as a result of the composition of what, as part of the Company’s product portfolio, comprises emerging revenue. For fiscal year 2022, emerging revenue growth was based on driving growth in the following key product categories: automotive, BAW-enabled device (i.e., a product containing at least one bulk acoustic wave filter) and audio device products, as well as products sold by Mixed Signal Solutions (i.e., the Infrastructure and Automotive business that the Company acquired from Silicon Laboratories, Inc. in July 2021) (“MSS”).
•EBITDA Margin Percentile Ranking Metric: The Compensation Committee set the target percentile at the 55th percentile of the FY22 Peer Group in order to further incentivize above-median performance.
•TSR Percentile Ranking Metric: Consistent with the prior year’s award, the Compensation Committee set the target percentile at the 55th percentile of the applicable peer group in order to further incentivize above-median performance.
The number of shares issuable under the FY22 PSAs corresponds to the level of achievement of the performance goals, as follows (subject to linear interpolation for amounts between “threshold” and “target” or “target” and “maximum”):
| | | | | | | | | | | |
| Performance Achieved |
| Threshold | Target | Maximum |
% of Target Level Shares Earned with Respect to Emerging Revenue Growth Metric | 50% | 100% | 200% |
% of Target Level Shares Earned with Respect to EBITDA Margin Percentile Ranking Metric | 50% | 100% | 200% |
% of Target Level Shares Earned with Respect to TSR Percentile Ranking Metric | 50% | 100% | 300% |
The “continued employment” condition of the FY22 PSAs provides that, to the extent that the performance goals are met, the shares earned under such metrics would vest as follows (provided, in each case, that the executive remains employed by the Company through each such vesting date):
| | | | | | | | |
| Anniversary of Grant Date (1) |
| Two Year | Three Year |
% of Shares Earned with Respect to Emerging Revenue Growth Metric | 100% | |
% of Shares Earned with Respect to EBITDA Margin Percentile Ranking Metric | 100% | |
% of Shares Earned with Respect to TSR Percentile Ranking Metric | | 100% |
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(1) In the event of termination by reason of death or permanent disability, the holder of an FY22 PSA (or the holder’s estate) would receive any earned but unissued shares that would have been issuable thereunder during the remaining term of the award.
During fiscal year 2021, the base period against which fiscal year 2022 emerging revenue performance was measured, the Company achieved revenue in the specified key product categories of $1,387 million. The base period emerging revenue included revenue from the automotive, BAW-enabled device and audio product categories, as well as revenue generated by MSS, which was acquired by the Company in July 2021, including MSS’s revenue during fiscal year 2021 that preceded the acquisition.
During fiscal year 2022, the Company achieved revenue in the specified key product categories of $2,205 million, representing emerging revenue growth of 59%, which exceeds the “maximum” level of performance. This growth was driven by strong performance in the BAW-enabled and MSS product categories. This resulted in the Company achieving 200% of the target level of shares for such metric. The shares earned under this metric will be issued in November 2023, provided that the Named Executive Officer meets the continued employment condition.
Outstanding PSAs at the End of Fiscal Year 2022
As summarized in the table below of the annual PSA grants made to Named Executive Officers since our fiscal year ended September 28, 2018 (“fiscal year 2018”) (the first year in which the Compensation Committee awarded PSAs subject to a metric measured over a three-year performance period), achievement of the TSR percentile ranking metric under the FY22 PSAs, which is subject to a three-year performance period, will be determined following the conclusion of the Company’s fiscal year ending September 27, 2024 (“fiscal year 2024”). During the three-year performance period under the fiscal year 2020 PSAs comprising the Company’s fiscal years 2020, 2021, and 2022, the Company achieved a TSR of 37% resulting in its ranking in the 23rd percentile against the applicable peer group. As a result of failing to achieve the threshold TSR percentile ranking metric, no shares were earned by the Named Executive Officers with respect to such metric, and all PSAs with respect to such metric were cancelled.
| | | | | | | | | | | | | | |
PSA Fiscal Year | Grant Date | Metric | Performance Period | Achieved (% of Target) |
FY18 | 11/7/2017 | Non-GAAP EBITDA Growth | FY18 | 99.8% |
3-year TSR Percentile Ranking | FY18–FY20 | 0% |
FY19 | 11/6/2018 | Non-GAAP EBITDA Growth | FY19 | 0% |
3-year TSR Percentile Ranking | FY19–FY21 | 74.1% |
FY20 | 11/5/2019 | Emerging Revenue Growth | FY20 | 200% |
Design Wins | FY20 | 200% |
3-year TSR Percentile Ranking | FY20–FY22 | 0% |
FY21 | 11/11/2020 | Emerging Revenue Growth | FY21 | 200% |
Design Wins | FY21 | 200% |
3-year TSR Percentile Ranking | FY21–FY23 | Perf. Period in Progress (1) |
FY22 | 11/10/2021 | Emerging Revenue Growth | FY22 | 200% |
EBITDA Margin Percentile Ranking | FY22–FY23 | Perf. Period in Progress (2) |
3-year TSR Percentile Ranking | FY22–FY24 | Perf. Period in Progress (3) |
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(1) As of January 20, 2023, performance under this metric during the applicable performance period was below the “threshold” level of performance.
(2) As of January 20, 2023, performance under this metric during the applicable performance period was between the “target” and “maximum” levels of performance.
(3) As of January 20, 2023, performance under this metric during the applicable performance period was below the “threshold” level of performance.
Other Compensation and Benefits
We provide other benefits to our executive officers that are intended to be part of a competitive overall compensation program and are not tied to any company performance criteria. Consistent with our objective of having compensation programs that are considered fair to our employees, executive officers are eligible to participate in the Company’s medical, dental, vision, life, and disability insurance plans, as well as the Company’s 401(k) Savings and Retirement Plan and Employee Stock Purchase Plan, under the same terms as such benefits are offered to other benefits-eligible employees. We do not provide executive officers with any enhanced retirement benefits (i.e., executive officers are subject to the same limits on contributions as other employees, as we do not offer any supplemental executive retirement plan or other similar non-qualified deferred compensation plan), and they are eligible for 401(k) company-match contributions under the same terms as other employees.
We offered executives the opportunity to participate in a reimbursement program for fiscal year 2022 providing up to an aggregate of $20,000 to each executive for the purchase of financial planning services, estate planning services, personal tax planning and preparation services, and/or an executive physical. No tax gross-up was provided for such reimbursements. In fiscal year 2022, each of the Named Executive Officers received reimbursement in connection with such services.
Severance and Change-in-Control Benefits
None of our executive officers, including the Named Executive Officers, has an employment agreement that provides a specific term of employment with the Company. Accordingly, the employment of any such employee may be terminated at any time. We do provide certain benefits to our Named Executive Officers upon certain qualifying terminations of employment and in connection with terminations of employment under certain circumstances following a change in control. A description of the material terms of our severance and change-in-
control arrangements with the Named Executive Officers can be found immediately below and further below under “Potential Payments Upon Termination or Change in Control.”
The Compensation Committee believes that severance protections can play a valuable role in recruiting and retaining superior talent. Severance and other termination benefits are an effective way to offer executives financial security to incent them to forego an opportunity with another company. These agreements also protect the Company as the Named Executive Officers are bound by non-solicit covenants for a period of twelve (12) months after termination of employment. Outside of the change-in-control context, each Named Executive Officer is entitled to severance benefits if his or her employment is involuntarily terminated by the Company without cause and, in the case of the Chief Executive Officer, if he terminates his own employment for good reason (as defined in the Chief Executive Officer’s change-in-control agreement). The level of each Named Executive Officer’s cash severance or other termination benefit is generally tied to his or her annual base salary and short-term incentive amounts.
Additionally, each Named Executive Officer would receive enhanced severance benefits and accelerated vesting of equity awards if his or her employment were terminated under certain circumstances in connection with a change in control of the Company. These benefits are described in detail further below under “Potential Payments Upon Termination or Change in Control.” The Compensation Committee believes these enhanced severance benefits and accelerated vesting are appropriate because the occurrence, or potential occurrence, of a change-in-control transaction would likely create uncertainty regarding the continued employment of executive officers that typically occurs in a change-in-control context, and such severance benefits and accelerated vesting encourage the Named Executive Officers to remain employed with the Company through the change-in-control process and to focus on enhancing stockholder value both before and during the process. In addition, the vesting protection helps assure the Named Executive Officers that they will not lose the expected value of their equity awards because of a change in control of the Company.
Executive Officer Stock Ownership Requirements
We have adopted executive officer stock ownership guidelines with the objective of more closely aligning the interests of our executive officers with those of our stockholders. Under the executive officer stock ownership guidelines, our Named Executive Officers are each required to hold the lower of (a) the number of shares with a fair market value equal to the applicable multiple of such executive’s current base salary, or (b) the applicable number of shares, each as set forth in the table below. All of our Named Executive Officers are in compliance with the executive officer stock ownership guidelines as of the date hereof.
| | | | | | | | |
| Multiple of Annual Base Salary (1) | Shares |
Chief Executive Officer | 6 | 96,900 |
Chief Financial Officer | 2.5 | 21,000 |
Senior Vice President, Technology and Manufacturing | 2.5 | 19,900 |
Senior Vice President, Sales and Marketing | 2.5 | 18,600 |
Senior Vice President and General Counsel | 2.5 | 18,600 |
________________________
(1) For purposes of the executive officer stock ownership guidelines, the fair market value of the Company’s common stock is the average closing price per share of the Company’s common stock as reported on the Nasdaq Global Select Market (or if the common stock is not then traded on such market, such other market on which the common stock is traded) for the twelve (12) month period ending with the determination date.
Executive Compensation Recoupment Policy (“Clawback”)
In March 2022, the Company adopted an executive compensation recoupment policy that applies to both cash and equity incentive compensation for executive officers. Under this policy, if we are required to prepare an accounting restatement for one or more periods due to material noncompliance with any financial reporting requirement under the U.S. federal securities laws, the Board or a committee of independent directors authorized by the Board will investigate the circumstances to determine whether an act or omission of a current or former executive officer, involving fraud or intentional misconduct, contributed to the circumstances resulting in the restatement. Following the investigation, we may require repayment of certain incentive-based compensation received by the executive officer in the three-year period preceding restatement. The Company is planning to adopt an updated executive compensation recoupment policy that will be in compliance with new SEC and Nasdaq rules when such rules become effective.
Prohibition on Hedging and Certain Other Transactions
We prohibit our directors, officers, and employees (or any of their designees) from directly or indirectly engaging in the following transactions with respect to securities of the Company:
•selling short, including short sales “against the box”;
•buying or selling put or call options; or
•purchasing financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of securities of the Company, whether through the use of traded securities, privately negotiated derivative securities, or synthetic financial instruments.
In addition, we prohibit our directors, officers, and employees from purchasing Company securities on margin, borrowing against Company securities held in a margin account, or pledging Company securities as collateral for a loan.
Compliance with Internal Revenue Code Section 162(m)
For fiscal year 2022, the Company will be unable to deduct compensation in excess of $1 million paid to certain executive officers, as specified under Section 162(m) of the Internal Revenue Code (“IRC”). The Compensation Committee uses its judgment to authorize compensation payments that may be subject to the limit when the Compensation Committee believes such payments are appropriate and in the best interests of the Company and its stockholders.
Compensation Tables for Named Executive Officers
Summary Compensation Table
The following table summarizes compensation earned by, or awarded or paid to, our Named Executive Officers for fiscal year 2022, fiscal year 2021, and fiscal year 2020.
| | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) |
Liam K. Griffin | 2022 | 1,124,289 | 13,087,793 | 2,423,906 | 31,174 | 16,667,162 |
Chairman, Chief Executive Officer | 2021 | 1,070,223 | 11,612,745 | 3,440,000 | 27,453 | 16,150,421 |
and President | 2020 | 1,043,888 | 17,430,589 | 3,292,800 | 33,162 | 21,800,439 |
Kris Sennesael | 2022 | 585,092 | 4,131,556 | 788,306 | 17,384 | 5,522,338 |
Senior Vice President and | 2021 | 556,885 | 3,589,223 | 1,120,000 | 15,203 | 5,281,311 |
Chief Financial Officer | 2020 | 537,192 | 5,677,593 | 1,060,000 | 18,591 | 7,293,376 |
Reza Kasnavi(4) | 2022 | 553,677 | 4,013,570 | 597,396 | 33,910 | 5,198,553 |
Senior Vice President, | | | | | | |
Technology and Manufacturing | | | | | | |
Carlos S. Bori | 2022 | 515,327 | 4,013,570 | 557,713 | 15,324 | 5,101,934 |
Senior Vice President, | 2021 | 473,131 | 3,061,420 | 760,000 | 17,154 | 4,311,705 |
Sales and Marketing | 2020 | 463,189 | 4,856,262 | 731,200 | 15,444 | 6,066,095 |
Robert J. Terry | 2022 | 518,885 | 3,305,147 | 559,858 | 22,731 | 4,406,621 |
Senior Vice President, | 2021 | 490,027 | 2,850,298 | 787,200 | 16,045 | 4,143,570 |
General Counsel and Secretary | 2020 | 479,396 | 4,431,833 | 756,800 | 15,994 | 5,684,023 |
________________________
(1) The amounts in the Stock Awards column represent the grant date fair values, computed in accordance with the provisions of FASB ASC Topic 718—Compensation—Stock Compensation (“ASC 718”), of PSAs and RSUs granted during the applicable fiscal year, without regard to estimated forfeiture rates. For fiscal years 2020, 2021, and 2022, assuming the highest level of performance achievement with respect to the PSAs, the grant date fair values of the Stock Awards would be as follows: Mr. Griffin (FY 2020: $25,430,512; FY 2021: $14,912,691; FY 2022: $16,912,789), Mr. Sennesael (FY 2020: $6,637,546; FY 2021: $4,609,190; FY 2022: $5,339,011), Mr. Kasnavi (FY 2022: $5,886,558), Mr. Bori (FY 2020: $5,666,259; FY 2021: $3,931,401; FY 2022: $5,186,558), and Mr. Terry (FY 2020: $5,211,819; FY 2021: $3,660,286; FY 2022: $4,271,095). For a description of the assumptions used in calculating the fair value of equity awards in fiscal year 2022 under ASC 718, see Note 10 of the Company’s financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on November 23, 2022.
(2) Reflects amounts paid to the Named Executive Officers pursuant to the executive incentive plan adopted by the Compensation Committee for each year indicated.
(3) “All Other Compensation” includes the Company’s contributions to the executive’s 401(k) Plan account, the cost of group term life insurance premiums, and financial planning benefits. For fiscal year 2022, it specifically includes $12,200 in Company contributions to each Named Executive Officer’s 401(k) Plan account, as well as $14,072, $2,562, $20,000, and $7,791 in financial planning benefits for Messrs. Griffin, Sennesael, Kasnavi and Terry, respectively.
(4) Mr. Kasnavi was not a Named Executive Officer prior to fiscal year 2022.
Grants of Plan-Based Awards Table
The following table summarizes all grants of plan-based awards made to the Named Executive Officers in fiscal year 2022, including incentive awards payable under the Incentive Plan.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares of Stock Or | Grant Date Fair Value of Stock and |
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Units (#)(3) | Option Awards ($) |
Liam K. Griffin | | 904,000 | 1,808,000 | 3,616,000 | | | | | |
| 11/10/2021 | | | | 23,860 | 47,720 | 119,300 | | 7,987,851(4) |
| 11/10/2021 | | | | | | | 31,813 | 5,099,942(5) |
Kris Sennesael | | 294,000 | 588,000 | 1,176,000 | | | | | |
| 11/10/2021 | | | | 7,532 | 15,064 | 37,660 | | 2,521,563(4) |
| 11/10/2021 | | | | | | | 10,043 | 1,609,993(5) |
Reza Kasnavi | | 222,800 | 445,600 | 891,200 | | | | | |
| 11/10/2021 | | | | 7,317 | 14,634 | 36,585 | | 2,449,585(4) |
| 11/10/2021 | | | | | | | 9,756 | 1,563,984(5) |
Carlos S. Bori | | 208,000 | 416,000 | 832,000 | | | | | |
| 11/10/2021 | | | | 7,317 | 14,634 | 36,585 | | 2,449,585(4) |
| 11/10/2021 | | | | | | | 9,756 | 1,563,984(5) |
Robert J. Terry | | 208,800 | 417,600 | 835,200 | | | | | |
| 11/10/2021 | | | | 6,025 | 12,051 | 30,127 | | 2,017,217(4) |
| 11/10/2021 | | | | | | | 8,034 | 1,287,931(5) |
________________________
(1) The amounts shown represent the potential value of awards earned under the Incentive Plan. The amounts actually paid to the Named Executive Officers under the Incentive Plan are shown above in the “Summary Compensation Table” under “Non-Equity Incentive Plan Compensation.” For a more complete description of the Incentive Plan, please see description above under “Components of Compensation—Short-Term Incentives.”
(2) The amounts shown represent shares potentially issuable pursuant to the FY22 PSAs granted on November 10, 2021, under the Company’s 2015 Long-Term Incentive Plan, as described above under “Components of Compensation—Long-Term Stock-Based Compensation.”
(3) Represents shares underlying RSU awards granted under the Company’s 2015 Long-Term Incentive Plan. Each RSU award vests over four years at a rate of twenty-five percent (25%) per year commencing one year after the grant date and on each subsequent anniversary of the grant date for the following three years, provided the executive remains employed by the Company through each such vesting date.
(4) Reflects the grant date fair value of the FY22 PSAs, computed in accordance with the provisions of ASC 718, using (a) a Monte Carlo simulation (which weights the probability of multiple potential outcomes) to value the portion of the award related to TSR percentile ranking, and (b) a price of $160.31 per share, which was the closing sale price of the Company’s common stock on the Nasdaq Global Select Market on November 10, 2021, to value the portion of the award related to emerging revenue growth and design wins, assuming performance at the “target” level. For a description of the assumptions used in calculating the fair value of equity awards granted in fiscal year 2022 under ASC 718, see Note 10 of the Company’s financial statements included in the Company’s Annual Report on Form 10-K filed with the SEC on November 23, 2022.
(5) Reflects the grant date fair value of the RSUs granted on November 10, 2021, computed in accordance with the provisions of ASC 718 using a price of $160.31 per share, which was the closing price of the Company’s common stock on the Nasdaq Global Select Market on November 10, 2021.
Outstanding Equity Awards at Fiscal Year End Table
The following table summarizes the unvested stock awards and all stock options held by the Named Executive Officers as of the end of fiscal year 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | Stock Awards |
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (#) | Market Value of Shares or Units of Stock that Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or other Rights that Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or other Rights that Have Not Vested ($)(1) |
Liam K. Griffin | 13,211 | — | 77.66 | 11/9/2023 | 22,936(2) | 1,955,753 | 15,194(8) | 1,295,592 |
| | | | | 23,860(3) | 2,034,542 | 11,468(9) | 977,876 |
| | | | | 12,100(4) | 1,031,767 | 35,790(10) | 3,051,813 |
| | | | | 20,258(5) | 1,727,400 | | |
| | | | | 22,937(6) | 1,955,838 | | |
| | | | | 31,813(7) | 2,712,694 | | |
Kris Sennesael | 40,000 | — | 75.22 | 8/29/2023 | 7,088(2) | 604,394 | 4,862(8) | 414,583 |
| 12,770 | — | 77.66 | 11/9/2023 | 7,532(3) | 642,254 | 3,544(9) | 302,197 |
| | | | | 3,388(4) | 288,895 | 11,298(10) | 963,380 |
| | | | | 6,482(5) | 552,720 | | |
| | | | | 7,089(6) | 604,479 | | |
| | | | | 10,043(7) | 856,367 | | |
Reza Kasnavi | | | | | 6,880(2) | 586,658 | 4,102(8) | 349,778 |
| | | | | 7,318(3) | 624,006 | 3,440(9) | 293,329 |
| | | | | 2,420(4) | 206,353 | 10,974(10) | 935,753 |
| | | | | 5,470(5) | 466,427 | | |
| | | | | 6,880(6) | 586,658 | | |
| | | | | 9,756(7) | 831,894 | | |
Carlos S. Bori | | | | | 6,046(2) | 515,542 | 4,102(8) | 349,778 |
| | | | | 7,318(3) | 624,006 | 3,023(9) | 257,771 |
| | | | | 3,267(4) | 278,577 | 10,974(10) | 935,753 |
| | | | | 5,470(5) | 466,427 | | |
| | | | | 6,046(6) | 515,542 | | |
| | | | | 9,756(7) | 831,894 | | |
Robert J. Terry | | | | | 5,628(2) | 479,900 | 3,950(8) | 336,816 |
| | | | | 6,026(3) | 513,837 | 2,815(9) | 240,035 |
| | | | | 2,057(4) | 175,400 | 9,038(10) | 770,670 |
| | | | | 5,266(5) | 449,032 | | |
| | | | | 5,629(6) | 479,985 | | |
| | | | | 8,034(7) | 685,059 | | |
________________________
(1) Reflects a price of $85.27 per share, which was the closing sale price of the Company’s common stock on the Nasdaq Global Select Market on September 30, 2022.
(2) Represents shares issuable under the fiscal year 2021 PSAs (“FY21 PSAs”) with respect to the remaining 50% of earned shares under two metrics, each of which was measured over a one-year performance period consisting of
the Company’s fiscal year 2021, and each of which vested 50% at the end of FY21 and 50% at the end of FY22, assuming achievement at the “maximum” level of performance, and which were issued on November 11, 2022.
(3) Represents shares issuable under the FY22 PSAs (awarded on November 10, 2021, as described above under “Components of Compensation—Long-Term Stock-Based Compensation”) with respect to the emerging revenue growth metric measured over a one-year performance period consisting of the Company’s fiscal year 2022, assuming achievement at the “maximum” level of performance. One hundred percent (100%) of the shares to be earned under the FY22 PSAs with respect to this metric will be issued on November 10, 2023, to the extent earned and provided that the executive meets the continued employment condition.
(4) Represents shares issuable under an RSU award granted on November 6, 2018, under the Company’s 2015 Long-Term Incentive Plan. The RSU award vested at a rate of 25% per year on each anniversary of the grant date until it became fully vested on November 6, 2022.
(5) Represents shares issuable under an RSU award granted on November 5, 2019, under the Company’s 2015 Long-Term Incentive Plan. The RSU award vests at a rate of 25% per year on each anniversary of the grant date through November 5, 2023.
(6) Represents shares issuable under an RSU award granted on November 11, 2020, under the Company’s 2015 Long-Term Incentive Plan. The RSU award vests at a rate of 25% per year on each anniversary of the grant date through November 11, 2024.
(7) Represents shares issuable under an RSU award granted on November 10, 2021, under the Company’s 2015 Long-Term Incentive Plan. The RSU award vests at a rate of 25% per year on each anniversary of the grant date through November 10, 2025.
(8) Represents shares issuable under the fiscal year 2020 PSAs (the “FY20 PSAs”) with respect to the TSR percentile ranking metric, assuming achievement at the “threshold” level of performance. This portion of the FY20 PSAs, which was subject to a three-year performance period, would have been issued November 5, 2022, had it been achieved.
(9) Represents shares issuable under the FY21 PSAs with respect to the TSR percentile ranking metric, assuming achievement at the “threshold” level of performance. This portion of the FY21 PSAs, which is subject to a three-year performance period, will be issued on November 11, 2023, to the extent earned and provided that the executive meets the continued employment condition.
(10) Represents shares issuable under the FY22 PSAs (awarded on November 10, 2021, as described above under “Components of Compensation—Long-Term Stock-Based Compensation”) with respect to the TSR percentile ranking metric, assuming achievement at the “threshold” level of performance. This portion of the FY22 PSAs, which is subject to a three-year performance period, will be issued on November 10, 2024, to the extent earned and provided that the executive meets the continued employment condition. Also represents shares issuable under the FY22 PSAs with respect to the EBITDA margin percentile ranking metric measured over a two-year performance period consisting of the Company’s fiscal years 2022 and 2023, assuming achievement at the “maximum” level of performance. This portion of the FY22 PSAs will be issued on November 10, 2023, to the extent earned and provided that the executive meets the continued employment condition.
Option Exercises and Stock Vested Table
The following table summarizes the Named Executive Officers’ option exercises and stock award vesting during fiscal year 2022.
| | | | | | | | | | | | | | |
| Option Awards | Stock Awards |
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) |
Liam K. Griffin | — | — | 211,274 | 34,766,022 |
Kris Sennesael | — | — | 44,111 | 7,265,809 |
Reza Kasnavi | — | — | 37,369 | 6,145,714 |
Carlos S. Bori | — | — | 39,291 | 6,476,473 |
Robert J. Terry | 502 | 8,398 | 32,101 | 5,280,556 |
________________________
(1) The value realized on exercise is based on the amount by which the market price of a share of the Company’s common stock at the time of exercise exceeded the applicable exercise price per share of the exercised option.
(2) The value realized upon vesting is determined by multiplying (a) the number of shares underlying the stock awards that vested, by (b) the closing price of the Company’s common stock on the Nasdaq Global Select Market on the applicable vesting date.
Potential Payments Upon Termination or Change in Control
Mr. Griffin
On May 11, 2016, in connection with the appointment of Mr. Griffin as Chief Executive Officer, the Company entered into an amended and restated Change in Control / Severance Agreement with Mr. Griffin (the “Griffin Agreement”). The Griffin Agreement sets out severance benefits that become payable if, while employed by the Company, other than following a change in control, Mr. Griffin either (i) is terminated without cause, or (ii) terminates his employment for good reason. The severance benefits provided to Mr. Griffin under either of these circumstances would consist of: (i) a lump-sum payment equal to two (2) times the sum of (A) his then-current annual base salary immediately prior to such termination and (B) the Bonus Amount (as defined below); (ii) full acceleration of the vesting of all of Mr. Griffin’s outstanding stock options, which stock options would become exercisable for a period of two (2) years after the termination date (but not beyond the expiration of their respective maximum terms), full acceleration of the vesting of all outstanding restricted stock awards, and the right to receive the number of performance shares under outstanding PSAs that are earned but unissued and that he would have earned had he remained employed through the end of the applicable performance period; and (iii) provided he is eligible for and timely elects to continue receiving group medical coverage, certain COBRA continuation for him and his eligible dependents (“COBRA continuation”) for up to fifteen (15) months after the termination date. The Bonus Amount is an amount equal to the greater of (x) the average of the short-term cash incentive awards received for the three (3) years prior to the year in which the termination occurs, and (y) the target annual short-term cash incentive award for the year in which the termination occurs.
The Griffin Agreement also sets out severance benefits that become payable if, within the period of time commencing three (3) months prior to and ending two (2) years following a change in control, Mr. Griffin’s employment is either (i) terminated by the Company without cause, or (ii) terminated by him for good reason (a “Qualifying Termination”). The severance benefits provided to Mr. Griffin in such circumstances would consist of the following: (i) a lump-sum payment equal to two and one-half (21/2) times the sum of (A) his annual base salary immediately prior to the change in control, and (B) the CIC Bonus Amount (as defined below); (ii) all of Mr. Griffin’s then-outstanding stock options would become exercisable for a period of thirty (30) months after the termination date (but not beyond the expiration of their respective maximum terms); and (iii) COBRA continuation for up to eighteen (18) months after the termination date. The CIC Bonus Amount is an amount equal to the greater of (x) the average of the annual short-term cash incentive awards received for the three (3) years prior to the year in which the change of control occurs and (y) the target annual short-term cash incentive award for the year in which the change of control occurs.
The Griffin Agreement also provides that in the event of a Qualifying Termination, Mr. Griffin is entitled to full acceleration of the vesting of all of his outstanding equity awards (including stock options, restricted stock awards, RSU awards, and all earned but unissued performance-based equity awards). At the time of a change in control, all such outstanding equity awards would continue to be subject to the same time-based vesting schedule to which the awards were subject prior to the change in control (including performance-based equity awards that are deemed earned at the time of the change in control as described below). For performance-based equity awards where the change in control occurs prior to the end of the performance period, such awards would be deemed earned as to the greater of (i) the target level of shares for such awards, or (ii) the number of shares that would have been earned pursuant to the terms of such awards based upon performance up through and including the day prior to the date of the change in control. In the event that the successor or surviving company does not agree to assume, or to substitute for, such outstanding equity awards on substantially similar terms with substantially equivalent economic benefits as
exist for such award immediately prior to the change in control, then such awards would accelerate in full as of the change in control.
In the event of Mr. Griffin’s death or permanent disability (within the meaning of Section 22(e)(3) of the IRC), the Griffin Agreement provides for full acceleration of the vesting of all then-outstanding equity awards subject to time-based vesting (including stock options, restricted stock awards, RSU awards, and all performance-based equity awards where the performance period has ended and the shares are earned but unissued). The Griffin Agreement also provides that if Mr. Griffin’s death or permanent disability occurs prior to the end of the performance period of a performance-based equity award, each such award would be deemed earned as to the greater of (i) the target level of shares for such award, or (ii) the number of shares that would have been earned pursuant to the terms of such award had he remained employed through the end of the performance period, and such earned shares would become vested and issuable to him after the performance period ends. In addition, all outstanding stock options would be exercisable for a period of twelve (12) months following the termination of employment (but not beyond the expiration of their respective maximum terms).
The Griffin Agreement is intended to be exempt from or compliant with Section 409A of the IRC and has an initial two (2) year term from May 11, 2016, and thereafter renews automatically on an annual basis for up to five (5) additional years unless either the Company or Mr. Griffin timely provides a notice of non-renewal to the other prior to the end of the then-current term. The payments due to Mr. Griffin under the Griffin Agreement are subject to potential reduction in the event that such payments would otherwise become subject to excise tax incurred under Section 4999 of the IRC, if such reduction would result in his retaining a larger amount, on an after-tax basis, than if he had received all of the payments due.
Additionally, the Griffin Agreement requires that Mr. Griffin sign a release of claims in favor of the Company before he is eligible to receive any benefits under the Griffin Agreement and contains a non-solicitation provision applicable to Mr. Griffin while he is employed by the Company and for twelve (12) months following the termination of his employment.
The terms “change in control,” “cause,” and “good reason” are each defined in the Griffin Agreement. Change in control means, in summary: (i) the acquisition by a person or a group of 40% or more of the outstanding stock of the Company; (ii) a change, without approval by the Board of Directors, of a majority of the Board of Directors of the Company; (iii) the acquisition of the Company by means of a reorganization, merger, consolidation, or asset sale; or (iv) stockholder approval of a liquidation or dissolution of the Company. Cause means, in summary: (i) deliberate dishonesty that is significantly detrimental to the best interests of the Company; (ii) conduct constituting an act of moral turpitude; (iii) willful disloyalty or insubordination; or (iv) incompetent performance or substantial or continuing inattention to or neglect of duties. Good reason means, in summary: (i) a material diminution in his base compensation, authority, duties, responsibilities, or budget over which he retains authority; (ii) a requirement that Mr. Griffin report to a corporate officer or employee instead of reporting directly to the Board of Directors; (iii) a material change in his office location; or (iv) any action or inaction constituting a material breach by the Company of the terms of the agreement.
Mr. Sennesael, Mr. Kasnavi, Mr. Bori, and Mr. Terry
The Company entered into Change in Control / Severance Agreements with each of Mr. Sennesael, Mr. Kasnavi, Mr. Bori, and Mr. Terry on August 29, 2016, November 9, 2016, November 9, 2016, and November 10, 2016, respectively. Each such Change in Control / Severance Agreement is referred to herein as a “CIC Agreement.”
Each CIC Agreement sets out severance benefits that become payable if, within the period of time commencing three (3) months prior to and ending twelve (12) months following a change in control, the executive officer’s employment is either (i) terminated by the Company without cause, or (ii) terminated by the executive for good reason (for each such executive, a “Qualifying Termination”). The severance benefits provided to the executive in such circumstances would consist of the following: (i) a lump sum payment equal to one and one-half (11/2) times the sum of (A) his or her annual base salary immediately prior to the change in control, and (B) the CIC Bonus Amount; (ii) all of the executive’s then-outstanding stock options would remain exercisable for a period of eighteen
(18) months after the termination date (but not beyond the expiration of their respective maximum terms); and (iii) COBRA continuation for up to eighteen (18) months after the termination date.
Each CIC Agreement also provides that in the event of a Qualifying Termination, the executive is entitled to full acceleration of the vesting of all of his or her outstanding equity awards (including stock options, restricted stock awards, RSU awards, and all earned but unissued performance-based equity awards). At the time of a change in control, all such outstanding equity awards would continue to be subject to the same time-based vesting schedule to which the awards were subject prior to the change in control (including performance-based equity awards that are deemed earned at the time of the change in control as described below). For performance-based equity awards where the change in control occurs prior to the end of the performance period, such awards would be deemed earned as to the greater of (i) the target level of shares for such awards, or (ii) the number of shares that would have been earned pursuant to the terms of such awards based upon performance up through and including the day prior to the date of the change in control. In the event that the successor or surviving company does not agree to assume, or to substitute for, such outstanding equity awards on substantially similar terms with substantially equivalent economic benefits as exist for such award immediately prior to the change in control, then such awards would accelerate in full as of the change in control.
Each CIC Agreement also sets out severance benefits outside a change in control that become payable if the executive’s employment is terminated by the Company without cause. The severance benefits provided to the executive under such circumstance would consist of the following: (i) biweekly compensation continuation payments for a period of twelve (12) months, with each such compensation continuation payment being equal to the aggregate payment amount divided by twenty-six (26), where the aggregate payment is equal to the sum of (x) his or her annual base salary, and (y) any short-term cash incentive award then due; (ii) all then-vested outstanding stock options would remain exercisable for a period of twelve (12) months after the termination date (but not beyond the expiration of their respective maximum terms); and (iii) COBRA continuation coverage for up to twelve (12) months after the termination date.
In the event of the executive’s death or permanent disability (within the meaning of Section 22(e)(3) of the IRC), each CIC Agreement provides for full acceleration of the vesting of all then-outstanding equity awards subject to time-based vesting (including stock options, restricted stock awards, RSU awards, and all performance-based equity awards where the performance period has ended and the shares are earned but unissued). Each CIC Agreement also provides that for a performance-based equity award where the executive’s death or permanent disability occurs prior to the end of the performance period, such award would be deemed earned as to the greater of (i) the target level of shares for such award, or (ii) the number of shares that would have been earned pursuant to the terms of such award had the executive remained employed through the end of the performance period, and such earned shares would become vested and issuable to the executive after the performance period ends. In addition, all outstanding stock options would remain exercisable for a period of twelve (12) months following the termination of employment (but not beyond the expiration of their respective maximum terms).
Each CIC Agreement is intended to be exempt from or compliant with Section 409A of the IRC and has an initial two (2) year term, and thereafter renews automatically on an annual basis for up to five (5) additional years unless either the Company or the executive timely provides a notice of non-renewal to the other prior to the end of the then-current term. The payments due to each executive under his or her CIC Agreement are subject to potential reduction in the event that such payments would otherwise become subject to excise tax incurred under Section 4999 of the IRC, if such reduction would result in the executive retaining a larger amount, on an after-tax basis, than if he or she had received all of the payments due.
Additionally, each CIC Agreement requires that the executive sign a release of claims in favor of the Company before he or she is eligible to receive any benefits under the agreement. Each CIC Agreement also contains non-solicitation provisions applicable to the executive while he or she is employed by the Company and for a period of twelve (12) months following the termination of his or her employment.
The terms “change in control,” “cause,” and “good reason” are each defined in the CIC Agreements. Change in control means, in summary: (i) the acquisition by a person or a group of 40% or more of the outstanding stock of the
Company; (ii) a change, without approval by the Board of Directors, of a majority of the Board of Directors of the Company; (iii) the acquisition of the Company by means of a reorganization, merger, consolidation, or asset sale; or (iv) stockholder approval of a liquidation or dissolution of the Company. Cause means, in summary: (i) deliberate dishonesty that is significantly detrimental to the best interests of the Company; (ii) conduct constituting an act of moral turpitude; (iii) willful disloyalty or insubordination; or (iv) incompetent performance or substantial or continuing inattention to or neglect of duties. Good reason means, in summary: (i) a material diminution in the executive’s base compensation, authority, duties, or responsibilities; (ii) a material diminution in the authority, duties, or responsibilities of the executive’s supervisor; (iii) a material change in the executive’s office location; or (iv) any action or inaction constituting a material breach by the Company of the terms of the agreement.
The following table summarizes the payments and benefits that would be made to the Named Executive Officers as of September 30, 2022, in the following circumstances as of such date:
•termination without cause outside of a change in control;
•termination without cause or for good reason in connection with a change in control; and
•in the event of a termination of employment because of death or disability.
The accelerated equity values in the table reflect a price of $85.27 per share, which was the closing sale price of the Company’s common stock on the Nasdaq Global Select Market on September 30, 2022. The table does not reflect any equity awards made after September 30, 2022.
| | | | | | | | | | | | | | |
Name | Benefit | Termination w/o Cause Outside Change in Control ($)(1) | Termination w/o Cause or for Good Reason, After Change in Control ($) | Death/ Disability ($) |
Liam K. Griffin(2) | Salary and Short-Term Incentive | 6,276,038(3) | 7,845,047(4) | — |
| Accelerated RSUs | 7,427,699 | 7,427,699 | 7,427,699 |
| Accelerated PSAs (5) | 11,924,753 | 11,924,753 | 11,924,753 |
| Medical | 33,052 | 39,662 | — |
| TOTAL | 25,661,542 | 27,237,161 | 19,352,452 |
Kris Sennesael(2) | Salary and Short-Term Incentive | 588,000(6) | 1,853,233(7) | — |
| Accelerated RSUs | — | 2,302,460 | 2,302,460 |
| Accelerated PSAs (5) | — | 3,749,578 | 3,749,578 |
| Medical | 26,441 | 39,662 | — |
| TOTAL | 614,441 | 7,944,933 | 6,052,038 |
Reza Kasnavi(2) | Salary and Short-Term Incentive | 557,000(6) | 1,528,689(7) | — |
| Accelerated RSUs | — | 2,091,332 | 2,091,332 |
| Accelerated PSAs (5) | — | 3,535,806 | 3,535,806 |
| Medical | 8,241 | 12,362 | — |
| TOTAL | 565,241 | 7,168,189 | 5,627,138 |
Carlos S. Bori(2) | Salary and Short-Term Incentive | 520,000(6) | 1,446,787(7) | — |
| Accelerated RSUs | — | 2,092,440 | 2,092,440 |
| Accelerated PSAs (5) | — | 3,393,575 | 3,393,575 |
| Medical | 26,441 | 39,662 | — |
| TOTAL | 546,441 | 6,972,464 | 5,486,015 |
Robert J. Terry(2) | Salary and Short-Term Incentive | 522,000(6) | 1,473,256(7) | — |
| Accelerated RSUs | — | 1,789,476 | 1,789,476 |
| Accelerated PSAs (5) | — | 3,002,953 | 3,002,953 |
| Medical | 26,441 | 39,662 | — |
| TOTAL | 548,441 | 6,305,347 | 4,792,429 |
________________________
(1) For Mr. Griffin, includes amounts payable pursuant to a termination for good reason outside of a change in control.
(2) Excludes the value of accrued vacation/paid time off required by law to be paid upon termination.
(3) Represents an amount equal to two (2) times the sum of (A) Mr. Griffin’s annual base salary as of September 30, 2022, and (B) an Incentive Plan payment, which is equal to the three (3) year average of the actual incentive payments made to Mr. Griffin for fiscal years 2019, 2020, and 2021, since such average is greater than the “target” short-term cash incentive award for fiscal year 2022.
(4) Represents an amount equal to two and one-half (2½) times the sum of (A) Mr. Griffin’s annual base salary as of September 30, 2022, and (B) an Incentive Plan payment, which is equal to the three (3) year average of the actual incentive payments made to Mr. Griffin for fiscal years 2019, 2020, and 2021, since such average is greater than the “target” short-term cash incentive award for fiscal year 2022.
(5) Represents the value of PSAs that were unvested and outstanding as of September 30, 2022, in accordance with Item 402(j) of Regulation S-K, using the following assumptions: (a) achievement at the “target” level of performance for the FY20 PSAs (3-year TSR percentile ranking metric) scheduled to vest on November 5, 2022,
based on the Company’s actual TSR relative to the applicable peer group for fiscal years 2020–2022 tracking below the “target” level of performance; (b) achievement at 200% of the “target” level of performance for the FY21 PSAs (emerging revenue growth and design wins metrics) scheduled to vest on November 11, 2022, based on the Company’s actual achievement at the “maximum” level of performance with respect to both metrics measured over a one-year performance period consisting of the Company’s fiscal year 2021; (c) achievement at the “target” level of performance for the FY21 PSAs (3-year TSR percentile ranking metric) scheduled to vest on November 11, 2023, based on the Company’s TSR relative to the applicable peer group for fiscal years 2021 and 2022 tracking below the “target” level of performance; (d) achievement at 200% of the “target” level of performance for the FY22 PSAs emerging revenue growth metric scheduled to vest on November 10, 2023, based on the Company’s actual achievement at the “maximum” level of performance with respect to the performance metric measured over a one-year performance period consisting of the Company’s fiscal year 2022; (e) achievement at 133% of the “target” level of performance for the FY22 PSAs EBITDA margin percentile ranking metric scheduled to vest on November 10, 2023, based on the Company’s tracking of achievement between the “target” and “maximum” levels of performance with respect to the metric measured over a two-year performance period consisting of the Company’s fiscal year 2022 and fiscal year 2023; and (f) achievement at the “target” level of performance for the FY22 PSAs (3-year TSR percentile ranking metric) scheduled to vest on November 10, 2024, based on the Company’s TSR relative to the applicable peer group for fiscal year 2022 tracking below the “target” level of performance.
(6) Represents an amount equal to the Named Executive Officer’s annual base salary as of September 30, 2022.
(7) Represents an amount equal to one and one-half (1½) times the sum of (A) the Named Executive Officer’s annual base salary as of September 30, 2022, and (B) an Incentive Plan payment, which is equal to the three (3) year average of the actual incentive payments made to the Named Executive Officer for fiscal years 2019, 2020, and 2021, since such average is greater than the Named Executive Officer’s “target” short-term cash incentive award for fiscal year 2022.
CEO Pay Ratio
Following is an estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of our other employees. For fiscal year 2022:
•The annual total compensation of our Chief Executive Officer was $16,667,162.
•The annual total compensation of our median compensated employee was $30,180.
•Based on the foregoing, we estimate that our Chief Executive Officer’s total annual compensation was approximately 552 times that of our median employee.
To determine the median of the annual total compensation of our employees, we applied the following methodology and material assumptions:
•We did not use the de minimis exception to exclude any non-U.S. employees. We have a globally diverse workforce with total headcount of approximately 11,150 as of September 30, 2022, of which approximately 77% are located outside the United States, primarily in locations employing large direct labor forces such as Mexico and Singapore where wages are significantly lower than in the United States. The median employee within our employee population was identified, consistent with prior years, as of the last day of our fiscal year, or September 30, 2022, and is a full-time employee in our Mexicali, Mexico facility.
•To identify the median employee, we used a consistently applied compensation measure that included total taxable earnings paid to our employees in the most recently completed taxable year in their respective jurisdictions. This included base salary, overtime pay, shift premiums, recognition bonuses, annual cash incentive awards, and long-term stock-based incentive awards. We annualized the compensation of permanent, full-time, and part-time employees who were hired after the beginning of the most recently completed taxable year in their respective jurisdictions.
•Using this consistently applied compensation measure, we identified an employee at the median and calculated such employee’s total compensation for fiscal year 2022 in accordance with Item 402(c)(2)(x) of Regulation S-K.
•We did not use any cost-of-living adjustments in identifying the median employee.
•The annual total compensation of our Chief Executive Officer is the amount reported in the “Total” column of our Summary Compensation Table for fiscal year 2022.
We believe our pay ratio presented above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios.
Director Compensation
The Board of Directors sets the compensation for the Company’s non-employee directors, after receiving the recommendations of the Compensation Committee. In formulating its recommendations, the Compensation Committee seeks and receives input from Aon/Radford related to the amounts, terms, and conditions of director cash compensation and stock-based compensation awards, with the goal of establishing non-employee director compensation that is similar to, and competitive with, the compensation of non-employee directors at peer companies in the semiconductor industry.
Cash Compensation
Non-employee directors are paid, in quarterly installments, an annual retainer of $80,000 (increased from $75,000 effective February 9, 2022). Additional annual retainers for Chairman, Lead Independent Director, and/or committee service (paid in quarterly installments) are as follows: any non-employee Chairman of the Board ($130,000); the Lead Independent Director, if one has been appointed ($50,000); the Chairman of the Audit Committee ($30,000); the Chairman of the Compensation Committee ($20,000); the Chairman of the Nominating and Governance Committee ($15,000); non-chair member of Audit Committee ($15,000); non-chair member of Compensation Committee ($10,000); and non-chair member of Nominating and Corporate Governance Committee ($7,500). In addition, the Compensation Committee continues to retain discretion to recommend to the full Board of Directors that additional cash payments be made to a non-employee director for extraordinary service during a fiscal year.
Equity Compensation
Currently, following each annual meeting of stockholders, each non-employee director who is reelected will receive a grant of RSUs having a value of approximately $225,000 (increased from $200,000 effective February 9, 2022). Any newly appointed non-employee director will receive an initial equity grant of RSUs having a value of approximately $225,000 (increased from $200,000 effective February 9, 2022). The number of shares subject to a non-employee director’s initial RSU award or annual award is determined by dividing the approximate value of the award, as stated above, by the average closing price per share of the Company’s common stock as reported on the Nasdaq Global Select Market (or if the common stock is not then traded on such market, such other market on which the common stock is traded) for each trading day during the 30 consecutive trading day period ending on, and including, the grant date. Unless otherwise determined by the Board of Directors, (a) a non-employee director’s initial equity grant of RSUs will vest in three (3) equal annual installments on the first three anniversaries of the date of grant, and (b) a non-employee director’s annual equity grant of RSUs will vest on the first anniversary of the date of grant. In the event of a change in control of the Company, any outstanding options and RSUs awarded under the 2008 Director Long-Term Incentive Plan will become fully exercisable and deemed fully vested, respectively.
No director who is also an employee receives separate compensation for services rendered as a director. Mr. Griffin is currently the only director who is also an employee of the Company.
Director Compensation Table
The following table summarizes the compensation paid to the Company’s non-employee directors for fiscal year 2022.
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Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | Total ($) |
Christine King, Lead Independent Director | 163,750 | 188,708 | 352,458 |
Alan S. Batey | 87,218 | 188,708 | 275,926 |
Kevin L. Beebe | 93,750 | 188,708 | 282,458 |
Timothy R. Furey, Former Director(3) | 61,545 | — | 61,545 |
Eric J. Guerin | 56,239 | 388,770 | 445,009 |
Suzanne E. McBride | 55,794 | 388,751 | 444,545 |
David P. McGlade | 117,782 | 188,708 | 306,490 |
Robert A. Schriesheim | 103,750 | 188,708 | 292,458 |
Kimberly S. Stevenson, Former Director(3) | 52,356 | | — | 52,356 | |
________________________
(1) The non-employee members of the Board of Directors who were directors on September 30, 2022 held the following aggregate number of unexercised stock options and unvested RSU awards as of such date:
| | | | | | | | |
Name | Number of Securities Underlying Unexercised Options | Number of Shares Subject to Unvested RSUs |
Christine King, Lead Independent Director | — | 1,900 |
Alan S. Batey | — | 1,900 |
Kevin L. Beebe | — | 1,900 |
Eric J. Guerin | — | 3,240 |
Suzanne E. McBride | — | 3,248 |
David P. McGlade | — | 1,900 |
Robert A. Schriesheim | — | 1,900 |
(2) Reflects, for each non-employee director elected at the 2022 Annual Meeting of Stockholders (i.e., Ms. King and Messrs. Batey, Beebe, McGlade, and Schriesheim), the grant date fair value of 1,900 RSUs granted on May 11, 2022, computed in accordance with the provisions of ASC 718 using a price of $99.32 per share, which was the closing sale price of the Company’s common stock on the Nasdaq Global Select Market on May 11, 2022. Upon first being elected to serve as a director, new directors received a grant having a grant date fair value approximating $200,000, vesting annually over three years, where the grant date fair value was based on the 30-day average of the stock price on the fifth business day following the director’s appointment. The value in this column also reflects the grant date fair value of 1,340 RSUs granted to Mr. Guerin on January 31, 2022 using a price of $149.30 per share and 1,348 RSUs granted to Ms. McBride on February 2, 2022 using a price of $148.40 per share.
(3) Mr. Furey and Ms. Stevenson each served as a director until the 2022 Annual Meeting of Stockholders on May 11, 2022.
Director Stock Ownership Requirements
We have adopted Director Stock Ownership guidelines with the objective of more closely aligning the interests of our directors with those of our stockholders. The minimum number of shares of the Company’s common stock that the Director Stock Ownership guidelines require non-employee directors to hold while serving in their capacity as directors is the director base compensation (currently $80,000) multiplied by five (5), divided by the fair market value of the Company’s common stock (rounded to the nearest 100 shares). For purposes of the Director Stock Ownership guidelines, the fair market value of the Company’s common stock is the average closing price per share of the Company’s common stock as reported on the Nasdaq Global Select Market (or if the common stock is not then traded on such market, such other market on which the common stock is traded) for the twelve (12) month period ending with the determination date. All of our directors have met the stock ownership guidelines as of the date hereof (with the exception of Mr. Guerin and Ms. McBride, who are not required to comply with the guidelines until the fifth anniversary of their respective appointments to the Board of Directors).
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors currently consists of Ms. King (Chairman), Mr. Batey, and Mr. Schriesheim. Mr. McGlade served on the Compensation Committee until May 11, 2022, when Mr. Batey was appointed to the Compensation Committee. No member of this committee was at any time during fiscal year 2022 an officer or employee of the Company, was formerly an officer of the Company or any of its subsidiaries, or had any employment relationship with the Company or any of its subsidiaries. No executive officer of the Company has served as a director or member of the compensation committee (or other committee serving an equivalent function) of any other entity, where one of such entity’s executive officers served as a director of the Company or a member of the Compensation Committee.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included herein with management, and based on the review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the annual report on this Form 10-K for the year ended September 30, 2022.
THE COMPENSATION COMMITTEE
Christine King, Chairman
Alan S. Batey
Robert A. Schriesheim