Texas Instruments 2014 Annual Report Download - page 101

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PROXY STATEMENT
Equity dilution
The Compensation Committee’s goal is to keep net annual dilution from equity compensation under 2 percent. “Net annual dilution”
means the number of shares under equity awards granted by the committee each year to all employees (net of award forfeitures) as
a percentage of the shares of the company’s outstanding common stock. Equity awards granted in 2014 resulted in 1.4 percent net
annual dilution.
Process for equity grants
The Compensation Committee makes grant decisions for equity compensation at its January meeting each year. The dates on which
these meetings occur are generally set three years in advance. The January meetings of the board and the committee generally occur in
the week or two before we announce our financial results for the previous quarter and year.
On occasion, the committee may grant stock options or restricted stock units to executives at times other than January. For example, it
has done so in connection with job promotions and for purposes of retention.
We do not back-date stock options or restricted stock units. We do not accelerate or delay the release of information due to plans for
making equity grants.
If the committee meeting falls in the same month as the release of the company’s financial results, the committee’s practice is to make
grants effective (i) after the results have been released or (ii) on the meeting day if later. In other months, its practice is to make them
effective on the day of committee action. The exercise price of stock options is the closing price of TI stock on the effective date of
the grant.
Recoupment policy
The committee has a policy concerning recoupment (“clawback”) of executive bonuses and equity compensation. Under the policy, in
the event of a material restatement of TI’s financial results due to misconduct, the committee will review the facts and circumstances
and take the actions it considers appropriate with respect to the compensation of any executive officer whose fraud or willful
misconduct contributed to the need for such restatement. Such action may include (a) seeking reimbursement of any bonus paid to
such officer exceeding the amount that, in the judgment of the committee, would have been paid had the financial results been properly
reported and (b) seeking to recover profits received by such officer during the twelve months after the restated period under equity
compensation awards. All determinations by the committee with respect to this policy are final and binding on all interested parties.
Most recent stockholder advisory vote on executive compensation
In April 2014, our shareholders cast an advisory vote on the company’s executive compensation decisions and policies as disclosed
in the proxy statement issued by the company in March 2014. Approximately 97 percent of the shares voted on the matter were cast
in support of the compensation decisions and policies as disclosed. The committee considered this result and determined that it was
not necessary at this time to make any material changes to the company’s compensation policies and practices in response to the
advisory vote.
Benefits
Retirement plans
The executive officers participate in our retirement plans under the same rules that apply to other U.S. employees. We maintain these
plans to have a competitive benefits program and for retention.
Like other established U.S. manufacturers, we have had a U.S. qualified defined benefit pension plan for many years. At its origin, the
plan was designed to be consistent with those offered by other employers in the diverse markets in which we operated, which at the
time included consumer and defense electronics as well as semiconductors and materials products. In order to limit the cost of the
plan, we closed the plan to new participants in 1997. We gave U.S. employees as of November 1997 the choice to remain in the plan,
or to have their plan benefits frozen (i.e., no benefit increase attributable to years of service or change in eligible earnings) and begin
participating in an enhanced defined contribution plan. Mr. Templeton and Mr. Crutcher chose not to remain in the defined benefit
plan. As a result, their benefits under that plan were frozen in 1997 and they participate in the enhanced defined contribution plan.
Mr. Anderson, who joined the company in 1999, participates in the enhanced defined contribution plan. The other named executive
officers have continued their participation in the defined benefit pension plan.
The Internal Revenue Code (IRC) imposes certain limits on the retirement benefits that may be provided under a qualified plan. To
maintain the desired level of benefits, we have non-qualified defined benefit pension plans for participants in the qualified pension plan.
Under the non-qualified plans, participants receive benefits that would ordinarily be paid under the qualified pension plan but for the
limitations under the IRC. For additional information about the defined benefit plans, please see pages 104-106.