SanDisk 2009 Annual Report Download - page 40

Compensation Committee recognized that Dr. Harari led negotiations with Samsung, which resulted in an
agreement to renew the patent cross license between Samsung and the Company, and played a key role in
reorganizing the Company to streamline operations and to facilitate the Company’s focus on retail and OEM
markets. Based on the factors above, the Compensation Committee assessed Dr. Harari’s individual performance
as “outstanding.” In determining the bonuses for the other three Named Executive Officers, the Compensation
Committee considered Dr. Harari’s assessment that the performances of the other three Named Executive
officers were also “outstanding”. The Compensation Committee’s determination of Mr. Mehrotra’s bonus
included consideration of his role in restructuring the Company’s ventures with Toshiba Corporation and the
Company’s captive supply arrangement and improving the Company’s pricing policies. The Compensation
Committee believes that these accomplishments directly impacted the Company’s gross margins which improved
on a non-GAAP basis to 28.4% in fiscal 2009 compared to (13.4%) in fiscal 2008. The Compensation
Committee’s determination of Mr. Cedar’s bonus included consideration of his role in improving the Company’s
pricing policies which contributed to the gross margin improvement noted above. The Compensation Committee
also considered Mr. Cedar’s role in bringing about significant growth of the Company’s OEM channel of
business. The Compensation Committee’s determination of Ms. Bruner’s bonus included consideration of her
role in reducing the Company’s non-GAAP operating expenses to $681 million in fiscal 2009 from $911 million
in fiscal 2008 and improving the Company’s free cash flow to $438 million in fiscal 2009 from ($338) million in
fiscal 2008.
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 our 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
our 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 our peer group 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
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