DEF 14A 1 wdc3550481-def14a.htm DEFINITIVE PROXY STATEMENT

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant Filed by a Party other than the Registrant      

CHECK THE APPROPRIATE BOX:
  Preliminary Proxy Statement
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
  Definitive Additional Materials
Soliciting Material Under Rule 14a-12

Western Digital Corporation

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

PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
  No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
Fee paid previously with preliminary materials:
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:


Table of Contents



Table of Contents

Our strategy supports our mission to be recognized as the world’s leading data infrastructure company

We continue to pursue a long-term value-creation strategy underpinned by growth in Big Data and Fast Data applications. Western Digital’s platform is strategically positioned to play a key role in supporting long-term growth trends.

Our strategy is dependent on continuing to build a culture of growth and innovation to accomplish four major strategic pillars

       
Re-architect
Data Infrastructure
Developing the technology
underlying the future of Big
Data and Fast Data
Lead in the
Data Center
Focusing on the scale,
reliability and capacity
necessary for data centers
Seek Targeted
Wins at the Edge
and End Points
Serving the distinctive
needs of specific data uses
and settings
Continue to Lead in
Client Devices & Retail
Customer-Focused
Solutions
Leading in client devices and
consumer solutions
       
Establish leadership in architectures supporting Zettascale deployments such as Zoned Storage
 
Build leadership in memory and storage fabrics
 
Build on technology leadership across storage technologies – hard disk drive (“HDD”) and flash to enable innovations such as RISC-V
Drive closer data-center customer engagements to become a strategic partner that serves the full breadth of customer requirements
 
Enable next-gen interface transitions for solid state drives (“SSDs”)
 
Leverage energy-assist technologies to drive long-term growth in Capacity HDDs
Provide a comprehensive suite of solutions to serve customers from the end points to the edge and beyond
 
Establish leadership in emerging segments such as Automotive and Industrials
 
Continue to innovate in other end point segments such as mobile and gaming
Focus on emerging HDD segments such as surveillance while growing consumer SSD business
 
Strengthen leadership in customer facing retail solutions, while driving growth through emerging retail segments such as personal cloud-based storage

       
  Culture of Growth and Innovation  
   
       


Table of Contents

                Letter from Our Chairman

                                   
 
            
                                   
       

“In the midst of challenging dynamics on both the market and geopolitical fronts in fiscal 2019, the Western Digital leadership team maintained its focus on execution, further improved operational efficiency and delivered the strongest product portfolio in the company’s history.”

 
                

Dear Fellow Stockholders:

On behalf of the Board of Directors, thank you for your investment in Western Digital. Our ongoing transformation into a data infrastructure company is on solid footing and we are well-positioned to capitalize on industry trends to deliver sustainable long-term value.

Diversified Global Data Storage Solutions Leader Positioned for Growth
In a very short period of time, data has transformed from being merely a byproduct of digital life to becoming the very engine of the global economy. Storage is fundamental to creating value from data, and we believe the future will be built by the most innovative and trusted companies providing advanced building blocks for intelligent data infrastructures. As a market leader and innovator in this space, we believe the future will be built on Western Digital’s platform.

In the midst of challenging dynamics on both the market and geopolitical fronts in fiscal 2019, the Western Digital leadership team maintained its focus on execution, further improved operational efficiency and delivered the strongest product portfolio in the company’s history. We ended the year with a leadership position in capacity enterprise hard drives, 3D flash technology and branded retail products, while achieving significant gains in client solid state drives. As our progress over the past year has demonstrated, Western Digital has earned an increasingly strategic position in today’s data-driven world.

In addition to continued progress against our long-term strategy, the Board has remained focused on overseeing succession planning for key members of the management team. In late calendar 2018, we announced the transition of our Chief Financial Officer position, and in May 2019 Bob Eulau was appointed to that role. Mr. Eulau’s background in optimizing financial and operational performance, paired with his strong leadership skills, positions us to maximize our short- and long-term growth opportunities. In addition, in connection with Martin Fink’s retirement in September 2019, Siva Sivaram has taken on an expanded role as President, Technology and Strategy. This combined role will allow Dr. Sivaram to efficiently oversee our key technology initiatives and corporate strategy as we further strengthen Western Digital’s leading technology position and innovative product portfolio.

Creating a Culture of Inclusion
Our progress this year could not have been possible without the diligent efforts of our global workforce of approximately 62,000 employees. We remain focused on creating a strong unified workforce culture and pursuing our strategic initiative to build a diverse and inclusive organization. In fiscal 2019, we hired our first-ever Vice President of Diversity and Inclusion, who is responsible for executing our global diversity and inclusion strategy. Some of the initiatives within this strategy have included implementing unconscious bias training across the enterprise, expanding our employee resource groups, creating a women’s leadership development program, initiating the development of a strategy to increase diversity in our candidate pipeline, publishing our Diversity and Inclusion Statement company-wide and conducting a pay equity analysis. The success of Western Digital is predicated on the success of our workforce, and we are working to ensure that our employees are supported by an inclusive company culture.

As data becomes an increasingly valuable asset, Western Digital is positioned to capitalize on this growing opportunity and deliver long-term value. We appreciate your ongoing support and thank you for being a Western Digital stockholder.


MATTHEW E. MASSENGILL
Independent Chairman of the Board
            

2019 PROXY STATEMENT     1            


Table of Contents

                 Letter from Our Lead
Independent Director
            
       
                                                      

“As Western Digital operates in a rapidly changing industry, the Board of Directors is focused on a Board composition that supports long-term value creation.”

                    
                

Dear Fellow Stockholders:

              

I am honored to serve as Lead Independent Director of Western Digital’s Board of Directors. As we approach our 2019 Annual Meeting, I would like to take this opportunity to share how our Board is addressing key areas of stockholder interest:

Evolution of Board Composition Supports Long-Term Value Creation
As Western Digital operates in a rapidly changing industry, the Board of Directors is focused on a Board composition that supports long-term value creation. Accordingly, the Board remains committed to Board diversity, recognizing that a broad range of perspectives is critical to effective corporate governance and overseeing the execution of our company’s strategy. The Governance Committee is actively engaged in succession planning to identify and recruit new directors. In recent years, the primary focus has been on committee chair roles, upcoming retirements and maintaining a diverse group of directors in terms of gender, skill sets and backgrounds.

These efforts have facilitated an orderly refreshment as our Board continues to evolve to align with the strategic direction of the company. Over the past five years, we have appointed four new independent directors, including most recently Kimberly Alexy and Stephanie Streeter in November 2018. Ms. Alexy founded Alexy Capital Management, a private investment fund, in 2005, and currently serves as its principal. Ms. Streeter is an accomplished business executive who served as the chief executive officer of Libbey Inc. from 2011 to 2016. Together, they bring decades of experience in strategic leadership in vertically integrated manufacturing, data analytics, cybersecurity, and supply chain and distribution, and their backgrounds complement the skills of our existing Board members.

Board Focus on Information Technology and Cybersecurity Risks
We recognize the increasing risks that information technology and cybersecurity threats pose to our business. Our Board as a whole is updated throughout the year on specific risks and mitigating measures in the course of its review of our strategy and business plan. Our Audit Committee, which is charged with overseeing our enterprise risk management process and cybersecurity risks, receives quarterly updates from our vice president of information security. Our recent Board appointments further reinforce our continued attention on the Board’s risk oversight role.

Commitment to Fostering a Sustainable Future
Our Board and governance practices continue to be informed by the perspectives of our stockholders. We maintain a robust, Board-driven stockholder outreach program, and stockholder feedback is shared with our full management team and Board.

Sound corporate responsibility in all aspects of our business is a focus of our Board, and sustainability has been a consistent theme throughout our recent investor conversations. Reflecting both our Board’s commitment to the issue and the interest of our stockholders, we recently amended the Governance Committee Charter to formalize the committee’s role in overseeing Western Digital’s corporate responsibility and sustainability policies and programs. Additionally, in September 2019, we published our 2018 Sustainability Report, which details our efforts in these areas and reflects the progress we’ve made on our sustainability journey.

On behalf of our Board, we appreciate our stockholders’ feedback and very much look forward to our continued dialogue. We are excited about the future of Western Digital, and we thank you for the trust you have placed in our Board.


LEN J. LAUER
Lead Independent Director

The responsibilities of our Lead Independent Director include:

Acting as a liaison between our independent directors and management;
Assisting our Chairman of the Board in establishing the agenda for Board meetings;
Coordinating the agenda for, and chairing, the executive sessions of our independent directors;
Presiding at any Board meetings at which our Chairman is not present;
Leading our stockholder engagement efforts;
Participating in the performance evaluation of our Chief Executive Officer;
Overseeing our Board and committee evaluations and individual director assessments;
Coordinating our Chief Executive Officer succession planning; and
Overseeing our Board succession planning.

                2     WESTERN DIGITAL


Table of Contents

Notice of Annual Meeting of Stockholders
Western Digital Corporation
5601 Great Oaks Parkway, San Jose, California 95119

Date
November 14, 2019


          Matters to be voted on
Proposal         Board
Recommendation

Time
8:00 a.m. Pacific Time

1     Election of the eight director nominees named in the attached Proxy Statement to serve until our next annual meeting of stockholders and until their respective successors are duly elected and qualified
VOTE FOR

Place
The Fairmont
San Jose
170 S. Market Street
San Jose,
California 95113


2 Approval on an advisory basis of the named executive officer compensation disclosed in the attached Proxy Statement
VOTE FOR
3 Approval of the amendment and restatement of our 2017 Performance Incentive Plan to, among other things, increase by 6 million the number of shares of our common stock available for issuance under that plan
VOTE FOR

Who can vote
Stockholders of record at the close of business on September 16, 2019 will be entitled to notice of and to vote at our annual meeting and any adjournments or postponements of the meeting.

4 Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2020
VOTE FOR
At the meeting, we will also consider any other business that may properly come before our annual meeting or any postponement or adjournment of the meeting

How to Vote Your Shares in Advance of the Meeting
Your vote is very important. Please submit your proxy as soon as possible via the Internet, telephone or mail. Submitting your proxy by one of these methods will ensure your representation at our annual meeting regardless of whether you attend the meeting.

VIA THE INTERNET
Visit the website listed on your proxy card, notice or voting instruction form
BY PHONE
Call the phone number listed on your proxy card or voting instruction form
BY MAIL
Complete, sign, date and return your proxy card or voting instruction form in the envelope provided

By Order of our Board of Directors,
MICHAEL C. RAY
Executive Vice President, Chief Legal Officer and Secretary
October 1, 2019

Important notice regarding the availability of proxy materials for our annual meeting of stockholders to be held on November 14, 2019: On or about October 1, 2019, proxy materials for the annual meeting, including the attached Proxy Statement and our 2019 Annual Report to stockholders, are being furnished to stockholders entitled to vote at the annual meeting. The Proxy Statement and 2019 Annual Report to stockholders are available on our Investor Relations homepage at investor.wdc.com. You can also view these materials at www.proxyvote.com by using the control number provided on your proxy card or Notice of Internet Availability of Proxy Materials.

2019 PROXY STATEMENT     3


Table of Contents

Table of Contents

1 Letter from Our Chairman
     
2 Letter from Our Lead Independent Director
     
3 Notice of Annual Meeting of Stockholders
     
6 Proxy Summary
     
14 Corporate Governance Matters
14  Proposal 1  Election of Directors
15 Nominees for Election
19 Director Skills and Expertise
20 Director Nominations and Board Refreshment
24 The Board’s Role and Responsibilities
24 Stockholder Engagement
25 Corporate Responsibility and Sustainability
27 Risk Oversight and Compensation Risk Assessment
28 Board Structure
29 Lead Independent Director
31 Board Processes and Policies
33 Board Evaluation
34 Director Compensation
39 Executive Officers
     
41 Executive Compensation
41  Proposal 2  Advisory Vote on Executive Compensation
42   Letter to Stockholders from the Compensation Committee
42 Report of the Compensation Committee
43 Compensation Discussion and Analysis
44 Fiscal 2019 Executive Summary
47 Fiscal 2019 Philosophy, Objectives and Process
52 Fiscal 2019 Decisions and Outcomes
58 Fiscal 2020 Decisions
59 Other Program Features and Policies
62 Executive Compensation Tables and Narratives
62 Fiscal 2017—2019 Summary Compensation Table
64 Fiscal 2019 Grants of Plan-Based Awards Table
65 Description of Compensation Arrangements for Named Executive Officers
67 Outstanding Equity Awards at Fiscal 2019 Year-End Table
68 Fiscal 2019 Option Exercises and Stock Vested Table
69 Fiscal 2019 Non-Qualified Deferred Compensation Table
70 Potential Payments upon Termination or Change in Control
75 CEO Pay Ratio
76 Equity Compensation Plan Information
     
78 Stock Ownership Information
     
80 Equity Plan Proposal
80  Proposal 3  Approval of the Amendment and Restatement of Our 2017 Performance Incentive Plan
93 Audit Committee Matters
93  Proposal 4  Ratification of Appointment of Our Independent Registered Public Accounting Firm
94 Report of the Audit Committee
96 Additional Information
96 General Information about the Annual Meeting
101 Availability of Annual Report
101 Communication with the Company
A-1 Appendix A—Non-GAAP Financial Measures
B-1 Appendix B—Amended and Restated 2017 Performance Incentive Plan

4     WESTERN DIGITAL


Table of Contents

Cautionary Note Regarding Forward-Looking Statements

This Proxy Statement contains forward-looking statements, including but not limited to, statements concerning our views with respect to the growth of digital data, our business strategy, our ability to execute that strategy, cost saving initiatives and our diversity and inclusion efforts. These forward-looking statements are based on our current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, including: volatility in global economic conditions; business conditions and growth in the storage ecosystem; impact of restructuring activities and cost saving initiatives; impact of competitive products and pricing; market acceptance and cost of commodity materials and specialized product components; actions by competitors; unexpected advances in competing technologies; our development and introduction of products based on new technologies and expansion into new data storage markets; risks associated with acquisitions, mergers and joint ventures; difficulties or delays in manufacturing; the outcome of legal proceedings; and other risks and uncertainties listed in our Annual Report on Form 10-K for the fiscal year ended June 28, 2019 and our other reports filed with the Securities and Exchange Commission (the “SEC”), to which your attention is directed. You should not place undue reliance on these forward-looking statements, which speak only as of the date hereof, and we undertake no obligation to update these forward-looking statements to reflect subsequent events or circumstances.

2019 PROXY STATEMENT     5


Table of Contents

Proxy Summary

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider. We encourage you to read the entire Proxy Statement for more information about these topics prior to voting.

                                                                          
OUR LONG-TERM VALUE CREATION STRATEGY

Our strategy is dependent on continuing to build a culture of growth and innovation to accomplish four major strategic pillars:

       
Re-architect Data Infrastructure
Developing the technology underlying the future of Big Data and Fast Data
Lead in the Data Center
Focusing on the scale, reliability and capacity necessary for data centers
Seek Targeted Wins at the Edge and End Points
Serving the distinctive needs of specific data uses and settings
Continue to Lead in Client Devices & Retail Customer-Focused Solutions
Leading in client devices and consumer solutions

KEY BUSINESS HIGHLIGHTS

                                                                          
POSITIONED FOR GROWTH IN A CHALLENGING MARKET

Our fiscal 2019 business results were adversely impacted by a cyclical downturn in the flash industry, a temporary pause in investments by datacenter customers and rising uncertainties on the geopolitical front. We delivered fiscal 2019 revenues of $16.6 billion, non-GAAP gross margin of 30.5% and $4.84 in non-GAAP earnings per share (“EPS“).(1) Our business generated $1.5 billion in operating cash flow, and we returned $1.1 billion to shareholders through cash dividends and share repurchases. We also reduced our long-term debt by nearly $750 million.

Despite a challenging year, in fiscal 2019, we remained focused on activities that drive long-term value creation for our stockholders. Specifically, we broadened our product portfolio, enhanced our technology positioning and further improved operational efficiency even as we lowered our cost and expense structure. We expect these actions to position us to emerge as a stronger company as the market environment improves. These factors provided important context for the Compensation Committee’s decisions regarding executive pay for the year in review, and as described further in the section entitled “Executive Compensation–Compensation Discussion and Analysis,” fiscal 2019 compensation levels to our executive team reflect the shift in performance results.

Strength of Product Portfolio

Our ability to continually drive innovation and expand our differentiated product base is an integral element of maintaining leadership in the rapidly evolving data storage industry. To that end, during fiscal 2019, we made significant strides in broadening and enhancing our product offerings, delivering the strongest product portfolio in our company’s history. Achievements of particular note include:

In capacity enterprise hard drives, we demonstrated our leadership through strong adoption of our 14-terabyte high capacity drives across our customer base.
Combined with our refreshed mid-range capacity air-based drives, we gained significant exabyte share in the capacity enterprise drives category.

(1) See Appendix A to this Proxy Statement for reconciliations of GAAP gross margin and GAAP EPS to non-GAAP gross margin and non-GAAP EPS, respectively.

6     WESTERN DIGITAL


Table of Contents

PROXY SUMMARY

We successfully launched our internally developed solid-state drive platforms following multi-year development and investment, which deliver significantly higher performance compared to prior offerings.
We were the first to launch 3D flash-based automotive grade products with unique capacities and capabilities.
Our retail offerings continued to enjoy excellent recognition across all brands.

Technology Advances

With approximately 14,000 patents worldwide and a broad approach to innovation across our entire technology portfolio, we are continuously developing and investing in new technologies and partnerships to build on our existing technology leadership:

In flash, we were the first to launch the 96-layer 3D technology that combines industry-leading storage capacity, performance and reliability at a competitive cost.
In hard drives, we continued to make significant progress towards bringing our energy assisted recording technology to market. This technology is critical to driving continued areal density improvements in next generation capacity enterprise products.
In May 2019, we announced a formal agreement with our flash joint venture partner Kioxia Corporation (formerly Toshiba Memory Corporation) to jointly invest in a new fab facility. This new facility will provide needed space for the continued transition to future 3D flash technologies.

Operational Focus

Our Board of Directors and management remain focused on operational efficiency, ensuring that capital is deployed in the most effective way to address existing market conditions and trends, while positioning our company for continued success:

In response to changing business conditions, in January 2019, we announced a program to reduce our annualized cost of revenue and operating expenses by $800 million. These savings should drive significant operating leverage as business conditions continue to improve throughout fiscal 2020.
During the first quarter of fiscal 2019, we recognized the need to proactively slow down capital deployment and wafer starts to better align with our view of demand for flash.
We accelerated the streamlining of our hard drive manufacturing footprint and ceased operations at our facility in Kuala Lumpur, Malaysia to focus on higher growth, higher margin segments, such as capacity enterprise.

Looking Ahead

We successfully managed and navigated dynamic market conditions in fiscal 2019. The secular trends of data growth and its increasing value – key drivers of our business opportunities – remain strong. Our hard drive business is performing well, and we believe that the flash market has reached a cyclical trough. With the strongest product portfolio in our company’s history and a leaner operating structure, our business is poised to deliver significant operating leverage as business conditions improve further. We believe we are well positioned to deliver long-term growth and stockholder value.

2019 PROXY STATEMENT     7


Table of Contents

PROXY SUMMARY

OUR DIRECTOR NOMINEES

    Name and Principal Occupation       Age Director
Since
Board
Committees
Other Current Public
Directorships

KIMBERLY E. ALEXY INDEPENDENT

Principal, Alexy Capital Management

49
2018
Alteryx, Inc.
FireEye, Inc.
Five9, Inc.

MARTIN I. COLE INDEPENDENT

Former Group Chief Executive, Technology of Accenture plc

63 2014
The Western Union Company
Cloudera, Inc.

KATHLEEN A. COTE INDEPENDENT

Former Chief Executive Officer of Worldport Communications, Inc.

70 2001

VeriSign, Inc.

TUNÇ DOLUCA INDEPENDENT

President and Chief Executive Officer of Maxim Integrated

61 2018 Maxim Integrated

LEN J. LAUER LEAD INDEPENDENT DIRECTOR

Chairman and Chief Executive Officer of Memjet

62 2010 None

MATTHEW E. MASSENGILL INDEPENDENT CHAIRMAN OF THE BOARD

Former President and Chief Executive Officer of Western Digital Corporation

58 2000 None

STEPHEN D. MILLIGAN

Chief Executive Officer of Western Digital Corporation

56 2013
Ross Stores, Inc.
Autodesk, Inc.

STEPHANIE A. STREETER INDEPENDENT

Former Chief Executive Officer of Libbey Inc.

62 2018
Goodyear Tire & Rubber Company
Kohl’s Corporation

    Audit            Compensation           Executive           Governance           Committee Chair

                                                                          
BOARD NOMINEE HIGHLIGHTS

Board Snapshot

87.5% Independent 37.5% Women 7.8 Years Average Tenure

INDEPENDENCE GENDER
   
   
AGE TENURE
Strong Director Engagement

Average director attendance at fiscal 2019 Board and committee meetings

Board Audit
94% 95%
Compensation Governance
97% 100%
Executive
100%

Over 95% Board and committee meeting aggregate attendance in fiscal 2019


8     WESTERN DIGITAL


Table of Contents

PROXY SUMMARY

Director Nominee Skills and Experience

INDUSTRY EXPERIENCE 8/8
Experience at the executive level in areas such as data storage, data centers, semiconductors and consumer electronics is important in understanding our business and strategy

RISK MANAGEMENT 8/8
Experience in assessing and managing enterprise risks is critical to our Board’s role in overseeing our Enterprise Risk Management program
INFORMATION TECHNOLOGY AND CYBERSECURITY 6/8
Experience understanding and managing information technology and cyber security threats is increasingly important to mitigate risks to our business
EXECUTIVE-LEVEL LEADERSHIP 7/8
Experience in executive-level positions is important to gain a practical understanding of complex organizations, corporate governance, operations, talent development, strategic planning and risk management
HUMAN RESOURCES MANAGEMENT 7/8
Experience in human resources management in large organizations assists our Board in overseeing succession planning, talent development and our executive compensation program
BUSINESS DEVELOPMENT AND STRATEGY 8/8
Experience setting and executing long-term corporate strategy is critical as we continue to transform our business
FINANCE AND ACCOUNTING 8/8
Experience overseeing accounting and financial reporting is key to our Board’s oversight of our financial reporting process and internal controls
MANUFACTURING AND OPERATIONS 6/8
Experience with sophisticated, large-scale manufacturing operations increases our Board’s understanding of our distribution, supply chain, manufacturing and other business operations
GLOBAL BUSINESS 7/8
Experience with businesses with substantial international operations provides critical business and cultural perspectives to our Board and is important in understanding the strategic opportunities and risks relating to our business
SALES AND MARKETING 7/8
Experience developing and executing on strategies to grow sales and market share assists our Board in advising management as we seek to develop new products and new markets for our products
CORPORATE GOVERNANCE 8/8
Experience on other public company boards supports strong Board and management accountability, transparency and protection of stockholder interests
GOVERNMENT, LEGAL AND REGULATORY 7/8
Experience in government relations, public policy and regulatory matters assists our Board in identifying and understanding compliance issues and the effect of governmental actions on our business

2019 PROXY STATEMENT     9


Table of Contents

PROXY SUMMARY

CORPORATE GOVERNANCE HIGHLIGHTS

Our Board of Directors is committed to maintaining the highest standards of corporate governance. We believe our strong corporate governance practices help promote the long-term interests of our stockholders and build public trust in our company.

                                                                          
CORPORATE GOVERNANCE CHANGES

Below is a description of some recent key changes to our corporate governance practices:

 
Appointed Three New Independent Directors in Fiscal 2019 Rotated Chair of Audit Committee Formalized Board Oversight of Corporate Responsibility and Sustainability
Kimberly Alexy brings to our Board more than 20 years of experience in capital markets, corporate finance and investments, as well as experience serving on numerous public company boards
Tunç Doluca brings to our Board over 30 years of executive leadership and technical experience in the semiconductor industry
Stephanie Streeter brings to our Board extensive senior executive leadership experience, as well as experience serving on several public company boards
The appointments of Ms. Alexy, Mr. Doluca and Ms. Streeter, and the retirements of Henry DeNero and Michael Lambert at the annual meeting under our retirement policy demonstrate our Board’s ongoing commitment to Board refreshment
In July 2019, we appointed Ms. Alexy as Chair of the Audit Committee to facilitate the transfer of knowledge from the former Chair of the Audit Committee, Mr. DeNero, to Ms. Alexy, due to Mr. DeNero reaching retirement age under our retirement policy
Ms. Alexy’s years of experience as a financial analyst, her service on public company boards, including the audit committees of several of these companies, and her certificate in Cybersecurity Oversight from the CERT Division of the Software Engineering Institute at Carnegie Mellon University, enable her to bring valuable experience and a fresh perspective to the Audit Committee
Mr. DeNero remains on the Audit Committee until his retirement to ensure a smooth transition
In August 2019, we amended the Governance Committee’s charter to specify that the Governance Committee will assist our Board in overseeing our corporate responsibility and sustainability policies and programs
We recently published our 2018 Sustainability Report
The Governance Committee will provide Board-level input on our social, environmental and human rights policies and programs
These updates reflect the deep commitment of our Board and executive leadership team to sound corporate responsibility in all aspects of our business

10     WESTERN DIGITAL


Table of Contents

PROXY SUMMARY

                                                                          
CORPORATE GOVERNANCE BEST PRACTICES

Robust year-round Board-led stockholder engagement program that informs Board decisions
Independent Board leadership, including a Lead Independent Director with clearly defined roles and responsibilities
Focus on Board refreshment, with three new directors appointed to our Board in fiscal 2019
Commitment to Board diversity, achieving more than 30% female representation on our Board in fiscal 2019
All directors elected annually by a simple majority of votes cast
Seven of eight director nominees are independent
Director retirement policy
Active Board oversight of strategic planning and risk management
Board-level oversight of corporate responsibility and sustainability
Succession planning for directors, our Chief Executive Officer and other key officers
Annual third-party facilitated Board and committee self-evaluations
Individual assessments of directors
Code of conduct for directors, officers and employees
All executive officers have achieved stock ownership requirements pursuant to our guidelines

FISCAL 2019 EXECUTIVE COMPENSATION HIGHLIGHTS

                                                                          
FISCAL 2019 PAY ALIGNED WITH PERFORMANCE

Our overriding executive compensation philosophy is clear and consistent we pay for performance. Our executives are accountable for the performance of our company and the operations they manage and are compensated primarily based on that performance.

Chief Executive Officer Compensation Aligned with Performance Results

We experienced challenging market and geopolitical conditions in fiscal 2019 and the total compensation for our executive team declined in fiscal 2019 relative to fiscal 2018, reflecting the alignment between our executive compensation program and our lower operational and financial results compared to fiscal 2018.

Based on compensation paid or awarded, the compensation of our Chief Executive Officer, Stephen D. Milligan, decreased 24.9% from fiscal 2018 to fiscal 2019:

Chief Executive Officer Pay Year-over-Year
Pay Element Fiscal 2018 Fiscal 2019 Year-over-Year Change
Base Salary $1,250,000 $1,250,000 0%
Short-Term Incentive (“STI”) Award
(based on amount earned)
$2,175,000 $0 (100%)
Long-Term Incentive (“LTI”) Award(1)
(based on grant date fair value)
$13,417,083 $11,601,177 (13.5%)
All Other Compensation $279,391 $15,292 (94.5%)
Total Chief Executive Officer Pay (Fiscal 2018 vs. Fiscal 2019) $17,121,474 $12,866,469 (24.9%)
     
(1) The fiscal 2018 LTI award value excludes a $2.6 million adjustment for a prior year (fiscal 2016-2017) performance stock unit (“PSU”) award that paid out in fiscal 2018 and was required to be reported in the Summary Compensation Table as compensation for fiscal 2018 in accordance with SEC and accounting rules. Our Chief Executive Officer’s total compensation as reported in the Summary Compensation Table for fiscal 2018 was $19,738,381; excluding the $2.6 million accounting adjustment results in total compensation of $17,121,474.

2019 PROXY STATEMENT     11


Table of Contents

PROXY SUMMARY

Pay for Performance Design

The charts below illustrate the mix of fiscal 2019 fixed pay (base salary) and variable or performance-based pay (annual STI target and annual LTI awards based on the target award value approved by the Compensation Committee) for our Chief Executive Officer and our other named executive officers (on average).

  Chief Executive Officer Pay Mix Named Executive Officer Average  
  Pay Mix (other than Chief Executive
Officer)(1)
 
     
(1) Excludes Robert K. Eulau, who was appointed Chief Financial Officer in May 2019 and was not subject to the same compensation arrangements as individuals who served as named executive officers for the full fiscal year.

                                                                          
STOCKHOLDER ENGAGEMENT IN FISCAL 2019

Our Board of Directors and management are committed to regular engagement with our stockholders and soliciting their views and input on important performance, executive compensation, governance, environmental, social human capital management and other matters. As a continuation of our robust outreach program, over the past year, we reached out to stockholders representing approximately 46% of shares outstanding. Our engagement team conducted calls with investors representing approximately 12% of shares outstanding, with the remainder either not responding or confirming that a follow-up discussion was not necessary at this time. While our discussions with investors covered a variety of topics, there were a few key areas of focus in our conversations:

Board composition and refreshment efforts, including the recent additions to our Board;
Executive compensation philosophy and program design, including how investor feedback drove recent program enhancements; and
Diversity and culture at Western Digital, including recent developments and enhanced disclosure in our 2018 Sustainability Report.

These views were shared with our Board and its committees, where applicable, for their consideration.

12     WESTERN DIGITAL


Table of Contents

PROXY SUMMARY

                                                                          
OUR COMMITMENT TO CORPORATE SUSTAINABILITY

We believe responsible and sustainable business practices support our long-term success as a company. Certainly, those practices help keep our communities and our environment vibrant and healthy. But they also lead us to more efficient and resilient business operations. They help us meet our customers’ efficiency targets. They reduce risks of misconduct and legal liability. They enhance the reliability of our supply chain. And they improve the health, well-being, engagement and productivity of our employees. We believe that being an industry leader is not just about having talented employees or innovative products. It is also about doing business the right way, every day. That is why our commitment to sound corporate responsibility is deeply rooted in all aspects of our business.

We are happy to share more details about our recent progress in this area through our 2018 Sustainability Report located on our Corporate Sustainability page at www.westerndigital.com (which is not incorporated by reference herein). The Governance Committee oversees our corporate responsibility and sustainability policies and programs pursuant to its charter. Below are some highlights from our 2018 Sustainability Report:
 
 
Architecting
Sustainable Products
Architecting a Responsible
Supply Chain
Architecting Vibrant Communities

We take responsibility for how our products impact the environment and communities. We believe transparency enhances accountability, helping us improve the long-term sustainability of our products and business.

__________ 
Efficient packaging conserved 650,000 kg of paper during calendar 2018

__________ 
Technology innovations reduced power consumption on a per-gigabyte basis by 970 million kilowatt-hour

The need for greater transparency is driving behavioral change in corporate supply chains, as global interconnectedness is greater than ever. We embrace and facilitate this change with our forward-thinking responsible supply chain program, based on a commitment to collaborate with suppliers and key stakeholders to ensure that our value chain is socially responsible and sustainable over the long run.

__________ 
Achieved one Platinum, two Gold and two Silver certificates after Responsible Business Alliance factory audits

__________ 
Audited all of our suppliers of conflict minerals, achieving fully compliant sourcing by the end of calendar 2018

We believe that corporate sustainability should go beyond environmental and labor considerations to provide a positive social impact on the local communities in which we operate. This has led us to an impactful giving and volunteerism program around the world, a deep commitment to inspiring and providing opportunities for future talent through STEM education and scholarship programs and utilizing our technology and expertise to create positive change on a macro scale.

__________ 
In calendar 2018, employees from 18 different sites volunteered 5,000 hours for Earth Day

__________ 
Employees packaged more than two million meals for people without adequate food

   
 
Architecting an Ethical Business Architecting a Better Environment Architecting a Stronger Workforce

Working with integrity is a part of our culture—one that we work hard to maintain and enhance. Our efforts help earn the trust of our customers and business partners, inspire our employees, deliver value for our stockholders and improve our communities.

__________
Recognized as one of the World’s Most Ethical Companies in February 2019

__________
Conducted global code of conduct training with nearly 30,000 employees in 39 countries over the past year

As we look to the future, Western Digital recognizes that environmental stewardship is critical to the long-term success of our company, our customers and other stakeholders. We are fully committed to responsible use of the Earth’s natural resources and we strive to minimize any impact on climate change as we work together to architect a better future.

__________
Achieved a 3% reduction in overall energy consumption in calendar 2018

__________
Reduced our scope 1 greenhouse gas emissions by 17% between calendar 2016 and 2018

Our people are our most important asset. Calendar 2018 was a milestone year for our workforce: we focused on creating a unified culture, amplifying the best aspects of our three legacy companies and architecting our path forward as one Western Digital.

__________
Received a perfect score for diversity and inclusion for LGBTQ employees from Human Rights Campaign

__________
Sponsor employee resource groups, including for diverse employees, female employees, LGBTQ employees and veterans

2019 PROXY STATEMENT     13


Table of Contents

Corporate Governance Matters

PROPOSAL 1 ELECTION OF DIRECTORS
  
Our Board of Directors recommends a vote FOR each of the eight director nominees named in this Proxy Statement.
All directors elected annually by a simple majority of votes cast
Independent Board leadership, including a Lead Independent Director with clearly defined roles and responsibilities
Seven of eight director nominees are independent
     

Our Board of Directors is presenting eight nominees for election as directors at the 2019 annual meeting of stockholders (“Annual Meeting”). Each of the nominees is currently a member of our Board and, other than Ms. Alexy and Ms. Streeter, who joined our Board in November 2018, was elected to our Board at the 2018 annual meeting of stockholders. Each director elected at the Annual Meeting will serve until our 2020 annual meeting of stockholders and until a successor is duly elected and qualified. Each of the nominees has consented to be named in this Proxy Statement and to serve as a director if elected. If any nominee is unable or unwilling for good cause to stand for election or serve as a director if elected, the persons named as proxies may vote for a substitute nominee designated by our existing Board of Directors, or our Board may choose to reduce its size.

                                                                          
VOTE REQUIRED FOR APPROVAL

Each director nominee will be elected as a director if the nominee receives the affirmative vote of a majority of the votes cast with respect to his or her election (in other words, the number of shares voted “for” a director must exceed the number of votes cast “against” that director).

If a nominee who is serving as a director is not elected at the Annual Meeting by the requisite majority of votes cast, Delaware law provides that the director would continue to serve on our Board of Directors as a “holdover director.” However, under our By-laws, any incumbent director who fails to be elected must offer to tender his or her resignation to our Board. If the director conditions his or her resignation on acceptance by our Board, the Governance Committee will then make a recommendation to our Board on whether to accept or reject the resignation or whether other action should be taken. Our Board of Directors will act on the Governance Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date the election results are certified. The director who tenders his or her resignation will not participate in our Board’s or the Governance Committee’s decision. Any nominee who was not already serving as a director and is not elected at the Annual Meeting by a majority of the votes cast with respect to such director’s election would not be elected to our Board.

14     WESTERN DIGITAL


Table of Contents

CORPORATE GOVERNANCE MATTERS

NOMINEES FOR ELECTION

Below is information about the experience and other key qualifications and attributes of each of our Board’s eight director nominees.

KIMBERLY E. ALEXY

INDEPENDENT


AGE

49

DIRECTOR SINCE

November 2018

COMMITTEES

Audit (Chair)

  

PROFESSIONAL EXPERIENCE

Ms. Alexy is a seasoned financial services professional with more than 20 years of experience in capital markets, corporate finance and investments. She founded Alexy Capital Management, a private investment fund, in 2005 and serves as its principal.

Previously, Ms. Alexy served as a sell-side equity research analyst on Wall Street for nearly a decade, specializing in the technology and corporate finance industries at Prudential Securities, Lehman Brothers and Wachovia Bank.

Within the last five years, Ms. Alexy served as a director of Microsemi Corporation and CalAmp Corp.

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS

Alteryx, Inc.

FireEye, Inc.

Five9, Inc.

BOARD SKILLS, QUALIFICATIONS AND EXPERTISE

Ms. Alexy’s deep expertise in finance, securities and corporate governance at several financial institutions and publicly held companies is directly relevant to our business. Her service on numerous public company boards of directors, including serving as a chair on the audit or governance committees of many of those boards, provides our Board with valuable insights and perspectives. We believe these experiences, qualifications, attributes and skills qualify her to serve as a member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS

Audit Committee Chair

Ms. Alexy’s financial skills and prior experience as a financial analyst for nearly a decade and her service as a member of several public company audit committees qualify her as an audit committee financial expert under SEC rules. In addition, Ms. Alexy contributes her specialized knowledge of cybersecurity issues, which includes a CERT Certificate in Cybersecurity Oversight for corporate directors issued by the CERT Division of the Software Engineering Institute at Carnegie Mellon University.


MARTIN I. COLE

INDEPENDENT


AGE

63

DIRECTOR SINCE

December 2014

COMMITTEES

Audit

Governance

PROFESSIONAL EXPERIENCE

Mr. Cole served as the chief executive of the technology group of Accenture plc, a leading global management consulting and professional services company, with responsibility for the full range of Accenture’s technology consulting and outsourcing solutions and delivery capabilities, including its global delivery network, from March 2012 until he retired in August 2014. Mr. Cole currently serves as a senior adviser to 3i Group plc.

Previously, Mr. Cole served as the chief executive of Accenture’s communications, media and technology operating group from September 2006 to March 2012, the chief executive of its government operating group from September 2004 to August 2006, the managing partner of its outsourcing and infrastructure delivery group from September 2002 to August 2004 and in a variety of capacities at Accenture since 1980.

On July 31, 2019, Mr. Cole was appointed interim chief executive officer of Cloudera, Inc., an enterprise data cloud company, to help ensure a smooth executive transition while its board of directors conducts a search for a permanent chief executive officer. The appointment is expected to be temporary.

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS

The Western Union Company

Cloudera, Inc.

BOARD SKILLS, QUALIFICATIONS AND EXPERTISE

Mr. Cole brings to our Board extensive senior executive leadership experience across a variety of business sectors and geographies. This demonstrates his ability to provide strategic advice and lead multiple teams across a variety of business sectors, and provides him with wide-ranging insights, including relating to technology solutions, which are an important part of our business. We believe these experiences, qualifications, attributes and skills qualify him to serve as a member of our Board of Directors.

Our Board of Directors has discussed with Mr. Cole the time and effort required of him as Cloudera’s interim chief executive officer in conjunction with his role as a member of our Board, and has affirmatively determined that his interim position at Cloudera does not impair his ability to continue serving as an effective member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS

Audit Committee Member

Mr. Cole’s financial skills and prior experience as a chief executive qualify him as an audit committee financial expert under SEC rules.

Governance Committee Member

Mr. Cole has substantial governance experience as chairman of the board of Cloudera, Inc. and as a director of The Western Union Company.

2019 PROXY STATEMENT     15


Table of Contents

CORPORATE GOVERNANCE MATTERS

KATHLEEN A. COTE

INDEPENDENT

AGE

70

DIRECTOR SINCE

January 2001

COMMITTEES

Compensation
Governance

 

PROFESSIONAL EXPERIENCE

Ms. Cote was the chief executive officer of Worldport Communications, Inc., a European provider of Internet managed services, from May 2001 to June 2003.

Prior to that, Ms. Cote served as president of Seagrass Partners, a provider of expertise in business planning and strategic development for early stage companies, from September 1998 to May 2001. From November 1996 to January 1998, she served as president and chief executive officer of Computervision Corporation, an international supplier of product development and data management software.

Within the last five years, Ms. Cote served as a director of GT Advanced Technologies, Inc.

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS

VeriSign, Inc.

BOARD SKILLS, QUALIFICATIONS AND EXPERTISE

Ms. Cote is a seasoned business executive with numerous years of experience overseeing global companies focused on technology and operations, which is directly relevant to our business. She has served on numerous public company boards of directors, including on the audit and governance committees of those boards, providing our Board with valuable board-level experience. Her tenure on our Board also provides us with specific expertise and insight into our business and the transformations it has undergone. We believe these experiences, qualifications, attributes and skills qualify her to serve as a member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS

Compensation Committee Member

Ms. Cote has significant experience establishing and overseeing executive compensation programs as a former chief executive officer and as a public company board member.

Governance Committee Member

Ms. Cote has substantial governance experience as a director of VeriSign, Inc. and as a former director of a number of public companies.

TUNÇ DOLUCA

INDEPENDENT

AGE

61

DIRECTOR SINCE

August 2018

COMMITTEES

Compensation

 

PROFESSIONAL EXPERIENCE

Mr. Doluca is the president and chief executive officer of Maxim Integrated, which designs, develops, manufactures and markets a broad range of linear and mixed-signal integrated circuits.

Prior to being named Maxim Integrated’s president and chief executive officer in January 2007, Mr. Doluca served as its group president from May 2005 to January 2007, senior vice president from 2004 to 2005 and vice president from 1994 to 2004. Prior to 1994, Mr. Doluca served in a number of integrated circuit development positions at Maxim Integrated since joining the company in 1984.

Mr. Doluca is a board member of the Semiconductor Industry Association and served as its chairman from 2017 to 2018.

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS

Maxim Integrated

BOARD SKILLS, QUALIFICATIONS AND EXPERTISE

Mr. Doluca brings to our Board over 30 years of executive leadership and technical experience in the semiconductor industry, which provides our Board with valuable perspectives directly relevant to our business. As a seasoned chief executive officer and director of a large public technology company, he has expertise in corporate strategy, financial management, operations, marketing and research and development, which are all critical to achieving our strategic objectives. We believe these experiences, qualifications, attributes and skills qualify him to serve as a member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS

Compensation Committee Member

Mr. Doluca has significant experience establishing and overseeing executive compensation programs as the chief executive officer of Maxim Integrated.

16     WESTERN DIGITAL


Table of Contents

CORPORATE GOVERNANCE MATTERS

LEN J. LAUER

LEAD INDEPENDENT DIRECTOR

AGE

62

DIRECTOR SINCE

August 2010

COMMITTEES

Compensation (Chair)
Governance (Chair)

 

PROFESSIONAL EXPERIENCE

Mr. Lauer is the chairman and chief executive officer of Memjet, a color printing technology company.

Prior to joining Memjet in January 2010, Mr. Lauer was executive vice president and chief operating officer of Qualcomm, Inc., a developer and manufacturer of digital telecommunications products and services, from August 2008 to December 2009, and he was executive vice president and group president from December 2006 to July 2008. From August 2005 to August 2006, he was chief operating officer of Sprint Nextel Corp., a global communications company, and he was president and chief operating officer of Sprint Corp. from September 2003 until the Sprint-Nextel merger in August 2005. Prior to that, he was president-Sprint PCS from October 2002 to October 2004, and was president-long distance (formerly the global markets group) from September 2000 to October 2002. Mr. Lauer also served in several executive positions at Bell Atlantic Corp. from 1992 to 1998 and spent the first 13 years of his business career at IBM in various sales and marketing positions.

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS

None

BOARD SKILLS, QUALIFICATIONS AND EXPERTISE

Mr. Lauer brings to our Board significant senior executive leadership experience from large, multinational public technology companies, which provides a valuable perspective to our Board. Mr. Lauer’s experience in semiconductor sourcing and integration at Qualcomm and Memjet provides our Board with perspectives on the semiconductor industry. He has also previously served on other public company boards and board committees, providing our Board with important board-level experience. We believe these experiences, qualifications, attributes and skills qualify him to serve as a member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS

Governance Committee Chair

Mr. Lauer has served on other public company boards and board committees and has significant experience leading public and private companies in both board and senior executive leadership roles.

Compensation Committee Chair

Mr. Lauer has significant senior executive leadership experience from large, multi-national public technology companies, with substantial experience establishing and overseeing executive compensation programs.


MATTHEW E. MASSENGILL

INDEPENDENT CHAIRMAN OF THE BOARD

AGE

58

DIRECTOR SINCE

January 2000

COMMITTEES

Executive

 

PROFESSIONAL EXPERIENCE

Mr. Massengill served as our President from January 2000 to January 2002 and our Chief Executive Officer from January 2000 to October 2005. Mr. Massengill previously also served as our Chairman of the Board from November 2001 to March 2007.

Prior to that, Mr. Massengill served as our Chief Operating Officer from October 1999 to January 2000 and in various executive capacities since joining our company in 1985.

Within the last five years, Mr. Massengill served as a director of GT Advanced Technologies, Inc. and Microsemi Corporation.

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS

None

BOARD SKILLS, QUALIFICATIONS AND EXPERTISE

Mr. Massengill’s many years of service to Western Digital as an executive and Board member provide our Board with extensive and significant experience directly relevant to our business. As our former Chief Executive Officer, he has a deep understanding of our operations, provides valuable knowledge to our Board on the issues we face to achieve our strategic objectives and has extensive international experience. His prior service on numerous other public company boards of directors also provides our Board with important board-level perspective. We believe these experiences, qualifications, attributes and skills qualify him to serve as a member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS

Executive Committee Member

Mr. Massengill has extensive and significant experience as an executive, including as a former Chief Executive Officer, Chief Operating Officer and Board member of our company.

2019 PROXY STATEMENT     17


Table of Contents

CORPORATE GOVERNANCE MATTERS

STEPHEN D. MILLIGAN

CHIEF EXECUTIVE OFFICER

AGE

56

DIRECTOR SINCE

January 2013

COMMITTEES

Executive (Chair)

 

PROFESSIONAL EXPERIENCE

Mr. Milligan has served as our Chief Executive Officer since January 2013 and served as our President from March 2012 to October 2015.

Prior to that, Mr. Milligan served as HGST’s president and chief executive officer from December 2009 until our acquisition of HGST in March 2012 and its president from March 2009 to December 2009. From September 2007 to October 2009, Mr. Milligan served as HGST’s chief financial officer. From January 2004 to September 2007, he served as our Chief Financial Officer after serving in other senior finance roles at our company from September 2002 to January 2004. From April 1997 to September 2002, he held various financial and accounting roles of increasing responsibility at Dell Inc. and was employed at Price Waterhouse for 12 years prior to joining Dell.

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS

Ross Stores, Inc.

Autodesk, Inc.

BOARD SKILLS, QUALIFICATIONS AND EXPERTISE

Mr. Milligan’s experience in our industry, including more than four years in senior management positions at HGST as its president and chief executive officer, in addition to other senior management roles, contributes indispensable knowledge and expertise to our Board. He has served Western Digital and HGST in numerous executive capacities, providing our Board with valuable operations, manufacturing and finance experience. We believe these experiences, qualifications, attributes and skills qualify him to serve as a member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS

Executive Committee Chair

Mr. Milligan serves as our Chief Executive Officer and has held numerous senior executive roles at our company and other large, multi-national technology companies, including HGST.


STEPHANIE A. STREETER

INDEPENDENT

AGE

62

DIRECTOR SINCE

November 2018

COMMITTEES

Audit
Governance

 

PROFESSIONAL EXPERIENCE

Ms. Streeter served as the chief executive officer of Libbey Inc., a producer of glass tableware and other tabletop products, from 2011 to 2016, where she developed and implemented a new corporate strategy and reconstructed the company’s balance sheet, manufacturing network and cost base.

Prior to that, Ms. Streeter served as the acting chief executive officer of the United States Olympic Committee from 2009 to 2010 and served on its board of directors from 2004 to 2009. Previously, Ms. Streeter held numerous senior management positions at Banta Corporation, a global technology, printing and supply-chain management company, where she served as chairman, president and chief executive officer, and at Avery Dennison Corporation, a global materials science and manufacturing company.

Within the last five years, Ms. Streeter served as a director of Olin Corporation.

OTHER CURRENT PUBLIC COMPANY DIRECTORSHIPS

Goodyear Tire & Rubber Company

Kohl’s Corporation

BOARD SKILLS, QUALIFICATIONS AND EXPERTISE

Ms. Streeter brings to our Board extensive senior executive leadership experience overseeing companies with manufacturing and operations across the globe. She has served on several public company boards of directors. We believe these experiences, qualifications, attributes and skills qualify her to serve as a member of our Board of Directors.

COMMITTEE EXPERTISE HIGHLIGHTS

Audit Committee Member

Ms. Streeter’s financial skills and years of experience as a chief executive officer and public company audit committee chair qualify her as an audit committee financial expert under SEC rules.

Governance Committee Member

Ms. Streeter has substantial governance experience as a director of Goodyear Tire & Rubber Company and Kohl’s Corporation, and as a former director of several public companies.

18     WESTERN DIGITAL


Table of Contents

CORPORATE GOVERNANCE MATTERS

                                                                          
DIRECTOR SKILLS AND EXPERTISE

Our Board of Directors believes our nominees’ breadth of experience and their mix of qualifications, attributes, tenure and skills strengthen our Board’s independent leadership and effective oversight of management.

87.5% Independent 37.5% Women 7.8 Years Average Tenure
     
INDEPENDENCE GENDER AGE TENURE

Director Nominee Skills and Experience

INDUSTRY EXPERIENCE 8/8
Experience at the executive level in areas such as data storage, data centers, semiconductors and consumer electronics is important in understanding our business and strategy

RISK MANAGEMENT 8/8
Experience in assessing and managing enterprise risks is critical to our Board’s role in overseeing our Enterprise Risk Management program

INFORMATION TECHNOLOGY AND CYBERSECURITY 6/8
Experience understanding and managing information technology and cybersecurity threats is increasingly important to mitigate risks to our business

EXECUTIVE-LEVEL LEADERSHIP 7/8
Experience in executive-level positions is important to gain a practical understanding of complex organizations, corporate governance, operations, talent development, strategic planning and risk management

HUMAN RESOURCES MANAGEMENT 7/8
Experience in human resources management in large organizations assists our Board in overseeing succession planning, talent development and our executive compensation program

BUSINESS DEVELOPMENT AND STRATEGY 8/8
Experience setting and executing long-term corporate strategy is critical as we continue to transform our business

FINANCE AND ACCOUNTING 8/8
Experience overseeing accounting and financial reporting is key to our Board’s oversight of our financial reporting process and internal controls

MANUFACTURING AND OPERATIONS 6/8
Experience with sophisticated, large-scale manufacturing operations increases our Board’s understanding of our distribution, supply chain, manufacturing and other business operations

GLOBAL BUSINESS 7/8
Experience with businesses with substantial international operations provides critical business and cultural perspectives to our Board and is important in understanding the strategic opportunities and risks relating to our business

SALES AND MARKETING 7/8
Experience developing and executing on strategies to grow sales and market share assists our Board in advising management as we seek to develop new products and new markets for our products

CORPORATE GOVERNANCE 8/8
Experience on other public company boards supports strong Board and management accountability, transparency and protection of stockholder interests

GOVERNMENT, LEGAL AND REGULATORY 7/8
Experience in government relations, public policy and regulatory matters assists our Board in identifying and understanding compliance issues and the effect of governmental actions on our business


                                                                                                   
                                     
Our Board is highly engaged and well qualified, and all director nominees possess the skills and experiences necessary to oversee our evolving and growing business.

2019 PROXY STATEMENT     19


Table of Contents

CORPORATE GOVERNANCE MATTERS

                                                                          
DIRECTOR MEETING ATTENDANCE

During fiscal 2019, our Board of Directors met seven times. Each of the directors who served during fiscal 2019 attended 75% or more of the aggregate number of Board meetings and meetings of our Board committees on which he or she served during fiscal 2019. Our Board of Directors strongly encourages each director to attend our annual meeting of stockholders. All of our directors standing for election at the 2018 annual meeting of stockholders were in attendance.

Strong Director Engagement

Average director attendance at fiscal 2019 Board and committee meetings

Board Audit
94% 95%
Compensation                      Governance
97% 100%
Executive
100%

Over 95% Board and committee meeting aggregate attendance in fiscal 2019

                                                                          
DIRECTOR INDEPENDENCE

Our Board of Directors has reviewed and discussed information provided by the directors and our company with regard to each director’s business and personal activities, as well as those of the director’s immediate family members, as they may relate to our company or our management. The purpose of this review is to determine whether there are any transactions or relationships that would be inconsistent with a determination that a director is independent under the listing standards of the Nasdaq Stock Market. Based on its review, our Board has affirmatively determined that, except for serving as a member of our Board of Directors, none of the non-employee director nominees for the Annual Meeting (Messrs. Cole, Doluca, Lauer or Massengill, or Mses. Alexy, Cote or Streeter) or the other current members of our Board who are not standing for re-election at the Annual Meeting due to reaching the retirement age under our retirement policy (Mr. DeNero and Mr. Lambert) has any relationship that, in the opinion of our Board, would interfere with such director’s exercise of independent judgment in carrying out his or her responsibilities as a director, and that each such director qualifies as “independent” as defined by the listing standards of the Nasdaq Stock Market. Ms. Paula Price, who resigned from our Board in February 2019, also qualified as independent during the period of her tenure in fiscal 2019. Mr. Milligan is currently a full-time, executive-level employee of our company and, therefore, is not “independent” as defined by the listing standards of the Nasdaq Stock Market.

DIRECTOR NOMINATIONS AND BOARD REFRESHMENT

                                                                          
KEY DIRECTOR CRITERIA

The Governance Committee has adopted a policy regarding critical factors to be considered in selecting director nominees, which include: the nominee’s personal and professional ethics, integrity and values; the nominee’s intellect, judgment, foresight, skills, experience (including understanding of marketing, finance, our technology and other elements relevant to the success of a company such as ours) and achievements, all of which are viewed in the context of the overall composition of our Board; the absence of any conflict of interest (whether due to a business or personal relationship) or legal impediment to, or restriction on, the nominee serving as a director; having a majority of independent directors on our Board; and representation of the long-term interests of our stockholders as a whole and a diversity of backgrounds and expertise, which are most needed and beneficial to our Board and our company. Although our Board of Directors has not established specific diversity guidelines, the Governance Committee is committed to Board diversity and takes into account the personal characteristics, experience and skills of current and prospective directors, including gender, race and ethnicity, to ensure that a broad range of perspectives is represented on our Board to effectively perform its governance role and oversee the execution of our company’s strategy.

As further detailed below, the Governance Committee annually evaluates the size and composition of our Board and assesses whether the composition appropriately aligns with our company’s evolving business and strategic needs. The focus is on ensuring that our Board is composed of directors who possess a wide variety of relevant skills, expertise and backgrounds, bring diverse viewpoints and perspectives, and effectively represent the long-term interests of stockholders. Through this process, our Board of Directors, upon the recommendation of the Governance Committee, develops a list of qualifications and skills sought in director candidates. Specific director criteria evolve over time to reflect our company’s strategic and business needs and the changing composition of our Board.

20     WESTERN DIGITAL


Table of Contents

CORPORATE GOVERNANCE MATTERS

                                                                          
DIRECTOR NOMINATION PROCESS

 

Assess

  Our Board of Directors, led by the Governance Committee, evaluates the size and composition of our Board at least annually, giving consideration to evolving skills, perspective and experience needed on our Board to perform its governance and oversight role as the business transforms and the underlying risks change over time. Among other factors, the Governance Committee considers our company’s strategy and needs, as well as our directors’ skills, expertise, experiences, gender, race, ethnicity, tenure and age. As part of the process, our Board assesses the skills and expertise of our current directors to then develop criteria for potential candidates to be additive and complementary to the overall composition of our Board. Specific director criteria evolve over time to reflect our company’s strategic and business needs and the changing composition of our Board. Please see the section entitled “Corporate Governance Matters—Board Processes and Policies—Board Evaluation” for additional information on our Board’s self-assessment process.
        
 

Identify

 

The Governance Committee is authorized to use any methods it deems appropriate for identifying candidates for membership on our Board of Directors, including considering recommendations from incumbent directors, management or stockholders and engaging the services of an outside search firm to identify suitable potential director candidates.

 
 

Evaluate

 

The Governance Committee has established a process for evaluating director candidates that it follows regardless of who recommends a candidate for consideration. Through this process, the Governance Committee considers a candidate’s skills and experience and other available information regarding each candidate. Following the evaluation, the Governance Committee recommends nominees to our Board.

 
 

Nominate

Our Board of Directors considers the Governance Committee’s recommended nominees, analyzes their independence and qualifications and selects nominees to be presented to our stockholders for election to our Board.

 

 

                                                                          
STOCKHOLDER NOMINATIONS AND RECOMMENDATIONS OF DIRECTOR CANDIDATES

The Governance Committee may receive recommendations for director candidates from our stockholders. Additionally, our stockholders may nominate director candidates for inclusion in our proxy materials pursuant to the proxy access right set forth in our By-laws or may nominate directors for election at future annual meetings of our stockholders pursuant to the advance notice provisions set forth in our By-laws, in each case as described further below.

2019 PROXY STATEMENT     21


Table of Contents

CORPORATE GOVERNANCE MATTERS

Stockholder Recommendations of Director Candidates

A stockholder may recommend a director candidate to the Governance Committee by delivering a written notice to our Secretary at our principal executive offices and including the following in the notice: the name and address of the stockholder as they appear on our books or other proof of share ownership; the class and number of shares of our common stock beneficially owned by the stockholder as of the date the stockholder gives written notice; a description of all arrangements or understandings between the stockholder and the director candidate and any other person(s) pursuant to which the recommendation or nomination is to be made by the stockholder; the name, age, business address and residence address of the director candidate and a description of the director candidate’s business experience for at least the previous five years; the principal occupation or employment of the director candidate; the class and number of shares of our common stock beneficially owned by the director candidate; the consent of the director candidate to serve as a member of our Board of Directors if appointed or elected; and any other information required to be disclosed with respect to a director nominee in solicitations for proxies for the election of directors pursuant to applicable rules of the SEC.

The Governance Committee may require additional information as it deems reasonably required to determine the eligibility of the director candidate to serve as a member of our Board of Directors. Stockholders recommending candidates for consideration by our Board in connection with the next annual meeting of stockholders should submit their written recommendation no later than June 1 of the year of that meeting.

The Governance Committee will evaluate director candidates recommended by stockholders for election to our Board in the same manner and using the same criteria as it uses for any other director candidate. If the Governance Committee determines that a stockholder-recommended candidate is suitable for membership on our Board of Directors, it will include the candidate in the pool of candidates to be considered for nomination upon the occurrence of the next vacancy on our Board or in connection with the next annual meeting of stockholders.

Proxy Access

Our By-laws provide for proxy access, a means for our stockholders to include stockholder-nominated director candidates in our proxy materials for annual meetings of stockholders. A stockholder, or group of not more than 20 stockholders (collectively, an “eligible stockholder”), meeting specified eligibility requirements is generally permitted to nominate the greater of (i) two director nominees or (ii) 20% of the number of directors on our Board. In order to be eligible to use the proxy access process, an eligible stockholder must, among other requirements, have owned 3% or more of our outstanding common stock continuously for at least three years. Use of the proxy access process to submit stockholder nominees is subject to additional eligibility, procedural and disclosure requirements set forth in Section 2.14 of our By-laws.

An individual or group of stockholders representing 3% of outstanding shares for 3 years Has the ability to nominate the greater of 2 nominees or 20% of directors

Other Director Nominations

Stockholders who wish to nominate a person for election as a director in connection with an annual meeting of stockholders (as opposed to making a recommendation to the Governance Committee as described above) and who do not intend for the nomination to be included in our proxy materials pursuant to the proxy access process described above must comply with the advance notice requirement set forth in our By-laws. Pursuant to this advance notice requirement, a stockholder must deliver written notice of the nomination to our Secretary in the manner described in Section 2.11 of our By-laws and within the time periods set forth in this Proxy Statement in the section entitled “Additional Information—General Information About the Annual Meeting—Submission of Stockholder Proposals and Director Nominations.”

22     WESTERN DIGITAL


Table of Contents

CORPORATE GOVERNANCE MATTERS

                                                                          
BOARD REFRESHMENT

Our Board of Directors believes that periodic Board refreshment can provide new experiences and fresh perspectives to our Board and is most effective if it is sufficiently balanced to maintain continuity among Board members that will allow for the sharing of historical perspectives and experiences relevant to our company. Our Board seeks to achieve this balance through its director succession planning process and director retirement policy described below. Our Board also utilizes the annual Board and individual director assessment process discussed below under “Corporate Governance Matters—Board Processes and Policies—Board Evaluation” to help inform its assessment of our Board’s composition and Board refreshment needs.

Succession Planning

Our Board of Directors is focused on ensuring that it has members with diverse skills, expertise, experience, tenure, age and backgrounds, including gender, race and ethnicity, because a broad range of perspectives is critical to effective corporate governance and overseeing the execution of our company’s strategy. The Governance Committee has developed a long-range succession plan to identify and recruit new directors, and our Board has appointed four new directors in the past five years. The Governance Committee also plans for the orderly succession of the Chairs of our Board’s committees, providing for their identification and development and the transition of responsibilities. Since the beginning of fiscal 2019, the Governance Committee’s succession planning focused primarily on the composition of our Board and its committees, upcoming retirements under our retirement policy, succession plans for committee Chairs, our commitment to Board diversity, including gender, skill sets and backgrounds, and recruiting new directors. As part of our Board evaluation process and taking into account expected director retirements, our Board developed criteria for potential candidates to be additive and complementary to the overall composition of our Board. The Governance Committee engaged an independent search firm to assist with its recruitment efforts and recommend candidates that satisfied our Board’s criteria.

Our Board appointed three new directors in fiscal 2019 pursuant to our ongoing succession planning and Board refreshment efforts and in anticipation of the retirements of Mr. DeNero and Mr. Lambert, who will not stand for re-election this year pursuant to our retirement policy (described below). Our Board of Directors and the Governance Committee prioritized directors who could bring complementary skills and experience and who would add diverse perspectives and backgrounds to our Board, which we believe are critical to enabling our Board to effectively represent the long-term interests of our stockholders.

APPOINTMENT OF TUNÇ DOLUCA

In August 2018, our Board appointed Mr. Doluca as a director. Mr. Doluca brings to our Board over 30 years of executive leadership and technical experience in the semiconductor industry, and he has a strong background in operations, manufacturing and strategy execution. Mr. Doluca was appointed to the Compensation Committee in November 2018, in anticipation of the retirement of Mr. Lambert, who currently serves on the Compensation Committee.

APPOINTMENTS OF KIMBERLY ALEXY AND STEPHANIE STREETER

In November 2018, our Board appointed Ms. Alexy and Ms. Streeter as directors. Ms. Alexy is the founder of Alexy Capital Management, a private investment fund, and has been an active board member at multiple publicly-traded technology companies for many years. She brings to our Board her deep experience in finance, securities, corporate governance, cybersecurity and the Internet of Things. Ms. Streeter is an accomplished business executive who provides management and operational expertise to our Board. Ms. Streeter served as the chief executive officer of Libbey Inc., a producer of glass tableware and other tabletop products, where she developed and implemented a new corporate strategy and reconstructed the company’s balance sheet, manufacturing network and cost base.

Ms. Alexy and Ms. Streeter were both appointed to the Audit Committee in November 2018. In July 2019, Ms. Alexy was appointed as Chair of the Audit Committee to succeed Mr. DeNero. Mr. DeNero remains on the Audit Committee through his retirement to ensure a smooth transition.

Ms. Streeter was also appointed to the Governance Committee in February 2019.

With these changes, our Board of Directors has sought to refresh its composition while maintaining institutional knowledge with directors of varying lengths of tenure and has implemented forward-looking plans for committee succession. The Governance Committee is committed to continuing to identify and recruit highly qualified director candidates with diverse experiences, perspectives and backgrounds to join our Board.

2019 PROXY STATEMENT     23


Table of Contents

CORPORATE GOVERNANCE MATTERS

Retirement Policy

To help facilitate the periodic refreshment of our Board, our Corporate Governance Guidelines provide that no director shall be nominated for re-election after the director has reached the age of 72, unless our Board of Directors determines in a particular instance that longer tenure is in the best interests of our company and our stockholders.

In accordance with our retirement policy, Mr. DeNero and Mr. Lambert are not standing for re-election at the Annual Meeting. In addition, Ms. Cote will reach retirement age under our retirement policy in 2021.

THE BOARD’S ROLE AND RESPONSIBILITIES

                                                                          
STOCKHOLDER ENGAGEMENT

Our Board of Directors and management are committed to regular engagement with our stockholders and soliciting their views and input on important performance, executive compensation, governance, environmental, social, human capital management and other matters.

Board-Driven Engagement. In addition to the Governance Committee’s oversight of the stockholder engagement process and the periodic review and assessment of stockholder input, our directors also engage directly with our stockholders by periodically participating in stockholder outreach, as appropriate.

Year-Round Engagement and Board Reporting. Our executive management members and directors, together with our investor relations and legal teams, conduct outreach to stockholders throughout the year to obtain their input on key matters and keep our management and Board informed about the issues that our stockholders tell us matter most to them.
Transparency and Informed Compensation Decisions and Governance Enhancements. The Compensation and Governance Committees routinely review our executive compensation design and governance practices and policies, respectively, with an eye towards continual improvement and enhancements. Stockholder input is regularly shared with our Board, its committees and management, facilitating a dialogue that provides stockholders with transparency into our executive compensation design and governance practices and considerations, and informs our company’s enhancement of those practices.

2019 Stockholder Engagement

As a continuation of our robust outreach program, over the past year, we reached out to stockholders representing approximately 46% of shares outstanding. Our engagement team conducted calls with investors representing approximately 12% of shares outstanding, with the remainder either not responding or confirming that a follow-up discussion was not necessary at this time. While our discussions with investors covered a variety of topics, there were a few key areas of focus in our conversations:

Board composition and refreshment efforts, including the recent additions to our Board;
Executive compensation philosophy and program design, including how investor feedback drove recent program enhancements; and
Diversity and culture at Western Digital, including recent developments and enhanced disclosure in our 2018 Sustainability Report.

These views were shared with our Board and its committees, where applicable, for their consideration.

24     WESTERN DIGITAL


Table of Contents

CORPORATE GOVERNANCE MATTERS

                                                                          
CORPORATE RESPONSIBILITY AND SUSTAINABILITY

We believe responsible and sustainable business practices support our long-term success as a company. Certainly, those practices help keep our communities and our environment vibrant and healthy. But they also lead us to more efficient and resilient business operations. They help us meet our customers’ efficiency targets. They reduce risks of misconduct and legal liability. They enhance the reliability of our supply chain. And they improve the health, well-being, engagement and productivity of our employees. We believe that being an industry leader is not just about having talented employees or innovative products. It is also about doing business the right way, every day. That is why our commitment to sound corporate responsibility is deeply rooted in all aspects of our business.

We are happy to share more details about our recent progress in this area through our 2018 Sustainability Report located on our Corporate Sustainability page at www.westerndigital.com (which is not incorporated by reference herein). The Governance Committee oversees our corporate responsibility and sustainability policies and programs pursuant to its charter. Below are some highlights from our 2018 Sustainability Report:

     
Architecting
Sustainable Products
Architecting a Responsible
Supply Chain
Architecting Vibrant Communities
We take responsibility for how our products impact the environment and communities. We believe transparency enhances accountability, helping us improve the long-term sustainability of our products and business.

__________
Efficient packaging conserved 650,000 kg of paper during calendar 2018

__________
Technology innovations reduced power consumption on a per-gigabyte basis by 970 million kilowatt-hour
The need for greater transparency is driving behavioral change in corporate supply chains, as global interconnectedness is greater than ever. We embrace and facilitate this change with our forward-thinking responsible supply chain program, based on a commitment to collaborate with suppliers and key stakeholders to ensure that our value chain is socially responsible and sustainable over the long run.

__________
Achieved one Platinum, two Gold and two Silver certificates after Responsible Business Alliance factory audits

__________
Audited all of our suppliers of conflict minerals, achieving fully compliant sourcing by the end of calendar 2018
We believe that corporate sustainability should go beyond environmental and labor considerations to provide a positive social impact on the local communities in which we operate. This has led us to an impactful giving and volunteerism program around the world, a deep commitment to inspiring and providing opportunities for future talent through STEM education and scholarship programs, and utilizing our technology and expertise to create positive change on a macro scale.

__________
In calendar 2018, employees from 18 different sites volunteered 5,000 hours for Earth Day

__________
Employees packaged more than two million meals for people without adequate food

 

     
Architecting an Ethical Business Architecting a Better Environment Architecting a Stronger Workforce

Working with integrity is a part of our culture—one that we work hard to maintain and enhance. Our efforts help earn the trust of our customers and business partners, inspire our employees, deliver value for our stockholders and improve our communities.

__________
Recognized as one of the World’s Most Ethical Companies in February 2019

__________
Conducted global code of conduct training with nearly 30,000 employees in 39 countries over the past year
As we look to the future, Western Digital recognizes that environmental stewardship is critical to the long-term success of our company, our customers and other stakeholders. We are fully committed to responsible use of the Earth’s natural resources and we strive to minimize any impact on climate change as we work together to architect a better future.

__________
Achieved a 3% reduction in overall energy consumption in calendar 2018

__________
Reduced our scope 1 greenhouse gas emissions by 17% between calendar 2016 and 2018
Our people are our most important asset. Calendar 2018 was a milestone year for our workforce: we focused on creating a unified culture, amplifying the best aspects of our three legacy companies and architecting our path forward as one Western Digital.

__________
Received a perfect score for diversity and inclusion for LGBTQ employees from Human Rights Campaign

__________
Sponsor employee resource groups, including for diverse employees, female employees, LGBTQ employees and veterans

2019 PROXY STATEMENT     25


Table of Contents

CORPORATE GOVERNANCE MATTERS

Oversight by Our Board of Directors

Sound corporate responsibility in all aspects of our business is a focus of our Board. To better reflect that focus and commitment, in August 2019, we amended the Governance Committee’s charter to specify that the Governance Committee will assist our Board in overseeing our corporate responsibility and sustainability policies and programs. The Governance Committee will provide Board-level input on our social, environmental and human rights policies and programs.

Unified Culture

Our employees drive our success and shape our future. To continue leading the data storage infrastructure industry, we rely on highly skilled individuals to drive our culture of innovation. We strive to create an environment where employees feel connected and committed to our mission and vision: to be recognized as the world’s leading data infrastructure company, architecting how data enables the world to solve its biggest challenges.

The past year was a milestone year for our workforce, as we focused on creating a unified culture, amplifying the best aspects of our three legacy companies, and architecting our path forward as one Western Digital. To this end, we have transformed our Human Resource function to focus on two primary areas: culture and people strategy, and diversity and inclusion. Our Board of Directors is committed to creating a culture of belonging for all of our employees—all genders, races, ages and any other dimension of diversity—across all levels of our organization.

Diversity and Inclusion

We believe that the more diverse our backgrounds and experiences, the more opportunity for success. In fiscal 2019, we hired our first-ever Vice President of Diversity and Inclusion, who is responsible for executing our global diversity and inclusion strategy. Over the past year, we have made progress in a number of key areas, including: implementing unconscious bias training across the enterprise, expanding our employee resource groups, creating a women’s leadership development program, initiating the development of strategy to increase diversity in our candidate pipeline, publishing our Diversity and Inclusion Statement company-wide and implementing a pay equity analysis. The Human Rights Campaign also awarded Western Digital a perfect score for diversity and inclusion for LGBTQ employees.

Human Rights

Respecting human rights is a non-negotiable and deeply-ingrained aspect of how we do business. We work diligently to ensure that all of our employees, regardless of where in the world they are located or what role they have, are provided with a working environment where they are treated fairly and with respect and dignity, and are provided with safe working conditions. We protect the rights of our employees through various internal policies, regular audits and risk assessments, full payment of any recruiting fees and active participation in the Responsible Labor Initiative. We are also currently developing a standalone global human rights policy.

26     WESTERN DIGITAL


Table of Contents

CORPORATE GOVERNANCE MATTERS

                                                                          
RISK OVERSIGHT AND COMPENSATION RISK ASSESSMENT

Board’s Role in Risk Oversight

Our Board of Directors’ role in risk oversight involves both our full Board and its committees. Individual committees are charged with identifying potential risks to our company during the course of their respective committee work. If a committee identifies a potential risk during the course of its work, the potential risk is raised to the Audit Committee and full Board for inclusion in our enterprise risk management (“ERM”) process described below. Our Board of Directors believes that the processes it has established for overseeing risk would be effective under a variety of leadership frameworks, and therefore such processes do not materially affect its choice of leadership structure as described in the section entitled “Board Leadership Structure” below.

   

Board of Directors

   

Our Board as a whole is updated throughout the year on specific risks and mitigating measures in the course of its review of our strategy and business plan, and through reports to our Board by its respective committees and senior members of management.

                                                                                                                     
Audit Committee
Oversees our ERM process on behalf of our Board
Our chief internal audit executive, who reports directly to the Audit Committee, facilitates the ERM process as part of our strategic planning process
Reviews and discusses with management our risk assessment and enterprise risk management policies as related to the Audit Committee’s areas of responsibility
Oversees the following additional risk topics:
Financial reporting, accounting, internal controls and fraud
Compliance with legal and regulatory requirements
Cybersecurity, including quarterly updates from our Vice President of Information Security
Tax and transfer pricing matters
Global political and market conditions
Other business risks, including strategic partner and supplier relationships, industry cycles, product development, expansion into new markets and other risks identified in our 2019 Annual Report on Form 10-K
ERM Process
1
Each of our major business unit and functional area heads, with the assistance of their staff, meet periodically with representatives from our internal audit department to identify risks that could affect achievement of our business goals and strategy, and develop risk mitigation measures and contingency plans.

2
After input from these individuals is received, our internal audit function summarizes the results of these meetings and creates a consolidated risk profile.

3
The risk profile is provided to our Chief Executive Officer, President and Chief Operating Officer and Chief Financial Officer for final review.

4
The risk profile is reviewed and discussed by the Audit Committee on a quarterly basis. Senior management also makes the analysis available to our Board on a quarterly basis.

5
The final analysis, including any input from the Audit Committee and full Board, is reviewed and used by our internal audit function in its internal audit planning.

 
Compensation Committee
Oversees the following risk topics:
Compensation programs, policies and practices
Equity and other incentive plans
Recruiting and retention
 
Governance Committee
Oversees the following risk topics:
Board and committee composition, including Board leadership structure
Director succession planning
Corporate governance policies and practices
Corporate responsibility and sustainability policies and programs
                                                            
                                                            

Management

 
Major business unit and functional area heads work with the internal audit department to identify risks that could affect achievement of business goals and strategy.
 
Our Chief Executive Officer, President and Chief Operating Officer and Chief Financial Officer review and discuss the consolidated risk profile with the internal audit function as part of the ERM process.
Senior management makes the analysis of the risk profile available to the full Board on a quarterly basis.

2019 PROXY STATEMENT     27


Table of Contents

CORPORATE GOVERNANCE MATTERS

Compensation Risk Assessment

Consistent with SEC disclosure requirements, we reviewed our fiscal 2019 compensation policies and practices to determine whether they encourage excessive risk taking. We concluded that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on our company.

Chief Executive Officer Evaluation and Succession Planning

The Governance Committee is responsible for developing and overseeing the process for annually evaluating our Chief Executive Officer’s performance. Our Chairman of the Board, our Lead Independent Director and the Compensation Committee review and approve our Chief Executive Officer’s goals and objectives and evaluate our Chief Executive Officer’s performance in light of those goals and objectives, with input from our Board. Following the evaluation of our Chief Executive Officer’s performance, the Compensation Committee determines and approves our Chief Executive Officer’s compensation.

Our Board of Directors oversees Chief Executive Officer and key management personnel succession planning, which is reviewed at least annually. Our Chief Executive Officer and Chief Human Resources Officer provide our Board with recommendations and evaluations of potential Chief Executive Officer successors and review their development plans. Our Board of Directors reviews potential internal candidates with our Chief Executive Officer and Chief Human Resources Officer, including the qualifications, experience and development priorities for these individuals. Directors engage with potential Chief Executive Officer and key management personnel successors at Board and committee meetings and in less formal settings to allow directors to personally assess candidates. Further, our Board periodically reviews the overall composition of our key management personnel’s qualifications, tenure and experience.

Our Board of Directors has also adopted an emergency Chief Executive Officer succession plan. The plan will become effective in the event our Chief Executive Officer becomes unable to perform his or her duties in order to minimize potential disruption or loss of continuity to our company’s business and operations. Our emergency Chief Executive Officer succession plan is reviewed annually by the Governance Committee and our Board.

BOARD STRUCTURE

                                                                          
BOARD LEADERSHIP STRUCTURE

Our Board of Directors does not have a policy with respect to whether the roles of Chairman of the Board and Chief Executive Officer should be separate and, if they are to be separate, whether our Chairman of the Board should be selected from our directors who are not our employees (referred to in this Proxy Statement as our “non-employee directors”) or be an employee. We currently separate the roles of Chief Executive Officer and Chairman of the Board, with Mr. Massengill currently serving as Chairman of the Board. Our Board of Directors believes this is the appropriate leadership for our company at this time because it permits Mr. Milligan, as our Chief Executive Officer, to focus on setting the strategic direction of our company and the day-to-day leadership and performance of our company, while permitting our Chairman of the Board to focus on providing guidance to our Chief Executive Officer and setting the agenda for Board meetings. Our Board of Directors also believes that the separation of the Chief Executive Officer and Chairman of the Board roles assists our Board in providing robust discussion and evaluation of strategic goals and objectives.

Our Corporate Governance Guidelines provide that our Board will appoint a Lead Independent Director if our Chairman of the Board is not an independent director under the Nasdaq Stock Market listing standards or if our Board otherwise deems it appropriate. Although our Board has determined that Mr. Massengill is independent under the Nasdaq Stock Market listing standards, because he is a former executive Chairman of the Board, President and Chief Executive Officer of our company, our Board determined it was appropriate to appoint Mr. Lauer as our Lead Independent Director.

Our Board of Directors acknowledges that no single leadership model is right for all companies at all times. As such, our Board periodically reviews its leadership structure and may, depending on the circumstances, choose a different leadership structure in the future.

28     WESTERN DIGITAL


Table of Contents

CORPORATE GOVERNANCE MATTERS

                                                                          
LEAD INDEPENDENT DIRECTOR

The duties of our Lead Independent Director include:

acting as a liaison between our independent directors and management;

assisting our Chairman of the Board in establishing the agenda for Board meetings;

coordinating the agenda for, and chairing, the executive sessions of our independent directors;

presiding at any Board meeting at which our Chairman is not present;

being available for engagement with stockholders as appropriate; and

performing such other duties as may be specified by our Board of Directors from time to time.

Mr. Lauer has devoted significant time to fulfilling his responsibilities as our Lead Independent Director. In addition to his duties outlined above, Mr. Lauer:

leads our stockholder engagement efforts;

participates in the performance evaluation of our Chief Executive Officer;

oversees our Board and committee evaluations and individual director assessments;

coordinates our Chief Executive Officer succession planning; and

oversees our Board succession planning.

Our independent directors also meet regularly in executive sessions without management to review, among other things, our strategy, financial performance, management effectiveness and succession planning.

                                                                          
COMMITTEES

Our Board of Directors has standing Audit, Compensation, Governance and Executive Committees. Each of the standing committees operates pursuant to a written charter that is available on our website under “Leadership & Governance” at investor.wdc.com. Our Board has affirmatively determined that all members of the Audit, Compensation and Governance Committees are independent as defined under the listing standards of the Nasdaq Stock Market.

AUDIT COMMITTEE
                        
KEY RESPONSIBILITIES
Solely responsible for appointing, compensating and overseeing independent accountants
Pre-approves all audit and non-audit services
Reviews annual and quarterly financial statements
Reviews adequacy of accounting and financial personnel resources
Reviews internal controls and internal audit program
Reviews and discusses with management risk assessment and enterprise risk management policies, including risks related to cybersecurity, global political conditions and compliance with regulatory requirements
Oversees ethics and compliance program









     

COMMITTEE MEMBERS

Kimberly
E. Alexy
(Chair)

 

Martin I.
Cole

Henry T.
DeNero

Stephanie A.
Streeter

 

   

Meetings Held in Fiscal 2019: 11

Committee Report page 94
 

Our Board has affirmatively determined that each member of the Audit Committee is independent as defined under the listing standards of the Nasdaq Stock Market and applicable rules of the SEC and that all members are “audit committee financial experts” as defined by rules of the SEC.

2019 PROXY STATEMENT     29


Table of Contents

CORPORATE GOVERNANCE MATTERS

COMPENSATION COMMITTEE
                        
KEY RESPONSIBILITIES
Evaluates and approves executive officer compensation
Reviews and makes recommendations on non-employee director compensation
Reviews and approves corporate goals and objectives for our Chief Executive Officer’s compensation and evaluates our Chief Executive Officer’s performance in light of those goals and objectives
Oversees incentive and equity-based compensation plans
Reviews and recommends changes to benefit plans requiring Board approval
Reviews and approves any compensation recovery (clawback) policy or stock ownership guidelines applicable to executive officers







     

COMMITTEE MEMBERS

Len J. Lauer
(Chair)

 

Kathleen A.
Cote

Tunç Doluca

Michael D.
Lambert

 

   

Meetings Held in Fiscal 2019: 9

Committee Report page 42
 

Our Board has affirmatively determined that each member of the Compensation Committee is independent as defined under the listing standards of the Nasdaq Stock Market.

The Compensation Committee retained Willis Towers Watson as its compensation consultant during fiscal 2019 to provide objective advice and counsel to the Compensation Committee on all matters related to the compensation of executive officers and directors. Please see the section entitled “Executive Compensation—Compensation Discussion and Analysis—Fiscal 2019 Philosophy, Objectives and Process—Role of the Independent Compensation Consultant” for more information. Certain of our executive officers and other employees also assist the Compensation Committee in the administration of our executive compensation program, as explained further in the section entitled “Executive Compensation—Compensation Discussion and Analysis—Fiscal 2019 Philosophy, Objectives and Process—Role of Management.” The Compensation Committee’s processes and procedures for determining non-employee director compensation are described in the section entitled “Director Compensation.”


GOVERNANCE COMMITTEE
                        
KEY RESPONSIBILITIES
Develops and recommends a set of corporate governance principles
Evaluates and recommends the size and composition of our Board and committees and functions of committees
Develops and recommends Board membership criteria
Identifies, evaluates and recommends director candidates
Reviews corporate governance issues and practices
Manages annual Board and committee evaluation process
Oversees evaluation of our Chief Executive Officer by our Board and the Compensation Committee
Develops and oversees our Chief Executive Officer succession planning process
Assists our Board in overseeing corporate responsibility and sustainability policies and programs
Reviews and oversees responses regarding stockholder proposals relating to corporate governance, corporate responsibility or sustainability matters







 
   

COMMITTEE MEMBERS

Len J. Lauer
(Chair)

 

Martin I.
Cole

Kathleen A.
Cote

Stephanie A.
Streeter

 

   

Meetings Held in Fiscal 2019: 7
 
 
 
 
 
 

30     WESTERN DIGITAL


Table of Contents

CORPORATE GOVERNANCE MATTERS

EXECUTIVE COMMITTEE
                    
KEY RESPONSIBILITIES
Has powers of our Board in management of our business affairs in between meetings of our Board, subject to applicable law or the rules and regulations of the SEC or the Nasdaq Stock Market and specific directions given by our Board
 

COMMITTEE MEMBERS

Stephen D. Milligan
(Chair)

Henry T.
DeNero

Matthew E.
Massengill

 

Meetings Held in Fiscal 2019: 1

Our Board has also established an Equity Awards Committee as a Board committee with limited delegated authority to approve and establish the terms of restricted stock unit (“RSU”) awards granted to eligible participants under our 2017 Performance Incentive Plan who are vice president-level or below, subject to individual and aggregate award limits, on pre-determined, fixed grant dates. Mr. Milligan is currently the sole director serving on the Equity Awards Committee. The Equity Awards Committee is required to report periodically to our Board or the Compensation Committee.

BOARD PROCESSES AND POLICIES

                                                                          
CORPORATE GOVERNANCE GUIDELINES AND CODE OF BUSINESS ETHICS

Our Board of Directors has adopted Corporate Governance Guidelines, which provide the framework for the governance of our company and represent our Board’s current views with respect to selected corporate governance issues considered to be of significance to stockholders, including:

the role and responsibilities of our Lead Independent Director;
director nomination procedures and qualifications;
director independence;
director orientation and continuing education;
annual performance evaluations of our Board and committees; and
succession planning and management development.

Our Board of Directors has also adopted a Code of Business Ethics that applies to all of our directors, employees and officers, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The current versions of the Corporate Governance Guidelines and the Code of Business Ethics are available on our website under “Leadership & Governance” at investor.wdc.com. To the extent required by applicable rules adopted by the SEC or the Nasdaq Stock Market, we intend to promptly disclose future amendments to certain provisions of the Code of Business Ethics, or waivers of such provisions granted to executive officers and directors, on our website under “Leadership & Governance” at investor.wdc.com.

2019 PROXY STATEMENT     31


Table of Contents

CORPORATE GOVERNANCE MATTERS

                                                                          
COMMUNICATION WITH MANAGEMENT

We have devoted significant effort in recent years to enhancing communication between our Board and management and have adopted the following practices to ensure clear, timely and regular communication between directors and management:

Business Updates. In between Board meetings, management provides our Board with updates on our business performance.
Meeting Agendas and Presentations. Our Chairman of the Board and committee Chairs regularly communicate with management to discuss the development of meeting agendas and presentations.
Developing Matters. In between Board meetings, directors receive prompt updates from management on developing matters affecting our company and our business.
Reference Materials. Directors also regularly receive quarterly strategy updates, securities analysts’ reports, investor communications, company publications, news articles and other reference materials.

                                                                          

DIRECTOR ORIENTATION AND EDUCATION

All new directors participate in an extensive director orientation program. New directors engage with members of the executive team and senior management to review, among other things, our historical business and go-forward strategy, technology, finance matters (tax, treasury and accounting), internal audit and enterprise risk matters, human resources matters, corporate governance policies and practices, Global Code of Conduct and legal matters. We provide new directors with written materials to supplement the management meetings to permit them to further understand our business, industry and product portfolio. In addition, we offer tours of our facilities. We have also implemented a mentorship program to pair new directors with longer tenured directors to facilitate a smooth transition onto our Board. Based on input from our directors, we believe our director orientation program, coupled with participation in regular Board and committee meetings, provides new directors with a strong foundation in our business, connects directors with members of management with whom they will interact and accelerates their effectiveness to engage fully in Board deliberations. Directors are provided additional orientation and educational opportunities upon acceptance of new or additional responsibilities on our Board and in committees that focus on those specific responsibilities.

Because our Board believes that ongoing director education is vital to the ability of directors to fulfill their roles, directors are encouraged to participate in external continuing director education programs, and we reimburse directors for their expenses associated with this participation. We also periodically invite to speakers to present during Board meetings on director education topics, such as emerging corporate governance matters.

32     WESTERN DIGITAL


Table of Contents

CORPORATE GOVERNANCE MATTERS

                                                                          
BOARD EVALUATION

Our Board of Directors believes that it is important to assess the performance of our Board, its committees and individual directors and to solicit and act upon the feedback received. Accordingly, the Governance Committee oversees an annual performance evaluation process.

Board and Committee Evaluation Process
1 Evaluation
questionnaires
are completed
Each director completes a written evaluation questionnaire covering various topics, including:
Board succession and the selection and evaluation of Board candidates
Board composition, including size and the mix of skills and experience on our Board
committee composition, structure and performance
Board practices, including the frequency of meetings, input on agendas and decision-making process
communication and relationships with management
procedures for review and approval of strategic operating plans and evaluation of management performance
risk management oversight
Chief Executive Officer and management succession process
    




    
 
2 Outside firm
compiles and
analyzes the
evaluation results
The results of each written evaluation are compiled and analyzed by an outside firm.
 
 
 
 
3 Results are
discussed with the full Board
The performance evaluation results are discussed with the full Board.

Individual Director Assessment Process
1 Evaluation
questionnaires
are completed
Each director completes a written self-evaluation questionnaire covering various topics, including:
contributions to our Board and areas for improvement
meeting attendance, preparation and participation
understanding of our business and strategy
relationships with management and other directors
    




    
 
2 Discussions with
each director
Our Chairman of the Board and/or Lead Independent Director discusses the written self-evaluation questionnaire responses with each director.
 
 
 
 
3 Results are
discussed with the
full Board
The individual assessment results are discussed with the full Board.

Evaluation Results

Our Board of Directors utilizes the results of the Board and committee evaluations and individual assessments of directors in making decisions on the structure of our Board, Board and committee responsibilities, agendas and meeting schedules for our Board and its committees, changes in the performance or functioning of our Board and continued service of individual directors on our Board. In response to director feedback, enhancements have been made and are continuing to be made to Board communications, including regular business updates from management between regularly scheduled Board meetings, and implementation of enhanced communication technologies.

2019 PROXY STATEMENT     33


Table of Contents

CORPORATE GOVERNANCE MATTERS

                                                                          
COMMUNICATING WITH DIRECTORS

Our Board of Directors provides a process for stockholders to send communications to our Board or to individual directors or groups of directors. In addition, interested parties may communicate with our Chairman of the Board or Lead Independent Director (who presides over executive sessions of our independent directors) or with our independent directors as a group. Our Board of Directors recommends that stockholders and other interested parties initiate any communications with our Board (or individual directors or groups of directors) in writing. These communications should be sent by mail to our Secretary at Western Digital Corporation, 5601 Great Oaks Parkway, San Jose, California 95119. This centralized process will assist our Board in reviewing and responding to stockholder and interested party communications in an appropriate manner. The name of any specific intended Board recipient or recipients should be clearly noted in the communication (including whether the communication is intended only for our non-executive Chairman of the Board, Lead Independent Director or for the non-management directors as a group). Our Board of Directors has instructed our Secretary to forward such correspondence only to the intended recipients; however, our Board has also instructed our Secretary, prior to forwarding any correspondence, to review such correspondence and not to forward any items deemed to be of a purely commercial or frivolous nature (such as spam) or otherwise obviously inappropriate for the intended recipient’s consideration. In such cases, our Secretary may forward some of the correspondence elsewhere within our company for review and possible response.

                                                                          
TRANSACTIONS WITH RELATED PERSONS

Policies and Procedures for Approval of Related Person Transactions

Our Board of Directors has adopted a written Related Person Transactions Policy. The purpose of this policy is to describe the procedures used to identify, review, approve and disclose, if necessary, any transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which (i) we were, are or will be a participant, (ii) the aggregate amount involved exceeds or is expected to exceed $120,000 in any fiscal year and (iii) a related person has or will have a direct or indirect material interest. For purposes of the policy, a related person is (a) any person who is, or at any time since the beginning of our last fiscal year was, one of our directors or executive officers or a nominee to become a director, (b) any person who is known to be the beneficial owner of more than 5% of our common stock or (c) any immediate family member of any of the foregoing persons.

Under the policy, once a related person transaction has been identified, the Audit Committee must review the transaction for approval or ratification. In determining whether to approve or ratify a related person transaction, the Audit Committee is to consider all relevant facts and circumstances of the related person transaction available to the Audit Committee. The Audit Committee may approve only those related person transactions that are in, or not inconsistent with, our best interests and the best interests of our stockholders, as the Audit Committee determines in good faith. No member of the Audit Committee will participate in any consideration of a related party transaction with respect to which that member or any member of his or her immediate family is a related person.

Certain Transactions with Related Persons

We have not participated in any transaction with a related person since the beginning of fiscal 2019.

DIRECTOR COMPENSATION

                                                                          
EXECUTIVE SUMMARY

We believe that it is important to attract and retain exceptional and experienced directors who understand our business, and to offer compensation opportunities that further align the interests of our directors with those of our stockholders. Our Board works with the independent compensation consultant to the Compensation Committee to regularly assess the competitiveness and reasonableness of our directors’ compensation. To that end, we established a compensation program for fiscal 2019 for each of our non-employee directors that consisted of a combination of:

annual cash retainer fees; and
equity incentive awards in the form of RSUs.

We also permit directors to participate in our Deferred Compensation Plan. Any director who is employed by us is not entitled to additional compensation under our director compensation program for serving as a director. Our director compensation program for fiscal 2019 is described in more detail in the tables and narrative that follow.

34     WESTERN DIGITAL


Table of Contents

CORPORATE GOVERNANCE MATTERS

Director Compensation Program Review Process
1 Periodic Review
by Compensation
Committee
The Compensation Committee regularly reviews our non-employee director compensation and trends concerning director compensation.
       
 
2 Evaluation by
Compensation
Consultant
The Compensation Committee’s independent compensation consultant periodically reviews and evaluates the competitiveness and reasonableness of our non-employee director compensation program in light of general trends and the director compensation practices of our peer group companies identified in the section entitled “Executive Compensation— Compensation Discussion and Analysis.”
 
 
3 Recommendation
to full Board
After receiving input from its independent compensation consultant, the Compensation Committee makes recommendations to the full Board regarding any changes in our nonemployee director compensation program that the Compensation Committee determines are advisable.
   
 
4 Outcomes After reviewing this input, our Board determines whether any changes should be made to our non-employee director compensation program. No changes were made to our non-employee director compensation program for fiscal 2019.

                                                                          
FISCAL 2019 DIRECTOR COMPENSATION PROGRAM

The following section describes the elements and other features of our director compensation program for fiscal 2019 for non-employee directors.

Non-Employee Director Cash Retainer Fees

The director retainer fees are payable based on Board and committee service from annual meeting to annual meeting and are paid in a lump sum immediately following the annual meeting marking the start of the year. Directors who are appointed to our Board during the year are paid a pro rata amount of the annual director retainer fees based on service to be rendered for the remaining part of the year after appointment.

The following table sets forth the schedule of the annual cash retainer and committee membership fees for non-employee directors for fiscal 2019.

Type of Fee Current
Annual Fee
($)
Annual Cash Retainer 75,000
Additional Non-Executive Chairman of the Board Cash Retainer 100,000
Additional Committee Member Cash Retainers
Audit Committee 15,000
Compensation Committee 12,500
Governance Committee 10,000
Additional Committee Chair Cash Retainers
Audit Committee 25,000
Compensation Committee 22,500
Governance Committee 12,500

If our Chairman of the Board is not one of our employees, he or she is entitled to both the Annual Cash Retainer and the Additional Non-Executive Chairman of the Board Cash Retainer referred to above. A non-employee director serving as Chair of a Board committee receives both the Additional Committee Chair Cash Retainer for that committee and the Additional Committee Member Cash Retainer paid to all members of that committee.

Non-employee directors do not receive a separate fee for each Board or committee meeting they attend. However, we reimburse our non-employee directors for reasonable out-of-pocket expenses incurred to attend each Board or committee meeting.

2019 PROXY STATEMENT     35


Table of Contents

CORPORATE GOVERNANCE MATTERS

Non-Employee Director Equity Awards

RESTRICTED STOCK UNIT GRANT PROGRAM

Our Board of Directors has adopted a Non-Employee Director Restricted Stock Unit Grant Program under our 2017 Performance Incentive Plan. For fiscal 2019, the Non-Employee Director Restricted Stock Unit Grant Program provided that each of our non-employee directors automatically receive, immediately following each annual meeting of stockholders if he or she has been reelected as a director at that annual meeting, an award of RSUs equal in value to $240,000 (or, in the case of our non-employee director serving as Chairman of the Board, $290,000, or, in the case of our Lead Independent Director, $270,000), based on the closing market value of an equivalent number of shares of our common stock on the grant date, rounded down to the nearest whole share.

We award non-employee directors who are newly elected or appointed to our Board after the date of the annual meeting for a given year a prorated award of RSUs for that year. We also award Board members a prorated award of RSUs upon or as soon as practical after first becoming a non-employee director by virtue of retiring or otherwise ceasing to be employed by us after the annual meeting for a given year. The number of RSUs subject to this prorated award is equal to the following, rounded down to the nearest whole share: (i) the number of units subject to the immediately preceding annual RSU award, divided by (ii) 365, multiplied by (iii) the number of days from the date such individual first becomes a non-employee director until the anticipated date for the immediately following annual meeting of stockholders. Each award of RSUs represents the right to receive an equivalent number of shares of our common stock on the applicable vesting date.

The RSUs granted in fiscal 2019 vest 100% upon the earlier of (i) the first anniversary of the grant date, or (ii) immediately prior to the first annual meeting of stockholders held after the grant date. If dividends are paid prior to the vesting and payment of any RSUs granted to our non-employee directors, the director is credited with additional RSUs as dividend equivalents that are subject to the same vesting requirements as the underlying RSUs.

Our stockholders have approved a cap on the value of equity awards that can be granted to our non-employee directors under our 2017 Performance Incentive Plan. Under that cap, the aggregate value of RSUs granted to our non-employee directors cannot exceed $900,000 during the one-year period between our annual meetings of stockholders (or such other annual period as our Board may determine), based on the grant date fair value of the awards.

Deferred Compensation Plan for Non-Employee Directors

For each calendar year, we permit each non-employee director to defer payment of up to 80% of any cash compensation to be paid to the director during the following calendar year in accordance with our Deferred Compensation Plan. We also permit non-employee directors to defer payment of any RSUs awarded under our Non-Employee Director Restricted Stock Unit Grant Program beyond the vesting date of the award. RSUs and other amounts deferred in cash by a director are generally credited and payable in the same manner as amounts deferred by our executive officers and other participants in our Deferred Compensation Plan as further described in the “Fiscal 2019 Non-Qualified Deferred Compensation Table.”

36     WESTERN DIGITAL


Table of Contents

CORPORATE GOVERNANCE MATTERS

                                                                          
DIRECTOR COMPENSATION TABLE FOR FISCAL 2019

The table below summarizes the compensation for fiscal 2019 for each of our non-employee directors. Mr. Milligan was one of our named executive officers for fiscal 2019 and information regarding his compensation for fiscal 2019 is presented in the “Fiscal 2017—2019 Summary Compensation Table” and the related explanatory tables. As our employee, Mr. Milligan did not receive any additional compensation for his services as a director during fiscal 2019.

Name Fees
Earned or
Paid in
Cash
($)(1)
Stock
Awards
($)(2)
Total
($)
Kimberly E. Alexy 85,161 (3) 232,106 317,267
Martin I. Cole 100,000 239,981 339,981
Kathleen A. Cote 97,500 239,981 337,481
Henry T. DeNero 115,000 239,981 354,981
Tunç Doluca 102,095 (4) 274,408 376,503
Michael D. Lambert 87,500 239,981 327,481
Len J. Lauer 132,500 269,972 402,472
Matthew E. Massengill 175,000 289,967 464,967
Paula A. Price(5) 90,000 239,981 329,981
Stephanie A. Streeter     92,500 (6) 232,106 324,606

(1) For a description of the fees earned by the non-employee directors during fiscal 2019, see the disclosure in the section entitled “Fiscal 2019 Director Compensation Program.”
(2) The amounts shown reflect the aggregate grant date fair value of equity awards granted in fiscal 2019 computed in accordance with Accounting Standards Codification 718 (“ASC 718”). On the date of our 2018 annual meeting of stockholders on November 7, 2018, each non-employee director at that time was automatically granted 4,945 RSUs (5,975 RSUs for our Chairman of the Board and 5,563 RSUs for our Lead Independent Director). The grant date fair value of each of these awards, calculated using the closing stock price of a share of common stock on the date of grant, was $239,981 ($289,967 for our Chairman of the Board and $269,972 for our Lead Independent Director). In addition, Mr. Doluca, who was appointed to our Board in August 2018, received a prorated grant of 534 RSUs at that time, with a grant date fair value of $34,427. Ms. Alexy and Ms. Streeter, who were appointed to our Board in November 2018, received prorated grants of 4,768 RSUs at that time, with a grant date fair value of $232,106. Our Non-Employee Director Restricted Stock Unit Grant Program is more fully described above in the section entitled “Non-Employee Director Equity Awards.”

2019 PROXY STATEMENT     37


Table of Contents

CORPORATE GOVERNANCE MATTERS

In addition, the following table presents the aggregate number of shares of our common stock covered by stock awards (and corresponding dividend equivalents settled in stock) held by each of our non-employee directors on June 28, 2019:

Name Aggregate
Number
of Unvested
Restricted
Stock Units
Aggregate
Number of
Deferred
Stock
Units
(a)
Kimberly E. Alexy 4,922
Martin I. Cole 5,105
Kathleen A. Cote 5,105 29,188
Henry T. DeNero 5,105 45,487
Tunç Doluca 5,105
Michael D. Lambert 5,105
Len J. Lauer 5,742
Matthew E. Massengill 6,168
Paula A. Price
Stephanie A. Streeter 4,922

(a) This amount consists of stock units (and corresponding dividend equivalents settled in stock) that the director has elected to defer under our Deferred Compensation Plan pursuant to (i) our Non-Employee Directors Stock-for-Fees Plan in lieu of all or a portion of annual retainer or meeting fees earned by the director during the year of the election, and/or (ii) our Non-Employee Director Restricted Stock Unit Grant Program. The deferred stock units are fully vested and payable in an equivalent number of shares of our common stock on the payment date specified in accordance with the non-employee director’s deferral election. For a description of the Non-Employee Director Restricted Stock Unit Grant Program and our Deferred Compensation Plan, see the section entitled “Fiscal 2019 Director Compensation Program.” The Non-Employee Directors Stock-for-Fees Plan expired in fiscal 2013, and no new awards are permitted under that plan. Directors are entitled to receive dividend equivalents settled in cash on stock units previously deferred under the Non-Employee Directors Stock-for-Fees Plan.

(3) Consists of a prorated annual retainer in the amount of $70,968 and prorated annual Audit Committee retainer in the amount of $14,193 paid to Ms. Alexy in connection with her appointment to our Board and the Audit Committee in November 2018.
(4) Includes a prorated annual retainer in the amount of $14,595 paid to Mr. Doluca in connection with his appointment to our Board in August 2018.
(5) Ms. Price resigned as a member of our Board in February 2019. Her RSU grant in connection with her service as a director for fiscal 2019 was forfeited due to her resignation.
(6) Consists of a prorated annual retainer in the amount of $70,968 and prorated annual Audit Committee retainer in the amount of $14,193 paid to Ms. Streeter in connection with her appointment to our Board and the Audit Committee in November 2018 and a prorated annual Governance Committee retainer in the amount of $7,339 paid to Ms. Streeter in connection with her appointment to the Governance Committee in February 2019.

                                                                          
DIRECTOR STOCK OWNERSHIP GUIDELINES

Under our director stock ownership guidelines, directors are prohibited from selling any shares of our common stock (other than in a same-day sale in connection with an option exercise to pay the exercise price of the option or to satisfy any applicable tax withholding obligations) unless they own “qualifying shares” with a market value of at least $375,000. Common stock, RSUs, deferred stock units and common stock beneficially owned by the director by virtue of being held in a trust, by a spouse or by the director’s minor children are considered qualifying shares for purposes of the stock ownership requirement. Shares the director has a right to acquire through the exercise of stock options (whether or not vested) are not counted towards the stock ownership requirement.

38     WESTERN DIGITAL


Table of Contents

Executive Officers

Listed below are all of our executive officers, followed by a brief account of their business experience. Executive officers are normally appointed annually by our Board at a meeting immediately following the annual meeting of stockholders. There are no family relationships among these officers nor any arrangements or understandings between any officer and any other person pursuant to which an officer was selected.

STEPHEN D. MILLIGAN   56, CHIEF EXECUTIVE OFFICER
        
Mr. Milligan was appointed Chief Executive Officer in January 2013. Biographical information regarding Mr. Milligan is set forth in the section entitled “Corporate Governance Matters—Proposal 1: Election of Directors.”

MICHAEL D. CORDANO   55, PRESIDENT AND CHIEF OPERATING OFFICER
        
Mr. Cordano has served as our President and Chief Operating Officer since October 2015, having previously served as President of our HGST subsidiary from July 2012 to October 2015.
Prior to that, Mr. Cordano served as HGST’s executive vice president, sales & marketing, and president, branded business, from April 2009 to March 2012. From February 2005 to April 2009, he served as chief executive officer and co-founder of Fabrik, Inc., which was acquired by HGST in April 2009. From 1994 to February 2005, he served in various roles of increasing responsibility at Maxtor Corporation, including as the executive vice president of worldwide sales and marketing from April 2001 to February 2005, where he formed and managed the branded products business unit.

SRINIVASAN SIVARAM   59, PRESIDENT, TECHNOLOGY AND STRATEGY
        
Dr. Sivaram has served as our President, Technology and Strategy, since August 2019, having previously served as our Executive Vice President, Silicon Technology & Manufacturing, from November 2017 to August 2019 and our Executive Vice President, Memory Technology, from May 2016 to November 2017.
Prior to that, Dr. Sivaram served as SanDisk’s executive vice president, memory technology, from February 2015 until our acquisition of SanDisk in May 2016, senior vice president, memory technology, from June 2013 to February 2015 and vice president, technology, from January 2006 to March 2007. Dr. Sivaram previously served as chief operating officer for Matrix Semiconductor, Inc. from November 1999 until it was acquired by SanDisk in January 2006. From July 1986 to October 1999, Dr. Sivaram held various engineering and management positions at Intel Corporation. Dr. Sivaram also served as chief executive officer of Twin Creeks Technologies, Inc. from January 2008 to December 2012.

2019 PROXY STATEMENT     39


Table of Contents

EXECUTIVE OFFICERS

ROBERT K. EULAU   57, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
        
Mr. Eulau joined our company in April 2019 and has served as our Executive Vice President and Chief Financial Officer since May 2019.
Prior to that, Mr. Eulau served as chief executive officer and director of Sanmina Corporation, an electronics manufacturing services provider, from October 2017 to August 2018 and as its executive vice president and chief financial officer from September 2009 to October 2017. From March 2006 to June 2008, Mr. Eulau served as executive vice president, chief operating officer and chief financial officer of Alien Technology Corporation, a developer of radio frequency identification products, and as senior vice president and chief financial officer of Rambus Inc., a technology licensing company, from May 2001 to March 2006. Mr. Eulau previously served over 15 years with Hewlett Packard Company in various leadership roles, including vice president and chief financial officer of its business customer organization and vice president and chief financial officer of its computing products business.

MICHAEL C. RAY   52, EXECUTIVE VICE PRESIDENT, CHIEF LEGAL OFFICER AND SECRETARY
        
Mr. Ray has served as our Executive Vice President, Chief Legal Officer and Secretary since November 2015, having previously served as our Senior Vice President, General Counsel and Secretary from April 2011 to November 2015, our Vice President, General Counsel and Secretary from October 2010 to April 2011, and in a number of positions in our legal department, ranging from Senior Counsel to Vice President, Legal Services, from September 2000 to October 2010.
Prior to that, Mr. Ray served as corporate counsel for Wynn’s International, Inc. from September 1998 to September 2000. Mr. Ray previously served as a judicial clerk to the U.S. District Court, Central District of California, and practiced law at O’Melveny & Myers LLP.

LORI S. SUNDBERG   55, EXECUTIVE VICE PRESIDENT AND CHIEF HUMAN RESOURCES OFFICER
        
Ms. Sundberg has served as our Chief Human Resources Officer since February 2018 and was also appointed Executive Vice President in March 2018.
Prior to that, Ms. Sundberg served as senior vice president, global human resources for Jacobs Engineering Group Inc., a technical professional services firm, from April 2013 to July 2017. From July 2017 to February 2018, Ms. Sundberg was on sabbatical. Ms. Sundberg served as the senior vice president of human resources and ethics for Arizona Public Service Company, an electric utility company, from November 2007 to April 2013. From 1998 to 2007, Ms. Sundberg served in a number of global human resources leadership roles with American Express, a financial services company.

40     WESTERN DIGITAL


Table of Contents

Executive Compensation

PROPOSAL 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION
  
Our Board of Directors recommends a vote FOR this Proposal 2 based on the efforts of the Compensation Committee and our Board to design an executive compensation program that provides:
Strong linkage between management and stockholders’ interests
Excellent pay for performance alignment and rewards for long-term value creation
Robust oversight by our Board and the Compensation Committee
     

PROPOSAL DETAILS

We currently provide our stockholders with the opportunity to cast a non-binding, advisory “Say on Pay” vote every year at our annual meeting of stockholders as required by Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Please read the “Executive Compensation—Compensation Discussion and Analysis” section set forth in this Proxy Statement (and the various compensation tables and narratives accompanying those tables included under “Executive Compensation Tables and Narratives”) for information necessary to inform your vote on this Proposal 2.

BOARD RECOMMENDATION AND VOTE REQUIRED FOR APPROVAL

                                                                          
BOARD RECOMMENDATION

Our Board of Directors recommends that you vote to approve, on a non-binding advisory basis, our executive compensation program for our named executive officers as disclosed in these proxy materials:

RESOLVED, that the compensation paid to the named executive officers, as disclosed in this Proxy Statement pursuant to the SEC’s executive compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative discussion that accompanies the compensation tables), is hereby approved.

Proxies received by our Board will be voted FOR this Proposal 2 unless specified otherwise. The next advisory vote on the compensation of our named executive officers will occur at our 2020 annual meeting of stockholders.

                                                                          
VOTE REQUIRED FOR APPROVAL

The affirmative vote of a majority of the shares of our common stock represented in person or by proxy at the Annual Meeting and entitled to vote on this Proposal 2 is required to approve the non-binding advisory vote on the compensation of our named executive officers.

While this vote is nonbinding on our company and our Board of Directors, and will not be construed as overruling a decision by our company or our Board or creating or implying any additional fiduciary duty for our company or our Board, our Board and the Compensation Committee value the opinions of our stockholders and will consider the outcome of the vote when making future compensation decisions for named executive officers under our executive compensation program.

2019 PROXY STATEMENT     41


Table of Contents

EXECUTIVE COMPENSATION

LETTER TO STOCKHOLDERS FROM THE COMPENSATION COMMITTEE

DEAR FELLOW STOCKHOLDERS,

As members of the Compensation Committee, our primary responsibility is to ensure that our executive compensation program aligns with the interests of our stockholders and adheres to our pay-for-performance philosophy, while allowing us the flexibility to attract, retain, develop and motivate highly qualified and skilled executives who can execute on our long-term strategy and drive value creation.

We regularly engage with our stockholders to solicit feedback on our executive compensation program, and the Compensation Committee considers that feedback in designing our executive compensation program. The Compensation Committee also regularly reviews our executive compensation program, working with its independent compensation consultant. As discussed ahead of our 2018 annual meeting of stockholders, in response to stockholder feedback and based on the Compensation Committee’s review of our program, we implemented a number of program changes for fiscal 2019 to better align our program with long-term value creation for our stockholders. The incentive arrangements discussed in the Compensation Discussion and Analysis section on pages 43 to 61 of this Proxy Statement reflect this redesigned compensation program. In discussions with our stockholders both ahead of the 2018 annual meeting of stockholders and in recent months, we received positive feedback regarding the fiscal 2019 compensation program.

As discussed in the Compensation Discussion and Analysis section, fiscal 2019 compensation levels for our continuing named executive officers were lower than fiscal 2018 compensation levels, reflecting the pay-for-performance design of our executive compensation program during a challenging market environment.

We welcome the opportunity to continue the dialogue with our stockholders, who may reach out with any questions or concerns related to our executive compensation program. Correspondence can be addressed to our Secretary, as set forth on page 34 of this Proxy Statement.

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee, comprised of independent directors, has reviewed and discussed the following Compensation Discussion and Analysis with management. Based on that review and discussion, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in the Proxy Statement for our 2019 Annual Meeting of Stockholders and incorporated by reference into our 2019 Annual Report on Form 10-K.

THE COMPENSATION COMMITTEE

LEN J. LAUER KATHLEEN A. COTE TUNÇ DOLUCA MICHAEL D. LAMBERT
Chair

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

All of the Compensation Committee members whose names appear on the Compensation Committee Report above, other than Tunç Doluca, were members of the Compensation Committee during all of fiscal 2019; Mr. Doluca joined our Board in August 2018 and was appointed to the Compensation Committee in November 2018. All members of the Compensation Committee during fiscal 2019 were independent directors and none of them were our employees or former employees or had any relationship with us requiring disclosure of certain transactions with related persons under SEC rules. There are no compensation committee interlocks between us and other entities in which one of our executive officers served on the compensation committee (or equivalent body) or the board of directors of another entity whose executive officer(s) served on the Compensation Committee or our Board.

42     WESTERN DIGITAL


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

                                                                          
OUR NAMED EXECUTIVE OFFICERS

When we refer to our “named executive officers,” we mean:

Stephen D. Milligan Michael D. Cordano Srinivasan Sivaram Robert K. Eulau
Chief Executive President and Chief President, Executive Vice
Officer Operating Officer Technology President and Chief
and Strategy Financial Officer

Under SEC rules, the individuals listed above, as well as Mark P. Long, our former Executive Vice President and Chief Financial Officer, who separated from our company in June 2019, and Martin R. Fink, our former Executive Vice President and Chief Technology Officer, who retired from full-time employment in September 2019, are our named executive officers for fiscal 2019 and are listed in the “Fiscal 2017—2019 Summary Compensation Table.”

                                                                          
OVERVIEW

Fiscal 2019 Executive Summary 44
Fiscal 2019 Philosophy, Objectives and Process 47
Fiscal 2019 Decisions and Outcomes 52
Fiscal 2020 Decisions 58
Other Program Features and Policies 59

                                                                                                   
                                     
Our compensation philosophy for executive officers is based on the belief that the interests of our executives should be closely aligned with our stockholders. To achieve our objectives, our program is focused on aligning pay with performance and linking performance metrics to objectives designed to create long-term stockholder value.

2019 PROXY STATEMENT     43


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

                                                                          
FISCAL 2019 EXECUTIVE SUMMARY

Business Highlights

We are rapidly moving into a data-centric world, where the volume and value of data continue to increase exponentially. In response to this evolution, we transformed our company into a leading global data infrastructure provider.

Managing our global business to provide long-term value for our stockholders requires a diverse team of passionate, innovative, dedicated and experienced executives. Our overriding executive compensation philosophy is clear and consistent — we pay for long-term value creation for our stockholders. Our executives are accountable for the performance of our company and the operations they manage and are compensated primarily based on that performance. We believe that our executive compensation program contributes to a high-performance culture where executives are expected to deliver results that drive sustained profitable growth.

We experienced challenging market and geopolitical conditions in fiscal 2019. In response to these challenges, we executed on enhancing our product portfolio, driving technology advances and lowering our cost and expense structure.

Fiscal 2019 Program Overview

Each year, the Compensation Committee, advised by its independent compensation consultant, undertakes a rigorous process to review and determine executive compensation in the context of an overarching pay-for-performance philosophy. The Compensation Committee believes a substantial portion of our executive compensation should be “incentive-based” and focused on long-term performance to help ensure that the interests of our executive officers are aligned with those of our stockholders. Our primary long-term objective is to drive sustainable value creation for our stockholders by attracting, retaining, developing and motivating a diverse group of executive talent through a comprehensive and market-competitive executive compensation program. The executive compensation program and the pay packages for our executive officers are reviewed annually.

Base Salary       Short-Term Cash Incentives       Long-Term Equity Incentives
We pay a competitive base level of compensation to attract, retain, develop and motivate key talent. We determine salary based on scope of responsibility, performance and experience. We annually review our executive officers’ base salaries against our peers and the market to maintain competitive levels.     We incentivize our executive officers with cash incentive opportunities based on the achievement of short-term financial performance objectives to reward executive officers for strong business performance. Beginning in fiscal 2019 we set goals on the basis of an annual performance period (as opposed to semi-annual periods).     We grant long-term incentive opportunities to our executive officers through a combination of performance-based and time-based equity awards that align management interests with long-term stockholder value creation. PSUs are only earned by achieving pre-established financial goals over a two-or three-year period and based on our relative total stockholder return (“TSR”) that compares our stock performance to our industry peers over a three-year period. Time-based RSUs provide balance and retention for our key executives by vesting evenly over four years.

44     WESTERN DIGITAL


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Fiscal 2019 Updates to our Program

As outlined in the chart below, we implemented numerous changes to our short-term and long-term incentive compensation programs for our executive officers in fiscal 2019 in response to feedback from our stockholders. Specific changes include:

Lengthening our short-term incentive program performance period to one year
Changing the STI metric to non-GAAP net income, which eliminated overlapping performance metrics with our PSUs
Lengthening the performance period for 87.5% of the target PSUs to three years; the remaining 12.5% of the target PSUs are based on two-year performance followed by a one-year service period
Introducing a standalone relative TSR metric for 50% of the target PSUs and capping the payout on these units at 100% if our absolute TSR is negative over the three-year performance period

We believe these changes strengthen the pay-for-performance design of our program and align our executive officers’ compensation with long-term value creation for our stockholders. The changes also demonstrate our responsiveness to stockholder feedback.

Incentive Compensation
Pay Element
Fiscal 2019
STI Program
Annual performance period
Non-GAAP net income
LTI Program PSUs
Relative TSR: 3-year goal (50%)
Revenue: 3-year goal (18.75%); 2-year goal followed by 1-year service period (6.25%)
Non-GAAP EPS: 3-year goal (18.75%); 2-year goal followed by 1-year service period (6.25%)
PSU payout on relative TSR units capped at 100% if absolute TSR is negative
Pre-established relative market performance adjustment (“relative MPA”) for financial metrics (see page 54 for additional information regarding relative MPA)
RSUs
Pro rata vesting over 4 years

Paying for Performance: Fiscal 2019 Performance Results and Payouts

Award Fiscal 2019 Payouts Performance Link Page
STI Performance Results and Payout in Fiscal 2019 52
Fiscal 2019 STI 0%
Non-GAAP Net Income: achievement at 45% of pre-established target resulted in no payout under our fiscal 2019 STI
LTI Performance Results and Payout in Fiscal 2019 56
Fiscal 2018-2019
PSU Awards
79%
Revenue: achievement at 90% of pre-established target
Non-GAAP EPS: achievement at 89% of pre-established target
Relative MPA: a pre-established modifier made performance goals more difficult to achieve by increasing each target during the performance period

As previously noted, we experienced challenging market and geopolitical conditions in fiscal 2019 and the total compensation for our executive team declined in fiscal 2019 relative to fiscal 2018, reflecting the alignment between our executive compensation program and our lower operational and financial results compared to fiscal 2018.

2019 PROXY STATEMENT     45


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Chief Executive Officer Compensation Aligned with Performance Results

Based on compensation paid or awarded, the compensation of our Chief Executive Officer, Mr. Milligan, decreased 24.9% from fiscal 2018 to fiscal 2019:

Chief Executive Officer Pay Year-over-Year
Pay Element Fiscal 2018 Fiscal 2019 Year-over-Year Change
Base Salary $1,250,000 $1,250,000 0%
STI Award
(based on amount earned)
$2,175,000 $0 (100%)
LTI Award(1)
(based on grant date fair value)
$13,417,083 $11,601,177 (13.5%)
All Other Compensation $279,391 $15,292 (94.5%)
Total Chief Executive Officer Pay (Fiscal 2018 vs. Fiscal 2019) $17,121,474 $12,866,469 (24.9%)
(1) The fiscal 2018 LTI award value excludes a $2.6 million adjustment for a prior year (fiscal 2016-2017) PSU award that paid out in fiscal 2018 and was required to be reported in the Summary Compensation Table as compensation for fiscal 2018 in accordance with SEC and accounting rules. Our Chief Executive Officer’s total compensation as reported in the Summary Compensation Table for fiscal 2018 was $19,738,381; excluding the $2.6 million accounting adjustment results in total compensation of $17,121,474.

Our Compensation Principles

                                                                          
WHAT WE DO     
Pay for performance by requiring that a substantial portion of our executives’ compensation be earned based on performance goals     
Actively engage with stockholders to obtain and consider their feedback in the future design of our executive compensation program
Link our compensation program to our long-term corporate growth strategy and key drivers of sustainable stockholder value creation
Use a mix of performance measures, cash- and equity-based vehicles, and short- and long-term incentive opportunities that hold our executive officers accountable for executing on our long-term corporate growth strategy
Cap maximum payout levels under our incentive plans, which are aligned with competitive market practices
Engage an independent compensation consultant to evaluate and advise the Compensation Committee on our compensation program design and pay decisions for our executive officers
Evaluate executive compensation data and practices of our peer companies with similar business complexity as selected annually by the Compensation Committee in coordination with guidance from our independent compensation consultant
Maintain executive stock ownership guidelines
Maintain a compensation recovery (clawback) policy applicable in the event an officer’s misconduct leads to an accounting restatement and provide for forfeiture of incentives in the event of an officer’s termination of employment due to misconduct
Provide limited executive perquisites
WHAT WE DON’T DO
No tax gross-up payments in connection with severance or change in control pay
No automatic vesting of equity awards upon a change in control (i.e., no single-trigger vesting)
No repricing of stock options without stockholder approval (other than equitable adjustments permitted under our plans)
No hedging or short-sale transactions by executive officers or directors
No dividend equivalent payments on awards that are not vested until earned


46     WESTERN DIGITAL


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

                                                                          
FISCAL 2019 PHILOSOPHY, OBJECTIVES AND PROCESS

Our compensation philosophy for executive officers is based on the belief that the interests of our executives should be closely aligned with our long-term performance and sustainable value creation for our stockholders. To support this philosophy, a large portion of each executive officer’s compensation is placed “at risk” and linked to the accomplishment of specific financial and operational performance goals that we expect will lead to increased long-term value creation for our stockholders.

Our executive compensation program and policies are designed to:

Attract, retain, develop and motivate highly qualified and talented individuals           Motivate executives to improve the overall performance and profitability of our company as well as the business group for which each executive officer is responsible, and reward executives when specific measurable results have been achieved/exceeded
Help ensure compensation levels are both externally competitive and internally equitable  
Encourage accountability by giving the Compensation Committee flexibility to take each executive officer’s individual contribution and performance into account in determining salaries and incentive award opportunity/payout  

Tie incentive awards to financial and market metrics that drive the performance of our company over the long term to further reinforce the linkage between the interests of our stockholders and our executives

Allocation of Target Total Direct Compensation

The Compensation Committee believes that a substantial portion of target total direct compensation should be performance-based compensation, with the percentage of the executive’s compensation that is performance-based to increase as the executive’s responsibility increases. This philosophy motivates executives to improve our overall performance over the long term, encourages accountability and links the interests of our stockholders with those of our executives. Performance-based pay is based on our stock price performance and achievement of other specified financial performance goals. As used in this Compensation Discussion and Analysis, “target total direct compensation” refers to an executive’s base salary, target annual STI award, and the annual LTI awards based on the target award value approved by the Compensation Committee.

The charts below illustrate the portion of fiscal 2019 target total direct compensation represented by fixed pay (base salary) and variable or performance-based pay (target annual STI and LTI awards) for our Chief Executive Officer and our other named executive officers (on average).

  Chief Executive Officer Pay Mix Named Executive Officer Average  
  Pay Mix (other than Chief Executive
Officer)(1)
 
     
(1) Excludes Mr. Eulau, who was appointed Chief Financial Officer in May 2019 and was not subject to the same compensation arrangements as individuals who served as named executive officers for the full fiscal year.

2019 PROXY STATEMENT     47


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Process for Determining Executive Compensation

ROLE OF THE COMPENSATION COMMITTEE

The Compensation Committee reviews and determines compensation for our executive officers. The Compensation Committee generally reviews the performance and compensation of our executive officers on an annual basis and at the time of hiring, promotion or other change in responsibilities. The Compensation Committee’s annual review typically occurs near the end of the prior fiscal year and beginning of the new fiscal year.

The Compensation Committee’s executive compensation decisions are informed by several factors, including:

External and Internal Factors

Our compensation philosophy and objectives
Our pay positioning relative to our peer group
The executive’s role, experience, performance and contributions
Internal pay equity
Succession planning and retention objectives 
Current and historical company performance and strategic and financial goals
Market performance and general economic conditions
   

Compensation Consultant

Advice from the Compensation Committee’s independent compensation consultant
Survey and peer group company market data prepared by the independent compensation consultant

Management

Our Chief Executive Officer’s recommendations for other executive officers (not including our Chief Executive Officer)

Stockholders

Feedback received during stockholder engagement

ROLE OF MANAGEMENT

Management assists the Compensation Committee in the administration of our executive compensation process. No executive participates in decisions or deliberations regarding his or her own compensation.

Our Chief Executive Officer provides recommendations regarding compensation for his direct reports (including our other executive officers) for consideration by the Compensation Committee during its annual review. While the Compensation Committee considers these recommendations, the Compensation Committee is solely responsible for making the final decision regarding the compensation of our executive officers.

Our Chief Human Resources Officer or her designee also provides internal and external compensation data to the Compensation Committee and its independent compensation consultant.

Our Chief Financial Officer or his designee provides input to the Compensation Committee on the financial targets for our performance-based executive compensation program and presents data regarding the impact of the program on our financial results.

Our Chief Legal Officer or his designee generally assesses and advises the Compensation Committee regarding legal implications or considerations involving our executive compensation program.

The Compensation Committee alone is charged with approving the compensation of our Chief Executive Officer, although in determining our Chief Executive Officer’s compensation, the Compensation Committee confers with other members of our Board of Directors, led by our Chairman of the Board and Lead Independent Director, who also evaluate our Chief Executive Officer’s performance. For a discussion of the process relating to the annual performance evaluation of our Chief Executive Officer, please see the section entitled “Corporate Governance Matters—The Board’s Role and Responsibilities—Chief Executive Officer Evaluation and Succession Planning.”

ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT

The Compensation Committee retains an independent compensation consultant to provide objective advice and counsel to the Compensation Committee on all matters related to the compensation of our Board members and executive officers.

For fiscal 2019, the Compensation Committee retained Willis Towers Watson (“WTW”) as its independent compensation consultant. WTW reported directly to the Compensation Committee during fiscal 2019. WTW also communicated with management to gather information and review management proposals as needed. WTW attended all in-person meetings of the Compensation Committee held during fiscal 2019.

48     WESTERN DIGITAL


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

The independent compensation consultant’s responsibilities for fiscal 2019 generally included:

reviewing and advising on director and executive compensation, including the performance measures to be used under the executive compensation program;
providing recommendations regarding the composition and selection of our peer group companies;
analyzing pay survey data;
providing advice regarding executive compensation practices and trends; and
advising on the Compensation Committee’s charter.

The Compensation Committee assessed the independence of WTW pursuant to applicable SEC and Nasdaq rules and concluded that the engagement of WTW did not raise any conflicts of interest during fiscal 2019 and currently does not raise any conflicts of interest.

Comparative Market Data

The Compensation Committee determines the composition of our peer group and reevaluates this group on an annual basis with input from its independent compensation consultant.

For fiscal 2019, market data was also collected from the Radford Executive Survey, an independent published survey. The survey data was filtered for high-technology companies and adjusted to screen for companies with revenue levels in the aggregate that are comparable to ours. The survey data and the peer group data were averaged to create what we refer to in this section as “composite market data.” With input from its independent compensation consultant, the Compensation Committee uses composite market data and industry practices during its annual review of the competitiveness of compensation levels and the appropriate mix of compensation elements for our executive officers. The composite market data provided the Compensation Committee a reference point, which was one of several factors that it used to make compensation decisions during its fiscal 2019 annual compensation review, as discussed in this section.

Fiscal 2019 Peer Group Companies

As reflected in the table below, the peer group for fiscal 2019 consists of U.S.-based technology companies with size (primarily based on revenue) and business characteristics that we believe are comparable to ours and that compete with us for executive talent. Most of the companies included in our fiscal 2019 peer group are, like us, included in the Dow Jones U.S. Technology Hardware & Equipment Index, which we have selected as the industry index for purposes of the stock performance graph appearing in our 2019 Annual Report on Form 10-K.

In choosing peer group companies, the Compensation Committee focused primarily on industry and revenue size. Revenue is a commonly-used proxy for organizational size and complexity and is relatively stable from year-to-year, making it a valuable metric when selecting appropriately-sized peers for compensation purposes. As part of its decision process, the Compensation Committee also references other metrics for informational purposes. However, the Compensation Committee recognizes that certain of these measures, in particular market capitalization, reflect in part non-operational factors and can be volatile year-to-year for companies in our industry, making these secondary indicators less-stable measures for peer group construction purposes than revenue.

                         
 
           
Advanced Micro Devices, Inc.
Applied Materials, Inc.
Broadcom Inc.
Cisco Systems, Inc.
Hewlett Packard
Enterprise Company
HP Inc.
Intel Corporation
LAM Research Corporation
Micron Technology, Inc.
Motorola Solutions, Inc.
NVIDIA Corporation
QUALCOMM Incorporated
Seagate Technology plc
Texas Instruments Incorporated
     
 

Western Digital Compared to Peer Group
 

    
(1) Represents the most recent four quarters of revenue as of the June 28, 2019 quarter for which public data was available through quarterly and annual reports filed by each company with the SEC. Our percentile rank compared to our peer group was 47%.

2019 PROXY STATEMENT     49


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

PEER GROUP CHANGES FOR FISCAL 2019

 REMOVED  ADDED
NetApp, Corning, TE Connectivity and NCR due to their lower revenues relative to Western Digital
Flextronics due to industry focus
HP Inc. based on revenue and industry focus
NVIDIA based on revenue and industry focus
Lam Research based on revenue and industry focus

Elements of Our Executive Compensation Program

We believe our emphasis on variable compensation is aligned with our focus on operating excellence, allowing our executive compensation levels to flex up or down more significantly depending on our company’s performance. We use several methods to examine the various elements of our executive compensation program to determine the competitive market position for each pay element.

In general, the Compensation Committee considers peer group compensation data when establishing base salary, short-term incentives and long-term incentive opportunities. Our actual pay positioning varies by executive, taking into account peer group and composite market data, competitive pay levels, pay plan risk, each executive’s role, past performance, scope of responsibility and expected contributions. Each executive’s compensation level, as well as the appropriate mix and types of compensation, reflects the Compensation Committee’s business judgment in consideration of the composite market data, our executive compensation philosophy, guidance from its independent compensation consultant and the other factors noted above.

We believe that our positioning approach is necessary to provide the Compensation Committee with the flexibility it needs to attract, retain, develop and motivate a diverse and talented executive team. In addition to the elements reflected below, we also provide executives with relatively limited perquisites and certain other indirect benefits, as described in the section below entitled “Other Program Features and Policies.”

50     WESTERN DIGITAL


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS


  Element of Direct
Compensation*
Characteristics Purpose Performance
Link/Key Benchmark

Base Salary

Fixed compensation
Attracts, develops and retains highly-qualified executive talent
Maintains stable management team
Compensates executives for sustained individual performance

Competitive with market and industry norms
Adjusted for experience, responsibility, potential and performance
 

STI

Annual performance-based cash incentive compensation
Motivates executives to drive overall performance
Encourages accountability by rewarding achievement of specific performance goals
Provides focus on achievement of near-term financial objectives

Non-GAAP net income
   
 
 
 

LTI

 

PSUs

Performance-based equity compensation
100% of award cliff vests after 3 years
At least 50% of our executive officers’ LTI mix is in the form of PSUs (60% for our Chief Executive Officer)
Creates direct alignment with stockholder interests by focusing executives on long-term value creation through specific multi-year financial objectives
Revenue and non-GAAP EPS goals are each weighted at 25%; financial metrics are subject to automatic adjustment pursuant to relative MPA (as described on page 54 below)
Relative TSR goal is weighted at 50%; for PSUs based on relative TSR, payout capped at 100% if absolute TSR is negative
   
 
 

RSUs

Variable long-term equity compensation
Vest ratably over 4 years
Provides alignment with stockholder interests by focusing executives on long-term value creation
Provides retention value
Value based on stock price
 
 

* The percentages shown for the elements of direct compensation in the table above are presented based on base salary, target annual STI award and the annual LTI awards (at the target award values approved by the Compensation Committee) granted to our Chief Executive Officer in fiscal 2019.

2019 PROXY STATEMENT     51


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

                                                                          
FISCAL 2019 DECISIONS AND OUTCOMES

Base Salary

The Compensation Committee concluded that the base salary levels of our named executive officers remained appropriate and, a result, no adjustments were made to their base salary levels for fiscal 2019. The Compensation Committee approved Mr. Eulau’s base salary in connection with his appointment as our Executive Vice President and Chief Financial Officer in May 2019. Each named executive officer’s annualized base salary for fiscal 2019 is reflected below:

Named Executive Officer Base Salary Level
($)
Change from
Fiscal 2018
Stephen D. Milligan 1,250,000 0%
Michael D. Cordano 800,000 0%
Srinivasan Sivaram 625,000 0%
Robert K. Eulau 700,000
Martin R. Fink 600,000 0%
Mark P. Long 675,000 0%

Short-Term Incentives

TARGET INCENTIVE LEVEL OPPORTUNITIES

The Compensation Committee concluded that the target short-term incentive levels for our named executive officers remained appropriate and, as a result, no adjustments were made to their target incentive levels for fiscal 2019. The Compensation Committee approved Mr. Eulau’s target incentive level in connection with his appointment as our Executive Vice President and Chief Financial Officer in May 2019; Mr. Eulau was eligible for a prorated incentive opportunity for fiscal 2019, subject to performance under the plan. Each named executive officer’s target short-term incentive opportunity for fiscal 2019 is reflected below:

Named Executive Officer Annual Target
Incentive Opportunity
(as Percentage of Base Salary)
Change from
Fiscal 2018
Stephen D. Milligan 150% 0%
Michael D. Cordano 125% 0%
Srinivasan Sivaram 110% 0%
Robert K. Eulau 110%
Martin R. Fink 110% 0%
Mark P. Long 110% 0%

FISCAL 2019 STI ACHIEVEMENT AND PAYOUTS

The following tables reflect the target STI goals for fiscal 2019 and actual fiscal 2019 performance against those goals; fiscal 2019 performance resulted in no payout under our STI Plan for our named executive officers, other than Mr. Long, who received a prorated target award pursuant to our Executive Severance Plan.

STI Performance Level Achievement Rate Payout Rate
Below Threshold <75% 0%
Threshold 75% 50%
Target 100% 100%
Maximum ≥130% 200% (capped)

52     WESTERN DIGITAL


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Fiscal 2019 STI Awards

Name Non-GAAP Net Income
Target (100%)
($, in billions)
Achievement
($, in billions)
(1)
Plan
Achievement
Rate
Payout
Rate
Target STI
Opportunity
Actual STI
Payout
Amount
($)
Stephen D. Milligan 3.176 1.429 45% 0% 150% 0
Michael D. Cordano 3.176 1.429 45% 0% 125% 0
Srinivasan Sivaram 3.176 1.429 45% 0% 110% 0
Robert K. Eulau(2) 3.176 1.429 45% 0% 110% 0
Martin R. Fink 3.176 1.429 45% 0% 110% 0

(1) See Appendix A to this Proxy Statement for a reconciliation of GAAP net income to non-GAAP net income.
(2) Mr. Eulau participated in our fiscal 2019 STI Plan on a prorated basis.

Long-Term Incentives

Fiscal 2019 Annual LTI Equity Awards

Our named executive officers received the following annual LTI equity awards during fiscal 2019. The vesting provisions of the PSUs are described below. The RSUs are generally scheduled to vest in four annual installments, subject to the executive’s continued employment through the applicable vesting date.

Named Executive Officer Total Awarded
Grant Value ($)
# Shares Underlying
LTI Grants
(1)
LTI Vehicle Mix
PSUs RSUs
Stephen D. Milligan 12,000,000 189,633 60% 40%
Michael D. Cordano 4,800,000 75,852 50% 50%
Srinivasan Sivaram 3,125,000 49,381 50% 50%
Martin R. Fink 2,400,000 37,925 50% 50%
Mark P. Long(2) 3,375,000 53,333 50% 50%

(1) The number of shares was determined by dividing the total awarded grant value by the closing price of a share of our common stock on the grant date of $63.28, rounded down to the nearest share, and reflecting PSUs at the target level of performance.
(2) Under the terms of our equity award agreements and Executive Severance Plan, in connection with the termination of his employment, Mr. Long vested in 25% of his fiscal 2019 RSU grant and will receive a pro rata portion of his fiscal 2019 PSU grant upon the vesting date based on actual company performance under the award.

Fiscal 2019–2021 PSU Awards

2019 PROXY STATEMENT     53


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

The fiscal 2019 PSU awards are earned based on the achievement of pre-established financial and market-based goals over a two- and three-year period, as discussed in more detail below.

Performance Metrics and Rigor in Goal-Setting

Our named executive officers may earn shares based on achievement of the specified performance goals over a two-year performance period covering fiscal 2019 and 2020 and three-year performance period covering fiscal 2019 through 2021:

Two-Year Performance Period (12.5% of Target PSU Award)

Revenue (6.25% of Target Award)
Non-GAAP EPS (6.25% of Target Award)
Three-year service period (one year beyond the two-year performance period)

Three-Year Performance Period (87.5% of Target PSU Award)

Revenue (18.75% of Target Award)
Non-GAAP EPS (18.75% of Target Award)
Relative TSR (50% of Target Award)

The Compensation Committee selected these performance metrics for the PSUs because non-GAAP EPS helps measure the effectiveness of our capital allocation strategy, while revenue helps focus our executives on sustainable long-term corporate growth. In fiscal 2019, the Compensation Committee added a relative TSR metric weighted at 50% to align PSU payouts with our stock performance relative to a group of industry peers.

Performance Period and Payout Range

In response to feedback from our stockholders, the Compensation Committee extended the performance period for 87.5% of the target fiscal 2019 PSUs to three years and retained a two-year performance period for just 12.5% of the target PSUs. We believe this design balances our focus on multi-year financial performance with the need to establish appropriate performance goals in the face of a rapidly changing industry. The portion of the PSUs that includes a two-year performance period also includes a three-year service period (one year beyond the two-year performance period), which means 100% of the fiscal 2019 PSUs will vest after three years.

The actual number of shares that may become earned and payable under the annual LTI PSU awards granted to our named executive officers will range from 0% to 200% of the target number of units based on achievement of the specified performance goals. However, if our absolute TSR for the three-year performance period is negative, payout of the PSUs allocated to the TSR metric is capped at 100% of the target number of units.

Relative Market Performance Adjustment for Financial Metrics

The cumulative PSU financial goals are subject to a pre-established, objective adjustment at the end of the applicable performance period in a relative proportion (up or down) by which the total market for our products (measured by revenue) during the period exceeds or falls short of the total market forecast approved by the Compensation Committee at the time the goals are established, as reported by independent third-party sources such as International Data Corporation (IDC), Forward Insights and Gartner. We refer to the relative market performance adjustment in this Proxy Statement as “relative MPA.”

Relative MPA is a pre-established modifier approved at the time the performance goals are set by the Compensation Committee and not subject to discretion as to whether the adjustment should be applied.
Rationale – We believe the relative MPA is an important element of our PSU program to help ensure we are paying for performance relative to the market demand and opportunity available to us and not due to unforeseen swings in the market. For example, if there is a significant demand in the market that was not forecasted at the beginning of the performance period when the Compensation Committee approved the performance goals, the adjustment factor would automatically increase the goals – and make them more difficult to achieve – to ensure that our executives are not benefitting from the unforeseen upswing in demand.

Relative TSR Metric

In response to stockholder feedback and to further align our executives’ interests with those of our stockholders, the Compensation Committee determined it would be appropriate to include a relative TSR metric for the fiscal 2019 PSUs, weighted at 50% of the target PSU grant for each of our named executive officers.

54     WESTERN DIGITAL


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

The relative TSR metric measures our stock performance, assuming reinvestment of dividends, relative to two high-tech indices over a three-year performance period: the S&P 500 Technology Hardware & Equipment Index (comprised of 15 companies as of the date of grant) and the PHLX Semiconductor Sector Index (comprised of 30 companies as of the date of grant). The Compensation Committee chose these indices due to the similarities between our business and those of the constituent companies and to provide a competitive line of sight for our executive team with respect to these sector indices. The 45 companies within these indices as of the fiscal 2019 PSU grant consist of the following:

Company Applicable Index
Advanced Micro Devices, Inc. PHLX
Amphenol Corporation S&P 500 TH&E
Analog Devices, Inc. PHLX
Apple Inc. S&P 500 TH&E
Applied Materials, Inc. PHLX
ASML Holding N.V. PHLX
Broadcom Inc. PHLX
Cirrus Logic, Inc. PHLX
Cisco Systems, Inc. S&P 500 TH&E
Corning Incorporated S&P 500 TH&E
Cypress Semiconductor Corporation PHLX
Entegris, Inc. PHLX
F5 Networks, Inc. S&P 500 TH&E
FLIR Systems, Inc. S&P 500 TH&E
Hewlett Packard Enterprise Company S&P 500 TH&E
HP Inc. S&P 500 TH&E
Integrated Device Technology, Inc. PHLX
Intel Corporation PHLX
IPG Photonics Corporation S&P 500 TH&E
Juniper Networks, Inc. S&P 500 TH&E
KLA-Tencor Corporation PHLX
Lam Research Corporation PHLX
Marvell Technology Group Ltd. PHLX
Maxim Integrated Products, Inc. PHLX
Mellanox Technologies, Ltd. PHLX
Microchip Technology Incorporated PHLX
Micron Technology, Inc. PHLX
MKS Instruments, Inc. PHLX
Monolithic Power Systems, Inc. PHLX
Motorola Solutions, Inc. S&P 500 TH&E
NetApp, Inc. S&P 500 TH&E
NVIDIA Corporation PHLX
ON Semiconductor Corporation PHLX
Qorvo, Inc. PHLX
QUALCOMM Incorporated PHLX
Seagate Technology plc S&P 500 TH&E
Silicon Laboratories Inc. PHLX
Skyworks Solutions, Inc. PHLX
SMART Global Holdings, Inc. PHLX
Taiwan Semiconductor Manufacturing PHLX
TE Connectivity Ltd. S&P 500 TH&E
Teradyne, Inc. PHLX
Texas Instruments Incorporated PHLX
Xerox Corporation S&P 500 TH&E
Xilinx, Inc. PHLX

2019 PROXY STATEMENT     55


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

The percentage of relative TSR PSUs that can be earned at the end of the three-year performance period is set forth below.

Western Digital’s Relative TSR results for the
Measurement Period
Portion of the PSUs subject to the Award
that become eligible to vest
Less than the 25th percentile 0%
25th percentile 25%
50th percentile 100%
75th percentile or greater 200%

Straight-line interpolation is used if performance falls between two points. If our absolute TSR is negative during the performance period, the relative TSR PSUs will be capped at a target payout (100%).

Achievement of Prior Year LTI Awards

Fiscal 2018–2019 PSU Awards: Achievement and Payout

In August 2017, the Compensation Committee approved the grant of annual PSU awards to our named executive officers. These PSU awards were granted with pre-established cumulative goals for revenue (50%) and non-GAAP EPS (50%) over fiscal 2018 and 2019. Between 0% and 200% of the target number of units covered by this award could have been earned based on the level of achievement of the milestones. No amount could have been paid in excess of 100% of target unless our relative TSR over the performance period was equal to or greater than the 50th percentile of our peer group.

The PSUs included a relative MPA modifier that automatically adjusted the performance goals up or down based on increases or decreases in the total market for our products (measured by revenue) during the period compared to the total market forecast approved by the Compensation Committee at the time the goals were established. The actual total market for the performance period was higher than forecasted when the PSU goals were established, which resulted in an increase in the target level of performance for both the revenue and non-GAAP EPS metrics relative to the targets established at grant, resulting in targets that were more difficult to achieve.

56     WESTERN DIGITAL


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

After application of the relative MPA modifier and certain required adjustments per the pre-established terms of the awards, described in the footnotes to the table below, the overall achievement resulted in a weighted overall payout rate of 79%.

Fiscal 2018–2019 PSU Achievement

Cumulative Goals       Threshold
(50%)
($)
Original
Target
(100%)
($)
Maximum
(200%)($)
Target After
Applying Relative
Market
Performance
Adjustment
(100%)
($)
Actual
Performance
($)
Achievement
Rate
Final
Payout
Rate
Revenue (50%)
(in billions)
33.663 39.603 43.563 41.574 37.216 90% 70%
Non-GAAP EPS (50%)(1) 15.08 18.85 22.62 21.87 19.57 89% 88%
Weighted Overall Payout: 79%

(1) See Appendix A to this Proxy Statement for a reconciliation of GAAP EPS to non-GAAP EPS.

Named Executive Officer Fiscal 2018–2019 PSU Payout

Named Executive Officer       Threshold
Payout (50%)
(# Shares)
Target
Payout (100%)
(# Shares)
Maximum
Payout (200%)
(# Shares)
Actual
Payout (79%)
(# Shares)
(1)
Stephen D. Milligan 41,584 83,167 166,334 65,701
Michael D. Cordano 15,758 31,516 63,032 24,897
Srinivasan Sivaram 5,873 11,745 23,490 9,278
Martin R. Fink 6,128 12,256 24,512 9,682

(1) Expressed as the portion of the target number of shares subject to the award that paid out. Pursuant to the terms of the award, the named executive officers also received dividend equivalents accrued with respect to the number of shares paid.

Chief Financial Officer Transition

Mr. Long ceased serving as our Chief Financial Officer in May 2019 and we terminated his employment in June 2019. In connection with the termination of his employment, Mr. Long received Tier I severance benefits as required under our Executive Severance Plan, as set forth in the Separation Agreement and General Release we entered into with Mr. Long. Please see the section entitled “Executive Compensation Tables and Narratives—Potential Payments upon Termination or Change in Control” for additional details relating to payments under Mr. Long’s separation agreement, which were paid shortly following his separation date. Mr. Long did not receive any additional compensation outside of what he was entitled to under our Executive Severance Plan.

Mr. Eulau commenced serving as our Executive Vice President and Chief Financial Officer in May 2019. In connection with his appointment, he received a cash signing bonus of $500,000, with the first half paid in fiscal 2019 and the second half to be paid within three weeks of April 22, 2020. Payment of the second installment is subject to Mr. Eulau’s continued employment with us through that date. In order to align Mr. Eulau’s interests with long-term value creation for our stockholders and consistent with market practice of providing equity grants to attract executive talent, the Compensation Committee also granted Mr. Eulau a $2,000,000 RSU grant that vests ratably over four years, reflecting a portion of the value of Mr. Eulau’s target annual LTI award value.


2019 PROXY STATEMENT     57


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Technology Leadership Transition

Mr. Fink retired from full-time employment as Executive Vice President and Chief Technology Officer effective in September 2019 and transitioned to a part-time advisory role to support our open source and RISC-V activities. In his part-time advisory role, Mr. Fink is no longer an officer subject to Section 16 reporting requirements. Our advisory agreement with Mr. Fink provides for a base salary of $150,000 for a period of six months; the agreement may be renewed for an additional six months by mutual agreement. Mr. Fink is not eligible to participate in our STI or LTI programs during his part-time advisory role. While serving as a part-time employee in his advisory role, Mr. Fink will continue to vest in equity awards granted to him prior to his transition to the advisory role.

In August 2019, our Board appointed Dr. Sivaram as our President, Technology and Strategy, overseeing the company’s key technology initiatives and corporate strategy. In connection with Dr. Sivaram’s appointment, the Compensation Committee approved an increase in his annual base salary from $625,000 to $700,000.

                                                                          
FISCAL 2020 DECISIONS

Fiscal 2020 Annual LTI Awards

The following LTI awards were granted to our named executive officers in fiscal 2020 as part of our regular annual LTI program:

Named Executive Officer(1)       Total Awarded
Grant Value
($)
# Shares Underlying
LTI Grants(2)
LTI Vehicle Mix
PSUs RSUs
Stephen D. Milligan 12,000,000 202,257 60% 40%
Michael D. Cordano 4,800,000 80,901 50% 50%
Srinivasan Sivaram 4,000,000 67,417 50% 50%
Robert K. Eulau 4,000,000 67,417 50% 50%

(1) Mr. Fink did not receive a fiscal 2020 LTI award due to his retirement from full-time employment in September 2019.
(2) The number of shares was determined by dividing the total awarded grant value by the closing price of a share of our common stock on the grant date of $59.33, rounded down to the nearest share, and reflecting PSUs at the target level of performance.

58     WESTERN DIGITAL


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

                                                                          
OTHER PROGRAM FEATURES AND POLICIES

Perquisites

We provide our executive officers with limited perquisites, consisting principally of a $5,000 annual allowance for financial planning services (net of taxes), which is available to other officers in our company, and a monthly transitional housing and travel allowance, which is currently provided to two executives who relocated for their current roles. None of our named executive officers has received a transitional housing and travel allowance.

We did not provide any tax gross-up payments to our named executive officers, except as to the modest financial planning services in accordance with the terms of the program, to the extent permitted by applicable tax law and to the extent these benefits are taxable to the participant.

401(k) Plan Benefits We provide retirement benefits to our executive officers and other eligible employees under the terms of our 401(k) Plan. Eligible employees may contribute up to 30% of their annual cash compensation up to a maximum amount allowed by the Internal Revenue Code, and are also eligible for matching contributions, which vest over a two-year service period. Our executive officers participate in the 401(k) Plan on substantially the same terms as our other participating employees. The 401(k) Plan and our matching contributions are designed to assist us in achieving our compensation objectives of attracting and retaining talented individuals and ensuring that our executive compensation program is competitive and equitable. We do not maintain any defined benefit supplemental retirement plans for our executive officers.
Deferred Compensation
Opportunities
Our executives and certain other key employees who are subject to U.S. federal income taxes are eligible to participate in our Deferred Compensation Plan. Participants in our Deferred Compensation Plan can elect to defer certain compensation without regard to the tax code limitations applicable to tax-qualified plans. We did not make any company matching or discretionary contributions to our Deferred Compensation Plan on behalf of participants in fiscal 2019. Our Deferred Compensation Plan is intended to promote retention by providing employees with an opportunity to save for retirement in a tax-efficient manner. Please see the “Fiscal 2019 Non-Qualified Deferred Compensation Table” and related narrative section entitled “Non-Qualified Deferred Compensation Plan” in the “Executive Compensation Tables and Narratives” section of this Proxy Statement for a more detailed description of our Deferred Compensation Plan and the deferred compensation amounts that our executives have deferred under the plan.
Severance Protections

Our philosophy is that, outside of a change in control context, severance protections are only appropriate in the event an executive is involuntarily terminated without “cause.” Under our Executive Severance Plan and equity award agreements, in such circumstances our executive officers are entitled to:

Two years’ base salary
A pro rata target bonus for the bonus cycle in which the termination occurs
Six months’ accelerated vesting of time-based equity awards (or, in certain circumstances for awards granted in fiscal 2019 and later, prorated vesting) and prorated vesting based on actual performance for PSUs
Payment for COBRA continuation of health benefits for 18 months
Outplacement services for 12 months
No tax gross-up provisions

We believe these severance benefits are appropriate in light of severance protections available to executives at our peer group companies and are an important component of each executive’s overall compensation as they help us to attract and retain our key executives who could have other job alternatives that may appear to them to be more attractive absent these protections.

2019 PROXY STATEMENT     59


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Change in Control
Protections

Change of Control Severance Plan

We believe that the occurrence or potential occurrence of a change in control transaction will create uncertainty regarding the continued employment of our executive officers. This uncertainty results from the fact that many change in control transactions result in significant organizational changes, particularly at the senior executive level. To encourage executives to remain employed with us during an important time when their prospects for continued employment following the transaction are often uncertain, we provide our executives with additional severance protections under our Change of Control Severance Plan. We also provide these severance protections to help ensure that executives can objectively evaluate change in control transactions that may be in the best interests of stockholders despite the potential negative consequences such transactions may have on them personally.

Under our Change of Control Severance Plan, eligible executives receive benefits if they are terminated by us without “cause” or if the executive voluntarily terminates for “good reason” in connection with or within one year after a “change in control” event. “Good reason” generally includes certain materially adverse changes in responsibilities, compensation, benefits or location of work place.

These double-trigger severance benefits generally consist of:

An amount equal to two times the sum of the executive’s annual base salary and target bonus
Accelerated vesting of equity awards
Continued health and welfare benefits for 24 months
No tax gross-up provisions

We believe these severance protections are appropriate in light of severance protections available to executives at our peer group companies and are an important component of each executive’s overall compensation as they help us to attract and retain our key executives who could have other job alternatives that may appear to them to be more attractive absent these protections.

Double-Trigger Acceleration Under Equity Incentive Plans

We only provide full acceleration of equity awards held by our executive officers in connection with a change in control in the event of a qualifying termination of employment without “cause” or for “good reason” (not merely because the change in control occurred) or in certain circumstances where the award is to terminate in connection with the change in control.

Please see the section entitled “Executive Compensation Tables and Narratives—Potential Payments upon Termination or Change in Control” for a description and quantification of the potential payments that may be made to the executive officers in connection with their termination of employment or a change in control.

Employment
Agreements
The Compensation Committee does not have an established policy for entering into employment agreements with executive officers. Generally, absent other factors, the Compensation Committee’s intent is to retain the flexibility to review and adjust compensation for our executive officers on at least an annual basis. None of our executive officers is currently party to an employment agreement with us. In August 2019, we entered into an advisory agreement with Mr. Fink relating to limited services he will continue to provide to us following his retirement.

60     WESTERN DIGITAL


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Compensation
Recovery
(Clawback) Policy

Our Board of Directors adopted by resolution a compensation recovery (clawback) policy whereby in the event of a restatement of our company’s audited financial statements involving misconduct by an executive officer, a Board committee will consider whether such officer engaged in intentional financial accounting misconduct such that the officer should disgorge any net option exercise profits or cash bonuses attributable to such misconduct. Our 2017 Performance Incentive Plan also provides that the plan administrator has the right to provide in the terms of any award or agreement that awards granted under the plan be subject to the provisions of any clawback or similar policy adopted by us, which may require the award recipient to repay any proceeds or gains and forfeit the award.

Misconduct Policies

We maintain several policies relating to employee misconduct. In the event an executive’s employment is terminated for cause due to the executive’s misconduct or violation of company policy, among other reasons, the executive will forfeit all outstanding incentives, including unearned or unvested LTI and STI awards. In addition, the executive would not be eligible for severance benefits.

Executive Stock
Ownership Guidelines

To help achieve our compensation objective of linking the interests of our stockholders with those of our executive officers, we established executive stock ownership guidelines covering our senior officers, including our named executive officers. The guidelines provide that each officer must achieve ownership of a number of “qualifying shares” with a market value equal to the specified multiple of the officer’s base salary in effect upon the date he or she first becomes subject to the guidelines shown below.

    Position       Multiple
Chief Executive Officer 5 x Salary
President and Division Presidents 3 x Salary
Executive Vice Presidents 2 x Salary
Senior Vice Presidents 1 x Salary

Each officer must achieve ownership of the required market value of shares within three years of becoming subject to the guidelines. Thereafter, the officer must maintain ownership of at least the number of shares that were necessary to meet the executive’s required market value of ownership on the date the requirement was first achieved (subject to certain adjustments in the event of a change in base salary or position). Ownership that counts toward the guidelines includes common stock, RSUs, PSUs, deferred stock units and common stock beneficially owned by the officer by virtue of being held in a trust, by a spouse or by the executive’s minor children. Shares the officer has a right to acquire through the exercise of stock options (whether or not vested) are not counted toward the stock ownership requirement. All of our current officers who are subject to these guidelines have met their required ownership level as of the date of this Proxy Statement.

Internal Revenue Code
Section 162(m)

Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally disallows a tax deduction to public companies for compensation in excess of $1 million paid to a company’s chief executive officer and certain current and former executive officers. Certain awards granted before November 2, 2017 that were based upon attaining pre-established performance measures that were set by the Compensation Committee under a plan approved by our stockholders, as well as amounts payable to former executives pursuant to a written binding contract that was in effect on November 2, 2017, may qualify for an exception to the $1 million deductibility limit. The Compensation Committee considers, among other relevant factors, the deductibility of compensation when it reviews our compensation plans and policies. However, there can be no assurance that any compensation will, in fact, be deductible, and the Compensation Committee may award non-deductible compensation when it determines it to be appropriate.

2019 PROXY STATEMENT     61


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE COMPENSATION TABLES AND NARRATIVES

                                                                          
FISCAL 2017—2019 SUMMARY COMPENSATION TABLE

The following table presents information regarding compensation earned for fiscal 2017, 2018 and 2019 by our named executive officers. Unless otherwise noted, the footnote disclosures apply to fiscal 2019 compensation. For an explanation of the amounts included in the table for fiscal 2017 or 2018, please see the footnote disclosures in our proxy statement for our annual meeting of stockholders for the corresponding fiscal year.

Name and
Principal Position
Fiscal
Year
Salary
($)
Bonus
($)
Stock
Awards
($)(1)(2)(3)
Option
Awards
($)(1)
Non-Equity
Incentive Plan
Compensation
($)(4)
All Other
Compensation
($)(5)
Total
($)
Stephen D. Milligan
Chief Executive Officer
2019 1,250,000 11,601,177 15,292 12,866,469
2018 1,250,000 16,033,990 2,175,000 279,391 19,738,381
2017 1,150,000 10,142,049 3,620,556 2,932,500 62,519 17,907,624

Michael D. Cordano
President and Chief Operating Officer

2019 800,000 4,666,984 8,400 5,475,384
2018 800,000 6,530,594 1,160,000 18,167 8,508,761
2017 800,000 5,049,909 1,958,940 1,700,000 8,458 9,517,307
Srinivasan Sivaram
President, Technology and Strategy
2019 625,000 3,038,291 10,158 3,673,449
2018 623,377 4,724,167 774,377 8,976 6,130,897
Robert K. Eulau
Executive Vice President and Chief Financial Officer
2019 134,615 250,000 (6) 1,999,970 3,231 2,387,816
Martin R. Fink
Former Executive Vice President and Chief Technology Officer
2019 600,000 2,333,432 16,657 2,950,089
2018 600,000 2,321,899 765,600 19,720 3,707,219
2017 265,385 400,000 2,948,710 405,041 1,782 4,020,918
Mark P. Long
Former President WD Capital, Chief Strategy Officer and Chief Financial Officer
2019 649,038 3,281,448 2,104,528 6,035,014
2018 675,000 4,104,813 861,300 9,492 5,650,605
2017 625,000 5,319,476 979,470 1,168,750 8,910 8,101,606

(1)

The amounts shown reflect the aggregate grant date fair value of stock and option awards granted in the applicable fiscal year computed in accordance with ASC 718. These amounts were calculated based on the assumptions described in Note 12 in the Notes to Consolidated Financial Statements included in our Form 10-K for the applicable fiscal year, but exclude the impact of estimated forfeitures related to service-based vesting conditions. No named executive officers except Mr. Long forfeited any stock or option awards during fiscal 2019. Mr. Long forfeited 53,710 shares relating to unvested RSU and PSU awards and 13,400 unvested and unexercised stock options following the termination of his employment. See the “Fiscal 2019 Grants of Plan-Based Awards Table” below for information on awards made in fiscal 2019.

(2)

The following amounts represent the grant date fair value of PSU awards granted to our named executive officers during fiscal 2017, 2018 and 2019 assuming the probable outcome of the awards on the grant date (which we considered the “target” level of performance for PSUs other than TSR PSUs, and determined using a Monte Carlo simulation in the case of TSR PSUs) and assuming maximum performance under the awards. The dollar value of the awards included in the Summary Compensation Table for the year of grant is based on the probable outcome of the awards on the grant date.

62     WESTERN DIGITAL


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Grant Date Fair Value of PSU Awards Based on
Probable Outcome on the Grant Date
Grant Date Fair Value of PSU Awards
at Maximum Performance
      Named Executive
Officer
Fiscal 2017
($)
Fiscal 2018
($)
Fiscal 2019
($)
Fiscal 2017
($)
Fiscal 2018
($)
Fiscal 2019
($)
Stephen D. Milligan 10,142,049 8,739,188 6,801,199 23,664,781 12,323,686 13,602,398
Michael D. Cordano 3,658,326 3,311,701 2,267,027 7,316,651 4,670,041 4,534,054
Srinivasan Sivaram 1,234,165 1,475,845 1,740,374 2,951,690
Martin R. Fink 1,287,860 1,133,454 1,816,094 2,266,908
Mark P. Long 4,623,683 2,276,768 1,593,960 12,041,919 3,210,616 3,187,920

(3) As discussed in our 2017 Proxy Statement, the Compensation Committee modified the payout under our fiscal 2016-2017 PSUs shortly following the end of fiscal 2017, from a payout of 35% to a payout of 90% of the target level of shares. In accordance with ASC 718 and applicable SEC and accounting rules, we were required to treat the value of the additional payout as an “additional” or “modified” grant in fiscal 2018, using the closing price of our common stock on July 19, 2017 ($94.48), the date of the Compensation Committee’s determination of the fiscal 2016-2017 PSU payout. This resulted in the following additional values required to be reported in the Summary Compensation Table in fiscal 2018:

      Named Executive
Officer
Incremental Shares
Relating to Prior Payout of
Fiscal 2016-2017 PSUs
Incremental Value Required to be Reported in
Fiscal 2018 Summary Compensation Table
Under SEC and Accounting Rules
Fiscal 2018 Stock
Awards Value
Without Additional
Accounting Value
Stephen D. Milligan 27,698 $2,616,907 $13,417,083
Michael D. Cordano 5,926 $559,888 $5,970,706

(4)

None of our named executive officers received non-equity incentive plan compensation in fiscal 2019.

(5)

The table below summarizes all other compensation to each of our named executive officers in fiscal 2019:


      Name Perquisites(a)
($)
401(k) Plan Company
Matching Contributions
($)
Other
($)
Stephen D. Milligan 8,250
Michael D. Cordano 8,400
Srinivasan Sivaram 7,836
Robert K. Eulau 3,231
Martin R. Fink 11,159 (b) 5,498
Mark P. Long 11,111 (c) 8,400 2,085,017 (d)

      (a)

In accordance with applicable SEC rules, no amount is reflected if the aggregate amount of perquisites and other personal benefits paid to such individual during fiscal 2019 was less than $10,000.

(b)

The amount shown reflects a taxable life insurance benefit of $1,242 and reimbursed financial planning services of $9,917. 

(c)

The amount shown reflects a taxable life insurance benefit of $1,194 and reimbursed financial planning services of $9,917.

(d)

In connection with the termination of his employment effective in June 2019, Mr. Long entered into a separation agreement, which provided for the following lump sum cash separation payments: cash severance of $1,350,000, continuation of benefits of $23,454 and a $711,563 prorated STI award based on 100% achievement of performance targets pursuant to the terms of our Executive Severance Plan, in each case, subject to standard withholding and authorized deductions. For more information see the section entitled “Executive Compensation—Executive Tables and Narratives—Potential Payments upon Termination or Change in Control.”

(6)

In connection with his appointment as Executive Vice President and Chief Financial Officer effective in May 2019, Mr. Eulau received a signing bonus of $500,000, with the first half being paid in fiscal 2019 and the second half to be paid in fiscal 2020; payment of the second installment is subject to Mr. Eulau’s continued employment with our company through April 22, 2020.

2019 PROXY STATEMENT     63


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

                                                                          
FISCAL 2019 GRANTS OF PLAN-BASED AWARDS TABLE

The following table presents information regarding all grants of plan-based awards made to our named executive officers during fiscal 2019.

Name Award
Type
(1)
Grant
Date
Estimated Future Payouts
Under Non-Equity
Incentive Plan
Awards
Estimated Future Payouts
Under Equity Incentive Plan
Awards
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
Exercise
or Base
Price of
Option
Awards
($/Sh)
Grant
Date Fair
Value of
Stock
and
Option
Awards
($)(2)
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Stephen D.
Milligan
STI 6/30/18 937,500 1,875,000 3,750,000
PSUs — Financial (3) 8/30/18 28,445 56,890 113,780 3,599,999
PSUs — TSR (4) 8/30/18 28,445 56,890 113,780 3,201,200
RSUs (5) 8/30/18 75,853 4,799,978
Michael D.
Cordano
STI 6/30/18 500,000 1,000,000 2,000,000
PSUs — Financial (3) 8/30/18 9,482 18,963 37,926 1,199,979
PSUs — TSR (4) 8/30/18 9,482 18,963 37,926 1,067,048
RSUs (5) 8/30/18 37,926 2,399,957
Srinivasan
Sivaram
STI 6/30/18 343,750 687,500 1,375,000
PSUs — Financial (3) 8/30/18 6,173 12,345 24,690 781,192
PSUs — TSR (4) 8/30/18 6,173 12,345 24,690 694,653
RSUs (5) 8/30/18 24,691 1,562,446
Robert K.
Eulau
STI 4/22/19 74,038 148,077 296,153
RSUs (5) 4/22/19 36,893 1,999,970
Martin R.
Fink
STI 6/30/18 330,000 660,000 1,320,000
PSUs — Financial (3) 8/30/18 4,741 9,481 18,962 599,958
PSUs — TSR (4) 8/30/18 4,741 9,481 18,962 533,496
RSUs (5) 8/30/18 18,963 1,199,978
Mark P.
Long
STI 6/30/18 371,250 742,500 1,485,000
PSUs — Financial (3) 8/30/18 6,667 13,333 26,666 843,712
PSUs — TSR (4) 8/30/18 6,667 13,333 26,666 750,248
RSUs (5) 8/30/18 26,667 1,687,488

(1)

To help explain this table and the awards granted to our named executive officers in fiscal 2019, we included an additional column showing the type of award granted.

(2)

The dollar value of the awards shown represents the grant date fair value of the award computed in accordance with ASC 718. See Note 12 in the Notes to Consolidated Financial Statements included in our 2019 Annual Report on Form 10-K for more information about the assumptions used to determine these amounts. The grant date of each award, other than the RSU award to Mr. Eulau, is August 30, 2018, the date on which the award was approved by the Compensation Committee. The grant date of the RSU award to Mr. Eulau is April 22, 2019, the date on which Mr. Eulau commenced employment with our company. The grant date fair value for the PSU awards subject to financial goals, at the target level, is based on the closing value of our common stock on August 30, 2018, $63.28 per share. The grant date fair value for the PSU awards subject to relative TSR performance, at the probable outcome, is based on the value of our common stock on August 30, 2018 using a Monte Carlo simulation, which resulted in a simulated award value of $56.27 per share based on applicable assumptions.

64     WESTERN DIGITAL


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

(3)

Represents an annual LTI PSU award granted to the named executive officer for the two-year performance period covering fiscal 2019 and 2020 and three-year performance period covering fiscal 2019 through 2021, subject to cliff vesting at August 30, 2021, based on our achievement of specified revenue and non-GAAP EPS performance goals that correspond to specific payout percentages ranging between 0% and 200% of the target number of units subject to the award.

(4)

Represents an annual LTI PSU award granted to the named executive officer for the three-year performance period covering fiscal 2019 through 2021, subject to cliff vesting at August 30, 2021, based on our relative TSR performance that corresponds to specific payout percentages ranging between 0% and 200% of the target number of units subject to the award and capped at 100% if our absolute TSR is negative over the three-year performance period.

(5) Represents RSUs awarded to the named executive officer, which are scheduled to vest ratably over four years. See the section entitled “—Description of Compensation Arrangements for Named Executive Officers—Equity-Based Awards” below for more information about these awards.

                                                                          
DESCRIPTION OF COMPENSATION ARRANGEMENTS FOR NAMED EXECUTIVE OFFICERS

Overview

The “Fiscal 2017—2019 Summary Compensation Table” above quantifies the value of the different forms of compensation earned by our named executive officers in fiscal 2017, 2018 and 2019, and the “Fiscal 2019 Grants of Plan-Based Awards Table” above provides information regarding the equity incentive awards and non-equity incentive awards granted to our named executive officers in fiscal 2019. These tables should be read in conjunction with the narrative descriptions and additional tables that follow.

Non-Equity Incentive Plan Compensation and Awards

Under our STI Plan, our named executive officers are eligible to receive cash awards on an annual basis (or such other period as the Compensation Committee approves). The amount of the awards payable under our STI Plan is determined based on our achievement of operating and/or financial performance goals established by the Compensation Committee annually (or such other period as the Compensation Committee approves) as well as other discretionary factors, including non-financial and strategic operating objectives, business and industry conditions and individual and business group performance. The named executive officer is generally required to remain employed with us through the date on which the Compensation Committee determines, and we pay, the award amounts for the applicable performance period to be eligible to receive payment of the award for that period. See the section entitled “Executive Compensation—Compensation Discussion and Analysis” for a more detailed description of our STI Plan and tables reflecting each executive’s STI target award opportunities and actual payouts under our STI Plan for fiscal 2019.

Equity-Based Awards

Each RSU and PSU award reported in the “Fiscal 2019 Grants of Plan-Based Awards Table” was granted by the Compensation Committee under, and is subject to, the terms of our 2017 Performance Incentive Plan. Our Board of Directors has delegated general administrative authority for our 2017 Performance Incentive Plan to the Compensation Committee. The Compensation Committee has broad authority under our 2017 Performance Incentive Plan with respect to granting awards, including the authority to select participants and determine the type of award they are to receive, to determine the number of shares that are to be subject to awards and the terms and conditions of awards, to accelerate or extend the vesting or exercisability or extend the term of any or all outstanding awards, to make certain adjustments to an outstanding award and to authorize the conversion, succession or substitution of an award upon the occurrence of certain corporate events such as reorganizations, mergers and stock splits, and to make provision for the payment of the purchase price of an award (if any) and ensure that any tax withholding obligations incurred in respect of awards are satisfied.

PSU Awards. The annual LTI PSU awards granted to our named executive officers were granted as part of our regular annual LTI award process, and each PSU award represents a contractual right to receive a percentage of the target number of shares of our common stock based on achievement of certain goals over the performance period. The Compensation Committee selected cumulative revenue and non-GAAP EPS as the financial performance goals over a three-year performance period covering fiscal 2019 through 2021 (representing 37.5% of the target PSU awards) and a two-year performance period covering fiscal 2019 and 2020 (representing 12.5% of the target PSU awards). The Compensation Committee further selected cumulative relative TSR compared to a group of industry peers over a three-year performance period covering fiscal 2019 through 2021 (representing 50% of the target PSU awards).

2019 PROXY STATEMENT     65


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

Each PSU award is subject to cliff vesting at the end of three years; the portion of the PSUs that has a two-year performance period includes a three-year service period (one year beyond the two-year performance period) for our named executive officers to vest in the awards. The number of units received upon vesting is based upon achievement of the pre-established performance goals. The actual number of shares of our common stock that may become earned and payable after the performance period will range from 0% to 200% of the target number of shares underlying these PSU awards based on the level of achievement of the applicable metrics.

Our named executive officers are not entitled to voting rights with respect to their PSUs. However, if we pay an ordinary cash dividend on our outstanding shares of common stock, the named executive officer will have the right to receive a dividend equivalent with respect to any unpaid PSUs (whether vested or not) held as of the record date for the dividend payment. A dividend equivalent is a credit to the named executive officer’s bookkeeping account of an additional number of PSUs equal to (i) the per-share cash dividend, multiplied by (ii) the number of PSUs remaining subject to the award held by the named executive officer as of the record date of the dividend payment, divided by (iii) the per-share closing market price of our common stock on the date the dividend is paid. Dividend equivalents will be subject to the same vesting, payment and other terms and conditions as the original PSUs to which they relate (except that dividend equivalents may be paid in cash based on the closing market price of a share of our common stock on the date of payment).

RSUs. Each RSU award granted to our named executive officers in fiscal 2019 represents a contractual right to receive one share of our common stock per RSU on the vesting date(s) of the RSUs. The vesting dates of the RSU awards reported in the “Fiscal 2019 Grants of Plan-Based Awards Table” are disclosed in the “Outstanding Equity Awards at Fiscal 2019 Year-End Table” below.

Our named executive officers are not entitled to voting rights with respect to their RSUs. However, if we pay an ordinary cash dividend on our outstanding shares of common stock, the named executive officer will have the right to receive a dividend equivalent with respect to any unpaid RSU (whether vested or not) held as of the record date for the dividend payment. A dividend equivalent is a credit to the named executive officer’s bookkeeping account of an additional number of RSUs equal to (i) the per-share cash dividend, multiplied by (ii) the number of RSUs held by the named executive officer as of the record date of the dividend payment, divided by (iii) the per-share closing market price of our common stock on the date the dividend is paid. Dividend equivalents will be subject to the same vesting, payment and other terms and conditions as the original stock units to which they relate (except that dividend equivalents may be paid in cash based on the closing market price of a share of our common stock on the date of payment).

Additional information regarding the vesting acceleration provisions applicable to equity awards granted to our named executive officers is included in the section entitled “Potential Payments upon Termination or Change in Control.”

66     WESTERN DIGITAL


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

                                                                          
OUTSTANDING EQUITY AWARDS AT FISCAL 2019 YEAR-END TABLE

The following table presents information regarding the current holdings of stock options and stock awards (and corresponding dividend equivalents) held by each of our named executive officers as of June 28, 2019. This table includes vested but unexercised stock option awards, unvested and unexercisable stock option awards, and unvested awards of RSUs and PSUs at target level or, if applicable, the credited amount.

Option Awards Stock Awards
Name Grant
Date
(1)
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Option
Exercise
Price
($)
Option
Expiration
Date
Number of
Shares or
Units of Stock
That Have Not
Vested
(#)
Market
Value of
Shares or
Units of
Stock
That Have
Not Vested
($)(2)
Equity
Incentive Plan
Awards: Number
of Unearned
Shares, Units
or Other Rights
That Have
Not Vested
(#)
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)(2)
Stephen D. Milligan 8/14/2013 5,664 68.49 8/14/2020
9/11/2014 74,094 100.06 9/11/2021
8/5/2015 98,006 6,533 (3)  84.69 8/5/2022
8/3/2016 66,042          82,553 (3)  44.78 8/3/2023
8/2/2017        44,351 (4)  2,108,890
8/30/2018 79,019 (4)  3,757,353 59,264 (5)  2,818,003
59,264 (6)  2,818,003
Michael D. Cordano 9/11/2014 57,629 100.06 9/11/2021
8/4/2015 41,936 2,795 (3)  84.39 8/4/2022
11/3/2015 8,408 2,802 (3)  68.53 11/3/2022
8/3/2016 98,266 44,666 (3)  44.78 8/3/2023 17,034 (4)  809,967
8/2/2017 25,210 (4)  1,198,736
8/30/2018 39,509 (4)  1,878,653           19,754 (5)  939,303
19,754 (6)  939,303
Srinivasan Sivaram 5/12/2016 11,380 40.63 2/16/2022 11,198 (7)  532,465
8/3/2016 14,492 18,114 (3)  44.78 8/3/2023 13,816 (4)  656,951
8/2/2017 9,394 (4)  446,685
11/1/2017 29,697 (8)  1,412,092
8/30/2018 25,722 (4)  1,223,081 12,860 (5)  611,493
12,860 (6)  611,493
Robert K. Eulau 4/22/2019 37,231 (4)  1,770,334
Martin R. Fink 2/1/2017 20,087 (4)  955,137
8/2/2017 9,804 (4)  466,180
8/30/2018 19,754 (4)  939,303 9,877 (5)  469,651
9,877 (6)  469,651
Mark P. Long 9/11/2014 27,373 100.06 9/16/2019
8/3/2016 26,799 44.78 9/16/2019
8/30/2018 4,427 (5)(9)  210,504
4,975 (6)(9)  236,561

(1) To help explain this table and the awards held by our named executive officers, we included an additional column showing the grant date of each stock option and stock award.
(2) The amount shown for the market value of the stock awards is based on the $47.55 closing price of our common stock on June 28, 2019, the last trading day in fiscal 2019.

2019 PROXY STATEMENT     67


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

(3) These stock option awards are scheduled to vest as to 25% of the underlying shares on the first anniversary of the grant date, and as to an additional 6.25% of the underlying shares at the end of each three-month period thereafter until the award is fully vested on the fourth anniversary of the grant date.
(4) These RSU awards are scheduled to vest in four substantially equal annual installments on each of the first, second, third and fourth anniversaries of the grant date.
(5) These PSU awards are scheduled to vest on August 30, 2021, based on achievement of specified relative TSR goals established by the Compensation Committee for the three-year period covering fiscal 2019 through 2021. The awards will be payable in shares of our common stock on the vesting date based on our achievement of the specified goals that correspond to specific payment percentages ranging between 0% and 200% of the target number of units subject to the awards indicated in the table above.
(6) These PSU awards are scheduled to vest on August 30, 2021, based on achievement of specified revenue and non-GAAP EPS goals established by the Compensation Committee for the two-year and three-year periods covering fiscal 2019 and 2020 and fiscal 2019 through 2021, respectively. The awards will be payable in shares of our common stock on the vesting date based on our achievement of the specified goals that correspond to specific payment percentages ranging between 0% and 200% of the target number of units subject to the awards indicated in the table above.
(7) This RSU award was originally granted by SanDisk and was assumed by us in connection with the acquisition of SanDisk in May 2016. This RSU award is scheduled to vest on February 16, 2020.
(8) This RSU award is scheduled to vest on the third anniversary of the date of grant.
(9) In connection with the termination of Mr. Long’s employment, these PSU awards reflect the pro rata portion subject to open performance-based vesting conditions.

                                                                          
FISCAL 2019 OPTION EXERCISES AND STOCK VESTED TABLE

The following table presents information regarding the amount realized upon the exercise of stock options and the vesting of stock unit awards for our named executive officers during fiscal 2019.

Option Awards Stock Awards
Name Number of
Shares Acquired
on Exercise
(#)
Value Realized
on Exercise
($)(1)
Number of
Shares Acquired
on Vesting
(#)
Value Realized
on Vesting
($)(2)
Stephen D. Milligan 93,446 5,753,822
Michael D. Cordano 144,402 7,624,466
Srinivasan Sivaram 36,020 2,029,377
Robert K. Eulau
Martin R. Fink 23,322 1,290,967
Mark P. Long 4,467 111,698 195,661 9,054,034

(1) The amount shown for value realized on exercise of stock options equals (i) the number of shares of our common stock to which the exercise of the stock option related, multiplied by (ii) the difference between the per-share market price of the shares on the date of exercise and the per-share exercise price of the option. If the stock acquired upon exercise was sold on the day of exercise, the market price was determined as the actual sales price of the stock. If the stock acquired upon exercise was not sold on the day of exercise, the market price was determined as the closing price of the stock on the exercise date.
(2) The amount shown for the value realized on the vesting of stock awards equals the number of shares of our common stock subject to the named executive officer’s stock awards that vested during fiscal 2019 (and corresponding dividend equivalents) multiplied by the closing price of the stock on the applicable vesting date (or, for PSUs, the applicable payment date) of the award.

68     WESTERN DIGITAL


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

                                                                          
FISCAL 2019 NON-QUALIFIED DEFERRED COMPENSATION TABLE

The following table presents information regarding the contributions to, investment earnings, distributions and total value of our named executive officers’ balances under our Deferred Compensation Plan during fiscal 2019 and as to RSUs that vested in fiscal 2019 but as to which payment had not been made at fiscal year-end.

Name Executive
Contributions in
Fiscal 2019
($)
Registrant
Contributions in
Fiscal 2019
($)
Aggregate
Earnings
in Fiscal 2019
($)(1)
Aggregate
Withdrawals/
Distributions
($)
Aggregate
Balance at
June 28, 2019
($)(2)
Stephen D. Milligan 562,500       196,536 6,749,418
Michael D. Cordano
Srinivasan Sivaram 490,625 70,813 1,464,273
Robert K. Eulau
Martin R. Fink 744,000 106,076 2,180,212
Mark P. Long          250,033 (3) 80,214 (4) 330,247

(1) The amounts reported are not considered to be at above-market rates under applicable SEC rules. In accordance with SEC rules, we did not include these amounts as compensation to the named executive officers in the “Fiscal 2017—2019 Summary Compensation Table” above.
(2) The balances reported represent compensation already reported in the “Fiscal 2017—2019 Summary Compensation Table” in this year’s Proxy Statement and its equivalent table in prior years’ proxy statements, except for the earnings on contributions that are not considered to be at above-market rates under SEC rules and for amounts earned while the individual was not a named executive officer under SEC rules.
(3) The amount shown reflects the value, based on the closing price of our common stock on the applicable vesting date, of Mr. Long’s RSUs that vested during fiscal 2019 but as to which payment will be made after the end of fiscal 2019 in accordance with the terms of the awards.
(4) Reflects the change in value between the vesting date and the last day of fiscal 2019, based on the closing prices of our common stock on those dates, of Mr. Long’s RSUs that vested during fiscal 2019 but as to which payment will be made after the end of fiscal 2019 in accordance with the terms of the awards.

Non-Qualified Deferred Compensation Plan

We permit our named executive officers and other key employees to elect to receive a portion of their compensation reported in the “Fiscal 2017—2019 Summary Compensation Table” on a deferred basis under our Deferred Compensation Plan. Under the plan, each participant may elect to defer up to 80% of his or her eligible compensation that may be earned during the following year.

Under the plan, we are permitted to make additional discretionary contributions with respect to amounts deferred under the plan. We did not make any discretionary contributions during fiscal 2019. In addition, we have not in the past made any discretionary contributions under our Deferred Compensation Plan to any of our current named executive officers.

For cash amounts deferred under the plan, the participant may elect one or more measurement funds to be used to determine investment gains or losses to be credited to his or her account balance, including certain mutual funds. Amounts may be deferred until a specified date, retirement, disability or death. At the participant’s election, compensation deferred until retirement or death may be paid as a lump sum or in installments over five, ten, fifteen or twenty years. If the participant’s employment terminates before the participant qualifies for retirement, including due to disability, the participant’s deferred compensation balance will be paid in a single lump sum upon termination. Emergency hardship withdrawals are also permitted under the plan.

Prior to the plan year beginning on January 1, 2016, under our Deferred Compensation Plan, named executive officers and other key employees were permitted to defer receipt of any RSUs awarded under our 2017 Performance Incentive Plan beyond the vesting date of the award. A participant could elect to defer receipt of RSUs until a specified date, retirement, disability or death, as described above. If a participant made an election to defer RSUs, the participant would receive a distribution with respect to the RSUs (including any stock units credited as dividend equivalents) in an equivalent number of shares of our common stock in accordance with the participant’s deferral election. Commencing with the plan year beginning on January 1, 2016, employees are no longer permitted to defer receipt of RSUs under our Deferred Compensation Plan.

2019 PROXY STATEMENT     69


Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS

                                                                          
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

This section describes severance and change in control plans covering our named executive officers and certain agreements we have entered into with some of our named executive officers that could require us to make payments to the executives in connection with certain terminations of their employment with us and/or a change in control.

Change in Control—No Termination

Except as described below, our equity awards will not automatically vest should a change in control occur. Upon any event in which our company does not survive, or does not survive as a public company in respect of its common stock, each award may be terminated. If an award is to be terminated in those circumstances, and the Compensation Committee has not provided for the substitution, assumption, exchange or other continuation or settlement of the award or the award would otherwise continue in accordance with its terms in the circumstances, the award will become fully vested (and PSU awards as to which the applicable performance period has not ended will become vested at the target number of shares or such greater number of shares as the Compensation Committee may determine appropriate in the circumstances). For the specific definitions related to accelerated vesting in these circumstances, please refer to the applicable stock plan or form of award agreement as filed with the SEC.

Unless otherwise determined by the Compensation Committee, any stock options that are vested prior to or that become vested in connection with a transaction referred to above will generally terminate if not exercised prior to the transaction.

Change in Control—Termination Without Cause or For Good Reason

In addition to the change in control benefits described above, named executive officers may be entitled to severance benefits in the event of certain terminations of employment in connection with or following a change in control. These benefits are provided under our Change of Control Severance Plan, which was adopted by our Board on March 29, 2001, as most recently amended and restated as of November 3, 2015. The severance benefits are payable if we or our subsidiaries terminate the employment of the named executive officer without “cause” or the employee voluntarily terminates his or her employment for “good reason” within one year after a change in control or prior to and in connection with, or in anticipation of, such a change.

For these purposes:

The term “change in control” generally means an acquisition by any person or group of more than one-third of our stock, certain majority changes in our board of directors over a period of not more than two years, mergers and similar transactions that result in a 50% or greater change in our ownership, and certain liquidations and dissolutions of our company.
The term “cause” generally means the commission of certain crimes by the executive, the executive’s willful engaging in fraud or dishonest conduct, refusal or failure to perform certain duties, breach of fiduciary duty, or breach of certain other violations of company policy.
The term “good reason” generally means a material diminution in the executive’s authority, duties or responsibilities, a material diminution in the executive’s base compensation, certain relocations of the executive’s employment, or a material breach by us (or our successor) with respect to our obligations under our Change of Control Severance Plan.

For the specific definitions of change in control, cause and good reason, please refer to our Change of Control Severance Plan as filed with the SEC.

Each of our named executive officers is a “Tier 1 Executive” for purposes of our Change of Control Severance Plan due to each such officer’s status as an executive officer subject to Section 16 of the Exchange Act.

For each of the named executive officers, the severance benefits generally consist of the following:

1. a lump sum payment equal to two times the sum of the officer’s annual base compensation plus the target bonus as in effect immediately prior to the change in control or as in effect on the date of notice of termination of the officer’s employment with us, whichever is higher;