DEF 14A of Diodes Inc /Del/
Filed Apr 19, 2024 · FY20230000950170-24-046039
COMPENSATION OF DIRECTORS
COMPENSATION OF DIRECTORS The following table sets forth the compensation of each director, who is not a NEO, for service in 2023:
COMPENSATION OF DIRECTORS
| Name (a) | Fees Earned or Paid in Cash ($)(1) (b) | RSUs ($) (2) (3) (c) | Stock Options ($) (1) (d) | Non-Equity Incentive Plan Compensation ($) (e) | Changes in Pension Value and Nonqualified Deferred Compensation Earnings ($) (f) | All Other Compensation ($) (g) | Total ($) (h) | | Angie Chen Button | 120,000 | 262,110 | — | — | — | — | 382,110 | | Elizabeth Bull | 97,500 | 262,110 | — | — | — | — | 359,610 | | Warren Chen | 102,500 | 262,110 | — | — | — | — | 364,610 | | Michael R. Giordano | 100,000 | 262,110 | — | — | — | — | 362,110 | | Peter M. Menard | 93,650 | 262,110 | — | — | — | — | 355,760 | | Christina Wen-Chi Sung | 97,500 | 262,110 | — | — | — | — | 359,610 |
COMPENSATION OF DIRECTORS
(1) See below for the details of cash retainers paid to non-employee directors. (2) These amounts reflect the value determined by the Company for financial accounting purposes for these awards and do not reflect whether each director has actually realized a financial benefit from the awards. The value of the equity awards in column (c) and (d) is based on the grant date fair value calculated in accordance with the amount recognized for financial statement reporting purposes. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Amounts reported for RSUs are calculated by multiplying the number of shares subject to the award by the closing price of the Company’s Common Stock on the grant date. See Note 14, Share-Based Compensation, to the Company’s audited financial statements for the fiscal year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 9, 2024, for a further discussion of the relevant valuation assumptions used in calculating grant date fair value. All equity awards vest in four equal annual installments. (3) Under the Company’s 2023 director compensation arrangements, each non-employee director listed in the table above was granted an award under the 2022 Equity Incentive Plan of 3,000 RSUs on May 26, 2023. The per-share closing price of our Common Stock on May 26, 2023 was $87.37 . (3) Ms. Bull served as chair of the Audit Committee and received an additional $30,000 retainer for such service. The following table shows the aggregate number of shares underlying outstanding RSUs and outstanding stock options held by non-employee directors as of December 31, 2023:
COMPENSATION OF DIRECTORS
| Name | RSUs (#) | Stock Options (#) | | Angie Chen Button | 6,150 | — | | Elizabeth Bull | 3,000 | — | | Warren Chen | 7,050 | — | | Michael R. Giordano | 7,050 | — | | Peter M. Menard | 7,050 | — | | Christina Wen-Chi Sung | 7,050 | — |
COMPENSATION OF DIRECTORS
During 2023, each non-employee director of the Company received a grant of 3,000 RSUs, which vest in four equal annual installments commencing on the first anniversary of the date of grant. The Board may in its discretion modify such director compensation arrangements in the future. For additional information see, “Certain Relationships and Related Person Transactions – Relationships and Transactions.” The table below sets for the cash retainers paid for non-employee directors for service in 2023 and 2024:
COMPENSATION OF DIRECTORS
| | 2023 | 2024 | | Quarterly retainer: | $22,500 | $22,500 | | Additional quarterly retainer: | | | | Lead Director, Chair of Governance and Compensation Committees | 10,000 | 10,000 | | Chair of Audit Committee | 10,000 | 10,000 | | Chair of Risk Committee | 5,000 | 5,000 | | Member of the Audit Committee | 2,500 | 2,500 |
PAY FOR PERFORMANCE
PAY FOR PERFORMANCE The chart below illustrates the relative degree of alignment between the total stockholder return ("TSR," defined as stock price appreciation plus dividends) and the CEO's annual compensation as reported in the Summary Compensation Table for the Company (set forth below) and its 2023 Peer Group (as defined below) for the most recent three-year period available. For further information concerning the 2023 Peer Group, see “Compensation Review Process – Selection of Peer Group.” The table below illustrates the change in Dr. Lu’s total direct compensation for 2021, 2022 and 2023:
PAY FOR PERFORMANCE
| CEO's Total Direct Compensation | | | | | | | 2021 | 2022 | 2023 | 2021 vs 2023 | | Base Salary | $728,250 | $757,303 | $805,753 | 11% | | Bonus | $1,843,688 | $1,919,501 | $211,905 | -89% | | RSU's | | | | | | Number of shares | 32,000 | 32,000 | 42,000 | 31% | | Value/share (closing price on day of grant) | $79.57 | $91.89 | $93.35 | 17% | | Number of shares | 5,000 | 5,000 | 6,000 | 20% | | Value/share (closing price on day of grant) | $75.29 | $73.91 | $87.37 | 16% | | Value | $2,922,690 | $3,310,030 | $4,444,920 | 52% | | PSU's | | | | | | Number of shares | 32,000 | 32,000 | 42,000 | 31% | | Value/share (closing price on day of grant) | $79.57 | $91.89 | $93.35 | 17% | | Value | $2,546,240 | $2,940,480 | $3,920,700 | 54% | | Total Long-Term Incentive | $5,468,930 | $6,250,510 | $8,365,620 | 53% | | Other compensation | $96,461 | $118,332 | $100,538 | 4% | | Total Compensation | $8,137,329 | $9,045,646 | $9,483,816 | 17% | | Change from previous year | 2.9% | 11.2% | 4.8% | N/A |
Annual (Bonus) Incentive Plan
Annual (Bonus) Incentive Plan Annual incentives reward both the achievement of short-term financial goals, as well as the execution of activities to advance our strategic priorities, which support near-term financial performance and long-term strategic objectives. Our annual bonus plan for 2022 and 2023 was simple, formulaic and responsive to investor feedback: This table illustrates the structure of the plan for 2022 and 2023.
Annual (Bonus) Incentive Plan
| Annual Incentives – Plan Structure (2022 and 2023) | | | | Weighting | Performance Objectives | Metrics | | 80% | Financial Metrics | Non-GAAP Earnings Per Share (EPS), Net Sales and CSER | | 20% | Strategic Priorities | Examples of strategic initiatives include, but are not limited to: • Manage the Company through the semiconductor industry slowdown • Expand internal manufacturing • Increase % of net sales from the combined automotive and industrial markets • Develop new products |
Annual (Bonus) Incentive Plan
Both the financial metrics and the strategic priorities are set at the beginning of the year and on an absolute basis. The schedule below sets forth the annual incentives to be paid as a percentage of target. Performance below or above target will result in an award ranging from 0% to a maximum of 200% of target. The Compensation Committee chose to use EPS and net sales as the primary measures for 2022 and 2023 to keep our NEOs focused on profitability and profitable growth. The Compensation Committee determined these measures to be appropriate since they are measures used by our peers in evaluating performance and are commonly used by stakeholders in the evaluation of company performance. The Compensation Committee has weighted CSER to the financial metrics at a to 5% weighting, and established an internal committee to improve the Company's focus on its ongoing environmental, social and governance activities. Achieving goals in all of these areas is critical to driving short-term results that have long-term impact on value creation. The strategic initiatives will be evaluated based upon demonstrated performance against the specific pre-determined targets.
Annual (Bonus) Incentive Plan
| Annual Incentives – Financial and Strategic Performance & Payout Ranges | | | Performance Level | Range of Payout* | | Below 80% of Target | 0% payout | | From 80% to 100% of Target | 50% to 100% payout | | From 100% to 120% of Target | 100% to 200% payout | | Above 120% of Target | 200% payout (capped) |
Annual (Bonus) Incentive Plan
*Performance between 80% and 100% of target and between 100% and 120% of target is interpolated between the end points identified above. The following table sets forth the performance targets established by the Compensation Committee and the results achieved by the Company for fiscal 2022 and fiscal 2023:
Annual (Bonus) Incentive Plan
| | 2022 | | | 2023 | | | Performance | | Objective | Weight | Target | Actual | Weight | Target | Actual | vs. Target | | Financial objectives (80% of award) | | | | | | | | | Net sales (millions) | 18% | $1,900.0 | $2,000.6 | 18% | $1,971.0 | $1,661.7 | Not Met | | Non-Gaap diluted earnings per share | 77% | $5.74 | $7.36 | 77% | $6.55 | $4.81 | Not Met | | CSER (1) | 5% | 7 | 8 | 5% | 7 | 5 | Exceeded | | Strategic objectives (20% of award) | | | | | | | | | Manage the Company through the semiconductor industry slowdown | | | | | | | Achieved (2) | | Expand internal manufacturing | | | | | | | Achieved (3) | | Develop new products | | | | | | | Achieved (4) | | Increase % of net sales from the combined automotive and industrial markets | | | | | | | Achieved (5) |
Annual (Bonus) Incentive Plan
(1) The Company combines the social and environmental scores provided by Institutional Shareholder Services as a CSER measurement; (2) The Company's management managed the semiconductor slowdown; (3) The Company has expanded its internal manufacturing, reflected by increased loading at Company-owned facilities and the purchase of SPFAB: (4) The Company continues to develop successful new products; and (5) Net related to the combined automotive and industrial markets increased to 46% in 2023 from 42% in 2022. The following payout percentages, as a percent of target opportunity, for 2023 were calculated based upon the weight of each performance objective for 2023 and the results set forth above:
Annual (Bonus) Incentive Plan
| Performance Objective | % Attained to Target | % Payout to Target | Weight | | Financial objective | | | | | Net sales | 84 | 61 | 14% | | Non-GAAP earnings per share | 73 | — | 62% | | CSER | 120 | 200 | 4% | | Strategic objectives | — | 85 | 20% |
Annual (Bonus) Incentive Plan
For fiscal 2022 and 2023, each financial objective (i.e., net sales, Non-GAAP diluted earnings per share and CSER) was established after consideration by the Compensation Committee to ensure that the performance targets establish challenging goals and thereby align the interests of our executives with the interests of our stockholders. The following table shows each NEO’s maximum executive bonus opportunity for 2021, 2022 and 2023 and the percentage change from the prior year:
Annual (Bonus) Incentive Plan
| | 2021 | | 2022 | | 2023 | | | Name | $ | Change (%) | $ | Change (%) | $ | Change (%) | | Dr. Keh-Shew Lu | 1,820,625 | — | 1,893,259 | 4.0% | 2,049,000 | 8.2% | | Brett R. Whitmire | 411,600 | 2.1% | 432,098 | 5.0% | 462,000 | 6.9% | | Gary Yu | 462,000 | N/A | 487,622 | 5.5% | 630,000 | 29.2% | | Francis Tang | 546,700 | — | 558,870 | 2.2% | 462,000 | -17.3% | | Julie Holland (1) | 546,700 | — | 558,870 | 2.2% | — | — |
Annual (Bonus) Incentive Plan
In late 2023, the Compensation Committee reviewed the design of our annual incentive plan for 2024. For 2024, the Compensation Committee set the bonus target for the CEO at 100% of annual salary, the bonus target for the President at 90% of salary and the bonus target for all other executives to 65% of salary. Previous targets were 125% of salary for the CEO and 70% for all other executives No changes were made to the financial objectives, the strategic objectives, or the relative weight of the financial objectives as compared to the strategic objectives. The weighting of the Non-GAAP diluted earnings per share financial metric will continue to be 77% to emphasize profitability, the weighting of net sales will be 18% and CSER will be 5%. The Compensation Committee feels these measures reflect the Company’s longer-term goal of achieving a 40% gross margin and the increased focus on corporate governance. Due to the sensitivity of earnings per share and net sales forecasts and the correlation of earnings per share to our stock price, the 2024 targets are not being disclosed at this time. However, the targets will be disclosed at the end of the performance period along with the achievement levels against such targets.
Long-Term Incentive (LTI) Plan
Long-Term Incentive (LTI) Plan Under the Company's 2022 Plan, the Company may grant any type of equity award whose value is derived from the value of the Common Stock of the Company, including, but not limited to, shares of Common Stock, stock options, stock appreciation rights (“SARs”), restricted stock units (“RSUs”), performance stock units (“PSUs”) and restricted stock. Equity awards encourage our NEOs to execute on longer-term financial goals that drive stockholder value creation and support our retention strategy. In February 2023, the Committee granted long-term incentive (“LTI”) awards under the 2022 Plan to certain executive officers. Each LTI award consisted of (1) restricted stock units (“RSUs”) which vest over four years and (2) performance stock units (“PSUs”) which contain a performance-based vesting condition under which the PSUs will vest upon the Company achieving a cumulative 3-year Non-GAAP operating income target for 2023-2025. In December 2023, the Compensation Committee reviewed the design of our LTI plan. No changes were made to the structure of the plan compared to 2023, except for a change to the 3-year Non-GAAP operating income target for 2024-2026 and a change in our peer group, as described below. For PSU awards granted in fiscal 2021, 2022 and 2023 each year a 3-year cumulative operating income goal is set as a target. It is not adjusted for market changes or company performance throughout the 3-year period. The following chart illustrates the structure of the plan for 2021, 2022 and 2023. The structure of the LTI awards is the same for the CEO and all other NEOs.
Long-Term Incentive (LTI) Plan
| LTI Plan Structure | | | | Weighting | Equity Vehicles | Metrics | | 50% | Performance-Based Stock Units: Vest according to actual performance compared to pre-established, three‐year absolute financial performance targets. | For the 2021‐2023 award cycle, the Compensation Committee chose a GAAP operating income target of $535.9 million, and increased this target for 2022-2024. | | 50% | Time-Based Restricted Stock Units: Vest ratably over a four‐year period (i.e., 25% on each anniversary of the award). | N/A |
Long-Term Incentive (LTI) Plan
The actual amount of performance-based awards that are earned and vest will be driven by the achievement of the performance metrics at the end of the three-year performance period relative to our three-year absolute performance goals:
Long-Term Incentive (LTI) Plan
| Annual Incentives – Financial and Strategic Performance & Payout Ranges | | | Performance Level | Range of Payout* | | Below 80% of Target | 0% payout | | From 80% to 100% of Target | 50% to 100% payout | | From 100% to 120% of Target | 100% to 200% payout | | Above 120% of Target | 200% payout (capped) |
Long-Term Incentive (LTI) Plan
*Performance between 80% and 100% of target and between 100% and 120% of target is interpolated between the end points identified above. The following table sets forth the number of shares subject to RSUs and PSUs granted to each NEO in 2022, 2023 and 2024, the grant date fair value of such awards, and the percentage change in such shares and such value from the prior year:
Long-Term Incentive (LTI) Plan
| | | 2022 | | | 2023 | | | 2024 | | | | Name | Shares/ Value | RSUs (2) | PSUs | Change % (1) | RSUs (2) | PSUs | Change % (1) | RSUs | PSUs | Change % (1) | | Dr. Keh-Shew Lu | # | 37,000 | 32,000 | — | 48,000 | 42,000 | — | 32,000 | 32,000 | — | | | | 3,310,030 | 2,940,480 | 15% | 4,444,920 | 3,920,700 | 1.6% | 2,166,080 | 2,166,080 | -44.8% | | Brett R. Whitmire | # | 7,600 | 7,600 | — | 9,000 | 9,000 | — | 7,600 | 7,600 | — | | | | 698,364 | 698,364 | 15% | 840,150 | 840,150 | 1.6% | 514,444 | 514,444 | -38.8% | | Gary Yu | # | 8,500 | 8,500 | — | 13,000 | 13,000 | — | 8,500 | 8,500 | — | | | | 781,065 | 781,065 | 15% | 1,213,550 | 1,213,550 | 1.6% | 575,365 | 575,365 | -52.6% | | Francis Tang | # | 7,600 | 7,600 | — | 9,000 | 9,000 | — | 7,600 | 7,600 | — | | | | 698,364 | 698,364 | 15% | 840,150 | 840,150 | 1.6% | 514,444 | 514,444 | -38.8% | | Julie Holland (3) | # | 9,200 | 9,200 | — | — | — | — | — | — | — | | | | 845,388 | 845,388 | 15% | — | — | — | — | — | — |
Long-Term Incentive (LTI) Plan
(1) Represents the combined number of shares subject to RSUs and PSUs for the given year and the combined grant date values of such RSUs and PSUs, compared to the combined number of shares subject to awards and the combined grant date values of such awards for the prior year. (2) In May of 2022 and May 2023 Dr. Lu received 5,000 and 6,000 RSUs, respectively, related to his role as Chairman of the Board. (3) Ms. Holland retired as an executive officer effective March 31, 2023. The Compensation Committee believes that both performance-based and time-based awards are appropriate equity vehicles for a portion of long-term incentive compensation for the Company’s executive officers because both such awards align executive officers’ interests with the interests of stockholders by focusing executive officers on long-term Company performance. The value of these awards increases if the Company’s stock price increases, and the value of these awards decreases if the stock price declines. Time-based awards also serve to retain executive officers because they provide executive officers some economic value (if time-based vesting requirements are met) regardless of stock price changes. Performance-based awards encourage NEOs to achieve the specific pre-determined performance objectives selected by the Compensation Committee. The Compensation Committee’s policy is to grant equity awards annually in recognition of each executive officer's current and potential contributions to the Company. To encourage retention, stock option and restricted stock awards are subject to a four-year time-based vesting requirement in addition to any performance-based vesting requirement. In determining equity awards in 2022, 2023 and 2024, the Compensation Committee first reviewed the NEOs’ equity awards in light of the executive compensation philosophy that the total compensation (i.e., the aggregate of all cash and equity awards) of the NEOs and all other executive officers should be competitive with the total compensation paid to executive officers with comparable duties paid by similarly sized companies in the semiconductor industry. The number of RSU and PSU awards is adjusted to reflect the Company’s stock price at the time the award is granted. The Compensation Committee noted that in 2023, management contended with challenges presented by the slowdown in the semiconductor industry, increased net sales in the combined automotive and industrial markets, expanded internal manufacturing, and developed new products. The Compensation Committee then reviewed each NEO’s personal performance and contribution to the Company. When doing its review, the Compensation Committee believes that target compensation should be competitive with that being offered to individuals with comparable roles in semiconductor companies with which we compete for talent. This is done to ensure we employ the best people to lead to our success. The Compensation Committee reviews the allocation between cash and non-cash components of the NEO’s compensation, and the size, term and value of the awards made in prior years. The Compensation Committee believes that each NEO made meaningful contributions in each area of his or her responsibilities to the growth and profitability of the Company. The Compensation Committee believes that it has appropriately valued the cash awards and equity awards granted in 2022, 2023 and 2024 consistent with the Company’s compensation objectives and philosophy.
COMPENSATION REVIEW PROCESS
COMPENSATION REVIEW PROCESS Our Board of Directors has delegated to the Compensation Committee the authority to approve all compensation and awards to NEOs. When making individual compensation decisions for NEOs, the Compensation Committee takes many factors into account, including the performance of the Company as a whole, the current market conditions, the executive officer’s experience, responsibilities, management abilities and job performance, and pay levels for similar positions at comparable companies. The Compensation Committee does not assign any particular formula or weight to the foregoing factors. The Compensation Committee has ultimate authority, including delegated authority over all aspects of NEO compensation, including the base salary for each NEO and the overall compensation of the Chief Executive Officer. The Role of the Compensation Committee The Compensation Committee determines the compensation for the executive officers, including the NEOs. The Compensation Committee meets in an executive session at the beginning of each fiscal year to: • Evaluate the performance of the NEOs and all other executive officers during the prior fiscal year; • Determine their final annual bonuses, if any, for the prior fiscal year; • Determine the threshold, target and maximum bonus opportunity for the current fiscal year for each executive officer as a percentage of base salary, the performance objectives and the formula for computing the bonus; and • Determine the mix of stock options, restricted shares and/or restricted stock units to be granted in the current year, the portion of such equity compensation that will be time-vested or performance-based, and the performance objectives. At the end of each fiscal year, the Compensation Committee: • Certifies satisfaction of the performance objectives; and • Determines the annual bonuses, if any, for all executive officers for such fiscal year. The Compensation Committee may meet from time to time during the year to assess the adequacy of the Company’s compensation for all executive officers. The Role of Management The Compensation Committee discusses with, and takes into consideration, the recommendations of the CEO concerning the annual evaluation of the executive officers, except for matters related to his own evaluation and compensation. The CEO has a role in determining executive compensation because he evaluates employee performance, recommends performance goals and objectives, and recommends salary levels, bonuses and incentive awards of the executive officers, other than himself. The Role of the Independent Consultant To gain a perspective on external pay levels, emerging practices and regulatory changes, our Compensation Committee from time to time engages outside executive compensation consultants that are independent under the SEC and NASDAQ Stock Market rules to provide benchmark and survey information and advise the Compensation Committee as it conducts its review of our executive compensation programs. The Compensation Committee retained CP in January 2020 and in September 2022. CP advised the Compensation Committee as to the composition of our 2020 and 2022 Peer Groups and compared our 2020 and 2023 projected executive target compensation to the respective Peer Group. CP each was selected by and reported directly to the Compensation Committee. The individuals at CP who provided the compensation consulting services to the Compensation Committee have provided no other services to the Company or its subsidiaries. The Compensation Committee’s reason for updating the benchmarking/survey information at least every three years as opposed to every year is that the Compensation Committee does not believe that the executive compensation benchmark or the comparable companies are likely to have significant changes over just a one or two year period. In accordance with its charter, the Compensation Committee analyzed whether the work of CP as a compensation consultant has raised any conflict of interest, taking into consideration the following factors: (i) the provision of other services to the Company by CP; (ii) the amount of fees from the Company paid to CP as a percentage of the firm’s total revenue; (iii) CP’s policies and procedures that are designed to prevent conflicts of interest; (iv) any business or personal relationship of CP or the individual compensation advisors employed by the firm with an executive officer of the Company; (v) any business or personal relationship of the individual compensation advisors with any member of the Compensation Committee; and (vi) any stock of the Company owned by CP or the individual compensation advisors employed by the firm. The Compensation Committee has determined based on its analysis of the above factors, that the work of CP and the individual compensation advisors employed by CP as compensation consultants to the Company has not created a conflict of interest. Selection of Peer Group The Compensation Committee reviews data concerning the pay practices among semiconductor companies of similar size to the Company. Below is the Company's current peer group (the “2023 Peer Group”): Based on the review undertaken in 2022 by CP, the Company’s peer group effective for 2023 consists of the following companies (the “2022 Peer Group”):
COMPENSATION REVIEW PROCESS
| Peer Group | | | Alpha and Omega Semiconductor Limited | Monolithic Power Systems, Inc. | | Cirrus Logic, Inc. | Qorvo, Inc. | | Coherent | Semtech Corporation | | Infinera Corporation | Silicon Laboratories Inc. | | Littelfuse, Inc. | Skyworks Solutions, Inc. | | Marvell Technology Incorporated | Synaptics Incorporated | | Maxlinear | Vishay Intertechnology, Inc. | | Microchip Technology Incorporated | Wolfspeed, Inc. | | MKS Instruments | |
POST-TERMINATION AND CHANGE- IN-CONTROL PAYMENTS
POST-TERMINATION AND CHANGE- IN-CONTROL PAYMENTS The Compensation Committee believes that a change-in-control transaction would create uncertainty regarding the continued employment of the Company’s executive officers. This is because many change-in-control transactions result in significant organizational changes, particularly at the senior executive level. In order to encourage the Company’s executive officers to remain employed with the Company during an important time when their continued employment in connection with, or following, a transaction is often uncertain, and to help keep the Company’s executive officers focused on Company business rather than on their personal financial security, the Compensation Committee believes that providing certain of the Company’s executive officers with severance benefits upon certain terminations of employment following an actual or potential change-in-control transaction is in the best interests of the Company and its stockholders. On January 17, 2024, the Company and Dr. Lu entered into Amendment # 3 (the "Third Amendment") to Employment Agreement between the Company and Dr. Lu dated as of July 21, 2015, as amended February 22, 2017, as described below. The Third Amendment removed the role of "President" from Dr. Lu's title and reduced his annual salary to $740,000. In the event that Dr. Lu’s employment by the Company is terminated (a) by the Company for "cause" (as defined in Dr. Lu's employment agreement), or (b) by him other than for "good reason" (as defined in Dr. Lu's employment agreement), or (c) due to his death, neither the Company nor he shall have any remaining duties or obligations under the employment agreement, except that: a) the Company shall promptly pay or provide to Dr. Lu, or his estate, the annual base salary, prorated through the date of termination; b) the Company shall pay to Dr. Lu, or his estate, any amount payable under an executive bonus plan for the fiscal year in which such termination occurs, prorated to the date of the termination; c) all stock-based compensation previously granted to Dr. Lu shall continue to be governed by the applicable award agreement; and d) Dr. Lu shall continue to be bound by the restrictions on the use of trade secrets, “competitive activities” (as defined in Dr. Lu's employment agreement) and solicitation of employees and independent contractors. In the event that Dr. Lu’s employment by the Company is terminated by (a) the Company other than for "cause" including a termination by the Company due to Dr. Lu’s “Disability” (as defined in Dr. Lu's employment agreement), or (b) Dr. Lu for "good reason", neither the Company nor Dr. Lu shall have any remaining duties or obligations under the agreement, except that: 1) clauses (a) through (d) in the preceding paragraph shall each be applicable; 2) the Company shall continue to pay or provide to Dr. Lu, or his estate, the annual base salary during the period commencing on the 60th day after the effective date of such termination and ending on the first anniversary of such effective date such that an aggregate total of 12 months of base salary are provided; 3) the Company shall provide to Dr. Lu continued participation in any group health plan or medical reimbursement plan on the terms existing on the date of termination for the period commencing on the effective date of such termination and ending on the earlier of 18 months thereafter or the date that the Company is otherwise unable to continue to cover him under its group health plans without penalty under applicable law; and The term of Dr. Lu’s employment agreement commenced on July 21, 2015 and shall end on May 31, 2027, unless sooner terminated as provided in the agreement or due to death. Employment is “at will” and may be terminated by either the Company or Dr. Lu at any time. See Exhibits 99.1 to the Current Reports on Form 8-K filed with the SEC on July 27, 2015, February 27, 2017, June 1, 2022 and January 22, 2024, for a complete copy of the employment agreement and the amendments thereto between the Company and Dr. Lu. See, "CEO Employment Agreement" below, for a summary of Dr. Lu's employment agreement .
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
| Name and Principal Position (a) | Year (b) | Salary ($) (1) (c) | Bonus ($) (2) (d) | Stock Awards ($) (3) (e) | Non-Equity Incentive Plan Compensation ($) (2) (g) | Change in Pension Value and Non-qualified Deferred Compensation Earnings ($) (h) | All Other Compensation ($) (4) (i) | Total ($) (5) (j) | | Dr. Keh-Shew Lu | 2023 | 805,753 | — | 8,365,620 | 211,905 | 341 | 100,538 | 9,483,816 | | Chairman and | 2022 | 757,303 | 204,615 | 6,250,510 | 1,714,886 | 99 | 118,332 | 9,045,646 | | Chief Executive Officer | 2021 | 728,250 | 168,058 | 5,468,930 | 1,675,630 | 1 | 96,461 | 8,137,329 | | Brett R. Whitmire | 2023 | 328,301 | — | 1,680,300 | 48,370 | 17,508 | 52,622 | 2,109,594 | | Chief Financial Officer | 2022 | 308,641 | 83,461 | 1,396,728 | 391,716 | 4 | 50,721 | 2,231,267 | | | 2021 | 293,030 | 67,846 | 1,209,464 | 378,820 | — | 49,598 | 1,998,759 | | Gary Yu | 2023 | 441,507 | — | 2,427,100 | 65,959 | 152,810 | 15,905 | 2,950,471 | | President | 2022 | 348,301 | 94,231 | 1,562,130 | 442,260 | (111,741) | 12,082 | 2,459,005 | | | 2021 | 316,066 | 76,154 | 1,352,690 | 425,206 | 114,450 | 15,076 | 2,185,193 | | Francis Tang | 2023 | 409,151 | — | 1,680,300 | 48,370 | 130,169 | 30,699 | 2,168,520 | | Senior Vice President, | 2022 | 399,193 | 107,692 | 1,396,728 | 505,440 | (135,914) | 30,176 | 2,439,229 | | World Wide Discrete Products | 2021 | 390,500 | 90,115 | 1,209,464 | 378,820 | 97,892 | 27,729 | 2,096,628 | | Julie Holland (6) | 2023 | 562,123 | — | — | — | 1,224 | 33,037 | 595,160 | | Former Senior Vice President | 2022 | 399,193 | 107,692 | 1,690,776 | 505,440 | (1,456) | 32,111 | 2,735,212 | | Corporate Operations | 2021 | 390,500 | 90,115 | 1,464,088 | 503,161 | 955 | 30,517 | 2,478,381 |
SUMMARY COMPENSATION TABLE
(1) Each executive officer’s salary is established in February of each year. Amounts shown represent the amounts earned in each fiscal year. Effective February 1, 2024, the base salaries for Dr. Lu and Messrs. Whitmire, Yu and Tang were $740,000, $330,000, 630,000 and 410,000, respectively. (2) The amount shown is the actual cash bonus paid for 2023. This amount consists of any performance-based bonus and any discretionary bonus. Under the executive bonus formula that established the target bonus for each executive officer (i) 80% of the bonus was tied to the financial metrics of the Company and (ii) 20% of the bonus was tied to individual goals for each NEO. See “Compensation Discussion and Analysis – Principal Components of Compensation – Annual (Bonus) Incentive Plan.” (3) These amounts reflect the value determined by the Company for accounting purposes for these awards and do not reflect whether each NEO has actually realized a financial benefit from the awards. The value of the equity awards in columns (e) and (f) is based on the grant date fair value calculated in accordance with the amount recognized for financial statement reporting purposes. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Amounts reported in the Stock Awards column (e) above (in the form of RSUs and PSUs) are calculated by multiplying the number of shares subject to the award by the closing price of the Company’s Common Stock on the grant date. See Note 14, Share-Based Compensation, to the Company’s audited financial statements for the fiscal year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 9, 2024, for a further discussion of the relevant valuation assumptions used in calculating grant date fair value. All restricted stock and option awards vest in four equal annual installments after the date of grant. Performance-based equity awards vest according to actual performance compared to pre-established, three‐year absolute financial performance targets. (4) Certain of the Company’s executive officers receive personal benefits in addition to salary, cash bonuses and share-based compensation, consisting of automobile allowance, medical insurance, dental insurance, vision insurance, employee assistance program, taxable per diem, contributions under the Company’s retirement plans, deferred compensation plan, life insurance payable at the direction of the employee, accidental death and dismemberment insurance (“AD&D”), business travel accident insurance, and short-term and long-term disability insurance. The amount shown in column (i) for “All Other Compensation” includes benefits summarized in the following table for each``. (5) The total does not include change in deferred compensation plan benefit value, if any. The table below sets forth the detail of “All Other Compensation” for each NEO:
SUMMARY COMPENSATION TABLE
| Name | Year | Auto Allowance ($) | Health Insurance ($)(1) | Retirement Plans ($) | Life and Disability Insurance ($)(2) | Per Diem ($)(3) | Total ($) | | Dr. Keh-Shew Lu | 2023 | 15,600 | 17,031 | 9,900 | 3,106 | 54,901 | 100,538 | | | 2022 | 15,600 | 17,043 | 9,150 | 2,918 | 73,621 | 118,332 | | | 2021 | 15,600 | 16,055 | 8,700 | 2,762 | 53,344 | 96,461 | | Brett R. Whitmire | 2023 | 12,000 | 27,616 | 9,900 | 3,106 | — | 52,622 | | | 2022 | 12,000 | 26,654 | 9,150 | 2,918 | — | 50,721 | | | 2021 | 12,000 | 26,148 | 8,700 | 2,751 | — | 49,598 | | Gary Yu | 2023 | — | 2,898 | 9,900 | 3,106 | — | 15,905 | | | 2022 | — | 15 | 9,150 | 2,918 | — | 12,082 | | | 2021 | 3,600 | 15 | 8,700 | 2,762 | — | 15,076 | | Francis Tang | 2023 | — | 17,693 | 9,900 | 3,106 | — | 30,699 | | | 2022 | — | 18,109 | 9,150 | 2,918 | — | 30,176 | | | 2021 | — | 16,267 | 8,700 | 2,762 | — | 27,729 | | Julie Holland (4) | 2023 | — | 20,031 | 9,900 | 3,106 | — | 33,037 | | | 2022 | — | 20,043 | 9,150 | 2,918 | — | 32,111 | | | 2021 | — | 19,055 | 8,700 | 2,762 | — | 30,517 |
SUMMARY COMPENSATION TABLE
(1) Consists of medical, dental, and vision insurance, as well as employee assistance program. (2) Consists of life, AD&D, business travel accident, and short-term and long-term disability insurance. (3) Taxable per diem amounts consist of amounts paid to Dr. Lu for reimbursements while staying at his personal residence while traveling on Company business.
GRANTS OF PLAN-BASED AWARDS
GRANTS OF PLAN-BASED AWARDS The following table sets forth certain information with respect to grants of awards to the NEOs under the Company’s non-equity incentive plan and the 2022 Plan during 2023:
GRANTS OF PLAN-BASED AWARDS
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | | | | | Grant Date (b) | Threshold ($) (c) | Target ($) (1) (d) | Maximum ($) (e) | Threshold (#) (f) | Target (#) (g) | Maximum (#) (h) | All Other Stock Awards: Number of Shares of Stock or Units (#) (i) | Grant Date Fair Value of Stock and Option Awards ($) (2) (l) | | Dr. Keh-Shew Lu | 2/1/2023 | 475,000 | 950,000 | 1,900,000 | 21,000 | 42,000 | 84,000 | 42,000 | 7,841,400 | | | 5/24/2023 | — | — | — | — | — | — | 6,000 | 524,220 | | Brett R. Whitmire | 2/1/2023 | 115,500 | 231,000 | 462,000 | 4,500 | 9,000 | 18,000 | 9,000 | 1,680,300 | | Gary Yu | 2/1/2023 | 157,500 | 315,000 | 630,000 | 6,500 | 13,000 | 26,000 | 13,000 | 2,427,100 | | Francis Tang | 2/1/2023 | 115,500 | 231,000 | 462,000 | 4,500 | 9,000 | 18,000 | 9,000 | 1,680,300 | | Julie Holland (3) | 2/1/2023 | — | — | — | — | — | — | — | — |
GRANTS OF PLAN-BASED AWARDS
(1) The amount shown is the actual cash bonus paid for 2023. This amount consists of any performance-based bonus and any discretionary bonus. Under the executive bonus formula that established the target bonus for each executive officer (i) 80% of the bonus was tied to the financial metrics of the Company and (ii) 20% of the bonus was tied to individual goals for each NEO. See “Compensation Discussion and Analysis – Principal Components of Compensation – Annual (Bonus) Incentive Plan.” (2) These amounts reflect the value determined by the Company for accounting purposes for these awards and do not reflect whether each NEO has actually realized a financial benefit from the awards. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Grant date fair value reported for stock awards in the form of RSUs and PSUs is calculated by multiplying the number of shares subject to the award by the closing price of the Company’s Common Stock on the grant date. See Note 14, Share-Based Compensation, to the Company’s audited financial statements for the fiscal year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 9, 2024, for a further discussion of the relevant valuation assumptions used in calculating grant date fair value. All equity awards vest in four equal annual installments. In addition to time requirements, in order for performance-based equity awards to vest, certain performance criteria must be met. (3) Ms. Holland retired as an executive officer effective March 31, 2023.
CEO Pay Ratio
CEO Pay Ratio At the end of 2023 the Company had approximately 8,635 employees worldwide, located mainly in Asia. The annual total compensation for our median employee for 2023 was $27,843 and $9,483,816 for our CEO. The resulting ratio of our CEO’s pay to the pay of our median employee for 2023 was 341 to 1. The annual total compensation for our median US employee for 2023 was $124,474 and the resulting ratio of our CEO’s pay to the pay of our median US employee for 2023 was 76 to 1. We identified the median employee by examining the 2023 compensation data for all individuals, excluding our CEO, who were employed by us as of December 31, 2023. We included all employees, whether employed on a full-time, part-time or seasonal basis. We did not make any cost-of-living adjustments in identifying the median employee. We also did not make any assumptions or adjustments with respect to total cash compensation. We calculated the median employee’s annual total compensation using the same methodology we use for our NEOs as set forth in the 2023 Summary Compensation Table in this Proxy Statement.
NARRATIVE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE
NARRATIVE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The following table sets forth certain information regarding equity-based awards held by NEOs as of December 31, 2023:
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| Stock Awards | | | | | | | | Name (a) | Number of Shares or Units of Stock That Have Not Vested (#) (1) (g) | Grant Date | Market Value of Shares or Units of Stock That Have Not Vested ($) (h) | Equity Incentive Plan Awards: Number of Unearned Shares, Units of Other Rights That Have Not Vested (#) (1) (i) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, of Other Rights That Have Not Vested ($) (j) | Grant Date | | Dr. Keh-Shew Lu | 13,275 | 2/19/2020 | 1,068,903 | 32,000 | 5,153,280 | 2/8/2021 | | | 1,688 | 5/18/2020 | 135,918 | 32,000 | 5,153,280 | 2/1/2022 | | | 16,000 | 2/8/2021 | 1,288,320 | 42,000 | 6,763,680 | 02/01/2023 | | | 2,500 | 5/24/2021 | 201,300 | — | — | — | | | 24,000 | 2/1/2022 | 1,932,480 | — | — | — | | | 3,750 | 05/26/2022 | 301,950 | — | — | — | | | 42,000 | 2/1/2023 | 3,381,840 | — | — | — | | | 6,000 | 5/24/2023 | 483,120 | — | — | — | | Brett R. Whitmire | 2,700 | 2/19/2020 | 217,404 | 7,600 | 1,223,904 | 2/8/2021 | | | 3,800 | 2/8/2021 | 305,976 | 6,080 | 979,123 | 02/01/2022 | | | 4,560 | 02/01/2022 | 367,171 | 1,520 | 244,781 | 02/01/2022 | | | 1,140 | 02/01/2022 | 91,793 | 7,200 | 579,744 | 02/01/2023 | | | 7,200 | 02/01/2023 | 579,744 | 1,800 | 289,872 | 02/01/2023 | | | 1,800 | 02/01/2023 | 144,936 | — | — | 12/31/1899 | | Gary Yu | 2,000 | 07/01/2020 | 161,040 | 8,500 | 1,368,840 | 07/01/2020 | | | 4,250 | 02/08/2021 | 342,210 | 3,400 | 547,536 | 02/01/2022 | | | 2,550 | 02/01/2022 | 205,326 | 5,100 | 821,304 | 12/31/1899 | | | 3,825 | 02/01/2022 | 307,989 | 6,500 | 1,046,760 | 12/31/1899 | | | 6,500 | 02/01/2023 | 523,380 | 6,500 | 1,046,760 | 12/31/1899 | | | 6,500 | 02/01/2023 | 523,380 | — | — | 12/31/1899 | | Francis Tang | 3,825 | 02/19/2020 | 307,989 | 7,600 | 1,223,904 | 2/8/2021 | | | 3,800 | 02/8/2021 | 305,976 | 7,600 | 611,952 | 2/1/2022 | | | 5,700 | 02/01/2022 | 458,964 | 9,000 | 724,680 | 2/1/2023 | | | 9,000 | 2/1/2023 | 724,680 | — | — | 12/31/1899 | | Julie Holland (2) | 3,825 | 02/19/2020 | 307,989 | 6,133 | 987,658 | 02/8/2021 | | | 4,600 | 02/8/2021 | 370,392 | 3,067 | 493,910 | 02/01/2022 | | | 6,900 | 02/01/2022 | 555,588 | — | — | — |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
(1) Equity awards vest in four equal annual installments on the first four anniversary dates of the date of grant. Performance-based awards can pay out between 0% and 200% of target, based on actual performance compared to pre-established, three-year financial performance targets. The amount reflected in column J is based on an achievement level of 200%, based on the most recent performance-based award achievement. The price per share to calculate the above value of equity awards was $80.52 which was the closing price per share on December 29, 2023. There are no outstanding stock options. (2) Ms. Holland retired as an executive officer effective March 31, 2023.
OPTION EXERCISES AND STOCK VESTED
OPTION EXERCISES AND STOCK VESTED The following table sets forth certain information regarding vesting of RSU or PSUs held by NEOs during the year ended December 31, 2023 (no stock options were exercised during the period):
OPTION EXERCISES AND STOCK VESTED
| | Stock Awards | | | Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (1) | | Dr. Keh-Shew Lu | 154,413 | 14,308,817 | | Brett R. Whitmire | 31,100 | 2,879,771 | | Gary Yu | 7,250 | 672,823 | | Francis Tang | 42,475 | 3,933,360 | | Julie Holland (2) | 43,275 | 4,007,288 |
OPTION EXERCISES AND STOCK VESTED
(1) Value realized on vesting is calculated by (i) multiplying the number of shares acquired upon vesting by (ii) the closing share price of the Common Stock of the Company on the vesting date and does not necessarily reflect the actual value realized. The actual value ultimately realized depends upon the number of shares actually sold by each NEO, if any, and the value received upon such sales.
NONQUALIFIED DEFERRED COMPENSATION
NONQUALIFIED DEFERRED COMPENSATION The Company maintains a nonqualified deferred compensation plan, which permits the Board and eligible employees, including the NEOs, to voluntarily elect to defer up to 75% of base salary, and up to 100% of cash bonuses and stock awards until designated future dates, provided that their total deferrals do not reduce their total compensation below the amount necessary to satisfy obligations such as employment taxes and benefit plan payments. Amounts deferred are credited with earnings or losses based on the participant’s investment allocation among investment options, which may include stocks, bonds and mutual fund shares. Withdrawals can be made pursuant to Internal Revenue Service regulations for retirement and distributions. While still employed, distributions are paid in accordance with the participants’ elections with regard to the timing and form of distributions. Upon termination of an executive, a 100% distribution of their account is made after six months has lapsed from their separation from service. The Company may, from time to time, make discretionary contributions to participants’ accounts. No discretionary contributions were made in 2023, 2022 or 2021. The Company offsets its obligations under the nonqualified deferred compensation plan by investing in the actual underlying investments. These investments are classified as trading securities and are carried at fair value. At December 31, 2023, these investments totaled approximately $14.6 million. Gains and losses in these investments are materially offset by corresponding gains and losses in the deferred compensation plan liabilities. The following table sets forth certain information related to the nonqualified deferred compensation plan for the NEOs:
NONQUALIFIED DEFERRED COMPENSATION
| Name (a) | Executive Contributions in Last Fiscal Year ($) (1) (b) | Registrant Contributions in Last Fiscal Year ($) (c) | Aggregate Earnings in Last Fiscal Year ($)(2) (d) | Aggregate Withdrawals/ Distributions ($) (e) | Aggregate Balance at Last Fiscal Year End ($) (f) | | Dr. Keh-Shew Lu | — | — | 341 | — | 7,279 | | Brett R. Whitmire | 46,423 | — | 17,508 | — | 95,235 | | Gary Yu | 274,720 | — | 152,810 | — | 1,047,413 | | Francis Tang | — | — | 130,169 | — | 779,706 | | Julie Holland (3) | — | — | 1,224 | — | 7,735 |
NONQUALIFIED DEFERRED COMPENSATION
(1) Contributions are reported as compensation in the last completed fiscal year in either the “Salary” or the “Bonus” column in the Summary Compensation Table depending on the source of the deferral. (2) The amounts reported in this column are reported as compensation for 2023 in the Summary Compensation Table.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL The following discussion sets forth potential payments payable to the NEOs upon termination of their employment or a change in control of the Company. For purposes of this section, certain relevant provisions and terms that are generally applicable and which therefore cover the NEOs are described below:
Payments Upon Termination by the Company Other Than for “Cause” or by Employee for “Good Reason”
Payments Upon Termination by the Company Other Than for “Cause” or by Employee for “Good Reason” Payments upon termination by the Company other than for “cause” (as defined in Dr. Lu’s employment agreement) which includes termination due to Disability (as defined in Dr. Lu’s employment agreement) or by Dr. Lu for “good reason” (as defined in Dr. Lu’s employment agreement) are governed by his current employment agreement entered into with the Company on July 21, 2015, as amended. Dr. Lu’s relationship with the Company is “at will” and may be terminated at the option of either party, for any or no reason whatsoever, with or without cause. • “Cause” means: the willful and continued refusal of employee to substantially perform his duties in accordance with his employment agreement (other than any such failure resulting from incapacity due to physical or mental illness), insubordination, or material violation of the Company’s policies, in each case after a written demand for substantial performance is delivered to employee by the Board which specifically identifies the manner in which the Board believes that employee has not substantially performed such duties, the acts constituting such insubordination, or such violations of the Company’s policies, as the case may be, and employee shall have had a reasonable opportunity to remedy the same; or • the conviction of, or a plea of nolo contendere by, employee to a felony; or • a charge or indictment of a felony, the defense of which renders employee substantially unable to perform his duties under his employment agreement. In order to terminate employee’s employment for Cause, the Company must provide employee with a copy of a resolution adopted by the affirmative vote of not less than a majority of all members of the Board at a meeting of the Board (after reasonable notice is provided to employee and employee is given an opportunity, together with counsel, to be heard before the Board), finding that employee is guilty of a Cause act. “Good Reason” means: • a material diminution in employee’s base salary; • a material diminution in employee’s authority, duties or responsibilities as contemplated in his employment agreement; • a material change in the geographic location at which employee must perform services; or • any other action or inaction that constitutes a material breach by the Company of the employment agreement. Good Reason shall not exist unless employee has notified the Company within thirty (30) days of the initial existence of the actions or failures to act giving rise to Good Reason, and such actions or failures have not been cured or remedied by the Company within thirty (30) days of the receipt of such notice. Thereafter, employee must then timely consummate his resignation for Good Reason. “Disability” generally means: (other than for equity awards which consist of tax code section 422 incentive stock options or tax code section 409A nonqualified deferred compensation) a medically determinable physical or mental incapacitation such that for a continuous period of not less than twelve (12) months, employee is unable to engage in any substantial gainful activity or which can be expected to result in death. The definition of Disability with respect to incentive stock options and nonqualified deferred compensation is provided by their respective tax code definitions. In the event Dr. Lu’s employment is terminated by (a) the Company other than for “cause” (as defined), or (b) Dr. Lu for “good reason” (as defined), (i) the Company shall continue to pay or provide to Dr. Lu the annual base salary during the period commencing on the 60th day after the effective date of such termination and ending on the first anniversary of such effective date such that an aggregate total of 12 months of base salary are provided, (ii) the Company shall pay to Dr. Lu any amount payable under an executive bonus plan for the fiscal year in which such termination occurs, prorated to the date of the termination, (iii) the Company shall pay Dr. Lu his accrued but unused paid time off, (iv) the Company shall provide to Dr. Lu continued participation in any group health plan or medical reimbursement plan on the terms existing on the date of termination for the period commencing on the effective date of such termination and ending 18 months thereafter, and (v) all stock-based compensation previously granted to Dr. Lu (including, but not limited to, all stock options, SARs, stock units, bonus units and stock grants) shall continue to be governed by the applicable award agreement. The benefits provided by the foregoing clauses (i) and (iv) are conditioned upon Dr. Lu’s execution of a separation agreement with the Company and such agreement shall include a release of all claims against the Company and its affiliates. However, if Dr. Lu’s employment is terminated either by the Company other than for “cause” (as defined) or by Dr. Lu for “good reason” (as defined) and if Dr. Lu then obtains a new employment within one year from the date of his termination, the annual post-employment base salary payable by the Company to Dr. Lu shall be reduced by any amount received by him during such one year in connection with such other employment.
Payments Upon Termination by the Company for “Cause” or by Dr. Lu Other Than for “Good Reason”
Payments Upon Termination by the Company for “Cause” or by Dr. Lu Other Than for “Good Reason” In the event that Dr. Lu’s employment is terminated by (a) the Company for “cause” (as defined) or (b) Dr. Lu other than for “good reason” (as defined), (i)the Company shall promptly pay or provide to Dr. Lu the annual base salary, prorated through the date of termination, (ii) the Company shall pay to Dr. Lu any amount payable under an executive bonus plan for the fiscal year in which such termination occurs, prorated to the date of the termination, (iii) the Company shall pay Dr. Lu his accrued but unused paid time off, and (iv) all stock-based compensation previously granted to Dr. Lu (including, but not limited to, all stock options, SARs, stock units, bonus units and stock grants) shall continue to be governed by the applicable award agreement. A termination of employment by Dr. Lu due to his retirement will generally be treated the same as a resignation without Good Reason.
Payment Upon Termination Due To Death or Disability
Payment Upon Termination Due To Death or Disability Under Dr. Lu’s employment agreement, Dr. Lu is entitled to a life insurance policy with a death benefit in an amount equal to that existing on the date of his employment agreement and a disability insurance policy in the maximum insurable amount as defined by such policy. Additionally, if termination of employment occurred due to Dr. Lu’s death or Disability then he would also receive the same benefits provided for a resignation without Good Reason.
Payment Upon Termination
Payment Upon Termination Mr. Whitmire, Mr. Yu and Mr. Tang do not have employment agreements with the Company, and payments upon termination under any circumstance for them are governed by their respective equity award agreements, the 2022 Plan, the 2013 Incentive Plan and Company’s general policies for termination of employees as specified in the Company’s employee handbook. Please refer to the tables below in this Proxy Statement for further discussion of Mr. Whitmire’s, Mr. Yu's and Mr. Tang’s payments upon termination on December 31, 2023, under any circumstance.
NEO Payments Upon Termination Events and Change In Control
NEO Payments Upon Termination Events and Change In Control The following tables assume (i) the triggering event took place on December 29, 2023; (ii) the price per share used to calculate the value of equity awards was $80.52, the closing price per share on December 29, 2023, the last trading day of 2023; (iii) the intrinsic value of nonqualified stock option acceleration is calculated by multiplying the difference between the respective exercise prices of any unvested nonqualified stock option shares that would have been subject to acceleration and $80.52 by the number of shares underlying the unvested nonqualified stock options that would have been subject to acceleration; (iv) the value of RSUs and Modified Awards acceleration is calculated by multiplying $80.52 by the number of RSUs and Modified Awards that would have been subject to acceleration; and (v) a performance incentive bonus was earned for 2023 at the level set forth in the “Summary Compensation Table.”
NEO Payments Upon Termination Events and Change In Control
| Name | Voluntary Termination or Termination With Cause ($) | Termination Due to Disability or Death ($) (1) (3) | Termination Without Cause ($) (1) | Change in Control ($) (2)(3) | | Dr. Keh-Shew Lu | 289,790 | 17,618,740 | 1,125,284 | 17,328,951 | | Brett R. Whitmire | 71,216 | 3,726,824 | 71,216 | 3,655,608 | | Gary Yu | 102,305 | 4,581,230 | 102,305 | 4,478,925 | | Francis Tang | 87,793 | 3,833,986 | 87,793 | 3,746,193 | | Julie Holland (4) | — | — | — | — |
NEO Payments Upon Termination Events and Change In Control
(1) Such amounts do not include a $700,000 benefit for each NEO paid by the Company's life insurance policy upon death and do not include short- and long-term disability payments for the first year and long-term disability payments for the second year paid by disability insurance policies. (2) Reflects the estimate of the payments and benefits that each NEO would receive assuming the NEO's employment was terminated without "cause" (and for Dr. Lu if he terminated his employment with “good reason”) on December 29, 2023. These disclosed amounts are estimates only and do not necessarily reflect the actual amounts that would be paid to the NEOs, which would only be known at the time they become eligible for such payments. (3) Represents the value of the continued vesting of the following shares underlying RSUs and PRSAs upon a death or disability on December 29, 2023. (4) Ms. Holland retired as an executive officer effective March 31, 2023 and no longer is entitled to payments or other benefits upon termination events or change in control None of our NEOs have any outstanding stock options. The following table reflects the estimate of the payments and benefits that each NEO would receive assuming the NEO's employment was terminated without "cause" (and for Dr. Lu if he terminated his employment for good reason) on December 29, 2023. These disclosed amounts are estimates only and do not necessarily reflect the actual amounts that would be paid to the NEOs, which would only be known at the time they become eligible for such payments.
NEO Payments Upon Termination Events and Change In Control
| Name (a) | Base Salary ($) (b) | Bonus ($) (c) | Paid Vacation ($) (d) | Medical Benefits ($) (e) | Life Insurance, Disability and AD&D Benefits ($) (f) | Continued Vesting of Share-based Compensation ($) (g) | Total ($) (h) | | Dr. Keh-Shew Lu | 810,000 | 211,905 | 77,885 | 25,494 | — | — | 1,125,284 | | Brett R. Whitmire | — | 48,370 | 22,846 | ― | — | — | 71,216 | | Gary Yu | — | 65,959 | 36,346 | ― | — | — | 102,305 | | Francis Tang | — | 48,370 | 39,423 | ― | — | — | 87,793 | | Julie Holland (1) | — | — | — | ― | — | — | — |
NEO Payments Upon Termination Events and Change In Control
(b) For purposes of determining this amount, Dr. Lu would receive his current base salary for one-year following the termination. (c) Any bonus amount would be prorated based on days employed in 2023 and calculated using actual 2022 results per the performance criteria in accordance with the Company's executive bonus plan. (d) Reflects the estimated lump sum value of 18-month accrual of paid vacations. (e) Reflects the estimated lump sum value of premiums to be paid on behalf of the executive under the medical benefit plans for 18 months for Dr. Lu. (f) In the event of termination without cause, the Company does not continue to provide benefits under the life, disability, and accidental death and dismemberment insurance plans. (1) Ms. Holland retired as an executive officer effective March 31, 2023 and no longer is entitled to payments or other benefits upon termination events or change in control. The table below details the number of RSUs and PSUs, currently unvested, that would vest upon a change in control:
NEO Payments Upon Termination Events and Change In Control
| Name | Stock Options (#) | RSUs (#) | PSU (#) | Total (#) | | Dr. Keh-Shew Lu | — | 109,213 | 106,000 | 215,213 | | Brett R. Whitmire | — | 21,200 | 24,200 | 45,400 | | Gary Yu | — | 25,625 | 11,900 | 37,525 | | Francis Tang | — | 22,325 | 24,200 | 46,525 | | Julie Holland (1) | — | — | — | — |
NEO Payments Upon Termination Events and Change In Control
(1) Ms. Holland retired as an executive officer effective March 31, 2023 and no longer is entitled to payments or other benefits upon termination events or change in control.
Pay versus Performance Disclosure
Pay versus Performance Disclosure We are required by SEC rules to disclose the following information regarding compensation paid to our NEOs (including our principal executive officer(“PEO”), also referred to herein as our “CEO”) as compared to the Company's performance. The amounts set forth below under the headings “Compensation Actually Paid to PEO” and “Average Compensation Actually Paid to Non-PEO NEOs” have been calculated in a manner consistent with Item 402(v) of Regulation S-K. Footnotes (2) and (3) below discuss the adjustments from the Total Compensation for each NEO reported in the Summary Compensation Table above to derive the "compensation actually paid" ("CAP") to each NEO. The following table sets forth additional compensation information of our PEO and our non-PEO NEOs along with total shareholder return ("TSR"), net income, and net sales performance results for fiscal years 2020, 2021, 2022 and 2023:
Pay versus Performance Disclosure
| Pay versus Performance | | | | | | | | | | | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | Year (a) | Summary Compensation Table Total for PEO (b) (1) | Compensation Actually Paid to PEO (c) (2) | Average Summary Compensation Table Total for Non-PEO NEOs (d) | Average Compensation Actually Paid to Non-PEO NEOs (e) (3) | Total Shareholder Return (f) | Peer Group Total Shareholder Return (g) (4) | Net Income (000) (h) | Net Sales (000) (5) | | 2023 | $9,483,816 | $13,252,259 | $1,955,936 | $2,683,673 | $114 | $103 | $227,182 | $1,661,739 | | 2022 | $9,045,646 | $(2,249,898) | $2,466,178 | $1,048,748 | $135 | $129 | $331,283 | $2,000,580 | | 2021 | $8,137,329 | $30,669,186 | $2,189,740 | $5,627,245 | $195 | $202 | $228,763 | $1,805,162 | | 2020 | $7,856,116 | $21,550,659 | $2,051,918 | $4,438,637 | $125 | $146 | $98,088 | $1,229,215 |
Pay versus Performance Disclosure
(1) The dollar amounts reported are the amounts of total compensation reported for our PEO in the Summary Compensation Table for the applicable fiscal year. (2) (3) The dollar amounts reported represent the amount of CAP, as computed in accordance with SEC rules. The dollar amounts do not reflect the actual amounts of compensation paid to our PEO or other NEOs during the applicable year, but also include (i) the year-end value of equity awards granted during the reported year, and (ii) the change in the value of equity awards that were unvested at the end of the prior year, measured through the date the awards vested or were forfeited, or through the end of the reported fiscal year along with changes in pension value and nonqualified deferred compensation earnings. The tables below provide full details. (4) Reflects cumulative TSR of the Company's Peer Group (as described above in this Proxy Statement) index, as of the applicable fiscal years. See "Compensation Review Process" for the composition of our Peer Group Companies for the applicable year. (5) Net Sales is the financial measure that the Company believes to be the most important measure (that is not otherwise required to be disclosed in the table) it used in the most recent fiscal year to link CAP to the NEOs. The Company generates revenue from sales of its semiconductor products to direct customers and distributors and recognizes revenue when control is transferred. Revenues are reduced in the period of sale for estimates of product returns and other allowances including distributor adjustments resulting in net sales. The PEO and other NEOs included in the above compensation columns are comprised of the following:
Pay versus Performance Disclosure
| Year | PEO | NON-PEO NEOS | | 2023 | Dr. Keh-Shew Lu | Brett R. Whitmire, Gary Yu, Francis Tang, Julie Holland | | 2022 | Dr. Keh-Shew Lu | Brett R. Whitmire, Gary Yu, Francis Tang, Julie Holland | | 2021 | Dr. Keh-Shew Lu | Brett R. Whitmire, Gary Yu, Francis Tang, Julie Holland | | 2020 | Dr. Keh-Shew Lu | Brett R. Whitmire, Francis Tang, Emily Yang, Julie Holland |
Pay versus Performance Disclosure
To calculate the amounts in the "Compensation Actually Paid to PEO" column in the Pay versus Performance table above, the following amounts were deducted from and added to (as applicable) "Total" compensation of our PEO for each applicable year, as reported in the Summary Compensation Table above.
Pay versus Performance Disclosure
| Compensation Actually Paid to PEO | | | | | | | Year | Summary Compensation Table Total for PEO (i) | Minus Reported Value of Equity Awards for PEO (ii) | Plus Equity Award Adjustments for PEO (iii) | Plus Reported Change in Pension Value and Non-qualified Deferred Compensation Earnings ($) | Compensation Actually Paid to PEO | | 2023 | $9,483,816 | $8,365,620 | $12,133,722 | $341 | $13,252,259 | | 2022 | $9,045,646 | $6,250,510 | $(5,045,133) | $99 | $(2,249,898) | | 2021 | 8,137,329 | 5,468,930 | 28,000,786 | 1 | 30,669,186 | | 2020 | 7,856,116 | 5,571,738 | 19,266,259 | 22 | 21,550,659 |
Pay versus Performance Disclosure
(i) The dollar amounts reported are the amounts of total compensation reported for our PEO in the Summary Compensation Table for the applicable fiscal year. (ii) Represents the grant date fair value of the equity awards to our PEO, as reported in the “Stock Awards” column in the Summary Compensation Table for each applicable year. (iii) Represents the year-over-year change in the fair value of equity awards to our PEO, as itemized in the table below. No awards granted in any year vested in the year they were granted. Fair value or change in fair value, as applicable, of equity awards in the "Compensation Actually Paid" columns was determined by reference to (a) for RSU awards, closing price on applicable year-end dates (b) for PSU awards, the same valuation methodology as RSU awards above except year-end share amounts are multiplied by the probability of achievement as of each such date.
Pay versus Performance Disclosure
| Equity Award Adjustments for PEO | | | | | | 2023 | 2022 | 2021 | | Fair Value of Equity Awards for PEO | | | | | Plus as of year-end value for awards granted during the year | $10,628,640 | $7,690,140 | $11,090,810 | | Plus year-over-year change of unvested awards granted in previous years | 828,753 | (8,169,217) | 9,551,577 | | Plus change from prior fiscal year-end awards that vested during the year | 676,329 | (4,566,056) | 7,358,400 | | Total equity award adjustments | 12,133,722 | (5,045,133) | 28,000,786 |
Pay versus Performance Disclosure
To calculate the amounts in the “Average Compensation Actually Paid to Non-PEO NEOs” column in the Pay versus Performance table above, the following amounts were deducted from and added to (as applicable) the average of the “Total” compensation of our non-PEO NEOs for each applicable year, as reported in the Summary Compensation Table above.
Pay versus Performance Disclosure
| Average Compensation Actually Paid to Non-PEO NEOs | | | | | | | Year | Average Summary Compensation Table Total for Non-PEO NEOs (i) | Minus Average Reported Value of Equity Awards for Non-PEO NEOs (ii) | Plus Average Equity Award Adjustments for Non-PEO NEOs (iii) | Plus Average Reported Change in Pension Value and Non-qualified Deferred Compensation Earnings for Non-PEO NEOs ($) | Average Compensation Actually Paid to Non-PEO NEOs | | 2023 | $1,955,936 | $1,446,925 | $2,099,234 | $75,428 | $2,683,673 | | 2022 | $2,466,178 | $1,511,591 | $156,437 | $(62,277) | $1,048,748 | | 2021 | $2,189,740 | $1,308,927 | $4,615,418 | $131,013 | $5,627,245 | | 2020 | $2,051,918 | $1,313,960 | $3,670,333 | $30,346 | $4,438,637 |
Pay versus Performance Disclosure
(i) The dollar amounts reported is the average of the amounts of total compensation reported for our Non-PEO NEOs in the Summary Compensation Table for the applicable fiscal year. (ii) Represents the grant date fair value of the equity awards to our Non-PEO NEOs, as reported in the “Stock Awards” column in the Summary Compensation Table for each applicable year. (iii) Represents the year-over-year change in the fair value of equity awards to our Non-PEO NEOS, as itemized in the table below. No awards vested in the year they were granted. Fair value or change in fair value, as applicable, of equity awards in the "Compensation Actually Paid" columns was determined by reference to (a) for RSU awards, closing price on applicable year-end dates (b) for PSU awards, the same valuation methodology as RSU awards above except year-end share amounts are multiplied by the probability of achievement as of each such date.
Pay versus Performance Disclosure
| Average Equity Award Adjustments for Non-PEO NEOs | | | | | | 2023 | 2022 | 2021 | | Fair Value of Equity Awards for Non-PEO NEOs | | | | | Plus as of year-end value for awards granted during the year | $1,872,090 | $1,878,755 | $2,709,562 | | Plus year-over-year change of unvested awards granted in previous years | 91,255 | (885,837) | 919,834 | | Plus change from prior fiscal year-end awards that vested during the year | 135,890 | (836,481) | 986,023 | | Total equity award adjustments | 2,099,234 | 156,437 | 4,615,418 |
Pay versus Performance Disclosure
The following graphs illustrates the relationship of CAP for our PEO and the average CAP for our Non-PEO NEOs in relationship to our Total Shareholder Return ("TSR"), net income and net sales the Company Selected Measure. Additionally, the graphs also describe the relationship between our own TSR versus peer group TSR. Compensation Actually Paid Versus Net Income($000) $35,000 $30,000 $25,000 $15,000 $10,000 $5,000 $0 ($5,000) $350,000 $300,000 $250,000 $150,000 $100,000 $50,000 $0 2020 2021 2022 $98,088 $228,763 $331,283 PEO CAP Non PEONEO CAP NET INCOME Compensation Actually Paid Versus Net Sales ($000) $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 ($5,000) $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 2020 2021 2022 PEO CAP Non PEO NEO CAP Net Sales $1,229,215 $1,805,162 $2,000,580 The three financial performance measures listed in the following table represent an unranked list of the “most important” financial performance measures linking CAP to the NEOs for 2023 and company performance. After net sales, we do not consider any one of the other following financial performance measures to be a more important measure than the other when measuring performance for our company or executive compensation program. See the discussion above in "Compensation Discussion and Analysis" for additional discussion related to executive pay.
Pay versus Performance Disclosure
| Net sales | | Operating income | | Non-GAAP earnings per share |
Pay versus Performance Disclosure
PROPOSAL THREE RATIFICATION OF THE APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The firm of Moss Adams LLP has been the Company’s independent registered public accounting firm since 1993 and has been selected by the Board, upon the recommendation of the Audit Committee, to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2024. Professional services rendered by Moss Adams LLP for 2023 consisted of an audit of the Company’s annual financial statements (including services incurred with rendering an opinion under Section 404 of the Sarbanes-Oxley Act of 2002) and review of quarterly financial statements, services related to filings with the SEC and meetings with the Company’s Audit Committee. All professional services rendered by Moss Adams LLP during 2023 were furnished at customary rates and terms. Representatives of Moss Adams LLP are expected to be present at the Meeting and will have the opportunity to make a statement, if they so desire, and respond to appropriate questions, previously submitted, from stockholders.