SanDisk 2009 Annual Report Download - page 39

Proxy Statement
Based on the prior year’s analysis and the subjective factors described above, as well as our determination
that salary increases would not be appropriate given the losses sustained by the Company in fiscal 2008, there
were no changes to base salaries of Named Executive Officers for fiscal 2009 compared with fiscal 2008.
Annual Cash Incentive Award
None of our Named Executive Officers has an employment agreement or other contractual right to cash
incentive awards or bonuses for any given year. In recent years, the Company has granted cash incentive awards
to the Named Executive Officers that were determined based on the achievement of specified performance goals.
In March 2009, the Compensation Committee adopted non-binding guidelines related to Company profitability to
determine a range of bonus payments for fiscal 2009 performance. In November 2009, the Committee reviewed
these guidelines and updated them in light of the Company’s performance, which was much better than
anticipated. While the Compensation Committee retained its discretionary ability to pay out in excess or less than
the guidelines, the actual payouts were within the guidelines as established in November 2009. As described
below under “Subsequent Committee Actions,” the Compensation Committee has adopted a cash incentive
award program for fiscal 2010.
The Named Executive Officers’ cash incentive opportunity for fiscal 2009 contained a target incentive
amount, expressed as a percentage of base salary, which was approved by the Compensation Committee. For
Named Executive Officers other than the Chief Executive Officer, the Compensation Committee took into
account the recommendation of the Chief Executive Officer in determining the target incentive amount. The
percentage target bonus for each Named Executive Officer was generally determined by reference to comparable
bonus opportunities at our peer group companies, internal comparability with percentage targets of other
executives and the executive’s level of responsibility, experience and knowledge. The target incentive amounts
generally increase as an executive’s responsibilities increase, reflecting our compensation philosophy that, as an
executive officer’s level of responsibility increases, a greater portion of that officer’s total compensation should
be dependent on the Company’s performance. For fiscal 2009, each Named Executive Officer’s target bonus was
the same as his or her target bonus for fiscal 2008: Dr. Harari’s target bonus was 125% of base salary,
Mr. Mehrotra’s target bonus was 100% of base salary, Ms. Bruner’s target bonus was 90% of base salary, and
Mr. Cedar’s target bonus was 75% of base salary.
For fiscal 2009, the Compensation Committee established a bonus pool for the Company’s employees,
including the Named Executive Officers, based on Company performance against non-GAAP pre-tax income
goals. The Company achieved significant improvement on this metric with non-GAAP pre-tax income of
$667 million in fiscal 2009 compared to a loss of ($713) million in fiscal 2008. The Committee recognized this
achievement and approved bonus payouts for fiscal 2009 that averaged in excess of 100% of the target bonuses
for the Company’s employees, including the Named Executive Officers. Bonuses to employees, including the
Named Executive Officers, also included consideration of individual performance.
After the completion of fiscal 2009, the Compensation Committee evaluated the performance of the
Company and the individual performance of each Named Executive Officer during the year. Key consideration
was given to the actions taken by the Named Executive Officers to improve the Company’s financial results and
financial condition and the rapid and significant improvement which occurred on both measures in fiscal 2009. In
light of the performance and significant contributions of the executive team, the Compensation Committee
determined that each Named Executive Officer would receive a fiscal 2009 bonus significantly higher than his or
her target bonus. Actual bonuses for fiscal 2009 were $1,696,000 for Dr. Harari (160% of his target bonus);
$1,000,000 for Mr. Mehrotra (178% of his target bonus); $750,000 for Ms. Bruner (171% of her target bonus);
and $625,000 for Mr. Cedar (206% of his target bonus).
In determining Dr. Harari’s bonus, the Compensation Committee considered the significant improvements
in non-GAAP pre-tax net income as mentioned above as well as the improvement of non-GAAP earnings per
share which improved to $1.84 on a fully diluted basis in fiscal 2009 from ($2.07) in fiscal 2008. The
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