Compensation Discussion and Analysis
2022 Long-Term Incentive Awards. In February 2022, the HCC Committee
approved the Companys long-term incentive program for 2022 (the 2022 LTI Program) and the related equity awards under such program for the Companys employees, including the applicable NEOs. The 2022 LTI Program was designed
to reward performance consistent with the Companys evolving long-term strategic objectives. Consistent with that approach, each of the NEOs received two awards a PBRSU award (the 2022 PBRSUs) and an RSU award (the 2022
RSUs). The HCC Committee weighted the 2022 PBRSUs approximately 60% and the 2022 RSUs approximately 40% in line with the Companys pay-for-performance
philosophy.
The 2022 RSUs will vest pro rata over three years from the date of grant, subject to continued employment or service to the Company
through the vesting date.
The 2022 PBRSUs will vest, according to their terms, only if and to the extent that certain performance goals (the
2022 Performance Goals) established by the HCC Committee are achieved. The HCC Committee established a payout scale to translate performance levels into vesting results. Exact achievement of the 2022 Performance Goals generally
translates into earning 100% of the target number of shares, with lesser earnings provided for lesser performance and greater earnings provided for greater performance.
The 2022 Performance Goals selected by the HCC Committee in February 2022 include three financial performance goals revenue, non-GAAP gross margin and non-GAAP operating income performance and three operational or organizational goals increasing the revenue driven by products
containing Silicon Carbide technology, establishing baselines for each of the three categories (Scopes 1, 2 and 3) tracked by the U.S. Environmental Protection Agency across which carbon emissions are measured and establishing a customer experience
program during the fiscal year 2022 performance period. Based on the level of achievement of the performance goals under the 2022 LTI Program, each NEO could receive up to 150% achievement for the financial goals or 200% achievement for the
operational and organizational goals, in each case, for results at or above the stretch levels, with straight-line interpolation between the threshold and target levels and between the target and stretch levels. Similar to the 2021 LTI Program,
shares earned for 2022 performance will be divided into three portions that will be scheduled to vest over three years, no later than the date that the Company files its Annual Report on Form 10-K for each of
2022, 2023 and 2024, respectively, subject to the executive remaining continuously employed with the Company through the applicable vesting date, and as adjusted by the TSR Adjustment factor.
Similar to the 2021 PBRSUs, the 2022 PBRSUs granted are also eligible for longer-term upside opportunities up to 150% by virtue of the TSR Adjustment.
Each of the three vesting tranches described above would be subject to a modification of the aggregate PBRSUs earned based on the TSR Adjustment, which could reduce the PBRSUs otherwise earned by 50%, or alternatively could increase the PBRSUs
otherwise earned to up to 150% of the target PBRSUs. The Relative TSR goals that characterize the TSR Adjustment reflect those discussed above with respect to the Relative TSR component of the 2021 PBRSUs.
Based on its annual evaluation of the peer group at the August 2021 HCC Committee meeting, which included a review and analysis of a report prepared by
Pearl Meyer, the HCC Committee determined to (i) add Monolithic Power Systems, Inc., (ii) retain Maxim Integrated Products, Inc. and Xilinx, Inc., which were acquired by Analog Devices, Inc. in August 2021 and by Advanced Micro Devices, Inc. in
February 2022, respectively, pending such acquisitions, and (iii) otherwise keep the peer group used for purposes of 2022 NEO compensation decisions identical to the 2021 Peer Group.
Post-Termination Compensation
Severance and Change in Control Arrangements. Under the SIP, the HCC Committee has discretion to accelerate equity-based vesting upon a
Change in Control (as defined in the SIP) (Change in Control). In addition, we have entered into the following arrangements with our NEOs that provide for post-termination payments in the event of a Change in Control:
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RSU Award Agreements. The 2020 RSU agreements awarded to our NEOs contain provisions providing for the
unvested portion of the awards to fully vest upon any termination of employment in connection with a Change in Control, or upon a resignation by the NEO for Good Reason (as such terms are defined in the applicable NEOs employment
agreement), within a two-year period after a Change in Control. Under the award agreements for the 2020 RSUs awarded to our applicable NEOs, if a Change in Control occurs after a qualifying retirement, the
unvested RSUs subject to those award agreements will also immediately vest. While the 2021 RSU agreements |
onsemi 2022
Proxy Statement 45