SUPER MICRO COMPUTER, INC.
980 Rock Avenue
San Jose, California 95131
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 1, 2017MONDAY, JANUARY 22, 2024
To the Stockholders of Super Micro Computer, Inc.:
Notice is hereby given that the Annual Meeting of stockholders of Super Micro Computer, Inc. (the “Company”) will be held on Wednesday, March 1, 2017,Monday, January 22, 2024, at 11:2:00 a.m.p.m., localPacific time, solely online by remote communication, in a virtual only format at our principal offices locatedwww.virtualshareholdermeeting.com/SMCI2024. Instructions on how to participate in the Annual Meeting and demonstrate proof of stock ownership are posted at 980 Rock Avenue, San Jose, CA 95131,www.proxyvote.com. The webcast of the Annual Meeting will be archived for one year after the date of the Annual Meeting at www.virtualshareholdermeeting.com/SMCI2024. Only stockholders who held stock at the close of business on the record date, November 27, 2023, may vote at the Annual Meeting, including any adjournment or postponement thereof.
The Annual Meeting will be held for the following purposes:
1.To elect twothree Class III directors to hold office until the annual meeting of stockholders in 2019following fiscal year 2026 or until their successors are duly elected and qualified.
2.To vote on a non-binding advisory resolution to approve the compensation of our named executive officers.
4.To approve the further amendment and restatement of the Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan.
5.To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
The accompanying Proxy Statement more fully describes the business to be transacted at the Annual Meeting. Our boardBoard of directorsDirectors recommends that you vote (1) “FOR” the election of each of our nominees for Class II director as proposed in this Proxy Statement, (2) “FOR” the non-binding advisory resolution to approve the compensation of our named executive officers, (3) “FOR” holding future advisory votes on executive compensation once every three years and (4) “FOR” the ratification of DeloitteErnst & ToucheYoung LLP as our independent registered public accounting firm for fiscal year 2017. 2024, and (4) “FOR” the approval of the further amendment and restatement of the Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan. We have not received notice of other matters that may be properly presented at the Annual Meeting.
These proxy materials are being made available or distributed to you on or about December 8, 2023.
If you were a stockholder as of the close of business (Eastern Time) on January 10, 2017,November 27, 2023, you are entitled to vote at the Annual Meeting and any adjournment thereof. For ten days prior to the Annual Meeting, a complete list of stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder, for any purpose relating to the Annual Meeting, during ordinary business hours at our principal offices located at 980 Rock Avenue, San Jose, CA 95131.
By Order of the Board of Directors
| David E. Weigand | ||
________________________________________________________________Information on our website, other than this Proxy Statement, is not a part of this Proxy Statement. | ||
| The Company’s Annual Report for the year ended June 30, 2023 is being mailed to stockholders concurrently with the Proxy Statement. The Annual Report contains financial and other information about the Company, but is not incorporated into the Proxy Statement and is not deemed to be a part of the proxy soliciting materials. | ||
IMPORTANT: To ensure that your vote is recorded promptly, please vote as soon as possible, even if you plan to attend the meeting.meeting (virtually). Most stockholders have three options for submitting their votes prior to the meeting: (1) via the Internet; (2) by telephone; or (3) by mail. If you have Internet access, we encourage you to record your vote on the Internet. It is convenient and saves us postage and processing costs. Your completed proxy, or your telephone or Internet vote, will not prevent you from attending the meeting (virtually) and voting in person (virtually) should you so choose.
TABLE OF CONTENTS
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| APPENDIX A – AMENDED AND RESTATED SUPER MICRO COMPUTER, INC. 2020 EQUITY AND INCENTIVE COMPENSATION PLAN | |||||
SUPER MICRO COMPUTER, INC.
980 Rock Avenue
San Jose, California 95131
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 1, 2017MONDAY, JANUARY 22, 2024
GENERAL INFORMATION
The enclosed proxy is being solicited by our board of directorsBoard for use in connection with the Annual Meeting of stockholders to be held on Wednesday, March 1, 2017Monday, January 22, 2024 solely online by remote communication, in a virtual only format at www.virtualshareholdermeeting.com/SMCI2024. You will be able to access, participate in, and vote at the Annual Meeting at www.virtualshareholdermeeting.com/SMCI2024 by using the 16-digit control number included on the proxy card and voting instruction form. Stockholders admitted to the virtual meeting using their control number may submit questions, vote or view our principal offices locatedlist of stockholders during the Annual Meeting by following the instructions that will be available on the meeting website. Stockholders may log into the meeting platform beginning at 980 Rock Avenue, San Jose, CA 95131, commencing1:45 p.m. Pacific Time on January 22, 2024. To submit a question during the meeting, visit www.virtualshareholdermeeting.com/SMCI2024, enter your 16-digit control number, type your question into the “Ask a Question” field and click “Submit.” Questions pertinent to meeting matters will be answered during the Annual Meeting, subject to time constraints. The Annual Meeting is not to be used as a forum to present personal matters, or general economic, political or other views that are not directly related to the business of the Company and the matters properly before the Annual Meeting, and therefore questions on such matters will not be answered. Any questions pertinent to meeting matters that cannot be answered during the Annual Meeting due to time constraints will be posted online and answered at 11:00 a.m. local time,https://ir.supermicro.com. The questions and at any adjournments thereof. Theanswers will be available as soon as practical after the Annual Meeting and will remain available until one week after posting.
This Proxy Statement and the accompanying proxy solicitation materialscard and notice were first made available on or about January 18, 2017December 8, 2023 to all stockholders entitled to vote at the Annual Meeting.
This Proxy Statement and our annual report for the year ended June 30, 2023 (the “Annual Report”) are available on our website at www.supermicro.com and, prior to the meeting date, at www.proxyvote.com.
You may request that we send future proxy materials to you electronically by e-mail or in printed form by mail by going to www.proxyvote.com. If you elect to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by e-mail or printed form by mail will remain in effect until you terminate it. We encourage you to elect to receive future proxy materials by e-mail, which will allow us to provide you with the information you need in a more timely manner, will save us the cost of printing and mailing documents to you and will conserve natural resources.
In this Proxy Statement:
•“We,” “us,”We”, “us”, “our”, “Company” and “Supermicro” refer to Super Micro Computer, Inc. with its principleprincipal executive offices located at 980 Rock Avenue, San Jose, CA 95131
•“Annual Meeting” or “Meeting” means our 2016 Annual Meeting of Stockholders following our fiscal year 2023
•“Board of Directors” or “Board” means our Board of Directors
•“SEC” means the Securities and Exchange Commission
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We have summarized below important information with respect to the Annual Meeting.
| Proposal No. | Proposal | Recommendation | |||||||||
| No. 1 | Election of each of the nominees as Class II director | FOR each of the nominees | |||||||||
| No. 2 | Approval, on a non-binding advisory basis, of our named executive officers’ compensation | FOR | |||||||||
| No. 3 | Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending June 30, 2024 | FOR | |||||||||
| No. 4 | Approval of the further amendment and restatement of the Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan | FOR | |||||||||
Please see “Questions and Answers” for a list of frequently asked questions and answers relating to vote at the meeting?
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PROPOSAL 1
ELECTION OF CLASS II DIRECTORS
Composition of the Board
The authorized number of directors of the Company as of the date of this proxy statement is eight.nine. There are currently eightnine directors. Our amendedAmended and restated certificateRestated Certificate of incorporationIncorporation provides for a classified board of directors divided into three classes. The members of each class are elected to serve a three-year term with the term of office for each class ending in consecutive years. Vacancies may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. Alternatively, the board of directors,Board, at its option, may reduce the number of directors, provided that no decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Directors chosen to fill newly created directorships hold office for a term expiring at the next annual meeting of stockholders to which the term of the office of the class to which they have been elected expires.
At this year’s Annual Meeting, the termterms of our twothree current Class III directors will expire. Charles LiangThe Board’s nominees for the three Class II directors are Judy Lin, Sara Liu and Sherman Tuan are the current Class I directors. Charles Liang and Sherman Tuan have each been nominated for re-election to the board of directors to serve until the 2019 annual meeting or until their successors are elected and qualified.Yih-Shyan (Wally) Liaw. Each of the nominees hasMs. Lin, Ms. Liu, and Mr. Liaw have agreed to serve, as a director if elected. elected, and the Board has no reason to believe they will be unable to serve. The Board recommends that shareholders vote in favor of each of Ms. Lin, Ms. Liu, and Mr. Liaw.
Proxies may not be voted for more than twothree Class II directors. Assuming a quorum is present, the twothree director nominees who receive the highest number of the votes cast by the stockholders entitled to vote at the election will be elected. elected as Class II directors. There are no other nominees for Class II directors. In the event that a nominee is unable or unwilling to serve, the enclosed proxy will be voted to elect the replacement nominee designated by the board of directors,Board, unless the boardBoard instead decides to reduce the number of directors.
 | THE BOARD RECOMMENDS A VOTE FOR ELECTION OF EACH OF THE NOMINEES TO SERVE AS A CLASS II DIRECTOR. PROXIES WILL BE VOTED FOR THE ELECTION OF EACH OF THE NOMINEES UNLESS OTHERWISE SPECIFIED. | ||||
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The names offollowing table sets forth the current directorsclass and nominees and certain information about them is set forth below:
| Name | Principal Occupation | Age | Director Since |
| Charles Liang | Founder, President, Chief Executive Officer and Chairman of the Board of Supermicro | 59 | 1993 |
| Sherman Tuan | Founder, Chief Executive Officer and Chairman of the Board of PurpleComm, Inc. | 63 | 2007 |
| Name | Principal Occupation | Age | Director Since |
| Yih-Shyan (Wally) Liaw | Co-Founder, Senior Vice President of International Sales, Corporate Secretary and Director of Supermicro | 62 | 1993 |
| Laura Black | Managing Director of Needham & Company, LLC | 55 | 2012 |
| Michael S. McAndrews | Principal of Abbott, Stringham & Lynch | 64 | 2015 |
| Name | Principal Occupation | Age | Director Since |
| Chiu-Chu (Sara) Liu Liang | Co-Founder, Senior Vice President of Operations, Chief Administration Officer, Treasurer and Director of Supermicro | 55 | 1993 |
| Hwei-Ming (Fred) Tsai | Independent business consultant and director of ANZ Bank (Taiwan) Limited, a wholly owned subsidiary of Australia and New Zealand Banking Group Limited | 61 | 2006 |
| Saria Tseng | Vice President of Strategic Corporate Development, General Counsel and Secretary of Monolithic Power Systems | 46 | 2016 |
Name (Age)(1) | Class | Expiration of Term | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee (the “Governance Committee”) | |||||||||||||||||||||||||||
| Charles Liang (66) | I | Annual General Meeting following fiscal year 2025 | ||||||||||||||||||||||||||||||
| Sherman Tuan (70) | I | Annual General Meeting following fiscal year 2025 | Chair | Member | ||||||||||||||||||||||||||||
| Tally Liu (73) | I | Annual General Meeting following fiscal year 2025 | Chair | Member | ||||||||||||||||||||||||||||
| Judy Lin (70) | II | Director Nominee | Member | |||||||||||||||||||||||||||||
| Sara Liu (62) | II | Director Nominee | ||||||||||||||||||||||||||||||
| Yih-Shyan (Wally) Liaw (68) | II | Director Nominee | ||||||||||||||||||||||||||||||
| Daniel Fairfax (68) | III | Annual General Meeting following fiscal year 2024 | Member | Member | ||||||||||||||||||||||||||||
| Robert Blair (75) | III | Annual General Meeting following fiscal year 2024 | ||||||||||||||||||||||||||||||
| Shiu Leung (Fred) Chan (76) | III | Annual General Meeting following fiscal year 2024 | Member | Chair | ||||||||||||||||||||||||||||
(1)Ages are as of December 8, 2023.
The following Board Diversity Matrix is provided pursuant to Nasdaq Rule 5606. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Rule 5605(f).
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| Board Diversity Matrix (As of December 8, 2023) | ||||||||||||||
| Total Number of Directors | 9 | |||||||||||||
| Female | Male | Non-Binary | Did Not Disclose Gender | |||||||||||
| Part I: Gender Identity | ||||||||||||||
| Directors | 2 | 7 | 0 | 0 | ||||||||||
| Part II: Demographic Background | ||||||||||||||
| African American or Black | 0 | 0 | 0 | 0 | ||||||||||
| Alaskan Native or Native American | 0 | 0 | 0 | 0 | ||||||||||
| Asian | 2 | 5 | 0 | 0 | ||||||||||
| Hispanic or Latinx | 0 | 0 | 0 | 0 | ||||||||||
| Native Hawaiian or Pacific Islander | 0 | 0 | 0 | 0 | ||||||||||
| White | 0 | 2 | 0 | 0 | ||||||||||
| Two or More Races or Ethnicities | 0 | 0 | 0 | 0 | ||||||||||
| LGBTQ+ | 0 | |||||||||||||
| Did Not Disclose Demographic Background | 0 | |||||||||||||
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Class II Directors - Nominees for Term Expiring at the Annual Meeting of Stockholders Following Fiscal Year 2026
Judy Lin has been a member of our Board since April 2022. Ms. Lin is a retired executive who has 30 years of experience in the disk drive industry. She served as an Independent Board Director of MORESCO Corporation, a leading manufacturer of specialty chemicals based in Japan, from June 2014 to May 2022. Ms. Lin served as Vice President of Western Digital Media Operations, a leader in data infrastructure, from September 2007 until her retirement in September 2012. Prior to Western Digital, Ms. Lin served as Vice President at Komag Inc., a leading supplier of thin-film disks to the hard disk drive industry and held various management positions from April 1994 until Western Digital acquired Komag in September 2007. Before joining Komag, Ms. Lin was with IBM Almaden Research Center Storage Systems Division for 11 years as a Senior Scientist from January 1983 to April 1994. Ms. Lin holds a MSc degree in Materials Science and Mineral Engineering from University of California, Berkeley where she was also a PhD candidate, and a BS in Chemical Engineering from National Cheng Kung University in Taiwan. Our Governance Committee concluded that Ms. Lin should serve on the Board based on her substantial leadership and management experience and, considering she is well versed in technology innovation, product development, engineering and global operations, she will add valuable perspective to the Board.
Sara Liu co-founded Super Micro in September 1993, has been a member of our Board since our inception in September 1993 and currently serves as our Co-Founder, Senior Vice President, and a director. She has held a variety of positions with the Company, including Treasurer from inception to May 2019, Senior Vice President of Operations from May 2014 to February 2018, and Chief Administrative Officer from October 1993 to May 2019. From 1985 to 1993, Ms. Liu held accounting and operational positions for several companies, including Micro Center Computer Inc. Ms. Liu holds a B.S. in Accounting from Providence University in Taiwan. Ms. Liu is married to Mr. Charles Liang, our Chairman, President and Chief Executive Officer. Our Governance Committee concluded that Ms. Liu should serve on the Board based on her skills, experience, her general expertise in business and operations and her long familiarity with our company’s business.
Yih-Shyan (Wally) Liaw co-founded Super Micro in September 1993. From our founding until January 2018, Mr. Liaw was an employee and held various executive positions at our company, including Senior Vice President of Worldwide Sales and Corporate Secretary. He was also a member of the Board from 1993 until January 2018. In January 2018, Mr. Liaw resigned from all his positions with our company, including from the Board, during a period when we were not current in our filings with the Securities and Exchange Commission, and, following information about themselves. Datescompletion of an Audit Committee investigation, in connection with a restructuring of our sales organization as part of our remediation of material weaknesses in our internal control over financial reporting. From February 2018 until June 2020, Mr. Liaw was retired. From June 2020 until April 2021, Mr. Liaw was the president of 2CRSi Corporation, a company headquartered in Strasbourg, France that develops, produces and sells high-performance customized, environmentally-friendly servers. Mr. Liaw returned to our company as a consultant in May 2021, advising us with respect to business development matters. In August 2022, Mr. Liaw returned to full-time employment with us as Senior Vice President, Business Development. He was re-appointed to the Board in December 2023. Mr. Liaw holds an M.S. in Computer Engineering from University of Arizona, an M.S. in Electrical Engineering from Tatung Institute of Technology in Taiwan, and a B.S. degree from Taiwan Provincial College of Marine and Oceanic Technology. Our Governance Committee concluded that Mr. Liaw should serve on the Board based on his technical expertise and his long familiarity with our company’s business.
Class III Directors - Term Expiring at the Annual Meeting of Stockholders Following Fiscal Year 2024
Daniel Fairfax has been a member of our Board since July 2019. Mr. Fairfax served as Senior Vice President and Chief Financial Officer of Brocade Communications, a networking equipment company (“Brocade”) from June 2011 to November 2017. Brocade was acquired by Broadcom in November 2017. Mr. Fairfax previously served as Brocade’s Vice President of Global Services from August 2009 to June 2011 and Brocade’s Vice President of Business Operations from January 2009 to August 2009. Prior to Brocade, Mr. Fairfax served as Chief Financial Officer of Foundry Networks, Inc., from January 2007 until December 2008. Foundry Networks was acquired by Brocade in December 2008. Earlier in his career Mr. Fairfax served in executive financial management and/or general management positions at GoRemote Internet Communications, Ironside Technologies, Acta Technology, NeoVista Software, Siemens and Spectra-Physics. He began his career as a consultant with the National Telecommunications Practice Group of Ernst & Young. Mr. Fairfax is a certified public accountant with an inactive license in California and holds an MBA degree from The University of Chicago Booth School of Business and a Bachelor of Arts degree, with a major in Economics, from Whitman College. Our Governance Committee concluded that Mr. Fairfax should serve on the Board based on his skills, experience, his financial literacy and his familiarity with technology businesses.
Robert Blair has been a member of our Board since December 2022.Mr. Blair was President and Chief Executive Officer of ESS Technology, Inc., a fabless semiconductor company for 19 years from September 1999 through July 2018 where he also
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served as a director from September 1999 through August 2019. During this time, ESS Technology, Inc. was a publicly listed company on NASDAQ for 9 years. Mr. Blair has been a director of Pictos, Inc., a technology licensing company that owns a portfolio of fundamental CMOS imaging patents, since July 2008 where he also previously served as President and Chief Executive Officer between 2008 and 2013. His professional background also includes more than 35 years of experience in marketing, sales, engineering, operations, and general management, principally in the nomineescomputer hardware, software, and continuing directors include servicesemiconductor industries. His experience includes roles at Global Semiconductor Alliance, Logistix Corporation, and XEGMAG (a division of Xidex Corporation). Mr. Blair holds twelve issued U.S. patents plus additional patents worldwide, and studied electrical engineering at Arizona State University and applied economics at the University of San Francisco. Our Governance Committee concluded that Mr. Blair should serve on the Board based on his familiarity with technology businesses, skills and experience with business operations at technology companies, and public company experience.
Shiu Leung (Fred) Chan has been a member of our Board since October 2020. Mr. Chan is the founder and currently the president of KCR Development, Inc. which has developed real estate projects in excess of $1 billion in California and Hawaii specializing in high-density residential and retail projects. Mr. Chan also has more than three decades of experience in the high technology sector and as directorsan entrepreneur. He most recently served as chairman of predecessorESS Technology, Inc., a privately held semiconductor company which he had founded, from 2015 to 2019. ESS Technology was previously a public company listed on Nasdaq from 1995 until 2008, where he had held a variety of senior executive roles, including as chairman, president and chief executive officer, and served as a director. Mr. Chan has also previously served as chairman of a privately-held consumer electronics company, founder and an executive officer of a VLSI chip design center providing computer aided design, engineering and other design services, and co-founder and an executive officer of a company in the business of computer aided engineering systems development. Mr. Chan holds B.S.E.E. and M.S.C. degrees from the University of Hawaii. Our Governance Committee concluded that Mr. Chan should serve on the Board based on his skills and experience in growing companies to Supermicro.and familiarity with technology businesses.
Class I Directors—Nominees forDirectors - Terms Expiring at the 2019 Annual Meeting of Stockholders Following Fiscal Year 2025
Charles Liang, age 59, founded Super Micro Computer, Inc. and has served as our President, Chief Executive Officer and Chairman of the Board since our inception in September 1993. Mr. Liang has been developing server and storage system architectures and technologies for the past twothree decades. From July 1991 to August 1993, Mr. Liang was President and Chief Design Engineer of Micro Center Computer Inc., a high-end motherboard design and manufacturing company. From January 1988 to April 1991, Mr. Liang was Senior Design Engineer and Project Leader for Chips & Technologies, Inc., a chipset technology company, and Suntek Information International Group, a system and software development company. Mr. Liang has been granted many23 U.S. server technology patents. Mr. Liang holds an M.S. in Electrical Engineering from the University of Texas at Arlington and a B.S. in Electrical Engineering from National Taiwan University of Science & Technology in Taiwan. Our Nominating and Corporate Governance Committee (“Governance Committee”) concluded that Mr. Liang should serve on the Board based on his skills, experience and qualifications in managing technology businesses, his technical expertise, and his long familiarity with our company’s business.
Tally Liu was appointed to our Board in January 2019. He has been retired since 2015. Prior to his retirement, Mr. Liu was Chief Executive Officer of Wintec Industries, a supply chain solutions company for high-tech manufacturers, from 2012 to 2015. Prior to Wintec, Mr. Liu served as Chairman of the Company’s business.Board and Chief Executive Officer of Newegg, Inc., an internet consumer technology retailer, from 2008 to 2010, and as President of Newegg in 2008. Prior to Newegg, Mr. Liu held various positions with Knight Ridder Inc., including Vice President, Finance & Advanced Technology and Vice President of Internal Audit. Mr. Liu served as President of the International Newspapers Financial Executives (INFE) for one year before it merged with other media associations. A Certified Public Accountant from 1982-2007, Mr. Liu is a member of the American Institute of Certified Public Accountants (AICPA) with retired status and was previously a member of the Florida Institute of Certified Public Accountants (FICPA). Mr. Liu is also a Certified Information System Auditor (CISA) and Certified Information Security Manager (CISM), with non-practice status, with the Information Systems Audit and Control Association (ISACA) and has also been certified in Control Self-assessment (CCSA) by the Institute of Internal Auditors (IIA). After earning his BA of Commerce from National Chengchi University, Taipei, Taiwan, and MBA from Florida Atlantic University, Mr. Liu received executive leadership training at the Stanford Advanced Finance Program in 1986 and at Harvard Business School in the Advanced Management Program (AMP) in 1998. Mr. Liu is not related to any member of our Board or any of our officers. Our Governance Committee concluded that Mr. Liu should serve on the Board based on his skills, experience, his financial literacy and his familiarity with technology businesses.
Sherman Tuan, age 63, has been a member of our board of directorsBoard since February 2007. Mr. Tuan is founder of PurpleComm, Inc. (doing business as 9x9.tv), a platform for connected TV, where he has served as Chief Executive Officer since January 2005 and Chairman of the Board since June 2003. From September 1999 to May 2002, he was director of Metromedia Fiber Network, Inc., a fiber optical networking infrastructure provider. Mr. Tuan was co-founder of AboveNet Communications, Inc., an
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internet connectivity solutions provider, where he served as President from March 1996 to January 1998, Chief Executive Officer from March 1996 to May 2002 and director from March 1996 to September 1999. Mr. Tuan holds a degree in Electrical Engineering from Feng-Chia University in Taiwan. Our Governance Committee concluded that Mr. Tuan should serve on the Board based on his skills, experience and qualifications in managing technology businesses, his technical expertise, and his familiarity with the Company’sour company’s business.
Except for Mr. Charles Liang and Ms. Chiu-Chu (Sara)Sara Liu, Liang who are married to each other, there are no other family relationships among any of our directors or executive officers.
The following graph details the tenures of our directors. We believe that having a mix of new directors and directors with a long history with the Company provides both new ideas and insights while maintaining a continuity of Company-specific knowledge.
(1) Average director tenure including Charles Liang and Sara Liu is 10.1 years. Also, excludes Wally Liaw’s prior director service from 1993 to 2018.
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CORPORATE GOVERNANCE
Corporate Governance Guidelines
We have adopted “Corporate Governance Guidelines” to help ensure that the board of directorsBoard is independent from management, that it appropriately performs its function as the overseer of management, and that the interests of the boardBoard of directorsDirectors and management align with the interests of theour stockholders. The “Corporate Governance Guidelines” are available at www.Supermicro.comby first clicking on “About Us” and then “Investor Relations” and then “Corporate Governance.”https://ir.supermicro.com/governance/governance-documents/default.aspx.
Code of Ethics
We have adopted a “Code of Business Conduct and Ethics” that is applicable to all directors, executive officers and employees and embodies our principles and practices relating to the ethical conduct of our business and our long-standing commitment to honesty, fair dealing and full compliance with all laws affecting our business. TheOur “Code of Business Conduct and Ethics” is available at www.Supermicro.com by first clicking on “About Us” and then “Investor Relations” and then “Corporate Governance”https://ir.supermicro.com/governance/governance-documents/default.aspx. Any substantive amendment or waiver of the Code relating to executive officers or directors will be made only after approval by a committee comprisedour Board of a majority of our independent directorsDirectors and will be promptly disclosed on our website within four business days.
Engagement with Stockholders
Our Board and management value the perspectives and feedback from our stockholders. During the fiscal year 2023, our management team regularly and actively engaged in discussions with our stockholders in numerous venues and formats including conferences, non-deal roadshows, hosting on site visits, and conducted calls and “virtual” (i.e., via online videoconference) meetings with investors and analysts. We regularly seek feedback from our stockholders and sell side analysts following our quarterly earnings conference calls and at in person and virtual investor events. During those in person, virtual meetings and calls, we have solicited and received from stockholders and analysts their perspectives on issues related to our company. During fiscal year 2023, we engaged in discussions with nine of our top ten investors and approximately 63% of investors, who we believe hold in excess of 100,000 of our shares of common stock.
Those discussions, in fiscal 2023 and continuing through the date of this proxy statement, have covered a wide range of topics, including our overall business strategy, our financial performance, our governance structure, our internal control over financial reporting, our capital efficiency, market dynamics and our compensation philosophy and practices (including the 2021 CEO Performance Award). Our management team regularly communicates the substance of stockholder discussions to our Board and committees. Our Board and committees take those views into consideration in conducting their oversight and decision-making processes.
We also recognize that some of our stockholders consider data from third parties to assist in evaluating our environmental, social and governance (“ESG”) practices and performance. We have begun an engagement process to enhance confidence that data being supplied to such outside third-party services is timely and accurate, and we remain committed to enhancing our ESG practices.
While we believe we benefit from mutual and ongoing dialogue with our stockholders and we remain committed to maintaining productive relationships, we understand we may not have communicated directly with all stockholders. If you would like to engage with us, please send correspondence to us at Attn: Investor Relations, Supermicro Computer, Inc., 980 Rock Ave., San Jose, CA 95131 or email IR@supermicro.com.
Director Independence
The ruleslisting requirements of NASDAQThe Nasdaq Stock Market generally require that a majority of the members of a listed company'scompany’s board of directors be independent. In addition, the listing rules generally require that, subject to specified exceptions, each member of a listed company'scompany’s audit committee, compensation committee, and nominating and corporate governance committee be independent.
Audit Committeecommittee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the listing requirements of The NASDAQNasdaq Stock Market. In addition, compensation committee members must satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act and the listing requirements of The NASDAQNasdaq Stock Market.
Each year, the Board affirmatively determinesassesses the independence of each director and nominee for election as a director in accordance with guidelines it has adopted, which include all elementsthe listing requirements of independence set forth in applicable NASDAQ listing standards. Our director independence standards are set forth in our “Corporate Governance Guidelines” available at the website noted above.The Nasdaq Stock Market.
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Based on these standards, our board of directorsBoard has determined that fivesix of ourits current eight members, Hwei-Ming (Fred) Tsai, Laura Black, Michael S. McAndrews, Saria Tseng andDaniel Fairfax, Judy Lin, Robert Blair, Sherman Tuan, Shiu Leung (Fred) Chan and Tally Liu, are "independent directors"“independent directors” under the applicable rules and regulations of the SEC and the listing requirements and rules of The NASDAQNasdaq Stock Market.
Executive Sessions
Non-management directors meet in executive session without management present each time the boardBoard holds its regularly scheduled meetings.
Director Qualifications and Nomination Process
Criteria
The Nominating and Corporate Governance Committee of the Board (the “Governance Committee”) is responsible for reviewing, on an annual basis, the appropriate skills and characteristics required of boardBoard members, individually as well as for the boardBoard as a whole. Except as may be required by rules and regulations promulgated by NASDAQNasdaq or the SEC and as set forth herein, it is the current belief of the Governance Committee that there are no specific minimum qualifications that must be met by each candidate for the board,Board, nor are there specific qualities or skills that are necessary for one or more of the members of the boardBoard to possess. In evaluating the qualifications of any director candidates, the Governance Committee will consider many factors, including without limitation, character, judgment, independence, expertise, diversity of experience, length of service, and other commitments. The Governance Committee will evaluate such factors, among others, and does not assign any particular weighting or priority to any of these factors. The Governance Committee will consider each individual candidate in the context of the current perceived needs of the boardBoard as a whole. While the Governance Committee has not established specific minimum qualifications for director candidates, the boardBoard believes that candidates and nominees must reflect a board that is comprised of directors who (a) are predominantly independent, (b) are of high integrity, (c) have experience, expertise and qualifications that will increase overall board effectiveness of the Board, including contributing to the diversity of the Board, and (d) meet other requirements as may be required by applicable rules and regulationslisting requirements of NASDAQThe Nasdaq Stock Market and the SEC. For future nominations, the Governance Committee expects to consider diversity when identifying nominees.
Identification and Evaluation of Nominees
The Governance Committee is responsible for regularly assessing the appropriate size of the boardBoard and whether any vacancies on the boardBoard are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Governance Committee is responsible for considering potential candidates for director. The Governance Committee will consider bona fide candidates from all relevant sources, including current boardBoard members, professional search firms, stockholders and other persons. The Governance Committee will consider director candidates recommended by our stockholders, based on the same criteria listed above that would apply to candidates identified by a Governance Committee member. The Governance Committee is responsible for evaluating director candidates in light of the boardBoard membership criteria described above, based on all relevant information and materials available to the Governance Committee. This includes information and materials provided by stockholders recommending director candidates, professional search firms and other parties.
Stockholder Recommendations
The Governance Committee will consider director candidates recommended by stockholders of the Company. Stockholder nominations for director must be made in writing and addressed to the Corporate Secretary of the Company. Such stockholder’s notice shall set forth the following information:
•The information required by Section 2.15 of our Bylaws (a copy of which is included as an exhibit to our Registration
Statement on Form S-1 as filed with the SEC on March 27, 2007); and
•Any other information that such stockholder believes is relevant in considering the director candidate.
Communications with the Board of Directors
The board of directorsBoard welcomes the submission of any comments or concerns from stockholders or other interested parties. If you wish to send any communications to the board of directors,Board, you may use one of the following methods:
•Write to the boardBoard at the following address:
Board of Directors
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Super Micro Computer, Inc.
c/o Robert Aeschliman, General Counsel
980 Rock Avenue
San Jose, California 95131
•E-mail the boardBoard of directorsDirectors at BODInquiries@supermicro.com
Communications that are intended specifically for the independent directors or non-management directors should be sent to the e-mail address or street address noted above, to the attention of the "Independent Directors"“Independent Directors”.
MEETINGS AND COMMITTEES OF THE BOARD
Board Meetings
Each director is expected to devote sufficient time, energy and attention to ensure diligent performance of his or her duties and to attend all boardBoard and committee meetings. We encourage, but do not require, each boardBoard member to attend our annual meeting of stockholders. Five of our directors attended ourWe held an annual meeting of stockholders held duringon May 19, 2023, for our fiscal year 2016.2022, and five Board members were in attendance. The board of directorsBoard held fournine meetings during fiscal year 2016, each2023, four of which were regularly scheduled meetings. The boardmeetings and five of directors also acted by written consent one time during fiscal year 2016.which were special meetings. All directors attended at least 75% of the meetings of the board of directorsBoard and of the committees on which they served during the time they served as a director inwere members of the Board or such committees during fiscal year 2016.2023.
Board Leadership Structure
Our Chairman, Charles Liang, is also our CEO.Chief Executive Officer. The Board and our Nominating and Corporate Governance Committee believe that it is appropriate for Mr. Liang to serve as both the CEOChief Executive Officer and Chairman due to the relatively small size of our Board, and the fact that Mr. Liang is the founder of the Companyour company with extensive experience in our industry. The Company does not currently have aIn December 2023, Tally Liu was appointed as lead independent director.director for a term of one year.
Board Role in the Oversight of Risk
Our management, with oversight from our Compensation Committee, has reviewed our compensation policies and practices with respect to risk-taking incentives and risk management and does not believe that potential risks arising from our compensation polices or practices are reasonably likely to have a material adverse effect on the Company.our company.
Committees of the Board of Directors
The Board has three standing committees to facilitate and assist the board of directorsBoard in discharging its responsibilities: the Audit Committee, the Compensation Committee and the Governance Committee. In accordance with applicable NASDAQ listing standards,requirements of The Nasdaq Stock Market, each of these committees is comprised solely of non-employee, independent directors. The charter for each committee is available at www.Supermicro.com by first clicking on “About Us”https://ir.supermicro.com/governance/governance-documents/default.aspx. In April 2023, the Governance Committee conducted a review of its charter and then “Investor Relations” and then “Corporate Governance”.amended it in connection with such review. In October 2023, each of the three standing committees (including the Governance Committee) conducted their periodic review of their charters. A description of the charters is set forth below. The charter of each committee also is available in print to any stockholder who requests it. The following table sets forth the current members of each of the standing board committees:Board committees.
| Audit Committee | Compensation Committee | Governance Committee | ||||||||||||||
| Daniel Fairfax | Sherman | |||||||||||||||
| Shiu Leung (Fred) Chan | ||||||||||||||||
(1) Committee Chairperson
Audit Committee
The Audit Committee has three members.members as of the date of this Proxy Statement. The Audit Committee met seventen times in fiscal year 2016,2023, four of which were regularly scheduled quarterly meetings and threesix of which were special meetings. Our boardThe Board has determined that each member of our Audit Committee meets the requirements for independence under the applicable listing standardsrequirements of NASDAQThe Nasdaq Stock Market (including Rule 5605(c)(2)(A)) and the rules of the SEC. Our board of directorsSEC (including Rule 10A-3 promulgated under the Exchange Act). The Board has also determined that each memberof the three members of our Audit Committee is an “audit committee financial expert” as defined under applicable SEC rules.in Item 407 of Regulation S-K promulgated by the SEC.
As outlined more specifically in the Audit Committee charter, the Audit Committee has, among other duties, the following responsibilities:
•Appoints, retains and approves the compensation and retention of our independent auditors, and the reviewreviews and evaluation ofevaluates the auditors’ qualifications, independence and performance;
•Oversees the independent auditors'auditors’ audit work and reviews and pre-approves all audit and non-audit services that may be performed by them;
•Reviews and discusses with the independent auditors any audit problems, or difficulties and management’s response to them, and all matters that the Public Company Accounting Oversight Board and the SEC require to be discussed with the committee;
•Reviews and discusses with management press releases regarding our financial results, as well as financial information and earnings guidance provided to securities analysts and rating agencies;
•Reviews and approves the planned scope of theour annual audit;
•Monitors the rotation of partners of the independent auditors on thetheir engagement team as required by law;
•Reviews our financial statements and discusses with management and the independent auditors the results of the annual audit and the review of our quarterly financial statements;
•Reviews our critical accounting policies and estimates;
•Oversees the adequacy of our financial controls;
•Reviews, discusses and approves the internal audit function’s (i) internal audit plan, (ii) all related-partymajor changes to the internal audit plan, (iii) the scope, progress and results of executing the internal audit plan, and (iv) the annual performance of the internal audit function;
•Reviews, approves and oversees all related party transactions;
•Establishes and oversees procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls or auditing matters and oversees enforcement, compliance and remedial measures under our Code of Business Conduct and Ethics;
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•Initiates investigations and hires legal, accounting and other outside advisors or experts to assist the Audit Committee, as it deems necessary to fulfill its duties;
•Periodically reviews and discusses with management our major financial risk exposures and steps management has taken to monitor and control the exposures, including our risk assessment and risk management guidelines and policies;
•Reviews and evaluates, at least annually, the adequacy of the audit committeeAudit Committee charter and recommendrecommends any proposed changes to the boardBoard for approval; and
•Periodically performs an evaluation of directors for approval.the Audit Committee’s performance of its duties.
Compensation Committee
The Compensation Committee has three members as of the date of this Proxy Statement. The Compensation Committee charter provides that the Compensation Committee shall be comprised of no fewer than two members andmembers. The Compensation Committee met foureleven times in fiscal year 2016.2023, four of which were regularly scheduled meetings and seven of which were special meetings. The Compensation Committee is comprised solely of non-employee directors. Our boardThe Board has determined that each member of our Compensation Committee meets the requirements for independence under the applicable listing standardsrequirements of NASDAQ.The Nasdaq Stock Market.
As outlined more specifically in the Compensation Committee charter, the Compensation Committee has, among other duties, the following responsibilities:
•Periodically reviews and advises our boardthe Board concerning the Company'sour overall compensation philosophy, policies and plans, including a review and approval of both regionala group of companies for general executive compensation competitive comparisons, approval of target pay and performance objectives against this group (and broader industry reference), and monitoring of our executive compensation practiceslevels and trends;their performance relative to this group;
•Reviews and approves corporate goals and objectives relevant to compensation of the chief executive officerChief Executive Officer and other executive officers;
•Evaluates the performance of the chief executive officerChief Executive Officer and other executive officers in light of those goals and objectives;objectives, including generally against the overall performance of executive officers at comparable companies, all while taking into account our risk management policies and practices, and any other factors the Compensation Committee deems appropriate;
•Reviews and approves the compensation of the chief executive officerChief Executive Officer and other executive officers;officers and other key employees;
•Reviews and approves our incentive compensation plans and equity compensation plans;
•Monitors and assesses risks associated with our compensation policies, including whether such policies could lead to unnecessary risk-taking behavior, and consults with management regarding such risks;
•Administers the issuance of restricted stock grants, stock options and other equity awards to executive officers, directors and directorsother eligible individuals under our stock plans;equity compensation plans, provided that the Compensation Committee may delegate the approval of grants of options and other equity awards to participants other than certain individuals subject to Section 16 of the Exchange Act as provided in the applicable plan;
•Reviews and evaluates, at least annually, the performance of the compensation committee and its members, including compliance of the compensation committee with its charter and the adequacy of the Compensation Committee charter and recommends any proposed changes to the Board for approval; and
•Periodically performs an evaluation of the Compensation Committee’s performance of its duties.
In general, the Compensation Committee discharges the Board’s responsibilities regarding the determination of executive compensation, committee charter.and reviews and makes recommendations to the full Board in the determination of non-employee director compensation. The Compensation Committee also makes recommendations to the full Board regarding non-ordinary course executive compensation matters, including with respect to new or amended employment contracts, severance or change-in-control plans or arrangements, and may adopt, amend and terminate such agreements, arrangements or plans. The Compensation Committee may delegate its responsibilities, along with the authority to take action in relation to such responsibilities, to subcommittees comprised of one or more Compensation Committee members, subject to requirements of our bylaws and applicable laws, regulations and the terms of our executive compensation plans. Additional information about the Compensation Committee’s processes for determining executive and non-employee director compensation, including the role of the Compensation Committee’s compensation consultant and our executive officers, can be found in the “Executive Compensation” and “2023 Director Compensation” sections of this Proxy Statement.
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Governance Committee
The Governance Committee has three members as of the date of this Proxy Statement. The Governance Committee charter provides that the Governance Committee shall be comprised of no fewer than two members andmembers. The Governance Committee met foursix times in fiscal year 2016.2023, four of which were regularly scheduled meetings and two of which were special meetings. The Governance Committee is comprised solely of non-employee directors. Our boardThe Board has determined that each member of our Governance Committee meets the requirements for independence under the applicable listing standardsrequirements of NASDAQ.The Nasdaq Stock Market.
As outlined more specifically in the Governance Committee charter, the Governance Committee has, among other duties, the following responsibilities:
•Reviews and makes recommendations to the Board regarding the size of the Board;
•Identifies individuals qualified to become directors;
•Develops and recommends to our board of directorsthe Board criteria any other factors that the Governance Committee deems relevant, including those that promote diversity, for selecting qualified director candidates;candidates in the context of the current make-up of the Board;
•Considers any nominations of director candidates validly made by our stockholders;
•Conducts an annual evaluation of director independence that considers applicable Nasdaq rules, applicable law and our Corporate Governance Guidelines to enable the Board to make a determination of each director’s independence;
•Reviews committee memberstructures and compositions and recommends to the Board concerning qualifications, appointment and removal;removal of committee members;
•Oversees compliance with our Corporate Governance Guidelines and reports on such compliance to the Board;
•Assists the Board in the evaluation of our board of directorsthe Board and each committee;
•Periodically assesses, reports, and provides guidance to management and the full Board on our practices with respect to environmental, social and corporate governance issues, including monitoring climate-related issues, and reviews boardenvironmental sustainability performance reports;
•Provides guidance and committee charters for consistency and adequacy under applicable rules, and make recommendations to the board for any proposed changes;Board regarding legal compliance matters as appropriate relating to current environmental public policy trends;
•Reviews and
•Periodically performs an evaluation of the Compensation Committee’s performance of its duties.
The Governance Committee may delegate its responsibilities, along with the authority to take action in relation to such responsibilities, to subcommittees comprised of one or more Governance Committee members, subject to requirements of our bylaws, applicable laws and regulations.
In accordance with our bylaws, our Board establishes additional committees for specific delegated purposes, roles and responsibilities that are temporary in nature.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee as of the date of this Proxy Statement is a current or former officer or employee of theour Company or had any relationship with theour Company requiring disclosure.
In addition, during fiscal year 2016,2023, none of our executive officers served as a member of the compensation committee of the board of directors or compensation committee of any other entity that has one or more executive officers who served on our boardCompensation Committee of directors orthe Board. Mr. Sherman Tuan and Mr. Tally Liu served on the Compensation Committee.Committee during all of fiscal year 2023. Mr. Dan Fairfax served on the Compensation Committee during a portion of fiscal year 2023 with his appointment commencing on October 26, 2022.
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP BY MANAGEMENT
The following table sets forth certain information known to us regarding beneficial ownership of our common stock as of December 31, 2016November 24, 2023 by:
| Name and Address of Beneficial Owner(1) | Amount and Nature of Beneficial Ownership(2) | Percent of Common Stock Outstanding(3) | |||
| Executive Officers and Directors: | |||||
| Charles Liang(4) | 8,947,256 | 18.0 | % | ||
| Howard Hideshima(5) | 159,874 | * | |||
| Phidias Chou(5) | 135,871 | * | |||
| Chiu-Chu (Sara) Liang(6) | 8,947,256 | 18.0 | % | ||
| Yih-Shyan (Wally) Liaw(7) | 2,203,823 | 4.6 | % | ||
| Laura Black(5) | 16,500 | * | |||
| Michael S. McAndrews(5) | 9,000 | * | |||
| Hwei-Ming (Fred) Tsai(8) | 301,000 | * | |||
| Saria Tseng | — | * | |||
| Sherman Tuan(5) | 59,500 | * | |||
| All directors and executive officers as a group (10 persons)(9) | 11,832,824 | 23.6 | % | ||
| 5% Holders Not Listed Above: | |||||
| BlackRock, Inc.(10) | 3,457,156 | 7.2 | % | ||
| FMR LLC(11) | 3,917,139 | 8.1 | % | ||
| The Vanguard Group(12) | 3,139,239 | 6.5 | % | ||
Name and Address of Beneficial Owner(1) | Amount and Nature of Beneficial Ownership(2) | Percent of Common Stock Outstanding(3) | |||||||||
| Executive Officers and Directors: | |||||||||||
Charles Liang(4) | 7,815,881 | 14.3 | % | ||||||||
Don Clegg(5) | 32,565 | * | |||||||||
George Kao(6) | 29,342 | * | |||||||||
David Weigand(7) | 53,130 | * | |||||||||
Sherman Tuan(8) | 30,113 | * | |||||||||
Sara Liu(9) | 7,815,881 | 14.3 | % | ||||||||
| Tally Liu | 28,313 | * | |||||||||
| Daniel Fairfax | 20,987 | * | |||||||||
| Shiu Leung (Fred) Chan | 40,917 | * | |||||||||
| Judy Lin | 4,863 | * | |||||||||
| Robert Blair | 1,386 | * | |||||||||
Yih-Shyan (Wally) Liaw(10) | 1,592,998 | 3.0 | % | ||||||||
All directors and executive officers as a group(11) | 9,650,495 | 17.6 | % | ||||||||
| 5% Holders Not Listed Above: | |||||||||||
Disciplined Growth Investors Inc.(12) | 2,831,259 | 5.3 | % | ||||||||
BlackRock, Inc.(13) | 5,457,942 | 10.2 | % | ||||||||
The Vanguard Group(14) | 5,083,962 | 9.5 | % | ||||||||
| Total executives, directors & 5% or more stockholders | 42.6 | % | |||||||||
*Represents beneficial ownership of less than one percent of the outstanding shares of common stock
(1)Except as otherwise indicated, to our knowledge the persons named in this table have sole voting and investment power with respect to all shares of |
(2)Under the SEC rules, a person is deemed to be the beneficial owner of shares that can be acquired by such person within 60 days upon the exercise of options or RSUs subject to vesting. As a result, amounts reported by beneficial owners in this table may differ from amounts reported in Section 16 filings made by such person.
(3)Calculated on the basis of 53,538,116 shares of common stock outstanding as of November 24, 2023, provided that any additional shares of common stock that a stockholder has the right to acquire within 60 days after November 24, 2023 are deemed to be outstanding for the purposes of calculating that stockholder’s percentage of beneficial ownership.
(4)Includes 4,068,665 shares held by Mr. Liang and 1,096,750 shares issuable upon the exercise of options exercisable within 60 days after November 24, 2023. Also includes 2,647,752 shares jointly held by Mr. Liang and Sara Liu, his spouse, 2,714 shares held directly by Ms. Liu. See footnote 9.
(5)Includes 29,922 options exercisable within 60 days after November 24, 2023.
(6)Includes 22,082 options exercisable within 60 days after November 24, 2023.
(7)Includes 38,865 options exercisable within 60 days after November 24, 2023.
(8)Includes 2,500 shares issuable upon the exercise of options exercisable within 60 days after November 24, 2023.
(9)Includes 2,647,752 shares jointly held by Ms. Liu and Mr. Liang, her spouse, 4,068,665 shares held by Charles Liang, and 1,096,750 shares issuable upon the exercise of options exercisable within 60 days after November 24, 2023 by Mr. Liang. See footnote 4.
(10)Includes 8,437 shares issuable upon the exercise of options exercisable within 60 days after November 24, 2023. 1,540,805 shares held by The Liaw Family Trust, for which Mr. Liaw and his spouse serve as trustees, and 34,377 shares held by Mr. Liaw’s spouse.
(11)Includes 1,198,556 options exercisable within 60 days after November 24, 2023.
(12)The information is based solely on the Schedule 13-F filed on November 15, 2023. Disciplined Growth Investors Inc. has sole voting power over 2,617,316 shares of common stock and sole dispositive power over 2,831,259 shares of common stock. The address for the reporting requirementsperson is 150 S. Fifth St. Suite 2550, Minneapolis, MN 55402.
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(13)The information is based solely on the Amendment No. 2 to Schedule 13G filed on January 6, 2023. BlackRock, Inc. has sole voting power over 5,342,645 shares of common stock and sole dispositive power over 5,457,942 shares of common stock. The address for the reporting person is 55 East 52nd Street, New York, New York 10055.
(14)The information is based solely on the Amendment No. 2 to Schedule 13G filed on February 9, 2023. The Vanguard Group has shared voting power over 78,721 shares of common stock, sole dispositive power over 4,958,841 shares of common stock and shared dispositive power over 125,121 shares of common stock. The address for the reporting person is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act, which require them to file reports with respect to their ownershiprequires our directors, executive officers, and holders of more than 10% of our common stock to file reports regarding their ownership and their transactionschanges in ownership of our common stock. Based upon (i)securities with the SEC, and to furnish us with copies of all Section 16(a) reports that we received from such persons for their fiscal year 2016 transactions in our common stockthey file.
Based solely upon a review of Forms 3 and their common stock holdings4 and (ii) theamendments thereto furnished to us and certain written representations received from one or more of such persons that no annual Form 5 reports were requiredprovided to be filed by them for fiscal year 2016,us, we believe that all reporting requirements under Section 16(a) were met in a timely manner byduring the persons who werefiscal year ended June 30, 2023, our directors, executive officers, members of the board of directors orand greater than 10% stockholders during such fiscal year, other than one late report made by Phidias Choucomplied with respect to one transaction.all applicable Section 16(a) filing requirements.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis (“CD&A”)
In this section we provide an explanation and analysis of the material elements of the compensation provided to our Chief Executive Officer, Chief Financial Officer, and both of our other two executive officers who were serving on June 30, 2023, which was the end of our fiscal year 2023 (collectively referred to as our “named executive officers” or “NEOs”).
Our named executive officers and their positions at the end of fiscal year 2023 were:
| Charles Liang | President, Chief Executive Officer (“CEO”) and Chairman of the Board | ||||
| David Weigand | Senior Vice President, Chief Financial Officer and Chief Compliance Officer | ||||
| Don Clegg | Senior Vice President, Worldwide Sales | ||||
| George Kao | Senior Vice President, Operations | ||||
Overview of Compensation
(1)The chart presents the percentage compensation by compensation component received by the three non-CEO named executive officers together (aggregate compensation) as a group, as well as the split between cash and equity compensation for all such persons received in the aggregate as a group. No equivalent chart is presented for CEO compensation because, for all of fiscal year 2023, and continuing for up to about the next five years, almost all of Mr. Liang’s compensation has been, and is expected to be, based only upon his ability to earn the 2021 CEO Performance Award (and a successor award), all as further described below.
Compensation Philosophy and Objectives—Continuing Improvement of Performance-Based Compensation Arrangements
Our executive compensation philosophy is to link a significant portion of NEO compensation to corporate performance using components such as performance-based restricted stock units (“PRSUs”) and stock options and reduce our historical reliance on fixed compensation such as base salary, fixed bonuses and regularly refreshed stock grants with time-based vesting. Beginning in fiscal year 2021 our efforts to revise our NEO compensation plans were primarily focused on our CEO but, in fiscal year 2022, the Compensation Committee expanded the linkage of compensation to corporate performance to two additional named executive officers. During fiscal year 2023, the Compensation Committee further refined the link between compensation and corporate performance for these other two named executive officers. For both fiscal year 2022 and fiscal year 2023 the Compensation Committee used a similar balance between fixed compensation components and performance-based compensation components for our Other NEOs. However, for fiscal year 2023 the Compensation Committee re-evaluated the performance metrics (“key performance indicators” or “KPIs”) used under the performance-based portion of such programs, as well as the fixed bonus component of such programs. These efforts culminated in the adoption of a new fiscal year 2023 compensation program for each of Messrs. Weigand and Clegg in January 2023 (the “FY2023 Performance Program for Other Named Executive Officers”). See “FY2023 Performance Program for Other Named Executive Officers” below for more
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specific information about the design and operation of the compensation program for Messrs. Weigand and Clegg for fiscal year 2023.
With respect to our CEO, Mr. Liang, fiscal year 2023 was the second year of evaluating and monitoring the results of performance-based compensation arrangements made with Mr. Liang in fiscal year 2021. In March 2021, we changed Mr. Liang’s compensation to be almost completely performance-based. As discussed in more detail below, in March 2021, we converted nearly 100% of Mr. Liang’s compensation to performance-based compensation through the issuance of performance-based options (the “2021 CEO Performance Award”) to purchase 1,000,000 shares of our common stock at an exercise price of $45.00 per share, which price was 32% higher than the market price of our common stock on the date of the award ($34.08). The 2021 CEO Performance Award is comprised of five tranches that vest only if the market price of our common stock reaches various prices (ranging from $45.00 to $120.00 per share) and we achieve certain specified revenue goals, all as described in greater detail below. In connection with the 2021 CEO Performance Award, Mr. Liang’s base salary was reduced to $1.00 per year and Mr. Liang agreed that he would not be eligible for any increase in base salary, or any other cash compensation, until June 30, 2026.
For fiscal year 2023, Mr. Liang’s compensation was again based almost entirely upon the 2021 CEO Performance Award and related agreements. During fiscal year 2022, the first of five tranches under the 2021 CEO Performance Award (representing 200,000 options granted under such award) was earned, and during fiscal year 2023 an additional three tranches under the 2021 CEO Performance Award (representing an additional 600,000 options granted under such award) were earned. This is because, during fiscal year 2023, each of the second, third, and fourth revenue goals of $4.8 billion, $5.8 billion, and $6.8 billion, respectively, in annualized revenue were achieved and the second, third, and fourth stock price goals of $60.00, $75.00, and $95.00, respectively, were achieved. In addition, during fiscal year 2023 and through the date of this proxy statement, the Compensation Committee also certified the achievement of the fifth and final stock price goal of $120.00. As a result, as of the date of this proxy statement, only 200,000 of the original 1,000,000 options granted under the 2021 CEO Performance Award remain unearned, and the only remaining goal under the 2021 CEO Performance Award is the fifth revenue goal of $8.0 billion in annualized revenue. Mr. Liang received a base salary of $1 during fiscal year 2023.
In summary, since the latter part of fiscal year 2021 and for fiscal years 2022 and 2023, almost all of Mr. Liang’s compensation has been based only upon achieving the revenue goals described below and the common stock price targets described below. To fully achieve the performance goals of the 2021 CEO Performance Award, our revenue must continue to increase to $8 billion over a rolling four-quarter period (from $3.6 billion for fiscal year 2020 which was the last full fiscal year before the award). The 60-trading-day average stock price of our common stock has already reached the final stock price goal of $120.00 per share (from $34.08 on the day the award was granted). As of the date of this proxy statement, the 2021 CEO Performance Award has been earned and is exercisable at a per share price of $45 with respect to 800,000 shares. See also “- Subsequent Event - CEO Performance Award Granted in Fiscal Year 2024.”
Fiscal Year 2023 Business Performance Highlights
The following are highlights of our performance for fiscal year 2023. When given, comparisons are between fiscal year 2023 and fiscal year 2022 results.
•Revenue was $7,123.5 million, up 37.1%;
•Gross margin was 18.0%, an improvement from 15.4%;
•Net income was $640.0 million, an improvement of 124.4%;
•Diluted net income per common share was $11.43 million, up 114.8%; and
•During fiscal year 2023 and the period from July 1, 2022 to June 30, 2023, our stock price reached a high of $261.66 on June 9, 2023.
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Process Overview
The Compensation Committee of the board of directorsBoard discharges the board of directors’Board’s responsibilities relating to compensation of all of our executive officers. TheAt the end of fiscal year 2023, the Compensation Committee iswas comprised of three non-employee directors, although during the period from July 1, 2022 through October 25, 2022, the Compensation Committee was principally comprised of two non-employee directors. All of the non-employee directors both of whom arewho served on the Compensation Committee during fiscal year 2023 were independent pursuant to the applicable listing rules of NASDAQ and Rule 16b-3 under the Exchange Act, and Section 162(m) of the Internal Revenue Code (“Code”).Act.
The agenda for meetings is determined by the Chair of the Compensation Committee with the assistance of Howard Hideshima, our Chief Financial Officer.Officer and General Counsel. Committee meetings are regularly attended by Mr. Hideshimaour Chief Financial Officer and Robert Aeschliman, our General Counsel. However, Mr. Hideshima does not attendduring the portionmeetings, neither our Chief Financial Officer nor our General Counsel participates in the consideration of meetings during which histheir own performance or compensation, is being discussed. Mr. Hideshimaalthough he may provide an introduction of the topic to be considered to the Compensation Committee. Our Chief Financial Officer and Mr. AeschlimanGeneral Counsel support the Compensation Committee in its work by providing information relating to our financial plans performance assessments of our executive officers and othercertain personnel-related data. In addition, the Compensation Committee has the authority under its charter to hire, terminate and approve fees for advisors, consultants and agents as it deems necessary to assist in the fulfillment of its responsibilities. In July 2015, asAs part of making an overall assessment of each individual’snamed executive officer’s role and performance, and structuring our compensation programs for fiscal year 2016,2023, the Compensation Committee (among other things) (1) reviewed recommendations of management as well asour Chief Executive Officer, (2) considered publicly available peer group compensation data.
| NetApp, Inc. | |||||
| Ciena Corporation | NETGEAR, Inc. | ||||
| Diebold Nixdorf, Inc. | |||||
| Extreme Networks, Inc. | |||||
| F5, Inc. | Teradata Corporation | ||||
| Infinera Corporation | TTM Technologies, Inc. | ||||
| Juniper Networks, Inc. | Viasat, Inc. | ||||
| Lumentum Holdings Inc. | Vishay Intertechnology, Inc. | ||||
The Compensation Committee utilized for fiscal year 2023 the independent consultant report developed for fiscal year 2022 as it believed the report continued to be relevant. Recognizing that over-reliance on external comparisons can be of concern, the Compensation Committee used external comparisons as only one point of reference and was mindful of the value and limitations of comparative data. Before receiving Radford’s information and assistance in fiscal year 2022, the Compensation Committee assessed the independence of Radford in the light of all relevant factors, including additional services and other factors required by the SEC, that could give rise to a potential conflict of interest with respect to Radford. Based on these reviews and assessments, the Compensation Committee did not identify any conflicts of interest raised by the work performed by Radford.
Key Fiscal Year 2023 Executive Compensation Decisions and Actions
Key fiscal year 2023 executive compensation decisions and actions included the following:
•As a part of its philosophy to link compensation to corporate performance, the Compensation Committee adopted the FY2023 Performance Program for Other Named Executive Officers in January 2023. Similar to the program for these persons utilized during the prior fiscal year, in addition to base salary and fixed bonus components, the program continued to include a performance-based annual incentive award, which is payable in the form of service-based restricted stock units (“RSUs”) that generally vest over a period of four years and cash. The performance-based annual incentive award continues to have each of the following features:
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*Primarily formula-based;
*Utilizes company performance metrics that are individualized based upon the role of the officer; and
*Utilizes company performance metrics tied closely to stockholder value, including percentage appreciation in stock price from the prior fiscal year and percentage increase in worldwide revenue from the prior fiscal year. See “- FY2023 Performance Program for Other Named Executive Officers” below for more information.
•As a part of continued efforts to evolve the approach to named executive officer compensation and to further improve the linkage of compensation to corporate performance for other named executive officers, the Compensation Committee carefully re-evaluated the KPIs utilized under the performance-based portion of the FY2023 Performance Program for Other Named Executive Officers and the fixed bonus component of the FY2023 Performance Program for Other Named Executive Officers:
*Under such program, the Compensation Committee determined to utilize the same KPIs for fiscal year 2023 as were utilized in fiscal year 2022 for Mr. Weigand.These included a Stock Price Increase KPI and a Long-Term Investor Increase KPI, as well as a subjective Individual Performance Evaluation KPI determined by the CEO. The Compensation Committee believed such KPIs continued to accurately reflect the most relevant factors to measure the CFO’s performance in a manner that aligns with stockholder value and stockholder interests. The weightings given to such KPIs were also unchanged between the programs for fiscal year 2022 and fiscal year 2023. See “- FY2023 Performance Program for Other Named Executive Officers – Performance Incentive Award” below for more information.
In selectingaddition, the companiesCompensation Committee decided to leave unchanged the fixed bonus component for inclusionMr. Weigand at 30% of his base salary for fiscal year 2023. See “- FY2023 Performance Program for Other Named Executive Officers – Fixed bonus component” below for more information.
*Under such program, the Compensation Committee determined to utilize an updated and different mix of KPIs for fiscal year 2023 for Mr. Clegg’s program. For fiscal year 2023, Mr. Clegg’s KPIs continued to include a Worldwide Revenue KPI, as well as a subjective Individual Performance Evaluation KPI determined by the CEO (features similar to those used for fiscal year 2022).However, for fiscal year 2023, Mr. Clegg’s other KPIs included both a Growth in Top 3000 Customer KPI and a Slow Moving & Excess and Obsolete Inventory KPI (the “Inventory KPI”), which are new. Previously, in fiscal year 2022, Mr. Clegg’s other KPIs included both a Stock Price Increase KPI and a Worldwide Net Profit KPI, which the sample,Compensation Committee determined not to utilize for fiscal year 2023, as the following factors were considered: industry, net revenues, operating incomeCompensation Committee believed the new KPIs more accurately reflected the appropriate objectives of a Senior Vice President of Worldwide Sales in a manner that aligns with stockholder value and whether the company may compete against us for executive talent. These companies ranged in annual revenue from approximately $552.9 million to $6.1 billion.stockholder interests. In addition, to gathering data specific to the above listed companies, the Compensation Committee also reviewed public surveysdetermined for fiscal year 2023 to adjust the weightings of the various KPIs selected for Mr. Clegg. For example, while the Worldwide Revenue KPI had been double weighted in Mr. Clegg’s program for fiscal year 2022, for fiscal year 2023 this KPI was triple weighted. See “- FY2023 Performance Program for Other Named Executive Officers – Performance Incentive Award” below for more information.
In addition, the Compensation Committee decided to adjust the fixed bonus component for Mr. Clegg to 20% of his base salary for fiscal year 2023, compared to 25% of his base salary for the prior fiscal year 2022. See “- FY2023 Performance Program for Other Named Executive Officers – Fixed bonus component” below for more information.
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•Based on effective base salaries and the Compensation Committee’s review and certification of actual performance (as described further below) under the FY2023 Performance Program for Other Named Executive Officers for fiscal year 2023:
*Mr. Weigand received a fixed bonus amount of $148,568 paid in semi-monthly installments during fiscal year 2023, and based on performance against fiscal year 2023 goals earned a cash payment of $167,127 and earned an aggregate grant of $668,509 in RSUs that were granted on August 24, 2023 and August 25, 2023. These RSUs generally vest in annual installments over four years; and
*Mr. Clegg received a fixed bonus amount of $88,888 paid in semi-monthly installments during fiscal year 2023, and based on performance against fiscal year 2023 goals earned a cash payment of $157,923, and earned an aggregate grant of $157,923 in RSUs that were granted on August 24, 2023 and August 25, 2023. These RSUs generally vest in annual installments over four years.
•Base salaries for the named executive officers other than the CEO were also adjusted during fiscal year 2023 as a part of a perceived critical need to enhance retention value for key personnel, and were based in part upon:
*Analyses provided in the previously prepared compensation practices.study for fiscal year 2022 that indicated that base salaries for such named executive officers (prior to the increases) were generally below the 25th percentile in the market. With the adjustments made during fiscal year 2023, based upon the previously prepared compensation study for fiscal year 2022 (prepared in July 2021), the base salaries for the named executive officers other than the CEO were generally at the 50th percentile in the market according to such study; and
*Consideration of the continued inflationary market conditions in fiscal year 2023.
•Fiscal year 2023 was the second full fiscal year in which the CEO operated under the 2021 CEO Performance Award, and related agreements, which was granted in March 2021. During the preceding fiscal year 2022, one of the five tranches under the 2021 CEO Performance Award (representing 200,000 options granted under such award) was earned. During fiscal year 2023, the Compensation Committee closely monitored the Company’s performance and the CEO’s performance against not only the key metrics of the 2021 CEO Performance Award, but also the objectives of the 2021 CEO Performance Award, for alignment with stockholder value and stockholder interests. During fiscal year 2023, the CEO received a base salary of only $1, no short-term cash bonus awards, and no time-based or performance-based equity awards.
•During fiscal year 2023, an additional three tranches under the 2021 CEO Performance Award (representing 600,000 options granted under such award) were earned. More specifically:
*The Company’s annualized revenue exceeded $4.8 billion (representing the second revenue goal under the 2021 CEO Performance Award) for the four quarters ended June 30, 2022. The trailing 60-trading-day average of closing prices of the Company’s Common Stock reached $60.00 (representing the second stock price goal under the 2021 CEO Performance Award) on October 11, 2022. Based upon the matching of the relevant revenue goal with the corresponding stock price goal, the Compensation Committee certified the vesting of the second 200,000 shares subject to the 2021 CEO Performance Award on October 25, 2022;
*The Company’s annualized revenue exceeded $5.8 billion (representing the third revenue goal under the 2021 CEO Performance Award) for the four quarters ended September 30, 2022. The trailing 60-trading-day average of closing prices of the Company’s Common Stock reached $75.00 (representing the third stock price goal under the 2021 CEO Performance Award) on December 23, 2022. Based upon the matching of the relevant revenue goal with the corresponding stock price goal, the Compensation Committee certified the vesting of the third 200,000 shares subject to the 2021 CEO Performance Award on January 4, 2023; and
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*The Company’s annualized revenue exceeded $6.8 billion (representing the fourth revenue goal under the 2021 CEO Performance Award) for the four quarters ended June 30, 2023. The trailing 60-trading-day average of closing prices of the Company’s Common Stock reached $95.00 (representing the fourth stock price goal under the 2021 CEO Performance Award) on April 17, 2023. Based upon the matching of the relevant revenue goal with the corresponding stock price goal, the Compensation Committee certified the vesting of the fourth 200,000 shares subject to the 2021 CEO Performance Award on September 19, 2023.
•The trailing 60-trading-day average of closing prices of the Company’s Common Stock reached $120.00 (representing the fifth and final stock price goal under the 2021 CEO Performance Award) on May 30, 2023.
The Compensation Committee does not seekwill continue to specifically benchmark compensation based uponclosely monitor the sample companies reviewed nor doesCompany’s performance and the Compensation Committee employ any other formulaic process in making compensation decisions. RatherCEO’s performance against both the Compensation Committee uses its subjective judgment based uponkey metrics and objectives of the 2021 CEO Performance Award. As of the date of this proxy statement, the 2021 CEO Performance Award has been earned and is exercisable at a reviewper share price of all information, including an annual review for each officer$45 with respect to 800,000 shares. The fifth and final annualized revenue goal of his or her level$8.0 billion under the 2021 CEO Performance Award remains to be achieved. In the event the fifth revenue goal is achieved, then the fifth and final tranche of responsibility, contributions to our financial results and our overall performance. the 2021 CEO Performance Award will be earned.
The Role of the Most Recent Stockholder Say-on-Pay Vote
The Compensation Committee, makes a generalized assessment of these factors and this information is not weighted in any specific manner.
Our last annual meeting of stockholders was held on February 13, 2014May 19, 2023 (the "2013“Fiscal Year 2022 Annual Meeting"Meeting”), and we provided our stockholders the annual opportunity to vote to approve, on an advisory basis, the compensation of the Company'sour named executive officers as disclosed in the proxy statement for our 2013 Annual Meeting.such meeting. At the meeting, 35,521,057 shares orstockholders representing approximately 98.1%98% of the stockholders who votedstock present and entitled to vote on thethis “say-on-pay” proposal approved the compensation of our named executive officers, while only 514,344 or approximately 1.4% voted against (with approximately 155,954 shares or 0.4% abstaining). 4,727,490 shares held by brokers were not voted with respect to this proposal.officers. Although the advisory stockholderFiscal Year 2022 Annual Meeting was held during the latter part of fiscal year 2023 when significant decisions affecting compensation matters for fiscal year 2023 for the named executives had already been made by the Compensation Committee and the say-on-pay vote on executive compensation iswas non-binding, the Compensation Committee has considered and willexpects to continue to consider the outcome of thethat vote when making future compensation decisions for our named executive officers. In determining and deciding on executive compensation for fiscal year 2016, our Compensation Committee took into account the results of the 2013 Annual Meeting stockholder advisory vote to approve executive compensation, particularly the strong support expressed by the Company's stockholders, as one of the many factors considered in deciding that the Company's compensation policies and procedures for 2016 should largely remain consistent with our policies and procedures in prior years.
Role of Executive Officers in the Compensation Process
Each year, management provides recommendations to the Compensation Committee on issues such asregarding compensation program design and evaluations of executive and Company performance. In particular, in fiscal year 2016,2023, both our Chief Executive Officer and Chief Financial Officer provided the Compensation Committee with their views on the merits of a performance-based compensation program for certain named executive officers (other than the CEO), and the design of such program (including components thereof such as base salary, short-term cash incentives, equity incentives, and the KPIs utilized under the performance-based portion of such program). The Compensation Committee believes the participation of such named executive officers in the process which culminated in the adoption in fiscal year 2023 of the FY2023 Performance Program for Other Named Executive Officers, and the willingness of such named executive officers to participate in the program developed, is evidence of the commitment of these named executive officers to our Company and their confidence in our future.
At the end of fiscal year 2023, our Chief Financial Officer provided the Compensation Committee with information about the Company’s performance against the objective metrics set forth in the FY2023 Performance Program for Other Named Executive Officers and the Chief Executive Officer provided the Compensation Committee with his subjective evaluation of the performance of such participating named executive officers, which is one of performance metrics contained in the FY2023 Performance Program for Other Named Executive Officers. This performance evaluation provided by the CEO included his views as to the impact of individual named executive officers on strategic initiatives and organizational goals, as well as their functional expertise and leadership. The Chief Executive Officer also had access to competitive data collected by management. provided the Compensation Committee with his views of the nature and extent of our performance against expectations.
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While the Compensation Committee carefully considers all recommendations made by members of management, ultimate authority for all compensation decisions regarding our named executive officers rests with the Compensation Committee.Committee and the Board.
Fiscal Year 2023 CEO Compensation
Overview of Fiscal Year 2023 CEO Compensation
Fiscal year 2023 was the second full fiscal year in which the CEO operated under the 2021 CEO Performance Award, and related agreements. In addition,connection with the grant of the 2021 CEO Performance Award, Mr. Liang receives a de minimis salary of $1 per year and no cash bonuses through June 30, 2026. Mr. Liang must also remain as the Company’s CEO (or such other position with the Company evaluatesas Mr. Liang and the useBoard may agree) at the time each goal is met in order for the corresponding tranche to vest. This helps ensure Mr. Liang’s active leadership of the Company over the long term.
Discussion and Analysis of 2021 CEO Performance Award
On March 2, 2021, the Compensation Committee granted to our Chief Executive Officer, Mr. Liang, the 2021 CEO Performance Award, which is a compensation consultant each year, but currently does not feel that it is necessarylong-term performance-based option award to engage a compensation consultant as partpurchase up to 1,000,000 shares of the Company’s compensation process.common stock that may vest in five equal tranches. Each of the five tranches vests if a specified revenue goal (each, a “Revenue Goal”) and a specified stock price goal (each, a “Stock Price Goal”) is achieved. Revenue Goals must be achieved by June 30, 2026 (the “Revenue Performance Period”) and Stock Price Goals must be achieved by September 30, 2026 (the “Stock Price Performance Period”). As of July 31, 2023, four of the five Revenue Goals have been achieved and all of the Stock Price Goals have been achieved. The 2021 CEO Performance Award will generally expire on March 2, 2031, and includes, among other terms and conditions, a restriction on the sale of any shares issued upon exercise of the 2021 CEO Performance Award until March 2, 2024, the third anniversary of the date of grant.
Revenue Goals(1) | Absolute Change From Revenue Reported for the Fiscal Year Ended Prior to the Grant of the CEO Performance Award (June 30, 2020)(2) | Achievement Status | ||||||||||||
| $4.0 billion | 20% | Achieved(3) | ||||||||||||
| $4.8 billion | 44% | Achieved(4) | ||||||||||||
| $5.8 billion | 74% | Achieved(5) | ||||||||||||
| $6.8 billion | 104% | Achieved(6) | ||||||||||||
| $8.0 billion | 140% | Not yet achieved | ||||||||||||
(1)Revenue means the Company’s total revenues, as reported by the Company in its financial statements on Forms 10-Q and 10-K filed with the SEC (but without giving effect to any rounding used in reporting the amounts in Form 10-Q and Form 10-K), for the previous four consecutive fiscal quarters of the Company.
(2)Revenue reported in the Company’s Form 10-K for the fiscal year 2016,ended June 30, 2020, was $3.34 billion.
(3)Revenue reported for the principal componentsfour quarters ended December 31, 2021, was $4.17 billion.
(4)Revenue reported for the four quarters ended June 30, 2022 was $5.20 billion.
(5)Revenue reported for the four quarters ended September 30, 2022 was $6.02 billion.
(6)Revenue reported for the four quarters ended June 30, 2023 was $7.1 billion.
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The following table sets forth the Stock Price Goals which must be achieved by September 30, 2026, together with its achievement status as of compensationJuly 31, 2023:
Stock Price Goals(1) | Absolute Change in Stock Price from Grant Date Stock Price(2) | Absolute Change in Stock Price From $45 Exercise Price | Achievement Status | ||||||||
| $45 | 32% | 0% | Achieved(3) | ||||||||
| $60 | 76% | 33% | Achieved(4) | ||||||||
| $75 | 120% | 67% | Achieved(5) | ||||||||
| $95 | 179% | 111% | Achieved(6) | ||||||||
| $120 | 252% | 167% | Achieved(7) | ||||||||
(1)Sustained stock price performance is required for our executive officers were:
(2)Utilizes closing stock price on March 2, 2021, of $34.08 per share.
(3)The sixty-trading day average stock price from March 15, 2022 through June 8, 2022 was $45.12.
(4)The sixty-trading day average stock price from July 19, 2022 through October 11, 2022 was $60.16.
(5)The sixty-trading day average stock price from September 30, 2022 through December 23, 2022 was $75.40.
(6)The sixty-trading day average stock price from January 20, 2023 through April 17, 2023 was $95.11.
(7)The sixty-trading day average stock price from March 6, 2023 through May 30, 2023 was $120.87.
Each of the five tranches vests only when both the applicable Revenue Goal and Stock Price Goal for such tranche are determined annuallycertified by the Compensation Committee basedas having been met.
A Revenue Goal and a Stock Price Goal that are matched together can be achieved at different points in time and vesting will occur at the later of the achievement certification dates for such Revenue Goal and Stock Price Goal. Subject to any applicable clawback provisions, policies or other forfeiture terms described in the 2021 CEO Performance Award, once a goal is achieved, it is forever deemed achieved for determining the vesting of a tranche.
There is no automatic acceleration of vesting of the 2021 CEO Performance Award upon recommendationsa future “change in control,” but any tranches that are unvested as of the date of the change in control will vest upon the change in control if the Stock Price Goal related to that tranche is achieved (the Revenue Goals will be disregarded). For purposes of determining whether any Stock Price Goal has been achieved, the stock price shall equal the greater of (1) the most recent closing price per share immediately prior to the effective time of such change in control, or (2) the per share common stock price (plus the per share of common stock value of any other consideration) received by our Chief Executive Officer, taking into account such factors as salary norms in comparable companies and publicly available data regarding compensation increasesstockholders in the industry, a subjective assessmentchange in control. To the extent any tranche of the nature2021 CEO Performance Award has not vested prior to the change in control and does not vest in connection with the change of control based on attainment of the position and an annual reviewrelevant Stock Price Goal, as described above, such tranche under the 2021 CEO Performance Award will terminate as of the contribution and experienceeffective date of each executive officer.the change in control. For the Chief Executive Officer,these purposes, we note that all Stock Price Goals have now been achieved.
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As stated above, during fiscal year 2023, the Compensation Committee considers substantiallyclosely monitored the same sort of information, as well asCompany’s performance and the sizeCEO’s performance against not only the key metrics of the Company2021 CEO Performance Award, but also the objectives of the 2021 CEO Performance Award, for alignment with stockholder value and stockholder interests. The Compensation Committee designed the Chief Executive Officer’s overall stock ownership.
FY2023 Performance Program for Other Named Executive Officers
Overview
On January 24, 2023, after consultations with Mr. Liang, and consideration of such other factors as the Compensation Committee considered appropriate (including input previously received from the Compensation Committee’s compensation consultant and an executive compensation study from prior years), the Compensation Committee approved an executive compensation program for fiscal year 2023 for two of the Company’s NEOs, Mr. Weigand (the “CFO Compensation Program”) and Mr. Clegg (the “SVP Sales Compensation Program”).
The Compensation Committee believes the FY2023 Performance Program for Other Named Executive Officers furthers the Company’s executive compensation philosophy to link compensation to corporate and individual performance. The principal compensation elements of the FY2023 Performance Program for Other Named Executive Officers are:
•A base salary in the form of cash and representing fixed compensation to reward individual performance and contributions (“Base Salary”);
•A fixed bonus component payable in semi-monthly installments in the form of cash and based upon a percentage of Base Salary (the “Fixed Bonus”); and
•A performance-based annual incentive award (“Performance Incentive Award”) which, for Mr. Weigand, is payable 20% in the form of cash (the “Performance Cash”) and 80% in the form of service-based RSUs (the “Performance RSUs”) and, for Mr. Clegg, is payable 50% in the form of Performance Cash and 50% in the form of Performance RSUs. Performance RSUs earned will generally vest in equal annual installments over a period of approximately four years.
Base Salary
The following table sets forth Base Salaries for Mr. Weigand and Mr. Clegg at the end of each of fiscal year 2022 and 2023:
| Name | Principal Position During Fiscal Year 2023 | End of Fiscal Year 2022 Base Salary Rate(1)(2) | End of Fiscal Year 2023 Base Salary Rate(1)(3) | Base Salary % Change | ||||||||||||||||||||||
| David Weigand | Senior Vice President, Chief Financial Officer and Chief Compliance Officer | $ | 465,151 | $ | 520,969 | 12.0 | % | |||||||||||||||||||
| Don Clegg | Senior Vice President, Worldwide Sales | $ | 403,382 | $ | 435,652 | 8.0 | % | |||||||||||||||||||
(1)The base salary amounts actually paid to each named executive officer for fiscal year 2022 and 2023 are disclosed in the Summary Compensation Table.
(2)For fiscal year 2022, salary amounts disclosed in the Summary Compensation Table for each named executive officer are less than the amounts disclosed in the table above because of the adjustments made to Base Salary during fiscal year 2022, which were: for Mr. Weigand, increases to $418,000 effective July 1, 2021, to $434,720 effective March 1, 2022, and to $465,151 effective May 1, 2022; and for Mr. Clegg, increases to $376,640 effective July 1, 2021, to $384,173 effective March 1, 2022, and to $403,382 effective May 1, 2022.
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(3)For fiscal year 2023, salary amounts disclosed in the Summary Compensation Table for each named executive officer differ from the amounts disclosed in the table above because of the timing of adjustments made to Base Salary during fiscal year 2023, which were: for Mr. Weigand, increase to $520,969 effective October 1, 2022; and for Mr. Clegg, increase to $435,652 effective October 1, 2022. In addition, salary amounts disclosed in the Summary Compensation Table for such named executive officers also include amounts for paid out vacation and sick days.
Adjustments to Base Salaries for Mr. Weigand and Mr. Clegg were made during fiscal year 2023 after the Compensation Committee considered recommendations from the CEO. Primary factors the Compensation Committee considered in connection with these increases included the following:
•Analyses provided in the compensation study for fiscal year 2022 which indicated that even after multiple adjustments to base salaries for such executive officers made during the prior fiscal year 2022 (which were discussed in the prior year’s Compensation Discussion & Analysis), the base salaries of ourfor such executive officers were still generally below the 50th percentile in the market. With the adjustments made during fiscal year 2023, based upon the fiscal year 2022 compensation study, the base salaries for Mr. Weigand and Mr. Clegg were generally at the 50th percentile in the market according to such study; and
•Consideration of continuing inflationary market conditions in fiscal year 2023.
In addition, while not participating in the FY2023 Performance Program for Other Named Executive Officers, Mr. George Kao, another named executive officer, also received an adjustment to his base salary rate during fiscal year 2023 based upon the same factors the Compensation Committee considered for each of Mr. Weigand and Mr. Clegg. During fiscal year 2023, Mr. Kao’s base salary rate increased from $373,411 to $395,816 effective January 1, 2023, an aggregate increase of 6.0% during fiscal year 2023.
Fixed bonus component
Under the FY2023 Performance Program for Other Named Executive Officers, Mr. Weigand and Mr. Clegg receive a fixed bonus component payable in semi-monthly installments in the form of cash, which is based upon a percentage of Base Salary (the “Fixed Bonus”). The Compensation Committee included the Fixed Bonus as a part of the FY2023 Performance Program for Other Named Executive Officers for their continued achievements and contributions to the Company.
The Fixed Bonus percentage of Base Salary for fiscal year 2016. In determining base salaries2023 was 30% for Mr. Weigand. While the Fixed Bonus percentage of Base Salary remain unchanged between fiscal year 2016,2022 and fiscal year 2023 for Mr. Weigand, Mr. Clegg’s Fixed Bonus percentage of Base Salary was adjusted between fiscal year 2022 and fiscal year 2023. Mr. Clegg’s Fixed Bonus percentage was 25% from July 1, 2022 to September 30, 2022 (“Mr. Clegg’s Prior Fixed Bonus Percentage”) and 20% from October 1, 2022 to June 30, 2023 (Mr. Clegg’s New Fixed Bonus Percentage”). The Compensation Committee believed such adjustment with a smaller amount of Mr. Clegg’s compensation being fixed was appropriate given his role, when also coupled with the increased weighting adjustment given to Mr. Clegg’s worldwide revenue KPI under the Performance Incentive Award component of his award. See “- Performance Incentive Award” below.
The Compensation Committee decided to increaseretain the Fixed Bonus component for the FY2023 Performance Program for Other Named Executive Officers because the Committee believed the aggregate total cash compensation for these two officers, based on their base salaries effective on October 1, 2022, amount of cash earned under the Fixed Bonus percentages, and the amount of cash which the Committee believed would likely be earned under the cash portion of the Performance Incentive Award (see “- Performance Incentive Award” below), was likely to still be less than the market 50th percentile for comparable positions based upon the prior compensation study for fiscal year 2022. The following table sets forth the total amount of Fixed Bonus received by such persons for fiscal year 2023:
| Name | Principal Position During Fiscal Year 2023 | Fiscal Year 2023 Fixed Bonus Received | ||||||||||||
| David Weigand | Senior Vice President, Chief Financial Officer and Chief Compliance Officer | $148,568(1) | ||||||||||||
| Don Clegg | Senior Vice President, Worldwide Sales | $88,888(2) | ||||||||||||
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(1)For Mr. Weigand, the Fixed Bonus paid from July 1, 2022 to September 30, 2022 was determined based upon a base salary of our$418,000 at the beginning of fiscal year 2022. The Fixed Bonus paid from October 1, 2022 to June 30, 2023 was determined based upon Mr. Weigand’s increase in base salary to $520,969.
(2)For Mr. Clegg, the Fixed Bonus paid from July 1, 2022 to September 30, 2022 was determined based upon a base salary of $376,640 at the beginning of fiscal year 2022 and Mr. Clegg’s Prior Fixed Bonus Percentage. The Fixed Bonus paid from October 1, 2022 to June 30, 2023 was determined based upon Mr. Clegg’s increase in base salary to $435,652 and Mr. Clegg’s New Fixed Bonus Percentage.
Mr. George Kao, another named executive officers other than the Chief Executive Officer after taking into account the recommendations of our Chief Executive Officer and taking into account such factors as salary norms in comparable companies and publicly available data regarding compensation increasesofficer, does not participate in the industry, a subjective assessmentFY2023 Performance Program for Other Named Executive Officers, but during fiscal year 2023 was eligible for the Company’s regular semi-annual bonus payouts available to employees pursuant to which he received $14,362. Such bonus payouts are discretionary on the part of the natureCompany, but (when made based upon Company performance) are available to a broad base of Company employees with amounts subject to CEO discretion and approval. Mr. Kao’s discretionary bonus payout was equal to less than 4% of his base salary at the end of fiscal year 2023.
Performance Incentive Award
Description of Performance Incentive Award. Under the Performance Incentive Award portion of the FY2023 Performance Program for Other Named Executive Officers, participants have the ability to earn Performance Incentive Awards based upon the achievement of certain specified KPIs and the CEO’s subjective evaluation of each positionparticipant’s performance during the fiscal year. Any Performance Incentive Awards earned by Mr. Weigand are payable 20% in cash and an annual review80% in Performance RSUs, and any Performance Incentive Awards earned by Mr. Clegg are payable 50% in cash and 50% in Performance RSUs. The cash portion of the contributionaward is paid out promptly after the amount of any Performance Incentive Award is determined and experience of each executive officer. For the Chief Executive Officer,approved by the Compensation Committee considered substantiallyfollowing the end of the fiscal year, and the Performance RSUs are granted at approximately the same sorttime. The number of information,Performance RSUs granted to the participants is determined by dividing the value of the Performance RSU portion of the Performance Incentive Award by an average closing price of our stock, as welldescribed in more detail below. These Performance RSUs generally vest in equal annual installments over a period of four years from the first day of the new fiscal year, so long as the sizeindividual continues to be employed. Performance RSUs for the annual award are (for purposes of administration of shares available under the amended and restated 2020 Equity and Incentive Compensation Plan) capped for each of Messrs. Weigand and Clegg at a level unlikely to be earned. In addition:
•The amount of the Companyearned Performance Incentive Award is determined as a multiple (the “Multiple”) of a base incentive target (calculated as a set percentage of Base Salary) set for each participant (the “Base Incentive Unit”).
•The Base Incentive Unit for fiscal year 2023 was set at 10% of Base Salary for each of Messrs. Weigand and Clegg.
•Each KPI and the Chief Executive Officer’sCEO’s subjective evaluation of performance contribute to the calculation of the Multiple, which is applied to the Base Incentive Unit to determine the total amount of the earned Performance Incentive Award:
◦For Mr. Weigand, the KPIs for fiscal year 2023 were based upon:
•Percentage appreciation in Company stock ownership,price from June 30, 2022, to June 30, 2023, with a 100% increase in the stock price counting as 1.00 towards determination of the final aggregate Multiple; and determined
*This KPI is “double weighted,” meaning that such percentage increase in stock price is then multiplied by two, and that resulting percentage is then used in the calculation of the aggregate Multiple as described above and illustrated below; and
•Percentage increase in number of long-term investors in the Company from June 30, 2022, to June 30, 2023, with a 100% increase in the number of long-term investors counting as 1.00 towards the determination of the final aggregate Multiple; and
*Such KPI is also “double weighted,” meaning that such percentage increase is multiplied by two, and that resulting percentage is then used in the calculation of the aggregate Multiple as described above and illustrated below.
◦For Mr. Weigand, an individual performance evaluation rating (on a scale from 1.0 to 5.0) was also given by the CEO for the fiscal year, with each 1.00 of rating counting as 1.00 towards determination of the final aggregate Multiple.
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The scores arising from these KPI results, and the performance evaluation, are then added together to determine the final aggregate Multiple that is applied to the Base Incentive Unit to determine the value of the Performance Incentive Award. For these purposes, long-term investors in the Company are defined as either (1) a new long-term investor with at least 100,000 shares (which represents approximately about 0.2% of the total number of shares outstanding) added during fiscal year 2023 or (2) an existing long-term investor who had increased its holdings by at least 50% during fiscal year 2023; provided, however, that index funds, hedge funds, and broker-dealers are excluded from the definition of long-term investors. A list of potential long-term investors at the end of fiscal year 2022 had been identified based upon certain SEC filings made by such investors, and the foregoing evaluation criteria was then applied to such list.
◦For Mr. Clegg, the KPIs for fiscal year 2023 are based upon:
•Percentage increase in number of our internally measured top 3,000 customers (“Top 3,000 Customers”) from June 30, 2022, to June 30, 2023, with a 100% increase in the number of our Top 3,000 Customers counting as 1.00 towards determination of the final aggregate Multiple. For these purposes, new Top 3,000 Customers are identified based upon new customer accounts which were set up in our internal accounting system during fiscal year 2023 based upon approximately 900+ accounts which were targeted for marketing efforts in the fiscal year;
*Such KPI is “double weighted,” meaning that such percentage increase is multiplied by two, and that resulting percentage is then used in the calculation of the aggregate Multiple as described above and illustrated below.
•Percentage increase in worldwide revenue from the prior fiscal year, with a 100% increase in revenue counting as 1.00 towards determination of the final aggregate Multiple;
*This KPI is “triple weighted,” meaning that such percentage increase in worldwide revenue is then multiplied by three, and that resulting percentage is then used in the calculation of the aggregate Multiple as described above and illustrated below. During the prior fiscal year 2022, Mr. Clegg had this same KPI, but it was only “double weighted.” The Compensation Committee believed it was appropriate to increase the base salaryweighting of this KPI to “triple weighted” for fiscal year 2023 given Mr. Clegg’s role as Senior Vice President, Worldwide Sales, as achievement against this metric has high correlation with the Company's stock price performance; and
•Change in Slow Moving & Excess and Obsolete Inventory KPI, or Inventory KPI, which is calculated by dividing slow moving and excess and obsolete inventory for fiscal year 2022 by slow moving and excess and obsolete inventory for fiscal year 2023, and subtracting 1.00 from such quotient;
*The Inventory KPI is “double weighted,” meaning that such resulting number from the calculation described above is then multiplied by two, and that resulting number is then used in the calculation of the Chief Executive Officer. aggregate Multiple as described above and illustrated below; and
◦For Mr. Clegg, an individual performance evaluation rating (on a scale from 1.0 to 5.0) was also given by the CEO for the fiscal year, with each 1.00 of rating counting as 1.00 towards determination of the final aggregate Multiple.
The scores arising from these KPI results, and the performance evaluation are then added together to determine the final aggregate Multiple that is applied to the Base Incentive Unit to determine the value of the Performance Incentive Award.
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For each of Mr. Weigand and Mr. Clegg, a decrease in stock price, number of long-term investors, number of our Top 3,000 Customers, and/or worldwide revenue from the prior fiscal year (as may be applicable) results in a multiple of zero for that KPI for purposes of determining the aggregate Multiple. For these purposes, worldwide revenue is defined as our net sales for the fiscal year as reported in our consolidated financial statements. In addition, for Mr. Clegg, an increase in slow moving and excess and obsolete inventory from the prior fiscal year results in a multiple of zero for the Inventory KPI for purposes of determining the aggregate Multiple. Slow moving and excess and obsolete inventory apply written guidelines that have been established which categorize products based upon various criteria (such as price sensitivity based upon age (e.g. CPUs, GPUs), volume/cost of product, and product lead time), and then for each such category define a time period after which they are considered slow moving.
Performance Cash earned is generally paid in the next payroll cycle following the Compensation Committee’s certification and approval of the calculation of the Performance Incentive Award after the end of the fiscal year, or as soon as reasonably practical thereafter.
Performance RSUs are to be granted to the respective participating officer on a grant date within 10 days of the Compensation Committee’s certification and approval of the results of the Performance Incentive Award (the “Grant Date”), but in no event later than August 31, 2023, subject to the recipient remaining employed with, or otherwise continuing to provide services to, the Company through such Grant Date. The number of Performance RSUs earned will be determined by dividing the value of the portion of the Performance Incentive Award earned thereunder allocated to the Performance RSUs portion by the sixty-trading day average closing stock price of the Company’s common stock as of (and including) the date immediately prior to the Grant Date (rounded to the nearest whole RSU, and subject to (for purposes of administration of shares available under the amended and restated 2020 Equity and Incentive Compensation Plan) a maximum cap at a level unlikely to be earned.
Measurement of Fiscal Year 2023 Performance against the Performance Incentive Award. The following sets forth the determination of the Performance Incentive Award based upon fiscal year 2023 performance for Mr. Weigand:
| Performance Measure | Achievement | Weighting Factor | Final Weighted Score | ||||||||
| Stock Price Increase KPI | 518% (or 5.18)(1) | 2X | 10.36 | ||||||||
| Long-Term Investor Increase KPI | 44% (or 0.44)(2) | 2X | 0.88 | ||||||||
| Individual Performance Evaluation | 4.8(3) | 1X | 4.8 | ||||||||
| Total Multiple | 16.04 | ||||||||||
| Base Incentive Unit | $52,097 | ||||||||||
| Final Earned Performance Incentive Award Value | $835,636 | ||||||||||
| Performance Cash Payout Value (20%) | $167,127 | ||||||||||
| Performance RSUs Payout Value (80%) | $668,509 | ||||||||||
Number of Performance RSUs Granted in August 2023(4) | 2,479 | ||||||||||
(1)Our closing stock price on June 30, 2022 and June 30, 2023 was $40.35 and $249.25, respectively.
(2)Utilizing the definition of long-term investor specified above, it was determined the number of Long-Term Investors increased from 50 to 72 during fiscal year 2023.
(3)Based upon its review,the CEO’s evaluation.
(4)2,046 and 433 RSUs were granted on August 24, 2023 and August 25, 2023, respectively, based on the average 60-trading day closing stock price of $269.46 and $269.94, respectively.
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The following sets forth the determination of the Performance Incentive Award based upon fiscal year 2023 performance for Mr. Clegg:
| Performance Measure | Achievement | Weighting Factor | Final Weighted Score | ||||||||
| Top 3,000 Customers KPI | 92% (or 0.92)(1) | 2X | 1.84 | ||||||||
| Worldwide Revenue KPI | 37% (or 0.37)(2) | 3X | 1.11 | ||||||||
| Inventory KPI | NA(3) | 2X | NA | ||||||||
| Individual Performance Evaluation | 4.3(4) | 1X | 4.3 | ||||||||
| Total Multiple | 7.25 | ||||||||||
| Base Incentive Unit | $43,565 | ||||||||||
| Final Earned Performance Incentive Award Value | $315,846 | ||||||||||
| Performance Cash Payout Value (50%) | $157,923 | ||||||||||
| Performance RSUs Payout Value (50%) | $157,923 | ||||||||||
Number of Performance RSUs Granted in August 2023(5) | 585 | ||||||||||
(1)Using the definition of new top 3,000 customer specified above, it was determined that 123 such customers were added during fiscal year 2023.
(2)In our consolidated financial statements, we recorded revenues of $5,196.1 million and $7,123.5 million for fiscal year 2022 and fiscal year 2023, respectively.
(3)The final weighted score for this performance measure was determined to be zero. In our consolidated financial statements, we recorded a $36.6 million increase in inventory reserve charges between fiscal year 2022 and fiscal year 2023
(4)Based upon the CEO’s evaluation.
(5)320 and 265 RSUs were granted on August 24, 2023 and August 25, 2023, respectively, based on the average 60-trading day closing stock price of $269.46 and $269.94, respectively.
Other Equity-Based Incentive Compensation
While participants in the FY2023 Performance Program for Other Named Executive Officers are eligible to receive performance-based awards under the Performance Incentive Award portion of such program, such persons also continue to be eligible to receive other equity-based incentive compensation, along with our other named executive officers and other persons eligible for awards under the amended and restated 2020 Equity and Incentive Compensation Plan. In continuing to award other equity-based incentive compensation to participants in the FY2023 Performance Program for Other Named Executive Officers, the Compensation Committee approved increases in base salaries for ournoted that the fiscal year 2022 compensation study described above indicated that the historical level of equity awards made had low retention power, and that equity vehicles that included a mix of both time-based RSUs and PRSUs should be considered. As a result, the Compensation Committee elected to continue its practice of making regular periodic refresh grants of time-based equity incentives of both RSUs and options to the named executive officers set forth below. The base salary increases were comparable toparticipating in the average percentage base salary increases granted to our employees generally.FY2023 Performance Program for Other Named Executive Officers.
| Principal Position | 2015 Base Salary | 2016 Base Salary | Base Salary % Change | ||||||||||
| Charles Liang | President, Chief Executive Officer and Chairman of the Board | $ | 331,963 | $ | 365,160 | 10.0 | % | ||||||
| Howard Hideshima | Senior Vice President and Chief Financial Officer | $ | 300,956 | $ | 322,023 | 7.0 | % | ||||||
| Phidias Chou | Senior Vice President, Worldwide Sales | $ | 273,635 | $ | 287,317 | 5.0 | % | ||||||
| Yih-Shyan (Wally) Liaw | Senior Vice President, International Sales, Corporate Secretary and Director | $ | 222,216 | $ | 233,327 | 5.0 | % | ||||||
| Chiu-Chu (Sara) Liu Liang | Senior Vice President of Operations, Chief Administration Officer, Treasurer, and Director | $ | 216,505 | $ | 238,156 | 10.0 | % | ||||||
For fiscal year 2023, in addition to the Performance RSUs discussed above under “- Performance Incentive Award,” the Compensation Committee determined to provide the awards of service-based stock options and restrictedRSUs to named executive officers as outlined in the table below.
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| Name | Type of Award | Quantity (at Target) of Award | Rationale for Providing the Award | |||||||||||||||||
| David Weigand | RSUs(1) | 7,687 | Special grant | |||||||||||||||||
RSUs(2) | 3,752 | Performance grant | ||||||||||||||||||
RSUs(3) | 1,000 | Recognition grant | ||||||||||||||||||
| Don Clegg | RSUs(2) | 3,184 | Performance grant | |||||||||||||||||
RSUs(3) | 1,000 | Recognition grant | ||||||||||||||||||
| George Kao | RSUs(3) | 1,500 | Recognition grant | |||||||||||||||||
RSUs(4) | 2,930 | Refresh grant | ||||||||||||||||||
Stock Options(5) | 6,500 | Refresh grant | ||||||||||||||||||
(1)As discussed in the Compensation Discussion & Analysis in the prior year proxy statement, during fiscal year 2022, Mr. Weigand received a special award of 30,000 stock unitoptions (the “Special Award”) to further incent him as a result of his promotion to Chief Financial Officer in February 2021, at which time no additional equity incentive had been awarded to him. The Committee originally commenced discussion of granting such Special Award in January 2022, but the grant was delayed until April 2022. The Company’s stock price, however, had appreciated significantly during such period. Taking this information into consideration, the Committee, upon the recommendation of the CEO, awarded this special grant of RSUs to Mr. Weigand on August 12, 2022 specifically regarding this difference in Special Award grant timing, which special grant of RSUs has vesting dates generally in line with the vesting dates of the Special Award, vesting at the rate of seven equal quarterly installments with the initial vesting date on November 10, 2022, and the final vesting date will be May 10, 2024.
(2)Such RSUs were earned by Messrs. Weigand and Clegg as payouts pursuant to their Performance Incentive Awards under the FY2022 performance program. See the Compensation Discussion & Analysis discussion in the prior year proxy statement for additional information. The RSUs were actually granted on August 29, 2022, and vest at an annual rate of 25% per year commencing July 1, 2023, with the final installment vesting on July 1, 2026.
(3)Such grants made on September 15, 2022 were part of a special recognition grant made to a broad set of employees which included Messrs. Weigand, Clegg, and Kao. These grants, consistent with certain prior practices over recent years to these same NEOs in connection with other broad-based special recognition rewards, vested 50% on October 25, 2022 and 50% on March 25, 2023, and were intended to recognize and currently reward the Company’s general assessment of awardees’ recent collective achievement for and contributions to the Company. The CEO made the recommendation on size of grants for the other NEOs to the Committee based on his subjective assessment of their contributions to the Company. For context, Company-wide, an aggregate of 170,365 RSUs were granted in connection with this special recognition grant to approximately 1,321 employees, with awards ranging in sizes up to a maximum of 2,000 units. The average award was for 129 RSUs, and (based upon the recommendation of the CEO) an aggregate of 29 employees received awards of 1,000 RSUs or more.
(4)Such RSUs were part of Mr. Kao’s regular periodic refresh grant cycle, and were granted on November 4, 2022. These RSUs generally vest at the rate of 25% of the total number of units on November 10, 2023, and then an additional 1/16th of the units at the end of each successive calendar quarter thereafter. See the table above for additional information with respect to executive officersthis refresh grant.
(5)Such stock options were part of Mr. Kao’s regular periodic refresh grant cycle, and were granted on November 4, 2022 with a 10-year term and an exercise price equal to the closing market price of our common stock on the grant date ($76.63). Subject generally to the continued service of Mr. Kao, such stock options vest and become exercisable at the rate of 25% of the shares on November 4, 2023, and then an additional 1/16th of the shares at the end of each successive calendar quarter thereafter. The particular size of the stock option grants to Mr. Kao was determined based upon the recommendation of Mr. Liang, which was reviewed and approved by the Compensation Committee generally vest over periods
The particular sizes of four years,the RSU grants to each of these named executive officers was determined based upon the recommendation of Mr. Liang, which was reviewed and stock options expire no later than ten years from the date of grant.
Stock Ownership Guidelines
In January 2022, our Board adopted stock ownership guidelines that apply to the Chief Executive Officer and our non-executive directors (the “Guidelines”). Under the Guidelines, the Chief Executive Officer has a target holding of 3x his then-current annual base salary; provided, however, that for so long as the Chief Executive Officer is Mr. Charles Liang, and his then-current annual base salary is less than his annual base salary as in effect immediately prior to the grant of his 2021 CEO Performance Award on March 2, 2021 (which annual base salary was $522,236 (the “Pre-grant CEO Salary”)), then for purposes of determination of the Chief Executive Officer’s target holding, his target shall be three times the Pre-grant CEO Salary. Under the Guidelines, non-employee directors have a target holding of 3x the then-current annual Board member retainer (regardless of whether such director actually receives such retainer). For purposes of determining such target holding for non-employee directors, other director cash fees such as fees for Committee member/chair service or excess per meeting fees are not requireconsidered as part of then-current annual Board member retainer.
Under the Guidelines, each target is expected to be attained by the later of (1) five years from the effective date of the Guidelines or (2) five years from the effective date of a covered person’s assumption of the applicable role or responsibilities (or applicable designation as a covered person with a specific stock ownership target by the Compensation Committee) subjecting the covered person to the then-applicable stock ownership target. After the applicable five-year period has concluded, the covered person will be required to retain at least 50% of the common stock received (net of applicable withholding taxes) under our directorsequity awards earned by, vested with respect to or executive officersexercised by the covered person if the covered
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person does not comply with his or her stock ownership target. Once a covered person has initially achieved his or her stock ownership target, the covered person will be considered to own a particular amountcontinue to be in compliance with the Guidelines unless as of ourthe annual measurement the covered person’s common stock. The Committee is satisfied that stock ownership drops to less than 85% of the covered person’s stock ownership target (in which case the covered person will have one year to again achieve compliance with the Guidelines).
Annual compliance with the stock ownership target will be measured, for each fiscal year, at the end of such fiscal year. Compliance with the stock ownership targets at any point in time will be based on the average closing price for the common stock for the immediately prior 60 days. For purposes of determining compliance with the stock ownership target, the following holdings by the covered person and option holdings among our directorshis or her immediate family members sharing his or her household will be considered the equivalent of owning the corresponding applicable underlying common stock: (1) outright ownership of common stock; (2) vested common stock held in retirement or deferred compensation accounts; and executive officers are sufficient at this time(3) service-based restricted share, restricted stock unit and/or deferred share awards regarding common stock (whether or not vested).
As of June 30, 2023, each of the covered persons subject to provide motivation and to align this group’s interests with those of our stockholders. the Guidelines met his or her stock ownership target.
Our insider trading policy prohibits any of our directors, executive officers, employees or contractors from engaging in any transactions in publicly-traded options, such as puts and calls, and other derivative securities, including any hedging or similar transaction, with respect to our common stock.
Stock Retention Policy
We have adopted a stock retention policy which requires that our Chief Executive Officer hold a significant portion of the shares of our common stock acquired under our equity incentive planplans for at least 36 months. UnderGenerally, under the policy, the Chief Executive Officer must retain at least 50% of all “net” shares received (“net” shares means those shares remaining after the sale or withholding of shares in payment of the exercise price, if applicable, and withholding taxes) for at least 36 months following the date on which an equity award is vested, settled or exercised.exercised, as applicable. In addition, in connection with the 2021 CEO Performance Award previously granted to our Chief Executive Officer, the Board required a restriction on the sale of any shares issued upon the exercise of the options associated with such award until March 2, 2024, the third anniversary of the grant date. See “Discussion and Analysis of 2021 CEO Performance Award.”
Clawback Policy
Prior to calendar year 2023, we established a Recoupment Policy that isrecoupment policy applicable to our named executive officers.officers (the “Recoupment Policy”). Under the policy,Recoupment Policy, if we are required to prepare an accounting restatement due to material noncompliance with the financial reporting requirements under U.S.United States securities laws, the Compensation Committee shall be entitled to have the Company recover from any current or former executive officer any excess incentive-based compensation received by such person during the three yearthree-year period prior to the date on which we are required to prepare the restatement. This policy appliesRecoupment Policy applied to both equity-based and cash-based incentive compensation awards. The “excess incentive-based compensation” is the difference between the actual amount that was paid, and the amount that would have been paid under the restated financial results.
During fiscal year 2024, in light of new rules promulgated by Nasdaq National Market and SEC requirements, we adopted a new compensation clawback policy effective October 25, 2023 (the “New Clawback Policy”) which complies with the required standards. The New Clawback Policy provides for the prompt recovery or clawback of certain excess incentive-based compensation received during an applicable three-year recovery period by current or former executive officers in the event we are required to prepare an accounting restatement due to the material noncompliance with any financial reporting requirement under the securities laws. This includes restatements to correct an error in previously issued financial statements that is material to such previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. Excess incentive-based compensation for these purposes generally means the amount of incentive-based compensation received (on or after October 2, 2023) by such executive officer that exceeds the amount of incentive-based compensation that would have been received by such executive officer had it been determined based on the restated amounts, without regard to any taxes paid. Incentive-based compensation potentially subject to recovery under the New Clawback Policy is in general limited to any compensation granted, earned or vested based wholly or in part on the attainment of one or more financial reporting measures. In general, we may utilize a broad range of recoupment methods under the New Clawback Policy. The New Clawback Policy does not condition clawback on the fault of the executive officer, but we are not required to clawback amounts only in limited circumstances where the Compensation Committee has made a determination that recovery would be impracticable and (1) we have already attempted to recover such amounts but the direct expenses paid to a third party in an effort to enforce the New Clawback Policy would exceed the amount
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to be recovered, (2) the recovery of amounts would violate applicable home country law, or (3) the recovery would cause the non-compliance of a tax-qualified retirement plan under the Internal Revenue Code and applicable regulations. Amounts received prior to the adoption of the New Clawback Policy continue to be governed by the Recoupment Policy. We may not indemnify any such executive officer against the loss of such recovered compensation.
Other Benefits
Health and Welfare Benefits
Benefits. Our named executive officers receive the same health and welfare benefits as are offered to our other employees, including medical, dental, vision, life, accidental death and dismemberment and disability insurance coverage, flexible spending accountsaccount participation and holiday pay. The same contribution amounts, percentages and plan design provisions are applicable to all employees. We offer these health and welfare benefits generally to help provide a competitive compensation package to employees to assist with the attraction, hiring and retention of employees.
Retirement Program
Program. Our named executive officers may participate in the same tax-qualified, employee-funded 401(k) plan that is offered to all our other employees. We currently have no Supplemental Executive Retirement Plan, or SERP, obligations. We do not maintain a supplemental executive retirement plan, nor do we offer any defined benefit retirement plans or other defined contribution plans to our named executive officers. We offer these retirement program benefits generally to help provide a competitive compensation package to employees to assist with the attraction, hiring and retention of employees.
Perquisites. We do not provide specialperquisites or personal benefits or other perquisites to any of our named executive officers.
Employment Arrangements, Severance and Change of Control Benefits
Benefits. We have not entered into employment agreements with any of our named executive officers. Mr. Hideshima, Mr. ChouEach of Messrs. Clegg, Kao and Ms. Liang haveWeigand currently has a signed offer lettersletter which provideprovides for at-will employment. TheEach such offer letters provideletter provides for an initial base salary rate, an initial stock optionsoption grant and rightrights to participate in our employee benefit plans.plans as described above. We do not have any written employment arrangements with Messrs. Liang and Liaw. WeMr. Liang. Other than as described in the following sentence, we do not have any arrangements with any of our named executive officers that provide for any severance or other benefits in the event of termination or change of control.control of our Company. See also - “Fiscal Year 2023 Potential Payments Upon Termination or Change of Control.” The 2021 CEO Performance Award has certain provisions related to the treatment of such award in the event of a change of control of our Company. See “Discussion and Analysis of 2021 CEO Performance Award.”
Tax and Accounting Treatment of Compensation
Considerations. In our review and establishment of named executive officer compensation programs and payments, we consider, but do not place greatsubstantial emphasis on, the anticipated accounting and tax treatment of our compensation programs onto us and our named executive officers. While we may consider accounting and tax treatment, these factors alone are not dispositive. Among other factors that receive greater consideration are the net costs to us and our ability to effectively administer executive compensation in the short and long-term interests of stockholders understockholders.
Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), generally limits a proposedCompany’s ability to deduct for tax purposes compensation arrangement.
in excess of $1.0 million paid in any single tax year to certain executive officers (and, since 2018, certain former executive officers). We have endeavoredexpect to structure the performance-based incentive elements ofcontinue to design and maintain executive compensation arrangements that we believe will attract and retain the executive talent that we need to meet the requirements for deductibility under Section 162(m). The Committee does not believe that compensation decisions should be constrained by how muchcompete successfully, even if in certain cases such compensation is not deductible for federal income tax purposes. Accordingly, the Committee is not limited to paying compensation under plans that are qualified under Section 162(m) and the Committee's ability to retain flexibility in this regard may, in certain circumstance, outweigh the advantages of qualifying all compensation as deductible under Section 162(m).
We account for equity compensation paid to our employees in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock CompensationStock-Compensation (“FASB ASC Topic 718”), which requires us to estimate and record expenses for each award of equity compensation over the service period of the award.
We intend that our plans, arrangements and agreements providing for deferral of compensation will be structured and administered in a manner that complies with (or is intended to comply withexempt from) the requirements of Section 409A of the Code. Participation in, and compensation paid under, our plans, arrangements and agreements may, in certain instances, result in the deferral of compensation that is subject to the requirements of Section 409A. If our plans, arrangements and agreements as administered fail to meet certain requirements under or exemptions from Section 409A, compensation earned thereunder may be subject to immediate taxation and tax penalties.
Summary
The Compensation Committee believes that our compensation philosophy and programs are designed to foster a performance-oriented culture that aligns our named executive officers’ interests with those of our stockholders. The
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Compensation Committee also believes that the compensation of our named executive officers is both appropriate and responsive to the goal of building stockholder value.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) with the Company’sour management. Based on this review and these discussions, the Compensation Committee recommended to the board of directorsBoard that the CD&A be included in this filing.Proxy Statement.
This report has been furnished by the Compensation Committee.
Sherman Tuan, Chair
Daniel Fairfax
Tally Liu
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Fiscal Year 2023 Summary Compensation Table
The following table sets forth information concerning the reportable compensation earned duringfor our named executive officers for the fiscal years ended 2016, 20152023, 2022 and 2014 by our Chief Executive Officer, our Chief Financial Officer, and our three other most highly-compensated executive officers. We refer to these officers2021 as our “named executive officers.”applicable.
FISCAL YEAR 2023 SUMMARY COMPENSATION TABLE
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(3) | All Other Compensation ($)(4) | Total ($) | ||||||||||||||||||||||||
| Charles Liang | 2016 | 363,776 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 363,776 | |||||||||||||||||
President, Chief Executive Officer and Chairman of the Board | 2015 | 331,963 | 7,607 | — | 2,607,616 | — | — | 35,565 | 2,982,751 | ||||||||||||||||||||||||
| 2014 | 312,793 | — | — | — | — | — | 17,505 | 330,298 | |||||||||||||||||||||||||
| Howard Hideshima | 2016 | 321,146 | — | — | — | — | — | 1,500 | 322,646 | ||||||||||||||||||||||||
Senior Vice President and Chief Financial Officer | 2015 | 300,956 | 6,990 | — | 403,580 | — | — | 14,860 | 726,386 | ||||||||||||||||||||||||
| 2014 | 286,173 | 2,593 | — | — | — | — | 9,839 | 298,605 | |||||||||||||||||||||||||
| Phidias Chou | 2016 | 286,747 | 3,416 | 137,160 | 138,000 | — | — | — | 565,323 | ||||||||||||||||||||||||
| Senior Vice President, Worldwide Sales | 2015 | 273,635 | 6,446 | — | — | — | — | 26,643 | 306,724 | ||||||||||||||||||||||||
| 2014 | 257,396 | 2,341 | — | 225,577 | — | — | 14,042 | 499,356 | |||||||||||||||||||||||||
| Yih-Shyan (Wally) Liaw | 2016 | 232,864 | — | 109,959 | 105,089 | — | — | — | 447,912 | ||||||||||||||||||||||||
Senior Vice President, International Sales, Corporate Secretary and Director | 2015 | 222,216 | 5,422 | — | — | — | — | 25,055 | 252,693 | ||||||||||||||||||||||||
| 2014 | 206,122 | 1,867 | — | 202,899 | — | — | 11,196 | 422,084 | |||||||||||||||||||||||||
| Chiu-Chu (Sara) Liu Liang | 2016 | 237,253 | — | 110,484 | 113,961 | — | — | — | 461,698 | ||||||||||||||||||||||||
Senior Vice President of Operations, Treasurer and Director | 2015 | 216,505 | 5,309 | — | — | — | — | 14,041 | 235,855 | ||||||||||||||||||||||||
| 2014 | 200,357 | 1,814 | — | 174,800 | — | — | 5,806 | 382,777 | |||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Stock Awards ($)(3) | Option Awards ($)(4) | Non-Equity Incentive Plan Compensation ($)(5) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||||||||||||||||||||
Charles Liang President, Chief Executive Officer and Chairman of the Board | 2023 | 1 | — | — | — | — | — | 1 | |||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 1 | — | — | — | — | — | 1 | ||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 421,785 | 3,360 | — | 11,616,000 | 6,057,526 | (6) | — | 18,098,671 | |||||||||||||||||||||||||||||||||||||||||||||
David Weigand Senior Vice President, Chief Financial Officer and Chief Compliance Officer | 2023 | 522,151 | 148,568 | 1,021,243 | — | 167,127 | — | 1,859,089 | |||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 442,601 | 285,050 | 353,404 | 1,074,005 | 48,973 | — | 2,204,033 | ||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 367,709 | 43,360 | 109,188 | 113,280 | — | — | 633,537 | ||||||||||||||||||||||||||||||||||||||||||||||
Don Clegg Senior Vice President, Worldwide Sales | 2023 | 449,469 | 88,888 | 331,660 | — | 157,923 | — | 1,027,940 | |||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 398,470 | 221,620 | 183,653 | 98,700 | 166,250 | — | 1,068,693 | ||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 362,140 | 9,990 | 102,515 | 106,200 | — | — | 580,845 | ||||||||||||||||||||||||||||||||||||||||||||||
George Kao Senior Vice President, Operations | 2023 | 394,813 | 14,362 | 322,566 | 269,815 | — | — | 1,001,556 | |||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 364,409 | 45,980 | — | — | — | — | 410,389 | ||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 333,858 | 6,273 | 57,688 | 60,213 | — | — | 458,032 | ||||||||||||||||||||||||||||||||||||||||||||||
(1)Amounts disclosed under "Salary" for fiscal year 2023 include leave pay earned by the named executive officers.
(2)Amounts disclosed under “Bonus” for fiscal year 2023 reflect, as applicable, fixed amount bonuses, special bonuses, profit sharing amounts, holiday bonuses and/or our sales bonus program, all as further described above in the CD&A.
(3)Amounts disclosed for fiscal year 2023 represent the grant date fair values of RSU awards granted during fiscal year 2023 calculated in accordance with ASC Topic 718 and are based on the closing market price of our common stock on the date of grant. Amounts also include the fair values of the RSU portion of Messrs. Weigand and Clegg’s Performance Incentive Award provided for fiscal year 2023, based on probable outcome, as of January 2023. The RSU portion of each award was capped at a level unlikely to be earned. The actual number of RSUs earned by Messrs. Weigand and Clegg for their Performance Incentive Awards were granted in early fiscal year 2024, as disclosed in CD&A above.
(4)The amount disclosed for fiscal year 2023 represents the grant date fair values of the stock option award calculated in accordance with ASC Topic 718, using the Black Scholes option pricing model. Assumptions used in the calculation of this amount are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Part II, Item 8, Note 10 “Stock-based Compensation and Stockholders’ Equity”, to our consolidated financial statements for fiscal year 2023 included in our Annual Report.
(5)Amounts disclosed for fiscal year 2023 represent payouts of the cash portion of Messrs. Weigand and Clegg’s Performance Incentive Awards for fiscal 2023, as further described above in CD&A.
(6)As discussed in the Prior Year CD&A, in March 2020, Mr. Liang received a special performance-based cash incentive award opportunity. Mr. Liang’s award, for a cash incentive opportunity of up to $8,076,701 (the “Maximum Value”), was specifically linked to Company stock price performance, as further described below under “- Update on Special Performance-Based Cash Incentive Award Granted in March 2020.” The applicable stock price performance conditions for the award were achieved during fiscal year 2021 and, as a result, 50% of the Maximum Value (or $4,038,351) was paid to Mr. Liang in fiscal year 2021. However, the Board had discretion to reduce the payout value of the remaining portion of the award under certain circumstances. As further described below under “- Update on Special Performance-Based Cash Incentive Award Granted in March 2020” in September 2021, the Board exercised this discretion and reduced the payout for the remaining portion of the award to 25% of the Maximum Value (or $2,019,175), for a total award payout for 2021 of $6,057,526.
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Fiscal Year 2023 Grants of Plan-Based Awards
The following table provides information concerning all plan-based awards granted during fiscal year 20162023 to each of our named executive officers:officers, which grants were made under the amended and restated Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan.
FISCAL YEAR 2023 GRANTS OF PLAN-BASED AWARDS TABLE
| Name | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(1) | ||||||||||||||||||
Threshold ($) | Target ($) | Maximum ($) | ||||||||||||||||||||||
| Phidias Chou | 10/21/2015 | — | — | — | 5,400 | (2) | — | $ | — | $ | 137,160 | |||||||||||||
| Phidias Chou | 10/21/2015 | — | — | — | — | 7,130 | (3) | 25.40 | 81,995 | |||||||||||||||
| Phidias Chou | 10/21/2015 | — | — | — | — | 4,870 | (4) | 25.40 | 56,005 | |||||||||||||||
| Yih-Shyan (Wally) Liaw | 4/27/2016 | — | — | — | 3,830 | (5) | — | — | 109,959 | |||||||||||||||
| Yih-Shyan (Wally) Liaw | 4/27/2016 | — | — | — | — | 3,390 | (6) | 28.71 | 41,912 | |||||||||||||||
| Yih-Shyan (Wally) Liaw | 4/27/2016 | — | — | — | — | 5,110 | (7) | 28.71 | 63,177 | |||||||||||||||
| Chiu-Chu (Sara) Liu Liang | 1/27/2016 | — | — | — | 4,050 | (8) | — | — | 110,484 | |||||||||||||||
| Chiu-Chu (Sara) Liu Liang | 1/27/2016 | — | — | — | — | 9,000 | (9) | 27.28 | 113,961 | |||||||||||||||
| Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Possible Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Charles Liang | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| David Weigand | 8/12/2022 | — | — | — | — | — | — | 7,687 | — | — | 502,038 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/24/2023 | 9,303 | (2) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/24/2023 | — | — | — | (2) | (2) | (2) | — | — | — | 193,982 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9/15/2022 | — | — | — | — | — | — | 1,000 | — | — | 65,360 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Don Clegg | 1/24/2023 | 20,169 | (2) | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1/24/2023 | — | — | — | (2) | (2) | (2) | — | — | — | 45,776 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9/15/2022 | — | — | — | — | — | — | 1,000 | — | — | 65,360 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| George Kao | 9/15/2022 | — | — | — | — | — | — | 1,500 | — | — | 98,040 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/4/2022 | — | — | — | — | — | — | 2,930 | — | — | 224,526 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 11/4/2022 | — | — | — | — | — | — | — | 6,500 | 76.63 | 269,815 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1)Amounts disclosed in this column represent the fair value of the RSU and stock option awards as of the date of grant or award opportunity computed in accordance with ASC Topic 718, excluding the effect of estimated forfeitures.
(2)As further described in CD&A, each of Messrs. Weigand and Clegg received a Performance Incentive Award for fiscal year 2023 payable for Mr. Weigand 20% in cash and 80% in Performance RSUs, and payable for Mr. Clegg 50% in cash and 50% in Performance RSUs, which Performance RSUs will vest over four years from July 1, 2023. Based on the design of the Performance Incentive Award, there was essentially no target or maximum cash amount to be earned, and essentially no target number of Performance RSUs to be earned, but the threshold amount of the award was equal to $46,515 for Mr. Weigand and $40,338 for Mr. Clegg, and the award was capped at a level unlikely to be earned. The cash portions earned by Messrs. Weigand and Clegg are reported in the “Non-Equity Incentive Plan Compensation” column of the Fiscal Year 2023 Summary Compensation Table, and the fair values of the RSU portions disclosed in this table, based on probable outcome, as of January 2023 are included in the “Stock Awards” column of the Fiscal Year 2023 Summary Compensation Table. The actual Performance RSUs earned by Messrs. Weigand and Clegg for their Performance Incentive Awards were granted in early fiscal year 2024, as disclosed in CD&A above.
Grants made in fiscal year 2023 are described more fully in the “Compensation Discussion and Analysis” section of this Proxy Statement.More information concerning the terms of the employment arrangements, if applicable, in effect with our named executive officers during fiscal year 2023 is provided under the "Employment Arrangements, Severance and Change of Control Benefits" under the “Compensation Discussion and Analysis”.
Outstanding Equity Awards at 2023 Fiscal Year-End 2016
The following table provides information concerning the outstanding equity-based awards as of June 30, 2016, and the option exercise price and expiration dates for each award,2023, held by each of our named executive officers.
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| Option Awards | Stock Awards | ||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested ($)(1) | |||||||||||
| Charles Liang | 720,000 | (2) | — | $ | 10.66 | 3/4/2019 | |||||||||||
| 132,000 | (3) | — | $ | 18.59 | 4/25/2021 | ||||||||||||
| 202,352 | (4) | 28,908 | (4) | $ | 20.70 | 1/21/2023 | |||||||||||
| 62,530 | 104,220 | (5) | $ | 35.07 | 1/19/2025 | ||||||||||||
| Howard Hideshima | 19,198 | (6) | — | $ | 13.89 | 11/17/2016 | |||||||||||
| 21,428 | (6) | — | $ | 13.89 | 11/17/2016 | ||||||||||||
| 22,500 | (7) | — | $ | 10.19 | 4/26/2017 | ||||||||||||
| 56,614 | (8) | — | $ | 13.61 | 8/2/2020 | ||||||||||||
| 10,886 | (8) | — | $ | 13.61 | 8/2/2020 | ||||||||||||
| 37,810 | (9) | — | $ | 12.50 | 8/6/2022 | ||||||||||||
| 8,690 | (9) | — | $ | 12.50 | 8/6/2022 | ||||||||||||
| 13,370 | (10) | 13,370 | (10) | $ | 26.75 | 8/4/2024 | |||||||||||
| 3,630 | (10) | 3,630 | (10) | $ | 26.75 | 8/4/2024 | |||||||||||
| Phidias Chou | 17,500 | (11) | — | $ | 5.53 | 4/29/2019 | |||||||||||
| 31,030 | (12) | — | $ | 8.36 | 10/26/2019 | ||||||||||||
| 18,970 | (12) | — | $ | 8.36 | 10/26/2019 | ||||||||||||
| 32,850 | (13) | — | $ | 15.22 | 10/24/2021 | ||||||||||||
| 6,150 | (13) | — | $ | 15.22 | 10/24/2021 | ||||||||||||
| 11,843 | (14) | 5,384 | (14) | $ | 14.23 | 10/21/2023 | |||||||||||
| 11,530 | (14) | 5,243 | (14) | $ | 14.23 | 10/21/2023 | |||||||||||
| — | 7,130 | (15) | $ | 25.40 | 10/21/2025 | ||||||||||||
| — | 4,870 | (15) | $ | 25.40 | 10/21/2025 | ||||||||||||
| 5,400 | (16) | 134,190 | |||||||||||||||
| Yih-Shyan (Wally) Liaw | 10,635 | (17) | — | $ | 7.46 | 4/28/2018 | |||||||||||
| 30,275 | (17) | — | $ | 7.46 | 4/28/2018 | ||||||||||||
| 10,079 | (18) | — | $ | 13.61 | 8/2/2020 | ||||||||||||
| 7,671 | (18) | — | $ | 13.61 | 8/2/2020 | ||||||||||||
| 18,313 | (19) | — | $ | 17.29 | 4/23/2022 | ||||||||||||
| 8,687 | (19) | — | $ | 17.29 | 4/23/2022 | ||||||||||||
| 8,694 | (20) | 6,764 | (20) | $ | 18.93 | 4/21/2024 | |||||||||||
| 4,241 | (20) | 3,301 | (20) | $ | 18.93 | 4/21/2024 | |||||||||||
| — | 3,390 | (21) | $ | 28.71 | 4/27/2026 | ||||||||||||
| — | 5,110 | (21) | $ | 28.71 | 4/27/2026 | ||||||||||||
| 3,830 | (22) | 95,176 | |||||||||||||||
| Chiu-Chu (Sara) Liu Liang | 20,300 | (11) | — | $ | 5.53 | 4/29/2019 | |||||||||||
| 19,615 | (23) | — | $ | 11.81 | 1/25/2020 | ||||||||||||
| 20,985 | (23) | — | $ | 11.81 | 1/25/2020 | ||||||||||||
| 29,000 | (24) | — | $ | 17.09 | 1/23/2022 | ||||||||||||
| 14,375 | (25) | 8,625 | (25) | $ | 17.96 | 1/20/2024 | |||||||||||
| — | 9,000 | (26) | $ | 27.28 | 1/27/2026 | ||||||||||||
| 4,050 | (27) | 100,643 | |||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(14) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(14) | |||||||||||||||||||||||||||||||||||||||||||||||
| Charles Liang | 166,750 | — | — | 35.07 | 1/19/2025 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| 130,000 | — | — | 26.95 | 8/2/2027 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| 600,000 | — | 400,000 | (2) | 45.00 | 3/2/2031 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| David Weigand | 16,072 | — | — | 22.10 | 7/31/2028 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| 3,928 | — | — | 22.10 | 7/31/2028 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2,475 | 2,000 | (3) | — | 30.33 | 8/4/2030 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| 3,525 | — | — | 30.33 | 8/4/2030 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| 15,000 | 15,000 | (4) | — | 53.04 | 5/5/2032 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| 494 | 4,633 | (5) | — | 53.04 | 5/5/2032 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| 1,881 | 2,492 | (5) | — | 53.04 | 5/5/2032 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 900 | (6) | 224,325 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 3,210 | (7) | 800,093 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 4,393 | (8) | 1,094,955 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 3,752 | (9) | 935,186 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Don Clegg | 2,000 | — | — | 20.54 | 8/3/2026 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| 14,679 | — | — | 22.10 | 7/31/2028 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| 5,321 | — | — | 22.10 | 7/31/2028 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2,413 | 1,875 | (3) | — | 30.33 | 8/4/2030 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| 3,212 | — | — | 30.33 | 8/4/2030 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| 542 | 2,541 | (5) | — | 53.04 | 5/5/2032 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| 365 | 182 | (5) | — | 53.04 | 5/5/2032 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 845.00 | (6) | 210,616 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 1,223 | (7) | 304,833 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 3,184 | (9) | 793,612 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| George Kao | 14,840 | — | — | 26.95 | 8/2/2027 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| 5,160 | — | — | 26.95 | 8/2/2027 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2,972 | — | — | 13.00 | 10/30/2028 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2,968 | — | — | 13.00 | 10/30/2028 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| 1,560 | — | — | 20.37 | 3/27/2030 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
| 3,381 | 2,029 | (10) | — | 23.74 | 10/27/2030 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | 4,378 | (11) | — | 76.63 | 11/4/2032 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | 2,122 | (12) | — | 76.63 | 11/4/2032 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 912 | (12) | 227,316 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | 2,930 | (13) | 730,303 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
(1)Represents the closing stock price per share of our common stock as of June 30, 2023 ($249.25) multiplied by the number of shares underlying RSUs that had not vested as of June 30, 2023.
(2)These stock options are performance-based and vest and become exercisable depending upon the degree of satisfaction of both the Stock Price Goals and Revenue Goals discussed above in CD&A. The Stock Price Goals must be achieved on or prior to September 30, 2026 and the Revenue Goals must be achieved on or prior to June 30, 2026. The options vest in tranches of 200,000 shares each only when coordinating Stock Price Goals and Revenue Goals, respectively, of $45.00 sixty-trading-day-average stock price and $4.0 billion in four-consecutive-fiscal-quarter revenue, $60.00 sixty-trading-day-average stock price and $4.8 billion four-consecutive-fiscal-quarter revenue, $75.00 sixty-trading-day-average stock price and $5.8 billion four-consecutive-fiscal-quarter revenue, $95.00 sixty-trading-day-average stock price and $6.8 billion four-consecutive-fiscal-quarter revenue, and $120.00 sixty-trading-day-average stock price and $8.0 billion four-consecutive-fiscal-quarter revenue, are achieved. The smallest amount of these stock options (threshold) that could have been earned based on performance was vested stock options for 200,000 shares for
38
achieving a Stock Price Goal of $45.00 sixty-trading-day-average stock price and a Revenue Goal of $4.0 billion in four-consecutive-fiscal-quarter revenue. However, even if those goals are achieved, if the Company’s stock price had remained at $45.00 per share, based on the $45.00 exercise price for these stock options, there would have been no appreciation value in those stock options for Mr. Liang. For more information about the operation of this award, see “Executive Compensation - Compensation Discussion and Analysis (“CD&A”) – Fiscal Year 2023 CEO Compensation – Discussion and Analysis of 2021 CEO Performance Award” above.
(3)These incentive and nonqualified stock options vest at the rate of 25% on May 1, 2021 and 1/16th per quarter thereafter, such that the granted options will be fully vested on May 1, 2024.
(4)These nonqualified stock options vest at the rate of 1/8th of the shares on the first quarter of the vesting commencement date on August 5, 2022, and 1/8th at the end of each successive calendar quarter thereafter.
(5)These incentive and nonqualified stock option vest the rate of 25% on May 5, 2023 and 1/16th per quarter thereafter, such that the granted options will be fully vested on May 5, 2026.
(6)The RSUs vest at the rate of 25% on May 10, 2021 and 1/16th per quarter thereafter, such that the RSUs will be fully vested on May 10, 2024.
(7)The RSUs vest at the rate of 25% on May 10, 2023 and 1/16th per quarter thereafter, such that the RSUs will be fully vested on May 10, 2026.
(8)The RSUs vest equally at the rate of 14.3% in seven quarters on November 10, 2022, such that the RSUs will be fully vested on May 10, 2024.
(9)The RSUs vest in four equal annual increments on July 1 of each year, beginning on July 1, 2023, such that the RSUs will be fully vested on July 1, 2026.
(10)These incentive stock options vest at the rate of 25% on October 27, 2021 and 1/16th per quarter thereafter, such that the granted options will be fully vested on October 27, 2024.
(11)These incentive and nonqualified stock options vest at the rate of 25% on November 4, 2023 and 1/16th per quarter thereafter, such that the granted options will be fully vested on November 4, 2026.
(12)These RSUs vest at the rate of 63% on May 10, 2021 and at a rate of 6% per quarter thereafter, such that the RSUs will be fully vested on November 10, 2024.
(13)These RSUs vest at the rate of 25% on November 10, 2023 and 1/16th per quarter thereafter, such that the RSUs will be fully vested on November 10, 2026.
(14)As further described in CD&A, as of the end of fiscal year 2023, each of Messrs. Weigand and Clegg participated in a Performance Incentive Award for fiscal year 2023 payable for Mr. Weigand 20% in cash and 80% in Performance RSUs, and payable for Mr. Clegg 50% in cash and 50% in Performance RSUs, which Performance RSUs will vest over four years from July 1, 2023. Based on the design of the Performance Incentive Award, there was essentially no target number of Performance RSUs to be earned, but the award was capped at a level unlikely to be earned. The actual Performance RSUs earned by Messrs. Weigand and Clegg for their Performance Incentive Awards were granted in early fiscal year 2024, as disclosed in CD&A above, and will appear in this table in subsequent years.
Fiscal Year 2023 Option Exercises and Stock Vested During Fiscal Year 2016
The following table sets forth the dollar amounts realized by each of our named executive officers pursuant to the exercise or vesting of equity-based awards during fiscal year 2023.
FISCAL YEAR 2023 OPTION EXERCISES AND STOCK VESTED TABLE
| Option Awards | Stock Awards | |||||||||||||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | ||||||||||||||||||||||
| Charles Liang | 231,260 | 13,472,113 | — | — | ||||||||||||||||||||||
| David Weigand | — | — | 6,264 | 650,495 | ||||||||||||||||||||||
| Don Clegg | 8,000 | 1,656,171 | 2,252 | 221,527 | ||||||||||||||||||||||
| George Kao | — | — | 2,532 | 220,076 | ||||||||||||||||||||||
(1) The value disclosed in this column is based on the difference between the price of our common stock at the time of exercise and the exercise price.
(2) The values disclosed in this column are based on the closing price of our common stock on the date of vesting, multiplied by the gross number of shares vested.
Fiscal Year 2023 Pension Benefits and Nonqualified Deferred Compensation
We do not provide any nonqualified deferred compensation arrangements or pension plans. As such, the Pension Benefits disclosure and Nonqualified Deferred Compensation disclosure for fiscal year 2023 are omitted from this Proxy Statement.
Fiscal Year 2023 Potential Payments Upon Termination or Change of Control
Other than as set forth below or described elsewhere in this Proxy Statement, we do not currently, and did not during fiscal year 2023 have, any arrangements with any of our named executive officers that provide for any additional or enhanced severance or other compensation or benefits in the event of termination or change of control of our Company.
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Other than with respect to the 2021 CEO Performance Award, the Company’s stock option agreements generally provide for three months of exercise of vested options after termination of service, one year of exercise after disability, and one year of exercise after death. The 2021 CEO Performance Award has certain provisions related to the treatment of such award in the event of a change of control of our Company. See “Discussion and Analysis of 2021 CEO Performance Award.” The final two tranches of 400,000 options under the 2021 CEO Performance Award would have been earned thereunder for a change in control occurring on June 30, 2023 (based on the closing stock price of $249.25 on such date). The exercise price under the 2021 CEO Performance Award is $45.00. As a result, the intrinsic value of these 400,000 options would have been $81.7 million at June 30, 2023.
Fiscal Year 2023 Chief Executive Officer Pay Ratio
For fiscal year 2023, the ratio of the annual total compensation of Mr. Liang, our Chief Executive Officer (“2023 CEO Compensation”), to the median of the annual total compensation of all of our employees and those of our consolidated subsidiaries other than Mr. Liang (“2023 Median Annual Compensation”), was 0.095 (or ninety-five hundredths) to 1. For purposes of this pay ratio disclosure, 2023 CEO Compensation was determined to be $7,104 which represents the total compensation reported for Mr. Liang under the “Fiscal Year 2023 Summary Compensation Table,” plus the Company’s contribution to certain non-discriminatory group health and welfare benefits provided to Mr. Liang. The 2023 Median Annual Compensation for the identified median employee was determined to be $75,170, also including the Company’s contribution to the same non-discriminatory group health and welfare benefits provided to the median employee. Please see the CD&A above for more information about Mr. Liang’s compensation arrangements in place for fiscal year 2023, which included participation in the 2021 CEO Performance Award.
Due to our permitted use of reasonable estimates and assumptions in preparing this pay ratio disclosure, the disclosure may involve a degree of imprecision, and thus we believe this pay ratio disclosure is a reasonable estimate.
To identify the median employee, we examined our total employee population as of June 30, 2021 (the “Determination Date”). We included all 2,367 full-time, part-time, seasonal and temporary employees of the Company and our consolidated subsidiaries in the U.S. We also included all 1,665 full-time, part-time, seasonal and temporary employees of the Company and our consolidated subsidiaries in The Netherlands and Taiwan. We excluded independent contractors and “leased” workers. We also excluded all our employees in European countries other than The Netherlands, which together represented approximately 1% of our total employees worldwide (4,155 individuals), which countries consisted of France (8 individuals), Germany (13 individuals), Italy (5 individuals), Spain (1 individual) and United Kingdom (15 individuals). We also excluded all our employees in China (46 individuals), Japan (30 individuals), and South Korea (5 individuals), which together represented an additional approximately 2% of our total employees worldwide. Our analysis identified 4,032 individuals who were not excluded.
To determine the median of the annual total compensation of all of such employees, other than Mr. Liang, we generally reviewed compensation for the period beginning on July 1, 2020, and ending on the Determination Date. We totaled, for each included employee other than Mr. Liang, base earnings (salary, hourly wages and overtime, as applicable) and cash bonuses paid during the measurement period, plus the Company’s contribution to group health and welfare benefits. We did not use any statistical sampling or cost-of-living adjustments for those purposes. A portion of our employee workforce (full-time and part-time) worked for less than the full fiscal year (due to mid-measurement period start dates, disability status or similar factors, etc.). In determining the median employee, we generally annualized the total compensation for such individuals based on reasonable assumptions and estimates relating to our employee compensation program. For temporary employees, we avoided creating full-time equivalencies.
In calculating our Chief Executive Officer pay ratio for fiscal year 2023, we did not go through a renewal of the process (described above) of identifying a median employee as was conducted for fiscal year 2021. This is because we believe that there has been no change in our employee population or employee compensation arrangements during fiscal year 2016.2023 that would result in a significant change to our Chief Executive Officer pay ratio disclosure. However, due to a change in the circumstances of the median employee that was identified as of the Determination Date (the “Original Median Employee”), as such Original Median Employee departed from the Company during the course of fiscal year 2022, it was no longer appropriate to use the Original Median Employee for these pay ratio purposes.As a result, for fiscal year 2022, we used another employee whose compensation was substantially similar to the Original Median Employee based on the compensation measures discussed above used to select the Original Median Employee. For fiscal year 2023, we continued to use the same employee identified for fiscal year 2022.
| Option Awards | Stock Awards | ||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | |||||||||
| Charles Liang | — | $ | — | — | $ | — | |||||||
| Howard Hideshima | 40,624 | $ | 626,078 | — | $ | — | |||||||
| Phidias Chou | 10,000 | $ | 237,799 | — | $ | — | |||||||
| Yih-Shyan (Wally) Liaw | 20,000 | $ | 494,333 | — | $ | — | |||||||
| Chiu-Chu (Sara) Liu Liang | — | $ | — | — | $ | — | |||||||
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