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Applied Materials, Inc. 3050 Bowers Avenue Santa Clara, California 95054 (408) 727-5555 |
January 24, 2024
Dear Fellow Shareholders:
On behalf of the Board of Directors, we are pleased to invite you to attend Applied Materials’ 2024 Annual Meeting of Shareholders, which will be held on Thursday, March 7, 2024, at 10:00 a.m. Central Time at our offices at 9700 US 290 East, Building 37, Austin, Texas 78724.
We encourage you to read this Proxy Statement because it contains important information for voting your shares and sets forth how the Board oversaw your investment over the past year. This year’s Proxy Statement reflects our continued focus on our business strategy, an engaged and effective Board, sound corporate governance and executive compensation practices, our sustainability strategy, and our regular dialogue with and responsiveness to our shareholders.
Financial Performance and Business Strategy
In fiscal 2023, Applied Materials delivered record revenue, earnings and cash flow, and we are outgrowing the wafer fabrication equipment market for the fifth year in a row. Our revenue increased 3% and earnings per share increased 9% year-over-year, despite semiconductor and wafer fabrication equipment spending both being down in 2023.
As we look ahead, we remain very positive about our long-term growth opportunities. Semiconductors are the foundation of digital transformation that will affect nearly every sector of the global economy in the coming years. The strategic importance of semiconductors is increasing throughout the world, and Applied Materials is in a great position to benefit from this exciting period of industry innovation and growth. We have the industry’s broadest portfolio of products and technologies that enable improvements in chip performance and power consumption, and we are collaborating closely with our customers to accelerate development and commercialization of next-generation technologies.
Making Possible a Better Future
We also continued to make strong progress towards our 10-year sustainability roadmap, which considers our direct impact and how we run our business (1X), our industry’s impact and those of our customers and suppliers (100X), and how our technology can be used to advance sustainability on a global scale (10,000X). Among our other achievements, we continued to make progress toward our 2030 greenhouse gas emission goals – which were validated in 2023 by the Science Based Targets initiative, strengthen our culture of inclusion, and accelerate sustainable innovation, including improving the energy efficiency and longevity of our products. We also designed and deployed a Net Zero 2040 Playbook to work collaboratively across our industry to reduce and mitigate our climate impact. We are committed to significantly reducing our impacts by bringing improved efficiency across our global operations, using cleaner, renewable energy and enabling groundbreaking technology innovation.
An Independent, Diverse and Skilled Board
This year’s director nominees possess a wide range of backgrounds, skills and experience, and further our Board’s commitment to maintain a composition that aligns with the Company’s evolving business and strategic needs. With a balance of tenures, a diversity of personal characteristics and experiences, and a range of skills – including relevant subject matter expertise – our Board is well-positioned to oversee Applied’s management team and support Applied’s long-term strategy. This Proxy Statement also includes information about the Board’s governance practices – including its active and ongoing Board refreshment process, annual self-evaluation, independent leadership and committee practices – that foster this effective oversight.
Robust Shareholder Engagement
We remain committed to effective corporate governance that is informed by our shareholders, promotes the long-term interests of our Company and its shareholders, and strengthens the Board’s and management’s accountability. Our corporate governance practices are enhanced by a robust shareholder engagement program, which includes regular outreach to holders of more than half of our outstanding shares. Our shareholder engagement program focuses on issues of interest to our shareholders, particularly in the areas of governance, compensation, environmental sustainability, and human capital matters such as diversity, equity and inclusion. Shareholder feedback continues to directly inform the Board’s decision-making on a variety of important matters.
Thank you for your continued investment in and support of Applied Materials.
Sincerely,
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Thomas J. Iannotti Chairman of the Board |
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Gary E. Dickerson President and Chief Executive Officer |
Proxy Statement Summary
Shareholder Engagement
We believe that strong corporate governance should include regular engagement with our shareholders to enable us to understand and respond to shareholder concerns. In addition to the regular meetings that our CEO, CFO and Investor Relations team holds with investors, prospective investors and investment analysts, we have a robust shareholder outreach program led by a cross-functional team that includes members of our Investor Relations, Global Rewards, ESG and Legal functions. Independent members of our Board are also involved, as appropriate. In the fall, we proactively solicit feedback on our executive compensation program, corporate governance practices, and sustainability and diversity and inclusion initiatives, as well as any matters voted on at our prior annual meeting. After the filing of our proxy statement, we engage again with our shareholders about important topics to be addressed at our annual meeting. Following our annual meeting, our Board of Directors, led by its Human Resources and Compensation Committee (the “HRCC”) and Governance Committee, reviews the results of the meeting and investor feedback, as well as evaluate emerging trends in corporate governance and other areas. See “Shareholder Engagement” on page 22 for more information.
In response to shareholder support at last year’s annual meeting for the proposal to lower the ownership threshold required for shareholders to call a special meeting to 10%, as part of our shareholder outreach in 2023, we also asked our shareholders about their views on our special meeting right. The feedback we received from our shareholders on this topic was reviewed and discussed with our Governance Committee and the Board. In response to the feedback and the support for the proposal at last year’s annual meeting, in December 2023 the Board approved an amendment and restatement of our Bylaws to lower the ownership threshold required to call a special meeting from 20% to 10%. See “Shareholder Engagement” on page 22 for more information.
Executive Compensation
Company Overview
Applied Materials is the leader in the materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations Make Possible® a Better Future.
We develop, design, produce and service semiconductor and display equipment for manufacturers that sell into highly competitive and rapidly changing end markets. Our competitive positioning is driven by the ability of our talented workforce to identify major technology inflections early, and to develop highly differentiated materials engineering solutions for our customers to enable those technology inflections. Through our broad portfolio of products, technologies and services, innovation leadership and focused investments in research and development, we are enabling our customers’ success and creating significant value for our shareholders. Applied’s ability to hire, develop and retain a world-class global workforce is based on our commitment to creating a Culture of Inclusion that embraces different backgrounds, perspectives, and experiences to build stronger, more resilient teams. Consistent with our core values, we enable our employees to do their best work by providing quality training, learning and career development opportunities; promoting diversity, equity and a connected and inclusive culture; and upholding a high standard of ethics and respect for human rights.
In addition to our other accomplishments, we continue to make strong progress towards our 10-year road map for environmental and social responsibility, which we introduced in 2020. At Applied, making a positive contribution is at the foundation of our culture and of our vision to Make Possible® a Better Future. Our 1x, 100x and 10,000x sustainability framework refers to the holistic goals and commitments we’ve set for our operations, how we work with customers and suppliers, and how our technology can be used to advance sustainability on a global scale. In 2023, we announced our Net Zero 2040 playbook – a clear pathway and detailed plan to work across our industry, including with customers and supply chain partners, to reduce the semiconductor industry’s carbon emissions. More details of Applied’s sustainability vision and strategy, including a copy of the Company’s most recent Sustainability Report, can be found at https://www.appliedmaterials.com/company/corporate-responsibility.
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APPLIED MATERIALS, INC. 2024 PROXY STATEMENT | v |
Board and Corporate Governance Practices
Diversity. Our Board values having a Board that reflects diverse perspectives, including those based on gender, ethnicity, skills, experience at policy-making levels in areas that are relevant to the Company’s global activities, and functional, geographic or cultural backgrounds. Our Board has adopted a Policy on Board Diversity within our Corporate Governance Guidelines, which reflects the Board’s commitment to actively seek out women and ethnically diverse director candidates and to consider the factors above, among others, in the context of the current composition of the Board and needs of the Company, when identifying and evaluating director candidates.
The ten director nominees for election at our 2024 Annual Meeting bring to our Board a variety of different backgrounds, skills, professional and industry experience, and other attributes and perspectives that contribute to the overall diversity of our Board.
Independence. The Board’s Governance Committee expects each non-employee director to be free of relationships, interests or affiliations that could give rise to conflicts of interest or interfere with the director’s exercise of independent judgment. Applied’s Corporate Governance Guidelines require that a majority of our directors must be independent, and that our Audit, HRCC and Governance Committees must consist solely of independent directors. Director independence is determined under Nasdaq listing standards and SEC rules. The Board has affirmatively determined that, other than Mr. Dickerson, our Chief Executive Officer, all members of the Board who served during 2023 and all director nominees are independent under applicable Nasdaq listing standards and SEC rules.
Tenure. The Board believes that new ideas and perspectives are critical to a forward-looking and strategic Board, as are the valuable experiences and deep understanding of Applied’s business and industries that longer-serving directors offer. Our Corporate Governance Guidelines do not impose a term limit on Board service, but our directors are not typically nominated for re-election after they reach the age of 72. Feedback from the annual Board evaluations and discussions regarding individual performance between each non-employee director and our Chair are important considerations of director tenure. As a result of our ongoing Board refreshment efforts, we have added three new directors to the Board over the last five years, which has resulted in a balanced range of tenures, ensuring both continuity and fresh perspectives among our director nominees. Our nominees have an average tenure of nine years.
Key Attributes of the Board
* Ethnically diverse means a director who self-identifies as one or more of the following (defined by Nasdaq as an Underrepresented Minority): African American or Black, Alaskan Native or Native American, Asian, Hispanic or Latinx, or Native Hawaiian or Pacific Islander.
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| 14 | APPLIED MATERIALS, INC. 2024 PROXY STATEMENT |
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Board and Corporate Governance Practices
Shareholder Recommendations or Nominations. The evaluation procedures described above apply to all candidates for director nomination, including candidates submitted by shareholders. Shareholders wishing to recommend a candidate for consideration by the Governance Committee should submit the candidate’s name, biographical data and a description of their qualifications in light of the criteria listed above to Teri A. Little, Corporate Secretary, Applied Materials, Inc., 3225 Oakmead Village Drive, M/S 1268, P.O. Box 58039, Santa Clara, CA 95052, or by e-mail at corporatesecretary@amat.com.
Shareholders wishing to nominate a director should follow the specific procedures set forth in our Bylaws.
Corporate Governance
Corporate Governance Guidelines
Applied’s Corporate Governance Guidelines establish the governance framework within which the Board conducts its business and fulfills its responsibilities. These guidelines and other important governance materials are available on our website at: https://www.appliedmaterials.com/us/en/about/corporate-governance/corporate-governance-documents.html. The Board regularly reviews our Corporate Governance Guidelines in light of legal and regulatory requirements, evolving best practices and other developments.
Board Leadership
Our corporate governance framework provides the Board flexibility to determine the appropriate leadership structure for the Company and whether the roles of Chair and CEO should be separated or combined. In making this determination, the Board considers many factors, including the needs of the business, the Board’s assessment of its leadership needs from time to time, and the best interests of shareholders. If the role of Chair is filled by a director who does not qualify as an independent director, the independent directors will designate a Lead Independent Director. As discussed below, our Chair is currently an independent director. However, if Applied were to designate a Lead Independent Director in the future, our Corporate Governance Guidelines set forth the roles and authority such individual would have, including, among other things, presiding at all meetings of the Board at which the Chair is not present, including executive sessions of the independent directors, having the authority to call meetings of the independent directors, and serving as a liaison for consultation and direct communication with shareholders.
The Board believes that it is currently appropriate to separate the roles of Chair and CEO. The CEO is responsible for setting our strategic direction and the day-to-day leadership of our business, while the Chair, along with the rest of our independent directors, ensures that the Board’s time and attention are focused on effective oversight of the matters most critical to Applied. Mr. Iannotti, an independent director, currently serves as the Chair of the Board. Mr. Iannotti has significant experience and knowledge of Applied, including having worked with two CEOs and different management teams at Applied, and the Board believes that his deep knowledge of the Company and industry, as well as his strong leadership and governance experience, enables him to lead the Board effectively and independently.
As the independent Board Chair, Mr. Iannotti’s roles include:
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Presiding at all meetings of the Board, including executive sessions of the independent directors |
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Having the authority to call meetings of the Board and of the independent directors |
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Serving as a liaison between the CEO and the independent directors |
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Approving information sent to the Board and advising management on the Board’s information needs |
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Approving meeting agendas and meeting schedules |
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Having the authority to retain outside advisors and consultants who report directly to the Board |
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Presiding at all meetings of shareholders |
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Serving as a liaison for direct communication with shareholders |
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Providing direct guidance to the CEO, including advising on executing the Company’s long-term strategy |
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APPLIED MATERIALS, INC. 2024 PROXY STATEMENT | 17 |
Board and Corporate Governance Practices
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Leading, along with the members of the HRCC and the other independent directors, the annual performance review of the CEO |
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In conjunction with the relevant committees of the Board, reviewing and assessing director performance and compensation, and the size and composition of the Board |
The Chairs of all the Board’s Committees – Audit, Governance, HRCC and Strategy and Investment – are also independent directors.
Director Onboarding and Education
When new directors join our Board, they participate in a comprehensive onboarding program to learn about our industry, business, strategies and policies. The multi-day onboarding program includes meetings with senior executives to discuss our businesses, strategy and operations, and our corporate functions, such as finance, technology, information systems and legal, and a tour of the Maydan Technology Center, our state-of-the-art R&D facility. New directors also meet with the executives and staff supporting the Committees on which they sit, as well as the Committees’ external consultants and advisors. Each new director is also partnered with an experienced fellow director “mentor” to facilitate the integration of the new director to the Board.
For continued education regarding our business and industry, we provide presentations by internal and external experts during Board meetings on topics such as technology inflections, industry trends, changes in the geopolitical and macroeconomic landscape, and the sustainability landscape, with particular focus on the implications and impact to the Company. Our Board and Committees also regularly review developments in corporate governance to continue enhancing the Board’s effectiveness. We encourage directors to participate in external continuing director education programs and provide reimbursement for expenses associated with this participation. Throughout the year, Board members also visit our manufacturing facilities and attend Company events, including our Engineering and Technology (ET) Conference and the announcement of our investment to build the Equipment and Process Innovation and Commercialization (EPIC) Center, an advanced facility for collaborative semiconductor process technology and manufacturing equipment R&D. These interactions, along with meetings with leaders below the CEO Executive Leadership Team level throughout the year, provide directors additional visibility to provide oversight of the Company’s culture, strategies and operations.
Board and Committee Evaluations
Our Board recognizes that a thorough, constructive evaluation process enhances our Board’s effectiveness and is an essential element of good corporate governance. Each year, the Governance Committee, in consultation with our independent Board Chair, reviews and determines the design, scope, content and execution of the evaluation process, including whether to modify the written evaluation questionnaire or to engage a third party to facilitate the evaluation.
In 2023, the Governance Committee reviewed the evaluation process that had been in place for a number of years and considered the input of Board members on the evaluation process. Based on this review, the Governance Committee determined to make enhancements to the process to include more focused questions to invite open-ended responses, rather than numerical ratings, on each director’s assessments of the Board, the Board Committees and individual directors. Written questionnaires were used in the evaluation to solicit feedback on a range of topics, including overall Board effectiveness; Board dynamics and communication; interaction with management; Board skills and experience; the role of the Board and Committee chairs; and information and resources.
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| 18 | APPLIED MATERIALS, INC. 2024 PROXY STATEMENT |
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Board and Corporate Governance Practices
The risks identified by the ERM program are reported to the Board, with a focus on the most significant risks facing the Company, including strategic, operational, financial, legal and compliance risks. Oversight responsibility for a particular risk may fall within an area of responsibility and expertise of one of the Board Committees. Management presents regular analyses of risk mitigation strategies to the Board or the respective Committee with oversight responsibility for the relevant risk. The ERM Committee reports to the Audit Committee at least semi-annually and provides a broader annual risk mitigation update to the full Board.
Risk Assessment of Compensation Programs. We have assessed our compensation policies, plans and practices, and determined that they do not create risks that are reasonably likely to have a material adverse effect on Applied. To make this determination, our management reviewed Applied’s compensation policies, plans and practices, and assessed the following aspects: design, payment methodology, potential payment volatility, relationship to our financial results, length of performance period, risk-mitigating features, performance measures and goals, oversight and controls, and plan features and values compared to market practices. Management reviewed its analysis with the HRCC, which agreed with this determination. Applied also has in place various controls to mitigate risks relating to compensation policies, plans and practices, such as executive stock ownership guidelines and a clawback policy that enables the recovery of certain incentive compensation payments in certain circumstances.
Board’s Role in Oversight of Strategy
The Board and its Committees actively engage with management to provide guidance on and oversight of Applied’s business strategy throughout the year. The Board dedicates one meeting annually to focus on Applied’s long-term strategy, which include strategic plans from members of senior management on the priorities and implementation strategies for their respective lines of business. These strategic plans guide Applied’s actions to manage risk and deliver shareholder value. The Board’s expanded strategy sessions also include presentations by internal experts to discuss technologies and markets relevant to our core businesses as well as adjacent and emerging technologies. In addition, various elements of strategy are discussed at every Board meeting, as well as at many meetings of the Board’s Committees, including the Strategy and Investment Committee. In order to assess performance against our strategic plans, the Board receives regular updates on progress and execution, and provides direction to senior management throughout the year.
To enhance its oversight of Applied’s strategy and process for considering long-term trends within the Company’s industries, the Board also leverages Applied’s Growth Technical Advisory Board, which is composed of leading academic and industry luminaries with a diverse set of backgrounds in fields such as science, technology, government and education. This Advisory Board, which includes a former member of the Applied Board, provides Applied and the Board with additional, independent insights on how major industries will continue to evolve in a technology-centric world.
Management Succession Planning
The Board and the HRCC recognize that developing the capabilities of Applied’s executives is vital to our ability to capitalize on our opportunities and increase long-term shareholder value. Accordingly, the HRCC’s most important goal is to oversee the Company’s programs that foster executive capability and retention, with emphasis on leadership development, management capabilities and succession plans.
We build our leadership capability using a multi-step approach to succession planning for our most critical roles, including CEO, executive and technology leadership positions. Our executive succession planning process is a carefully designed, thoughtful and long-term approach overseen by the HRCC and the Board. With the guidance of the HRCC, the Board also maintains a CEO emergency succession plan. We plan, and prepare as many years in advance as possible, for anticipated transitions to ensure leadership continuity and positive outcomes for the Company. Another key component of succession planning is leadership assessment and development of potential successors, including moving leaders into new, increasingly complex roles that complement their professional development. In addition, diversity of our succession pipelines is a priority of our Board and the Company, and we strive to ensure a diverse succession slate.
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APPLIED MATERIALS, INC. 2024 PROXY STATEMENT | 21 |
Board and Corporate Governance Practices
Management reports quarterly either to the HRCC or the full Board on executive leadership development and succession planning. The reports include updates regarding succession and development programs for the CEO and other senior executives, with an eye toward ensuring development of the talent needed to lead Applied today and in the future and readiness of succession candidates who can assume top management positions without undue interruption. Board members have opportunities throughout the year to engage with members of senior management and other high-potential leaders in a variety of formal and informal settings, including Board meetings and events, preparatory meetings, analyst meetings, and internal and external business and technology conferences. The HRCC and Board also regularly discuss individual executive transitions as needed over the course of the year. The Board’s goal is to have a long-term and continuing process for effective senior leadership capability, development and succession, and to ensure that there are readily available choices when the need arises.
Shareholder Rights
In addition to direct engagement through our recurring shareholder engagement program discussed below, we have instituted a number of mechanisms that allow shareholders to advance their points of view, including:
Right to Call a Special Meeting. Our Bylaws permit shareholders holding at least 10% of our outstanding shares of common stock to call a special meeting. Our Board approved an amendment and restatement of our Bylaws to lower the threshold from 20% to 10% in response to majority support of a shareholder proposal on this topic at our 2023 annual meeting and subsequent feedback we received during our shareholder outreach, as discussed further below under “Shareholder Engagement.”
Right to Act by Written Consent. Our Certificate of Incorporation permits shareholders holding at least 20% of our outstanding shares of common stock to initiate the process for shareholders to take action by written consent without a meeting.
Proxy Access. Our Bylaws permit proxy access. Any shareholder (or group of up to 20 shareholders) owning 3% or more of Applied’s common stock continuously for at least three years may nominate up to two individuals or 20% of our Board, whichever is greater, as director candidates for election to the Board, and require us to include such nominees in our annual meeting proxy statement.
Majority Voting. Under our Bylaws, in any uncontested election of directors (an election in which the number of nominees does not exceed the number of directors to be elected), any nominee who receives a greater number of votes cast “for” their election than votes cast “against” their election will be elected.
Our Bylaws provide that in the event an incumbent director receives more “against” than “for” votes, they shall tender their resignation after certification of the shareholder vote. Our Governance Committee, composed entirely of independent directors, will consider the offer of resignation, taking into consideration all factors it deems relevant, and recommend to the Board the action to be taken. The Board must take action on the recommendation within 90 days following certification of the shareholder vote. No director who tenders an offer of resignation may participate in the vote on the Governance Committee’s recommendation or the Board’s determination of whether to accept the resignation offer. Applied will publicly disclose the Board’s decision, including, if applicable, the reasons for rejecting an offer to resign.
Shareholder Engagement
We believe that strong corporate governance should include regular engagement with our shareholders to enable us to understand and respond to shareholder concerns.
Investor Relations. Our senior management team, including our CEO, CFO and members of our Investor Relations team, maintain regular contact with a broad base of investors, including through quarterly earnings calls, individual meetings and other channels for communication, to understand their concerns. In 2023, senior management participated in 103 meetings with investors, including 91 meetings with our CFO and 15 with our CEO.
Shareholder Outreach Program. In addition, we have a robust shareholder outreach program, which is a recurring, year-round effort, led by a cross-functional team that includes members of our Investor Relations, Global Rewards, ESG and Legal functions, with participation of our independent directors, where appropriate. This engagement enables us to build meaningful relationships over time with our shareholders. The Board’s Governance Committee oversees our shareholder engagement program.
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| 22 | APPLIED MATERIALS, INC. 2024 PROXY STATEMENT |
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Board and Corporate Governance Practices
gender for our employees, both globally and in the U.S., as well as the adjusted pay ratio comparing compensation for minorities with non-minorities in the U.S. In each instance, the ratio is based on total compensation, consisting of base salary, cash bonus and equity awards, and in alignment with our compensation philosophy, accounts for factors such as employees’ roles, organizational levels and geographic locations. These adjusted pay ratios are disclosed on our corporate website at: https://www.appliedmaterials.com/us/en/corporate-responsibility/people.html#payequity. We will continue to publish these ratios annually in our Sustainability Report.
Shareholder Communications
Any shareholder wishing to communicate with any of our directors regarding Applied may write to the director, c/o Teri A. Little, Corporate Secretary, Applied Materials, Inc., 3225 Oakmead Village Drive, M/S 1268, P.O. Box 58039, Santa Clara, CA 95052, or by e-mail at corporatesecretary@amat.com. The Board has instructed the Corporate Secretary to review correspondence directed to the Board and, at the Corporate Secretary’s discretion, forward items that she deems appropriate for the Board’s consideration.
Stock Ownership Guidelines
The Board has adopted stock ownership guidelines to align the interests of our directors and executive officers with those of our shareholders. The guidelines provide that non-employee directors should each own Applied stock with a value of at least five times the annual base retainer for non-employee directors. Applied’s Chief Executive Officer should own Applied stock with a value of at least six times his annual base salary. Each Section 16 officer on the CEO Executive Leadership Team should own Applied stock with a value of at least three times their annual base salary. Unearned performance awards and unexercised options (or portions thereof) are not included for purposes of satisfying the applicable ownership requirement. Under our guidelines, directors and officers may not sell any shares of Applied stock if their ownership is, or following the sale, would fall, below the applicable guideline. As of December 31, 2023, all of our directors and executive officers were in compliance with the stock ownership guidelines.
Standards of Business Conduct
Applied’s Standards of Business Conduct embody our commitment to ethical and legal business practices. The Board expects Applied’s directors, officers and all other members of its workforce to act ethically at all times and to acknowledge their commitment to Applied’s Standards of Business Conduct. The Standards of Business Conduct are available on our website at: https://www.appliedmaterials.com/us/en/about/corporate-governance/corporate-governance-documents.html.
Board Meetings and Committees
The Board met four times in fiscal 2023. Each director attended over 75% of all Board and applicable committee meetings held during fiscal 2023. Directors are strongly encouraged to attend the Annual Meeting of Shareholders, and all of the directors serving on our Board at the time attended our 2023 Annual Meeting of Shareholders.
The Board has three principal committees performing the functions required by applicable SEC rules and Nasdaq listing standards to be performed by independent directors: the Audit Committee, the HRCC and the Governance Committee. Each of these committees meets regularly and has a written charter approved by the Board that is reviewed annually by the respective committee and by the Board. The Board also has a Strategy and Investment Committee, whose role and responsibilities are described in Applied’s Corporate Governance Guidelines.
At each regularly-scheduled Board meeting, the Chair of each committee reports on any significant matters addressed by the committee since the last regularly-scheduled Board meeting. Each director who serves on the Audit Committee, HRCC, or Governance Committee is an independent director under applicable Nasdaq listing standards and SEC rules.
Copies of the current charters for the Audit, HRCC and Governance Committees can be found on our website at: https://www.appliedmaterials.com/us/en/about/corporate-governance/corporate-governance-documents.html.
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| 24 | APPLIED MATERIALS, INC. 2024 PROXY STATEMENT |
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PROPOSAL 2 – Approval, on an Advisory Basis, of
the Compensation of Our Named Executive Officers
PROPOSAL 2 – Approval, on an Advisory Basis, of the Compensation of Our Named Executive Officers
Pursuant to Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”), we are asking shareholders to approve, on a non-binding, advisory basis, the compensation of our NEOs, as described in this Proxy Statement. We seek this approval each year. Our annual “say-on-pay” proposals have been supported by our shareholders each year since we began providing this vote in 2011, and received the support of 92% of votes cast in 2023.
Our Board of Directors believes that our compensation policies and practices promote a performance-based culture and align our executives’ interests with those of our shareholders through a strong emphasis on at-risk compensation tied to the achievement of performance objectives and shareholder value. Our executive compensation program is also designed to attract and retain highly-talented executives who are critical to the successful implementation of Applied’s strategic plan.
Performance-Based Compensation. We align compensation with our business objectives, performance and shareholder interests. See the section titled “Overview of Compensation Program Philosophy and Governance Framework” on page 38 for a discussion of the principal objectives of our executive compensation program.
Significant Portion of CEO Pay Consists of Variable Compensation and Long-Term Incentives. In fiscal 2023, 96% of our CEO’s compensation comprised variable compensation elements, and 90% of his overall compensation was delivered in equity with multi-year vesting. Performance objectives include financial and market objectives relating to adjusted operating margin, relative TSR, adjusted gross margin and wafer fabrication equipment market share, as well as other strategic and operational objectives, as described on pages 42 and 43.
Please see the “Compensation Discussion and Analysis” section for further discussion of our executive compensation program and the fiscal 2023 compensation of our NEOs.
We are asking our shareholders to approve the compensation of our NEOs as described in this Proxy Statement by voting in favor of the following resolution:
“RESOLVED, that the shareholders approve, on a non-binding, advisory basis, the compensation paid to the Company’s named executive officers as disclosed in the Company’s Proxy Statement for the 2024 Annual Meeting of Shareholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis section, the Summary Compensation Table, other compensation tables, narrative discussion and related disclosure.”
Even though this say-on-pay vote is advisory and therefore will not be binding on the Company, the HRCC and the Board value the opinions of our shareholders, and will consider the results of the vote when making future compensation decisions for our NEOs.
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The Board recommends that you vote FOR the approval, on an advisory basis, of the compensation of our named executive officers for fiscal year 2023, as disclosed in this Proxy Statement |
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APPLIED MATERIALS, INC. 2024 PROXY STATEMENT | 31 |
Compensation Discussion and Analysis
Compensation Discussion and Analysis
Executive Summary
Our Business and Strategy
Applied Materials is the leader in the materials engineering solutions used to produce virtually every new chip and advanced display in the world. Our expertise in modifying materials at atomic levels and on an industrial scale enables customers to transform possibilities into reality. At Applied Materials, our innovations Make Possible® a Better Future.
We develop, design, produce and service semiconductor and display equipment for manufacturers that sell into highly competitive and rapidly changing end markets. Our competitive positioning is driven by the ability of our talented workforce to identify major technology inflections early, and to develop highly differentiated materials engineering solutions for our customers to enable those technology inflections. Through our broad portfolio of products, technologies and services, innovation leadership and focused investments in research and development, we are enabling our customers’ success and creating significant value for our shareholders. Applied’s ability to hire, develop and retain a world-class global workforce is based on our commitment to creating a Culture of Inclusion that embraces different backgrounds, perspectives, and experiences to build stronger, more resilient teams. Consistent with our core values, we enable our employees to do their best work by providing quality training, learning and career development opportunities; promoting diversity, equity and a connected and inclusive culture; and upholding a high standard of ethics and respect for human rights.
In addition to our other accomplishments, we continue to make strong progress towards our 10-year road map for environmental and social responsibility, which we introduced in 2020. At Applied, making a positive contribution is at the foundation of our culture and of our vision to Make Possible® a Better Future. Our 1x, 100x and 10,000x sustainability framework refers to the holistic goals and commitments we’ve set for our operations, how we work with customers and suppliers, and how our technology can be used to advance sustainability on a global scale. In 2023, we announced our Net Zero 2040 playbook – a clear pathway and detailed plan to work across our industry, including with customers and supply chain partners, to reduce the semiconductor industry’s carbon emissions. More details of Applied’s sustainability vision and strategy, including a copy of the Company’s most recent Sustainability Report, can be found at https://www.appliedmaterials.com/company/corporate-responsibility.
Our Performance Highlights
Over the past several years, our broad portfolio of products and services has enabled Applied to extend its leadership at the major technology inflections that are driving our customers’ roadmaps and future industry growth. In fiscal 2023, we delivered record revenue, earnings and cash flow, and we are outgrowing the wafer fabrication equipment market for the fifth year in a row. Key highlights of our financial outperformance include:
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Record revenue of $26.5 billion, up 3% year-over-year, despite overall semiconductor and wafer fabrication equipment spending both being down in 2023. |
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Record GAAP EPS of $8.11, and record non-GAAP adjusted EPS of $8.05 (see Appendix A for a reconciliation of non-GAAP adjusted measures). |
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Record $8.7 billion in cash from operations, and record free cash flow of $7.6 billion (see Appendix A for a reconciliation of non-GAAP measures). |
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| 32 | APPLIED MATERIALS, INC. 2024 PROXY STATEMENT |
|
|
Compensation Discussion and Analysis
Compensation Governance and Decision-Making Framework
Overview of Compensation Program Philosophy and Governance Framework
Our executive compensation program has three principal objectives:
| |
» |
|
To attract, reward and retain highly-talented executive officers and other key employees; |
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» |
|
To motivate these individuals to achieve short-term and long-term goals that enhance shareholder value; and |
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» |
|
To support our core values and culture. |
We seek to achieve these objectives by:
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» |
|
Providing compensation that is competitive with the practices of other leading high-technology companies; and |
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» |
|
Linking rewards to Company and individual performance by: |
| |
• |
|
Setting challenging performance goals for executive officers and other key employees; |
| |
• |
|
Balancing retention needs with performance objectives; and |
| |
• |
|
Providing a high proportion of total target compensation in the form of long-term incentive awards to motivate executive officers and other key employees to increase long-term value in alignment with shareholders’ interests. |
The HRCC uses these principles to set appropriate base salary levels and to design and determine annual incentive bonuses and long-term incentive awards. The HRCC also considers Applied’s business strategy and objectives, external factors such as the geopolitical and economic environment, competitive practices and trends, and corporate factors, including the overall cost of the compensation program.
The HRCC further considers the results of the annual advisory “say-on-pay” vote and shareholder feedback. At our Annual Meeting in 2023, our “say-on-pay” proposal received a substantial majority (92%) of votes cast, reflecting continuing strong support for our ongoing executive compensation program. Following the Annual Meeting and throughout the remainder of 2023, we continued our extensive shareholder outreach efforts and specifically solicited feedback on our executive compensation program. A broad group of Applied management team members participated in the outreach through a series of virtual meetings and conference calls, with active independent director participation either directly on the calls or through oversight of the shareholder engagement program. During those discussions, we continued to receive broadly positive investor feedback on the compensation program structure and design. Taking into account the results of the “say-on-pay” vote at our 2023 Annual Meeting and the shareholder feedback gathered through our outreach efforts, the HRCC approved an executive compensation program structure for fiscal 2023 that was generally unchanged from the fiscal 2022 program.
Compensation Program Peer Group
The HRCC regularly reviews the structure and amount of compensation paid by our peer group, which consists of high-technology companies whose businesses are comparable to ours and with whom we are likely to compete for executive talent, as a reference point for evaluating our compensation program. The HRCC generally screens for companies that meet the following criteria: (1) innovative technology companies with product manufacturing, (2) companies whose revenues and market capitalization were approximately one-fourth to five times that of Applied, (3) publicly-traded companies with global operations that disclose executive compensation pursuant to SEC rules, and (4) companies that represent: (i) industry competitors, (ii) competitors for key talent, (iii) customers or suppliers, and/or (iv) comparable alternatives for shareholder investment.
Data gathered on executive compensation practices across the peer group include base salary levels, bonus payouts, target and actual cash compensation, long-term incentive award values and total compensation levels. The HRCC uses this information as a reference point in informing its decision making, rather than targeting a specific percentile of the peer data for our NEOs. The executive compensation data for the peer companies is gathered from the sources described in “Role of Compensation Consultant” below.
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| 38 | APPLIED MATERIALS, INC. 2024 PROXY STATEMENT |
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Compensation Discussion and Analysis
In setting goals for the PSUs, the HRCC considered Applied’s historical results and relative performance, and established goals that are aligned with Applied’s financial and strategic objectives and will require exceptional results to achieve the maximum level.
Restricted Stock Units. The RSU awards are scheduled to vest ratably over three years, providing a link to shareholder value creation and maintaining retention value.
Retirement Provisions. The fiscal 2023 PSU and RSU awards are subject to retirement provisions which, in the event of a qualifying retirement based on age and years of service, provide for the potential of a partial payout of the PSU awards based on actual performance at the conclusion of the three-year performance period and partial accelerated vesting of RSU awards. The retirement vesting provisions are designed to maintain engagement and focus, as well as to provide a retention incentive, for our executive officers when they approach potential retirement decisions.
Performance and Payout for Fiscal 2021 Performance Share Unit Awards
The PSUs granted to our NEOs in fiscal 2021 were eligible to vest after the conclusion of a three-year performance period, based on achievement of an average non-GAAP adjusted operating margin goal for fiscal 2021 through fiscal 2023 and relative TSR percentile rank within the S&P 500 for fiscal 2021 through fiscal 2023, with equal weighting given to each metric. In setting the adjusted operating margin performance requirements for the PSUs, the HRCC considered a number of factors, including the Company’s past performance, analyst expectations, then-current and expected macro-economic forces, the spectrum of potential outcomes, and competitor practices. The number of PSUs that could vest was based on the achievement of threshold, target or maximum levels of each metric, and straight-line interpolation for achievement that fell between the levels. The threshold, target and maximum levels and actual results achieved for each metric, as well as the resulting payout factors for the fiscal 2021 PSUs, are shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three-Year Average |
|
|
|
|
|
|
|
|
|
|
| Metric |
|
Threshold |
|
|
Target |
|
|
Max |
|
|
Result |
|
|
Payout
Factor |
|
|
|
|
|
|
|
| Operating Margin (1) |
|
|
25.3% |
|
|
|
27.3% |
|
|
|
30.3% |
|
|
|
30.4% |
|
|
|
200% |
|
|
|
|
|
|
|
| Relative TSR |
|
|
25th
%ile |
|
|
|
50th
%ile |
|
|
|
75th
%ile |
|
|
|
92nd
%ile |
|
|
|
200% |
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200% |
|
| (1) |
See Appendix A for a reconciliation of non-GAAP adjusted operating margin. |
The actual number of fiscal 2021 PSUs earned for each NEO (with the exception of Messrs. Hill and Deane, who were not executive officers and did not receive PSUs in fiscal 2021) is shown below.
|
|
|
|
|
|
|
|
|
| NEO |
|
Target
Number of
PSUs |
|
|
Number of
PSUs
Earned |
|
|
|
|
| Gary E. Dickerson |
|
|
122,169 |
|
|
|
244,338 |
|
|
|
|
| Prabu G. Raja |
|
|
24,826 |
|
|
|
49,652 |
|
|
|
|
| Omkaram Nalamasu |
|
|
15,680 |
|
|
|
31,360 |
|
Applied Global Services Leadership Compensation
In September 2022, Mr. Deane was appointed to lead Applied Global Services with no immediate change in his ongoing compensation but was granted a one-time RSU award with a grant date value of $1,000,000, vesting over a four-year period. In early fiscal 2023, the HRCC approved ongoing compensation for Mr. Deane commensurate with his new role, consisting of an initial annual base salary of $600,000; a target bonus opportunity of 120% of his base salary; and an annual long-term incentive award with a target value of $2,800,000, consisting of 50% RSUs and 50% PSUs, consistent with the equity mix for other non-CEO NEOs.
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|
|
|
|
APPLIED MATERIALS, INC. 2024 PROXY STATEMENT | 49 |
Compensation Discussion and Analysis
Role and Authority of the Human Resources and Compensation Committee
The HRCC has a written charter approved by the Board that specifies the HRCC’s duties and responsibilities, which is available on our website at: https://www.appliedmaterials.com/us/en/about/corporate-governance/corporate-governance-documents.html#Documents. In accordance with its charter, the HRCC oversees our programs that foster executive and employee development and retention, with an emphasis on leadership development, management capabilities, succession plans, company culture and human capital management. The HRCC also determines executive and director compensation, and oversees significant employee benefits programs, policies and plans.
Each member of the HRCC has been determined by the Board to be independent under Nasdaq and SEC rules. The HRCC may delegate any of its responsibilities to subcommittees. See “Board Meetings and Committees” on page 24 for more information about the HRCC.
Role of Compensation Consultant
The HRCC has the authority to engage independent advisors to assist it in carrying out its responsibilities. For fiscal 2023, the HRCC engaged Semler Brossy Consulting Group (“Semler Brossy”) as its independent executive compensation consultant. Semler Brossy, who reports directly to the HRCC and not to management, is independent from Applied, has not provided any services to Applied other than to the HRCC and receives compensation from Applied only for services provided to the HRCC. The HRCC assessed the independence of Semler Brossy pursuant to SEC rules and concluded that the work of Semler Brossy for the HRCC has not raised any conflict of interest.
Semler Brossy reviews and advises on all principal aspects of the executive compensation program. Its main responsibilities are as follows:
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» |
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Advise on alignment of pay and performance; |
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» |
|
Review and advise on executive total compensation, including base salaries, short- and long-term incentives, associated performance goals and retention and severance arrangements; |
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» |
|
Advise on trends in executive compensation; |
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» |
|
Provide recommendations regarding the composition of our peer group; |
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» |
|
Analyze market compensation practices based on peer group proxy statements, compensation survey data and other publicly available data; and |
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» |
|
Perform any special projects requested by the HRCC. |
The HRCC typically asks Semler Brossy to attend the HRCC’s meetings, including executive sessions at which management is not present. Semler Brossy communicates regularly with the HRCC Chair outside of committee meetings and also meets with management to gather information and review proposals.
Role of Executive Officers and Management in Compensation Decisions
In fiscal 2023, the HRCC invited Mr. Dickerson (as CEO) and other executives, including representatives of Global Human Resources and Global Rewards, to attend its meetings. The HRCC also regularly held executive sessions without management present. The CEO, together with the HRCC, assesses the performance of our NEOs and other executive officers. The CEO presents to the HRCC his evaluation of each executive officer’s performance over the past year and makes recommendations to the HRCC regarding base salaries, bonus targets and actual payments, performance goals and weightings, and long-term incentive awards for executive officers. The HRCC considers these recommendations in making its final determinations, in addition to considering input from Semler Brossy. The HRCC discusses the CEO’s compensation and makes final decisions regarding the CEO’s compensation when he is not present.
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| 50 | APPLIED MATERIALS, INC. 2024 PROXY STATEMENT |
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|
Compensation Discussion and Analysis
Additional Compensation Programs and Policies
Non-Qualified Deferred Compensation Plan
Our 2016 Deferred Compensation Plan (the “DCP”) allows our NEOs and other eligible employees to voluntarily defer on a pre-tax basis a portion of their eligible earnings. We do not provide matching or other employer contributions to our executive officers under this plan. Deferrals made prior to October 2015 under the DCP are credited with deemed interest and are subject to the distribution rules in place prior to the plan amendment in October 2015. Beginning in fiscal 2016, participants are permitted to notionally invest new deferrals in certain investment options available under the plan. Additionally, for new deferrals, the DCP provides distribution rules for in-service distributions or upon a qualifying separation from service, an elected future date, disability and change in control. See “Nonqualified Deferred Compensation” below for more information about the DCP.
Retirement and Other Benefits
During fiscal 2023, all full-time and part-time (working 20 or more hours a week) U.S. employees, including the NEOs, were eligible to participate in Applied’s 401(k) plan, a tax-qualified retirement plan. Eligible Applied 401(k) plan participants receive matching contributions from Applied. We do not provide defined benefit pension plans or, other than the 401(k) plan and the DCP, defined contribution retirement plans to the NEOs or other employees, except as required in certain countries outside the U.S. for legal or competitive reasons. Applied offers a number of other benefits programs to a broad base of eligible employees, including a tax-qualified employee stock purchase plan, medical, dental and vision insurance, long-term and short-term disability plans, life and accidental death and dismemberment plans, health and dependent care flexible spending accounts, business travel insurance, wellness programs, educational assistance, employee assistance program and certain other country-specific benefits.
Applied annually benchmarks its overall benefits programs, including the 401(k) plan, against those of our peers. Applied’s overall broad-based benefits programs are consistent with market practice, which the HRCC believes allows us to remain competitive in attracting and retaining talent.
Applied maintains a relocation program available to all eligible employees that is consistent with current practices among large global companies. Applied provides competitive relocation benefits to ensure it can fill positions critical to its business needs and provide career development opportunities for high-potential employees. During fiscal 2023, the Company provided Mr. Hill with benefits to support his relocation to the Bay Area. Given the timing of Mr. Hill’s relocation, a portion of the expenses will be incurred in, and reported for, fiscal 2024. Until his relocation, the Company paid for Mr Hill’s travel from his home in Oregon to the Company’s headquarters in Santa Clara, California. While these travel costs and relocation benefits are required to be disclosed as compensation for Mr. Hill, we do not consider them to be a personal benefit.
The safety and security of the Company’s CEO are important to Applied’s continued success. Based on the recommendations from a previously-conducted third-party security risk assessment, during fiscal 2023, the HRCC approved the costs for equipment and monitoring and maintenance services of a residential security system for Mr. Dickerson. The HRCC also approved costs for ancillary travel-related security services for Mr. Dickerson’s family, in response to the heightened geopolitical risk environment. The HRCC will continue to review the nature and cost of any future security provided for Mr. Dickerson.
The value of the benefits provided under the programs discussed above are not considered by the HRCC in determining an individual NEO’s total compensation.
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|
|
|
|
APPLIED MATERIALS, INC. 2024 PROXY STATEMENT | 51 |
Compensation Discussion and Analysis
Stock Ownership Guidelines
We have stock ownership guidelines to help align the interests of our Section 16 officers on the Executive Leadership Team with those of our shareholders. The guidelines provide that officers may not sell any shares of Applied stock if their ownership is, or following the sale would fall, below the following ownership levels:
|
|
|
| Position |
|
Ownership Level |
|
|
| CEO |
|
6x base salary |
|
|
| Other Officers |
|
3x base salary |
Unearned performance awards are not included for purposes of satisfying the guidelines.
As of December 31, 2023, all of our officers were in compliance with the stock ownership guidelines.
Hedging and Pledging Prohibitions
Applied has an insider trading policy that, among other things, prohibits all of our employees (including officers) and directors from engaging in hedging or other speculative transactions relating to Applied shares. Prohibited transactions include short sales, derivative securities (such as put and call options, or other similar instruments) and other hedging transactions (such as equity swaps, prepaid variable forwards, or similar instruments), or any transactions that have, or are designed to have, the effect of hedging or offsetting any decrease in the market value of Applied securities. In addition, Section 16 officers and directors are prohibited from holding Applied securities in a margin account or otherwise pledging Applied securities as collateral for a loan.
Compensation Recovery Policy
We have a Compensation Recovery Policy, adopted by the HRCC in fiscal 2023 (the “Recovery Policy”), that, in the event of an accounting restatement, requires reimbursement from a current or former Section 16 officer of erroneously awarded incentive-based compensation received by them, regardless of any fault or misconduct by the officer. The compensation that may be recovered is the actual incentive-based compensation received by an officer minus the amount the officer would have received had such compensation been determined based on the restated financial statements, calculated on a pre-tax basis. The Recovery Policy applies to incentive-based compensation that is received by the Section 16 officer on or after October 2, 2023 and during the three fiscal years that ended immediately before the Company determines that it is required to restate its financial statements, and that is granted, earned or vested based wholly or in part on the achievement of any financial reporting measure or based on the Company’s stock price.
We also have a legacy “clawback” policy that applies to incentive compensation received by an officer before October 2, 2023. This policy allows the Board to require reimbursement of incentive compensation from an executive officer in the event that intentional misconduct by the officer is determined to be the primary cause of a material negative restatement of Applied’s financial results. The compensation that may be recovered is the after-tax portion of any bonus paid to, and any performance-based equity awards earned by, the NEO within the 12 months after filing of the erroneous financial statements, if the compensation would not have been paid to the NEO had Applied’s financial results been reported properly. The policy applies to financial statements filed in a rolling three- year, look-back period.
The policies described above are in addition to any policies or recovery rights that are required under applicable laws, including the Sarbanes-Oxley Act.
Tax Deductibility
Section 162(m) of the Internal Revenue Code, as amended by the Tax Cuts and Jobs Act of 2017, restricts deductibility for federal income tax purposes of annual individual compensation in excess of $1 million to each NEO, effective for tax years beginning after 2017, subject to a transition rule for certain written binding contracts which were in effect on November 2, 2017, and which were not modified in any material respect on or after such date. While the HRCC considers the deductibility of compensation as a factor in making compensation decisions, it retains the flexibility to provide compensation that is consistent with the Company’s goals for its executive compensation program, even if such compensation is not tax-deductible.
|
|
|
| 52 | APPLIED MATERIALS, INC. 2024 PROXY STATEMENT |
|
|
Executive Compensation
Non-Qualified Deferred Compensation
Applied’s 2016 Deferred Compensation Plan (the “DCP”) is a non-qualified deferred compensation plan that allows eligible employees, including executive officers, to voluntarily defer receipt of up to 40% of their base salaries and all or a portion of their eligible sales incentive and annual bonus payments, if any.
Deferrals made prior to October 2015 are retained as separate “rollover” accounts under the DCP. These deferrals continue to be credited with deemed interest in the sum of (a) the yield-to-maturity of five-year U.S. Treasury notes, plus (b) 1.50%. Deferred amounts in the rollover accounts, plus deemed interest thereon, are generally payable on the same date selected by the participants or specified prior to October 2015 under the terms of the DCP. Beginning in fiscal 2016, deferrals under the DCP are credited with deemed investment returns, gains or losses based upon investment crediting options available under the DCP. Applied does not make any matching or other employer contributions to the DCP for our executive officers.
Under the DCP, a change in control (as defined prior to October 2015), would trigger the distribution of all deferred balances in the rollover accounts. For account balances after October 2015, the DCP provides distribution rules for in-service and future date distribution options and upon a qualifying separation from service, disability and change in control, including the option to change the time and form of payment within three (3) months following a change in control, as such term is defined in the DCP. Distributions are payable from the general assets of Applied or from the assets of a grantor trust (known as a rabbi trust) established by Applied for distributions made from accounts consisting of deferrals made after October 2015 and as of December 31, 2019, and their associated earnings.
Non-Qualified Deferred Compensation for Fiscal 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Name |
|
Executive Contributions in Last Fiscal Year ($)(1) |
|
|
Registrant Contributions in Last Fiscal Year ($) |
|
|
Aggregate Earnings in Last Fiscal Year ($)(2) |
|
|
Aggregate Withdrawals/ Distributions ($) |
|
|
Aggregate Balance at Last Fiscal Year End ($)(3) |
|
|
|
|
|
|
|
| Gary E. Dickerson |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
| Brice Hill |
|
|
224,001 |
|
|
|
— |
|
|
|
7,202 |
|
|
|
— |
|
|
|
383,326 |
|
|
|
|
|
|
|
| Prabu G. Raja |
|
|
1,012,614 |
|
|
|
— |
|
|
|
261,694 |
|
|
|
— |
|
|
|
8,638,916 |
|
|
|
|
|
|
|
| Omkaram Nalamasu |
|
|
798,074 |
|
|
|
— |
|
|
|
225,686 |
|
|
|
226,241 |
|
|
|
6,354,866 |
|
|
|
|
|
|
|
| Timothy M. Deane |
|
|
394,090 |
|
|
|
— |
|
|
|
6,888 |
|
|
|
— |
|
|
|
1,679,246 |
|
| (1) |
Amounts in this column are included in the Salary and/or Non-Equity Incentive Plan Compensation columns of the Summary Compensation Table for fiscal 2023. |
| (2) |
Amounts in this column are not included in the Summary Compensation Table because there were no above-market or preferential earnings for fiscal 2023. |
| (3) |
Amounts in this column represent balances as of October 29, 2023 and include compensation reported in the Summary Compensation Table for fiscal 2023 and in the Summary Compensation Tables for prior years’ proxy statements, except for (i) the earnings on contributions, which were not at above-market or preferential rates, and (ii) contributions made when the individual was not a NEO. |
Employment Agreement
Applied does not have employment agreements with any of its NEOs, other than an agreement with Mr. Dickerson. The agreement with Mr. Dickerson was entered into in connection with his appointment as President and CEO.
Mr. Dickerson’s employment agreement, dated August 14, 2013, provides that if Applied terminates his employment other than for cause and other than due to death or disability, he would be entitled to receive a lump sum payment equal to 275% of his base salary, provided that he executes an agreement containing a release of claims and non-solicitation and non-disparagement provisions in favor of Applied.
For purposes of Mr. Dickerson’s agreement, “cause” generally means the willful failure to perform his duties after written notice and an opportunity to cure; the willful commission of a wrongful act that caused, or was reasonably likely
|
|
|
| 58 | APPLIED MATERIALS, INC. 2024 PROXY STATEMENT |
|
|
Executive Compensation
Change of Control – Employee Stock Incentive Plan. Our Stock Plan provides that the vesting of equity awards granted under the plan to employees, including the NEOs, will be accelerated in full upon a change of control of Applied if the successor corporation (or its parent or subsidiary) does not assume or provide a substitute for the outstanding awards. Separately, equity awards will be accelerated in full if the award holder is terminated without cause or resigns employment with Applied for good reason, in each case, within 12 months following a change of control of Applied and as defined under the Stock Plan or the applicable award agreement. This double-trigger accelerated vesting does not apply if the applicable award agreement specifically states that it will not apply or if the participant’s employment is terminated due to his or her death or disability, resignation without good reason or termination for cause.
The following table shows the amounts attributable to the accelerated vesting of equity awards under the Stock Plan following a change of control in which the awards are not assumed or substituted, or within 12 months following a change of control in which the NEO is terminated without cause or resigns for good reason, in each case assuming the change of control and termination or resignation occurred on October 27, 2023, the last business day of fiscal 2023.
|
|
|
|
|
| Named Executive Officer |
|
Value of Vesting Acceleration ($)(1) |
|
|
|
| Gary E. Dickerson |
|
|
70,357,105 |
|
|
|
| Brice Hill |
|
|
12,243,725 |
|
|
|
| Prabu G. Raja |
|
|
19,643,268 |
|
|
|
| Omkaram Nalamasu |
|
|
9,666,700 |
|
|
|
| Timothy M. Deane |
|
|
7,391,402 |
|
| (1) |
Amount based on the number of RSUs and target number of PSUs for which vesting would have been accelerated, multiplied by $131.30, the closing price of Applied common stock on October 27, 2023. |
CEO Pay Ratio
In accordance with SEC rules, we are providing the ratio of the annual total compensation of our CEO, to the median of the annual total compensation of our employees (other than the CEO). The fiscal 2023 annual total compensation of our CEO, Mr. Dickerson, was $26,854,544, the fiscal 2023 annual total compensation of our median compensated employee (other than the CEO) was $96,883, and the ratio of these amounts was 277 to 1.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our human resources system of record and the methodology described below. Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
As permitted under the SEC rules, we are using the same median employee as was identified for purposes of our fiscal 2021 CEO pay ratio, as we believe the changes in our employee population and compensation arrangements have not significantly impacted our pay ratio disclosure. For purposes of identifying our median compensated employee for fiscal 2021, we used our global employee population as of October 31, 2021, the last day of fiscal 2021, identified based on our human resources system of record. We used total direct compensation as our consistently applied compensation measure for such population. In this context, total direct compensation means the sum of the applicable annualized base salary determined as of October 31, 2021, the annual incentive earned for service in fiscal 2021, and the approved value of the annual equity awards granted during fiscal 2021, not including off-cycle grants in the case of new hires, promotions, or similar circumstances. Given the Company’s global population, we used the foreign currency exchange rates in effect at the end of fiscal 2021 for the salary and the annual incentive. We then calculated the annual fiscal 2023 total compensation for our previously-identified median compensated employee using the same methodology used for our CEO as set forth in the Summary Compensation Table of this Proxy Statement.
|
|
|
| 60 | APPLIED MATERIALS, INC. 2024 PROXY STATEMENT |
|
|
PROPOSAL 3 – Ratification of The Appointment of
Independent Registered Public Accounting Firm
Audit Fees consisted of fees for (a) professional services rendered for the annual audit of Applied’s consolidated financial statements and audit of internal control over financial reporting, (b) review of the interim consolidated financial statements included in quarterly reports and (c) services that are typically provided by an independent registered public accounting firm in connection with statutory and regulatory filings or engagements.
Audit-Related Fees included fees for assurance and related services that were reasonably related to the performance of the audit or review of Applied’s consolidated financial statements and are not reported under “Audit Fees,” including fees incurred for services in connection with compliance with government-funded grant requirements and audits of financial statements of certain employee benefit plans.
Tax Fees consisted of fees for professional services for tax compliance and review, and tax planning and advice. Tax compliance and review services included federal, state, and international tax compliance, assistance with tax audits and appeals, and assistance with customs and duties audits. Tax planning and advice services included consultations related to tax compliance matters and certain international operations.
All Other Fees consisted of fees for professional services other than the services reported above, including services in connection with compliance with local regulations.
The Audit Committee has concluded that the provision of the non-audit services described above was compatible with maintaining the independence of KPMG.
|
|
|
|
|
|
|
|
The Board recommends that you vote FOR the ratification of the appointment of KPMG as Applied’s independent registered public accounting firm for fiscal 2024 |
Policy on Audit Committee’s Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
The Audit Committee reviews and, as appropriate, pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, and tax services, as well as specifically designated non-audit services which, in the opinion of the Audit Committee, will not impair the independence of the independent registered public accounting firm. Pre-approval generally is provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and generally is subject to a specific budget. The independent registered public accounting firm and Applied’s management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, including the fees for the services performed to date. In addition, the Audit Committee also may pre-approve particular services on a case-by-case basis, as necessary or appropriate.
Audit Committee Report
The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Applied specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.
Composition. The Audit Committee of the Board is composed of the directors named below. Each member of the Audit Committee meets the independence and financial experience requirements under applicable SEC rules and Nasdaq listing standards. In addition, the Board has determined that each of Judy Bruner, Kevin P. March, Yvonne McGill and Scott A. McGregor is an “audit committee financial expert” as defined by SEC rules.
Responsibilities. The Audit Committee operates under a written charter that has been adopted by the Board. The charter is reviewed annually for changes, as appropriate. The Audit Committee is responsible for general oversight of Applied’s auditing, accounting and financial reporting processes, system of internal control over financial reporting, and tax, trade, legal, regulatory and ethical compliance. Applied’s management is responsible for: (a) maintaining Applied’s books of account and preparing periodic financial statements based thereon; and (b) maintaining the system of internal
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APPLIED MATERIALS, INC. 2024 PROXY STATEMENT | 67 |
PROPOSAL 4 – Shareholder Proposal
Regarding Lobbying Report
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» |
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Memberships in trade, business, and civic associations, as well as the amount of dues paid to the associations – including those associations to which we pay annual dues of $25,000 or more – and the percentage of such dues that are specified by the associations as nondeductible lobbying activity expenditures; |
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» |
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Board and management oversight of our lobbying and political activities and expenditures; and |
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Links to our federal and state filings, as well as other publicly-available reports, that relate to our lobbying and political activities. |
The Report also discloses the activities and expenditures of the Applied Materials, Inc. Political Action Committee (“AMPAC”), which is funded entirely through voluntary contributions from eligible employees.
We believe that the Report, which we intend to publish annually, and our overall reporting on this topic are consistent with or exceed that of many other public companies; fully comply with the level of disclosure required by federal, state, and local laws; and provide appropriate transparency into and context with respect to our lobbying activities and expenditures and the policies and procedures governing such activities.
We have policies and procedures in place to promote effective oversight of our lobbying and political activities
As described in the Report, we have appropriate Board- and management-level procedures in place to oversee our lobbying and political activities. The Corporate Governance and Nominating Committee of the Board, comprised entirely of independent directors, oversees our public policy activities and receives an annual report detailing our political contributions and policies relating to our political giving and activities. The Vice President of Communications and Public Affairs and the Managing Director, Government Affairs, are responsible for the management of our lobbying and political activities, including: ensuring our lobbying and political spending aligns with our primary policy focus areas, such as technology regulation, international trade, talent and workforce development, and sustainability; and reviewing and approving the Company’s membership in trade, business, and civic associations.
AMPAC’s activities are overseen and its contributions are reviewed and approved by the AMPAC board of directors. AMPAC contributes to federal candidates, political action committees, and party committees supporting issues of strategic importance to our Company, consistent with legal requirements. In addition, a State Contributions Committee, comprised of the individuals who also serve on the AMPAC board of directors, oversees corporate political spending at the state and local levels. These responsibilities are further described in the Report.
Our lobbying and political activities are in the best interests of the Company and its shareholders
The Board ultimately believes that the Company should be an effective participant in the political process, including through lobbying activities and participation in trade and industry associations. As a leader in the technology industry, our participation in lobbying activities is a result of careful consideration of political and legislative matters that may have an impact on the Company or our strategy and allows us to advocate for our policy positions, share our business expertise, and be part of public education efforts regarding issues facing our industry and the business community. As we disclose in the Report, the focus areas of our lobbying include technology regulation, international trade, research and development (R&D), human resources and labor, and sustainability. Efforts within these areas include advocating for immigration reform that embraces the contributions of immigrants to the economy; advocating for fairness, diversity and inclusion; and working on policies, partnerships and R&D incentives to develop and advance next-generation technologies. We believe this thoughtful approach and engagement further the best interests of the Company, our shareholders, and our employees. For example, as disclosed in our 2022 Sustainability Report, we advocated for passage of the U.S. CHIPS and Science Act, which provides a catalyst for the semiconductor industry to accelerate investments to build more robust supply chains, speed up innovation and create thousands of new jobs.
Additionally, we are members of various groups for reasons unrelated to lobbying, such as information gathering and professional development. These efforts are necessarily focused on issues and positions important to the Company; however, lobbying done on behalf of our industry by certain industry groups of which we may be members may not necessarily represent our positions at all times. Our membership and participation in an organization does not imply our endorsement of the entirety of that organization’s or its members’ policy positions. Where the views of a particular association of which we are a member are not aligned with our own views, we engage to share our dissenting views to advance the policy debate within the association membership.
Following careful review and consideration and for the reasons stated above, the Board has determined that adoption of this shareholder proposal is not necessary or appropriate and is not in the best interest of Applied or its shareholders.
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The Board recommends that you vote AGAINST this shareholder proposal |
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APPLIED MATERIALS, INC. 2024 PROXY STATEMENT | 71 |
PROPOSAL 5 – Shareholder Proposal
Regarding Pay Equity Reporting
labor economist to conduct statistical analyses relevant to gender and racial pay equity in the U.S. Through this process, we make adjustments as appropriate. We are currently working to expand this approach to our other locations.
We are committing to publish annually in our Sustainability Report our pay ratios – comparing compensation for men and women both globally and for the U.S., and comparing compensation for minorities with non-minorities in the U.S.
In our engagement with shareholders, we have heard from certain shareholders that additional disclosure regarding our pay practices would be beneficial. Accordingly, and as part of our continued commitment to enhanced transparency and accountability, we will annually disclose adjusted pay ratios by gender for our employees, both globally and for our U.S. employees, and by minorities compared to non-minorities for our U.S. employees, beginning with our 2023 Sustainability Report, which is scheduled to be published in June 2024. Our adjusted pay ratios will reflect total compensation, consisting of base salary, cash bonus and stock awards. We believe that adjusted pay ratios better reflect pay equity as the ratios take into account factors such as employees’ roles, organizational levels, and geographic locations. These disclosures should advance shareholder understanding of pay equity at Applied.
We do not believe that an unadjusted median pay figure is a meaningful metric for pay equity. An unadjusted median pay ratio measures the difference in pay of two employees whose compensation happens to fall at the midpoint among employees in a given demographic (such as gender or ethnicity), without accounting for valid factors that impact pay, such as employees’ roles, organizational levels, and geographic locations. This statistic does not accurately demonstrate whether women and racial-minority employees are being paid equitably for similar roles and would not advance an understanding of pay equity at Applied.
The Board does not believe that the proposal’s request that we also report unadjusted median pay ratios across race and gender would provide transparency with respect to pay equity and equal opportunity, and would not enhance an understanding of or accountability for our diversity efforts.
We are transparent regarding the diversity of our workforce, and we hold ourselves accountable for our goals to increase representation of women and minorities
We believe there is no greater asset to innovation than the diversity of our people. Fostering diverse perspectives and experiences unlocks breakthrough innovation and strengthens every aspect of our business. To this end, we have set bold goals for us to achieve by 2030: 25% women representation globally; 21% executive women representation globally; 25% underrepresented minority representation in the U.S. workforce; and 10% executive underrepresented minority representation the U.S. workforce. Furthermore, we aspire to achieve equal global and executive representation of women by 2040.
We believe that a commitment to transparency helps to build trust with our shareholders and internal and external stakeholders, and holds us accountable to our commitments. Since 2018, we have published talent data, goals, and actions being taken to increase representation. In our annual Sustainability Report, we currently report the actual percentage representation, and its trend over time, for representation among global women, U.S. women, and U.S. underrepresented minorities across four job levels: Executives, People Managers, Professionals, and Other Professionals (hourly employees). We believe that these metrics are more meaningful indicators of representation and equal opportunity than the unadjusted median pay ratios sought by the proponent. In addition, to provide even greater transparency, we publish our consolidated EEO-1 reports.
We have implemented programs to foster an inclusive culture and to increase diverse representation
More broadly, we are committed to strengthening a Culture of Inclusion across every business group, function and region of our Company. Our Culture of Inclusion strategy is focused on: engaging leaders as champions of change; eliminating systemic barriers to inclusion; and operationalizing inclusion in all we do.
To accelerate our Culture of Inclusion strategy and support our efforts in achieving our 2030 diversity goals, we launched a DEI Engine – a framework of training, resources and process to empower all employees, at every level, to accelerate our progress. The three pillars of the DEI Engine are: ingraining an inclusive culture; inspire, attract, and retain talent; and impact DEI in our industry and society. Ensuring equitable compensation falls within the inspire, attract and retain talent pillar.
In addition, we invest in building an inclusive talent pipeline to expand opportunities for those who have been traditionally underrepresented in the technology sector, benefitting individuals while providing the Company and our
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| 74 | APPLIED MATERIALS, INC. 2024 PROXY STATEMENT |
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Questions and Answers About the Proxy
Statement and Our 2024 Annual Meeting
| Q: |
What is the record date? How many shares are entitled to vote? |
| A: |
Shareholders who owned Applied common stock at the close of business on January 10, 2024, the record date, are entitled to vote at the Annual Meeting. On the record date, there were 832,062,050 shares of Applied common stock outstanding. Each share of Applied common stock is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on. |
A complete list of these shareholders will be available for the 10 days prior to the Annual Meeting. To make arrangements to view the list, please contact our Corporate Secretary by e-mail at corporatesecretary@amat.com. A shareholder may examine the list for any legally valid purpose related to the Annual Meeting.
| Q: |
What is the difference between holding shares as a shareholder of record and as a beneficial owner? |
| A: |
Most Applied shareholders hold their shares as beneficial owners (through a broker, bank, or other nominee) rather than as a shareholder of record (directly in their own name). |
Shareholders of Record. If your shares are registered directly in your name with Applied’s transfer agent, Computershare, you are considered the shareholder of record with respect to those shares, and these proxy materials are being sent directly to you. As a shareholder of record, you have the right to grant your voting proxy directly to Applied or to vote in person at the Annual Meeting. If you requested printed proxy materials, we have enclosed an accompanying proxy card for you to use. You may also submit voting instructions via the Internet or by telephone by following the instructions on the accompanying proxy card, as described below under “How can I vote my shares?”
Beneficial Owners. If your shares are held in a brokerage account or by a broker, bank, or other nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker, bank, or other nominee, which is considered the shareholder of record with respect to those shares. As a beneficial owner, you have the right to direct your broker, bank, or other nominee on how to vote the shares in your account. However, because you are not the shareholder of record, you may not vote these shares in person at the Annual Meeting, unless you request and provide at the Annual Meeting a valid proxy from your broker, bank, or other nominee. Your broker, bank, or other nominee has included a voting instruction form for you to use to direct them how to vote your shares. Please instruct your broker, bank, or other nominee how to vote your shares using the voting instruction form you received from them.
| Q: |
Can I attend the Annual Meeting? |
| A: |
Applied shareholders on the record date or their legal proxy holders may attend the Annual Meeting. To be admitted to the Annual Meeting, you will need a form of photo identification and valid proof of ownership of Applied common stock or a valid legal proxy. If you have a legal proxy from a shareholder of record, you must bring a form of photo identification and the legal proxy to the Annual Meeting. If you have a legal proxy from a street name shareholder, you must bring a form of photo identification, a legal proxy from the record holder (i.e., the bank, broker or other holder of record) to the street name shareholder that is assignable, and the legal proxy from the street name shareholder to you. Each shareholder may appoint only one proxy holder to attend on such shareholder’s behalf. |
The use of cameras, recording equipment and other electronic devices (including cell phones, tablets, laptops, etc.) is not permitted at the Annual Meeting.
| Q: |
How can I vote my shares? |
| A: |
You may vote over the Internet, by telephone, by mail, or in person at the Annual Meeting. Votes submitted by telephone or over the Internet must be received by 11:59 p.m., Eastern Time, on Wednesday, March 6, 2024, unless otherwise indicated. |
Voting over the Internet. To vote over the Internet, please follow either the instructions included on your proxy card or the voting instructions you receive by e-mail or that are being provided via the Internet. If you vote over the Internet, you do not need to complete and mail a proxy card.
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APPLIED MATERIALS, INC. 2024 PROXY STATEMENT | 77 |
Other Matters
Other Matters
Shareholder Proposals or Nominations for 2025 Annual Meeting
If a shareholder would like us to consider including a proposal in the proxy statement for our 2025 Annual Meeting pursuant to Rule 14a-8 of the Exchange Act, the proposal must be received by our Corporate Secretary at our principal executive offices or by e-mail at corporatesecretary@amat.com on or before September 26, 2024.
For a shareholder’s notice of nomination of one or more director candidates to be included in our proxy statement and ballot pursuant to the proxy access right included in Section 2.15 of our Bylaws, it must be received by our Corporate Secretary at our principal executive offices or by e-mail at corporatesecretary@amat.com no earlier than August 27, 2024, and no later than the close of business on September 26, 2024. The notice must contain the information required by our Bylaws, and the shareholder(s) and nominee(s) must comply with the information and other requirements in our Bylaws relating to the inclusion of shareholder nominees in our proxy materials.
If a shareholder seeks to propose other business or nominate a director, but does not seek to include a proposal or director nominee in our proxy statement for our 2025 Annual Meeting, pursuant to the advance notice provisions of our Bylaws, notice must be received by our Corporate Secretary at our principal executive offices no earlier than November 22, 2024, and no later than the close of business on December 22, 2024. The notice must contain the information required by our Bylaws, including the information required by Rule 14a-19 of the Exchange Act in the case of a shareholder who intends to solicit proxies in support of director nominees other than the Company’s nominees.
Our Bylaws contain specific requirements regarding a shareholder’s ability to nominate a director or to submit a proposal for consideration at an upcoming meeting. If you would like a copy of our Bylaws, please contact our Corporate Secretary by e-mail at corporatesecretary@amat.com.
No Incorporation by Reference
In Applied’s filings with the SEC, information is sometimes “incorporated by reference.” This means that we are referring you to information that has previously been filed with the SEC and the information should be considered as part of the particular filing. As provided under SEC rules, the “Audit Committee Report” and the “Human Resources and Compensation Committee Report” contained in this Proxy Statement are not incorporated by reference into any of our other filings with the SEC, except to the extent we specifically incorporate either report by reference into a filing. In addition, this Proxy Statement includes several website addresses, including the website where our Sustainability Report can be accessed. These website addresses are intended to provide inactive, textual references only. The information on these websites and in our Sustainability Report is not part of or incorporated by reference into this Proxy Statement or any of our other filings with the SEC.
YOU MAY OBTAIN A COPY OF APPLIED’S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER 29, 2023 ON OUR WEBSITE AT www.appliedmaterials.com OR WITHOUT CHARGE BY SENDING A WRITTEN REQUEST TO APPLIED MATERIALS, INC., 3050 BOWERS AVENUE, P.O. BOX 58039, M/S 1261, SANTA CLARA, CALIFORNIA 95052-8039, ATTN: INVESTOR RELATIONS.
By Order of the Board of Directors
Santa Clara, California
January 24, 2024
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APPLIED MATERIALS, INC. 2024 PROXY STATEMENT | 81 |
Pay vs Performance Disclosure - USD ($)
|
12 Months Ended |
Oct. 29, 2023 |
Oct. 30, 2022 |
Oct. 31, 2021 |
| Pay vs Performance Disclosure |
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| Pay vs Performance Disclosure, Table |
The following disclosure sets forth information concerning the compensation for our principal executive officer (“PEO”) and the average compensation for our other NEOs (“Non-PEO NEOs”), as reported in the Summary Compensation Table and with certain adjustments to reflect the “compensation actually paid” to such individuals, and certain financial performance measures, for our three most recently completed fiscal years. This disclosure has been prepared in accordance with Item 402(v) of the Exchange Act. Pay versus Performance Table
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Value of Initial Fixed $100
Investment Based on: |
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Summary Compensation Table Total for PEO (1) |
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Compensation Actually Paid to PEO (1)(2)(3) |
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Average Summary Compensation Table Total for Non-PEO NEOs (1) |
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Average Compensation Actually Paid to Non-PEO NEOs (1)(2)(4) |
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Total Shareholder Return (5) |
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Peer Group Total Shareholder Return (5) |
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2023 |
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$26,854,544 |
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$ 71,918,135 |
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$6,475,471 |
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$12,376,821 |
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$221.11 |
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$142.27 |
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$6,856 |
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$8.05 |
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2022 |
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$20,399,972 |
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($ 22,058,266 |
) |
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$5,953,570 |
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$ 1,634,909 |
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$149.67 |
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$105.92 |
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$6,525 |
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$7.70 |
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2021 |
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$35,265,559 |
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$144,856,918 |
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$6,675,150 |
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$14,982,610 |
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$226.06 |
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$148.13 |
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$5,888 |
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$6.84 |
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| (1) |
Mr. Dickerson was our PEO for each year presented. The Non-PEO NEOs were: (i) for fiscal 2023, Drs. Raja and Nalamasu and Messrs. Hill and Deane, (ii) for fiscal 2022, Drs. Raja and Nalamasu, Messrs. Hill and Deane, Robert J. Halliday, and Ali Salehpour, and (iii) for fiscal 2021, Drs. Raja and Nalamasu, Messrs. Halliday and Salehpour, and Daniel J. Durn. |
| (2) |
The dollar amounts reported represent the amount of “compensation actually paid,” as calculated in accordance with SEC rules. The dollar amounts do not reflect the amounts of compensation actually earned, realized or received by our NEOs during the applicable fiscal year. In accordance with SEC rules, certain adjustments were made to the Summary Compensation Table total compensation to determine the amount of “compensation actually paid,” as shown in notes 3 and 4 to this table. |
| (3) |
The following table shows the amounts deducted from and added to the Summary Compensation Table (“SCT”) total compensation to calculate “compensation actually paid” to Mr. Dickerson. |
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Subtract: Amounts Reported as Stock Awards in SCT |
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Year-End Fair Value of Equity Awards Granted in the Year and Unvested at Year End |
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Fair Value
As of the
Vesting
Date of
Equity
Awards
Granted
and
Vested in
the Year |
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Year over
Year Change
in Fair Value
of Equity
Awards
Granted in
Prior Years
and
Unvested at
Year End |
|
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Change As
of the
Vesting
Date (From
End of Prior
Fiscal Year)
in Fair
Value of
Equity
Awards
Granted in
Prior Years
that Vested
in the Year
($) |
|
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Fair Value as of Prior Year-End of Equity Awards Granted in Prior Years that Failed to Meet Vesting Conditions in the Year ($) |
|
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Value of
Dividends
or other
Earnings
Paid on
Equity
Awards not
Otherwise
Reflected in
Fair Value |
|
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Compensation
Actually Paid
($) |
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2023 |
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26,854,544 |
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23,951,048 |
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34,382,124 |
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— |
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29,015,408 |
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5,617,107 |
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— |
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— |
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71,918,135 |
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2022 |
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20,399,972 |
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17,783,334 |
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11,152,105 |
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— |
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(40,108,077 |
) |
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4,281,068 |
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— |
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— |
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(22,058,266 |
) |
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2021 |
|
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35,265,559 |
|
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31,710,469 |
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67,242,440 |
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— |
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67,802,579 |
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6,256,810 |
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— |
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— |
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144,856,918 |
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| (4) |
The following table shows the amounts deducted from and added to the average SCT total compensation to calculate the average “compensation actually paid” to our Non-PEO NEOs. |
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Amounts
Reported as
Stock Awards in
SCT |
|
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Year-End Fair Value of Equity Awards Granted in the Year and Unvested at Year End |
|
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Fair Value
As of the
Vesting
Date of
Equity
Awards
Granted
and Vested
in the Year |
|
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Year over
Year
Change in
Fair Value
of Equity
Awards
Granted in
Prior Years
and
Unvested at
Year End |
|
|
Change As
of the
Vesting
Date (From
End of Prior
Fiscal Year)
in Fair
Value of
Equity
Awards
Granted in
Prior Years
that Vested
in the Year
($) |
|
|
Fair Value as of Prior Year-End of Equity Awards Granted in Prior Years that Failed to Meet Vesting Conditions in the Year ($) |
|
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Value of
Dividends
or other
Earnings
Paid on
Equity
Awards not
Otherwise
Reflected in
Fair Value |
|
|
Compensation
Actually Paid
($) |
|
2023 |
|
|
6,475,471 |
|
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4,825,590 |
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6,605,428 |
|
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|
— |
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3,400,246 |
|
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721,266 |
|
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|
— |
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— |
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12,376,821 |
|
2022 |
|
|
5,953,570 |
|
|
|
4,139,424 |
|
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2,811,599 |
|
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|
— |
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|
(3,525,315 |
) |
|
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534,479 |
|
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— |
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— |
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|
1,634,909 |
|
2021 |
|
|
6,675,150 |
|
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|
5,370,836 |
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6,775,456 |
|
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|
— |
|
|
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7,971,327 |
|
|
|
1,370,968 |
|
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2,439,455 |
|
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— |
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|
14,982,610 |
|
| (5) |
Total Shareholder Return for the Company and the Peer Group is based on an initial fixed investment of $100 beginning with the market close on October 23, 2020, the last trading day before fiscal 2021, and is calculated in accordance with SEC rules. The Peer Group TSR set forth in this table reflects the TSR for the PHLX Semiconductor Index, which we also use in the performance graph required by Item 201(e) of Regulation S-K under the Exchange Act, and included in our Annual Report on Form 10-K for the fiscal year ended October 29, 2023. |
| (6) |
Non-GAAP Adjusted Diluted Earnings Per Share is the financial measure that was determined to be the most important financial performance measure linking “compensation actually paid” to our NEOs to company performance for fiscal 2023 and therefore was selected as the fiscal 2023 “Company-Selected Measure” as defined in Item 402(v) of Regulation S-K under the Exchange Act. See Appendix A for a reconciliation of non-GAAP adjusted EPS. |
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|
| Company Selected Measure Name |
Adjusted Diluted Earnings Per Share
|
|
|
| Named Executive Officers, Footnote |
Mr. Dickerson was our PEO for each year presented. The Non-PEO NEOs were: (i) for fiscal 2023, Drs. Raja and Nalamasu and Messrs. Hill and Deane, (ii) for fiscal 2022, Drs. Raja and Nalamasu, Messrs. Hill and Deane, Robert J. Halliday, and Ali Salehpour, and (iii) for fiscal 2021, Drs. Raja and Nalamasu, Messrs. Halliday and Salehpour, and Daniel J. Durn.
|
|
|
| Peer Group Issuers, Footnote |
Total Shareholder Return for the Company and the Peer Group is based on an initial fixed investment of $100 beginning with the market close on October 23, 2020, the last trading day before fiscal 2021, and is calculated in accordance with SEC rules. The Peer Group TSR set forth in this table reflects the TSR for the PHLX Semiconductor Index, which we also use in the performance graph required by Item 201(e) of Regulation S-K under the Exchange Act, and included in our Annual Report on Form 10-K for the fiscal year ended October 29, 2023.
|
|
|
| PEO Total Compensation Amount |
$ 26,854,544
|
$ 20,399,972
|
$ 35,265,559
|
| PEO Actually Paid Compensation Amount |
$ 71,918,135
|
(22,058,266)
|
144,856,918
|
| Adjustment To PEO Compensation, Footnote |
| (3) |
The following table shows the amounts deducted from and added to the Summary Compensation Table (“SCT”) total compensation to calculate “compensation actually paid” to Mr. Dickerson. |
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|
|
|
|
|
|
|
|
|
Subtract: Amounts Reported as Stock Awards in SCT |
|
|
Year-End Fair Value of Equity Awards Granted in the Year and Unvested at Year End |
|
|
Fair Value
As of the
Vesting
Date of
Equity
Awards
Granted
and
Vested in
the Year |
|
|
Year over
Year Change
in Fair Value
of Equity
Awards
Granted in
Prior Years
and
Unvested at
Year End |
|
|
Change As
of the
Vesting
Date (From
End of Prior
Fiscal Year)
in Fair
Value of
Equity
Awards
Granted in
Prior Years
that Vested
in the Year
($) |
|
|
Fair Value as of Prior Year-End of Equity Awards Granted in Prior Years that Failed to Meet Vesting Conditions in the Year ($) |
|
|
Value of
Dividends
or other
Earnings
Paid on
Equity
Awards not
Otherwise
Reflected in
Fair Value |
|
|
Compensation
Actually Paid
($) |
|
|
|
|
|
|
|
|
|
|
|
2023 |
|
|
26,854,544 |
|
|
|
23,951,048 |
|
|
|
34,382,124 |
|
|
|
— |
|
|
|
29,015,408 |
|
|
|
5,617,107 |
|
|
|
— |
|
|
|
— |
|
|
|
71,918,135 |
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
20,399,972 |
|
|
|
17,783,334 |
|
|
|
11,152,105 |
|
|
|
— |
|
|
|
(40,108,077 |
) |
|
|
4,281,068 |
|
|
|
— |
|
|
|
— |
|
|
|
(22,058,266 |
) |
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
35,265,559 |
|
|
|
31,710,469 |
|
|
|
67,242,440 |
|
|
|
— |
|
|
|
67,802,579 |
|
|
|
6,256,810 |
|
|
|
— |
|
|
|
— |
|
|
|
144,856,918 |
|
|
|
|
| Non-PEO NEO Average Total Compensation Amount |
$ 6,475,471
|
5,953,570
|
6,675,150
|
| Non-PEO NEO Average Compensation Actually Paid Amount |
$ 12,376,821
|
1,634,909
|
14,982,610
|
| Adjustment to Non-PEO NEO Compensation Footnote |
| (4) |
The following table shows the amounts deducted from and added to the average SCT total compensation to calculate the average “compensation actually paid” to our Non-PEO NEOs. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
Reported as
Stock Awards in
SCT |
|
|
Year-End Fair Value of Equity Awards Granted in the Year and Unvested at Year End |
|
|
Fair Value
As of the
Vesting
Date of
Equity
Awards
Granted
and Vested
in the Year |
|
|
Year over
Year
Change in
Fair Value
of Equity
Awards
Granted in
Prior Years
and
Unvested at
Year End |
|
|
Change As
of the
Vesting
Date (From
End of Prior
Fiscal Year)
in Fair
Value of
Equity
Awards
Granted in
Prior Years
that Vested
in the Year
($) |
|
|
Fair Value as of Prior Year-End of Equity Awards Granted in Prior Years that Failed to Meet Vesting Conditions in the Year ($) |
|
|
Value of
Dividends
or other
Earnings
Paid on
Equity
Awards not
Otherwise
Reflected in
Fair Value |
|
|
Compensation
Actually Paid
($) |
|
2023 |
|
|
6,475,471 |
|
|
|
4,825,590 |
|
|
|
6,605,428 |
|
|
|
— |
|
|
|
3,400,246 |
|
|
|
721,266 |
|
|
|
— |
|
|
|
— |
|
|
|
12,376,821 |
|
2022 |
|
|
5,953,570 |
|
|
|
4,139,424 |
|
|
|
2,811,599 |
|
|
|
— |
|
|
|
(3,525,315 |
) |
|
|
534,479 |
|
|
|
— |
|
|
|
— |
|
|
|
1,634,909 |
|
2021 |
|
|
6,675,150 |
|
|
|
5,370,836 |
|
|
|
6,775,456 |
|
|
|
— |
|
|
|
7,971,327 |
|
|
|
1,370,968 |
|
|
|
2,439,455 |
|
|
|
— |
|
|
|
14,982,610 |
|
|
|
|
| Compensation Actually Paid vs. Total Shareholder Return |
|
|
|
| Compensation Actually Paid vs. Net Income |
|
|
|
| Compensation Actually Paid vs. Company Selected Measure |
|
|
|
| Total Shareholder Return Vs Peer Group |
|
|
|
| Tabular List, Table |
Financial Performance Measures The following table lists the financial performance measures that, in the Company’s assessment, represent the most important financial performance measures used to link “compensation actually paid” to the Company’s NEOs to Company performance for fiscal 2023.
| |
|
|
Non-GAAP Adjusted Operating Margin |
| |
|
|
Non-GAAP Adjusted Gross Margin |
|
|
|
| Total Shareholder Return Amount |
$ 221.11
|
149.67
|
226.06
|
| Peer Group Total Shareholder Return Amount |
142.27
|
105.92
|
148.13
|
| Net Income (Loss) |
$ 6,856,000,000
|
$ 6,525,000,000
|
$ 5,888,000,000
|
| Company Selected Measure Amount |
8.05
|
7.7
|
6.84
|
| PEO Name |
Mr. Dickerson
|
|
|
| Measure:: 1 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
Non-GAAP Adjusted EPS
|
|
|
| Non-GAAP Measure Description |
Non-GAAP Adjusted Diluted Earnings Per Share is the financial measure that was determined to be the most important financial performance measure linking “compensation actually paid” to our NEOs to company performance for fiscal 2023 and therefore was selected as the fiscal 2023 “Company-Selected Measure” as defined in Item 402(v) of Regulation S-K under the Exchange Act. See Appendix A for a reconciliation of non-GAAP adjusted EPS.
|
|
|
| Measure:: 2 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
Non-GAAP Adjusted Operating Margin
|
|
|
| Measure:: 3 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
Non-GAAP Adjusted Gross Margin
|
|
|
| Measure:: 4 |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Name |
Relative TSR
|
|
|
| PEO | Amounts Reported as Stock Awards in SCT [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
$ 23,951,048
|
$ 17,783,334
|
$ 31,710,469
|
| PEO | Year End Fair Value of Equity Awards Granted in the Year and Unvested at Year End [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
34,382,124
|
11,152,105
|
67,242,440
|
| PEO | Fair Value As of the Vesting Date of Equity Awards Granted and Vested in the Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
0
|
0
|
0
|
| PEO | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years and Unvested at Year End [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
29,015,408
|
(40,108,077)
|
67,802,579
|
| PEO | Change As of the Vesting Date (From End of Prior Fiscal Year) in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
5,617,107
|
4,281,068
|
6,256,810
|
| PEO | Fair Value as of Prior YearEnd of Equity Awards Granted in Prior Years that Failed to Meet Vesting Conditions in the Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
0
|
0
|
0
|
| PEO | Value of Dividends or other Earnings Paid on Equity Awards not Otherwise Reflected in Fair Value [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
0
|
0
|
0
|
| Non-PEO NEO | Amounts Reported as Stock Awards in SCT [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
4,825,590
|
4,139,424
|
5,370,836
|
| Non-PEO NEO | Year End Fair Value of Equity Awards Granted in the Year and Unvested at Year End [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
6,605,428
|
2,811,599
|
6,775,456
|
| Non-PEO NEO | Fair Value As of the Vesting Date of Equity Awards Granted and Vested in the Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
0
|
0
|
0
|
| Non-PEO NEO | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years and Unvested at Year End [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
3,400,246
|
(3,525,315)
|
7,971,327
|
| Non-PEO NEO | Change As of the Vesting Date (From End of Prior Fiscal Year) in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
721,266
|
534,479
|
1,370,968
|
| Non-PEO NEO | Fair Value as of Prior YearEnd of Equity Awards Granted in Prior Years that Failed to Meet Vesting Conditions in the Year [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
0
|
0
|
2,439,455
|
| Non-PEO NEO | Value of Dividends or other Earnings Paid on Equity Awards not Otherwise Reflected in Fair Value [Member] |
|
|
|
| Pay vs Performance Disclosure |
|
|
|
| Adjustment to Compensation, Amount |
$ 0
|
$ 0
|
$ 0
|