SanDisk 2014 Annual Report Download - page 38

These peer companies were selected using criteria intended to identify companies that: (i) operate in
a similar industry as the Company, (ii) compete with the Company for executive talent, and (iii) are
comparable to the Company in size and growth patterns. In addition, the peer selection process targets
companies that fall within an approximately 0.5x to 2x range of the Company’s revenue and an
approximately 0.3x to 3x multiple of the Company’s market capitalization. Companies that fall outside of
these parameters may be included based on relevance as product and/or labor market competitors.
With the assistance of its independent compensation consultant, the Company adjusted its peer group
to be utilized for fiscal year 2015. The 2015 peer companies were generally selected with an objective that
they meet a majority of the following criteria: (i) operate in a similar industry as the Company, (ii) have at
least a 5% growth in revenue, (iii) have at least 45% of revenue from non-U.S. markets, (iv) have
approximately 0.4x to 2.5x range of the Company’s revenue, (v) have research and development
expenditures of at least 8% of revenue, (vi) have at least 35% gross margin, (vii) own and operate
fabrication plants, and (viii) have multiple selling channels, including retail and commercial. Companies
that fall outside of these parameters may be included based on relevance as product and/or labor market
competitors. The 2015 peer companies are as follows:
• Advanced Micro Devices, Inc. • NetApp, Inc.
• Analog Devices, Inc. • NVIDIA Corporation
• Broadcom Corporation • Seagate Technology PLC
• Freescale Semiconductor, Ltd. • Symantec Corporation
• Juniper Networks, Inc. • Texas Instruments Incorporated
• Marvell Technology Group Ltd. • VMware, Inc.
• Micron Technology, Inc. • Western Digital Corporation
In evaluating competitive compensation levels, the Compensation Committee also refers to survey
data, which is focused on technology-oriented companies and provided by Radford. While the
Compensation Committee evaluates executive officer compensation relative to the market data, the
Compensation Committee does not use a formula for determining compensation for the executive officers,
including the Named Executive Officers, and therefore does not benchmark compensation at any specific
levels relative to the peer companies. In setting compensation for the Named Executive Officers, the
Compensation Committee reviews and considers a multitude of factors, including not only
competitiveness, but also experience levels, performance achieved, specific skills or competencies, the
desired pay mix between near-, medium- and long-term incentives, the Company’s budget, and the Chief
Executive Officer’s recommendation (with respect to executive officers other than himself). In determining
the appropriate levels of compensation to be paid to the executive officers, including the Named Executive
Officers, the Compensation Committee also considers compensation previously realized by the executive
officer in his or her employment with the Company. However, amounts realized from prior compensation
were not a material factor in determining the fiscal year 2014 compensation for the Named Executive
Officers.
Processes and Procedures. The Company’s President and Chief Executive Officer (the ‘‘Chief
Executive Officer’’) recommends to the Compensation Committee for its approval the base salary, annual
bonus and long-term equity compensation levels for the executive officers other than himself, in
accordance with the Compensation Committee charter. At Compensation Committee meetings pertaining
to executive officer compensation, the Company’s Chief Executive Officer presents compensation
recommendations for the executive officers other than himself and explains to the Compensation
Committee the basis and rationale for his recommendations. With respect to his recommendations, the
Company’s Chief Executive Officer considers the scope and responsibility of each executive officer’s
position, the individual performance of each executive officer and the contributions of each executive
officer to the Company’s performance. He also reviews survey data on the compensation of similarly
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