UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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Synaptics Incorporated
SYNAPTICS INCORPORATED
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OF STOCKHOLDERS
October 30, 2018
The Annual Meeting of Stockholders of Synaptics Incorporated, a Delaware corporation, will be held at 9:00 a.m., Pacific time, on Tuesday, October 30, 2018, via live interactive webcast on the Internet at www.virtualshareholdermeeting.com/syna2018 for the following purposes:
1. To elect three directors, each to serve for a three-year term expiring in 2021.
Date and Time: Tuesday, October 26, 2021 at 9:00 a.m. local (Pacific) time Place: Live interactive webcast on the Internet at www.virtualshareholdermeeting.com/syna2021.You will not be able to attend the 2021 annual meeting of stockholders (the “Annual Meeting”) in person. Items of Business: 1. Elect as directors the three nominees named in the attached Proxy Statement, each to serve for a three-year term expiring in 2024. 2. Approve, on an advisory basis, the compensation of our named executive officers. 3. Ratify the appointment of KPMG LLP as our independent auditor for the year ending June 25, 2022. 4 Approve our amended and restated 2019 Equity and Incentive Compensation Plan. Record Date: The Board of Directors has fixed the close of business on September 1, 2021 as the record date for determining the stockholders entitled to receive notice of and to vote at the Annual Meeting, or any adjournment(s) or postponement(s) thereof. Proxy Voting: Your vote is very important to us. Whether or not you plan to participate in the Annual Meeting, we urge you to submit your proxy or voting instructions as soon as possible to ensure your shares are represented at the Annual Meeting. If you participate in and vote at the Annual Meeting, your proxy or voting instructions will not be used. PROXY MATERIALS The Notice of Annual Meeting, Proxy Statement and our 2021 Annual Report on Form 10-K are first being made available to stockholders at www.proxyvote.com on or about September 7, 2021. You are encouraged to access and review all of the important information contained in our proxy materials before voting. Michael Hurlston President and Chief Executive Officer2. To approve, on anon-binding advisory basis, the compensation of our named executive officers for fiscal 2018(“say-on-pay”).3. To ratify the appointment of KPMG LLP, an independent registered public accounting firm, as the independent auditor of our company for the fiscal year ending June 29, 2019.4. To approve an amendment to our Amended and Restated 2010 Incentive Compensation Plan, which (i) provides for an increase of 1,700,000 shares of the Company’s common stock authorized for issuance thereunder, and (ii) expressly prohibits the payout of dividends and dividend equivalents on equity awards until the underlying award has been earned or becomes vested.5. To approve our Amended and Restated 2010 Employee Stock Purchase Plan, which provides for an increase of 100,000 shares of the Company’s common stock authorized for issuance thereunder.6. To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.The foregoing items of business are more fully described in the proxy statement accompanying this notice.Only stockholders of record at the close of business on September 4, 2018, are entitled to notice of and to vote at the meeting or any adjournment or postponement thereof.All stockholders are cordially invited to attend the meeting and vote their shares electronically during the meeting via the Internet. To assure your representation at the meeting, however, you are urged to vote by proxy as soon as possible over the Internet as instructed in the Notice of Internet Availability of Proxy Materials or, if you receive paper copies of the proxy materials by mail, you can also vote by telephone or by mail by following the instructions on the proxy card. You may vote your shares electronically during the virtual meeting even if you have previously returned a proxy. By Order of the Board of Directors, Sincerely,IMPORTANT NOTICE REGARDING THE AVAILABILITY OF San Jose, CaliforniaRichard A. BergmanSeptember 17, 2018September 7, 2021: San Jose, California SYNAPTICS INCORPORATED PROXY STATEMENT 1
SYNAPTICS INCORPORATED | PROXY STATEMENT | 2 |
Forward-Looking Statements
This Proxy Statement contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business, and can be identified by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements may include words such as “expect,” “anticipate,” “intend,” “believe,” “estimate,” “plan,” “target,” “strategy,” “continue,” “may,” “will,” “should,” variations of such words, or other words and terms of similar meaning. All forward-looking statements reflect our best judgment and are based on several factors relating to our operations and business environment, including our expectations regarding the potential impacts on our business of the COVID-19 pandemic, all of which are difficult to predict and many of which are beyond our control. Such factors include, but are not limited to, the risk that our business, results of operations and financial condition and prospects may be materially and adversely affected by the COVID-19 pandemic and that significant uncertainties remain related to the impact of COVID-19 on our business operations and future results; global supply chain disruptions and component shortages that are currently affecting the semiconductor industry as a whole; the risks as identified in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” sections of our most recent Annual Report on Form 10-K and other risks as identified from time to time in our Securities and Exchange Commission reports. Forward-looking statements are based on information available to us on the date hereof, and we do not have, and expressly disclaim, any obligation to publicly release any updates or any changes in our expectations, or any change in events, conditions, or circumstances on which any forward-looking statement is based. Actual results and the timing of certain events could differ materially from the forward-looking statements. These forward-looking statements do not reflect the potential impact of any mergers, acquisitions, or other business combinations that had not been completed as of the date of this Proxy Statement.
Fiscal Year Information
Our fiscal year is the 52- or 53-week period ending on the last Saturday in June. The fiscal periods presented in this proxy statement were the 52-week periods for the fiscal years ended June 26, 2021, or fiscal 2021, June 27, 2020, or fiscal 2020, and June 29, 2019, or fiscal 2019. Our principal executive offices are located at 1251 McKay Drive, San Jose, California 95131-1709.
SYNAPTICS INCORPORATED | PROXY STATEMENT | 3 |
This section highlights information about Synaptics Incorporated (“we,” “our,” “us” or the “Company”) and our Board of Directors (the “Board”) that is contained elsewhere in this Proxy Statement. This section does not contain all of the information that you should consider and you should read the entire Proxy Statement before voting.
BUSINESS AND FINANCIAL HIGHLIGHTS
Fiscal 2021 was one of the most financially rewarding periods of the Company’s 35-year history with several record setting milestones having been reached. First, the early results are beginning to show as the company successfully pivots its core strategy to focus more heavily on the growing opportunities within the Internet of Things (IoT) market, expanding our sales mix from 21% IoT in fiscal 2019 to exiting the fourth quarter of fiscal 2021 at 50% of sales from IoT products. This remarkable acceleration of revenue growth within IoT has allowed the company to become a more diversified and stable generator of profits and will enable us to fund future technology developments. As a result of our renewed strategy, the Company has transformed itself into one which delivers high value semiconductor products to its customers, which can be seen through record high gross margins, and a company which is highly profitable and able to self-fund technology development, as demonstrated through record high operating margins. In addition, as a result of our disciplined approach to managing operating expenses, we have achieved record setting cash flow from operations during the year. These combined efforts have delivered significant value to our stockholders, as our stock price has nearly tripled since the end of fiscal 2020, has increased five-fold since the end of fiscal 2019, and has significantly outperformed both the S&P 500 and the Philadelphia Semiconductor Index over these time periods.
During fiscal 2021, our leadership team led the Company to the following notable achievements:
§ | GAAP earnings per share of $2.08 and record high non-GAAP earnings per share of $8.26; |
§ | annual GAAP gross margins of 45.6% and record annual non-GAAP gross margins of 53.6%; |
§ | record GAAP and non-GAAP fourth quarter gross margins of 52.1% and 57.5%, respectively; |
§ | record cash flow from operations of $319.2 million; |
§ | a fiscal 2021 year-end stock price of $147.58, which was 162% higher than as compared to our prior fiscal year-end; and |
§ | revenue of $1,339.6 million for our fiscal year ended June 26, 2021 |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 4 |
STOCKHOLDER ENGAGEMENT AND RESPONSIVENESS
We believe regular and transparent communications with our stockholders is essential to our long-term success. Our management team, including our Chief Executive Officer and Chief Financial Officer, regularly participates at various investor conferences around the world and have received valuable feedback from our stockholders who have provided important external perspectives on the strategy of the Company. Feedback from our stockholders is shared with our Board regularly.
2020 Stockholder Outreach |
· In fiscal 2021, we contacted our top 15 institutional stockholders representing an aggregate ownership of approximately 75% of our then-outstanding shares to discuss corporate governance and executive compensation. |
· Management ultimately had discussions with stockholders representing 37% of our then outstanding shares. |
· Stockholders representing 38% of our then outstanding shares did not require a meeting, had no concerns or did not respond. |
What We Heard |
· Stockholders wanted to see the Company set objective financial targets that are quantifiable and for incentive compensation to be tied to such financial targets. |
· Stockholders wanted more transparency around our compensation decisions. |
· Stockholders wanted more outreach from, and engagement with, the Company on a regular basis. |
· Stockholders wanted to understand the one-time nature of our CEO equity grants and to see better alignment with peer compensation going forward. |
· Stockholders wanted more gender diversity on our Board. |
What We Have Done in Response |
· Effective fiscal 2020 and continuing into fiscal 2021, our annual performance-based cash bonus plan was modified from prior practice and redesigned to base award payments as measured against three objective financial performance metrics – revenue, non-GAAP gross margin, and non-GAAP operating profit. |
· We provide in this Proxy Statement greater transparency about our compensation plans. |
· We have implemented an outreach program to regularly interact with our stockholders on matters regarding corporate governance and executive compensation. |
· We have not offered any one-time or extraordinary grants to our CEO in fiscal 2021 and continue to maintain our process of aligning management compensation to our peer group, balancing the need for a highly-qualified management with a reasonable pay-for-performance philosophy. |
· We recently increased the gender diversity on our Board with the appointment of Susan Hardman and Patricia Kummrow and have added an additional disclosure regarding our management succession planning process. |
Continuing Engagement Process |
· We are committed to increasing stockholder engagement through increased participation at stockholder conferences and targeted stockholder marketing events. In fiscal 2021, we presented at 17 such conferences and five such marketing events, which was consistent with the number of such events we had attended in fiscal 2020. |
· We reach out to our top 15 institutional stockholders on a regular basis. |
· We discuss the feedback we receive from stockholder calls and the activities outlined above at each of our Board meetings. |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 5 |
The Compensation Committee approved the fiscal 2021 compensation arrangements for our Named Executive Officers (“NEOs”). Below are highlights from the Compensation Discussion and Analysis (the “CD&A”) section of this Proxy Statement:
Compensation Framework
Annual Cash Bonuses Based on Performance | Determined based on a rigorous performance measurement framework that measures the Company’s actual performance against multiple pre-established financial goals – which include revenue, non-GAAP gross margin, and non-GAAP operating profit goals – and each NEO’s contribution to that performance. | |
Direct Compensation is “At Risk” | Approximately 94% of our Chief Executive Officer’s target total direct compensation and approximately 87% of our other continuing NEOs’ target total direct compensation was tied directly to the performance of the Company and/or the Company’s stock price (as reflected in the pay mix charts below). | |
Majority of Target Total Direct Compensation is in the Form of Long-Term Incentives | The most significant component of each NEO’s target total direct compensation opportunity is in the form of equity awards that each vest or are earned over a multi-year (three- or four-year) period. In fiscal 2021, approximately 86% of our Chief Executive Officer’s, and approximately 77% of our other continuing NEOs’, target total direct compensation was annual long-term incentive compensation in the form of equity awards. | |
Majority of Target TDC Long-Term Incentives are Performance -Based | Approximately 57% of our Chief Executive Officer’s, and approximately 52% of our other continuing NEOs’, annual long-term incentive compensation for fiscal 2021 is subject to performance-based vesting requirements. |
Pay Mix for Fiscal 2021
CEO - Michael Hurlston
All other continuing NEOs
SYNAPTICS INCORPORATED | PROXY STATEMENT | 6 |
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SYNAPTICS INCORPORATED
1251 McKay Drive
San Jose, CA95131-1709BOARD OF DIRECTORS SNAPSHOT
Name | Age | Director Since | Independent | Primary Occupation | Committee Membership* | |||||||||
Nelson Chan | 60 | 2007 | Yes | Chair of the Board of Synaptics | EC (Chair), AC, NCGC | |||||||||
Kiva Allgood | 49 | 2019 | Yes | Consultant | NCGC, CC | |||||||||
Jeffrey Buchanan | 65 | 2005 | Yes | Consultant | AC (Chair), NCGC, EC | |||||||||
Keith Geeslin | 68 | 1986 | Yes | General Partner of Francisco Partners | CC (Chair), EC | |||||||||
Susan Hardman | 60 | 2020 | Yes | Consultant | CC | |||||||||
Michael Hurlston | 54 | 2019 | No | President and Chief Executive Officer of Synaptics | — | |||||||||
Patricia Kummrow | 51 | 2021 | Yes | Vice President, Data Center Group and General Manager, Ethernet Division at Intel | — | |||||||||
James Whims | 66 | 2007 | Yes | Partner at Alsop Louie Partners | NCGC (Chair), AC, EC |
PROXY STATEMENT* AC = Audit Committee; NCGC = Nominations and Corporate Governance Committee; CC = Compensation Committee; EC = Executive Committee
SYNAPTICS INCORPORATED | PROXY STATEMENT | 7 |
CORPORATE GOVERNANCE HIGHLIGHTS
The Company is committed to good corporate governance, which promotes the long-term interests of stockholders, strengthens accountability of the Board and helps build public trust in the Company. Highlights include the following:
Independent Board Leadership and Practices |
· Independent Chair of the Board with a well-defined role and robust responsibilities |
· All directors are independent except our Chief Executive Officer (7 out of 8 current directors) |
· All Board committees are composed solely of independent directors |
· Commitment to include women and individuals from minority groups in the qualified pool from which new director candidates are selected |
· Comprehensive risk oversight practices, including quarterly updates from management on risks we face |
· Regular strategic updates from our Chief Executive Officer |
· Regular executive sessions of independent directors led by our independent Chair of the Board |
· Annual Board and committee self-evaluations |
· Nominations and Corporate Governance Committee makes regular reports on succession planning efforts |
· Directors may only serve on the board of directors of three other public companies, absent approval from the Chair of the Board or the Nominations and Corporate Governance Committee |
Stockholder Rights |
· Majority voting for directors |
· Annual Say-on-Pay voting |
· No stockholder rights plan |
Best Compensation and Governance |
Practices |
· Independent compensation consultant |
· Robust stock ownership guidelines for executives and non-employee directors |
· Stock holding requirement for our directors and executive officers |
· Anti-hedging policy |
· Anti-pledging policy |
· Clawback policy |
· No “single trigger” change of control provisions |
· No excise tax gross-ups |
· No repricing of underwater stock options without stockholder approval |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 8 |
VOTING MATTERS AND OTHER MATTERSBOARD RECOMMENDATIONS
General
The accompanyingOur Board is soliciting your proxy is solicitedto vote on behalf of Synaptics Incorporated, a Delaware corporation, by our Board of Directors for usethe following matters at our Annual Meeting of Stockholders to be held at 9:00 a.m. local (Pacific) time on Tuesday, October 30, 2018, at 9:00 a.m., Pacific time, or at any adjournment or postponement thereof, for the purposes set forth in this proxy statement and in the accompanying meeting notice. The meeting will be held26, 2021, via live interactive webcast on the Internet. YouInternet at www.virtualshareholdermeeting.com/syna2021, where you will also have the opportunity to submit questions to the Company during the Annual Meeting:
Vote Required | Vote Required | Board | Page | |||||
Proposal No. 1 | Election of Three Director Nominees | Majority of Votes Cast | For | 10 | ||||
Proposal No. 2 | Advisory Approval of Compensation of Named Executive Officers | Majority of Votes Cast | For | 21 | ||||
Proposal No. 3 | Ratification of Appointment of KPMG LLP as Independent Auditor for 2022 | Majority of Votes Cast | For | 24 | ||||
Proposal No. 4 | Approval of Amended and Restated 2019 Equity and Incentive Compensation Plan | Majority of Votes Cast | For | 25 |
INTERNET | PHONE | AT THE ANNUAL MEETING | ||||
Follow the instructions provided in the notice or separate proxy card or voting instruction form you received. | Follow the instructions provided in the separate proxy card or voting instruction form you received. | Send your completed and signed proxy card or voting instruction form to the address on your proxy card or voting instruction form. | Vote during the meeting via the Internet at www.virtualshareholdermeeting.com/ syna2021 | |||
On September 7, 2021, the proxy materials for our Annual Meeting, including this Proxy Statement and our 2021 Annual Report on Form 10-K (the “2021 Annual Report”), were first sent or made available to our stockholders entitled to vote at the Annual Meeting. |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 9 |
ELECTION OF DIRECTORS
Our Board currently consists of eight directors and is divided into three classes, with one class standing for election each year for a three-year term, as follows:
Class 1 directors with terms expiring at the Annual Meeting | Class 2 directors with terms expiring at the 2022 annual meeting of stockholders | Class 3 directors with terms expiring at the 2023 annual meeting of stockholders | ||
Jeffrey Buchanan | Kiva Allgood | Nelson Chan | ||
Keith Geeslin | Michael Hurlston | Susan Hardman | ||
James Whims | Patricia Kummrow |
On the recommendation of the Nominations and Corporate Governance Committee (the “Nominations Committee”), the Board has nominated Jeffrey Buchanan, Keith Geeslin, and James Whims for re-election as Class 1 directors. If elected, the Class 1 directors will serve for three-year terms expiring at the 2024 annual meeting of stockholders or until their respective successors are duly elected and qualified.
Unless otherwise instructed, the proxy holders will vote the proxies received by them “FOR” the election of each of Jeffrey Buchanan, Keith Geeslin, and James Whims. Messrs. Buchanan, Geeslin, and Whims are currently directors of the Company and were previously elected to serve on the Board by our stockholders. Messrs. Buchanan, Geeslin, and Whims have each consented to being named in this Proxy Statement and to serve as a director if elected. We have no reason to believe that any of Messrs. Buchanan, Geeslin, or Whims will be ableunable or unwilling for good cause to attend,serve if elected. In the event Messrs. Buchanan, Geeslin, or Whims is unable for any reason or unwilling for good cause to serve at the time of the Annual Meeting, the persons who are designated as proxy holders may exercise discretionary authority to vote and submit your questions duringfor a substitute nominee selected by our Board or our Board may reduce the meeting at www.virtualshareholdermeeting.com/syna2018.number of directors on the Board.
In accordance with rules adopted by the Securities and Exchange Commission, or the SEC, that allow companies to furnish their proxy materials over the Internet, we are mailingBOARD COMPOSITION
Board Snapshot
The following provides a Notice of Internet Availability of Proxy Materials instead of a paper copysnapshot of our proxy statementthree director nominees and our 2018 Annual Report to mostfive continuing directors:
SYNAPTICS INCORPORATED | PROXY STATEMENT | 10 |
Director Skills, Experience and Background
We believe each of our stockholders. The Notice of Internet Availability of Proxy Materials contains instructions on howthree director nominees and five continuing directors possess the professional and personal qualifications necessary for effective service as a director. In addition to access those documentseach director’s specific experience, qualifications and vote over the Internet. The Notice of Internet Availability of Proxy Materials also contains instructions on how to request a paper copyskills, we believe that each director has individual character and integrity; business experience and leadership ability; strategic planning skills, ability, and experience; requisite knowledge of our proxy materials, includingindustry and finance, accounting, and legal matters; communications and interpersonal skills; and the ability and willingness to devote time to our proxy statement, our 2018 Annual Report, and a form of proxy card.company. We believe this processall directors have a commitment to the Company and to building long-term stockholder value. The following chart shows a summary of the skills and core competencies of our three director nominees and five continuing directors:
SYNAPTICS INCORPORATED | PROXY STATEMENT | 11 |
Jeffrey D. Buchanan Independent Director Age: 65 Director Since 2005 Committees: Audit (Chair), Nominations and Executive | Jeffrey D. Buchanan has been a director of the Company since September 2005. In August 2020, Mr. Buchanan retired from his full-time senior executive role and is presently an independent consultant in the technology industry. Mr. Buchanan was the Executive Vice President, Chief Financial Officer, and Treasurer of Smith & Wesson Brands, Inc. (formerly American Outdoor Brands Corporation), a Nasdaq Global Select Market (“Nasdaq”)-listed company that is a U.S.-based leader in firearm manufacturing and design, from January 2011 to August 2020. Mr. Buchanan also served as the Chief Administrative Officer of Smith & Wesson Brand, Inc. from May 2015 until August 2020, as Secretary of Smith & Wesson Brands, Inc. from January 2011 until April 2012, and as a member of the board of directors and as the Chair of the Audit Committee of Smith & Wesson Brands, Inc. from November 2004 until December 2010. He was Of Counsel to the law firm of Ballard Spahr LLP from May 2010 until December 2010. Mr. Buchanan served as a Senior Managing Director of CKS Securities, LLC, a registered broker-dealer, from August 2009 until May 2010 and as a Senior Managing Director of Alare Capital Securities, L.L.C., a registered broker-dealer, from November 2006 until July 2009. From 2005 to 2006, Mr. Buchanan was principal of Echo Advisors, Inc., a corporate consulting and advisory firm focusing on mergers, acquisitions, and strategic planning. Mr. Buchanan served in various positions for Three-Five Systems, Inc., a publicly traded electronic manufacturing services company, including as Executive Vice President, Chief Financial Officer, and Treasurer, from May 1996 until February 2005. Mr. Buchanan was a business attorney for the law firm of O’Connor, Cavanagh, Anderson, Killingsworth & Beshears from 1986 until 1996 and for the law firm of Davis Wright Tremaine LLP from 1984 until 1986. He was a senior staff person at Deloitte & Touche LLP from 1982 to 1984. Mr. Buchanan holds a Bachelor of Science degree in Accounting from Arizona State University, a Juris Doctor degree from the University of Arizona, and a Master of Laws degree in Tax from the University of Florida. Specific Qualifications, Attributes, Skills and Experience: We believe Mr. Buchanan’s legal, accounting, and investment banking background, his roles as the chief financial officer and treasurer of public companies, and his public company board service provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board. |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 12 |
Keith B. Geeslin Independent Director Age: 68 Director Since 1986 Committees: Compensation (Chair) and Executive | Keith B. Geeslin has been a director of the Company since 1986. Mr. Geeslin has been a General Partner of Francisco Partners, a firm specializing in structured investments in technology companies undergoing strategic, technological, and operational inflection points, since January 2004. From 2001 until October 2003, Mr. Geeslin served as Managing General Partner of the Sprout Group, a venture capital firm, with which he became associated in 1984. In addition, Mr. Geeslin served as a general or limited partner in a series of investment funds associated with the Sprout Group, a division of DLJ Capital Corporation, which is a subsidiary of Credit Suisse (USA), Inc. Mr. Geeslin is currently a member of the board of directors and Chair of the Compensation Committee of CommVault Systems, Inc., a public company that provides data management software. Mr. Geeslin holds a Bachelor of Science degree in Electrical Engineering, a Master’s of Science degree in Engineering and Economic Systems from Stanford University, and a Master of Arts degree in Philosophy, Politics, and Economics from Oxford University. Specific Qualifications, Attributes, Skills and Experience: We believe Mr. Geeslin’s long career at leading private equity and venture capital firms with a focus on investments in high-technology companies, his service on multiple boards of directors, and his engineering background provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board. |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 13 |
James L. Whims Independent Director Age: 66 Director Since 2007 Committees: Nominations (Chair), Audit and Executive | James L. Whims has been a director of the Company since October 2007. Mr. Whims has been a partner at Alsop-Louie Partners, a venture capital firm focused on identifying promising entrepreneurs, since February 2010. From 1996 to 2007, Mr. Whims was a Managing Director of Techfund Capital l, LP and Techfund Capital II, LP and since 2001, a Managing Director and Venture Partner at Techfund Capital Europe, which are venture capital firms concentrating on high-technology enterprises. Mr. Whims was Executive Vice President of Sony Computer Entertainment of America from 1994 to 1996, where he was responsible for the North American launch of the Playstation and was the winner of the Brandweek/Ad Week marketing executive of the year. From 1990 to 1994, Mr. Whims was Executive Vice President of Software Toolworks. Mr. Whims co-founded Worlds of Wonder, an American toy company that launched Teddy Ruxpin, Lazer Tag and the United States launch of Nintendo, where he was an executive from 1985 to 1988. Mr. Whims is currently a member of the board of directors and a member of the Audit Committee and Compensation Committee of the private company DigiLens Inc., a diffractive waveguide optical company, and a member of the board of directors and Compensation Committee at each of private companies Kuprion, Inc. a nano-copper materials company, Keyssa, a wireless connectivity company, and Phizzle, an engagement automation software company. Previously, Mr. Whims was a member of the board of directors of THQ, Inc., Portal Player, and 3DFX, all of which were Nasdaq-listed companies, and of Twitch TV, which was a private company. Mr. Whims holds a Bachelor of Science degree in Economics and Communications from Northwestern University and a Master of Business Administration degree in Finance and Marketing from the University of Arizona. Specific Qualifications, Attributes, Skills and Experience: We believe Mr. Whims’ senior executive positions with major companies, his experience as an investor in high-technology companies, his service as a director of multiple companies, and his expertise in e-communications and marketing provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board. |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 14 |
Kiva A. Allgood Independent Director Age: 49 Director Since 2019 Committees: Nominations, Compensation | Kiva A. Allgood has been a director of the Company since May 2019. In June 2021, Ms. Allgood retired from her full-time senior executive role and has acted as an independent consultant in the technology industry. Ms. Allgood was the Global Business Unit Head of IOT and Automotive for Telefonaktiebolaget LM Ericsson, a Nasdaq-listed company that is a global provider of communications technology from April 2019 to June 2021. Ms. Allgood served as the Chief Commercial Development Officer for GE Ventures, a Corporate Venture Company, from August 2017 to April 2019 and as Managing Director for Innovation Group of GE Corporate from November 2016 to August 2017. From June 2012 to November 2016, Ms. Allgood served as President, Qualcomm Intelligent Solutions, IoT and Smart Cities, at Qualcomm Incorporated, a Nasdaq-listed company that is a global provider of foundational technologies and products used in mobile devices and other wireless products. Earlier in her career, Ms. Allgood served in senior-level operational roles including sales, marketing, and business development in the technology industry. Ms. Allgood holds a Bachelor of Science degree and Master of Business Administration degree, both from Northwestern University. Specific Qualifications, Attributes, Skills and Experience: We believe that Ms. Allgood’s senior management positions with other leading companies, her career at a leading venture capital firm with a focus on investments in high-technology companies, her engineering background, and her knowledge and experience in the Internet of Things and automotive technology sectors, provide the requisite qualifications, skills, perspectives, and experiences that make her well qualified to serve on our Board. |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 15 |
Nelson C. Chan Chair of the Board and Independent Director Age: 60 Director Since 2007 Committees: Executive (Chair), Audit and Nominations | Nelson C. Chanhas been the Chair of our Board since October 2018 and a director of the Company since February 2007. From December 2006 until August 2008, Mr. Chan served as the Chief Executive Officer of Magellan Corporation, a leader in the consumer, survey, GIS, and OEM GPS navigation and positioning markets. From 1992 through 2006, Mr. Chan served in various senior management positions with SanDisk Corporation, a global leader in flash memory cards, including as Executive Vice President and General Manager, Consumer Business. From 1983 to 1992, Mr. Chan held marketing and engineering positions at Chips and Technologies, Signetics, and Delco Electronics. Mr. Chan is a member of the board of directors and the Audit Committee of Deckers Outdoor Corporation, a New York Stock Exchange (“NYSE”)-listed company, which is a footwear, apparel and accessories designer and distributor, and a member of the board of directors of Twist Bioscience, a Nasdaq-listed company, which manufactures synthetic DNA. Mr. Chan also currently serves on the Boards of Directors of several private companies. Previously, Mr. Chan was Chair of the board of directors, Chair of the Compensation Committee, member of the Audit Committee and member of the Nominating and Corporate Governance Committee of Adesto Technologies, a Nasdaq-listed company, from 2010 to June 2020, prior to its acquisition by Dialog Semiconductor plc, a member of the board of directors, Chair of the Compensation Committee and member of the Nominating and Corporate Governance committee of Socket Mobile, a Nasdaq-listed company, from 2016 to 2019, a member of the board of directors of Silicon Laboratories, Inc., a Nasdaq-listed company, from 2007 to 2010, a member of the board of directors, Chair of the Audit Committee and member of the Compensation Committee of Affymetrix, from 2010 to 2016, prior to its acquisition by Thermo Fisher, and a member of the board of directors and Chair of the board of directors from June 2013 to September 2016 of Outerwall, a Nasdaq-listed company, prior to its acquisition by Apollo Global Management, a private equity firm. Mr. Chan holds a Bachelor of Science degree in Electrical and Computer Engineering from the University of California at Santa Barbara and a Master’s degree in Business Administration from Santa Clara University. Specific Qualifications, Attributes, Skills and Experience: We believe that Mr. Chan’s experience as the Chief Executive Officer of Magellan, his senior management positions with other leading companies, and his service as a director of multiple companies provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board. |
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Susan J. Hardman Independent Director Age: 60 Director Since 2020 Committees: Compensation | Susan J. Hardman has been a director of the Company since 2020. In April 2015, Ms. Hardman retired from her full-time senior executive role and has acted as an independent consultant in the technology industry. From 2010 to 2015, she was an advisory board member for Santa Clara University’s School of Electrical Engineering. From August 2013 to January 2015, Ms. Hardman served as senior vice president of the Specialty products group for Intersil Corporation (subsequently acquired by Renesas), a company that was a leading global provider of analog semiconductor solutions for the computing, consumer, industrial and communications markets. From September 2008 to July 2013, she served as senior vice president of Intersil’s Analog and Mixed Signal product group. Additionally, while employed by Intersil, Ms. Hardman held roles of vice president and general manager of the Automotive and Specialty products group and vice president of Corporate Marketing. She joined Intersil from Exar Corporation (subsequently acquired by MaxLinear Inc.), where she was vice president and general manager of Exar’s Interface products division. Prior to that, she served as vice president of Corporate Marketing and director of Product Marketing for Exar. From 1983 to 1999, Ms. Hardman held roles in marketing, product design, applications, and product testing with VLSI Technology and Motorola. Ms. Hardman holds a Bachelor of Science degree in Chemical Engineering from Purdue University and a Masters of Business Administration degree from the University of Phoenix. Specific Qualifications, Attributes, Skills and Experience: We believe that Ms. Hardman’s senior management positions with other semiconductor companies, her extensive knowledge of the semiconductor industry, her engineering background, and her knowledge and experience in the consumer and automotive technology sectors, provide the requisite qualifications, skills, perspectives, and experiences that make her well qualified to serve on our Board. |
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Michael E. Hurlston President, Chief Executive Officer and Director Age: 54 Director Since 2019 Committees: None | Michael E. Hurlston has been a director and the President and Chief Executive Officer of the Company since August 2019. Prior to joining the Company, Mr. Hurlston served as the Chief Executive Officer and a member of the board of directors of Finisar Corporation from January 2018 to August 2019. Prior to joining Finisar, he served as Senior Vice President and General Manager of the Mobile Connectivity Products/Wireless Communications and Connectivity Division and held senior leadership positions in sales, marketing and general management at Broadcom Limited and its predecessor corporation from November 2001 through October 2017. Prior to joining Broadcom in 2001, Mr. Hurlston held senior marketing and engineering positions at Oren Semiconductor, Inc., Avasem, Integrated Circuit Systems, Micro Power Systems, Exar and IC Works from 1991 until 2001. Mr. Hurlston is a member of the board of directors and the Audit Committee of Flextronics International, Ltd., a Nasdaq-listed company. From August 2016 to August 2020, Mr. Hurlston was a member of the board of directors and the Compensation, Audit and Nominating and Governance Committees of Ubiquiti Networks, Inc., an NYSE-listed company. Mr. Hurlston serves on the Board of Executive Trustees of the UC Davis Foundation and on the Dean’s Executive Committee for the College of Engineering and the Dean’s Advisory Counsel for the Graduate School of Management at the University of California, Davis. Mr. Hurlston holds a Bachelor of Science and a Master of Science degree in Electrical Engineering and a Master’s degree in Business Administration from the University of California, Davis. Specific Qualifications, Attributes, Skills and Experience: We believe Mr. Hurlston’s position as Chief Executive Officer of the Company, and his successful career at major companies before joining our company provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board. |
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Patricia Kummrow Independent Director Age: 51 Director Since July 2021 Committees: None | Patricia Kummrow has been a director of the Company since July 2021. Ms. Kummrow has served as the Vice President, Network and Edge Group, and General Manager, Ethernet Division, at Intel Corporation (“Intel”) since March 2017. She served as the Vice President, Platform Engineering Group, at Intel from January 2016 to March 2017, and in other senior engineering leadership roles at Intel from 2005 to 2016. Earlier in her career, Ms. Kummrow served in engineering and engineering management roles at Hewlett-Packard. Ms. Kummrow holds a Bachelor of Science degree in Electrical Engineering with a minor in Mathematics from the University of Texas at El Paso, and Master’s of Science degree in the Management of Technology from Walden University. Specific Qualifications, Attributes, Skills and Experience: We believe that Ms. Kummrow’s senior management positions with other semiconductor companies, her extensive knowledge of the semiconductor industry, her engineering background, and her understanding of embedded hardware and software, provide the requisite qualifications, skills, perspectives, and experiences that make her well qualified to serve on our Board. |
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Each director nominee will allow us to provide our stockholders with the information they need in a more timely manner, while reducing the environmental impact and lowering our costs of printing and delivering the proxy materials.
These proxy solicitation materials were first released on or about September 17, 2018, to all stockholders entitled to votebe elected at the meeting.
Record Date and Outstanding Shares
Stockholders of record at the close of business on September 4, 2018, which we have set as the record date, are entitled to notice of and to vote at the meeting. On the record date, there were 34,881,570 outstanding shares of our common stock, par value $0.001 per share.
Quorum
The presence, via online attendance or by proxy, of the holders of a majority of the total number of shares of common stock outstanding and entitled to vote constitutes a quorum for the transaction of business at the meeting. Each stockholder voting at the meeting, either via online attendance or by proxy, may cast one vote per share of common stock held on all matters to be voted on at the meeting.
Required Votes
Assuming that a quorum is present, the affirmative vote ofAnnual Meeting if such nominee receives a majority of the votes cast with respect to such nominee’s election (that is, required for the election of the three director nominees for three-year terms expiring in 2021, to ratify the appointment of KPMG LLP, an independent registered public accounting firm, as the independent auditor of our company for the fiscal year ending June 29, 2019, to approve the Amended and Restated 2010 Incentive Compensation Plan, and to approve the Amended and Restated 2010 Employee Stock Purchase Plan. The advisory vote on the compensation of our named executive officers for fiscal 2018(“say-on-pay”) is non-binding, but our Board of Directors will consider the input of stockholders based on a majoritynumber of votes cast “FOR” the nominee must exceed the number of votes cast “AGAINST” the nominee). Proxies cannot be voted for the say-on-pay proposal.
Our Boarda greater number of Directors recommends that you vote “for”persons than the three director nominees named herein, and in favor of each of the other proposals.
Voting of Proxies
When a proxy is properly executed and returned, the shares it represents will be voted at the meeting as directed. If no specification is indicated, the shares will be voted (1) “for” the election of each of the nominees for director set forth in this proxy statement, (2) “for” the advisory approval of the compensation of our named executive officers for fiscal 2018, (3) “for” the proposal to ratify the appointment of KPMG LLP, an independent registered public accounting firm, as the independent auditor of our company for the fiscal year ending June 29, 2019, (4) “for” the proposal to amend the Amended and Restated 2010 Incentive Compensation Plan, (5) “for” the approval of the Amended and Restated 2010 Employee Stock Purchase Plan, and (6) as the persons specified in the proxy deem advisable on such other matters as may come before the meeting.
BrokerNon-Votes and Abstentions
Brokers, banks, or other nominees that hold shares of common stock in “street name” for a beneficial owner of those shares typically have the authority to vote in their discretion if permitted by the stock exchange or other organization of which they are members. Brokers, banks, and other nominees are permitted to vote the beneficial owner’s proxy in their own discretion as to certain “routine” proposals, such as the ratification of the appointment of KPMG LLP as the independent auditor of our company for the fiscal year ending June 29, 2019, when they have not received instructions from the beneficial owner. If a broker, bank, or other nominee votes such “uninstructed” shares for or against a “routine” proposal, those shares will be counted towards determining whether or not a quorum is present and are considered entitled to vote on the “routine” proposals. However, when a proposal is“non-routine,” a broker, bank, or other nominee is not permitted to exercise its voting discretion on that proposal without specific instructions from the beneficial owner. Thesenon-voted shares are referred to as “brokernon-votes” when the nominee has voted on othernon-routine matters with authorization or voted on routine matters. These shares will be counted towards determining whether or not a quorum is present, but will not be counted for purposes of determining the votes received on the“non-routine” proposals.
Please note that brokers, banks, or other nominees may not use discretionary authority to vote shares on the election of directors, the say-on-pay, the approval of the Amended and Restated 2010 Incentive Compensation Plan, or the approval of the Amended and Restated 2010 Employee Stock Purchase Plan proposals if they have not received specific instructions from their clients. For your vote to be counted in the above, you will need to communicate your voting decisions to your broker, bank, or other nominee before the date of the meeting.
As provided in our bylaws, a majority of the votes cast means that the number of votes cast “for” a proposal exceeds the number of votes cast “against” that proposal. Because abstentions and brokernon-votes do not represent votes cast “for” or “against” a proposal, broker non-votes and abstentions will have no effect on the proposal to elect directors, thesay-on-pay proposal, the proposal to ratify the appointment of KPMG LLP as the independent auditor of our company for the fiscal year ending June 29, 2019, the proposal to approve the Amended and Restated 2010 Incentive Compensation Plan, or the proposal to approve the Amended and Restated 2010 Employee Stock Purchase Plan, as each such proposal is determined by reference to the votes actually cast by the shares present or represented by proxy and entitled to vote.
In accordance with our policy, anAn incumbent candidate for director who does not receive the required votes forre-election is is expected to tender their resignation to our Board of Directors.Board. Our Board, of Directors, or another duly authorized committee of our Board, of Directors, will make a determination as to whether to accept or reject the tendered resignation generally within 90 days after certification of the election results of the stockholder vote. If applicable, we will publicly disclose the decision regarding any tendered resignation and the rationale behind the decision in a filing of a Current Report on Form8-K with with the SEC.Securities and Exchange Commission (the “SEC”).
Revocability of ProxiesRECOMMENDATION
Any stockholder giving a proxy may revoke the proxy at any time before its use by furnishing to us either a written notice of revocation or a duly executed proxy bearing a later date, or by attending the meeting via the Internet at www.virtualshareholdermeeting.com/syna2018 and voting electronically during the live webcast of the meeting. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request.THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE DIRECTOR NOMINEES.
Election Inspector
Votes cast by proxy or by voting electronically during the live webcast of the meeting will be tabulated by the election inspector appointed for the meeting, who will determine whether a quorum is present. The election inspector will treat brokernon-votes and abstentions as shares that are present and entitled to vote for purposes of determining the presence of a quorum, and as described in the “BrokerNon-Votes and Abstentions” section of this proxy statement for purposes of determining the approval of any matter submitted to stockholders for a vote.
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We will bear the cost of this solicitation. In addition, we may reimburse brokerage firms and other persons representing beneficial owners of shares for expenses incurred in forwarding solicitation materials to such beneficial owners. Proxies also may be solicited by certain of our directors and officers, personally or by telephone or e-mail, without additional compensation.ADVISORY APPROVAL OF OUR NAMED EXECUTIVE OFFICER COMPENSATION
Annual Report and Other Matters
Our 2018 Annual Report to Stockholders, which was made available to stockholders with or preceding this proxy statement, contains financial and other information about our company, but is not incorporated into this proxy statement and is not to be considered a part of these proxy materials or subject to RegulationsSection 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires that we provide our stockholders an opportunity to vote to approve, on an advisory or non-binding basis, the compensation of our NEOs as disclosed in this Proxy Statement in accordance with the SEC’s rules. This proposal, commonly known as a “say on pay” proposal, gives our stockholders the opportunity to express their views on our NEOs’ compensation as a whole. This vote is not intended to address any specific item of compensation or any specific named executive officer, but rather the overall compensation of all of our NEOs and the philosophy, policies and practices described in this Proxy Statement.
We are asking our stockholders to approve the compensation of our NEOs (as identified in the CD&A) as disclosed pursuant to the SEC’s executive compensation disclosure rules and set forth in this Proxy Statement (including in the CD&A, the compensation tables, and the narratives accompanying those tables).
To align executive compensation with the Company’s corporate strategies, business objectives and the creation of long-term value for our stockholders without encouraging unnecessary or excessive risk-taking;
To provide an incentive to achieve key strategic and financial performance measures by linking short-term incentive award opportunities and a substantial portion of long-term incentive award opportunities to the achievement of corporate and operational performance objectives in these areas;
To offer total compensation opportunities to our executive officers that are competitive and fair;
To align the interests of our executive officers with those of our stockholders by linking our executive officers’ long-term incentive compensation opportunities to stockholder value creation and their cash incentives to our annual performance; and
To provide compensation and benefit levels that will attract, motivate, reward, and retain a highly-talented team of executive officers within the context of responsible cost management.
The Compensation Committee values input from our stockholders regarding the Company’s executive compensation program.
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FISCAL 2021 COMPENSATION HIGHLIGHTS
Annual Cash Bonuses are Based on Achievement of Quantifiable Performance Goals | Determined based on a rigorous performance measurement framework that measures the Company’s actual performance against multiple pre-established financial goals – which include revenue, non-GAAP gross margin, and non-GAAP operating profit goals – and each NEO’s contribution to that performance. See “Fiscal 2021 Named Executive Officer Compensation — Annual Performance-Based Cash Bonuses” on pages 56-58 or more information about how the financial goals are set and the Company’s actual performance for fiscal 2021. | |
Majority of Target Total Direct Compensation is “At Risk” | Approximately 94% of our Chief Executive Officer’s target total direct compensation (“TDC”)1 and approximately 87% of our other continuing NEOs’ target TDC was tied directly to the performance of the Company and/or the Company’s stock price, as shown in the pay mix charts on page 50. | |
Majority of Target Total Direct Compensation is in the Form of Long-Term Incentives | The most significant component of each NEO’s target total direct compensation opportunity is in the form of performance stock unit (“PSU”) awards, market stock unit (“MSU”) awards, and restricted stock unit (“RSU”) awards that each vest or are earned over a multi-year (three- or four-year) period. In fiscal 2021, approximately 86% of our Chief Executive Officer’s, and approximately 77% of our other continuing NEOs’, target TDC was annual long-term incentive compensation in the form of equity awards. We believe equity compensation directly align the interests of our NEOs and our stockholders. | |
Majority of Target TDC Long-Term Incentives are Performance-Based | Approximately 57% of our Chief Executive Officer’s, and approximately 52% of our other continuing NEOs’, annual long-term incentive compensation for fiscal 2021 is subject to performance-based vesting requirements. Vesting for the fiscal 2021 annual equity awards with performance-based vesting requirements was contingent on our relative TSR performance compared to each company in the Russell 2000 Index over a multi-year period in the case of the MSU awards and on our design-win revenue (33%), non-GAAP gross margin percentage (33%), and non-GAAP operating expense dollars (33%) performance over a one-year performance period and a multi-year time-based vesting requirement in the case of the PSU awards. |
1 As used in this Proxy Statement, “target total direct compensation” means the named executive officer’s base salary, target annual cash bonus opportunity and grant date fair value (based on the value approved by the Compensation Committee and used to determine the number of shares subject to the award) of annual long-term incentive awards granted to the named executive officer in fiscal 2021.
In accordance with the requirements of Section 14A of the Exchange Act, and the related rules of the SEC, our Board requests your advisory Say-on-Pay vote to approve the following resolution at our Annual Meeting:
RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed in this Proxy Statement pursuant to the Securities and Exchange Commission’s executive compensation disclosure rules (which disclosure includes the “Compensation Discussion and Analysis” section, the compensation tables and the narrative discussion that accompanies the compensation tables), is hereby approved.
This vote is an advisory vote only and will not be binding on the Company, our Board or the Exchange Act. The information contained inCompensation Committee, and will not be construed as overruling a decision by, or creating or implying any additional fiduciary duty for, the “Compensation Committee Report”Company, our Board or the Compensation Committee. However, our Board and the “ReportCompensation Committee will consider the outcome of this vote when making future compensation decisions for our NEOs.
The Company’s current policy is to provide our stockholders with an advisory Say-on-Pay vote to approve the compensation of our NEOs each year at the annual meeting of stockholders. It is expected that the next advisory Say-on-Pay vote will be held at the 2022 annual meeting of stockholders.
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The compensation of our NEOs will be approved, on an advisory basis, if a majority of the votes cast on Proposal 2 at the Annual Meeting are cast in favor of the proposal. Abstentions and broker non-votes are not counted as votes cast and, accordingly, will have no effect on the outcome of this proposal.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
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RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITOR
We are seeking stockholder ratification of our appointment of KPMG LLP (“KPMG”) as our independent auditor for the fiscal year ending June 25, 2022. KPMG has served as our independent auditor since 2003. In August 2021, the Audit Committee re-appointed KPMG as our independent auditor for the year ending June 25, 2022. The Audit Committee has considered whether the provision of non-audit services by KPMG is compatible with maintaining KPMG’s independence.
Additional information about KPMG, including the fees we paid to KPMG in fiscal years 2021 and 2020, can be found in this Proxy Statement under the caption “Audit and Non-Audit Fees.” The report of the Audit Committee” shallCommittee included in this Proxy Statement under the caption “Audit Committee Report” also contains information about the role of KPMG with respect to the audit of the Company’s annual financial statements.
A representative of KPMG is expected to be present at our Annual Meeting, be available to respond to appropriate questions and will have the opportunity to make a statement, if desired.
Stockholder ratification of the appointment of KPMG as our independent auditor is not required by our Amended and Restated Bylaws (the “Bylaws”) or otherwise. However, the Board is submitting the appointment of KPMG to the stockholders for ratification as a matter of good corporate governance. If the stockholders fail to ratify the appointment, the Audit Committee may reconsider whether or not to retain KPMG. Even if the appointment is ratified, the Audit Committee, in its discretion, may appoint a different independent auditor at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company and our stockholders.
Ratification of the appointment of KPMG as our independent auditor will be approved if a majority of the votes cast on Proposal 3 at the Annual Meeting are cast in favor of the proposal. Abstentions are not counted as votes cast.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG AS OUR INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING JUNE 25, 2022.
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APPROVAL OF AMENDED AND RESTATED 2019 EQUITY AND INCENTIVE COMPENSATION PLAN
General
At the Annual Meeting, our stockholders will be asked to approve an amended and restated version of our 2019 Equity and Incentive Compensation Plan (the “2019 Incentive Plan”), adopted by our Board on July 27, 2021. The purpose of the amendment to the 2019 Incentive Plan is to increase the share limit of the plan, subject to stockholder approval, by an additional 2,000,000 shares, so that the new aggregate share limit for the 2019 Incentive Plan would be 4,590,000 shares. If stockholders do not approve this 2019 Incentive Plan proposal, the share limits and terms of the 2019 Incentive Plan in effect prior to the July 27, 2021 amendment and restatement of the 2019 Incentive Plan will continue in effect.
Why We Believe You Should Vote for Proposal 4
In evaluating our request to approve the 2019 Incentive Plan proposal, we ask that you consider the following:
• | Incentive to Attract and Retain Talent.We believe that our future success depends in part on our ability to attract, hire, motivate and retain high quality employees, directors and consultants and that the ability to provide equity awards under the 2019 Incentive Plan is critical to achieving this success. We would be at a severe disadvantage if we could not use equity-based awards covering a meaningful number of shares to recruit and secure or retain key talent in the current competitive market for highly skilled and qualified employees. |
• | Alignment of Interests.We believe that our future success depends on our ability to align the interests of our employees, directors and consultants with those of our stockholders, and that equity compensation is a key way to foster this alignment. |
• | Significant Focus on Performance-Based Vesting Equity Awards.Approximately two-thirds of the annual equity awards granted to our NEOs in fiscal 2021 are subject to performance-based vesting requirements, with the vesting of the awards based on our TSR compared to the Russell 2000 Index TSR (“Russell 2000 Index TSR”) and the Company’s revenue, non-GAAP gross margin, and non-GAAP operating expense. The foregoing percentages are based on the grant date fair value of the awards granted in fiscal 2021. |
• | Limiting Cash Compensation Expense.Equity compensation limits the cash cost of our compensation programs and can preserve cash for other uses in growing our business or returning value to our stockholders. If the 2019 Incentive Plan proposal is not approved, we may need to replace the lost compensation value with larger cash awards, which would increase our cash compensation expense. That cash might be better utilized if reinvested in our business or returned to our stockholders. |
• | Responsible Share Request Size.We believe that we are asking for enough shares to be able to continue to grant equity awards under the 2019 Incentive Plan for approximately one to two years (as discussed in more detail below). We want our stockholders to have the ability to regularly validate their support of our approach to equity awards. |
• | Responsible Plan Features. Our 2019 Incentive Plan includes restrictive minimum vesting requirements, and a holding period requirement for awards granted to our CEO. |
To help our stockholders better understand our historical equity compensation practices, currently anticipated needs, and an estimate of the potential cost of dilution from our request for additional shares, we note that, as of August 20, 2021:
We have 39,098,526 shares of our common stock issued and outstanding;
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• | We have 2,220,781 shares (5.7% of our issued and outstanding common stock) subject to outstanding unvested full value awards (i.e., awards other than options and stock appreciation rights (“SARs”)) (1,511,861 of which were outstanding under the 2019 Incentive Plan, 257,823 of which were outstanding under the 2019 Inducement Equity Plan (the “2019 Inducement Plan”) and 451,097 of which were outstanding under the 2010 Incentive Compensation Plan (the “2010 Plan” or the “Predecessor Plan”)). There are no awards outstanding under our Amended and Restated 2001 Incentive Compensation Plan (the “2001 Plan”); |
We have 53,930 shares (0.1% of our issued and outstanding common stock) subject to outstanding stock options (all of which were granted under the 2010 Plan), with a weighted average exercise price of $66.55 and a weighted average remaining term of 1.78 years;
We have 1,446,479 shares available for future grants under the 2019 Incentive Plan. No new awards may be granted under the 2001 Plan, the 2010 Plan, or the 2019 Inducement Plan;
The total number of shares of common stock subject to outstanding awards under the 2019 Incentive Plan, the 2010 Plan and the 2019 Inducement Plan (2,274,711 shares in total), plus the total number of shares available for future awards under the 2019 Incentive Plan (1,446,479 shares in total), represents a current overhang percentage of 9.5% (in other words, the potential dilution of our stockholders represented by these plans when viewed against our shares of common stock currently issued and outstanding);
We are asking for an additional 2,000,000 shares of common stock available for awards under the 2019 Incentive Plan proposal – this represents 5.1% of our issued and outstanding common stock as of August 20, 2021, which percentage reflects the simple dilution of our stockholders that would occur if the 2019 Incentive Plan proposal is approved and all such shares were delivered in respect of awards granted under the plan; and
Based on the closing price of our common stock on Nasdaq on August 20, 2021 of $169.59 per share, the aggregate market value as of that date of the additional 2,000,000 shares of common stock requested for issuance under the 2019 Incentive Plan proposal was $339,180,000.
We recognize that our stockholders want to know about our recent grant practices, including our recent “burn rate,” when considering how to vote on our 2019 Incentive Plan proposal. Burn rate or run rate (measuring a company’s annual usage of shares) is generally calculated as the number of shares granted divided by the weighted average number of shares outstanding and is used to demonstrate how quickly a company uses available shares. The table below provides our average burn rate under the 2019 Incentive Plan (with performance-based awards being included for the year in which they are earned based on the number of shares earned).
Fiscal Year | Options Granted | Restricted Stock Awards/Units Granted (excluding Performance- Based) | Performance-Based Restricted Stock Awards/Units Earned | Total Shares Granted | Weighted Average Shares at End of Fiscal Year | Burn Rate | ||||||
2019 | — | 1,263,966 | 184,672 | 1,448,638 | 34,600,000 | 4.19% | ||||||
2020 | — | 742,586 | 84,686 | 827,272 | 33.600,000 | 2.46% | ||||||
2021 | — | 803,721(1) | 410,110 | 1,213,831 | 34.800,000 | 3.49% | ||||||
Average Three-Year Burn Rate (2019-2021) | 3.38% |
(1) | Includes 187,139 replacement awards issued in connection with the acquisition of the Broadcom Wireless Connectivity Business and 17,216 replacement awards issued in connection with the acquisition of DisplayLink. |
We currently anticipate that the shares requested, when combined with reserves currently available under the 2019 Incentive Plan, will provide flexibility for us to make grants in the ordinary course of business for approximately two to three years. However, this is only an estimate, in our judgment, based on current circumstances. The total number of shares that are subject to our award grants in any one year or from year-to-year may change based on a number of variables, including, without limitation, the value of our common stock (since higher share prices generally require that fewer shares be issued to produce awards of the same grant date fair value), changes in competitors’ compensation practices or changes in compensation practices in the market generally, changes in the number of employees, changes in the number of directors and officers, whether and the extent to which vesting conditions applicable to equity-based awards are satisfied, acquisition activity and the need to grant awards to new employees in connection with acquisitions, the need to attract, retain and incentivize key talent, the type of awards we grant, and how we choose to balance total compensation between cash and equity-based awards.
Responsible Plan Features
Our Board believes the use of stock-based incentive awards promotes best practices in corporate governance by incentivizing the creation of stockholder value. By providing participants in the 2019 Incentive Plan with a stake in our success, the interests of participants are
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further aligned with those of our stockholders. Specific features of the 2019 Incentive Plan that we believe are consistent with good corporate governance practices include:
General administrative authority for the 2019 Incentive Plan has been delegated to the Compensation Committee of the Board, consisting entirely of directors the Board has determined are independent;
Except for substitute awards granted in connection with a corporate transaction such as an acquisition, stock options and SARs under the 2019 Incentive Plan may not be deemed “filed”granted with exercise or base prices lower than the fair market value of the underlying shares on the grant date;
Except for customary adjustments in connection with a corporate transaction (such as a stock split) or change of control, the 2019 Incentive Plan prohibits the repricing of stock options and SARs without stockholder approval, including the cancellation and replacement of any outstanding option or SAR with a new option, SAR, other award or cash and any amendment or modification that reduces the exercise price of an option or base price of a SAR;
The 2019 Incentive Plan prohibits the grant of dividend equivalents with respect to stock options and SARs and subjects all dividends and dividend equivalents paid with respect to other awards to the same vesting conditions as the underlying shares subject to the awards;
The 2019 Incentive Plan prohibits “liberal share recycling,” meaning that shares used to pay the exercise price or withholding taxes relating to an award under the 2019 Incentive Plan will not be recycled back into the 2019 Incentive Plan for future grants;
As noted above and as described in more detail below, the amendment and restatement of the 2019 Incentive Plan includes more restrictive minimum vesting requirements, and a holding period requirement for awards granted to our Chief Executive Officer;
The 2019 Incentive Plan does not contain an “evergreen” feature;
The 2019 Incentive Plan does not contain a liberal change of control definition, meaning that an acquisition of the Company would need to be consummated to constitute a change of control; and
Non-employee directors may not be awarded compensation for services as a director in any calendar year that exceeds $750,000.
Plan Summary
The principal terms of the 2019 Incentive Plan are summarized below. The following summary is qualified in its entirety by the full text of the 2019 Incentive Plan, which appears as Appendix B to this Proxy Statement.
Purpose
The purpose of the 2019 Incentive Plan is to provide a means through which the Company may attract and retain key non-employee directors, officers, employees and certain consultants of the Company and its subsidiaries, and to provide to such persons incentives and rewards for service and/or performance.
Eligibility
Non-employee directors, officers, employees, and consultants of the Company and its subsidiaries are eligible for awards, as selected by the Compensation Committee or such other committee designated by the Board to administer the plan; provided, that, incentive stock options may be granted only to employees. As of August 20, 2021, 1,488 employees and 7 non-employee directors were considered eligible to participate in the 2019 Incentive Plan.
Share Limits
An aggregate of 3,564,141 shares of common stock (1,230,000 shares approved by stockholders on October 29, 2019, 1,360,000 shares approved by stockholders on October 27, 2020, and 974,141 shares transferred from the Predecessor Plan after October 29, 2019 through August 20, 2021) may be issued pursuant to awards of options, SARs, restricted stock, RSUs, performance shares or performance units, dividend equivalents, or other awards granted under the 2019 Incentive Plan. If stockholders approve this 2019 Incentive Plan proposal, this share limit will be increased to 5,564,141 shares (an increase in the share limit, before taking into account share transfers from the Predecessor Plan, from 2,590,000 shares to 4,590,000 shares, and including the 974,141 shares that have transferred from the Predecessor Plan as of August 20, 2021). In addition, if stockholders approve this 2019 Incentive Plan proposal the plan’s limit on the number of shares of common stock that may be delivered pursuant to “incentive stock options” under the plan will be increased from 2,590,000 shares to 4,590,000 shares (with, for purposes of clarity, any such shares to also count against the aggregate share limit for the plan).
If any award granted under the 2019 Incentive Plan expires unexercised, is canceled, forfeited, settled in cash or unearned (in whole or in part), shares of our common stock subject to such award will again be made available for future grants under the 2019 Incentive Plan. Further, if any award granted under the Predecessor Plan expires unexercised, is canceled, forfeited, settled in cash or unearned (in
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whole or in part), shares of our common stock subject to such award will again be made available for future grants under the 2019 Incentive Plan. As of August 20, 2021, a total of 974,141 shares had become available for award grants under the 2019 Incentive Plan as a result of the expiration, cancellation, forfeiture or settlement of awards under the Predecessor Plan, and a total of 505,027 shares were then subject to outstanding awards under the Predecessor Plan. Shares of our common stock that are used to pay the required exercise price of options granted under the 2019 Incentive Plan or to satisfy tax withholding with respect to awards granted under the 2019 Incentive Plan, as well as any shares reacquired by the Company on the open market (whether by using cash proceeds from the exercise of an option or otherwise), will not be available again for other awards under the 2019 Incentive Plan. If a participant elects to give up the right to receive compensation in exchange for shares of common stock based on fair market value, such shares of common stock will not count against the aggregate share limit authorized under the 2019 Incentive Plan.
Minimum Vesting Requirements; Minimum Holding Requirement for CEO Awards
No award granted under the 2019 Incentive Plan may vest earlier than after a one-year vesting period or a one-year performance period, as applicable, unless in connection with the SECaward recipient’s death or subjectdisability or in connection with a change of control of the Company. However, up to Regulations 14A or 14C, or5% of the sum of (i) the aggregate number of shares available for issuance under the 2019 Incentive Plan as described above, and (ii) the number of shares returned to the liabilities2019 Incentive Plan as a result of awards originally granted under the Predecessor Plan that are cancelled or forfeited, settled in cash, or unearned, may be granted in the form of awards that do not meet such minimum vesting requirements.
Any award granted under the 2019 Incentive Plan to an individual who, at the time of grant of the award, is the Company’s chief executive officer must include a provision for any net shares acquired with respect to the award (the total number of shares acquired pursuant to the award less any shares used to pay the exercise or purchase price of the award and any shares used to satisfy any tax and tax withholding obligations with respect to the award) to be held for at least a one year period, or until the award recipient is no longer employed by the Company or one of its subsidiaries, before such shares may be sold or transferred (except for certain transfers to a family member for estate or tax planning purposes and where the holding period requirement continues in effect as to the shares, or in connection with or following a Change in Control).
Individual Director Limit
Non-employee directors may not be granted compensation (including cash compensation) having an aggregate maximum value at the date of grant that exceeds $750,000 per calendar year.
Administration
The Compensation Committee administers the 2019 Incentive Plan. Among other responsibilities, the Compensation Committee selects participants and determines the type of awards granted to participants, the number of shares of common stock covered by awards and the terms and conditions of awards, interprets the 2019 Incentive Plan and awards granted thereunder, and makes any other determinations and takes any other actions that it may deem necessary or desirable to administer the 2019 Incentive Plan. The Compensation Committee may delegate to a subcommittee of its members, officers of the Company, agents or advisors, such administrative duties or powers as the Compensation Committee deems advisable, and the Compensation Committee, the subcommittee or any other person to whom duties or powers have been delegated, may employ persons to render advice with respect to a responsibility of the Compensation Committee. The Compensation Committee may also, by resolution, authorize officers of the Company to designate employees to be recipients of awards and to determine the size of such awards; provided, however, that (A) the Compensation Committee may not delegate such responsibilities to any such officer for awards granted to an employee who is an officer, director, or more than 10% “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of any class of the Company’s equity securities that is registered pursuant to Section 1812 of the Exchange Act.
Through our website,www.synaptics.com, we make available free of charge all of our SEC filings, including our proxy statements, our annual reports on Form 10-K, our quarterly reports on Form10-Q, and our current reports on Form8-K,Act, as well as Form 3, Form 4, and Form 5 reports of our directors, officers, and principal stockholders, togetherdetermined by the Compensation Committee in accordance with amendments to these reports filed or furnished pursuant to Sections 13(a), 15(d), orSection 16 of the Exchange Act.We willAct; (B) the resolution providing for such authorization must set forth the total number of common shares the officer may grant; and (C) the officer(s) must periodically report to the Compensation Committee regarding the nature and scope of such awards granted. The Board may also provide, upon written request, without charge to each stockholder of record asassume administration of the record2019 Incentive Plan or certain aspects of the plan.
Amendment or Termination
Unless earlier terminated, the expiration date of the 2019 Incentive Plan will be July 29, 2029; provided, however, that such expiration will not affect awards then outstanding, and the terms and conditions of the 2019 Incentive Plan will continue to apply to such awards. The Board may amend or terminate the 2019 Incentive Plan at any time. Stockholder approval for an amendment will be required only to the extent then required by applicable law or deemed necessary or advisable by the Board. Further, any such amendment that would impair the rights of any participant, holder or beneficiary of any award granted under the 2019 Incentive Plan will not be effective without the consent of the affected participant, holder or beneficiary.
No Repricing
Except for customary adjustments in connection with a copycorporate transaction (such as a stock split) or change of control, none of the following actions may be taken under the 2019 Incentive Plan without approval of our Annual Report on Form10-Kstockholders: (i) an amendment or modification to reduce the exercise price of any option or the base price of any SAR; (ii) the cancellation of any outstanding option or SAR and
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replacement of such option or SAR with a new option, SAR, other award or cash for the fiscalpurpose of repricing the award; or (iii) any other action that is considered a “repricing” for purposes of Nasdaq stockholder approval rules.
Options
The Compensation Committee may, in its discretion, grant incentive stock options and nonqualified stock options to participants. Non-employee directors, officers, employees, and consultants of the Company and its subsidiaries may be granted nonqualified stock options, but only employees of the Company and its subsidiaries may be granted incentive stock options. The Compensation Committee determines the exercise price of options granted under the 2019 Incentive Plan. Subject to certain exceptions in connection with a corporate transaction such as an acquisition, the exercise price of an incentive or nonqualified stock option must be at least 100% of the fair market value of the common stock subject to the option on the date the option is granted. The Compensation Committee determines, in its sole discretion, the terms of each option. Options may not be exercisable for more than ten years from the date they are granted and may not provide for any dividends or dividend equivalents thereon. Acceptable consideration for the purchase of the common stock issued upon the exercise of an option is specified in the award agreement and may include cash, check, cash equivalents, shares of common stock, a reduction in the number of shares deliverable upon exercise, or such other forms of consideration that the Compensation Committee may accept.
SARs
The Compensation Committee may, in its discretion, grant SARs to participants in the 2019 Incentive Plan. Generally, SARs permit a participant to exercise the right and receive a payment equal to the value of the common stock’s appreciation over a period of time in excess of the fair market value (the “base price”) of a share of the common stock on the date of grant. Subject to certain exceptions in connection with a corporate transaction such as an acquisition, the base price of a SAR must be at least 100% of the fair market value of the common stock subject to the award on the date the SAR is granted. The Company may settle such amount in cash, in shares of our common stock valued at fair market value, or in any combination thereof, as determined by the Compensation Committee and specified in the award agreement. SARs granted under the 2019 Incentive Plan become exercisable and expire in such manner and on such date(s) as determined by the Compensation Committee, with the term of the SAR not to exceed ten years from the grant date. The Compensation Committee determines, in its sole discretion, the terms of each SAR. SARs granted under the 2019 Incentive Plan may not provide for any dividends or dividend equivalents thereon.
Restricted Stock
The Compensation Committee may, in its discretion, grant restricted stock to participants in the 2019 Incentive Plan. The Compensation Committee determines, in its sole discretion, the terms of each grant of restricted stock. Subject to the terms of the award, a recipient of restricted stock generally has the rights and privileges of a stockholder with respect to the restricted stock, including the right to vote the stock, on the grant date. Dividends, if any, paid by the Company with respect to awards of restricted stock prior to the time all restrictions and vesting conditions on the restricted stock have lapsed are withheld by the Compensation Committee and distributed to the participant in cash or shares of common stock upon, and subject to, the release of the restrictions applicable to the underlying shares of restricted stock.
RSUs
The Compensation Committee may, in its discretion, grant RSUs to participants. An RSU is the right to receive shares of our common stock (or to the extent provided in the award agreement, cash or a combination of cash and common stock) following achievement of all vesting conditions and the lapse of all restrictions. The Compensation Committee determines, in its sole discretion, the terms of each award of RSUs. Recipients of RSUs do not have the rights and privileges of a stockholder with respect to the common stock underlying such RSUs, including the right to vote the stock or receive dividends on the stock, until common stock in respect of the RSUs is actually issued to the recipient following satisfaction of all vesting conditions. If dividends are paid by the Company with respect to common stock underlying an award of RSUs prior to the time all vesting conditions on the RSU have been satisfied, an RSU award may provide that the recipient will be credited with dividend equivalents with respect to the RSUs. Any such dividend equivalents will be subject to the same vesting and payment terms that apply to the RSUs as to which the dividend equivalents were credited. RSUs may be settled in shares of our common stock, cash or a combination thereof in the discretion of the Compensation Committee.
Other Stock-Based Awards
The Compensation Committee, in its discretion, may award unrestricted shares of our common stock, or other awards denominated in shares of our common stock, to participants either alone or in tandem with other awards granted under the 2019 Incentive Plan. The Compensation Committee determines, in its sole discretion, the terms of each other stock-based award.
Cash Incentive Awards, Performance Shares, and Performance Units
The Compensation Committee may, in its discretion, also grant performance shares, performance units or cash incentive awards to participants under the 2019 Incentive Plan. Each grant specifies the number or amount of performance shares or performance units, or the amount payable with respect to cash incentive awards, which number or amount may be subject to adjustment to reflect changes in compensation or other factors. These awards, when granted under the 2019 Incentive Plan, become payable to participants upon the achievement of specified management objectives and upon such terms and conditions as the Compensation Committee determines at
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the time of grant. Each grant may specify, with respect to the management objectives, a minimum acceptable level of achievement and may set forth a formula for determining the number of performance shares or performance units, or the amount payable with respect to cash incentive awards, that will be earned if performance is at or above the minimum or threshold level, or is at or above the target level but falls short of maximum achievement. If the Compensation Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, the manner in which it conducts its business, or other events or circumstances render the management objectives unsuitable or an adjustment thereto is appropriate, the Compensation Committee may in its discretion modify such management objectives or the acceptable levels of achievement, in whole or in part, as the Compensation Committee deems appropriate. Each grant specifies the time and manner of payment of cash incentive awards, performance shares or performance units that have been earned, and any grant may further specify that any such amount may be paid or settled in cash, shares of common stock, restricted stock, restricted stock units or any combination thereof. Any grant of performance shares may provide for the payment of dividend equivalents in cash or in additional shares of common stock, subject to deferral and payment on a contingent basis based on the participant’s earning of the performance shares with respect to which such dividend equivalents are paid. Each grant of performance shares, performance units or cash incentive awards is evidenced by an award agreement which specifies the applicable terms and conditions of such award, including any vesting and forfeiture provisions. The performance period with respect to a cash incentive award, performance share, or performance unit is a period of time determined by the Compensation Committee on the grant date. The performance period may be subject to earlier lapse or modification, including in the event of retirement, death or disability of the participant.
Adjustments in Capitalization
In general, in the event of (1) any extraordinary cash dividend, stock dividend, stock split, combination of common stock, recapitalization or other change in the capital structure of the Company, (2) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities or (3) any other corporate transaction or event having an effect similar to any of the foregoing, equitable adjustments (as determined by the Compensation Committee) will be made to the number of shares of common stock or other securities of the Company (or number and kind of other securities, consideration or other property) that may be delivered in respect of awards or with respect to which awards may be granted under the 2019 Incentive Plan, as well as adjustments to the exercise price of options and base price of SARs granted under the 2019 Incentive Plan. In addition, in the event of a Change in Control (as defined within the 2019 Incentive Plan), the Compensation Committee may provide in substitution for any or all awards outstanding under the 2019 Incentive Plan such alternative consideration (including cash), if any, it in good faith may determine to be equitable in the circumstances and shall require in connection therewith the surrender of all awards so replaced. In connection with any of the foregoing events, the Compensation Committee may in its sole discretion elect to cancel outstanding options or SARs with an exercise price or base price that is equal to or less than the then current fair market value of our common stock without any consideration to the participant therefor.
Change in Control
A Change in Control is defined in the 2019 Incentive Plan as the occurrence of any of the following events:
● | A change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act; |
● | The following individuals no longer constitute a majority of the members of the Board: (1) the individuals who, as of October 29, 2019, constituted the Board (the “Current Directors”); (2) the individuals who thereafter were elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of a majority of all of the Current Directors then still in office (such directors becoming “Additional Directors” immediately following their election); and (3) the individuals who were elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of a majority of all of the Current Directors and Additional Directors then still in office; |
● | A tender offer or exchange offer is made whereby the effect of such offer is to take over and control the Company, and such offer is consummated for the equity securities of the Company representing more than 50% of the combined voting power of the Company’ then outstanding voting securities; |
● | Following approval by the stockholders of the Company, the Company closes a reorganization, merger, consolidation or recapitalization of the Company, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not obtained, other than any such transaction that would result in more than 50% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the holders of outstanding voting securities of the Company immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; |
The consummation of a transaction approved by our stockholders of a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or a substantial portion of the Company’s assets to another person, which is not a wholly owned subsidiary of the Company; or
Any “person” (as that term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly of more than 50% of the total voting power represented by the Company’s then outstanding voting securities.
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In the event of a Change in Control and except as the Compensation Committee may otherwise provide as to a particular award: (i) unvested options and SARs will immediately vest, except to the extent that replacement awards (as such term is defined within the 2019 Incentive Plan) are provided; (ii) any restrictions, deferral of settlement and forfeiture conditions applicable to restricted stock, RSUs, or other awards that vest solely based on continued service (and not based on the achievement of management objectives) will lapse and be deemed fully vested, except to the extent that replacement awards are provided; (iii) with respect to cash incentive awards, performance shares, performance units, and other awards that are subject to the achievement of management objectives (other than with respect to awards described as “Market Stock Units”), the management objectives will be deemed satisfied at target, the applicable performance periods will be deemed completed, and if no replacement awards are provided, remaining restrictions, deferral of settlement and forfeiture conditions will lapse and the awards will be deemed fully vested; and (iv) with respect to RSUs with management objectives described as “Market Stock Units,” a prorated portion of such units will vest based on the actual performance of the management objectives through the date of the Change in Control, while the remainder of the Market Stock Units will vest in accordance with their regular vesting schedules if replacement awards are provided, or if not, the remaining restrictions, deferral of settlement and forfeiture conditions will lapse and the Market Stock Units will be deemed fully vested.
Clawback/Repayment
All awards granted under the 2019 Incentive Plan and held by the Company’s executive officers are subject to clawback, recoupment or forfeiture (i) to the extent that an executive officer engages in fraud or intentional illegal conduct that resulted in the Company materially not complying with applicable financial reporting requirements and resulted in a financial restatement; or (ii) to the extent required by applicable laws, rules, regulations or listing requirements. Additionally, all awards granted under the 2019 Incentive Plan are subject to recoupment to the extent necessary to comply with any clawback policy that the Company is required to adopt pursuant to applicable law or the listing standards of the applicable national securities exchange.
Transferability
Awards under the 2019 Incentive Plan are generally not transferable except by will or the laws of descent and distribution or as otherwise determined by the Compensation Committee.
No Right to Continued Employment
The 2019 Incentive Plan does not give participants any right to be retained in the employ or service of the Company or any of its subsidiaries.
No Limit on Other Authority
The 2019 Incentive Plan does not limit the authority of the Board or any committee to grant awards or authorize any other compensation, with or without reference to the common stock, under any other plan or authority.
U.S. Federal Income Tax Consequences
The following is a brief summary of certain United States federal income tax consequences generally arising with respect to awards under the 2019 Incentive Plan. This discussion does not address all aspects of the United States federal income tax consequences of participating in the 2019 Incentive Plan that may be relevant to participants in light of their personal investment or tax circumstances and does not discuss any state, local or non-United States tax consequences of participating in the 2019 Incentive Plan.
Incentive Stock Options
A participant who is granted an incentive stock option will not have federal income tax liability upon the grant of an incentive stock option and will not recognize regular taxable income when the incentive stock option is exercised. However, the participant will recognize alternative minimum taxable income equal to the excess of the fair market value of the purchased shares at the time of exercise over the exercise price paid for those shares, if the participant is subject to the alternative minimum tax in the taxable year ended June 30, 2018,of the exercise. A participant generally will recognize income in the year in which the participant disposes of the shares purchased under such incentive stock option. If the participant makes a “qualifying disposition,” the participant will recognize a long-term capital gain equal to the excess of (i) the amount realized upon the sale or disposition over (ii) the exercise price paid for the shares and the Company cannot take an income tax deduction with respect to those shares. A qualifying disposition occurs when the participant’s sale or other disposition of the shares takes place (a) more than two (2) years after the grant date of the incentive stock option and (b) more than one (1) year after the date the option was exercised for the particular shares involved in the disposition. In contrast, a “disqualifying disposition” is any sale or other disposition of the shares made before both of these minimum holding periods are satisfied. Normally, when shares purchased under an incentive stock option are subject to a disqualifying disposition, the participant will recognize ordinary income at the time of the disposition in an amount equal to the excess of (x) the lesser of (1) the amount realized upon that disposition and (2) the excess of the fair market value of the shares on the exercise date over (y) the exercise price paid for those shares. the Company will be entitled to an income tax deduction equal to the amount of ordinary income that the participant recognizes in connection with the disposition, subject to any applicable limitations under Section 162(m) of the Internal Revenue Code (“Code”).
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Nonqualified Stock Options
A participant who is granted a nonqualified stock option will not have federal income tax liability upon the grant of the nonqualified stock option, but will recognize ordinary income in the year in which the participant exercises the option in an amount equal to the excess of (i) the fair market value of the purchased shares on the exercise date over (ii) the exercise price paid for those shares. The Company will be entitled to an income tax deduction equal to the amount of ordinary income that the participant recognizes, subject to any applicable limitations under Section 162(m) of the Code. A participant will later also recognize a capital gain to the extent that the amount realized from the subsequent sale of the shares exceeds the participant’s basis in the shares.
Appreciation Rights (SARs)
A participant who is granted a SAR will not have federal income tax liability upon the grant of the SAR, but will recognize ordinary income in the year in which the participant exercises the SAR in an amount equal to the amount of the cash or the value of the stock that is transferred to the participant upon exercise of the SAR. The Company will be entitled to an income tax deduction equal to the amount of ordinary income that the participant recognizes, subject to any applicable limitations under Section 162(m) of the Code.
Restricted Stock
A participant who is granted an award of restricted stock will recognize taxable income when the substantial risk of forfeiture of the shares lapses, i.e., at the time of “vesting,” unless the participant makes an election to be taxed at the time of grant. Assuming such an election is not made, the taxable income will be equal to the fair market value of the shares of restricted stock when they vest over the amount, if any, paid for those shares and the Company will be entitled to an income tax deduction equal to the amount of ordinary income that the participant recognizes, subject to any applicable limitations under Section 162(m) of the Code. The participant may elect under Section 83(b) of the Code to include as ordinary income in the year of the award an amount equal to the fair market value of the shares on the transfer date, less the amount, if any, paid for those shares. If the participant makes a Section 83(b) election, the participant will not recognize any additional income when the shares vest. If a Section 83(b) election is made, any appreciation in the value of the shares of restricted stock after the award is granted is not taxed as compensation but instead is taxed as a capital gain when the restricted shares are later sold or transferred. If the participant makes a Section 83(b) election and the restricted stock is later forfeited, the participant is not entitled to a tax deduction or a refund of the tax already paid. The Section 83(b) election must be filed with the SEC.Any exhibits listedInternal Revenue Service within thirty (30) days after the shares are awarded to the participant.
Restricted Stock Units (RSUs)
A participant who is granted a RSU generally will not recognize income when the RSU is granted or vested, but only when the RSU is settled. The participant will recognize ordinary income equal to the amount of the cash or the fair market value of the stock that the participant receives on settlement. The Company will be entitled to an income tax deduction equal to the amount of ordinary income that the participant recognizes, subject to any applicable limitations under Section 162(m) of the Code.
Cash Incentive Awards, Performance Shares and Performance Units
Generally, no income is recognized upon the grant of cash incentive awards, performance shares or performance units. Upon payment or settlement of cash incentive awards, performance shares or performance units, the recipient is generally required to include as taxable ordinary income in the Formyear of receipt an amount equal to the amount of cash received and the fair market value of any 10-Knon-restricted report alsoshares of common stock received. The Company will be furnishedentitled to an income tax deduction equal to the amount of ordinary income that the participant recognizes, subject to any applicable limitations under Section 162(m) of the Code.
Section 162(m)
Section 162(m) of the Code generally limits a public company’s ability to deduct aggregate compensation paid in excess of $1 million during any taxable year to current or former Named Executive Officers (including amounts attributable to equity-based and other incentive awards).
Withholding Taxes
To the extent the Company is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a participant or other person under the 2019 Incentive Plan, it is a condition to the receipt of such payment or the realization of such benefit that the participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld, which arrangements, in the discretion of the Compensation Committee, may include relinquishment of a portion of such benefit. If a participant’s benefit are to be received in the form of shares of common stock, then, unless otherwise determined by the Compensation Committee, the Company will withhold, from the shares required to be delivered to the participant, shares of our common stock having a value equal to the amount required to be withheld under applicable law. In no event will the market value of the shares of our common stock withheld or delivered to the Company in order to satisfy applicable withholding taxes exceed the minimum amount of taxes required to be withheld unless: (i) an additional amount can be withheld and not result in adverse accounting consequences; (ii) such additional withholding amount is authorized by the Compensation Committee; and (iii) the total amount withheld does not exceed the participant’s estimated tax obligations attributable to the applicable transaction. The shares used for tax withholding will be valued at an amount equal to the market value of our common stock on the date the benefit is to be included in the participant’s income.
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New Plan Benefits
The Company has not approved any awards that are conditioned upon requeststockholder approval of the 2019 Incentive Plan proposal. The Company is not currently considering any other specific award grants under the 2019 Incentive Plan, except for the annual grants of RSUs to non-employee directors described below. If the proposed plan amendments subject to the 2019 Incentive Plan proposal had been in effect in fiscal 2021, the Company expects that its award grants for fiscal 2021 would not have been substantially different from those actually made in that year under the current version of the 2019 Incentive Plan. For information regarding stock-based awards granted to the Named Executive Officers during fiscal 2021, see the material under the heading “Compensation Discussion and Analysis” below.
As described under the heading “Director Compensation” below, our current practice is to make grants of RSUs with a value of approximately $175,000 to non-employee directors each year after our Annual Meeting of Stockholders. The number of RSUs subject to each grant is based on the average closing price of our common stock on Nasdaq during the month of October in the applicable year. Assuming, for illustrative purposes only, that the price of our common stock used for the conversion of the $175,000 grant value into RSUs is $169.59 (which was the closing price of our common stock on Nasdaq on August 20, 2021), the total number of RSUs that would be granted to our seven continuing non-employee directors who are nominees for re-election at, or will continue in office after, the Annual Meeting, as a group, for fiscal years 2022 through 2028 (the seven remaining years in the term of the 2019 Incentive Plan) would be approximately 50,563 RSUs. This calculation assumes, among other future variables, that there are no new eligible directors, the directors eligible to receive these grants continue to serve on the Board through the scheduled grant date and there are no changes to the awards granted under the director equity grant program.
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Aggregate Past Grants Under the 2019 Incentive Plan
As of August 20, 2021, awards covering 2,134,484 shares of our common stock had been granted under the 2019 Incentive Plan. This number of shares includes shares subject to awards granted under our equity incentive plans that expired or terminated without having been exercised and paid and became available for new award grants under the 2019 Incentive Plan. In the following table, performance-based vesting awards that were outstanding at the actual expense we incur in furnishing such exhibits. Any such requests should be directed to our corporate secretary at our executive offices set forth in this proxy statement.
Our fiscal year istime the 52- or 53-weekperformance period ending on the last Saturday in June. The fiscal periods presented in this proxy statement were the53-week period for the fiscal year ended June 30, 2018, or fiscal 2018 and the52-week periods for the fiscal years ended June 24, 2017, or fiscal 2017, and June 25, 2016, or fiscal 2016. Our principal executive offices are located at 1251 McKay Drive, San Jose, California95131-1709.
PROPOSAL ONE: ELECTION OF DIRECTORS
Nominees
Our Certificate of Incorporation and bylaws provide that the number of directors shall be fixed from time to time by resolution of our Board of Directors. Our Board of Directors has fixed the number of directors at eight. The directors are divided into three classes, with one class standing for election each year for a three-year term. Our Board of Directors has nominated Jeffrey D. Buchanan, Keith B. Geeslin, and James L. Whims for election as class 1 directors for three-year terms expiring in 2021 or until their successorswas complete have been electedadjusted to reflect the actual performance level (which was greater than the targeted level as to those performance periods). The following table shows information regarding the distribution of all awards among the persons and qualified.groups identified below, option exercises, and stock units vesting prior to that date, and option and unvested stock unit holdings as of that date.
Unless otherwise instructed, the proxy holders will vote the proxies received by them “for” the nominees named above.
Stock Options | Stock Units | |||||||||||||
Name and Position | Number of Shares Subject to Past Option Grants | Number of Shares Acquired on Exercise | Number of Shares Underlying Options as of August 20, 2021 | Number of Shares/Units Subject to Past Awards | Number of Shares/Units Vested as of August 20, 2021 | Number of Shares/Units Outstanding and Unvested as of August 20, 2021 | ||||||||
Exercisable | Unexercisable | |||||||||||||
Michael Hurlston | - | - | - | - | 258,567 | 93,985 | 223,712 | |||||||
President and Chief Executive Officer | ||||||||||||||
Dean Butler | - | - | - | - | 42,464 | 11,375 | 36,743 | |||||||
Senior Vice President Chief Financial Officer | ||||||||||||||
Saleel Awsare | - | - | - | - | 71,222 | 26,390 | 62,086 | |||||||
Senior Vice President and General Manager, PC and Peripherals Division | ||||||||||||||
Phillip Kumin | - | - | - | - | 14,709 | 7,185 | 11,095 | |||||||
Former Senior Vice President, Worldwide Sales | ||||||||||||||
John McFarland | - | - | - | - | 66,524 | 24,903 | 57,722 | |||||||
Senior Vice President, General Counsel and Secretary | ||||||||||||||
Total for All Current | - | - | - | - | 469,087 | 159,709 | 410,112 | |||||||
Executive Officers as a Group (5 persons): | ||||||||||||||
Nelson Chan | - | - | - | - | 6,761 | 6,145 | 616 | |||||||
Kiva Allgood | - | - | - | - | 6,761 | 6,145 | 616 | |||||||
Jeffrey Buchanan | - | - | - | - | 6,761 | 6,145 | 616 | |||||||
Keith Geeslin | - | - | - | - | 6,761 | 6,145 | 616 | |||||||
Susan Hardman | - | - | - | - | 4,331 | 3,715 | 616 | |||||||
Patricia Kummrow | - | - | - | - | 329 | - | 329 | |||||||
James Whims | - | - | - | - | 6,761 | 6,145 | 616 | |||||||
Total for All Current | - | - | - | - | 38,465 | 34,440 | 4,025 | |||||||
Non-Executive Directors as a Group (7 persons): | ||||||||||||||
Each other person who has received 5% or more of the options, warrants or rights: | - | - | - | - | - | - | - | |||||||
All employees, including all | - | - | - | - | 1,626,932 | 308,740 | 1,200,210 | |||||||
current officers who are not executive officers or directors, as a group: | ||||||||||||||
Total | 2,134,484 | 502,889 | 1,614,347 |
Messrs. Buchanan, Geeslin, and Whims are currently directors of our company. In the event that Messrs. Buchanan, Geeslin or Whims are unable or decline to serve as directors at the time of the meeting, the proxies will be voted for any nominees designated by our current Board of Directors to fill the vacancies. At this time, it is not expected that Messrs. Buchanan, Geeslin and Whims will be unable or will decline to serve as directors.
Our Board of Directors recommends a vote“for”the nominees named herein.
The following table sets forth certain information regarding our directors and theeach nominees for director:
Name | Age | Position | Term Expires | |||
Francis F. Lee | 66 | Chairman of the Board | 2020 | |||
Richard A. Bergman | 54 | President, Chief Executive Officer, and Director | 2019 | |||
Jeffrey D. Buchanan | 62 | Director | 2018 | |||
Nelson C. Chan | 57 | Director | 2020 | |||
Keith B. Geeslin | 65 | Director | 2018 | |||
Russell J. Knittel | 68 | Director | 2019 | |||
Richard L. Sanquini | 83 | Director | 2020 | |||
James L. Whims | 63 | Director | 2018 |
Francis F. Leehas been the Chairman of the Board of Directors of our company since October 2008 and a director of our company since December 1998. Mr. Lee served as Chief Executive Officer of our company from December 1998 until July 2009 and as President of our company from December 1998 to July 2008. Mr. Lee was a consultant from August 1998 to November 1998. From May 1995 until July 1998, Mr. Lee served as General Manager of NSM, a Hong Kong-based joint venture between National Semiconductor Corporation and S. Megga. Mr. Lee held a variety of executive positions for National Semiconductor from 1988 until August 1995. These positions included Vice President of Communication and Computing Group, Vice President of Quality and Reliability, Director of Standard Logic Business Unit, and various other operations and engineering management positions. Mr. Lee is a member of the Board of Directors of Adesto Technologies, a NASDAQ Global SelectMarket-listedre-election company, which develops innovative,low-power memory solutions. Mr. Lee holds a Bachelor of Science degree, with honors, in Electrical Engineering from the University of California at Davis. We believe Mr. Lee’s service for more than 10 years as our Chief Executive Officer gives him invaluable insights into our business, our culture, our personnel, our opportunities, and our challenges and provides the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board of Directors.
Richard A. Bergmanhas been President, Chief Executive Officer, and a director of our company since September 2011. Prior to joining our company, Mr. Bergman was Senior Vice President and General Manager of Product Group at Advanced Micro Devices, Inc. or AMD, a New York Stock Exchange-listed global semiconductor company, from May 2009 to September 2011. From October 2006 to May 2009, Mr. Bergman served as Senior Vice President and General Manager of AMD’s Graphics Product Group. Mr. Bergman’s career at AMD began in October 2006 when AMD acquired ATI Technologies, or ATI, where he served as Senior Vice President and General Manager of PC Group. Prior to ATI, Mr. Bergman served as Chief Operating Officer at S3 Graphics, a division of SonicBlue Inc. Mr. Bergman has held senior level management positions in the technology field since his early roles at Texas Instruments, Inc. and IBM. Mr. Bergman is a member of the Board of Directors, Chairman of the Compensation Committee, and a member of the Audit Committee of Maxwell Technologies, a developer and manufacturer of energy storage and power delivery solutions. Mr. Bergman holds a Bachelor of Science degree in Electrical Engineering from the University of Michigan and a Master’s degree in Business Administration from the University of Colorado. We believe Mr. Bergman’s position as Chief Executive Officer of our company, his intimate knowledge and experience with all aspects of the opportunities, operations, and challenges of our company, and his successful career at major companies before joining our company provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board of Directors.
Jeffrey D. Buchananhas been a director of our company since September 2005. Mr. Buchanan has been the Executive Vice President, Chief Financial Officer, and Treasurer of American Outdoor Brands Corporation, a NASDAQ Global Select Market-listed company that is aU.S.-based leader in firearm manufacturing and design, since January 2011. Mr. Buchanan became the Chief Administrative Officer of American Outdoor Brands Corporation in May 2015. Mr. Buchanan also served as Secretary of American Outdoor Brands Corporation from January 2011 until April 2012, and as a member of the Board of Directors and as the Chairman of the Audit Committee of American Outdoor Brands Corporation from November 2004 until December 2010. He was Of Counsel to the law firm of Ballard Spahr LLP from May 2010 until December 2010. Mr. Buchanan served as a Senior Managing Director of CKS Securities, LLC, a registeredbroker-dealer, from August 2009 until May 2010 and as a Senior Managing Director of Alare Capital Securities, L.L.C., a registeredbroker-dealer, from November 2006 until July 2009. From 2005 to 2006, Mr. Buchanan was principal of Echo Advisors, Inc., a corporate consulting and advisory firm focusing on mergers, acquisitions, and strategic planning. Mr. Buchanan served in various positions for Three-Five Systems, Inc., a publicly traded electronic manufacturing services company, including as Executive Vice President, Chief Financial Officer, and Treasurer, from May 1996 until February 2005. Mr. Buchanan was a business attorney for the law firm of O’Connor, Cavanagh, Anderson, Killingsworth & Beshears from 1986 until 1996 and for the law firm of Davis Wright Tremaine LLP from 1984 until 1986. He was a senior staff person at Deloitte & Touche LLP from 1982 to 1984. Mr. Buchanan holds a Bachelor of Science degree in Accounting from Arizona State University, a Juris Doctor degree from the University of Arizona, and a Master of Laws degree in Tax from the University of Florida. We believe Mr. Buchanan’s legal, accounting, and investment banking background, his roles as the chief financial officer and treasurer of public companies, and his public company board service provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board of Directors.
Nelson C. Chanhas been a director of our company since February 2007. From December 2006 until August 2008, Mr. Chan served as the Chief Executive Officer of Magellan Corporation, a leader in the consumer, survey, GIS, and OEM GPS navigation and positioning markets. From 1992 through 2006, Mr. Chan served in various senior management positions with SanDisk Corporation, a global leader in flash memory cards, including most recently as Executive Vice President and General Manager, Consumer Business. From 1983 to 1992, Mr. Chan held marketing and engineering positions at Chips and Technologies, Signetics, and Delco Electronics. Mr. Chan is Chairman of the Board of Directors of Adesto Technologies, a NASDAQ Global SelectMarket-listed company, which develops innovative,low-power memory solutions, a member of the Board of Directors and a member of the Audit Committee of Deckers Outdoor Corporation, a footwear, apparel and accessories designer and distributor, and a member of the Board of Directors and Chair of the Compensation Committee of Socket Mobile, a company that creates data capture and delivery solutions for enhanced productivity in retail point of sale, field service, healthcare and other mobile markets. Mr. Chan was a member of the Board of Directors of Silicon Laboratories, Inc., a NASDAQ Global Select Market-listed company, which is a fabless,analog-intensive mixed-signal semiconductor company from 2007 to 2010, and a member of the Board of Directors, Chairman of the Audit Committee and member of the Compensation Committee of Affymetrix, a company which developed, manufactured and sold products and services for genetic analysis to the life science research and clinical healthcare markets from 2010 to 2016, prior to its acquisition by Thermo Fisher. Mr. Chan was also a member of the Board of Directors from July 2011 to September 2016 and Chairman of the Board of Directors from June 2013 to September 2016 of Outerwall, a NASDAQ Global Select Market-listed company, which was a provider of automated retail solutions offering services that drove incremental traffic and revenue for retailers, prior to its acquisition by Apollo Global Management, a private equity firm. Mr. Chan also currently serves on the Boards of Directors of several private companies. Mr. Chan holds a Bachelor of Science degree in Electrical and Computer Engineering from the University of California at Santa Barbara and a Master’s degree in Business Administration from Santa Clara University. We believe that Mr. Chan’s experience as the Chief Executive Officer of Magellan, his senior management positions with other leading companies, and his service as a director of multiple companies provideat the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serveAnnual Meeting.
Equity Compensation Plan Information
For additional information on our Board of Directors.
Keith B. Geeslinhas been a directorequity compensation plans, including information about shares of our company since 1986. Mr. Geeslin has been a General Partnercommon stock that may be issued on exercise of Francisco Partners, a firm specializing in structured investments in technology companies undergoing strategic, technological,options and operational inflection points, since January 2004. From 2001 until October 2003, Mr. Geeslin servedwarrants under all of our equity compensation plans as Managing General Partnerof June 26, 2021, please refer to the “Equity Compensation Plan Information” section of this Proxy Statement.
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The amendment and restatement of the Sprout Group, a venture capital firm, with which he became associated in 1984. In addition, Mr. Geeslin served as a general or limited partner in a series of investment funds associated with the Sprout Group, a division of DLJ Capital Corporation, which is a subsidiary of Credit Suisse (USA), Inc. Mr. Geeslin is a member of the Board of Directors and Chairman of the Compensation Committee of CommVault Systems, Inc., a public company that provides data management software. Mr. Geeslin holds a Bachelor of Science degree in Electrical Engineering, a Master’s of Science degree in Engineering and Economic Systems from Stanford University, and a Master of Arts degree in Philosophy, Politics, and Economics from Oxford University. We believe Mr. Geeslin’s long career at leading private equity and venture capital firms with a focus on investments in high-technology companies, his service on multiple boards of directors, and his engineering background provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board of Directors.
Russell J. Knittelhas been a director of our company since October 2010. Mr. Knittel served as Interim President and Chief Executive Officer of our company from October 2010 through September 2011, and as Executive Vice President of our company from July 2007 to October 2010. Mr. Knittel served as Chief Financial Officer, Chief Administrative Officer, Secretary, and Treasurer of our company from November 2001 through September 2009; as Senior Vice President of our company from
November 2001 until July 2007; and as Vice President of Administration and Finance, Chief Financial Officer, and Secretary of our company from April 2000 through October 2001. Mr. Knittel is a member of the Board of Directors and a member of the Audit Committee, the Compensation Committee, and the Corporate Governance and Nominations Committee of Quest Resource Holding Corporation, a NASDAQ Global Select Market-listed company that provides waste management and recycling services programs. Mr. Knittel served as a director of Source Photonics, a privately held company that designs, manufactures and sells optical communications and data connectivity products, from March 2012 to January 2017, a director of MarineMax, Inc., a New York Stock Exchange-listed company that is the nation’s largest recreational boat dealer, from June 2009 to February 2014, and as a director of OCZ Technology Group, Inc., a former public company, that designed, manufactured, and distributedsolid-state drives and computer components, from June 2010 to August 2014. Mr. Knittel holds a Bachelor of Arts degree in Accounting from California State University at Fullerton and a Master’s degree in Business Administration from San Jose State University. We believe Mr. Knittel’s service as Interim Chief Executive Officer and Chief Financial Officer of our company and his board service at other companies provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board of Directors.
Richard L. Sanquinihas been a director of our company since 1994. Mr. Sanquini is presently a Partner at LiteCAP, a private equity firm, and has been a consultant in the semiconductor industry for more than five years. Mr. Sanquini is the former Chairman of the Board of Directors of PortalPlayer, Inc., formerly a public company that developed the silicon and operating system firmware for the Apple iPod, and was acquired by NVIDIA Corporation in January 2007. Mr. Sanquini retired from National Semiconductor in 1999 after a 20-year tenure, where he managed key business units, including microprocessors and microcontrollers, served as Chief Technology Officer, managed business development and intellectual property protection, and was Chairman of the Board of Directors for two China joint ventures. Prior to National Semiconductor, he served as President and Chief Executive Officer of Information Storage Devices and in various executive positions at RCA. Mr. Sanquini is the Chairman of the Board of Directors of Pixelworks Inc., a NASDAQ Global Select Market-listed company that designs, develops, and markets video and pixel processing semiconductors and software for digital video applications, and is on the Board of Directors of R2 Semiconductor, a power management company for consumer devices. Mr. Sanquini previously served on the Board of Directors of Validity Sensors, Inc., which we acquired in fiscal 2014, and Keyssa. Mr. Sanquini holds a Bachelor of Science degree in Electrical Engineering from the Milwaukee School of Engineering, Wisconsin. We believe that Mr. Sanquini’s long career and executive positions with numerous high-technology companies, his engineering background, his knowledge and experience in the semiconductor industry, and his service on numerous boards of directors provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board of Directors.
James L. Whimshas been a director of our company since October 2007. Mr. Whims has been a partner at Alsop-Louie Partners, a venture capital firm focused on identifying promising entrepreneurs, since February 2010. From 1996 to 2007, Mr. Whims was a Managing Director of Techfund Capital l, LP and Techfund Capital II, LP and since 2001, a Managing Director and Venture Partner at Techfund Capital Europe, which are venture capital firms concentrating on high-technology enterprises. Mr. Whims also serves on the Board of Directors and as a member of the Compensation Committee of DigiLens . Mr. Whims was formerly a member of the Board of Directors of THQ, Inc., Portal Player, and 3DFX, all of which were NASDAQ Global Select Market-listed companies, and of Phizzle, Twitch TV and Keyssa, which were private companies. Mr. Whims was Executive Vice President of Sony Computer Entertainment of America from 1994 to 1996, where he was responsible for the North American launch of the Playstation and was the winner of the Brandweek/Ad Week marketing executive of the year. From 1990 to 1994, Mr. Whims was Executive Vice President of Software Toolworks. Mr. Whimsco-founded Worlds of Wonder, an American toy company that launched Teddy Ruxpin, Lazer Tag and the United States launch of Nintendo, where he was an executive from 1985 to 1988. Mr. Whims holds a Bachelor of Science degree from Northwestern University and a Master’s degree in Business Administration from the University of Arizona. We believe Mr. Whims’ senior executive positions with major companies, his experience as an investor in high-technology companies, his service as a director of multiple companies, and his expertise in e-communications and marketing provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board of Directors.
Election of Nominees
The election of Messrs. Buchanan, Geeslin and Whims as class 1 directors for three-year terms expiring in 2021 or until their successors have been elected and qualified2019 Incentive Plan will require the affirmative vote ofbe approved if a majority of the votes cast assuming that a quorum is present at the meeting.Annual Meeting are cast in favor of the proposal. Abstentions and broker non-votes are not counted as votes cast and, accordingly, will have no effect on the outcome of this proposal.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY AND INCENTIVE COMPENSATION PLAN.
The Board believes that the adoption of the 2019 Incentive Plan proposal will promote the interests of the Company and its stockholders and will help the Company and its subsidiaries continue to be able to attract, retain and reward persons important to its success.
All members of the Board and all of our executive officers are eligible for awards under the 2019 Incentive Plan and thus have a personal interest in the approval of the 2019 Incentive Plan proposal.
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BOARD COMPOSITION AND GOVERNANCE
Director IndependenceAttendance
OurDuring fiscal 2021, the Board held 7 meetings. All directors who served on the Board during fiscal 2021 attended at least 75% of the total number of meetings of the Board and meetings of the Board committees on which each director served that were held during the period of the director’s service during the fiscal year. We encourage our directors to attend each annual meeting of stockholders. To that end, and to the extent reasonably practicable, we generally schedule a meeting of our Board on the same day as our annual meeting of stockholders. All of our directors attended our 2020 annual meeting of stockholders.
Independent Directors
Under the corporate governance rules of Nasdaq, a majority of the members of the Board must satisfy Nasdaq’s criteria for “independence.” No director qualifies as independent unless the Board affirmatively determines that the director has no relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Board has determined after considering all the relevant factsthat each of Mses. Allgood, Hardman, and circumstances, including information requested fromKummrow and provided by each director concerning his background, employment and affiliation, including family relationships, that Messrs. Buchanan, Chan, Geeslin, Lee, Knittel, Sanquini, and Whims areis independent directors, as “independence” is defined byunder the current listing standards of NASDAQ and the SEC, because they have no relationship with us that would interfere with their exercise of independent judgment.Nasdaq. Mr. BergmanHurlston is not considered an independent director of our company because ofdue to his current position as CEO of our company.Chief Executive Officer. There are no family relationships among any of our directors and director nominees or executive officers. In this Proxy Statement, we refer to each of Mses. Allgood, Hardman, and Kummrow and Messrs. Buchanan, Chan, Geeslin, and Whims as our “Independent Directors.”
In addition, our Board previously determined that Richard Sanquini was independent under the listing standards of Nasdaq during his service on our Board in fiscal 2021.
Executive Sessions and Independent Director Meetings
We regularly schedule executive sessions of our Board at which non-management directors meet without the presence or participation of management. The Chair of our Board presides at such executive sessions. The Independent Directors also meet in regularly scheduled executive sessions, generally in connection with regularly scheduled Board meetings.
Corporate Governance Guidelines
Our Board has adopted Corporate Governance Guidelines, which provide the framework for the governance of our Company and represent the Board’s current views with respect to selected corporate governance issues considered to be of significance to our stockholders. The Corporate Governance Guidelines direct our Board’s actions with respect to, among other things, director qualifications, establishment of the Board’s standing committees, succession planning and the Board’s annual performance evaluation. A current copy of the Corporate Governance Guidelines is available in the Investor Relations — Corporate Governance — Overview section of our website at http://www.synaptics.com.
Board CommitteesLeadership Structure
The Board has no policy with respect to the separation of the offices of Chair and the Chief Executive Officer. The Board believes that this issue is part of the succession planning process and that it is in the best interests of the Company for the Board to make a determination when it elects a Chief Executive Officer. We currently maintain separate roles between the Chief Executive Officer and the Chair of the Board in recognition of the differences between the two responsibilities. Our Chief Executive Officer is responsible for setting our strategic direction and for day-to-day leadership and performance of our company. Our Chair of the Board provides input to the Chief Executive Officer, sets the agenda for Board meetings, and presides over meetings of the full Board as well as executive sessions of the Board.
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Board Oversight of Risk
Our bylaws authorizeBoard believes that effective risk management involves our entire corporate governance framework. As is the case in virtually all businesses, we face a number of risks, including operational, economic, financial, legal, regulatory, cybersecurity and competitive risks. Our management is responsible for the day-to-day management of the risks we face, while our Board, as a whole and through its committees, has responsibility for the oversight of Directors to appoint, from among its members, one or more committees, each consisting of one or more directors. risk management.
Board Responsibilities ● Overall oversight of the risk management process ● Receives at least quarterly updates from senior management and periodically from outside advisors regarding risks facing the Company ● Regularly reviews the risks facing the Company and identified in the Company’s filings with the SEC ● Regularly reviews risks relating to various developments, including acquisitions, stock repurchases, debt and equity placements and product introductions | ||||
Audit Committee ● Oversees financial reporting process ● Responsible for the quality and integrity of financial statements ● Oversees internal controls over financial reporting and disclosure controls and procedures ● Oversees our compliance with legal and regulatory matters ● Responsible for the performance and independence of the independent auditor ● Assists the Board in fulfilling its oversight responsibilities regarding cybersecurity risk | Compensation Committee ● Oversees the assessment and management of risks related to compensation plans and policies ● Oversees compensation policies and programs, including appropriate incentives and controls | Nominations Committee ● Oversees Board processes and corporate governance-related risks ● Responsible for risks related to director independence and conflicts of interest ● Oversees risks relating to management succession planning ● Oversees corporate social responsibility, sustainability, and governance risk and the Company’s ESG program | ||
Management Responsibilities ● Ensures that information with respect to material risks is transmitted to our Board ● Identifies material risks and implements appropriate risk management strategies ● Integrates risk management into our decision making process ● Attends committee meetings and reports on matters that may not be otherwise addressed at these meetings | ||||
Our Board of Directorsbelieves that the process it has established three standing committees: an Audit Committee,to administer the Board’s risk oversight function would be effective under a Compensation Committee,variety of leadership frameworks and, therefore, does not have a Nominationsmaterial effect on our choice of the Board’s leadership structure described above under “Board Leadership Structure.”
Code of Ethics
We have adopted a Code of Ethics that applies to our Chief Executive Officer and all senior financial officers, including the Chief Financial Officer and Principal Accounting Officer. The “Code of Ethics for the CEO and Senior Financial Officers” is available in the Investor Relations — Corporate Governance Committee. The— Overview section of our website at http://www.synaptics.com.
We intend to satisfy the disclosure requirement under Item 5.05(c) of Form 8-K regarding any amendment to, or waiver from, a provision of this code of ethics by posting such information on our website, at the address and location specified above to the extent required by applicable SEC rules and Nasdaq listing standards.
Succession Planning
Pursuant to our Corporate Governance Guidelines, the Nominations Committee makes an annual report to the Board on succession planning. As appropriate, the entire Board works with the Nominations Committee to nominate and evaluate potential successors to the
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Chief Executive Officer. In addition, the Chief Executive Officer at all times makes available his recommendations and evaluations of potential successors for both himself and other key executives, along with a review of any development plans recommended for such individuals. In the event of an emergency, the independent Chair of the Board or, if the Chair is unavailable, the Chief Financial Officer, will serve as interim Chief Executive Officer.
Prohibition on Derivatives Trading, Hedging and Pledging
Our Insider Trading Policy prohibits the members of our Board, executive officers, employees, and any family member residing in the same household of such persons from engaging in derivatives trading and hedging involving our securities, and from pledging our securities as collateral for a loan.
Corporate Social Responsibility and Sustainability
We believe that sustainable corporate practices and consistent attention to social and governance priorities will help enhance long-term value for stockholders. In addition, our Board recognizes the importance of our sustainability initiatives and the need to provide effective oversight of those initiatives. The Corporate Social Responsibility section of our company website provides a central portal for information on our Corporate Social Responsibility and environmental, social and governance initiatives. This site is the foundation for stockholders to obtain information on the various programs we are implementing and on the progress we are making. We have adopted a set of policies that address concerns such as human rights and climate change – a summary of these policies is provided below. Copies of the policies are available in the Investor Relations — Corporate Governance — Overview section of our website at http://www.synaptics.com.
Our Values:
Corporate Social Responsibility ● Synaptics strives to be a leading corporate citizen ● We uphold the most ethical standards in our business practices and policies, and we believe that sustainable corporate practices and consistent attention to social and governance priorities will help enhance long-term value for our stockholders ● Our management team applies an integrated methodology to financial matters, corporate governance, and corporate responsibility, leading to increased accountability, better decision making and ultimately creating better long-term value ● Our focus on environmental, social and governance factors influences everything we do | ||||
Environmental ● We have implemented internal green programs and initiatives to reinforce our commitment to minimizing natural resource consumption, improving sustainability, disposing of end-of-life products in an environmentally safe manner, reducing waste, and increasing reuse and recycling programs company-wide | Social ● Our employees and communities are the heart of the company, and we take pride in our social responsibility to them as well becoming better global citizens ● We support our local communities through charitable causes and events, and we have numerous programs in place around the world that promote our commitments to diversity, equality of opportunity, non-discrimination, and the highest standards of human rights ● We are committed to the use of a socially responsible supply chain ● Our efforts include maintaining a supplier policy that bars the use of forced or child labor and governs the use and distribution of conflict minerals | Governance ● We are dedicated to supporting leading corporate governance and board practices to ensure oversight accountability and transparency in our business practices ● We place a high value on ethical actions, individual integrity and fair dealing in every aspect of what we do | ||
Accountability ● Our Board and management are strongly committed to our corporate responsibility policies and will continue to regularly evaluate these policies to ensure an effective outcome and strict adherence by our employees, suppliers, vendors, and partners ● We actively monitor and audit our internal compliance with our Code of Conduct and other corporate social responsibility policies and programs |
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Our Policies:
Environmental Policy ● Manage and minimize the consumption of energy, water, paper and other resources ● Reuse and recycle materials ● Dispose of end-of-life products in an environmentally safe manner ● Develop, manufacture, and market products that are efficient in their use of energy, and that can be reused, recycled or disposed of safely | ||||
Anti-Corruption and Anti-Bribery ● Strict prohibition against all forms of bribery and kickbacks ● Strict prohibition against the participation in, or facilitation of, corrupt activities of any kind ● Such prohibitions apply to all third parties such as our suppliers, agents, contractors, consultants, and distributors | Labor and Human Rights Policy ● Prohibition against the use of forced labor of any kind ● Prohibition against the use of child labor and young workers ● Commitment to diversity, equality of opportunity and non-discrimination ● Prohibition against harsh or inhumane treatment of workers, including sexual harassment ● Commitment to providing a fair and living wage and legally mandated benefits ● Recognition of the right of freedom of association and collective bargaining | Supplier and Vendor Code of ● Contractual obligation on our supply chain to comply with the Responsible Business Alliance Code of Conduct ● Requires our suppliers to uphold the highest standards of human rights, as detailed in our Labor and Human Rights Policy ● Requires our suppliers to adhere to the highest standards of ethics ● Requires our suppliers to implement and maintain management systems to conform to this Supplier and Vendor Code of Conduct | ||
Conflict Minerals and Cobalt Sourcing Policy ● No direct sourcing of conflict minerals or cobalt ● Requires our suppliers to have in place conflict minerals and cobalt sourcing policies ● Requires our suppliers to comply with the Responsible Business Alliance Code of Conduct and the Responsible Minerals Initiative |
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Our Board has four standing committees: (i) the Audit Committee, (ii) the Compensation Committee, and(iii) the Nominations and Corporate Governance Committee consist entirely of independent directors.
The Audit Committee
The purposesand (iv) the Executive Committee. All members of the Audit Committee, include overseeingCompensation Committee, Nominations Committee and Executive Committee are Independent Directors. Our Committees each operate under a written charter adopted by our Board, which is available in the financial and reporting processesInvestor Relations — Corporate Governance — Overview section of our company and the auditswebsite at http://www.synaptics.com.
Director Name | Independent | Audit | Compensation | Nominations | Executive | |||||
Nelson Chan « | Yes | ● | ● | C | ||||||
Kiva Allgood | Yes | ● | ● | |||||||
Jeffrey Buchanan | Yes | F C | ● | ● | ||||||
Keith Geeslin | Yes | C | ● | |||||||
Susan Hardman | Yes | ● | ||||||||
Michael Hurlston | No | |||||||||
Patricia Kummrow | Yes | |||||||||
James Whims | Yes | ● | C | ● |
« Chair of the financial statements of our company, and providing assistance to our Board of Directors with respect to the oversight of the integrity of the financial statements of our company; our company’s compliance with legal and regulatory matters; the independent auditor’s qualifications and independence; and the performance of our company’s independent auditor. ●Committee Member C Committee Chair F Financial Expert
Audit Committee
Meetings Held in Fiscal 2021: 5
Primary Responsibilities: The primary responsibilities of the Audit Committee are set forth in its charter and include various matters with respect to the oversight of our company’s accounting and financial reporting processes and audits of the financial statements of our company on behalf of our Board of Directors. The Audit Committee also selects the independent auditor to conduct the annual audit of the financial statements of our company; reviews the proposed scope of such audit; reviews accounting and financial controls of our company with the independent auditor and our financial accounting staff; and reviews and approves any transactions between us and our directors, executive officers, and their affiliates.include:
The Audit Committee currently consists of Messrs. Buchanan, Chan, Geeslin and Knittel, each of whom is an independent director of our company under NASDAQ listing standards as well as under rules adopted by the SEC pursuant to theSarbanes- Oxley Act of 2002, or Sarbanes-Oxley.
● | Overseeing our accounting and financial reporting processes and the audits of our financial statements. |
● | Assisting the Board in fulfilling its oversight responsibilities regarding: |
o | the integrity of our financial statements; |
o | our compliance with legal and regulatory matters; |
o | the independent auditor’s qualifications and independence; and |
o | the performance of our independent auditor; |
● | Assisting the Board in fulfilling its oversight responsibilities regarding cybersecurity risk, which it discusses at least semi-annually; |
● | Preparing the Audit Committee report that SEC rules require to be included in our annual proxy statement; |
● | Selecting the independent auditor to conduct the annual audit of our financial statements and reviewing the proposed scope of such audit; |
● | Reviewing our accounting and financial controls with the independent auditor and our financial accounting staff; and |
● | Reviewing and approving any related party transactions between us and our directors, executive officers, and their affiliates. |
Independence: Our Board of Directors has determined that each member of Messrs.the Audit Committee satisfies the enhanced independence standards applicable to audit committees pursuant to Rule 10A-3(b)(1)(i) under the Exchange Act and Nasdaq listing standards. In addition, each member of the Audit Committee is financially literate, and Mr. Buchanan and Knittel (whose backgrounds are detailed above) qualifyhas been designated as an “audit committee financial expert” in accordance with applicable rules and regulations ofas that term is defined by the SEC. Mr. Geeslin serves as the Chairman of the Audit Committee.
The
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Compensation Committee
Meetings Held in Fiscal 2021: 6
Primary Responsibilities: The purposesprimary responsibilities of the Compensation Committee include determining,include:
● | Determining, or recommending to our Board |
● | Discharging the responsibilities of our Board relating to our compensation programs; |
● | Preparing the Compensation Committee report that SEC rules require to be included in our annual proxy statement and our Annual Report on Form 10-K; |
● | Establishing and reviewing our overall compensation philosophy; |
● | Reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and our other executive officers, evaluating the performance of our Chief Executive Officer and our other executive officers in light of those goals and objectives, and determining and approving our Chief Executive Officer and our other executive officers compensation level based on such evaluation; |
● | Reviewing and recommending to the Board the compensation of our directors; and |
● | Reviewing and making recommendations to the full Board with respect to, or approving, our incentive compensation plans and equity-based plans, including reviewing and overseeing the activities of the individuals responsible for administering those plans. |
In fulfilling its responsibilities, the Compensation Committee may delegate any or all of its responsibilities to a subcommittee of the Compensation Committee.
In accordance with the Compensation Committee’s charter, the Compensation Committee may retain independent compensation advisors and other management consultants. In fiscal 2021, the Compensation Committee retained Compensia, Inc. (“Compensia”)to assist in reviewing our executive compensation program and analyzing the competitive market for executive talent. As discussed under “Compensation Discussion and Analysis — How We Make Compensation Decisions” below, the Compensation Committee has assessed the independence of Compensia and has concluded that its engagement of Compensia does not raise any conflict of interest. The services provided by Compensia in fiscal 2021 are also discussed in that section.
At the request of the Compensation Committee, our Chief Executive Officer aids the Compensation Committee in reviewing and analyzing the performance of, and our goals and objectives for, our other executive officers, including our other named executive officers. These services are discussed under “Compensation Discussion and Analysis — How We Make Compensation Decisions — Role of our company, and discharging the responsibilitiesCEO” below.
Independence: Our Board has determined that each member of our Board of Directors relatingthe Compensation Committee satisfies the additional independence requirements specific to compensation programscommittee membership under Nasdaq listing standards. In making this determination, the Board considered whether the director has a relationship with the Company that is material to the director’s ability to be independent from management in connection with the duties of our company. The Compensation Committee currently consists of Messrs. Chan, Sanquini, and Whims, each of whom is an independent director of our company under NASDAQ listing standards as well as under rules adopted by the SEC pursuant to Sarbanes-Oxley. Mr. Chan serves as the Chairmana member of the Compensation Committee.
The
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Nominations and Corporate Governance Committee
Meetings Held in Fiscal 2021: 4
Primary Responsibilities: The purposesprimary responsibilities of the Nominations and Corporate Governance Committee include selecting, or recommending to our Board of Directors for selection, individuals to stand for election as directors at the annual meeting of stockholders or, if applicable, a special meeting of stockholders, overseeinginclude:
● | Selecting, or recommending to our Board for selection, individuals to stand for election as directors at the annual meeting of stockholders or, if applicable, a special meeting of stockholders; |
● | Identifying individuals believed to be qualified candidates to serve on the Board; |
● | Overseeing the selection and composition of the committees of our Board and, as applicable, overseeing the management succession planning process; |
● | Overseeing and approving the management continuity planning processes and reviewing and evaluating the succession plans relating to the Chief Executive Officer and other executive officer positions; |
● | Overseeing the evaluation, at least annually, of the Board and its committees; and |
● | Overseeing our corporate social responsibility and sustainability initiatives, including policies and operational controls for environmental, health and safety, and social risks, which it discusses at least annually. |
Independence: Our Board has determined that each member of the Nominations Committee is independent under Nasdaq listing standards.
Executive Committee
Meetings Held in Fiscal 2021: None
Primary Responsibilities: The primary responsibility of the Executive Committee is exercising from time to time, and to the fullest extent permitted by law, all powers of the Board in the management of our business and affairs.
Independence: Our Board has determined that each member of the Executive Committee is independent under Nasdaq listing standards.
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DIRECTOR SELECTION, EVALUATION AND COMMUNICATIONS
Qualifications of Director Nominees
The Nominations Committee is responsible for reviewing with the Board, on an annual basis, the requisite skills and characteristics required for new Board members as well as the composition of the Board as a whole. This assessment may include, among other things, the following:
Diversity, age, background, skills, and experience;
Personal qualities and characteristics, accomplishments, and reputation in the business community;
Knowledge and contacts in the communities in which the Company conducts business and in the Company’s business industry or other industries relevant to the Company’s business;
Ability and willingness to devote sufficient time to serve on the Board and committees of our Board of Directors,the Board;
Knowledge and as applicable, overseeing the management succession planning process. The Nominations and Corporate Governance Committee currently consists of Messrs. Buchanan, Sanquini, and Whims, each of whom is an independent director of our company under NASDAQ listing standards as well as under rules adoptedexpertise in various activities deemed appropriate by the SEC pursuant to Sarbanes-Oxley. Mr. Whims servesBoard, such as the Chairmanmarketing, production, distribution, technology, accounting, finance, and law; and
Fit of the Nominationsindividual’s skills, experience, and Corporate Governance Committee.
The Nominationspersonality with those of other directors in maintaining an effective, collegial, and Corporate Governance Committee will consider persons recommended by stockholders for inclusion as nominees for election to our Board of Directors if the information required by our bylaws is submitted in writing in a timely manner, and addressed and delivered to our corporate secretary at our executive offices set forth in this proxy statement. In addition to persons recommended by stockholders for inclusion as nominees for election to our Board of Directors, the Nominations and Corporate Governance Committee may also identify director candidates that come to its attention through incumbent directors,responsive Board.
management or third parties, and may, if it deems appropriate under the circumstances, engage athird-party search firm to assist in identifying qualified candidates. The Nominations and Corporate Governance Committee evaluates nominees for director in the same manner, regardless of whether the nominee is recommended by a stockholder or other person or entity.
In making its selection of director candidates, the Nominations and Corporate Governance Committee bears in mind that the foremost responsibility of a director is to represent the interests of our stockholders as a whole. Directors are expected to exemplify the highest standards of personal and professional integrity, and to constructively challenge management through their active participation and questioning. The Nominations and Corporate Governance Committee identifies and evaluates nominees for our Board of Directors based on these and other factors it considers appropriate, some of which may include strength of character, mature judgment, career specialization, relevant technical skills, expertise in areas relevant to the strategy and operations of our company, diversity, and the extent to which the nominee would fill a present need on our Board of Directors. The activities and associations of candidates are also reviewed for any legal impediment, conflict of interest, or other consideration that might prevent service on our Board of Directors.
Committee Charters, Corporate Governance, and Code of Ethics
Our Board of Directors has adopted charters for the Audit, Compensation, and Nominations and Corporate Governance Committees describing the authority and responsibilities delegated to each committee by our Board of Directors. Our Board of Directors has also adopted Corporate Governance Guidelines, a Code of Conduct, and a Code of Ethics for the CEO and Senior Financial Officers. We post the charters of our Audit, Compensation, and Nominations and Corporate Governance Committees; our Corporate Governance Guidelines, Code of Conduct, and Code of Ethics for the CEO and Senior Financial Officers, and any amendments or waivers thereto; and any other corporate governance materials specified by SEC or NASDAQ regulations on our website at www.synaptics.com. These documents are also available in print for any stockholder requesting a copy in writing from our corporate secretary at our executive offices set forth in this proxy statement.
Board’s Role in Risk Oversight
As is the case in virtually all businesses,In addition, we face a number of risks, including operational, economic, financial, legal, regulatory, and competitive risks. Our management is responsible for theday-to-day management of the risks we face. Our Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management.
Our Board of Directors’ involvement in our business strategy and strategic plans plays a key role in its oversight of risk management, its assessment of management’s risk appetite, and its determination of the appropriate level of enterprise risk. Our Board of Directors receives updates at least quarterly from senior management and periodically from outside advisors regarding the various risks we face. Our Board of Directors also reviews the various risks we identify in our filings with the SEC, as well as risks relating to various specific developments, such as acquisitions, stock repurchases, debt and equity placements, and product introductions.
Our Board committees assist our Board of Directors in fulfilling its oversight role in certain areas of risk. Pursuant to its charter, the Audit Committee oversees the financial and reporting processes of our company and the audit of the financial statements of our company, and provides assistance to our Board of Directors with respect to the oversight and integrity of the financial statements of our company, our company’s compliance with legal and regulatory matters, the independent auditor’s qualification and independence, and the performance of our independent auditor. The Compensation Committee considers the risks that our compensation policies and practices may have in attracting, retaining, and motivating valued employees and endeavors to assure that it is not reasonably likely that our compensation policies and practices would have a material adverse effect on our company. Our Nominations and Corporate Governance Committee oversees governance-related risks, such as director independence, conflicts of interests, and management succession planning.
Board Diversity
We seek diversity in experience, viewpoint, education, skill, and other individual qualities and attributes to be represented on our Board of Directors.Board. We believe directors should have various qualifications, including individual character and integrity; business experience and leadership ability; strategic planning skills, ability, and experience; requisite knowledge of our industry and finance, accounting, and legal matters; communications and interpersonal skills; and the ability and willingness to devote time to our company. We also believe the skill sets, backgrounds, and qualifications of our directors, taken as a whole, should provide a significant mix of diversity in personal and professional experience, background, viewpoints, perspectives, knowledge, and abilities. Nominees are not to be discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability, or any other basis proscribed by law. The assessment of directors is made in the context of the perceived needs of our Board of Directors from time to time.
AllProcess for Identifying Nominees for Director; Stockholder-Recommended Director Candidates
At any appropriate time prior to each annual meeting of our directors have held high-level positions in business or professional service firms and have experience in dealing with complex issues. We believe that all of ourstockholders at which directors are individuals of high characterto be elected, and integrity, are able to work well with others, and have committed to devote sufficient time towhenever there is otherwise a vacancy on the business and affairs of our company. In addition to these attributes,Board, the description of each director’s background set forth above indicatesNominations Committee will assess the specific experience, qualifications and skills necessary to conclude that each individual should continue to serve as a director of our company.
Board Leadership Structure
We believe that effective board leadership structure can depend on the experience, skills, and personal interaction between persons in leadership roles as well as the needs of our company at any point in time. We currently maintain separate roles between the Chief Executive Officer and Chairmaneffectiveness of the current Board in recognition of the differences between the two responsibilities. Our Chief Executive Officer is responsible for setting our strategic direction and for day-to-day leadership and performance of our company. Our Chairman of the Board provides input to the Chief Executive Officer, sets the agenda for Board of Directors meetings, and presides over meetings of the full Board of Directors as well as executive sessions of the Board of Directors.
We currently select, on a rotating basis, one of our independent directors to serve as Lead Director. Mr. Geeslin is currently serving as our Lead Director. In that role, Mr. Geeslin helps to facilitate communication and interaction between the Board of Directors and management.
Prohibition on Derivatives Trading and Hedging
Our Insider Trading Policy prohibits the members of our Board of Directors and employees, including our executive officers, and any family member residing in the same household from engaging in derivatives trading and hedging involving our securities without the prior approval of our Chief Financial Officer and our General Counsel.
Stock Ownership Guidelines
We maintain stock ownership guidelines that require our Chief Executive Officer to own shares of our common stock with a value equal to at least three times his annual base salary and thenon-employee members of our Board of Directors to own shares of our common stock with a value equal to at least five times their annual cash retainer. These individuals had five years from fiscal 2012, when these guidelines were adopted, to achieve their required ownership levels, and each of these individuals is currently in compliance with such guidelines. We believe that these guidelines promote the alignment of thelong-term interests of our Chief Executive Officer and the members of our Board of Directors with our stockholders. Further, we believe that these guidelines help mitigate the risks associated with our executive compensation program.
Compensation Committee Interlocks and Insider Participation
Our Compensation Committee consists of Messrs. Chan, Sanquini and Whims. None of these individuals was an officer or employee of the Company or had any contractual or other relationships with us during the fiscal year except as directors, and none of these individuals was formerly an officer of the Company. None of our executive officers currently serves, or in the past has served, as a member of the board of directors or as a member of the compensation committee for any entity, which has one or more of its executive officers serving on our Company’s Board of Directors or Compensation Committee.
Board and Committee Meetings
Our Board of Directors held a total of seven meetings during fiscal 2018. During fiscal 2018, the Audit Committee held five meetings; the Compensation Committee held six meetings; and the Nominations and Corporate Governance Committee held three meetings. Each of our directors attended at least 75% of the total number of meetings held in fiscal 2018 by our Board of Directors and each of the committees of our Board of Directors on which such person served during fiscal 2018.
Executive Sessions
We regularly schedule executive sessions of our Board of Directors at which non-management directors meet without the presence or participation of management. The Chairman of our Board of Directors presides at such executive sessions. We also schedule meetings of the independent directors, which are presided over by our Lead Director.
Annual Meeting Attendance
We encourage our directors to attend each Annual Meeting of Stockholders. To that end, and, to the extent reasonably practicable, we generally schedulethere is a meetingneed, will seek other individuals qualified and available to serve as potential Board members. The Nominations Committee will review each potential candidate’s qualifications in light of the criteria described above under “Qualifications of Director Nominees” and any additional criteria (such as experience, qualifications, attributes and skills) desired for directors and director candidates as may be determined from time to time by the Board. In reviewing each potential candidate, the Nominations Committee also considers the results of the annual Board evaluations for purposes of assessing the suitability of each Board member for continued service on the Board. See “Annual Board Evaluations” below for additional information regarding the annual Board evaluation process. The Nominations Committee will select the candidate or candidates it believes are the most qualified to recommend to the Board for selection as a director nominee.
The Nominations Committee will also consider persons recommended by stockholders for inclusion as nominees for election to our Board if the information as required by our Bylaws is submitted in writing in a timely manner and addressed and delivered to our Corporate Secretary at our principal executive offices set forth in this Proxy Statement. In addition to persons recommended by stockholders for inclusion as nominees for election to our Board, the Nominations Committee may also identify director candidates that come to its attention through incumbent directors, management or third parties, and may, if it deems appropriate under the circumstances, engage a third-party search firm to assist in identifying qualified candidates. The Nominations Committee evaluates nominees for director in the same manner, regardless of Directorswhether the nominee is recommended by a stockholder or other person or entity. The Nominations Committee may from time to time engage third-party search firms to assist in identifying potential nominees to our Board.
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Annual Board Evaluations
The Board conducts an annual self-evaluation to determine whether it and its committees are functioning effectively. The Nominations Committee receives comments from all directors and report annually to the Board with an assessment of the Board’s performance. This assessment is discussed with the full Board following the end of each fiscal year. The assessments focus on the same day as our Annual Meetingeffectiveness and composition of Stockholders. Allthe Board and each Board committee, the Board’s interaction with Company management, the Board’s standards of ourconduct, and the performance of each individual director. In fiscal 2021, the self-evaluations revealed that Board members desired further improvements in communication with Company management and felt that the Board composition would benefit from additional directors attended our Annual Meetingwith technical expertise. The Board has taken steps to address both areas of Stockholders last year.feedback, including increasing outreach to management and appointing Ms. Kummrow to bolster the Board’s technical expertise.
Communications with Directorsthe Board
Interested parties may communicate with our Board of Directors or specific members of our Board, of Directors, including our independent directorsIndependent Directors and the members of the various committees of our Board, of Directors, by submitting a letter addressed to the Board of Directors of Synaptics Incorporated, c/o any specified individual director or directors at our executive offices: 1251 McKay Drive, San Jose, California95131-1709. Any such letters will be forwarded to the indicated directors.
COMPENSATION DISCUSSION AND ANALYSIS
Named Executive Officers
This Compensation DiscussionAll communications will be received, processed and Analysis provides an overview ofthen forwarded to the material components of our executive compensation program for the following executive officers:
Richard A. Bergman, our Chief Executive Officer & President (our “CEO”);
Wajid Ali, our Senior Vice President and Chief Financial Officer (our “CFO”);
Kevin Barber, our Senior Vice President & General Manager, Mobile Division;
Huibert Verhoeven, our Senior Vice President & General Manager, Internet of Things (“IoT”) Division; and
Alex Wong, our Senior Vice President of Worldwide Operations.
We refer to these executive officers collectively in this Compensation Discussion and Analysis and the related compensation tables as our “Named Executive Officers” or “NEOs.”
Specifically, this Compensation Discussion and Analysis provides an overview of our executive compensation philosophy, the overall objectives of our executive compensation program, and each component of compensation that we provide. In addition, we explain how and why the Compensation Committeeappropriate member(s) of our Board, except that, certain items unrelated to the Board’s duties and responsibilities, such as spam, junk mail, mass mailings, solicitations, resumes and employment inquiries and similar items will not be forwarded. Board members receiving communications will respond as such directors deem appropriate, including the possibility of Directors,referring the matter to management of our Company, to the full Board or the Compensation Committee, arrived at the specific compensation policies and decisions involving our executive officers, including our Named Executive Officers, during fiscal 2018.
Executive Summary
Our executive compensation program is designed to align executive realized compensation with company performance (both financial results and stock price performance). Both cash and equity compensation for fiscal 2018 reflect the generally weak financial and stock price performancean appropriate committee of the Company in fiscal 2018.
The following compensation practices and decisions highlight our commitment to pay for performance:Board.
Excluding the impact of the voluntary temporary salary reductions in fiscal 2017, no increases were made to cash compensation for our CEO, CFO or our SVP of Worldwide Operations from fiscal 2016 through fiscal 2018 (this includes no increase to base salary or target annual cash bonus opportunities).
Our Compensation Committee and our CEO chose to retain base salaries for our CEO and CFO that trail the market median in order to emphasize performance-based pay through bonus opportunity and equity compensation.
Annual performance-based cash bonus payouts are aligned with company performance. In fiscal 2018, the CEO bonus was paid out at 34% of target and other NEO bonuses were paid at approximately 46% of target, on average. Below-target payouts reflect performance relative to our operating plan.
Equity compensation was granted in a mix of 29% performance stock units (“PSUs”), 37% market stock units (“MSUs”), 29% deferred stock units (“DSUs”) and 5% stock options. Our Compensation Committee believes that performance-based equity, in the form of both PSUs and MSUs, provide stronger alignment with stockholder value, requiring financial performance targets to be met and our stock price to perform well on an absolute and relative basis for value to be realized. Therefore, our Compensation Committee decided to no longer grant stock options to our executive officers starting in fiscal 2018 (the last stock option grant made in fiscal 2018 was approved in fiscal 2017. See Fiscal 2018 Long-Term Incentive Compensation Decisions in this section for additional information. The Compensation Committee’s decision to grant the majority of executive officer equity in performance-based equity also demonstrates the Compensation Committee’s commitment to performance-based compensation and alignment with stockholder value creation.
Fiscal 2018 was our sixth full fiscal year under the tenure of Mr. Bergman as our CEO. During fiscal 2018, net revenue decreased from fiscal 2017, and operating income/(loss), net income/(loss), and net income/(loss) per diluted share declined from fiscal 2017. As a result, given our emphasis on non-GAAP operating income, or operating profit, in our annual cash bonus plan, the actual cash compensation paid to our executive officers, including our Named Executive Officers, was significantly below their target total direct compensation opportunities for the year.
Fiscal 2018 Financial Results
Our performance for fiscal 2018 came in below expectations with revenue down from the prior fiscal year driven by a steep decline in our mobile fingerprint and discrete display driver business, partially offset by strong growth from our acquired IoT businesses. GAAP and non-GAAP operating income/(loss) for fiscal 2018 were down $126.6 million and $42.6 million from fiscal 2017, respectively, driven primarily by higher operating expenses and costs associated with the acquired IoT businesses. GAAP operating income/(loss) was further negatively impacted by incremental acquisition-related costs of $62.1 million driving lower GAAP gross margins, whilenon-GAAP gross margin improvedyear-over-year. GAAP net income/(loss) per diluted share was down $5.00 year-over-year, whilenon-GAAP net income per diluted share was down $0.83year-over-year.
For fiscal 2018, we recorded the following significant financial results:
Net revenue was $1.63 billion, a 5% decrease from net revenue of $1.72 billion for fiscal 2017;
GAAP operating income/(loss) was $(61.9) million, compared with GAAP operating income of $64.7 million for fiscal 2017;
GAAP net income/(loss) was $(124.1) million, or $(3.63) per diluted share, compared with GAAP net income of $48.8 million, or $1.37 per diluted share, for fiscal 2017;
Non-GAAP operating income, or operating profit, was $161.8 million, or 10.0% of net revenue, compared withnon-GAAP operating income of $204.4 million, or 11.9% of net revenue, for fiscal 2017; and
Non-GAAP net income was $141.4 million, or $4.05 per diluted share, compared withnon-GAAP net income of $173.9 million, or $4.88 per diluted share, for fiscal 2017.
See Appendix A to this Proxy Statement for a reconciliation of GAAP tonon-GAAP results.
Pay for Performance Analysis
Our compensation philosophy emphasizes performance-oriented compensation through:
Modest base salaries, which are generally positioned below the peer market median;
Annual performance-based cash bonus aligned with our annual operating plan and key strategic objectives; and
Stock-based compensation provided in three components to balance performance orientation and stockholder alignment (with approximately 71% of the total fiscal 2018 equity awards granted to our NEOs as PSUs, MSUs and options), and retention hold (approximately 29% of the fiscal 2018 equity awards granted to our NEOs were in the form of DSUs).
The Company’s weak performance in fiscal 2018 and strong performance-based plan design resulted in significantlybelow-target compensation, as detailed below:
Annual cash bonus pool achievement was approximately 49% of target for fiscal 2018, with individual performance adjustments resulting in a payout at 34% of target for the CEO.
As of our record date (September 4, 2018), outstanding MSUs are tracking to target as follows:
Fiscal 2016 MSUs granted to our NEOs (with payouts through fiscal 2019) are tracking to a 0% payout for the third performance period;
Fiscal 2017 MSUs granted to our NEOs (with payouts through fiscal 2020) are tracking to a 0% payout for the second performance period; and
Fiscal 2018 MSUs granted to our NEOs (with payouts through fiscal 2021) are tracking to a 124% payout for the first performance period.
As of our record date, the exercise price of all options granted to our NEOs in fiscal 2016 and 2017 is below the closing price of our stock on such date.
In the following chart, we summarize CEO target and realizable compensation. Over the last three fiscal years, realizable compensation significantly trailed target compensation levels.
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As reflected in the CEO realizable pay analysis above, the equity compensation we grant to our executive officers aligns their compensation with company performance and the creation of stockholder value. In our fiscal 2018, approximately 75% of our CEO’s target total direct compensation was delivered through equity awards; as a result, realizable compensation varies meaningfully based on stock price performance.
CEO pay is also aligned with performance on a relative basis. The following tables illustrate the alignment of our CEO’s target total direct compensation (on a “realizable pay” basis) with our financial performance (based on total stockholder return, or TSR) relative to the Company’s current compensation peer group. As demonstrated by these tables, the realizable compensation of our CEO for fiscal 2018 was well aligned with our one-year and three-year TSR, as of June 29, 2018, when compared with our current compensation peer group.
The vertical axis represents the percentile ranking of our TSR and our compensation peer group’s TSR over the indicated period. The horizontal axis represents the percentile ranking of our CEO’s realizable compensation and our compensation peer group’s chief executive officers’ realizable compensation over the indicated period.
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We have consistently set aggressive target levels for the financial performance measures used in our annual performance-based cash bonus plan. As reflected in the following table,non-GAAP operating income declinedyear-over-year driving a reduction in the annual bonus pool achievement to 49% for fiscal 2018. Actual bonus payment to the CEO in fiscal 2018 was further reduced to 34% based on individual performance measures.
Results of Most RecentSay-on-Pay Vote
At our 2017 Annual Meeting of Stockholders, we conducted our seventh stockholder advisory vote on the compensation of our Named Executive Officers (commonly referred to as a“say-on-pay” vote). Our stockholders approved the fiscal 2017 compensation of our Named Executive Officers, with approximately 92% of the votes cast in favor of our say-on-pay proposal.
Following our 2017 Annual Meeting of Stockholders, the Compensation Committee reviewed the results of thesay-on-pay vote, and continued the process of re-examining the executive compensation program to ensure it isperformance-based and aligns compensation levels with stockholder outcomes. The following practices illustrate the Compensation Committee and management teams’ commitment to a pay for performance philosophy:
Challenging bonus plan design and resulting payouts that significantly trail target bonus opportunities;
Confirming its prior fiscal year decision to adjust the CEO and CFO equity pay mix for future fiscal years to a 67% performance-based equity weighting to ensure the majority of equity compensation is directly linked to performance conditions; and
Continuing to review and adopt best practice compensation policies, as deemed appropriate by the Compensation Committee, including stock ownership guidelines, hedging restrictions and a compensation recovery (“clawback”) policy.
Our Board of Directors determined that our stockholders should have the opportunity to cast an advisory vote on the compensation of our Named Executive Officers each year, consistent with the preference expressed by our stockholders at our Annual Meeting of Stockholders in October 2017.
Compensation Philosophy and Objectives
We are a leading worldwide developer and supplier of custom-designed human interface semiconductor product solutions that enable people to interact more easily and intuitively with a wide variety of mobile computing, communications, entertainment, and other electronic devices. We operate in a highly competitive business environment, which is characterized by frequent technological advances, rapidly changing market requirements, and the emergence of new market entrants. To successfully compete in this dynamic environment, we must continually develop and refine our products and services to stay ahead of customer needs and challenges. To achieve these objectives, we need a highly talented and seasoned team of engineering, sales, marketing, operations, and other business professionals.
We are headquartered in the Silicon Valley region of Northern California and compete with many of the premier global technology companies in attracting and retaining a skilled management team and key engineering talent. Our competitors for management and engineering talent usestock-based compensation as an important element of their overall compensation programs. To meet the challenges presented by our operating environment, we have embraced a compensation philosophy that seeks to achieve the following specific objectives:
reward the successful achievement of our financial objectives;
drive the development of a successful and profitable business;
attract, motivate, reward, and retain highly qualified executive officers who are important to our success;
align compensation to our interests as a whole and the interests of our stockholders, which requires an emphasis on stock-based compensation; and
recognize strong performing executive officers by offering compensation that rewards individual achievement, corporate stewardship, and fiscal responsibility, as well as contributions to our overall success.
Total compensation levels are set to reflect the role, responsibilities, and contributions of each executive officer, as well as the achievement of corporate and individual financial and operational goals. As a result of our compensation philosophy, compensation levels may vary significantly from fiscal year to fiscal year on an absolute basis and among our various executive officers.
Each year, the most important measure in assessing our corporate performance is operating profit. At the same time, the most important measure of individual performance is the achievement of each executive officer’s individual objectives that vary from year to year and position to position, but generally include financial and operating performance, product success, timely product delivery, forecasting accuracy, customer satisfaction, cost reduction, leadership, team building, and employee retention.
We expect the compensation level of our CEO will be higher than that of our other executive officers, assuming relatively equal achievement of individual performance objectives, since our compensation policies establish the framework for our executive officers’ base salaries, target annual cash bonus opportunities, and stock-based compensation after reviewing those of comparable companies, which generally compensate their chief executive officers at higher levels because of their roles and their importance to overall company success.
Compensation-Setting Process
Our Board of Directors has appointed the members of the Compensation Committee, which consists solely of independent directors. The Compensation Committee is authorized to determine and approve or make recommendations to our Board of Directors for approval with respect to, the cash compensation of our executive officers, including our Named Executive Officers, and to grant, or recommend the grant of,stock-based compensation to our executive officers, including our Named Executive Officers. The Compensation Committee currently makescompensation-related decisions regarding our executive officers.
Role of the Compensation Committee
The Compensation Committee evaluates the performance of our CEO each fiscal year and determines his compensation in light of our goals and objectives for that year. The Compensation Committee, together with our CEO, assesses the performance of our other executive officers, including our other Named Executive Officers, each year. Based in part on the recommendations of our CEO, the Compensation Committee determines the compensation of our other executive officers.
Role of the Chief Executive Officer
At the request of the Compensation Committee, our CEO typically attends a portion of each Compensation Committee meeting, including meetings at which the Compensation Committee’s compensation consultant is present. This enables the Compensation Committee to review with our CEO the corporate and individual goals and objectives that he regards as important to our overall success. The Compensation Committee also requests that our CEO assess the performance of, and our goals and objectives for, our other executive officers, including our other Named Executive Officers. Although the participation of our CEO may influence the establishment of performance target levels and individual objectives, including his own, the Compensation Committee makes all determinations regarding corporate and individual performance measures, goals, and objectives, and related target levels. Our CEO does not attend any portion of the Compensation Committee meetings at which his compensation is discussed.
Role of the Compensation Consultant
The Compensation Committee also retains a compensation consultant to assist in the discharge of its responsibilities, including reviewing trends in executive compensation and identifying relevant comparable companies. The Compensation Committee makes all determinations regarding the engagement, fees, and services of the compensation consultant or other advisor, and its compensation consultant or other advisor reports directly to the Compensation Committee.
During fiscal 2018, the Compensation Committee engaged Compensia, Inc. (“Compensia”), a national compensation consulting firm, to assist it in connection with its review of our fiscal 2018 executive compensation program and its analysis of the competitive market for executive talent. Compensia provided the Compensation Committee with an analysis of the compensation practices of the companies in the compensation peer group; determined our compensation positioning relative to the compensation peer group; developedmarket-based guidelines for the structure of our fiscal 2018 executive compensation program; reviewed the overall compensation packages; and advised the Compensation Committee regarding the propriety of our fiscal 2018 executive compensation program.
Compensia also provided advice to the Compensation Committee regarding the amendment and restatement of our 2010 Incentive Compensation Plan, which is being submitted to our stockholders for a vote as Proposal Four in this Proxy Statement. Compensia attends most Compensation Committee meetings and provides additional assistance as requested on topics including Board compensation, executive severance and change in control agreements, bonus plan design and other topics, as requested by the Compensation Committee.
The Compensation Committee has considered the independence of Compensia in light of the listing standards of NASDAQ on compensation committee independence and the rules of the SEC. The Compensation Committee requested and received confirmation from Compensia concerning certain factors for determining the independence of the firm and its senior advisors working with the Compensation Committee. The Compensation Committee discussed these considerations and concluded that the work performed by Compensia did not raise any material conflict of interest.
Use of Competitive Market Data
In determining the compensation of our executive officers, including our Named Executive Officers, the Compensation Committee considers data gathered from a self-constructed group of peer companies, and published survey data for technology companies.
During the latter stages of fiscal 2017, after consultation with Compensia, the Compensation Committee developed and approved a compensation peer group for use in its executive compensation decisions for fiscal 2018 based on the following selection criteria:
Industry: companies that compete in the semiconductor or peripherals industries or that supply technology components to original equipment manufacturers, or OEMs.
Revenue: companies with revenue between approximately $530 million and $4.8 billion, based upon the last four quarters of reported revenue at the time of selection.
Market capitalization: companies with a market capitalization of greater than $640 million at the time of selection.
The companies included in the compensation peer group approved by the Compensation Committee were as follows:
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The Compensation Committee strives to select peer companies such thatDIRECTOR COMPENSATION
For their service on the Board, our company falls near the median for revenuenon-employee directors receive cash compensation and market capitalization within the selected peer group. For fiscal 2019, based upon recommendations from Compensia, the Compensation Committee approved changes to the compensation peer group criteria to include semiconductor companies with revenue of between approximately $577 million and $5.2 billion, based upon the last four quarters of reported revenue at the time of selection, and a market capitalization of greater than $433 million. As a result of the new criteria, including acquisition and merger activity impacting the companies in the compensation peer group, the Compensation Committee removed Analog Devices, Cavium, Microchip Technology, Skyworks Solutions and Xilinx, and added Inphi, Knowles, MACOM Technology Solutions, and Mellanox Technologies to the compensation peer group for fiscal 2019.
Compensation Elements
Our executive compensation program consists primarily of three elements: base salary,an annual performance-based cash bonuses, and long-term incentive, or LTI, compensation in the form of stock-based awards.equity award. Our executive officers who also participate in several company-wide benefit plans, including retirement and health and welfare benefit plans, which generallyserve as directors are available to all regularfull-time employees.not paid any additional compensation for their service as a director.
Base Salary
We seek to pay base salaries at competitive levels that enable us to attract, motivate, and retain highly qualified executive officers. Base salaries for our executive officers, including our Named Executive Officers, reflect each individual’s position, responsibilities, experience, skills, performance, and ongoing and expected future contributions. In determining base salary,The Board may change the Compensation Committee also takes into account salary levels for similar positions at the companies in the compensation peer group and base salary levels relative to other positions within our company. Consistent with our compensation philosophy, we set the base salariesterms of our executive officers at levels that are less than the market median to reinforce our desire that our annual performance-based cash bonuses and LTInon-employee director compensation which are based on our financial performance and our executive officers’ achievement of individual performance objectives as setprogram from time to time, represent a significant portion oftime. In fiscal 2021, the executive officers’ target compensation each year.
The Compensation Committee determines theBoard increased its annual base salary of our CEO in its sole discretion. The base salaries of our other executive officers, including our other Named Executive Officers, are determined by the Compensation Committee after considering the recommendations of our CEO as well as the factors described above.
As has been its practice, for fiscal 2018, the Compensation Committee set the base salaries for our executive officers, including our Named Executive Officers, at the beginning of the fiscal year. Base salary adjustments were not made for our CEO, CFO or Senior Vice President of Worldwide Operations for fiscal 2018 based on the Compensation Committee’s review of company performance and its assessment of the competitive market. The annual base salaries for our Named Executive Officers during fiscal 2018 were as follows:
Named Executive Officer | Annualized Fiscal 2017 Base Salary (1) | Annualized Fiscal 2018 Base Salary | Percentage Change | |||||||||
Richard A. Bergman | $ | 700,000 | $ | 700,000 | — | |||||||
Wajid Ali | $ | 395,000 | $ | 395,000 | — | |||||||
Kevin Barber | $ | 370,000 | $ | 400,000 | 8.1 | % | ||||||
Huibert Verhoeven | $ | 340,000 | $ | 350,000 | 2.9 | % | ||||||
Alex Wong | $ | 340,000 | $ | 340,000 | — |
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In June 2016, our Named Executive Officers requested a voluntary and temporary base salary reduction effective only for fiscal 2017 of 20% for Mr. Bergman and 10% for our other Named Executive Officers. The salary reductions were reviewed and approved by the Compensation Committee.
Annual Performance-Based Cash Bonuses
We use annual performance-based cash bonuses to motivate our executive officers, including our Named Executive Officers, to achieve our annual financial and operational objectives as set forth in our annual operating plan, while making progress towards and supporting our longer-term strategic and growth goals. The payment of these bonuses is based upon the achievement of one or more corporate performance objectives, which typically include meeting a specified target level of operating profit and individual performance goals.
At the beginning of each fiscal year, our Board of Directors approves our annual operating plan, which forms the basis for the corporate performance measures and individual performance goals for our annual performance-based cash bonuses. Further, the Compensation Committee reviews and sets the framework for the annual performance-based cash bonuses for the fiscal year, including confirming the plan participants, establishing a target annual cash bonus opportunity for each participating executive officer, and reviewing the corporate performance measures and individual performance goals for the fiscal year.
Target Bonus Opportunities
As in prior years, the Compensation Committee determined that the target annual cash bonus opportunities for each of our Named Executive Officers for fiscal 2018 should be based on a percentage of such Named Executive Officer’s base salary. The target annual cash bonus opportunity established for each Named Executive Officer for fiscal 2018, which was maintained at its fiscal 2017 level, was as follows:
Named Executive Officer | Annualized Fiscal 2018 Base Salary | Target Annual Cash Bonus Opportunity (as a percentage of base salary) | Target Annual Cash Bonus Opportunity (as a dollar amount) | |||||||||
Richard A. Bergman | $ | 700,000 | 145 | % | $ | 1,015,000 | ||||||
Wajid Ali | $ | 395,000 | 75 | % | $ | 296,250 | ||||||
Kevin Barber | $ | 400,000 | 75 | % | $ | 300,000 | ||||||
Huibert Verhoeven | $ | 350,000 | 75 | % | $ | 262,500 | ||||||
Alex Wong | $ | 340,000 | 75 | % | $ | 255,000 |
In setting these target annual cash bonus opportunities for our Named Executive Officers, the Compensation Committee exercised its judgment and considered several factors, including our overall financial and operational results for the prior fiscal year, the prior performance of each individual Named Executive Officer, the Named Executive Officer’s potential to contribute to ourlong-term strategic success, the Named Executive Officer’s role and responsibilities, the Named Executive Officer’s individual experience and skills, market practices for annual bonuses, and, for our other Named Executive Officers, the recommendations of our CEO.
Corporate Performance Measures
For fiscal 2018, our Board of Directors selectednon-GAAP operating profit as the primary corporate performance measure, representing 75% of the target annual cash bonus opportunity, together with selected strategic and individual performance goals, representing the remaining 25% of the target annual cash bonus opportunity, as the criterion that best supported our annual operating plan and enhanced long-term value creation for purposes of funding our bonus pool. As determined by the Compensation Committee, our executive officers, including our Named Executive Officers, were eligible to earn bonus payments based on our actual performance against thenon-GAAP operating profit target set forth in our fiscal 2018 annual operating plan. Fiscal 2018non-GAAP operating profit was determined by adjusting GAAP operating profit for acquisition and integration related costs, which includes amortization of purchased intangible assets and inventory fair value adjustments associated with acquisitions;share-based compensation costs; restructuring costs; and arbitration costs (for more information on hownon-GAAP operating profit is calculated, see Appendix A of this Proxy Statement).
For fiscal 2018, the target level for thenon-GAAP operating profit performance measure was $194 million and we achieved $162 million. The operating profit achievement and assessment of strategic goal attainment resulted in a bonus pool funded at approximately 49% for our fiscal 2018. Our Board of Directors set this target level to be aggressive, yet achievable, with diligent effort during the fiscal year.
Individual Performance Objectives
Consistent with our compensation philosophy of rewarding individual performance, our CEO developed and recommended to the Compensation Committee a series of individual performance goals for our executive officers, including our other Named Executive Officers, which he deemed to be integral to the achievement of our annual operating plan. These objectives were approved by the Compensation Committee. The Compensation Committee determined the individual performance goals that should be used to assess the performance of our CEO.
For purposes of the fiscal 2018 annual performance-based cash bonuses, the individual performance goals for each of our Named Executive Officers were as follows:
Mr. Bergman – Achieve our fiscal 2018 annual operating plan, support our business growth objectives, evaluate and drive long-term corporate growth strategies and market opportunities, and foster an environment of high integrity and ethics.
Mr. Ali – Support our business growth objectives with appropriate processes and controls, monitor and review our corporate and financial structure, set future financial strategy, and foster an environment of high integrity, ethics, and regulatory compliance.
Mr. Barber – Expand position within strategic customers, drive market share within strategic markets, establish long-term focus and strategy for identified Mobile market strategies, and support the overall achievement of our fiscal 2018 annual operating plan.
Mr. Verhoeven – Expand and develop our IoT position within strategic customers, identify and drive market share within strategic markets with existing products, establishlong-term focus for IoT market strategies based on the integration efforts of the two acquisitions that are focused on the expansion of our IoT market position, and support the achievement of our fiscal 2018 annual operating plan.
Mr. Wong – Focus on achieving fiscal 2018 annual operating plan by having the necessary supply chain, inventory and service levels to fulfill customer demand, along with responsibility of product quality by developing, directing and implementing quality strategies in support of overall business goals.
After the end of the fiscal year, our CEO evaluated each executive officer’s progress towards the achievement of their individual performance objectives. In the case of our CEO, the Compensation Committee evaluated his progress towards the achievement of his individual performance goals.
Fiscal 2018 Bonus Decisions
For fiscal 2018, annual performance-based cash bonus payments were determined after the end of the fiscal year by the Compensation Committee. The Compensation Committee’s determination of annual performance-based cash bonuses involved a multi-step process. First, the Compensation Committee established the annual target cash bonus pool for fiscal 2018 based on the aggregate target annual cash bonus opportunities for all of our employees, including our executive officers. The portion of the bonus pool that was subject to the actual level of achievement of thepre-established non-GAAP operating profit target level for the fiscal year was adjusted based on our performance relative to thenon-GAAP operating profit target level as approved by our Board of Directors at the beginning of the year. Second, the portion of the bonus pool that was subject to the actual level of achievement of thepre-established strategic goals for the fiscal year, was adjusted based on our performance relative to thepre-established strategic goals as approved by our Board of Directors at the beginning of the year.
The Compensation Committee then determined the cash bonus payment, if any, to be received from the available bonus pool by an executive officer by evaluating the executive officer’s position and responsibility level within our company, as well as performing a subjective assessment of each executive officer’s actual performance as measured against each executive officer’s individual performance objectives (in the case of our other Named Executive Officers, after considering the recommendations of our CEO). Further, the Compensation Committee exercised discretion in determining each executive officer’s bonus payment based upon the size of the available pool.
Based on this criteria, the following bonus payments were made to our Named Executive Officers for fiscal 2018:
Named Executive Officer | Target Annual Cash Bonus Opportunity | Actual Total Cash Bonus Payout (as a dollar amount) | Actual Cash Bonus Payment (as a percentage of fiscal 2018 Target Annual Cash Bonus Opportunity) | Actual Cash Bonus Payment (as a percentage of base salary earned in fiscal 2018) | ||||||||||||
Richard A. Bergman | $ | 1,015,000 | $ | 345,303 | 34.0 | % | 49.3 | % | ||||||||
Wajid Ali | $ | 296,250 | $ | 143,978 | 48.6 | % | 36.5 | % | ||||||||
Kevin Barber | $ | 300,000 | $ | 116,640 | 38.9 | % | 29.2 | % | ||||||||
Huibert Verhoeven | $ | 262,500 | $ | 127,575 | 48.6 | % | 36.5 | % | ||||||||
Alex Wong | $ | 255,000 | $ | 117,734 | 46.2 | % | 34.6 | % |
For fiscal 2018 as a whole, our employees achieved an average payout level of approximately 49% of their target bonuses, while our Named Executive Officers achieved a payout level of approximately 43% of their target bonuses as a result of not achieving the target level for the non-GAAP operating profit performance measure and exceeding the target level for the selected strategic goals measure. The portion of the bonus pool established by the Compensation Committee for our Named Executive Officers represented approximately 0.5% of our fiscal 2018non-GAAP operating profit.
Long-Term Incentive Compensation
As a technology company that encounters significant competition for qualified personnel,long-term incentive, or LTI, compensation plays a critical role in our ability to attract, hire, motivate, and retain qualified and experienced executive officers. The use of equity compensation is necessary for usfrom $175,000 to compete for qualified executive officers without significantly increasing cash compensation and is the most important component of our executive compensation program. We use LTI compensation in the form of equity awards to motivate our executive officers, including our Named Executive Officers, forlong-term corporate performance based on the value of our common stock and thereby, further align their interests with those of our stockholders. Our LTI compensation consists of stock options, performance-based MSU and PSU awards, andtime-based DSU awards, the purposes for which are described below:$200,000.
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Fiscal 2018Long-Term Incentive Compensation Decisions
For new grants approved in fiscal 2018, we granted NEO equity compensation in a target value mix of 33% DSUs, 33% PSUs and 33% MSUs. The Compensation Committee determined that an LTI award consisting of a combination of DSU awards, PSU awards and MSU awards would provide our executive officers with a competitive equity compensation package, while further aligning their compensation with our long-term business and financial objectives and promoting the creation of stockholder value. The final tranche of stock option grants approved by our Compensation Committee in fiscal 2017 was granted to our NEOs in August 2017.
For fiscal 2018, the fair value of the equity awards granted to our NEOs as part of our annual “refresh” program were, on average, 5% in the form of a stock option award, approximately 29% in the form of a DSU award, 29% in the form of a PSU award and 37% in the form of an MSU award. The actual grant date fair values of the awards granted to our NEOs varies from the target mix due to the accounting valuation methodology for MSUs.
The equity awards granted to our Named Executive Officers in fiscal 2018 were as follows.
Named Executive Officer | Options(1) | DS Us | PS Us | MS Us | Grant Date Fair Value | Intrinsic Value(3) | ||||||||||||||||||
Richard A. Bergman | 17,925 | 45,711 | 45,711 | 45,711 | $ | 5,921,151 | $ | 7,803,773 | ||||||||||||||||
Wajid Ali | 6,875 | 17,478 | 17,478 | 17,478 | $ | 2,264,386 | $ | 2,983,948 | ||||||||||||||||
Kevin Barber | 5,150 | 12,996 | 12,996 | 12,996 | $ | 1,684,402 | $ | 2,218,946 | ||||||||||||||||
Huibert Verhoeven | 4,575 | 12,100 | 12,100 | 12,100 | $ | 1,564,303 | $ | 2,064,852 | ||||||||||||||||
Alex Wong | 5,150 | 11,652 | 11,652 | 11,652 | $ | 1,519,814 | $ | 1,992,160 |
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The size of these LTI compensation awards were determined by the Compensation Committee based on its assessment of our financial results for fiscal 2017, its evaluation of each executive officer’s performance during fiscal 2017, and the following additional factors: each executive officer’s position within our company; an assessment of the equity award practices of the companies in our compensation peer group; and an assessment of the outstanding equity awards then-held by each executive officer. In making its award decisions, the Compensation Committee exercised its judgment to set the size of each award at a level it considered appropriate to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value.
DSU Awards and Stock Options
Once the size of the LTI compensation awards for our Named Executive Officers were determined, the Compensation Committee decided that the portion of the award to be delivered in the form of DSU awards would vest as follows: for current executives, DSUs generally vest over three years, with 1/3rd of the total number of shares of our common stock subject to the DSU award vesting annually in the quarter the award was granted until fully vested; for newly hired executives, DSUs generally vest over four years, with 1/4th of the total number of shares of our common stock subject to the DSU award vesting annually in the quarter the award was granted until fully vested.
Beginning in fiscal 2018, our Named Executive Officers no longer receive stock options as part of their equity compensation. For stock option awards approved in fiscal 2017, the stock option awards were granted quarterly in four equal installments beginning in October 2016, which is in the second quarter of our fiscal 2017, through the first quarter of fiscal 2018, with an exercise price equal to the fair market value of our common stock on each grant date.
PSU Awards
As established by the Compensation Committee, each PSU award consists of the right to receive a specified number of shares of our common stock if the award’s performance conditions are satisfied.
The PSUs granted to our executive officers are designed to vest in three tranches with the target quantity for each tranche equal toone-third of the total PSU grant. The grants have a specific one-year performance period and vesting occurs over three service periods with the final service period ending approximately three years from the grant date. Performance is measured based on the achievement of a specified level of non-GAAP earnings per share. The potential payout ranges from 0% to 200% of the target number of shares subject to the award for each tranche and is adjusted on a linear basis with a payout triggering if ournon- GAAP earnings per share equals greater than 65% of the target with a maximum payout achieved at 135% of target. PSUs granted in fiscal 2018 to our executive officers are based on our performance in calendar year 2018.
Delivery of shares earned, if any, will take place on the dates provided in the applicable PSU grant agreement, assuming the grantee is still an employee of our company at the end of the applicable service period. On the delivery date, we withhold shares to cover statutory tax withholding requirements and deliver a net quantity of shares to the executive officer after such withholding. Until delivery of shares, the grantee has no rights as a stockholder with respect to any shares underlying the PSU award.
In limited circumstances, including in the event of a change of control of our company and termination of employment of an executive officer, acceleration of vesting may occur; such acceleration, if any, will occur pursuant to the equity agreement underlying such equity and anythen-in-effect Change of Control policy covering such executive officer.
MSU Awards
As established by the Compensation Committee, each MSU award granted to our executive officers consists of the right to receive a specified number of shares of our common stock if the award’s performance conditions are satisfied. The shares of our common stock subject to such MSU awards will be earned, if at all, based on our total stockholder return, or TSR, compared to that of the S&P Semiconductor Select Industry Index, or SPSISC Index TSR, for awards granted to our executive officers beginning in fiscal 2018, and compared to that of the Philadelphia Semiconductor Index TSR, or the SOX Index TSR, for awards granted to our executive officers prior to fiscal 2018, over a one-year, a two-year, and a three-year performance period. In other words, the actual number of shares of our common stock that may be earned under the MSU awards will vary based on over- or under-performance of our TSR compared to that of the SPSISC Index TSR or SOX Index TSR, as applicable, over the specified performance periods. Pursuant to the terms of the fiscal 2018 MSU awards granted on October 30, 2017:
The target number of shares of our common stock subject to each MSU award will be earned if our TSR equals that of the SPSISC Index TSR or SOX Index TSR as measured over the one-year, the two-year, and the three-year performance periods (as determined on September 30, 2018, September 30, 2019, and September 30, 2020).
Payouts are scaled such thatbelow-target performance will result in a reduction in the number of shares of our common stock earned using atwo-to-one ratio, while above-target performance will result in a payout of 100% of the target number of shares of our common stock for the one-year and two-year performance periods and an increase in the number of shares of our common stock earned using atwo-to-one ratio for the three-year performance period less any shares that were delivered for the one-year and two-year performance periods (subject to a cap of 200% of the target number of shares of our common stock subject to the MSU awards if our TSR is 50 percentage points or more above the SPSISC Index TSR or SOX Index TSR, as applicable).
One-third of the target award is tied to each performance period (one-year, two-year and three-year periods). For the one-year and two-year measurement periods, executive officers can only earn up to target for the portion of the award tied to each performance period. All above-target payouts for the award are tied to the full three-year performance period and require that the executive officer remains employed through the end of the three-year period.
Any shares of our common stock earned under an MSU award will vest and be delivered to an executive officer within 30 days of the end of the one-year, two-year, and three-year performance periods. In limited circumstances, including in the event of a change of control of our company and termination of employment of an executive officer, an acceleration of vesting may occur; such acceleration, if any, will occur pursuant to the equity agreement underlying such equity and anythen-in-effect Change of Control policy covering such executive officer.
As of our record date, the outstanding MSU awards held by our NEOs are currently tracking to pay out against their target as follows:
Fiscal 2016 MSUs granted to our NEOs (with payouts through fiscal 2019) are tracking to a 0% payout for the third performance period;
Fiscal 2017 MSUs granted to our NEOs (with payouts through fiscal 2020) are tracking to a 0% payout for the second performance period; and
Fiscal 2018 MSUs granted to our NEOs (with payouts through fiscal 2021) are tracking to a 124% payout for the first performance period.
Stock Ownership Guidelines and Hedging Prohibition
We maintain stock ownership guidelines that require our CEO to own shares of our common stock with a value equal to at least three times his annual base salary. Our CEO had five years from fiscal 2012 to achieve this required ownership level and currently has met this ownership guideline. We believe that these guidelines further promote the alignment of the long-term interests of our CEO with our stockholders. We also believe that these guidelines help mitigate the risks associated with our executive compensation program. In addition, our Insider Trading Policy prohibits our executive officers, and any family member residing in the same household, from engaging in derivatives trading and hedging involving our securities without the prior approval of our Chief Financial Officer and our General Counsel.
Equity Award Grant Policy
Our Board of Directors or the Compensation Committee, as applicable, approves equity awards at its regularly scheduled meetings each year. Generally, in the case of equity awards granted to newly hired executive officers, we set the price of such awards at the closing market price of our common stock as reported on the NASDAQ Global Select Market on the date such grant is approved by our Board of Directors, the Compensation Committee or their delegate. Generally, in the case of a DSU award granted to our existing executive officers, we provide for effective dates on the first business day after the applicable quarterly financial earnings release. In the case of a stock option granted to our existing executive officers, the exercise price of such awards is equal to the fair market value of our common stock as reported on the NASDAQ Global Select Market on each grant date, which is generally the first business day after the applicable quarterly financial earnings release. In the case of MSU and PSU awards granted to our existing executive officers, we provide for an effective date at the October Compensation Committee meeting. For more information on our MSU and PSU awards, refer to the “Long-Term Incentive Compensation” section in this Compensation Discussion and Analysis.
Employment Arrangements
While we do not have employment agreements with any of our executive officers, the initial terms and conditions of employment for each of our Named Executive Officers have been set forth in a written employment offer letter. Each of these arrangements was approved on our behalf by the Compensation Committee or, in certain instances, by our Board of Directors.
In filling our executive positions, our Board of Directors or the Compensation Committee, as applicable, recognized that it would need to develop competitive compensation packages to attract qualified candidates in a dynamic labor market. At the same time, our Board of Directors and the Compensation Committee were sensitive to the need to integrate new executive officers into the executive compensation structure that we were seeking to develop, balancing both competitive and internal equity considerations.
Each of these employment offer letters provides for “at will” employment and sets forth the initial compensation arrangements for the executive officer, including an initial base salary, an annual performance-based cash bonus opportunity, and a stock-based compensation award in the form of an option to purchase shares of our common stock and DSU awards, that was submitted to our Compensation Committee for approval.
Perquisites and Other Personal Benefits
We do not view perquisites or other personal benefits as a significant component of our executive compensation program. From time to time, we may provide perquisites or other personal benefits in limited circumstances, such as when we believe it is appropriate to assist an individual executive officer in the performance of the executive officer’s duties, to make our executive officers more efficient and effective, and for recruitment, motivation, or retention purposes. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee.
Nonqualified Deferred Compensation
We do not provide any nonqualified deferred compensation for any of our employees.
Retirement and Other Benefits
We have established a Section 401(k) retirement savings plan for our executive officers, including our Named Executive Officers, on the same basis as for all of our other employees who satisfy certain eligibility requirements. Under this plan, participants may elect to makepre-tax contributions of up to 30% of their current compensation, not to exceed the applicable statutory income tax limitation. Currently, we match 25% of the contributions made by participants in the plan, up to a maximum of $4,500 per participant on a calendar year basis. We intend for the plan to qualify under Section 401(a) of the Internal Revenue Code, or the Code, so that contributions by participants or by us to the plan, and income earned on plan contributions, are not taxable to participants until withdrawn from the plan.
Additional benefits received by our executive officers, including our Named Executive Officers, include medical, dental, vision, life, and disability insurance benefits and participation in our employee stock purchase plan. These benefits are provided to our executive officers on the same basis as to all of our regular full-time employees.
Severance Policy
In October 2011, our Board of Directors adopted the amended Severance Policy for Principal Executive Officers, or the Severance Policy, which was further amended and approved by the Compensation Committee on October 30, 2017, and which applies to certain executive officers designated by our Board of Directors. All of our Named Executive Officers are covered by the Severance Policy. Under the Severance Policy, we will pay (i) 100% of the base salary in the case of our CEO over a period of one year and 50% of the base salary in the case of our other designated executive officers over a period of six months; (ii) 100% of the target bonus in the case of our CEO, the greater of 50% of the target bonus or a pro rata amount of the target bonus in the case of our CFO, and a pro rata amount of the target bonus in the case of our other designated executive officers, in each case for the fiscal year during which such termination occurs, and (iii) pay the COBRA premium for coverage under our medical plan for the designated executive officer and the executive officer’s dependents following a termination of employment by us without “good cause” or by the executive officer for “good reason,” each as defined in the Severance Policy, for one year in the case of our CEO and six months in the case of our other designated executive officers. All outstanding and unvested stock options and DSU awards held by our CEO or our other designated executive officers will cease to vest on such executive officer’s date of employment termination, and such executive officer’s outstanding and vested stock option awards will be exercisable for 90 days after such executive officer’s date of employment termination, but not beyond their original term. The Severance Policy will terminate upon a “change of control” of our company as defined in the Severance Policy.
Change of Control Severance Policy
In July 2014, we enacted a Change of Control Severance Policy for Principal Executive Officers, or the CoC Severance Policy, which was further amended and approved by the Compensation Committee on October 30, 2017. The CoC Severance Policy applies to certain executive officers who have been designated by our Board of Directors. All of our Named Executive Officers are covered by the CoC Severance Policy. The CoC Severance Policy replaced individual Change of Control Severance Agreements entered into with our CEO and several of our executive officers. The CoC Severance Policy was designed by the Compensation Committee to meet current market expectations and was modeled after the practices of the companies in our then-current compensation peer group. The CoC Severance Policy provides for specified payments and benefits only upon a qualifying termination of employment following a “change of control” of our company as defined in the policy (a “double trigger” arrangement), meaning that both a change of control of our company and a termination of employment must occur before the designated executive officer is eligible to receive any payments or benefits.
The CoC Severance Policy provides that, in the event of a termination of employment by our company without “good cause” or by the designated executive officer with “good reason,” each as defined in the policy, within three months prior to a change of control or 18 months following a change of control of our company, such designated executive officer will be eligible to receive the following:
An amount equal to 200% of base salary and target annual cash bonus in the case of our CEO, and 150% of base salary and target annual cash bonus for the other designated executive officers, in each case for the fiscal year in which such termination of employment occurs;
Continuation of health insurance coverage for the designated executive officer and the executive officer’s dependents for a period of 18 months; and
Continuation of life insurance coverage for the designated executive officer for a period of 18 months.
The foregoing payments and benefits are contingent upon the designated executive officer executing and not revoking a release of all claims that he or she may have against us.
The CoC Severance Policy also provides that, in the event of a change of control of our company, all outstanding and unvested stock options and DSU awards (but not including any outstanding MSU awards) will immediately vest in full if the employment of the designated executive officer is terminated by our company without “good cause” or by the designated executive officer with “good reason,” each as defined in the policy. Such stock options will be exercisable for 90 days after such executive officer’s date of employment termination, but not beyond their original term.
All outstanding and unearned MSU and PSU awards will continue to be earned in accordance with the terms of the MSU or PSU grant agreement.
We implemented the CoC Severance Policy to mitigate a potential disincentive for these executive officers when they are evaluating a potential acquisition of our company, particularly when their services may not be required by the acquiring entity. The CoC Severance Policy has been designed to provide each of our executive officers, including the Named Executive Officers, with consistent treatment and to avoid the inadvertent incurrence of an excise tax under Section 409A of the Code.
Except as described herein or under “Potential Payments Upon Termination or Change of Control” below, we do not offer our executive officers, including our Named Executive Officers, any other severance payments or benefits upon their termination of employment with our company, whether or not in connection with a change of control of our company.
Tax and Accounting Considerations
Deductibility of Executive Compensation
We take into account the tax effects of executive compensation on us and our executive officers. Section 162(m) of the Code (“Section 162(m)”) limits the deductibility, for federal income tax purposes, of remuneration in excess of $1 million paid to certain executives of any publicly held corporation in any taxable year. Thus, we are able to deduct certain types of remuneration paid to any of these individuals only to the extent that such remuneration during any taxable year does not exceed $1 million. Historically, remuneration in excess of $1 million could be deducted if it qualified as“performance-based compensation” within the meaning of Section 162(m) or satisfied the condition of another exemption from the deductibility limit. This performance-based exception has been repealed, effective for taxable years beginning after December 31, 2017. However, certain arrangements in place as of November 2, 2017 may be eligible for transition relief under the Code. Our Amended and Restated 2010 Incentive Compensation Plan (as more fully described in Proposal 4) retains certain legacy provisions that were originally included in the plan so that outstanding awards that may qualify for transition relief under the Code are not impacted.
While the Compensation Committee is mindful of the benefit of being able to fully deduct the compensation paid to our Named Executive Officers, it believes that we should retain the flexibility to provide compensation to our Named Executive Officers that is not fully tax deductible when it believes that such payments are appropriate to attract and retain executive talent or meet other business objectives. Thus, the Compensation Committee may, in its judgment, authorize compensation payments that are not deductible by reason of the application of 162(m) when it believes that such payments are appropriate to attract and retain executive talent, and is in our best interests and the best interests of our stockholders.
Taxation of “Parachute” Payments
Sections 280G and 4999 of the Code provide that executive officers and directors, who hold significant equity interests, and certain other service providers may be subject to significant additional taxes if they receive payments or benefits that exceed certain prescribed limits in connection with a change of control of a company, and that the company (or a successor) may forfeit a deduction on the amounts subject to this additional tax. We did not provide any executive officer, including any Named Executive Officer, with a“gross-up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G and 4999 of the Code during fiscal 2018, and we have not agreed and are not otherwise obligated to provide any executive officer with such a “gross-up” or other reimbursement.
Accounting for Stock-Based Compensation
We account for stock-based compensation arrangements in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718 “Compensation – Stock Compensation,” or ASC Topic 718. ASC Topic 718 requires companies to measure the compensation expense for all stock-based payment awards made to employees and directors, including stock options, PSU, DSU and MSU awards, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our Named Executive Officers may never realize any value from their awards. ASC Topic 718 also requires companies to recognize the compensation cost of theirstock-based compensation awards in their income statements over the period that an employee or director is required to render service in exchange for the stock option or other award. In determining stock-based compensation, the Compensation Committee considers the potential expense of these awards under ASC Topic 718 and other accounting implications such awards may have on us.
Compensation Recovery Policy
On October 12, 2016, our Board of Directors approved an amendment and restatement of the Company’s 2010 Incentive Compensation Plan, which now contains a clawback provision that applies to all awards held by the Company’s executive officers (as defined by the Securities Exchange Act of 1934). All awards (cash and equity) held by an executive officer will be subject to clawback, recoupment or forfeiture, (i) to the extent that such executive officer is determined to have engaged in fraud or intentional illegal conduct that caused the Company’s materialnon-compliance with any applicable financial reporting requirements and resulted in a financial restatement, the result of which is that the amount received from such award would have been lower had it been calculated on the basis of such restated results, or (ii) as required by applicable laws, rules, regulations or listing requirements. Such clawback, recoupment or forfeiture, in addition to any other remedies available under applicable law, will occur through the cancellation of the excess awards and the recoupment of any gains realized with respect to the excess awards. The executive officers may not claim the operation of the clawback as the basis for “good reason” to resign and receive severance benefits.
The Compensation Committee has reviewed and discussed with management the “Compensation Discussion and Analysis” included in this Proxy Statement and, based on such review and discussion, the Compensation Committee recommended to our Board of Directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement.
Fiscal 2018 Summary Compensation Table
The following table sets forth information regarding compensation for services in all capacities to us and our subsidiaries received by our Named Executive Officers for the fiscal years 2018, 2017, and 2016.
Stock | Option | Non-Equity Incentive Plan | All Other | |||||||||||||||||||||||||
Fiscal | Salary | Awards | Awards | Compensation | Comp | Total | ||||||||||||||||||||||
Name and Principal Position | Year | ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($)(5) | ($) | |||||||||||||||||||||
Rick Bergman | 2018 | $ | 700,000 | $ | 5,597,768 | $ | 323,383 | $ | 345,303 | $ | 45,568 | $ | 7,012,022 | |||||||||||||||
Chief Executive Officer & President | 2017 | $ | 560,000 | $ | 3,422,280 | $ | 1,446,337 | $ | 439,698 | $ | 3,942 | $ | 5,872,257 | |||||||||||||||
2016 | $ | 700,000 | $ | 4,536,630 | $ | 1,746,138 | $ | 812,000 | $ | 4,500 | $ | 7,799,268 | ||||||||||||||||
Wajid Ali | 2018 | $ | 395,000 | $ | 2,140,355 | $ | 124,031 | $ | 143,978 | $ | 21,028 | $ | 2,824,392 | |||||||||||||||
Senior Vice President and Chief | 2017 | $ | 355,500 | $ | 1,308,872 | $ | 441,939 | $ | 213,893 | — | $ | 2,320,204 | ||||||||||||||||
Financial Officer | 2016 | $ | 395,000 | $ | 1,001,246 | — | $ | 267,217 | $ | 137,379 | (6) | $ | 1,800,842 | |||||||||||||||
Kevin D. Barber | 2018 | $ | 395,000 | $ | 1,591,491 | $ | 92,911 | $ | 116,640 | $ | 24,515 | $ | 2,220,557 | |||||||||||||||
Senior Vice President & General | 2017 | $ | 333,000 | $ | 984,656 | $ | 415,665 | $ | 220,390 | $ | 4,163 | $ | 1,957,874 | |||||||||||||||
Manager, Mobile Division | 2016 | $ | 368,333 | $ | 1,296,180 | $ | 479,225 | $ | 204,795 | $ | 4,069 | $ | 2,352,602 | |||||||||||||||
Huibert Verhoeven | 2018 | $ | 348,333 | $ | 1,481,766 | $ | 82,537 | $ | 127,575 | $ | 24,948 | $ | 2,065,159 | |||||||||||||||
Senior Vice President & General | 2017 | $ | 306,000 | $ | 876,584 | $ | 365,805 | $ | 174,904 | $ | 5,745 | $ | 1,729,038 | |||||||||||||||
Manager, Internet of Things Division | 2016 | $ | 338,333 | $ | 1,101,753 | $ | 295,059 | $ | 198,645 | $ | 4,575 | $ | 1,938,365 | |||||||||||||||
Alex Wong | 2018 | $ | 340,000 | $ | 1,426,903 | $ | 92,911 | $ | 117,734 | $ | 24,240 | $ | 2,001,788 | |||||||||||||||
Senior Vice President of Worldwide | 2017 | $ | 306,000 | $ | 984,656 | $ | 415,665 | $ | 165,699 | $ | 4,500 | $ | 1,876,520 | |||||||||||||||
Operations | 2016 | $ | 338,333 | $ | 1,296,180 | $ | 443,156 | $ | 261,375 | $ | 4,500 | $ | 2,343,544 |
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Fiscal 2018 Grants of Plan-Based Awards Table
The following table sets forth certain information with respect to grants of plan-based awards to our Named Executive Officers for the fiscal year ended June 30, 2018.
All Other | All Other | |||||||||||||||||||||||||||||||||||||||||||||||
Stock | Option | |||||||||||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts | Estimated Future Payouts | Awards: | Awards: | Exercise | Grant Date | |||||||||||||||||||||||||||||||||||||||||||
UnderNon-Equity | Under Equity | Number of | Number of | or Base | Fair Value | |||||||||||||||||||||||||||||||||||||||||||
Incentive Plan Awards(2) | Incentive Plan Awards | Shares of | Securities | Price of | of Stock | |||||||||||||||||||||||||||||||||||||||||||
Committee | Stock or | Underlying | Options | and Options | ||||||||||||||||||||||||||||||||||||||||||||
Approval | Threshold | Target | Maximum | Threshold | Target | Maximum | Units | Options | Awards | Awards | ||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Date(1) | ($) | ($) | ($) | ($) | ($) | ($) | (#)(5) | (#)(6) | ($/Sh) | ($)(7) | ||||||||||||||||||||||||||||||||||||
Richard A. | — | $ | 1,015,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Bergman | 8/4/2017 | 10/25/2016 | — | — | — | — | — | — | — | 17,925 | $ | 45.32 | $ | 323,383 | ||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | 45,711 | 91,422 | (3) | — | — | — | $ | 2,204,184 | |||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | 45,711 | 91,422 | (4) | — | — | — | $ | 1,696,792 | |||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | 45,711 | — | — | $ | 1,696,792 | ||||||||||||||||||||||||||||||||||||||
Wajid Ali | — | $ | 296,250 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
8/4/2017 | 10/25/2016 | — | — | — | — | — | — | — | 6,875 | $ | 45.32 | $ | 124,031 | |||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | 17,478 | 34,956 | (3) | — | — | — | $ | 842,789 | |||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | 17,478 | 34,956 | (4) | — | — | — | $ | 648,783 | |||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | 17,478 | — | — | $ | 648,783 | ||||||||||||||||||||||||||||||||||||||
Kevin D. | — | $ | 296,250 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Barber | 8/4/2017 | 10/25/2016 | — | — | — | — | — | — | — | 5,150 | $ | 45.32 | $ | 92,911 | ||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | 12,996 | 25,992 | (3) | — | — | — | $ | 626,667 | |||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | 12,996 | 25,992 | (4) | — | — | — | $ | 482,412 | |||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | — | — | 12,996 | — | — | $ | 482,412 | ||||||||||||||||||||||||||||||||||||
Huibert | — | $ | 261,250 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Verhoeven | 8/4/2017 | 10/25/2016 | — | — | — | — | — | — | — | 4,575 | $ | 45.32 | $ | 82,537 | ||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | 12,100 | 24,200 | (3) | — | — | — | $ | 583,462 | |||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | 12,100 | 24,200 | (4) | — | — | — | $ | 449,152 | |||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | — | — | 12,100 | — | — | $ | 449,152 | ||||||||||||||||||||||||||||||||||||
Alex Wong | — | $ | 255,000 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
8/4/2017 | 10/25/2016 | — | — | — | — | — | — | — | 5,150 | $ | 45.32 | $ | 92,911 | |||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | 11,652 | 23,304 | (3) | — | — | — | $ | 561,859 | |||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | 11,652 | 23,304 | (4) | — | — | — | $ | 432,522 | |||||||||||||||||||||||||||||||||||
10/31/2017 | 10/30/2017 | — | — | — | — | — | — | 11,652 | — | — | $ | 432,522 |
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Fiscal 2018 Outstanding Equity Awards at FiscalYear-End Table
The following table sets forth information with respect to outstanding equity-based awards held by our Named Executive Officers as of June 30, 2018.
Option Awards(1) | Stock Awards(2) | |||||||||||||||||||||||||||||||||||||||
Equity | Equity Incentive | |||||||||||||||||||||||||||||||||||||||
Incentive | Equity Incentive | Plan Awards: | ||||||||||||||||||||||||||||||||||||||
Plan Awards: | Market | Plan Awards: | Market or | |||||||||||||||||||||||||||||||||||||
Number of | Number of | Number of | Number of | Value of | Number of | Payout Value of | ||||||||||||||||||||||||||||||||||
Securities | Securities | Securities | Shares or | Shares or | Unearned | Unearned | ||||||||||||||||||||||||||||||||||
Underlying | Underlying | Underlying | Units of | Units of | Shares, Units or | Shares, Units or | ||||||||||||||||||||||||||||||||||
Unexercised | Unexercised | Unexercised | Options | Stock That | Stock That | Other Rights | Other Rights | |||||||||||||||||||||||||||||||||
Options | Options | Unearned | Exercise | Option | Have Not | Have Not | That Have Not | That Have Not | ||||||||||||||||||||||||||||||||
Grant | (#) | (#) | Options | Price | Expiration | Vested | Vested | Vested | Vested | |||||||||||||||||||||||||||||||
Name | Date | Exercisable | Unexercisable | (#) | ($) | Date | (#) | ($) | (#) | ($) | ||||||||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||||||||||||
Richard A. | 09/28/11 | (3) | 20,000 | — | — | $ | 23.25 | 09/28/18 | — | — | — | — | ||||||||||||||||||||||||||||
Bergman | 10/31/12 | (4) | 18,750 | — | — | $ | 23.16 | 10/31/19 | — | — | — | — | ||||||||||||||||||||||||||||
01/28/13 | (4) | 18,750 | — | — | $ | 35.76 | 01/28/20 | — | — | — | — | |||||||||||||||||||||||||||||
04/29/13 | (4) | 18,750 | — | — | $ | 42.57 | 04/29/20 | — | — | — | — | |||||||||||||||||||||||||||||
08/05/13 | (4) | 18,750 | — | — | $ | 39.80 | 08/05/20 | — | — | — | — | |||||||||||||||||||||||||||||
10/28/13 | 23,750 | — | — | $ | 46.50 | 10/28/20 | — | — | — | — | ||||||||||||||||||||||||||||||
01/27/14 | 23,750 | — | — | $ | 60.22 | 01/27/21 | — | — | — | — | ||||||||||||||||||||||||||||||
04/28/14 | 23,750 | — | — | $ | 61.40 | 04/28/21 | — | — | — | — | ||||||||||||||||||||||||||||||
08/01/14 | 23,750 | — | — | $ | 78.11 | 08/01/21 | — | — | — | — | ||||||||||||||||||||||||||||||
10/24/14 | 19,325 | — | — | $ | 62.10 | 10/24/21 | — | — | — | — | ||||||||||||||||||||||||||||||
01/30/15 | 19,325 | — | — | $ | 76.81 | 01/30/22 | — | — | — | — | ||||||||||||||||||||||||||||||
04/24/15 | 19,325 | — | — | $ | 85.69 | 04/24/22 | — | — | — | — | ||||||||||||||||||||||||||||||
07/31/15 | 17,714 | 1,611 | — | $ | 79.38 | 07/31/22 | — | — | — | — | ||||||||||||||||||||||||||||||
10/23/15 | 11,875 | 2,375 | — | $ | 89.29 | 10/23/22 | — | — | — | — | ||||||||||||||||||||||||||||||
01/29/16 | 10,687 | 3,563 | — | $ | 73.31 | 01/29/23 | — | — | — | — | ||||||||||||||||||||||||||||||
04/29/16 | 9,500 | 4,750 | — | $ | 71.55 | 04/29/23 | — | — | — | — | ||||||||||||||||||||||||||||||
07/29/16 | 8,312 | 5,938 | — | $ | 51.95 | 07/29/23 | ||||||||||||||||||||||||||||||||||
10/28/16 | (5) | 8,962 | 8,963 | — | $ | 52.57 | 10/28/23 | — | — | — | — | |||||||||||||||||||||||||||||
01/27/17 | (5) | 7,468 | 10,457 | — | $ | 54.36 | 01/27/24 | — | — | — | — | |||||||||||||||||||||||||||||
04/28/17 | (5) | 5,975 | 11,950 | — | $ | 54.77 | 04/28/24 | — | — | — | — | |||||||||||||||||||||||||||||
08/04/17 | (5) | — | 17,925 | — | $ | 45.32 | 08/04/24 | — | — | — | — | |||||||||||||||||||||||||||||
10/23/15 | (6) | — | — | — | — | — | 6,999 | $ | 352,540 | — | — | |||||||||||||||||||||||||||||
10/28/16 | (6) | — | — | — | — | — | 18,998 | $ | 956,929 | — | — | |||||||||||||||||||||||||||||
10/31/17 | (6) | — | — | — | — | — | 45,711 | $ | 2,302,463 | — | — | |||||||||||||||||||||||||||||
10/23/15 | (7) | — | — | — | — | — | — | — | 7,000 | $ | 352,590 | |||||||||||||||||||||||||||||
10/28/16 | (7) | — | — | — | — | — | — | — | 19,000 | $ | 957,030 | |||||||||||||||||||||||||||||
10/31/17 | (7) | — | — | — | — | — | — | — | 45,711 | $ | 2,302,463 | |||||||||||||||||||||||||||||
10/31/17 | (8) | — | — | — | — | — | — | — | 45,711 | $ | 2,302,463 | |||||||||||||||||||||||||||||
Wajid Ali | 05/11/15 | (5) | 40,000 | — | — | $ | 88.66 | 05/11/22 | — | — | — | — | ||||||||||||||||||||||||||||
10/28/16 | (5) | 3,437 | 3,438 | — | $ | 52.57 | 10/28/23 | — | — | — | — | |||||||||||||||||||||||||||||
01/27/17 | (5) | 2,864 | 4,011 | — | $ | 54.36 | 01/27/24 | — | — | — | — | |||||||||||||||||||||||||||||
04/28/17 | (5) | 2,292 | 4,583 | — | $ | 54.77 | 04/28/24 | — | — | — | — | |||||||||||||||||||||||||||||
08/04/17 | (5) | — | 6,875 | — | $ | 45.32 | 08/04/24 | — | — | — | — | |||||||||||||||||||||||||||||
10/28/16 | (6) | — | — | — | — | — | 7,265 | $ | 365,938 | — | — | |||||||||||||||||||||||||||||
10/31/17 | (6) | — | — | — | — | — | 17,478 | $ | 880,367 | — | — | |||||||||||||||||||||||||||||
10/23/15 | (7) | — | — | — | — | — | — | — | 2,633 | $ | 132,624 | |||||||||||||||||||||||||||||
10/28/16 | (7) | — | — | — | — | — | — | — | 7,266 | $ | 365,988 | |||||||||||||||||||||||||||||
10/31/17 | (7) | — | — | — | — | — | — | — | 17,478 | $ | 880,367 | |||||||||||||||||||||||||||||
10/31/17 | (8) | — | — | — | — | — | — | — | 17,478 | $ | 880,367 | |||||||||||||||||||||||||||||
Kevin D. | 01/27/14 | 3,363 | — | — | $ | 60.22 | 01/27/21 | — | — | — | — | |||||||||||||||||||||||||||||
Barber | 04/28/14 | 3,923 | — | — | $ | 61.40 | 04/28/21 | — | — | — | — | |||||||||||||||||||||||||||||
08/01/14 | 6,726 | — | — | $ | 78.11 | 08/01/21 | — | — | — | — | ||||||||||||||||||||||||||||||
10/24/14 | 3,544 | — | — | $ | 62.10 | 10/24/21 | — | — | — | — | ||||||||||||||||||||||||||||||
01/30/15 | 4,725 | — | — | $ | 76.81 | 01/30/22 | — | — | — | — | ||||||||||||||||||||||||||||||
04/24/15 | 4,725 | — | — | $ | 85.69 | 04/24/22 | — | — | — | — | ||||||||||||||||||||||||||||||
07/31/15 | 4,331 | 394 | — | $ | 79.38 | 07/31/22 | — | — | — | — | ||||||||||||||||||||||||||||||
10/23/15 | 3,416 | 684 | — | $ | 89.29 | 10/23/22 | — | — | — | — | ||||||||||||||||||||||||||||||
01/29/16 | 3,075 | 1,025 | — | $ | 73.31 | 01/29/23 | — | — | — | — | ||||||||||||||||||||||||||||||
04/29/16 | 2,733 | 1,367 | — | $ | 71.55 | 04/29/23 | — | — | — | — | ||||||||||||||||||||||||||||||
07/29/16 | 2,391 | 1,709 | — | $ | 51.95 | 07/29/23 | ||||||||||||||||||||||||||||||||||
10/28/16 | (5) | 2,575 | 2,575 | — | $ | 52.57 | 10/28/23 | — | — | — | — | |||||||||||||||||||||||||||||
01/27/17 | (5) | 2,146 | 3,004 | — | $ | 54.36 | 01/27/24 | — | — | — | — | |||||||||||||||||||||||||||||
04/28/17 | (5) | 1,717 | 3,433 | — | $ | 54.77 | 04/28/24 | — | — | — | — | |||||||||||||||||||||||||||||
08/04/17 | (5) | — | 5,150 | — | $ | 45.32 | 08/04/24 | — | — | — | — | |||||||||||||||||||||||||||||
10/23/15 | (6) | — | — | — | — | — | 1,999 | $ | 100,690 | — | — | |||||||||||||||||||||||||||||
10/28/16 | (6) | — | — | — | — | — | 5,466 | $ | 275,322 | — | — | |||||||||||||||||||||||||||||
10/31/17 | (6) | — | — | — | — | — | 12,996 | $ | 654,609 | — | — | |||||||||||||||||||||||||||||
10/23/15 | (7) | — | — | — | — | — | — | — | 2,000 | $ | 100,740 | |||||||||||||||||||||||||||||
10/28/16 | (7) | — | — | — | — | — | — | — | 5,466 | $ | 275,322 | |||||||||||||||||||||||||||||
10/31/17 | (7) | — | — | — | — | — | — | — | 12,996 | $ | 654,609 | |||||||||||||||||||||||||||||
10/31/17 | (8) | — | — | — | — | — | — | — | 12,996 | $ | 654,609 |
Huibert | 10/24/14 | (5) | 23,742 | — | — | $ | 62.10 | 10/24/21 | — | — | — | — | ||||||||||||||||||||||||||||
Verhoeven | 10/23/15 | 2,895 | 580 | — | $ | 89.29 | 10/23/22 | — | — | — | — | |||||||||||||||||||||||||||||
01/29/16 | 2,606 | 869 | — | $ | 73.31 | 01/29/23 | — | — | — | — | ||||||||||||||||||||||||||||||
04/29/16 | 2,316 | 1,159 | — | $ | 71.55 | 04/29/23 | — | — | — | — | ||||||||||||||||||||||||||||||
07/29/16 | 2,027 | 1,448 | — | $ | 51.95 | 07/29/23 | — | — | — | — | ||||||||||||||||||||||||||||||
10/28/16 | (5) | 2,287 | 2,288 | — | $ | 52.57 | 10/28/23 | — | — | — | — | |||||||||||||||||||||||||||||
01/27/17 | (5) | 1,906 | 2,669 | — | $ | 54.36 | 01/27/24 | — | — | — | — | |||||||||||||||||||||||||||||
04/28/17 | (5) | 1,525 | 3,050 | — | $ | 54.77 | 04/28/24 | — | — | — | — | |||||||||||||||||||||||||||||
08/04/17 | (5) | — | 4,575 | — | $ | 45.32 | 08/04/24 | — | — | — | — | |||||||||||||||||||||||||||||
10/23/15 | (6) | — | — | — | — | — | 1,699 | $ | 85,579 | — | — | |||||||||||||||||||||||||||||
10/28/16 | (6) | — | — | — | — | — | 4,866 | $ | 245,100 | — | — | |||||||||||||||||||||||||||||
10/31/17 | (6) | — | — | — | — | — | 12,100 | $ | 609,477 | — | — | |||||||||||||||||||||||||||||
10/23/15 | (7) | — | — | — | — | — | — | — | 1,700 | $ | 85,629 | |||||||||||||||||||||||||||||
10/28/16 | (7) | — | — | — | — | — | — | — | 4,866 | $ | 245,100 | |||||||||||||||||||||||||||||
10/31/17 | (7) | — | — | — | — | — | — | — | 12,100 | $ | 609,477 | |||||||||||||||||||||||||||||
10/31/17 | (8) | — | — | — | — | — | — | — | 12,100 | $ | 609,477 | |||||||||||||||||||||||||||||
Alex Wong | 10/31/12 | (4) | 1,300 | — | — | $ | 23.16 | 10/31/19 | — | — | — | — | ||||||||||||||||||||||||||||
01/28/13 | (4) | 1,700 | — | — | $ | 35.76 | 01/28/20 | — | — | — | — | |||||||||||||||||||||||||||||
04/29/13 | (4) | 5,000 | — | — | $ | 42.57 | 04/29/20 | — | — | — | — | |||||||||||||||||||||||||||||
08/05/13 | (4) | 5,000 | — | — | $ | 39.80 | 08/05/20 | — | — | — | — | |||||||||||||||||||||||||||||
10/28/13 | 5,240 | — | — | $ | 46.50 | 10/28/20 | — | — | — | — | ||||||||||||||||||||||||||||||
01/27/14 | 5,241 | — | — | $ | 60.22 | 01/27/21 | — | — | — | — | ||||||||||||||||||||||||||||||
04/28/14 | 5,240 | — | — | $ | 61.40 | 04/28/21 | — | — | — | — | ||||||||||||||||||||||||||||||
08/01/14 | 5,241 | — | — | $ | 78.11 | 08/01/21 | — | — | — | — | ||||||||||||||||||||||||||||||
10/24/14 | 3,425 | — | — | $ | 62.10 | 10/24/21 | — | — | — | — | ||||||||||||||||||||||||||||||
01/30/15 | 3,425 | — | — | $ | 76.81 | 01/30/22 | — | — | — | — | ||||||||||||||||||||||||||||||
04/24/15 | 3,425 | — | — | $ | 85.69 | 04/24/22 | — | — | — | — | ||||||||||||||||||||||||||||||
07/31/15 | 3,139 | 286 | — | $ | 79.38 | 07/31/22 | — | — | — | — | ||||||||||||||||||||||||||||||
10/23/15 | 3,416 | 684 | — | $ | 89.29 | 10/23/22 | — | — | — | — | ||||||||||||||||||||||||||||||
01/29/16 | 3,075 | 1,025 | — | $ | 73.31 | 01/29/23 | — | — | — | — | ||||||||||||||||||||||||||||||
04/29/16 | 2,733 | 1,367 | — | $ | 71.55 | 04/29/23 | — | — | — | — | ||||||||||||||||||||||||||||||
07/29/16 | 2,391 | 1,709 | — | $ | 51.95 | 07/29/23 | ||||||||||||||||||||||||||||||||||
10/28/16 | (5) | 2,575 | 2,575 | — | $ | 52.57 | 10/28/23 | — | — | — | — | |||||||||||||||||||||||||||||
01/27/17 | (5) | 2,146 | 3,004 | — | $ | 54.36 | 01/27/24 | — | — | — | — | |||||||||||||||||||||||||||||
04/28/17 | (5) | 1,717 | 3,433 | — | $ | 54.77 | 04/28/24 | — | — | — | — | |||||||||||||||||||||||||||||
08/04/17 | (5) | — | 5,150 | — | $ | 45.32 | 08/04/24 | — | — | — | — | |||||||||||||||||||||||||||||
10/23/15 | (6) | — | — | — | — | — | 1,999 | $ | 100,690 | — | — | |||||||||||||||||||||||||||||
10/28/16 | (6) | — | — | — | — | — | 5,466 | $ | 275,322 | — | — | |||||||||||||||||||||||||||||
10/31/17 | (6) | — | — | — | — | — | 11,652 | $ | 586,911 | — | — | |||||||||||||||||||||||||||||
10/23/15 | (7) | — | — | — | — | — | — | — | 2,000 | $ | 100,740 | |||||||||||||||||||||||||||||
10/28/16 | (7) | — | — | — | — | — | — | — | 5,466 | $ | 275,322 | |||||||||||||||||||||||||||||
10/31/17 | (7) | — | — | — | — | — | — | — | 11,652 | $ | 586,911 | |||||||||||||||||||||||||||||
10/31/17 | (8) | — | — | — | — | — | — | — | 11,652 | $ | 586,911 |
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Fiscal 2018 Option Exercises and Vested Stock Table
The following table sets forth the number of shares of our common stock acquired by our Named Executive Officers upon the exercise of stock options and vesting of stock awards and the value realized thereby, during the fiscal year ended June 30, 2018.
Option Awards | Stock Awards | |||||||||||||||
Number of Shares | Value Realized | Number of Shares | Value Realized | |||||||||||||
Acquired on Exercise | on Exercise | Acquired on Vesting | on Vesting | |||||||||||||
Named Executive Officer | (#) | ($) | (#) | ($) | ||||||||||||
Richard A. Bergman | 37,500 | $ | 1,061,750 | 16,501 | $ | 612,517 | ||||||||||
Wajid Ali | — | — | 8,635 | $ | 355,668 | |||||||||||
Kevin Barber | — | — | 4,734 | $ | 175,726 | |||||||||||
Huibert Verhoeven | — | — | 5,723 | $ | 224,736 | |||||||||||
Alex Wong | 2,300 | $ | 41,917 | 4,734 | $ | 175,726 |
For stock options, the value realized is computed as the difference between the closing market price of our common stock on the date of exercise and the exercise price, multiplied by the number of shares of our common stock acquired upon exercise. For stock awards, the value realized is computed as the closing market price of our common stock on the later of the date the restrictions lapse or the delivery date, multiplied by the number of vested shares.
For the fiscal year ending June 30, 2018, the ratio of the annual total compensation of Mr. Bergman, our Chief Executive Officer (“CEO Compensation”), to the median of the annual total compensation of all of our employees other than our Chief Executive Officer (“Median Annual Compensation”) was 77:1. This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of RegulationS-K using the data and assumptions summarized below. In this summary, we refer to the employee who received such Median Annual Compensation as the “Median Employee.” For purposes of this disclosure, the date used to identify the Median Employee was June 30, 2018 (the “Determination Date”).
Our CEO Compensation represents the total compensation reported for Mr. Bergman under the “Fiscal 2018 Summary Compensation Table,” set forth in this Proxy Statement, which was $7,012,022 for fiscal 2018. For purposes of this disclosure, Median Annual Compensation was $91,641, and was calculated by totaling, for our Median Employee, annual total compensation using the same methodology we use to calculate the amount reported for our Named Executive Officers in the “Total” column of the Fiscal 2018 Summary Compensation Table, set forth in this proxy statement for fiscal 2018, which was also in accordance with Item 402(c)(2)(x) of RegulationS-K.
To identify the Median Employee, we first determined our employee population as of the Determination Date. We had 2,140 employees, representing all full-time, part-time, seasonal and temporary employees of us and our consolidated subsidiaries as of the Determination Date. This number does not include Mr. Bergman or any independent contractors or “leased” workers, as permitted by the applicable SEC rules. We then measured compensation for the period beginning on June 25, 2017 and ending on June 30, 2018 for these employees. This compensation measurement was calculated by totaling, for each employee, salary or wages plus overtime paid, any earned cash incentive compensation, and the grant date fair value of equity award grants for fiscal 2018. For employees paid other than in U.S. dollars, we converted their compensation to U.S. dollars using exchange rates in effect on the Determination Date. A portion of our employee workforce worked for less than the full fiscal year due to commencing employment after the beginning of the fiscal year. In determining the Median Employee, we annualized the compensation for such individuals.
Of the 2,140 employees, 45 employees (or approximately 2.1%) are employed in Hong Kong, 20 employees (or approximately 0.9%) are employed in Armenia, 5 employees (or approximately 0.2%) are employed in Canada, 5 employees (or approximately 0.2%) are employed in Switzerland, 2 employees (or approximately 0.1%) are employed in France, 2 employees (or approximately 0.1%) are employed in Thailand, 2 employees (or approximately 0.1%) are employed in Vietnam, and 1 employee (or less than 0.1%) is employed in Denmark. We have chosen to exclude these 82 employees (or approximately 3.8% of our total employees) based outside of the U.S. in determining our Median Employee as permitted under the de minimis exemption to Item 402(u) of RegulationS-K, which allows us to exclude up to 5% of our total employees who arenon-U.S. employees. We used our number of total employees excluding Mr. Bergman (2,140) in making our de minimis calculation. Neither our Compensation Committee nor our management used the ratio of our CEO Compensation to our Median Annual Compensation in making compensation decisions.
Potential Payments Upon Termination or Change of Control
The following table sets forth certain information regarding potential payments and other benefits that would be payable to the Named Executive Officers upon termination of employment or a change of control of our Company, assuming the termination or change of control event took place on June 30, 2018.
Change in Control | Termination Without Good Cause or | |||||||||||||||||||||||||||
(Not in Connection | with Good Reason (Not in | Termination Without Good Cause or | ||||||||||||||||||||||||||
with a Qualifying | Connection with a Qualifying Change | with Good Reason Following a | ||||||||||||||||||||||||||
Termination) | in Control) | Qualifying Change in Control | ||||||||||||||||||||||||||
Cash- | Care and | Cash- | Care and | Equity Treatment(2) | ||||||||||||||||||||||||
Based | Welfare | Equity | Based | Welfare | ||||||||||||||||||||||||
Name | Equity Treatment(1) | Severance | Benefits | Treatment | Severance | Benefits | ||||||||||||||||||||||
Richard A. Bergman | $ | 1,424,649 | $ | 1,715,000 | $ | 18,124 | — | $ | 3,430,000 | $ | 27,186 | $ | 9,113,241 | |||||||||||||||
Wajid Ali | $ | 544,727 | $ | 345,625 | $ | 12,662 | — | $ | 1,036,875 | $ | 37,987 | $ | 3,349,886 | |||||||||||||||
Kevin D. Barber | $ | 405,039 | 350,000 | 12,090 | — | $ | 1,050,000 | $ | 36,271 | $ | 2,594,958 | |||||||||||||||||
Huibert Verhoeven | $ | 377,114 | 306,250 | 12,070 | — | $ | 918,750 | $ | 36,210 | $ | 2,395,531 | |||||||||||||||||
Alex Wong | $ | 363,151 | 297,500 | 18,594 | — | $ | 892,500 | $ | 55,781 | $ | 2,368,172 |
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Severance Policies
Each of our Named Executive Officers participates in our CoC Severance Policy and Severance Policy. Please see “Compensation Discussion and Analysis — Severance Policy” and “Compensation Discussion and Analysis — CoC Severance Policy” for further information about the payments and benefits under these policies.
Treatment of MSUs upon a Change in Control
Upon a change of control of the Company (as defined in the Amended and Restated 2010 Incentive Compensation Plan), the number of MSUs for any performance tranches that are ongoing as of a change of control (the “CoC MSUs”) will be determined based on actual achievement of the applicable performance criteria as of the day immediately prior to such change in control. A prorated portion of such CoC MSUs (based on the amount of time elapsed in the applicable performance tranche through the change in control) will become vested as of the change of control. The remaining portion of such CoC MSUs (the“Non-Vested CoC MSUs”) will remain outstanding after the change in control and will vest on the applicable vesting dates for such performance tranches, subject to the awardholder’s continued service. However, any Non- Vested CoC MSU that is not assumed or substituted by a successor or acquiring entity will become fully vested, effective as of, and contingent upon, a change of control.
Indemnification Under Our Certificate of Incorporation, Bylaws and Indemnification Agreements
Our Certificate of Incorporation provides that no director will be personally liable to our company or our stockholders for monetary damages for breach of a fiduciary duty as a director, except to the extent such exemption or limitation of liability is not permitted under the Delaware General Corporation Law, or the DGCL. The effect of this provision in our Certificate of Incorporation is to eliminate the rights of our company and our stockholders, either directly or through stockholders’ derivative suits brought on behalf of our company, to recover monetary damages from a director for breach of the fiduciary duty of care as a director, except in those instances described under the DGCL. In addition, we have adopted provisions in our bylaws and entered into indemnification agreements that require us to indemnify our directors, officers, and certain other representatives of our company against expenses and certain other liabilities arising out of their conduct on behalf of our company to the maximum extent and under all circumstances permitted by law. Indemnification may not apply in certain circumstances related to actions arising under the federal securities laws.
Stock-Based Compensation Plan Information
The following table sets forth information, as of June 30, 2018, with respect to shares of our common stock that may be issued under both stockholder approved and unapproved stock-based compensation plans upon delivery of shares for MSU awards and DSU awards, exercise of outstanding stock options, the weighted average exercise price of outstanding stock options, and the number of securities available for future issuance under our various stock-based compensation plans.
Number of Securities Remaining | ||||||||||||||||
Available for Future Issuance | ||||||||||||||||
Number of Securities | Under Stock-Based | |||||||||||||||
to Be Issued Upon | Number of Securities to Be | Compensation Plans (Excluding | ||||||||||||||
Delivery of Shares for | Issued Upon Exercise of | Weighted-Average Exercise | Securities Reflected in Columns | |||||||||||||
DSU and MSU awards | Outstanding Options | Price of Outstanding Options | (a) and (b)) | |||||||||||||
Plan Category | (a) | (b) | (c) | (d) | ||||||||||||
Stock-Based Compensation Plans Approved by Stockholders | 2,502,825 | 1,618,209 | $ | 57.14 | 2,210,217 | |||||||||||
Stock-Based Compensation Plans Not Approved by Stockholders | — | — | — | — | ||||||||||||
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Total | 2,502,825 | 1,618,209 | $ | 57.14 | 2,210,217 |
2001 Incentive Compensation Plan
Our 2001 Incentive Compensation Plan, as amended, or the 2001 Plan, was designed to attract, motivate, retain, and reward our executive officers, employees, directors, and independent contractors, by providing such persons with annual and long-term performance incentives to expend their maximum efforts in the creation of stockholder value. The 2001 Plan was adopted by our Board of Directors in March 2001 and approved by our stockholders in November 2001. Our 2010 Incentive Compensation Plan, upon approval by our stockholders in October 2010, replaced our 2001 Plan. As of June 30, 2018, stock options to purchase 177,013 shares of our common stock and zero DSUs were outstanding under the 2001 Plan. During fiscal year 2018, 505,166 shares of our common stock were issued upon exercise of outstanding options, and zero net shares of our common stock were delivered upon vesting of DSUs.
Amended and Restated 2010 Incentive Compensation Plan
Our Amended and Restated 2010 Incentive Compensation Plan, or the 2010 Plan, is designed to attract, motivate, retain, and reward our executive officers, employees, directors, and consultants by providing such persons with annual and long-term performance incentives to expend their maximum efforts in the creation of stockholder value. The 2010 Plan was originally adopted by our Board of Directors in August 2010 and approved by our stockholders in October 2010. At our 2017 Annual Stockholders Meeting, our stockholders approved an amendment and restatement of the 2010 Plan to increase the number of shares of common stock available for future awards by 2,000,000 shares. In July 2018, the Compensation Committee approved an Amended and Restated 2010 Incentive Compensation Plan to, among other things, increase the number of shares of common stock available for future awards by 1,700,000 shares, subject to stockholder approval at the upcoming Annual Meeting of Stockholders. Please see “Proposal Four: Approval of the Amended and Restated 2010 Incentive Compensation Plan” for further information.
Under the 2010 Plan and as of the end of fiscal 2018, an aggregate of 1,969,926 shares of our common stock may be issued pursuant to the granting of stock options to acquire common stock, the direct granting of restricted common stock, DSUs, and MSUs, the granting of stock appreciation rights, or the granting of dividend equivalents. As of June 30, 2018, stock options to purchase 1,441,196 shares of our common stock and 2,502,825 DSUs, PSUs and MSUs were outstanding under the 2010 Plan. During fiscal year 2018, 185,144 shares of our common stock were issued upon exercise of outstanding stock options, and 406,529 net shares of our common stock were delivered upon vesting of DSUs and MSUs.
2010 Employee Stock Purchase Plan
Our 2010 Employee Stock Purchase Plan, or the 2010 ESPP, is designed to provide our employees with an opportunity to acquire a proprietary interest in our company and thereby, align their interests with the interests of our stockholders and give them an additional incentive to use their best efforts to strive for the long-term success of our company. The 2010 ESPP was adopted by our Board of Directors in August 2010 and approved by our stockholders in October 2010. We initially reserved for issuance 650,000 shares of our common stock under the 2010 ESPP. An automatic annual increase will be made on the first day of each of our fiscal years beginning in 2012 and ending in 2019, equal to the lesser of 500,000 shares, 1% of all shares of our common stock outstanding, or a lesser amount as determined by our Board
of Directors. In September 2018, our Board of Directors approved an Amended and Restated 2010 Employee Stock Purchase Plan to increase the number of shares of common stock available for future awards by 100,000 shares (while maintaining other existing plan provisions and limitations on issuance), subject to stockholder approval at the upcoming Annual Meeting of Stockholders. Please see “Proposal Five: Approval of the Amended and Restated 2010 Employee Stock Purchase Plan” for further information.
The cumulative shares authorized under the 2010 ESPP (including as amended and restated) will be less than 10% of our shares outstanding from time to time, unless a greater number of shares of our common stock are authorized by our stockholders. As of the end of fiscal 2018, there were 240,291 shares of our common stock reserved for issuance under the 2010 ESPP. During fiscal 2018, 486,263 shares of our common stock were issued under the 2010 ESPP.
We pay eachnon-employee director compensation program in effect for fiscal 2021, each non-employee director received an annual cash retainer of $60,000 in cash or shares of our common stock at the director’s election, and we pay the Chairman$60,000. The non-executive Chair of our Board of Directorsreceived an additional annual cash retainer of $70,000, in cash.and a further monthly payment of $25,000 as compensation for service as Chair of the Board. We also pay ournon-employee directors an additional annual retainer for committee service, in cash or shares of our common stock at the director’s election, as follows:
Committee Chair | Committee Member | |||||||||||
Committee Chairman | Committee Member | |||||||||||
Audit Committee | $ | 25,000 | $ | 10,000 | $25,000 | $10,000 | ||||||
Compensation Committee | $ | 20,000 | $ | 7,500 | $20,000 | $7,500 | ||||||
Nominations and Corporate Governance Committee | $ | 10,000 | $ | 5,000 | $10,000 | $5,000 |
Annual retainers for service on our Board of Directors and committees are paid in quarterly installments.installments in advance.
Starting in fiscal 2018, our non-employeeNon-employee directors are eligiblereimbursed for reasonable expenses incurred to attend director and committee meetings and incident to their service as a director.
Under our non-employee director compensation program in effect for fiscal 2021, each non-employee director may receive their annual cash retainer in cash or vested shares of our common stock at the director’s election. For directors electing to receive shares of our common stock in lieu of a cash retainer, the total valuenumber of their equity compensation inshares issued is determined by taking the formcash retainer amount otherwise due to such director and converting it to a number of DSUs, forshares using the closing price of our common stock on Nasdaq on the date the shares are to be delivered to that director. In addition, non-employee directors also receive an annual grant of RSUs with a total estimatedgrant value of approximately $200,000. Per the terms$200,000 in connection with our annual meeting of our Amended and Restated 2010 Incentive Compensation Plan, ournon-employee directors are not eligible to receive compensatory equity awards exceeding an aggregate grant date fair value of $750,000 in any fiscal year.stockholders. The total equitygrant value for the award granted in fiscal 2021 was calculatedconverted to a number of RSUs using the average closing price of our common stock on Nasdaq for the one month ended October 31, 201726, 2020 and differs from the accounting value which is based on the grant date fair value determined in accordance with ASC Topic 718. We also reimburseThe annual grant of RSUs vests in four quarterly installments through the first anniversary of the grant date (or, for a non-employee director not standing for re-election, immediately prior to the Company’s next annual meeting of stockholders). Subject to our Board’s discretion, a non-employee director appointed to our Board at any time other than in connection with an annual meeting may receive a pro-rated grant of RSUs valued on the same basis as the latest annual non-employee director grants that vests on the same schedule as the grants made to non-employee directors for expenses incurred to attend Board of Directors and committee meetings.at the most recent annual meeting.
FISCAL 2018 DIRECTOR COMPENSATION TABLELIMITS
DSU awards to continuingPer the terms of our 2019 Incentive Plan, our non-employee directors generally vest quarterly over the period from the vesting start date through the subsequent Annual Meetingare not eligible to receive, individually, compensation exceeding an aggregate maximum value of Stockholders. Starting$750,000 in any fiscal 2018, we no longer grant stock optionyear, including both cash and equity awards. The value of equity awards to our directors. Stock option awards to continuing non-employee directors granted in prior years generally vested monthly over the period fromis based on the grant date throughfair value of the subsequent Annual Meetingawards, as such grant date fair value is determined for our financial reporting purposes.
We maintain stock ownership guidelines for our non-employee directors. Under these guidelines, each non-employee director is to own or to acquire, within five years of Stockholders. first becoming a director, shares of our common stock having a market value at least equal to five times the director’s annual retainer. As of June 26, 2021, all of our non-employee directors met the ownership requirement or were within the five-year period since first becoming a director to acquire the applicable level of ownership. We believe that these guidelines promote the alignment of the long-term interests of the members of our Board with our stockholders.
SYNAPTICS INCORPORATED | PROXY STATEMENT | 45 |
DIRECTOR COMPENSATION TABLE — FISCAL 2021
The following table sets forth thesummary information regarding compensation for each of our non-employee directors for the fiscal year ended June 30, 2018. Employee directors do2021. The compensation paid to Mr. Hurlston is presented in our executive compensation disclosure below. Mr. Hurlston is not entitled to receive any additional compensation for his service on our Board of Directors.as a director.
Director Name | Fees Earned or Paid in Cash(1)($) | Stock Awards(2)($) | Total ($) | |||||||||
Francis F. Lee | $ | 120,000 | $ | 199,631 | $ | 319,631 | ||||||
Jeffrey D. Buchanan | $ | 75,000 | $ | 199,631 | $ | 274,631 | ||||||
Nelson C. Chan | $ | 87,500 | $ | 199,631 | $ | 287,131 | ||||||
Keith B. Geeslin | $ | 85,000 | $ | 199,631 | $ | 284,631 | ||||||
Russell J. Knittel | $ | 70,000 | $ | 199,631 | $ | 269,631 | ||||||
Richard L. Sanquini | $ | 72,426 | (3) | $ | 199,631 | $ | 272,057 | |||||
James L. Whims | $ | 77,500 | $ | 199,631 | $ | 277,131 |
Name | Fees Earned or Paid in cash (1) ($) | Stock Awards(2) ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change In Pension Value & Nonqualified Deferred Compensation Earnings ($) | All Other Compensation | Total ($) | |||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | |||||||||
Nelson Chan | $145,000 | $185,814 | - | - | - | - | $ | 330,814 | ||||||||
Kiva Allgood | $73,625 | $185,814 | - | - | - | - | $ | 259,439 | ||||||||
Jeffrey Buchanan | $90,000 | $185,814 | - | - | - | - | $ | 275,814 | ||||||||
Keith Geeslin | $80,000 | $185,814 | - | - | - | - | $ | 265,814 | ||||||||
Susan Hardman | $68,625 | $185,814 | - | - | - | - | $ | 254,439 | ||||||||
Richard Sanquini(3) | $22,437(4) | - | - | - | - | - | $ | 22,437 | ||||||||
James Whims | $80,000 | $185,814 | - | - | - | - | $ | 265,814 |
(1) |
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(2) | Each non-employee director was awarded 2,467 RSUs on November 2, 2020. The amounts |
(3) | Mr. Sanquini retired as a director of the Company effective October 27, 2020. |
(4) | This amount represents the prorated value of Mr. Sanquini’s annual retainer for Board and committee services which Mr. Sanquini elected to receive in shares of our common stock. The number of shares of our common stock granted to Mr. Sanquini for the period from June 28, 2020 to October 27, 2020 was determined by taking the cash retainer amount that was otherwise due to Mr. Sanquini and converting it to a number of shares using the closing price of our common stock on Nasdaq on the |
The aggregate number of unvested RSUs outstanding as of June 26, 2021, held by each of our non-employee directors then in office are as set forth below. None of our non-employee directors held any outstanding stock options as of that date.
Director |
Stock Awards | |
Nelson Chan | 1,233 | |
Kiva Allgood | 1,233 | |
Jeffrey Buchanan | 1,233 | |
Keith Geeslin | 1,233 | |
Susan Hardman | 1,233 | |
James Whims | 1,233 |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 46 |
KPMG has served as the Company’s independent auditor since 2003. In August 2021, the Audit Committee re-appointed KPMG as our independent auditor for the year ending June 25, 2022. The Audit Committee of the Board has determined that KPMG is independent with regard to the Company within the meaning of the Exchange Act and the applicable published rules and regulations thereunder and by the Public Company Accounting Oversight Board (the “PCAOB”).
REPORT OF THE AUDIT COMMITTEEPRE-APPROVAL POLICIES
The charter of our Audit Committee provides that the duties and responsibilities of our Audit Committee include the pre-approval of all audit, audit-related, tax, and other services permitted by law or applicable SEC regulations (including fee and cost ranges) to be performed by our independent auditor. Any pre-approved services that will involve fees or costs exceeding pre-approved levels will also require specific pre-approval by the Audit Committee. Unless otherwise required by law or applicable SEC regulations, any pre-approval shall be effective until the respective service is complete to the satisfaction of the Audit Committee under the terms of the engagement with the independent auditor or until such date as the Audit Committee designates. The Audit Committee will not approve any non-audit services prohibited by applicable SEC regulations or any services in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported by the Code and related regulations.
To the extent deemed appropriate, the Audit Committee may delegate pre-approval authority to the Chair of the Audit Committee or any one or more other members of the Audit Committee, provided that any member of the Audit Committee who has exercised any such delegation must report any such pre-approval decision to the Audit Committee at its next scheduled meeting. The Audit Committee will not delegate to management the pre-approval of services to be performed by the independent auditor.
Our Audit Committee requires that our independent auditor, in conjunction with our Chief Financial Officer, be responsible for seeking pre-approval for providing services to us and that any request for pre-approval must provide information to the Audit Committee about each service to be provided, and the details of such service.
All of the services provided by KPMG in fiscal 2021 and fiscal 2020 described below under the captions “Audit Fees,” “Audit-Related Fees,” “Tax Fees,” and “All Other Fees” were approved by our Audit Committee pursuant to the foregoing pre-approval policies.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The aggregate fees billed to the Company by KPMG for professional services rendered in fiscal years 2021 and 2020 are as follows:
Fees | 2021 | 2020 | ||
Audit Fees | $2,494,500 | $2,254,600 | ||
Audit-Related Fees | — | — | ||
Tax Fees(1) | $1,262,773 | $941,166 | ||
All Other Fees | — | — | ||
Total Fees | $3,757,273 | $3,195,766 |
(1) | Includes fees for professional services rendered by KPMG with respect to tax preparation and compliance, and tax due diligence for acquisition and tax consultation. The fees for tax consultation services were $987,303 and $700,460 for fiscal 2021 and 2020, respectively. |
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Our Board of Directors has appointed an Audit Committee consisting of fourthree directors. The current members of the Audit Committee are Nelson Chan, Jeffrey D. Buchanan Nelson C. Chan, Keith B. Geeslin and Russell J. Knittel.James Whims. Each of the Audit Committee members is “independent” of our company and management, as that term is defined under applicable NASDAQNasdaq listing standards and SEC rules.
The primary responsibility of the committee is to assist our Board of Directors in fulfilling its responsibility to oversee management’s conduct of our company’sCompany’s financial reporting process, including overseeing the financial reports and other financial information provided by our companyCompany to governmental or regulatory bodies (such as the SEC), the public, and other users thereof; our company’sCompany’s systems of internal accounting and financial controls; and the annual independent audit of our company’sCompany’s financial statements.
Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The independent auditor is responsible for auditing the financial statements and expressing an opinion on the conformity of those audited financial statements with GAAP.
In fulfilling its oversight responsibilities, the committeeAudit Committee reviewed and discussed the audited financial statements with management and the independent auditor. The committeeAudit Committee discussed with the independent auditor the matters required to be discussed by Auditing Standards No. 1301, “Communications with Audit Committees.” This included a discussionthe applicable requirements of the auditor’s judgments as toPCAOB and the quality – not just the acceptability – of our company’s accounting principles and such other matters as are required to be discussed with the committee under generally accepted auditing standards.SEC. In addition, the committeeAudit Committee received from the independent auditor written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding the independent auditor’s communications with the committeeAudit Committee concerning independence. The committeeAudit Committee also discussed with the independent auditor the auditor’sfirm’s independence from management and our company,Company, including the matters covered by the written disclosures and letter provided by the independent auditor, and considered the compatibility ofnon-audit services services with auditorKPMG’s independence.
The committeeAudit Committee discussed with the independent auditor the overall scope and plans for its audits. The committeeAudit Committee met with the independent auditor, with and without management present, to discuss the results of its audit, its consideration of our company’sCompany’s internal controls, and the overall quality of the financial reporting. The committeeAudit Committee held five5 meetings with management of our company,Company, all of which were attended by our independent auditor, with respect to our company’sCompany’s financial statements and audit or quarterly review procedures.
Based on the reviews and discussions referred to above, the committeeAudit Committee recommended to our Board, of Directors, and our Board of Directors approved that the audited financial statements be included in our company’sCompany’s Annual Report on Form10-K for for the fiscal year ended June 30, 201826, 2021 for filing with the SEC. The committeeCommittee also has appointed KPMG as our company’sCompany’s independent auditor.
This report has been furnished by the Audit Committee of the Board of Directors.Board.
Respectfully submitted,
Keith B. Geeslin, ChairmanAudit Committee
Jeffrey D. Buchanan, Chair
Nelson C. Chan
Russell J. Knittel
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a)The foregoing report of the Audit Committee is not soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, requireswhether made before or after the date of this Proxy Statement and irrespective of any general incorporation language in such filing.
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AND ANALYSIS
This Compensation Discussion and Analysis provides information with respect to the following persons who, pursuant to SEC rules, constitute our directors,named executive officers (“NEOs”) for fiscal 2021:
◾ | Michael Hurlston, our President and Chief Executive Officer (our “CEO”); |
◾ | Dean Butler, our Senior Vice President and Chief Financial Officer (our “CFO”); |
◾ | Saleel Awsare, our Senior Vice President and General Manager, PC and Peripherals Division; |
◾ | Phillip Kumin,1 our former Senior Vice President of Worldwide Sales; and |
◾ | John McFarland, our Senior Vice President, General Counsel and Secretary. |
This Compensation Discussion and persons that own more than 10% of a registered classAnalysis provides an overview of our company’s equity securitiesexecutive compensation philosophy, the overall objectives of our executive compensation program, and each component of compensation that we provide. In addition, we explain how and why the Compensation Committee arrived at the specific compensation policies and decisions involving our executive officers, including our NEOs, during fiscal 2021.
Fiscal 2021 Business Highlights
Fiscal 2021 was one of the most financially rewarding periods of the Company’s 35-year history with several record setting milestones having been reached. First, the early results are beginning to file reportsshow as the company successfully pivots its core strategy to focus more heavily on the growing opportunities within the Internet of ownershipThings (IoT) market, expanding our sales mix from 21% IoT in fiscal 2019 to exiting the fourth quarter of fiscal 2021 at 50% of sales from IoT products. This remarkable acceleration of revenue growth within IoT has allowed the company to become a more diversified and changes in ownershipstable generator of profits and will enable us to fund future technology developments. As a result of our renewed strategy, the Company has transformed itself into one which delivers high value semiconductor products to its customers, which can be seen through record high gross margins, and a company which is highly profitable and able to self-fund technology development, as demonstrated through record high operating margins. In addition, as a result of our disciplined approach to managing operating expenses, we have achieved record setting cash flow from operations during the year. These combined efforts have delivered significant value to our stockholders, as our stock price has nearly tripled since the end of fiscal 2020, has increased five-fold since the end of fiscal 2019, and has significantly outperformed both the S&P 500 and the Philadelphia Semiconductor Index over these time periods.
During fiscal 2021, our leadership team led the Company to the following notable achievements:
◾ | GAAP earnings per share of $2.08 and record high non-GAAP earnings per share of $8.26; |
◾ | annual GAAP gross margins of 45.6% and record annual non-GAAP gross margins of 53.6%; |
◾ | record GAAP and non-GAAP fourth quarter gross margins of 52.1% and 57.5%, respectively; |
◾ | record cash flow from operations of $319.2 million; |
◾ | a fiscal 2021 year-end stock price of $147.58, which was 162% higher than as compared to our prior fiscal year-end; and |
◾ | revenue of $1,339.6 million for our fiscal year ended June 26, 2021 |
1 Mr. Kumin served as our Senior Vice President of Worldwide Sales until his voluntary resignation from that position on June 4, 2021, effective August 31, 2021.
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We view our executive compensation program as an important part of our success, as our annual performance-based cash bonus plan, coupled with our long-term incentive plans, provide us with effective tools for incentivizing our senior executive team, and rewarding them for their accomplishments. We believe our executive compensation program is reasonable, competitive, and appropriately balances the SEC. Directors, officers,goals of attracting, motivating, rewarding, and greater than 10% stockholders are required by SEC regulations to furnish our company with copies of all Section 16(a) forms they file. Our administrative staff typically assistsretaining our executive officers and directorsthat it helps provide us with a solid foundation for the future as we continue to motivate our executives to grow and expand our business on behalf of our stockholders.
Fiscal 2021 Executive Compensation Highlights
Our executive compensation program is designed to promote a long-term focus, thereby aligning the interests of our NEOs with the interests of our stockholders. For this reason, the compensation of our NEOs is largely variable in preparing initial ownership reportsnature. at-risk, and reporting ownership changes,subject to Company performance measured against specific financial objectives that are key for driving our success. Accordingly, our NEOs are incentivized to drive our business forward and typically causes those reportsreturn long-term value to our stockholders.
Target Total Direct Compensation – Pay Mix
The target total direct compensation of our CEO and of our other continuing NEOs includes a significant portion of equity incentives that are based on our financial performance and/or stock price growth.
Pay Mix for Fiscal 2021
CEO - Michael Hurlston
All other continuing NEOs
SYNAPTICS INCORPORATED | PROXY STATEMENT | 50 |
Our Compensation Program Emphasizes Performance-Based and At-Risk Pay
Approximately 94% of our Chief Executive Officer’s target total direct compensation and approximately 87% of our other continuing NEOs’ target total direct compensation for fiscal 2021 was not guaranteed but rather was tied directly to the performance of the Company and the Company’s stock price.
Short-Term Incentive Compensation
Historically, we have used annual performance-based cash bonuses to incentivize and reward the achievement of our annual financial and operational objectives as set forth in our annual operating plan. For fiscal 2021, the Compensation Committee based cash bonuses on the achievement of objective financial performance metrics as reflected in our annual operating plan. The metrics under our fiscal 2021 annual performance-based cash bonus plan were as follows:
◾ | Revenue |
◾ | Non-GAAP gross margin percentage |
◾ | Non-GAAP operating profit |
◾ | Anticipated Operating Profits (“AOP”) scaling factor (modifier) |
Long-Term Incentive Compensation
We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. We use these awards to incentivize and reward our NEOs for performance that leads to long-term success and stockholder value creation, and to promote retention of critical executives to remain with us in an environment where competition for talent is fierce. In fiscal 2021, we used three equity award vehicles – MSU awards, PSU awards, and RSU awards – to provide long-term incentive compensation opportunities to our NEOs as part of our annual equity program. These three vehicles were equally weighted under the program (based on the number of shares subject to each type of award).
2021 Long-Term Incentive Mix and Metrics
All NEOs
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MSU Metrics (CEO and NEOs) · Relative TSR · Compared to the peer companies in the Russell 2000 Index · Measured over one-, two-, and three-year performance periods · Target shares allocated equally over three performance periods · The one- and two-year payouts are subject to cap of 200% (maximum number of shares earned overall is 200% of target) · Payouts for the one- and two-year performance periods will be trued up at the end of the full three-year performance period based on overachievement during the cumulative three-year performance period · Starting measurement period is 90-day period ending June 30, 2020 and ending measurement periods will be 90-day periods ending June 30, 2021, June 30, 2022, and June 30, 2023 for the three performance periods · Payout for each performance period requires continued employment through the end of that period |
PSU Metrics (CEO and NEOs) · Design win revenue (33%), non-GAAP gross margin percentage (33%), and non-GAAP operating expense dollars (33%) · One-year performance period (fiscal 2021) · Earned shares vest in three equal tranches on the first three anniversaries of award grant date, subject to continued employment through the applicable vesting date · Maximum number of shares earned overall is 200% of target · Targets may be adjusted by the Compensation Committee for merger and acquisition activity |
RSU Metrics (CEO and NEOs) · Time-based and vest in three equal tranches on the first three anniversaries of award grant date, subject to continued employment through the applicable vesting date · For new executives, initial RSU awards vest in four equal tranches on the first four anniversaries of award grant date, subject to continued employment through the applicable vesting date |
Stockholder Engagement and Fiscal 2020 Say-on-Pay Vote
At our 2020 annual meeting of stockholders, approximately 71% of the votes cast on our Say-on-Pay proposal were voted in favor of the fiscal 2020 compensation of our NEOs. During the lead-up to the 2020 annual meeting of stockholders, members of our senior management contacted many of our largest institutional stockholders representing approximately 75% of our outstanding shares of common stock to solicit feedback on such topics as our compensation practices, proxy disclosure, and corporate governance policies, and to listen to any stockholder concerns. This feedback was discussed with our management and shared with our full Board and the Compensation Committee.
Our Board recognizes that there is always room for improvement. We are dedicated to increased transparency in our Compensation Discussion and Analysis and continued proactive stockholder engagement in the future. The Compensation Committee will continue to consider our stockholders’ views when making future decisions regarding our pay practices, proxy disclosure, and corporate governance policies.
Fiscal 2021 Key Compensation Decisions
· | Annual Performance-Based Cash Bonus Plan Payments Reflected Fiscal 2021 Company Performance. Based upon our achievement of a funding score of 140% under our annual performance-based cash bonus plan for fiscal 2021, our NEOs (other than our CEO) received bonus payments in amounts ranging from $350,438 to $420,000, with a bonus payment for our CEO in the amount of $1,274,000 (representing 140% of each of their fiscal 2021 target annual cash bonus opportunities, except Mr. Awsare, as discussed under “Fiscal 2021 Bonus Decisions,” below). |
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· | Named Executive Officer Equity Awards. As part of our annual equity program, we granted a combination of MSU awards, PSU awards, and RSU awards to our NEOs on August 17, 2020, subject to our TSR performance over a multi-year period in the case of the MSU awards, our design win revenue, non-GAAP gross margin percentage, and non-GAAP operating expense dollar performance over a one-year performance period and a multi-year time-based vesting requirement in the case of the PSU awards, and a time-based vesting requirement in the case of the RSU awards. |
HOW WE MAKE COMPENSATION DECISIONS
Role of the Compensation Committee | Role of our CEO | Role of the Compensation Consultant | ||
• Discharges the responsibilities of our Board relating to the compensation of our executive officers, including our NEOs. • Periodically reviews and makes recommendations to our Board regarding the compensation of the non-employee members of our Board. • Oversees our compensation and benefits policies generally. •Oversees and evaluates the compensation plans, policies, and practices applicable to our executive officers. • Reviews and approves the performance criteria and targets for our short-term and long-term incentive compensation programs. • Administers our equity compensation plans. • Evaluates the performance of our CEO for the fiscal year and determines our CEO’s compensation in light of our goals and objectives for that year. • Considers our CEO’s recommendations in determining the compensation of our other executive officers. | • Attends the meetings of the Compensation Committee to review and discuss the corporate and individual goals and objectives that he regards as important to our overall success and other related matters. • Assesses the performance of, and our goals and objectives for, our other executive officers, including our other NEOs. • Makes recommendations for each element of the compensation for our other executive officers, including our other NEOs, based on his evaluation of their performance. | • Conducts an analysis of the compensation practices of the companies in the compensation peer group and determines our compensation positioning relative to the compensation peer group. • Develops market-based guidelines for the structure of our executive compensation program and reviews the overall compensation packages of our executive officers. • Conducts a review of the overall compensation program for our Board. • Reviews market practices in performance share plan design. • Provides the Compensation Committee with information regarding executive compensation trends generally, as well as industry specific compensation trends. • Answers questions that may be posed by the Compensation Committee regarding compensation issues. |
Compensation Consultant
During fiscal 2021, the Compensation Committee engaged Compensia, a national compensation consulting firm, to serve as its compensation consultant to assist it in connection with its review of our fiscal 2021 executive compensation program and its analysis of the competitive market for executive talent. The Compensation Committee assessed the independence of Compensia pursuant to the six independence factors set forth in the SEC rules and Nasdaq listing standards and has concluded that Compensia is independent, and that its work for the Compensation Committee does not raise any conflict of interest. Compensia did not provide any additional services or products to us during fiscal 2021 beyond the services provided to the Compensation Committee.
Compensation Peer Group and Market Review
In determining the compensation of our executive officers, including our NEOs, the Compensation Committee considers data gathered from a self-constructed group of peer companies, and published survey data for technology companies. During January 2020,
SYNAPTICS INCORPORATED | PROXY STATEMENT | 53 |
after consultation with Compensia, the Compensation Committee developed and approved a compensation peer group for use in its executive compensation decisions for fiscal 2021 based on the following selection criteria:
The companies included in the compensation peer group approved by the Compensation Committee for fiscal 2021 were as follows:
Fiscal 2021 Compensation Peer Group | ||||
Ambarella, Inc. | Inphi* | Mellanox Technologies* | ||
Cirrus Logic Inc. | Knowles | ON Semiconductor Corporation | ||
Cree, Inc. | M/A-Com Technology Solutions | Qorvo, Inc. | ||
Cypress Semiconductor | Marvel Technology Group | Semtech Corporation | ||
Diodes | Maxim Integrated Products, Inc. | Silicon Laboratories Inc. |
* Included in the compensation peer group for fiscal 2021 but has since been acquired.
The Compensation Committee used data gathered by Compensia from the public filings of the companies in our compensation peer group, as well as data from a custom peer data cut drawn from the Radford Global Technology Surveydatabase for purposes of providing additional perspective in the case of executive positions where the compensation peer group offered a limited number of relevant data points. In reviewing survey data, the Compensation Committee does not focus on any particular company in the survey (other than the peer companies listed above). In general, the Compensation Committee uses the data provided by Compensia as background information for its compensation decisions and does not “benchmark” aggregate compensation at any particular level relative to the peer companies. Except as otherwise noted in this Compensation Discussion and Analysis, decisions by the Compensation Committee are qualitative and the result of the Compensation Committee’s business judgment, which is informed by the experience of the members of the Compensation Committee as well as input from our CEO and Compensia.
GOVERNANCE AND PAY POLICIES AND PRACTICES
We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. Below is a summary of what we believe to be filedbest practices that we have implemented and practices that we avoid because we believe they are not in the best interests of the Company or our stockholders.
What We Do | What We Don’t Do | |
✓ Maintain an independent compensation committee | X No executive retirement plans | |
✓ Engage an independent compensation consultant to support the Compensation Committee | X No excessive perquisites | |
✓ Conduct an annual executive compensation review | X No tax reimbursements on perquisites | |
✓ Use a “pay-for-performance” compensation philosophy | X No hedging of our equity securities | |
✓ Use multiple financial metrics under our annual bonus plan | X No guaranteed bonuses | |
✓ Use performance-based MSUs and PSUs in our long-term incentive compensation program | X No special health or welfare benefit programs for our executive officers | |
✓ Maintain stock ownership guidelines for our NEOs | X No post-employment excise tax “gross-up” payment or other reimbursement | |
✓ Maintain a compensation recovery (“clawback”) policy for misconduct in the event of a financial restatement | X No stock option repricing (without stockholder approval) |
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What We Do | What We Don’t Do | |
✓ Conduct an annual stockholder advisory vote on NEO compensation | ||
✓ Evaluate succession planning on a regular basis | ||
✓ Require “double-trigger” change of control provisions | ||
✓ Impose caps on maximum incentive award payouts |
COMPENSATION PHILOSOPHY AND OBJECTIVES
Our executive compensation program is guided by our overarching philosophy of paying for demonstrable performance. Consistent with this philosophy, we have designed our executive compensation program to achieve the following primary objectives:
◾ | Align executive compensation with the Company’s corporate strategies, business objectives, and the creation of long-term value for our stockholders without encouraging unnecessary or excessive risk-taking; |
◾ | Provide an incentive to achieve key strategic and financial performance measures by linking short-term incentive award opportunities and a substantial portion of long-term incentive award opportunities to the achievement of corporate and operational performance objectives in these areas; |
◾ | Offer total compensation opportunities to our executive officers that are competitive and fair; |
◾ | Align the interests of our executive officers with those of our stockholders by linking our executive officers’ long-term incentive compensation opportunities to stockholder value and their cash incentives to our annual performance; and |
◾ | Provide compensation and benefit levels that will attract, motivate, reward, and retain a highly-talented team of executive officers within the context of responsible cost management. |
FISCAL 2021 NAMED EXECUTIVE OFFICER COMPENSATION
Our executive compensation program has five principal elements:
Base Salary
We use base salaries to compensate our NEOs for performing their day-to-day duties and responsibilities. In determining base salary, the Compensation Committee exercises its judgment and primarily considers each individual’s performance, experience level, role and responsibilities during the year, the competitive market for the position as reflected by peer group and relevant survey data, and the recommendations of our CEO (except with respect to his own base salary). Consistent with our compensation philosophy, the Compensation Committee sets base salaries that are at or below the market median to reinforce our desire that our annual performance-based cash bonuses and long-term incentive compensation represent the majority of our executive officers’ target total direct compensation each year. For purposes of ascertaining the competitive market, the Compensation Committee reviews compensation data compiled from our compensation peer group as well as from a custom peer data cut drawn from the Radford Global Technology Survey database.
For fiscal 2021, the Compensation Committee determined not to adjust the base salary of any of our NEOs.The annual base salaries of our NEOs for fiscal 2020 and 2021 were as follows:
Named Executive Officer | Fiscal 2020 Base Salary | Fiscal 2021 Base Salary | Percentage Change | |||
Mr. Hurlston | $700,000 | $700,000 | — | |||
Mr. Butler | $400,000 | $400,000 | — | |||
Mr. Awsare | $350,000 | $350,000 | — | |||
Mr. Kumin | $375,000 | $375,000 | — | |||
Mr. McFarland | $390,000 | $390,000 | — |
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Annual Performance-Based Cash Bonuses
We use annual performance-based cash bonuses to motivate our NEOs to achieve our annual financial objectives as set forth in our annual operating plan, while making progress towards and supporting our longer-term strategic and growth goals. For fiscal 2021, the design of our annual performance-based cash bonus plan (the “Fiscal 2021 Cash Bonus Plan”) linked the funding of the annual bonus pool entirely to the achievement of objective financial performance measures as selected by our Board and reflected in our annual operating plan. The annual target cash bonus pool is established by the Compensation Committee based on the aggregate target annual cash bonus opportunities for all of our employees, including our executive officers.
At the beginning of each fiscal year, our Board approves our annual operating plan, which forms the basis for the corporate performance measures for our annual performance-based cash bonuses. Further, the Compensation Committee reviews and sets the framework for the annual performance-based cash bonuses for the fiscal year, including confirming the plan participants, establishing a target annual cash bonus opportunity for each participating executive officer, and selecting the corporate performance measures and related target levels for the fiscal year.
The earned cash incentive amount is paid after the end of the fiscal year.
Target Annual Cash Bonus Opportunities
As in prior years, the Compensation Committee determined that the target annual cash bonus opportunities for each of our NEOs for fiscal 2021 should be based on a percentage of such NEO’s base salary. In setting these target annual cash bonus opportunities, the Compensation Committee exercised its judgment and primarily considered our overall financial and operational results for the prior fiscal year, each individual’s performance, experience level, role and responsibilities during the year, the competitive market for the position as reflected by peer group and relevant survey data, and the recommendations of our CEO (except with respect to his own target annual cash bonus opportunity).
For fiscal 2021, the Compensation Committee determined not to adjust the target annual cash bonus opportunities of any of our NEOs. Mr. Hurlston’s fiscal 2021 target annual cash bonus opportunity was 130% of his annual base salary, and each of our other NEOs had a fiscal 2021 target annual cash bonus opportunity of 75% of their behalf.annual base salaries.
Based solely uponThe following formula was used to calculate the actual annual cash bonus payments for participants in the Fiscal 2021 Cash Bonus Plan:
Corporate Performance Metrics
For purposes of the Fiscal 2021 Cash Bonus Plan, the Compensation Committee used multiple objective financial performance metrics as reflected in our annual operating plan rather than a single financial metric. For fiscal 2021, the Compensation Committee selected three equally weighted corporate financial metrics as the performance measures for the Fiscal 2021 Cash Bonus Plan – revenue, non-GAAP gross margin percentage, and non-GAAP operating profit. The Compensation Committee believed these performance metrics were appropriate because, in its view, they represent key elements necessary to drive the successful execution of our fiscal 2021 annual operating plan. In addition, they provided a strong emphasis on growth while managing expenses, which the Compensation Committee believed would most directly influence the creation of sustainable long-term stockholder value.
Our Board set our annual operating plan at the start of fiscal 2021 consistent with a “bottoms-up” review of the copiesthen-internal financial forecast for the Company. Consistent with past practices the financial performance metrics were set at the close of the prior fiscal year. Given the onset of the COVID-19 pandemic in early calendar year 2020, the management team and Board reviewed various scenarios on the likely impact this external event was to have on the company and chose to adopt an annual operating plan that incorporated pandemic risks but would also yield beneficial results for stockholders. Although our CEO and management team energized and drove the Company to exceed these expectations, our Board viewed the Fiscal 2021 Cash Bonus Plan financial performance metrics as realistic and difficult to achieve at the time they were set.
For purposes of the Fiscal 2021 Cash Bonus Plan:
◾ | “non-GAAP gross margin percentage” was calculated as GAAP gross margin, excluding acquisition costs, retention program costs, share-based compensation, and theimpact of the loss (recovery) on supply commitment; and |
◾ | “non-GAAP operating profit” was calculated as GAAP operating profit excluding share-based compensation, acquisition/divestiture-related costs, retention program costs, restructuringcosts, gain on sale of audio technology assets and prepaid development costs, and the impact of the loss (recovery) on supply commitment. |
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The Compensation Committee established target achievement levels for each of these performance metrics for fiscal 2021 as follows:
Corporate Performance Metric | Weighting | Target Achievement Level | ||
Revenue | 33.3% | $1,105 million | ||
Non-GAAP gross margin percentage | 33.3% | 49.9% | ||
Non-GAAP operating profit | 33.3% | $194 million |
The actual achievement level for each corporate performance metric is based on the percentage by which we exceed or fail to achieve the target achievement level for that metric. The actual achievement levels are weighted to calculate an aggregate weighted achievement score for our corporate performance for purposes of the Fiscal 2021 Cash Bonus Plan. There is a threshold level of achievement for each performance metric, below which the weighed achievement score for that metric would be 0%.
Funding of the bonus pool is capped at a maximum weighted achievement score of 140%. As described below, the aggregate weighted achievement score, without regard to such forms receivedcap, is then multiplied by us duringthe AOP scaling factor to generate the final percentage of the target cash bonus opportunity that is to be used in determining bonus payments for the year.
After the end of the fiscal year, endedthe Compensation Committee evaluates our performance with respect to the corporate performance metrics. The Fiscal 2021 Cash Bonus Plan opportunities for our NEOs with corporate responsibilities were based entirely on the performance of the foregoing metrics at the corporate level. In the case of a NEO with business unit responsibilities, 50% of the NEO’s annual performance-based cash bonus opportunity was based on our corporate performance and the remaining 50% was based on revenue, non-GAAP gross margin percentage, and non-GAAP operating profit calculated at the business unit level.
AOP Scaling Factor
The AOP scaling factor, which may range between 50% to 150%, reflects a fixed ratio as of the beginning of the year, the portion of the Company’s anticipated operating profits which will be allocated to employee cash-bonuses for the fiscal year. Any scaling factor below 100% is considered a negative multiplier, and all other variables being equal would result in lower compensation. This approach balances the rewards of employee efforts during the year with anticipated profit generation for the Company. This negative multiplier, which is established when the annual operating plan is being developed, is recommended by management and approved by the Compensation Committee. For fiscal 2021, it was determined that a negative multiplier of 70% best balanced stockholder interests while continuing to motivate employees for their contributions to the Company.
Fiscal 2021 Bonus Decisions
Our revenue was $1,339 million, our non-GAAP gross margin percentage was 53.6%, and our non-GAAP operating profit was $366 million. Based on these results, in July 2021, the Compensation Committee determined that we had achieved200% of the target performance level for revenue, 200% of the target performance level for non-GAAP gross margin percentage, and 200% of the target performance level for non-GAAP operating profit. Applying the weighting factor for each corporate performance measure, this resulted in an aggregate weighted achievement score of 200%.
The aggregate weighted achievement score was then multiplied by the AOP scaling factor of 70%, as selected by the Compensation Committee, to produce a cash bonus payment percentage of 140%, which was equal to the capped funding of the bonus pool, as set forth in the following table:
Corporate Performance Measure | Target Performance Level | Maximum Performance Level | Weight | Actual Results | Achievement Level | |||||
Revenue (in millions) | $1,105 | $1,326 | 33.33% | $1,339 | 200% | |||||
Non-GAAP gross margin percentage | 49.9% | 51.5% | 33.33% | 53.6% | 200% | |||||
Non-GAAP operating profit (in millions) | $194 | $243 | 33.33% | $366 | 200% | |||||
Aggregate Weighted Achievement Score | 200% | |||||||||
AOP Scaling Factor (Negative Multiplier) | 70% | |||||||||
Cash Bonus Payment Percentage | 140% |
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Based on the foregoing, the Compensation Committee approved the following annual performance-based cash bonus payments for our NEOs for fiscal 2021:
Named Executive Officer | Actual Fiscal 2021 Base Salary | Target Annual Cash Bonus Opportunity | Target Annual Cash Bonus Opportunity (as a percentage of base salary) | Actual Cash Bonus Payment | Actual Cash Bonus Payment (as a percentage of base salary earned in fiscal 2021) | Actual Cash Bonus Payment (as a percentage of the fiscal 2021 target annual cash bonus opportunity) | ||||||
Mr. Hurlston | $700,000 | $910,000 | 130% | $1,274,000 | 182% | 140% | ||||||
Mr. Butler | $400,000 | $300,000 | 75% | $420,000 | 105% | 140% | ||||||
Mr. Awsare(1) | $350,000 | $262,500 | 75% | $350,438 | 100% | 133% | ||||||
Mr. Kumin | $375,000 | $281,250 | 75% | $393,750 | 105% | 140% | ||||||
Mr. McFarland | $390,000 | $292,500 | 75% | $409,500 | 105% | 140% |
(1) | As our Senior Vice President and General Manager, PC and Peripherals Division, Mr. Awsare’s annual performance-based cash bonus payment was based 50% on the cash bonus payment percentage at the corporate level (140%) and 50% on the cash bonus payment percentage as determined for his business unit based on the same three performance measures used at the corporate level (127%) resulting in an actual cash bonus payment percentage of 133%. We are not presenting the target achievement levels for Mr. Awsare’s performance metrics at the business unit level because we do not publicly disclose financial performance for that business unit and believe that such disclosure would result in competitive harm to the Company. |
Long-Term Incentive Compensation
We use long-term incentive compensation in the form of equity awards to incentivize our NEOs for long-term corporate performance based on the potential for increases in the value of our common stock and, thereby, further align their interests with the interests of our stockholders. In October 2019, the Compensation Committee determined that the annual equity awards for our NEOs would consist of a combination of MSU awards, PSU awards, and RSU awards with each such equity award equally weighted based on the number of shares subject to each award. The actual grant date fair values of the awards granted to our NEOs as reflected in the Summary Compensation Table varies from the target mix due to the accounting valuation methodology for MSU awards.
The size of these equity awards was determined by the Compensation Committee based on its assessment of our financial results for fiscal 2020, its evaluation of each NEO’s performance or expected contributions, as applicable, an assessment of the equity award practices of the companies in our compensation peer group, and an assessment of the outstanding equity awards then-held by each NEO. In making its award decisions, the Compensation Committee exercised its judgment to set the size of each award at a level it considered appropriate to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value and, in the case of PSUs, the achievement of financial goals we believed would contribute to the long-term success of the Company.
The annual equity awards granted to our NEOs in fiscal 2021 were as follows:
Named Executive Officer | MSU Award (target | PSU Award (target number of shares) | RSU Award (number of shares) | Aggregate Fair Value | ||||
Mr. Hurlston | 30,648 | 30,648 | 30,648 | $9,723,998 | ||||
Mr. Butler | 7,764 | 7,764 | 7,764 | $2,463,362 | ||||
Mr. Awsare | 6,844 | 6,844 | 6,844 | $2,171,449 | ||||
Mr. Kumin | 4,903 | 4,903 | 4,903 | $1,555,608 | ||||
Mr. McFarland | 6,946 | 6,946 | 6,946 | $2,203,811 |
MSU Awards
MSU awards are earned based on our TSR performance relative to the TSR of each company in the Russell 2000 Index for awards granted to our executive officers beginning in fiscal 2021, and compared to the TSR of the S&P Semiconductors Select Industry (SPSISC) Index TSR for awards granted to our executive officers prior to fiscal 2021, over one-, two-, and three-year performance periods
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(as determined on September 30, 2020, September 30, 2021, and September 30, 2022, respectively, for the awards granted in fiscal 2020 and as determined on June 30, 2018,2021, June 30, 2022, and written representationsJune 30, 2023, respectively, for the awards granted in fiscal 2021).
Our percentile ranking within the Russell 2000 Index during fiscal 2021 ranged from the 20th percentile to the 79th percentile.
The ranges of our TSR compared to that of the SPSISC Index TSR for MSU awards granted in the last two fiscal years were as follows:
Fiscal Year of MSU Award | Range of Our TSR Compared to SPSISC Index TSR | |
Fiscal 2020 (CEO) | 0 – 233.2 percentage points | |
Fiscal 2020 | 0 – 143.8 percentage points | |
Fiscal 2019 | -47.8 – 104.1 percentage points |
The features of the fiscal 2021 MSU awards granted in August 2020 are as follows:
MSU Award Feature | Description | |
Payout Range | Three-year program with payout range of 0% to 200% of target shares | |
Performance Measure | Based on our TSR performance relative to the peer companies in the Russell 2000 Index TSR | |
Performance Scaling | Two-to-one ratio for both above and below target performance, with no payout if our TSR is below the 25th percentile of the TSR of each company in the Russell 2000 Index for each performance period, and a cumulative payout of 200% of target shares if our TSR is above the 75th percentile of the TSR of each company in the Russell 2000 Index for the one-, two-, and three-year performance periods. Performance payouts between the 25th and 75th percentiles will be determined on a linear basis with performance at the 50th percentile equal to 100% of target. | |
Payout Frequency | One-third of target shares eligible for payout after each of years one, two, and three | |
Payouts in Years One & Two | Capped at 200% of target shares allocated to the performance period | |
Payout in Year Three | The payouts for the one- and two-year performance periods are trued up based on final achievement in the three-year performance period: · Based on shares actually earned using a two-to-one ratio for the three-year performance period (less any shares previously delivered for the one- and two-year performance periods), subject to cap of 200% of target shares if our TSR is above the 75th percentile of the TSR of each company in the Russell 2000 Index · If performance for full three-year performance period results in a payout that is less than the combined payout for the one-year and two-year performance periods, we do not clawback shares delivered in earlier performance periods |
Any shares earned under an MSU award will vest and be delivered within 30 days of the end of the one-, two-, and three-year performance periods.
In fiscal 2021, certain of our NEOs received the following payouts in connection with their previously-granted MSU awards:
MSU Grant | Tranche Ending Fiscal 2021 | Payout (Percentage of Target) | ||
Fiscal 2018 | Third Performance Period | 200% | ||
Fiscal 2019 | Second Performance Period | 100% | ||
Fiscal 2020 | First Performance Period | 100% | ||
Fiscal 2020 (CEO) | First Performance Period | 100% |
As of the record date, the following chart represents MSU awards expected to be earned by our NEOs for MSUs granted in fiscal 2019, 2020, and 2021. All four awards will be earned at 200%.
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PSU Awards
PSU awards are earned over a one-year performance period based on the achievement of pre-established levels of design-win revenue (33%), non-GAAP gross margin (33%), and non-GAAP operating expense (33%). For this purpose, “non-GAAP gross margin” was calculated as GAAP gross margin, excluding acquisition-related costs, share-based compensation, the impact of the loss (recovery) on supply commitment, and retention program costs, and “non-GAAP operating expense” was calculated as GAAP operating expenses excluding share-based compensation, acquisition/divestiture-related costs, restructuring costs, retention program costs, amortization of prepaid development costs, gain on the sale of audio technology assets, and in-process researchand development charges.
The potential payout ranges from 0% to 200% of the target number of shares subject to the PSU award and is determined on a linear basis with a maximum payout of 200% of the target number of shares. Earned PSUs vest in three equal tranches over three one-year service periods with the final service period ending approximately three years from the grant date, subject to the NEO’s continued employment with us through each relevant vesting date.
For fiscal 2021, our design-win revenue target was $1.300 million, while our actual design-win revenue for fiscal 2021 was $1.305 million, which exceeded our target and resulted in a payout percentage of 101%. Our non-GAAP gross margin target was 49.9%, while our actual non-GAAP gross margin for fiscal 2021 was 53.6%, which also exceeded our target and resulted in a payout percentage of 200%. Our non-GAAP operating expense target was $358 million, while our actual non-GAAP operating expense for fiscal 2021 was $351 million, which exceeded our target and resulted in a payout percentage of 118%. Applying the weighting factor for each corporate performance measure, this resulted in an aggregate weighted score of 139.5%with our NEOs earning 139.5%of the target number of shares subject to the PSU awards as follows
Named Executive Officer | PSU Award (target number of shares) | PSU Award shares) | Shares Vesting as of the End of Each Required Service Period | |||
Mr. Hurlston | 30,648 | 42,753 | 14,251 | |||
Mr. Butler | 7,764 | 10,830 | 3,610 | |||
Mr. Awsare | 6,844 | 9,547 | 3,182 | |||
Mr. Kumin | 4,903 | 6,840 | 2,280 | |||
Mr. McFarland | 6,946 | 9,690 | 3,230 |
Accordingly, our NEOs who remained employed through August 17, 2021, the end of the initial service period for the awards, received one-third of their earned shares. They will receive the remaining earned shares if they remain employed through the end of the required second and third service periods.
The following chart represents the PSU awards granted in fiscal 2019, fiscal 2020, and fiscal 2021 and the corresponding shares earned as a percentage of target.
SYNAPTICS INCORPORATED | PROXY STATEMENT | 60 |
RSU Awards
Each RSU award generally vests over three years, with one-third of the total number of shares subject to the award vesting annually in the same fiscal quarter in which the award was granteduntil fully vested, subject to the NEO’s continued employment with us through each relevant vesting date. Typically, RSU awards granted to newly-hired executive officersvest over four years, with one-quarter of the total number of shares of our common stock subject to the award vesting annually on each subsequent anniversary of the executive officer’s employment start date until fully vested, subject to the executive officer’s continued employment with us through each relevant vesting date.
Health, Welfare, and Retirement Benefits
Our executive officers, including our NEOs, are eligible to participate in the same standard health and welfare benefit plans, and on the same terms and conditions, as all other regular full-time employees. These benefits include medical, dental, vision, life and disability insurance benefits, and participation in our employee stock purchase plan.
We maintain a tax-qualified Section 401(k) retirement savings plan for all employees who satisfy certain eligibility requirements, including requirements relating to age and length of service. Under this plan, participants may elect to make pre-tax contributions of up to 50% of their current compensation, not to exceed the applicable statutory income tax limitation. In fiscal 2021, we made matching contributions of up to 25% of the contributions made by participants in the plan, including our NEOs, up to a maximum of $4,875 per participant.We intend for the plan to qualify under Section 401(a) of the Code, so that contributions by employees to the plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the plan.
Perquisites and Other Personal Benefits
We do not view perquisites or other personal benefits as a significant element of our executive compensation program. Accordingly, we do not provide perquisites or other personal benefits to our NEOs except as generally made available to our employees or in situations where we believe it is appropriate to assist an individual in the performance of the NEO’s duties, to make the NEO more efficient and effective, and for recruitment, motivation, or retention purposes. During fiscal 2021, none of our NEOs received perquisites or other personal benefits that were, in the aggregate, $10,000 or more for each individual.
SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS
We believe that severance and change of control arrangements are important parts of the overall compensation program for our executive officers. Severance arrangements provide a stable work environment and are used primarily to attract, motivate, and retain individuals with the requisite experience and ability to drive our success. The provision of enhanced severance benefits for an involuntary termination of the executive’s employment in connection with a change of control helps to secure the continued employment and dedication of our executive officers, to reduce any concern that they might have regarding their own continued employment prior to or following a change of control of the Company, and to promote continuity of management during a corporate transaction.
Severance Policy for Principal Executive Officers
We maintain the Severance Policy for Principal Executive Officers (the “Severance Policy”), which applies to those executive officers who have been designated by our Board as a “Covered Executive” under such policy. All of our NEOs currently employed with us are covered by the Severance Policy. Under the Severance Policy, we will pay certain specified amounts to a designated executive officer following a termination of employment by us without “good cause” or by the executive officer for “good reason” (as such terms are
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defined in the policy), contingent upon the executive officer providing a general release of claims, for a period of 12 months in the case of our CEO and six months in the case of our other designated executive officers.
Change of Control Severance Policy for Principal Executive Officers
We also maintain the Change of Control Severance Policy for Principal Executive Officers (the “Change of Control Severance Policy”), which applies to those executive officers who have been designated by our Board as an “Executive” under such policy. All of our NEOs currently employed with us are covered by the Change of Control Severance Policy. Underthe Change of Control Severance Policy, we will pay certain specified amounts and provide certain specified benefits (including accelerated vesting of all outstanding and unvested equity awards granted by the Company on or after June 28, 2019 (excluding MSU awards)) to a designated executive officer following a termination of employment by us without “good cause” or by the executive officer for “good reason” within three months prior to, or 18 months following, a “change of control” (as such terms are defined in the policy), contingent upon the executive officer providing a general release of claims, for a period of 18 months.
For a summary of the material terms and conditions of the arrangements under the Severance Policy and the Change of Control Severance Policy, as well as an estimate of the potential payments and benefits payable to our NEOs, see “Potential Payments upon Termination or Change of Control” below.
Outstanding Equity Awards
For a discussion of the treatment of outstanding equity awards held by our NEOs in the event of a change of control of the Company or certain involuntary terminations of an NEO’s employment with us, see “Potential Payments upon Termination or Change of Control – Equity Awards” below.
Separation Agreement with Mr. Kumin
In connection with his separation from employment in August 2021, we entered into a separation and release agreement with Mr. Kumin. The terms and conditions of this agreement are described in “Estimated Severance and Change of Control Benefits” below.
In May 2019, we instituted a retention program for certain of our executive officers to encourage their continued commitment to the support and management of the operations of the Company during the transition to new executive leadership (the “Retention Program”). Of our incumbent NEOs, Messrs. Awsare andMcFarland were the only remaining participants in the Retention Program during fiscal 2021. Under the Retention Program, each participating executive officer received a lump-sum cash award payment in November 2020, each having remained a full-time active employee of the Company in good standing through November 1, 2020. The retention award amounts for Messrs. Awsare andMcFarland were $512,164 and $586,661 respectively.
Equity Grant Policy
Our Compensation Committee approves annual equity awards to our executive officers at a regularly scheduled meeting in the first half of each year. However, the Compensation Committee may also approve grants of equity awards at other times of the year such as in connection with the hiring of a new executive officer or in such other circumstances as the Compensation Committee may determine appropriate.
Stock Ownership Guidelines
We maintain stock ownership guidelines for our directors and senior executive officers to promote the alignment of the long-term interests of the members of our Board and senior executive officers with our stockholders.
Requirement |
· Non-Employee Directors: 5.0x annual retainer |
· Chief Executive Officer: 6.0x base salary |
· Other Executive Officers: 2.0x base salary |
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Measurement · Measured at fiscal year-end using 90 trading-day average stock price · Ownership includes shares owned outright, vested in-the-money stock options, and unvested RSUs (unvested PSUs and MSUs do not count), however, none of our Executive Officers own any stock options |
Compliance · Grace period of five years from when participant becomes subject to guidelines · If participant falls below target ownership, participant must meet target within two years · Management annually notifies participants and the Compensation Committee of compliance and progress towards ownership requirement · As of June 26, 2021, all participants either met the requirements or were within the five-year grace period |
Stock Holding Requirements
Under our 2019 Incentive Plan, any award of equity to an individual who, at the time of grant of the award, is the Company’s chief executive officer must include a provision for any net shares acquired with respect to the award (the total number of shares acquired pursuant to the award less any shares used to pay the exercise or purchase price of the award and any shares used to satisfy any tax and tax withholding obligations with respect to the award) must be held for at least a one year period, or until the award recipient is no longer employed by the Company or one of its subsidiaries, before such shares may be sold or transferred (except for certain transfers to a family member for estate or tax planning purposes and where the holding period requirement continues in effect as to the shares, or in connection with or following a change of control of the Company).
Compensation Recovery (“Clawback”) Policy
Our 2010 Plan, our 2019 Inducement Plan and our 2019 Incentive Plan each contain a compensation recovery (“clawback”) provision that no other reports wereapplies to all awards held by our executive officers. Pursuant to these plans, all awards (cash and equity) held by an executive officer will be subject to clawback, recoupment or forfeiture to the extent that such executive officer is determined to have engaged in fraud or intentional illegal conduct that caused a material non-compliance with any applicable financial reporting requirements and resulted in a financial restatement, the result of which is that the amount received from such award would have been lower had it been calculated on the basis of such restated results, or as required we believe that each personby applicable laws, rules, regulations or listing requirements.
Deductibility of Executive Compensation
Section 162(m) of the Code generally disallows a publicly-held corporation a deduction for federal income tax purposes of remuneration in excess of $1 million paid in any taxable year to certain “covered employees,” which include any individuals who served as the principal executive officer or principal financial officer at any time during such fiscalthe taxable year, each of the three other most highly-compensated executive officers whose compensation may be required to be disclosed to our stockholders under the Exchange Act in the taxable year, and each person who was a covered employee for any taxable year beginning after December 31, 2016. Further, as a result of the enactment of the Tax Cuts and Jobs Act of 2017, “qualified performance-based compensation” is exempt from this $1 million deduction limitation only if payable pursuant to a written binding contract in effect on November 2, 2017 (and that has not subsequently been materially modified).
While the Compensation Committee considers the deductibility of compensation as one factor in determining executive compensation, the Compensation Committee believes that it is in the best interests of our stockholders to maintain flexibility in our approach to executive compensation in order to structure a program that we consider to be the most effective in attracting, motivating and retaining our executive officers.
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MATTERS
The Compensation Committee has reviewed and discussed our Compensation Discussion and Analysis section with management and, based on the review and discussions, recommended to the Board that the Compensation Discussion and Analysis section be included in this Proxy Statement on Schedule 14A.
Compensation Committee
Keith Geeslin, Chair
Kiva Allgood
Susan Hardman
The foregoing report of the Compensation Committee is not soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date of this Proxy Statement and irrespective of any general incorporation language in such filing.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mses. Allgood and Hardman and Mr. Geeslin were members of the Compensation Committee during all of fiscal 2021, and Mr. Sanquini served on the Compensation Committee for a portion of fiscal 2021. No one who served on the Compensation Committee at any time during fiscal 2021 is or has been an executive officer of the Company or had any relationships requiring disclosure by the Company under the rules of the SEC requiring disclosure of certain relationships and related party transactions. None of our executive officers who served as a director officer,of the Company or beneficial owneras a member of more than 10%the Compensation Committee during fiscal 2021 served as a director or a member of a compensation committee (or other committee serving an equivalent function) for any other entity.
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NAMED EXECUTIVE OFFICER COMPENSATION TABLES
The Summary Compensation Table quantifies the value of the different forms of compensation earned by or awarded to our NEOs for fiscal 2019, 2020 and 2021. The primary elements of each NEO’s total compensation reported in the table are base salary, a short-term incentive (annual cash bonus) and long-term incentive equity awards. Our NEOs also received the other benefits listed in column (i) of the Summary Compensation Table, as further described in the footnotes to the table.
The Summary Compensation Table should be read in conjunction with the tables and narrative descriptions that follow. A description of the material terms of employment offer letters for Messrs. Hurlston, Butler, Awsare and Kumin regarding base salary and short-term incentive amounts is provided immediately following the Summary Compensation Table. The Grants of Plan-Based Awards table, and the accompanying disclosure following that table, provide information regarding the cash and equity awards granted to our NEOs in fiscal 2021. The Outstanding Equity Awards at Fiscal Year End and Option Exercises and Stock Vested tables provide further information on the NEOs’ potential realizable value and actual value realized with respect to their equity awards.
SUMMARY COMPENSATION TABLE — FISCAL YEARS 2019, 2020 AND 2021
The following table sets forth summary information regarding compensation for each of our NEOs for all services rendered to us in all capacities in fiscal 2019, 2020 and 2021.
Name and Principal Positions | Fiscal Year | Salary | Bonus | Stock Awards | Option | Non-Equity | Change in | All Other | Total | |||||||||||||||||||||
($)(1) | ($) | ($)(2) | Awards | Incentive Plan | Pension Value | Compensation | ($) | |||||||||||||||||||||||
($) | Compensation | & Non· | ($)(4) | |||||||||||||||||||||||||||
($)(3) | qualified | |||||||||||||||||||||||||||||
Deferred | ||||||||||||||||||||||||||||||
Compensation | ||||||||||||||||||||||||||||||
Earnings ($) | ||||||||||||||||||||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |||||||||||||||||||||
Michael Hurlston | 2021 | $ | 700,000 | - | $ | 9,723,998 | - | $ | 1,274,000 | - | $ | 6,657 | $ | 11,704,655 | ||||||||||||||||
President and Chief Executive Officer | 2020 | $ | 609,849 | - | $ | 21,944,599 | - | $ | 851,220 | - | $ | 5,962 | $ | 23,411,630 | ||||||||||||||||
Dean Butler | 2021 | $ | 400,000 | - | $ | 2,463,362 | - | $ | 420,000 | - | $ | 5,361 | $ | 3,288,723 | ||||||||||||||||
Senior Vice President and Chief Financial Officer | 2020 | $ | 279,167 | $ | 150,000 | (5) | $ | 2,838,043 | - | $ | 224,852 | - | $ | 506 | $ | 3,492,568 | ||||||||||||||
Saleel Awsare | 2021 | $ | 350,000 | $ | 512,164 | (6) | $ | 2,171,449 | - | $ | 350,438 | - | $ | 7,108 | $ | 3,391,159 | ||||||||||||||
Senior Vice President and General Manager, PC & Peripherals Division | 2020 | $ | 350,000 | $ | 100,000 | $ | 1,714,471 | - | $ | 223,650 | - | $ | 7,182 | $ | 2,395,303 | |||||||||||||||
Phillip Kumin(7) | 2021 | $ | 375,000 | - | $ | 1,555,608 | - | $ | 393,750 | - | $ | 7,197 | $ | 2,331,555 | ||||||||||||||||
Former Senior Vice President, Worldwide Sales | 2020 | $ | 96,354 | - | $ | 2,004,174 | - | $ | 77,182 | - | $ | 2,324 | $ | 2,180,034 | ||||||||||||||||
John McFarland | 2021 | $ | 390,000 | $ | 586,661 | (6) | $ | 2,203,811 | - | $ | 409,500 | - | $ | 3,366 | $ | 3,593,338 | ||||||||||||||
Senior Vice President, | 2020 | $ | 376,667 | - | $ | 1,543,010 | - | $ | 315,900 | - | $ | 2,184 | $ | 2,237,761 | ||||||||||||||||
General Counsel and Secretary | 2019 | $ | 348,333 | - | $ | 1,123,498 | - | $ | 105,000 | - | $ | 2,113 | $ | 1,578,944 |
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(1) | All base salaries reported represent actual base salaries paid for the twelve-month periods ended June 26, 2021, June 29, 2019 and June 30, 2018. |
(2) | The amounts reported in column (e) of the table above for each year reflect the aggregate grant date fair value of PSUs, MSUs and RSUs awarded in the applicable year as computed in accordance with FASB Accounting Standards Codification (“ASC”) Topic 718, Compensation — Stock Compensation (determined as of the date of grant of the awards, as the date of grant is determined for accounting purposes, and excluding the effect of estimated forfeitures). For information on the assumptions used in the grant date fair value computations, refer to Note 9 “— Share-Based Compensation” in the Notes to Consolidated Financial Statements in the Company’s 2021 Annual Report on Form 10-K filed with the SEC for the fiscal year ended June 26, 2021 (or, for awards granted prior to fiscal 2021, the corresponding note in the Company’s Annual Report on Form 10-K for the applicable fiscal year). The amounts included in the Summary Compensation Table above, and in the tables below in this footnote, may not be indicative of the realized value of the awards if they vest. |
As discussed in the CD&A, in fiscal 2019, 2020 and 2021, the Company granted annual long-term incentive awards of PSUs and MSUs to our NEOs, the vesting of which is subject, in part, to the Company’s performance. As required by applicable SEC rules, the grant date fair value of the PSUs and MSUs awarded in these years was determined based on the probable outcome (determined as of the date of grant of the awards, as the date of grant is determined for accounting purposes) of the performance-based conditions applicable to the awards.
For these purposes, as of the date of grant of the awards, we determined that the “target” level of performance for the PSU awards was the probable outcome of the applicable performance-based conditions. Accordingly, for these PSU awards, the grant date fair value is included for the NEOs in the “Stock Awards” column for the year in which the grant was made based on the “target” number of shares subject to the awards. For the MSU awards, the grant date fair value was included for the NEOs in the “Stock Awards” column for the year in which the grant was made based on a Monte Carlo simulation pricing model (which probability weights multiple potential outcomes) as of the date of grant of the awards. Under the terms of the PSU and MSU awards, between 0% and 200% of the target number of shares subject to the awards can be earned and vest based on performance and the other vesting conditions applicable to the awards. The following tables present the grant date fair value (determined as described above as of the date of grant of the awards) of the PSUs and MSUs awarded to the NEOs in fiscal 2019, 2020 and 2021 under two sets of assumptions: (a) assuming performance would be achieved at the level which we originally judged to be the probable outcome as described above (or in the case of MSUs, based on the Monte Carlo simulation pricing model), and (b) assuming that the highest level of performance for each such award would be achieved.
Aggregate Grant Date Fair Value of Annual PSU Awards | ||||||||||||
Fiscal Year 2019 | Fiscal Year 2020 | Fiscal Year 2021 | ||||||||||
| ||||||||||||
Based on | Based on | Based on | ||||||||||
Probable | Based on | Probable | Based on | Probable | Based on | |||||||
Outcome as of | Maximum | Outcome as of | Maximum | Outcome as of | Maximum | |||||||
Name | the Date of Grant | Performance | the Date of Grant | Performance | the Date of Grant | Performance | ||||||
Michael Hurlston | - | - | $1,550,027 | $3,100,054 | $2,603,548 | $5,207,096 | ||||||
Dean Butler | - | - | $861,107 | $1,722,214 | $659,552 | $1,319,104 | ||||||
Saleel Awsare | - | - | $516,648 | $1,033,296 | $581,398 | $1,162,796 | ||||||
Phillip Kumin | - | - | - | - | $416,510 | $833,020 | ||||||
John McFarland | $338,445 | $676,890 | $464,979 | $929,958 | $590,063 | $1,180,126 |
Aggregate Grant Date Fair Value of Annual MSU Awards | ||||||||||||
Fiscal Year 2019 | Fiscal Year 2020 | Fiscal Year 2021 | ||||||||||
| ||||||||||||
Based on Monte | Based on Monte | Based on Monte | ||||||||||
Carlo Simulation | Carlo Simulation | Carlo Simulation | ||||||||||
Pricing Model as | Based on | Pricing Model as | Based on | Pricing Model as | Based on | |||||||
of the Date of | Maximum | of the Date of | Maximum | of the Date of | Maximum | |||||||
Name | Grant | Performance | Grant | Performance | Grant | Performance | ||||||
Michael Hurlston | - | - | $11,705,788 | $16,242,782 | $4,516,902 | $5,207,096 | ||||||
Dean Butler | - | - | $1,135,328 | $1,722,214 | $1,144,258 | $1,319,104 | ||||||
Saleel Awsare | $233,435 | $380,300 | $681,175 | $1,033,296 | $1,008,653 | $1,162,796 | ||||||
Phillip Kumin | - | - | $1,257,118 | $1,494,113 | �� | $722,588 | $833,020 | |||||
John McFarland | $446,608 | $676,890 | $613,052 | $929,958 | $1,023,685 | $1,180,126 |
(3) | The amounts reported in column (g) of the table above constitute amounts earned under our annual performance-based cash bonus plan during the applicable fiscal year, which amounts are generally paid early in the next fiscal year. |
(4) | The following table identifies the items reported in the “All Other Compensation” column of the table for each NEO in fiscal 2021: |
Executive Officers | Company 401(k) | Group Term Life | Total Benefits | |||
Michael Hurlston | $4,875 | $1,782 | $6,657 | |||
Dean Butler | $4,875 | $486 | $5,361 | |||
Saleel Awsare | $4,786 | $2,322 | $7,108 | |||
Phillip Kumin | $4,875 | $2,322 | $7,197 |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 66 |
Executive Officers | Company 401(k) | Group Term Life | Total Benefits | |||
John McFarland | $1,584 | $1,782 | $3,366 |
(5) | In connection with his acceptance of our offer to join the Company, Mr. Butler received a signing bonus of $150,000 that must be repaid to the Company on a pro rata basis should he voluntarily terminate his employment within two years of his employment start date. |
(6) | Reflects retention bonuses paid to Messrs. Awsare and McFarland in fiscal 2021, in accordance with the Retention Program. |
(7) | Mr. Kumin resigned from his role as Senior Vice President, Worldwide Sales effective August 31, 2021. |
Employment Agreements
Mr. Hurlston
Mr. Hurlston entered into an employment offer letter with the Company effective August 19, 2019. The letter provides for “at will” employment. The letter provides that Mr. Hurlston will receive an initial annual base salary of $700,000 and that his annual cash bonus target will be set at 130% of his base salary, with the Compensation Committee to determine Mr. Hurlston’s actual bonus award amounts each year. The letter also provides for Mr. Hurlston to participate in the Company’s long-term incentive program and to receive the equity awards during fiscal 2021 described in the CD&A above. In addition, the letter provides for Mr. Hurlston to participate in the Company’s severance plans for its executive officers as described below under “Potential Payments Upon Termination or Change of Control.”
Mr. Butler
Mr. Butler entered into an employment offer letter with the Company effective October 21, 2019. The letter provides for “at will” employment. The letter provides that Mr. Butler will receive an initial annual base salary of $400,000 and that his annual cash bonus target will be set at 75% of his base salary, with the Compensation Committee to determine Mr. Butler’s actual bonus award amounts each year. Mr. Butler also received a cash signing bonus of $150,000 that must be repaid to the Company on a pro rata basis should he voluntarily terminate his employment within two years of his employment start date. The letter also provides for Mr. Butler to participate in the Company’s long-term incentive program and to receive the equity awards during fiscal 2021 described in the CD&A above. In addition, the letter provides for Mr. Butler to participate in the Company’s severance plans for its executive officers as described below under “Potential Payments Upon Termination or Change of Control.”
SYNAPTICS INCORPORATED | PROXY STATEMENT | 67 |
GRANTS OF PLAN-BASED AWARDS — FISCAL 2021
The following table sets forth summary information regarding the plan-based awards granted to our NEOs during fiscal 2021.
Estimated Future Payouts Under Non-Equity Incentive Plan Awards(2) | Estimated Future Payouts Under Equity Incentive Plan Awards | |||||||||||||||||||||||||
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Name | type of Award | Grant Date | Approval Date (1) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Options Awards; Number of Securities Underlying Options (#) | Exercise of Base Price of Option ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(3) | |||||||||||||
(a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | (k) | (I) | (m) | (n) | |||||||||||||
Michael Hurlston | Bonus | - | - | - | $910,000 | $1,274,000 | - | - | - | - | - | - | - | |||||||||||||
MSU | 08/17/20 | 07/27/20 | - | - | - | - | 30,648 | 61,296 | - | - | - | $4,516902 | ||||||||||||||
PSU | 08/17/20 | 07/27/20 | - | - | - | - | 30,648 | 61,296 | - | - | - | $2,603,548 | ||||||||||||||
RSU | 08/17/20 | 07/27/20 | - | - | - | - | - | - | 30,648 | - | - | $2,603,548 | ||||||||||||||
Dean Butler | Bonus | - | - | - | $300,000 | $400,000 | - | - | - | - | - | - | - | |||||||||||||
MSU | 08/17/20 | 07/27/20 | - | - | - | - | 7,764 | 15,528 | - | - | - | $1,144,258 | ||||||||||||||
PSU | 08/17/20 | 07/27/20 | - | - | - | - | 7,764 | 15,528 | - | - | - | $659,552 | ||||||||||||||
RSU | 08/17/20 | 07/27/20 | - | - | - | - | - | - | 7,764 | - | - | $659,552 | ||||||||||||||
Saleel Awsare | Bonus | - | - | - | $262,500 | $367,500 | - | - | - | - | - | - | - | |||||||||||||
MSU | 08/17/20 | 07/27/20 | - | - | 6,844 | 13,688 | - | - | - | $1,008,653 | ||||||||||||||||
PSU | 08/17/20 | 07/27/20 | - | - | 6,844 | 13,688 | - | - | - | $581,398 | ||||||||||||||||
RSU | 08/17/20 | 07/27/20 | - | - | - | - | 6,844 | - | - | $581,398 | ||||||||||||||||
Phillip Kumin | Bonus | - | - | - | $281,250 | $393,750 | - | - | - | - | - | - | - | |||||||||||||
MSU | 08/17/20 | 07/27/20 | - | - | - | - | 4,903 | 9,806 | - | - | - | $722,588 | ||||||||||||||
PSU | 08/17/20 | 07/27/20 | - | - | - | - | 4,903 | 9,806 | - | - | - | $416,510 | ||||||||||||||
RSU | 08/17/20 | 07/27/20 | - | - | - | - | - | - | 4,903 | - | - | $416,510 | ||||||||||||||
John McFarland | Bonus | - | - | - | $292,500 | $409,500 | - | - | - | - | - | - | - | |||||||||||||
MSU | 08/17/20 | 07/27/20 | - | - | - | - | 6,946 | 13,892 | - | - | - | $1,023,685 | ||||||||||||||
PSU | 08/17/20 | 07/27/20 | - | - | - | - | 6,946 | 13,892 | - | - | - | $590,063 | ||||||||||||||
RSU | 08/17/20 | 07/27/20 | - | - | - | - | - | - | 6,946 | - | - | $590,063 |
(1) | The “Approval Date” refers to the date on which the Compensation Committee or the Board approved the award. See “Compensation Discussion and Analysis – Equity Award Grant Policy.” |
(2) | Our fiscal 2021 annual cash bonus plan had no threshold payout but had a maximum payout equal to 140% of the applicable target annual cash bonus opportunity. The reported amounts reflect the applicable target and maximum annual cash bonus opportunities for our NEOs under our fiscal 2021 annual performance-based cash bonus plan. All such awards have been paid, and the actual amounts paid are set forth under “Non-Equity Incentive Plan Compensation” in the Fiscal 2021 Summary Compensation Table. Our fiscal 2021 annual cash bonus plan is discussed under “Compensation Discussion and Analysis — Annual Performance-Based Cash Bonuses.” |
(3) | These amounts present the aggregate grant date fair value of the equity awards computed in accordance with FASB ASC Topic 718, Compensation — Stock Compensation (determined as of the date of grant of the awards, as the date of grant is determined for accounting purposes). For information on the assumptions used in the grant date fair value computations, refer to Note 9 “— Share-Based Compensation” in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended June 26, 2021. Also see footnote (2) to the Summary Compensation Table above. |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 68 |
DESCRIPTION OF PLAN-BASED AWARDS
The non-equity incentive plan awards reported in the Grants of Plan-Based Awards table above represent the annual cash bonus opportunities for our NEOs for fiscal 2021. The amounts actually paid to our NEOs pursuant to these awards are presented in the Summary Compensation Table under the heading “Non-Equity Incentive Plan Compensation.” See the “Fiscal 2021 Named Executive Officer Compensation – Annual Performance-Based Cash Bonuses” section of the CD&A for a discussion of our performance measurement framework and the fiscal 2021 annual performance-based cash bonus awards for our NEOs.
Each of the equity awards reported in the above table was granted under, and is subject to, the terms of the 2019 Incentive Plan. The Compensation Committee has authority to interpret the provisions of each of these plans and to make all required determinations under the plans. Awards granted under the plans are generally only transferable by the NEO by will or the laws of descent and distribution.
Each NEO may be entitled to accelerated vesting of his outstanding equity awards upon certain terminations of employment with the Company in connection with a change of control of the Company. Outstanding awards under our equity plans will also generally vest on a change of control to the extent replacement awards are not provided by the acquiring or successor entity. The terms of this accelerated vesting are described in this section and below under “Potential Payments Upon Termination or Change of Control.”
Each RSU, MSU, and PSU subject to the awards described below represents a contractual right to receive one share of our common stock. Payment will generally be made as the equity award vests. Until delivery of the shares, the NEO has no rights as a stockholder with respect to any shares of our common stock compliedunderlying the award, although the award may provide for dividend equivalents to accrue while the award is outstanding and be paid upon and subject to vesting of the underlying units. Subject to the NEO’s award agreement evidencing the RSUs, MSUs or PSUs, if a NEO’s employment terminates for any reason during the vesting period, any units that have not previously vested will terminate.
Time-Based RSUs
Awards of RSUs granted to our NEOs in fiscal 2021 vest based solely on the NEO’s continued employment or service with the Company. Each of the annual RSU awards granted to the NEOs in fiscal 2021 is subject to a three-year vesting schedule, with one-third of the award vesting on each of the first, second, and third anniversaries of the date of grant.
Performance-Based MSUs
As described more fully above under “Compensation Discussion and Analysis — Fiscal 2021 Named Executive Officer Compensation,” the percentage of the performance-based MSU awards granted to each of the NEOs in fiscal 2021 that become eligible to vest range from 0% to 200% (with years one and two capped at 100%) of the total number of MSUs subject to the award depending on the Company’s TSR compared to that of the Russell 2000 Index TSR over a one-, a two-, and a three-year performance period (with such performance periods ending on September 30, 2020, September 30, 2021 and September 30, 2022, respectively).
Performance-Based PSUs
As described more fully above under “Compensation Discussion and Analysis — Fiscal 2021 Named Executive Officer Compensation,” the percentage of the performance-based PSU awards granted to each of the NEOs in fiscal 2021 that become eligible to vest range from 0% to 200% of the PSUs subject to the award depending on the Company’s design win revenue, non-GAAP gross margin, and non-GAAP operating expense during fiscal 2021. To the extent earned based on performance, PSUs vest in three equal installments on each of the first three anniversaries of the grant date.
SYNAPTICS INCORPORATED | PROXY STATEMENT | 69 |
OUTSTANDING EQUITY AWARDS AT FISCAL 2021 YEAR END
The following table sets forth summary information regarding the outstanding equity awards held by each of our NEOs as of June 26, 2021, including the vesting dates for the portions of these awards that had not vested as of that date.
Stock Awards | ||||||||||
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Name | Grant Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (1) | |||||
(a) | (b) | (c) | (d) | (e) | (f) | |||||
Michael Hurlston | 08/19/19(2) | 44,829 | $6,615,864 | - | - | |||||
08/19/19(3) | - | - | 116,238 | $17,154,404 | ||||||
09/24/19(4) | 98,430 | $14,526,299 | - | - | ||||||
09/24/19(5) | - | - | 23,247 | $3,430,792 | ||||||
10/31/19(6) | 24,539 | $3,621,466 | - | - | ||||||
10/31/19(7) | - | - | 24,539 | $3,621,466 | ||||||
10/31/19(8) | 49,072 | $7,242,046 | - | - | ||||||
08/17/20(9) | 30,648 | $4,523,032 | - | - | ||||||
08/17/20(10) | - | - | 30,648 | $4,523,032 | ||||||
08/17/20(11) | 42,753 | $6,309,488 | - | - | ||||||
Dean Butler | 10/31/19(12) | 20,517 | $3,027,899 | - | - | |||||
10/31/19(13) | - | - | 20,449 | $3,017,863 | ||||||
10/31/19(14) | 40,898 | $6,035,727 | - | - | ||||||
08/17/20(9) | 7,764 | $1,145,811 | - | - | ||||||
08/17/20(10) | - | - | 7,764 | $1,145,811 | ||||||
08/17/20(11) | 10,830 | $1,598,291 | - | - | ||||||
Saleel Awsare | 08/09/17(15) | 2,500 | $368,950 | - | - | |||||
11/14/18(16) | 2,173 | $320,691 | - | - | ||||||
12/14/18(16) | 3,333 | $491,884 | - | - | ||||||
12/14/18(7) | - | - | 1,666 | $245,868 | ||||||
10/31/19(17) | 8,178 | $1,206,909 | - | - | ||||||
10/31/19(7) | - | - | 8,179 | $1,207,057 | ||||||
10/31/19(18) | 16,358 | $2,414,114 | - | - | ||||||
08/17/20(9) | 6,844 | $1,010,038 | - | - | ||||||
08/17/20(10) | - | - | 6,844 | $1,010,038 | ||||||
08/17/20(11) | 9,547 | $1,408,946 | - | - | ||||||
Phillip Kumin | 03/20/20(19) | 8,349 | $1,232,145 | - | - | |||||
03/20/20(7) | - | - | 9,393 | $1,386,219 | ||||||
08/17/20(9) | 4,903 | $723,585 | - | - | ||||||
08/17/20(10) | - | - | 4,903 | $723,585 | ||||||
08/17/20(11) | 6,839 | $1,009,300 | - | - | ||||||
John McFarland | 11/13/18(20) | 3,188 | $470,485 | - | - | |||||
11/13/18(7) | - | - | 3,188 | $470,485 | ||||||
11/13/18(21) | 1,435 | $211,718 | - | - | ||||||
10/31/19(22) | 7,360 | $1,086,189 | - | - | ||||||
10/31/19(7) | - | - | 7,361 | $1,086,336 | ||||||
10/31/19(23) | 14,722 | $2,172,673 | - | - | ||||||
08/17/20(9) | 6,946 | $1,025,091 | - | - | ||||||
08/17/20(10) | - | - | 6,946 | $1,025,091 | ||||||
08/17/20(11) | 9,689 | $1,429,903 | - | - |
(1) | The dollar amounts shown in columns (i) and (k) are determined by multiplying the number of shares or units reported in columns (h) and (j), respectively, by $147.58 per share (the Company’s closing stock price on Nasdaq on June 25, 2021, the last trading day of fiscal 2020). |
(2) | This unvested portion of the RSU award were scheduled to vest in three remaining installments on August 19, 2021, August 19, 2022, and August 19, 2023. |
(3) | This is the unvested portion of the performance-based MSUs granted to Mr. Hurlston in August 2019, which vested in-part on August 19, 2021, and will vest in two remaining installments on August 19, 2022, and August 19, 2023. The number of performance-based MSUs that may be earned will vary based on over- or under-performance of our TSR compared to that of the SPSISC Index TSR over a one-, a two-, a three-, and a four-year performance period (as determined on August 18, 2020, August 18, 2021, August 18, 2022, and August 18, 2023). Payouts are scaled such that below-target performance will result in a reduction in the number of shares of our common stock earned using a two-to-one ratio. Above-target performance will result in a payout of 100% of the target number of shares for the one-, two-, and three-year performance periods with any additional payout deferred until delivery of shares based on our performance over the four-year performance period, where Mr. Hurlston will receive the number of shares of our common stock earned using a two-to-one ratio for the four-year performance period less any shares that were delivered for the one-, two-, and three-year performance periods (subject to a cap of 200% of the target number of shares subject to the MSU awards if our TSR is 50 percentage points or more above the SPSISC Index TSR). If the shares determined for the four-year performance period less any shares |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 70 |
that were delivered for the one-, two-, and three-year performance periods is negative, no claw-back applies. The number of shares reported in the table above reflects the target number of shares subject to the award that were allocated to each of the performance periods that were still in progress as of June 26, 2021. |
(4) | This is the unvested portion of the performance-based MSUs granted to Mr. Hurlston in September 2019, which vests in three remaining installments on September 24, 2021, September 24, 2022, and September 24, 2023. The number of performance-based MSUs that may be earned will vary based on over- or under-performance of our TSR compared to that of the SPSISC Index TSR over a one-, a two-, a three-, and a four-year performance period (as determined on August 18, 2021, August 18, 2022, and August 18, 2023). Payouts are scaled such that below-target performance will result in a reduction in the number of shares of our common stock earned using a two-to-one ratio. Above-target performance will result in a payout of 100% of the target number of shares for the one-, two-, and three-year performance periods with any additional payout deferred until delivery of shares based on our performance over the four-year performance period, where Mr. Hurlston will receive the number of shares of our common stock earned using a two-to-one ratio for the four-year performance period less any shares that were delivered for the one-, two-, and three-year performance periods (subject to a cap of 200% of the target number of shares subject to the MSU awards if our TSR is 50 percentage points or more above the SPSISC Index TSR). If the shares determined for the four-year performance period less any shares that were delivered for the one-, two-, and three-year performance periods is negative, no claw-back applies. The number of shares reported in the table above reflects the target number of shares subject to the award that were allocated to each of the performance periods that were still in progress as of June 26, 2021. |
(5) | This unvested portion of the RSU award is scheduled to vest in three remaining installments on September 24, 2021, September 24, 2022, and September 24, 2023. |
(6) | This unvested portion of the RSU award is scheduled to vest in two remaining installments on October 31, 2021, and October 31, 2022. |
(7) | This is the unvested portion of the performance-based MSUs granted to our NEOs, which vest in two remaining installments on September 30, 2021, and September 30, 2022, as applicable. The number of performance-based MSUs that may be earned will vary based on over- or under-performance of our TSR compared to that of the SPSISC Index TSR over a one-, a two-, and a three-year performance period, with each such period beginning on October 1 of the fiscal year in which the award was granted and ending on September 30 at the end of the applicable period (i.e., on September 30, 2019, September 30, 2020, and September 30, 2021 for grants made in fiscal 2019, and on September 30, 2020, September 30, 2021, and September 30, 2022 for grants made in fiscal 2020). The vesting of any earned MSUs is subject to the NEO’s continued employment through the end of the applicable performance period. Payouts are scaled such that below-target performance will result in a reduction in the number of shares of our common stock earned using a two-to-one ratio. Above-target performance will result in a payout of 100% of the target number of shares for the one- and two-year performance periods with any additional payout deferred until delivery of shares based on our performance over the three-year performance period, where the NEO will receive the number of shares of our common stock earned using a two-to-one ratio for the three-year performance period less any shares that were delivered for the one- and two-year performance periods (subject to a cap of 200% of the target number of shares subject to the MSU awards if our TSR is 50 percentage points or more above the SPSISC Index TSR). If the shares determined for the three-year performance period less any shares that were delivered for the one- and two-year performance periods is negative, no claw-back applies. The number of shares reported in the table above reflects the target number of shares subject to the award that were allocated to each of the performance periods that were still in progress as of June 26, 2021. |
(8) | This is the unvested portion of the performance-based PSUs granted to Mr. Hurlston in October 2019, which vests in two remaining installments on October 31, 2021, and October 31, 2022. The shares of common stock represent a 200% payout of the target quantity based on non-GAAP earnings per share during the one-year performance period ending on June 27, 2020. |
(9) | This unvested portion of the RSU award vested in-part on August 17, 2021, and will vest in two remaining installments on August 17, 2022, and August 17, 2023. |
(10) | This is the unvested portion of the performance-based MSUs granted to our NEOs, which vested in-part on August 17, 2021, and will vest in two remaining installments on August 17, 2022, and August 17, 2023, as applicable. The number of performance-based MSUs that may be earned will vary based on over- or under-performance of our TSR relative to the TSRs of each company in the Russell 2000 Index over a one-, a two-, and a three-year performance period, with each such period beginning on July 1 of the fiscal year in which the award was granted and ending on June 30 at the end of the applicable period. The vesting of any earned MSUs is subject to the NEO’s continued employment through the end of the applicable performance period. No payout will occur if our TSR performance falls below the 25th percentile of the TSRs of each company in the Russell 2000 Index, and a 200% payout will occur if our TSR performance exceeds the 75th percentile of the TSRs of each company in the Russell 2000 Index. Performance payouts between the 25th and 75th percentiles will be determined on a linear basis with performance at the 50th percentile equal to 100% of target. The one- and the two-year performance periods payout up to 200% of the target number of shares, and the payout for the three-year performance period will be calculated based on the total target quantity for the entire grant multiplied by the payout factor, based on performance for the three-year performance period, less shares issued for the one- and two-year performance periods. If the shares determined for the three-year performance period less any shares that were delivered for the one- and two-year performance periods is negative, no claw-back applies. The number of shares reported in the table above reflects the target number of shares subject to the award that were allocated to each of the performance periods that were still in progress as of June 26, 2021. |
(11) | This is the unvested portion of the performance-based PSUs granted to the NEOs on August 17, 2020, which vested in-part on August 17, 2021, and the remainder of which will vest August 17, 2022, and August 17, 2023. The shares of common stock represent a 139.5% payout of the target quantity based on design win revenue (33%), non-GAAP gross margin (33%), and non-GAAP operating expense (33%) during the one-year performance period ended on June 26, 2021. |
(12) | This unvested portion of the RSU award is scheduled to vest in three remaining installments on October 21, 2021, October 21, 2022, and October 21, 2023. |
(13) | This is the unvested portion of the performance-based MSUs granted to Mr. Butler in October 2019, which vests in two remaining installments on September 30, 2021 and September 30, 2022. The number of performance-based MSUs that may be earned will vary based on over- or under-performance of our TSR compared to that of the SPSISC Index TSR over a one-, a two-, and a three-year performance period (as determined on September 30, 2020, September 30, 2021 and September 30, 2022). Payouts are scaled such that below-target performance will result in a reduction in the number of shares of our common stock earned using a two-to-one ratio. Above-target performance will result in a payout of 100% of the target number of shares for the one- and two-year performance periods with any additional payout deferred until delivery of shares based on our performance over the three-year performance period, where Mr. Butler will receive the number of shares of our common stock earned using a two-to-one ratio for the three-year performance period less any shares that were delivered for the one- and two-year performance periods (subject |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 71 |
to a cap of 200% of the target number of shares subject to the MSU awards if our TSR is 50 percentage points or more above the SPSISC Index TSR). If the shares determined for the three-year performance period less any shares that were delivered for the one- and two-year performance periods is negative, no claw-back applies. The number of shares reported in the table above reflects the target number of shares subject to the award that were allocated to each of the performance periods that were still in progress as of June 27, 2021. |
(14) | This is the unvested portion of the performance-based PSUs granted to Mr. Butler in October 2019, which vests in two remaining installments on October 31, 2021, and October 31, 2022. The shares of common stock represent a 200% payout of the target quantity based on non-GAAP earnings per share during the one-year performance period ending on June 27, 2020. |
(15) | This unvested portion of the RSU award vested on July 31, 2021. |
(16) | This unvested portion of the RSU award is scheduled to vest in one remaining installment vest on October 31, 2021. |
(17) | This unvested portion of the RSU award is scheduled to vest in two remaining installments on October 31, 2021, and October 31, 2022. |
(18) | This is the unvested portion of the performance-based PSUs granted to Mr. Awsare in October 2019, which vests in two remaining installments on October 31, 2021, and October 31, 2022. The shares of common stock represent a 200% payout of the target quantity based on non-GAAP earnings per share during the one-year performance period ending on June 27, 2020. |
(19) | This unvested portion of the RSU award is scheduled to vest in three remaining installments on March 30, 2022, March 30, 2023, and March 30, 2024. |
(20) | This unvested portion of the RSU award is scheduled to vest in one remaining installment on October 31, 2021. |
(21) | This is the unvested portion of the performance-based PSUs granted to Mr. McFarland in November 2018, which vests in one remaining installment on November 13, 2021. The shares of common stock represent a 45% payout of the target quantity based on non-GAAP earnings per share during the one-year performance period ending on June 29, 2019. |
(22) | This unvested portion of the RSU award is scheduled to vest in two remaining installments on October 31, 2021, and October 31, 2022. |
(23) | This is the unvested portion of the performance-based PSUs granted to Mr. McFarland in October 2019, which vests in two remaining installments on October 31, 2021, and October 31, 2022. The shares of common stock represent a 200% payout of the target quantity based on non-GAAP earnings per share during the one-year performance period ending on June 27, 2020. |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 72 |
OPTION EXERCISES AND STOCK VESTED — FISCAL 2021
The following table summarizes the exercise of stock options and vesting of stock awards during fiscal 2021 that were previously granted to our NEOs.
Option Awards | Stock Awards | |||||||
| ||||||||
Name | Number of (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired (#) | Value Realized on Vesting ($)(2) | ||||
(a) | (b) | (c) | (d) | (e) | ||||
Michael Hurlston | - | - | 143,333 | $11,485,006 | ||||
Dean Butler | - | - | 25,581 | $2,007,162 | ||||
Saleel Awsare | - | - | 38,302 | $3,219,896 | ||||
Phillip Kumin | - | - | 7,306 | $751,029 | ||||
John McFarland | 33,923 | $1,682,920 | 41,312 | $3,263,873 |
(1) | The dollar amounts shown in column (c) above are determined by multiplying the number of shares subject to the exercise by the difference between the Company’s closing stock price per share on the date of exercise and the exercise price. |
(2) | The dollar amounts shown in column (e) above are determined by multiplying the number of shares or units, as applicable, that vested by the Company’s closing stock price per share on the vesting date. |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
The following section describes the payments and benefits that would be provided to certain NEOs in connection with a termination of their employment with the Company and/or a change of control of the Company as of June 26, 2021.
Severance Policies
Under the Severance Policy, if a NEO’s employment is terminated prior to a “change of control” of the Company either by the Company without “good cause” or by the NEO for “good reason” (as such terms are defined in the policy), contingent on the NEO providing a general release of claims, the NEO is entitled to receive the following payments and benefits: (i) 50% of the executive’s base salary and a pro rata portion of the executive’s target bonus (or, in the case of the CFO only, the greater of 50% of the CFO’s target bonus or a pro rata portion of the CFO’s target bonus) paid in installments over six months, except that, in the case of the Chief Executive Officer, the severance amount is 100% of the Chief Executive Officer’s base salary and 100% of the Chief Executive Officer’s target bonus and is paid in installments over twelve months; and (ii) payment of the premiums charged for the NEO, the NEO’s spouse and the NEO’s eligible dependents to continue health coverage under COBRA for six months after the date of termination (in the case of the Chief Executive Officer, twelve months).
Under the Change of Control Severance Policy, if a NEO’s employment is terminated either by the Company without “good cause” or by the NEO for “good reason” within three months prior to, or eighteen months following, a “change of control” (as such terms are defined in the policy), contingent on the NEO providing a general release of claims, the NEO is entitled to receive the following payments and benefits: (i) 150% of the executive’s base salary and 150% of the executive’s target bonus (or, in the case of the Chief Executive Officer, 200% of base salary and 200% of target bonus) paid in installments over eighteen months; (ii) payment of the premiums charged for the NEO, the NEO’s spouse and the NEO’s eligible dependents to continue health coverage under COBRA for eighteen months after the date of termination; (iii) continuation of life insurance coverage comparable to that provided to the NEO immediately prior to termination of employment for eighteen months; and (iv) accelerated vesting of all of the NEO’s outstanding and unvested equity awards granted by the Company (excluding MSU awards). Further, under the Change of Control Severance Policy, in the event any payment to a NEO would be subject to the excise tax imposed by Section 16(a) filing requirements4999 of the Code (as a result of the payment being classified as a “parachute payment” under Section 280G of the Code), the NEO will receive such payment as would entitle such NEO to receive the greatest after-tax benefit, even if it means that we pay such NEO a lower aggregate payment so as to minimize or eliminate the potential excise tax that would be imposed by Section 4999. We do not provide for tax gross-up payments for any elements of compensation, including for excise taxes imposed pursuant to Sections 280G and 4999 of the Code.
SYNAPTICS INCORPORATED | PROXY STATEMENT | 73 |
Equity Awards
Under the terms of our stock incentive plans (i.e., the 2019 Incentive Plan, the 2019 Inducement Plan, and the 2010 Plan) and the award agreements thereunder, in the event of a change of control of the Company, outstanding awards granted under the plan will not automatically accelerate and become vested. If, however, the awards will not continue, be substituted for, or assumed after the change of control (that is, the awards are to be terminated in connection with the change of control event), the awards would generally become fully vested and, in the case of options, exercisable. The Compensation Committee also has discretion to establish other change of control provisions with respect to awards granted under the plans. As noted above, the Change of Control Severance Policy also provides for accelerated vesting of equity awards if a participant’s employment terminates in circumstances in which the participant would be entitled to severance benefits under the policy as described above.
The PSU awards granted to our NEOs under the plans generally provide that, in the event that a change of control occurs during a “performance period” (as defined therein), the NEO will be deemed to have satisfied the applicable performance-based vesting condition(s) for the award at the target level, and the performance period will be deemed completed as of immediately prior to the change of control. The target number of PSUs will remain outstanding after the change of control and will continue to vest pursuant to the service-based vesting schedule set forth in the NEO’s grant notice. However, in the event the successor or acquiring entity does not assume or substitute for the PSU awards (that is, the PSUs are to be terminated in connection with the change of control event), the PSU awards will become fully vested.
The MSU awards granted to our NEOs under the plans generally provide that, in the event that a change of control occurs during a “performance period” (as defined therein), the number of MSUs that will be eligible to vest for that performance period (the “CIC MSUs”) will be determined based on the Company’s actual TSR performance relative to the TSRs of the companies in the applicable comparator group for the award (based on the consideration for the Company’s common stock in the change of control). A pro-rated portion of the CIC MSUs will become vested as of the change of control based on the portion of the performance period that has elapsed as of the change of control date. The remaining portion of such CIC MSUs (the “Non-Vested MSUs”) will remain outstanding after the change of control and will vest on the applicable vesting dates for the applicable performance period, subject to the NEO’s continued service to the Company. However, in the event the successor or acquiring entity does not assume or substitute for the Non-Vested MSUs (that is, the Non-Vested MSUs are to be terminated in connection with the change of control event), or if the NEO’s employment is terminated within 18 months after the change of control either by the Company without “cause” or by the NEO for “good reason” (as such terms are defined in the award agreement), the Non-Vested MSUs will become fully vested.
Mr. Hurlston’s employment offer letter with the Company also provides that the RSU and MSU awards granted to him in September 2019 shown in the Grants of Plan-Based Awards table above, will fully vest if his employment is terminated either by the Company without “good cause” or by him for “good reason” (as such terms are defined in the Severance Policy). The number of MSUs that will be eligible to vest for the performance period ended on the date of termination will be determined based on the Company’s actual TSR performance relative to the TSRs of the companies in the applicable comparator group for such award and such number of MSUs will become fully vested.
Executive Retention Program
As described in the CD&A above, our Board approved a retention program for certain of our executive officers in May 2019 (including Messrs. McFarland and Awsare). Under the program, these executive officers were entitled to receive a cash payment (determined in each case by the Executive Committee) provided they remained full-time active employees of the Company in good standing through November 1, 2020 for 18 consecutive calendar months starting May 1, 2019. If the executive officer’s employment was terminated prior to November 1, 2020, either by the Company without “good cause” or by the executive for “good reason” (as such terms are defined in the Severance Policy), the executive officer would have received a pro rata portion of the retention amount based on the actual number of consecutive full calendar months completed as a full-time employee of the Company during the retention period, provided that the executive officer resigned from all director and officer positions with the Company and its affiliates and executes a separation agreement and release in a form acceptable to the Company.
SYNAPTICS INCORPORATED | PROXY STATEMENT | 74 |
ESTIMATED SEVERANCE AND CHANGE OF CONTROL BENEFITS
The information in this section sets forth the value of payments and benefits that would be provided to each of the NEOs who was employed by us on June 26, 2021 pursuant to the arrangements described in “Potential Payments Upon Termination or Change of Control” above if their employment with us terminated in the circumstances described above on June 26, 2021 or a change of control of the Company occurred on that date. The severance payable pursuant to Mr. Kumin’s Separation Agreement in connection with his separation from employment is described in “Phillip Kumin Separation Agreement” below.
Severance Benefits (No Change of Control)
The following table presents the payments and benefits that would be provided to each of our NEOs if their employment were terminated on June 26, 2021 either by the Company without “good cause” or by the NEO for “good reason,” as each of these terms is defined in the Severance Policy (other than in connection with a change of control):
Name | Cash Severance (Salary Component) ($) | Cash Severance (Target Bonus Component) ($) | Continuation of Health Insurance Coverage ($)(1) | Equity Acceleration ($) | Total ($) | |||||
Michael Hurlston | $700,000 | $910,000 | $26,523 | $22,531,629 | $24,168,152 | |||||
Dean Butler | $200,000 | $150,000 | $13,621 | - | $363,621 | |||||
Saleel Awsare | $175,000 | $131,250 | $11,741 | - | $317,991 | |||||
Phillip Kumin | $187,500 | $140,625 | $13,261 | - | $341,386 | |||||
John McFarland | $195,000 | $146,250 | $9,472 | - | $350,722 |
(1) | This amount represents the Company’s estimated cost to pay or reimburse the NEO’s COBRA premiums for continued health coverage under the Severance Policy for the applicable period described above. |
Severance Benefits (Change of Control)
The following table presents the payments and benefits that would be provided to each of our NEOs if their employment were terminated on June 26, 2021 either by the Company without “good cause” or by the NEO for “good reason” and such termination occurred within three months prior to or eighteen months following a “change of control,” as each of these terms is defined in the Change of Control Severance Policy:
Name | Cash Severance (Salary Component) ($) | Cash Severance (Target Bonus Component) | Continuation of Health Insurance Coverage | Continuation of Life Insurance ($)(2) | Equity Acceleration ($)(3) | Total ($) | ||||||
Michael Hurlston | $1,400,000 | $1,820,000 | $39,785 | $1,683 | $108,971,000 | $112,232,468 | ||||||
Dean Butler | $600,000 | $450,000 | $40,863 | $1,683 | $16,359,948 | $17,452,494 | ||||||
SaIeel Awsare | $525,000 | $393,750 | $35,223 | $1,606 | $13,411,684 | $14,367,263 | ||||||
Phillip Kumin | $562,500 | $421,875 | $39,785 | $1,683 | $7,646,811 | $8,672,654 | ||||||
John McFarland | $585,000 | $438,750 | $28,418 | $1,683 | $13,366,951 | $14,420,802 |
(1) | This amount represents the Company’s estimated cost to pay or reimburse the NEO’s COBRA premiums for continued health coverage under the Change of Control Severance Policy for the applicable period described above. |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 75 |
(2) | This amount represents the Company’s estimated cost to provide continued life insurance coverage to the NEO under the Change of Control Severance Policy for the applicable period described above. |
(3) | As described above, if a change of control of the Company occurs during the performance period for a PSU award or MSU award, the number of PSUs or MSUs subject to the award will be adjusted at the time of the change of control as described under “Potential Payments Upon Termination or Change of Control” above. The amounts reflected in this column represent the value of the NEO’s RSU awards, PSU awards and MSU awards (such number of PSUs and MSUs determined after giving effect to the adjustment upon the change of control) that would be subject to accelerated vesting in connection with a termination of the NEO’s employment by the Company without “good cause” or by the NEO for “good reason” pursuant to the Change of Control Severance Policy or the applicable award agreement as described above and are calculated using the closing price of our common stock on Nasdaq as of June 25, 2021 (the last trading day of fiscal 2021), which was $147.58 per share, assuming that both the change of control and termination of the awards occurred on June 26, 2021. |
As noted above, the adjustment of the MSU awards upon a change of control will be made based on the Company’s performance through the change of control date. A pro-rated portion of these adjusted MSUs (referred to above as “CIC MSUs”) will become vested as of the change of control based on the portion of the performance period that has elapsed as of the change of control date. The remaining portion of the CIC MSUs will remain outstanding after the change of control and will vest on the applicable vesting dates for the applicable performance period, subject to the NEO’s continued service to the Company. If a change of control had occurred on June 26, 2021, the aggregate value of the CIC MSUs held by each NEO that would have vested as of the change of control date (regardless of any termination of the NEO’s employment in connection with or after the change of control) would be as follows: Mr. Hurlston - $45,841,199; Mr. Butler - $5,165,370; Mr. Awsare - $4,555,208; Mr. Kumin - $3,186,881; and Mr. McFarland - $5,349,565. For clarity, these amounts are included as part of each NEO’s “Equity Acceleration” benefit reported in the table above.
If the awards were not substituted for, assumed or otherwise continued following a change of control transaction (that is, the awards were to be terminated in connection with the transaction), the unvested portion of the awards would also generally accelerate and become fully vested (with awards of PSUs and MSUs being adjusted upon the change of control as described above). In these cases, the value of the acceleration of the unvested portion of the awards, excluding the value of the CIC MSUs, would be as follows: Mr. Hurlston - $63,129,801; Mr. Butler - $11,194,579; Mr. Awsare - $8,856,475; Mr. Kumin - $4,459,930; and Mr. McFarland - $8,017,386.
Phillip Kumin Separation Agreement
In August 2021, the Company entered into a separation agreement with Mr. Kumin pursuant to which Mr. Kumin’s employment with the Company terminated effective August 31, 2021. Mr. Kumin received the following payments and benefits in connection with his separation from the Company: (i) a cash payment equal to six months of Mr. Kumin’s base salary, or $187,500, payable in a lump sum within seven business days after the effective date of the separation agreement; (ii) an additional cash payment of $200,000, payable in a lump sum within seven business days after the effective date of the separation agreement; and (iii) six months of COBRA continuation coverage under the Company’s health insurance benefit plan. All then-unvested Company RSU, PSU and MSU awards held by Mr. Kumin terminated as of August 31, 2021. The Separation Agreement contains a general release of claims, as well as non-disparagement and indefinite confidentiality covenants.
SYNAPTICS INCORPORATED | PROXY STATEMENT | 76 |
Pursuant to the Exchange Act, we are required to disclose in this Proxy Statement the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of all of our employees (excluding our Chief Executive Officer). Based on SEC rules for this disclosure and applying the methodology described below, we have determined that our Chief Executive Officer’s total compensation for fiscal 2021 was $11,704,655, and the median of the total fiscal 2021 compensation of all of our employees (excluding our Chief Executive Officer) was $116,635. Accordingly, we estimate the ratio of our Chief Executive Officer’s annual total compensation for fiscal 2021 to the median of the fiscal 2021 annual total compensation of all of our employees (excluding our Chief Executive Officer) to be 100 to 1.
Of our 1,463 employees, 46 are employed outside the U.S. in the following countries: Korea (33), Switzerland (8), Canada (2), Singapore (2), and Denmark (1). These employees account for approximately 3.1% of our total employee population. In determining the median employee, we have chosen to exclude our 46 non-U.S. employees as permitted under the de minimis exemption to Item 402(u) of Regulation S-K, which allows us to exclude up to 5% of our total employees who are non-U.S. employees.
We identified the median employee by taking into account the total cash compensation and the grant date fair value of equity awards granted in fiscal 2021 for all individuals, excluding our Chief Executive Officer, who were employed by us or one of our affiliates on June 26, 2021, the last day of our fiscal year. We included all U.S. employees, whether employed on a full-time, part-time, temporary or seasonal basis.
We did not make any assumptions, adjustments or estimates with respect to their total compensation for fiscal 2021, other than to annualize the base wages for any full-time employee not employed by us for the entire year. Once the median employee was identified as described above, that employee’s total annual compensation for fiscal 2021 was determined using the same rules that apply to reporting the compensation of our NEOs (including our Chief Executive Officer) in the “Total” column of the Summary Compensation Table.
SYNAPTICS INCORPORATED | PROXY STATEMENT | 77 |
SECURITYEQUITY COMPENSATION PLAN INFORMATION
The Company currently maintains four equity incentive plans: the 2010 Plan, the 2019 Incentive Plan, the 2019 Inducement Plan, and the 2019 Employee Stock Purchase Plan (the “2019 ESPP”). All such plans, except for the 2019 Inducement Plan, have been approved by the Company’s stockholders. The following table provides certain information as of June 26, 2021 with respect to shares of our common stock available for issuance under our equity compensation plans.
Plan Category | Number of Shares of Common Stock to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Shares of Common Stock Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Shares Reflected in Column (a)) | |||
(a) | (b) | (c) | ||||
Equity Compensation plans approved by stockholders | 2,160,509(1) | $66.68(2) | 3,043,478(3) | |||
Equity Compensation plans not approved by stockholders | 558,178(4) | - | - | |||
Total | 2,718,687 | $66.68 | 3,043,478 |
(1) | Includes (i) for the 2019 Incentive Plan, no shares subject to outstanding stock options, 760,169 shares subject to outstanding RSU awards, 362,935 shares subject to outstanding PSU awards, and 388,952 shares subject to outstanding MSU awards; and (ii) for the 2010 Plan, 55,061 shares subject to outstanding stock options, 366,384 shares subject to outstanding RSU awards, 126,928 shares subject to outstanding PSU awards, and 100,080 shares subject to outstanding MSU awards. In each case, the number of shares subject to outstanding PSU and MSU awards is presented based on (i) levels actually achieved for the performance conditions for which the performance period has been completed and (ii) at maximum levels for the other performance conditions for awards still in a performance period. No new awards may be granted under the 2010 Plan. |
(2) | Reflects the weighted-average exercise price of the 55,061 stock options included in column (a). This weighted-average exercise price does not reflect shares subject to RSU, PSU or MSU awards. |
(3) | Includes 1,834,896 shares available for issuance under the 2019 Incentive Plan and 1,208,582 shares available for issuance under the 2019 ESPP, in each case as of June 26, 2021. The calculation of shares available for issuance under the 2019 Incentive Plan is presented after taking into account a reserve for a sufficient number of shares to cover the vesting and payment of outstanding awards under the plan, including performance-based vesting awards at (i) levels actually achieved for the performance conditions for which the performance period has been completed and (ii) at maximum levels for the other performance conditions for awards still in a performance period. The shares available under the 2019 Incentive Plan may, subject to the plan’s limits, be used for any type of award authorized under the 2019 Incentive Plan, including stock options, stock appreciation rights, restricted stock, stock units, dividend equivalents, and other awards specified therein. The number of shares available for issuance under the 2019 ESPP is presented before giving effect to any purchases that may be made under the 2019 ESPP during the offering period that began March 16, 2021. |
(4) | Includes, for the 2019 Inducement Plan, no shares subject to outstanding stock options, 196,733 shares subject to outstanding RSU awards, 35,268 shares subject to outstanding PSU awards, and 326,177 shares subject to outstanding MSU awards (with the number of shares subject to outstanding PSU and MSU awards determined as described in note (1) above). No new awards may be granted under the 2019 Inducement Plan. |
SYNAPTICS INCORPORATED | PROXY STATEMENT | 78 |
BENEFICIAL OWNERSHIP OF PRINCIPALCERTAIN STOCKHOLDERS DIRECTORS, AND OFFICERS
The following table sets forth certain information, as of August 20, 2021, regarding the beneficial ownership of our common stock as of August 17, 2018 by (1) each director; (2) the Named Executive Officers listed in the Fiscal 2018 Summary Compensation Table; (3) all directors and current executive officers as a group; and (4)for (i) each person or entity known by usthe Company to beneficially own or to exercise voting or dispositive control overbe the beneficial owner of more than 5% of ourthe Company’s outstanding common stock.
Shares Beneficially Owned | ||||||||
Name of Beneficial Owner | Number(1) | Percent(2) | ||||||
Directors and Named Executive Officers: | ||||||||
Richard A. Bergman(3) | 382,537 | 1.1 | % | |||||
Wajid Ali(4) | 54,018 | * | ||||||
Kevin D. Barber(5) | 58,255 | * | ||||||
Jeffrey D. Buchanan(6) | 19,540 | * | ||||||
Nelson C. Chan(7) | 63,739 | * | ||||||
Keith B. Geeslin(8) | 34,489 | * | ||||||
Russell J. Knittel(9) | 27,923 | * | ||||||
Francis F. Lee(10) | 59,207 | * | ||||||
Richard L. Sanquini(11) | 25,347 | * | ||||||
Huibert Verhoeven(12) | 54,441 | * | ||||||
James L. Whims(13) | 50,177 | * | ||||||
Alex Wong(14) | 98,642 | * | ||||||
All directors and current executive officers as a group (14 persons)(15) | 981,616 | 2.7 | % | |||||
5% Stockholders | ||||||||
Ameriprise Financial, Inc.(16) | 4,631,342 | 13.1 | % | |||||
The Vanguard Group(17) | 3,652,913 | 10.3 | % | |||||
Blackrock, Inc.(18) | 3,509,397 | 9.9 | % |
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