DEF 14A 1 diod-def14a_20210524.htm DEF 14A - 2021 ANNUAL MEETING diod-def14a_20210524.htm

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.      )

 

Filed by the Registrant                                   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 § 240.14a-12

DIODES INCORPORATED

(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:

      

 

 


DIODES INCORPORATED

Notice of Annual Meeting of Stockholders

To Be Held May 24, 2021

Notice is hereby given that the annual meeting (the “Meeting”) of the stockholders of Diodes Incorporated (the “Company”) will be held online via live audio webcast at www.proxydocs.com/DIOD on Monday, May 24, 2021, at 7:00 p.m. (Central Time). Due to the continued public health impact of the Coronavirus outbreak and out of an abundance of caution to support the health and well-being of our employees, stockholders, and communities, the Meeting will be conducted completely virtually, via a live audio webcast; there will be no physical meeting location. Even though our Meeting is being held virtually, stockholders will still have the ability to participate in, hear others, and ask questions during the Meeting. The Meeting is being held for the following purposes:

 

1.

Election of Directors. To elect eight persons to the Board of Directors of the Company, each to serve until the next annual meeting of stockholders and until their respective successors have been elected and qualified. The Board of Directors’ nominees are: Angie Chen Button, C.H. Chen, Warren Chen, Michael R. Giordano, Keh-Shew Lu, Peter M. Menard, Christina Wen-Chi Sung and Michael K.C. Tsai.

 

2.

Approval of Executive Compensation. To approve, on an advisory basis, the Company’s executive compensation.

 

3.

Ratification of Appointment of Independent Registered Public Accounting Firm. To ratify the appointment of Moss Adams LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021.

 

4.

Other Business. To transact such other business as properly may come before the Meeting or any adjournment or postponement thereof.

It is possible that an adjournment or postponement may be necessary that makes us unable to hold the Meeting on the date as planned. If such an adjournment or postponement is made, the Company will notify stockholders through the issuance of a press release and the filing of definitive additional soliciting material with the Securities and Exchange Commission.

Only persons who were stockholders of record at the close of business on March 29, 2021 are entitled to notice of and to vote either by proxy or at the Meeting or any adjournment or postponement thereof.

The proxy statement, which accompanies this Notice, contains additional information regarding the proposals to be considered at the Meeting, and stockholders are encouraged to read it in its entirety.

We have elected to provide access to our proxy materials by notifying you of the availability of our proxy statement and our fiscal 2020 Annual Report to Stockholders over the Internet at www.proxydocs.com/DIOD. Stockholders may also obtain a printed copy of the proxy materials free of charge by following the instructions provided in the Notice of Internet Availability of Proxy Materials that will be first mailed to stockholders on or about April 14, 2021 or in the enclosed proxy statement.

As set forth in the enclosed proxy statement, proxies are being solicited by and on behalf of the Board of Directors of the Company. All proposals set forth above are proposals of the Board of Directors.

Whether or not you plan to participate in the virtual Meeting, YOUR VOTE IS IMPORTANT. Please follow the instructions enclosed to ensure that your shares are voted. If you participate in the Meeting, you may revoke your proxy at any time prior to its exercise at the Meeting.

Dated at Plano, Texas, this 14th day of April, 2021.

By Order of the Board of Directors,

DIODES INCORPORATED

Richard D. White,
Secretary

IF YOU PLAN TO ATTEND THE MEETING

 

If you plan to attend the Meeting online you must be registered no later than 5:00 p.m. Central Time on May 22, 2021. To register go to www.proxydocs.com/DIOD.  Upon completing your registration, you will receive further instructions via email, including your unique links that will allow you access to the Meeting and will also permit you to submit questions during the Meeting and in advance. Please be sure to follow instructions found on your proxy card and subsequent instructions that will be delivered to you via email. You will be able to listen, vote, and submit questions from any remote location that has Internet connectivity.  Technical assistance is available as part of the instructions.

 

 


TABLE OF CONTENTS

 

Page

General Information

 

1

Matters to be Considered at the Meeting

 

1

Voting Recommendations of the Board

 

1

Voting Shares Held in “Street Name”

 

1

Internet Access to Proxy Materials

 

1

How to Vote

 

2

How to Change or Revoke Your Vote

 

3

Meeting Admission

 

3

Voting Rights

 

3

Procedures for Stockholder Nominations and Proposals

 

5

Cost of Proxy Solicitation

 

5

Other Business

 

5

Security Ownership of Certain Beneficial Owners and Management

 

6

Proposal One – Election of Directors

 

9

Corporate Governance

 

14

Committees of the Board

 

14

Meetings of the Board and Committees

 

15

Board Leadership Structure

 

16

Nominating Procedures and Criteria and Board Diversity

 

16

Director Resignation Policy

 

17

Communications with Directors

 

17

Compensation of Directors

 

18

Compensation Committee Interlocks and Insider Participation

 

19

Corporate Policies

 

19

Corporate Sustainability

 

22

Executive Officers of the Company

 

28

Report of the Audit Committee

 

30

Code of Ethics

 

31

Certain Relationships and Related Person Transactions

 

31

Compliance with Section 16(a) of the Securities Exchange Act of 1934

 

33

Proposal Two - Approval of Executive Compensation

 

34

Compensation Discussion and Analysis

 

35

Introduction

 

35

Executive Summary

 

35

Overview of Compensation Program

 

37

Pay for Performance

 

39

Principal Components of Compensation

 

41

Compensation Review Process

 

49

Additional Benefits and Perquisites

 

50

Best Practices

 

51

Compensation Risk Assessment

 

51

Post-Termination and Change-In-Control Payments

 

51

Tax and Accounting Considerations

 

53

Report of the Compensation Committee on Executive Compensation

 

54

Executive Compensation

 

55

Summary Compensation Table

 

55

Grants of Plan-Based Awards

 

56

CEO Pay Ratio

 

57

Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table

 

57

Outstanding Equity Awards at Fiscal Year-End

 

61

Option Exercises and Stock Vested

 

61

Equity Compensation Plan Information

 

62

Nonqualified Deferred Compensation

 

63

Potential Payments Upon Termination or Change in Control

 

63

Proposal Three - Ratification of the Appointment of Independent Registered Public Accounting Firm

 

68

Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees

 

68

Proposals of Stockholders and Stockholder Nominations for 2022 Annual Meeting

 

70

Annual Report and Form 10-K

 

71

Meeting Location

 

Back Cover

 

 

 


 

DIODES INCORPORATED

4949 Hedgcoxe Road, Suite 200

Plano, Texas 75024

(972) 987-3900

PROXY STATEMENT

ANNUAL MEETING: MAY 24, 2021

GENERAL INFORMATION

This proxy statement (“Proxy Statement”) is furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Diodes Incorporated (the “Company”) for use at the annual meeting (the “Meeting”) of the stockholders of the Company to be held online via live audio webcast at www.proxydocs.com/DIOD on Monday, May 24, 2021, at 7:00 p.m. (Central Time), and at any adjournment or postponement thereof. Only stockholders of record at the close of business on March 29, 2021 (the “Record Date”) are entitled to notice of and to vote by proxy or at the Meeting or any adjournment or postponement thereof.

Matters to be Considered at the Meeting

The matters to be considered and voted upon at the Meeting will be:

 

1.

Election of Directors. To elect eight persons to the Board, each to serve until the next annual meeting of stockholders and until their respective successors have been elected and qualified. The Board’s nominees are: Angie Chen Button, C.H. Chen, Warren Chen, Michael R. Giordano, Keh-Shew Lu, Peter M. Menard, Christina Wen-Chi Sung and Michael K.C. Tsai.

 

2.

Approval of Executive Compensation. To approve, on an advisory basis, the Company’s executive compensation.  

 

3.

Ratification of Appointment of Independent Registered Public Accounting Firm. To ratify the appointment of Moss Adams LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021.

 

4.

Other Business. To transact such other business as properly may come before the Meeting or any adjournment or postponement thereof.

Voting Recommendations of the Board

Our Board recommends that you vote your shares “FOR” each of the nominees to the Board, “FOR” the approval of executive compensation and “FOR” the ratification of the appointment of Moss Adams LLP.

Voting Shares Held in “Street Name”

Brokerage firms who are members of the New York Stock Exchange cannot vote your shares held in street name in the election of directors or on executive compensation, if you fail to instruct the organization how to vote such shares. Therefore, it is very important that you provide instructions on how to vote any shares beneficially owned by you in street name.

Internet Access to Proxy Materials

Under rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the Internet at www.proxydocs.com/DIOD. Stockholders will not receive printed copies of the proxy materials unless they have requested us to provide proxy materials in printed form. On or about April 14, 2021, a

1 Diodes Incorporated


Notice of Internet Availability of Proxy Materials (the “Notice”) will be first sent to our stockholders of record and beneficial owners.  All stockholders receiving the Notice can request a printed copy of the proxy materials.

The Notice provides you with instructions regarding how to:

 

View our proxy materials for the Meeting on the Internet;

 

Request a printed copy of the proxy materials; and

 

Instruct us to send future proxy materials to you by mail or electronically by email on an ongoing basis.

Choosing to receive future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce the impact of our annual meetings on the environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate it, and it is your responsibility to notify us of any change to your email address given to us.

The proxy materials include:

 

Notice of Annual Meeting of Stockholders;

 

This Proxy Statement; and

 

The 2020 Annual Report to Stockholders, which includes our audited consolidated financial statements.

If you request printed copies of the proxy materials by mail, these materials will also include a proxy card.

How to Vote

Stockholder of Record. If your shares are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered the stockholder of record with respect to those shares, and the Notice was sent directly to you by the Company. If you are a stockholder of record, you may attend the Meeting and vote in person via the Internet at www.proxydocs.com/DIOD.

If you do not wish to attend the Meeting and vote online during the Meeting, you may vote by proxy. There are three ways to vote by proxy. You may submit a proxy by telephone by calling (855) 686-4804 and following the instructions provided. You may submit a proxy over the Internet at www.proxypush.com/diod by following the instructions provided. If you request and receive a printed copy of the proxy materials by mail, you can submit a proxy by signing and dating the enclosed proxy card and either mailing it in the postage-paid envelope provided to the address stated on the proxy card or transmitting it by facsimile to the Inspector of Elections at (972) 731-3510.

Telephone and Internet voting facilities for stockholders will be available 24 hours a day and will close at 5:00 p.m. (Central Time) on May 21, 2021. If a proxy is properly submitted and is not revoked, the proxy will be voted at the Meeting in accordance with the stockholder’s instructions indicated on the proxy. If no instructions are indicated on the proxy with respect to any matter, the proxy will be voted on such matter as follows: “FOR” the election of the Board’s nominees, “FOR” the approval of executive compensation, “FOR” ratification of the appointment of Moss Adams LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021, and in accordance with the recommendations of the Board as to any other matter that may properly be brought before the Meeting or any adjournment or postponement thereof.

Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. The organization holding your shares is considered the stockholder of record for purposes of voting at the Meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account by following the instructions they provided. If you wish to attend the Meeting and vote during the Meeting in person via the Internet, you must obtain a proxy executed in your favor from the organization that holds your shares.

2 Diodes Incorporated


Even if you plan to attend the Meeting, we recommend that you also submit your proxy or voting instructions so that your vote will be counted if you later decide not to attend the Meeting.

How to Change or Revoke Your Vote

You may change your vote at any time before the vote at the Meeting. If you are a stockholder of record, you may change your vote by submitting a proxy over the Internet or telephone on a later date (only your last Internet or telephone proxy will be counted), or by filing a written revocation, or a duly executed proxy card bearing a later date, with the Company’s Secretary at the Meeting or at our offices located at 4949 Hedgcoxe Road, Suite 200, Plano, Texas 75024 provided that any such written revocation or duly executed proxy card bearing a later date must be received at such offices no later than May 21, 2021. You may also change your vote by attending the Meeting and voting in person via the Internet. Attending the Meeting will not automatically revoke a previously granted proxy unless you vote at the Meeting or file a written revocation with the Company’s Secretary at or before the Meeting.

If you are a beneficial owner of shares held in street name, you may change your vote by submitting new voting instructions to the brokerage firm, bank, broker-dealer or other organization holding your shares by following the instructions they provided or, if you obtained a proxy in your favor from that organization, by attending the Meeting and voting in person via the Internet.

Meeting Admission

Due to concerns around the spread of COVID-19 in the United States and globally, this year our Meeting will be a completely virtual meeting, which will be conducted via live audio webcast at www.proxydocs.com/DIOD. You are entitled to participate in the Meeting only if you were a holder of Diodes’ Common Stock at the close of business on March 29, 2021, which is the record date for the Meeting, or if you hold a valid proxy. If you plan to attend the Meeting online you must be registered no later than 5:00 p.m. (Central Time) on May 21, 2021. Upon completing your registration, you will receive further instructions via email, including your unique links that will allow you access to the Meeting and will also permit you to submit questions during the Meeting and in advance. Please be sure to follow instructions found on your proxy card and subsequent instructions that will be delivered to you via email. You will be able to participate in, hear others and ask questions from any remote location that has Internet connectivity.  Technical assistance is available as part of the instructions.

Voting Rights

The authorized capital of the Company consists of (i) 70,000,000 shares of Common Stock, par value $0.66-2/3 per share (“Common Stock”), of which 44,599,992 shares were issued and outstanding on the Record Date, and (ii) 1,000,000 shares of Preferred Stock, par value $1.00 per share (“Preferred Stock”), none of which were issued and outstanding on the Record Date.

A majority of the shares of Common Stock issued and outstanding and entitled to vote at the Meeting, present either in person via the Internet or by proxy, constitutes a quorum for the conduct of business at the Meeting. Votes withheld, abstentions and “broker non-votes” (as defined below) will be counted for the purpose of determining the presence of a quorum.

Each stockholder is entitled to one vote, in person via the Internet or by proxy, for each share of Common Stock standing in his or her name on the books of the Company at the close of business on the Record Date on any matter submitted to the stockholders, except that in connection with the election of directors, each stockholder has the right to cumulate votes. Cumulative voting entitles a stockholder to give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of shares of Common Stock owned by such stockholder, or to distribute such stockholder’s votes on the same principle among as many candidates and in such manner as the stockholder shall desire.

3 Diodes Incorporated


If you are a stockholder of record and wish to exercise cumulative voting rights, you must submit a proxy by mail or attend the Meeting and vote in person via the Internet. Your proxy card or ballot must specify how you want to allocate your votes among the nominees. Telephone and Internet voting facilities do not accommodate cumulative voting. If you hold your shares in street name, contact your brokerage firm, bank, broker-dealer, or other similar organization for directions on how to exercise cumulative voting rights using their voting instruction card, or to request a legal proxy so that you can vote your shares directly. Discretionary authority to cumulate votes is hereby solicited by the Board. If you return a signed proxy card or submit voting instructions in writing without providing instructions about cumulative voting, or if you submit a proxy by telephone or in person via the Internet, you will confer on the designated Proxyholders named below discretionary authority to exercise cumulative voting. If they elect to do so, they will be authorized, in their discretion, to cast your votes for some or all of the nominees in the manner recommended by the Board or otherwise in the discretion of the Proxyholders. However, they will not cast any of your votes for a nominee as to whom you have instructed them on your proxy card, voting instruction card or otherwise to withhold a vote. If you do not wish to grant the Proxyholders authority to cumulate your votes in the election of directors, you must explicitly state that objection on your proxy card or voting instruction card, as applicable.

 

For Proposal 1, our Bylaws provide that, in the election of directors, the candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected; provided, however, that the Board has adopted a policy requiring that in an uncontested election (such as the election held at this Meeting), each nominee will submit an irrevocable resignation promptly following the election if he or she fails to receive a majority of votes cast. An uncontested election means that there are as many candidates standing for election as there are vacancies on the Board. A majority of votes cast means that the number of shares cast “FOR” a director’s election exceeds the number of votes “WITHHELD.” Abstentions and broker non‑votes are not considered a vote cast and, therefore, will have no effect with respect to the election of directors other than to reduce the number of affirmative votes required to elect a director. “Broker non‑votes” are shares of stock held in record name by brokers or nominees for which instructions have not been received from the beneficial owners or persons entitled to vote and the broker or nominee does not have discretionary voting power under applicable rules or the instrument under which it serves in such capacity. See “Proposal One – Election of Directors” and “Corporate Governance – Director Resignation Policy.”

Proposals 2 and 3 require the affirmative vote of the holders of a majority of the outstanding shares of Common Stock present, in person via the Internet or by proxy, and entitled to vote on the proposal at the Meeting. Abstentions will be included in the number of votes present and entitled to vote on these proposals and, accordingly, will have the effect of a vote “AGAINST” the proposal.  Broker non-votes with respect to these proposals will not be counted as shares present and entitled to vote on these proposals and, accordingly, will not have any effect with respect to the approval of these proposals (other than to reduce the number of affirmative votes required to approve the proposal). The vote with respect to executive compensation is not binding on the Company, the Board or the Compensation Committee of the Board (the “Compensation Committee”). However, the Board and the Compensation Committee will review the result of this vote and take it into consideration when making future decisions regarding executive compensation.  Although the appointment of Moss Adams LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021 is not required to be submitted to a vote of stockholders, the Audit Committee believes that it is appropriate as a matter of policy to request that the stockholders ratify the appointment of the Company’s independent registered public accounting firm. If the stockholders do not ratify the appointment, which requires the affirmative vote of a majority of the outstanding shares of Common Stock present, in person via the Internet or by proxy, and entitled to vote on the proposal at the Meeting, the Board will consider the selection of another independent registered public accounting firm.

On the Record Date, 1,596,150 shares (or approximately 3.5%) were beneficially owned by directors and executive officers of the Company. Each of the directors and executive officers have informed the Company that they will vote “FOR” the election of the Board’s nominees named herein, “FOR” the approval of executive compensation and “FOR” ratification of the appointment of Moss Adams LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021.

4 Diodes Incorporated


Organizations holding Common Stock in “street name” that are members of a stock exchange are required by the rules of the applicable stock exchange to transmit the proxy materials to the beneficial owner of the Common Stock and to solicit voting instructions with respect to the matters submitted to the stockholders. If the organization has not received instructions from the beneficial owner by the date specified in the statement accompanying such proxy materials, the organization may give or authorize the giving of a proxy to vote the Common Stock in its discretion as to “routine” matters, but not as to “non-routine” matters. When an organization is unable to vote a client’s shares on a proposal, the missing votes are referred to as “broker non-votes.” If you hold Common Stock in “street name” and you fail to instruct the organization that holds your shares as to how to vote such shares, that organization may, in its discretion, vote such Common Stock “FOR” ratification of the appointment of Moss Adams LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021, which is considered a routine matter, but not with respect to the election of the nominees to the Board or the advisory vote on executive compensation, which are considered non-routine matters.

Procedures for Stockholder Nominations and Proposals

Under the Company’s Bylaws, any stockholder generally may submit proposals or nominate one or more persons for election as directors by following the procedures described in this Proxy Statement under “Proposals of Stockholders and Stockholder Nominations for 2022 Annual Meeting.” No notice of a stockholder proposal or nomination was timely received in connection with the Meeting.

Cost of Proxy Solicitation

This proxy solicitation is made by the Board, and the Company will bear the costs of this solicitation, including the expense of preparing, assembling, printing and mailing this Proxy Statement and any other material used in this proxy solicitation. If it should appear desirable to do so to ensure adequate representation at the Meeting, officers and regular employees may communicate with stockholders of record, beneficial owners, banks, brokerage houses, custodians, nominees and others, by telephone, facsimile transmissions, email or in person via the Internet to request that the proxies be furnished. No additional compensation will be paid for these services to officers or employees of the Company. The Company will reimburse banks, brokerage houses, and other custodians, nominees and fiduciaries, for their reasonable expenses in forwarding proxy materials to their principals. We have not engaged a proxy solicitor at this time, but the Board may determine it is necessary to employ an outside firm to assist in the solicitation process. If so, we will pay the proxy solicitor its reasonable and customary fees, estimated not to exceed $15,000 plus reasonable out-of-pocket expenses.

Other Business

As of the date of this Proxy Statement, the Board knows of no business to be presented for consideration at the Meeting other than as stated in the Notice of Annual Meeting of Stockholders. However, if any other matters properly come before the Meeting, including a motion to adjourn the Meeting to another time or place in order to solicit additional proxies in favor of the recommendations of the Board, the designated proxyholders, Dr. Keh-Shew Lu, the Company’s Chairman, President and Chief Executive Officer and Brett Whitmire, the Company’s Chief Financial Officer, (the “Proxyholders”), will vote the shares represented by the proxies on such matters in accordance with the recommendation of the Board, and authority to do so is included in the proxy. Such authorization includes authority to appoint a substitute nominee or nominees to the Board’s nominees identified herein where death, illness or other circumstances arise which prevent any such nominee from serving in such position and to vote such proxy for such substitute nominee.

 

 

5 Diodes Incorporated


 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of Common Stock as of the Record Date by each person known to the Company to be the beneficial owner of five percent (5%) or more of the outstanding shares of Common Stock (other than depositories).  

 

Name and Address of Beneficial Owner

Amount and Nature of

Beneficial Ownership (1)

 

Percent of Class (2)

BlackRock, Inc. (“BlackRock”)

55 East 52nd Street

New York, New York 10022

6,567,054

(3)

14.7%

The Vanguard Group (“Vanguard”)

100 Vanguard Blvd.

Malvern, Pennsylvania 19355

5,133,298

(4)

11.5%

Dimensional Fund Advisors LP ("Dimensional")

15660 Dallas Pkwy Ste 850

Dallas, Texas 75248

2,860,798

(5)

6.4%

 

(1) The named stockholder has sole voting power and investment power with respect to the shares listed, except as indicated below.

(2) Based on 44,599,992 shares outstanding as of the Record Date.

(3) Based solely on information provided by BlackRock in Schedule 13G/A filed with the SEC on January 27, 2021, reporting beneficial ownership of the Company’s Common Stock. According to the Schedule 13G/A, BlackRock has sole voting power with respect to 6,501,030 shares, has sole dispositive power with respect to 6,567,054 shares and has neither shared voting power nor shared dispositive power with respect to any shares.

(4) Based solely on information provided by Vanguard in Schedule 13G/A filed with the SEC on March 10, 2021, reporting beneficial ownership of the Company’s Common Stock. According to the Schedule 13G/A, Vanguard has shared voting power with respect to 54,175 shares, has sole dispositive power with respect to 5,042,940 shares and has shared dispositive power with respect to 90,358 shares.

(5) Based solely on information provided by Dimensional in Schedule 13G/A filed with the SEC on February 12, 2021, reporting beneficial ownership of the Company’s Common Stock.  According to the Schedule 13G/A, Dimensional has sole voting power with respect to 2,754,587 shares, has sole dispositive power with respect to 2,860,798 shares and has neither shared voting power nor shared dispositive power with respect to any shares.

6 Diodes Incorporated


The following table sets forth the beneficial ownership of Common Stock of the Company as of the Record Date by (i) each director and nominee of the Company, (ii) each Named Executive Officer (“NEO”) of the Company (as defined below), and (iii) all directors, nominees and executive officers of the Company as a group.

 

Name of Beneficial Owner

Common Stock Underlying Options or Restricted Stock Units (1)

Common

Stock

Amount and Nature

of Beneficial

Ownership (2)

 

Percent of  Class (3) (4)

Directors and Nominee

 

 

 

 

 

Angie Chen Button

 

*

C.H. Chen

13,525

211,904

225,429

(1)

*

Warren Chen

900

900

(1)

*

Michael R. Giordano

4,050

74,855

78,905

(1)

*

Keh-Shew Lu (5)

151,687

861,672

1,013,359

(1)(6)(8)

2.3%

Peter M. Menard

2,975

3,150

6,125

(1)

*

Christina Wen-Chi Sung

4,050

6,375

10,425

(1)

*

Michael K.C. Tsai

4,050

35,400

39,450

(1)

*

Named Executive Officers

 

 

 

 

 

Brett R. Whitmire

(1)(8)

*

Julie Holland

31,077

31,077

(1)(8)

*

Francis Tang

34,206

34,206

(1)(8)

*

Emily Yang

24,373

24,373

(1)(8)

*

All directors and executive officers of the Company as a group (15 individuals including those named above)

181,237

1,414,913

1,596,150

(7)

3.5%

* Indicates less than 1%.

(1) Consists of shares of Common Stock that the named individual has the right to acquire within sixty (60) days after the Record Date by exercising stock options or the vesting of restricted stock units (“RSUs”) or performance stock units (“PSUs”). For further discussion on the Company’s use of equity awards, see “Compensation Discussion and Analysis – Principal Components of Compensation - Long-Term Incentive (LTI) Plan.”

(2) The named stockholder has sole voting power and investment power with respect to the shares listed, except as indicated and subject to community property laws where applicable.

(3) Under Rule 13d-3 of the Securities Exchange Act of 1934 (the “Act”), certain shares may be deemed to be beneficially owned by more than one person (for example, if a person shares the power to vote or the power to dispose of the shares). In addition, under Rule 13d-3(d)(1) of the Exchange Act, shares which the person (or group) has the right to acquire within sixty (60) days after the Record Date are deemed to be outstanding in calculating the beneficial ownership and the percentage ownership of the person (or group) but are not deemed to be outstanding as to any other person or group. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership of voting power with respect to the number of shares of Common Stock actually outstanding at the Record Date.

(4) Percent of Class is based on 44,599,992 shares of the Common Stock of the Company outstanding as of the Record Date.  

(5) Dr. Lu is Chairman of the Board, President and the Chief Executive Officer of the Company, and a NEO.

(6) Includes 46,150 shares of Common Stock held in the name of an UTMA (Custodial) Trust, and 421,671 shares held in the name of the Lu Grandchildren’s Trust. Dr. Lu is a co-trustee of the Lu Family Revocable Trust, the UTMA (Custodial) Trust and the Lu Grandchildren’s Trust. Dr. Lu has voting and investment authority over these shares.

(7) Includes 182,112 shares that all directors and executive officers of the Company have the right to acquire within sixty (60) days after the Record Date, by exercising stock options or the vesting of RSUs, but excludes an additional 678,538 shares that all directors and executive officers of the Company will have the right to acquire upon the exercise of stock options or the vesting of RSUs and PSUs, which may vest in installments more than sixty (60) days after the Record Date.

(8) Does not include 59,000, 12,000, 17,000, 17,000 and 13,000 shares of Common Stock subject to PSUs granted February 21, 2019 to Messrs. Lu, Whitmire, Tang, Ms. Holland and Ms. Yang, respectively, that vest only if (i) the Company achieves a targeted Non-GAAP operating income for 2019 through 2021 and (ii) the executive continues to provide services to the Company. Also does not include 53,100, 10,800, 15,300, 15,300 and 11,700 shares of Common Stock subject to PSUs granted February 19, 2020 to Messrs. Lu, Whitmire and Tang, Ms. Holland and Ms. Yang, respectively, that vest only if (i) the Company achieves a targeted Non-GAAP operating income for 2020 through 2022 and (ii) the executive continues to provide services to the Company. Also does not include 32,000, 7,600, 7,600, 9,200 and 7,600 shares of Common Stock subject to PSUs granted February 8, 2021 to Messrs. Lu, Whitmire and Tang, Ms. Holland and Ms. Yang, respectively, that vest only if (i) the Company achieves a targeted Non-GAAP operating income for 2021 through 2023 and (ii) the executive continues to provide services to the Company.

Also does not include 450 shares of Common Stock subject to RSUs granted on July 3, 2017 to Ms. Yang that vest in one remaining installment on July 3, 2021, if the executive continues to provide services to the Company. Also does not include 15,750, 4,500, 3,250, and 2,500 shares of Common Stock subject to RSUs granted on February 14, 2018 to Messrs. Lu, Tang, Ms. Holland and Ms. Yang, respectively, that vest on February 14, 2022, if the executive continues to provide services to the Company. Also does not include 29,500, 6,000, 8,500, 8,500 and 6,500 shares of Common Stock subject to RSUs granted on February 21, 2019 to Messrs. Lu, Whitmire, Tang and Ms. Holland and Ms. Yang, respectively, that vest in two equal annual installments on February 26,  2022 and 2023, if the executive continues to provide services to the Company. Also does not include 39,825, 8,100, 11,475, 11,475 and 8,775 shares of Common Stock subject to RSUs granted on February 19, 2020 to Messrs. Lu, Whitmire, Tang and Ms. Holland and Ms. Yang, respectively, that vest in three equal annual installments on February 19, 2022, 2023 and 2024, if the executive continues to provide services to the Company. Also does not include 32,000, 7,600, 7,600, 9,200 and 7,600 shares of Common Stock subject

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to RSUs granted on February 8, 2021 to Messrs. Lu, Whitmire, Tang and Ms. Holland and Ms. Yang, respectively, that vest in three equal annual installments on February 24, 2022, 2023, 2024 and, if the executive continues to provide services to the Company. Also does not include 6,750 shares of Common Stock subject to RSUs granted on May 20, 2020 to Dr. Lu that vest in four equal annual installments on May 20, 2021, 2022, 2023 and 2024, if the executive continues to provide services to the Company. Also does not include 750 shares of Common Stock subject to RSUs granted on July 3, 2017, to Mr. Whitmire that vest on July 3, 2021, if the executive continues to provide services to the Company. Also does not include 1,200 shares of Common Stock subject to RSUs granted on July 2, 2018, to Mr. Whitmire that vest in two equal installments on July 3, 2021 and 2022, if the executive continues to provide services to the Company.

For further discussion on the operating income performance goal and service condition related to these grants, see “Compensation Discussion and Analysis – Principal Components of Compensation - Long-Term Incentive (LTI) Plan.”

 

 

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PROPOSAL ONE

ELECTION OF DIRECTORS

The Company’s Bylaws provide that the number of directors shall be determined from time to time by the Board, but may not be less than five nor more than seventeen. Currently, the Board has fixed the number of directors at eight. The Company’s Bylaws further provide for the election of each director at each annual meeting of stockholders.

The persons nominated have been nominated for election to the Board to serve until the next annual meeting of stockholders and until their respective successors have been elected and qualified. All nominees are currently directors of the Company, and all nominees have indicated their willingness to serve. Unless otherwise instructed, proxies will be voted in such a way as to elect as many of these nominees as possible under applicable voting rules. In the event that any of the nominees should be unable or unwilling to serve as a director, proxies will be voted for the election of such substitute nominees, if any, as shall be designated by the Board. The Board has no reason to believe that any nominee will be unable or unwilling to serve.

The Company’s Corporate Governance Guidelines provides that a member of the Board will not be eligible to stand for re-election to the Board after attaining the age of 75 provided that the Board may waive the requirement for up to five years for any director.  Prior to the date of this Proxy Statement, Mr. C.H. Chen attained the age of 77, and the Board waived this requirement to allow him to be eligible to stand for re-election to the Board at the Meeting.

The eight nominees who receive the highest number of affirmative votes will be elected. The Board has adopted a policy requiring that in an uncontested election (such as the election held at the Meeting), each nominee will submit an irrevocable resignation promptly following the election if he or she fails to receive a majority of votes cast. An uncontested election means that there are as many candidates standing for election as there are vacancies on the Board. A majority of votes cast means that the number of shares cast “FOR” a director’s election exceeds the number of votes “WITHHELD.” See “Corporate Governance – Director Resignation Policy.”

None of the nominees were selected pursuant to any arrangement or understanding, other than that with the directors of the Company acting within their capacity as such. There are no family relationships among the directors of the Company as of the date hereof, and, except as set forth below, as of the date hereof, no directorships are now, or in the past five years have been, held by any director in a company that has a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940.

The following table and discussion sets forth certain biographical information concerning the nominees of the Company as of the Record Date:

 

Nominees

Age

Position with the Company

Director Since

Keh-Shew Lu

74

Chairman of the Board, President and Chief Executive Officer, and Director

2001

C.H. Chen

77

Director and Vice Chairman of the Board

2000

Michael K.C. Tsai

67

Lead Director

2010

Angie Chen Button

67

Director

2021

Warren Chen

71

Director

2020

Michael R. Giordano

74

Director

1990

Peter M. Menard

67

Director

2018

Christina Wen-Chi Sung

67

Director

2017

 

 

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Keh-Shew Lu

Chairman, President, and Chief Executive Officer

Member, Risk Oversight Committee

 

Dr. Lu was elected Chairman of the Board in May 2020 and appointed President and Chief Executive Officer of the Company in June 2005 after serving on the Board since 2001. Dr. Lu is also a board member of Lite-On Technology Corporation and Nuvoton Technology Corporation, two publicly held companies. Dr. Lu is the founding Chairman of the Asian American Citizen’s Council. From 2001 to 2005, Dr. Lu was a partner of the WK Technology Venture Fund. From 1998 to 2001, Dr. Lu served as Senior Vice President and General Manager of Worldwide Mixed-Signal and Logic Products of Texas Instruments (“TI”). His responsibilities included all aspects of the analog, mixed-signal and logic products for TI’s worldwide business, including design, process and product development, manufacturing and marketing. From 1996 to 1998, Dr. Lu was the manager of TI’s worldwide memory business. In addition, he served as the President of TI Asia from 1994 to 1997 where he supervised all of TI activities in Asia, excluding Japan. Dr. Lu holds a bachelor’s degree in Electrical Engineering from the National Cheng Kung University in Taiwan, and a master’s degree and a doctorate in Electrical Engineering from Texas Tech University.

 

Having worked in the semiconductor industry for more than 40 years and, particularly, having served in various managerial and senior executive capacities at TI, Dr. Lu possesses a wealth of semiconductor management experience. Dr. Lu is also an experienced board leader and member, having served for many years on behalf of several public and private companies.

 

C.H. Chen

Director and Vice Chairman of the Board

Chair, Governance and Stockholder Relations Committee

Chair, Risk Oversight Committee

 

Mr. Chen was appointed the Company’s Vice Chairman of the Board in 2005. Mr. Chen is also a board member of Lite-On Technology Corp. and Kwong Lung Enterprise Co., Ltd. Mr. Chen served as the Company’s President and Chief Executive Officer from 2000 until 2005. From 1969 to 1990, Mr. Chen held various positions at Texas Instruments (“TI”), most recently as the Vice President of TI Taiwan. In 1990, he left TI to found Dyna Image Corporation, which merged with Lite-On Semiconductor Corp. in 2000. Mr. Chen received his bachelor’s degree in Mechanical Engineering from National Taiwan University.

 

Mr. Chen has extensive experience in the semiconductor industry, particularly in Asia, including as a director of several Asian semiconductor companies. This experience provides the Board with a valuable perspective on the current and future trends and challenges in the semiconductor industry in Asia. As the Company’s former President and Chief Executive Officer, Mr. Chen’s understanding of the Company enables him to provide advice to the Board on matters concerning the operations of the Company. Mr. Chen is not related to Ms. Button or Mr. Warren Chen.

Michael K.C. Tsai

Lead Director

Chair, Compensation Committee

Member, Governance and Stockholder Relations Committee

 

Mr. Tsai joined and co-founded Powerchip Semiconductor Corp. in 1994, and with the company’s growth has held various positions as Senior VP, President, and Vice Chairman. He has acted as Chairman of the Board of several companies that Powerchip held equity positions in: Nexchip Semiconductor Corp., a joint venture in China, since April 2020; AP Memory Technology Corp. since 2017; Maxchip Electronics Corp. from 2008 to April 2019; Zentel Electronics Corp. from 2010 to 2016; and uPI Semiconductor Corp. from 2007 to 2011. He was also the Chairman of the Board and the Chief Executive Officer of Elitegroup Computer Systems, Inc. from 1991 to 1994; a partner of Tailink Venture Corp. from 1990 to 1994; the President and Chief Executive Officer of Esprit Systems, Inc. from 1989 to 1990; and held numerous executive positions in sales, marketing, planning, and general management with the Acer Group from 1978 to

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1988. He has further been a director on the board of the Taiwan Semiconductor Industry Association since 2000 through the present. Mr. Tsai began his career as an electronic design engineer with Tatung Corp. in 1977. Mr. Tsai received his bachelor’s degree in Control Engineering and Computer Science from National Chiao-Tung University in Taiwan in 1975.

 

Mr. Tsai’s decades of experience serving on the boards of numerous technology and semiconductor companies, and holding various management positions in companies in the technology and semiconductor industry, provide an insightful view of the semiconductor industry to the Board. Mr. Tsai also brings a range of boardroom experience and corporate governance knowledge to further strengthen the operation of the Board.

 

Angie Chen Button

Director

Ms. Button has served as a representative in the State of Texas House of Representatives since 2009. The only Asian American Woman legislator in Texas, she currently chairs the International Relations and Economic Development Committee, and has previously served as Chair of the Urban Affairs Committee, as Chair of the Economic and Small Business Development Committee, as Vice Chair of the Technology Committee, sat on the Appropriations (Budget) Committee, and has sat and currently serves on the Ways and Means (Taxation) Committee. A CPA, Ms. Button worked for Texas Instruments for over 30 years in various auditing, finance, business development, procurement, and international marketing positions. She also served on the Audit Committee of the Dallas Area Rapid Transit Board. As a state representative, she brings experience and connections in dealing with government officials and business leaders, including promoting international business and trade.

 

Ms. Button received her bachelor’s degree in Accounting from National Taiwan University in 1976, her master’s degree in Public Finance from National Chengchi University in 1978, and her master’s degree in Management Science from University of Texas at Dallas in 1980. Ms. Button is a co-founder of the DFW Asian American Citizens Council. Ms. Button is not related to Mr. C.H. Chen or Mr. Warren Chen.

Warren Chen

Director

Member, Compensation Committee

Member, Governance and Stockholder Relations Committee

Member, Risk Oversight Committee

 

Mr. Warren Chen has been a member of the Board of Lite-On Technology Corp. (“LTC”) since 2002 and was promoted to President of the Lite-On Group in 2010. He was named Vice Chairman and Group CEO of LTC since 2014 and stepped down on July 31, 2020. He joined the Lite-On Group in 1983 and has served in positions of increasing responsibility, including as Group Deputy CEO and Core Investment CEO from 2006 to 2010, Deputy CEO of LTC from 2000 to 2006, President of Taiwan Lite-On Electronics Inc. from 1992 to 2000, Senior Vice President of Lite-On Inc. and Production Manager of Compound Semi, Inc. (CA). Prior to joining the Lite-On Group, from 1975 to 1983, Mr. Warren Chen served as manufacturing superintendent for TI Taiwan. Mr. Warren Chen holds a bachelor’s degree in Chemical Engineering from Chinese Culture University. Lite-On Semiconductor Corp. was a company in the Lite-On Group. See “Certain Relationships and Related Person Transactions – Relationships and Transactions.”

 

Mr. Warren Chen’s approximately 45 years of management experience in the electronics industry and the global supply chain provides the Board with perspective on the future trends and challenges in the semiconductor industry. Mr. Warren Chen is not related to Ms. Angie Chen Button or Mr. C.H. Chen.

 

Michael R. Giordano

Director

Chair, Audit Committee (Audit Committee Financial Expert)

 

Mr. Giordano, CIMA, currently serves as Associate Director, Senior Wealth Strategy Associate at the private-banking firm of UBS Financial Services, Inc., having previously served as Senior Vice President-Investment Consulting from when UBS

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AG acquired PaineWebber, Inc. in 2000 until 2017. PaineWebber, Inc. had acquired his previous employer, Kidder Peabody and Co., Inc., by whom he was employed since 1979. Mr. Giordano advises corporations, foundations, trusts, and municipal governments in investments and finance. Mr. Giordano has served as a board member of Rosalind Inc., a private San Diego genomic analysis company, since July 2017, and also served as Chairman of the Board and the Chief Executive Officer of the Leo D. Fields Co. from 1980 to 1990, when GWC Holdings acquired it. From 2001 to 2003, he served as a board member of Professional Business Bank, a publicly traded corporation. Formerly a captain and pilot in the United States Air Force, Mr. Giordano received his bachelor’s degree in Aerospace Engineering from California State Polytechnic University and his master’s degree in Business Administration (Management and Finance) from the University of Utah. Mr. Giordano also completed post-graduate work in International Investments at Babson College and is certified by the Investment Management Consultants Association. He is also certified by the John E. Anderson Graduate School of Management, University of California at Los Angeles as a Corporate Director, having demonstrated understanding of directorship and corporate governance.

 

Mr. Giordano is an experienced leader who has worked in the financial sector for more than 38 years and possesses the skills necessary to lead the Company’s Audit Committee. Having been with UBS Financial Services, Inc. (and its predecessors) since 1979, he has advised numerous public, private, profit, and non-profit organizations in investments and finance. Mr. Giordano’s experience provides the Board with knowledge in financial and accounting matters.

 

Peter M. Menard

Director

Member, Audit Committee

Member, Governance and Stockholder Relations Committee

 

Mr. Menard practiced securities law from 1979 until 2018. From 1998 until his retirement in 2018, Mr. Menard was a partner with the international law firm of Sheppard, Mullin, Richter & Hampton, LLP where his principal areas of practice were corporate governance, securities law compliance, and corporate transactions. He has been a member of the Executive Committee of the Business Law Section of the California Lawyers Association (“BLS”), a Chair of the Corporations Committee of the BLS, Chair of the Business & Corporations Section of the Los Angeles County Bar Association, and an adjunct professor at University of Southern California Gould School of Law where he taught a course in securities regulation. Mr. Menard is a member of the Board of Directors and a member of the Governance Committee and the Audit Committee of Huntington Medical Research Institutes.  He received a bachelor’s degree in Mathematics from Santa Clara University in 1974 and a master’s degree in Mathematics in 1976 and J.D. in 1979 from the University of Michigan.

 

Mr. Menard has 40 years of experience representing publicly traded companies. He brings extensive experience in corporate governance, securities law compliance, corporate social responsibility, shareholder engagement, financial reporting, and executive compensation. He has served of the Board of Directors of multiple nonprofit entities.

 

Christina Wen-Chi Sung

Director

Member, Audit Committee

Member, Compensation Committee

 

Ms. Sung served as the Chairman of the Taipei Financial Center Corporation, the management company for Taipei 101, from 2012 to 2015. She previously served as a Director for Arcadyan Technology Corporation from 2012 to 2014 and Independent Director for Lite-On IT Corporation from 2009 to 2013. She was also the head of the HSBC Asset Management Group (Taiwan) from 2004 to 2006 and the co-CEO of JP Morgan Chase (Taiwan) in 2003. Ms. Sung has earned numerous accolades, including: inclusion in the 2019 Most Influential Corporate Directors list by WomenInc. Magazine, the 2003 Most Influential Business Woman of the Year by Taiwan Commonwealth Magazine, the 2002 Montblanc Business Woman of the Year, the 1998 Best CEO of the Securities Industry in Taiwan by the Securities and

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Futures Development Foundation Golden Goblet Awards, and 1998 Outstanding Business Woman in Taiwan by the Chinese Business Woman’s Association.

 

Ms. Sung brings extensive directorship and business experience to the Board, and she continues to serve on multiple nonprofit boards, including as a director of Feng Chia University. After retiring from Taipei 101, she founded Social Welfare and Social Enterprise Revolving Trust (“SERT”) at the end of 2015, which is aimed at providing financial support and management to non-profit organizations and social enterprises in Taiwan. SERT has been awarded by the government for two consecutive years for its special contribution to the related sector. Ms. Sung received her bachelor’s degree in English language and literature from Soochow University in 1976 and her master’s degree in Executive Management of Business Administration from National Cheng-chi University in 2003.

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE EIGHT NOMINEES TO THE BOARD SET FORTH ABOVE.

 

 

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CORPORATE GOVERNANCE

COMMITTEES OF THE BOARD

The Board has four standing committees: the Audit Committee, the Compensation Committee, the Governance and Stockholder Relations Committee and the Risk Oversight Committee (the “Committees”). Each Committee consists of three or more directors who serve at the discretion of the Board. The Board usually makes Committee and Committee chair assignments annually at its meeting immediately following the Company’s annual meeting of stockholders. The current composition of each Committee is as follows:

 

Directors

Audit Committee

Compensation Committee

Governance and Stockholder Relations Committee

Risk Oversight Committee

Keh-Shew Lu

 

 

 

Member

C. H. Chen (1)

 

 

Chair

Chair

Angie Chen Button (1)(3)

 

 

 

 

Warren Chen (1)

 

Member

Member

Member

Michael R. Giordano (1)

Chair (2)

 

 

 

Peter M. Menard (1)

Member

 

Member

 

Christina Wen-Chi Sung (1)

Member

Member

 

 

Michael K.C. Tsai (1)

 

Chair

Member

 

 

(1) Independent director (as determined by the Board under the rules of The NASDAQ Stock Market LLC (“Nasdaq”) and, in the case of members of the Audit Committee, the rules of the SEC).

(2) Qualifies as “audit committee financial expert” as the term is defined in Item 407(d)(5) of Regulation S-K promulgated under the Exchange Act.

(3) Ms. Button will receive her committee assignments after the Meeting.

 

Director Independence

The Board has determined that seven of the eight current directors (all directors other than Dr. Lu, our Chairman, President and Chief Executive Officer) are “independent directors” as shown in the above table, and as the term “independent director” is defined under the rules of Nasdaq. The Board also has determined that each member of its Audit Committee, Compensation Committee and Governance and Stockholder Relations Committee meets the applicable independence requirements prescribed by Nasdaq and the SEC.

In making its independence determinations with regard to Messrs. C.H. Chen and Warren Chen, the Board considered the relationships described under “Certain Relationships and Related Person Transactions – Relationships and Transactions.”

Audit Committee

The Audit Committee makes recommendations to the Board regarding the engagement of the Company’s independent registered public accounting firm, reviews the plan, scope and results of the audit, reviews the Company’s policies and procedures with the Company’s management concerning internal accounting and financial controls, and reviews changes in accounting policy and the scope of non-audit services which may be performed by the Company’s independent registered public accounting firm. The Audit Committee also monitors policies to prohibit unethical, questionable or illegal activities by the Company’s employees. The “Audit Committee Report” section of this Proxy Statement describes in more detail the Audit Committee’s responsibilities, particularly with regard to the Company’s financial statements and its interactions with the Company’s independent registered public accounting firm.

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The Board has determined that each member of the Audit Committee is “independent” as that term is defined under the rules of Nasdaq and the SEC, and is able to read and understand fundamental financial statements. The Board also has determined that Mr. Giordano qualifies as an “audit committee financial expert” as defined under the rules of the SEC.

Compensation Committee

The Compensation Committee makes recommendations to the Board regarding compensation, benefits and incentive arrangements for the Chief Executive Officer and other officers and key employees of the Company. The Compensation Committee also administers the 2013 Equity Incentive Plan (the “2013 Plan”), the 2001 Omnibus Equity Incentive Plan (the “2001 Incentive Plan”), the Company’s 401(k) profit sharing plan (the “401(k) Plan”) and the Company’s nonqualified deferred compensation plan. The Board has determined that each member of the Compensation Committee is “independent” as that term is defined under the rules of Nasdaq.

Governance and Stockholder Relations Committee

The principal purposes of the Governance and Stockholder Relations Committee (the “Governance Committee”) are to help ensure that the Board (i) identifies individuals qualified to become members of the Board, consistent with criteria approved by the Board, and (ii) selects the nominees for election at the next annual meeting of stockholders. The Board has determined that each member of the Governance Committee is “independent” as that term is defined under the rules of Nasdaq.

Risk Oversight Committee

The Risk Oversight Committee assists the Board in overseeing the Company’s risk management process by (i) overseeing the Company’s efforts to align its management of risks with its strategic objectives, (ii) overseeing the establishment and implementation of a risk oversight framework, and (iii) reviewing the effectiveness of the risk oversight framework in the identification, assessment, monitoring, management and disclosure of significant risks. The Risk Oversight Committee’s oversight provides reasonable assurance that processes are in place to identify, assess, monitor, manage and disclose risks that may have a material adverse effect on the achievement of the Company’s strategic objectives.

Charters of the Committees

All four Committees operate pursuant to written charters, current copies of which are available on the Company’s website, at www.diodes.com, in the “Investors – Corporate Governance” section.

MEETINGS OF THE BOARD AND COMMITTEES

The following table represents the number of meetings and actions taken by written consent of the Board and the Committees in 2020:

 

 

Meetings Held

Action by

Written Consent

Board

5

2

Audit Committee

6

Compensation Committee

4

Governance and Stockholder Relations  Committee

3

Risk Oversight Committee

4

All current directors attended at least 75% of the total number of meetings of the Board and Committees on which each served held during the period he or she served in 2020.

It is the policy of the Company to require Board members to attend the annual meetings of stockholders, if practicable. Each director, except Mr. Soong, who did not stand for reelection at the 2020 annual meeting of stockholders, and Ms. Button who became a director April 1, 2021, attended the 2020 annual meeting of stockholders.

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BOARD LEADERSHIP STRUCTURE

The Chairman of the Board conducts each Board meeting and sets the agenda of each Board meeting after consulting with the Vice Chairman of the Board and members of the Board. The Chairman of the Board also has the responsibility to establish effective communications with the Company’s stakeholders, including stockholders, customers, employees, communities, suppliers, creditors, governments and corporate partners. The Vice Chairman of the Board has the responsibility to assist the Chairman of the Board in fulfilling these responsibilities. With Dr. Lu's appointment as Chairman, the Board determined that the appointment of an independent lead director ("Lead Director") would be appropriate in order to strengthen Board oversight, share certain responsibilities, and facilitate communication, between our Chairman and our independent directors, and continue to follow best practices in corporate governance. To this end, the Board appointed Mr. Tsai, an independent director, to serve as Lead Director. The duties of the Lead Director are to preside at executive sessions of the independent directors, serve as principal liaison between the independent directors and the Chairman, work with the Chairman to set and approve the schedule and agenda for meetings of the Board and its committees, direct the retention of advisors and consultants who report directly to the Board, serve as liaison for consultation and communication with stockholders, oversee the annual evaluation of our Board and its committees and evaluate, in cooperation with the Compensation Committee and all members of the Board, the Chief Executive Officer's performance.

NOMINATING PROCEDURES AND CRITERIA AND BOARD DIVERSITY

Among its functions, the Governance Committee considers and approves nominees for election to the Board. In addition to the candidates proposed by the Board or identified by the Governance Committee, the Governance Committee considers candidates for director suggested by stockholders provided such recommendations are made in accordance with the procedures set forth under “Proposals of Stockholders and Stockholder Nominations for 2022 Annual Meeting.” Stockholder nominations that comply with these procedures and meet the criteria outlined below will receive the same consideration that the Governance Committee’s nominees receive.

Essential criteria for all candidates considered by the Governance Committee include the following:

 

integrity and a commitment to ethical behavior;

 

personal maturity and leadership skills in industry, education, the professions, or government;

 

independence of thought and willingness to deal directly with difficult issues;

 

fulfillment of the broadest definition of diversity, seeking diversity of thought; and

 

broad business or professional experience, with an understanding of business and financial affairs, and the complexities of business organizations.

In evaluating candidates for certain Board positions, the Governance Committee evaluates additional criteria, including the following:

 

technical expertise in engineering, chemistry, solid state physics or electronics;

 

senior management experience and expertise, especially from leadership roles in semiconductor, information technology or electronics corporations;

 

financial or accounting expertise, generally and as necessary to fulfill the financial requirements of the SEC and Nasdaq regulations;

 

leadership experience in other industries to help the Company better understand the care-abouts in key, targeted industries; and

 

experience in investment banking, commercial lending or other financing activities.

In selecting nominees for the Board, the Governance Committee evaluates the general and relevant specialized criteria set forth above prior to commencement of the recruitment process, determines whether a nominee fulfills the independence requirements of the SEC and Nasdaq, evaluates recommendations received from other existing members

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of the Board, reviews the education of the nominee, evaluates the quality of experience and achievement of the nominee, reviews the nominee’s current or past membership on other companies’ boards, determines that the nominee has the ability and the willingness to spend the necessary time required to function effectively as a director (except in extraordinary circumstances, no director shall serve on the board of more than four other public companies), and determines that the nominee has a genuine interest in representing the stockholders and the interests of the Company overall.

If the Governance Committee is evaluating a nominee for re-election, the Governance Committee will review the nominee’s performance, including the following: availability for and attendance at meetings; contribution to Board processes such as information gathering and decision making; accessibility for communication with other directors and management; participation in Committee activities; depth of knowledge of the Company and its industry; the Company’s performance during the nominee’s previous term, in light of the role played by the Board and the nominee in guiding management; and any specialized expertise or experience that has contributed or may contribute to the functioning of the Board or the success of the Company.

The Governance Committee believes that the Board should include individuals with a broad range of relevant professional expertise, experience and education and reflect the diversity and cultural and geographical perspectives of the Company’s employees, customers and suppliers.

The Governance Committee, as well as the full Board, has recommended the Board’s nominees for election at the Meeting. Stockholders have not proposed any candidates for election at the Meeting.

DIRECTOR RESIGNATION POLICY

Under the Company’s director resignation policy, promptly following the receipt of the final report from the Inspector of Elections relating to an election of directors of the Company (other than elections in which the number of nominees exceeds the number of directors to be elected), any nominee who receives a greater number of votes “WITHHELD” from his or her election than votes “FOR” his or her election, will tender his or her resignation for consideration by the Board. Subject to certain conditions, the Governance Committee will meet to consider the tendered resignation and make a recommendation to the Board concerning the action, if any, to be taken with respect to the director’s resignation.

The Board will consider and act upon the Governance Committee’s recommendation within 90 days of certification of the vote at the Meeting. In considering the director’s resignation, the Governance Committee and the Board will consider all factors they deem relevant, including, without limitation, the underlying reason for the vote result, if known, the director’s contributions to the Company during his or her tenure, and the director’s qualifications. The Board may accept the resignation, refuse the resignation, or refuse the resignation subject to such conditions designed to cure the underlying cause as the Board may impose. Within four business days of the decision regarding the tendered resignation, the Company will file with the SEC a report on Form 8-K disclosing the decision with respect to the resignation, describing the deliberative process and, if applicable, the specific reasons for rejecting the tendered resignation.

COMMUNICATIONS WITH DIRECTORS

You may communicate with the chair of our Audit Committee, our Compensation Committee, our Governance Committee or our Risk Oversight Committee or with our independent directors individually or as a group, by writing to any such person or group c/o Corporate Secretary, Diodes Incorporated, 4949 Hedgcoxe Road, Suite 200, Plano, Texas 75024.

Communications are distributed to the Board, or to any individual director, depending on the facts and circumstances set forth in the communication. In that regard, the Board has requested that certain items that are unrelated to the duties and responsibilities of the Board be excluded, including, but not limited to, the following: junk mail and mass mailings; product complaints; product inquiries; new product suggestions; résumés and other forms of job inquiries;

17 Diodes Incorporated


surveys; and business solicitations or advertisements. In addition, material that is unduly hostile, threatening, illegal or similarly unsuitable will not be distributed, provided that any communication that is not distributed will be made available to any independent director upon request.

Communications that include information that would be better addressed by the Company’s ethics and compliance hotline, which reports to the Audit Committee at (855) 316-2192, will be delivered to the Audit Committee.

 

COMPENSATION OF DIRECTORS

The following table sets forth the compensation of each director, who is not a NEO, for service in 2020:

 

Name

(a)

 

Fees

Earned or

Paid in

Cash

($)

(b)

 

RSUs

($) (1) (2)

(c)

 

Stock

Options

($) (1)

(d)

 

Non-Equity

Incentive Plan

Compensation

($)

(e)

 

Changes in Pension

Value and

Nonqualified

Deferred

Compensation

Earnings

($)

(f)

 

All Other

Compensation

($)

(g)

 

Total

($)

(h)

Raymond K.Y. Soong (3)

 

30,550

 

 

 

 

 

 

C.H. Chen

 

80,000

 

547,560

 

 

 

 

 

627,560

Angie Chen Button(4)

 

 

 

 

 

 

 

Warren Chen

 

50,550

 

168,480

 

 

 

 

 

219,030

Michael R. Giordano

 

100,000

 

168,480

 

 

 

 

 

268,480

Peter M. Menard

 

90,000

 

168,480

 

 

 

 

 

258,480

Christina Wen-Chi Sung

 

90,000

 

168,480

 

 

 

 

 

258,480

Michael K.C. Tsai

 

90,000

 

168,480

 

 

 

 

 

258,480

 

(1) These amounts reflect the value determined by the Company for financial accounting purposes for these awards and do not reflect whether each director has actually realized a financial benefit from the awards. The value of the equity awards in column (c) and (d) is based on the grant date fair value calculated in accordance with the amount recognized for financial statement reporting purposes. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Amounts reported for RSUs are calculated by multiplying the number of shares subject to the award by the closing price of the Company’s Common Stock on the grant date. See Note 14, Share-Based Compensation, to the Company’s audited financial statements for the fiscal year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2021, for a further discussion of the relevant valuation assumptions used in calculating grant date fair value. All equity awards vest in four equal annual installments.

(2) Under the Company’s 2020 director compensation arrangements, each non-employee director listed in the table above was granted an award under the 2013 Equity Incentive Plan of 3,600 RSUs on May 18, 2020, except Mr. Raymond K.Y. Soong and Mr. C.H. Chen, who were granted awards of 0 and 11,700 RSUs, respectively, on May 18, 2020.  The per-share closing price of our Common Stock on May 18, 2020 was $46.80.

(3) Mr. Soong did not stand for re-election to the Board at the 2020 annual meeting of stockholders, and his tenure as a member of the Board expired on the date of the 2020 Annual Shareholder Meeting.  

(4)  Ms. Button became a director April 1, 2021.


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The following table shows the aggregate number of shares underlying outstanding RSUs and outstanding stock options held by non-employee directors as of December 31, 2020:

 

Name

 

RSUs (#)

 

Stock Options (#)

C.H. Chen

 

32,475

 

Angie Chen Button

 

 

Warren Chen

 

3,600

 

Michael R. Giordano

 

9,825

 

Peter M. Menard

 

8,750

 

Christina Wen-Chi Sung

 

9,825

 

Michael K.C. Tsai

 

9,825

 

Since 2007, each non-employee director of the Company has received a quarterly retainer of $20,000, the Chairman of the Audit Committee has received an additional $5,000 quarterly retainer, and each other member of the Audit Committee has received an additional $2,500 quarterly retainer.

In addition, the following amounts of RSUs, which vest in four equal annual installments commencing on the first anniversary of the date of grant, have historically been granted to each non-employee director on an annual basis: Vice Chairman: 14,700 shares; and all other directors: 4,300 shares.  During 2020 the Board decreased the RSU grant amount and the following amounts of RSUs were granted, which vest in four equal annual installments commencing on the first anniversary of the date of grant: Vice Chairman: 11,700 shares; and all other directors: 3,600 shares. The Board may in its discretion modify such director compensation arrangements in the future.   For additional information see, “Certain Relationships and Related Person Transactions – Relationships and Transactions.”

 

Compensation Committee Interlocks and Insider Participation

During 2020, the Compensation Committee consisted of three directors: Michael K.C. Tsai (Chairman), Warren Chen and Christina Wen-Chi Sung. During 2020, no executive officer of the Company served on the compensation committee (or equivalent) of the board of directors of another entity whose executive officer(s) served on the Company’s Compensation Committee or Board.

 

CORPORATE POLICIES

Anti-Hedging Policy

The Company’s insider trading policy prohibits all executive officers and directors of the Company from engaging in any hedging or monetization transactions involving the Company’s securities, including zero cost collars, forward sale contracts, and trading in options, puts, calls, or other derivative instruments related to the Company’s Common Stock. To the best of the Company’s knowledge, no executive officers or directors of the Company currently are parties to a hedge with respect to any shares of Common Stock of the Company.

Anti-Pledging Policy

The Company’s insider trading policy prohibits executive officers and directors from pledging the Company’s securities. Acquiring Company shares on margin also is prohibited.  To the best of the Company’s knowledge, no executive officers or directors of the Company currently are parties to a pledge of any shares of the Common Stock of the Company.

Short-Selling Policy

Directors and executive officers are prohibited from selling the Company’s equity securities “short” (i.e., the sale of a security that is not owned and must be borrowed to complete the sale) or “selling short against the box” (i.e., the sale of a security that is currently owned but is not delivered against such sale within twenty days thereafter, or is not within

19 Diodes Incorporated


five days after such sale deposited in the mails or other usual channels of transportation and the sale is completed with borrowed shares). To the best of the Company’s knowledge, no executive officers or directors of the Company currently are parties to any short-selling transactions with respect to any shares of Common Stock of the Company.

Stock Ownership Policy

Stock Ownership Policy for Directors. The Company’s stock ownership policy provides that all non-employee directors are required to acquire (and thereafter throughout the term of appointment maintain ownership of) a minimum number of shares of Common Stock with a value equal to three times the annual retainer received by them as directors within five years of the later of (1) the adoption of this stock ownership policy, or (2) their respective appointment or initial election. All of the directors are currently or are expected to be in compliance with our stock ownership policy in accordance with the time frame requirements.

Stock Ownership Policy for Executive Officers. The Company’s stock ownership policy provides that all individuals holding the positions with the Company listed below are required to acquire (and thereafter throughout the term of employment maintain ownership of) a minimum number of shares of Common Stock with a value equal to the multiple of such executive officer’s annual base salary (excluding bonus) within five years of the later of (1) the adoption of this stock ownership policy, or (2) their respective appointment (other than a newly-appointed Chief Executive Officer, who has seven years to comply), as follows:

 

Position

Multiple of Salary

Chief Executive Officer of the Company

Six times annual base salary (excluding bonus)

Senior Vice President or Vice President

Two times annual base salary (excluding bonus)

 

All of the executive officers are currently or are expected to be in compliance with our stock ownership policy in accordance to the time frame requirements.

For purposes of this stock ownership policy, stock ownership includes any shares owned by an executive officer or director or his or her immediate family members or held by him or her as part of a tax or estate plan in which the executive officer or director retains beneficial ownership. The value of shares held is calculated once per year, on the last business day of the fiscal year. For purposes of determining compliance with this stock ownership policy, “value” means an assumed per share value based on the closing price of Common Stock on the last business day of the fiscal year. An executive officer or director subject to this stock ownership policy is not required to acquire shares of Common Stock in accordance with this policy if acquisition at such time would result in a violation of the Company’s insider trading policy, in which event the executive officer or director is required to comply with this stock ownership policy as soon as reasonably feasible thereafter. A hardship exception is available at the discretion of the Compensation Committee, but no exceptions have been solicited or granted to date.

If any executive officer or director is determined to own less than the minimum number of shares of Common Stock, such executive officer or director shall have the two open periods after the two subsequent “Blackout Periods” to obtain the minimum number of shares of Common Stock. Blackout Period is (i) a period starting on the fifteenth day of the third month in the first calendar quarter and the period starting on the first day of the third month in the second, third and fourth calendar quarters (i.e. March 15, June 1, September 1, December 1) and ending two business days after earnings for that quarter have been publicly released (trading of the Company’s securities can begin on the third day after announcement); and (ii) any other period of significant corporate activity designated from time to time by the Company.

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Stock Retention Policy

In addition to the stock ownership policy described above, under which each executive officer or director must maintain a certain multiple of his or her annual base salary or annual retainer throughout the term of employment or appointment, each executive officer or director who acquires shares of our Common Stock through the exercise of a stock option is required to retain 33% of the “net” shares acquired (i.e., net of the tax impact of the stock option exercise) until the earlier to occur of the first anniversary of the date of exercise or the date the individual ceases to be an executive officer or director. This stock retention policy applies to all stock option grants awarded to executive officers or directors.

Clawback Policy

In the event the Company is required to restate any interim or annual financial statement filed with the SEC to correct an accounting error due to the material noncompliance of the Company, as a result of misconduct (as defined), with any financial reporting requirement under the federal securities laws, the Board, or any committee of independent directors (as defined in Nasdaq Rule 5605(a)(2)) appointed by the Board (“Independent Committee”), shall review each performance-based award (as defined) paid or granted to or exercised by each covered person (as defined) during the covered period (as defined).

If the Board or the Independent Committee shall determine, in its sole discretion, that (1) a covered person has committed misconduct and (2) the payment, grant, amount, value or vesting during the covered period of any performance-based award would have been different had it been determined, in whole or in part, based on the achievement of the financial results as subsequently restated, then the Board or such Independent Committee may take such actions as it deems appropriate, to recoup any portion of any such performance-based award that would not have been awarded to the covered person had the financial results been properly reported. The Company shall not take any action more than three years after the end of the covered period.

A copy of each such corporate policy is available on the Company’s website, at www.diodes.com, in the “Investors – Corporate Governance” section.


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CORPORATE SUSTAINABILITY

Corporate Social and Environmental Responsibility (“CSER”) Statement

The Company is committed to operating in an economically, socially, and environmentally sustainable manner, while recognizing the interests of our stakeholders.

As a participant in the global community, we recognize the impact we have on the communities in which our employees, customers, suppliers and other stakeholders live and work. By living our core values – integrity, commitment, and innovation - continuously through our actions in the way we conduct business and interact with our stakeholders, we uphold our commitment to be a responsible corporate citizen and positive contributor to our global community. We adhere to responsible and ethical business practices and we strive to contribute back to our communities.

The Company is committed to a safe and healthy workplace for all our employees. We value diversity and inclusion as it contributes to our competitiveness in the global marketplace. The Company is dedicated to ensuring that our employees, customers and suppliers are treated with dignity and respect. In addition to compliance with applicable laws and regulations of the countries in which we operate, we also look for opportunities to contribute to the well-being of the communities which we serve.

The Company is also committed to the protection and preservation of the environment and our communities. We design and manufacture products using sustainable practices to minimize our impact on the environment.

The Company strongly believes in and actively supports environmental protection, health and safety performance, and other social responsibility requirements to which the Company subscribes. We identify and leverage global best practices and guidelines to help us ensure responsible stewardship and sustainable operations for the long term benefit of our stakeholders.

Governance and Oversight

CSER is a strategic focus for the Diodes management team and the Board. To further accelerate our commitment to sustainability, and with the support of the Board, we created a Steering Committee to focus on CSER and the ongoing assessment of our operations and their impact on the communities in which we operate (the “Steering Committee”).

The Steering Committee is headed by the Company’s Senior Vice President of Operations and is comprised of representatives from multiple functions including corporate governance, regional management, operations management, legal and compliance, human resources, and quality. The Steering Committee approves CSER-related policies, long term objectives, and external disclosures and reporting. The Steering Committee also has operational control of environmental, health and safety, and social risks, and provides guidance on actions needed to address these risks.

Given the Company’s global manufacturing footprint and strong commitment to environmental responsibility, we also formed a Task Force represented by regional environmental, health, and safety (“EHS”) subject matter experts (the “Task Force”). This Task Force is supported by the general counsel and corporate compliance officer to focus on harmonizing our EHS metrics and leverage best practices. Both the Task Force and the Steering Team conduct regular review meetings to assess performance and drive continuous improvement.

The Task Force works closely with the Steering Committee, which provides periodic updates to the Board and engages frequently with the CEO and Lead Director on sustainability issues. With oversight and support from the Board, we have developed and implemented business strategies, and managed business operations in ways that are resilient to sustainability-related risks, including the impacts of climate change and pandemics.

22 Diodes Incorporated


In addition to the Board’s increased oversight of sustainability efforts, the executive bonus compensation includes a measurable CSER component to further demonstrate and enhance the management’s commitment to CSER.

We also engage in regular dialogue with stakeholders and sustainability rating agencies to solicit feedback as we continue to sharpen our focus on sustainability. Taking into account sustainability standards that are appropriate for the semiconductor industry, and for companies with a manufacturing footprint and scale of operations that are comparable to ours, specific sustainability performance metrics are identified where appropriate as we strive for continuous improvement. We believe these collective sustainability efforts help us create and maintain long-term profitability for our stockholders.

Response to COVID-19

The Company operates in many parts of the world and sees the impact COVID-19 has on communities where our employees and stakeholders live and work. As we navigate through this unprecedented time, we are committed to protecting our employees and stakeholders and supporting our workforce and communities.

The health and well-being of our employees continues to be our top priority. We have changed our business practices to include:

Providing onsite facial masks, face coverings and other personal protective equipment as well as alcohol-based hand sanitizers and disinfectants;

Installing Plexiglas, desk and table divider shields and other separation panels in meetings rooms, cafeterias and other communal areas;

Increasing the frequency and extent of cleaning and sanitizing our facilities;

Using ultraviolet disinfection lights to sanitize workspaces, meeting rooms, communal areas, and incoming deliveries;

Providing and paying for accommodations to employees who are subject to quarantines and unable to return home;

Providing paid leave to employees who participate in COVID-19 pandemic response operations; and

Continuing to raise awareness regarding workplace health and safety protocols in alignment with government guidance.

We collaborate with local governments in their COVID-19 recovery programs, infection control and prevention plans, and actively promote awareness of health and safety measures to protect our communities. As an example, our support of frontline health workers was recognized through certificates of appreciation issued by the Affiliated Hospital & Clinical Medical College of Chengdu University.

Through our manufacturing facility at Greenock, Scotland, we donated 17,000 face masks to help protect and support the healthcare workers on the frontlines of the pandemic. These face masks were added to the stock of personal protective equipment held by Inverclyde Health and Social Care Partnership. As recognized by Councilor Robert Moran with Inverclyde Council, this kind of community spirit will help us come out of the pandemic stronger.  In our care for the senior citizens’ community and dementia patients, our manufacturing facility in Oldham, U.K. donated face masks and aprons to their local community.

In addition, many of our employees volunteer their time and resources for COVID-19 pandemic response programs in their communities, and we applaud their participation in these relief efforts through public recognition at the sites.

The Company is committed in doing everything we can to expedite shipment and ensure supply of our products that are used in healthcare technologies and medical equipment that are essential for the diagnostics and treatment of COVID-19. We work with local governments to ensure that our facilities remain in operation or resume manufacturing activities

23 Diodes Incorporated


promptly so that we can continue manufacturing products that are critical to the frontline health workers, the medical community, and our society.

We are making every effort to assist our customers in the ongoing global fight against COVID-19 by supporting many medical applications, including diagnostic and tomography imaging systems, such as ultra-sound monitors, x-ray systems, and pulse oximetry monitors. The Company delivered switching diode products for personal protective equipment used by first responders and health care providers so they can provide excellent care while still maintaining their own health and safety. Similarly, our MOSFETs, diodes, crystals, and crystal oscillators have been adopted in a number of medical applications ranging from testing equipment to ventilators, especially those to fight COVID-19.

CSER Conduct

The Company’s CSER Code of Supplier Conduct is based on the Responsible Business Alliance (“RBA”) Code of Conduct, formerly the Electronic Industry Citizenship Coalition, as it establishes standards to ensure safe working conditions in the electronics industry and in industries in which electronics is a key component, including the supply chains that support those industries. The RBA Code of Conduct seeks to ensure workers are treated with respect and dignity and that business operations are environmentally responsible and ethically conducted. The RBA is the world’s largest industry coalition dedicated to corporate social responsibility in global supply chains.

Through its rigorous Validated Assessment Program, the Company received Silver recognition at two of its Shanghai manufacturing sites during their initial RBA audits.

Conflict Minerals

The Company is dedicated to ensuring that we use responsibly sourced minerals in both our supply chain as well as through our suppliers. The armed conflict and human rights atrocities that proliferate and are funded by the exploitation of natural resources in the Democratic Republic of Congo (“DRC”) are unacceptable and any manufacture of product connected with this will not be tolerated.

Commonly known conflict minerals are those such as tantalum, tin, tungsten, and gold. Conflict minerals originating from the DRC must not be included in materials or products supplied to the Company. We are committed to ensuring an ethical and diverse supply chain that is focused on responsible mineral sourcing.

Human Capital Management

As an international semiconductor company with a global footprint, the Company recognizes the important role its human capital plays in a talent-based economy, and what the impact of effective and efficient human capital management (“HCM”) has on its long-term strategic success and sustainable growth. Our employees are our most critical asset—they contribute to our financial success for the benefit of all our stakeholders, they fuel product innovation, and they contribute to the success of the communities in which we live and work. Human capital management affects many aspects of our operations, including recruitment, retention, training, workforce optimization, performance management, workplace safety, employee health and wellness, employee engagement, and diversity and inclusion.  

24 Diodes Incorporated


Developing two–way communications and deploying effective feedback mechanisms are critical components in our employee engagement process. In addition to quarterly CEO “all hands” meetings, we have an “Open Door” policy, and encourage employees to have regular conversations with their managers to share feedback and express concerns. We also solicit employee feedback informally through regular employee interactions. We hold our managers accountable for setting clear expectations and goals with their teams, for providing coaching, as well as identifying professional development opportunities for their teams, and for engaging in periodic performance reviews. We assist our managers with performance management tools as needed to help them effectively manage their teams and optimize workforce productivity.

We utilize third-party portals to allow employees to efficiently and timely manage several of their employment related activities, such as employee benefits, expense reporting, leave of absence management, and attendance records. In addition to employee onboarding orientations and on-the-job training, we leverage a third-party learning management system to provide training to our employees. We regularly assess the training modules to be responsive to the professional development and training needs of our employees.  

Employee retention is a critical element in our sustainable success. To maintain a stable workforce, we provide skill advancement training and coaching, where appropriate, to help our employees enhance their existing skill sets. With our support and preparation, our employees can continue to grow in their current role and maximize the value they contribute to their current teams. Where a suitable rotation opportunity arises, we provide skill expansion training to equip employees for these new positions. By honing their skills, our employees can leverage their institutional knowledge and experience to contribute to the overall success of the organization. The availability of rotational opportunities can also help keep our employees motivated and engaged.

Human Rights and Workforce Labor Rights Policy

The Company’s human rights and workforce labor rights policy (“Policy”) is rooted in protecting human rights and affording each individual dignity, freedom, respect, and acceptance. This Policy outlines our expectations with respect to human rights and labor practices and the high standard of conduct expected of our employees and suppliers worldwide. The principles of this Policy are reflected in our operational policies and procedures and applied in a non-discriminatory manner, irrespective of geographic location.  

The Company is committed to providing a fair and living wage to all of its employees, and our employee remuneration is consistent with the all applicable wage laws, including those relating to minimum wage, overtime hours, and legally mandated benefits.

We support the elimination of all forms of forced, bonded, or indentured labor and child labor is prohibited in any of our operations. We support our employees’ rights to freedom of association in each of the countries where we operate.

These human rights and workforce labor rights are monitored and assessed through our management, human resources, and environmental, health and safety teams as they apply to all of the Company’s operations worldwide and to our suppliers, vendors, partners, or service providers to the Company. These rights are embedded in our Code of Business Conduct, CSER Code of Supplier Conduct, and Supplier Letter, and serve to provide essential protections of the women and minorities in our workforce as reinforced through employee training on fundamental topics such as prevention of harassment, discrimination, abusive conduct, and retaliation.

We believe that employee concerns can be satisfactorily addressed through our “Open Door” channels, but if not, the hotline is an alternative. Consistent with our policies and practices, and legal requirements, the Company will not allow any retribution or retaliation against an employee who reports a compliance issue in good faith. This hotline can be used by our customers, vendors and interested parties to report any conduct that they believe in good faith to be an actual or apparent violation of our Code of Conduct.

25 Diodes Incorporated


Modern Slavery Act Transparency Statement

The Company conducts business in accordance with its core values of integrity, commitment, and innovation. As a global business committed to protecting human rights, we take seriously the responsibility of preventing modern slavery in our business and supply chains. We are committed to upholding best practices and remaining vigilant to continuously improve.

Pay and Gender

We are committed to complying with applicable wage laws to ensure our employees are fairly and timely compensated and strive to be equitable and ethical in regards to appropriate compensation for applicable roles.

Health and Safety

The Company’s health and safety policy is based on our commitment to provide a safe worksite for all employees worldwide and applies to our suppliers, vendors, partners, and other companies that sell goods or services to the Company and its affiliates. Every employee is responsible for safety, and the Company encourages employees to make sure they notify the responsible party if safety issues arise. To that end we seek to ensure that all domestic federal and state safety practices are observed at all times and our commitment is embedded in our code of supplier conduct, supplier letters and supplier quality codes.

To achieve the goal of having a completely safe workplace, each site has implemented policies and procedures to address emergency preparedness and response, industrial hygiene and health resources, as well as the use of equipment and personal protective equipment. We ask each employee to be safety conscious. The Company will attempt to do everything in its control to ensure a safe working environment that is compliant with local safety regulations in the countries where we operate. As part of our efforts to encourage a safe workplace, all employees should understand that we will not tolerate any retaliation against an employee for making safety complaints.

Environment

The Company recognizes that environmental responsibility is integral to producing world-class products. We understand the impact our operations have on the environment, the community, as well as the health and safety of our employees, contractors, and suppliers. Therefore we are committed to environmentally sustainable business practices and to minimizing the environmental impact across our supply chain.

As such the Company has based its environmental code of conduct on the RBA code of conduct, to ensure that business operations are environmentally responsible and compliant, at a minimum, with applicable environmental laws and regulations of the countries in which we have operations. The Company’s direct suppliers are expected to implement the RBA code of conduct as well as maintain an adequate management system to ensure continued compliance with this code.

Furthermore, the Company’s internal manufacturing sites are certified to the International Organization for Standardization (“ISO”) 14001 environmental management system standard. The expectation for our external suppliers is that they should be ISO 14001 certified as well or, at a minimum, submit a plan to become certified.

For the Company’s products we seek to enforce rigorous product compliance with the EU Directive regarding the Restriction of Hazardous Substances (“RoHS”) 2011/65/EU and the REACH Directive 2006/1907 on the Registration, Evaluation, and Authorization and Restriction of Chemicals.

26 Diodes Incorporated


Where substances of very high concern (“SVHC”) are contained within our operations, these are listed in our master Certificate of Compliance (“CofC”) where they are either registered for usage, exempt or impurities.

All of the Company’s products, including products of our subsidiary companies, are RoHS compliant. Some use exemptions to enable their compliance and are listed in our master CofC.

RoHS compliance is indicated on shipping labels that are attached on packing materials such as reels and shipping boxes.

Investment in Our Employees

The Company values a diverse, inclusive, safe and respectful work environment while offering our employees career growth, professional development and competitive benefits. In today’s product-driven corporations, we regard our employees as our most important asset. We are committed to providing an excellent environment for the development and achievement of the professional goals of our employees.

We believe in the value of continuous improvement so that we can strive to satisfy our customers’ requirements. In its broadest sense, we believe our customers include our employees, partners and communities where we operate. We believe in the value of continuous learning and fostering a culture of professional growth. We offer various learning opportunities to employees at all levels. Through developmental courses and experiential learning, we reach out to managers to identify training needs of their employees, and we encourage our employees to search for relevant training opportunities.

In 2021, we will strive to deliver training to our employees worldwide. We aim to enhance our employees' knowledge on a variety of key topics, including ethics, harassment, anti-bribery and corruption through online and small group training sessions. These topics are important to ensuring our employees operate in a work environment that is diverse, inclusive, safe and respectful.

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Executive Officers of the Company

None of the executive officers was selected pursuant to any arrangement or understanding, other than with the executive officers of the Company acting within their capacity as such. Executive officers serve at the discretion of the Board. The following table and discussion sets forth certain biographical information concerning the Company’s executive officers as of the Record Date:

 

 

Age

Position with the Company

Dr. Keh-Shew Lu (1)

74

Chairman, President and Chief Executive Officer ("CEO")

Brett R. Whitmire

55

Chief Financial Officer

Julie Holland

59

Senior Vice President, Corporate Operations

Francis Tang

66

Senior Vice President, Worldwide Discrete Products

Emily Yang

52

Senior Vice President, Worldwide Sales and Marketing

Evan Yu

60

Senior Vice President, Worldwide Power Products

Gary Yu

48

Senior Vice President, Business Groups

Jin Zhao

52

Vice President, Worldwide Analog Products

(1) See “Proposal One - Election of Directors” for biographical information regarding Dr. Keh-Shew Lu.

Brett R. Whitmire         Chief Financial Officer

Mr. Whitmire assumed his current position as the Company’s Chief Financial Officer in March 2019. He has 32 years of industry experience and has been with the Company for over ten years. Prior to being named CFO, he served as the Corporate Controller and Principal Accounting Officer of the Company, and previously served as the director of global supply chain. Mr. Whitmire worked at Freescale Semiconductor as Chief Financial Officer for the Analog & Sensors Division. He began his career at Texas Instruments in a variety of finance and operations leadership positions including seven years as Vice President while serving as the finance and operations executive for the High Volume Analog & Logic Division and the corporate supply chain head. Mr. Whitmire holds both a bachelor's degree in Mechanical Engineering and an MBA from The University of Texas at Austin.

Julie Holland           Senior Vice President, Corporate Operations

Ms. Holland joined the Company in 2008. She previously spent over 20 years at Texas Instruments (TI) where she held several key management roles, last serving as director and general manager of the Connectivity Solutions business unit prior to her departure in 2007. Her responsibilities included leading business and technical teams in the United States, Asia and Japan in the development, production and marketing of multiple analog and interface product lines. Prior to joining the Connectivity Solutions business unit, Ms. Holland served at TI as Director, Worldwide Bus Solutions from 2000 to 2001 and as Director, Computer Peripheral and Control Products from 1997 to 1999. She earned her bachelor’s degree in Physics and Mathematics at Northwestern University and her master’s degree in Engineering Management at Southern Methodist University. She is an alumna of Leadership America and Leadership Texas, and was named a Fellow of the International Women’s Forum Leadership Foundation.

Francis Tang           Senior Vice President, Worldwide Discrete Products

Mr. Tang was appointed Vice President, Worldwide Discrete Products in 2006 and Senior Vice President in November 2020. He previously served as the Company’s Global Product Manager since 2005. From 2002 until joining the Company, Mr. Tang served as general manager of T2 Microelectronics in Shanghai, China where he managed complex mixed-signal SOC product development. From 1996 to 2001, Mr. Tang was the senior strategic marketing director for Acer Labs, Inc. USA, and prior to that, he was employed by National Semiconductor for 17 years, where he held various management positions in analog and mixed-signal circuit design, applications and strategic marketing. Mr. Tang holds a master’s degree in Electrical Engineering from University of Missouri – Rolla.

Emily Yang   Senior Vice President, Worldwide Sales and Marketing

Ms. Yang was appointed Vice President of Worldwide Sales and Marketing in 2017 and Senior Vice President in November 2020. She has been with the Company since the acquisition of Pericom Semiconductor Corporation in 2015, where she was Vice President of Global Sales. Prior to that, she held a number of sales management positions with Pericom since 1998, including: VP of Sales, NAEU, Contract Manufacturing Sales Director, Western Regional Sales

28 Diodes Incorporated


Director, and Strategic Account Sales Director covering Asia, North America, and Europe. Ms. Yang holds a bachelor’s degree in Economics from the University of Toronto.

Evan Yu   Senior Vice President, Worldwide Power Products

Mr. Yu joined the Company in 2008. Prior to joining the Company, he was the CEO of Commit Inc., a China home-grown TDSCDMA standard 3/4G chip set start-up company from 2003 to 2008. Prior to Commit Inc., Mr. Yu worked at Texas Instruments for 15 years, where he held several key management roles, including Asia Vice President of the Application Specific Products organization (ASP) before his departure in 2001. Mr. Yu’s billion-dollar business responsibilities in ASP included leading several business developments, marketing, and technical units of wireless communication, ASIC, DSP, broadband, and digital still camera business units. He studied electrical engineering at Kaoshung Institute of Technology (KIT) and earned his bachelor’s degree in Electrical Engineering at Tam Kang University in Taiwan.

Mr. Yu joined the Company in 2008. Prior to joining Diodes, he was the CEO of Commit Inc., a China home-grown TDSCDMA standard 3/4G chip set start-up company from 2003-2008. Prior to Commit Inc., Mr. Yu worked at Texas Instruments for 15 years, where he held several key management roles, including Asia Vice President of the Application Specific Products organization (ASP) before his departure in 2001. Mr. Yu’s billion-dollar business responsibilities in ASP included leading several business developments, marketing, and technical units of wireless communication, ASIC, DSP, broadband, and digital still camera business units. He studied electrical engineering at Kaoshung Institute of Technology (KIT) and earned his bachelor’s degree in Electrical Engineering at Tam Kang University in Taiwan.

Gary YuSenior Vice President, Business Groups

Mr. Yu, who has been with the Company since 2008, was appointed to his current position in November 2020. He most recently served as the Company’s President, Asia Pacific Region. Prior roles in the Company include General Manager of the Company’s Shanghai wafer fabrication operation and its BCD business unit, Vice President of Asia Pacific Sales and manager of the Company’s DBS and Sensor business unit. Prior to joining the Company, Mr. Yu spent over 10 years at Lite-On Semiconductor Corp. as Vice President, Worldwide Sales and at Texas Instruments in finance and capacity planning positions. Mr. Yu holds a bachelor’s degree in MIS from Fu-Jen University, Taiwan, a master’s degree in Telecommunication Engineering from Southern Methodist University, and an MBA from University of Texas at Dallas.

Jin ZhaoVice President, Worldwide Analog Products

Dr. Zhao was appointed to his current position in November 2020. He previously served as the Company’s Linear, Logic and Power Product Division Manager under the Analog Business Group. From 2014 until joining the Company in 2017, Dr. Zhao served in Vice President and General Manager roles at NXP and Fairchild Semiconductor, managing various product lines including analog interface products and high voltage discrete products. Dr. Zhao worked at Texas Instruments (“TI”) from 2001 to 2014, with roles including management of the integrated PMIC and over-voltage protection product lines. Prior to TI, Dr. Zhao worked at AMD Fab25 at Austin, Texas. Dr. Zhao holds a Ph.D. in Chemistry from the State University of New York at Buffalo and an MBA from the University of Texas at Dallas.


29 Diodes Incorporated


 

 

REPORT OF THE AUDIT COMMITTEE

The Report of the Audit Committee of the Board does not constitute soliciting material and shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

AUDIT COMMITTEE REPORT

The Board maintains an Audit Committee comprised of three of the Company’s directors, Michael R. Giordano (Chairman), Peter M. Menard and Christina Wen-Chi Sung. Each member of the Audit Committee meets the independence and experience requirements of Nasdaq and the independence requirements of the SEC. Mr. Giordano qualifies as an “audit committee financial expert” as defined under the rules of the SEC. The Audit Committee assists the Board in monitoring the accounting, auditing and financial reporting practices of the Company.

Management is responsible for the preparation of the Company’s financial statements and financial reporting process, including evaluating the effectiveness of its system of internal controls. In fulfilling its oversight responsibilities, the Audit Committee:

 

reviewed and discussed with management the audited financial statements contained in the Company’s Annual Report on Form 10-K for fiscal 2020; and

 

obtained from management their representation that the Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

The independent registered public accounting firm is responsible for performing an audit of the Company’s financial statements in accordance with the auditing standards of the Public Company Accounting Oversight Board and expressing an opinion on whether the Company’s financial statements present fairly, in all material respects, the Company’s financial position and results of operations for the periods presented and conform with accounting principles generally accepted in the United States and the effectiveness of the Company’s internal control over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee:

 

discussed with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301 (“Communications with Audit Committees”);

 

has received the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board, regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with Moss Adams LLP the firm’s independence, and;

 

reviewed and discussed with management, the internal auditor, and the independent registered public accounting firm management’s assessment of the effectiveness of the Company’s internal control over financial reporting and the independent registered public accounting firm’s opinion about the effectiveness of the Company’s internal control over financial reporting.

The Audit Committee operates under a written charter, which was adopted by the Board and is assessed annually for adequacy by the Audit Committee. The Audit Committee held six (6) meetings during fiscal 2020.

In performing its functions, the Audit Committee acts only in an oversight capacity. It is not the responsibility of the Audit Committee to determine that the Company’s financial statements are complete and accurate, are presented in accordance with accounting principles generally accepted in the United States or present fairly the results of operations of the Company for the periods presented or that the Company maintains appropriate internal controls. Nor is it the duty of the Audit Committee to determine that the audit of the Company’s financial statements has been carried out in accordance with the generally accepted auditing standards of the Public Company Accounting Oversight Board (United States) or that the Company’s auditors are independent. Based upon the reviews and discussions described above, and

30 Diodes Incorporated


the report of the independent registered public accounting firm, the Audit Committee has recommended to the Board, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for filing with the SEC. The Audit Committee also has recommended, and the Board also has approved, the selection of Moss Adams LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021.

 

Dated:  March 31, 2021

 

THE AUDIT COMMITTEE

 

 

Michael R. Giordano, Chairman

 

 

Peter M. Menard 

 

 

Christina Wen-Chi Sung

 

CODE OF ETHICS

The Company has adopted a Code of Ethics applicable to the principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions, and all members of the finance department of the Company. The Code of Ethics is available on the Company’s website at www.diodes.com, in the “Investors – Corporate Governance” section. The Company intends to disclose future amendments to, or waivers from, certain provisions of the Code of Ethics on the Company’s website within four business days following the date of such amendment or waiver.

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Policy Regarding Related Person Transactions

The Audit Committee has adopted a written policy (the “Policy”) to review any transaction in which the Company was, or is to be, a participant and in which any director, executive officer, or beneficial owner of more than five percent (5%) of the outstanding shares of Common Stock of the Company, or any immediate family member of any such person, has a direct or indirect material interest (a “related person transaction”). The Policy requires the following:

 

the Audit Committee shall review any proposed agreement or arrangement relating to a related person transaction or series of related person transactions, and any proposed amendment to any such agreement or arrangement;

 

the Audit Committee shall establish standards for determining whether the transactions covered by such proposed agreement or arrangement are on terms no less favorable to the Company than could be obtained from an unrelated third party (“fair to the Company”);

 

before the Company enters into any such proposed agreement or arrangement, and at least annually thereafter, the Company’s internal audit department shall report to the Audit Committee whether the transactions covered by such agreement or arrangement are fair to the Company under the standards established by the Audit Committee;

 

the Audit Committee shall make all reasonable efforts (taking into account the cost thereof to the Company) to cancel or to renegotiate any such agreement or arrangement which is not so determined to be fair to the Company; and

 

the Company shall disclose any related person transactions required to be disclosed by the rules promulgated by the SEC, in the manner so required.

From time to time, the Audit Committee also will review any transaction it deems significant to the Company, including, but not limited to, transactions with Keylink International (B.V.I.) Inc. and its subsidiaries and affiliates (“Keylink”), and Chengdu Ya Guang Electronic Co., Ltd. and its subsidiaries and affiliates (“Ya Guang”). Keylink is the Company’s 5% joint venture partner in the Company’s Shanghai, China manufacturing facilities, and Ya Guang is the Company’s 5% and 2% joint venture partner in the Company’s Chengdu, China manufacturing facilities.

31 Diodes Incorporated


Relationships and Transactions

The Audit Committee reviews all related person transactions for potential conflict of interest situations on an ongoing basis, in accordance with such procedures as the Audit Committee may adopt from time to time. We believe that all related person transactions are on terms no less favorable to us than could be obtained from unaffiliated third parties.

We historically conducted business with a related party company, Lite-On Semiconductor Corporation; (“LSC”), and its subsidiaries and affiliates.  LSC was also our largest stockholder, owning approximately 15% of our outstanding Common Stock.  As of November 30, 2020, we acquired LSC and they are no longer a stockholder or related party.  We also conduct business with Nuvoton Technology Corporation and its subsidiaries and affiliates (collectively, “Nuvoton”). Raymond Soong, the former Chairman of the Board of Diodes, was the Chairman of LSC, and was the Chairman of Lite-On Technology Corporation (“LTC”), which was a significant shareholder of LSC. C.H. Chen, our former President and Chief Executive Officer and currently the Vice Chairman of the Board, was also Vice Chairman of LSC and a board member of LTC. Dr. Keh-Shew Lu, our current Chairman of the Board, President and Chief Executive Officer, is a board member of LTC, and a board member of Nuvoton. We consider our relationships Nuvoton to be mutually beneficial, and we plan to continue our strategic alliance with Nuvoton.   We purchased silicon wafers from Nuvoton that we use in the production of finished goods, totaling $8.4 million and $7.7 million, respectively, for the years ended December 31, 2020 and 2019. See “Risk Factors – One of our external suppliers is also a related party. The loss of this supplier could harm our business, operating results and financial condition.” in Part I, Item 1A, and Note 15 - “Related Party Transactions,” to the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2021 for additional information.

We also conduct business with Keylink International (B.V.I.) Inc. and its subsidiaries and affiliates (“Keylink”). Keylink is our 5% joint venture partner in our Shanghai assembly and test facilities.   We sell products to, and purchase inventory from, companies owned by Keylink. We sold products to companies owned by Keylink, totaling approximately 2% of our net sales for the 12 months ended December 31, 2020 and December 31, 2019. In addition, our subsidiaries in China lease their manufacturing facilities in Shanghai from, and subcontract a portion of our manufacturing process (metal plating and environmental services) to, Keylink. We also pay a consulting fee to Keylink. The aggregate amounts paid to Keylink for the years ended December 31, 2020, 2019 and 2018 were approximately $14.6 million, $15.3 million and $16.6 million, respectively.   In addition, Chengdu Ya Guang Electronic Company Limited (“Ya Guang”) is our 2% joint venture partner in one of our Chengdu assembly and test facilities and our 5% partner in our other Chengdu assembly and test facilities; however, we have no material transactions with Ya Guang, other than this joint venture.  We also purchase materials from Jiyuan Crystal Photoelectric Frequency Technology Ltd. (“JCP”), an FCP manufacturing company in which we have made an equity investment and account for using the equity method of accounting.

Notwithstanding such relationships and transactions, the Board determined that each of Messrs. Soong and Chen is independent under the rules of Nasdaq and the SEC at the relevant times.

Mr. Kevin Chou, the son-in-law of Dr. Keh-Shew Lu, the Company’s Chairman of the Board, President and Chief Executive Officer, is employed by the Company as Corporate Controller.  He has been an employee since 2009. For 2020, Mr. Chou’s total cash compensation was approximately $239,600, and his total equity compensation was 2,080 RSUs, which vest in four equal annual installments.

 

 

32 Diodes Incorporated


COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Under Section 16(a) of the Exchange Act, the Company’s directors, executive officers and any persons holding ten percent or more of the Common Stock are required to report their ownership of Common Stock and any changes in that ownership to the SEC and to furnish the Company with copies of such reports.

Specific due dates for these reports have been established by the SEC, and the Company is required to report any failure to file on a timely basis. Based solely upon review of copies of reports filed by the Company’s directors and executive officers with the SEC during the most recent fiscal year ended December 31, 2020, the following Section 16(a) filings were not made timely; two Form 4’s for Mr. Brett Whitmire representing two transactions; one Form 4 for Mr. Tang representing two transactions; and one Form 4 for Mr. Warren Chen representing one transaction.

 

33 Diodes Incorporated


 

PROPOSAL TWO

APPROVAL OF EXECUTIVE COMPENSATION

At the Meeting, the stockholders are being asked to approve the compensation of the NEOs as disclosed below pursuant to the compensation disclosure rules of the SEC, including the information in “Compensation Discussion and Analysis” and in the Summary Compensation Table and other related tables and narrative disclosure below in “Executive Compensation.”

At the Company’s 2017 annual meeting of the stockholders, the Company’s stockholders voted in favor of providing stockholders an advisory vote on the approval of the compensation of the Company’s NEOs on an annual basis.

As discussed below, our executive compensation programs are designed to attract, retain and motivate executives who are critical to our long-term growth and profitability. Under these programs, our executives are incentivized to achieve Company performance goals and individual objectives established by the Compensation Committee, without encouraging undue or unreasonable risk-taking.

The Compensation Committee reviews our executive compensation programs annually to ensure they align executive compensation with the interests of our stockholders and current market practices. See “Compensation Discussion and Analysis” and “Executive Compensation” for information about our executive compensation programs, including information about the fiscal 2020 compensation of the NEOs.

This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on the compensation of our NEOs. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the executive compensation philosophy and decisions described in “Compensation Discussion and Analysis” and “Executive Compensation.”

Approval of the compensation paid to the NEOs, as disclosed below pursuant to the compensation disclosure rules of the SEC, requires the affirmative vote of the holders of a majority of the outstanding shares of the Common Stock present, in person via the Internet or by proxy, and entitled to vote on the proposal at the Meeting.

This vote is advisory and is not binding on the Company, the Board or the Compensation Committee. However, the Board and the Compensation Committee value the opinions of our stockholders and will review the result of the vote and take it into consideration when making future decisions regarding executive compensation.

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NEOS AS DISCLOSED IN “COMPENSATION DISCUSSION AND ANALYSIS” AND “EXECUTIVE COMPENSATION.”

 

34 Diodes Incorporated


 

 

COMPENSATION DISCUSSION AND ANALYSIS

INTRODUCTION

This Compensation Discussion and Analysis (“CD&A”) explains the design and operation of the Company’s compensation program for (i) anyone who served during the fiscal year as our Chief Executive Officer or our Chief Financial Officer and (ii) our three other most highly compensated executive officers in the fiscal year (collectively, our “NEOs”).

Our NEOs for fiscal 2020 were:

Name

Position with the Company

Dr. Keh-Shew Lu

Chairman, President and Chief Executive Officer ("CEO")

Brett R. Whitmire

Chief Financial Officer

Julie Holland

Senior Vice President, Corporate Operations

Francis Tang

Senior Vice President, Worldwide Discrete Products

Emily Yang

Senior Vice President, Worldwide Sales and Marketing

 

EXECUTIVE SUMMARY

“Say-on-Pay” Vote Summary

At our 2020 annual meeting of stockholders, our stockholders approved, by a vote of approximately 99% of the shares present in person or by proxy and entitled to vote on the proposal (not counting abstentions and broker non-votes), the compensation paid to our NEOs for services rendered in 2019 as presented in the proxy statement for the 2020 annual meeting of stockholders.  In light of this favorable “say on pay” vote and our stockholder engagement, the Compensation Committee did not materially adjust the Company’s compensation program for 2020 or 2021.

We have engaged with our stockholders to understand their perspectives on our Company, including our strategies, performance, governance, and executive compensation. This ongoing dialogue has helped inform the Board's decision-making and ensure our interests remain well-aligned with those of our stockholders.

The Company has a record of adopting provisions or modifying practices to reflect stockholder input. Examples include the Company's majority vote policy which was strengthened and documented at the request of our stockholders, as well as the 2017 redesign of our executive compensation program.

 

2020 Business Summary

Below is a summary of our 2020 financial results:

      Net sales for fiscal 2020 were $1.23 billion, a decrease of 1.6% from the $1.25 billion in fiscal 2019,

      Gross profit for fiscal 2020 was $431.1 million, a decrease of 7.4% from the $465.8 million in fiscal 2019,

      Gross profit margin for fiscal 2020 decreased 220 basis points to 35.1% from 37.3% for fiscal 2019,

      Income from operations for fiscal 2020 decreased 33.0% to $134.3 million, or 10.9% of revenue, from $200.6 million, or 16.1% of revenue, for fiscal 2019,

      Net income for fiscal 2020 was $98.1 million, or $1.88 per diluted share, compared to $153.3 million, or $2.96 per diluted share, in fiscal 2019,  

35 Diodes Incorporated


      Achieved cash flow from operations of $187.2 million including $75.8 million of capital expenditures. Net cash flow was a positive $61.0 million, which included the purchase of LSC during the fourth quarter for approximately $453.4 million; and

      As of December 31, 2020, the Company had approximately $327 million in cash and cash equivalents, restricted cash, and short-term investments. Total debt (including long-term and short-term) amounted to approximately $451 million and working capital was approximately $514 million. 

The following table provides additional information concerning our performance in fiscal 2020 compared to fiscal 2019:

Description (in millions, except per share amounts)

2020

 

2019

Net sales

$1,229.2

 

$1,249.1

Gross profit

431.1

 

465.8

Gross profit margin

35.1%

 

37.3%

Income from operations

134.3

 

200.6

Diluted net income per share

1.88

 

2.96

Stock price at fiscal year end

70.50

 

56.37

Adjusted earnings per share - common stockholders (Non-GAAP)

2.35

 

2.91

 

CONSOLIDATED RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME

(unaudited)

(in thousands, except per share data)

 

 

 

For the 12 Months Ended December 31,

 

 

 

2020

 

2019

 

 

 

 

 

 

GAAP net income - common stockholders

 

 

$98,088

 

$153,250

GAAP earnings per share - common stockholders

 

 

 

 

 

     Diluted

 

 

$1.88

 

$2.96

Adjustments to reconcile net income - common stockholders

 

 

 

 

 

to adjusted net income - common stockholders, net of tax:

 

 

 

 

 

Amortization of acquisition-related intangible assets

 

 

13,270

 

14,779

Acquisition-related financing costs

 

 

7,331

 

-

Acquisition-related costs

 

 

2,366

 

1,314

Restructuring costs

 

 

2,009

 

-

Board member retirement costs

 

 

1,347

 

-

Reverse gain on LSC investments

 

 

(1,714)

 

-

Gain on land sale

 

 

-

 

(19,201)

Loss on impairment

 

 

-

 

1,283

Land sale inspection extension fee

 

 

-

 

(336)

Adjusted net income - common stockholders (Non-GAAP) (1)

 

 

$122,697

 

$151,089

 

 

 

 

 

 

Diluted shares used in computing earnings per share

 

 

52,133

 

51,860

Adjusted earnings per share - common stockholders (Non-GAAP)

 

 

 

 

 

   Diluted (1)

 

 

$2.35

 

$2.91

(1) See Exhibit 99.1 to the Current Report on Form 8-K filed with the SEC on February 16, 2021 for a description of the adjustments used to calculate Adjusted net income – common stockholders (Non-GAAP) and Adjusted earnings per share – common stockholders (Non-GAAP) Diluted.

 

36 Diodes Incorporated


OVERVIEW OF COMPENSATION PROGRAM

Compensation Philosophy

Our executive compensation program is designed to attract, retain and motivate experienced executives to achieve sustainable profitable growth and generate positive cash flow.  Our compensation philosophy is driven by the following guiding principles:

37 Diodes Incorporated


Best-Practice Compensation Governance Features

Our executive compensation program is based upon best-practices.

What We Do

What We Don’t Do

Place heavy emphasis on performance-based variable compensation. Generally the Company sets performance objectives for annual bonuses and long-term equity incentives higher year-over-year to establish challenging goals and thereby align the interests of our executives with the interests of our stockholders.

Allow option backdating, cash out of underwater options or option repricing

Emphasize long-term equity awards in executive pay mix

Gross up excise taxes upon a change in control

Apply stock ownership and stock retention guidelines to align executives’ interests with stockholders’ interests

Permit hedging or pledging of Company stock, or short sales and transactions in derivatives

Include a clawback provision in our incentive plans

Provide perquisites to NEOs that are not available to other senior management generally

Conduct an annual risk assessment

Offer enhanced retirement formulas or death benefits

Engage an independent compensation consultant periodically to ensure alignment with market executive compensation

Provide automatic acceleration of equity awards upon retirement

Have a “double-trigger” equity vesting upon a change in control

Provide automatic “single trigger” acceleration of equity or other benefits in the event of a change in control

Conduct an annual stockholder say-on-pay vote

Pay dividend equivalents on unearned restricted shares or stock units

Components of Compensation

The principal elements of our executive compensation program for 2018, 2019 and 2020 are summarized in the table below:

 

Element

Form

What It Does

 

How It Links to Performance

Base Salary

Cash (Fixed)

Provides a competitive rate relative to similar positions in the market, and enables the Company to attract and retain critical executive talent

 

Based on job scope, level of responsibilities, experience, tenure and market levels

Annual (Bonus) Incentive Plan

Cash (Variable)

Focuses executives on achieving annual financial and strategic goals that drive long-term stockholder value

 

Payouts: 0% to 200% of target, based on results against pre-established goals

 

Financial Metrics: 80% of bonus for 2020 and 2021 - Earnings per share (“EPS”), and Net sales and CSER

 

Individual Goals: 20% of bonus for 2020 and 2021 - Tied to specific strategic objectives

Long-Term Incentive (LTI) Plan

Equity (Variable)

Provides incentives for executives to execute on longer-term financial and strategic growth goals that drive long-term stockholder value and support the Company’s retention strategy

 

50% of the LTI award is performance-based and 50% vests ratably over a four-year period

 

Performance-based awards can pay out between 0% and 200% of target, based on actual performance compared to pre-established, three-year financial performance targets

38 Diodes Incorporated


 

Factors Considered in Making Compensation Decisions

Our compensation strategy is flexible and enables us to appropriately differentiate and reward executives by taking into account:

Company financial and operational performance;

The executive's individual performance, experience and qualifications;

The scope of the executive's role;

The level of total compensation for our other executives; and

Competitive market data which helps us evaluate how our executive pay levels compare to that being offered to individuals with comparable roles in semiconductor companies with which we compete for talent.

For additional information regarding elements of compensation, please refer to the graphs below in the section entitled “Principal Components of Compensation."

PAY FOR PERFORMANCE

The chart below illustrates the relative degree of alignment between the total stockholder return ("TSR," defined as stock price appreciation plus dividends) and the CEO's annual compensation as reported in the Summary Compensation Table for the Company (set forth below) and its 2020 Peer Group (as defined below) for the most recent three-year period available. For further information concerning the 2020 Peer Group, see “Compensation Review Process – Selection of Peer Group.”

 

39 Diodes Incorporated


The table below illustrates the change in Dr. Lu’s total direct compensation for 2018, 2019 and 2020:

CEO's Total Direct Compensation

 

2018

2019

 

2020

2020 vs 2018

Base Salary

$689,320

$723,713

 

$728,250

6%

Bonus

$1,686,265

$1,507,594

 

$1,453,201

-14%

 

 

 

 

 

 

RSU's

 

 

 

 

 

  Number of shares

63,000

59,000

 

53,100

-16%

  Value/share (closing price on day of grant)

$29.27

$41.04

 

$49.49

69%

  Value

$1,844,010

$2,421,360

 

$2,627,919

43%

 

 

 

 

 

 

PSU's

 

 

 

 

 

  Number of shares

63,000

59,000

 

53,100

-16%

  Value/share (closing price on day of grant)

$29.27

$41.04

 

$49.49

69%

  Value

$1,844,010

$2,421,360

 

$2,627,919

43%

 

 

 

 

 

 

Stock Options

 

 

 

 

 

  Number of shares

 

  Value/share

 

  Value

 

 

 

 

 

 

 

Total Long-Term Incentive

$3,688,020

$4,842,720

 

$5,255,838

43%

 

 

 

 

 

 

Other compensation

$81,377

$70,032

 

$102,927

26%

 

 

 

 

 

 

Total Compensation

$6,144,982

$7,144,059

 

$7,540,216

23%

  Change from previous year

11%

16.3%

 

5.5%

N/A

Total shareholder return for 2018, 2019 and 2020 was 12.5%, 74.7% and 25.1%, respectively.  

The Compensation Committee retained Compensation Advisory Partners (“CAP”) in January 2020.  CAP advised the Compensation Committee as to the composition of the 2020 Peer Group and compared our 2020 projected executive compensation to that of our 2020 Peer Group.  CAP reported directly to the Compensation Committee. The individuals at CAP who provided compensation consulting services to the Compensation Committee provide no other services to the Company or its subsidiaries.

40 Diodes Incorporated


In January 2020, CAP reviewed the compensation elements and market practices impacting the top six senior executive positions at Diodes.  The scope of the review focused on the base salary plus target annual and target long-term incentive compensation levels of the top six senior executive positions. The report relied on the compensation practices of our 2020 Peer Group. For a description of the 2020 Peer Group, see “Compensation Review Process – Selection of Peer Group” below. The review summarized the executives’ overall percentile alignment for Diodes’ executives compared to the final blended market data, with target compensation being the primary focus of the study percentile value and derived from base salary, target total cash, 2020 target long-term incentives and total direct compensation at target total cash. The review demonstrated that with some variation by individual, Diodes’ executives are compensated at the 63rd percentile in terms of total direct compensation using target total cash plus 2020 target long-term incentives. The 63rd percentile measurement was primarily driven by the long-term performance incentives portion of our executive compensation program. Total direct compensation using actual total cash plus target long-term incentives is positioned slightly higher at the 66th percentile. The relative pay rank for our CEO and other executives by type of compensation is detailed in the following chart:

 

 

Pay Rank

Component of Pay

 

CEO

 

Other Executive Officers

 

Overall

Base salary

 

32nd

 

22nd

 

24th

Cash compensation (base salary + target bonus)

 

69th

 

44th

 

48th

Long-term incentives ("LTI")

 

73rd

 

70th

 

71st

Total direct compensation (cash compensation + LTI)

 

67th

 

48th

 

63rd

 

PRINCIPAL COMPONENTS OF COMPENSATION

2020 Pay Mix

The Compensation Committee set 2020 base salary and target bonus and LTI award levels to generally align the NEOs’ total direct compensation with the 50th percentile of the market.  The charts below illustrate the relative composition of 2020 total direct compensation for our CEO and our other NEOs.

Base Salaries

We provide each of our NEOs with a competitive fixed annual base salary. The base salaries for our NEOs are reviewed annually by the Compensation Committee by taking into account each executive officer's scope of responsibility, level of experience, individual performance, and past and potential contribution to the Company's business, as well as the Company’s performance and the current year’s change in the cost of living.  The Compensation Committee does not assign any particular formula or weight to the foregoing factors.  

41 Diodes Incorporated


Consistent with our compensation philosophy, base salaries represent a fixed portion of total compensation and may generally be at or lower than the median base salaries being offered to individuals with comparable roles in semiconductor companies with which we compete for talent.

The following table shows each NEO’s annualized base salary for 2019 to 2021 and the percentage change in each NEOs’ annualized base salary from the prior year.  With the exception of Mr. Whitmire, whose pay increase reflects his additional responsibilities upon being appointed CFO, the NEO’s did not receive a salary increase in 2020, reflecting the Company’s decline in performance in 2020 when compared to 2019.

Annualized Base Salary

 

 

2018

 

2019

 

2020

Name

 

Base Salary

($)

 

(%) Change

 

Base Salary

($)

 

(%) Change

 

Base Salary

($)

 

(%) Change

Keh-Shew Lu

 

693,750

 

5%

 

728,250

 

5%

 

728,250

 

Brett R. Whitmire (1)

 

N/A

 

N/A

 

288,000

 

N/A

 

294,000

 

2%

Julie Holland

 

312,150

 

5%

 

390,500

 

25%

 

390,500

 

Francis Tang

 

372,000

 

5%

 

390,500

 

5%

 

390,500

 

Emily Yang

 

280,000

 

N/A

 

294,000

 

5%

 

294,000

 

(1) Mr. Whitmire became an NEO in 2019.

Annual (Bonus) Incentive Plan

Annual incentives reward both the achievement of short-term financial goals, as well as the execution of activities to advance our strategic priorities, which support near-term financial performance and long-term strategic objectives.  Our annual bonus plan for 2019 and 2020 was simple, formulaic and responsive to investor feedback:

 

 

42 Diodes Incorporated


This table illustrates the structure of the plan for 2019 and 2020.  

 

Annual Incentives – Plan Structure (2019)

Weighting

Performance Objectives

Metrics

80%

Financial Metrics

Non-GAAP Earnings Per Share (EPS),

Net Sales and CSER

 

20%

Strategic Priorities

Examples of strategic initiatives include, but are not limited to:

   Complete the acquisition of LSC

   Manage the impact of the COVID-19 virus on the Company’s operations

   Increase market share

   Develop new products

   Increase % of sales from automotive industry

 

 

Both the financial metrics and the strategic priorities are set at the beginning of the year and on an absolute basis. The schedule below sets forth the annual incentives to be paid as a percentage of target.  Performance below or above target will result in an award ranging from 0% to a maximum of 200% of target.

 

The Compensation Committee chose to use EPS and net sales as the primary measures for 2019 and 2020 to keep our NEOs focused on profitability and profitable growth.  The Compensation Committee determined these measures to be appropriate since they are measures used by our peers in evaluating performance and are commonly used by stakeholders in the evaluation of company performance.  In 2020, the Compensation Committee added CSER to the financial metrics at a 3% weighting and established an internal committee to improve Diodes’ focus on its ongoing environmental, social and governance activities.  Achieving goals in all of these areas is critical to driving short-term results that have long-term impact on value creation.  The strategic initiatives will be evaluated based upon demonstrated performance against the specific pre-determined targets.

 

Annual Incentives –
Financial and Strategic Performance & Payout Ranges

Performance Level

Range of Payout*

Below 80% of Target

0% payout

From 80% to 100% of Target

50% to 100% payout

From 100% to 120% of Target

100% to 200% payout

Above 120% of Target

200% payout (capped)

*Performance between 80% and 100% of target and 100% and

120% of target is interpolated between the end points identified above.

 

43 Diodes Incorporated


Beginning in 2021 the performance level and payout ranges are revised as follows:

 

Annual Incentives –
Financial and Strategic Performance & Payout Ranges

Performance Level

Range of Payout*

Below 60% of Target

0% payout

From 60% to 100% of Target

50% to 100% payout

From 100% to 140% of Target

100% to 200% payout

Above 140% of Target

200% payout (capped)

 

*Performance between 60% and 100% of target and between 100% and

140% of target is interpolated between the end points identified above.

The following table sets forth the performance targets established by the Compensation Committee and the results achieved by the Company for fiscal 2019 and fiscal 2020:

 

 

2019

 

2020

 

 

Objective

 

Weighting

 

Target

 

Actual

 

Weighting

 

Target

 

Actual

 

Performance vs. Target

Financial objectives (80% of award)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales (millions)

 

20%

 

$1,290.0

 

$1,249.1

 

19%

 

$1,160.0

 

$1,212.3

 

Exceeded

Non-GAAP diluted earnings per share

 

80%

 

$2.55

 

$2.91

 

78%

 

$2.07

 

$2.34

 

Exceeded

CSER

 

N/A

 

N/A

 

N/A

 

3%

 

11

 

7

 

Exceeded

Strategic objectives (20% of award)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Complete the acquisition of Lite-On Semiconductor

 

 

 

 

 

 

 

 

 

 

 

 

 

Achieved (1)

Manage the impact of COVID-19 on the Company's operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Achieved (2)

Increase market share

 

 

 

 

 

 

 

 

 

 

 

 

 

Achieved (3)

Develop new products

 

 

 

 

 

 

 

 

 

 

 

 

 

Achieved (4)

Increase % of revenues from automotive industry

 

 

 

 

 

 

 

 

 

 

 

 

 

Achieved (5)

(1) In November 2020, the Company completed its acquisition LSC;

(2) During 2020, the Company managed the challenges presented by COVID-19 with minimum disruptions on its operations;

(3) The Company has increased market share;

(4) The Company continues to develop successful new products; and

(5) Net sales related to the automotive industry increased to 11% in 2020 from 10% in 2019.

The following payout percentages, as a percent of target opportunity, for 2020 were calculated based upon the weight of each performance objective for 2020 and the results set forth above:

Performance Objective

% Attained to Target

% Payout to Target

Weight

Financial objective

 

 

 

Net sales

105%

123%

15%

Non-GAAP diluted earnings per share

113%

167%

63%

CSER

157%

200%

2%

Strategic objectives

143%

20%

44 Diodes Incorporated


 

 

Based upon the Company’s 2020 performance, our NEOs received the following bonuses:

Name

Target Bonus as Percentage of Salary

 

Actual Payout as % of Target

 

Actual Payout as % of Salary

 

2020 Bonus

Dr. Keh-Shew Lu

125%

 

160%

 

200%

 

$1,453,201

Brett R. Whitmire

70%

 

152%

 

107%

 

305,738

Julie Holland (1)

70%

 

152%

 

112%

 

436,369

Francis Tang

70%

 

152%

 

106%

 

414,551

Emily Yang

70%

 

152%

 

106%

 

312,107

 

For fiscal 2019 and 2020, each financial objective (i.e., net sales and Non-GAAP diluted earnings per share) was established after consideration by the Compensation Committee to ensure that the performance targets establish challenging goals and thereby align the interests of our executives with the interests of our stockholders.

The following table shows each NEO’s maximum executive bonuses for 2018, 2019 and 2020 and the percentage change from the prior year:

 

 

2018

 

2019

 

2020

Name

 

$(1)

 

Change (%)

 

$(1)

 

Change (%)

 

$(1)

 

Change (%)

Dr. Keh-Shew Lu

 

1,659,582

 

13%

 

1,820,626

 

10%

 

1,820,625

 

Brett R. Whitmire

 

N/A

 

N/A

 

392,000

 

N/A

 

401,359

 

2.4%

Julie Holland

 

448,164

 

N/A

 

546,700

 

22%

 

546,700

 

Francis Tang

 

498,341

 

177%

 

546,700

 

10%

 

546,700

 

Emily Yang

 

375,095

 

N/A

 

411,600

 

10%

 

411,600

 

(1) In 2017, the Compensation Committee redesigned our executive bonus plan to determine actual payouts using a formula based on financial metrics (80%) and specific strategic targets (20%).  

This executive bonus plan is operated pursuant to the 2013 Plan which permits the grant of cash awards.  See “Executive Compensation – Narrative to Summary Compensation Table and Grants of Plan-Based Awards Table – 2013 Equity Incentive Plan.”  The executive bonus formula used performance criteria approved by our stockholders.

 

In early 2021, the Compensation Committee reviewed the design of our annual incentive plan for 2021.  No changes were made to the target awards as a percentage of base salary, the financial objectives, the strategic objectives, or the relative weight of the financial objectives as compared to the strategic objectives.  The weighting of the Non-GAAP diluted earnings per share financial metric will be 77% to emphasize profitability, the weighting of net sales will be 18% and CSER will be 5%.  The Compensation Committee feels these measures reflect the Company’s longer-term goal of achieving a 40% gross margin and the increased focus on corporate governance. Due to the sensitivity of earnings per share and net sales forecasts and the correlation of earnings per share to our stock price, the 2021 targets are not being disclosed at this time.  However, the targets will be disclosed at the end of the performance period along with the achievement levels against such targets.

45 Diodes Incorporated


Long-Term Incentive (LTI) Plan

Under the Company's 2013 Plan, the Company may grant any type of equity award whose value is derived from the value of the Common Stock of the Company, including, but not limited to, shares of Common Stock, stock options, stock appreciation rights (“SARs”), restricted stock units (“RSUs”), performance stock units (“PSUs”) and restricted stock. Equity awards encourage our NEOs to execute on longer-term financial goals that drive stockholder value creation and support our retention strategy.

 

In February 2020, the Committee granted long-term incentive (“LTI”) awards to certain executive officers. Each LTI award consisted of (1) restricted stock units (“RSUs”) which vest over four years and (2) performance stock units (“PSUs”) which contain a performance-based vesting condition under which the PSUs will vest upon the Company achieving a cumulative 3-year Non-GAAP operating income target for 2020-2022.

In February 2020, the Compensation Committee reviewed the design of our LTI plan for 2020, with the assistance of CAP. No changes were made to the structure of the plan compared to 2019, except for a change to the 3-year Non-GAAP operating income target for 2020-2022 and a change in our peer group.  

For fiscal 2018 and 2019, the cumulative 3-year Non-GAAP earnings per share target was substantially increased over the corresponding objective for the prior year to ensure that the performance targets establish challenging goals and thereby align the interests of our executives with the interests of our stockholders.  For fiscal 2020, the cumulative 3-year Non-GAAP earnings per share was reduced compared to 2019 to reflect current market conditions.

The following chart illustrates the structure of the plan for 2018, 2019 and 2020.  The structure of the LTI awards is the same for the CEO and all other NEOs.

 

        

46 Diodes Incorporated


 

 

LTI Plan Structure

Weighting

Equity Vehicles

Metrics

50%

Performance-Based Stock Units: Vest according to actual performance compared to pre-established, three‐year absolute financial performance targets.

For the 2020‐2022 award cycle, the Compensation Committee chose a Non-GAAP operating income target of $390.6 million, and increased this target for 2021-2023.

50%

Time-Based Restricted Stock Units: Vest ratably over a four‐year period (i.e., 25% on each anniversary of the award).

N/A

 

The actual amount of performance-based awards that are earned and vest will be driven by the achievement of the performance metrics at the end of the three-year performance period relative to our three-year absolute performance goals:

LTI Awards
Financial Performance & Payout Ranges

Performance Level

Range of Payout*

Below 80% of Target

0% payout

From 80% to 100% of Target

50% to 100% payout

From 100% to 120% of Target

100% to 200% payout

Above 120% of Target

200% payout (capped)

*Performance between 80% and 100% of target and between 100% and

120% of target is interpolated between the end points identified above.

47 Diodes Incorporated


 

Beginning in 2021 the performance level and payout ranges are revised as follows:

 

Annual Incentives –
Financial and Strategic Performance & Payout Ranges

Performance Level

Range of Payout*

Below 60% of Target

0% payout

From 60% to 100% of Target

50% to 100% payout

From 100% to 140% of Target

100% to 200% payout

Above 140% of Target

200% payout (capped)

*Performance between 60% and 100% of target and between 100% and

140% of target is interpolated between the end points identified above.

 

The following table sets forth the number of shares subject to RSUs and PSUs granted to each NEO in 2019, 2020 and 2021, the grant date fair value of such awards, and the percentage change in such shares and such value from the prior year:

 

 

 

 

2019

 

2020

 

2021

Name

Shares/Value

 

RSUs

 

PSUs

 

Change % (1)

 

RSUs

 

PSUs

 

Change % (1)

 

RSUs

 

PSUs

 

Change % (1)

Dr. Keh-Shew Lu

#

 

59,000

 

59,000

 

-6%

 

53,100

 

53,100

 

-10%

 

32,000

 

32,000

 

-40%

 

$

 

2,421,360

 

2,421,360

 

31%

 

2,627,919

 

2,627,919

 

9%

 

2,546,240

 

2,546,240

 

-3%

Brett R. Whitmire

#

 

12,000

 

12,000

 

N/A

 

10,800

 

10,800

 

-10%

 

7,600

 

7,600

 

-30%

 

$

 

492,480

 

492,480

 

N/A

 

534,492

 

534,492

 

9%

 

604,732

 

604,732

 

13%

Julie Holland

#

 

17,000

 

17,000

 

31%

 

15,300

 

15,300

 

-10%

 

9,200

 

9,200

 

-40%

 

$

 

697,680

 

697,680

 

83%

 

757,197

 

757,197

 

9%

 

732,044

 

732,044

 

-3%

Francis Tang

#

 

17,000

 

17,000

 

-6%

 

15,300

 

15,300

 

-10%

 

7,600

 

7,600

 

-50%

 

$

 

697,680

 

697,680

 

32%

 

757,197

 

757,197

 

9%

 

604,732

 

604,732

 

-20%

Emily Yang

#

 

13,000

 

13,000

 

30%

 

11,700

 

11,700

 

-10%

 

7,600

 

7,600

 

-35%

 

$

 

533,520

 

533,520

 

82%

 

579,033

 

579,033

 

9%

 

604,732

 

604,732

 

4%

(1) Represents the combined number of shares subject to RSUs and PSUs for the given year and the combined grant date values of such RSUs and PSUs, compared to the combined number of shares subject to awards and the combined grant date values of such awards for the prior year.

The Compensation Committee believes that both performance-based and time-based awards are appropriate equity vehicles for a portion of long-term incentive compensation for the Company’s executive officers because both such awards align executive officers’ interests with the interests of stockholders by focusing executive officers on long-term Company performance.  The value of these awards increases if the Company’s stock price increases, and the value of these awards decreases if the stock price declines.  Time-based awards also serve to retain executive officers because they provide executive officers some economic value (if time-based vesting requirements are met) regardless of stock price changes. Performance-based awards encourage NEOs to achieve the specific pre-determined performance objectives selected by the Compensation Committee.

The Compensation Committee’s policy is to grant equity awards annually in recognition of each executive officer's current and potential contributions to the Company. To encourage retention, stock option and restricted stock awards are subject to a four-year time-based vesting requirement in addition to any performance-based vesting requirement.

In determining equity awards in 2019, 2020 and 2021, the Compensation Committee first reviewed the NEOs’ equity awards in light of the executive compensation philosophy that the total compensation (i.e., the aggregate of all cash and equity awards) of the NEOs and all other executive officers should be competitive at the median (50th percentile) with the total compensation paid to executive officers with comparable duties paid by similarly sized companies in the semiconductor industry.  The number of RSU and PSU awards is adjusted to reflect the Company’s stock price at the time the award is granted. The Compensation Committee noted that in 2020, the Company acquired LSC and contended with the impact of the COVID 19 pandemic.

48 Diodes Incorporated


The Compensation Committee then reviewed each NEO’s personal performance and contribution to the Company.  When doing its review, the Compensation Committee believes that target compensation should be competitive with that being offered to individuals with comparable roles in semiconductor companies with which we compete for talent.  This is done to ensure we employ the best people to lead to our success.  The Compensation Committee reviews the allocation between cash and non-cash components of the NEO’s compensation, and the size, term and value of the awards made in prior years.  The Compensation Committee believes that each NEO made meaningful contributions in each area of his or her responsibilities to the growth and profitability of the Company.  The Compensation Committee believes that it has appropriately valued the cash awards and equity awards granted in 2019, 2020 and 2021 consistent with the Company’s compensation objectives and philosophy.

 

 

COMPENSATION REVIEW PROCESS

When making individual compensation decisions for NEOs, the Compensation Committee takes many factors into account, including the performance of the Company as a whole, the current market conditions, the executive officer’s experience, responsibilities, management abilities and job performance, and pay levels for similar positions at comparable companies.  The Compensation Committee does not assign any particular formula or weight to the foregoing factors.  

The Role of the Compensation Committee The Compensation Committee determines the compensation for the executive officers, including the NEOs.  The Compensation Committee meets in an executive session at the beginning of each fiscal year to:

 

Evaluate the performance of the NEOs and all other executive officers during the prior fiscal year;