NARRATIVE EXPLANATION OF CERTAIN ASPECTS OF THE SUMMARY COMPENSATION TABLE
The compensation paid during the year ended December 31, 2023 to Ocugen’s NEOs who are employees, consisted of the following components:
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Base salaries;
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Annual cash incentives; and
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Long-term equity incentives.
Direct compensation for our NEOs who are employees primarily consists of three principal components: base salary, annual cash incentive opportunities, and equity based LTI awards.
Base Salary
Base salary represents the fixed portion of an executive officer’s compensation and is intended to provide compensation for day-to-day performance. The Compensation Committee believes that a competitive base salary is a necessary element of any compensation program that is designed to attract and retain talented and experienced executives. Base salaries are reviewed annually, typically in connection with the annual performance review process, and adjusted from time to time to take into account market levels, individual responsibilities, performance, and experience.
In December 2022, based on our Compensation Committee’s review and recommendation, our Board decided to increase Dr. Musunuri’s base salary for fiscal year 2023 from $715,000 to $757,900. For the 2023 fiscal year, the annual base salary for Dr. Upadhyay, Mr. Vu, and Ms. Crespo was equal to $466,200, $425,000, and $390,000, respectively.
Annual Cash Incentive
The Compensation Committee believes that performance-based cash incentive bonuses play an important role in providing incentives to executives to achieve annual corporate goals. For fiscal year 2023, the Compensation Committee approved target annual incentive bonuses and developed a framework for determining the payout percentage.
Each NEO who is an employee has a target annual cash incentive amount, which is expressed as a percentage of his/her salary. This target is set forth in each such NEO’s employment agreement and is evaluated by our Compensation Committee annually based upon a review of the peer group and industry data provided by FW Cook, as well as other items used in the process for determining executive officer compensation, as described above. From time to time, our Board or Compensation Committee may approve other discretionary or formulaic annual bonuses for the NEOs based on corporate performance (for CEO) and corporate as well as individual performance for other NEOs, as otherwise determined to be appropriate.
For the 2023 fiscal year, the approved annual incentive targets for Dr. Musunuri, Dr. Upadhyay, Mr. Vu and Ms. Crespo was equal to 66%, 45%, 45%, and 45%, respectively, of such NEO’s annual base salary.
The corporate performance metrics for 2023 included advancing product pipeline & clinical development, focused business development, operational & manufacturing excellence, and financial execution, corporate responsibility & talent management. Even though gene therapies progressed well as planned in the clinic, the Compensation Committee considered overall business factors including cash runway and market conditions, and recommended fraction of target bonus as corporate performance. Based on this corporate performance recommendation, our Board approved $102,544 as bonus for the CEO, Dr. Musunuri. The Compensation Committee approved $126,398 bonus for Dr. Upadhyay, NEO, and this bonus includes corporate as well as individual performance metrics.
Long-Term Incentive Compensation
We believe that equity grants provide the NEOs with a strong link to long-term performance and retention incentives, create an ownership culture, and help to align the interests of executive officers and stockholders.