Notice of 2019 Annual Meeting and Proxy Statement
UNITED STATES
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Notice of 2019 Annual Meeting and Proxy Statement
January 25, 2019
 | Analog Devices, Inc. One Analog Way Wilmington, MA 01887 |
Letter From Our Board
DEAR SHAREHOLDER:Dear Fellow Shareholders,
YouFirst and foremost, we thank you for your continued investment in Analog Devices, Inc., or ADI.
At ADI, we are committed to maximizing shareholder value creation over the long-term, and we have a highly engaged Board and sound corporate governance structure in place to oversee this commitment.
The ADI Board of Directors cordially invitedinvites you to attend the 2021 Annual Meeting of Shareholders, toor Annual Meeting, which will be held virtually on Wednesday, March 10, 2021, at 9:00 a.m. local time on Wednesday, March 13, 2019,. Due to the continued public health concerns about in-person gatherings related to the COVID-19 pandemic, the Board of Directors supports the company’s decision that this year, ADI will hold a virtual Annual Meeting conducted via live webcast in order to protect the health and well-being of its shareholders, employees and directors. We believe that hosting a virtual meeting will facilitate shareholder attendance and participation at our offices located at 125 Summer Street, Boston, Massachusetts 02110.
At the Annual Meeting by enabling shareholders to participate remotely from any location around the world. We have designed the format of the virtual Annual Meeting so that shareholders have the same rights and opportunities to vote and participate as they would have at a physical meeting. Shareholders will be able to submit questions before and during the meeting using online tools, providing you are being asked to:
1. Elect eleven members of our Board of Directors, each to servewith the opportunity for a term expiring atmeaningful engagement with the next annual meeting of shareholders;
2. Approve anon-binding advisory proposalcompany. For instructions on the compensation of our named executive officers;
3. Ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the 2019 fiscal year; and
4. Consider a shareholder proposal described in the proxy statement, if properly presented atattending the Annual Meeting.Meeting virtually and voting your shares, please see pages A-6 and A-7.
YourYou vote is very important to us. Our Board of Directors recommends thatencourages you vote FOR the election of each of the directors named in the proxy statement, FOR items 2 and 3 and AGAINST item 4.
Please carefully review the attachedto read these proxy materials and taketo vote your shares “FOR” each proposal.
Thank you for the trust you place in us and the opportunity to serve as your directors.
THE ADI BOARD OF DIRECTORS
| Analog Devices, Inc. One Analog Way Wilmington, MA 01887 |
Letter From Our CEO
Dear Fellow Shareholders,
The global pandemic created a challenging year for all. We were forced to rethink the health and safety of our employees as well as our customer engagement and business operations, while balancing our lives at home. At ADI, I’m proud of how we worked together with determination and optimism. We embraced and learned from this undoubtedly tough time, while making great strides in strengthening ADI for the future.
Fiscal 2020 Results & Strategic Progress
Over the past decade, we strategically realigned our portfolio toward more durable end markets, creating a more diverse business across customers, products and applications. At the same time, we accelerated our innovation engine to castcontinue to develop cutting-edge technologies, guided by our vision to solve our customers’ and the world’s toughest engineering challenges. It’s this combination of diversity and innovation, along with our financial discipline, that creates a virtuous cycle of innovation-led success.
Looking back at fiscal 2020, it was an uneven year. The first half was dampened by the pandemic, but the second half came back strong with revenue increasing 14% versus the first half. In total, we generated $5.6 billion of revenue, and our business-to-business (B2B) end markets of industrial, communications and automotive cumulatively outperformed peers for a third straight year. Despite this tough environment, we maintained solid profitability and delivered strong cash generation with operating cash flow of $2.0 billion and free cash flow of $1.8 billion. Notably, our free cash flow margin continues to be in the top 10% of companies in the S&P 500. And, importantly, we returned more than $1.1 billion through dividends and share repurchases.
This resilient business model allows us to invest in our future during any economic backdrop. In fiscal 2020, we spent more than $1.0 billion in research and development with over 95% targeted at the most attractive B2B opportunities. This includes funding our go-to-market activities and product development to drive new vectors of growth, such as digital healthcare. We also announced our proposed acquisition of Maxim Integrated Products, Inc., or Maxim Integrated. This complementary combination will deepen our domain expertise and engineering capabilities, enabling us to create even more complete solutions for our customers.
Destination for the Best Analog Engineering Talent
Over the last several years, our customers have reallocated more of their engineering resources towards software, away from hardware. As a result, they are increasingly relying on us to fill this void and be their critical innovation partner in architecting analog solutions. Given these dynamics, I believe talent will become an even more important competitive differentiator across the semiconductor industry.
We have built ADI to be a destination for the world’s best analog engineering talent. At our core, we are a global team of problem solvers who do not wait for the future—but imagine it and build it. That’s why we’re committed to empowering our engineers with freedom and unlimited opportunities to improve the world around us and push the boundaries of what’s possible. Once combined with Maxim Integrated, we will stand at 10,000 engineers strong, and this increased scale will unlock additional avenues of professional growth for our people.
Our Mission to “Engineer Good”
At ADI, we are passionately driven by our mission to “engineer good” for generations to come. This mission came to life in a unique way in fiscal 2020 as the COVID-19 pandemic revealed the fragility of our global healthcare system. To help meet the needs of the medical community, our team prioritized production of our healthcare solutions to support customers and we continued to partner with hospitals and biotech start-ups to develop solutions that leverage our technologies. Furthermore, our impact extended beyond our own facilities and capabilities as we made multi-million dollar donations through the Analog Devices Foundation to aid both global and local pandemic response efforts.
Beyond the immediate challenges of the pandemic, we believe there is much more ADI can do, leveraging our expertise to preserve and regenerate our precious natural ecosystem. In support of this, we launched the semiconductor industry’s first green bond to help finance projects that offer sustainability benefits within our own operations. We also recently joined the United Nations Global Compact, a voluntary leadership platform for the development, implementation and disclosure of responsible business practices, that reinforces our commitment to operate with integrity.
A More Connected, Safer and Sustainable Future
We are living in a time of unbounded opportunities driven by astonishing innovation in the third wave of Information and Communications Technology. This wave is characterized by pervasive sensing, hyper- scale and edge computing and ubiquitous connectivity. In this world, our customers are prioritizing digitalization and connectivity more than ever and new applications are emerging.
ADI, where data is born, provides the essential technologies to interpret the physical world around us and is enabling this market revolution. Over the years, we have invested in an industry-leading product portfolio with a suite of capabilities that range from DC to 100 gigahertz, from nanowatts to kilowatts, and from sensor to cloud. This portfolio supports customers of all sizes and is the foundation upon which we build more targeted, integrated solutions for our vertical applications. From Industry 4.0 to vehicle electrification to 5G communications, our next generation smart architectures are shaping a more connected, safer and sustainable future.
Building Resilience
In his book, “Antifragile: Things That Gain From Disorder,” author Nassim Nicholas Taleb writes that certain systems in nature, business and society actually gain strength when they are stressed, when randomness takes root, and chaos is the order of the day, calling them antifragile.
Over our 56-year history, ADI has proven to be antifragile. We have not only remained resilient during crises but have demonstrated an ability to learn and adapt quickly in a period of tremendous change. I am encouraged by our momentum and I am more confident than ever in ADI’s place in this reordered world.
Thank you for choosing to invest in ADI and for your vote.continued trust in our management team.
Yours sincerely,
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VINCENT ROCHE President and Chief Executive Officer |
| B2B Highlights | ||||||
| Industrial | ||||||
| Industrial is characterized by a diversity of customers, products and applications, and long product life cycles. ADI’s heritage in this market positions us as the partner of choice to meet the expanding needs of our customers from traditional challenges of precision, control and power management, as well as emerging challenges of connectivity and safety. | |||||
| Automotive | ||||||
| ADI is creating a more sustainable, safe and immersive vehicle experience with our core franchises of audio processing, connectivity and power management. As we look ahead, the electric vehicle revolution unlocks new opportunities. We are a market leader in battery management systems, with over half of the top 10 electric vehicle brands using our solution. | |||||
| Communications | ||||||
| In wireless, ADI is enabling next generation 5G systems. With our expertise in radio signal chains, microwave, mmWave and power, our radio solutions possess best-in-class performance, size and cost. In wireline, we are a leader in precision signal chains for optical control systems and power management, used by carrier networks and in data centers. | |||||
| Digital Healthcare | ||||||
| Our core healthcare technologies, consisting of medical imaging, instrumentation and vital signs monitoring, have been critical in the fight against COVID-19. Looking forward, one of our missions is to fast-track the affordability, accessibility and wellness focus of global healthcare by extending clinical-grade patient care from the hospital to the home. | |||||
| Analog Devices, Inc. One Analog Way Wilmington, MA 01887 |
A Global Team
“At ADI, we don’t wait for the future — we imagine it and then we build it. Our global team of insatiably curious problem solvers is working every day to address our customers’ toughest challenges and develop breakthrough solutions that impact the world. By empowering our team through investment, creative freedom and a culture of innovation, we strive to be the destination for the world’s best analog engineering talent.”
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DAN LEIBHOLZ Chief Technology Officer |
Talent Priorities
Core to our talent engagement and development strategy is building a culture of 360-degree training and development throughout each team member’s career. We provide all of our people with the freedom, opportunity, and support so that they can realize their full potential and collectively shape the ADI of the future.
1. | Continuous Education & Networking
| Encouraging our team to keep learning & grow their networks | Our annual General Technical Conference (GTC) is dedicated to showcasing our talent & innovation. In fiscal 2020, 5,000+ engineers from 30+ countries participated in a virtual meeting with 280+ technical papers, posters, demos & live workshops. | Hundreds of employees take part in our ADI Technical University, which offers in-person and on-demand classes & workshops. It provides employees with the opportunity to broaden their engineering and functional expertise as well as learn through hands-on experiences. | ||||
2. | Promoting Experiential Career Development
| Investing in our people with hands-on experiences | GEEC, or Global Early Employee Challenge, is a company-wide competition that develops the business skills of those with five or fewer years of experience. We had 400+ early career participants across 60 teams in fiscal 2020. | Analog Garage is our innovation incubation laboratory, bringing together 80+ engineers, data scientists, and hardware & software experts to create new technologies & new solutions in a fast-moving, idea-driven startup atmosphere. | ||||
3. | Broadening Access
| Developing leaders who reflect our global business | 20 years ago, we created the Academe Linkage program in the Philippines to forge long-term, collaborative relationships with local higher education institutions. This has helped inspire many students to | �� pursue engineering degrees & dramatically aided our recruiting efforts. Today, we have a team of 1,800+ engineers, including those who develop & test algorithms. | ||||
4. | Prioritizing Diversity & Inclusion
| Building a culture of inclusion & embracing different perspectives | We support women’s career development through our Elevate program. More than 50% of women in this accelerated developmentprogram have moved into higher profile career roles. | We have a variety of Employee Networks that help create a sense of inclusion. We added two new networks this year, including The Green Team to support ESG, for a total of six across ADI. |
We know that amazing talent drives our success as a company. That’s why we aim to be the destination for the world’s best analog engineering talent. We invest in career-long talent development and foster an inclusive workplace where all voices and diverse backgrounds can contribute, thrive and produce better outcomes for our employees and customers.
 | ~7,600 Engineers Worldwide |
| ~3,600 Global Patents | |||||
 | $1B+ R&D Investment |
| 96% Employee Retention |
| SPOTLIGHT: |
Analog Devices Fellows
ADI Fellow is a distinguished technical position given to engineers who contribute significantly to the company’s success through exceptional innovation, leadership and an unparalleled ability to unite and mentor others. In addition to their business and innovation impact, Fellows serve as company ambassadors and are recognized as industry leaders in their fields of expertise.
“ADI has changed a lot over the last five years, and now the opportunities for exploration and broadening your skillset are just enormous. It’s a very rewarding, dynamic environment and people who are good at self-direction are going to find that there is unlimited opportunity here.”
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ADI Fellow |
“New technologies find their way to market and the developers of the old way find new things to do. This culture of constant reinvention has a lot to do with ADI’s success over the last 50+ years. You can’t do one thing for that length of time in the world of technology and expect to be successful.”
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VP of Technology for Automotive, Communications and Aerospace |
ANALOG DEVICES, INC.
ONE TECHNOLOGY WAY
| Analog Devices, Inc. One Analog Way Wilmington, MA 01887 |
Notice of 2021
NORWOOD, MASSACHUSETTS 02062-9106
NOTICE OF 2019 ANNUAL MEETING OF SHAREHOLDERS
To Be Held On March 13, 2019Annual Meeting of Shareholders
TO OUR SHAREHOLDERS:2021 Annual Meeting of Shareholders
Date and Time: Wednesday, March 10, 2021 9:00 am local time | Place: Virtual Meeting www.virtualshareholdermeeting.com/ADI2021 | Record Date: Monday, January 4, 2021 |
Items of Business
The 20192021 Annual Meeting of Shareholders of Analog Devices, Inc. will be held at our offices at 125 Summer Street, Boston, Massachusetts 02110,virtually on Wednesday, March 13, 201910, 2021 at 9:00 a.m. local time.time. At the meeting, shareholders will consider and vote on the following matters:
| 1. | To elect the eleven director nominees named in this proxy statement to our Board of Directors, each to serve for a term expiring at the next annual meeting of shareholders; |
| 2. | To approve, bynon-binding “say on pay” vote, the compensation of our named executive officers, as described in the Compensation Discussion and Analysis, executive compensation tables and accompanying narrative disclosures in this proxy statement; and |
| 3. | To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending |
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The shareholders will also act on any other business that may properly come before the meeting.
WeThe Board recommends that you vote “FOR” each director nominee included in Proposal 1 and “FOR” each of the other proposals. The full text of these proposals is set forth in this proxy statement. Registered shareholders of the Company at the close of business on the record date are providingeligible to vote at the meeting.
Please note that we are furnishing proxy materials and access to our proxy materials overstatement to our shareholders via our website instead of mailing printed copies to each of our shareholders. By doing so, we save costs and reduce our impact on the Internet under the U.S. Securities and Exchange Commission’s “notice and access” rules. As a result,environment.
Beginning on January 22, 2021, we are mailingwill mail to our shareholders a Notice of Internet Availability of Proxy Materials, (the “Notice”) instead of a paper copy of this proxy statement and our Annual Report for the fiscal year ended November 3, 2018 (the “2018 Annual Report”). We are mailing theor Notice, on or about January 25, 2019, and itwhich contains instructions on how to access those documents overour proxy materials and vote online. If you attend the Internet.Annual Meeting virtually, you may withdraw your proxy and vote online during the Annual Meeting if you so choose. The Notice also contains instructions on how each of our shareholders can receive a paper copy of our proxy materials, including this proxy statement, our 20182020 Annual Report and a form of proxy card or voting instruction card. All shareholders who do not receive the Notice, including shareholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail unless they have previously requested delivery of proxy materials electronically. We have chosen to employ this distribution process to conserve natural resources and reduce the costs of printing and distributing our proxy materials.
Shareholders of record at the close of business on January 7, 2019 are entitled to vote at the meeting. Your vote is important no matter how many shares you own. Whether you expect to attend the meeting or not, please vote your shares by using the Internet as described in the instructions included on your Notice, by calling the toll-free telephone number, or, if you received a paper copy of the proxy materials, by completing, signing, dating and returning your proxy card or voting instruction form. Your prompt response is necessary to ensure that your shares are represented at the meeting. You can change your vote and revoke your proxy at any time before the polls close at the meeting by following the procedures described in the accompanying proxy statement.
All shareholders are cordially invited to attend the meeting.
By order of the Board of Directors,
MARGARET K. SEIF
Secretary
Norwood, Massachusetts
January 25, 2019
2019 Proxy Statement i
ANALOG DEVICES, INC.
ONE TECHNOLOGY WAY
NORWOOD, MASSACHUSETTS 02062-9106
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
March 13, 2019
This proxy statement contains information about the 2019 Annual Meeting of Shareholders, or Annual Meeting, of Analog Devices, Inc. The Annual Meeting will be held on Wednesday, March 13, 2019, at 9:00 a.m. local time, at our offices at 125 Summer Street, Boston, Massachusetts 02110. You may obtain directions to the location of the Annual Meeting by visiting our website at www.analog.com or by contacting our Investor Relations Department at Analog Devices, Inc., One Technology Way, Norwood, Massachusetts 02062; telephone:781-461-3282.
We are furnishing this proxy statement to you in connection with the solicitation of proxies by the Board of Directors of Analog Devices, Inc. (which we also refer to as Analog Devices, ADI, or the Company) for use at the Annual Meeting and at any adjournment, postponement, continuation or rescheduling of the meeting. All proxies will be voted in accordance with the instructions they contain. If you do not specify your voting instructions on the proxy that you submit for the Annual Meeting, it will be voted in accordance with the recommendation of the Board of Directors. You may revoke your proxy at any time before it is exercised at the Annual Meeting by giving our Secretary written notice to that effect.
We are providing access to our proxy materials over the Internet under the U.S. Securities and Exchange Commission’s “notice and access” rules. As a result, we are mailing to our shareholders a Notice of Internet Availability of Proxy Materials, or Notice, on or about January 25, 2019, and it contains instructions on how to access this proxy statement and our Annual Report for the fiscal year ended November 3, 2018, or our 2018 Annual Report, over the Internet. The Notice also contains instructions on how each of our shareholders can receive a paper copy of our proxy materials, including this proxy statement, our 2018 Annual Report, and a form of proxy card or voting instruction card. All shareholders who do not receive the Notice, including shareholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail unless they have previously requested delivery of proxy materials electronically.
Important Notice RegardingFurther information about how to attend the Availability of Proxy Materials forAnnual Meeting online, vote your shares online during the Annual
Meeting of Shareholders to be Held on March 13, 2019:
This proxy statementmeeting, and submit questions online before and during the 2018 Annual Report to Shareholders are available for viewing, printing and downloading at www.analog.com/AnnualMeeting.
This summary highlights information contained elsewheremeeting is included in this proxy statement. This summary does not contain allA list of our registered holders as of the information that you should consider and you should read the entire proxy statement before voting. For more informationclose of business on the 2018 financialrecord date will be made available to shareholders during the meeting at www.virtualshareholdermeeting.com/ADI2021. To access such list of registered holders beginning January 24, 2021 and operating performanceuntil the meeting, shareholders should email Analog Devices Investor Relations at investor.relations@analog.com.
Your vote is important no matter how many shares you own, and we encourage you to vote promptly whether or not you plan to attend the Annual Meeting.
By Order of the Company, please review the Company’s Annual Report on Form10-K for the year ended November 3, 2018 that was filed with the U.S. Securities and Exchange Commission on November 27, 2018.Board of Directors,
YOON AH OH
Corporate Secretary
January 22, 2021
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COMPANY STRATEGY AND FISCAL 2018 BUSINESS HIGHLIGHTS
We are a leading global high-performance analog technology company dedicated to solving the toughest engineering challenges. We enable our customers to interpret the world around us by intelligently bridging the physical and digital with unmatched technologies that sense, measure, power, connect and interpret. Our strategy is to focus on challenges that our customers have in applications that matter the most, helping them to grow and adapt their offerings in complex and evolving markets. Our focus is largely on thebusiness-to-business (B2B) markets of industrial, automotive and communications and their applications, as well as a few selected consumer applications, with the goal of driving sustainable and profitable growth for Analog Devices over the long-term. Our superior innovation and the 2017 acquisition of Linear Technology Corporation, which we refer to as Linear Technology, broadened our technology base, which will help us deliver more value to our customers and position us for long-term profitable growth.
2 Analog Devices, Inc.
Fiscal 2018 Financial and Strategic Results
$6.2 Billion Revenue $2.4 Billion Operating Cash Flow Trailing Twelve Months $2.2 Billion Free Cash Flow* Trailing Twelve Months 68.3% GAAP Gross Margins 71.2% Non-GAAP Gross Margins* 30.3% GAAP Operating Margins 42.4% Non-GAAP Operating Margins* $3.97 GAAP Diluted Earnings Per Share $5.94 Non-GAAP Diluted Earnings Per Share* *See Appendix A for additional information regarding non-GAAP financial measures and reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures SHAREHOLDER VALUE CREATION $890m 7% We returned ~$890 million to shareholders in the form of dividends and share repurchases. Increased our dividends per share paid to shareholders by 7%. 3- and 5-year TSR of 69% and 111%, respectively, outperforming the S&P 500 over the same periods. STRATEGIC ACCOMPLISHMENTS Significant progress made on the integration of Linear Technology. The combination of Analog Devices, Linear Technology, and HittiteMicrowave Corporation (acquired in 2014) has enabled us to create an unparalleled high performance analog franchise. Achieved $150 million of cost synergies announced in connection with Linear Technology acquisition. Revenue synergy opportunity has doubled to $2 billion over the past 18 months.
Pay for Performance
A significant portion of the total target compensation for our named executive officers, or NEOs, is variable and directly linked to Company performance in the form of variable cash incentive bonus payments and equity awards. This approach provides our executives with an opportunity to earn above peer average compensation if ADI delivers strong results. Conversely, our NEOs’ total compensation is modulated if our business results are below target.
PERFORMANCE AND INCENTIVE PAY MIX
Salary Cash Bonus Short-Term Variable Incentive Time-Based RSUs Performance-Based RSUs Long-Term Equity Incentive Options Target Value Base Salary Short-Term Variable Incentive Long-Term Equity Incentive Performance-based incentives: 90% 11% 16% 74% 2018 Target Comp for CEO 19% 19% 62% Performance-based incentives: 81% 2018 Target Comp for Other NEOs Excluding SVP, Power Products
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2019 Proxy StatementPLEASE VOTE BY FOLLOWING THE INSTRUCTIONS ON YOUR PROXY CARD OR VOTING INSTRUCTION FORM 3
The pay mix charts above are based on target compensation consisting of the annual rate of base salary and short-term and long-term incentive targets approved by the Compensation Committee. The pay mix for the “other NEOs” in the chart above excludes Mr. Pietkiewicz as he remained on the legacy Linear Technology variable cash incentive bonus program for the first half of fiscal 2018. It also excludes the equity awards granted to Messrs. Cotter and Hassett in September 2018 in recognition of their meaningful contributions in fiscal 2018 in driving our top line revenue growth and profit expansion. If those equity awards were taken into account, the percentage of performance-based incentives would increase for such NEOs. For more information about the components of the performance and incentive pay mix for our NEO compensation, see “Compensation Discussion and Analysis—Components of Executive Compensation.”
Please see the Compensation Discussion and Analysis section beginning on page 39 of this proxy statement for a more detailed description of our executive compensation program, philosophy and design.
Pay and Governance Practices
Our pay and governance practices are designed to align our executives’ interests with our shareholders. For example:
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4 Analog Devices, Inc.
Shareholder Engagement By the Numbers
We contacted our TOP 25 SHAREHOLDERS and other key stakeholders Representing over 63% of our shares outstanding, with invitations to discuss a variety of matters, including our executive compensation program and how they evaluate it. Of those shareholders that accepted our invitation the topics covered included: Board composition: diversity, qualifications, skills, and leadership structure Board evaluations and refreshment Corporate governance trends, including environmental, social and governance considerations Executive compensation polices and design
2019 Proxy Statement 5
BOARD OF DIRECTORS
Director Nominees
| Name | Age | Director Since | Principal Occupation | Independent Director | Other Public Company Board(s) | Committee Membership | ||||||
Ray Stata | 84 | 1965 | Chairman of the Board of Analog Devices, Inc. | Ò | — | — | ||||||
Vincent Roche | 58 | 2013 | President and Chief Executive Officer of Analog Devices, Inc. | Ò | 1 | — | ||||||
James A. Champy | 76 | 2003 | Former Vice President of the Dell/Perot Systems business unit of Dell, Inc. | ✓ | — | NCGC (Chair) | ||||||
Anantha P. Chandrakasan | 50 | 2019 | Dean of MIT’s School of Engineering and Vannevar Bush Professor of Electrical Engineering and Computer Science | ✓ | — | — | ||||||
Bruce R. Evans | 59 | 2015 | Chairman of the Board of Summit Partners and Senior Advisor | ✓ | 1 | AC | ||||||
Edward H. Frank | 62 | 2014 | Co-Founder and former CEO of Cloud Parity | ✓ | 2 | CC, NCGC | ||||||
Karen M. Golz | 64 | 2018 | Former Global Vice Chair | ✓ | — | AC | ||||||
Mark M. Little | 66 | 2017 | Former SVP, GE Global Research & Chief Technology Officer of General Electric Company | ✓ | — | AC | ||||||
Neil Novich | 64 | 2008 | Former Chairman, President and Chief Executive Officer of Ryerson Inc. | ✓ | 3 | CC (Chair) | ||||||
Kenton J. Sicchitano | 74 | 2003 | Former Global Managing Partner of PricewaterhouseCoopers LLP | ✓ | — | AC (Chair) | ||||||
Lisa T. Su | 49 | 2012 | President and Chief Executive Officer of Advanced Micro Devices, Inc. | ✓ | 1 | CC | ||||||
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6 Analog Devices, Inc.
Composition of Board Nominees
The Board of Directors and the Nominating and Corporate Governance Committee are committed to ensuring that the Board is comprised of a highly capable group of directors who collectively provide a significant breadth of experience, knowledge and ability to effectively represent the interest of shareholders, drive shareholder value and reflect our corporate values of integrity, honesty and adherence to high ethical standards. The Board also believes that having directors with a mix of tenure helps transition the institutional knowledge of the more experienced directors while providing a broad, fresh set of perspectives. The following charts reflect the broad experience, gender diversity and tenure of our eleven director nominees.
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2019 Proxy Statement 7
CORPORATE GOVERNANCE HIGHLIGHTS
The Company’s governance practices include:
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| For details on voting your shares during the virtual annual meeting, see “Q&A About Annual Meeting and Voting” on page 65. |
Web links throughout this document are provided for convenience only, and the content on the referenced websites does not constitute a part of this proxy statement.
The sum and/or computation of individual numerical amounts or percentages disclosed in this proxy statement may not equal the total due to rounding.
FORWARD-LOOKING STATEMENTSForward-Looking Statements
This Proxy Statementproxy statement contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” “could” and “will,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections regarding our future financial performance; expected benefitsthe proposed acquisition of Maxim Integrated Products, Inc.; our anticipated growth and synergiestrends in our businesses; our future liquidity, capital needs and capital expenditures; the impact of the acquisitionCOVID-19 pandemic on our business, financial condition and results of Linear Technology Corporation, including expected growth rates of the combined companies and expected product offerings, product development, marketing position and technical advances resulting from the transaction;operations; our future market position and expected competitive changes in the marketplace for our products; our ability to pay dividends or repurchase stock; our ability to service our outstanding debt; our expected tax rate; the effect of changes in or the application of new or revised tax laws; expected cost savings; the effect of new accounting pronouncements; our ability to successfully integrate acquired businesses and technologies; and other characterizations of future events or circumstances are forward-lookingforward- looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified in Part I, Item 1A. “Risk Factors” and elsewhere in our most recent Annual Report on Form 10-K. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements, including to reflect events or circumstances occurring after the date of the filing of this report, except to the extent required by law.
Notice of 2021 Annual Meeting of Shareholders
Helpful Resources
Annual Meeting
Proxy Statement & Annual Report:
investor.analog.com/financial-info/annual-reports
Voting Your Proxy via the Internet Before the Annual Meeting: www.proxyvote.com
Board of Directors
investor.analog.com/governance/board-of-directors
Governance Documents
investor.analog.com/corporate-governance.cfm Corporate governance documents and policies, including:
Investor Relations
investor.analog.com
Corporate Social Responsibility
analog.com/csr
Voting Matters | 2021 t |
This proxy summary provides an overview of select information in this proxy statement. We encourage you to read the entire Proxy Statement before voting. Shareholders will be asked to vote on the following matters at the Annual Meeting:
Proposal | Items of Business | Board Recommendation | Where to Find Details | |||
| 1 |
Election of Eleven Directors
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each director nominee | 10 | |||
| 2 | Advisory Approval of the Compensation of the Company’s Named Executive Officers |
| 30 | |||
| 3 | Ratification of the Selection of Ernst & Young LLP as Independent Registered Public Accounting Firm for the Company’s Fiscal Year ending October 30, 2021 |
| 61 | |||
| What’s New? |
We continually review our corporate governance practices to ensure that ADI is in a position to consistently deliver on its commitment to sustaining a culture of innovation, collaboration, solid performance, and fiduciary responsibility. We believe providing a broader understanding of our perspectives on these items will be beneficial to you as you consider this year’s voting matters. This year’s updated items include:
8 Governance HighlightsAnalog Devices, Inc.
| Effective Board leadership, independent oversight and strong corporate governance | Shareholder rights and accountability | |||||
| Majority of directors are independent |  | Annual election of directors of a declassified Board | |||
| Average tenure of independent directors standing for re-election is approximately 6.7 years | | Majority voting for directors in uncontested director election | |||
| Regular executive sessions of independent directors | | Implemented proxy access bylaw | |||
| Adopted clawback policy for CEO and executive officers | | Annual Board and Committee self-evaluations | |||
| Active Board engagement in managing talent and long-term succession planning for executives | | No dual class of stock or controlling shareholder | |||
At ADI, we are committed to solving our customers’ and the world’s toughest challenges.
Our hardware technologies are uniquely positioned at the edge – where data is born. They sense, measure and interpret phenomena, such as temperature, pressure, sound, light, speed, and motion, and transform these signals into intelligent actions – bridging the physical and cyber worlds and igniting human breakthroughs. We create leading edge technologies and solutions to solve our customers’ problems in instrumentation, automation, communications, healthcare, automotive and numerous other industries.
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
| ADI At A Glance |
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Founded: 1965 |
Headquarters: Wilmington, MA |
Employees: 15,900 |
Countries: 30+ Worldwide sales, field applications, engineers, |
Products: ~45,000 SKUs |
Customers: 125,000+ |
Publicly Listed – NASDAQ: ADI |
Design Centers: ~44 |
Global Manufacturing: U.S. (Massachusetts, California, Washington) Ireland | Philippines | Malaysia | Singapore |
| Fiscal 2020 Revenue: $5.6B | ||
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Aerospace and Defense Energy Factory Automation Healthcare Instrumentation | |
| Communications Wired/Optical Networking Wireless | |
| Automotive Electrification Infotainment Autonomous Mobility | |
 | Consumer Hearable & Wearable Devices High-End Audio & Video Portables | |
Our Strategy
Central to our strategy is our focus on challenges that our customers have across the most impactful application areas. By bringing together domain expertise with some of the world’s best technologies across hardware, software and AI, we make our customers’ solutions more accurate, efficient and intelligent — driving profitable growth.
Despite the highly uncertain environment and unprecedented challenges of the COVID-19 pandemic, fiscal
2020 represented a year of strategic progress for ADI as we continued to deliver strong results and progress against our three key priorities:
Efficient Use of Capital | • R&D investment of $1B+ with 95% targeted on most attractive B2B opportunities • Extracting value from M&A to drive long-term value creation, including pending acquisition of Maxim Integrated • Targeting to return 100% of free cash flow after debt repayments to shareholders in the | |||||
Deepening Customer Centricity | • Partnering more deeply with customers to deliver complete solutions • Extensive breadth of engineering capabilities and depth of domain expertise • Executing on opportunity pipeline conversion and achieving record value | |||||
Capitalizing on Secular Trends | • Automotive: Electrification, Autonomous Driving, Cabin Digitalization • Industrial: Industrial 4.0 IoT, Digital Health, Space • Communications: Next-Gen Wireless (5G), Data Center | |||||
| Fiscal 2020 Performance Highlights |
$5.6B Revenue |
Gross Margins | 26.7% Operating Margins | $3.28 Diluted Earnings per Share | $2.0B Operating Cash Flow | ||||
~90% Business- to-Business Revenue | 69.1% Adjusted Gross Margins* | 39.9% Adjusted Operating Margins* | $4.91 Adjusted Diluted Earnings per Share* | $1.8B Free Cash Flow* |
| * | See Additional Information for additional information regarding non-GAAP financial measures and |
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| Fiscal 2020 Shareholder Value Creation |
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Returned $1.1B to shareholders in the form of dividends and share repurchases | Increased our dividends per share paid to shareholders by 15% on an annualized basis | 1-, 3- and 5-year TSR1 of 12%, 38% and 121%, respectively, which outperformed the S&P 500 over the same periods |
| (1) | Total Shareholder Return calculation is share price appreciation plus cumulative cash dividend payments, and the effect of reinvesting those dividends into the security, for the one-, three- and five-year periods ended October 31, 2020. |
Governance Highlights
ADI’s Board is composed of a diverse, experienced group of global thought, business, and academic leaders.
Director Nominees
| Name | Age | Director Since | Principal Occupation | Independent Director | Other Company | Committee Member- ship(s) | ||||||||
 | Ray Stata | 86 | 1965 | Chairman of the Board of Analog Devices, Inc. | — | — | — | |||||||
 | Vincent Roche | 60 | 2013 | President and Chief Executive Officer of Analog Devices, Inc. | — | 1 | — | |||||||
 | James A. Champy | 78 | 2003 | Former Vice President of the Dell/Perot Systems business unit of Dell, Inc. | | — | NCGC (Chair) | |||||||
 | Anantha P. Chandrakasan | 52 | 2019 | Dean of MIT’s School of Engineering and Vannevar Bush Professor of Electrical Engineering and Computer Science
| | — | NCGC | |||||||
 | Bruce R. Evans | 61 | 2015 | Senior Advisor & Former Chairman of the Board of Summit Partners | | 1 | AC | |||||||
 | Edward H. Frank | 64 | 2014 | Co-Founder and Former CEO of Cloud Parity | | 2 | CC (Chair) | |||||||
 | Laurie H. Glimcher | 69 | 2020 | Professor of Medicine at Harvard Medical School and President and Chief Executive Officer of the Dana-Farber Cancer Institute | | 1 | CC | |||||||
 | Karen M. Golz | 66 | 2018 | Former Global Vice Chair of Ernst & Young | | — | AC | |||||||
 | Mark M. Little | 68 | 2017 | Former SVP, GE Global Research & Chief Technology Officer of General Electric Company | | — | CC | |||||||
 | Kenton J. Sicchitano | 76 | 2003 | Former Global Managing Partner of PricewaterhouseCoopers LLP | | — | AC (Chair) | |||||||
 | Susie Wee | 51 | 2019 | Senior Vice President and General Manager of DevNet and CX Ecosystem Success at Cisco Systems | | — | CC | |||||||
AC = Audit Committee CC = Compensation Committee NCGC = Nominating and Corporate Governance Committee
Board Composition
The electionBoard of Directors and the Nominating and Corporate Governance Committee are committed to ensuring that the Board is comprised of a highly capable group of directors who collectively provide a significant breadth of experience, knowledge and ability to effectively represent the interest of shareholders, drive shareholder value and reflect our corporate values of integrity, honesty and adherence to high ethical standards.
45% of director nominees added in the last 5 years | 97% overall attendance at Board and Committee meetings in fiscal 2020 | 31 Board and Committee meetings in fiscal 2020 | 9 of 11 director nominees are independent |
Strong Board Diversity
The Board also believes that having directors with a mix of tenure helps transition the institutional knowledge of the more experienced directors while providing a broad, fresh set of perspectives. The Board has continued to make progress in broadening the experience, gender and tenure of our eleven nominees nameddirector nominees.
| Average Tenure | Diversity |
45% 27% 27% 6.7 Years | 0-5 Years 5-10 Years 10+ Years Average Tenure of independent director nominees |
| 3 of 11 Directors are female, or 27% 2 of 11 Directors are ethnically diverse, or 18% |
Board Profile
ADI’s directors contribute significant experience in the areas most relevant to overseeing the Company’s business and strategy. The below matrix provides a high-level summary of the experience and qualifications of our director nominees:
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Vincent Roche |
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James A. Champy |
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Anantha P. Chandrakasan |
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Bruce R. Evans |
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Edward H. Frank |
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Laurie H. Glimcher |
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Karen M. Golz |
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Mark M. Little |
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Kenton J. Sicchitano |
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Susie Wee |
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Integrated Approach to Shareholder Engagement
We conduct extensive investor outreach throughout the year involving our senior management, investor relations, legal and human resources departments. This helps management and the Board understand and focus on the issues that matter most to our shareholders, so ADI can address them effectively.
ADI’s Year-Round Engagement Process
Engaging with Shareholders Year-round
| �� | In fiscal 2020, we held more than 400 meetings with our shareholders, including the majority of our top 25 shareholders, on a variety of topics |
Launched a new webcast series, ADI Uncovered, discussing business strategy and secular growth trends of 5G communications, vehicle electrification, digital healthcare and processing at the edge
Held multiple webcasts and attended multiple conferences to keep shareholders informed of Company developments; this proxy statementincluded a special call regarding our proposed acquisition of Maxim Integrated
Enhancing Practices & Disclosures
During fiscal 2020, we reached out to our top 25 shareholders, representing approximately 55% of our outstanding shares, with an invitation to have discussions with their corporate governance teams
Topics of interest during engagement included Board composition and risk oversight, Board evaluation and refreshment, corporate governance trends and environmental, social and governance considerations, including human capital management reporting
Shareholder and stakeholder feedback are integrated into boardroom discussions regularly and helps to inform the Board’s decisions and the Company’s practices and disclosures
Shareholder Topics & Company Response
In the spirit of continuous improvement, we have reviewed with our Board of Directors eachthe key takeaways from these meetings with our shareholders with the goal of continuing to evolve our corporate governance practices to best meet the needs of the Company and our shareholders. Our dialogue has led to enhancements to our practices and disclosure, which our Board believes are in the best interests of our company and our shareholders. For example:
Topics of Discussion | Recent Outcomes of Engagement | |
Corporate | • Continued focus on active Board refreshment and diversity, adding two new female directors to the Board • Enhanced risk oversight practices for our Board, including cybersecurity at the Board level and ESG under the Nominating and Corporate Governance Committee • Adopted a new clawback policy for all executive officers with respect to cash and equity incentives that is applicable in the event of a material financial restatement due to fraud or willful misconduct | |
Corporate Social | • Published our inaugural Corporate Responsibility Report in May 2020 that includes enhanced disclosure of our ESG initiatives • Enhanced our diversity and inclusion disclosures, including management perspective and workforce data on diversity and inclusion topics in the Corporate Responsibility Report • Continued to refine our shareholder engagement process to connect our shareholders with key stakeholders within our company around topics of interest | |
Executive Compensation
Our executive compensation program is designed to attract, retain and motivate top executive talent and align the interests of our executives and our shareholders.
Compensation Best Practices
2. The approval, bynon-binding
Overview of CEO Pay
Executive pay at ADI is strongly aligned with long-term company performance, with the majority of compensation delivered in long-term equity-based awards. The pay mix chart is based on target compensation consisting of the annual rate of base salary and short-term and long-term incentive targets approved by the Compensation Committee.
Fiscal 2020 Total Shareholder Return
2020 compensation actions for our NEOs are supported by solid corporate performance and strong shareholder returns.
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| Total Shareholder Return calculation is share price appreciation plus cumulative cash dividend payments, and the effect of reinvesting those dividends into the security for the one-year period ended October 30, 2020. |
Summary of Direct Compensation Elements
We provide a mix of compensation elements that support our namedgoals of attracting and retaining top executive officers, as describedtalent and incentivizing our key performance objectives in the short- and long-term.
Pay Element |  | Purpose | | Time Period | | Performance Measures | ||||||||
• Base Salary | • Attract and retain executive talent | • Annual | ||||||||||||
• Variable Cash Incentive | • Motivate and reward executives for achieving short-term Company financial objectives aligned with value creation | • Paid semi-annually, with quarterly corporate financial targets tied to corporate strategy of profitable growth | • 50%: quarterly OPBT margin • 50%: year over year revenue growth (measured quarterly) • Minimum OPBT margin required for payout | |||||||||||
• Annual Long-Term Incentives | • TSR PRSUs – 25% | • Align NEO and shareholder interest to drive superior relative TSR results | • Cumulative three-year period | • Relative TSR compared to comparator group • Payouts capped at target if absolute TSR is negative | ||||||||||
• Financial Metric PRSUs – 25% | • Align NEO and shareholder interests with long-term profitability | • One-year, two-year cumulative and three-year cumulative time periods | • Operating profit ($) | |||||||||||
• Stock Options | • Align NEO and shareholder interests in absolute stock price appreciation | • Four year graded vesting • 10 year term | • Absolute stock price appreciation | |||||||||||
• RSUs – 25% | • Retain key executives | • Four year graded vesting | • None | |||||||||||
OPBT = Operating Profit Before Taxes. TSR = Total Shareholder Return
Historical “Say on Pay” Votes Our pay programs have a history of strong shareholder support. Our Compensation Committee believes the results of last year’s “Say on Pay” vote and input from our shareholder engagement affirmed our shareholders’ support of our company’s executive compensation program. This informed our decision to maintain a consistent overall approach in setting executive compensation in fiscal 2020. |  |
Please see the Compensation Discussion and Analysis executive compensation tables and accompanying narrative disclosures in this proxy statement.
3. The ratificationsection beginning on page 31 of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending November 2, 2019, or fiscal 2019.
4. The consideration of a shareholder proposal described in this proxy statement if properly presented at the Annual Meeting.
The shareholders will also act on any other business that may properly come before the meeting or any postponement, adjournment, rescheduling or continuationfor a more detailed description of the meeting.our executive compensation program, philosophy and design.
Corporate Responsibility
Our Approach
As a global company, we are passionately driven to be a leading corporate citizen—“engineering good” through the relentless pursuit of innovative technologies in order for our customers to be more successful in a more connected, greener and healthier future.
We believe that sustainability is about delivering holistic solutions to make a real, demonstrable impact in the world. Our goal is to help our customers solve their sustainability challenges while making meaningful progress on environmental regeneration efforts and broader societal challenges. We drive positive impact through our technologies and solutions, which are used across a range of end-markets and end-uses, as well as our sustainability strategy and platform, which is focused on three core pillars:
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(1) You may vote over the Internet. If you have Internet access, you may vote your shares from any location in the world by following the Internet voting instructions on the Notice or the proxy card. Proxies submitted via the Internet must be received by 11:59 p.m. Eastern Time on March 12, 2019.
(2) You may vote by telephone. You may vote your shares by calling 1-800-690-6903 toll-free within the United States, U.S. territories and Canada and following the instructions provided by the recorded message. Proxies submitted via telephone must be received by 11:59 p.m. Eastern Time, on March 12, 2019.
(3) You may vote by mail. If you received a printed proxy card, you may vote by completing and signing the proxy card and promptly mailing it in the enclosed postage-prepaid envelope. You do not need to put a stamp on the enclosed envelope if you mail it in the United States. The shares you own will be voted according to your instructions on the proxy card that you mail.If you return the proxy card, but do not give any instructions on a particular matter described in this proxy statement, the shares you own will be voted in accordance with the recommendations of our Board of Directors. The Board of Directors recommends that you vote FOR each director nominee, FOR Proposals 2 and 3 and AGAINST Proposal 4.
(4) You may vote in person. If you attend the Annual Meeting, you may vote by delivering your completed proxy card in person or by completing a ballot. Ballots will be available at the Annual Meeting.
Please note that you cannot vote by marking up the Notice of Internet Availability of the Proxy Materials and mailing the Notice back. Any votes returned in that manner will not be counted.
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2019 Proxy Statement 9Sustainability Governance
Our sustainability agenda is led and managed by our Chief Executive Officer alongside a senior management team that includes our Chief People Officer, Chief Financial Officer, Chief Legal Officer, Senior Vice President of Industrial and Consumer, and newly appointed Director of Social Purpose.
Disclosure & Transparency | Our Environment | |||
If you hold shares through an account with a broker, the voting of shares by such broker when you do not provide voting instructions is governed by applicable stock exchange rules. These rules allow brokers to vote shares at their discretion on “routine” matters for which their customers do not provide voting instructions. On matters that are considered“non-routine,” brokers may not vote shares without your instruction. The ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2019 (Proposal 3) is considered a “routine” matter and your broker will be able to vote on that proposal even if it does not receive instructions from you, so long as it holds your shares in its name.The election of directors (Proposal 1), the “say on pay” advisory vote (Proposal 2) and the shareholder proposal (Proposal 4) are“non-routine” matters. If you do not instruct your bank, broker or other nominee how to vote with respect to these proposals, your bank, broker or other nominee may not vote with respect to these proposals and those votes will be counted as “brokernon-votes.” “Brokernon-votes” are shares that are held in “street name” by a bank, broker or other nominee that indicates on its proxy that it does not have or did not exercise discretionary authority to vote on a particular proposal.
If your shares are held in “street name,” you must bring an account statement or letter from your broker or other nominee, showing that you are the beneficial owner of the shares as of the record date (January 7, 2019) in order to be admitted to the Annual Meeting on March 13, 2019. To be able to vote your shares held in “street name” at the Annual Meeting, you will need to obtain a legal proxy from your bank, broker or other nominee, issued in your name giving you the right to vote your shares.
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• Published the company’s first Corporate Responsibility Report • Our Corporate Responsibility Report is prepared in accordance with the Global Reporting Initiative (GRI): Core Option and we report separately to the CDP Climate Change and Water Security projects • Our sustainability activities and reporting are appropriately aligned with the UN Sustainable Development Goals • Going forward, we plan to review other evolving ESG disclosure frameworks (e.g., TCFD and SASB) to better inform our sustainability reports | • Significant progress against emissions reduction targets • Set ambitious absolute emissions reduction goals by 2025 • Issued inaugural green bond—the first in the industry—to help finance or • Continued to innovate and develop solutions with meaningful environmental benefits, including our Battery Management Solutions, Energy Storage Systems and leveraging our intelligent sensing systems to make data centers greener | • Expanded training and development programs and established employee-led networks to drive inclusion and engagement • Shifted production focus to healthcare technologies, supporting the • Established the Analog Devices Foundation to formalize the company’s philanthropy and charitable giving • Provided support to global and local COVID-19 relief efforts through the Analog Devices Foundation • Partnered with Massachusetts General Hospital and the Analog Devices Foundation donated $500,000 towards MGH’s Vaccine and Immunotherapy Center | ||
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Your attendance at the meeting alone will not revoke your proxy.
If your shares are held in “street name,” you may submit a new, later-dated voting instruction form or contact your bank, broker or other nominee. You may also vote in person at the Annual Meeting if you obtain a legal proxy as described in the answer to the question above entitled “Can I vote if my shares are held in ‘street name’”?
Election of Directors |
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10 Analog Devices, Inc.
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Shares of common stock represented in person or by proxy (including “brokernon-votes” and shares that abstain or do not vote with respect to a particular proposal) will be counted for the purpose of determining whether a quorum exists at the Annual Meeting for that proposal.
If a quorum is not present, the Annual Meeting will be adjourned until a quorum is obtained.
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“Say on Pay.”Our Board of Directors is seeking anon-binding advisoryunanimously recommends that you vote regarding the compensation of our named executive officers, as described in the Compensation
Discussion and Analysis, executive compensation tables and accompanying narrative disclosures contained in this proxy statement. Under our bylaws, the affirmative vote of a majority of the total number of votes cast on the proposal is needed to approve this resolution. The vote is advisory andnon-binding in nature but our Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.If you do not instruct your bank, broker or other nominee how to vote with respect to this proposal, your bank, broker or other nominee may not vote your shares with respect to this proposal.
Ratification of independent registered public accounting firm. Under our bylaws, the affirmative vote of a majority of the total number of votes cast on the proposal is needed to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2019.Even if you do not instruct your bank, broker or other nominee how to vote with respect to this proposal, your bank, broker or other nominee may vote your shares with respect to this proposal.
Shareholder Proposal. Under our bylaws, the affirmative vote of a majority of the total number of votes cast on the proposal is needed to approve the shareholder proposal.If you do not instruct your bank, broker or other nominee how to vote with respect to this proposal, your bank, broker or other nominee may not vote your shares with respect to this proposal.
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2019 Proxy Statement 11
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FOR the election of each of the eleven nominees to serve as directors on the Board of Directors, each for a term expiring at the next annual meeting of shareholders (Proposal 1);
FOR the approval, bynon-bindingbelow nominees. “say on pay” vote, of the compensation of our named executive officers, as described in the Compensation Discussion and Analysis, executive compensation tables and accompanying narrative disclosures contained in this proxy statement (Proposal 2);
FOR the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2019 (Proposal 3); and
AGAINST the shareholder proposal relating to a diversity report (Proposal 4).
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12 Analog Devices, Inc.
Shareholder director nominations not included in proxy statement: In addition, our bylaws require that we be given advance written notice for nominations for election to our Board of Directors and other matters that shareholders wish to present for action at an annual meeting other than those to be included in our proxy statement under Rule14a-8. The Secretary must receive such notice at the address noted below not less than 90 days or more than 120 days before the first anniversary of the preceding year’s annual meeting. However, if the date of our annual meeting is advanced by more than 20 days, or delayed by more than 60 days, from the anniversary date, then we must receive such notice at the address noted below not earlier than the 120th day before such annual meeting and not later than the close of business on the later of (1) the 90th day before such annual meeting and (2) the seventh day after the day on which notice of the meeting date was mailed or public disclosure was made, whichever occurs first. Assuming that the 2020 annual meeting is not advanced by more than 20 days nor delayed by more than 60 days from the anniversary date of the 2019 annual meeting, you would need to give us appropriate notice at the address noted below no earlier than November 14, 2019, and no later than December 14, 2019. If a shareholder does not provide timely notice of a nomination or other matter to be presented at the 2020 annual meeting, under Massachusetts law, it may not be brought before our shareholders at a meeting.
Our bylaws also specify requirements relating to the content of the notice that shareholders must provide to the Secretary of Analog Devices for any matter, including a shareholder proposal or nomination for director, to be properly presented at a shareholder meeting. A copy of the full text of our bylaws is on file with the SEC and publicly available on our website.
Any proposals, nominations or notices should be sent to:
Margaret K. Seif, Secretary
Analog Devices, Inc.
One Technology Way
Norwood, Massachusetts 02062
Phone:781-461-3367
Email: margaret.seif@analog.com
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2019 Proxy Statement 13
Investor Relations Department
Analog Devices, Inc.
One Technology Way
Norwood, Massachusetts 02062
Phone:781-461-3282
Email: investor.relations@analog.com
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On December 13, 2018, our Board of Directors approved amendments to our bylaws to implement a proxy access provision, as described above, and to make other administrative, clarifying and conforming changes. The full text of our bylaws, as amended and restated, is filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on December 17, 2018.
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy statement and annual report to shareholders may have been sent to multiple shareholders in your household unless we have received contrary instructions from one or more shareholders. We will promptly deliver a separate copy of either document to you if you contact us at the following address, telephone number or email address: Investor Relations Department, Analog Devices, Inc., One Technology Way, Norwood, Massachusetts 02062,telephone: 781-461-3282, email: investor.relations@analog.com. If you want to receive separate copies of the proxy statement or annual report to shareholders in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address, telephone number or email address.
14 Analog Devices, Inc.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information regarding the beneficial ownership of our common stock as of January 4, 2019 (unless otherwise specified) by:
the shareholders we know to beneficially own more than 5% of our outstanding common stock;
each director named in this proxy statement;
each executive officer named in the Summary Compensation Table included in this proxy statement; and
all of our directors and executive officers as a group.
Name and Address of Beneficial Owner(1)
| Shares Beneficially Owned(2)
| Shares Acquirable within 60 Days(3)
| Total Beneficial Ownership
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Percent of Common Stock Beneficially Owned(4)
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5% Shareholders: | ||||||||||||||||||||
Vanguard Group Inc.(5) | 31,687,292 | — | 31,687,292 | 8.6 | % | |||||||||||||||
PO Box 2600 Valley Forge, Pennsylvania 19482 | ||||||||||||||||||||
BlackRock Inc.(6) | 24,272,230 | — | 24,272,230 | 6.6 | % | |||||||||||||||
55 East 52nd Street New York, New York 10055 | ||||||||||||||||||||
JPMorgan Chase & Co.(7) | 21,929,230 | — | 21,929,230 | 5.9 | % | |||||||||||||||
270 Park Avenue New York, New York 10017 | ||||||||||||||||||||
Directors and Named Executive Officers: | ||||||||||||||||||||
James A. Champy(8) | 66,945 | 53,210 | 120,155 | * | ||||||||||||||||
Anantha P. Chandrakasan(9) | — | — | — | * | ||||||||||||||||
Martin Cotter | 173 | 85,263 | 85,436 | * | ||||||||||||||||
Bruce R. Evans | 70,095 | 12,890 | 82,985 | * | ||||||||||||||||
Edward H. Frank | 7,125 | 23,340 | 30,465 | * | ||||||||||||||||
Karen M. Golz(10) | — | — | — | * | ||||||||||||||||
Joseph (John) Hassett | 14,711 | 30,846 | 45,557 | * | ||||||||||||||||
Mark M. Little | 2,650 | 1,040 | 3,690 | * | ||||||||||||||||
Prashanth Mahendra-Rajah | 2,556 | — | 2,556 | * | ||||||||||||||||
Neil Novich | 22,740 | 53,210 | 75,950 | * | ||||||||||||||||
Steve Pietkiewicz | 46,153 | 6,078 | 52,231 | * | ||||||||||||||||
Vincent Roche | 17,376 | 115,564 | 132,940 | * | ||||||||||||||||
Kenton J. Sicchitano | 20,240 | 46,000 | 66,240 | * | ||||||||||||||||
Ray Stata(11) | 900,645 | 39,120 | 939,765 | * | ||||||||||||||||
Lisa T. Su | 10,840 | 25,760 | 36,600 | * | ||||||||||||||||
All directors and executive officers as a group (19 persons, consisting of 9 executive officers and 10non-employee directors)(12) | 1,211,359 | 535,220 | 1,746,579 | 0.5 | % | |||||||||||||||
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2019 Proxy Statement 15
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16 Analog Devices, Inc.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our executive officers, directors and the holders of more than 10% of our common stock to file with the SEC initial reports of ownership of our common stock and other equity securities on a Form 3 and reports of changes in such ownership on a Form 4 or Form 5. Officers, directors and 10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of our records and written representations by the persons required to file these reports, all filing requirements of Section 16(a) were satisfied on a timely basis with respect to fiscal 2018.
2019 Proxy Statement 17
ELECTION OF DIRECTORS
ELECTION PROCESSElection Process
Our entire Board of Directors is elected annually by our shareholders and currently consists of eleven directors, of whom nine are deemed to be “independent directors.” At the Annual Meeting, shareholders will accordingly have an opportunity to vote for each of the eleven nominees listed below. The persons named in the proxy card, upon receipt of a properly executed proxy, will vote for each of these nominees, unless you instruct them to vote otherwise on the proxy card (whether executed by you or through Internet or telephonic voting). Each of the nominees has indicated his or her willingness to serve, if elected. However, if any or all of the nominees should be unable or unwilling to serve, the proxies may be voted for a substitute nominee designated by our Board of Directors or our Board of Directors may reduce the number of directors.
We have also agreed to add two members of the Maxim Integrated Board of Directors to our Board of Directors upon the completion of our proposed acquisition of Maxim Integrated, with such two directors to hold office until the earliest to occur of the appointment or election of his or her respective successor or his or her resignation or proper removal. One of the directors will be Tunç Doluca, President and Chief Executive Officer of
Maxim Integrated, and the other director will be selected by mutual agreement between us and Maxim Integrated. We have agreed to nominate both directors for election at the first annual meeting of our shareholders that occurs after the closing of the acquisition.
DIRECTOR CRITERIA, QUALIFICATIONS AND EXPERIENCEDirector Criteria, Qualifications and Experience
The Board of Directors is committed to ensuring that it is composed of a highly capable group of directors who collectively span a broad range of leadership skills and provide a significant breadth of experience, knowledge and abilities, relevant to the Company’s strategic vision, long-term objectives and business activities to effectively represent the interests of shareholders, exercise sound judgment and reflect our corporate values of integrity, honesty and adherence to high ethical standards. Key factors that the Board of Directors and the Nominating and Corporate Governance Committee consider when selecting directors include:
BOARD EXPERTISE AND SKILLS
Experience and Strong Business AcumenThe board strives for its members to span a range of leadership skills and represent a broad breadth of experience relevant to the companys strategic vision and business activities, as well as the ability to exercise sound judgment in matters that relate to the current and long-term objectives of the company. Board Expertise and skills CEO EXPERIENCE INDUSTRY EXPERIENCE INTERNATIONAL EXPERIENCE TECHNOLOGY AND INNOVATION LEADERSHIP FINANCE EXPERIENCE GOVERNANCE/PUBLIC COMPANY BOARD EXPERTISE STRATEGY AND RISK MANAGEMENT EXPERIENCE
18 Analog Devices, Inc.
| Diversity | Independence | |||||
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Directors are female, or 27% |
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| 2 of 11 Directors are ethnically diverse, or 18% | 9 Directors | ||||
While the Board of Directors does not have a specific diversity policy, our Corporate Governance Guidelines provide that gender, racial, and ethnic diversity, consistent with the requirement for relevant and diverse experience, skills, and industry familiarity, are important search criteria.
Under Nasdaq rules, a majority of the members of our Board must be independent directors. To be considered independent, a director must be independent as determined under applicable Nasdaq rules, and in the Board’s judgment, the director must not have a relationships with the Company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
| Director Experience |
| Experience/Expertise | Number of Directors | |
Experienced leadership of complex global businesses |  | |
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Technology Leadership Expertise and thought leadership relating to technological innovation in our industry and our end markets |  | |
Governance/Public Company Board Expertise Knowledge of public company governance issues and policies to enhance Board practices |  | |
Financial Expertise Oversight of our company’s audit function and preparation of financial statements and capital market expertise |  | |
International Experience Insight into the |  | |
Strategy Experience Oversight of management’s development and implementation of strategic priorities |  | |
Risk Management Expertise Oversight of risks facing our company and a |  | |
Cybersecurity Expertise Oversight of our | | |
The following paragraphs provide information as of the date of this proxy statement about each nominee. The information presented includes information each director has given us about his or her age, all positions he or she holds, his or her principal occupation and business experience, and the names of other publicly-held companies of which he or she currently serves as a director or has served as a director during the past five years. In addition to the information presented below regarding each nominee’s specific experience, qualifications, attributes and skills that led our Board of Directors to the conclusion that he or she should serve as a director, we also believe that all of our director nominees have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to ADI and our Board of Directors. Finally, we value their significant experience on other public company boards of directors and board committees.
Information about the number of shares of common stock beneficially owned by each director appears abovebelow under the heading “Security Ownership of Certain Beneficial OwnersDirectors and Management.Executive Officers.” See also “Certain
Relationships and Related Transactions.” There are no family relationships among any of the directors and executive officers of ADI.
Ray Stata
Chairman of the Board ofDirectors
Director since: 1965Age: 86 Committee(s): None
| Professional Experience and Background Mr. Stata has served as our Chairman of the Board of Directors since 1973 and served as an executive officer of our Company from its inception until April 2012. Mr. Stata served as our Chief Executive Officer from 1973 to November 1996 and as our President from 1971 to November 1991.
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Key Qualifications and Expertise
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Other Public Company | ||||||
Boards:
Current:NonePast 5 Years: None
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2019 Proxy Statement 19
Vincent Roche President and Chief Executive Officer
| Professional Experience and Background Mr. Roche has served as President of Analog Devices since 2012 and was appointed Chief Executive Officer and elected as a director in 2013. Under his leadership, ADI has extended its market leadership and grown to
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Key Qualifications and Expertise
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Other Public Company | ||||||
Current:Acacia Communications, Inc.Past 5 Years: None
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James A. Champy
Presiding Director
Independent Director since: 2003 Age: 78
Committee(s):Nominating and Corporate Governance | Professional Experience and Background Mr. Champy retired in 2010 as Vice President of the Dell/Perot Systems business unit of Dell, Inc., a computer and technology services company. He was previously a Vice President and the Chairman of Consulting at Perot Systems Corporation, a technology services company, from 1996 to November 2009. He served as a director of Perot Systems Corporation from 1996 to 2004. Mr. Champy is the author of several business books and is a Life Member of the MIT Corporation, the governing body of the Massachusetts Institute of
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Key Qualifications and Expertise
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Other Public Company | ||||||
Current:NonePast 5 Years: None
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Anantha P. Chandrakasan
Independent Director since: 2019 Age: 52 Committee(s): Nominating and Corporate Governance
| Professional Experience and Background Dr. Chandrakasan has served as the Dean of the School of Engineering at Massachusetts Institute of Technology, or MIT, a private research university, since July 2017, and as the Vannevar Bush Professor of Electrical Engineering and Computer Science since 2003. He also co-chairs the MIT-IBM Watson AI Lab and
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Key Qualifications and Expertise
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Other Public Company | ||||||
Current:NonePast 5 Years: None
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20 Analog Devices, Inc.
Bruce R. Evans
Independent Director since: 2015Age: 61 Committee(s): Audit
| Professional Experience and Background Mr. Evans has served as president of Evans Capital LLC, a private investment fund, since March 2019. Mr. Evans has also served in various positions with Summit Partners, a growth equity, venture capital and credit investment firm, since 1986, including most recently as Senior Advisor to the firm, a role he has held since January 2018. From 2011 to March 2019, he served as Chairman of Summit Partners’
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Key Qualifications and Expertise
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Other Public Company | ||||||
Current:Casa Systems, Inc.Past 5 Years: None
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Edward H. Frank
Independent Director since: 2014Age: 64 Committee(s): Compensation
| Professional Experience and Background Dr. Frank was most recentlyco-founder and CEO of Cloud Parity Social Networking, a voice of the customer startup, from January 2014 through August 2016. From May 2009 to October 2013, Dr. Frank held the position of Vice President, Macintosh Hardware Systems Engineering at Apple Inc., a company that designs, manufactures and markets electronic devices. Prior to his tenure at Apple, Dr. Frank served as Corporate Vice President, Research and Development, of Broadcom Corp. Dr. Frank was founding CEO of Epigram, Inc., a developer of integrated circuits and software for home networking, which Broadcom acquired in 1999, and was a Distinguished Engineer at Sun Microsystems, Inc. Dr. Frank is
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Key Qualifications and Expertise
Other Public Company Current: Marvell Technology Group, Ltd. Past 5 Years: Cavium, Inc. (until 2018) SiTime Corp. Amesite, Inc. (until 2020)
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2019 Proxy Statement 21
Independent Director since:
| Professional Experience and Background Dr. Glimcher has served as a Professor of Microbiology and Immunology at Harvard Medical School since May 2017, the Richard and Susan Smith Professor of Medicine at Harvard Medical School and Dana-Farber Cancer Institute since October 2016, an Attending Physician, Department of Cancer Immunology and Virology at Dana-Farber Cancer Institute since October 2016 and the President and Chief Executive Officer of the Dana-Farber Cancer Institute since September 2016. In addition to a number of senior leadership roles held at both Harvard Medical School and Harvard School of Public Health from 1984 to 2011 and from October 2016 to present, she also served as the Stephen and Suzanne Weiss Dean and Professor of Medicine of Weill Cornell Medicine and as Provost for Medical Affairs of Cornell University from January 2012 to August 2016. She is a member of the Board of Trustees at the Dana-Farber Cancer Institute and a member of the US National Academy of Sciences, the National Academy of Medicine, the American Academy of Arts and Sciences and the American Philosophical Society. Key Qualifications and Expertise Dr. Glimcher’s scientific and public health expertise as well as diversity of technical skills and experience as a physician, scientist and professor. Other Public Company Boards: Current: GlaxoSmithKline plc Past 5 Years: Bristol-Myers Squibb Company (until 2017) Waters Corporation (until 2020) |
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Karen M. Golz Independent Director since: 2018 Age: 66 Committee(s): Audit Professional Experience and Background Ms. Golz is a retired partner from Ernst & Young (EY), a public accounting firm, where she held various senior leadership positions during her tenure at the firm, including most recently as Global Vice Chair, Japan from
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Key Qualifications and Expertise
Other Public Company | ||||
Current:None | Past 5 Years:None | |||
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Mark M. Little Independent Director since: 2017 Age: 68 Committee(s): Compensation Professional Experience and Background Dr. Little is the former Senior Vice President, GE Global Research and Chief Technology Officer of General Electric Company, or GE, a global digital industrial company. Dr. Little joined GE in 1978, and during his37-year tenure, held management positions in engineering and business, culminating with his most recent position, which he held from November 2005 until his retirement in December 2015. In addition to his technology leadership, Dr. Little led several multi-billion dollar business units at GE, including GE Energy’s power-generation segment.
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Key Qualifications and Expertise
Other Public Company Current: None Past 5 Years: None
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22 Analog Devices, Inc.
Kenton J. Sicchitano
Independent Director since: 2003Age: 76 Committee(s): Audit
| Professional Experience and Background Mr. Sicchitano retired from PricewaterhouseCoopers LLP, or PwC, a public accounting firm, in July 2001. At the time of his retirement, Mr. Sicchitano was the Global Managing Partner of Independence and Regulatory Matters for PwC. Mr. Sicchitano joined Price Waterhouse LLP, a predecessor firm of PwC, in 1970 and became a partner in 1979. During his31-year tenure with PwC, Mr. Sicchitano held various positions including the Global Managing Partner of Audit/Business Advisory Services and the Global Managing Partner responsible for Audit/Business Advisory, Tax and Financial Advisory Services.
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Key Qualifications and Expertise
Other Public Company | ||||
Current:None | Past 5 Years:PerkinElmer, Inc. (until 2017) Metlife, Inc. (until 2017) | |||
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Susie Wee Independent Director since: 2019 Age: 51 Committee(s): Compensation Professional Experience and Background Dr.
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Key Qualifications and Expertise
Other Public Company Current: None Past 5 Years: None
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Our Board of Directors unanimously recommends that you vote FOR the election of each of the above nominees.
2019 Proxy Statement 23
CORPORATE GOVERNANCECorporate Governance
GENERALBoard Policies & Practices
We have long believed that good corporate governance is important to ensure that Analog Devices is managed for the long-term benefit of our shareholders. We periodically review our corporate governance policies and practices and compare them to those suggested by various authorities in corporate governance and the practices of other public companies. As a result, we have adopted the following policies and procedures that we believe are in the best interests of Analog Devices and our shareholders. In particular, we have adopted the following policies and procedures:shareholders:
Policy/Practice | Summary | |
Corporate Governance Guidelines | Our Board of Directors has adopted Corporate Governance Guidelines for our Company that | |
Declassified Board of Directors | We have a declassified Board of Directors and our bylaws provide that each director will serve for a term ending on the date of the annual meeting following the one at which such director was elected. All of our directors will stand for election for terms expiring at the next annual meeting of shareholders. | |
Majority Voting for Election of Directors | Our bylaws provide for a majority voting standard in uncontested director elections, so a nominee is elected to the Board of Directors if the votes “for” that director exceed the votes “against” (with abstentions and brokernon-votes not counted as for or against the election). If a nominee does not receive more “for” votes than “against” votes, the director must offer his or her resignation, which the Board of Directors must determine whether to accept and publicly disclose that determination. | |
Executive Sessions | At least twice per year, our Board of Directors holds executive sessions ofnon-employee directors, who are all independent as defined under The Nasdaq Stock Market, Inc. Marketplace Rules, or Nasdaq Rules. Our Presiding Director, James A. Champy, presides at these executive sessions. In addition, the committees of our Board of Directors also regularly hold executive sessions with their advisors without management present. | |
No Hedging Policy | We prohibit all hedging transactions or short sales involving Company securities by our directors and employees, including our executive officers. | |
No Pledging Policy | Since January 2013, we have prohibited our directors and executive officers from holding any Company securities in a margin account, and from any future pledging of their Company securities as collateral for a loan. | |
Equity Award Grant | We do not time or select the grant dates of any stock options or stock-based awards in coordination with our release of materialnon-public information, nor do we have any program, plan or practice to do so. In addition, the Compensation Committee has adopted specific written policies regarding the grant dates of stock option and stock-based awards made to our directors, executive officers and employees. See “—Director Compensation” and | |
24 Analog Devices, Inc.
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Executive Stock Ownership Guidelines | Under our guidelines, the target stock ownership levels are two times annual base salary for the Chief Executive Officer and one times annual base salary for other executive officers. The Chief Executive Officer has four years from the date of his appointment as CEO to achieve his targeted level. Executive officers other than the CEO have five years from the date he or she becomes an executive officer to achieve their targeted level. Shares subject to unexercised options, whether or not vested, and unvested performance-based RSUs whose performance has not yet been certified by the Compensation Committee will not be counted for purposes of satisfying these guidelines. RSUs and restricted stock (whether or not vested) and unvested performance-based RSUs whose performance has been certified by the Compensation Committee are counted for purposes of satisfying the guidelines. All of our executive officers were in compliance with our stock ownership guidelines as of the end of the fiscal year ended 2020. | |
Adoption of Clawback Policy | Our recently adopted clawback policy provides that in the event of a material restatement of our financial results, the Compensation Committee may, as appropriate, seek to recover from any executive officer whose fraud or willful misconduct caused or partially caused such restatement, all or a portion of the performance-based compensation awarded to such executive officer that was in excess of the amount that would have been awarded based on the restated financial results. | |
Adoption of Proxy Access Right | Our Board of Directors approved a bylaw amendment implementing proxy access, which allows shareholders that meet standard eligibility requirements to submit director candidates for election in the Company’s proxy statement. | |
You can access our bylaws, the current charters for our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, our Corporate Governance Guidelines, our Code of Business Conduct and Ethics, our Related Person Transaction Policy and our Equity Award Grant Date Policy at investor.analog.com/corporate-governance.cfm or by writing to:
Investor Relations Department
Analog Devices, Inc.
One TechnologyAnalog Way
Norwood,Wilmington, Massachusetts 0206201887
Phone:781-461-3282
Email: investor.relations@analog.com
ENGAGEMENT WITH OUR SHAREHOLDERS
Since our inception as a public company, we have maintained an active engagement program with our shareholders, meeting with them extensively throughout the year as part of our investor outreach efforts. In fiscal 2018, we held more than 330 meetings with our shareholders, including the majority of our top 25 shareholders, to discuss the Company’s performance and prospects, as well as trends affecting the semiconductor industry. We also continued our specific outreach effort with our institutional investors to discuss corporate governance issues affecting the Company. During 2018, we reached out to our top 25 shareholders, representing approximately 63% of outstanding shares with an invitation to have discussions with their corporate governance teams. Of the shareholders who accepted our engagement invitation, topics covered in these meetings included:
Board composition: diversity, qualifications, skills and leadership structure
Board evaluations and refreshment
Corporate governance trends, including environmental, social and governance considerations
Executive compensation policies and design
In the spirit of continuous improvement, we have reviewed with our Board of Directors the key takeaways from these meetings with the goal of continuing to evolve our corporate governance practices to best meet the needs of the Company and our shareholders. We intend to continue our shareholder outreach efforts on an on-going basis and look forward to other meetings with our valued shareholders.
We have a long history of leadership in corporate responsibility, and pursue corporate social responsibility and sustainability along four axes—economic, environmental, social, and governance and ethics.
2019 Proxy Statement 25
Economic Sustainability. ADI works to ensure that our technological innovations continue to have impact and our employees, customers, partners and investors continue to share in the success of ADI. This is executed through our best-in-class financial model, global operations, and smart supply chain management. Economic sustainability considers the economic conditions of all of our stakeholders: employees, their families and communities, the communities where we operate, and world we all live in.
Environmental Sustainability. At ADI, we are committed to operating in a way that minimizes impacts to the environment. We establish environmental performance objectives using a five-year planning horizon, and make annual updates to our objectives, targets, and programs. Progress is reviewed quarterly at the corporate level and monthly at the site level, and senior management allocates resources appropriately to help keep programs on plan.
Social Sustainability. ADI’s stakeholder ecosystem extends beyond the typical focus on investors, employees, and customers to the communities and world in which we operate. We strive to be a positive influence in our communities by living up to the highest ethical standards, pursuing socially minded business practices, providing rewarding career and employment opportunities, and giving back to our communities in concert with our employees’ individual efforts.
Governance and Ethical Sustainability. Ethical behavior has been a core tenet of our Company’s values since our earliest days. Our employees, across all locations and job functions, have internalized the value of ethical behavior, routinely going beyond mere compliance with applicable laws and regulations. Our long history of leadership in the area of governance and ethics has resulted in a trusted reputation among our customers, investors, and employees, as well as the communities where we operate. That is a trust that we have worked hard to earn and one we don’t take lightly.
For more information about our corporate responsibility efforts, please refer to our Sustainability Report available on the Analog Devices web site.
54% reduction in Greenhouse Gas emissions 7 million kW-hr savings 69% recycled non-hazardous waste110 million gallons of water recycled Greenhouse gas emissions and non-hazardous waste and water recycling data excludes legacy Linear Technology sites. Greenhouse gas emissions data compared to 2015 levels. Non-hazardous waste and water recycling for calendar year 2017.
Greenhouse gas emissions and non-hazardous waste and water recycling data excludes legacy Linear Technology sites.
Greenhouse gas emissions data compared to 2015 levels. Non-hazardous waste and water recycling for calendar year 2017.
Under applicable Nasdaq Rules, a director of Analog Devices will only qualify as an “independent director” if, in the opinion of our Board of Directors, that person does not have a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our Board of Directors has established guidelines (within our Corporate Governance Guidelines) to assist it in determining whether a director has a relationship with Analog Devices that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. These guidelines are posted on our website under investor.analog.com/corporate-governance.cfm. For relationships not covered by the guidelines, the determination of whether such a relationship exists is made by the members of our Board of Directors who are independent (as defined above). Our Board of Directors has determined that none of Messrs. Champy, Evans, Novich and Sicchitano, Ms. Golz and Drs. Chandrakasan, Frank, Little and Su has a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is an “independent director” as defined under Rule 5605(a)(2) of the Nasdaq Rules. The Board of Directors has determined that Mr. Roche, our President and Chief Executive Officer, and Mr. Stata, our Chairman and founder, are not “independent” under the Nasdaq Rules because Mr. Roche is a current employee and Mr. Stata is our founder. The Board of Directors considered the Company’s annual laboratory membership and sponsorship of university research projects with MIT (of which Anantha P. Chandrakasan is the Dean of the School of Engineering and James A. Champy is a board member) and Karen Golz’s former affiliation with Ernst & Young and determined that those relationships would not interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
26 Analog Devices, Inc.
Shareholders of record of Analog Devices may recommend director candidates for inclusion by the Board of Directors in the slate of nominees that the Board of Directors recommends to our shareholders for election. The qualifications of recommended candidates will be reviewed by the Nominating and Corporate Governance Committee. If the Board of Directors determines to nominate a shareholder-recommended candidate and recommends his or her election as a director by the shareholders, the name will be included in Analog Devices’ proxy card for the shareholders’ meeting at which his or her election is recommended.
Shareholders may recommend individuals for the Nominating and Corporate Governance Committee to consider as potential director candidates by submitting their names and background and a statement as to whether the shareholder or group of shareholders making the recommendation has beneficially owned more than 5% of Analog Devices’ common stock for at least one year as of the date the recommendation is made, to the “Analog Devices Nominating and Corporate Governance Committee,” c/o Margaret K. Seif, Secretary, Analog Devices, Inc., One Technology Way, Norwood, Massachusetts 02062. The Nominating and Corporate Governance Committee will consider a recommendation only if appropriate biographical information and background material is provided on a timely basis.
The process followed by the Nominating and Corporate Governance Committee to identify and evaluate candidates includes requests to Board members and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the Nominating and Corporate Governance Committee and the Board of Directors. From time to time, the Nominating and Corporate Governance Committee may also seek input from director search firms for identification and evaluation of candidates. Assuming that appropriate biographical and background material is provided for candidates recommended by shareholders on a timely basis, the Nominating and Corporate Governance Committee will evaluate director candidates recommended by shareholders by following substantially the same process, and applying substantially the same criteria, as it follows for director candidates submitted by Board members.
Shareholders also have the right to directly nominate director candidates, without any action or recommendation on the part of the Nominating and Corporate Governance Committee or the Board of Directors, by following the procedures set forth in ADI’s amended and restated bylaws and described in the response to the question“How and when may I submit a shareholder proposal, including a shareholder nomination for director, for the 2020 annual meeting of shareholders?” above.
In considering whether to recommend any candidate for inclusion in the Board of Directors’ slate of recommended director nominees, including candidates recommended by shareholders, the Nominating and Corporate Governance Committee will apply the criteria set forth in our Corporate Governance Guidelines. These criteria include the candidate’s integrity, business acumen, experience, commitment, and diligence, the presence of any conflicts of interest and the ability of the candidate to act in the interests of all shareholders. The Nominating and Corporate Governance Committee seeks nominees with a broad diversity of experience, professions, skills, geographic representation and backgrounds. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. Analog Devices believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board of Directors to fulfill its responsibilities. While we do not have a policy regarding Board diversity, the Nominating and Corporate Governance Committee includes gender, racial and ethnic diversity as part of its search criteria, consistent with the requirement for relevant and diverse experience, skills and industry familiarity.
COMMUNICATIONS FROM SHAREHOLDERS AND OTHER INTERESTED PARTIES
The Board of Directors will give appropriate attention to written communications on issues that are submitted by shareholders and other interested parties, and will respond if and as appropriate. Absent unusual circumstances or as contemplated by committee charters, the Chairman of the Nominating and Corporate Governance Committee will, with the assistance of Analog Devices’ internal legal counsel, (1) be primarily responsible for monitoring communications from shareholders and other interested parties and (2) provide copies or summaries of such communications to the other directors as he considers appropriate.
2019 Proxy Statement 27
Communications will be forwarded to all directors if they relate to substantive matters and include suggestions or comments that the Chairman of the Nominating and Corporate Governance Committee considers to be important for the directors to review. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to personal grievances, commercial solicitations, and matters as to which Analog Devices tends to receive repetitive or duplicative communications.
Shareholders and other interested parties who wish to send communications on any topic to the Board of Directors (including the Presiding Director or the independent directors as a group) should address such communications to James A. Champy, Presiding Director, c/o Secretary, Analog Devices, Inc., One Technology Way, Norwood, Massachusetts 02062.
BOARD OF DIRECTORS LEADERSHIP STRUCTURELeadership Structure
Our Corporate Governance Guidelines provide that the roles of Chief Executive Officer and Chairman of the Board of Directors should be separate, unless otherwise determined by a majority of the Board of Directors, and we currently separate these roles. Our Chief Executive Officer is responsible for setting the strategic direction for the Company and theday-to-day leadership and performance of the Company, while our Chairman of the Board of Directors provides guidance to the Chief Executive Officer, sets the agenda for Board meetings and presides over meetings of the full Board of Directors. Because our Board of Directors has determined that Mr. Stata, our Chairman and founder, is not an independent director under the Nasdaq Rules, our Board of Directors has appointed James A. Champy as Presiding Director to preside at all executive sessions of directors without management present. The Board of Directors meets in executive session at each regular meeting.
BOARD OF DIRECTORS MEETINGS AND COMMITTEESBoard of Directors Meetings and Committees
The Board of Directors has responsibility for reviewing our overall performance, rather thanday-to-day operations. The Board of Directors’ primary responsibility is to oversee the management of the Company and, in doing so, doing, serve the best interests of the Company and its shareholders. The Board of Directors provides for the succession of the Chief Executive Officer, nominates for election at annual shareholder meetings individuals to serve as directors of Analog Devices, and elects individuals to fill any vacancies on the Board of Directors. It reviews corporate objectives and strategies, and evaluates and approves significant policies and proposed major commitments of corporate resources. It participates in decisions that have a potential major economic impact on Analog Devices. Management keeps the directors informed of Company activity through regular written reports and presentations at Board and committee meetings.
The Board of Directors met 12ten times and its committees collectively held 21 meetings in fiscal 20182020 (including by telephone conference). During fiscal 2018,2020, overall attendance at Board and committee meetings was 97% and each of our incumbent directors attended 75% or more of the total number of meetings of the Board of Directors and the committees on which he or she served. The Board of Directors has standing Audit, Compensation, and Nominating and Corporate Governance Committees. All members of all three committees are independent,non-employee directors. Each committee has a charter that has been approved by the Board of Directors and is reviewed annually. In addition, each Committeecommittee conducts an annual self-evaluation of its own performance.performance and the performance of its members in accordance with its respective Committee charter. Each director also undertakes an evaluation of the Board more generally. Our Presiding Director, who is also currently the Chair of our Nominating and Corporate Governance Committee, working with outside counsel, also has conversations with each Board member designed to assess the competencies and skills each director brings to the Board. Summaries of the evaluations are presented to the Board. Mr. Roche is the only current director who is, or has been in the past three years, an employee of Analog Devices. Messrs. Roche and Stata do not serve on any standing Board committee and do not participate in the portion of any Board or committee meeting during which their compensation is evaluated. The independent directors met in executive session without Messrs. Stata or Roche at eachin-person Board meeting in fiscal 2018.2020.
Our Corporate Governance Guidelines set forth our policy that directors are expected to attend annual meetings of shareholders. AllDue to unforeseen circumstances relating to the COVID-19 pandemic, only one of our then-serving directors attended the 2018our in-person 2020 Annual Meeting of Shareholders.
Audit Committee
The current members of our Audit Committee are Messrs. Sicchitano (Chair) and Evans and Ms. Golz and Dr. Little.Golz. The Board of Directors has determined that each of Messrs. Sicchitano and Evans and Ms. Golz and Dr. Little qualifies as an “audit committee financial expert” under the rules of the U.S. Securities and Exchange Commission, or SEC, and is independent as defined under the Nasdaq Rules and the independence requirements under Rule10A-3(b)(1) of the
28 Analog Devices, Inc.
Exchange Act. In addition, our Board of Directors has determined that each member of the Audit Committee is able to read and understand financial statements, including the Company’s consolidated balance sheet and its consolidated statements of income, comprehensive income, shareholders’ equity and cash flows and related notes as required under the Nasdaq Rules. The Board of Directors has certified that it has at least one member of the audit committeeAudit Committee who has past employment experience in finance or accounting as required by the Nasdaq Rules. None of Messrs. Sicchitano and Evans or Ms. Golz or Dr. Little serves on the audit committees of more than two other public companies.
The primary purpose of the Audit Committee is to assist the Board of Directors’ oversight of (i) the integrity of our financial statements and the Company’s systems of internal control over financial reporting and disclosure controls and procedures, (ii) the qualifications and independence of our independent registered public accounting firm, and (iii) the performance of our internal audit function and independent registered public accounting firm. The Audit Committee has the authority to engage any independent legal, accounting and other advisors that it deems necessary or appropriate to carry out its responsibilities. These independent advisors may be the regular advisors to the Company. The Audit Committee is empowered, without further action by the Board of Directors, to cause the Company to pay the compensation of those advisors as established by the Audit Committee. The Audit Committee selected and appointed Ernst & Young LLP, our independent registered public accounting firm, and did not retain any other advisors during fiscal 2018.2020. The Audit Committee met 9eleven times during fiscal 20182020 (including by telephone conference). The responsibilities of our Audit Committee and its activities during fiscal 20182020 are described in the Report of the Audit Committee below.
Compensation Committee
The current members of our Compensation Committee are Mr. Novich (Chair) and Drs. Frank (Chair), Glimcher, Little and Su.Wee. Dr. Lisa Su also served on the Compensation Committee during fiscal 2020. The Board of Directors has determined that each of Mr. Novich and Drs. Frank, Glimcher Little and SuWee is independent as defined under the Nasdaq Rules and the independence requirements under Rule10C-1 of the Exchange Act. The Compensation Committee evaluates and sets the compensation of our Chief Executive Officer and our other executive officers, and makes recommendations to our Board of Directors regarding the compensation of our directors. The Compensation Committee oversees the evaluation of senior management. In connection with its oversight and administration of ADI’s cash and equity incentive plans, the Compensation Committee authorizes the granting of stock options, RSUs and other stock incentives (within guidelines established by our Board of Directors and in accordance with our Stock Option and Stock-Based Award Grant Date Policies) to our officers. In accordance with the terms of our Amended and Restated 2006 Stock Incentive Plan, which we refer to as the 2006 Stock Incentive Plan, the Amended and Restated 20052020 Equity Incentive Plan, which we refer to as the 20052020 Plan, and the Amended and Restated 2010 Equity Incentive Plan, which we refer to as the 2010 Plan (the latter two of which were assumed by us in the Linear Technology acquisition), the Compensation Committee has delegated to our Chief Executive Officer the power to grant and modify options, RSUs and other stock awards to employees who are not executive officers, other senior vice presidents who report to the Chief Executive Officer or directors, subject to specified thresholds, parameters and applicable law. Additionally, the Compensation Committee oversees our newly adopted clawback policy, as well as any clawback policy the Company may adopt in the future. Our Compensation Committee held 12eight meetings (including by telephone conference) during fiscal 2018.2020.
Compensation Committee Consultants.The Compensation Committee has the authority, in its sole discretion, to retain or obtain the advice of any independent legal, accounting or other advisors it deems necessary or appropriate to carry out its responsibilities. The Compensation Committee is empowered, without further action by the Board of Directors, to cause the Company to pay the compensation of these advisors as established by the Compensation Committee. The Compensation Committee retained Pearl Meyer and Partners, or Pearl Meyer, an independent compensation consultant, during fiscal 2018.2020. Pearl Meyer reports directly to the Compensation Committee and assists the Compensation Committee in evaluating and designing our executive and director compensation program and policies. InFor fiscal 2018,2020, the Compensation Committee instructed Pearl Meyer to assist in the following matters:
comparing ourreviewing and validating the appropriateness of executive and director compensation arrangements to those of our defined peer group;
assisting the Compensation Committee in defining a comparator group of companies for the 20182020 relative total shareholder return performance-based RSUs;
2019 Proxy Statement 29
providing market data and advice regarding executive and director compensation plan design, design of the executive performance incentive plan and equity incentive mix and design;
conducting a risk assessment of our executive compensation program.
In connection with its work for the Compensation Committee, Pearl Meyer is invited to attend the Compensation Committee’s meetings and, upon request of the Compensation Committee, attends executive sessions of the Compensation Committee. Pearl Meyer is retained only by the Compensation Committee and does not provide any other consulting services to Analog Devices. The Compensation Committee also solicits advice from time to time from our outside counsel, WilmerHale. The Compensation Committee assesses the independence of its advisors on an annual basis. The Compensation Committee requested and received an independence letter from each of Pearl Meyer and WilmerHale providing information to assist the Compensation Committee in selecting and receiving advice from such advisor after considering the independence factors that are identified in the Nasdaq rules. The Compensation Committee determined that the engagement of these advisors did not raise any conflicts of interest for all work performed for the Compensation Committee during fiscal 2018.2020. The activities of our Compensation Committee and the services Pearl Meyer performed for the Compensation Committee during fiscal 20182020 are further described in “INFORMATION ABOUT EXECUTIVE COMPENSATION — COMPENSATION—Compensation Discussion and Analysis” below.
Nominating and Corporate Governance Committee
The current members of our Nominating and Corporate Governance Committee are Mr. Champy (Chair) and Dr. Frank.Chandrakasan. The Board of Directors has determined that each of Mr. Champy and Dr. FrankChandrakasan is independent as defined under the Nasdaq Rules. The primary responsibility of the Nominating and Corporate Governance Committee is to identify individuals qualified to become Board members consistent with criteria approved by the Board of Directors, recommend to the Board of Directors the persons to be nominated by the Board of Directors for election as directors at any meeting of shareholders and the persons to be elected by the Board to fill any vacancies on the Board, recommend to the Board of Directors the directors to be appointed to each committee of the Board of Directors, develop and recommend to the Board of Directors a set of corporate governance principles and oversee the evaluation of the Board of Directors. The Nominating and Corporate Governance Committee also leads the Board of Directors’ succession planning efforts with respect to senior executives and oversight of our Code of Business Conduct and Ethics. Ethics, and oversees and periodically reviews the Company’s environmental, social and governance policies, goals and programs.
The Nominating and Corporate Governance Committee has the authority to engage any independent legal and other advisors it deems necessary or appropriate to carry out its responsibilities. These independent advisors may be the regular advisors to the Company. The Nominating and Corporate Governance Committee is empowered, without further action by the Board of Directors, to cause the Company to pay the compensation of
these advisors as established by the Nominating and Corporate Governance Committee. For information relating to nominations of directors by our shareholders, see “—Director Candidates” above. Our Nominating and Corporate Governance Committee held fivesix meetings during fiscal 20182020 (including by telephone conference).
30 Under applicable Nasdaq Rules, a director of Analog Devices Inc.
will only qualify as an “independent director” if, in the opinion of our Board of Directors, that person does not have a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our Board of Directors has established guidelines (within our Corporate Governance Guidelines) to assist it in determining whether a director has a relationship with Analog Devices that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. These guidelines are posted on our website under investor.analog.com/corporate-governance.cfm. For relationships not covered by the guidelines, the determination of whether such a relationship exists is made by the members of our Board of Directors who are independent (as defined above). Our Board of Directors has determined that none of Messrs. Champy, Evans and Sicchitano, Ms. Golz and Drs. Chandrakasan, Frank, Glimcher, Little and Wee has a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is an “independent director” as defined under Rule 5605(a)(2) of the Nasdaq Rules. The Board also determined that Lisa Su and Neil Novich, both former directors, were each an “independent director” prior to their retirements from the Board on March 11, 2020. The Board of Directors has determined that Mr. Roche, our President and Chief Executive Officer, and Mr. Stata, our Chairman and founder, are not “independent” under the Nasdaq Rules because Mr. Roche is a current employee and Mr. Stata is our founder. The Board of Directors considered the Company’s annual laboratory membership and sponsorship of university research projects with MIT (of which Anantha P. Chandrakasan is the Dean of the School of Engineering and James A. Champy is a board member) and Karen Golz’s former affiliation with Ernst & Young and determined that those relationships would not interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
THE BOARD OF DIRECTORS’ ROLE IN RISK OVERSIGHTDirector Candidates
Shareholders of record of Analog Devices may recommend director candidates for inclusion by the Board of Directors in the slate of nominees that the Board of Directors recommends to our shareholders for election. The qualifications of recommended candidates will be reviewed by the Nominating and Corporate Governance Committee. If the Board of Directors determines to nominate a shareholder-recommended candidate and recommends his or her election as a director by the shareholders, the name will be included in Analog Devices’ proxy card for the shareholders’ meeting at which his or her election is recommended.
Shareholders may recommend individuals for the Nominating and Corporate Governance Committee to consider as potential director candidates by submitting their names and background and a statement as to whether the shareholder or group of shareholders making the recommendation has beneficially owned more than 5% of Analog Devices’ common stock for at least one year as of the date the recommendation is made, to the “Analog Devices Nominating and Corporate Governance Committee,” c/o Yoon Ah Oh, Secretary, Analog Devices, Inc., One Analog Way, Wilmington, Massachusetts 01887. The Nominating and Corporate Governance Committee will consider a recommendation only if appropriate biographical information and background material is provided on a timely basis.
The process followed by the Nominating and Corporate Governance Committee to identify and evaluate candidates includes requests to Board members and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the Nominating and Corporate Governance Committee and the Board of Directors. From time to time, the Nominating and Corporate Governance Committee may also seek input from director search firms for identification and evaluation of candidates. Laurie H. Glimcher, who joined our Board of Directors in August 2020, was recommended by a non-management director.
Assuming that appropriate biographical and background material is provided for candidates recommended by shareholders on a timely basis, the Nominating and Corporate Governance Committee will evaluate director candidates recommended by shareholders by following substantially the same process, and applying substantially the same criteria, as it follows for director candidates submitted by Board members.
Shareholders also have the right to directly nominate director candidates, without any action or recommendation on the part of the Nominating and Corporate Governance Committee or the Board of Directors, by following the procedures set forth in our bylaws and described in the response to the question “How and when may I submit a shareholder proposal, including a shareholder nomination for director, for the 2022 annual meeting of shareholders?” below.
In considering whether to recommend any candidate for inclusion in the Board of Directors’ slate of recommended director nominees, including candidates recommended by shareholders, the Nominating and Corporate Governance Committee will apply the criteria set forth in our Corporate Governance Guidelines. These criteria include the candidate’s integrity, business acumen, experience, commitment, and diligence; the presence of any conflicts of interest and the ability of the candidate to act in the interests of all shareholders. The Nominating and Corporate Governance Committee seeks nominees with a broad diversity of experience, professions, skills, geographic representation and backgrounds. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. Analog Devices believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board of Directors to fulfill its responsibilities. While we do not have a policy regarding Board diversity, the Nominating and Corporate Governance Committee includes gender, racial and ethnic diversity as part of its search criteria, consistent with the requirement for relevant and diverse experience, skills and industry familiarity.
Communications from Shareholders and Other Interested Parties
The Board of Directors will give appropriate attention to written communications on issues that are submitted by shareholders and other interested parties, and will respond if and as appropriate. Absent unusual circumstances or as contemplated by committee charters, the Chairman of the Nominating and Corporate Governance Committee will, with the assistance of Analog Devices’ internal legal counsel, (1) be primarily responsible for monitoring communications from shareholders and other interested parties and (2) provide copies or summaries of such communications to the other directors as he considers appropriate.
Communications will be forwarded to all directors if they relate to substantive matters and include suggestions or comments that the Chairman of the Nominating and Corporate Governance Committee considers to be important for the directors to review. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to personal grievances, commercial solicitations and matters as to which Analog Devices tends to receive repetitive or duplicative communications.
Shareholders and other interested parties who wish to send communications on any topic to the Board of Directors (including the Presiding Director or the independent directors as a group) should address such communications to James A. Champy, Presiding Director, c/o Secretary, Analog Devices, Inc., One Analog Way, Wilmington, Massachusetts 01887.
The Board of Directors’ Role in Risk Oversight
The following table summarizes management’s and the Board of Directors’ role in risk management and oversight:
Management | Our Risk Management Framework defines how we identify, manage and govern risk throughout our organization to promote the achievement of our financial and operational goals in a compliant manner. It assigns accountability for risk management | |
Board of | The Board of Directors’ role in the Company’s risk oversight process includes receiving regular reports from members of senior management on areas of material risk to the | |
Audit | The Audit Committee discusses ADI’s policies with respect to risk assessment and risk management as they apply to ADI’s financial statement integrity and reporting and internal controls. The Audit Committee also receives regular reports from our Director of Internal Audit on internal audit matters and receives reports at least annually from our Chief Information Officer on information security, technology and data privacy and protection. The Chief Information Officer also provides an annual report to the full Board of Directors regarding cybersecurity risk. | |
Compensation
| The Compensation Committee considers whether ADI’s executive compensation program and | |
Nominating Corporate
| The Nominating and Corporate Governance Committee leads the Board with respect to the adequacy of the Company’s governance structure and process and of succession planning for the Company’s Board of Directors, Chief Executive Officer and other executive officers. The Committee oversees the Company’s environmental, social and governance policies, goals and programs, including reviewing the Company’s sustainability initiatives and goals and the Company’s progress toward achieving those goals. | |
REPORT OF THE AUDIT COMMITTEEEngagement with Our Shareholders
The Audit CommitteeSince our inception as a public company, we have maintained an active engagement program with our shareholders, meeting with them extensively throughout the year as part of our investor outreach efforts. In fiscal 2020, we held more than 400 meetings with our shareholders, including the majority of our top 25 shareholders, to discuss the Company’s performance and prospects, as well as trends affecting the semiconductor industry. We also continued our specific outreach effort with our institutional investors to discuss corporate governance issues affecting the Company. During fiscal 2020, we reached out to our top 25 shareholders, representing approximately 55% of our outstanding shares, with an invitation to have discussions with their corporate governance teams. Of the shareholders who accepted our engagement invitation, topics covered in these meetings included:
In the spirit of continuous improvement, we have reviewed with our Board of Directors assisted the key takeaways from these meetings with our shareholders with the goal of continuing to evolve our corporate governance practices to best meet the needs of the Company and our shareholders. Our dialogue has led to enhancements to our practices and disclosure, which our Board of Directors’ oversight of (i)believes is in the integritybest interests of our financial statementscompany and the Company’s systems of internal control over financial reportingour shareholders. For example:
Topics of Discussion | Recent Outcomes of Engagement | |
Corporate Governance | • Continued focus on active Board refreshment and diversity, adding two new female directors to the Board | |
• Enhanced risk oversight practices for our Board, including cybersecurity at the Board level and ESG under the Nominating and Corporate Governance Committee | ||
• Adopted a new clawback policy for all executive officers with respect to cash and equity incentives that is applicable in the event of a material financial restatement due to fraud or willful misconduct | ||
Corporate Social Responsibility | • Published our inaugural Corporate Responsibility Report in May 2020 that includes enhanced disclosure of our ESG initiatives | |
• Enhanced our diversity & inclusion disclosures, including management perspective and workforce data on diversity and inclusion topics in the Corporate Responsibility Report | ||
• Continued to refine our shareholder engagement process to connect our shareholders with key stakeholders within our company around topics of interest | ||
We intend to continue our shareholder outreach efforts on an on-going basis and disclosure controls and procedures, (ii) the qualifications and independence of our independent registered public accounting firm, and (iii) the performance of our internal audit function and independent registered public accounting firm. The Audit Committee also met privatelylook forward to continuing to engage with our independent registered public accounting firmvalued shareholders.
Corporate Responsibility Highlights
We believe that sustainability is about delivering holistic solutions to ensure we are making a real, demonstrable impact in the world. ADI strives to create a rewarding workplace and be a trusted partner, leading corporate citizen, environmental steward and contributor to our communities. We periodically evaluate our sustainability priorities outlined in our 2020 Corporate Responsibility Report, entitled Engineering Good, to ensure alignment with our long-term strategy. As part of this process, we regularly engage with key stakeholders to ensure we continue to focus on the most important issues.
| Approach to Stakeholder Engagement |
| Our Shareholders | Our Workforce | Our Suppliers | Our Communities | |||
| We actively engage with our shareholders around topics of interest, including sustainability reporting and human capital management. | Through employee-led Green Teams, our employees focus on improving sustainability at local offices and provide feedback through our quarterly ADI Pulse engagement survey. | ADI is a proud member of the Responsible Business Alliance and requires our suppliers to adhere to our code of conduct. | ADI continues to fund and support STEM education and local environmental initiatives across the globe. | |||
Our sustainability agenda is led and managed by our Chief Executive Officer alongside a senior management team that includes our Chief People Officer, Chief Financial Officer, Chief Legal Officer, Senior Vice President of Industrial and Consumer, and newly appointed Director of Internal Audit to discuss our financial statements and disclosures, accounting policies and their application, internal controls over financial reporting, and other matters of importance to the Audit Committee, the independent registered public accounting firm and the internal auditors. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal controls over financial reporting.Social Purpose. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements contained in our Annual Report on Form10-K and the quarterly financial statements during fiscal 2018, including the specific disclosures in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These discussions also addressed the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Audit Committee reported on these meetings toaddition, our Board of Directors. The Audit CommitteeDirectors is fully engaged and receives updates from senior management about our progress against our sustainability initiatives.
We utilize third-party disclosure initiatives to inform our sustainability activities and reporting. Our 2019 Corporate Responsibility Report was prepared in accordance with the Global Reporting Initiative: Core Option and we also selected and appointed our independent registered public accounting firm, reviewed the performance of the independent registered public accounting firm during the annual audit and on assignments unrelatedreport separately to the audit, assessedCDP Climate Change and Water Security projects. Our sustainability activities and reporting are appropriately aligned with the independenceUN Sustainable Development Goals. Going forward, we plan to review other evolving ESG disclosure frameworks (e.g., TCFD and SASB) to better inform our sustainability reports.
We have a long history of leadership in corporate responsibility and pursue corporate social responsibility and sustainability along four pillars—Protect and Regenerate the independent registeredEnvironment, Empower People, Impact Through Engagement and Promoting Good Governance.
Protect and Regenerate the Environment—While we are focused on reducing our carbon footprint and our impact on the environment today, we also strive to deliver an even greater environmental impact. Our goal is to make meaningful progress on environmental regeneration efforts and partner with our customers to help them solve their sustainability challenges. We leverage our expertise to develop new solutions to help restore natural resources, regenerate the quality of our biosphere and reduce carbon.
We establish environmental performance objectives using a five-year planning horizon, and make annual updates to our objectives, targets, and programs. For example, key 2025 operational targets for ADI include: 50% greenhouse gas emission reduction over our 2015 baseline; 50% water recycling rate; and 100% renewable energy use for power generation. Progress is reviewed quarterly at the corporate level and monthly at the site level and senior management allocates resources appropriately to help keep programs on plan.
Empower People—We are committed to helping our employees thrive through education, inclusion and support. We are focused on building programs within ADI to enhance our diverse and accepting workplace culture, while also broadening availability of STEM education, training and employment to impoverished communities across the globe.
As we continue to evolve our business offerings and innovate our designs, we are also placing our environmental and social responsibilities at the center of our operations. The empowerment of our people is a key focus area. Our empowerment strategy is led by our new Social Purpose Governance Council, made up of members from across our business units who provide different perspectives across age, gender, ethnicity and sexual orientation. Core to our empowerment strategy is embracing diversity and building a culture of inclusion across the organization. We plan to achieve this by expanding the diversity of our workforce, creating growth and development opportunities for our employees, embracing different perspectives and fostering an inclusive work environment for all.
Impact Through Engagement—ADI takes an active role in addressing problems that impact our employees, our communities and our planet. We stand behind our employee engagement efforts and are proud to contribute to their causes. For example, Analog Devices Foundation, Analog Devices and our employees—through an accelerated employee match—donated a combined $4 million to the World Health Organization’s COVID-19 Solidarity Response Fund. Additionally, the Analog Devices Foundation donated $500,000 to fund research for the Vaccine & Immunotherapy Center, or the VIC, at Massachusetts General Hospital. The donation directly supports work to develop a vaccine and novel point-of-care testing technologies for COVID-19. Analog Devices and the VIC are supporting a trial to deploy new diagnostic testing to identify those infected with COVID-19 and confirm which individuals have developed an immune response and are virus negative.
Promoting Good Governance—We have long believed that good corporate governance is important to ensure Analog Devices is managed for the long-term benefit of our shareholders. We review our corporate governance policies and practices annually and compare them to those suggested by various authorities in corporate governance and the practices of other public accounting firm, and reviewed and approved the independent registered public accounting firm’s fees. The Audit Committee also hascompanies. As a result, we have adopted policies and procedures forthat we believe are in thepre-approval best interests of audit andnon-audit services for the purpose of maintaining the independence of our independent registered public accounting firm. The Audit Committee operates under a written charter adopted by our Board of Directors.
2019 Proxy Statement 31
The Audit Committee reviewed with our independent registered public accounting firm, who are responsible for expressing an opinion on the conformity of the audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards. In addition, the Audit Committee has discussed with the independent registered public accounting firm (i) the matters to be discussed as required by AS 1301:Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board (PCAOB) and (ii) the independent registered public accounting firm’s independence from Analog Devices and its management,our shareholders.
Sustainability is infused into all aspects of how we do business, and we are proud that our sustainability commitment is routinely recognized around the globe, including most recently with the following awards:
Employer Brand
• The Boston Globe’s Top Places to Work (2017-2020) | • Forbes World’s Best Employers (2018-2020) | |
— Rankings based on employee satisfaction | — Rankings based on employee evaluations |
Corporate Reputation
• Derwent Top 100 Global Innovators™ (2020) | • Shingo Accreditation (2020) | |
— Awarded to the world’s most innovative organizations which successfully develop patented inventions that also have strong commercialization potential | — Global recognition for premier quality and operational excellence; ADI Limerick is the first semiconductor site in the world to achieve this |
For more information about our corporate responsibility efforts, please refer to our Corporate Responsibility Report available at analog.com/csr. We are not including the matters in the written disclosures and the letter we received from the independent registered public accounting firm required by the PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, regarding the independent registered public accounting firm’s communications with the Audit Committee on independence. The Audit Committee considered the appropriateness of the provision ofnon-audit services by the independent registered public accounting firm relative to their independence.
Based on its review and discussions referred to above, the Audit Committee recommended to our Board of Directors (and the Board of Directors approved) that our audited financial statements be includedinformation contained in our AnnualCorporate Responsibility Report on Form10-K for the fiscal year ended November 3, 2018. The Audit Committee also selected Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending November 2, 2019.
Audit Committee
Kenton J. Sicchitano,Chairman
Bruce R. Evans
Karen M. Golz
Mark M. Littlein, or incorporating it by reference into, this proxy statement.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND OTHER MATTERS
The following table presents the aggregate fees billed for services rendered by Ernst & Young LLP, our independent registered public accounting firm, for fiscal 2018 and fiscal 2017.
| Fiscal 2018 | Fiscal 2017 | |||||||
Audit Fees | $ | 5,132,000 | $ | 6,115,000 | ||||
Audit-Related Fees | 95,000 | 249,000 | ||||||
Tax Fees | 5,465,000 | 6,251,000 | ||||||
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| |||||
Total Fees | $ | 10,692,000 | $ | 12,615,000 | ||||
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Audit Fees. These are fees related to professional services rendered in connection with the audit of our consolidated financial statements, the audit of the effectiveness of our internal control over financial reporting, the reviews of our interim financial statements included in each of our Quarterly Reports on Form10-Q, international statutory audits, reviews and comfort letter procedures related to our filings on FormS-3, assistance with registration statements and other periodic filings, and accounting consultations that relate to the audited financial statements and are necessary to comply with U.S. generally accepted accounting principles.
Audit-Related Fees. These are fees for assurance and related services and consisted primarily of audits of employee benefit plans, accounting matters not related to the annual audit, and attestation services that are not required by statute or regulation.
Tax Fees. These are fees for tax advice and services, including services relating to the acquisition of Linear Technology, professional services related to tax return preparation services for our expatriates, international tax returns, tax advice and planning and assistance with international tax audits. Included in this amount are fees of $376,000 in fiscal 2018, and $406,000 in fiscal 2017, for tax compliance services for our international affiliates and tax return preparation services for our expatriate employees on international assignments. Ernst & Young LLP does not provide tax services to any person in a financial reporting oversight role at Analog Devices.
32 Analog Devices, Inc.
Audit Committee’sPre-Approval Policy and Procedures
The Audit Committee of our Board of Directors has adopted policies and procedures for thepre-approval of audit andnon-audit services for the purpose of maintaining the independence of our independent registered public accounting firm. We may not engage our independent registered public accounting firm to render any audit ornon-audit service unless either the service is approved in advance by the Audit Committee or the engagement to render the service is entered into pursuant to the Audit Committee’spre-approval policies and procedures. On an annual basis, the Audit Committee maypre-approve services that are expected to be provided to Analog Devices by the independent registered public accounting firm during the following 12 months. At the time thepre-approval is granted, the Audit Committee must (1) identify the particularpre-approved services in a sufficient level of detail so that management will not be called upon to make a judgment as to whether a proposed service fits within thepre-approved services and (2) establish a monetary limit with respect to each particularpre-approved service, which limit may not be exceeded without obtaining furtherpre-approval under the policy. At regularly scheduled meetings of the Audit Committee, management or the independent registered public accounting firm must report to the Audit Committee regarding each service actually provided to Analog Devices.
If the cost of any service exceeds thepre-approved monetary limit, that service must be approved (1) by the entire Audit Committee if the cost of the service exceeds $100,000 or (2) by the Chairman of the Audit Committee if the cost of the service is less than $100,000 but greater than $10,000. If the cost of any service exceeds thepre-approved monetary limit, individual items with a cost of less than $10,000 each do not require furtherpre-approval, provided that the total cost of all individual items does not exceed $40,000 and an update of all items in this category is provided to the Audit Committee at each quarterly scheduled meeting. However, if the cost of all the individual items will exceed $40,000, the Chairman of the Audit Committee must receive a summary of those items with a request for approval of any amounts to be incurred in excess of $40,000.
The Audit Committee has delegated authority to the Chairman of the Audit Committee topre-approve any audit ornon-audit services to be provided to Analog Devices by the independent registered public accounting firm for which the cost is less than $100,000. During fiscal 2018 and fiscal 2017, all services provided to Analog Devices by Ernst & Young LLP werepre-approved in accordance with thepre-approval policies and procedures described above.
DIRECTOR COMPENSATIONDirector Compensation
Ournon-employee director compensation program is designed to attract and retain experienced and knowledgeable directors and to provide equity-based compensation to align the interests of our directors with those of our shareholders. Eachnon-employee director receives an annual cash retainer and an annual equity award in the form of RSUs. To reflect their additional responsibilities, the Chairs and members of all committees receive an additional cash retainer. The Presiding Director also receives an additional cash retainer. Mr. Roche, as an employee director, does not receive any additional compensation for his services as director.
The Board of Directors has delegated to the Compensation Committee the responsibility to review and recommend to the Board of Directors any proposed changes tonon-employee director compensation. Annually, the Compensation Committee reviews with Pearl Meyer, the Compensation Committee’s independent compensation consultant,non-employee director compensation information for our peer group to check the alignment of ournon-employee director compensation package with market practice and current trends. The Compensation Committee then makes recommendations to the full Board with respect to compensation of ournon-employee directors, and the full Board reviews these recommendations and makes a final determination.
In fiscal 20182020 we granted 100% of the value of the annual equity award to each of ournon-employee directors in the form of time-based RSUs. These RSUs vest in full on the earlier of the first anniversary of the date of grant or the date of the Company’s next annual meeting.meeting of shareholders. On March 14, 2018,11, 2020, we granted eachnon-employeenon- employee director 2,1552,210 RSUs for services to be provided during fiscal 2018.from that date until the earlier of the first anniversary of the date of the grant or the Company’s next annual meeting of shareholders. On JulyDecember 16, 2018, Ms. Golz,2019, Dr. Wee, who joined the Board in June 2018,November 2019, was granted 1,504520 RSUs for services to be provided during fiscal 2018.
2019 Proxy Statement 33
from the date of her initial election as a director through the 2020 annual meeting of shareholders. On September 15, 2020, Dr. Glimcher, who joined the Board in August 2020, was granted 1,060 RSUs for services to be provided from the date of her initial election as a director through the 2021 annual meeting of shareholders.
The following table details the total compensation earned by ournon-employee directors in fiscal 2018.2020.
2018 DIRECTOR COMPENSATIONFiscal 2020 Director Compensation
| Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | All Other Compensation ($)(4) | Total ($) | Fees Earned or Paid in Cash ($) (1) | Stock (2) (3) | All Other Compensation ($) (4) | Total ($) | ||||||||||||||||||||||||
James A. Champy | 105,000 | 198,669 | — | 303,669 | 125,000 | 203,179 | — | 328,179 | ||||||||||||||||||||||||
Anantha P. Chandrakasan(5) | — | — | — | — | ||||||||||||||||||||||||||||
Anantha P. Chandrakasan | 90,000 | 203,179 | — | 293,179 | ||||||||||||||||||||||||||||
Bruce R. Evans | 80,000 | 198,669 | — | 278,669 | 95,000 | 203,179 | — | 298,179 | ||||||||||||||||||||||||
Edward H. Frank | 82,500 | 198,669 | — | 281,169 | 100,000 | 203,179 | — | 303,179 | ||||||||||||||||||||||||
Karen M. Golz(6) | 31,648 | 144,008 | — | 175,656 | ||||||||||||||||||||||||||||
Laurie H. Glimcher (5) | 18,750 | 120,395 | — | 139,145 | ||||||||||||||||||||||||||||
Karen M. Golz | 95,000 | 203,179 | — | 298,179 | ||||||||||||||||||||||||||||
Mark M. Little | 80,000 | 198,669 | — | 278,669 | 90,000 | 203,179 | — | 293,179 | ||||||||||||||||||||||||
Neil Novich | 90,000 | 198,669 | — | 288,669 | ||||||||||||||||||||||||||||
Neil Novich (6) | 33,929 | — | — | 33,929 | ||||||||||||||||||||||||||||
Kenton J. Sicchitano | 95,000 | 198,669 | — | 293,669 | 110,000 | 203,179 | — | 313,179 | ||||||||||||||||||||||||
Ray Stata | 250,000 | 198,669 | 13,884 | 462,553 | 250,000 | 203,179 | 15,324 | 468,503 | ||||||||||||||||||||||||
Lisa T. Su | 77,500 | 198,669 | — | 276,169 | ||||||||||||||||||||||||||||
Lisa T. Su (6) | 32,143 | — | — | 32,143 | ||||||||||||||||||||||||||||
Susie Wee (7) | 83,571 | 262,251 | — | 345,822 | ||||||||||||||||||||||||||||
| (1) | This amount includes a |
| (2) | These amounts represent the aggregate grant date fair value of awards for grants of RSUs to each listed director in fiscal |
| (3) | The aggregate number of stock options and RSUs outstanding held by each non-employee director (representing unexercised stock options and unvested RSUs) at |
| Name | Number of Shares November 3, 2018 | Number of RSUs that have not Vested as of November 3, 2018 | ||||||
James A. Champy | 53,210 | 2,155 | ||||||
Anantha P. Chandrakasan | — | — | ||||||
Bruce R. Evans | 12,890 | 2,155 | ||||||
Edward H. Frank | 23,340 | 2,155 | ||||||
Karen M. Golz | — | 1,504 | ||||||
Mark M. Little | 1,040 | 2,155 | ||||||
Neil Novich | 53,210 | 2,155 | ||||||
Kenton J. Sicchitano | 46,000 | 2,155 | ||||||
Ray Stata | 39,120 | 2,155 | ||||||
Lisa T. Su | 25,760 | 2,155 | ||||||
34 Analog Devices, Inc.
Name | Number of Shares Subject to Option Awards Held as of October 31, 2020 | Number of RSUs that have not Vested as of October 31, 2020 | ||||||
James A. Champy | 37,620 | 2,210 | ||||||
Anantha P. Chandrakasan | — | 2,210 | ||||||
Bruce R. Evans | — | 2,210 | ||||||
Edward H. Frank | — | 2,210 | ||||||
Laurie H. Glimcher | — | 1,060 | ||||||
Karen M. Golz | — | 2,210 | ||||||
Mark M. Little | 1,040 | 2,210 | ||||||
Neil Novich | — | — | ||||||
Kenton J. Sicchitano | 25,760 | 2,210 | ||||||
Ray Stata | 37,620 | 2,210 | ||||||
Lisa Su | — | — | ||||||
Susie Wee | — | 2,210 | ||||||
The following table includes the assumptions, rounded to the nearest hundredth, which we used to calculate the grant date fair value amounts included in the “Stock Awards” column for fiscal 20182020 Director Compensation.
Grant Date
| Assumptions | |||||||||||||
Risk-Free Interest Rate (%) | Dividend Yield (%) | Grant Date Fair Value Per Share ($) | ||||||||||||
3/14/2018 | RSUs | 2.03 | 2.04 | 92.19 | ||||||||||
7/16/2018 | RSUs | 1.97 | 2.39 | 95.75 | ||||||||||
Grant Date | Assumptions | |||||||||||||||
Risk-Free Interest Rate (%) |
Dividend Yield (%) |
Grant Date Fair Value | ||||||||||||||
12/16/2019 | RSUs | 1.67 | 1.82 | 113.60 | ||||||||||||
3/11/2020 | RSUs | 0.10 | 2.63 | 91.94 | ||||||||||||
9/15/2020 | RSUs | 0.13 | 2.14 | 113.58 | ||||||||||||
The grant date fair value of RSUs represents the value of our common stock on the date of grant, reduced by the present value of dividends expected to be paid on our common stock prior to vesting. For a more detailed description of the assumptions used for purposes of determining grant date fair value, see Note 3 to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Operations—Critical Accounting Policies and Estimates — Estimates—Stock-Based Compensation,” included in our Annual Report onForm 10-K for the year ended November 3, 2018.October 31, 2020.
| (4) | The amount represents payment of medical and dental insurance premiums on behalf of Mr. Stata and his spouse. |
| (5) |
|
| (6) |
|
| (7) | Dr. Wee joined the Board on November 29, 2019, and in accordance with our Equity Award Grant Date Policy, was |
We also reimburse our directors for travel to Board meetings and other related expenses.
Stock Ownership Guidelines forNon-Employee Directors
Under our stock ownership guidelines, the target share ownership level fornon-employee directors is at least four times the directors’ annual cash retainer. Directors have four years to achieve their targeted level. Shares subject to unexercised options, whether or not vested, and any shares that have been pledged as collateral for a loan will not be counted for purposes of satisfying these guidelines. Unvested RSUs are counted for purposes of satisfying the guidelines. All of ournon-employee directors were in compliance with our stock ownership guidelines as of the end of fiscal 2018.2020.
Equity Award Grant Date Policy forNon-Employee Directors
During fiscal 2018,2020, our equity award grant policyEquity Award Grant Date Policy fornon-employee directors provided for the following:
For fiscal 2018,2020, RSUs granted to ournon-employee directors under the 2006 Stock2020 Equity Incentive Plan vest on the earlier of the date of the Annual Meeting and the first anniversary of the date of grant, subject to acceleration as described below. The RSU awards vest in full upon the occurrence of a Change in Control Event (as defined in the 2006 Stock2020 Equity Incentive Plan) or the director’s death. If the director ceases to serve as a director by reason of his or her disability, as determined by the Board of Directors, each outstanding and
2019 Proxy Statement 35
unvested RSU will vest in full at the time he or she ceases to be a director. In addition, upon the occurrence of a Change in Control Event or in the event of the director’s death, disability or retirement after age 60, each vested option will continue to be exercisable for the balance of its term.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSCertain Relationships and Related Transactions
Transactions with Related Persons
During fiscal 2018,2020, Mr. Stata, our founder and Chairman of the Board, received a cash retainer for service on the Board of $250,000. Following his retirement as an employee in 2012, the Company agreed to provide medical and dental benefits to Mr. Stata and his spouse during their lifetimes on the same basis as provided to U.S. employees of the Company. The value of those medical and dental benefits in 2018fiscal 2020 was $13,884.$15,324. On March 14, 2018,11, 2020, we granted 2,1552,210 RSUs to Mr. Stata. This award is identical to the award granted to our othernon-employee directors on March 14, 201811, 2020 and vests on the earlier of the date of the Annual Meeting or the first anniversary of the grant date.
The Company contributes annually to Massachusetts Institute of Technology (MIT) to fund university research projects. In fiscal 2018,2020, the Company made approximately $2.4$1.6 million in total contributions to MIT of which $120,000 funded a graduate student working in Dr. Chandrakasan’s laboratory.
Policies and Procedures for Related Person Transactions
Our Board of Directors has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which Analog Devices is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% shareholders (or their immediate family members,members), each of whom we refer to as a “related person” has a direct or indirect material interest.
If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our General Counsel.Chief Legal Officer. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the Nominating and Corporate Governance Committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If our General CounselChief Legal Officer determines that advance review and approval is not practicable, the Nominating and Corporate Governance Committee will review, and, in its discretion, may ratify the related person transaction at the next meeting of the Nominating and Corporate Governance Committee. The policy also permits the Chairman of the Nominating and Corporate Governance Committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the Nominating and Corporate Governance Committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.
A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the Nominating and Corporate Governance Committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the Nominating and Corporate Governance Committee will review and consider:
the approximate dollar value of the amount involved in the related person transaction;
the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;
whether the transaction was undertaken in the ordinary course of our business;
the purpose of, and the potential benefits to us of, the transaction; and
any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.
36 Analog Devices, Inc.
The Nominating and Corporate Governance Committee may approve or ratify the transaction only if the Nominating and Corporate Governance Committee determines that, under all of the circumstances, the transaction is in Analog Devices’ best interests. The Nominating and Corporate Governance Committee may, in its sole discretion, impose any conditions on us or the related person in connection with approval of the related person transaction.
In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, the Board of Directors has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:
negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, and (c) the amount involved in the transaction equals less than the greater of $200,000 or 5% of the annual gross revenues of the company receiving payment under the transaction; or |
the transactions that are specifically contemplated by provisions of Analog Devices’ charter or bylaws.
The policy provides that the transactions involving compensation of executive officers shall be reviewed and approved by the Compensation Committee in the manner specified in its charter.
2019 Proxy Statement 37
| u |
Advisory Vote on the Compensation of Our Named Executive Officers |
ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERSOur Board of Directors unanimously recommends that you vote FOR approval of the compensation of our named executive officers as disclosed in this proxy statement.
We are requesting shareholder approval of the compensation of the executive officers named in our Summary Compensation Table below, who we refer to as our “named executive officers” or “NEOs.” We are required to provide our shareholders with the opportunity to vote to approve, on an advisory(non-binding) basis, the compensation of our NEOs as disclosed in this proxy statement in accordance with the SEC’s rules. At the 2017 annual meeting of shareholders, our shareholders voted in favor of holding future “say on pay” votes every year. In accordance with the results of that vote, our Board of Directors determined to submit “say on pay” proposals to our shareholders every year.
Our Board of Directors is asking shareholders to approve the followingnon-binding advisory resolution:
RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed pursuant to Item 402 of RegulationS-K, including the Compensation Discussion and Analysis, compensation tables and accompanying narrative disclosures in this proxy statement, is hereby approved.
As required by the Dodd-Frank Act, this is an advisory vote, which means that this proposal is not binding on us. Our Compensation Committee, however, values the opinions expressed by our shareholders and will carefully consider the outcome of the vote when making future compensation decisions for our NEOs. You may vote for, against or abstain from voting on this matter.
At our 20182020 annual meeting of shareholders, our compensation program for our NEOs received the support of 96.8%95.9% of the total votes cast. In light of the support received, our Compensation Committee did not make significant changes to our executive compensation program.
As described in detail in the “Compensation Discussion and Analysis” section of this proxy statement, ADI’s executive compensation program is significantly performance-based and designed to attract, retain and motivate strong executives to lead our complex, global organization and to align their interests with those of our shareholders. We seek to provide total compensation to our executives that is competitive with our peers, and we believe that our executive compensation program is designed to encourage the most talented individuals to grow their careers at ADI.
ADI has a longstanding philosophy and practice of paying executives for performance. In order to align our pay practices with shareholder interests, we tie a significant percentage of each executive’s compensation to the Company’s performance, in the form of variable cash incentive bonus payments, and equity awards that are subject to performance vesting and rise in value only if our stock price increases. InWhile fiscal 2018,2020 represented a year of strategic progress for ADI, our results were partly impacted by the economic volatility and supply chain disruptions related to the COVID-19 pandemic. We actively managed operating expenses, and for fiscal 2020, we delivered reported operating margins of 26.7% and adjusted operating margins of 39.9%. Revenue was $5.6 billion in which ADIfiscal 2020, down modestly year-over-year. Importantly, we saw continued improvement quarter to quarter as evidenced by our second half revenue increasing 14% when compared to the first half. We exceeded both our profitability and year-over-yeartarget but did not meet our revenue growth targets, aggregate paymentstarget under our executive performance incentive bonus plan, werewhich resulted in aggregate payments under the plan made at 183%77% of target, compared to 248%95% in fiscal 20172019 and 85%183% in the fiscal year ended October 29, 2016, or fiscal 2016.2018.
We believe that our executive compensation program is working as intended and appropriately aligns executive pay with Company performance.
Our Board of Directors unanimously recommends that you vote FOR approval of the compensation of our named executive officers as disclosed in this proxy statement.
38 Analog Devices, Inc.
INFORMATION ABOUT EXECUTIVE COMPENSATIONExecutive Compensation
COMPENSATION DISCUSSION AND ANALYSISCompensation Discussion and Analysis
We intend to provide compensation for our executives that is competitive with our peers, with an opportunity for increased compensation if the Company’s performance warrants. We have designed our compensation program to make a substantial percentage of our executive pay variable, subject to increase when corporate targets are overachieved and reduction when corporate targets are not reached. The elements of our executives’ total compensation are base salary, variable cash incentive awards, long-term equity compensation awards and retirement and other employee benefits.
This Compensation Discussion and Analysis, or CD&A, and the tables and narrative that follow provide important information about our executive officer compensation program for fiscal 2018.2020. In this proxy statement, the terms “named executive officers” or “NEOs” refer to the following individuals who served as executive officers during fiscal 2018:2020:
Named Executive Officer
| Position
| |
Vincent Roche | President and Chief Executive Officer | |
Prashanth Mahendra-Rajah | Senior Vice President, Finance and Chief Financial Officer | |
Martin Cotter | Senior Vice President, Worldwide Sales and Digital Marketing | |
John Hassett | Senior Vice President, | |
Steve Pietkiewicz | Senior Vice President, Power Products | |
Fiscal 2020 Financial Results and Shareholder Value Creation
In fiscal 2020, ADI delivered solid financial results against a backdrop of challenging macroeconomic conditions, including disruptions caused by the COVID-19 pandemic and ongoing trade uncertainty. Importantly, we made progress positioning ADI for continued long-term success through deepening our customer engagements, continuing to invest in our business to drive innovation, extracting value from recent acquisitions and capitalizing on secular trends to drive addressable markets and diversified growth. We also announced the proposed acquisition of Maxim Integrated Products, Inc., which if completed will strengthen ADI as a semiconductor leader with increased breadth and scale across multiple attractive end markets. We also demonstrated our commitment to deliver strong shareholder returns during fiscal 2020, returning approximately $1.1 billion to our shareholders in the form of dividends and share buybacks.
Fiscal 2020 Performance Highlights
$5.6B Revenue | 65.9% Gross Margins | 26.7% Operating Margins | $3.28 Diluted Earnings per Share | $2.0B Operating Cash Flow | ||||||||||||||
~90% Business- to-Business Revenue | 69.1% Adjusted Gross Margins* | 39.9% Adjusted Operating Margins* | $4.91 Adjusted Diluted Earnings per Share* | $1.8B Free Cash Flow* | ||||||||||||||
Compensation Processes and Philosophy
| * | See Additional Information for additional information regarding non-GAAP financial measures and reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures |
| Fiscal 2020 Shareholder Value Creation |
|
| | ||
Returned $1.1B to shareholders in the form of dividends and share repurchases | Increased our dividends per share paid to shareholders by 15% on an annualized basis | 1-, 3- and 5-year TSR1 of 12%, 38% and 121%, respectively, which outperformed the S&P 500 over the same periods |
| 1. | Total Shareholder Return, or TSR, calculation is share price appreciation plus cumulative cash dividend payments, and the effect of reinvesting those dividends into the security, for the one-, three- and five-year periods ended October 31, 2020. |
Our executive compensation program is designed to attract and retain top executive talent and align the interests of our executives and our shareholders. We accomplish this through the following steps:
COMPENSATION PROCESSES AND PHILOSOPHY Our executive compensation program is designed to attract and retain top executive talent and align the interests of our executives and our shareholders. We accomplish this through the following steps: First, we ensure our executive compensation is competitive and attracts and retains top executive talent by understanding how the total target compensation (consisting of salary, bonus, and equity awards) of our NEOs compares to the total target compensation of those in similar positions within our peer group. We then consider a variety of factors, including the scope of the role, tenure in the position, and the performance and experience of the individual when deciding how to position each NEOs total target compensation to the total target compensation of those in similar positions within our peer group. We structure our compensation package to align executives interests with those of our shareholders by tying a significant portion of their total compensation directly to ADIs short- and long-term performance, which for the NEOs is measured by OPBT margin and year-over-year revenue growth, which both drive shareholder value, stock price appreciation, and relative total shareholder return.
Our Chief Executive Officer’s compensation is described in more detail below under “—Chief Executive Officer Compensation.” Our other NEOs’ compensation is described in more detail below under “—Compensation for Other Named Executive Officers.”
Our Board of Directors unanimously recommends that you vote
