SanDisk 2012 Annual Report Download - page 34

issuance, which represents an increase of only approximately 10.3 million shares from the shares available for
future grant under the 2005 Plan as of March 15, 2013, but which, combined with the “fungible plan” design of
the 2013 Plan, would provide shares sufficient for multiple years of awards. The Compensation Committee
recommended to the Board the adoption of the 2013 Plan, and the Board approved the adoption of the 2013 Plan,
with a view to seeking stockholder approval for a pool of shares sufficient for multiple years of awards
(assuming that current practices on equity mix continue), which the Compensation Committee determined is in
line with the practice of other public companies and would enable stockholders to continue to provide input on
share increases in equity plans. Furthermore, because the 2005 Plan expires on March 15, 2015, the
Compensation Committee recommended to the Board that a new stock plan be approved and adopted in lieu of
recommending an additional increase in the number of RSUs available for future issuance under the 2005 Plan.
While a large number of shares remain available for grant under the 2005 Plan in the aggregate, unless
either the 2013 Plan and the requested initial reserve of 20,000,000 shares or an increase in the number of shares
of Common Stock reserved for issuance under the 2005 Plan is approved, the Company does expect to exhaust
the shares currently available for future grant as Full Value Awards in the first half of fiscal year 2014, prior to
the expected date of the 2014 Annual Meeting of Stockholders. The requested initial reserve of 20,000,000 shares
for the 2013 Plan share reserve is expected to be used over multiple years.
The Compensation Committee and the Board intend to continue to consider the Company’s equity
expenditures in a manner that effectively attracts, retains and motivates individuals to achieve long-term value
creation in line with the interests of our stockholders.
The Company Has Historically Maintained a Low Burn Rate and Overhang Percentage
The Company is committed to effectively managing its equity compensation programs while minimizing
stockholder dilution. For this reason, in evaluating the advisability of the 2013 Plan, the Compensation
Committee considered both the Company’s “burn rate” and “overhang” percentage in evaluating the impact of
the 2013 Plan on our stockholders.
The Compensation Committee reviewed the Company’s peer companies (further discussed below under
“Compensation Discussion & Analysis”) to evaluate the Company’s share usage rate and its need for additional
shares beyond fiscal year 2013. The Company endeavors to ensure that its burn rate and overhang approximate or
are below the median rates of its peer companies, and that they are within the guidelines recommended by
independent shareholder advisory groups.
For the purposes of this proxy statement, we define “burn rate” as the number of equity awards granted
during the fiscal year (options and RSUs) divided by the number of shares outstanding at the end of the fiscal
year. The burn rate measures the potential dilutive effect of the Company’s equity grants. The burn rate presented
in this proxy statement does not apply the fungible ratio proposed for the 2013 Plan in order to provide for
comparability of the Company’s data with that of its peer companies. As shown in the table below, the
Company’s burn rate has remained low in recent years and has been consistently below the median burn rate of
its peer companies.
Fiscal Year
Total
Options Granted
Total
RSUs Granted
SanDisk
Burn Rate
Peer Companies
Median Burn Rate
2012 .......................... 2,336,670 1,839,488 1.7% N/A(1)
2011 .......................... 3,156,404 1,335,210 1.9% 2.3%
2010 .......................... 3,015,857 1,100,326 1.8% 2.4%
(1) Peer companies median burn rate data for fiscal year 2012 was not yet available as of the date of this proxy
statement.
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