UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrantx☒ �� Filed by a Party other than the Registrant¨☐
Check the appropriate box:
Preliminary Proxy Statement | ||
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||
Definitive Proxy Statement | ||
Definitive Additional Materials | ||
Soliciting Material Pursuant to § 240.14a-12 |
Texas Instruments Incorporated
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
No fee required. | ||||
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | ||||
(1) | Title of each class of securities to which the transaction applies:
| |||
| ||||
(2) | Aggregate number of securities to which the transaction applies:
| |||
| ||||
(3) | Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
| |||
| ||||
(4) | Proposed maximum aggregate value of the transaction:
| |||
| ||||
(5) | Total fee paid: | |||
| ||||
Fee paid previously with preliminary materials. | ||||
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | ||||
(1) | Amount Previously Paid:
| |||
| ||||
(2) | Form, Schedule or Registration Statement No.:
| |||
| ||||
(3) | Filing Party:
| |||
| ||||
(4) | Date Filed:
| |||
|
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
April 21, 201626, 2018
|
Dear Stockholder:
You are cordially invited to attend the 20162018 annual meeting of stockholders on Thursday, April 21, 2016, at26, 2018, in the cafeteriaauditorium on our property at 12500 TI Boulevard, Dallas, Texas, at 9:008:30 a.m. (Central time). See “Attendance requirements” for important information about attending the annual meeting. At the meeting we will consider and act upon the following matters:
Stockholders of record at the close of business on February 22, 2016,26, 2018, are entitled to vote at the annual meeting.
We urge you to vote your shares as promptly as possible by: (1) accessing the Internetinternet website, (2) calling the toll-free number or (3) signing, dating and mailing the enclosed proxy.
Sincerely,
Cynthia Hoff Trochu
Senior Vice President,
Secretary and
General Counsel
Dallas, Texas
March 9, 2016
TEXAS INSTRUMENTS • | 1 |
3 | ||||
6 | ||||
7 | ||||
7 | ||||
Proposal regarding advisory approval of the company’s executive compensation | ||||
18 | ||||
19 | ||||
�� | 19 | |||
20 | ||||
21 | ||||
27 | ||||
27 | ||||
27 | ||||
Most recent stockholder advisory vote on executive compensation | 28 | |||
28 | ||||
Compensation following employment termination or change in control | 29 | |||
29 | ||||
Consideration of tax and accounting treatment of compensation | 29 |
30 | ||||
| ||||
| 33 | |||
35 | ||||
43 | ||||
Proposal to ratify appointment of independent registered public accounting firm | ||||
48 | ||||
Electronic delivery of proxy materials and copies of our Form10-K | ||||
A-1 | ||||
Appendix B (Texas Instruments | B-1 |
2 | TEXAS INSTRUMENTS • |
PROXY STATEMENT – MARCH 9, 201613, 2018
EXECUTIVE OFFICES
12500 TI BOULEVARD, DALLAS, TEXASTX 75243
MAILING ADDRESS: P.O. BOX 660199, DALLAS, TEXASTX 75266-0199
Voting procedures, quorum and quorumattendance requirements
TI’s board of directors requests your proxy for the annual meeting of stockholders on April 21, 2016.26, 2018. If you sign and return the enclosed proxy, or vote by telephone or on the Internet,internet, you authorize the persons named in the proxy to represent you and vote your shares for the purposes mentioned in the notice of annual meeting. This proxy statement and related proxy are being distributed on or about March 9, 2016.13, 2018. If you come to the meeting, you can vote in person. If you do not come to the meeting, your shares can be voted only if you have returned a properly signed proxy or followed the telephone or Internetinternet voting instructions, which can be found on the enclosed proxy. If you sign and return your proxy but do not give voting instructions, the shares represented by that proxy will be voted as recommended by the board of directors. You can revoke your authorization at any time before the shares are voted at the meeting.
A quorum of stockholders is necessary to hold a valid meeting. If at least a majority of the shares of TI common stock issued and outstanding and entitled to vote are present in person or by proxy, a quorum will exist. Abstentions and brokernon-votes are counted as present for purposes of establishing a quorum. Brokernon-votes occur when a beneficial owner who holds company stock through a broker does not provide the broker with voting instructions as to any matter on which the broker is not permitted to exercise its discretion and vote without specific instruction.
ScheduledShown below is a list of the matters to be considered at the meeting are the election(each of directors, an advisory vote regarding approval of the company’s executive compensation, ratification of the appointment of our independent registered public accounting firm and approval of amendments to the Texas Instruments 2009 Long-Term Incentive Plan. Each of these matterswhich is discussed elsewhere in this proxy statement. On each of these matters you may vote “for,” “against” or “abstain.” Thestatement), and the vote required for election or approval, as the election of directors and approval of the other matters is shown in the table below.case may be.
Matter | Required Vote for Election or Approval | Impact of Abstentions or Broker Non-Votes | ||
Election of | Majority of votes present in person or by proxy at the meeting and entitled to be cast in the election with respect to a nominee must be cast for that nominee. | Abstentions have the same effect as votes against. Brokernon-votes are not counted as votes for or against. | ||
Advisory vote to approve named executive officer compensation. | Majority of votes present in person or by proxy at the meeting must be cast for the proposal. | Abstentions and brokernon-votes have the same effect as votes against. | ||
Proposal to approve the Texas Instruments 2018 Director Compensation Plan. | Majority of votes present in person or by proxy at the meeting must be cast for the proposal. | Abstentions and brokernon-votes have the same effect as votes against. | ||
Proposal to ratify appointment of independent registered public accounting firm. | Majority of votes present in person or by proxy at the meeting must be cast for the proposal. | Abstentions have the same effect as votes against. (Brokers are permitted to exercise their discretion and vote without specific instruction on this matter. Accordingly, there are no brokernon-votes.) | ||
Any other matter that may properly be submitted at the | Majority of votes present in person or by proxy at the meeting must be cast for the proposal. | Abstentions and brokernon-votes have the same effect as votes against. | ||
TEXAS INSTRUMENTS • | 3 |
Attendance requirements
Attendance at the meeting is limited to stockholders or their legal proxy holders. Each attendee must present a government-issued photo ID and an advance registration form.
If you plan to attend the annual meeting in person, you must print your own advance registration form and bring it to the meeting to gain access.
Guest advance registration forms are not available. Exceptions may be granted to stockholders who require a companion in order to facilitate their own attendance (for example, due to a physical disability) by contacting Investor Relations.
Additionally, if you plan to attend as proxy for a stockholder of record, you must present a valid legal proxy from the stockholder of record to you. If you plan to attend as proxy for a street name stockholder, you must present a valid legal proxy from the stockholder of record (i.e., the bank, broker or other holder of record) to the street name stockholder that is assignable and a valid legal proxy from the street name stockholder to you. Stockholders may appoint only one proxy holder to attend on their behalf.
4 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
Directors are elected at the annual meeting to hold office until the next annual meeting and until their successors are elected and qualified. The board of directors has designated the following persons as nominees: RALPH W. BABB, JR., MARK A. BLINN, TODD M. BLUEDORN, DANIEL A. CARP, JANET F. CLARK, CARRIE S. COX, BRIAN T. CRUTCHER, JEAN M. HOBBY, RONALD KIRK, PAMELA H. PATSLEY, ROBERT E. SANCHEZ WAYNE R. SANDERS,and RICHARD K. TEMPLETON and CHRISTINE TODD WHITMAN.TEMPLETON.
If you return a proxy that is not otherwise marked, your shares will be voted FOR each of the nominees.
All of the nominees for directorship are directors of the company. For a discussion of each nominee’s qualifications to serve as a director of the company, please see pages 6-8.“Board diversity and nominee qualifications.” If any nominee becomes unable to serve before the meeting, the persons named as proxies may vote for a substitute or the number of directors will be reduced accordingly.
Directors
RALPH W. BABB, JR. Age Director since 2010
|
Member, Governance and Stockholder Relations Committee |
Age Director since 2015 Committee | RONALD KIRK Age 63 Director since 2013Member, Governance and Stockholder Relations Committee | |||||||||||
MARK A. BLINN Age Director since 2013
|
Age Director since Member, Governance and Stockholder Relations Committee |
| ||||||||||||
| PAMELA H. PATSLEY Age Director since 2004 |
Member, Compensation Committee | ||||||||||||
Age Director since | BRIAN T. CRUTCHER Age 45 Director since 2017 | ROBERT E. SANCHEZ Age Director since 2011 Chair, Compensation Committee | ||||||||||||
DANIEL A. CARP Age 69 Director since 1997Member, Compensation Committee | JEAN M. HOBBY Age 57 Director since 2016Member, Audit Committee | RICHARD K. TEMPLETON Age 59 Chairman since 2008 and director since 2003 |
| TEXAS INSTRUMENTS • | 5 |
Director not standing forre-election
Age 70
Stockholder Relations Committee |
Ms. Simmons,Mr. Sanders, a highly valued director since 1999,1997, has attained the age of 70 and is therefore ineligible under the company’sby-laws to stand forre-election at the 20162018 annual meeting. Subject to their re-election by stockholders, Mr. Blinn and Mr. Kirk have been duly elected as new lead director and new GSR chair, respectively, to take effect immediately following the 2018 annual meeting of stockholders.
The board is responsible for approving nominees for election as directors. To assist in this task, the board has designated a standing committee, the Governance and Stockholder Relations Committee (the G&SRGSR Committee), which is responsible for reviewing and recommending nominees to the board. The G&SRGSR Committee is comprised solely of independent directors as defined by the rules of Thethe NASDAQ Stock Market (NASDAQ) and the board’s corporate governance guidelines. Our board of directors has adopted a written charter for the G&SRGSR Committee. It can be found on our website atwww.ti.com/corporategovernance.corporategovernance.
Director candidate recommendations
It is a long-standing policy of the board to consider prospective board nominees recommended by stockholders. A stockholder who wishes to recommend a prospective board nominee for the G&SRGSR Committee’s consideration can write to the Secretary of the G&SRGSR Committee, Texas Instruments Incorporated, P.O. Box 655936, MS 8658, Dallas, TX 75265-5936. The G&SRGSR Committee will evaluate the stockholder’s prospective board nominee in the same manner as it evaluates other nominees.
Criteria
In evaluating prospective nominees, the G&SRGSR Committee looks for the following minimum qualifications, qualities and skills:
Stockholders, non-employeeOutside board memberships
In evaluating prospective nominees, the GSR Committee will consider the number of other boards on which the individual serves as director, and in particular the board’s policy that directors management and others may submit recommendationsshould not serve on the boards of more than three other public companies.
The board is sensitive to the G&SR Committee.fact that a director’s service in an executive role at another company can be time consuming. In this regard, the board reviewed Mr. Bluedorn’s outside directorships at Lennox International, Inc. and Eaton Corporation, plc, and determined that they enhance the breadth and depth of experience on the board. Because of these directorships, Mr. Bluedorn brings to the company a unique combination of specialized knowledge and experience in the industrial market, an area in which the company has publicly disclosed its intent to focus R&D investments. He also brings a familiarity with the challenges posed by
6 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
complex international manufacturers. Additionally, Mr. Bluedorn has held senior management positions at United Technologies, such as leading its Otis Elevator and Carrier (HVAC) business, that provide the board with important perspective on the industrial market.
There is a strong consensus among the directors that Mr. Bluedorn is willing and able to devote the time required to perform board activities, and that his service with Lennox and Eaton will not interfere with his duties to the company and its shareholders. Mr. Bluedorn has served on the boards of Lennox and Eaton since 2007 and 2010, respectively, so his familiarity with his roles and responsibilities at those organizations enables him to devote the balance of his time to his service on the board. Also, two of Mr. Bluedorn’s directorships (Lennox and TI) are located within ten miles of each other in the Dallas, Texas area, and Mr. Bluedorn’s exemplary attendance record at both Lennox and Eaton, as well as at the company, indicate his commitment to devoting sufficient time to board duties.
Stockholder nomination of directors
Under the company’sby-laws, a stockholder, or a group of up to 20 stockholders, owning at least 3 percent of the company’s outstanding common stock continuously for at least three years, may nominate and include in the company’s proxy materials director nominees constituting up to the greater of two individuals or 20 percent of the board of directors, provided that the stockholder(s) and the nominee(s) satisfy the requirements specified in theby-laws.
The company’sby-laws also allow stockholders to nominate directors without involving the GSR Committee or including the nominee in the company’s proxy materials. To do so, stockholders must comply with the requirements set forth in theby-laws, which can be found on our website at www.ti.com/corporategovernance.
All nominees for directorship are currently directors of the company. Ms. Clarkcompany, including Mr. Crutcher, who was elected to the board effective July 15, 2015. She19, 2017. He is the only director nominee at the 20162018 annual meeting of stockholders who is standing for election by the stockholders for the first time. A search firm retained by the company to assist the G&SR Committee in identifying and evaluating potential nominees initially identified Ms. Clark as a potential director candidate. The search firm conducted research to identify a number of potential candidates, based on qualifications and skills the G&SR Committee determined that candidates should possess. It then conducted further research on the candidates in whom the G&SR Committee had the most interest.
The board believes its current size is within the desired range as stated in the board’s corporate governance guidelines.
Board diversityDiversity and nominee qualifications
As indicated by the criteria above, the board prefers a mix of background and experience among its members. The board does not follow any ratio or formula to determine the appropriate mix. Rather, it uses its judgment to identify nominees whose backgrounds, attributes and experiences, taken as a whole, will contribute to the high standards of board service at the company. Maintaining a balance of tenure among the directors is part of the board’s consideration. Longer-serving directors bring valuable experience with
the company and familiarity with the strategic and operational challenges it has faced over the years, while newer directors bring fresh perspectives and ideas. To help maintain this balance, the company has a mandatory retirement policy, pursuant to which directors cannot stand for election after reaching age 70. The effectiveness of the board’s approach to board composition decisions is evidenced by the directors’ participation in the insightful and robust, yet respectful, deliberation that occurs at board and committee meetings, and in shaping the agendas for those meetings.
Nominee assessment
As it considered director nominees for the 20162018 annual meeting, the board kept in mind that the most important issues it considers typically relate to the company’s strategic direction; succession planning for senior executive positions; the company’s financial performance; the challenges of running a large, complex enterprise, including the management of its risks; major acquisitions and divestitures; and significant research and development (R&D) and capital investment decisions. These issues arise in the context of the company’s operations, which primarily involve the manufacture and sale of semiconductors all over the world into industrial, automotive, personal electronics, communications equipment and enterprise systems markets.
As described below, each of our director nominees has achieved an extremely high level of success in his or her career, whether at multi-billion dollar, multinational corporate enterprises or significant governmental organizations. In these positions, each has been directly involved in the challenges relating to setting the strategic direction and managing the financial performance, personnel and processes of large, complex organizations. Each has had exposure to effective leaders and has developed the ability to judge leadership qualities. Ten of the director nominees have experience in serving on the board of directors of at least one other major corporation, and two haveone has served in high political office, all of which provides additional relevant experience on which each nominee can draw.
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 7 |
In concluding that each nominee should serve as a director, the board relied on the specific experiences and attributes listed below and on the direct personal knowledge, born of previous service on the board, that each of the nominees brings insight and theto board deliberations as well as a willingness to ask difficult questions to board deliberations.challenging questions.
Mr. Babb
Mr. Blinn
Mr. Bluedorn
Mr. Carp
Ms. Clark
|
Ms. Cox
8 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
Mr. Crutcher
Ms. Hobby
Mr. Kirk
Ms. Patsley
Mr. Sanchez
Mr. Sanders
Mr. Templeton
Ms. Whitman
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 9 |
Stockholders and others who wish to communicate with the board, a board committee or an individual director may write to them at: P.O. Box 655936, MS 8658, Dallas, TX 75265-5936. All communications sent to this address will be shared with the board, committee or individual director as applicable.
The board has a long-standing commitment to responsible and effective corporate governance. We annually conduct extensive governance reviews and engage in investor outreach specific to governance and executive compensation matters. The board’s corporate governance guidelines (which include the director independence standards), the charters of each of the board’s committees, TI’s code of conduct, and our code of ethics for our CEO and senior financial officers and ourby-laws are available on our website at www.ti.com/corporategovernance. Stockholders may request copies of these documents free of charge by writing to Texas Instruments Incorporated, P.O. Box 660199, MS 8657, Dallas, TX 75266-0199, Attn: Investor Relations.
It is a policy of the board to encourage directors to attend each annual meeting of stockholders. Such attendance allows for direct interaction between stockholders and board members. In 2015,2017, all directors then in office and standing forre-election attended TI’s annual meeting of stockholders.
The board has determined that each of our directors is independent except for Mr. Templeton.Templeton and Mr. Crutcher. In connection with this determination, information was reviewed regarding directors’ business and charitable affiliations, directors’ immediate family members and their employers, and any transactions or arrangements between the company and such persons or entities. The board has adopted the following standards for determining independence.
A. | In no event will a director be considered independent if: |
1. | He or she is a current partner of or is employed by the company’s independent auditors; |
2. | A family member of the director is (a) a current partner of the company’s independent auditors or (b) currently employed by the company’s independent auditors and personally works on the company’s audit; |
3. | Within the current or preceding three fiscal years he or she was, and remains at the time of the determination, a partner in or a controlling shareholder, an executive officer or an employee of an organization that in the current year or any of the past three fiscal years (a) made payments to, or received payments from, the company for property or services, (b) extended loans to or received loans from, the company, or (c) received charitable contributions from the company, in an amount or amounts which, in the aggregate in such fiscal year, exceeded the greater of $200,000 or 2 percent of the recipient’s consolidated gross revenues for that year (for purposes of this standard, “payments” excludes payments arising solely from investments in the company’s securities and payments undernon-discretionary charitable contribution matching programs); or |
4. | Within the current or preceding three fiscal years a family member of the director was, and remains at the time of the determination, a partner in or a controlling shareholder or an executive officer of an organization that in the current year or any of the past three fiscal years (a) made payments to, or received payments from, the company for property or |
|
services, (b) extended loans to or received loans from the company, or (c) received charitable contributions from the company, in an amount or amounts which, in the aggregate in such fiscal year, exceeded the greater of $200,000 or 2 percent of the recipient’s consolidated gross revenues for that year (for purposes of this standard, “payments” excludes payments arising solely from investments in the company’s securities and payments undernon-discretionary charitable contribution matching programs). |
B. | In no event will a director be considered independent if, within the preceding three years: |
1. | He or she was employed by the company (except in the capacity of interim chairman of the board, chief executive officer or other executive officer, provided the interim employment did not last longer than one year); |
2. | He or she received more than $120,000 during any twelve-month period in compensation from the company (other than (a) compensation for board or board committee service, (b) compensation received for former service lasting no longer than one year as an interim chairman of the board, chief executive officer or other executive officer and (c) benefits under atax-qualified retirement plan, ornon-discretionary compensation); |
3. | A family member of the director was employed as an executive officer by the company; |
10 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
4. | A family member of the director received more than $120,000 during any twelve-month period in compensation from the company (excluding compensation as anon-executive officer employee of the company); |
5. | He or she was (but is no longer) a partner or employee of the company’s independent auditors and worked on the company’s audit within that time; |
6. | A family member of the director was (but is no longer) a partner or employee of the company’s independent auditors and worked on the company’s audit within that time; |
7. | He or she was an executive officer of another entity at which any of the company’s current executive officers at any time during the past three years served on that entity’s compensation committee; or |
8. | A family member of the director was an executive officer of another entity at which any of the company’s current executive officers at any time during the past three years served on that entity’s compensation committee. |
C. | No member of the Audit Committee may accept directly or indirectly any consulting, advisory or other compensatory fee from the company, other than in his or her capacity as a member of the board or any board committee. Compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the company (provided that such compensation is not contingent in any way on continued service). In addition, no member of the Audit Committee may be an affiliated person of the company except in his or her capacity as a director. |
D. | With respect to service on the Compensation Committee, the board will consider all factors that it deems relevant to determining whether a director has a relationship to the company that is material to that director’s ability to be independent from management in connection with the duties of a Compensation Committee member, including but not limited to: |
1. | The source of compensation of the director, including any consulting, advisory or compensatory fee paid by the company to the director; and |
2. | Whether the director is affiliated with the company, a subsidiary of the company or an affiliate of a subsidiary of the company. |
E. | For any other relationship, the determination of whether it would interfere with the director’s exercise of independent judgment in carrying out his or her responsibilities, and consequently whether the director involved is independent, will be made by directors who satisfy the independence criteria set forth in this section. |
For purposes of these independence determinations, “company” and “family member” will have the same meaning as under NASDAQ rules.
During 2015,2017, the board held nine meetings. The board has three standing committees described below. The committees of the board collectively held 2418 meetings in 2015.2017. Each director attended at least 8486 percent of the board and relevant committee meetings combined. Overall attendance at board and committee meetings was approximately 96 percent.
Audit Committee
The Audit Committee is a separately designated standing committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. All members of the Audit Committee are independent under NASDAQ rules and the board’s corporate governance guidelines. From July 20, 2016, to April 18, 2014, to July 14, 2015,20, 2017, the committee members were Mr. Babb (Chair), Mr. Blinn and Ms. Simmons. Since July 15, 2015, the committee members have been Mr. Babb (chair), Mr. Blinn, Ms. Clark and Ms. Simmons.Hobby, with Mr. Bluedorn joining the committee March 1, 2017. Since April 21, 2017, the committee members have been Mr. Blinn (chair), Mr. Bluedorn, Ms. Clark and Ms. Hobby. The Audit Committee is generally responsible for:
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 11 |
The board has determined that all members of the Audit Committee are financially sophisticated, as the board has interpreted such qualifications in its business judgment. In addition, the board has designated Mr. BabbBlinn as the audit committee financial expert as defined in the Securities Exchange Act of 1934, as amended.
The Audit Committee met tensix times in 2015.2017. The Audit Committee holds regularly scheduled meetings and reports its activities to the board. The committee also continued its long-standing practice of meeting directly with our internal audit staff to discuss the audit plan and to allow for direct interaction between Audit Committee members and our internal auditors. Please see pages 40-41See page 43 for a report of the committee.
Compensation Committee
All members of the Compensation Committee are independent. From April 18, 2014,21, 2016, to April 16, 2015,20, 2017, the committee members were Mr. Sanchez (chair), Ms. Patsley and Ms. Whitman. Since April 17, 2015, the committee members have been Mr. Sanchez (chair), Mr. Carp, Ms. Patsley and Christine Todd Whitman (who retired from the board in April 2017). Since April 21, 2017, the committee members have been Mr. Sanchez (Chair), Mr. Carp and Ms. Whitman.Patsley. The committee is responsible for:
¡ | Institution and termination of, revisions in and actions under employee benefit plans that (i) increase benefits only for officers of the company or disproportionately increase benefits for officers of the company more than other employees of the company, (ii) require or permit the issuance of the company’s stock or (iii) |
¡ | Reservation of company stock for use as awards of grants under plans or as contributions or sales to any trustee of any employee benefit plan. |
|
The Compensation Committee met six times in 2015.2017. The Compensation Committee holds regularly scheduled meetings, reports its activities to the board, and consults with the board before setting annual executive compensation. Please seeSee page 2830 for a report of the committee.
In performing its functions, the committee is supported by the company’s Human Resources organization. The committee has the authority to retain any advisors it deems appropriate to carry out its responsibilities. The committee retained Pearl Meyer & Partners as its compensation consultant for the 20152017 compensation cycle. The committee instructed the consultant to advise it directly on executive compensation philosophy, strategies, pay levels, decision-making processes and other matters within the scope of the committee’s charter. Additionally, the committee instructed the consultant to assist the company’s Human Resources organization in its support of the committee in these matters with such items as peer-group assessment, analysis of the executive compensation market, and compensation recommendations.
12 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
The Compensation Committee considers it important that its compensation consultant’s objectivity not be compromised by other engagements with the company or its management. In support of this belief, the committee has a policy on compensation consultants, a copy of which may be found on www.ti.com/corporategovernance. During 2015,2017, the committee determined that its compensation consultant was independent of the company and had no conflict of interest.
The Compensation Committee considers executive compensation in a multistep process that involves the review of market information, performance data and possible compensation levels over several meetings leading to the annual determinations in January. Before setting executive compensation, the committee reviews the total compensation and benefits of the executive officers and considers the impact that their retirement, or termination under various other scenarios, would have on their compensation and benefits.
The CEO and the senior vice president responsible for Human Resources, who is an executive officer, are regularly invited to attend meetings of the committee. The CEO is excused from the meeting during any deliberations or vote on his compensation. No executive officer determines his or her own compensation or the compensation of any other executive officer. As members of the board, the members of the committee receive information concerning the performance of the company during the year and interact with our management. The CEO gives the committee and the board an assessment of his own performance during the year just ended. He also reviews the performance of the other executive officers with the committee and makes recommendations regarding their compensation. The senior vice president responsible for Human Resources assists in the preparation of and reviews the compensation recommendations made to the committee other than for her compensation.
The Compensation Committee’s charter provides that it may delegate its power, authority and rights with respect to TI’s long-term incentive plans, employee stock purchase plan and employee benefit plans to (i) one or more committees of the board established or delegated authority for that purpose; or (ii) employees or committees of employees except that no such delegation may be made with respect to compensation of the company’s executive officers.
Pursuant to that authority, the Compensation Committee has delegated to a special committee established by the board the authority to, among other things, grant a limited number of stock options and restricted stock units (RSUs) under the company’s long-term incentive plans. The sole member of the special committee is Mr. Templeton. The special committee has no authority to grant, amend or terminate any form of compensation for TI’s executive officers. The Compensation Committee reviews the grantall activity of the special committee.
Governance and Stockholder Relations Committee
All members of the G&SRGSR Committee are independent. From April 18, 2014,21, 2016, to April 16, 2015,20, 2017, the committee members were Mr. Sanders (chair), Mr. Carp, Ms. Cox and Mr. Kirk. Since April 17, 2015,21, 2017, the committee members have been Mr. Sanders (chair)(Chair), Mr. Babb, Ms. Cox and Mr. Kirk. The G&SRGSR Committee is generally responsible for:
¡ | The development and revision of our corporate governance principles. |
¡ | The size, composition and functioning of the board and board committees. |
¡ | Candidates to fill board positions. |
¡ | Nominees to be designated for election as directors. |
¡ | Compensation of board members. |
¡ | Organization and responsibilities of board committees. |
¡ | Succession planning by the company. |
¡ | Issues of potential conflicts of interest involving a board member raised under TI’s conflict of interest policy. |
¡ | Election of executive officers of the company. |
¡ | Topics affecting the relationship between the company and stockholders. |
¡ | Public issues likely to affect the company. |
¡ | Responses to proposals submitted by stockholders. |
¡ | Contribution policies of the company and the TI Foundation. |
¡ | Scope of activities of the company’s political action committee. |
¡ | Revisions to TI’s code of conduct. |
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 13 |
The G&SRGSR Committee met eightsix times in 2015.2017. The G&SRGSR Committee holds regularly scheduled meetings and reports its activities to the board. Please see page 5See “Director candidate recommendations” and “Stockholder nomination of directors” for a discussion of stockholder nominations and page 8recommendations and “Communications with the board” for a discussion of communications withdetails on how to contact the board.
The board’s current leadership structure combines the positions of chairman and CEO, and includes a lead director who presides at executive sessions and performs the duties listed below. The board believes that this structure, combined with its other practices (such as (a) including on each board agenda an opportunity for the independent directors to comment on and influence the proposed strategic agenda for future meetings and (b) holding an executive session of the independent directors at each board meeting), allows it to maintain the active engagement of independent directors and appropriate oversight of management.
The lead director is elected by the independent directors annually. The independent directors have elected Mr. BabbSanders to serve as lead director.director until April 26, 2018, on which date Mr. Blinn will become lead director subject to hisre-election by stockholders. The duties of the lead director are to:
In addition, the lead director has authority to call meetings of the independent directors.
The board, led by its G&SRGSR Committee, regularly reviews the board’s leadership structure. The board’s consideration is guided by two questions: would stockholders be better served and would the board be more effective with a different structure. The board’s views are informed by a review of the practices of other companies and insight into the preferences of top stockholders, as gathered fromface-to-face dialogue and review of published guidelines. The board also considers how board roles and interactions would change if its leadership structure changed. The board’s goal is for each director to have an equal stake in the board’s actions and equal accountability to the corporation and its stockholders.
The board continues to believe that there is no uniform solution for a board leadership structure. Indeed, the company has had varying board leadership models over its history, at times separating the positions of chairman and CEO and at times combining the two, and now utilizing a lead director.
It is management’s responsibility to assess and manage the various risks TI faces. It is the board’s responsibility to oversee management in this effort. In exercising its oversight, the board has allocated some areas of focus to its committees and has retained areas of focus for itself, as more fully described below.
|
Management generally views the risks TI faces as falling into the following categories: strategic, operational, financial and compliance. The board as a whole has oversight responsibility for the company’s strategic and operational risks (e.g., major initiatives, competitive markets and products, sales and marketing, and research and development)R&D). Throughout the year the CEO discusses these risks with the board during strategy reviews that focus on a particular business or function. In addition, at the end of the year, the CEO provides a formal report on the top strategic and operational risks.
TI’s Audit Committee has oversight responsibility for financial risk (such as accounting, finance, internal controls and tax strategy). Oversight responsibility for compliance risk is shared by the board committees. For example, the Audit Committee oversees compliance with the company’s code of conduct and finance- and accounting-related laws and policies, as well as the company’s compliance program itself; the Compensation Committee oversees compliance with the company’s executive compensation plans and related laws and policies; and the G&SRGSR Committee oversees compliance with governance-related laws and policies, including the company’s corporate governance guidelines.
The Audit Committee oversees the company’s approach to risk management as a whole. It reviews the company’s risk management process at least annually by means of a presentation by the CFO.
14 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
The board’s leadership structure is consistent with the board and committees’ roles in risk oversight. As discussed above, the board has found that its current structure and practices are effective in fully engaging the independent directors. Allocating various aspects of risk oversight among the committees provides for similar engagement. Having the chairman and CEO review strategic and operational risks with the board ensures that the director most knowledgeable about the company, the industry in which it operates and the competition and other challenges it faces shares those insights with the board, providing for a thorough and efficient process.
The G&SRGSR Committee has responsibility for reviewing and making recommendations to the board on compensation fornon-employee directors, with the board making the final determination. The committee has no authority to delegate its responsibility regarding director compensation. In carrying out this responsibility, it is supported by TI’s Human Resources organization. The CEO, the senior vice president responsible for Human Resources and the Secretary review the recommendations made to the committee. The CEO also votes, as a member of the board, on the compensation ofnon-employee directors.
The compensation arrangements in 20152017 for thenon-employee directors were:
The board has determined that annual grants of equity compensation tonon-employee directors will be timed to occur when grants are made to our U.S. employees in connection with the annual compensation review process. Accordingly, such equity grants tonon-employee directors are made in January. Please see theSee “Process for equity grants” for a discussion regarding the timing of equity compensation grants on page 25.grants.
Directors are not paid a fee for meeting attendance, but we reimbursenon-employee directors for their travel, lodging and related expenses incurred in connection with attending board, committee and stockholders meetings and other designated TI events. In addition,non-employee directors may travel on company aircraft to and from these meetings and other designated events. On occasion, directors’ spouses are invited to attend board events; the spouses’ expenses incurred in connection with attendance at those events are also reimbursed.
Under the Director Plan, some directors have chosen to defer all or part of their cash compensation until they leave the board (or certain other specified times). These deferred amounts were credited to either a cash account or stock unit account. Cash accounts earn interest from TI at a rate currently based on Moody’s Seasoned Aaa Corporate Bonds. For 2015,2017, that rate was 4.053.44 percent. Stock unit accounts fluctuate in value with the underlying shares of TI common stock, which will be issued after the deferral period. Dividend equivalents are paid on these stock units. Directors may also defer settlement of the restricted stock units they receive.
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 15 |
We have arrangements with certain customers whereby our employees may purchase consumer products containing TI components at discounted pricing. In addition, the TI Foundation has an educational and cultural matching gift program. In both cases, directors are entitled to participate on the same terms and conditions available to employees.
Non-employee directors are not eligible to participate in anyTI-sponsored pension plan.
20152017 director compensation
The following table shows the compensation of all persons who werenon-employee members of the board during 20152017 for services in all capacities to TI in 2015.2017.
Name | Fees Earned or Paid in Cash ($) (2) | Stock Awards ($) (3) | Option Awards ($) (4) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (5) | All Other Compensation ($) (6) | Total ($) | Fees Earned or Paid in Cash ($) (2) | Stock Awards ($) (3) | Option Awards ($) (4) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings (5) | All Other Compensation ($) (6) | Total ($) | |||||||||||||||||||||||||||||||||||||||||||||||||
R. W. Babb, Jr. | $ | 131,667 | $ | 99,951 | $ | 99,995 | — | — | $ | 40 | $ | 331,653 | $ | 95,000 | $ | 99,947 | $ | 99,988 | — | — | $ | 40 | $ | 294,975 | |||||||||||||||||||||||||||||||||||||||
M. A. Blinn | $ | 85,000 | $ | 99,951 | $ | 99,995 | — | — | $ | 6,540 | $ | 291,486 | $ | 105,000 | $ | 99,947 | $ | 99,988 | — | — | $ | 40 | $ | 304,975 | |||||||||||||||||||||||||||||||||||||||
T. M. Bluedorn | $ | 70,833 | $ | 156,300 | — | — | — | $ | 40 | $ | 227,173 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
D. A. Carp | $ | 85,000 | $ | 99,951 | $ | 99,995 | — | — | $ | 797 | $ | 285,743 | $ | 85,000 | $ | 99,947 | $ | 99,988 | — | — | $ | 893 | $ | 285,828 | |||||||||||||||||||||||||||||||||||||||
J. F. Clark (1) | $ | 39,301 | $ | 98,980 | — | — | — | $ | 20,040 | $ | 158,321 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
J. F. Clark | $ | 85,000 | $ | 99,947 | $ | 99,988 | — | — | $ | 20,040 | $ | 304,975 | |||||||||||||||||||||||||||||||||||||||||||||||||||
C. S. Cox | $ | 85,000 | $ | 99,951 | $ | 99,995 | — | $ | 2,066 | $ | 10,040 | $ | 297,052 | $ | 85,000 | $ | 99,947 | $ | 99,988 | — | $ | 5,520 | $ | 40 | $ | 290,495 | |||||||||||||||||||||||||||||||||||||
J. M. Hobby | $ | 85,000 | $ | 99,947 | $ | 99,988 | — | — | $ | 40 | $ | 284,975 | |||||||||||||||||||||||||||||||||||||||||||||||||||
R. Kirk | $ | 85,000 | $ | 99,951 | $ | 99,995 | — | — | $ | 40 | $ | 284,986 | $ | 85,000 | $ | 99,947 | $ | 99,988 | — | — | $ | 40 | $ | 284,975 | |||||||||||||||||||||||||||||||||||||||
P. H. Patsley | $ | 85,000 | $ | 99,951 | $ | 99,995 | — | — | $ | 40 | $ | 284,986 | $ | 85,000 | $ | 99,947 | $ | 99,988 | — | — | $ | 40 | $ | 284,975 | |||||||||||||||||||||||||||||||||||||||
R. E. Sanchez | $ | 105,000 | $ | 99,951 | $ | 99,995 | — | — | $ | 10,040 | $ | 314,986 | $ | 113,333 | $ | 99,947 | $ | 99,988 | — | — | $ | 10,040 | $ | 323,308 | |||||||||||||||||||||||||||||||||||||||
W. R. Sanders | $ | 108,333 | $ | 99,951 | $ | 99,995 | — | — | $ | 797 | $ | 309,076 | $ | 116,667 | $ | 99,947 | $ | 99,988 | — | — | $ | 893 | $ | 317,495 | |||||||||||||||||||||||||||||||||||||||
R. J. Simmons | $ | 85,000 | $ | 99,951 | $ | 99,995 | — | $ | 391 | $ | 10,040 | $ | 295,377 | ||||||||||||||||||||||||||||||||||||||||||||||||||
C. T. Whitman | $ | 85,000 | $ | 99,951 | $ | 99,995 | — | — | $ | 40 | $ | 284,986 | $ | 28,335 | $ | 99,947 | $ | 99,988 | — | — | $ | 40 | $ | 228,310 |
(1) |
(2) | Includes amounts deferred at the director’s election. |
(3) | Shown is the aggregate grant date fair value of restricted stock units granted in |
|
earlier of termination of service from the board after completing eight years of service or death or disability. For information regarding share issuances under restricted stock units granted after 2006, |
Name | Restricted Stock Units (in Shares) | |||
R. W. Babb, Jr. | ||||
M. A. Blinn | ||||
T. M. Bluedorn | 2,000 | |||
D. A. Carp | ||||
J. F. Clark | ||||
C. S. Cox | ||||
J. M. Hobby | 3,261 | |||
R. Kirk | ||||
P. H. Patsley | ||||
R. E. Sanchez | ||||
W. R. Sanders | ||||
| ||||
C. T. Whitman |
16 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
(4) | Shown is the aggregate grant date fair value of options granted in |
Name | Options (in Shares) | |||
R. W. Babb, Jr. | ||||
M. A. Blinn | ||||
T. M. Bluedorn | — | |||
D. A. Carp | ||||
J. F. Clark | ||||
C. S. Cox | ||||
J. M. Hobby | 6,065 | |||
R. Kirk | ||||
P. H. Patsley | ||||
R. E. Sanchez | ||||
W. R. Sanders | ||||
| ||||
C. T. Whitman |
(5) | SEC rules require the disclosure of earnings on deferred compensation to the extent that the interest rate exceeds a specified rate (Federal Rate), which is 120 percent of the applicable federal long-term interest rate with compounding. Under the terms of the Director Plan, deferred compensation cash amounts earn interest at a rate based on Moody’s Seasoned Aaa Corporate Bonds. For |
(6) | Consists of (a) the annual cost ($40 per director) of premiums for travel and accident insurance policies, (b) contributions under the TI Foundation matching gift program of |
We are providing youshareholders the opportunity to cast an advisory votevotes on named executive officer compensation as required by Section 14A of the Securities Exchange Act. The company holds this vote annually.
Proposal regarding advisory approval of the company’s executive compensation
The board asks the shareholders to cast an advisory vote on the compensation of our named executive officers. The “named executive officers” are the chief executive officer, each person who served as the chief financial officer during 2017 and the three other most highly compensated executive officers, as named in the compensation tables on pages 28-40.30-42.
Specifically, weWe ask the shareholders to approve the following resolution:
RESOLVED, that the compensation paid to the company’s named executive officers, as disclosed in this proxy statement pursuant to the Securities and Exchange Commission’s compensation disclosure rules, including the Compensation Discussion and Analysis, compensation tables and narrative discussion on pages 16-4018-42 of this proxy statement, is hereby approved.
We encourage shareholders to review the Compensation Discussion and Analysis section of the proxy statement, which follows. It discusses our executive compensation policies and programs and explains the compensation decisions relating to the named executive officers for 2015.2017. We believe that the policies and programs serve the interests of our shareholders and that the compensation received by the named executive officers is commensurate with the performance and strategic position of the company.
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 17 |
Although the outcome of this annual vote is not binding on the company or the board, the Compensation Committee of the board will consider it when setting future compensation for the executive officers.
The board of directors recommends a vote FOR the annual resolution approving the named executive officer compensation for 2015,2017, as disclosed in this proxy statement.
Compensation Discussion and Analysis
This section describes TI’s compensation program for executive officers. It will provide insight into the following:
Currently,The executive officers of TI has 10 executive officers. These executives have the broadest job responsibilities and policy-making authority in the company. We hold them accountable for the company’s performance and for maintaining a culture of strong ethics. Details of compensation for our CEO, both individuals who served as CFO during 2017 and the three other highest paid individuals who were executive officers in 20152017 (collectively called the “named executive officers”) can be found in the tables beginning on page 28.following the Compensation Committee report.
¡ | Base salary was increased by |
¡ | The grant date fair value of equity compensation awarded in |
|
¡ | The bonus decision was based primarily on the following performance results in |
| | |||||
Revenue Growth: Total TI | Median | |||||
Profit from Operations as a % of Revenue | Above median | |||||
Total Shareholder Return (TSR) |
Year-on-Year Change in CEO Bonus ( | 5% change |
* | Relative to semiconductor competitors as outlined |
¡ | Executive officers do not have employment contracts and are not guaranteed salary increases, bonus amounts or awards of equity compensation. |
¡ | We have never repriced stock options. We do not grant reload options. We grant equity compensation with double-triggerchange-in-control terms, which accelerate the vesting of grants only if the grantee has been terminated involuntarily within a limited time after a change in control of the company. |
18 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
¡ | Bonus and equity compensation awards are subject to clawback as described under |
¡ | We do not provide excessive perquisites. We provide no taxgross-ups for perquisites. |
¡ | We do not guarantee a return or provide above-market returns on compensation that has been deferred. |
¡ | Pension benefits are calculated on salary and bonus only; the proceeds earned on equity or other performance awards are not part of the pension calculation. |
The committee’s strategy for setting cash and non-cash compensation is described in the table that follows immediately below. Its compensation decisions for the named executive officers for 2015 are discussed on pages 20-25. Benefit programs in which the executive officers participate are discussed on pages 26-27. Perquisites are discussed on page 27.
Compensation philosophy and elements
The Compensation Committee of TI’s board of directors is responsible for setting the compensation of all TI executive officers. The committee consults with the other independent directors and its compensation consultant, Pearl Meyer & Partners, before setting annual compensation for the executives. The committee chair regularly reports on committee actions at board meetings.
The primary elements of our executive compensation program are as follows:
Near-term compensation, paid in cash
| Basic, least variable form of compensation, designed to provide a stable source of income | |||||||
Strategy | ||||||||
Terms | Paid twice monthly |
Profit | |||
Purpose | Broad-based program designed to emphasize that each employee contributes to the company’s profitability and can share in it | ||
Strategy | Pay according to a formula that focuses employees on a company goal, and at a level that will affect behavior. Profit sharing is paid in addition to any performance bonus awarded for the year.
For the last | ||
Terms | Payable in a single cash payment shortly after the end of the performance year
As in recent years, the formula for
• Below 10% company-level annual operating profit as a percentage of revenue (“Margin”): no profit sharing • At 10% Margin: profit sharing = 2% of base salary • At Margin above 10%: profit sharing increases by 0.5% of base salary for each percentage point of Margin between 10% and 24%, and 1% of base salary for each percentage point of Margin above 24%. The maximum profit sharing is 20% of base salary.
In |
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 19 |
Performance | ||||
Purpose | To motivate executives and reward them according to the company’s relative and absolute performance and the executive’s individual performance | |||
Strategy | Determined primarily on the basis ofone-year and three-year company performance on certain measures (revenue growth percent, operating margin and total shareholder return1) as compared |
|
with competitors and on our strategic progress in key markets and with customers. These factors have been chosen to reflect our near-term financial performance as well as our progress in building long-term shareholder value.
The committee aims to pay total cash compensation (base salary, profit sharing and bonus) appropriately above median if company performance is above that of competitors, and pay total cash compensation appropriately below the median if company performance is below competitors.
The committee does not rely on formulas or performance targets or thresholds. Instead, it uses its judgment based on its assessment of the factors described above. | ||||||
Terms | Determined by the committee and paid in a single payment after the performance year |
Long-term compensation, awarded in equity
Stock | ||||||
Purpose | Alignment with shareholders; long-term focus; retention, particularly with respect to restricted stock units | |||||
Strategy | We grant a combination of | |||||
Terms | The terms and conditions of stock options and restricted stock units are summarized |
The Compensation Committee considers the market level of compensation when setting the salary, bonuses and equity compensation of the executive officers. The committee targets salary below market median in order to weight total compensation to performance-based elements. To estimate the market level of pay, the committee uses information provided by its compensation consultant and TI’s Compensation and Benefits organization about compensation paid to executives in similar positions at a peer group of companies (the “Comparator Group”).
The committee sets the Comparator Group.Group and reviews it annually. In general, the Comparator Group companies (1) are U.S.-based, (2) engage in the semiconductor business, or other electronics or information technology activities or use sophisticated manufacturing processes, (3) have executive positions comparable in complexity to those of TI and (4) use forms of executive compensation comparable to TI’s.
Shown in the table below is the Comparator Group used for the compensation decisions for 2015.2017.
3M Company
Accenture PLC
Analog Devices, Inc.
Applied Materials, Inc.
Broadcom CorporationLimited
Computer Sciences Corporation
eBayCisco Systems, Inc.
EMC CorporationCorning Incorporated
DXC Technology Company *
Emerson Electric Co.
Honeywell International Inc.
Intel Corporation
Medtronic Public Limited Company
Motorola Solutions, Inc.
QUALCOMM Incorporated
Seagate Technology
TE Connectivity Ltd.
Thermo Fisher Scientific Inc.
Western Digital Corporation
Xerox Corporation
* | formerly Computer Sciences Corporation |
1 | Total shareholder return refers to the percentage change in the value of a shareholder’s investment in a company over the relevant time period, as determined by dividends paid and the change in the company’s share price during the period. See notes to the Performance summary table under “Analysis of compensation determinations – Bonus.” |
20 | TEXAS INSTRUMENTS • |
The committee set the Comparator Group in July 20142016 for the base salary and equity compensation decisions it made in January 2015.2017. For a discussion of the factors considered by the committee in setting the Comparator Group in July 2016, please see “Comparator group” on pages 88-8921-22 of the company’s 20152017 proxy statement.
In July 2015,2017, the committee conducted its regular review of the Comparator Group in terms of industry, revenue and market capitalization. With the advice of its compensation consultant, the committee decided to make no change to the group. Accordingly, it used the same Comparator Group for the bonus decisions in January 20162018 relating to 20152017 performance as it used to set salary and equity compensation in January 2015.2017. The table below compares the groupComparator Group to TI in terms of revenue and market capitalization.
Company | Revenue ($ billion)* | Market Cap ($ billion)* | Revenue ($ Billion) * | Market Cap ($ Billion) * | ||||||||||||||
Intel Corporation | 55.4 | 162.6 | 62.1 | 219.3 | ||||||||||||||
EMC Corporation | 24.7 | 49.8 | ||||||||||||||||
Cisco Systems, Inc. | 47.8 | 192.1 | ||||||||||||||||
Honeywell International Inc. | 39.7 | 116.3 | ||||||||||||||||
Accenture PLC | 35.9 | 94.6 | ||||||||||||||||
3M Company | 31.0 | 140.3 | ||||||||||||||||
Medtronic Public Limited Company | 29.6 | 111.3 | ||||||||||||||||
QUALCOMM Corporation | 24.0 | 75.1 | 22.3 | 96.1 | ||||||||||||||
Thermo Fisher Scientific Inc. | 19.8 | 77.0 | ||||||||||||||||
Western Digital Corporation | 19.6 | 24.0 | ||||||||||||||||
Broadcom Limited | 17.6 | 108.9 | ||||||||||||||||
DXC Technology Company | 15.9 | 27.1 | ||||||||||||||||
Emerson Electric Co. | 22.3 | 31.2 | 15.3 | 45.4 | ||||||||||||||
Xerox Corporation | 17.4 | 10.8 | ||||||||||||||||
Western Digital Corporation | 14.0 | 13.9 | ||||||||||||||||
Seagate Technology | 12.9 | 10.9 | ||||||||||||||||
Applied Materials, Inc. | 14.5 | 56.0 | ||||||||||||||||
TE Connectivity Ltd. | 11.6 | 25.0 | 13.1 | 33.5 | ||||||||||||||
Applied Materials, Inc. | 9.7 | 21.5 | ||||||||||||||||
Computer Sciences Corporation | 9.3 | 4.5 | ||||||||||||||||
eBay Inc. | 8.6 | 33.0 | ||||||||||||||||
Broadcom Corporation | 8.5 | 35.2 | ||||||||||||||||
Corning Incorporated | 10.0 | 28.3 | ||||||||||||||||
Motorola Solutions, Inc. | 5.8 | 12.1 | 6.3 | 14.7 | ||||||||||||||
Analog Devices, Inc. | 3.4 | 17.3 |
| 5.1
|
|
| 33.3
|
| ||||||||||
Median | 12.2 | 23.2 |
|
19.7 |
|
|
85.8 |
| ||||||||||
Texas Instruments Incorporated | 13.0 | 55.4 | 14.6 | 104.0 |
* | Trailing four-quarter revenue and market capitalization is as reported by Thomson Reuters on |
Analysis of compensation determinations for 2015
Total compensation
Before finalizing the compensation of the executive officers, the committee reviewed all elements of compensation. The information included total cash compensation (salary, profit sharing and projected bonus), the grant date fair value of equity compensation, the impact that proposed compensation would have on other compensation elements such as pension, and a summary of benefits that the executives would receive under various termination scenarios. The review enabled the committee to see how various compensation elements relate to one another and what impact its decisions would have on the total earnings opportunity of the executives. In assessing the information, the committee did not target a specific level of total compensation or use a formula to allocate compensation among the various elements. Instead, it used its judgment in assessing whether the total was consistent with the objectives of the program. Based on this review, the committee determined that the level of compensation was appropriate.
Mr. Rafael Lizardi, who is our current chief financial officer, became an executive officer effective February 1, 2017. Because he was not an executive officer when base salary and equity compensation determinations were made in January 2017, these components of Mr. Lizardi’s compensation were reviewed with the compensation committee but were set by management and, therefore, are not included in the following analysis of the committee’s process.
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 21 |
Base salary
The committee set the 20152017 rate of base salary for the following named executive officers as follows:
Officer | 2015 Annual Rate | Change from 2014 Annual Rate | ||||||||
R. K. Templeton | $ | 1,143,000 | 3.0 | % | ||||||
K. P. March | $ | 649,000 | 3.0 | % | ||||||
B. T. Crutcher | $ | 800,000 | 3.2 | %* | ||||||
S. A. Anderson | $ | 600,000 | 9.1 | %* | ||||||
K. J. Ritchie | $ | 670,000 | 3.1 | % |
Officer | 2017 Annual Rate | Change from 2016 Annual Rate | ||||||
R. K. Templeton | $ | 1,190,000 | 2.1 | % | ||||
K. P. March | $ | 682,000 | 2.1 | % | ||||
B. T. Crutcher | $ | 875,000 | 6.1 | % | ||||
K. J. Ritchie | $ | 704,000 | 2.0 | % | ||||
R. G. Delagi | $ | 700,000 | 2.2 | % |
The committee set the 20152017 base-salary rate for each of the named executive officers listed above in January 2015.2017. In keeping with its strategy, the committee settargeted the annual base-salary rates to be belowat the estimated median level of salaries expected to be paid to similarly situated executives (considering job scope and tenure) of companies within the Comparator Group in 2015.January 2017.
The salary differences between the named executive officers were driven primarily by the market rate of pay for each officer and not the application of a formula designed to maintain a differential between the officers.
|
Equity compensation
In 2015,2017, the committee awarded equity compensation to each of the named executive officers.officers listed below. The grants are shown in the grantstable under “Grants of plan-based awards in 2015 table on page 30.2017.” The grant date fair value of the awards is reflected in that table and in the “Stock Awards” and “Option Awards” columns of the 2017 summary compensation table on page 28.table. The table below is provided to assist the reader in comparing the grant date fair values and number of shares for each of the years shown in the summary compensation table.
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
Officer | Year | Grant Date Fair Value * | Stock Options (In Shares) | Restricted Stock Units (In Shares) | ||||||||||||
R. K. Templeton | 2017 | $ | 11,000,014 | 333,615 | 69,392 | |||||||||||
2016 | $ | 9,800,055 | 489,557 | 92,576 | ||||||||||||
2015 | $ | 9,800,023 | 516,440 | 90,842 | ||||||||||||
K. P. March | 2017 | $ | 2,700,048 | 81,888 | 17,033 | |||||||||||
2016 | $ | 2,700,035 | 134,878 | 25,506 | ||||||||||||
2015 | $ | 2,700,017 | 142,285 | 25,028 | ||||||||||||
B. T. Crutcher | 2017 | $ | 7,500,034 | 227,465 | 47,313 | |||||||||||
2016 | $ | 5,500,031 | 274,751 | 51,956 | ||||||||||||
2015 | $ | 5,500,029 | 289,839 | 50,983 | ||||||||||||
K. J. Ritchie | 2017 | $ | 4,000,056 | 121,315 | 25,234 | |||||||||||
2016 | $ | 4,000,014 | 199,819 | 37,786 | ||||||||||||
2015 | $ | 4,000,045 | 210,792 | 37,079 | ||||||||||||
R. G. Delagi | 2017 | $ | 3,600,090 | 109,184 | 22,711 |
* | See notes 2 and 3 to the summary compensation table |
In January 2015,2017, the committee awarded equity compensation to each of the named executive officers.officers listed above. The committee’s general objective was to award to those officers equity compensation that had a grant date fair value at approximately the median market level, in this case the 40th to 60th percentile of the 3-yearthree-year average of equity compensation (including an estimate of amounts for 2015)2017) granted by the Comparator Group.
In assessing the market level, the committee considered information presented by TI’s Compensation and Benefits organization (prepared using data provided by the committee’s compensation consultant) on the estimated value of the awards expected to be granted to similarly situated executives (considering job scope and tenure) of companies within the Comparator Group. The award value was estimated using the same methodology used for financial accounting.
22 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
For each officer, the committee set the desired grant value. The committee decided to allocate the value equally between restricted stock units and options for each officer, to give equal emphasis to promoting retention, motivating the executive and aligning his interests with those of shareholders.
Before approving the grants, the committee reviewed the amount of unvested equity compensation held by the officers to assess its retention value. In making this assessment, the committee used its judgment and did not apply any formula, threshold or maximum. This review did not result in an increase or decrease of the awards.
The exercise price of the options was the closing price of TI stock on January 28, 2015,26, 2017, the second trading day after the company released its annual and fourth quarterfourth-quarter financial results for 2014.2016. All grants were made under the Texas Instruments 2009 Long-Term Incentive Plan, which shareholders approved in April 2009.2009 and amended in 2016.
All grants have the terms described on pages 32-33.under “Outstanding equity awards at fiscalyear-end 2017.” The differences in the equity awards between the named executive officers were primarily the result of differences in the applicable estimated market level of equity compensation for their positions, and not the application of any formula designed to maintain differentials between the officers.
Bonus
In January 2016,2018, the committee set the 20152017 bonus compensation for executive officers based on its assessment of 20152017 performance. In setting the bonuses, the committee used the following performance measures to assess the company:
¡ | revenue growth, |
¡ | operating profit as a percentage of revenue, |
¡ | total shareholder |
In addition, the committee considered our strategic progress by reviewing how competitive we areTI competitiveness in key markets with our core products and technologies, as well as the strength of our relationships with customers.
One-year relative performance on the three measures and one-year strategic progress were the primary considerations in the committee’s assessment of the company’s 2015 performance. In assessing performance, the committee did not use formulas, thresholds or multiples. Because market conditions can quickly change in our industry, thresholds established at the beginning of a year could prove irrelevant byyear-end. The committee believes its approach, which assesses the company’s relative performance in hindsight afteryear-end, gives it the insight to most effectively and critically judge results and encourages executives to pursue strategies that serve the long-term interests of the company and its shareholders.
In the comparison of relative performance, the committee used the following companies (the “competitor companies”):2
Advanced Micro Devices, Inc.
Analog Devices, Inc.
Atmel Corporation
Avago TechnologiesBroadcom Limited
Broadcom Corporation
Fairchild Semiconductor International, Inc.
Infineon Technologies AG
Intel Corporation
Intersil Corporation
Linear Technology Corporation
Marvell Technology Group Ltd.
Maxim Integrated Products, Inc.
Microchip Technology Incorporated
NVIDIA Corporation
NXP Semiconductors N.V.
ON Semiconductor Corporation
QUALCOMM Incorporated
Skyworks Solutions, Inc.
STMicroelectronics N.V.
Xilinx, Inc.
To the extent the companies had not released financial results for the year or the most recent quarter, the committee based its evaluation on estimates and projections of the companies’ financial results for 2017.
This list includes both broad-based and niche suppliers that operate in our key markets or offer technology that competes with our products. The committee considers annually whether the list is still appropriate in terms of revenue, market capitalization and changes in business activities of the companies. In July 2015, the committee added Avago Technologies Limited to increase the overall comparability of the group to TI. In December 2015, Altera2017, Intersil Corporation and Freescale Semiconductor, Ltd. were acquired by other companies and accordinglyLinear Technology Corporation were removed from the list.list after being acquired by other companies. The committee made no other changechanges to the list of competitor companies in 2015.2017.
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 23 |
Assessment of 20152017 performance
The committee spent extensive time in December and January assessing TI’s results and strategic progress for 2015.2017. In setting bonuses, the committee considered quantitative and qualitative measures on both an absolute and relative basis and it appliedmade certain that resulting decisions were founded on both solid data and sound judgment. On both an absolute and relative basis mostall measures were positive and improved from the prior year, and in relative comparisons with competitors most measures were as good as or better than the median. In aggregate, the committee determined that performance in 20152017 was strongstronger than in 2016, both on an absolute and on par with the prior year, which also was strong.relative basis. Therefore, the committee heldincreased bonuses for 2015 performance to the same levels they were in 20142017 for named executive officers by 5 percent except for two individuals whose bonuses increased because 2015 was their first full yearto reflect the new roles assumed by these individuals in current positions.2017. Details on the committee’s assessment are below.
Revenue and margin
• | Annual performance |
¡ | TI’s revenue |
|
Revenues for the company’s core businesses of Analog and Embedded Processing were up 2.9 percent and 1.7 percent, respectively. Analog and Embedded Processing each gained share, as they have for six consecutive years.
¡ | Operating profit margin was |
• | Three-year performance |
¡ | Compound annual revenue growth for |
¡ | Average operating profit for |
Total shareholder return (TSR)
• | TSR was |
• | The company again generated strong cash, with free cash flow at |
• | The balance sheet remained robust, ending the year with cash and short-term investments of |
• | The three-year compound annual growth rate for TSR was |
Strategic progress
• | The company’s business model is designed around four sustainable competitive advantages that in combination put us in a unique class of companies. These advantages include (1) manufacturing and technology, (2) breadth of differentiated product portfolio, (3) channel reach of sales force and TI.com and (4) diversity and longevity of product, market and customer positions. In 2017, the company continued to strengthen and leverage these advantages. |
• | The company’s strategic focus is on |
¡ | TI’s broad analog and embedded processing product portfolio includes tens of thousands of |
Performance summary
1-Year | 3-Year | |||||
Revenue growth: total TI | -0.3% | 0.5% CAGR | ||||
Operating margin | 32.9% | 28.9% average | ||||
Free cash flow as % of revenue | 28.6% | 26.7% average | ||||
% of free cash flow returned to shareholders | 112.6% | 121.4% average | ||||
Increase in quarterly dividend rate | 11.8% | 81.0% | ||||
Total shareholder return (TSR) | 5.2% | 24.4% CAGR |
CAGR (compound annual growth rate) is calculated using the formula (Ending Value/Beginning Value)1/number of years-1.
Free cash flow was calculated by subtracting Capital expenditures from the GAAP-based Cash flows from operating activities. For a reconciliation to GAAP, see Appendix A to this proxy statement. |
24 | TEXAS INSTRUMENTS • |
TI’s revenue continues to come from a diverse base of |
• | TI’sin-house capability to produce high volumes of Analog semiconductors on300-millimeter wafers remains a competitive advantage. In 2017, the company again increased production on300-millimeter wafers, which enabled more chips to be produced per wafer, thereby improving margins and cash generation. |
• | In total, the committee determined that TI’s strategic position was strengthened by management’s decisions and actions in 2017. |
Performance summary
1-Year | 3-Year | |||||
Revenue growth: total TI | 11.9% | 4.7% CAGR | ||||
Operating margin | 40.7% | 36.9% average | ||||
Free cash flow as % of revenue | 31.2% | 30.5% average | ||||
% of free cash flow returned to shareholders | 99.8% | 100.2% average | ||||
Increase in quarterly dividend rate | 24.0% | 82.4% | ||||
Total shareholder return (TSR) | 46.8% | 28.3% |
CAGR (compound annual growth rate) is calculated using the formula (Ending Value/Beginning Value)1/number of years minus 1.
One-year and three-year TSR percentages are obtained from a report generated using a subscription service to Equilar, an executive compensation and corporate governance data firm.
Before setting the bonuses for the named executive officers, the committee considered the officers’ individual performance. The performance of the CEOMr. Templeton was judged according to the performance of the company. For the other officers, the committee considered the factors described below in assessing individual performance. In making this assessment, the committee did not apply any formula or performance targets.
Mr. March iswas the chief financial officer until February 1, 2017, at which time Mr. Lizardi became the chief financial officer. The committee noted the financial management of the company.
Mr. Crutcher is responsible for all of the company’s product linesbusiness operations and sales activities.manufacturing. The committee noted the financial performance and strategic position of the product lines and activities for which he is responsible.
Mr. Anderson is responsible for the company’s analog semiconductor product lines. The committee noted the financial performance and strategic position of the product lines for which he is responsible.
Mr. Ritchie is responsible for the company’s semiconductor manufacturing operations. The committee noted the performance of those operations, including their cost-competitiveness and inventory management.
Mr. Delagi is responsible for the company’s embedded processing and custom product lines. The committee noted the financial performance and strategic position of these product lines.
The bonuses awarded for 20152017 performance are shown in the table below. The differences in the amounts awarded to the named executive officers were primarily the result of differences in the officers’ level of responsibility and the applicable market level of total cash compensation expected to be paid to similarly situated officers at companies within the Comparator Group. The bonus of each named executive officer was paid under the Executive Officer Performance Plan described on pages 28 and 30.in footnote 3 to the 2017 summary compensation table.
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 25 |
Results of the compensation decisions
Results of the compensation decisions made by the committee relating to the named executive officers, as well as the results of the compensation decisions made by management and reviewed by the committee for 2015Mr. Lizardi for 2017 are summarized in the following table. This table is provided as a supplement to the summary compensation table on page 28 for investors who may find it useful to see the data presented in this form. Although the committee does not target a specific level of total compensation, it considers information similar to that in the table to ensure that the sum of these elements is, in its judgment, in a reasonable range. The principal differences between this
Officer | Year | Salary (Annual Rate) | Profit Sharing | Bonus | Equity Compensation (Grant Date Fair Value) | Total | ||||||||||||||||||
R. K. Templeton | 2017 | $ | 1,190,000 | $ | 237,601 | $ | 3,625,000 | $ | 11,000,014 | $ | 16,052,615 | |||||||||||||
2016 | $ | 1,166,000 | $ | 232,817 | $ | 3,450,000 | $ | 9,800,055 | $ | 14,648,872 | ||||||||||||||
2015 | $ | 1,143,000 | $ | 203,877 | $ | 3,450,000 | $ | 9,800,023 | $ | 14,596,900 | ||||||||||||||
R. R. Lizardi | 2017 | $ | 500,000 | $ | 97,667 | $ | 850,000 | $ | 3,000,060 | $ | 4,447,727 | |||||||||||||
K. P. March | 2017 | $ | 682,000 | $ | 113,950 | $ | 0 | $ | 2,700,048 | $ | 3,495,998 | |||||||||||||
2016 | $ | 668,000 | $ | 133,283 | $ | 1,110,000 | $ | 2,700,035 | $ | 4,611,318 | ||||||||||||||
2015 | $ | 649,000 | $ | 115,758 | $ | 1,110,000 | $ | 2,700,017 | $ | 4,574,775 | ||||||||||||||
B. T. Crutcher | 2017 | $ | 875,000 | $ | 174,167 | $ | 2,350,000 | $ | 7,500,034 | $ | 10,899,201 | |||||||||||||
2016 | $ | 825,000 | $ | 164,583 | $ | 2,000,000 | $ | 5,500,031 | $ | 8,489,614 | ||||||||||||||
2015 | $ | 800,000 | $ | 142,668 | $ | 1,750,000 | $ | 5,500,029 | $ | 8,192,697 | ||||||||||||||
K. J. Ritchie | 2017 | $ | 704,000 | $ | 140,567 | $ | 1,325,000 | $ | 4,000,056 | $ | 6,169,623 | |||||||||||||
2016 | $ | 690,000 | $ | 137,667 | $ | 1,265,000 | $ | 4,000,014 | $ | 6,092,681 | ||||||||||||||
2015 | $ | 670,000 | $ | 119,498 | $ | 1,265,000 | $ | 4,000,045 | $ | 6,054,543 | ||||||||||||||
R. G. Delagi | 2017 | $ | 700,000 | $ | 139,750 | $ | 1,100,000 | $ | 3,600,090 | $ | 5,539,840 |
This table andshows the annual rate of base salary for each named executive officer. In the summary compensation table, the “Salary” column shows the actual salary paid in the year. This table has separate columns for profit sharing and bonus. In the summary compensation table, profit sharing and bonus are explainedaggregated in footnote 4 below.4the column for“Non-Equity Incentive Plan Compensation,” in accordance with SEC requirements. Please see notes 2 and 3 to the summary compensation table for information about how grant date fair value was calculated.
Officer | Year | Salary (Annual Rate) | Profit Sharing | Bonus | Equity Compensation (Grant Date Fair Value) | Total | ||||||||||||||||||||||||
R. K. Templeton | 2015 | $ | 1,143,000 | $ | 203,877 | $ | 3,450,000 | $ | 9,800,023 | $ | 14,596,900 | |||||||||||||||||||
2014 | $ | 1,110,000 | $ | 168,941 | $ | 3,450,000 | $ | 9,800,034 | $ | 14,528,975 | ||||||||||||||||||||
2013 | $ | 1,075,000 | $ | 92,199 | $ | 3,000,000 | $ | 9,299,374 | $ | 13,466,573 | ||||||||||||||||||||
K. P. March | 2015 | $ | 649,000 | $ | 115,758 | $ | 1,110,000 | $ | 2,700,017 | $ | 4,574,775 | |||||||||||||||||||
2014 | $ | 630,000 | $ | 95,884 | $ | 1,110,000 | $ | 2,700,039 | $ | 4,535,923 | ||||||||||||||||||||
2013 | $ | 610,000 | $ | 52,317 | $ | 965,000 | $ | 2,656,964 | $ | 4,284,281 | ||||||||||||||||||||
B. T. Crutcher | 2015 | $ | 800,000 | $ | 142,668 | $ | 1,750,000 | $ | 5,500,029 | $ | 8,192,697 | |||||||||||||||||||
2014 | $ | 775,000 | * | $ | 112,860 | $ | 1,510,000 | $ | 4,500,008 | $ | 6,897,868 | |||||||||||||||||||
2013 | $ | 675,000 | $ | 57,728 | $ | 1,210,000 | $ | 3,985,446 | $ | 5,928,174 | ||||||||||||||||||||
S. A. Anderson | 2015 | $ | 600,000 | $ | 106,535 | $ | 1,000,000 | $ | 3,800,037 | $ | 5,506,572 | |||||||||||||||||||
2014 | $ | 550,000 | * | $ | 77,635 | $ | 925,000 | $ | 4,700,042 | $ | 6,252,677 | |||||||||||||||||||
K. J. Ritchie | 2015 | $ | 670,000 | $ | 119,498 | $ | 1,265,000 | $ | 4,000,045 | $ | 6,054,543 | |||||||||||||||||||
2014 | $ | 650,000 | $ | 98,872 | $ | 1,265,000 | $ | 4,000,015 | $ | 6,013,887 | ||||||||||||||||||||
2013 | $ | 625,000 | $ | 53,571 | $ | 1,100,000 | $ | 3,542,630 | $ | 5,321,201 |
| TEXAS INSTRUMENTS • |
For Mr. Crutcher, the “Total” for 2015 was higher than for 2014 primarily due to the higher grant date fair value of his equity compensation in 2015, the first full year in which he was in his current position. For Mr. Anderson, the “Total” for 2015 was lower than for 2014 due to the lower value of his equity compensation as compared to 2014, when he received a retention grant upon assuming his current position. For the other officers, including Mr. Templeton, the “Total” for 2015 was essentially unchanged from 2014, as the bonus for 2015 and the value of 2015 equity compensation granted to each of them were held flat.
The compensation decisions shown above resulted in the following 20152017 compensation mix for the named executive officers:
The Compensation Committee’s goal is to keep net annual dilution from equity compensation under 2 percent. “Net annual dilution” means the number of shares under equity awards granted by the committee each year to all employees (net of award forfeitures) as a percentage of the shares of the company’s outstanding common stock. Equity awards granted in 20152017 resulted in 1.30.7 percent net annual dilution.
The Compensation Committee makes grant decisions for equity compensation at its January meeting each year. The dates on which these meetings occur are generally set three years in advance. The January meetings of the board and the committee generally occur in the week or two before we announce our financial results for the previous quarter and year.
On occasion, the committee may grant stock options or restricted stock units to executives at times other than January. For example, it has done so in connection with job promotions and for purposes of retention.
We do not back-date stock options or restricted stock units. We do not accelerate or delay the release of information due to plans for making equity grants.
If the committee meeting falls in the same month as the release of the company’s financial results, the committee’s practice is to make grants effective (i) on the second trading day after the results have been released or (ii) on the meeting day if later. In other months, its practice is to make them effective on the day of committee action. The exercise price of stock options is the closing price of TI stock on the effective date of the grant.
The committee has a policy concerning recoupment (“clawback”) of executive bonuses and equity compensation. Under the policy, in the event of a material restatement of TI’s financial results due to misconduct, the committee will review the facts and circumstances and take the actions it considers appropriate with respect to the compensation of any executive officer whose fraud or willful misconduct contributed to the need for such restatement. Such action may include (a) seeking reimbursement of any bonus paid to such officer exceeding the amount that, in the judgment of the committee, would have been paid had the financial
results been properly reported and (b) seeking to recover profits received by such officer during the twelve12 months after the restated period under equity compensation awards. All determinations by the committee with respect to this policy are final and binding on all interested parties.
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 27 |
Most recent stockholder advisory vote on executive compensation
In April 2015,2017, our shareholders cast an advisory vote on the company’s executive compensation decisions and policies as disclosed in the proxy statement issued by the company in March 2015.2017. Approximately 9695 percent of the shares voted on the matter were cast in support of the compensation decisions and policies as disclosed. The committee considered this result and determined that it was not necessary at this time to make any material changes to the company’s compensation policies and practices in response to the advisory vote.
Retirement plans
The executive officers participate in our retirement plans under the same rules that apply to other U.S. employees. We maintain these plans to have a competitive benefits program and for retention.
Like other established U.S. manufacturers, we have had a U.S. qualified defined benefit pension plan for many years. At its origin, the plan was designed to be consistent with those offered by other employers in the diverse markets in which we operated, which at the time included consumer and defense electronics, as well as semiconductors and materials products. In order to limit the cost of the plan, we closed the plan to new participants in 1997. We gave U.S. employees as of November 1997 the choice to remain in the plan, or to have their plan benefits frozen (i.e., no benefit increase attributable to years of service or change in eligible earnings) and begin participating in an enhanced defined contribution plan. Mr. Templeton and Mr. Crutcher chose not to remain in the defined benefit plan. As a result, their benefits under that plan were frozen in 1997, and they participate in the enhanced defined contribution plan. Mr. Anderson,Lizardi, who joined the company in 1999,2001, also participates in the enhanced defined contribution plan. The other named executive officers have continued their participation in the defined benefit pension plan.
The Internal Revenue Code (IRC) imposes certain limits on the retirement benefits that may be provided under a qualified plan. To maintain the desired level of benefits, we havenon-qualified defined benefit pension plans for participants in the qualified pension plan. Under thenon-qualified plans, participants receive benefits that would ordinarily be paid under the qualified pension plan but for the limitations under the IRC. For additional information about the defined benefit plans, please see pages 34-36.“2017 pension benefits.”
Employees accruing benefits in the qualified pension plan, including the named executive officers other than Mr. Templeton, Mr. CrutcherDelagi and Mr. Anderson,Ritchie, also are eligible to participate in a qualified defined contribution plan that provides employer matching contributions. The enhanced defined contribution plan, in which Mr. Templeton, Mr. Crutcher and Mr. AndersonLizardi participate, provides for a fixed employer contribution plus an employer matching contribution.
In general, if an employee who participates in the pension plan (including an employee whose benefits are frozen as described above) dies after having met the requirements for normal or early retirement, his or her beneficiary will receive a benefit equal to thelump-sum amount that the participant would have received if he or she had retired before death. Having already reached the age of 55 and at least 20 years of employment, Mr. Templeton, Mr. MarchDelagi and Mr. Ritchie are eligible for early retirement under the pension plans.
Because benefits under the qualified andnon-qualified defined benefit pension plans are calculated on the basis of eligible earnings (salary and bonus), an increase in salary or bonus may result in an increase in benefits under the plans. Salary or bonus increases for Mr. Templeton and Mr. Crutcher do not result in greater benefits for them under the company’s defined benefit pension plans because their benefits under those plans were frozen in 1997. Mr. AndersonLizardi does not participate in the company’s defined benefit pension plans. The committee considers the potential effect on the executives’ retirement benefits when it sets salary and performance bonus levels.
Deferred compensation
Any U.S. employee whose base salary and management responsibility exceed a certain level may defer the receipt of a portion of his or her salary, bonus and profit sharing. Rules of the U.S. Department of Labor require that this plan be limited to a select group of management or highly compensated employees. The plan allows employees to defer the receipt of their compensation in atax-efficient manner. Eligible employees include, but are not limited to, the executive officers. We have the plan to be competitive with the benefits packages offered by other companies.
|
The executive officers’ deferred compensation account balances are unsecured and all amounts remain part of the company’s operating assets. The value of the deferred amounts tracks the performance of investment alternatives selected by the participant. These alternatives are a subset ofidentical to those offered to participants in the defined contribution plans described above. The company does not guarantee any minimum return on the amounts deferred. In accordance with SEC rules, no earnings on deferred compensation are shown in the summary compensation table on page 28 for 20152017 because no “above market” rates were earned on deferred amounts in that year.
28 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
Employee stock purchase plan
We have an employee stock purchase plan. Under the plan, which our shareholders approved, all employees in the U.S. and certain other countries may purchase a limited number of shares of the company’s common stock at a 15 percent discount. The plan is designed to offer the broad-based employee population an opportunity to acquire an equity interest in the company and thereby align their interests with those of shareholders. Consistent with our general approach to benefit programs, executive officers are also eligible to participate.
Health-related benefits
Executive officers are eligible under the same plans as all other U.S. employees for medical, dental, vision, disability and life insurance. These benefits are intended to be competitive with benefits offered in the semiconductor industry.
Other benefits
Executive officers receive only a few benefits that are not available to all other U.S. employees. The CEO isThey are eligible for a company-paid physical and financial counseling. In addition, the board of directors has determined that for security reasons, it is in the company’s interest to require the CEOMr. Templeton to use company aircraft for personal air travel. Please see pages 29 (footnote 6)footnote 6 of the summary compensation table for 2017 and 38“Potential payments upon termination or change in control – Termination – Perquisites” for further details. The company provides no taxgross-ups for perquisites to any of the executive officers.
Compensation following employment termination or change in control
None of the executive officers has an employment contract. Executive officers are eligible for benefits on the same terms as other U.S. employees upon termination of employment or a change in control of the company. The current programs are described under the heading Potential“Potential payments upon termination or change in control beginning on page 37.control.” None of the few additional benefits that the executive officers receive continue after termination of employment, except the amount forthat financial counseling is provided in thefor a transition period following year in the event of retirement. The committee reviews the potential impact of these programs before finalizing the annual compensation for the named executive officers. The committee did not raise or lower compensation for 20152017 based on this review.
The Texas Instruments 2009 Long-Term Incentive Plan generally establishes double-triggerchange-in-control terms for grants made in 2010 and later years. Under those terms, options become fully exercisable and shares are issued under restricted stock unit awards (to the extent permitted by Section 409A of the IRC) if the grantee is involuntarily terminated within 24 months after a change in control of TI. These terms are intended to encourage employees to remain with the company through a transaction while reducing employee uncertainty and distraction in the period leading up to any such event.
Stock ownership guidelines and policy against hedging
Our board of directors has established stock ownership guidelines for executive officers. The guideline for the CEO is four times base salary or 125,000 shares, whichever is less. The guideline for other executive officers is three times base salary or 25,000 shares, whichever is less. Executive officers have five years from their election as executive officers to reach these targets. Directly owned shares and restricted stock units count toward satisfying the guidelines.
Short sales of TI stock by our executive officers are prohibited. It is against TI policy for any employee, including an executive officer, to engage in trading in “puts” (options to sell at a fixed price), “calls” (similar options to buy), or other options or hedging techniques on TI stock.
Consideration of tax and accounting treatment of compensation
Section 162(m) of the IRC generally denies a deductionhistorically limited the tax deductibility of annual compensation paid to any publicly held corporation for compensation paid in a taxable year to the company’scorporation’s CEO and three other highest compensated officers excluding the CFO, to the extent that the officer’s compensation (other than qualified performance-based compensation) exceedsexceeded $1 million. The Compensation Committee considershas, in the past, considered the impact of this deductibility limit, on the compensation that it intends to award. The committee exercisesalthough as only one factor in its discretion to award compensation that does not meet the requirementsdetermination of Section 162(m) when applying the limitsamounts and forms of Section 162(m) would frustrate or be inconsistent with our compensation policies and/or when the value of the foregone deduction would not be material. The
committee has exercised this discretion when awarding restricted stock units that vest over time, without performance conditions to vesting. The committee believes it iscompensation. Recent changes in the best interest oftax laws eliminated the “performance-based” exception, and the limitation on deductibility has been expanded to include all named executive officers. As a result, beginning in 2018, the company andmay no longer deduct compensation paid to our shareholders that restricted stock unit awards provide for the retention of ournamed executive officers in all market conditions.
The Texas Instruments Executive Officer Performance Plan is intended to ensure that performance bonuses under the plan are fully tax deductible under Section 162(m). The plan, which shareholders approved in 2002, is further described on page 30. The committee’s general policy is to award bonuses within the plan, although the committee reserves the discretion to pay a bonus outside the plan if it determines that it is in the best interestexcess of the company and our shareholders to do so. The committee set the bonuses of the named executive officers for 2015 performance at the levels described on pages 22 and 24. The bonuses were awarded within the plan.$1 million.
When setting equity compensation, the committee considers the cost for financial reporting purposes of equity compensation it intends to grant. Its consideration of the cost of grants made in 20152017 is discussed on page 21.under “Analysis of compensation determination for 2017 – Equity compensation.”
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 29 |
The Compensation Committee of the board of directors has furnished the following report:
The committee has reviewed and discussed the Compensation Discussion and Analysis (CD&A) with the company’s management. Based on that review and discussion, the committee has recommended to the board of directors that the CD&A be included in the company’s annual report on Form10-K for 20152017 and the company’s proxy statement for the 20162018 annual meeting of stockholders.
Robert E. Sanchez, Chair | Daniel A. Carp | Pamela H. Patsley |
20152017 summary compensation table
The table below shows the compensation of the company’s CEO, each person who served as the CFO during 2017 and each of the other three most highly compensated individuals who were executive officers during 20152017 (collectively called the “named executive officers” (NEOs)) for services in all capacities to the company in 2015. For a discussion of the amount of a named executive officer’s salary and bonus in proportion to his total compensation, please see the CD&A on pages 16-28.2017.
Name and Principal Position | Year | Salary ($) | Bonus ($) (1) | Stock Awards ($) (2) | Option Awards ($) (3) | Non-Equity Incentive Plan Compensation ($) (4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (5) | All Other Compensation ($) (6) | Total ($) | Year | Salary ($) | Stock Awards ($) (2) | Option Awards ($) (3) | Non-Equity Incentive Plan Compensation ($) (4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (5) | All Other Compensation ($) (6) | Total ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Richard K. Templeton | 2015 | $ | 1,140,250 | — | $ | 4,900,017 | $ | 4,900,006 | $ | 3,653,877 | $ | 13,950 | $ | 317,702 | $ | 14,925,802 | 2017 | $ | 1,188,004 | $ | 5,500,010 | $ | 5,500,004 | $ | 3,862,601 | $ | 166,278 | $ | 329,825 | $ | 16,546,722 | ||||||||||||||||||||||||||||||||||||||||||||||
Chairman, President | 2014 | $ | 1,107,083 | — | $ | 4,900,030 | $ | 4,900,004 | $ | 3,618,941 | $ | 199,552 | $ | 318,084 | $ | 15,043,694 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
& Chief Executive Officer | 2013 | $ | 1,072,083 | — | $ | 5,740,000 | $ | 3,559,374 | $ | 3,092,199 | — | $ | 249,203 | $ | 13,712,859 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chairman, President & | 2016 | $ | 1,164,083 | $ | 4,900,048 | $ | 4,900,007 | $ | 3,682,817 | $ | 107,604 | $ | 325,510 | $ | 15,080,069 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chief Executive Officer | 2015 | $ | 1,140,250 | $ | 4,900,017 | $ | 4,900,006 | $ | 3,653,877 | $ | 13,950 | $ | 317,702 | $ | 14,925,802 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rafael R. Lizardi | 2017 | $ | 488,333 | $ | 2,000,047 | $ | 1,000,013 | $ | 947,667 | — | $ | 60,814 | $ | 4,496,874 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President & | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chief Financial Officer | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kevin P. March | 2015 | $ | 647,417 | — | $ | 1,350,010 | $ | 1,350,007 | $ | 1,225,758 | $ | 872,191 | $ | 23,837 | $ | 5,469,220 | 2017 | $ | 569,750 | $ | 1,350,036 | $ | 1,350,012 | $ | 113,950 | — | $ | 148,487 | $ | 3,532,235 | |||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President | 2014 | $ | 628,333 | — | $ | 1,350,036 | $ | 1,350,003 | $ | 1,205,884 | $ | 1,621,825 | $ | 20,509 | $ | 6,176,590 | 2016 | $ | 666,417 | $ | 1,350,033 | $ | 1,350,002 | $ | 1,243,283 | $ | 1,079,121 | $ | 5,300 | $ | 5,694,156 | ||||||||||||||||||||||||||||||||||||||||||||||
& Chief Financial Officer | 2013 | $ | 608,333 | — | $ | 1,640,000 | $ | 1,016,964 | $ | 1,017,317 | — | $ | 8,243 | $ | 4,290,857 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2015 | $ | 647,417 | $ | 1,350,010 | $ | 1,350,007 | $ | 1,225,758 | $ | 872,191 | $ | 23,837 | $ | 5,469,220 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Brian T. Crutcher | 2015 | $ | 797,917 | — | $ | 2,750,023 | $ | 2,750,006 | $ | 1,892,668 | $ | — | $ | 125,744 | $ | 8,316,358 | 2017 | $ | 870,833 | $ | 3,750,028 | $ | 3,750,006 | $ | 2,524,167 | $ | 1,173 | $ | 160,804 | $ | 11,057,011 | ||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President | 2014 | $ | 739,583 | — | $ | 2,250,001 | $ | 2,250,007 | $ | 1,622,860 | $ | 1,112 | $ | 110,688 | $ | 6,974,251 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 671,250 | — | $ | 2,460,000 | $ | 1,525,446 | $ | 1,267,728 | — | $ | 106,655 | $ | 6,031,079 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stephen A. Anderson | 2015 | $ | 595,833 | — | $ | 1,900,037 | $ | 1,900,000 | $ | 1,106,535 | — | $ | 86,566 | $ | 5,588,971 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President | 2014 | $ | 508,750 | — | $ | 3,350,039 | $ | 1,350,003 | $ | 1,002,635 | — | $ | 74,202 | $ | 6,285,629 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Executive Vice President & | 2016 | $ | 822,917 | $ | 2,750,031 | $ | 2,750,000 | $ | 2,164,583 | $ | 577 | $ | 155,079 | $ | 8,643,187 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chief Operating Officer | 2015 | $ | 797,917 | $ | 2,750,023 | $ | 2,750,006 | $ | 1,892,668 | — | $ | 125,744 | $ | 8,316,358 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Kevin J. Ritchie | 2015 | $ | 668,333 | — | $ | 2,000,041 | $ | 2,000,004 | $ | 1,384,498 | $ | 1,370,848 | $ | 5,300 | $ | 7,429,024 | 2017 | $ | 702,833 | $ | 2,000,047 | $ | 2,000,009 | $ | 1,465,567 | $ | 2,082,760 | $ | 5,400 | $ | 8,256,616 | ||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President | 2014 | $ | 647,917 | — | $ | 2,000,011 | $ | 2,000,004 | $ | 1,363,872 | $ | 2,146,473 | $ | 5,200 | $ | 8,163,477 | 2016 | $ | 688,333 | $ | 2,000,013 | $ | 2,000,001 | $ | 1,402,667 | $ | 1,468,531 | $ | 5,300 | $ | 7,564,845 | ||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 622,917 | — | $ | 2,186,678 | $ | 1,355,952 | $ | 1,153,571 | — | $ | 7,427 | $ | 5,326,545 | 2015 | $ | 668,333 | $ | 2,000,041 | $ | 2,000,004 | $ | 1,384,498 | $ | 1,370,848 | $ | 5,300 | $ | 7,429,024 | ||||||||||||||||||||||||||||||||||||||||||||||||
R. Gregory Delagi | 2017 | $ | 698,750 | $ | 1,800,074 | $ | 1,800,016 | $ | 1,239,750 | $ | 1,491,494 | $ | 16,492 | $ | 7,046,576 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Vice President |
(1) |
| company’s president and chief executive officer through May 31, 2018. Mr. Crutcher will become the company’s president and chief executive officer on June 1, 2018. Mr. Templeton will continue as the company’s chairman. |
(2) | Shown is the aggregate grant date fair value of restricted stock unit (RSU) awards calculated in accordance with ASC 718. The discussion of the assumptions used for purposes of the valuation of the awards granted in |
30 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
(3) | Shown is the aggregate grant date fair value of options calculated in accordance with ASC 718. The discussion of the assumptions used for purposes of the valuation of options granted in |
(4) | Consists of performance |
Name | 401(k) Contribution | Defined Contribution Retirement Plan (a) | Unused Vacation Time (b) | ||||||||||||
R.K. Templeton | $ | 10,600 | $ | 247,429 | $ | 45,467 | |||||||||
K. P. March | $ | 5,300 | N/A | $ | 18,537 | ||||||||||
B. T. Crutcher | $ | 10,600 | $ | 115,144 | — | ||||||||||
S. A. Anderson | $ | 10,600 | $ | 75,966 | — | ||||||||||
K. J. Ritchie | $ | 5,300 | N/A | — |
The perquisites and personal benefits are as follows: $14,206 for Mr. Templeton, consisting of financial counseling, an executive physical and personal use of company aircraft. Financial counseling and an executive physical were made available to the other named executive officers, but the amounts attributable to those officers were below the disclosure thresholds.
Grants of plan-based awards in 2015
The following table shows the grants of plan-based awards to the named executive officers in 2015.
Grant Date | Date of Committee Action |
Estimated Possible Payouts under Non-Equity Incentive Plan Awards |
Estimated Future Payouts under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) (2) | All Other Option Awards: Number of Securities Underlying Options (#) (3) | Exercise or Base Price of Option Awards ($/Sh) (4) | Grant Date Fair Value of Stock and Option Awards (5) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
R. K. Templeton | 1/28/15 | (1) | 1/15/15 | * | * | * | — | — | — | 516,440 | $ | 53.94 | $ | 4,900,006 | ||||||||||||||||||||||||||||||||||||||||||||||
1/28/15 | (1) | 1/15/15 | 90,842 | $ | 4,900,017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
K. P. March | 1/28/15 | (1) | 1/15/15 | * | * | * | — | — | — | 142,285 | $ | 53.94 | $ | 1,350,007 | ||||||||||||||||||||||||||||||||||||||||||||||
1/28/15 | (1) | 1/15/15 | 25,028 | $ | 1,350,010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
B. T. Crutcher | 1/28/15 | (1) | 1/15/15 | * | * | * | — | — | — | 289,839 | $ | 53.94 | $ | 2,750,006 | ||||||||||||||||||||||||||||||||||||||||||||||
1/28/15 | (1) | 1/15/15 | 50,983 | $ | 2,750,023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
S. A. Anderson | 1/28/15 | (1) | 1/15/15 | * | * | * | — | — | — | 200,252 | $ | 53.94 | $ | 1,900,000 | ||||||||||||||||||||||||||||||||||||||||||||||
1/28/15 | (1) | 1/15/15 | 35,225 | $ | 1,900,037 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
K. J. Ritchie | 1/28/15 | (1) | 1/15/15 | * | * | * | — | — | — | 210,792 | $ | 53.94 | $ | 2,000,004 | ||||||||||||||||||||||||||||||||||||||||||||||
1/28/15 | (1) | 1/15/15 | 37,079 | $ | 2,000,041 |
(5) | The company does not pay above-market earnings on deferred compensation. Therefore, no amounts are reported in this column for deferred compensation. The amounts in this column represent the change in the actuarial value of the named executive officers’ benefits under the qualified defined benefit pension plan (TI Employees Pension Plan) and thenon-qualified defined benefit pension plans (TI EmployeesNon-Qualified Pension Plan and TI EmployeesNon-Qualified Pension Plan II) from December 31, 2016, through December 31, 2017. This “change in the actuarial value” is the difference between the 2016 and 2017 present value of the pension benefit accumulated as ofyear-end by the named executive officer, assuming that benefit is not paid until age 65. Mr. Templeton’s and Mr. Crutcher’s benefits under the company’s pension plans were frozen as of December 31, 1997. Mr. Lizardi does not participate in any of the company’s defined benefit pension plans. Mr. March retired from the company on November 1, 2017. He received a partial distribution of his total pension benefit on December 1, 2017. The remainder of his benefit will be distributed on June 1, 2018, as required by Section 409A of the IRC. See the 2017 pension benefits table for additional information. |
(6) | Consists of (i) the amounts in the table below, which result from programs available to all eligible U.S. employees, and (ii) perquisites and personal benefits that meet the disclosure thresholds established by the SEC and are detailed in the paragraph below. |
Name | 401(k) Contribution | Defined Contribution Retirement Plan (a) | Unused Vacation | |||||||||
R. K. Templeton | $ | 10,800 | $ | 266,752 | — | |||||||
R. R. Lizardi | $ | 10,800 | $ | 39,520 | — | |||||||
K. P. March | $ | 5,400 | N/A | $ | 143,087 | |||||||
B. T. Crutcher | $ | 10,800 | $ | 150,004 | — | |||||||
K. J. Ritchie | $ | 5,400 | N/A | — | ||||||||
R. G. Delagi | $ | 5,400 | N/A | — |
(a) | Consists of (i) contributions under the company’s enhanced defined contribution retirement plan of $5,400 and (ii) an additional amount of $261,352 for Mr. Templeton, $144,604 for Mr. Crutcher, and $34,120 for Mr. Lizardi accrued by TI to offset IRC limitations on amounts that could be contributed to the enhanced defined contribution retirement plan, which amount is also shown in the 2017non-qualified deferred compensation table. |
(b) | Represents payments for unused vacation time that could not be carried forward. |
The perquisites and personal benefits are as follows: $52,273 for Mr. Templeton, consisting of financial counseling, an executive physical and personal use of company aircraft ($39,950), and $10,494 for Mr. Lizardi and $11,092 for Mr. Delagi, consisting of financial counseling and an executive physical. Financial counseling and an executive physical were made available to the other named executive officers, but the amounts attributable to those officers were below the disclosure thresholds.
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 31 |
Grants of plan-based awards in 2017
The following table shows the grants of plan-based awards to the named executive officers in 2017.
Name | Grant Date | Date of Committee Action | All Other Number of | All Other Number of | Exercise or Base Price of Option Awards ($/Sh) (4) | Grant Date Fair Value of Stock and Option Awards (5) | ||||||||||||||||||
R. K. Templeton | 1/26/17 | (1) | 1/19/17 | 333,615 | $ | 79.26 | $ | 5,500,004 | ||||||||||||||||
1/26/17 | (1) | 1/19/17 | 69,392 | $ | 5,500,010 | |||||||||||||||||||
R. R. Lizardi | 1/26/17 | (1) | 1/19/17 | 60,658 | $ | 79.26 | $ | 1,000,013 | ||||||||||||||||
1/26/17 | (1) | 1/19/17 | 25,234 | $ | 2,000,047 | |||||||||||||||||||
K. P. March | 1/26/17 | (1) | 1/19/17 | 81,888 | $ | 79.26 | $ | 1,350,012 | ||||||||||||||||
1/26/17 | (1) | 1/19/17 | 17,033 | $ | 1,350,036 | |||||||||||||||||||
B. T. Crutcher | 1/26/17 | (1) | 1/19/17 | 227,465 | $ | 79.26 | $ | 3,750,006 | ||||||||||||||||
1/26/17 | (1) | 1/19/17 | 47,313 | $ | 3,750,028 | |||||||||||||||||||
K. J. Ritchie | 1/26/17 | (1) | 1/19/17 | 121,315 | $ | 79.26 | $ | 2,000,009 | ||||||||||||||||
1/26/17 | (1) | 1/19/17 | 25,234 | $ | 2,000,047 | |||||||||||||||||||
R. G. Delagi | 1/26/17 | (1) | 1/19/17 | 109,184 | $ | 79.26 | $ | 1,800,016 | ||||||||||||||||
1/26/17 | (1) | 1/19/17 | 22,711 | $ | 1,800,074 |
(1) | In accordance with the grant policy of the Compensation Committee of the board (described |
(2) | The stock awards granted to the named executive officers in |
(3) | The options were granted under the company’s 2009 Long-Term Incentive Plan. For information on the terms and conditions of these options, |
(4) | The exercise price of the options is the closing price of TI common stock on January |
(5) | Shown is the aggregate grant date fair value computed in accordance with ASC 718 for stock and option awards in |
None of the options or other equity awards granted to the named executive officers was repriced or modified by the company.
For additional information regarding TI’s equity compensation grant practices, please see pages 19, 21, 25-26, 27-28the Compensation Discussion and 32-33.
| TEXAS INSTRUMENTS • |
Outstanding equity awards at fiscalyear-end 2015 2017
The following table shows the outstanding equity awards for each of the named executive officers as of December 31, 2015.2017.
Option Awards | Stock Awards | Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | 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 ($) | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | 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) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
R. K. Templeton | — | 516,440 | (2) | — | $ | 53.94 | 1/28/2025 | 90,842 | (6) | $ | 4,979,050 | — | — | — | 333,615 | (2) | $ | 79.26 | 1/26/2027 | 69,392 | (6) | $ | 7,247,300 | ||||||||||||||||||||||||||||||||||||||||||||||
150,673 | 452,019 | (3) | — | $ | 44.09 | 1/23/2024 | 111,137 | (7) | $ | 6,091,419 | — | — | 122,389 | 367,168 | (3) | $ | 52.93 | 1/29/2026 | 92,576 | (7) | $ | 9,668,637 | |||||||||||||||||||||||||||||||||||||||||||||||
262,500 | 262,500 | (4) | — | $ | 32.80 | 1/25/2023 | 175,000 | (8) | $ | 9,591,750 | — | — | 258,220 | 258,220 | (4) | $ | 53.94 | 1/28/2025 | 90,842 | (8) | $ | 9,487,538 | |||||||||||||||||||||||||||||||||||||||||||||||
356,250 | 118,750 | (5) | — | $ | 32.36 | 1/26/2022 | 158,334 | (9) | $ | 8,678,287 | — | — | 452,019 | 150,673 | (5) | $ | 44.09 | 1/23/2024 | 111,137 | (9) | $ | 11,607,148 | |||||||||||||||||||||||||||||||||||||||||||||||
450,000 | — | — | $ | 34.63 | 1/27/2021 | — | — | — | — | 525,000 | — | $ | 32.80 | 1/25/2023 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
540,000 | — | — | $ | 23.05 | 1/28/2020 | — | — | — | — | 475,000 | — | $ | 32.36 | 1/26/2022 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
664,461 | — | — | $ | 14.95 | 1/29/2019 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
R. R. Lizardi | — | 60,658 | (2) | $ | 79.26 | 1/26/2027 | 25,234 | (6) | $ | 2,635,439 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
7,493 | 22,480 | (3) | $ | 52.93 | 1/29/2026 | 5,668 | (7) | $ | 591,966 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
11,857 | 11,858 | (4) | $ | 53.94 | 1/28/2025 | 4,172 | (8) | $ | 435,724 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
270,000 | — | — | $ | 29.79 | 1/25/2018 | — | — | — | — | 20,756 | 6,919 | (5) | $ | 44.09 | 1/23/2024 | 5,104 | (9) | $ | 533,062 | ||||||||||||||||||||||||||||||||||||||||||||||||||
K. P. March | — | 142,285 | (2) | — | $ | 53.94 | 1/28/2025 | 25,028 | (6) | $ | 1,371,785 | — | — | — | 81,888 | (2) | $ | 79.26 | 1/26/2027 | 17,033 | (6) | $ | 1,778,927 | ||||||||||||||||||||||||||||||||||||||||||||||
41,512 | 124,536 | (3) | — | $ | 44.09 | 1/23/2024 | 30,620 | (7) | $ | 1,678,282 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
75,000 | 75,000 | (4) | — | $ | 32.80 | 1/25/2023 | 50,000 | (8) | $ | 2,740,500 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
112,500 | 37,500 | (5) | — | $ | 32.36 | 1/26/2022 | 50,000 | (9) | $ | 2,740,500 | — | — | 33,719 | 101,159 | (3) | $ | 52.93 | 1/29/2026 | 25,506 | (7) | $ | 2,663,847 | |||||||||||||||||||||||||||||||||||||||||||||||
137,500 | — | — | $ | 34.63 | 1/27/2021 | — | — | 71,142 | 71,143 | (4) | $ | 53.94 | 1/28/2025 | 25,028 | (8) | $ | 2,613,924 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
107,500 | — | — | $ | 23.05 | 1/28/2020 | — | — | 124,536 | 41,512 | (5) | $ | 44.09 | 1/23/2024 | 30,620 | (9) | $ | 3,197,953 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
B. T. Crutcher | — | 289,839 | (2) | — | $ | 53.94 | 1/28/2025 | 50,983 | (6) | $ | 2,794,378 | — | — | — | 227,465 | (2) | $ | 79.26 | 1/26/2027 | 47,313 | (6) | $ | 4,941,370 | ||||||||||||||||||||||||||||||||||||||||||||||
69,186 | 207,561 | (3) | — | $ | 44.09 | 1/23/2024 | 51,032 | (7) | $ | 2,797,064 | — | — | — | 206,064 | (3) | $ | 52.93 | 1/29/2026 | 51,956 | (7) | $ | 5,426,285 | |||||||||||||||||||||||||||||||||||||||||||||||
— | 112,500 | (4) | — | $ | 32.80 | 1/25/2023 | 75,000 | (8) | $ | 4,110,750 | — | — | — | 144,920 | (4) | $ | 53.94 | 1/28/2025 | 50,983 | (8) | $ | 5,324,665 | |||||||||||||||||||||||||||||||||||||||||||||||
12,500 | 46,875 | (5) | — | $ | 32.36 | 1/26/2022 | 62,500 | (9) | $ | 3,425,625 | — | — | — | 69,187 | (5) | $ | 44.09 | 1/23/2024 | 51,032 | (9) | $ | 5,329,782 | |||||||||||||||||||||||||||||||||||||||||||||||
100,000 | (10) | $ | 5,481,000 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
K. J. Ritchie | — | 121,315 | (2) | $ | 79.26 | 1/26/2027 | 25,234 | (6) | $ | 2,635,439 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | 149,865 | (3) | $ | 52.93 | 1/29/2026 | 37,786 | (7) | $ | 3,946,370 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
S. A. Anderson | — | 200,252 | (2) | — | $ | 53.94 | 1/28/2025 | 35,225 | (6) | $ | 1,930,682 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | 105,396 | (4) | $ | 53.94 | 1/28/2025 | 37,079 | (8) | $ | 3,872,531 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | 61,500 | (5) | $ | 44.09 | 1/23/2024 | 45,362 | (9) | $ | 4,737,607 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
R. G. Delagi | — | 109,184 | (2) | $ | 79.26 | 1/26/2027 | 22,711 | (6) | $ | 2,371,937 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
41,512 | 124,536 | (3) | — | $ | 44.09 | 1/23/2024 | 30,620 | (7) | $ | 1,678,282 | — | — | 44,959 | 134,879 | (3) | $ | 52.93 | 1/29/2026 | 34,008 | (7) | $ | 3,551,796 | |||||||||||||||||||||||||||||||||||||||||||||||
68,750 | 68,750 | (4) | — | $ | 32.80 | 1/25/2023 | 45,834 | (8) | $ | 2,512,162 | — | — | 94,856 | 94,857 | (4) | $ | 53.94 | 1/28/2025 | 33,371 | (8) | $ | 3,485,267 | |||||||||||||||||||||||||||||||||||||||||||||||
103,125 | 34,375 | (5) | — | $ | 32.36 | 1/26/2022 | 45,834 | (9) | $ | 2,512,162 | — | — | 166,047 | 55,350 | (5) | $ | 44.09 | 1/23/2024 | 40,826 | (9) | $ | 4,263,867 | |||||||||||||||||||||||||||||||||||||||||||||||
41,745 | (11) | $ | 2,288,043 | — | — | 200,000 | — | $ | 32.80 | 1/25/2023 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
175,000 | — | $ | 32.36 | 1/26/2022 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
K. J. Ritchie | — | 210,792 | (2) | — | $ | 53.94 | 1/28/2025 | 37,079 | (6) | $ | 2,032,300 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
61,499 | 184,498 | (3) | — | $ | 44.09 | 1/23/2024 | 45,362 | (7) | $ | 2,486,291 | — | — | 162,500 | — | $ | 34.63 | 1/27/2021 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
— | 100,000 | (4) | — | $ | 32.80 | 1/25/2023 | 66,667 | (8) | $ | 3,654,018 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
— | 43,750 | (5) | — | $ | 32.36 | 1/26/2022 | 58,334 | (9) | $ | 3,197,287 | — | — |
(1) | Calculated by multiplying the number of RSUs by the closing price of TI common stock on December |
(2) | One-quarter of the shares became exercisable on January |
(3) | One-third of the shares became exercisable on January |
(4) | One-half of the shares became exercisable on January |
(5) | Became fully exercisable on January |
(6) | Vesting date is February 1, 2021. |
(7) | Vesting date is January 31, 2020. |
(8) | Vesting date is January 31, 2019. |
TEXAS INSTRUMENTS • |
The “Option Awards” shown in the table above arenon-qualified stock options, each of which represents the right to purchase shares of TI common stock at the stated exercise price. The exercise price is the closing price of TI common stock on the grant date. The term of each option is ten10 years unless the option is terminated earlier pursuant to provisions summarized in the chart below and in the paragraph following the chart. Options vest (become exercisable) in increments of 25 percent per year beginning on the first anniversary of the date of the grant. The chart below shows the termination provisions relating to stock options outstanding as of December 31, 2015.2017. The Compensation Committee of the board of directors established these termination provisions to promote employee retention while offering competitive terms.
Employment Termination Due to Death or Permanent Disability | Employment Termination (at Least 6 Months after Grant) When Retirement
| Employment Termination (at Least 6 Months after Grant) with 20 Years of Credited Service, but Not Retirement
| Employment Termination for Cause | Other Circumstances of Employment | ||||
Vesting continues; option remains in effect to end of term | Vesting continues; option remains in effect to end | Option remains in effect to term; vesting does not continue after employment termination | Option cancels | Option remains exercisable for 30 days |
* | Defined for purposes of equity awards made after 2012 as at least age 55 with 10 or more years of TI service or at least age 65. For awards made before 2013, the definition of normal or early retirement eligibility in the relevant pension plan applies (see |
** | This provision is not applicable to grants made after 2012. |
Options may be cancelled if, during the two years after employment termination, the grantee competes with TI or solicits TI employees to work for another company, or if the grantee discloses TI trade secrets. In addition, for options received while the grantee was an executive officer, the company may reclaim (or “claw back”) profits earned under grants if the officer engages in such conduct. These provisions are intended to strengthen retention and provide a reasonable remedy to TI in case of competition, solicitation of our employees or disclosure of our confidential information.
Options granted after 2009 become fully vested if the grantee is involuntarily terminated from employment with TI (other than for cause) within 24 months after a change in control of TI. “Change in control” is defined as provided in the Texas Instruments 2009 Long-Term Incentive Plan and occurs upon (1) acquisition of more than 50 percent of the voting stock or at least 80 percent of the assets of TI or (2) change of a majority of the board of directors in a12-month period unless a majority of the directors then in office endorsed the appointment or election of the new directors (“Plan definition”). These terms are intended to reduce employee uncertainty and distraction in the period leading up to a change in control, if such an event were to occur. For options granted before 2010, the stock option terms provide that upon a change in control of TI, the option becomes fully vested to the extent it is then outstanding; and if employment termination (except for cause) has occurred within 30 days before the change in control, the change in control is deemed to have occurred first. “Change in control” is defined in thesepre-2010 options as (1) acquisition of 20 percent of TI common stock other than through a transaction approved by the board of directors, or (2) change of a majority of the board of directors in a24-month period unless a majority of the directors then in office have elected or nominated the new directors (together, the “pre-2010“pre-2010 definition”).
The “Stock Awards” column in the table of outstanding equity awards at fiscalyear-end 2015 2017 are RSU awards. Each RSU represents the right to receive one share of TI common stock on a stated date (the “vesting date”) unless the award is terminated earlier under terms summarized below. In general, the vesting date is approximately four years after the grant date. Each RSU includes the right to receive dividend equivalents, which are paid annually in cash at a rate equal to the amount paid to stockholders in dividends.
|
The table below shows the termination provisions of RSUs outstanding as of December 31, 2015.2017.
Employment Termination Death or Permanent Disability | Employment Termination (at Least 6 Months after Grant) When Retirement Eligible | Employment Termination
For Cause | Other Circumstances of Termination | |||
Vesting continues; shares are paid at the scheduled vesting date | Grant cancels; no shares are issued | Grant cancels; no shares are issued |
34 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
These termination provisions are intended to promote retention. All RSU awards contain cancellation and clawback provisions like those described above for stock options. The terms provide that, to the extent permitted by Section 409A of the IRC, the award vests upon involuntary termination of TI employment within 24 months after a change in control. Change in control is the Plan definition. These cancellation, clawback andchange-in-control terms are intended to conform RSU terms with those of stock options (to the extent permitted by the IRC) and to achieve the objectives described above in the discussion of stock options.
In addition to the “Stock Awards” shown in the outstanding equity awards at fiscalyear-end 2015 2017 table, on page 31, Mr. Templeton holds an award of RSUs that was granted in 1995. The award, for 120,000 shares of TI common stock, vested in 2000. Under the award terms, the shares will be issued to Mr. Templeton in March of the year after his termination of employment for any reason. These terms were designed to provide a tax benefit to the company by postponing the related compensation expense until it was likely to be fully deductible. In accordance with SEC requirements, this award is reflected in the 2015 2017non-qualified deferred compensation table on page 36.table.
20152017 option exercises and stock vested
The following table lists the number of shares acquired and the value realized as a result of option exercises by the named executive officers in 20152017 and the value of any RSUs that vested in 2015.2017. For option exercises, the value realized is calculated by multiplying the number of shares acquired by the difference between the exercise price and the market price of TI common stock on the exercise date. For RSUs, the value realized is calculated by multiplying the number of RSUs that vested by the market price of TI common stock on the vesting date.
Option Awards | Stock Awards | |||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||
R. K. Templeton | 620,000 | $ | 14,112,500 | 150,000 | $ | 8,200,500 | ||||||
K. P. March | — | $ | — | 45,834 | $ | 2,505,745 | ||||||
B. T. Crutcher | 253,125 | $ | 5,715,775 | 54,167 | $ | 2,961,310 | ||||||
S. A. Anderson | 125,000 | $ | 2,552,330 | 41,667 | $ | 2,277,935 | ||||||
K. J. Ritchie | 134,375 | $ | 3,269,518 | 54,167 | $ | 2,961,310 |
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
R. K. Templeton | 990,000 | $ | 57,796,600 | 175,000 | $ | 13,632,500 | ||||||||||
R. R. Lizardi | 5,625 | $ | 257,047 | 7,500 | $ | 584,250 | ||||||||||
K. P. March | 300,000 | $ | 16,750,191 | 50,000 | $ | 3,895,000 | ||||||||||
B. T. Crutcher | 339,043 | $ | 14,093,292 | 75,000 | $ | 5,842,500 | ||||||||||
K. J. Ritchie | 266,849 | $ | 9,480,310 | 66,667 | $ | 5,193,359 | ||||||||||
R. G. Delagi | 238,750 | $ | 18,206,506 | 66,667 | $ | 5,193,359 |
The following table shows the present value as of December 31, 2015,2017, of the benefit of the named executive officers under our qualified defined benefit pension plan (TI Employees Pension Plan) andnon-qualified defined benefit pension plans (TI EmployeesNon-Qualified Pension Plan (which governs amounts earned before 2005) and TI EmployeesNon-Qualified Pension Plan II (which governs amounts earned after 2004)). In accordance with SEC requirements, the amounts shown in the table do not reflect any named executive officer’s retirement eligibility or any increase in benefits that may result from the named executive officer’s continued employment after December 31, 2015.2017.
Name (1) | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) (6) | Payments During Last Fiscal Year ($) | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year ($) | ||||||||||||||||
R. K. Templeton (2) | TI Employees Pension Plan | 16 (3) | $ | 662,160 | — | TI Employees Pension Plan | 16 | (3) | $ | 820,318 | (6) | — | ||||||||||||
TI Employees Non-Qualified Pension Plan | 16 (3) | $ | 289,171 | — | TI EmployeesNon-Qualified Pension Plan | 16 | (3) | $ | 373,837 | (6) | — | |||||||||||||
TI Employees Non-Qualified Pension Plan II | 16 (5) | $ | 199,375 | — | TI EmployeesNon-Qualified Pension Plan II | 16 | (5) | $ | 230,434 | (6) | — | |||||||||||||
K. P. March | TI Employees Pension Plan | 30 (3) | $ | 946,474 | — | TI Employees Pension Plan | 31.8 | (3) | — | $ | 1,559,211 | |||||||||||||
TI Employees Non-Qualified Pension Plan | 19 (4) | $ | 178,569 | — | TI EmployeesNon-Qualified Pension Plan | 19 | (4) | — | $ | 259,758 | ||||||||||||||
TI Employees Non-Qualified Pension Plan II | 30 (5) | $ | 5,557,022 | — | TI EmployeesNon-Qualified Pension Plan II | 31.8 | (5) | $ | 9,453,650 | (7) | — | |||||||||||||
B. T. Crutcher (2) | TI Employees Pension Plan | 0.9 (3) | $ | 4,059 | — | TI Employees Pension Plan | 0.9 | (3) | $ | 5,809 | (6) | — | ||||||||||||
K. J. Ritchie | TI Employees Pension Plan | 36 (3) | $ | 1,391,664 | — | TI Employees Pension Plan | 38 | (3) | $ | 1,787,262 | (6) | — | ||||||||||||
TI Employees Non-Qualified Pension Plan | 25 (4) | $ | 532,589 | — | TI EmployeesNon-Qualified Pension Plan | 25 | (4) | $ | 667,115 | (6) | — | |||||||||||||
TI Employees Non-Qualified Pension Plan II | 36 (5) | $ | 7,444,716 | — | TI EmployeesNon-Qualified Pension Plan II | 38 | (5) | $ | 10,465,884 | (6) | — | |||||||||||||
R. G. Delagi | TI Employees Pension Plan | 32 | (3) | $ | 1,167,992 | (6) | — | |||||||||||||||||
TI EmployeesNon-Qualified Pension Plan | 19 | (4) | $ | 335,334 | (6) | — | ||||||||||||||||||
TI EmployeesNon-Qualified Pension Plan II | 32 | (5) | $ | 6,021,538 | (6) | — |
(1) | Mr. |
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 35 |
(2) | In 1997, TI’s U.S. employees were given the choice between continuing to participate in the defined benefit pension plans or participating in a new enhanced defined contribution retirement plan. Messrs. Templeton and Crutcher chose to participate in the defined contribution plan. Accordingly, their accrued pension benefits under the qualified andnon-qualified plans were frozen (i.e., they will experience no increase attributable to years of service or change in eligible earnings) as of December 31, 1997. Contributions to the defined contribution plan for Mr. Templeton’s and Mr. Crutcher’s benefits are included in the |
(3) | For each of the named executive officers, credited service began on the date the officer became eligible to participate in the plan. For Mr. Crutcher, eligibility to participate began on the first day of the month following completion of one year of employment. For each of the other named executive officers, eligibility to participate began on the earlier of 18 months of employment, or January 1 following the completion of one year of employment. Accordingly, each of the named executive officers has been employed by TI for longer than the years of credited service shown above. |
(4) | Credited service began on the date the named executive officer became eligible to participate in the TI Employees Pension Plan as described in note 3 above and ceased at December 31, 2004. |
(5) | Credited service began on the date the named executive officer became eligible to participate in the TI Employees Pension Plan as described in note 3 above. |
(6) | The assumptions and valuation methods used to calculate the present value of the accumulated pension benefits shown are the same as those used by TI for financial reporting purposes and are described in Note 10 to the financial statements contained in Item 8 in TI’s annual report on Form10-K for the year ended December 31, |
(7) | ||||
| Mr. March retired from the company on November 1, 2017. His TI EmployeesNon-Qualified Pension Plan II benefit will be paid to him on June 1, 2018, as required by Section 409A of the IRC. The benefit is calculated using the Plan’s assumptions in effect on December 1, 2017. |
TI Employees Pension Plan
The TI Employees Pension Plan is a qualified defined benefit pension plan. Please see page 26See “Benefits – Retirement plans” for a discussion of the origin and purpose of the plan. Employees who joined the U.S. payroll after November 30, 1997, are not eligible to participate in this plan.
A plan participant is eligible for normal retirement under the terms of the plan if he is at least 65 years of age with one year of credited service. A participant is eligible for early retirement if he is at least 55 years of age with 20 years of employment or 60 years of age with five years of employment. As of December 31, 2015,2017, Mr. Templeton Mr. March and Mr. Ritchie were eligible for early or normal retirement.
A participant may request payment of his accrued benefit at termination or any time thereafter. Participants may choose a lump sumlump-sum payment or one of six forms of annuity. In order of largest to smallest periodic payment, the forms of annuity are: (i) single life annuity,(ii) 5-year certain and life annuity,(iii) 10-year certain and life annuity, (iv) joint and 50 percent survivor annuity, (v) joint and 75 percent survivor annuity, and (vi) joint and 100 percent survivor annuity. If the participant does not request payment, he will begin to receive his benefit in April of the year after he reaches the age of 701⁄/2 in the form of annuity required under the IRC.
The pension formula for the qualified plan is intended to provide a participant with an annual retirement benefit equal to 1.5 percent multiplied by the product of (i) years of credited service and (ii) the average of the five highest consecutive years of his base salary plus bonus up to a limit imposed by the IRS, less a percentage (based on his year of birth, when he elects to retire and his years of service with TI) of the amount of compensation on which his Social Security benefit is based.
If an individual takes early retirement and chooses to begin receiving his annual retirement benefit at that time, such benefit is reduced by an early retirement factor. As a result, the annual benefit is lower than the one he would have received at age 65.
36 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
If the participant’s employment terminates due to disability, the participant may choose to receive his accrued benefit at any time prior to age 65. Alternatively, the participant may choose to defer receipt of the accrued benefit until reaching age 65 and then take a disability benefit. The disability benefit paid at age 65 is based on salary and bonus, years of credited service the participant would have accrued to age 65 had he not become disabled and disabled status.
The benefit payable in the event of death is based on salary and bonus, years of credited service and age at the time of death, and may be in the form of a lump sum or annuity at the election of the beneficiary. The earliest date of payment is the first day of the second calendar month following the month of death.
Leaves of absence, including a bridge to retirement, are credited to years of service under the qualified pension plan. Please seeSee the discussion of leaves of absence on page 38.under “Potential payments upon termination or change in control – Termination – Perquisites.”
TI employeesnon-qualified pension plans
TI has twonon-qualified pension plans: the TI EmployeesNon-Qualified Pension Plan (Plan I), which governs amounts earned before 2005; and the TI EmployeesNon-Qualified Pension Plan II (Plan II), which governs amounts earned after 2004. Each is anon-qualified defined benefit pension plan. Please see page 26See “Benefits – Retirement plans” for a discussion of the purpose of the plans. As with the qualified defined benefit pension plan, employees who joined the U.S. payroll after November 30, 1997, are not eligible to participate in Plan I or Plan II. Eligibility for normal and early retirement under these plans is the same as under the qualified plan (please see(see above). Benefits are paid in a lump sum.
A participant’s benefits under Plan I and Plan II are calculated using the same formula as described above for the TI Employees Pension Plan. However, the IRS limit on the amount of compensation on which a qualified pension benefit may be calculated does not apply. Additionally, the IRS limit on the amount of qualified benefit the participant may receive does not apply to these plans. Once thisnon-qualified benefit amount has been determined using the formula described above, the individual’s qualified benefit is subtracted from it. The resulting difference is multiplied by anage-based factor to obtain the amount of thelump-sum benefit payable to an individual under thenon-qualified plans.
Amounts under Plan I will be distributed when payment of the participant’s benefit under the qualified pension plan commences. Amounts under Plan II will be distributed subject to the requirements of Section 409A of the IRC. Because the named executive officers are among the 50 most highly compensated officers of the company, Section 409A of the IRC requires that they not receive any lump sumlump-sum distribution payment under Plan II before the first day of the seventh month following termination of employment.
If a participant terminates due to disability, amounts under Plan I will be distributed when payment of the participant’s benefit under the qualified plan commences. For amounts under Plan II, distribution is governed by Section 409A of the IRC, and the disability benefit is reduced to reflect the payment of the benefit prior to age 65.
In the event of death, payment under both plans is based on salary and bonus, years of credited service and age at the time of death and will be in the form of a lump sum. The earliest date of payment is the first day of the second calendar month following the month of death.
Balances in the plans are unsecured obligations of the company. For amounts under Plan I, in the event of a change in control, the present value of the individual’s benefit would be paid not later than the month following the month in which the change in control occurred. For such amounts, thepre-2010 definition of a change in control (please see page 32)(see the discussion following the Outstanding equity awards at fiscalyear-end 2017 table) applies. For all amounts accrued under this plan, if a sale of substantially all of the assets of the company occurred, the present value of the individual’s benefit would be distributed in a lump sum as soon as reasonably practicable following the sale of assets. For amounts under Plan II, no distribution of benefits is triggered by a change in control.
Leaves of absence, including a bridge to retirement, are credited to years of service under thenon-qualified pension plans. For a discussion of leaves of absence, please see page 38.“Potential payments upon termination or change in control – Termination – Perquisites.”
TI Employees Survivor Benefit Plan
TI’s qualified andnon-qualified pension plans provide that upon the death of a retirement-eligible employee, the employee’s beneficiary receives a payment equal to half of the benefit to which the employee would have been entitled under the pension plans had he retired instead of died. We have a survivor benefit plan that pays the beneficiary a lump sum that, when added to the reduced amounts the beneficiary receives under the pension plans, equals the benefit the employee would have been entitled to receive had he retired instead of died. Because Messers.Messrs. Templeton March and Ritchie were eligible for early retirement in 2015,2017, their beneficiaries would be eligible for benefits under the survivor benefit plan if they were to die.
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 37 |
2015 2017non-qualified deferred compensation
The following table shows contributions to theeach named executive officer’s deferred compensation account in 20152017 and the aggregate amount of his deferred compensation as of December 31, 2015.2017.
Name | Executive Contributions in Last FY ($) (1) | Registrant Contributions in Last FY ($) (2) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) (5) | Executive Contributions in Last FY ($) (1) | Registrant Contributions in Last FY ($) (2) | Aggregate Earnings in Last FY ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance at Last FYE ($) (5) | |||||||||||||||||||||||||||||||||||
R. K. Templeton | $ | 173,595 | $ | 242,129 | $ | 312,573 | (3) | $ | 351,336 | (4) | $ | 7,598,617 | (6) | $ | 173,640 | $ | 261,352 | $ | 4,211,140 | (3) | $ | 254,400 | (4) | $ | 14,576,748 | (6) | |||||||||||||||||||
R. R. Lizardi | 48,833 | $ | 34,120 | $ | 60,827 | — | $ | 368,475 | |||||||||||||||||||||||||||||||||||||
K. P. March | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
B. T. Crutcher | $ | 155,332 | $ | 109,844 | $ | (5,910 | ) | — | $ | 1,079,545 | $ | 120,000 | $ | 144,604 | $ | 225,479 | — | $ | 1,932,834 | ||||||||||||||||||||||||||
S. A. Anderson | $ | 185,458 | $ | 70,666 | $ | (2,492 | ) | $ | 14,861 | $ | 674,674 | ||||||||||||||||||||||||||||||||||
K. J. Ritchie | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
R. G. Delagi | — | — | — | — | — |
(1) | Amount shown for Mr. Templeton includes a portion of his salary and bonus paid in |
(2) | Company matching contributions pursuant to the defined contribution plan. These amounts are included in the All Other Compensation column of the |
(3) | Consists of: (a) |
(4) | Consists of dividend equivalents paid on the RSU award discussed in note |
(5) |
(6) | Of this amount, |
|
Please see page 26See “Benefits – Retirement plans” for a discussion of the purpose of the plan. An employee’s deferred compensation account contains eligible compensation the employee has elected to defer and contributions by the company that are in excess of the IRS limits on (i) contributions the company may make to the enhanced defined contribution plan and (ii) matching contributions the company may make related to compensation the executive officer deferred into his deferred compensation account.
Participants in the deferred compensation plan may choose to defer up to (i) 25 percent of their base salary, (ii) 90 percent of their performance bonus, and (iii) 90 percent of profit sharing. Elections to defer compensation must be made in the calendar year prior to the year in which the compensation will be earned.
During 2015,2017, participants could choose to have their deferred compensation mirror the performance of one or more of the following mutual funds, each of which is managed by a third party (these alternatives, which may be changed at any time, are a subset ofthe same as those offered to participants in the defined contribution plans): BlackRock MSCI ACWIex-U.S. IMI IndexNon-Lendable Fund F and BlackRock MSCI ACWIex-U.S. IMI Index Lendable Fund F, Northern Trust Short Term Investment Fund, Northern Trust Aggregate Bond Index Fund-Lending, Northern Trust Russell 1000 Value Index Fund-Lending, Northern Trust Russell 1000 Growth Index Fund-Lending, Northern Trust Russell 2000 Index Fund-Lending, Northern Trust MidCap 400 Index Fund-Lending, Fidelity Puritan Fund, BlackRock Equity Index Fund F, BlackRock (EAFE) (Europe, Australia, Far East) Equity Index Fund F, BlackRock Lifepath Index 2020 Fund F, BlackRock Lifepath Index 2030 Fund F, BlackRock Lifepath Index 2040 Fund F, BlackRock Lifepath Index 2050 Fund F and BlackRock Lifepath Index Retirement Fund F. From among the available investment alternatives, participants may change their instructions relating to their deferred compensation daily. Earnings on a participant’s balance are determined solely by the performance of the investments that the participant has chosen for his plan balance. The company does not guarantee any minimum return on investments. A third party administers the company’s deferred compensation program.
A participant may request distribution from the plan in the case of an unforeseeable emergency. To obtain an unforeseeable emergency withdrawal, a participant must meet the requirements of Section 409A of the IRC. Otherwise, a participant’s balance is paid pursuant to his distribution election and is subject to applicable IRC limitations.
38 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
Amounts contributed by the company, and amounts earned and deferred by the participant for which there is a valid distribution election on file, will be distributed in accordance with the participant’s election. Annually participants may elect separate distribution dates for deferred compensation attributable to a participant’s (i) bonus and profit sharing and (ii) salary. Participants may elect that these distributions be in the form of a lump sum or annual installments to be paid out over a period of five or ten consecutive years. Amounts for which no valid distribution election is on file will be distributed three years from the date of deferral.
In the event of the participant’s death, payment will be in the form of a lump sum and the earliest date of payment is the first day of the second calendar month following the month of death. For any other circumstance resulting in termination of employment, payments are distributed in accordance with the participant’s valid distribution election.
Like the balances under thenon-qualified defined benefit pension plans, deferred compensation balances are unsecured obligations of the company. For amounts earned and deferred prior to 2010, a change in control does not trigger a distribution under the plan. For amounts earned and deferred after 2009, distribution occurs, to the extent permitted by Section 409A of the IRC, if the participant is involuntarily terminated within 24 months after a change in control. Change in control is the Plan definition.
Potential payments upon termination or change in control
None of the named executive officers has an employment contract with the company. They are eligible for benefits on generally the same terms as other U.S. employees upon termination of employment or change in control of the company. TI does not reimburse executive officers for any income or excise taxes that are payable by the executive as a result of payments relating to termination or change in control. For a discussion of the impact of these programs on the compensation decisions for 2017, see “Analysis of compensation determinations for 2017 – Total compensation” and “Compensation following employment termination or change in control.”
Termination
The following programs may result in payments to a named executive officer whose employment terminates. Most of these programs have been discussed above. For a discussion of the impact of these programs on the compensation decisions for 2015, please see pages 20 and 27.
Bonus
Our policies concerning bonus and the timing of payments are described on pages 18-19.under “Compensation philosophy and elements.” Whether a bonus would be awarded under other circumstances and in what amount would depend on the facts and circumstances of termination and is subject to the Compensation Committee’s discretion. If awarded, bonuses are paid by the company.
Qualified andnon-qualified defined benefit pension plans
The purposes of these plans are described on page 26.under “Benefits – Retirement plans.” The formula for determining benefits, the forms of benefit and the timing of payments are described on pages 34-36.under “2017 pension benefits.” The amounts disbursed under the qualified andnon-qualified plans are paid, respectively, by the TI Employees Pension Trust and the company.
Survivor benefit plan
The purpose of this plan, is described on page 36. Thealong with the formula for determining the amount of benefit, the form of benefit and the timing of payments, are described on page 36.under “2017 pension benefits – TI Employees Survivor Benefit Plan.” Amounts distributed are paid by the TI Employees Health Benefit Trust.
Deferred compensation plan
The purpose of this plan is described on page 26.under “Benefits – Deferred Compensation.” The amounts payable under this program depend solely on the performance of investments that the participant has chosen for his plan balance. The timing of payments is discussed on page 37.under “2017non-qualified deferred compensation” and except in the case of death, payments are made according to the participant’s distribution election. Amounts distributed are paid by the company.
Equity compensation
Depending on the circumstances of termination, grantees whose employment terminates may retain the right to exercise previously granted stock options and receive shares under outstanding RSU awards. Please see pages 32-33.awards as described in the discussion following the Outstanding equity awards at fiscalyear-end 2017 table. RSU awards include a right to receive dividend equivalents. The dividend equivalents are paid annually by the company in a single cash payment after the last dividend payment of the year.
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 39 |
Perquisites
Financial counseling is availableprovided to executive officers in the year afterfor a transition period following retirement. Otherwise, no perquisites continue after termination of employment.
In the case of a resignation pursuant to a separation arrangement, an executive officer (like other employees above a certain job grade level) will typically be offered a12-month paid leave of absence before termination, in exchange for anon-compete andnon-solicitation commitment and a release of claims against the company. The leave period will be credited to years of service under the pension plans described above. During the leave, the executive officer’s stock options will continue to become exercisable and his RSUs will continue to vest. Amounts paid to an individual during a paid leave of absence are not counted when calculating benefits under the qualified andnon-qualified pension plans.
In the case of a separation arrangement in which the executive officer will be at least 50 years old and have at least 15 years of employment with the company on his or her last day of active employment before beginning the paid leave of absence, the separation arrangement will typically include an unpaid leave of absence, to commence at the end of the paid leave and end when the executive officer has reached the earlier of age 55 with at least 20 years of employment or age 60 with at least five(bridge to retirement). During the bridge to retirement, years of service (bridgewill continue to retirement). The bridge to retirement will be credited to years of serviceaccrue under the qualified andnon-qualified pension plans described above. Stock options will continue to become exercisable and RSUs will remain in effect, but for grants made before 2013, the number of RSUs will be reduced as described in note * on page 33.effect.
Change in control
Our only program, plan or arrangement providing benefits triggered by a change in control is the TI EmployeesNon-Qualified Pension Plan. A change in control at December 31, 2015,2017, would have accelerated payment of the balance under that plan. Please see page 36See “2017 pension benefits – TI employeesnon-qualified pension plans” for a discussion of the purpose of change in control provisions of that plan as well as the circumstances and the timing of payment.
Upon a change in control there is no acceleration of vesting of stock options and RSUs granted after 2009. Only upon an involuntary termination (not for cause) within 24 months after a change in control of TI will the vesting of such stock options and RSUs accelerate. Please see pages 32 and 33See the discussion following the Outstanding equity awards at fiscalyear-end 2017 table for further information concerning change in control provisions relating to stock options and RSUs.
For a discussion of the impact of these programs on the compensation decisions for 2015, please see pages 20 and 27.
| TEXAS INSTRUMENTS • |
The table below shows the potential payments upon termination or change in control for each of the named executive officers.
Form of Compensation | Disability | Death | Involuntary termination for cause | Resignation; termination (not for | Retirement | Change in control | Disability | Death | Involuntary Termination for Cause | Resignation; Termination (not for | Retirement | Change in Control | ||||||||||||||||||||||||||||||||||||
R.K. Templeton (1) | ||||||||||||||||||||||||||||||||||||||||||||||||
R. K. Templeton (1) | ||||||||||||||||||||||||||||||||||||||||||||||||
Qualified Defined Benefit Pension Plan | $ | 948,016 | (2) | $ | 460,214 | (3) | $ | 910,341 | (4) | $ | 910,341 | (4) | $ | 910,341 | (4) | — | $ | 1,011,331 | (2) | $ | 487,120 | (3) | $ | 962,396 | (4) | $ | 962,396 | (4) | $ | 962,396 | (4) | — | ||||||||||||||||
Non-Qual. Defined Benefit Pension Plan | $ | 609,677 | (5) | $ | 198,869 | (3) | $ | 393,314 | (4) | $ | 393,314 | (4) | $ | 393,314 | (4) | $ | 393,314 | (4) | $ | 609,677 | (5) | $ | 220,490 | (3) | $ | 435,375 | (4) | $ | 435,375 | (4) | $ | 435,375 | (4) | $ | 435,375 | (4) | ||||||||||||
Non-Qual. Defined Benefit Pension Plan II | $ | 221,506 | (5) | $ | 137,059 | (3) | $ | 271,178 | (4) | $ | 271,178 | (4) | $ | 271,178 | (4) | — | $ | 224,202 | (5) | $ | 135,713 | (3) | $ | 268,366 | (4) | $ | 268,366 | (4) | $ | 268,366 | (4) | — | ||||||||||||||||
Survivor Benefit Plan | — | $ | 822,814 | (6) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Deferred Compensation | — | $ | 1,021,417 | (6) | — | — | — | — | — | $ | 2,043,948 | (7) | — | — | — | — | ||||||||||||||||||||||||||||||||
RSUs | $ | 35,917,706 | (7) | $ | 35,917,706 | (7) | $ | 6,577,200 | (8) | $ | 33,748,161 | (9) | $ | 33,748,161 | (9) | $ | 6,577,200 | (8) | $ | 50,543,425 | (8) | $ | 50,543,425 | (8) | $ | 12,532,800 | (9) | $ | 50,543,425 | (10) | $ | 50,543,425 | (10) | $ | 12,532,800 | (9) | ||||||||||||
Stock Options | $ | 88,601,377 | (10) | $ | 88,601,377 | (10) | — | $ | 88,601,377 | (10) | $ | 88,601,377 | (10) | — | $ | 167,919,189 | (11) | $ | 167,919,189 | (11) | — | $ | 167,919,189 | (11) | $ | 167,919,189 | (11) | — | ||||||||||||||||||||
R.K. Templeton Total | $ | 126,298,282 | $ | 127,115,333 | (11) | $ | 8,152,033 | $ | 123,924,371 | (4) | $ | 123,924,371 | $ | 6,970,514 | ||||||||||||||||||||||||||||||||||
R. K. Templeton Total | $ | 220,307,824 | $ | 222,172,699 | $ | 14,198,937 | $ | 220,128,751 | $ | 220,128,751 | $ | 12,968,175 | ||||||||||||||||||||||||||||||||||||
K.P. March (1) | ||||||||||||||||||||||||||||||||||||||||||||||||
R. R. Lizardi | ||||||||||||||||||||||||||||||||||||||||||||||||
Qualified Defined Benefit Pension Plan | $ | 1,679,605 | (2) | $ | 669,710 | (3) | $ | 1,284,788 | (4) | $ | 1,284,788 | (4) | $ | 1,284,788 | (4) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Non-Qual. Defined Benefit Pension Plan | $ | 349,792 | (5) | $ | 122,620 | (3) | $ | 236,251 | (4) | $ | 236,251 | (4) | $ | 236,251 | (4) | $ | 236,251 | (4) | — | — | — | — | — | — | ||||||||||||||||||||||||
Non-Qual. Defined Benefit Pension Plan II | $ | 7,926,839 | (5) | $ | 3,832,854 | (3) | $ | 7,352,032 | (4) | $ | 7,352,032 | (4) | $ | 7,352,032 | (4) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Survivor Benefit Plan | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Deferred Compensation | — | — | — | — | — | — | — | $ | 368,475 | (7) | — | — | — | — | ||||||||||||||||||||||||||||||||||
RSUs | $ | 8,531,067 | (7) | $ | 8,531,067 | (7) | — | $ | 7,845,942 | (9) | $ | 7,845,942 | (9) | — | $ | 4,196,190 | (8) | $ | 4,196,190 | (8) | — | — | — | — | ||||||||||||||||||||||||
Stock Options | $ | 14,761,773 | (10) | $ | 14,761,773 | (10) | — | $ | 14,761,773 | (10) | $ | 14,761,773 | (10) | — | $ | 5,939,071 | (11) | $ | 5,939,071 | (11) | — | $ | 2,237,368 | (12) | — | — | ||||||||||||||||||||||
K.P. March Total | $ | 33,249,076 | $ | 32,165,911 | (11) | $ | 8,873,071 | $ | 31,480,786 | $ | 31,480,786 | $ | 236,251 | |||||||||||||||||||||||||||||||||||
R. R. Lizardi Total | $ | 10,135,261 | $ | 10,503,736 | — | $ | 2,237,368 | — | — | |||||||||||||||||||||||||||||||||||||||
B.T. Crutcher | ||||||||||||||||||||||||||||||||||||||||||||||||
K. P. March (13) | ||||||||||||||||||||||||||||||||||||||||||||||||
Qualified Defined Benefit Pension Plan | $ | 10,783 | (2) | $ | 1,957 | (3) | $ | 3,888 | (4) | $ | 3,888 | (4) | — | — | — | — | — | — | $ | 1,559,211 | (14) | — | ||||||||||||||||||||||||||
Non-Qual. Defined Benefit Pension Plan | — | — | — | — | — | — | — | — | — | — | $ | 259,758 | (14) | — | ||||||||||||||||||||||||||||||||||
Non-Qual. Defined Benefit Pension Plan II | — | — | — | — | — | — | — | — | — | — | $ | 9,453,650 | (15) | — | ||||||||||||||||||||||||||||||||||
Survivor Benefit Plan | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Deferred Compensation | — | $ | 1,079,545 | (6) | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
RSUs | $ | 18,608,817 | (7) | $ | 18,608,817 | (7) | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Stock Options | $ | 7,027,982 | (10) | $ | 7,027,982 | (10) | — | $ | 1,022,299 | (12) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
B.T. Crutcher Total | $ | 25,647,582 | $ | 26,718,301 | $ | 3,888 | $ | 1,026,187 | — | — | ||||||||||||||||||||||||||||||||||||||
K. P. March Total | — | — | — | — | $ | 11,272,619 | — | |||||||||||||||||||||||||||||||||||||||||
S.A. Anderson | ||||||||||||||||||||||||||||||||||||||||||||||||
B. T. Crutcher | ||||||||||||||||||||||||||||||||||||||||||||||||
Qualified Defined Benefit Pension Plan | — | — | — | — | — | — | $ | 11,492 | (2) | $ | 2,180 | (3) | $ | 4,509 | (4) | $ | 4,509 | (4) | — | — | ||||||||||||||||||||||||||||
Non-Qual. Defined Benefit Pension Plan | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Non-Qual. Defined Benefit Pension Plan II | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Survivor Benefit Plan | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Deferred Compensation | — | $ | 674,674 | (6) | — | — | — | — | — | $ | 1,932,834 | (7) | — | — | — | — | ||||||||||||||||||||||||||||||||
RSUs | $ | 10,921,331 | (7) | $ | 10,921,331 | (7) | — | — | — | — | $ | 21,022,101 | (8) | $ | 21,022,101 | (8) | — | — | — | — | ||||||||||||||||||||||||||||
Stock Options | $ | 8,067,504 | (10) | $ | 8,067,504 | (10) | — | $ | 4,273,352 | (12) | — | — | $ | 27,835,821 | (11) | $ | 27,835,821 | (11) | — | — | — | — | ||||||||||||||||||||||||||
S.A. Anderson Total | $ | 18,988,835 | $ | 19,663,509 | — | $ | 4,273,352 | — | — | |||||||||||||||||||||||||||||||||||||||
B. T. Crutcher Total | $ | 48,869,414 | $ | 50,792,936 | $ | 4,509 | $ | 4,509 | — | — | ||||||||||||||||||||||||||||||||||||||
K.J. Ritchie (1) | ||||||||||||||||||||||||||||||||||||||||||||||||
K. J. Ritchie (1) | ||||||||||||||||||||||||||||||||||||||||||||||||
Qualified Defined Benefit Pension Plan | $ | 2,083,592 | (2) | $ | 909,558 | (3) | $ | 1,789,662 | (4) | $ | 1,789,662 | (4) | $ | 1,789,662 | (4) | — | $ | 2,238,116 | (2) | $ | 1,371,524 | (3) | $ | 1,993,953 | (4) | $ | 1,993,953 | (4) | $ | 1,993,953 | (4) | — | ||||||||||||||||
Non-Qual. Defined Benefit Pension Plan | $ | 926,549 | (5) | $ | 343,447 | (3) | $ | 673,384 | (4) | $ | 673,384 | (4) | $ | 673,384 | (4) | $ | 673,384 | (4) | $ | 926,549 | (5) | $ | 513,892 | (3) | $ | 749,469 | (4) | $ | 749,469 | (4) | $ | 749,469 | (4) | $ | 749,469 | (4) | ||||||||||||
Non-Qual. Defined Benefit Pension Plan II | $ | 9,993,984 | (5) | $ | 4,782,631 | (3) | $ | 9,412,777 | (4) | $ | 9,412,777 | (4) | $ | 9,412,777 | (4) | — | $ | 12,320,242 | (5) | $ | 7,910,563 | (3) | $ | 11,498,197 | (4) | $ | 11,498,197 | (4) | $ | 11,498,197 | (4) | — | ||||||||||||||||
Survivor Benefit Plan | — | $ | 4,445,640 | (6) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Deferred Compensation | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
RSUs | $ | 11,369,896 | (7) | $ | 11,369,896 | (7) | — | $ | 10,570,602 | (9) | $ | 10,570,602 | (9) | — | $ | 15,191,947 | (8) | $ | 15,191,947 | (8) | — | $ | 15,191,947 | (10) | $ | 15,191,947 | (10) | — | ||||||||||||||||||||
Stock Options | $ | 6,003,664 | (10) | $ | 6,003,664 | (10) | — | $ | 6,003,664 | (10) | $ | 6,003,664 | (10) | — | $ | 19,808,281 | (11) | $ | 19,808,281 | (11) | — | $ | 19,808,281 | (11) | $ | 19,808,281 | (11) | — | ||||||||||||||||||||
K.J. Ritchie Total | $ | 30,377,685 | $ | 29,249,383 | (11) | $ | 11,875,823 | $ | 28,450,089 | $ | 28,450,089 | $ | 673,384 | |||||||||||||||||||||||||||||||||||
K. J. Ritchie Total | $ | 50,485,135 | $ | 49,241,847 | $ | 14,241,619 | $ | 49,241,847 | $ | 49,241,847 | $ | 749,469 | ||||||||||||||||||||||||||||||||||||
R. G. Delagi | ||||||||||||||||||||||||||||||||||||||||||||||||
Qualified Defined Benefit Pension Plan | $ | 2,190,303 | (2) | $ | 530,261 | (3) | $ | 1,051,311 | (4) | $ | 1,051,311 | (4) | — | — | ||||||||||||||||||||||||||||||||||
Non-Qual. Defined Benefit Pension Plan | $ | 522,241 | (5) | $ | 153,560 | (3) | $ | 303,025 | (4) | $ | 303,025 | (4) | — | $ | 303,025 | (4) | ||||||||||||||||||||||||||||||||
Non-Qual. Defined Benefit Pension Plan II | $ | 8,624,747 | (5) | $ | 2,743,800 | (3) | $ | 5,441,373 | (4) | $ | 5,441,373 | (4) | — | — | ||||||||||||||||||||||||||||||||||
Survivor Benefit Plan | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Deferred Compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
RSUs | $ | 13,672,867 | (8) | $ | 13,672,867 | (8) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
Stock Options | $ | 73,240,649 | (11) | $ | 73,240,649 | (11) | — | $ | 55,413,128 | (12) | — | — | ||||||||||||||||||||||||||||||||||||
R. G. Delagi Total | $ | 98,250,807 | $ | 90,341,137 | $ | 6,795,709 | $ | 62,208,837 | — | $ | 303,025 |
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 41 |
(1) | Messrs. Templeton |
(2) | The amount shown is thelump-sum benefit payable at age 65 to the named executive officer in the event of termination as of December 31, |
(3) | Value of the benefit payable in a lump sum to the executive officer’s beneficiary calculated as required by the terms of the plan assuming the earliest possible payment date. The plan provides that in the event of death, the beneficiary receives 50 percent of the participant’s accrued benefit, reduced by theage-applicable joint and 50 percent survivor factor. |
(4) | Lump-sum value of the accrued benefit as of December 31, |
(5) | The amount shown is thelump-sum benefit payable at age 65, in the case of theNon-Qualified Defined Benefit Pension Plan, or separation from service in the case of Plan II. The assumptions used are the same as those described in note 2 above. |
(6) | Calculated as required by the terms of the plan assuming the earliest possible payment date. |
(7) | Balance as of December 31, |
Calculated by multiplying the number of outstanding RSUs by the closing price of TI common stock as of December |
Calculated by multiplying the previously discussed 120,000 vested RSUs by the closing price of TI common stock as of December |
Due to retirement eligibility, calculated by multiplying the number of outstanding RSUs held at such termination by the closing price of TI common stock as of December |
Calculated as the difference between the grant price of all outstandingin-the-money options and the closing price of TI common stock as of December |
(12) | Calculated as the difference between the grant price of all exercisablein-the-money options and the closing price of TI common stock as of December |
(13) | Mr. March retired from the company on November 1, 2017. |
(14) | Benefit paid to Mr. March on December 1, 2017. |
(15) | Calculated using the Plan’s assumptions in effect on December 1, 2017. Amount will be paid on June 1, 2018, as required by Section 409A of the IRC. |
42 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
For 2017, the median of annual total compensation of all employees of our company (other than our CEO), was $78,951. The annual total compensation of our CEO was $16,573,019. Based on this information, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was approximately 210 to 1.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of the “median employee,” we used the following methodology and material assumptions, adjustments and estimates:
The annual total compensation of our CEO is the amount reported in the “Total” column of our 2017 Summary Compensation Table, adding in the value of health and welfare benefits (estimated for our CEO and his eligible dependents) and retirement-related benefits. This resulted in annual total compensation for purposes of determining the ratio in the amount of $16,573,019.
The Audit Committee of the board of directors has furnished the following report:
As noted in the committee’s charter, TI management is responsible for preparing the company’s financial statements. The company’s independent registered public accounting firm is responsible for auditing the financial statements. The activities of the committee are in no way designed to supersede or alter those traditional responsibilities. The committee’s role does not provide any special assurances with regard to TI’s financial statements, nor does it involve a professional evaluation of the quality of the audits performed by the independent registered public accounting firm.
The committee has reviewed and discussed with management and the independent accounting firm, as appropriate, (1) the audited financial statements and (2) management’s report on internal control over financial reporting and the independent accounting firm’s related opinions.
The committee has discussed with the independent registered public accounting firm, Ernst & Young, the required communications specified by auditing standards together with guidelines established by the SEC and the Sarbanes-Oxley Act.
The committee has received the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board, regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with Ernst & Young the firm’s independence.
|
Based on the review and discussions referred to above, the committee recommended to the board of directors that the audited financial statements be included in the company’s annual report on Form10-K for 20152017 for filing with the SEC.
| | Janet F. Clark |
|
Proposal to ratify appointment of independent registered public accounting firm
The Audit Committee of the board has the authority and responsibility for the appointment, compensation, retention and oversight of the work of TI’s independent registered public accounting firm. The Audit Committee has appointed Ernst & Young LLP to be TI’s
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 43 |
independent registered public accounting firm for 2016.2018.
TI has engaged Ernst & Young or a predecessor firm to serve as the company’s independent registered public accounting firm for over 60 years. In order to assure continuing auditor independence, the Audit Committee periodically considers whether the annual audit of TI’s financial statements should be conducted by another firm.
The lead audit partner on the TI engagement serves no more than five consecutive years in that role, in accordance with SEC rules. The Audit Committee Chair and management have direct input into the selection of the lead audit partner.
The members of the Audit Committee and the board believe that the continued retention of Ernst & Young to serve as the company’s independent registered public accounting firm is in the best interest of the company and its investors. Consequently, the board asks the stockholders to ratify the appointment of Ernst & Young. If the stockholders do not ratify the appointment, the Audit Committee will consider whether it should appoint another independent registered public accounting firm.
Representatives of Ernst & Young are expected to be present and to be available to respond to appropriate questions at the annual meeting. They have the opportunity to make a statement if they desire to do so; they have indicated that, as of this date, they do not.
The fees for services provided by Ernst & Young to the company are described below:
Audit fees. Ernst & Young’s Audit Fees were $9,096,000 in 2015 and $9,134,000 in 2014.
2017 | 2016 | |||||||
Audit | $ | 9,774,000 | $ | 9,664,000 | ||||
Audit-Related | $ | 722,000 | $ | 789,000 | ||||
Tax | $ | 3,088,000 | $ | 3,238,000 | ||||
All Other | $ | 23,000 | $ | 28,000 |
The services provided in exchange for these fees were as follows:
Audit: our annual audit, including the audit of internal control over financial reporting, reports on Form10-Q, assistance with public debt offerings, statutory audits required internationally and accounting consultations.
Audit-related fees. Ernst & Young’s fees for Audit-related services were $795,000 in 2015 and $797,000 in 2014. The services provided in exchange for these fees includedAudit-related: including employee benefit plan audits and certification procedures relating to compliance with local-government or other regulatory standards for variousnon-U.S. subsidiaries, and 2014 access to Ernst & Young’s online research tool. subsidiaries.
Tax fees. Ernst & Young’s fees forTax: professional services rendered for tax compliance (preparation and review of income tax returns and othertax-related filings) and tax advice on U.S. and foreign tax matters were $2,827,000 in 2015 and $1,802,000 in 2014.matters.
All other fees. Ernst & Young’s fees for all other professional services rendered were $29,000 in 2015 and $32,000 in 2014 for theOther: TI Foundation audit training and 2015 access to Ernst & Young’s online research tool.training.
Pre-approval policy. The Audit Committee is required topre-approve the audit andnon-audit services to be performed by the independent registered public accounting firm in order to assure that the provision of such services does not impair the firm’s independence.
Annually the independent registered public accounting firm and the director of internal audits present to the Audit Committee services expected to be performed by the firm over the next 12 months. The Audit Committee reviews and, as it deems appropriate,pre-approves those services. The services and estimated fees are presented to the Audit Committee for consideration in the following categories: Audit, Audit-related, Tax and All otherOther (each as defined in Schedule 14A of the Securities Exchange Act). For each service listed in those categories, the committee receives detailed documentation indicating the specific services to be provided. The term of anypre-approval is 12 months from the date ofpre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee reviews on at least a quarterly basis the services provided to date by the firm and the fees incurred for those services. The Audit Committee may revise the list ofpre-approved services and related fees from time to time, based on subsequent determinations.
In order to respond to time-sensitive requests for services that may arise between regularly scheduled meetings of the Audit Committee, the committee has delegatedpre-approval authority to its Chair (the Audit Committee does not delegate to management its responsibilities topre-approve services). The Chair reportspre-approval decisions to the Audit Committee and seeks ratification of such decisions at the Audit Committee’s next scheduled meeting.
44 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
The Audit Committee or its Chairpre-approved all services provided by Ernst & Young during 2015.2017.
The board of directors recommends a vote FOR ratification of the appointment of Ernst & Young LLP as the company’s independent registered public accounting firm for 2016.2018.
Proposal to approve amendment of the Texas Instruments 2009 Long-Term Incentive2018 Director Compensation Plan
The board asks stockholders to approve amending the Texas Instrumentscompany’s 2009 Long-Term IncentiveDirector Compensation Plan (the “2009 Plan”) to provide for the following:
The board has approved these amendments to the 2009 Plan subject to approval of stockholders. For the reasons stated below, the board believes these amendments are in the best interest of the company and stockholders and urges that this proposal be approved.
The 2009 Plan is intended to enhance the company’s abilitydefer their compensation. This plan was designed to attract and retain qualified individuals to serve as employeesdirectors of the company and encourage them to acquire aincrease the proprietary and vested interest of directors in the growth and performance of the company. The board believes that the 2009 Plan is our only activehas been effective in achieving these objectives and that the company continues to need a plan under which we mayof this type.
The 2009 Plan expires in April 2019. As of December 31, 2017, there were approximately 1.0 million shares of common stock available for grant equity awards to employees. Non-employee directors are not eligible for awards under the 2009 Plan.
The 2009 Plan reflects responsible equity compensation practices. These include:
Stockholders approved the 2009 Plan in April 2009 and reapproved in April 2014 the performance goals identified in the 2009 Plan for purposes of certain performance-based awards. Without taking account of the proposed increase in the Share Reserve, the remaining Share Reserve under the 2009 Plan as of January 31, 2016, is 18,464,864 Shares. For more details on the Share Reserve, please see the first table on page 43.
We consider the 2009 Plan to be a vital element of our employee compensation program and believe that the continued ability to grant awards at competitive levels is in the best interest of the company and stockholders. If stockholders approve the proposal, the requested increase in the Share Reserve and extensionadoption of the Term will become effective onTexas Instruments 2018 Director Compensation Plan (the “2018 Director Plan”). If the date of stockholder approval. We believe the Share Reserve will then be sufficient to enable us to make awards under the 20092018 Director Plan for approximately the next three years, assuming historical grant and forfeiture levels and recent market prices of Shares. The Term is proposed to be extended to April 21, 2026, to give us the flexibility to use the 2009 Plan throughout that period if our granting activity is less than we anticipate.
|
If stockholders do not approve the proposed amendments,approved, the 2009 Plan will remain in effect through April 16, 2019, and we may continue to makefor awards outstanding under that Plan until no such awards remain outstanding, however, no further awards will be made under the plan until then, to the extent Shares remain available for grant. We believe the current Share Reserve2009 Plan. Similarly, no additional amounts will be enough only for approximatelyable to be deferred into the next one year on2009 Plan. If stockholders do not approve the assumptions described above. In that event, our flexibility to make equity awards at competitive levels may2018 Director Plan, it will not be severely limited.
Information regarding share usage and dilutionimplemented.
The following table setssummary of the 2018 Director Plan is qualified in its entirety by reference to the complete text of the 2018 Director Plan, which is attached to this Proxy Statement as Appendix B. Capitalized terms not separately defined herein have the meanings set forth in the 2018 Director Plan.
Principal features of the 2018 Director Plan
Types of awards
The 2018 Director Plan provides for the grant of the same types of awards as the 2009 Plan: (1) stock options, (2) restricted stock and restricted stock units, and (3) other awards (including stock appreciation rights) valued based on common stock of the company.
Shares available for awards
Under the 2018 Director Plan, the number of shares of common stock available for issuance will be 2,000,000, plus shares related to terminated or canceled awards granted under the 2018 Director Plan. Shares available for future awards under eachissuance may be adjusted by the Administrator (defined below) to prevent dilution or enlargement of plan benefits because of stock splits and other events.
Administrator
The 2018 Director Plan will be administered by the board or a committee of directors appointed by the board (the “Administrator”). The Administrator will have the power to, among other things, interpret and administer the plan. Decisions of the company’s equity compensation plans asAdministrator are final and binding on all parties.
Grants
The 2018 Director Plan provides that eachnon-employee director will receive an annual grant of January 31, 2016:
Available for Future Awards | Additional Shares Requested in This Proposal | Total Available for Future Awards If This Proposal is Approved | ||||||||||
2009 Plan | 18,464,864 | 40,000,000 | 58,464,864 | |||||||||
Texas Instruments 2009 Director Compensation Plan (1) | 1,195,829 | — | 1,195,829 | |||||||||
Total (2) | 19,660,693 | 40,000,000 | 59,660,693 |
The 40,000,000 Shares that we are proposingoptions to add topurchase shares of TI common stock with a grant date value of $100,000, and an annual grant of restricted stock units with a grant date value of $100,000. In addition, each eligible director who is initially elected or appointed after the Share Reserve are approximately 4 percenteffective date of the 1,008,975,790 Shares outstanding as2018 Director Plan will receive aone-time grant of January 31, 2016.2,000 restricted stock units under the 2018 Director Plan. Notwithstanding the foregoing, the total value of awards granted to any director in any given year shall not exceed $500,000 in grant date value.
The following table sets forth information concerning outstanding awards undercompany targets pay fornon-employee directors, including retainer fees, to be at the company’s plansmedian level of pay of our Comparator Group. Every two years, the company reviews and considers comparator compensation levels and, as of January 31, 2016:
2009 Plan | Director Plan | All Other Plans (3)(4) | Total | |||||||||||
Shares underlying outstanding stock options (1) | 58,413,672 | 638,959 | 6,940,020 | 65,992,651 | ||||||||||
Shares underlying outstanding restricted stock units (2) | 13,016,795 | 132,614 | 182,734 | 13,332,143 | ||||||||||
Total Shares underlying outstanding awards | 71,430,467 | 771,573 | 7,122,754 | 79,324,794 | ||||||||||
Total Shares underlying outstanding awards as a percentage of Shares outstanding | 7% | Less than 1% | 1% | 8% |
TEXAS INSTRUMENTS • |
The table below shows netOptions will become exercisable in four equal annual dilutioninstallments commencing on the first anniversary date of the grant and other metrics concerning equity grantsexpire not more than ten years after the date of grant. It is expected that all options granted under the company’s plansPlan will benon-qualified options for U.S. tax purposes. Each restricted stock unit will be paid or settled by the last three fiscal years. The only active plan for granting equity awards to employees during this period wasissuance of one share of TI common stock as soon as practicable after the 2009 Plan.
Metric | 2015 | 2014 | 2013 | Average | ||||
Dilution (1) | 1.3% | 1.4% | 1.3% | 1.3% | ||||
Burn rate (2) | 1.4% | 1.6% | 1.7% | 1.6% | ||||
Overhang (3) | 10.4% | 11.6% | 13.5% | 11.8% |
Summaryfourth anniversary of the 2009 Plan
The 2009 Plan is attached as Appendix B. The summary below is qualifieddate of grant. If a director experiences a Separation from Service within 24 months after a Change in its entirety by reference to the text of the 2009 Plan.
The 2009 Plan provides for the grant of the following types of awards: (1) stockControl, options (2) restricted stockbecome immediately exercisable and restricted stock units (3) performance unitsvest immediately and (4) other awards (including SARs) valued in wholeare paid or in part by reference to or otherwise based on common stock of the company.settled as soon as practicable.
The Compensation Committee of TI’s board of directors (the “Committee”) administers the 2009 Plan. The Committee consists exclusively of (1) independent directors within the meaning of the rules of The NASDAQ Stock Market and (2) outside directors as described in Section 162(m) of the Internal Revenue Code (the “Code”). The Committee has the sole discretion to grant awards to eligible grantees under the 2009 Plan and determine the terms, timing, transferability and method of exercise of awards, as applicable.
Employees of the company and its subsidiaries and affiliates are eligible to receive awards under the 2009 Plan. As of January 31, 2016, we have approximately 30,000 employees who are eligible to be considered for awards under the 2009 Plan, including 10 executive officers. Substitute awards may be made in case of acquisitions and business combinations. While the 2009 Plan also provides that awards may be granted to independent contractors, no award has been granted under the 2009 Plan to an independent contractor of the company or any subsidiary or affiliate, and none will be granted in the future under the 2009 Plan. Directors who are not employees of the company are not eligible to receive awards under the 2009 Plan.
The number of Shares currently authorized for issuance under the 2009 Plan is 75,000,000 Shares (which we are requesting stockholders to increase by 40,000,000 Shares in this proposal), plus Shares subject to any award made under a previous long-term incentive plan that are not issued due to cancellation or forfeiture of the award. The number of authorized Shares may be adjusted in the case ofIf a dividend or other distribution, recapitalization, stock split, or otheranother corporate event or transaction. Shares underlyingtransaction described in Section 5(d) of the 2018 Director Plan affects our common stock such that an adjustment is appropriate to prevent dilution or enlargement of the benefits, or potential benefits, intended to be made available under the 2018 Director Plan, then an equitable adjustment shall be made to: (i) the number and type of shares (or other securities or property) which may be made the subject of awards, (ii) the number and type of shares (or other securities or property) subject to outstanding awards, and (iii) the grant, purchase or exercise price with respect to any award. The Administrator may not take any other action to reduce the exercise price of any option as established at the time of grant.
Awards will be granted for no cash consideration, or for minimal cash consideration if required by applicable law. Awards may provide that upon their exercise the company makesholder will receive cash, stock, other securities, other awards, other property or any combination thereof, as the Administrator will determine. Any shares of stock deliverable under the 2018 Director Plan may consist in assumption of,whole or in substitution for, awards previously granted by a company thatpart of authorized and unissued shares or treasury shares.
The exercise price of stock under any stock option, the company acquires (“Substitute Awards”) do not count againstgrant price of any stock appreciation right, and the Shares authorized for issuance under the 2009 Plan.
Except in the case of Substitute Awards, and except as a result of a corporate adjustment event described above, stock options, SARs and similar stock-based awards under the 2009 Plan with an exercise or a purchase price of any security that may be purchased under any other stock-based award will not have an exercise or a purchase price (or equivalent) ofbe less than 100%100 percent of the fair market value (as defined in the 2018 Director Plan) of the stock or other security on the date of the Committee grantsgrant of the stock option, right or award. Determinations of fair market value under the 2009 Plan are made in accordance with methods or procedures established by the Committee.
Under the 2009 Plan, no individual may receive stock options and SARs, considered together, for more than 4,000,000 Shares in any calendar year. In any calendar year, no individual may be granted awards under the 2009 Plan (other than stock options or SARs) intended to qualify as performance-based compensation under Section 162(m) that exceed, in the aggregate, $5,000,000 or, if denominated in Shares, 4,000,000 Shares.
|
Any award under the 2009 Plan may, but need not, be subject to the satisfaction of one or more performance goals. Awards will be made subject to one or more performance goals if the Committee determines that such awards are in the best interest of the company and its stockholders.
Awards (other than stock options and SARs) intended to qualify as performance-based compensation under Section 162(m) will be granted subject to performance goals based on one or more of the following business criteria as applied, in the Committee’s discretion, on an absolute basis or relative to other companies: cash flow; cycle time; earnings before income taxes; earnings before income taxes, depreciation and amortization; earnings per share; free cash flow; gross profit; gross profit margin; manufacturing process yield; market share; net income; net revenue per employee; operating profit; return on assets; return on capital; return on common equity; return on invested capital; return on net assets; revenue growth; or total stockholder return.
With respect to awards made after 2009, if a grantee is involuntarily terminated from employment with the company within 24 months after a change in control of the company, then unless specifically provided to the contrary in the award agreement orUnless otherwise determined by the Committee, (i) awards held by the grantee will become fully vested and exercisable and any restrictions applicable to the awards will lapse and (ii) to the extent permitted without additional tax or penalty by Section 409A of the Code, the Shares underlying restricted stock units will be issued as soon as practicable after the grantee’s involuntary termination (or if additional tax or penalty would apply to accelerated issuance, the Shares will not be issued until the issuance date specified in theAdministrator, no award agreement).
Unless the proposed amendment is approved, no awards may be granted under the 20092018 Director Plan after April 16, 2019. may be transferred or otherwise encumbered by the individual to whom it is granted, other than by will, by designation of a beneficiary, or by the laws of descent and distribution. During the individual’s lifetime, each award will be exercisable only by the individual or by the individual’s guardian or legal representative.
Amendment
The board of directors may amend, alter, discontinue or terminate the 20092018 Director Plan or any portion of the plan at any time. However, stockholder approval must be obtained for any amendment or alteration that would increase in the number of Sharesshares available for awards except uponor increase the total value of awards that may be granted in any given year (other than in connection with certain corporate events, as described in Section 5(d) of the 2018 Director Plan) or any other material amendment of the 2018 Director Plan.
Term
No awards may be granted under the 2018 Director Plan after the tenth anniversary of the effective date of the 2018 Director Plan.
Deferral
Each director will be able to elect, with respect to any year, that all or any portion of his or her eligible cash compensation and restricted stock unit grant be deferred in accordance with the terms of the 2018 Director Plan. Each director will be able to elect that his or her deferred compensation for any year be credited to a corporate adjustment event described above.cash account, a stock unit account or any combination thereof.
New plan benefits
We are not proposing any change toThe actual number of units granted will depend on the typesvalue of benefits any individual may receive underour common stock on the 2009 Plan.date of grant. The following table sets forth the benefits or amounts that individuals will receivewould have been received by or allocated to each of thenon-employee directors for the fiscal year ending December 31, 2017, had the 2018 Director Plan been in the future under the 2009 Plan continue to be subject to the discretion of the Committee and, accordingly, are not determinable. In 2015, the named executive officers were granted awards as set forth in the grants of plan-based awards in 2015 tableeffect on page 30. The executive officers may have an interest in this proposal by virtue of their eligibility for awards under the 2009 Plan. In 2015, the executive officers as a group were granted awards for 2,183,071 Shares (consisting of stock options for 1,839,162 Shares and 343,909 restricted stock units), and non-executive officer employees as a group were granted awards for 12,284,278 Shares (consisting of stock options for 9,969,280 Shares and 2,314,998 restricted stock units). Non-employee directors are not eligible for awards under the 2009 Plan. The closing price of Shares on January 29, 2016, was $52.93.such date.
Texas Instruments 2018 Director Compensation Plan (1) | ||||||||||||
Participant | Shares Subject to Options | Restricted Stock Units | Total ($) | |||||||||
Non-Employee Director Group (2) | 66,715 | (3) | 13,871 | (4) | $ | 2,199,285 |
(1) | Based on the $79.26 closing price of our common stock on January 26, 2017, when 2017 awards were granted. Number of shares and units reported does not include those that may be credited to a director upon an election to defer all or a portion of the director’s cash compensation or dividend equivalents into stock unit accounts because future elections are not determinable. |
46 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
As a result of deferral elections made for 2017: four directors deferred a total of $368,333 of their cash compensation into stock unit accounts under the 2009 Plan; seven directors deferred receipt of their restricted stock units granted in 2017; and five directors deferred receipt of cash dividend equivalents on restricted stock units in the amount of $203,151, which were paid into director stock unit and cash accounts during 2017. |
(2) | Currently, there are 11non-employee directors. |
(3) | Eachnon-employee director would have received an option to purchase 6,065 shares of TI common stock had the Plan been in effect in 2017, based on a grant date value of $100,000. |
(4) | Eachnon-employee director would have received a grant of 1,261 restricted stock units had the plan been in effect in 2017, based on a grant date value of $100,000. The 2018 Director Plan also provides for additional benefits in the form of other stock-based awards. To date, these types of awards have not been utilized and thenon-employee directors would not have been eligible for automatic grant of any such awards. |
Tax matters
The following summary is limited to the U.S. federal tax laws. It does not include the tax laws of any municipality, state or foreign country in which the participant resides.
Stock options: Counsel for the company has advised that a participant will recognize no income under the Code upon the receipt of any stock option award. In the case of an incentive stock option, if a participant exercises the stock option during or within three months of employment and does not dispose of the Shares within two years of the date of grant or one year after the transfer of the Shares to the participant, the participant will be entitled for federal income tax purposes to treat any profit which may be recognized upon the disposition of the Shares as a long-term capital gain. In contrast, aA participant who receives a grant of an option or a restricted stock unit will not be in receipt of taxable income under the Internal Revenue Code upon the making of the grant. A participant who receives an option under the 20092018 Director Plan that is not an incentive stock option or who does not comply with the conditions noted above will generally recognize ordinary income at the time of exercise in the amount of the excess, if any, of the fair market value of the stock on the date of exercise over the stock option price. SuchUpon payment or settlement of a restricted stock unit award in cash or stock, the participant will recognize ordinary income generally is subjectequal to withholdingthe value of income and employment taxes. any cash or shares received.
The company shouldwill not be allowed any deduction for federal income tax purposes upon the grant of options or restricted stock units. The company will be entitled to a deduction for federal income tax purposes equal to the amount of ordinary income, if any, recognized by a participant who (a) exercises a stock option that is not an incentive stock option, or (b) disposes of stock that was acquired pursuant to the exercise of an incentive stock option prior to the end of the required holding period described above, except to the extent such tax deduction is limited by applicable provisions of the Code. In the case of incentive stock options, any excess of the fair market value of the stock at the time of exercise over the stock option price would be an item of income for purposes of the participant’s alternative minimum tax.
Restricted stock units: Counsel for the company has advised that a participant will recognize no income under the Code upon the receipt of an unvested restricted stock unit award. Upon the settlement of a restricted stock unit award, participants will recognize ordinary income in the year of receipt in an amount equal to the fair market value of any Shares received. Such ordinary income, generally is subject to withholding of income and employment taxes. Uponif any, realized by a participant who exercises an option. Also, the sale of any Shares received, any gain or loss, based on the difference between the sale price and the fair market value on the date of settlement,company will be taxed as capital gain or loss. The company should be entitled to a deduction for federal income tax purposes at the same time as, and in an amount equal to, the amountrecognition of ordinary income by a participant in respect of restricted stock unit awards under the 2018 Director Plan and the settlement thereof.
A participant will not be deemed to have received any taxable income under the Internal Revenue Code as a result of a deferral election until the participant receives a distribution. When a distribution is made from a cash account or stock unit account, the participant will recognize ordinary income equal to the value of any cash and shares received. The company will be entitled to a deduction for federal income tax purposes at the time a distribution is made from a cash account or stock unit account in an amount equal to the income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.participant.
The board of directors recommends a vote “FOR” the proposal to approve amendment ofFOR the Texas Instruments 2009 Long-Term Incentive Plan as described above.2018 Director Compensation Plan.
Equity compensation plan information
The following table sets forth information about the company’s equity compensation plans as of December 31, 2015:2017.
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in column (a)) (c) | Number of Securities to be Issued Upon Outstanding Options, Warrants and Rights (a) | Weighted- Exercise Price of Options, Warrants and Rights (b) | Number of Securities Issuance under Equity Compensation Plans securities reflected | |||||||||||||||||||||
Equity compensation plans approved by security holders | 67,812,353 | (1) | $ | 37.51 | (2) | 70,481,353 | (3) | 52,939,620 | (1) | $ | 48.68 | (2) | 88,998,010 | (3) | |||||||||||||
Equity compensation plans not approved by security holders | 5,532,651 | (4) | $ | 37.45 | (2) | 0 | 1,391,991 | (4) | $ | 48.49 | (2) | 0 | |||||||||||||||
Total | 73,345,004 | (5) | $ | 37.50 | 70,481,353 | 54,331,611 | (5) | $ | 48.67 | 88,998,010 |
(1) | Includes shares of TI common stock to be issued under the Texas Instruments 2003 Director Compensation Plan (the “2003 Director Plan”), the Texas Instruments 2009 Long-Term Incentive Plan (the “2009 LTIP”) and predecessor stockholder-approved plans, the Texas Instruments 2009 Director Compensation Plan (the “2009 Director Plan”) and the TI Employees 2014 Stock Purchase Plan (the “2014 ESPP”). |
(2) | Restricted stock units and stock units credited to directors’ deferred compensation accounts are settled in shares of TI common stock on aone-for-one basis. Accordingly, such units have been excluded for purposes of computing the weighted-average exercise price. |
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 47 |
(3) | Shares of TI common stock available for future issuance under the 2009 LTIP, the 2009 Director Plan and the 2014 ESPP. |
(4) | Includes shares to be issued under the Texas Instruments 2003 Long-Term Incentive Plan (the “2003 LTIP”). The 2003 LTIP was replaced by the 2009 LTIP, which was approved by stockholders. No further grants may be made under the 2003 LTIP. Onlynon-management employees were eligible to receive awards under the 2003 LTIP. The 2003 LTIP authorized the grant of shares in the form of restricted stock units, options or other stock-based awards such as restricted stock. The plan is administered by a committee of independent directors (the Committee). The Committee had the sole discretion to grant to eligible participants one or more equity awards and to determine the number or amount of any award. Except in the case of awards made through assumption of, or in substitution for, outstanding awards previously granted by an acquired company, and except as a result of an adjustment event such as a stock split, the exercise price under any stock option, the grant price of any stock appreciation right, and the purchase price of any security that could be purchased under any other stock-based award under the 2003 LTIP could not be less than 100 percent of the fair market value of the stock or other security on the effective date of the grant of the option, right or award. |
Also includes shares to be issued under the Texas Instruments Directors Deferred Compensation Plan and the Texas Instruments Restricted Stock Unit Plan for Directors. These plans were replaced by the stockholder-approved 2003 Director Plan (which was replaced by the 2009 Director Plan), and no further grants may be made under them.
| Also includes shares to be issued under the Texas Instruments Directors Deferred Compensation Plan and the Texas Instruments Restricted Stock Unit Plan for Directors. These plans were replaced by the stockholder-approved 2003 Director Plan (which was replaced by the 2009 Director Plan), and no further grants may be made under them. |
(5) | Includes |
As stated in the notice of annual meeting, holders of record of the common stock at the close of business on February 22, 2016,26, 2018, may vote at the meeting or any adjournment of the meeting. As of February 22, 2016, 1,005,257,72326, 2018, 983,105,798 shares of TI common stock were outstanding. This is the only class of capital stock entitled to vote at the meeting. Each holder of common stock has one vote for each share held.
Security ownership of certain beneficial owners
The following table shows the only persons who have reported beneficial ownership of more than 5 percent of the common stock of the company.company by virtue of filing a schedule 13G with the SEC. Persons generally “beneficially own” shares if they have the right to either vote those shares or dispose of them. More than one person may be considered to beneficially own the same shares.
Name and Address | Shares Owned at December 31, 2015 | Percent of Class | ||||||||
Capital Research Global Investors (1) | ||||||||||
333 South Hope Street | ||||||||||
Los Angeles, CA 90071 | 88,088,517 | (2) | 8.71 | % | ||||||
Capital World Investors (1) | ||||||||||
333 South Hope Street | ||||||||||
Los Angeles, CA 90071 | 68,528,496 | (3) | 6.78 | % | ||||||
The Vanguard Group | ||||||||||
100 Vanguard Blvd. | ||||||||||
Malvern, PA 19355 | 68,503,499 | (4) | 6.77 | % | ||||||
BlackRock, Inc. | ||||||||||
55 East 52ndStreet | ||||||||||
New York, NY 10055 | 58,798,732 | (5) | 5.81 | % | ||||||
PRIMECAP Management Company | ||||||||||
225 South Lake Ave., #400 | ||||||||||
Pasadena, CA 91101 | 54,483,936 | (6) | 5.39 | % |
Name and Address | Shares Owned at December 31, 2017 | Percent of Class | ||||||
The Vanguard Group | ||||||||
100 Vanguard Blvd. | ||||||||
Malvern, PA 19355 | 83,312,134 | (1) | 8.47 | % | ||||
BlackRock, Inc. | ||||||||
55 East 52ndStreet | ||||||||
New York, NY 10055 | 68,837,536 | (4) | 7.0 | % |
(1) |
Security ownership of directors and management
The following table shows the beneficial ownership of TI common stock by directors, the named executive officers and all executive officers and directors as a group. Each director and named executive officer has sole voting power (except for shares
48 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
obtainable within 60 days, shares subject to RSUs and shares credited to deferred compensation accounts as detailed in the footnotes to the table) and sole investment power with respect to the shares owned. The table excludes shares held by a family member if a director or executive officer has disclaimed beneficial ownership. No director or executive officer has pledged shares of TI common stock.
Name | Shares Owned at December 31, | Percent of Class | ||||||
Directors (1) | ||||||||
R. W. Babb, Jr. | 75,519 | * | ||||||
M. A. Blinn | 20,487 | * | ||||||
D. A. Carp | 141,043 | * | ||||||
J. F. Clark | 2,762 | * | ||||||
C. S. Cox | 92,679 | * | ||||||
R. Kirk | 14,904 | * | ||||||
P. H. Patsley | 135,749 | * | ||||||
R. E. Sanchez | 48,331 | * | ||||||
W. R. Sanders | 77,323 | * | ||||||
R. J. Simmons | 64,196 | * | ||||||
R. K. Templeton | 4,303,565 | * | ||||||
C. T. Whitman | 116,684 | * | ||||||
Management (2) | ||||||||
K. P. March | 981,368 | * | ||||||
B. T. Crutcher | 666,405 | * | ||||||
S. A. Anderson | 572,970 | * | ||||||
K. J. Ritchie | 477,828 | * | ||||||
All executive officers and directors as a group (3) | 10,338,972 | 1.02 | % |
Name | Shares Owned at December 31, 2017 | Percent of Class | ||||||
Directors | ||||||||
R. W. Babb, Jr. | 81,898 | * | ||||||
M. A. Blinn | 26,667 | * | ||||||
T. M. Bluedorn | 2,000 | * | ||||||
D. A. Carp | 119,226 | * | ||||||
J. F. Clark | 14,869 | * | ||||||
C. S. Cox | 103,922 | * | ||||||
B. T. Crutcher | 468,785 | * | ||||||
J. M. Hobby | 4,777 | * | ||||||
R. Kirk | 36,971 | * | ||||||
P. H. Patsley | 151,085 | * | ||||||
R. E. Sanchez | 49,933 | * | ||||||
W. R. Sanders | 80,018 | * | ||||||
R. K. Templeton | 3,119,589 | * | ||||||
Management (2) | ||||||||
R. R. Lizardi | 123,510 | * | ||||||
K. P. March | 661,594 | * | ||||||
K. J. Ritchie | 341,486 | * | ||||||
R. G. Delagi | 1,164,875 | * | ||||||
All executive officers and directors as a group (3) | 8,248,780 | * |
* | less than 1 percent. |
(1) | Included in the shares owned shown above are: |
Directors | Shares Obtainable within 60 Days | Shares Credited to 401(k) Account | RSUs (in Shares) (a) | Shares Credited to Deferred Compensation Accounts (b) | Shares Obtainable within 60 Days | Shares to 401(k) | RSUs (in Shares) (a) | Shares to Deferred Compensation Accounts (b) | ||||||||||||||||||||||||
R. W. Babb, Jr. | 42,002 | — | 15,146 | 17,371 | 41,463 | — | 18,296 | 21,139 | ||||||||||||||||||||||||
M. A. Blinn | 8,783 | — | 6,121 | 5,583 | 9,724 | — | 9,271 | 7,672 | ||||||||||||||||||||||||
T. M. Bluedorn | — | — | 2,000 | — | ||||||||||||||||||||||||||||
D. A. Carp | 70,002 | — | 31,810 | 39,231 | 41,463 | — | 34,960 | 42,803 | ||||||||||||||||||||||||
J. F. Clark | — | — | 2,000 | 762 | 6,511 | — | 5,150 | 3,208 | ||||||||||||||||||||||||
C. S. Cox | 63,002 | — | 25,146 | 1,392 | 70,621 | — | 28,296 | 1,866 | ||||||||||||||||||||||||
B. T. Crutcher | 267,276 | — | 201,284 | — | ||||||||||||||||||||||||||||
J. M. Hobby | 1,516 | — | 3,261 | — | ||||||||||||||||||||||||||||
R. Kirk | 8,783 | — | 6,121 | — | 26,714 | — | 7,271 | 986 | ||||||||||||||||||||||||
P. H. Patsley | 70,002 | — | 12,259 | 40,601 | 77,621 | — | 9,271 | 45,168 | ||||||||||||||||||||||||
R. E. Sanchez | 32,000 | — | 10,259 | 4,072 | 26,714 | — | 7,271 | 7,810 | ||||||||||||||||||||||||
W. R. Sanders | 42,002 | — | 19,859 | 1,575 | 26,714 | — | 16,871 | 1,659 | ||||||||||||||||||||||||
R. J. Simmons | 12,435 | — | 31,146 | 20,615 | ||||||||||||||||||||||||||||
R. K. Templeton | 3,223,774 | 13,113 | 655,313 | — | 2,318,278 | 13,095 | 483,947 | — | ||||||||||||||||||||||||
C. T. Whitman | 70,002 | — | 22,646 | 9,044 |
(a) | Thenon-employee directors’ RSUs granted before 2007 are settled in TI common stock generally upon the director’s termination of service provided he or she has served at least eight years or has reached the company’s retirement age for directors. RSUs granted after 2006 are settled in TI common stock generally upon the fourth anniversary of the grant date. |
(b) | The shares in deferred compensation accounts are issued following the director’s termination of service. |
| TEXAS INSTRUMENTS • | 49 |
(2) | Included in the shares owned shown above are: |
Executive Officer | Shares Obtainable within 60 Days | Shares Credited to 401(k) Account | RSUs (in Shares) | Shares within 60 Days | Shares 401(k) | RSUs (in Shares) | |||||||||||||||||||||
R. R. Lizardi | 75,686 | — | 40,178 | ||||||||||||||||||||||||
K. P. March | 626,202 | 2,114 | 155,648 | 360,672 | 2,111 | 98,187 | |||||||||||||||||||||
B. T. Crutcher | 326,564 | — | 339,515 | ||||||||||||||||||||||||
S. A. Anderson | 373,712 | — | 199,258 | ||||||||||||||||||||||||
K. J. Ritchie | 269,553 | — | 207,442 | 194,556 | — | 145,461 | |||||||||||||||||||||
R. G. Delagi | 1,018,420 | 12,220 | 130,916 |
(3) | Includes: |
(a) |
(b) |
(c) |
(d) |
Because we believe that company transactions with directors and executive officers of TI or with persons related to TI directors and executive officers present a heightened risk of creating or appearing to create a conflict of interest, we have a written related person transaction policy that has been approved by the board of directors. The policy states that TI directors and executive officers should obtain the approvals or ratifications specified below in connection with any related person transaction. The policy applies to transactions in which:
1. | TI or any TI subsidiary is or will be a participant; |
2. | The amount involved exceeds or is expected to exceed |
3. | Any of the following (a “related person”) has or will have a direct or indirect interest: |
(a) | A TI director or executive officer, or an Immediate Family Member of a director or executive officer; |
(b) | A stockholder owning more than 5 percent of the common stock of TI or an Immediate Family Member of such stockholder, or, if the 5 percent stockholder is not a natural person, any person or entity designated in the Form 13G or 13D filed under the SEC rules and regulations by the 5 percent stockholder as having an ownership interest in TI stock (individually or collectively, a “5 percent holder”); or |
(c) | An entity in which someone listed in (a) |
For purposes of the policy, an “Immediate Family Member” is any child, stepchild, parent, stepparent, spouse, sibling,mother-in-law,father-in-law,son-in-law,daughter-in-law,brother-in-law,sister-in-law or any person (other than a tenant or employee) sharing the household of a TI director, executive officer or 5 percent holder.
The policy specifies that a related person transaction includes, but is not limited to, any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions or arrangements.
50 | TEXAS INSTRUMENTS • |
The required approvals are as follows:
Arrangement | Approval | |
Executive officer who is also a member of the TI board, an Immediate Family Member of such person, or an entity in which any of the foregoing has a 5 percent or greater ownership interest | ||
Chair of the | ||
Any other director or executive officer, an Immediate Family Member of such person, or an entity in which any of the foregoing has a 5 percent or greater ownership interest | Chief Compliance Officer in consultation with the Chair of the | |
A 5 percent holder |
No member of the G&SRGSR Committee will participate in the consideration of a related person arrangement in which such member or any of his or her Immediate Family Members is the related person.
The approving body or persons will consider all of the relevant facts and circumstances available to them, including (if applicable) but not limited to: the benefits to the company of the arrangement; the impact on a director’s independence; the availability of other sources for comparable products or services; the terms of the arrangement; and the terms available to unrelated third parties or to employees generally. The primary consideration is whether the transaction between TI and the related person (a) was the result of undue influence from the related person or (b) could adversely influence or appear to adversely influence the judgment, decisions or actions of the director or executive officer in meeting TI responsibilities or create obligations to other organizations that may come in conflict with responsibilities to TI.
No related person arrangement will be approved unless it is determined to be in, or not inconsistent with, the best interests of the company and its stockholders, as the approving body or persons shall determine in good faith.
The chief compliance officer will provide periodic reports to the committee on related person transactions. Any related person transaction brought to the attention of the chief compliance officer or of which the chief compliance officer becomes aware that is not approved pursuant to the process set forth above shall be terminated as soon as practicable.
The board has determined that the following types of transactions pose little risk of a conflict of interest and therefore has deemed them approved:
¡ | the direct or indirect ownership in another party to the transaction and that ownership, when combined with the ownership of all the other individuals specified in 3(a)-(c) above, is less than 5 percent of the outstanding equity of such party; |
¡ | an interest as a limited partner in a partnership, and that ownership interest, when combined with all the other ownership interests of the other individuals specified in 3(a)-(c) above, is less than 5 percent of the total ownership interest of the limited partnership; |
¡ | their position as a director of another corporation or organization; |
¡ | the ownership of TI stock and all holders of that class of stock receive the same benefit on apro-rata basis; |
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 51 |
During 2015, two family members of executive officers were employed by2017, the company. The son of R. Gregory Delagi (Senior Vice President) was employed in our facilities organization, and the spouse of Cynthia Hoff Trochu (Senior Vice President and General Counsel) was employed in our finance organization until his retirement in August 2015. Neitherorganization. Mr. Delagi nor Ms. Trochu was not involved in any decisions regarding their family member’shis son’s employment at TI, and the compensation of both family membershis son was consistent with that of similarly situated employees. These transactions have been reviewed and ratified in accordance with the company’s related person transactions policy described above.
Compensation committee interlocks and insider participation
During 2015,2017, Messrs. Carp and Sanchez and Mses. Patsley and Whitman served on the Compensation Committee. No committee member (i) was an officer or employee of TI, (ii) was formerly an officer of TI or (iii) had any relationship requiring disclosure under the SEC’s rules governing disclosure of related person transactions (Item 404 of RegulationS-K). No executive officer of TI served as a director or member of the compensation committee of another entity, one of whose directors or executive officers served as a member of our board of directors or a member of the Compensation Committee.
The solicitation is made on behalf of our board of directors. TI will pay the cost of soliciting these proxies. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for reasonable expenses they incur in sending these proxy materials to you if you are a beneficial holder of our shares.
|
Without receiving additional compensation, officials and regular employees of TI may solicit proxies personally, by telephone, fax or e-mail,email, from some stockholders if proxies are not promptly received. We have also hired Georgeson Inc. to assist in the solicitation of proxies at a cost of $12,000 plusout-of-pocket expenses.
Stockholder proposals and nominations for 20172019
If you wishThe table below shows the deadlines for stockholders to submit a proposalproposals or director nominations for possible inclusion in TI’s 2017 proxy material, we must receive your notice, in accordance with the rules of the SEC, on or before November 9, 2016. next year’s annual meeting.
Proposals for Inclusion in 2019 Proxy Materials | Director Nominees for Inclusion in 2019 Proxy Materials | Other Proposals/Nominees to be Proxy Materials) | ||||
When proposal must be received by Texas Instruments | On or before November 13, 2018 | No earlier than October 14, 2018, and no later than November 13, 2018 | No earlier than December 27, 2018, and no later than January 26, 2019 |
Proposals are to be sent to: Texas Instruments Incorporated, 12500 TI Boulevard, MS 8658, Dallas, TX 75243, Attn: Secretary.
If you wishWe reserve the right to submit areject, rule out of order, or take any other appropriate action with respect to any proposal at the 2017 annual meeting (butor nomination that does not seek inclusion of the proposal in the company’s proxy material), we must receive your notice, in accordancecomply with the company’s by-laws, on or before January 21, 2017.these and other applicable requirements.
AllIn addition, all suggestions from stockholders concerning the company’s business are welcome and will be carefully considered by TI’s management. To ensure that your suggestions receive appropriate review, the G&SRGSR Committee reviews correspondence from stockholders and management’s responses. Stockholders are thereby given access at the board level without having to resort to formal stockholder proposals. Generally, the board prefers you present your views in this manner rather than through the process of formal stockholder proposals. Please see page 8See “Communications with the board” for information on contacting the board.
If you are a participant in the TI Contribution and 401(k) Savings Plan, or the TI 401(k) Savings Plan, you are a “named fiduciary” under the plans and are entitled to direct the voting of shares allocable to your accounts under these plans. The trustee
52 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
administering your plan will vote your shares in accordance with your instructions. If you wish to instruct the trustee on the voting of shares held for your accounts, you should do so by April 18, 2016,23, 2018, in the manner described in the notice of annual meeting.
Additionally, participants under the plans are designated as “named fiduciaries” for the purpose of voting TI stock held under the plans for which no voting direction is received. TI shares held by the TI 401(k) savings plans for which no voting instructions are received by April 18, 2016,23, 2018, will be voted in the same proportions as the shares in the plans for which voting instructions have been received by that date unless otherwise required by law.
Section 16(a) beneficial ownership reporting compliance
Section 16(a) of the Securities Exchange Act requires certain persons, including the company’s directors and executive officers, to file reports with the SEC regarding beneficial ownership of certain equity securities of the company. Due to an administrative error, there was one late filing for Mr. Xie with respect to a gift of shares. The company believes that all other reports during 20152017 were timely filed by its directors and executive officers.
Telephone and Internetinternet voting
Registered stockholders and benefit plan participants. Stockholders with shares registered directly with Computershare (TI’s transfer agent) and participants who beneficially own shares in a TI benefit plan may vote telephonically by calling(800) 690-6903 (within the U.S. and Canada only, toll-free) or via the Internetinternet at www.proxyvote.com.
The telephone and Internetinternet voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to give their voting instructions and to confirm that stockholders’ instructions have been recorded properly. TI has been advised by counsel that the telephone and Internetinternet voting procedures, which have been made available through Broadridge Financial Solutions, Inc., are consistent with the requirements of applicable law.
Stockholders with shares registered in the name of a brokerage firm or bank. A number of brokerage firms and banks offer telephone and Internetinternet voting options. These programs may differ from the program provided to registered stockholders and benefit plan participants. Check the information forwarded by your bank, broker or other holder of record to see which options are available to you.
Stockholders voting via the Internetinternet should understand that there may be costs associated with electronic access, such as usage charges from telephone companies and Internetinternet access providers, that must be borne by the stockholder.
Stockholders sharing the same address
To reduce the expenses of delivering duplicate materials, we take advantage of the SEC’s “householding” rules whichthat permit us to deliver only one set of proxy materials (or one Notice of Internet Availability of Proxy Materials) to stockholders who share an address unless otherwise requested. If you share an address with another stockholder and have received only one set of these materials, you may request a separate copy at no cost to you by calling Investor Relations at 214-479-3773(214)479-3773 or by writing to Texas Instruments Incorporated, P.O. Box 660199, MS 8657, Dallas, TX 75266-0199, Attn: Investor Relations. For future annual meetings, you may request separate materials, or request that we send only one set of materials to you if you are receiving multiple copies, by calling (800) 542-1061(866) 540-7095 or writing to Investor Relations at the address given above.
Electronic delivery of proxy materials and copies of our Form10-K
As an alternative to receiving printed copies of these materials in future years, we are pleased to offer stockholders the opportunity to receive proxy mailings electronically. To request electronic delivery, please vote via the Internetinternet at www.proxyvote.com and, when prompted, enroll to receive or access proxy materials electronically in future years. After the meeting date, stockholders holding shares through a broker or bank may request electronic delivery by visiting www.icsdelivery.com/ti and entering information for each account held by a bank or broker. If you are a registered stockholder and would like to request electronic delivery, please visitwww-us.computershare.com/investor or call TI Investor Relations at 214-479-3773(214)479-3773 for more information. If you are a participant in a TI benefit plan and would like to request electronic delivery, please call TI Investor Relations for more information.
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | 53 |
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on April 21, 2016.26, 2018. This 20162018 proxy statement and the company’s 20152017 annual report are accessible at: www.proxyvote.com.
The company’s Annual Reportannual report to Stockholders,stockholders, which contains consolidated financial statements for the year ended December 31, 2015,2017, accompanies this Proxy Statement.proxy statement.You may also obtain a copy of the company’s Annual Reportannual report on Form10-K for theyear ended December 31, 2015,2017, that was filed with the SEC without charge by writing to Investor Relations, P.O. Box 660199, MS 8657, Dallas, TX 75266-0199. Our Form10-K is also available in the “Investor Relations” section of our website at www.TI.com.www.ti.com.
Sincerely,
Cynthia Hoff Trochu
Senior Vice President,
Secretary and General Counsel
March 9, 201613, 2018
Dallas, Texas
Notice regarding forward-looking statements
This proxy statement includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Statements herein that describe TI’s business strategy, plans, goals, future capital spending levels and potential for growth, improved profit margins and cash generation are forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results and amounts to differ materially from those in forward-looking statements. For a detailed discussion of the risks and uncertainties, see the Risk factors discussion in Item 1A of our annual report on Form10-K for the year ended December 31, 2015.2017. The forward-looking statements included in this proxy statement are made only as of the date of this proxy statement, and we undertake no obligation to update the forward-looking statements to reflect subsequent events or circumstances.
| TEXAS INSTRUMENTS • |
Directions and other annual meeting information
Directions
From DFW airport:Take the North Airport exit toIH-635E. TakeIH-635E to the Greenville Avenue exit. Turn right (South) on Greenville. Turn right (West) on Forest Lane. Texas Instruments will be on your right at the second traffic light. Please use the North entrance to the building.
From Love Field airport:Take Mockingbird Lane East toUS-75N (Central Expressway). Travel North on 75N to the Forest Lane exit. Turn right (East) on Forest Lane. You will pass two traffic lights. At the third light, the entrance to Texas Instruments will be on your left. Please use the North entrance to the building.
Parking
There will be reserved parking for allAll visitors at the North Lobby. Visitors with special needs requiring assistance will be accommodatedshould park at the South Lobby, entrance.where reserved parking will be available.
Security
Please beBe advised that TI’s security policy forbids weapons, cameras and audio/video recording devices inside TI buildings. All bags will be subject to search upon entry into the building.
Attendance
For additional information about attending the annual meeting see the discussion under “Attendance requirements” on page 4.
TEXAS INSTRUMENTS • |
Non-GAAP reconciliations
This proxy statement refers to ratios based on free cash flow. These are financial measures that were not prepared in accordance with generally accepted accounting principles in the U.S. (GAAP). Free cash flow is anon-GAAP measure calculated by subtracting Capital expenditures from the most directly comparable GAAP measure, Cash flows from operating activities (also referred to as Cash flow from operations). We believe free cash flow and these ratios based on it provide insight into our liquidity, our cash-generating capability and the amount of cash potentially available to return to investors,shareholders, as well as insight into our financial performance. Thesenon-GAAP measures are supplemental to the comparable GAAP measures and are reconciled in the table below to the most directly comparable GAAP measures.
For Years Ended December 31, | Percentage of Revenue | |||||||||||||||||||||||||||||||
For Years Ended December 31, | ||||||||||||||||||||||||||||||||
Free Cash Flow as a Percentage of Revenue | 2015 | 2014 | 2013 | Total | 2015 | 2014 | 2013 | Total | ||||||||||||||||||||||||
(Millions of dollars) | ||||||||||||||||||||||||||||||||
Revenue | $ | 13,000 | $ | 13,045 | $ | 12,205 | $ | 38,250 | ||||||||||||||||||||||||
Cash flow from operations (GAAP) | $ | 4,268 | $ | 3,892 | $ | 3,384 | $ | 11,544 | 32.8% | 29.8% | 27.7% | 30.2% | ||||||||||||||||||||
Capital expenditures | (551 | ) | (385 | ) | (412 | ) | (1,348 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Free cash flow (non-GAAP) | $ | 3,717 | $ | 3,507 | $ | 2,972 | $ | 10,196 | 28.6% | 26.9% | 24.4% | 26.7% | ||||||||||||||||||||
|
|
|
|
|
|
|
|
Percentage of Revenue | ||||||||||||||||||||||||||||||||
For Years Ended December 31, | For Years Ended December 31, | |||||||||||||||||||||||||||||||
Free Cash Flow as a Percentage of Revenue | 2017 | 2016 | 2015 | Total | 2017 | 2016 | 2015 | Total | ||||||||||||||||||||||||
(Millions of dollars) | ||||||||||||||||||||||||||||||||
Revenue | $ | 14,961 | $ | 13,370 | $ | 13,000 | $ | 41,331 | ||||||||||||||||||||||||
Cash flow from operations (GAAP) | $ | 5,363 | $ | 4,614 | $ | 4,397 | $ | 14,374 | 35.8 | % | 34.5 | % | 33.8 | % | 34.8 | % | ||||||||||||||||
Capital expenditures | (695 | ) | (531 | ) | (551 | ) | (1,777 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Free cash flow(non-GAAP) | $ | 4,668 | $ | 4,083 | $ | 3,846 | $ | 12,597 | 31.2 | % | 30.5 | % | 29.6 | % | 30.5 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
A-1 | TEXAS INSTRUMENTS • |
TEXAS INSTRUMENTS 2009 LONG-TERM INCENTIVE2018 DIRECTOR COMPENSATION PLAN
As amended effectiveDated April 21, 2016 (marked to show proposed amendments)26, 2018
SECTION 1.Purpose. PURPOSE.
The Texas Instruments 2009 Long-Term Incentive2018 Director Compensation Plan (“the Plan”) is intended as a successor plan to the Company’s 2000 Long-Term Incentive Plan, 2003 Long-Term Incentive Plan and the predecessors thereto.2009 Director Compensation Plan. This Plan is designed to enhance the abilityattract and retain qualified individuals to serve as directors of the Company to attract and retain exceptionally qualified individuals and to encourage them to acquire aincrease the proprietary and vested interest of such directors in the growth and performance of the Company. This Plan is effective for Awards granted on or after the Effective Date.
SECTION 2.Definitions. DEFINITIONS.
As used in the Plan, the following terms shall have the meanings set forth in this Section 2. Any definition of a performance measure used in connection with an Award described by Section 11(f) shall have the meaning commonly ascribed to such term by generally acceptable accounting principles as practiced in the United States.below:
(a) | “ |
(b) | “Administrator” means the Board or a committee of directors designated by the |
(c) | “Award” means any |
(d) | “Award Agreement” |
(e) | “Board” |
(f) | “Cash Account”means the bookkeeping accounts established or maintained pursuant to Section 11(b)(i) on behalf of each Director who elects pursuant to Section 11(b) to have any of his or her Deferred Compensation credited to a cash account. |
(g) | “Change in |
(i) | On the date any Person, other than |
(ii) | On the date a majority of members of the Board is replaced during any12-month period by directors whose appointment or election is not endorsed by a majority of the Board before the date of the appointment or election; or |
(iii) | On the date any Person acquires (or has acquired during the12-month period ending on the date of the most recent acquisition by such Person) assets from the Company that have a total gross fair market value equal to or more than 80 percent of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. However, there is no Change in Control when there is such a sale or transfer to (i) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s then outstanding stock; (ii) an entity, at least 50 percent of the total value or voting power of the stock of which is owned, directly or indirectly, by the Company; (iii) a Person that owns, directly or indirectly, at least 50 percent of the total value or voting power of the outstanding stock of the Company; or (iv) an entity, at least 50 percent of the total value or voting power of the stock of which is owned, directly or indirectly, by a Person that owns, directly or indirectly, at least 50 |
percent of the total value or voting power of the outstanding stock of the Company. |
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | B-1 |
(iv) | For purposes of (i), (ii) and (iii) of this Section |
(A) | “Affiliate” shall have the meaning set forth in Rule12b-2 promulgated under Section 12 of the Securities Exchange Act of 1934, as amended; |
(B) | “Person” shall have the meaning given in Section 7701(a)(1) of the Code. Person shall include more than one Person acting as a group as defined by the Final Treasury Regulations issued under Section 409A of the Code; and |
(C) | “Subsidiary” means any entity whose assets and net income are included in the consolidated financial statements of the Company audited by the Company’s independent auditors and reported to stockholders in the annual report to stockholders. |
(v) | Notwithstanding the foregoing, in no case will an event in (i), (ii) or (iii) of this Section |
(h) | “Code” |
(i) | “Company” |
(j) | “ |
(k) | “Deferred Compensation”means that portion of any Director’s Eligible Compensation that he or she elects pursuant to Section 11(a) to be deferred in accordance with this Plan. |
(l) | “Deferred Compensation Account” means a Cash Account or Stock Unit Account containing amounts earned and deferred under this Plan and Restricted Stock Units, the |
(m) | “Director”means a |
(n) | “ |
(o) | “Eligible Compensation” means (i) the cash portion of |
(p) | “Fair Market Value” |
(q) | “ |
(r) | “ |
(s) | “Participant”means an individual who has received an Award or established an Account under the Plan. |
(t) | “Plan”means this Texas Instruments 2018 Director Compensation Plan. |
(u) | “Restricted Stock Unit”means a contractual right granted under this Plan that is |
(v) | “Secretary”means the Secretary of the |
|
B-2 | TEXAS INSTRUMENTS • |
(w) | “Separation from Service”means a termination of services provided by a Participant as a member of the Board or of the board of directors of any other member of the controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Company (for purposes of this Section 2(x), the controlled group members other than the Company are referred to collectively as “ERISA Affiliates”), whether such termination is voluntary or involuntary, as determined by the Administrator in accordance with Treas. Reg.§1.409A-1(h). In determining whether a Participant has experienced a Separation from Service as a member of the Board or of a board of directors of an ERISA Affiliate, the following provisions shall apply: |
(ii) |
(x) |
“Shares”shall mean shares of the common stock of the Company, $1.00 par value. |
(y) | “Specified Employee” |
Identification of the individuals who fall within the above-referenced definition of “key employee” shall be based upon the12-month period ending on each December 31st (referred to below as the “identification date”). In applying the applicable provisions of Code Section 416(i) to identify such individuals, “compensation” shall be determined in accordance with Treas. Reg. §1.415(c)2(a) without regard to (i) any safe harbor provided in Treas. Reg.§1.415(c)-2(d), (ii) any of the special timing rules provided in Treas. Reg.§1.415(c)-2(e), and (iii) any of the special rules provided in Treas. Reg.§1.415(c)-2(g); and |
(ii) | Each Participant who is among the individuals identified as a “key employee” in accordance with part (i) of this Section 2(z) shall be treated as a Specified Employee for purposes of this Plan if such Participant experiences a Separation from Service during the12-month period that begins on the April 1st following the applicable identification date. |
(z) | “Stock Appreciation |
(aa) |
(bb) | “ |
SECTION 3.Eligibility.
(cc) |
TEXAS INSTRUMENTS • | B-3 |
SECTION 3. ELIGIBILITY.
Each Director shall be eligible to defer Eligible Compensation and to receive Awards under the Plan.
SECTION 4.Administration. ADMINISTRATION.
This Plan shall be administered by the Administrator. Subject to the terms of the Plan and applicable law, the Administrator shall have full power and authority to: (i) interpret, construe and administer the Plan and any instrument or agreement relating to, or Award granted or Accounts established under, the Plan; (ii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it deems appropriate for the proper administration of the Plan; and (iii) make any other determination and take any other action that it deems necessary or desirable for the administration of this Plan. All decisions of the Administrator shall be final, conclusive and binding upon all parties, including the Company, the stockholders and the Directors.
SECTION 5. SHARES AVAILABLE FOR AWARDS.
SECTION 5.Shares Available for Awards.
(a) | Subject to adjustment as provided in this Section 5, the number of Shares available for issuance under the Plan shall be |
(b) | If, after the effective date of the Plan, (i) any Shares covered by an Award or Stock Unit Account, or to which such an Award relates, are forfeited, or (ii) |
(c) |
Any Shares delivered pursuant to an Award or Stock Unit Account may consist, in whole or in part, of authorized and unissued Shares, of treasury Shares or of both. |
In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,split-up,spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the |
SECTION 6. EQUITY GRANT UPON INITIAL ELECTION.
(a) | Initial Grant. Following the effective date of this Plan, each Director shall, effective as of the date of such individual’s initial election or appointment to the Board, be granted 2,000 Restricted Stock Units. |
(b) | Terms and Conditions. The terms and conditions of each Restricted Stock Unit granted under this Section 6 shall be as described in Section 9. |
SECTION 7. ANNUAL EQUITY GRANTS.
(a) | Annual Grant. Each Director will be granted annually an Option with a grant-date value of approximately $100,000 determined using a Black-Scholes option-pricing model and a Restricted Stock Unit Award with a grant-date value of approximately $100,000, in each case rounded down to the nearest whole share. The Restricted Stock Units granted under this Section 7(a) shall be in addition to any RSUs granted to any Director pursuant to Section 6. |
B-4 | TEXAS INSTRUMENTS • |
SECTION 6.Options.
(b) | Effective Date of Annual Grant. In each year the effective date for the annual grant of equity to the Company’s executive officers by the Compensation Committee of the Board (or any successor committee) shall be the date the Options and Restricted Stock Units are granted; provided that in any year in which the Compensation Committee does not grant equity to any of the Company’s executive officers in connection with the annual compensation review process, then the third trading day after the release of the Company’s financial results for the first quarter of such year shall be the date the Options and Restricted Stock Units are granted. |
(c) | Terms and Conditions. The |
(d) | Reductions in Awards. Prior to the effective date of any annual grant as described in this Section |
SECTION 8. OPTIONS.
The Options granted under this Plan will be nonstatutory stock options not intended to qualify under Section 422 of the Code and shall have the terms and conditions described in this Section 8:
(a) | Price and Term of Options. The purchase price per |
(b) | Payment. The Secretary shall |
(c) | Exercisability. Subject to Section 8(d), Options shall become exercisable in four equal annual installments commencing on the first anniversary date of the grant. |
(d) | Termination of Service as a Director. The effect of a Participant’s termination of service as a member of the Board shall be as follows: |
(ii) | Death: All outstanding Options held by the Participant shall continue to full term, becoming exercisable in accordance with Section 8(c), and shall be exercisable by such Participant’s heirs or legal representatives. |
(iii) | Permanent disability, termination after 8 years of |
(iv) | Change in Control: If a Participant experiences a Separation From Service (other than for cause) within 24 months after a Change in Control, the provisions of Section |
SECTION 7.Restricted Stock and Restricted Stock Units.
(e) | Option Agreement. Each Option granted under this Plan shall be evidenced by an Award Agreement with the Company, which shall contain the terms and |
SECTION 8.Performance Units.
TEXAS INSTRUMENTS • | B-5 |
SECTION 9. RESTRICTED STOCK UNITS.
Each Restricted Stock Appreciation Rights (SARs).Unit granted under this Plan shall be paid or settled by the issuance of one Share and shall have the terms and conditions described in this Section 9:
(a) | Vesting and Settlement. Subject to Section 9(b) and subject to a Director’s election to defer the settlement of Restricted Stock Units pursuant to Section 11, the shares covered by the Restricted Stock Units shall be paid or settled as soon as practicable after the fourth anniversary of the date of grant. |
(b) | Termination of Service as a Director. The effect of a Participant’s termination of service as a member of the Board shall be as follows: |
(i) | Death: All outstanding Restricted Stock Units held by the Participant shall continue to full term subject to the other terms and conditions of this Plan, and shares shall be issued to such Participant’s heirs at such times and in such manner as if the Participant were still a member of the Board. |
(ii) | Permanent disability, termination after 8 years of service, or termination for reason of ineligibility to stand for reelection under the Company’sBy-Laws: All outstanding Restricted Stock Units held by the Participant shall continue to full term subject to the other terms and conditions of this Plan, and shares shall be issued to such Participant at such times and in such manner as if the Participant were still a member of the Board. |
(iii) | Separation From Service after a Change in Control: If a Participant experiences a Separation From Service (other than for cause) within 24 months after a Change in Control, the provisions of Section 9(a) shall not apply and: |
(A) | To the extent permitted without additional tax or penalty by Section 409A of the Code, all shares underlying such Restricted Stock Units held by the Participant (including any such Restricted Stock Units subject to an election to defer settlement under Section 11) will be issued on, or as soon as practicable (but no later than 60 days) after, the Participant’s Separation From Service; provided, however, that if the participant is a Specified Employee upon such Separation From Service, the shares will be issued on, or as soon as practicable (but no more than 10 days) after, the first day of the seventh month following the Separation From Service and any such Restricted Stock Units outstanding under this Plan shall vest and be paid immediately. |
(B) | To the extent that the issuance of shares is not permitted without additional tax or penalty by Section 409A, the Award will continue to full term and the shares will be issued at the issuance date specified in the Award Agreement as if the Participant were still a Director on such date or (for any such Restricted Stock Units subject to an election to defer settlement pursuant to Section 11) in accordance with Section 11(h)(i). |
(iv) | Other: For any termination other than those specified above, all outstanding Restricted Stock Units held by the Participant shall terminate and become void without any shares being issued. |
(c) | Restricted Stock Unit Agreement. Each Restricted Stock Unit Award granted under this Plan shall be evidenced by an Award Agreement with the Company, which shall contain the terms and conditions set forth herein and shall otherwise be consistent with the provisions of this Plan. |
(d) | Right to Dividend Equivalents.Each recipient of Restricted Stock Units under this Plan shall have the right, during the period when such Restricted Stock Units are outstanding and prior to the termination, forfeiture or payment or settlement thereof, to receive dividend equivalents equal to the amount or value of any cash or other distributions or dividends payable on the same number of Shares. The Company shall accumulate dividend equivalents on each dividend payment date and, unless a Director has elected to defer receipt of such dividend equivalents pursuant to Section 11, pay such accumulated amounts without interest in December of each fiscal year, but no later than March 15 of the calendar year following the calendar year in which the related dividend is declared. |
(e) | Issuance of Shares. A stock certificate or certificates shall be registered and issued or other indicia of ownership of shares shall be issued, in the name or for the benefit of the holder of Restricted Stock Units and delivered to such holder as soon as practicable after such Restricted Stock Units have become payable or settleable in accordance with the terms of the Plan. |
B-6 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
SECTION 10. STOCK APPRECIATION RIGHTS (SARs).
(a) |
(b) | The term of each SAR shall be fixed by the |
SECTION 10.Other Stock-based Awards.11. DEFERRED COMPENSATION.
(a) | Deferral Election. Each Director may elect, with respect to any Year, that all or any percentage of his or her Eligible Compensation be deferred in accordance with the terms of this Plan. |
(b) | Cash CompensationInvestment Alternatives. Each Director may elect that his or her Deferred Cash Compensation for any Year be credited to a Cash Account or a Stock Unit Account or to any combination thereof. |
(i) | Cash Accounts. |
(A) | The Company shall establish and maintain, as appropriate, separate unfunded Cash Accounts for each Director who has elected that any portion of his or her Deferred Cash Compensation be credited to a Cash Account. |
(B) | As of the date on which any amount of a Director’s Deferred Cash Compensation becomes payable, his or her Cash Account shall be credited with an amount equal to that portion of such Deferred Cash Compensation as such Director has elected be credited to his or her Cash Account. |
(C) | As of the last day of each month, interest on each Cash Account shall be credited on the average of the balances on the first and last day of such month. Interest shall be credited at a rate equivalent to the average yield on corporate bonds rated Aaa by Moody’s Investors Service on September 30 of the preceding Year (or if there is no such yield reported for such date, then on the next preceding date for which such a yield is reported) as published in Federal Reserve Statistical Release H.15, or at such other rate that would qualify as a “reasonable rate of interest” as defined by Section 409A of the Code, as may be determined by the GSR Committee for each Year. |
(ii) | Stock Unit Accounts. |
(A) | The Company shall establish and maintain, as appropriate, separate unfunded Stock Unit Accounts for each Director who has elected that any portion of his or her Deferred Cash Compensation be credited to a Stock Unit Account. |
(B) | As of each date on which any amount of a Director’s Deferred Cash Compensation becomes payable, his or her Stock Unit Account shall be credited with that number of units as are equal to the number of full or fractional Shares as could be purchased at the Fair Market Value on the first trading day preceding such date with the portion of such Deferred Cash Compensation as such Director has elected be credited to his or her Stock Unit Account. |
(C) | As of the payment date for each dividend on Shares declared by the Board, there shall be credited to each Stock Unit Account that number of units as are equal to the number of full or fractional Shares as could be purchased at the Fair Market Value on the first trading day preceding the payment date for such dividend with an amount equal to the product of: (i) the dividend per share, and (ii) the number of units in such Stock Unit Account immediately prior to the record date for such dividend. |
(c) | Restricted Stock Units. Each Director may elect to defer all or a portion of any Restricted Stock Unit Award. |
(d) | Dividend Equivalents.Each Director may elect to defer all or a portion of any dividend equivalents paid on Restricted Stock Units. |
(e) | Time of Election. An election to defer all or any portion of Eligible Compensation for any Year shall be made in writing in the form (“Election Form”) prescribed by the Secretary. |
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | B-7 |
(i) | Except as hereinafter provided, to be effective, an Election Form relating to payments for a Year, or to Restricted Stock Units that may be granted in such Year, must be received by the Secretary on or before December 31 of the preceding Year. In the case of a Director’s initial election to the Board, the initial Election Form must be received not more than 30 days following his or her election to the Board and, if received within such30-day period, the Election Form shall be effective only for Eligible Compensation earned after the election becomes irrevocable pursuant to Section 11(f). The time of election and the time of distribution shall comply in all respects with the applicable requirements of Section 409A of the Code. |
(f) | Irrevocability of Election. A Director’s election to defer all or any portion of his or her Eligible Compensation for any Year shall be irrevocable upon receipt by the Secretary of a completed Election Form from the Director. |
(g) | Form of Distributions. |
(i) | Distributions of amounts credited to each Participant’s Cash Account shall be made in cash. |
(ii) | Distributions of units credited to each Participant’s Stock Unit Account shall be made by issuing to such Participant an equivalent number of Shares. |
(iii) | Distribution of Shares relating to vested Restricted Stock Units the Participant has elected to defer shall be made by issuing to such Participant the whole number of Shares attributable to such vested Restricted Stock Units. Notwithstanding the foregoing, no fractional shares will be issued and any fractional unit will be distributed by payment of cash in the amount represented by such fractional unit based on the Fair Market Value on the date preceding the date of payment. |
(h) | Time of Distributions. |
(i) | Normal Distributions. Except as otherwise hereinafter provided, distributions from a Participant’s Deferred Compensation Account shall be made on the first day of the month following such Participant’s Separation from Service on the Board for any reason other than death. |
Notwithstanding the foregoing, no distribution may be made to a Specified Employee before the date that is six months after the date of Separation from Service or, if earlier, the date of death.
(ii) | Change in Control. In the event a Participant experiences a Separation From Service (other than for cause) within 24 months after a Change in Control, then, to the extent permitted without additional tax or penalty by Section 409A of the Code, such Participant shall receive a distribution of the balances credited to the Participant’s Account which are attributable to amounts credited to the account. See Section 9(b)(iii) for the effect of such Separation From Service on deferred Restricted Stock Units. |
The amounts to be distributed pursuant to this Section 11(h)(ii) shall be paid on, or as soon as practicable (but no later than 60 days) after, the Participant’s Separation from Service, provided, however, that if the Participant is a Specified Employee upon such Separation From Service, the balances credited to the Participant’s Account will be distributed on, or as soon as practicable (but no more than 10 days) after, the first day of the seventh month following such Separation From Service.
To the extent that distributions of amounts pursuant to this Section 11(h)(ii) are not permitted without additional tax or penalty by Section 409A of the Code, the affected Participant shall receive distribution of the amounts referred to in this Section 11(h)(ii) in accordance with Section 11(h)(i).
(iii) | Unforeseeable Emergency. An earlier distribution may be made upon a finding that the Participant is suffering from an Unforeseeable Emergency. A withdrawal on account of Unforeseeable Emergency may not be made to the extent that such emergency is or may be relieved (A) through reimbursement or compensation from insurance or otherwise, (B) by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or (C) by cessation of deferrals under the Plan. |
B-8 | TEXAS INSTRUMENTS • 2018 PROXY STATEMENT |
Withdrawal because of an Unforeseeable Emergency must be limited to the amount reasonably necessary to satisfy the emergency need (which may include amounts necessary to pay any federal, state, local, or foreign income taxes or penalties reasonably anticipated to result from the distribution), as determined by the Administrator, in its sole discretion. The Participant must apply in writing for a payment upon an “Unforeseeable Emergency,” using the form prescribed by the Administrator. The Administrator retains the sole and absolute discretion to grant or deny a payment upon an Unforeseeable Emergency. In the event of approval of a payment upon an Unforeseeable Emergency, the Participant’s outstanding deferral elections under the Plan shall be cancelled.
(i) | Death of Participant. Notwithstanding the foregoing, in the event of the death of a Participant prior to receipt by such Participant of the full amount of cash and number of shares to be distributed from his or her Deferred Compensation Account, all such cash and/or shares will be distributed to the beneficiary or beneficiaries designated by the Participant, or if no beneficiary has been designated, to the Participant’s estate as soon as practicable following the month in which the death occurred. Shares to be distributed to the Participant in connection with deferred Restricted Stock Units shall also be distributed as described in the preceding sentence but in no event earlier than the fourth anniversary of the date of grant. |
(j) | Certain Rights Reserved by the Company. In the event that, pursuant to Section 13, the Company suspends, modifies or terminates this Plan, the Company shall have the right to distribute to each Participant all amounts in such Participant’s Cash Account or Shares equivalent to units in such Participant’s Stock Unit Account, including, in the case of Stock Unit Accounts, the right to distribute cash equivalent to the units in such Accounts and all Shares attributable to vested Restricted Stock Units that a Participant has elected to defer, provided that any such suspension, modification or termination may be effected without penalty under Section 409A of the Code. |
(k) | Certain Affiliations. In the event that a Participant terminates his or her membership on the Board and becomes affiliated with a government agency, all amounts in such Participant’s Cash Account, shares equivalent to units in such Participant’s Stock Unit Account and Shares attributable to Restricted Stock Units that such Participant has elected to defer will be distributed to the Participant if such payment is necessary to avoid violation of any applicable federal, state, local or foreign ethics or conflict of interest law or if necessary to comply with an ethics agreement with the federal government. |
SECTION 12. OTHER STOCK-BASED AWARDS.
The CommitteeAdministrator is hereby authorized to grant to ParticipantsDirectors such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares) as are deemed by the CommitteeAdministrator to be consistent with the purposes of the Plan. Subject to the terms of the Plan, the CommitteeAdministrator shall determine the terms and conditions of such Awards. Shares or other securities delivered pursuant to a purchase right granted under this Section 1012 shall be purchased for such consideration, which may be paid by such method or methods and in such form or forms, including, without limitation, cash, Shares, other securities, other Awards, or other property, or any combination thereof, as the CommitteeAdministrator shall determine, the value of which consideration, as established by the Committee,Administrator, shall except in the case of Substitute Awards, not be less than the Fair Market Value of such Shares or other securities as of the date such purchase right is granted. The Company intends that such other Awards granted pursuant to this Section shall comply with Section 409A of the Code if applicable.
SECTION 11.General Provisions Applicable13. AMENDMENT AND TERMINATION.
Except to Awards.the extent prohibited by or inconsistent with applicable law:
(a) |
|
|
|
SECTION 12.Amendment and Termination.
|
TEXAS INSTRUMENTS • 2018 PROXY STATEMENT | B-9 |
price of less than the Fair Market Value of a Share on the date of grant thereof or (2) except as provided in Section 5(d), |
(b) | ||||
SECTION 13.Miscellaneous.14. GENERAL PROVISIONS.
(a) | No |
(b) | Limits of Transfer of Awards. No Award and no right under any such Award, shall be assignable, alienable, saleable or transferable by a Participant otherwise than by will or by the |
(c) | No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. |
(d) | Governing Law. The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware without giving effect to the principles of conflict of laws thereof. |
(e) |
Severability. If any provision of the Plan or any Award Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, or as to any person, Award or |
(f) | No Trust or Fund Created. Neither the Plan nor any Award or Account shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other person. To the extent that any person acquires a right to receive |
(g) | Accounts Unsecured. Until distributed, all amounts credited to any Cash Accounts or represented by units credited to any Stock Unit Account shall be property of the Company, available for the Company’s use, and subject to the claims of general creditors of the Company. The rights of any Participant or beneficiary to distributions under this Plan are not subject to anticipation, alienation, sale, transfer, assignment, or encumbrance, and shall not be subject to the debts or liabilities of any Participant or beneficiary. |
(h) | Withholding. The Company shall be authorized to withhold from any Awards granted or any transfer made under any Award or under the Plan or from any dividend equivalents to be paid on Restricted Stock Units the amount (in cash, Shares, other securities, or other property) of any taxes required to be withheld in respect of a grant, exercise, payment or settlement of an Award or any payment of dividend equivalents under Restricted Stock Units or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations of the Company for the payment of any such taxes. |
| TEXAS INSTRUMENTS • |
(i) | No |
(j) | 409A Compliance. The Company makes no representations or covenants that any Award granted or Deferred Compensation arrangement maintained under the |
SECTION 14.Effective Date of the Plan.15. EFFECTIVE DATE OF THE PLAN.
The Plan shall be effective as of the date of its approval by the stockholders of the Company.
SECTION 15.Term of the Plan.16. TERM OF THE PLAN.
No Award shall be granted or compensation deferred under the Plan afterthe tenth anniversary of the effective dateApril 21, 2026.Effective Date of the Plan. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted or Account established prior to the termination of the Plan may extend beyond such date, and the authority of the Committee and the Board under Section 12 to amend, alter, adjust, suspend, discontinue, or terminate any such Award or Account, or to waive any conditions or rights under any such Award, and to amend the Plan,thereunder, shall extend beyond such date.
SECTION 16.Governing Law.
The Plan shall be construed in accordance with and governed by the laws of the State of Texas without giving effect to the principles of conflict of laws thereof.
TEXAS INSTRUMENTS • |
TEXAS INSTRUMENTS INCORPORATED
ATTN: JANE NAHRA
P.O. BOX 655474
MS 3999
DALLAS, TX 75265-5474
For registered shares, your proxy must be received by 11:59 P.M. (Eastern time) onApril 20, 201625, 2018.
For shares allocable to a benefit plan account, your proxy must be received by 11:59 P.M. (Eastern time) onApril 18, 201623, 2018..
VOTE BY INTERNET -www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until the applicablecut-off date and time above. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mailemail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE -1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions until the applicablecut-off date and time above. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717, so that it is received by the applicable date and time above.
STOCKHOLDER MEETING ADVANCE REGISTRATION
You must register and print your advance registration form by 11:59 p.m. April 25, 2018 at the stockholder meeting registration site: www.proxyvote.com. If you are unable to print your advance registration form, please call Stockholder Meeting Registration Phone Support (Toll Free)1-844-318-0137 or (International Toll Call)1-925-331-6070.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
TEXAS INSTRUMENTS INCORPORATED
The the nominees for | ||||||||||
Vote on Directors | ||||||||||
1. | Election of Directors | |||||||||
Nominees: | For | Against | Abstain | |||||||
1a. R. W. Babb, Jr. | ||||||||||
1b. M. A. Blinn | ||||||||||
1c. | ||||||||||
1d. | ||||||||||
1e. | ||||||||||
1f. | ||||||||||
1g. | ||||||||||
1h. | ||||||||||
1i. | ||||||||||
1j. | ||||||||||
|
| For | Against | Abstain | |||||||||||||
1k. R. E. Sanchez | ☐ | ☐ | ☐ | |||||||||||||
1l. R. K. Templeton | ☐ | ☐ | ☐ | |||||||||||||
2. Board proposal regarding advisory approval of the Company’s executive compensation. | ☐ | ☐ | ||||||||||||||
3. Board proposal to approve the Texas Instruments 2018 Director Compensation Plan. | ☐ | ☐ | ☐ | |||||||||||||
4. Board proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for | ☐ | |||||||||||||||
| ||||||||||||||||
NOTE: Such other business as may properly come before themeeting or any adjournment thereof. |
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
Signature [PLEASE SIGN WITHIN BOX] | Date |
Signature(Joint Owners) | Date |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 21, 201626, 2018
You are invited to attend the 20162018 annual meeting of stockholders on Thursday, April 21, 2016, at26, 2018, in the cafeteriaauditorium on our property at 12500 TI Boulevard, Dallas, Texas, at 9:008:30 a.m. (Central time). At the meeting we will consider the election of directors, advisory approval of the Company’s executive compensation, approval of the Texas Instruments 2018 Director Compensation Plan, ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for 2016, approval of amendments to the Texas Instruments 2009 Long-Term Incentive Plan,2018, and such other matters as may properly come before the meeting.
Electronic Delivery of Proxy Materials
We are pleased to offer stockholders the opportunity to receive future proxy mailings bye-mail. To request electronic delivery, please vote via the Internet at www.proxyvote.com and, when prompted, enroll to receive proxy materials electronically in future years.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The 20162018 Notice and Proxy Statement and 20152017 Annual Report are also available at www.proxyvote.com.
E00181-P73230E37574-P02076
PROXY FOR ANNUAL MEETING
TO BE HELD APRIL 21, 201626, 2018
This proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints RALPH W. BABB, JR.,MARK A. BLINN, ROBERT E. SANCHEZ, WAYNE R. SANDERS, RICHARD K. TEMPLETON, or any one or more of them, the true and lawful attorneys of the undersigned with power of substitution, to vote as proxies for the undersigned at the annual meeting of stockholders of Texas Instruments Incorporated to be held in Dallas, Texas, on April 21, 2016,26, 2018, at 9:008:30 a.m. (Central time) and at any or all adjournments thereof, according to the number of shares of common stock that the undersigned would be entitled to vote if then personally present, in the election of directors, upon the boardBoard proposals and upon other matters properly coming before the meeting.If no contrary indication is made, this proxy will be voted FORthe election of each director nominee and FOR Proposals 2 through 4.If other matters come before the meeting, this proxy willproxywill be voted in the discretion of the named proxies.
Should you have an account in the TI Contribution and 401(k) Savings Plan or the TI 401(k) Savings Plan, this proxy represents the number of TI shares allocable to that plan account as well as other shares registered in your name. As a “named fiduciary” under the plans for TI shares allocable to that plan account and for shares for which no voting instructions are received, this proxy will serve as voting instructions for The Northern Trust Company, trustee for the plans, or its designee. The plans provide that the trustee will vote each participant’s shares in accordance with the participant’s instructions unless otherwise required by law. If the trustee does not receive voting instructions for TI shares under the plans by April 18, 2016,23, 2018, those shares will be voted, in accordance with the terms of plans, in the same proportion as the shares for which voting instructions have been received unless otherwise required by law. If other matters come before the meeting, the named proxies will vote plan shares on those matters in their discretion.
IMPORTANT - On the reverse side of this card are procedures on how to vote the shares.
Please consider voting by Internet or telephone.
You received this e-mail because you are enrolled to receive TEXAS INSTRUMENTS INCORPORATED communications and vote by proxy via the Internet.
2018 Annual Meeting
April 26, 2018
Important Notice Regarding the Availability of Proxy Materials
2016 TEXAS INSTRUMENTS INCORPORATED Annual Meeting of Shareholders
MEETING DATE: April 21, 2016
RECORD DATE: February 22, 2016
CUSIP NUMBER: 882508104
This e-mail represents all shares in the following account(s).proxy voting material is ready for your action.
| ||
TEXAS INSTRUMENTS INC. COMMON | 123,456,789,012.00000 | |
TEXAS INSTRUMENTS INC. 401K SAVINGS | 123,456,789,012.00000 | |
TEXAS INSTRUMENTS INC. 401K SAVINGS | 123,456,789,012.00000 | |
TEXAS INSTRUMENTS INC. 401K | 123,456,789,012.00000 | |
TEXAS INSTRUMENTS INCORPORATED | 123,456,789,012.00000 | |
TEXAS INSTRUMENTS INCORPORATED | 123,456,789,012.00000 | |
EMAIL MATCHING FILE | 123,456,789,012.00000 | |
TEXAS INSTRUMENTS INC. COMMON | 123,456,789,012.00000 |
You can enter your voting instructions and view the shareholder material at the Internet site below. If your browser supports secure transactions, you will automatically be directedThree
Ways to a secure site.
https://www.proxyvote.com/00123456789012345
You may need your CONTROL NUMBER and your PIN:
For registered shares, you may vote by Internet until 11:59 p.m. Eastern time on April 20, 2016. For shares allocable to a benefit plan account, voting instructions must be received no later than 11:59 p.m. Eastern time on April 18, 2016.
The relevant supporting documentation can also be found at the following Internet site(s):
Annual Report and Proxy Statement
https://materials.proxyvote.com/Approved/882508/20160222/CMBO_273128/
*custom site*
If you would like to cancel your enrollment, or change your e-mail address or PIN, please go to https://www.InvestorDelivery.com. You will need the enrollment number below and your four-digit PIN. If you have forgotten your PIN, you can have it sent to your enrolled e-mail address by going to https://www.InvestorDelivery.com.Vote
| Vote By | |||
At the Meeting | April 25, 2018 11:59 P.M. ET | |||
By Phone | For shares held in a Plan, vote by | |||
1.800.690.6903 | April 23, 2018 11:59 P.M. ET | |||
Control Number:0123456789012345 |
There are no charges for this service. There may be costs associated with electronic access, such as usage charges from Internet access providers and telephone companies, whichTo attend the Annual Meeting in person, you must be bornerequest an advance registration form at www.proxyvote.com by the stockholder.
Questions regarding this communication should be directed to your advisor or the company’s Investor Relations department. For questions specific to the proxyvote.com website, please reply to this email and include the original text and subject line for identification purposes.
LogoutTEXAS INSTRUMENTS INCORPORATED2016 Annual MeetingTHURSDAY, APRIL 21, 2016Proxy Voting InstructionsMake your selection below.Votes can be changed until voting deadline.The voting instructions indicated below represent the most up-to-date vote information on file.Active - VotedFor registered shares, vote by Apr. 20, 2016April 25, 2018 11:59 p.m. EDTFor shares allocable to a benefit plan account, votes must be received by 11:59 p.m. EDT on April 18, 2016.Control #9916576939869332
P.M. ET.
ImportantMaterials?Grant of Proxy AuthorityOrder a hard copy
Materials
Annual Report and Proxy StatementGoPaperlessSIGN UP FOR E-DELIVERYProposal(s)1A. ELECTION OF DIRECTOR: R.W. BABB, JR.1B. ELECTION OF DIRECTOR: M.A. BLINN1C. ELECTION OF DIRECTOR: D.A. CARP1D. ELECTION OF DIRECTOR: J.F. CLARK1E. ELECTION OF DIRECTOR: C.S. COX1F. ELECTION OF DIRECTOR: R. KIRK1G. ELECTION OF DIRECTOR: P.H. PATSLEYBOARD RECOMMENDATION: FORBOARD RECOMMENDATION: FORBOARD RECOMMENDATION: FORBOARD RECOMMENDATION: FORBOARD RECOMMENDATION: FORBOARD RECOMMENDATION: FORBOARD RECOMMENDATION: FORFOR AGAINST ABSTAINFOR AGAINST ABSTAINFOR AGAINST ABSTAINFOR AGAINST ABSTAINFOR AGAINST ABSTAINFOR AGAINST ABSTAINFOR AGAINST ABSTAINInvestorEducationLearn more about the process atSEC: Spotlight on Proxy Matters
1H. ELECTION OF DIRECTOR: R E. SANCHEZ BOARD RECOMMENDATION: FORFOR AGAINST ABSTAIN1I. ELECTION OF DIRECTOR: W.R. SANDERS BOARD RECOMMENDATION: FORFOR AGAINST ABSTAIN1J. ELECTION OF DIRECTOR: R.K. TEMPLETON BOARD RECOMMENDATION: FORFOR AGAINST ABSTAIN1K. ELECTION OF DIRECTOR: C.T. WHITMAN BOARD RECOMMENDATION: FORFOR AGAINST ABSTAIN2. BOARD PROPOSAL REGARDING ADVISORY APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION. BOARD RECOMMENDATION: FORFOR AGAINST ABSTAIN3. BOARD PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2016. BOARD RECOMMENDATION: FORFOR AGAINST ABSTAIN4. BOARD PROPOSAL TO APPROVE AMENDMENTS TO THE TEXAS INSTRUMENTS 2009 LONG-TERM INCENTIVE PLAN. BOARD RECOMMENDATION: FORFOR AGAINST ABSTAIN
For holders as of Monday, February 22, 2016CUSIP: 882508 RESET UPDATE VOTEBy clicking “update vote” I am hereby granting a proxy as defined in the materials.26, 2018