SanDisk 2009 Annual Report Download - page 38

compensation paid to comparable executives at our peer group companies. To that end, we generally target base
salaries and long-term incentives at approximately the 50th percentile within our peer group companies. We
generally target total cash compensation at approximately the 60th percentile within our peer group companies;
however, we have the ability to, and do, exercise discretion to set compensation levels that are above or below
these benchmarks. In determining the appropriate levels of compensation to be paid to Named Executive
Officers, the Compensation Committee retains the discretion to consider amounts realized from prior
compensation. However, amounts realized from prior compensation were not a material factor in determining
fiscal 2009 compensation for our Named Executive Officers. Furthermore, amounts realized from prior
compensation were not considered in setting future retirement benefits since the only retirement benefit currently
offered by the Company is the Named Executive Officer’s ability to participate in the Company’s 401(k) plan
during his or her employment with the Company.
Dr. Harari attends each meeting of the Compensation Committee that relates to Company-wide
compensation issues and the compensation of his direct reporting officers. At meetings pertaining to officer pay,
Dr. Harari presents compensation recommendations for his direct reports and explains to the Compensation
Committee the basis and rationale for his recommendations. The Compensation Committee understands that in
determining his recommendations Dr. Harari considers the scope and responsibility of each officer’s position and
the individual performance of each officer and reviews compensation of similarly situated officers in the
Company’s peer group, to the extent that there is a similarly situated officer. With respect to Dr. Harari’s
compensation, the Company and its advisers collect chief executive officer compensation data from comparable
companies, including those in the Company’s peer group, based on size, location and industry. The Company
presents the collected data to the Compensation Committee. The Compensation Committee reviews the data and
deliberates to determine an appropriate level of compensation for Dr. Harari based on the Company’s targeted
compensation levels. Dr. Harari does not participate in the Compensation Committee deliberations that relate to
his personal compensation and he excuses himself from that portion of the Compensation Committee meeting.
Dr. Harari and other employees of the Company occasionally meet with a compensation consulting firm retained
by the Company to discuss broader compensation issues and trends or to discuss officer pay. Dr. Harari does not
meet or consult with the compensation consulting firm individually nor does Dr. Harari discuss his individual
compensation with the consulting firm retained by the Company.
Current Executive Compensation Program Elements
Base Salaries
None of our Named Executive Officers has an employment agreement or other contractual right to receive a
fixed base salary. The Compensation Committee generally reviews the base salaries for each Named Executive
Officer in the first quarter of each year. To assist with that review, management has in the past provided the
Compensation Committee with a summary of the base salary levels in effect for comparable executives at our
peer group companies (based on their published prior fiscal year’s data). The Compensation Committee has
typically considered such summary, as well as internal comparables, individual performance and the Company’s
financial performance. The weighting of these factors by the Compensation Committee has been subjective, not
formulaic. For example, for positions that are comparable to positions at our peer companies, such as Chief
Executive Officer and President, an equal weighting might be given to all three factors. For other positions that
are somewhat hybrid in nature and not directly comparable to positions at our peer group, such as Executive Vice
President, OEM Business and Corporate Engineering, the internal comparables and individual performance
factors may be weighted more heavily than the market data. The Compensation Committee does not use a
formula for determining base salaries and other forms of compensation and does not benchmark compensation at
any specific levels relative to the peer companies. However, for fiscal 2009, the Compensation Committee did
not consider any changes to the base salaries of the Named Executive Officers. This is because for fiscal 2009,
the Company instituted a salary freeze generally applicable to all levels of the Company’s employees, and the
Compensation Committee therefore believed that it was also appropriate to freeze the salaries of the Named
Executive Officers.
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