DEF 14A 1 d242738ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

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LOGO


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LOGO   

Analog Devices, Inc.

One Analog Way

Wilmington, MA 01887

LETTER FROM OUR BOARD

Dear Fellow Shareholders,

First and foremost, we thank you for your continued investment in Analog Devices, Inc., or ADI.

At ADI, we are committed to maximizing shareholder value creation over the long-term, and we have a highly engaged Board and sound corporate governance structure in place to oversee this commitment.

The ADI Board of Directors cordially invites you to attend the 2022 Annual Meeting of Shareholders, or Annual Meeting, which will be held at ADI’s offices located at 125 Summer Street, Boston, Massachusetts 02110 on Wednesday, March 9, 2022, at 9:00 a.m. local time.

At the Annual Meeting you are being asked to:

 

  1.

Elect 12 members of our Board of Directors, each to serve for a term expiring at the next annual meeting of shareholders;

 

  2.

Approve a non-binding advisory proposal on the compensation of our named executive officers;

 

  3.

Approve the Analog Devices, Inc. 2022 Employee Stock Purchase Plan; and

 

  4.

Ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the 2022 fiscal year.

Your vote is very important to us. Our Board encourages you to read these proxy materials and to vote your shares “FOR” each proposal.

Thank you for the trust you place in us and the opportunity to serve as your directors.

Sincerely,

THE ADI BOARD OF DIRECTORS


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LOGO   

Analog Devices, Inc.

One Analog Way

Wilmington, MA 01887

LETTER FROM OUR CEO

 

Dear Fellow Shareholders,

While 2021 was a tumultuous year for the world, ADI worked closely with our customers, invested in impactful innovations, and focused on operational excellence to not just weather the challenges, but accelerate through them. Our efforts to support our customers through supply constraints and inflationary pressures helped to differentiate ADI from our competitors and resulted in increased customer engagement and strong financial results in fiscal 2021. Our investments in high-value applications across automotive, communications, digital healthcare, industrial and more, positioned us well to take advantage of society’s accelerating digitalization and the ongoing evolution of how we work, learn and live our lives. We enter fiscal 2022 with tremendous momentum and look forward to collaborating more closely than ever with our customers and ecosystems on the innovations that will continue humanity’s advancement in 2022 and beyond.

Strategic Progress & Fiscal 2021 Results

Fiscal 2021 was a remarkable year for ADI, with record operating results. Our success was driven by our industry-leading, high-performance product portfolio and our team’s strong operational execution, which collectively enabled us to meet the increased demand for our products. We delivered $7.3 billion of revenue, adjusted gross margins over 70%, and record adjusted earnings per share. We continued to deliver strong cash generation, with operating cash flow of $2.7 billion and free cash flow of $2.4 billion. Notably, our free cash flow margin is in the top 10% of companies in the S&P 500 and we returned more than $3.7 billion to shareholders through dividends and share repurchases.

It was also a year of transformation for ADI. To complement our organic efforts, we have selectively used M&A over the years to expand both our scale and scope. The completion of the Maxim Integrated acquisition further builds our comprehensive portfolio of products, enabling us to serve the expanding needs of our customers better than ever before, which we believe better positions ADI to deliver long-term, profitable and sustainable growth.

Milestone Acquisition of Maxim Integrated

We are hard at work on the integration of Maxim Integrated as we work to further solidify ADI as the strongest and most durable analog franchise on earth. This combination increases the breadth and depth of our best-in-class technology offerings – we now have approximately 75,000 product SKUs, and 80% of these products individually account for less than 0.1% of our total revenue. We believe our portfolio diversity helps to create a high barrier to entry and business model that is both resilient and rich with growth opportunities.

The addition of Maxim Integrated positions us to develop and deliver more complete, cutting-edge solutions for our customers. For example, we now have a more comprehensive power management portfolio, where Maxim’s primarily application-focused offerings are highly complementary with ADI’s more general purpose or catalog portfolio. We expect to accelerate growth in our more than $2 billion revenue power management portfolio as there are abundant cross-selling and design support opportunities across all our end markets.

More importantly, Maxim Integrated expands our global team of talented employees, including our cadre of brilliant engineering talent, which now stands at 11,000 engineers strong. This increased scale unlocks additional avenues of professional growth for our people, while enabling us to better address the future needs of our customers.

Destination for the Best Engineering Talent

We recognize the importance of our engineering talent as a key competitive differentiator. Over the last several years, our customers have allocated more of their engineering resources towards software and away from hardware. As a result, they are increasingly relying on us to fill this void and be a close partner in helping them architect complete analog solutions.

Our commitment to R&D investment and engineer autonomy is what makes us a destination for the world’s best technologists. At its core, our culture is deeply rooted in solving our customers’ most challenging problems and developing and shaping the growth of our people. Our global team of problem solvers is mentored by the best minds and empowered to imagine the future instead of waiting for it. With that foundation, they’re able to develop breakthrough solutions that impact the world.

At the same time, ADI continues to expand our recruitment efforts to attract more diverse talent to our organization. Bringing different perspectives together not only fosters innovation, but it also strengthens bonds between people working towards a united goal and results in improved business outcomes.

Our Mission to “Engineer Good”

Broadly speaking, we believe our industry-leading portfolio defines the edge of performance, creates successful business outcomes, and inherently delivers environmental and sustainability benefits.

With each generation of chip design, we increase energy efficiency, while enhancing the performance of our customers’ systems. For example, in 2021 alone, electric vehicles equipped with ADI’s battery management system (BMS) technologies reduced the amount of carbon dioxide entering the atmosphere by nearly 100 million tons.

 

 

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Beyond making products that enable energy-efficient applications across transportation, communication, healthcare, and more, we are leveraging our expertise to support climate-focused initiatives. In April 2021, we launched the Ocean and Climate Innovation Accelerator (OCIA) consortium with Woods Hole Oceanographic Institution. Unleashing the ocean’s potential to address the global climate crisis begins with science-driven knowledge, and our sensors and domain expertise in physical world metrology measurement will be critical to understanding the ocean’s role in climate change.

 

We’re also committed to answering the global call to action to address the world’s environmental degradation and climate change with more sustainable operations. For our part, we’ve set science-based emission reduction targets that ensure our sustainability plans are based on climate science and are independently verified and certified. These include using 100% renewable energy in our legacy ADI manufacturing sites by 2025, as well as achieving carbon neutrality by 2030 and net zero emissions by 2050 or sooner.

 

Thank You

 

In closing, our company remains strong, resilient, and adaptable in a period of tremendous change for our industry. I’ve never been more optimistic about our future in this ubiquitously sensed and connected world given the wide array of secular growth drivers, the breadth and depth of our product and technology portfolio and, critically, our increased ability to reach and fully serve our more-than one hundred thousand customers. I’d like to thank our employees and partners, who worked tirelessly throughout fiscal 2021 to help ADI achieve these historic results. I would also like to thank the Board for their confidence in appointing me as the incoming Chair of the Board, effective as of our Annual Meeting date. I look forward to continuing to work with the Board and management team to take ADI to even greater heights.

 

Lastly, thank you for choosing to invest in ADI and for your continued trust in our Board and management team.

 

LOGO  

LOGO

 

  
 

VINCENT ROCHE

Incoming Chair and

Chief Executive Officer

  

 

Strengthening Our End

Markets with Maxim Integrated

 

Industrial

 

LOGO

 

The Industrial sector is characterized by a diversity of customers, products and applications, and features sticky, long-life-cycle products. ADI’s heritage in this market, combined with Maxim Integrated, positions us as the partner of choice across precision signal processing, control, power management, connectivity and safety. And, we have a significant opportunity to connect Maxim’s rich power portfolio, which is underrepresented in the Industrial sector today, with ADI’s strong position in this market.

 

Automotive

 

LOGO

 

ADI’s automotive business is focused on vehicle electrification and in-cabin connectivity. Maxim Integrated strengthens our market-leading BMS position with its growing power management capabilities. Now, seven of the top 10 electric vehicle brands use our solution, and our BMS revenue has doubled. Maxim Integrated also adds an industry-leading Gigabit Multimedia Serial Link (GSML) franchise, making ADI the go to provider for connectivity systems in the vehicle, which is critical in architecting Advanced Driver Assistance Systems (ADAS) systems.

 

Communications

 

LOGO

 

ADI is a wireless market leader, and our deep domain expertise enabled the launch of the industry’s first software-defined radio transceiver with a fully integrated digital front end this year. In wireline, our precision signal chain for optical control systems and power management is used by carrier networks and data centers. Maxim Integrated more than doubles our data center exposure and expands our growth opportunities with power management solutions for cloud processors and accelerators.

 

Consumer

 

LOGO

 

Our Consumer business is focused on enhancing human sensory experiences, and we have repositioned this franchise by further diversifying our customers, products and applications. Our portfolio is defined by signal processing solutions across hearables, wearables and professional audio/video, along with strong power management capabilities. Maxim Integrated builds on this, bringing additional power and sensing capabilities and new applications, including fast charging and gaming.

 

 

 

 

 

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LOGO   

Analog Devices, Inc.

One Analog Way

Wilmington, MA 01887

A GLOBAL TEAM

“At ADI, our greatest asset is our people. We offer the most curious problem-solvers career-long opportunities to learn from the best minds and maximize their potential and impact. This environment, when paired with our inspiring mission to solve the world’s most complex challenges, creates a unique draw for brilliant people who are passionate about partnering with our customers to make a lasting, positive impact on humanity. And this applies across all functions – their ingenuity and collaborative approach power the innovation engine that is at the root of our customer success and long-term value creation.”

 

LOGO           
 

ANELISE SACKS

Chief Customer Officer

      

Talent Priorities

We invest in our people so they can engineer the next generation of technology that betters our world. We care about our employees, offering competitive benefits and compensation, as well as fulfilling career opportunities. In support of this, we are continuously looking for ways to evolve our programs and practices to ensure employee satisfaction.

 

 

 1.

 

 

Empower Innovation

Leadership &

Mentoring

 

LOGO

 

 

Empowering our teams to innovate and learn, across every level & function

 

 

Our pandemic-inspired ADI Ignite Network “innovates how we innovate.” The network opens up innovation to all employees and expands the impact of mentoring across the globe. Our recently launched ADI Mentoring Program makes it easier for mentors and mentees to connect via a digital platform that matches mentors and mentees based on suggestions, personality, and other preferences.

 

 

ADI’s Pulse survey captures employee feedback on 30 cultural dimensions and enables ADI to prioritize actions for positive organizational impact. Employee participation in fiscal 2021 was 87% with 80% likely to recommend working at ADI and 77% employee satisfaction.

 

 2.

 

 

Focus on Social

Purpose & Employee

Engagement

 

LOGO

 

 

Fostering a collaborative workplace where the best minds can do the best work

 

 

GEEC, or Global Early Employee Challenge, is a company-wide competition that helps to develop the business skills of employees with five or fewer years of experience. In fiscal 2021, we had 400+ early career participants across 60 teams focused on designing solutions that help protect and regenerate the environment, enabling a more sustainable future.

 

 

Diversity, equity, and inclusion is a global mission for us. We launched a Diversity Council and Working Group to ensure all our initiatives resonate locally while still having a global impact. These teams are currently helping to identify systemic oppression within their regions so we can address inequity beyond the United States.

 

 3.

 

 

Building the

Workforce

of the Future

 

LOGO

 

 

Evolving our workforce skills to prepare our customers for the future

 

 

As the future of the workforce is redefined, ADI continues to prioritize attracting and retaining the world’s finest talent to push the limit of what’s possible. ADI is focused on creating an agile, evolving view of the workforce of the future by developing a more complete understanding of the types of skills, location, and working environment employees prefer.

 

 

As experiential learning is vitally important to employees’ development, we will continue to work to make opportunities and roles available to employees starting early in their careers and at every stage thereafter, preparing them for long, distinguished careers at ADI.

 

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We know that amazing talent drives our success as a company. That’s why we aim to be the destination for the world’s best analog engineering talent. We invest in our people, so they can engineer solutions that sense the world around us and make it better. ADI is proud to foster an inclusive workplace where all voices and diverse backgrounds can contribute, thrive and produce better outcomes for our employees and customers.

 

LOGO  

~11,000

 

Engineers Worldwide

 

    

 

LOGO

 

~4,700

 

U.S. Patents

       
LOGO  

$1.3B

 

R&D Investment

in FY’21

   

LOGO

 

93%

 

Employee Retention

in FY’21

 

SPOTLIGHT:  

  

Analog Devices Fellows

ADI Fellow is a distinguished technical position given to engineers who contribute significantly to the company’s success through exceptional innovation, leadership and an unparalleled ability to unite and mentor others. In addition to their business and innovation impact, Fellows serve as company ambassadors and are recognized as industry leaders in their fields of expertise.

 

“ADI challenges you to push the bounds of what’s possible, presenting tremendous opportunity to innovate for the future. Our culture is defined by diversity of perspective, background and interests enabling us to deliver solutions for our customer’s most complex problems.”

 

 

LOGO    
 

SUSAN FEINDT

ADI Fellow

 

“I’m inspired by the ADI culture, and more specifically, our talented colleagues who are deeply committed to collaboration. It’s a dream environment for an engineer to work in, with state-of-the-art technologies, world-leading products and knowing that I’m having the opportunity to innovate and really make an impact.”

 

LOGO    
 

KHIEM NGUYEN

ADI Fellow

 
 

 

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LOGO   

Analog Devices, Inc.

One Analog Way

Wilmington, MA 01887

NOTICE OF 2022

ANNUAL MEETING OF SHAREHOLDERS

2022 Annual Meeting of Shareholders

 

Date and Time:

Wednesday, March 9, 2022

9:00 a.m. local time

  

Place:

125 Summer Street

Boston, MA 02110

  

Record Date:

Monday, January 3, 2022

Items of Business

The 2022 Annual Meeting of Shareholders of Analog Devices, Inc., or Annual Meeting, will be held at our offices located at 125 Summer Street, Boston,

Massachusetts 02110, on Wednesday, March 9, 2022 at 9:00 a.m. local time. At the meeting, shareholders will consider and vote on the following matters:

 

1.

To elect the 12 director nominees named in this proxy statement to our Board of Directors, each to serve for a term expiring at the next annual meeting of shareholders;

 

2.

To approve, by a non-binding “say on pay” vote, the compensation of our named executive officers, as described in the Compensation Discussion and Analysis, executive compensation tables and accompanying narrative disclosures in this proxy statement;

 

3.

To approve the Analog Devices, Inc. 2022 Employee Stock Purchase Plan; and

 

4.

To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending October 29, 2022.

The shareholders will also act on any other business that may properly come before the meeting.

The Board recommends that you vote “FOR” each director nominee included in Proposal 1 and “FOR” each of the other proposals. The full text of these proposals is set forth in this proxy statement. Registered shareholders of the Company at the close of business on the record date are eligible to vote at the meeting.

Please note that we are furnishing proxy materials and access to our proxy statement to our shareholders via our website instead of mailing printed copies to each of our shareholders. By doing so, we save costs and reduce our impact on the environment.

Beginning on January 21, 2022, we will mail to our shareholders a Notice of Internet Availability of Proxy Materials, or Notice, which contains instructions on how to access our proxy materials and vote online. The Notice also contains instructions on how each of our shareholders can receive a paper copy of our proxy materials, including this proxy statement, our 2021 Annual Report and a form of proxy card or voting instruction form. All shareholders who do not receive the Notice, including shareholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail unless they have previously requested delivery of proxy materials electronically.

Shareholders of record at the close of business on the record date of January 3, 2022 are entitled to vote at the meeting.

Your vote is important no matter how many shares you own, and we encourage you to vote promptly whether or not you plan to attend the Annual Meeting.

By Order of the Board of Directors,

 

 

LOGO   LOGO   
 

JANENE ASGEIRSSON

Chief Legal Officer, Chief Risk Officer and Corporate Secretary

January 21, 2022

  

 

LOGO   Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on March 9, 2022: This proxy statement and the 2021 Annual Report are available for viewing, printing and downloading at www.analog.com/AnnualMeeting.

 

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How to vote: Your vote is important

PLEASE VOTE BY FOLLOWING THE INSTRUCTIONS ON YOUR PROXY CARD OR VOTING INSTRUCTION FORM

 

LOGO

 

Vote by Internet

Go to www.proxyvote.com
You will need the 16-digit
control number that appears on
your proxy card or the Notice.

 

LOGO

 

Vote by Telephone

Call 1-800-690-6903
You will need the 16-digit
control number that appears on
your proxy card or the Notice.

 

 

LOGO  

 

Vote by Mail

Mark, sign, date, and mail your proxy
card or your voting instruction form.
No postage is required if mailed in
the United States.

 

 

DURING THE ANNUAL MEETING     

 

LOGO

  For details on voting your shares during the Annual Meeting,
see “Q&A About Annual Meeting and Voting” on page 77.

Web links throughout this document are provided for convenience only, and the content on the referenced websites does not constitute a part of this proxy statement.

The sum and/or computation of individual numerical amounts or percentages disclosed in this proxy statement may not equal the total due to rounding.

Forward-Looking Statements

This proxy statement contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” “could” and “will,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections regarding our future financial performance; our anticipated growth and trends in our businesses; our future liquidity, capital needs and capital expenditures; the impact of the COVID-19 pandemic on our business, financial condition and results of operations; our future market position and expected competitive changes in the marketplace for our products; our ability to pay dividends or repurchase stock; our ability to service our outstanding debt; our expected tax rate; the effect of changes in or the application of new or revised tax laws, expected cost savings; the effect of new accounting pronouncements; our ability to successfully integrate acquired businesses and technologies, including the acquired business, operations and employees of Maxim Integrated Products, Inc.; and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified in Part I, Item 1A. “Risk Factors” and elsewhere in our most recent Annual Report on Form 10-K. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements, including to reflect events or circumstances occurring after the date of the filing of this proxy statement, except to the extent required by law.

 

 

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TABLE OF CONTENTS

Notice of 2022 Annual Meeting of Shareholders

 

Proxy Summary     1  
Proposal 1 — Election of Directors     11  
Corporate Governance     19  

Board Policies & Practices

    19  

Board of Directors Leadership Structure

    20  

Board of Directors Meetings and Committees

    20  

Determination of Independence

    23  

Director Nominees

    24  

Communications from Shareholders and
Other Interested Parties

    24  

The Board of Directors’ Role in Risk Oversight

    25  

Engagement with our Shareholders

    25  

Corporate Responsibility Highlights

    26  

Director Compensation

    28  

Certain Relationships and Related Transactions

    30  
Proposal 2 — Advisory Vote on the Compensation of our
Named Executive Officers
    32  
Information about Executive Compensation     33  

Compensation Discussion and Analysis

    33  

Fiscal 2020 Financial Results and Shareholder
Value Creation

    34  

Pay and Governance Best Practices

    35  

Factors Considered in Determining Fiscal 2020
Target Compensation Levels

    38  

Components of Executive Compensation

    39  

Compensation Processes and Policies

    47  

Summary Compensation Table

    50  

Grants of Plan-Based Awards in Fiscal 2020

    55  

Outstanding Equity Awards at Fiscal Year-End 2020

    58  

Option Exercises and Stock Vested During Fiscal 2020

    59  

Non-Qualified Deferred Compensation Plan

    60  

Change in Control Benefits

    61  

CEO Pay Ratio

    63  

Equity Award Program Description

    64  

Securities Authorized for Issuance Under
Equity Compensation Plans

    65  

Compensation Committee Interlocks and Insider Participation

    66  

Compensation Committee Report

    66  
Proposal 3 — Approval of the Analog Devices, Inc.
2022 Employee Stock Purchase Plan
    67  
Proposal 4 — Ratification of Selection of
Independent Registered Public Accounting Firm
    73  

Independent Registered Public Accounting Firm Fees

    74  

Audit Committee’s Pre-Approval Policy and Procedures

    74  

Audit Committee Report

    75  
Other Matters     76  
Q&A About Annual Meeting and Voting     77  
Additional Information     81  

Householding of Annual Meeting Materials

    81  

Security Ownership of Certain Beneficial Owners

    81  

Security Ownership of Directors and Executive Officers

    82  

Delinquent Section 16(a) Reports

    83  
Appendix A: Reconciliation of GAAP Measures to
Non-GAAP Measures
    84  
Appendix B: 2022 Employee Stock Purchase Plan     86  
 

 

Helpful Resources

 

Annual Meeting

Proxy Statement & Annual Report:

investor.analog.com/financial-info/annual-reports

Voting Your Proxy via the Internet Before the Annual Meeting: www.proxyvote.com

Board of Directors

investor.analog.com/governance/board-of-directors

Investor Relations

investor.analog.com

Corporate Social Responsibility

analog.com/csr

Governance Documents

https://investor.analog.com/governance/governance-documents. Corporate governance documents and policies, including:

 

  Corporate Governance Guidelines

 

  Committee Charters

 

  Code of Business Conduct and Ethics

 

  Related Person Transaction Policy

 

  Stock Option and Stock-Based Award Grant Date Policy

 

  Code of Corporate Social Responsibility

 

  Global Tax Policy

 

  Political Contributions and Expenditures
 

 

 

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Proxy Summary

LOGO  VOTING MATTERS

 

 

This proxy summary provides an overview of select information in this proxy statement. We encourage you to read the entire proxy statement before voting. Shareholders will be asked to vote on the following matters at the Annual Meeting:

 

Proposal

  

Items of Business

 

Board

Recommendation

 

Where to

Find Details 

  1     

 

Election of 12 directors

 

 

 

  LOGO  FOR 

each director nominee

  11
              
  2     

Advisory approval of the compensation of the company’s named

executive officers

 

 

  LOGO  FOR 

  32
              
  3      Approval of the Analog Devices, Inc. 2022 Employee Stock Purchase Plan  

 

  LOGO  FOR 

 

  67
              
  4     

Ratification of the selection of Ernst & Young LLP as independent registered

public accounting firm for the company’s fiscal year ending October 29, 2022

 

 

  LOGO  FOR 

 

  73
              

 

  What’s new?   

We continually review our corporate strategy and governance practices to ensure that ADI is in a position to consistently deliver on its commitment to sustaining a culture of innovation, collaboration, solid performance, and fiduciary responsibility. We believe providing a broader understanding of our perspectives on these items will be beneficial to you as you consider this year’s voting matters. This year’s updated items include:

 

 

Completed the acquisition of Maxim Integrated Products, Inc., or Maxim Integrated, on August 26, 2021

 

 

Continued to enhance ESG disclosure, publishing second annual Corporate Responsibility Report and EEO-1 data

 

 

First U.S. technology company to deploy a sustainable finance instrument with an inaugural green bond issuance in fiscal 2020, followed by the issuance of a sustainability-linked revolving credit facility and a sustainability-linked bond offering in fiscal 2021

 

 

Strengthened ADI’s commitment to reducing carbon emissions by setting a new goal to reach carbon neutrality by 2030 and net zero greenhouse gas emissions by 2050 or sooner

 

 

Continued to connect our shareholders with key stakeholders within our company around topics of interest, including sustainability and human capital management reporting

 

 

Appointed ADI’s first Chief Risk Officer and continued to enhance risk oversight practices with quarterly cross-functional committee meetings and regular updates to the Board

 

 

Further diversified Board, with female directors now representing more than 30% of the Board

 

 

Increased our stock ownership guidelines for the CEO from 2x to 5x and for all other executive officers from 1x to 3x

Governance Highlights

 

  Effective Board leadership, independent

 

  oversight and strong corporate governance

    Shareholder rights and accountability

LOGO

  Majority of directors are independent   LOGO   Annual election of directors of a declassified Board

LOGO

  Average tenure of independent directors standing for re-election is approximately 6.7 years   LOGO   Majority voting for directors in uncontested director elections

LOGO

  Regular executive sessions of independent directors   LOGO   Proxy access bylaw

LOGO

 

Clawback policy for CEO and executive officers, including

our named executive officers

  LOGO   Annual Board and Committee self-evaluations

LOGO

 

Active Board engagement in managing talent and

long-term succession planning for executives

  LOGO   No dual class of stock or controlling shareholder

 

LOGO

 

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ABOUT ADI

ADI is a leading global high-performance semiconductor company dedicated to solving the toughest engineering challenges.

As a premier edge processing company, we connect the physical and digital worlds, where data is born. Our technologies transform physical phenomena into digital intelligence that ignites human breakthroughs.

 

 ADI At a Glance   

 

 

 

Background

 

Founded: 1965

 

 

Headquarters: Wilmington, MA

 

 

Employees: ~24,700

 

 

Countries: 35

Worldwide sales, field applications, engineers,
distribution, design and technical support

 

 

Products: ~75,000 SKUs

 

 

Customers: 125,000+

 

 

Publicly Listed – NASDAQ: ADI

 

 

Design Centers: ~70

 

 

Global Manufacturing:

 

United States (Massachusetts, Oregon, Washington)

Ireland  |  Philippines  |  Malaysia  |  Thailand

 

 

    Fiscal 2021 Revenue: $7.3B

 

LOGO   

Industrial

 

Aerospace and Defense

Energy

Factory Automation

Healthcare

Instrumentation

 

LOGO

  

Automotive

 

Electrification

Infotainment

Autonomous Mobility

 

LOGO

 

  

Communications

 

Wired/Optical Networking

Wireless

LOGO   

Consumer

 

Hearable & Wearable Devices

High-End Audio & Video

Portables

 

 

LOGO

 

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Table of Contents

Our Strategy

Central to our strategy is our focus on challenges that our customers have across the most impactful application areas. By bringing together domain expertise with some of the world’s best technologies across hardware, software and AI, we make our customers’ solutions more accurate, efficient and intelligent — driving profitable growth.

Fiscal 2021 represented a year of strategic progress for ADI as we continued to deliver strong results and progress against our three key priorities:

 

Deploying

Capital

Efficiently

 

 

  Combined annual R&D investment of $1.3B with 95% targeted on most attractive B2B opportunities

 

  Extracting value from M&A to enhance scale & scope, creating destination for world’s best analog talent: Maxim Integrated in FY’21, Linear Technology in FY’17 & Hittite in FY’14

 

  Updated our capital allocation priorities in September 2021 following the acquisition of Maxim Integrated, including targeting to return 100% of free cash flow via dividends & buybacks with 7–15% dividend CAGR

 

Deepening

Customer

Centricity

 

 

  Partnering more deeply with customers to deliver complete solutions

 

  Strengthening customer engagement: customers enhancing software focus, leaving more of the increasingly complex hardware challenges to ADI

 

  Accelerating innovation engine to develop cutting-edge technologies. Opportunity pipeline value achieved record levels in FY’21

 

Capitalizing

on Secular

Trends

 

 

  Automotive: Electrification, In-Cabin Digitalization

 

  Industrial: Industrial 4.0 IoT, Digital Health, Space

 

  Communications: Next-Gen Wireless (5G), Data Center

 

  Consumer: Consumer IoT

 

 

 Fiscal 2021 Performance Highlights*      

 

$7.3B

 

Revenue

 

   

61.8%

 

Gross

Margins

 

   

23.1%

 

Operating

Margins

 

   

$3.46

 

Diluted

Earnings

per Share

 

   

$2.7B

 

Operating

Cash Flow

 

~88%

 

Business-

to-Business

Revenue

   

70.9%

 

Adjusted

Gross

Margins**

   

42.4%

 

Adjusted

Operating

Margins**

   

$6.46

 

Adjusted

Diluted

Earnings

per Share**

   

$2.4B

 

Free Cash

Flow**

 

*

The fiscal 2021 financial results in this proxy statement include the financial results of Maxim Integrated prospectively from the closing date of the Maxim Integrated acquisition, or Acquisition Date.

**

See Additional Information for additional information regarding non-GAAP financial measures and reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures.

 

 Fiscal 2021 Shareholder Value Creation      

 

LOGO   LOGO   LOGO

Returned $3.7B to shareholders

in the form of dividends and

share repurchases

 

Increased our dividends per

share paid to shareholders by

11% on an annualized basis

  1-, 3- and 5-year TSR1 of 49%,
111% and 202%, respectively,
which outperformed the S&P 500
over the same periods

 

(1)

Total Shareholder Return calculation is share price appreciation plus cumulative cash dividend payments, and the effect of reinvesting those dividends into the security, for the one-, three- and five-year periods ended October 30, 2021.

 

LOGO

 

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Table of Contents

GOVERNANCE HIGHLIGHTS

ADI’s Board is composed of a diverse, experienced group of global thought, business, and academic leaders. Tunç Doluca and Mercedes Johnson joined ADI’s Board on August 26, 2021 in connection with our acquisition of Maxim Integrated. On January 18, 2022, Dr. Little informed our Nominating and Corporate Governance Committee of his intent to retire from our Board and not stand for re-election. Consequently, Dr. Little’s term as a director will expire at the Annual Meeting on March 9, 2022. Our Nominating and Corporate Governance Committee has recommended, and our Board of Directors has determined, to nominate all other members of our Board for re-election at the Annual Meeting. If the current nominees are elected we will have 12 members serving on our Board and the size of our Board will decrease to 12 members at such time.

Director Nominees

 

Name

  Age   Director
Since
 

Principal

Occupation

  Independent
Director
 

Other

Company
Board(s)

  Committee
Member-
ship(s)
LOGO   Ray Stata   87   1965  

Outgoing Chair of the Board

of Analog Devices, Inc.

     

 

LOGO   Vincent Roche   61   2013  

Incoming Chair of the Board and Chief Executive Officer of Analog Devices, Inc.

     

 

LOGO   James A. Champy   79   2003  

Former Vice President of the Dell/Perot

Systems business unit of Dell, Inc.

  LOGO     NCGC (Chair)

 

LOGO   Anantha P. Chandrakasan       53   2019  

Dean of MIT’s School of Engineering

and Vannevar Bush Professor of Electrical

Engineering and Computer Science

  LOGO     NCGC

 

LOGO   Tunç Doluca   64   2021  

Former President and Chief Executive Officer of

Maxim Integrated Products, Inc.

    1  

 

LOGO   Bruce R. Evans   62   2015  

President of Evans Capital and

Senior Advisor & Former Chairman of the

Board of Summit Partners

  LOGO   1   AC

 

LOGO   Edward H. Frank   65   2014  

Co-Founder and Former

Chief Executive Officer of Cloud Parity

  LOGO   2   CC (Chair)

 

LOGO   Laurie H. Glimcher   70   2020  

Professor of Medicine at Harvard Medical School

and President and Chief Executive Officer of the

Dana-Farber Cancer Institute

  LOGO   1   CC

 

LOGO   Karen M. Golz   67   2018  

Former Global Vice

Chair of Ernst & Young

  LOGO   2   AC (Chair)

 

LOGO   Mercedes Johnson   67   2021  

Former Chief Financial Officer of Avago

Technologies (now Broadcom Inc.)

  LOGO   3   AC

 

LOGO   Kenton J. Sicchitano   77   2003  

Former Global Managing Partner of

PricewaterhouseCoopers LLP

  LOGO     NCGC

 

LOGO   Susie Wee   52   2019  

Former Senior Vice President and General

Manager of DevNet and CX Ecosystem

Success at Cisco Systems

  LOGO     CC

 

AC = Audit Committee CC = Compensation Committee NCGC = Nominating and Corporate Governance Committee

 

LOGO

 

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Table of Contents

Board Composition

The Board of Directors and the Nominating and Corporate Governance Committee are committed to ensuring that the Board is composed of a highly capable group of directors who collectively provide a significant breadth of experience, knowledge and ability to effectively represent the interest of shareholders, drive shareholder value and reflect our corporate values of integrity, honesty and adherence to high ethical standards.

 

50%    92%    36    9 of 12

of director

nominees added

in the last 5 years

  

overall attendance at

Board and Committee

meetings in fiscal 2021

  

Board and Committee

meetings in fiscal 2021

  

director nominees

are independent

Strong Board Diversity

The Board also believes that having directors with a mix of tenure helps transition the institutional knowledge of the more experienced directors while providing a broad, fresh set of perspectives. The Board has continued to make progress in broadening the experience, gender and tenure of our 12 director nominees.

 

 Average Tenure of Director Nominees
50%  

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

0–5 Years

 

25%

 

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

5–10 Years

 

25%

 

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

10+ Years

7.0 Years   

Average Tenure of

independent director nominees

 Diversity of Director Nominees

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

4 of 12

Directors are female, or 33%

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

3 of 12

Directors are ethnically diverse, or 25%

 

 

 

Board Profile

ADI’s directors contribute significant experience in the areas most relevant to overseeing the Company’s business and strategy. The below matrix provides a high-level summary of the experience and qualifications of our director nominees:

 

Name

   LOGO    LOGO    LOGO   

 

LOGO

   LOGO    LOGO    LOGO    LOGO    LOGO

Ray Stata

   LOGO    LOGO    LOGO     

 

    

 

   LOGO    LOGO     

 

    

 

Vincent Roche

   LOGO    LOGO    LOGO    LOGO     

 

   LOGO    LOGO    LOGO     

 

James A. Champy

    

 

   LOGO    LOGO     

 

    

 

   LOGO    LOGO     

 

   LOGO

Anantha P. Chandrakasan

    

 

   LOGO    LOGO     

 

    

 

   LOGO    LOGO     

 

    

 

Tunç Doluca

   LOGO    LOGO    LOGO    LOGO     

 

   LOGO    LOGO    LOGO     

 

Bruce R. Evans

   LOGO     

 

   LOGO    LOGO    LOGO    LOGO    LOGO     

 

   LOGO

Edward H. Frank

   LOGO    LOGO    LOGO    LOGO     

 

    

 

   LOGO     

 

   LOGO

Laurie H. Glimcher

   LOGO    LOGO    LOGO    LOGO     

 

    

 

   LOGO     

 

    

 

Karen M. Golz

    

 

    

 

    

 

   LOGO    LOGO    LOGO    LOGO    LOGO     

 

Mercedes Johnson

    

 

   LOGO    LOGO    LOGO    LOGO    LOGO    LOGO     

 

    

 

Kenton J. Sicchitano

    

 

    

 

    

 

   LOGO    LOGO    LOGO    LOGO     

 

    

 

Susie Wee

    

 

   LOGO    LOGO     

 

    

 

   LOGO    LOGO     

 

   LOGO

 

LOGO

 

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Table of Contents

INTEGRATED APPROACH TO

SHAREHOLDER ENGAGEMENT

We conduct extensive investor outreach throughout the year involving our senior management, investor relations, legal and human resources departments. This helps management and the Board understand and focus on the issues that matter most to our shareholders, so ADI can address them effectively.

ADI’s Year-Round Engagement Process

Engaging with Shareholders Year-round

 

 

In fiscal 2021, we conducted more than 200 unique engagements with our shareholders, including the majority of our top 25 shareholders, on a variety of topics

 

 

Continued ADI Uncovered webcast series discussing business strategy and secular growth trends of instrumentation & test, and space

 

 

Held multiple webcasts and attended multiple conferences to keep shareholders informed of Company developments; this included a special investor call regarding our capital allocation plans following the close of the Maxim Integrated acquisition

Enhancing Practices & Disclosures

 

 

During fiscal 2021, we reached out to our top 25 shareholders, representing approximately 45% of our outstanding shares, with an offer to engage with their corporate governance teams

 

 

Topics of interest during engagement included Board composition and risk oversight, Board evaluation and refreshment, corporate governance trends and environmental, social and governance considerations, including human capital management reporting

 

 

Shareholder and stakeholder feedback is integrated into boardroom discussions regularly and helps to inform the Board’s decisions and the Company’s practices and disclosures

Shareholder Topics & Company Response

In the spirit of continuous improvement, we have reviewed with our Board of Directors the key takeaways from these meetings with our shareholders with the goal of continuing to evolve our corporate governance practices to best meet the needs of the Company and our shareholders. Our dialogue has led to enhancements to our practices and disclosure, our Board believes are in the best interests of the Company and our shareholders. For example:

 

Topics of

Discussion

  Recent Outcomes of Engagement

Corporate Governance

 

 

 Continued focus on active Board refreshment and diversity; added one new female director to the Board, bringing female representation to more than 30% of the Board

 

 Increased our stock ownership guidelines for the CEO from 2x to 5x and for all other executive officers from 1x to 3x

 

 Appointed ADI’s first Chief Risk Officer and continued to enhance our risk oversight practices with quarterly cross-functional committee meetings, quarterly updates to the Audit Committee and regular updates to the Board

 

Corporate Social
Responsibility

 

 

 Continued to enhance ESG disclosure, publishing second annual Corporate Responsibility Report and EEO-1 data

 

 First U.S. technology company to deploy a sustainable finance instrument with an inaugural green bond issuance, followed by the issuance of a sustainability-linked revolving credit facility and a sustainability-linked bond offering

 

 Strengthened ADI’s commitment to reducing carbon emissions by setting a new goal to reach carbon neutrality by 2030 and net zero greenhouse gas emissions by 2050 or sooner

 

 

LOGO

 

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Table of Contents

EXECUTIVE COMPENSATION

Our executive compensation program is designed to attract, retain and motivate top executive talent and align the interests of our executive officers and our shareholders.

Compensation Best Practices

 

 

Our cash incentive bonus awards are based solely on our financial performance

 

 

A significant portion of equity awards are contingent upon long-term performance achievement

 

 

Incentive awards are tied to rigorous performance targets aligned with our corporate strategy

 

 

Payout for relative TSR-based awards capped at target for instances of negative absolute TSR

 

 

Clawback policy for all executive officers in the event of a material financial restatement due to fraud or willful misconduct

 

 

Specific policy regarding the grant dates of stock options, RSUs and other stock-based awards for our directors, executive officers and employees

 

 

Stock ownership guidelines for all officers and directors

 

 

Prohibit hedging and pledging of ADI securities

 

 

Annual “say on pay” vote

Overview of CEO Pay

Executive pay at ADI is strongly aligned with long-term company performance, with the majority of compensation delivered in long-term equity-based awards. The pay mix chart is based on target compensation consisting of the annual rate of base salary and short-term and long-term incentive targets approved by the Compensation Committee.

 

 

LOGO

 

(1)

The sum of the individual amounts may not equal the total due to rounding. See page 35 for further details regarding the calculations.

Fiscal 2021 Total Shareholder Return

2021 compensation actions for our executive officers, including our named executive officers, are supported by solid corporate performance and strong shareholder returns.

 

 

LOGO

 

Total Shareholder Return calculation is share price appreciation plus cumulative cash dividend
payments, and the effect of reinvesting those dividends into the security for the one-year period
ended October 30, 2021.

 

LOGO

 

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Table of Contents

Summary of Direct Compensation Elements

We provide a mix of compensation elements that support our goals of attracting and retaining top executive talent and incentivizing our key performance objectives in the short-and long-term.

 

 

  Pay Element

 

 

 

  LOGO     

 

  Purpose

  LOGO     

 

  Time Period

  LOGO     

 

  Performance Measures

 

 Base Salary

       

 

 Attract and retain executive talent

   

 

 Annual

     

 

 Variable Cash Incentive

 

   

 

 Motivate and reward our executive officers for achieving short-term Company financial objectives aligned with value creation

 

   

 

 Paid semi-annually, with quarterly corporate financial targets tied to corporate strategy of profitable growth

 

   

 

 50%: quarterly operating profit before taxes, or OPBT, margin

 

 50%: year over year revenue growth (measured quarterly)

 

 Minimum OPBT margin required for payout

 

 Annual
Long-Term Incentives

 

 

 TSR PRSUs – 25%

   

 

 Align executive officer and shareholder interest to drive superior relative TSR results

   

 

 Cumulative three-year period

   

 

 Relative TSR compared to comparator group

 Payouts capped at target if absolute TSR is negative

   

 

 Financial Metric PRSUs – 25%

   

 

 Align executive officer and shareholder interests with long-term profitability

   

 

 One-year, two-year cumulative and three-year cumulative time periods

   

 

 Operating profit

   

 

 Stock Options – 25%

   

 

 Align executive officer and shareholder interests in absolute stock price appreciation

   

 

 Four year graded vesting

 10 year term

   

 

 Absolute stock price appreciation

   

 

 RSUs – 25%

   

 

 Attract and retain key executives

   

 

 Four year graded vesting

   

 

 None

OPBT = Operating Profit Before Taxes.    TSR = Total Shareholder Return

 

Historical “Say on Pay” Votes

 

Our pay programs have a history of strong shareholder support. Our Compensation Committee believes the results of last year’s “Say on Pay” vote and input from our shareholder engagement affirmed our shareholders’ support of our company’s executive compensation program. This informed our decision to maintain a consistent overall approach in setting executive compensation in fiscal 2021.

  LOGO            

Please see the Compensation Discussion and Analysis section beginning on page 32 of this proxy statement for a more detailed
description of our executive compensation program, philosophy and design.

 

LOGO

 

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Table of Contents

CORPORATE RESPONSIBILITY

Our Approach

As a global company, we are passionately driven to be a leading responsible corporate citizen — “engineering good” through the relentless pursuit of innovative technologies in order for our customers to be more successful in a better connected, greener and healthier future.

We believe sustainability means delivering holistic solutions that make a positive, demonstrable impact on the world. The following core pillars are the foundation of our strategy for achieving our sustainability goals:

 

1.

Protect and Regenerate the Environment: Deliver solutions that reduce our carbon and environmental footprint, as well as restore and replenish our natural resources and ecosystems

 

2.

Empower People: Create opportunities for people and make a meaningful impact on their lives — both at ADI and in the broader community

 

3.

Impact Through Engagement: Leverage the ingenuity of ADI employees to drive positive change and help solve real-world problems that benefit our lives, communities and planet

Sustainability Governance

Our Chief Executive Officer, alongside a senior management team that includes our Chief People Officer, Chief Financial Officer, Chief Legal & Risk Officer, Senior Vice President, Automotive & Energy, Communications and Aerospace Group and our recently appointed Senior Director, ESG and Sustainability Programs, leads our sustainability agenda. Our Chief Legal & Risk Officer also chairs our Enterprise Risk Management Committee, which oversees risk management on a company-wide basis.

Our Board of Directors receives regular updates from management about our progress against our sustainability initiatives and regarding areas of material risk to ADI. Our Nominating and Corporate Governance Committee has specific oversight responsibility for our ESG-related programs and our Audit Committee oversees enterprise risk management.

Fiscal 2021 Highlights

 

Disclosure & Transparency

 

Our Environment

 

Our People & Society

 

 Published the company’s second Corporate Responsibility Report

 

 Our Corporate Responsibility Report is prepared in accordance with the Global Reporting Initiative (GRI): Core Option and we report separately to the CDP Climate Change and Water Security projects

 

 Aligned our Corporate Responsibility Report with two additional sustainability frameworks (TCFD and SASB), and we will continue to assess other evolving frameworks

 

 Published online our most recent EEO-1 reports in the interest of increased transparency

 

 

 Science Based Targets initiative, SBTi, approved our science-based emission reductions targets

 

 Set goals to become carbon neutral by 2030 and achieve net zero emissions by 2050 or sooner, joining the U.N. Global Compact and their campaign, Business Ambition for 1.5°C

 

 First U.S. technology company to deploy a sustainable finance instrument with an inaugural green bond issuance, followed by the issuance of a sustainability-linked revolving credit facility and a sustainability-linked bond offering

 

 Continued to innovate and develop solutions with meaningful environmental benefits, including our Battery Management Solutions, Energy Storage Systems and leveraged our intelligent sensing systems to make data centers greener

 

 

 Grew ADI’s female engineering population1 by 20% over the last 3 years, experienced 5% YoY growth in ‘FY21

 

 Partnered with Historically Black Colleges and Universities (HBCUs) to enhance their engineering curriculum and research efforts

 

 Provided $1.8 million in community grants and matched $720,000 in employee donations in FY’21 through the Analog Devices Foundation, supporting 900+ unique organizations

 

 Supported Gavi, the Vaccine Alliance, with a $1 million donation for COVAX efforts to help ensure people in all corners of the world have access to COVID-19 vaccines

 

(1)

Includes exempt engineering roles globally

 

LOGO

 

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Table of Contents

Innovating for Environmental Sustainability

Our technologies reduce greenhouse gas emissions and waste, contributing to a lower carbon economy. ADI views achieving environmental sustainability as not only a responsibility for businesses and a necessity for a healthy planet, but also a business opportunity for energy efficient products.

 

Electrification

 

Communications

 

Industry 4.0

 

LOGO

 

 

LOGO

 

 

LOGO

Electric Vehicles (EVs)

 

Data Centers

 

Factory Automation

 

  ADI’s battery management
systems enable EVs to achieve
longer drive range and less
charge time at lower costs

 

  Impact: EVs equipped with
ADI’s BMS solutions reduced
CO2 emissions by nearly
100 million tons in 2021

 

 

  ADI’s power solutions for high
density servers, storage and
network equipment improve
energy efficiency and operating
costs

 

  Impact: ADI is on the leading
edge of transition to 48 volts,
delivering systems solutions
that reduce wasted power
by 15% compared with the
industry standard

 

 

  Precision sensing and drive
technologies from ADI enable
variable-speed motors to operate
factory lines with more efficient
energy usage

 

  Impact: 40% reduced motor
energy consumption in factory
lines using ADI’s precision signal
chain and power management
technology

 

LOGO

 

 

LOGO

 

 

 

LOGO

Renewable Energy

 

5G Networks

 

Predictive Maintenance

 

  Energy Storage Systems capture
renewable energy, store and
redeploy it to provide efficient
grid distribution and help EV
charging stations run off
cleaner energy

 

  Impact: 30% more battery life
in ADI’s energy storage systems,
combining accuracy with
efficient power conversion
and isolation capabilities

 

 

  Exponential growth in network
traffic would increase emissions
to 600M tonnes by 2030 if
5G networks weren’t 90%
more energy efficient than 4G
networks

 

  Impact: 540M tonnes of avoided
emissions. ADI’s transceivers and
algorithms allow miniaturization
that enables beamforming and
densification

 

 

  ADI’s AI-driven sensing
interpretation platform
OtoSense® provides real-time
machine health insights at the
edge

 

  Impact: 98% reduced energy
consumption enabled by ADI-OtoSense® edge computing,
compared to traditional
services using a cloud

 

LOGO

 

10


Table of Contents

Proposal 1

 

LOGO

ELECTION OF DIRECTORS

 

 

Our Board of Directors unanimously recommends that you vote   LOGO FOR   the election of each of the below nominees.

Election Process

All members of our Board of Directors are elected annually by our shareholders and currently consists of 13 directors, of whom 10 are deemed to be “independent directors” as defined and in accordance with the Nasdaq Stock Market, Inc. Marketplace Rules, or Nasdaq Rules. Tunç Doluca and Mercedes Johnson joined our Board on August 26, 2021, in connection with our acquisition of Maxim Integrated. On January 18, 2022, Dr. Little informed our Nominating and Corporate Governance Committee of his intent to retire from our Board and not stand for re-election. Consequently, Dr. Little’s term as a director will expire at the Annual Meeting on March 9, 2022. Our Nominating and Corporate Governance Committee recommended, and our Board has determined, to nominate all other current directors for reelection in 2022. As such, at the Annual Meeting, our shareholders will have an opportunity to vote for each of the 12 nominees listed below. If the current nominees are elected, we will have 12 members serving on our Board, of whom 9 are deemed to be “independent directors” in accordance with Nasdaq Rules, and the number of directors composing our Board will be reduced to 12. The persons named in the proxy card, upon receipt of a properly executed proxy, will vote for each of these nominees, unless you instruct them to vote otherwise on the proxy card (whether executed by you or through Internet or telephonic voting). Each of the nominees has indicated his or her willingness to serve, if elected. However, if any or all of the nominees should be unable or unwilling to serve, the proxies may be voted for a substitute nominee designated by our Board of Directors or our Board of Directors may reduce the number of directors.

Director Criteria, Qualifications and Experience

The Board of Directors is committed to ensuring that it is composed of a highly capable group of directors who collectively span a broad range of leadership skills and provide a significant breadth of experience, knowledge and abilities, relevant to the Company’s strategic vision, long-term objectives and business activities to effectively represent the interests of shareholders, exercise sound judgment and reflect our corporate values of integrity, honesty and adherence to high ethical standards. Key factors that the Board of Directors and the Nominating and Corporate Governance Committee consider when selecting director nominees include:

 

 Diversity of Director Nominees

 

  LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

 

4 of 12

 Directors are female, or 33%

 

  LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

 

3 of 12

 Directors are ethnically diverse, or 25%

While the Board of Directors does not have a specific diversity policy, our Corporate Governance Guidelines provide that gender, racial, and ethnic diversity, consistent with the requirement for relevant and diverse experience, skills, and industry familiarity, are important search criteria.

 Independence of Director Nominees

 

  LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

 

9 of 12

 Directors are Independent, or 75%

Under Nasdaq Rules, a majority of the members of our Board must be independent directors. To be considered independent, a director must be independent as determined under applicable Nasdaq Rules, and in the Board’s judgment, the director must not have a relationship with the Company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

 

 

 

11


Table of Contents

 Experience of our Director Nominees

    

Experience/Expertise

  Number of Directors

CEO Experience

Experienced leadership of complex global businesses

    6      LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

Industry Experience

Insight into key issues affecting our Company

    9      LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

Technology Leadership

Expertise and thought leadership relating to technological innovation in our industry and our end markets

    10      LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

Governance/Public Company Board Expertise

Knowledge of public company governance issues and policies to enhance Board practices

    8      LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

Financial Expertise

Oversight of our company’s audit function and preparation of financial statements and capital market expertise

    4      LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

International Experience

Insight into the many factors involved in overseeing management of our Company’s global footprint

    10      LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

Strategy Experience

Oversight of management’s development and implementation of strategic priorities

    12      LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

Risk Management Expertise

Oversight of risks facing our Company and a comprehensive approach to risk management

    3      LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

Cybersecurity Expertise

Oversight of our Company’s efforts to maintain our customers’ trust and protect the security of their data

    4      LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO   LOGO

The following paragraphs provide information as of the date of this proxy statement about each nominee. The information presented includes information each director nominee has given us about his or her age, all positions he or she holds, his or her principal occupation and business experience, and the names of other publicly-held companies of which he or she currently serves as a director or has served as a director during the past five years. In addition to the information presented below regarding each nominee’s specific experience, qualifications, attributes and skills that led our Board of Directors to the conclusion that he or she should serve as a director, we also believe that all of our director nominees have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to ADI and our Board of Directors. Finally, we value their significant experience on other public company boards of directors and board committees.

Information about the number of shares of common stock beneficially owned by each director nominee appears below under the heading “Security Ownership of Directors and Executive Officers.” See also “Certain Relationships and Related Transactions.” There are no family relationships among any of the directors and executive officers of ADI.

 

 

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Ray Stata

 

Outgoing Chair of the Board of Directors

 

Director since: 1965        Age: 87        Committee(s): None

 

Professional Experience and Background

Mr. Stata has served as our Chair of the Board of Directors since 1973 and served as an executive officer of ADI from its inception until April 2012. Mr. Stata will be stepping down as the Chair of our Board of Directors at the Annual Meeting on March 9, 2022. Mr. Stata served as our Chief Executive Officer from 1973 to November 1996 and as our President from 1971 to November 1991.

 

Key Qualifications and Expertise

Mr. Stata has more than 50 years of experience and leadership in the semiconductor industry, including as our founder, our Chair for 44 years and formerly as our President for 20 years.

 

Other Public Company Boards:

 

Current: None                Past 5 Years: None

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Vincent Roche

 

Incoming Chair of the Board of Directors and Chief Executive Officer

 

Director since: 2013        Age: 61        Committee(s): None

 

Professional Experience and Background

Mr. Roche has served as President of ADI since 2012 and was appointed Chief Executive Officer and elected as a Director in 2013. At the Annual Meeting, Mr. Roche will also become the Chair of our Board. Mr. Roche’s tenure as CEO began in 2013 through the end of fiscal 2021, the Company’s total shareholder returns has increased 371% (vs. S&P total shareholder return of 237% over the same time period), our market capitalization has increased by more than $80 billion and our revenue has more than doubled to $7.3 billion. Mr. Roche began his career at ADI in 1988 and has served in key positions spanning corporate leadership, worldwide sales, strategic marketing, business development, and product management over his more than 30-year tenure at ADI. Mr. Roche was recognized by Forbes in 2019 as one of America’s Most Innovative Leaders.

 

Key Qualifications and Expertise

Mr. Roche’s leadership role in the Company and his deep knowledge of the Company’s products, markets, customers, culture and organization.

 

Other Public Company Boards:

 

Current: None                Past 5 Years: Acacia Communications, Inc. (until March 2021)

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James A. Champy

 

Presiding Director

 

Independent Director since: 2003       Age: 79

 

Committee(s): Nominating and Corporate Governance

 

Professional Experience and Background

Mr. Champy retired in 2010 as Vice President of the Dell/Perot Systems business unit of Dell, Inc., a computer and technology services company. He was previously a Vice President and the Chairman of Consulting at Perot Systems Corporation from 1996 to November 2009. He served as a director of Perot Systems Corporation from 1996 to 2004. Mr. Champy is the author of several business books and is a Life Member of the MIT Corporation, the governing body of the Massachusetts Institute of Technology.

 

Key Qualifications and Expertise

Mr. Champy’s expertise in corporate strategy development and his organizational acumen.

 

Other Public Company Boards:

 

Current: None                Past 5 Years: None

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Anantha P. Chandrakasan

 

Independent Director since: 2019         Age: 53

Committee(s): Nominating and Corporate Governance

 

Professional Experience and Background

Dr. Chandrakasan has served as the Dean of the School of Engineering at the Massachusetts Institute of Technology, or MIT, a private research university, since July 2017, and is the Vannevar Bush Professor of Electrical Engineering and Computer Science. In addition, Dr. Chandrakasan co-chairs the MIT–IBM Watson AI Lab, the MIT-Takeda Program, and the MIT and Accenture Convergence Initiative for Industry and Technology. Dr. Chandrakasan currently serves on the Board of Directors of the Singapore-MIT Alliance for Research and Technology, or SMART. Dr. Chandrakasan joined the MIT faculty in 1994. He was the director of the Microsystems Technology Laboratories (MTL) from 2006 until he became the head of the Department of Electrical Engineering and Computer Science in 2011, a position that concluded with his appointment as Dean in July 2017. He is an Institute of Electrical and Electronics Engineers (IEEE) fellow, and was elected to the National Academy of Engineering in 2015 and to the American Academy of Arts & Sciences in 2019.

 

Key Qualifications and Expertise

Dr. Chandrakasan’s deep understanding of complex technologies and experience driving innovation.

 

Other Public Company Boards:

 

Current: None                Past 5 Years: None

  LOGO

 

   

Tunç Doluca

 

Director since: 2021        Age: 64

Committee(s): None

 

Professional Experience and Background

Mr. Doluca has over 30 years of executive leadership and technical experience in the semiconductor industry. He served as a director of Maxim Integrated, as well as its President and Chief Executive Officer, from January 2007 to August 2021, when Analog Devices completed its acquisition of Maxim Integrated. Mr. Doluca joined Maxim Integrated in 1984 as a Member of Technical Staff. While at Maxim Integrated, Mr. Doluca personally designed over 40 products and holds 11 patents. In 1994, he became the leader of Maxim Integrated’s first vertical business unit for portable power-management products. Mr. Doluca currently serves on the Board of Trustees of University of California, Santa Barbara Foundation.

 

Key Qualifications and Expertise

Mr. Doluca’s over 30 years of executive leadership and technical experience in the semiconductor industry, and his valuable perspectives directly relevant to our business.

 

Other Public Company Boards:

 

Current: Western Digital Corporation    Past 5 Years: Maxim Integrated Products, Inc. (until 2021)

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Bruce R. Evans

 

Independent Director since: 2015       Age: 62       Committee(s): Audit

 

Professional Experience and Background

Mr. Evans has served as the President of Evans Capital, a private investment fund, since he founded it in March 2019. Mr. Evans has also served in various positions with Summit Partners, a growth equity and venture capital focused alternative investments firm, since 1986, including most recently as Senior Advisor, a role he has held since 2018. From 2018 to March 2019, he served as Chairman of Summit Partners’ board and as a Senior Advisor to the firm. From 2011 to December 2017, he served as Managing Director and Chairman of Summit Partners’ board. From 1999 to 2011, he was one of Summit Partners’ Co-Managing Partners. During his 36 years with Summit Partners, Mr. Evans has served as a member of the boards of directors of over 35 technology and other growth industry companies , including 14 public companies. In addition, Mr. Evans is Chairman of the Vanderbilt University Board of Trust and the former Chairman of Vanderbilt’s Investment Committee.

 

Key Qualifications and Expertise

Mr. Evans’ financial and management expertise, including his investing experience in the technology sector and his experience with acquisitions and other transactions.

 

Other Public Company Boards:

 

Current: Casa Systems, Inc.                Past 5 Years: None

  LOGO

 

   

Edward H. Frank

 

Independent Director since: 2014       Age: 65     Committee(s): Compensation

 

Professional Experience and Background

Dr. Frank was most recently co-founder and CEO of Cloud Parity, a voice of the customer startup, from January 2014 through August 2016. From May 2009 to October 2013, Dr. Frank held the position of Vice President, Macintosh Hardware Systems Engineering at Apple Inc., a company that designs, manufactures and markets electronic devices. Prior to his tenure at Apple, Dr. Frank served as Corporate Vice President, Research and Development, of Broadcom Corp. Dr. Frank was founding CEO of Epigram, Inc., a developer of integrated circuits and software for home networking, which Broadcom acquired in 1999, and was a Distinguished Engineer at Sun Microsystems, Inc. Dr. Frank is vice-chair of the Carnegie Mellon University Board of Trustees, where he has been a Trustee since 2000, and since July 2017, has been Executive Director (pro bono) of Metallica’s All Within My Hands Foundation. He is a member of the National Academy of Engineering and a Fellow of the IEEE.

 

Key Qualifications and Expertise

Dr. Frank’s substantial experience in the design, manufacture, sale and marketing of semi-conductors for a broad set of markets, including many of the markets serviced by the Company and his extensive executive leadership experience.

 

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Other Public Company Boards:  
Current: Marvell Technology, Inc.   Past 5 Years: Cavium, Inc. (until 2018)
              SiTime Corp.                          Amesite, Inc. (until 2020)
                         Quantenna Communications, Inc  (until 2018)

 

 

 

 

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Laurie H. Glimcher

 

Independent Director since: 2020       Age: 70       Committee(s): Compensation

 

Professional Experience and Background

Dr. Glimcher has served as a Professor of Microbiology and Immunology at Harvard Medical School since May 2017, the Richard and Susan Smith Professor of Medicine at Harvard Medical School and Dana-Farber Cancer Institute since October 2016, an Attending Physician, Department of Cancer Immunology and Virology at Dana-Farber Cancer Institute since October 2016 and the President and Chief Executive Officer of the Dana-Farber Cancer Institute since September 2016. In addition to a number of senior leadership roles held at both Harvard Medical School and Harvard School of Public Health from 1984 to 2011 and from October 2016 to present, she also served as the Stephen and Suzanne Weiss Dean and Professor of Medicine of Weill Cornell Medicine and Provost for Medical Affairs of Cornell University from January 2012 to August 2016. She is a member of the Board of Trustees at the Dana-Farber Cancer Institute and a member of the US National Academy of Sciences, the National Academy of Medicine, the American Academy of Arts and Sciences and the American Philosophical Society.

 

Key Qualifications and Expertise

Dr. Glimcher’s scientific and public health expertise as well as diversity of technical skills and experience as a physician, scientist and professor.

 

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Other Public Company Boards:              
Current:  GlaxoSmithKline plc   Past 5 Years:     Bristol-Myers Squibb Company (until 2017)
                             Waters Corporation (until 2020)

 

   

Karen M. Golz

 

Independent Director since: 2018       Age: 67       Committee(s): Audit

 

Professional Experience and Background

Ms. Golz is a retired partner of Ernst & Young, or EY, a public accounting firm, where she held various senior leadership positions during her tenure at the firm, including most recently, Global Vice Chair, Japan from July 2016 to 2017 and prior thereto, from July 2010 to 2016, as Global Vice Chair, Professional Practice. Ms. Golz also served on EY’s Global Risk Management Executive Committee, which was charged with risk management across EY’s global network, from 2008 to 2016. Ms. Golz currently serves as senior advisor to The Boston Consulting Group’s Audit and Risk Committee, a role she has held since August 2017, and as a principal for K.M. Golz Associates, LLC, a consulting services company, since August 2017. She also sits on the Board of Trustees of the University of Illinois Foundation. Ms. Golz is also a National Association of Corporate Directors (NACD) Board Leadership Fellow.

 

Key Qualifications and Expertise

Ms. Golz’s accounting and audit expertise and extensive experience helping large organizations successfully navigate the complexities of international trade and regulation.

 

Other Public Company Boards:

 

Current: Aspen Technology, Inc.                Past 5 Years: None

              iRobot Corporation

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Mercedes Johnson

 

Independent Director since: 2021     Age: 67     Committee(s): Audit

 

Professional Experience and Background

Ms. Johnson is a seasoned executive with more than 20 years of experience in finance, accounting, corporate development, corporate governance, management, and operations. Ms. Johnson served as interim Chief Financial Officer (CFO) of Intersil Corporation from April 2013 to September 2013 and as Senior Vice President and Chief Financial Officer of Avago Technologies Limited (now Broadcom Inc.) from December 2005 to August 2008. Prior to joining Avago, Ms. Johnson was Senior Vice President, Finance, of Lam Research Corporation from June 2004 to January 2005 and Chief Financial Officer of Lam from May 1997 to May 2004.

 

Key Qualifications and Expertise

Ms. Johnson’s valuable industry experience as a former senior financial executive at semiconductor and semiconductor equipment companies as well as current directorships at global technology companies.

 

Other Public Company Boards:

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Current: Teradyne, Inc.   Past 5 Years: Juniper Networks, Inc. (until 2019)
              Synopsys, Inc.                          Micron Technology, Inc. (until 2019)
              Millicom International Cellular SA                          Intersil Corporation (until 2017)
                         Maxim Integrated Products, Inc. (until 2021)

 

   

Kenton J. Sicchitano

 

Independent Director since: 2003       Age: 77       Committee(s): Nominating and Corporate Governance

 

Professional Experience and Background

Mr. Sicchitano retired from PricewaterhouseCoopers LLP, or PwC, a public accounting firm, in July 2001. At the time of his retirement, Mr. Sicchitano was the Global Managing Partner of Independence and Regulatory Matters for PwC. Mr. Sicchitano joined Price Waterhouse LLP, a predecessor firm of PwC, in 1970 and became a partner in 1979. During his 31-year tenure with PwC, Mr. Sicchitano held various positions, including the Global Managing Partner of Audit/Business Advisory Services and the Global Managing Partner responsible for Audit/Business Advisory, Tax and Financial Advisory Services.

 

Key Qualifications and Expertise

Mr. Sicchitano’s extensive experience with public and financial accounting matters for complex global organizations.

 

Other Public Company Boards:

 

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Current: None               Past 5 Years: PerkinElmer, Inc. (until 2017)  
                         MetLife, Inc. (until 2017)

 

 

 

 

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Susie Wee

 

Independent Director since: 2019       Age: 52       Committee(s): Compensation

 

Professional Experience and Background

Dr. Wee is the former Senior Vice President and General Manager of DevNet and CX Ecosystem Success at Cisco Systems Inc., or Cisco, a technology company, a position she held from October 2019 to August 2021. She founded and led DevNet, Cisco’s developer program, beginning in 2013. Dr. Wee began working at Cisco in April 2011, and has held leadership roles including Senior Vice President & Chief Technology Officer of DevNet from October 2018 to October 2019, Vice President & Chief Technology Officer of DevNet from October 2013 to October 2018, Vice President & Chief Technology Officer of Networked Experiences from October 2012 to October 2013, and Vice President & Chief Technology and Experience Officer of Cisco’s Collaboration Technology Group from April 2011 to October 2012. Previously, Dr. Wee had a 15-year career at Hewlett Packard Enterprise Company, a technology company, where she held a number of technical and leadership roles, including Vice President and General Manager of the HP Experience Software Business and Lab Director at HP Labs. Dr. Wee is an IEEE fellow and serves on the visiting committee of the MIT Electrical Engineering and Computer Science department.

 

Key Qualifications and Expertise

Dr. Wee’s extensive experience in information technology and application development, together with her established track record of driving software innovation at global technology companies.

 

Other Public Company Boards:

 

Current: None                 Past 5 Years: None

  LOGO

 

 

Board Diversity Matrix (as of October 30, 2021)

Total Number of Directors: 13

 

 

 

    Female           Male       Non-Binary Did Not
Disclose Gender

Part I: Gender Identity

 

 

 

 

Directors

4 9 0 0

Part II: Demographic Background

 

 

 

 

African American or Black

0 0 0 0

Alaskan Native or Native American

0 0 0 0

Asian

1 1 0 0

Hispanic or Latinx

1 0 0 0

Native Hawaiian or Pacific Islander

0 0 0 0

White

2 8 0 0

Two or More Races or Ethnicities

0 0 0 0

LGBTQ+

0 0 0 0

Did Not Disclose Demographic Background

0 0 0 0

 

 

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CORPORATE GOVERNANCE

Board Policies & Practices

We have long believed that good corporate governance is important to ensure that Analog Devices is managed for the long-term benefit of our shareholders. We periodically review our corporate governance policies and practices and compare them to those suggested by various authorities in corporate governance and the practices of other public companies. As a result, we have adopted the following policies and procedures that we believe are in the best interests of Analog Devices and our shareholders:

 

Policy/Practice

  Summary

Corporate

Governance Guidelines

  Our Board of Directors has adopted Corporate Governance Guidelines for our Company that establish a common set of expectations to assist the Board and its committees in performing their duties. The Board reviews these Guidelines at least annually, and updates them as necessary to reflect changing regulatory requirements and evolving practices.

Declassified

Board of Directors

  We have a declassified Board of Directors and our bylaws provide that each director will serve for a term ending on the date of the annual meeting following the one at which such director was elected. All of our directors will stand for election for terms expiring at the next annual meeting of shareholders.

Majority Voting

for Election

of Directors

  Our bylaws provide for a majority voting standard in uncontested director elections, so a nominee is elected to the Board of Directors if the votes “for” that director exceed the votes “against” (with abstentions and broker non-votes not counted as for or against the election). If a nominee does not receive more “for” votes than “against” votes, the director must offer his or her resignation, which the Board of Directors must determine whether to accept and publicly disclose that determination.

Executive

Sessions

  At least twice per year, our Board of Directors holds executive sessions with our independent, non-employee directors, as defined under the Nasdaq Rules. Our Presiding Director, James A. Champy, presides at these independent director executive sessions. In addition, the committees of our Board of Directors also regularly hold executive sessions with their advisors without management present.

No Hedging and
No Pledging

Policy

  We prohibit all hedging transactions or short sales involving Company securities by our directors and employees, including our executive officers. Since January 2013, we have prohibited our directors and executive officers from holding any Company securities in a margin account, and from any future pledging of their Company securities as collateral for a loan.

Equity Award

Grant Date
Policy

  We do not time or select the grant dates of any stock options or stock-based awards in coordination with our release of material non-public information, nor do we have any program, plan or practice to do so. In addition, the Compensation Committee has adopted specific written policies regarding the grant dates of stock option and stock-based awards made to our directors, executive officers and employees. See “—Director Compensation” and “INFORMATION ABOUT EXECUTIVE COMPENSATION—Compensation Discussion and Analysis—Equity Award Grant Date Policy” below for more information.

Executive

Stock
Ownership

Guidelines

  Under our recently updated guidelines, the target stock ownership levels are five times annual base salary for the Chief Executive Officer and three times annual base salary for other executive officers and any Senior Vice President reporting to the Chief Executive Officer, which we collectively refer to as, the Leadership Team. The Chief Executive Officer has four years from the date of his appointment as CEO to achieve his targeted level. Members of the Leadership Team other than the CEO have five years from the date he or she becomes part of the Leadership Team to achieve their targeted level. Shares subject to unexercised options, whether or not vested, and unvested performance-based RSUs whose performance have not yet been certified by the Compensation Committee will not be counted for purposes of satisfying these guidelines. RSUs and restricted stock (whether or not vested) and unvested performance-based RSUs whose performance has been certified by the Compensation Committee are counted for purposes of satisfying the guidelines. All members of the Leadership Team, other than Mses. Sacks and Asgeirsson, who first joined ADI in fiscal 2021, were in compliance with our stock ownership guidelines as of the end of fiscal 2021. Mses. Sacks and Asgeirsson are expected to be in compliance with our stock ownership guidelines within the first five years of their appointment to the Leadership Team.

Clawback

Policy

  Our clawback policy provides that in the event of a material restatement of our financial results, the Compensation Committee may, as appropriate, seek to recover from any executive officer whose fraud or willful misconduct caused or partially caused such restatement, all or a portion of the performance-based compensation awarded to such executive officer that was in excess of the amount that would have been awarded based on the restated financial results.

Adoption of Proxy Access Right

  Our Board of Directors approved a bylaw amendment implementing proxy access, which allows shareholders that meet standard eligibility requirements to nominate and include in the Company’s proxy statement director candidates for election.

Code of Business Conduct and

Ethics

  We have a Code of Business Conduct and Ethics which details Analog Devices’ commitment to conducting business ethically, in compliance with the law, and in a way that reflects our deeper values. Our Board of Directors recently approved updates to the Code to further detail our commitment to safeguarding personal data, better explain our whistleblower reporting process, and make other updates consistent with best practices. The new Code provides greater transparency on our enhanced whistleblower process. Specifically, we affirm our commitment to a consistent and transparent review process, prompt and thorough investigations, assignment of neutral investigators, communication about investigation outcomes, and implementation of appropriate corrective actions.

Code of

Corporate Social Responsibility

 

 

We recently implemented a new Code of Corporate Social Responsibility that details Analog Devices’ policies for itself and its suppliers in the areas of Labor and Human Rights, Health and Safety, Environmental, Ethics, Management Systems and Data Privacy.

 

 

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You can access our bylaws, the current charters for our Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Corporate Development Committee, our Corporate Governance Guidelines, our Code of Business Conduct and Ethics, our Related Person Transaction Policy, our Stock Option and Stock-Based Award Grant Date Policy and other governance documents and corporate policies at investor.analog.com/corporate-governance.cfm or by writing to:

Investor Relations Department

Analog Devices, Inc.

One Analog Way

Wilmington, Massachusetts 01887

Phone: 781-461-3282

Email: investor.relations@analog.com

Board of Directors Leadership Structure

The Board is responsible for broad corporate policy and overall performance of the Company through oversight of management. Among other duties, the Board appoints the Company’s executive officers, assigns to them responsibility for management of the Company’s operations, and reviews their performance. The Board of Directors regularly reviews our Board leadership structure and it is recognized that the combination or separation of the CEO and Chair roles are driven by the needs of the Company at a particular time. Currently, the roles are separate with Mr. Stata serving as the non-executive Chair and Mr. Roche serving as the CEO. In January 2022, in connection with Mr. Stata’s decision to step down as our Board Chair in 2022, our Board determined to appoint Mr. Roche to the role of Chair, in addition to his role as CEO, in connection with the Annual Meeting. Mr. Champy has served as our independent Presiding Director since 2010. In accordance with best practices, the Presiding Director has significant responsibilities, including:

 

 

Leadership of executive sessions of the independent directors or other meetings at which the Chair is not present;

 

 

Authority to call meetings of the independent directors;

 

 

Coordinating with the Chair to call Board meetings;

 

 

Overseeing the annual Board evaluation process;

 

 

Serving as a liaison between the Chair and the independent directors, as required;

 

 

Coordinating with the Chair to set and approve the Board schedule and agenda to assure sufficient time for discussion of all agenda items;

 

 

Determining the appropriate materials to be provided to the Board;

 

 

Serving as the focal point for shareholder communications with the independent directors and requests for consultation addressed to independent members of the Board;

 

 

The ability to retain outside professionals on behalf of the Board as the Board may determine is necessary or appropriate; and

 

 

Such other functions as the Board may direct from time to time.

Board of Directors Meetings and Committees

The Board of Directors has responsibility for reviewing our overall performance, rather than day-to-day operations. The Board of Directors’ primary responsibility is to oversee the management of the Company and, in doing so, serve the best interests of the Company and its shareholders. The Board of Directors provides for the succession of the Chief Executive Officer, nominates for election at annual shareholder meetings individuals to serve as directors of Analog Devices, and elects individuals to fill any vacancies on the Board of Directors. It reviews corporate objectives and strategies, and evaluates and approves significant policies and proposed major commitments of corporate resources. It oversees the Company’s risk management programs and participates in decisions that have a potential major economic impact on Analog Devices. Management keeps the directors informed of Company activity through regular written reports and presentations at Board and committee meetings.

 

 

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The Board of Directors met ten times and its committees collectively held 26 meetings in fiscal 2021 (including by telephone and video conference). During fiscal 2021, overall attendance at Board and committee meetings was 92% and each of our incumbent directors attended 90% or more of the total number of meetings of the Board of Directors and the committees on which he or she served. The Board of Directors has standing Audit, Compensation, Nominating and Corporate Governance, and Corporate Development Committees. With the exception of the Corporate Development Committee, of which Vincent Roche is Chair, the members of all three other committees are comprised of independent, non-employee directors. Each committee has a charter that has been approved by the Board of Directors and is reviewed annually. In addition, each committee conducts an annual self-evaluation of its own performance and the performance of its members in accordance with its respective Committee charter. Each director also undertakes an evaluation of the Board more generally. Our Presiding Director, working with our Chief Legal Officer, also has conversations with each Board member designed to assess the competencies and skills each director brings to the Board. Summaries of the evaluations are presented to the Board. Mr. Roche is the only current director who is, or has been in the past three years, an employee of Analog Devices. Mr. Stata does not serve on any standing Board committee and Messrs. Roche and Stata do not participate in the portion of any Board or committee meeting during which their compensation is evaluated. Prior to Mr. Doluca having joined the Board, the independent directors met in executive session without Messrs. Stata or Roche at two Board meetings during fiscal 2021.

Our Corporate Governance Guidelines set forth our policy that directors are expected to attend annual meetings of shareholders. All of our directors attended our virtual 2021 Annual Meeting of Shareholders.

Audit Committee

The current members of our Audit Committee are Mses. Golz (Chair) and Johnson and Mr. Evans. The Board of Directors has determined that each of Mses. Golz and Johnson and Mr. Evans qualifies as an “audit committee financial expert” under the rules of the U.S. Securities and Exchange Commission, or SEC, and is independent as defined under the Nasdaq Rules and the independence requirements under Rule 10A-3(b)(1) of the Exchange Act. In addition, our Board of Directors has determined that each member of the Audit Committee is able to read and understand financial statements, including the Company’s consolidated balance sheet and its consolidated statements of income, comprehensive income, shareholders’ equity and cash flows and related notes as required under the Nasdaq Rules. The Board of Directors has certified that it has at least one member of the Audit Committee who has past employment experience in finance or accounting as required by the Nasdaq Rules. Our Audit Committee charter provides that no member of the Audit Committee may serve on the audit committee of more than two other public companies in addition to ADI, unless approved by the Board of Directors. Ms. Johnson, who first joined the Board in August 2021, is a member our Audit Committee and is also a member of the audit committees of three other public companies, serving as the audit committee chair for two of those public companies. Our Audit Committee considered Ms. Johnson’s additional board and audit committee service and whether or not such service created an actual or potential conflict with her service on the ADI Board and Audit Committee. Having determined that no such conflict existed, our Audit Committee recommended that our Board approve, and our Board did approve, Ms. Johnson’s service on up to four public company boards, inclusive of the Company’s Board. Neither Ms. Golz nor Mr. Evans serve on the audit committees of more than two other public companies in addition to ADI.

The primary purpose of the Audit Committee is to assist the Board of Directors’ oversight of (i) the integrity of our financial statements and the Company’s systems of internal control over financial reporting and disclosure controls and procedures, (ii) the qualifications and independence of our independent registered public accounting firm, (iii) the performance of our internal audit function and independent registered public accounting firm, and (iv) the process relating to internal enterprise risk management and control systems. The Audit Committee has the authority to engage any independent legal, accounting and other advisors that it deems necessary or appropriate to carry out its responsibilities. These independent advisors may be the regular advisors to the Company. The Audit Committee is empowered, without further action by the Board of Directors, to cause the Company to pay the compensation of those advisors as established by the Audit Committee. The Audit Committee selected and appointed Ernst & Young LLP, our independent registered public accounting firm, and did not retain any other advisors during fiscal 2021. The Audit Committee met eight times during fiscal 2021 (including by telephone and video conference). The responsibilities of our Audit Committee and its activities during fiscal 2021 are described in the Report of the Audit Committee below.

 

 

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Table of Contents

Compensation Committee

The current members of our Compensation Committee are Drs. Frank (Chair), Glimcher, Little1 and Wee. The Board of Directors has determined that each of Drs. Frank, Glimcher, Little and Wee is independent as defined under the Nasdaq Rules and the independence requirements under Rule 10C-1 of the Exchange Act. The Compensation Committee (i) evaluates and sets the compensation of our Chief Executive Officer, our other executive officers and any Senior Vice President reporting to the Chief Executive Officer, (ii) makes recommendations to our Board of Directors regarding the compensation of our directors, (iii) oversees management of the risks associated with the Company’s compensation practices and policies and (iv) oversees the evaluation of senior management. In connection with its oversight and administration of ADI’s cash and equity incentive plans, the Compensation Committee authorizes the granting of stock options, RSUs and other stock incentives (within guidelines established by our Board of Directors and in accordance with our Stock Option and Stock-Based Award Grant Date Policies) to our officers. In accordance with the terms of our Amended and Restated 1996 Stock Incentive Plan (which we refer to as the 1996 Plan and which we assumed in the Maxim Integrated acquisition), and our 2020 Equity Incentive Plan, which we refer to as the 2020 Plan, the Compensation Committee has delegated to a standing committee composed of our Chief Executive Officer, Chief Financial Officer, Chief People Officer and Chief Legal Officer the power to grant options, RSUs and other stock awards to employees who are not (i) executive officers, (ii) other senior vice presidents who report to the Chief Executive Officer or (iii) directors, subject to specified thresholds, parameters and applicable law. The same standing committee also has the ability to accelerate outstanding awards under 1996 Plan, 2020 Plan, Amended and Restated 2006 Stock Incentive Plan, which we refer to as the 2006 Plan, our Amended and Restated 2005 Equity Plan, which we refer to as the 2005 Plan, and out Amended and Restated 2010 Equity Incentive Plan, which we refer to as the 2010 Plan (the latter two of which were assumed by us when as acquired Linear Technology Corporation, or Linear Technology) granted to employees who are not (i) executive officers, (ii) other senior vice presidents who report to the Chief Executive Officer or (iii) directors, subject to specified thresholds, parameters and applicable law. Additionally, the Compensation Committee oversees our clawback policy, as well as any clawback policy the Company may adopt in the future. Our Compensation Committee held eight meetings (including by telephone and video conference) during fiscal 2021.

Compensation Committee Consultants. The Compensation Committee has the authority, in its sole discretion, to retain or obtain the advice of any independent legal, accounting or other advisors it deems necessary or appropriate to carry out its responsibilities. The Compensation Committee is empowered, without further action by the Board of Directors, to cause the Company to pay the compensation of these advisors as established by the Compensation Committee. The Compensation Committee retained Pearl Meyer and Partners, or Pearl Meyer, an independent compensation consultant, during fiscal 2021. Pearl Meyer reports directly to the Compensation Committee and assists the Compensation Committee in evaluating and designing our executive and director compensation program and policies. For fiscal 2021, the Compensation Committee instructed Pearl Meyer to assist in the following matters:

 

 

Defining a peer group of companies;

 

 

Reviewing and validating the appropriateness of executive incentive plan goals;

 

 

Advising on the design of the CEO Performance Stock Option award and the Maxim Integrated PRSU awards;

 

 

Providing market data and advice regarding executive and director compensation plan design, design of the executive performance incentive plan and equity incentive mix and design, including a market update relating to the effects of COVID-19 on executive compensation;

 

 

Conducting a detailed analysis of the competitiveness and appropriateness of the Company’s total executive compensation opportunity and total director compensation opportunity in comparison to our defined peer group; and

 

 

Conducting a risk assessment of our executive compensation program.

In connection with its work for the Compensation Committee, Pearl Meyer is invited to attend the Compensation Committee’s meetings and, upon request of the Compensation Committee, attends executive sessions of the Compensation Committee. Pearl Meyer is retained only by the Compensation Committee and does not provide any other consulting services to Analog Devices. The Compensation Committee also solicits advice from time to time from our outside counsel, WilmerHale. The Compensation Committee assesses the independence of its advisors on an annual basis. The Compensation Committee requested and received an independence letter from each of Pearl Meyer and WilmerHale providing information to assist the Compensation Committee in selecting and receiving advice from such advisor after considering the independence factors that are identified in the Nasdaq Rules. The Compensation Committee determined that the engagement of these advisors did not raise any conflicts of interest for all work performed for the Compensation Committee during fiscal 2021. The activities of our Compensation Committee and the services Pearl Meyer performed for the Compensation Committee during fiscal 2021 are further described in “INFORMATION ABOUT EXECUTIVE COMPENSATION–Compensation Discussion and Analysis” below.

 

(1)

Dr. Little is not standing for re-election and his term on the Board will end at the Annual Meeting on March 9, 2022.

 

 

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Nominating and Corporate Governance Committee

The current members of our Nominating and Corporate Governance Committee are Messrs. Champy (Chair) and Sicchitano and Dr. Chandrakasan. The Board of Directors has determined that each of Messrs. Champy and Sicchitano and Dr. Chandrakasan is independent as defined under the Nasdaq Rules. The primary responsibilities of the Nominating and Corporate Governance Committee are to identify individuals qualified to become Board members consistent with criteria approved by the Board of Directors, recommend to the Board of Directors the persons to be nominated by the Board of Directors for election as directors at any meeting of shareholders and the persons to be elected by the Board to fill any vacancies on the Board, recommend to the Board of Directors the directors to be appointed to each committee of the Board of Directors, develop and recommend to the Board of Directors a set of corporate governance principles and oversee the evaluation of the Board of Directors. The Nominating and Corporate Governance Committee also leads the Board of Directors’ succession planning efforts with respect to senior executives, has oversight of our Code of Business Conduct and Ethics, and oversees and periodically reviews the Company’s environmental, social and governance policies, goals and programs. The Nominating and Corporate Governance Committee also oversee risks associated with its areas of responsibility.

The Nominating and Corporate Governance Committee has the authority to engage any independent legal and other advisors it deems necessary or appropriate to carry out its responsibilities. These independent advisors may be the regular advisors to the Company. The Nominating and Corporate Governance Committee is empowered, without further action by the Board of Directors, to cause the Company to pay the compensation of these advisors as established by the Nominating and Corporate Governance Committee. For information relating to nominations of directors by our shareholders, see “—Director Candidates” above. Our Nominating and Corporate Governance Committee held four meetings during fiscal 2021 (including by telephone and video conference).

Corporate Development Committee

The Corporate Development Committee was established by the Board of Directors in June 2021 to assist the Board in evaluating strategic transactions, investments and capital allocation and structure. The current members of our Corporate Development Committee are Messrs. Roche (Chair) and Evans and Drs. Frank and Chandrakasan. The Board of Directors has determined that each of Mr. Evans and Drs. Frank and Chandrakasan is independent as defined under the Nasdaq Rules. The primary responsibility of the Corporate Development Committee is to review and, where appropriate, make recommendations to the Board of Directors, with respect to: (i) strategic plans and transactions, including mergers, acquisitions and divestitures; (ii) the results, performance and financial impact of significant capital expenditures and material transactions; (iii) the Company’s capital structure, including potential issuance of debt and equity securities, credit agreements, investment policy, dividends, stock splits and stock repurchases; (iv) significant financial exposures and contingent liabilities of the Company; and (v) the Company’s financial outlook and plans for financing its working and long-term capital requirements.

The Corporate Development Committee has the authority to engage any independent legal and other advisors it deems necessary or appropriate to carry out its responsibilities. These independent advisors may be the regular advisors to the Company. The Corporate Development Committee is empowered, without further action by the Board of Directors, to cause the Company to pay the compensation of these advisors as established by the Corporate Development Committee. The Corporate Development Committee met one time during fiscal 2021 (by video conference).

Determination of Independence

Under applicable Nasdaq Rules, a director of Analog Devices will only qualify as an “independent director” if, in the opinion of our Board of Directors, that person does not have a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our Board of Directors has established guidelines (within our Corporate Governance Guidelines) to assist it in determining whether a director has a relationship with Analog Devices that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. These guidelines are posted on our website under investor.analog.com/corporate-governance.cfm. For relationships not covered by the guidelines, the determination of whether such a relationship exists is made by the members of our Board of Directors who are independent (as defined above). Our Board of Directors has determined that none of Messrs. Champy, Doluca, Evans and Sicchitano, Mses. Golz and Johnson, and Drs. Chandrakasan, Frank, Glimcher, Little1 and Wee has a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is an “independent director” as defined under Rule 5605(a)(2) of the Nasdaq Rules. The Board of Directors has determined that Mr. Roche, incoming Chair and Chief Executive Officer, and Mr. Stata, our outgoing Chair and founder, are not “independent” under the Nasdaq Rules because Mr. Roche is a current

 

 

(1) Dr. Little is not standing for re-election and his term on the Board will end at the Annual Meeting on March 9, 2022.

 

 

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employee and Mr. Stata is our founder. In addition, the Board of Directors has determined that Mr. Doluca is not “independent” under the Nasdaq Rules at this time given his prior role as the President and Chief Executive Officer of Maxim Integrated, which was acquired by the Company in August 2021, and the fact that integration efforts between the companies are still ongoing. The Board of Directors considered the Company’s annual laboratory membership and sponsorship of university research projects with MIT (of which Anantha P. Chandrakasan is the Dean of the School of Engineering and James A. Champy is a board member) and Karen Golz’s former affiliation with Ernst & Young, and determined that those relationships would not interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Director Candidates

Shareholders of record of Analog Devices may recommend director candidates for inclusion by the Board of Directors in the slate of nominees that the Board of Directors recommends to our shareholders for election. The qualifications of recommended candidates will be reviewed by the Nominating and Corporate Governance Committee. If the Board of Directors determines to nominate a shareholder-recommended candidate and recommends his or her election as a director by the shareholders, the name will be included in Analog Devices’ proxy card for the shareholders’ meeting at which his or her election is recommended.

Shareholders may recommend individuals for the Nominating and Corporate Governance Committee to consider as potential director candidates by submitting their names and background and a statement as to whether the shareholder or group of shareholders making the recommendation has beneficially owned more than 5% of Analog Devices’ common stock for at least one year as of the date the recommendation is made, to the “Analog Devices Nominating and Corporate Governance Committee,” c/o Janene Asgeirsson, Corporate Secretary, Analog Devices, Inc., One Analog Way, Wilmington, Massachusetts 01887. The Nominating and Corporate Governance Committee will consider a recommendation only if appropriate biographical information and background material is provided on a timely basis.

The process followed by the Nominating and Corporate Governance Committee to identify and evaluate candidates includes requests to Board members and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the Nominating and Corporate Governance Committee and the Board of Directors. From time to time, the Nominating, and Corporate Governance Committee may also seek input from director search firms for identification and evaluation of candidates. Assuming that appropriate biographical and background material is provided for candidates recommended by shareholders on a timely basis, the Nominating and Corporate Governance Committee will evaluate director candidates recommended by shareholders by following substantially the same process, and applying substantially the same criteria, as it follows for director candidates submitted by Board members.

Shareholders also have the right to directly nominate director candidates, without any action or recommendation on the part of the Nominating and Corporate Governance Committee or the Board of Directors, by following the procedures set forth in our bylaws and described in the response to the question “How and when may I submit a shareholder proposal, including a shareholder nomination for director, for the 2023 annual meeting of shareholders?” below.

In considering whether to recommend any candidate for inclusion in the Board of Directors’ slate of recommended director nominees, including candidates recommended by shareholders, the Nominating and Corporate Governance Committee will apply the criteria set forth in our Corporate Governance Guidelines. These criteria include the candidate’s integrity, business acumen, experience, commitment, and diligence; the presence of any conflicts of interest and the ability of the candidate to act in the interests of all shareholders. The Nominating and Corporate Governance Committee seeks nominees with a broad diversity of experience, professions, skills, geographic representation and backgrounds. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. Analog Devices believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board of Directors to fulfill its responsibilities. While we do not have a policy regarding Board diversity, the Nominating and Corporate Governance Committee includes gender, racial and ethnic diversity as part of its search criteria, consistent with the requirement for relevant and diverse experience, skills and industry familiarity.

Communications from Shareholders and Other Interested Parties

The Board of Directors will give appropriate attention to written communications on issues that are submitted by shareholders and other interested parties, and will respond if and as appropriate. Absent unusual circumstances or as contemplated by committee charters, the Chair of the Nominating and Corporate Governance Committee will, with the assistance of Analog Devices’ internal legal counsel, (1) be primarily responsible for monitoring communications from shareholders and other interested parties and (2) provide copies or summaries of such communications to the other directors as he or she considers appropriate.

 

 

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Communications will be forwarded to all directors if they relate to substantive matters and include suggestions or comments that the Chair of the Nominating and Corporate Governance Committee considers to be important for the directors to review. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to personal grievances, commercial solicitations and matters as to which Analog Devices tends to receive repetitive or duplicative communications.

Shareholders and other interested parties who wish to send communications on any topic to the Board of Directors (including the Presiding Director or the independent directors as a group) should address such communications to James A. Champy, Presiding Director, c/o Corporate Secretary, Analog Devices, Inc., One Analog Way, Wilmington, Massachusetts 01887.

The Board of Directors’ Role in Risk Oversight

The following table summarizes management’s and the Board of Directors’ role in risk management and oversight:

 

   

Management

  Our enterprise risk management program defines how we identify, manage and govern risk throughout our organization to promote the achievement of our financial and operational goals in a compliant manner. It assigns accountability for risk management to every business unit, based on the risks they encounter as part of their day-to-day operations. Risk governance is managed by our Enterprise Risk Management Committee, which is chaired by our newly appointed Chief Risk Officer. Our Chief Risk Officer, and other members of management, report to the Board of Directors (or the appropriate committee in the case of risks that are under the purview of a particular committee) regarding risk identification, risk management and risk mitigation strategies.

Board of

Directors

  The Board of Directors’ role in the Company’s risk oversight process includes receiving regular reports from members of senior management on areas of material risk to the Company. Specifically, our Chief Risk Officer, who oversee internal enterprise risk management programs and chairs our Enterprise Risk Management Committee, provides regular reports to our full Board of Directors regarding our management of all enterprise and operational risks and our enterprise risk management program, with periodic updates on focus areas, such as cybersecurity. The Board also receives regular updates from our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, which provide our Board with thorough insight about how ADI manages risk.

Audit
Committee

  The Audit Committee is chaired by Karen Golz, who previously served on EY’s Global Risk Management Executive Committee. The Audit Committee has oversight responsibility with respect to ADI’s risk assessment and risk management programs, especially as they apply to ADI’s financial statement integrity and reporting and internal controls. The Audit Committee also receives regular reports from our Director of Internal Audit on internal audit matters and, since our Chief Risk Officer joined in August 2021, from our Chief Risk Officer on risk management matters. The Audit Committee also receives reports at least annually from our Chief Information Officer on information security, technology and data privacy and protection. The Chief Information Officer also provides an annual report to the full Board of Directors regarding cybersecurity risk.

Compensation Committee

  The Compensation Committee assesses risk associated with their areas of oversight, including whether ADI’s executive compensation program and non-executive director compensation practices encourage excessive or inappropriate risk taking.

Nominating

and Corporate

Governance Committee

  The Nominating and Corporate Governance Committee leads the Board with respect to the adequacy of the Company’s governance structure and process and of succession planning for the Company’s Board of Directors, Chief Executive Officer and other executive officers. The Committee oversees the Company’s environmental, social and governance policies, goals and programs, including reviewing the Company’s sustainability initiatives and goals and the Company’s progress toward achieving those goals.

Engagement with Our Shareholders

Since our inception as a public company, we have maintained an active engagement program with our shareholders, meeting with them extensively throughout the year as part of our investor outreach efforts. In fiscal 2021, we conducted more than 200 unique engagements with our shareholders, including the majority of our top 25 shareholders, on a variety of topics. We also continued our specific outreach effort with our institutional investors to discuss corporate governance issues affecting the Company. During fiscal 2021, we reached out to our top 25 shareholders, representing approximately 45% of our outstanding shares, with an invitation to have discussions with their corporate governance teams. Of the shareholders who accepted our engagement invitation, topics covered in these meetings included:

 

 

Board composition and risk oversight

 

 

Board evaluations and refreshment

 

 

Corporate governance trends

 

 

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Environmental, social and governance considerations, including diversity, equity and inclusion and human capital management

 

 

Executive compensation practices and design

In the spirit of continuous improvement, we have reviewed with our Board of Directors the key takeaways from these meetings with our shareholders with the goal of continuing to evolve our corporate governance practices to best meet the needs of the Company and our shareholders. Our dialogue has led to enhancements to our practices and disclosure, which our Board believes is in the best interests of our company and our shareholders. For example:

 

Topics of

Discussion

 

Recent Outcomes of Engagement

Corporate
Governance
 

 

• Continued focus on active Board refreshment and diversity; added one new female director to the Board, bringing female representation to more than 30% of the Board

 

• Enhanced risk oversight practices for our Board, including cybersecurity at the Board level and ESG under the Nominating and Corporate Governance Committee

 

• Named ADI’s first Chief Risk Officer and continued to enhance risk oversight practices with quarterly cross-functional committee meetings and regular updates to Board

 

Corporate
Social
Responsibility  
 

 

• Published our second Corporate Responsibility Report in May 2021 that includes enhanced disclosure of our ESG initiatives

 

• Enhanced our diversity and inclusion disclosures including publishing our most recent EEO-1 reports online in the interest of increased transparency

 

• Continued to refine our shareholder engagement process to connect our shareholders with key stakeholders within our company around topics of interest

 

We intend to continue our shareholder outreach efforts on an on-going basis and look forward to continuing to engage with our valued shareholders.

Corporate Responsibility Highlights

We believe that sustainability is about delivering holistic solutions to ensure we are making a real, positive impact in the world. ADI strives to create a rewarding workplace and be a trusted partner, leading corporate citizen, environmental steward and contributor to our communities. We periodically evaluate our sustainability priorities outlined in our 2020 Corporate Responsibility Report, entitled Engineering Good, to ensure alignment with our long-term strategy. As part of this process, we regularly engage with key stakeholders to ensure we continue to focus on the most important issues.

 

 Approach to Stakeholder Engagement
Our Shareholders    Our Workforce    Our Suppliers    Our Communities
We actively engage with our shareholders around topics of interest, including sustainability reporting and human capital management.    We solicit employee feedback through our quarterly ADI Pulse engagement survey and empower employee-led Green Teams to champion and improve sustainability initiatives at local offices globally.    ADI is a proud member of the Responsible Business Alliance and requires our suppliers adhere to its code of conduct.    ADI continues to fund and support STEM education and local environmental initiatives across the globe.

Our sustainability agenda is led and managed by our Chief Executive Officer alongside a senior management team that includes our Chief People Officer, Chief Financial Officer, Chief Legal and Risk Officer, Senior Vice President, Automotive & Energy, Communications and Aerospace Group, Chief Customer Officer, and our recently appointed Senior Director, ESG and Sustainability Programs. In addition, our Board of Directors is fully engaged and receives updates from senior management about our progress against our sustainability initiatives.

 

 

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We utilize third-party disclosure initiatives to inform our sustainability activities and reporting. In fiscal 2021, we aligned our Corporate Responsibility Report with two additional frameworks (TCFD and SASB) as well as with the Global Reporting Initiative: Core Option. We also report separately to the CDP Climate Change and Water Security Projects. Our sustainability activities and reporting are aligned with the UN Sustainable Development Goals.

We have a long history of leadership in corporate responsibility and pursue a four-pronged strategy — Protect and Regenerate the Environment, Empower People, Impact Through Engagement and Promoting Good Governance.

Protect and Regenerate the Environment — While we are focused on reducing our carbon footprint and our impact on the environment today, we also strive to deliver an even greater environmental impact. Our goal is to make meaningful progress on environmental regeneration efforts and partner with our customers to help them solve their sustainability challenges. We leverage our expertise to develop new solutions to help restore natural resources, regenerate the quality of our biosphere and reduce carbon.

We have established both long-term environmental goals and interim environmental performance objectives using a five-year planning horizon, and make annual updates to our objectives, targets, and programs. In fiscal 2021, ADI set and developed emission reduction plans approved by the SBTi. Additionally, ADI has set goals to become carbon neutral by 2030 and achieve net zero emissions by 2050 or sooner — and is part of the UN Global Compact and their campaign, Business Ambition for 1.5°C. We were also the first U.S. technology company to deploy a sustainable finance instrument with an inaugural green bond issuance, followed by the issuance of a sustainability-linked revolving credit facility and a sustainability-linked bond offering. At the business level, we continued to innovate and develop solutions with meaningful environmental benefits, including our Battery Management Solutions,

Energy Storage Systems and leveraging our intelligent sensing systems to make data centers greener.

Empower People — We are committed to helping our employees thrive through education, inclusion and support. We are focused on building programs within ADI to enhance our diverse and accepting workplace culture, while also broadening availability of STEM education, training and employment to underserved communities across the globe.

As we continue to evolve our business offerings and innovate our designs, we are also placing our environmental and social responsibilities at the center of our operations. The empowerment of our people is a key focus area. Core to our empowerment strategy is embracing diversity and building a culture of inclusion across the organization. This year we launched a Diversity Council and Working Group following a global listening tour focused on accelerating ADI’s diversity, equity, and inclusion journey. We plan to continue to expand the diversity of our workforce, creating growth and development opportunities for our employees, embracing different perspectives and fostering an inclusive work environment for all.

Impact Through Engagement — ADI takes an active role in addressing problems that impact our employees, our communities and our planet. We stand behind our employee engagement efforts and are proud to contribute to their causes. For example, the Analog Devices Foundation provided $1.8 million in community grants and matched $720,000 in employee donations in fiscal 2021 supporting 900+ unique organizations.

Promoting Good Governance — We have long believed that good corporate governance is important to ensure Analog Devices is managed for the long-term benefit of our shareholders. We review our corporate governance policies and practices annually and compare them to those suggested by various authorities in corporate governance and the practices of other public companies. In 2021 we revised our policies and practices in ways that enhance transparency and that we believe are in the best interests of Analog Devices and our shareholders. For example, we recently published our EEO-1 reports online, creating greater transparency about the make-up of our workforce.

Sustainability is infused into all aspects of how we do business, and we are proud that our sustainability commitment is routinely recognized around the globe, including most recently with the following awards:

Employer Brand

 

  The Boston Globe’s Top Places to Work (2017–2021)
   —

Rankings based on employee satisfaction

 

  Forbes World’s Best Employers (2018–2020)
   —

Rankings based on independent survey

  Forbes 2021 World’s Top Female-Friendly Companies (2021)
   —

Rankings based on independent survey

 

  Newsweek’s Most Responsible Companies (2021–2022)
   —

Rankings based on independent survey

 

 

 

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Corporate Reputation

 

  Clarivate Top 100 Global Innovators (2016–2021)
   —

Recognizes companies at the pinnacle of the global innovation landscape by measuring the ideation culture that produces patents

  Shingo Accreditation (2021)
   —

Global recognition for premier quality and operational excellence; ADI Limerick is the first semiconductor site in the world to achieve this

 

 

For more information about our corporate responsibility efforts, please refer to our Corporate Responsibility Report available at analog.com/csr. We are not including the information contained in our Corporate Responsibility Report in, or incorporating it by reference into, this proxy statement.

Director Compensation

Our non-employee director compensation program is designed to attract and retain experienced and knowledgeable directors and to provide equity-based compensation to align the interests of our directors with those of our shareholders. Each non-employee director receives an annual cash retainer and an annual equity award in the form of RSUs. To reflect their additional responsibilities, the Chairs and members of all committees receive an additional cash retainer. The Presiding Director also receives an additional cash retainer. Mr. Roche, as an employee director, does not receive any additional compensation for his services as director or as Chair of the Corporate Development Committee.

The Board of Directors has delegated to the Compensation Committee the responsibility to review and recommend to the Board of Directors any proposed changes to non-employee director compensation. Annually, the Compensation Committee reviews with Pearl Meyer, the Compensation Committee’s independent compensation consultant, non-employee director compensation information for our peer group to check the alignment of our non-employee director compensation package with market practice and current trends. The Compensation Committee then makes recommendations to the full Board with respect to compensation of our non-employee directors, and the full Board reviews these recommendations and makes a final determination. In fiscal 2021 we granted 100% of the value of the annual equity award to each of our non-employee directors in the form of time-based RSUs. These RSUs vest in full on the earlier of the first anniversary of the date of grant or the date of the Company’s next annual meeting of shareholders. On March 10, 2021, we granted each non- employee director 1,435 RSUs for services to be provided from that date until the earlier of the first anniversary of the date of the grant or the Company’s next annual meeting of shareholders. On September 15, 2021, each of Mercedes Johnson and Tunç Doluca, who joined the Board of Directors in August 2021 in connection with the Company’s acquisition of Maxim Integrated, was granted 685 RSUs for services to be provided from the date of their initial elections as directors through the Annual Meeting.

The following table details the total compensation earned by our non-employee directors in fiscal 2021.

Fiscal 2021 Director Compensation

 

Name

  

Fees Earned or Paid in

Cash ($) (1)

    

Stock Awards

($)(2) (3)

    

All Other

Compensation ($)(4)

     Total ($)  

James A. Champy

  

 

125,000

 

  

 

207,144

 

  

 

 

  

 

332,144

 

Anantha P. Chandrakasan

  

 

93,778

 

  

 

207,144

 

  

 

 

  

 

300,922

 

Tunç Doluca (5)

  

 

14,444

 

  

 

117,354

 

  

 

 

  

 

131,798

 

Bruce R. Evans

  

 

98,778

 

  

 

207,144

 

  

 

 

  

 

305,922

 

Edward H. Frank

  

 

103,779

 

  

 

207,144

 

  

 

 

  

 

310,923

 

Laurie H. Glimcher

  

 

90,000

 

  

 

207,144

 

  

 

 

  

 

297,144

 

Karen M. Golz

  

 

97,708

 

  

 

207,144

 

  

 

 

  

 

304,852

 

Mercedes Johnson (5)

  

 

17,152

 

  

 

117,354

 

  

 

 

  

 

134,506

 

Mark M. Little

  

 

90,000

 

  

 

207,144

 

  

 

 

  

 

297,144

 

Kenton J. Sicchitano

  

 

106,388

 

  

 

207,144

 

  

 

 

  

 

313,532

 

Ray Stata

  

 

250,000

 

  

 

207,144

 

  

 

14,948

 

  

 

472,092

 

Susie Wee

  

 

90,000

 

  

 

207,144

 

  

 

 

  

 

297,144

 

 

(1)

This amount includes an $80,000 annual board retainer. An additional annual retainer of $30,000 was paid to the chair of the Audit Committee, an additional annual retainer of $20,000 was paid to the chair of the Compensation Committee and an additional annual retainer of $20,000 was paid to the chair of the Nominating and Corporate Governance Committee. Mr. Roche, as an employee director, did not receive any additional compensation for his services as director or as Chair of the

 

 

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  Corporate Development Committee. The Presiding Director also received an additional annual retainer of $25,000. The members of the Audit Committee (other than the chair) received an additional annual retainer of $15,000, the members of the Compensation Committee (other than the chair) received an additional annual retainer of $10,000, the members of the Nominating and Corporate Governance Committee (other than the chair) received an additional annual retainer of $10,000 and the members of the Corporate Development Committee (other than the chair) received an additional annual retainer of $10,000. For fiscal 2021, Mr. Stata, as Chair of the Board of Directors, received a total annual retainer of $250,000. All cash retainers are paid in quarterly installments each on the 15th day of December, March, June and September of each fiscal year and are pro-rated for a partial year of service. Each director can elect to defer receipt of his or her fees under our Deferred Compensation Plan, or DCP. For more information relating to our DCP, see “Information About Executive Compensation—Non-Qualified Deferred Compensation Plan” below. Dr. Frank and Dr. Gilmcher elected to defer receipt of their fees under the DCP in fiscal 2021.

 

(2)

These amounts represent the aggregate grant date fair value of awards for grants of RSUs to each listed director in fiscal 2021. These amounts do not represent the actual amounts paid to or realized by the directors during fiscal 2021. We recognize the fair value as of the grant date for RSUs over the number of days of service required for the award to become vested.

 

(3)

The aggregate number of stock options and RSUs outstanding held by each non-employee director (representing unexercised stock options and unvested RSUs) at October 30, 2021 is as follows:

 

Name

 

Number of Shares Subject to Option Awards

Held as of October 30, 2021

 

Number of RSUs that have not

Vested as of October 30, 2021

James A. Champy

  37,620  

1,435

Anantha P. Chandrakasan

   

1,435

Tunc Doluca

   

685

Bruce R. Evans

   

1,435

Edward H. Frank

   

1,435

Laurie H. Glimcher

   

1,435

Karen M. Golz

   

1,435

Mercedes Johnson

   

685

Mark M. Little

  1,040  

1,435

Kenton J. Sicchitano

  16,100  

1,435

Ray Stata

  37,620  

1,435

Susie Wee

   

1,435

The following table includes the assumptions, rounded to the nearest hundredth, which we used to calculate the grant date fair value amounts included in the “Stock Awards” column for fiscal 2021 Director Compensation.

 

Grant Date

        Assumptions   

Grant Date Fair Value
Per Share ($)

   Risk-Free
Interest Rate (%)
   Dividend Yield
(%)

3/10/2021

   RSUs    0.08    1.88   

144.35

9/15/2021

   RSUs    0.07    1.59   

171.32

The grant date fair value of RSUs represents the value of our common stock on the date of grant, reduced by the present value of dividends expected to be paid on our common stock prior to vesting. For a more detailed description of the assumptions used for purposes of determining grant date fair value, see Note 3 to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Stock-Based Compensation,” included in our Annual Report on Form 10-K for the year ended October 30, 2021.

 

(4)

The amount represents payment of medical and dental insurance premiums on behalf of Mr. Stata and his spouse.

 

(5)

Tunç Doluca and Mercedes Johnson joined the Board on August 26, 2021, and in accordance with our Equity Award Grant Date Policy, each was granted a pro rata RSU award for his or her service from August 26, 2021 through our Annual Meeting.

We also reimburse our directors for travel to Board meetings and other related expenses.

 

 

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Stock Ownership Guidelines for Non-Employee Directors

Under our stock ownership guidelines, the target share ownership level for non-employee directors is at least four times the directors’ annual cash retainer. Directors have four years to achieve their targeted level. Shares subject to unexercised options, whether or not vested, and any shares that have been pledged as collateral for a loan will not be counted for purposes of satisfying these guidelines. Unvested RSUs are counted for purposes of satisfying the guidelines. All of our non-employee directors were in compliance with our stock ownership guidelines as of the end of fiscal 2021.

Equity Award Grant Date Policy for Non-Employee Directors

During fiscal 2021, our Equity Award Grant Date Policy for non-employee directors provided for the following:

 

 

Each newly elected non-employee director elected other than at an annual meeting of shareholders is granted under the 2020 Plan an RSU award for a number of shares of our common stock approved by the Board of Directors, on the 15th day of the month following the month of the date of initial election as a director, or if Nasdaq is closed on that day, the next succeeding business day that Nasdaq is open.

 

 

On an annual basis, each non-employee director elected or re-elected at an annual meeting of shareholders is granted under the 2020 Plan an RSU award for a number of shares of our common stock approved by the Board of Directors, on the date of our annual meeting of shareholders, or if Nasdaq is closed on that day, the next succeeding business day that Nasdaq is open.

For fiscal 2021, RSUs granted to our non-employee directors under the 2020 Plan vest on the earlier of the date of the Annual Meeting and the first anniversary of the date of grant, subject to acceleration as described below. The RSU awards vest in full upon the occurrence of a Change in Control Event (as defined in the 2020 Plan) or the director’s death. If the director ceases to serve as a director by reason of his or her disability, as determined by the Board of Directors, each outstanding and unvested RSU will vest in full at the time he or she ceases to be a director. In addition, upon the occurrence of a Change in Control Event or in the event of the director’s death, disability or retirement after age 60, each vested option will continue to be exercisable for the balance of its term.

Certain Relationships and Related Transactions

Transactions with Related Persons

During fiscal 2021, Mr. Stata, our founder and Chair of the Board, received a cash retainer for service on the Board of $250,000. Following his retirement as an employee in 2012, the Company agreed to provide medical and dental benefits to Mr. Stata and his spouse during their lifetimes on the same basis as provided to U.S. employees of the Company. The value of those medical and dental benefits in fiscal 2021 was $14,948. On March 10, 2021, we granted 1,435 RSUs to Mr. Stata. This award is identical to the award granted to our other non-employee directors on March 10, 2021 and vests on the earlier of the date of the Annual Meeting or the first anniversary of the grant date.

The Company contributes annually to Massachusetts Institute of Technology (MIT) to fund university research projects. In fiscal 2021, the Company made approximately $1.4 million in total contributions to MIT of which $120,000 funded a graduate student working in Dr. Chandrakasan’s laboratory.

Policies and Procedures for Related Person Transactions

Our Board of Directors has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which Analog Devices is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% shareholders (or their immediate family members), each of whom we refer to as a related person, has a direct or indirect material interest.

If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a related person transaction, the related person must report the proposed related person transaction to our Chief Legal Officer. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the Nominating and Corporate Governance Committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If our Chief Legal Officer determines that advance review and approval is not practicable, the Nominating and Corporate Governance Committee will review, and, in its discretion, may ratify the related person transaction at the next meeting of the Nominating and Corporate Governance Committee. The policy also permits the Chair of the Nominating and Corporate Governance Committee to

 

 

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review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the Nominating and Corporate Governance Committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.

A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the Nominating and Corporate Governance Committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the Nominating and Corporate Governance Committee will review and consider:

 

 

The related person’s interest in the related person transaction;

 

 

The approximate dollar value of the amount involved in the related person transaction;

 

 

The approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;

 

 

Whether the transaction was undertaken in the ordinary course of our business;

 

 

Whether the terms of the transaction are no less favorable to us than the terms that could have been reached with an unrelated third party;

 

 

The purpose of, and the potential benefits to us of, the transaction; and

 

 

Any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

The Nominating and Corporate Governance Committee may approve or ratify the transaction only if the Nominating and Corporate Governance Committee determines that, under all of the circumstances, the transaction is in Analog Devices’ best interests. The Nominating and Corporate Governance Committee may, in its sole discretion, impose any conditions on us or the related person in connection with approval of the related person transaction.

In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, the Board of Directors has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:

 

 

Interests arising solely from the related person’s position as an executive officer of another entity (whether or not the person is also a director of that entity), that is a participant in a transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in the entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, and (c) the amount involved in the transaction equals less than the greater of $200,000 or 5% of the annual gross revenues of the company receiving payment under the transaction; or

 

 

The transactions that are specifically contemplated by provisions of Analog Devices’ charter or bylaws.

The policy provides that the transactions involving compensation of executive officers shall be reviewed and approved by the Compensation Committee in the manner specified in its charter.

 

 

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Proposal 2

LOGO    ADVISORY VOTE ON THE

COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

 

 

Our Board of Directors unanimously recommends that you vote   LOGO  FOR  approval of the compensation of our named executive officers as disclosed in this proxy statement.

We are requesting shareholder approval of the compensation of the executive officers named in our Summary Compensation Table below, who we refer to as our named executive officers or NEOs. We are required to provide our shareholders with the opportunity to vote to approve, on an advisory (non-binding) basis, the compensation of our NEOs as disclosed in this proxy statement in accordance with the SEC’s rules. At the 2017 annual meeting of shareholders, our shareholders voted in favor of holding future “say on pay” votes every year. In accordance with the results of that vote, our Board of Directors determined to submit “say on pay” proposals to our shareholders every year.

Our Board of Directors is asking shareholders to approve the following non-binding advisory resolution:

RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and accompanying narrative disclosures in this proxy statement, is hereby approved.

As required by the Dodd-Frank Act, this is an advisory vote, which means that this proposal is not binding on us. Our Compensation Committee, however, values the opinions expressed by our shareholders and will carefully consider the outcome of the vote when making future compensation decisions for our NEOs. You may vote for, against or abstain from voting on this matter. At our 2021 annual meeting of shareholders, our compensation program for our NEOs received the support of 94.95% of the total votes cast. In light of the support received, our Compensation Committee did not make significant changes to our executive compensation program.

As described in detail in the “Compensation Discussion and Analysis” section of this proxy statement, ADI’s executive compensation program is significantly performance-based and designed to attract, retain and motivate strong executives to lead our complex, global organization and to align their interests with those of our shareholders. We seek to provide total compensation to our executive officers, including our named executive officers, that is competitive with our peers, and we believe that our executive compensation program is designed to encourage the most talented individuals to grow their careers at ADI.

ADI has a longstanding philosophy and practice of paying executives for performance. In order to align our pay practices with shareholder interests, we tie a significant percentage of each executive’s compensation to the Company’s performance, in the form of variable cash incentive bonus payments, and equity awards that are subject to performance vesting and rise in value only if our stock price increases. In fiscal 2021, a year in which

ADI experienced robust year-over-year revenue growth, aggregate payments under our executive performance incentive bonus plan were made at 253% of target, compared to 77% in fiscal 2020 and 95% in fiscal 2019.

We believe that our executive compensation program is working as intended and appropriately aligns executive pay with Company performance.

 

 

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INFORMATION ABOUT EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This Compensation Discussion and Analysis, or CD&A, describes our fiscal 2021 executive compensation goals, philosophies and program design, including the Compensation Committee’s process for determining compensation, the various components of pay, and how our fiscal 2021 financial results affected performance-based compensation. As used in this proxy statement, named executive officers or NEOs refers to the following individuals who served as executive officers during fiscal 2021:

 

Named Executive Officer

  Position

Vincent Roche

  President and Chief Executive Officer

Prashanth Mahendra-Rajah

  Senior Vice President, Finance and Chief Financial Officer

Martin Cotter

  Senior Vice President, Industrial and Multi-Markets

John Hassett

  Senior Vice President and Chief Operating Officer of the Maxim Integrated Business (1)

Greg Henderson

  Senior Vice President, Automotive & Energy, Communications and Aerospace Group

Anelise Sacks

  Senior Vice President and Chief Customer Officer

 

(1)

Mr. Hassett served as an executive officer and Senior Vice President, Industrial and Consumer for the first few months of fiscal 2021. In February 2021, Mr. Hassett’s role changed to Senior Vice President, Corporate Integration Management and, after consummation of the acquisition of Maxim Integrated, to Senior Vice President and Chief Operating Officer of the Maxim Integrated Business. As of Mr. Hassett’s role change in February 2021, he was no longer considered an executive officer of the Company. He is included as a NEO for fiscal 2021 because he would have been one of the three most highly compensated executive officers of the Company other than our Chief Executive Officer and our Chief Financial Officer during such period, but for the fact that he was not serving as an executive officer as of the end of fiscal 2021.

Performance and Key Pay Decisions

Fiscal 2021 was an important year for ADI. We completed our acquisition of Maxim Integrated, strengthening ADI as a semiconductor leader with increased breadth and scale across multiple attractive end markets. We delivered record financial results against a backdrop of challenging conditions, including global supply chain constraints and ongoing disruptions caused by the COVID-19 pandemic. In fiscal 2021, we delivered sequential revenue growth every quarter, leading to all-time high annual revenue of $7.3 billion and industry-leading gross and operating margins. Importantly, we made progress positioning ADI for continued long-term success through deepening our customer engagements, continuing to invest in our business to drive innovation, extracting value from recent acquisitions and capitalizing on secular trends to drive addressable markets and diversified growth. We also demonstrated our commitment to deliver strong shareholder returns during fiscal 2021, returning approximately $3.7 billion to our shareholders in the form of dividends and share buybacks. ADI’s total shareholder return over its last three fiscal years, ending October 30, 2021, was 111%, which is 1.4x the S&P 500 return of 78% over that same time period.

Fiscal 2021 also highlighted the strength of our executive leadership team, including our CEO. Mr. Roche has played a key role in transforming the company since he became CEO in 2013, and the Board recognizes the importance of retaining the continuity of his leadership during this critical phase in ADI’s growth. Since Mr. Roche’s tenure as CEO began in 2013 through the end of fiscal 2021, the Company’s total shareholder return has increased to 371%, which is 1.5x the S&P 500 return of 237% for the same time period, and the Company’s market capitalization has increased by more than $80 billion. Mr. Roche’s unique depth of understanding of ADI, strength of leadership capability and vision are important to driving the long-term corporate strategy and continued success of the Company, particularly given the rapid changes and consolidation taking place within the semiconductor industry and the constant need to transform and grow within this highly competitive environment.

 

 

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Fiscal 2021 Performance Highlights*

 

$7.3B

Revenue

   

61.8%

Gross Margins

   

23.1%

Operating Margins

   

$3.46

Diluted

Earnings

per Share

   

$2.7B

Operating

Cash Flow

~88%

Business- to-Business Revenue

   

70.9%

Adjusted Gross Margins**

   

42.4%

Adjusted Operating Margins**

   

$6.46

Adjusted Diluted Earnings per Share**

   

$2.4B

Free Cash

Flow**

 

*

The fiscal 2021 financial results in this proxy statement include the financial results of Maxim Integrated prospectively from the closing date of the Maxim Integrated acquisition, or Acquisition Date.

 

**

See Additional Information for additional information regarding non-GAAP financial measures and reconciliations of non-GAAP financial measures to their most directly comparable GAAP financial measures.

 

Fiscal 2021 Shareholder Value Creation

 

LOGO    LOGO    LOGO

 

Returned $3.7B to shareholders
in the form of dividends and
share repurchases

  

 

Increased our dividends per
share paid to shareholders by
11% on an annualized basis

  

 

1-, 3- and 5-year TSR1 of 49%, 111% and 202%,
respectively, which outperformed the S&P 500
over the same periods

 

1.

Total Shareholder Return, or TSR, calculation is share price appreciation plus cumulative cash dividend payments, and the effect of reinvesting those dividends into the security, for the one-, three- and five-year periods ended October 30, 2021.

Important Fiscal 2021 Compensation Actions

Our executive team has been key in weathering the impact of COVID-19, completing key strategic integrations, and delivering strong financial results. In December 2020, while the Maxim Integrated acquisition remained pending, the Compensation Committee considered the importance of maintaining leadership continuity, and especially the importance of retaining Vincent Roche as our Chief Executive Officer in light of the significant value he has created since becoming our Chief Executive Officer in 2013. The Committee also considered the need to incentivize continued stock price appreciation, particularly following an all-equity acquisition, and the importance of a successful integration of Maxim Integrated. In light of this, the Committee established two entirely performance-based special awards that were awarded in addition to our annual compensation program:

 

1.

The CEO Performance Stock Option Award, which was awarded to Vincent Roche and is a performance option award tied to the attainment of challenging stock price goals over a five-year performance period. The target award is not earned unless the stock price grows by at least 79% from the date the award was determined.

 

2.

The Maxim Integration PRSUs, which were awarded to our executives officers other than the CEO, are performance-based RSUs, which are tied to achieving key synergies related to the Maxim Integrated acquisition in a timely manner, as well as strong profit margins.

These awards are described in greater detail below in the section entitled “Special Equity Awards.”

Compensation Philosophy and Objectives

Our business is based on innovation and helping our customers solve some of the world’s most complex problems. As a knowledge-based business, we believe that the skills, expertise, and experience of our employees, including our NEOs, are unique and critical factors in our overall success. The competition for talent in the technology sector is fierce. To drive continued successful operational and financial performance, we must attract, motivate, reward, and retain top executive talent. Accordingly, our executive compensation program is designed to:

 

 

Create alignment between executive and shareholder interests;

 

 

Pay for performance by ensuring incentives are tied to multiple business performance metrics; and

 

 

Provide highly competitive compensation to attract and retain top executive talent.

 

 

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Each of these important elements is discussed in more detail below.

Pay and Governance Best Practices

Our pay and governance practices are designed to align our executive officers’ interests with those of our shareholders.

For example:

 

 

Our cash incentive bonus awards are based solely on our financial performance

 

 

A significant portion of equity awards are contingent upon long-term performance achievement

 

 

Incentive awards are tied to rigorous performance targets aligned with our corporate strategy

 

 

Payout for relative TSR-based awards capped at target for instances of negative absolute TSR

 

 

We have a clawback policy for all executive officers in the event of a material financial restatement due to fraud or willful misconduct

 

 

We have a specific policy regarding the grant dates of stock options, RSUs and other stock-based awards for our directors, executive officers and employees

 

 

We have stock ownership guidelines for all directors, and have recently increased the stock ownership guidelines for our CEO to 5x, and for all other members of our Leadership Team to 3x

 

 

We prohibit hedging and pledging of ADI securities

 

 

Annual “say on pay” vote

Pay for Performance

A significant portion of the total target compensation for our executive officers, including our NEOs, is in the form of variable, performance-based incentive compensation, with only a small portion of the total target compensation provided in the form of “fixed” compensation. We believe this provides our executive officers an opportunity to earn above average compensation, as compared to our peer group companies, if ADI delivers strong results. Conversely, if the Company delivers weaker results, our executive officers will earn less compensation. The target pay mix for our NEOs for fiscal 2021 is shown below:

 

 

LOGO

In order to best illustrate the underlying structure of our executive compensation program, the pay mix charts above exclude the impact of the special one-time, performance-vested equity awards granted to our NEOs in fiscal 2021, which are described below under “Special Equity Awards” and reflect the regular annual target compensation consisting of the annual rate of base salary and short-term and long-term incentive targets approved by the Compensation Committee as part of its annual executive compensation review. When taking into account the impact of the special one-time equity awards in fiscal 2021, the percentage of total compensation which is tied to performance based incentives increases to 96% for the CEO and 89% for the other NEOs. For more information about the components of the performance-based incentive compensation for our NEOs, see

“Compensation Discussion and Analysis—Components of Executive Compensation.”

(1) The sum of the individual amounts may not equal the total due to rounding.

 

 

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Summary of Direct Compensation Elements

We provide a mix of compensation elements that support our goals of attracting and retaining top executive talent and incentivizing our key performance objectives in the short- and long-term.

 

 

Pay Element

   

  LOGO  

 

 

 

Purpose

 

 

 

  LOGO  

 

 

 

Time Period

 

 

 

  LOGO  

 

 

 

Performance Measures

 Base Salary

   

 Attract and retain executive talent

 

   

 Annual

     

 Variable Cash Incentive

   

 Motivate and reward our executive officers for achieving short-term Company financial objectives aligned with value creation

   

 Paid semi-annually, with quarterly corporate financial targets tied to corporate strategy of profitable growth

   

 50%: quarterly operating profit before taxes, or OPBT, margin

 50%: year over year revenue growth (measured quarterly)

 Minimum OPBT margin required for payout

 

 Annual
Long-Term Incentives

 

 TSR PRSUs – 25%

   

 Align executive officer and shareholder interest to drive superior relative TSR results

   

 Cumulative three-year period

   

 Relative TSR compared to comparator group

 Payouts capped at target if absolute TSR is negative

 

   

 Financial
Metric
PRSUs – 25%

 

   

 Align executive officer and shareholder interests with long-term profitability

 

   

 One-year, two-year cumulative and three-year cumulative time periods

 

   

 Operating profit

   

 Stock Options
– 25%

   

 Align executive officer and shareholder interests in absolute stock price appreciation

 

   

 Four year graded vesting

 10 year term

   

 Absolute stock price appreciation

   

 RSUs – 25%

   

 Attract and retain key executives

 

   

 Four year graded vesting

   

 None

OPBT = Operating Profit Before Taxes     TSR = Total Shareholder Return

Process for Determining Fiscal 2021 Compensation

As part of its annual review of our executive compensation program, including NEO compensation, our Compensation Committee solicits the input of Mr. Roche and the Compensation Committee’s independent compensation consultant, Pearl Meyer, which reports directly to our Compensation Committee. The roles of our Compensation Committee, Pearl Meyer and management, including our CEO, CFO, and Human Resources and Legal departments, in setting our fiscal 2021 executive compensation program are summarized below.

In June 2020, Pearl Meyer and management recommended a peer group of companies for the purpose of assessing our executive compensation program, which was approved by the Compensation Committee. Management then gathered data from these companies as well as from the Radford Global Technology Survey, which was considered by Pearl Meyer in its analysis of Mr. Roche’s compensation, and by Mr. Roche in his recommendations on our other executive officers’ compensation. The Compensation Committee considered Pearl Meyer’s advice, Mr. Roche’s recommendations for those executive officers reporting to him, and management’s proposed fiscal 2021 performance goals prior to making its final and sole decision on all fiscal 2021 executive compensation. At the Compensation Committee’s direction, Pearl Meyer provided a risk analysis of our executive compensation program. Finally, the Compensation Committee also certified performance-based compensation payouts for the applicable periods ended fiscal 2021.

 

 

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During fiscal 2021, our Compensation Committee continued to use Pearl Meyer as its compensation consultant because of Pearl Meyer’s experience working with our Compensation Committee and with compensation committees at other technology companies. Our Compensation Committee analyzed whether Pearl Meyer’s role raised any conflicts of interest. In conducting its analysis, the Compensation Committee considers the following factors: (i) Pearl Meyer does not provide any services directly to ADI (although we pay Pearl Meyer on the Compensation Committee’s behalf), (ii) the percentage of Pearl Meyer’s total revenue resulting from fees paid by us on the Compensation Committee’s behalf, (iii) Pearl Meyer’s conflict of interest policies and procedures, (iv) any business or personal relationship between Pearl Meyer and an executive officer, or between Pearl Meyer’s individual compensation advisors and an executive officer or any member of our Compensation Committee, and (v) any ADI stock owned by Pearl Meyer or its individual compensation advisors. After considering these factors, our Compensation Committee determined that Pearl Meyer’s work did not create any conflicts of interest.

Market Compensation Data

The Compensation Committee has sought to select peer group companies that are publicly traded, are headquartered in the United States, compete with us for talent, and are similar to ADI in their product and services offerings, business model, revenue size and market capitalization.

As a result of rapid consolidation in the semiconductor industry over the last several years, in addition to companies that meet the criteria outlined above, the peer group also includes companies outside of the semiconductor industry. These additional companies are similar in size and have similar gross margins and research and development expenditures as the Company, include peers of peers and peers of other companies in our sector, and often compete with the Company for talent. Further to this review, our peer group companies for fiscal 2021 remained unchanged from fiscal 2020.

In fiscal 2021, the peer group companies used by the Compensation Committee to evaluate executive compensation consisted of the following companies:

 

2021 Peer Group

   

Advanced Micro Devices, Inc.

 

Maxim Integrated Products, Inc.

Agilent Technologies, Inc.

 

Microchip Technology Inc.

Applied Materials, Inc.

 

NetApp, Inc.

Boston Scientific Corporation

 

NVIDIA Corporation

Broadcom Limited

 

Skyworks Solutions Inc.

KLA-Tencor Corporation

 

Texas Instruments Inc.

Lam Research Corporation

 

Xilinx Inc.

Marvell Technology Group Ltd.

   

 

 

     2020 Market Capitalization      2020 Revenue  
 

 

   (as of April 2020) (in millions)      (in millions)  

Analog Devices

     $40,357        $5,603  

2021 Peer Group Median

     $25,725        $5,806  

For executive officers in positions for which the fiscal 2021 peer group companies do not publicly disclose compensation data, the Compensation Committee reviewed data collected from Radford’s Global Technology Survey. This survey depicts executive compensation levels across a wide spectrum of technology sector companies comparable to ADI in annual revenue size.

 

 

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Determining Fiscal 2021 Target Compensation Levels

Our executive compensation program is designed to attract and retain top executive talent and align the interests of our executive officers, including our NEOs, and shareholders. The level of compensation for our executive officers is determined through the following steps:

 

Step 1

   

Step 2

   

Step 3

LOGO

   

LOGO

   

LOGO

First, we ensure our executive compensation is competitive and attracts and retains top executive talent by understanding how the total target compensation (consisting of salary, bonus, and equity awards) of each of our executive officers compares to the total target compensation of those in similar positions within our peer group.     We then consider a variety of factors, including the scope of the role, tenure in the position, and the performance and experience of the individual when deciding how to position each executive officer’s total target compensation to the total target compensation of those in similar positions within our peer group.     We structure our compensation package to align our executive officers’ interests with those of our shareholders by tying a significant portion of their total compensation directly to ADI’s short- and long-term performance. For executive officers, this is measured by OPBT, OPBT margin, year-over-year revenue growth, absolute stock price appreciation, and relative total shareholder return, which all drive shareholder value.

Factors Considered in Determining Fiscal 2021 Target Compensation Levels

Chief Executive Officer Pay Determination. Mr. Roche has served as our President and Chief Executive Officer since May 2013. Under his leadership, the Company has experienced significant growth and transformation, including successfully completing the acquisition of Maxim Integrated in 2021. In determining Mr. Roche’s compensation as President and Chief Executive Officer for fiscal 2021, the Compensation Committee considered all elements of Mr. Roche’s compensation and compared his total target compensation to the median of chief executive officer compensation of our peer group companies. The Committee also considered Mr. Roche’s experience, tenure, and performance executing the Company’s strategy and driving long-term shareholder value. The design of Mr. Roche’s fiscal 2021 compensation provided incentives that linked realized compensation with Company performance.

Pay Determination for Other Executive Officers: In determining fiscal 2021 compensation for our other executive officers, including our named executive officers, including base salary levels, annual incentive payout targets, and fiscal 2021 equity grants, the Compensation Committee considered the executive’s individual responsibilities and other factors including their performance, tenure and market data, and benchmark information from our peer group companies.

 

 

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Components of Fiscal 2021 Executive Compensation

For fiscal 2021, compensation for our executive officers, including our named executive officers, consisted of the following principal elements:

 

 

Base Salary

 

 

  LOGO  

 

 

Cash Incentive

Bonus Award

 

 

 

  LOGO  

 

 

Long-term Equity Compensation

 

 

  LOGO  

 

 

Retirement and Other Employee Benefits

 Attract and retain executive talent

 

 Provide stable source of income

   

 Link pay and short-term Company performance

 

 Motivate and reward executives for achieving short-term Company financial objectives aligned with value creation

   

 Link pay and long- term Company performance

 

 Align the interests of executives with shareholders by rewarding long-term stock price appreciation

   

 Retain executive talent by providing financial protection and security

Base Salary

We use salaries for similar positions within our peer group companies as an important factor in setting the base salaries of our executive officers at a level designed to attract and retain talent. When setting the fiscal 2021 base salary for each individual executive officer, the Compensation Committee also considered other factors, including the scope of the role and the performance and experience of the individual.

Fiscal 2021 Executive Performance Incentive Plan

In September 2020, the Compensation Committee approved the terms of our executive performance incentive plan for fiscal 2021. The plan is designed to be variable, depending on ADI’s operating results.

All executive officers, including our NEOs, participated in our fiscal 2021 executive performance incentive plan.

We calculated and paid bonuses under this plan as follows:

 

Base

Salary

 

 

 

 

  LOGO  

 

 

 

Individual

Target

Bonus

Percentage

 

 

 

 

 

 

  LOGO  

 

Bonus

Payout

Factor

 

 

 

 

  LOGO  

 

Bonus

Payout

Individual Target Bonus Percentage. For fiscal 2021, the Compensation Committee set target percentages of 150% of base salary for our Chief Executive Officer and 100% of base salary for our other executive officers, including each of our NEOs. The Compensation Committee selected these target bonus percentages to ensure that a substantial portion of each executive officer’s cash compensation is performance-based and linked directly to our business performance, and to ensure that total compensation is competitive with those in similar positions within our peer group companies. Setting our Chief Executive Officer’s target at 150% also ties the majority of his cash compensation directly to Company performance.

Bonus Payout Factor. For fiscal 2021, we based the Bonus Payout Factor for the applicable quarterly bonus period on our OPBT margin and year-over-year revenue growth compared to the same quarter in the prior year. While our executive performance incentive plan contains quarterly performance targets, the Compensation Committee designed this plan to drive long-term performance. The targets are directly linked to our long-term corporate strategy of profitable growth, which drives shareholder value. We believe this combination ensures that we encourage a long-term focus on our business objectives, while measuring and rewarding progress against those objectives on a quarterly basis.

 

 

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The Compensation Committee reviews and approves our performance targets, and historically these targets have not been re-set during the performance period, regardless of Company performance or economic conditions. We believe that this approach fosters accountability for our business results and is in keeping with our core belief that variable compensation expense, which increases when our performance is good and contracts when it is poor, gives us maximum flexibility to operate our business. While the OPBT margin and year-over-year revenue growth targets are typically set annually, we measure performance against those targets on a quarterly basis, applying the corresponding Bonus Payout Factor to base salary for that quarter, and pay the bonus amounts to our executive officers on a semi-annual basis following the end of the second and fourth fiscal quarters.

In setting performance targets for our executive performance incentive plan, multiple factors are considered including our actual past business results, estimates of multi-year performance from our long-term strategic planning, and the performance of market competitors. Based on our evaluation of these factors the Compensation Committee determined that our fiscal 2021 OPBT margin and year-over-year revenue growth targets would remain the same as fiscal 2020 and that these quarterly performance targets were challenging and consistent with the Company’s long-term strategy, incentivizing continued industry-leading profit margins and long-term growth.

The Compensation Committee implemented the following targets1 for fiscal 2021:

 

50% of Bonus Based on

OPBT Margin

  

Bonus Payout

Factor

    

50% of Bonus Based

on Revenue Growth

    

Bonus Payout

Factor

 

£36%

  

 

0%

 

  

 

£0%

 

  

 

0%

 

39%

  

 

100%

 

  

 

5%

 

  

 

100%

 

42%

  

 

200%

 

  

 

10%

 

  

 

200%

 

³45%

  

 

300%

 

  

 

³15%

 

  

 

300%

 

We also have a floor on the OPBT margin target so that profitability at or below 36% will result in no bonus payments for that performance period, regardless of revenue growth levels.

Fiscal 2021 was a year in which we had strong financial results and robust year-over-year revenue growth.

 

(1)

Note: The Compensation Committee may adjust the OPBT margin and year-over-year revenue growth metrics in its sole discretion to exclude special items such as (but not limited to) restructuring-related expense, acquisition-related expense, amortization of intangibles, gain or loss on disposition of businesses, non-recurring royalty payments, and other similar non-cash or non-recurring items. The Compensation Committee may, in its discretion, exclude these items in order to prevent payments under the plan from being adversely or advantageously affected by special items. For purposes of determining the Bonus Payout Factor for each quarter of fiscal 2021, OPBT margin was adjusted to exclude acquisition-related expenses, acquisition-related transaction costs, and restructuring-related expenses (or special charges in the case of our fourth quarter financial results), consistent with the non-GAAP adjustments included in our fiscal 2021 quarterly earnings releases.

For fiscal 2021, the calculated OPBT Margin, Year-Over-Year Revenue Growth and Bonus Payout Factor under our executive performance incentive program for each quarter were as follows:

 

     OPBT Margin (50% weight)        Revenue Growth (50% weight)      

Quarterly Bonus
Payout Factor (average)

Quarter

  

OPBT Margin

(by quarter)

   Bonus Payout
Factor (by quarter)
       YOY Revenue
Growth (by quarter)
  

Bonus Payout

Factor (by quarter)

Q1

  

40.7%

  

158%

      

19.5%

  

300%

     

229%

Q2

  

41.7%

  

192%

      

26.1%

  

300%

     

246%

Q3

  

43.6%

  

252%

      

20.8%

  

300%

     

276%

Q41

  

42.6%

  

219%

      

16.7%

  

300%

     

260%

 

(1)

Results do not include results of Maxim Integrated

Aggregate payments under our executive performance incentive plan were made at 253% of target, compared to 77% in fiscal 2020 and 95% in fiscal 2019.

 

 

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Base Salary and Individual Target Bonus Percentages

In March 2021, as part of our standard annual review cycle, the Compensation Committee reviewed the base salaries and individual target bonus percentages for Mr. Roche and our other executive officers, including our NEOs. They considered several factors, including each executive officer’s performance, tenure, job responsibilities, market benchmark information from our peer group and continued uncertainties in the broader economy resulting from the COVID-19 pandemic. As a result of this review, the Compensation Committee decided to make no changes to base salary and target bonus percentages in fiscal 2021, except for Mr. Henderson whose base salary was increased by 2.2%. Ms. Sacks joined ADI in February 2021.

The Compensation Committee approved base salaries and target bonus percentages for our NEOs for fiscal 2021 as specified in the table below:

 

Name of Executive

 

Fiscal

2021

Base

Salary

   

Fiscal

2020

Base

Salary

    %
Increase
   

Fiscal 2021
Individual
Target Bonus
as % of

Base Salary

   

Fiscal 2020
Individual
Target Bonus
as % of

Base Salary

    %
Increase
 

Vincent Roche

President &

Chief Executive Officer

 

 

$1,050,000

 

 

 

$1,050,000

 

 

 

0%

 

 

 

150%

 

 

 

150%

 

 

 

0%

 

Prashanth Mahendra-Rajah

Senior Vice President, Finance and Chief Financial Officer

 

 

$575,000

 

 

 

$575,000

 

 

 

0%

 

 

 

100%

 

 

 

100%

 

 

 

0%

 

Martin Cotter

Senior Vice President, Industrial and Multi-Markets

 

 

$460,000

 

 

 

$460,000

 

 

 

0%

 

 

 

100%

 

 

 

100%

 

 

 

0%

 

John Hassett

Senior Vice President and Chief Operating Officer of the Maxim Integrated Business

 

 

$475,000

 

 

 

$475,000

 

 

 

0%

 

 

 

100%

 

 

 

100%

 

 

 

0%

 

Greg Henderson

Senior Vice President, Automotive & Energy, Communications and Aerospace Group

 

 

$460,000

 

 

 

$450,000

 

 

 

2.2%

 

 

 

100%

 

 

 

100%

 

 

 

0%

 

Anelise Sacks

Senior Vice President,

Chief Customer Officer

 

 

$425,000

 

 

 

N/A

 

 

 

N/A

 

 

 

100%

 

 

 

N/A

 

 

 

N/A

 

Equity Compensation

Our equity compensation program is a broad-based, long-term employee rewards program that is intended to attract, retain and motivate our employees, executive officers and directors and to align their interests with those of our shareholders. We believe that our equity program is critical to our efforts to hire and retain the best talent in the extremely competitive analog semiconductor industry. All equity awards granted to our executive officers, including our NEOs, in fiscal 2021 were made under the 2020 Plan.

Equity Mix. The most significant portion of our executive officers’, including our NEOs’, total compensation is in the form of equity awards, the value of which is directly tied to our stock price performance over the long term. In fiscal 2021, approximately 75% of the average total target compensation of our NEOs was in the form of equity.

 

 

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In fiscal 2021, the form and mix of equity awards delivered as part of our annual equity award program for our executive officers, including our NEOs, was as follows:

 

 Equity
 Award Type
  Value of
Annual
Grant
  Purpose   TimePeriod   Performance
Metrics
  Payout

Relative
TSR PRSUs

  25%   Align executive officers’ and

shareholders’ interests to

drive superior TSR relative

to comparison group

  3-year performance

period. Earned shares

(if any) vest 3 years +14

days after grant date

  ADI’s 3-year

TSR compared

to median of a

comparator group

  0–200%

Financial
Metric PRSUs

  25%   Align executive officers’

and shareholders’ interests

in long-term profitability

  1-year, 2-year cumulative

and 3-year cumulative

performance periods;

earned shares (if any)

vest on 3rd anniversary

of grant date. 3-year

cliff vesting

  1-year, 2-year

cumulative and

3-year cumulative

operating profit

(in dollars)

  0–200%

Stock
Options

  25%   Align executive officers’

and shareholders’ interests

in absolute stock price

appreciation

  • 4-year graded vesting

 

• 10-year term

  Absolute stock

price appreciation

  100% Value

only delivered

if stock price

appreciates

Time-Based
RSUs

  25%   Attract and retain

key executives

  4-year graded vesting   None   100% Value

in line with

stock price

performance

Equity Vehicle Structure

PRSUs. For fiscal 2021, approximately 50% of our annual equity awards to our executive officers, including our NEOs, were in the form of PRSUs. To ensure that a direct link exists between the value of our long-term incentives and the value that is created for our shareholders, our fiscal 2021 equity compensation program included two types of PRSUs for our executive officers: Relative TSR PRSUs and Financial Metric PRSUs.

Relative TSR PRSUs. The number of PRSUs that executive officers, including our NEOs, may earn is based on our TSR performance relative to the TSR performance of other companies in the Philadelphia Semiconductor Index (SOX Index) over a three-year period. The number of PRSUs vested is determined by ADI’s TSR performance relative to the median SOX Index company TSR. Target vesting of PRSUs is achieved when ADI’s TSR equals the TSR of the median company in the SOX Index. The actual amount of PRSUs that will be earned can range from 0%-200% of the target amount, and will adjust upward or downward from the target 100% payout by 1.5% for each percentage point ADI’s TSR is above or below that of the median company’s TSR. No shares will vest if ADI’s TSR is 66.67 percentage points lower than the median company’s TSR. The number of earned shares is capped at 100% if ADI’s TSR performance is negative.

The following table illustrates the percentage of target PRSUs that could be earned based on the Company’s relative TSR performance to the median company in the SOX Index:

 

ADI TSR

  Payout Percentage                

Equal to or greater than 66.67% above the median company TSR

  200%

Equal to Median Company TSR

  100%

Equal to or less than -66.67% below the median company TSR

  —%

Attainment within performance parameters is subject to interpolation on a linear basis.

 

 

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2018-2021 TSR PRSUs Payouts. The relative TSR PRSUs granted on March 29, 2018 had a three-year performance period that ended on March 29, 2021. The comparator group designated by the Compensation Committee for the relative TSR PRSUs granted in fiscal 2018 once again consisted of the companies represented in the SOX Index as of the grant date that are included in the SOX Index for the entire performance period. On a three-year cumulative basis, our TSR performance was 69.88%, compared to the median comparative peer group TSR of 121.96%. The median comparative peer group TSR performance exceeded the Company’s TSR performance by more than 50 percentage points, the performance threshold for the 2018 TSR PRSUs, which resulted in a payout percentage of 0% of target.

Financial Metric PRSUs. Beginning in fiscal 2019, the Compensation Committee has included Financial Metric PRSUs, based on non-GAAP operating profit in dollars, for our executive officers to incentivize long-term profitable growth measured over one-year, two-year cumulative and three-year cumulative time periods.

The Compensation Committee selected this metric because it is a key measure that executives use both internally to drive business decisions and externally when speaking to investors about Company results and progress against execution of the Company’s strategy. The use of multiple performance periods incentivizes executives to achieve short-term objectives that support our long-term strategy, as well as to focus on long-term financial growth. For each award, the Compensation Committee reviews and approves challenging targets taking into consideration the Company’s long-term strategic priorities and objectives.

The Compensation Committee does not re-set these targets during the performance period, regardless of Company performance or economic conditions.

The number of PRSUs an executive officer, including each NEO, may earn ranges from 0% to a maximum of 200% of the target amount based on the Company’s performance against the targets of this metric. The Compensation Committee determines the level of achievement of each tranche of Financial Metric PRSUs after the completion of each of the one-year, two-year cumulative and three-year cumulative performance periods. After such determination, the number of shares of PRSUs earned by an executive officer remains subject to a time-based service requirement and will cliff vest on the third anniversary of the grant date, subject to the executive’s employment through such date.

In December 2021, the Compensation Committee determined the level of achievement of the current Financial Metric PRSUs as follows:

2019 – 2021 Financial Metric PRSUs: The targets were set at the beginning of fiscal 2019, and the awards were granted in March 2019. The Compensation Committee reviewed the achievement of the third and final tranche of these awards, covering the three-year cumulative non-GAAP operating profit for fiscal 2019 through fiscal 2021, and determined that with a non-GAAP operating profit of $7.520 billion, which was below the non-GAAP operating profit maximum attainment level of $8.920 billion and the non-GAAP operating profit target attainment level of $8.305 billion, but above the non-GAAP operating profit minimum attainment level of $7.335 billion, the executives had achieved a 16% attainment level under this incentive compensation vehicle for that period. With all three measurement periods completed, and with the first and second tranches payable at 0%, the Company’s executive officers will earn an aggregate of 5.3% of the total target number of PRSUs subject to this incentive compensation vehicle.

2020 – 2022 Financial Metric PRSUs: The targets were set at the beginning of fiscal 2020, and the awards were granted in March 2020. The Compensation Committee reviewed the achievement of the second tranche of these awards, covering the two-year non-GAAP operating profit for fiscal 2020 and fiscal 2021, and determined that with a non-GAAP operating profit of $5.087 billion, which was above both the non-GAAP operating profit target attainment level of $4.481 billion and the non-GAAP operating profit maximum attainment level of $4.705 billion, 200% of the target number of PRSUs subject to the second tranche were earned by the Company’s executive officers under this incentive compensation vehicle for that period.

2021-2023 Financial Metric PRSUs: The targets were set at the beginning of fiscal 2021, and the awards were granted in March 2021. The Compensation Committee reviewed the achievement of the first tranche of these awards, covering the one-year non-GAAP operating profit for fiscal 2021, and determined that with a non-GAAP operating profit of $2.853 billion, which was above both the non-GAAP operating profit target attainment level of $2.392 billion and the non-GAAP operating profit maximum attainment level of $2.512 billion, 200% of the target number of PRSUs subject to the first tranche were earned by the Company’s executive officers under this incentive compensation vehicle for that period.

 

 

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Stock Options. We use stock options as a way to reward long-term value creation. Stock options granted to our executive officers, including our NEOs, in fiscal 2021 will vest 25% per year on each of the first four anniversaries of March 10, 2021, and are subject to a 10 year term.

Time-Based RSUs. In a volatile stock market, time-based RSUs continue to provide incentive and retentive value when stock options may not, which the Compensation Committee believes to be useful in retaining talented executives and employees in uncertain economic times. In this way, we use time-based RSUs as a retention tool and to enable our executive officers to accumulate stock ownership in the Company. Time-based RSUs granted to our executive officers, including our NEOs, in fiscal 2021 will vest 25% per year on each of the first four anniversaries of March 10, 2021.

Special Equity Awards

Maxim Integration PRSUs. To promote the successful integration of Maxim Integrated and the achievement of the Company’s synergy goals, in December 2020, the Compensation Committee approved the award of Maxim Integration PRSUs to a select group of key employees, including our NEOs, but excluding our CEO. The CEO received a different award, described in greater detail below, that vests contingent on significant stock price appreciation. Both awards ultimately incentivize the accomplishment of ADI’s long-term strategy and the creation of long-term shareholder value. However, the Compensation Committee determined it was important to incentivize the CEO to achieve substantial stock price appreciation following the all-stock Maxim Integrated acquisition, while focusing other executives on the more immediate objective of a successful integration.

The number of Maxim Integration PRSUs that may be earned ranges from zero to a maximum of 200% of the target amount of Maxim Integration PRSUs, or the Target Amount, and will be determined according to the achievement of three performance metrics set forth below. Any PRSUs earned will vest on the 60th day following the period, which we refer to as the Performance Period, which extends from December 15, 2020 until August 26, 2023, which is the two-year anniversary of the closing date of the Maxim Integrated acquisition, or the Acquisition Date. The performance metrics are designed to incentivize the achievement of stretch targets with respect to both the magnitude of cost synergies and the speed of delivery:

 

 

Operating Profit Goal: As a gatekeeping hurdle, the combined company must maintain a minimum average non-GAAP OPBT for the last four fiscal quarters completed as of the end of the Performance Period as a percentage of revenue. If this requirement is not met, then no Maxim Integration PRSUs will vest.

 

 

Synergy Performance Goal: Provided the Operating Profit Goal has been attained for the Performance Period, a number of Maxim Integration PRSUs ranging from zero to 150% of the Target Amount will vest based on the gross dollar amount of cost synergies attained following the Acquisition Date, as represented by the scale set forth below. For cost synergies to be deemed attained, either (i) cost synergies must take effect within the Performance Period, or (ii) cost synergies must take effect within the 12-month period following the Performance Period as a result of a firm commitment made during the Performance Period.

 

 

While the Synergy Performance goals cannot be disclosed due to competitive reasons, they are rigorous, with threshold performance set higher than the synergy target of $275 million that ADI announced at the time of the Maxim Integrated acquisition.

The number of Maxim Integration PRSUs that will vest will be calculated based on linear interpolation between targets.

 

Synergy Performance Goal Attained

  Percentage of Target Amount to Vest    

Minimum threshold as determined by the Compensation Committee

 

0%

Target threshold as determined by the Compensation Committee

 

100%

Maximum threshold as determined by the Compensation Committee

 

150%

 

 

Speed of Delivery Accelerator: If the minimum Synergy Performance Goal is fully realized within 18 months following the Acquisition Date, then an additional number of Maxim Integration PRSUs equal to 50% of the Target Amount will vest.

A recipient can only obtain the maximum 200% of the Target Amount if both (i) the minimum Synergy Performance Goal is attained within 18 months following the Acquisition Date, in which case the Speed of

 

 

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Delivery Accelerator will apply, and (ii) the maximum Synergy Performance Goal is attained within the Performance Period. The recipient must be employed on the vesting date in order for any of the Maxim Integration PRSUs to vest.

Dilution Considerations. The Company is committed to keeping dilution under its stock plans for employees at reasonable levels. Our gross and net dilution rate have been consistently lower than that of our peer group companies over the past several years.

CEO Performance Stock Option Award

In addition to the grants described above, in December 2020, the Compensation Committee approved the grant of a special performance stock option award to Mr. Roche, which we refer to as the CEO Performance Stock Option Award.

Since Mr. Roche’s tenure as CEO began in 2013 through the end of fiscal 2021, the Company’s total shareholder return has increased to 371%, which is 1.5x the S&P 500 return of 237% for the same time period, and the Company’s market capitalization has increased by more than $80 billion. The CEO Performance Stock Option Award was granted to provide Mr. Roche with a strong incentive to continue to create sustained exceptional growth in the Company and its stock price. The award carries a long-term performance period and rigorous stock price hurdles.

Before granting the CEO Performance Stock Option Award in December 2020, the Compensation Committee considered the following factors:

 

 

The key role that Mr. Roche has played in leading and transforming ADI since he became CEO in 2013 and the importance of his continued leadership during this critical phase of ADI’s growth, particularly given the Maxim Integrated acquisition, which was pending at the time;

 

 

Mr. Roche’s unique depth of understanding of ADI, strength of leadership capability and vision to drive the long-term corporate strategy and continued success of the Company;

 

 

The rapid changes and consolidation taking place within the semiconductor industry and the constant need to transform and grow within this highly competitive environment;

 

 

The importance of continuing to incentivize continued exceptional shareholder value creation over an extended timeframe, and

 

 

The importance of aligning Mr. Roche’s interests with those of our shareholders.

The CEO Performance Stock Option Award, designed by the Compensation Committee in consultation with Pearl Meyer, its independent compensation consultant, emphasizes sustainable shareholder value creation over time. The Compensation Committee specifically determined to issue this award in the form of performance-vested stock options such that Mr. Roche will only realize value from the award if significant increases in our stock price are sustained above the exercise price, thereby closely aligning with shareholder interests.

The CEO Performance Stock Option Award is exercisable for up to 460,000 shares of our common stock, or the Target Number of Shares, at an exercise price per share of $144.06 (which was the closing price of our common stock on the date of grant of the CEO Performance Stock Option Award) and vests subject to the satisfaction of certain challenging target price thresholds during a five-year period. The award was valued at $14.4 million on the date of grant. The value when annualized over the five-year performance period is $2.9 million per year, approximately one-third of the average value of Mr. Roche’s long-term incentive compensation over the past three years. The CEO Performance Stock Option Award was granted to Mr. Roche in addition to his annual equity awards for fiscal 2021. The Committee does not intend to grant Mr. Roche additional special awards during the performance period of this award.

 

 

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The target price thresholds, and the number of shares underlying the CEO Performance Stock Option Award that will become exercisable as a result of the attainment of each threshold, are set forth below. To determine meaningful but challenging target price thresholds, the Compensation Committee established a baseline stock price of $122.72, which was calculated as the 70-trading day average closing stock price on November 30, 2020. The target price thresholds were chosen to reward significant growth from our baseline stock price. The actual number of shares that will become exercisable will range from zero to a maximum of 100% of the Target Number of Shares based on the attainment of such target price thresholds at any time during a five-year period from December 15, 2020 to December 15, 2025.

 

Target Price Threshold

 

Share price % increase vs

baseline stock price of $122.72

 

Number of Shares Exercisable as a

Percentage of Target Number of Shares

$180 per share

 

47%

 

33%

$200 per share

 

63%

 

66%

$220 per share

 

79%

 

100%

A given target price threshold will be met, and the shares underlying the CEO Performance Stock Option Award that are associated with such threshold will become exercisable, when our average closing stock price over 70 consecutive trading days is equal to or exceeds the threshold. If a threshold is attained, the earned number of shares will become exercisable one year after the attainment date, or if earlier, on December 15, 2025, in each case provided that Mr. Roche continues to serve as our CEO (or in a substantially similar role as determined by our Board) on the applicable vesting date. There is no linear interpolation between target price thresholds and a threshold may be met only once.

Equity Awards Granted in Fiscal 2021

In fiscal 2021, the Compensation Committee granted equity awards to our NEOs as follows:

 

Name

  Standard
Stock
Options
    Time-
based
RSUs
    Relative
TSR
PRSUs
    Financial
Metric
PRSUs
   

Maxim

Integration
PRSUs

    CEO
Performance
Stock Option
    Total
Grant Date
Fair Value
 

Vincent Roche

 

 

70,786

 

 

 

19,361

 

 

 

19,361

 

 

 

19,361

 

 

 

— 

 

 

 

460,000

 

 

 

$25,709,208

 

Prashanth Mahendra-Rajah

    19,306       5,281       5,281       5,281       19,433              $5,769,343  

Martin Cotter

 

 

14,158

 

 

 

3,873

 

 

 

3,873

 

 

 

3,873

 

 

 

13,460 

 

 

 

 

 

 

$4,120,908

 

John Hassett

 

 

14,158

 

 

 

3,873

 

 

 

3,873

 

 

 

3,873

 

 

 

13,460 

 

 

 

 

 

 

$4,120,908

 

Greg Henderson

 

 

14,158

 

 

 

3,873

 

 

 

3,873

 

 

 

3,873

 

 

 

13,460 

 

 

 

 

 

 

$4,120,908

 

Anelise Sacks

 

 

8,366

 

 

 

2,289

 

 

 

2,289

 

 

 

2,289

 

 

 

11,377 

(1) 

 

 

 

 

 

$3,007,784

 

 

(1)

Ms. Sacks joined ADI in February 2021, and the Maxim Integrated PRSU award was granted to Ms. Sacks on March 15, 2021 rather than in December 2020.

Other Compensation Elements

Retirement and Other Employee Benefits

We maintain broad-based benefits for all employees, including health and dental insurance, life and disability insurance and retirement plans. Executive officers, including our NEOs, are eligible to participate in all of our employee benefit plans on the same basis as our other employees. The retirement and other employee benefit components of our executive compensation program are designed to attract excellent candidates by providing financial protection and security, and reward our executives for the total commitment we expect from them in service to ADI.

We maintain a Deferred Compensation Plan, or DCP, under which our executive officers and directors, along with a group of highly compensated management and engineering employees, are eligible to defer receipt of some or all of their cash compensation. This plan offers many of the same investment options as our 401(k) plan. Under our DCP, we provide all participants (other than non-employee directors) with Company contributions equal to 8% of eligible deferred contributions.

In the United States during fiscal 2021, we contributed to our 401(k) plan on behalf of all eligible employees, including our NEOs, amounts equal to 5% of the employee’s eligible compensation, plus matching contributions up to an additional 3%, subject to Internal Revenue Service, or IRS, limits. For those employees who also

 

 

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participated in the DCP described above, any compensation that was deferred under that plan was not considered eligible compensation for purposes of our Company contributions under the 401(k) plan. We also provided employees who are eligible to participate in the 401(k) plan but whose compensation is greater than the amount that may be taken into account in any plan year as a result of IRS limits ($290,000 for fiscal 2021), with a taxable payment equal to 8% of the employee’s 401(k)-eligible compensation in excess of the IRS limit.

Limited Perquisites

We do not award extensive perquisites to our executive officers. In fiscal 2021, we provided a voluntary health services benefit to executives and reimbursement for financial and tax planning services of up to $15,000 for our Chief Executive Officer and up to $10,000 for our other executive officers, including our NEOs. These items are detailed in the Summary Compensation Table below.

On occasion, and with the approval of our CEO, an officer or director may have his or her family members accompany him or her on the Company’s leased airplane when traveling on business. The executive or director may incur taxable income for any such travel in accordance with applicable tax rules. We do not gross-up or in any way compensate the officer or director for any income tax owed for any such travel. No such travel occurred in fiscal 2021.

In November 2021, ADI adopted a Post-Employment Equity Vesting policy under which eligible stock-based awards, including RSUs, restricted stock awards and stock options may continue to vest, subject to the terms of the policy, after an employee’s retirement. Awards issued to Executive Officers, including our NEOs, will be eligible for post-employment vesting under the policy.

Compensation Processes and Policies

Executive Stock Ownership Guidelines

Under our guidelines, the target stock ownership levels are five times annual base salary for the Chief Executive Officer, and three times annual base salary for other members of the Leadership Team. The Chief Executive Officer has four years from the date of his or her appointment as CEO to achieve his or her targeted level. Members of the Leadership Team other than the CEO have five years from the date he or she becomes part of the Leadership Team to achieve their targeted level. Shares subject to unexercised options, whether or not vested, and unvested PRSUs whose performance has not yet been certified by the Compensation Committee are not counted for purposes of satisfying these guidelines. Time-based RSUs (whether or not vested) and unvested PRSUs whose performance has been certified by the Compensation Committee are counted for purposes of satisfying the guidelines. All members of our Leadership Team, other than Mses. Sacks and Asgeirsson, who first joined ADI in fiscal 2021, were in compliance with our stock ownership guidelines as of the end of fiscal 2021. Mses. Sacks and Asgeirsson are expected to be in compliance with our stock ownership guidelines within the first five years of their appointment to the Leadership Team.

Compensation Recovery

Under the Sarbanes-Oxley Act, in the event of misconduct that results in a financial restatement that would have reduced a previously paid incentive amount, we can recoup those improper payments from our Chief Executive Officer and Chief Financial Officer. In addition, in December 2020, our Board of Directors adopted a compensation clawback policy. The policy provides that in the event of a material restatement of our financial results, the result of which is that any performance-based cash or equity compensation received by an executive officer, or awarded compensation, would have been lower had it been calculated based on such restated financial results, or actual compensation, the Compensation Committee may, in its sole discretion and as appropriate under the circumstances, seek to recover for our benefit all or a portion of the difference between the awarded compensation and the actual compensation of any executive officer whose fraud or willful misconduct caused or partially caused the need for such restatement. For purposes of the policy, the term “executive officer” has the meaning given to that term in Rule 3b-7 under the Securities Exchange Act of 1934, as amended.

We will amend our compensation clawback policy, if necessary, so that it is compliant with the regulations mandated under the Dodd-Frank Wall Street Reform and Consumer Protection Act when the regulations are adopted by the SEC and corresponding listing standards become effective.

 

 

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Equity Award Grant Date Policy

Our Compensation Committee has adopted specific policies regarding the grant dates of stock options, RSUs and other stock-based awards for our executive officers and employees. In each case, the exercise price of stock options equals the closing price of our common stock on the grant date.

 

 

New Hire Grants: The grant date of all awards to newly hired executive officers and employees is the 15th day of the month after the date on which the individual commences employment with us (or the next succeeding business day that Nasdaq is open).

 

 

Annual Grants: The grant date of all annual awards is the earlier to occur of (i) the scheduled date of the annual meeting of shareholders, or (ii) the first business day of April that Nasdaq is open.

 

 

Other Grants: All other awards granted to existing executive officers and employees throughout the year (off-cycle awards) have a grant date of the 15th day of the month (or the next succeeding business day that Nasdaq is open) provided the award is approved on or prior to such grant date.

 

 

Foreign Registrations: Any awards requiring registration or approval in a foreign jurisdiction will have a grant date of the 15th day of the month (or the next succeeding business day that Nasdaq is open) following the effective date of that registration or approval.

 

 

Blackout Periods: Our Compensation Committee does not approve off-cycle awards to our executive officers during the quarterly and annual blackout periods under our insider trading policy. The quarterly and annual blackout periods begin three weeks before the end of each fiscal quarter and end at the beginning of the second full trading day after we announce our quarterly earnings.

We describe the Equity Award Grant Date Policy for our non-employee directors above under “Corporate Governance—Director Compensation.”

Severance, Retention and Change in Control Benefits

Change in Control Benefits

We have entered into change in control retention agreements with each of our executive officers and other key employees. Among other things, these retention agreements provide for severance benefits if the employee’s service with us is terminated within 24 months after a change in control (as defined in each agreement) that was approved by our Board of Directors.

We designed the change in control retention agreements to help ensure that our executive team is able to evaluate objectively whether a potential change in control transaction is in the best interests of ADI and our shareholders, despite possible risks to their future employment. We believe that retaining the services of our key executives during a change in control scenario is critical. These agreements help ensure the continued services of our executive officers throughout the change in control transaction by giving them incentives to remain with us rather than seeking alternative employment or being recruited to a competitor during a highly uncertain time. The Compensation Committee reviewed prevalent market practices in determining the severance amounts and the events that trigger payments under the agreements. The Compensation Committee determined that the amounts and triggering events were appropriate and designed to encourage decision-making that is in the best interests of ADI. In fiscal 2021, the Compensation Committee asked Pearl Meyer, its independent compensation consultant, to review our severance, retention and change in control arrangements and Pearl Meyer determined that those arrangements were competitive with existing market practice in the semiconductor industry and that it was appropriate to maintain the program for fiscal 2021. Change in control retention agreements entered into between the Company and eligible employees since 2009 do not contain excess parachute payment tax gross-up provisions.

Under our 2020 Plan and our 2006 Plan, in the event of a change in control, all of our employees who continue to remain employed on the closing of the change in control, including our NEOs, would have the vesting of one-half of the shares of common stock subject to their then outstanding unvested equity awards accelerate and become immediately exercisable and free from forfeiture. The remaining one-half of their unvested equity awards would continue to vest in accordance with the original vesting schedules, and any remaining unvested equity awards would vest if, on or prior to the first anniversary of the change in control, his or her employment is terminated without “cause” or for “good reason” (as defined in the plan). We have provided more detailed information about these benefits, along with estimates of their value under various circumstances, under the caption “—Potential Payments Upon Termination or Change in Control” below.

 

 

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Severance Benefits

When the employment of an executive officer terminates in a situation that does not involve a change in control, the executive officer is entitled to receive the same benefits as any other terminated employee in that geographical location.

Tax and Accounting Considerations

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation in excess of $1 million paid to certain of the Company’s executives. Pursuant to the Tax Cuts and Jobs Act of 2017, or the Tax Act, for fiscal years beginning after December 31, 2017, the group of executives whose compensation is subject to the deduction limitation is broader than under prior law. Prior to the effectiveness of the Tax Act, the deduction limit did not apply to “performance-based compensation” satisfying the requirements of Section 162(m). For fiscal years commencing after December 31, 2017 and future tax years, subject to the transition rules, all compensation in excess of $1 million paid to the specified executives will not be deductible.

Mr. Roche has a change in control retention agreement that contains provisions regarding Section 280G of the Internal Revenue Code. Since 2009, any new executive compensation arrangements for new executives do not contain tax gross up provisions for excess parachute payments.

We expense in our financial statements the compensation that we pay to our executive officers, as required by U.S. generally accepted accounting principles. As one of many factors, the Compensation Committee considers the financial statement impact in determining the amount of, and allocation among the elements of, compensation. We account for stock-based compensation under our 2020 Plan, 2006 Plan, 2005 Plan, 2010 Plan, and 1996 Plan, as well as all predecessor plans, in accordance with U.S. generally accepted accounting principles.

Risk Considerations in Our Compensation Program

In fiscal 2021, our Compensation Committee reviewed our incentive compensation programs, discussed the concept of risk as it relates to our compensation program, considered various mitigating factors and reviewed these items with its independent consultant, Pearl Meyer. In addition, our Compensation Committee asked Pearl Meyer to conduct an independent risk assessment of our executive compensation program. Based on these reviews and discussions, the Compensation Committee does not believe that any risks arising from our employee compensation policies and practices are reasonably likely to have a material adverse effect on our company. Our Compensation Committee believes that any such risks are mitigated by the following factors, among others:

 

 

We structure our pay to consist of both fixed and variable compensation with short- and long-term horizons. We feel that the variable elements of compensation, which represented 92% and 84% of the total target compensation for our CEO and other NEOs, respectively, for fiscal 2021, are a sufficient percentage of overall compensation to motivate executives to produce superior short- and long-term corporate results and to achieve Company goals, while the fixed element is also sufficiently high that the executives are not encouraged to take unnecessary or excessive risks in doing so.

 

 

We believe that our focus on both OPBT margin and year-over-year revenue growth through our executive performance incentive plan, and operating profit and stock price performance through our equity compensation program, provides a check on excessive short-term risk taking. That is, even if our executives could inappropriately increase OPBT margin or revenue by excessively reducing expenses or adding new revenue sources that are inconsistent with our business model, this could ultimately harm our stock price and the value of their equity awards. Conversely, if our executives were to add revenue sources at low margins in order to generate a higher growth multiple and increased stock prices, it could decrease OPBT margin and the value of their cash bonus payments. Our OPBT margin and year-over-year revenue targets are applicable to our executives and employees alike, which we believe encourages consistent behavior across the organization, and reflect goals that are challenging, but not so high that they require performance outside of what the Compensation Committee believes is reasonable for us or could motivate our executives and employees to take actions in which we assume unreasonable levels of risk.

 

 

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We cap our bonus payout factors. Even if we dramatically exceed our OPBT margin or year-over-year revenue growth targets, bonus payments are limited. In fiscal 2021, the bonus payment factor cap was 300% of target. Conversely, we also have a floor on the OPBT margin target so that profitability at or below 36% will result in no bonus payments for that performance period, regardless of revenue growth levels. We believe this avoids incentivizing management to drive revenue levels without regard to profitability.

 

 

Our stock ownership guidelines provide an incentive for management to consider ADI’s long-term interests because a portion of their personal investment portfolio consists of ADI stock.

Summary Compensation Table

The following table contains certain information about the compensation that our named executive officers earned in fiscal 2021, fiscal 2020 and fiscal 2019.

 

  Name and

  Principal Position

  Fiscal
Year
    Salary ($)    

Bonus

($)(1)

   

Stock

Awards

($)(2a)

   

Option

Awards

($)(2b)

   

 

Non-Equity

Incentive Plan

Compensation

($)(3)

   

All Other

Compensation

($)(4)

    Total ($)  

 

 Vincent Roche

 President and Chief

 Executive Officer

 

 

 

 

2021

 

 

    1,050,000             8,591,204       17,118,004       3,981,115       84,000       30,824,323  
 

 

 

 

2020

 

 

    1,050,000             7,505,999       2,484,988       1,229,106       87,825       12,357,918  
 

 

 

 

2019

 

 

    1,030,769             7,039,560       2,362,177       1,430,337       85,591       11,948,434  

 Prashanth Mahendra-Rajah

 Senior Vice President,

 Finance and Chief

 Financial Officer

 

 

 

 

2021

 

 

    575,000             5,024,568       744,775       1,453,423       57,200       7,854,966  
 

 

 

 

2020

 

 

    575,000             1,951,648       646,093       448,721       57,200       3,678,662  
 

 

 

 

2019

 

 

    565,385             1,851,447       621,295       523,413       153,136       3,714,676  

 

 Martin Cotter

 Senior Vice President,

 Industrial and Multi-Markets

 

 

 

 

2021

 

 

    460,000             3,574,729       546,179       1,162,738       37,676       5,781,322  
 

 

 

 

2020

 

 

    460,000             1,351,289       447,305       358,977       36,800       2,654,371  
 

 

 

 

2019

 

 

    456,154             1,178,980       408,592       395,809       103,098       2,542,633  

 John Hassett

 Senior Vice President,

 and Chief Operating Officer

 of the Maxim Integrated

 Business (5)

 

 

 

 

2021

 

 

    475,000             3,574,729       546,179       1,200,654       53,963       5,850,525  
 

 

 

 

2020

 

 

    475,000             1,351,289       447,305       370,683       51,767       2,696,044  
               
    2019       471,154             1,234,544       414,212       437,875       45,899       2,603,684  

 Greg Henderson

    2021       456,154             3,574,729       546,179       1,153,669       42,142       5,772,873  

 Senior Vice President,

 Automotive & Energy,

 Communications and

 Aerospace Group

 Anelise Sacks

 Senior Vice President and

 Chief Customer Officer (6)

    2021       294,231       400,000       2,673,979       333,805       769,250       323,619       4,794,884  

 

(1)

Represents a cash sign-on bonus paid in connection with commencement of employment.

(2) a.

Amounts represent the aggregate grant date fair value of time-based RSUs and PRSUs granted in fiscal 2021, 2020 and 2019.

  b.

Amounts represent the aggregate grant date fair value of stock options and performance-based stock options granted in fiscal 2021, 2020 and 2019.

These amounts do not represent the actual amounts paid to or realized by the NEO for these awards during the respective fiscal years. We recognize the value as of the grant date for stock options and time-based RSUs and PRSUs over the number of days of service required for the grant to become vested.

 

 

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The following table includes the assumptions, rounded to the nearest hundredth, that we used to calculate the grant date fair value reported for fiscal years 2021, 2020 and 2019 on a grant-by-grant basis and the grant date fair value of relative TSR PRSUs and financial metric PRSUs, assuming the achievement of the maximum level of performance conditions.

 

Name

  Grant Date    

Options/

Restricted

Stock Units

Granted (#)

   

Exercise

Price ($)

   

Volatility

(%)

   

Expected

Life

(Years)

   

Risk-

Free
Interest
Rate (%)

   

Dividend

Yield (%)

   

Grant Date

Fair Value

($) Per

Share

   

Grant Date

Fair Value at

Maximum

Achievement

Level for

Performance

Based RSUs ($)

 

Vincent

Roche

    3/29/2018       26,366                         2.54       2.11       86.51          
    3/29/2018       26,366 **            25.63             2.37       2.08       101.23       5,338,060  
    3/29/2018       110,661       91.13       27.77       5.0       2.64       2.11       20.83          
    3/13/2019       22,763                       2.42       2.00       102.89          
    3/13/2019       22,763 **            24.07             2.38       2.00       114.36       5,206,353  
    3/13/2019       22,763 ***                        2.42       2.00       92.00       4,636,823  
    3/13/2019       100,803       108.08       26.32       5.0       2.42       2.00       23.43          
    3/11/2020       27,368                       0.66       2.63       88.28          
    3/11/2020       27,368 **            27.99             0.58       2.59       97.71       5,348,255  
    3/11/2020       27,368 ***                        0.66       2.63       88.28       4,832,094  
    3/11/2020       134,620       94.41       29.49       5.0       0.66       2.63       18.46          
    12/15/2020       460,000 ****      144.06       30.42       (7)       0.94       1.72       31.28       14,387,265  
    3/10/2021       70,786       147.11       35.25       5.0       0.80       1.88       38.58          
    3/10/2021       19,361                       0.80       1.88       140.30          
    3/10/2021       19,361 **            37.47             0.32       1.86       163.14       6,317,108  
    3/10/2021       19,361 ***                        0.80       1.88       140.30       5,432,696  

Prashanth

Mahendra-

Rajah

    3/29/2018       8,287                       2.54       2.11       86.51          
    3/29/2018       8,287 **            25.63             2.37       2.08       101.23       1,677,786  
    3/29/2018       34,779       91.13       27.77       5.0       2.64       2.11       20.83          
    3/13/2019       5,987                       2.42       2.00       102.89          
    3/13/2019       5,987 **            24.07             2.38       2.00       114.36       1,369,347  
    3/13/2019       5,987 ***                        2.42       2.00       92.00       1,219,552  
    3/13/2019       26,513       108.08       26.32       5.0       2.42       2.00       23.43          
    3/11/2020       7,116                       0.66       2.63       88.28          
    3/11/2020       7,116 **            27.99             0.58       2.59       97.71       1,390,609  
    3/11/2020       7,116 ***                        0.66       2.63       88.28       1,256,401  
    3/11/2020       35,001       94.41       29.49       5.0       0.66       2.63       18.46          
    12/15/2020       19,443 *****                        0.37       1.72       137.90       5,362,379  
    3/10/2021       19,306       147.11       35.25       5.0       0.80       1.88       38.58          
    3/10/2021       5,281                       0.80       1.88       140.30          
    3/10/2021       5,281 **            37.47             0.32       1.86       163.14       1,732,084  
    3/10/2021       5,281 ***                        0.80