SanDisk 2007 Annual Report Download - page 28

Our annual cash incentive opportunity is primarily intended to hold Named Executive Officers accountable for
performance, although we also believe it aligns Named Executive Officers’ interests with those of our stockholders
and helps us attract, retain and motivate executives. Our long-term equity incentives are primarily intended to align
Named Executive Officers’ interests with those of our stockholders, although we also believe they help hold
executives accountable for performance and help us attract, retain and motivate executives. These are the elements
of our current executive compensation program that are designed to reward performance and the creation of
stockholder value, and therefore the value of these benefits is dependent on performance. Each Named Executive
Officer’s annual bonus opportunity is paid out on an annual short-term basis and is designed to reward performance
for that period. Long-term equity incentives are generally paid out or earned on a longer-term basis and are designed
to reward performance over one or more years.
The individual compensation elements are intended to create a total compensation package for each Named
Executive Officer that we believe achieves our compensation objectives and provides competitive compensation
opportunities. From time to time, management has retained Compensia, Inc., an independent compensation
consulting firm, to review and identify our appropriate peer group companies, and to obtain and evaluate current
executive compensation data for these companies. We selected the following companies as our peer group
companies in fiscal 2007: Adobe Systems Incorporated; Advanced Micro Devices Inc.; Analog Devices, Inc.;
Avaya Inc.; Broadcom Corp.; CA Inc.; Electronic Arts Inc.; Juniper Networks, Inc.; LSI Corporation; Marvell
Technology Group Ltd.; Maxim Integrated Products, Inc.; Micron Technology, Inc.; Network Appliance, Inc.;
NVIDIA Corp.; Seagate Technology LLC; Symantec Corporation; Xilinx, Inc.; and Yahoo! Inc. We believe that
these peer group companies, which were selected from within and outside the Company’s industry, are comparable
in size and growth pattern with the Company and compete with the Company for executive talent. Although the peer
group differs from the S&P Semiconductor Company Stock Index, and the PHLX Semiconductor Index, which the
Company has selected as the industry indices for purposes of the stock performance graph that appeared in the
Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2007, we believe these peer group
companies provide relevant comparative compensation data for the Company.
Consistent with our compensation philosophies described above, our goal is to provide each Named Executive
Officer with a current executive compensation program that is competitive in light of the compensation paid to
comparable executives at our peer group companies. To that end, we generally target base salaries and long-term
incentives at approximately the 50th percentile within our peer group companies. We generally target total cash
compensation at approximately the 60th percentile within our peer group companies; however, we have the ability
to, and do, exercise discretion to set compensation levels that are above or below these benchmarks. As indicated in
the charter of the Compensation Committee, in determining the appropriate levels of compensation to be paid to
Named Executive Officers, the Compensation Committee retains the discretion to consider amounts realized from
prior compensation. However, amounts realized from prior compensation were not a material factor in determining
2007 compensation for our Named Executive Officers. Furthermore, amounts realized from prior compensation
were not considered in setting future retirement benefits since the only retirement benefit currently offered by the
Company is the Named Executive Officer’s ability to participate in the Company’s 401(k) plan during his or her
employment with the Company.
Dr. Harari attends each meeting of the Compensation Committee that relates to Company-wide compensation
issues and the compensation of his direct reporting officers. At meetings pertaining to officer pay, Dr. Harari
presents compensation recommendations for his direct reports and explains to the Compensation Committee the
basis and rationale for his recommendations. The Compensation Committee understands that in determining his
recommendations Dr. Harari considers the scope and responsibility of each officer’s position and the individual
performance of each officer and reviews compensation of similarly situated officers in the Company’s peer group, to
the extent that there is a similarly situated officer. With respect to Dr. Harari’s compensation, the Company and its
advisers collect chief executive officer compensation data from comparable companies, including those in the
Company’s peer group, based on size, location and industry. The Company presents the collected data to the
Compensation Committee. The Compensation Committee reviews the data and deliberates to determine an
appropriate level of compensation for Dr. Harari based on the Company’s targeted compensation levels. Dr. Harari
does not participate in the Compensation Committee deliberations that relate to his personal compensation and he
excuses himself from that portion of the Compensation Committee meeting. Dr. Harari and other employees of the
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