DEF 14A of Monolithic Power Systems, Inc.
Filed Apr 29, 2024 · FY20230001437749-24-013657
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
Classified Board of Directors and Nominees
Classified Board of Directors and Nominees The Board currently consists of eight members. Under our Certificate of Incorporation and Bylaws, the Board has the authority to set the number of directors from time to time by resolution. In addition, our Certificate of Incorporation provides for a classified Board consisting of three classes of directors, each serving staggered three-year terms. As a result, a portion of the Board will be elected each year for three-year terms. Three Class II directors are to be elected to the Board at the Annual Meeting. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the Board’s nominees, Eugen Elmiger, Eileen Wynne and Jeff Zhou. Mr. Elmiger, Ms. Wynne and Mr. Zhou are standing for re-election to the Board. Each person nominated for election has agreed to serve if elected, and the Board has no reason to believe that any nominee will be unavailable or will decline to serve. In the event, however, that any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who is designated by the current Board to fill the vacancy. The term of office of each person elected as a Class II director will continue for three years or until his or her successor has been duly elected and qualified. If elected, the term for Mr. Elmiger, Ms. Wynne and Mr. Zhou will expire at the 2027 annual meeting of stockholders. Our directors are elected by a “plurality” vote. The nominees for each of the three Board seats to be voted on at the Annual Meeting receiving the greatest number of votes cast will be elected. Abstentions and shares held by brokers that are not voted in the election of directors will have no effect. In addition, we have adopted a corporate governance policy requiring each director nominee to submit a resignation letter if more “Withheld” than “For” votes are received. See “Director Voting Policy” for more details on this policy. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE ELECTION TO THE BOARD OF EACH OF THE PROPOSED NOMINEES.
Information Regarding Nominees and Other Directors
Information Regarding Nominees and Other Directors The following table summarizes certain information regarding the nominees and other directors:
Information Regarding Nominees and Other Directors
| Name | Age | Director Since | Principal Role | | Michael Hsing | 64 | 1997 | Chairman of the Board, President and Chief Executive Officer | | Herbert Chang (1)(2) | 62 | 1999 | Lead Independent Director | | Eugen Elmiger (1)(3) | 60 | 2012 | Director / Nominee | | Victor K. Lee (2) | 67 | 2006 | Director | | Carintia Martinez (3) | 58 | 2021 | Director | | James C. Moyer | 81 | 1998 | Director | | Eileen Wynne (2) | 58 | 2023 | Director / Nominee | | Jeff Zhou (1)(2) | 69 | 2010 | Director / Nominee |
Information Regarding Nominees and Other Directors
| (1) Member of the Compensation Committee. | | (2) Member of the Audit Committee. | | (3) Member of the Nominating and Corporate Governance (“NCG”) Committee. |
Nominees for Class II Directors Whose Term Will Expire in 2024
Nominees for Class II Directors Whose Term Will Expire in 2024 Eugen Elmiger has served on our Board since October 2012. Mr. Elmiger currently serves as Chief Executive Officer of Maxon group, a leading advanced motion company, which position he has held since January 2011. Mr. Elmiger currently serves on the board of directors of Kardex, a global leader in automated storage solutions and material handling systems. Mr. Elmiger holds a B.S. in Electrical Engineering from the Lucerne (Horw) University of Applied Science and Art. Eileen Wynne has served on our Board since February 2023. Ms. Wynne served as interim Chief Financial Officer of IDEX Biometrics ASA (“IDEX”), a provider of fingerprint identification technologies, from August 2022 to September 2023, and supported IDEX on a consulting basis since December 2020. From November 1999 to June 2019, Ms. Wynne held various managerial and senior roles at Analog Devices, Inc., a global semiconductor company, including Vice President and Chief Accounting Officer from May 2013 to June 2019, and interim Chief Financial Officer from March 2017 to September 2017. Ms. Wynne holds a B.A. in Financial Economics from St. Anselm College and an M.S. in Accounting from Bentley University. Jeff Zhou has served on our Board since February 2010. Dr. Zhou is a retired business executive. Before his retirement, Dr. Zhou served as Executive Vice Chairman of MiaSolé, a developer of thin film solar technology, which position he held from 2018 to 2019. Dr. Zhou served as Chief Executive Officer of MiaSolé from 2013 to 2018. Dr. Zhou holds a Ph.D. degree in Electrical Engineering from the University of Florida.
Incumbent Class III Directors Whose Term Will Expire in 2025
Incumbent Class III Directors Whose Term Will Expire in 2025 Michael Hsing has served on our Board and as our President and Chief Executive Officer since founding MPS in August 1997. Prior to founding MPS, Mr. Hsing was a Senior Silicon Technology Developer at several analog integrated circuits (“IC”) companies, where he developed and patented key technologies, which set new standards in the power electronics industry. Mr. Hsing is an inventor on numerous patents related to the process development of bipolar mixed-signal semiconductor manufacturing. Mr. Hsing holds a B.S.E.E. from the University of Florida. Herbert Chang has served on our Board since September 1999. Mr. Chang is currently the general partner of GrowStar Partners Group Limited. From March 2014 until December 2019, Mr. Chang was the general manager of Mutto Optronics Corporation, an OEM/ODM knife manufacturer listed on the Taiwan OTC. Mr. Chang is a venture capitalist and focuses on investing in companies in the semiconductor, telecommunications, networking, software and Internet industries. Mr. Chang serves on the board of directors of a number of private companies and a TWSE-listed company. Mr. Chang received a B.S. in geology from National Taiwan University and an M.B.A. from National Chiao Tung University in Taiwan. Carintia Martinez has served on our Board since May 2021. Ms. Martinez currently serves as Chief Information Officer of IHS Towers, a provider of shared communications infrastructure, which position she has held since January 2024. From January 2018 to May 2023, Ms. Martinez served as Vice President, Chief Information Officer of Thales Alenia Space, a European aerospace manufacturer specializing in satellite systems. From February 2008 to December 2017, Ms. Martinez held various senior positions, including Vice President of Renault-Nissan Alliance Quality and Vice President of Information Systems for Marketing and Sales, at Renault Group, a French automobile manufacturer. Ms. Martinez holds a master’s degree in Architecture and City Planning from Pontificia Universidade Catolica do Parana in Brazil, a master’s degree in Project Management from Université de Technologie de Compiègne in France, and a master’s degree in Urban Planning from Université Paris XII - Val de Marne and Ecole Nationale des Ponts et Chaussées in France.
Incumbent Class I Directors Whose Terms Will Expire in 2026
Incumbent Class I Directors Whose Terms Will Expire in 2026 Victor K. Lee has served on our Board since September 2006. Mr. Lee was a member of the board of directors at MoSys, Inc., a fabless semiconductor company, from June 2012 to June 2016. Mr. Lee served as Chief Financial Officer of Ambarella, Inc., a fabless semiconductor company, from August 2007 to March 2011. Mr. Lee holds a B.S. in Industrial Engineering and Operations Research and an M.B.A. from the University of California, Berkeley. James C. Moyer has served on our Board since October 1998. Mr. Moyer is a retired business executive and served as our Chief Design Engineer from September 1997 until his retirement in January 2016. Mr. Moyer holds a B.A.E.E. from Rice University. There is no family relationship among any of our executive officers, directors and nominees.
Board Leadership Structure
Board Leadership Structure The Board currently consists of eight members, seven of which the Board has determined are independent. Leadership Structure. Our current leadership structure and governing documents permit the roles of Chairman and Chief Executive Officer to be filled by the same or different individuals. Should the Board determine that it remains in the best interests of MPS and its stockholders that the Chief Executive Officer serve as Chairman, the independent members of the Board then elect a Lead Independent Director. The Board has currently determined that it is in the best interests of MPS and its stockholders to have Michael Hsing, our President and Chief Executive Officer, serve as Chairman, coupled with an active Lead Independent Director. As such, Mr. Hsing holds the position of Chairman, President and Chief Executive Officer, and the Board has designated one of the independent directors, Mr. Chang, as the Lead Independent Director. Our Lead Independent Director is appointed by the Board on an annual basis. The Board believes our leadership structure, with its strong emphasis on Board independence, an active Lead Independent Director, and strong Board and committee involvement, provides sound and robust oversight of management, and provides a counterbalance to the management perspective provided by Mr. Hsing during Board deliberations. The Board considers and discusses the Board leadership structure every year. As part of this evaluation process, the Board reviews its leadership structure and whether combining or separating the roles of Chairman and CEO is in the best interests of MPS and our stockholders. The Board also considers:
Board Leadership Structure
| ● | The effectiveness of the policies, practices and people in place at MPS to help ensure strong, independent Board oversight; |
Board Leadership Structure
| ● | MPS’s performance and the effect the leadership structure could have on its performance; |
Board Leadership Structure
| ● | The Board’s performance and the effect the leadership structure could have on the Board’s performance; |
Board Leadership Structure
| ● | The Chairman’s performance in the role; |
Board Leadership Structure
| ● | The views of MPS’s stockholders; and |
Board Leadership Structure
| ● | The practices at other companies and trends in governance. |
Board Leadership Structure
While we recognize that different board leadership structures may be appropriate for different companies, we believe that our current Board leadership structure is optimal for us. Our leadership structure demonstrates to our employees, suppliers, customers, stockholders and other stakeholders that we are governed by strong, balanced leadership, with a single person setting the tone and consistent message for the Board and management and having primary responsibility for managing our day-to-day operations, with appropriate oversight and direction from our Lead Independent Director and other independent directors. This message is increasingly important as we continue to seek to achieve success through new product releases and business growth. We also believe that our leadership structure sends the message that we value strong, independent oversight of our management operations and decisions in the form of our Lead Independent Director and other independent directors. Further, having a single leader for both MPS and the Board eliminates the potential for strategic misalignment or duplication of efforts, and provides clear leadership for us. Benefits of Combined Leadership Structure. The Board believes that MPS and our stockholders have been best served by having Mr. Hsing in the role of Chairman and Chief Executive Officer for the following reasons:
Board Leadership Structure
| ● | Mr. Hsing is most familiar with our business and the unique challenges we face. Mr. Hsing’s day-to-day insight into our challenges facilitates timely deliberation by the Board of important matters; |
Board Leadership Structure
| ● | Mr. Hsing has and will continue to identify agenda items and lead effective discussions on the important matters affecting us. Mr. Hsing’s knowledge and extensive experience regarding our operations and the highly competitive semiconductor industry in which we compete position him to identify and prioritize matters for Board review and deliberation; |
Board Leadership Structure
| ● | As Chairman and Chief Executive Officer, Mr. Hsing serves as an important bridge between the Board and management and provides critical leadership for carrying out our strategic initiatives and confronting our challenges. The Board believes that Mr. Hsing brings a unique, stockholder-focused insight to assist MPS to most effectively execute its strategy and business plans in the best interests of our stockholders; |
Board Leadership Structure
| ● | The strength and effectiveness of the communications between Mr. Hsing, as our Chairman, and Mr. Chang, as our Lead Independent Director, as well as our other independent directors, result in comprehensive Board oversight of the issues, plans and prospects of MPS; and |
Board Leadership Structure
| ● | This leadership structure provides the Board with more complete and timely information about MPS, a unified structure and consistent leadership direction internally and externally and provides a collaborative and collegial environment for Board decision making. |
Board Leadership Structure
Lead Independent Director Responsibilities. As the Lead Independent Director, Mr. Chang’s primary roles and responsibilities include:
Board Leadership Structure
| ● | Reviewing meeting agendas; |
Board Leadership Structure
| ● | Reviewing schedules and information sent to the Board; |
Board Leadership Structure
| ● | Retaining independent advisors on behalf of the Board, or committees, as the Board may determine is necessary or appropriate; |
Board Leadership Structure
| ● | Assuring that there is sufficient time for discussion of all meeting agenda items; |
Board Leadership Structure
| ● | Consulting and communicating with independent directors and with the Chief Executive Officer/Chairman of the Board, as appropriate; |
Board Leadership Structure
| ● | Performing such other functions as the independent directors may designate from time to time; |
Board Leadership Structure
| ● | Presiding at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors; and |
Board Leadership Structure
| ● | Calling and leading meetings of independent directors. |
Board Leadership Structure
Our independent directors meet in executive session during a portion of regularly scheduled Board or committee meetings, and otherwise as needed. Our Lead Independent Director presides over meetings of our independent directors and we believe that these meetings help to ensure an appropriate level of independent scrutiny of the functioning of MPS and the Board.
Board Meetings and Committees
| ● | Review the composition and qualifications of the Board, recommend director nominees for the selection of the Board, and evaluate director compensation; |
2023 Director Compensation
2023 Director Compensation
Analysis of 2023 Compensation Elements
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Total ($) | | Herbert Chang | 140,000 | 220,000 | 360,000 | | Eugen Elmiger | 100,000 | 220,000 | 320,000 | | Victor K. Lee | 105,000 | 220,000 | 325,000 | | Carintia Martinez | 82,500 | 220,000 | 302,500 | | James C. Moyer | 75,000 | 220,000 | 295,000 | | Eileen Wynne | 75,000 | 220,000 | 295,000 | | Jeff Zhou | 110,000 | 220,000 | 330,000 |
Executive Summary
| (1) Represents our 2023 peer group approved by the Compensation Committee. See “Peer Group and Use of Peer Data” for further discussion. |
Executive Summary
| ● | Encourage our NEOs to focus on achieving both short-term goals as well as long-term goals; and |
Executive Summary
| ● | Performance Period. We extended the performance period of the 2023 equity compensation program from two years to three years. | | ● | Peer Group. We removed certain semiconductor companies with a market capitalization greater than $100 billion from our peer group starting in 2024. |
Executive Summary
| ● | Mid-Cycle Changes to Performance Metrics. The Compensation Committee recognized that the changes in 2023 was a one-time event in order to make the performance conditions more rigorous due to macroeconomic conditions. In general, the Compensation Committee does not make mid-cycle changes but for extraordinary circumstances. |
Executive Summary
| 1. | A significant portion of our NEOs’ payout opportunity is at risk, which clearly demonstrates the direct link between pay and performance. |
Executive Summary
| 2. | Commitment to short-term cash incentives and long-term equity awards using different performance metrics, and alignment of executive compensation with the interests of our stockholders. |
Executive Summary
Our stockholders expressed a preference for the use of different performance metrics across our plans. In determining performance metrics, our Compensation Committee selected those that have a greater connection to financial and stock performance. Therefore, we use non-GAAP operating income for our short-term cash incentive plan, and, to balance that metric, a mix of revenue and operating goals for our long-term performance equity incentive plan. By using a non-GAAP operating income metric in our short-term incentive plan and various performance metrics in our long-term incentive plan, we can reward our executives for achieving our short-term financial objectives while at the same time planning for long-term growth, without encouraging excessive risk taking. In 2023, 100% of the annual cash incentives earned by the NEOs continued to be tied to specific, pre-established non-GAAP operating income metrics, and 100% of the total equity awards (in the form of performance-based restricted stock units) granted to our NEOs were tied to the following performance conditions: (a) achievement of an average revenue growth rate as measured against the analog industry’s average revenue growth rate over a three-year performance period, and (b) securing additional manufacturing capacity outside of China to support our long-term supply chain strategy over a three-year performance period. No equity awards were granted to the NEOs that vest solely based on continued service. The following graph shows the three-year history of our performance in revenue, GAAP operating income and non-GAAP operating income, which demonstrates a balance of our overall financial health, compared to our CEO’s total compensation (as reported in the 2023 Summary Compensation Table). ______________
Executive Summary
| 3. | Capping payouts under our non-equity incentive plans. |
Independent Compensation Consultant
Independent Compensation Consultant In 2023, the Compensation Committee again engaged Radford as the independent compensation consultant with respect to our non-employee director and executive compensation programs. Radford did not perform any other work for us. In 2023, the Compensation Committee assessed the independence of Radford pursuant to SEC rules and concluded that no conflict of interest exists that would prevent them from serving as independent consultant to the Compensation Committee. In 2023, the Compensation Committee requested and received the following services from Radford: (1) updates on evolving compensation trends, (2) recommendations for additions or deletions to the peer group used for 2023, (3) compensation data for officers and directors (gathered from public filings for our peers and broader surveys), and (4) general advice on analyzing and responding to stockholder feedback on our compensation programs.
Peer Group and Use of Peer Data
Peer Group and Use of Peer Data In February 2023, the Compensation Committee reviewed recommendations made by our independent compensation consultant and selected a peer group of companies in the semiconductor and similar industries with revenue approximately ranging from 50% to 300% of our revenue for the most recent four quarters. In addition, the Compensation Committee selected large cap semiconductor companies that have a similar growth profile and are the key competitors for talent, and companies in the semiconductor and electronic component industries based on the recommendation by Institutional Shareholder Services, Inc., a proxy advisory firm. The 2023 peer group consisted of the following companies, which did not change from 2022:
Peer Group and Use of Peer Data
| Advanced Micro Devices, Inc. | Micron Technology, Inc. | Silicon Laboratories, Inc. | | Ambarella, Inc. | NVIDIA Corporation | Skyworks Solutions, Inc. | | Analog Devices, Inc. | ON Semiconductor Corporation | Synaptics Incorporated | | Applied Materials, Inc. | Power Integrations, Inc. | Teradyne, Inc. | | Cirrus Logic, Inc. | Qorvo, Inc. | Texas Instruments Incorporated | | Coherent, Inc. | Rambus Inc. | Universal Display Corporation | | MKS Instruments, Inc. | Semtech Corporation | Wolfspeed, Inc. |
Peer Group and Use of Peer Data
In February 2024, based on the feedback received from our stockholders, the Compensation Committee removed the following semiconductor companies with market capitalization greater than $100 billion from our peer group: Advanced Micro Devices, Inc., Applied Materials, Inc. and NVIDIA Corporation.
NEO Compensation Components
| Compensation Components | Objectives | | Key Features | | Base salary | Designed to reward individual effort associated with job-related duties and to attract and retain talented executive officers. | ● | Paid in cash. | | | | ● | Reviewed annually. | | Short-term cash incentive compensation | Designed to encourage outstanding company performance by motivating the NEOs to achieve short-term financial goals. | ● | Paid in cash. | | | | ● | Reviewed annually. | | | | ● | 100% of the compensation is subject to financial performance goals. | | | | ● | Payouts capped at 400% of target. | | | | ● | Subject to clawback policy. | | Long-term equity incentive compensation | Designed to align the interests of our NEOs with the interests of our stockholders by focusing on our long-term financial and business performance. | ● | Reviewed annually. | | | | ● | 100% of the awards is subject to revenue and operational goals. | | | | ● | Maximum payouts at 500% of target. | | | | ● | Subject to clawback policy. | | Dividend equivalents | Designed to treat equity award holders equally with stockholders under our dividend program. | ● | Paid in cash. | | | | ● | Equal to the dividend declared and paid on a share of Common Stock. | | | | ● | Accumulate during the vesting period of the underlying equity awards. | | | | ● | Subject to forfeiture if the underlying equity awards do not vest. |
Analysis of 2023 Compensation Elements
In 2023, the Compensation Committee approved an increase in base salaries for our NEOs to account for inflation adjustments and better align the amounts with the pay practices of our peer group. Short-Term Cash Incentive Compensation: We provide a short-term cash incentive opportunity to each of our NEOs to encourage them to achieve our corporate short-term operating income goals. The Compensation Committee used non-GAAP operating income as the sole corporate performance metric for determining the short-term cash incentive (or bonus) compensation. The Compensation Committee believed that non-GAAP operating income would best reflect our short-term performance. See Annexure A for a reconciliation of the GAAP operating income to the non-GAAP operating income used in the short-term cash incentive plan. 100% of the short-term cash incentives were tied to a specific, pre-established non-GAAP operating income metric for all the NEOs. The target bonus for each NEO was 200% of his or her annual base salary. For 2023, our non-GAAP operating income target was $660.3 million as established in the annual operating plan approved by the Board. Achievement of 120% or more of the non-GAAP operating income target would result in a maximum 400% payout of the target bonus for each NEO, achievement of 100% of the non-GAAP operating income target would result in a 100% target bonus payout, and performance below 80% of the non-GAAP operating income target would result in no bonus payout. For performance between the minimum, target and maximum levels, the percentage of payout would be determined based on linear interpolation. For 2023, we achieved non-GAAP operating income of $648.0 million (see Annexure A), which resulted in a payout of 90.7% of the target bonus for each NEO. The following table summarizes the 2023 bonus payout approved by the Compensation Committee for each of our NEOs:
Analysis of 2023 Compensation Elements
| | Bonus Amount | | | | | Name | Minimum ($) | Target ($) | Maximum ($) | Earned ($) | | Michael Hsing | - | 1,663,200 | 6,652,800 | 1,508,805 | | Bernie Blegen | - | 808,600 | 3,234,400 | 733,537 | | Deming Xiao | - | 877,800 | 3,511,200 | 796,314 | | Maurice Sciammas | - | 877,800 | 3,511,200 | 796,314 | | Saria Tseng | - | 877,800 | 3,511,200 | 796,314 |
Analysis of 2023 Compensation Elements
Long-Term Equity Incentive Compensation: We provide long-term equity compensation awards to reward and retain our valued executives, and to encourage our executives to focus on achieving long-term development goals for the future. In determining the number of shares subject to long-term equity compensation awards granted to each of the NEOs, the Compensation Committee establishes a value of such awards, which represents a multiple of each NEO’s target cash compensation. The Compensation Committee believes these multiples properly reflect the relative position and responsibility of each NEO as well as the officer’s ability to develop the vision for the future of MPS, drive the strategy to obtain such vision, and effect certain cost savings for us. We have regularly engaged with our stockholders for their opinions in setting performance metrics. The Compensation Committee believes that the NEOs’ long-term incentive compensation should be in the form of equity and 100% of the equity awards granted to our NEOs in 2023 should vest based on the achievement of performance-based criteria. No equity awards were granted to our NEOs in 2023 that would vest solely based on continued service. A Balanced Approach to Our Equity Compensation Program The Compensation Committee is committed to establishing a balanced equity compensation program with different performance objectives and a long-term performance period. When designing the annual executive equity compensation program, the Compensation Committee is guided by the following three key principles that promote the best interests of both MPS and its stockholders:
Analysis of 2023 Compensation Elements
| ● | The performance goals must be rigorous. |
Analysis of 2023 Compensation Elements
In February 2023, the Compensation Committee granted performance-based RSUs (“PSUs”) to each NEO that are subject to the achievement of two performance conditions: (i) our revenue growth rate compared against the analog industry during a three-year (2023 to 2025) performance period and (ii) increase in our manufacturing capacity outside of China to support our supply chain strategy over the same three-year period. The following table summarizes the number of shares subject to the 2023 PSUs that can be earned by the NEOs at the minimum, target and maximum performance levels, subject to the criteria described below. The number of shares earned will be linearly interpolated for actual achievement between the minimum, target and maximum performance levels.
Analysis of 2023 Compensation Elements
The PSUs contained a purchase price feature, which required the NEOs to pay MPS $30 per share upon vesting of the shares. The target number of shares granted to each NEO was determined based on the target compensation value for such PSUs, divided by our closing stock price on the date of grant less the purchase price. This $30 purchase price requirement would be deemed satisfied and waived if the closing stock price on the last trading day of the performance period is $30 higher than the closing stock price on the date of grant. First Performance Condition - Revenue Goal For 2023, the number of PSUs that can ultimately be earned at the end of the three-year performance period on December 31, 2025, is based on MPS’s average three-year (2023 to 2025) revenue growth rate as measured against the average three-year revenue growth rate for the analog industry published by the SIA. Taking into account of the semiconductor industry’s cyclical nature and stockholders’ feedback, the Compensation Committee determined that three years is the most optimal performance period for the revenue-based PSU awards. A revenue-based performance period that is longer than three years makes it impractical for the Compensation Committee to determine appropriate performance goals due to the volatility from macroeconomic and industry-specific conditions. In selecting the minimum, target and maximum performance levels, the Compensation Committee carefully considered our historical and projected performance and the fundamentals of the analog industry at that time. The Compensation Committee took into account SIA’s projections for the anticipated revenue growth in the analog industry for the three-year performance period. Instead of benchmarking against the broad semiconductor sector, the Compensation Committee elected to focus solely on the analog industry in setting the performance objectives, which are measured against our closest and most relevant peers within the semiconductor sector. In addition, the Compensation Committee chose the revenue projections reported by SIA as the baseline because the SIA report is well-respected in the semiconductor industry and used by Wall Street financial analysts in preparing their analyses, forecasts and recommendations. The performance criteria and the minimum, target and maximum levels of the PSUs that can be earned were as follows:
Analysis of 2023 Compensation Elements
| MPS’s Average Three-Year Revenue Growth Rate Exceeds the Analog Industry by | PSU Earn-Out | | Less than 3% | 0% | | 3% | 50% of Target | | 5% | 100% of Target | | 15% and above | 300% of Target |
Analysis of 2023 Compensation Elements
| Percentage of Capacity to Support $1.2 Billion of Annual Revenue for North America and EMEA | PSU Earn-Out | | Less than 70% | 0% of Target | | 70% | 50% of Target | | 80% | 100% of Target | | 100% or more | 200% of Target |
Analysis of 2023 Compensation Elements
The performance period for both the first performance condition and the second performance condition is three years (2023 to 2025). If the performance metrics are achieved, the PSUs will vest on December 31, 2025, subject to continued employment through such date. The NEOs will be required to pay MPS $30 per share upon vesting of the shares, unless the stock price target as described above is achieved.
Dividend Equivalents
Dividend Equivalents In connection with our quarterly cash dividend program, all outstanding and unvested time and performance-based full value stock awards granted to employees, including the NEOs, have the right to receive dividend equivalents in order to maintain the economic alignment between the value of such awards and the value of a share of our Common Stock. The dividend equivalents are accumulated during the vesting periods of the shares underlying such awards and are paid in cash to employees only if and when the underlying shares vest. Dividend equivalents accrued on the underlying shares are forfeited if the employees do not fulfill their service requirement during the vesting periods. Dividend equivalents paid to the NEOs in 2023 are included in “2023 Option Exercises and Stock Vested” below.
Certifications of Achievement of Prior Performance-Based Awards
Certifications of Achievement of Prior Performance-Based Awards As previously disclosed in our proxy statement for the 2022 Annual Meeting of Stockholders, the Compensation Committee granted each NEO a PSU award in February 2021 (the “2021 PSUs”) that could be earned based on the achievement of three environmental goals during a three-year performance period. The maximum earn-out was 100% of the target grant. The actual results, as approved by the Compensation Committee in May 2023, were as follows:
Certifications of Achievement of Prior Performance-Based Awards
| Achievement of Environmental Goals | | | PSU Earned | | Goal #1 | ● | Established Board oversight to ensure our ESG practices and policies are aligned with our Environmental and Climate Change Policy, long-term business strategy, and external requirements and expectations. | 25% of Target | | | ● | Defined the scope of our environmental projects for our global operations in accordance with GHG Protocol, an internationally accepted carbon accounting standard. | | | | ● | Developed measurable milestones designed to ensure that our goals could be achieved within the performance period set by the Compensation Committee, and within a budget that would not cause a significant burden to our financial resources and operations. | | | | ● | Engaged sustainability consultants to help us better understand the key environmental priorities for the semiconductor industry and other key stakeholders. | | | | ● | Conducted initial analyses and identified gaps in our GHG emissions, waste management and product efficiency, which helped us prioritize areas of focus and design an effective project plan. | | | | ● | Invested in additional staff with substantial expertise, both academically and professionally, who understands relevant regulatory requirements and best practices, and can manage the complex technical issues. | | | Goal #2 | ● | Formed an ESG Steering Committee consisting of a team of two senior executives in charge of compliance and operations, cross-functional managers and personnel to establish our missions and sustainability policies, and to supervise the management and execution of our ESG initiatives. | 25% of Target | | | ● | Collected, analyzed and reconciled baseline data that was far more complex than what we had reviewed and compiled in previous years, including a thorough review of our Scope 1 and Scope 2 data sources such as refrigerants, natural gas heating, generators, electricity and fuel covering global facilities, which include testing facilities, design centers, EMC labs and offices. | | | | ● | Improved the quality of records and documentation using a third-party software platform, so that we could accurately and timely report our data in accordance with global frameworks such as the Sustainability Accounting Standards Board and the Task Force on Climate-Related Financial Disclosures. | | | | ● | Completed an assessment of our waste handling procedures and evaluated the energy efficiency of our solutions used in data centers. | | | | ● | Established the credibility of our emissions data by working with a third-party firm specializing in auditing GHG emissions data, and received assurance on the accuracy and completeness of our emissions data in accordance with GHG Protocol. | | | Goal #3 | ● | Developed GHG reduction target proposals that we believe are reasonable, rigorous and measurable by conducting an in-depth analysis of: (a) various reduction measures including investments in new equipment and procedures for refrigerant reductions, renewable energy credits, green tariffs and solar panels, as well as the economic benefits of implementing these measures in each country where we have significant operations, (b) our long-term business expansion plan, as well as refrigerant, fuel and electricity usage projections for our facilities, and (c) our long-term financial model designed to achieve the proposed reduction goals. | 50% of Target | | | ● | Conducted peer benchmarking analyses and studied the scope of our peers’ environmental initiatives, their assumptions and methodologies, targets and timelines for reducing GHG emissions and adopting renewable energy, and their performance against their goals, so we could align with best practices within the semiconductor industry. | | | | ● | Evaluated the different GHG emissions reduction proposals with our management team, assessed the overall rigor of the reduction goals and the reasonableness of key assumptions used in our financial model, conducted cost analyses of the proposals, and reviewed the financial, operational and regulatory risks associated with the proposals. | | | | ● | Provided quarterly updates to the Board on our progress, who evaluated our performance, challenged methodologies and assumptions used, and more importantly, ensured that our ESG initiatives would align with our long-term business strategy without undesired or excessive risks. | | | | ● | Established rigorous mid- and long-term goals on GHG emissions, renewable electricity, waste management and power density improvements related to certain products used in data centers. | | | | ● | Published our first Corporate Responsibility Report, which highlights our environmental, social and governance initiatives, practices and goals. | |
Severance and Change in Control Arrangements
Severance and Change in Control Arrangements We offer severance benefits to our NEOs, including severance in connection with a change in control of MPS. In general, severance does not exceed six to twelve months of base salary, target bonus and other benefits, and is conditioned on a release of claims and compliance with ongoing obligations. We believe these modest benefits balance the costs to MPS with the retention benefits that are commonly understood to come from offering severance and change in control benefits. For all change in control arrangements, the NEO is entitled to benefits if his or her employment is terminated without cause or if he or she leaves for good reason within one year following a change in control. This approach is commonly referred to as a “double-trigger” arrangement and is favored by many institutional investors and their advisors. We believe the size and conditions to receipt of these severance benefits are consistent with market practices. These arrangements are discussed in more detail in “Named Executive Officer Compensation — Potential Payments Upon Termination or Termination Upon Change in Control.”
Tax and Accounting Impacts of Equity Grants
Tax and Accounting Impacts of Equity Grants Section 162(m) of the Internal Revenue Code disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1 million in any taxable year for “covered employees,” which consist of all of the NEOs, including the Chief Financial Officer. Our Compensation Committee is aware of current rules governing the taxation and accounting for cash and equity compensation as applicable to public companies. Our Compensation Committee believes that, in establishing the cash and equity incentive compensation plans and arrangements for our NEOs, the potential deductibility of the compensation payable under those plans and arrangements should be only one of a number of relevant factors taken into consideration, and not the sole governing factor. The Compensation Committee believes it is important to maintain cash and equity incentive compensation at the requisite level to attract and retain the individuals essential to our financial success, even if all or part of that compensation may not be deductible by reason of the Section 162(m) limitation.
2023 Summary Compensation Table
2023 Summary Compensation Table The following table sets forth the compensation for our Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers serving on December 31, 2023, which officers together constitute our NEOs:
2023 Summary Compensation Table
| | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | | Michael Hsing | 2023 | 822,877 | - | 12,311,787 | 1,508,805 | - | 14,643,469 | | Chief Executive Officer, President | 2022 | 751,846 | - | 13,865,090 | 6,048,000 | - | 20,664,936 | | and Chairman of the Board | 2021 | 711,923 | - | 13,782,908 | 5,760,000 | - | 20,254,831 | | Bernie Blegen | 2023 | 400,054 | - | 3,486,353 | 733,537 | - | 4,619,944 | | Executive Vice President, | 2022 | 365,481 | - | 3,626,424 | 2,940,000 | - | 6,931,905 | | Chief Financial Officer | 2021 | 342,500 | - | 2,791,906 | 2,800,000 | - | 5,934,406 | | Deming Xiao | 2023 | 434,296 | - | 5,144,271 | 796,314 | - | 6,374,881 | | Executive Vice President, | 2022 | 396,808 | - | 5,539,193 | 3,192,000 | - | 9,128,001 | | Global Operations | 2021 | 375,385 | - | 4,243,375 | 3,040,000 | - | 7,658,760 | | Maurice Sciammas | 2023 | 434,296 | - | 5,144,271 | 796,314 | - | 6,374,881 | | Executive Vice President, | 2022 | 396,808 | - | 5,539,193 | 3,192,000 | - | 9,128,001 | | Worldwide Sales and Marketing | 2021 | 375,385 | - | 4,243,375 | 3,040,000 | - | 7,658,760 | | Saria Tseng | 2023 | 434,296 | - | 5,144,271 | 796,314 | - | 6,374,881 | | Executive Vice President, Strategic Corporate | 2022 | 396,808 | - | 5,539,193 | 3,192,000 | - | 9,128,001 | | Development and General Counsel | 2021 | 375,385 | - | 4,243,375 | 3,040,000 | - | 7,658,760 |
2023 Summary Compensation Table
| (1) For more information regarding the 2023 stock awards, refer to “Named Executive Officer Compensation — Compensation Discussion and Analysis.” The amounts reflect the aggregate grant date fair value of the 2023 PSUs computed in accordance with ASC Topic 718, excluding the impact of estimated forfeitures. The calculation of the grant date fair value was performed by a third-party valuation firm using a Monte Carlo simulation model. Assumptions used in the calculation are included in Note 1 and Note 7 to the financial statements included in our 2023 Annual Report. |
2023 Summary Compensation Table
| (2) Assuming the highest level of performance for the 2023 stock awards, the aggregate grant date fair value would be as follows: (a) $61,558,936 for Mr. Hsing, (b) $17,431,763 for Mr. Blegen, (c) $25,721,355 for Mr. Xiao, (d) $25,721,355 for Mr. Sciammas, and (e) $25,721,355 for Ms. Tseng. There is no guarantee that the highest level of performance will be achieved by the NEOs. |
2023 Summary Compensation Table
| (3) The 2023 amounts reflect the short-term cash incentive compensation earned by the NEOs under our non-equity incentive plan, as described under “Named Executive Officer Compensation — Compensation Discussion and Analysis.” |
2023 Summary Compensation Table
| (4) We did not provide other benefits or compensation for the NEOs that is required to be disclosed under Item 402(c)(2)(ix) of Regulation S-K. |
Grants of Plan-Based Awards for the Year Ended December 31, 2023
Grants of Plan-Based Awards for the Year Ended December 31, 2023
Grants of Plan-Based Awards for the Year Ended December 31, 2023
| | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | | Grant Date Fair Value of Stock and Option | | Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Awards ($)(3) | | Michael Hsing | - | - | 1,663,200 | 6,652,800 | - | - | - | - | | | 2/7/2023 | - | - | - | - | 27,365 | 136,825 | 12,311,787 | | Bernie Blegen | - | - | 808,600 | 3,234,400 | - | - | - | - | | | 2/7/2023 | - | - | - | - | 7,749 | 38,745 | 3,486,353 | | Deming Xiao | - | - | 877,800 | 3,511,200 | - | - | - | - | | | 2/7/2023 | - | - | - | - | 11,434 | 57,170 | 5,144,271 | | Maurice Sciammas | - | - | 877,800 | 3,511,200 | - | - | - | - | | | 2/7/2023 | - | - | - | - | 11,434 | 57,170 | 5,144,271 | | Saria Tseng | - | - | 877,800 | 3,511,200 | - | - | - | - | | | 2/7/2023 | - | - | - | - | 11,434 | 57,170 | 5,144,271 |
Grants of Plan-Based Awards for the Year Ended December 31, 2023
| (1) The amounts reflect the threshold, target and maximum awards under the short-term cash incentive compensation program, which is described in detail in “Named Executive Officer Compensation — Compensation Discussion and Analysis.” |
Grants of Plan-Based Awards for the Year Ended December 31, 2023
| (2) The amounts reflect the threshold, target, and maximum number of the PSUs that may be earned based on the achievement of specific goals under the long-term equity incentive compensation program, which is described in detail in “Named Executive Officer Compensation —Compensation Discussion and Analysis.” |
Grants of Plan-Based Awards for the Year Ended December 31, 2023
| (3) The amounts reflect the aggregate grant date fair value of the awards calculated in accordance with ASC Topic 718, excluding the impact of estimated forfeitures. The amounts reflect the target level of performance. The PSUs include a purchase price feature, which requires the NEOs to pay MPS $30 per share upon vesting of the shares. This $30 purchase price requirement is deemed satisfied and waived if the closing stock price on the last trading day of the performance period is $30 higher than the grant date stock price. The grant date fair value was $449.91 per share, which was calculated using a Monte Carlo simulation model. Assumptions used in the calculation of the grant date fair value of the stock awards are included in Note 1 and Note 7 to the financial statements included in our 2023 Annual Report. |
Narrative Disclosure to 2023 Summary Compensation Table and Grants of Plan-Based Awards for the Year Ended December 31, 2023
Narrative Disclosure to 2023 Summary Compensation Table and Grants of Plan-Based Awards for the Year Ended December 31, 2023 A discussion of 2023 salaries, incentive plans and awards is set forth under “Named Executive Officer Compensation — Compensation Discussion and Analysis,” including a discussion of the material terms and conditions of the short-term cash incentive compensation and the long-term equity compensation. For information regarding our employment agreements with the NEOs, see “Named Executive Officer Compensation – Potential Payments Upon Termination or Termination Upon Change in Control – Employment Agreements and Change in Control Arrangements.”
Outstanding Equity Awards at 2023 Year-End
Outstanding Equity Awards at 2023 Year-End The following table sets forth, as to the NEOs, certain information regarding their outstanding stock awards as of December 31, 2023. There were no outstanding option awards held by the NEOs as of December 31, 2023.
Outstanding Equity Awards at 2023 Year-End
| | Stock Awards | | | | | | Name | Grant Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | | Michael Hsing | 10/25/2018(2) | 108,000 | 69,422,400 | - | - | | | 2/4/2020(3) | 9,585 | 6,127,179 | - | - | | | 7/21/2020(4) | 24,125 | 15,449,168 | - | - | | | 2/2/2021(5) | 35,262 | 22,447,084 | - | - | | | 10/25/2022(6) | - | - | 60,584 | 38,502,950 | | | 2/7/2023(7) | - | - | 27,365 | 16,549,805 | | Bernie Blegen | 10/25/2018(2) | 48,000 | 30,854,400 | - | - | | | 2/4/2020(3) | 1,701 | 1,087,359 | - | - | | | 7/21/2020(4) | 5,025 | 3,217,910 | - | - | | | 2/2/2021(5) | 7,143 | 4,547,091 | - | - | | | 10/25/2022(6) | - | - | 17,538 | 11,145,925 | | | 2/7/2023(7) | - | - | 7,749 | 4,686,440 | | Deming Xiao | 10/25/2018(2) | 48,000 | 30,854,400 | - | - | | | 2/4/2020(3) | 2,481 | 1,585,971 | - | - | | | 7/21/2020(4) | 8,040 | 5,148,655 | - | - | | | 2/2/2021(5) | 10,857 | 6,911,349 | - | - | | | 10/25/2022(6) | - | - | 27,104 | 17,225,405 | | | 2/7/2023(7) | - | - | 11,434 | 6,915,055 | | Maurice Sciammas | 10/25/2018(2) | 48,000 | 30,854,400 | - | - | | | 2/4/2020(3) | 2,481 | 1,585,971 | - | - | | | 7/21/2020(4) | 8,040 | 5,148,655 | - | - | | | 2/2/2021(5) | 10,857 | 6,911,349 | - | - | | | 10/25/2022(6) | - | - | 27,104 | 17,225,405 | | | 2/7/2023(7) | - | - | 11,434 | 6,915,055 | | Saria Tseng | 10/25/2018(2) | 48,000 | 30,854,400 | - | - | | | 2/4/2020(3) | 2,481 | 1,585,971 | - | - | | | 7/21/2020(4) | 8,040 | 5,148,655 | - | - | | | 2/2/2021(5) | 10,857 | 6,911,349 | - | - | | | 10/25/2022(6) | - | - | 27,104 | 17,225,405 | | | 2/7/2023(7) | - | - | 11,434 | 6,915,055 |
Outstanding Equity Awards at 2023 Year-End
| (1) The market value of the unvested stock awards is based on the closing market price of our Common Stock of $630.78 as of December 29, 2023 (the last trading day of 2023), and includes any outstanding dividend equivalents accumulated and unpaid on such awards. |
Outstanding Equity Awards at 2023 Year-End
| (2) Reflects market-based RSUs (“MSUs”) granted in October 2018. The performance goals with respect to the MSUs were achieved as of December 31, 2019. These MSUs fully vested on January 1, 2024, for a total vesting period of approximately five years, subject to continued employment. In addition, the MSUs contain a post-vesting sales restriction for up to an additional two years. |
Outstanding Equity Awards at 2023 Year-End
| (3) Reflects PSUs granted in February 2020. The performance goals with respect to the PSUs were achieved as of December 31, 2021. 50% of these PSUs vested in February 2022, and the remaining 50% vested quarterly over the following two years through February 2024, for a total vesting period of four years, subject to continued employment. |
Outstanding Equity Awards at 2023 Year-End
| (4) Reflects market and performance-based RSUs (“MPSUs”) granted in July 2020. The performance goals with respect to the MPSUs were achieved as of December 31, 2020. 75% of these MPSUs vested in July 2023, and the remaining 25% will vest in July 2024, for a total vesting period of four years, subject to continued employment. In addition, the MPSUs contain a post-vesting sales restriction for one year. |
Outstanding Equity Awards at 2023 Year-End
| (5) Reflects PSUs granted in February 2021. The performance goals with respect to the PSUs were achieved as of December 31, 2022. 50% of these PSUs vested in February 2023, and the remaining 50% vest quarterly over the following two years through February 2025, for a total vesting period of four years, subject to continued employment. |
Outstanding Equity Awards at 2023 Year-End
| (6) Reflects MSUs granted in October 2022 at the target level of performance. The MSUs will vest upon achievement of the pre-determined stock price targets and the relative TSR performance during the performance period from October 25, 2022 to October 24, 2025, for a total vesting period of three years, subject to continued employment. |
Outstanding Equity Awards at 2023 Year-End
| (7) Reflects PSUs granted in February 2023 at the target level of performance. Upon achievement of the pre-determined performance goals through the end of the performance period on December 31 2025, these PSUs will vest immediately, for a total vesting period of approximately three years, subject to continued employment. See “Named Executive Officer Compensation — Compensation Discussion and Analysis” for further discussion. |
2023 Option Exercises and Stock Vested
2023 Option Exercises and Stock Vested The following table sets forth certain information on the stock awards vested for our NEOs in 2023. There were no option exercises in 2023.
2023 Option Exercises and Stock Vested
| | Stock Awards | | | Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | | Michael Hsing | 341,019 | 174,979,073 | | Bernie Blegen | 53,074 | 26,758,684 | | Deming Xiao | 113,576 | 58,708,218 | | Maurice Sciammas | 113,576 | 58,708,218 | | Saria Tseng | 113,576 | 58,708,218 |
2023 Option Exercises and Stock Vested
| (1) Value realized on vesting is equal to (a) the closing price of our Common Stock on the vesting date less any purchase price, multiplied by the number of shares that vested, plus (b) accumulated dividend equivalents attributable to such shares. |
2023 Option Exercises and Stock Vested
The amount of realized value of the vested stock awards for our NEOs is directly linked to the significant increase in our stock price during the vesting periods, thereby consistently creating significant long-term value for our stockholders. Each year, based on feedback from our stockholders, the Compensation Committee imposes substantial performance and vesting periods on all of our stock awards granted to the NEOs. For example, in 2023, a large portion (34%) of Mr. Hsing’s realized stock value was attributable to MSUs granted in December 2013 (“2013 MSUs”). These 2013 MSUs had a five-year performance period and, upon achievement of the market conditions, an additional five-year service condition, for a total of ten years. The 2013 MSUs began vesting quarterly in March 2019 and our stock price has increased more than 2,000% from December 14, 2013 (the grant date) to December 31, 2023, as illustrated in the chart below: As a result of the significant stock price appreciation during the performance and vesting periods, the realized value of the 2013 MSUs also increased when the shares began vesting in March 2019. Hypothetically, if our stock price had remained at the grant date level ($31.73), Mr. Hsing’s realized value for the 2013 MSUs would have been significantly lower ($57 million less in 2023), as shown in the chart below: In summary, we believe that our NEOs’ high realized pay in 2023 is in full alignment with long-term stockholder interests given that a significant portion of their realized pay is attributed to their stock awards earned based on strong company performance and being subject to long service-based vesting periods, combined with our stock price increasing significantly during such periods.
2023 Non-Qualified Deferred Compensation Plan
2023 Non-Qualified Deferred Compensation Plan We have a non-qualified, unfunded deferred compensation plan, which allows key employees, including our NEOs, to defer the receipt of, and taxation on, cash compensation. Plan participants may defer up to 70% of their salary and up to 90% of their non-equity incentive plan compensation. Plan participants may elect to receive the deferred funds either in a lump sum or in annual installments of up to ten years, and to begin receiving distributions either at retirement or at a future date not less than 24 months from the election date. Investment returns on deferred balances are linked to the performance of the investment choices available in the plan. We do not make contributions to the plan or guarantee returns on the investments. The following table summarizes the non-qualified deferred compensation activity for our NEOs in 2023:
2023 Non-Qualified Deferred Compensation Plan
| Name | Executive Contributions in Last FY ($)(1) | Aggregate Earnings in Last FY ($)(2) | Aggregate Balance at Last FYE ($)(3) | | Michael Hsing | 2,340,734 | 1,130,120 | 20,487,353 | | Bernie Blegen | - | 79,177 | 1,459,706 | | Deming Xiao | 287,280 | 870,426 | 9,984,736 | | Maurice Sciammas | 287,280 | 734,337 | 7,159,084 | | Saria Tseng | 1,235,687 | 1,559,044 | 12,251,520 |
2023 Non-Qualified Deferred Compensation Plan
| (1) All executive contributions are reported as salary or non-equity incentive plan compensation in “Named Executive Officer Compensation — 2023 Summary Compensation Table.” |
2023 Non-Qualified Deferred Compensation Plan
| (2) Represents the net amounts credited to the NEOs’ accounts as a result of the performance of their investment choices. The amounts are not included in “Named Executive Officer Compensation — 2023 Summary Compensation Table” because plan earnings are not “preferential or above-market” under SEC rules. |
2023 Non-Qualified Deferred Compensation Plan
| (3) Includes the following cumulative amounts reported as compensation for the NEOs in the Summary Compensation Tables for previous years: Mr. Hsing, $14,662,554; Mr. Blegen, $786,811; Mr. Xiao, $7,149,434; Mr. Sciammas, $5,429,201; and Ms. Tseng, $7,936,509. |
Potential Payments Upon Termination or Termination Upon Change in Control
Potential Payments Upon Termination or Termination Upon Change in Control
Estimated Payments Upon Termination or Change in Control with Termination
Estimated Payments Upon Termination or Change in Control with Termination The following table sets forth the estimated payments required to be made to each NEO in connection with the termination of his or her employment upon specified events, assuming a stock price of $630.78 per share, the closing price as of December 29, 2023 (the last business day of 2023). The estimated amounts shown also assume that the termination was effective as of December 29, 2023, and include estimates of severance benefits which would be paid to the executives upon their termination. The actual amounts payable to each NEO can only be determined at the time of the termination of the executive’s employment.
Estimated Payments Upon Termination or Change in Control with Termination
| | Termination without Cause or Departure for Good Reason | | | | Change in Control with Termination | | | | | Name | Base Salary and Target Bonus ($) | Acceleration of Vesting of Equity Awards ($) | Other ($) | Total Compensation ($) | Base Salary and Target Bonus ($) | Acceleration of Vesting of Equity Awards ($) | Other ($) | Total Compensation ($) | | Michael Hsing | 2,494,800 | 107,181,980 | 28,537 | 109,705,317 | 2,494,800 | 316,140,386 | 28,537 | 318,663,723 | | Bernie Blegen | 606,450 | 33,152,614 | 9,684 | 33,768,748 | 1,212,900 | 98,142,989 | 19,369 | 99,375,258 | | Deming Xiao | 658,350 | 34,581,567 | 12,569 | 35,252,486 | 1,316,700 | 134,858,775 | 25,137 | 136,200,612 | | Maurice Sciammas | 658,350 | 34,581,567 | 16,887 | 35,256,804 | 1,316,700 | 134,858,775 | 33,775 | 136,209,250 | | Saria Tseng | 658,350 | 34,581,567 | 18,587 | 35,258,504 | 1,316,700 | 134,858,775 | 37,175 | 136,212,650 |
Estimated Payments Upon Termination or Change in Control with Termination
In the event the NEOs resign without good reason or we terminate their employment for cause, we will have no obligation to pay or provide any compensation or benefits as a result of the employment agreements between us and the NEOs. In the event of the NEOs’ death or disability, except as required by applicable law, we will have no obligation to pay or provide any compensation or benefits under the employment agreements between us and the NEOs.
CEO Pay Ratio
CEO Pay Ratio For 2023, our CEO pay ratio was determined as follows:
CEO Pay Ratio
| ● | The annual total compensation of our CEO was $14,643,469 as reported in the “Total” column in the 2023 Summary Compensation Table disclosed above. |
CEO Pay Ratio
| ● | The median of the annual total compensation of all employees (other than our CEO) was $49,493. The median employee was located in China. |
CEO Pay Ratio
| ● | The ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 296 to 1. This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. |
CEO Pay Ratio
To determine the median of the annual total compensation of our employees, we applied the following methodologies and assumptions:
CEO Pay Ratio
| ● | We selected December 31, 2023 as the date for purposes of establishing the employee population used in identifying the median employee. |
CEO Pay Ratio
| ● | As of December 31, 2023, our global headcount consisted of approximately 3,500 permanent and temporary employees, with a majority of these employees located in international locations with various market wages and cost of living standards. All of these employees were included in the employee population used in identifying the median employee. |
CEO Pay Ratio
| ● | We used payroll and equity plan records for the twelve-month period from January 1, 2023 to December 31, 2023. The components of annual compensation included base salary, sales commissions, bonuses, the grant date fair value of stock awards and certain employee benefits. |
CEO Pay Ratio
| ● | Total compensation was annualized for permanent employees who commenced employment during the year. Total compensation was not annualized for temporary employees. |
CEO Pay Ratio
| ● | No cost-of-living or other adjustments permissible by the SEC rules were made. |
CEO Pay Ratio
The SEC rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. Therefore, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. Alternative Measure: As discussed in the Compensation Discussion and Analysis section above, more than 94% of our CEO’s annual compensation was tied to rigorous performance conditions in 2023, while the annual compensation of our median employee was not tied to performance goals. Accordingly, as an alternative measure, management believes that a more direct and meaningful pay ratio is to compare compensation that is not tied to any performance objectives. Based on this method, our alternative CEO pay ratio was determined as follows:
CEO Pay Ratio
| ● | The alternative annual total compensation of our CEO was $822,877 (consisting of his cash salary for 2023). |
CEO Pay Ratio
| ● | The median of the annual total compensation of all employees (other than our CEO) remained $49,493. |
CEO Pay Ratio
| ● | The ratio of the alternative annual total compensation of our CEO to the median of the annual total compensation of all employees was 17 to 1. |
Pay Versus Performance
Pay Versus Performance The following Pay Versus Performance information presents the compensation of our NEOs disclosed in the Summary Compensation Table (“SCT”), as well as compensation actually paid (“CAP”) to our NEOs and certain performance measure results prepared in accordance with Item 402(v) of SEC Regulation S-K. As discussed further below, the CAP amounts do not necessarily represent actual compensation earned or realized by our NEOs in a given year. The Compensation Committee did not consider the Pay Versus Performance information in making its compensation decisions for our NEOs. For additional information about our performance-based pay philosophy and how the Compensation Committee aligns executive compensation with our performance, refer to “Named Executive Officer Compensation — Compensation Discussion and Analysis.”
Pay Versus Performance
| | | | | | Value of Initial Fixed $100 Investment Based on: | | | | | Year | Summary Compensation Table Total for PEO ($)(1) | Compensation Actually Paid to PEO ($)(1)(2) | Average Summary Compensation Table Total for Non-PEO NEOs ($)(1) | Average Compensation Actually Paid to Non- PEO NEOs ($)(1)(2) | TSR ($)(3) | Peer Group TSR ($)(3) | Net Income (in thousands)($)(4) | Company-Selected Measure: Revenue Growth Rate (5) | | 2023 | 14,643,469 | 138,253,668 | 5,936,147 | 48,844,169 | 365.00 | 225.75 | 427,374 | 2% | | 2022 | 20,664,936 | (66,596,378) | 8,578,977 | (18,412,649) | 203.03 | 136.90 | 437,672 | 49% | | 2021 | 20,254,831 | 114,053,034 | 7,227,671 | 35,989,415 | 281.12 | 213.35 | 242,023 | 43% | | 2020 | 14,670,153 | 166,896,795 | 4,194,878 | 50,263,845 | 207.49 | 151.14 | 164,375 | 34% |
Pay Versus Performance
| (1) For each of 2023, 2022, 2021 and 2020 (each, a “Covered Year”), our CEO, Mr. Hsing, served as our principal executive officer (“PEO”). For each Covered Year, our non-PEO NEOs were Mr. Blegen, Mr. Xiao, Mr. Sciammas and Ms. Tseng. |
Pay Versus Performance
| (2) The CAP amounts reflect the following adjustments to the SCT amounts for each Covered Year: |
Pay Versus Performance
PEO:
Pay Versus Performance
| Reconciliation of SCT amounts to CAP amounts (a) | | FY 2023 ($) | FY 2022 ($) | FY 2021 ($) | FY 2020 ($) | | Total SCT amounts | | 14,643,469 | 20,664,936 | 20,254,831 | 14,670,153 | | - | “Stock Awards” amounts under the SCT | (12,311,787) | (13,865,090) | (13,782,908) | (12,395,153) | | + | Covered Year-end fair value of awards granted in the Covered Year that are outstanding and unvested as of the end of the Covered Year | 16,607,564 | 13,362,890 | 18,645,892 | 25,907,039 | | +/- | Change in fair value (from prior year-end to Covered Year-end) of awards granted prior to Covered Year that are outstanding and unvested as of the end of the Covered Year | 66,793,621 | (60,534,831) | 73,338,316 | 118,265,198 | | +/- | Change in fair value (from prior year-end to vesting date) of awards granted prior to Covered Year that vested in the Covered Year | 52,520,801 | (26,224,283) | 15,596,903 | 20,449,558 | | Total CAP amounts | | 138,253,668 | (66,596,378) | 114,053,034 | 166,896,795 |
Pay Versus Performance
Average Non-PEO NEOs:
Pay Versus Performance
| Reconciliation of SCT amounts to CAP amounts (a) | | FY 2023 ($) | FY 2022 ($) | FY 2021 ($) | FY 2020 ($) | | Total SCT amounts | | 5,936,147 | 8,578,977 | 7,227,671 | 4,194,878 | | - | “Stock Awards” amounts under the SCT | (4,729,791) | (5,061,001) | (3,880,508) | (3,189,878) | | + | Covered Year-end fair value of awards granted in the Covered Year that are outstanding and unvested as of the end of the Covered Year | 6,380,090 | 3,843,543 | 5,249,657 | 6,629,115 | | +/- | Change in fair value (from prior year-end to Covered Year-end) of awards granted prior to Covered Year that are outstanding and unvested as of the end of the Covered Year | 25,927,600 | (19,793,194) | 23,214,310 | 36,946,829 | | +/- | Change in fair value (from prior year-end to vesting date) of awards granted prior to Covered Year that vested in the Covered Year | 15,330,123 | (7,053,985) | 4,178,285 | 5,682,901 | | + | Excess fair value for award modifications | - | 1,073,011 | - | - | | Total CAP amounts | | 48,844,169 | (18,412,649) | 35,989,415 | 50,263,845 |
Pay Versus Performance
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Pay Versus Performance
| (a) Our equity awards include PSUs with a purchase price condition, MSUs and MPSUs. The grant date fair value for these awards was determined using a Monte Carlo simulation model. Assumptions used in the grant date valuation are disclosed in our 2023 Annual Report. For equity awards vested during the applicable Covered Year, the fair value was based on the closing stock price plus accumulated dividend equivalents at the vesting date. For outstanding equity awards for which the performance conditions have not been achieved, the year-end fair value was determined using a Monte Carlo simulation model. The increases or decreases in the year-end fair value were mainly driven by changes in our stock price. For outstanding equity awards for which all the performance conditions have been achieved but additional time-based service conditions are required, the year-end fair value was based on the closing stock price plus accumulated dividend equivalents. |
Pay Versus Performance
| (3) For purposes of this tabular disclosure, our peer group represents the PHLX Index, which we also disclose in the stock performance graph required by Item 201(e) of Regulation S-K included in our 2023 Annual Report. For each Covered Year, our TSR and our peer group’s TSR were calculated as the cumulative TSR from December 31, 2019 through the last day of the applicable Covered Year, assuming that $100 was invested on December 31, 2019. Because fiscal years are presented in the table in reverse chronological order (from top to bottom), the table should be read from bottom to top for purposes of understanding cumulative returns over time. |
Pay Versus Performance
| (4) The amounts represent GAAP net income. |
Pay Versus Performance
| (5) In our assessment, the Company-Selected Measure is our revenue growth rate, which represents the most important financial performance measure used by us to link CAP to our NEOs for 2023 to our performance. Refer to “Named Executive Officer Compensation — Compensation Discussion and Analysis” for further discussion. Revenue growth rate represents the year-over-year percentage increase in GAAP revenue. While the performance measure under our long-term equity compensation program for 2023 is based on the average of our three-year revenue growth rate, the Company-Selected Measure presented in the table covers our one-year revenue growth rate for each applicable Covered Year in accordance with SEC rules. |