DEF 14A of On Semiconductor Corp
Filed Apr 4, 2024 · FY20230001097864-24-000001
Director Nominees Overview
Director Nominees Overview
Director Nominees Overview
| | | | | | Committee Memberships | | | | Name and Principal Occupation | | Age | Director Since | Independent | Audit Committee | Governance and Sustainability Committee | Human Capital and Compensation Committee | | | Atsushi Abe Managing Partner of Advanced Solutions, Inc. | 70 | 2011 | ü | l | | | | | Alan Campbell Chairman of the Board Former Chief Financial Officer of Freescale Semiconductor, Inc. | 66 | 2015 | ü | l | l | | | | Susan K. Carter Former Senior Vice President and Chief Financial Officer of Ingersoll Rand plc (now Trane Technologies plc) | 65 | 2020 | ü | µ | l | | | | Thomas L. Deitrich President and Chief Executive Officer of Itron, Inc. | 57 | 2020 | ü | | l | l | | | Hassane El-Khoury President and Chief Executive Officer | 44 | 2020 | | | | | | | Bruce E. Kiddoo Former Chief Financial Officer of Maxim Integrated Products, Inc. | 63 | 2020 | ü | l | | | | | Christina Lampe-Önnerud Founder and Chief Executive Officer of Cadenza Innovation Inc. | 57 | 2023 | ü | l | | | | | Paul A. Mascarenas Former Chief Technical Officer of Ford Motor Company | 62 | 2014 | ü | | µ | l |
Director Nominees Overview
| | Gregory L. Waters Former President and Chief Executive Officer of Integrated Device Technology, Inc. | 63 | 2020 | ü | l | | | Christine Y. Yan Former President of Asia, Stanley Black & Decker, Inc. | 58 | 2018 | ü | µ |
Director Nominees Overview
l Member µ Committee Chair
Director Nominees Overview
| PROPOSAL NO. 2: | | Our Board recommends a vote FOR say-on-pay. | | Advisory Vote to Approve Named Executive Officer Compensation (Say-on-Pay) | ü | | | (page 25) | | |
Director Nominees Overview
Our Board recommends that stockholders vote to approve, on a nonbinding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement.
Director Nominees Overview
| PROPOSAL NO. 3: | | Our Board recommends a vote FOR ratification of PwC as our auditors for 2024. | | Ratification of Appointment of Independent Registered Public Accounting Firm | ü | | | (page 54) | | |
Director Nominees Overview
The Audit Committee appointed PricewaterhouseCoopers LLP to serve as our independent registered public accounting firm for 2024. PwC has been retained as our independent registered public accounting firm continuously since 1999. The Audit Committee and the Board believe that the continued retention of PwC as our independent registered public accounting firm is in our best interests and those of our stockholders.
THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Proposal No. 1: Election of Directors
Proposal No. 1: Election of Directors Our Board recommends a vote “FOR” each of the 10 director nominees named below. Our directors are elected annually as provided in our bylaws. Once elected, directors hold office until their terms expire at the next annual meeting of stockholders and until the election of their successors (or, if earlier, upon their death, resignation or removal). The Board regularly assesses its size and composition and the skill sets of each director to ensure an appropriate diversity of perspectives, viewpoints, backgrounds and skills in light of our current and future business objectives and the evolving nature of our product offerings and technology in the highly competitive semiconductor industry. As of the record date, our Board had 10 directors, nine of whom were elected at our 2023 annual meeting of stockholders, as well as Ms. Lampe-Önnerud, who was appointed to the Board effective September 1, 2023. Considering its most recent assessment and upon the recommendation of its GS Committee, our Board has renominated each of our current directors — Messrs. Abe, Campbell, Deitrich, El-Khoury, Kiddoo, Mascarenas and Waters and Msses. Carter, Lampe-Önnerud and Yan — for election to a new term. lf elected, each will serve a term beginning at the annual meeting and expiring at our 2025 annual meeting of stockholders and until the election of his or her successor. Each nominee has consented to being named as a nominee in this proxy statement and to serve as a director if elected. The designated proxies intend to vote your proxy for the election of each such nominee, unless otherwise directed. If, contrary to our expectations, any nominee is unable to serve or for good cause will not serve, your proxy will be voted for a substitute nominee designated by the Board, or the Board may choose to reduce its size.
Director Nominees at a Glance
Director Nominees at a Glance
Director Nominees at a Glance
| Age Distribution | Gender | Tenure | Geography/International | | | | | | | | | | | | The Board is committed to balancing the age and experience of its members with four directors under 60 years of age and six directors over 60 years of age. All directors nominees are below the mandatory retirement age of 75. | In 2023, we increased our Board’s gender diversity to 30% female with the addition of Ms. Lampe-Önnerud. We have seven male and three female director nominees. | The tenure of the director nominees demonstrates the Board’s commitment to balancing experience and refreshment with six directors with tenures of less than five years and four directors with tenures of six or more years. | All nominees for director have international experience, and one is based outside of the United States. |
Information about our Director Nominees
Information about our Director Nominees Set forth below is biographical information about each director nominee, which is intended to highlight each nominee’s particular strengths. An individual director nominee may have other skills, experiences and personal attributes not highlighted. Our Board believes that it is important that the following qualifications, attributes, skills and experience are represented on our Board because of their particular relevance to our business. In addition to the specific qualifications described below, we believe that each director nominee has the business acumen and sound judgment required for the proper functioning of our Board and the integrity, honesty and adherence to high ethical standards necessary to set the “tone at the top.” Most of our directors also have significant experience on other public company boards, which we believe broadens their knowledge of board processes, issues and solutions.
Information about our Director Nominees
| Key to Relevant Skills and Qualifications | Semiconductor /Technology | | Public Company Management | | International | | | | Manufacturing | | Finance | | Compliance | | | | Enterprise Risk Management (ERM) | | Mergers and Acquisitions | | Government Relations | | | | Environmental, Social and Governance (ESG) | | Sustainability/Climate | | Information Security | | | | | | Marketing | | | |
Information about our Director Nominees
| ATSUSHI ABE | | | | | | | | | | | Age 70 Director since 2011 Other Public Company Boards: •Fujitsu Ltd., 2015 - Present (Chairman of the Board, 2019 - Present) | Career Highlights | | | | | | | | | | | ■ Advanced Solutions, Inc. (a consulting and financial advisory firm), 2022 – Present — Managing Partner ■ Sangyo Sosei Advisory Inc. (a technology, media and telecommunication industry-focused mergers and acquisitions advisory firm), 2009 – 2022 — Senior Advisor ■ Unitas Capital (formerly JPMorgan Partners Asia), 2004 – 2009 — Partner Other Board Experience ■ Binfinity AG, 2018 – 2022 ■ Edwards Group Limited, 2007 – 2009 | | | | | | | | | | | Relevant Skills and Qualifications | | | | | | | | | | | | | | | | | | | | | | ■ Extensive experience in the investment banking and private equity industry, particularly in the area of technology, and familiarity with businesses throughout Asia, including Japan ■ Experience in mergers and acquisitions as well as in capital markets transactions, financial transactions and negotiations ■ 22 years of cumulative public company board experience | | | | | | | | | | ALAN CAMPBELL | | | | | | | | | | | Age 66 Director since 2015 Chair of Board since 2017 | Career Highlights | | | | | | | | | | | ■ Freescale Semiconductor, Inc. (acquired by NXP Semiconductors N.V.), 2004 – 2014 — Chief Financial Officer Other Board Experience ■ Dialog Semiconductor Plc (acquired by Renesas Electronics Corporation), 2015 – 2021 | | | | | | | | | | | Relevant Skills and Qualifications | | | | | | | | | | | | | | | | | | | | | | ■ Extensive experience in the semiconductor industry ■ Experience as chief financial officer of a publicly held semiconductor company ■ Significant management experience and relevant knowledge of financial statement preparation and regulatory compliance ■ Significant mergers and acquisitions and global experience | | | | | | | | |
Information about our Director Nominees
| SUSAN K. CARTER | | | | | | | | | | | | | | Age 65 Director since 2020 Other Public Company Boards: •Amcor plc •Stanley Black & Decker, Inc. | Career Highlights | | | | | | | | | | | | | | ■ Ingersoll Rand plc (now known as Trane Technologies plc) (an industrial manufacturing company domiciled in Ireland), 2013 – 2020 — Senior Vice President and Chief Financial Officer ■ KBR, Inc., 2009 – 2013 — Executive Vice President and Chief Financial Officer ■ Lennox International, Inc., 2004 – 2009 — Executive Vice President and Chief Financial Officer Other Board Experience ■ Pursuit Aerospace ■ Air Products and Chemicals, Inc., 2011 – 2021 | | | | | | | | | | | | | | Relevant Skills and Qualifications | | | | | | | | | | | | | | | | | | | | | | | | | | | | ■ Experience as chief financial officer of a publicly held industrial company ■ Significant management experience and relevant knowledge of financial statement preparation and regulatory compliance ■ Significant experience in manufacturing, automotive, aerospace, defense and engineering and construction industries ■ Extensive experience in accounting and financial reporting, international business, mergers and acquisitions, investor relations, information technology, finance and capital management, government relations and ESG matters | | | | | | | | | | | | | THOMAS L. DEITRICH | | | | | | | | | | | | | | Age 57 Director since 2020 Other Public Company Boards: •Itron, Inc. | Career Highlights | | | | | | | | | | | | | | ■ Itron, Inc. (an energy and water resource management technology company), 2015 – Present — President, Chief Executive Officer and Director, 2019 – Present — Chief Operating Officer, 2015 – 2019 ■ Freescale Semiconductor, Inc. (acquired by NXP Semiconductors N.V.), 2006 – 2015 — Senior Vice President and General Manager Other Board Experience ■ National Electrical Manufacturers Association ■ Ferric, Inc., 2016 – 2020 | | | | | | | | | | | | | | Relevant Skills and Qualifications | | | | | | | | | | | | | | | | | | | | | | | | | | | | ■ Experience as chief executive officer of a publicly held technology company ■ Extensive experience in product management, research and development, supply chain management, business development and sales ■Significant management experience and relevant knowledge in semiconductor and industrial markets served ■Significant mergers and acquisitions and global experience | | | | | | | | | | | |
Information about our Director Nominees
| HASSANE EL-KHOURY | | | | | | | | | | | | | | | Age 44 Director since 2020 | Career Highlights | | | | | | | | | | | | | | | ■ ON Semiconductor Corporation, December 2020 – Present — President, Chief Executive Officer and Director ■ Cypress Semiconductor Corporation (acquired by Infineon Technologies AG) (a semiconductor design and manufacturing company), 2007 – 2020 — President, Chief Executive Officer and Director, 2016 – 2020 — Executive Vice President, Programmable Systems Division, 2012 – 2016 — Senior Director of Automotive Business Unit, 2010 – 2012 — Senior Business Development Manager, 2008 – 2010 — Staff Application Engineer, 2007 – 2008 Other Board Experience ■ Leia, Inc. ■ Sakuú Corporation, 2020 – March 2023 | | | | | | | | | | | | | | | Relevant Skills and Qualifications | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ■ ■ Experience as chief executive officer of a publicly held semiconductor company ■ ■ Extensive experience in the semiconductor and automotive industries ■ ■ Significant management and product development experience ■ ■ Significant mergers and acquisitions and global experience | | | | | | | | | | | | |
Information about our Director Nominees
| BRUCE E. KIDDOO | | | | | | | | | | | | Age 63 Director since 2020 | Career Highlights | | | | | | | | | | | | ■ Maxim Integrated Products, Inc. (a semiconductor design and manufacturing company), 2007 – 2019 — Chief Financial Officer ■ Broadcom Corporation, 1999 – 2007 — Vice President and Acting Chief Financial Officer, 2006 – 2007 — Vice President, Finance and Corporate Controller — Controller, Broadband Communications Other Board Experience ■ San Onofre Parks Foundation | | | | | | | | | | | | Relevant Skills and Qualifications | | | | | | | | | | | | | | | | | | | | | | | | ■ Extensive experience in the semiconductor industry and with mergers and acquisitions ■ Experience as chief financial officer of a publicly held semiconductor company ■ Significant management experience and relevant knowledge of financial statement preparation and regulatory compliance | | | | | | | | | |
Information about our Director Nominees
| CHRISTINA LAMPE-ÖNNERUD | | | | | | | | | | Age 57 Director since 2023 Other Public Company Boards: •Arcadium Lithium plc | Career Highlights | | | | | | | | | | ■ Cadenza Innovation, Inc. (a developer and designer of lithium-ion battery batteries and storage solutions), 2012 – Present — Founder, Chief Executive Officer and Director ■ Boston-Power, Inc., 2004 – 2012 — Founder and Chairman, 2004 – 2012 — Chief Executive Officer, 2004 – 2011 Other Board Experience ■ MIT Corporation Visiting Committee for Department of Chemistry ■ NYBEST – New York Battery and Energy Storage Technology Consortium, 2016 – 2024 ■ Future Battery Industry Collaborative Research Center, 2019 – 2022 ■ FuelCell Energy, Inc., 2018 – 2019 ■ Syrah Resources Ltd, 2016 – 2019 | | | | | | | | | | Relevant Skills and Qualifications | | | | | | | | | | | | | | | | | | | | ■ Leadership in Lithium-ion battery technology and energy storage innovation ■ Significant advisory experience in the battery industry and energy and economic forums ■ Experience as a chief executive officer and as a public company director | | | | | | | | | PAUL A. MASCARENAS | | | | | | | | | | Age 62 Director since 2014 Other Public Company Boards: •The Shyft Group •United States Steel Corporation | Career Highlights | | | | | | | | | | ■ Ford Motor Company, 1982 – 2014 — Vice President of Research & Advanced Engineering and Chief Technical Officer, 2011 – 2014 — Vice President of Engineering, 2007 – 2011 — Vice President, North American Vehicle Programs, 2005 – 2007 — Various positions in product development, program management and business leadership, 1982 – 2005 Other Board Experience ■ BorgWarner, Inc., 2018 – 2022 ■ FISITA – The International Federation of Automotive Engineering Societies, 2012 – 2021 ■ British-American Business Council, Michigan Chapter, 2015 – 2021 ■ Society of Automotive Engineers International, 2018 – 2021 ■ Mentor Graphics, 2015 – 2017 | | | | | | | | | | Relevant Skills and Qualifications | | | | | | | | | | | | | | | | | | | | ■ Extensive experience in technical strategy, planning and research and development ■ Leadership and strategic planning expertise in automotive industry ■ Significant corporate governance experience | | | | | | | |
Information about our Director Nominees
| GREGORY L. WATERS | | | | | | | | | | | | | Age 63 Director since 2020 | Career Highlights ■ MatrixSpace, Inc. (an artificial intelligence software company), 2019 – Present — Founder ■ Integrated Device Technology, Inc. (a semiconductor design and manufacturing company acquired by Renesas Electronics Corporation), 2014 – 2019 — President, Chief Executive Officer and Director ■ Skyworks Solutions, Inc., 2003 – 2012 — Executive Vice President Other Board Experience ■ Cyxtera Technologies, Inc. (acquired by Brookfield Infrastructure Partners L.P.), 2021 – 2024 ■ Mythic Inc., 2020 – 2023 ■ Sierra Wireless, Inc. (acquired by Semtech Corporation), 2020 – 2023 ■ Mellanox Technologies Ltd. (acquired by NVIDIA Corporation), 2018 – 2020 ■ Sand 9 Inc. (acquired by Analog Devices Inc.), 2011 – 2014 | | | | | | | | | | | | | Relevant Skills and Qualifications | | | | | | | | | | | | | | | | | | | | | | | | | | ■ Extensive experience with device technology companies ■ Experience as chief executive officer of a publicly held technology company ■ Significant management experience and relevant knowledge of financial statement preparation and regulatory compliance | | | | | | | | | | |
Information about our Director Nominees
| CHRISTINE Y. YAN | | | | | | | | | | | Career Highlights | | | | | | | | | | ■ Stanley Black & Decker, Inc. (leading global provider of innovative tools and solutions for industrial, construction and DIY markets), 1989 – 2018 — Vice President, Integration, January 2018 – November 2018 — President, Asia, 2014 – January 2018 — President, Stanley Storage and Workspace Systems, 2013 – 2014 — President, Americas, Stanley Engineered Fastening, 2008 – 2013 — President, Global Automotive, Stanley Engineered Fastening, 2006 – 2008 — Various roles in sales and marketing, engineering and research and development, 1989 – 2006 | | | | | | | | | | Relevant Skills and Qualifications | | | | | | | | | | | | | | | | | | | | ■ Extensive commercial, technology and operations management experience, including as member of senior management team of a Fortune 500 company ■ Deep experience running global businesses, especially emerging markets ■ Significant mergers and acquisitions experience ■ Extensive management experience in the automotive, industrial and consumer markets ■ Experience in corporate governance and ESG | | | | | | | | | Age 58 | | | | | | | | | | Director since 2018 Other Public Company Boards: •Ansell Limited •Cabot Corporation •Modine Manufacturing Company | | | | | | | | |
Information about our Director Nominees
Additional information regarding our Board, its committees, director compensation and our corporate governance practices may be found immediately following this Proposal.
Director Nominee Qualifications
Director Nominee Qualifications The GS Committee is required to develop and periodically review criteria for nominees for director. When the GS Committee considers diversity, as it did in connection with the Board’s 2023 self-evaluation process, it considers diversity of experience, thought, skills and viewpoints, as well as diversity concepts, such as race, ethnicity or gender identification, as it deems appropriate. Among other matters, the GS Committee may consider the following nomination criteria regarding Board membership: •the appropriate size of the Board; •a nominee’s knowledge, skills and experience, including, without limitation, experience in: finance and accounting, general business management, the semiconductor industry and semiconductor technology, international business, cybersecurity, sales and marketing, corporate governance and compliance and intellectual property; •the needs of the Company with respect to particular skills and experience; •a nominee’s experience leading and supporting ESG criteria, sustainability initiatives and civic responsibility; •a nominee’s independence as defined in Nasdaq and SEC rules and regulations; •diversity, which fosters diversity of thought; •a nominee’s age and tenure; and •the desire to balance the benefit of continuity with the periodic injection of fresh perspectives provided by new Board members. The Board’s goal is to assemble a diverse set of directors who bring together a variety of perspectives and skills derived from high-quality business and professional and personal experiences. Directors must be willing to devote sufficient time to carrying out their duties and responsibilities effectively and should be committed to serve on the Board for an extended period of time. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue in service are considered for re-nomination. If any member of the Board does not wish to continue in service, if the GS Committee decides not to re-nominate a member for re-election or determines to replace that director or if the Board considers increasing the size of the Board, the Board identifies the desired skills and experience for a new nominee in light of the criteria described above. Pursuant to its charter, if a stockholder nominates a director in accordance with the director nomination procedures described in the bylaws, the GS Committee will consider that nomination and evaluate such stockholder nomination in the same manner as it evaluates other nominees. Additionally, certain eligible stockholders may include one or more director nominees in our proxy statement without the GS Committee’s approval of such nominees, provided that the stockholders comply with certain disclosure requirements and notification procedures as described in greater detail in our bylaws.
2023 Compensation of Directors
2023 Compensation of Directors The table below summarizes total compensation paid to or earned by each of our non-employee directors for service during 2023.
2023 Compensation of Directors
| Name | Fees Earned or Paid in Cash (1) ($) | Stock Awards (2) ($) | Total ($) | | Atsushi Abe | 95,000 | 225,047 | 320,047 | | Alan Campbell | 225,604 | 225,047 | 450,651 | | Susan K. Carter | 120,604 | 225,047 | 345,651 | | Thomas L. Deitrich | 87,500 | 225,047 | 312,547 | | Gilles Delfassy (3) | 34,121 | — | 34,121 | | Bruce E. Kiddoo | 95,000 | 225,047 | 320,047 | | Christina Lampe-Önnerud (4) | 26,522 | 159,139 | 185,661 | | Paul A. Mascarenas | 105,000 | 225,047 | 330,047 | | Gregory L. Waters | 90,000 | 225,047 | 315,047 | | Christine Y. Yan | 101,552 | 225,047 | 326,599 | | (1) This column reflects annual retainer fees earned for board service in 2023, regardless of when paid. The schedule of fees is provided below under “Discussion of Director Compensation.” | | | | | (2) This column reflects the aggregate grant date fair value of the restricted stock award (i) granted to each non-employee director other than Mr. Delfassy and Ms. Lampe-Önnerud on May 18, 2023, and (ii) granted to Ms. Lampe-Önnerud on September 1, 2023, computed in accordance with FASB ASC Topic 718 (i.e., the closing price on the date of grant multiplied by the number of shares granted). As of December 31, 2023, (i) each sitting non-employee director other than Ms. Lampe-Önnerud held a total of 2,602 shares of restricted stock, and (ii) Ms. Lampe-Önnerud held a total of 1,601 shares of restricted stock, all of which are scheduled to vest on the day prior to the annual meeting. | | | | | (3) Mr. Delfassy’s board service ended on May 18, 2023 (just prior to the 2023 annual meeting of stockholders). He did not receive a stock award during 2023. | | | | | (4) Ms. Lampe-Önnerud was appointed to the Board effective September 1, 2023. | | | |
Discussion of Director Compensation
Discussion of Director Compensation Our Board has delegated responsibility for reviewing and determining non-employee director compensation to the HCC Committee. The HCC Committee reviews the compensation payable to our non-employee directors annually. In determining compensation and benefits for our non-employee directors, the HCC Committee is guided by three goals: (i) to fairly pay non-employee directors for the work required to serve as a director for a public company of our size and scope; (ii) to align non-employee directors’ interests with the long-term interests of our stockholders; and (iii) to structure the compensation in a way that is straightforward and transparent. Generally, the HCC Committee believes that these goals are served by compensating non-employee directors with a mix of cash and equity-based awards. In May 2023, FW Cook provided the HCC Committee with an analysis of our non-employee director compensation program and pay levels, including a comparative review of director compensation programs among the same peer group we use to evaluate executive compensation. Taking into consideration FW Cook’s analysis and recommendations, the HCC Committee approved modest increases to the annual equity retainer ($10,000) and to the annual cash retainer for certain Chairs (between $2,500 and $5,000) in order to stay competitive with market peers. Each of these changes is discussed in greater detail below.
2023 Compensation Program Highlights
2023 Compensation Program Highlights The HCC Committee believes that the design and outcomes of our 2023 executive compensation program were directly tied to our performance and advanced our strategic priorities for 2023 and beyond. At the beginning of 2023, considering, among other things, the Company’s significant growth and strong performance over the prior two-year tenure of our CEO and his leadership team, the HCC approved certain increases to target total direct compensation (TDC) levels for each of our NEOs, with an emphasis on performance-based or at-risk compensation elements, and established the metrics for our 2023 STI and LTI metrics. By the end of 2023, as noted in the Proxy Statement Summary under “2023 Performance Highlights,” we had achieved solid financial results while demonstrating resilience in a macroeconomic environment that had become increasingly uncertain as the year progressed. As a result, our incentive programs yielded mixed payouts against the ambitious goals that we had set for ourselves at the beginning of the year, as follows: 2023 STI Program. The two performance components of our 2023 STI program were our Corporate Multiplier (based on our achievement of correlated revenue and non-GAAP operating margin metrics) and each NEO’s Individual Goals. The Individual Goal percentage achievement is capped at 100%, which means that it may only decrease, but not increase, any amounts earned based on the Corporate Multiplier. •Company Results. For 2023, we achieved revenue of $8,253.0 million and non-GAAP operating margin of 32.3%. •Pay Results. Our combined revenue and operating margin results fell below target levels, yielding a 64.1% achievement on the Corporate Multiplier. The final STI payout percentage (Corporate Multiplier x Individual Goals achieved) for our CEO was just below 54% of target and between 47-54% of target for each of our other NEOs, compared to a maximum possible payout of 200% of target. 2023 LTI Program. The performance-based restricted stock units (PBRSUs) granted under our 2023 LTI program include four separately-scored, one-year goals and a relative total stockholder return (TSR) payout adjustment component to ensure that the award is linked to performance for a full three-year period. Specifically, the four goals include two financial metrics (new product revenue percentage and non-GAAP operating margin) and two strategic metrics (related to increases in SiC revenue and securing design wins). Our 2023 PBRSUs pay out over a three-year period. Payouts under the strategic goals can range between 0-200% of target. Payouts under the financial goals can range between 0-150% of target, with a further adjustment, up or down on a tranche-by-tranche basis (50-150%), by our relative TSR over one-, two- and three-year periods beginning January 1, 2023 and ending on December 31 of the year prior to each vesting date. •Company Results. With respect to our financial goals, in addition to the operating margin results described above, nearly 30% of our 2023 revenue came from new product offerings, underscoring our commitment to ensuring our product offerings keep pace with both customer needs and technological advances. On our strategic goals, we continued to make significant progress in increasing our SiC product revenue (quadrupling it from the prior year) and securing over $5.8 billion in design wins to position us for sustainable revenue growth over the longer term. •Pay Results. The combined payout percentage for the first tranche of our 2023 PBRSUs was 151% of target, compared to a maximum possible payout of 212.5% of target. We exceeded the target level, but fell below the stretch level, on three of the four goals. On the fourth goal, operating margin, we fell slightly below target. The combined payout on each of our second and third tranches will vary between 104-162% of target for each tranche, depending on our two- or three-year relative TSR performance. Specifically: ◦On the strategic goals, we achieved a combined payout 150% of target (133% on the SiC revenue goal and 184% on the design win goal). ◦On the financial goals, we achieved a combined preliminary payout of 116% of target (143% on new product revenue and 88% on operating margin). The first tranche payout was then adjusted by our one-year relative TSR results (66th percentile among our peers), for a combined first tranche payout on the financial goals of 153% and an overall combined payout percentage for the first tranche of 151%. This first tranche of the 2023 PBRSUs vested and paid out in February 2024. ◦For each of the remaining two tranches, which will vest in 2025 and 2026, we will adjust the financial goal payouts based on our two- or three-year relative TSR performance (ranging between a decrease of 50% to a minimum 58% payout or an increase of 150% to a maximum 174% payout), which means that the overall payout on each of those two tranches will range between 104-162% of its original target. All of these decisions and results are discussed in greater detail under “Elements of Our Compensation Program.”
Performance-Driven Compensation Opportunities
Performance-Driven Compensation Opportunities The goal of our executive compensation program is to enhance stakeholder value by delivering a competitive compensation package that is significantly performance-based, thus linking executive pay, company performance and stockholder returns. The primary components of our program, which we refer to as total direct compensation (TDC), are base salary, target STI award opportunity and target LTI awards, which are structured as 60% PBRSUs and 40% time-based restricted stock units (RSUs). As reflected in the charts below, approximately 94% of Mr. El-Khoury’s target TDC for 2023 was variable, with approximately 60% based on measurable performance goals (target STI and PBRSUs) and another 33% tied to the value of our stock price (RSUs). For our other NEOs, on average, approximately 88% of their target TDC was variable. These figures reflect the highest base salary, target STI opportunity and target LTI opportunity for each of our other NEOs in 2023.
Elements of our Compensation Program
| NEO | Base Salary ($) | | Target STI Opportunity (% of Base Salary) | | Target LTI (2) ($) | | | | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | | Hassane El-Khoury | 1,000,000 | 1,200,000 | 150% | 175% | 11,500,000 | 16,750,000 | | Thad Trent | 600,000 | 675,000 | 100% | 125% | 4,250,000 | 6,000,000 | | Simon Keeton | 525,000 | 600,000 | 85% | 100% | 2,250,000 | 4,500,000 | | Sudhir Gopalswamy (1) | 415,000 | 475,000 | 85% | 85% | 1,300,000 | 1,700,000 | | Ross F. Jatou | 450,000 | 475,000 | 85% | 85% | 1,400,000 | 2,000,000 | | (1) Mr. Gopalswamy’s compensation was further adjusted on May 26, 2023, following his April 2023 appointment to the position of General Manager, ASG. Specifically, his annual base salary was increased by $25,000 to a total of $500,000 and he received an incremental LTI award with a grant date target value of $600,000, which increased his annual target LTI value to a total of $2,300,000. | | | | | | | | (2) These figures represent the grant date target value of the LTI awards. For the number of RSUs and PBRSUs granted to each NEO during 2023, including Mr. Gopalswamy’s incremental grant described in footnote 1, please see the chart under “Long-Term Incentive Program.” | | | | | | |
2023 STI Program Formula
2023 STI Program Formula Corporate Multiplier Component. Our 2023 STI program included a performance matrix, the Corporate Multiplier, that links two financial metrics (revenue and non-GAAP operating margin) and reflects threshold‐to‐maximum opportunities based on various achievement levels of those metrics. This Corporate Multiplier is designed to ensure that funding of the 2023 STI program is in line with our Board-approved annual operating plan (AOP). If we achieve target levels on both metrics by meeting our AOP, the Corporate Multiplier would be 100%. The Corporate Multiplier can range from 0% to up to a maximum of 200% for performance meeting or exceeding stretch levels. Given the use of a matrix, there are multiple ways to calculate (and achieve) threshold, target and maximum performance. The Corporate Multiplier establishes the maximum that may be earned by a given participant under our STI program. As shown in the table below, based on our combined results for 2023, we achieved a Corporate Multiplier of 64.1% of target.
2023 STI Program Formula
| Corporate Multiplier Component (matrix-based correlation) | 0% Achievement (Threshold) (1) | 100% Achievement (Target) | 200% Achievement (Maximum) (2) | Actual Achievement (64.1%) | | Revenue | $8.151 billion | $8.677 billion (3) | $8.993 billion | $8.253 billion | | Non-GAAP Operating Margin | 29.0% | 32.6% (4) | 35.0% | 32.3%(5) | | (1) This combination of revenue and operating margin is only one way for our combined results to yield no payout. Under the matrix, no bonus would be earned if revenue did not exceed $7.800 billion and our operating margin fell below 30.2%. Conversely, no bonus would have been earned if our operating margin was below 27.8% and revenue did not exceed $8.501 billion. | | | | | | (2) This combination of revenue and operating margin is only one way to achieve maximum payout. Under the matrix, we could achieve 200% with revenue as low as $8.817 billion but only if our operating margin met or exceeded 35.6%. Conversely, we could achieve 200% with an operating margin of 34.7% but only if our revenue met or exceeded $9.111 billion. | | | | | | (3) The 2023 target goal represented approximately a 4.2% increase relative to reported 2022 revenue. | | | | | | (4) The 2023 target goal represented a decrease of 190 bps from reported 2022 non-GAAP operating margin. This goal, tied to our AOP, reflected our expectation that 2023 operating margin would decrease slightly from the prior year given the capital expenditures necessary to expand SiC production and ramp up operations at our EFK fab, which we acquired on January 1, 2023. | | | | | | (5) Non-GAAP operating margin is calculated as disclosed in our earnings releases. | | | | |
2023 STI Program Formula
Individual Goal Achievement Percentage Component. In addition to the Corporate Multiplier, each NEO received a score based on the level of achievement of the Individual Goal achievement percentage. The maximum possible Individual Goal achievement percentage is 100%, which means that performance against these particular goals will not increase a participant’s STI payout; rather, performance at less than target will serve to decrease any STI payout to that participant. For our NEOs, this component is further divided into two equally-weighted categories: financial goals (NEO Financial Goals) and certain executive-specific strategic or operational goals (NEO Strategic Goals). The NEO Financial Goals – this portion, which represents 50% of the Individual Goal achievement percentage, is tied to three corporate financial targets. For the 2023 STI program, the scoring of the NEO Financial Goals was based on our level of achievement of revenue, non-GAAP gross margin and non-GAAP operating expense targets as described in the table below. Each of the goals is scored separately and, once above-threshold levels are achieved, our performance as measured against the NEO Financial Goals could result in attainment of up to 100% for results at or above target. While the targets are annual, progress is measured quarterly so that if a given quarter is missed, it cannot be made up in a subsequent quarter even if the full year results for that goal actually exceed the annual target.
2023 STI Program Formula
| NEO Financial Goals | 0% Achievement (Threshold) | 100% Achievement (Target) | Annual Results | Scoring (% Earned Based on the Sum Total of Four Quarters)(3) | | Revenue (20% of NEO Financial Goals) | Company: $8.24 billion | Company: $8.68 billion | Company: $8.25 billion | 48% | | | PSG: $4.28 billion | PSG: $4.51 billion | PSG: $4.45 billion | 75% | | | ISG: $1.45 billion | ISG: $1.53 billion | ISG: $1.32 billion | 0% | | | ASG: $2.51 billion | ASG: $2.64 billion | ASG: $2.49 billion | 0% | | Non-GAAP Gross Margin (1) (40% of NEO Financial Goals) | Company: 46.0% | Company: 47.0% | Company: 47.1% | 75% | | | PSG: 44.0% | PSG: 45.0% | PSG: 47.5% | 90% | | | ISG: 47.8% | ISG: 48.8% | ISG: 48.7% | 78% | | | ASG: 51.3% | ASG: 52.3% | ASG: 52.5% | 50% | | Non-GAAP Operating Expense (2) (40% of NEO Financial Goals) | Company: $1,275 million | Company: $1,250 million | Company: $1,220 million | 75% | | | PSG: $511 million | PSG: $501 million | PSG: $489 million | 50% | | | ISG: $290 million | ISG: $284 million | ISG: $275 million | 100% | | | ASG: $475 million | ASG: $466 million | ASG: $456 million | 75% |
2023 STI Program Formula
(1) Non-GAAP gross margin is calculated as disclosed in our earnings releases, except with respect to the ASG-specific NEO Financial Goal, which excludes the impact of higher-than-anticipated manufacturing costs at our EFK fab, which we acquired on January 1, 2023. Please see the Appendix for a reconciliation. (2) Non-GAAP operating expense is calculated as disclosed in our earnings releases. (3) Although the Company and two business units (PSG and ASG) exceeded their 2023 gross margin targets, none of our NEOs earned 100% of possible points on that goal given that each missed one or more quarterly targets. Similarly, although results on the operating expense goal for the Company and each business unit exceeded target, only ISG fully achieved that goal in each of the four quarters to earn 100% of the possible points for that goal. For each of Messrs. El-Khoury and Trent, each of the NEO Financial Goals was measured against Company-wide results (69.5% in the aggregate). For each of our other NEOs, his NEO Financial Goals was measured against the results for his specific business unit (Mr. Keeton – PSG, 71% aggregate score; Mr. Jatou – ISG, 71% aggregate score; and Mr. Gopalswamy – ASG, 50% aggregate score). The NEO Strategic Goals – this portion, which represents the other 50% of the Individual Goal achievement percentage, is composed of between four and 10 additional metrics and targets specifically tailored to each NEO’s role, area of oversight and strategic focus, including financial and non-financial goals and other metrics based on the definition and deployment of management’s strategy and the planning and execution of certain transformation initiatives, including ESG, new product, quality improvement, human capital and operational initiatives. Mr. Gopalswamy, who transitioned from the role of Chief Strategy Officer to General Manager of ASG mid-year, was evaluated on strategic goals specific to his Chief Strategy Officer role for the first quarter but assumed ASG-specific strategic goals for the remainder of the year. The NEO Strategic Goals were scored: (i) for certain binary metrics, at either 0% or 100% attainment without linear interpolation between the attainment levels, or (ii) at up to 100% attainment, with linear interpolation for attainment between the threshold and target levels. Like the NEO Financial Goals, each NEO Strategic Goal was scored separately and each was weighted with a specific point value based on its strategic importance and/or the level of complexity involved in achieving the goal. Particular scoring metrics used to determine whether a given target had been achieved were also established at the time the 2023 STI program was approved. Following the end of the year, the HCC Committee evaluated performance against these metrics, and after considering the CEO’s recommendations regarding performance of each NEO, including himself, determined each NEO’s Individual Goal achievement percentage, as follows:
2023 STI Program Formula
| NEO | NEO Financial Goals (50% weighting) | NEO Strategic Goals (50% weighting) | Final Individual Goal Achievement Percentage | Combined Payout Percentage Final Individual Goal Achievement x Corporate Multiplier (64.1%) | | Hassane El-Khoury | 69.50% | 97.66% | 83.58% | 53.57% | | Thad Trent | 69.50% | 100.00% | 84.75% | 54.32% | | Simon Keeton | 71.00% | 86.68% | 78.84% | 50.54% | | Sudhir Gopalswamy | 50.00% | 96.72% | 73.36% | 47.02% | | Ross F. Jatou | 71.00% | 81.58% | 76.29% | 48.90% |
2023 STI Program Formula
As indicated in the chart above, each of Messrs. El-Khoury, Trent and Gopalswamy met nearly all of his NEO Strategic Goals for 2023, resulting in achievement of 96% or more on NEO Strategic Goals. For Messrs. Keeton and Jatou, who earned just under 87% and 82%, respectively for their NEO Strategic Goals, the few additional points lost were primarily related to certain business unit milestones such as inventory reduction, which became more challenging than expected as our sector began experiencing softening in the second half of 2023. As noted in the chart above, the resulting Individual Goal Achievement percentages for our NEOs ranged between 73-85%. Use of Non-GAAP Measures. Several of the financial targets in the Corporate Multiplier and NEO Financial Goals were non-GAAP measures. The HCC Committee determined that non-GAAP metrics should be used for the 2023 STI program rather than GAAP metrics to prevent payments under the 2023 STI program from being significantly impacted (positively or negatively) by extraordinary or unusual events or non-cash items. The HCC Committee also considered adjustments eliminating the effect of certain non-cash items to be appropriate, believing that the adjusted numbers are a better indicator of the Company’s actual operating performance. For a reconciliation of GAAP to non-GAAP measures included in this proxy statement, please see the Appendix. Final Payouts under the 2023 STI Program. After evaluating all relevant performance results, the HCC Committee approved the following payouts to our NEOs under the 2023 STI program:
2023 STI Program Formula
| NEO | Corporate Multiplier (%) | Individual Goal Achievement Percentage (%) | STI Target (% of Base Salary) | Eligible Earnings (1) ($) | Final Cash STI Payment ($) | | Hassane El-Khoury | 64.1% | 83.58% | 175% | 1,130,769 | 1,060,163 | | Thad Trent | 64.1% | 84.75% | 125% | 649,038 | 440,736 | | Simon Keeton | 64.1% | 78.84% | 100% | 574,038 | 290,099 | | Sudhir Gopalswamy | 64.1% | 73.36% | 85% | 470,577 | 188,091 | | Ross F. Jatou (2) | 64.1% | 76.29% | 85% | 466,346 | — | | (1) Represents base salary actually paid during the year as reflected in the SCT. | | | | | | | (2) Although Mr. Jatou was employed for the full year, given that his last date of employment (February 22, 2024) occurred before the payout date, he was not eligible to receive a payout under the 2023 STI program. Based on actual performance, his 2023 STI payout would have been $193,844. | | | | | |
2023 STI Program Formula
Long-Term Incentive Program. Our 2023 LTI program reflects the following principles: •equity-based awards should comprise the largest percentage of each NEO’s annual target TDC in order to further align NEO and stockholder interests; •equity grants are budgeted consistent with market practice with actual grants awarded based on performance and potential; •the performance goals underlying our PBRSUs are designed to drive behavior in support of our AOP and long-term business strategies; •performance above target or above stretch levels should provide commensurate payout opportunities; and •company, department and individual performance may drive above-market equity grants in the following annual cycle. During 2023, the HCC Committee made annual LTI awards (the 2023 LTI program) to each NEO as described in the following table. These LTI awards consisted of 60% PBRSUs (the 2023 PBRSUs) and 40% RSUs (the 2023 RSUs), which were granted under the SIP. The HCC Committee determined that this allocation between PBRSUs and RSUs provided a reasonable balance between performance-based and retention incentives.
2023 STI Program Formula
| NEO | Target 2023 PBRSU Value ($) | 2023 PBRSUs (at Target) (#) | Target 2023 RSU Value ($) | 2023 RSUs (#) | Total Target 2023 LTI Value (PBRSUs + RSUs) ($) | | Hassane El-Khoury | 10,050,000 | 126,766 | 6,700,000 | 84,511 | 16,750,000 | | Thad Trent | 3,600,000 | 45,409 | 2,400,000 | 30,273 | 6,000,000 | | Simon Keeton | 2,700,000 | 34,057 | 1,800,000 | 22,705 | 4,500,000 | | Sudhir Gopalswamy (1) | 1,380,000 | 17,023 | 920,000 | 11,349 | 2,300,000 | | Ross F. Jatou | 1,200,000 | 15,137 | 800,000 | 10,091 | 2,000,000 | | (1) These figures include two grants made to Mr. Gopalswamy: (a) his February 2023 annual LTI award with a grant date target value of $1.7 million and (b) an incremental LTI award in May 2023 with a grant date target value of $0.6 million, in consideration of his assumption of the General Manager, ASG role. | | | | | |
2023 STI Program Formula
Description of 2023 RSUs. As in prior years, the 2023 RSUs are time-based and will vest annually in one-third increments on each anniversary of the grant date, subject to the NEO’s continued employment through the applicable vesting date. Description of 2023 PBRSUs. The 2023 PBRSUs are performance-based equity awards for which vesting is contingent upon our achievement of a mix of annual financial and strategic goals, including a component that adjusts a portion of final payouts, up or down, based on our one-, two-, and three-year TSR performance relative to a peer group, to ensure that the awards remain linked to performance over a full three-year period. As a first step, we measure our performance against four performance goals (the 2023 LTI Performance Goals). As detailed in the below chart, two of the goals are financial (LTI Financial Goals) and the other two are strategic (LTI Strategic Goals), with each of the four goals scored separately. All four goals measured performance over the 2023 fiscal year but the awards will pay out in equal installments over a three-year period and, as a second step, the payout under each tranche of the LTI Financial Goals (50% of the target award) is further adjusted based on our TSR relative to a peer group over the one-, two- or three-year periods beginning on January 1, 2023 and ending on December 31 prior to each vesting date (the TSR Adjustment).
2023 STI Program Formula
| Step 1 - Measure Performance Against LTI Performance Goals | | | | | | Type of Goal | LTI Goal | Description and Measurement | Max Payout (as a % of Target) | Subject to Step 2 TSR Adjustment? | | Financial | New Product Revenue | Derived from our 2023 financial statements | 150% | Yes (see below for details) | | | Non-GAAP Operating Margin | Derived from our 2023 financial statements and calculated as described in the GAAP reconciliation appendix to our earnings release | 150% | | | Strategic | SiC Product Revenue Ramp | Measured based on the revenue we generated for new SiC products as compared to 2022 | 200% | No TSR Adjustment | | | Design Wins Supporting 5-year Plan | Measured based on the amount of revenue generated by such design wins | 200% | |
2023 STI Program Formula
We believe that using a mix of performance periods in our LTI program emphasizes different priorities. All four of our 2023 LTI Performance Goals, while measured over a one-year period, are forward-looking and establish a baseline to help us achieve our longer-term strategic goals. Having our PBRSUs vest over a three-year period, with a significant portion of the ultimate payout remaining variable, to be adjusted up or down with our relative TSR performance measured from January 1 of the year of grant to December 31 of the year before each scheduled vesting date, links overall payout of these awards to longer-term stockholder returns. Considerations Regarding 2023 LTI Performance Goals. The 2023 LTI program was designed to reward performance consistent with our long-term strategic objectives. Similar to our 2023 STI program, the HCC Committee determined that the use of certain non-GAAP metrics would be more appropriate for our 2023 LTI program than GAAP metrics as it would prevent 2023 LTI payouts from being significantly impacted (positively or negatively) by extraordinary or unusual events or non-cash items. The HCC Committee also considered adjustments eliminating the effect of certain non-cash items to be appropriate, believing that the adjusted numbers are a better indicator of our Company’s actual operating performance. The HCC Committee also considered the advantages and disadvantages of using absolute versus relative performance measures and believes that the 2023 LTI Program struck an appropriate balance by using both types of measures in the PBRSU grants. Absolute measures are consistent with stockholder expectations, allow for greater sense of control and influence by the executive, encourage motivation and are consistent with our cash flow and ability to pay. Conversely, relative measures, such as our TSR Adjustment, result in adjustment, up or down, to payouts for our executives based on our performance compared to our peers in a highly competitive marketplace. The following is a summary of the specific targets under each of the 2023 LTI Performance Goals:
2023 STI Program Formula
| 2023 LTI Performance Goals Measured after 2023 PBRSU Performance Period (1) | Weighting (as % of Target LTI) | 0% Payout (Threshold) | 100% Payout (Target) | 150% or 200% Payout (Stretch) | | New Product Revenue (as a percent of all revenue) | 25.0% | 19% | 25% | 30% | | Non-GAAP Operating Margin (2) | 25.0% | 30.0% | 32.6% | 34.0% | | SiC Product Revenue Ramp | 33.3% | 2x | 3.8x | 4.4x | | Design Wins Supporting 5-year Plan (3) | 16.7% | $4.0 billion | $5.0 billion | $6.0 billion | | TSR Adjustment Measured after each TSR Performance Period | | Payout Range | | | | Relative TSR | | 50% to 150% (4) | | | | (1) All LTI Performance Goals aside from the goal regarding the delivery of design wins are calculated in a manner consistent with how we calculate these figures for purposes of our earnings releases. Payouts under each 2023 LTI Performance Goal are determined using linear interpolation from threshold to target and from target to stretch. | | | | | | (2) Non-GAAP operating margin measures the percentage growth from our actual results achieved for the prior fiscal year. It is calculated and adjusted by the HCC Committee in the same manner as for the 2023 STI program (discussed above). | | | | | | (3) Design win revenue means the annual value of all “standard” opportunities in the sales funnel whose sales status at the part number level is advanced to “design win” during 2023. | | | | | | (4) As described above, the TSR Adjustment, which applies to the LTI Financial Goals, is a further adjustment (from a reduction of 50% to a maximum increase of 150%) to the number of shares earned on the basis of our performance as measured against each LTI Financial Goal. | | | | |
2023 STI Program Formula
Following the end of 2023, the HCC Committee determined the number of PBRSUs deemed to be preliminarily earned based on the results of each of the 2023 LTI Performance Goals. These units will then vest and pay out in shares of our common stock in three equal annual installments in 2024, 2025 and 2026, subject to any applicable TSR Adjustment as described below and provided the NEO remains employed on the applicable vesting date. For a discussion of our 2023 performance results, please see below under “Results for PBRSUs with Performance Periods Ending in 2023.” One-, Two- and Three-Year TSR Adjustments. As noted above, we include a relative TSR Adjustment in the design of our PBRSUs to emphasize the importance of our stock performance as compared to an industry peer group. Specifically, the number of PBRSUs vesting in each tranche as a result of the LTI Financial Goals will be adjusted based on our relative TSR over the performance period beginning on January 1, 2023 and ending on December 31 of the year immediately preceding the vesting date. This means that, for the portion of any PBRSUs subject to the TSR Adjustment, the number of shares preliminarily earned based on our results relative to the LTI Financial Goals will be further adjusted, on a tranche-by-tranche basis, by our one-year (first tranche), two-year (second tranche) and three-year (third tranche) relative TSR. The TSR Adjustment is a percentage (between 50-150%) that is then multiplied by the number of shares preliminarily earned under each of the LTI Financial Goals in a given tranche as follows:
2023 STI Program Formula
| Step 2 - TSR Adjustment to Step 1 Results for Financial Goals | | | Relative TSR | TSR Adjustment (applied to Step 1 Financial Units in each Tranche) | | Equal to or greater than 75th Percentile | 150% (fixed) | | Greater than 50th but less than 75th Percentile | % determined by straight line linear interpolation | | At least 25th but no greater than 50th Percentile | 100% (fixed) | | Less than 25th Percentile | 50% (fixed) |
2023 STI Program Formula
TSR Peer Companies. To determine our relative TSR at the end of the applicable period, we calculate the percentage change between the beginning stock price and the ending stock price for our stock and that of each TSR peer company. For purposes of this calculation, we use the average closing stock price for fourth fiscal quarter of 2022 as the beginning stock price and the average closing stock price for the fourth fiscal quarter of the last year in the TSR performance period (2023, 2024 or 2025) as the ending stock price. Any dividends paid are treated as reinvested and the companies are then ordered by percentage change. Unless the HCC Committee determines otherwise, any peer company that is no longer trading on a national securities market on the last day of the performance period will be removed from the list for purposes of the relative TSR calculation for that period. For the 2023 PBRSUs, our TSR performance peer companies consist of the following companies:
2023 STI Program Formula
| TSR Performance Peer Companies | | | | Ambarella Inc. | Maxlinear Inc. | Renesas Electronics Corporation | | ams AG | Melexis N.V. | Rohm Co., Ltd. | | Analog Devices, Inc. | Microchip Technology Incorporated | Semtech Corporation | | Broadcom Inc. | MKS Instruments, Inc. | Sensata Technologies Holding plc | | Cirrus Logic, Inc. | Monolithic Power Systems, Inc. | Silicon Laboratories Inc. | | Diodes Incorporated | Murata Manufacturing Co., Ltd. | Skyworks Solutions, Inc. | | Infineon Technologies AG | National Instruments Corporation* | STMicroelectronics N.V. | | Knowles Corporation | NXP Semiconductors N.V. | Synaptics Incorporated | | Lattice Semiconductor Corporation | Parade Technologies, Ltd. | Texas Instruments Incorporated | | Littelfuse, Inc. | Power Integrations, Inc. | Vishay Intertechnology, Inc. | | Macom Technology Solutions Holdings, Inc. | Qorvo, Inc. | Wolfspeed, Inc. | | Marvell Technology, Inc. | Realtek Semiconductor Corp. | |
2023 STI Program Formula
*National Instruments Corporation was acquired in October 2023 and thus was excluded from subsequent TSR calculations. The TSR peer companies listed above represent a mix of companies listed on the PHLX Semiconductor Index and other publicly traded semiconductor companies whose product and service offerings, market capitalization, business model and other characteristics are similar to ours. Results for PBRSUs with Performance Periods Ending in 2023. CFO New Hire Grant. In connection with our appointment of Mr. Trent as our chief financial officer (CFO) in February 2021, the HCC Committee granted him an onboarding LTI award, including PBRSUs with a grant date value of approximately $3.9 million. As previously disclosed, vesting of these PBRSUs would vary between 0-100% depending upon our TSR over the two-year period following Mr. Trent’s appointment (February 16, 2021 through February 15, 2023), relative to the TSR of our defined group of peer companies (same group and calculation principles as our 2021 PBRSUs). Following the end of the performance period, the HCC Committee confirmed that 100% of the PBRSUs were earned, as our TSR was highest among the peer group, excluding four peers (Dialog Semiconductor PLC, Inphi Corporation, Maxim Integrated Products, Inc. and Xilinx, Inc.) that had been acquired or were no longer trading at the end of the period. These PBRSUs vested on March 14, 2023. Final Tranche of 2021 PBRSUs. In early 2024, the HCC Committee determined that our three-year relative TSR was ranked first amongst our peer group for purposes of the 2021 PBRSUs subject to a TSR Adjustment. As a result, for officers holding those awards, their third tranche payout, as preliminarily determined on the basis of 2021 financial metrics, was multiplied by 150%. Following the HCC Committee’s certification of the results, these PBRSUs vested on February 15, 2024. The peer group for these awards was the same as the TSR peer group for our 2023 PBRSUs except it included Dialog Semiconductor Plc, Inphi Corporation, Maxim Integrated Products, Inc. and Xilinx, Inc. Ultimately, Dialog Semiconductor Plc (acquired in August 2021), Inphi Corporation (acquired in April 2023), Maxim Integrated Products, Inc. (acquired in August 2021), Xilinx, Inc. (acquired in February 2022) and National Instruments Corporation (acquired in October 2023) were excluded from the calculation. Second Tranche of 2022 PBRSUs. In early 2024, the HCC Committee determined that our two-year relative TSR was ranked third amongst our peer group for purposes of the 2022 PBRSUs subject to a TSR Adjustment. As a result, for officers holding those awards, their second tranche payout, as preliminarily determined on the basis of 2022 financial metrics, was multiplied by 150%. Following the HCC Committee’s certification of the results, these PBRSUs vested on February 2, 2024. The peer group for these awards was the same as the TSR peer group for our 2023 PBRSUs except it included Xilinx, Inc. Ultimately, both Xilinx, Inc. (acquired in February 2022) and National Instruments Corporation (acquired in October 2023) were excluded from the calculation. First Tranche of 2023 PBRSUs. In early 2024, the HCC Committee reviewed the LTI Performance Goals underlying our 2023 PBRSUs and determined that our LTI Financial Goals were achieved at an aggregate 116% and our LTI Strategic Goals were achieved at an aggregate 150%. Additionally, our relative TSR for 2023 was at the 66th percentile among our peers (excluding National Instruments Corporation, which was acquired in October 2023), resulting in a combined payout under the LTI Financial Goals of 153%, and an overall combined payout of 151% for the first tranche of the 2023 PBRSUs. A breakdown of performance by LTI Performance Goal is shown in the chart below. For 2023 PBRSUs, payout on each of the second and third tranches (in 2024 and 2025, respectively) will be adjusted based on our relative TSR for the applicable two- or three-year period once those performance periods are complete. Based on performance thus far, the combined payout percentage for each of the second and third tranches will range between 104-162% of the original target for that tranche.
2023 STI Program Formula
| Type of Goal (1) | LTI Performance Goal | 0% Payout (Threshold) | 100% Payout (Target) | 150% or 200% Payout (Stretch) | Actual 2023 Performance | Resulting Goal Achievement Percentage (2) | Final Payout Percentage for First Tranche (3) | | Financial | New Product Revenue (as a percent of all revenue) | 19% | 25% | 30% | 29.3% | 143% | 189% | | | Non-GAAP Operating Margin | 30.0% | 32.6% | 34.0% | 32.3% | 88% | 116% | | Strategic | SiC Product Revenue Ramp | 2x | 3.8x | 4.4x | 4.0x | 133% | 133% | | | Design Wins Supporting 5-year Plan | $4.0 billion | $5.0 billion | $6.0 billion | $5.84 billion | 184% | 184% | | | | | | First tranche combined payout percentage | | | 151% | | (1) The maximum payout at the stretch level for each financial goal, without giving effect to any TSR Adjustment, is 150%, while the maximum payout at the stretch level for each strategic goal is 200%. | | | | | | | | | (2) This column reflects the degree of achievement on each of the four goals, without giving effect to any TSR Adjustment. To calculate the number of PBRSUs preliminarily earned under each goal, we multiply this figure by the number of target PBRSUs granted to the NEO that were associated with that goal, then divide the result into three equal tranches. For the tranches associated with LTI Strategic Goals, that number of PBRSUs is fixed and will be paid over a three-year period, subject to the NEO’s continued employment through each vesting date. The tranches associated with LTI Financial Goals are not fixed but rather will be adjusted, on a tranche-by-tranche basis, for our relative TSR performance over the one-, two- or three-year performance period, as applicable. | | | | | | | | | (3) This column reflects the payout percentages under each of the four goals for the first tranche, with the payout for each LTI Financial Goal adjusted based on our relative TSR performance for 2023 (achieved at the 66th percentile, which meant that the resulting goal achievement percentage for each LTI Financial Goal was multiplied by 132%). This compares to a maximum possible combined payout percentage of 212.5% for each tranche. | | | | | | | |
2023 STI Program Formula
Post-Termination Compensation. In addition to the compensation received by our NEOs during 2023 and the other benefits under our programs available to all eligible employees, we also provide certain post-termination benefits to our executive officers as described below. Employment Agreements. Under our employment agreements, each NEO would be entitled to certain post-termination payments in the event of a qualifying termination (whether in connection with, or outside of, a change in control). For more detail regarding the severance and change in control provisions of the employment agreements, see “Compensation of Executive Officers — Employment Agreements” and “Compensation of Executive Officers — Potential Payments Upon Termination of Employment or Change in Control” below in this proxy statement. Release Requirement and Restrictive Covenants. The HCC Committee believes that our post-termination compensation and related arrangements with our NEOs are aligned with existing market practices related to, and are consistent with, the principal objectives of our compensation programs. To the extent a NEO’s employment agreement contains severance benefits or a change in control provision, those benefits are predicated upon the NEO being terminated without cause (or resigning for good reason). In addition, an NEO’s receipt of any severance benefits is conditioned upon the NEO signing a general release and waiver and complying with certain restrictive covenants, including non-solicitation, confidentiality and non-disparagement agreements, as well as non-competition or non-interference agreements, all of which serve the best interests of onsemi and our stockholders. Advantages of Our Double-Trigger Change in Control Arrangements. The HCC Committee believes that our management plays a critical role in the success of our company and that it is important to protect them with a baseline of guaranteed compensation in the event of an involuntary (or constructive) termination in connection with a change in control. Change of control protections for our executive officers and other key personnel are an important part of good corporate governance, as they alleviate individual concerns about the possible involuntary loss of employment and ensure that the interests of our executives will be materially consistent with the interests of other stockholders when considering corporate transactions. In addition, we believe that these change of control protections preserve morale and productivity and encourage retention in the face of the potential disruptive impact of an actual or potential change of control of onsemi. Limited Perquisites. Consistent with our pay-for-performance compensation philosophy, we provide our executive officers with the following limited perquisites: •a monthly auto allowance; •enhanced coverage for life insurance (coverage of $1,000,000, which is $500,000 above the maximum allowed standard coverage of two times base salary that is afforded to all employees); •an executive physical examination; and •financial planning services reimbursement up to $10,000 per year. The HCC Committee believes these limited perquisites help to maintain the competitiveness of our compensation package vis-à-vis our peer companies and provide value at a reasonable cost to us. Other Benefit Plans and Programs. We do not currently offer any executive retirement plans, pension benefits or non-qualified deferred compensation plans. Executives are eligible to participate in benefit programs available to all of our full-time employees. These generally available programs, which are designed to provide competitive capital accumulation and other benefits, include: •a tax-qualified employee stock purchase plan; •a 401(k) savings plan; and •medical, dental, disability and life insurance programs.
Process and Procedures for Considering and Determining Executive Compensation
Process and Procedures for Considering and Determining Executive Compensation Among other responsibilities, our HCC Committee is primarily responsible for establishing the compensation programs for our NEOs and other senior executives, including the CEO, as well as monitoring, annually reviewing and approving the goals and objectives relevant to these programs. Role of Compensation Consultants. The HCC Committee engaged FW Cook as its primary independent compensation consultant to assist in recommending the form and amount of executive and director compensation for our 2023 executive compensation programs. Among other things, with respect to our 2023 compensation programs, FW Cook was requested to: •perform an executive compensation review, including a peer group review and competitive pay assessments; •perform a short-term incentive plan and equity grant review; •perform a non-employee director compensation review; •provide legislative and regulatory updates; •provide additional assistance, as requested, in analyzing and determining senior executive compensation and reviewing the CD&A; and •attend meetings of the HCC Committee as requested. After evaluating FW Cook’s independence in light of applicable SEC rules and Nasdaq listing standards, the HCC Committee has concluded that FW Cook is independent and that its work for the HCC Committee has not raised any conflict of interest. In determining compensation for our executive officers and non-employee directors, the HCC Committee considers information and advice provided by its independent compensation consultant. The HCC Committee believes that FW Cook has the requisite skills, knowledge, industry expertise and experience, as well as the necessary resources, to provide a comprehensive approach to executive and non-employee director compensation planning, strategy and governance. While the HCC Committee considers the advice and recommendations of its independent consultant, ultimately, the HCC Committee has the decision-making authority with respect to our compensation programs, including the specific amounts paid to our executive officers. Role of Senior Executives in Determining Executive Compensation. The HCC Committee made all compensation decisions related to our NEO compensation in 2023 except that the full Board (excluding Mr. El-Khoury) reviews and approves compensation for Mr. El-Khoury, taking into account the HCC Committee’s recommendations. However, our CEO and other senior executives regularly provide information and recommendations to the HCC Committee on the compensation and performance of other officers. Specifically, the CEO presents the HCC Committee with an individual performance overview for each executive officer, describing the officer’s accomplishments for the prior year, as well as his or her strengths, areas of improvement and development plans. The senior executives also assist the HCC Committee in determining the level of achievement of the performance targets underlying performance-based awards and incentives and provide other information specifically requested by the HCC Committee from time to time. With respect to the compensation of the CEO, FW Cook works directly with the HCC Committee, which makes a recommendation to the full Board (excluding Mr. El-Khoury). The CEO does not make, and neither the HCC Committee nor the Board seek from him, recommendations on the level of his compensation. Further, no NEO or any other member of management makes recommendations on the level of his or her own compensation. Use of Market Data. The HCC Committee considers competitive market data, among other factors, in determining the individual elements of our compensation programs and in allocating between cash and non-cash compensation and between STI and LTI compensation. Although the peer company or other survey data is a starting point and a significant factor in the HCC Committee’s compensation determinations, it is not the only factor. During 2022, FW Cook conducted an executive compensation study and made recommendations regarding changes to compensation design for our 2023 programs (the FW Cook Report). The HCC Committee used data provided in the FW Cook Report to assist in structuring the 2023 compensation packages for our NEOs. In connection with its preparation of this report, FW Cook recommended changes to the peer group in light of consolidation within the semiconductor industry and changes to the revenue and market capitalization of our prior peer group companies. Criteria used to screen the peer group generally included: •revenue between approximately 0.4 to 3 times our revenue; •twelve-month average market capitalization between approximately 0.33 to 5 times our market capitalization; •industry screens pertaining to other semiconductor, semiconductor equipment and broader technology hardware companies; •peer groups that Institutional Shareholder Services Inc. and Glass, Lewis & Co. LLC utilize for onsemi; •analyses of the “peers of current peers” as of the date of the FW Cook Report and of other companies using onsemi as a benchmark; and •onsemi’s relative TSR performance peer group. After considering these criteria, the HCC Committee determined that the peer group identified in 2022 to inform 2023 compensation decisions (the 2023 Peer Group) would consist of:
Process and Procedures for Considering and Determining Executive Compensation
| 2023 Peer Group | | | Advanced Micro Devices, Inc. | Microchip Technology Incorporated | | Analog Devices, Inc. | Monolithic Power Systems, Inc. | | Applied Materials, Inc. | Qorvo, Inc. | | First Solar, Inc. | Skyworks Solutions, Inc. | | Lam Research Corporation | Texas Instruments Incorporated | | Marvell Technology, Inc. | Wolfspeed, Inc. | | Maxim Integrated Products, Inc. (1) | | | (1) Maxim Integrated Products, Inc. was acquired by Analog Devices, Inc. in August 2021. | |
Other Policies Relating to Executive Compensation
Other Policies Relating to Executive Compensation Hedging / Pledging Transactions. We have a comprehensive Insider Trading Policy, which, among other things, prohibits our executive officers and non-employee directors from engaging in transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of Company securities or that otherwise have economic consequences comparable to the same. Our executive officers and non-employee directors are also prohibited from any pledging or margin transactions with respect to our stock, including, but not limited to, holding our securities in a margin account or otherwise pledging such securities as collateral for a loan. Our other employees are also encouraged to adhere to these rules. Stock Ownership and Retention Guidelines for Officers. We have adopted robust stock ownership guidelines for our executive officers and non-employee directors. The minimum stock ownership guideline varies based on position, ranging from two times base salary (for anyone holding the title of Senior Vice President) to six times base salary for our CEO. For purposes of the guidelines, we count only fully-vested, unrestricted shares of our common stock (not any unvested equity awards). As of the record date, all of our NEOs were either in compliance with, or within the five-year grace period for compliance under, these guidelines. For additional information regarding these guidelines, please see the section entitled, “Director and Officer Stock Ownership and Retention Guidelines” in the Stock Ownership section of this proxy statement. Clawback Policies. We have had robust clawback policies in place since 2014, covering both financial restatements as well as misconduct. In 2023, in light of the new SEC rules and NASDAQ listing standards regarding clawback policies, we adopted a standalone Dodd-Frank Clawback Policy (Dodd-Frank Policy) that tracks those new requirements. In addition to our Dodd-Frank Policy, our NEOs continue to be subject to our Conduct-based Clawback Policy (Conduct Policy), a version of which has been in place since 2014. The Conduct Policy applies to a broader scope of persons (including all senior vice presidents and others employed by or providing services to onsemi as determined by the HCC Committee), compensation (any incentive-based compensation, including time-based equity awards), and conduct than our Dodd-Frank Policy. Specifically, the Conduct Policy applies to (1) intentional misconduct by a covered person that is materially injurious to onsemi as determined by the Board, including conduct that contributes to an accounting restatement that would have triggered clawback from a covered person under the Dodd-Frank Policy had that person been a Section 16 officer subject to that policy; and (2) a material breach of a material provision of written agreement between onsemi and the covered person (such as restrictive covenants in an employment agreement).
Accounting and Tax Considerations on Executive Compensation
Accounting and Tax Considerations on Executive Compensation Accounting considerations play a role in the design of our executive compensation program. Accounting rules require us to expense the grant date fair values of our equity awards (that is, the value of our equity awards based on GAAP), which reduces the amount of our reported profits under GAAP. Because of this stock-based expensing and the impact of dilution to our stockholders, we closely monitor the number, the share amounts and the fair values of the equity awards that are granted each year. The HCC Committee also takes into account tax and other accounting consequences of its total compensation program and weighs these factors when setting total compensation and determining the individual elements of an officer’s compensation package.
Summary Compensation Table
Summary Compensation Table
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards (1) ($) | Non-Equity Incentive Plan Compensation (2) ($) | All Other Compensation (3) ($) | Total ($) | | Hassane El-Khoury President and Chief Executive Officer | 2023 | 1,130,769 | — | 17,733,531 | 1,060,163 | 41,050 | 19,965,513 | | | 2022 | 984,615 | — | 12,557,026 | 2,938,191 | 39,870 | 16,519,702 | | | 2021 | 950,000 | 285,000 | 9,413,592 | 2,137,500 | 39,470 | 12,825,562 | | Thad Trent Executive Vice President, Chief Financial Officer and Treasurer | 2023 | 649,038 | — | 6,352,386 | 440,736 | 42,832 | 7,484,992 | | | 2022 | 600,000 | — | 4,667,814 | 1,185,000 | 41,567 | 6,494,381 | | | 2021 | 505,385 | 101,077 | 9,030,390 | 758,077 | 236,588 | 10,631,517 | | Simon Keeton Group President, Power Solutions Group | 2023 | 574,038 | — | 4,764,335 | 290,099 | 37,965 | 5,666,437 | | | 2022 | 517,307 | — | 2,471,243 | 842,487 | 34,761 | 3,865,798 | | | 2021 | 473,462 | 80,488 | 2,675,491 | 603,664 | 33,172 | 3,866,277 | | Sudhir Gopalswamy (4) Group President, Analog and Mixed-Signal Group and Intelligent Sensing Group | 2023 | 470,577 | — | 2,450,469 | 188,091 | 36,500 | 3,145,637 | | Ross F. Jatou (5) Former Senior Vice President and General Manager, Intelligent Sensing Group | 2023 | 466,346 | — | 2,117,501 | — | 40,389 | 2,624,236 | | | 2022 | 450,000 | — | 1,537,690 | 723,155 | 31,622 | 2,742,467 | | | 2021 | 450,000 | 76,500 | 1,645,882 | 563,805 | 33,522 | 2,769,709 | | (1) Amounts in this column represent the aggregate grant date fair value of awards of PBRSUs and RSUs computed in accordance with FASB ASC Topic 718 using the closing price of our common stock on the date of grant, except that the grant date value of the relative TSR component of our PBRSUs is determined by a third-party valuation firm based on probable outcomes. For the 2023 PBRSUs, this valuation was based upon a 100% attainment, which represents the probable outcomes of the performance conditions for those awards, consistent with the estimate of aggregate compensation cost to be recognized over the service period, determined as of the grant date, excluding the effect of estimated forfeitures. The amounts in this column do not necessarily represent the fair value for expensing purposes or the fair value of awards that were expected to vest as of December 31, 2023. The estimated number of units which are expected to vest is evaluated and adjusted each reporting period, as necessary, in connection with the Company’s quarterly and annual financial statements. We further discuss the assumptions we made in the valuation of stock awards in Note 11 of the Notes to Consolidated Financial Statements in the Form 10-K. At maximum, the 2023 PBRSUs would pay out to the applicable NEOs as follows: Mr. El-Khoury: $19,062,751; Mr. Trent: $6,828,460; Mr. Keeton: $5,121,375; Mr. Gopalswamy: $2,640,491; and Mr. Jatou: $2,276,265. | | | | | | | | | (2) The amounts in this column reflect annual cash incentives actually earned by the NEO under our STI program. For information regarding our 2023 STI program, please see “Elements of Our Compensation Program — Short-Term Cash Incentive Program” in the CD&A. | | | | | | | |
Summary Compensation Table
| (3) For 2023, amounts in this column consist of the following: | | | | | | | | | Name | Company Contributions Under 401(k) Plan ($) | Executive Group Term Life Insurance Imputed Income ($) | Premiums Paid by the Company for Basic Life Insurance and Accidental D&D Insurance ($) | Car Allowance ($) | Financial Planning Services ($) | Imputed Income for Post-Tax Long-Term Disability Insurance Benefit Payments ($) | Other Amounts* ($) | | Hassane El-Khoury | 13,200 | 1,150 | 1,380 | 14,400 | 10,000 | 540 | 380 | | Thad Trent | 13,200 | 1,150 | 1,380 | 14,400 | 10,000 | 2,322 | 380 | | Simon Keeton | 13,200 | 1,150 | 1,380 | 14,400 | 5,212 | 2,622 | — | | Sudhir Gopalswamy | 13,200 | 1,078 | 1,380 | 9,600 | 10,000 | 1,242 | — | | Ross F. Jatou | 13,200 | — | 1,380 | 14,400 | 8,500 | 1,242 | 1,667 | | * The figures in “Other Amounts” reflect personal use electronic equipment for each of Messrs. El-Khoury and Trent and a patent award for Mr. Jatou. | | | | | | | | | (4) Mr. Gopalswamy, who previously served as Senior Vice President, Chief Strategy Officer, assumed the role of General Manager, ASG on April 25, 2023. On February 22, 2024, he was promoted to the position of Group President of both the newly-constituted Analog and Mixed-Signal Group (which combined the former ASG with one division that was previously a part of PSG) and the Intelligent Sensing Group. | | | | | | | | | (5) Mr. Jatou resigned from the offices of Senior Vice President and General Manager, Intelligent Sensing Group effective February 22, 2024. Upon his termination, all of his unvested equity awards were forfeited and he was no longer eligible to receive a payout under the 2023 STI program. | | | | | | | |
Grants of Plan-Based Awards in 2023
Grants of Plan-Based Awards in 2023
Grants of Plan-Based Awards in 2023
| Name | Grant Date | Type of Award | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | All Other Stock Awards: Number of Shares of Stock or Units (3) (#) | Grant Date Fair Value of Stock and Option Awards (4) ($) | | | | | Target ($) | Maximum ($) | Target (#) | Maximum (#) | | | | Hassane El-Khoury | 2/21/2023 | Annual Incentive | 2,100,000 | 4,200,000 | | | | | | | 2/21/2023 | RSUs | | | | | 84,511 | 6,700,032 | | | 2/21/2023 | PBRSUs | | | 126,766 | 269,378 | | 11,033,499 | | Thad Trent | 2/20/2023 | Annual Incentive | 843,750 | 1,687,500 | | | | | | | 2/20/2023 | RSUs | | | | | 30,273 | 2,400,043 | | | 2/20/2023 | PBRSUs | | | 45,409 | 96,495 | | 3,952,342 | | Simon Keeton | 2/20/2023 | Annual Incentive | 600,000 | 1,200,000 | | | | | | | 2/20/2023 | RSUs | | | | | 22,705 | 1,800,052 | | | 2/20/2023 | PBRSUs | | | 34,057 | 72,372 | | 2,964,283 | | Sudhir Gopalswamy (5) | 2/20/2023 | Annual Incentive | 425,000 | 850,000 | | | | | | | 2/20/2023 | RSUs | | | | | 8,578 | 680,064 | | | 2/20/2023 | PBRSUs | | | 12,866 | 27,341 | | 1,119,846 | | | 5/26/2023 | RSUs | | | | | 2,771 | 240,024 | | | 5/26/2023 | PBRSUs | | | 4,157 | 8,834 | | 410,535 | | Ross F. Jatou (6) | 2/20/2023 | Annual Incentive | 403,750 | 807,500 | | | | | | | 2/20/2023 | RSUs | | | | | 10,091 | 800,014 | | | 2/20/2023 | PBRSUs | | | 15,137 | 32,166 | | 1,317,487 | | (1) Amounts in these columns represent the range of possible payouts under our 2023 STI program. The 2023 STI program does not have a threshold payout and the maximum that may be earned is 200% of target. If we do not achieve minimum performance levels on the metrics in the Corporate Multiplier, no payouts would be earned. For more information on the 2023 STI program, please see “Elements of Our Compensation Program — Short-Term Cash Incentive Program” in the CD&A. For amounts actually paid under the 2023 STI program based on our performance during the year, please see the amounts reported in the “Non-Equity Incentive Plan Compensation” column in the SCT. | | | | | | | | | | (2) The amounts shown in these columns represent the number of shares that may be earned under the 2023 PBRSUs, which were granted to our NEOs under our 2023 LTI program and the SIP. The amounts in the “Target” column represent the total number of 2023 PBRSUs that could be earned, assuming that all performance goals are achieved at target but without taking into account any upside or TSR Adjustment. The amounts in the “Maximum” column represent the total number of PBRSUs that could be earned, assuming that all performance goals are achieved at stretch levels and, for each tranche of PBRSUs related to financial goals, that our relative TSR exceeds the stretch level for each of the three TSR performance periods (combined maximum of 212.5% of target). If our performance results for the 2023 LTI Performance Goals do not exceed minimum performance levels, all of the PBRSUs will be forfeited. | | | | | | | | | | (3) This column represents time-based RSU awards made to our NEOs in 2023. | | | | | | | | | | (4) The amounts in this column represent the grant date fair value of each award calculated in accordance with FASB ASC Topic 718. The grant date fair value for RSUs and PBRSUs is based on the closing price on the date of grant except for the relative TSR component of the 2023 PBRSUs, which is determined by a third-party valuation firm based on probable outcome. The valuation for the PBRSUs is based upon a 100% attainment for the 2023 PBRSUs, which represents the probable outcome of the performance conditions for those awards, consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures. The amounts in this column do not necessarily represent the fair value for expensing purposes or the fair value of awards that were expected to vest as of December 31, 2023. | | | | | | | | | | (5) In May 2023, in consideration of his April 2023 assumption of the role of the General Manager, ASG and related increase in his annual LTI target, the HCC Committee granted Mr. Gopalswamy an incremental LTI award of 2,771 RSUs and 4,157 PBRSUs. | | | | | | | | | | (6) The annual incentive opportunity shown for Mr. Jatou, a former executive officer, is based on his base salary and target STI opportunity as in effect in February 2023, when the HCC Committee approved his participation in the 2023 STI program. Following Mr. Jatou’s resignation from onsemi effective February 22, 2024, he was no longer eligible to receive a payout under the 2023 STI program. In addition, the second and third tranches of the RSUs and PBRSUs granted to Mr. Jatou during 2023 were forfeited upon the end of his employment. | | | | | | | | |
Other Material Factors — Summary Compensation Table and Grants of Plan-Based Awards in 2023 Table
Other Material Factors — Summary Compensation Table and Grants of Plan-Based Awards in 2023 Table For additional information regarding the material terms of each NEO’s employment agreement, see “Employment Agreements” in this proxy statement. For additional information regarding other material factors related to the SCT and Grants of Plan-Based Awards in 2023 Table, including, but not limited to, an explanation of the amount of salary and STI in proportion to total compensation, please refer to the “Elements of Our Compensation Program” section of the CD&A. For further information regarding our 2023 LTI awards, please see “Elements of Our Compensation Program — Long-Term Incentive Program” above in the CD&A.
Outstanding Equity Awards at Fiscal Year-End 2023
Outstanding Equity Awards at Fiscal Year-End 2023
Outstanding Equity Awards at Fiscal Year-End 2023
| | | | All Other Stock Awards (1) | | Equity Incentive Plan Awards (2) | | | Name | Grant Date | Type of Award | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested (3) ($) | Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (3) ($) | | Hassane El-Khoury | 2/12/2021 | RSUs | 25,846 | 2,158,916 | | | | | 2/12/2021 | PBRSUs | 87,228 | 7,286,155 | | | | | 2/11/2022 | RSUs | 52,004 | 4,343,894 | | | | | 2/11/2022 | PBRSUs (4) | 116,031 | 9,692,090 | 43,877 | 3,665,067 | | | 2/21/2023 | RSUs | 84,511 | 7,059,204 | | | | | 2/21/2023 | PBRSUs (5) | 127,316 | 10,634,730 | 73,313 | 6,123,822 | | Thad Trent | 2/16/2021 | RSUs | 25,886 | 2,162,258 | | | | | 2/16/2021 | PBRSUs | 43,009 | 3,592,521 | | | | | 2/10/2022 | RSUs | 17,870 | 1,492,681 | | | | | 2/10/2022 | PBRSUs (4) | 39,873 | 3,330,592 | 15,075 | 1,259,215 | | | 2/20/2023 | RSUs | 30,273 | 2,528,704 | | | | | 2/20/2023 | PBRSUs (5) | 45,606 | 3,809,474 | 26,261 | 2,193,578 | | Simon Keeton | 2/12/2021 | RSUs | 6,865 | 573,433 | | | | | 2/12/2021 | PBRSUs | 23,168 | 1,935,244 | | | | | 7/1/2021 | RSUs | 527 | 44,020 | | | | | 7/1/2021 | PBRSUs | 1,185 | 98,983 | | | | | 2/10/2022 | RSUs | 9,461 | 790,277 | | | | | 2/10/2022 | PBRSUs (4) | 21,109 | 1,763,214 | 7,981 | 666,632 | | | 2/20/2023 | RSUs | 22,705 | 1,896,549 | | | | | 2/20/2023 | PBRSUs (5) | 34,205 | 2,857,120 | 19,696 | 1,645,183 | | Sudhir Gopalswamy | 3/7/2022 | PBRSUs (6) | | | 22,889 | 1,911,918 | | | 3/7/2022 | RSUs | 13,017 | 1,087,310 | | | | | 3/7/2022 | PBRSUs (4) | 14,452 | 1,207,155 | 5,461 | 456,136 | | | 2/20/2023 | RSUs | 8,578 | 716,520 | | | | | 2/20/2023 | PBRSUs (5) | 12,923 | 1,079,432 | 7,440 | 621,436 | | | 5/26/2023 | RSUs | 2,771 | 231,462 | | | | | 5/26/2023 | PBRSUs (5) | 4,174 | 348,670 | 2,405 | 200,865 | | Ross F. Jatou (7) | 2/12/2021 | RSUs | 4,038 | 337,294 | | | | | 2/12/2021 | PBRSUs | 13,628 | 1,138,368 | | | | | 7/1/2021 | RSUs | 527 | 44,020 | | | | | 7/1/2021 | PBRSUs | 1,185 | 98,983 | | | | | 2/10/2022 | RSUs | 5,887 | 491,741 | | | | | 2/10/2022 | PBRSUs (4) | 13,136 | 1,097,208 | 4,964 | 414,601 | | | 2/20/2023 | RSUs | 10,091 | 842,901 | | | | | 2/20/2023 | PBRSUs (5) | 15,205 | 1,270,086 | 8,751 | 730,999 | | (1) Represents unvested awards that remain subject to the NEO’s continued employment through the applicable vesting date and all other terms and conditions of the SIP and the award agreement. These include unvested time-based RSUs, which vest in three equal installments on the first three anniversaries of the grant date, and any unvested PBRSUs for which all performance criteria were complete on or before December 31, 2023. | | | | | | |
Outstanding Equity Awards at Fiscal Year-End 2023
| (2) Represents outstanding PBRSUs that, as of December 31, 2023, remain subject to performance conditions, the NEO’s continued employment through the applicable vesting date, and all other terms and conditions of the SIP and the award agreement. The number of PBRSUs reported in this column assumes maximum performance on the remaining metric (relative TSR over a two- or three-year period), which would increase payouts, on a tranche-by-tranche basis, by 150% of the number of PBRSUs calculated as earned based on one-year financial metrics. However, the actual relative TSR Adjustment may range between a reduction of 50% to the maximum increase of 150%. The amounts in this column do not necessarily represent the number of shares used for expensing purposes or the number of awards that were expected to vest as of December 31, 2023. The estimated number of units that are expected to vest is evaluated and adjusted each reporting period, as necessary, in connection with the preparation of the Company’s quarterly and annual financial statements. | | (3) The dollar values in this column are calculated by multiplying the closing market price of our common stock on December 31, 2023 ($83.53) by the number of RSUs or PBRSUs shown as held by the NEO. The amounts in this column do not necessarily represent the fair value for expensing purposes or the fair value of awards that were expected to vest as of December 31, 2023. | | (4) For these 2022 PBRSUs, the number shown under “All Other Stock Awards” reflects the total number of PBRSUs earned in the second tranche, including the two-year TSR Adjustment. Our relative TSR performance exceeded the stretch level, which meant that the number of PBRSUs earned in the second tranche, as originally determined on the basis of 2022 financial metrics, was multiplied by 150% to determine the payout. This second tranche of PBRSUs vested on February 15, 2024. The number shown under “Equity Incentive Plan Awards” reflects the number of PBRSUs in the third tranche, as calculated based on our performance on 2022 financial metrics and assuming the maximum three-year TSR Adjustment. Following the end of the three-year performance period, the HCC Committee will certify the number of PBRSUs earned in that tranche based on our actual relative TSR performance, and those PBRSUs will vest on February 15, 2025 subject to the NEO’s continued employment through that date. | | (5) For our 2023 PBRSUs, the number shown under “All Other Stock Awards” reflects one-third of the number of PBRSUs calculated as earned under the LTI Financial Goals (the first tranche), including the one-year TSR Adjustment, plus all PBRSUs calculated as earned under the LTI Strategic Goals (all three tranches), as the performance period ended on December 31, 2023 for each of those components. We achieved a combined 116% on the LTI Financial Goals and a combined 150% on the LTI Strategic Goals. In addition, our one-year relative TSR performance was at the 66th percentile, which meant that the number of PBRSUs in the first tranche calculated as earned under the LTI Financial Goals was multiplied by 132% to determine the payout on that portion of the award, for a combined first tranche payout on all LTI Performance Goals of 151%. The remainder of the 2023 PBRSUs (the second and third tranches of the PBRSUs tied to, and calculated as earned under, the LTI Financial Goals) is reported under “Equity Incentive Plan Awards,” assuming maximum TSR Adjustment for each. The first tranche of PBRSUs vested on February 6, 2024, following the HCC Committee’s certification of performance, while the second two tranches, with the PBRSUs tied to LTI Financial Goals to be further adjusted for our actual two- or three-year relative TSR performance, will vest in February of 2025 and 2026, respectively, in each case, subject to the NEO’s continued employment through the vesting date. For more information on these awards, please see the section entitled “Elements of our Compensation Program — Long-Term Incentive Program” in our CD&A. | | (6) Represents a new hire grant of PBRSUs awarded to Mr. Gopalswamy on March 7, 2022. Vesting of these PBRSUs could vary between 0-100% depending upon our TSR over the two-year period following grant (March 7, 2022 through March 7, 2024), relative to the TSR of our defined group of peer companies. | | (7) On February 22, 2024, Mr. Jatou’s last day of onsemi employment, all of his unvested equity awards were forfeited. |
2023 Stock Vested
2023 Stock Vested
2023 Stock Vested
| | Stock Awards | | | Name | Number of Shares Acquired on Vesting (1) (#) | Value Realized on Vesting (2) ($) | | Hassane El-Khoury | 251,749 | 21,228,408 | | Thad Trent | 197,312 | 16,476,807 | | Simon Keeton | 64,480 | 5,443,277 | | Sudhir Gopalswamy | 16,474 | 1,364,565 | | Ross F. Jatou | 41,887 | 3,634,182 | | (1) This column represents the total number of shares underlying RSUs and PBRSUs that vested in 2023. RSUs and PBRSUs were the only types of LTI awards held by our NEOs during 2023. | | | | (2) The value realized equals the number of shares of stock vested multiplied by the market value of one share of our common stock on the date of vesting or, if the vesting date is not a trading date, the immediately preceding trading date. | | |
Potential Payments upon Termination of Employment or Change in Control
Potential Payments upon Termination of Employment or Change in Control In the table below, we provide estimates of the payments that will be made to each of our NEOs upon a termination of employment or change in control of the Company. The table should be read together with the chart above and the following material assumptions.
onsemi 2023 Pay Ratio Disclosure
onsemi 2023 Pay Ratio Disclosure For 2023: •the annual total compensation of our median employee (other than Mr. El-Khoury, our CEO) was $15,746; •the annual total compensation of our median U.S.-based non-manufacturing employee (other than Mr. El-Khoury) was $141,397; and •the annual total compensation of Mr. El-Khoury, as reported in our SCT, was $19,965,513. Based on this information, for 2023, the ratios of the annual total compensation of Mr. El-Khoury to the annual total compensation of our median employee and to the annual total compensation of our median U.S.-based non-manufacturing employee were 1,268 to 1 and 141 to 1, respectively. We calculated these pay ratios using the following assumptions and principles: Methodology for Determining our Median Employees. As permitted under SEC rules, we used the same median employee and the same median U.S. non-manufacturing employee that we used for purposes of disclosing our 2022 pay ratios as there has been no change in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio analysis. To determine our median employees, we surveyed our global employee population as of December 1, 2022 from our human resources system of record, using cash compensation as the basis for comparison. We define cash compensation as base pay, overtime pay and STI compensation, which includes all commissions and bonuses. We did not annualize the compensation of any employees who did not work for us or our consolidated subsidiaries for the full year. As a significant percentage of our workforce is based outside the U.S., we converted amounts paid in foreign currency to U.S. dollars using our calculated corporate treasury exchange rate for February 2023 but did not make any cost-of-living adjustments. We excluded the value of annual equity awards and certain employee allowances, as those items are neither widely nor uniformly distributed across our employee population and thus do not reasonably reflect the annual compensation of our employees. Identification of Our Median Employees. Using the methodology described above, we determined that the median employee was a full-time operator located in Malaysia and the median U.S. non-manufacturing employee was a systems analyst located in Scottsdale, Arizona. Calculating Total Compensation for Our Median Employees. For purposes of determining the pay ratios, we calculated annual total compensation for each of our median employees using the same methodology we use for our NEOs in the SCT. We believe that these pay ratios are reasonable estimates calculated in a manner consistent with SEC rules. Because SEC rules for identifying the median employee and calculating the pay ratio allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their compensation practices and workforce composition, the pay ratios reported by other companies may not be comparable to ours.
2023 Pay versus Performance
2023 Pay versus Performance The table below compares the pay of our principal executive officer (PEO) and the average pay of all other NEOs to our performance on certain metrics during each of the last four fiscal years (2020, 2021, 2022 and 2023). In this table, executive pay is presented in two ways: (1) total compensation as disclosed in the SCT for the relevant year and (2) “compensation actually paid” (CAP) for the same year, calculated as required by SEC rules, which is intended to, among other things, adjust SCT totals to capture actual payouts from equity awards vesting during a given year as well as year-over-year changes in the value of unvested equity awards that are outstanding at the end of that year. Graphs illustrating the relationship between executive pay and each of these metrics are located below the table. For further information regarding our pay-for-performance philosophy and how we align executive compensation with our performance, please see our CD&A.
2023 Pay versus Performance
| Pay versus Performance Table | | | | | | | | | | | | | Current PEO (1) | | Former PEO (2) | | All Other NEOs (3) | | Value of Initial Fixed $100 Investment Based On (4): | | | CSM (5) | | Year | SCT Total (6) ($) | CAP (7) ($) | SCT Total (6) ($) | CAP (7) ($) | Average SCT Total (6) ($) | Average CAP (7) ($) | Company TSR ($) | Peer Group TSR ($) | Net Income ($ millions) | Revenue ($ millions) | | 2023 | 19,965,513 | 35,879,947 | — | — | 4,730,325 | 8,918,083 | 343 | 226 | 2,184 | 8,253 | | 2022 | 16,519,702 | 20,249,043 | — | — | 3,699,715 | 2,710,546 | 256 | 137 | 1,902 | 8,326 | | 2021 | 12,825,562 | 37,831,495 | — | — | 4,014,944 | 10,996,407 | 279 | 213 | 1,010 | 6,740 | | 2020 | 7,866,813 | 8,510,970 | 7,056,742 | 5,738,178 | 2,363,835 | 2,129,348 | 134 | 151 | 236 | 5,255 | | (1) Current PEO refers to Mr. El-Khoury, who was appointed as our President and CEO on December 7, 2020. | | | | | | | | | | | | (2) Former PEO refers to Keith Jackson, Mr. El-Khoury’s predecessor in office. | | | | | | | | | | | | (3) All Other NEOs refers to all named executive officers, other than the PEO, who were designated as such under the SEC’s executive compensation disclosure rules based on their position and the compensation paid to them during the relevant year shown in the chart. All Other NEOs for each year consists of the following officers: for 2023, Messrs. Trent, Keeton, Jatou and Gopalswamy; for 2022, Messrs. Trent, Keeton, Jatou, and former officers Robert Tong and Vince Hopkin; for 2021, Messrs. Trent, Keeton, Jatou and Hopkin, as well as former officers George H. Cave and Bernard Gutmann; and for 2020, Messrs. Keeton, Hopkin and Gutmann, as well as former officer William Schromm. | | | | | | | | | | | | (4) Represents one-, two-, three- and four-year cumulative TSR. To illustrate peer group TSR, we selected the PHLX Semiconductor Sector Index (SOX), which we also use for comparison purposes in the five-year cumulative stock performance graph included in our annual report to stockholders. Our TSR performance relative to a smaller group of peer companies is a key performance metric in determining compensation actually paid to our NEOs, as identified below under “Most Important Performance Metrics.” | | | | | | | | | | | | (5) For purposes of this chart, we have selected revenue as our company-selected metric (CSM). | | | | | | | | | | | | (6) The totals in these columns reflect amounts reported in our SCT for the applicable year. | | | | | | | | | | | | (7) To calculate compensation actually paid (CAP), the corresponding SCT total was adjusted as detailed below as required by SEC rules. For a reconciliation of SCT to CAP, please see the next two tables. | | | | | | | | | | |
2023 Pay versus Performance
| SCT to CAP Reconciliation — PEOs (A) | | | | | | | | | | | Adjust Value of Current Year’s Equity Grant | | Adjust for Incremental Increase/(Decrease) in Value of All Other Outstanding Equity Grants | | | | | Year | SCT Total ($) | Subtract Grant Date Fair Market Value as reported in SCT ($) | Add Fair Market Value at 12/31 ($) | Unvested Awards as of 12/31 ($) | Vested during Year ($) | Forfeited during Year ($) | Ending CAP ($) | | 2023 | 19,965,513 | (17,733,531) | 21,898,735 | 3,496,312 | 8,252,918 | — | 35,879,947 | | 2022 | 16,519,702 | (12,557,026) | 18,713,998 | (3,109,730) | 682,099 | — | 20,249,043 | | 2021 | 12,825,562 | (9,413,592) | 20,760,924 | 12,588,427 | 1,070,174 | — | 37,831,495 | | 2020 (B) | 7,866,813 | (7,578,939) | 8,223,096 | — | — | — | 8,510,970 | | 2020 (C) | 7,056,742 | (5,982,515) | 4,357,116 | 2,376,715 | (2,024,880) | — | 5,783,178 | | (A) In determining the fair value of unvested equity awards, we applied the same methodology used to determine grant date fair value of equity awards for purposes of SCT reporting but calculated as of the last day of the year, with no material changes to the underlying assumptions for any of the awards since grant date except that probable outcomes may have changed. For more information, please see Note 1 to the SCT. | | | | | | | | | (B) This is the SCT to CAP reconciliation for Mr. El-Khoury. | | | | | | | | | (C) This is the SCT to CAP reconciliation for Mr. Jackson, our Former PEO. | | | | | | | |
2023 Pay versus Performance
| SCT to CAP Reconciliation — Average of All Other NEOs (A) | | | | | | | | | | | Adjust Value of Current Year’s Equity Grant | | Adjust for Incremental Increase/(Decrease) in Value of All Other Outstanding Equity Grants | | | | | Year | SCT Total ($) | Subtract Grant Date Fair Market Value as reported in SCT ($) | Add Fair Market Value at 12/31 ($) | Unvested Awards as of 12/31 ($) | Vested during Year ($) | Forfeited during Year ($) | Ending CAP ($) | | 2023 | 4,730,325 | (3,921,173) | 4,820,751 | 951,556 | 2,336,624 | — | 8,918,083 | | 2022 | 3,699,715 | (2,542,484) | 2,887,979 | (700,029) | (413) | (634,222) | 2,710,546 | | 2021 | 4,014,944 | (2,955,672) | 6,317,938 | 4,106,036 | 228,638 | (715,477) | 10,996,407 | | 2020 | 2,363,835 | (1,868,651) | 1,429,507 | 647,814 | (443,157) | — | 2,129,348 | | (A) In determining the fair value of unvested equity awards, we applied the same methodology used to determine grant date fair value of equity awards for purposes of SCT reporting but calculated as of the last day of the year, with no material changes to the underlying assumptions for any of the awards since grant date except that probable outcomes may have changed. For more information, please see Note 1 to the SCT. | | | | | | | |