NVIDIA 2014 Annual Report Download - page 47

Table of Contents
Risk Analysis of Our Compensation Plans
With the oversight of the CC, members from the Company’
s legal, human resources and finance departments, collectively Management, and
Exequity, the independent consultant engaged by the CC, performed an assessment of the Company’
s compensation programs and policies for
Fiscal 2015 as generally applicable to our employees to ascertain any potential material risks that may be created by our compensation programs.
The assessment focused on programs with variability of payout and the ability of participants to directly affect payout and the controls over
participant action and payout. Specifically, Management and Exequity reviewed the Company’
s variable cash compensation and equity
compensation programs. Management and Exequity identified the key terms of these programs, potential concerns regarding risk taking behavior
and specific risk mitigation features. Management’
s assessment was first presented to our chief administrative officer and our chief financial
officer. The assessment was then presented to the CC.
The CC considered the findings of the assessment described above and concluded that our compensation programs, which are structured to
recognize both short-term and long-
term contributions to the Company, do not create risks which are reasonably likely to have a material adverse
effect on our business or financial condition.
The CC believes that the following compensation design features guard against excessive risk-taking:
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• Our compensation program encourages our employees to remain focused on both our short-term and long-
term goals. For example,
while our Variable Cash Plan measured performance on an annual basis in Fiscal 2015, our equity awards vest in installments over four
years, with the first installment not vesting until the first anniversary of the grant date, which we believe encourages our employees to
focus on the long-term performance of NVIDIA. Annual variable pay is not awarded below the executive level;
•
We design our variable cash and PSU compensation programs for executives so that payouts are based on achievement of corporate
performance targets, and we cap the potential award payout;
•
We have internal controls over our financial accounting and reporting, including operating income, which is used to measure and
determine the eligible compensation award under our plan;
•
Financial plan target goals and final awards under the Variable Cash Plan and of PSUs are approved by the CC and consistent with the
annual operating plan approved by the full board each year;
•
We have a compensation recovery policy applicable to all employees that allows NVIDIA to recover compensation paid in situations of
fraud or material financial misconduct;
• All executive officer equity awards have multi-
year vesting;
• We have stock ownership guidelines that we believe are reasonable and are designed to align our executive officers’
interests with those
of our stockholders; and
• We enforce a “no-hedging” policy and a “no-pledging”
policy involving our common stock which prevents our employees from
insulating themselves from the effects of NVIDIA stock price performance.