DEF 14A 1 masi-20210415xdef14a.htm DEF 14A Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No.    )
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ýDefinitive Proxy Statement
oDefinitive Additional Materials
oSoliciting Material Pursuant to §240.14a-12
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MASIMO CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Table of Contents
ABOUT MASIMO
About Masimo                                        
“Improve patient outcomes and reduce the cost of care”
________________________
Masimo Corporation is a global medical technology company that develops, manufactures and markets a variety of noninvasive patient monitoring technologies, hospital automation solutions, home monitoring devices and consumer products. Our mission is to improve patient outcomes and reduce the cost of care. Our patient monitoring solutions generally incorporate a monitor or circuit board, proprietary single-patient use or reusable sensors, software and/or cables. We primarily sell our products to hospitals, emergency medical service providers, home care providers, physician offices, veterinarians, long-term care facilities, and consumers through our direct sales force, distributors and original equipment manufacturer partners, and through our website. Our core measurement technologies are Measure-through Motion and Low Perfusion pulse oximetry, known as Masimo Signal Extraction Technology® (SET®) pulse oximetry, and advanced rainbow® Pulse CO-Oximetry parameters such as noninvasive hemoglobin (SpHb®), alongside many other technologies, including brain function monitoring, regional oximetry, acoustic respiration rate monitoring, caponography, nasal high-flow respiratory support therapy, patient position and activity tracking, and neuromodulation technology for the reduction of symptoms associated with opioid withdrawal. Masimo measurements are available on many types of devices, from bedside hospital monitors like the Root® Patient Monitoring and Connectivity Hub, to various handheld and portable devices, and to the tetherless Masimo SafetyNet remote patient surveillance solution. The Masimo Hospital Automation Platform facilitates data integration, connectivity, and interoperability through solutions like Patient SafetyNet, Replica, and UniView to facilitate more efficient clinical workflows and help clinicians provide the best possible care, both in-person and remotely. Leveraging our expertise in hospital-grade technologies, we are also expanding our suite of products intended for use outside the hospital and products for consumers, including Sleep and the Radius Tº wireless, wearable continuous thermometer.
An industry leader in patient monitoring

9 of the
top 10 U.S. hospitals
have chosen Masimo as their primary pulse oximetry provider.(1)
 More than
200
million
patients monitored each year using Masimo SET® technology.(2)
17%
estimated
installed base
growth in
FY 2020.
2.2 million
technology boards
and instruments have shipped over the last 10 years.
Our long-range plan
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8 to 10%
product revenue growth
30%
operating margins
$300 million
free cash flow(3)
____________________________
(1) As listed in the 2019 - 2020 U.S. News and World Report Best Hospitals Honor Roll.
(2) In leading hospitals and other healthcare settings around the world.
(3) Free cash flow is a non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.


        
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Letter to Masimo Corporation Stockholders
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Joe Kiani
Chairman and Chief Executive Officer
April 15, 2021
Dear Fellow Stockholders:
Last year was full of challenges for our customers and for millions of patients around the world who struggled to overcome the burden and effects of the COVID-19 (“COVID”) pandemic. Throughout 2020, as our customers on the front lines responded to this crisis and tried to save as many lives as possible under life-threatening conditions, we responded to their demands to rapidly secure and install new monitoring technologies, enabling them to accommodate more critically ill patients than ever before, even at home.
Within this tough environment, I am proud to say that our team contributed to the critical solutions that were, and are still, required to manage this pandemic. In the midst of the pandemic, last year was also a milestone year for Masimo as our revenues exceeded $1 billion for the first time since our founding over 30 years ago. Today, we are even more committed to helping our customers overcome the persistent challenges related to this pandemic with an expanding portfolio of products to improve patient outcomes.
We realized many significant achievements in 2020 such as the introduction of our Masimo SafetyNet system for enabling hospital-to-home monitoring while also capturing a wider customer base for our Patient SafetyNet solution that enables hospitals to streamline workflows and improve patient care, especially where hospital staff are overwhelmed due to many COVID patient admissions. Within Masimo, our dedicated team was nimble in its response to our customers in the face of significant demand for our existing products, while at the same time expanding our portfolio. This expansion included several important products beyond SafetyNet for COVID, some organic, such as the Radius-Tº continuous wearable thermometer, Centroid continuous wearable bed sore and fall detection monitor, and Masimo SafetyNet-OPEN to help institutions open and stay open safely, and other important products acquired through acquisitions, such as the SoftFlow High Flow Nasal Cannula respiratory support system from TNI and the LiDCO cardiac output and hemodynamic monitor. We are excited to bring these clinically relevant technologies to our growing customer base around the world.
On the financial front, we were happy to report full-year 2020 results that exceeded expectations and set the stage for another promising year ahead. For the full-year, our product revenues increased 22% to reach one billion, one hundred and forty-four million ($1,144 million). In addition, we delivered GAAP EPS growth of 20% to reach $4.14 per share and non-GAAP EPS(1) growth of 12% to reach $3.60 per share.
We were able to achieve this level of performance despite the unprecedented challenges related to the pandemic facing our organization, which required many modifications to our operations and the sheer determination and commitment of our team. We instituted multiple safety measures throughout, including at our manufacturing facilities, such as regular health and temperature checks as well as safe transportation protocols for our team members. This internal solution was the basis for Masimo SafetyNet-OPEN, recently launched worldwide for others to use. Changes to our operations also included the production of greater inventory levels of the products our customers relied upon to provide care to their patients as we believed it prudent to prepare for a scenario where COVID would prevent our plants from operating. Fortunately, that never happened and hopefully will not happen, but we will continue to be prepared. Our customer interactions in the field were also carefully maintained in the face of heavy restrictions on hospital visitors, as our sales and installation teams rose to the occasion to ensure timely deliveries, training and product activations as rapidly as possible. Lastly, while many of our team members worked from home, most of our exceptional team of engineers continued their activities at Masimo facilities to maintain the unparalleled pace of innovation that has always been our hallmark.
Thank you for your continued support of Masimo and I hope you will be able to join us for the Annual Meeting.
Joe Kiani
Chairman and Chief Executive Officer
____________
(1) Constant currency product revenue and non-GAAP EPS are non-GAAP financial measures - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.



        
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NOTICE OF 2021
ANNUAL MEETING
OF STOCKHOLDERS
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How to Attend the Virtual Stockholders’ MeetingDate: Thursday. May 27, 2021
Virtual Stockholders Meeting at:Time: 2:00 p.m., Pacific Daylight Time
www.meetingcenter.io/216850033Who Can Vote
Due to continuing COVID-19 related restrictions, this year’s Annual Meeting of Masimo Stockholders will be held virtually. The Annual Meeting will begin promptly at 2:00 p.m. Pacific Daylight Time. If you plan to participate in the meeting, please see the instructions on page 96 of this Proxy Statement. Stockholders of record will be able to listen, vote, and submit questions from their home or anywhere that has Internet connectivity. There will be no physical location for stockholders to attend the Annual Meeting. Stockholders may only participate online by logging in at www.meetingcenter.io/216850033.
The record date for the 2021 Annual Meeting of Stockholder’s is April 5, 2021. Only stockholders of record at the close of business on that date may vote at the Annual Meeting.
ITEMS OF BUSINESS:Board RecommendationPage Reference
1.Election of a Class II director as named in our Proxy Statement;
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FOR each95
2.
Ratification of appointment of Grant Thornton LLP as our independent registered public accounting firm for our fiscal year ending January 1, 2022;
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FOR97
3.Advisory vote to approve named executive officer compensation; and
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FOR98
4.To conduct any other business properly brought before the Annual Meeting and any adjournment or postponement thereof.
How to Cast Your Vote (See page 103 for additional details.)
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By InternetTelephoneMail
Visit 24/7Dial the toll-free telephone number listed on your proxy card under the heading “vote by telephone”Cast your ballot, sign the proxy card and drop in the mailbox
www.meetingcenter.io/216850033
By order of the Board of Directors,
/s/ JOE KIANI
Chairman & Chief Executive Officer
Irvine, California
April 15, 2021


        
Table of Contents

PROXY STATEMENT TABLE OF CONTENTS
NOTICE OF 2021 ANNUAL MEETING OF STOCKHOLDERS.................................................................
PROXY STATEMENT SUMMARY.................................................................................................................
1CORPORATE GOVERNANCEOur Executive Officers..........................................................
Our Board of Directors.........................................................
Corporate Governance Guidelines.......................................
Consideration of Director Nominees....................................
Board Leadership Structure.................................................
Board’s Role in Risk Oversight............................................
Investor Feedback and Engagement....................................
Corporate Responsibility and Sustainability......................
Cybersecurity Risk Practices................................................
Human Capital Management...............................................
Charitable Outreach..............................................................
Adoption of Proxy Access.....................................................
Meetings and Executive Sessions..........................................
Policy Regarding Board Member Attendance at Annual Meetings..................................................................................
Independence of the Board of Directors..............................
Code of Business Conduct and Ethics..................................
Stockholder Communications with the Board of Directors.................................................................................
Information Regarding Board Committees........................
Non-Employee Director Compensation...............................
2
 AUDIT COMMITTEE MATTERS
Audit Committee’s Pre-Approval Policies and Procedures..............................................................................
Principal Accountant Fees and Services..............................
Audit Committee Report.......................................................
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3EXECUTIVE COMPENSATIONCompensation Discussion and Analysis...............................
Compensation Committee Report........................................
Compensation Committee Interlocks and Insider Participation...........................................................................
Summary Compensation Table............................................
Grants of Plan-Based Awards During Fiscal Year 2020....
Outstanding Equity Awards on January 2, 2021................
Option Exercises and Stock Vested During Fiscal Year 2020.........................................................................................
Employment Arrangements with Named Executive Officers....................................................................................
Pay Ratio Disclosure..............................................................
4OWNERSHIP OF OUR STOCKSecurity Ownership of Certain Beneficial Owners and Management...........................................................................
Securities Authorized for Issuance Under Equity Compensation Plans..............................................................
Stock Ownership Policy........................................................
Non-Employee Director Stock Ownership Policy...............
5PROPOSALS TO BE VOTED ONPROPOSAL 1: Election of Director....................................
PROPOSAL 2: Ratification of Selection of Independent Registered Public Accounting Firm.....................................
PROPOSAL 3: Advisory Vote to Approve the Compensation of Our Named Executive Officers...............
6ADDITIONAL INFORMATIONTransactions with Related Persons, Promoters and Certain Control Persons........................................................
Questions and Answers You May Have About These Proxy Materials and Voting..................................................
Householding..........................................................................
Annual Report on Form 10-K..............................................
Important Notice Regarding Availability of Proxy Materials for Stockholders Meeting to be Held on May 27, 2021...................................................................................
Other Matters.........................................................................
Appendix A...........................................................................................................................................................A-1
Appendix B...........................................................................................................................................................B-1
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YOUR VOTE IS IMPORTANT
You are cordially invited to attend the meeting. Whether or not you expect to attend the meeting, please complete, date and sign and return the enclosed proxy or submit your proxy through the internet or by telephone as promptly as possible in order to ensure your representation at the meeting. If you choose to submit your proxy by mail, a return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience. Even if you have voted by proxy, you may still vote electronically at the meeting. Please note, however, if your shares are held of record by a broker, bank or other agent and you wish to vote electronically at the meeting, you must obtain a proxy issued in your name from that record holder.
The Notice of Internet Availability of Proxy Materials containing instructions on how to access this Proxy Statement and our annual report is first being mailed on or about April 15, 2021 to all stockholders entitled to receive notice of and to vote at the Annual Meeting.
SPECIAL NOTE ON FORWARD LOOKING INFORMATION
This Proxy Statement contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements. These statements are often identified by the use of words such as “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “ongoing”, “opportunity”, “plan”, “potential”, “predicts”, “seek”, “should”, “will” or “would”, and similar expressions and variations or negatives of these words. These forward-looking statements are based on the expectations, estimates, projections, beliefs and assumptions of our management based on information currently available to management, all of which is subject to change. Such forward-looking statements are subject to risks, uncertainties and other factors that are difficult to predict and could cause our actual results and the timing of certain events to differ materially and adversely from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed under Item 1A-“Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended January 2, 2021, as filed with the Securities and Exchange Commission on February 23, 2021. Furthermore, such forward-looking statements speak only as of the date of this Proxy Statement. We undertake no obligation to update or revise publicly any forward-looking statements to reflect events or circumstances after the date of such statements for any reason, except as required by law.

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PROXY STATEMENT SUMMARY
PROXY STATEMENT SUMMARY
The Annual Meeting and this Proxy Statement provide an important opportunity for us to communicate with you about the achievements of the past year and the leadership of Masimo. As you consider your vote, we ask that you carefully review the information in this Proxy Statement, which includes an overview of our business and summarizes key aspects of our performance, executive compensation and corporate governance.

The following summary highlights certain information contained elsewhere in this Proxy Statement. This summary does not contain all the information that you should consider, and you should read the entire Proxy Statement carefully before voting.
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Date and TimeLocationRecord Date
Thursday, May 27, 2021, 2:00 p.m. PDT
The 2021 Annual Meeting of Masimo Stockholders will be held virtually. Please visit www.meetingcenter.io/216850033
to join the meeting.
April 5, 2021
Voting Matters and Recommendations
ProposalsPage No.Board
Recommendations
 1To elect a Class II Director as named in our Proxy StatementPage 89FOR
2
To ratify the selection of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending January 1, 2022
Page 91FOR
3To provide an advisory vote to approve the compensation of our named executive officersPage 92FOR
New for 2020
This year’s proxy statement includes a discussion of the impact of COVID-19 on our business, as well as expanded discussions regarding executive compensation, corporate responsibility and sustainability matters, our human capital and our cybersecurity risk practices. We believe that a deeper understanding of our approach to these issues will assist you in your consideration of our proposals.
l Discussion of COVID-19’s impact on the business
see page 44
l Enhanced transparency on the design of Masimo’s executive compensation programs
see pages 48-66
l Expanded focus on corporate responsibility and sustainability matters, human capital management and cybersecurity risk practices
see pages 29-31


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PROXY STATEMENT SUMMARY
Fiscal 2020 Performance Highlights
Our performance in fiscal 2020 demonstrates yet another year of strong execution towards our long-range plan and enabled us to reinvest in the business to drive growth and deliver long-term stockholder value.
1-Year Financial Performance | Year-Over-Year Growth Rates (FY2019 to FY2020)
l
22% GAAP product revenue growth
l
22% Non-GAAP product revenue(1) growth
l16% GAAP operating profit growthl
17% Non-GAAP operating profit(1) growth
l
20% GAAP EPS growth
l
12% Non-GAAP EPS(1) growth
3-Year Financial Performance | Compound Annual Growth Rates (CAGR) (FY2017 to FY2020)
l13% GAAP product revenue growthl
16% Non-GAAP product revenue(1) growth
l12% GAAP operating profit growthl
24% Non-GAAP operating profit(1) growth
l23% GAAP EPS growthl
28% Non-GAAP EPS(1) growth
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Fiscal 2020 Performance Highlights(1)
l Shipped 472,300 non-invasive technology boards and monitors, which reflects a 92% increase over the prior year.
l Shipped over 2.2 million non-invasive technology boards and monitors over the last 10 years, which reflects a 17% increase over the prior year.
l Product revenues increased 22% or $207 million, to reach $1,144 million, which exceeded our original FY2020 financial guidance of $1,035 million.
l GAAP operating profit was $256 million and non-GAAP operating profit was $264 million, growing 16% and 17% over the prior year, respectively.
l GAAP EPS increased 20% to reach $4.14 per diluted share. Non-GAAP EPS increased 12% to reach $3.60 per diluted share, which exceeded our original FY2020 guidance of $3.56 per diluted share.
l Delivered $211 million of operating cash flow, despite a year marked by substantial inventory investment to sustain our operations during the pandemic.
l Successfully completed three acquisitions during FY2020 with a total value of $113 million.
l Repurchased 453,000 shares of Masimo common stock, valued at $111 million.
______________________
(1)/*    Non-GAAP Product Revenue, Non-GAAP Operating Profit and Non-GAAP EPS are non-GAAP financial measures - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.

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PROXY STATEMENT SUMMARY
Cumulative Total Stockholder Return (TSR)
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Our 2020 TSR of 68% reflects our strong financial results in FY2020. Furthermore, our TSR has outperformed those of the Nasdaq Composite and the Nasdaq Medical Equipment Indices over a 1-year, 3-year and 5-year period.

Corporate Governance Highlights
Board IndependenceBoard Effectiveness
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All of our non-employee directors are independent
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All directors attended more than 75% of the Board and their committee meetings
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Maintain an independent Compensation Committee
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Commitment to Board refreshment with three new independent directors since 2016
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Compensation Committee retains an independent compensation advisor
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Diverse Board with mix of skills, tenure and age
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Director nominee selection process aligned with our long-term strategic plans
Best PracticesStockholder Rights
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Stock ownership policy for executive and Board members
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Annual stockholder advisory vote on named executive officer compensation
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Annual compensation-related risk assessment
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Stockholder engagement that includes our Compensation Committee Chairperson
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Annual executive compensation review
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Stockholders have proxy access with market standard conditions for director nominations
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Compensation recovery (“Clawback”) policy
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No stockholder rights plan (“poison pill”)
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No hedging; pledging requires pre-approval



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PROXY STATEMENT SUMMARY
Executive Compensation Highlights
Masimo’s executive compensation programs are designed to align the interests of Masimo’s executive officers with those of its stockholders, attract and retain highly-talented individuals and support our long-term growth and profitability goals. Our compensation programs provide a mix of fixed, variable and long-term incentive (“LTI”) compensation elements that are closely aligned with company performance and are sensitive to our stock performance, including the following:
TypeComponentObjective
Fixed compensationBase salary
l
Fixed portion of annual cash compensation
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l
Attract and retain talent
l
Motivate strong business performance without encouraging excessive risk-taking
Performance-based
Compensation
Annual incentive
l
Variable, earned amounts paid annually
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l
Drive the achievement of key business results on an annual basis
l
Recognize individuals based on their contributions
l
Performance-based and not guaranteed
Long-term incentives
l
Variable, equity-based:
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l 25% in the form of stock options that vest annually over a five year period; and
l 75% in the form of performance share units (“PSUs”) that vest after three years based on our actual performance as measured against multiple pre-established performance objectives at the end of the multi-year performance period
l
Reinforce the need for long-term sustained performance and business growth, and value creation
l
Focus executives on annual objectives that support the long-term business strategy and creation of stockholder value
l
Align the long-term interests of executives and stockholders
l
Balance cash payments with equity ownership
l
Encourage retention

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PROXY STATEMENT SUMMARY
Total Target Compensation
Masimo’s “at-risk” compensation (which includes the annual cash bonus and LTI compensation) comprised 92.2% of our Chief Executive Officer’s (“CEO”) compensation and an average of 80.2% of the compensation of our other Named Executive Officers’ (“NEOs”) FY2020 total target compensation, as seen below:
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Total long-term incentive compensation =81.0%Total long-term incentive compensation =66.0%
Total “at-risk” compensation = 92.2%Total “at-risk” compensation = 80.2%
    
Our compensation philosophy and structure has continued to evolve, based on changing market conditions, input from our Compensation Committee’s independent compensation consultant and direct feedback from our stockholders. The Compensation Committee believes that the current LTI equity award structure focuses our NEOs on driving increased stockholder value over a multi-year period and enables us to achieve our retention objectives, while maintaining a conservative approach to overall share usage.

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PROXY STATEMENT SUMMARY
Compensation Policies and Practices at a Glance
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What We DoWhat We Don’t Do
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Maintain an Independent Compensation Committee
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No Guaranteed Bonuses
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Compensation Committee Retains an Independent Compensation Advisor
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No Special Executive Retirement Plans
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Annual Executive Compensation Review
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No Hedging; Pledging Requires Pre-Approval
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Compensation At-Risk - Pay For Performance
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No Tax Payments on Perquisites
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Annual Compensation-Related Risk Assessment
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No Tax Gross-Up Payments on Post-Employment Compensation Arrangements
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Multi-Year Vesting Requirements
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No Stock Option Re-pricing
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Compensation Recovery (“Clawback”) Policy
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No Evergreen Provision
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Stock Ownership Policies
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Annual Stockholder Advisory Vote on Named Executive Officer Compensation
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Stockholder Engagement That Includes Our Compensation Committee Chairperson
Stockholder Advisory Vote (“Say-On-Pay Vote”)
In 2020, stockholders continued their support for our FY2019 executive compensation programs with approximately 88% approval of the stockholder advisory votes. Consistent with the Company’s strong interest in stockholder engagement and our pay-for-performance approach, the Compensation Committee continues to review our executive compensation program to ensure alignment between the respective interests of our executives and stockholders. No significant changes were made for FY2020.
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PROXY STATEMENT SUMMARY
Director Snapshot
Our directors possess broad expertise, skills, experience and perspectives that facilitate the oversight and strategic direction required to govern Masimo’s business and strengthen and support the executive management team. As shown in the following charts, our Board of Directors (“Board”) is comprised of individuals with expertise in fields that align with Masimo’s business and long-term strategy, and reflects a blend of tenure that allows for both new perspectives and continuity. Our Nominating, Compliance and Corporate Governance Committee is responsible for identifying and recommending director candidates to our Board for nomination. The Nominating, Compliance and Corporate Governance Committee reviews candidates for director nominees in the context of the current composition of our Board and committees, our operating requirements and the long-term interests of our stockholders. In conducting this assessment, the Nominating, Compliance and Corporate Governance Committee may consider the director nominee’s qualifications, diversity, skills and such other factors as it deems appropriate given the current needs of our Board, the committees and Masimo, to maintain a balance of knowledge, experience, diversity and capability.
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100%of non-employee Directors are INDEPENDENT.3NEW DIRECTORS added since 2016, bringing fresh perspectives to the Board.
The graph below provides an overview of the collective experiences, qualifications and attributes of the Board. See page 20 of this Proxy Statement for individual details for each director.(1)
Skills/Experience Number of Directors with Relevant Skills/Experience
CEO & Board Leadership3
Financial Expertise5
Sciences/Technology2
Healthcare Industry5
Medical Device Operations3
International5
Diversity5

_______________
(1) The data presented in this graph includes Messrs. Cohen, Kiani, Mikkelson, Reynolds and Dr. Shimer, all of our current directors other than Mr. Harkin. Mr. Harkin’s service on the Board will cease when his current term expires at the Annual Meeting.

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OUR EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
Our executive officers are appointed by and serve at the discretion of our Board. Our executive officers, their ages, respective positions and biographies are listed below:
Name
Age(1)
Position(s)
Joe Kiani56Chief Executive Officer & Chairman of the Board
Micah Young42Executive Vice President, Chief Financial Officer
Bilal Muhsin40Chief Operating Officer
Tao Levy47Executive Vice President, Business Development
Tom McClenahan48Executive Vice President, General Counsel & Corporate Secretary
____________
(1)    As of April 15, 2021.
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Joe Kiani
Chief Executive Officer & Chairman of the Board
Employee Since: 1989
Joe Kiani is the founder of Masimo and has served as Chief Executive Officer (“CEO”) & Chairman of the Board since our inception in 1989. He is an inventor on more than 100 patents related to signal processing, sensors and patient monitoring, including patents for the invention of Measure-through motion and low-perfusion pulse oximetry. Mr. Kiani holds a B.S.E.E. and an M.S.E.E. from San Diego State University. In addition to Mr. Kiani’s role at Masimo, he is also the Chairman of the Masimo Foundation for Ethics, Innovation and Competition in Healthcare, and the Chairman and CEO of Cercacor Laboratories, Inc. Mr. Kiani also serves on a number of other Boards of Directors, including Stereotaxis, Inc. (NYSE: STXS), CHOC Children’s Orange/CHOC Children’s at Mission Hospital, the Patient Safety Movement Foundation, the Medical Device Manufacturers Association, Like Minded Media Ventures and CalTech. As Masimo’s founder, Chief Executive Officer and Chairman of the Board since our formation in 1989, Mr. Kiani has the deepest understanding of Masimo, our history, our culture and our technology. He has broad experience in a wide range of functional areas, including strategic planning, strategic investments, engineering and development, and legal and governmental affairs. Our Nominating, Compliance and Corporate Governance Committee believes Mr. Kiani is critical to our continued development and growth.

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Micah Young
Executive Vice President, Chief Financial Officer
Employee Since: 2017
Micah Young has served as our Executive Vice President, Chief Financial Officer (“CFO”) since October 2017. From July 2012 to September 2017, Mr. Young served as Vice President, Finance, at NuVasive, Inc. (Nasdaq: NUVA), a medical device company focused on the design, development and marketing of products for the surgical treatment of spine disorders. Prior to that time, he served as NuVasive, Inc.’s Senior Director, Finance, Global Operations, from December 2009 to July 2012. From 2002 to 2009, Mr. Young held various accounting and finance positions with Zimmer Holdings, Inc., a company focused on the design, development, manufacture and marketing of orthopedic reconstructive, spinal and trauma devices, dental implants and related surgical products. Prior to his time at Zimmer Holdings, Inc., Mr. Young was an accountant at Deloitte & Touche LLP from 2000 to 2002. He holds a Bachelor of Science, Accounting and Criminal Justice from Indiana Wesleyan University and is a Certified Public Accountant (inactive).
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OUR EXECUTIVE OFFICERS

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Bilal Muhsin
Chief Operating Officer
Employee Since: 2000
Bilal Muhsin has served as our Chief Operating Officer since May 2019. Prior to this, Mr. Muhsin served as Executive Vice President, Engineering, Marketing and Regulatory Affairs from March 2018 to May 2019. Prior to March 2018, Mr. Muhsin, held various other roles including Executive Vice President, Engineering; Vice President, Engineering, Instruments and Systems; Director and Manager level positions within Masimo since June 2000. Mr. Muhsin’s technical, product and overall leadership skills have helped Masimo bring revolutionary new products to the marketplace, including Masimo’s Patient SafetyNet, Radical-7®, Root and various significant software products. Mr. Muhsin holds a B.S. in Computer Science from San Diego State University.

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Tao Levy
Executive Vice President, Business Development
Employee Since: 2018
Tao Levy has served as our Executive Vice President, Business Development since January 2018. From March 2013 to December 2017, Mr. Levy served as Managing Director, Medical Devices Equity Research, at Wedbush Securities. Prior to that time, he served as Senior Analyst, Medical Devices Equity Research at Loewen Ondaatje McCutcheon, from August 2012 to March 2013. From September 2010 to February 2012, Mr. Levy was Managing Director, Medical Devices Equity Research at Collins Stewart. Prior to his time at Collins Stewart, Mr. Levy was Director, Medical Devices Equity Research at Deutsche Bank where he served from 2002 to 2010. He holds a B.A. in Biology from the University of Pennsylvania.

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Tom McClenahan
Executive Vice President, General Counsel & Corporate Secretary
Employee Since: 2011
Tom McClenahan has served as our Executive Vice President & General Counsel since April 2013 and as our Corporate Secretary since August 2014. From April 2011 to April 2013, Mr. McClenahan was our Vice President and Assistant General Counsel. From November 2002 to April 2011, he was an associate and then principal with the law firm of Fish & Richardson. From September 1999 to November 2002, he was an associate with the law firm of Knobbe, Martens, Olson & Bear. Mr. McClenahan holds a B.S. in Mechanical Engineering from Iowa State University and a J.D. from the University of Minnesota Law School.
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OUR BOARD OF DIRECTORS
BOARD OF DIRECTORS
Our Board presently has six members and is divided into three classes, designated Class I, Class II and Class III. Each class currently consists of two directors and has a three-year term. Class I, Class II and Class III directors currently have a remaining term of office until the 2021, 2022 and 2023 Annual Meeting of Stockholders, respectively. Vacancies on the Board may be filled only by persons elected by a majority of the remaining directors in office (even though the remaining directors may constitute less than a quorum). A director elected by our Board to fill a vacancy in a Class, including a vacancy created by an increase in the number of directors, will serve for the earlier of the remainder of the full term of that Class, until the director’s successor is elected and qualified or until the director’s death, resignation or removal.
The names of our current directors, their ages, director class and position(s) are listed below.
Name
Age(1)
Director ClassTerm ExpiresPosition(s)
H Michael Cohen55Class I2023Director
Thomas Harkin(2)
81Class II2021Director
Joe Kiani(3)
56Class II2021Chief Executive Officer & Chairman of the Board
Adam Mikkelson42Class III2022Director
Craig Reynolds72Class III2022Director
Julie A. Shimer, Ph.D.68Class I2023Director
______________
(1)    As of April 15, 2021.
(2)    Mr. Harkin’s service on the Board will cease when his current term expires at the Annual Meeting.
(3)    Please see “Executive Officers” on page 17 of this Proxy Statement for Mr. Kiani’s biography.
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OUR BOARD OF DIRECTORS
DIRECTOR SKILLS MATRIX(1)
Director Skills and ExperienceCohenKianiMikkelsonReynoldsShimer
CEO & Board Leadership
CEO and board leadership experience brings skills that help our Board to capably advise, support, and oversee our executive management team, and our strategy to drive long-term value.
üüü
Financial Expertise
Financial expertise assists our Board in overseeing our financial statements, capital structure and internal controls.
üüüüü
Science/Technology
Innovation and technology experience is important in overseeing our business in the rapidly changing medical device/life sciences industry. Our success is highly dependent on the continued development and investment in new technologies, R&D and engineering trends while addressing constant threats in the ever changing physical and cyber realm.
üü
Healthcare Industry
Healthcare industry experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals.
üüüüü
Medical Device Operations
Medical device operations increase the Board’s understanding of our distribution and manufacturing operations.
üüü
International
International exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that shapes our global business perspective, strategy and enhances oversight of our multinational operations.
üüüüü
Diversity
Representation of a range of perspectives, skills, experiences and expertise, as well as gender, race, ethnic or national origin, expands the Boards understanding of the needs and viewpoints of consumers, employees, healthcare providers, investors and others worldwide.
üüüüü
______________
(1)    Mr. Harkin’s service on the Board will cease when his current term expires at the Annual Meeting. As such, Mr. Harkin was excluded from the above table.

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OUR BOARD OF DIRECTORS
SKILLS AND QUALIFICATION OF OUR BOARD OF DIRECTORS
The table below illustrates some of the skills, qualifications, background and experience of each member of the Board of Directors. This high level summary is not intended to be an exhaustive list of each of the Board members’ skills or contributions to the Board.    
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H Michael Cohen
Board Committee: Audit Committee Chairperson and Compensation Committee
Director since: 2018
Experience and Qualification of Particular Relevance to Masimo:
Mr. Cohen has served as a member of our Board since August 2018. Mr. Cohen has almost 30 years of experience in the healthcare industry. Over the past 19 years, he has held various roles at Deutsche Bank, including Global Head, Healthcare Investment Banking and most recently Vice Chairman, Healthcare Investment Banking. Prior to joining Deutsche Bank, Mr. Cohen worked at SG Cowen, Union Bank of Switzerland, and Booz Allen Hamilton. Mr. Cohen began his career in healthcare at Hambrecht & Quist, where he was a member of the equity research team covering biotechnology, medical device and diagnostic companies. He received his B.A. in Economics from the University of Vermont and his M.B.A. from Columbia University. Our Nominating, Compliance and Corporate Governance Committee believes Mr. Cohen’s financial background and investment experience allow him to provide additional insight to the Board on strategy and business decisions as well as make valuable contributions to the Audit Committee and the Compensation Committee.
Current/Prior Public Company Boards:
lNone

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Thomas Harkin
Board Committees: None(1)
Director since: 2015
Experience and Qualification of Particular Relevance to Masimo:
Mr. Harkin has served as a member of our Board since December 2015. Mr. Harkin, formerly a five-term U.S. Senator from the State of Iowa, retired from the U.S. Senate in January 2015. Mr. Harkin was first elected to the U.S. House of Representatives in 1974, and 10 years later, he was elected to the U.S. Senate. Prior to his service in the House of Representatives, Mr. Harkin served in the U.S. Navy and achieved the rank of lieutenant commander. Mr. Harkin holds a B.S. from Iowa State University, a J.D. from Catholic University of America and was admitted to the Iowa Bar in 1972. Mr. Harkin’s experience in the Senate, and in particular his work on healthcare-related legislation, as well as his extensive understanding of the healthcare system in the U.S., bring a unique perspective and insight to the Board.
Current/Prior Public Company Boards:
lNone






____________
(1)    Mr. Harkin’s service on the Board will cease when his current term expires at the Annual Meeting. He served on the Compensation Committee and the Nominating, Compliance and Corporate Governance Committee (as its Chairperson) until April 1, 2021.
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Adam Mikkelson
Board Committees: Audit Committee, Compensation Committee and Nominating, Compliance and Corporate Governance Committee
Director since: 2016
Experience and Qualification of Particular Relevance to Masimo:
Mr. Mikkelson has served as a member of our Board since October 2016. Mr. Mikkelson is a Partner at Camber Capital Management, LLC, a healthcare-focused investment fund. Mr. Mikkelson was been with Camber Capital since 2007 and has nearly 15 years of experience in the healthcare investment arena, where he focused on identifying and actively monitoring investment opportunities in both the therapeutic and medical device sectors. Prior to joining Camber Capital, Mr. Mikkelson held various roles at Datamonitor plc and Leerink Partners. He received his B.S. in Business Administration from Boston University.

Our Nominating, Compliance and Corporate Governance Committee believes Mr. Mikkelson’s investment experience allows him to provide additional insight to the Board on strategy and business decisions as well as make valuable contributions to the Audit, Compensation and Nominating, Compliance and Corporate Governance Committees.
Current/Prior Public Company Boards:
lNone

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Craig Reynolds
Board Committees: Compensation Committee Chairperson and Nominating, Compliance and Corporate Governance Committee
Director since: 2014
Experience and Qualification of Particular Relevance to Masimo:
Mr. Reynolds has served as a member of our Board since April 2014. Mr. Reynolds previously held the role of Chief Executive Officer and a director of Cereve, Inc., a medical company engaged in resolving insomnia issues. Prior to joining Cereve, Mr. Reynolds served as Chief Operating Officer of Philips-Respironics Home Health Solutions a subsidiary of Philips, from 2008 to 2010. Prior to Philips-Respironics, Mr. Reynolds was the Chief Operating Officer and a board member of Respironics, Inc., from 1998 to 2008. From 1993 to 1998, Mr. Reynolds was with Healthdyne Technologies, Inc., a medical device company, serving for five years as Chief Executive Officer and director. From 1981 through 1992, Mr. Reynolds was with Healthdyne, Inc. in the positions of Executive V.P. (1981 to 1983), President of Healthdyne Cardiovascular Division (1984 to 1985) and President of Healthdyne Homecare Division (1986 to 1992). From 2008 through 2014, Mr. Reynolds served as a director of Symmetry Medical, Inc., most recently as Chairman of the Board. He also served as Chairman of the Board of Symmetry Surgical, Inc. from 2014 through 2016. Mr. Reynolds was a member of the Board of Directors of Vapotherm, Inc. from 2010 through late 2020, and Welch Allyn, Inc. from 2012 through 2014.

Mr. Reynolds earned his B.S. in Industrial Management from the Georgia Institute of Technology and his M.B.A. from Georgia State University. Our Nominating, Compliance and Corporate Governance Committee believes Mr. Reynolds’ experience allow him to provide additional insight to the Board on strategy decisions as well as make valuable contributions to the Compensation Committee and Nominating, Compliance and Corporate Governance Committees.
Current/Prior Public Company Boards:
lVapotherm, Inc. - (2010-2020)

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Julie A. Shimer, Ph.D.
Board Committees: Nominating, Compliance and Corporate Governance Committee Chairperson and Audit Committee
Director since: 2019
Experience and Qualification of Particular Relevance to Masimo:
Dr. Shimer is currently a private investor and has over 30 years of product development experience. Dr. Shimer was President and Chief Executive Officer of Welch Allyn, from March 2007 to April 2012. Prior to Welch Allyn, Dr. Shimer served as President and Chief Executive Officer of Vocera Communications, Inc., from September 2001 through February 2007, also serving on the Board of Directors. Dr. Shimer also previously held executive positions at 3Com Corporation from January 2000 through August 2001, most recently serving as Vice President and General Manager of its networking products. Before joining 3Com, she held executive positions at Motorola, Inc., from 1993 through 1999, where she was Vice President and General Manager for the paging division, and prior to that post, Vice President of its semiconductor products section. Dr. Shimer worked for AT&T Bell Laboratories and Bethlehem Steel Company before joining Motorola.

Dr. Shimer is a member of the Society of Women Engineers and the Institute of Electrical and Electronics Engineers. Dr. Shimer holds a B.S. in Physics from Rensselaer Polytechnic Institute and M.S. and Ph.D. degrees in Electrical Engineering from Lehigh University. Our Nominating, Compliance and Corporate Governance Committee believes Dr. Shimer’s extensive executive leadership and financial background allow her to provide significant insight to the Board on business decisions as well as make valuable contributions to the Nominating, Compliance and Corporate Governance Committee and the Audit Committee.
Current Public Company Boards:
lApollo Endosurgery, Inc. - (2018 - present)
lAvanos Medical, Inc. (formerly known as Halyard Health) - (2014 - present)
Prior Public Company Boards:
lWindstream Holdings - (2017 - 2020)
lNetgear, Inc. - (2007 - 2019)
lEarthlink Holdings Corp. - (2013-2017)
lWindstream Holdings, Inc. - (2017 - 2020)
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CORPORATE GOVERNANCE AND BOARD MATTERS
CORPORATE GOVERNANCE AND BOARD MATTERS
This section describes key corporate governance guidelines and practices that we have adopted. Complete copies of the charters of the committees of our Board and our Code of Business Conduct and Ethics described below may be viewed on our website at https://investor.masimo.com/governance/governance-documents/default.aspx under “Governance Documents.” Alternatively, you can request a copy of any of these documents free of charge by writing to our Corporate Secretary, c/o Masimo Corporation, 52 Discovery, Irvine, California 92618.
CORPORATE GOVERNANCE PRACTICES
Our Board has adopted corporate governance guidelines to ensure that our Board will have the necessary authority and practices in place to exercise its duties and responsibilities, to review and evaluate our business operations as needed, to make decisions that are independent of our management and to serve the best interests of Masimo and our stockholders. These corporate governance guidelines provide a framework for the conduct of the Board’s business and provide that:
except in unusual circumstances, the positions of Chairman of our Board and CEO will be held by the same person;
ordinarily, directors should not serve on more than five boards of publicly-traded companies, including our Board, and all of our directors currently satisfy this requirement;
outside directors must own a minimum number of shares of our common stock (see “Non-Employee Director Compensation—Non-Employee Director Stock Ownership Policy” on page 39 of this Proxy Statement for additional information); and
a non-employee director will not be nominated for re-election at the next annual meeting of stockholders for which his or her class of directors is up for election following his or her 15th anniversary of service on our Board, unless our Board waives this term limit with respect to such non-employee director as a result of its determination that such nomination is in the best interests of Masimo and its stockholders.
CHARACTERISTICS OF OUR BOARD(1)
3
New directors joined the Board
since 2016

5 Year Board
Refreshment rate:

50%


20%
 
Women

Average tenure of our Board:

3.6
Years


Average Age of our Board:

62

100%
 
Independent
(non-employees)
____________________________
(1) The data presented in these boxes includes Messrs. Cohen, Kiani, Mikkelson, Reynolds and Dr. Shimer, all of our current directors other than Mr. Harkin. Mr. Harkin’s service on the Board will cease when his current term expires at the Annual Meeting.

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CONSIDERATION OF DIRECTOR NOMINEES
Director Qualifications
The Board does not prescribe any minimum qualifications for director candidates. The Nominating, Compliance and Corporate Governance Committee may consider a potential director candidate’s experience, areas of expertise and other factors relative to the overall composition of our Board and its committees, including the following characteristics:
the highest ethical standards and integrity and a strong personal reputation;
a background that demonstrates experience and achievement in business, finance, technology, healthcare or other activities relevant to our business and activities;
a willingness to act on and be accountable for Board and, as applicable, committee decisions;
an ability to provide reasoned, informed and thoughtful counsel to management on a range of issues affecting us and our stockholders;
an ability to work effectively and collegially with other individuals;
loyalty and commitment to driving our success and increasing long-term value for our stockholders;
sufficient time to devote to our Board and, as applicable, committee membership and matters; and
meeting the independence requirements imposed by the SEC and Nasdaq.
Diversity of background, including diversity of gender, race, ethnic or national origin, and experience (including in business, finance, government, technology, healthcare or other activities relevant to our business) is also a relevant factor, as a diverse Board is more likely to reflect varying perspectives and a breadth of experience that will positively contribute to robust discussion at Board meetings.
The Nominating, Compliance and Corporate Governance Committee retains the right to modify these criteria from time to time.
Stockholder Nominations and Proxy Access
The Nominating, Compliance and Corporate Governance Committee will consider director candidates recommended by our stockholders. The Nominating, Compliance and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates based on whether a candidate was recommended by a stockholder or not. Stockholders may nominate directors for election if such stockholders satisfy the advance notice provisions set forth in our Bylaws. To be timely for our 2022 Annual Meeting of Stockholders, stockholders who wish to recommend individuals for consideration by the Nominating, Compliance and Corporate Governance Committee to become nominees for election to the Board at the 2022 Annual Meeting of Stockholders, must do so by delivering a written recommendation to the Nominating, Compliance and Corporate Governance Committee, c/o Masimo Corporation, 52 Discovery, Irvine, California 92618, Attention: Corporate Secretary, no later than the close of business on March 1, 2022, and no earlier than January 30, 2022, unless the meeting date is more than 30 days before or after May 27, 2022, in which case the written recommendation must be received by our Corporate Secretary no later than the close of business on the later of (i) the 90th day before the 2022 Annual Meeting of Stockholders, or (ii) the 10th day following the day on which we first publicly announce the date of the 2022 Annual Meeting of Stockholders.
Each written recommendation must contain the following minimum information:
the name and address of the stockholder and any beneficial owner on whose behalf the nomination is being made;
the class, series and number of shares of Masimo, and any convertible securities of Masimo, that are beneficially owned by the stockholder and any beneficial owner on whose behalf the nomination is being made;
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any proxy, contract, arrangement, understanding or relationship pursuant to which the stockholder and any beneficial owner on whose behalf the nomination is being made has the right to vote any of Masimo’s voting securities;
any “short” interest in Masimo’s securities held by the stockholder and any beneficial owner on whose behalf the nomination is being made;
the proposed director candidate’s full legal name, age, business address and residential address;
complete biographical information for the proposed director candidate, including the proposed director candidate’s principal occupation or employment and business experience for at least the previous five years;
a description of the proposed candidate’s qualifications as a director;
the class and number of shares of Masimo that are beneficially owned by the proposed director candidate as of the date of the written recommendation; and
any other information relating to the proposed director candidate that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Director candidate recommendations from stockholders must include the written consent of each proposed nominee to serve as director if so elected. If a proposed director candidate is recommended by a stockholder in accordance with the procedural requirements discussed above, the Corporate Secretary will provide the foregoing information to the Nominating, Compliance and Corporate Governance Committee.
In 2019, we amended our Bylaws to permit eligible stockholders to nominate candidates for election to the Board in accordance with procedures providing for proxy access (the “Proxy Access Bylaw”). The Proxy Access Bylaw may be used by an eligible stockholder, or a group of up to 20 eligible stockholders, who has continuously owned at least 3% of the outstanding shares of our common stock for at least the three years before, and including the day of the submission of the proxy access notice, who continues to hold the qualifying minimum number of shares through the date of the applicable annual meeting of stockholders, so long as the eligible stockholder(s) and the director nominee(s) satisfy the requirements specified in the Proxy Access Bylaw. The Proxy Access Bylaw further provides that an eligible stockholder, or a group of eligible stockholders, may nominate up to the greater of (i) 25% of the total number of directors who are members of the Board as of the last day on which a proxy access notice may be submitted, or (ii) two directors, subject to reduction in the event a director has been elected to the Board through proxy access at one of the two immediately preceding annual meetings of our stockholders.
Stockholders who wish to recommend director nominees for inclusion in our proxy materials at the 2022 Annual Meeting of Stockholders in compliance with the Proxy Access Bylaw must do so by delivering a proxy access notice to be received by our Corporate Secretary no earlier than November 16, 2021, and no later than December 16, 2021. In the event that the date of the 2022 Annual Meeting of Stockholders is more than 30 days before or after May 27, 2022, such proxy access notice must be received by the later of (i) 180 days prior to the 2022 Annual Meeting of Stockholders, or (ii) the 10th day following the date that the 2022 Annual Meeting of Stockholders is first publicly announced or disclosed.

Evaluating Nominees for Director
Our Nominating, Compliance and Corporate Governance Committee will consider director candidates that are recommended by members of the committee, other members of our Board, members of management, advisors and our stockholders who submit recommendations in accordance with the requirements set forth above.
The Nominating, Compliance and Corporate Governance Committee may also retain a third-party search firm to identify candidates on terms and conditions acceptable to the Nominating, Compliance and Corporate Governance Committee, but has not done so to date. The Nominating, Compliance and Corporate Governance Committee will evaluate all candidates for director using the same approach regardless of who recommended them.

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The Nominating, Compliance and Corporate Governance Committee will review candidates for director nominees in the context of the current composition of our Board and committees, the operating requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the Nominating, Compliance and Corporate Governance Committee may consider the director nominee’s qualifications, diversity, age, skills and such other factors as it deems appropriate given the current needs of the Board, the committees and Masimo, to maintain a balance of knowledge, experience, diversity and capability. In the case of incumbent directors whose terms of office are set to expire, the Nominating, Compliance and Corporate Governance Committee may review such directors’ overall service to the Board, the committees and Masimo during their term, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the Nominating, Compliance and Corporate Governance Committee will also determine whether the nominee must be independent for Nasdaq purposes, which determination will be based upon applicable Nasdaq listing standards and applicable SEC rules and regulations. Although we do not have a formal diversity policy, when considering diversity in evaluating director nominees, the Nominating, Compliance and Corporate Governance Committee will focus on whether the nominees can contribute varied perspectives, skills, experiences and expertise to the Board. Diversity of background, including diversity of gender, race, ethnic or national origin, and experience (including in business, finance, government, technology, healthcare or other activities relevant to our business) is also a relevant factor in considering nominees to the Board, as a diverse Board is more likely to reflect varying perspectives and a breadth of experience that will positively contribute to robust discussion at Board meetings.
The Nominating, Compliance and Corporate Governance Committee will evaluate each of the director candidates and recommend whether the Board should nominate the proposed director candidate for election by our stockholders.
BOARD LEADERSHIP STRUCTURE
Our Board believes that our CEO is best situated to serve as Chairman because he is the director who is most familiar with our business and industry, possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing us and is therefore best positioned to ensure that the Board’s time and attention are focused on the most critical matters. Our independent directors bring experience, oversight and expertise from outside the Company and industry, while the CEO brings Company-specific experience and expertise. The Board believes that the combined role of Chairman and CEO facilitates information flow between management and the Board, which is essential to effective governance. We have no lead independent director.
BOARD’S ROLE IN RISK OVERSIGHT
Our Board has an active role, as a whole and also at the committee level, in overseeing the management of our risks. Each committee is responsible for evaluating certain risks and overseeing the management of such risks and reporting to the entire Board as necessary.
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INVESTOR FEEDBACK AND ENGAGEMENT
In an effort to foster direct, open and transparent communication with our investors and stockholders, Masimo’s leadership and investor relations team met with analysts and stockholders, as well as potential stockholders, at ten conferences, five roadshows and three bus tours during fiscal 2020. In addition, we hosted quarterly earnings calls, and also engaged with investors via frequent phone calls and emails.
We value the feedback from our investors and stockholders. During fiscal 2020, the Chairman of our Compensation Committee and members of management were involved in more than 15 in-person or telephonic meetings with stockholders representing more than 45% of our outstanding shares. These discussions covered topics such as long-term strategy, financial and operating performance, risk management, executive compensation and governance practices. We found these meetings to be informative, and they help us shape our compensation programs and other strategic priorities.
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CORPORATE RESPONSIBILITY & SUSTAINABILITY
Under the guidance and supervision of the Board, we pursue high standards of corporate responsibility and sustainability, including how we support, protect and empower our employees, how we work with our customers, how we govern the Company and how we connect with our communities.
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Environment
l
Masimo is committed to operating in an environmentally responsible manner and supports the internationally recognized environmental principles set forth in the United Nations Global Compact.
lWe actively seek to decrease our energy consumption through the use of energy efficient fixtures and machinery, occupancy sensors, motion sensors, and automated lighting controls.
Minimizing our environmental impact
We strive to identify new opportunities to improve the sustainability of our business and encourage our employees to join in our efforts.
lWe have installed solar photovoltaic panels on key facilities to supply our energy needs for lighting, HVAC, manufacturing needs and electric vehicle charging.
As a global manufacturer of patient monitoring technology, our mission is to improve patient outcomes and reduce the cost of care. We also understand that the materials we use and the products we manufacture, which include single-patient-use sensors, have an impact on the environment.
lThe lightweight design of our latest generation of RD patient sensors reduces material waste versus our traditional cable-based sensors. Based on our sales of the RD sensors from 2016 to 2020, the new sensors have resulted in approximately 1,100 metric tons of material eliminated.
Masimo is always considering ways to reduce the company’s overall environmental footprint. We have implemented and will continue to implement measures to promote greater environmental responsibility, conserve resources, and reduce waste in an effort to help combat climate change.lTo reduce landfill waste, we recycle returned Masimo products to harness re-useable natural elements and materials to minimize raw material usage.
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Supply Chain
lSuppliers are critical partners in the Masimo value supply chain. We are committed to efforts to prevent forced labor, modern slavery and human trafficking and child labor in our supply chain.lWe are committed to further improving our supply chain due diligence processes, driving accountability within the supply chain by leveraging the industry standard Responsible Mineral Initiative - Conflict Mineral Reporting Template and continuing our outreach efforts in order to further develop transparency in our supply chain and mitigate the risk that Masimo’s use of conflict minerals benefits or finances armed groups.
Responsibility in supply chainl
Ethical sourcing is an important facet of our ethical conduct strategy. Masimo prohibits any form of forced labor, including slavery and human trafficking in its supply chain. Masimo evaluates suppliers through questionnaires, supplier audits, and risk-based assessments.
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Workforce/Workplace
lWe understand the need for great ideas, innovation and leadership to stay current and relevant.l
We are committed to maintaining a safe workplace environment free from discrimination and harassment.
Building an innovative, collaborative and
diverse workforce
lWe seek to retain our employees through fair and competitive compensation, benefits and challenging work experiences with increasing levels of responsibility.l
We do not tolerate employment discrimination based on race, religion, gender, age, marital status, national origin, sexual orientation, citizenship status, disability or other protected characteristics.
CYBERSECURITY RISK PRACTICES
Cybersecurity is a critical component of our risk management. We rely on information technology and any failure, inadequacy, interruption or security lapse of such technology, including any cybersecurity incidents, could harm our ability to operate our business effectively.
Our cybersecurity program is focused on the following:
Cybersecurity Awareness: We identify and assess cyber risks through the dissemination of information from industry groups and third-party experts.
Training: We provide annual cybersecurity training for company personnel with network access and conduct periodic phishing exercises.
Technical Safeguards: We deploy measures to protect our network perimeter and internal information technology platforms, such as internal and external firewalls, network intrusion detection and prevention, penetration testing, vulnerability assessments, threat intelligence, anti-malware and access controls.
Vendor Management: For our vendors that receive personal information, we maintain data protection agreements that contain contractual provisions requiring safeguards for the protection of the personal information.
Incident Response Plans: We maintain and update incident response plans that address the life cycle of a cyber incident (i.e., detection, response and recovery), as well as data breach response, and test those plans annually with table-top exercises.
Mobile Security: We deploy controls to prevent loss of data through mobile devices.
Security Standards: We hold accreditations for information and security standards for HIPAA, HITRUST, NIST CSF, and PCI DSS.
Insurance: We maintain a cybersecurity insurance program with established and respected insurance companies.
HUMAN CAPITAL MANAGEMENT
At the core of our long-term strategy for human capital management is attracting, developing and retaining the best talent globally with the right skills to drive our future success. We seek to attract and retain highly talented, highly motivated, experienced and well-educated individuals to support our long-term growth and profitability goals.
Our success and future growth is largely dependent on our continued ability to retract, retain and develop a diverse workforce at all levels of the organization. To succeed, we have developed key recruitment and retention strategies that we focus on as part of our overall management of our business. These include:
Compensation. Our compensation programs are designed to align the compensation of our employees with their performance and to provide the proper incentives to attract, retain and motivate employees to achieve

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superior results. The structure of our compensation programs balances incentive earnings for both short-term and long-term performance.
We utilize a nationally-recognized compensation consultants to evaluate our executive compensation program.
Our executive compensation program is designed so that a significant portion of compensation is “at-risk” based on performance, to align the interests of our executive officers and stockholders.
We provide employee wages that are competitive and consistent with employee positions, experience, skills, knowledge and geography.
A large part of our employee population has received equity as part of their overall compensation, which helps align our employee’s interests with those of our stockholders.
Annual increases and cash incentives are based on merit, and not guaranteed.
We offer a wide variety of benefits, including health insurance, paid time off, and a retirement plan, as well as voluntary benefits such as financial and personal wellness benefits.
Health and Safety. We are committed to the safety and well-being of our employees. In response to the COVID-19 pandemic, we implemented changes to our business in an effort to protect our employees and customers. A majority of our employees worked remotely during most of 2020, and we instituted safety protocols and procedures for our essential employees who continued to work on-site, including:
Daily temperature checks upon entering all facilities;
Implementation of Masimo SafetyNet to pre-clear employees entering our main campus facilities;
Installation of plexiglass partitions between work stations for our manufacturing/assembly facilities; and
Increased distancing and implementation of extensive cleaning and sanitation procedures for our manufacturing and assembly facilities as well as our general administration and sales facilities.
Succession Planning. We are committed to identifying and developing the talents of our next generation of leaders. Our executive management team periodically conducts an organization and leadership review of all business units and leaders, focusing on our high-performing and high-potential talent, diversity, and succession planning for critical roles.
Employee Feedback and Retention. In November 2020, we were certified as a Great Place to Work®. To assess and improve employee retention and engagement, we periodically survey employees and take actions to address areas of employee concerns. The average tenure of our employee is approximately 5.5 years and more than 20% of our employees have been employed by us for more than ten years.
Diversity. Our workforce grew from approximately 1,600 full-time employees and approximately 3,700 dedicated contract personnel worldwide as of December 28, 2019 to approximately 2,000 full-time employees and approximately 4,200 dedicated contract personnel worldwide as of January 2, 2021. Of our full-time employees, approximately 65% were male and approximately 35% were female, and women represented approximately 27% of our management/leadership roles. Minorities represented approximately 49% of our U.S. workforce, and approximately 39% of the employees in our management/leadership roles.
CHARITABLE OUTREACH
We undertake philanthropic activities both directly and indirectly through the non-profit organizations we support throughout the globe. We believe in being an active corporate citizen and, among other things, support programs, initiatives and research designed to improve patient safety and outcomes, promote efficient and cost-effective healthcare delivery, and provide advanced healthcare to people worldwide who may not otherwise have access to lifesaving technologies.
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$1.5 Million
in contributions
to the Masimo Foundation
$2.4 Million
in cash contributions to nonprofit organizations (other than the Masimo Foundation)
$3.6 Million
in contributions of Masimo products to charitable organizations
ADOPTION OF PROXY ACCESS
In 2019, our Board adopted the Proxy Access Bylaw, which permits eligible stockholders to nominate candidates for election to our Board. The Proxy Access Bylaw may be used by an eligible stockholder, or a group of up to 20 eligible stockholders, who has continuously owned at least 3% of the outstanding shares of our common stock for at least the three years before, and including the day of the submission of the proxy access notice, who continues to hold the qualifying minimum number of shares through the date of the applicable annual meeting of stockholders, provided that the eligible stockholder(s) and the director nominee(s) satisfy the requirements specified in the Proxy Access Bylaw. The Proxy Access Bylaw further provides that an eligible stockholder, or a group of eligible stockholders, may nominate up to the greater of (i) 25% of the total number of directors who are members of our Board as of the last day on which a proxy access notice may be submitted, or (ii) two directors, subject to reduction in the event a director has been elected to our Board through proxy access at one of the two immediately preceding annual meetings of our stockholders. See “—Consideration of Director Nominees—Stockholder Nominations” on page 25 of this Proxy Statement for additional information regarding the Proxy Access Bylaw and deadlines for the 2022 Annual Meeting of Stockholders.
MEETINGS AND EXECUTIVE SESSIONS
Our Board meets on a regular basis throughout the year to review significant developments affecting the Company and to act upon matters requiring its approval. Our Board also holds special meetings, as required from time to time, when important matters arise requiring Board action between scheduled meetings. During fiscal 2020, our Board met five times. None of our directors attended fewer than 75% of the total number of meetings held by the Board and the committees (on which and for the period during which the director served) during fiscal 2020.
As required under applicable Nasdaq listing standards, our independent directors periodically meet in executive sessions at which only they are present.
POLICY REGARDING BOARD MEMBER ATTENDANCE AT ANNUAL MEETINGS
It is the policy of our Board to invite directors and nominees for director to attend annual meetings of our stockholders. We held one Annual Meeting of Stockholders in fiscal 2020, which was attended by Mr. Kiani.
INDEPENDENCE OF THE BOARD OF DIRECTORS
Our Board has the responsibility for establishing corporate policies and for the overall performance of the Company, although it is not involved in day-to-day operations. As required under the Nasdaq rules, a majority of the members of our Board must qualify as “independent” as affirmatively determined by our Board. Our Board consults with our counsel to ensure that the Board’s determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent” including those set forth in applicable Nasdaq rules. Consistent with these considerations, after review of all relevant transactions or relationships between each director, and the director’s family members and Masimo, our senior management, and our independent registered public accounting firm, our Board has determined that all of our directors other than Mr. Kiani are independent, as that term is defined in Nasdaq Listing Rule 5605(a)(2).

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CODE OF BUSINESS CONDUCT AND ETHICS
We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, executive officers and directors. The Code of Business Conduct and Ethics is available to stockholders on our website at https://investor.masimo.com/governance/governance-documents/default.aspx under “Governance Documents.” If we make any substantive amendments to our Code of Business Conduct and Ethics or grant any waiver from a provision of the Code of Business Conduct and Ethics to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our website at https://investor.masimo.com/governance/governance-documents/default.aspx under “Governance Documents” and/or in our public filings with the SEC.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Our Board has adopted a formal process by which stockholders may communicate with the Board or any of its directors. Stockholders of Masimo wishing to communicate with our Board or an individual director may send a written communication to the Board or such director, c/o Masimo Corporation, 52 Discovery, Irvine, California 92618, Attention: Compliance Officer. Each communication must set forth:
the name and address of all the Masimo stockholders on whose behalf the communication is sent; and
the number of Masimo shares that are beneficially owned by the stockholders as of the date of the communication.
Each communication will be reviewed by Masimo’s Compliance Officer to determine whether it is appropriate for presentation to the Board or the individual director. Examples of inappropriate communications include junk mail, spam, mass mailings, product complaints, product inquiries, new product suggestions, resumes, job inquiries, surveys, business solicitations and advertisements, as well as unduly hostile, threatening, illegal, unsuitable, frivolous, patently offensive or otherwise inappropriate material. These screening procedures have been approved by a majority of the independent members of our Board. Communications determined by our Compliance Officer to be appropriate for presentation to the Board or such director will be submitted to the Board or the individual director on a periodic basis.
In accordance with our Open Door Policy for Reporting Accounting, Audit, and Other Compliance Concerns (the “Open Door Policy”), all communications directed to the Board, a committee of the Board or an individual director relating to accounting topics, internal accounting controls, or auditing matters involving the Company are forwarded to our Compliance Officer regardless of the method of communication, and then promptly and directly forwarded by the Compliance Officer to the Audit Committee or the Board, as appropriate. All communications directed to the Board, committee, or individual director that relate to non-financial matters (including, without limitation, purported or suspected violations of any law or regulation, our Code of Business Conduct and Ethics or other policies) will be forwarded to Masimo’s Compliance Officer, and, if the Compliance Officer deems the matter to be a potentially significant violation of law, the Code of Business Conduct and Ethics, or company policy, the Compliance Officer will promptly and directly forward the communication to the Nominating, Compliance and Corporate Governance Committee.
INFORMATION REGARDING BOARD COMMITTEES
Our Board has established a standing Audit Committee, Compensation Committee, and Nominating, Compliance and Corporate Governance Committee to devote attention to specific subjects and to assist it in the discharge of the Board’s responsibilities. All of these committees operate under a written charter adopted by our Board, each of which is available on our website at https://investor.masimo.com/governance/governance-documents/default.aspx under “Governance Documents.” The following table provides committee membership and meeting information for fiscal 2020 for the Audit Committee, Compensation Committee and Nominating, Compliance and Corporate Governance Committee.
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Committee Membership
NameIndependentAuditCompensationNominating, Compliance and
 Corporate Governance
Employee Director:
Joe Kiani
Non-Employee Directors:
H Michael Cohen(1)
u
¬
À
ü
Thomas Harkin(2)
u
Adam Mikkelsonu
ü
À
üü
Craig ReynoldsuŸ
Julie A. Shimer, Ph.D.(3)
u
ü
À
¬
Total meetings in fiscal 2020542
______________
¬    Committee Chairperson.     À Financial Expert.     ü    Member.    u Independent.
(1)    Mr. Cohen was appointed the Audit Committee Chairperson effective March 20, 2020. He joined the Compensation Committee April 1, 2021.
(2)    Mr. Harkin’s service on the Board will cease when his current term expires at the Annual Meeting. He served on the Compensation Committee and the Nominating, Compliance and Corporate Governance Committee (as its Chairperson) until April 1, 2021.
(3)    Dr. Shimer joined the Nominating, Compliance and Corporate Governance Committee and was appointed its Chairperson effective April 1, 2021.
Audit Committee
We maintain a separately-designated Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. Our Board has adopted a written charter of the Audit Committee that is available to stockholders on our website at https://investor.masimo.com/governance/governance-documents/default.aspx under “Governance Documents.”
Our Board has determined that all members of the Audit Committee meet the criteria for independence and financial literacy under Nasdaq Listing Rule 5605(c)(2)(A)(i) and (ii) and Rule 10A-3(b)(1) under the Exchange Act and qualify as financial experts under the applicable Nasdaq and SEC rules.
Both our independent registered public accounting firm and internal financial personnel regularly meet privately with our Audit Committee and have unrestricted access to the Audit Committee.

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Members and Number of MeetingsPrimary Committee Functions
Committee Members:(1)
l Appointing, retaining and determining the compensation of our independent registered public accounting firm;
l Overseeing and approving any proposed audit and permissible non-audit services provided by our independent registered public accounting firm;
l Reviewing at least annually the qualifications, performance and independence of our independent registered public accounting firm;
l Overseeing the relationship with our independent registered public accounting firm, including the rotation of the audit partners, as well as reviewing and resolving any disagreements between our management and ensuring discussions with our management and our independent registered public accounting firm relating to internal controls over financial reporting;
l Discussing with our management and our independent registered public accounting firm the design, implementation, adequacy and effectiveness of our internal controls;
l Reviewing and discussing with our management and our independent registered public accounting firm the results of the annual audit and the review of our quarterly financial statements;
l Overseeing and approving the annual Committee Report to be included in our annual public filings;
l Reviewing the quarterly earnings announcements and any other public announcements regarding our results of operations with our management;
l Reviewing and discussing reports from our independent registered public accounting firm relating to our critical accounting policies and practices;
l Establishing and overseeing the processes and procedures for the receipt, retention and treatment of any complaints regarding accounting, internal controls or audit matters, as well as the confidential and anonymous submissions by employees concerning questionable accounting, auditing and internal control matters;
l Investigating any matter brought to its attention, with full access to our books, records, facilities and employees, and with sole authority to select, retain and terminate any consultants, legal counsel or advisors to advise the Audit Committee; and
l Reviewing and evaluating, at least annually, the performance of the Audit Committee and its members, including compliance of the Audit Committee with its charter.
Mr. Cohen, Chairperson(2)
Mr. Mikkelson
Dr. Shimer
Number of Meetings:(3)
5
Attendance Rate:
100%
_____________
(1) Our Board has determined that each of Messrs. Cohen and Mikkelson and Dr. Shimer is an audit committee financial expert, as defined under applicable SEC rules, and that Messrs. Cohen and Mikkelson and Dr. Shimer each meet the background and financial sophistication requirements under Nasdaq Listing Rule 5605(c)(2)(A). In making this determination, the Board made a qualitative assessment of Messrs. Cohen’s and Mikkelson’s and Dr. Shimer’s level of knowledge and experience based on a number of factors, including each of their respective formal education and experience.
(2) Mr. Cohen was appointed Audit Committee Chairperson effective March 20, 2020.
(3) Typically, the Audit Committee meets at least quarterly and with greater frequency if necessary.
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Compensation Committee
Our Board has adopted a written charter for the Compensation Committee that is available to stockholders on our website at https://investor.masimo.com/governance/governance-documents/default.aspx under “Governance Documents.” The charter of the Compensation Committee grants the Compensation Committee full access to all of our books, records, facilities and personnel. The Compensation Committee has the authority, in its sole discretion, to retain and terminate (or obtain the advice of) any advisor to assist it in the performance of its duties, but only after taking into consideration factors relevant to the advisor’s independence specified in Nasdaq Listing Rule 5605(d)(3). The Compensation Committee is directly responsible for the appointment, compensation and oversight of the work of any advisor retained by the Compensation Committee, and has sole authority to approve the advisor’s fees and the other terms and conditions of the advisor’s retention.
Our Board has determined that all members of our Compensation Committee meet the criteria for independence under Nasdaq Listing Rule 5605(a)(2) and Rule 10C-1 of the Exchange Act.
Members and Number of MeetingsPrimary Committee Functions
Committee Members:
l Reviewing and approving our general compensation strategy;
l Establishing annual and long-term performance goals for our executive officers;
l Conducting and reviewing with the Board an annual evaluation of the performance of our CEO and other executive officers;
l Considering the competitiveness of the compensation of our executive officers;
l Reviewing and approving all salaries, bonuses, equity awards, perquisites, post-service arrangements, and other compensation and benefit plans for our CEO and all other executive officers;
l Reviewing and approving the terms of any offer letters, employment agreements, termination agreements or arrangements, change in control agreements and other material agreements between us, on the one hand, and any of our executive officers, on the other;
l Acting as the administering committee of our Board for our executive compensation and cash incentive plans and for any equity incentive plans, including establishing performance metrics, determining bonus payouts and granting equity awards to employees and executive officers;
l Providing oversight for our overall compensation plans and benefit programs;
l Reviewing and approving compensation programs as well as salaries, fees, bonuses and equity awards for the non-employee members of our Board;
l Reviewing and discussing with management, and recommending the annual Compensation Discussion and Analysis disclosure and the related tabular and narrative disclosures regarding named executive officer compensation included in our annual public filings;
l Overseeing and approving the annual Compensation Committee Report included in our annual public filings;
l Overseeing risks and exposures associated with executive compensation programs and arrangements, including incentive plans; and
l Reviewing and evaluating, at least annually, the performance of the Compensation Committee and its members, including compliance of the Compensation Committee with its charter.
Mr. Reynolds, Chairperson
Mr. Cohen(1)
Mr. Mikkelson
Number of Meetings:(2)

4
Attendance Rate:
100%
_____________
(1) Mr. Cohen joined the Compensation Committee effective April 1, 2021. Mr. Harkin served on the Compensation Committee until April 1, 2021.
(2) The Compensation Committee meets from time to time during the year.

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The Compensation Committee has retained the services of Compensia, Inc. (“Compensia”) to assist the Compensation Committee in assessing and determining competitive compensation packages and to provide input on other executive compensation related matters. Compensia provides no other services to Masimo, and its sole relationship with Masimo is as an advisor to the Compensation Committee.
For more information regarding the Compensation Committee’s engagement of Compensia, see “Executive Compensation—Compensation Discussion and Analysis” starting on page 43 of this Proxy Statement.
The Compensation Committee meets outside the presence of all of our executive officers, including the named executive officers, in order to consider appropriate compensation for our CEO. Our CEO may not participate in or be present during any deliberations or determinations of the Compensation Committee regarding his compensation. For all other named executive officers, the Compensation Committee meets outside the presence of all executive officers except our CEO. The specific determinations of the Compensation Committee with respect to executive compensation for fiscal 2020 are described in greater detail in the “Compensation Discussion and Analysis” section of this Proxy Statement.
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Nominating, Compliance and Corporate Governance Committee
Our Board has adopted a written charter of the Nominating, Compliance and Corporate Governance Committee that is available to stockholders on our website at https://investor.masimo.com/governance/governance-documents/default.aspx under “Governance Documents.” Our Board has determined that all members of our Nominating, Compliance and Corporate Governance Committee meet the criteria for independence under Nasdaq Listing Rule 5605(a)(2). The Nominating, Compliance and Corporate Governance Committee meets from time to time as it deems appropriate or necessary.
Members and Number of MeetingsPrimary Committee Functions
Committee Members:
l Evaluating the composition, size, organization and governance of our Board and its committees, making recommendations to our Board about the appointment of directors to committees of our Board and recommending the selection of chairs of these committees to the Board;
l Reviewing and recommending to our Board director independence determinations made with respect to continuing and prospective directors;
l Reviewing and recommending to our Board “Section 16 officer” determinations with respect to our executive officers;
l Developing and recommending to our Board policies for considering director nominees for election to the Board;
l Identifying, reviewing, considering and evaluating candidates for election to the Board and recommending to the Board candidates to be nominated for election or incumbent directors to be nominated for re-election at each annual meeting of our stockholders or to fill any vacancies on the Board or any newly-created directorships;
l Overseeing our Board’s performance and annual self-evaluation process and evaluating the participation of members of the Board in continuing education activities in accordance with Nasdaq rules;
l Overseeing corporate governance;
l Overseeing our corporate compliance programs;
l Developing, and updating as necessary, a legal compliance and ethics program designed to evaluate, maintain and correct, when appropriate, our overall compliance with all federal and state rules and regulations and all of our codes of ethics and conduct;
l In consultation with the Audit Committee, reviewing and, if appropriate, updating or recommending to our Board updates to our existing procedures for the receipt, retention and treatment of reports or evidence of violations of any federal or state rules or regulations or of our codes of ethics and conduct; and
l Reviewing and evaluating, at least annually, the performance of the Nominating, Compliance and Corporate Governance Committee and its members, including compliance of the Nominating, Compliance and Corporate Governance Committee with its charter.
Dr. Shimer, Chairperson(1)
Mr. Mikkelson
Mr. Reynolds
Number of Meetings:(2)

2
Attendance Rate:
100%
__________________
(1) The Nominating, Compliance and Corporate Governance Committee meets from time to time during the year.
(2) Dr. Shimer joined the Nominating, Compliance and Corporate Governance Committee and was appointed as its Chairperson effective April 1, 2021. Mr. Harkin served on the Nominating, Compliance and Corporate Governance Committee and as its Chairperson until April 1, 2021.



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NON-EMPLOYEE DIRECTOR COMPENSATION
Our current non-employee director compensation policy was adopted by the Board effective January 1, 2020, after consultation with the Compensation Committee’s independent compensation consultant and consideration of market data for a group of peer companies (the “Non-Employee Director Compensation Policy”). During fiscal 2020, the Non-Employee Director Compensation Policy provided for the following compensation:
non-employeedirectorcompxv.jpg
Compensation Item(s):Annual
Amount
Annual Cash Retainer(1)
Board Service$70,000 
Audit Committee12,500 
Compensation Committee10,000 
Nominating, Compliance and Corporate Governance Committee5,000 
Committee Chairperson Annual Cash Retainer(2)
Audit Committee$25,000 
Compensation Committee20,000 
Nominating, Compliance and Corporate Governance Committee15,000 
Equity Awards(3)(4)
Restricted Share Units$180,000 
_____________
(1)    All annual cash retainers are payable on a quarterly basis in arrears. For Board committees, excludes committee chairperson.
(2)    All annual cash retainers are payable on a quarterly basis in arrears.
(3)    Each year on the date of our annual meeting of stockholders, each non-employee director is granted an award of restricted share units (“RSUs”) with respect to shares of our common stock having a grant date fair value of $180,000, rounded down to the nearest whole share, which vest on the earlier of the first anniversary of the grant date or the date of the next annual meeting of stockholders.
(4)    The Non-Employee Director Compensation Policy also provides that all RSU awards granted to the non-employee directors pursuant to the policy will vest in full in the event of a change in control of Masimo.

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The following table sets forth summary information concerning compensation paid or accrued for services rendered to us in all capacities to the non-employee members of our Board for the fiscal year ended January 2, 2021.
Fiscal 2020 Non-Employee Director Compensation Table:
Name(1)
Fees Earned
or Paid in Cash
 
Stock
Awards(2)(3)
Option
Awards(4)
All Other
Compensation
Total
Steven J. Barker, Ph.D., M.D.(5)
$29,555 $— $— $110,000 
(6)
$139,555 
H Michael Cohen92,253 179,902 — — 272,155 
Sanford Fitch(5)
35,051 — — 5,000 
(6)
40,051 
Thomas Harkin95,000 179,902 — — 274,902 
Adam Mikkelson97,500 179,902 — — 277,402 
Craig Reynolds87,500 179,902 — — 267,402 
Julie A. Shimer, Ph.D.82,500 179,902 — — 262,402 
______________
(1)Our Chairman and CEO, Mr. Kiani, is not included in this table as he is an employee of Masimo and therefore receives no compensation for his service as a director. Mr. Kiani’s compensation is included in the “Summary Compensation Table” on page 69 of this Proxy Statement.
(2)As of January 2, 2021, each of the listed non-employee directors held RSU awards with respect to 749 shares of our common stock.
(3)These amounts generally represent the aggregate grant date fair value of the RSU awards granted to each listed non-employee director in fiscal 2020, computed in accordance with Financial Accounting Standard Board Accounting Standard Codification Topic 718 (“ASC Topic 718”). These amounts do not represent the actual amounts paid to or realized by the directors during fiscal 2020. The value as of the grant date for the RSU awards is calculated based on the number of RSUs at the grant date market price and is recognized once the requisite service period for the RSUs is satisfied. For a detailed description of the assumptions used for purposes of determining grant date fair value, see Note 18 to our Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates-Share-Based Compensation,” included in our Annual Report on Form 10-K for the year ended January 2, 2021 that was filed with the SEC on February 23, 2021.
(4)As of January 2, 2021, none of our then serving non-employee directors held any options to purchase shares of our common stock other than Craig Reynolds, who held options to purchase an aggregate of 60,000 shares.
(5)Dr. Barker’s and Mr. Fitch’s service on our Board ceased when their then-current terms expired at our 2020 Annual Meeting of Stockholders held on May 29, 2020.
(6)Consists of fees earned for non-employee consulting services provided to the Company.



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AUDIT RELATED MATTERS
AUDIT RELATED MATTERS
AUDIT COMMITTEE’S PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has adopted a policy for the pre-approval of audit and non-audit services rendered by our independent registered public accounting firm, Grant Thornton LLP. The policy generally pre-approves specified services in the defined categories of audit, audit-related and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committee’s approval of the scope of the engagement of the independent registered public accounting firm or on an individual explicit case-by-case basis before the independent registered public accounting firm is engaged to provide each service. The pre-approval of services may be delegated to one or more of the Audit Committee’s members, but the decision must be reported to the full Audit Committee at its next scheduled meeting. By the adoption of this policy, the Audit Committee has delegated the authority to pre-approve services to the Chairperson of the Audit Committee, subject to certain limitations.
The Audit Committee has determined that the rendering of the services other than audit services by Grant Thornton LLP is compatible with maintaining the independent registered public accounting firm’s independence.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table represents aggregate fees billed to Masimo for the fiscal years ended January 2, 2021 and December 28, 2019 by Grant Thornton LLP, our independent registered public accounting firm for such periods. All fees described below were approved by the Audit Committee.
 Fiscal Year Ended
 January 2, 2021December 28, 2019
Audit Fees(1)
$1,967,130 $1,995,593 
Audit-Related Fees(2)
131,838 895,015 
Tax Fees(3)
36,270 35,490 
All Other Fees(4)
— 26,377 
Total Fees$2,135,238 $2,952,475 
______________
(1)Audit fees consist of fees billed for services rendered for the audit of our consolidated annual financial statements, including performance of the attestation procedures required by Section 404 of the Sarbanes-Oxley Act of 2002, as amended, review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Grant Thornton LLP in connection with statutory and regulatory filings or engagements.
(2)Audit-related fees consist of fees for assurance and related services performed by our independent registered public accounting firm and include fees reasonably related to the performance of the audit of our U.S. retirement savings plan as well as due diligence services in connection with strategic investments and other merger and acquisition-related activities.
(3)Tax fees consist of fees related to certain U.S. state and local tax preparation and consultation services.
(4)All other fees primarily consist of fees associated with the reimbursement of out-of-pocket expenses related to certain legal matters.

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AUDIT RELATED MATTERS
AUDIT COMMITTEE REPORT
Our Audit Committee is composed of “independent directors,” as determined in accordance with Nasdaq Listing Rule 5605(a)(2) and Rule 10A-3 of the Exchange Act. The Audit Committee operates pursuant to a written charter adopted by the Board, a copy of which may be viewed on our website at https://investor.masimo.com/governance/governance-documents/default.aspx under “Governance Documents.”
As described more fully in its charter, the purpose of the Audit Committee is to assist our Board with its oversight responsibilities regarding the integrity of our financial statements, assessing the independent registered public accounting firm’s qualifications and independence and the performance of the persons performing internal audit duties for us and the independent registered public accounting firm. Management is responsible for the preparation, presentation and integrity of our financial statements as well as our financial reporting process, accounting policies, internal audit function, internal accounting controls and disclosure controls and procedures. The independent registered public accounting firm is responsible for performing an independent audit of our consolidated financial statements in accordance with generally-accepted auditing standards and issuing a report. The Audit Committee’s responsibility is to monitor and oversee these processes. The following is the Audit Committee’s report submitted to the Board for fiscal 2020.
The Audit Committee has:
reviewed and discussed our audited financial statements with management and Grant Thornton LLP, the independent registered public accounting firm;
discussed with Grant Thornton LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC; and
received from Grant Thornton LLP the written disclosures and the letter regarding their communications with the Audit Committee concerning independence as required by the applicable requirements of the Public Company Accounting Oversight Board and discussed Grant Thornton LLP’s independence with them.
In addition, the Audit Committee has met separately with management and with Grant Thornton LLP as part of the committee’s quarterly meetings.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended January 2, 2021 for filing with the SEC. The Audit Committee also has selected and engaged Grant Thornton LLP as Masimo’s independent registered public accounting firm for the fiscal year ending January 1, 2022, and is seeking ratification of the selection by Masimo’s stockholders.
Audit Committee
Mr. H Michael Cohen
Mr. Adam Mikkelson
Dr. Julie A. Shimer
This foregoing audit committee report is not “soliciting material,” is not deemed “filed” with the SEC, and shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing of ours under the Securities Act of 1933, as amended, or under the Exchange Act, except to the extent we specifically incorporate this report by reference.
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 EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
The following Compensation Discussion and Analysis may contain statements regarding future individual and Company performance targets and goals. Any targets and goals so disclosed are referenced in the limited context of Masimo’s compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. Masimo specifically cautions investors not to apply these statements to other contexts.
This Compensation Discussion and Analysis describes the compensation program for our Principal Executive Officer, Principal Financial Officer and the next three most highly-compensated Executive Officers of the Company for fiscal 2020 (our “Named Executive Officers” or “NEOs”). During fiscal 2020, these individuals were:
NamePosition(s)
Joe Kiani Chief Executive Officer & Chairman of the Board
Micah Young Executive Vice President, Chief Financial Officer
Bilal MuhsinChief Operating Officer
Tao LevyExecutive Vice President, Business Development
Tom McClenahanExecutive Vice President, General Counsel & Corporate Secretary
This Compensation Discussion and Analysis describes the material elements of our executive compensation program for fiscal 2020. It also provides an overview of our executive compensation philosophy and objectives. Finally, it analyzes how and why the Compensation Committee of our Board (the “Compensation Committee”) arrived at the specific compensation decisions for our executive officers, including our NEOs, for fiscal 2020, including the key factors that the Compensation Committee considered in determining their compensation.
COMPENSATION DISCUSSION & ANALYSIS TABLE OF CONTENTS
lExecutive Summary
lCompensation Philosophy & Objectives
lGovernance of Executive Compensation
lIndividual Compensation Elements
lOther Compensation Policies and Practices
lTax and Accounting Considerations
lSummary Compensation Table
EXECUTIVE SUMMARY
Our compensation programs are designed to attract and retain the most talented employees within our industry and motivate them to perform at the highest level while executing our long-term plan. In order to retain and motivate this caliber of talent, the Compensation Committee is committed to promoting a performance-based culture. Compensation is tied to financial metrics that incentivize management to successfully deliver on the long-term plan and our commitments to our stockholders.
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 EXECUTIVE COMPENSATION
Fiscal 2020 Performance Highlights
The following represents a few financial and operational highlights of fiscal 2020 (these include GAAP and non-GAAP measures(1)):

Product Revenue
(in millions)

$1,144
Goal: $1,035M

Non-GAAP
Product Revenue Growth(1)

22%

Non-GAAP EPS(1)
($ per diluted share)

$3.60
Goal: $3.56

Non-GAAP EPS(1)
(% growth)

12%
In 2020, we witnessed extremely challenging situations for patients and healthcare providers around the world related to the COVID-19 pandemic. We also witnessed incredible leadership, resilience and courage by many people in many walks of life, and in particular the frontline healthcare providers: our doctors, nurses, respiratory therapists, EMS professionals and others.
Within this tough environment, our global organization contributed to the critical solutions that were, and still are, required to manage this pandemic. In the midst of the pandemic, last year was also a milestone year for Masimo as our revenues exceeded $1 billion for the first time since our founding over 30 years ago. Today, we are even more committed to helping our customers overcome the persistent challenges related to this pandemic with an expanding portfolio of products to improve patient outcomes and reduce the cost of care.
We realized many significant achievements in 2020 such as the introduction of our Masimo SafetyNet system for enabling hospital-to-home monitoring while also growing the customer base for our Patient SafetyNet solution that enables hospitals to streamline workflow and improve patient care, especially where hospital staff were overwhelmed due to many COVID-19 patient admissions. Within Masimo, our dedicated team was nimble in its response to our customers in the face of significant demand for our products, while at the same time expanding our portfolio. This expansion included Radius-Tºcontinuous wearable thermometer, Centroid continuous wearable patient orientation and activity sensor, and Masimo SafetyNet-OPEN to help institutions open and stay open safely. We also completed three notable acquisitions, including the iSirona Connected Care business from NantHealth, TNI medical AG, and LiDCO Group Plc, which expands our technology portfolio into the large and growing markets for hospital automation, respiratory therapy and hemodynamic monitoring, respectively.
Our performance in 2020 demonstrates yet another year of strong execution towards our long-range plans and a commitment to reinvest in the business to drive growth and deliver long-term stockholder value.
1-Year Financial Performance | Year-Over-Year Growth Rates (FY2019 to FY2020)(1)
l
22% GAAP product revenue growth
l
22% Non-GAAP product revenue growth
l16% GAAP operating profit growthl17% Non-GAAP operating profit growth
l
20% GAAP EPS growth
l
12% Non-GAAP EPS growth
3-Year Financial Performance | Compound Annual Growth Rates (CAGR) (FY2017 to FY2020)(1)
l13% GAAP product revenue growthl16% Non-GAAP product revenue growth
l12% GAAP operating profit growthl24% Non-GAAP operating profit growth
l23% GAAP EPS growthl28% Non-GAAP EPS growth

________
(1)    Non-GAAP product revenue and non-GAAP EPS are non-GAAP financial measures - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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 EXECUTIVE COMPENSATION
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Fiscal 2020 Performance Highlights(1)
l Shipped 472,300 non-invasive technology boards and monitors, which reflects a 92% increase over the prior year.
l Shipped over 2.2 million non-invasive technology boards and monitors over the last 10 years, which reflects a 17% increase over the prior year.
l Product revenues increased 22% or $207 million, to reach $1,144 million, which exceeded our original FY2020 financial guidance of $1,035 million.
l GAAP operating profit was $256 million and non-GAAP operating profit was $264 million, growing 16% and 17% over the prior year, respectively.
l GAAP EPS increased 20% to reach $4.14 per diluted share. Non-GAAP EPS increased 12% to reach $3.60 per diluted share, which exceeded our original FY2020 guidance of $3.56 per diluted share.
l Delivered $211 million of operating cash flow, despite a year marked by substantial inventory investment to sustain our operations during the pandemic.
l Successfully completed three acquisitions during FY2020 with a total value of $113 million.
l Repurchased 453,000 shares of Masimo common stock, valued at $111 million.













__________________
(1/)*    Non-GAAP Product Revenue, non-GAAP operating profit and Non-GAAP EPS are non-GAAP financial measures - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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 EXECUTIVE COMPENSATION
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Our 2020 Total Stockholder Return (“TSR”) of 68% reflects our strong fiscal 2020 financial results, outperforming the median TSR of those of the Nasdaq Composite and the Nasdaq Medical Equipment Indices over a 1-year, 3-year and 5-year periods.
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 EXECUTIVE COMPENSATION
Several widely accepted measures of operating performance reflect the strength of our fiscal 2020 financial performance on both an absolute and relative basis, as compared to other companies that comprised our fiscal 2020 compensation peer group, which included other publicly-traded companies classified as health care equipment and supplies companies in Global Industry Classification Standard Code 351010 (see “—Competitive Positioning” on page 58 of this Proxy Statement for a discussion of our fiscal 2020 compensation peer group). Such operating measures for the fiscal years ended nearest to January 2, 2021 were as follows:
Measures of
Operating Performance
Masimo
Performance
Percentile Ranking
Versus Fiscal 2020 Compensation
Peer Group Companies
Return on Equity18.7%72nd
Return on Capital12.1%82nd
Return on Assets10.3%85th
Total Revenue Growth22%89th
Operating Margin22.3%86th
We believe that our fiscal 2020 performance results reflect the continued attention and focus by our executive team on delivering financial results that reflect not only revenue growth, but also strong financial returns based on our assets, equity, and capital structure. In fact, our fiscal 2020 performance results placed Masimo above the 80th percentile of our compensation peer group for return on capital, return on assets, revenue growth and operating margin, with return on equity at the 72nd percentile. We believe that our strong operating performance measures relative to our compensation peer group further demonstrates the success of our executive team’s efforts during fiscal 2020.
Results of Fiscal 2019 Compensation Stockholder Advisory Vote
At our 2020 Annual Meeting of Stockholders, we conducted a non-binding stockholder advisory vote on the fiscal 2019 compensation of our named executive officers (commonly known as a “Say-on-Pay” vote). Our stockholders approved our Say-on-Pay proposal with approximately 88% of the votes cast in favor of the fiscal 2019 compensation of our named executive officers. While this represented an increase in support for our executive compensation program compared to our fiscal 2018 compensation program, our Board believes that it remains important to be responsive to feedback from our stockholders about our executive compensation program. During fiscal 2020, the Chairperson of our Compensation Committee and members of management were involved in more than 15 in-person or telephonic meetings with stockholders representing more than 45% of our outstanding shares. These discussions covered topics such as long-term strategy, financial and operating performance, risk management, executive compensation and governance practices. These discussions, together with our fiscal 2019 Say-on-Pay results, indicated support for our 2019 compensation program and influenced our decision to maintain a consistent overall approach for fiscal 2020 compensation.
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 EXECUTIVE COMPENSATION
Fiscal 2020 Executive Compensation Program
As previously noted, the Compensation Committee values the feedback we receive from our stockholders. In 2017, in response to feedback received from our stockholders, the Compensation Committee implemented certain changes to our executive compensation program, which carried forward into fiscal 2018, 2019 and 2020, and which continue to align the compensation of our executive officers with both short-term and long-term performance that supports our long-term business strategy. Although we do not provide detailed disclosure of our forward-looking performance metrics for competitive reasons, which is a commonly accepted practice, we do provide a detailed disclosure of our prior awards within “—Executive Compensation—Individual Compensation Elements” starting on page 59 of this Proxy Statement.
Annual Cash Incentives - The annual cash incentive plan is designed to provide performance-based compensation that will be earned only upon achieving various pre-established levels of Company financial performance. For fiscal 2020, the Compensation Committee selected 2020 Adjusted Product Revenue(2) and 2020 Adjusted Non-GAAP EPS(2) as the performance measures for the funding percentages, each weighted equally, as the Compensation Committee believes these performance measures directly support both our short-term strategy and our long-term objective of creating sustainable stockholder value.
LTI Compensation - Equity Awards - The Compensation Committee believed that a one-year performance period was appropriate for the 2017 PSU awards in light of the transition to our new 2017 Equity Incentive Plan. However, to further align the compensation of our executive officers with long-term performance, the Compensation Committee decided to extend the performance period for the 2018, 2019 and 2020 PSU awards from one year to three years. For example, the 2018 PSU awards vested in fiscal 2021, based on actual performance achieved in fiscal 2020. The performance objectives were established at the beginning of 2018, which required us to deliver improving financial results over the 3-year performance period (2018 through 2020) in order to achieve our financial objectives for fiscal 2020.
Accordingly, the Compensation Committee granted LTI awards to our executive officers for fiscal 2020 consisting of the following mix of equity awards:
25% in the form of stock options that vest annually over a five year period; and
75% in the form of PSU awards that are earned, if at all, at the end of a three-year performance period based on our actual performance as measured against pre-established performance objectives. For the fiscal 2020 PSU awards, the Compensation Committee selected fiscal 2022 Adjusted Product Revenue(2) and fiscal 2022 Adjusted Non-GAAP Operating Margin(2) as the performance measures for the targeted PSU award percentages, each weighted equally.
Performance Stock Unit Awards
2017201820192020202120222023
2017 Grant1-Year Performance Period
Vest(1)
Vest(1)
Vest(1)
Vest(1)
2018 Grant3-Year Performance Period
Vest(2)(3)
2019 Grant3-Year Performance Period
Vest(2)(4)
2020 Grant3-Year Performance Period
Vest(2)(5)




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(2)    Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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 EXECUTIVE COMPENSATION
_______________
(1)The 2017 Grant vests annually at 20% per year through 2021.
(2)Assumes that at least the threshold performance level is achieved.
(3)The 2018 Grant vested in fiscal 2021 based on actual performance achieved in 2020. As such, the PSUs vested on the date of the approval by the Audit Committee of the audit of our financial statements for fiscal 2020.
(4)The 2019 Grant will vest in fiscal 2022 based on actual performance achieved in 2021. If performance objectives are achieved, the PSUs will vest on the date of the approval by the Audit Committee of the audit of our financial statements for fiscal 2021 (or such later date determined by the Compensation Committee).
(5)The 2020 Grant will vest in fiscal 2023 based on actual performance achieved in 2022. If performance objectives are achieved, the PSUs will vest on the date of the approval by the Audit Committee of the audit of our financial statements for fiscal 2022 (or such later date determined by the Compensation Committee).
Our Response to Investor Feedback Related to Executive Compensation Programs and Governance Practices
Our Compensation Committee is committed to ensuring that our executive compensation programs reflect sound compensation principles and compensation-related governance practices. The following actions have been taken by our Compensation Committee with respect to our executive compensation program and governance practices since 2011:
Effective Date of Response
Fiscal Year
Corporate Governance or
 Compensation Practice
`Issues Previously Raised in Stockholder Outreach or
Corporate Governance Reviews
Our Response
2020Executive compensationLimited disclosure of Annual Cash Incentive and Long-term Incentive compensation plan targetsProvided additional disclosure related to equity targets
Corporate responsibility and sustainabilityLimited disclosure related to corporate responsibility and sustainability practicesProvided expanded disclosure related to corporate responsibility and sustainability practices, (see page 29 herein)
CybersecurityLimited disclosure related to Cybersecurity practices.Provided expanded disclosure related to Cybersecurity practices, (see page 30 herein)
2019Proxy accessAbsence of proxy access bylawsAdopted proxy access bylaws
2018Executive compensationEquity compensation is not directly tied to long-term Company performanceGranted performance-based equity tied to three-year Company performance
2017Executive compensationEquity compensation includes a large discretionary componentGranted performance-based equity tied to defined target matrix
2016Stockholders’ rights agreementPresence of “poison pill” arrangementEliminated the “poison pill”
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 EXECUTIVE COMPENSATION
Effective Date of Response
Fiscal Year
Corporate Governance or Compensation Practice`Issues Previously Raised in Stockholder Outreach or Corporate Governance ReviewsOur Response
2016
(Continued
from above)
Non-employee directors’ stock ownership policyAbsence of stock ownership policy for members of Board of DirectorsAdopted stock ownership policy for non-employee members of our Board, which requires each non-employee director to own and hold shares of our common stock with a value equal to at least $250,000
2015Term limits for service on Board of DirectorsAbsence of term limits for non-employee members of Board of DirectorsAdopted term limit of 15 years for non-employee members of our Board
Tax “gross-up” paymentsAbsence of formal policy restricting the provision of tax “gross-up” or similar payments in connection with a change in control of the CompanyIn addition, our CEO’s employment agreement, entered into in November 2015, eliminated similar tax “gross-up” provisions. After the elimination of this provision, there are no longer any “gross-up” provisions at the Company
2013Executive stock ownership policyAbsence of formal stock ownership policy for executive officersAdopted stock ownership policy for executive officers, which requires our CEO to own and hold shares of our common stock with a value equal to at least six times his annual base salary and our other executive officers to own and hold shares of our common stock with a value equal to the executive officer’s annual base salary
2012Compensation recovery (“clawback”) policyAbsence of formal compensation recovery (“clawback”) policyAdopted formal compensation recovery (“clawback”) policy for executive officers
2011Tax “gross-up” paymentsAbsence of formal policy restricting the provision of tax “gross-up” or similar payments in connection with a change in control of the CompanyAdopted formal policy providing that the Compensation Committee will no longer approve any arrangements with executive officers that include a tax “gross-up” or similar provision that results in the Company paying excise taxes on change in control payments
We continue to seek and value the opinions of our stockholders, as well as the insights gained from the discussions we have with specific stockholders. The Compensation Committee finds these discussions to be helpful as it considers and adopts compensation policies affecting our executive officers, including our NEOs. We will continue to consider the outcome of future Say-on-Pay votes, as well as feedback received throughout the year when making compensation decisions for our executive officers.
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 EXECUTIVE COMPENSATION
Fiscal 2020 NEO Compensation Highlights
The Compensation Committee took the following key actions for fiscal 2020 with respect to the compensation of our NEOs:
Base Salaries - We increased the annual base salaries of our NEOs by 3.0%, which was consistent with the increases provided to our other employees as a whole. Please see “Base Salary” on page 59 of this Proxy Statement for additional information.
Annual Cash Incentives - Based on our Adjusted Product Revenue(2) and Adjusted Non-GAAP EPS(2) for fiscal 2020, we paid annual cash bonuses under our fiscal 2020 Executive Bonus Incentive Plan to our NEOs (other than our CEO) for fiscal 2020 ranging from $250,194 to $405,048, and an annual cash bonus to our CEO in the amount of $1,657,764.
LTI Compensation - Equity Awards - In March 2020, we granted options to purchase shares of our common stock to each of our NEOs (other than our CEO) with a grant date fair value of ranging from $299,973 to $599,991, and an option to purchase shares of our common stock to our CEO with a grant date fair value in the amount of $2,999,999. In March 2020, we also granted PSU awards with a target grant date fair value ranging from $899,971 to $1,799,941 to our NEOs (other than our CEO) and a PSU award with a target grant date fair value of $8,999,887 to our CEO.
Total Target Compensation
We believe that our fiscal 2020 executive compensation was closely aligned with our stockholders’ interests. While base salary and an annual cash bonus opportunity focused on the achievement of shorter-term goals, our equity awards, in the form of options to purchase shares of our common stock and PSU awards, provided for a longer-term compensation structure to focus attention on our long-term operating results and promote retention. Most of the fiscal 2020 annual compensation of our executive officers was directly tied, through performance-based annual cash bonuses and LTI compensation in the form of stock options and PSU awards, to the achievement of financial and operating results that increased stockholder value.
The following charts show the mix of our CEO’s and, on average, each NEO’s target total direct compensation for fiscal 2020, consisting of base salary, a target annual cash bonus opportunity and the grant date fair value of the equity awards granted during the year:
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Total long-term incentive compensation =81.0%Total long-term incentive compensation =66.0%
Total “at risk” compensation =92.2%Total “at risk” compensation =80.2%
________________
(2) Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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 EXECUTIVE COMPENSATION
As illustrated above, the target total direct compensation opportunities of our NEOs are directly linked to our financial performance. We believe that our executive officers’ interests were and continue to be aligned with those of our stockholders given that a substantial portion of their target total direct compensation was “at-risk” and variable commensurate with our financial performance. We also believe that our executive compensation program appropriately emphasized performance-based compensation that rewarded our executive officers for delivering financial, operational and strategic results that met or exceeded pre-established goals through our annual cash bonus plan and the PSU awards under our LTI compensation plans. In addition, we further aligned the interests of our executive officers with those of stockholders and our long-term interests through executive stock ownership requirements. As of the date of this Proxy Statement, each of our executive officers to whom such stock ownership requirements are applicable was in compliance with such requirements.
Executive Compensation Policies and Practices
We endeavor to maintain sound executive compensation policies and practices, including compensation-related corporate governance standards, consistent with our executive compensation philosophy. During fiscal 2020, we maintained the following executive compensation policies and practices, including both policies and practices we have implemented to drive performance and policies and practices that either prohibit or minimize behaviors that we do not believe serve our stockholders’ long-term interests:
What We Do
ü    Maintain an Independent Compensation Committee. The Compensation Committee consists solely of independent directors who establish our compensation practices.
ü    Compensation Committee Retains an Independent Compensation Advisor. The Compensation Committee has engaged its own compensation consultant to provide information, analysis and other advice on executive compensation independent of management.
ü    Annual Executive Compensation Review. At least once a year, the Compensation Committee conducts a review of our compensation strategy.
ü    Compensation At-Risk - Pay For Performance. Our executive compensation program is designed so that a significant portion of our executive officers’ compensation is “at-risk” based on corporate performance, to align the interests of our executive officers and stockholders.
ü    Annual Compensation-Related Risk Assessment. The Compensation Committee considers our compensation-related risk profile to ensure that our compensation plans and arrangements do not create inappropriate or excessive risk and are not reasonably likely to have a material adverse effect on the Company. The Compensation Committee has determined that there are no risks arising from our compensation policies and practices for our employees that are reasonably likely to have a material adverse effect on the Company.
ü    Multi-Year Vesting Requirements and Performance Periods. To align the interests of our executive officers and stockholders, the time-based stock-option awards granted to our executive officers vest over a five-year period. In 2020, we granted our executive officers PSU awards that will be earned, if at all, at the end of a three-year performance period based on our actual performance as measured against pre-established performance objectives relating to fiscal 2022 Adjusted Product Revenue(2) and fiscal 2022 Adjusted Non-GAAP Operating Margin(2).
ü    Compensation Recovery (“Clawback”) Policy. We have adopted a compensation recovery (“clawback”) policy, which enables our Board to recover incentive compensation (including gains from equity awards) from our current and former executive officers that is based on erroneous data, received during the three-year period preceding the date on which we become required to prepare an accounting restatement; and is in excess of what would have been paid if calculated under the restatement.
_____________________________________
(2)    Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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 EXECUTIVE COMPENSATION
ü    Stock Ownership Policies. We have adopted stock ownership policies for our executive officers and the non-employee members of our Board under which they must accumulate and maintain, consistent with the terms of our stock ownership policy, shares of our common stock. For additional information, see “Ownership Of Our Stock - Stock Ownership Policies” starting on page 85 of this Proxy Statement.
ü    Annual Stockholder Advisory Vote on Named Executive Officer Compensation. We conduct an annual stockholder advisory vote on the compensation of our NEOs. The Compensation Committee considers the results of this advisory vote during the course of its deliberations on our executive compensation program.
ü    Stockholder Engagement that Includes our Compensation Committee Chairperson. We engage with our stockholders on executive compensation matters and include our Compensation Committee Chairperson in these engagement activities.

What We Do Not Do
û    No Guaranteed Bonuses. We do not provide guaranteed bonuses to our executive officers. 
û    No Special Executive Retirement Plans. We do not currently offer, nor do we have plans to offer, defined benefit pension plans or any non-qualified deferred compensation plans or arrangements to our executive officers other than the plans and arrangements that are available to all employees. Our executive officers are eligible to participate in our defined contribution plan under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), on the same basis as our other employees.
û    No Hedging; Pledging Requires Pre-Approval. We prohibit our employees, including our executive officers, and the non-employee members of our Board from hedging our equity securities. In addition, all pledging of our equity securities by our executive officers and members of our Board must be pre-approved by the Compensation Committee and, as a condition to pre-approving any pledge of our equity securities, the executive officer or member of our Board seeking to pledge securities must clearly demonstrate his or her financial capacity to repay any loan for which securities will be pledged as collateral without resort to the securities to be pledged.
û    No Tax Payments on Perquisites. We do not provide any tax reimbursement payments (including “gross-ups”) to our executive officers on any perquisites or other personal benefits.
û    No Gross-Up Payments on Post-Employment Compensation Arrangements. We do not provide any tax reimbursement payments (including “gross-ups”) on payments or benefits contingent upon a change in control of the Company.
û    No Stock Option Re-pricing. We do not permit options to purchase shares of our common stock to be re-priced to a lower exercise price without the approval of our stockholders. We have never repriced our stock options.
û    No Evergreen Provisions. The 2017 Equity Plan does not contain an annual “evergreen” provision that increases the number of shares available for issuance each year. The 2017 Equity Plan authorizes a fixed number of shares, so that stockholder approval is required to increase the maximum number of shares that may be issued subject to awards under the 2017 Equity Plan.





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 EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY AND OBJECTIVES
The primary objective of our executive compensation program is to attract and retain a talented, entrepreneurial and creative team of executives who will provide leadership for our success in driving our technologies and products to the broadest number of patients, and in turn, creating sustainable long-term value. We seek to accomplish this objective in a way that is aligned with the long-term interests of our stockholders.
Compensation Philosophy
We operate within a very complex business environment, which requires a very strong management team. Our business model requires our management team to be adept at developing competitive products and sales/marketing strategies to support multiple customers, including hospitals, alternate care facilities and original equipment manufacturers within multiple geographies. Many of our competitors have substantially greater capital resources, larger customer bases and larger sales forces than we do, and have ties with group purchasing organizations and other purchasers that are stronger than ours. In addition, the medical device industry is characterized by rapid product development and technological advances, which require our management team to be adept at managing these key areas of the business.
As a result, the Compensation Committee believes that it is critical to attract, develop and retain a highly-qualified management team with the experience, knowledge, expertise and vision capable of not only operating, but also excelling, in this complex and competitive business environment, including competing against larger competitors and developing and commercializing new products, new and improved technologies and new applications for our existing technologies.
Compensation Objectives and Program Design
Our executive compensation program is intended to help us achieve and foster a goal-oriented, highly-motivated management team with a clear understanding of our business objectives and shared corporate values. To this end, the Compensation Committee believes that our executive compensation program should provide compensation that:
attracts and retains the best executive talent;
appropriately aligns our business objectives and stockholder interests;
maintains a reasonable balance across types and purposes of compensation, particularly with respect to fixed compensation objectives, short-term and long-term performance-based objectives and retention objectives;
motivates our executive officers to achieve our annual and long-term strategic goals and rewards performance based on the attainment of such goals;
appropriately considers risk and reward in the context of our business environment and long-range business plans;
recognizes individual value and contributions to our success;
considers but does not exclusively rely upon competitive market data; and
supports our succession planning objectives.
We seek to achieve these objectives in a way that is consistent with our long-term interests and our stakeholders, including our stockholders and employees. We structure the annual compensation of our executive officers, including our NEOs, using three principal elements: base salary, annual cash incentive opportunities and LTI compensation opportunities in the form of equity awards. While the pay mix may vary from year to year, the ultimate goal is to achieve our compensation objectives as described above. The relationships between each element and such compensation objectives are as follows:
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 EXECUTIVE COMPENSATION
TypeComponentPurposeKey Features
Fixed CompensationBase SalaryProvide competitive, fixed compensation to attract and retain the best possible executive talent
l
Cash-based
image1231a.jpg
l
Reviewed annually, changes effective July
l
Takes into account level of responsibility, time in role, performance and the ability to replace the individual
Performance-Based
Cash Incentives
Align executive compensation with our corporate strategies and business objectives; promote the achievement of key strategic and financial performance measures by linking annual cash incentives to the achievement of corporate performance goals
l
Cash-based
Compensation
image1241a.jpg
l
Reviewed annually, paid in March
l
Performance-based and not guaranteed
l
Drive the achievement of key business results on an annual or multi-year basis
Equity AwardsAlign executive compensation with our corporate strategies, and business objectives, motivate the Company’s officers to create sustainable long-term value for our stockholders and achieve other business objectives, encourage stock ownership by the Company’s officers in order to align their financial interests with the long-term interest of stockholders
l
Equity-based
equitypiea1a011.jpg
l
Attract and retain talent
l
Multi-year performance period and not guaranteed
l
Combination of:
l Performance-based restricted stock units
l Time-based stock options
l
Based on performance goals tied to determined financial metric approved by the Board (PSUs)
l
Drive the achievement of key long-term business results on a multi-year basis
GOVERNANCE OF EXECUTIVE COMPENSATION PROGRAM
Role of Compensation Committee
The Compensation Committee discharges the responsibilities of our Board relating to the compensation of our executive officers. The Compensation Committee consists of directors who are “independent” directors as required by the Nasdaq listing standards and Exchange Act Rule 10C-1, and “non-employee directors” for purposes of Exchange Act Rule 16b-3. During fiscal 2020, the Compensation Committee was comprised of Messrs. Harkin, Mikkelson and Reynolds (the current Chairperson of the Compensation Committee). Mr. Cohen joined the Compensation Committee effective April 1, 2021. Mr. Harkin served on the Compensation Committee until April 1, 2021.
The Compensation Committee has responsibility for overseeing our compensation and benefits policies generally, and overseeing, evaluating and approving the compensation plans, policies, and programs applicable to our CEO, as well as our other executive officers. In carrying out its responsibilities, the Compensation Committee evaluates our compensation policies and practices with a focus on the degree to which these policies and practices reflect our executive compensation philosophy, develops recommendations, makes decisions that it believes advances our philosophy and reviews the performance of our executive officers when making decisions with respect to their compensation.

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 EXECUTIVE COMPENSATION
The Compensation Committee reviews the base salary levels, annual cash bonus opportunities, and LTI compensation opportunities of our executive officers annually or more frequently as warranted. In making decisions about the compensation of our executive officers, the Compensation Committee relies on its general experience and subjective considerations of various factors, including the following:
our performance against the financial, operational and strategic objectives established by the Compensation Committee and our Board;
each individual executive officer’s skills, experience, and qualifications relative to other similarly-situated executives at the companies in our compensation peer group;
the scope of each executive officer’s role compared to other similarly-situated executives at the companies in our compensation peer group;
the performance of each individual executive officer, based on a subjective assessment of his or her contributions to our overall performance, ability to lead his or her business unit or function, and work as part of a team, all of which reflect our core values;
compensation parity among our executive officers;
our financial performance relative to our compensation and performance peers;
feedback from our investor outreach programs; and
with respect to his direct reports, the recommendations of our CEO.
These factors provide the framework for compensation decision-making and final decisions regarding the compensation opportunity for each executive officer. No single factor is determinative in setting pay levels, nor was the impact of any factor on the determination of pay levels quantifiable.
The Compensation Committee also considers the potential risks in our business when designing and administering our executive compensation program. We believe our balanced approach to performance measurement and pay delivery works to avoid misaligned incentives for individuals to undertake excessive or inappropriate risk.
The Compensation Committee does not engage in formal benchmarking against other companies’ compensation programs or practices to establish our compensation levels or make specific compensation decisions with respect to our executive officers. Instead, in making its determinations, the Compensation Committee reviews information summarizing the compensation paid at a representative group of peer companies, to the extent that the executive positions at these companies are considered comparable to our positions and informative of the competitive environment, as well as more broad-based compensation surveys to gain a general understanding of market compensation levels.
Role of Management
In discharging its responsibilities, the Compensation Committee works with members of our management team, including our CEO. The management team assists the Compensation Committee by providing information on the Company’s performance, as well as individual performance, market data and management’s perspective and recommendations on compensation matters.
The Compensation Committee solicits and reviews our CEO’s recommendations and proposals with respect to adjustments to annual cash compensation, LTI compensation opportunities, program structures and other compensation-related matters for our executive officers (other than with respect to his own compensation). The Compensation Committee reviews and discusses these recommendations and proposals with our CEO and uses them as one factor in determining and approving the compensation for our executive officers. However, when the Compensation Committee sets the compensation for our CEO, he recuses himself from discussions regarding his own compensation. The Compensation Committee does not delegate any of its functions to others in deciding executive compensation.
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EXECUTIVE COMPENSATION
Role of Compensation Consultant
The Compensation Committee engages an independent compensation consultant to assist it by providing information, analysis and other advice relating to our executive compensation program and the decisions resulting from its executive compensation review. The compensation consultant serves at the discretion of the Compensation Committee, which reviews the engagement annually.
Since October 2016, the Compensation Committee has retained Compensia, a national compensation consulting firm, to serve as its compensation advisor. During fiscal 2020, Compensia provided the following services to the Compensation Committee:
consulting with the Compensation Committee chairperson and other members between Compensation Committee meetings;
providing competitive market data based on the compensation peer group for our executive officer positions and evaluating how the compensation we pay our executive officers compares both to our performance and to how the companies in our compensation peer group compensate their executives;
reviewing and analyzing the base salary levels, annual cash bonus opportunities, and LTI compensation opportunities of our executive officers;
assessing executive compensation trends within our industry, and providing updates on corporate governance and regulatory issues and developments;
reviewing the Compensation Discussion & Analysis in this Proxy Statement; and
assessing compensation risk to determine whether our compensation policies and practices are reasonably likely to have a material adverse impact on the Company.
Compensia did not provide any services to us other than the consulting services to the Compensation Committee.
The Compensation Committee regularly reviews the objectivity and independence of the advice provided by its compensation consultant to the Compensation Committee on executive compensation matters. During fiscal 2020, the Compensation Committee considered the six specific independence factors adopted by the SEC and Nasdaq in past years, determined that Compensia was still an independent advisor, and concluded that its work did not raise any conflicts of interest. During fiscal 2020, the total fees payable to Compensia were approximately $72,000.
Competitive Positioning
For purposes of comparing our executive compensation against the competitive market (Industry - health care equipment and supplies; Global Industry Classification Standard code 351010), the Compensation Committee reviews and considers the compensation levels and practices of a group of comparable companies. The companies in this compensation peer group for fiscal 2020 were approved on February 28, 2020 on the basis of their similarity to us in size, in terms of annual revenue and market capitalization.
In determining the fiscal 2020 compensation peer group, the Compensation Committee tried to select peer companies that resulted in us being near the median of the group in terms of both revenue and market capitalization. Our compensation peer group for fiscal 2020 was as follows:
ABIOMED, Inc.
Hill-Rom Holdings, Inc.
NuVasive, Inc.
Align Technology, Inc.
Hologic, Inc.
OSI Systems, Inc.
Cooper Companies, Inc.
Insulet
ResMed, Inc.
DENTSPLY SIRONA, Inc.
ICU Medical, Inc.
Teleflex, Inc.
Dexcom, Inc.
Integra LifeSciences Holdings Corp.
Varian Medical Systems, Inc.
Globus Medical, Inc.
LivaNova PLC
West Pharmaceutical Services, Inc.
Haemonetics Corp.
Merit Medical Systems, Inc.
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 EXECUTIVE COMPENSATION
The companies included in the compensation peer group had median revenues of $1.4 billion, ranging from approximately $700 million to approximately $4.0 billion, based on the four fiscal quarters ended nearest to December 26, 2019, representing approximately 0.76 times to 4.4 times our last four quarters of revenue of approximately $913 million as of such date. In addition, the compensation peer group had a median market capitalization of $9.7 billion, ranging from approximately $1.6 billion to $21.7 billion, as of December 26, 2019, and representing approximately 0.2 times to 2.6 times our market capitalization of $8.3 billion as of such date.
To analyze the compensation practices of the companies in our compensation peer group, Compensia gathered data from public filings (primarily proxy statements). This market data was then used as a general external reference point for the Compensation Committee in assessing our current compensation levels for executive base salaries, annual cash bonus opportunities and total equity compensation targets.
The Compensation Committee reviews our compensation peer group periodically and makes adjustments to its composition as it considers necessary and appropriate, taking into account changes in both our business and the businesses of the companies in the peer group.
INDIVIDUAL COMPENSATION ELEMENTS
The specific elements of our executive compensation program for fiscal 2020 included base salary, annual cash incentive opportunities, LTI compensation opportunities in the form of equity awards, welfare and health benefits and post-employment compensation arrangements. We use short-term compensation, such as base salary and annual cash bonus opportunities, to motivate and reward our executive officers. We believe that, in addition to base salaries and annual cash bonus opportunities, LTI compensation opportunities, which in fiscal 2020 were provided in the form of options to purchase shares of our common stock and PSU awards that could be earned and settled for shares of our common stock, are an effective tool in attracting and retaining strong executive talent. A full description of each compensation element follows:
Base Salary
Base salary represents the fixed portion of the compensation of our executive officers, including our NEOs, and is an important element of compensation intended to attract and retain highly-talented individuals. Generally, we use base salary to provide each executive officer with a specified level of cash compensation during the year with the expectation that he or she will perform his or her responsibilities to the best of his or her ability and in our best interests.
Generally, we establish the initial base salaries of our executive officers through arm’s-length negotiation at the time we hire the individual executive officer, taking into account his or her position, qualifications, experience, prior salary level and the base salaries of our other executive officers. Thereafter, the Compensation Committee reviews the base salaries of our executive officers annually and makes adjustments to base salaries as it determines to be necessary or appropriate.
During fiscal 2020, the Compensation Committee reviewed the base salaries of our executive officers, including the NEOs, taking into consideration a competitive market analysis and the recommendations of our CEO, as well as the other factors described above. Following this review, the Compensation Committee approved a 3.0% base salary increase for executive officers, which was consistent with the increases provided to our other employees as a whole. Please see “Base Salary” on page 60 of this Proxy Statement for additional information.
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 EXECUTIVE COMPENSATION
The base salaries of the NEOs for fiscal 2020 were as follows:
NameBase Salary as of
December 28, 2019
Base Salary as of
January 2, 2021
Percentage
Change
Joe Kiani $1,125,510 $1,159,275 3.0 %
Micah Young429,605 442,493 3.0 
Bilal Muhsin550,000 566,500 3.0 
Tao Levy339,730 349,922 3.0 
Tom McClenahan427,694 440,525 3.0 
Annual Cash Incentive
In March 2020, the Compensation Committee approved the terms of the 2020 Executive Bonus Incentive Plan under which our NEOs are eligible to receive a cash bonus based on the achievement of Company performance goals. At the beginning of the year, the Compensation Committee approves funding percentages that include payout scenarios for various levels of Company financial performance. For 2020, the Compensation Committee selected Adjusted Product Revenue(2) and Adjusted Non-GAAP EPS(2) as the performance measures for the funding percentages, each weighted equally, as the Compensation Committee believes these performance measures directly support both our short-term strategy and our long-term objective of creating sustainable stockholder value.
2020 Adjusted Product Revenue(2): The target goal for 2020 Adjusted Product Revenue(2) was $1,035 million, which reflected growth of 10.5% over the prior year period.
2020 Adjusted Non-GAAP EPS(2): The target goal for 2020 Adjusted Non-GAAP EPS(2) was $3.56, which reflected growth of 10.6% over the prior year period.
For purposes of calculating the performance achievement and funding percentages for 2020, the Compensation Committee determined that the performance measures would be adjusted to exclude the impact of foreign currency fluctuations. The purpose of these adjustments is to ensure the measurement of performance reflects factors that management can directly control and that payout levels are not artificially inflated or impaired by factors unrelated to the ongoing operations of the business.
The table below sets forth the Adjusted Product Revenue(2) and Adjusted Non-GAAP EPS(2) performance goals and funding percentages at the threshold, target and maximum funding levels for 2020, as well as the actual performance results:
MetricWeightingTarget GoalActual Performance
Achievement %(1)
Payout %(1)
Weighted Result
ThresholdMaximumActual PerformanceMinimumMaximumActual Performance
Adjusted
Product Revenue
50%$1,035$1,138.990%110%110%0%200%200%143%
Adjusted Non-GAAP EPS50%$3.56$3.5190%110%99%0%200%86%
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(1)    Pursuant to the 2020 Executive Bonus Incentive Plan, payouts for achievement levels between the threshold and maximum were based on a linear interpolation between points along the funding curve.


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(2)    Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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 EXECUTIVE COMPENSATION
For 2020, we reported Adjusted Product Revenue(2) of $1,143 million and Adjusted non-GAAP EPS(2) of $3.60. Excluding the impact of foreign exchange fluctuations versus the plan, we achieved Adjusted Product Revenue(2) of $1,138.9 million and Adjusted Non-GAAP EPS(2) of $3.51. Based on the funding table for the 2020 bonus plan, the Compensation Committee approved a funding percentage of 143% of target for the 2020 Executive Bonus Incentive Plan, which is the weighted average of the actual performance percentages achieved and funded for Adjusted Product Revenue(2) and Adjusted Non-GAAP EPS(2) for fiscal 2020.
The following is a summary of the target annual cash bonus opportunities, the actual annual 2020 bonus awards for the NEOs and a comparison relative to their target awards:
NameBase Salary as of
January 2, 2021
2020 Target
Cash Bonus
(% of Base Salary)
2020 Target
Cash Bonus
Amount
2020 Actual
Cash Bonus
Amount
2020 Award
(% of Target)
Joe Kiani $1,159,275 100%$1,159,275 $1,657,764 143%
Micah Young442,493 50221,247 316,383 143
Bilal Muhsin566,500 50283,250 405,048 143
Tao Levy349,922 50174,961 250,194 143
Tom McClenahan440,525 50220,263 314,975 143

Long-Term Incentive (“LTI”) Compensation - Equity Awards
The Compensation Committee believes LTI compensation in the form of equity awards provides an incentive for our executive officers, including our NEOs, to focus on driving increased stockholder value over a multi-year period, serves as a reward for appreciation in our stock price and long-term value creation, and enables us to achieve our retention objectives.
Furthermore, the Compensation Committee believes that stock options and PSU awards are effective tools for increasing long-term stockholder value for several reasons. In the case of stock options, they only have value to the extent that the market price of our common stock price appreciates above the option exercise price, thereby driving value over the vesting period. In the case of PSU awards, the value of the award fluctuates based on our achievement of pre-established performance objectives over the multi-year performance period.
To directly align LTI awards with stockholder value, the Compensation Committee awarded 2020 LTI awards to our NEOs in the form of stock options (25% of total target award value) and PSUs (75% of target award value). The following is a summary of the annual 2020 LTI awards for the NEOs.








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(2)    Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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 EXECUTIVE COMPENSATION
Stock OptionsPSUs
NameTotal 2020 LTI
Target Award Value
Options to Purchase Shares
of Common Stock
(number of shares)(1)
Options to Purchase Shares
of Common Stock
(total fair value at grant date)(2)
PSUs at Target
(number of shares granted)
(3)
PSUs at Target
(grant date fair value)(4)
Joe Kiani $11,999,886 66,336 $2,999,999 $50,161 $8,999,887 
Micah Young1,199,944 6,633 299,973 5,016 899,971 
Bilal Muhsin2,399,932 13,267 599,991 10,032 1,799,941 
Tao Levy1,199,944 6,633 299,973 5,016 899,971 
Tom McClenahan1,199,944 6,633 299,973 5,016 899,971 
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(1)The 2020 stock option awards were granted on March 12, 2020.
(2)Amounts set forth in this column reflect the grant date fair value of the option awards, computed in accordance with ASC Topic 718. All of these amounts reflect certain assumptions with respect to the option awards and do not necessarily correspond to the actual value that will be recognized by our NEOs. The actual value, if any, that may be realized from an option award is contingent upon the satisfaction of the conditions to vesting of that award, and upon the excess of the stock price over the exercise price, if any, on the date the option award is exercised. See Note 18 of the Notes to Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 2, 2021 that was filed with the SEC on February 23, 2021 for a discussion of the assumptions made in determining the grant date fair value of the stock options.
(3)Reflects the target number of shares subject to PSUs, assuming all performance goals and other requirements are met. As described below, the PSUs earned will range from 50% to 200% of target based on the achievement of performance goals, which vest in the form of shares of our common stock following the conclusion of the three-year performance period.
(4)The 2020 PSU awards were granted on March 12, 2020. The number of shares was determined by dividing the economic value by the closing stock price per share of $179.42 on the date of grant. Any calculation that results in a fractional share was rounded down to the nearest whole share.

The table below sets forth the 2020 LTI award type, purpose, performance goals and vesting terms.
LTI Award TypePurposePerformance Goal(s)Vesting Terms
Stock options
(25% of total target value)
Retain and reward executives for driving long-term stockholder valueContinuous service with the CompanyVest annually over a five year period (20% per year)
PSUs
(75% of total target value)
Retain and reward executives for the achievement of multi-year performance goals
2022 Adjusted Product Revenue(1) and 2022 Adjusted Non-GAAP Operating Margin(1)
Vest in 2023 with opportunity that ranges from 50%-200%
The Compensation Committee selected 2022 Adjusted Product Revenue(1) and Adjusted Non-GAAP Operating Margin(1) as the primary performance metrics for the 2022 PSU awards because it believes management should be incentivized to deliver multi-year revenue results and operating margin expansion that drives long term shareholder value. Furthermore, the Compensation Committee believes that it has set challenging, yet attainable, forward-looking 2022 Adjusted Product Revenue(1) and Adjusted Non-GAAP Operating Margin(1) goals.
The Compensation Committee believes that the current LTI equity award structure focuses our NEOs on driving increased stockholder value over a multi-year period and enables us to achieve our retention objectives, while maintaining a conservative approach to overall share usage. As a result, our company-wide equity burn rate was low in 2016, 2017, 2018 and 2019 and continued to decline even further in 2020.



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(1)    Non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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 EXECUTIVE COMPENSATION
Prior PSU Award Payouts
The 2018 PSU awards vested at the end of a three-year performance period on February 22, 2021 based on actual performance against pre-established performance objectives. The Compensation Committee selected fiscal 2020 Adjusted Product Revenue(1) and fiscal 2020 Adjusted Non-GAAP Operating Margin(1) as the performance measures for the targeted PSU award percentages, each weighted equally.
2020 Adjusted Product Revenue(1): The target goal for 2020 Adjusted Product Revenue(1) was $960 million, which reflected a compound annual growth rate (CAGR) of 9.2% over the 3-year performance period.
2020 Adjusted Non-GAAP Operating Margin(1): The target goal for 2020 Adjusted Non-GAAP Operating Margin(1) was 24.0%, which reflected a cumulative operating margin improvement of 540 basis points over the 3-year performance period.
The table below sets forth the Adjusted Product Revenue(1) and Adjusted Non-GAAP Operating Margin(1) performance goals and funding percentages at the threshold, target and maximum funding levels, as well as the actual performance results:
MetricWeightingTarget GoalActual PerformanceAchievement %Payout %Weighted Result
ThresholdMaximumActual PerformanceMinimumMaximumActual Performance
Adjusted
Product Revenue
50%$960$1,143.790%110%119%50%200%200%141%
Adjusted Non-GAAP Operating Margin50%24.0%23.1%90%110%96%50%200%82%
Welfare and Health Benefits
Our NEOs participate in our employee benefit plans on the same terms as all of our other eligible employees.
We maintain a tax-qualified Code Section 401(k) defined contribution plan in which all of our employees, including our executive officers, who satisfy certain eligibility requirements, including requirements relating to age and length of service, are entitled to participate. Employees may contribute their own funds on a pre-tax basis.
The plan permits us to make matching contributions and we have historically provided employer contributions that match eligible employee contributions (“employer matching contributions”), generally limited to 3% of the compensation that can be taken into account for this purpose under federal law.
Employer matching contributions vest 50% when an employee has been employed for two years, and vest an additional 25% for each additional year of service until fully vested after four years of eligible employment.
In addition, we provide health care, dental, vision and life insurance, health savings account (“HSA”) employer contributions, an employee assistance plan and both short-term and long-term disability, accidental death and dismemberment benefits to all full-time employees. These benefits are subject to applicable laws and at benefit levels that we believe are generally consistent with the benefits of companies with which we compete for talent.


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(1)    Non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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EXECUTIVE COMPENSATION
Perquisites and Other Personal Benefits
Generally, we provide perquisites and other personal benefits to our executive officers, including our NEOs, in situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective and for recruitment and retention purposes.
In addition, under the Amended CEO Agreement (as defined below), we reimburse our CEO for all reasonable travel and lodging expenses, which include travel and hospitality expenses for first class travel and accommodations, including travel by private or chartered aircraft, for his family and household members if they accompany him during business travel. Our Board believes that these arrangements are appropriate because of the extensive travel requirements of our CEO’s position.
We also have established a security program for our CEO that provides physical and personal security services as they may, from time to time, be deemed necessary. This security program is not limited to providing security services at business facilities or functions or during business-related travel and may include providing security services at his residences and during personal travel. Our Board does not consider any of these security services to be a personal benefit as the requirement for this occasional security is directly the result of his role as our CEO. As our CEO, Mr. Kiani’s personal safety is vital to our continued success. We may also provide security services for other executive officers from time to time on an as-needed basis.
We own one aircraft to facilitate the business travel of our executive officers and certain other employees. In general, our employees are not permitted to use the aircraft for personal travel. In fiscal 2017, we entered into an aircraft time share agreement with Mr. Kiani, pursuant to which we have agreed to make our aircraft available to Mr. Kiani for lease on a time sharing basis. Under this agreement, Mr. Kiani reimburses us for incremental costs incurred in connection with his personal use of our aircraft, in accordance with Federal Aviation Administration requirements.
We have reported the actual amounts that we have paid for our CEO’s family and household members to accompany him during his business travel and for his security arrangements that were not security arrangements provided at our business facilities in the “All Other Compensation” column in the Fiscal 2020 Summary Compensation Table in this Proxy Statement.
Post-Employment Compensation
Each of our NEOs, other than our CEO, is eligible to participate in our 2007 Severance Protection Plan (the “Severance Plan”) pursuant to a written severance agreement that they have executed with us. The Severance Plan provides these NEOs with specified payments and benefits in the event of certain terminations of employment or a change in control of Masimo or both. Our CEO’s post-employment compensation arrangements are set forth in the Amended CEO Agreement and are described in the section entitled “Employment Arrangements with Named Executive Officers - Employment Agreement with Mr. Kiani” starting on page 75 of this Proxy Statement.
We believe that having in place reasonable and competitive post-employment compensation arrangements is essential to attracting and retaining highly-qualified executive officers. Our post-employment compensation arrangements are designed to provide reasonable compensation to executive officers who leave the Company under certain circumstances to facilitate their transition to new employment. Further, we seek to mitigate any potential employer liability and avoid future disputes or litigation by requiring a departing executive officer to sign a separation and release agreement acceptable to us as a condition to receiving post-employment compensation payments or benefits.
We also believe that these arrangements are designed to align the interests of our executive officers and our stockholders when considering our long-term future. The primary purpose of these arrangements in the case of a change in control of the Company is to keep our most senior executive officers focused on pursuing all corporate transaction activities that are in the best interests of our stockholders, regardless of whether those transactions may result in their own job loss.
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 EXECUTIVE COMPENSATION
Reasonable post-acquisition payments and benefits should serve the interests of both the executive officer and our stockholders. Further, we believe that these arrangements are necessary to offer compensation packages that are competitive with the market.
For information on the employment arrangements for our CEO and other NEOs, as well as an estimate of the potential payments and benefits payable under these arrangements as of the end of fiscal 2020, see “—Employment Arrangements with Named Executive Officers” in this Proxy Statement.
OTHER COMPENSATION POLICIES AND PRACTICES
Equity Awards Grant Policy
Equity awards granted to newly-hired employees are effective as of the later of the date the individual commences work or service with us or the grant approval date. Equity awards granted to existing employees and others providing services to us are effective as of the grant approval date. The terms of each equity award, including the date of grant, the corresponding exercise, purchase or base price, the vesting conditions, the term of such award, and the number of shares of our common stock subject to such award, as applicable, are approved by our Board, the Compensation Committee, or the non-officer equity award committee (as defined in the policy), as applicable. In addition, the exercise price for options to purchase shares of our common stock may not be less than the fair market value of our common stock as of the close of business on the effective date of the option.
Compensation Recovery (“Clawback”) Policy
We maintain a compensation recovery (“clawback”) policy that provides that in the event we are required to restate our financial statements as a result of “material noncompliance” with the financial reporting requirements under the securities laws, we will recover from our current and former executive officers any incentive-based compensation (including stock options) that is: