DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

Filed by the Registrant    

Filed by a Party other than the Registrant    

Check the appropriate box:

 

 Preliminary Proxy Statement

 Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 Definitive Proxy Statement

 Definitive Additional Materials

 Soliciting Material Pursuant to § 240.14a-12

Analog Devices, Inc.

 

 

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Notice of 2020 Annual Meeting and Proxy Statement


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LOGO

January 24, 2020

DEAR SHAREHOLDER:

You are cordially invited to attend the Annual Meeting of Shareholders to be held at 9:00 a.m. local time on Wednesday, March 11, 2020, at our offices located at 125 Summer Street, Boston, Massachusetts 02110.

At the Annual Meeting you are being asked to:

1. Elect ten members of our Board of Directors, each to serve for a term expiring at the next annual meeting of shareholders;

2. Approve a non-binding advisory proposal on the compensation of our named executive officers;

3. Approve the Analog Devices, Inc. 2020 Equity Incentive Plan; and

4. Ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the 2020 fiscal year.

Your Board of Directors recommends that you vote FOR the election of each of the directors named in the proxy statement and FOR items 2, 3 and 4.

Please carefully review the attached proxy materials and take the time to cast your vote.

Yours sincerely,

 

LOGO     LOGO

Ray Stata

Chairman of the Board of Directors

 

   

Vincent Roche

President and Chief Executive Officer

 

 


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ANALOG DEVICES, INC.

ONE TECHNOLOGY WAY

NORWOOD, MASSACHUSETTS 02062-9106

NOTICE OF 2020 ANNUAL MEETING OF SHAREHOLDERS

To Be Held On March 11, 2020

TO OUR SHAREHOLDERS:

The 2020 Annual Meeting of Shareholders of Analog Devices, Inc. will be held at our offices at 125 Summer Street, Boston, Massachusetts 02110, on Wednesday, March 11, 2020 at 9:00 a.m. local time. At the meeting, shareholders will consider and vote on the following matters:

 

  1.

To elect the ten director nominees named in this proxy statement to our Board of Directors, each to serve for a term expiring at the next annual meeting of shareholders;

 

  2.

To approve, by non-binding “say on pay” vote, the compensation of our named executive officers, as described in the Compensation Discussion and Analysis, executive compensation tables and accompanying narrative disclosures in this proxy statement;

 

  3.

To approve the Analog Devices, Inc. 2020 Equity Incentive Plan; and

 

  4.

To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending October 31, 2020.

The shareholders will also act on any other business that may properly come before the meeting.

We are providing access to our proxy materials over the Internet under the U.S. Securities and Exchange Commission’s “notice and access” rules. As a result, we are mailing to our shareholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this proxy statement and our Annual Report for the fiscal year ended November 2, 2019 (the “2019 Annual Report”). We are mailing the Notice on or about January 24, 2020, and it contains instructions on how to access those documents over the Internet. The Notice also contains instructions on how each of our shareholders can receive a paper copy of our proxy materials, including this proxy statement, our 2019 Annual Report and a form of proxy card or voting instruction card. All shareholders who do not receive the Notice, including shareholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail unless they have previously requested delivery of proxy materials electronically. We have chosen to employ this distribution process to conserve natural resources and reduce the costs of printing and distributing our proxy materials.

Shareholders of record at the close of business on January 6, 2020 are entitled to vote at the meeting. Your vote is important no matter how many shares you own. Whether you expect to attend the meeting or not, please vote your shares by using the Internet as described in the instructions included on your Notice, by calling the toll-free telephone number, or, if you received a paper copy of the proxy materials, by completing, signing, dating and returning your proxy card or voting instruction form. Your prompt response is necessary to ensure that your shares are represented at the meeting. You can change your vote and revoke your proxy at any time before the polls close at the meeting by following the procedures described in the accompanying proxy statement.

All shareholders are cordially invited to attend the meeting.

By order of the Board of Directors,

LARRY WEISS

Secretary

Norwood, Massachusetts

January 24, 2020


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TABLE OF CONTENTS

 

PROXY STATEMENT HIGHLIGHTS

     2  

FORWARD-LOOKING STATEMENTS

     8  
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING      9  
HOUSEHOLDING OF ANNUAL MEETING MATERIALS      14  
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT      15  
DELINQUENT SECTION 16(A) REPORTS      17  
PROPOSAL 1 — ELECTION OF DIRECTORS      18  

CORPORATE GOVERNANCE

     24  

General

     24  

Engagement with our Shareholders

     25  

Sustainability

     26  

Determination of Independence

     27  

Director Candidates

     28  

Communications from Shareholders and Other Interested Parties

     28  

Board of Directors Leadership Structure

     29  

Board of Directors Meetings and Committees

     29  

The Board of Directors’ Role in Risk Oversight

     32  

Report of the Audit Committee

     32  

Independent Registered Public Accounting Firm Fees and Other Matters

     33  

Director Compensation

     34  

Certain Relationships and Related Transactions

     37  
PROPOSAL 2 — ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS      39  
INFORMATION ABOUT EXECUTIVE COMPENSATION      40  

Compensation Discussion and Analysis

     40  

Compensation Processes and Philosophy

     40  

Components of Executive Compensation

     44  

Chief Executive Officer Compensation

     50  

Compensation for Other Named Executive Officers

     51  

Severance, Retention and Change in Control Benefits

     52  

Equity Award Grant Date Policy

     52  

Tax and Accounting Considerations

     53  

Risk Considerations in Our Compensation Program

     53  

Summary Compensation Table

     54  

Grants of Plan-Based Awards in Fiscal 2019

     58  

Outstanding Equity Awards at Fiscal Year-End 2019

     60  

Option Exercises and Stock Vested During Fiscal 2019

     62  

Non-Qualified Deferred Compensation Plan

     62  

Change in Control Benefits

     63  

Potential Payments Upon Termination or Change in Control

     64  

CEO Pay Ratio

     66  

Equity Award Program Description

     67  

Securities Authorized for Issuance Under Equity Compensation Plans

     68  

Compensation Committee Interlocks and Insider Participation

     69  

Compensation Committee Report

     69  
PROPOSAL 3 — APPROVAL OF THE ANALOG DEVICES, INC. 2020 EQUITY INCENTIVE PLAN      70  
PROPOSAL 4 — RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM      82  
OTHER MATTERS      83  
ELECTRONIC VOTING      84  
APPENDIX A — RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL MEASURES      A-1  
APPENDIX B — ANALOG DEVICES, INC. 2020 EQUITY INCENTIVE PLAN      B-1  
 

 

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ANALOG DEVICES, INC.

ONE TECHNOLOGY WAY

NORWOOD, MASSACHUSETTS 02062-9106

NOTICE OF 2020 ANNUAL MEETING OF SHAREHOLDERS

To Be Held On March 11, 2020

This proxy statement contains information about the 2020 Annual Meeting of Shareholders, or Annual Meeting, of Analog Devices, Inc. (which we also refer to as Analog Devices, ADI or the Company). The Annual Meeting will be held on Wednesday, March 11, 2020, at 9:00 a.m. local time, at our offices at 125 Summer Street, Boston, Massachusetts 02110. You may obtain directions to the location of the Annual Meeting by visiting our website at www.analog.com or by contacting our Investor Relations Department at Analog Devices, Inc., One Technology Way, Norwood, Massachusetts 02062; telephone: 781-461-3282.

We are furnishing this proxy statement to you in connection with the solicitation of proxies by the Board of Directors of Analog Devices for use at the Annual Meeting and at any adjournment, postponement, continuation or rescheduling of the meeting. All proxies will be voted in accordance with the instructions they contain. If you do not specify your voting instructions on the proxy that you submit for the Annual Meeting, it will be voted in accordance with the recommendation of the Board of Directors. You may revoke your proxy at any time before it is exercised at the Annual Meeting by giving our Secretary written notice to that effect.

We are providing access to our proxy materials over the Internet under the U.S. Securities and Exchange Commission’s “notice and access” rules. As a result, we are mailing to our shareholders a Notice of Internet Availability of Proxy Materials, or Notice, on or about January 24, 2020, and it contains instructions on how to access this proxy statement and our Annual Report for the fiscal year ended November 2, 2019, or our 2019 Annual Report, over the Internet. The Notice also contains instructions on how each of our shareholders can receive a paper copy of our proxy materials, including this proxy statement, our 2019 Annual Report and a form of proxy card or voting instruction card. All shareholders who do not receive the Notice, including shareholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail unless they have previously requested delivery of proxy materials electronically.

Important Notice Regarding the Availability of Proxy Materials for the Annual

Meeting of Shareholders to be Held on March 11, 2020:

This proxy statement and the 2019 Annual Report to Shareholders are available for viewing, printing and downloading at www.analog.com/AnnualMeeting.


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PROXY STATEMENT HIGHLIGHTS

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all the information that you should consider and you should read the entire proxy statement before voting. For more information on the 2019 financial and operating performance of the Company, please review the Company’s Annual Report on Form 10-K for the year ended November 2, 2019 that was filed with the U.S. Securities and Exchange Commission on November 26, 2019.

 

 

LOGO         

    2020 ANNUAL MEETING OF SHAREHOLDERS

 

             Date:      March 11, 2020
             Time:      9:00 a.m. local time
             Place:     

Analog Devices’ Offices

125 Summer Street

Boston, Massachusetts 02110

             Record Date:      January 6, 2020
VOTING MATTERS AND BOARD RECOMMENDATIONS

 

Proposals

     

Board

Recommendation

  More Information

1.  Election of Ten Directors

    FOR each director
nominee
  Page 18

2.  Advisory Approval of the Compensation of the Company’s Named Executive Officers

    FOR   Page 39

3.  Approval of the Analog Devices, Inc. 2020 Equity Incentive Plan

    FOR   Page 70

4.  Ratification of the Selection of Ernst & Young LLP as Independent Registered Public Accounting Firm for the Company’s Fiscal Year Ending October 31, 2020

    FOR   Page 82

COMPANY STRATEGY AND FISCAL 2019 BUSINESS HIGHLIGHTS

We are a leading global high-performance analog technology company dedicated to solving our customers’ toughest engineering challenges. We enable our customers to interpret the world around us by intelligently bridging the physical and digital with unmatched technologies that sense, measure, power, connect and interpret. Our strategy is to focus on challenges that our customers have in applications that matter the most, helping them to grow and adapt their offerings in complex and evolving markets. Our focus is largely on the business-to-business (B2B) markets of Industrial, Automotive and Communications and their applications, as well as a few selected consumer applications, with the goal of driving sustainable and profitable growth for Analog Devices over the long-term. As a global company, we are also passionately driven to be a leading corporate citizen, creating a better tomorrow for all our stakeholders. We believe we have a responsibility to engineer a more sustainable future and we are increasingly working to develop new solutions that restore and replenish our ecosystems and reduce the environmental impacts of our operations.



 

2    Analog Devices, Inc.


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Fiscal 2019 Financial Results and Shareholder Value Creation

 

 

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Pay for Performance

A significant portion of the total target compensation for our named executive officers, or NEOs, is variable and directly linked to Company performance in the form of variable cash incentive bonus payments and equity awards. This approach provides our executives with an opportunity to earn above peer average compensation if ADI delivers strong results. Conversely, our NEOs’ total compensation is reduced if our business results are below target.

PERFORMANCE AND INCENTIVE PAY MIX

 

LOGO

 

1 

Total Shareholder Return calculation is share price appreciation plus cumulative cash dividend payments, and the effect of reinvesting those dividends into the security, for the three- and five-year periods ended November 2, 2019.



 

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The pay mix charts above are based on target compensation consisting of the annual rate of base salary and short-term and long-term incentive targets approved by the Compensation Committee. The pay mix for the “other NEOs” in the chart above excludes the equity award granted to Mr. Pietkiewicz in June 2019, which was in connection with the alignment of the compensation programs of legacy ADI and Linear Technology employees after the Company’s acquisition of Linear Technology Corporation in 2017. If that equity award was taken into account, the percentage of performance-based incentives would increase for Mr. Pietkiewicz. For more information about the components of the performance and incentive pay mix for our NEO compensation, see “Compensation Discussion and Analysis—Components of Executive Compensation.”

Please see the Compensation Discussion and Analysis section beginning on page 40 of this proxy statement for a more detailed description of our executive compensation program, philosophy and design.

Pay and Governance Practices

Our pay and governance practices are designed to align our executives’ interests with our shareholders. For example:

 

WHAT WE DO        WHAT WE DO NOT DO

  Our cash incentive bonus awards are based solely on our financial performance     Ò   We do not guarantee salary increases or non-performance-based bonuses

 

   

 

  We have a specific policy regarding the grant dates of stock options, RSUs and other stock-based awards for our directors, executive officers and employees     Ò   We do not modify our performance targets during the performance period, even in challenging years

 

   

 

  We have stock ownership guidelines for all officers and directors     Ò   We do not provide new tax gross-ups for executive officers

 

   

 

  We prohibit hedging transactions and “short sales” involving ADI securities     Ò   With the exception of restricted stock awards assumed in connection with the Linear Technology acquisition, we do not pay dividends on unvested equity awards

 

   

 

  We prohibit holding ADI securities in margin accounts     Ò   We do not provide extensive perquisites to our executives

 

   

  We prohibit pledging ADI securities as collateral for a loan      

 

   

  Annual “say on pay” vote            


 

4    Analog Devices, Inc.


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Shareholder Engagement By the Numbers

 

 

LOGO

In the spirit of continuous improvement, we have reviewed with our Board of Directors the key takeaways from these meetings with our shareholders with the goal of continuing to evolve our corporate governance practices to best meet the needs of the Company and our shareholders. Our dialogue has led to enhancements to our practices and disclosure, which our Board believes is in the best interests of our company and our shareholders. For example we:

 

   

Enhanced our disclosure through publishing our first Diversity & Inclusion report, which can be found within our Sustainability Report on our website

 

   

Continued to refine our shareholder engagement process to connect our shareholders with key stakeholders within our company around topics of interest, including sustainability reporting and human capital management

 

   

Updated our corporate governance disclosure regarding our Board and its practices, including director qualifications and skills, the Board self-evaluation process and the Board’s oversight of risk

 

   

Expanded our CD&A disclosure relating to incentive performance targets

We intend to continue our shareholder outreach efforts on an on-going basis and look forward to continuing to engage with our valued shareholders.



 

2020 Proxy Statement    5


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BOARD OF DIRECTORS

Director Nominees

 

Name

  Age   Director
Since
  Principal Occupation   Independent
Director
  Other Public
Company
Board(s)
  Committee
Membership

Ray Stata

  85   1965   Chairman of the Board of Analog Devices, Inc.   Ò    

Vincent Roche

  59   2013   President and Chief Executive Officer of Analog Devices, Inc.   Ò   1  

James A. Champy

  77   2003   Former Vice President of the Dell/Perot Systems business unit of Dell, Inc.       NCGC (Chair)

Anantha P. Chandrakasan

  51   2019   Dean of MIT’s School of Engineering and Vannevar Bush Professor of Electrical Engineering and Computer Science       NCGC

Bruce R. Evans

  60   2015   Senior Advisor of Summit Partners     1   AC

Edward H. Frank

  63   2014   Co-Founder and Former CEO of Cloud Parity     3  

CC

(Chair)

Karen M. Golz

  65   2018   Former Global Vice Chair of Ernst & Young       AC

Mark M. Little

  67   2017   Former SVP, GE Global Research & Chief Technology Officer of General Electric Company       CC

Kenton J. Sicchitano

  75   2003   Former Global Managing Partner of PricewaterhouseCoopers LLP      

AC

(Chair)

Susie Wee

  49   2019   Senior Vice President and General Manager of DevNet and CX Ecosystem Success at Cisco Systems       CC

 

AC = Audit Committee   CC = Compensation Committee   NCGC =  

Nominating and Corporate

Governance Committee



 

6    Analog Devices, Inc.


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Composition of Board Nominees

The Board of Directors and the Nominating and Corporate Governance Committee are committed to ensuring that the Board is comprised of a highly capable group of directors who collectively provide a significant breadth of experience, knowledge and ability to effectively represent the interest of shareholders, drive shareholder value and reflect our corporate values of integrity, honesty and adherence to high ethical standards. The Board also believes that having directors with a mix of tenure helps transition the institutional knowledge of the more experienced directors while providing a broad, fresh set of perspectives. The following charts reflect the broad experience, gender and ethnic diversity and tenure of our ten director nominees.

 

 

LOGO

 

 

LOGO



 

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LOGO

 

 

    

 

CORPORATE GOVERNANCE HIGHLIGHTS

 

The Company’s governance practices include:

 

   
      WHAT WE DO            
    

  Majority of directors are independent                    Share ownership guidelines for executive officers and non-employee directors    
                
    

  Annual election of directors       Active Board engagement in managing talent and long-term succession planning for executives    
                
    

  Majority voting for directors in uncontested director elections       No supermajority voting provisions    
                
    

  Average tenure of independent directors standing for re-election is approximately 6.5 years       Annual Board and Committee self-evaluations    
                
    

  Regular executive sessions of independent directors             Implemented proxy access bylaw    
 

 

FORWARD-LOOKING STATEMENTS

This Proxy Statement contains forward-looking statements regarding future events and our future results that are subject to the safe harbor created under the Private Securities Litigation Reform Act of 1995 and other safe harbors under the Securities Act of 1933 and the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” “could” and “will,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections regarding our future financial performance; expected product offerings, product development, marketing position and technical advances; our future market position and expected competitive changes in the marketplace for our products; our ability to successfully integrate acquired businesses and technologies; and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified in Part I, Item 1A. “Risk Factors” and elsewhere in our most recent Annual Report on Form 10-K. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements, including to reflect events or circumstances occurring after the date of the filing of this report, except to the extent required by law.

 


 

8    Analog Devices, Inc.


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INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

 

Q:

What is the purpose of the Annual Meeting?

 

A:

At the Annual Meeting, shareholders will consider and vote on the following matters:

1. The election of the ten nominees named in this proxy statement to our Board of Directors, each for a term expiring at the next annual meeting of shareholders.

2. The approval, by non-binding “say on pay” vote, of the compensation of our named executive officers, as described in the Compensation Discussion and Analysis, executive compensation tables and accompanying narrative disclosures in this proxy statement.

3. The approval of the Analog Devices, Inc. 2020 Equity Incentive Plan.

4. The ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending October 31, 2020, or fiscal 2020.

The shareholders will also act on any other business that may properly come before the meeting or any postponement, adjournment, rescheduling or continuation of the meeting.

 

Q:

Who can vote?

 

A:

To be able to vote, you must have been an Analog Devices shareholder of record at the close of business on January 6, 2020. This date is the record date for the Annual Meeting. The number of outstanding shares entitled to vote on each proposal at the Annual Meeting is 368,954,404 shares of our common stock.

 

Q:

How many votes do I have?

 

A:

Each share of our common stock that you own on the record date entitles you to one vote on each matter that is voted on.

 

Q:

Is my vote important?

 

A:

Yes. Your vote is important no matter how many shares you own. Please take the time to vote. Take a moment to read the instructions below. Choose the way to vote that is easiest and most convenient for you and cast your vote as soon as possible.

 

Q:

How do I vote?

 

A:

If you are the “record holder” of your shares, meaning that you own your shares in your own

  name and not through a bank, broker or other nominee, you may vote in one of four ways.

(1) You may vote over the Internet. If you have Internet access, you may vote your shares from any location in the world by following the Internet voting instructions on the Notice or the proxy card. Proxies submitted via the Internet must be received by 11:59 p.m. Eastern Time on March 10, 2020.

(2) You may vote by telephone. You may vote your shares by calling 1-800-690-6903 toll-free within the United States, U.S. territories and Canada and following the instructions provided by the recorded message. Proxies submitted via telephone must be received by 11:59 p.m. Eastern Time, on March 10, 2020.

(3) You may vote by mail. If you received a printed proxy card, you may vote by completing and signing the proxy card and promptly mailing it in the enclosed postage-prepaid envelope. You do not need to put a stamp on the enclosed envelope if you mail it in the United States. The shares you own will be voted according to your instructions on the proxy card that you mail. If you return the proxy card, but do not give any instructions on a particular matter described in this proxy statement, the shares you own will be voted in accordance with the recommendations of our Board of Directors. The Board of Directors recommends that you vote FOR each director nominee and FOR Proposals 2, 3 and 4.

(4) You may vote in person. If you attend the Annual Meeting, you may vote by delivering your completed proxy card in person or by completing a ballot. Ballots will be available at the Annual Meeting.

Please note that you cannot vote by marking up the Notice of Internet Availability of the Proxy Materials and mailing the Notice back. Any votes returned in that manner will not be counted.

 

Q:

Can I vote if my shares are held in “street name”?

 

A:

If the Analog Devices shares that you own are held in “street name” by a bank, broker or

 

 

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  other nominee, your bank, broker or other nominee is considered, with respect to those shares, the record holder of your shares, and is required to vote your shares according to your instructions. In order to vote your shares, you will need to follow the instructions that your bank, broker or other nominee provides you. Many banks, brokers or other nominees also offer the option of voting over the Internet or by telephone, instructions for which would be provided by your bank, broker or other nominee on your voting instruction form.

If you hold shares through an account with a broker, the voting of shares by such broker when you do not provide voting instructions is governed by applicable stock exchange rules. These rules allow brokers to vote shares at their discretion on “routine” matters for which their customers do not provide voting instructions. On matters that are considered “non-routine,” brokers may not vote shares without your instruction. The ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2020 (Proposal 4) is considered a “routine” matter and your broker will be able to vote on that proposal even if it does not receive instructions from you, so long as it holds your shares in its name. The election of directors (Proposal 1), the “say on pay” advisory vote (Proposal 2) and the approval of the Analog Devices, Inc. 2020 Equity Incentive Plan (Proposal 3) are “non-routine” matters. If you do not instruct your bank, broker or other nominee how to vote with respect to these proposals, your bank, broker or other nominee may not vote with respect to these proposals and those votes will be counted as “broker non-votes.” “Broker non-votes” are shares that are held in “street name” by a bank, broker or other nominee that indicates on its proxy that it does not have or did not exercise discretionary authority to vote on a particular proposal.

If your shares are held in “street name,” you must bring an account statement or letter from your broker or other nominee, showing that you are the beneficial owner of the shares as of the record date (January 6, 2020) in order to be admitted to the Annual Meeting on March 11, 2020. To be able to vote your shares held in “street name” at the Annual Meeting, you will need to obtain a legal proxy from your bank, broker or other nominee,

issued in your name giving you the right to vote your shares.

 

Q:

Can I change my vote after I have mailed my proxy card or after I have voted my shares over the Internet or by telephone?

 

A:

Yes. If you are the “record holder” of your shares, you can revoke your proxy or change your vote at any time before the polls close at the Annual Meeting by doing any one of the following things:

 

    voting over the Internet or by telephone as instructed above (only your latest Internet or telephone vote is counted);

 

    signing and returning another proxy card with a later date;

 

    giving our Secretary a written notice before or at the meeting that you want to revoke your proxy; or

 

    attending the Annual Meeting, requesting that your proxy be revoked and voting in person as instructed above.

Your attendance at the meeting alone will not revoke your proxy.

If your shares are held in “street name,” you may submit a new, later-dated voting instruction form or contact your bank, broker or other nominee. You may also vote in person at the Annual Meeting if you obtain a legal proxy as described in the answer to the question above entitled “Can I vote if my shares are held in ‘street name’”?

 

Q:

How do I vote my shares held in trust in the Analog Ireland Success Sharing Share Plan?

 

A:

If you participate in the Analog Ireland Success Sharing Share Plan, which we refer to as the Ireland share plan, you may instruct Irish Pensions Trust Limited, which serves as the trustee of the Ireland share plan, to vote the amount of shares of common stock that they hold on your behalf as of the record date. You will receive a voting card that you may use to direct Mercer Ireland Limited, or Mercer, which administers the Irish share plan on behalf of Irish Pensions Trust Limited, how to vote your shares. You should sign the voting card and return it to Mercer in the envelope provided. Mercer will vote the shares in the manner that you direct on the voting card. If

 

 

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  Mercer does not receive your voting card by 5:00 p.m. Greenwich Mean Time (GMT) on March 4, 2020, Mercer will not vote your shares.

 

Q:

What constitutes a quorum?

 

A:

In order for business to be conducted at the Annual Meeting, a quorum must be present in person or represented by valid proxies. For each of the proposals to be presented at the Annual Meeting, a quorum consists of the holders of a majority of the shares of common stock issued and outstanding on January 6, 2020, the record date, or at least 184,477,203 shares.

Shares of common stock represented in person or by proxy (including “broker non-votes” and shares that abstain or do not vote with respect to a particular proposal) will be counted for the purpose of determining whether a quorum exists at the Annual Meeting for that proposal.

If a quorum is not present, the Annual Meeting will be adjourned until a quorum is obtained.

 

Q:

What vote is required for each proposal?

 

A:

Election of directors. Under our bylaws, a nominee will be elected to the Board of Directors if the votes cast “for” the nominee’s election exceed the votes cast “against” the nominee’s election, with abstentions and “broker non-votes” not counting as votes “for” or “against.” If the shares you own are held in “street name” by a bank, broker or other nominee, your bank, broker or other nominee, as the record holder of your shares, is required to vote your shares according to your instructions. If you do not instruct your bank, broker or other nominee how to vote with respect to this proposal, your bank, broker or other nominee may not vote your shares with respect to the election of directors. If an incumbent director nominee in an uncontested election of directors receives a majority of votes “against” his or her election, the director must tender a resignation from the Board of Directors. The Board of Directors will then decide whether to accept the resignation within 90 days following certification of the shareholder vote (based on the recommendation of a committee of independent directors). We will publicly disclose the Board of Directors’ decision and its reasoning with regard to the offered resignation.

“Say on Pay.” Our Board of Directors is seeking a non-binding advisory vote regarding the compensation of our named executive officers, as described in the Compensation Discussion and Analysis, executive compensation tables and accompanying narrative disclosures contained in this proxy statement. Under our bylaws, the affirmative vote of a majority of the total number of votes cast on the proposal is needed to approve this resolution. The vote is advisory and non-binding in nature but our Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. If you do not instruct your bank, broker or other nominee how to vote with respect to this proposal, your bank, broker or other nominee may not vote your shares with respect to this proposal.

Approval of the Analog Devices, Inc. 2020 Equity Incentive Plan. Under our bylaws, the affirmative vote of a majority of the total number of votes cast on the proposal is needed to approve the Analog Devices, Inc. 2020 Equity Incentive Plan. If you do not instruct your bank, broker or other nominee how to vote with respect to this proposal, your bank, broker or other nominee may not vote your shares with respect to this proposal.

Ratification of independent registered public accounting firm. Under our bylaws, the affirmative vote of a majority of the total number of votes cast on the proposal is needed to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2020. Even if you do not instruct your bank, broker or other nominee how to vote with respect to this proposal, your bank, broker or other nominee may vote your shares with respect to this proposal.

 

Q:

How will votes be counted?

 

A:

Each share of common stock will be counted as one vote according to the instructions contained on a properly completed proxy card, whether submitted in person, by mail, over the Internet or by telephone, or on a ballot voted in person at the Annual Meeting. With respect to all proposals, shares will not be voted in favor of the matter, and will not be counted as voting on the matter, if they either (1) abstain from voting on a particular matter, or (2) are “broker

 

 

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  non-votes.” Banks, brokers and other nominees who do not receive instructions with respect to Proposals 1, 2 or 3 will not be allowed to vote these shares, and all such shares will be “broker non-votes” rather than votes “for” or “against.” Accordingly, assuming the presence of a quorum, abstentions and “broker non-votes” for a particular proposal will not be counted as votes cast to determine the outcome of a particular proposal.

 

Q:

Who will count the votes?

 

A:

The votes will be counted, tabulated and certified by Broadridge.

 

Q:

Will my vote be kept confidential?

 

A:

Yes, your vote will be kept confidential and we will not disclose your vote, unless (1) we are required to do so by law (including in connection with the pursuit or defense of a legal or administrative action or proceeding), or (2) there is a contested election for the Board of Directors. The tabulation agent will forward any written comments that you make on the proxy card to management without providing your name, unless you expressly request disclosure on your proxy card.

 

Q:

How does the Board of Directors recommend that I vote on the proposals?

 

A:

The Board of Directors recommends that you vote:

FOR the election of each of the ten nominees to serve as directors on the Board of Directors, each for a term expiring at the next annual meeting of shareholders (Proposal 1);

FOR the approval, by non-binding “say on pay” vote, of the compensation of our named executive officers, as described in the Compensation Discussion and Analysis, executive compensation tables and accompanying narrative disclosures contained in this proxy statement (Proposal 2);

FOR the approval of the Analog Devices, Inc. 2020 Equity Incentive Plan (Proposal 3); and

FOR the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2020 (Proposal 4).

 

Q:

Will any other matters be voted on at this meeting?

 

A:

No. Under the laws of Massachusetts, where we are incorporated, an item may not be brought before our shareholders at a meeting

  unless it appears in the notice of the meeting. Our bylaws establish the process for a shareholder to bring a matter before a meeting. See “How and when may I submit a shareholder proposal, including a shareholder nomination for director, for the 2021 annual meeting of shareholders?” below.

 

Q:

Where can I find the voting results?

 

A:

We will report the voting results in a Form 8-K filed with the SEC within four business days after the conclusion of the Annual Meeting.

 

Q:

How and when may I submit a shareholder proposal, including a shareholder nomination for director, for the 2021 annual meeting of shareholders?

 

A:

Shareholder proposals for inclusion in proxy statement: If you are interested in submitting a proposal for inclusion in our proxy statement for the 2021 annual meeting, you need to follow the procedures outlined in Rule 14a-8 of the Securities Exchange Act of 1934, or the Exchange Act. To be eligible for inclusion, we must receive your shareholder proposal for our proxy statement for the 2021 annual meeting of shareholders at our principal corporate offices in Norwood, Massachusetts at the address below no later than September 26, 2020.

Shareholder director nominations for inclusion in proxy statement: The Board of Directors has implemented a proxy access provision in our bylaws, which allows a shareholder or group of up to 20 shareholders owning in aggregate 3% or more of our outstanding shares of common stock continuously for at least three years to nominate and include in our proxy materials director nominees constituting up to 20% of the number of directors in office or two nominees, whichever is greater, provided the shareholder(s) and nominee(s) satisfy the requirements in the bylaws. If a shareholder or group of shareholders wishes to nominate one or more director candidates to be included in our proxy statement pursuant to these proxy access provisions in Article I, Section 1.9(c) of our bylaws, the Secretary must receive advance written notice at the address noted below not less than 120 days nor more than 150 days before the first anniversary of the preceding year’s annual meeting. However, if the date of our annual meeting is advanced by more than 20 days, or delayed by more than 60 days, from the anniversary date, or if no

 

 

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annual meeting was held in the preceding year, then we must receive such notice at the address noted below not earlier than the 150th day before such annual meeting and not later than the close of business on the later of (1) the 120th day prior to such annual meeting and (2) the seventh day after the day on which notice of the meeting date was mailed or public disclosure was made, whichever occurs first. Assuming that the 2021 annual meeting is not advanced by more than 20 days nor delayed by more than 60 days from the anniversary date of the 2021 annual meeting, you would need to give us appropriate notice at the address noted below no earlier than October 12, 2020, and no later than November 11, 2020.

Shareholder director nominations not included in proxy statement: In addition, our bylaws require that we be given advance written notice for nominations for election to our Board of Directors and other matters that shareholders wish to present for action at an annual meeting other than those to be included in our proxy statement under Rule 14a-8. The Secretary must receive such notice at the address noted below not less than 90 days or more than 120 days before the first anniversary of the preceding year’s annual meeting. However, if the date of our annual meeting is advanced by more than 20 days, or delayed by more than 60 days, from the anniversary date, then we must receive such notice at the address noted below not earlier than the 120th day before such annual meeting and not later than the close of business on the later of (1) the 90th day before such annual meeting and (2) the seventh day after the day on which notice of the meeting date was mailed or public disclosure was made, whichever occurs first. Assuming that the 2021 annual meeting is not advanced by more than 20 days nor delayed by more than 60 days from the anniversary date of the 2020 annual meeting, you would need to give us appropriate notice at the address noted below no earlier than November 11, 2020, and no later than December 11, 2020. If a shareholder does not provide timely notice of a nomination or other matter to be presented at the 2021 annual meeting, under Massachusetts law, it may not be brought before our shareholders at a meeting.

Our bylaws also specify requirements relating to the content of the notice that shareholders must provide to the Secretary of Analog Devices for any matter, including a shareholder proposal or nomination for director, to be

properly presented at a shareholder meeting. A copy of the full text of our bylaws is on file with the SEC and publicly available on our website.

Any proposals, nominations or notices should be sent to:

Larry Weiss, Secretary

Analog Devices, Inc.

One Technology Way

Norwood, Massachusetts 02062

Phone: 781-461-3816

Email: larry.weiss@analog.com

 

Q:

What are the costs of soliciting these proxies and who will pay?

 

A:

We will bear the costs of solicitation of proxies. We have engaged Alliance Advisors LLC to assist us with the solicitation of proxies and expect to pay Alliance Advisors approximately $12,000 for their services. In addition to solicitations by mail, Alliance Advisors and our directors, officers and regular employees may solicit proxies by telephone, email and personal interviews without additional remuneration. We will request brokers, custodians and fiduciaries to forward proxy soliciting material to the owners of shares of our common stock that they hold in their names. We will reimburse banks and brokers for their reasonable out-of-pocket expenses incurred in connection with the distribution of our proxy materials.

 

Q:

Why did I receive a “Notice of Internet Availability of Proxy Materials” but no proxy materials?

 

A:

We are distributing our proxy materials to stockholders via the Internet under the “Notice and Access” approach permitted by the rules of the U.S. Securities and Exchange Commission, or SEC. This approach expedites stockholders’ receipt of proxy materials while conserving natural resources and reducing our distribution costs. On or about January 24, 2020, we mailed a Notice of Internet Availability of Proxy Materials containing instructions on how to access the proxy materials on the Internet to participating stockholders, and if desired, to request to receive a paper copy of our proxy materials by mail.

 

Q:

How can I obtain an Annual Report on Form 10-K?

 

A:

Our Annual Report on Form 10-K for the fiscal year ended November 2, 2019, or fiscal 2019, is available on our website at www.analog.com. If you would like a copy of our Annual Report on

 

 

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  Form 10-K for fiscal 2019 and/or any of its exhibits, we will send you such materials without charge. Please contact:

Investor Relations Department

Analog Devices, Inc.

One Technology Way

Norwood, Massachusetts 02062

Phone: 781-461-3282

Email: investor.relations@analog.com

Q:

Whom should I contact if I have any questions?

 

A:

If you have any questions about the Annual Meeting or your ownership of our common stock, please contact our Investor Relations Department, at the address, telephone number or email address listed above.

 

 

HOUSEHOLDING OF ANNUAL MEETING MATERIALS

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy statement and annual report to shareholders may have been sent to multiple shareholders in your household unless we have received contrary instructions from one or more shareholders. We will promptly deliver a separate copy of either document to you if you contact us at the following address, telephone number or email address: Investor Relations Department, Analog Devices, Inc., One Technology Way, Norwood, Massachusetts 02062, telephone: 781-461-3282, email: investor.relations@analog.com. If you want to receive separate copies of the proxy statement or annual report to shareholders in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address, telephone number or email address.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table contains information regarding the beneficial ownership of our common stock as of January 3, 2020 (unless otherwise specified) by:

 

   

the shareholders we know to beneficially own more than 5% of our outstanding common stock;

 

   

each director named in this proxy statement;

 

   

each executive officer named in the Summary Compensation Table included in this proxy statement; and

 

   

all of our directors and executive officers as a group.

 

Name and Address of Beneficial Owner(1)   

Shares

Beneficially

Owned(2)

    

Shares

Acquirable

within 60

Days(3)

    

Total

Beneficial

Ownership

    

 

Percent of

Common

Stock

  Beneficially  

Owned(4)

 

 5% Shareholders:

           

Vanguard Group Inc.(5)

     32,119,115        —          32,119,115        8.7

PO Box 2600

Valley Forge, Pennsylvania 19482

           

BlackRock Inc.(6)

     24,432,403        —          24,432,403        6.6

55 East 52nd Street

New York, New York 10055

           

JPMorgan Chase & Co.(7)

     21,127,182        —          21,127,182        5.7

383 Madison Avenue

New York, New York 10179

           

Massachusetts Financial Services Co.(8)

     18,890,839        —          18,890,839        5.1

111 Huntington Avenue

Boston, Massachusetts 02199

           

 Directors and Named Executive Officers:

           

James A. Champy(9)

     58,605        37,620        96,225        *  

Anantha P. Chandrakasan

     450        —          450        *  

Martin Cotter

     173        74,396        74,569        *  

Bruce R. Evans

     85,140        —          85,140        *  

Edward H. Frank

     9,280        8,460        17,740        *  

Karen M. Golz

     1,504        —          1,504        *  

Joseph (John) Hassett

     12,202        20,178        32,380        *  

Mark M. Little

     4,805        1,040        5,845        *  

Prashanth Mahendra-Rajah

     —          8,694        8,694        *  

Neil Novich

     24,895        —          24,895        *  

Steve Pietkiewicz

     28,447        18,084        46,531        *  

Vincent Roche

     21,206        148,283        169,489        *  

Kenton J. Sicchitano

     22,395        37,620        60,015        *  

Ray Stata(10)

     822,800        37,620        860,420        *  

Lisa Su

     12,995        25,760        38,755        *  

Susie Wee(11)

     —          —          —          *  

All directors and executive officers as a group
(17 persons, consisting of 6 executive officers and 11 non-employee directors)(12)

     1,110,723        438,185        1,548,908        *  

 

*

Represents less than 1% of the outstanding shares of our common stock.

(1)

Unless otherwise indicated, the address of each beneficial owner listed is c/o Analog Devices, Inc., One Technology Way, Norwood, Massachusetts 02062.

 

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(2)

For each person, the “Shares Beneficially Owned” column may include shares of common stock attributable to the person because of that person’s voting or investment power. Unless otherwise indicated, each person in the table has sole voting and investment power over the shares listed. The inclusion in the table of any shares, however, does not constitute an admission of beneficial ownership of those shares by the named shareholder.

(3)

The number of shares of common stock beneficially owned by each person is determined under applicable SEC rules. Under these rules, a person is deemed to have “beneficial ownership” of any shares over which that person has or shares voting or investment power, plus any shares that the person has the right to acquire within 60 days, including through the exercise of stock options. Unless otherwise indicated, for each person named in the table, the number in the “Shares Acquirable within 60 Days” column consists of shares covered by stock options that may be exercised and restricted stock units, or RSUs, that vest within 60 days after January 3, 2020.

(4)

The percent ownership for each shareholder on January 3, 2020 is calculated by dividing (1) the total number of shares beneficially owned by the shareholder by (2) the number of shares of our common stock outstanding on January 3, 2020 (369,010,543 shares) plus any shares acquirable (including exercisable stock options) by the shareholder in question within 60 days after January 3, 2020.

(5)

Based solely on a Form 13F-HR filed by Vanguard Group Inc. on November 14, 2019 reporting stock ownership as of September 30, 2019. Vanguard Group Inc. also reported that, as of September 30, 2019, it had sole voting power for 442,205 shares, sole investment power for 31,609,212 shares, shared voting power for 98,896 shares, shared investment power for 509,903 shares and no voting power with respect to 31,578,014 shares.

(6)

Based solely on a Form 13F-HR filed by BlackRock Inc. on November 8, 2019 reporting stock ownership as of September 30, 2019. BlackRock Inc. also reported that, as of September 30, 2019, it had sole voting power for 21,064,353 shares and no voting power with respect to 3,368,050 shares.

(7)

Based solely on a Schedule 13G/A filed by JPMorgan Chase & Co. on January 8, 2020 reporting stock ownership as of December 31, 2019. JPMorgan Chase & Co. also reported that, as of December 31, 2019, it had sole voting power for 19,440,819 shares, sole dispositive power for 20,939,936 shares, shared voting power for 112,902 shares and shared dispositive power for 181,789 shares.

(8)

Based solely on a Form 13F-HR filed by Massachusetts Financial Services Co. on November 5, 2019 reporting stock ownership as of September 30, 2019. Massachusetts Financial Services Co. also reported that, as of September 30, 2019, it had sole voting power for 15,706,708 shares, sole investment power for 15,984,038 shares, shared voting power for 2,323,451 shares, shared investment power for 2,906,801 shares and no voting power with respect to 860,680 shares.

(9)

Includes 45,645 shares held in trust for the benefit of Mr. Champy’s spouse and son, as to which Mr. Champy disclaims beneficial ownership.

(10)

Includes 668,709 shares held by Mr. Stata’s spouse, as to which Mr. Stata disclaims beneficial ownership. Includes 648,709 shares held by Mr. Stata’s spouse and 133,138 shares held directly by Mr. Stata that are pledged as collateral for a line of credit from a bank. Since January 2013, we have prohibited our directors and executive officers from future pledging of their Company securities as collateral for a loan.

(11)

Susie Wee joined the Board of Directors on November 29, 2019.

(12)

All directors and executive officers as a group disclaim beneficial ownership of a total of 714,354 shares.

 

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DELINQUENT SECTION 16(A) REPORTS

Section 16(a) of the Exchange Act requires our executive officers, directors and the holders of more than 10% of our common stock to file with the SEC initial reports of ownership of our common stock and other equity securities on a Form 3 and reports of changes in such ownership on a Form 4 or Form 5. Officers, directors and 10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of our records and written representations by the persons required to file these reports, all filing requirements of Section 16(a) were satisfied on a timely basis with respect to fiscal 2019, with the exception of a late filing by Mr. Champy to report a gift of 162 shares to an educational institution.

 

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 PROPOSAL 1

 

 

ELECTION OF DIRECTORS

ELECTION PROCESS

Our entire Board of Directors is elected annually by our shareholders and currently consists of twelve directors, of whom ten are deemed to be “independent directors.” Lisa Su and Neil Novich are retiring from the Board of Directors and therefore are not standing for re-election at the Annual Meeting. Dr. Su and Mr. Novich will continue to serve as directors until their terms expire at the Annual Meeting. At the Annual Meeting, shareholders will accordingly have an opportunity to vote for each of the ten nominees listed below. The persons named in the proxy card, upon receipt of a properly executed proxy, will vote for each of these nominees, unless you instruct them to vote otherwise on the proxy card (whether executed by you or through Internet or telephonic voting). Each of the nominees has indicated his or her willingness to serve, if elected. However, if any or all of the nominees should be unable or unwilling to serve, the proxies may be voted for a substitute nominee designated by our Board of Directors or our Board of Directors may reduce the number of directors.

DIRECTOR CRITERIA, QUALIFICATIONS AND EXPERIENCE

The Board of Directors is committed to ensuring that it is composed of a highly capable group of directors who collectively span a broad range of leadership skills and provide a significant breadth of experience, knowledge and abilities, relevant to the Company’s strategic vision, long-term objectives and business activities to effectively represent the interests of shareholders, exercise sound judgment and reflect our corporate values of integrity, honesty and adherence to high ethical standards. Key factors that the Board of Directors and the Nominating and Corporate Governance Committee consider when selecting directors include:

BOARD EXPERTISE AND SKILLS

 

 

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The following paragraphs provide information as of the date of this proxy statement about each nominee. The information presented includes information each director has given us about his or her age, all positions he or she holds, his or her principal occupation and business experience, and the names of other publicly-held companies of which he or she currently serves as a director or has served as a director during the past five years. In addition to the information presented below regarding each nominee’s specific experience, qualifications, attributes and skills that led our Board of Directors to the conclusion that he or she should serve as a director, we also believe that all of our director nominees have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to ADI and our Board of Directors. Finally, we value their significant experience on other public company boards of directors and board committees.

Information about the number of shares of common stock beneficially owned by each director appears above under the heading “Security Ownership of Certain Beneficial Owners and Management.” See also “Certain Relationships and Related Transactions.” There are no family relationships among any of the directors and executive officers of ADI.

 

Ray Stata

 

Chairman of the Board of Directors

 

Director since: 1965

 

Age: 85

 

Committee(s):

None

  

Professional Experience and Background

 

Mr. Stata has served as our Chairman of the Board of Directors since 1973 and served as an executive officer of our Company from its inception until April 2012. Mr. Stata served as our Chief Executive Officer from 1973 to November 1996 and as our President from 1971 to November 1991.

 

  

Key Qualifications and Expertise

 

We believe Mr. Stata’s qualifications to serve on our Board of Directors include more than 50 years of experience and leadership in the semiconductor industry, including as our founder, our Chairman for 44 years and formerly as our President for 20 years. If re-elected, the Company expects that Mr. Stata will continue to serve as our Chairman of the Board of Directors in 2020.

 

   Other Public Company Boards    
  

 

Current

None

 

 

 

Past 5 Years

None

 

 

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Vincent Roche

 

President and Chief Executive Officer

 

Director since: 2013

 

Age: 59

 

Committee(s):

None

  

Professional Experience and Background

 

Mr. Roche has served as President of Analog Devices since 2012 and was appointed Chief Executive Officer and elected as a director in 2013. Under his leadership, ADI has extended its market leadership and grown to approximately $6 billion in revenue in fiscal 2019. Mr. Roche began his career at ADI in 1988 and has served in key positions spanning corporate leadership, worldwide sales, strategic marketing, business development, and product management over his more than 30-year tenure at ADI.

 

  

Key Qualifications and Expertise

 

We believe that Mr. Roche’s qualifications to serve on the Board of Directors include his leadership role in the Company and his deep knowledge of the Company’s products, markets, customers, culture and organization.

 

   Other Public Company Boards    
  

 

Current

Acacia Communications, Inc.

 

 

 

Past 5 Years

None

 

          

James A. Champy

 

Presiding Director

 

Independent

Director since: 2003

 

Age: 77

 

Committee(s):

Nominating and

Corporate Governance

  

Professional Experience and Background

 

Mr. Champy retired in 2010 as Vice President of the Dell/Perot Systems business unit of Dell, Inc., a computer and technology services company. He was previously a Vice President and the Chairman of Consulting at Perot Systems Corporation from 1996 to November 2009. He served as a director of Perot Systems Corporation from 1996 to 2004. Mr. Champy is the author of several business books and is a Life Member of the MIT Corporation, the governing body of the Massachusetts Institute of Technology.

 

  

Key Qualifications and Expertise

 

We believe Mr. Champy’s qualifications to serve on our Board of Directors include his expertise in corporate strategy development and his organizational acumen.

 

   Other Public Company Boards    
  

 

Current

None

 

 

 

Past 5 Years

None

 

          

Anantha P.

Chandrakasan

 

Independent

Director since: 2019

 

Age: 51

 

Committee(s):

Nominating and

Corporate Governance

  

Professional Experience and Background

 

Dr. Chandrakasan has served as the Dean of the School of Engineering at Massachusetts Institute of Technology, or MIT, a private research university, since 2017, and the Vannevar Bush Professor of Electrical Engineering and Computer Science since 2003. He also co-chairs the MIT-IBM Watson AI Lab and chairs the MIT-SenseTime Alliance on Artificial Intelligence and J-Clinic, the Abdul Latif Jameel Clinic for Machine Learning in Health at MIT. From July 2011 to June 2017, Dr. Chandrakasan was the head of MIT’s Department of Electrical Engineering and Computer Science (EECS). He is an Institute of Electrical and Electronics Engineers fellow, and in 2015 he was elected to the National Academy of Engineering.

 

  

Key Qualifications and Expertise

 

We believe Dr. Chandrakasan’s qualifications to serve on our Board of Directors include his deep understanding of complex technologies and experience driving innovation.

 

   Other Public Company Boards    
  

 

Current

None

 

 

 

Past 5 Years

None

 

 

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Bruce R. Evans

 

Independent

Director since: 2015

 

Age: 60

 

Committee(s):

Audit

  

Professional Experience and Background

 

Mr. Evans has served in various positions with Summit Partners, a growth equity, venture capital and credit investment firm, since 1986, including most recently as Senior Advisor to the firm. From January 2018 to March 2019, he served as Chairman of Summit Partners’ Board and Senior Advisor to the firm. From 2011 to December 2017, he served as Managing Director and Chairman of Summit Partners’ Board. From 1999 to 2011, he was one of Summit Partners’ Co-Managing Partners. During his 32 years with Summit Partners, Mr. Evans has served as a member of the boards of directors of over 30 technology and other growth industry companies in the U.S. and Europe, including 14 public companies. In addition, Mr. Evans is Chairman of the Vanderbilt University Board of Trust and the former Chairman of Vanderbilt’s Investment Committee.

 

  

Key Qualifications and Expertise

 

We believe Mr. Evans’ qualifications to serve on our Board of Directors include his financial and management expertise, including his investing experience in the technology sector and his experience with acquisitions and other transactions.

 

   Other Public Company Boards    
  

 

Current

Casa Systems, Inc.

 

 

 

Past 5 Years

None

 

          

Edward H. Frank

 

Independent

Director since: 2014

 

Age: 63

 

Committee(s):

Compensation

  

Professional Experience and Background

 

Dr. Frank was most recently co-founder and CEO of Cloud Parity, a voice of the customer startup, from January 2014 through August 2016. From May 2009 to October 2013, Dr. Frank held the position of Vice President, Macintosh Hardware Systems Engineering at Apple Inc., a company that designs, manufactures and markets electronic devices. Prior to his tenure at Apple, Dr. Frank served as Corporate Vice President, Research and Development, of Broadcom Corp. Dr. Frank was founding CEO of Epigram, Inc., a developer of integrated circuits and software for home networking, which Broadcom acquired in 1999, and was a Distinguished Engineer at Sun Microsystems, Inc. Dr. Frank is vice-chairman of Carnegie Mellon University Board of Trustees, where he has been a Trustee since 2000, and since July 2017, has been Executive Director (pro bono) of Metallica’s All Within My Hands Foundation.

 

  

Key Qualifications and Expertise

 

We believe Dr. Frank’s qualifications to serve on our Board of Directors include his substantial experience in the design, manufacture, sale and marketing of semiconductors for a broad set of markets, including many of the markets serviced by the Company and his extensive executive leadership experience.

 

   Other Public Company Boards    
  

 

Current

Amesite, Inc.

Marvell Semiconductor, Inc.

SiTime Corp.

 

 

 

Past 5 Years

Cavium, Inc. (until 2018)

Quantenna Communications, Inc.

(until 2018)

 

 

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Karen M. Golz

 

Independent

Director since: 2018

 

Age: 65

 

Committee(s):

Audit

  

Professional Experience and Background

 

Ms. Golz is a retired partner from Ernst & Young, a public accounting firm, where she held various senior leadership positions during her tenure at the firm, including most recently as Global Vice Chair, Japan from 2016 to 2017 and prior thereto, from 2010 to 2016, as Global Vice Chair, Professional Practice. Ms. Golz currently serves as senior advisor to The Boston Consulting Group’s Audit and Risk Committee, a role she has held since 2017, and she sits on the Board of Trustees of the University of Illinois Foundation. Ms. Golz is also a National Association of Corporate Directors (NACD) Board Leadership Fellow.

 

  

Key Qualifications and Expertise

 

We believe Ms. Golz’s qualifications to serve on our Board of Directors include her accounting and audit expertise and extensive experience helping large organizations successfully navigate the complexities of international trade and regulation.

 

   Other Public Company Boards    
  

 

Current

None

 

 

 

Past 5 Years

None

 

    

Mark M. Little

 

Independent

Director since: 2017

 

Age: 67

 

Committee(s):

Compensation

  

Professional Experience and Background

 

Dr. Little is the former Senior Vice President, GE Global Research and Chief Technology Officer of General Electric Company, or GE, a global digital industrial company. Dr. Little joined GE in 1978, and during his 37-year tenure, held management positions in engineering and business, culminating with his most recent position, which he held from 2005 until 2015. In addition to his technology leadership, Dr. Little led several multi-billion dollar business units at GE, including GE Energy’s power-generation segment.

 

  

Key Qualifications and Expertise

 

We believe Dr. Little’s qualifications to serve on our Board of Directors include his extensive leadership experience in a global technology company, combined with his experience driving change and innovation through GE’s various phases of business transformation.

 

   Other Public Company Boards    
  

 

Current

None

 

 

 

Past 5 Years

None

 

          

  Kenton J.
  Sicchitano

 

  Independent

  Director since: 2003

 

  Age: 75

 

  Committee(s):

  Audit

  

Professional Experience and Background

 

Mr. Sicchitano retired from PricewaterhouseCoopers LLP, or PwC, a public accounting firm, in July 2001. At the time of his retirement, Mr. Sicchitano was the Global Managing Partner of Independence and Regulatory Matters for PwC. Mr. Sicchitano joined Price Waterhouse LLP, a predecessor firm of PwC, in 1970 and became a partner in 1979. During his 31-year tenure with PwC, Mr. Sicchitano held various positions including the Global Managing Partner of Audit/Business Advisory Services and the Global Managing Partner responsible for Audit/Business Advisory, Tax and Financial Advisory Services.

 

  

Key Qualifications and Expertise

 

We believe Mr. Sicchitano’s qualifications to serve on our Board of Directors include his extensive experience with public and financial accounting matters for complex global organizations.

 

   Other Public Company Boards    
  

 

Current

None

 

 

 

Past 5 Years

PerkinElmer, Inc. (until 2017)

Metlife, Inc. (until 2017)

 

 

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Susie Wee

 

Independent

Director since: 2019

 

Age: 49

 

Committee(s): Compensation

  

Professional Experience and Background

 

Dr. Wee has served as the Senior Vice President and General Manager of DevNet and CX Ecosystem Success at Cisco Systems, which is building a vibrant ecosystem of customers, partners, network/IT professionals and developers who innovate with Cisco platforms, since November 2019. She leads Cisco’s professional training and certification program and developer and customer experience communities. Prior to her current role, Dr. Wee was the Senior Vice President and Chief Technology Officer of Cisco DevNet, Cisco’s developer community which she founded and grew to over 500,000 developers, from October 2018 to November 2019. Additionally, she was the Vice President & Chief Technology and Experience Officer of Cisco’s Collaboration Technology Group from October 2013 to October 2018. Previously, Dr. Wee had a 15-year career at Hewlett Packard, where she was the founding Vice President and General Manager of the Experience Software Business and Lab Director at HP Labs.

 

  

Key Qualifications and Expertise

 

We believe Dr. Wee’s qualifications to serve on our Board of Directors include her extensive experience in information technology and application development, together with her established track record of driving software innovation at global technology companies.

 

   Other Public Company Boards    
  

 

Current

None

 

 

 

Past 5 Years

None

 

LOGO Our Board of Directors unanimously recommends that you vote FOR the election of each of the above nominees.

 

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CORPORATE GOVERNANCE

GENERAL

We have long believed that good corporate governance is important to ensure that Analog Devices is managed for the long-term benefit of our shareholders. We periodically review our corporate governance policies and practices and compare them to those suggested by various authorities in corporate governance and the practices of other public companies. As a result, we have adopted policies and procedures that we believe are in the best interests of Analog Devices and our shareholders. In particular, we have adopted the following policies and procedures:

 

 
Policy/Practice

 

 

Summary

 

Corporate Governance   Guidelines

 

Our Board of Directors has adopted Corporate Governance Guidelines for our Company that establishes a common set of expectations to assist the Board and its committees in performing their duties. The Board reviews these Guidelines at least annually, and updates them as necessary to reflect changing regulatory requirements and evolving practices.

 

Declassified Board of

Directors

 

We have a declassified Board of Directors and our bylaws provide that each director will serve for a term ending on the date of the annual meeting following the one at which such director was elected. All of our directors will stand for election for terms expiring at the next annual meeting of shareholders.

 

Majority Voting for

Election of Directors

 

Our bylaws provide for a majority voting standard in uncontested director elections, so a nominee is elected to the Board of Directors if the votes “for” that director exceed the votes “against” (with abstentions and broker non-votes not counted as for or against the election). If a nominee does not receive more “for” votes than “against” votes, the director must offer his or her resignation, which the Board of Directors must determine whether to accept and publicly disclose that determination.

 

Executive Sessions

 

At least twice per year, our Board of Directors holds executive sessions of non-employee directors, who are all independent as defined under The Nasdaq Stock Market, Inc. Marketplace Rules, or Nasdaq Rules. Our Presiding Director, James A. Champy, presides at these executive sessions. In addition, the committees of our Board of Directors also regularly hold executive sessions with their advisors without management present.

 

No Hedging Policy

 

We prohibit all hedging transactions or short sales involving Company securities by our directors and employees, including our executive officers.

 

No Pledging Policy

 

Since January 2013, we have prohibited our directors and executive officers from holding any Company securities in a margin account, and from any future pledging of their Company securities as collateral for a loan.

 

Equity Award Grant
Date Policy

 

We do not time or select the grant dates of any stock options or stock-based awards in coordination with our release of material non-public information, nor do we have any program, plan or practice to do so. In addition, the Compensation Committee has adopted specific written policies regarding the grant dates of stock option and stock-based awards made to our directors, executive officers and employees. See “— Director Compensation” and “INFORMATION ABOUT EXECUTIVE COMPENSATION — Compensation Discussion and Analysis — Equity Award Grant Date Policy” below for more information.

 

 

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Policy/Practice

 

 

Summary

 

Executive Stock

Ownership Guidelines

 

Under our guidelines, the target stock ownership levels are two times annual base salary for the Chief Executive Officer and one times annual base salary for other executive officers. The Chief Executive Officer has four years from the date of his appointment as CEO to achieve his targeted level. Executive officers other than the CEO have five years from the date he or she becomes an executive officer to achieve their targeted level. Shares subject to unexercised options, whether or not vested, and unvested performance-based RSUs whose performance has not yet been certified by the Compensation Committee will not be counted for purposes of satisfying these guidelines. RSUs and restricted stock (whether or not vested) and unvested performance-based RSUs whose performance has been certified by the Compensation Committee are counted for purposes of satisfying the guidelines. All of our executive officers were in compliance with our stock ownership guidelines as of the end of the fiscal year ended November 2, 2019, or fiscal 2019.

 

Adoption of Proxy

Access Right

 

Our Board of Directors approved a bylaw amendment implementing proxy access, which allows shareholders that meet standard eligibility requirements to submit director candidates for election in the Company’s proxy statement.

 

You can access our bylaws, the current charters for our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, our Corporate Governance Guidelines, our Code of Business Conduct and Ethics, our Related Person Transaction Policy and our Equity Award Grant Date Policy at investor.analog.com/corporate-governance.cfm or by writing to:

Investor Relations Department

Analog Devices, Inc.

One Technology Way

Norwood, Massachusetts 02062

Phone: 781-461-3282

Email: investor.relations@analog.com

ENGAGEMENT WITH OUR SHAREHOLDERS

Since our inception as a public company, we have maintained an active engagement program with our shareholders, meeting with them extensively throughout the year as part of our investor outreach efforts. In fiscal 2019, we held more than 430 meetings with our shareholders, including the majority of our top 25 shareholders, to discuss the Company’s performance and prospects, as well as trends affecting the semiconductor industry. We also continued our specific outreach effort with our institutional investors to discuss corporate governance issues affecting the Company. During fiscal 2019, we reached out to our top 25 shareholders, representing approximately 55% of our outstanding shares with an invitation to have discussions with their corporate governance teams. Of the shareholders who accepted our engagement invitation, topics covered in these meetings included:

 

   

Board composition and risk oversight

 

   

Board evaluations and refreshment

 

   

Corporate governance trends

 

   

Environmental, social and governance considerations, including diversity and inclusion and human capital management

 

   

Executive compensation practices and design

In the spirit of continuous improvement, we have reviewed with our Board of Directors the key takeaways from these meetings with the goal of continuing to evolve our corporate governance practices to

 

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best meet the needs of the Company and our shareholders. Our dialogue has led to enhancements to our practices and disclosure, which our Board believes is in the best interests of our company and our shareholders. For example we:

 

   

Enhanced our disclosure through publishing our first Diversity & Inclusion report, which can be found within our Sustainability Report on our website

 

   

Continued to refine our shareholder engagement process to connect our shareholders with key stakeholders within our company around topics of interest, including sustainability reporting and human capital management

 

   

Updated our corporate governance disclosure regarding our Board and its practices, including director qualifications and skills, the Board self-evaluation process and the Board’s oversight of risk

 

   

Expanded our CD&A disclosure relating to incentive performance targets

We intend to continue our shareholder outreach efforts on an on-going basis and look forward to continuing to engage with our valued shareholders.

SUSTAINABILITY

We believe that in order to deliver solid financial results for ADI, we must, among other things, create a rewarding workplace and be a trusted partner, leading corporate citizen, environmental steward and contributor to our communities. We have a long history of leadership in corporate responsibility, and pursue corporate social responsibility and sustainability along four axes—economic, environmental, social and governance and ethics.

Economic Sustainability. ADI works to ensure that our technological innovations continue to have impact and our employees, customers, partners and investors continue to share in the success of ADI. This is executed through our best-in-class financial model, global operations and smart supply chain management. Economic sustainability considers the economic conditions of all of our stakeholders: employees, their families and communities; the communities where we operate; and world we all live in.

Environmental Sustainability. At ADI, we are passionate about our responsibility to engineer a more sustainable future. For us, this means more than simply environmental sustainability—it extends to regenerating our environment. We continue to work on developing new solutions and applications which can help restore and replenish our natural resources and ecosystems, reduce our carbon footprint and minimize the impacts of our operations to the environment. We also seek to partner with our customers and suppliers to reduce the impact they have on our shared planet.

We establish environmental performance objectives using a five-year planning horizon, and make annual updates to our objectives, targets, and programs. For example, a key operational goal for ADI is to achieve a 50% greenhouse gas emission reduction target by 2025 over our 2015 baseline, a significant step up from our previous emission reduction goals. Progress is reviewed quarterly at the corporate level and monthly at the site level and senior management allocates resources appropriately to help keep programs on plan.

Social Sustainability. ADI is committed to a work environment where employees are treated with respect and fairness. We understand that our people are the driving force of our company and keep us at the leading edge. The mission of our diversity and inclusion program is to drive a culture that values and leverages the uniqueness of each employee so that they may develop and grow at ADI. In fiscal 2019, we published our first Diversity and Inclusion report, providing a look at the state of our organization and an overview of some of the initiatives we launched over the past year to drive continued improvement across diversity and inclusion at ADI. Our focus on being a great place to work and for providing industry-leading benefits and a work culture that has led to strong employee satisfaction and pride has been recognized across the globe, including most recently the awards listed below.

Additionally, ADI’s stakeholder ecosystem extends beyond the typical focus on investors, employees, and customers to the communities and world in which we operate. We strive to be a positive influence in our

 

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communities by living up to the highest ethical standards, pursuing socially minded business practices, providing rewarding career and employment opportunities and giving back to our communities in concert with our employees’ individual efforts.

Governance and Ethical Sustainability. Ethical behavior has been a core tenet of our Company’s values since our earliest days. Our employees, across all locations and job functions, have internalized the value of ethical behavior, routinely going beyond mere compliance with applicable laws and regulations. Our long history of leadership in the area of governance and ethics has resulted in a trusted reputation among our customers, investors and employees, as well as the communities where we operate. That is a trust that we have worked hard to earn and one we don’t take lightly.

Sustainability is infused into all aspects of how we do business, and we are proud that our sustainability commitment is routinely recognized around the globe, including most recently with the following awards:

 

 

LOGO

For more information about our corporate responsibility efforts, please refer to our Sustainability and Diversity and Inclusion Reports available on the Analog Devices web site.

DETERMINATION OF INDEPENDENCE

Under applicable Nasdaq Rules, a director of Analog Devices will only qualify as an “independent director” if, in the opinion of our Board of Directors, that person does not have a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Our Board of Directors has established guidelines (within our Corporate Governance Guidelines) to assist it in determining whether a director has a relationship with Analog Devices that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. These guidelines are posted on our website under investor.analog.com/corporate-governance.cfm. For relationships not covered by the guidelines, the determination of whether such a relationship exists is made by the members of our Board of Directors who are independent (as defined above). Our Board of Directors has determined that none of Messrs. Champy, Evans, Novich and Sicchitano, Ms. Golz and Drs. Chandrakasan, Frank, Little, Su and Wee has a relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is an “independent director” as defined under Rule 5605(a)(2) of the Nasdaq Rules. The Board of Directors has determined that Mr. Roche, our President and Chief Executive Officer, and Mr. Stata, our Chairman and founder, are not “independent” under the Nasdaq Rules because Mr. Roche is a current employee and Mr. Stata is our founder. The Board of Directors considered the Company’s annual laboratory membership and sponsorship of university research projects with MIT (of which Anantha P. Chandrakasan is the Dean of the School of Engineering and James A. Champy is a board member) and Karen Golz’s former affiliation with Ernst & Young and determined that those relationships would not interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

 

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DIRECTOR CANDIDATES

Shareholders of record of Analog Devices may recommend director candidates for inclusion by the Board of Directors in the slate of nominees that the Board of Directors recommends to our shareholders for election. The qualifications of recommended candidates will be reviewed by the Nominating and Corporate Governance Committee. If the Board of Directors determines to nominate a shareholder-recommended candidate and recommends his or her election as a director by the shareholders, the name will be included in Analog Devices’ proxy card for the shareholders’ meeting at which his or her election is recommended.

Shareholders may recommend individuals for the Nominating and Corporate Governance Committee to consider as potential director candidates by submitting their names and background and a statement as to whether the shareholder or group of shareholders making the recommendation has beneficially owned more than 5% of Analog Devices’ common stock for at least one year as of the date the recommendation is made, to the “Analog Devices Nominating and Corporate Governance Committee,” c/o Larry Weiss, Secretary, Analog Devices, Inc., One Technology Way, Norwood, Massachusetts 02062. The Nominating and Corporate Governance Committee will consider a recommendation only if appropriate biographical information and background material is provided on a timely basis.

The process followed by the Nominating and Corporate Governance Committee to identify and evaluate candidates includes requests to Board members and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the Nominating and Corporate Governance Committee and the Board of Directors. From time to time, the Nominating and Corporate Governance Committee may also seek input from director search firms for identification and evaluation of candidates. Assuming that appropriate biographical and background material is provided for candidates recommended by shareholders on a timely basis, the Nominating and Corporate Governance Committee will evaluate director candidates recommended by shareholders by following substantially the same process, and applying substantially the same criteria, as it follows for director candidates submitted by Board members.

Shareholders also have the right to directly nominate director candidates, without any action or recommendation on the part of the Nominating and Corporate Governance Committee or the Board of Directors, by following the procedures set forth in our bylaws and described in the response to the question “How and when may I submit a shareholder proposal, including a shareholder nomination for director, for the 2021 annual meeting of shareholders?” above.

In considering whether to recommend any candidate for inclusion in the Board of Directors’ slate of recommended director nominees, including candidates recommended by shareholders, the Nominating and Corporate Governance Committee will apply the criteria set forth in our Corporate Governance Guidelines. These criteria include the candidate’s integrity, business acumen, experience, commitment, and diligence; the presence of any conflicts of interest and the ability of the candidate to act in the interests of all shareholders. The Nominating and Corporate Governance Committee seeks nominees with a broad diversity of experience, professions, skills, geographic representation and backgrounds. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees. Analog Devices believes that the backgrounds and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge and abilities that will allow the Board of Directors to fulfill its responsibilities. While we do not have a policy regarding Board diversity, the Nominating and Corporate Governance Committee includes gender, racial and ethnic diversity as part of its search criteria, consistent with the requirement for relevant and diverse experience, skills and industry familiarity.

COMMUNICATIONS FROM SHAREHOLDERS AND OTHER INTERESTED PARTIES

The Board of Directors will give appropriate attention to written communications on issues that are submitted by shareholders and other interested parties, and will respond if and as appropriate. Absent unusual circumstances or as contemplated by committee charters, the Chairman of the Nominating and Corporate Governance Committee will, with the assistance of Analog Devices’ General Counsel, (1) be

 

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primarily responsible for monitoring communications from shareholders and other interested parties and (2) provide copies or summaries of such communications to the other directors as he considers appropriate.

Communications will be forwarded to all directors if they relate to substantive matters and include suggestions or comments that the Chairman of the Nominating and Corporate Governance Committee considers to be important for the directors to review. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to personal grievances, commercial solicitations and matters as to which Analog Devices tends to receive repetitive or duplicative communications.

Shareholders and other interested parties who wish to send communications on any topic to the Board of Directors (including the Presiding Director or the independent directors as a group) should address such communications to James A. Champy, Presiding Director, c/o Secretary, Analog Devices, Inc., One Technology Way, Norwood, Massachusetts 02062.

BOARD OF DIRECTORS LEADERSHIP STRUCTURE

Our Corporate Governance Guidelines provide that the roles of Chief Executive Officer and Chairman of the Board of Directors should be separate, unless otherwise determined by a majority of the Board of Directors, and we currently separate these roles. Our Chief Executive Officer is responsible for setting the strategic direction for the Company and the day-to-day leadership and performance of the Company, while our Chairman of the Board of Directors provides guidance to the Chief Executive Officer, sets the agenda for Board meetings and presides over meetings of the full Board of Directors. Because our Board of Directors has determined that Mr. Stata, our Chairman and founder, is not an independent director under the Nasdaq Rules, our Board of Directors has appointed James A. Champy as Presiding Director to preside at all executive sessions of directors without management present. The Board of Directors meets in executive session at each regular meeting.

BOARD OF DIRECTORS MEETINGS AND COMMITTEES

The Board of Directors has responsibility for reviewing our overall performance, rather than day-to-day operations. The Board of Directors’ primary responsibility is to oversee the management of the Company and, in so doing, serve the best interests of the Company and its shareholders. The Board of Directors provides for the succession of the Chief Executive Officer, nominates for election at annual shareholder meetings individuals to serve as directors of Analog Devices, and elects individuals to fill any vacancies on the Board of Directors. It reviews corporate objectives and strategies, and evaluates and approves significant policies and proposed major commitments of corporate resources. It participates in decisions that have a potential major economic impact on Analog Devices. Management keeps the directors informed of Company activity through regular written reports and presentations at Board and committee meetings.

The Board of Directors met nine times in fiscal 2019 (including by telephone conference). During fiscal 2019, each of our directors attended 75% or more of the total number of meetings of the Board of Directors and the committees on which he or she served. The Board of Directors has standing Audit, Compensation, and Nominating and Corporate Governance Committees. All members of all three committees are independent, non-employee directors. Each committee has a charter that has been approved by the Board of Directors and is reviewed annually. In addition, each Committee conducts an annual self-evaluation of its own performance and the performance of its members in accordance with its respective Committee charter. Each director also undertakes an evaluation of the Board more generally. Our Lead Director, who is also currently the Chair of our Nominating and Corporate Governance Committee, working with outside counsel, also has conversations with each Board member designed to assess the competencies and skills each director brings to the Board. Summaries of the evaluations are presented to the Board. Mr. Roche is the only current director who is, or has been in the past three years, an employee of Analog Devices. Messrs. Roche and Stata do not serve on any standing Board committee and do not participate in the portion of any Board or committee meeting during which their compensation is evaluated. The independent directors met in executive session without Messrs. Stata or Roche at each in-person Board meeting in fiscal 2019.

 

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Our Corporate Governance Guidelines set forth our policy that directors are expected to attend annual meetings of shareholders. All of our then-serving directors attended the 2019 Annual Meeting of Shareholders.

Audit Committee

The current members of our Audit Committee are Messrs. Sicchitano (Chair), Evans and Novich and Ms. Golz. Dr. Little also served on the Audit Committee during fiscal 2019. The Board of Directors has determined that each of Messrs. Sicchitano, Evans and Novich and Ms. Golz qualifies as an “audit committee financial expert” under the rules of the SEC and is independent as defined under the Nasdaq Rules and the independence requirements under Rule 10A-3(b)(1) of the Exchange Act. In addition, our Board of Directors has determined that each member of the Audit Committee is able to read and understand financial statements, including the Company’s consolidated balance sheet and its consolidated statements of income, comprehensive income, shareholders’ equity and cash flows and related notes as required under the Nasdaq Rules. The Board of Directors has certified that it has at least one member of the Audit Committee who has past employment experience in finance or accounting as required by the Nasdaq Rules. None of Messrs. Sicchitano, Evans and Novich or Ms. Golz serves on the audit committees of more than two other public companies.

The primary purpose of the Audit Committee is to assist the Board of Directors’ oversight of (i) the integrity of our financial statements and the Company’s systems of internal control over financial reporting and disclosure controls and procedures, (ii) the qualifications and independence of our independent registered public accounting firm, and (iii) the performance of our internal audit function and independent registered public accounting firm. The Audit Committee has the authority to engage any independent legal, accounting and other advisors that it deems necessary or appropriate to carry out its responsibilities. These independent advisors may be the regular advisors to the Company. The Audit Committee is empowered, without further action by the Board of Directors, to cause the Company to pay the compensation of those advisors as established by the Audit Committee. The Audit Committee selected and appointed Ernst & Young LLP, our independent registered public accounting firm, and did not retain any other advisors during fiscal 2019. The Audit Committee met ten times during fiscal 2019 (including by telephone conference). The responsibilities of our Audit Committee and its activities during fiscal 2019 are described in the Report of the Audit Committee below.

Compensation Committee

The current members of our Compensation Committee are Drs. Frank (Chair), Little, Su and Wee. Mr. Novich also served on the Compensation Committee during fiscal 2019.    The Board of Directors has determined that each of Drs. Frank, Little, Su and Wee is independent as defined under the Nasdaq Rules and the independence requirements under Rule 10C-1 of the Exchange Act. The Compensation Committee evaluates and sets the compensation of our Chief Executive Officer and our other executive officers, and makes recommendations to our Board of Directors regarding the compensation of our directors. The Compensation Committee oversees the evaluation of senior management. In connection with its oversight and administration of ADI’s cash and equity incentive plans, the Compensation Committee authorizes the granting of stock options, RSUs and other stock incentives (within guidelines established by our Board of Directors and in accordance with our Stock Option and Stock-Based Award Grant Date Policies) to our officers. In accordance with the terms of our Amended and Restated 2006 Stock Incentive Plan, which we refer to as the 2006 Stock Incentive Plan, the Amended and Restated 2005 Equity Incentive Plan, which we refer to as the 2005 Plan, and the Amended and Restated 2010 Equity Incentive Plan, which we refer to as the 2010 Plan (the latter two of which were assumed by us in the Linear Technology acquisition), the Compensation Committee has delegated to our Chief Executive Officer the power to grant and modify options, RSUs and other stock awards to employees who are not executive officers, other senior vice presidents who report to the Chief Executive Officer or directors, subject to specified thresholds, parameters and applicable law. Our Compensation Committee held ten meetings (including by telephone conference) during fiscal 2019.

Compensation Committee Consultants. The Compensation Committee has the authority, in its sole discretion, to retain or obtain the advice of any independent legal, accounting or other advisors it deems

 

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necessary or appropriate to carry out its responsibilities. The Compensation Committee is empowered, without further action by the Board of Directors, to cause the Company to pay the compensation of these advisors as established by the Compensation Committee. The Compensation Committee retained Pearl Meyer and Partners, or Pearl Meyer, an independent compensation consultant, during fiscal 2019. Pearl Meyer reports directly to the Compensation Committee and assists the Compensation Committee in evaluating and designing our executive and director compensation program and policies. For fiscal 2019, the Compensation Committee instructed Pearl Meyer to assist in the following matters:

 

   

defining a peer group of companies;

 

   

reviewing and validating the appropriateness of executive incentive plan goals;

 

   

assisting the Compensation Committee in defining a comparator group of companies for the 2019 relative total shareholder return performance-based RSUs;

 

   

providing market data and advice regarding executive and director compensation plan design, design of the executive performance incentive plan and equity incentive mix and design;

 

   

conducting a detailed analysis of the competitiveness and appropriateness of the Company’s total executive compensation opportunity and total director compensation opportunity in comparison to our defined peer group; and

 

   

conducting a risk assessment of our executive compensation program.

In connection with its work for the Compensation Committee, Pearl Meyer is invited to attend the Compensation Committee’s meetings and, upon request of the Compensation Committee, attends executive sessions of the Compensation Committee. Pearl Meyer is retained only by the Compensation Committee and does not provide any other consulting services to Analog Devices. The Compensation Committee also solicits advice from time to time from our outside counsel, WilmerHale. The Compensation Committee assesses the independence of its advisors on an annual basis. The Compensation Committee requested and received an independence letter from each of Pearl Meyer and WilmerHale providing information to assist the Compensation Committee in selecting and receiving advice from such advisor after considering the independence factors that are identified in the Nasdaq rules. The Compensation Committee determined that the engagement of these advisors did not raise any conflicts of interest for all work performed for the Compensation Committee during fiscal 2019. The activities of our Compensation Committee and the services Pearl Meyer performed for the Compensation Committee during fiscal 2019 are further described in “INFORMATION ABOUT EXECUTIVE COMPENSATION—Compensation Discussion and Analysis” below.

Nominating and Corporate Governance Committee

The current members of our Nominating and Corporate Governance Committee are Mr. Champy (Chair) and Dr. Chandrakasan. The Board of Directors has determined that each of Mr. Champy and Dr. Chandrakasan is independent as defined under the Nasdaq Rules. The primary responsibility of the Nominating and Corporate Governance Committee is to identify individuals qualified to become Board members consistent with criteria approved by the Board of Directors, recommend to the Board of Directors the persons to be nominated by the Board of Directors for election as directors at any meeting of shareholders and the persons to be elected by the Board to fill any vacancies on the Board, recommend to the Board of Directors the directors to be appointed to each committee of the Board of Directors, develop and recommend to the Board of Directors a set of corporate governance principles and oversee the evaluation of the Board of Directors. The Nominating and Corporate Governance Committee also leads the Board of Directors’ succession planning efforts with respect to senior executives and oversight of our Code of Business Conduct and Ethics. The Nominating and Corporate Governance Committee has the authority to engage any independent legal and other advisors it deems necessary or appropriate to carry out its responsibilities. These independent advisors may be the regular advisors to the Company. The Nominating and Corporate Governance Committee is empowered, without further action by the Board of Directors, to cause the Company to pay the compensation of these advisors as established by the Nominating and Corporate Governance Committee. For information relating to nominations of directors by our shareholders, see “— Director Candidates” above. Our Nominating and Corporate Governance Committee held five meetings during fiscal 2019 (including by telephone conference).

 

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THE BOARD OF DIRECTORS’ ROLE IN RISK OVERSIGHT

The following table summarizes management’s and the Board of Directors’ role in risk management and oversight:

 

    Management

  

Our management team is responsible for day-to-day risk management activities. Members of management report to the Board of Directors (or the appropriate committee in the case of risks that are under the purview of a particular committee) regarding risk identification, risk management and risk mitigation strategies.

 

    Board of Directors

  

The Board of Directors’ role in the Company’s risk oversight process includes receiving regular reports from members of senior management on areas of material risk to the Company, including operational, financial, legal and regulatory, culture and human capital management and strategic and reputational risks. The Board receives regular updates from our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, which provide our Board with thorough insight about how ADI manages risk.

 

    Audit Committee

  

The Audit Committee discusses ADI’s policies with respect to risk assessment and risk management as they apply to ADI’s financial statement integrity and reporting and internal controls. The Audit Committee also receives regular reports from our Director of Internal Audit on internal audit matters and receives reports at least annually from our Chief Information Officer on information security, technology and data privacy and protection. The Chief Information Officer also provides an annual report to the full Board of Directors regarding cybersecurity risk.

 

    Compensation

    Committee

  

The Compensation Committee considers whether ADI’s executive compensation program and non-executive director compensation practices encourage excessive or inappropriate risk taking.

 

    Nominating and

    Corporate

    Governance

    Committee

  

The Nominating and Corporate Governance Committee leads the Board with respect to the adequacy of the Company’s governance structure and process and of succession planning for the Company’s Board of Directors, Chief Executive Officer and other executive officers.

 

REPORT OF THE AUDIT COMMITTEE

The Audit Committee of the Board of Directors assisted the Board of Directors’ oversight of (i) the integrity of our financial statements and the Company’s systems of internal control over financial reporting and disclosure controls and procedures, (ii) the qualifications and independence of our independent registered public accounting firm, and (iii) the performance of our internal audit function and independent registered public accounting firm. The Audit Committee also met privately with our independent registered public accounting firm and our Director of Internal Audit to discuss our financial statements and disclosures, accounting policies and their application, internal control over financial reporting, and other matters of importance to the Audit Committee, the independent registered public accounting firm and the internal auditors. Management has the primary responsibility for the financial statements and the reporting process, including the system of internal control over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements contained in our Annual Report on Form 10-K and the quarterly financial statements during fiscal 2019, including the specific disclosures in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These discussions also addressed the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Audit Committee reported on these meetings to our Board of Directors. The Audit Committee also selected and appointed our independent registered public accounting firm, reviewed the performance of the independent registered public accounting firm during the annual audit and on

 

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assignments unrelated to the audit, assessed the independence of the independent registered public accounting firm and reviewed and approved the independent registered public accounting firm’s fees. The Audit Committee also has adopted policies and procedures for the pre-approval of audit and non-audit services for the purpose of maintaining the independence of our independent registered public accounting firm. The Audit Committee operates under a written charter adopted by our Board of Directors.

The Audit Committee reviewed with our independent registered public accounting firm, who are responsible for expressing an opinion on the conformity of the audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards. In addition, the Audit Committee has discussed with the independent registered public accounting firm (i) the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC and (ii) the independent registered public accounting firm’s independence from Analog Devices and its management, including the matters in the written disclosures and the letter we received from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence. The Audit Committee considered the appropriateness of the provision of non-audit services by the independent registered public accounting firm relative to their independence.

Based on its review and discussions referred to above, the Audit Committee recommended to our Board of Directors (and the Board of Directors approved) that our audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended November 2, 2019. The Audit Committee also selected Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending October 31, 2020.

Audit Committee

Kenton J. Sicchitano, Chairman

Bruce R. Evans

Karen M. Golz

Neil Novich

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES AND OTHER MATTERS

The following table presents the aggregate fees billed for services rendered by Ernst & Young LLP, our independent registered public accounting firm, for fiscal 2019 and the fiscal year ended November 3, 2018, or fiscal 2018.

 

     Fiscal 2019      Fiscal 2018  

Audit Fees

   $ 4,772,000      $ 5,132,000  

Audit-Related Fees

     116,000        95,000  

Tax Fees

     1,263,000        5,465,000  
  

 

 

    

 

 

 

Total Fees

   $ 6,151,000      $ 10,692,000  
  

 

 

    

 

 

 

Audit Fees. These are fees related to professional services rendered in connection with the audit of our consolidated financial statements, the audit of the effectiveness of our internal control over financial reporting, the reviews of our interim financial statements included in each of our Quarterly Reports on Form 10-Q, international statutory audits, assistance with registration statements and other periodic filings, and accounting consultations that relate to the audited financial statements and are necessary to comply with U.S. generally accepted accounting principles.

Audit-Related Fees. These are fees for assurance and related services and consisted primarily of audits of employee benefit plans, accounting matters not related to the annual audit, and attestation services that are not required by statute or regulation.

 

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Tax Fees. These are fees for tax advice and services, including services relating to the acquisition of Linear Technology, professional services related to tax return preparation services for our expatriates, international tax returns, tax advice and planning and assistance with international tax audits. Included in this amount are fees of $439,000 in fiscal 2019, and $376,000 in fiscal 2018, for tax compliance services for our international affiliates and tax return preparation services for our expatriate employees on international assignments. Ernst & Young LLP does not provide tax services to any person in a financial reporting oversight role at Analog Devices.

Audit Committee’s Pre-Approval Policy and Procedures

The Audit Committee of our Board of Directors has adopted policies and procedures for the pre-approval of audit and non-audit services for the purpose of maintaining the independence of our independent registered public accounting firm. We may not engage our independent registered public accounting firm to render any audit or non-audit service unless either the service is approved in advance by the Audit Committee or the engagement to render the service is entered into pursuant to the Audit Committee’s pre-approval policies and procedures. On an annual basis, the Audit Committee may pre-approve services that are expected to be provided to Analog Devices by the independent registered public accounting firm during the following 12 months. At the time the pre-approval is granted, the Audit Committee must (1) identify the particular pre-approved services in a sufficient level of detail so that management will not be called upon to make a judgment as to whether a proposed service fits within the pre-approved services and (2) establish a monetary limit with respect to each particular pre-approved service, which limit may not be exceeded without obtaining further pre-approval under the policy. At regularly scheduled meetings of the Audit Committee, management or the independent registered public accounting firm must report to the Audit Committee regarding each service actually provided to Analog Devices.

If the cost of any service exceeds the pre-approved monetary limit, that service must be approved (1) by the entire Audit Committee if the cost of the service exceeds $100,000 or (2) by the Chairman of the Audit Committee if the cost of the service is less than $100,000 but greater than $10,000. If the cost of any service exceeds the pre-approved monetary limit, individual items with a cost of less than $10,000 each do not require further pre-approval, provided that the total cost of all individual items does not exceed $40,000 and an update of all items in this category is provided to the Audit Committee at each quarterly scheduled meeting. However, if the cost of all the individual items will exceed $40,000, the Chairman of the Audit Committee must receive a summary of those items with a request for approval of any amounts to be incurred in excess of $40,000.

The Audit Committee has delegated authority to the Chairman of the Audit Committee to pre-approve any audit or non-audit services to be provided to Analog Devices by the independent registered public accounting firm for which the cost is less than $100,000. During fiscal 2019 and fiscal 2018, all services provided to Analog Devices by Ernst & Young LLP were pre-approved in accordance with the pre-approval policies and procedures described above.

DIRECTOR COMPENSATION

Our non-employee director compensation program is designed to attract and retain experienced and knowledgeable directors and to provide equity-based compensation to align the interests of our directors with those of our shareholders. Each non-employee director receives an annual cash retainer and an annual equity award in the form of RSUs. To reflect their additional responsibilities, the Chairs and members of all committees receive an additional cash retainer. The Presiding Director also receives an additional cash retainer. Mr. Roche, as an employee director, does not receive any additional compensation for his services as director.

The Board of Directors has delegated to the Compensation Committee the responsibility to review and recommend to the Board of Directors any proposed changes to non-employee director compensation. Annually, the Compensation Committee reviews with Pearl Meyer, the Compensation Committee’s independent compensation consultant, non-employee director compensation information for our peer group to check the alignment of our non-employee director compensation package with market practice and

 

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current trends. The Compensation Committee then makes recommendations to the full Board with respect to compensation of our non-employee directors, and the full Board reviews these recommendations and makes a final determination.

In fiscal 2019 we granted 100% of the value of the annual equity award to each of our non-employee directors in the form of time-based RSUs. These RSUs vest in full on the earlier of the first anniversary of the date of grant or the date of the Company’s next annual meeting. On March 13, 2019, we granted each non-employee director 2,035 RSUs for services to be provided during fiscal 2019. In addition, on February 15, 2019, Dr. Chandrakasan, who joined the Board in January 2019, was granted 450 RSUs for services to be provided during fiscal 2019.

The following table details the total compensation earned by our non-employee directors in fiscal 2019.

2019 DIRECTOR COMPENSATION

 

Name

  

Fees Earned or

Paid in Cash

($)(1)

  

Stock Awards

($)(2)(3)

  

All Other

Compensation

($)(4)

  

Total

($)

James A. Champy

       120,000        215,608        —          335,608

Anantha P. Chandrakasan(5)

       72,802        262,341        —          335,143

Bruce R. Evans

       91,250        215,608        —          306,858

Edward H. Frank

       95,625        215,608        —          311,233

Karen M. Golz

       91,250        215,608        —          306,858

Mark M. Little

       88,750        215,608        —          304,358

Neil Novich

       94,272        215,608        —          309,880

Kenton J. Sicchitano

       106,250        215,608        —          321,858

Ray Stata

       250,000        215,608        14,924        480,532

Lisa T. Su

       86,875        215,608        —          302,483

Susie Wee(6)

       —          —          —          —  

 

(1)

This amount includes a $80,000 annual board retainer. An additional annual retainer of $30,000 was paid to the chair of the Audit Committee, an additional annual retainer of $20,000 was paid to the chair of the Compensation Committee and an additional annual retainer of $20,000 was paid to the chair of the Nominating and Corporate Governance Committee. The Presiding Director also received an additional annual retainer of $25,000. The members of the Audit Committee (other than the chair) received an additional annual retainer of $15,000, the members of the Compensation Committee (other than the chair) received an additional annual retainer of $10,000, and the members of the Nominating and Corporate Governance Committee (other than the chair) received an additional annual retainer of $10,000. For fiscal 2019, Mr. Stata, as Chairman of the Board of Directors, received a total annual retainer of $250,000. All cash retainers are paid in quarterly installments each on the 15th day of December, March, June and September of each fiscal year and are pro-rated for a partial year of service. Each director can elect to defer receipt of his or her fees under our Deferred Compensation Plan, or DCP. For more information relating to our DCP, see “INFORMATION ABOUT EXECUTIVE COMPENSATION — Non-Qualified Deferred Compensation Plan” below. Dr. Frank elected to defer receipt of his fees under the DCP in fiscal 2019.

 

(2)

These amounts represent the aggregate grant date fair value of awards for grants of RSUs to each listed director in fiscal 2019. These amounts do not represent the actual amounts paid to or realized by the directors during fiscal 2019. We recognize the fair value as of the grant date for RSUs over the number of days of service required for the award to become vested.

 

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(3)

The aggregate number of stock options and RSUs outstanding held by each non-employee director (representing unexercised stock options and unvested RSUs) at November 2, 2019 is as follows:

 

Name

   Number of Shares
Subject to Option
Awards Held as of
November 2, 2019
   Number of RSUs that have not
Vested as of November 2,
2019

James A. Champy

       37,620        2,035

Anantha P. Chandrakasan

       —          2,035

Bruce R. Evans

       —          2,035

Edward H. Frank

       8,460        2,035

Karen M. Golz

       —          2,035

Mark M. Little

       1,040        2,035

Neil Novich

       25,760        2,035

Kenton J. Sicchitano

       37,620        2,035

Ray Stata

       37,620        2,035

Lisa T. Su

       25,760        2,035

Susie Wee

       —          —  

The following table includes the assumptions, rounded to the nearest hundredth, which we used to calculate the grant date fair value amounts included in the “Stock Awards” column for fiscal 2019 Director Compensation.

 

Grant Date

        Assumptions     
  

Risk-Free

Interest

Rate

(%)

  

Dividend

Yield

(%)

  

Grant Date

Fair Value

Per Share

($)

2/15/2019

       RSUs        2.55        1.82        103.85

3/13/2019

       RSUs        2.53        2.00        105.95

The grant date fair value of RSUs represents the value of our common stock on the date of grant, reduced by the present value of dividends expected to be paid on our common stock prior to vesting. For a more detailed description of the assumptions used for purposes of determining grant date fair value, see Note 3 to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Stock-Based Compensation,” included in our Annual Report on Form 10-K for the year ended November 2, 2019.

 

(4)

The amount represents payment of medical and dental insurance premiums on behalf of Mr. Stata and his spouse.

 

(5)

Dr. Chandrakasan joined the Board on January 1, 2019, and in accordance with our Equity Award Grant Date Policy, was granted a pro rata RSU award for his service from January 1, 2019 through our 2019 Annual Shareholder Meeting.

 

(6)

Dr. Wee joined the Board on November 29, 2019, and therefore did not receive any compensation in fiscal 2019.

We also reimburse our directors for travel to Board meetings and other related expenses.

Stock Ownership Guidelines for Non-Employee Directors

Under our stock ownership guidelines, the target share ownership level for non-employee directors is at least four times the directors’ annual cash retainer. Directors have four years to achieve their targeted level. Shares subject to unexercised options, whether or not vested, and any shares that have been pledged as collateral for a loan will not be counted for purposes of satisfying these guidelines. Unvested RSUs are

 

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counted for purposes of satisfying the guidelines. All of our non-employee directors were in compliance with our stock ownership guidelines as of the end of fiscal 2019.

Equity Award Policy for Non-Employee Directors

During fiscal 2019, our equity award grant policy for non-employee directors provided for the following:

 

   

Each newly elected non-employee director elected other than at an annual meeting of shareholders is automatically granted under the 2006 Stock Incentive Plan an RSU award for a number of shares of our common stock approved by the Board of Directors, on the 15th day of the month following the month of the date of initial election as a director, or if Nasdaq is closed on that day, the next succeeding business day that Nasdaq is open.

 

   

On an annual basis, each non-employee director elected or re-elected at an annual meeting of shareholders is automatically granted under the 2006 Stock Incentive Plan an RSU award for a number of shares of our common stock approved by the Board of Directors, on the date of our annual meeting of shareholders, or if Nasdaq is closed on that day, the next succeeding business day that Nasdaq is open.

For fiscal 2019, RSUs granted to our non-employee directors under the 2006 Stock Incentive Plan vest on the earlier of the date of the Annual Meeting and the first anniversary of the date of grant, subject to acceleration as described below. The RSU awards vest in full upon the occurrence of a Change in Control Event (as defined in the 2006 Stock Incentive Plan) or the director’s death. If the director ceases to serve as a director by reason of his or her disability, as determined by the Board of Directors, each outstanding and unvested RSU will vest in full at the time he or she ceases to be a director. In addition, upon the occurrence of a Change in Control Event or in the event of the director’s death, disability or retirement after age 60, each vested option will continue to be exercisable for the balance of its term.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Related Persons

During fiscal 2019, Mr. Stata, our founder and Chairman of the Board, received a cash retainer for service on the Board of $250,000. Following his retirement as an employee in 2012, the Company agreed to provide medical and dental benefits to Mr. Stata and his spouse during their lifetimes on the same basis as provided to U.S. employees of the Company. The value of those medical and dental benefits in 2019 was $14,924. On March 13, 2019, we granted 2,035 RSUs to Mr. Stata. This award is identical to the award granted to our other non-employee directors on March 13, 2019 and vests on the earlier of the date of the Annual Meeting or the first anniversary of the grant date.

The Company contributes annually to Massachusetts Institute of Technology (MIT) to fund university research projects. In fiscal 2019, the Company made approximately $3.0 million in total contributions to MIT of which $120,000 funded a graduate student working in Dr. Chandrakasan’s laboratory.

Policies and Procedures for Related Person Transactions

Our Board of Directors has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which Analog Devices is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% shareholders (or their immediate family members), each of whom we refer to as a “related person” has a direct or indirect material interest.

If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our General Counsel. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by the Nominating and Corporate Governance Committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If our

 

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General Counsel determines that advance review and approval is not practicable, the Nominating and Corporate Governance Committee will review, and, in its discretion, may ratify the related person transaction at the next meeting of the Nominating and Corporate Governance Committee. The policy also permits the Chairman of the Nominating and Corporate Governance Committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the Nominating and Corporate Governance Committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.

A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the Nominating and Corporate Governance Committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the Nominating and Corporate Governance Committee will review and consider:

 

   

the related person’s interest in the related person transaction;

 

   

the approximate dollar value of the amount involved in the related person transaction;

 

   

the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;

 

   

whether the transaction was undertaken in the ordinary course of our business;

 

   

whether the terms of the transaction are no less favorable to us than the terms that could have been reached with an unrelated third party;

 

   

the purpose of, and the potential benefits to us of, the transaction; and

 

   

any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.

The Nominating and Corporate Governance Committee may approve or ratify the transaction only if the Nominating and Corporate Governance Committee determines that, under all of the circumstances, the transaction is in Analog Devices’ best interests. The Nominating and Corporate Governance Committee may, in its sole discretion, impose any conditions on us or the related person in connection with approval of the related person transaction.

In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, the Board of Directors has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:

 

   

interests arising solely from the related person’s position as an executive officer of another entity (whether or not the person is also a director of that entity), that is a participant in a transaction, where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in the entity, (b) the related person and his or her immediate family members are not involved in the negotiation of the terms of the transaction and do not receive any special benefits as a result of the transaction, and (c) the amount involved in the transaction equals less than the greater of $200,000 or 5% of the annual gross revenues of the company receiving payment under the transaction; or

 

   

the transactions that are specifically contemplated by provisions of Analog Devices’ charter or bylaws.

The policy provides that the transactions involving compensation of executive officers shall be reviewed and approved by the Compensation Committee in the manner specified in its charter.

 

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 PROPOSAL 2

 

 

ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

We are requesting shareholder approval of the compensation of the executive officers named in our Summary Compensation Table below, who we refer to as our “named executive officers” or “NEOs.” We are required to provide our shareholders with the opportunity to vote to approve, on an advisory (non-binding) basis, the compensation of our NEOs as disclosed in this proxy statement in accordance with the SEC’s rules. At the 2017 annual meeting of shareholders, our shareholders voted in favor of holding future “say on pay” votes every year. In accordance with the results of that vote, our Board of Directors determined to submit “say on pay” proposals to our shareholders every year.

Our Board of Directors is asking shareholders to approve the following non-binding advisory resolution:

RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and accompanying narrative disclosures in this proxy statement, is hereby approved.

As required by the Dodd-Frank Act, this is an advisory vote, which means that this proposal is not binding on us. Our Compensation Committee, however, values the opinions expressed by our shareholders and will carefully consider the outcome of the vote when making future compensation decisions for our NEOs. You may vote for, against or abstain from voting on this matter. At our 2019 annual meeting of shareholders, our compensation program for our NEOs received the support of 95.3% of the total votes cast. In light of the support received, our Compensation Committee did not make significant changes to our executive compensation program. The Compensation Committee did introduce another form of performance-based equity to increase the total target mix of performance-based restricted stock units to approximately 50% of the target value of equity awarded to our NEOs.

As described in detail in the “Compensation Discussion and Analysis” section of this proxy statement, ADI’s executive compensation program is significantly performance-based and designed to attract, retain and motivate strong executives to lead our complex, global organization and to align their interests with those of our shareholders. We seek to provide total compensation to our executives that is competitive with our peers, and we believe that our executive compensation program is designed to encourage the most talented individuals to grow their careers at ADI.

ADI has a longstanding philosophy and practice of paying executives for performance. In order to align our pay practices with shareholder interests, we tie a significant percentage of each executive’s compensation to the Company’s performance, in the form of variable cash incentive bonus payments, and equity awards that are subject to performance vesting and rise in value only if our stock price increases. ADI delivered solid financial results in fiscal 2019 against a backdrop of challenging macroeconomic conditions. We exceeded our profitability target but did not meet our revenue growth target under our executive performance incentive bonus plan, which resulted in aggregate payments under the plan made at 95% of target, compared to 183% in fiscal 2018 and 248% in the fiscal year ended October 28, 2017, or fiscal 2017.

We believe that our executive compensation program is working as intended and appropriately aligns executive pay with Company performance.

 

LOGO Our Board of Directors unanimously recommends that you vote FOR approval of the compensation of our named executive officers as disclosed in this proxy statement.

 

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INFORMATION ABOUT EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

We intend to provide compensation for our executives that is competitive with our peers, with an opportunity for increased compensation if the Company’s performance warrants. We have designed our compensation program to make a substantial percentage of our executive pay variable, subject to increase when corporate targets are overachieved and reduction when corporate targets are not reached. The elements of our executives’ total compensation are base salary, variable cash incentive awards, long-term equity compensation awards and retirement and other employee benefits.

This Compensation Discussion and Analysis, or CD&A, and the tables and narrative that follow provide important information about our executive officer compensation program for fiscal 2019. In this proxy statement, the terms “named executive officers” or “NEOs” refer to the following individuals who served as executive officers during fiscal 2019:

 

Named Executive Officer

 

Position

Vincent Roche

 

President and Chief Executive Officer

Prashanth Mahendra-Rajah

 

Senior Vice President, Finance and Chief Financial Officer

Martin Cotter

 

Senior Vice President, Worldwide Sales and Digital Marketing

John Hassett

 

Senior Vice President, Industrial and Consumer

Steve Pietkiewicz

 

Senior Vice President, Power Products

Compensation Processes and Philosophy

Our executive compensation program is designed to attract and retain top executive talent and align the interests of our executives and our shareholders. We accomplish this through the following steps:

 

 

LOGO

Our Chief Executive Officer’s compensation is described in more detail below under “—Chief Executive Officer Compensation.” Our other NEOs’ compensation is described in more detail below under “—Compensation for Other Named Executive Officers.”

 

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Pay and Governance Practices

Our pay and governance practices are designed to align our executives’ interests with our shareholders. For example:

 

WHAT WE DO        WHAT WE DO NOT DO

  Our cash incentive bonus awards for our executives are based solely on our financial performance     Ò   We do not guarantee salary increases or non-performance-based bonuses

 

   

 

  We have a specific policy regarding the grant dates of stock options, RSUs and other stock-based awards for our directors, executive officers and employees     Ò  

We do not modify our performance targets during the performance period, even in challenging years

 

 

   

 

  We have stock ownership guidelines for all officers and directors     Ò   We do not provide new tax gross-ups for executive officers

 

   

 

  We prohibit hedging transactions and “short sales” involving ADI securities     Ò   With the exception of restricted stock awards assumed in connection with the Linear Technology acquisition, we do not pay dividends on unvested equity awards

 

   

 

  We prohibit holding ADI securities in margin accounts     Ò   We do not provide extensive perquisites to our executives

 

   

  We prohibit pledging ADI securities as collateral for a loan      

 

   

  Annual “say on pay” vote            

Pay for Performance

A significant portion of the total target compensation for our executives is in the form of variable, performance-based incentive compensation, with only a small portion of the total target compensation provided in the form of “fixed” compensation. We believe this provides our executives an opportunity to earn above peer average compensation if ADI delivers strong results, and conversely, if the Company delivers weaker results, our executives would earn less compensation. The target pay mix for our NEOs for fiscal 2019 is shown below:

 

 

LOGO

The pay mix charts above are based on target compensation consisting of the annual rate of base salary and short-term and long-term incentive targets approved by the Compensation Committee. The pay mix for the “other NEOs” in the chart above excludes the equity award granted to Mr. Pietkiewicz in June

 

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2019 as the final portion of the alignment of the compensation programs of our legacy ADI and Linear Technology employees. Taking that equity award into account, the percentage of performance-based incentives would increase for Mr. Pietkiewicz. For more information about the components of the performance and incentive pay mix for our Named Executive Officer Compensation, see “Compensation Discussion and Analysis—Components of Executive Compensation.”

Variable Cash Incentive Bonus Payments. For fiscal 2019, we linked a significant portion of our executives’ cash compensation to ADI’s performance, measured by our operating profit before taxes as a percentage of revenue, or OPBT margin and year-over-year revenue growth on a quarterly basis, through our executive performance incentive plan. For fiscal 2019, the Compensation Committee set target percentages of 150% of base salary for our Chief Executive Officer and between 90%-100% of base salary for our remaining NEOs. The Compensation Committee selected these target bonus percentages to ensure that a substantial portion of each executive’s cash compensation is directly linked to our business performance.

In setting performance targets for our executive performance incentive plan, multiple factors are considered including our actual past business results, estimates of multi-year performance from our long-term strategic planning, and the performance of market competitors. Based on our evaluation of these factors, we develop a range of performance scenarios and then set goals at threshold, target and maximum performance levels. Based on analyses of our peer group performance over the past three years, as presented by our Compensation Committee’s independent consultant, Pearl Meyer, our OPBT margin target of 39% was well above our peer group median performance, while our year-over-year revenue growth target of 5% was well aligned with our peer group median performance. Our fiscal 2019 OPBT margin and year-over-year revenue growth targets were the same as compared to the third and fourth quarters of fiscal 2018 and align with our long-term financial model, which we announced at our Investor Day in June 2017.

Equity Awards. We also link pay and performance by providing a significant amount of our executives’ compensation in the form of equity awards, the value of which is directly tied to our stock price performance over the long term. In fiscal 2019, approximately 72% of the average total target compensation of our NEOs was in the form of equity. In fiscal 2019, the form and mix of equity awards delivered as part of our annual equity award program for our NEOs was as follows:

 

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Benchmarking

In making its compensation determinations, including base salary, cash incentive bonus award targets and long-term equity compensation, the Compensation Committee annually reviews the total compensation that each of our executives is eligible to receive against the compensation levels of comparable positions of a peer group of companies. The composition of the peer group is also reviewed annually by the Compensation Committee. In fiscal 2018, the Compensation Committee engaged Pearl Meyer to conduct a review of the composition of the Company’s peer group for fiscal 2019. The Compensation Committee has sought to select peer companies that are publicly traded, are headquartered in the United States, compete with us for talent, and are similar to ADI in their product and services offerings, business model, revenue size and market capitalization. As a result of rapid consolidation in the semiconductor industry over the last several years, in addition to companies that meet the criteria outlined above, the peer group for 2019 included companies outside of the semiconductor industry. These additional companies are similar in size and have similar gross margins and research and development spend as the Company, include peers of peers and peers of other companies in our sector, and often compete with the Company for talent.

The peer group used by the Compensation Committee in fiscal 2019 to evaluate executive compensation consisted of the following companies:

 

 

 

2019 Peer Group

 

   

Advanced Micro Devices, Inc.

   Maxim Integrated Products, Inc.

Agilent Technologies, Inc.

   Microchip Technology Inc.

Applied Materials, Inc.

   NetApp, Inc.

Boston Scientific Corporation

   NVIDIA Corporation

Broadcom Limited

   Skyworks Solutions Inc.

KLA-Tencor Corporation

   Texas Instruments Incorporated

Lam Research Corporation

   Xilinx Inc.

Marvell Technology Group Ltd.

  

 

     

 

    2018 Market Capitalization

(as of June 2018)            

 

  

 

2018 Revenues

 

     

Analog Devices

       $35.5 billion    $6.2 billion
     

2019 Peer Group Median

       $20.7 billion    $6.5 billion

For officers in positions for which the fiscal 2019 peer group companies do not publicly disclose compensation data, the Compensation Committee reviewed data collected from Radford’s Global Technology Survey. This survey depicts executive compensation levels across a wide spectrum of technology sector companies comparable in annual revenue size.

 

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Components of Executive Compensation

For fiscal 2019, compensation for our executive officers consisted of the following principal elements:

 

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Base Salary

We use salaries for similar positions within our peer group as an important factor in setting a base salary that can attract and retain talent. When setting the fiscal 2019 base salary for each individual NEO, the Compensation Committee also considered other factors, including the scope of the role and the performance and experience of the individual.

Fiscal 2019 Executive Performance Incentive Plan

In September 2018, the Compensation Committee approved the terms of our executive performance incentive plan for fiscal 2019. In February 2019, the Compensation Committee approved the terms of the amended and restated executive performance incentive plan to clarify the methodology for measuring OPBT margin. No other changes were made to the plan. The plan is designed to be variable, depending on ADI’s operating results.

 

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All executive officers, including our NEOs, participated in our fiscal 2019 executive performance incentive plan. We calculated and paid bonuses under the fiscal 2019 plan as follows:

 

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Individual Target Bonus Percentage. For fiscal 2019, the Compensation Committee set target percentages of 150% of base salary for our Chief Executive Officer and between 90%-100% of base salary for our other NEOs. The Compensation Committee selected these target bonus percentages to ensure that a substantial portion of each NEO’s cash compensation is performance-based and linked directly to our business performance, and to ensure that total compensation is competitive with those in similar positions within our peer group. Setting our Chief Executive Officer’s target at 150% also ties the majority of his cash compensation directly to Company performance.

Bonus Payout Factor. For fiscal 2019, we based the Bonus Payout Factor for the applicable quarterly bonus period on our OPBT margin and year-over-year revenue growth compared to the same quarter in the prior year. While our executive performance incentive plan contains quarterly performance targets, the Compensation Committee designed this plan to drive long-term performance. The targets are directly linked to our long-term corporate strategy of profitable growth, which drives shareholder value. We believe this combination ensures that we encourage a long-term focus on our business objectives, while measuring and rewarding progress against those objectives on a quarterly basis.

The Compensation Committee may adjust the OPBT margin and year-over-year revenue growth metrics in its sole discretion to exclude special items such as (but not limited to) restructuring-related expense, acquisition-related expense, amortization of intangibles, gain or loss on disposition of businesses, non-recurring royalty payments, and other similar non-cash or non-recurring items. The Compensation Committee may, in its discretion, exclude these items in order to prevent payments under the plan from being adversely or advantageously affected by special items. For purposes of determining the Bonus Payout Factor for each quarter of fiscal 2019, OPBT margin was adjusted to exclude acquisition-related expenses, acquisition-related transaction costs and restructuring-related expenses, consistent with the non-GAAP adjustments included in our fiscal 2019 quarterly earnings releases. When calculating year-over-year revenue growth in the first quarter of fiscal 2019, the Compensation Committee also normalized the financial results of the first quarter of fiscal 2018, which was a 14-week quarter, to a 13-week quarter.

Until fiscal 2019, we measured revenue on a sell-through basis (also called POS). Commencing in fiscal 2019, pursuant to the adoption of ASC 606, we report revenue on a sell-in basis (also called POA). Because fiscal 2019 was a transition year, we continued to use sell-through revenue to measure year-over-year revenue growth for the 2019 executive performance incentive plan, as well as the fiscal 2019 incentive plan for other eligible employees. For fiscal 2020, the Compensation Committee determined that the executive performance incentive bonus plan and the employee performance incentive plan would be aligned with our sell-in revenue reported under ASC 606. The Company manages its inventory closely and thus the Compensation Committee believes using sell-in versus sell-through does not have a major impact on the bonuses paid and aligns the incentive plan results with the Company’s reported results.

The Compensation Committee reviews and approves our performance targets, and historically these targets have not been re-set during the performance period, regardless of Company performance or economic conditions. We believe that this approach fosters accountability for our business results and is in keeping with our core belief that variable compensation expense, which increases when our performance is good and contracts when it is poor, gives us maximum flexibility to operate our business. While the OPBT margin and year-over-year revenue growth targets are typically set annually, we measure performance against those targets on a quarterly basis, applying the corresponding Bonus Payout Factor to base salary for that quarter, and pay the bonus amounts on a semi-annual basis following the end of the second and fourth quarters.

 

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In setting performance targets for our executive performance incentive plan, multiple factors are considered including our actual past business results, estimates of multi-year performance from our long-term strategic planning, and the performance of market competitors. During fiscal 2018, our Compensation Committee, in conjunction with its independent consultant, Pearl Meyer, reviewed the Company’s historical OPBT margin and revenue growth as well as those for our peers to inform our incentive goal-setting process. The analyses also reviewed historical payout results and included scenario modeling to understand what historical payouts would have been under different goal structures. The Compensation Committee determined quarterly performance targets were sufficiently rigorous and consistent with the Company’s long-term financial model. Based on our evaluation of these factors, the Compensation Committee implemented the following targets for the second half of fiscal 2018 as well as for fiscal 2019:

 

50% of Bonus
Based on OPBT
Margin
  Bonus Payout
Factor
      50% of Bonus
Based on
Revenue Growth
  Bonus Payout
Factor

 

£ 36%

 

 

0%

 

   

£ 0%

 

 

0%

 

 

39%

 

 

100%

 

   

5%

 

 

100%

 

 

42%

 

 

200%

 

   

10%

 

 

200%

 

 

³45%

 

 

300%

 

   

³15%

 

 

300%

 

We also have a floor on the OPBT margin target so that profitability below 36% will result in no bonus payments for that performance period, regardless of revenue growth levels.

Fiscal 2019 was a year in which we met or exceeded our quarterly profitability targets, exceeded our year-over-year revenue growth target in the first quarter, but did not meet our year-over-year revenue growth targets for the remainder of the year amidst significant macroeconomic uncertainty. For a summary of our fiscal 2019 financial results, see page 49 of this proxy statement. For fiscal 2019, the calculated OPBT Margin, Year-Over-Year Revenue Growth and Bonus Payout Factor under our executive performance incentive program for each quarter were as follows:

 

    OPBT Margin (50% weight)       Revenue Growth (50% weight)  

Quarterly Bonus

Payout Factor

(average)

   

OPBT

Margin

(by quarter)

 

Bonus Payout

Factor

(by quarter)

     

YOY Revenue

Growth

(by quarter)

 

Bonus Payout

Factor

(by quarter)

 

Q1

 

 

41.2%

 

 

173%

 

   

7.5%

 

 

150%

 

 

162%

 

 

Q2

 

 

41.5%

 

 

184%

 

   

0%

 

 

0%

 

 

92%

 

 

Q3

 

 

40.8%

 

 

160%

 

   

(6)%

 

 

0%

 

 

80%

 

 

Q4

 

 

38.8%

 

 

94%

 

   

(9)%

 

 

0%

 

 

47%

 

Aggregate payments under our executive performance incentive plan were made at 95% of target, compared to 183% in fiscal 2018 and 248% in fiscal 2017.

Equity Compensation

Our equity compensation program is a broad-based, long-term employee rewards program that is intended to attract, retain and motivate our employees, officers and directors and to align their interests with those of our shareholders. We believe that our equity program is critical to our efforts to hire and retain the best talent in the extremely competitive analog semiconductor industry. All equity awards granted to our executive officers are made under the Company’s 2006 Equity Incentive Plan.

For fiscal 2019, the value of our annual equity awards to our NEOs was comprised of four equity vehicles, each approximately 25% of the target value delivered to each NEO: two forms of performance-based RSUs, or PRSUs, (relative total shareholder return, or TSR, PRSUs and financial metric PRSUs), options and time-based RSUs.

 

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PRSUs. For fiscal 2019, approximately 50% of our annual equity awards to our NEOs was in the form of PRSUs. Our fiscal 2019 equity compensation program includes two types of PRSUs for our executives, relative TSR PRSUs and financial metric PRSUs, to ensure that a direct link exists between the value of our long-term incentives and the value that is created for our shareholders.

Relative TSR PRSUs. The number of shares of ADI common stock received by an executive officer following vesting of the relative TSR PRSUs will range from 0% to a maximum of 200% of the target amount based on ADI’s TSR performance measured against the median TSR of an established comparator group over a three-year period, capped at a maximum of 100% of the initial number of PRSUs granted if the Company’s TSR is negative. For fiscal 2019, the performance parameters established by the Compensation Committee were equal to 100% plus or minus one and one-half times the difference between the Company’s TSR and the comparator group median TSR. Attainment among performance parameters is subject to interpolation on a linear basis.

The relative TSR PRSUs granted on March 9, 2016 had a three-year performance period that ended on March 9, 2019. The comparative peer group consisted of companies represented in the Philadelphia Semiconductor Index (SOX Index) as of the grant date that are included in the SOX Index for the entire performance period. On a three-year cumulative basis, our TSR performance was 74.53%, compared to the median comparative peer group TSR of 79.04%. The median comparative peer group TSR performance exceeded the Company’s TSR performance, which resulted in a payout percentage of 90.98% of target.

The comparator group designated by the Compensation Committee for the relative TSR PRSUs granted in fiscal 2019 once again consisted of the companies represented in the SOX Index as of the grant date that are included in the SOX Index for the entire performance period. The Compensation Committee chose this comparator group because it consists of publicly traded companies, which compete in the semiconductor industry, are representative of likely alternative investment opportunities for our investors, compete with us for talent, and are similar to ADI in their product and services offerings and business models. Consistent with our Compensation Committee’s desire to tie pay to performance, the value of each of these awards is directly linked to the long-term performance of our stock price.

Financial Metric PRSUs. New to our executive equity compensation program for fiscal 2019, the Compensation Committee included financial metric PRSUs, based on non-GAAP operating profit in dollars, for our executives to incentivize long-term profitable growth measured over one-year, two-year cumulative and three-year cumulative time periods. The Compensation Committee selected this metric because it is a key measure that executives use both internally to drive business decisions and externally when speaking to investors about Company results and progress against execution of the Company’s strategy. The number of shares of ADI common stock received by an executive officer following vesting of the financial metric PRSUs will range from 0% to a maximum of 200% of the target amount based on the Company’s one-year, two-year cumulative and three-year cumulative non-GAAP OPBT targets set by the Compensation Committee, measured as a dollar value. The Compensation Committee will determine the level of achievement of each tranche of financial metric PRSUs after the completion of each of the one-year, two-year cumulative and three-year cumulative performance periods. After such determination, the number of shares of ADI common stock earned by an executive remains subject to a time-based service requirement and will vest on the third anniversary of the grant date, subject to the executive’s employment through such date. In December 2019, the Compensation Committee determined that the one-year non-GAAP operating profit threshold set at the beginning of fiscal 2019 relating to the financial metric PRSUs granted in March 2019 had not been met, which resulted in zero shares being earned by the Company’s executives under this incentive compensation vehicle for that period.

Stock Options. We use stock options as a way to reward long-term value creation.

Time-Based RSUs. In a volatile stock market, time-based RSUs continue to provide value when stock options may not, which the Compensation Committee believes will be useful in retaining talented executives and employees in uncertain economic times. In this way, we use time-based RSUs as a retention tool and to enable our executives to accumulate stock ownership in the Company.

We set a goal each year to keep the shareholder dilution related to our equity compensation program to a certain percentage, calculated as the total number of shares of common stock underlying new equity

 

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grants made during the year, divided by the total number of outstanding shares of our common stock at the beginning of the year. Our gross and net dilution rate have been consistently lower than that of our peers over the past several years. For fiscal 2019, our gross dilution percentage was 0.5%, compared to an average of 1.4% for our peer group, and our net dilution percentage was 0.3%, compared to an average of 1.2% for our peers. For the last five years, our gross dilution percentage was 0.8% on average, compared to 1.4% on average for our peer group, and our net dilution percentage was 0.6% on average, compared to 0.9% on average for our peer group. For the fiscal year ending October 31, 2020, our Board of Directors set the maximum aggregate number of shares of common stock with respect to which awards may be granted under the Company’s shareholder approved equity plans, in the aggregate, at 3.7 million shares, which equals approximately 1.0% of our outstanding common stock at the end of fiscal 2019.

Executive Stock Ownership Guidelines

Under our guidelines, the target stock ownership levels are two times annual base salary for the Chief Executive Officer and one times annual base salary for other executive officers. The Chief Executive Officer has four years from the date of his appointment as CEO to achieve his targeted level. Executive officers other than the CEO have five years from the date he or she becomes an executive officer to achieve their targeted level. Shares subject to unexercised options, whether or not vested, and unvested PRSUs whose performance has not yet been certified by the Compensation Committee will not be counted for purposes of satisfying these guidelines. RSUs (whether or not vested) and unvested PRSUs whose performance has been certified by the Compensation Committee are counted for purposes of satisfying the guidelines. All of our executive officers were in compliance with our stock ownership guidelines as of the end of fiscal 2019.

Retirement and Other Employee Benefits

We maintain broad-based benefits for all employees, including health and dental insurance, life and disability insurance and retirement plans. Executives are eligible to participate in all of our employee benefit plans on the same basis as our other employees. The retirement and other employee benefit component of our executive compensation program is designed to attract excellent candidates by providing financial protection and security, and reward our executives for the total commitment we expect from them in service to ADI.

We maintain a Deferred Compensation Plan, or DCP, under which our executive officers and directors, along with a group of highly compensated management and engineering employees, are eligible to defer receipt of some or all of their cash compensation. This plan offers many of the same investment options as our 401(k) plan. Under our DCP, we provide all participants (other than non-employee directors) with Company contributions equal to 8% of eligible deferred contributions.

In the United States during fiscal 2019, we contributed to our 401(k) plan on behalf of all eligible employees, including our NEOs, amounts equal to 5% of the employee’s eligible compensation, plus matching contributions up to an additional 3%, subject to Internal Revenue Service, or IRS, limits. For those employees who also participated in the DCP described above, any compensation that was deferred under that plan was not considered eligible compensation for purposes of our Company contributions under the 401(k) plan. We also provided employees who are eligible to participate in the 401(k) plan but whose compensation is greater than the amount that may be taken into account in any plan year as a result of IRS limits ($280,000 for fiscal 2019), with a taxable payment equal to 8% of the employee’s 401(k)-eligible compensation in excess of the IRS limit.

Limited Perquisites

We do not award extensive perquisites to our executive officers. In fiscal 2019, we provided a voluntary health services benefit to executives and reimbursement for financial and tax planning services of up to $15,000 for the Chief Executive Officer and up to $10,000 for the other executive officers. These items are detailed in the Summary Compensation Table below.

We also maintain an expatriate program that provides certain benefits to our employees who accept expatriate assignments. Our executive officers are entitled to the same benefits under the Company’s expatriate program as other Company employees. Under the Company’s expatriate program, such benefits include providing gross-ups on taxable foreign assignment assistance and making tax equalization

 

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payments on behalf of (or to) expatriate employees who, as a result of their expatriate assignment, incur tax liabilities in excess of what they would have incurred had they not accepted the expatriate assignment.

On occasion, and with the approval of our CEO, an officer or director may have his or her family members accompany him or her on the Company’s leased airplane when traveling on business. The executive or director may incur taxable income for any such travel in accordance with applicable tax rules. We do not gross-up or in any way compensate the officer or director for any income tax owed for any such travel. No such travel occurred in fiscal 2019.

Compensation Recovery

Under the Sarbanes-Oxley Act, in the event of misconduct that results in a financial restatement that would have reduced a previously paid incentive amount, we can recoup those improper payments from our Chief Executive Officer and Chief Financial Officer. We will implement a broader clawback policy that is compliant with the regulations mandated under the Dodd-Frank Act when the regulations are adopted by the SEC and corresponding listing standards become effective.

Fiscal 2019 Financial Results and Shareholder Value Creation

 

 

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1 

Total Shareholder Return calculation is share price appreciation plus cumulative cash dividend payments, and the effect of reinvesting those dividends into the security, for the three-and five-year periods ended November 2, 2019.


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Chief Executive Officer Compensation

Mr. Roche has served as our Chief Executive Officer since May 2013. Under his leadership, the Company has successfully executed its financial, strategic and operational objectives intended to drive long-term profitable growth and increase shareholder value. In 2019, ADI delivered solid financial results against a backdrop of challenging macroeconomic conditions and ongoing trade uncertainty. Importantly, we made progress positioning ADI for continued long-term success through deepening our customer engagements, continuing to invest in our business to drive innovation, extracting value from recent acquisitions and capitalizing on secular trends to drive addressable markets and drive diversified growth. We also demonstrated our commitment to deliver strong shareholder returns during fiscal 2019, returning approximately $1.4 billion to our shareholders in the form of dividends and share buybacks.

In determining Mr. Roche’s compensation as Chief Executive Officer for fiscal 2019, the Compensation Committee considered all elements of Mr. Roche’s compensation and compared his total target compensation to the median of Chief Executive Officer compensation within our peer companies. They also considered Mr. Roche’s experience, tenure, and performance executing the Company’s strategy and driving long-term shareholder value. The design of Mr. Roche’s fiscal 2019 compensation provided incentives that linked realized compensation with Company performance and was comprised of the following:

 

   

Annual base salary of $1,050,000, an increase of 5% compared to Mr. Roche’s fiscal 2018 annual base salary of $1,000,000;

 

   

Annual target bonus of 150% of base salary, calculated in accordance with the terms of the Company’s executive performance incentive plan, which remain unchanged from fiscal 2018; and

 

   

A relative TSR PRSU grant with a grant date fair value of $2,603,177 (22,763 shares), a financial metric PRSU grant with a grant date fair value of $2,094,298 (22,763 shares), a time-based RSU grant with a grant date fair value of $2,342,085 (22,763 shares), and an option grant with a grant date value of $2,362,177 (100,803 shares). The number of shares, if any, earned under the relative TSR PRSU grant will vest three years and fourteen days after its grant date, subject to the level of attainment of the performance parameters. The number of shares, if any, earned under the financial metric PRSU grant will vest on the third anniversary of the grant date, subject to the level of attainment of the performance parameters. Mr. Roche’s time-based RSU grant will vest 25% per year on each of the first four anniversaries of the date of grant. Mr. Roche’s option grant will vest 25% per year on each of the first four anniversaries of the date of grant. These vesting terms are identical to those generally contained in equity grants made to our employees in fiscal 2019.

 

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Compensation for Other Named Executive Officers

Base Salary and Individual Target Bonus Percentages

During fiscal 2019, the Compensation Committee authorized base salaries and target bonus percentages for our NEOs (other than our Chief Executive Officer), as specified in the table below:

 

Name of Executive

   2019 Base
Salary
     2018 Base Salary      % Increase     

 

2019 Individual
Target Bonus as
% of Base  Salary

     2018 Individual
Target Bonus as
% of Base Salary
     % Increase  

 Prashanth Mahendra-Rajah Senior Vice President, Finance and Chief Financial Officer

 

    

 

$575,000

 

 

 

    

 

$550,000

 

 

 

    

 

4.5%

 

 

 

    

 

100%

 

 

 

    

 

100%

 

 

 

    

 

0%

 

 

 

 Martin Cotter
Senior Vice President, Worldwide Sales & Digital Marketing

 

    

 

$460,000

 

 

 

    

 

$450,000

 

 

 

    

 

2.2%

 

 

 

    

 

100%

 

 

 

    

 

90%

 

 

 

    

 

11.1%

 

 

 

 John Hassett
Senior Vice President, Industrial and Consumer

 

    

 

$475,000

 

 

 

    

 

$465,000

 

 

 

    

 

2.1%

 

 

 

    

 

100%

 

 

 

    

 

100%

 

 

 

    

 

0%

 

 

 

 Steve Pietkiewicz
Senior Vice President, Power Products

 

    

 

$450,000

 

 

 

    

 

$400,000

 

 

 

    

 

12.5%

 

 

 

    

 

90%

 

 

 

    

 

90%

 

 

 

    

 

0%

 

 

 

In March 2018, effective May 2018, the Compensation Committee increased the base salaries of Messrs. Mahendra-Rajah, Cotter, Hassett and Pietkiewicz and the individual target bonus for Mr. Cotter after consideration of factors including their performance, tenure, job responsibilities and market data, including benchmark information from our peer group.

Equity Awards

In fiscal 2019, the Compensation Committee authorized grants of equity awards to our NEOs (other than our Chief Executive Officer), as follows:

 

Name of Executive

   Stock Options      Time-based
RSUs
     Relative TSR
PRSUs
    

Financial Metric

PRSUs

 

Prashanth Mahendra-Rajah

  

 

26,513

 

  

 

5,987

 

  

 

5,987

 

  

 

5,987

 

Martin Cotter

  

 

17,676

 

  

 

3,992

 

  

 

3,992

 

  

 

3,992

 

John Hassett

  

 

17,676

 

  

 

3,992

 

  

 

3,992

 

  

 

3,992

 

Steve Pietkiewicz

  

 

17,676

 

  

 

7,841

 

  

 

3,992

 

  

 

3,992

 

In granting awards to Messrs. Mahendra-Rajah, Cotter, Hassett and Pietkiewicz, the Compensation Committee considered the executive’s individual responsibilities and other factors including their performance, tenure and market data, including benchmark information from our peer group. The time-based RSUs granted by the Compensation Committee to Mr. Pietkiewicz include 3,849 RSUs granted in June 2019 as part of the alignment of the compensation of our executives and legacy ADI and Linear Technology employees and is the final award granted to Mr. Pietkiewicz in connection with such alignment.

 

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Severance, Retention and Change in Control Benefits

Change in Control Benefits

We have entered into change in control retention agreements with each of our executive officers and other key employees. Among other things, these retention agreements provide for severance benefits if the employee’s service with us is terminated within 24 months after a change in control (as defined in each agreement) that was approved by our Board of Directors.

We designed the change in control retention agreements to help ensure that our executive team is able to evaluate objectively whether a potential change in control transaction is in the best interests of ADI and our shareholders, despite possible risks to their future employment. We believe that retaining the services of our key executives during a change in control scenario is critical. These agreements help ensure the continued services of our executive officers throughout the change in control transaction by giving them incentives to remain with us rather than seeking alternative employment or being recruited to a competitor during a highly uncertain time. The Compensation Committee reviewed prevalent market practices in determining the severance amounts and the events that trigger payments under the agreements. The Compensation Committee determined that the amounts and triggering events were appropriate and designed to encourage decision-making that is in the best interests of ADI. In fiscal 2019, the Compensation Committee asked Pearl Meyer, its independent compensation consultant, to review our severance, retention and change in control arrangements and Pearl Meyer determined that those arrangements were competitive with existing market practice in the semiconductor industry and that it was appropriate to maintain the program for fiscal 2019. Change in control retention agreements entered into between the Company and eligible employees since 2009 do not contain excess parachute payment tax gross-up provisions.

Under our 2006 Stock Incentive Plan, in the event of a change in control, all of our employees, including our NEOs, if they remain employed by ADI, would have one-half of the shares of common stock subject to their then outstanding unvested options accelerate and become immediately exercisable and one-half of their unvested RSUs would vest. The remaining one-half of their unvested options and RSUs would continue to vest in accordance with the original vesting schedules, and any remaining unvested options and RSUs would vest if, on or prior to the first anniversary of the change in control, his or her employment is terminated without “cause” or for “good reason” (as defined in the plan). We have provided more detailed information about these benefits, along with estimates of their value under various circumstances, under the caption “—Potential Payments Upon Termination or Change in Control” below.

Severance Benefits

When the employment of an executive officer terminates in a situation that does not involve a change in control, the officer is entitled to receive the same benefits as any other terminated employee in that geographical location.

Equity Award Grant Date Policy

Our Compensation Committee has adopted specific policies regarding the grant dates of stock options, RSUs and other stock-based awards for our executive officers and employees. In each case, the exercise price of stock options equals the closing price of our common stock on the grant date.

 

   

New Hire Grants: The grant date of all awards to newly hired executive officers and employees is the 15th day of the month after the date on which the individual commences employment with us (or the next succeeding business day that Nasdaq is open).

 

   

Annual Grants: The grant date of all annual awards is the earlier to occur of (i) the scheduled date of the annual meeting of shareholders, or (ii) the first business day of April that Nasdaq is open.

 

   

Other Grants: All other awards granted to existing executive officers and employees throughout the year (off-cycle awards) have a grant date of the 15th day of the month (or the next succeeding business day that Nasdaq is open) provided the award is approved on or prior to such grant date.

 

   

Foreign Registrations: Any awards requiring registration or approval in a foreign jurisdiction will have a grant date of the 15th day of the month (or the next succeeding business day that Nasdaq is open) following the effective date of that registration or approval.

 

52    Analog Devices, Inc.


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Blackout Periods: Our Compensation Committee does not approve off-cycle awards to our executive officers during the quarterly and annual blackout periods under our insider trading policy. The quarterly and annual blackout periods begin three weeks before the end of each fiscal quarter and end at the beginning of the second full trading day after we announce our quarterly earnings.

We describe the equity award grant date policy for our non-employee directors above under “Corporate Governance—Director Compensation.”

Tax and Accounting Considerations

Section 162(m) of the Internal Revenue Code, generally disallows a tax deduction to public companies for compensation in excess of $1 million paid to certain of the Company’s executives. Pursuant to the Tax Cuts and Jobs Act of 2017, or Tax Act, for fiscal years beginning after December 31, 2017, the group of executives whose compensation is subject to the deduction limitation is broader than under prior law. Prior to the effectiveness of the Tax Act, the deduction limit did not apply to “performance-based compensation” satisfying the requirements of Section 162(m). For fiscal 2019 and future tax years, subject to the transition rules, all compensation in excess of $1 million paid to the specified executives will not be deductible.

Mr. Roche has a change in control retention agreement that contains provisions regarding Section 280G of the Internal Revenue Code. Since 2009, any new executive compensation arrangements for new executives do not contain tax gross up provisions for excess parachute payments.

We expense in our financial statements the compensation that we pay to our executive officers, as required by U.S. generally accepted accounting principles. As one of many factors, the Compensation Committee considers the financial statement impact in determining the amount of, and allocation among the elements of, compensation. We account for stock-based compensation under our 2006 Stock Incentive Plan and the 2005 Plan and the 2010 Plan (the latter two of which we assumed in the Linear Technology acquisition), as well as all predecessor plans, in accordance with U.S. generally accepted accounting principles.

Risk Considerations in Our Compensation Program

In fiscal 2019, our Compensation Committee reviewed our incentive compensation programs, discussed the concept of risk as it relates to our compensation program, considered various mitigating factors and reviewed these items with its independent consultant, Pearl Meyer. In addition, our Compensation Committee asked Pearl Meyer to conduct an independent risk assessment of our executive compensation program. Based on these reviews and discussions, the Compensation Committee does not believe that any risks arising from our employee compensation policies and practices are reasonably likely to have a material adverse effect on our company. Our Compensation Committee believes that any such risks are mitigated by the following factors, among others:

 

   

We structure our pay to consist of both fixed and variable compensation with short- and long-term horizons. We feel that the variable elements of compensation, which represented 91% and 82% of the total target compensation for our CEO and other NEOs, respectively, for fiscal 2019, are a sufficient percentage of overall compensation to motivate executives to produce superior short- and long-term corporate results and to achieve Company goals, while the fixed element is also sufficiently high that the executives are not encouraged to take unnecessary or excessive risks in doing so.

 

   

We believe that our focus on both OPBT margin and year-over-year revenue growth through our executive performance incentive plan, and operating profit and stock price performance through our equity compensation program, provides a check on excessive short-term risk taking. That is, even if our executives could inappropriately increase OPBT margin or revenue by excessively reducing expenses or adding new revenue sources that are inconsistent with our business model, this could ultimately harm our stock price and the value of their equity awards. Conversely, if our executives were to add revenue sources at low margins in order to generate a higher growth multiple and increased stock prices, it could decrease OPBT margin and the value of their cash bonus payments. Our OPBT margin and year-over-year revenue targets are applicable to our executives and employees alike, which we believe encourages consistent behavior across the organization,

 

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  and reflect goals that are challenging, but not so high that they require performance outside of what the Compensation Committee believes is reasonable for us or could motivate our executives and employees to take actions in which we assume unreasonable levels of risk.

 

   

We cap our bonus payout factors. Even if we dramatically exceed our OPBT margin or year-over-year revenue growth targets, bonus payments are limited. In fiscal 2019, the bonus payment factor cap was 300% of target. Conversely, we also have a floor on the OPBT margin target so that profitability below 36% will result in no bonus payments for that performance period, regardless of revenue growth levels. We believe this avoids incentivizing management to drive revenue levels without regard to profitability.

 

   

Our stock ownership guidelines provide an incentive for management to consider ADI’s long-term interests because a portion of their personal investment portfolio consists of ADI stock.

SUMMARY COMPENSATION TABLE

The following table contains certain information about the compensation that our named executive officers earned in fiscal 2019, fiscal 2018 and fiscal 2017.

 

 Name and

 Principal Position

 

Fiscal

Year

   

Salary

($)

   

Bonus

($)(1)

   

Stock

Awards

($)(2a)

   

Option

Awards

($)(2b)

   

Non-Equity

Incentive Plan

Compensation

($)(3)

   

All Other

Compensation

($)(4)

   

Total

($)

 

 Vincent Roche

    2019       1,030,769       —         7,039,560       2,362,177       1,430,337       85,591       11,948,434  

President and Chief

    2018       984,615       —         4,949,953       2,305,013       2,682,173       85,937       11,007,691  

Executive Officer

    2017       878,000       —         4,316,355       1,978,473       3,268,693       70,240       10,511,761  
               

 Prashanth Mahendra-Rajah

    2019       565,385       —         1,851,447       621,295       523,413       153,136       3,714,676  

Senior Vice President,

    2018       571,154       —         1,555,801       724,429       1,040,769       92,608       3,984,761  

Finance and Chief

Financial Officer

    2017       35,962       500,000       3,746,541       —         82,712       65,895       4,431,110  

  Martin Cotter

    2019       456,154       —         1,178,980       408,592       395,809       103,098       2,542,633  

Senior Vice President, Worldwide

Sales & Digital Marketing

    2018       445,673       —         1,208,486       428,088       687,348       108,627       2,878,222  
               

 John Hassett

    2019       471,154       —         1,234,544       414,212       437,875       45,899       2,603,684  

Senior Vice President, Industrial and Consumer

    2018       469,423       —         1,208,486       428,088       762,186       49,668       2,917,851  
    2017       423,077       —         2,132,825       338,200       839,803       39,948       3,773,853  
               

 Steve Pietkiewicz

    2019       438,462       —         1,618,867       414,212       365,763       331,740       3,169,044  

Senior Vice President, Power

Products

    2018       408,786       —         1,451,045       493,930       771,403       242,397       3,367,561  
    2017       215,926       —         3,288,608       476,470       553,183       41,010       4,575,197  

 

(1)

The amount reported for Mr. Mahendra-Rajah for fiscal 2017 represents a hiring bonus paid pursuant to his offer letter dated August 4, 2017.

 

(2)     a.

Amounts represent the aggregate grant date fair value of time-based RSUs and PRSUs granted in fiscal 2019, 2018 and 2017 to the NEOs and the Linear Integration PRSUs granted in fiscal 2017 to the NEOs (excluding our CEO).

 

   b.

Amounts represent the aggregate grant date fair value of stock options granted in fiscal 2019, 2018 and 2017.

These amounts do not represent the actual amounts paid to or realized by the NEO for these awards during the respective fiscal years. We recognize the value as of the grant date for stock options and time-based RSUs and PRSUs over the number of days of service required for the grant to become vested.

 

 

54    Analog Devices, Inc.


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The following table includes the assumptions, rounded to the nearest hundredth, that we used to calculate the grant date fair value reported for fiscal years 2019, 2018 and 2017 on a grant-by-grant basis and the grant date fair value of relative TSR PRSUs, financial metric PRSUs and the Linear Integration PRSUs granted in fiscal 2017, assuming the achievement of the maximum level of performance conditions.

 

                      Assumptions              
 Name  

Grant

Date

   

Options/

Restricted
Stock
Units
Granted

(#)

   

Exercise

Price

($)

   

Volatility

(%)

    

Expected

Life

(Years)

   

Risk-Free

Interest

Rate (%)

   

Dividend

Yield

(%)

   

Grant

Date

Fair

Value

($)

Per
Share

   

Grant Date
Fair Value at
Maximum
Achievement Level

for Performance
    Based RSUs ($)    

 

 Vincent Roche

    3/8/2017       25,026     —         —          —         1.65       2.16       78.22    
    3/8/2017       25,026 **      —         25.97        —         1.64       3.00       94.25       4,717,401  
    3/8/2017       114,356       83.48       26.42        5.0       2.08       2.16       17.30    
    3/29/2018       26,366     —         —          —         2.54       2.11       86.51    
    3/29/2018       26,366 **      —         25.63        —         2.37       2.08       101.23       5,338,060  
    3/29/2018       110,661       91.13       27.77        5.0       2.64       2.11       20.83    
    3/13/2019       22,763     —         —          —         2.42       2.00       102.89    
    3/13/2019       22,763 **      —         24.07        —         2.38       2.00       114.36       5,206,353  
    3/13/2019       22,763 ****      —         —          —         2.42       2.00       92.00       4,636,823  
    3/13/2019       100,803       108.08       26.32        5.0       2.42       2.00       23.43    

 Prashanth Mahendra- Rajah

    10/16/2017       23,756     —         —          —         1.66       2.05       85.31    
    10/16/2017       20,013 ***      —         —          —         1.76       1.97       85.94       2,063,901  
    3/29/2018       8,287     —         —          —         2.54       2.11       86.51    
    3/29/2018       8,287 **      —         25.63        —         2.37       2.08       101.23       1,677,786  
    3/29/2018       34,779       91.13       27.77        5.0       2.64       2.11       20.83    
    3/13/2019       5,987     —         —          —         2.42       2.00       102.89    
    3/13/2019       5,987 **      —         24.07        —         2.38       2.00       114.36       1,369,347  
    3/13/2019       5,987 ****      —         —          —         2.42       2.00       92.00       1,219,552  
    3/13/2019       26,513       108.08       26.32        5.0       2.42       2.00       23.43    

 Martin Cotter

    3/29/2018       4,897     —         —          —         2.54       2.11       86.51    
    3/29/2018       4,897 **      —         25.63        —         2.37       2.08       101.23       991,447  
    3/29/2018       20,552       91.13       27.77        5.0       2.64       2.11       20.83    
    9/17/2018       3,334     —         —          —         2.87       2.10       86.72    
    3/13/2019       2,295     —         —          —         2.42       2.00       102.89    
    3/13/2019       2,295 **      —         24.07        —         2.38       2.00       114.36       524,912  
    3/13/2019       2,295 ****      —         —          —         2.42       2.00       92.00       467,492  
    3/13/2019       10,164       108.08       26.32        5.0       2.42       2.00       23.43    
    6/17/2019       1,697     —         —          —         1.83       2.06       100.39    
    6/17/2019       1,697 **      —         24.07        —         2.38       2.00       116.20       394,383  
    6/17/2019       1,697 ****      —         —          —         1.83       2.06       59.94       337,160  
    6/17/2019       7,512       108.08       28.90        5.0       1.83       2.10       22.69    

 John Hassett

    3/8/2017       4,278     —         —          —         1.65       2.16       78.22    
    3/8/2017       4,278 **      —         25.97        —         1.64       3.00       94.25       806,403  
    3/8/2017       19,548       83.48       26.42        5.0       2.08       2.16       17.30    
    7/17/2017       16,232 ***      —         —          —         176.00       1.97       85.94       1,673,974  
    3/29/2018       4,897     —         —          —         2.54       2.11       86.51    
    3/29/2018       4,897 **      —         25.63        —         2.37       2.08       101.23       991,447  
    3/29/2018       20,552       91.13       27.77        5.0       2.64       2.11       20.83    
    9/17/2018       3,334     —         —          —         2.87       2.10       86.72    
    3/13/2019       3,992     —         —          —         2.42       2.00       102.89    
    3/13/2019       3,992 **      —         24.07        —         2.38       2.00       114.36       913,050  
    3/13/2019       3,992 ****      —         —            2.42       2.00       92.00       813,170  
    3/13/2019       17,676       108.08       26.32        5.0       2.42       2.00       23.43    

 

2020 Proxy Statement    55


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                      Assumptions              
 Name  

Grant

Date

   

Options/

Restricted
Stock
Units
Granted

(#)

   

Exercise

Price

($)

   

Volatility

(%)

    

Expected

Life

(Years)

   

Risk-Free

Interest

Rate (%)

   

Dividend

Yield

(%)

   

Grant

Date

Fair

Value

($)

Per
Share

   

Grant Date
Fair Value at
Maximum
Achievement Level

for Performance
    Based RSUs ($)    

 

 Steve Pietkiewicz

    6/15/2017       6,715     —         —          —         1.49       2.26       74.48    
    6/15/2017       30,391       79.75       26.10        5.0       1.76       2.26       15.68    
    7/17/2017       15,218 ***      —         —          —         1.76       1.97       85.94       1,569,402  
    10/16/2017       17,356     —         —          —         1.66       2.05       85.31    
    3/29/2018       5,650     —         —          —         2.54       2.11       86.51    
    3/29/2018       5,650 **      —         25.63        —         2.37       2.08       101.23       1,143,899  
    3/29/2018       23,713       91.13       27.77        5.0       2.64       2.11       20.83    
    6/15/2018       4,028     —         —          —         2.75       1.89       96.90    
    3/13/2019       3,992     —         —          —         2.42       2.00       102.89    
    3/13/2019       3,992 **      —         24.07        —         2.38       2.00       114.36       913,050  
    3/13/2019       3,992 ****      —         —          —         2.42       2.00       92.00       813,170  
    3/13/2019       17,676       108.08       26.32        5.0       2.42       2.00       23.43    
    6/17/2019       3,849     —         —          —         1.83       2.06       99.85    

 

Entries above with single asterisks (*) are time-based RSUs, entries with double asterisks (**) are relative TSR PRSUs, entries with triple asterisks (***) are Linear Integration PRSUs, entries with quadruple asterisks (****) are financial metric PRSUs and entries without asterisks are stock options. The grant date fair value of time-based RSUs represents the value of our common stock on the date of grant, reduced by the present value of dividends expected to be paid on our common stock prior to vesting. The grant date fair value of the relative TSR PRSUs was calculated using the Monte Carlo simulation model which utilizes multiple input variables that determine the probability of satisfying the performance conditions stipulated in the award grant to calculate the fair market value. The Monte Carlo simulation model also uses stock price volatility and other variables to estimate the probability of satisfying the performance conditions, including the possibility that the market condition may not be satisfied, and the resulting fair value of the award. The grant date fair value of Linear Integration PRSUs represents the value of our common stock as of October 28, 2017, reduced by the present value of dividends expected to be paid on our common stock prior to vesting based upon the then-probable outcome of the performance conditions. The grant date fair value of the financial metric PRSUs represents the value at the grant date based upon the probable outcome of the performance conditions at the date of grant. The grant date fair value of stock options is computed using a Black-Scholes valuation methodology. For a more detailed description of the assumptions used for purposes of determining grant date fair value, see Note 3 to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Critical Accounting Policies and Estimates —Stock-Based Compensation,” included in our Annual Report on Form 10-K for the year ended November 2, 2019.

 

(3)

Reflects the amounts earned under our executive performance incentive plan in fiscal 2019, 2018 and 2017. For Mr. Pietkiewicz, amounts earned in fiscal 2017 and the first half of fiscal 2018 were under the legacy Linear Technology profit sharing program and Linear Technology Corporation Executive Bonus Plan.

 

56    Analog Devices, Inc.


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(4)

The amounts shown in the “All Other Compensation” column are comprised of the following:

 

 Name  

Fiscal

Year

   

Company

401(k)

and DCP

Payments
(a)

   

Employee

Service

Award

(b)

    Executive
Health
Services
   

Healthcare

Savings

Account

   

Relocation

Expenses

(c)

    Expatriate
Assignment
Payment (d)
    Cash
Awards
    Tax
Planning
    Vacation/
Sabbatical
Payout (e)
   

Dividend
Payments
on RSAs

(f)

 

 Vincent Roche

    2019     $ 82,462     $ —       $ —       $ —       $ —       $ —       $ —       $ 3,129     $ —       $ —    
    2018     $ 78,769     $ 988     $ —       $ —       $ —       $ —       $ —       $ 6,180     $ —       $ —    
    2017     $ 70,240     $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —    

 Prashanth Mahendra-Rajah

    2019     $ 45,231     $ —       $ —       $ 1,200     $ 106,705     $ —       $ —       $ —       $ —       $ —    
    2018     $ 45,692     $ —       $ 2,850     $ 2,400     $ 36,629     $ —       $ —       $ 5,037     $ —       $ —    
    2017     $ 2,433     $ —       $ —       $ —       $ 63,462     $ —       $ —       $ —       $ —       $ —    

 Martin Cotter

    2019     $ 36,492     $ —       $ —       $ —       $ —       $ 66,606     $ —       $ —       $ —       $ —    
    2018     $ 35,654     $ —       $ 2,950     $ —       $ —       $ 70,023     $ —       $ —       $ —       $ —    

 John Hassett

    2019     $ 37,692     $ —       $ 4,507     $ 1,200     $ —       $ —       $ —       $ 2,500     $ —       $ —    
    2018     $ 37,554     $ 6,610     $ 4,304     $ 1,200     $ —       $ —       $ —       $ —       $ —       $ —    
    2017     $ 33,846     $ 740     $ 4,162     $ 1,200     $ —       $ —       $ —       $ —       $ —       $ —    

 Steve Pietkiewicz

    2019     $ 29,539     $ —       $ —       $ 1,200     $ —       $ —       $ 194,950     $ —       $ 66,695     $ 39,356  
    2018     $ 9,351     $ —       $ —       $ —       $ —       $ —       $ 194,950     $ —       $ —       $ 38,096  
    2017     $ 9,508     $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ —       $ 31,502  

 

  (a)

Amounts paid to Messrs. Roche, Mahendra-Rajah, Cotter, Hassett and Pietkiewicz consist of the Company contribution into 401(k) and DCP accounts up to the permissible IRS limit and the taxable Company contribution in excess of IRS limits described under “Retirement and Other Employee Benefits” above.

 

  (b)

Paid in connection with our Employee Service Award Program.

 

  (c)

Amounts paid to Mr. Mahendra-Rajah in connection with his relocation from Belgium to the United States.

 

  (d)

Amounts relate to reimbursement of costs and tax equalization payments associated with an expatriate assignment.

 

  (e)

Represents payout of accrued unused paid time off and sabbatical pay as part of the integration of the U.S. Benefits programs for eligible legacy Linear U.S. employees effective January 1, 2019.

 

  (f)

Represents dividends paid on unvested restricted stock awards assumed as part of the Company’s acquisition of Linear Technology.

 

2020 Proxy Statement    57


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GRANTS OF PLAN-BASED AWARDS IN FISCAL 2019

The following table presents information on plan-based awards granted in fiscal 2019 to our NEOs:

 

 Name

 

Grant

Date

    Estimated Possible
Payouts Under  Non-Equity
Incentive Plan Awards (1)
   

 

Estimated Future
Payouts Under
Equity Incentive
Plan Awards (2)

   

All Other
Stock Awards:
Number of
Shares of

Stock or Units
(3)

   

All Other
Option Awards:

Number of
Securities
Underlying
Options (4)

   

Exercise

Price of
Option
Awards

($ Per
Share)
(5)

   

Grant

Date Fair

Value of
Stock and
Option
Awards

($)

 
 

Threshold

($)

   

Target

($)

   

Maximum

($)

    Threshold
(#)
    Target
(#)
    Maximum
(#)
 

 Vincent Roche

    N/A       —         1,546,154       4,638,462       —         —         —         —         —         —         —    
    3/13/2019       —         —         —         —         22,763       45,526       —         —         —         2,603,177 (6) 
    3/13/2019       —         —         —         —         22,763       45,526       —         —         —         2,094,298 (6) 
    3/13/2019       —         —         —         —         —         —         22,763       —         —         2,342,085 (7) 
    3/13/2019       —         —         —         —         —         —         —         100,803       108.08       2,362,177 (8) 

 Prashanth Mahendra- Rajah

    N/A       —         565,385       1,696,155       —         —         —         —         —         —         —    
    3/13/2019       —         —         —         —         5,987       11,974       —         —         —         684,673 (6) 
    3/13/2019       —         —         —         —         5,987       11,974       —         —         —         550,831 (6) 
    3/13/2019       —         —         —         —         —         —         5,987       —         —         615,943 (7) 
    3/13/2019       —         —         —         —         —         —         —         26,513       108.08       621,295 (8) 

 Martin Cotter

    N/A       —         456,154       1,368,462       —         —         —         —         —         —         —    
    3/13/2019       —         —         —         —         2,295       4,590       —         —         —         262,456 (6) 
    3/13/2019       —         —         —         —         2,995       4,590       —         —         —         211,150 (6) 
    3/13/2019       —         —         —         —         —         —         2,995       —         —         236,110 (7) 
    3/13/2019       —         —         —         —         —         —         —         10,164       108.08       238,179 (8) 
    6/17/2019       —         —         —         —         1,697       3,394       —         —         —         197,191 (6) 
    6/17/2019       —         —         —         —         1,697       3,394       —         —         —         101,710 (6) 
    6/17/2019       —         —         —         —         —         —         1,697       —         —         170,363 (7) 
    6/17/2019       —         —         —         —         —         —         —         7,512       108.08       170,413 (8) 

 John Hassett

    N/A       —         471,154       1,413,462       —         —         —         —         —         —         —    
    3/13/2019       —         —         —         —         3,992       7,984       —         —         —         456,525 (6) 
    3/13/2019       —         —         —         —         3,992       7,984       —         —         —         367,282 (6) 
    3/13/2019       —         —         —         —         —         —         3,992       —         —         410,737 (7) 
    3/13/2019       —         —         —         —         —         —         —         17,676       108.08       414,212 (8) 

 Steve Pietkiewicz

    N/A       —         394,615       1,183,845       —         —         —         —         —         —         —    
    3/13/2019       —         —         —         —         3,992       7,984       —         —         —         456,525 (6) 
    3/13/2019       —         —         —         —         3,992       7,984       —         —         —         367,282 (6) 
    3/13/2019       —         —         —         —         —         —         3,992       —         —         410,737 (7) 
    3/13/2019       —         —         —         —         —         —         —         17,676       108.08       414,212 (8) 
    6/17/2019       —         —         —         —         —         —         3,849       —         —         384,323 (7) 

 

(1)

The amounts shown for Messrs. Roche, Mahendra-Rajah, Cotter, Hassett and Pietkiewicz in the threshold, target and maximum columns reflect the minimum, target and maximum amounts payable under our executive performance incentive plan, respectively. Amounts in the maximum column above reflect 300% of the executive’s target bonus, which is the cap under the plan. The actual amounts earned in fiscal 2019 are reflected in the Summary Compensation Table above and were as follows:

 

 Name   

Actual Payout under
Non-Equity Incentive

Plans for Fiscal 2019

 

 Vincent Roche

   $ 1,430,337  

 Prashanth Mahendra-Rajah

   $ 523,413  

 Martin Cotter

   $ 395,809  

 John Hassett

   $ 437,875  

 Steve Pietkiewicz

   $ 365,763  

See “—Compensation Discussion and Analysis” above for a discussion of how these amounts were determined under our executive performance incentive plan.

 

(2)

Represents PRSUs granted under our 2006 Stock Incentive Plan. The relative TSR PRSUs have both a market condition and a service condition, while the financial metric PRSUs have a performance condition and a service condition, and vest, so long as the executive continues to be employed with us, after the applicable three-year performance period. The number of shares of the Company’s common

 

58    Analog Devices, Inc.


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  stock to be issued upon vesting of the relative TSR PRSUs will range from 0% to 200% of the target amount, based on the comparison of the Company’s TSR to the median TSR of a specified peer group over a three-year period. The number of shares of the Company’s common stock to be issued upon vesting of the financial metric PRSUs on the third anniversary of the grant date will range from 0% to 200% of the target amount, based on the Company’s attainment of one-year, two-year cumulative and three-year cumulative operating profit dollar targets set by the Compensation Committee.

 

(3)

Represents time-based RSUs granted under our 2006 Stock Incentive Plan. The time-based RSUs vest, so long as the executive continues to be employed with us, in four equal installments on each of the first, second, third and fourth anniversaries of the grant date. Dividends are not payable on unvested RSUs.

 

(4)

Represents stock options granted under our 2006 Stock Incentive Plan. These options become exercisable, so long as the executive continues to be employed with us, in four equal annual installments on each of the first, second, third and fourth anniversaries of the grant date.

 

(5)

The exercise price per share is equal to the closing price per share of our common stock on the date of grant.

 

(6)

This amount does not represent the actual amount paid to or realized by the executives for these awards during the fiscal year. This amount represents the grant date fair value of the PRSUs. The grant date fair value of the relative TSR PRSUs was calculated using the Monte Carlo simulation model which utilizes multiple input variables that determine the probability of satisfying the performance conditions stipulated in the award grant to calculate the fair market value. The Monte Carlo simulation model also uses stock price volatility and other variables to estimate the probability of satisfying the performance conditions, including the possibility that the market condition may not be satisfied, and the resulting fair value of the award. The grant date fair value per share of the relative TSR PRSU awards granted to Messrs. Roche, Mahendra-Rajah, Cotter, Hassett and Pietkiewicz on March 13, 2019 was $114.36. The grant date fair value per share of the relative TSR PRSU awards granted to Mr. Cotter on June 17, 2019 was $116.20. The grant date fair value of financial metric PRSUs represents the value at the grant date based upon the probable outcome of the performance conditions at the date of grant. Mr. Cotter received equity awards on June 17, 2019 to correct an administrative error that occurred in March 2019 where he was not granted the full value of the equity awards that the Compensation Committee had intended to grant. The terms of the June 2019 grants to Mr. Cotter are identical to the terms of the awards granted in March 2019, including the vesting dates, performance conditions and the option exercise price ($108.08), which was higher than the closing price of ADI’s common stock on the June 17, 2019 grant date ($105.10).

 

(7)

This amount does not represent the actual amount paid to or realized by the executives for these awards during the fiscal year. This amount represents the grant date fair value of the time-based RSUs.

The following table includes the assumptions, rounded to the nearest hundredth, which we used to calculate the grant date fair value amounts:

 

 Grant Date

 

   Assumptions     

Grant Date

Fair Value

Per Share

($)

 
  

Risk-Free

Interest

Rate

(%)

  

Dividend

Yield

(%)

 

 3/13/2019

   2.42      2.00        102.89  

 6/17/2019

   1.83      2.06        99.85  

 6/17/2019

   1.83      2.06        100.39  

The grant date fair value of the time-based RSUs is the value of our common stock on the date of grant, reduced by the present value of dividends expected to be paid on our common stock prior to vesting.

 

(8)

This amount does not represent the actual amount paid to or realized by the executives for these awards during the fiscal year. The grant date fair value of stock options granted were computed using a Black-Scholes valuation methodology. We estimated the full grant date fair value of these stock options using the following assumptions:

 

 Grant Date    Assumptions     

Grant Date

Fair Value

Per Share

($)

 
  

Risk-Free

Interest

Rate

(%)

     Dividend
Yield
(%)
     Expected
Volatility
(%)
    

Expected
Life

(Years)

 

 3/13/2019

     2.42        2.00        26.32        5.00        23.43  

 6/17/2019

     1.83        2.10        28.90        5.00        22.69  

 

2020 Proxy Statement    59


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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2019

The following table provides information with respect to outstanding stock options and unvested time-based RSUs and PRSUs for each of our named executive officers as of November 2, 2019:

 

          Option Awards     Stock Awards  
 Name   Grant
Date
    Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
    Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable (1)
   

Option

Exercise

Price ($)

   

Option

Expiration

Date (2)

   

Number of
Shares or
Units/
Awards of
Stock

That Have

Not
Vested (#)(3)

   

Market

Value of
Shares
or Units/
Awards
of Stock
That
Have  Not
Vested
($)(4)

   

Equity
Incentive
Plan
Awards:
Number

of

Unearned
Shares,
Units, or
Other
Rights
That

Have Not
Vested
(#)(5)

   

Equity
Incentive
Plan

Awards:
Market or
Payout

Value of
Unearned
Shares,
Units or
Other
Rights

That
Have Not
Vested
($)(4)

 

 Vincent Roche

    3/12/2014       18,876       —         51.73       3/12/2024       —         —         —         —    
    3/11/2015       12,564       22,954       57.29       3/11/2025       —         —         —         —    
    3/9/2016       53,436       40,706       54.93       3/9/2026       —         —         —         —    
    3/8/2017       45,742       68,614       83.48       3/8/2027       25,026       2,737,094       25,026       2,737,094  
    3/29/2018       27,665       82,996       91.13       3/29/2028       19,775       2,162,792       26,366       2,883,649  
    3/13/2019       —         100,803       108.08       3/13/2029       22,763       2,489,589       37,938       4,149,279  

 Prashanth Mahendra-Rajah

    10/16/2017       —         —         —         —         7,920       866,210       20,013       2,188,822  
    3/29/2018       8,694       26,085       91.13       3/29/2028       6,216       679,844       8,287       906,349  
    3/13/2019       —         26,513       108.08       3/13/2029       5,987       654,798       9,978       1,091,294  

 Martin Cotter

    3/15/2013       17,720       —         46.48       3/12/2023       —         —         —         —    
    3/12/2014       14,490       —         51.73       3/12/2024       —         —         —         —    
    3/11/2015       8,600       2,150       57.29       3/11/2025       —         —         —         —    
    3/9/2016       5,212       3,475       54.93       3/9/2026       —         —         —         —    
    10/17/2016       16,199       10,800       61.70       10/17/2026       —         —         —         —    
    3/8/2017       7,037       10,557       83.48       3/8/2027       3,851       421,184       3,851       421,184  
    7/17/2017       —         —         —         —         —         —         15,218       1,664,393  
    3/29/2018       5,138       15,414       91.13       3/29/2028       3,673       401,716       4,897       535,585  
    9/17/2018       —         —         —         —         2,501       273,534       —         —    
    3/13/2019       —         10,164       108       3/13/2029       2,295       251,004       3,825       418,340  
    6/17/2019       —         7,512       108       3/13/2029       1,697       185,601       2,828       309,298  

 John Hassett

    3/11/2015       —         4,386       57.29       3/11/2025       —         —         —         —    
    3/9/2016       7,221       8,148       54.93       3/9/2026       —         —         —         —    
    3/8/2017       7,819       11,729       83.48       3/8/2027       4,278       467,885       4,278       467,885  
    7/17/2017       —         —         —         —         —         —         16,232       1,775,294  
    3/29/2018       5,138       15,414       91.13       3/29/2028       3,673       401,716       4,897       535,585  
    9/17/2018       —         —         —         —         2,501       273,534       —         —    
    3/13/2019       —         17,676       108.08       03/13/2029       3,992       436,605       6,653       727,639  

 Steve Pietkiewicz

    3/10/2017 (6)      —         —         —         —         13,328       1,457,683       —         —    
    6/15/2017       12,156       18,235       79.75       6/15/2027       6,715       734,420       —         —    
    7/17/2017       —         —         —         —         —         —         15,218       1,664,393  
    10/16/2017       —         —         —         —         10,414       1,138,979       —         —    
    3/29/2018       5,928       17,785       91.13       3/29/2028       4,238       463,510       5,650       617,941  
    6/15/2018       —         —         —         —         3,021       330,407       —         —    
    3/13/2019       —         17,676       108.08       3/13/2029       3,992       436,605       6,653       727,639  
    06/17/2017       —         —         —         —         3,849       420,965       —         —    

 

60    Analog Devices, Inc.


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(1)

The unexercisable options held by these officers vest, subject to continued employment, as follows:

 

 Grant Date    Vest Date     

Vincent

Roche

    

Prashanth

Mahendra

-Rajah

    

Martin

Cotter

    

John

Hassett

    

Steve

Pietkiewicz

 

 3/11/2015

     3/11/2020        22,954        —          2,150        4,386        —    

 3/9/2016

     3/9/2020        20,353        —          1,738        4,074        —    
     3/9/2021        20,353        —          1,737        4,074        —    

 10/17/2016

     10/17/2020        —          —          5,400        —          —    
     10/17/2021        —          —          5,400        —          —    

 3/8/2017

     3/8/2020        22,871        —          3,519        3,910        —    
     3/8/2021        22,871        —          3,519        3,909        —    
     3/8/2022        22,872        —          3,519        3,910        —    

 6/15/2017

     6/15/2020        —          —          —          —          6,078  
     6/15/2021        —          —          —          —          6,078  
     6/15/2022        —          —          —          —          6,079  

 3/29/2018

     3/29/2020        27,665        8,695        5,138        5,138        5,928  
     3/29/2021        27,665        8,695        5,138        5,138        5,928  
     3/29/2022        27,666        8,695        5,138        5,138        5,929  

 3/13/2019

     3/13/2020        25,200        6,628        2,541        4,419        4,419  
     3/13/2021        25,201        6,628        2,541        4,419        4,419  
     3/13/2022        25,201        6,628        2,541        4,419        4,419  
     3/13/2023        25,201        6,629        2,541        4,419        4,419  

 06/17/2019

     3/13/2020        —          —          1,878        —          —    
     3/13/2021        —          —          1,878        —          —    
     3/13/2022        —          —          1,878        —          —    
     3/13/2022        —          —          1,878        —          —    

 

(2)

The expiration date of each stock option award is ten years after its grant date.

 

(3)

The time-based RSUs granted before March 2018 as part of the annual award cycle vest in one installment on the third anniversary of the grant date. The time-based RSUs granted in 2018 and 2019 vest in four equal installments on the first, second, third and fourth anniversaries of the grant date.

 

(4)

The market value was calculated based on $109.37, the closing price per share of our common stock on November 1, 2019, the last trading day of fiscal 2019.

 

(5)

For awards granted on March 8, 2017, the number of shares, if any, earned under the relative TSR PRSU award will vest in one installment fourteen days after the third anniversary of the grant date. For the Linear Integration PRSUs granted on July 17, 2017 and October 16, 2017, the number of shares, if any, earned will vest in one installment on July 17, 2020.

 

(6)

In connection with the Linear Technology acquisition and in accordance with the terms of the merger agreement, the Company issued equity and cash awards to certain Linear Technology employees, including Mr. Pietkiewicz, in replacement of outstanding Linear Technology equity awards. These awards vest, subject to continued employment as follows:

 

Grant Date    Vest Date    Shares(#)    Cash($)

3/10/2017

   4/21/2020    1,392    276,000
   7/21/2020    5,968    —  
   7/21/2021    5,968    —  
     

 

  

 

   Total:    13,328    276,000

 

2020 Proxy Statement    61


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OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2019

The following table provides information on the aggregate value realized by each named executive officer upon the exercise of stock options and the vesting of restricted stock units/awards, time-based RSUs and PRSUs during fiscal 2019:

 

    Option Awards     Stock Awards  
 Officer Name  

Number of Shares

Acquired on Exercise

   

Value Realized

on Exercise

($)(1)

   

Number of Shares

Acquired on Vesting

   

Value Realized

on Vesting

($)(2)

 

 

 Vincent Roche

 

 

 

 

 

 

80,000

 

 

 

 

 

 

 

 

 

4,179,634

 

 

 

 

 

 

 

 

 

69,224

 

 

 

 

 

 

 

 

 

7,365,652

 

 

 

 

 

 Prashanth Mahendra-Rajah

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

9,990

 

 

 

   

 

1,093,776

 

 

 

 

 Martin Cotter

 

   

 

31,710

 

 

 

   

 

2,180,584

 

 

 

   

 

8,788

 

 

 

   

 

960,097

 

 

 

 

 John Hassett

 

   

 

32,584

 

 

 

   

 

1,929,870

 

 

 

   

 

12,079

 

 

 

   

 

1,292,447

 

 

 

 

 Steve Pietkiewicz (3)

 

   

 

—  

 

 

 

   

 

—  

 

 

 

   

 

14,575

 

 

 

   

 

1,617,124

 

 

 

 

(1)

Value realized represents the difference between the closing price per share of our common stock on the date of exercise and the exercise price per share, multiplied by the number of shares acquired on exercise.

 

(2)

Value realized represents the closing price per share of our common stock on the vesting date, multiplied by the number of shares vested.

 

(3)

In addition to the amounts reflected in the table, during fiscal 2019 Mr. Pietkiewicz received $538,200 upon the vesting of cash awards, which were granted by the Company in connection with the Linear Technology acquisition, and in accordance with the terms of the merger agreement, in replacement of outstanding Linear Technology equity awards.

NON-QUALIFIED DEFERRED COMPENSATION PLAN

Since 1995, our executive officers and directors, along with some of our management and engineering employees, have been eligible to participate in our Deferred Compensation Plan, or DCP. We established the DCP to provide participants with the opportunity to defer receiving all or a portion of their compensation, which includes salary, bonus, commissions and director fees. Under our DCP, we provide all participants (other than non-employee directors) with Company contributions equal to 8% of eligible deferred contributions.

We credit each participant’s account with earnings on the deferred amounts. These earnings represent the amounts that the participant would have earned if the deferred amounts had been invested in one or more of the various investment options selected by the participant. Under the terms of the DCP, only the payment of the compensation earned is deferred; we do not defer the expense in our financial statements related to the participant’s deferred compensation and investment earnings. We charge the salary, bonuses, commissions, director fees and investment earnings on deferred balances to our income statement as an expense in the period in which the participant earned the compensation. Our balance sheet includes separate line items for Deferred Compensation Plan Investments and Deferred Compensation Plan Liabilities.

We hold DCP assets in a separate Rabbi trust segregated from other assets. We invest in the same investment alternatives that the DCP participants select for their DCP balances. Participants whose employment with us terminates due to retirement after reaching age 62 with ten years of service, disability or death will be paid their DCP balance in either a lump sum or in installments over ten or fewer years, based on the elections they have made. Participants (other than key employees, including our NEOs) who terminate their employment with us for any other reason will receive payment of their DCP balance in the form of a lump sum upon their termination of employment. Payments to our NEOs and key employees will be delayed six months or as otherwise required by relevant tax regulations.

 

62    Analog Devices, Inc.


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Mr. Pietkiewicz did not participate in the DCP in fiscal 2017 or fiscal 2018 because the DCP was not available to legacy Linear Technology employees during that time. The following table shows the non-qualified deferred compensation activity for the NEOs during fiscal 2019:

Non-Qualified Deferred Compensation for Fiscal 2019

 

 Name  

Executive

Contributions in

Last Fiscal Year

($)

   

Analog Devices

Contributions in

Last Fiscal Year

($)(1)

   

Aggregate

Earnings in

Last Fiscal

Year ($)(2)

   

Aggregate

Withdrawals/

Distributions ($)

   

Aggregate

Balance at Last

Fiscal Year

End ($)(3)

 

 Vincent Roche

    2,245,054       8,246       364,136       (2,263,901     8,035,612  

 Prashanth Mahendra-Rajah

    24,038       1,923       2,132       —         114,045  

 Martin Cotter

    —         —         701       —         32,159  

 John Hassett

    —         —         —         —         —    

 Steve Pietkiewicz

    319,231       29,539       23,598       —         372,368  

 

(1)

These amounts are included in the Summary Compensation Table above in the “All Other Compensation” column.

 

(2)

These amounts are excluded from the Summary Compensation Table above in accordance with SEC regulations, as we did not pay above-market earnings on deferred compensation in fiscal 2019.

 

(3)

Of the amounts in this column, the following amounts have also been reported in the Summary Compensation Table for fiscal 2018 and 2017:

 

 Name    Previously Reported for
Fiscal 2018 ($)
     Previously Reported for
Fiscal 2017 ($)
 

 Vincent Roche

     3,007,201        1,885,842  

 Prashanth Mahendra-Rajah

     82,475        2,741  

 Martin Cotter

     31,020        —    

 John Hassett

     —          —    

 Steve Pietkiewicz

     —          —    

CHANGE IN CONTROL BENEFITS

Change in Control Retention Agreements

We have entered into change in control retention agreements with each of our executive officers and other key employees. These agreements provide for severance benefits if any of the following occurs:

 

   

within 24 months after a change in control (as defined in each agreement) that was approved by our Board of Directors, we terminate the employee’s employment with us for a reason other than “cause” (as defined in the agreement) or the employee’s death or disability;

 

   

within 24 months after a change in control that was approved by our Board of Directors, the employee terminates his or her employment for “good reason” (as defined in the agreement); or

 

   

within 12 months after a change in control that was not approved by our Board of Directors, we or the employee terminate the employee’s employment with us for a reason other than “cause” (as defined in the agreement) or the employee’s death or disability.

For purposes of our change in control retention agreements, a “change in control” occurs when:

 

   

any person or entity becomes the beneficial owner of 30% or more of the combined voting power of our outstanding securities;

 

   

our shareholders approve specified mergers of ADI with another entity; or

 

   

our shareholders approve a plan of liquidation or sale of all, or substantially all, of ADI’s assets.

 

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