Texas Instruments 2013 Annual Report Download - page 82

TEXAS INSTRUMENTS80 • 2014 PROXY STATEMENT
PROXY
STATEMENT
Health-related benefits
Executive officers are eligible under the same plans as all other U.S. employees for medical, dental, vision, disability and life insurance.
These benefits are intended to be competitive with benefits offered in the semiconductor industry.
Other benefits
Executive officers receive only a few benefits that are not available to all other U.S. employees. The CEO is eligible for a company-paid
physical and financial counseling. In addition, the board of directors has determined that for security reasons, it is in the company’s
interest to require the CEO to use company aircraft for personal air travel. Please see pages 82 (footnote 6) and 90 for further details.
The company provides no tax gross-ups for perquisites to any of the executive officers.
Compensation following employment termination or change in control
None of the executive officers has an employment contract. Executive officers are eligible for benefits on the same terms as other
U.S. employees upon termination of employment or a change in control of the company. The current programs are described under
the heading Potential Payments upon Termination or Change in Control beginning on page 90. None of the few additional benefits that
the executive officers receive continue after termination of employment, except the amount for financial counseling is provided in the
following year in the event of retirement. The committee reviews the potential impact of these programs before finalizing the annual
compensation for the named executive officers. The committee did not raise or lower compensation for 2013 based on this review.
The Texas Instruments 2009 Long-Term Incentive Plan generally establishes double-trigger change-in-control terms for grants made
in 2010 and later years. Under those terms, options become fully exercisable and shares are issued under restricted stock unit awards
(to the extent permitted by Section 409A of the IRC) if the grantee is involuntarily terminated within 24 months after a change in control
of TI. These terms are intended to encourage employees to remain with the company through a transaction while reducing employee
uncertainty and distraction in the period leading up to any such event.
Stock ownership guidelines and policy against hedging
Our board of directors has established stock ownership guidelines for executive officers. The guideline for the CEO is four times base
salary or 125,000 shares, whichever is less. The guideline for other executive officers is three times base salary or 25,000 shares,
whichever is less. Executive officers have five years from their election as executive officers to reach these targets. Directly owned
shares and restricted stock units count toward satisfying the guidelines.
Short sales of TI stock by our executive officers are prohibited. It is against TI policy for any employee, including an executive officer,
to engage in trading in “puts” (options to sell at a fixed price on or before a certain date), “calls” (similar options to buy), or other options
or hedging techniques on TI stock.
Consideration of tax and accounting treatment of compensation
Section 162(m) of the IRC generally denies a deduction to any publicly held corporation for compensation paid in a taxable year to the
company’s CEO and three other highest compensated officers excluding the CFO, to the extent that the officer’s compensation (other
than qualified performance-based compensation) exceeds $1 million. The Compensation Committee considers the impact of this
deductibility limit on the compensation that it intends to award. The committee exercises its discretion to award compensation that
does not meet the requirements of Section 162(m) when applying the limits of Section 162(m) would frustrate or be inconsistent with
our compensation policies and/or when the value of the foregone deduction would not be material. The committee has exercised this
discretion when awarding restricted stock units that vest over time, without performance conditions to vesting. The committee believes
it is in the best interest of the company and our shareholders that restricted stock unit awards provide for the retention of our executive
officers in all market conditions.
The Texas Instruments Executive Officer Performance Plan is intended to ensure that performance bonuses under the plan are fully
tax deductible under Section 162(m). The plan, which shareholders approved in 2002, is further described on page 83. The committee’s
general policy is to award bonuses within the plan, although the committee reserves the discretion to pay a bonus outside the plan if it
determines that it is in the best interest of the company and our shareholders to do so. The committee set the bonuses of the named
executive officers for 2013 performance at the levels described on page 77. The bonuses were awarded within the plan.
When setting equity compensation, the committee considers the estimated cost for financial reporting purposes of equity
compensation it intends to grant. Its consideration of the estimated cost of grants made in 2013 is discussed on pages 73-74.