DEF 14A
Table of Contents

 

 

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

LAM RESEARCH CORPORATION

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

   No fee required.
  

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

   (1)   

Title of each class of securities to which transaction applies:

 

   (2)   

Aggregate number of securities to which transaction applies:

 

   (3)   

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

   (4)   

Proposed maximum aggregate value of transaction:

 

   (5)   

Total fee paid:

 

   Fee paid previously with preliminary materials.
   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
   (1)   

Amount Previously Paid:

 

   (2)   

Form, Schedule or Registration Statement No.:

 

   (3)   

Filing Party:

 

   (4)   

Date Filed:

 

 

 

 


Table of Contents
    

 

 

LOGO

September 26, 2018

Dear Lam Research Stockholders,

We cordially invite you to attend, in person or by proxy, the Lam Research Corporation 2018 Annual Meeting of Stockholders. The annual meeting will be held on Tuesday, November 6, 2018, at 9:30 a.m. Pacific Standard Time in the Building CA1 Auditorium at the principal executive offices of Lam Research Corporation, which is located at 4650 Cushing Parkway, Fremont, California 94538.

At this year’s annual meeting, stockholders will be asked to elect the nine nominees named in the attached proxy statement as directors to serve until the next annual meeting of stockholders, and until their respective successors are elected and qualified; to cast an advisory vote to approve our named executive officer compensation, or “Say on Pay”; to approve the adoption of the Lam Research Corporation 1999 Employee Stock Purchase Plan (the “ESPP”), as amended and restated; and to ratify the appointment of the independent registered public accounting firm for fiscal year 2019. The Board of Directors recommends that you vote in favor of each director nominee, Say on Pay, the adoption of the ESPP, as amended and restated, and the ratification of the appointment of the independent registered public accounting firm for fiscal year 2019. Management will not provide a business update during this meeting; please refer to our latest quarterly earnings report for our current outlook.

Please refer to the proxy statement for detailed information about the annual meeting and each of the proposals, as well as voting instructions. Your vote is important, and we strongly urge you to cast your vote by the internet, telephone, or mail even if you plan to attend the meeting in person.

Sincerely yours,

Lam Research Corporation

 

LOGO

Stephen G. Newberry

Chairman of the Board

 

 


Table of Contents
    

Notice of 2018 Annual Meeting

of Stockholders

 

 

LOGO

4650 Cushing Parkway

Fremont, California 94538

Telephone: 510-572-0200

 

Date and Time    Tuesday, November 6, 2018
   9:30 a.m. Pacific Standard Time
Place    Lam Research Corporation
   Building CA1 Auditorium
   4650 Cushing Parkway
   Fremont, California 94538

Items of Business

 

  1.

Election of nine directors to serve until the next annual meeting of stockholders, and until their respective successors are elected and qualified

  2.

Advisory vote to approve our named executive officer compensation, or “Say on Pay”

  3.

Approval of the adoption of the Lam Research Corporation 1999 Employee Stock Purchase Plan, as amended and restated

  4.

Ratification of the appointment of the independent registered public accounting firm for fiscal year 2019

  5.

Transact such other business that may properly come before the annual meeting (including any adjournment or postponement thereof)

Record Date

Only stockholders of record at the close of business on September 7, 2018, the “Record Date,” are entitled to notice of and to vote at the annual meeting.

Voting

Please vote as soon as possible, even if you plan to attend the annual meeting in person. You have three options for submitting your vote before the annual meeting: by the internet, telephone, or mail. The proxy statement and the accompanying proxy card provide detailed voting instructions.

Internet Availability of Proxy Materials

Our Notice of 2018 Annual Meeting of Stockholders, Proxy Statement, and Annual Report to Stockholders are available on the Lam Research website at https://investor.lamresearch.com and at www.proxyvote.com.

By Order of the Board of Directors,

 

LOGO

Sarah A. O’Dowd

Secretary

This proxy statement is first being made available and/or mailed to our stockholders on or about September 26, 2018.

 

 


Table of Contents

LAM RESEARCH CORPORATION

Proxy Statement for 2018 Annual Meeting of Stockholders

TABLE OF CONTENTS

 

Proxy Statement Summary      1  

Figure 1. Proposals and Voting Recommendations

     1  

Figure 2. Summary Information Regarding Director Nominees

     1  

Figure 3. Director Key Qualifications and Skills Highlights

     2  

Figure 4. Board Composition Highlights

     2  

Figure 5. Corporate Governance Highlights

     3  

Figure 6. Executive Compensation Highlights

     4  
Stock Ownership      5  

Security Ownership of Certain Beneficial Owners and Management

     5  

Section 16(a) Beneficial Ownership Reporting Compliance

     6  
Governance Matters      7  

Corporate Governance

     7  

Corporate Governance Policies

     7  

Board Nomination Policies and Procedures

     7  

Director Independence Policies

     9  

Leadership Structure of the Board

     9  

Other Governance Practices

     9  

Meeting Attendance

     10  

Board Committees

     10  

Board’s Role and Engagement

     11  

Stockholder Engagement

     12  

Stockholder Proposal

     12  

Corporate Social Responsibility

     12  

Director Compensation

     13  
Compensation Matters      16  

Executive Compensation and Other Information

     16  

Compensation Discussion and Analysis

     16  

I. Overview of Executive Compensation

     16  

II. Executive Compensation Governance and Procedures

     20  

III. Primary Components of Named Executive Officer Compensation; Calendar Year 2017 Compensation Payouts; Calendar Year 2018 Compensation Targets and Metrics

     22  

IV. Tax and Accounting Considerations

     29  

Compensation Committee Report

     30  

Compensation Committee Interlocks and Insider Participation

     30  

Executive Compensation Tables

     31  

CEO Pay Ratio

     40  

Securities Authorized for Issuance under Equity Compensation Plans

     40  
Audit Matters      42  

Audit Committee Report

     42  

Relationship with Independent Registered Public Accounting Firm

     42  

Annual Evaluation and Selection of Independent Registered Public Accounting Firm

     42  

Fees Billed by Ernst & Young LLP

     43  

Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services

     44  

Certain Relationships and Related Party Transactions

     44  
Voting Proposals      45  

Proposal No. 1: Election of Directors

     45  

2018 Nominees for Director

     46  

Proposal No.  2: Advisory Vote to Approve Our Named Executive Officer Compensation, or “Say on Pay”

     53  

Proposal No.  3: Approval of the Adoption of the Lam Research Corporation 1999 Employee Stock Purchase Plan, as Amended and Restated

     54  

Proposal No.  4: Ratification of the Appointment of the Independent Registered Public Accounting Firm for Fiscal Year 2019

     58  

Other Voting Matters

     58  
Voting and Meeting Information      59  

Information Concerning Solicitation and Voting

     59  

Other Meeting Information

     60  


Table of Contents
    

 

Proxy Statement Summary

 

 

To assist you in reviewing the proposals to be acted upon at the annual meeting, we call your attention to the following summarized information about the proposals and voting recommendations, the Company’s director nominees, highlights of the director’s key qualifications and skills, board composition, the Company’s corporate governance, and executive compensation. For more complete information about these topics, please review the complete proxy statement.

We use the terms “Lam Research,” “Lam,” the “Company,” “we,” “our,” and “us” in this proxy statement to refer to Lam Research Corporation, a Delaware corporation. We also use the term “Board” to refer to the Company’s Board of Directors.

Figure 1. Proposals and Voting Recommendations

 

 

  Voting Matters

 

 

 

Board Vote

Recommendation

 

 

 

  Proposal No. 1: Election of Directors

 

 

 

 

 

 

FOR each nominee

 

 

 

 

 

  Proposal No. 2: Advisory Vote to Approve Our Named Executive Officer Compensation, or “Say on Pay”

 

 

 

 

 

 

FOR

 

 

 

 

 

Proposal No. 3: Approval of the Adoption of the Lam Research Corporation 1999 Employee Stock Purchase Plan, as Amended and Restated

 

 

 

 

 

 

FOR

 

 

 

 

 

  Proposal No. 4: Ratification of the Appointment of the Independent Registered Public Accounting Firm for Fiscal Year 2019

 

 

 

 

 

 

FOR

 

 

 

 

Figure 2. Summary Information Regarding Director Nominees

You are being asked to vote on the election of these nine directors. The following table provides summary information about each director nominee as of September 2018, and their biographical information is contained in the “Voting Proposals – Proposal No. 1: Election of Directors – 2018 Nominees for Director” section below.

 

     Director    Committee
Membership
  

Other Current Public

Boards

 

 

  Name

 

 

 

Age

 

  

 

Since

 

 

 

Independent(1)

 

  

 

AC

 

  

 

CC

 

  

 

NGC

 

 

  Martin B. Anstice

 

 

 

51

 

  

 

2012

 

 

 

No

 

  

 

*

 

              

 

  Eric K. Brandt

 

 

 

56

 

  

 

2010

 

 

 

Yes

 

  

 

C/FE

 

            

 

Altaba (formerly Yahoo!), Dentsply Sirona,

Macerich

 

 

  Michael R. Cannon

 

 

 

65

 

  

 

2011

 

 

 

Yes

 

  

 

M/FE

 

       

 

M

 

  

 

Dialog Semiconductor,

Seagate Technology

 

 

  Youssef A. El-Mansy

 

 

 

73

 

  

 

2012

 

 

 

Yes

 

       

 

M

 

         

 

  Christine A. Heckart

 

 

 

52

 

  

 

2011

 

 

 

Yes

 

  

 

M

 

              

 

  Catherine P. Lego

 

 

 

61

 

  

 

2006

 

 

 

Yes

 

  

 

*

 

  

 

C

 

  

 

M

 

  

 

Cypress Semiconductor,

IPG Photonics

 

 

  Stephen G. Newberry

 

 

 

64

 

  

 

2005

 

 

 

Yes

 

  

 

*

 

            

 

Splunk

 

 

  Abhijit Y. Talwalkar

 

 

 

54

 

  

 

2011

 

 

 

Yes

(Lead Independent Director)

 

  

 

*

 

  

 

M

 

  

 

C

 

  

 

Advanced Micro Devices,

iRhythm Technologies,

TE Connectivity

 

 

  Lih Shyng (Rick L.) Tsai

 

 

 

67

 

  

 

2016

 

 

 

Yes

 

                 

 

MediaTek,

USI Corporation

 

 

(1)  Independence determined based on  Nasdaq rules.

  

C – Chairperson

AC – Audit committee   

M – Member

CC – Compensation committee   

FE – Audit committee financial expert (as determined based on SEC rules)

NGC – Nominating and governance committee   

* – Qualifies as an audit committee financial expert (as determined based on SEC rules)

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   1


Table of Contents

Figure 3. Director Key Qualifications and Skills Highlights

The table below summarizes the key qualifications, skills and attributes most relevant to the decision to nominate candidates to serve on our Board. Not having a mark does not mean the director does not possess that qualification or skill. Director biographies contained in the “Voting Proposals – Proposal No. 1: Election of Directors – 2018 Nominees for Director” section below describe each director’s background and relevant experience in more detail.

 

 

  Key Skills & Experiences of Directors

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

Industry Knowledge - Knowledge of and experience with our industry and markets, including an understanding of our customers’ markets and needs

  x   x   x   x   x   x   x   x   x

Technology Knowledge - Deep knowledge and understanding of semiconductor and semiconductor wafer front end technologies

  x   x   x       x           x   x

Marketing Experience - Extensive knowledge and experience in business-to-business marketing and sales, and/or business development, preferably in a capital equipment industry

  x   x       x       x       x   x

Business and Operations Leadership Experience - Experience as a current or former CEO, president and/or COO

  x   x   x   x       x       x   x

Finance Experience - Profit and loss (“P&L”) and financing experience as an executive responsible for financial results of a breadth and level of complexity comparable to the Company

  x   x   x   x           x   x   x

International Business Experience - Experience as a current or former business executive resident outside the United States and responsible for at least one business unit outside the United States

  x   x       x                   x

Mergers and Acquisitions Experience (“M&A”) - M&A and integration experience (including buy- and sell-side and hostile M&A experience) as a public company director or officer

  x   x   x   x   x   x   x   x   x

Board/Governance Experience - Experience with corporate governance requirements and practices

  x   x   x   x   x   x   x   x   x

Public Relations/Investor Relations/Public Policy Experience

  x   x   x   x       x       x    

Cybersecurity Expertise - Understanding of and/or experience overseeing corporate cybersecurity programs, and having a history of participation in relevant cyber education

          x                   x    

Figure 4. Board Composition Highlights

The Board is committed to diversity and the pursuit of board refreshment and balanced tenure. The following table shows the tenure, age and gender diversity of the current board.

 

 

LOGO

tenure age gender diversity

 

2


Table of Contents

Figure 5. Corporate Governance Highlights

 

 

   Board and Other Governance Information

 

 

 

As of September 2018

 

 

 

Size of Board as Nominated

 

 

 

 

 

 

9

 

 

 

 

 

Number of Independent Nominated Directors

 

 

 

 

 

 

8

 

 

 

 

 

Number of Nominated Directors Who Attended ³75% of Meetings

 

 

 

 

 

 

9

 

 

 

 

 

Number of Nominated Directors on More Than Four Public Company Boards

 

 

 

 

 

 

0

 

 

 

 

 

Number of Nominated Non-Employee Directors Who Are Sitting Executives on More Than Three Public Company Boards

 

 

 

 

 

 

0

 

 

 

 

 

Directors Subject to Stock Ownership Guidelines

 

 

 

 

 

 

Yes

 

 

 

 

 

Annual Election of Directors

 

 

 

 

 

 

Yes

 

 

 

 

 

Voting Standard

 

 

 

 

 

 

Majority

 

 

 

 

 

Plurality Voting Carveout for Contested Elections

 

 

 

 

 

 

Yes

 

 

 

 

 

Separate Chairman and Chief Executive Officer (“CEO”)

 

 

 

 

 

 

Yes

 

 

 

 

 

Lead Independent Director

 

 

 

 

 

 

Yes

 

 

 

 

 

Independent Directors Meet Without Management Present

 

 

 

 

 

 

Yes

 

 

 

 

 

Annual Board (Including Individual Director) and Committee Self-Evaluations

 

 

 

 

 

 

Yes

 

 

 

 

 

Annual Independent Director Evaluation of CEO

 

 

 

 

 

 

Yes

 

 

 

 

 

Risk Oversight by Full Board and Committees

 

 

 

 

 

 

Yes

 

 

 

 

 

Commitment to Board Refreshment and Diversity

 

 

 

 

 

 

Yes

 

 

 

 

 

Robust Director Nomination Process

 

 

 

 

 

 

Yes

 

 

 

 

 

Significant Board Engagement

 

 

 

 

 

 

Yes

 

 

 

 

 

Board Orientation/Education Program

 

 

 

 

 

 

Yes

 

 

 

 

 

Code of Ethics Applicable to Directors

 

 

 

 

 

 

Yes

 

 

 

 

 

Stockholder Proxy Access

 

 

 

 

 

 

Yes

 

 

 

 

 

Stockholder Ability to Act by Written Consent

 

 

 

 

 

 

Yes

 

 

 

 

 

Stockholder Engagement Program

 

 

 

 

 

 

Yes

 

 

 

 

 

Poison Pill

 

 

 

 

 

 

No

 

 

 

 

 

Publication of Corporate Social Responsibility Report on Our Website

 

 

 

 

 

 

Yes

 

 

 

 

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   3


Table of Contents

Figure 6. Executive Compensation Highlights

 

 

  What We Do

 

 

Pay for Performance (Pages 16-19, 22-28) – Our executive compensation program is designed to pay for performance with 100% of the annual incentive program tied to company financial, strategic, and operational performance metrics; 50% of the long-term incentive program tied to relative total shareholder return, or “TSR,” performance; and 50% of the long-term incentive program awarded in stock options and service-based restricted stock units, or “RSUs.”

 

 

Three-Year Performance Period for Our 2018 Long-Term Incentive Program (Pages 25-28) – Our current long-term incentive program is designed to pay for performance over a period of three years.

 

 

Absolute and Relative Performance Metrics (Pages 22-28) – Our annual and long-term incentive programs for executive officers include the use of absolute and relative performance factors.

 

 

Balance of Annual and Long-Term Incentives – Our incentive programs provide a balance of annual and long-term incentives.

 

 

Different Performance Metrics for Annual and Long-Term Incentive Programs (Pages 22-28) – Our annual and long-term incentive programs use different performance metrics.

 

 

Capped Amounts (Pages 22-28) – Amounts that can be earned under the annual and long-term incentive programs are capped.

 

 

Compensation Recovery/Clawback Policy (Pages 19-20) – We have a policy pursuant to which we can recover the excess amount of cash incentive-based compensation granted and paid to our officers who are covered by section 16 of the Securities Exchange Act of 1934, as amended, or the “Exchange Act.”

 

 

Prohibit Option Repricing – Our stock incentive plans prohibit option repricing without stockholder approval.

 

 

Hedging and Pledging Policy (Page 7) – We have a policy applicable to our executive officers and directors that prohibits pledging and hedging.

 

 

Stock Ownership Guidelines (Page 19) – We have stock ownership guidelines for each of our executive officers and certain other senior executives; each of our named executive officers as set forth in Figure 16 has met his or her individual ownership level under the current program or has a period of time remaining under the guidelines to do so.

 

 

Independent Compensation Advisor (Page 20) – The compensation committee benefits from its utilization of an independent compensation advisor retained directly by the committee that provides no other services to the Company.

 

 

Stockholder Engagement – We engage with stockholders on an annual basis and stockholder advisory firms on an as needed basis to obtain feedback concerning our compensation program.

 

 

  What We Don’t Do

 

 

Tax “Gross-Ups” for Perquisites, for Other Benefits or upon a Change in Control (Pages 29, 31-32, 35-37) – Our executive officers do not receive tax “gross-ups” for perquisites, for other benefits, or upon a change in control.(1)

 

 

Single-Trigger Change in Control Provisions (Pages 28, 35-37) – None of our executive officers has single-trigger change in control agreements.

 

 

(1) 

Our executive officers may receive tax gross-ups in connection with relocation benefits that are widely available to all of our employees.

 

4


Table of Contents
    

 

Stock Ownership

 

 

Security Ownership of Certain Beneficial Owners and Management

 

The table below sets forth the beneficial ownership of shares of Lam common stock by: (1) each person or entity who we believe, based on our review of filings made with the United States Securities and Exchange Commission, or the “SEC,” beneficially owned as of September 7, 2018, more than 5% of Lam’s common stock on the date set forth below; (2) each current director of the Company; (3) each NEO identified below in the “Compensation Matters – Executive Compensation and Other Information – Compensation Discussion and Analysis” section; and (4) all current directors and current executive officers as a group. With the exception

of 5% owners, and unless otherwise noted, the information below reflects holdings as of September 7, 2018, which is the Record Date for the 2018 Annual Meeting of Stockholders and the most recent practicable date for determining ownership. For 5% owners, holdings are as of the dates of their most recent ownership reports filed with the SEC, which are the most practicable dates for determining their holdings. The percentage of the class owned is calculated using 152,286,842 as the number of shares of Lam common stock outstanding on September 7, 2018.

 

 

Figure 7. Beneficial Ownership Table

 

Name of Person or Identity of Group

  Shares
Beneficially
Owned
(#)(1)
     Percentage
of Class
 

 

5% Stockholders

 

                

 

The Vanguard Group, Inc.
100 Vanguard Boulevard
Malvern, PA 19355

    14,164,985 (2)        9.3
                  

 

BlackRock, Inc.
55 East 52nd Street
New York, NY 10055

    11,318,362 (3)        7.4
                  

 

Directors

 

                

 

Martin B. Anstice (also a Named Executive Officer)

 

 

 

 

 

 

133,648

 

 

 

 

  

 

 

 

 

*

 

 

 

 

 

Eric K. Brandt

 

 

 

 

 

 

27,440

 

 

 

 

  

 

 

 

 

*

 

 

 

 

 

Michael R. Cannon

 

 

 

 

 

 

14,740

 

 

 

 

  

 

 

 

 

*

 

 

 

 

 

Youssef A. El-Mansy

 

 

 

 

 

 

20,826

 

 

 

 

  

 

 

 

 

*

 

 

 

 

 

Christine A. Heckart

 

 

 

 

 

 

16,240

 

 

 

 

  

 

 

 

 

*

 

 

 

 

 

Catherine P. Lego

 

 

 

 

 

 

49,248

 

 

 

 

  

 

 

 

 

*

 

 

 

 

 

Stephen G. Newberry

 

 

 

 

 

 

8,497

 

 

 

 

  

 

 

 

 

*

 

 

 

 

 

Abhijit Y. Talwalkar

 

 

 

 

 

 

24,340

 

 

 

 

  

 

 

 

 

*

 

 

 

 

 

Lih Shyng (Rick L.) Tsai

 

 

 

 

 

 

3,520

 

 

 

 

  

 

 

 

 

*

 

 

 

 

 

Named Executive Officers (“NEOs”)

 

                

 

Timothy M. Archer

 

 

 

 

 

 

74,198

 

 

 

 

  

 

 

 

 

*

 

 

 

 

 

Douglas R. Bettinger

 

 

 

 

 

 

85,563

 

 

 

 

  

 

 

 

 

*

 

 

 

 

 

Richard A. Gottscho

 

 

 

 

 

 

42,897

 

 

 

 

  

 

 

 

 

*

 

 

 

 

 

Scott G. Meikle

 

 

 

 

 

 

3,873

 

 

 

 

  

 

 

 

 

*

 

 

 

 

 

All current directors and executive officers as a group (18 people)

 

 

 

 

 

 

675,160

 

 

 

 

  

 

 

 

 

*

 

 

 

 

 

*

Less than 1%.

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   5


Table of Contents
(1) 

Includes shares subject to outstanding stock options that are now exercisable or will become exercisable within 60 days after September 7, 2018, as well as RSUs, that will vest within that time period, as follows:

 

    

 

Shares

 

 

 

Martin B. Anstice

 

 

 

 

 

 

52,611

 

 

 

 

 

Eric K. Brandt

 

 

 

 

 

 

960

 

 

 

 

 

Michael R. Cannon

 

 

 

 

 

 

960

 

 

 

 

 

Youssef A. El-Mansy

 

 

 

 

 

 

960

 

 

 

 

 

Christine A. Heckart

 

 

 

 

 

 

960

 

 

 

 

 

Catherine P. Lego

 

 

 

 

 

 

960

 

 

 

 

 

Stephen G. Newberry

 

 

 

 

 

 

960

 

 

 

 

 

Abhijit Y. Talwalkar

 

 

 

 

 

 

960

 

 

 

 

 

Lih Shyng (Rick L.) Tsai

 

 

 

 

 

 

960

 

 

 

 

 

Timothy M. Archer

 

 

 

 

 

 

29,780

 

 

 

 

 

Douglas R. Bettinger

 

 

 

 

 

 

45,282

 

 

 

 

 

Richard A. Gottscho

 

 

 

 

 

 

—  

 

 

 

 

 

Scott G. Meikle

 

 

 

 

 

 

—  

 

 

 

 

 

All current directors and executive officers as a group (18 people)

 

 

 

 

 

 

184,890

 

 

 

 

The terms of any outstanding stock options that are now exercisable are reflected in “Figure 33. FYE2018 Outstanding Equity Awards,” except as described in the following sentence. Ms. O’Dowd and Mr. Jennings have options covering 47,984 and 1,553 shares, respectively, which are unexercised and exercisable within 60 days of September 7, 2018. The grants for Ms. O’Dowd and Mr. Jennings have terms consistent with the terms reflected in “Figure 33. FYE2018 Outstanding Equity Awards,” except for the grant to Ms. O’Dowd on February 8, 2013 of 22,140 shares, which fully vested on February 8, 2015 and will expire on February 8, 2020.

As discussed in “Governance Matters – Director Compensation” below, the non-employee directors receive an annual equity grant as part of their compensation. These grants generally vest on October 31, 2018, subject to continued service on the board as of that date, with immediate delivery of the shares upon vesting. For 2018, Drs. El-Mansy and Tsai; Messrs. Brandt, Cannon, Newberry and Talwalkar; and Mses. Heckart and Lego each received grants of 960 RSUs. These RSUs are included in the tables above.

 

(2) 

All information regarding The Vanguard Group, Inc., or “Vanguard,” is based solely on information disclosed in amendment number six to Schedule 13G filed by Vanguard with the SEC on February 9, 2018. According to the Schedule 13G filing, of the 14,164,985 shares of Lam common stock reported as beneficially owned by Vanguard as of December 31, 2017, Vanguard had sole voting power with respect to 233,688 shares, had shared voting power with respect to 33,378 shares, had sole dispositive power with respect to 13,905,425 shares, and shared dispositive power with respect to 259,560 shares of Lam common stock reported as beneficially owned by Vanguard as of that date. The 14,164,985 shares of Lam common stock reported as beneficially owned by Vanguard include 180,906 shares beneficially owned by Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, as a result of it serving as investment manager of collective trust accounts, and 130,240 shares beneficially owned by Vanguard Investments Australia, Ltd., a wholly–owned subsidiary of Vanguard, as a result of it serving as investment manager of Australian investment offerings.

 

(3) 

All information regarding BlackRock Inc., or “BlackRock,” is based solely on information disclosed in amendment number ten to Schedule 13G filed by BlackRock with the SEC on February 8, 2018 on behalf of BlackRock and its subsidiaries: BlackRock Life Limited; BlackRock International Limited; BlackRock Advisors, LLC; BlackRock Capital Management, Inc.; BlackRock (Netherlands) B.V.; BlackRock Institutional Trust Company, National Association; BlackRock Asset Management Ireland Limited; BlackRock Financial Management, Inc.; BlackRock Japan Co., Ltd.; BlackRock Asset Management Schweiz AG; BlackRock Investment Management, LLC; BlackRock Investment Management (UK) Limited; BlackRock Asset Management Canada Limited; BlackRock Asset Management Deutschland AG; BlackRock (Luxembourg) S.A.; BlackRock Investment Management (Australia) Limited; BlackRock Advisors (UK) Limited; BlackRock Fund Advisors; BlackRock Asset Management North Asia Limited; BlackRock (Singapore) Limited; and BlackRock Fund Managers Ltd. According to the Schedule 13G filing, of the 11,318,362 shares of Lam common stock reported as beneficially owned by BlackRock as of December 31, 2017, BlackRock had sole voting power with respect to 9,933,451 shares, did not have shared voting power with respect to any shares, had sole dispositive power with respect to 11,318,362 shares, and did not have shared dispositive power with respect to any shares of Lam common stock reported as beneficially owned by BlackRock as of that date.

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our executive officers, directors, and people who own more than 10% of a registered class of our equity securities to file an initial report of ownership (on a Form 3) and reports on subsequent changes in ownership (on Forms 4 or 5) with the SEC by specified due dates. Our executive officers, directors, and greater-than-10% stockholders are also required by SEC rules

to furnish us with copies of all section 16(a) forms they file. We are required to disclose in this proxy statement any failure to file any of these reports on a timely basis. Based solely on our review of the copies of the forms that we received from the filers, and on written representations from certain reporting persons, we believe that all of these requirements were satisfied during fiscal year 2018.

 

 

6


Table of Contents
    

 

Governance Matters

 

 

Corporate Governance

 

Our Board and members of management are committed to responsible corporate governance to manage the Company for the long-term benefit of its stockholders. To that end, the Board and management periodically review and update, as appropriate, the Company’s corporate governance policies and practices. As part of that process, the Board and management consider the requirements of federal and state law, including rules and regulations of the SEC; the listing standards for the Nasdaq Global Select Market, or “Nasdaq;” published guidelines and recommendations of proxy advisory firms; published guidelines of some of our top stockholders; published guidelines of other selected public companies; and any feedback we receive from our stockholders. A list of key corporate governance practices is provided in the “Proxy Statement Summary” above.

Corporate Governance Policies

We have instituted a variety of policies and procedures to foster and maintain responsible corporate governance, including the following:

Board committee charters. Each of the Board’s audit, compensation, and nominating and governance committees has a written charter adopted by the Board that establishes practices and procedures for the committee in accordance with applicable corporate governance rules and regulations. Each committee reviews its charter annually and recommends changes to the Board, as appropriate. Each committee charter is available on the Investors section of our website at https://investor.lamresearch.com/corporate-governance. The content on any website referred to in this proxy statement is not a part of or incorporated by reference in this proxy statement unless expressly noted. See “Board Committees” below for additional information regarding these committees.

Corporate governance guidelines. We adhere to written corporate governance guidelines, adopted by the Board and reviewed annually by the nominating and governance committee and the Board. Selected provisions of the guidelines are discussed below, including in the “Board Nomination Policies and Procedures,” “Director Independence Policies,” and “Other Governance Practices” sections below. The corporate governance guidelines are available on the Investors section of our website at https://investor.lamresearch.com/corporate-governance.

Corporate code of ethics. We maintain a code of ethics that applies to all employees, officers, and members of the Board.

The code of ethics establishes standards reasonably necessary to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, and full, fair, accurate, timely, and understandable disclosure in the periodic reports we file with the SEC and in other public communications. We will promptly disclose to the public any amendments to, or waivers from, any provision of the code of ethics to the extent required by applicable laws. We intend to make this public disclosure by posting the relevant material on our website, to the extent permitted by applicable laws. A copy of the code of ethics is available on the Investors section of our website at https://investor.lamresearch.com/corporate-governance.

Global standards of business conduct policy. We maintain written standards of appropriate conduct in a variety of business situations that apply to our worldwide workforce. Among other things, these global standards of business conduct address relationships with one another, relationships with Lam (including conflicts of interest, safeguarding of Company assets, and protection of confidential information), and relationships with other companies and stakeholders (including anti-corruption).

Insider trading policy. Our insider trading policy restricts the trading of Company stock by our directors, officers, and employees, and includes provisions addressing insider blackout periods and prohibiting hedges and pledges of Company stock.

Board Nomination Policies and Procedures

Board membership criteria. Under our corporate governance guidelines, the nominating and governance committee is responsible for recommending nominees to the independent directors, and the independent directors nominate the slate of directors for approval by our stockholders. In making its recommendations, whether for new or incumbent directors, the committee assesses the appropriate balance of experience, skills, and characteristics required for the Board at the time.

Factors to be considered by the nominating and governance committee may include but are not limited to: experience; business acumen; wisdom; integrity; judgment; the ability to make independent analytical inquiries; the ability to understand the Company’s business environment; the candidate’s willingness and ability to devote adequate time to board duties; specific skills, background, or experience

 

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   7


Table of Contents

considered necessary or desirable for board or committee service; specific experiences with other businesses or organizations that may be relevant to the Company or its industry; diversity with respect to any attribute(s) the Board considers appropriate, including geographic, gender, age, and ethnic diversity; and the interplay of a candidate’s experiences and skills with those of other Board members.

The specific skills, background, and experiences that are evaluated in connection with board service include:

 

    Industry knowledge: knowledge of and experience with our industry and markets, including an understanding of our customers’ markets and needs;
    Technology knowledge: deep knowledge and understanding of semiconductor and semiconductor wafer front end technologies;
    Marketing experience: extensive knowledge and experience in business-to-business marketing and sales, and/or business development, preferably in a capital equipment industry;
    Business and operations leadership experience: experience as a current or former CEO, president, and/or COO;
    Finance experience: profit and loss and financing experience as an executive responsible for financial results of a breadth and level of complexity comparable to the Company;
    International business experience: experience as a current or former business executive resident outside the United States and responsible for at least one business unit outside the United States;
    Mergers and acquisitions experience (“M&A”): M&A and integration experience (including buy- and sell-side and hostile M&A experience) as a public company director or officer;
    Board/governance experience: experience with corporate governance requirements and practices;
    Public relations/investor relations/public policy experience; and
    Cybersecurity expertise: understanding of and/or experience in overseeing corporate cybersecurity programs; and having a history of participation in relevant cyber education.

Each nominee’s key qualifications, skills, and attributes most relevant to the nomination of the candidate to serve on the Board are reflected in their biographies under “Voting Proposals – Proposal No. 1: Election of Directors – 2018 Nominees for Director” below. For a summary of the key qualifications, skills, and attributes of the Board see “Proxy Statement Summary – Figure 3. Director Key Qualifications and Skills Highlights.” The Board and the nominating and governance committee regard board refreshment as important, and strive to maintain an appropriate balance of tenure, turnover, diversity, and skills on the Board. See “Proxy Statement Summary–Figure 4. Board Composition Highlights” for additional information. In line with the Board’s pursuit of

board refreshment and balanced tenure, including consideration of any resignations, the Board has appointed seven new directors in the last six years.

For many years, the composition of the Board has reflected the Board’s commitment to diversity. For example, every year since 2016 the Board has had at least two female directors, and over the last 10 years has expanded the experiences, areas of substantive expertise and geographic diversity of the directors, as illustrated by the information provided in their biographies under “Voting Proposals – Proposal No. 1: Election of Directors – 2018 Nominees for Director” below.

Regarding tenure, the Board believes that new perspectives and ideas are important to a forward-looking and strategic board as is the ability to benefit from the valuable experience and familiarity of longer serving directors who can bring to bear their learnings from experience with the Company and in the industry and business environment in which the Company operates.

To be nominated, a new or incumbent candidate must provide an irrevocable conditional resignation that will be effective upon (1) the director’s failure to receive the required majority vote at an annual meeting at which the nominee faces re-election and (2) the Board’s acceptance of such resignation. In addition, no director, after having attained the age of 75 years, may be nominated for re-election or reappointment to the Board.

Nomination procedure. The nominating and governance committee identifies, screens, evaluates, and recommends qualified candidates for appointment or election to the Board. The committee considers recommendations from a variety of sources, including search firms, Board members, executive officers, and stockholders. Nominations for election by the stockholders are made by the independent members of the Board. See “Voting Proposals – Proposal No. 1: Election of Directors – 2018 Nominees for Director” below for additional information regarding the 2018 candidates for election to the Board.

Certain provisions of our bylaws apply to the nomination or recommendation of candidates by a stockholder. For example, in February 2017, the Board amended and restated our bylaws to provide that under certain circumstances, a stockholder, or group of up to 20 stockholders, who have maintained continuous ownership of at least three percent (3%) of our common stock for at least three years may nominate and include a specified number of director nominees in our annual meeting proxy statement that cannot exceed the greater of two or 20% of the aggregate number of directors then serving on the Board (rounded down). Information regarding the nomination procedure is provided in the “Voting and Meeting Information – Other Meeting Information – Stockholder-Initiated Proposals and Nominations for 2019 Annual Meeting” section below.

 

 

8


Table of Contents

Director Independence Policies

Board independence requirements. Our corporate governance guidelines require that a majority of the Board members be independent. No director will qualify as “independent” unless the Board affirmatively determines that the director qualifies as independent under the Nasdaq rules and has no relationship that would interfere with the exercise of independent judgment as a director. In addition, no non-employee director may serve as a consultant or service provider to the Company without the approval of a majority of the independent directors (and any such director’s independence must be reassessed by the full Board following such approval).

Board member independence. The Board has determined that all current directors, other than Mr. Anstice, are independent in accordance with Nasdaq criteria for director independence.

Board committee independence. All members of the Board’s audit, compensation, and nominating and governance committees must be non-employee or outside directors and independent in accordance with applicable Nasdaq criteria as well as, in the case of the compensation committee, applicable rules under section 162(m) of the Internal Revenue Code of 1986, as amended, or the “Code,” and Rule 16b-3 of the Exchange Act. See “Board Committees” below for additional information regarding these committees.

Lead independent director. Our corporate governance guidelines authorize the Board to designate a lead independent director from among the independent members. Mr. Talwalkar was appointed the lead independent director, effective August 27, 2015. See “Leadership Structure of the Board” below for information regarding the responsibilities of the lead independent director.

Executive sessions of independent directors. The Board and its audit, compensation, and nominating and governance committees hold meetings of the independent directors and committee members, without management present, as part of each regularly scheduled meeting and at any other time at the discretion of the Board or committee, as applicable.

Board access to independent advisors. The Board as a whole, and each standing Board committee separately, has the complete authority to retain, at the Company’s expense, and terminate, in their discretion, any independent consultants, counselors, or advisors as they deem necessary or appropriate to fulfill their responsibilities.

Board education program. Our corporate governance guidelines provide that directors are expected to participate in educational events sufficient to maintain their understanding of their duties as directors and to enhance their ability to fulfill their responsibilities. In addition to any external educational opportunities that the directors find useful, the Company and the board leadership are expected to facilitate such

participation by arranging for appropriate educational presentations from time to time.

Leadership Structure of the Board

The leadership structure of the Board consists of a chairman and a lead independent director. The Board has determined our chairman, Mr. Newberry, who served as chief executive officer of the Company from June 2005 to January 2012, to be independent. The Board recognizes the value of having an independent chairman and a lead independent director managing the responsibilities of board leadership. Lam and its stockholders benefit from having Mr. Newberry as its chairman, as he brings to bear his experience as CEO as well as his other qualifications in carrying out his responsibilities as chairman, which include (1) preparing the agenda for the Board meetings with input from the CEO, the Board, and the committee chairs; (2) upon invitation, attending meetings of any of the Board committees on which he is not a member; (3) conveying to the CEO, together with the chair of the compensation committee, the results of the CEO’s performance evaluation; (4) reviewing proposals submitted by stockholders for action at meetings of stockholders and, depending on the subject matter, determining the appropriate body, among the Board or any of the Board committees, to evaluate each proposal and making recommendations to the Board regarding action to be taken in response to such proposal; (5) performing such other duties as the Board may reasonably request from time to time; and (6) as requested by the Board, providing reports to the Board on the chairman’s activities. The Company and its stockholders also benefit from having Mr. Talwalkar as its lead independent director, as he brings to bear his experience as a former CEO of a semiconductor company and a board chairman of another public company as well as his other qualifications in carrying out his responsibilities as lead independent director, which include: (1) coordinating the activities of the independent directors; (2) consulting with the chairman regarding matters such as (a) schedules of and agendas for Board meetings, (b) the quality, quantity, and timeliness of the flow of information from management, and (c) the retention of consultants who report directly to the Board; (3) developing the agenda for and moderating executive sessions of the Board’s independent directors; and (4) moderating executive sessions of the full Board when the chairman is unable to be present.

Other Governance Practices

In addition to the principal policies and procedures described above, we have established a variety of other practices to enhance our corporate governance, including the following:

Board and committee assessments. Every year, the Board conducts a self-evaluation of the Board, its committees, and the individual directors, overseen by the nominating and

 

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   9


Table of Contents

governance committee and generally led by the lead independent director and the chairman of the Board. From time to time, the evaluation is facilitated by an independent third-party consultant. The evaluation solicits the opinions of the directors regarding the effectiveness of the Board, committees, and individual directors in fulfilling its/their obligations. Feedback on Board and committee effectiveness is provided to the full Board for discussion, and feedback regarding individual director performance is provided to each individual director. The Board and committees identify and hold themselves accountable for any action items stemming from the assessment. The results of the evaluations are also considered as part of the director nomination process.

Director resignation or notification of change in executive officer status. Under our corporate governance guidelines, any director who is also an executive officer of the Company must offer to submit his or her resignation as a director to the Board if the director ceases to be an executive officer of the Company. The Board may accept or decline the offer, in its discretion. The corporate governance guidelines also require a non-employee director to notify the nominating and governance committee if the director changes or retires from his or her executive position at another company. The nominating and governance committee reviews the appropriateness of the director’s continuing Board membership under the circumstances, and the director is expected to act in accordance with the nominating and governance committee’s recommendations.

Limitations on other board and committee memberships. Board members may not serve on more than four public company boards (including service on the Company’s Board). Non-employee directors who are sitting executives may not serve on more than three public company boards (including the Company’s Board). The nominating and governance committee will review the appropriateness of continued Board membership if a non-employee director who is a sitting executive serves on more than two such boards, and the director is expected to follow the recommendation of the nominating and governance committee. In addition, non-employee directors may not serve on more than three audit committees of public company boards (including the Company’s audit committee).

Director and executive stock ownership. Under the corporate governance guidelines, each director is expected to own at least the lesser of five times the value of the annual cash retainer (not including any committee chair or other supplemental retainers for directors) or 3,000 shares of Lam common stock, by the fifth anniversary of his or her initial election to the Board. Guidelines for stock ownership by designated members of the executive management team are described below under “Compensation Matters – Executive Compensation and Other Information – Compensation Discussion and Analysis.” All of our directors and designated members of our executive management team were in

compliance with the Company’s applicable stock ownership guidelines at the end of fiscal year 2018 or have a period of time remaining under the program to do so.

Communications with board members. Any stockholder who wishes to communicate directly with the Board, with any Board committee, or with any individual director regarding the Company may write to the Board, the committee, or the director c/o Secretary, Lam Research Corporation, 4650 Cushing Parkway, Fremont, California 94538. The Secretary will forward all such communications to the appropriate director(s).

Any stockholder, employee, or other person may communicate any complaint regarding any accounting, internal accounting control, or audit matter to the attention of the Board’s audit committee by sending written correspondence by mail (to Lam Research Corporation, Attention: Board Audit Committee, P.O. Box 5010, Fremont, California 94537-5010) or by telephone (855-208-8578) or internet (through the Company’s third-party provider website at www.lamhelpline.ethicspoint.com). The audit committee has established procedures to ensure that employee complaints or concerns regarding audit or accounting matters will be received and treated anonymously (if the complaint or concern is submitted anonymously and permitted under applicable law).

Meeting Attendance

Our Board held a total of five meetings during fiscal year 2018. The number of committee meetings held is shown in Figure 8. All of the directors attended at least 75% of the aggregate number of Board meetings and meetings of Board committees on which they served during their tenure in fiscal year 2018, with the exception of Young Bum (YB) Koh, Ph.D. due to medical reasons.

We expect our directors to attend the annual meeting of stockholders each year unless unusual circumstances make attendance impractical. All but one of the individuals who were directors as of the 2017 annual meeting of stockholders attended that meeting.

Board Committees

The Board has three standing committees: an audit committee, a compensation committee, and a nominating and governance committee. The purpose, membership, and charter of each are described below.

 

 

10


Table of Contents

Figure 8. Committee Membership

 

 

Current Committee Memberships

 

Name

 

 

Audit

 

 

Compensation

 

 

 

Nominating   

and   

Governance   

 

 

Eric K. Brandt

 

 

 

Chair

 

       

 

Michael R. Cannon

 

 

 

x

 

     

 

x

 

 

Youssef A. El-Mansy

 

     

 

x

 

   

 

Christine A. Heckart

 

 

 

x

 

       

 

Catherine P. Lego

 

     

 

Chair

 

 

 

x

 

 

Abhijit Y. Talwalkar

 

     

 

x

 

 

 

Chair

 

 

Total Number of

Meetings Held in FY2018

 

 

8

 

 

5

 

 

4

 

Audit committee. The purpose of the audit committee is to oversee the Company’s accounting and financial reporting processes and the audits of our financial statements, including the system of internal controls. As part of its responsibilities, the audit committee reviews and oversees potential conflict of interest situations, transactions required to be disclosed pursuant to Item 404 of Regulation S-K of the SEC, and any other transaction involving an executive or Board member. A copy of the audit committee charter is available on the Investors section of our website at https://investor.lamresearch.com/corporate-governance.

The Board concluded that all audit committee members are non-employee directors who are independent in accordance with the Nasdaq listing standards and SEC rules for audit committee member independence and that each audit committee member is able to read and understand fundamental financial statements as required by the Nasdaq listing standards. The Board also determined that Messrs. Brandt and Cannon (both members of the committee) are each, and Messrs. Anstice, Newberry, and Talwalkar and Ms. Lego (members of the Board) each qualify as, an “audit committee financial expert” as defined in the SEC rules.

Compensation committee. The purpose of the compensation committee is to discharge certain responsibilities of the Board relating to executive compensation; to oversee incentive, equity-based plans, and other compensatory plans in which the Company’s executive officers and/or directors participate; and to produce an annual report on executive compensation for inclusion as required in the Company’s annual proxy statement. The compensation committee is authorized to perform the responsibilities of the committee referenced above and described in its charter. A copy of the compensation committee charter is available on the Investors section of our website at https://investor.lamresearch.com/corporate- governance.

The Board concluded that all members of the compensation committee are non-employee directors who are independent in accordance with Rule 16b-3 of the Exchange Act and the Nasdaq criteria for director and compensation committee member independence and who are outside directors for purposes of section 162(m) of the Code.

Nominating and governance committee. The purpose of the nominating and governance committee is to identify individuals qualified to serve as members of the Board of the Company, to recommend nominees for election as directors of the Company, to oversee self-evaluations of the Board’s performance, to develop and recommend corporate governance guidelines to the Board, and to provide oversight with respect to corporate governance. A copy of the nominating and governance committee charter is available on the Investors section of our website at https://investor.lamresearch.com/corporate-governance.

The Board concluded that all nominating and governance committee members are non-employee directors who are independent in accordance with the Nasdaq criteria for director independence.

The nominating and governance committee will consider for nomination persons properly nominated by stockholders in accordance with the Company’s bylaws and other procedures described below under “Voting and Meeting Information – Other Meeting Information – Stockholder-Initiated Proposals and Nominations for the 2019 Annual Meeting.” Subject to then-applicable law, stockholder nominations for director will be evaluated by the Company’s nominating and governance committee in accordance with the same criteria as is applied to candidates identified by the nominating and governance committee or other sources.

Board’s Role and Engagement

General. The Board directs and oversees the management of the business and affairs of the Company. In this oversight role, the Board serves as the ultimate decision-making body of the Company, except for those matters reserved for the stockholders.

The Board and its committees have the primary responsibilities for:

 

    discussing, reviewing, monitoring and approving the Company’s business strategies, capital allocation plans/priorities, annual operating plan, and major corporate actions as set forth below;
  °    A strategic plan is presented to the Board for discussion on an annual basis, and updates are presented at each quarterly Board meeting.
  °    An operating plan is presented to the Board for discussion on an annual basis, and updates are presented at each quarterly Board meeting.
 

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   11


Table of Contents
  °    Capital allocation plans and priorities are discussed on a quarterly basis.
  °    Major corporate actions are presented and discussed as part of strategic plan updates and as special agenda topics, as appropriate.
    appointing, evaluating the performance of, and approving the compensation of the CEO;
    reviewing with the CEO the performance of the Company’s executive officers and approving their compensation;
    reviewing and approving CEO and top leadership succession planning;
    advising and mentoring the Company’s senior management;
    overseeing the Company’s internal controls over financial reporting and disclosure controls and procedures;
    overseeing the Company’s ethics and compliance programs, including the Company’s code of ethics; and
    overseeing the Company’s enterprise risk management processes and programs, described in further detail below.

Risk Oversight. The Board is actively engaged in risk oversight. Management regularly reports to the Board on its risk assessments and risk mitigation strategies for the major risks of our business. Generally, the Board exercises its oversight responsibility directly; however, in specific cases, such responsibility has been delegated to committees of the Board. Committees that have been charged with risk oversight regularly report to the Board on those risk matters within their areas of responsibility. Risk oversight responsibility has been delegated to committees of the Board as set forth below.

 

    Our audit committee oversees risks related to the Company’s accounting and financial reporting, internal controls, annual financial statement audits, independent registered public accounting firm, internal audit function, and related party transactions. The audit committee also oversees the review and monitoring of information security policies, with the responsibility of recommending such Board action as it deems appropriate.
    Our compensation committee oversees risks related to the Company’s equity, and executive compensation programs and plans.
    Our nominating and governance committee oversees risks related to director independence, Board and Board committee composition, and CEO succession planning.

Stockholder Engagement

We believe that engagement with our stockholders is an important part of effective corporate governance. Our senior management, including our CEO, CFO and members of our Investor Relations team, maintain regular contact with a broad base of investors through quarterly earnings calls, meetings, analyst day events, industry conferences and other investor and industry events. In addition, we regularly engage with major stockholders on governance matters, including

compensation and environmental and social governance. The outreach is generally conducted outside of our proxy solicitation period and, depending on the topics, includes members of our Investor Relations, Human Resources, Environmental Health & Safety and Legal functions. During the proxy solicitation period, we may also engage with our stockholders about topics to be addressed at our annual meeting of stockholders. We share all opinions and information received from our stockholders with our board of directors. Over the last few years, we have heard from stockholders about their views on subjects such as proxy access, returning capital to stockholders, director tenure, board refreshment, director skills and experiences, board and workforce diversity, and environmental and social governance matters. Understanding the feedback shared with us, we have adopted proxy access and have enhanced our proxy statement and Corporate Social Responsibility (CSR) Report disclosures.

Stockholder Proposal

At our 2017 annual meeting of stockholders, an advisory stockholder proposal regarding annual disclosure of EEO-1 data received support of approximately 40% of shares voted. As part of our stockholder engagement, some of our investors also told us they would appreciate more disclosure about inclusion and diversity. We will include in our next CSR report enhanced disclosure about our inclusion and diversity programs and demographic information about the ethnic and gender diversity of our workforce. In addition, we will update our leadership disclosure on our website to include our Office of the Chief Executive Officer (OCEO) staff rather than only our executive officers.

Corporate Social Responsibility

Our core values underpin our commitments to sustainable growth and making a positive contribution to people and the planet. We are committed to responsible business practices and continuous improvement in our own operations, in our partnerships with our customers, and across our supply chain.

Workplace. Guided by our Core Value of mutual trust and respect, we strive to provide a work environment that fosters inclusion and diversity, ensures every voice can be heard, and enables employees to achieve their full potential. We aim to maintain a collaborative, supportive, and opportunity-rich culture that enhances innovation and employee engagement.

Community. We believe that positively involving our employees and giving back to our community is central to our culture and aligned with our Core Values. Our charitable giving includes employee volunteer hours, the Lam Research Foundation grant program, and employee giving.

As a successful equipment supplier in the technology industry, we encourage students to pursue science, technology,

 

 

12


Table of Contents

engineering, or math (STEM) careers, engage in activities that give young people visibility into careers in the semiconductor industry, and support those students who demonstrate excellence in the STEM fields.

Operations: Environment and Safety. Lam Research carefully monitors and manages its environmental impact across the business – from procurement to manufacturing, during R&D and product design, and throughout a product’s lifecycle.

We aim to protect the health and safety of our personnel throughout our entire operation, including our offices, manufacturing sites, R&D centers, and our field team working at customer sites.

Responsible and Accountable Global Supply Chain. All direct suppliers are expected to comply with our Global Supplier

Code of Conduct, which covers ethics, integrity, transparency, anti-corruption, and responsible business practices. Additionally, all direct material suppliers must comply with our conflict minerals and human trafficking policies.

Lam Research is a proponent of industry standards and has adopted the standard guidelines published by the Institute for Supply Management (ISM), “Principles And Standards Of Ethical Supply Management Conduct With Guidelines.” Lam Research has also adopted the Responsible Business Alliance (RBA) Code of Conduct.

For more information about our corporate social responsibility efforts, please refer to our report available on the Company’s website.

 

 

 

Director Compensation

 

Our director compensation is designed to attract and retain high-caliber directors and to align director interests with those of stockholders. Director compensation is reviewed and determined annually by the Board (in the case of Mr. Anstice, by the independent members of the Board, and Mr. Newberry, by all other independent members of the Board) upon recommendation from the compensation committee. Non-employee director compensation (including the compensation of Mr. Newberry, who is currently our non-employee chairman) is described below. Mr. Anstice, whose compensation as CEO is described below under “Compensation Matters – Executive Compensation and Other Information – Compensation Discussion and Analysis,” does not receive additional compensation for his service on the Board.

Non-employee director compensation. Non-employee directors receive annual cash retainers and equity awards. The chairman of the Board, the lead independent director, and committee chairs and members receive additional cash retainers. Non-employee directors who join the Board or a committee mid-year receive pro-rated cash retainers and equity awards, as applicable. Our non-employee director compensation program is based on service during the calendar year; however, SEC rules require us to report compensation in this proxy statement on a fiscal-year basis. Cash compensation paid to non-employee directors for the fiscal year ended June 24, 2018, together with the annual cash compensation program components in effect for calendar years 2018 and 2017, is shown below.

Figure 9. Director Annual Retainers

 

Annual Retainers   Calendar
Year 2018
($)
    Calendar
Year 2017
($)
    Fiscal
Year 2018
($)
 

 

Non-employee Director

 

 

 

 

 

 

75,000

 

 

 

 

 

 

 

 

 

65,000

 

 

 

 

 

 

 

 

 

70,000

 

 

 

 

 

Chairman

 

 

 

 

 

 

120,000

 

 

 

 

 

 

 

 

 

160,000

 

 

 

 

 

 

 

 

 

140,000

 

 

 

 

 

Lead Independent Director

 

 

 

 

 

 

27,500

 

 

 

 

 

 

 

 

 

22,500

 

 

 

 

 

 

 

 

 

25,000

 

 

 

 

 

Audit Committee – Chair

 

 

 

 

 

 

30,000

 

 

 

 

 

 

 

 

 

30,000

 

 

 

 

 

 

 

 

 

30,000

 

 

 

 

 

Audit Committee – Member

 

 

 

 

 

 

12,500

 

 

 

 

 

 

 

 

 

12,500

 

 

 

 

 

 

 

 

 

12,500

 

 

 

 

 

Compensation Committee – Chair

 

 

 

 

 

 

20,000

 

 

 

 

 

 

 

 

 

20,000

 

 

 

 

 

 

 

 

 

20,000

 

 

 

 

 

Compensation Committee – Member

 

 

 

 

 

 

10,000

 

 

 

 

 

 

 

 

 

10,000

 

 

 

 

 

 

 

 

 

10,000

 

 

 

 

 

Nominating and Governance Committee – Chair

 

 

 

 

 

 

15,000

 

 

 

 

 

 

 

 

 

15,000

 

 

 

 

 

 

 

 

 

15,000

 

 

 

 

 

Nominating and Governance Committee – Member

 

 

 

 

 

 

5,500

 

 

 

 

 

 

 

 

 

5,000

 

 

 

 

 

 

 

 

 

5,250

 

 

 

 

Each non-employee director also receives an annual equity grant on the first Friday following the annual meeting with a targeted grant date value equal to $200,000 (the number of RSUs subject to the award is determined by dividing $200,000 by the closing price of a share of Company common stock as of the date of grant, rounded down to the nearest 10 shares). These grants generally vest on October 31 in the year following the grant and are subject to the terms and conditions of the Company’s 2015 Stock Incentive Plan, as amended, or the “2015 Plan,” and the applicable award agreements. These grants immediately vest in full: (1) if a non-employee director dies or becomes subject to a “disability” (as determined pursuant to the 2015 Plan), (2) upon the occurrence of a “Corporate Transaction” (as defined in the 2015 Plan), or

 

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   13


Table of Contents

(3) on the date of the annual meeting if the annual meeting during the year in which the award was expected to vest occurs prior to the vest date and the non-employee director is not re-elected or retires or resigns effective immediately prior to the annual meeting. Non-employee directors who commence service after the annual award has been granted receive on the first Friday following the first regularly scheduled, quarterly Board meeting attended a pro-rated grant based on the number of regularly scheduled, quarterly Board meetings remaining in the year as of the effective date of the director’s appointment. The pro-rated grants are subject to the same vesting schedule, terms and conditions as the annual equity awards, except that if the award is granted on the first Friday following the regularly scheduled quarterly November Board meeting, the grant vests immediately.

On November 10, 2017, each director other than Mr. Anstice received a grant of 960 RSUs for service during calendar year 2018.

Unless there is an acceleration event, these RSUs granted to each current director for service during calendar year 2018 will vest in full on October 31, 2018, subject to the director’s continued service on the Board.

Chairman compensation. Mr. Newberry, in addition to his regular compensation as a non-employee director, receives an additional cash retainer of $120,000 on the same date.

Mr. Newberry was eligible to participate through 2014 in the Company’s Elective Deferred Compensation Plan that is generally applicable to executives of the Company, subject to the general terms and conditions of such plan. He continues to maintain a balance in the plan until he no longer performs service for the Company as a director but is no longer eligible to defer any compensation into the plan.

The following table shows compensation for fiscal year 2018 for persons serving as directors during fiscal 2018 other than Mr. Anstice:

Figure 10. FY2018 Director Compensation

 

Director Compensation for Fiscal Year 2018  
    Fees
Earned
or Paid
in Cash
($)
    Stock
Awards
($) (1)
    All Other
Compen-
sation
($)(2)
    Total
($)
 

 

Stephen G. Newberry

    195,000 (3)       197,395 (4)       28,456       420,851  
                                 

 

Eric K. Brandt

    105,000 (5)       197,395 (4)       —         302,395  
                                 

 

Michael R. Cannon

    93,000 (6)       197,395 (4)       —         290,395  
                                 

 

Youssef A. El-Mansy

    85,000 (7)       197,395 (4)       28,456       310,851  
                                 

 

Christine A. Heckart

    87,500 (8)       197,395 (4)       —         284,895  
                                 

 

Young Bum (YB) Koh

    75,000 (9)       197,395 (4),(10)       —         272,395  
                                 

 

Catherine P. Lego

    100,500 (11)       197,395 (4)       27,150       325,045  
                                 

 

Abhijit Y. Talwalkar

    127,500 (12)       197,395 (4)       —         324,895  
                                 

 

Lih Shyng (Rick L.) Tsai

    75,000 (13)       197,395 (4)       —         272,395  
                                 

 

(1) 

The amounts shown in this column represent the grant date fair value of unvested RSU awards granted during fiscal year 2018 in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, Compensation — Stock Compensation, or “ASC 718.” However, pursuant to SEC rules, these values are not reduced by an estimate for the probability of forfeiture. The assumptions used to calculate the fair value of the RSUs in fiscal year 2018 are set forth in Note 4 to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the fiscal year ended June 24, 2018.

 

(2) 

Represents the portion of medical, dental, and vision premiums paid by the Company.

 

(3) 

Mr. Newberry received $195,000, representing his $120,000 chairman retainer and $75,000 annual retainer as a director.

 

(4) 

On November 10, 2017, each non-employee director who was on the board received an annual grant of 960 RSUs based on the $207.39 closing price of Lam’s common stock and the target value of $200,000, rounded down to the nearest 10 shares.

 

(5) 

Mr. Brandt received $105,000, representing his $75,000 annual retainer and $30,000 as the chair of the audit committee.

 

(6) 

Mr. Cannon received $93,000, representing his $75,000 annual retainer, $12,500 as a member of the audit committee, and $5,500 as a member of the nominating and governance committee.

 

(7) 

Dr. El-Mansy received $85,000, representing his $75,000 annual retainer and $10,000 as a member of the compensation committee.

 

(8) 

Ms. Heckart received $87,500, representing her $75,000 annual retainer and $12,500 as a member of the audit committee.

 

(9) 

Dr. Koh received a $75,000 annual retainer.

 

(10) 

Dr. Koh resigned from his board membership effective the close of business on May 14, 2018, which resulted in the forfeiture of the 960 RSUs received as part of the annual grant.

 

(11) 

Ms. Lego received $100,500, representing her $75,000 annual retainer, $20,000 as the chair of the compensation committee, and $5,500 as a member of the nominating and governance committee.

 

 

14


Table of Contents
(12) 

Mr. Talwalkar received $127,500, representing his $75,000 annual retainer, $27,500 as lead independent director, $10,000 as a member of the compensation committee, and $15,000 as the chair of the nominating and governance committee.

 

(13) 

Dr. Tsai received a $75,000 annual retainer.

Other benefits. Any members of the Board enrolled in the Company’s health plans on or prior to December 31, 2012, can continue to participate after retirement from the Board in the Company’s Retiree Health Plans. The Board eliminated this benefit for any person who became a director after December 31, 2012. The most recent valuation of the Company’s accumulated post-retirement benefit obligation under Accounting Standards Codification 715, Compensation-Retirement Benefits as of June 24, 2018, for eligible former directors and the current directors who may become eligible is shown below. Factors affecting the amount of post-retirement benefit obligation include current age, age at retirement, coverage tier (e.g., single, plus spouse, plus family), interest rate, and length of service.

Figure 11. FY2018 Accumulated Post-Retirement Benefit Obligations

 

Director Compensation for Fiscal Year 2018  
   Name   Accumulated
Post-Retirement
Benefit Obligation,
as of June 24,  2018
($)
 

 

   Stephen G. Newberry

 

 

 

 

 

 

840,000

 

 

 

 

 

   Eric K. Brandt

 

 

 

 

 

 

—  

 

 

 

 

 

   Michael R. Cannon

 

 

 

 

 

 

—  

 

 

 

 

 

   Youssef A. El-Mansy

 

 

 

 

 

 

585,000

 

 

 

 

 

   Christine A. Heckart

 

 

 

 

 

 

—  

 

 

 

 

 

   Young Bum (YB) Koh

 

 

 

 

 

 

—  

 

 

 

 

 

   Catherine P. Lego

 

 

 

 

 

 

487,000

 

 

 

 

 

   Abhijit Y. Talwalkar

 

 

 

 

 

 

—  

 

 

 

 

 

   Lih Shyng (Rick L.) Tsai

 

 

 

 

 

 

—  

 

 

 

 

 

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   15


Table of Contents
    

 

Compensation Matters

 

 

Executive Compensation and Other Information

Compensation Discussion and Analysis

This Compensation Discussion and Analysis, or “CD&A,” describes our executive compensation program. It is organized into the following four sections:

 

I.

Overview of Executive Compensation (including our Philosophy and Program Design)

 

II.

Executive Compensation Governance and Procedures

 

III.

Primary Components of Named Executive Officer Compensation; Calendar Year 2017 Compensation Payouts; Calendar Year 2018 Compensation Targets and Metrics

 

IV.

Tax and Accounting Considerations

Our CD&A discusses compensation earned by our fiscal year 2018 “Named Executive Officers,” or “NEOs,” who are as follows:

Figure 12. FY2018 NEOs

 

Named Executive Officer    Position(s)
Martin B. Anstice    Chief Executive Officer
Timothy M. Archer    President and Chief Operating Officer
Douglas R. Bettinger    Executive Vice President and Chief Financial Officer
Richard A. Gottscho    Executive Vice President, Corporate Chief Technology Officer
Scott G. Meikle    Senior Vice President, Global Customer Operations

I. OVERVIEW OF EXECUTIVE COMPENSATION

To align with stockholders’ interests, our executive compensation program is designed to foster a pay-for-performance culture and achieve the executive compensation objectives set forth in “Executive Compensation Philosophy and Program Design—Executive Compensation Philosophy” below. We have structured our compensation program and payouts to reflect these goals. Our CEO’s compensation in relation to our revenue and net income is shown below.

Figure 13. FY2013-FY2018 CEO Pay for Performance

 

LOGO

CEO Pay for performance net income revenue CEO total compensation (1)(2) Total compensation (in thousands) revenue and Net Income (in thousands)

 

16


Table of Contents
(1)

“CEO Total Compensation” consists of base salary, annual incentive payments, accrued values of the cash payments under the long-term incentive program when applicable and grant date fair values of equity-based awards under the long-term incentive program, and all other compensation as reported in the “Summary Compensation Table” below.

 

(2)

The CEO Total Compensation for fiscal year 2013 reflects awards covering a two-year performance period as compared to the three-year period in all subsequent fiscal years. In 2014, the committee granted one-time calendar year 2014 Gap Year Awards as defined below of Market-based Performance Restricted Stock Units, or “Market-based PRSUs,” stock options and RSUs on the terms set forth in Figure 16 of the 2014 proxy statement. The one-time 2014 Gap Year Award, with a value of $3,074,271 that is reflected in the “Executive Compensation Tables – Summary Compensation Table” for fiscal year 2014 is not included in fiscal year 2014 CEO Total Compensation in order to allow readers to more easily compare compensation in prior and subsequent periods and better reflect the compensation payable in any fiscal year following the transition. In 2014, our long-term incentive program, or “LTIP” was redesigned by: (i) establishing a program entirely composed of equity, (ii) introducing a new LTIP vehicle, a Market-based PRSU, designed to reward eligible participants based on our stock price performance relative to the Philadelphia Semiconductor Sector Index (SOX), or “SOX index,” (iii) differentiating the metric in our LTIP from the absolute operational performance metrics used for the annual incentive program, and (iv) extending the performance period for the LTIP from two to three years. This change would have left participants with a gap in long-term incentive vesting opportunity in 2016. To ensure that participants received a long-term award that vested in 2016, the committee also awarded in 2014 a one-time gap year award with a two-year performance period, or the “Gap Year Award.” The target amount awarded under the Gap Year Award was equal to 50% of the target award opportunity under the regular three-year LTIP award. While the impact on the employee from the extended performance period and the Gap Year Award was to normalize the received compensation in any year, assuming the same year after year performance and target opportunities, the impact on the Company from such normalization was a higher grant-based compensation expense in fiscal year 2014.

To understand our executive compensation program fully, we believe it is important to understand:

 

    our business, our industry environment, and our financial performance; and
    our executive compensation philosophy and program design.

Our Business, Our Industry Environment, and Our Financial Performance

 

 

Lam Research is a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry. We have built a strong global presence with core competencies in areas like nanoscale applications enablement, chemistry, plasma and fluidics, advanced systems engineering, and a broad range of operational disciplines. Our products and services are designed to help our customers build smaller, faster, and better performing

devices that are used in a variety of electronic products, including mobile phones, personal computers, servers, wearables, automotive devices, storage devices, and networking equipment. Our vision is to realize full value from natural technology extensions of our company.

Our customer base includes leading semiconductor memory, foundry, and integrated device manufacturers that make products such as non-volatile memory, DRAM memory, and logic devices. We aim to increase our strategic relevance with our customers by contributing more to their continued success. Our core technical competency is integrating hardware, process, materials, software, and process control enabling results on the wafer.

Semiconductor manufacturing, our customers’ business, involves the complete fabrication of multiple dies or integrated circuits on a wafer. This involves the repetition of a set of core processes and can require hundreds of individual steps. Fabricating these devices requires highly sophisticated process technologies to integrate an increasing array of new materials with precise control at the atomic scale. Along with meeting technical requirements, wafer processing equipment must deliver high productivity and be cost-effective.

Demand from the Cloud, Internet of Things (IoT), and other markets is driving the need for increasingly powerful and cost-efficient semiconductors. At the same time, there are growing technical challenges with traditional scaling. These trends are driving significant inflections in semiconductor manufacturing, such as the increasing importance of vertical 3D scaling strategies as well as multiple patterning to enable shrinks.

We believe we are in a strong position with our leadership and competency in deposition, etch, and clean to facilitate some of the most significant innovations in semiconductor device manufacturing. Several factors create opportunity for sustainable differentiation for us: (i) our focus on research and development, with several on-going programs related to sustaining engineering, product and process development, and concept and feasibility; (ii) our ability to effectively leverage cycles of learning from our broad installed base; (iii) our collaborative focus with ecosystem partners; and (iv) our focus on delivering our multi-product solutions with a goal to enhance the value of Lam’s solutions to our customers.

Although we have a June fiscal year end, our executive compensation program is generally designed and oriented on a calendar-year basis to correspond with our calendar-year-based business planning. This CD&A generally reflects a calendar-year orientation rather than a fiscal-year orientation, as shown below. The Executive Compensation Tables at the end of this CD&A are based on our fiscal year, as required by SEC regulations.

 

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   17


Table of Contents

Figure 14. Executive Compensation Calendar-Year Orientation

 

LOGO

Fiscal Year 2018 Relevant for executive compensation tables Calendar Year 2017 Calendar Year 2018 Relevant for compensation program design and orientation

In calendar year 2017, demand for semiconductor equipment continued to increase relative to calendar year 2016, as technology inflections continued to lead to higher investments from our customers. Against this backdrop, Lam delivered another year of record financial performance.

Highlights for calendar year 2017:

 

    achieved record revenues of approximately $9.6 billion for the calendar year, representing a 50% increase over calendar year 2016;
    generated operating cash flow of approximately $2.0 billion, which represents approximately 21% of revenues; and
    generated sufficient cash flow to support payment of approximately $293 million in dividends to stockholders, a 53% increase compared to calendar year 2016.

In the first half of calendar year 2018, investments for wafer fabrication equipment spending were strong as customers transition to next-generation technology nodes, which are increasingly complex and costlier to produce.

Lam has continued to generate solid operating income and cash generation with revenues of $6.0 billion, and cash flows from operations of $1.8 billion, earned from the March and June 2018 quarters combined.

Executive Compensation Philosophy and Program Design

 

 

Executive Compensation Philosophy

The philosophy of our compensation committee that guided this year’s awards and payout decisions is that our executive compensation program should:

 

    provide competitive compensation to attract and retain top talent;
    provide total compensation packages that are fair to employees and reward corporate, organizational, and individual performance;
    align pay with business objectives while driving exceptional performance;
    optimize value to employees while maintaining cost-effectiveness to the Company;
    create stockholder value over the long term;
    align our annual program to annual performance and our long-term program to longer-term performance;
    recognize that a long-term, high-quality management team is a competitive differentiator for Lam, enhancing customer trust/market share and, therefore, stockholder value; and
    provide rewards when results have been demonstrated.

Our compensation committee’s executive compensation objectives are to motivate:

 

    performance that creates long-term stockholder value;
    outstanding performance at the corporate, organization, and individual levels; and
    retention of a long-term, high-quality management team.

Program Design

Our program design uses a mix of annual and long-term components, and a mix of cash and equity components. Our executive compensation program includes base salary, an annual incentive program, or “AIP,” and a LTIP, as well as stock ownership guidelines and a compensation recovery policy. As illustrated below, our program design is weighted toward performance and stockholder value. The performance-based program components include AIP cash payouts and market-based equity and stock option awards under the LTIP.

 

 

18


Table of Contents

Figure 15. NEO Compensation Target Pay Mix Averages(1)

 

LOGO

Calendar Year 2018 Average NEO Target Pay Mix 58% Performance-Based(2) Calendar Year 2017 Average NEO Target Pay Mix 58% Performance-Based(2) Calendar Year 2016 Average NEO Target Pay Mix 65% Performance-Based (2) Performance-Based Compensation(3) Non-Performance-Based Compensation

 

(1) 

Data for 2018, 2017, and 2016 charts is for the then-applicable NEOs (i.e., fiscal year 2018 NEOs are represented in the 2018 chart, etc.).

 

(2) 

The Company’s LTIP design provides that 50% of the target award opportunity is awarded in Market-based PRSUs and the remaining 50% in a combination of stock options and service-based RSUs with at least 10% of the award in each of these two vehicles. In 2017 and 2018, the percentages of the target award opportunity awarded in stock options and service-based RSUs were 10% and 40%, respectively. In 2016, the corresponding percentages awarded in stock options and service-based RSUs were 20% and 30%. See “III. Primary Components of Named Executive Officer Compensation; Calendar Year 2017 Compensation Payouts; Calendar Year 2018 Compensation Targets and Metrics – Long-Term Incentive Program – Design” for further information regarding the impact of such a target pay mix.

 

(3) 

For purposes of this illustration, we include Market-based PRSUs and stock options as performance-based, but do not classify service-based RSUs as performance-based.

 

For senior vice presidents and above, we also have stock ownership guidelines that foster a long-term orientation. See next paragraph for additional information.

Our stock ownership guidelines for our NEOs and certain other senior executives are shown below. The requirements are specified in the alternative of shares or dollars to allow for stock price volatility. Ownership levels as shown below must

be achieved within five years of appointment to one of the below positions. Increased requirements due to promotions or an increase in the ownership guideline must be achieved within five years of promotion or a change in the guidelines. At the end of fiscal year 2018, all NEOs were in compliance with our stock ownership guidelines or have a period of time remaining under the guidelines to meet the required ownership level.

 

 

Figure 16. Executive Stock Ownership Guidelines

 

   Position    Guidelines (lesser of)

 

   Chief Executive Officer

 

  

 

5x base salary or 50,000 shares

 

 

   President and Chief Operating Officer

 

  

 

3x base salary or 20,000 shares

 

 

   Executive Vice Presidents

 

  

 

2x base salary or 10,000 shares

 

 

   Senior Vice Presidents

 

  

 

1x base salary or 5,000 shares

 

 

Compensation Recovery, or “Clawback” Policy

 

 

Our executive officers covered by section 16 of the Exchange Act are subject to the Company’s compensation recovery, or “clawback,” policy. The clawback policy was adopted in August 2014 and will enable us to recover, within 36 months

of the issuance of the original financial statements, the excess amount of cash incentive-based compensation issued starting in calendar year 2015 to officers covered by section 16 of the Exchange Act when a material restatement of financial results is required. A covered individual’s fraud must have materially contributed to the need to issue restated financial statements

 

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   19


Table of Contents

in order for the clawback policy to apply to that individual. The recovery of compensation is not the exclusive remedy available in the event that the clawback policy is triggered.

Executive Compensation Highlights

 

 

Highlights of our executive compensation program are listed in “Proxy Statement Summary – Figure 6. Executive Compensation Highlights” above.

 

 

II. EXECUTIVE COMPENSATION GOVERNANCE AND PROCEDURES

 

Role of the Compensation Committee

 

 

Our Board has delegated certain responsibilities to the compensation committee, or the “committee,” through a formal charter. The committee(1) oversees the compensation programs in which our chief executive officer, president and chief operating officer, and CEO’s direct executive and senior vice president reports participate. The independent members of our Board approve the compensation packages and payouts for our CEO. The CEO is not present for any decisions regarding his compensation packages and payouts.

Committee responsibilities include but are not limited to: reviewing and approving the Company’s executive compensation philosophy, objectives, and strategies; reviewing and approving the appropriate peer group companies for purposes of evaluating the Company’s compensation competitiveness; causing the Board to perform a periodic performance evaluation of the CEO; recommending to the independent members of the Board (as determined under both Nasdaq’s listing standards and section 162(m) of the Code) corporate goals and objectives under the Company’s compensation plans, compensation packages (e.g., annual base salary level, annual cash incentive award, long-term incentive award and any employment agreement, severance arrangement, change-in-control arrangement, equity grant, or special or supplemental benefits, and any material amendment to any of the foregoing) as applicable to the CEO, and compensation payouts for the CEO; annually reviewing with the CEO the performance of the Company’s other executive officers in light of the Company’s executive compensation goals and objectives and approving the compensation packages and compensation payouts for such individuals; reviewing and recommending for appropriate Board action all cash, equity-based and other compensation packages, and compensation payouts applicable to the chairman and other members of the Board; and reviewing, and approving where appropriate, equity-based compensation plans.

The committee is authorized to delegate its authority and responsibilities as it deems proper and consistent with legal requirements to its members, any other committee of the Board and one or more officers of the Company in accordance with the provisions of the Delaware General Corporation Law. For additional information on the committee’s responsibilities and authorities, see “Governance Matters—Corporate Governance—Board Committees—Compensation Committee” above.

In order to carry out these responsibilities, the committee receives and reviews information, analysis, and proposals prepared by our management and by the committee’s compensation consultant (see “Role of Committee Advisors” below).

Role of Committee Advisors

 

 

The committee is authorized to engage its own independent advisors to assist in carrying out its responsibilities. The committee has engaged the services of Compensia, Inc., or “Compensia,” a national compensation consulting firm, as the committee’s compensation consultant. Compensia provides the committee with independent and objective guidance regarding the amount and types of compensation for our chairman, non-employee directors, and executive officers and how these amounts and types of compensation compare to other companies’ compensation practices, as well as guidance on market trends, evolving regulatory requirements, compensation of our independent directors, peer group composition, and other matters as requested by the committee.

Representatives of Compensia regularly attend committee meetings (including executive sessions without management present), communicate with the committee chair outside of meetings, and assist the committee with its consideration of performance metrics and goals. Compensia reports to the committee, not to management. At the committee’s request, Compensia meets with members of management to gather and discuss information that is relevant to advising the committee. The committee may replace Compensia or hire additional advisors at any time. Compensia has not provided any other services to the committee or to our management, and has received no compensation from us other than with respect to the services described above. The committee assessed the independence of Compensia pursuant to SEC rules and Nasdaq listing standards, including the following factors: (1) the absence of other services provided by it to the Company; (2) the fees paid to it by the Company as a percentage of its total revenue; (3) its policies and procedures to prevent conflicts of interest; (4) the absence of any

 

(1) 

For purposes of this CD&A, a reference to a compensation action or decision by the committee with respect to our chairman and our chief executive officer, means an action or decision by the independent members of our Board after considering the recommendation of the committee and, in the case of all other NEOs, an action or decision by the compensation committee.

 

 

20


Table of Contents

business or personal relationships with committee members; (5) the fact that it does not own any Lam common stock; and (6) the absence of any business or personal relationships with our executive officers. The committee assessed this information and concluded that the work of Compensia had not raised any conflict of interest.

Role of Management

 

 

Our CEO, with support from our human resources and finance organizations, develops recommendations for the compensation of our other executive officers. Typically, these recommendations cover base salaries, annual incentive program target award opportunities, long-term incentive program target award opportunities, and the criteria upon which these award opportunities may be earned, as well as actual payout amounts under the annual and long-term incentive programs.

The committee considers the CEO’s recommendations within the context of competitive compensation data, the Company’s compensation philosophy and objectives, current business conditions, the advice of Compensia, and any other factors it considers relevant. At the request of the committee, our chairman also provides input to the committee.

Our CEO attends committee meetings at the request of the committee, but leaves the meeting for any deliberations related to and decisions regarding his own compensation, when the committee meets in executive session, and at any other time requested by the committee.

Peer Group Practices and Survey Data

 

 

In establishing the total compensation levels of our executive officers, as well as the mix and weighting of individual compensation elements, the committee monitors compensation data from a group of comparably sized companies in the technology industry, or the “Peer Group,” which may differ from peer groups used by stockholder advisory firms. The committee selects the companies constituting our Peer Group based on their comparability to our lines of business and industry, annual revenue, and market capitalization, and our belief that we are likely to compete with them for executive talent. Our Peer Group is focused on U.S.-based, public semiconductor, semiconductor equipment and materials companies, and similarly sized high-technology equipment and hardware companies with a global presence and a significant investment in research and development. The table below summarizes how the Peer Group companies compare to the Company:

Figure 17. 2018 Peer Group Revenue and Market Capitalization

 

   Metric   Lam
Research
($M)
    Target for
Peer Group
  Peer
Group
Median
($M)
 

 

   Revenue (last completed four

   quarters as of May 5, 2017)

 

 

 

 

 

7,215

 

 

 

 

0.33 to
3 times Lam

 

 

 

 

 

4,769

 

 

 

   Market Capitalization (30-day

   average as of May 5, 2017)

 

 

 

 

 

22,258

 

 

 

 

0.33 to
3 times Lam

 

 

 

 

 

17,906

 

 

Based on these criteria, the Peer Group and targets may be modified from time to time. Our Peer Group was reviewed in July 2017 for calendar year 2018 compensation decisions and based on the criteria identified above, three companies were added to the peer group (Microchip Technology Incorporated, Texas Instruments Inc. and Western Digital Corporation) and one company (SanDisk Corporation) was removed. Our Peer Group consists of the companies listed as follows:

Figure 18. CY2018 Peer Group Companies

 

 

   Advanced Micro Devices, Inc.

 

 

 

   Maxim Integrated Products, Inc.

 

 

   Agilent Technologies, Inc.

 

 

 

   Microchip Technology

   Incorporated

 

 

   Analog Devices, Inc.

 

 

 

   NetApp, Inc.

 

 

   Applied Materials, Inc.

 

 

 

   NVIDIA Corporation

 

 

   Broadcom Limited

 

 

 

   ON Semiconductor Corporation

 

 

   Corning Incorporated

 

 

 

   Skyworks Solutions, Inc.

 

 

   Juniper Networks, Inc.

 

 

 

   Texas Instruments Inc.

 

 

   KLA-Tencor Corporation

 

 

 

   Western Digital Corporation

 

 

   Micron Technology, Inc.

 

 

 

   Xilinx, Inc.

 

We derive revenue, market capitalization, and NEO compensation data from public filings made by our Peer Group companies with the SEC and other publicly available sources. Radford Technology Survey data may be used to supplement compensation data from public filings as needed. The committee reviews compensation practices and selected data on base salary, bonus targets, total cash compensation, equity awards, and total compensation drawn from the Peer Group companies and/or the Radford Technology Survey as a reference to help ensure compensation packages are consistent with market norms.

 

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   21


Table of Contents

Base pay levels for each executive officer are generally set with reference to market competitive levels and in reflection of each officer’s skills, experiences, and performance. Variable pay target award opportunities and total direct compensation for each executive officer are generally designed to deliver market competitive compensation for the achievement of stretch goals with downside risk for underperforming and upside reward for overperforming. For those executive officers who are new to their roles, compensation arrangements may be designed to deliver below market compensation for a period of time. However, the committee does not “target” pay at any specific percentile. Rather, individual pay positioning depends on a variety of factors, such as prior job performance, job scope and responsibilities, skill set, prior experience, time in position, internal comparisons of pay levels for similar skill levels or positions, our goals to attract and retain executive talent, Company performance, and general market conditions.

Assessment of Compensation Risk

 

 

Management, with the assistance of Compensia, the committee’s independent compensation consultant, conducted a compensation risk assessment in 2018 and concluded that the Company’s current employee compensation programs are not reasonably likely to have a material adverse effect on the Company’s business.

2017 Say on Pay Voting Results; Company Response

 

 

We evaluate our executive compensation program annually. Among other things, we consider the outcome of our most recent Say on Pay vote and input we receive from our stockholders. In 2017, our stockholders approved our 2017 advisory vote on executive compensation, with 94.78% of the votes cast in favor of the advisory proposal. We believe that our most recent Say on Pay vote signifies our stockholders’ support of our executive compensation program and practices. We did not make any material changes to our programs and practices in fiscal year 2018.

 

 

III. PRIMARY COMPONENTS OF NAMED EXECUTIVE OFFICER COMPENSATION; CALENDAR YEAR 2017 COMPENSATION PAYOUTS; CALENDAR YEAR 2018 COMPENSATION TARGETS AND METRICS

 

This section describes the components of our executive compensation program. It also describes, for each component, the payouts to our NEOs for calendar year 2017 and the forward-looking actions taken with respect to our NEOs in calendar year 2018.

Base Salary

 

 

We believe the purpose of base salary is to provide competitive compensation to attract and retain top talent and to provide compensation to employees, including our NEOs, with a fixed and fair amount of compensation for the jobs they perform. Accordingly, we seek to ensure that our base salary levels are competitive in reference to Peer Group practice and market survey data. Adjustments to base salary are generally considered by the committee each year in February.

For calendar years 2018 and 2017, base salaries for NEOs were determined by the committee in February of each year and became effective on March 1 or the first day of the pay period that included March 1 (if earlier), based on the factors described above. The following base salary adjustments for 2017 were made to remain competitive against our Peer Group and reflect performance as follows: Mr. Anstice’s was increased by 3.5%, Mr. Archer’s was increased by 3.0%, Dr. Meikle’s was increased by 2.4%, and Mr. Bettinger’s was increased by 1.5%. The base salaries of the NEOs for calendar years 2018 and 2017 are shown below.

Figure 19. NEO Annual Base Salaries

 

  Named Executive Officer

 

 

 

Annual Base
Salary
2018 (1)
($)

 

   

 

Annual Base
Salary
2017 (2)
($)

 

 

 

  Martin B. Anstice

 

 

 

 

1,025,000

 

 

 

 

 

 

990,000

 

 

 

  Timothy M. Archer

 

 

 

 

688,418

 

 

 

 

 

 

668,367

 

 

 

  Douglas R. Bettinger

 

 

 

 

592,770

 

 

 

 

 

 

584,010

 

 

 

  Richard A. Gottscho

 

 

 

 

567,324

 

 

 

 

 

 

567,324

 

 

 

  Scott G. Meikle (3)

 

 

 

 

430,000

 

 

 

 

 

 

420,000

 

 

 

(1) 

Effective February 26, 2018

 

(2)

Effective February 27, 2017

 

(3)

Dr. Meikle commenced employment with Lam on September 1, 2017. His base salary for calendar year 2017 was determined by the committee in July 2017.

Annual Incentive Program

 

 

Design

Our annual incentive program is designed to provide annual, performance-based compensation that: (1) is based on the achievement of pre-set annual financial, strategic, and operational objectives aligned with outstanding performance, and (2) will allow us to attract and retain top talent, while maintaining cost-effectiveness to the Company. The committee establishes individual target award opportunities for each NEO as a percentage of base salary. Specific target award opportunities are determined based on job scope and responsibilities, as well as an assessment of Peer Group data. Awards have a maximum payment amount defined as a

 

 

22


Table of Contents

multiple of the target award opportunity. The maximum award for 2017 and 2018 was set at 2.25 times target, consistent with prior years.

Annual incentive program components

Annual incentive program components, each of which plays a role in determining actual payments made, include:

 

    a Funding Factor,
    a Corporate Performance Factor, and
    various Individual Performance Factors.

The Funding Factor is set by the committee to create a maximum payout amount from which annual incentive program payouts may be made. The committee may exercise negative (but not positive) discretion against the Funding Factor result, and generally the entire funded amount is not paid out. Achievement of a minimum level of performance against the Funding Factor goals is required to fund any program payments. In February 2017, for calendar year 2017, the committee set non-GAAP operating income as a percentage of revenue as the metric for the Funding Factor, with the following goals:

 

    a minimum achievement of 5% non-GAAP operating income as a percentage of revenue was required to fund any program payments, and
    achievement of non-GAAP operating income (as a percentage of revenue) greater than or equal to 22% resulting in the maximum payout potential of 225% of target,
    with actual funding levels interpolated between those points.

The committee selected non-GAAP operating income as a percentage of revenue because it believes that operating income as a percentage of revenue is the performance metric that best reflects core operating results.(2) Non-GAAP operating income is considered useful to investors for analyzing business trends and comparing performance to prior periods. By excluding certain costs and expenses that are not indicative of core results, non-GAAP results are more useful for analyzing business trends over multiple periods.

As a guide for using negative discretion against the Funding Factor results and for making payout decisions, the committee primarily tracks the results of the following two components that are weighted equally in making payout decisions, and against which discretion may be applied in a positive or

negative direction, provided the Funding Factor result is not exceeded:

 

    the Corporate Performance Factor, which is based on a corporate-wide metric and goals that are designed to be stretch goals that apply to all NEOs; and
    the Individual Performance Factors, which are based on organization-specific metrics and goals that are designed to be stretch goals that apply to each individual NEO. In addition, in assessing individual performance, the CEO considers the performance of the whole executive team.

The specific metrics and goals, and their relative weightings, for the Corporate Performance Factor are determined by the committee based upon the recommendation of our CEO, and the Individual Performance Factors are determined by our CEO, or in the case of the CEO, by the committee.

The metrics and goals for the Corporate and Individual Performance Factors are set annually. Goals are set depending on the business environment, ensuring that they are stretch goals regardless of changes in the business environment. Accordingly, as business conditions improve, goals are set to require better performance, and if business conditions deteriorate, goals are set to require stretch performance under more difficult conditions.

We believe that, over time, outstanding business results create stockholder value. Consistent with this belief, multiple performance-based metrics (non-GAAP operating income, product market share, and strategic operational, and organizational metrics) are established for our NEOs as part of the Corporate and Individual Performance Factors.

We believe the metrics and goals set under this program, together with the exercise of discretion by the committee as described above, have been effective to motivate our NEOs and the organizations they lead and to achieve pay-for-performance results.

 

(2) 

Non-GAAP results are designed to provide information about performance without the impact of certain non-recurring and other non-operating line items. Non-GAAP operating income is derived from GAAP results, with charges and credits in the following line items excluded from GAAP results for applicable quarters during fiscal years 2018 and 2017: acquisition-related costs: costs associated with rationalization of certain product configurations; amortization related to intangible assets acquired through certain business combinations; costs associated with campus consolidation; litigation settlement; and costs associated with business process reengineering.

 

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   23


Table of Contents

Figure 20. Annual Incentive Program Payouts

 

   Calendar
   Year
   Average NEO’s
Annual Incentive
Payout as % of Target
Award  Opportunity
     Business Environment

 

   2017

  

 

 

 

204

 

 

  

 

Strong operating performance and continued expansion of served available markets, supported by overall economic environment. Healthy demand for semiconductor equipment driven by capacity and technology investments.

 

 

   2016

  

 

 

 

166

 

 

  

 

Strong operating performance and continued expansion of served available markets, supported by stable economic conditions. Healthy demand for semiconductor equipment driven by capacity and technology investments.

 

 

   2015

  

 

 

 

159

 

 

  

 

Strong operating performance and expansion of served available markets, supported by stable economic conditions. Robust demand for semiconductor equipment driven by both capacity and technology investments.

 

 

Calendar year 2017 annual incentive program parameters and payout decisions

In February 2017, the committee set the calendar year 2017 target award opportunity and established the metrics and goals for the Funding Factor, the metrics and annual goals for the Corporate Performance Factor, and the metrics and goals were established for the Individual Performance Factors for each then-employed NEO, except for Dr. Meikle whose metrics and goals for his Individual Performance Factor were determined in July 2017 in conjunction with the commencement of his employment. In February 2018, the committee considered the actual results under these factors and made payout decisions for the calendar year 2017 program, all as described below.

2017 Annual Incentive Program Target Award Opportunities. The annual incentive program target award opportunities for calendar year 2017 for each NEO were as set forth below in Figure 21 in accordance with the principles set forth above under “Executive Compensation Governance and Procedures – Peer Group Practices and Survey Data.”

2017 Annual Incentive Program Corporate Performance Factor. In February 2017, the committee set non-GAAP operating income as a percentage of revenue as the metric for the calendar year 2017 Corporate Performance Factor, and set:

 

    a goal of 22% of revenue for the year, which was designed to be a stretch goal, and which would result in a Corporate Performance Factor of 1.00;
    a minimum Corporate Performance Factor of 0.10 for any payout; and
    a maximum Corporate Performance Factor of 1.50 for the maximum payout.

These goals were designed to be stretch goals. Actual non-GAAP operating income as a percentage of revenue was 28.7% for calendar year 2017. This performance which exceeded the maximum Corporate Performance Factor, resulted in a total Corporate Performance Factor of 1.50 for calendar year 2017.

2017 Annual Incentive Program Individual Performance Factors. For 2017, the performance metrics and goals for each NEO’s Individual Performance Factor were set on an annual basis and were designed to be stretch goals. The Individual Performance Factor for Mr. Anstice (as well as Mr. Archer) for calendar year 2017 was based on the average of the Individual Performance Factors of all the executive and senior vice presidents reporting to him, subject to discretion based on the Company’s performance to business, strategic, and operational objectives. For all other NEOs, their respective Individual Performance Factors were based on market share and/or strategic, operational, and organizational performance goals specific to the organizations they managed, as described in more detail below.

The accomplishments of actual individual performance against the established goals described below during 2017 were considered.

 

    Mr. Archer’s Individual Performance Factor for calendar year 2017 was based on the accomplishment of market share, and strategic, operational, and organizational development goals for the organization.
    Mr. Bettinger’s Individual Performance Factor for calendar year 2017 was based on the accomplishment of strategic, operational, and organizational development goals for finance, global information systems, and investor relations.
    Dr. Gottscho’s Individual Performance Factor for calendar year 2017 was based on the accomplishment of market share, and strategic, operational, and organizational development goals for the central engineering groups and the establishment of strategic and organizational goals for the office of the chief technology officer.
    Dr. Meikle’s Individual Performance Factor for calendar year 2017 was based on the accomplishment of strategic, operational, and organizational development goals for the global customer operations group.

The committee’s consideration of the above accomplishments resulted in the following Individual Performance Factors for each NEO: Mr. Anstice, 1.45; Mr. Archer, 1.45; Mr. Bettinger, 1.16; Dr. Gottscho, 1.40; and Dr. Meikle 1.35.

 

 

24


Table of Contents

2017 Annual Incentive Program Payout Decisions. In February 2018, in light of the Funding Factor results and based on the above results and decisions, the committee approved for the

calendar year 2017 annual incentive program for each NEO, which were less than the maximum payout available under the Funding Factor as shown below in Figure 21:

 

 

Figure 21. CY2017 Annual Incentive Program Payouts

 

   Named Executive Officer    Target Award
Opportunity
(% of Base Salary)
     Target Award
Opportunity
($) (1)
    Maximum Payout under
Funding Factor (225.0% of
Target Award Opportunity)
($) (2)
     Actual
Payouts
($)
 

 

 

   Martin B. Anstice

  

 

 

 

 

 

150

 

 

 

  

 

 

 

 

 

1,485,000

 

 

 

 

 

 

 

 

 

3,341,250

 

 

 

  

 

 

 

 

 

3,229,875

 

 

 

 

 

   Timothy M. Archer

  

 

 

 

 

 

110

 

 

 

  

 

 

 

 

 

735,204

 

 

 

 

 

 

 

 

 

1,654,209

 

 

 

  

 

 

 

 

 

1,599,068

 

 

 

 

 

   Douglas R. Bettinger

  

 

 

 

 

 

90

 

 

 

  

 

 

 

 

 

525,609

 

 

 

 

 

 

 

 

 

1,182,620

 

 

 

  

 

 

 

 

 

914,560

 

 

 

 

 

   Richard A. Gottscho

  

 

 

 

 

 

90

 

 

 

  

 

 

 

 

 

510,592

 

 

 

 

 

 

 

 

 

1,148,832

 

 

 

  

 

 

 

 

 

1,072,242

 

 

 

   Scott G. Meikle      80        112,224 (3)       252,504        227,254  

 

(1) 

Calculated by multiplying each NEO’s annual base salary for calendar year 2017 by his or her respective target award opportunity percentage.

(2) 

The Funding Factor resulted in a potential payout of up to 225.0% of target award opportunity for the calendar year (based on the actual non-GAAP operating income percentage results detailed under “2017 Annual Incentive Program Corporate Performance Factor” above and the specific goals set forth in the second paragraph under “Annual incentive program components” above).

(3) 

Dr. Meikle, having commenced employment with the Company on September 1, 2017, was an eligible participant under the annual incentive program for a portion of calendar year 2017. The prorated portion of his 2017 annual base salary eligible for incentive payouts constituted $140,280.

 

Calendar year 2018 annual incentive program parameters

In February 2018, the committee set the target award opportunity for each NEO as a percentage of base salary, and consistent with prior years set a cap on payments equal to 2.25 times the target award opportunity. The target award opportunity for each NEO is shown below.

Figure 22. CY2018 Annual Incentive Program Target Award Opportunities

 

Named Executive Officer   Target Award
Opportunity
(% of Base Salary)
 

 

 

Martin B. Anstice

 

 

 

 

 

 

150

 

 

 

 

 

Timothy M. Archer

 

 

 

 

 

 

125

 

 

 

 

 

Douglas R. Bettinger

 

 

 

 

 

 

90

 

 

 

 

 

Richard A. Gottscho

 

 

 

 

 

 

90

 

 

 

 

 

Scott G. Meikle

 

 

 

 

 

 

85

 

 

 

The committee also approved the annual metric for the Funding Factor and the Corporate Performance Factor as non-GAAP operating income as a percentage of revenue and set the annual goals for the Funding Factor and the Corporate Performance Factor. Consistent with the program design, the Corporate Performance Factor goal is more difficult to achieve than the Funding Factor goal. Individual Performance Factor metrics and goals were also established for each NEO. These include strategic and operational performance goals specific to individuals and their business organization. As a result, each NEO has multiple performance metrics and goals under this program. All Corporate and Individual Performance Factor goals were designed to be stretch goals.

Long-Term Incentive Program

 

 

Design

Our LTIP is designed to attract and retain top talent, provide competitive levels of compensation, align pay with achievement of business objectives and with stock performance over a multi-year period, reward our NEOs for outstanding Company performance, and create stockholder value over the long term.

Under the current long-term incentive program, at the beginning of each multi-year performance period, target award opportunities (expressed as a U.S. dollar value) and performance metrics are established for the program. Of the total target award opportunity, 50% is awarded in Market-based PRSUs, and the remaining 50% is awarded in a combination of stock options and service-based RSUs with at least 10% of the award in each of these two vehicles. The specific percentage of service-based RSUs and stock options are reviewed annually to determine whether service-based RSUs or stock options are the more efficient form of equity for the majority of the award based on criteria such as the current business environment and the potential value to motivate and retain the executives. We consider performance-based RSUs and stock options as performance-based, but do not classify service-based RSUs as performance-based. This means that if options constitute 10% of the total target award opportunity, the long-term incentive program will be 60% performance-based. If options constitute 40% of the total target award opportunity, the long-term incentive program will be 90% performance-based.

 

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   25


Table of Contents

Equity Vehicles

The equity vehicles used in our 2018/2020 long-term incentive program are as follows:

Figure 23. 2018/2020 LTIP Program Equity Vehicles

 

   Equity

   Vehicles

 

 

 

% of Target

Award

Opportunity

 

    

Terms

 

 

   Market-based    PRSUs

 

 

 

 

50

 

 

  

 

•  Awards cliff vest three years from the March 1, 2018 grant date, or “Grant Date,” subject to satisfaction of a minimum performance requirement and continued employment. Cliff, rather than annual, vesting provides for both retention and for aligning NEOs with longer-term stockholder interests.

 

•  The performance period for Market-based PRSUs is three years from the first business day in February (February 1, 2018 through January 31, 2021).

 

•  The number of shares represented by the Market-based PRSUs that can be earned over the performance period is based on our stock price performance compared to the market price performance of the Philadelphia Semiconductor Sector Index (SOX), subject to the below-referenced ceiling. The stock price performance or market price performance is measured using the closing price for the 50 trading days prior to the dates the performance period begins and ends. The target number of shares represented by the Market-based PRSUs is increased by 2% of target for each 1% that Lam’s stock price performance exceeds the market price performance of the SOX index; similarly, the target number of shares represented by the Market-based PRSUs is decreased by 2% of target for each 1% that Lam’s stock price performance trails the market price performance of the SOX index. The result of the vesting formula is rounded down to the nearest whole number. A table reflecting the potential payouts depending on various comparative results is shown below in Figure 24.

 

•  The final award cannot exceed 150% of target (requiring a positive percentage change in the Company’s stock price performance compared to that of the market price performance of the SOX index equal to or greater than 25 percentage points) and can be as little as 0% of target (requiring a percentage change in the Company’s stock price performance compared to that of the market price performance of the SOX index equal to or lesser than negative 50 percentage points).

 

•  The number of Market-based PRSUs granted was determined by dividing 50% of the target opportunity by the 30-day average of the closing price of our common stock prior to the Grant Date, $189.97, rounded down to the nearest share.

 

•  Awards that vest at the end of the performance period are distributed in shares of our common stock.

 

   Stock    Options

 

 

 

 

10

 

 

  

 

•  Awards vest one-third on the first, second, and third anniversaries of the March 1, 2018 grant date, or “Grant Date,” subject to continued employment.

 

•  The number of stock options granted is determined by dividing 10% of the target opportunity by the 30-day average of the closing price of our common stock prior to the Grant Date, $189.97, rounded down to the nearest share and multiplying the result by four. The ratio of four options for every RSU is based on a Black Scholes fair value accounting analysis.

 

•  Awards are exercisable upon vesting.

 

• Expiration is on the seventh anniversary of the Grant Date.

 

   RSUs

 

 

 

 

40

 

 

  

 

•  Awards vest one-third on the first, second, and third anniversaries of the March 1, 2018 grant date, or “Grant Date,” subject to continued employment.

 

•  The number of RSUs granted is determined by dividing 40% of the target opportunity by the 30-day average of the closing price of our common stock prior to the Grant Date, $189.97, rounded down to the nearest share.

 

•  Awards are distributed in shares of our common stock upon vesting.

 

26


Table of Contents

Figure 24. Market-based PRSU Vesting Summary

 

   % Change in Lam’s Stock Price
   Performance Compared to % Change in
   SOX Index Market Price Performance

 

 

 

Market-based PRSUs
That Can Be Earned

(% of Target) (1)

 

 

 

   + 25% or more

 

 

 

 

150

 

 

 

   10%

 

 

 

 

120

 

 

 

   0% (equal to index)

 

 

 

 

100

 

 

 

   - 10%

 

 

 

 

80

 

 

 

   - 25%

 

 

 

 

50

 

 

 

   - 50% or less

 

 

 

 

0

 

 

 

(1)

As set forth in the third bullet of the first row of Figure 23, the results of the vesting formula (reflecting the number of Market-Based PRSUs that can be earned) are linearly interpolated between the stated percentages using the described formula.

Target Award Opportunity

Under the long-term incentive program, the committee sets a target award opportunity for each participant based on the NEO’s position and responsibilities and an assessment of competitive compensation data. The target award opportunities for each participant are expressed in a U.S. dollar value. The target amounts for each NEO under the program cycles affecting fiscal year 2018 are shown below.

Figure 25. LTIP Target Award Opportunities

 

  Named Executive Officer

 

 

Long-
Term
Incentive
Program

 

    

Target Award
Opportunity
($)

 

 
  Martin B. Anstice  

 

 

 

2018/2020

 

(1) 

 
  

 

 

 

9,000,000

 

 

 

 

 

 

2017/2019

 

(2) 

 
  

 

 

 

8,000,000

 

 

 

 

 

 

2016/2018

 

(3) 

 
  

 

 

 

7,500,000

 

 

 

 

 

 

2015/2017

 

(4) 

 
  

 

 

 

6,750,000

 

 

 

  Timothy M. Archer

 

 

 

 

2018/2020

 

(1) 

 
  

 

 

 

5,000,000

 

 

 

 

 

 

2017/2019

 

(2) 

 
  

 

 

 

4,500,000

 

 

 

 

 

 

2016/2018

 

(3) 

 
  

 

 

 

4,000,000

 

 

 

 

 

 

2015/2017

 

(4) 

 
  

 

 

 

3,500,000

 

 

 

  Douglas R. Bettinger

 

 

 

 

2018/2020

 

(1) 

 
  

 

 

 

2,250,000

 

 

 

 

 

 

2017/2019

 

(2) 

 
  

 

 

 

2,750,000

 

 

 

 

 

 

2016/2018

 

(3) 

 
  

 

 

 

2,750,000

 

 

 

 

 

 

2015/2017

 

(4) 

 
  

 

 

 

2,500,000

 

 

 

  Richard A. Gottscho

 

 

 

 

2018/2020

 

(1) 

 
  

 

 

 

2,500,000

 

 

 

 

 

 

2017/2019

 

(2) 

 
  

 

 

 

3,250,000

 

 

 

 

 

 

2016/2018

 

(3) 

 
  

 

 

 

3,250,000

 

 

 

 

 

 

2015/2017

 

(4) 

 
  

 

 

 

3,000,000

 

 

 

  Scott G. Meikle (5)

 

 

 

 

2018/2020

 

(1) 

 
  

 

 

 

1,250,000

 

 

(1)

The three-year performance period for the 2018/2020 LTIP began on February 1, 2018 and ends on January 31, 2021.

 

(2)

The three-year performance period for the 2017/2019 LTIP began on February 1, 2017 and ends on January 31, 2020.

 

(3)

The three-year performance period for the 2016/2018 LTIP began on February 1, 2016 and ends on January 31, 2019.

 

(4)

The three-year performance period for the 2015/2017 LTIP began on February 2, 2015 and ended on February 1, 2018.

 

(5)

Dr. Meikle did not participate in the 2015/2017, 2016/2018, and 2017/2019 LTIPs because his employment with the Company commenced September 1, 2017.

Calendar Year 2015/2017 LTIP Award Parameters and Payouts

On February 11, 2015, the committee granted to each NEO as part of the calendar year 2015/2017 long-term incentive program, or “2015/2017 LTIP Awards,” Market-based PRSUs, and service-based RSUs and stock options with a total target award opportunity shown below. The service-based RSUs and stock options vested over three years, one-third on each anniversary of the grant date. The Market-based PRSU’s cliff vested three years from the grant date.

Figure 26. 2015/2017 LTIP Awards

 

   Named Executive Officer (1)

 

 

 

Target
Award
Opportunity
($)

 

   

 

Market-
based
PRSUs
Award (2)
(#)

 

   

 

Stock
Options
Award
(#)

 

   

 

Service-
based
RSUs
Award
(#)

 

 

 

   Martin B. Anstice

 

 

 

 

6,750,000

 

 

 

 

 

 

41,873

 

 

 

 

 

 

25,122

 

 

 

 

 

 

33,498

 

 

 

   Timothy M. Archer

 

 

 

 

3,500,000

 

 

 

 

 

 

21,712

 

 

 

 

 

 

13,026

 

 

 

 

 

 

17,369

 

 

 

   Douglas R. Bettinger

 

 

 

 

2,500,000

 

 

 

 

 

 

15,508

 

 

 

 

 

 

9,303

 

 

 

 

 

 

12,406

 

 

 

   Richard A. Gottscho

 

 

 

 

3,000,000

 

 

 

 

 

 

18,610

 

 

 

 

 

 

11,166

 

 

 

 

 

 

14,888

 

 

 

(1)

Dr. Meikle did not participate in the 2015/2017 LTIP because his employment with the Company commenced September 1, 2017.

 

(2)

The number of Market-based PRSUs awarded is reflected at target. The final number of shares that may have been earned is 0% to 150% of target.

In February 2018, the committee determined the payouts for the calendar year 2015/2017 LTIP Awards of Market-based PRSUs. The number of shares represented by the Market-based PRSUs earned over the performance period was based on our stock price performance compared to the market price performance of the SOX index.

Based on the above formula and Market-based PRSU Vesting Summary set forth in Figures 23 and 24, the Company’s stock price performance over the three-year performance period was equal to 143.56% and performance of the SOX index (based on market price) over the same three-year performance period was equal to 92.36%. While Lam’s stock price outperformed the SOX index by 51.20%, which would have resulted in a performance payout of 202.40% to target

 

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   27


Table of Contents

under our Market-based PRSU program, the actual number of shares paid represented by the Market-based PRSUs was limited to the maximum payout of 150% of the target number of Market-based PRSUs granted to each NEO. Based on such results, the committee made the following payouts to each NEO for the 2015/2017 LTIP Award of Market-based PRSUs.

Figure 27. 2015/2017 LTIP Market-based PRSU Award Payouts

 

  Named Executive Officer (1)

 

 

Target
Market-
based
PRSUs
(#)

 

   

 

Actual Payout
(equal to
Maximum
Payout) of
Market-based
PRSUs 150%
of Target Award
Opportunity)

(#)

 

 

 

  Martin B. Anstice

 

 

 

 

41,873

 

 

 

 

 

 

62,809

 

 

 

  Timothy M. Archer

 

 

 

 

21,712

 

 

 

 

 

 

32,568

 

 

 

  Douglas R. Bettinger

 

 

 

 

15,508

 

 

 

 

 

 

23,262

 

 

 

  Richard A. Gottscho

 

 

 

 

18,610

 

 

 

 

 

 

27,915

 

 

 

(1)

Dr. Meikle did not participate in the 2015/2017 LTIP because his employment with the Company commenced September 1, 2017.

Calendar Year 2018 LTIP Awards

Calendar year 2018 decisions for the 2018/2020 long-term incentive program. On March 1, 2018, the committee made a grant under the 2018/2020 long-term incentive program, of Market-based PRSUs, stock options, and service-based RSUs on the terms set forth in Figure 23 with a combined value equal to the NEO’s total target award opportunity, as shown below.

Figure 28. 2018/2020 LTIP Awards

 

 

  Named Executive Officer

 

 

Target

Award

Opportunity

($)

   

 

Market-

based

PRSUs

Award (1)

(#)

   

 

Stock

Options

Award

(#)

   

 

Service-

based

RSUs

Award

(#)

 

 

  Martin B. Anstice

 

 

 

 

9,000,000

 

 

 

 

 

 

23,687

 

 

 

 

 

 

18,948

 

 

 

 

 

 

18,950

 

 

 

  Timothy M. Archer

 

 

 

 

5,000,000

 

 

 

 

 

 

13,159

 

 

 

 

 

 

10,524

 

 

 

 

 

 

10,527

 

 

 

  Douglas R. Bettinger

 

 

 

 

2,250,000

 

 

 

 

 

 

5,921

 

 

 

 

 

 

4,736

 

 

 

 

 

 

4,737

 

 

 

  Richard A. Gottscho

 

 

 

 

2,500,000

 

 

 

 

 

 

6,579

 

 

 

 

 

 

5,260

 

 

 

 

 

 

5,263

 

 

 

  Scott G. Meikle

 

 

 

 

1,250,000

 

 

 

 

 

 

3,289

 

 

 

 

 

 

2,628

 

 

 

 

 

 

2,631

 

 

 

(1)

The number of Market-based PRSUs awarded is reflected at target. The final number of shares that may be earned will be 0% to 150% of target.

Employment / Change in Control Arrangements

 

 

The Company enters into employment / change in control agreements to help attract and retain our NEOs and believes

that these agreements facilitate a smooth transaction and transition planning in connection with change in control events. Effective January 2018, the Company entered into new three-year term employment agreements with Messrs. Anstice, Archer, and Bettinger and Dr. Gottscho, and a new change in control agreement with Dr. Meikle. The employment agreements generally provide for designated payments in the event of an involuntary termination of employment, death or disability, as such terms are defined in the applicable agreements. The employment agreements, and also the change in control agreements, generally provide for designated payments in the case of a change in control when coupled with an involuntary termination (i.e., a double trigger is required before payment is made due to a change in control), as such terms are defined in the applicable agreements.

For additional information about these arrangements and detail about post-termination payments under these arrangements, see the “Potential Payments upon Termination or Change in Control” section below.

Other Benefits Not Available to All Employees

 

 

Elective Deferred Compensation Plan

The Company maintains an Elective Deferred Compensation Plan that allows eligible employees (including all the NEOs) to voluntarily defer receipt of all or a portion of base salary and certain incentive compensation payments until a date or dates elected by the participating employee. This allows the employee to defer taxes on designated compensation amounts. In addition, the Company provides a limited Company contribution to the plan for all eligible employees.

Supplemental Health and Welfare

We provide certain health and welfare benefits not generally available to other employees, including the payment of premiums for supplemental long-term disability insurance and Company-provided coverage in the amount of $1 million for both life and accidental death and dismemberment insurance for all NEOs.

We also provide post-retirement medical and dental insurance coverage for eligible former executive officers under our Retiree Health Plans, subject to certain eligibility requirements. The program was closed to executive officers who joined the Company or became executive officers through promotion effective on or after January 1, 2013. We have an independent actuarial valuation of post-retirement benefits for eligible NEOs conducted annually in accordance with generally accepted accounting principles. The most recent valuation was conducted in June 2018 and reflected the retirement benefit obligation for the NEOs as shown below.

 

 

28


Table of Contents

Figure 29. NEO Post-Retirement Benefit Obligations

 

   Named Executive Officer  

 

As of
June 24, 2018
($)

 

 

   Martin B. Anstice

 

 

 

 

 

 

704,000

 

 

 

 

 

   Timothy M. Archer

 

 

 

 

 

 

749,000

 

 

 

 

 

   Douglas R. Bettinger (1)

 

 

 

 

 

 

 

 

 

 

 

   Richard A. Gottscho

 

 

 

 

 

 

648,000

 

 

 

 

 

   Scott G. Meikle (1)

 

 

 

 

 

 

 

 

 

 

 

(1) 

Mr. Bettinger and Dr. Meikle were not eligible to participate because they were not employees of the Company prior to the termination of the program.

 

 

IV. TAX AND ACCOUNTING CONSIDERATIONS

 

Deductibility of Executive Compensation

 

 

Prior to 2018, section 162(m) of the Code imposed limitations on the deductibility for federal income tax purposes of compensation in excess of $1 million paid to our chief executive officer, and any of our three other most highly compensated executive officers (other than our chief financial officer) in a single tax year unless the compensation qualified as “performance-based compensation” within the meaning of the Code.

The committee considers a number of factors, including the deductibility of such compensation when making compensation decisions and retains the discretion to award compensation even if it is not deductible.

Taxation of “Parachute” Payments

 

 

Sections 280G and 4999 of the Code provide that “disqualified individuals” within the meaning of the Code (which generally includes certain officers, directors and employees of the Company) may be subject to additional tax if they receive payments or benefits in connection with a change in control of the Company that exceed certain prescribed limits. The Company or its successor may also forfeit a deduction on the amounts subject to this additional tax.

We did not provide any of our executive officers, any director, or any other service provider with a “gross-up” or other reimbursement payment for any tax liability that the individual might owe as a result of the application of sections 280G or 4999 during fiscal year 2018, and we have not agreed and are not otherwise obligated to provide any individual with such a “gross-up” or other reimbursement as a result of the application of sections 280G and 4999.

Internal Revenue Code Section 409A

 

 

Section 409A of the Code imposes significant additional taxes on an executive officer, director, or service provider that receives non-compliant “deferred compensation” that is within the scope of section 409A. Among other things, section 409A potentially applies to the cash awards under the LTIP, the Elective Deferred Compensation Plan, certain equity awards, and severance arrangements.

To assist our employees in avoiding additional taxes under section 409A, we have structured the LTIP, the Elective Deferred Compensation Plan, and our equity awards in a manner intended to qualify them for exclusion from, or compliance with, section 409A.

Accounting for Stock-Based Compensation

 

 

We follow ASC 718 for accounting for our stock options and other stock-based awards. ASC 718 requires companies to calculate the grant date “fair value” of their stock option grants and other equity awards using a variety of assumptions. This calculation is performed for accounting purposes. ASC 718 also requires companies to recognize the compensation cost of stock option grants and other stock-based awards in their income statements over the period that an employee is required to render service in exchange for the option or other equity award.

 

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   29


Table of Contents

Compensation Committee Report

The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of SEC Regulation S-K. Based on this review and discussion, the compensation committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and the Company’s Annual Report on Form 10-K.

This Compensation Committee Report shall not be deemed “filed” with the SEC for purposes of federal securities law, and it shall not, under any circumstances, be incorporated by reference into any of the Company’s past or future SEC filings. The report shall not be deemed soliciting material.

MEMBERS OF THE COMPENSATION COMMITTEE

Youssef A. El-Mansy

Catherine P. Lego (Chair)

Abhijit Y. Talwalkar

Compensation Committee Interlocks and Insider Participation

None of the compensation committee members has ever been an officer or employee of Lam Research. No interlocking relationship exists as of the date of this proxy statement or existed during fiscal year 2018 between any member of our compensation committee and any member of any other company’s board of directors or compensation committee.

 

 

30


Table of Contents

Executive Compensation Tables

The following tables (Figures 30-35) show compensation information for our named executive officers:

Figure 30. Summary Compensation Table

 

Summary Compensation Table  
   Name and Principal Position   Fiscal
Year
    Salary
($)
    Bonus
($)
    Stock
Awards
($) (1)
    Option
Awards
($) (2)
    Non-Equity
Incentive Plan
Compensation
($) 
    All Other
Compensation
($) (3)
    Total
($)
 

   Martin B. Anstice
   Chief Executive Officer

        

    2018       1,001,442       —         7,526,050       1,080,493       3,229,875 (4)       10,785       12,848,645  
    2017       969,808       —         7,023,914       758,314       2,396,304 (5)       10,541       11,158,881  
    2016       937,789       —         6,175,315       1,224,848       2,207,558 (6)       10,521       10,556,031  
   Timothy M. Archer
   President and Chief
   Operating Officer
    2018       674,922       —         4,180,920       600,122       1,599,068 (4)       9,856       7,064,888  
    2017       646,945       —         3,950,881       426,531       1,165,193 (5)       11,301       6,200,851  
    2016       624,061       —         3,293,501       653,260       1,079,250 (6)       10,689       5,660,761  

   Douglas R. Bettinger
   Executive Vice President and

   Chief Financial Officer

    2018       586,874       —         1,881,292       270,066       914,560 (4)       9,123       3,661,915  
    2017       572,561       —         2,414,365       260,640       849,190 (5)       7,983       4,104,739  
    2016       548,827       —         2,264,175       449,109       771,574 (6)       8,080       4,041,765  
   Richard A. Gottscho
   Executive Vice President,
   Corporate Chief Technology Officer
    2018       567,324       5,867 (7)       2,090,283       316,208       1,072,242 (4)       9,384       4,061,308  
    2017       559,837       6,171 (7)       2,853,402       362,059       833,015 (5)       9,307       4,623,791  
    2016       545,296       9,600 (7)       2,675,862       606,262       771,574 (6)       9,082       4,617,676  
   Scott G. Meikle
   Senior Vice President,
   Global Customer Operations
    2018       344,115       —         4,089,102 (8)       149,859       227,254 (4)       8,797       4,819,127  
    2017       —         —         —         —         —         —         —    
    2016       —         —         —         —         —         —         —    

 

(1) 

The amounts shown in this column represent the value of service-based and market-based performance RSU awards, under the LTIP, granted in accordance with ASC 718. However, pursuant to SEC rules, these values are not reduced by an estimate for the probability of forfeiture. The assumptions used to calculate the fair value of the RSUs in fiscal year 2018 are set forth in Note 4 to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the fiscal year ended June 24, 2018. For additional details regarding the grants see “FY2018 Grants of Plan-Based Awards” table below.

 

(2) 

The amounts shown in this column represent the value of the stock option awards granted, under the LTIP, in accordance with ASC 718. However, pursuant to SEC rules, these values are not reduced by an estimate for the probability of forfeiture. The assumptions used to calculate the fair value of stock options in fiscal year 2018 are set forth in Note 4 to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the fiscal year ended June 24, 2018. For additional details regarding the grants see “FY2018 Grants of Plan-Based Awards” table below.

 

(3) 

Please refer to “FY2018 All Other Compensation Table” which immediately follows this table, for additional information.

 

(4) 

Represents the amount earned by and subsequently paid under the calendar year 2017 AIP.

 

(5) 

Represents the amount earned by and subsequently paid under the calendar year 2016 AIP.

 

(6) 

Represents the amount earned by and subsequently paid under the calendar year 2015 AIP.

 

(7) 

Represents patent awards.

 

(8) 

Represents grant of service-based RSUs and Market-based PRSUs under the LTIP and a new hire grant of service-based RSUs.

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   31


Table of Contents

Figure 31. FY2018 All Other Compensation Table

 

All Other Compensation Table for Fiscal Year 2018  
    Company Matching
Contribution to
the Company’s
Section 401(k) Plan
($)
    Company
Paid Long-Term
Disability  Insurance
Premiums (1)
($)
    Company
Paid Life
Insurance
Premiums (2)
($)
    Company
Contribution to the
Elective Deferred
Compensation Plan
($)
    Total
($)
 

Martin B. Anstice

 

 

8,285

 

 

 

—  

 

 

 

—  

 

 

 

2,500

 

 

 

10,785

 

Timothy M. Archer

 

 

7,356

 

 

 

—  

 

 

 

—  

 

 

 

2,500

 

 

 

9,856

 

Douglas R. Bettinger

 

 

8,252

 

 

 

—  

 

 

 

—  

 

 

 

871

 

 

 

9,123

 

Richard A. Gottscho

 

 

8,250

 

 

 

1,134

 

 

 

—  

 

 

 

—  

 

 

 

9,384

 

Scott G. Meikle

 

 

8,797

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

8,797

 

 

(1) 

Represents the portion of supplemental long-term disability insurance premiums paid by Lam.

 

(2)

Represents the portion of life insurance premiums paid by Lam in excess of the non-discriminatory life insurance benefits provided to all Company employees.

Figure 32. FY2018 Grants of Plan-Based Awards

 

Grants of Plan-Based Awards for Fiscal Year 2018  
   

Award

Type

 

Grant
Date

   

 

 

Approved
Date

 

 

Estimated Future
Payouts Under Non-

Equity Incentive
Plan Awards

   

 

Estimated Future
Payouts Under
Equity Incentive
Plan Awards

    All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
    Exercise
or Base
Price of
Option
Awards
($/Sh)
    Grant
Date Fair
Value of
Stock
and
Option
Awards
($) (3)
 
  Name   Target
($) (1)
    Maximum
($) (1)
    Target
(#) (2)
    Maximum
(#) (2)
 
  Annual Incentive Program   N/A       2/7/18     1,537,500       3,459,375                                                  
  LTIP-Equity                                                                            

Martin B. Anstice

 

Market-based PRSUs

  3/1/18       2/7/18                     23,687 (4)       35,530 (4)                               4,030,343  
 

Service-based RSUs

  3/1/18       2/7/18                                     18,950 (5)                       3,495,707  
   

Stock Options

  3/1/18       2/7/18                                             18,948 (6)       190.07       1,080,493  
  Annual Incentive Program   N/A       2/6/18     860,523       1,936,177                                                  
  LTIP-Equity                                                                            

Timothy M. Archer  

 

Market-based PRSUs

  3/1/18       2/6/18                     13,159 (4)       19,738 (4)                               2,239,004  
 

Service-based RSUs

  3/1/18       2/6/18                                     10,527 (5)                       1,941,916  
   

Stock Options

  3/1/18       2/6/18                                             10,524 (6)       190.07       600,122  
  Annual Incentive Program   N/A       2/6/18     533,493       1,200,359                                                  
  LTIP-Equity                                                                            

Douglas R. Bettinger    

 

Market-based PRSUs

  3/1/18       2/6/18                     5,921 (4)       8,881 (4)                               1,007,458  
 

Service-based RSUs

  3/1/18       2/6/18                                     4,737 (5)                       873,834  
   

Stock Options

  3/1/18       2/6/18                                             4,736 (6)       190.07       270,066  
  Annual Incentive Program   N/A       2/6/18     510,592       1,148,832                                                  
  LTIP-Equity                                                                            

Richard A. Gottscho

 

Market-based PRSUs

  3/1/18       2/6/18                     6,579 (4)       9,868 (4)                               1,119,417  
 

Service-based RSUs

  3/1/18       2/6/18                                     5,263 (5)                       970,866  
   

Stock Options

  3/1/18       2/6/18                                             5,260 (6)       190.07       316,208  
  Annual Incentive Program   N/A       2/6/18     365,500       822,375                                                  
  LTIP-Equity                                                                            

Scott G. Meikle

 

Market-based PRSUs

  3/1/18       2/6/18                     3,289 (4)       4,933 (4)                               559,623  
 

Service-based RSUs

  3/1/18       2/6/18                                     2,631 (5)                       485,341  
 

Stock Options

  3/1/18       2/6/18                                             2,628 (6)       190.07       149,859  
   

New Hire

  9/1/17       7/31/17                                     18,827 (7)                       3,044,138  

 

(1) 

The AIP target and maximum estimated future payouts reflected in this table were calculated using the base salary approved in February 2018, effective as of February 26, 2018. Awards payouts range from 0% to 225% of target.

 

32


Table of Contents
(2) 

The amounts reported represent the target and maximum number of Market-based PRSUs that may vest on the terms described in “Executive Compensation and Other Information – Compensation Discussion and Analysis” above. The number of shares that may be earned is equal to 0% to 150% of target.

 

(3) 

The amounts reported represent the fair value of Market-based PRSU, service-based RSU, and stock option awards granted during fiscal year 2018 in accordance with ASC 718. However, pursuant to SEC rules, these values are not reduced by an estimate for the probability of forfeiture. The assumptions used to calculate the fair value of awards granted during fiscal year 2018 are set forth in Note 4 to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the fiscal year ended June 24, 2018.

 

(4) 

The Market-based PRSUs will vest on March 1, 2021, subject to continued employment. The actual conversion of Market-based PRSUs into shares of Lam common stock following the conclusion of the three-year performance period will range from 0% to 150% of the target amount, depending upon Lam’s stock price performance compared to the market price performance of the SOX index over the applicable three-year performance period.

 

(5) 

The RSUs will vest in three equal installments on March 1 of each of 2019, 2020, and 2021, subject to continued employment.

 

(6) 

The stock options will become exercisable in three equal installments on March 1 of each of 2019, 2020, and 2021, subject to continued employment.

 

(7) 

The RSUs will vest in three equal installments on September 1 of each of 2018, 2019, and 2020, subject to continued employment.

Figure 33. FYE2018 Outstanding Equity Awards

 

Outstanding Equity Awards at 2018 Fiscal Year-End  
    Option Awards     Stock Awards  
    Name   Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
   

Market
Value

of Shares or
Units of
Stock

That Have
Not
Vested
($) (1)

   

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested

(#)

   

Equity
Incentive

Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested ($) (1)

 

Martin B. Anstice

            18,948 (2)       190.07       3/1/25                                  
                                    18,950 (3)       3,310,565                  
                                                    23,687 (4)       4,138,119  
    9,209 (5)       18,419 (5)       119.67       3/1/24                                  
                                    18,421 (6)       3,218,149                  
                                                    34,539 (7)       6,033,963  
    43,402 (8)       21,701 (8)       75.57       3/1/23                                  
                                    10,851 (9)       1,895,670                  
                                                    54,253 (10)       9,477,999  

Timothy M. Archer

            10,524 (2)       190.07       3/1/25                                  
                                    10,527 (3)       1,839,067                  
                                                    13,159 (4)       2,298,877  
    5,180 (5)       10,360 (5)       119.67       3/1/24                                  
                                    10,362 (6)       1,810,241                  
                                                    19,428 (7)       3,394,072  
    11,574 (8)       11,574 (8)       75.57       3/1/23                                  
                                    5,787 (9)       1,010,989                  
                                                    28,935 (10)       5,054,945  
    13,026 (11)               80.60       2/11/22                                  

Douglas R. Bettinger

            4,736 (2)       190.07       3/1/25                                  
                                    4,737 (3)       827,554                  
                                                    5,921 (4)       1,034,399  
    3,165 (5)       6,331 (5)       119.67       3/1/24                                  
                                    6,332 (6)       1,106,200                  
                                                    11,872 (7)       2,074,038  
    15,914 (8)       7,957 (8)       75.57       3/1/23                                  
                                    3,979 (9)       695,131                  
                                                    19,892 (10)       3,475,132  
    9,303 (11)               80.60       2/11/22                                  
    9,658 (12)               51.76       2/18/21                                  
    7,242 (13)               51.76       2/18/21                                  

 

Continues on next page  u

 

Lam Research Corporation 2018 Proxy Statement   33


Table of Contents
Outstanding Equity Awards at 2018 Fiscal Year-End  
    Option Awards     Stock Awards  
    Name   Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
   

Market
Value

of Shares or
Units of
Stock

That Have
Not
Vested
($) (1)

   

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested

(#)

   

Equity
Incentive

Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested ($) (1)

 

Richard A. Gottscho

            5,260 (2)       190.07       3/1/25                                  
                                    5,263 (3)       919,446                  
                                                    6,579 (4)       1,149,351  
            7,483 (5)       119.67       3/1/24                                  
                                    7,484 (6)       1,307,455                  
                                                    14,031 (7)       2,451,216  
            9,403 (8)       75.57       3/1/23                                  
                                    4,702 (9)       821,439                  
                                                    23,509 (10)       4,107,022  

Scott G. Meikle

            2,628 (2)       190.07       3/1/25                                  
                                    2,631 (3)       459,636