SanDisk 2007 Annual Report Download - page 37

Compensation of Named Executive Officers
The Summary Compensation Table — Fiscal 2006 and 2007 above quantifies the value of the different forms
of compensation earned by or awarded to our Named Executive Officers in fiscal years 2006 and 2007. The primary
elements of each Named Executive Officer’s total compensation reported in the table are base salary, an annual
bonus and long-term equity incentives consisting of stock options and restricted stock units. The Named Executive
Officers also earned or were paid the other benefits listed in column (i) of the Summary Compensation Table —
Fiscal 2006 and 2007, as further described in footnote (4) to the table.
The Summary Compensation Table — Fiscal 2006 and 2007 should be read in conjunction with the tables and
narrative descriptions that follow. A description of the material terms of each Named Executive Officer’s base salary
and annual bonus is provided immediately following this paragraph. The Grants of Plan-Based Awards in Fiscal
2007 table, and the description of the material terms of the stock options and restricted stock units granted in fiscal
2007 that follows it, provides information regarding the long-term equity incentives awarded to the Named
Executive Officers in fiscal 2007. The Outstanding Equity Awards at Fiscal 2007 Year-End and Option Exercises
and Stock Vested in Fiscal 2007 tables provide further information on the Named Executive Officers’ potential
realizable value and actual value realized with respect to their equity awards. The discussion of the potential
payments due upon a termination of employment or change in control that follows is intended to further explain the
potential future payments that are, or may become, payable to our Named Executive Officers under certain
circumstances.
Description of Employment Agreements, Salary and Bonus Amounts
As indicated above, none of the Named Executive Officers is employed pursuant to an employment agreement.
As a result, their base salary and bonus opportunities are not fixed by contract. Instead, in the first quarter of each
fiscal year, the Compensation Committee establishes the base salary level for each of our Named Executive Officers
for the year. In making its determination, the Compensation Committee considers the factors discussed above under
“Current Executive Compensation Program Elements — Base Salaries.” In fiscal 2007, instead of granting
discretionary cash bonuses, the Company granted Named Executive Officers a cash incentive award under the
2005 Plan. In determining the terms of such awards, the Compensation Committee considered the factors discussed
above under “Current Executive Compensation Program Elements — Annual Cash Incentive Award.” The material
terms of the cash incentive awards granted to each Named Executive Officer in fiscal 2007 are described below
under “Description of Plan-Based Awards.”
Consistent with the Company’s philosophy that a substantial portion of compensation should be contingent on
the Company’s performance, base salary for Named Executive Officers in fiscal 2007 comprised a relatively low
percentage (generally between 7% and 12%) of total compensation. Equity and non-equity incentive compensation
for Named Executive Officers in fiscal 2007, the value of which, as described below under “Description of Plan-
Based Awards”, is significantly dependent upon on Company performance, comprised a much larger percentage
(generally between 88% and 93%) of total compensation. The Company believes this allocation of base salary and
incentive compensation in proportion to total compensation is appropriate to balance the Company’s dual goals of
aligning the interests of executives and stockholders and providing predictable benefit amounts that reward an
executive’s continued service.
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