SanDisk 2010 Annual Report Download - page 65

Proxy Statement
of his target bonus) and $525,000 for Mr. Brelsford (200% of his target bonus). Dr. Harari received a bonus of
$2,312,500 (200% of his target bonus) pursuant to the terms of the Company’s retirement agreement with
Dr. Harari described in further detail below. In determining the Named Executive Officers’ bonuses, the
Compensation Committee considered the significant improvements in non-GAAP EPS as mentioned above as
well as the Company’s overall financial performance during fiscal 2010, including the achievements described in
the “Executive Summary” above. Bonuses to employees including the Named Executive Officers also included
consideration of individual performance.
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 the Company’s stockholders. Therefore, 100% of the Named Executive Officers’
long-term compensation is currently awarded in the form of share-based instruments that are in or valued by
reference to Common Stock. Share-based awards have been made in the form of stock options and restricted
stock units, although the bulk of the awards have historically been stock options. The number of shares of
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 the Company’s peer 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 share-based incentives. There is no program, plan or policy related to the timing of grants to its
executive officers in coordination with the release of material nonpublic information. Long-term share-based
incentive awards granted to new hires or to promoted employees occur after the new hire has joined the
Company or, in the case of a promoted employee, after the promotion has been approved. For a newly hired or
promoted executive officer, the associated stock award is granted at the next meeting of the Compensation
Committee. For a newly hired or promoted employee who is not an executive officer, the associated stock award
is granted by the Company’s Special Option Committee which takes actions every Friday.
Stock Options. The Company makes a portion of its long-term incentive awards to Named Executive
Officers in the form of stock options with an exercise price that is equal to the fair market value of Common
Stock on the grant date. Thus, the Named Executive Officers will only realize value on their stock options if the
Company’s stockholders realize value on their shares. The stock options also function as a retention incentive for
the Company’s executives as they vest over a four (4) year period following the grant date. In fiscal 2010, the
Compensation Committee granted stock options to each of the Named Executive Officers. The material terms of
these options are described below under “Grants of Plan-Based Awards in Fiscal 2010.”
Restricted Stock Units. The Company may make a portion of its long-term incentive grants to Named
Executive Officers in the form of restricted stock units. A restricted stock unit represents a contractual right to
receive one share of Common Stock if the applicable vesting requirements are satisfied. The Company has
determined that it is advisable to grant restricted stock units in addition to stock options (and in lieu of larger
stock option grants) in order to minimize stock expense to the Company and dilution. Restricted stock units
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