DEF 14A 1 proxy2016.htm DEF 14A DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.    )
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[   ]  Soliciting Material Pursuant to Section 240.14a-12

QUALCOMM INCORPORATED

 (Name of Registrant as Specified In Its Charter)
 (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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January 21, 2016

Dear Fellow Stockholder:
You are cordially invited to attend Qualcomm’s 2016 Annual Meeting of Stockholders (the Annual Meeting) on Tuesday, March 8, 2016. The meeting will begin promptly at 9:30 a.m. Pacific Time at the Irwin M. Jacobs Qualcomm Hall, 5775 Morehouse Drive, San Diego, California 92121. I invite you to arrive early at 8:30 a.m. to preview our product displays. We will begin the Annual Meeting with a discussion and vote on the matters set forth in the Notice of Annual Meeting of Stockholders, followed by presentations and a report on Qualcomm’s fiscal 2015 performance.
I would like to highlight Proposal 3, Approval of the 2016 Long-Term Incentive Plan. We offer a broad-based equity compensation program that is critical to attracting, retaining and engaging the finest people in our industry and ensuring alignment among our employees and stockholders. Our program of providing broad merit-based grants of restricted stock units to our employees has been a central part of our compensation and benefits mix, and we believe it has helped to create Qualcomm’s inclusive and results-oriented culture. Without this program, we believe Qualcomm’s competitiveness would be negatively impacted and would place Qualcomm at a disadvantage in its efforts to attract and retain the most talented and skilled individuals in the industry.
Whether or not you plan to attend the Annual Meeting, please vote as soon as possible. As an alternative to voting in person at the Annual Meeting, you may vote via the Internet, by telephone, or if you receive a paper proxy card in the mail, by mailing the completed proxy card. Voting by any of these methods will ensure your representation at the Annual Meeting.
Your vote is very important to us. I urge you to vote as our Board of Directors recommends.
Thank you for your support and continued interest in Qualcomm. I look forward to seeing you in San Diego at the Irwin M. Jacobs Qualcomm Hall on Tuesday, March 8, 2016.

Sincerely,

Steve Mollenkopf
Chief Executive Officer




5775 Morehouse Drive
San Diego, California 92121-1714
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On March 8, 2016
To the Stockholders of QUALCOMM Incorporated:
NOTICE IS HEREBY GIVEN that the 2016 Annual Meeting of Stockholders (Annual Meeting) of QUALCOMM Incorporated, a Delaware corporation (the Company), will be held at the Irwin M. Jacobs Qualcomm Hall, 5775 Morehouse Drive, San Diego, California 92121, on Tuesday, March 8, 2016 at 9:30 a.m. Pacific Time for the following purposes:

1.
To elect 12 directors to hold office until the next annual meeting of stockholders and until their respective successors have been elected and qualified.
2.
To ratify the selection of PricewaterhouseCoopers LLP as our independent public accountants for our fiscal year ending September 25, 2016.
3.
To approve the 2016 Long-Term Incentive Plan.
4.
To hold an advisory vote to approve our executive compensation.
5.
To act on a stockholder proposal, if properly presented at the Annual Meeting.
6.
To transact such other business as may properly come before stockholders at the Annual Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on January 11, 2016 as the record date for the determination of stockholders entitled to notice of and to vote at the Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors,


Donald J. Rosenberg
Executive Vice President,
General Counsel and Corporate Secretary
San Diego, California
January 21, 2016




TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

i


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

ii

Proxy Overview

PROXY OVERVIEW
2016 ANNUAL MEETING OF STOCKHOLDERS (ANNUAL MEETING)
 
 
 
Date and Time
  
March 8, 2016
9:30 a.m. Pacific Time
Location
  
Irwin M. Jacobs Qualcomm Hall
5775 Morehouse Drive, San Diego, California 92121
Record Date
  
January 11, 2016
Voting
  
Stockholders of record as of the record date may vote via the Internet at www.proxyvote.com; by telephone at 1-800-690-6903; by completing and returning their proxy card; or in person at the Annual Meeting.
Date of First Distribution
of Proxy Materials
  
January 21, 2016
VOTING MATTERS AND BOARD RECOMMENDATIONS
 
 
 
 
 
 
 
Proposal
  
  
  
Board Recommendation
  
Page Reference
PROPOSAL 1
  
Election of Directors
  
FOR each Nominee
  
17
PROPOSAL 2
  
Ratification of the selection of PricewaterhouseCoopers LLP as our independent public accountants for our fiscal year ending September 25, 2016
  
FOR
  
25
PROPOSAL 3
 
Approval of the 2016 Long-Term Incentive Plan
 
FOR
 
27
PROPOSAL 4
  
Approval of our executive compensation
  
FOR
  
39
PROPOSAL 5
 
Stockholder proposal
 
AGAINST
 
41


QUALCOMM Incorporated    1

Proxy Overview

DIRECTOR NOMINEES (SEE PAGE 17)
 
 
 
 
 
Name
 
Age
 
Director
Since
 
Occupation
 
Independent 
Barbara T. Alexander
 
67
 
2006
 
Independent Consultant
 
X
Raymond V. Dittamore
 
72
 
2002
 
Retired Audit Partner, Ernst &Young LLP
 
X
Jeffrey W. Henderson
 
51
 
2016
 
Advisory Director to Berkshire Partners LLC
 
X
Thomas W. Horton *
 
54
 
2008
 
Senior Advisor to Warburg Pincus LLC
 
X
Paul E. Jacobs
 
53
 
2005
 
Executive Chairman and Chairman of the Board, QUALCOMM Incorporated
 
 
Harish Manwani
 
62
 
2014
 
Former Chief Operating Officer, Unilever
 
X
Mark D. McLaughlin
 
50
 
2015
 
Chairman, President and Chief Executive Officer, Palo Alto Networks, Inc.
 
X
Steve Mollenkopf
 
47
 
2013
 
Chief Executive Officer, QUALCOMM Incorporated
 
 
Clark T. Randt, Jr.
 
70
 
2013
 
President, Randt & Co. LLC
 
X
Francisco Ros
 
65
 
2010
 
Founder and President, First International Partners, S.L.
 
X
Jonathan J. Rubinstein
 
59
 
2013
 
Former Chairman and CEO, Palm, Inc.
 
X
Anthony J. Vinciquerra
 
61
 
2015
 
Senior Advisor to Texas Pacific Group
 
X

*     Presiding Director


QUALCOMM Incorporated    2

Proxy Overview

EXECUTIVE COMPENSATION HIGHLIGHTS
 
 
 
 
 
Our executive compensation decisions in fiscal 2015 were influenced by retention actions we took in fiscal 2014, feedback from stockholders, enhancements to align executive pay with company performance and continuing executive compensation programs and policies, all within the framework of what the Compensation Committee believed to be in the best interests of the Company and our stockholders. We highlight these factors in the following sections to provide context for the more detailed Compensation Discussion & Analysis (CD&A) that follows.
In fiscal 2014, the Board determined that strong defensive actions were necessary to maintain the continuity of our senior executive team in the intensely competitive mobile communications industry, where their expertise made them candidates-of-choice at other companies. We realigned leadership responsibilities, awarded selective special equity grants and granted early (or “front-loaded”) a portion of future equity for the next three-to-five years (varied by individual). We believe these Board initiatives successfully served the long-term interests of our stockholders; however, reaction from some investors and proxy advisory services providers was mixed.
At the 2015 annual meeting, 58% of our stockholders who voted were in favor of our advisory say-on-pay proposal covering fiscal 2014 compensation. Prior to the vote, the Chairman of our Compensation Committee and executives from our investor relations department engaged in discussions with institutional stockholders, who in aggregate owned approximately 50% of our outstanding shares. Our engagement with stockholders both before and after the vote, which also included our Presiding Director, provided constructive feedback that informed further Compensation Committee actions during fiscal 2015. We considered the voting results and stockholder feedback and changed our executive compensation program for increased strategic alignment. In addition, we initiated a Strategic Realignment Plan designed to improve execution, enhance financial performance and drive profitable growth as we work to create sustainable long-term value for stockholders. As part of that plan, we implemented and continue to implement cost reductions to reduce our annual costs from fiscal 2015 levels (adjusted for variable compensation) of $7.3 billion (as announced on July 22, 2015) by approximately $1.1 billion through a series of targeted reductions that will not jeopardize our growth objectives or core technology roadmap. We are also reducing annual share-based compensation grants by approximately $300 million. We expect these cost initiatives to be fully implemented by the end of fiscal 2016.
In fiscal 2015, we only granted performance stock units (PSUs) to our Named Executive Officers (NEOs). We did not grant time-vested restricted stock units (RSUs) to our NEOs in fiscal 2015 because they had received front-loaded RSUs for retention in fiscal 2014. This resulted in a reduction in the equity and total direct compensation (TDC) amounts included in the Summary Compensation Table for fiscal 2015 compared to fiscal 2014. This, and the reduced Annual Cash Incentive Plan (ACIP) compensation amounts earned for fiscal 2015, resulted in an 81% reduction in TDC among our executives who were NEOs in both fiscal 2014 and 2015 from an aggregate of $172.6 million in fiscal 2014 to $33.6 million in 2015.
Our fiscal 2015 financial and relative TSR performance resulted in performance-based pay that was significantly below the target amounts. The final payouts of two components of the NEOs’ fiscal 2015 performance-based pay were determined at the end of fiscal 2015: (1) earnings under the fiscal 2015 ACIP and (2) earnings under the PSUs granted in fiscal 2013 (Fiscal 2013 PSUs) for which the multi-year performance period was completed at the end of fiscal 2015. Mr. Mollenkopf’s earnings for performance-based pay determined at the end of fiscal 2015 were $1,025,000, which was only 14% of his aggregate target amount of $7,120,000. Dr. Jacobs’s earnings for performance-based pay were $0 compared to his target amount of $8,100,000.
The NEOs’ aggregate earnings under the fiscal 2015 ACIP were 47% of their target award amounts because we achieved only 90% of our Adjusted Revenues objective and 89% of our Adjusted Operating Income objective. (See page 65 for the definitions of the performance measures used in calculating ACIP amounts for fiscal 2015.)
Mr. Mollenkopf earned $1,025,000, or only 45%, of his target amount of $2,260,000. Dr. Jacobs is not eligible to participate in the ACIP.
The NEOs did not earn any shares of our common stock under the Fiscal 2013 PSUs (whose multi-year performance period was completed at the end of fiscal 2015). The Fiscal 2013 PSUs were based on relative TSR for fiscal 2014 - 2015.
The grant date fair values of the Fiscal 2013 PSUs granted to Mr. Mollenkopf and Dr. Jacobs were $4,860,000 and $8,100,000, respectively. Because relative TSR was below the payout threshold, no shares were earned.
In addition to the Fiscal 2013 PSUs, there is one other PSU award with a performance period that includes fiscal 2015. The PSUs granted in fiscal 2014 (Fiscal 2014 PSUs) are based on relative TSR for fiscal 2015 - 2017. No measurement


QUALCOMM Incorporated    3

Proxy Overview

period was completed in fiscal 2015, and the first interim measurement period will be completed on March 27, 2016. If a measurement period had been completed as of the end of fiscal 2015, the payout would have been 0% of the target award because relative TSR for fiscal 2015 was below the payout threshold.
The PSUs granted in fiscal 2015 (Fiscal 2015 PSUs) were granted on September 25, 2015. One-half of the Fiscal 2015 PSUs is based on relative TSR for fiscal 2016 - 2018, and the other half is based on Adjusted Return On Invested Capital (ROIC) for the same performance period. There is a single measurement period at the end of fiscal 2018. (See page 65 for the definition of the Adjusted ROIC performance measure to be used in determining the number of Fiscal 2015 PSUs earned over the fiscal 2016 - 2018 performance period.)
The remainder of equity granted to executive officers in prior years was in the form of RSUs. We did not grant any RSUs to our NEOs in fiscal 2015. The grants made to Mr. Mollenkopf and Dr. Jacobs in fiscal 2014 were front-loaded (Fiscal 2014 RSUs), and the grant date fair values reflected five years of annual RSUs, including the value of RSUs that would have been granted in fiscal 2015. Our fiscal 2015 stock price performance resulted in significant reductions in the value of the Fiscal 2014 RSUs.
Mr. Mollenkopf’s front-loaded RSUs reflected an annualized grant date fair value of $6,000,000 and vest in equal annual installments over five years. One-fifth of the RSUs vested in fiscal 2015, and the fair value of these vested RSUs as of the end of fiscal 2015 was 27% lower than the annualized fair value on the date of grant.
Dr. Jacobs’s front-loaded RSUs reflected an annualized grant date fair value of $9,000,000 and vest in equal installments on the third, fourth and fifth anniversaries of the grant date. While no RSUs from this front-loaded award vested in fiscal 2015, the front-loaded grant reflected five years of annual RSUs. The fair value of one-fifth of the RSUs as of the end of fiscal 2015 was 33% lower than the annualized fair value on the date of grant.
To illustrate the impact of fiscal 2015 performance on the cash and equity compensation components for Mr. Mollenkopf and Dr. Jacobs, the following table compares the target amounts to the actual earnings for performance-based pay at the end of fiscal 2015.
Figure 1: Impact of Performance on Cash and Equity Compensation
Name
Pay Component
Effective Date/
Grant Date
Target Amount
($)
Cash Earned/
Fair Value of Equity Awards
($)
Percent of Target Amount
 
Fiscal 2015 ACIP
11/30/2014
2,260,000
1,025,000
45%
Steve Mollenkopf
Fiscal 2013 PSUs
9/29/2013
4,860,000
0
0%
 
Total
 
7,120,000
1,025,000
14%
 
Fiscal 2015 ACIP
11/30/2014
N/A
N/A
N/A
Paul Jacobs
Fiscal 2013 PSUs
9/29/2013
8,100,000
0
0%
 
Total
 
8,100,000
0
0%


QUALCOMM Incorporated    4

Proxy Overview

Compensation Program Changes to Strengthen Stockholder Alignment
In response to stockholder feedback during fiscal 2015, our Compensation Committee approved changes to the ACIP for fiscal 2016 and for PSUs granted in fiscal 2015 that may be earned for the fiscal 2016 - 2018 performance period as described in the table below. In structuring our cash and long-term equity incentive award programs, we continue to use variations of non-GAAP performance measures as financial objectives. (See page 65 for definitions of the various performance measures used in determining our cash and long-term equity incentives.)
Figure 2: Summary of Key Changes to Executive Compensation
Executive compensation component
Feedback from our stockholders
Actions we took and anticipated impact
Annual Cash Incentive Plan (ACIP)
NEOs’ ACIP earnings are determined based on metrics that may not adequately align with stockholder value creation and exclude share-based compensation expense from the definition of operating income.
Replaced an adjusted operating income measure with an adjusted earnings per share (EPS) measure that includes share-based compensation expense.
The change further encourages NEOs to focus on (1) growing per share net income (a perspective not captured by operating income alone); (2) reducing our share count; and (3) managing our share-based compensation expense.
Also, as a stockholder safeguard, the Adjusted EPS calculation will exclude any share repurchases that were not anticipated in establishing the ACIP target.
Performance Stock Units (PSUs)
NEOs’ earned PSUs are based entirely on the Company’s relative TSR compared to the NASDAQ-100, which does not directly encourage value-creating capital allocation, which is a strategic priority.
Added an adjusted return on invested capital (ROIC) measure for determining 50% of PSU awards beginning with fiscal 2015 grants (ROIC PSUs), with the remaining 50% continuing to be earned based on relative TSR compared to the NASDAQ-100 (Relative TSR PSUs).
PSU interim measurement periods
The use of three-year relative TSR for determining NEOs’ earned PSUs based on overlapping interim measurement periods of 18, 24, 30 and 36 months is complicated and potentially mitigates downside performance risk during the overall measurement period.
Removed the interim measurement periods for determining earned PSUs based on relative TSR performance and will measure performance only for the full three years for grants beginning in fiscal 2015. The new ROIC PSUs will also measure performance over the full three years.


QUALCOMM Incorporated    5

Proxy Overview

Compensation Program Best Practices
Our compensation program is market-based and supports our business strategy, and governance is strong under the oversight of an independent Compensation Committee. We have avoided problematic pay practices and have implemented compensation plans that reinforce a performance-based company culture.
What We Do
þ
A significant portion of our NEOs’ compensation varies with the Company’s performance. For fiscal 2015, approximately 95% of our NEOs’ aggregate TDC was attributable to the grant date fair values of the Relative TSR and ROIC PSUs, the portion of the grant date fair value of RSUs awarded in fiscal 2014 that we attribute to fiscal 2015, and target ACIP amounts (Figures 6 and 7 in the CD&A).
 
þ
We have a balanced approach to incentive programs with differentiated measures. ACIP is based on annual performance, and PSUs are based on three-year performance periods.
þ
We have limits on the amounts of variable compensation that may be earned. Earned annual cash incentives are limited to 2x target amounts, and earned PSUs are limited to 2x the target shares. We further limit earned PSUs to no more than 1x the target shares if absolute TSR is negative over the three-year performance period regardless of the level of relative TSR or the extent to which we achieve the ROIC objective.
 
þ
We have a cash incentive compensation repayment (“clawback”) policy. We require executive officers, including NEOs, to repay to us the amount of any earned annual cash incentive that was paid as required by our policy, SEC regulations or stock exchange rules.
þ
We have robust stock ownership guidelines. Our CEO is required to own 6x his salary, our President is required to own 3x his salary, and our other NEOs and executive officers are required to own 2x their respective salaries in our common stock. The ownership guideline for our Executive Chairman, whose annual salary is $1, is 6x his prior salary as CEO.

 
þ
We manage potential compensation-related risks to the Company. We perform annual risk assessments for our executive compensation program, as well as incentive arrangements below the executive level. This review is conducted by the Compensation Committee’s independent consultant, Frederic W. Cook & Co., Inc. (FWC).

þ
Our 2006 Long-Term Incentive Plan (LTIP) and our proposed 2016 LTIP include a “double-trigger” provision for vesting of equity in connection with a change in control. In the event of a change in control where the acquirer assumes our outstanding unvested equity awards, the vesting of an NEO’s awards would accelerate only if the NEO was involuntarily terminated or the NEO voluntarily resigned for “good reason” during a specified period after the change in control.
 
 
 
What We Don’t Do
ý
Our insider trading policy, as applicable to executive officers, including NEOs and nonemployee directors, prohibits the hedging and pledging of our common stock and trading in put and call options and other types of equity derivatives.
 
ý
Our NEOs do not have severance agreements or employment contracts. Generally, all U.S. employees, including all of our NEOs, have “at will” employment relationships without severance agreements or contracts. This enables us to terminate employment with discretion as to the terms and conditions of any separation.

ý
We do not provide tax gross-ups for benefits unless they are provided under a policy generally applicable to all U.S.-based employees, such as relocation.

 
ý
We do not have guaranteed severance arrangements upon a change in control (i.e., no “single trigger” payments) or excise tax gross-ups for change-in-control payments.



QUALCOMM Incorporated    6


PROXY STATEMENT
In this document, the words “Qualcomm,” “the Company,” “we,” “our,” “ours” and “us” refer only to QUALCOMM Incorporated, a Delaware corporation, and its consolidated subsidiaries and not to any other person or entity.
MEETING INFORMATION
 
 
 
 
 
The Board of Directors (Board) of QUALCOMM Incorporated is soliciting your proxy for use at the Company’s 2016 Annual Meeting of Stockholders (Annual Meeting) to be held on Tuesday, March 8, 2016, at 9:30 a.m. Pacific Time and at any adjournment or postponement thereof.
VOTING RIGHTS AND OUTSTANDING SHARES
 
 
 
 
 
Only holders of record of common stock at the close of business on January 11, 2016 (Record Date) will be entitled to notice of and to vote at the Annual Meeting. At the close of business on the Record Date, we had 1,494,754,354 shares of common stock outstanding and entitled to vote. Each holder of record of common stock on the Record Date will be entitled to one vote for each share held on all matters to be voted upon. If no choice is indicated on the proxy, the shares will be voted as described in the section “How Your Shares Will Be Voted” below. All votes will be counted by an independent inspector of election appointed for the Annual Meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes.
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS
 
 
 
 
 
We are furnishing proxy materials to our stockholders primarily via the Internet under rules adopted by the U.S. Securities and Exchange Commission (SEC), instead of mailing printed copies of those materials to each stockholder. On January 21, 2016, we commenced mailing to our stockholders (other than those who previously requested electronic delivery or a full set of printed proxy materials) a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials, including this proxy statement. The Notice of Internet Availability of Proxy Materials also provides instructions on how to access your proxy card to vote via the Internet.
This process is designed to expedite stockholders’ receipt of proxy materials, lower the cost of the Annual Meeting and help conserve natural resources. If you received the Notice of Internet Availability of Proxy Materials and would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability of Proxy Materials. If you have previously elected to receive our proxy materials electronically, you will continue to receive these materials via email unless you elect otherwise.
This proxy statement and our Annual Report on Form 10-K for fiscal year 2015 are available at http://www.qualcomm.com.
VOTING METHODS
 
 
 
 
 
If you are a stockholder with shares registered in your name, you may vote by one of the following three options depending on the method of delivery by which you received the proxy materials: 
Vote via the Internet. Go to the web address http://www.proxyvote.com and follow the instructions for Internet voting shown on the proxy card or the Notice of Internet Availability of Proxy Materials mailed to you or the instructions that you received by email.
Vote by Telephone. Dial 1-800-690-6903 and follow the instructions for telephone voting shown on the proxy card you received by mail.
Vote by Proxy Card. Complete, sign, date and mail the proxy card in the envelope provided. If you vote via the Internet or by telephone, please do not mail your proxy card.


QUALCOMM Incorporated    7


If your shares are held by a broker, bank or other stockholder of record, in nominee name or otherwise, exercising fiduciary powers (typically referred to as being held in “street name”), please follow the instructions you receive from them. You may need to contact your broker, bank or other stockholder of record to determine whether you will be able to vote electronically via the Internet or by telephone.
PLEASE NOTE THAT IF YOUR SHARES ARE HELD BY A BROKER, BANK OR OTHER STOCKHOLDER OF RECORD AND YOU WISH TO VOTE AT THE ANNUAL MEETING, YOU MUST FIRST OBTAIN A LEGAL PROXY ISSUED IN YOUR NAME FROM THE RECORD HOLDER. OTHERWISE, YOU WILL NOT BE PERMITTED TO VOTE IN PERSON AT THE MEETING.
HOW YOUR SHARES WILL BE VOTED
 
 
 
 
 
Your shares will be voted in accordance with your instructions. If you do not specify voting instructions on your proxy, the shares will be voted as follows: 
Proposal
  
  
  
Vote
  
Page Reference
PROPOSAL 1
  
Election of Directors
  
FOR each Nominee
  
17
PROPOSAL 2
  
Ratification of the selection of PricewaterhouseCoopers LLP as our independent public accountants for our fiscal year ending September 25, 2016
  
FOR
  
25
PROPOSAL 3
 
Approval of the 2016 Long-Term Incentive Plan
 
FOR
 
27
PROPOSAL 4
  
Approval of our executive compensation
  
FOR
  
39
PROPOSAL 5
 
Stockholder proposal
 
AGAINST
 
41
In the absence of instructions to the contrary, proxies will be voted in accordance with the judgment of the person exercising the proxy on any other matter properly presented at the Annual Meeting.
BROKER NON-VOTES
 
 
 
 
 
A broker non-vote occurs when a broker, bank or other stockholder of record, in nominee name or otherwise, exercising fiduciary powers (typically referred to as being held in “street name”) submits a proxy for the Annual Meeting, but does not vote on a particular proposal because that holder does not have discretionary voting power with respect to that proposal and has not received voting instructions from the beneficial owner. Abstentions and broker non-votes have no effect on the determination of whether a nominee or the proposal has received the vote of a majority of the shares of common stock present or represented by proxy and voting at the Annual Meeting. Under the rules that govern brokers who are voting with respect to shares held in street name, brokers have the discretion to vote those shares on routine matters, but not on non-routine matters. Routine matters include ratification of the selection of independent public accountants. Non-routine matters include the election of directors, actions on incentive plans, advisory votes on executive compensation and stockholder proposals.
REVOCABILITY OF PROXIES
 
 
 
 
 
Any person giving a proxy pursuant to this solicitation has the power to revoke it at any time before it is voted. A proxy may be revoked by filing a written notice of revocation or a duly executed proxy bearing a later date with our Corporate Secretary at our principal executive offices, 5775 Morehouse Drive, N-520I, San Diego, California 92121-1714, or it may be revoked by attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not, by itself, revoke a proxy.


QUALCOMM Incorporated    8


PROXY SOLICITATION
 
 
 
 
 
We will bear the entire cost of the solicitation of proxies, including the preparation, assembly, printing and mailing of the Notice of Internet Availability of Proxy Materials, this proxy statement, the proxy card and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of common stock beneficially owned by others to forward to such beneficial owners. We may reimburse persons representing beneficial owners of common stock for their costs of forwarding solicitation materials to such beneficial owners. In addition, we have retained Morrow & Company to act as a proxy solicitor in conjunction with the Annual Meeting. We have agreed to pay that firm $12,500, plus reasonable out-of-pocket expenses, for proxy solicitation services. Solicitation of proxies by mail may be supplemented by telephone or personal solicitation by our directors, officers or other employees. No additional compensation will be paid to directors, officers or other employees for such services.
STOCKHOLDER PROPOSALS
 
 
 
 
 
The deadline for submitting a stockholder proposal for inclusion in our proxy materials for our 2017 Annual Meeting of Stockholders is September 23, 2016. Stockholder nominations for director that are to be included in our proxy materials under the proxy access provision of our bylaws must be received no earlier than August 24, 2016 and no later than the close of business on September 23, 2016. Stockholder nominations for director and other proposals that are not to be included in such materials must be received no earlier than November 9, 2016 and no later than the close of business on December 9, 2016. Any such stockholder proposals or nominations for director must be submitted to our Corporate Secretary in writing at 5775 Morehouse Drive, N-520I, San Diego, California 92121-1714. Stockholders are advised to review our Amended and Restated Bylaws, which contain additional requirements for submitting stockholder proposals and director nominations. See page 14 for further information.
HOUSEHOLDING
 
 
 
 
 
The SEC allows companies and intermediaries (such as brokers) to implement a delivery procedure called “householding.” Under this procedure, multiple stockholders who reside at the same address may receive a single copy of our proxy materials, including the Notice of Internet Availability of Proxy Materials, unless the affected stockholder has notified us that they want to continue receiving multiple copies. This practice is designed to reduce duplicate mailings and save printing and postage costs, as well as natural resources. Householding for bank and brokerage accounts is limited to accounts within the same bank or brokerage firm. For example, if you and your spouse share the same last name and mailing address and you and your spouse each have two accounts containing Qualcomm stock at two different brokerage firms, your household will receive two copies of the Qualcomm proxy materials, one from each brokerage firm. To reduce the number of duplicate sets of proxy materials your household receives, you may wish to enroll some or all of your accounts in our electronic delivery program at http://enroll.icsdelivery.com/qcom.
If you received a householded mailing this year and you would like to have separate copies of our Notice of Internet Availability of Proxy Materials and proxy materials mailed to you, please submit your request to Broadridge ICS, either by calling toll-free (866) 540-7095 or by writing to Broadridge ICS, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. They will promptly send additional copies of our Notice of Internet Availability of Proxy Materials and proxy materials upon receipt of such request. Once you have received notice from your bank or broker that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent. Stockholders may revoke their consent at any time by contacting Broadridge ICS as provided above. Please note, however, that if you want to receive a paper proxy or voting instruction form or other proxy materials for purposes of this year’s Annual Meeting, you should follow the instructions included in the Notice of Internet Availability that was sent to you. If you received multiple copies of the proxy materials and would prefer to receive a single copy in the future or if you would like to opt out of householding for future mailings, you may contact Broadridge ICS as provided above.


QUALCOMM Incorporated    9


FINANCIAL INFORMATION
 
 
 
 
 
Attached as Appendix 1 is certain financial information from our Annual Report on Form 10-K for fiscal 2015 that we filed with the SEC on November 4, 2015. We have not undertaken any updates or revisions to such information since the date it was filed with the SEC. Accordingly, we encourage you to review Appendix 1 together with any subsequent information we have filed with the SEC and other publicly available information.
PERFORMANCE MEASUREMENT COMPARISON OF STOCKHOLDER RETURN
 
 
 
 
 
Attached as Appendix 2 is a graph that compares total stockholder return on our common stock since September 26, 2010 to two indices: the Standard & Poor’s 500 Stock Index (S&P 500) and the NASDAQ-100 Index (NASDAQ-100).
CORPORATE DIRECTORY
 
 
 
 
 
Attached as Appendix 3 is a listing of our executive officers and members of our Board.


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Corporate Governance

CORPORATE GOVERNANCE
CODE OF ETHICS AND CORPORATE GOVERNANCE PRINCIPLES AND PRACTICES
 
 
 
 
 
The Board has adopted a Code of Ethics applicable to all of our employees, including our executive officers and employees of our subsidiaries, and members of our Board. Any amendments to, or waivers under, the Code of Ethics that are required to be disclosed by SEC rules will be disclosed on our website at www.qualcomm.com under the “Corporate Governance” section of our “Investor Relations” page, which appears under the “Company” tab. To date, there have not been any waivers by us under the Code of Ethics.
The Board has also adopted Corporate Governance Principles and Practices, which include information regarding the Board’s policies that guide its governance practices, including the roles, responsibilities and composition of the Board, director qualifications, committee matters and stock ownership guidelines, among others.
The Code of Ethics and the Corporate Governance Principles and Practices are available on our website at
http://www.qualcomm.com under the “Corporate Governance” section of our “Investor Relations” page.
BOARD LEADERSHIP STRUCTURE
 
 
 
 
 
Chairman and CEO Roles
The Board believes that it should maintain flexibility to establish and revise Qualcomm’s Board leadership structure from time to time. Our charter documents and policies do not prevent our Chief Executive Officer from also serving as our Chairman of the Board. Our Board evaluates its leadership structure and elects the Chairman and the Chief Executive Officer based on the criteria it deems to be appropriate and in the best interests of the Company and its stockholders, given the circumstances at the time of such election. While we have in the past had one person serve as Chairman of the Board and Chief Executive Officer, the positions are currently held by separate individuals.
Presiding (Lead Independent) Director Role
Our Board believes that the role of Presiding Director, which pursuant to our Corporate Governance Principles and Practices must be an independent director, provides an appropriate balance in Qualcomm’s leadership. The Presiding Director helps ensure a strong, independent and active Board. Under our Corporate Governance Principles and Practices, at or before each annual meeting of the Board, which follows immediately after the annual meeting of stockholders, (i) the Governance Committee shall recommend the director who would serve as Presiding Director for the next term, and (ii) the Presiding Director shall be elected by a vote of the independent members of the Board. An individual shall serve as the Presiding Director for a one-year period, commencing with the annual meeting of the Board. No Presiding Director shall serve more than two consecutive terms. Mr. Thomas Horton, a member of the Audit Committee, is currently the Presiding Director, having commenced his service in this role in March 2015. The Presiding Director has the following roles and responsibilities:
Presiding at all Board meetings at which the Chairman is not present, including executive sessions of the independent directors;
Collaborating with the Chairman and the Chief Executive Officer in developing agendas for Board meetings;
Acting as the principal liaison between the independent directors and the Chairman and the Chief Executive Officer;
Communicating with independent directors to ensure that matters of interest are included on agendas for Board meetings;
Communicating with independent directors and management to affirm that appropriate briefing materials are being provided to directors sufficiently in advance of Board meetings to allow for proper preparation and participation in meetings; and
Calling special meetings of the Board, with the concurrence of at least one additional director, as appropriate.


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Corporate Governance

BOARD MEETINGS, COMMITTEES AND ATTENDANCE
 
 
 
 
 
During fiscal 2015, the Board held ten meetings. Board agendas include regularly scheduled sessions for the independent directors to meet without management present, and the Board’s Presiding Director leads those sessions. The Board delegates various responsibilities and authority to different Board committees. We have four standing Board committees: the Audit, Compensation, Governance and Finance committees. Committees regularly report on their activities and actions to the full Board. Committee assignments are re-evaluated annually and approved by the Board at an annual meeting that follows the annual meeting of stockholders, typically in March of each year. Each committee acts according to a written charter approved by the Board. Copies of each charter can be found on our website at www.qualcomm.com under the “Corporate Governance” section of our “Investor Relations” page as follows:
Name of Committee
    
Website Link
 
 
Audit Committee
    
http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=463
 
 
Compensation Committee
    
http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=462
 
 
Governance Committee
    
http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=461
 
 
Finance Committee
    
http://investor.qualcomm.com/documentdisplay.cfm?DocumentID=464
The table below provides current committee membership information for each of the Board committees.
 
Committees
Name
Audit
Compensation
Governance
Finance
Barbara T. Alexander
 
 
 
C
Donald G. Cruickshank
X
 
 
 
Raymond V. Dittamore
C
 
 
 
Jeffrey W. Henderson
 
 
 
 
Susan Hockfield
 
 
X
 
Thomas W. Horton *
X
 
 
 
Paul E. Jacobs
 
 
 
 
Sherry Lansing
 
X
 
 
Harish Manwani
 
 
 
X
Mark D. McLaughlin
 
 
X
 
Steve Mollenkopf
 
 
 
 
Clark T. Randt, Jr.
 
 
C
 
Francisco Ros
 
 
 
X
Jonathan J. Rubinstein
 
X
 
 
Marc I. Stern
 
C
 
 
Anthony J. Vinciquerra
X
 
 
 
C    Committee Chair
*     Presiding Director
The Audit Committee. The Audit Committee meets at least quarterly with our management and independent public accountants to review the results of the annual integrated audit and quarterly reviews of our consolidated financial statements and to discuss our financial statements and earnings releases. The Audit Committee selects, engages, oversees and evaluates the qualifications, performance and independence of our independent public accountants, reviews the plans and results of internal audits and reviews evaluations by management and the independent public accountants of our internal control over financial reporting and the quality of our financial reporting, among other functions. The Audit Committee met ten times during fiscal 2015. All of the members of the Audit Committee are audit committee financial


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experts as defined by the SEC and independent directors within the meaning of Rule 5605 of the NASDAQ Stock Market LLC (NASDAQ Rule 5605) and Rule 10A-3(b)(1)(ii) of the Securities Exchange Act of 1934, as amended.
The Compensation Committee. The Compensation Committee determines compensation levels for the Chief Executive Officer, the named executive officers (as listed in the Fiscal 2015 Summary Compensation Table), the Chief Accounting Officer, the other executive officers and Board members, administers and approves stock offerings under our employee stock purchase and long-term incentive plans and performs such other functions regarding compensation as the Board may delegate. The Compensation Committee met seven times during fiscal 2015. All of the members of the Compensation Committee are independent directors within the meaning of NASDAQ Rule 5605 and outside directors within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.
The Governance Committee. The Governance Committee reviews, approves and oversees various corporate governance-related policies and procedures applicable to us, including emergency procedures (such as disaster recovery and security). The Committee also reviews and evaluates the effectiveness of our executive development and succession planning processes and provides active leadership and oversight with respect to these processes. In addition, the Governance Committee evaluates and recommends nominees for membership on the Board and its committees. The Governance Committee met twelve times during fiscal 2015. All of the members of the Governance Committee are independent directors within the meaning of NASDAQ Rule 5605.
The Finance Committee. The Finance Committee reviews our financial position, cash management, dividend and stock repurchase programs, securities issuances, acquisitions and other major strategic investment decisions and provides oversight of our budgeting process. The Finance Committee met nine times during fiscal 2015. All of the members of the Finance Committee are independent directors within the meaning of NASDAQ Rule 5605.
During fiscal 2015, each Board member attended at least 75% of the aggregate of the meetings of the Board and of the meetings of the committees on which he or she served and that were held during the period for which he or she was a Board or committee member, respectively.
BOARD’S ROLE IN RISK OVERSIGHT
 
 
 
 
 
Qualcomm does not view risk in isolation, but considers risk as part of its regular evaluation of business strategy and business decisions. Assessing and managing risk is the responsibility of Qualcomm’s management, which establishes and maintains risk management processes, including action plans and controls, to balance risk mitigation and opportunities to create stockholder value. It is management’s responsibility to anticipate, identify and communicate risks to the Board and/or its committees. The Board oversees and reviews certain aspects of the Company’s risk management efforts, either directly or through its committees. Qualcomm approaches risk management by integrating its strategic planning, operational decision making and risk oversight and communicating risks and opportunities to the Board. The Board commits extensive time and effort every year to discussing and agreeing upon the Company’s strategic plan, and it reconsiders key elements of the strategic plan as significant events and opportunities arise during the year. As part of the review of the strategic plan, as well as in evaluating events and opportunities that occur during the year, the Board and management focus on the primary success factors and risks for the Company.
While the Board has primary responsibility for oversight of the Company’s risk management, the Board’s standing committees support the Board by regularly addressing various risks in their respective areas of oversight. Specifically, the Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and compliance with certain public reporting requirements. The Compensation Committee assists the Board in fulfilling its risk management oversight responsibilities with respect to risks arising from compensation policies and programs. The Governance Committee assists the Board in fulfilling its risk management oversight responsibilities with respect to risks related to corporate governance, succession planning and emergency procedures (including disaster recovery and security). The Finance Committee assists the Board in fulfilling its risk management oversight responsibilities with respect to risks related to major strategic investment decisions and other financial transactions, treasury functions and policies and budget processes. Each of the committee Chairs reports to the full Board at regular meetings concerning the activities of the committee, the significant issues it has discussed and the actions taken by the committee.
We believe that our leadership structure supports the risk oversight function of the Board. With two members of management, our Executive Chairman and our Chief Executive Officer, serving on the Board, they are able to promote open


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communication between management and directors relating to risk. Additionally, each Board committee is comprised solely of independent directors, and all directors are actively involved in the risk oversight function.
DIRECTOR NOMINATIONS
 
 
 
 
 
Our Amended and Restated Bylaws contain provisions that address the process (including required information and deadlines) by which a stockholder may nominate an individual to stand for election to the Board at our annual meeting of stockholders. In addition, the “proxy access” provisions of our Amended and Restated Bylaws provide that, under certain circumstances, a stockholder or group of up to 20 stockholders seeking to include director candidates in our proxy statement must own at least 3% of our outstanding common stock continuously for at least the previous three years. The number of stockholder-nominated candidates appearing in the proxy statement for our annual meeting cannot exceed 20% of the number of directors to be elected. If 20% of the number of directors is not a whole number, the maximum number of stockholder-nominated candidates is rounded down to the next whole number. If the number of stockholder-nominated candidates exceeds 20%, one nominee from each nominating stockholder or group of stockholders, based on the order of priority provided by such nominating stockholder or group of stockholders, would be selected for inclusion in our proxy materials until the maximum number is reached. The order of priority among nominating stockholders or groups of stockholders would be determined based on the number (largest to smallest) of shares of our common stock held by such nominating stockholders or groups of stockholders. Each nominating stockholder or group of stockholders must provide the information required by our Amended and Restated Bylaws, and each nominee must meet the qualifications required by our Amended and Restated Bylaws. Requests to include stockholder-nominated candidates in our proxy materials for next year’s annual meeting must be received by the Corporate Secretary at our corporate offices at 5775 Morehouse Drive, N-520I, San Diego, California 92121-1714, no earlier than August 24, 2016 and no later than the close of business on September 23, 2016. Stockholders are advised to review our Amended and Restated Bylaws, which contain additional requirements for submitting director candidates.
The Board has also adopted a formal policy concerning stockholder recommendations of Board candidates to the Governance Committee. This policy is set forth in our Corporate Governance Principles and Practices, which is available on our website at www.qualcomm.com under the “Corporate Governance” section of our “Investor Relations” page. Under this policy, the Governance Committee will review a reasonable number of candidates recommended by a single stockholder who has held over 1% of our common stock for over one year and who satisfies the notice, information and consent requirements set forth in our Amended and Restated Bylaws. To recommend a nominee for election to the Board, a stockholder must submit his or her recommendation to the Corporate Secretary at our corporate offices at 5775 Morehouse Drive, N-520I, San Diego, California 92121-1714. A stockholder’s recommendation must be received by us within the time limits set forth above under “Stockholder Proposals.” A stockholder’s recommendation must be accompanied by the information with respect to the stockholder nominee as specified in the Amended and Restated Bylaws, including among other things, the name, age, address and occupation of the recommended person, the proposing stockholder’s name and address, the ownership interests of the proposing stockholder and any beneficial owner on whose behalf the nomination is being made (including the number of shares beneficially owned, any hedging, derivative, short or other economic interests and any rights to vote any shares), and any material monetary or other relationships between the recommended person and the proposing stockholder and/or the beneficial owners on whose behalf the nomination is being made. The proposing stockholder must also provide evidence of owning the requisite number of shares of our common stock for over one year. Candidates so recommended will be reviewed using the same process and standards for reviewing Governance Committee recommended candidates.
In evaluating director nominees, the Governance Committee considers the following factors:
The appropriate size of the Board;
Our needs with respect to the particular talents and experience of our directors;
The knowledge, skills and experience of nominees, including experience in technology, business, finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board;
Familiarity with national and international business matters;
Experience in political affairs;
Experience with accounting rules and practices;


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Appreciation of the relationship of our business to the changing needs of society;
The nominee’s other commitments, including the other boards on which the nominee serves; and
The desire to balance the considerable benefit of continuity with the periodic injection of the fresh perspective provided by new members.
The Governance Committee’s goal is to assemble a board of directors that brings to us a diversity of perspectives and skills derived from high quality business and professional experience. In doing so, the Governance Committee also considers candidates with appropriate non-business backgrounds.
Other than the foregoing, there are no stated minimum criteria for director nominees, although the Governance Committee may also consider such other factors as it may deem are in the best interests of the Company and its stockholders. The Governance Committee does, however, believe it appropriate for at least one, and preferably several, members of the Board to meet the criteria for an “audit committee financial expert” as defined by the SEC, and for a majority of the members of the Board to meet the definition of “independent director” under NASDAQ Rule 5605. The Governance Committee also believes that it is in the best interests of stockholders that at least one key member of our current management participates as a member of the Board. The Governance Committee identifies nominees by first evaluating the current members of the Board willing to continue their service. Current members of the Board with skills and experience that are relevant to our business and who are willing to continue their service are considered for re-nomination, balancing the value of continuity of service by existing members of the Board with that of obtaining a new perspective. If any member of the Board does not wish to continue to serve or if the Governance Committee or the Board decides not to re-nominate a member for re-election, and if the Board determines not to reduce the Board size as a result, the Governance Committee identifies the desired skills and experience of a new nominee based on the criteria above. Current members of the Governance Committee and Board are polled for suggestions as to individuals meeting the criteria of the Governance Committee. Research may also be performed to identify qualified individuals. We have, in the past, engaged third parties to assist in identifying and evaluating potential nominees.
MAJORITY VOTING
 
 
 
 
 
Under our Amended and Restated Bylaws, in an uncontested election, if any incumbent nominee for director receives a greater number of “withhold” votes (ignoring abstentions and broker non-votes) than votes cast “for” his or her election, the director shall promptly tender his or her resignation from the Board, subject to acceptance by the Board. In that event, the Governance Committee shall make a recommendation to the Board as to whether to accept or reject the tendered resignation or whether other actions should be taken. In making its recommendation, the Governance Committee will consider all factors it deems relevant, including, without limitation, the stated reasons why stockholders withheld votes from such director, the length of service and qualifications of such director, the director’s past contributions to us and the availability of other qualified candidates for director. The Governance Committee’s evaluation shall be forwarded to the Board to permit the Board to act on it no later than 90 days following the date of the stockholder meeting. In reviewing the Governance Committee’s recommendation, the Board shall consider the factors evaluated by the Governance Committee and such additional information and factors as the Board believes to be relevant. If the Board determines that the director’s resignation is in the best interests of the Company and its stockholders, the Board shall promptly accept the resignation. We will publicly disclose the Board’s decision within four business days in a Current Report on Form 8-K, providing an explanation of the process by which the decision was reached and, if applicable, the reasons for not accepting the director’s resignation. The director in question will not participate in the Governance Committee’s or the Board’s considerations of the appropriateness of his or her continued service, except to respond to requests for information.
STOCK OWNERSHIP GUIDELINES
 
 
 
 
 
We adopted stock ownership guidelines for our directors and executive officers to help ensure that they each maintain an equity stake in the Company and, by doing so, appropriately link their interests with those of other stockholders. The guideline for executive officers is based on a multiple of the executive’s base salary, ranging from two to six times, with the size of the multiple based on the individual’s position with the Company. Only shares actually owned (as shares or as vested deferred stock units) count toward the requirement. Executives are required to achieve these stock ownership levels within five years of becoming an executive officer. Nonemployee directors are required to hold a number of shares of our common stock with a value equal to five times the annual retainer for Board service paid to U.S. residents. Nonemployee directors


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are required to achieve this ownership level within five years of joining the Board. In addition to the preceding ownership guidelines, all directors are expected to own shares of our common stock within one year of joining the Board.
COMMUNICATIONS WITH DIRECTORS
 
 
 
 
 
We have adopted a formal process for stockholder communications with the Board. This process is also set forth in our Corporate Governance Principles and Practices. Stockholders who wish to communicate to the Board should do so in writing to the following address:
[Name of Director(s) or Board of Directors]
Qualcomm Incorporated
Attn: General Counsel
5775 Morehouse Drive, N-520I
San Diego, California 92121-1714
Our General Counsel logs all such communications (and the disposition of such communications as set forth below) and forwards those not deemed frivolous, threatening or otherwise inappropriate to the Chair of the Governance Committee for distribution to the appropriate members of the Board and/or management.
ANNUAL MEETING ATTENDANCE
 
 
 
 
 
Our Corporate Governance Principles and Practices set forth a policy on director attendance at annual meetings. Directors are encouraged to attend absent unavoidable conflicts. All directors then in office attended our last annual meeting, except for Sherry Lansing.
DIRECTOR INDEPENDENCE
 
 
 
 
 
The Board has determined that, except for Dr. Paul E. Jacobs and Mr. Steve Mollenkopf, all of the members of the Board are “independent directors” within the meaning of NASDAQ Rule 5605.


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Proposal 1: Election of Directors

PROPOSAL 1:  ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
 
 
 
 
 
Our Restated Certificate of Incorporation and Amended and Restated Bylaws provide that directors are to be elected at our annual meeting of stockholders to hold office until the next annual meeting and until their respective successors are elected and qualified. Vacancies on the Board resulting from death, resignation, disqualification, removal or other causes may be filled by either the affirmative vote of the holders of a majority of the then-outstanding shares of common stock or by the affirmative vote of a majority of the remaining directors then in office, even if less than a quorum of the Board is present. Newly created directorships resulting from any increase in the number of directors may, unless the Board determines otherwise, be filled only by the affirmative vote of the directors then in office, even if less than a quorum of the Board is present. Any director elected as a result of a vacancy shall hold office for a term expiring at the next annual meeting of stockholders and until such director’s successor has been elected and qualified.
Our Restated Certificate of Incorporation provides that the number of directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board. Sir Donald Cruickshank, Dr. Susan Hockfield, Ms. Sherry Lansing and Mr. Marc Stern will conclude their service as directors at the Annual Meeting. The Board, upon recommendation of its Governance Committee, has decided to set the number of directors at 12 effective as of the time the stockholders vote on the election of directors at the Annual Meeting. Therefore, 12 directors will stand for election at the Annual Meeting.
In an uncontested election, our Bylaws provide that a director nominee will be elected only if he or she receives a majority of the votes cast with respect to his or her election (that is, the number of shares voted “for” a director nominee must exceed the number of “withhold” votes cast against that nominee). Abstentions and broker non-votes have no effect on the vote. In an uncontested election, if any nominee for director who is currently serving on the Board receives a greater number of “withhold” votes than votes “for” his or her election, the director shall promptly tender his or her resignation from the Board, subject to acceptance by the Board. The process that will be followed by the Board in that event is described above under the heading “Majority Voting.”
The nominees receiving a majority of votes cast with respect to his or her election will be elected directors of the Company. Shares of common stock represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the 12 nominees named below. Each person nominated for election has agreed to serve, if elected, and the Board has no reason to believe that any nominee will be unable to serve.
NOMINEES FOR ELECTION
 
 
 
 
 
BARBARA T. ALEXANDER
  
Age:  67
 
Director since:  2006
Ms. Alexander has been an independent consultant since February 2004. She was a senior advisor for UBS from October 1999 to January 2004 and a managing director of Dillon Read & Co., Inc. (Dillon Read) from January 1992 to September 1999. Prior to joining Dillon Read, Ms. Alexander was a managing director in the corporate finance department of Salomon Brothers. Ms. Alexander is past Chairman of the Board of the Joint Center for Housing Studies at Harvard University (the Center) and is currently a member of that board’s executive committee and a senior industry fellow of the Center. Ms. Alexander has been a director of Allied World Assurance Company Holdings, Ltd. since August 2009 and Choice Hotels


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Proposal 1: Election of Directors

since February 2012. Ms. Alexander previously served as a director of KB Home from October 2010 to April 2014, Federal Home Loan Mortgage Corporation (Freddie Mac) from November 2004 to March 2010, Centex Corporation from July 1999 to August 2009, Harrah’s Entertainment, Inc. from February 2002 to April 2007 and Burlington Resources, Inc. from January 2004 to March 2006. She holds B.S. and M.S. degrees in theoretical mathematics from the University of Arkansas.
We believe that Ms. Alexander’s qualifications to serve on our Board include her significant financial and accounting experience. In addition, she has extensive experience serving on several other public company boards, including in most instances service on the compensation committee and/or the audit committee of those other boards, which provides valuable insights to our Board. Her experience at Freddie Mac has added to her knowledge regarding risk management issues.
RAYMOND V. DITTAMORE
  
Age:  72
 
Director since:  2002
Mr. Dittamore retired in June 2001 as a partner of Ernst & Young LLP, an international public accounting firm, after 35 years of service. Mr. Dittamore previously served as a director of Life Technologies Corporation from July 2001 to February 2014, Gen-Probe Incorporated from August 2002 to September 2009 and Digirad Corporation from March 2004 to March 2008. Mr. Dittamore holds a B.S. degree in accounting from San Diego State University.
We believe that Mr. Dittamore’s qualifications to serve on our Board include his many years of financial and accounting experience, including his long service with an international accounting firm as an audit partner and as a member of that firm’s management. In addition, Mr. Dittamore has served on other public company boards, where he has gained extensive audit committee experience as well as additional insight into the practices of other boards and their committees. He has been designated as an audit committee financial expert.
JEFFREY W. HENDERSON
  
Age:  51
 
Director since:  2016
Mr. Henderson has been an Advisory Director to Berkshire Partners LLC, a private equity firm, since September 2015. He served as Chief Financial Officer of Cardinal Health Inc., a health care services company, from May 2005 to November 2014. Prior to joining Cardinal Health, Mr. Henderson held multiple positions at Eli Lilly and General Motors, including serving as President and General Manager of Eli Lilly Canada, Controller and Treasurer of Eli Lilly Inc., and in management positions with General Motors in Great Britain, Singapore, Canada and the U.S. Mr. Henderson has been a director of Halozyme Therapeutics, Inc. since August 2015 and a director of FibroGen, Inc. since August 2015. Mr. Henderson holds a B.S. degree in electrical engineering from Kettering University and an M.B.A. degree from Harvard Business School.


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Proposal 1: Election of Directors

We believe that Mr. Henderson’s qualifications to serve on our Board of Directors include his financial and operational management experience, including his significant experience in international operations, which is a source of valuable insights to our Board. His experience in senior operational and financial management positions at companies that experienced significant growth and transformation, including into additional business areas, also provides a useful resource to our senior management. Additionally, pursuant to the Cooperation Agreement with JANA Partners, we have committed to include Mr. Henderson on the slate of director nominees recommended by the Board for election at the Annual Meeting.
THOMAS W. HORTON
  
Age:  54
 
Director since:  2008
Mr. Horton is a Senior Advisor in the Industrials and Business Services Group of Warburg Pincus LLC, a private equity firm focused on growth investing. Mr. Horton was Chairman of American Airlines Group Inc. (formed upon the merger of AMR Corporation (AMR) and US Airways Group, Inc.) from December 2013 to June 2014 and Chairman of American Airlines, Inc. (American) from November 2011 to June 2014. He was Chairman and Chief Executive Officer of AMR and Chief Executive Officer of American from November 2011 to December 2013, and President of AMR and American from July 2010 to December 2013. He served as Executive Vice President and Chief Financial Officer of AMR and American from March 2006 to July 2010. He served as Vice Chairman and Chief Financial Officer of AT&T Corporation (AT&T) from January 2002 to February 2006. Prior to joining AT&T, Mr. Horton was Senior Vice President and Chief Financial Officer of AMR from January 2000 to January 2002 and served in numerous management positions with AMR since 1985. Mr. Horton has been a director of Wal-Mart Stores, Inc. since November 2014. Mr. Horton holds a B.B.A. degree in accounting from Baylor University and an M.B.A. degree from Southern Methodist University.
We believe that Mr. Horton’s qualifications to serve on our Board include his management, financial and accounting experience, including his former service as President of AMR, as Vice Chairman and Chief Financial Officer of AT&T and as Executive Vice President and Chief Financial Officer of AMR. In particular, Mr. Horton’s roles in operational and financial management at AMR and AT&T bring valuable insights to our Board, as well as providing a useful resource to our senior management. He has been designated as an audit committee financial expert.
PAUL E. JACOBS
  
Age:  53
 
Director since:  2005


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Proposal 1: Election of Directors

Dr. Jacobs is our Executive Chairman and Chairman of the Board of Directors. He has served as Chairman of the Board since March 2009 and as Executive Chairman since March 2014. He served as Chief Executive Officer from July 2005 to March 2014 and as Group President of Qualcomm Wireless & Internet from July 2001 to July 2005. In addition, he served as an executive vice president from February 2000 to June 2005. Dr. Jacobs was a director of A123 Systems, Inc. from November 2002 to July 2012. Dr. Jacobs holds a B.S. degree in electrical engineering and computer science, an M.S. degree in electrical engineering and a Ph.D. degree in electrical engineering and computer science from the University of California, Berkeley.
We believe that Dr. Jacobs’s qualifications to serve on our Board include his extensive business, operational and management experience in the wireless telecommunications industry, including his current position as our Executive Chairman and his prior service as our Chief Executive Officer. His extensive knowledge of our business, products, strategic relationships and opportunities, as well as the rapidly evolving technologies and competitive environment in our industry, bring valuable insights and knowledge to our Board.
HARISH MANWANI
  
Age:  62
 
Director since:  2014
Mr. Manwani was the Chief Operating Officer for Unilever PLC, a leading global consumer products company, from September 2011 to December 2014. He served as Unilever’s President, Asia, Africa, Middle East and Turkey, which was later extended to include Central and Eastern Europe, from April 2005 to August 2011. He served as Unilever’s President, Home & Personal Care, North America from March 2004 to March 2005. He served as Unilever’s President, Home & Personal Care, Latin America and as the Chairman of Unilever’s Latin America Advisory Council from April 2001 to February 2004. He served as Unilever’s Senior Vice President, Global Hair and Oral Care from June 2000 to March 2001. He served as a whole time Director on the board of Hindustan Unilever Limited from August 1995 to April 2000, a company he joined as a management trainee in 1976, and subsequently held various general management positions of increasing responsibilities within Unilever globally. Mr. Manwani has been a director of Whirlpool Corporation since August 2011 and Pearson plc since October 2013, and has been the Non-Executive Chairman of Hindustan Unilever Limited since July 2005. He has also been a Global Executive Advisor to the Blackstone Private Equity Group since February 2015 and a director of The Economic Development Board (Singapore) since February 2013 and the Indian School of Business since April 2006. Mr. Manwani previously served as a director of ING Group from April 2008 to April 2010, the Citigroup India Advisory Board from November 2010 to February 2013 and the Human Capital Leadership Institute from October 2012 to February 2014. Mr. Manwani holds a B.Sc. honors degree in statistics and an M.M.S. degree in management studies, both from Mumbai University in India. He has also attended the Advanced Management Program at Harvard Business School.
We believe that Mr. Manwani’s qualifications to serve on our Board include his substantial management experience involving international operations, particularly in Asia. His executive management experience, particularly with respect to strategic planning and leadership of complex organizations, provides a valuable resource for our senior management. His experience on the boards of several other companies also brings valuable insights to our Board.


QUALCOMM Incorporated    20

Proposal 1: Election of Directors

MARK D. McLAUGHLIN
  
Age:  50
 
Director since:  2015
Mr. McLaughlin is Chairman of the Board, President and Chief Executive Officer of Palo Alto Networks, Inc., a network security company. He joined Palo Alto Networks as President and Chief Executive Officer, and as a director, in August 2011 and became Chairman of the Board in April 2012. Mr. McLaughlin served as President and Chief Executive Officer and as a director of VeriSign, Inc., a provider of Internet infrastructure services, from August 2009 through July 2011 and as President and Chief Operating Officer from January 2009 to August 2009. Mr. McLaughlin served in several roles at VeriSign, including as Executive Vice President, Products and Marketing, from February 2000 through November 2007. Prior to joining VeriSign, Mr. McLaughlin was Vice President, Sales and Business Development at Signio Inc., an internet payments company acquired by VeriSign in February 2000. President Barack Obama appointed Mr. McLaughlin to serve on the National Security Telecommunications Advisory Committee (NSTAC) in January 2011 and to the position of Chairman of the NSTAC in 2014. Mr. McLaughlin has been a director of Opower, Inc. since April 2014. Mr. McLaughlin holds a B.S. degree from the U.S. Military Academy at West Point and a J.D. from Seattle University School of Law.
We believe that Mr. McLaughlin’s qualifications to serve on our Board include his operational and management experience at several technology companies. Mr. McLaughlin’s service on the National Security Telecommunications Advisory Committee, as well as his experience as Chief Executive Officer and a member of the Board of Directors of a network security company, provide him with significant knowledge regarding the operations and security of telecommunications systems and cybersecurity matters, which bring valuable insights to our Board. Additionally, pursuant to the Cooperation Agreement with JANA Partners, we have committed to include Mr. McLaughlin on the slate of director nominees recommended by the Board for election at the Annual Meeting.
STEVE MOLLENKOPF
  
Age:  47
 
Director since:  2013
Mr. Mollenkopf has served as our Chief Executive Officer since March 2014 and as a director since December 2013. Mr. Mollenkopf has served as our Chief Executive Officer since March 2014. He served as Chief Executive Officer-elect and President from December 2013 to March 2014 and as President and Chief Operating Officer from November 2011 to December 2013. In addition, he served as Executive Vice President and Group President from September 2010 to November 2011, as Executive Vice President and President of QCT from August 2008 to September 2010, as Executive Vice President, QCT Product Management from May 2008 to August 2008, as Senior Vice President, Engineering and Product Management from July 2006 to May 2008 and as Vice President, Engineering from April 2002 to July 2006. Mr. Mollenkopf joined Qualcomm in 1994 as an engineer and throughout his tenure at Qualcomm has held several other technical and leadership roles. Mr. Mollenkopf holds a B.S. degree in electrical engineering from Virginia Tech and an M.S. degree in electrical engineering from the University of Michigan.


QUALCOMM Incorporated    21

Proposal 1: Election of Directors

We believe that Mr. Mollenkopf’s qualifications to serve on our Board include his extensive business, operational and management experience in the wireless telecommunications industry, including his current position as our Chief Executive Officer. His extensive knowledge of our business, products, strategic relationships and opportunities, as well as the rapidly evolving technologies and competitive environment in our industry, bring valuable insights and knowledge to our Board.
CLARK T. “SANDY” RANDT, JR.
  
Age:  70
 
Director since:  2013
Ambassador Randt has been President of Randt & Co. LLC, a company that advises firms with interests in China, since February 2009. He is a former U.S. ambassador to the People’s Republic of China, where he served from July 2001 to January 2009. He was a partner resident in the Hong Kong office of Shearman & Sterling, a major international law firm, where he headed the firm’s China practice, from January 1994 to June 2001. Ambassador Randt served as First Secretary and Commercial Attaché at the U.S. Embassy in Beijing from August 1982 to October 1984. He was the China representative of the National Council for United States-China Trade in 1974 and he served in the U.S. Air Force Security Service from August 1968 to March 1972. Ambassador Randt is a member of the New York Bar Association and the Council on Foreign Relations. He is also a former governor and first vice president of the American Chamber of Commerce in Hong Kong. Ambassador Randt has been a director of Valmont Industries, Inc. since February 2009, a director of the United Parcel Service, Inc. since August 2010 and a director of Wynn Resorts Ltd. since October 2015, and he serves on the Advisory Board of the Duke Kunshan University. He is fluent in Mandarin Chinese. Ambassador Randt graduated from Yale University with a B.A. degree in English literature and received a J.D. degree from the University of Michigan. He also attended Harvard Law School where he was awarded the East Asia Legal Studies Traveling Fellowship to China.
We believe that Ambassador Randt’s qualifications to serve on our Board include his deep understanding of Asia and experience in facilitating business throughout Asia, which is one of the most important regions to our business. He brings to our Board substantial experience in both diplomacy and international trade, including service as the U.S. Ambassador to The People’s Republic of China. His international experience and knowledge of Asian business operations provide valuable insights to our Board.
FRANCISCO ROS
  
Age:  65
 
Director since:  2010
Dr. Ros is President of First International Partners, S.L., a business consulting firm he founded in 2002. He was Secretary of State (vice minister) of the Government of Spain from May 2004 to July 2010. He served as a senior director of business development of Qualcomm from July 2003 to April 2004. He was Chairman and CEO of Alua Broadband Optical Access, a company he co-founded, from January 2000 to June 2002. Dr. Ros served as President and CEO of Unisource (a joint venture among KPN, Telia, Swisscom and Telefónica) from May 1996 to October 1998. Dr. Ros headed several business areas within


QUALCOMM Incorporated    22

Proposal 1: Election of Directors

the Telefónica Group from April 1983 to November 1996 and became Managing Director of the holding company and a member of its Executive Management Board. Dr. Ros has been a director of Elephant Talk Communications Corp. since September 2014 and Non-Executive Chairman of Asurion Europe Limited in Spain since April 2014. He was a director of Proteccion On-Line S.L. from October 2012 to June 2013. In 2011, he was the recipient of the Great Cross of the Order of Civil Merit and the Great Plate of Telecommunications and the Information Society, both granted by the Government of Spain. Dr. Ros holds an engineering and a Ph.D. degree in telecommunications from the Universidad Politecnica de Madrid, an M.S. degree in electrical engineering and a Ph.D. degree in electrical engineering and computer science from the Massachusetts Institute of Technology and an advanced management degree from the Instituto de Estudios Superiores de la Empresa Business School in Madrid.
We believe that Dr. Ros’s qualifications to serve on our Board include his significant experience related to the regulatory environment in Europe for wireless technology, as well as his technical and business background and education. In addition, Dr. Ros brings a non-U.S. perspective to issues facing us, enhancing the understanding of our Board.
JONATHAN J. RUBINSTEIN
  
Age:  59
 
Director since:  2013
Mr. Rubinstein was Senior Vice President, Product Innovation for the Personal Systems Group of the Hewlett-Packard Company (HP) from July 2011 to January 2012 and Senior Vice President and General Manager, Palm Global Business Unit of HP from July 2010 to July 2011. Mr. Rubinstein was Chief Executive Officer and President of Palm, Inc. (Palm) from June 2009 until its acquisition by HP in July 2010 and Chairman of the Board of Palm from October 2007 through the date of acquisition. He was Senior Vice President, iPod Division of Apple Inc. (Apple) from 2003 to 2006 and Senior Vice President, Hardware Engineering of Apple from 1997 to 2003. Mr. Rubinstein is a member of the National Academy of Engineering. Mr. Rubinstein has been a director of Amazon.com, Inc. since December 2010. Mr. Rubinstein holds B.S. and M.Eng. degrees in electrical engineering from Cornell University and an M.S. degree in computer science from Colorado State University.
We believe that Mr. Rubinstein’s qualifications to serve on our Board include his substantial operational and executive management experience at a range of large technology companies, including senior management responsibilities at HP, Palm and Apple. His experience in addressing product development issues in emerging and evolving technology environments provides our Board with valuable knowledge and insights.
ANTHONY J. VINCIQUERRA
  
Age:  61
 
Director since:  2015
Mr. Vinciquerra is Senior Advisor to Texas Pacific Group (TPG) in the Technology, Media and Telecom sectors, where he advises TPG on acquisitions and operations. He has been Senior Advisor of TPG since September 2011. Mr. Vinciquerra was


QUALCOMM Incorporated    23

Proposal 1: Election of Directors

Chairman of Fox Networks Group, the largest and most profitable operating unit of News Corporation, from September 2008 to February 2011 and President and Chief Executive Officer from June 2002 to February 2011. Earlier in his career, he held various management positions in the broadcasting and media industry. Mr. Vinciquerra has also been a director of DirecTV since September 2013. He previously served as a director of Motorola Mobility Holdings, Inc. from January 2011 to May 2012, and Motorola, Inc. from July 2007 to January 2011. Mr. Vinciquerra holds a B.A. degree in marketing from the State University of New York.
We believe that Mr. Vinciquerra’s qualifications to serve on our Board include his management experience, including significant experience in operations, which is a source of important insights to our Board, as well as providing a useful resource to our senior management. His prior media industry experience is especially valuable with the convergence of the Internet, wireless, media and computing industries. He has been designated as an audit committee financial expert. Additionally, pursuant to the Cooperation Agreement with JANA Partners, we have committed to include Mr. Vinciquerra on the slate of director nominees recommended by the Board for election at the Annual Meeting.
REQUIRED VOTE AND BOARD RECOMMENDATION
 
 
 
 
 
If a quorum is present and voting, each of the 12 nominees for director will be elected by a vote of a majority of the votes cast, meaning that the number of shares cast “for” a director’s election exceeds the number of “withhold” votes cast against that director. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have no effect on the vote. If you hold your shares through a broker and you do not instruct the broker on how to vote for each of the 12 nominees, your broker will not have the authority to vote your shares. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum but will not have any effect on the outcome of the vote.
THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE ABOVE NOMINEES.


QUALCOMM Incorporated    24

Proposal 2: Ratification of Selection of Independent Public Accountants

PROPOSAL 2:  RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board has selected PricewaterhouseCoopers LLP as our independent public accountants for the fiscal year ending September 25, 2016, and the Board has directed that management submit this selection for ratification by the stockholders at the Annual Meeting. PricewaterhouseCoopers LLP has audited our consolidated financial statements since we commenced operations in 1985.
The Audit Committee has evaluated PricewaterhouseCoopers LLP’s qualifications, performance and independence, including that of the lead audit partner. This evaluation was conducted with input from senior management.
Stockholder ratification of the selection of PricewaterhouseCoopers LLP as our independent public accountants is not required by our Amended and Restated Bylaws or otherwise. However, the Board is submitting the selection of PricewaterhouseCoopers LLP to stockholders for ratification as a matter of good corporate governance. If stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain PricewaterhouseCoopers LLP. Even if the selection is ratified, the Audit Committee at its discretion may direct the appointment of different independent public accountants at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.
FEES FOR PROFESSIONAL SERVICES
 
 
 
 
 
The following table presents fees for professional services rendered by PricewaterhouseCoopers LLP during our fiscal years ended September 27, 2015 and September 28, 2014 for the audits of our annual consolidated financial statements and fees for other services. All of the services described in the following table were approved in conformity with the Audit Committee’s pre-approval process described below.
 
Fiscal
2015
Fiscal
2014
Audit fees (1)
$
6,725,000

$
6,777,000

Audit-related fees (2)
4,597,700

3,481,000

Tax fees (3)
115,200

10,000

All other fees (4)
82,400

413,000

Total
$
11,520,300

$
10,681,000

(1)
Audit fees consist of fees for professional services rendered for the audit of our annual consolidated financial statements and the effectiveness of our internal control over financial reporting, the reviews of our interim condensed consolidated financial statements included in quarterly reports and audits of certain subsidiaries and businesses for statutory, regulatory and other purposes.
(2)
Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or reviews of our consolidated financial statements and are not reported under “audit fees.” This category includes fees principally related to field verification of royalties from certain licensees.
(3)
Tax fees consist of fees for permissible advisory services regarding general tax consulting services, including consulting on tax matters related to merger and acquisition activity (2015) and fees for professional services rendered for transfer pricing advice (2014).
(4)
All other fees consist of fees for permissible advisory services provided in connection with market condition studies, services related to conflict minerals reporting requirements and technical publications purchased from the independent public accountants.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES OF INDEPENDENT PUBLIC ACCOUNTANTS
 
 
 
 
 
The Audit Committee’s policy is to pre-approve all audit and non-audit services provided by our independent public accountants. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services


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Proposal 2: Ratification of Selection of Independent Public Accountants

and an estimated fee. The Audit Committee has delegated certain pre-approval authority to certain committee members and members of management when expedition of approval is necessary. Our independent public accountants and management periodically report to the full Audit Committee regarding the extent of services provided by the independent public accountants and the fees for the services performed to date.
REPRESENTATION FROM PRICEWATERHOUSECOOPERS LLP AT THE ANNUAL MEETING
 
 
 
 
 
Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
REQUIRED VOTE AND BOARD RECOMMENDATION
 
 
 
 
 
The affirmative vote of a majority of the votes cast at the Annual Meeting at which a quorum is present, either in person or by proxy, is required to approve this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have no effect on the vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will have the authority, but is not required, to vote your shares. Abstentions and any broker non-votes will each be counted as present for purposes of determining the presence of a quorum but will not have any effect on the outcome of the proposal.
THE BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 25, 2016.


QUALCOMM Incorporated    26

Proposal 3: Approval of the 2016 Long-Term Incentive Plan

PROPOSAL 3:  APPROVAL OF THE 2016 LONG-TERM INCENTIVE PLAN
We offer a broad-based equity compensation program that is critical to attracting, retaining and engaging the finest people in our industry and ensuring alignment among our employees and stockholders. Employees with a stake in the future success of our business are highly motivated to innovate, execute and partner to achieve long-term growth and increase stockholder value. The purpose of Proposal 3, which seeks to establish the 2016 Long-Term Incentive Plan (the 2016 LTIP), is to provide the Company with a sufficient share reserve and added flexibility to continue to provide our employees with opportunities for equity ownership in a highly competitive and dynamic employment market.
While the 2016 LTIP provides flexibility in the type of equity compensation awards we may grant, we currently intend to continue to grant time-based restricted stock units to our general employee population and both time-based and performance-based restricted stock units to our executive officers. Our program of providing broad merit-based grants of restricted stock units to our employees has been a central part of our compensation and benefits mix, and we believe it has helped to create an inclusive and results-oriented culture of collaborative innovation. Without this program, we believe our competitiveness would be negatively impacted and would place us at a significant disadvantage in our efforts to attract and retain the most talented and skilled individuals in the industry.
In fiscal 2015, we granted 2.46% of our annual share-based compensation expense to our Named Executive Officers (NEOs), 0.76% to our other executive officers and 96.78% to our remaining employee population in the form of on-going retention and new hire grants. Equity compensation remains a significant component of our compensation and benefits mix. Over 98% of our regular, full-time employees currently have unvested restricted stock units.
In July 2015, we announced that we plan to reduce annual share-based compensation grants by approximately $300 million from fiscal 2015 levels. We expect these cost reduction initiatives to be fully implemented by the end of fiscal 2016. We recognize that share-based grants dilute existing stockholders, and therefore, we are committed to continued responsible management of our equity compensation program.
SUMMARY OF THE 2016 LONG-TERM INCENTIVE PLAN
 
 
 
 
 
At the Annual Meeting, stockholders will be asked to approve the Qualcomm Incorporated 2016 Long-Term Incentive Plan (the 2016 LTIP), which was adopted by the Board of Directors on December 7, 2015, subject to stockholder approval.
The Company currently maintains the Qualcomm Incorporated 2006 Long-Term Incentive Plan (the 2006 LTIP). As of December 14, 2015, a total of 63,850,864 shares of the Company’s common stock were subject to outstanding awards granted under the 2006 LTIP, and an additional 19,766,726 shares were available for new award grants under the 2006 LTIP.
No awards will be issued under the 2016 LTIP unless stockholders approve it at the Annual Meeting. If stockholders approve the 2016 LTIP, no new awards will be granted under the 2006 LTIP after the Annual Meeting, although all outstanding awards under that plan will remain outstanding according to their terms. If stockholders do not approve the 2016 LTIP, the Company will continue to have the authority to grant awards under the 2006 LTIP until March 7, 2018.
We believe that equity incentives are critical to attracting and retaining the most talented employees in our industry. Stockholder approval of the proposed 2016 LTIP will allow us to continue to provide such incentives.
Significant Historical Award Information
The following table provides information regarding the grant of equity awards under our 2006 LTIP over the past three completed fiscal years:
Key Equity Metrics
2013
2014
2015
Percentage of equity awards granted to NEOs (1)
5.0%
12.5%
3.4%
Equity burn rate (2)
0.9%
1.0%
1.0%
Dilution (3)(5)
12.1%
8.7%
6.9%
Overhang (4)(5)
6.2%
4.4%
3.9%
(1)
Percentage of equity awards granted to individuals who were named executive officers (NEOs) in the relevant year is calculated by dividing the number of shares that were issuable pursuant to equity awards that were granted to NEOs


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Proposal 3: Approval of the 2016 Long-Term Incentive Plan

during the fiscal year by the number of shares issuable pursuant to all equity awards that were granted during the fiscal year.
(2)
Equity burn rate is calculated by dividing the number of shares issuable pursuant to equity awards granted during the fiscal year by the weighted-average number of shares outstanding during the period.
(3)
Dilution is calculated by dividing the sum of (x) the number of shares issuable pursuant to equity awards outstanding at the end of the fiscal year (59,890,371) and (y) the number of shares available under the 2006 LTIP for future grants (45,465,812), by the number of shares outstanding at the end of the fiscal year (1,524,308,039).
(4)
Overhang is calculated by dividing the number of shares issuable pursuant to equity awards outstanding at the end of the fiscal year (59,890,371) by the number of shares outstanding at the end of the fiscal year (1,524,308,039).
(5)
The Company repurchased 172,434,913 shares during fiscal 2015. If the Company had not repurchased these shares, 1,696,742,952 shares would have been outstanding at the end of fiscal 2015, and dilution and overhang would have been 6.2% and 3.5%, respectively, for fiscal 2015.
For purposes of the table above, the number of shares issuable pursuant to equity awards does not include any dividend equivalents that may be earned after the date of grant, and the number of shares issuable pursuant to an award that provides for issuance of a variable number of shares based on the extent to which performance targets are satisfied is deemed to be the maximum number of shares that may be issued on attainment of maximum performance targets, even though a lesser number of shares may be issued based on actual performance.
Summary of the 2016 LTIP
The following is a summary of the principal features of the 2016 LTIP. This summary does not purport to be a complete description of all of the provisions of the 2016 LTIP. It is qualified in its entirety by reference to the full text of the 2016 LTIP, a copy of which is attached to this Proxy Statement as Appendix 5.
General
The 2016 LTIP provides for the grant of incentive and nonstatutory stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock units, performance units, performance shares (including performance stock units or PSUs), deferred compensation awards and other stock-based awards. Incentive stock options granted under the 2016 LTIP are intended to qualify as “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the Code). Nonstatutory stock options granted under the 2016 LTIP are not intended to qualify as incentive stock options under the Code.
Purpose
The purpose of the 2016 LTIP is to advance the interests of the Company and its stockholders by providing an incentive to attract and retain the best qualified personnel to perform services for the Company, by motivating such persons to contribute to the growth and profitability of the Company, by aligning their interests with the interests of the Company’s stockholders, and by rewarding such persons for their services by tying a portion of their total compensation package to the success of the Company.
Administration
The 2016 LTIP would be administered by the Compensation Committee of the Board or, if there is no Compensation Committee, it would be administered by the Board. Subject to the limitations in the 2016 LTIP, the Compensation Committee has the authority to interpret the 2016 LTIP and to determine the recipients of awards, the number of shares subject to each award, the times when an award will become exercisable or vest, the exercise price, the type of consideration to be paid upon exercise and other terms of the award. To the extent permitted by applicable law and the terms of the 2016 LTIP, the Committee may delegate to the appropriate officers of the Company the authority to grant, amend, modify, cancel, extend or renew awards to persons other than directors or executive officers whose transactions are subject to Section 16 of the Securities Exchange Act of 1934, as amended. Accordingly, as used herein with respect to the 2016 LTIP, references to the “Committee” include the full Board, the Compensation Committee and any officer of the Company to whom such authority may be delegated as provided in the 2016 LTIP.
Maximum Number of Shares Issuable Under the 2016 LTIP
Maximum Number of Shares Issuable. The maximum number of shares that may be issued pursuant to awards under the 2016 LTIP will equal:


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Proposal 3: Approval of the 2016 Long-Term Incentive Plan

90,000,000 shares, plus
the number of any shares available for new award grants under the 2006 LTIP on the date of the Annual Meeting, determined before giving effect to the termination of the authority to grant new awards under the 2006 LTIP, plus
the number of any shares subject to stock options granted under the 2006 LTIP and outstanding as of the date of the Annual Meeting which expire, or for any reason are forfeited, canceled or terminated, after that date without being exercised, plus
the number of any shares subject to full-value awards (including restricted stock units, performance shares and deferred stock units) granted under the 2006 LTIP that are outstanding as of the date of the Annual Meeting which are forfeited, terminated, canceled, not earned due to any performance goal that is not met or that fail to vest or are otherwise reacquired after that date without having become vested, in each case with the number of shares that may be issued pursuant to the 2016 LTIP being increased by two times the number of such shares, plus
the number of any shares subject to full-value awards granted under the 2006 LTIP and outstanding on the date of the Annual Meeting that are paid in cash, exchanged by a participant or withheld by the Company after the date of the Annual Meeting to satisfy any tax withholding or tax payment obligations related to such award, in each case with the number of shares that may be issued pursuant to the 2016 LTIP being increased by two times the number of such shares.
As of December 14, 2015, 19,766,726 shares were available for new grants under the 2006 LTIP. The table below presents the number of shares, including dividend equivalents, that were subject to various outstanding equity awards at December 14, 2015 under the 2006 LTIP:
Outstanding Award
Stock options (number of shares)
26,233,039

Weighted-average exercise price of stock options
$41.69
Weighted-average remaining term of stock options (years)
2.4

Restricted stock units (number of shares)
35,253,978

Performance shares (number of shares)
2,255,001

Deferred stock units (number of shares)
108,846

Share Counting. The following are other rules for counting shares against the maximum number of shares that may be issued pursuant to the 2016 LTIP:
Shares issued with respect to awards granted under the 2016 LTIP other than stock options or stock appreciation rights (referred to as a full-value award) are counted against the 2016 LTIP’s aggregate share limit as two shares for every one share actually issued in connection with the award.
To the extent that shares are delivered pursuant to the exercise of a stock option or stock appreciation right, the number of underlying shares to which the exercise related shall be counted against the applicable share limits, regardless of the number of shares actually issued. Further, any shares that are exchanged by a participant or withheld by the Company as full or partial payment of the exercise price of any stock option or stock appreciation right or to satisfy any tax withholding or payment obligations related to any stock option or stock appreciation right will not be available for issuance of subsequent awards under the 2016 LTIP.
To the extent that an award is settled in cash, the shares that would have been issued had there been no such cash settlement will not be counted against the number of shares available for issuance under the 2016 LTIP.
Shares that are subject to awards that are forfeited, terminated, canceled, not earned due to any performance goal that is not met or otherwise fail to vest or are reacquired by the Company will again be available for subsequent awards under the 2016 LTIP. Any such shares subject to full value awards will be credited as two shares for purposes of determining the maximum number of shares available for issuance under the 2016 LTIP.
If shares are exchanged by a participant or withheld by the Company to satisfy the tax withholding or payment obligations related to any full-value award, the maximum number of shares that are issuable pursuant to the 2016 LTIP will be credited with two (2) shares for each such share.
Shares tendered (by attestation or otherwise), exchanged or withheld as full or partial payment of the exercise price of any option or stock appreciation right will not be available for subsequent awards; shares exchanged or withheld to satisfy the tax withholding or tax payment obligations related to any option or stock appreciation right


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Proposal 3: Approval of the 2016 Long-Term Incentive Plan

will not be available for subsequent awards; shares purchased or repurchased by the Company with option proceeds will not be available for subsequent awards; and shares covered by an option or stock appreciation right, to the extent that it is exercised and settled in shares, and whether or not shares are actually issued upon exercise, will be considered issued or transferred pursuant to the 2016 LTIP.
Shares issued in connection with awards that are granted by or become obligations of the Company through the assumption of awards (or in substitution for awards) in connection with an acquisition of another company will not count against the shares available for issuance under the 2016 LTIP unless determined otherwise by the Board, and such awards may reflect the original terms of the related award being assumed or substituted for and need not comply with other specific terms of the 2016 LTIP.
Shares of stock of an acquired company that are available under a pre-existing plan approved by its stockholders and not adopted in contemplation of such acquisition (as adjusted using the exchange ratio or other adjustment formula used in such acquisition or combination to determine the consideration payable to its stockholders) may be used for awards under the 2016 LTIP and will not reduce the number of shares available for issuance under the 2016 LTIP, provided that awards using such available shares cannot be made after the date the awards or grants could have been made under the terms of the pre-existing plan and will only be made to individuals who were not employees, consultants or nonemployee directors of the Company prior to such acquisition or combination.
Eligibility and Award Limitations
Awards other than incentive stock options are generally granted to our employees and directors, although the 2016 LTIP permits the grant of awards to consultants. Incentive stock options may be granted only to employees. As of December 14, 2015, the Company had approximately 26,800 employees and 13 nonemployee directors who would have been eligible to participate in the 2016 LTIP had it been in effect on that date.
If an incentive stock option is granted to any person who, at the time of the grant, owns (or is deemed to own) stock possessing more than 10% of the total combined voting power of the Company, or any of its parent or subsidiary corporations, the option must be granted at an exercise price that is at least 110% of the fair market value of the Company’s stock on the date of grant, and the term of the option must not exceed five years. The aggregate fair market value, determined at the time of grant, of the shares of common stock with respect to which incentive stock options granted under the 2016 LTIP that are exercisable for the first time by an optionee during any calendar year (under all our plans and our parent and subsidiary corporations) may not exceed $100,000.
Service Vesting Requirements. Generally, full-value awards, stock options and stock appreciation rights will vest based on a continued service with the Company over a period of no less than twelve months from the date on which such award is granted, except in connection with death, disability, retirement, termination of service without cause or upon a change in control. However, 5% of the aggregate number of shares authorized for issuance under the 2016 LTIP will not be subject to such service vesting requirements.
Section 162(m) Award Limits. In order to permit awards to qualify as “performance-based compensation” under Section 162(m) of the Code, the 2016 LTIP provides the following limits:
Stock options and stock appreciation rights: No employee shall be granted within any fiscal year of the Company one or more options or freestanding stock appreciation rights which in the aggregate are for more than 3,000,000 shares.
Restricted stock and restricted stock unit awards vesting based upon the attainment of performance goals: No employee shall be granted within any fiscal year of the Company one or more restricted stock awards or restricted stock unit awards subject to vesting conditions based on the attainment of performance goals for more than 2,000,000 shares.
Performance share awards: No employee shall be granted within any fiscal year of the Company performance shares which could result in such employee receiving more than 2,000,000 shares.
Performance unit awards: No employee shall be granted within any fiscal year of the Company performance units which could result in such employee receiving more than $10,000,000.
Limitation on Awards to Nonemployee Directors: The aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of awards granted to any nonemployee director under the 2016 LTIP during any single calendar year shall not exceed $500,000. However, this limit does not apply to any awards made at the election of a nonemployee director to receive awards in lieu of all or a portion of any annual committee cash retainers or other similar cash-based payments.


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Proposal 3: Approval of the 2016 Long-Term Incentive Plan

Stock Options and Stock Appreciation Rights
The following is a general description of the terms of stock options and stock appreciation rights that may be awarded under the 2016 LTIP. Individual grants may have different terms, subject to the overall requirements of the 2016 LTIP.
Exercise Price; Payment. The exercise price of incentive stock options under the 2016 LTIP may not be less than the fair market value of the Company’s common stock subject to the option on the date of grant, and in some cases may not be less than 110% of the fair market value on the grant date (see “Eligibility”). As of December 14, 2015, the fair market value (i.e., closing price) of a share of the Company’s common stock was $46.83. The exercise price of a nonstatutory stock option and a stock appreciation right may not be less than the fair market value of the Company’s stock subject to the award on the date of grant. The exercise price of options granted under the 2016 LTIP must be paid: (1) in cash, check or a cash equivalent; (2) by tender of shares of common stock of the Company subject to attestation to the ownership of the shares and to having a fair market value not less than the exercise price; (3) if permitted by the Committee and to the extent allowed by law, by means of a promissory note; (4) by net exercise whereby the number of shares issuable upon the exercise of the option is reduced by a number of shares having a fair market value equal to the exercise price; (5) in any other form of payment as may be approved by the Committee; or (6) by a combination of the above forms of payment.
Repricing and Reload Options Prohibited. The Company may not, without obtaining stockholder approval, (1) amend or modify the terms of any outstanding option or stock appreciation right to reduce the exercise price; (b) cancel, exchange or permit or accept the surrender of any outstanding option or stock appreciation right in exchange for an option or stock appreciation right with a lower exercise price; or (c) cancel, exchange or permit or accept the surrender of any outstanding option or stock appreciation right in exchange for any other award, cash or other securities for purposes of repricing that option or stock appreciation right. Also, no option may be granted to any participant on account of the use of shares to exercise a prior option.
Exercise. Stock options and stock appreciation rights granted under the 2016 LTIP vest in cumulative increments as determined by the Committee, provided that the holder’s employment by, or service as a director of or consultant to, the Company or certain related entities or designated affiliates, continues from the date of grant until the applicable vesting date. Stock options and stock appreciation rights granted under the 2016 LTIP may be subject to different vesting terms, subject to the one-year minimum service vesting requirement (see “Service Vesting Requirements”). In addition, the Committee has the power to accelerate the time during which an award may be exercised, subject to these limitations.
Term. The maximum term of stock options and stock appreciation rights under the 2016 LTIP is 10 years, except for certain incentive stock options with a maximum term of five years (see “Eligibility”). The 2016 LTIP provides for the earlier termination of an award due to the holder’s termination of service.
Restrictions on Transfer. During a participant’s lifetime, stock options may be exercised only by the participant or the participant’s guardian or legal representative. Stock options are not subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment. Participants may not transfer incentive stock options granted under the 2016 LTIP, except by will or by the laws of descent and distribution. The terms and conditions of award agreements may provide that nonstatutory stock options are transferrable by written designation of a beneficiary taking effect upon the death of the participant or by delivering written notice to the Company, in a form acceptable to the Company, that the participant will be gifting the option to certain family members, other specific entities controlled by or for the benefit of such family members.
Restricted Stock Units
The Committee may grant restricted stock units under the 2016 LTIP. Restricted stock units represent a right to receive shares of the Company’s common stock at a future date determined in accordance with the participant’s award agreement. There is no purchase or exercise price associated with restricted stock units or with the shares issued in settlement of the award. The Committee may grant restricted stock unit awards that vest subject to the one-year minimum service vesting requirement (see “Service Vesting Requirements”) or upon attainment of one or more performance goals described below in connection with performance awards. Participants may not transfer shares acquired pursuant to restricted stock units until the units vest and are settled. Participants have no voting rights or rights to receive cash dividends with respect to restricted stock unit awards until shares of common stock are issued in settlement of such awards. However, the Committee may grant restricted stock units that entitle the holders to receive dividend equivalents, which are rights to receive additional restricted stock units or cash amounts on restricted stock units that vest based on the value of any cash dividends the Company declares prior to the settlement of vested restricted stock units.
Restricted Stock Awards


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Proposal 3: Approval of the 2016 Long-Term Incentive Plan

The Committee may grant restricted stock awards under the 2016 LTIP in the form of either a restricted stock purchase right, an immediate right to purchase common stock or a restricted stock bonus, for which the participant furnishes consideration in the form of services to the Company. The Committee determines the purchase price payable under restricted stock purchase rights, which may be less than the then current fair market value of the Company’s common stock. Restricted stock awards may be subject to vesting conditions specified by the Committee based on service subject to the one-year minimum service vesting requirement (see “Service Vesting Requirements”) or performance criteria, including the attainment of one or more performance goals similar to those described below in connection with performance awards. Participants may not transfer shares acquired pursuant to a restricted stock award until the shares vest. Unless otherwise provided by the Committee, participants forfeit any unvested shares of restricted stock upon termination of service. Participants holding restricted stock generally may vote the shares and receive any dividends paid; however, the restrictions on the original restricted stock award apply to dividends or distributions paid in shares, adjustments made upon a change in the capital structure of the Company, and any substituted or additional securities or property arising from such award.
Performance Awards
The Committee may grant performance awards subject to the fulfillment of conditions and the attainment of performance goals over such periods as the Committee determines in writing and sets forth in a written agreement between the Company and the participant. These awards may be designated as performance shares or performance units. Performance shares are awards that provide for a payment in shares (or cash equivalent to the fair market value of shares) based on satisfaction of performance goals established by the Committee, and performance units are awards that provide for the payment of cash based on the satisfaction of performance goals established by the Committee.
No later than the earlier of (a) the date ninety (90) days after the commencement of the applicable performance period or (b) the date on which 25% of the performance period has elapsed, the Committee will establish one or more performance goals applicable to the award. Performance goals are based on the attainment of specified target levels with respect to one or more selected measures of business or financial performance. Performance goals may be based on one or more of the following measures: revenues, average selling price, average unit costs, excess and obsolete inventory costs, costs of revenues, gross profit, gross margin, research and development expenses, selling, marketing and general and administrative expenses, operating expense, operating income, operating margin, contribution margin, earnings before any one or more of stock-based compensation expense, interest and dividend income, taxes, depreciation and amortization, net income, earnings per share, cost reductions or savings, stock price, economic value added, operating cash flow, free cash flow, return on capital, which includes return on invested capital, compound annual growth rate, return on stockholders’ equity, total stockholder return, return on assets, balance of cash, cash equivalents and marketable securities, design wins, product launch, product quality, establishing relationships with commercial entities with respect to marketing, distribution and sale of the Company’s products, supply chain achievements, customer satisfaction, customer leadership evaluation, completion of identified project(s), completion of a joint venture or corporate transaction, financing or other capital raising transactions (including sales of the Company’s debt or equity), forecast accuracy, including demand or total addressable opportunities accuracy, regulatory achievements, including submitting or filing application or other documents with regulatory authorities or receiving approval of any such application or other document and passing preapproval inspections, brand reputation, market share or other measures as determined by the Committee. The degree of attainment of performance measures may be measured in absolute terms, relative terms (including but not limited to the passage of time or period to period comparisons and/or against other companies or financial metrics), on a per share and/or share per capita basis, against the performance of the Company as a whole or against particular entities, segments, operating or business units, regional operations or segments or products of the Company, in accordance with generally accepted accounting principles in the United States (GAAP) and/or other objective and pre-established principles which are not in accordance with GAAP, on a pre-tax or after-tax basis. The Committee may provide for exclusion of the impact of an event or occurrence which the Committee determines should appropriately be excluded, including but not limited to: restructurings, discontinued operations, extraordinary items and other unusual, infrequently occurring or non-recurring charges or events, asset write-downs, litigation or claim judgments or settlements, acquisitions or divestitures, reorganization or change in corporate structure or capital structure of the Company, an event either not directly related to the operations of the Company, participating company, division, business, segment or business unit or not within the reasonable control of management, foreign exchange gains and losses, a change in the fiscal year of the Company, the refinancing or repurchase of bank loans or debt securities, unbudgeted capital expenditures, the issuance or repurchase of equity securities and other changes in the number of outstanding shares, conversion of some or all of convertible securities to common stock, any business interruption event, the cumulative effects of tax or accounting changes in accordance with GAAP, or the effect of changes in other laws or regulatory rules affecting reported results.
Following completion of the applicable performance period, the Committee certifies in writing the extent to which a participant has attained the applicable performance goals and the resulting value of the participant’s award. The Committee


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Proposal 3: Approval of the 2016 Long-Term Incentive Plan

retains the discretion to eliminate or reduce, but not increase, the amount that would otherwise be payable to a participant who is a “covered employee” within the meaning of Section 162(m) of the Code. However, no such reduction may increase the amount correspondingly paid to any other participant. The Committee may make positive or negative adjustments to performance award payments to participants other than covered employees to reflect individual job performance or other factors. At its discretion, the Committee may provide for the payment of dividend equivalents with respect to cash dividends paid on the Company’s common stock to a participant awarded performance shares. The Committee may provide for performance award payments in lump sums or installments. If any payment is to be made on a deferred basis, the Committee may provide for the payment of dividend equivalents or interest during the deferral period.
Unless otherwise provided by the Committee, if a participant terminates service due to death or disability prior to completion of the applicable performance period, the final award value is determined at the end of the performance period on the basis of the performance goals attained during the entire performance period, but is prorated for the number of months of the participant’s service during the performance period. If a participant’s service terminates prior to completion of the applicable performance period for any other reason, the participant forfeits the performance award, unless the Committee determines otherwise. Participants may not sell or transfer a performance award, other than by will or the laws of descent and distribution, prior to the end of the applicable performance period.
Deferred Compensation Awards
The 2016 LTIP authorizes the Committee to establish a deferred compensation award program. If and when implemented, participants designated by the Committee who are officers, nonemployee directors or members of a select group of highly compensated employees may elect to receive an award of deferred stock units, in lieu of compensation otherwise payable in cash or in lieu of cash or shares of common stock issuable upon the exercise or settlement of stock options, stock appreciation rights, performance shares or performance unit awards. Each such stock unit represents a right to receive one share of common stock at a future date determined in accordance with the participant’s award agreement. Deferred stock units are fully vested upon grant and settled by distribution to the participant of a number of whole shares of common stock equal to the number of stock units subject to the award upon the earlier of the date on which the participant separates from service or a specific date elected by the participant at the time of his or her election to receive the deferred stock unit award. A holder of deferred stock units has no voting rights or other rights as a stockholder until shares of common stock are issued to the participant in settlement of the deferred stock units. However, participants holding deferred stock units may receive dividend equivalents credited in the form of additional stock units as determined by the Committee. Prior to settlement, deferred stock units may not be assigned or transferred other than by will or the laws of descent and distribution.
Other Stock-Based Awards
The 2016 LTIP permits the Committee to grant other awards based on the Company’s stock or based on dividends paid on its stock. No such other awards were granted under the 2006 LTIP during fiscal 2015 or were outstanding at December 14, 2015.
Adjustments Upon Certain Corporate Events
In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, the 2016 LTIP provides for appropriate adjustments in (i) the maximum number and class of shares subject to the 2016 LTIP and to any outstanding awards, (ii) Code Section 162(m) per employee grant limits (see “Section 162(m) Award Limits”) and (iii) the exercise price per share of any outstanding awards. Any fractional share resulting from an adjustment is rounded down to the nearest whole number, and at no time will the exercise price of any stock option or stock appreciation right be decreased to an amount less than par value of the stock subject to the award.
Change in Control. The Committee may provide in any award agreement or, in the event of a change in control, take such actions as it deems appropriate to accelerate the exercisability and vesting of stock options or stock appreciation rights in connection with a change in control; provided such acceleration may not occur solely upon a change in control to the extent the stock option or stock appreciation right is being assumed or substituted with a similar award in connection with such change in control. Further, with respect to awards other than stock options and stock appreciation rights in the event of a change in control or in the event of a termination of employment following a change in control, the Committee may provide in any award agreement for the lapsing of vesting conditions or restrictions, restriction periods, performance goals or other limitations applicable to the stock subject to such award held by a participant whose service has not terminated prior to the change in control; provided such acceleration or waiver may not occur solely upon a change in control. If a change in control occurs, the surviving, continuing, successor or purchasing corporation or parent corporation thereof may either assume the Company’s rights and obligations under the outstanding awards or substitute substantially equivalent awards without the


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Proposal 3: Approval of the 2016 Long-Term Incentive Plan

consent of the participant. With respect to awards that are not assumed or substituted with substantially equivalent awards, nor exercised as of the date of the change in control, will terminate and cease to be outstanding effective as of the date of the change in control.
Duration, Amendment and Termination
The Board may amend or terminate the 2016 LTIP at any time. If not earlier terminated, the 2016 LTIP will continue in effect until the date on which all of the shares of Stock available for issuance under the 2016 LTIP have been issued, all restrictions on such shares under the terms of the 2016 LTIP have lapsed and the agreements evidencing awards have lapsed. However, awards will not be granted under the 2016 LTIP later than the tenth anniversary of the date it was originally approved by the stockholders (March 8, 2026). No amendment authorized by the Board will be effective unless approved by the stockholders of the Company if the amendment would (1) increase the number of shares reserved under the 2016 LTIP; (2) change the class of persons eligible to receive incentive stock options; (3) reprice any stock option or stock appreciation right (see “Repricing and Reload Options Prohibited”) or (4) modify the 2016 LTIP in any other way that requires stockholder approval under applicable law.
Specific Benefits
The Company has not approved any awards that are conditioned on stockholder approval of the 2016 LTIP proposal. The Company cannot currently determine the benefits or number of shares subject to awards that may be granted in the future to executive officers and employees (including employee directors) under the 2016 LTIP because the Company’s equity award grants are discretionary in nature. If the proposed 2016 LTIP had been in effect in 2015, the Company expects that its award grants for 2015 would not have been different from those actually made in that year under the 2006 LTIP. For information regarding awards that were granted to the NEOs during 2015, see “Awards Granted During Fiscal 2015 to Certain Persons under the 2006 LTIP.” For information regarding past award grants under the 2006 LTIP, see the “Aggregate Past Grants Under the 2006 LTIP” table below.
Awards Granted During Fiscal 2015 to Certain Persons under the 2006 LTIP
The following table sets forth for each NEO, for all current executive officers, all current directors (who are not executive officers) and for all employees (who are not executive officers): (1) the Annual Cash Incentive Plan (ACIP) awards for fiscal 2015; (2) the aggregate number of shares subject to restricted stock units and performance shares granted under the 2006 LTIP during fiscal 2015; and (3) the aggregate dollar value of such shares based on $53.22 per share, the fair market value of our common stock on September 27, 2015, the last trading day of fiscal 2015.
Name and Position
ACIP Awards ($) (1)
Number of Shares Subject to Restricted Stock Units
(#)
Dollar Value of Restricted Stock Units
($)
Number of Shares Subject to Performance Shares
(#)
Dollar Value of Performance Shares
($)
Steve Mollenkopf
Chief Executive Officer
1,025,000



296,814

15,796,441

George S. Davis
Executive Vice President and Chief Financial Officer
400,000



100,176

5,331,367

Derek K. Aberle
President
520,000



140,246

7,463,892

Cristiano R. Amon
Executive Vice President, Qualcomm Technologies, Inc. and President, QCT
320,000



134,310

7,147,978

Paul E. Jacobs
Executive Chairman



333,916

17,771,010

All current executive officers as a group (10 persons)
3,415,000

26,999

1,436,887

1,385,394

73,730,669

All current directors, who are not executive officers, as a group (13 persons) (2)

34,569

1,839,762



All employees, who are not executive officers, as a group (26,695 persons)

15,411,716

820,211,526





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Proposal 3: Approval of the 2016 Long-Term Incentive Plan

(1)
The Company provides annual cash incentive bonus opportunities for its employees. Individuals serving as executive officers as of the beginning of fiscal 2015 received ACIP awards under the 2006 LTIP in order to comply with the performance-based compensation exception provided under Section 162(m) of the Code. All other employees received annual cash incentive bonus opportunities under a separate discretionary program.
(2)
Amount includes 714 fully vested deferred stock units granted to nonemployee directors in lieu of their annual cash retainer and 31,104 deferred stock units and 2,751 restricted stock units granted under the nonemployee director compensation program.
Aggregate Past Grants Under the 2006 LTIP
As of December 14, 2015, awards covering 275,008,143 shares of the Company’s common stock had been granted under the 2006 LTIP. This number of shares includes shares subject to awards that expired or terminated without having been exercised or paid and became available for new award grants under the 2006 LTIP. The following table shows information regarding the distribution of those awards among the persons and groups identified below. The number of performance shares that were subject to past awards and the number of performance shares that are outstanding at December 14, 2015 reflect the maximum number of shares that could be earned based on satisfaction of the applicable performance goals.
 
Stock Options
Restricted Stock Units/
Performance Shares
 
Number of Shares Subject to Past Grants
Number of Shares Acquired On Exercise
Number of Shares Underlying Options as of December 14, 2015
Number of Units/Shares Subject to Past Awards
Number of Units/Shares Vested as of December 14, 2015
Number of Units/Shares Outstanding and Unvested as of December 14, 2015
Name and Position
Exercisable
Unexercisable
Steve Mollenkopf
Chief Executive Officer
1,076,150
1,076,150
0
0
1,673,844
627,280
1,090,615
George S. Davis
Executive Vice President and Chief Financial Officer
0
0
0
0
389,618
108,198
289,851
Derek K. Aberle
President
790,100
689,049
101,051
0
924,782
373,807
574,313
Cristiano R. Amon
Executive Vice President, Qualcomm Technologies, Inc. and President, QCT
432,000
343,375
71,625
17,000
452,818
146,531
314,562
Paul E. Jacobs
Executive Chairman
3,030,250
2,614,294
415,956
0
1,955,464
830,354
1,159,141
All current executive officers as a group (10 persons)
7,549,550
6,449,218
1,070,582
29,750
6,788,549
2,775,283
4,159,591
All current directors, who are not executive officers, as a group (13 persons) (1)
332,500
108,245
224,255
0
194,863
168,253
34,383
All employees, who are not executive officers, as a group (26,788 persons)
166,028,467
117,448,024
24,872,134
14,498
94,114,214
53,692,395
33,249,860
(1)
Amount includes 24,635 fully vested deferred stock units granted to nonemployee directors in lieu of their annual cash retainer and 149,894 deferred stock units and 20,334 restricted stock units granted under the nonemployee director compensation program.
United States Federal Income Tax Information
The following discussion is intended to be a general summary only of the federal income tax aspects of awards granted under the 2016 LTIP and not of state or local taxes that may apply to awards under the 2016 LTIP. Tax consequences may vary depending on particular circumstances, and administrative and judicial interpretations of the application of the federal income tax laws are subject to change. Participants in the 2016 LTIP who are residents of or are employed in a country other than the United States may be subject to taxation in accordance with the tax laws of that particular country in addition to or in lieu of United States federal income taxes. This discussion is based on the provisions of the Code in effect at the time this


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Proposal 3: Approval of the 2016 Long-Term Incentive Plan

summary was drafted for inclusion in this Proxy Statement. It does not include a discussion of or anticipate changes that may become effective or be implemented after December 31, 2015. Subsequent developments in the U.S. federal income tax law could have a material effect on the U.S. federal income tax consequences of awards granted under the 2016 LTIP.
Incentive Stock Options. An optionee recognizes no taxable income for regular income tax purposes as the result of the grant or exercise of an incentive stock option. Optionees who do not dispose of their shares for at least two years following the date the incentive stock option was granted or within one year following the exercise of the option normally will recognize a long-term capital gain or loss equal to the difference, if any, between the sale price and the purchase price of the shares. If an optionee satisfies both such holding periods upon a sale of the shares, the Company will not be entitled to any deduction for federal income tax purposes. If an optionee disposes of shares either within two years after the date of grant or within one year from the date of exercise (referred to as a “disqualifying disposition”), the difference between the fair market value of the shares on the exercise date and the option exercise price (not to exceed the gain realized on the sale if the disposition is a transaction with respect to which a loss, if sustained, would be recognized) will be taxed as ordinary income at the time of disposition. Any gain in excess of that amount will be treated as a capital gain. If a loss is recognized, it will be a capital loss. A capital gain or loss will be long-term if the optionee’s holding period is more than 12 months. Any ordinary income recognized by the optionee upon the disqualifying disposition of the shares generally should be deductible by the Company for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code or the regulations thereunder. The difference between the option exercise price and the fair market value of the shares on the exercise date of an incentive stock option is an adjustment in computing the optionee’s alternative minimum taxable income and may be subject to an alternative minimum tax, which is paid if such tax exceeds the regular tax for the year. Special rules may apply with respect to certain subsequent sales of the shares in a disqualifying disposition, certain basis adjustments for purposes of computing the alternative minimum taxable income on a subsequent sale of the shares and certain tax credits which may arise with respect to optionees subject to the alternative minimum tax.
Nonstatutory Stock Options and Stock Appreciation Rights. Nonstatutory stock options and stock appreciation rights have no special tax status. A holder of these awards generally does not recognize taxable income as the result of the grant of such award. Upon exercise of a nonstatutory stock option or stock appreciation right, the holder normally recognizes ordinary income in an amount equal to the difference between the exercise price and the fair market value of the shares on the exercise date. If the holder is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of stock acquired by the exercise of a nonstatutory stock option or stock appreciation right, any gain or loss, based on the difference between the sale price and the fair market value on the exercise date, will be taxed as capital gain or loss. A capital gain or loss will be long-term if the holding period of the shares is more than 12 months. The Company generally is entitled to a deduction equal to the amount of ordinary income recognized by the optionee as a result of the exercise of a nonstatutory stock option or stock appreciation right, except to the extent such deduction is limited by applicable provisions of the Code or the regulations thereunder. No tax deduction is available to the Company with respect to the grant of a nonstatutory stock option or stock appreciation right or the sale of the stock acquired pursuant to such grant.
Restricted Stock. A participant acquiring restricted stock generally will recognize ordinary income equal to the fair market value of the shares on the “determination date.” The determination date is the date on which the participant acquires the shares unless the shares are subject to a substantial risk of forfeiture and are not transferable, in which case the determination date is the earlier of (i) the date on which the shares become transferable or (ii) the date on which the shares are no longer subject to a substantial risk of forfeiture. If the determination date is after the date on which the participant acquires the shares, the participant may elect, pursuant to Section 83(b) of the Code, to have the date of acquisition be the determination date by filing an election with the Internal Revenue Service no later than 30 days after the date on which the shares are acquired. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the determination date, will be taxed as capital gain or loss. The Company generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.
Performance Shares, Performance Units and Restricted Stock Unit Awards. A participant generally will recognize no income upon the receipt of a performance share, performance unit or restricted stock unit award. Upon the settlement of such an award, participants normally will recognize ordinary income in the year of receipt in an amount equal to the cash received and the fair market value of any substantially vested shares received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. If the participant receives shares of restricted stock, the participant generally will be taxed in the same manner as described under “Restricted Stock.” Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the fair market value on the determination date (as defined under “Restricted Stock”), will be taxed as capital gain or loss. The Company generally is


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Proposal 3: Approval of the 2016 Long-Term Incentive Plan

entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.
Deferred Compensation Awards. A participant generally will recognize no income upon the receipt of a deferred compensation award. Upon the settlement of the award, the participant normally will recognize ordinary income in the year of settlement in an amount equal to the fair market value of the shares received. Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the fair market value of the shares on the date they were transferred to the participant, will be taxed as capital gain or loss. The Company generally is entitled to a deduction equal to the amount of ordinary income recognized by the participant, except to the extent such deduction is limited by applicable provisions of the Code. Deferred compensation awards, when granted, would generally be subject to the requirements of Section 409A of the Code, which would impose certain restrictions on the timing and form of payment of deferred compensation.
Potential Limitation on Company Deductions. In accordance with applicable regulations issued under Section 162(m), compensation attributable to stock options and stock appreciation rights should qualify as performance-based compensation, provided that: (1) the 2016 LTIP contains a per-employee limitation on the number of shares for which options or stock appreciation rights may be granted during a specified period; (2) the per-employee limitation is approved by the stockholders; (3) the option is granted by a compensation committee comprised solely of outside directors (as defined in Section 162(m) of the Code); and (4) the exercise price of the option or right is not less than the fair market value of the stock on the date of grant. For the above reasons, our 2016 LTIP provides for an annual per employee limitation as required under Section 162(m), and our Compensation Committee is comprised solely of outside directors. Accordingly, options or stock appreciation rights granted by the Compensation Committee should qualify as performance-based compensation, and the other awards subject to performance goals may also qualify.
EQUITY COMPENSATION PLAN INFORMATION
 
 
 
 
 
The following table sets forth information regarding outstanding equity awards and shares reserved for future issuance under our equity compensation plans as of September 27, 2015 (number of shares in thousands): 
Plan Category
 
Number of Shares to be Issued Upon Exercise / Vesting of Outstanding Awards
 
Weighted Average Exercise Price of Outstanding Options (1)
 
Number of Shares Remaining Available for Future Issuance  
 
Equity compensation plans approved by stockholders (2)
 
61,123

(4)
$41.76
 
71,826

(6)
Equity compensation plans not approved by stockholders (3)
 
995

(5)
$28.17
 

  
Total
 
62,118

  
$41.40
 
71,826

  
 
(1)
Weighted Average Exercise Price of Outstanding Options does not include outstanding performance shares, time-based restricted stock units and performance-based restricted stock units, which were all granted under an equity compensation plan approved by stockholders.
(2)
Consists of four plans: the Company’s 2001 Stock Option Plan, 2006 Long-Term Incentive Plan, 2001 Non-Employee Directors’ Stock Option Plan and Amended and Restated 2001 Employee Stock Purchase Plan.
(3)
Consists of the Atheros Communications, Inc. 2004 Stock Incentive Plan, as amended (the Atheros Plan), which was assumed in connection with the acquisition of Atheros in May of 2011, and other plans assumed in connection with mergers and acquisitions.
(4)
Includes approximately 32,522,000 shares that may be issued upon the satisfaction of performance objectives or other conditions pursuant to performance shares, time-based restricted stock units and performance-based restricted stock units granted under the 2006 Long-Term Incentive Plan. The performance shares include the maximum number of shares that may be issued.
(5)
Includes approximately 219,000 shares that may be issued under the Atheros Plan.
(6)
Includes approximately 26,361,000 shares reserved for issuance under the Amended and Restated 2001 Employee Stock Purchase Plan.


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Proposal 3: Approval of the 2016 Long-Term Incentive Plan

REQUIRED VOTE AND BOARD RECOMMENDATION
 
 
 
 
 
The affirmative vote of a majority of the votes cast at the Annual Meeting, at which a quorum is present, either in person or by proxy, is required to approve the 2016 LTIP, as discussed above. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have no effect on the vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have the authority to vote your shares. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum, but will not have any effect on the outcome of the proposal.
Should stockholder approval not be obtained, the 2016 LTIP will not be implemented, and the 2006 LTIP will continue in effect pursuant to its current terms. However, the shares reserved for issuance will be depleted, the 2006 LTIP will expire on March 7, 2018, and the Company will not achieve its intended objectives of helping to attract and retain employees.
The Board believes that the proposed 2016 LTIP is in the best interests of the Company and its stockholders for the reasons stated above.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE 2016 LONG-TERM INCENTIVE PLAN.


QUALCOMM Incorporated    38

Proposal 4: Advisory Vote for Approval of Our Executive Compensation

PROPOSAL 4:  ADVISORY VOTE FOR APPROVAL OF OUR EXECUTIVE COMPENSATION
This stockholder advisory vote, commonly known as “Say-on-Pay,” is required pursuant to the Securities Exchange Act of 1934, as amended, and gives our stockholders the opportunity to approve or not approve, on a non-binding advisory basis, the compensation paid to our named executive officers (NEOs). The Board recommends a vote for the following resolution:
“Resolved, that the stockholders of QUALCOMM Incorporated approve, on a non-binding advisory basis, the compensation paid to the Company’s named executive officers, as disclosed in this proxy statement, including the Compensation Discussion and Analysis, compensation tables and narrative disclosures.”
COMPENSATION PROGRAM BEST PRACTICES
 
 
 
 
 
We continued the many ongoing practices that promote consistent leadership, decision-making and actions without taking inappropriate or unnecessary risks. These practices are discussed in detail in the Compensation Discussion and Analysis (CD&A) section and include: 
A majority of our long-term incentive equity awards (based on the annualized value of the front-loaded restricted stock units) are performance-based. All of the long-term incentive equity awards granted in fiscal 2015 were performance-based.
A significant portion of our NEOs’ compensation varies with Company financial and stock performance.
We have a balanced approach to incentive programs, including a mix of short- and long-term incentives and performance measures.
We have limits on incentive amounts that may be earned in the event we significantly exceed our annual financial performance objectives or experience exceptional performance relative to peer companies. We also have limits on incentive amounts that may be earned in the event we do not meet or exceed our annual financial performance objectives. Further, if certain threshold annual financial performance objectives are not met, no incentive amounts will be earned.
We have an enterprise risk management process that includes compensation, talent management and succession planning.
We have stock ownership guidelines.
We do not provide tax gross-ups for benefits unless they are provided under a policy generally applicable to all eligible employees, such as relocation.
We have a cash incentive compensation clawback policy in the event of an accounting restatement.
Our insider trading policy includes a prohibition on hedging and pledging of our common stock covering all executive officers and directors.
Our NEOs do not have severance agreements or employment contracts, and our equity acceleration in the event of a change in control is “double-trigger.”
Our compensation decisions are made with both prevalent practices and comparative performance information as background, using objectively selected smaller and larger peers where the Company is reasonably positioned in the middle of the range.
The Compensation Committee engages an independent compensation consulting firm to advise it on compensation matters, such as recommendations for potential peer companies, analyses of competitive practices for executive officers, directors and aggregate equity compensation spending.
CHANGES TO OUR COMPENSATION PROGRAMS
 
 
 
 
 
In response to stockholder feedback during fiscal 2015, the Compensation Committee approved changes to the Annual Cash Incentive Plan (ACIP) for fiscal 2016 and for performance stock units (PSUs) granted at the end of fiscal 2015. We describe


QUALCOMM Incorporated    39

Proposal 4: Advisory Vote for Approval of Our Executive Compensation

these changes in the “Compensation Program Changes to Strengthen Stockholder Alignment” section of the Proxy Overview on page 5. The changes include:
Replaced an adjusted operating income measure with an adjusted earnings per share (EPS) measure that includes share-based compensation expense. The change further encourages named executive officers to focus on (1) growing per share net income, (2) reducing our share count and (3) managing our share-based compensation expense.
Added an adjusted return on invested capital (ROIC) measure for determining 50% of PSU awards with the remaining 50% continuing to be earned based on relative total shareholder return (TSR).
Removed the interim measurement periods for determining earned PSUs and will measure performance only for the full three years for grants beginning in fiscal 2015.
REQUIRED VOTE
 
 
 
 
 
The affirmative vote of a majority of the votes cast at the Annual Meeting at which a quorum is present, either in person or by proxy, is required to approve this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have no effect on the vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have the authority to vote your shares. Abstentions and any broker non-votes will each be counted as present for purposes of determining the presence of a quorum but will not have any effect on the outcome of the proposal.
EFFECT OF THIS RESOLUTION
 
 
 
 
 
Because your vote is advisory, it will not be binding upon the Company, the Board or the Compensation Committee. However, our Board and Compensation Committee value the opinions of our stockholders, and the Compensation Committee will take into account the outcome of this vote when considering future compensation decisions.
BOARD RECOMMENDATION
 
 
 
 
 
The Board believes that the compensation of our NEOs, as described in the CD&A, compensation tables and narrative disclosures, is appropriate for the reasons discussed herein.
THE BOARD RECOMMENDS AN ADVISORY VOTE “FOR” APPROVAL OF OUR EXECUTIVE COMPENSATION.


QUALCOMM Incorporated    40

Proposal 5: Stockholder Proposal

PROPOSAL 5: STOCKHOLDER PROPOSAL
The following stockholder proposal will be voted on at the Annual Meeting if properly presented by or on behalf of the stockholder proponent.
The Company has been advised that Mr. James McRitchie, 9295 Yorkship Court, Elk Grove, California 95758, has indicated that he is a beneficial owner of at least $2,000 in market value of the Company’s common stock and intends to submit the following proposal at the Annual Meeting:
Shareholder Proxy Access
RESOLVED: Shareholders of QUALCOMM Incorporated (the "Company") ask the board of directors (the "Board") to adopt, and present for shareholder approval; a "proxy access" bylaw as follows:
Require the Company to include in proxy materials prepared for a shareholder meeting at which directors are to be elected the name, Disclosure and Statement (as defined herein) of any person nominated for election to the board by a shareholder or an unrestricted number of shareholders forming a group (the "Nominator") that meets the criteria established below.
Allow shareholders to vote on such nominee on the Company's proxy card.
The number of shareholder-nominated candidates appearing in proxy materials should not exceed one quarter of the directors then serving or two, whichever is greater. This bylaw should supplement existing rights under Company bylaws, providing that a Nominator must:
a)
have beneficially owned 3% or more of the Company's outstanding common stock, including recallable loaned stock, continuously for at least three years before submitting the nomination;
b)
give the Company, within the time period identified in its bylaws, written notice of the information required by the bylaws and any Securities and Exchange Commission (SEC) rules about (i) the nominee, including consent to being named in proxy materials and to serving as director if elected; and (ii) the Nominator, including proof it owns the required shares (the "Disclosure"); and
c)
certify that (i) it will assume liability stemming from any legal or regulatory violation arising out of the Nominator's communications with the Company shareholders, including the Disclosure and Statement; (ii) it will comply with all applicable laws and regulations if it uses soliciting material other than the Company's proxy materials; and (iii) to the best of its knowledge, the required shares were acquired in the ordinary course of business, not to change or influence control at the Company.
The Nominator may submit with the Disclosure a statement not exceeding 500 words in support of the nominee (the "Statement"). The Board should adopt procedures for promptly resolving disputes over whether notice of a nomination was timely, whether the Disclosure and Statement satisfy the bylaw and applicable federal regulations, and the priority given to multiple nominations exceeding the one-quarter limit. No additional restrictions that do not apply to other board nominees should be placed on these nominations or re-nominations.
Supporting Statement: Long-term shareholders should have a meaningful voice in nominating directors. The SEC's universal proxy access Rule 14a-11 (https://www.sec.gov/rules/final/2010/33-9136.pdf) was vacated, in part due to inadequate cost-benefit analysis. Proxy Access in the United States (http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2014.n9.1), a cost-benefit analysis by CFA Institute, found proxy access would "benefit both the markets and corporate boardrooms, with little cost or disruption," raising US market capitalization by up to $140.3 billion. Public Versus Private Provision of Governance (http://ssrn.com/abstract=2635695) found a 0.5 percent average increase in shareholder value for proxy access targeted firms.
Enhance shareholder value. Vote for Shareholder Proxy Access - Proposal 5
THE COMPANY’S STATEMENT IN OPPOSITION TO PROPOSAL 5
 
 
 
 
 
The Board recommends a vote AGAINST Proposal 5.
The Board believes that this stockholder proposal is unnecessary because our stockholders already have a meaningful and well-considered “proxy access” right. After engaging with a number of our significant stockholders and considering the


QUALCOMM Incorporated    41

Proposal 5: Stockholder Proposal

published positions of other significant stockholders regarding the desirability of a proxy access mechanism and the appropriate terms for a proxy access framework, in December 2015, the Board amended the Company’s bylaws to allow any stockholder (or group of no more than 20 stockholders) owning 3% or more of the Company’s common stock continuously for at least three years to nominate director candidates for up to 20% of our Board, and require the Company to include such nominees in our proxy statement and on the Company’s proxy card.
As we believe that our current proxy access framework is in the best interests of our stockholders, the Board recommends a vote AGAINST the stockholder proposal.
We have adopted a carefully considered proxy access framework that strikes the appropriate balance between promoting stockholder rights and adequately protecting the best interests of all of our stockholders.
Our Board carefully considered the many viewpoints on proxy access rights and recently adopted a proxy access bylaw. Many stockholders and investors have expressed their support for proxy access generally, noting their beliefs that proxy access rights would increase accountability of directors to stockholders and would give stockholders a more meaningful voice in electing directors. At the same time, however, stockholders have expressed varying points of view about the appropriate terms of a proxy access framework. The Board also considered the views of other large investors and certain governance experts who do not support proxy access, believing that the implementation of any proxy access provision could undermine the role of the Company’s independent Governance Committee, and could lead to, among other things, unnecessary expense and distraction, as well as an inexperienced, fragmented and less effective Board with directors who may pursue special interests not shared by all or most of our stockholders.
Based on the information available to the Board and the Board’s own thoughtful and thorough deliberations on the topic, the Board concluded that the best course of action for the Company and our stockholders was to adopt a proxy access bylaw with thresholds that were set based on the parameters of proxy access provisions adopted by similar companies seeking to implement meaningful proxy access rights for their stockholders, while also tailored to the Company’s particular circumstances. The Board determined that a 3% ownership threshold for at least a three-year holding period, and a nominating group of no more than 20 stockholders with the ability to nominate candidates for up to 20% of our Board, was most appropriate for the Company.
The Board believes that this stockholder proposal, which contemplates proxy access for up to one quarter of the Board and an unlimited stockholder group, does not appropriately balance the potential disruption that could be created by regular proxy contests and the corresponding turnover of a number of Board seats, together with the challenges of on-boarding and integrating these new directors, against the benefits stockholders would gain under proxy access. Based on the composition of the stockholder base and feedback from stockholders, the Board believes that limiting the size of the nominating group to no more than 20 stockholders provides stockholders with an appropriate opportunity to include nominees in the proxy statement. The Board also considered the complexities of nominations from a large number of stockholders (each potentially holding small numbers of shares) and the costs that would be associated with managing such an unwieldy process. The Board concluded that making available one-fifth of the Board seats to proxy access with a reasonable limitation on the number of stockholders that could constitute a group provides an appropriately balanced approach.
We have a strong corporate governance structure and record of accountability.
The Company’s current corporate governance structure reflects a significant and ongoing commitment to strong and effective governance practices and a willingness to be responsive and accountable to stockholders. We regularly assess and refine our corporate governance policies and procedures to take into account evolving best practices and to address feedback provided by our stockholders.
In addition to adopting a proxy access bylaw, over the last several years, we have implemented numerous other corporate governance enhancements to ensure the Board remains accountable to stockholders and to provide our stockholders with both a meaningful voice in the nomination and election of directors and the ability to engage with directors and promote the consideration of stockholder views. The following corporate governance measures are in place to safeguard our stockholders’ interests:
Each director serves a one-year term and stands for re-election at each annual meeting of stockholders.
In an uncontested election, directors must be elected by a majority vote, and a director who fails to receive the required majority of votes for re-election must tender his or her written resignation for consideration by the Board.
The Board is composed entirely of independent directors, other than the Executive Chairman and the CEO.
Standing committees of the Board are comprised only of independent directors.


QUALCOMM Incorporated    42

Proposal 5: Stockholder Proposal

We have an independent Presiding Director (elected by and from the independent members of the Board) with defined and significant responsibilities, including acting as the principal liaison between the independent directors and the Executive Chairman and the CEO, collaborating with the Executive Chairman and the CEO in developing agendas for Board meetings, and presiding during executive sessions of the independent directors.
Our stockholders are able to:
recommend director candidates to our Governance Committee, which considers such recommendations in the same manner as recommendations received from other sources (as described above in the “Corporate Governance” section under the heading “Director Nominations”);
directly nominate director candidates and solicit proxies for the election of those candidates in accordance with our bylaws and the federal securities laws;
submit proposals for inclusion in the Company’s proxy statement for consideration at an annual meeting of stockholders, subject to the rules and regulations of the SEC;
communicate directly with members of our Board, the Executive Chairman, the Presiding Director, any Board committee or our independent directors as a group (as described further in the “Corporate Governance” section under “Communications with Directors”); and
express their views on executive compensation through annual “say-on-pay” votes.
Our Board also has shown an ongoing commitment to Board refreshment and to having highly qualified, independent voices in the boardroom. In the last year, the Company reduced the size and average tenure of the Board. Through our robust director nomination and evaluation process, seven of the Company’s independent directors have been added to the Board since 2012. Importantly, several of these new directors were based on suggestions from stockholders, demonstrating that stockholders already have an effective mechanism for providing director candidates. In addition, four of our current directors, including several of our longer serving directors, are not seeking reelection at the Annual Meeting, and another longer serving director will not seek reelection at the 2017 annual meeting of stockholders.
In light of the Board’s continuing commitment to ensuring effective corporate governance, as evidenced by the adoption of a proxy access bylaw and by the other actions described above and elsewhere in this proxy statement, the Board believes that adoption of this stockholder proposal and the underlying changes to our proxy access framework that it would suggest are not necessary and could be potentially detrimental to our stockholders.
REQUIRED VOTE
 
 
 
 
 
The affirmative vote of a majority of the votes cast at the Annual Meeting at which a quorum is present, either in person or by proxy, is required to approve this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have no effect on the vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have the authority to vote your shares. Abstentions and any broker non-votes will each be counted as present for purposes of determining the presence of a quorum but will not have any effect on the outcome of the proposal.
EFFECT OF THIS RESOLUTION
 
 
 
 
 
Because your vote is advisory, it will not be binding upon the Company or the Board. However, our Board values the opinions of our stockholders, and will take into account the outcome of this vote when considering future proxy access decisions.
BOARD RECOMMENDATION
 
 
 
 
 
The Board believes that this stockholder proposal is not in the best interests of stockholders for the reasons discussed herein.
THE BOARD RECOMMENDS A VOTE “AGAINST” THIS PROPOSAL 5.


QUALCOMM Incorporated    43

Stock Ownership of Certain Beneficial Owners and Management

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of our common stock as of December 14, 2015 by: (i) each stockholder known to us to have greater than a 5% ownership interest (based solely on our review of Schedules 13D and 13G Form 13F, filed with the SEC); (ii) each of our executive officers named in the Fiscal 2015 Summary Compensation Table under “Executive Compensation and Related Information” (the Named Executive Officers or NEOs); (iii) each current director and nominee for director; and (iv) all of our executive officers and directors as a group.
  
Amount and Nature of
Beneficial Ownership (1)
Name of Beneficial Owner
Number of
Shares
Percent of   
Class   
BlackRock, Inc.
106,042,068

7.10%
55 East 52nd Street
 
 
New York, NY 10055 (2)
 
 
Vanguard Group Inc.
101,772,524

6.81%
P.O. Box 2600, V26
 
 
Valley Forge, PA 19482-2600 (3)
 
 
Steve Mollenkopf (4)
278,881

*
George S. Davis (5)
64,363

*
Derek K. Aberle (6)
169,393

*
Cristiano R. Amon (7)
81,135

*
Paul E. Jacobs (8)
1,772,594

*
Barbara T. Alexander (9)
46,144

*
Donald G. Cruickshank (10)
69,225

*
Raymond V. Dittamore (11)
81,531

*
Jeffrey W. Henderson (12)

*
Susan Hockfield (13)
2,227

*
Thomas W. Horton (14)
14,591

*
Sherry Lansing (15)
41,384

*
Harish Manwani (16)

*
Mark D. McLaughlin (17)
5,650

*
Clark T. Randt, Jr. (18)
748

*
Francisco Ros (19)
4,847

*
Jonathan J. Rubinstein (20)
797

*
Marc I. Stern (21)
389,617

*
Anthony J. Vinciquerra (22)
1,567

*
All Executive Officers and Directors as a Group (23 persons) (23)
3,640,245

*
*
Less than 1%
(1)
The information for officers and directors in this table is based upon information supplied by those officers and directors. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 1,494,451,232 shares outstanding on December 14, 2015, adjusted as required by rules promulgated by the SEC.
(2)
This information is as of December 31, 2014 and based on the Schedule 13G/A filed with the SEC by BlackRock, Inc. on January 30, 2015.
(3)
This information is as of December 31, 2014 and based on the Schedule 13G filed with the SEC by Vanguard Group Inc. on February 10, 2015.


QUALCOMM Incorporated    44

Stock Ownership of Certain Beneficial Owners and Management

(4)
Includes 192,716 shares held in family trusts and 86,165 restricted stock units and related dividend equivalents that will vest within 60 days.
(5)
Includes 64,363 shares held in family trusts.
(6)
Includes 101,051 shares issuable upon exercise of options exercisable within 60 days.
(7)
Includes 80,125 shares issuable upon exercise of options exercisable within 60 days.
(8)
Includes 1,135,468 shares held in family trusts, 534 shares held by an individual sharing Dr. Jacobs’s household, 397 shares held by his former spouse, 2,200 shares owned by The Paul and Stacy Jacobs Foundation and 218,039 shares held for the benefit of his children. Also includes 415,956 shares issuable upon exercise of options exercisable within 60 days, of which all shares are held in trusts for the benefit of his children. Dr. Jacobs disclaims all beneficial ownership for the shares held in trust for the benefit of his children and his former spouse.
(9)
Includes 23,929 shares held in family trusts, 22,000 shares issuable upon exercise of options exercisable within 60 days and 215 fully vested deferred stock units and related dividend equivalents to be released within 60 days. Excludes 7,951 fully vested deferred stock units and dividend equivalents that settle three years after the date of grant.
(10)
Includes -9,225 shares held in a pension plan pursuant to which Sir Donald Cruickshank has voting rights or discretion over the holdings in the plan. Also includes 60,000 shares issuable upon exercise of options exercisable within 60 days.
(11)
Includes 25,400 shares held in family trusts and 3,131 held jointly with his spouse. Also includes 53,000 shares issuable upon exercise of options exercisable within 60 days. Excludes 10,872 fully vested deferred stock units and dividend equivalents that settle on December 31, 2020 and 5,879 fully vested deferred stock units and dividend equivalents shares that settle three years after the date of grant.
(12)
Mr. Henderson joined the Board on January 12, 2016.
(13)
Includes 2,227 shares held in a living trust. Excludes 5,879 fully vested deferred stock units and dividend equivalents that settle three years after the date of grant.
(14)
Includes 12,091 shares held jointly with Mr. Horton’s spouse and 2,500 shares issuable upon exercise of options exercisable within 60 days. Excludes 5,879 fully vested deferred stock units and dividend equivalents that settle three years after the date of grant.
(15)
Includes 14,629 shares held in family trusts and 26,755 shares issuable upon exercise of options exercisable within 60 days. Excludes 5,879 fully vested deferred stock units and dividend equivalents that settle three years after the date of grant.
(16)
Excludes 1,975 fully vested deferred stock units and dividend equivalents that settle three years after the date of grant.
(17)
Includes 5,650 shares held in family trusts.
(18)
Includes 748 shares held jointly with Mr. Randt’s spouse. Excludes 2,745 fully vested deferred stock units and dividend equivalents that settle on March 4, 2020.
(19)
Excludes 5,879 fully vested deferred stock units and dividend equivalents that settle three years after the date of grant.
(20)
Includes 797 shares held in family trusts. Excludes 2,745 fully vested deferred stock units and dividend equivalents that settle on March 4, 2019 and 2,492 fully vested deferred stock units and dividend equivalents that settle three years after the date of grant.
(21)
Includes 295,437 shares owned through a grantor trust and 34,180 shares owned by The Marc and Eva Stern Foundation (the Foundation), of which Mr. Stern is the trustee. Mr. Stern disclaims all beneficial ownership for the shares owned by the Foundation. Also includes 60,000 shares issuable upon exercise of options exercisable within 60 days. Excludes 18,554 fully vested deferred stock units and dividend equivalents that settle upon retirement from the Board.
(22)
Includes 1,567 shares held in family trusts. Excludes 318 fully vested deferred stock units and dividend equivalents that settle on January 1, 2019.
(23)
Includes 1,309,712 shares issuable upon exercise of options exercisable within 60 days. Also includes 86,380 fully vested restricted stock units, deferred stock units and dividend equivalents to be released within 60 days for all directors and executive officers as a group. Excludes 77,044 fully vested deferred stock units and related dividend equivalents.


QUALCOMM Incorporated    45

Stock Ownership of Certain Beneficial Owners and Management

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
 
 
 
 
Section 16(a) of the Securities Exchange Act requires our directors, executive officers and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater-than-10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, all Section 16(a) filing requirements were complied with during fiscal 2015, except for a late Form 4 that was filed in December 2014 to report a grant of Restricted Stock Units to Mr. John Murphy, Senior Vice President and Chief Accounting Officer.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS
 
 
 
 
 
None of the members of our Compensation Committee are, or have been, employees or officers of the Company. During fiscal 2015, no member of the Compensation Committee had any relationship with us requiring disclosure under Item 404 of Regulation S-K. During fiscal 2015, none of our executive officers served on the compensation committee (or equivalent) or board of another entity whose executive officer(s) served on our Compensation Committee or Board.


QUALCOMM Incorporated    46

Certain Relationships and Related-Person Transactions

CERTAIN RELATIONSHIPS AND RELATED-PERSON TRANSACTIONS
Our Code of Ethics states that our executive officers and directors, including their immediate family members, are charged with avoiding situations in which their personal, family or financial interests conflict with those of the Company. Our Conflicts of Interest and Outside Activities policy provides additional rules regarding the employment of relatives. In accordance with its charter, the Audit Committee is responsible for reviewing and approving transactions between the Company and any directors or executive officers or any of such person’s immediate family members or affiliates, which would be reportable as a related-person transaction under SEC rules. The Audit Committee’s charter also provides that the Audit Committee may delegate review and approval of employment-related, related-person transactions to the Compensation Committee. In considering the proposed arrangement, the Audit Committee or Compensation Committee, as appropriate, will consider the relevant facts and circumstances and the potential for conflicts of interest or improprieties.
During fiscal 2015, we employed the family members of certain of our directors and executive officers. The Audit Committee delegated to the Compensation Committee the review and approval of such related-person transactions, and the Compensation Committee approved the related-person transactions below.
Those employees whose compensation (salary, cash incentives and grant date fair value of equity awards) exceeded $120,000 are discussed below, all of whom were adults who did not live with the related director or executive officer, except as otherwise described below. Each family member is compensated according to our standard practices, including participation in our employee benefit plans generally made available to employees of a similar responsibility level. We do not view any of the directors or executive officers as having a beneficial interest in the compensation of family members described below that is material to them or the Company. Restricted stock units were granted under our 2006 Long-Term Incentive Plan and generally vest over three years from the grant date, contingent upon continued service with the Company.
Duane A. Nelles’s son, Duane A. Nelles III, serves as Vice President, QCT Corporate Development, Qualcomm Technologies, Inc. During fiscal 2015, Duane A. Nelles III earned $292,877 in base salary and $133,500 in cash incentives and received restricted stock unit grants totaling 8,733 shares with an aggregate grant date fair value of $604,581. Duane A. Nelles retired from the Board in July 2015.
Duane A. Nelles’s son, Paul S. Nelles, serves as a Senior Program Manager, Qualcomm Technologies, Inc. During fiscal 2015, Paul S. Nelles earned $132,213 in base salary and $14,665 in cash incentives and received restricted stock unit grants totaling 637 shares with an aggregate grant date fair value of $44,036.
Cristiano Amon’s brother, Rogerio Amon, serves as a Senior Director, Program Management, Qualcomm Technologies, Inc. During fiscal 2015, Rogerio Amon earned $118,189 in base salary and $43,820 in cash incentives and received restricted stock unit grants totaling 1,700 shares with an aggregate grant date fair value of $117,593.
Steve Mollenkopf’s brother, James D. Mollenkopf, serves as a Senior Director, Strategic Development, Qualcomm Technologies, Inc. During fiscal 2015, James D. Mollenkopf earned $232,998 in base salary and $64,660 in cash incentives and received restricted stock unit grants totaling 3,180 shares with an aggregate grant date fair value of $220,067.
Donald J. Rosenberg’s son-in-law, Dr. Lucian Iancovici, serves as a Manager, Ventures, Qualcomm Technologies, Inc. During fiscal 2015, Dr. Lucian Iancovici earned $171,822 in base salary and $61,710 in cash incentives and received restricted stock unit grants totaling 421 shares with an aggregate grant date fair value of $29,070.
Michelle M. Sterling shares her household with Mark E. Palamar, who serves as a Senior Director, IP Licensing Analysis. During fiscal 2015, Mark E. Palamar earned $215,960 in base salary and $51,010 in cash incentives and received restricted stock unit grants totaling 2,417 shares with an aggregate grant date fair value of $167,449.
Daniel L. Sullivan’s daughter, Megan Delgado, serves as Staff Manager, Marketing, Qualcomm Incorporated. Megan Delgado earned $146,809 in base salary and $17,435 in cash incentives and received restricted stock unit grants totaling 899 shares with an aggregate grant date fair value of $62,129. Daniel L. Sullivan stepped down from his role as Executive Vice President, Human Resources in April 2015 and assumed the role of Executive Vice President and Senior Advisor. He retired from the Company in January 2016.


QUALCOMM Incorporated    47

Compensation Committee Report

COMPENSATION COMMITTEE REPORT
The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis (CD&A) with management. Based on this review and discussion, the Compensation Committee recommended to the Board that the CD&A be included in our 2016 Proxy Statement.
COMPENSATION COMMITTEE

Marc I. Stern, Chair
Sherry Lansing
Jonathan J. Rubinstein


QUALCOMM Incorporated    48

Compensation Discussion & Analysis

EXECUTIVE COMPENSATION AND RELATED INFORMATION
COMPENSATION DISCUSSION & ANALYSIS
This section of the proxy statement explains how the Compensation Committee of the Board of Directors oversees our executive compensation programs and discusses the compensation earned by our named executive officers (NEOs), as presented in the tables below under “Compensation Tables and Narrative Disclosures.”
This Compensation Discussion and Analysis is composed of six sections:
 
Page
Our Named Executive Officers (NEOs) for Fiscal 2015
50
Compensation Components
51
The Amounts and Mix of NEO Compensation for Fiscal 2015
53
Process and Rationale for NEO Compensation Decisions
61
Performance Measures
65
Detailed compensation tables that quantify and further explain our NEOs’ compensation follow this Compensation Discussion and Analysis.


QUALCOMM Incorporated    49

Compensation Discussion & Analysis

OUR NAMED EXECUTIVE OFFICERS (NEOs) FOR FISCAL 2015
 
 
 
 
 
Our NEOs for fiscal 2015 were as follows:
Steve Mollenkopf
 
 
 
Current position
  Chief Executive Officer (CEO), since March 2014
Prior Qualcomm positions include:
CEO-Elect and President, 2013 - 2014
President and Chief Operating Officer, 2011 - 2013
21 years of service with Qualcomm
 
 
 
George S. Davis
 
 
 
Current position
Executive Vice President and Chief Financial Officer (CFO), since March 2013
3 years of service with Qualcomm
 
 
 
Derek K. Aberle
 
 
 
Current position
President, since March 2014
Prior Qualcomm positions include:
Executive Vice President and Group President, 2011 - 2014
Executive Vice President and President, QTL, 2008 - 2011
15 years of service with Qualcomm
 
 
 
Cristiano R. Amon
 
 
 
Current position
Executive Vice President, Qualcomm Technologies, Inc. and President QCT since November 2015
Prior Qualcomm positions include:
Executive Vice President, Qualcomm Technologies, Inc. and Co-President QCT from October 2012 to November 2015 Senior Vice President and Co-President, 2012
Senior Vice President, Product Management, 2007 - 2012
18 years of service with Qualcomm
 
 
 
 
Paul E. Jacobs
 
 
 
Current position
 Executive Chairman and Chairman of the Board, since March 2014
Prior Qualcomm positions include:
Chairman of the Board and CEO, 2009 - 2014
 CEO, 2005 - 2009
25 years of service with Qualcomm



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Compensation Discussion & Analysis

COMPENSATION COMPONENTS
 
 
 
 
 
Figure 3 is an overview of the primary components of total direct compensation (TDC) for fiscal 2015 that include base salary, earnings under the Annual Cash Incentive Plan (ACIP), Performance Stock Units (PSUs) and Restricted Stock Units (RSUs). It also highlights how each component aligns with the objectives of our compensation program. In structuring our cash and long-term equity incentive award programs, we continue to use variations of non-GAAP performance measures as financial objectives. (See page 65 for definitions of the various performance measures used in determining our cash and long-term equity incentives.)
Figure 3: Fiscal 2015 TDC Overview
 
Salary
ACIP
Performance Stock Units
Restricted Stock Units
Key Features
 
 
 
(Not granted in fiscal 2015)
Form
Cash
Cash
Equity
Equity
Type
Fixed Compensation
Variable Compensation
Performance Period
● Set at the beginning of fiscal 2015
● Earned for fiscal 2015
● Set at the beginning of fiscal 2015
● Earned for performance in fiscal 2015
● Awarded at the end of fiscal 2015
● To be earned for performance in fiscal 2016 - 2018
● A portion of the fiscal 2014 award replaced the grant that would otherwise have been made in fiscal 2015
Measures and relative weightings
● Individual performance, experience, expertise, skills, competitive practices and internal comparisons
● Adjusted Revenues performance (weighted 40%)
● Adjusted Operating Income performance (weighted 60%)
● Relative total shareholder return (TSR) compared to NASDAQ-100 (50% of total PSU awards) (RTSR PSUs)
● Average annual Adjusted Return On Invested Capital (ROIC) (50% of total PSU awards) (ROIC PSUs)
● Award vests based on continued service
Objectives
 
 
 
 
Align interests of NEOs and stockholders
● Competitive amounts that attract and retain executives who execute the business strategy
● Aligns approximately 9% of NEOs’ aggregate TDC to achieving Company’s annual financial objectives
● Aligns approximately 86% of NEOs’ aggregate TDC to long-term absolute and relative TSR performance and efficient use of capital for the fiscal 2016 - 2018 performance period
Pay for performance - amounts earned vary with performance
● Individual contributions are considered when adjusting salary amounts
● Payouts vary from 0 (performance at or below 80% of objective) to 2x target (performance at or above 125% of objective)
● Funding rate for fiscal 2015 was 0.48x of target award for performance at 90% of objective
● Earned shares vary from 0 to 2x of target award, depending on relative stock price performance and achieving ROIC objective
● Earned shares for both awards capped at target if absolute TSR is negative
● Fair value of award varies depending on stock price performance
Tax efficient for the Company
● Deductible except for portion of CFO’s salary in excess of $1 million, if any
● Designed with intent to comply with the requirements for tax deductibility under Internal Revenue Code Section 162(m)
Internally fair and equitable
● The Compensation Committee considers business and individual factors to evaluate internal fairness and equitability and monitors the internal compensation relationships among the NEOs but does not set specific internal relationships.
Competitive for the business
● Competitive levels to attract, motivate, engage and retain executives. The Compensation Committee considers competitive practices of peer companies as reference points for comparative purposes but does not set specific benchmark percentile objectives.
High standards for governance and risk management
● The Compensation Committee reviews annually the amounts of all components of compensation and obtains industry and peer data in consultation with Frederic W. Cook Co., Inc. (FWC), the Compensation Committee’s independent consultant.
 
● Cash incentive compensation repayment (“clawback”) policy
 
● The Executive Chairman must hold net after-tax shares from the front-loaded RSUs for one year after termination of service.



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Compensation Discussion & Analysis

In addition to TDC, we have competitive health and welfare benefits that are generally structured the same for all U.S. employees, plus several other benefits. Figure 4 describes the other benefits that are generally available to U.S.-based executives, and Figure 5 describes the other benefits that are generally available to all U.S.-based employees, including executives.
Figure 4: U.S. Executive Benefits
Component
Form and Purpose
Comment
Nonqualified deferred compensation program Company match (NQDC Plan)
Company match on employees’ deferred contributions up to a predefined formula maximum amount
Provide a competitive, nonqualified, tax-efficient defined contribution retirement program for employees deemed to be “highly compensated”
We do not have a pension plan or other defined benefit retirement program. See the “Fiscal 2015 Nonqualified Deferred Compensation” table for a description of the Company match program.
Financial planning reimbursement
Reimbursement of actual expenses incurred for financial, estate and tax planning
Attract and retain executive-level employees
Assist NEOs with managing their time
We reimburse up to $12,500 for the Executive Chairman, the CEO and the President and up to $8,000 for the other NEOs.
Additional life insurance
Additional coverage, above the amount provided to all employees
Attract and retain executive-level employees
The additional coverage is $1 million for the Executive Chairman and the CEO and $750,000 for the other NEOs.
Use of corporate aircraft for personal travel
Facilitate flexible travel arrangements and provide security
We have a program that limits the amount of compensation reported in the Summary Compensation Table to $250,000 for the CEO and $650,000 for all NEOs in the aggregate.
Figure 5: U.S. All-Employee Benefits
Component
Form and Purpose
Comment
Tax qualified deferred compensation
401(k) Plan
Provide a tax-efficient retirement savings opportunity
Attract and retain employees
The 401(k) Plan is a tax-qualified deferred compensation plan. We match employee contributions in cash using a tiered structure in order to encourage participation among all employees.
Employee Stock Purchase Plan (ESPP)
Qualcomm stock
Encourage stock ownership and align employee and stockholder interests
Attract and retain employees
The ESPP is a tax-qualified plan available to all U.S.-based employees. Purchases through payroll deductions are limited to $12,500 in fair market value (FMV) of the stock per 6-month offering period (determined on the first day of each offering period). The purchase price is equal to 85% of the lower of: (1) the FMV on the first day of the offering period or (2) the FMV on the last day of the offering period.
Charitable contribution match
Matching cash paid to the charitable organization
Encourage and extend employees’ support of cultural, educational and community non-profit organizations
We match 100% of employee contributions, up to pre-defined maximum amounts, to qualified tax-exempt non-profit organizations, excluding organizations that further religious doctrine, exclusionary organizations and/or political non-profit organizations. The maximum annual amount we will match is based on the employee’s job level. We will match up to $125,000 for the Executive Chairman, the CEO and the President and up to $100,000 annually for the other NEOs.


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Compensation Discussion & Analysis

In addition to the programs identified above, we offer supplemental dental and vision programs that provide limited coverage above the basic dental and vision plans to senior-level, U.S.-based employees. The purpose of this program is to attract and retain experienced talent.
THE AMOUNTS AND MIX OF NEO COMPENSATION FOR FISCAL 2015
 
 
 
 
 
Performance-Based Incentives
Figure 6 is an overview of Mr. Mollenkopf’s target TDC, and Figure 7 is a similar overview of the aggregate target TDC for our other NEOs. Target TDC includes base salary, the ACIP target award that would be paid for 100% achievement of our financial objectives, target PSUs awarded on September 25, 2015 and the annualized value of the front-loaded RSUs awarded in fiscal 2014 (see the discussion under “RSU Awards for Fiscal 2015” for further explanation). Figure 6 shows that approximately 94% of Mr. Mollenkopf’s fiscal 2015 target TDC was attributable to performance-based incentive compensation that varies with financial metrics, including relative and absolute TSR and ROIC.
Figure 6: CEO Compensation Mix


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Compensation Discussion & Analysis

Figure 7: Other NEOs’ Aggregate Compensation Mix
Fiscal 2015 Salaries
In September 2014, the Compensation Committee approved the fiscal 2015 salaries for our NEOs (see Figure 8). These increases positioned their salaries within 5% of the median of our peer companies, excluding Dr. Jacobs’s salary, which is $1 annually and precludes meaningful comparison. Prior to the increases, Mr. Mollenkopf’s salary was slightly below the competitive median, and Mr. Aberle’s salary was aligned with the competitive median. Prior to their increases, Messrs. Davis’s and Amon’s salaries were at least 10% below the competitive median, and the increases positioned their salaries approximately 5% below the competitive medians.
Figure 8: Fiscal 2015 Salaries for the CEO and Other NEOs
 
Base Salary
Name
2014
($)
2015
($)
Increase
%
Steve Mollenkopf
1,100,000

1,130,000

2.7%
George S. Davis
725,000

760,000

4.8%
Derek K. Aberle
780,000

800,000

2.6%
Cristiano R. Amon
475,000

525,000

10.5%
Paul E. Jacobs
1

1

—%
Total
3,080,001

3,215,001

4.4%
Fiscal 2015 ACIP Earnings
In Fiscal 2015, we achieved 90% of our weighted financial performance objectives, and our NEOs earned 45% of their aggregate target amounts.
Figure 9 shows the objectives and performance levels for Adjusted Revenues and Adjusted Operating income, which were the measures that the Compensation Committee established during the first quarter of fiscal 2015 for determining earned ACIP awards. The fiscal 2015 weighted financial performance was 90% of our objectives, resulting in an ACIP funding rate of


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Compensation Discussion & Analysis

0.48 (compared to a funding rate of 1.0 had we achieved our financial objectives). See page 65 for definitions of the various performance measures used in determining our cash incentives.
Figure 9: Fiscal 2015 ACIP Financial Objectives and Performance
The funding rate was determined through the following steps:
Adjusted Revenues performance was 90% of the objective and Adjusted Operating Income performance was 88% of the objective. Consistent with the ACIP, we applied a relative weighting of 40% to Adjusted Revenues and 60% to Adjusted Operating Income to emphasize the relative importance of operating income to stockholder value creation. Accordingly, our weighted financial performance was 89% [(90% x 40%) + (89% x 60%)].
The funding rate is based on the weighted financial performance, such that:
For each one percent that the weighted financial performance exceeds the objective, the funding rate increases by 0.04 from the target funding rate of 1.00 up to a maximum of 2.00.
For each one percent that the weighted financial performance falls short of the objective, the funding rate decreases by 0.05 from the target funding rate of 1.00, which would reach zero for weighted financial performance at or below 80% of the objective.
Our fiscal 2015 weighted financial performance was 89%, or 11 percent short of the objective, resulting in a 0.52 reduction from the target funding rate of 1.00. Accordingly, the fiscal 2015 ACIP funding rate was 0.48 (1.00 - 0.52).
In addition to the funding rate determined by fiscal 2015 Adjusted Revenues and Adjusted Operating income, the Compensation Committee considered other strategic and operational achievements by the NEOs. Some examples of these achievements include resolution with China’s National Development and Reform Commission (NDRC), execution of the initial phase of the Company’s plan to reduce operating expenses and numerous business acquisition and strategic investment


QUALCOMM Incorporated    55

Compensation Discussion & Analysis

transactions, including the acquisition of CSR plc. To maximize tax deductibility, amounts earned under the ACIP are designed to qualify as performance-based compensation under Section 162(m). This design provides that if certain financial objectives are met, the NEOs may receive up to 2x of their target amounts, subject to the Compensation Committee’s negative discretion to pay any amount less than that maximum.
Figure 10 shows the calculations for determining the fiscal 2015 performance-adjusted amounts and earned amounts for each NEO.
Figure 10: Fiscal 2015 ACIP Target, Performance-Adjusted and Earned Amounts
Name
 
ACIP Target
($)
x
Funding Rate
=
Performance-Adjusted Amount
($)
 
Earned Amount Awarded by Compensation Committee
($)
 
Variance of Earned Amount vs Performance-Adjusted Amount
(%)
Steve Mollenkopf
 
2,260,000

 
0.48
 
1,084,800

 
1,025,000
 
-6%
George S. Davis
 
988,000

 
0.48
 
474,240

 
400,000
 
-16%
Derek K. Aberle
 
1,080,000

 
0.48
 
518,400

 
520,000
 
0%
Cristiano R. Amon
 
525,000

 
0.48
 
252,000

 
320,000
 
27%
Paul E. Jacobs
 

 
n/a
 

 
n/a
 
n/a
Total
 
4,853,000

 
 
 
2,329,440

 
2,265,000
 
-3%
The Compensation Committee was authorized under the fiscal 2015 ACIP to modify Adjusted Revenues and Adjusted Operating Income in calculating financial performance on which fiscal 2015 cash incentives were determined. Modifications are intended to eliminate the distorting effect of certain unusual income or expense items if the Compensation Committee determines, in its discretion, that the items do not reflect a fair measurement of our operating performance. The Committee did not make any such modifications for fiscal 2015.
Fiscal 2015 ACIP Compared to Previous Years
Figure 11 summarizes ACIP performance for fiscal years 2013 - 2015 and illustrates the alignment of Company financial performance and ACIP earnings. (See page 65 for definitions of the various performance measures as those terms were used in calculating ACIP amounts.)
In fiscal 2013, the Company exceeded the Adjusted Revenues and Adjusted Operating Income objectives by 5% and 3%, respectively, resulting in an ACIP funding rate of 1.16 (16% above the target amount).
In fiscal 2014, the Company fell short of the Adjusted Revenues and Adjusted Operating Income objectives, resulting in an ACIP funding rate of 0.71 (29% below the target amount).
In fiscal 2015, the Company fell short of the Adjusted Revenues and Adjusted Operating Income objectives, resulting in an ACIP funding rate of 0.48 (52% below the target amount).


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Compensation Discussion & Analysis

Figure 11: ACIP Financial Objectives and Performance
Fiscal 2016 Changes to the ACIP
Based on stockholder input and the Compensation Committee’s own review, the Compensation Committee changed the ACIP metrics for fiscal 2016 by replacing the Adjusted Operating Income measure used in fiscal 2015 with the new Adjusted Earnings Per Share (EPS) measure that includes share-based compensation expense and excludes certain items to the extent that they were not anticipated in establishing the ACIP target. (See page 65 for the definitions of performance measures used in calculating ACIP amounts.)
Fiscal 2015 Long-Term Incentives
In fiscal 2015, all equity granted to the NEOs was in the form of PSUs, and the potential number of shares of our common stock that may be earned at the end of the three-year performance period varies from 0 to 2x of the target amount. The Compensation Committee determines in its sole discretion the appropriate mix of equity awards, the target values of these awards, the achievement of the performance measures and the potential maximum number of equity awards that may be earned. The Compensation Committee approved PSU awards for each NEO in fiscal 2015, taking into consideration the annualized value of front-loaded RSUs it awarded to the NEOs in fiscal 2014. (See further discussion on page 59 under “Annualized Portion of Fiscal 2014 Front-Loaded RSU Awards Attributable to Fiscal 2015.”) The Compensation Committee approved two separate PSU awards for each NEO as described below.
Relative TSR PSUs (RTSR PSUs)
The RTSR PSU award allows the NEOs to earn a variable number of shares of our common stock based on the relative performance of our total shareholder return (TSR) compared to that of the companies comprising the NASDAQ-100. The


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Compensation Discussion & Analysis

NEOs must also satisfy time-based service requirements. The Compensation Committee selected relative TSR because it aligns directly with stockholder value creation.
Relative TSR compares our TSR percentile rank among the companies comprising the NASDAQ-100 over a three-year period according to the payout schedule set forth in Figure 12.
Figure 12: RTSR PSUs Payout Schedule
Award Level
Qualcomm’s TSR Percentile Rank Among the NASDAQ-100
Multiple of Target RTSR PSUs Earned
(1)
Maximum Award Level
90th percentile and above
2x
Target Award Level
60th percentile
1x
Threshold Award Level
33rd percentile
0.33x
Below Threshold
Below 33rd percentile
No shares would be earned
(1)
The multiple of target RTSR PSUs earned between the award levels interpolates linearly with our TSR percentile ranking.
The RTSR PSUs also provide that the total number of shares earned may not exceed the target number of shares if our absolute TSR for the entire three-year performance period is negative. This provision considers stockholder’s interests by limiting the number of shares that may be earned in the event relative TSR performance is strong despite a declining stock price.
Return On Invested Capital PSUs (ROIC PSUs)
The Compensation Committee introduced Adjusted ROIC PSUs to tie a portion of our NEOs’ awards to efficient use of capital. The ROIC PSU awards allow the NEOs to earn a variable number of shares of our common stock based on the achievement of a three-year ROIC objective established by the Compensation Committee at the time of grant in September 2015. Eligible participants must also satisfy time-based service requirements.
ROIC is a common financial term, and there are numerous methods for calculating ROIC. We calculate our Adjusted ROIC by averaging over the three-year performance period (a) Adjusted After-Tax Operating Income divided by (b) the sum of average Adjusted Debt and average Adjusted Equity for the relevant year. (See page 65 for the definitions of performance measures to be used in determining the number of PSUs for the 2016 - 2018 performance period.) The payout schedule is set forth in Figure 13.
Figure 13: ROIC PSU Payout Schedule
Award Level
Average Annual ROIC
for Fiscal 2016 - 2018
Multiple of Target ROIC PSUs Earned
(1)
Maximum Award Level
ROIC is at or above 120% of Target
2x
Target Award Level
ROIC is at Target
1x
Threshold Award Level
ROIC is 80% of Target
0.33x
Below Threshold
ROIC is less than 80% of Target
No shares would be earned
(1)
The multiple of target ROIC PSUs earned between the award levels interpolates linearly with our average annual Adjusted ROIC.
The ROIC PSUs also provide that the total number of shares earned may not exceed the target number of shares if our average annual Adjusted ROIC for the entire three-year performance period is negative.
Figure 14 shows the grant date fair values of the PSUs the Compensation Committee awarded to the NEOs on September 25, 2015.


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Compensation Discussion & Analysis

Figure 14: Grant Date Fair Values of PSUs Awarded to NEOs in Fiscal 2015
 
Grant Date Fair Value
Name
RTSR PSUs
($)
ROIC PSUs
($)
Aggregate PSU Awards
($)
Steve Mollenkopf
4,000,019
4,000,015
8,000,034
George S. Davis
1,350,014
1,350,032
2,700,046
Derek K. Aberle
1,890,052
1,890,002
3,780,054
Cristiano Amon
1,810,048
1,810,012
3,620,060
Paul E. Jacobs
4,500,028
4,500,017
9,000,045
Total
13,550,161
13,550,078
27,100,239
Annualized Portion of Fiscal 2014 Front-Loaded RSU Awards Attributable to Fiscal 2015
In fiscal 2014, we granted front-loaded RSUs, which accelerated future years’ RSU grant values into fiscal 2014, to encourage retention without making above-market grants and increasing related costs and dilution over time. Since we attributed a portion of the front-loaded RSUs granted in fiscal 2014 to fiscal 2015, the Compensation Committee considered the annualized value of the fiscal 2014 RSU grants in determining fiscal 2015 total equity grant values (i.e., the Compensation Committee reduced the total equity value that they would have otherwise granted to the NEOs in fiscal 2015 by the amount of the RSUs granted in fiscal 2014 which were attributable to fiscal 2015). There will be similar annual offsets for Messrs. Mollenkopf and Aberle and Dr. Jacobs through fiscal 2018 as their RSUs were front-loaded for five years. The RSUs granted to Messrs. Davis and Amon were front-loaded for three years and consequently will have annual offsets through 2016. The structure of the fiscal 2014 awards is summarized below in Figure 15 for clarity on this point.
Figure 15: Fiscal 2014 Front-Loaded NEO RSU Grants
Name
Grant Date Fair Value
($ millions)
Periods Covered By Grant Value
Vesting
Steve Mollenkopf
30.0

 
Fiscal 2014 through 2018
Five equal annual installments
George S. Davis
6.9

 
Fiscal 2014 through 2016
Five equal annual installments
Derek K. Aberle
16.1

 
Fiscal 2014 through 2018
Five equal annual installments
Cristiano R. Amon
4.1

 
Fiscal 2014 through 2016
Five equal annual installments
Paul E. Jacobs
45.0

 
Fiscal 2014 through 2018
Three equal installments on the 3rd, 4th and 5th anniversaries of the grant date
With respect to Messrs. Mollenkopf and Aberle and Dr. Jacobs, one-fifth of the fiscal 2014 RSUs are treated as attributable to fiscal 2015. With respect to Messrs. Davis and Amon, one-third of the fiscal 2014 RSUs are treated as attributable to fiscal 2015.
PSU Performance in Previous Years
The number of shares of our common stock earned by the NEOs has varied based on the relative performance of our TSR compared to that of the NASDAQ-100 during applicable measurement periods. The Compensation Committee has awarded RTSR PSUs to our NEOs and other executive officers annually since fiscal 2010. The four performance periods for RTSR PSUs granted in fiscal 2010, 2011, 2012 and 2013 have been completed, the number of shares of our common stock earned for each of these four performance periods have been determined, and the shares have been issued to the recipients.
Figure 16 summarizes the TSRs for Qualcomm relative to the NASDAQ-100 and the percent of target shares earned for our relative TSR performance.
Our TSR out-performed the NASDAQ-100 TSR for one of the four performance periods and under-performed for the other three performance periods. The RTSR PSUs earned as a percent of the target shares were aligned with our relative performance.
Our relative TSR for the fiscal 2010 RTSR PSU awards (for the three-year performance period from 11/2/2009 - 10/31/2012) underperformed the NASDAQ-100 TSR, resulting in a payout of 98% of the target shares.


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Compensation Discussion & Analysis

Our relative TSR for the fiscal 2011 RTSR PSU awards (for the three-year performance period from 11/1/2010 - 10/31/2013) out-performed the NASDAQ-100 TSR, resulting in a payout of 119% of the target shares.
Our relative TSR for the fiscal 2012 RTSR PSU awards (for the three-year performance period from 9/26/2011 - 9/26/2014) underperformed the NASDAQ-100 TSR, resulting in a payout of 88% of the target shares.
Our relative TSR for the fiscal 2013 RTSR PSU awards (for the two-year performance period from 9/30/2013 - 9/27/2015) was below the 33rd percentile threshold compared to the NASDAQ-100, and as a result, no shares were earned or issued.
Figure 16: Qualcomm and NASDAQ-100 3-Year Total Shareholder Returns for PSUs Granted in Fiscal 2010 - 2013 (1)
(1)
We are providing information on PSUs granted prior to fiscal 2015 to illustrate the historical performance of PSUs and the strong relationship between the percent of target PSUs earned and our TSR relative to the NASDAQ-100.


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Compensation Discussion & Analysis

PROCESS AND RATIONALE FOR NEO COMPENSATION DECISIONS
 
 
 
 
 
We consider several factors in determining the compensation levels of our NEOs. The Compensation Committee does not have a predefined framework that determines which of these factors may be more or less important, and the emphasis placed on specific factors may vary among the NEOs. Ultimately, it is the Compensation Committee’s judgment about these factors that forms the basis for determining our NEOs’ compensation.
We review the compensation practices of other companies with which we compete.
The Compensation Committee identified peer companies to use for competitive analyses, taking into account recommendations made by FWC, the Compensation Committee’s independent compensation consultants. The peer companies were identified based on the following characteristics:
Technology, telecommunications and media companies (excluding those that are primarily content producers) based on Global Industry Classification Standard (GICS) codes;
Companies of comparable size, with both market capitalization and revenues between 0.25x to 4.0x Qualcomm’s size;
We believe that market capitalization is appropriate as the primary quantitative criterion because:
Market capitalization, a key component of which is stock price, is the key driver of equity compensation grant value, and equity compensation grant value is the single largest component of CEO compensation among technology companies with large market capitalizations;
Market capitalization is directly related to stockholder benefit; and
A significant portion of our business is technology licensing, which is a high-margin business, and as such, Qualcomm typically has higher market capitalization and profit than companies with similar revenues.
We also include revenues as a secondary quantitative criterion because revenues are commonly used as a selection criterion by our peer companies, third-party compensation survey providers and proxy advisory services.
Comparable compensation model;
Consistent and on-going data availability; and
Peers of peers, which are the peer companies often disclosed by our peer companies.
Figure 17 identifies the peer companies the Compensation Committee selected in May 2015. The peer companies and Qualcomm are ranked, high-to-low, on revenues, net income, EBITDA, EBITDA margin and market capitalization. Compared to the prior year’s peer group, the Compensation Committee removed Yahoo!, which fell below the revenue threshold. The Compensation Committee added Micron Technology and Visa, both prominent technology companies that fit the criteria. Broadcom’s market capitalization was below the threshold, but was retained to maintain continuity and a sufficiently robust peer company sample size. (The proposed acquisition of Broadcom by Avago was announced after the Compensation Committee approved the peer companies.)
Qualcomm’s percentile rankings among the peer companies illustrate that, relative to our peer companies, we are below median for revenues and above median for the other metrics, and our market capitalization is strongly supported by the other metrics.


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Compensation Discussion & Analysis

Figure 17: Qualcomm’s Relative Rankings Among Peer Companies as of March 31, 2015 (1)
Revenue
 
Net Income
 
EBITDA
 
EBITDA Margin
 
Market Cap
Company
Ticker
$ Millions
 
Ticker
$ Millions

 
Ticker
$ Millions
 
Ticker
 
 
Ticker
$ Millions
Microsoft
MSFT
93,074

 
MSFT
20,675

 
MSFT
34,150

 
V
68%
 
GOOG
372,734

IBM
IBM
92,793

 
GOOG
14,444

 
INTC
24,191

 
FB
50%
 
MSFT
334,103

Amazon.com
AMZN
88,988

 
IBM
12,022

 
CMCSA
23,160

 
ORCL
46%
 
FB
229,955

Comcast
CMCSA
68,775

 
INTC
11,704

 
IBM
22,833

 
INTC
43%
 
ORCL
188,695

Google
GOOG
66,001

 
ORCL
10,827

 
GOOG
21,476

 
TXN
39%
 
AMZN
173,027

United Technologies
UTX
64,270

 
CSCO
8,653

 
ORCL
17,856

 
MSFT
37%
 
V
161,161

Intel
INTC
55,870

 
CMCSA
8,380

 
CSCO
13,434

 
QCOM
36%
 
IBM
158,979

Cisco
CSCO
48,083

 
QCOM
8,064

 
UTX
11,231

 
TWC
36%
 
INTC
148,470

Lockheed Martin
LMT
45,600

 
UTX
6,220

 
QCOM
9,687

 
MU
35%
 
CMCSA
143,494

Honeywell
HON
40,306

 
V
5,600

 
V
8,759

 
CMCSA
34%
 
CSCO
140,570

Oracle
ORCL
38,840

 
HON
4,239

 
DTV
8,489

 
GOOG
33%
 
QCOM
114,688

DirecTV
DTV
33,260

 
MU
3,690

 
TWC
8,228

 
CSCO
28%
 
UTX
106,579

Qualcomm
QCOM
26,964

 
LMT
3,614

 
HON
7,353

 
EBAY
28%
 
HON
81,591

EMC
EMC
24,440

 
FB
2,940

 
LMT
6,368

 
DTV
26%
 
EBAY
70,600

Time Warner Cable
TWC
22,812

 
TXN
2,821

 
EMC
6,323

 
EMC
26%
 
LMT
63,729

eBay
EBAY
17,902