DEF 14A 1 ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a)

OF THE SECURITIES EXCHANGE ACT OF 1934

(Amendment No.     )

 

Filed by the Registrant    x

 

Filed by a Party other than the Registrant    ¨

 

Check the appropriate box:

 

¨ Preliminary Proxy Statement

 

¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

x Definitive Proxy Statement

 

¨ Definitive Additional Materials

 

¨ Soliciting Material Pursuant to Section 240.14a-12

 

POLYCOM, INC.

 

(Name of Registrant as Specified In Its Charter)

 

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

x No fee required.

 

¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

  (1) Title of each class of securities to which transaction applies:

 

 

 

  (2) Aggregate number of securities to which transaction applies:

 

 

 

  (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

  (4) Proposed maximum aggregate value of transaction:

 

 

 

  (5) Total fee paid:

 

 

       $

 

 

¨ Fee paid previously with preliminary materials.

 

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

  (1) Amount previously paid:

 

 

 

  (2) Form, Schedule or Registration Statement No.:

 

 

 

  (3) Filing Party:

 

 

 

  (4) Date Filed:

 

 

 


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LOGO

 

 

 

NOTICE OF 2011 ANNUAL MEETING OF STOCKHOLDERS

May 26, 2011

 

 

 

To Polycom Stockholders:

 

Notice is hereby given that the 2011 Annual Meeting of Stockholders (the “2011 Annual Meeting”) of Polycom, Inc., a Delaware corporation, will be held on Thursday, May 26, 2011, at 10:00 a.m., Pacific time, at Polycom’s principal executive offices located at 4750 Willow Road, Pleasanton, California 94588, for the following purposes:

 

  1. To elect the seven directors listed in the accompanying proxy statement to serve for the ensuing year and until their successors are duly elected and qualified.

 

  2. To approve an amendment to Polycom’s Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 175,000,000 to 350,000,000.

 

  3. To approve Polycom’s 2011 Equity Incentive Plan.

 

  4. To approve an amendment to Polycom’s 2005 Employee Stock Purchase Plan to increase the number of shares of common stock reserved for issuance under the plan by 3,500,000.

 

  5. To conduct a non-binding advisory vote on executive compensation.

 

  6. To conduct a non-binding advisory vote on the frequency of holding future advisory votes on executive compensation.

 

  7. To ratify the appointment of PricewaterhouseCoopers LLP as Polycom’s independent registered public accounting firm for the fiscal year ending December 31, 2011.

 

  8. To transact such other business as may properly come before the meeting or any adjournment thereof.

 

The preceding items of business are more fully described in the proxy statement accompanying this notice. Any action on the items of business described above may be considered at the 2011 Annual Meeting at the time and on the date specified above or at any time and date to which the 2011 Annual Meeting may be properly adjourned or postponed.

 

This year we are again taking advantage of a U.S. Securities and Exchange Commission rule that allows us to furnish our proxy materials over the Internet to all of our stockholders rather than in paper form. We believe that this delivery process reduces our environmental impact and lowers the costs of printing and distributing our proxy materials without impacting our stockholders’ timely access to this important information. Accordingly, stockholders of record at the close of business on April 1, 2011, will receive a Notice of Internet Availability of Proxy Materials and may vote at the 2011 Annual Meeting (the “Notice of Internet Availability”) and any postponements or adjournments of the meeting. The Notice of Internet Availability is being distributed to stockholders on or about April 13, 2011.

 

Your vote is very important. Whether or not you plan to attend the 2011 Annual Meeting, we encourage you to read the proxy statement and vote as soon as possible. For specific instructions on how to vote your shares, please refer to the section entitled “Questions and Answers About the 2011 Annual Meeting and Procedural Matters” and the instructions on the Notice of Internet Availability.

 

All stockholders are cordially invited to attend the 2011 Annual Meeting in person. Any stockholder attending the 2011 Annual Meeting may vote in person even if such stockholder has previously voted by another method, and any previous votes that were submitted by the stockholder, whether by Internet, telephone or mail, will be superseded by the vote that such stockholder casts at the 2011 Annual Meeting.

 

Thank you for your ongoing support of Polycom.

 

By Order of the Board of Directors of Polycom, Inc.

LOGO

 

Andrew M. Miller
Chief Executive Officer, President and Director


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PROXY STATEMENT

FOR 2011 ANNUAL MEETING OF STOCKHOLDERS

 

Table of Contents

 

     Page  

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 26, 2011

     1   

QUESTIONS AND ANSWERS ABOUT THE 2011 ANNUAL MEETING AND PROCEDURAL MATTERS

     1   

Why am I receiving these proxy materials?

     1   

Where is the 2011 Annual Meeting?

     1   

Can I attend the 2011 Annual Meeting?

     2   

Who is entitled to vote at the 2011 Annual Meeting?

     2   

What is the difference between holding shares as a stockholder of record or as a beneficial owner?

     2   

How can I vote my shares in person at the 2011 Annual Meeting?

     2   

How can I vote my shares without attending the 2011 Annual Meeting?

     2   

How many shares must be present or represented to conduct business at the 2011 Annual Meeting?

     3   

What proposals will be voted on at the 2011 Annual Meeting?

     3   

What is the voting requirement to approve each of the proposals?

     4   

How are votes counted?

     4   

What is the effect of not casting a vote at the 2011 Annual Meeting?

     5   

How does the Board of Directors recommend that I vote?

     5   

What happens if additional matters are presented at the 2011 Annual Meeting?

     5   

Can I change my vote?

     5   

What happens if I decide to attend the 2011 Annual Meeting, but I have already voted or submitted a proxy card covering my shares?

     6   

What should I do if I receive more than one set of voting materials?

     6   

Is my vote confidential?

     6   

Who will serve as inspector of election?

     6   

Where can I find the voting results of the 2011 Annual Meeting?

     6   

Who will bear the cost of soliciting votes for the 2011 Annual Meeting?

     7   

What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to serve as directors?

     7   

How may I obtain a separate copy of the Notice of Internet Availability or the 2010 Annual Report?

     8   

 

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     Page  
PROPOSAL ONE—ELECTION OF DIRECTORS      9   

General

     9   

Nominees

     9   

Director Qualifications and Diversity

     9   

Information Regarding the Nominees

     10   

PROPOSAL TWO—APPROVAL OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

     14   

General

     14   

Required Vote

     15   
PROPOSAL THREE—APPROVAL OF THE 2011 EQUITY INCENTIVE PLAN      16   

Reason for the Amendment

     16   

Changes Made in the 2011 Plan from the 2004 Plan

     16   

Required Vote

     17   

Description of the 2011 Equity Incentive Plan

     17   

Summary of U.S. Federal Income Tax Consequences

     22   

Participation in the Plans

     24   

Summary

     24   
PROPOSAL FOUR—APPROVAL OF AN AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN      25   

Reason for the Amendment

     25   

Required Vote

     25   

Description of the ESPP

     25   

Number of Shares Purchased by Certain Individuals and Groups

     27   

Tax Aspects

     27   
PROPOSAL FIVE—ADVISORY VOTE ON EXECUTIVE COMPENSATION      29   

Required Vote

     29   

PROPOSAL SIX—ADVISORY VOTE ON THE FREQUENCY OF HOLDING FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION

     30   

Required Vote

     31   

PROPOSAL SEVEN—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     32   

General

     32   

Principal Accounting Fees and Services

     32   

Pre-Approval of Audit and Non-Audit Services

     33   

 

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CORPORATE GOVERNANCE

     34   

Corporate Governance Principles and Code of Business Ethics and Conduct

     34   

Director Independence

     34   

Board Leadership Structure

     34   

Board Role in Risk Oversight

     35   

Board Meetings and Committees

     35   

Compensation Committee Interlocks and Insider Participation

     37   

Process for Recommending Candidates for Election to the Board of Directors

     37   

Director Resignation

     38   

Attendance at Annual Meetings of Stockholders by the Board of Directors

     39   

Contacting the Board of Directors

     39   

EXECUTIVE COMPENSATION

     40   

Compensation Discussion and Analysis

     40   

Compensation Committee Report

     69   

Summary Compensation Table

     70   

Grants of Plan-Based Awards in 2010

     72   

Outstanding Equity Awards at 2010 Fiscal Year-End

     74   

2010 Option Exercises and Stock Vested

     75   

Potential Payments Upon Termination or Change of Control

     76   

Compensation of Directors

     81   

Equity Compensation Plan Information

     83   

Number of Awards Granted Annually for Past Three Fiscal Years

     84   

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     85   

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     85   

OWNERSHIP OF SECURITIES

     86   

AUDIT COMMITTEE REPORT

     88   

OTHER MATTERS

     89   

APPENDIX A: AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

     A-1   

APPENDIX B: 2011 EQUITY INCENTIVE PLAN

     B-1   

APPENDIX C: 2005 EMPLOYEE STOCK PURCHASE PLAN

     C-1   

 

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POLYCOM, INC.

4750 Willow Road

Pleasanton, California 94588

 

 

 

PROXY STATEMENT

FOR 2011 ANNUAL MEETING OF STOCKHOLDERS

 

 

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 26, 2011

 

The proxy statement and annual report to stockholders are available at www.edocumentview.com/plcm.

 

In accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission (the “SEC”), we are pleased to provide access to our proxy materials over the Internet to all of our stockholders rather than in paper form. Accordingly, a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) will be mailed to our stockholders on or about April 13, 2011. Stockholders will have the ability to access the proxy materials on a website at www.edocumentview.com/plcm or request a printed set of the proxy materials be sent to them, by following the instructions in the Notice of Internet Availability. By furnishing a notice and providing access to our proxy materials by the Internet, we are lowering the costs and reducing the environmental impact of our annual meeting.

 

The Notice of Internet Availability will also provide instructions on how you may request that we send future proxy materials to you electronically by email or in printed form by mail. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email or in printed form by mail will remain in effect until you terminate it. We encourage you to choose to receive future proxy materials by email, which will allow us to provide you with the information you need in a more timely manner, will save us the cost of printing and mailing documents to you and will conserve natural resources.

 

QUESTIONS AND ANSWERS ABOUT THE 2011 ANNUAL MEETING

AND PROCEDURAL MATTERS

 

Q: Why am I receiving these proxy materials?

 

A: The Board of Directors of Polycom, Inc. is providing these proxy materials to you in connection with the solicitation of proxies for use at Polycom’s 2011 Annual Meeting of Stockholders (the “2011 Annual Meeting”) to be held Thursday, May 26, 2011, at 10:00 a.m., Pacific time, and at any adjournment or postponement thereof, for the purpose of considering and acting upon the matters set forth in this proxy statement. These proxy materials are being distributed to you on or about April 13, 2011. As a stockholder, you are invited to attend the 2011 Annual Meeting and are requested to vote on the proposals described in this proxy statement.

 

Q: Where is the 2011 Annual Meeting?

 

A: The 2011 Annual Meeting will be held at Polycom’s principal executive offices, located at 4750 Willow Road, Pleasanton, California 94588. Stockholders may request directions to our principal executive offices in order to attend the 2011 Annual Meeting by calling (925) 924-5907.

 

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Q: Can I attend the 2011 Annual Meeting?

 

A: You are invited to attend the 2011 Annual Meeting if you were a stockholder of record or a beneficial owner as of April 1, 2011 (the “Record Date”). You should bring photo identification for entrance to the 2011 Annual Meeting. The meeting will begin promptly at 10:00 a.m., Pacific time and you should leave ample time for the check-in procedures.

 

Q: Who is entitled to vote at the 2011 Annual Meeting?

 

A: You may vote your shares of Polycom common stock if our records show that you owned your shares of common stock at the close of business on the Record Date. At the close of business on the Record Date, there were 88,216,555 shares of Polycom common stock outstanding and entitled to vote at the 2011 Annual Meeting. You may cast one vote for each share of common stock held by you as of the Record Date on all matters presented.

 

Q: What is the difference between holding shares as a stockholder of record or as a beneficial owner?

 

A: If your shares are registered directly in your name with Polycom’s transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, the “stockholder of record,” and the Notice of Internet Availability has been sent directly to you by Polycom. As the stockholder of record, you have the right to grant your voting proxy directly to Polycom or to a third party, or to vote in person at the 2011 Annual Meeting.

 

If your shares are held by a brokerage account or by a bank or another nominee, you are considered the “beneficial owner” of shares held in “street name,” and the Notice of Internet Availability has been forwarded to you by your broker, trustee or nominee who is considered, with respect to those shares, the stockholder of record. As a beneficial owner, you have the right to direct your broker, trustee or nominee as to how to vote your shares. Please refer to the voting instruction card provided by your broker, trustee or nominee. You are also invited to attend the 2011 Annual Meeting. However, because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the 2011 Annual Meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the 2011 Annual Meeting.

 

Q: How can I vote my shares in person at the 2011 Annual Meeting?

 

A: Shares held in your name as the stockholder of record may be voted in person at the 2011 Annual Meeting. Shares held beneficially in street name may be voted in person at the 2011 Annual Meeting only if you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the 2011 Annual Meeting, we recommend that you also submit your vote as instructed on the Notice of Internet Availability and below, so that your vote will be counted even if you later decide not to attend the 2011 Annual Meeting.

 

Q: How can I vote my shares without attending the 2011 Annual Meeting?

 

A: Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the 2011 Annual Meeting. If you are a stockholder of record, you may vote by submitting a proxy. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker, trustee or nominee. For instructions on how to vote, please refer to the instructions below and those included on the Notice of Internet Availability or, for shares held beneficially in street name, the voting instructions provided to you by your broker, trustee or nominee.

 

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By Internet—Stockholders of record of Polycom common stock with Internet access may submit proxies by following the “Vote by Internet” instructions on the Notice of Internet Availability until 11:59 p.m., Eastern time, on May 25, 2011. If you are a beneficial owner of Polycom common stock held in street name, please check the voting instructions provided by your broker, trustee or nominee for Internet voting availability.

 

By telephone—Stockholders of record of Polycom common stock who live in the United States or Canada may submit proxies by following the “Vote by Telephone” instructions on the Notice of Internet Availability until 11:59 p.m., Eastern time, on May 25, 2011. If you are a beneficial owner of Polycom common stock held in street name, please check the voting instructions provided by your broker, trustee or nominee for telephone voting availability.

 

By mail—Stockholders of record of Polycom common stock may request a paper proxy card from Polycom by following the procedures outlined in the Notice of Internet Availability. If you elect to vote by mail, please indicate your vote by completing, signing and dating the proxy card where indicated and by returning it in the prepaid envelope that will be included with the proxy card. Proxy cards submitted by mail must be received by the time of the meeting in order for your shares to be voted. Polycom stockholders who hold shares beneficially in street name may vote by mail by completing, signing and dating the voting instructions provided by their brokers, trustees or nominees and mailing them in the accompanying pre-addressed envelopes.

 

Q: How many shares must be present or represented to conduct business at the 2011 Annual Meeting?

 

A: The presence of the holders of a majority of the shares entitled to vote at the 2011 Annual Meeting is necessary to constitute a quorum at the 2011 Annual Meeting. Such stockholders are counted as present at the meeting if (1) they are present in person at the 2011 Annual Meeting or (2) have properly submitted a proxy.

 

Under the General Corporation Law of the State of Delaware, abstentions and broker “non-votes” are counted as present and entitled to vote and are, therefore, included for the purposes of determining whether a quorum is present at the 2011 Annual Meeting.

 

A broker “non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received voting instructions from the beneficial owner.

 

Q: What proposals will be voted on at the 2011 Annual Meeting?

 

A: The proposals scheduled to be voted on at the 2011 Annual Meeting are:

 

   

The election of seven directors to serve for the ensuing year and until their successors are duly elected and qualified;

 

   

The approval of Polycom’s Amended and Restated Certificate of Incorporation to increase the number of shares of common stock authorized;

 

   

The approval of Polycom’s 2011 Equity Incentive Plan;

 

   

The approval of an amendment to Polycom’s 2005 Employee Stock Purchase Plan to increase the number of shares of common stock reserved for issuance thereunder;

 

   

The non-binding advisory vote on executive compensation;

 

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The non-binding advisory vote on the frequency of holding future advisory votes on executive compensation; and

 

   

The ratification of the appointment of PricewaterhouseCoopers LLP as Polycom’s independent registered public accounting firm for the fiscal year ending December 31, 2011.

 

Q: What is the voting requirement to approve each of the proposals?

 

A: The voting requirements to approve each of the proposals is as follows:

 

   

A plurality of the votes cast is required for the election of directors (Proposal One) and to approve the advisory vote on the frequency of holding future advisory votes on executive compensation (Proposal Six).

 

   

The affirmative vote of a majority of the shares entitled to vote at the 2011 Annual Meeting is required to approve Polycom’s Amended and Restated Certificate of Incorporation (Proposal Two).

 

   

The affirmative vote of a majority of votes cast is required to approve Polycom’s 2011 Equity Incentive Plan (Proposal Three), the amendment to Polycom’s 2005 Employee Stock Purchase Plan (Proposal Four) and the advisory vote on Polycom’s executive compensation (Proposal Five) and to ratify the appointment of PricewaterhouseCoopers LLP as Polycom’s independent registered public accounting firm (Proposal Seven).

 

Q: How are votes counted?

 

A: You may vote “FOR” or “WITHHOLD” on each of the nominees for election as director (Proposal One). The seven nominees for director receiving the highest number of affirmative votes will be elected as directors. Therefore, abstentions or broker non-votes will not affect the outcome of the election.

 

You may vote “FOR,” “AGAINST” or “ABSTAIN” on the proposal to approve the Amended and Restated Certificate of Incorporation (Proposal Two). Abstentions and broker non-votes have the same effect as a vote against this proposal.

 

You may vote “FOR,” “AGAINST” or “ABSTAIN” on the proposals to approve the 2011 Equity Incentive Plan (Proposal Three); the amendment to the 2005 Employee Stock Purchase Plan (Proposal Four); the advisory vote on Polycom’s executive compensation (Proposal Five); and the ratification of the appointment of PricewaterhouseCoopers LLP as Polycom’s independent registered public accounting firm (Proposal Seven). Abstentions are deemed to be votes cast and have the same effect as a vote against these proposals. However, broker non-votes are not deemed to be votes cast and, therefore, are not included in the tabulation of the voting results on these proposals.

 

You may vote “1 YEAR,” “2 YEARS,” “3 YEARS,” or “ABSTAIN” with respect to the advisory vote on the frequency of holding future advisory votes on executive compensation (Proposal Six). If you abstain from voting on Proposal Six, the abstention will not have an effect on the outcome of the vote. Broker non-votes are not deemed to be votes cast and, therefore, are not included in the tabulation of the voting results on this proposal.

 

All shares entitled to vote and represented by properly executed proxies received prior to the 2011 Annual Meeting (and not revoked) will be voted at the 2011 Annual Meeting in accordance with the instructions indicated. If you submit a proxy via the Internet, by telephone or by mail and do not make voting selections, the shares represented by that proxy will be voted as recommended by the Board of Directors.

 

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Q: What is the effect of not casting a vote at the 2011 Annual Meeting?

 

A: If you are a stockholder of record and you do not cast your vote, no votes will be cast on your behalf on any of the items of business at the 2011 Annual Meeting.

 

If you are a beneficial owner of shares held in street name, it is critical that you cast your vote if you want it to count in the election of directors (Proposal One); the approval of the Amended and Restated Certificate of Incorporation (Proposal Two); the approval of the 2011 Equity Incentive Plan (Proposal Three); the approval of the amendment to the 2005 Employee Stock Purchase Plan (Proposal Four); the advisory vote on executive compensation (Proposal Five); and the advisory vote on the frequency of holding future advisory votes on executive compensation (Proposal Six). In the past, if you held your shares in street name and you did not indicate how you wanted your shares voted in the election of directors, your bank or broker was allowed to vote those shares on your behalf in the election of directors as they felt appropriate. Recent changes in regulation were made to take away the ability of your bank or broker to vote your uninstructed shares in the election of directors on a discretionary basis. Thus, if you hold your shares in street name and you do not instruct your bank or broker how to vote in the election of directors, no votes will be cast on your behalf. Your bank or broker will, however, continue to have discretion to vote any uninstructed shares on the ratification of the appointment of Polycom’s independent registered public accounting firm (Proposal Seven).

 

Q: How does the Board of Directors recommend that I vote?

 

A: The Board of Directors recommends that you vote your shares:

 

   

FOR” the seven nominees for election as directors (Proposal One);

 

   

FOR” the approval of Polycom’s Amended and Restated Certificate of Incorporation (Proposal Two);

 

   

FOR” the approval of Polycom’s 2011 Equity Incentive Plan (Proposal Three);

 

   

FOR” the approval of the amendment to Polycom’s 2005 Employee Stock Purchase Plan (Proposal Four);

 

   

FOR” the approval of the compensation for Polycom’s named executive officers (Proposal Five);

 

   

For “3 YEARS” as the frequency for holding future advisory votes on the compensation of Polycom’s named executive officers (Proposal Six); and

 

   

FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as Polycom’s independent registered public accounting firm for the fiscal year ending December 31, 2011 (Proposal Seven).

 

Q: What happens if additional matters are presented at the 2011 Annual Meeting?

 

A: If any other matters are properly presented for consideration at the 2011 Annual Meeting, including, among other things, consideration of a motion to adjourn the 2011 Annual Meeting to another time or place (including, without limitation, for the purpose of soliciting additional proxies), the persons named as proxy holders, Andrew M. Miller and Sayed M. Darwish, or either of them, will have discretion to vote on those matters in accordance with their best judgment. Polycom does not currently anticipate that any other matters will be raised at the 2011 Annual Meeting.

 

Q: Can I change my vote?

 

A: Subject to any rules your broker, trustee or nominee may have, you may change your proxy instructions at any time before your proxy is voted at the 2011 Annual Meeting.

 

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If you are the stockholder of record, you may change your vote (1) by granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described above (and until the applicable deadline for each method), (2) by providing a written notice of revocation to Polycom’s Corporate Secretary at Polycom, Inc., 4750 Willow Road, Pleasanton, CA 94588 prior to your shares being voted, or (3) by attending the 2011 Annual Meeting and voting in person. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request.

 

If you are a beneficial owner of shares held in street name, you may change your vote by (1) submitting new voting instructions to your broker, trustee or nominee or (2) if you have obtained a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote your shares, by attending the 2011 Annual Meeting and voting in person.

 

Q: What happens if I decide to attend the 2011 Annual Meeting, but I have already voted or submitted a proxy card covering my shares?

 

A: Subject to any rules your broker, trustee or nominee may have, you may attend the 2011 Annual Meeting and vote in person even if you have already voted or submitted a proxy card. Any previous votes that were submitted by you will be superseded by the vote you cast at the 2011 Annual Meeting. Please be aware that attendance at the 2011 Annual Meeting will not, by itself, revoke a proxy.

 

If a broker, trustee or nominee beneficially holds your shares in street name and you wish to attend the 2011 Annual Meeting and vote in person, you must obtain a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote the shares.

 

Q: What should I do if I receive more than one set of voting materials?

 

A: You may receive more than one set of voting materials, including multiple copies of proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card or voting instruction card that you receive to ensure that all your shares are voted.

 

Q: Is my vote confidential?

 

A: Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within Polycom or to third parties, except: (1) as necessary to meet applicable legal requirements, (2) to allow for the tabulation of votes and certification of the vote and (3) to facilitate a successful proxy solicitation. Occasionally, stockholders provide written comments on their proxy cards, which may be forwarded to Polycom management.

 

Q: Who will serve as inspector of election?

 

A: The inspector of election will be Computershare Trust Company, N.A.

 

Q: Where can I find the voting results of the 2011 Annual Meeting?

 

A: We intend to announce preliminary voting results at the 2011 Annual Meeting and will publish final results in a Current Report on Form 8-K, which will be filed with the SEC within four (4) business days of the 2011 Annual Meeting.

 

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Q: Who will bear the cost of soliciting votes for the 2011 Annual Meeting?

 

A: We will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. We may reimburse brokerage firms, custodians, nominees, fiduciaries and other persons representing beneficial owners for their reasonable expenses in forwarding solicitation material to such beneficial owners. Our directors, officers and employees may also solicit proxies in person or by other means of communication. Such directors, officers and employees will not be additionally compensated but may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation. We have retained The Proxy Advisory Group LLC to aid in the solicitation of proxies from certain brokers, bank nominees and other institutional owners for an estimated fee of $10,000 plus reasonable out-of-pocket expenses.

 

If you choose to access the proxy materials and/or vote over the Internet, you are responsible for Internet access charges you may incur. If you choose to vote by telephone, you are responsible for telephone charges you may incur.

 

Q: What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to serve as directors?

 

A: You may submit proposals, including recommendations of director candidates, for consideration at future stockholder meetings.

 

For inclusion in Polycom’s proxy materials—Stockholders may present proper proposals for inclusion in Polycom’s proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals in writing to Polycom’s Corporate Secretary in a timely manner. In order to be included in the proxy statement for the 2012 annual meeting of stockholders, stockholder proposals must be received by Polycom’s Corporate Secretary no later than December 14, 2011, and must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

To be brought before annual meeting—In addition, Polycom’s bylaws establish an advance notice procedure for stockholders who wish to present certain matters before an annual meeting of stockholders.

 

In general, nominations for the election of directors may be made (1) by or at the direction of the Board of Directors, or (2) by a stockholder who has delivered written notice to Polycom’s Secretary within the Notice Period (as defined below) and who was a stockholder at the time of such notice and as of the record date. The notice must contain specified information about the nominees and about the stockholder proposing such nominations.

 

Polycom’s bylaws also provide that the only business that may be conducted at an annual meeting is business that is (1) specified in the notice of meeting given by or at the direction of the Board of Directors, (2) properly brought before the meeting by or at the direction of the Board of Directors or (3) properly brought before the meeting by a stockholder who has delivered written notice to Polycom’s Corporate Secretary within the Notice Period (as defined below) and who was a stockholder at the time of such notice and as of the record date. The notice must contain specified information about the matters to be brought before such meeting and about the stockholder proposing such matters.

 

The “Notice Period” is defined as that period not less than 45 days nor more than 75 days prior to the one year anniversary of the date on which Polycom mailed its proxy materials to stockholders in connection with the previous year’s annual meeting of stockholders. As a result, the Notice Period for the 2012 annual meeting of stockholders will start on January 29, 2012 and end on February 28, 2012.

 

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If a stockholder who has notified Polycom of his or her intention to present a proposal at an annual meeting does not appear to present his or her proposal at such meeting, Polycom need not present the proposal for vote at such meeting.

 

A copy of the full text of the bylaw provisions discussed above may be obtained by writing to Polycom’s Corporate Secretary at our principal executive offices or by accessing Polycom’s filings on the SEC’s website at www.sec.gov. All notices of proposals by stockholders, whether or not included in Polycom’s proxy materials, should be sent to Polycom’s Corporate Secretary at our principal executive offices.

 

Q: How may I obtain a separate copy of the Notice of Internet Availability or the 2010 Annual Report?

 

A: If you share an address with another stockholder, each stockholder may not receive a separate copy of the Notice of Internet Availability and 2010 Annual Report. Stockholders may request to receive separate or additional copies of the Notice of Internet Availability and 2010 Annual Report by calling (925) 924-5907 or by writing to Polycom, Inc., 4750 Willow Road, Pleasanton, CA 94588, Attention: Investor Relations. Stockholders who share an address and receive multiple copies of the Notice of Internet Availability and 2010 Annual Report can also request to receive a single copy by following the instructions above.

 

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PROPOSAL ONE

 

ELECTION OF DIRECTORS

 

General

 

Polycom’s bylaws currently set the number of members of Polycom’s Board of Directors at eight. Because Michael R. Kourey is not standing for re-election, seven directors are to be elected to Polycom’s Board of Directors at the 2011 Annual Meeting, all of whom have been recommended for nomination by the Corporate Governance and Nominating Committee of the Board of Directors, and all of whom are currently serving as directors of Polycom. All nominees, except for Andrew M. Miller, were elected by the stockholders at last year’s annual meeting. In June 2010, the Board of Directors appointed Mr. Miller to the Board of Directors in connection with his appointment as President and Chief Executive Officer of Polycom. Polycom’s bylaws have been amended, effective immediately prior to the 2011 Annual Meeting, to reduce the size of the Board of Directors to seven.

 

Each director holds office until the next annual meeting of stockholders or until that director’s successor is duly elected and qualified. Each person nominated for election has agreed to serve if elected, and management has no reason to believe that any nominee will be unavailable to serve. In the event any nominee is unable or declines to serve as a director at the time of the 2011 Annual Meeting, the proxies will be voted for any nominee who may be proposed by the Corporate Governance and Nominating Committee and designated by the present Board of Directors to fill the vacancy. Unless otherwise instructed, the proxy holders will vote the proxies received by them FOR the nominees named below. Your proxies cannot be voted for a greater number of persons than the number of nominees named in this proxy statement.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE

FOR THE ELECTION OF THE NOMINEES LISTED BELOW.

 

Nominees

 

The names of the nominees for director, their ages, their positions with Polycom and other biographical information as of March 31, 2011, are set forth below. There are no family relationships among any of Polycom’s directors or executive officers. Beneath the biographical details of each nominee or director listed below, we have also detailed the specific experience, qualifications, attributes or skills of each nominee or director that led the Board of Directors to conclude that each nominee or director should serve on the Board of Directors.

 

Name

   Age     

Position

Andrew M. Miller

     51      

Chief Executive Officer, President and Director

Betsy S. Atkins (2)(3)

     55      

Director

David G. DeWalt (2)

     46       Chairman of the Board of Directors

John A. Kelley, Jr. (1)(3)

     61       Director

D. Scott Mercer (1)(3)

     60       Director

William A. Owens (2)

     70       Director

Kevin T. Parker (1)

     51       Director

 

(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Corporate Governance and Nominating Committee

 

Director Qualifications and Diversity

 

We have adopted a policy for evaluating director candidates, which is described in more detail in the “Corporate Governance” section, under the heading “Process for Recommending Candidates for Election to the Board of Directors,” on page 37 below. Under this policy, the Corporate Governance and Nominating Committee considers issues such as character, judgment, diversity, age, expertise, business experience, length of service, independence, other commitments and the like in evaluating Board candidates and members of the Board of

 

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Directors. Polycom does not maintain a diversity policy with respect to its Board of Directors. As noted above, however, Polycom does consider diversity to be a relevant consideration, among others, in the process of evaluating and identifying director candidates, and views diversity broadly to consider those attributes that it believes will constitute the Board of Directors best able to guide the Company and its strategic direction through a variety of backgrounds, viewpoints, professional experiences, skills, educational experiences and other such attributes. Polycom believes each of its current directors has broad experience at the policy-making level in business and in the technology industry and brings a strong set of relevant skills to the Board of Directors, giving the Board of Directors as a whole competence and experience in a wide variety of areas, including technology industry expertise, operations, corporate governance and compliance, board service, executive management, finance, customer segments, mergers and acquisitions, and international business. As the biographical information of our directors illustrates, all of our directors satisfy our criteria for Board of Directors membership. When identifying director candidates, we take into account the present and future needs of the Board of Directors and the expertise and experience required for committees of the Board of Directors. For instance, depending on the composition of the Board of Directors at a given time, a candidate capable of meeting the requirements of an audit committee financial expert might be a more attractive candidate than a candidate with significantly more technology experience, or vice versa. We also consider the character, judgment and integrity of director candidates, which we evaluate through reference checks, background verification and reputation in the business community. We believe all of our directors to be of good character, sound judgment and high integrity. Our principal goal with respect to director qualifications is to seat directors who are best able to effectively carry out their oversight duties, increase the overall effectiveness of the Board of Directors and ensure that the best interests of stockholders are being served. Beneath the biographical details of each nominee or director listed below is a discussion of the specific experience, qualifications, attributes or skills of each nominee that led the Board of Directors to conclude that each nominee should continue to serve on the Board of Directors.

 

Information Regarding the Nominees

 

Andrew M. Miller has been a director of Polycom since June 2010. Mr. Miller has served as Polycom’s President and Chief Executive Officer since May 2010. He also served as Polycom’s Executive Vice President of Global Field Operations from July 2009 to May 2010. Prior to joining Polycom, Mr. Miller served as global president of IPC Information Systems, LLC, a trading technology and network connectivity provider, from December 2007 to June 2009. Prior to his position with IPC, Mr. Miller joined Monster Worldwide Inc., a provider of global online employment solutions, as Senior Vice President, Monster North America, from June 2006 to August 2007. Mr. Miller served as Chief Executive Officer of Tandberg asa, a video solutions provider, from January 2002 to June 2006. Mr. Miller also held a number of roles at Cisco Systems, Inc. from 1990 to 2001, including Vice President, US Area Sales (West) and Vice President, Marketing (Customer Advocacy). Mr. Miller served on the board of directors of BroadSoft, Inc. from June 2006 to October 2010. Mr. Miller holds a B.S. in Business Administration from the University of South Carolina.

 

Qualifications to serve as director:    Mr. Miller is uniquely qualified to contribute to Polycom’s future delivery on its strategic initiatives through his experience as a 29-year technology industry and sales veteran with deep knowledge of strategic and operational issues within the technology industry and a breadth of direct, industry-specific experience as the former chief executive officer of Tandberg and having served in other notable technology leadership roles, including at Cisco Systems and IPC Information Systems. During his career, Mr. Miller has developed a strong track record for driving growth at companies such as Cisco Systems and Tandberg, building customer relationships and leading world-class organizations. In addition, Mr. Miller has a comprehensive understanding of Polycom’s business, operations, competition and financial position.

 

Betsy S. Atkins has been a director of Polycom since April 1999. Ms. Atkins has served as the Chief Executive Officer of Baja LLC, an independent venture capital firm focused on technology, renewable energy and life sciences industries, since 1994. Ms. Atkins served as Chief Executive Officer and Chairman of the board of directors of Clear Standards, Inc., a provider of enterprise carbon management and sustainability solutions, from February 2009 until August 2009 when Clear Standards was acquired by SAP AG, a business software

 

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company. Previously, Ms. Atkins served as Chairman and Chief Executive Officer of NCI, Inc., a functional food/nutraceutical company, from 1991 through 1993. Ms. Atkins was a co-founder of Ascend Communications, Inc. in 1989 and a member of its board of directors, and served as its EVP of sales, marketing, professional services and international operations prior to its acquisition by Lucent Technologies. Ms. Atkins served on the boards of directors of Towers Watson & Co. from January 2010 to November 2010, Reynolds American Inc. from July 2004 to June 2010 and has served on the boards of directors of SunPower Corporation since October 2005 and Chico’s FAS, Inc. since January 2004, as well as the boards of a number of private companies. Ms. Atkins is also an advisor to British Telecom and SAP and was a presidential-appointee to the Pension Benefit Guaranty Corporation advisory committee. Ms. Atkins holds a B.A. from the University of Massachusetts.

 

Qualifications to serve as director:    Ms. Atkins is independent and has deep expertise in many areas, including senior management and operational experience in the telecommunications industry. As a co-founder and Executive Vice President of Ascend Communications and as an advisor to British Telecom, Ms. Atkins has a strong skill set in sales, marketing and international operations in the telecommunications industry and extensive knowledge of its principal customer segments. In addition, Ms. Atkins has significant public board experience, including large, multi-national enterprises, as well as service as a director of The NASDAQ Stock Market LLC and as a former appointee to the Pension Benefit Guaranty corporation advisory committee, which gives her broad experience and thought leadership in corporate governance matters generally, including executive compensation, and evolving best practices in corporate governance. Ms. Atkins currently chairs Polycom’s compensation committee and previously served as Lead Independent Director from May 2003 to February 2006.

 

David G. DeWalt has been a director of Polycom since November 2005. In May 2010, Mr. DeWalt was named Chairman of the Board of Directors. Mr. DeWalt served as President, Chief Executive Officer and director of McAfee, Inc., a provider of antivirus software and intrusion prevention solutions, from April 2007 until February 2011 when McAfee was acquired by Intel Corporation, a maker of semiconductor chips. Mr. DeWalt now serves as President of McAfee, a wholly-owned subsidiary of Intel, effective February 2011. From December 2003 to March 2007, Mr. DeWalt held various positions at EMC Corporation, a developer and provider of information infrastructure technology and solutions, including as Executive Vice President, EMC Software Group, and the President of EMC’s Documentum and Legato Software divisions. Prior to joining EMC, Mr. DeWalt served as President and Chief Executive Officer of Documentum, Inc. from July 2001 to December 2003, Executive Vice President and Chief Operating Officer of Documentum from October 2000 to July 2001, and Executive Vice President and General Manager, eBusiness Unit, of Documentum from August 1999 to October 2000. Prior to joining Documentum in 1999, Mr. DeWalt was the founding principal and Vice President of Eventus Software from August 1997 to December 1998. Following the 1998 acquisition of Eventus by Segue, Inc. Software, Mr. DeWalt served as Segue’s Vice President, North American sales. Mr. DeWalt holds a B.S. in Computer Science and Electrical Engineering from The University of Delaware.

 

Qualifications to serve as director:    Mr. DeWalt is independent and has extensive senior management expertise in the technology industry, including previously as chief executive officer of McAfee, Inc. and as Executive Vice President, EMC Software Group, of EMC Corporation and now in his current role as President of McAfee, a wholly-owned subsidiary of Intel Corporation. Mr. DeWalt’s strategic and operational experience as a senior executive officer of a Fortune 500 company and recently as CEO of McAfee is directly relevant to strategic and operational issues faced by Polycom, including strategic positioning, go-to-market initiatives, international operations, strategic partnerships and mergers and acquisitions. In addition, Mr. DeWalt has a comprehensive understanding of the technology industry generally and of the prevailing industry trends, including industry consolidation. Mr. DeWalt is a member of Polycom’s compensation committee (and served as Chair from February 2006 to May 2008) and previously served as Lead Independent Director from May 2008 to May 2010. Mr. DeWalt currently serves as Polycom’s Chairman of the Board.

 

John A. Kelley, Jr. has been a director of Polycom since March 2000. Mr. Kelley has served as the Chief Executive Officer of CereScan Corp., a provider of high-definition functional brain imaging, since July 2009 and as Chairman of the board of directors of CereScan since February 2009. Previously, Mr. Kelley served as the Chairman, President and Chief Executive Officer of McDATA Corporation, a provider of storage networking

 

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and data infrastructure solutions until McDATA was acquired by Brocade Communications Systems, Inc., a data infrastructure company, in January 2007. Mr. Kelley started at McDATA as President and Chief Operating Officer in August 2001. Prior to joining McDATA, Mr. Kelley served as Executive Vice President of Networks at Qwest Communications International, Inc. from August 2000 to December 2000. He served as President of Wholesale Markets for U.S. West, Inc. from May 1998 to July 2000. From 1995 to April 1998, Mr. Kelley served as Vice President and General Manager of Large Business and Government Accounts and President of Federal Services for U.S. West. Prior to joining U.S. West, Mr. Kelley was the Area President for Mead Corporation’s Zellerbach Southwest Business Unit from 1991 to 1995, and held senior positions at Xerox Corporation and NBI, Inc. Mr. Kelley served on the board of directors of McData Corporation from August 2001 until McDATA was acquired in January 2007. Mr. Kelley is also a director of several private company and not-for-profit boards. Mr. Kelley holds a B.S. in business management from the University of Missouri, St. Louis.

 

Qualifications to serve as director:    Mr. Kelley is independent and has broad experience, knowledge and expertise in the communications industry, including as chief executive officer of McDATA and in senior management positions at large telecommunications companies. Mr. Kelley’s strategic and operational experience as a senior executive officer and as chief executive officer in the telecommunications and networking industries is directly relevant to many of the strategic and operational issues faced by Polycom, including strategic planning, operations, finance, governance and industry consolidation. Mr. Kelley currently chairs Polycom’s corporate governance and nominating committee and is a member of the audit committee.

 

D. Scott Mercer has been a director of Polycom since November 2007. Since April 2008, Mr. Mercer has served as the Chief Executive Officer of Conexant Systems, Inc., a semiconductor solutions company that provides products for imaging, video, audio and Internet connectivity applications. Mr. Mercer was appointed to the board of directors of Conexant in May 2003 and was named Chairman of the board of directors of Conexant in August 2008. Mr. Mercer served as interim Chief Executive Officer of Adaptec, Inc., a provider of software and hardware-based storage solutions, from May 2005 through November 2005. Mr. Mercer also served as a senior vice president and advisor to the chief executive officer of Western Digital Corporation, a supplier of disk drives to the personal computer and consumer electronics industries, from February 2004 through December 2004. Prior to that, Mr. Mercer was a Senior Vice President and the Chief Financial Officer of Western Digital Corporation from October 2001 through January 2004. From June 2000 to September 2001, Mr. Mercer served as Vice President and Chief Financial Officer of Teralogic, Inc. From June 1996 to May 2000, Mr. Mercer held various senior operating and financial positions with Dell, Inc. In addition to Conexant, Mr. Mercer served on the boards of directors of Net Ratings, Inc. from January 2001 to June 2007, Adaptec, Inc. from November 2003 to October 2008, SMART Modular Technologies (WWH), Inc. from June 2007 to January 2009, Palm, Inc. from June 2005 until July 2010 when Palm was acquired by Hewlett-Packard Company, and he has served as a director of QLogic Corp. since September 2010. He holds a B.S. in Accounting from California Polytechnic University.

 

Qualifications to serve as director:    Mr. Mercer is independent and an audit committee financial expert, with significant senior management and operational experience over the last 28 years in a number of technology companies. Mr. Mercer’s experience as a senior executive officer, including as both chief executive officer and chief financial officer, of high growth technology companies gives him a strong skill set in planning, operations, compliance and finance matters. Further, Mr. Mercer has significant public board experience which adds to his relevant knowledge and experience. Mr. Mercer serves on Polycom’s audit committee and corporate governance and nominating committee.

 

William A. Owens has been a director of Polycom since December 2005 and was previously a director of Polycom from August 1999 to May 2004. Mr. Owens presently serves as the Chairman of AEA Investors (Asia) since April 2006 and has served as Managing Director, Chairman and Chief Executive Officer of AEA Holdings Asia, a New York private equity company at various times during that period. Mr. Owens previously served as Vice Chairman, Chief Executive Officer and President of Nortel Networks Corporation, a global supplier of

 

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communications equipment, from May 2004 to November 2005. Prior to that, Mr. Owens served as Chairman and Chief Executive Officer of Teledesic LLC, a satellite communications company, from February 1999 to May 2004. During that same period, Mr. Owens also served as Chairman and Chief Executive Officer of Teledesic’s affiliated company, Teledesic Holdings Ltd. From 1996 to 1998, Mr. Owens was President, Chief Operating Officer and Vice Chairman of Science Applications International Corporation (SAIC). Mr. Owens was a career officer in the U.S. Navy where he served as commander of the U.S. Sixth Fleet in 1990 and 1991, and as senior military assistant to Secretaries of Defense Frank Carlucci and Dick Cheney. Mr. Owens’ military career culminated in his position as vice chairman of the Joint Chiefs of Staff where he had responsibility for the reorganization and restructuring of the armed forces in the post-Cold War era. Mr. Owens is widely recognized for bringing commercial high technology into the U.S. Department of Defense for military applications and as the architect of the Revolution in Military Affairs (RMA), an advanced systems technology approach to military operations. Mr. Owens is also a member of the board of directors of CenturyTel, Inc., Wipro Limited and several philanthropic and private company boards. Mr. Owens was a member of the board of directors of Daimler Chrysler AG from November 2003 until April 2009, of Embarq Corporation from May 2006 to July 2009 and of Nortel Networks Corporation from February 2002 to November 2005. Mr. Owens holds a B.A. in mathematics from the U.S. Naval Academy, Bachelor’s and Master’s degrees in politics, philosophy, and economics from Oxford University, and a Master’s degree in Management from George Washington University.

 

Qualifications to serve as director:    Mr. Owens is independent and has extensive experience in the telecommunications industry following a distinguished military career, including as Vice Chairman of the Joint Chiefs of Staff. Mr. Owens has broad senior management and operational experience in the technology industry and at the highest levels in the military and government, where his responsibilities encompassed the reorganization and restructuring of the nation’s military. Mr. Owens brings a level of insight and experience to Polycom’s business and international operations that is unique. In addition, his past and current experience on the board of directors of very large international companies based in Europe and Asia, as well as his current position with AEA Holdings Asia where he devotes extensive time to business in Asia, provides directly relevant knowledge and insight to Polycom’s international operations and global strategies, particularly in the Asia-Pacific region. Mr. Owens serves on Polycom’s compensation committee, and served as Lead Independent Director from February 2006 to May 2008.

 

Kevin T. Parker has been a director of Polycom since January 2005. Mr. Parker has served as President and Chief Executive Officer of Deltek, Inc., a provider of enterprise software applications, since June 2005 and as Chairman of the board of directors of Deltek since April 2006. Prior to joining Deltek, Mr. Parker served as Co-President of PeopleSoft, Inc., an enterprise application software company, from October 2004 to December 2004, as Executive Vice President of Finance and Administration and Chief Financial Officer of PeopleSoft from January 2002 to October 2004, and as Senior Vice President and Chief Financial Officer of PeopleSoft from October 2000 to December 2001. Prior to joining PeopleSoft, Mr. Parker served as Senior Vice President and Chief Financial Officer from 1999 to 2000 at Aspect Communications Corporation, a customer relationship management software company. From 1996 to 1999, Mr. Parker was Senior Vice President of Finance and Administration at Fujitsu Computer Products of America. Mr. Parker also serves on a private company board. Mr. Parker holds a B.S. in Accounting from Clarkson University and sits on its board of trustees.

 

Qualifications to serve as director:    Mr. Parker is independent, an audit committee financial expert, and a recognized technology industry leader with significant senior management and operational experience. Mr. Parker’s service as both a president and chief executive officer, as a chief financial officer and in other significant senior finance roles gives him a valuable perspective into the operations and management of a company. From such roles, Mr. Parker has crucial insight into the technology industry, technology trends, and industry consolidation. In addition to his business and financial acumen, Mr. Parker brings operational experience to the Company from his oversight of administrative, human resources, legal, facilities and IT functions. Mr. Parker serves as the chairman of Polycom’s audit committee.

 

See “Corporate Governance” and “Executive Compensation—Compensation of Directors” below for additional information regarding the Board of Directors.

 

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PROPOSAL TWO

 

APPROVAL OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

 

General

 

The Board of Directors has adopted, subject to stockholder approval, the Amended and Restated Certificate of Incorporation attached as Appendix A to this proxy statement, which increases the number of authorized shares of common stock, $0.0005 par value per share, from 175,000,000 shares to 350,000,000 shares (the “Amended Certificate”). Our current Restated Certificate of Incorporation also authorizes 5,000,000 shares of preferred stock, $0.001 par value per share, and the Amended Certificate does not change the number of authorized shares of preferred stock. If the stockholders approve the Amended Certificate, the Board of Directors intends to file the Amended Certificate with the Secretary of State of the State of Delaware.

 

As of March 15, 2011, 88,166,140 shares of common stock were issued and outstanding, 1,159,717 shares of common stock were reserved for issuance upon exercise of outstanding options, 3,093,508 shares of common stock were reserved for future issuance subject to outstanding performance shares and restricted stock units that remain subject to vesting and/or forfeiture, and no shares of preferred stock were issued and outstanding.

 

The Board of Directors believes that it is prudent to increase the authorized number of shares of common stock in order to maintain a reserve of shares available for immediate issuance to meet business needs promptly as they arise. In addition, the increase in the number of authorized shares of common stock will allow us to continue providing equity incentives to our employees, officers and directors. All authorized but unissued shares of common stock will be available for issuance from time to time for any proper purpose approved by the Board of Directors (including issuances in connection with stock-based employee benefit plans, future stock splits by means of a dividend and issuances to raise capital or effect acquisitions). The Board of Directors believes that maintaining a reserve of common stock will save time and money in responding to future events requiring the issuance of additional shares of common stock, such as a stock split, raising capital, expanding our business or product lines through the acquisition of other businesses or products, or establishing strategic relationships with other companies. There are currently no arrangements, agreements or understandings for the issuance of the additional shares of authorized common stock except for issuances in the ordinary course of business. The Board of Directors does not presently intend to seek further stockholder approval of any particular issuance of shares unless such approval is required by applicable law or the rules of The Nasdaq Stock Market.

 

The additional shares of common stock to be authorized by the Amended Certificate would have rights identical to the currently outstanding common stock of the Company. Our stockholders do not currently have any preemptive or similar rights to subscribe for or purchase any additional shares of common stock that may be issued in the future, and therefore, future issuances of common stock may, depending on the circumstances, have a dilutive effect on the earnings per share, voting power and other interests of existing stockholders.

 

If the Amended Certificate is not approved by the stockholders, our Restated Certificate of Incorporation will continue as currently in effect, which could limit our ability to pursue potential future transactions involving our common stock, such as stock splits and acquisitions.

 

If the Amended Certificate is approved by stockholders, the increase in the authorized number of shares of common stock and the subsequent issuance of such shares could have the effect of delaying or preventing a change in control of the Company without further action by the stockholders. Shares of authorized but unissued common stock could (within the limits imposed by applicable law) be issued in one or more transactions, which would make a change in control of the Company more difficult, and therefore less likely. Any such issuance of additional stock could have the effect of diluting the earnings per share and book value per share of outstanding shares of common stock, and such additional shares could be used to dilute the stock ownership or voting rights of a person seeking to obtain control of the Company. However, the Amended Certificate is not in response to any effort of which we are aware to accumulate our common stock or obtain control of us.

 

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THE BOARD OF DIRECTORS RECOMMENDS A VOTE

FOR APPROVAL OF THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.

 

Required Vote

 

The affirmative vote of the holders of a majority of the outstanding shares of the Company’s common stock entitled to vote at the 2011 Annual Meeting is required to approve the Amended Certificate. Abstentions and broker non-votes will have the same effect as a vote against the approval of the Amended Certificate. If the Amended Certificate is not approved by the stockholders, our Restated Certificate of Incorporation will continue as currently in effect.

 

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PROPOSAL THREE

 

APPROVAL OF THE 2011 EQUITY INCENTIVE PLAN

 

Reason for the Amendment

 

We are asking stockholders to approve the 2011 Equity Incentive Plan (the “2011 Plan”) so that we may continue to achieve our goals of attracting, motivating and retaining our employees through grants of equity awards as well as receive a federal income tax deduction for certain compensation that constitutes “performance-based compensation” within the meaning of Section 162(m) of the Code. The Board of Directors approved the 2011 Plan and terminated our 2004 Equity Incentive Plan (the “2004 Plan”), subject to stockholder approval of the 2011 Plan. If the stockholders do not approve the 2011 Plan, the 2004 Plan will continue under its current terms until it expires or is terminated in accordance with the terms of the 2004 Plan. The 2004 Plan, however, will continue to govern awards previously granted under it. The Board of Directors has determined that it is in the best interests of the Company and its stockholders to adopt a new equity incentive plan and is asking the Company’s stockholders to approve the 2011 Plan.

 

The 2011 Plan’s share reserve which the stockholders will be asked to approve is 9,900,000 shares, plus any shares (not to exceed 6,818,274) that otherwise would have been returned to the 2004 Plan after May 26, 2011, on account of the expiration, cancellation or forfeiture of awards granted under the Company’s 1996 Stock Incentive Plan (the “1996 Plan”) or the 2004 Plan.

 

We strongly believe that the approval of the 2011 Plan is essential to our continued success. The Board of Directors and management believe that equity awards motivate high levels of performance, align the interests of employees and stockholders by giving employees the perspective of an owner with an equity stake in the Company, and provide an effective means of recognizing employee contributions to the success of the Company. The Board of Directors and management believe that equity awards are a competitive necessity in our high-technology industry, and are essential to recruiting and retaining the highly qualified technical and other key personnel who help the Company meet its goals, as well as rewarding and encouraging current employees. The Board of Directors and management believe that the continued ability to grant equity awards will be important to the future success of the Company.

 

The 2011 Plan is also designed to allow the Company to take a full federal income tax deduction for the compensation paid to its executive officers in connection with certain awards granted under the 2011 Plan.

 

Changes Made in the 2011 Plan from the 2004 Plan

 

The following is a summary of the material differences between the 2011 Plan and the 2004 Plan. This comparative summary is qualified in its entirety by reference to the 2011 Plan itself set forth in Appendix B.

 

   

Stockholders are being asked to authorize for issuance under the 2011 Plan a number of shares equal to 9,900,000 shares of the Company’s common stock, plus any Shares (not to exceed 6,818,274) that otherwise would have been returned to the 2004 Plan after May 26, 2011, on account of the expiration, cancellation or forfeiture of awards granted under the 1996 Plan or the 2004 Plan; and

 

   

The 2011 Plan requires that any shares subject to a restricted stock unit, restricted stock, performance share or performance unit award will be counted against the share reserve limits of the 2011 Plan as one and 83/100 (1.83) shares for every one (1) share subject to such award; and if shares acquired pursuant to any restricted stock unit, restricted stock, performance share or performance unit award are forfeited to the Company and would otherwise return to the 2011 Plan, one and 83/100 (1.83) times the number of shares so forfeited or repurchased will return to the 2011 Plan and will again become available for issuance.

 

The Compensation Committee and Board of Directors have approved the 2011 Plan, subject to the approval of our stockholders at the 2011 Annual Meeting.

 

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THE BOARD OF DIRECTORS RECOMMENDS A VOTE

FOR APPROVAL OF THE 2011 EQUITY INCENTIVE PLAN.

 

Required Vote

 

Approval of the 2011 Plan requires the affirmative vote of the holders of a majority of votes cast on the proposal. If stockholders do not approve the 2011 Plan, the 2004 Plan will continue under its current terms until it expires or is terminated in accordance with the terms of the 2004 Plan, and the Company will continue to grant future equity awards from the 2004 Plan.

 

Description of the 2011 Equity Incentive Plan

 

The following is a summary of the principal features of the 2011 Plan, as approved by the Board of Directors on March 25, 2011, subject to stockholder approval. However, this summary is not a complete description of all of the provisions of the 2011 Plan, and is qualified in its entirety by the specific language of the 2011 Plan. A copy of the 2011 Plan is provided as Appendix B to this proxy statement.

 

Background and Purpose of the 2011 Plan

 

The 2011 Plan permits the grant of the following types of incentive awards: (1) stock options, (2) stock appreciation rights, (3) restricted stock, (4) performance units, (5) performance shares and (6) restricted stock units (individually, an “Award”). The 2011 Plan is intended to attract, motivate, and retain (1) employees of Polycom and its subsidiaries, (2) consultants who provide significant services to Polycom and its subsidiaries, and (3) directors of Polycom who are employees of neither Polycom nor any subsidiary. The 2011 Plan also is designed to encourage stock ownership by employees, directors, and consultants, thereby aligning their interests with those of Polycom’s stockholders and to permit the payment of compensation that qualifies as performance-based compensation under Section 162(m). As defined in the 2011 Plan and used in the description below, “Shares” refers to shares of Polycom’s common stock.

 

Administration of the 2011 Plan

 

The 2011 Plan is administered by a committee (the “Committee”) appointed by the Board of Directors. The Compensation Committee of the Board of Directors administers the 2011 Plan and currently is expected to do so throughout the life of the 2011 Plan. The 2011 Plan requires that the Committee consist of at least two directors who qualify as “non-employee directors” under Rule 16b-3 of the Securities Exchange Act of 1934, and as “outside directors” under Section 162(m) (so that Polycom is entitled to a federal tax deduction for certain compensation paid under the 2011 Plan).

 

Subject to the terms of the 2011 Plan, the Committee has the sole discretion to select the employees, consultants, and directors who will receive Awards, determine the terms and conditions of Awards, and interpret the provisions of the 2011 Plan and outstanding Awards. The Committee may delegate any part of its authority and powers under the 2011 Plan to one or more directors and/or officers of Polycom; provided, however, the Committee may not delegate its authority and powers with respect to Awards intended to qualify as performance-based compensation under Section 162(m) if the delegation would cause the Awards to fail to so qualify and all discretionary awards to non-employee directors must be administered solely by an independent committee of the Board.

 

Number of Shares of Common Stock Available Under the 2011 Plan

 

The total number of Shares available for issuance under the 2011 Plan is equal to the sum of (a) 9,900,000 and (b) and any Shares (not to exceed 6,818,274) that otherwise would have been returned to the 2004 Plan or the 1996 Plan after May 26, 2011, on account of the expiration, cancellation or forfeiture of awards granted under such plans. No Awards have been granted under the 2011 Plan. Shares granted under the 2011 Plan may be either authorized but unissued Shares or treasury Shares. As of March 15, 2011, there were 1,159,717 shares subject to

 

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issuance upon exercise of outstanding options under all of the Company’s equity compensation plans, at a weighted average exercise price of $22.88, and with a weighted average remaining life of 2.42 years. In addition, as of March 15, 2011, there were a total of 3,093,508 shares subject to outstanding performance shares and restricted stock units that remain subject to vesting and/or forfeiture. As of such date, 5,467,275 shares remained available for future issuance under those plans. If the stockholders approve of the 2011 Plan, none of the remaining shares available for issuance under the 2004 Plan will be granted after May 26, 2011. As of March 15, 2011, the closing price of our common stock on NASDAQ was $48.79 per share.

 

The maximum number of Shares reserved for issuance under the 2011 Plan will be reduced by 1.83 Shares for every one (1) restricted stock unit, restricted stock, performance share or performance unit (referred to as a “full value award”) granted. If an Award is settled in cash, is cancelled, terminates, expires, or lapses for any reason without having been fully exercised or vested, the unvested or cancelled Shares generally will be returned to the available pool of Shares reserved for issuance under the 2011 Plan in the same proportion; for example, for every full value award share that is cancelled, terminated, expired or lapsed, 1.83 Shares will return to the available pool, and for every stock option that is cancelled, terminated, expired or lapsed, one (1) Share will return to the available pool.

 

If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to full value awards, is forfeited to or repurchased by the Company, the unpurchased (or forfeited or repurchased, as applicable) Shares that were subject to the Award will become available for future grant or sale under the 2011 Plan. Upon exercise of a stock appreciation right settled in Shares, the gross number of Shares covered by the portion of the Award that is exercised will cease to be available under the 2011 Plan. Shares that have been issued under the 2011 Plan under any Award will not be returned to or become available for future distribution under the 2011 Plan; provided, however, that if unvested Shares of any full value awards are repurchased by the Company or are forfeited to the Company, those Shares will become available for future grant under the 2011 Plan. Shares used to pay the exercise or purchase price of an Award and/or to satisfy the tax withholding obligations related to an Award will not become available for future grant or sale under the 2011 Plan. To the extent an Award is paid out in cash rather than Shares, such cash payments will not reduce the number of Shares available for issuance under the 2011 Plan. Shares issued pursuant to Awards transferred under any stockholder approved exchange program to reprice options or stock appreciation rights will not become available for grant under the 2011 Plan.

 

If Polycom experiences a stock dividend, reorganization, or other change in capital structure, the Committee will, in such manner as it determines is equitable, adjust the number and class of Shares available for issuance under the 2011 Plan, the outstanding Awards, and the per-person limits on Awards, as appropriate to reflect the stock dividend or other change.

 

No Repricing

 

No exchange programs to reprice options or stock appreciation rights are permitted under the 2011 Plan without the approval of our stockholders.

 

Eligibility to Receive Awards

 

The Committee selects the employees, consultants, and directors who will be granted Awards under the 2011 Plan. The actual number of individuals who will receive Awards cannot be determined in advance because the Committee has the discretion to select the participants. As of March 15, 2011, approximately 3,300 of our employees, directors and consultants would be eligible to participate in the 2011 Plan.

 

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Stock Options

 

A stock option is the right to acquire Shares at a fixed exercise price for a fixed period of time. Under the 2011 Plan, the Committee may grant nonqualified stock options and/or incentive stock options (which entitle employees, but not Polycom, to more favorable tax treatment). The Committee will determine the number of Shares covered by each option, but during any fiscal year of Polycom, no participant may be granted options (and/or stock appreciation rights) covering more than 750,000 Shares. Notwithstanding the foregoing, during the fiscal year in which the participant first becomes an employee, he or she may be granted options (and/or stock appreciation rights) covering up to an additional 750,000 Shares.

 

The exercise price of the Shares subject to each option is set by the Committee but cannot be less than 100% of the fair market value (on the date of grant) of the Shares covered by the option. An exception may be made for any options that the Committee grants in substitution for options held by employees of companies that Polycom acquires (in which case the exercise price preserves the economic value of the employee’s cancelled option from his or her former employer). In addition, the exercise price of an incentive stock option must be at least 110% of fair market value if (on the grant date) the participant owns stock possessing more than 10% of the total combined voting power of all classes of stock of Polycom or any of its subsidiaries. The aggregate fair market value of the Shares (determined on the grant date) covered by incentive stock options which first become exercisable by any participant during any calendar year also may not exceed $100,000. The exercise price of each option must be paid in full in cash (or cash equivalent) at the time of exercise. The Committee also may permit payment through the tender of Shares that are already owned by the participant, or by any other means that the Committee determines to be consistent with the purpose of the 2011 Plan.

 

Options become exercisable at the times and on the terms established by the Committee. The Committee also establishes the time at which options expire, but the expiration may not be later than 10 years after the grant date (except upon the death of a participant, the Committee may in its discretion provide that such participant’s unexpired options may remain exercisable for 3 years after the date of death). In addition, a participant who owns stock possessing more than 10% of the total combined voting power of all classes of stock of Polycom or any of its subsidiaries may not be granted an option that is exercisable after five years from the option’s grant date. Dividend equivalent rights are not permitted on options.

 

Stock Appreciation Rights

 

Stock appreciation rights (“SARs”) are awards that grant the participant the right to receive an amount (in the form of cash, Shares of equal value, or a combination thereof, as determined by the Committee) equal to (1) the number of shares exercised, times (2) the amount by which Polycom’s stock price exceeds the exercise price. The exercise price is set by the Committee but cannot be less than 100% of the fair market value of the covered Shares on the grant date. A SAR may be exercised only if it becomes vested based on the vesting schedule established by the Committee. SARs expire under the same rules that apply to options, meaning that the expiration may not be later than 10 years after the grant date (except upon the death of a participant, the Committee may in its discretion provide that such participant’s SARs may remain exercisable for 3 years after the date of death). SARs also are subject to the same per-person limits (750,000 covered Shares for SARs and/or options in any fiscal year plus an additional 750,000 Shares for SARs and/or options in the fiscal year in which the participant first becomes an employee). Dividend equivalent rights are not permitted on SARs.

 

Restricted Stock

 

Awards of restricted stock are Shares that vest in accordance with the terms and conditions established by the Committee. The Committee determines the number of Shares of restricted stock granted to any participant, but during any fiscal year of Polycom, no participant may be granted more than 375,000 Shares of restricted stock (and/or performance shares and/or restricted stock units) plus an additional 375,000 Shares of restricted stock (and/or performance shares and/or restricted stock units) in the fiscal year in which a participant first becomes an employee.

 

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In determining whether an Award of restricted stock should be made, and/or the vesting schedule for any such Award, the Committee may impose whatever conditions to vesting it determines to be appropriate. Notwithstanding the foregoing, if the Committee desires that the Award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements (see “Performance Goals” below for more information).

 

A holder of restricted stock will have full voting rights, unless determined otherwise by the Committee. A holder of restricted stock also generally will be entitled to receive all dividends and other distributions paid with respect to Shares; provided, however, that dividends and distributions generally will be subject to the same vesting criteria and transferability restrictions as the Shares upon which the dividend or distribution was paid.

 

Performance Units and Performance Shares

 

Performance units and performance shares are Awards that result in a payment to a participant (in the form of cash, Shares of equal value, or a combination thereof, as determined by the Committee) only if performance goals and/or other vesting criteria established by the Committee are achieved or the Awards otherwise vest. The applicable performance goals (which may be solely continued employment) will be determined by the Committee, and may be applied based on company-wide, business unit or individual goals, applicable federal or securities laws, or any other basis determined by the Committee in its discretion. However, if the Committee desires that the Award qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements (see “Performance Goals” below for more information).

 

During any fiscal year of Polycom, no participant may receive performance units having an initial value greater than $3,000,000. The Committee establishes the initial value of each performance unit on the date of grant. Additionally, grants of performance shares are subject to the same per-person limits as restricted stock and restricted stock units (375,000 Shares in any fiscal year plus an additional 375,000 Shares in the fiscal year in which the participant first becomes an employee).

 

Restricted Stock Units

 

Restricted stock units represent a right to receive Shares at a future date determined in accordance with the participant’s award agreement. No monetary payment is required for receipt of restricted stock units or the Shares issued in settlement of the Award, the consideration for which is furnished in the form of the participant’s service to Polycom. In determining whether an Award of restricted stock units should be made, and/or the vesting schedule for any such Award, the Committee may impose whatever conditions to vesting it determines to be appropriate. Polycom may pay the appreciation in cash, in Shares or in a combination of both.

 

The initial value of each restricted stock unit on the date of grant will be equal to the fair market value of a Share on such date. Grants of restricted stock units are subject to the same per-person limits as restricted stock and performance shares (375,000 Shares in any fiscal year plus an additional 375,000 Shares in the fiscal year in which the participant first becomes an employee).

 

Non-Employee Director Awards

 

Each non-employee director receives automatic, non-discretionary Awards under the 2011 Plan. On the date of each annual meeting of stockholders, each individual who is re-elected to serve as a non-employee director of Polycom automatically is granted an Award of 10,000 restricted stock units. Each non-employee director of Polycom who is first appointed or elected to the Board of Directors on or after the 2011 Annual Meeting automatically receives, as of the date of such appointment or election, a restricted stock unit grant covering a number of Shares equal to the product of (A) 10,000 and (B) the percentage determined by dividing (i) the number of calendar months remaining in the one-year period starting with the date of the last annual meeting of

 

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stockholders immediately before the date the individual is first appointed or elected as a non-employee director of Polycom, including the month in which he or she was appointed or elected, by (ii) 12, rounded down to the nearest whole Share (such grant is referred to herein as an “Initial RSU Grant”). These ongoing grants of restricted stock units vest at such times and are subject to restrictions and conditions that the Committee determines. Restricted stock units awarded on the date of an Annual Meeting of Stockholders vest in four equal quarterly installments over one year following grant, subject to continued service by the non-employee director through each relevant date. An Initial RSU Grant made to a non-employee director who joins the Board after an annual meeting of stockholders vests on the same remaining schedule as the grants to those elected at the most recent annual meeting of stockholders.

 

Once an individual ceases to be a director of Polycom, any Shares subject to restricted stock units that have not vested will revert to Polycom. The current form of restricted stock unit agreement for grants to non-employee directors, however, contains a voluntary termination provision that provides that in the event a director voluntarily terminates his or her service from the Board of Directors not less than six months after the grant date of such award, then such restricted stock unit award will fully vest on the date of the director’s termination from service. The Committee may adopt procedures to permit non-employee directors to elect to forego receipt of all or a portion of their annual retainer, committee fees and meeting fees in exchange for Awards. The number of Shares subject to such Awards will equal the amount of foregone compensation divided by the fair market value of a Share on the date the compensation otherwise would have been paid to the individual, rounded up to the nearest whole number of Shares. The Committee may grant non-employee directors Awards under the 2011 Plan outside of the automatic, non-discretionary Award program.

 

Performance Goals

 

The Committee (in its discretion) may make performance goals applicable to a participant with respect to an Award. If the Committee desires that an Award qualify as “performance-based compensation” under Section 162(m) (discussed below), then at the Committee’s discretion, one or more of the performance goals may apply. The 2011 Plan provides for the following performance goals:

 

   

Cash flow,

 

   

Customer satisfaction,

 

   

Earnings per share,

 

   

Margin,

 

   

Product quality,

 

   

Product unit sales,

 

   

Profit,

 

   

Return on equity,

 

   

Revenue, and/or

 

   

Total shareholder return.

 

Each of these goals is defined in the 2011 Plan. Any performance criteria used under the 2011 Plan may be measured, as applicable (1) in absolute terms, (2) in combination with more than one performance goal, (3) in relative terms (including, but not limited to, as compared to results for other periods of time, and/or against another company or companies), (4) on a per-share or per-capita basis, (5) against the performance of Polycom as a whole or a business unit or units of Polycom, and/or (6) on a pre-tax or after-tax basis. Further, any performance goals may be used to measure the performance of Polycom as a whole or of a business unit or other segment of Polycom, or of one or more product lines or specific markets, and may be measured relative to a peer group or index. Pursuant to the terms of the 2011 Plan, the Committee may determine whether any element(s) or

 

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item(s) will be included in or excluded from the calculation of any performance goal with respect to any participants. The Committee may choose a performance period that is not less than a fiscal quarter but not longer than a period of three fiscal years.

 

By granting awards that vest upon achievement of performance goals, the Committee may be able to preserve Polycom’s deduction for certain compensation in excess of $1,000,000. Section 162(m) limits Polycom’s ability to deduct annual compensation paid to Polycom’s Chief Executive Officer or our three other most highly compensated named executive officers (other than our Chief Executive Officer and Chief Financial Officer), to $1,000,000 per individual. However, Polycom can preserve the deductibility of certain compensation in excess of $1,000,000 if the conditions of Section 162(m) are met. The performance goals listed above, as well as the per-person limits on Shares covered by Awards, permit the Committee to grant Awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m), thereby permitting Polycom to receive a federal income tax deduction in connection with such Awards.

 

Limited Transferability of Awards

 

Awards granted under the 2011 Plan generally may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the applicable laws of descent and distribution. Notwithstanding the foregoing, the Committee may permit an individual to transfer an Award to an individual or entity. Any transfer will be made without consideration and in accordance with procedures established by the Committee.

 

Amendment and Termination of the 2011 Plan

 

The Board of Directors generally may amend or terminate the 2011 Plan at any time and for any reason. However, no amendment, suspension, or termination may impair the rights of any participant without his or her consent.

 

Summary of U.S. Federal Income Tax Consequences

 

The following paragraphs are a summary of the general federal income tax consequences to U.S. taxpayers and Polycom of equity awards granted under the 2011 Plan. Tax consequences for any particular individual may be different.

 

Nonqualified Stock Options.    No taxable income is reportable when a nonqualified stock option with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the excess of the fair market value (on the exercise date) of the shares purchased over the exercise price of the option. Any taxable income recognized in connection with an option exercise by an employee of Polycom is subject to tax withholding by Polycom. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.

 

Incentive Stock Options.    No taxable income is reportable when an incentive stock option is granted or exercised (except for purposes of the alternative minimum tax, in which case taxation is the same as for nonqualified stock options). If the participant exercises the option and then later sells or otherwise disposes of the shares more than two years after the grant date and more than one year after the exercise date, the difference between the sale price and the exercise price will be taxed as capital gain or loss. If the participant exercises the option and then later sells or otherwise disposes of the shares before the end of the two- or one-year holding periods described above, he or she generally will have ordinary income at the time of the sale equal to the fair market value of the shares on the exercise date (or the sale price, if less) minus the exercise price of the option.

 

Stock Appreciation Rights.    No taxable income is reportable when a stock appreciation right with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a

 

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participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the amount of cash received and the fair market value of any shares received. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.

 

Restricted Stock, Restricted Stock Units, Performance Units and Performance Shares.    A participant generally will not have taxable income at the time an Award of restricted stock, restricted stock units, performance shares or performance units are granted. Instead, he or she will recognize ordinary income in the first taxable year in which his or her interest in the shares underlying the Award becomes either (i) freely transferable, or (ii) no longer subject to substantial risk of forfeiture. However, the recipient of a restricted stock Award may elect to recognize income at the time he or she receives the Award in an amount equal to the fair market value of the shares underlying the Award (less any cash paid for the shares) on the date the Award is granted.

 

Tax Effect for Polycom.    Polycom generally will be entitled to a tax deduction in connection with an Award under the 2011 Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonqualified stock option). Special rules limit the deductibility of compensation paid to our Chief Executive Officer and to our three other most highly compensated named executive officers (other than our Chief Executive Officer and our Chief Financial Officer). Under Section 162(m), the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, we can preserve the deductibility of certain compensation in excess of $1,000,000 if the conditions of Section 162(m) are met. These conditions include stockholder approval of the 2011 Plan, setting limits on the number of Awards that any individual may receive and for Awards other than certain stock options, establishing performance criteria that must be met before the Award actually will vest or be paid. The 2011 Plan has been designed to permit the Committee to grant Awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m), thereby permitting us to continue to receive a federal income tax deduction in connection with such Awards.

 

Section 409A.    Section 409A of the Code (“Section 409A”) provides certain requirements for non-qualified deferred compensation arrangements with respect to an individual’s deferral and distribution elections and permissible distribution events. Awards granted under the 2011 Plan with a deferral feature will be subject to the requirements of Section 409A. If an award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with Section 409A’s provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation.

 

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Participation in the Plans

 

The grant of Awards (if any) that an employee or consultant may receive under the 2011 Plan is in the discretion of the Committee and therefore cannot be determined in advance. Our executive officers and non-employee directors have an interest in this proposal because they are eligible to receive discretionary Awards under the 2011 Plan. Our non-employee directors also receive automatic Awards under the 2011 Plan. The following table sets forth information with respect to the grant of options and other awards under the 2004 Plan to the executive officers named in the Summary Compensation Table, to all current executive officers as a group, to all non-employee directors as a group and to all other employees as a group during Polycom’s last fiscal year:

 

Name of Individual or Identity
of Group and Position

   Securities
Underlying
Options
Granted

(#)
     Weighted
Average
Exercise Price
Per Share

($)
     Full Value
Awards

(#)
     Weighted
Average Dollar
Value of Full
Value Awards

($)
 

Andrew M. Miller

President and Chief Executive Officer

     0         —           102,000         3,347,486   

Michael R. Kourey

Executive Vice President, Finance and Administration and Chief Financial Officer

     0         —           73,000         2,028,920   

Sayed M. Darwish

Executive Vice President, Chief Administrative Officer, General Counsel and Secretary

     0         —           38,000         933,141   

Sudhakar Ramakrishna

Executive Vice President and General Manager, Unified Communications Solutions and Chief Development Officer

     0         —           48,000         1,902,000   

Laura J. Durr

Vice President, Worldwide Controller and Principal Accounting Officer

     0         —           7,500         189,038   

All current executive officers as a group

     0         —           268,500         8,400,585   

All non-employee directors as a group

     0         —           60,000         1,859,400   

All other employees (including all current officers who are not executive officers) as a group

     0         —           2,255,494         62,684,605   

 

Summary

 

We believe strongly that the approval of the 2011 Plan is essential to our continued success. Awards such as those provided under the 2011 Plan constitute an important incentive and help us to attract and retain people whose skills and performance are critical to our success. Our employees and directors are our most important asset. The 2011 Plan is vital to our ability to attract and retain outstanding and highly skilled individuals to work for the Company and serve on our Board of Directors.

 

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PROPOSAL FOUR

 

APPROVAL OF AN AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN

 

Reason for the Amendment

 

We are asking stockholders to approve an amendment to the Employee Stock Purchase Plan (the “ESPP”) so that we may continue to use the ESPP to assist us in recruiting, retaining and motivating qualified personnel who help us achieve our business goals, including creating long-term value for stockholders. Our ESPP is intended to offer a significant incentive by allowing employees to purchase our common stock. Employees are allowed to purchase our common stock under the ESPP at a price equal to 85% of the lower of the fair market value on either the opening or closing date of the respective offering period.

 

Currently, a maximum of 5,000,000 Shares may be issued under the ESPP. As of March 15, 2011, 3,251,049 Shares had been issued and 1,748,951 Shares remained available for issuance. The amendment to the ESPP would increase the number of Shares issuable under the ESPP by 3,500,000 Shares, bringing the total that may be granted under the ESPP to 5,248,951 Shares. Without stockholder approval of this amendment, we believe our ability to attract and retain the individuals necessary to increase long-term stockholder value will be limited. We believe that the approval of the amendment to the ESPP is important to our continued success. If stockholders do not approve an increase in the number of Shares reserved for issuance under the ESPP, the ESPP’s goals of recruiting, retaining and motivating talented employees will be more difficult to meet.

 

The Compensation Committee and Board of Directors have approved the amendment to the ESPP, subject to the approval of our stockholders at the 2011 Annual Meeting.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE

FOR APPROVAL OF THE AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN.

 

Required Vote

 

Approval of the ESPP requires the affirmative vote of the holders of a majority of votes cast on the proposal. If stockholders do not approve the ESPP, the ESPP will continue under its current terms until it is terminated in accordance with the terms of the ESPP.

 

Description of the ESPP

 

The following paragraphs provide a summary of the principal features of the ESPP and its operation. However, this summary is not a complete description of all of the provision of the ESPP, and is qualified in its entirety by the specific language of the ESPP. A copy of the ESPP is provided as Appendix C to this proxy statement.

 

Purpose

 

The purpose of the ESPP is to provide eligible employees of the Company and its participating affiliates with the opportunity to purchase Shares through payroll deductions or, if payroll deductions are not permitted under local laws, through other means as specified by the Compensation Committee of the Company’s Board of Directors. The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (“Section 423”). In addition, the ESPP authorizes the grant of options that do not qualify under Section 423 pursuant to rules, procedures or sub-plans adopted by the Company’s Board of Directors that are designed to achieve desired tax or other objectives.

 

Eligibility to Participate

 

Most employees of the Company and its participating affiliates are eligible to participate in the ESPP. However, an employee is not eligible if he or she has the right to acquire five percent or more of the voting stock

 

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of the Company or of any subsidiary of the Company. Also, the Compensation Committee has discretion to exclude employees who normally are scheduled to work less than or equal to twenty hours per week or five months per calendar year, have worked for the Company for less than two years, or are officers or other highly compensated employees, provided that the exclusion of employees in such categories is not prohibited under applicable local law. As of March 15, 2011, approximately 3,000 employees are expected to be eligible to participate in the ESPP.

 

Administration, Amendment and Termination

 

The Compensation Committee administers the ESPP. The members of the Compensation Committee serve at the pleasure of the Board. Subject to the terms of the ESPP, the Compensation Committee has all discretion and authority necessary or appropriate to control and manage the operation and administration of the ESPP. The Compensation Committee also may establish a waiting period (not to exceed two years) before new employees may become eligible for the ESPP. The Compensation Committee may make whatever rules, interpretations, and computations, and take any other actions to administer the ESPP that it considers appropriate to promote the Company’s best interests, and to ensure that the ESPP remains qualified under Section 423 of the Internal Revenue Code. The Compensation Committee may delegate one or more of the ministerial duties in the administration of the ESPP. All decisions of the Compensation Committee are conclusive and binding on all persons and will be given the maximum deference permitted by law.

 

The Compensation Committee or the Board of Directors may amend or terminate the ESPP at any time and for any reason. However, as required by Section 423 of the Internal Revenue Code, certain material amendments must be approved by the Company’s stockholders.

 

Number of Shares of Common Stock Available under the ESPP

 

Currently, a maximum of 5,000,000 Shares had been approved for issuance pursuant to the ESPP. If stockholders approve the amendment to the ESPP, the number of Shares issuable under the ESPP would be increased by 3,500,000 Shares, bringing the total that may be granted under the ESPP to 5,248,951 Shares. Shares sold under the ESPP may be newly issued shares or treasury shares. In the event of any stock split, stock dividend or other change in the capital structure of the Company, appropriate adjustments will be made in the number, kind and purchase price of the Shares available for purchase under the ESPP. As of March 15, 2011, the closing price of our common stock on NASDAQ was $48.79 per share.

 

Enrollment and Contributions

 

Eligible employees voluntarily elect whether or not to enroll in the ESPP. Initially, employees joined the ESPP automatically for an offering period of six months. Employees who have joined the ESPP automatically are re-enrolled for additional rolling six month offering periods; provided, however, that an employee may cancel his or her enrollment at any time (subject to ESPP rules).

 

Employees contribute to the ESPP through payroll deductions or, if payroll withholding is not permitted under local laws, through such other means as specified by the Compensation Committee. Participating employees generally may contribute up to 20% of their eligible compensation through after-tax payroll deductions. From time to time, the Compensation Committee may establish a different maximum permitted contribution percentage, change the definition of eligible compensation, or change the length of the offering and purchase periods (but in no event may such periods exceed 24 months). After an offering period has begun, an employee may increase or decrease his or her contribution percentage (subject to ESPP rules).

 

Purchase of Shares

 

On the last business day of each six month offering period (or purchase period, as applicable), the Company uses each participating employee’s payroll deductions or contribution to purchase Shares for the employee. The

 

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price of the Shares purchased will be determined under a formula established in advance by the Compensation Committee. However, in no event may the purchase price be less than 85% of the lower of (1) the stock’s market value on the first day of the offering period, or (2) the stock market’s value on the purchase date. Market value under the ESPP means the closing price of our common stock on NASDAQ for the day in question. In any single year, no employee may purchase more than $25,000 of common stock (based on market value on the applicable enrollment date(s)). The Compensation Committee also has discretion to set a limit on the number of Shares that may be purchased on any purchase date (which is established at 5,000 Shares unless otherwise determined by the Compensation Committee), to set a lower (but not higher) limit on the dollar value of Shares that may be purchased, and to change the dates on which Shares are purchased.

 

Termination of Participation

 

Participation in the ESPP generally terminates when a participating employee’s employment with the Company or an affiliate ceases for any reason, the employee withdraws from the ESPP, or the Company terminates or amends the ESPP such that the employee no longer is eligible to participate.

 

Number of Shares Purchased by Certain Individuals and Groups

 

Given that the number of Shares that may be purchased under the ESPP is determined, in part, by the stock’s market value on the first and last day of the offering period (or last day of the purchase period, as applicable) and given that participation in the ESPP is voluntary on the part of employees, the actual number of Shares that may be purchased by any individual is not determinable. For illustrative purposes, the following table sets forth (a) the number of Shares that were purchased during 2010 under the ESPP, and (b) the average per share purchase price paid for such Shares.

 

Name of Individual or Identity of Group and Position

   Number
of Shares
Purchased
(#)
     Weighted
Average
Purchase
Price Per
Share
($)
 

Andrew M. Miller

President and Chief Executive Officer

     0         0.0   

Michael R. Kourey

Executive Vice President, Finance and Administration and Chief Financial Officer

     444         19.31   

Sayed M. Darwish

Executive Vice President, Chief Administrative Officer, General Counsel and Secretary

     1,058         19.07   

Sudhakar Ramakrishna

Executive Vice President and General Manager, Unified Communications Solutions and Chief Development Officer

     0         0.0   

Laura J. Durr

Vice President, Worldwide Controller and Principal Accounting Officer

     1,071         19.30   

All current executive officers as a group

     2,573         19.20   

All non-employee directors as a group

     0         0.0   

All other employees (including all current officers who are not executive officers) as a group

     653,572         19.31   

 

Tax Aspects

 

Based on management’s understanding of current federal income tax laws, the tax consequences of the purchase of Shares under the ESPP are as follows.

 

An employee will not have taxable income when the shares of our common stock are purchased for him or her, but the employee generally will have taxable income when the employee sells or otherwise disposes of stock purchased through the ESPP.

 

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For shares that the employee does not dispose of until more than 24 months after the applicable enrollment date and more than 12 months after the purchase date (the “holding period”), gain up to the amount of the discount (if any) from the market price of the stock on the enrollment date (or re-enrollment date) is taxed as ordinary income. Any additional gain above that amount is taxed at long-term capital gain rates. If, after the holding period, the employee sells the stock for less than the purchase price, the difference is a long-term capital loss. Shares sold within the holding period are taxed at ordinary income rates on the amount of discount received from the stock’s market price on the purchase date. Any additional gain (or loss) is taxed to the stockholder as long-term or short-term capital gain (or loss). The purchase date begins the period for determining whether the gain (or loss) is short-term or long-term.

 

The Company may deduct for federal income tax purposes an amount equal to the ordinary income an employee must recognize when he or she disposes of stock purchased under the ESPP within the holding period. The Company may not deduct any amount for shares disposed of after the holding period.

 

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PROPOSAL FIVE

 

ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) enables Polycom stockholders to vote to approve, on an advisory or non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with SEC rules.

 

As described in detail under the heading “Executive Compensation – Compensation Discussion and Analysis,” Polycom has a “pay-for-performance” philosophy that forms the foundation of all decisions regarding the compensation of our named executive officers. This compensation philosophy is designed to align the interests of our named executive officers with the interests of our stockholders and is central to our ability to attract, retain and motivate individuals who can achieve superior financial results. This approach, which has been used consistently over the years, has resulted in Polycom’s ability to attract and retain the executive talent necessary to guide Polycom during a period of tremendous growth and transformation.

 

We are asking for stockholder approval of the compensation of our named executive officers as disclosed in this proxy statement in accordance with SEC rules, which disclosures include the disclosures under “Executive Compensation—Compensation Discussion and Analysis,” the compensation tables and the narrative discussion following the compensation tables. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the policies and practices described in this proxy statement.

 

This vote is advisory and therefore not binding on our Board of Directors or the Compensation Committee of the Board of Directors. The Board of Directors and Compensation Committee value the opinions of Polycom stockholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, we will consider those stockholders’ concerns and evaluate whether any actions are necessary to address those concerns.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE

FOR THE APPROVAL OF THE COMPENSATION OF

POLYCOMS NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.

 

Required Vote

 

The affirmative vote of the holders of a majority of votes cast on this proposal is required for advisory approval of this proposal.

 

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PROPOSAL SIX

 

ADVISORY VOTE ON THE FREQUENCY OF HOLDING FUTURE ADVISORY VOTES

ON EXECUTIVE COMPENSATION

 

Pursuant to Section 951 of The Dodd-Frank Act, we are asking Polycom stockholders to cast an advisory vote on how frequently future advisory votes on the compensation of Polycom’s named executive officers should be held. By voting on this proposal, stockholders may indicate whether they would prefer that the Company hold an advisory vote on executive compensation once every year, every two years, or every three years or, if they prefer, they may abstain from casting a vote.

 

After careful consideration of the frequency alternatives, the Board of Directors believes that conducting an advisory vote on executive compensation every three years is appropriate for Polycom and its stockholders at this time based on a number of considerations, including the following:

 

   

Consistent with the long-term performance incentives in our executive compensation program.    Polycom’s executive compensation program, as described in detail under the heading “Executive Compensation—Compensation Discussion and Analysis,” emphasizes long-term performance and the creation of long-term, sustainable stockholder value by our named executive officers by granting them equity awards with multi-year service and performance periods. The Company typically grants executive officers a combination of restricted stock units that vest over three years and performance shares that vest based upon achievement of targets in total shareholder return (“TSR”) over a three-year period. The Board of Directors believes a vote every three years would be more consistent with our emphasis on long-term performance as an important component of our executive compensation program.

 

   

Allows meaningful input to our stockholders, while avoiding over-emphasis on short term variations.    We believe an advisory vote on executive compensation every three years will allow stockholders to make a more meaningful assessment of Polycom’s executive compensation program and to provide better input, while avoiding over-emphasis on short term variations in our compensation and business results and cyclical fluctuations in the market in which we compete. We feel that an annual advisory vote could lead to a short-term perspective that would bear inappropriately on our executive compensation program and its design, as well as to the long-term value creation objectives of the Company and its stockholders. A three-year vote cycle should allow our stockholders the appropriate opportunity to evaluate the effectiveness of our short- and long-term executive compensation strategies and our Company’s performance over that same period.

 

   

Provides sufficient opportunity for our Board to appropriately respond.    We believe an advisory vote every three years would give the Board of Directors sufficient time to consider the results of the vote and to implement any necessary changes to our executive compensation philosophy, policies and practices. Further, because the advisory vote on executive compensation occurs after we have already implemented our executive compensation program for the current year, and because the different elements of compensation as described in our “Compensation Discussion and Analysis” are designed to operate together as part of a total compensation program, we believe it may not be feasible to fully address and respond to any one year’s advisory vote on executive compensation by the time of the next year’s annual meeting of stockholders. In addition, we continually evaluate and make changes to our executive compensation program as we believe they are warranted to better align with stockholder interests, such as the recent change we made to measure the Company’s TSR performance for our performance shares against the Nasdaq Composite Index for performance periods commencing in 2011, and we will continue to do so in years in which no stockholder advisory vote is on the ballot.

 

   

Provides an additional, but not exclusive, means of communicating with us.    We believe our stockholders always have an opportunity to voice their opinions regarding any topic, including our pay practices, directly to us, and we value the input that holds us accountable and that we receive regularly

 

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from our stockholders through numerous channels. We can assure you that we consider this advisory vote as an additional, but not exclusive, means of communicating with us regarding our executive compensation practices.

 

   

Allows us to re-evaluate the frequency of our say-on-pay vote as circumstances change.    Although we believe that a triennial frequency vote is most appropriate for our stockholders at this time given the current design of our compensation programs, we will periodically assess that view to ensure that it continues to be appropriate due to future changes in our compensation programs, future changes in our business and industry, discussions with our stockholders and other factors.

 

We recognize that our stockholders may have different views as to the best approach for Polycom; therefore, we look forward to hearing from our stockholders as to their preferences on the frequency of an advisory vote on executive compensation.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE

FOR THE OPTION OF HOLDING AN ADVISORY VOTE ONCE EVERY THREE YEARS ON THE COMPENSATION OF POLYCOMS NAMED EXECUTIVE OFFICERS.

 

Required Vote

 

A plurality of the votes cast on this proposal is required for advisory approval of this proposal, which means that the choice of frequency that receives the highest votes will be considered the advisory vote of the Company’s stockholders. The Board of Directors will carefully consider the outcome of the vote when making future decisions regarding the frequency of advisory votes on executive compensation. However, because this vote is advisory and not binding, the Board of Directors may decide that it is in the best interests of Polycom and its stockholders to hold an advisory vote more or less frequently than the alternative that has been selected by our stockholders.

 

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PROPOSAL SEVEN

 

RATIFICATION OF APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

General

 

The Audit Committee has selected PricewaterhouseCoopers LLP as Polycom’s independent registered public accounting firm to audit the financial statements of Polycom for the fiscal year ending December 31, 2011, which will include an audit of the effectiveness of Polycom’s internal control over financial reporting. PricewaterhouseCoopers LLP and its predecessor entities have audited Polycom’s financial statements since fiscal 1991. A representative of PricewaterhouseCoopers LLP is expected to be present at the meeting, will have the opportunity to make a statement if he or she desires to do so, and is expected to be available to respond to appropriate questions.

 

Stockholder ratification of the selection of PricewaterhouseCoopers LLP is not required by our bylaws or other applicable legal requirements. However, the Board of Directors is submitting the selection of PricewaterhouseCoopers LLP to Polycom’s stockholders for ratification as a matter of good corporate practice. In the event that this selection of an independent registered public accounting firm is not ratified by the affirmative vote of a majority of the shares present and voting at the meeting in person or by proxy, the appointment of the independent registered public accounting firm will be reconsidered by the Audit Committee. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of Polycom and its stockholders.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS POLYCOMS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2011.

 

Principal Accounting Fees and Services

 

The following table presents fees billed for professional audit services and other services rendered to Polycom by PricewaterhouseCoopers LLP for the years ended December 31, 2009 and December 31, 2010 (in thousands).

 

     2009      2010  

Audit Fees (1)

   $ 2,175       $ 1,958   

Audit-Related Fees (2)

     —           1   

Tax Fees (3)

     23         22   

All Other Fees

     —           —     
                 

Total

   $ 2,198       $ 1,981   
                 

 

(1) Audit Fees consists of fees billed for professional services rendered for the audit of Polycom’s consolidated financial statements included in Polycom’s Annual Reports on Form 10-K and for the review of the financial statements included in Polycom’s Quarterly Reports on Form 10-Q, as well as services that generally only Polycom’s independent registered public accounting firm can reasonably provide, including statutory audits and services rendered in connection with SEC filings. Audit Fees also includes the audit of the effectiveness of Polycom’s internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002.
(2) Audit-Related Fees for fiscal 2010 consists of fees billed for assurance and related services that are traditionally performed by Polycom’s independent registered public accounting firm.
(3) Tax Fees consists of fees billed for support services related to tax audits by regulatory agencies and financial statement tax compliance work performed outside of the United States.

 

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Pre-Approval of Audit and Non-Audit Services

 

Polycom’s Audit Committee has adopted a policy for pre-approving the services and associated fees of Polycom’s independent registered public accounting firm. Under this policy, the Audit Committee must pre-approve all services and associated fees provided to Polycom by its independent registered public accounting firm, with certain exceptions described in the policy. The Policy for Preapproving Services and Fees of the Company’s Independent Auditor is available on Polycom’s website at www.polycom.com/company/investor_relations/corporate_governance.

 

All PricewaterhouseCoopers LLP services and fees in fiscal 2009 and fiscal 2010 were pre-approved by the Audit Committee.

 

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CORPORATE GOVERNANCE

 

Corporate Governance Principles and Code of Business Ethics and Conduct

 

Polycom believes that strong corporate governance practices are the foundation of a successful, well-run company. Polycom is committed to establishing an operating framework that exercises appropriate oversight of responsibilities at all levels throughout Polycom and managing its affairs consistent with high principles of business ethics. The Board of Directors has adopted Corporate Governance Principles that set forth our principal corporate governance policies, including the oversight role of the Board of Directors. The Board of Directors first adopted these Corporate Governance Principles in 2003 and has refined them from time to time. The Corporate Governance Principles are available on Polycom’s website at www.polycom.com/company/investor_relations/corporate_governance.

 

In addition, Polycom has adopted a Code of Business Ethics and Conduct, which is applicable to our directors and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Business Ethics and Conduct is available on Polycom’s website at www.polycom.com/company/investor_relations/corporate_governance. Polycom will disclose on its website any amendment to the Code of Business Ethics and Conduct, as well as any waivers of the Code of Business Ethics and Conduct that are required to be disclosed by the rules of the SEC or The NASDAQ Stock Market LLC (“NASDAQ”).

 

Director Independence

 

The Board of Directors has determined that, with the exception of Andrew M. Miller and Michael R. Kourey, who are employees, all of its current members are “independent directors” as that term is defined in the listing standards of NASDAQ. In the course of determining the independence of each non-employee director, the Board of Directors considered the annual amount of Polycom’s sales to, or purchases from, any company where a non-employee director serves as an executive officer. The Board of Directors determined that any such sales or purchases were made in the ordinary course of business and the amount of such sales or purchases in each of the past three fiscal years was less than 5% of Polycom’s or the applicable company’s consolidated gross revenues for the applicable year.

 

Board Leadership Structure

 

In May 2010, Polycom separated the positions of Chairman of the Board of Directors and Chief Executive Officer. The Board of Directors believes that its current leadership structure is appropriate at this time and provides the most effective leadership for Polycom in a highly competitive and rapidly changing technology industry. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairman of the Board to lead the Board of Directors in its fundamental role of providing advice to and independent oversight of management. The Board of Directors believes that an important component of our current leadership structure is having an independent director serve as the Chairman of the Board who has the broad authority to set Board agendas, direct the actions of the independent directors, conduct executive sessions comprised only of the independent directors and communicate regularly with the Chief Executive Officer. In making this decision regarding the optimum leadership structure for Polycom at this time, the Board of Directors considered a number of factors, including the fact that David G. DeWalt, an experienced technology executive, had served as Polycom’s Lead Independent Director in the past and would be able to seamlessly transition into the role of Chairman of the Board of Directors without impact on the organization.

 

Polycom also has a mechanism for shareholders to communicate directly with non-management directors through the Chairman of the Board of Directors (see “Contacting the Board of Directors” below for more information).

 

In addition, the Board of Directors has three standing committees—Audit, Compensation and Corporate Governance and Nominating, each of which are further described below. During fiscal 2010, the Board of

 

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Directors also had a Strategic Matters Committee, as further described below, but the committee was eliminated in November 2010. Each of the standing board committees is comprised solely of independent directors and each committee has a separate chair. Our independent directors generally meet in executive session at each regularly scheduled board meeting, and at such other times as necessary or appropriate as determined by the independent directors. In addition, on an annual basis, as part of our governance review and succession planning, the Board of Directors (led by the Corporate Governance and Nominating Committee) evaluates our leadership structure to ensure that it remains the optimal structure for Polycom.

 

Board Role in Risk Oversight

 

The Board of Directors has risk oversight responsibility for the Company. In its oversight role, the Board of Directors assesses the Company’s strategy and concurs with management on the risk inherent in that strategy, understands the critical risks facing the Company, ensures that management has implemented an appropriate system to manage risks (so that it can effectively identify, assess, mitigate, monitor and communicate about such risks) and provides effective risk oversight through the Board of Directors’ committee structure and oversight processes. As a technology company, we believe innovation and technological advancement will always require a certain amount of measured risk taking in pursuit of enhancing stockholder value; however, the Board of Directors recognizes that it is incumbent upon the Company and its management to do so in a way that is responsible and consistent with the Company’s overall strategy and to have effective systems in place that identify and mitigate those risks that could cause significant damage to the Company’s reputation, business model or stockholder value. Along such lines, it is management’s responsibility to manage risk and to bring material risks to the Company to the Board of Directors’ attention. Polycom’s management established an enterprise risk management (“ERM”) program in 2007, which ERM program is administered by management with oversight by the Audit Committee. The ERM program covers the strategic, operational, compliance and reporting risks that management believes are the most notable risks at the Company. As set forth in its charter, the Audit Committee reviews at least annually the Company’s processes to manage and monitor business and financial risk through its ERM process. In addition to Polycom’s ERM process, various committees are also tasked with specific risk oversight functions pursuant to the terms of the committee charters. In addition to its oversight of the ERM program, the Audit Committee also oversees the risks relevant to its areas of responsibility as designated under its charter, such as financial and accounting risks, treasury and investment risks, and information technology security risks. Similarly, the Compensation Committee oversees the risks related to its charter responsibilities, such as risks relating to the Company’s compensation policies and design of compensation programs and arrangements, and to the attraction and retention of key talent. Further, the Corporate Governance and Nominating Committee considers the risks relating to Chief Executive Officer and executive succession planning. Each of these Committees, in performing their respective risk oversight functions, has access to Company management and external advisors, as necessary, and reports their findings to the full Board of Directors. In addition, at each of its meetings and in particular at its annual strategic planning session at which the Board of Directors considers the Company’s strategic direction, our Board of Directors discusses the key strategic risks that the Company is currently facing. We believe that our directors provide effective oversight of Polycom’s risk management function.

 

Employee Compensation Risks

 

Per the discussions above, Company management and the Compensation Committee have assessed the risks associated with Polycom’s compensation policies and practices for all employees, including non-executive officers. Based on the results of this assessment, Polycom does not believe that its compensation policies and practices for all employees, including non-executive officers, create risks that are reasonably likely to have a material adverse effect on Polycom.

 

Board Meetings and Committees

 

During fiscal 2010, the Board of Directors held eleven (11) meetings. Each of the directors attended or participated in 75% or more of the aggregate of the total number of meetings of the Board of Directors and the

 

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total number of meetings held by all committees of the Board of Directors on which he or she served during the past fiscal year. The Board of Directors has three standing committees: an Audit Committee, a Compensation Committee and a Corporate Governance and Nominating Committee. The Strategic Matters Committee was a standing committee during the last fiscal year, but was eliminated in November 2010.

 

Audit Committee

 

The Audit Committee, which has been established in accordance with Section 3(a)(58)(A) of the Exchange Act, currently consists of John A. Kelley, Jr., D. Scott Mercer and Kevin T. Parker, each of whom is “independent” as such term is defined for audit committee members by the listing standards of NASDAQ. Mr. Parker is the chairman of the Audit Committee. The Board of Directors has determined that each of Mr. Mercer and Mr. Parker is an “audit committee financial expert” as defined in the rules of the SEC.

 

The Audit Committee is responsible for overseeing Polycom’s accounting and financial reporting processes and the audit of Polycom’s financial statements. The Audit Committee also assists the Board of Directors with the oversight of (1) the integrity of Polycom’s financial statements, (2) Polycom’s internal accounting and financial controls, (3) Polycom’s compliance with legal and regulatory requirements, (4) the organization and performance of Polycom’s internal audit function, and (5) the independent registered public accounting firm’s qualifications, independence and performance.

 

The Audit Committee held nine (9) meetings during the last fiscal year. The Audit Committee has adopted a written charter approved by the Board of Directors, which is available on Polycom’s website at www.polycom.com/company/investor_relations/corporate_governance.

 

The Audit Committee Report is included in this proxy statement on page 88.

 

Compensation Committee

 

The Compensation Committee currently consists of Betsy S. Atkins, David G. DeWalt and William A. Owens, each of whom qualifies as an independent director under the listing standards of NASDAQ. Ms. Atkins is the chairman of the Compensation Committee.

 

The Compensation Committee provides oversight of Polycom’s compensation policies, plans and benefit programs. The Compensation Committee also assists the Board of Directors in reviewing and making recommendations to the independent members of the Board of Directors with respect to the compensation of Polycom’s Chief Executive Officer and reviewing and approving the compensation of Polycom’s other executive officers; approving and evaluating Polycom’s executive officer compensation plans, policies and programs; overseeing the design of and administering Polycom’s equity compensation plans and overseeing the design of Polycom’s primary incentive plans and administering such plans with respect to executive officers. See “Executive Compensation—Compensation Discussion and Analysis” and “Executive Compensation—Compensation of Directors” below for a description of Polycom’s processes and procedures for the consideration and determination of executive and director compensation.

 

The Compensation Committee held nine (9) meetings during the last fiscal year. The Compensation Committee has adopted a written charter approved by the Board of Directors, which is available on Polycom’s website at www.polycom.com/company/investor_relations/corporate_governance.

 

The Compensation Committee Report is included in this proxy statement on page 69.

 

Corporate Governance and Nominating Committee

 

The Corporate Governance and Nominating Committee currently consists of Ms. Atkins, Mr. Kelley and Mr. Mercer, each of whom qualifies as an independent director under the listing standards of NASDAQ. Mr. Kelley is the chairman of the Corporate Governance and Nominating Committee.

 

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The Corporate Governance and Nominating Committee reviews and makes recommendations to the Board of Directors on matters concerning corporate governance, board composition, board evaluations and nominations, board committee structure and composition, conflicts of interest and stockholder proposals. The Corporate Governance and Nominating Committee also periodically reviews the succession planning for the Chief Executive Officer and other executive officers of Polycom and is responsible for evaluating and making recommendations to the Board of Directors regarding director compensation. The Corporate Governance and Nominating Committee will consider recommendations of candidates for the Board of Directors submitted by stockholders of Polycom (see “Process for Recommending Candidates for Election to the Board of Directors” below for more information).

 

The Corporate Governance and Nominating Committee held two (2) meetings during the last fiscal year. The Corporate Governance and Nominating Committee has adopted a written charter approved by the Board of Directors, which is available on Polycom’s website at www.polycom.com/company/investor_relations/corporate_governance.

 

Strategic Matters Committee

 

The Strategic Matters Committee met during fiscal 2010, but was eliminated in November 2010. Prior to being eliminated, the committee consisted of Ms. Atkins, and Messrs. DeWalt, Kelley and Parker, each of whom qualified as an independent director under the listing standards of NASDAQ. The Strategic Matters Committee did not have a chairman.

 

The Strategic Matters Committee was authorized to review, evaluate and provide input to management, and to make recommendations to the Board of Directors regarding Polycom’s strategic direction and potential strategic partnerships and transactions such as acquisitions, strategic investments, joint ventures and other strategic investments. The Strategic Matters Committee was also able to authorize and approve strategic investments of up to $10 million, as long as specified criteria were met, as well as the issuance of non-binding proposals to potential acquisition targets in amounts of up to $300 million.

 

The Strategic Matters Committee held three (3) meetings during the last fiscal year. The Strategic Matters Committee had adopted a written charter which was approved by the Board of Directors.

 

Compensation Committee Interlocks and Insider Participation

 

Ms. Atkins, Mr. DeWalt and Mr. Owens served as members of the Compensation Committee during fiscal 2010. No interlocking relationships exist between any member of Polycom’s Board of Directors or Compensation Committee and any member of the board of directors or compensation committee of any other company, nor has any such interlocking relationship existed in the past. No member of the Compensation Committee is or was formerly an officer or an employee of Polycom or its subsidiaries.

 

Process for Recommending Candidates for Election to the Board of Directors

 

The Corporate Governance and Nominating Committee is responsible for, among other things, determining the criteria for membership to the Board of Directors and recommending candidates for election to the Board of Directors. It is the policy of the Corporate Governance and Nominating Committee to consider recommendations for candidates to the Board of Directors from stockholders. Stockholder recommendations for candidates to the Board of Directors must be received by December 31st of the year prior to the year in which the recommended candidates will be considered for nomination, must be directed in writing to Polycom, Inc., 4750 Willow Road, Pleasanton, California 94588, Attention: Corporate Secretary, and must include the candidate’s name, home and business contact information, detailed biographical data and qualifications, information regarding any relationships between the candidate and Polycom within the last three years and evidence of the nominating person’s ownership of Company stock. Such recommendations must also include a statement from the

 

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recommending stockholder in support of the candidate, particularly within the context of the criteria for board membership, including issues of character, judgment, diversity, age, independence, expertise, corporate experience, length of service, other commitments and the like, personal references, and an indication of the candidate’s willingness to serve.

 

The Corporate Governance and Nominating Committee’s criteria and process for evaluating and identifying the candidates that it recommends to the full Board of Directors for selection as director nominees are as follows:

 

   

The Corporate Governance and Nominating Committee regularly reviews the current composition and size of the Board of Directors.

 

   

The Corporate Governance and Nominating Committee oversees an annual evaluation of the performance of the Board of Directors as a whole and evaluates the performance of individual members of the Board of Directors eligible for re-election at the annual meeting of stockholders.

 

   

In its evaluation of director candidates, including the members of the Board of Directors eligible for re-election, the Corporate Governance and Nominating Committee seeks to achieve a balance of knowledge, experience and capability on the Board of Directors and considers (1) the current size and composition of the Board of Directors and the needs of the Board of Directors and the respective committees of the Board of Directors, (2) such factors as issues of character, judgment, diversity, age, expertise, business experience, length of service, independence, other commitments and the like, and (3) such other factors as the Corporate Governance and Nominating Committee may consider appropriate.

 

   

While the Corporate Governance and Nominating Committee has not established specific minimum qualifications for director candidates, the Corporate Governance and Nominating Committee believes that candidates and nominees must reflect a Board that is comprised of directors who (1) are predominantly independent, (2) are of high integrity, (3) have broad, business-related knowledge and experience at the policy-making level in business or technology, including their understanding of the telecommunications industry and Polycom’s business in particular, (4) have qualifications that will increase overall Board effectiveness and (5) meet other requirements as may be required by applicable rules, such as financial literacy or financial expertise with respect to audit committee members.

 

   

With regard to candidates who are properly recommended by stockholders or by other means, the Corporate Governance and Nominating Committee will review the qualifications of any such candidate, which review may, in the Corporate Governance and Nominating Committee’s discretion, include interviewing references for the candidate, direct interviews with the candidate, or other actions that the Corporate Governance and Nominating Committee deems necessary or proper.

 

   

In evaluating and identifying candidates, the Corporate Governance and Nominating Committee has the authority to retain and terminate any third party search firm that is used to identify director candidates and has the authority to approve the fees and retention terms of any search firm.

 

   

The Corporate Governance and Nominating Committee will apply these same principles when evaluating candidates who may be elected initially by the full Board of Directors to fill vacancies or add additional directors prior to the annual meeting of stockholders at which directors are elected.

 

   

After completing its review and evaluation of director candidates, the Corporate Governance and Nominating Committee recommends to the full Board of Directors for selection the director nominees.

 

Director Resignation

 

Pursuant to Polycom’s Corporate Governance Principles, a director whose primary employment status changes materially from the most recent annual meeting of stockholders when such director was elected is expected to offer to resign from the Board of Directors. The Board of Directors does not believe that a director in this circumstance should necessarily leave the Board of Directors, but that the director’s continued service should

 

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be re-evaluated under the established Board membership criteria. Accordingly, the Corporate Governance and Nominating Committee will review and recommend to the Board of Directors whether the director’s continued service is appropriate, and the Board of Directors will then determine whether to accept such resignation. In addition, a director who reaches the age of 72 will notify the Board and offer to submit a letter of resignation to the Board of Directors, to be effective at the next meeting of stockholders held for the election of directors. Such letter of resignation will be accepted by the Board of Directors unless the Corporate Governance and Nominating Committee determines, after weighing the benefits of such director’s continued contributions against the benefits of fresh viewpoints and experience, to nominate the director for another term.

 

Attendance at Annual Meetings of Stockholders by the Board of Directors

 

Although Polycom does not have a formal policy regarding attendance by members of the Board of Directors at Polycom’s annual meeting of stockholders, Polycom encourages, but does not require, directors to attend. Messrs. Kelley, Kourey, Mercer, Miller and Parker attended Polycom’s 2010 annual meeting of stockholders.

 

Contacting the Board of Directors

 

Any stockholder who desires to contact our non-employee directors may do so electronically by sending an e-mail to the following address: directorcom@polycom.com. Our Chairman of the Board of Directors receives these communications unfiltered by Polycom, forwards communications to the appropriate committee of the Board of Directors or non-employee director, and facilitates an appropriate response. Please note that requests for investor relations materials should be sent to investor@polycom.com.

 

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EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis

 

Executive Summary

 

Polycom has designed its executive compensation program and philosophy to attract, motivate and retain talented executives responsible for the success of Polycom, which operates in an extremely competitive and rapidly changing high technology industry. The highlights of our compensation program include:

 

   

Pay for Performance.    We pay for performance through short-term cash incentives that require achievement of Polycom’s key financial goals and long-term equity incentives (described in the next bullet point below). In the second half of 2010, short-term cash incentives were contingent on Polycom’s achievement of revenue and non-GAAP operating income goals.

 

LOGO

 

(1) Performance-based bonuses for 2010 generally reflect amounts paid to NEOs for bonus programs in effect for the second half of 2010 only (as described in further detail below.)

 

A large portion of our current named executive officers’ compensation, including that of our Chief Executive Officer, consists of performance-based incentives, which were primarily in the form of long-term equity awards in 2010. (Throughout this Compensation Discussion and Analysis, the individuals included in the “Summary Compensation Table” on page 70, are referred to as our “named executive officers” or “NEOs.”)

 

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LOGO    LOGO

 

(1) The executive compensation mix excludes compensation with respect to Mr. Miller and the NEOs who terminated employment with us in 2010.
(2) The CEO compensation mix shows compensation for Mr. Miller.

 

   

Alignment with Stockholder Interests.    Our equity-based compensation encourages alignment of our executives’ interest with that of our stockholders. 54% of the equity awards granted to our NEOs in 2010 were tied to the performance of Polycom’s total shareholder return as measured against the Russell 2000 Index in three consecutive annual performance periods.

 

   

Competitive Compensation.    In order to attract and retain the best talent in the labor market, we provide base salary, short-term cash incentives, long-term equity-based incentives, post-termination benefits and certain other benefits to our NEOs. We target the median level of the market for base salary and long-term equity incentives and the 75th percentile for total cash compensation (in 2010) and short-term cash incentive compensation (in 2011), although from time to time we may set compensation salaries and equity awards at above median levels to attract critical executive talent. To maintain competitive compensation practices, we also provide severance benefits at levels that are in line with our peers.

 

2010 was a significant and high performing year for Polycom, in which we continued to grow our business and execute on our strategy effectively:

 

   

Revenues for 2010 were $1.2 billion, an increase of $251.5 million, or 26%, over 2009, allowing us to exit the year at an annual run rate of $1.4 billion;

 

   

Polycom achieved market share gains of approximately 2 points in video endpoints and 1 point in network infrastructure from 2009 to 2010;

 

   

Gross margins increased by 200 basis points and operating margins increased by 20 basis points (both on a GAAP basis) in 2010 over 2009;

 

   

Polycom generated approximately $143.4 million in cash flow from operating activities in 2010; and

 

   

Gains in the per share price of Polycom’s common stock in 2010, which increased by $13.40, or 52%, from January 2010 through the end of December 2010, provided above market returns to our stockholders.

 

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For purposes of illustration only, the following chart demonstrates our stock price performance over a five-year period as compared to the Nasdaq Composite Index and the Russell 2000 Index.

 

LOGO

 

(1) The foregoing graph assumes that $100 was invested on December 31, 2005, in Polycom’s common stock or in each of the other indices (against which Polycom’s total shareholder return-based performance share grants measure Polycom’s relative performance, as described in greater detail herein) and that all dividends were reinvested. No cash dividends have been declared in Polycom common stock.
(2) The stock price performance shown on the graph is not indicative of future price performance. Information used in the graph was obtained from a third party investment firm, a source believed to be reliable, but the Company is not responsible for any errors or omissions in such information.

 

To achieve these successes in 2010 and to enable our continued long-term growth, we made strategic changes to our executive team during the year:

 

   

New CEO.    In the first half of 2010, we promoted Andrew Miller to President and Chief Executive Officer (“CEO”) – a proven leader in the technology industry.

 

   

Newly Hired Executive and Non-Executive Officers.    We also strengthened our management team by hiring best-in-class, experienced talent to take Polycom to the next level, including hiring Sudhakar Ramakrishna in 2010 as Senior Vice President, General Manager of Unified Communications Products, and Chief Development Officer (who is an NEO for 2010) and other non-executive officers. Mr. Ramakrishna was promoted to Executive Vice President, General Manager of Unified Communications Solutions, and Chief Development Officer in February 2011.

 

Overview of Compensation Program and Philosophy

 

Polycom’s executive compensation program and philosophy are designed to attract, motivate and retain talented executives responsible for the success of Polycom. Our executive compensation program emphasizes “pay for performance” that requires achievement of financial and strategic objectives as well as individual contributions. Our program’s objectives are to:

 

   

Offer a total compensation program that takes into consideration the compensation practices of a specifically identified peer group of companies, so as to recruit and retain top executive talent;

 

   

Motivate executive officers to achieve quantitative financial and qualitative non-financial goals by creating a direct, meaningful link between achievement of these goals and individual executive compensation;

 

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Provide short-term cash incentive awards that take into account Polycom’s overall financial performance relative to corporate objectives and individual contributions by executives; and

 

   

Align the financial interests of executive officers with those of Polycom’s stockholders by providing significant equity-based, long-term incentives generally in the form of performance shares, restricted stock units, and/or stock options, while carefully considering both stockholder dilution and compensation expense.

 

The Compensation Committee of the Board of Directors uses these objectives as a guide in setting compensation for our executive officers and in assessing the appropriate balance between different elements of compensation. Rather than using pre-established policies or formulas for the allocation between the various compensation elements, we consider target ranges for base salary, total cash compensation (or target short-term cash incentive compensation) and long-term equity-based incentive awards relative to certain Peer Companies, as described in more detail on page 45.

 

Role and Authority of Our Compensation Committee

 

The Compensation Committee currently consists of directors Betsy S. Atkins (Chair), David G. DeWalt, and William A. Owens, each of whom served on the Compensation Committee for all of 2010 and qualifies as (i) an “independent director” under the requirements of The NASDAQ Stock Market LLC, (ii) a “non-employee director” under Rule 16b-3 of the Securities Exchange Act of 1934, and (iii) an “outside director” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

The Compensation Committee operates under a written charter adopted by the Compensation Committee and approved by the Board of Directors. The charter is available on Polycom’s website at www.polycom.com/company/investor_relations/corporate_governance. The overall purposes of the Compensation Committee are to: (i) oversee Polycom’s compensation policies, plans and benefits programs; (ii) evaluate and recommend to the independent members of the Board of Directors the compensation of the CEO; (iii) evaluate and approve the compensation of Polycom’s other executive officers (including officers reporting under Section 16 of the Securities Exchange Act of 1934); (iv) evaluate and approve the executive officer compensation plans, policies and programs of Polycom; (v) oversee the design of and administer Polycom’s equity compensation plans; and (vi) oversee the design of Polycom’s primary incentive (bonus) plans and administer such bonus plans for executive officers (subject to the authority of the independent members of the Board of Directors with respect to the compensation of our CEO). The Board of Directors most recently reviewed the Compensation Committee charter in February 2011, at which time it approved certain non-material clarifying changes to the charter.

 

In reviewing and establishing (or reviewing and recommending in the case of the CEO) the executive compensation packages offered to our CEO and other executive officers and key employees, the Compensation Committee seeks to make the packages consistent with our compensation program and philosophy. The Compensation Committee has the final decision-making authority with respect to the compensation of our NEOs, other than for the CEO, whose compensation is determined by the independent members of the full Board of Directors. In carrying out its responsibilities, the Compensation Committee may engage outside consultants and/or consult with Polycom’s Human Resources department. The Compensation Committee also may obtain advice and assistance from internal or external legal, accounting or other advisers selected by the Compensation Committee. The Compensation Committee may delegate certain responsibilities to one or more of its members or Polycom’s directors or to management. For example, the Compensation Committee has authorized management to create country-specific rules to enable administration of equity awards in compliance with the laws of the jurisdictions in which such awards may be granted.

 

Role of Executive Officers in Compensation Decisions

 

The Compensation Committee regularly meets with our CEO to obtain recommendations regarding the compensation of the other NEOs and employees. Typically, our CEO annually reviews the performance of

 

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Polycom’s executive officers. To assist our CEO in his review, our Chief Financial Officer (“CFO”) provides a performance assessment of the Worldwide Controller and Principal Accounting Officer, who reports directly to our CFO, and makes a recommendation with respect to her compensation. Our CEO shares his performance assessment of each executive officer with the Compensation Committee. Our CEO’s performance assessment of each executive officer generally addresses financial and non-financial objectives and the executive officer’s performance over a given year. In establishing an executive officer’s actual compensation, the Compensation Committee may take into account the CEO’s performance assessment of the executive officer. However, the Compensation Committee is not bound by and does not always accept those recommendations. Our CEO also provides a self-evaluation to the full Board of Directors on an annual basis. The Compensation Committee considers the self-evaluation and the factors described above, as well as Polycom’s performance as a whole and competitive market data when reviewing and making recommendations to the independent members of the full Board of Directors with respect to the CEO’s compensation. However, once the targeted amounts for him are set by the independent members of the Board of Directors, the CEO’s cash incentive compensation and long-term equity-based compensation awards (i.e., performance shares) are determined solely on the achievement of corporate performance and do not include any personal objectives.

 

Our CEO and other executives or employees from time to time attend Compensation Committee meetings, but they leave the meetings when certain matters of executive compensation are discussed, as appropriate. The Compensation Committee and independent members of the full Board of Directors make decisions with respect to the CEO’s compensation package without him present.

 

Role of Compensation Consultant

 

For 2010 and 2011, the Compensation Committee continued to directly engage Radford, a business unit of Aon Corporation and a compensation consulting firm. Radford serves at the discretion of the Compensation Committee. For 2010, and again for 2011, Radford was engaged to provide the following services:

 

   

Review our executive compensation philosophy;

 

   

Update the peer group of companies used in analyzing Polycom’s executive compensation program for the year;

 

   

Update the long-term incentive and retention analysis components of Polycom’s executive compensation review;

 

   

On an annual basis, review and assist with recommendations regarding the current executive compensation levels relative to the market and Polycom’s performance, including with respect to the retention and promotion of executive officers;

 

   

On an annual basis, assist the Compensation Committee in updating guidelines for stock awards for both executives and employees as a whole, including making recommendations with respect to the design of the performance criteria for performance shares;

 

   

Support Polycom’s preparation of documents to be filed with the Securities and Exchange Commission, such as its proxy statement and annual report, with respect to compensation matters;

 

   

Keep the Compensation Committee posted on developments on executive compensation over the course of the year;

 

   

Attend meetings of the Compensation Committee as requested; and

 

   

Provide such other assistance as deemed necessary by the Compensation Committee.

 

Radford also was specifically retained in 2010 to consult on total direct compensation decisions for new hires by providing competitive market data and reviewing offer packages with the Compensation Committee, as well as to assist in the process of transitioning our former CEO into a consulting role.

 

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Peer Companies

 

The Compensation Committee compares our executive officers’ compensation with those of a peer group of companies. The companies are chosen based on their respective businesses, revenues, market capitalization and number of employees. The peer group also includes companies with whom Polycom competes in attracting executive talent. For 2010, the Compensation Committee approved the following peer companies (the “Peer Companies”):

 

2010 Peer Companies

•    3Com Corporation

 

•    Citrix Systems, Inc.

 

•    Palm, Inc.

•    Activision, Inc.

 

•    Intuit, Inc.

 

•    Plantronics, Inc.

•    Autodesk, Inc.

 

•    JDS Uniphase Corporation

 

•    Sybase, Inc.

•    Avid Technology, Inc.

 

•    Juniper Networks, Inc.

 

•    Synopsys, Inc.

•    BMC Software, Inc.

 

•    McAfee, Inc.

 

•    Trimble Navigation Limited

•    Brocade Communications Systems, Inc.

 

•    Novell, Inc.

 

•    VeriSign, Inc.

•    Cadence Design Systems, Inc.

 

•    Nuance Communications, Inc.

 

 

In reviewing the companies that would comprise the Peer Companies for 2010, the Compensation Committee engaged Radford’s assistance. Radford compiled data on the compensation practices of the Peer Companies generally through publicly available information. Radford also used data from the Radford Executive High Technology Survey, covering high technology companies with revenues between $1 billion and $3 billion. This survey contains numerous participating companies. Survey data is used to supplement the specific Peer Companies for two purposes. First, Polycom recruits from, and loses employees to, a broader group of companies than the Peer Companies. The survey data provides a broader understanding of the compensation levels being paid across a larger group of similarly-sized technology companies. Second, the survey data validates the data drawn from the smaller group of Peer Companies, helping avoid “outlier” companies unduly influencing the recommendations to the Compensation Committee. The Compensation Committee did not look at companies within the survey group individually, but instead combined this information with the compensation information of our Peer Companies to arrive at a final market data point for comparative purposes. For purposes of Radford’s analysis, the peer group and the survey data were blended to reflect the overall market.

 

Prior to 2010, Radford assisted the Compensation Committee in reviewing 2010 executive compensation by using this data to compare, against the Compensation Committee’s stated compensation philosophy (described in more detail below), the base salary, short-term cash compensation, target total cash compensation (i.e., base salary plus target short-term cash compensation), long-term equity compensation and target total direct compensation (i.e., target total cash compensation plus long-term equity compensation values) for our CEO and other executive officers to those of officers at the Peer Companies (described below) with comparable positions. Taking into consideration that at the time Polycom continued to be smaller than the median company, on the basis of revenue, within the Peer Companies, Radford concluded that the compensation levels of our CEO and other executive officers were generally aligned with or slightly below Polycom’s targeted market percentile for 2010. Radford recommended considering merit adjustments in base salary based on individual performance and market competitiveness during the next regularly scheduled performance review cycle and no changes to the structure of bonuses in light of continuing market uncertainty that persisted through the beginning of 2010.

 

In determining the Peer Companies for 2011, the Compensation Committee analyzed peer group data in a similar manner as for 2010 and concluded that Polycom had grown solidly into its peer group as its revenues were at approximately the 33rd percentile of the Peer Companies. As a result, the Compensation Committee made no changes for 2011 in the group of Peer Companies used for conducting compensation analyses, other than the exclusion of Palm, Inc. due to its acquisition in 2010. In February 2011, Radford assisted the

 

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Compensation Committee and the independent directors in reviewing 2011 compensation for the CEO in the same manner as described above for 2010 compensation and as described further herein.

 

Components of Compensation

 

The principal components of Polycom’s executive officer compensation include:

 

   

Base salary;

 

   

Short-term cash incentive awards (which we commonly refer to as bonuses);

 

   

Long-term equity-based incentive awards;

 

   

Termination and change of control arrangements;

 

   

Retirement benefits provided under a 401(k) plan; and

 

   

Executive perquisites and generally available benefit programs.

 

We selected these components because we believe each is necessary to help us attract and retain the executive talent on which Polycom’s success depends. These components also allow us to reward performance throughout the year and to provide incentives that balance appropriately the executive’s focus between Polycom’s short-term and long-term strategic goals. The Compensation Committee believes that this set of components is effective and will continue to be effective in achieving the objectives of our compensation program and philosophy.

 

The Compensation Committee reviews the entire executive compensation program at least annually. The Compensation Committee is aided in this review by Radford. However, the Compensation Committee may review one or more components at any time as considered necessary or appropriate to ensure such components remain competitive and appropriately designed to reward performance.

 

In 2010 and 2011, the Compensation Committee continued to review compensation tally sheets that show the total compensation package for each executive officer in the prior year. The tally sheets include information on base salary, short-term cash incentive awards, and long-term equity-based incentive awards, as well as an executive officer’s employee benefits and perquisites and estimates of severance or other benefits payable in the event of certain terminations of employment. The tally sheets provided minimum, target and maximum amounts for 2010 (and target and maximum amounts in 2011) with respect to short-term cash incentive awards, performance-based equity awards and any other applicable benefits. The purpose of the tally sheets is to provide the Compensation Committee with a comprehensive snapshot of each executive officer’s compensation based on the prior year’s compensation decisions to allow the Compensation Committee to make more informed compensation decisions for the current year.

 

Target Compensation

 

Relative to our peer companies, these are the elements of compensation we reviewed for 2010 and 2011:

 

   

Base salary;

 

   

Total cash compensation (base salary plus short-term cash incentive awards) (for 2010);

 

   

Target short-term cash incentive awards (for 2011); and

 

   

Long-term equity-based incentive awards.

 

In 2010, at the recommendation of the Company and with support from Radford, the Compensation Committee shifted its review from total cash compensation at the 75th percentile to target short-term cash incentive compensation at the 75th percentile. The Compensation Committee considered the complexity involved

 

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in reviewing and setting target bonuses based on targeting total cash compensation at the 75th percentile while base salary is targeted at a different percentile. Accordingly, the Compensation Committee believed that a better result would be achieved by separately setting each element of compensation (i.e., setting short-term cash incentive awards separately from base salary) to a stated market position relative to the Peer Companies.

 

In general, compensation is targeted to be within a competitive range around the following percentiles as compared to the Peer Companies:

 

Elements of Compensation

 

2010 Target

 

2010 Target Range

 

2011 Target

 

2011 Target Range

Base salary   50th percentile   +/- 10% of target percentile   50th percentile   +/- 10% of target percentile
Total cash compensation (for 2010)   75th percentile with greater than 75th percentile for above plan performance   +/- 15% of target percentile  

 

Target short-term cash incentive awards (for 2011)  

 

  75th percentile with greater than 75th percentile for above plan performance   +/- 15% of target percentile
Long-term equity-based incentive awards   50th percentile   +/- 30% of the target percentile   50th percentile   +/- 30% of the target percentile

 

Since we target executive compensation within the competitive ranges shown above, references to targeted percentiles in this Compensation Discussion and Analysis actually are discussions of these targeted competitive ranges. In setting the compensation for a particular NEO, the Compensation Committee considers both individual and corporate factors, as well as market data with respect to similarly situated individuals at the applicable peer companies, in order to determine the appropriate level of compensation for each NEO. Consequently, if there are differences in the amount or type of compensation paid among the NEOs, including the CEO, the differences are primarily due to a similar disparity among positions within the applicable peer companies generally, as well as other factors such as an NEO’s tenure, new hire incentives, experience, skills, knowledge, responsibilities and performance. These and other subjective factors may influence the Compensation Committee’s decision regarding the compensation level and package that is appropriate for a particular NEO. However, the weight given to these factors by the Compensation Committee cannot be quantified and is not determined under a formula. Further, the actual performance of the Company as compared to the applicable performance goals with respect to performance-based compensation may result in a compensation level and package above or below the target. For example, performance goals that are stretch goals and are especially challenging to achieve may result in below-target compensation.

 

Non-GAAP Measures

 

Polycom uses GAAP revenue and non-GAAP measures of operating results, which are adjusted to exclude certain costs, expenses, gains and losses that management believes appropriate to enhance an overall understanding of Polycom’s past financial performance as well as Polycom’s future potential. Non-GAAP results are an indication of Polycom’s performance before gains, losses or other charges that are considered by management to be outside of Polycom’s core results and are excluded by management for purposes of internal budgets and making operating decisions. In addition, these adjusted non-GAAP results are among the primary indicators management uses as a basis for the planning and forecasting of future periods. As a result, the Compensation Committee also utilizes these non-GAAP measures as a means of measuring and rewarding executive performance, as appropriate. In 2010, non-GAAP exclusions from operating income included stock-based compensation expense, effect of stock-based compensation expense on warranty rates, amortization of

 

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purchased intangibles, restructuring costs, litigation reserves and payments, and legal and other costs associated with our CEO transition in May 2010.

 

Base Salary

 

Polycom provides base salary to its NEOs and other employees to compensate them for services rendered on a day-to-day basis. The Compensation Committee typically reviews NEOs’ salaries in the second quarter of the year in conjunction with performance evaluations. Increases generally are awarded within the context of our overall annual merit increase budget before considering more specific individual and market competitive factors. The Compensation Committee does not apply specific formulas to determine increases.

 

In the first half of 2010, the Compensation Committee reviewed the base salaries of all NEOs (other than Mr. Ramakrishna, who joined Polycom in late 2010). The Compensation Committee reviewed executive compensation data provided by Radford assessing Polycom’s current executive base salary levels against market levels for similarly situated individuals at the Peer Companies. The Compensation Committee reviewed this data in light of Polycom’s compensation philosophy of establishing competitive salaries targeted to be within a competitive range around the market 50th percentile of the Peer Companies. Pursuant to this data, Radford concluded that the majority of the NEOs’ base salaries were generally in line with Polycom’s target market position. At the time that Radford initially prepared the analysis for our NEO’s base salaries, Mr. Miller was serving in his previous role as Executive Vice President, Global Field Operations. When Mr. Miller was promoted to President and CEO in May 2010, the compensation consultant presented the Compensation Committee with Radford data for the CEO position, which the Compensation Committee used to give Mr. Miller a promotional increase; however, in making the decision regarding additional compensation in connection with Mr. Miller’s promotion, the Radford data was only used as a data point given the timing of the promotion and the compensation already awarded to Mr. Miller in 2010. Further, Mr. Miller was not given an additional salary increase during the regular NEO salary review cycle for 2010. Additionally, Mr. Ramakrishna’s base salary for 2010 was determined in connection with his hire in October 2010. Messrs. Miller and Ramakrishna’s compensation packages based on their promotion and hire, respectively, are discussed further in detail below under the section titled “Other Changes to and Determinations of Compensation” on page 64.

 

With respect to the other NEOs, after considering Radford’s analysis, the relevant market data, and each executive’s performance, the Compensation Committee approved merit increases (which, in the case of Mr. Darwish, also included an adjustment to market in connection with his role and responsibilities), resulting in a base salary increase for most of the direct reports to the CEO, including the NEOs other than our CEO. The base salary increases for the NEOs, other than our CEO, generally ranged from 3.1% to 11.7%.

 

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As demonstrated in the following table, other than with respect to Messrs. Miller and Kourey, each NEO’s respective 2010 base salaries after the increases took effect on July 1, 2010, were within the 2010 target range, based on the 50th percentile:

 

Named Executive Officer

   July 2010
Base Salary
Level ($)
     Low End of
50th  Percentile
Range ($)
     High End  of
50th Percentile
Range ($)
     Position in
50th  Percentile
Range
 

Andrew M. Miller (1)

     600,000         696,364         842,600         Below   

Michael R. Kourey

     448,000         370,182         447,920         Above   

Sayed M. Darwish

     390,000         364,182         440,660         Within   

Sudhakar Ramakrishna (2)

     —           —           —           —     

Laura J. Durr

     257,000         214,182         259,160         Within   

Robert C. Hagerty (3)

     —           —           —           —     

Geno J. Alissi

     341,700         284,091         343,750         Within   

Joseph A. Sigrist

     380,000         326,727         395,340         Within   

 

(1) Mr. Miller’s base salary was set in connection with his promotion to President and CEO, which became effective in May 2010.
(2) Mr. Ramakrishna joined Polycom in October 2010 and as a result, the base salary determinations that occurred in the first half of the year did not apply to him.
(3) Mr. Hagerty terminated employment with Polycom prior to these salary determinations, and as a result, these salary changes did not apply to him. Mr. Hagerty’s salary during of the period in 2010 that he was with Polycom remained unchanged from the 2009 level (at $650,000).

 

The variance from the targeted market position with respect to Mr. Kourey’s base salary was not considered to be significant and is attributable to a combination of his tenure and performance. With respect to Mr. Miller’s compensation, the Compensation Committee increased his base salary upon his promotion to CEO, upon advice from Radford, below the targeted market position, with the expectation that it would consider his compensation again based on his performance through 2010 to guide its determinations in the future. Accordingly, in early 2011, the Compensation Committee reviewed Mr. Miller’s compensation and considered his strong performance in 2010 as President and CEO of Polycom, Polycom’s strong financial and operating performance in 2010 and market analysis confirming that Mr. Miller’s base salary fell well below the 50th percentile range of the Peer Companies. Following this review, and in line with Polycom’s pay-for-performance philosophy, the Compensation Committee recommended, and the independent directors approved, an increase in Mr. Miller’s annual base salary to $750,000, effective February 2011, which brought his base salary level to within the 50th percentile range, as follows:

 

Named Executive Officer

   February 2011
Base Salary
Level ($)
     Low End of
50th Percentile
Range ($)
     High End of
50th Percentile
Range ($)
     Position in
50th Percentile
Range
 

Andrew M. Miller

     750,000         717,091         867,680         Within   

 

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Total Cash Compensation for 2010

 

At the time during the first half of 2010 that the Compensation Committee (and the independent members of the Board of Directors, in the case of the CEO) reviewed the 2010 total cash compensation for our executive officers, including our NEOs, the total cash compensation targeted to be paid to each of the NEOs, other than with respect to Messrs. Miller, Darwish, Hagerty, and Sigrist, was within the 2010 target range, based on the 75th percentile, as set forth in the table below.

 

Named Executive Officer

   February
2010
Base Salary
($)
     Target 2010
Short-Term
Cash
Incentive
Award ($)
     Target 2010
Total Cash
Compensation
($)
     Low End
of 75th
Percentile
Range ($)
     High End
of 75th
Percentile
Range ($)
     Position
in 75th
Percentile
Range
 

Andrew M. Miller (1)

     400,000         320,000         720,000         722,174         955,075         Below   

Michael R. Kourey

     427,400         341,920         769,320         736,609         974,165         Within   

Sayed M. Darwish

     349,000         209,400         558,400         584,522         773,030         Below   

Sudhakar Ramakrishna (2)

     —           —           —           —           —           —     

Laura J. Durr

     245,630         122,815         368,445         315,565         417,335         Within   

Robert C. Hagerty

     650,000         780,000         1,430,000         1,701,826         2,250,665         Below   

Geno J. Alissi

     341,700         239,190         580,890         556,870         736,460         Within   

Joseph A. Sigrist

     368,500         257,950         626,450         680,957         900,565         Below   

 

(1) At the time that the Compensation Committee reviewed total cash compensation, Mr. Miller’s compensation was based on his previous role as Executive Vice President, Global Field Operations.
(2) Mr. Ramakrishna joined Polycom in October 2010 and as a result, the base salary determinations that occurred in the first half of the year did not apply to him.

 

When the Compensation Committee reviewed total cash compensation for 2010, uncertainty still persisted with respect to the market and economic conditions. Given this environment, the Compensation Committee’s determination not to re-establish a formal bonus plan for the first half of 2010 (as described below), and the fact that the Company was still below the median size of the Peer Companies in terms of revenues, the Compensation Committee was comfortable with certain total cash compensation amounts for Messrs. Miller, Darwish, Hagerty and Sigrist falling below the stated market position.

 

Target Short-Term Cash Incentive Awards for 2011

 

For 2011, the Compensation Committee reviewed the target short-term cash incentive awards for the NEOs and with the exception of Messrs. Miller and Darwish, the NEOs’ target short-term cash incentive awards were within the stated market position as compared to the Peer Companies.

 

Named Executive Officer

   Target
Short-Term
Incentive (%)
     Low End of
75th Percentile
Range (%)
     High End of
75th Percentile
Range (%)
     Position in
75th Percentile
Range
 

Andrew M. Miller

     100         122         161         Below   

Michael R. Kourey

     80         78         104         Within   

Sayed M. Darwish

     60         65         86         Below   

Sudhakar Ramakrishna

     75         65         86         Within   

Laura J. Durr

     50         43         58         Within   

 

As a result of this review, Mr. Darwish’s target short-term cash incentive award was increased to 75% effective January 1, 2011, bringing him to within the targeted 75th percentile range.

 

Following its review of Mr. Miller’s compensation in February 2011, as discussed previously, the Compensation Committee recommended, and the independent directors approved, leaving Mr. Miller’s target

 

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short-term cash incentive award percentage at 100% of base salary, which is below the targeted 75th percentile range for target short-term cash incentive award compensation.

 

Short-term Cash Incentive Awards

 

To focus each executive officer on the importance of achieving Polycom’s goals, typically a substantial portion of the officer’s potential annual compensation is set in the form of short-term cash incentive compensation that is tied to achievement of those goals. Accordingly, Polycom maintains two bonus programs under which executive officers are eligible to receive bonuses: the Performance Bonus Plan and the Management Bonus Plan.

 

Performance Bonus Plan.    The Company’s Performance Bonus Plan is intended to focus Polycom’s senior management on meeting and exceeding Polycom’s operating plan and maximizing Polycom’s delivery of rewards to its stockholders and employees. The Performance Bonus Plan is intended to permit the payment of bonus awards that qualify as performance-based compensation under Section 162(m) of the Code. Under the Performance Bonus Plan, bonuses are paid only if the performance goals set by the Compensation Committee at the beginning of the applicable performance period are achieved. In setting the performance goals, the Compensation Committee assesses the anticipated difficulty and relative importance to the success of Polycom of achieving the performance goals. Accordingly, the actual awards (if any) payable for any given year will vary depending on the extent to which actual performance meets, exceeds or falls short of the goals approved by the Compensation Committee. The Compensation Committee has the discretion to determine whether a bonus will be paid in the event an executive terminates employment before the bonus is scheduled to be paid. In addition, the Compensation Committee has discretion to decrease (but not increase) the bonuses that otherwise would be paid under the Performance Bonus Plan based on actual performance versus the specified goals.

 

Second Half 2010 Performance Bonus Plan.    For 2010, the Compensation Committee approved a bonus model with one six-month performance period, beginning on July 1, 2010. The Compensation Committee had determined not to re-establish formal bonus plans for the Company’s executive officers for the first half of 2010. The deteriorated conditions of the macroeconomic environment in 2009 had resulted in continued uncertainty and unpredictability in the market and economy through the beginning of 2010. However, as a result of the anticipated improvement in the economy for the second half of 2010 and its expected positive impact on the Company’s business and financial performance, the Compensation Committee approved a bonus model based on a performance period for NEOs for the remaining six months of the year.

 

The extent to which awards became payable at the end of the performance period depended upon actual performance as compared to the targets set forth in Polycom’s operating plan for the performance period and performance goals. The plan provided for a quarterly progress payment equal to 50% of the bonus earned up to the 100% achievement level for the third quarter 2010 results. For retention purposes, no payments would be made for overachievement (i.e., above target performance) until the year-end payment was calculated, subject to the employee remaining employed through the payment date.

 

For 2010 bonuses, the Compensation Committee determined that there would be two, equally weighted performance goals based entirely on Company-wide performance that applied to all NEOs, aligning the entire executive team upon execution against the same corporate goals. This alignment, which was supported by Radford, was considered appropriate in order to motivate and incentivize the executives to work as team to achieve success for Polycom through the end of 2010, particularly in light of our CEO transition earlier in the year. These performance goals consisted of achievement of Polycom’s revenue and non-GAAP operating income, and were measured against the corresponding target amounts in Polycom’s 2010 operating plan for the second half of 2010. These comparisons yielded an achievement percentage for each of the applicable performance goals, which were then further compared in a pre-determined matrix that yielded a percentage to be applied to each NEO’s target bonus amount.

 

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The actual award (if any) payable for the second half of 2010 depended on the extent that actual performance met, exceeded or fell short of the pre-approved performance goals. For the second half of 2010, due to the fact that the Company set challenging goals under its operating plan and continued to make investments in the business to further the Company’s strategic initiatives, Polycom achieved the Company-wide revenue objective at 101% of target and the Company-wide non-GAAP operating income percent objective at 100% of target. The following table describes actual awards paid to our NEOs participating under the Performance Bonus Plan for 2010 based on the achievement of the performance goals:

 

Named Executive Officer

  Second Half
2010 Eligible
Earned Base
Salary
($)
    Target Second
Half 2010
Award as
Percentage of
Base Salary
(%)(1)
    Target Second
Half 2010
Potential
Award Range
as Percentage of
Target(2)
(%)
    Actual Second
Half 2010
Award
($)
    Actual Second
Half 2010
Award as
Percentage of
Second Half
Earned Base
Salary
(%)(3)
    Actual Second
Half 2010
Award as
Percentage of
Target Award
(%)
 

Andrew M. Miller

    300,000        100        0 to 250        303,000        101        101   

Michael R. Kourey

    224,000        80        0 to 250        180,992        81        101   

Sayed M. Darwish

    195,000        60        0 to 250        118,170        61        101   

Robert C. Hagerty (4)

    —          —          —          —          —          —     

Geno J. Alissi (5)

    —          70        —          —          —          —     

Joseph A. Sigrist (5)

    —          70        —          —          —          —     

 

(1) The Performance Bonus Plan for 2010 was in effect only for the second half of the year. Accordingly, the target 2010 award as a percentage of base salary was applied to the base salaries earned by NEOs only during the second half of 2010. The base salary levels for the second half of 2010, on an annualized basis, are set forth in the table further above under the section titled “Base Salary.”
(2) No bonus was payable if a minimum of 80% achievement of each applicable performance goal was not met.
(3) 2010 Base Salary is as set forth in the Summary Compensation Table on page 70.
(4) Mr. Hagerty terminated employment during the first half of 2010, and as a result, he was not eligible to participate in any bonus plan.
(5) Messrs. Alissi and Sigrist terminated employment in August and September 2010, respectively, and as a result, they were not eligible to receive a bonus under the Performance Bonus Plan.

 

Management Bonus Plan.    Polycom also maintains the Management Bonus Plan, which is an incentive bonus program for directors, vice presidents and above, and selected managers who are not participants in the Performance Bonus Plan. The Management Bonus Plan is designed to provide incentives to, and reward the efforts of, senior employees in maximizing the short- and long-term financial performance of the business; however, awards under the Management Bonus Plan are not intended to qualify as performance-based compensation under Section 162(m) of the Code. In accordance with the terms of the Management Bonus Plan, the Compensation Committee may exercise its discretion from time to time to increase or decrease bonuses payable thereunder.

 

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2010 Management Bonus Plan.    For 2010, two of our NEOs, Mr. Ramakrishna and Ms. Durr, participated in the Management Bonus Plan which, similar to the Performance Bonus Plan, had only one six-month performance period that applied to the second half of 2010. The corporate performance goals under the Management Bonus Plan were the same as those under the Performance Bonus Plan and, accordingly, Polycom’s performance resulted in a payout under the Management Bonus Plan of 101% (which is described in more detail above with respect to the Performance Bonus Plan). The Management Bonus Plan also provides for positive or negative adjustment to a participant’s payout based upon their individual performance. Upon the recommendation of Mr. Kourey, for 2010, the Compensation Committee approved a multiplier of 109% to the bonus amount payable to Ms. Durr, in recognition of her strong performance and leadership through the second half of 2010. The following table describes actual awards paid to our NEOs that participated under the Management Bonus Plan for 2010 based on the achievement of the performance goals:

 

Named Executive Officer

  Second Half
2010 Eligible
Earned Base
Salary
($)
    Target Second
Half 2010
Award as
Percentage of
Base Salary
(%)(1)
    Target Second
Half 2010
Potential
Award Range
as Percentage
of Target (2)
(%)
    Actual Second
Half 2010
Award
($)
    Actual Second
Half 2010
Award as
Percentage of
Second Half
Earned Base
Salary
(%)(3)
    Actual Second
2010 Award as
Percentage of
Target Award
(%)
 

Sudhakar Ramakrishna (4)

    90,909        75        0 to 250        68,864        76        101   

Laura J. Durr

    128,500        50        0 to 250        70,733        55        110   

 

(1) The Management Bonus Plan for 2010 was in effect only for the second half of the year. Accordingly, the target 2010 award as a percentage of base salary was applied to the base salaries earned by NEOs only during the second half of 2010. The base salary levels for the second half of 2010, on an annualized basis, is set forth in the table further above under the section titled “Base Salary.”
(2) No bonus was payable if a minimum of 80% achievement of each applicable performance goal was not met.
(3) 2010 Base Salary is as set forth in the Summary Compensation Table on page 70.
(4) Mr. Ramakrishna joined Polycom in October 2010. As a result, his target award was determined at the time of his hire and his participation in the Management Bonus Plan was prorated based on his start date.

 

Difficulty in Achieving Performance Targets under the Performance Bonus Plan and Management Bonus Plan for 2010.    Achievement of the performance goals under the Performance Bonus Plan and Management Bonus Plan is measured against targets set forth in Polycom’s operating plan, which is developed by management and approved by the Board of Directors after significant review and discussion. The operating plan is designed to encourage the growth and development of Polycom and therefore is intentionally challenging and expected to be achieved by management and Polycom as a whole only with significant effort and skill. As the performance goals and target levels set by the Compensation Committee are based on Polycom’s operating plan, the difficulty in achieving the performance goals at the target levels reflects the inherent difficulty in achieving the goals and objectives set forth in the operating plan. Further, as discussed above, bonuses for 2010 would be payable at target levels only upon substantial overachievement of the performance goals in Polycom’s operating plan.

 

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At the time the performance goals and target levels were set for the executive officers, the Compensation Committee believed that the target levels would be difficult to achieve and that maximum payouts were unlikely to be achieved. In addition, in 2010, the Compensation Committee recognized that the Company was making significant investments in the business in support of the Company’s strategic initiatives and in furtherance of the Company’s long-term performance objectives, which would further limit the executive officers’ ability to achieve at above target performance levels against Polycom’s short-term operating plan, which specifically contemplated these investments. Achievement of a maximum payout would require substantial efforts by the executive officer and very high levels of company performance that historically have not been attained. The following table sets forth prior year payouts of cash incentive compensation received by Polycom’s named executive officers (at such time) as a percentage of their target bonus amount based upon actual earnings:

 

Fiscal Year  

Range of Cash

      Incentive Payouts      

2007   74% to 101%        
2008   25% to 80%(1)
2009   0% to 12.2%(2) 
2010 (Second Half)   101% to 110%(3)     

 

(1) Includes discretionary bonus payments made to named executive officers.
(2) Excludes Mr. Miller’s guaranteed bonus under the Management Bonus Plan.
(3) Reflects Second Half 2010 bonus payout for the six month performance period from July 1, 2010 to December 31, 2010.

 

2010 Discretionary Bonuses.    During 2010, the CFO recommended, and the Compensation Committee approved, discretionary bonuses for Ms. Durr for the first half of the year based on her strong performance and project work. Her bonuses were as follows:

 

First Quarter 2010 ($)

   Second Quarter 2010 ($)  

14,937

     18,000   

 

2010 New Hire Bonus.    In connection with his hire in October 2010, Mr. Ramakrishna became entitled to receive a signing and retention bonus in the amount of $80,000, payable in 2011 in four equal installments on a quarterly basis, subject to his continued employment with us through each such date. His new hire compensation package is discussed further below.

 

2011 Short-Term Cash Incentive Awards

 

For 2011, the Compensation Committee approved two six-month performance periods beginning on January 1, 2011, and July 1, 2011, under both the Performance Bonus Plan and Management Bonus Plan. There are two, equally weighted performance goals for NEOs under both plans. These consist of Polycom’s revenue and non-GAAP operating income as set forth in Polycom’s 2011 annual operating plan, and as adjusted for the second half of 2011. The Compensation Committee chose these performance goals, which are the same goals that applied to 2010 bonuses in order to motivate and align the NEOs to work toward these common objectives as a team to achieve Polycom’s success in 2011. The extent of achievement of these performance goals will determine the payout based on a pre-determined matrix of Polycom’s revenue and non-GAAP operating income that yields a specific percentage to be applied to each NEO’s target bonus amount. In addition, the Management Bonus Plan provides for positive or negative adjustment based upon an individual participant’s performance.

 

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Each NEO’s target bonus amount will be allocated equally among the two performance periods. The named executive officers’ 2011 target bonus percentages and potential award ranges under the applicable bonus plan are:

 

Named Executive Officer (1)

  

Bonus Plan

   Target 2011 Award as
Percentage of Base
Salary
(%)
     Potential Award
Range as
Percentage of Target
(%)
 

Andrew M. Miller

  

Performance Bonus Plan

     100         0 to 250   

Michael R. Kourey

  

Performance Bonus Plan

     80         0 to 250   

Sayed M. Darwish

  

Performance Bonus Plan

     75         0 to 250   

Sudhakar Ramakrishna

  

Performance Bonus Plan

     75         0 to 250   

Laura J. Durr

  

Management Bonus Plan

     50         0 to 250   

 

(1) Messrs. Hagerty, Alissi and Sigrist terminated employment during 2010 and as a result, are not eligible to participate in the Performance Bonus Plan for 2011.

 

Difficulty in Achieving Performance Targets under the Performance Bonus Plan and Management Bonus Plan for 2011.    We expect that, similar to the 2010 bonuses, achievement of the performance goals under the Performance Bonus Plan and Management Bonus Plan will be challenging, as these goals are determined under Polycom’s 2011 annual operating plan. Each annual operating plan is intentionally designed to set aggressive goals for management for the year, as was the case for the 2010 annual operating plan and which is described in more detail above. We expect that management will need to perform at high levels and expend significant effort and skill to achieve target level performance in 2011 under the bonus plans.

 

Long-Term, Equity-Based Incentive Awards

 

The goal of Polycom’s long-term equity-based incentive program is to better align the interests of executive officers with Polycom’s stockholders. The Compensation Committee determines the size of long-term, equity-based incentives based on each executive’s position within Polycom and seeks to set a level that will create a meaningful opportunity for stock ownership. In addition, the Compensation Committee takes into account an individual’s recent performance, his or her potential for future responsibility and promotion, the number and value of unvested equity awards already held by each individual and comparable awards made to individuals in similar positions with the Peer Companies.

 

In reviewing and analyzing the awards made to similarly situated executives at the Peer Companies, the Compensation Committee, with the assistance of its compensation consultant, compared:

 

   

The number of option equivalents subject to awards granted to an individual in a given role or position (or for 2011, annual long-term incentive values of awards to such individuals);

 

   

The value of the grant using a Black-Scholes valuation for options and the grant date value for full value equity awards for each role or position as compared to the value of the grants at the peer companies for each role or position, using a value that is consistent with FASB ASC Topic 718 (“ASC 718”);

 

   

The number of shares granted as a percent of Polycom’s total shares outstanding for each role or position compared to the number of shares granted as a percent of the Peer Companies’ total common shares outstanding for each role or position; and

 

   

The individual’s vested and unvested equity positions.

 

Equity Award Practices

 

Equity-based awards are granted to our employees, including executive officers, under Polycom’s 2004 Equity Incentive Plan. All equity awards are approved by the Compensation Committee on the grant date, and all

 

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option grants have a per share exercise price equal to the fair market value of Polycom’s common stock on the grant date. The Compensation Committee has not delegated authority to grant stock options and other equity awards under Polycom’s 2004 Equity Incentive Plan; therefore, the authority to grant equity awards currently resides solely with the Compensation Committee.

 

At the 2011 Annual Meeting, stockholders are being asked to approve a new 2011 Equity Incentive Plan (the “2011 Plan”) so that we may continue to be able to attract, motivate and retain our employees through grants of equity awards, as well as receive a federal income tax deduction for certain awards intended to constitute “performance-based compensation” under Section 162(m) of the Code. Polycom’s current 2004 Equity Incentive Plan (the “2004 Plan”) is being terminated in connection with the adoption of the 2011 Plan, but equity awards granted under the 2004 Plan will continue to be governed by the 2004 Plan.

 

The Compensation Committee historically has not had, and does not intend to establish, any program, plan or practice of timing the grant of equity awards to its executive officers in coordination with the release of material non-public information that is likely to result in either an increase or decrease in the price of Polycom common stock. In addition, to the extent Polycom’s stock price immediately increases following the grant of equity awards, recipients will not realize the full value of such increase given that full value equity awards typically vest over a two- or three- year period (with the use of one-year awards as deemed appropriate in certain instances), and options typically vest over a four-year period.

 

Stock Awards

 

For 2010 and 2011, the Compensation Committee has continued the practice of granting a combination of performance shares and time-based restricted stock units to director-level employees and above. The Compensation Committee has continued this practice after consulting with Radford and considering a number of factors, including the retentive value of outstanding long-term, equity-based incentive awards held by Polycom employees (including the NEOs), the importance of rewarding key employees for continued dedication and loyalty, trends regarding long-term, equity-based incentive awards, and alternative performance measures that will appropriately reflect Polycom’s long-term shareholder objectives.

 

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2010 Equity Awards

 

For 2010, the Compensation Committee, with the assistance of Radford, reviewed Polycom’s long-term, equity-based incentive program including the competitive position of the outstanding equity positions held by Polycom’s NEOs. Radford concluded that a majority of the number of shares of equity held by our NEOs (other than Messrs. Miller, Darwish, Alissi and Ramakrishna who was not hired until October 2010) were vested and with the exception of Messrs. Miller, Kourey, Darwish, Durr and Ramakrishna, each executive officers’ unvested equity awards had a value of less than two times the market median annual long-term incentive awards of the Peer Companies based on the then-current 30-day trading average of Polycom’s stock, presenting a potential retention risk for Polycom. After considering Radford’s recommendations, Polycom’s retention concerns, each NEO’s competitiveness relative to the market, individual performance for 2009 and expected future contribution, the Compensation Committee (and the independent members of the Board of Directors, in the case of Mr. Hagerty who was our then-CEO) approved the following equity grants to the NEOs:

 

Named Executive Officer

  2010
Restricted
Stock
Units
(#)
    Target 2010
Performance
Shares
(Total
Shareholder
Return)
(#)
    Target 2010
Performance
Shares
(Gross
Margin
Dollars)
(#)
    Target 2010
Restricted
Stock Units
and
Performance
Share
Values
($) (1)
    Low End
of 50th
Percentile
Range
($)
    High End
of 50th
Percentile
Range
($)
    Position
in 50th
Percentile
Range
 

Andrew M. Miller

    17,500        17,500        2,000        841,380        673,154        1,137,630        Within   

Michael R. Kourey

    17,500        17,500        13,000        1,091,520        541,769        869,960        Above   

Sayed M. Darwish

    14,000        14,000        10,000        864,120        470,462        795,080        Above   

Sudhakar Ramakrishna (2)

    —          —          —          —          —          —          —     

Laura J. Durr

    3,750        3,750        —          170,550        107,615        181,870        Within   

Robert C. Hagerty

    45,000        45,000        20,000        2,501,400        2,641,000        4,463,290        Below   

Geno J. Alissi

    14,000        14,000        11,000        886,860        427,769        722,930        Above   

Joseph A. Sigrist

    17,500        17,500        12,000        1,068,780        535,000        904,150        Above   

 

(1) On February 4, 2010, the effective date of the NEOs’ performance shares and restricted stock unit grants, the fair market value (or closing trading price) of Polycom’s common stock on NASDAQ was $22.74, which was used to calculate the value of the NEOs’ awards.
(2) Mr. Ramakrishna joined Polycom in October 2010 and therefore did not receive equity awards in February 2010.

 

The restricted stock units vest annually on the award’s grant date in equal installments over three years, subject to continued employment through such vesting date. The performance shares indicated as “Total Shareholder Return” in the table above vest based upon achievement of targets in total shareholder return (“TSR”) during three successive, one-year performance periods beginning on January 1, 2010, and continuing through 2012, subject to continued employment through each vesting date. The target number of performance shares was allocated equally among the three performance periods and the number of performance shares that could vest ranged from 0% to 200% of the target number of performance shares allocated to each performance period. If the performance criteria are not met in a particular period, the portion of performance shares allocated to such period will be permanently forfeited.

 

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For 2010, our TSR for each performance period was measured against the Russell 2000 Index. The Compensation Committee determined that the Russell 2000 Index was an appropriate index to use given that this index included similarly-sized companies, including at the time the Company and other companies comparable to the Company in terms of market capitalization, and is well-represented by technology companies. The award level, award criteria, and target number of performance shares that will vest based on achievement of the TSR objective are as follows:

 

Award Level

  

Award Criteria

   Target Number of Performance
Shares That Will Vest

Minimum Award

   TSR equals the 25th percentile of the Russell 2000 Index (1)    Fifty percent (50%) of the target
number of performance shares

Target Award

   TSR equals the 50th percentile of the Russell 2000 Index (2)    One hundred percent (100%) of
the target number of
performance shares

Maximum Award

   TSR equals or exceeds the top percentile of the Russell 2000 Index    Two hundred percent (200%) of
the target number of
performance shares

 

(1)

If TSR is below the 25th percentile of the Russell 2000 Index, no vesting would occur for that performance period. For each additional percentile above the 25th percentile up to the 50th percentile, an additional two percent of the target number of performance shares becomes vested until reaching the 50th percentile.

(2)

If TSR is above the 50th percentile of the Russell 2000 Index, an additional two percent of the target number of performance shares becomes vested for each additional percentile until reaching the top percentile.

 

Further, due to retention concerns and other factors described above, the Compensation Committee approved additional performance shares for certain of Polycom’s executive officers, including Messrs. Miller, Kourey, Darwish, Hagerty, Alissi, and Sigrist, indicated as “Gross Margin Dollars” in the table above. These additional performance shares, which the Compensation Committee believed achieved its objectives of retaining these key executives while also designed to pay out only upon the achievement of strategically important financial measures, resulted in Messrs. Kourey, Darwish, Alissi and Sigrist receiving grants above the targeted percentile range. The equity awards to Mr. Hagerty were below the market range. However, the Compensation Committee determined that the equity awards granted to Mr. Hagerty were appropriate after taking into consideration Polycom’s relative size in terms of revenues as compared to the Peer Companies.

 

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These awards were subject to vest upon achievement of the gross margin dollars target over a one-year performance period during 2010, subject to continued employment through such vesting date. The number of performance shares in which the recipient ultimately would be entitled to vest ranged from 0% to 200% of the target number of performance shares. The achievement of gross margin dollars would be compared to the gross margin dollars target in Polycom’s annual operating plan for 2010. The Compensation Committee believed that this measure was appropriate because achieving our gross margin dollars targets represented an important strategic focus for the Company and its stockholders as it was critical to increasing the Company’s future profitability and funding the Company’s core strategic initiatives. The award level, award criteria and target number of shares that would vest based on achievement of the gross margin dollars objective were as follows:

 

Award Level

  

Award Criteria

   Target Number of Performance
Shares That Will Vest

Minimum Award

   Gross margin dollars is achieved at 50% of target under the operating plan (1)    Fifty percent (50%) of the target
number of performance shares

Target Award

   Gross margin dollars is achieved at 100% of target under the operating plan (2)    One hundred percent (100%) of
the target number of
performance shares

Maximum Award

   Gross margin dollars is achieved at 125% or greater of target under the operating plan    Two hundred percent (200%) of
the target number of
performance shares

 

(1) If gross margin dollars was below 50% of the target under the operating plan, no vesting of the performance shares would occur. For each additional percentage of gross margin dollars achieved against the operating plan above fifty percent (50%), an additional one percent (1%) of the target number of performance shares becomes vested until gross margin dollars reached 100% of target under the operating plan.
(2) If gross margin dollars was above 100% of target under the operating plan, an additional four percent (4%) of the target number of performance shares became vested for each additional percentile until reaching 125% of the target under the operating plan.

 

The achievement level of these gross margin dollar awards is described in further detail under “Performance Share Results for 2010” below.

 

Modification of Performance Goals in Connection with Promotion.    In June 2010, we modified Mr. Miller’s performance goals for certain grants to better reflect his new role as President and CEO of Polycom. The changes were to Mr. Miller’s performance shares in the target amounts of 50,000 and 75,000 shares that were granted in 2009, in connection with his hire. Mr. Miller originally joined Polycom in the role of EVP, Global Field Operations and accordingly, the vesting of these performance shares was contingent upon achievement of targets relating to his responsibilities in that role (including the achievement of targets in market share of Polycom’s video and network solutions business, with respect to the 50,000 share grant, and the achievement of targets in market share and revenue for certain products, with respect to the 75,000 share grant).

 

However, in May 2010, when Mr. Miller’s role changed to that of President and CEO of Polycom, and with support from Radford, we revised the applicable performance vesting criteria for future performance periods under such awards commencing July 1, 2010, so that the performance criteria for the remaining target performance shares (100,000 shares) instead would be based on achievement of targets for Total Shareholder Return. We believe that the amendment better aligns the performance goals under these awards with Mr. Miller’s enhanced, Company-wide responsibilities as our President and CEO. Other terms of these awards remained unchanged.

 

For the first six-month performance periods ending June 30, 2010 that remained subject to the original terms under these two awards, of the 12,500 target performance shares related to the attainment of targets for market

 

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share, no shares were awarded to Mr. Miller as this performance measure was not satisfied, and of the 12,500 target performance shares related to the achievement of both market share and revenue targets, 12,500 shares were awarded to Mr. Miller as these performance goals were met. Polycom’s TSR result for the second six-month performance period ending December 31, 2010 was at approximately the 69th percentile ranking as compared to the Russell 2000 Index, resulting in the vesting of 138% of the target 25,000 shares awarded to Mr. Miller for such performance period, or 34,500 shares in the aggregate. The performance share results for other awards to Mr. Miller in 2010 are described below.

 

Supplemental Performance Shares.    In May 2010, in connection with Mr. Miller’s promotion to the President and CEO position, we granted equity awards to Mr. Miller in a combination of 50% performance shares and 50% time-based restricted stock units. In addition, for retention purposes and to ensure a successful transition following Mr. Miller’s promotion, we granted equity awards to Mr. Kourey (our CFO) in a combination of 50% time-based restricted stock units and 50% performance shares. Additionally, in November 2010, the Compensation Committee further reviewed Mr. Miller’s total direct compensation with Radford, which reported that Mr. Miller’s current compensation levels fell below the competitive range for each pay element (i.e. base salary, short-term incentive and long-term incentive). In recognition of his increased role as CEO and his strong performance to date in such role, as well as the fact that his current equity compensation was significantly below market, the Compensation Committee approved a supplemental grant to Mr. Miller in a combination of 50% time-based restricted stock units and 50% performance shares. We believe that these award grants are appropriate as they are consistent with our long-term strategic goals and that the combination of time-based and performance-based awards is appropriate to accomplish our objectives of providing incentive and retention value to the NEOs. The awards granted are as follows:

 

Named Executive Officer

   Restricted Stock Units
(#) (1)
     Target Performance
Shares (TSR)
(#)
 

Andrew M. Miller

     15,000         15,000 (2) 
     17,500         17,500 (3) 

Michael R. Kourey

     12,500         12,500 (2) 

 

(1) The restricted stock units are scheduled to vest annually in equal installments over a period of three years on the anniversary of the award’s grant date, subject to continued employment through each vesting date.
(2) These performance shares are subject to achievement of the same levels of TSR and terms and conditions as described above with respect to the annual awards, except that the performance periods are based on three, twelve-month periods with the first performance period commencing May 1, 2010 and the second and third performance periods comprising the 2011 and 2012 calendar years, respectively.
(3) These performance shares are subject to achievement of the same levels of TSR and terms and conditions as described above with respect to the annual awards.

 

New Hire Awards.    In connection with Mr. Ramakrishna’s hire in October 2010, the Compensation Committee approved a combination of time-based restricted stock units and performance shares. The awards granted are as follows:

 

Restricted Stock Units

(#)

  

Target Performance Shares (TSR)

(#)

25,500 (1)    22,500 (2)

 

(1) The restricted stock units are scheduled to vest annually in equal installments over a period of three years on the anniversary of the award’s grant date, subject to continued employment through each vesting date. 3,000 of these restricted stock units were awarded as a sign-on award with retention value.
(2) The performance shares are subject to achievement of the same levels of TSR and terms and conditions as described above with respect to the annual awards.

 

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Mr. Ramakrishna’s new hire compensation package is described further below.

 

Performance Share Results for 2010.    Following the end of the 2010 performance period, the Compensation Committee determined that Polycom’s TSR for 2010 was at approximately the 84th percentile ranking as compared to the Russell 2000 Index. This very strong ranking resulted in the vesting of 168% of the target number of the first one-third of the performance shares that were granted in 2010 measuring TSR performance against the Russell 2000 Index. It also approved the vesting of 108% of the target number of performance shares granted in 2010 measuring gross margin dollar performance, based on the level of Polycom’s achievement of gross margin dollars. The number of shares that vested as a result of these achievements is as follows:

 

Named Executive Officer

   Performance
Shares
(TSR) (#)(1)
     Performance
Shares
(Gross Margin
Dollars) (#)(1)
 

Andrew M. Miller

     76,499         2,160   

Michael R. Kourey

     22,401         14,040   

Sayed M. Darwish

     19,038         10,800   

Sudhakar Ramakrishna (2)

     —           —     

Laura J. Durr (3)

     4,200         —     

Robert C. Hagerty (4)

     —           —     

Geno J. Alissi (4)

     —           —     

Joseph A. Sigrist (4)

     —           —     

 

(1) These performance share results were certified in February 2011, and the shares vest on various dates in 2011 on the applicable one-year anniversary of the grant date.
(2) Mr. Ramakrishna was hired in October 2010, and as a result, he did not receive performance shares based on gross margin dollars.
(3) Ms. Durr did not receive performance shares based on gross margin dollars.
(4) Messrs. Hagerty, Alissi and Sigrist terminated employment prior to the end of the 2010 performance period, and as a result, forfeited their performance shares upon such termination.

 

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Difficulty in Achieving Target Gross Margin Dollars Performance

 

With respect to performance shares measuring achievement of gross margin dollars, the Compensation Committee set performance goals and target levels based on the goals and objectives set forth in Polycom’s annual operating plan. The annual operating plan is designed to encourage the growth and development of Polycom and is therefore intentionally challenging and expected to be achieved only with significant effort and skill. At the time the 2010 performance goals and target levels were set for the gross margin dollars performance shares granted to the NEOs, the Compensation Committee believed that the target levels would be difficult to achieve and were unlikely to be achieved at the maximum level. Achievement of a maximum payout would require substantial efforts by the executive officer and very high levels of company performance that historically have not been attained. For example, in each of 2007, 2008 and 2009 (in which years the Compensation Committee also awarded performance shares measuring performance (albeit in 2007 and 2008, revenue and income performance) against the operating plan), the Compensation Committee set similarly challenging goals that would be difficult to achieve, with the maximum number of performance shares to be potentially earned upon achievement of performance goals set at 250% (or 200% for 2009) of the target number of performance shares awarded to the NEO. However, the actual performance shares earned upon achievement of the performance goals for 2007, 2008 and 2009 for our then-CEO, CFO and other NEOs are reflected in the following table:

 

Fiscal Year

  

Participants

   Actual Achievement as Percentage
of Target Number of Shares (%)
 

2007

  

CEO and CFO

     98   
  

Other Named Executive Officers

     94   

2008

  

CEO and CFO

     0   
  

Other Named Executive Officers

     0   

2009

  

CEO and CFO

     122   
  

Other Named Executive Officers

     122   

 

2011 Equity Awards

 

For 2011 grants, the Compensation Committee considered Mr. Miller’s recommendations (other than with respect to awards to be granted to himself) and approved the awards, based on its review of Radford market data for the Peer Companies, executive tally sheets, target total direct compensation as well as the NEOs’ then-current equity award holdings.

 

Named Executive Officer

   2011
Restricted
Stock Units
(#)
     Target 2011
Performance
Shares (TSR)
(#)
     Target 2011
Restricted
Stock Units
and
Performance
Share Values
($) (1)(2)
     Low End of
50th
Percentile
Range
($)
     High End of
50th
Percentile
Range
($)
     Position in
50th
Percentile
Range
(3)
 

Andrew M. Miller

     29,000         29,000         2,639,000         2,272,923         3,841,240         Within   

Michael R. Kourey

     7,500         7,500         688,950         667,923         1,128,790         Within   

Sayed M. Darwish

     7,250         7,250         665,985         391,923         662,350         Above   

Sudhakar Ramakrishna

     9,250         9,250         849,705         502,385         849,030         Above   

Laura J. Durr

     4,000         4,000         367,440         171,077         289,120         Above   

Robert C. Hagerty (4)

     —           —           —           —           —           —     

Geno J. Alissi (4)

     —           —           —           —           —           —     

Joseph A. Sigrist (4)

     —           —           —           —           —           —     

 

(1) On February 23, 2011, the effective date of the CEOs’ performance shares and restricted stock unit grants, the fair market value (or closing trading price) of Polycom’s common stock on NASDAQ was $45.50, which was used to calculate the value of the CEO’s awards.

 

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(2) On February 22, 2011, the effective date of the NEOs’ (other than Mr. Miller’s) performance shares and restricted stock unit grants, the fair market value (or closing trading price) of Polycom’s common stock on NASDAQ was $45.93, which was used to calculate the value of such NEOs’ awards.
(3) Certain grants fall slightly above the targeted market range due to the fact that Polycom’s stock price increased between the date that competitive data was prepared for the Compensation Committee and the grant date of the awards.
(4) Messrs. Hagerty, Alissi and Sigrist terminated employment during 2010, and as a result, were not eligible to receive awards for 2011.

 

As indicated in the table above, we granted a combination of performance shares and time-based restricted stock units to our NEOs, as we did in 2010 and as described above. Restricted stock units are scheduled to vest in three equal, annual installments on the anniversary of the award’s grant date, subject to continued employment with Polycom through each vesting date. The performance shares indicated as “TSR” in the table above vest based upon achievement of targets in TSR during three successive, one-year performance periods beginning on January 1, 2011, and continuing through 2013, subject to continued employment through each vesting date. The target number of performance shares is allocated equally among the three performance periods and the number of performance shares that are eligible to vest ranges from 0% to 150% of the target number of performance shares allocated to each performance period. The Compensation Committee reduced the performance share cap, or maximum payout amount, to 150% from 200% in prior years as a means of continuing to recognize and reward the recipients for performance above the target level, while effectively managing the Company’s burn rate. If the performance criteria are not met in a particular period, the portion of performance shares allocated to such period will be permanently forfeited.

 

For awards granted in 2011, the TSR will be measured against the NASDAQ Composite Index (the “NASDAQ Index”). For awards granted in previous years, such awards will continue to be measured on the Russell 2000 Index, which reflects the performance criteria against which they were granted. The Compensation Committee believed that the NASDAQ Index would be appropriate because Polycom is a NASDAQ-listed company, the NASDAQ Index is inclusive of a large number of high technology companies, historical data showed a high correlation coefficient between Polycom and the NASDAQ Index and ten-year backtesting data and Radford further supported the selection of the NASDAQ Index. The award level, award criteria, and target number of performance shares that may vest based on achievement of the TSR objective are as follows:

 

Award Level

  

Award Criteria

  

Target Number of Performance
Shares That Will Vest

Minimum Award

   TSR equals the 25th percentile of the NASDAQ Composite Index (1)    Fifty percent (50%) of the target number of performance shares

Target Award

   TSR equals the 50th percentile of the NASDAQ Composite Index (2)    One hundred percent (100%) of the target number of performance shares

Maximum Award

   TSR equals or exceeds the top percentile of the NASDAQ Composite Index    One hundred fifty percent (150%) of the target number of performance shares

 

(1)

If TSR is below the 25th percentile of the NASDAQ Composite Index, no vesting will occur for that performance period. For each additional percentile above the 25th percentile up to the 50th percentile, an additional two percent of the target number of performance shares becomes vested until reaching the 50th percentile.

(2)

If TSR is above the 50th percentile of the NASDAQ Composite Index, an additional one percent of the target number of performance shares becomes vested for each additional percentile until reaching the top percentile.

 

For these 2011 annual awards, the Compensation Committee retains discretion to reduce the number of shares that otherwise would vest as a result of achievement of the performance goals. Under these awards, the Compensation Committee in its discretion may reduce the number of shares (including to zero) in the event of Polycom’s negative material restatement of financials, certain acts by the award holder involving fraud, or

 

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material violations of laws or regulations or material breaches of fiduciary duties owed to Polycom that have a significant negative effect on the Company’s reputation or business. The Compensation Committee in its discretion also may reduce the number of shares to the target level if our stock price at the end of the relevant performance period results in the measurement of TSR that is inconsistently substantially higher than the performance of our stock shortly preceding the last 30 days of such performance period (i.e., a change in the stock price of more than 40% in the last 30 days of the performance period as compared to the preceding 90-day period).

 

Other Changes to and Determinations of Compensation

 

Promotion to President and CEO

 

In May 2010, we promoted Mr. Miller, who had held the position of Executive Vice President, Global Field Operations, to President and CEO. In connection with the promotion, we revised Mr. Miller’s compensation as appropriate for his new role. In determining Mr. Miller’s new compensation package, we engaged Radford to provide analysis and recommendations with respect to the CEO position. Additionally, based on Mr. Miller’s relatively recent hire in 2009, in August 2010, we reviewed his relocation benefits that were initially negotiated with Mr. Miller at the time that he joined Polycom. The Compensation Committee recommended and the Board of Directors approved a seven-month extension of Company-paid, temporary living accommodations that were originally provided to Mr. Miller in recruiting him to join Polycom in the second half of 2009. In February 2011, we again reviewed Mr. Miller’s relocation arrangements and extended this benefit for an additional four months. These extensions will provide Mr. Miller with this benefit through August 2011 on a grossed up basis, subject to repayment of one-half of the total benefit in the event of his voluntary termination prior to July 1, 2011. The Compensation Committee believed the extensions were appropriate after considering Mr. Miller’s performance, other elements of his compensation and our retention goals following his promotion to President and CEO in 2010.

 

New Hire Compensation

 

In October 2010, we hired Mr. Ramakrishna to be Senior Vice President, General Manager of Unified Communications Products, and Chief Development Officer. In determining Mr. Ramakrishna’s compensation, the Compensation Committee considered the appropriate compensation package that would be required to recruit him to Polycom, his expected contributions, and internal equity. The Compensation Committee also consulted Radford regarding the levels of compensation appropriate for the position. However, we did not request a comprehensive analysis for the position at the time of his hire (which instead is conducted typically on an annual basis for our executives). In February 2011, Mr. Ramakrishna was promoted to Executive Vice President, General Manager of Unified Communications Solutions, and Chief Development Officer.

 

Hagerty Consulting Agreement

 

In May 2010, in order to ensure a smooth transition of the CEO position from Mr. Hagerty to Mr. Miller particularly in light of Mr. Hagerty’s nearly twelve-year tenure at Polycom as its CEO and his depth and breadth of knowledge of Polycom’s business, we entered into a consulting agreement with Mr. Hagerty. Under the agreement, Mr. Hagerty agreed to provide advisory services, as requested, to Polycom’s Board of Directors and Mr. Miller, for a period of at least one year (unless earlier terminated in accordance with the terms of the agreement). In exchange for such services, Mr. Hagerty would receive an aggregate amount of $500,000 payable over the term of the agreement. During the term of the agreement, Mr. Hagerty is subject to non-competition obligations with respect to certain identified companies. Upon mutual written agreement, the parties may elect to renew the agreement for an additional one-year term.

 

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Executive Stock Ownership Guidelines

 

Periodically, the Compensation Committee reviews the compensation practices of Polycom’s peer companies including executive stock ownership policies. In 2009, the Compensation Committee engaged Radford to report on the executive stock ownership practices of Polycom’s peer companies. Based on the report, the Compensation Committee considered the peer companies’ practices, including that in 2009, a majority of Polycom’s peer companies had in place executive stock ownership guidelines. After reviewing Radford’s recommendations and taking into consideration corporate governance factors, the Compensation Committee made a recommendation, and the full Board of Directors approved formal stock ownership guidelines for Polycom’s executive officers in early 2010. Pursuant to the guidelines, executive officers should have a minimum equity interest in the amount of 5,000 shares of Polycom’s stock, other than Polycom’s CEO who should have a minimum equity interest in the amount of 10,000 shares of Polycom’s stock. These minimums should be met by the later to occur of the fifth anniversary of the executive’s commencement of employment with the Company or February 4, 2015.

 

Termination and Change of Control Arrangements

 

One of the objectives of our compensation philosophy is to offer a total compensation program that takes into consideration the other compensation practices of our peer companies, including termination and change of control arrangements. Polycom has entered into change of control severance agreements with certain of Polycom’s senior executive officers, including Messrs. Miller, Kourey, Darwish, Ramakrishna, Hagerty, Alissi and Sigrist. The change of control severance agreements generally provide for the payment of compensation to Messrs. Miller, Kourey, Darwish and Ramakrishna (and which would have been provided to Messrs. Hagerty, Alissi and Sigrist) upon termination of employment under certain conditions in the event of a change of control, including a termination without cause or for good reason following a change of control of Polycom. Additionally, the Compensation Committee approved an Executive Severance Plan in February 2010, under which Messrs. Miller, Kourey, Darwish and Ramakrishna (following his hire date) and Ms. Durr are, and Messrs. Sigrist and Alissi had been (prior to their departures), eligible to participate. The Executive Severance Plan generally provides for the payment of compensation for the participating NEOs in the event of involuntary termination of employment other than for cause, death or disability, or voluntary termination for good reason in the amount of two times’ base and target bonus amount for Mr. Miller and one times’ base and target bonus amount for the other NEOs. Finally, Polycom had entered into a severance agreement with Mr. Hagerty which generally had provided for payment of compensation in the event of involuntary termination of employment other than for cause, death or disability, or his voluntary termination for good reason.

 

The various termination and change of control arrangements between Polycom and our executive officers are designed to meet the following objectives:

 

Arrangement

  

Objectives

Executive Severance Plan

   The purpose of the Executive Severance Plan is to provide assurances of specified severance benefits to eligible employees of Polycom whose employment is subject to being involuntarily terminated other than for death, disability, or cause or voluntary termination for good reason. Polycom believes that it is imperative to provide such individuals with severance benefits upon certain terminations of employment, which Polycom recognizes can be triggered at any time, to (i) secure their continued dedication to their work, notwithstanding the possibility of a termination by Polycom, and (ii) provide such individuals with an incentive to continue employment with Polycom. We believe that the benefits under the Executive Severance Plan are competitive relative to the

 

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Arrangement

  

Objectives

   severance protection provided to similarly situated individuals at the Peer Companies and appropriate given that the benefits are subject to the executive officer’s entry into a release of claims in favor of Polycom and non-solicitation and nondisparagement obligations, and in certain cases where enforceable non-competition obligations, for one year following termination of employment.

Change of Control Severance Agreements

   It is expected that Polycom from time to time will consider the possibility of an acquisition by another company or other change of control. Polycom recognizes that such consideration can be a distraction to executive officers and can cause executive officers to consider alternative employment opportunities. Polycom believes that it is imperative to provide such individuals with severance benefits upon their termination of employment following a change of control to (i) secure their continued dedication and objectivity, notwithstanding the possibility, threat or occurrence of a change of control, (ii) provide such individuals with an incentive to continue employment and motivate them to maximize the value of Polycom upon a change of control for the benefit of its stockholders, and (iii) provide such individuals with enhanced financial security.

Severance Agreement with Former CEO

   The purpose of the severance agreement with Mr. Hagerty, Polycom’s former CEO, was to encourage him to remain with Polycom and to provide him with enhanced financial security in recognition of his past and future service with Polycom. We believed that providing such benefits was competitive relative to the severance protection provided to similarly situated individuals at the Peer Companies and appropriate given that the benefits were subject to Mr. Hagerty’s entry into a release of claims in favor of Polycom and a non-solicitation provision for one year following termination of employment.

Other Arrangements

   Certain executive officers reporting under Section 16 of the Exchange Act, including the NEOs, are entitled to a twelve-month post-termination exercise period with respect to certain stock options in the event of (i) the involuntary termination of their employment without cause, (ii) the voluntary termination of their employment for good reason, or (iii) their retirement. The Compensation Committee believes that these arrangements are appropriate to help retain and motivate the executives and consistent with prevailing market practice. See “Potential Payments Upon Termination or Change of Control—Termination or Change of Control Arrangements” for more detail on these arrangements.

 

We believe the terms and payout levels of our termination and change of control arrangements are consistent with current market practices and competitively necessary to attract and retain qualified executives. To ensure that the severance and change of control agreements continue to remain consistent with our compensation philosophy and current market practices, the Compensation Committee periodically reviews the severance

 

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agreement and change of control severance agreements. However, these termination and change of control arrangements do not affect our decisions regarding other elements of compensation.

 

In late 2009, the Compensation Committee engaged Radford to conduct a review of arrangements entered into by the Peer Companies with respect to severance benefits provided in the event of certain termination of an executive’s employment that occurs not in connection with a change of control. In its review, Radford focused on the prevalence of companies that provide protection for its executives upon an involuntary termination or resignation for good reason and the level of severance benefits provided upon such termination. Radford concluded that 70% of companies provide severance benefits upon an involuntary termination or resignation for good reason and that typically, the benefits that executives would receive included 12 months of base salary and bonus, continued benefits coverage for the same period and accelerated vesting of equity awards. After considering the results of Radford’s review and the retention and motivational considerations with respect to its senior executives, the Compensation Committee determined that it was in Polycom’s and its stockholders’ best interests to implement arrangements for Polycom’s executives that would provide severance benefits upon such termination of employment. Accordingly, in February 2010, the Compensation Committee approved the Executive Severance Plan and determined the eligible participants under the plan, which include Messrs. Miller, Kourey, Darwish and Ms. Durr, and had included Messrs. Alissi and Sigrist.

 

As described in further detail in the section entitled “Potential Payments Upon Termination or Change of Control—Termination or Change of Control Arrangements,” the Executive Severance Plan provides for certain payments based on the participant’s base salary as then in effect plus target bonus in effect in the last year that ended prior to the termination date, continued health benefits and outplacement assistance. The Executive Severance Plan does not provide for vesting acceleration of equity awards. In connection with Mr. Miller’s promotion to President and CEO, his benefits under the Executive Severance Plan and change of control severance agreements were increased to the levels as described in further detail below, after considering, and in line with, the market data Radford had provided with respect to the CEO position. Additionally, the Compensation Committee approved Mr. Ramakrishna’s participation in the Executive Severance Plan as well as change of control severance agreement in connection with his hire in 2010.

 

During 2010, the Compensation Committee reviewed Mr. Hagerty’s severance agreement with respect to the non-competition obligation to which Mr. Hagerty would be subject if he became eligible to receive severance benefits under the agreement. Due to concerns regarding the enforceability of such obligation under applicable law, the Compensation Committee determined that it was in the best interests of Polycom and its stockholders to remove the provision from Mr. Hagerty’s severance agreement. The changes to Mr. Hagerty’s severance agreement also subsequently were approved by the independent members of the full Board of Directors and the amendment became effective in February 2010.

 

Upon termination of employment with Polycom, Mr. Hagerty received the benefits set forth in his severance agreement upon entering into a release of claims and subject to his compliance with a non-solicitation covenant, as described further below, and Mr. Alissi received benefits in accordance with the Executive Severance Plan upon entering into a release of claims with Polycom, as described further below. Mr. Sigrist did not receive benefits under the Executive Severance Plan upon his termination of employment with us. The various arrangements discussed above are described in more detail in “Potential Payments Upon Termination or Change of Control—Termination or Change of Control Arrangements” on page 76.

 

Retirement Benefits under the 401(k) Plan, Executive Perquisites and Generally Available Benefit Programs

 

In 2010, NEOs were eligible to participate in Polycom’s employee stock purchase plan and the health and welfare programs that are generally available to other Company employees, including medical, dental, vision, life, short-term and long-term disability, employee assistance, flexible spending, and accidental death & dismemberment. In addition, Polycom reimbursed executive officers for the cost of tax preparation and advisory services, subject to a maximum of $10,000 for our CEO and CFO and $5,000 for all other executive officers.

 

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Polycom also maintains a tax-qualified Polycom, Inc. 401(k) Plan (the “401(k) Plan”), which is broadly available to Polycom’s general employee population. Under the 401(k) Plan, all Company employees are eligible to receive matching contributions from Polycom. The matching contribution for the 2010 401(k) Plan year was 50% of the first 6% of compensation contributed by employees to the 401(k) Plan, up to a maximum per participating employee of $2,000. Polycom does not provide defined benefit pension plans or defined contribution retirement plans to its executive officers or other employees other than: (i) the 401(k) Plan or (ii) as required in certain countries other than the United States for legal or competitive reasons.

 

The 401(k) Plan and other generally available benefit programs allow Polycom to remain competitive, and Polycom believes that the availability of such benefit programs enhances employee loyalty and productivity. The benefit programs are primarily intended to provide all eligible employees with competitive and quality healthcare, financial protection for retirement and enhanced health and productivity. These benefit programs typically do not factor into decisions regarding executive compensation packages.

 

Accounting and Tax Considerations

 

Polycom generally takes into consideration the accounting and tax effect of each component of compensation when establishing the compensation programs, practices and packages offered to Polycom’s executive officers and aims to keep the compensation expense associated with such programs, practices and packages within reasonable levels and an established budget.

 

Compliance with Section 162(m) of the Internal Revenue Code

 

Under Section 162(m), Polycom generally receives a federal income tax deduction for compensation paid to our CEO and our three other most highly compensated NEOs (other than our CEO and CFO) only if the compensation is less than $1 million during any fiscal year or is “performance-based” under Section 162(m). Polycom generally structures a significant portion of the non-salary compensation paid to Polycom’s CEO and the three other most highly compensated NEOs (other than our CEO and CFO) as performance-based compensation. For example, cash compensation paid under the Performance Bonus Plan and performance shares granted under the 2004 Equity Incentive Plan to these individuals are intended to qualify as “performance-based” compensation under Section 162(m). We may from time to time pay compensation or grant equity awards to our executive officers, however, that may not be deductible when, for example, we believe that such compensation is appropriate and in the best interests of our stockholders, after taking into consideration changing business conditions and/or the executive officer’s performance. Time-based restricted stock units, for instance, are not qualified under Section 162(m).

 

Section 409A of the Internal Revenue Code

 

Section 409A imposes additional significant taxes in the event that an executive officer, director or service provider receives “deferred compensation” that does not satisfy the requirements of Section 409A. Although Polycom does not maintain a traditional nonqualified deferred compensation plan, Section 409A does apply to certain severance arrangements and equity awards. Consequently, to assist in avoiding additional tax under Section 409A, Polycom has amended the severance arrangements described above and structured its equity awards in a manner intended to either avoid the application of Section 409A or, to the extent doing so is not possible, comply with the applicable Section 409A requirements.

 

Accounting for Stock-Based Compensation

 

Polycom accounts for stock-based awards in accordance with the requirements of ASC 718.

 

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Compensation Committee Report

 

The Compensation Committee oversees Polycom’s compensation policies, plans and benefit programs. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

Respectfully submitted by the members of the Compensation Committee of the Board of Directors

 

Betsy S. Atkins (Chair)

David G. DeWalt

William A. Owens

 

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Summary Compensation Table

 

The following table presents information concerning the total compensation of (i) our principal executive officer, (ii) our principal financial officer, (iii) our three most highly compensated executive officers, other than our principal executive officer and principal financial officer, who were serving as executive officers at the end of our fiscal year ended December 31, 2010, and (iv) former executive officers for whom disclosure would have been provided pursuant to Item 402 of Regulation S-K but for the fact that the individuals were not serving as executive officers at the end of our fiscal year ended December 31, 2010 (our “named executive officers”). No disclosure is provided for 2008 or 2009 for those persons who were not named executive officers in 2008 and 2009.

 

Name and
Principal Position

  Year     Salary
($) (1)
    Bonus
($) (2)
    Stock
Awards
($) (3) (4)
    Option
Awards
($) (3)
    Non-Equity
Incentive Plan
Compensation
($) (5)
    All Other
Compensation
($) (6)
    Total
($)
 

Andrew M. Miller

    2010        529,167        —          3,347,486        —          303,000        162,215        4,341,868   

Chief Executive Officer and President

    2009        200,000        370,000        5,325,715        829,574        —          26,480        6,751,769   

Michael R. Kourey

    2010        437,700        —          2,028,920        —          180,992        12,000        2,659,612   

Executive Vice President, Finance and Administration and Chief Financial Officer

   
 
2009
2008
 
  
   

 

427,400

420,733

  

  

   

 

—  

97,722

  

  

   

 

662,700

471,800

  

  

   

 

—  

—  

  

  

   

 

—  

84,035

  

  

   

 

12,000

12,000

  

  

   

 

1,102,100

1,086,290

  

  

Sayed M. Darwish

    2010        369,500        —          933,141        —          118,170        2,000        1,422,811   

Executive Vice President, Chief Administrative Officer, General Counsel and Secretary

    2009        349,000        —          606,512        —          —          2,000        957,512   

Sudhakar Ramakrishna (7)

    2010        90,909        —          1,902,000        —          68,864        750        2,062,523   

Executive Vice President and General Manager, Unified Communications Solutions and Chief Development Officer

               

Laura J. Durr

    2010        251,315        32,937        189,038        —          70,733        2,000        546,023   

Vice President, Worldwide Controller and Principal Accounting Officer

               

Robert C. Hagerty (8)

    2010        295,414        —          2,723,250        —          —          3,207,809        6,226,473   

Former Chairman of the Board, Chief Executive Officer and President

   
 
2009
2008
 
  
   

 

650,000

643,750

  

  

   

 

—  

—  

  

  

   

 

2,282,633

1,164,000

  

  

   

 

—  

—  

  

  

   

 

—  

193,354

  

  

   

 

12,000

12,037

  

  

   

 

2,944,633

2,013,141

  

  

Geno J. Alissi (9)

    2010        214,587        —          955,881        —          —          600,980        1,771,448   

Former Senior Vice President and General Manager, Global Services

   
 
2009
2008
 
  
   

 

341,700

336,700

  

  

   

 

—  

38,014

  

  

   

 

441,800

353,850

  

  

   

 

—  

—  

  

  

   

 

29,300

150,892

  

  

   

 

2,000

2,000

  

  

   

 

814,800

881,456

  

  

Joseph A. Sigrist (10)

    2010        304,011        —          1,155,054        —          —          2,000        1,461,065   

Former Senior Vice President and General Manager, Video Solutions Group

   
 
2009
2008
 
  
   

 

—  

361,167

  

  

   

 

—  

56,788

  

  

   

 

—  

471,800

  

  

   

 

—  

—  

  

  

   

 

—  

67,345

  

  

   

 

—  

2,000

  

  

   

 

—  

959,100

  

  

 

(1) For 2010, includes accrued vacation payouts of (i) $62,497 to Mr. Hagerty, (ii) $15,263 to Mr. Alissi and (iii) $36,276 to Mr. Sigrist in connection with their terminations of employment from Polycom.

 

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(2) For 2010, reflects discretionary awards outside of the Management Bonus Plan of (i) $14,937 in the form of a STAR Award to Ms. Durr for first quarter of 2010 performance and (ii) $18,000 to Ms. Durr for second quarter of 2010 performance. For 2009, reflects a $250,000 sign-on bonus and a guaranteed bonus of $120,000 for Mr. Miller, in accordance with Mr. Miller’s offer of employment. For 2008, reflects discretionary bonuses awarded outside of the Performance Bonus Plan for fiscal 2008 performance, although such amounts were paid in fiscal 2009.
(3) Reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The assumptions used in the valuation of these awards are set forth in the notes to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on February 18, 2011.
(4) Includes both restricted stock units and performance shares. Amounts shown in the table reflect the target award level for performance shares, which we believe to be the probable outcome of a performance shares at the time the award is granted. If the outcomes for performance shares were achieved at the maximum award levels, the following values for stock awards would apply:

 

     2010      2009      2008  
     Target
(100%)
     Maximum
(200%)
     Target
(100%)
     Maximum
(200%)
     Target
(100%)
     Maximum
(250%)
 

Andrew M. Miller

     3,347,486         5,232,397         5,325,715         6,523,179         —           —     

Michael R. Kourey

     2,028,920         3,278,015         662,700         1,023,900         471,800         1,179,500   

Sayed M. Darwish

     933,141         1,547,922         606,512         927,578         —           —     

Sudhakar Ramakrishna

     1,902,000         2,920,425         —           —           —           —     

Laura J. Durr

     189,038         292,800         —           —           —           —     

Robert C. Hagerty

     2,723,250         4,423,200         2,282,633         3,526,766         1,164,000         2,910,000   

Geno J. Alissi

     955,881         1,593,402         441,800         682,600         353,850         884,625   

Joseph A. Sigrist

     1,155,054         1,912,159         —           —           471,800         1,179,500   

 

These amounts do not necessarily correspond to the actual value that was or may be recognized by the named executive officers.

 

(5) For 2010, reflects awards for the six-month performance period beginning July 1, 2010 under the Performance Bonus Plan (except for Mr. Ramakrishna and Ms. Durr whose awards were for the six-month period beginning July 1, 2010 under the Management Bonus Plan). For 2009, reflects awards for two six-month performance periods under the Performance Bonus Plan. For 2008, reflects awards for one twelve-month performance period under the Performance Bonus Plan.
(6) For 2010, reflects (i) 401(k) matching contributions by Polycom of $2,000 for each named executive officer except Mr. Ramakrishna who joined Polycom in October 2010 and received a matching contribution of $750, (ii) reimbursement by Polycom of tax preparation services of $3,450 for Mr. Miller, $10,000 for Mr. Kourey and $9,269 for Mr. Hagerty, (iii) relocation expenses in the amount of $107,918 ($156,572 on a grossed up tax basis) for Mr. Miller in accordance with Mr. Miller’s offer letter and (iv) a token gift at a Polycom event of $125 ($193 on a grossed up tax basis) for Mr. Miller. In connection with Mr. Hagerty’s termination of employment, Mr. Hagerty’s compensation for 2010 reflects (i) severance payment of $2,860,000, (ii) one year of COBRA payment valued at $14,057, (iii) Polycom issued computer and PDA valued at $1,054 and (iv) $321,429 pursuant to a Consulting Agreement dated as of May 10, 2010. In connection with Mr. Alissi’s termination of employment, Mr. Alissi’s compensation for 2010 reflects (i) severance payment of $580,890 and (ii) one year of COBRA payment valued at $18,090. For 2009, reflects (i) 401(k) matching contributions by Polycom of $2,000 for each named executive officer except Mr. Miller and (ii) reimbursement by Polycom of tax preparation services of $10,000 each for Mr. Hagerty and Mr. Kourey and (iii) reimbursement of $18,250 ($26,480 on a grossed up tax basis) in legal fees in accordance with Mr. Miller’s offer letter. For 2008, reflects (i) 401(k) matching contributions by Polycom of $2,000 for each named executive officer, (ii) reimbursement by Polycom of tax preparation services of $10,000 each for Mr. Hagerty and Mr. Kourey and (iii) a token gift at a Polycom event of $25 ($37 on a grossed up tax basis) for Mr. Hagerty.
(7) Mr. Ramakrishna joined Polycom in October 2010.
(8) Mr. Hagerty terminated employment with Polycom in May 2010.

 

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(9) Mr. Alissi terminated employment with Polycom in August 2010.
(10) Mr. Sigrist was not a named executive officer in 2009. Mr. Sigrist terminated employment with Polycom in September 2010.

 

Grants of Plan-Based Awards in 2010

 

The following table presents information concerning each grant of an award made to a named executive officer in fiscal 2010 under any plan.

 

Name

  Grant
Date
    Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards (1)
     Estimated Future Payouts
Under Equity Incentive
plan Awards
    All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)(5)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
    Exercise
or Base
Price of
Option
Awards
($)
    Grant Date
Fair Value
of Stock and
Option
Awards
($)(6)
 
    Target
($)
     Maximum
($)
     Target
(#)
     Maximum
(#)
         

A. Miller

    7/1/2010        300,000         750,000         —           —          —          —          —          —     
    2/4/2010 (2)      —           —           17,500         35,000        —          —          —          484,224   
    2/4/2010 (3)      —           —           2,000         4,000        —          —          —          45,480   
    2/4/2010        —           —           —           —          17,500        —          —          397,950   
    5/6/2010 (4)      —           —           15,000         30,000        —          —          —          563,100   
    5/6/2010        —           —           —           —          15,000        —          —          458,250   
    11/4/2010 (2)      —           —           17,500         35,000        —          —          —          792,107   
    11/4/2010        —           —           —           —          17,500        —          —          606,375   

M. Kourey

    7/1/2010        179,200         448,000         —           —          —          —          —          —     
    2/4/2010 (2)      —           —           17,500         35,000        —          —          —          484,224   
    2/4/2010 (3)      —           —           13,000         26,000        —          —          —          295,620   
    2/4/2010        —           —           —           —          17,500        —          —          397,950   
    5/6/2010 (4)      —           —           12,500         25,000        —          —          —          469,251   
    5/6/2010        —           —           —           —          12,500          —          381,875   

S. Darwish

    7/1/2010        117,000         292,500         —           —          —          —          —          —     
    2/4/2010 (2)      —           —           14,000         28,000        —          —          —          387,381   
    2/4/2010 (3)      —           —           10,000         20,000        —          —          —          227,400   
    2/4/2010        —           —           —           —          14,000        —          —          318,360   

S. Ramakrishna

    10/11/2010        68,182         170,454         —           —          —          —          —          —     
    11/4/2010 (2)      —           —           22,500         45,000        —          —          —          1,018,425   
    11/4/2010        —           —           —           —          22,500        —          —          779,625   
    11/4/2010        —           —           —           —          3,000        —          —          103,950   

L. Durr

    7/1/2010        64,250         160,625         —           —          —          —          —          —     
    2/4/2010 (2)      —           —           3,750         7,500        —          —          —          103,763   
    2/4/2010        —           —           —           —          3,750        —          —          85,275   

R. Hagerty

    2/4/2010 (2)      —           —           45,000         90,000        —          —          —          1,245,150   
    2/4/2010 (3)      —           —           20,000         40,000        —          —          —          454,800   
    2/4/2010        —           —           —           —          45,000        —          —          1,023,300   

G. Alissi

    7/1/2010        119,595         298,988         —           —          —          —          —          —     
    2/4/2010 (2)      —           —           14,000         28,000        —          —          —          387,381   
    2/4/2010 (3)      —           —           11,000         22,000        —          —          —          250,140   
    2/4/2010        —           —           —           —          14,000        —          —          318,360   

J. Sigrist

    7/1/2010        128,975         322,438         —           —          —          —          —          —     
    2/4/2010 (2)      —           —           17,500         35,000        —          —          —          484,224   
    2/4/2010 (3)      —           —           12,000         24,000        —          —          —          272,880   
    2/4/2010        —           —           —           —          17,500        —          —          397,950   

 

(1)

Reflects target and maximum bonus amounts for the second half of fiscal 2010 performance (July 1, 2010 through December 31, 2010 performance period) under the Performance Bonus Plan (except for

 

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Mr. Ramakrishna and Ms. Durr, who were on the Management Bonus Plan), as described in “Compensation Discussion and Analysis—Total Cash Compensation—Short-term Cash Incentive Awards.” There is no threshold payout amount. The actual bonus amounts were determined by the Compensation Committee in February 2011, and are reflected in the “Non-Equity Incentive Plan Compensation” column of the “Summary Compensation Table.”

(2) Reflects target and maximum number of standard performance shares for fiscal 2010 performance granted under the 2004 Equity Incentive Plan, as described in “Compensation Discussion and Analysis—Long Term, Equity-Based Incentive Awards.” There is no threshold payout amount. See “Outstanding Equity Awards at 2010 Fiscal Year-End” for a further description of certain terms, including vesting schedules, relating to these awards. The actual number of shares to vest with respect to the first one-third tranche of the 2010 standard performance share awards was certified by the Compensation Committee in February 2011. The table below reflects February 2011 payouts for these awards, as well as 9,799 shares from Mr. Miller’s November 4, 2010 award and 12,600 shares from Mr. Ramakrishna’s November 4, 2010 award which are reflected in the numbers below but whose first vesting and payout are scheduled to occur on November 4, 2011. The number of shares vesting represents a payout of 168% of the target award level:

 

Name

   Number of Shares Vesting  

A. Miller

     19,600   

M. Kourey

     9,801   

S. Darwish

     7,840   

S. Ramakishna

     12,600   

L. Durr

     2,100   

R. Hagerty

     0   

G. Alissi

     0   

J. Sigrist

     0   

 

(3) Reflects target and maximum number of gross margin performance shares for fiscal 2010 performance granted under the 2004 Equity Incentive Plan, as described in “Compensation Discussion and Analysis—Long Term, Equity-Based Incentive Awards.” There is no threshold payout amount. See “Outstanding Equity Awards at 2010 Fiscal Year-End” for a further description of certain terms, including vesting schedules, relating to these awards. The actual number of shares to vest in the total award was certified by the Compensation Committee in February 2011. The named executive officers received the following payout for their gross margin awards that vested in February 2011.

 

Name

   Number of Shares Vesting  

A. Miller

     2,160   

M. Kourey

     14,040   

S. Darwish

     10,800   

R. Hagerty

     0   

G. Alissi

     0   

J. Sigrist

     0   

 

(4) Reflects target and maximum number of supplemental performance shares granted under the 2004 Equity Incentive Plan to Mr. Miller in connection with his promotion to President and Chief Executive Officer and to Mr. Kourey for retention purposes, as described in “Compensation Discussion and Analysis—Long Term, Equity-Based Incentive Awards.” There is no threshold payout amount. See “Outstanding Equity Awards at 2010 Fiscal Year-End” for a further description of certain terms, including vesting schedules, relating to these awards.
(5) Reflects restricted stock units granted under the 2004 Equity Incentive Plan. See “Outstanding Equity Awards at 2010 Fiscal Year-End” for a further description of certain terms, including vesting schedules, relating to these awards.
(6)

Reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The assumptions used in the valuation of these awards are set forth in the notes to our consolidated financial

 

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statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on February 18, 2011. These amounts do not necessarily correspond to the actual value that may be recognized by the named executive officers.

 

Outstanding Equity Awards at 2010 Fiscal Year-End

 

The following table presents information concerning unexercised options and stock that has not vested for each named executive officer outstanding as of the end of fiscal 2010.

 

          Option Awards (1)     Stock Awards (2)  

Name

  Grant
Date
    Number of Securities Underlying
Unexercised Options (#)
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number of
Shares or
Units of Stock
That Have
Not Vested
(#)
    Market Value
of Shares or
Units of Stock
That Have
Not Vested
($) (3)
    Number of
Unearned
Shares or
Units of
Stock
That Have
Not Vested
(#)
    Market
Value of
Unearned
Shares or
Units of
Stock
That
Have Not
Vested
($) (3)
 
    Exercisable     Unexercisable              

A. Miller

    08/04/09        35,416        64,584        23.59        08/04/16        26,666        1,039,441        —          —     
    08/04/09        —          —          —          —          10,000 (4)      389,800        —          —     
    08/04/09        —          —          —          —          22,399        873,113        26,668        1,039,519   
    08/04/09 (5)      —          —          —          —          17,250        672,405        50,000        1,949,000   
    08/04/09 (5)      —          —          —          —          17,250        672,405        100,000        3,898,000   
    02/04/10        —          —          —          —          17,500        682,150        —          —     
    02/04/10        —          —          —          —          9,801        382,043        23,332        909,481   
    02/04/10        —          —          —          —          2,160 (6)      84,197        —          —     
    05/06/10        —          —          —          —          15,000        584,700        —          —     
    05/06/10        —          —          —          —          —          —          30,000        1,169,400   
    11/04/10        —          —          —          —          17,500        682,150        —          —     
    11/04/10        —          —          —          —          9,799        381,965        23,334        909,559   

M. Kourey

    02/21/07        28,750        1,250        34.19        02/21/14        —          —          —          —     
    02/20/09        —          —          —          —          15,000        584,700        —          —     
    02/20/09        —          —          —          —          12,600        491,148        15,000        584,700   
    02/04/10        —          —          —          —          17,500        682,150        —          —     
    02/04/10        —          —          —          —          14,040 (6)      547,279        —          —     
    02/04/10        —          —          —          —          9,801        382,043        23,332        909,481   
    05/06/10        —          —          —          —          12,500        487,250        —          —     
    05/06/10        —          —          —          —          —          —          25,000        974,500   

S. Darwish

    02/20/09        —          —          —          —          11,198        436,498        13,336        519,837   
    02/20/09        —          —          —          —          13,333        519,720        —          —     
    08/21/09        —          —          —          —          2,889 (7)      112,613        —          —     
    02/04/10        —          —          —          —          10,800 (6)      420,984        —          —     
    02/04/10        —          —          —          —          7,840        305,603        18,666        727,601   
    02/04/10        —          —          —          —          14,000        545,720        —          —     

S. Ramakrishna

    11/04/10        —          —          —          —          12,600        491,148        30,000        1,169,400   
    11/04/10        —          —          —          —          22,500        877,050        —          —