SanDisk 2007 Annual Report Download - page 29

Company occasionally meet with a compensation consulting firm retained by the Company to discuss broader
compensation issues and trends or to discuss officer pay. Dr. Harari does not meet or consult with the compensation
consulting firm individually nor does Dr. Harari discuss his individual compensation with the consulting firm
retained by the Company.
Current Executive Compensation Program Elements
Base Salaries
None of our Named Executive Officers has an employment agreement or other contractual right to receive a
fixed base salary. The Compensation Committee generally reviews the base salaries for each Named Executive
Officer in the first quarter of each year. In determining the appropriate fiscal 2007 base salary for our Named
Executive Officers, we considered the base salary levels in effect for comparable executives at our peer group
companies (based on their published 2006 fiscal year data), internal comparables and individual performance. The
weighting of these factors by the Compensation Committee is subjective, not formulaic. For example, for positions
that are easily benchmarked in the market, such as Chief Executive Officer and President, an equal weighting might
be given to all three factors. For other positions that are somewhat hybrid in nature and not directly comparable to
positions at our peer group of Companies, such as Executive Vice President, Technology and Worldwide Operations
and Executive Vice President, Mobile Business Unit and Corporate Engineering, the internal comparables and
individual performance factors may be weighed more heavily than the market data. The Compensation Committee
does not use a formula for determining compensation.
Based on our review in fiscal 2007, we determined that the appropriate base salary rate was as follows for each
Named Executive Officer for fiscal 2007: Dr. Harari, $848,000; Mr. Mehrotra, $510,000; Ms. Bruner, $450,000;
Dr. Thakur, $385,422 and Mr. Cedar, $385,422. This determination was made after the temporary reduction in base
salaries described below had ended. In line with our target benchmark, the fiscal 2007 compensation level (before
the reduction described below) for Named Executive Officers ranged from the 50th percentile to the 60th percentile
of the base salary levels in effect for comparable executives at our peer group companies (based on their published
2006 fiscal year data). In connection with the Company’s overall cost reduction program, the Compensation
Committee approved a base salary reduction for Named Executive Officers of 15% (20% for the Chief Executive
Officer), effective March 5, 2007. The reduction to base salaries continued until August 6, 2007, at which time the
rates of base salary increased to the amounts specified above for the remainder of fiscal 2007. No payment intended
to offset the temporary reduction to base salaries was made to any Named Executive Officer, and in determining the
base salary amounts set forth above, we did not attempt to compensate the Named Executive Officers for the
temporary reduction in base salaries. The total base salary amounts paid for fiscal 2007, taking into account these
adjustments, is reported for each Named Executive Officer in column (c) of the Summary Compensation Table —
Fiscal 2006 and 2007, below.
The Company’s third-party executive compensation consultant compared the Company’s compensation of
Named Executive Officers with the officer compensation at our peer group of companies, and reported the results of
its analysis to the Compensation Committee in February 2008. Based on the analysis and the subjective factors
described above, in February 2008 the Compensation Committee approved the following increases to the base
salaries of the Named Executive Officers: Dr. Harari, 0%; Mr. Mehrotra, 10%; Ms. Bruner, 8%; Dr. Thakur, 4%; and
Mr. Cedar, 5%.
Annual Cash Incentive Award
None of our Named Executive Officers has an employment agreement or other contractual right to a fixed
actual or target bonus for any given year. Prior to fiscal 2006, the Company utilized a formula based upon
achievement of financial targets under the Company’s operating plan to set aside pre-tax net income to fund a
discretionary bonus pool. Each executive officer’s participation in that bonus pool was based upon a target bonus,
which generally ranged from 75% to 100% of the officer’s base salary. Actual bonuses paid from the pool were
calculated based upon the Company’s achievement of financial targets under the Company’s operating plan for the
fiscal year, the officer’s target bonus and the officer’s individual performance. The Compensation Committee also
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