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PROPOSAL 2 – ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY”)
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The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 enables our shareholders to vote to approve, on an advisory (non-binding) basis, the compensation of our Named Executive Officers as described in this Proxy Statement in the “Compensation Discussion and Analysis” section and the related compensation tables beginning on page 27. We seek your advisory vote and ask that you indicate your support for the compensation of the Named Executive Officers as disclosed in this Proxy Statement.
This “say-on-pay” proposal gives our shareholders the opportunity to express their views on the compensation of our Named Executive Officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers as described in this Proxy Statement. At our fiscal 2017 Annual Meeting of Shareholders, our shareholders voted to have an annual advisory vote on say-on-pay and in accordance with the results of this vote, the Board of Directors determined to implement an advisory vote on executive compensation every year until the next required vote on the frequency of shareholder votes on the compensation of executives, which is expected to occur at the Fiscal 2023 Annual Meeting of Shareholders.
At our annual meeting of shareholders held in January 2021, 85% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. See “Consideration of the Fiscal 2020 Advisory Vote on Executive Compensation” on page 31.
Please read the “Compensation Discussion and Analysis” section and related compensation tables for information necessary to inform your vote on this proposal.
The Board of Directors invites you to review carefully the Compensation Discussion and Analysis beginning on page 27 and the tabular and other disclosures on executive compensation beginning on page 50, and cast a vote “FOR” the following resolution:
“Resolved, that shareholders approve, on an advisory basis, the compensation of Micron’s Named Executive Officers, as discussed and disclosed in the Compensation Discussion and Analysis, the executive compensation tables, and any narrative executive compensation disclosure contained in this Proxy Statement.”
The say-on-pay vote is required by Section 14A of the Exchange Act (15 U.S.C. 78n-1) and is advisory and therefore not binding on us, the Compensation Committee, or the Board of Directors. Furthermore, because this non-binding, advisory resolution primarily relates to the compensation of our Named Executive Officers that has already been paid or contractually committed, there may not be an opportunity for us to revisit these decisions. However, the Board of Directors and Compensation Committee value the opinions of our shareholders and will consider the results of the say-on-pay vote and any other feedback from shareholders in their evaluation of our compensation program as they believe to be appropriate.
25
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VOTE REQUIRED FOR APPROVAL
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The affirmative vote of a majority of the voting power of our Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this Proposal 2 is required to approve the non-binding advisory vote on the compensation of our Named Executive Officers.
While this vote is non-binding on our Company and our Board of Directors, and will not be construed as overruling a decision by our Company or our Board or creating or implying any additional fiduciary duty for our Company or our Board, our Board and the Compensation Committee value the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions for Named Executive Officers under our executive compensation program.
26 | 2021 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis presents material information helpful or necessary to understand the objectives and policies of our compensation program for executive officers and the compensation reported in the tables that follow. This discussion focuses on the compensation awarded to, earned by, and paid to the following individuals:
•Sanjay Mehrotra, our President and Chief Executive Officer;
•David A. Zinsner, our Executive Vice President and Chief Financial Officer;
•Manish Bhatia, our Executive Vice President, Global Operations;
•Scott J. DeBoer, our Executive Vice President, Technology and Products; and
•Sumit Sadana, our Executive Vice President and Chief Business Officer.
Throughout this discussion and elsewhere in this Proxy Statement, the foregoing individuals are referred to as our “Named Executive Officers.”
Executive Summary
Fiscal 2021 Highlights
•We achieved robust profitability in fiscal 2021 with record revenues across a diverse set of markets, including mobile, embedded, auto, and industrial, with an all-time high for NAND revenue:
◦$27.7 billion in revenue (compared to $21.4 billion in fiscal 2020);
◦$5.9 billion in GAAP net income attributable to Micron, or $5.14 in earnings per diluted share (compared to $2.7 billion and $2.37, respectively, in fiscal 2020).
•We ended fiscal 2021 with $10.5 billion of cash, marketable investments, and restricted cash.
•We initiated a quarterly dividend that was paid in October 2021, reflecting our confidence in the durable cash generation power of our business, and we plan to grow the dividend over time.
•For the first time in our history, we established technology leadership concurrently in both DRAM and NAND with our 1-alpha DRAM and 176-layer NAND, the industry’s most advanced nodes in high volume production, reaching mature yields 20% to 30% faster than prior nodes:
◦DRAM:
▪1-alpha and 1z DRAM nodes combined represented the majority of our DRAM bit production by fiscal year end; and
▪We were the first to introduce LP5X DRAM in mobile applications and safety-capable LP5 for automotive applications.
◦NAND:
▪We were the first to introduce uMCP5 managed NAND in mobile applications;
▪We continued our leadership on high-density QLC NAND storage with client QLC SSD bit mix hitting a new record; and
▪We moved our SSD portfolios toward leadership datacenter solutions.
▪We entered into new credit facilities with interest rates and fees linked in part to achievement of sustainability targets and continued to make progress toward achieving our long-term environmental goals
27
and aspirations announced in fiscal 2020 with plans to allocate about $1 billion of capital expenditures in support of those goals and aspirations.
▪The representation of women on the Board grew to comprise one-half of the Board in fiscal 2021.
Total Shareholder Return (“TSR”)
The following chart shows our relative TSR data as compared to the S&P 500 Composite Index and the median of our Compensation Peer Group as identified in "Compensation-setting Process and the Determination of Compensation Levels – ”Market Data” Defined" below.
The information presented is based on closing prices on or nearest to September 2 for each period presented above and represents annualized rates of return reflecting price appreciation plus reinvestment of dividends and the compounding effect of dividends paid, if any, on reinvested dividends.
Compensation Highlights
•In October 2020, the Compensation Committee set compensation levels and performance goals for fiscal 2021 based on a review of financial results, projections, individual contributions, strategic objectives, Market Data (as defined below), and market conditions.
28 | 2021 Proxy Statement
◦The following pay mix, based on target amounts, was established for our Chief Executive Officer and other Named Executive Officers (on average) for fiscal 2021:
◦Our Named Executive Officers are eligible to earn short-term incentive awards pursuant to our Executive Officer Performance Incentive Plan (“EIP”). The Compensation Committee selected performance goals for our Named Executive Officers based on their correlation to the creation of shareholder value and their alignment with our strategic objectives.
▪For fiscal 2021, the Compensation Committee established goals tied to profitability and the achievement of certain technology, inventory, product, and cost milestones, and goals focusing on key stakeholders. Please see “Fiscal 2021 Executive Compensation – Fiscal 2021 Short-Term Incentive Awards” for additional detail concerning these goals.
◦We used a mix of 50% time-based restricted stock and 50% performance-based restricted stock units for our fiscal 2021 long-term equity incentives.
◦The metrics for our performance-based restricted stock units include percentage of sales as high value solutions and TSR relative to the semiconductor sector. In addition, there is a technology product engineering sample and product qualification sample stretch goal associated with the high-value solutions goals. The relative TSR and high-value solutions goals have a three-year measurement period.
◦Salary and short-term incentive targets as a percentage of base salary did not change for any of our Named Executive Officers for fiscal 2021.
29
Components of our Executive Compensation Program
As illustrated in the table below, our executive compensation program is designed to focus on the longer-term and performance-based components of target compensation.
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Compensation Component*
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Characteristics
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Purpose
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Determining Factors
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Base Salary
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–
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Fixed Compensation
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–
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Compensates executives for performing day-to-day job responsibilities
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–
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Market Data median sets baseline
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–
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Attracts, develops, and retains highly-qualified executive talent
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–
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Adjusted for executive’s contributions, experience, and performance
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–
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Maintains stable management team
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Short Term Incentive Pay
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–
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Variable, performance-based cash compensation
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–
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Provides performance-based, incentive cash awards for outstanding performance at the individual, business-unit, and/or company-wide level
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–
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Market Data median forms baseline
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–
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Target payout is tied to a percentage of executive’s base salary
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–
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Encourages accountability by rewarding achievement of specific performance goals
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–
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Annual, pre-determined goals set by the Compensation Committee
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–
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Focuses executives on achievement of near-term financial and operational objectives
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- Net income target
- Achievement of certain technology, inventory, product, and cost milestones and other goals (including environmental sustainability and diversity, equality, and inclusion)
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–
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Promotes long-term company success and drives shareholder value
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Long Term Incentive Pay
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Performance RSUs
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–
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Variable, performance-based equity compensation
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–
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Creates direct, specific alignment with shareholders’ interests by focusing executives on long-term value creation through the achievement of key operational milestones and stock price performance
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–
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Goals set by the Compensation Committee
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–
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Three-year performance period
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- Percentage of sales as high value solutions
- TSR relative to the semiconductor sector
- Additional earning opportunities for achievement of stretch product milestones
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–
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Earned at the end of the second and third year for the operational goal and each day beginning on the first day of the second year for the financial goal
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50% of total banked PRSU vests at end of year 2, remaining and/or incremental vests at end of year 3
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Time-Based RSAs
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–
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Variable, performance-based equity compensation
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–
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Provides alignment with shareholder interests by focusing executives on long-term value creation
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–
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Value based on stock price
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–
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Vests ratably over 3 years
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–
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Provides retention value
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* The percentages shown for each of the compensation components in the table above are presented based on base salary, target annual STI award, and the annual LTI awards (at the target award values approved by the Compensation Committee) granted to our CEO (on the left) and averaged for all other Named Executive Officers, excluding our CEO (on the right).
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30 | 2021 Proxy Statement
Consideration of the Fiscal 2020 Advisory Vote on Executive Compensation
At the Fiscal 2020 Annual Meeting of Shareholders on January 14, 2021, in our annual advisory vote on executive compensation, 85% of the votes cast were voted in support of the compensation of our Named Executive Officers. The Compensation Committee appreciates and values the views of our shareholders. In considering the results of the fiscal 2020 advisory vote on executive compensation, the Compensation Committee concluded that the compensation paid to our executive officers and our overall executive pay practices have shareholder support and have been effective in implementing our stated compensation philosophy and objectives. The Compensation Committee recognizes that executive pay practices and governance principles continue to evolve. Consequently, we discussed executive compensation and other matters with shareholders throughout fiscal 2021 and intend to continue our outreach to shareholders on executive compensation and other matters. The Compensation Committee also intends to continue to seek the advice and counsel of its compensation advisors. Our shareholders may communicate any concerns or opinions on executive pay directly to the Compensation Committee or the Board of Directors. Please refer to “Executive Sessions and Communications with the Board of Directors” on page 21 for information about communicating with the Board of Directors.
Oversight of the Executive Compensation Program
Each year, the Compensation Committee, advised by its independent compensation consultant, undertakes a rigorous process to review our executive compensation program and determine executive compensation in the context of our pay-for-performance philosophy. The Compensation Committee believes a substantial portion of our executive compensation should be incentive-based and focused on long-term performance to help ensure that the interests of our executive officers are aligned with those of our shareholders. Our primary long-term objective is to drive sustainable value creation for our shareholders by attracting, retaining, developing, and motivating a diverse group of top executive talent through a comprehensive and market-competitive executive compensation program. The Compensation Committee reviews and approves the goals and objectives used to determine executive compensation, evaluates performance in light of such goals and objectives, and determines and approves compensation levels based on that evaluation.
The Compensation Committee annually engages an outside compensation consultant. The Compensation Committee also works closely with our CEO with respect to the determination of compensation of other officers. A more complete description of the Compensation Committee’s responsibilities is provided in the Compensation Committee’s Charter approved by the Board of Directors, which can be found on our website, www.micron.com. A more complete description of the role of the Compensation Committee’s compensation consultant and our CEO in the compensation process is described later in this Compensation Discussion and Analysis. Additional information regarding the Compensation Committee’s compensation consultant, the specific activities it undertakes for us, and its fees can be found under “Compensation-setting Process and the Determination of Compensation Levels” on page 34.
31
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Our Compensation Principles
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WHAT WE DO
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WHAT WE DON’T DO
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ü Pay for performance by requiring that a substantial portion of our executives’ compensation be earned based on performance goals
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û No special retirement benefits other than participation in our retirement plans on the same basis as other employees
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ü Link our compensation program to our long-term corporate growth strategy and key drivers of sustainable shareholder value creation
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û No tax gross-ups for change in control pay
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ü Use a mix of objective performance measures, cash- and equity-based components, and short- and long-term incentive opportunities that hold our executive officers accountable for executing on our long-term strategy
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û No repricing of options or stock appreciation rights without prior shareholder approval
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ü Engage an independent compensation consultant to evaluate and advise the Compensation Committee on our compensation program design and pay decisions for our executive officers
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û No “single-trigger” vesting for awards
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ü Cap maximum payout levels under our incentive plans
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û No pledging or hedging activities involving our stock
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ü Maintain a compensation recoupment (“clawback”) policy that provides for recoupment of incentive compensation paid to current and former executives in the event of an accounting restatement due to material noncompliance
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ü Maintain executive stock ownership guidelines
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ü Provide limited perquisites
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32 | 2021 Proxy Statement
Pay-for-Performance Philosophy
Our compensation philosophy for executive officers is based on the belief that the interests of our executives should be closely aligned with our long-term performance and sustainable value creation for our shareholders. To support this philosophy, a large portion of each executive officer’s compensation is placed “at risk” and linked to the accomplishment of specific financial and operational performance goals that we expect will lead to increased long-term value creation for our shareholders. The table below summarizes the key elements of the compensation that applied to our Named Executive Officers in fiscal 2021 relative to our pay-for-performance philosophy.
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Highlights of Our Pay-for-Performance Approach
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•
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A substantial majority of the compensation available for executives is performance-based and delivered in the form of equity in order to more closely align management and shareholder interests.
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•
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Market Data forms the basis of our compensation targets, with differentiation based on individual factors such as nature of the individual’s role, proficiency in the role, sustained performance over time, and importance to our leadership succession plans.
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•
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Incentive awards require achievement of critical financial and operating goals and are primarily measured against objective metrics that we believe result in the creation of sustainable value for our shareholders.
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•
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Actual, realized compensation is designed to fluctuate and be commensurate with changes in shareholder value over time.
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•
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Performance-based equity, measured by internal and external metrics ultimately aimed at driving shareholder value, comprises a significant portion of our long-term incentives.
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•
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The Compensation Committee reviews our pay-for-performance compensation arrangements annually, with input from our CEO and advice from the Compensation Committee’s independent compensation consultant.
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•
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Individual performance assessment is based on numerous factors, including among others: contribution to business results and company performance; completion of objectives; behavior consistent with the highest standard of integrity, ethics, and company values; and commitment to sustainability and diversity, equality, and inclusion programs and initiatives.
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Targeting “Reasonable” and “Competitive” Pay
We believe that offering a compensation package that is “reasonable” and “competitive” with what our executives could otherwise obtain in the market, and especially from companies within our Compensation Peer Group, enables us to attract, motivate, reward, and retain qualified individuals and to meet our overall objective of increasing shareholder value. Our Compensation Peer Group consists of companies that we believe are especially likely to be our competitors for executive talent and is discussed further in “Market Data Defined” below. We determine what would be “reasonable” and “competitive” compensation based upon an analysis of the Market Data, recommendations of our compensation consultant, and our historical experience.
Reasonable
The Compensation Committee generally considers the Market Data median to be “reasonable,” but could deviate from such benchmark based on certain factors, such as:
•differences in position and level of responsibility among officers, both in absolute terms and relative to our other officers and as compared to similarly situated officers within the Compensation Peer Group;
•past and anticipated contributions;
•technical expertise;
•Company performance;
•applicable business unit performance; and
•length of service and/or experience, both in absolute terms and relative to our other officers and as compared to officers within the Compensation Peer Group.
33
The semiconductor industry is highly volatile. Market Data, which is a compilation of data from many companies provided by our compensation consultant as further described below, may change dramatically from year to year and can evolve as compensation practices change, executives retire or are replaced with less experienced and lower-paid executives, goals are achieved or not achieved resulting in varying payouts, participants in proprietary surveys change, and the completeness or accuracy of compensation data improves or deteriorates. Accordingly, what may have been the median or within a “reasonable” range of competitiveness in one year, may be higher or lower for the next. For this reason, even though the Compensation Committee generally uses the Market Data median as its benchmark and guiding principle, officer compensation may vary, above or below the median, or a range from the median, year over year.
Competitive
We believe, including based on advice from our compensation consultant, that a competitive compensation package will address and measure compensation practices for executive positions with respect to three primary elements of compensation:
•base compensation (salary);
•short-term incentive compensation (cash bonus programs); and
•long-term incentive compensation (time-based restricted stock and performance-based restricted stock units).
We do not require that a particular element comprises a set portion of the total compensation mix. We do believe, however, that a significant portion of the compensation should be variable (such as performance-based incentives and incentives tied to the performance of the Company and its stock) as compared to fixed (such as base salary), and that such variable compensation aligns executives’ interests with those of our shareholders. Additionally, although the Compensation Committee reviews total direct compensation (which is the sum of base salary, short-term incentive, and long-term incentive compensation) for each of our Named Executive Officers, it does not have a fixed objective with respect to such total direct compensation. The Compensation Committee’s philosophy is to use incentive pay opportunities as a way to ensure we are able to attract and retain top talent, rather than base salary.
Compensation-setting Process and the Determination of Compensation Levels
The Compensation Committee reviews the compensation of our executive officers on an annual basis and sets compensation levels at the beginning of each fiscal year. As part of this process, the Compensation Committee reviews our financial results for the year just ended, projections for future periods, our strategic business plan, and the Market Data provided by our compensation consultant. The Compensation Committee also works with our CEO to establish performance goals that further our strategic objectives.
Engagement of Compensation Consultant
The Compensation Committee annually engages a compensation consultant to provide a comprehensive review of executive compensation matters. This compensation consultant provided the Compensation Committee with information for our officers on cash and non-cash compensation elements and historical and trend payment data.
The Compensation Committee has established procedures intended to keep its compensation consultant’s advice to the Compensation Committee objective and free of influence from our management. These procedures include: a direct reporting relationship to the Compensation Committee; a provision in the Compensation Committee’s engagement letter with the compensation consultant specifying what information, data, and recommendations can be shared with management; and an annual update to the Compensation Committee on the compensation consultant’s relationship with the Company, including a summary of the work performed during the preceding 12 months. For fiscal 2021, the specific activities undertaken by the compensation consultant for the Compensation Committee included:
34 | 2021 Proxy Statement
•review the Compensation Peer Group (as defined in the Compensation Discussion and Analysis) and recommend any changes to its members;
•benchmark total target direct compensation and its components (salary, target short-term incentives, and target long-term incentives) of our officers using several data sources;
•evaluate our historical pay-for-performance relationship;
•review the metrics and targets associated with the annual short-term incentives and long-term incentive plans;
•review the proposed equity grants for executives, along with vesting recommendations;
•assist with a risk assessment of our compensation practices;
•review a draft of the Compensation Discussion and Analysis component of our proxy statement disclosure; and
•attend the Compensation Committee meetings in which executive compensation matters are discussed.
Compensia, Inc. (“Compensia") was the Compensation Committee’s compensation consultant in fiscal 2021. We paid Compensia a total of $140,539 in fiscal 2021 for services provided. Compensia provided services related exclusively to the executive and non-employee director compensation consulting work performed for the Compensation Committee and for the Governance and Sustainability Committee.
The Compensation Committee considered Compensia’s independence in light of SEC rules and Nasdaq Listing Rules. The Compensation Committee received a letter from Compensia addressing its independence, including the following factors: (i) other services provided to us by them; (ii) fees paid by us as a percentage of their total revenue; (iii) policies or procedures maintained by them that are designed to prevent a conflict of interest; (iv) any business or personal relationships between the individual consultants involved in the engagement and any member of the Compensation Committee; (v) whether the individual consultants involved in the engagement owned shares of our Common Stock; and (vi) any business or personal relationships between our executive officers and them or the individual consultants involved in the engagement. The Compensation Committee concluded that there were no conflicts of interest with Compensia.
“Market Data” Defined
Each year, our Compensation Committee, with assistance from the management team (including our CEO) and Compensia, identifies a group of peer companies to use as benchmarks when setting target pay levels (our “Compensation Peer Group”). With input and advice from our compensation consultant, the Compensation Committee reviews our Compensation Peer Group annually to ensure that it reflects industry or economic changes, such as changes in business strategies, operations, product lines, revenues, or availability of key talent. Historically, the Compensation Committee’s peer selection process focused primarily on the semiconductor industry and revenue size.
Our Compensation Peer Group for fiscal 2021 is comprised of the following 16 companies, which we believe are companies with which we are likely to compete for executive talent. In consultation with Compensia, the Compensation Committee did not make any changes to the Compensation Peer Group for fiscal 2021.
35
For fiscal 2021, our Compensation Peer Group was as follows:
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Adobe Inc.
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Advanced Micro Devices, Inc.
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Applied Materials, Inc.
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Broadcom Inc.
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Cisco Systems, Inc.
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Hewlett Packard Enterprise Company
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IBM
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Intel Corporation
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Lam Research Corporation
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NVIDIA Corporation
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QUALCOMM Corporation
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Salesforce.com, Inc.
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Seagate Technology
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Texas Instruments Incorporated
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VMware, Inc.
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Western Digital Corporation
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Compensation Peer Group Data
Compensia gathers data from the proxy statements published by our Compensation Peer Group and from published compensation surveys. The relevant survey and Compensation Peer Group data for fiscal 2021, each as discussed below, were weighted equally by the Compensation Committee and are collectively referred to throughout this discussion as the “Market Data.”
When collecting and assessing market compensation data, we collect data based on job descriptions first. This permits the Compensation Committee to match positions held by our executives with those of our Compensation Peer Group and, as described more fully below, deviate from benchmarked data based on the factors described earlier. If we are not able to match positions to a reasonable number of companies within the Compensation Peer Group, we look to the rank of the person involved and match ranks, e.g., our third-highest paid officer could be compared to the third-highest paid officer at each company within the Compensation Peer Group.
Survey Data
Survey data may vary from year to year. For fiscal 2021, our compensation consultant used the Radford Global Technology Survey and information obtained from public filings by the Compensation Peer Group. We believe these surveys are particularly relevant for high-technology companies given the high level of participation by such companies in the survey.
Compensation-Setting Process
Compensia reviews the most recent available data and identifies the Market Data values for the 25th, 50th (i.e., median), and 75th percentile with respect to each position or rank, then compares our compensation data, both as to elements and amounts to be paid or potential value to be delivered, with that of the Market Data and reports its findings to the CEO and the Compensation Committee. Our CEO works with Compensia by providing our financial data with respect to the most-recently completed fiscal year. The CEO also reviews projected financial results for the current fiscal year and our strategic business plan. For all Named Executive Officers other than himself, the CEO makes suggestions as to base salary, recommends a potential set of company-wide and/or business unit metrics and targets for the current fiscal year with respect to short-term incentives, and offers suggestions as to long-term incentive compensation. He makes no recommendations as to his own level of compensation. The Compensation Committee reviews the Market Data, discusses the Market Data with the CEO and with Compensia, discusses individual officer performance based on input from the CEO and, without the CEO present, discusses the CEO’s own performance for the most-recently completed fiscal year and anticipated performance for the current year. The Compensation Committee uses the Market Data and the deliberations to determine whether our compensation is competitive and reasonable as described above and whether, and to what extent, the Compensation Committee believes it would be appropriate to deviate from the Market Data and competitive practices. Following this deliberation, the Compensation Committee exercises its business judgment to certify the payment of compensation based on the financial results for the most-recently completed fiscal year, and approves the compensation for the current fiscal year, including the metrics and targets for the current year.
36 | 2021 Proxy Statement
Fiscal 2021 Executive Compensation
Fiscal 2021 Base Salaries
At the completion of fiscal 2020, Market Data showed that the base salaries of Messrs. Zinsner, DeBoer, and Sadana were below the 50th percentile for their positions or ranks, and the base salaries of Mr. Bhatia and Mr. Mehrotra were above the 50th and 75th percentiles, respectively, for their positions or ranks. The Compensation Committee decided not to increase the base pay for each of our Named Executive Officers to align with the Company’s decision to delay team member base pay increases in light of economic uncertainty relating to the COVID-19 pandemic.
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Executive Officer
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Fiscal 2021 Base Salary
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Base Salary % Change From Fiscal 2020
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Sanjay Mehrotra
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$
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1,350,000
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0
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%
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David A. Zinsner
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662,000
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0
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%
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Manish Bhatia
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695,000
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0
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%
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Scott J. DeBoer
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595,000
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0
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%
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Sumit Sadana
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745,000
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0
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%
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Fiscal 2021 Short-Term Incentive Awards
We provided annual short-term incentive cash awards to our executive officers pursuant to the EIP. The EIP was last approved by our shareholders in January 2018. The purpose of the EIP is to attract, retain, and reward qualified executives who are important to our success, by providing performance-based, incentive cash awards for outstanding performance at the individual and/or company-wide level. In fiscal 2021, the Compensation Committee set the short-term incentive “opportunity” (“Target Award”) for each Named Executive Officer in terms of a specified percentage of such officer’s base salary.
The target incentive amounts payable under the EIP for achievement of the fiscal 2021 goals are shown in the columns “Estimated Future Payouts under Non-Equity Incentive Plan Awards” of the “Grants of Plan-Based Awards in Fiscal 2021” table. All goals were established with threshold (50%), target (100%), exceptional (150%), and maximum (200%) payout levels, with the threshold, target, exceptional, and maximum payouts requiring a significant level of execution and effort and no assurance of goal achievement.
Target Awards established for fiscal 2021 for our Named Executive Officers, as a percentage of base salary, were measured against the Market Data median, as part of the Compensation Committee’s efforts to make such opportunities “Reasonable” as described above. Though the Market Data median is instructive, the Compensation Committee also considers the other factors described under the section labeled “Reasonable” above when determining Target Awards for our Named Executive Officers. For fiscal 2021, the following Target Awards were established, and were unchanged from fiscal 2020:
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Executive Officer
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% of Base Salary
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Sanjay Mehrotra
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200
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%
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David A. Zinsner
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100
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%
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Manish Bhatia
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100
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%
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Scott J. DeBoer
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100
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%
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Sumit Sadana
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110
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%
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37
The Compensation Committee established a profitability goal and five operational metrics for evaluating performance in fiscal 2021, which includes performance on sustainability issues including labor practices, health and safety, environmental issues including climate change and water, and management systems:
•profitability (50% weighting);
•achievement of targeted levels of inventory (10% weighting)
•achievement of certain product milestones (including sales of certain NAND and DRAM products as a percentage of total sales, growth of certain channel sales, and revenue from emerging technologies) (10% weighting);
•execution to, and acceleration of, our technology roadmap (objective criteria/milestones related to NAND and DRAM), with an additional stretch goal for exceptional performance (10% weighting, plus potential stretch goal);
•continued increases in our cost competitiveness (10% weighting); and
•achievement of certain milestones focusing on customers and other key stakeholders (10% weighting), including:
◦customer quality ranking, delivery performance, and customer business review;
◦environmental sustainability (Process GHG emissions abatement, transition to renewables (vPPA / PPA); water restoration efforts; and increasing waste reuse, recycle, recovery (RRR)%); and
◦diversity, equality and inclusion (increasing representation of underrepresented groups at the new hire and senior leader levels; pay equity for underrepresented groups; increasing the inclusion index score in the Company’s engagement survey; and all team members completing one ally training session during fiscal 2021).
The Compensation Committee chose these metrics and their linkage to our business and results of operations because they believe:
•performance against these metrics enhances shareholder value and rewards operational excellence that positions the Company for better long-term performance;
•a focus on sustainability benefits our team members, communities, and other stakeholders;
•a balanced weighting limits the likelihood of rewarding executives for taking excessive risk;
•including a target encourages the pursuit of profitable revenue and strong margins; and
•using different measures avoids paying for the same performance twice.
Shortly after the fiscal year concluded, the Compensation Committee reviewed and determined the Company’s performance against these corporate metrics, applied the percentage of achievement to plan and weighted the results according to the weightings established at the beginning of the year. After applying this formula, the Compensation Committee considered each Named Executive Officer’s performance over fiscal 2021 and established a final EIP payout for fiscal 2021. Our Named Executive Officers received EIP bonuses in the following amounts in fiscal 2021:
|
|
|
|
|
|
Executive Officer
|
Bonus Paid
|
|
|
Sanjay Mehrotra
|
$
|
4,800,600
|
|
David A. Zinsner
|
1,177,036
|
|
Manish Bhatia
|
1,235,710
|
|
Scott J. DeBoer
|
1,057,910
|
|
Sumit Sadana
|
1,457,071
|
|
Fiscal 2021 Long-Term Equity Incentives
We believe long-term incentive compensation should be tied to our success and promote increases in shareholder value. Accordingly, performance-based restricted stock unit awards are a significant component of our executive compensation program. We believe these awards are especially aligned with shareholders’ interests as their value is dependent upon the achievement of key operational milestones or stock price performance. To
38 | 2021 Proxy Statement
help retain executives, we also grant time-based restricted stock awards. The Compensation Committee reviews peer data related to the mix and types of long-term incentive awards and works with its independent compensation consultant to determine the allocation and type of performance- and time-based awards to grant each fiscal year.
In fiscal 2021, the Compensation Committee set the long-term incentive mix at 50% performance-based restricted stock units (“PRSUs”) and 50% time-based restricted stock awards. The Compensation Committee believes that a high percentage of PRSUs emphasizes Micron’s strong pay-for-performance philosophy underlying our executive compensation program.
In determining the amount of the long-term equity incentive awards for our Named Executive Officers, the Compensation Committee reviewed Market Data and information provided by Mr. Mehrotra related to the other officers’ performance and his recommendation as to the amount of their awards. For information on Mr. Mehrotra’s long-term equity incentive, please see the discussion below on CEO compensation. The following table shows the value of our Named Executive Officers’ fiscal 2021 long-term equity incentives:
|
|
|
|
|
|
Named Executive Officer
|
Fiscal 2021 Long-Term Equity Incentives(1)
|
|
|
Sanjay Mehrotra
|
$
|
18,500,000
|
|
David A. Zinsner
|
5,000,000
|
|
Manish Bhatia
|
6,000,000
|
|
Scott J. DeBoer
|
5,000,000
|
|
Sumit Sadana
|
6,500,000
|
|
(1)Reflects target grant-date fair value.
We have not, and do not plan to time the grant of long-term incentive awards (or the award or payment of any other compensation) with the release of material, non-public information. Historically, long-term incentive awards have been made in the first quarter of the fiscal year with the exact grant date corresponding with the date of the meeting of the Compensation Committee. Historically, long-term incentive grants to the Named Executive Officers are approved by the Compensation Committee on the same day as the grants to other executive officers. For purposes of our equity plans, fair market value is defined as the closing price as quoted on Nasdaq for the last market-trading day prior to the date of grant.
Performance-based RSUs Granted in Fiscal 2021
PRSUs support the Compensation Committee’s desire to link realized value to the Company’s long-term success and help align executive compensation with shareholder interests. For fiscal 2021, the Compensation Committee awarded PRSUs under performance metrics that measure the percentage of bits shipped as part of a high-value solution (the “2021 High-Value Solutions PRSU Award”) and relative total shareholder return (TSR) growth (the “2021 TSR PRSU Award”). The achievement of these awards requires a significant level of execution and effort and there is no assurance of goal achievement.
PRSU awards are eligible to be earned (or “banked”) during the second and third years of the three-year period covering fiscal 2021, 2022, and 2023 (the “Performance Period”) based upon results against performance metrics set at the beginning of the Performance Period. The actual number of PRSUs that will be banked and become eligible to vest under the 2021 High-Value Solutions PRSU Award and the 2021 TSR PRSU Award (together the “2021 PRSU Awards”) is determined by reference to each Named Executive Officer’s target number of PRSUs and the payout factor that results from actual performance versus pre-established performance metrics (the “Payout Factor”), and is subject to the caps discussed below.
The number of PRSUs that each Named Executive Officer may earn under all 2021 PRSU Awards (taken together) during the Performance Period will not exceed two times the aggregate target number of PRSUs covered by all of a Named Executive Officers’ 2021 PRSU Awards (the “2x Limit”). As a result, our Named Executive Officers’ ability to earn and vest any PRSUs is capped at the 2x Limit. Additionally, the maximum award
39
of PRSUs may not exceed 5,000,000 shares of our Common Stock in any one calendar year to any one participant, as provided in the applicable equity incentive plan.
2021 High-Value Solutions PRSU Award
The 2021 High-Value Solutions PRSU Award ties 50% of each Named Executive Officer’s target performance-based long-term incentive opportunity to the achievement of certain percentages of products shipped as high-value solutions, with two additional earnings opportunities for stretch goals based on product development milestones.
Performance is measured by exceeding a threshold, then meeting certain prescribed targets, subject to a maximum payout. The maximum payout for achieving such targets is 200% of the target number of PRSUs under the award, subject to any increases for achieving the stretch milestones described below but capped by the 2x Limit described further above. 2021 High-Value Solutions PRSU Awards do not bank unless performance meets or exceeds the established threshold. When performance results in achievement above the threshold and between performance levels, the applicable Payout Factor will be determined based on interpolation between performance levels.
In addition, the 2021 Payout Factors with respect to the 2021 High-Value Solutions PRSU Award may be increased upon achievement of two stretch milestones relating to revenues that the Compensation Committee believes represent significant progress in the development of next-generation products that will enhance long-term shareholder value.
Determination of Payout
Achievement levels with respect to the Payout Factor applicable to a 2021 High-Value Solutions PRSU Award are measured at the end of each applicable fiscal year of the Performance Period. No later than 60 days after the end of each fiscal year in the Performance Period (each, a “Certification Date”), the Compensation Committee determines and certifies the resulting Payout Factors for the applicable fiscal year as set forth above. PRSUs that have achieved the requisite performance become banked.
Vesting
PRSUs do not vest under the 2021 High-Value Solutions PRSU Award until the Certification Date that immediately follows the end of fiscal 2022, when 50% of the then-unvested banked PRSUs (for the avoidance of doubt, inclusive of any PRSUs becoming banked PRSUs as of such Certification Date) will vest. Remaining banked PRSUs and/or incremental PRSUs that become banked PRSUs will vest as of the Certification Date that immediately follows the end of fiscal 2023. If the Named Executive Officer terminates employment with the Company for any reason other than a termination by the Company for cause, any banked shares will continue to vest on the vesting schedule described above. No further PRSUs under the 2021 High-Value Solutions PRSU Award will vest following the Named Executive Officer’s termination for cause. For purposes of the 2021 High-Value Solutions PRSU Award, cause is as defined in the agreement between the Named Executive Officer and the Company governing the terms of such Named Executive Officer’s employment or termination thereof, or if not so defined, as defined in the equity incentive plan under which the award was granted.
2021 TSR PRSU Award
The 2021 TSR PRSU Award ties 50% of each Named Executive Officer’s target performance-based long-term incentive opportunity to the Company’s share price growth as compared to the median total shareholder return of the companies in the PHLX Semiconductor Sector Index (SOX) over the three-year Performance Period. For fiscal 2021, the Compensation Committee set the target goal at the median of the SOX index, which is composed of companies primarily involved in the design, distribution, manufacture, and sale of semiconductors, calculated based on the difference between the Company’s and the median SOX index company’s 60-day average three-year TSR compounded annual growth rate performance.
40 | 2021 Proxy Statement
Payout Factor
The Payout Factor for the 2021 TSR PRSU Award is based on the average of the Company’s three-year total shareholder return for each of the 60 days trailing the applicable measurement date (inclusive of the measurement date), expressed as a compounded annual growth rate (the “TSR CAGR”), relative to the TSR CAGR of the median company in the PHLX Semiconductor Sector Index (SOX) (the “Median SOX Company”). The relative TSR (“rTSR”) CAGRs of the Company versus the Median SOX Company (the “rTSR CAGR”) will be measured on each day starting on the first day of fiscal 2022 through the last day of the Performance Period (each, a “measurement date”).
The following table sets forth the levels of rTSR CAGR required to be achieved under a 2021 TSR PRSU Award to result in the Payout Factors specified below:
|
|
|
|
|
|
rTSR CAGR Achieved on a Measurement Date
|
Payout Factor for the rTSR CAGR
|
|
|
Less than -50 percentage points (“pp”)
|
0.0x
|
-50pp (“rTSR Threshold”)
|
0.5x
|
0pp (“rTSR Target”)
|
1.0x
|
+25pp (“rTSR Maximum”)
|
1.5x
|
Greater than +25pp
|
1.5x
|
If the rTSR CAGR achieved is between the rTSR Threshold and rTSR Target levels or the rTSR Target and rTSR Maximum levels, the Payout Factor will be determined using interpolation between the applicable levels.
Cap on PRSU Earning and Vesting
The maximum number of PRSUs that may vest is equal to 150% of the target number of PRSUs granted under the 2021 TSR PRSU Award (subject to the total 2x Limit cap discussed under “Performance-based RSUs Granted in Fiscal 2021” above).
Determination of Payout
As of any measurement date, the number of PRSUs under a 2021 TSR PRSU Award that are considered banked through such date will equal the product of the Payout Factor determined based on the greatest rTSR CAGR achieved during the Performance Period through such date, and the target number of PRSUs subject to the 2021 TSR PRSU Award. Accordingly, once PRSUs under a 2021 TSR PRSU Award become banked on a measurement date (due to achievement of a particular rTSR CAGR level), additional PRSUs can become banked only if a greater rTSR CAGR level is achieved on a later measurement date. Such additional PRSUs banked, if any, will be equal to the excess of the Payout Factor determined using the new, greater rTSR CAGR achieved, over the Payout Factor determined using the next greatest rTSR CAGR previously achieved, multiplied by the target PRSUs subject to the 2021 TSR PRSU Award. Following completion of each of fiscal 2022 and 2023, the Compensation Committee will certify the extent of achievement of the Payout Factors as set forth above during fiscal 2022 and 2023, respectively (an “rTSR Certification”).
Vesting
On the date of the first rTSR Certification (following fiscal 2022), 50% of any PRSUs that have been certified as banked through the date of such rTSR Certification will vest. On the date of the second rTSR Certification (following fiscal 2023), the remaining 50% of PRSUs that were certified as banked upon the first rTSR Certification, and 100% of any additional PRSUs that are certified as banked for achievement of a greater Payout Factor during the remainder of the Performance Period after the first rTSR Certification, will vest. If the Named Executive Officer terminates employment with the Company for any reason other than a termination by the Company for cause, any banked shares also will continue to vest on the vesting schedule described above. No further PRSUs under the 2021 TSR PRSU Award will vest following the Named Executive Officer’s termination for cause. For purposes of the 2021 TSR PRSU Award, cause is as defined in the agreement between the Named Executive Officer and the Company governing the terms of such Named Executive Officer’s employment or
41
termination thereof, or if not so defined, as defined in the equity incentive plan under which the award was granted.
Fiscal 2021 PRSUs Achievement
The measurement periods for the 2021 High-Value Solutions PRSU Award and the 2021 TSR PRSU Award do not begin until fiscal 2022. Accordingly, no shares were banked during fiscal 2021 under the 2021 PRSU Awards.
Fiscal 2020 PRSUs Achievement
For fiscal 2020, the Compensation Committee awarded PRSUs under performance metrics that measure TSR growth (the “2020 TSR PRSU Award”) and the percentage of bits shipped as part of a high value solution (the “2020 High-Value Solutions PRSU Award”), with the 2020 TSR PRSU Award and the 2020 High-Value Solutions PRSU Award each representing 50% of the total target PRSU opportunity for each Named Executive Officer. In October 2021, the Compensation Committee reviewed the Company’s performance relative to the 2020 PRSU Award metrics, applied the applicable 2020 Payout Factors, and certified that the following shares had been banked by our Named Executive Officers under the 2020 PRSU Awards:
|
|
|
|
|
|
|
Shares Banked for Fiscal 2021 Performance under 2020 TSR PRSU Award
|
|
|
2020 TSR PRSU Award
|
16,589
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
Shares Banked for Fiscal 2021 Performance under 2020 TSR PRSU Award
|
Shares Vested under 2020 TSR PRSU Award
|
|
|
|
Sanjay Mehrotra
|
7,483
|
|
3,741
|
|
David A. Zinsner
|
1,996
|
|
998
|
|
Manish Bhatia
|
2,494
|
|
1,247
|
|
Scott J. DeBoer
|
1,871
|
|
935
|
|
Sumit Sadana
|
2,745
|
|
1,372
|
|
|
|
|
|
|
|
|
Shares Banked for Fiscal 2021 Performance under 2020 High-Value Solutions Award
|
|
|
2020 High-Value Solutions Award
|
—
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
Shares Banked for Fiscal 2021 Performance under 2020 High-Value Solutions PRSU Award
|
Shares Vested under 2020 High-Value Solutions PRSU Award (for performance during Fiscal 2020)
|
|
|
|
Sanjay Mehrotra
|
—
|
|
141,251
|
|
David A. Zinsner
|
—
|
|
37,667
|
|
Manish Bhatia
|
—
|
|
47,084
|
|
Scott J. DeBoer
|
—
|
|
35,313
|
|
Sumit Sadana
|
—
|
|
51,791
|
|
Fiscal 2019 PRSUs Achievement
For fiscal 2019, the Compensation Committee awarded PRSUs under performance metrics that measure cumulative adjusted free cash flow, the percentage of bits shipped as part of a high value solution, and forward
42 | 2021 Proxy Statement
price-to-earnings ratio (the “2019 PRSU Award Metrics”). In October 2021, the Compensation Committee reviewed the Company’s performance relative to the 2019 PRSU Award Metrics, applied the applicable payout factors, and concluded that no conditions for the lapsing of restrictions were achieved during fiscal 2021.
Time-Based RSAs
Time-based restricted stock awards (“RSAs”) support retention and are linked to shareholder value and ownership. Annual RSAs vest ratably over three years from the date of grant, subject to continued employment. In fiscal 2021, RSAs comprised 50% of the target value of awards granted.
Other Fiscal 2021 Employee Benefits
We provide a competitive level of time-off, health, life, disability, and retirement benefits to substantially all employees. The Named Executive Officers participate in the same plans as our other employees. Executive perquisites are minor in scope and amount, and therefore are not considered to be material elements of compensation.
43
CEO Compensation
The following charts show one-year relative TSR data, three-year relative TSR data, and CEO compensation for us and our Compensation Peer Group. The information presented in the one-year TSR chart below is based on closing prices of our Common Stock on September 2, 2020, and September 2, 2021, and represents the rates of return of our Common Stock reflecting price appreciation plus reinvestment of any dividends and the compounding effect of any dividends paid on reinvested dividends. The information presented in the three-year TSR chart below is based on closing prices of our Common Stock on August 31, 2018, and September 2, 2021, and represents the rates of return of our Common Stock reflecting price appreciation plus reinvestment of any dividends and the compounding effect of any dividends paid on reinvested dividends.
The CEO pay information presented in the chart below represents peer compensation data via proxy statements presented to the Compensation Committee in September 2020. The 50th percentile presented in the charts below represents total target direct compensation (i.e., the sum of base salary, target short-term incentive, and target long-term incentive compensation).
44 | 2021 Proxy Statement
The Compensation Committee considered this data and Market Data in setting Mr. Mehrotra’s total target direct compensation for fiscal 2021.
Mr. Mehrotra’s compensation is comprised of the following elements:
Base Salary
Mr. Mehrotra’s base salary for fiscal 2021 was $1,350,000. Market Data showed that Mr. Mehrotra’s base salary was above the 75th percentile for CEOs in our Compensation Peer Group.
Short-Term Incentive
Mr. Mehrotra’s short-term incentive target was 200% of his base salary for fiscal 2021. Market Data showed that a short-term incentive of 200% of base salary was at the 60th percentile for CEOs in our Compensation Peer Group.
Long-Term Equity Incentive
Mr. Mehrotra’s long-term equity incentive opportunity for fiscal 2021 was $18,500,000. Mr. Mehrotra’s equity awards were comprised of 50% time-based restricted stock and 50% performance-based restricted stock units. Market Data showed that Mr. Mehrotra’s long-term equity incentive was between the 60th and 75th percentile for our Compensation Peer Group.
45
The following table sets forth the elements and amounts of Mr. Mehrotra’s long-term incentive awards:
|
|
|
|
|
|
|
|
|
Fiscal 2021 Awards
|
Number of Options/ Shares(1)
|
Grant Date Fair Value(1)
|
|
|
|
Time-based Restricted Stock
|
178,090
|
|
$
|
9,249,995
|
|
Performance-based Restricted Stock Units(2)
|
164,285
|
|
9,250,000
|
|
|
342,375
|
|
$
|
18,499,995
|
|
(1)Information related to Mr. Mehrotra’s long-term incentive award is also included in the “Grants of Plan-Based Awards in Fiscal 2021” table. The time-based share amounts are listed in the column “All Other Stock Awards: Number of Shares of Stock or Units,” and the performance-based share amounts are listed in the column “Estimated Future Payouts under Equity Incentive Plan Awards.” The values included in those tables reflect the grant-date fair value under U.S. GAAP.
(2)Mr. Mehrotra banked 7,483 shares based on achievement of the 2021 Performance Metrics. Please see “– Fiscal 2021 Executive Compensation – Fiscal 2021 Long-Term Equity Incentives” above.
Other Compensation
The Compensation Committee agreed to reimburse Mr. Mehrotra for commuting expenses, and federal, state, and other income taxes resulting from imputed income related to his commuting expenses. See footnote 4 to the Fiscal 2021 Summary Compensation Table for additional information.
Severance and Change in Control Arrangements
Severance Agreements
President and Chief Executive Officer
At the time of his hire, we entered into an executive agreement with Mr. Mehrotra (the “Executive Agreement”) providing for severance benefits in certain circumstances. The Executive Agreement provides that if Mr. Mehrotra’s employment is terminated (i) as result of his death or “disability,” (ii) by us without “cause” or (iii) as a result of Mr. Mehrotra’s resignation for “good reason,” then in addition to receiving his accrued base salary, accrued vacation pay, and other earned and vested employee benefits, Mr. Mehrotra will receive the following severance benefits:
•salary continuation equal to two times Mr. Mehrotra’s salary in effect upon the date of termination paid in installments during the one-year period following termination (or paid in a lump sum if Mr. Mehrotra’s termination of employment occurs on, or within 12 months after, a “change in control”);
•a pro-rated annual bonus under the EIP for the year of termination, subject to achievement of applicable performance criteria, paid in accordance with the terms of the EIP;
•an additional bonus of two times Mr. Mehrotra’s target annual bonus under the EIP for the year of termination paid on the one-year anniversary of Mr. Mehrotra’s termination;
•continued vesting (and exercisability) of any options, restricted stock or other time-based, and, subject to achievement of applicable performance criteria, performance-based equity awards for the one-year period following Mr. Mehrotra’s termination of employment; and
•a cash payment equal to the medical benefits and employer qualified plan matching contributions Mr. Mehrotra would have received had Mr. Mehrotra remained employed for an additional two years, paid in a lump sum following termination.
If Mr. Mehrotra’s severance benefits become payable on account of his “good reason” resignation prior to a “change in control” and Mr. Mehrotra becomes employed within one year of his termination of employment, the
46 | 2021 Proxy Statement
unpaid portion of his salary continuation benefit will be forfeited. The Executive Agreement also includes a “cut-back” provision, which provides that Mr. Mehrotra’s benefits under the Executive Agreement will be reduced so that no excise tax will apply under Section 280G of the Code, if such reduction will result in a higher net after-tax benefit to Mr. Mehrotra. The Executive Agreement does not provide a tax gross-up for any such tax. Mr. Mehrotra’s entitlement to the benefits provided under the Executive Agreement are conditioned on Mr. Mehrotra signing a release of claims in favor of Micron and on Mr. Mehrotra’s compliance with terms of our non-competition, non-solicitation, and non-disclosure agreement.
Other Named Executive Officers
Each of our other Named Executive Officers have severance agreements (together, the “NEO Severance Agreements”). The NEO Severance Agreements provide for severance benefits upon certain terminations of employment. These benefits begin upon a “separation of service” as defined in Section 409A of the Code, regardless of when a termination of employment or loss of officer status occurs, and ends after one year (or 18 months if termination occurs within 12 months of a change in control). We believe severance agreements for certain of our officers are in the best interests of us and our shareholders, in that they help us attract and retain qualified executive talent, promote candid discussion among our officers, help provide for a smooth transition when there is a change in management, provide the officer with benefits in consideration of a promise not to compete with us after termination of employment, and release us, and our officers, directors, employees, and agents from any and all claims.
Provided a Named Executive Officer complies with post-employment obligations and restrictions described below and all other terms of the Severance Agreement, the Named Executive Officer is entitled to receive compensation during the 12- or 18-month period following termination of employment equivalent to the compensation and benefits customarily provided to such Named Executive Officer while employed including, but not limited to, salary, executive bonus, and in certain cases, continued vesting of outstanding stock options and restricted shares. With respect to cash and equity awards that are performance-based, the Named Executive Officer is entitled to receive such awards only if the goals are achieved before or during the 12- or 18-month period following termination of employment. Such terminated Named Executive Officers are not entitled to receive any new awards under our equity plans or the EIP or to the payment of any compensation that would be deferred past the 12- or 18-month period following termination of employment due to payment criteria of an incentive program, as those criteria exist as of the date of termination. Mr. Bhatia’s severance agreement also provides for acceleration of any unvested shares granted in connection with his hiring, with any shares that remain unvested at the end of the 12- or 18-month period following termination of employment becoming 100% vested and earned on the last day of such period.
Terminated Named Executive Officers are subject to the following post-termination obligations and restrictions:
•a one-year non-competition obligation;
•confidentiality obligations related to our proprietary and confidential information that last indefinitely;
•a non-disparagement and confidentiality obligation surrounding the reasons for, and circumstances of, the Named Executive Officer’s termination of employment or change in officer status that lasts indefinitely. However, we may disclose such information if we determine, in our sole discretion, it is either required by law to be disclosed or necessary to be disclosed to serve a valid business purpose; and
•non-solicitation and non-interference provisions relating to our employees and business partners that last at least one year.
Upon receipt of all benefits under the NEO Severance Agreement, we and the Named Executive Officer are considered to have settled, waived, and voluntarily released any and all claims each has or may have against the other, inclusive of any of our affiliates, officers, directors, employees or agents, both individually and in their official capacities, which claims are accruing prior to the end of the 12- or 18-month period following termination of employment.
47
Estimated Severance Payments
See “Potential Payments Upon Termination or Change in Control” on page 57 for a description of the estimated severance amounts as of the end of fiscal 2021 for Messrs. Mehrotra, Zinsner, Bhatia, DeBoer, and Sadana.
Change in Control Arrangements
We do not have separate change in control agreements for our Named Executive Officers and directors. The Executive Agreement and the NEO Severance Agreements referenced above provide for transitional benefits in the event of termination of employment, including following a change in control. In addition, under the terms of our EIP and our equity compensation plans, awards may be substituted, assumed or accelerated upon a change in control, depending upon the circumstances. Our equity plans provide for “double-trigger” vesting provisions in the event of a change in control. As a result, if awards are assumed by a successor in connection with a change in control, such awards will not automatically vest and pay out solely as a result of the change in control. Instead, such awards will only vest if within one year after the effective date of the change in control, the participant’s employment is terminated without cause or, in the case of certain participants including our Named Executive Officers, if the participant resigns for good reason. The compensation that Named Executive Officers could receive if a change in control occurs is intended to enable them to objectively evaluate whether a potential change in control is in the best interest of us and our shareholders. Estimated value that the Named Executive Officers could receive from our change in control provisions can be found in “Potential Payments Upon Termination or Change in Control” on page 57.
Consideration of Tax Consequences when Making Compensation Decisions
Section 162(m) generally disallows a tax deduction to public companies such as Micron for annual compensation over $1,000,000 per person paid to our Named Executive Officers and certain other current or former executive officers. Prior to fiscal 2019, qualifying performance-based compensation was not subject to the deduction limit if certain requirements were met. The key components of our long-term incentives in the form of stock option grants and performance-based restricted stock unit awards were designed to comply with these requirements. Awards under the EIP also generally were designed to comply with the statute. A number of requirements must be met for particular compensation to qualify, however, there can be no assurance that such compensation will be fully deductible under all circumstances. Although the Compensation Committee considers the deductibility of compensation under Section 162(m), it reserves the right to grant or approve compensation or awards that may be non-deductible when it believes such compensation or awards are in our and our shareholders’ best interests.
Stock Ownership Guidelines
We have established stock ownership guidelines for our executive officers. The Compensation Committee believes that officers will more effectively manage a company in the best interests of the shareholders if they are also shareholders. The minimum ownership guideline for our CEO is to hold shares with a value equal to five times his base salary. Messrs. Zinsner, Bhatia, DeBoer, and Sadana are required to hold shares with a value equal to three times their base salary. Executive officers are given five years to meet the ownership guidelines. The Governance and Sustainability Committee reviews the Ownership Guidelines annually and monitors each covered executive’s progress toward, and continued compliance with, the guidelines. Stock sales restrictions may be imposed upon executive officers if the stock ownership guidelines are not met. All our executive officers are in compliance with the guidelines.
48 | 2021 Proxy Statement
The following table shows compliance with the guidelines as of the Record Date:
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
Guideline Multiplier
|
Guideline Amount(1)
|
Compliance with Guideline
|
|
|
|
|
Sanjay Mehrotra
|
5
|
$
|
7,090,000
|
|
Yes
|
David A. Zinsner
|
3
|
2,144,880
|
|
Yes
|
Manish Bhatia
|
3
|
2,189,250
|
|
Yes
|
Scott J. DeBoer
|
3
|
1,874,250
|
|
Yes
|
Sumit Sadana
|
3
|
2,346,750
|
|
Yes
|
(1)Based on salary amounts as of the Record Date.
Please see page 23 for information on stock ownership guidelines for our directors.