CYPRESS SEMICONDUCTOR CORPORATION |
(Name of Registrant as Specified In Its Charter) |
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
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• | At our 2011 Annual Meeting, our stockholders voted in favor of including an annual advisory vote on the compensation of our named executive officers. |
• | Overwhelming approval, in excess of 95%, was received in 2011 and 2012. 2013 vote resulted in a slight majority approval, 53%, even though our compensation philosophy had not changed over this period. |
◦ | CY management launched an investor outreach program to better understand investor executive compensation and governance concerns. |
◦ | The outreach program targeted governance teams of the top 25 stockholders plus ISS and Glass Lewis. |
◦ | Resulting Observations: |
▪ | There was a disconnect in the 2013 Proxy between “targeted” executive equity compensation and actual TSR, with the “targeted” compensation being much greater than what was actually realized by the NEOs. Using the required Proxy data against our peer group put us in the 75th percentile versus the actual result putting us in approximately the 15th – 20th percentile of our peers, the later being more representative of the impact of our compensation philosophy. |
▪ | Investors want more disclosure of the details of our performance milestones. |
▪ | Investors want longer performance milestone measurement periods. |
▪ | Investors disagreed with a few of the members of our chosen peer group |
◦ | 2013 actions taken: |
▪ | Management recommended and the Compensation Committee agreed to exercise its authority to exert negative discretion to managements’ targeted and earned 2013 performance based equity awards. |
▪ | The negative discretion reduced our CEO’s total compensation by $3.1M or 60%, our CFO by $1.9M or 60% and the other NEO’s by $2.9M or 40%. |
◦ | 2014 actions taken as a result of ongoing shareholder outreach program: |
▪ | Executive base salaries will remain unchanged. |
▪ | Cash incentive targets will be lowered. |
▪ | 2014 Equity awards – targeted dollars will be reduced to the median. |
* | Milestones will have a multiplier of achieving revenue plan and stock performance to be a gate on underperformance even if milestone is achieved |
* | Milestone measurement periods will continue to lengthen – plan is to move to multi year awards within next 2 years |
* | Director ownership policy to increase to 5X retainer |
* | CEO ownership policy to increase to 6x base compensation |
* | NEO ownership policy to increase to 4x base compensation |
▪ | Enhanced disclosure of performance milestone metrics. |
◦ | In response to stockholder concerns about the prior pledging activity of two of our executives, management and our Board of Directors engaged in significant discussions amongst themselves and with our stockholders, as part of our annual investor outreach program, regarding the Company's policy and practices in this area. As a result of those discussions, the Company has formalized and adopted a written pledging policy. |
◦ | Significant ownership holdings are deemed a positive by our shareholders and our Board of Directors as they align our executives with our stockholders to a far greater degree than in most companies. |
◦ | Our pledging policy reiterates the Board's continued commitment to actively monitor such activity and specifically delegates the responsibility to oversee any pledging activity, including margin loans that include any amount of Cypress securities, to the Compensation Committee. |
◦ | Committed to improved disclosure regarding pledging activities of any NEO. |
◦ | Provided best in class disclosure in our 2014 CD&A. |