SanDisk 2010 Annual Report Download - page 60

philosophy described in more detail below, equity awards increased each Named Executive Officer’s stake in the
Company, thereby reinforcing the incentive to manage the Company’s business as owners and subjecting a
significant portion of their total compensation to fluctuations in the market price of Common Stock.
Compensation actions taken by the Compensation Committee in fiscal 2010 and 2011 demonstrate the
Company’s continued commitment to pay-for-performance, with a substantial portion of each Named Executive
Officer’s compensation being at-risk and subject to important performance measures aligned with long-term
stockholder value. The following compensation actions taken during fiscal 2010 and 2011 are designed to reward
high performance through short- and long-term incentives:
• During 2010, a significant portion of the compensation of each Named Executive Officer who is
currently employed by the Company was at-risk, being comprised of performance-based cash bonus,
the value of performance-based restricted stock units that vested in fiscal 2010, and at-the-money stock
option awards, which become valuable to the executive only upon realized share appreciation.
• The Compensation Committee determined that previously granted performance-based restricted stock
units became vested in fiscal 2010 based on the Company’s achievement of significant cumulative cash
flow from operations targets established for the four consecutive fiscal quarters ending June 30, 2010.
• The Compensation Committee established key performance metrics for the fiscal 2010 annual cash
incentive opportunity, which provided for payments upon attainment of a target level non-GAAP
earnings per share (“EPS”) and the achievement of certain non-financial key strategic operational
objectives.
Continued Commitment to Good Compensation Governance. The Company endeavors to maintain good
governance standards with respect to its executive compensation practices. The Compensation Committee
believes that the compensation arrangements for the Named Executive Officers are consistent with market
practice, provide for compensation that is reasonable in light of the Company’s and each individual officer’s
performance and do not contain features that would be considered problematic or egregious. The Company has
instituted the following policies, which remain in effect in fiscal 2011, to ensure that its compensation policies
are consistent with good governance standards:
• In general, Named Executive Officers will not be entitled guaranteed, non-performance based bonuses
or salary increases.
• In general, Named Executive Officers will not be entitled to tax reimbursement (“tax gross-up”)
payments in respect of perquisites or other compensation. In particular, during fiscal 2010 the
Company amended its form of change in control agreement (discussed in more detail below) such that
Named Executive Officers do not have any entitlement to tax “gross-up” payments in respect of excise
taxes that may become payable as a result of Section 280G of the Internal Revenue Code.
• To align the interests of the Company’s executive officers with the interests of the Company’s
stockholders, the Company maintains stock ownership guidelines (set forth in the Company’s
Corporate Governance Principles, which are available on the Company’ website) that require that each
executive officer retain a minimum equity ownership interest in the Company.
• Perquisites and other personal benefits do not constitute a significant portion of the compensation for
the Named Executive Officers. The Company’s executive officers participate in broad-based
Company-sponsored health and welfare benefits programs on the same basis as other regular
employees.
• The Company does not currently offer, nor does the Company have plans to provide, defined benefit
pension arrangements or nonqualified deferred compensation plans or arrangements to executives,
including the Named Executive Officers.
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