NVIDIA 2015 Annual Report Download - page 62

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Risk Analysis of Our Compensation Plans
With the oversight of the CC, members from the Company’s legal, human resources and finance departments,
collectively Management, and Exequity, the independent consultant engaged by the CC, performed an assessment of the
Company’s compensation programs and policies for Fiscal 2015 as generally applicable to our employees to ascertain any
potential material risks that may be created by our compensation programs. The assessment focused on programs with
variability of payout and the ability of participants to directly affect payout and the controls over participant action and
payout. Specifically, Management and Exequity reviewed the Company’s variable cash compensation and equity
compensation programs. Management and Exequity identified the key terms of these programs, potential concerns regarding
risk taking behavior and specific risk mitigation features. Management’s assessment was first presented to our chief
administrative officer and our chief financial officer. The assessment was then presented to the CC.
The CC considered the findings of the assessment described above and concluded that our compensation programs,
which are structured to recognize both short-term and long-term contributions to the Company, do not create risks which
are reasonably likely to have a material adverse effect on our business or financial condition.
The CC believes that the following compensation design features guard against excessive risk-taking:
• Our compensation program encourages our employees to remain focused on both our short-term and long-term
goals. For example, while our Variable Cash Plan measured performance on an annual basis in Fiscal 2015, our
equity awards vest in installments over four years, with the first installment not vesting until the first anniversary
of the grant date, which we believe encourages our employees to focus on the long-term performance of NVIDIA.
Annual variable pay is not awarded below the executive level;
• We design our variable cash and PSU compensation programs for executives so that payouts are based on
achievement of corporate performance targets, and we cap the potential award payout;
• We have internal controls over our financial accounting and reporting, including operating income, which is used
to measure and determine the eligible compensation award under our plan;
• Financial plan target goals and final awards under the Variable Cash Plan and of PSUs are approved by the CC
and consistent with the annual operating plan approved by the full board each year;
• We have a compensation recovery policy applicable to all employees that allows NVIDIA to recover compensation
paid in situations of fraud or material financial misconduct;
• All executive officer equity awards have multi-year vesting;
• We have stock ownership guidelines that we believe are reasonable and are designed to align our executive officers’
interests with those of our stockholders; and
• We enforce a “no-hedging” policy and a “no-pledging” policy involving our common stock which prevents our
employees from insulating themselves from the effects of NVIDIA stock price performance.