Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Approval of Fiscal 2020 Named Executive Officer Bonuses
On March 8, 2021, the Compensation and Leadership Committee (the “Committee”) of the Board of Directors of Motorola Solutions, Inc. (the “Company”), with the concurrence of the Board of Directors with respect to the Chairman and Chief Executive Officer, approved cash bonuses payable to the persons who will be considered “named executive officers” (“NEOs”) of the Company for fiscal 2020. The Company’s Executive Officer Short Term Incentive Plan goals approved by the Committee in February 2020 (the “2020 STIP”) contained targets for the Company’s non-GAAP operating earnings and free cash flow for fiscal 2020. In determining the bonuses payable under the 2020 STIP, the Company’s performance for fiscal 2020 was to be measured against these targets, with a minimum level of performance against the targets being required for bonuses to become payable under the 2020 STIP. Plan performance was expressed as a percentage (the “Corporate Performance Factor”), which would be applied to each plan participant’s bonus opportunity and adjusted for individual performance. Under the 2020 STIP, the Committee retained the right to terminate or amend the 2020 STIP in any respect, including by increasing or decreasing Company and individual incentive compensation targets, as well as by adjusting an individual’s incentive compensation up or down on a discretionary basis.
In 2020, the Company’s operations were negatively impacted by the COVID-19 pandemic, which reduced market demand for products (and therefore the Company’s revenue) and resulted in supply chain constraints. As a result, the Company’s non-GAAP operating earnings and free cash flow for fiscal 2020 fell short of the minimum thresholds for payout under the 2020 STIP. However, the Committee determined that the pandemic represented an extraordinary event outside of management’s control and that management had done an admirable job supporting key public safety and other essential customers during the year in a challenging environment. As the pandemic unfolded, management prioritized the protection of the health, safety and well-being of the Company’s employees by having the majority of its office workers work remotely, suspending employee travel, withdrawing from certain industry events, increasing the frequency of cleaning services, encouraging face coverings, and using thermal scanning. Management worked to protect the health, safety and well-being of the Company’s employees while continuing to lead the Company in servicing mission-critical networks on-site for the Company’s customers in order to continue to provide seamless operations. In addition, the Company’s sales teams continued to improve virtual engagement with customers and with our prioritization of research and development efforts, the Company’s engineering teams adapted the Company’s offerings to equip customers with the latest technology in an effort to protect their workplaces from the spread of COVID-19 and support essential customer workstreams. Although the Company’s revenue for fiscal 2020 decreased by 6% compared to fiscal 2019, management was able to grow the Software and Services segment revenue by 9% for the full year, sustain profitability levels comparable to the prior year through responsible cost management, achieve record backlog of $11.4 billion, and generate $1.6 billion in operating cash flow for the full year. In addition, management exceeded the financial outlook for the second half of the year provided to the investment community in July 2020.
In light of these factors and the Committee’s desire to recognize and reward management’s efforts during the pandemic, the Committee determined to award discretionary bonuses to the Company’s NEOs and authorized management of the Company to pay a similar discretionary bonus to employees who were eligible for an incentive award under the Company’s Annual Incentive Plan. Other factors that the Committee considered and that contributed to the Committee’s decision to apply its discretion to award such discretionary bonuses included each NEO’s significant individual contributions towards maintaining efficient operations in a highly uncertain and challenging environment, protecting the Company’s workforce, supporting key customers, and enabling essential workstreams to continue during the pandemic, along with the NEO’s in office in May 2020 voluntarily agreeing to a temporary reduction of base salary. Based on its assessment of the impact of the pandemic, the Committee determined that a discretionary bonus approximating 50 - 65% of the target amount under the 2020 STIP was reasonable and appropriate based on informed discretion. The Committee believes this approach is consistent with the Company’s pay-for-performance culture and fairly recognizes management’s successful efforts to mitigate the impacts of COVID-19 on the Company’s business and efforts to position the Company for a strong recovery and future growth.