SanDisk 2007 Annual Report Download - page 31

as of December 31, 2007. In exercising this discretion with respect to Named Executive Officers, the Compensation
Committee generally considered a variety of factors, including whether a larger portion of the company-wide bonus
pool should be allocated to other employees, the Named Executive Officer’s position and the Named Executive
Officer’s individual performance for the year. No specific weightings were assigned to these factors, and the
assessment was subjective rather than formulaic. In addition, the overall bonus pool payout to employees other than
the Named Executive Officers was 86% of target, and we believed that it was appropriate to set the payout for
Named Executive Officers at this same level. Although our discretionary adjustments represent the means by which
individual performance is factored into the incentive payout amount, we determined that individual performances
for 2007 did not warrant differential payout percentages for our Named Executive Officers.
In February 2008, the Compensation Committee reviewed the Company’s performance with respect to
earnings per share, certified the level of performance achieved and approved incentive payouts under the cash
incentive awards based on that review. The amount of the payout approved by the Compensation Committee under
each Named Executive Officer’s cash incentive awards for fiscal 2007 is presented in column (g) 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. The analysis indicated that the target total cash
compensation of two of the Company’s officers was lower than our targeted pay position. A recommendation was
submitted and approved by the Compensation Committee to increase the target bonuses for Mr. Mehrotra and
Ms. Bruner to conform the individual’s target total cash compensation with the Company’s compensation target,
after taking into consideration the market data. The target bonuses for our other Named Executive Officers were
unchanged. As a result, the fiscal 2008 individual bonus targets were established by the Compensation Committee
as the following percentages of base salary: Dr. Harari, 125%; Mr. Mehrotra, 100%; Ms. Bruner, 90%; Mr. Cedar,
75%; and Dr. Thakur, 75%.
Long-Term Share-Based Incentive Awards
The Company’s policy is that the Named Executive Officers’ long-term compensation should be directly
linked to the value provided to our stockholders. Therefore, 100% of the Named Executive Officers’ long-term
compensation is currently awarded in the form of share-based instruments that are valued by reference to our
Common Stock. Prior to fiscal 2006, the Company historically made annual equity incentive grants solely in the
form of stock options. In fiscal 2006, the annual awards were granted in the form of stock options and restricted
stock units. In fiscal 2007, the annual awards were granted in the form of stock options, except for a grant of
restricted stock units to Mr. Mehrotra to reflect his promotion to President and Chief Operating Officer and to
replace previously granted awards that expired in the money but unexercised. The Compensation Committee
believed that this grant was appropriate in light of Mr. Mehrotra’s significant contributions to the growth of the
Company over the period covered by the expired awards. The number of shares of the Company’s Common Stock
subject to each annual award is intended to create a meaningful opportunity for stock ownership in light of the
Named Executive Officer’s current position with the Company, the economic value of comparable awards to
comparable executives at our peer group companies, the individual’s potential for increased responsibility and
promotion over the award term, and the individual’s personal performance in recent periods. The Compensation
Committee also takes into account the number of unvested equity awards held by the Named Executive Officer in
order to maintain an appropriate level of equity incentive for that individual. However, the Compensation
Committee does not adhere to any specific guidelines as to the relative equity award holdings of the Company’s
Named Executive Officers. Furthermore, as with setting base salaries, weighting of the above factors is subjective,
and the Compensation Committee does not use a formula to determine the number or value of share-based incentive
awards granted to any individual officer.
The Compensation Committee typically grants long-term share-based awards in the first quarter of the fiscal
year except for awards to new hires and awards related to the promotion of current employees. However, except as
set forth below with respect to grants to new employees and promotions, there is no formal program, plan or policy
in place at the Company or in the Compensation Committee’s charter with regards to the timing of long-term share-
based incentive awards. The Compensation Committee has complete discretion as to when it awards long-term
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