UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
☑ | Filed by the Registrant | ☐ | Filed by a |
CHECK THE APPROPRIATE BOX: | ||
☐ | Preliminary Proxy Statement | |
☐ | Confidential, | |
☑ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material |
Western Digital Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Thanother than the Registrant)
PAYMENT OF FILING FEE (CHECK | |||
☑ | No fee | ||
☐ | Fee paid previously with preliminary materials | ||
☐ | Fee computed on table | ||
Our Long-Term Value Creation Strategy
Our strategy supports our mission to be recognized as the world’s leading data infrastructure company
We continue to pursue a long-term value-creation strategy underpinned by growth in Big Data applications through our hard disk drive (“HDD”) offerings and Fast Data applications through our flash offerings. Western Digital’s platform is strategically positioned to play a key role in supporting long-term growth trends.
Our strategy is dependent on continuing to build a culture of growth and innovation to accomplish five major strategic pillars:
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Our strategy across five major strategic pillars |
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Drive ●Capitalize on market transition to ●Focus on gross margin leadership ●Leverage consumer brand strength | |||||||
Create what’s next No matter how you follow your passion, you should be empowered and inspired by the data that surrounds you. At Western Digital, our broad and ever-expanding portfolio delivers powerful storage solutions with data security features for everyone from students, gamers and home offices to the largest enterprises and cloud providers. Through our flash and hard disk drive (“HDD”) products across our Western Digital®, WD®, WD_BLACK™, SanDisk® and SanDisk® Professional brands, we spark innovation, drive deeper connections and enable smarter decisions. As we constantly create opportunities for people to bridge the gap between aspiration and actualization, it is our culture and our passion to do things the right way. We thrive on inclusivity. We relentlessly pursue technological advancements, with approximately 13,000 active patents for groundbreaking memory technologies and beyond. We continuously analyze and optimize our operations for efficiency and reliability and to secure our supply chain. We are also proud to have been recognized as All the while, we keep our customers’ efficiency, security and overall capabilities front and center. It is our mission to fuel new possibilities and write the future in collaboration with our stakeholders, with solutions imagined and realized on their terms. Together, we can create what’s next. | |||||||
Capitalize on the HDD Opportunity in the
●Ensure reliable capacity growth and ●Enhance customers’ ability to generate value from data ●Develop new technologies across the storage landscape | |||||||
Grow through
●Lead in areal density | ●Reimagine every subsystem for HDD ●Drive capital-efficient bit growth in flash ●Maintain leadership in
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Deliver Customer Value ●Expand relationships at our largest customers to enrich our value ●Increase long-term engagement and through-cycle agreements with key hyperscalers ●Establish ourselves as “The Supplier” for storage in retail, e-tail and distribution channels, while developing | |||||||
Accelerate Operational Excellence ●Achieve operational excellence to translate technology into stockholder value ●Meet quarter-to-quarter cost down target to improve gross margin while improving inventory
●Focus on sustainability and
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Our Purpose |
LETTER FROM OUR CHAIRMAN AND LEAD INDEPENDENT DIRECTOR
Dear Fellow Stockholders:
On behalf of our entire Board, we thank you for your investment and trust in us to oversee the long-term success and sustainability of Western Digital. Despite the continued challenges presented by the past year, our Board provided critical oversight in helping the company adapt to near-term uncertainties and nurtured a culture that values protecting and growing your investment over the long term. As directors, we played an integral role in overseeing the strategic direction of the company, monitoring execution by Western Digital’s management and ensuring that the company’s culture continues to support and align with its long-term strategy.
As we approach the 2021 Annual Meeting, we would like to share some of the ways that we are working to provide strong independent oversight and represent your interests.
EXECUTING ON OUR GROWTH AND INNOVATION STRATEGY
An essential role of the Board is to provide effective oversight related to Western Digital’s corporate strategy and execution. We understand that we have a fundamental and strategic oversight role to play in building a resilient enterprise, while also laying the foundation for the company’s future success as an essential building block of the digital economy. We work closely with senior leadership in developing Western Digital’s strategy and positioning us to continue as a leading developer, manufacturer and provider of data storage devices and solutions. As we reflect on fiscal 2021, our results demonstrate continued momentum in our business as we executed on priorities we believe will drive growth.
Western Digital’s strengths in technology and cost leadership, expansive product portfolio and broad routes to market are providing a foundation upon which we are solidifying our position as the leading data infrastructure company. These strengths, combined with our increased operational and strategic focus enabled by our new business unit structure, are driving results. As we continue to face a dynamic environment, we are seeing the benefits of the synergistic value in the breadth of Western Digital’s portfolio, and our unique ability to deliver both hard drive and flash solutions to our diverse end-markets and customer base.
REFRESHING OUR BOARD WITH NEW PERSPECTIVES
Strong independent leadership and ongoing attention to Board composition are critical in our commitment to a thoughtful governance structure that is aligned with our strategic needs. In seeking to ensure an appropriate mix of tenure and expertise that provides a balance of fresh perspectives and institutional knowledge, we routinely evaluate the composition of the Board and strategically refresh our membership to ensure we have a balanced mix of deep subject-matter expertise across a variety of disciplines to guide the company. The Governance Committee invests a substantial amount of time assessing our Board’s composition as part of the annual self-evaluation process, and revisits the topic during the year if the Board sees changes in the company’s governance needs.
Since 2020, we have welcomed two independent directors to our Board, each of whom brings extensive experience and fresh perspectives that enrich our Board’s dialogue and enhance our ability to continue effectively overseeing the business. Following a robust search process, we welcomed Dr. Thomas (Tom) Caulfield and Miyuki Suzuki as our newest independent directors in July 2021. Tom and Miyuki both bring strong track records of professional success and expertise in a wide range of matters relevant to the company, including semiconductor and global operating experience that complements Western Digital’s growth and innovation strategy. Tom and Miyuki are both serving on our Governance Committee.
CONTINUING OUR BOARD-DRIVEN STOCKHOLDER ENGAGEMENT
Year-round engagement with our stockholders remains a key focus for our company and an important part of our Board’s governance commitment. During the past year, we continued our robust Board-driven stockholder engagement program, which allowed us to meet with a broad base of stockholders throughout the year. This dialogue helped us to better understand stockholders’ views on a variety of relevant issues, including company strategy and performance, board diversity and refreshment, executive compensation and corporate responsibility matters.
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Letter from Our Chair and
Lead Independent Director
Dear Fellow Stockholders:
On behalf of the entire Board, thank you for your continued support and investment in Western Digital. As we approach our 2023 Annual Meeting, our Board would like to take the opportunity to provide an update on how we are driving forward value creation for our stockholders and how we are progressing on key areas of stockholder interest. Driving Stockholder Value Creation During fiscal 2023, our Board continued to progress our strategic review of the business to unlock long-term value for our stockholders. This review, initiated last year, includes a comprehensive assessment of structural options for our market-leading flash and HDD businesses. In furtherance of continued focus on strategic options, Apollo Global Management and Elliott Investment Management made a substantial investment in Western Digital to strengthen our financial position during our strategic review. As we continue to make progress on the review, our Board and management team also remain focused on enhancing our business agility and delivering breakthrough innovations as we navigated challenging market dynamics and addressed the increasing data storage demands of our customers. | We expect that the decisions yielded from our strategic review, coupled with our ongoing strong execution and business positioning, will generate long-term value for our stockholders. Commitment to Strong Governance, Board Oversight and Stockholder Responsiveness We have a regular practice of maintaining dialogue with our stockholders throughout the year to inform Board deliberations and provide our Board with stockholders’ perspectives on a range of topics, including business and strategy, board composition and diversity, executive compensation and corporate responsibility and sustainability matters. Our Board members play a key role in these discussions with stockholders and in the past year, our Board and members of our senior management team engaged directly with stockholders representing 45% of our shares outstanding. The feedback we received over the past year directly informed several responsive actions and changes to our executive compensation program and practices and helped us further understand stockholders’ views. Details on these decisions and enhancements are included in the Compensation Discussion and Analysis section of this Proxy Statement. | As part of our commitment to strong governance practices, we maintain robust evaluation and succession planning processes for our Board, which has resulted in the thoughtful refreshment of our Board over the past several years. Since 2021, we have welcomed three new independent directors to our Board, each of whom brings extensive experience, diverse perspectives, and skills that reflect the continued evolution of our business. The most recent addition to our Board is an investor who we believe brings valuable capital markets expertise and augments our Board in supporting our ongoing strategic review. The Board changes over the last several years illustrate our Board’s succession planning practices and reflect our belief that a diversity of perspectives, backgrounds, institutional knowledge and expertise, best supports our oversight responsibilities and aligns with the needs of the business. |
Over the past year, we reached out to stockholders representing nearly 60% of shares outstanding. Our engagement team conducted calls with 14 stockholders, composed of investors with a variety of investment styles and geographic locations. These engagements continue to provide us with valuable feedback that allows our Board to better understand our stockholders’ priorities and perspectives and to incorporate them into our deliberations and decision making.
FOCUSING ON CORPORATE RESPONSIBILITY AND SUSTAINABILITY
Sound corporate responsibility in all aspects of our business is a focus of our Board and management team, and we have expanded our sustainability vision for what the company can accomplish in the coming years. We believe that being an industry leader is not just about having talented employees or innovative products, but also about doing business the right way, every day. To ensure our commitment to sound corporate responsibility is deeply rooted in all aspects of our business, we maintain Board-level oversight in the areas of corporate responsibility, sustainability and human capital management.
Earlier this year, we published our 2021 Sustainability Update, which aligns with standards set by both the Sustainability Accounting Standards Board (SASB) and Global Reporting Initiative (GRI). Highlights from our 2021 Sustainability Update can be found on page 23 of the Proxy Statement. We also invite you to review our 2020 Sustainability Report and 2021 Sustainability Update on our Corporate Sustainability page at www.westerndigital.com.
Additionally, in September 2021, we announced that our greenhouse gas emissions reduction goals, which are consistent with the Paris Agreement, were approved by the Science Based Targets initiative (SBTi). The company’s targets are aligned with the ambitious goal to limit global warming to 1.5° C above pre-industrial levels. While our targets were only recently approved by SBTi, we have already accelerated our investments in meaningful emissions reductions.
WE ASK FOR YOUR SUPPORT
We value the trust you place in us through your investment in Western Digital. We appreciate the opportunity to serve Western Digital on your behalf through fiscal 2022 and beyond, and will continue our focus on the sustainable and long-term growth of the company. We look forward to hearing your views at this year’s Annual Meeting and in the year to come.
Your vote is very important to us. We strongly encourage you to read both our proxy statement and annual report in their entirety prior to the Annual Meeting on November 16, 2021, and request that you support our voting recommendations.
Sincerely,
2023 Proxy Statement |
Aligning our Sustainability Goals with our Business At Western Digital, we are committed to corporate responsibility and sustainability in all aspects of our business, which includes transparency and thoughtful goal setting to align with supporting a sustainable future. In the past year, we made several commitments that establish clear goals for our business. These commitments include: Achieving net zero emissions in our operations (Scope 1 & 2) by 2032 Achieving 100% renewable energy across our operations by 2030 Diverting at least 95% of waste from landfills by 2030 Reducing total water withdrawals by 20% by 2030 We also continue to work to increase diverse representation across all levels of our workforce and support our diverse and talented employees. As part of this commitment, we recently expanded our pay equity analysis to cover 100% of our total global employee population. We are proud of the |
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We We are grateful for the opportunity to Sincerely, MATTHEW E. MASSENGILL Independent Chair of STEPHANIE A. STREETER |
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Notice of Annual Meeting
of Stockholders
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Western Digital Corporation
5601 Great Oaks Parkway
San Jose, California 95119
Date November 15, 2023 | ||
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Time Online check-in begins: 7:45 a.m. Pacific Time Meeting begins: 8:00 a.m. Pacific Time | ||
Location Our annual meeting will be a completely virtual meeting of stockholders that will provide stockholders comparable rights and opportunities to participate as they would have at an in-person meeting. To participate, vote or submit questions during the annual meeting via live webcast, please visit: www.virtualshareholdermeeting.com/ | ||
Who Can Vote Holders of record of shares of our common stock and Series A Convertible Perpetual Preferred Stock (“Series A Preferred Stock”) at the close of business on September A list of stockholders as of the record date for the annual meeting may be accessed during the virtual annual meeting at www.virtualshareholdermeeting. com/WDC2023 by using the control number on your Notice of Internet Availability of Proxy Materials, or on your proxy card or voting instruction form that accompanied your proxy materials. |
VOTING SHARES IN ADVANCE OF THE MEETING
Matters to be Voted on
Proposal | Board Recommendation | ||
01 | Election of the nine director nominees named in the attached Proxy Statement to serve until our next annual meeting of stockholders and until their respective successors are duly elected and qualified | VOTE FOR | |
02 | Approval on an advisory basis of the named executive officer compensation disclosed in the attached Proxy Statement | VOTE FOR | |
03 | Approval on an advisory basis of the frequency of future advisory votes on named executive officer compensation | VOTE ONE YEAR | |
04 | Approval of the amendment and restatement of our 2021 Long-Term Incentive Plan to increase by 2.35 million the number of shares of our common stock available for issuance under that plan | VOTE FOR | |
05 | Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2024 | VOTE FOR |
At the meeting, we will also consider any other business that may properly come before our annual meeting and any postponements or adjournments of the meeting.
By Order of our Board of Directors,
MICHAEL C. RAY
Executive Vice President, Chief Legal Officer and Secretary
October 5, 2023
Voting Shares in Advance of the Meeting
Your vote is very important.Please submit your proxy as soon as possible via the Internet, telephone or mail. Submitting your proxy by one of these methods will ensure your vote will be counted regardless of whether you attend the annual meeting.
Via the Internet Visit the website listed on your notice, proxy card | ||||
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Important notice regarding the availability of proxy materials for our annual meeting of stockholders to be held on November 15, 2023:
On or about October 5, 2023, proxy materials for the annual meeting, including the attached Proxy Statement and our Annual Report for the fiscal year ended June 30, 2023, are being furnished to stockholders entitled to vote at the annual meeting. The Proxy Statement and 2023 Annual Report are available on our Investor Relations website at investor.wdc.com. You can also view these materials at www.proxyvote.com by using the control number provided on your proxy card or Notice of Internet Availability of Proxy Materials.
Our 2021 annual meeting of stockholders (the “Annual Meeting”) will be a completely virtual meeting of stockholders conducted via live audio webcast to enable our stockholders to participate from any location around the world. You will be able to attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/WDC2021.
Attendance and Participation at the Virtual Annual Meeting
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4 | 2023 Proxy Statement |
Cautionary Note Regarding
Forward-Looking Statements
This Proxy Statement contains forward-looking statements within the meaning of the federal securities laws, including but not limited to, statements concerning our product and technology portfolio, views with respect to the growth of digital data, our business strategy and strategic priorities, including our review of strategic alternatives, our ability to execute our strategy, our future financial performance, our expectations regarding the impact of COVID-19,global events, our director succession plans and plans for our corporate responsibility and sustainability program, including our science-based emissions reduction targets, renewable energy, waste and water use goals, and our policies and reporting in the area of human rights and diversity and inclusion efforts. These forward-looking statements are based on ourmanagement’s current expectations as of the date of this Proxy Statement and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including:statements. These risks and uncertainties include, but are not limited to: volatility in global economic conditions; future responses to and effects of the COVID-19 pandemic; volatility in global economic conditions;health crises; impact of business and market conditions; the outcome and impact of our ongoing strategic review, including with respect to customer and supplier relationships, regulatory and contractual restrictions, stock price volatility and the diversion of management’s attention from ongoing business operations and opportunities; impact of competitive products and pricing; our development and introduction of products based on new technologies and expansion into new data storage markets; risks associated with cost saving initiatives, restructurings, acquisitions, divestitures, mergers, joint ventures and our strategic relationships; difficulties or delays in manufacturing or other supply chain disruptions; hiring and retention of key employees; our substantial level of debt and other financial obligations; changes to our relationships with key customers; disruptions in operationscompromise, damage or interruption from cyberattackscybersecurity incidents or other data system security risks; actions by competitors; our ability to achieve our emissions reduction and other sustainability goals; risks associated with compliance with changing legal and regulatory requirements and the outcome of legal proceedings; and other risks and uncertainties listed in our 2021 Annual Report on Form 10-K and our other reports filedfilings with the Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K filed with the SEC on August 22, 2023, to which your attention is directed. You should not place undue reliance on these forward-looking statements, which speak only as of the date hereof, and we undertake no obligation to update or revise these forward-looking statements to reflect subsequentnew information or events, or circumstances.except as required by law.
Website References
You may also access additional information about Western Digital at www.westerndigital.com.investor.wdc.com. References to our website throughout this Proxy Statement are provided for convenience only and the content on our website does not constitute a part of this Proxy Statement.
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TABLE OF CONTENTSTable of Contents
6 | Western Digital 2023 Proxy Statement |
Proxy Summary
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider. We encourage you to read thethis entire Proxy Statement for more information about these topics prior to voting.
Our Director Nominees
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Proxy Summary | 7 |
Board Nominee Highlights
INDEPENDENCE | GENDER | AGE | TENURE |
89% | 33% | 60 Years | <5 Years |
Independent | Women | Average | Median |
WOMEN IN BOARD LEADERSHIP ROLES
Lead Independent Director | Audit Committee Chair | Governance Committee Chair |
Corporate Governance Highlights
Our Board of Directors is committed to maintaining the highest standards of corporate governance. We believe ourOur strong corporate governance practices are intended to help promote the long-term interests of our stockholders and build public trust in us.stockholders.
Corporate Governance DevelopmentsBest Practices
Below is a description of some recent key changes toWe regularly evaluate our corporate governance practices:practices against prevailing best practices and emerging and evolving topics identified through stockholder outreach and corporate governance literature.
✓Independent Board leadership, including an independent Chair of |
✓Commitment to Board | |
✓Women serve in |
Proxy Summary
the Audit Committee and Governance Committee ✓All directors are elected annually by a simple majority of votes cast | |
✓Eight of nine director nominees are independent | |
✓Director retirement policy upon reaching age 72 | |
✓Active Board refreshment resulting in three new independent, non-employee directors being appointed since 2021 ✓Of the last seven independent directors to join our Board, more than half were women | ✓Overboarding policy for additional public company directorships by directors, including a lower threshold for our CEO ✓Active Board oversight of strategic planning and risk management |
✓Board committee oversight of corporate responsibility, sustainability and human capital management | |
✓Annual sustainability reporting via standalone Sustainability Report aligned with leading frameworks and standards ✓Succession planning for directors, our CEO and other key officers | |
✓Board committee oversight of political and lobbying activities and expenditures ✓Annual Board and committee self-evaluations | |
✓Annual individual assessments of directors | |
✓Anti-hedging, anti-pledging and | |
clawback policies ✓All current non-employee directors | |
guidelines ✓All executive officers achieved stock ownership requirements pursuant to our guidelines |
8 | Western Digital 2023 Proxy Statement |
Year-Round Stockholder Engagement
As a continuation of our robust Board-drivenOur long-standing stockholder engagement program overconsistently provides valuable input for our Board’s decision-making process. Leading up to, and following, our 2022 annual meeting of stockholders (“2022 Annual Meeting”), at which our advisory “Say on Pay” proposal received low support, the past year,Compensation and Talent Committee pursued a deliberate engagement program to enhance our ongoing outreach in order to better understand our stockholders’ perspectives and concerns. Over this period of time, we reached out toengaged with stockholders representing nearly 60%a total of 45% of our outstanding shares of common stock.
LEAD UP TO 2022 ANNUAL MEETING | FOLLOWING 2022 ANNUAL MEETING | ||
We contacted over 25 of our stockholders representing approximately 59% of our shares of common stock outstanding. The stockholder engagement team conducted numerous calls with stockholders representing approximately 34% of our shares of common stock outstanding,with our Chair of the Compensation and Talent Committee participating in meetings representing a majority of the shares that chose to engage. | We contacted over 30 of our stockholders representing approximately 64% of our shares of common stock outstanding. The stockholder engagement team conducted numerous calls with stockholders representing approximately 37% of our shares of common stock outstanding, with our Chair of the Compensation and Talent Committee participating in meetings representing a majority of the shares that chose to engage. |
As a result of feedback received through our year-round engagement, below is a summary of what we heard and conducted calls with 14 stockholders, composed of investors with a variety of investment styles and geographic locations.how we responded.
WHAT WE HEARD | ACTIONS TAKEN IN RESPONSE |
●Not pleased with the amendment to our CEO’s sign-on award eliminating the performance metric | ✓Committed on a go forward basis to not modify outstanding PSUs for named executive officers unless there are extraordinary circumstances |
●Asked about use of retention awards | ✓Did not grant retention awards for named executive officers in fiscal 2023 and, while not the primary driver of opposition in 2022, the committee reaffirmed its focus on compensating and incentivizing named executive officers through our normal course program |
●Desired a long-term performance measure in the long-term incentive (“LTI”) program | ✓Replaced the upside-only incentive tied to our absolute stock price CAGR with a three-year relative TSR modifier for fiscal 2024, which can impact payout positively or negatively |
●Questioned certain elements of our short-term incentive (“STI”) program, especially the use of the exabytes shipped metrics | ✓Eliminated the exabytes shipped metrics and replaced them with cash conversion cycle and emissions metrics |
●Requested adjustments to the peer group to be better aligned with our size | ✓Modified our proxy peer group for fiscal 2024 to include peers with revenues more commensurate with Western Digital |
In our recent summer 2021For additional information on stockholder engagement, we discussed a variety of topics, including the composition of our executive leadership team, board composition, experience and diversity, our executive compensation philosophy and program, corporate responsibility and sustainability and equity, inclusion and diversity. Stockholders generally provided positive feedback on the diversity of our Board and our executive compensation program. Investors were also very supportiveresponsive actions, please see the section entitled “Executive Compensation—Compensation Discussion and Analysis."
Proxy Summary | 9 |
Corporate Responsibility and Sustainability
We believe responsible and sustainable business practices support ourthe long-term success as aof our company. ThoseThese practices help keep our communities and our environment vibrant and healthy. But theyThey also lead us to more efficient and resilient business operations. Theyoperations, help us meet our customers’ efficiency targets. Theytargets, reduce risks of misconduct and legal liability. Theyliability, enhance the reliability of our supply chain. And theychain and improve the health, well-being, engagement and productivity of our employees. We believe that being an industry leader is not just about having talented employees or innovative products. It is also about doing business the right way, every day. That is why our commitment to sound corporate responsibility is deeply rootedembedded throughout our business.
In June 2023, we announced four new significant sustainability targets:
NET ZERO | Achieve net zero emissions in our operations (Scope 1 & 2) by 2032 | 100% | Achieve 100% renewable energy across our global operations by 2030 |
95% | Divert at least 95% of operational waste from landfills by 2030 | 20% | Reduce total water withdrawals by 20% by 2030 |
From fiscal 2020 to fiscal 2022, we reduced aggregate Scope 1 and market-based Scope 2 emissions by 14.8%, driven primarily by our adoption of long-term agreements to source 100% renewable energy. We were also recognized as one of the World’s Most Ethical Companies for the fifth consecutive year in all aspects2023 by Ethisphere.
Additionally, we thrive on the power and potential of diversity. By taking into account various perspectives, we get the best outcomes for our business.employees, our company, our customers and the world around us. We are committed to promoting an inclusive environment where every individual can thrive through a sense of belonging, respect and contribution.
Our 20202022 Sustainability Report and 2021 Sustainability Update areis located on our Corporate SustainabilityResponsibility page at www.westerndigital.com. The topics covered were selected based on a robustdetailed materiality assessment completed by a third party, which incorporated input from investors, customers and other stakeholders, as well as our strategic priorities, and the report alignswas prepared in accordance with boththe Global Reporting Initiative (“GRI”) standards: Core option, references Sustainability Accounting Standards Board (“SASB”) standards and Global Reporting Initiativeincludes disclosures aligned with the UN Sustainable Development Goals (“GRI”UN SDGs”) standards.and the Task Force on Climate-Related Financial Disclosures (“TCFD”) recommendations. The Governance Committee oversees our corporate responsibility and sustainability policies and programs pursuant to its charter.
For more information, please refer to the section entitled “Corporate Responsibility and Sustainability” on page 22.23. We plan to release our 2023 Sustainability Report later this fiscal year.
Western Digital 2023 Proxy Statement |
Corporate Governance Matters
PROPOSAL 1 ELECTION OF DIRECTORS We are asking our stockholders to elect nine directors to our Board of Directors at the 2023 annual meeting of stockholders. Defining attributes of our Board include: ●All directors elected annually by a simple majority of votes cast ●Independent Board leadership, including an independent Chair of the Board separate from our CEO and a Lead Independent Director with clearly defined roles and responsibilities ●Women serve in key Board leadership positions as our Lead Independent Director and Chairs of the Audit Committee and Governance Committee ●Eight of nine director nominees are independent ●Three new independent directors appointed since 2021 | Our Board of Directors recommends a vote FOR each of the nine director nominees named in this Proxy Statement |
Our Board of Directors is presenting nine nominees for election as directors at the our 2023 annual meeting of stockholders (“Annual Meeting.Meeting”). Each of the nominees is currently a member of our Board and, other than Dr. Caulfield and Ms. Suzuki, who joined our Board in July 2021,with the exception of Reed B. Rayman, was elected to our Board at the 2020 annual meeting of stockholders.our 2022 Annual Meeting. Each director elected at the Annual Meeting will serve until our 20222024 annual meeting of stockholders and until a successor is duly elected and qualified. Each of the nominees has consented to be named in this Proxy Statement and to serve as a director if elected. If any nominee is unable or unwilling for good cause to stand for election or serve as a director if elected, the persons named as proxies may vote for a substitute nominee designated by our existing Board of Directors, or our Board may choose to reduce its size.
InMr. Rayman joined our Board of Directors in January 2023, after being designated for appointment to our Board by AP WD Holdings, L.P. (“Apollo”) pursuant to an Investment Agreement we entered into with Apollo on January 31, 2023 (the “Investment Agreement”). Under the Investment Agreement, Apollo has the right to nominate and appoint one person to our Board for so long as it beneficially holds a minimum number of shares of our preferred stock or common stock. Mr. Rayman has been selected by Apollo as a director nominee in accordance with our retirement policy, Ms. Cote has not been nominated for re-election at the Annual Meeting. Our Board intends to reduce the size of our Board to nine directors immediately following the Annual Meeting. Stockholders may not vote their shares for more than nine director nominees.Investment Agreement.
Vote Required for Approval
Each director nominee will be elected as a director if the nominee receives the affirmative vote of a majority of the votes cast with respect to his or her election (in other words, the number of shares voted “for”votes “FOR” a director must exceed the number of votes cast “against”“AGAINST” that director). You may vote FOR, AGAINST or ABSTAIN with respect to each director nominee. Proxies received by our Board of Directors will be voted FOR each director nominee unless specified otherwise.
If a nominee who is serving as a director is not elected at the Annual Meeting by the requisite majority of votes cast, Delaware law provides that the director would continue to serve on our Board of Directors as a “holdover director.” However, underUnder our By-laws, any incumbent director who fails to be elected must offer to tender his or her resignation to our Board. If the director conditions his or her resignation on acceptance by our Board, the Governance Committee will then make a recommendation to our Board on whether to accept or reject the resignation or whether other action should be taken. Our Board will act on the committee’s recommendationresignation and publicly disclose and explain its decision and the rationale behind it within 90 days from the date the election results are certified. The director who tenders his or her resignation will not participate in our Board’s or the committee’s decision. Any nominee who was not already serving as a director and is not elected at the Annual Meeting by a majority of the votes cast with respect to such director’s election would not be elected to our Board.
Corporate Governance Matters | 11 |
Corporate Governance Matters
Below is information about the experience and other key qualifications and attributes of each of our Board’s nine director nominees.
KIMBERLY E. ALEXY, 53 INDEPENDENT
Director Since: Committees: | ||
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●Additionally, Ms. Alexy has | CAREER HIGHLIGHTS Alexy Capital Management, a private investment fund ●Founder and (2005-present) Prudential Securities ●Senior vice president and managing director (1998-2003) Lehman Brothers ●Vice president of | |
OTHER PUBLIC BOARDS | ||
Current ●None | Past Five Years ●Five9, Inc. ●Mandiant, Inc. ●Alteryx, Inc. ●CalAmp Corporation |
64 INDEPENDENT
Director Since: Committees: | ||
●Having served as an executive in the technology industry for over 30 years, Dr. Caufield brings crucial semiconductor technical and business expertise enabling our Board to oversee strategies to drive innovation and unlock stockholder value. ●With direct experience leading various aspects of global technology companies ranging from research and development, to supply chain, to sales, Dr. Caufield’s expertise has helped guide Western Digital’s review of its strategic plan. ●Dr. Caulfield | CAREER HIGHLIGHTS GlobalFoundries Inc., ● ●Senior vice president and general manager, Soraa, Inc. ●President and chief operating officer (2012-2014) Caitin Inc.
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●GlobalFoundries Inc. | Past Five Years ●None |
Audit | Compensation and Talent | Governance | Executive | Committee Chair |
Corporate Governance Matters
Western Digital 2023 Proxy Statement |
MARTIN I. COLE, 67 INDEPENDENT
Director Since: | |
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SKILLS & EXPERIENCE SUPPORTING BOARD ●Mr. Cole brings to our Board extensive senior executive leadership experience across a variety of business sectors and ●Through his roles at Accenture plc and
●Mr. Cole has significant experience establishing and overseeing executive compensation programs as a former executive, CEO and as a board and compensation committee member at other public companies.
●Mr. Cole’s former executive and board roles, along with his financial |
●Senior adviser (2017-present) Cloudera, Inc. ●Interim CEO (August 2019-January 2020) Accenture plc | |
● ●Chief executive – communications, media and ●Chief executive – government operating group (2004-2006) ●Managing partner, outsourcing and
(2002-2004) | |
OTHER PUBLIC BOARDS | |
Current ●The Western Union Company | Past Five Years ●Cloudera, Inc. |
TUNÇ DOLUCA, 65 INDEPENDENT Director Since: August 2018 Committees: | SKILLS & EXPERIENCE SUPPORTING BOARD ●Mr. Doluca brings to our Board ●As a seasoned CEO and previous director of ●Additionally, Mr. Doluca has a range of experience across compensation and human capital matters, and, as a member of the Compensation and Talent Committee, has helped guide the development of our compensation programs and people policies and programs, including those focusing on talent development and diversity, equity and inclusion (“DE&I”), all which are | CAREER HIGHLIGHTS Maxim Integrated (acquired by Analog Devices, Inc. in August 2021), an integrated circuits manufacturing company ●President and CEO ●Group president (2005-2007) ●Senior vice president (2004-2005) ●Vice president (1994-2004) | |
Current ●None | Past Five Years ●Analog Devices, Inc. ●Maxim Integrated |
Audit | Compensation and Talent | Governance | Executive | Committee |
Corporate Governance Matters
13 |
DAVID V. GOECKELER, 61 CHIEF EXECUTIVE OFFICER
Director Since: Committees: | ||
●With more than 30 years in the technology industry, Mr. Goeckeler has ● ●His experience, combined with his thorough knowledge and understanding of Western Digital’s operations, allow Mr. Goeckeler to lead and manage our day-to-day operations, while overseeing the strategic direction of our company. | CAREER HIGHLIGHTS Western Digital Corporation ●CEO (March 2020-present) Cisco Systems, Inc., a multinational technology company ●Executive vice president and general manager, (2017-March 2020) ●Senior vice president and general manager, (2016-2017) ●Senior vice president and general manager,
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OTHER PUBLIC BOARDS | ||
Current ●Automatic Data Processing, Inc. | Past Five Years ●None |
MATTHEW E. MASSENGILL, 62 INDEPENDENT CHAIR OF THE BOARD Director Since: January 2000 Committees: | SKILLS & EXPERIENCE SUPPORTING BOARD ●Mr.
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●In addition to his deep understanding of our operations, ●His prior service on numerous other public company boards has enabled Mr. Massengill to provide strong, independent leadership of | CAREER HIGHLIGHTS Western Digital Corporation ●Chair of
(2015-present and 2001- 2007) ● ●President (2000-2002) ●Chief Operating Officer |
OTHER PUBLIC BOARDS | |
●None | Past Five Years ●None |
Audit | Compensation and Talent | Governance | Executive | Committee Chair |
Corporate Governance Matters
2023 Proxy Statement
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INDEPENDENT Director Since: January 2023 Committees: None | SKILLS & EXPERIENCE SUPPORTING BOARD NOMINATION ● ●Mr. Rayman also provides a unique investor perspective critical to ●In addition, Mr. Rayman has experience leading public company boards, including as chairman of ADT Inc. | CAREER HIGHLIGHTS Apollo Global Management, Inc., a global alternative asset management company ●Partner (December 2019-present) ●Principal (2014-December 2019) ●
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●ADT Inc. ●Edgio, Inc. | ● |
STEPHANIE A. STREETER, 66 LEAD INDEPENDENT DIRECTOR
Director Since: Committees: | ||
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companies, Ms. Streeter brings to our Board extensive senior executive leadership experience overseeing companies with manufacturing and operations across the ●Ms. Streeter has a track record of driving growth for consumer products and supply chain management companies, contributing to our Board’s thoughtful consideration of our diverse stakeholders. Ms. Streeter has served on several public company boards of
●As Chair of the Governance Committee, | CAREER HIGHLIGHTS Libbey Inc. ●CEO (2011-2016) U.S. Olympic Committee ●Acting CEO (2009-2010) ●Board member (2004-2009) Banta Corporation ●President and (2001-2007) |
Current ●None | Past Five Years ●Kohl’s Corporation ●Olin Corporation ●Goodyear Tire & Rubber Company |
Audit | Compensation and Talent | Governance | Executive | Committee Chair |
Corporate Governance Matters
15 |
MIYUKI SUZUKI, 63 INDEPENDENT
Director Since: Committees: | ||
●Ms. Suzuki
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●Ms. Suzuki also has deep global operations experience across the Asia Pacific
●Ms. Suzuki has substantial governance experience as a public company director | CAREER HIGHLIGHTS Cisco Systems, Inc. ●President, Asia Pacific, Japan and China (2018-February 2021) ●President and general manager, Japan (2015-2018) Jetstar Japan ●President and CEO (2011-2015) KVH (now Colt Technology Services) ●President and vice chairman (2007-2011) Lexis Nexis Asia Pacific ●President and CEO (2004-2006) |
Corporate Governance Matters
Director Meeting Attendance
During fiscal 2021, our Board of Directors met 24 times. Each of the directors who served during fiscal 2021 attended 75% or more of the aggregate number of Board meetings and meetings of our Board committees on which he or she served during fiscal 2021. Our Board strongly encourages each director to attend our annual meeting of stockholders. All directors standing for election at the 2020 annual meeting of stockholders were in attendance.
●Twilio Inc. | Past Five Years ●None |
Audit | Compensation and Talent | Governance | Executive | Committee Chair |
Average director attendance at fiscal 2021 Board and committee meetings:
Board | Audit | Compensation and Talent | Governance |
96% | 100% | 100% | 97% |
Over 97% Board and committee meeting aggregate attendance in fiscal 2021.
Director Skills and ExpertiseExperience
Our Board of Directors believes our nominees’ breadth of experience, diversity and mix of qualifications, attributes, tenure and skills strengthen our Board’s independent leadership and effective oversight of management.
WOMEN IN BOARD LEADERSHIP ROLES |
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Lead Independent Director | Audit Committee Chair | Governance Committee Chair |
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16 | Western Digital 2023 Proxy Statement |
DIRECTOR NOMINEE SKILLS, EXPERIENCE AND BACKGROUNDS
EXECUTIVE | ||||||||||
SEMICONDUCTOR | ||||||||||
DATA INFRASTRUCTURE | ||||||||||
STRATEGIC TRANSACTIONS | ||||||||||
MANUFACTURING | ||||||||||
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OPERATIONS AND INFRASTRUCTURE | |||||||||||
TECHNOLOGY/INNOVATION |
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GLOBAL |
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FINANCE AND ACCOUNTING | |||||||||||
CYBERSECURITY |
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RISK MANAGEMENT | |||||||||||
CORPORATE ENVIRONMENTAL, SUSTAINABILITY AND | |||||||||||
CORPORATE SOCIAL RESPONSIBILITY |
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HUMAN CAPITAL MANAGEMENT | |||||||||||
MEMBER OF AN UNDERREPRESENTED COMMUNITY | |||||||||||
GENDER | F | M | M | M | M | M | F | F |
Indicates | |
Indicates |
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Corporate Governance Matters | 17 |
DESCRIPTION OF SKILLS, EXPERIENCE AND BACKGROUNDS
The skills, experience and backgrounds that we value for our Board align with our purpose to be the world’s iconic data storage company. The below table provides an overview of the collective skills of our Board nominees and why each is essential to the oversight and successful execution of our strategy and purpose.
DESIRED SKILL, EXPERIENCE OR BACKGROUND | DIRECTOR QUALIFICATIONS | ALIGNMENT TO OUR STRATEGY AND BUSINESS PURPOSE | |
EXECUTIVE | Experience in executive-level positions | Our scale and complexity benefit from insights gained from executive-level experience and a practical understanding of complex organizations, strategic planning, governance, operations, talent development and risk management | |
SEMICONDUCTOR | Experience in the semiconductor industry | Our purpose to be the world’s iconic data storage company is founded on a strong understanding of our business, technology, products and operations | |
DATA INFRASTRUCTURE | Experience in data infrastructure, including related software, hardware and data centers, storage, protection and management | Our mission to unlock the potential of data by harnessing the possibility to use it is based on a comprehensive understanding of the challenges and opportunities our business faces with respect to data infrastructure | |
STRATEGIC TRANSACTIONS | Experience leading a company through a large transition, transformation, integration, merger or acquisition | Our strategic ventures have been key to our successes in our rapidly evolving industry, and transactional experience helps us identify and capitalize on strategic opportunities that unlock long-term value for our stockholders | |
MANUFACTURING | Experience with sophisticated, large-scale manufacturing | Our business relies on complex distribution and supply chains, as well as smoothly operating manufacturing facilities globally | |
OPERATIONS AND INFRASTRUCTURE | Experience with complex, global operations | Our path to advancing operational excellence and thriving in evolving market conditions is guided by insights in operational efficiencies and risk mitigation | |
TECHNOLOGY/ INNOVATION | Experience in researching, developing or designing leading-edge technologies | Our efforts to drive continued growth through innovation across our entire portfolio of products begin with a vision to pioneer new horizons | |
GLOBAL | Experience with businesses with substantial international operations | Our global scale requires critical business and cultural perspectives that help us understand the strategic opportunities and risks relating to our business worldwide | |
FINANCE AND ACCOUNTING | Experience overseeing accounting and financial reporting | Our position as a large public company necessitates robust financial management and accurate disclosure, including our Board’s oversight of our financial reporting process and internal controls | |
CYBERSECURITY | Experience understanding and managing information technology and cybersecurity threats | Our business and industry are becoming increasingly subject to cybersecurity attacks and the safeguarding of our assets depends on our Board’s ability to oversee company efforts to identify and mitigate these risks | |
RISK MANAGEMENT | Experience in assessing and managing enterprise risks | Our management of enterprise risks largely depends on our ability to detect, evaluate and control those risks, and skilled oversight by our Board promotes our compliance with legal obligations and overall long-term success | |
CORPORATE ENVIRONMENTAL, SUSTAINABILITY AND CLIMATE | Experience in assessing environmental, sustainability and climate-related risks | Our efforts to address risks related to climate changes, and drive long-term value for our stockholders, are driven by our corporate sustainability policies and programs overseen by our Board | |
CORPORATE SOCIAL RESPONSIBILITY | Experience in promoting and upholding gender and racial equality, human rights standards and responsible corporate citizenship | Our business and customer base necessitates our commitment to gender and racial equality, human rights and responsible corporate citizenship | |
HUMAN CAPITAL MANAGEMENT | Experience in human capital management in large organizations | Our most valuable assets are our talented and global workforce, and our Board oversees our talent attraction, development and retention programs |
Corporate Governance MattersTable of Contents
18 | Western Digital 2023 Proxy Statement |
Board Diversity Matrix (As of October 5, 2023)
Our Board of Directors believes that having a mix of directors with diverse and complementary qualifications, expertise and attributes is fundamental to meeting its oversight responsibility. The table below reflects certain diversity information for our current Board based on self-identification by each director.
Total Number of Directors | 9 | |||||||
Female | Male | Non-Binary | Did Not Disclose Gender | |||||
Part 1: Gender Identity | ||||||||
Directors | 3 | 6 | — | — | ||||
Part II: Demographic Background | ||||||||
Asian | 1 | — | — | — | ||||
White | 2 | 6 | — | — |
Director Independence
Our Board of Directors has reviewed and discussed information provided by the directors and our company with regard to each director’s business and personal activities, as well as those of the director’s immediate family members, as they may relate to our company or our management. The purpose of this review is to determine whether there are any transactions or relationships that would be inconsistent with a determination that a director is independent under the listing standards of the Nasdaq Stock Market. Based on its review, our Board has affirmatively determined that, except for serving as a member of our Board, none of our current non-employee directors (Messrs. Caulfield, Cole, Doluca, Massengill or Massengill,Rayman, or Mses. Alexy, Cote, Price, Streeter or Suzuki) has any relationship that, in the opinion of our Board, would interfere with such director’s exercise of independent judgment in carrying out his or her responsibilities as a director, and that each such director qualifies as “independent” as defined by the listing standards of the Nasdaq Stock Market. In making this determination, our Board considered the relationship that Mr. Rayman has with Apollo and certain of its affiliates, including Apollo Global Management, Inc., as a result of Apollo’s investment in our company in January 2023 pursuant to the Investment Agreement. After considering the nature of such relationships, our Board determined that Mr. Rayman’s affiliation with Apollo and certain of its affiliates does not compromise his ability to exercise independent judgment in carrying out his responsibilities as a director. Our Board also previously determined that Paula A. Price, who served as a non-employee director until November 2022, qualified as “independent” as defined by the listing standards of the Nasdaq Stock Market during the period of her service in fiscal 2023. Mr. Goeckeler is currently a full-time, executive-level employee of our company and, therefore, is not “independent” as defined by the listing standards of the Nasdaq Stock Market.
Director Meeting Attendance
During fiscal 2023, our Board of Directors met 12 times. Each of the directors who served during fiscal 2023 attended 75% or more of the aggregate number of Board meetings and meetings of the Board committees on which he or she served during fiscal 2023.
Our Board strongly encourages each director to attend our annual meeting of stockholders. All directors standing for election at our 2022 Annual Meeting attended the meeting.
STRONG DIRECTOR ENGAGEMENT
Average director attendance at fiscal 2023 Board and committee meetings:
Board 99% | Audit 91% | Compensation and Talent 100% | Governance 90% | Executive 92% |
Our Board and committee meeting aggregate average attendance in fiscal 2023 was 95%.
Corporate Governance Matters | 19 |
Director Nominations, and Board Refreshment and Diversity
Key Director Criteria
The Governance Committee has adopted a policy regarding critical factors to be considered in selecting director nominees, which include: the nominee’s personal and professional ethics, integrity and values; the nominee’s intellect, judgment, foresight, skills, experience (including understanding of marketing, finance, our technology and other elements relevant to the success of a company such as ours) and achievements, all of which are viewed in the context of the overall composition of our Board of Directors; the absence of any conflict of interest (whether due to a business or personal relationship) or legal impediment to, or restriction on, the nominee serving as a director; having a majority of independent directors on our Board; and representation of the long-term interests of our stockholders as a whole and a diversity of backgrounds and expertise, which are most needed and beneficial to our Board and our company.
The Governance Committee is committed to Board diversity and takes into account the personal characteristics, experience and skills of current and prospective directors, including gender, race, ethnicity and membership in another underrepresented community, to ensure that a broad range of perspectives is represented on our Board to effectively perform its governance role and oversee the execution of our strategy.
As further detailed below, the Governance Committee annually evaluates the size and composition of our Board of Directors and assesses whether the composition appropriately aligns with our evolving business and strategic needs. The focus of this exercise is on ensuring that our Board is composed of directors who possess a wide variety of relevant skills, expertise and backgrounds (including gender, race, ethnicity or other characteristics), bring diverse viewpoints and perspectives and effectively represent the long-term interests of stockholders. Through this process, our Board, upon the recommendation of the Governance Committee,committee, develops a list of qualifications, skills and attributes sought in director candidates. Specific director criteria evolve over time to reflect our strategic and business needs and the changing composition of our Board.
Adoption of Diverse Director Candidate Pool Provision
Although it has long been the practice ofOur Corporate Governance Guidelines require the Governance Committee to include diverse candidates in the director search process, our Board of Directors recently formalized this process by adopting a provision in our Corporate Governance Guidelines requiring the committee to include, and instruct any search firm it engages to include, women and members of underrepresented communities in the pool from which the committee selects director nominees. The diverse director candidate pool provision reflects our Board’s continued commitment to diversity in the boardroom. Of the last sixseven independent directors to join our Board, fourmore than half were women, including two from underrepresented communities.women.
20 | Western Digital 2023 Proxy Statement |
Corporate Governance Matters
Director Nomination Process
ASSESS | |
Our Board of Directors, led by the Governance Committee, evaluates the size and composition of our Board at least annually, considering the evolving skills, perspectives and experience needed on our Board to perform its governance and oversight role as our business transforms and the underlying risks change over time. Among other factors, the committee considers our strategy and needs, as well as our directors’ skills, expertise, experience, tenure, age and backgrounds, including gender, race, ethnicity and membership in another underrepresented community. After assessing these factors, our Board develops criteria for potential candidates to be additive and complementary to the overall composition of our Board. Specific director criteria evolve over time to reflect our strategic and business needs and the changing composition of our Board.
IDENTIFY |
The Governance Committee is authorized to use any methods it deems appropriate for identifying candidates for membership on our Board of Directors, including considering recommendations from incumbent directors, management or stockholders and engaging the services of an outside search firm to identify suitable potential director candidates. The committee will include, and instruct any search firm it engages to include, women and members of underrepresented communities in the pool of director candidates.
EVALUATE |
The Governance Committee has established a process for evaluating director candidates that it follows regardless of who recommends a candidate for consideration. Through this process, the committee considers a candidate’s skills, experience, outside commitments, including service on public company boards, and other available information regarding each candidate. For incumbent director candidates, this process includes consideration of the results of the annual Board and committee evaluations. See the section entitled “Board Processes and Policies—Board and Committee Evaluations” below. Following the evaluation, the committee recommends nominees to our Board.
NOMINATE |
Our Board of Directors considers the Governance Committee’s recommended nominees, analyzes their independence and qualifications and selects nominees to be presented to our stockholders for election to our Board.
Stockholder Recommendations and Nominations of Director Candidates
The Governance Committee may receive recommendations for director candidates from our stockholders. Additionally, our stockholders may nominate director candidates for inclusion in our proxy materials pursuant to the proxy access right set forth in our By-laws or may nominate directors for election at future annual meetings of our stockholders pursuant to the advance notice provisions set forth in our By-laws, in each case as described further below.
Corporate Governance Matters
Stockholder Recommendations of Director Candidates
A stockholder may recommend a director candidate to the Governance Committee by delivering a written notice to our Secretary at our principal executive offices and including the following in the notice: the name and address of the stockholder as they appear on our books or other proof of share ownership; the class and number of shares of our common stock beneficially owned by the stockholder as of the date the stockholder gives written notice; a description of all arrangements or understandings between the stockholder and the director candidate and any other person(s) pursuant to which the recommendation or nomination is to be made by the stockholder; the name, age, business address and residence address of the director candidate and a description of the director candidate’s business experience for at least the previous five years; the principal occupation or employment of the director candidate; the class and number of shares of our common stock beneficially owned by the director candidate; the consent of the director candidate to serve as a member of our Board of Directors if appointed or elected; and any other information required to be disclosed with respect to a director nominee in solicitations for proxies for the election of directors pursuant to applicable rules of the SEC.
The committee may require additional information as it deems reasonably required to determine the eligibility of the director candidate to serve as a member of our Board of Directors. Stockholders recommending candidates for consideration by our Board in connection with the next annual meeting of stockholders should submit their written recommendation no later than June 1 of the year of that meeting.
Corporate Governance Matters | 21 |
The committee will evaluate director candidates recommended by stockholders for election to our Board in the same manner and using the same criteria as it uses for any other director candidate. If the committee determines that a stockholder-recommended candidate is suitable for membership on our Board, of Directors, it will include the candidate in the pool of candidates to be considered for nomination upon the occurrence of the next vacancy on our Board or in connection with the next annual meeting of stockholders.
Proxy Access
Our By-laws provide for proxy access, a means for our stockholders to include stockholder-nominated director candidates in our proxy materials for annual meetings of stockholders. A stockholder, or group of not more than 20 stockholders (collectively, an “eligible stockholder”), meeting specified eligibility requirements is generally permitted to nominate the greater of: (i) two director nominees; and (ii) 20% of the number of directors on our Board. In order to be eligible to use the proxy access process, an eligible stockholder must, among other requirements, have owned 3% or more of our outstanding common stock continuously for at least three years and deliver written notice of the nomination to our Secretary in the manner described in Section 2.14 of our By-laws and within the time periods set forth in this Proxy Statement in the section entitled “Additional Information—General Information About the Annual Meeting—Submission of Stockholder Proposals and Director Nominations.” Use of the proxy access process to submit stockholder nominees is subject to additional eligibility, procedural and disclosure requirements set forth in Section 2.14 of our By-laws.
Other Director Nominations
Stockholders who wish to nominate a person for election as a director in connection with an annual meeting of stockholders (as opposed to making a recommendation to the Governance Committee as described above) and who do not intend for the nomination to be included in our proxy materials pursuant to the proxy access process described above must comply with the advance notice requirement set forth in our By-laws. Pursuant to this advance notice requirement, a stockholder must deliver written notice of the nomination to our Secretary in the manner described in Section 2.11 of our By-laws and within the time periods set forth in this Proxy Statement in the section entitled “Additional Information—General Information About the Annual Meeting—Submission of Stockholder Proposals and Director Nominations.”
Board Refreshment
Our Board of Directors believes that periodic Board refreshment can provide new experiencesexperience and fresh perspectives to our Board and is most effective if it is sufficiently balanced to maintain continuity among Board members that will allow for the sharing of historical perspectives and experiencesexperience relevant to our company. Our Board seeks to achieve this balance through its director succession planning process and director retirement policy described below. Our Board also utilizes the annual Board and individual director assessment process discussed below under “Board Processes and Policies—
Corporate Governance Matters
Board Evaluation”and Committee Evaluations” to help inform its assessment of our Board’s composition and Board refreshment needs. As part of our ongoing refreshment process, our Board regularly evaluates its composition, and has undergone deliberate refreshment to both add and maintain skills critical to overseeing our business as our strategy and oversight priorities evolve. In keeping with our commitment to Board refreshment,the past five years, we have currently engaged an executive search firmadded five new independent directors, including three since 2021, who each bring new complementary skills to assist us in identifyingour Board, and evaluating potential independent director nominees to jointhree longer-serving directors have retired from our Board.
Succession Planning
Our Board of Directors is focused on ensuring that it has members with diverse skills, expertise, experience, tenure, age and backgrounds, including gender, race and ethnicity, because a broad range of perspectives is critical to effective corporate governance and overseeing the execution of our strategy. The Governance Committee has developed aCommittee’s long-range succession plan not only helps to identify and recruit new directors, and our Board has appointed four new directors in the past two years.but also ensures a smooth transition when succession needs arise. The committee also plans for the orderly succession of theour Chairs of our Board’sthe Board committees.
In accordance with our retirement policy described below, Ms. Cote, who serves as our Lead Independent Director, has not been nominated for re-election at the Annual Meeting. In anticipation of Ms. Cote’s retirement, the Governance Committee undertook a thoughtful process to identify a successor to serve as our Lead Independent Director. As part of the process, the committee developed selection criteria and each independent director provided input on candidates. In August 2021, the independent directors appointed Ms. Streeter to serve as our Lead Independent Director upon Ms. Cote’s retirement in November 2021. Ms. Streeter’s leadership roles on our special CEO search committee, in successful director searches and as our Governance Committee Chair, as well as her relationship with our CEO and other members of our Board and leadership roles on other public company boards, qualify her to serve as our Lead Independent Director.
Appointment of Dr. Thomas H. Caulfield and Miyuki Suzuki
In July 2021, our Board appointed Dr. Caulfield and Ms. Suzuki as directors. Dr. Caulfield is a demonstrated leader with over 30 years of semiconductor industry experience. He brings to our Board his extensive semiconductor knowledge, from an engineering, manufacturing, management and global operations perspective. Dr. Caulfield was recommended to the Governance Committee by an outside search firm. Ms. Suzuki is an accomplished business executive with over 35 years of leadership experience in the technology, telecommunications and airline industries. Ms. Suzuki brings to our Board her deep global expertise that spans the Asia Pacific region. Ms. Suzuki was referred to the Governance Committee by our CEO. Dr. Caulfield and Ms. Suzuki serve on the Governance Committee.
With these changes, our Board of Directors has sought to refresh its composition while maintaining institutional knowledge with directors of varying lengths of tenure and has implemented forward-looking plans for committee succession. The Governance Committee is committed to continuing to identify and recruit highly qualified director candidates with diverse experiences, perspectives and backgrounds to join our Board.
Retirement Policy
To help facilitate the periodic refreshment of our Board of Directors, our Corporate Governance Guidelines provide that no director shall be nominated for re-election after the director has reached the age of 72, unless72.
Director Orientation and Education
All incoming directors participate in a director orientation program, which includes engagement with members of the executive team and senior management to review matters relevant to our business. When directors accept new or additional responsibilities on our Board determinesor on committees, they are provided additional orientation and educational opportunities on relevant topics.
Because our Board believes that ongoing director education is vital to the ability of directors to fulfill their responsibilities, directors are encouraged to participate in a particular instance that longer tenure is inexternal continuing director education programs, and we reimburse directors for their expenses associated with this participation. We also invite speakers to present at least annually during Board meetings on director education topics, such as emerging and evolving issues related to corporate governance, the best interests of our companygeopolitical environment and our stockholders.cybersecurity.
Board’s Role and Responsibilities
Our Board of Directors and management are committed to regular engagement with our stockholders and soliciting their views and input on important performance, executive compensation, governance, environmental, social, human capital management and other matters.
Corporate Governance Matters
2023 Proxy Statement |
YEAR-ROUND STOCKHOLDER ENGAGEMENTBoard’s Role and Responsibilities
As a continuationRisk Oversight and Compensation Risk Assessment
Board’s Role in Risk Oversight
Our management team is charged with managing risk and bringing to our Board of Directors’ attention all material risk exposures to our robust Board-driven stockholder engagement program,company. Our Board is responsible for overseeing the risk management process and exercises this risk oversight through both our full Board and its committees as further detailed below.
Our enterprise risk management (“ERM”) process is designed to facilitate the identification, assessment, management, reporting and monitoring of material risks our company may face over the past year, we reached out to stockholders representing nearly 60% of shares outstanding. Our engagement team conducted calls with 14 stockholders, composed of investors with a variety of investment stylesshort-term and geographic locations. The other stockholders we contacted confirmed that a discussion was not needed at that time or did not respond. Our Chair of the Compensationlong-term and Talent Committee, an independent director, led several of these stockholder calls.
SUMMER 2021 STOCKHOLDER ENGAGEMENT AND FEEDBACK
While our discussions with investors covered a variety of topics, there were some key areas of focus in our conversations:
Stockholders generally provided positive feedback on the diversity of our Board and our executive compensation program. Investors were also very supportive of our progress in sustainability reporting, particularly with respect to our progress toward alignment with the Task Force on Climate-Related Financial Disclosures and our commitment to set science-based targets. These views were sharedassure regular communication with our Board and its committees where applicable, for their consideration.
Corporate Responsibility and Sustainability
We believe responsible and sustainable business practices support our long-term success as a company. Those practices help keep our communities and our environment vibrant and healthy. But they also lead us to more efficient and resilient business operations. They help us meet our customers’ efficiency targets. They reduce risks of misconduct and legal liability. They enhance the reliability of our supply chain. And they improve the health, well-being, engagement and productivity of our employees. We believe that being an industry leader is not just about having talented employees or innovative products. It is also about doing business the right way, every day. That is why our commitment to sound corporate responsibility is deeply rooted in all aspects of our business.
Oversight by Our Board of Directors
Sound corporate responsibility in all aspects of our business is a focus of our Board of Directors. The Governance Committee is responsible for assisting our Board in overseeing our corporate responsibility and sustainability policies and programs. The committee provides Board-level input on our social, environmental and human rights policies and programs. In addition, the Compensation and Talent Committee periodically reviews our human capital management policies, programs and initiatives, including those focusing on culture, diversity and inclusion. The Governance Committee receives updates from our sustainability group and management two to three times each year and discusses implementation of new sustainability initiatives.
Corporate Governance Matters
2021 Sustainability Update
As a reflection of the increasing importance of sustainability to our business, we are transitioning our annual sustainability reporting to align with our financial reporting. Our 2020 Sustainability Report covered calendar year 2019, which included the first half of fiscal 2020, and our 2021 Sustainability Update covers the second half of fiscal 2020. Beginning with our report for fiscal 2021, we plan to publish our reports and the underlying data after the close of our fiscal year. The 2020 Sustainability Report and the 2021 Sustainability Update can be found on our Corporate Sustainability page at www.westerndigital.com.
Our 2021 Sustainability Update topics were selected based on a materiality assessment completed in 2020, which incorporated input from investors, customers and other stakeholders, as well as strategic priorities. The update aligns with both SASB and GRI standards. Below are notable highlights from our program:
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Corporate Governance Matters
Unified Culture
Our employees drive our success and shape our future. To continue leading the data storage infrastructure industry, we rely on highly skilled individuals to drive our culture of innovation. We work diligently to foster a working environment where all of our employees, regardless of where in the world they are located or what roles they have, can be treated fairly and with respect and dignity, and are provided with safe working conditions. We strive to create an environment where employees feel connected and committed to our mission and vision: to be recognized as the world’s leading data infrastructure company, architecting how data enables the world to solve its biggest challenges.
In fiscal 2021, we implemented a continuous employee listening platform to collect feedback to better understand and improve the employee experience and identify opportunities to strengthen our employee engagement. We had a 92% employee participation rate and identified key strengths including that employees have a sense of belonging at Western Digital, they feel their work is meaningful and are excited about our future.
To promote our culture of inclusion and integrity, we designated approximately 100 culture advocates representing our employees around the world and 20 culture champions selected by members of our executive leadership team to represent our culture attributes at the leadership level. With the support of our culture advocates and champions, our business leaders and employees have been embracing the attributes and bringing them to life.
One of our culture attributes focuses on giving back to the communities that support our employees and operations. Our Global Giving and Doing program is committed to maintaining Western Digital’s reputation as a good corporate citizen. Our charitable donations and volunteerism track the issues that mean the most to us, including equality, environmental preservation, hunger relief and STEM education.
As part of our Culture Journey and focus on people strategy, we also regularly review our talent attraction strategy, including our employer brand and competition for talent. Our goal is to continue our positive track record of attracting and retaining talent.
Equity, Inclusion and Diversity
Western Digital is committed to creating a culture of belonging for all of our employees—all genders, races, ages and any other underrepresented groups, such as racially or ethnically diverse groups or LGBTQ+ community members—across all levels of our organization, starting with our Board of Directors. We believe that the fusion of various ideas results in greater innovation and better business outcomes and we know we are at our absolute best when we leverage the diversity of our employees around the world.
Embracing this philosophy, we continued executing on our global equity, inclusion and diversity strategy and have made additional progress in a number of key areas. For example, we launched our Advancing Women in Leadership program to help women enhance their leadership skills and rise to the top ranks of leadership within the organization. We delivered unconscious bias training in the U.S. equipping leaders to lead inclusively and help all employees identify unconscious bias. We enhanced our parental leave program in the U.S. to provide additional support for new parents and we expanded our Employee Assistance Program for fiscal 2022 to cover all employees globally and align our focus on wellbeing. We continued enhancing our business resource groups, which work with our Equity, Inclusion and Diversity team and business leaders to raise awareness of equity and diversity issues and advocate for equality in general. In the U.S., we conduct pay equity reviews annually to assess the fairness of pay to women and underrepresented ethnic groups. In 2020, we expanded our pay equity review process to include Israel and Malaysia. With the addition of Thailand and India in 2021, our review process covered approximately 48,000 employees, or 75% of our workforce.
We have a dedicated Equity, Inclusion and Diversity team that helps identify global equity, diversity and inclusion initiatives, ensures we carry out our initiatives and monitors progress in our inclusion efforts. The team partners closely with our CEO and Chief People Officer, who report progress to our Board of Directors on a regular basis. Additionally, the Compensation and Talent Committee oversees human capital issues and policies, including those focusing on equity, inclusion and diversity.
Corporate Governance Matters
Risk Oversight and Compensation Risk Assessment
Board’s Role in Risk Oversight
Our Board of Directors’ role in risk oversight involves both our full Board and its committees. Individual committees are charged with ensuring that reasonable information and reporting systems exist to identify potential risks to our company encountered through their respective committee work and with exercising appropriate oversight of thoseregarding these risks. PotentialKey risks are raised by management to the Audit Committee and the full Board. At least annually, our Chief Audit Executive, who manages the day-to-day activities of our ERM program, reports to our Board for inclusion in ouron enterprise risk management (“ERM”) process.assessment under our ERM program, providing updates on key risks, status of mitigation efforts and residual risk trends. Our Board believes thatconsults with outside advisors and members of management, including those involved in ERM, and has access to and periodically meets with external advisors to help monitor trends, identify potential threats and assess our company’s risk environment. Risk areas identified in the processes it has established for overseeingERM process help inform how we present the risks facing our company in the “Risk Factors” section of our Annual Report on Form 10-K, which is also reviewed with the Audit Committee.
The independence of our Board and our Board leadership enhances our Board’s ability to exercise its risk would be effective under a varietyoversight. Through the authority of leadership frameworks,our independent Chair of the Board and therefore such processes do not materially affect its choiceLead Independent Director to establish Board agendas, and call and preside at Board meetings and executive sessions of leadership structureour independent directors as described in the section entitledunder “Board Structure—Board Leadership Structure” below.below, our current Board leadership structure offers mechanisms to facilitate our Board’s exercise of its oversight responsibilities, including by requiring management reports on specific risk exposures and requesting additional information or directing alternative actions with respect to management’s recommendation on any risk matters as our Board may determine to be necessary or advisable.
BOARD OF DIRECTORS Our Board meets periodically with our | ||||
AUDIT COMMITTEE ●Oversees ●Oversees the following risk topics: ●Financial reporting, accounting, internal controls, fraud and ●Cybersecurity ●Legal and regulatory compliance, including our Ethics and Compliance program ● ●Tax and transfer pricing matters ●General business risks | COMPENSATION AND TALENT COMMITTEE Oversees the following risk topics: ●Compensation programs, policies and practices ●Equity and other incentive plans ●Recruiting, engagement and retention ● ●CEO succession planning and | GOVERNANCE COMMITTEE Oversees the following risk topics: ●Board and committee composition, including Board leadership structure ●Director succession planning ●Corporate governance policies and practices ●Corporate responsibility and sustainability policies and programs, including related to human rights, environmental and climate change ●Corporate political and lobbying activities and expenditures | ||
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Each of our major business unit and functional area heads, with | ||||
Corporate Governance Matters | 23 |
Compensation Risk Assessment
Consistent with SEC disclosure requirements, we reviewed our fiscal 20212023 compensation policies and practices to determine whether they encourage excessive risk taking. We concluded that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on our company.
Corporate Responsibility and Sustainability
We believe responsible and sustainable business practices support our long-term success as a company. These practices help keep our communities and our environment vibrant and healthy. They also lead us to more efficient and resilient business operations, help us meet our customers’ efficiency targets, reduce risks of misconduct and legal liability, enhance the reliability of our supply chain and improve the health, well-being, engagement and productivity of our employees. We believe that being an industry leader is not just about having talented employees or innovative products. It is also about doing business the right way, every day. That is why our commitment to corporate responsibility is deeply embedded in all aspects of our business.
Oversight by Our Board of Directors
Sound corporate responsibility in all aspects of our business is a focus of our Board of Directors. The Governance Committee is responsible for assisting our Board in overseeing the development and maintenance of our corporate responsibility and sustainability policies, practices and programs, including our public sustainability reporting. The committee has specific responsibility for periodically reviewing our policies and practices related to human rights, environmental and climate change, political and lobbying activities and other topics designated by our Board from time to time. The committee receives updates from our sustainability group and management regularly, including progress towards our sustainability initiatives or established targets or goals, and reviews trends, priorities and implementation of new sustainability initiatives.
The Audit Committee is responsible for reviewing the implementation of legal or regulatory requirements regarding public disclosure of topics covered by our corporate responsibility and sustainability programs and management’s controls and procedures with respect to these disclosures.
In addition, the Compensation and Talent Committee periodically reviews our people policies and programs, including those focusing on talent attraction, engagement and retention, DE&I and other topics as may be designated by our Board from time to time.
24 | Western Digital 2023 Proxy Statement |
2023 Sustainability Progress
We made notable new commitments and progress on key sustainability issues in fiscal 2023. Our annual sustainability reports are located on our Corporate Responsibility–Overview page at www.westerndigital.com. The topics covered are selected based on detailed biennial materiality assessments completed by a third party, which incorporate input from investors, customers and other stakeholders, as well as our strategic priorities. Our reports are prepared in accordance with GRI standards: Core option, reference SASB standards and include disclosures aligned with UN SDGs and the TCFD recommendations. Below are highlights from our sustainability program in fiscal 2023:
New Environmental Targets | Energy and Emissions | Lifecycle Impacts | |||
In June 2023, we announced significant new commitments to environmental sustainability. Those commitments are closely aligned with the results of our materiality assessments, our customers’ expectations and our long-term sustainability strategy. ●By 2030 ●Achieve 100% renewable energy across our global operations ●Reduce water withdrawals by 20% ●Divert at least 95% of our operational waste from landfills ●By 2032, achieve net zero emissions in our operations (Scope 1 and 2) | We aim to do our part in helping build an environmentally sustainable future by reducing our energy consumption, investing in conservation projects and managing our impacts on the environment. ●Reported progress against our science-based emissions reduction targets, achieving a 14.8% reduction in Scope 1 and Scope 2 emissions from fiscal 2020 to fiscal 2022 ●Achieved a year-over-year 13% reduction in energy intensity from fiscal 2021 to fiscal 2022 ●Completed a robust data analysis of our fiscal 2021 Scope 3 GHG inventory to better understand our value chain impacts and to support emissions reduction targets | We care for our world at every step, everywhere we operate. Because our products are used widely throughout the world, we are committed to delivering products designed and manufactured with long-term sustainability in mind. ●Obtained third-party validation of recycled content in our highest-volume HDDs ●Enabled the diversion of over eleven metric tons of waste from landfills since the launch of our product takeback program in April 2020 ●Completed several ISO-conformant lifecycle assessments to evaluate the impacts of our products ●Executed initiatives to reduce packaging and increase use of recycled materials | |||
Diversity, Equity and Inclusion | Human Rights and Labor | Integrity | |||
Our people are Western Digital’s most valuable resource. We believe we can achieve the best business outcomes by empowering our diverse and talented employees to make an impact, together. ●Disclosed gender pay equity results and Employment Information Report (EEO-1) data ●Recognized for the fourth consecutive year by Women’s Choice Award as a Best Company for Millennials, and received a perfect score from Human Rights Campaign in their Corporate Equality Index ●Promoted a Global Anti-Harassment and Discrimination Policy with associated training worldwide | Respecting human rights is a foundational aspect of how we do business. We work diligently to foster a working environment where Western Digital employees and employees of our suppliers can be treated with respect and dignity and are provided with fair and safe working conditions. ●Expanded our disclosure of human rights and labor management practices in our Modern Slavery Compliance Statement ●Enhanced human rights-related training within our supply chain | As a global company operating across a wide range of geographies, Western Digital is committed to doing business fairly and legally. We set a consistent tone across our organization to form our global culture of integrity. ●Recognized by Ethisphere Institute for the fifth consecutive year as one of the World’s Most Ethical Companies ●100% of operations assessed for risks related to corruption |
Corporate Governance Matters | 25 |
Our People Strategy
In order to support our company’s strategy, a continued emphasis on talent is required. We continue to focus on attracting, developing, engaging and retaining the best talent for our company. At the end of fiscal 2023, we employed approximately 53,000 people worldwide, across 38 countries with approximately 85% of our people in Asia Pacific, 13% in the Americas and 2% in Europe, the Middle East and Africa.
Diversity, Equity and Inclusion
We are committed to diversity and promoting an inclusive environment where every individual can thrive through a sense of belonging, respect and contribution. We support inclusive hiring, providing training and development opportunities and ensuring equitable pay for employees, and we continue to focus on increasing diverse representation at every level of our company.
Racial/Ethnic Diversity(1) | Gender Diversity | |
U.S. Management | Management | Technical Staff |
(1) | As of June 30, 2023. Racially/ethnically diverse U.S. Management group consists of members of Asian, Black/African American, Hispanic/Latino or other racially or ethnically diverse communities. |
Our employee resource groups (“ERGs”) help create an inclusive culture that embraces the uniqueness of our employees. We have several ERG communities, focusing on women, LGBTQ+, racial and ethnic minorities, military and people with disabilities. In fiscal 2023, we continued the self-identification initiative we launched the previous year by inviting new hires to share more about who they are across dimensions of gender, gender identity, veteran status and disabilities. Participation was optional, data was protected and the results were anonymized. We believe an in-depth understanding of our employee population will enable us to better engage and retain our talent.
Compensation and Benefits
We believe in the importance of investing in our people, and we do that through a robust total rewards program. Some achievements and initiatives of our compensation program include:
● | Benchmarked our compensation and benefits programs using market data from reputable third-party consultants |
● | Conducted internal focus groups and employee surveys to inform programs and identify opportunities |
● | Expanded our annual pay equity assessment to cover 100% of our employee population globally to promote equal pay for equal work for men and women |
● | Conducted a global recognition program as part of compensation to celebrate the contributions of employees who bring our core values and cultural attributes to life |
● | Continued our multi-year journey to modernize and improve our benefits portfolio to offer more choices to meet the unique needs of our diverse employees |
Talent Attraction, Development and Engagement
Foundational to our people strategy is the attraction, development and engagement of our employees. In fiscal 2023, we continued to enhance our people strategy with the following achievements and initiatives:
● | Fostered the next generation of talent by increasing our U.S. intern conversion rate by over 40 percentage points in fiscal 2023 and by leveraging corporate sponsor opportunities |
● | Implemented a program to remove potential for bias from our talent sourcing process for interns |
● | Applied a skills-based screening to hire employees based on capabilities and potential |
26 | Western Digital 2023 Proxy Statement |
● | Invested in leadership development through our flagship program, “Leadership Essentials,” and self-directed development modules to help people at all levels cultivate skills |
● | Engaged employees in philanthropy to support the communities in which they work and live, with 32% employee participation in company-sponsored volunteer events; to reach this goal, we increased our participation from our factory worker population by 27 percentage points |
Communication with Management
We have the following practices to promote clear, timely and regular communication between directors and management.
● | Business Updates. Between Board meetings, our Board receives regular updates from our CEO and management, including on key company developments. For example, in fiscal 2023, management provided frequent updates to our Board regarding our strategic review and network security incident. |
● | Communications with Management. Our Board regularly interacts with our CEO and management during and between Board meetings through meetings, presentations and informal gatherings of our Board and management. |
● | Meeting Agendas and Presentations. Our Chair of the Board, Lead Independent Director and committee Chairs regularly communicate with management to discuss the development of meeting agendas and presentations. |
● | Reference Materials. Directors also regularly receive securities analysts’ reports, investor communications, company publications, news articles and other reference materials. |
Chief Executive Officer Evaluation and Succession Planning
Evaluation
The Compensation and Talent Committee reviews and approves our CEO’s goals and objectives. Ourobjectives in concert with the full Board of Directors. The Compensation and Talent Committee Chair leads the evaluation of our CEO’s performance in light of those goals and objectives by seeking input from each non-employee director, which is then discussed with our Board. Following the evaluation of our CEO’s performance, the Compensation and Talent Committeecommittee determines and approves our CEO’s compensation.
Corporate Governance Matters
Ongoing Succession Planning
Our Board of DirectorsThe Compensation and Talent Committee oversees CEO and key management personnel succession planning. Our Board of Directors periodically reviews potential internal candidates, including the qualifications, experienceour CEO’s and key management’s development priorities for these individuals.plans. Directors engage with potential CEO and key management personnel successors at Board and committee meetings and in less formal settings to allow directors to personally assess candidates. Furthermore, our Board periodically reviews the overall composition of our key management personnel’s qualifications, tenure and experience.
Emergency Succession
Our Board of Directors has also adopted an emergency CEO succession plan. The plan will become effective in the event our CEO becomes unable to perform his or her duties in order to minimize potential disruption or loss of continuity to our business and operations. Our emergency CEO succession plan is reviewed annually by the Governance Committee and our Board.
Stockholder Engagement
Our Board of Directors and management are committed to regular engagement with our stockholders and soliciting their views and input on important performance, executive compensation, governance, environmental, social, human capital management and other matters.
● | Transparency and Informed Compensation Decisions and Governance Enhancements. The Compensation and Talent and Governance Committees routinely review our executive compensation design and governance practices and policies, respectively, with an eye towards continual improvement and enhancements. Stockholder input is |
Corporate Governance Matters | 27 |
regularly shared with our Board, its committees and management, facilitating a dialogue that provides stockholders with transparency into our executive compensation design and governance practices and considerations, and informs our company’s enhancement of those practices. | |
● | Board-Driven Engagement. In addition to the Governance Committee’s oversight of the stockholder engagement process and the periodic review and assessment of stockholder input, our directors also engage directly with our stockholders by periodically participating in stockholder outreach. |
● | Year-Round Engagement and Board Reporting. Our management members and directors conduct outreach to stockholders throughout the year to obtain their input on key matters and keep our management and Board informed about the issues that our stockholders tell us matter most to them. |
As part of our Board’s year-round stockholder engagement program, we conducted outreach and engagement both in the lead up to our 2022 Annual Meeting to discuss our stockholders’ perspectives on ballot items, and then following the 2022 Annual Meeting. After the meeting, we sought to understand our stockholders’ concerns regarding key vote outcomes and we discussed broader updates on our business, Board composition and corporate responsibility and sustainability efforts. Over this period of time, we engaged with stockholders representing a total of 45% of our outstanding shares of common stock.
LEAD UP TO 2022 ANNUAL MEETING | FOLLOWING 2022 ANNUAL MEETING | ||
We contacted over 25 of our stockholders representing approximately 59% of our shares of common stock outstanding. The stockholder engagement team conducted numerous calls with stockholders representing approximately 34% of our shares of common stock outstanding, with our Chair of the Compensation and Talent Committee participating in meetings representing a majority of the shares that chose to engage. | We contacted over 30 of our stockholders representing approximately 64% of our shares of common stock outstanding. The stockholder engagement team conducted numerous calls with stockholders representing approximately 37% of our shares of common stock outstanding, with our Chair of the Compensation and Talent Committee participating in meetings representing a majority of the shares that chose to engage. |
Below is a summary of key areas of stockholder interest discussed:
● | Our executive compensation program, specifically changes to be considered for fiscal 2024 given the Say on Pay vote outcome at our 2022 Annual Meeting |
● | Our ongoing strategic review, our executive leadership team and relevant updates to our business strategy and performance |
● | Our Board’s collective and diverse skillsets and experience |
● | Corporate responsibility and sustainability efforts, including our recently announced commitment to achieve net zero emissions in our operations (Scope 1 & 2) by 2032 |
● | Human capital matters including DE&I initiatives, reporting and oversight |
For additional information on stockholder engagement, feedback and our responsive actions relating to our executive compensation program, please see the section entitled “Executive Compensation—Compensation Discussion and Analysis.”
28 | Western Digital 2023 Proxy Statement |
Board Structure
Board Leadership Structure
Current Leadership Structure
DAVID V. GOECKELER | MATTHEW E. MASSENGILL | STEPHANIE A. STREETER |
Chief Executive Officer and Director | Independent Chair of the Board | Lead Independent Director |
Our Board of Directors does not have a policy with respect to whether the roles of ChairmanChair of the Board and CEO should be separate and, if they are to be separate, whether our ChairmanChair of the Board should be selected from our non-employee directors who are not our employees (referred to in this Proxy Statement as our “non-employee directors”) or should be an employee. Our Board believes the Board’s leadership structure at any point in time should be based upon an assessment of the needs of our Board and our company at the time after giving consideration to, among other things, our business plans, strategic opportunities and succession planning priorities. Our Board also considers the views of stockholders, including as it relates to director independence, as well as corporate governance and industry trends.
We currently separate the roles of CEO and ChairmanChair of the Board, with Mr. Massengill currently serving as ChairmanChair of the Board. Mr. Massengill has served as Chair of the Board since 2015. Our Board believes this is the appropriate leadership for our company at this time because it permits Mr. Goeckeler, as our CEO, to focus on setting our strategic direction, day-to-day leadership and our performance, while permitting our ChairmanChair of the Board to focus on providing guidance to our CEO and setting the agenda for Board meetings. Our Board also believes that the separation of our CEO and ChairmanChair of the Board roles assists our Board in providing robust discussion and evaluation of strategic goals and objectives. We believe that Mr. Massengill is best suited for the Chair of the Board position based on his many years of service to Western Digital as an executive and Board member, which provide him with a deep understanding of our operations and provides valuable knowledge to our Board on the issues we face to achieve our strategic objectives.
Our Corporate Governance Guidelines provide that our Board will appoint a Lead Independent Director if our ChairmanChair of the Board is not an independent director under the Nasdaq Stock Market listing standards or if our Board otherwise deems it appropriate. Although our Board has determined that Mr. Massengill is independent under the Nasdaq Stock Market listing standards, because he is a former executive ChairmanChair of the Board and President and CEO of our company, our Board determinedbelieves that it wasis appropriate to annually appoint a Lead Independent Director. Our Lead Independent Director plays an important role in maintaining effective independent oversight of our company. The independent members of our Board have most recently appointed Ms. CoteStreeter as our Lead Independent Director. UponDirector, a position she has held since 2021. Ms. Cote’s retirementStreeter’s strong leadership skills, significant public company board experience, contributions to successful CEO and director searches, financial expertise and service as the Governance Committee Chair, in November 2021, Ms. Streeter will becomeaddition to her skills and experience described in the section entitled “Election of Directors—Nominees for Election,” qualify her to serve as our Lead Independent Director. See page 21 for a discussion
Table of Ms. Streeter’s qualificationsContents
Corporate Governance Matters | 29 |
The responsibilities of our Chair of the Board and our succession planning process.
Our Board of Directors acknowledges that no single leadership model is right for all companies at all times. As such, our Board periodically reviews its leadership structure and may, depending on the circumstances, choose a different leadership structure in the future.
The duties of our Lead Independent Director include:are summarized in the table below.
CHAIR OF THE BOARD | LEAD INDEPENDENT DIRECTOR |
●Leads our Board of Directors in overseeing the management and direction of our company ●Calls meetings of our Board and stockholders ●Chairs meetings of the Board and the annual meeting of stockholders ●Establishes Board meeting schedules and agendas ●Calls executive sessions of our independent directors ●Engages in discussions with members of our management and our Board, as appropriate ●Engages in discussions with our stockholders and other stakeholders on relevant matters, as appropriate ●Communicates with all directors on key issues and concerns outside of Board meetings | ●Acts as a liaison between our independent directors and management |
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● | ●Oversees our stockholder engagement efforts ●Represents our company from time to time in communications with our stockholders and |
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OurWhile our Chair of the Board and Lead Independent Director have authority to establish Board meeting agendas, propose actions for approval and represent the interests of our company and our Board in discussions with management and our stockholders, any specific actions taken in connection with these matters are exercised by our full Board or any Board committee to which authority has been delegated, and not by any individual director.
Executive Sessions
All members of our Board of Directors, other than our CEO, are independent. In order to assure that our independent directors alsoare not inappropriately influenced by management, the independent directors meet regularlywithout management in executive sessions without management toled by our independent Chair of the Board or, in his absence, our Lead Independent Director, in conjunction with each regularly scheduled meeting of our Board, and otherwise as deemed necessary by our Chair of the Board or our other independent directors. At these executive sessions, our independent directors review, among other things, our strategy, financial performance, management effectiveness and succession planning. Our Chairs of each of the Board committees also lead regular executive sessions of each of the Board committees. These executive sessions allow independent directors to speak candidly on any matter of interest, without members of management present.
30 | Western Digital 2023 Proxy Statement |
Committees
Corporate Governance Matters
Committees
Our Board of Directors has standing Audit, Compensation and Talent, Governance and Executive Committees. Each of the standing committees operates pursuant to a written charter that is available on our website under “Leadership & Governance” at investor.wdc.com. Our Board has affirmatively determined that all members of the Audit, Compensation and Talent and Governance Committees are independent as defined under the listing standards of the Nasdaq Stock Market and applicable SEC rules.
Meetings Held in Fiscal 2023: 13 | Committee Report: page 94 |
KEY RESPONSIBILITIES | ||||
●Directly responsible for appointing, compensating and overseeing independent accountants, with input from management ●Pre-approves all audit and non-audit services provided by our independent accountants ●Reviews annual and quarterly financial statements ●Reviews adequacy of accounting and financial personnel resources ●Oversees and appoints our chief audit executive and reviews our internal audit plan and internal controls ●Reviews and discusses with management risk assessment and enterprise risk management policies, including risks related to financial reporting, accounting, internal controls, fraud, capital structure, legal and regulatory compliance and cybersecurity ●Reviews and discusses with management the implementation of legal and regulatory requirements regarding public disclosure of topics covered by our corporate responsibility and sustainability programs ●Oversees ethics and compliance program Our Board has affirmatively determined that | ||||
Alexy (Chair) | Martin I. Cole | |||
Stephanie A. Streeter | ||||
Compensation and Talent Committee | Meetings Held in Fiscal |
KEY RESPONSIBILITIES | ||||
●Evaluates and approves executive officer compensation ●Reviews our ●Reviews and makes recommendations on non-employee director compensation ●Reviews and approves corporate goals and objectives for our CEO’s compensation and evaluates our CEO’s performance in light of those goals and objectives ●Oversees incentive and equity-based compensation plans ●Reviews and recommends changes to benefit plans requiring Board approval ●Reviews and approves any compensation recovery (clawback) policy or stock ownership guidelines applicable to executive officers ●Oversees the CEO succession plan and senior leadership development program | ||||
(Chair) | ||||
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Stephanie A. Streeter |
Corporate Governance Matters
31 |
Governance Committee | Meetings Held in Fiscal 2023: 8 |
KEY RESPONSIBILITIES | ||||
●Develops and recommends a set of corporate governance principles ●Evaluates and recommends the size and composition of our Board and committees and functions of committees ●Develops and recommends Board membership criteria ●Identifies, evaluates and recommends director candidates ●Reviews corporate governance issues and practices ●Reviews directorships in other companies held by or offered to directors and executive officers ●Manages the annual Board and committee evaluation process ● ●Reviews and oversees responses regarding stockholder proposals relating to corporate governance, corporate responsibility or sustainability matters ●Oversees our political and lobbying strategy, activities and expenditures | ||||
Streeter (Chair) | Caulfield | |||
Miyuki Suzuki |
Executive Committee | Meetings Held in Fiscal |
KEY RESPONSIBILITIES | ||||
●Has powers of our Board in management of our business affairs in between meetings of our Board, subject to applicable law or the rules and regulations of the SEC or the Nasdaq Stock Market and specific directions given by our Board ●Oversees the evaluation of potential strategic alternatives for our company | ||||
Goeckeler (Chair) | Kimberly E. Alexy | |||
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Matthew E. Massengill | Stephanie A. Streeter |
Western Digital 2023 Proxy Statement |
EquityEmployee Awards Committee
Our Board of Directors has also established an EquityEmployee Awards Committee as a Board committee with limited delegated authority to approve and establish the terms of restricted stock unit (“RSU”)equity and performance stock unit (“PSU”)cash awards granted to eligible participants. Mr. Goeckeler is currently the sole director serving on the committee.
Corporate Governance Matters
Corporate Governance Guidelines and Code of Business Ethics
Our Board of Directors has adopted Corporate Governance Guidelines, which provide the framework for governance of our company and represent our Board’s current views with respect to selected corporate governance issues considered to be of significance to stockholders, including:
● | The role and responsibilities of our Lead Independent Director |
● | Director nomination procedures and qualifications |
● | Director independence |
● | Policies related to board refreshment and limitations on other board service |
● | Director orientation and continuing education |
● | Annual performance evaluations of our Board and committees |
● | Succession planning and management development |
Our Board of Directors has also adopted a Code of Business Ethics that applies to all of our directors, employees and officers, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.officers. The current versions of the Corporate Governance Guidelines and the Code of Business Ethics are available on our website under “Leadership & Governance” at investor.wdc.com. To the extent required by applicable rules and regulations of the SEC or the Nasdaq Stock Market, we
We intend to promptly disclose future amendments to certain provisions of the Code of Business Ethics, or waivers of such provisions granted to executive officers and directors, on our website under “Leadership & Governance” at investor.wdc.com.investor.wdc.com, to the extent required by applicable rules and regulations of the SEC or the Nasdaq Stock Market.
CommunicationDirector Overboarding Policy
Our Board of Directors encourages directors to limit the number of other boards on which they serve to ensure that they are able to devote sufficient time and effort to properly discharge their duties and responsibilities as a member of our Board. In determining the appropriate number of outside directorships, directors should consider potential board attendance, participation and effectiveness on these boards. The table below summarizes the limits on the number of outside directorships under our overboarding policy set forth in our Corporate Governance Guidelines.
Directors | CEO |
A director may not simultaneously serve on the boards of more than 5 public companies (including Western Digital) | Our CEO may not simultaneously serve on the boards of more than 2 public companies (including Western Digital) |
All incumbent directors are in compliance with Managementour overboarding policy.
We have devoted significant effort in recent yearsBefore accepting an invitation to enhancing communication betweenserve on another board, a director must notify our Chair of the Board and management and have adopted the following practices to promote clear, timely and regular communication between directors and management.
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Director Orientation and Education
All incoming directors participate in an extensive director orientation program, which includes engagement with membersour Chair of the executive team and senior managementGovernance Committee. The Governance Committee reviews whether the position would affect the director’s ability to review matters relevant to our business, including technology, finance, internal audit and enterprise risk, corporate governance policies and practices, our Global Code of Conduct and legal matters. We also implemented a mentorship program to pair new directors with longer tenured directors to facilitate a smooth transition onto our Board of Directors. We believe our director orientation program provides new directors with a strong foundation to understand our business. When directors accept new or additional responsibilitiesserve on our Board or on committees, they are provided additional orientation(including potential conflicts of interest, independence, related person transactions and educational opportunities on relevant topics.
Becausetime commitments). The Governance Committee reviews outside directorship positions annually and reviews the overboarding policy annually as part of its review of our Board believes that ongoing director education is vital to the ability of directors to fulfill their roles, directors are encouraged to participate in external continuing director education programs, and we reimburse directors for their expenses associated with this participation. We also invite speakers to present at least annually during Board meetings on director education topics, such as emerging corporate governance matters, the geopolitical environment and cybersecurity.Corporate Governance Guidelines.
Corporate Governance Matters | 33 |
Board and Committee Evaluations
Corporate Governance Matters
Our Board of Directors engages in a comprehensive annual Board and Board committee evaluation process. Our Board believes that it is important to assess the performance ofa thorough evaluation process that encourages director engagement will foster constructive feedback and enhance our Board, its committees and individual directors and to solicit and act upon the feedback received.Board’s overall effectiveness. Accordingly, the Governance Committee oversees an annual performance evaluation process.process that includes the following:
Evaluation Questionnaires |
Comprehensive evaluation questionnaires
Each director completes a written questionnaire covering various topics, including:
Each director completes a written questionnaire soliciting feedback on various topics, including: ●Board | |
materials ● |
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Board composition ●Board committee performance ●Relationships with management ●Communications among and | |
management ● |
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Our Board’s strategic oversight role ● | Management and Board succession planning |
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Overall Board effectiveness |
Discussions with each director
An outside firm compiles and analyzes the results of each written evaluation, which our Governance Committee Chair discusses with each director to solicit further feedback on issues raised.
Results discussed with each committee and the full Board
The full Board and each respective committee discuss the performance evaluation results, and, if determined appropriate, act on the feedback received.
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Discussions with Each Director | An outside firm compiles and analyzes the results of each written evaluation, and summarizes the results on an aggregated and anonymous basis, which our Governance Committee Chair discusses with each director to solicit further feedback. |
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with the Full Board and Each Committee | The full Board and each respective committee discusses the performance evaluation results, and, if determined appropriate, acts on the feedback received. |
As part of the annual performance evaluation process, each director also completes a written self-evaluation covering various topics, including:
Individual Director Assessments | As part of the annual performance evaluation process, each director also completes a written self-evaluation covering various topics, including: ●Meeting attendance, preparation and participation |
● | Understanding of our business and strategy |
● | Relationships with management and other directors Our Chair of the Board discusses individual self-evaluation responses with each director. |
Our Chairman of the Board discusses individual self-evaluation responses with each director.
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Results |
Utilized by our Board of Directors in making decisions on:
The information collected during our Board evaluation process is utilized by our Board to make decisions regarding Board structure, | |
Board committees and | |
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34 | Western Digital 2023 Proxy Statement |
In response to director feedback, we:
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Communicating with Directors
Our Board of Directors provides a process for stockholders to send communications to our Board or to individual directors or groups of directors. In addition, interested parties may communicate with our ChairmanChair of the Board or Lead Independent Director (who presides over executive sessions of our independent directors) or with our independent directors as a group. Our Board recommends that stockholders and other interested parties initiate any communications with our Board (or individual directors or groups of directors) in writing. These communications should be sent by mail to our Secretary (please see page 83101 for contact information). This centralized process will assist our Board
Corporate Governance Matters
in reviewing and responding to stockholder and interested party communications in an appropriate manner. The name of any specific intended Board recipient or recipients should be clearly noted in the communication (including whether the communication is intended only for our non-executive Chairmannon-employee Chair of the Board, Lead Independent Director or for the non-managementour non-employee directors as a group). Our Board of Directors has instructed our Secretary to forward such correspondence only to the intended recipients; however, our Board has also instructed our Secretary, prior to forwarding any correspondence, to reviewrecipients unless such correspondence and not to forward any items deemed to be of ais purely commercial or frivolous in nature (such as spam), or otherwise obviously inappropriate for the intended recipient’s consideration. In such cases, our Secretary may forward some of the correspondence elsewhere within our company for review and possible response.
Transactions with Related Persons
Policies and Procedures for Approval of Related Person Transactions
Our Board of Directors has adopted a written Related Person Transactions Policy. The purpose of this policy is to describe the procedures used to identify, review, approve and disclose, if necessary, any transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which: (i) we were, are or will be a participant; (ii) the aggregate amount involved exceeds or is expected to exceed $120,000 in any fiscal year; and (iii) a related person has or will have a direct or indirect material interest. For purposes of the policy, a related person is: (i) any person who is, or at any time since the beginning of our last fiscal year was, one of our directors or executive officers or a nominee to become a director; (ii) any person who is known to be the beneficial owner of more than 5% of our common stock; or (iii) any immediate family member of any of the foregoing persons.
Under the policy, once a related person transaction has been identified, the Audit Committee must review the transaction for approval or ratification. In determining whether to approve or ratify a related person transaction, the committee is to consider all relevant facts and circumstances of the related person transaction available to the committee. The committee may approve only those related person transactions that are in, or not inconsistent with, our best interests and the best interests of our stockholders, as the committee determines in good faith. No member of the committee will participate in any consideration of a related party transaction with respect to which that member or any member of his or her immediate family is a related person.
Certain Transactions with Related Persons
We have not participated inhad any transaction with a related person transaction since the beginning of fiscal 2021.2023.
Corporate Governance Matters | 35 |
Director Compensation
Executive SummaryFiscal 2023 Director Compensation Program for Non-Employee Directors
We believe that it is important to attract and retain exceptional and experienced directors who understand our business, and to offer compensation opportunities that further align the interests of our non-employee directors with those of our stockholders. Our Board of Directors works with the independent compensation consultant to the Compensation and Talent Committee to regularly assess the competitiveness and reasonableness of our directors’ compensation. To that end, we established a compensation program for fiscal 2021 for each of our non-employee directors that consisted of a combination of annual cash retainers and RSUs.
We also permit directors to participate in our Deferred Compensation Plan. Any director who is employed by us is not entitled to additional compensation under our director compensation program for serving as a director.
The Compensation and Talent Committee, with the assistance of theits independent compensation consultant, regularly reviews our non-employee director compensation and market trends in director compensation (including non-employee director compensation practices at a group of peer companies) and evaluates the competitiveness and reasonableness of the compensation program in light of general trends and practices. The committee makes recommendations based on such review to our Board of Directors, which determines whether any changes should be made to our non-employee director compensation program. No changes were made to
We established a compensation program for fiscal 2023 for each of our non-employee directors that generally consisted of a combination of annual cash retainers and restricted stock units (“RSUs”). As a part of its most recent review of the non-employee director compensation program, the Compensation and Talent Committee reviewed an analysis of competitive market data and determined that our non-employee director compensation program from fiscal 2018 through fiscal 2021.
Tablewas near the median of Contentsour peers in terms of average total direct compensation amount.
Corporate Governance Matters
Fiscal 2021 Director Compensation Program
The following section describes the elements and other features of our director compensation program for fiscal 20212023 for non-employee directors. There are no planned changes to the non-employee director compensation program for fiscal 2024.
Non-Employee Director Cash Retainer Fees
Cash retainer fees are paid to our non-employee directors based on Board and committee service from annual meeting to annual meeting and are paid in a lump sum immediately following the annual meeting marking the start of the year. The following table sets forth the schedule of annual cash retainer and committee membership fees for our non-employee directors for fiscal 2021.2023.
Type of Fee | Current Annual Fee ($) | |
Additional | 100,000 | |
Additional Committee Member | ||
Audit Committee | 15,000 | |
Compensation and Talent Committee | 12,500 | |
Governance Committee | 10,000 | |
Additional Committee Chair | ||
Audit Committee | 25,000 | |
Compensation and Talent Committee | 22,500 | |
Governance Committee |
A non-employee director serving as Chair of a Board committee receives both the Additional Committee Chair Cash Retainer and the Additional Committee Member Cash Retainer for that committee. DirectorsNon-employee directors who are appointed to our Board, a Board committee, or to one of our Chair positions noted above during the year are paid a pro rata amount of the annual retainer fees for that position based on service to be rendered for the remaining part of the year after appointment.
Non-employee directors do not receive a separate fee for each Board or committee meeting they attend. We reimburse our non-employee directors for reasonable out-of-pocket expenses incurred to attend each Board or committee meeting.
36 | Western Digital 2023 Proxy Statement |
Non-Employee Director Equity Awards
Under our Non-Employee Director Restricted Stock Unit Grant Program, each of our non-employee directors automatically received for fiscal 20212023 an award of RSUs equal in value to $240,000 (or, in the case of our non-employee director serving as ChairmanChair of the Board, $290,000, or, in the case of our Lead Independent Director, $270,000)$280,000). Non-employee directors receive the awards immediately following the annual meeting of stockholders if he or she has been re-elected as a director at that meeting. In the case of a non-employee director who is newly elected or appointed after the date of the annual meeting, we grant a prorated award of RSUs for the year in which he or she is elected or appointed.
In fiscal 2023, our Board amended our Non-Employee Director Restricted Stock Unit Grant Program such that a non-employee director who is serving on our Board pursuant to an investor’s contractual right (an “Investor Designated Director”) will receive a cash award in lieu of RSUs. The amount of a cash award granted in lieu of RSUs will be equal to the value of RSUs that the recipient would otherwise have been entitled to receive. Accordingly, we granted a prorated cash award in the amount of $189,369 in lieu of RSUs in connection with Mr. Rayman’s appointment to our Board in January 2023.
The RSUs and cash awards granted in fiscal 20212023 vest 100% upon the earlier of: (i) November 18, 202116, 2023 (the first anniversary of the grant date); and (ii) immediately prior to the first annual meeting of stockholders held after the grant date.
Deferred Compensation Plan for Non-Employee Directors
We permit each non-employee director to defer payment of up to 80% of his or her annual cash compensation in accordance with our Deferred Compensation Plan. We also permit non-employee directors to defer payment of any RSUs awarded under our Non-Employee Director Restricted Stock Unit Grant Program beyond the vesting date of the award. RSUs and other amounts deferred in cash by a director are generally credited and payable in the same manner as amounts deferred by our executive officers and other participants in our Deferred Compensation Plan as further described in the “Fiscal 20212023 Non-Qualified Deferred Compensation Table.”
Corporate Governance Matters
Director Compensation Table for Fiscal 20212023
The table below summarizes the compensation for fiscal 20212023 for each of our non-employee directors serving on our Board of Directors in fiscal 2021.2023. Mr. Goeckeler was a named executive officer for fiscal 20212023 and did not receive any additional compensation for his services as a director during fiscal 2021.2023. Information regarding his compensation for fiscal 20212023 is presented in the “Fiscal 2019–20212021–2023 Summary Compensation Table” and the related explanatory tables. Dr. Caulfield and Ms. Suzuki joined our Board in July 2021 and did not receive any compensation in fiscal 2021.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | |||||||
Kimberly E. Alexy | 125,000 | 239,984 | 364,984 | 125,000 | 239,971 | 364,971 | |||||||
Thomas Caulfield | 95,000 | 239,971 | 334,971 | ||||||||||
Martin I. Cole | 125,000 | 239,984 | 364,984 | 135,000 | 239,971 | 374,971 | |||||||
Kathleen A. Cote | 97,500 | 269,981 | 367,481 | ||||||||||
Tunç Doluca | 87,500 | 239,984 | 327,484 | 97,500 | 239,971 | 337,471 | |||||||
Matthew E. Massengill | 175,000 | 289,994 | 464,994 | 185,000 | 289,976 | 474,976 | |||||||
Paula A. Price | 90,000 | 239,984 | 329,984 | — | — | — | |||||||
Reed B. Rayman | 267,789 | (4) | — | 267,789 | |||||||||
Stephanie A. Streeter | 112,500 | 239,984 | 352,484 | 137,500 | 279,997 | 417,497 | |||||||
Miyuki Suzuki | 95,000 | 239,971 | 334,971 |
(1) | The amounts shown reflect the aggregate grant date fair value of equity awards granted in fiscal |
Corporate Governance Matters | 37 |
The following table presents the aggregate number of shares of our common stock covered by unvested stock awards (and corresponding dividend equivalents that may be settled in stock) held by each of our non-employee directors on June 30, 2023:
Name | Aggregate Number of Unvested Restricted Stock Units | |
Kimberly E. Alexy | 6,589 | |
Thomas Caulfield | 6,589 | |
Martin I. Cole | 6,589 | |
Tunç Doluca | 6,589 | |
Matthew E. Massengill | 7,962 | |
Paula A. Price | — | |
Reed B. Rayman | — | |
Stephanie A. Streeter | 7,688 | |
Miyuki Suzuki | 6,589 |
(2) | Mr. Massengill elected to defer 80% of his cash compensation earned in calendar year 2023 and 100% of his fiscal 2023 RSU award. |
(3) | Ms. Price’s service on our Board ended at our 2022 Annual Meeting. |
(4) | Mr. Rayman’s cash compensation includes prorated annual retainers totaling $78,420, paid in connection with his appointment to our Board in January 2023 and Audit Committee in February 2023. Effective August 2023, Mr. Rayman no longer serves on our Audit Committee. Mr. Rayman’s cash compensation also includes a prorated cash award in the |
Name | Aggregate Number of Unvested Restricted Stock Units | Aggregate Number of Deferred Stock Units | ||
Kimberly E. Alexy | 5,648 | — | ||
Martin I. Cole | 5,648 | — | ||
Kathleen A. Cote | 6,354 | 29,188 | ||
Tunç Doluca | 5,648 | — | ||
Matthew E. Massengill | 6,825 | — | ||
Paula A. Price | 5,648 | — | ||
Stephanie A. Streeter | 5,648 | — |
Director Stock Ownership Guidelines
Under our director stock ownership guidelines, directors are generally prohibited from selling any shares of our common stock unless they own “qualifying shares” with a market value of at least $375,000, which include common stock, RSUs, deferred stock units and common stock beneficially owned by the director by virtue of being held in a trust, by a spouse or by the director’s minor children. Shares the director has a right to acquire through the exercise of stock options (whether or not vested) do not count towards the stock ownership requirement. All of our current non-employee directors comply with our director stock ownership guidelines.
38 | Western Digital 2023 Proxy Statement |
Executive Officers
Listed below are our current executive officers, followed by a brief account of their business experience. Executive officers are normally appointed annually by our Board of Directors at a meeting immediately following the annual meeting of stockholders. There are no family relationships among these officers nor any arrangements or understandings between any officer and any other person pursuant to which an officer was selected.
David V. Goeckeler 61, Chief Executive Officer ●Mr. Goeckeler has served as our CEO since March 2020. Biographical information regarding Mr. Goeckeler is set forth in the section entitled “Corporate Governance Matters—Proposal 1: Election of Directors.” |
Wissam G. Jabre 53, Executive Vice President and Chief Financial Officer ●Mr. ●Prior to that, Mr. |
Executive Officers
Robert W. Soderbery 57, Executive Vice President and General Manager, Flash Business ●Mr. Soderbery has served as our Executive Vice President and General Manager, Flash Business, since September 2020. ●Prior to that, Mr. Soderbery served as president and board member of UpLift, Inc., a travel finance company, from |
Michael C. Ray 56, Executive Vice President, Chief Legal Officer and Secretary ●Mr. Ray has served as our Executive Vice President, Chief Legal Officer and Secretary since ●Prior to that, Mr. Ray served as corporate counsel for Wynn’s International, Inc. from |
39 |
Executive Compensation
PROPOSAL 2 ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION The Compensation and Talent Committee ●Strong linkage between management and stockholders’ interests ● ●Robust oversight by our Board and | Our Board of Directors recommends a vote FOR this Proposal 2 to approve on an advisory basis the executive compensation program for our named executive |
Proposal Details
You have the opportunity to cast a non-binding, advisory “Say on Pay” vote on the executive compensation of our named executive officers. Our current policy is to provide our stockholders with an advisory Say on Pay vote every year as required by Section 14Ayear. For information regarding the frequency of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).future Say on Pay votes, please refer to Proposal 3.
Please read the section entitled “Executive Compensation—Compensation Discussion and Analysis” (and the various compensation tables and narratives accompanying those tables included under “Executive Compensation Tables and Narratives”) for information necessary to inform your vote on this Proposal 2.
Board Recommendation and Vote
Required for Approval
Board Recommendation
Our Board of Directors recommends that you vote FOR approval, on a non-binding advisory basis, of our executive compensation program for our named executive officers as disclosed in this Proxy Statement:
RESOLVED, that the compensation paid to the named executive officers, as disclosed in this Proxy Statement pursuant to the SEC’s executive compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative discussion that accompanies the compensation tables), is hereby approved.
The next advisory vote on the compensation of our named executive officers will occur at our 2022 annual meeting of stockholders.
Vote Required for Approval
The affirmative vote of a majority of the voting power of the shares of our common stockVoting Stock (as described in the section entitled “Additional Information—General Information About the Annual Meeting—Who Can Vote”) represented in person or by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve this Proposal 2. You may vote FOR, AGAINST or ABSTAIN on this proposal. Proxies received by our Board of Directors will be voted FOR this Proposal 2 unless specified otherwise.
While this vote is nonbinding on our company and our Board of Directors, and will not be construed as overruling a decision by our company or our Board or creating or implying any additional fiduciary duty for our company or our Board, our Board and the Compensation and Talent Committee value the opinions of our stockholders and will consider the outcome of the vote when making future compensation decisions for our named executive officers under our executive compensation program.
40 | Western Digital 2023 Proxy Statement |
Letter to Stockholders from the Compensation and Talent Committee
Executive CompensationDear Fellow Stockholders:
As members of Western Digital’s Compensation and Talent Committee, we are aligned around a compensation philosophy that is designed to accomplish three goals: (i) attract, retain and motivate premier talent, (ii) pay for performance and (iii) align the interests of our executive officers with the interests of our stockholders. It is with this overriding philosophy in mind that we make our compensation decisions. Compensation to Drive Our Strategic Focus We began a strategic review of our business as fiscal 2022 ended to evaluate all options to unlock long-term value creation for our stockholders. We also have been navigating a challenging and dynamic market in which our management team has focused on business agility and product innovation, while also right-sizing and refocusing our business to align with the demand environment. During this period of strategic review and challenging market dynamics, the Compensation and Talent Committee has been highly focused on ensuring our compensation practices evolve alongside our business and strategic focus. This includes appropriately incentivizing the management team to drive forward the necessary execution of our strategic objectives, retaining the right talent and leadership during this pivotal time and rewarding performance that drives long-term value creation for our stockholders. | Stockholder Dialogue Informs Committee Actions We received a clear message from our stockholders through the Say on Pay vote outcome at our 2022 Annual Meeting. While we have an ongoing stockholder engagement program and strong track record of incorporating stockholder feedback into our deliberations and actions, we took this year as an opportunity to further expand the scope of our stockholder outreach to help ensure we fully understood the concerns that drove stockholder vote decisions. Our Chair participated in more than half of all stockholder conversations. We heard clear feedback from our stockholders that one of the primary drivers of opposition was the removal of performance conditions for an outstanding performance stock unit award. We also heard valuable feedback on the metrics and structure of our program. All of this feedback informed the Compensation and Talent Committee’s extensive dialogue and deliberation over the course of the year and helped shape the actions that we have taken as we continue to refine the framework and structure of our incentive compensation program to appropriately reward creation of long-term value in line with our strategic business priorities. | Actions to Respond to Feedback and Further Align our Program with our Strategic Focus Based on the feedback we received from the stockholders with whom we had direct conversations, as well as the committee’s ongoing focus on evolving our compensation program with the evolution of the business, the committee has taken several actions and made multiple enhancements to our executive compensation program. The committee believes these changes further align the interests of our management team and stockholders, including: ●Committing to not modify outstanding PSUs absent extraordinary circumstances ●Reaffirming the committee’s practice to motivate and retain our named executive officers through the annual compensation program rather than one-time awards ●Establishing a three-year relative total stockholder return modifier for PSUs beginning with the fiscal 2024 awards ●Removing an “upside” incentive tied to stock price compound annual growth rate from the PSU program beginning with the fiscal 2024 awards ●Removing the exabytes shipped metric from our short-term incentive program and replacing it with a cash metric and emissions metric |
Executive Compensation | 41 |
●Replacing the individual performance component of the short-term incentive program with an individual performance modifier capped at 100% if our profit metric is below the minimum performance target for fiscal 2024 ●Updating our proxy peer group for fiscal 2024 to include peers with revenues more commensurate with Western Digital In addition to these changes, in February 2023, the committee reduced the base salaries of our named executive officers through the end of fiscal 2023 to align our executive team with employees who experienced cutbacks in the context of the market downturn. We also did not make a payout under our short-term incentive plan given our company’s performance, which aligns with our pay-for-performance philosophy. Full details of all decisions and actions taken may be found starting on page 44 of this Proxy Statement. | We want to thank the many stockholders who have taken the time to meet and provide feedback on compensation matters over the past year and in prior years. We look forward to continued engagement and hope to have your support on this year’s Say on Pay vote. Sincerely, MARTIN I. COLE, Chair TUNÇ DOLUCA STEPHANIE A. STREETER |
42 | Western Digital 2023 Proxy Statement |
Report of the Compensation and Talent Committee
The Compensation and Talent Committee, comprised entirely of independent directors, reviewed and discussed the following Compensation Discussion and Analysis with management. Based on that review and discussion, the committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in the Proxy Statement for our 20212023 annual meeting of stockholders and incorporated by reference into our 20212023 Annual Report on Form 10-K.
THE COMPENSATION AND TALENT COMMITTEE
MARTIN I. COLE Chair | TUNÇ DOLUCA | STEPHANIE A. STREETER | ||
Compensation and Talent Committee Interlocks and Insider Participation
Each of the committee members whose names appear on the Compensation and Talent Committee Report above other than Ms. Streeter, were members of the committee during all of fiscal 2021. Ms. Streeter was appointed to the committee in September 2021.2023. All members of the committee during fiscal 20212023 were independent directors and none of them were our employees or former employees or had any relationship with us requiring disclosure of certain transactions with related persons under SEC rules. There are no compensation committee interlocks between us and other entities in which one of our executive officers served on the compensation committee (or equivalent body) or the board of directors of another entity whose executive officer(s) served on the committee or our Board of Directors.Board.
Executive Compensation | 43 |
Executive Compensation
Compensation Discussion and Analysis
Our Named Executive Officers
When we refer to our “named executive officers,”officers” for fiscal 2023, we mean:
DAVID V. GOECKELER | WISSAM G. JABRE | ROBERT W. SODERBERY | MICHAEL C. RAY | |||||
Chief Executive Officer | Executive Vice President and Chief Financial Officer | Executive Vice President and General Manager, Flash Business | Executive Vice President, Chief Legal Officer and Secretary |
Srinivasan Sivaram, our former President, Technology and Strategy, who voluntarily terminated his employment in September 2023, was also a named executive officer for fiscal 2023.
Contents
44 | Western Digital 2023 Proxy Statement |
Overview and Stockholder Engagement
Executive Compensation
Business Highlights
Our company executedIn the context of a challenging and dynamic market in fiscal 2023, management focused on its fiscal 2021 targets despite headwinds associatedbusiness agility and product innovation, while also right-sizing and refocusing our business to align with the global pandemic and restrictionsdemand environment. Although management’s focus on sales to certain entitiesexecution delivered solid financial results in China. This dynamic environment required agility from our management team. We implementedthe midst of a new business unit structure to bring greater focus to our flash and HDD businesses and to strengthen performance and business outcomes. Our updated organizational structure helped the management team deliver on our fiscal 2021 targets. The charts below summarizesubstantial cyclical market downturn, our performance in key financialwas below the targets established by the Compensation and operational metrics.Talent Committee for fiscal 2023.
Business Highlights
NON-GAAP OPERATING INCOME(1) ($M) | FLASH EXABYTES SHIPPED (Exabytes) | HDD EXABYTES SHIPPED (Exabytes) | |||
(1) | See Appendix A to this Proxy Statement for a reconciliation of GAAP operating income to non-GAAP operating income. |
Paying for Performance: Fiscal 20212023 Performance Results and Payouts
OurPayouts under our incentive plans’compensation plans reflect our lower financial performance reflects our financial and market performance.in fiscal 2023 relative to fiscal 2022. The fiscal 2021 short-term incentive plan (“STI”) paid2023 STI did not pay out at an average of 149% of target(0%) for our named executive officers, reflecting below threshold performance with respect to our strongannual financial and operating performance this past year in the context of the global pandemic. Despite a rebound in our stock price during fiscal 2021, our total stockholder return (“TSR”) was low relative to many of our technology peers and theoperational targets. The payout onfor the fiscal 2019–2021 PSUs2021-2023 performance stock units (“PSUs”) under our long-term incentive (“LTI”)LTI program reflects this lower performance, with our named executive officers receiving a payout at 41% ofwas also below target. The executive incentive compensation plan payouts align with the Compensation and Talent Committee’s pay-for-performance philosophy.
Award | Fiscal 2023 Payouts | Page | ||
STI Payout for Fiscal 2023 | ||||
Fiscal 2023 STI | 0% | 58 | ||
LTI Payout for Fiscal 2023 | ||||
Fiscal 2021–2023 PSUs | 48% | 62 |
Executive Compensation | 45 |
Stockholder Engagement and Responsiveness
Leading up to, and following, our 2022 Annual Meeting, at which our proposal on named executive officer compensation received low support (12%), we pursued a deliberate engagement program to enhance our ongoing outreach, and to better understand the perspectives and concerns of our stockholders.
In the fall of 2022, prior to our 2022 Annual Meeting, we conducted extensive outreach to our stockholders to discuss voting matters at our upcoming 2022 Annual Meeting. Through this engagement, we understood that our stockholders were primarily concerned with the amendment to our CEO’s sign-on PSU award to eliminate the performance metric. We also heard feedback regarding our short- and long-term incentive metric selection and retention awards granted to our named executive officers. As a result of feedback received in the lead up to our 2022 Annual Meeting, the Compensation and Talent Committee launched an evaluation of our executive compensation program and practices and, in the summer of 2023, initiated a broad-based stockholder engagement effort to discuss changes under consideration. During the fall of 2022 and summer of 2023, management team members from Human Resources, Corporate Sustainability, Investor Relations and Legal, as well as our Compensation and Talent Committee Chair, collectively engaged with stockholders representing a total of 45% of our outstanding shares of common stock. The Compensation and Talent Committee leveraged feedback and insights from stockholders on proposed changes under consideration as it reviewed our executive compensation, resulting in changes to our program and associated disclosures.
LEAD UP TO 2022 ANNUAL MEETING | FOLLOWING 2022 ANNUAL MEETING |
Stockholders contacted >25 | Stockholders contacted >30 |
Shares outstanding represented 59% | Shares outstanding represented 64% |
Shares outstanding engaged 34% | Shares outstanding engaged 37% |
Shares outstanding engaged with director 30% | Shares outstanding engaged with director 27% |
The table below includes a detailed summary of the key feedback we heard from stockholders and the actions taken by the Compensation and Talent Committee to enhance our executive compensation program, respond to stockholder concerns and align with stockholder expectations. These changes are also described in more detail in the section entitled “Fiscal 2024 Decisions Following Stockholder Engagement” on page 47.
46 | Western Digital 2023 Proxy Statement |
WHAT WE HEARD | ACTIONS TAKEN IN RESPONSE | ||
One-Time Actions | ●Consistent feedback against the amendment to our CEO’s sign-on PSU award to eliminate the performance metric. Predominant driver of votes against Say on Pay at our 2022 Annual Meeting | ●Committed to not modify outstanding PSUs going forward absent extraordinary circumstances | |
●Asked about the use of time-based retention awards | ●Reaffirmed focus on providing incentive opportunities through the annual compensation program as opposed to one-off time-based retention awards, which stockholders understood may be warranted to retain talent in light of developments with our business and ongoing strategic review ●The committee did not grant retention awards to our named executive officers in fiscal 2023 | ||
LTI Design | ●Desire for a long-term performance measure to accompany annual PSU performance targets | ●Incorporated a three-year relative total stockholder return (“TSR”) modifier that modifies the PSU payout +/- 10% based on our relative market performance over a full three-year period | |
●Disliked the upside incentive in the fiscal 2023-2025 PSUs tied to our stock price compound annual growth rate (“CAGR”) | ●Removed the upside incentive from the fiscal 2024-2026 PSUs | ||
STI Design | ●Discussed appropriate STI metrics; questioned alignment of exabytes shipped metrics to strategy | ●Eliminated the exabytes shipped metrics for fiscal 2024 ●Added cash conversion cycle and emissions metrics for fiscal 2024 | |
●Concerns regarding the individual performance component (“IPC”) payouts in fiscal 2022 that exceeded STI corporate performance | ●Replaced the IPC with an individual performance modifier based on individual goals, including environmental, social and governance (“ESG”) goals for fiscal 2024 ●The individual performance modifier is capped at 100% if our profit metric (non-GAAP operating income) is below the minimum performance target | ||
Proxy Peer Group | ●Consider the revenue and market capitalization of proxy peers that are more comparable to our company | ●Updated our proxy peer group for fiscal 2024, removing HP Inc. due to its large annual revenue relative to our company and adding four new manufacturing peers that have revenues more comparable to our company: KLA Corporation, Microchip Technology Inc., NXP Semiconductors N.V. and GlobalFoundries Inc. |
The Compensation and Talent Committee will continue to carefully consider results of the Say on Pay vote and stockholder feedback in the future when making decisions on design and structure of our executive compensation program and decisions on individual named executive officer compensation.
Executive Compensation | 47 |
Fiscal 2024 Decisions Following Stockholder Engagement
Commitment Not to Modify PSUs
Following low stockholder support of our Say on Pay proposal at our 2022 Annual Meeting, we engaged in extensive outreach and engagement to solicit input from our stockholders. We received feedback from many stockholders that did not support the fiscal 2022 amendment to our CEO’s unvested sign-on PSU award, which removed the performance metric in response to business uncertainties associated with the strategic review announced in June 2022. The Compensation and Talent Committee affirms that the fiscal 2022 PSU amendment was a one-time event and commits not to modify unvested PSUs again absent extraordinary circumstances. The committee understood our stockholders’ feedback, and affirms its intent to compensate executives through our regular, annual program, which remains heavily performance-based.
While we cannot define all possible future extraordinary circumstances, we believe an extraordinary circumstance must create an unforeseen, outsized impact outside of management’s direct control on the macroeconomic environment, our company or our industry. Going forward, the committee affirms that:
● | Feedback received from our stockholders following our fiscal 2022 compensation decisions will play a pivotal role in its approach with respect to potential future extraordinary events |
● | Before taking action in such a scenario, the committee will consider the feasibility of seeking stockholder feedback on the actions under consideration |
● | Any subsequent compensation action would be accompanied by robust disclosure in the following proxy statement, including the committee’s rationale and decision-making process |
The commitment would not apply to adjustments made pursuant to the standard terms of an award agreement, such as those described in the section entitled “Equity Plan Proposal—Summary Description of the Plan—Adjustments” on page 86. The committee values feedback from our stockholders and intends to continue considering stockholders’ feedback in future decision-making.
Retention Awards
During engagement with stockholders, we also discussed certain retention awards granted to our named executive officers in fiscal 2022. These awards were intended to help retain the selected executive team members through our strategic review process and help these members focus on enhancing stockholder value. While some stockholders asked about the use of retention awards, they did not suggest this was a significant factor in Say on Pay vote decisions at our 2022 Annual Meeting. Stockholders strongly expressed their preference for incentive opportunities to be delivered through our annual compensation program, which relies heavily on performance-based incentive awards, but acknowledged that there may be circumstances where we may need to act outside of our standard structure. Stockholders requested that in the event awards are granted outside our annual compensation program, that they be performance-based. The Compensation and Talent Committee appreciated the feedback shared by stockholders, and agrees and confirms that the annual compensation program is the preferred approach to motivating and retaining executives. The committee did not adjust outstanding incentivegrant any retention awards to address any COVID-19 impacts or government-imposed restrictions on our sales to entities within China.executive officers in fiscal 2023.
Award | Fiscal 2021 Payouts | Page | ||
STI Payout for Fiscal 2021 | ||||
Fiscal 2021 STI(1) | 149% | 47 | ||
LTI Payout for Fiscal 2021 | ||||
Fiscal 2019–2021 PSUs | 41% | 51 |
Western Digital 2023 Proxy Statement |
Fiscal 2024 STI
During our stockholder outreach and engagement, stockholders questioned aspects of the STI design, including the following:
● | Inclusion of the exabytes shipped metrics, noting these metrics incentivize output and revenue instead of profitability and efficiency |
● | The committee’s application of the IPC, noting that IPC payouts in fiscal 2022 for our named executive officers |
The Compensation and Talent Committee carefully considered stockholder feedback before finalizing the fiscal 2024 STI design in August 2023. After assessing our fiscal 2024 objectives, market conditions and considering stockholder feedback, the committee approved the following STI design for fiscal 2024:
Operating Income 45% Weighting | + | Cash Conversion Cycle 45% Weighting | + | Emissions 10% Weighting | x | Individual Modifier* (75%-125%) | = | Payout (Capped at 250%) | ||||
0%-200% Performance Range for each Metric |
* | The Individual Modifier will be no more than 100% if non-GAAP operating income is below the minimum performance target |
The committee eliminated the exabytes shipped metrics and the IPC metric from the fiscal 2023 STI and replaced them with a cash conversion cycle metric and an emissions metric. The cash conversion cycle metric measures the length of time it takes to convert our working capital investments into cash, which the committee believes complements non-GAAP operating income by focusing executives on both profitability and managing working capital (inventory, receivables and payables) to generate cash. The emissions metric aligns executive officers’ compensation to progress on our Scope 1 and Scope 2 emissions reduction targets.
The individual performance modifier in the fiscal 2024 STI includes ESG goals focused on inclusion and governance, as well as individual organizational goals. The individual performance modifier is capped at 100% if our non-GAAP operating income performance is below the minimum performance target for that metric.
Fiscal 2024-2026 PSUs
During our stockholder outreach and engagement, stockholders questioned aspects of our PSU design, including the following:
● | The fiscal 2023-2025 PSU design incorporates three annual performance targets with payouts averaged for a final three-year payout; we received questions about whether annual targets adequately incentivize and reward longer-term performance |
● | Inclusion of an upside incentive tied to our stock price CAGR instead of a relative stock price modifier; stockholders expressed a consistent preference for a relative market modifier versus an absolute market modifier |
In evaluating the fiscal 2024-2026 PSU design, the Compensation and Talent Committee removed the upside incentive tied to our stock price CAGR and replaced it with a relative TSR modifier that modifies PSU payouts +/- 10% based on our performance relative to the S&P 500 Information Technology Index constituents as of the beginning of the performance period. The modifier compares our three-year TSR performance to the median company in the index based on three-year TSR performance. If our TSR performance exceeds the TSR of the median company by 50 percentage points or more, the PSU payout is modified by +10%; if our TSR performance is lower than the median company by 50 percentage points or more, the PSU payout is modified by -10%. Straight line interpolation will be used for performance between those points to determine the PSU payout modifier. In the event our TSR performance is negative, the relative TSR modifier will be capped at 0%.
Executive Compensation | 49 |
The committee chose the S&P 500 Information Technology Index constituents for the relative TSR peer group because our company is a member of the index and it also includes all but one of our proxy peers. The index includes companies that our stockholders review in comparing our relative performance and also reflects input from stockholders that they prefer that we use an industry peer set for relative TSR versus a broad-based index such as the S&P 500 Index.
After carefully considering stockholder feedback before finalizing the fiscal 2024-2026 PSU design, the Compensation and Talent Committee opted to retain the annual performance targets given the extreme cyclicality of our markets and the limited line of sight to predicting market cycles over longer time horizons. The committee believes the annual performance targets with the final payout based on the average of three annual payouts remains the appropriate design for our PSUs by allowing for the necessary flexibility in our goal setting process. Following completion of the strategic review and executing on the outcome of the strategic review, the committee intends to reevaluate incorporating longer PSU performance periods in our PSU design.
The Compensation and Talent Committee granted the following LTI awards to our named executive officers in fiscal 2024. Each named executive officer’s PSU award reflects the updated design discussed above.
Total Awarded Grant Value ($) | LTI Vehicle Mix | ||||
Named Executive Officer(1) | PSUs | RSUs | |||
David V. Goeckeler | 15,000,000 | 60% | 40% | ||
Wissam G. Jabre | 3,750,000 | 50% | 50% | ||
Robert W. Soderbery | 3,550,000 | 50% | 50% | ||
Michael C. Ray | 2,500,000 | 50% | 50% |
(1) | Dr. Sivaram voluntarily terminated employment with our company on September 6, 2023 and did not receive a fiscal 2024 LTI award. |
50 | Western Digital 2023 Proxy Statement |
Evolution of Executive Compensation Program Design
Our executive compensation program continues to evolve and remains responsive to stockholder feedback. The changes implemented by the Compensation Principlesand Talent Committee over the past two years and for fiscal 2024 seek to further align our executive compensation with performance, business strategy and developments in our broader industry. These changes include:
● | Streamlining STI metrics to focus on core financial and strategic priorities |
● | Adding an ESG category to the STI plan |
● | Evolving the PSU performance periods to align with business cyclicality, while preserving long-term performance periods by evaluating average performance over three consecutive annual periods |
● | Reestablishing a relative performance measure in the form of relative TSR |
Bold text in the table below indicates a new or modified program element since the prior year.
Fiscal 2024 | |||
STI | One-year measurement of: ● ●Flash Exabytes Shipped (12.5%) ●HDD Exabytes Shipped (12.5%) ●Individual Performance Component (25%) | One-year measurement of: ●Non-GAAP Operating Income (50%) ●Flash Exabytes Shipped (12.5%) ●HDD Exabytes Shipped (12.5%) ●Individual Performance Component (25%) ●Includes ESG category, with goals related to emissions reduction and DE&I | One-year measurement of: ●Non-GAAP Operating Income (45%) ●Cash Conversion Cycle (45%) ●Emissions (10%) ●Individual Performance Modifier (+/-25%) ●Includes a cap on payout if non-GAAP Operating Income is below the minimum performance ● |
LTI | ●CEO: 60% PSUs / 40% RSUs ●Other Named Executive Officers: 50% PSUs / 50% RSUs PSU Metrics: Three-year measurement of: ●Relative TSR (50%) ●Revenue (25%) ●Non-GAAP EPS (25%) ●Pre-established relative market performance adjustment (“MPA”) modifier for financial metrics ●TSR-based awards capped at 100% if absolute TSR is negative RSU Vesting: Pro-rata vesting over four years | ||
PSU / RSU Mix: ● ●Other Named Executive Officers: 50% PSUs / 50% RSUs PSU Metrics: Annual performance periods with Metrics: ● ●Non-GAAP EPS (50%) Upside incentive of 10%-50% based on three-year stock price CAGR; no upside incentive provided if the financial metric payout is zero RSU Vesting: Pro-rata vesting | PSU / RSU Mix: ● ● Annual performance periods with final payout based on Metrics: ●Revenue (50%) ●Non-GAAP EPS (50%) ●Three-year relative TSR modifier weighted at +/-10% ●Relative TSR modifier capped at 0% if absolute TSR is negative RSU Vesting: Pro-rata vesting over four years |
Executive Compensation | 51 |
Fiscal 2021Executive Compensation Philosophy, Objectives and Process
Our compensation philosophy is designed to accomplish three goals: (i) attract, retain and motivate premier talent, (ii) pay for performance and (iii) align the interests of our executivesexecutive officers with our stockholders. The summary below provides the key objectives of our program:
Attract, retain and motivate premier talent necessary to accelerate our growth and drive financial, operational and market performance | ||
Provide competitive target compensation relative to the technology industry in which we compete for business and talent | ||
Encourage accountability by tying a substantial portion of each executive officer’s target total direct compensation opportunity to individual, corporate and market-based performance objectives that we expect to create long-term value for our stockholders |
Pay for performance by providing a substantial portion of compensation in the form of | |
Align the interests of our |
Our Compensation Policies and Practices
WHAT WE DON’T DO | |
✓Pay for performance by tying a substantial portion of executive compensation to the achievement of pre-established performance goals ✓Actively engage with our stockholders on an ongoing basis and consider their feedback in the future design of our executive compensation program ✓Link our executive compensation program to our long-term corporate strategy and sustainable stockholder value creation ✓Use a mix of performance measures, cash- and equity-based vehicles and short-and long-term incentive compensation opportunities that hold our executive officers accountable for executing on our long-term corporate strategy ✓Cap maximum vesting or payout levels under our incentive compensation awards, which are aligned with competitive market practices ✓Engage an independent compensation consultant to evaluate and advise the Compensation and Talent Committee on our executive compensation program design and pay decisions ✓Evaluate executive compensation data and practices of our proxy peer group companies as selected annually by the Compensation and Talent Committee with guidance from its independent compensation consultant ✓Limit payouts under our Change in Control Severance Plan to double-trigger events ✓Maintain executive stock ownership guidelines ✓Maintain a compensation recovery (“clawback”) policy ✓Provide limited executive perquisites | ✕No tax gross-up payments in connection with severance or change in control payments ✕No repricing of stock options without stockholder approval (other than equitable adjustments permitted under our equity compensation plans) ✕No hedging, pledging or short-sale or derivative transactions by executive officers or directors ✕No dividend equivalent payments on equity awards until they are earned and vested |
52 | Western Digital 2023 Proxy Statement |
Executive Compensation
Elements of Our Fiscal 20212023 Executive Compensation Program
We believe our emphasis on variable compensation is alignedaligns with our focus on operating excellence allowingand allows our executive compensation levels to reflect our performance. After evaluating our variable compensation plans with its independent compensation consultant, the Compensation and Talent Committee approved the incentive compensation design summarized below for fiscal 2023.
Our actual pay positioning for each named executive officer varies by executive, consideringbased upon the committee’s review of our proxy peer group and survey market data, competitive pay levels for comparable roles, and each executive’sexecutive officer’s role, past performance, scope of responsibility and expected future contributions.
In addition to the elements reflected below, we also provide executivesour executive officers with relatively fewlimited perquisites and certain other indirect benefits, as described in the section below entitled “Other Program Features and Policies.”
2023 Target Total Direct Compensation | ||||||||||||||||||
CEO | Other Named Executive Officers | Characteristics | Purpose | Performance Link/ Key Benchmark | ||||||||||||||
BASE SALARY | ●Fixed compensation | ●Attracts, retains and motivates premier executive talent ●Compensates | ●Competitive with market and industry practices ●Adjusted for experience, responsibility, potential and performance | |||||||||||||||
STI | ●Annual performance-based cash incentive compensation | ●Motivates ●Encourages accountability by rewarding achievement of corporate and individual | ●Non-GAAP operating income (50% weighting) ●Flash exabytes shipped (12.5% weighting) ●HDD exabytes shipped (12.5% weighting) ●Individual | |||||||||||||||
LTI PSUs | ●Performance-based equity compensation ● ●60% of our CEO’s LTI are PSUs; 50% of our other named executive officers’ LTI are PSUs | ●Encourages accountability by rewarding achievement of long-term corporate and market-based performance objectives ● | ●Revenue and non-GAAP EPS goals are each weighted at ●Upside incentive of 10%-50% of the underlying three-year average financial | |||||||||||||||
RSUs | ●Variable long-term equity compensation ●Vests | ●Provides alignment with stockholder interests by focusing ●Provides retention value | ●Value based on stock price performance | |||||||||||||||
Executive Compensation | 53 |
Executive Compensation
Process for Determining Executive Compensation
The Compensation and Talent Committee reviews and determines compensation for our executive officers. The committee reviews the performance and compensation of our executive officers on an annual basis and at the time of hiring, promotion or other change in responsibilities. The committee’s annual review typically occurs near the end of the prior fiscal year and beginning of the new fiscal year.
The committee considers stockholders’the views and input received fromthrough our ongoing stockholder outreach and engagement efforts when making determinations regarding our compensation programs. Stockholders supported our compensation programs last year with the advisory vote on executive compensation receivingprogram. As discussed in the support of 92% ofsection entitled “Fiscal 2024 Decisions Following Stockholder Engagement” on page 47, the votes cast.committee updated our executive compensation design to respond to stockholder feedback provided in our fall 2022 and summer 2023 outreach. The committee also made a commitment not to modify outstanding PSUs absent extraordinary circumstances and the committee considered stockholder feedback on retention awards, and did not grant any retention awards to our executive officers in fiscal 2023.
TheIn determining our fiscal 2023 executive compensation program design and evolving that design for fiscal 2024, the committee’s executive compensation decisions arewere informed by several factors, including:
EXTERNAL AND INTERNAL FACTORS ●Our compensation philosophy and objectives ●Our pay positioning relative to our proxy peer group and broad compensation survey market data ●The ●Internal pay equity ●Our retention objectives ●Succession planning ●Current and historical company performance and strategic and financial goals ●Market performance and general economic conditions | COMPENSATION CONSULTANT ●Views from the committee’s independent compensation consultant ● | |
MANAGEMENT ●Our CEO’s recommendations for our other executive officers (not including ●Our CFO’s (or designee’s) input on financial targets for our performance-based ●Internal and external compensation data provided by our Chief People Officer (or designee) | ||
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For fiscal 2021, theThe Compensation and Talent Committee retained Willis Towers Watsonengaged Compensia, Inc. (“WTW”Compensia”) as its independent compensation consultant. WTW reportsconsultant in fiscal 2023. Compensia reported directly to the committee. WTW alsocommittee and communicated with management to gather information and review management proposals as needed. WTWCompensia attended all regularly-scheduledregularly scheduled meetings of the committee during fiscal 20212023 and theirits responsibilities for fiscal 20212023 generally included:
● | Reviewing and advising on executive compensation, including the performance |
● | Reviewing and advising on compensation design and amounts for non-employee members of our Board of Directors |
● | Providing recommendations regarding the composition and selection of our proxy peer group companies |
● | Analyzing |
● | Providing advice regarding executive compensation policies, practices and trends |
● | Advising on the |
The committee assessed the independence of WTWCompensia pursuant to applicable rules and regulations of the SEC and the Nasdaq Stock Market and concluded that the engagement of WTWCompensia did not raise any conflicts of interest during fiscal 20212023 and currently does not raise any conflicts of interest.
54 | Western Digital 2023 Proxy Statement |
Executive Compensation
Comparative Market Data
The Compensation and Talent Committee determines the composition of our proxy peer group and reevaluates this group on an annual basis with input from WTW.its independent compensation consultant.
For fiscal 2021,2023, market data was also collected from the Radford Executive Survey,Global Compensation Database, an independently published survey, and WTW’s High-Tech Compensation Survey.survey. The survey data was filtered for high-technology companies and adjusted to screen for companies in our proxy peer group who participate in the survey and, for executive roles in which such survey screen resulted an insufficient data, a broader screen of technology companies as adjusted for revenue size.size was used. With input from theits independent compensation consultant, the committee usesconsidered such market data and industry practices during its annual review of the competitiveness of our compensation levels and the appropriate mix of compensation elements for our named executive officers. This market data provided the committee a reference point, which was one of several factors that it used to make compensation decisions during its fiscal 20212023 annual compensation review.
Fiscal 20212023 Proxy Peer Group Companies for Benchmarking Pay and Incentive Design
The proxy peer group companies that the Compensation and Talent Committee used for comparative pay and incentive design purposes for fiscal 2021 consists2023 consisted of technology companies that compete with us for talent and have the size (primarily based on revenue) and business characteristics that we believe are comparable to ours. Like us, mostmany companies included in our fiscal 2021proxy peer group are included in the Dow Jones U.S. Technology Hardware & Equipment Index.
In choosing companies for our proxy peer group, companies, the Compensation and Talent Committee focused primarily on industry, talent market and revenue size. Revenue is a commonly used proxy for organizational size and complexity and is relativelytypically stable from year-to-year, making it a valuable metric when selecting peers for executive compensation purposes. As part of its decision process, the committee also referencesreferenced other metrics for informational purposes.purposes, including comparative market capitalization and profitability metrics. Following its annual review, the committee did not make any changes to the fiscal 2023 proxy peer group compared to the fiscal 2022 proxy peer group.
WESTERN DIGITAL COMPARED TO PROXY PEER GROUP
Advanced Micro Devices, Inc.
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| ON Semiconductor Corporation
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(1) | Represents annual revenue for the most recent fiscal year for which data was available through SEC filings as of August 31, |
Executive Compensation | 55 |
Proxy Peer Group Changes for Fiscal 20222024
During fiscal 2021, followingFollowing the Compensation and Talent Committee’s annual review of our proxy peer group with WTW,its independent compensation consultant, and reflecting input from our investors,stockholders, the committee revised our proxy peer group for fiscal 20222024 by (i) removing Intel Corporation and Flex Ltd. and adding Analog Devices,HP Inc. The committee removed Intel Corporation, due to its large sizehigh revenue relative to Western Digital in terms ofour revenue, and (ii) adding four manufacturing companies in the semiconductor industry that each had similar revenue to ours during the period reviewed for comparing financial and market capitalizationdata: KLA Corporation, Microchip Technology Inc., NXP Semiconductors N.V. and removed Flex Ltd.GlobalFoundries Inc. Our revenue in fiscal 2023 was materially lower than our revenue in recent years due to its different business focus as a contract manufacturer with a much larger employee population and manufacturing footprint than Western Digital. The committee added Analog Devices, Inc. due to its business model as an in-house semiconductor manufacturer and revenue sizethe unprecedented market downturn, impacting our positioning relative to Western Digital.
Table of Contentsour fiscal 2023 proxy peer group companies, as noted in the graphic above. The committee’s proxy peer group changes for fiscal 2024 position our company closer to median revenue relative to the fiscal 2024 proxy peer group.
Executive Compensation
Fiscal 20212023 Decisions and Outcomes
Base Salary
Named Executive Officer | Base Salary Level ($) | Increase from Fiscal 2022 | ||
David V. Goeckeler | 1,250,000 | 0% | ||
Wissam G. Jabre | 625,000 | 0% | ||
Robert W. Soderbery | 710,000 | 0% | ||
Michael C. Ray | 625,000 | 0% | ||
Srinivasan Sivaram | 750,000 | 0% |
In August 2020,February 2023, the Compensation and Talent Committee, upon the recommendation of our CEO and with the support of our executive leaders, reduced the base salaries shown above for each named executive officer by 20% for the remainder of fiscal 2023. The committee approved athese reductions to align our executive team with our employees who incurred benefits reductions during fiscal 2023 to support our business during the market downturn. The 2023 annual base salary increaseamounts in the “Fiscal 2021-2023 Summary Compensation Table” reflect the reduced base salaries for Dr. Sivaram to reflect his strong performance, his critical role in our flash business and his key relationships with our joint venture partner.each named executive officer.
Named Executive Officer | Base Salary Level(1) ($) | Increase from Fiscal 2020 | ||
David V. Goeckeler | 1,250,000 | 0% | ||
Robert K. Eulau | 715,000 | 0% | ||
Srinivasan Sivaram | 750,000 | 7% | ||
Robert W. Soderbery(2) | 710,000 | — | ||
Michael C. Ray | 625,000 | 0% |
Short-Term Incentives
Fiscal 2023 Target Incentive Award Opportunities
Named Executive Officer | Annual Target Incentive Award Opportunity (as Percentage of Base Salary) | Increase from Fiscal 2022 | ||
David V. Goeckeler | 175% | 0% | ||
Wissam G. Jabre | 120% | 0% | ||
Robert W. Soderbery | 120% | 0% | ||
Michael C. Ray | 100% | 0% | ||
Srinivasan Sivaram | 120% | 0% |
2023 Proxy Statement |
Short-Term IncentivesFiscal 2023 STI Design and Performance
Fiscal 2021 Target Incentive Level Opportunities
In August 2020,For fiscal 2023, the Compensation and Talent Committee approved an increase in Dr. Sivaram’s target incentive opportunity in connection with his base salary adjustment described above. The increased target enhances Dr. Sivaram’s performance compensation opportunity and reflects the committee’s determination that he performs a critical role for our company and was a strong performer.
Named Executive Officer | Annual Target Incentive Opportunity (as Percentage of Base Salary) | Increase from Fiscal 2020 | ||
David V. Goeckeler | 175% | 0% | ||
Robert K. Eulau | 110% | 0% | ||
Srinivasan Sivaram | 120% | 9% | ||
Robert W. Soderbery | 120% | — | ||
Michael C. Ray | 85% | 0% |
Fiscal 2021 Design and Performance
FISCAL 2021 DESIGN
The fiscal 2020 STI plan funded based on a single metric: non-GAAP net income. The Compensation and Talent Committee updatedgenerally retained the STI plan design it previously approved for fiscal 2021 to better align with our core operations2022, which included financial and to add operational metrics and an individual performance component to recognize performance in support of our core operations, as reflected below. The individual performance component included new ESG goals related to emissions reduction and DE&I.
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Non-GAAP Operating Income 50% Weighting | + | Flash Exabytes Shipped 12.5% Weighting | + | HDD Exabytes Shipped 12.5% Weighting | + | Individual Performance 25% Weighting | = | Individual Final Payout (Capped at 200%) |
Executive Compensation
In updatingretaining the fiscal 2022 STI plan design for fiscal 2021,2023, the committee considered the following factors:
● | Non-GAAP operating income |
● | Exabytes shipped provides the executive team with tangible operational goals and the metric aligns with our short-term strategy. This metric is a primary driver for maintaining our market share and, given our fixed assets, shipping more exabytes improves our utilization of those assets. The inclusion of profit metrics in both the STI plan and LTI |
● | The |
FISCAL 2021 CORPORATE PERFORMANCEFiscal 2023 Corporate Performance
The Compensation and Talent Committee approved corporate performance targets for the fiscal 2023 STI plan that incorporated higher exabyte shipped targets relative to fiscal 2022, but a lower profitability target relative to fiscal 2022 in anticipation of a downturn in the flash market cycle. Although the committee lowered the STI plan profitability target, the fiscal 2023 corporate performance targets represented aggressive goals in the context of the broader market.
We did not achieve threshold performance level for any of those targets, resulting in no (0%) STI plan payout on the corporate performance metrics.
Executive Compensation | 57 | |
NON-GAAP OPERATING INCOME(1)
($M)
Non-GAAP Operating Income(1) (50% Weighting) | ||||||
Performance Achievement | Performance (% Target) | STI Payout (% Target) | Performance ($ millions) | |||
Maximum | 130% | 200% | 2,733 | |||
Target | 100% | 100% | 2,102 | |||
Threshold | 65% | 30% | 1,366 | |||
Actual | -28% | 0% | (594) |
(1) | |
Non-GAAP Operating Income(1) (50% Weighting) | |||||||||
Performance | STI Payout | Performance | |||||||
Performance Achievement | (% Target) | (% Target) | ($ millions) | ||||||
Maximum | 130 | % | 200 | % | $ | 2,074 | |||
Target | 100 | % | 100 | % | $ | 1,595 | |||
Threshold | 75 | % | 50 | % | $ | 1,196 | |||
Actual | 120 | % | 165 | % | $ | 1,906 |
See Appendix A to this Proxy Statement for a reconciliation of GAAP operating income to non-GAAP operating income. |
Flash Exabytes Shipped (12.5% Weighting) | ||||||||
Performance | STI Payout | Performance | ||||||
Performance Achievement | (% Target) | (% Target) | (Exabytes) | |||||
Maximum | 105 | % | 200 | % | 75.8 | |||
Target | 100 | % | 100 | % | 72.2 | |||
Threshold | 95 | % | 50 | % | 68.6 | |||
Actual | 102 | % | 134 | % | 73.4 |
HDD Exabytes Shipped (12.5% Weighting) | ||||||||
Performance | STI Payout | Performance | ||||||
Performance Achievement | (% Target) | (% Target) | (Exabytes) | |||||
Maximum | 110 | % | 200 | % | 544 | |||
Target | 100 | % | 100 | % | 495 | |||
Threshold | 90 | % | 50 | % | 445 | |||
Actual | 94 | % | 70 | % | 467 |
Table of ContentsFLASH EXABYTES SHIPPED
Flash Exabytes Shipped (12.5% Weighting) | ||||||
Performance Achievement | Performance (% Target) | STI Payout (% Target) | Performance (Exabytes) | |||
Maximum | 105% | 200% | 107.8 | |||
Target | 100% | 100% | 102.7 | |||
Threshold | 92.5% | 25% | 95.0 | |||
Actual | 86% | 0% | 88.4 |
Executive CompensationHDD EXABYTES SHIPPED
HDD Exabytes Shipped (12.5% Weighting) | ||||||
Performance Achievement | Performance (% Target) | STI Payout (% Target) | Performance (Exabytes) | |||
Maximum | 110% | 200% | 671 | |||
Target | 100% | 100% | 610 | |||
Threshold | 85% | 25% | 519 | |||
Actual | 68% | 0% | 412 |
The weighted average payout for the corporate metrics is 144%was 0% of target:the target performance levels:
Non-GAAP Operating | Flash Exabytes | HDD Exabytes | Aggregate Corporate | |||
Income Payout % | Shipped Payout % | Shipped Payout % | Payout % | |||
(50% Weighting) | (12.5% Weighting) | (12.5% Weighting) | (75.0%) | |||
165% | 134% | 70% | 144% |
Non-GAAP Operating Income Payout % (50% Weighting) | Flash Exabytes Shipped Payout % (12.5% Weighting) | HDD Exabytes Shipped Payout % (12.5% Weighting) | Aggregate Corporate Payout % (75.0%) | |||
0% | 0% | 0% | 0% |
FISCAL 2021 INDIVIDUAL PERFORMANCE COMPONENT (“IPC”)Table of Contents
58 | Western Digital 2023 Proxy Statement |
Fiscal 2023 Individual Performance Component
In early fiscal 2021, the Compensation and Talent Committee reviewed with our CEO the approach to managing and assessing thePerformance Goal Setting
The IPC, forweighted at 25% of each named executive officers. The committee agreed toofficer’s target incentive award opportunity, was split the measures into an equal weight forequally between leadership, execution and execution.ESG goals. Our named executive officers (other than our CEO) worked with our CEO to prepare draft individual performance goals. Our CEO separately submitted his fiscal 2023 performance goals for the committee’s review, with input from our Board of Directors.
Performance Assessment and IPC Payout Percentage Determination
The ESG goals incorporated into the IPC included both DE&I and emissions reduction goals.
● | Our DE&I goals focused on year-over-year improvement in our attraction and retention rates of underrepresented minorities among early career professionals at Western Digital and also included sponsorship goals for our executive officers. Our executive officers achieved target on one of our DE&I goals but did not achieve target on the remaining DE&I goals in a challenging year to attract and retain talent. |
● | Our emissions goal focused on a 20% year-over-year reduction in Scope 1 and Scope 2 emissions per petabyte relative to fiscal 2022. This goal supports our public commitment to reduce our Scope 1 and Scope 2 emissions by 42% between fiscal 2020 and fiscal 2030. While our company remains on track for our fiscal 2030 commitment, we did not achieve the emissions per petabyte target for 2023. |
Given our challenging fiscal 2023 financial performance, our CEO and the committee agreed that no payout should be made with respect to the leadership and execution goals in early fiscal 2021 and management submitted those goals for review by the committee; the committee provided feedback to our CEO on those goals and agreed to evaluate each named executive officer’s IPC performance after the close of fiscal 2021.
Prior to the committee meeting that was designated to approve IPC payout percentages, our CEO submitted recommended IPC payout percentages for each named executive officer, excluding himself. Our CEO’s recommendations included his assessment of each named executive officer’s performance relative toparticipant in the executive’s fiscal 2021 IPC goals and included our CEO’s narrative assessment of that executive’s performance. Our CEO also submitted a self-evaluation of his performance relative to his fiscal 2021 key objectives for the committee‘s review.
In an August 2021 meeting, the committee reviewed and discussed with our CEO the proposed IPC payout percentage for each named executive officer, excluding our CEO, under the fiscal 2021 STI plan. The committee discussed our CEO’s fiscal 2021 performance in executive session without participation of any members of our management team. Following the executive session, the committee approved IPC payout percentages for each ofplan, including our named executive officers as outlined below.
Mr. Goeckeler:
Priorofficers. Our CEO and the committee also agreed that no payout should be made with respect to the committee meetingESG goals.
As a result of the committee’s IPC determinations, none of the participants in our STI plan received a payout with respect to approve IPC payout percentages, our Compensation and Talent Committee Chair met with each non-employee member of our Board of Directors to solicit input on Mr. Goeckeler’s fiscal 2021 performance relative to his key objectives for the year. This input was then discussed by our Board and, based on feedback received during those discussions, the committee set Mr. Goeckeler’s IPC rating in the “exceeds” category, consistent with our Board’s view of his contributions to Western Digital’s strong performance during the fiscal year. In making this determination,2023 performance period. The 0% payout aligns with the committee focused on the following factors:
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In evaluating our other named executive officers, the committee considered the following factors:committee’s pay-for-performance philosophy.
Mr. Eulau:Fiscal 2023 STI Payouts
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Named Executive Officer | Corporate Payout % (75% Weighting) | IPC Payout % (25% Weighting) | Aggregate Payout % | STI Payout ($) | ||||
David V. Goeckeler | 0% | 0% | 0% | — | ||||
Wissam G. Jabre | 0% | 0% | 0% | — | ||||
Robert W. Soderbery | 0% | 0% | 0% | — | ||||
Michael C. Ray | 0% | 0% | 0% | — | ||||
Srinivasan Sivaram | 0% | 0% | 0% | — |
Executive Compensation
Dr. Sivaram:
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Mr. Soderbery:
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Mr. Ray:
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After assessing these factors, the committee approved the following IPC payout percentages:
Named Executive Officer | IPC Target Weighting | IPC Payout %(1) | ||||
David V. Goeckeler | 25 | % | 180 | % | ||
Robert K. Eulau | 25 | % | 113 | % | ||
Srinivasan Sivaram | 25 | % | 180 | % | ||
Robert W. Soderbery | 25 | % | 175 | % | ||
Michael C. Ray | 25 | % | 163 | % |
FISCAL 2021 STI PAYOUTS
Corporate Payout % | IPC Payout % | Aggregate Payout | STI Payout | |||||||||
Named Executive Officer | (75% Weighting) | (25% Weighting) | % | ($) | ||||||||
David V. Goeckeler | 144 | % | 180 | % | 153 | % | $ | 3,346,875 | ||||
Robert K. Eulau | 144 | % | 113 | % | 136 | % | $ | 1,070,623 | ||||
Srinivasan Sivaram | 144 | % | 180 | % | 153 | % | $ | 1,366,408 | ||||
Robert W. Soderbery(1) | 144 | % | 175 | % | 152 | % | $ | 994,546 | ||||
Michael C. Ray | 144 | % | 163 | % | 149 | % | $ | 789,570 |
Executive Compensation
Long-Term Incentives: Fiscal 20212023 Equity Awards
Fiscal 20212023 LTI Awards
Our named executive officers received the following LTI awards in September 2020. Each named executive officer’s fiscal 2021 LTI award consistsAugust 2022 consisting of a mix of PSUs and RSUs. Except for Mr. Soderbery’s sign-on RSU award, theThe named executive officers’ RSUs are scheduled to vest in four equal annual installments. Mr. Soderbery’s sign-on RSUwith respect to 25% of the award is scheduledon the first anniversary of the grant date and with respect to vest in two equal annual installments.6.25% of the award quarterly thereafter for three years. The vesting provisions of the PSUs are described below.below under the section entitled “Fiscal 2023-2025 PSU Awards”.
Total Awarded | ||||||||||||||
Grant Value | LTI Vehicle Mix | Total LTI Target Grant Value ($)(1) | LTI Vehicle Mix | |||||||||||
Named Executive Officer | ($)(1) | PSUs | RSUs | PSUs | RSUs | |||||||||
David V. Goeckeler | 12,000,000 | 60 | % | 40 | % | 15,000,000 | 60% | 40% | ||||||
Robert K. Eulau | 3,575,000 | 50 | % | 50 | % | |||||||||
Wissam G. Jabre | 4,500,000 | 50% | 50% | |||||||||||
Robert W. Soderbery | 3,550,000 | 50% | 50% | |||||||||||
Michael C. Ray(2) | 2,500,000 | 50% | 50% | |||||||||||
Srinivasan Sivaram | 3,750,000 | 50 | % | 50 | % | 3,750,000 | 50% | 50% | ||||||
Robert W. Soderbery(2) | 9,050,000 | 20 | % | 80 | % | |||||||||
Michael C. Ray | 2,187,500 | 50 | % | 50 | % |
(1) | The differences between the target grant values approved by the Compensation and Talent Committee (as reflected in the table above) and the grant date fair values of the awards as determined for financial reporting purposes (as reflected in the “Fiscal 2021-2023 Summary Compensation |
(2) | Mr. |
Long-Term Incentives: PSU Design and Performance
Fiscal 2021 Retention RSU2023–2025 PSU Awards
In April 2021,August 2022, the Compensation and Talent Committee approved retention RSUs for Dr. Sivaram and Mr. Ray ingranted the amounts of $4,000,000 and $1,500,000, respectively. The RSUs vest in substantially equal annual installments over two years and the award amounts align with market data for retention awards grantedfiscal 2023-2025 PSUs to comparable executives. No otherour named executive officers, received retention awards during fiscal 2021. Inwith an updated design. The committee evaluated the changes to the PSU design in multiple meetings before approving the retention awards for Dr. Sivaram and Mr. Ray,design summarized below. In updating the PSU design, the committee consideredconcluded that the following factors:new design would: (i) better align our named executive officers’ compensation with our financial and operational performance and incentivize the high-performing team assembled by our CEO over the past few years to execute on our strategy; (ii) provide better line of sight for our named executive officers with respect to our LTI program targets; and (iii) align the interests of our named executive officers with the interests of our stockholders by rewarding sustained financial and operational performance that the committee believes will result in strong market performance.
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Executive Compensation
Western Digital 2023 Proxy Statement |
The table below summarizes the changes adopted for the fiscal 2023-2025 PSUs compared to the fiscal 2022-2024 PSUs and the committee’s rationale in adopting those changes.
PSU Terms | Fiscal 2022-2024 PSUs | Fiscal 2023-2025 PSUs | Rationale For Change |
●25% Revenue ●25% Non-GAAP EPS ●50% Relative TSR | ●50% Revenue ●50% Non-GAAP EPS | ●Revenue and non-GAAP EPS represent long-term value drivers for ●The Compensation and Talent Committee believes that focusing on strong operational performance is the best path to long-term value creation | |
Periods | ●Three-year targets ●Relative MPA modifier (as defined below) to reflect market conditions | ●3x1-year annual targets ●Payout determined by average at the ●No relative MPA modifier | ●Limited visibility in setting three-year targets in a highly cyclical industry ●Relative MPA modifier mitigated market cyclicality, but executive officers lacked line of sight to final targets ●Payout using the |
Incentive | ●N/A | ●Upside incentive of 10%-50% of the ●Based on three-year stock price CAGR ●No upside incentive if the | ●Links incentive opportunity to |
THREE-YEAR PERFORMANCE PERIOD | |||||
+ | Three-Year Stock Price CAGR | Upside Incentive % | |||
5% | 10% | ||||
10% | 20% | ||||
15% | 50% |
Long-Term Incentives:As noted in the table below, we achieved below threshold performance level during year one of the PSU Designmeasurement period; the 0% payout for fiscal 2023 will be averaged with the payouts calculated for fiscal 2024 and Performancefiscal 2025 to determine the final payout on the fiscal 2023-2025 PSU awards.
Fiscal 2021–Following our summer 2023 PSU Awards
The fiscal 2021–2023 PSU awards includestockholder engagement, the following performance metrics, each of which is measured over a three-year period covering fiscal 2021 through fiscal 2023.
The Compensation and Talent Committee selected these performance metrics because revenue focuses our executives on sustainable long-term corporate growth, non-GAAP EPS measures the effectivenessfurther refined certain features of our capital allocation strategy, andPSU design for the relative TSR metric aligns our executives with our stockholders by rewarding our named executive officers basedfiscal 2024-2026 PSUs, as described in the section entitled “Fiscal 2024 Decisions Following Stockholder Engagement” on our stock performance relativepage 47.
Executive Compensation | 61 |
Fiscal 2023-2025 PSU Performance (Year One of Three)
Financial Metrics | Threshold (50%) ($) | Target (100%) ($) | Maximum (200%) ($) | Actual Performance ($) | Achievement Rate | Year One Payout % | ||||||
One-Year Revenue (50%) (in millions) | 14,886 | 17,513 | 20,140 | 12,318 | 70% | 0% | ||||||
One-Year Non-GAAP EPS (50%)(1) | 2.94 | 3.92 | 5.10 | (3.59) | -92% | 0% | ||||||
Weighted Payout: | 0% |
(1) | See Appendix A to this Proxy Statement for a reconciliation of GAAP EPS to non-GAAP EPS. |
Fiscal 2023 Payout % | Fiscal 2024 Payout % | Fiscal 2025 Payout % | Three-Year Average Payout % |
0% | TBD | TBD | TBD |
Performance of Fiscal 2021-2023 PSUs
The PSUs granted in fiscal 2021 reflected the broader equities market.following design:
Financial Metrics. The PSU financial metrics are cumulative annual targets established at grant and measured over the three-year performance period. The cumulative PSU financial goals are subject to a pre-established, objective adjustment at the end of the performance period in a relative proportion (up or down) by which the total market for our products (measured by revenue) during the period exceeds or falls
● | Financial Performance Metrics (50% Weighting) |