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
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  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)

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Table of Contents
    

 

 

LOGO

September 25, 2019

Dear Lam Research Stockholders,

We cordially invite you to attend, in person or by proxy, the Lam Research Corporation 2019 Annual Meeting of Stockholders. The annual meeting will be held on Tuesday, November 5, 2019, at 9:30 a.m. Pacific Standard Time in the Building CA1 Auditorium at the principal executive offices of Lam Research Corporation, which are located at 4650 Cushing Parkway, Fremont, California 94538.

At this year’s annual meeting, stockholders will be asked to elect the 10 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”; and to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2020. The Board of Directors recommends that you vote in favor of each director nominee and each of these proposals. 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, each director nominee, and each of the proposals, as well as voting instructions. Your vote is important, and we strongly urge you to cast your vote as soon as possible 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 2019 Annual Meeting

of Stockholders

 

LOGO

4650 Cushing Parkway

Fremont, California 94538

Telephone: 510-572-0200

 

Meeting Information

 

   

    

   Category

 

    

Details

 

LOGO   Date and Time

 

Tuesday, November 5, 2019

9:30 a.m. Pacific Standard Time

 

LOGO   Place

 

Lam Research Corporation

Building CA1 Auditorium

4650 Cushing Parkway

Fremont, California 94538

Record Date

 

Only stockholders of record at the close of business on September 6, 2019, the “Record Date,” are entitled to notice of, and to vote at, the annual meeting.

Proxy and Annual Report Materials

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2019 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 5, 2019

Our notice of 2019 Annual Meeting of Stockholders, proxy statement, and annual report to stockholders are available on the Lam Research website at https://investor.lamresearch.com.

 

  Elect Electronic Delivery - Save Time, Money & Trees

As part of our efforts to be an environmentally responsible corporate citizen, we encourage Lam stockholders to voluntarily elect to receive future proxy and annual report materials electronically.

 

•  If you are a registered stockholder, please visit
https://enroll.icsdelivery.com/lrcx
for simple instructions.

•  If you are a stockholder who owns stock through a broker or brokerage account, please opt for e-delivery at https://enroll.icsdelivery.com/lrcx or by contacting your nominee.

 

 

Date of Distribution

This notice, proxy statement and proxy card are first being made available and/or mailed to our stockholders on or about September 25, 2019.

Items of Business

 

       

   #

 

Proposal

 

Our Board’s
Recommendation

   

1.

 

Election of 10 directors to serve until the next annual meeting of stockholders, and until their respective successors are elected and qualified

 

    FOR each Director Nominee

   

2.

 

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

 

    FOR

   

3.

 

Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2020

 

    FOR

   

Transaction of such other business as may properly come before the annual meeting (including any adjournment or postponement thereof)

   

Voting

Please vote as soon as possible, even if you plan to attend the annual meeting in person, on all of the voting matters. You have three options for submitting your vote before the annual meeting:

 

LOGO   by the internet,
LOGO   by telephone, or
LOGO   by mail.

The proxy statement and the accompanying proxy card provide detailed voting instructions.

IT IS IMPORTANT THAT YOU VOTE to play a part in the future of the Company. Please carefully review the proxy materials for the 2019 Annual Meeting of Stockholders.

By Order of the Board of Directors,

 

 

LOGO

Sarah A. O’Dowd

Secretary

 

 

 


Table of Contents

LAM RESEARCH CORPORATION

Proxy Statement for 2019 Annual Meeting of Stockholders

TABLE OF CONTENTS

 

Proxy Statement Summary     1  

About Lam Research Corporation

    1  

Fiscal Year 2019 Financial Highlights

    2  

Figure 1. Proposals and Voting Recommendations

    2  

Figure 2. Summary Information Regarding Director Nominees

    2  

Figure 3. Director Nominee Key Qualifications, Skills and Experiences Highlights

    3  

Figure 4. Director Nominee Composition Highlights

    3  

Figure 5. Corporate Governance Highlights

    4  

Figure 6. Executive Compensation Highlights

    5  
Stock Ownership     6  

Security Ownership of Certain Beneficial Owners and Management

    6  
Governance Matters     9  

Corporate Governance

    9  

Corporate Governance Policies

    9  

Board Nomination Policies and Procedures

    9  

Director Independence Policies

    11  

Leadership Structure of the Board

    11  

Other Governance Practices

    12  

Meeting Attendance

    12  

Board Committees

    13  

Board’s Role and Engagement

    14  

Stockholder Engagement

    14  

Corporate Social Responsibility

    14  

Director Compensation

    15  
Compensation Matters     18  

Executive Compensation and Other Information

    18  

Compensation Discussion and Analysis

    18  

I.   Overview of Executive Compensation

    19  

II.  Executive Compensation Governance and Procedures

    23  

III.  Primary Components of Named Executive Officer Compensation; Calendar Year 2018 Compensation Payouts; Calendar Year 2019 Compensation Targets and Metrics

    25  

IV. Tax and Accounting Considerations

    33  

Compensation Committee Report

    34  

Compensation Committee Interlocks and Insider Participation

    34  

Executive Compensation Tables

    35  

CEO Pay Ratio

    45  

Securities Authorized for Issuance under Equity Compensation Plans

    46  
Audit Matters     47  

Audit Committee Report

    47  

Relationship with Independent Registered Public Accounting Firm

    48  

Annual Evaluation and Selection of Independent Registered Public Accounting Firm

    48  

Fees Billed by Ernst & Young LLP

    48  

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

    49  

Certain Relationships and Related Party Transactions

    49  
Voting Proposals     50  

Proposal No. 1: Election of Directors

    50  

2019 Nominees for Director

    51  

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

    59  

Proposal No. 3: Ratification of the Appointment of Ernst  & Young LLP as our Independent Registered Public Accounting Firm for Fiscal Year 2020

    60  

Other Voting Matters

    60  
Voting and Meeting Information     61  

Information Concerning Solicitation and Voting

    61  

Other Meeting Information

    62  


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 Company, the proposals and voting recommendations, the Company’s director nominees, highlights of the directors’ key qualifications, skills and experiences, board composition, corporate governance, and executive compensation. For more complete information about these topics, please review the complete proxy statement before voting. We also encourage you to read our latest annual report on Form 10-K, which is also available at: https://investor.lamresearch.com. The content of any website referred to in this proxy statement is not a part of nor incorporated by reference in this proxy statement unless expressly noted.

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.

ABOUT LAM RESEARCH CORPORATION

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 vehicles, and data storage devices. Our vision is to realize full value from the 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, dynamic random-access memory (DRAM), 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.

 

 

LOGO

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.

 

Continues on next page  u

 

Lam Research Corporation 2019 Proxy Statement   1


Table of Contents

FISCAL YEAR 2019 FINANCIAL HIGHLIGHTS

 

 

LOGO

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: Ratification of the Appointment of Ernst & Young LLP as our Independent Registered Public Accounting Firm for Fiscal Year 2020

 

 

FOR

 

Transaction of such other business as may properly come before the annual meeting (including any adjournment or postponement thereof)

       

Figure 2. Summary Information Regarding Director Nominees

You are being asked to vote on the election of these 10 directors. The following table provides summary information about each director nominee as of September 2019, and their biographical information is contained in the “Voting Proposals – Proposal No. 1: Election of Directors – 2019 Nominees for Director” section below.

 

       
    Director    Committee
Membership
  

Other Current Public

Boards

   Name   Age      Since     Independent (1)    AC    CC    NGC

Sohail U. Ahmed

 

 

61

 

  

 

2019

 

 

Yes

                   

Timothy M. Archer

 

 

52

 

  

 

2018

 

 

No

  

*

              

Eric K. Brandt

 

 

57

 

  

 

2010

 

 

Yes

  

C/FE

       

M

  

Altaba (formerly Yahoo!), Dentsply Sirona,

Macerich

Michael R. Cannon

 

 

66

 

  

 

2011

 

 

Yes

  

M/FE

       

M

  

Dialog Semiconductor,

Seagate Technology

Youssef A. El-Mansy

 

 

74

 

  

 

2012

 

 

Yes

       

M

         

Catherine P. Lego

 

 

62

 

  

 

2006

 

 

Yes

  

*

  

C

  

M

  

Cypress Semiconductor,

Guidewire Software,

IPG Photonics

Bethany J. Mayer

 

 

57

 

  

 

2019

 

 

Yes

  

M/FE

            

Marvell Technology Group, Sempra Energy

Abhijit Y. Talwalkar

 

 

55

 

  

 

2011

 

 

Yes

(Lead Independent Director(2))

  

*

  

M

  

C

  

Advanced Micro Devices,

iRhythm Technologies,

TE Connectivity

Lih Shyng (Rick L.) Tsai

 

 

68

 

  

 

2016

 

 

Yes

       

M

       

MediaTek

Leslie F. Varon

 

 

62

 

  

 

2019

 

 

Yes

  

M/FE

            

Dentsply Sirona,

Hamilton Lane

 

(1) 

Independence determined in accordance with Nasdaq rules.

 

(2) 

Mr. Talwalkar will continue as the lead independent director (“LID”) through November 4, 2019. Thereafter, there will no longer be an LID and provided he is re-elected, Mr. Talwalkar will be the chairman of the Board. See “Governance Matters – Corporate Governance – Leadership Structure of the Board” for details.

 

AC – Audit committee   

C – Chairperson

CC – Compensation and human resources committee   

M – Member

NGC – Nominating and governance committee   

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

  

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

 

2


Table of Contents

Figure 3. Director Nominee Key Qualifications, Skills and Experiences Highlights

The table below summarizes the key qualifications, skills and experiences of our nominees. Not having a mark does not mean the director nominee does not possess that qualification, skill or experience. The director biographies contained in the “Voting Proposals – Proposal No. 1: Election of Directors – 2019 Nominees for Director” section below describe each director nominee’s background and relevant experience in more detail, and identifies those qualifications, skills and experiences considered most relevant to the decision to nominate candidates to serve on our Board.

 

                     

 

  Key Qualifications, Skills & Experiences of Director Nominees

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

LOGO

 

Industry Knowledge – Knowledge of and experience with our semiconductor and broader technology industries and markets

 

X

 

X

 

X

 

X

 

X

 

X

 

X

 

X

 

X

 

X

Customer/Deep Technology Knowledge – Deep knowledge and understanding of semiconductor processing equipment technologies, including an understanding of our customers’ markets and needs

 

X

 

X

 

X

 

X

 

X

 

X

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

 

X

 

X

 

X

 

X

 

X

 

X

Leadership Experience – Experience as a current Or former CEO, president, COO and/or general manager of a significant business

 

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

 

X

Global Business Experience – Experience as a current or former business executive of a business with substantial global operations

 

X

 

X

 

X

 

X

 

X

 

X

 

X

 

X

Mergers and Acquisitions (‘‘M&A”) Experience – 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

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

 

X

 

X

 

X

Figure 4. Director Nominee 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 director nominees.

 

 

Tenure

 

 

LOGO

  

Age

 

 

LOGO

  

Gender Diversity

 

 

LOGO

 

Continues on next page  u

 

Lam Research Corporation 2019 Proxy Statement   3


Table of Contents

Figure 5. Corporate Governance Highlights

 

   

   Board and Other Governance Information

 

As of September 2019

 

Size of Board as Nominated

 

 

10

 

Number of Independent Nominated Directors

 

 

9

 

Number of Nominated Directors Who Attended ³75% of Meetings

 

 

10

 

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 (Page 12)

 

 

Yes

 

Hedging and Pledging Prohibited (Page 9)

 

 

Yes

 

Annual Election of Directors (Page 50)

 

 

Yes

 

Voting Standard (Page 50)

 

 

Majority

 

Plurality Voting Carveout for Contested Elections

 

 

Yes

 

Separate Chairman and Chief Executive Officer (“CEO”)

 

 

Yes

 

Lead Independent Director (Page 11)

 

 

Yes

(1) 

Independent Directors Meet Without Management Present (Page 11)

 

 

Yes

 

Annual Board (Including Individual Director) and Committee Self-Evaluations (Page 12)

 

 

Yes

 

Annual Independent Director Evaluation of CEO (Page 14)

 

 

Yes

 

Risk Oversight by Full Board and Committees (Page 14)

 

 

Yes

 

Commitment to Board Refreshment and Diversity (Page 10)

 

 

Yes

 

Robust Director Nomination Process (Pages 9-10)

 

 

Yes

 

Significant Board Engagement (Page 14)

 

 

Yes

 

Board Orientation/Education Program (Page 11)

 

 

Yes

 

Code of Ethics Applicable to Directors (Page 9)

 

 

Yes

 

Stockholder Proxy Access (Pages 10, 63)

 

 

Yes

 

Stockholder Ability to Act by Written Consent

 

 

Yes

 

Stockholder Engagement Program (Page 14)

 

 

Yes

 

Poison Pill

 

 

No

 

Publication of Corporate Social Responsibility Report on Our Website (Pages 14-15)

 

 

Yes

 

 

(1)

Effective as of November 5, 2019, there will be no lead independent director position and only an independent chairman.

 

4


Table of Contents

Figure 6. Executive Compensation Highlights

 

  What We Do

Pay for Performance (Pages 18-22, 25-31) – 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 2019 Long-Term Incentive Program (Pages 28-31) – Our current long-term incentive program is designed to pay for performance over a period of three years.

Absolute and Relative Performance Metrics (Pages 25-31) – 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 25-31) – Our annual and long-term incentive programs use different performance metrics.

Capped Amounts (Pages 26-31) – Amounts that can be earned under the annual and long-term incentive programs are capped.

Compensation Recovery/Clawback Policy (Page 23) – 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.

Stock Ownership Guidelines (Page 22) – 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 (Pages 23-24) – The compensation and human resources 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 32, 35-36, 41-46) – 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 32, 41-42) – None of our executive officers have 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.

 

Continues on next page  u

 

Lam Research Corporation 2019 Proxy Statement   5


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 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 6, 2019, which is the Record Date for the 2019 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 144,834,045 as the number of shares of Lam common stock outstanding on September 6, 2019.

 

 

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

 

 

11,885,413

(2) 

  

 

8.21

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

 

 

11,429,062

(3) 

  

 

7.89

Ameriprise Financial, Inc.
145 Ameriprise Financial Center
Minneapolis, MN 02100

 

 

9,286,271

(4) 

  

 

6.41

Directors

                

Sohail U. Ahmed

 

 

470

 

  

 

*

 

Timothy M. Archer (also a Named Executive Officer)

 

 

118,447

 

  

 

*

 

Eric K. Brandt

 

 

26,195

 

  

 

*

 

Michael R. Cannon

 

 

16,090

 

  

 

*

 

Youssef A. El-Mansy

 

 

22,176

 

  

 

*

 

Christine A. Heckart

 

 

15,540

 

  

 

*

 

Catherine P. Lego

 

 

50,598

 

  

 

*

 

Bethany J. Mayer

 

 

470

 

  

 

*

 

Stephen G. Newberry

 

 

9,847

 

  

 

*

 

Abhijit Y. Talwalkar

 

 

13,727

 

  

 

*

 

Lih Shyng (Rick L.) Tsai

 

 

4,870

 

  

 

*

 

Leslie F. Varon

 

 

470

 

  

 

*

 

Named Executive Officers (“NEOs”)

                

Douglas R. Bettinger

 

 

114,489

 

  

 

*

 

Richard A. Gottscho

 

 

63,345

 

  

 

*

 

Patrick J. Lord

 

 

1,620

 

  

 

*

 

Vahid Vahedi

 

 

33,423

 

  

 

*

 

Seshasayee (Sesha) Varadarajan

 

 

43,425

 

  

 

*

 

Martin B. Anstice

 

 

81,037

(5) 

  

 

*

 

All current directors and executive officers as a group (20 people)

 

 

628,915

 

  

 

*

 

 

*

Less than 1%.

 

6


Table of Contents
(1) 

Includes shares subject to outstanding stock options that are now exercisable or will become exercisable within 60 days after September 6, 2019, as well as RSUs, that will vest within that time period, as follows:

 

   
    Shares  

Sohail U. Ahmed

 

 

470

 

Timothy M. Archer

 

 

50,042

 

Eric K. Brandt

 

 

1,350

 

Michael R. Cannon

 

 

1,350

 

Youssef A. El-Mansy

 

 

1,350

 

Christine A. Heckart

 

 

1,350

 

Catherine P. Lego

 

 

1,350

 

Bethany J. Mayer

 

 

470

 

Stephen G. Newberry

 

 

1,350

 

Abhijit Y. Talwalkar

 

 

1,350

 

Lih Shyng (Rick L.) Tsai

 

 

1,350

 

Leslie F. Varon

 

 

470

 

Douglas R. Bettinger

 

 

57,982

 

Richard A. Gottscho

 

 

1,753

 

Patrick J. Lord

 

 

1,333

 

Vahid Vahedi

 

 

1,192

 

Seshasayee (Sesha) Varadarajan

 

 

1,192

 

Martin B. Anstice

 

 

—  

 

All current directors and executive officers as a group (20 people)

 

 

181,206

 

The terms of any outstanding stock options that are now exercisable are reflected in “Figure 37. FYE2019 Outstanding Equity Awards,” except as described in the following sentences. Scott Meikle, Ph.D. and Sarah A. O’Dowd have options covering 876 and 54,626 shares, respectively, which are unexercised and exercisable within 60 days of September 6, 2019. The grants for Dr. Meikle and Ms. O’Dowd have terms consistent with the terms reflected in “Figure 37. FYE 2019 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, 2019, subject to continued service on the board as of that date, with immediate delivery of the shares upon vesting. For 2019, Drs. El-Mansy and Tsai; Messrs. Brandt, Cannon, Newberry and Talwalkar; and Mses. Heckart and Lego each received grants of 1,350 RSUs. For 2019, Mr. Ahmed and Mses. Mayer and Varon, who were appointed directors following the annual equity grant, each received pro-rated grants of 470 RSUs that 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 seven to Schedule 13G filed by Vanguard with the SEC on February 11, 2019. According to the Schedule 13G filing, of the 11,885,413 shares of Lam common stock reported as beneficially owned by Vanguard as of December 31, 2018, Vanguard had sole voting power with respect to 195,218 shares, had shared voting power with respect to 33,392 shares, had sole dispositive power with respect to 11,664,065 shares, and had shared dispositive power with respect to 221,348 shares of Lam common stock. The 11,885,413 shares of Lam common stock reported as beneficially owned by Vanguard include 142,438 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 129,752 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 eleven to Schedule 13G filed by BlackRock with the SEC on February 6, 2019 on behalf of BlackRock and its subsidiaries: BlackRock Life Limited; BlackRock International Limited; BlackRock Advisors, LLC; 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 11,429,062 shares of Lam common stock reported as beneficially owned by BlackRock as of December 31, 2018, BlackRock had sole voting power with respect to 10,034,525 shares, did not have shared voting power with respect to any shares, had sole dispositive power with respect to 11,429,062 shares, and did not have shared dispositive power with respect to any shares of Lam common stock.

 

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(4) 

All information regarding Ameriprise Financial, Inc., or “Ameriprise,” is based solely on information disclosed in amendment number six to Schedule 13G filed by Ameriprise with the SEC on February 14, 2019. According to the Schedule 13G filing, of the 9,286,271 shares of Lam common stock reported as beneficially owned by Ameriprise as of December 31, 2018, Ameriprise did not have sole voting power with respect to any shares, had shared voting power with respect to 9,078,943 shares, did not have sole dispositive power with respect to any shares, and had shared dispositive power with respect to 9,286,271 shares of Lam common stock. According to the Schedule 13G filing, Ameriprise, as the parent company of Columbia Management Investment Advisers, LLC, or “Columbia,” may be deemed to have, but disclaims, beneficial ownership of the shares reported by Columbia in the Schedule 13G filing. Accordingly, the shares reported as beneficially owned by Ameriprise include those shares separately reported as beneficially owned by Columbia.

 

(5) 

Mr. Anstice terminated his employment with the Company as of December 5, 2018, the date as of which his beneficial ownership information is reflected.

 

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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:

Figure 8. Policies and Procedures Summary

 

   

   Policy and

   Procedure

  Summary

Board

committee

charters*

 

Each of the Board’s audit, compensation and human resources, and nominating and governance committees has a written charter adopted by the Board that delegates authority and responsibilities to the committee.

 

Each committee reviews its charter, and the nominating and governance committee reviews the charters of all of the committees, annually and recommends changes to the Board, as appropriate. 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.

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.

Global Standards of Business Conduct*

  We maintain written standards of business conduct to address a variety of situations that apply to our worldwide workforce. Among other things, these global standards of business conduct address relationships and/or conduct with one another, with Lam (including conflicts of interest, safeguarding of Company assets, and protection of confidential information), and 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 pledges of Company stock, and prohibiting such persons from engaging in hedging transactions, such as “cashless” collars, forward sales, equity swaps and other similar arrangements. Investments in exchange funds may be permitted on a case-by-case basis if the fund is broadly diversified.

 

*

A copy is available on the Investors section of our website at https://investor.lamresearch.com/corporate-governance.

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.

 

 

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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 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 the semiconductor and broader technology industries and markets;
    Customer/deep technology knowledge: deep knowledge and understanding of semiconductor processing equipment technologies, including an understanding of our customers’ markets and needs;
    Marketing experience: extensive knowledge and experience in business-to-business marketing and sales, and services and/or business development, preferably in a capital equipment industry;
    Leadership experience: experience as a current or former CEO, president, COO, and/or general manager of a significant business;
    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;
    Global business experience: experience as a current or former business executive of a business with substantial global operations;
    Mergers and acquisitions (“M&A”) experience: 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; 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 considered most relevant to the nomination of the candidate to serve on the Board are reflected in his or her biography under “Voting Proposals – Proposal No. 1: Election of Directors – 2019 Nominees for Director” below. For a summary of the key qualifications, skills, and attributes of the nominees to the Board, see “Proxy Statement Summary – Figure 3. Director Nominee Key Qualifications, Skills and Experiences 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. Director Nominee 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 four new directors in the last year.

For many years, the composition of the Board has reflected the Board’s commitment to diversity. For example, every year since 2006, the Board has had at least two female directors, and over the last 10 years has appointed directors who have expanded the experiences, areas of substantive expertise and geographic and industry diversity of the board, as illustrated by the information provided in their biographies under “Voting Proposals –Proposal No. 1: Election of Directors – 2019 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 their experience with the Company and with 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 sets specific qualifications for new directors, and 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 – 2019 Nominees for Director” below for additional information regarding the 2019 candidates for election to the Board.

Certain provisions of our bylaws apply to the nomination or recommendation of candidates by a stockholder. For example, our bylaws 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

 

 

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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 2020 Annual Meeting” section below.

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. Archer, are independent in accordance with Nasdaq criteria for director independence. In making the determination, the Board considered prior employment with the Company, disclosed related party transactions, known familial relationships of directors with employees (not involving immediate family members) and commercial transactions involving other parties with common directorships, none of which qualified as related party transactions or were considered by the Board to interfere with the exercise of independent judgment as a director.

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 and human resources 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, who was appointed the lead independent director effective August 27, 2015, will continue to hold such role until November 4, 2019, the effective date of Mr. Newberry’s previously disclosed retirement. As described below under “Leadership Structure of the Board,” beginning November 5, 2019, Mr. Talwalkar will be chairman of the board and there will be no 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 Company’s governance framework provides the Board with the flexibility to select the appropriate leadership structure for the Board of the Company. In making determinations about the leadership structure, the Board considers many factors, including the specific needs of the business and what is in the best interests of the Company’s stockholders.

The leadership structure of the Board currently consists of a chairman and a lead independent director. Lam and its stockholders have benefited 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. In light of Mr. Newberry’s previously announced retirement from the board, effective the close of business on November 4, 2019, the Board has elected Mr. Talwalkar, whom it has determined to be independent, as chairman, and determined there will be no lead independent director position as of November 5, 2019. Lam believes that it and its stockholders will benefit from having Mr. Talwalkar as its chairman, which role will include all of the responsibilities of the current chairman and lead independent director, as he will bring to bear his experiences as the Company’s lead independent director over the last four years, 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 chairman.

The chairman’s duties will 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 of which he is not a member; (3) conveying to the CEO, together with the chair of the compensation and human resources committee, the results of the CEO’s performance evaluation; (4) reviewing proposals submitted by stockholders for action at meetings of

 

 

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Lam Research Corporation 2019 Proxy Statement   11


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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) as requested by the Board, providing reports to the Board on the chairman’s activities; (6) coordinating the activities of the independent directors; (7) developing the agenda for, and moderating executive sessions of, the full Board and the Board’s independent directors; and (8) performing such other duties as the Board may reasonably request from time to time.

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 governance committee. 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, 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 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 at other public companies 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). Finally, the Company’s CEO may not serve on more than one other public company board.

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 2019 or have a period of time remaining under the guidelines to meet the requirements.

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 if permitted under applicable law).

Meeting Attendance

Our Board held a total of eight meetings during fiscal year 2019. The number of committee meetings held is shown in Figures 9-11. 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 2019.

 

 

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We expect our directors to attend the annual meeting of stockholders each year unless unusual circumstances make attendance impractical. All of the individuals who were directors as of the 2018 annual meeting of stockholders attended that meeting.

Board Committees

The Board has three standing committees: an audit committee, a compensation and human resources committee, and a nominating and governance committee. The purpose, membership, and charter of each are described below. Copies of each charter are available on the Investors section of our website at https://investor.lamresearch.com/corporate-governance.

Figure 9. Audit Committee

 

   
   Membership (1)(2)  

Meetings  

in  

FY2019  

   

   Eric K. Brandt (Chair) (3)

   Michael R. Cannon (3)

   Christine A. Heckart

   Bethany J. Mayer (4)

   Leslie F. Varon (3)(4)

 

Independence (5)   

5 of 5   

  8  

Purpose

Purpose is to oversee the Company’s accounting and financial reporting processes, the Company’s Internal Audit Program, its investment policies and performance, its information security policies, its Ethics and Compliance Program, 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.

 

(1)

As of September 6, 2019.

 

(2) 

Each member is able to read and understand fundamental financial statements as required by the Nasdaq listing standards. Messrs. Newberry and Talwalkar and Ms. Lego (members of the Board) each qualify as an “audit committee financial expert” as defined in the SEC rules.

 

(3) 

Each is an “audit committee financial expert” as defined in the SEC rules.

 

(4) 

Mses. Mayer and Varon were appointed to the committee effective August 26, 2019.

 

(5) 

The Board concluded that all members are non-employee directors who are independent in accordance with the Nasdaq listing standards and SEC rules for audit committee member independence.

Figure 10. Compensation and Human Resources Committee

 

   
   Membership (1)  

Meetings  

in  

FY2019  

   

   Youssef A. El-Mansy

   Catherine P. Lego (Chair)

   Abhijit Y. Talwalkar

   Lih Shyng (Rick L.) Tsai (2)

 

Independence (3)   

4 of 4   

  4  

Purpose

Purpose 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; to produce an annual report on executive compensation for inclusion as required in the Company’s annual proxy statement; and to discharge certain responsibilities of the Board with respect to organization and people matters.

The committee is authorized to perform the responsibilities referenced above and described in its charter.

 

(1)

As of September 6, 2019.

 

(2) 

Dr. Tsai was appointed to the committee effective August 26, 2019.

 

(3) 

The Board concluded that all members of the compensation and human resources 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 are outside directors for purposes of section 162(m) of the Code.

Figure 11. Nominating and Governance Committee

 

   
   Membership (1)  

Meetings  

in  

FY2019  

   

   Eric K. Brandt (2)

   Michael R. Cannon

   Catherine P. Lego

   Abhijit Y. Talwalkar

   (Chair)

 

Independence (3)   

4 of 4   

  4  

Purpose

Purpose 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.

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 2020 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.

 

(1)

As of September 6, 2019.

 

(2) 

Mr. Brandt was appointed to the committee effective August 26, 2019.

 

 

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(3) 

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.

Board’s Role and Engagement

General. The Board 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. Board agendas facilitate Board/management dialogue regarding drivers of long-term stockholder value and key strategic and operational risks.

The Board and its committees have the primary responsibilities for:

 

    overseeing the Company’s business strategies, and approving the Company’s capital allocation plans and priorities, annual operating plan, and major corporate actions as set forth in the below sub-bullets;
  °    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;
  °    Capital allocation plans and priorities are discussed on a quarterly basis; and
  °    Other major corporate actions are presented and discussed as part of strategic plan updates and as special agenda topics, as appropriate.
    appointing, annually evaluating the performance of, and approving the compensation of the CEO;
    reviewing with the CEO the performance of the Company’s other 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 material risks and enterprise risk management processes and programs.

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 and human resources committee oversees risks related to the Company’s equity, executive compensation programs and plans, and organizational risks.
    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 president and CEO, chief financial officer (CFO) and members of our Investor Relations team, maintain regular contact with a broad base of investors through quarterly earnings calls, meetings, investor 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 Legal, Investor Relations, Corporate Communications and Human Resources 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 the 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, have maintained our focus on board diversification, board refreshment based on skills and experiences, workforce diversity, and pay for performance, and have enhanced our proxy statement and Corporate Social Responsibility (CSR) Report disclosures.

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.

 

 

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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 donations.

Our charitable grantmaking is focused on two key areas: science, technology, engineering and math (STEM) education/education support programs and “quality of life” grants for social impact. As a successful equipment supplier in the technology industry, we encourage students to pursue 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 research and development (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 and the Responsible Business Alliance Code of Conduct, both of which cover ethics, integrity, transparency, anti-corruption, conflict minerals, human trafficking, environmental sustainability, and social responsibility.

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 Environmental Health & Safety section our website at https://www.lamresearch.com/company/corporate-social-responsibility/environmental-health-safety/.

 

 

 

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. Archer, as our president and CEO, by the independent members of the Board, and in the case of Mr. Newberry, by all other independent members of the Board) following a recommendation from the compensation [and people] committee. Non-employee director compensation (including the compensation of Mr. Newberry, who is currently our non-employee chairman) is described below. Mr. Archer, whose compensation as president and 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 30, 2019, together with the annual cash compensation program components in effect for calendar years 2019 and 2018, is shown below.

 

 

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Lam Research Corporation 2019 Proxy Statement   15


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Figure 12. Director Annual Retainers

 

       
   Annual Retainers (1)   Calendar
Year 2019
($)
    Calendar
Year 2018
($)
    Fiscal
Year 2019
($)
 

Non-employee Director

 

 

75,000

 

 

 

75,000

 

 

 

75,000

 

Chairman

 

 

120,000

 

 

 

120,000

 

 

 

120,000

 

Lead Independent Director

 

 

27,500

 

 

 

27,500

 

 

 

27,500

 

Audit Committee – Chair

 

 

30,000

 

 

 

30,000

 

 

 

30,000

 

Audit Committee – Member

 

 

12,500

 

 

 

12,500

 

 

 

12,500

 

Compensation and Human Resources Committee – Chair

 

 

20,000

 

 

 

20,000

 

 

 

20,000

 

Compensation and Human Resources 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

 

 

 

5,500

 

 

 

5,500

 

 

(1) 

Each director is entitled to an annual non-employee director cash retainer. Directors are also entitled to supplemental retainer fees if they have board leadership positions (e.g., chairman or lead independent director) and/or are either committee leaders or members.

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 (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 9, 2018, each director at such time other than the president and CEO received a grant of 1,350 RSUs for service during calendar year 2019.

Unless there is an acceleration event, these RSUs granted to each current director for service during calendar year 2019 will vest in full on October 31, 2019, 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, received an additional cash retainer of $120,000.

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 2019 for persons serving as directors during fiscal year 2019 other than Mr. Archer and Martin B. Anstice:

Figure 13. FY2019 Director Compensation

 

 
Director Compensation for Fiscal Year 2019  
    Fees
Earned
or Paid
in Cash
($)
    Stock
Awards
($) (1)
    All Other
Compen-
sation
($) (2)
    Total
($)
 

 

Stephen G. Newberry

 

 

 

 

 

 

195,000

 

 

(3) 

 

 

 

 

 

 

193,820

 

 

(4) 

 

 

 

 

 

 

31,030

 

 

 

 

 

 

 

 

 

419,850

 

 

 

 

 

Sohail U. Ahmed(5)

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

—  

 

 

 

 

 

Eric K. Brandt

 

 

 

 

 

 

105,000

 

 

(6) 

 

 

 

 

 

 

193,820

 

 

(4) 

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

298,820

 

 

 

 

 

Michael R. Cannon

 

 

 

 

 

 

93,000

 

 

(7) 

 

 

 

 

 

 

193,820

 

 

(4) 

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

286,820

 

 

 

 

 

Youssef A. El-Mansy

 

 

 

 

 

 

85,000

 

 

(8) 

 

 

 

 

 

 

193,820

 

 

(4) 

 

 

 

 

 

 

31,030

 

 

 

 

 

 

 

 

 

309,850

 

 

 

 

 

Christine A. Heckart

 

 

 

 

 

 

87,500

 

 

(9) 

 

 

 

 

 

 

193,820

 

 

(4) 

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

281,320

 

 

 

 

 

Catherine P. Lego

 

 

 

 

 

 

100,500

 

 

(10) 

 

 

 

 

 

 

193,820

 

 

(4) 

 

 

 

 

 

 

29,668

 

 

 

 

 

 

 

 

 

323,988

 

 

 

 

 

Bethany J. Mayer(5)

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

—  

 

 

 

 

 

Abhijit Y. Talwalkar

 

 

 

 

 

 

127,500

 

 

(11) 

 

 

 

 

 

 

193,820

 

 

(4) 

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

321,320

 

 

 

 

 

Lih Shyng (Rick L.) Tsai

 

 

 

 

 

 

75,000

 

 

(12) 

 

 

 

 

 

 

193,820

 

 

(4) 

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

268,820

 

 

 

 

 

Leslie F. Varon(5)

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

—  

 

 

 

 

 

 

 

 

 

—  

 

 

 

 

 

(1) 

The amounts shown in this column represent the grant date fair value of unvested RSU awards granted during fiscal year 2019 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 2019 are set forth in Note 5 to the Consolidated Financial Statements of the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2019.

 

(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.

 

 

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(4) 

On November 9, 2018, each non-employee director who was on the board at such time received an annual grant of 1,350 RSUs based on the $147.85 closing price of Lam’s common stock and the target value of $200,000, rounded down to the nearest 10 shares.

 

(5) 

Mr. Ahmed was appointed to the Board effective June 3, 2019. Mses. Mayer and Varon were appointed to the Board effective May 9, 2019. Each received prorated annual retainers and RSU awards in fiscal year 2020 for service during calendar year 2019.

 

(6) 

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

 

(7) 

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.

 

(8) 

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

 

(9) 

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

 

(10) 

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

 

(11) 

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 and human resources committee, and $15,000 as the chair of the nominating and governance committee.

 

(12) 

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 30, 2019, for eligible 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 14. FY2019 Accumulated Post-Retirement Benefit Obligations

 

 
Director Compensation for Fiscal Year 2019  
   Name   Accumulated
Post-Retirement
Benefit Obligation,
as of June 30, 2019
($)
 

Stephen G. Newberry

 

 

847,000

 

Sohail U. Ahmed

 

 

—  

 

Eric K. Brandt

 

 

—  

 

Michael R. Cannon

 

 

—  

 

Youssef A. El-Mansy

 

 

584,000

 

Christine A. Heckart

 

 

—  

 

Catherine P. Lego

 

 

487,000

 

Bethany J. Mayer

 

 

—  

 

Abhijit Y. Talwalkar

 

 

—  

 

Lih Shyng (Rick L.) Tsai

 

 

—  

 

Leslie F. Varon

 

 

—  

 

 

 

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Lam Research Corporation 2019 Proxy Statement   17


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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 2018 Compensation Payouts; Calendar Year 2019 Compensation Targets and Metrics
IV.   Tax and Accounting Considerations

Our CD&A discusses compensation earned by our fiscal year 2019 “Named Executive Officers,” or “NEOs,” who are as follows:

Figure 15. FY2019 NEOs

 

   
   Named Executive Officer    Position(s)

Timothy M. Archer

  

President and Chief Executive Officer (effective December 5, 2018)

President and Chief Operating Officer (through December 5, 2018)

Douglas R. Bettinger

  

Executive Vice President and Chief Financial Officer

Richard A. Gottscho

  

Executive Vice President, Chief Technology Officer

Patrick J. Lord

  

Senior Vice President and General Manager, Customer Support Business Group (CSBG)

Vahid Vahedi

  

Senior Vice President and General Manager, Etch Business Unit

Seshasayee (Sesha) Varadarajan

  

Senior Vice President and General Manager, Deposition Business Unit

Martin B. Anstice

  

Former Chief Executive Officer (through December 5, 2018)

On December 5, 2018, Martin B. Anstice resigned as CEO of the Company and a member of the Board, terminating his participation in the calendar year 2018 annual incentive program and canceling all of his unvested equity awards under the Company’s long-term incentive programs. In order to create a long-term, stable leadership structure, the Board took the following actions. Pursuant to the Company’s succession plan, the Board immediately appointed Mr. Archer, the Company’s then president and chief operating officer (“COO”), as CEO and as a member of the Board. The Board also took steps to retain Mr. Bettinger as CFO and, in lieu of appointing a COO, expanded Mr. Bettinger’s responsibilities to cover certain operational matters. The Board issued longer-term retentive awards to both of them and adjusted their compensation accordingly. The details are described in more detail under each element of our compensation program, including “Compensation Relating to Management Transition,” under “III. Primary Components of Named Executive Officer Compensation; Calendar Year 2018 Compensation Payouts; Calendar 2019 Compensation Targets and Metrics.”

 

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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. Highlights of our executive compensation program are listed in “Proxy Statement Summary – Figure 6. Executive Compensation Highlights” above. Our president and CEO’s compensation in relation to each of our revenue and net income, as well as the Company’s cumulative five-year total shareholder return on common stock compared against the cumulative returns of other indexes, are shown below.

Figure 16. FY2014-FY2019 CEO Pay for Performance

CEO Pay for Performance

 

 

LOGO

 

(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 both under the long-term incentive program or otherwise, and all other compensation as reported in the “Summary Compensation Table” below.

 

(2) 

The CEO Total Compensation for fiscal year 2019 represents Mr. Archer’s compensation for service as president and COO until December 5, 2018 and thereafter until the end of the 2019 fiscal

  year as president and CEO; for additional information with respect to the special equity award associated with Mr. Archer’s promotion see “III. Primary Components of Named Executive Officer Compensation; Calendar Year 2018 Compensation Payouts; Calendar Year 2019 Compensation Targets and Metrics – Compensation Relating to Management Transition.” For prior years, the CEO Total Compensation relates to the compensation of the applicable CEO.
 

 

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Lam Research Corporation 2019 Proxy Statement   19


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The graph below compares Lam’s cumulative five-year total shareholder return on common stock with the cumulative total returns of the Nasdaq Composite Index, the Standard & Poor’s (“S&P”) 500 Index, and the Philadelphia Semiconductor Sector Index. The graph tracks the performance of a $100 investment in our common stock and in each of the indices (with the reinvestment of all dividends) for the five years ended June 30, 2019.

COMPARISON OF CUMULATIVE FIVE-YEAR TOTAL RETURN*

Among the Company, the Nasdaq Company Index,

the S&P 500 Index and the Philadelphia Semiconductor Sector Index

 

LOGO

 

*

$100 invested on June 29, 2014 in stock or June 30, 2014 in index, including reinvestment of dividends. Indexes calculated on month-end basis.

Copyright © 2019 Standard & Poor’s, a division of S&P Global. All rights reserved.

 

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

 

 

An overview of our business and industry environment is set forth in “Proxy Statement Summary” above.

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.

Figure 17. Executive Compensation Calendar-Year Orientation

 

 

LOGO

In calendar year 2018, demand for semiconductor equipment continued to increase relative to calendar year 2017, 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 2018:

 

    achieved record revenues of approximately $10.9 billion for the calendar year, representing a 14% increase over calendar year 2017;
    generated operating cash flow of approximately $3.1 billion, which represents approximately 29% of revenues; and
 

 

20


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    generated sufficient cash flow to support payment of approximately $504 million in dividends to stockholders, a 72% increase compared to calendar year 2017.

In the first half of calendar year 2019, wafer fabrication equipment spending levels reduced mainly related to the memory segment. Customers lowered their investments in memory capacity in response to the overall demand environment.

In a reduced wafer fabrication spending environment, Lam has continued to generate solid operating income and cash generation with revenues of $4.8 billion, and operating cash flows of $1.8 billion, earned from the March and June 2019 quarters combined.

Executive Compensation Philosophy and Program Design

 

 

Executive Compensation Philosophy

The philosophy of our compensation and human resources 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 and human resources 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 incorporates an annual review of the compensation elements. However, a review can be undertaken whenever there is a change in roles or responsibilities or a new hire joins the Company.

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”; a long-term incentive program, or “LTIP”; promotion, retention and/or new hire awards whenever necessary, which is not usual; 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.

 

 

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Lam Research Corporation 2019 Proxy Statement   21


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Figure 18. NEO Compensation Target Pay Mix Averages (1)

 

 

LOGO

 

(1) 

Data for 2019, 2018, and 2017 charts is for the then-applicable NEOs (i.e., fiscal year 2019 NEOs are represented in the 2019 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. Except as provided in footnote 4, in 2019, the percentages of the LTIP target award opportunity awarded in stock options and service-based RSUs were 20% and 30%, respectively. In 2017 and 2018, the corresponding percentages awarded in stock options and service-based RSUs were 10% and 40%. See “III. Primary Components of Named Executive Officer Compensation; Calendar Year 2018 Compensation Payouts; Calendar Year 2019 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.

 

(4) 

Data for 2018 and 2019 does not include the service-based RSUs and stock options awarded to Mr. Archer and the service-based RSUs awarded to Mr. Bettinger in connection with the management transition. See “III. Primary Components of Named Executive Officer Compensation; Calendar Year 2018 Compensation Payouts; Calendar Year 2019 Compensation Targets and Metrics – Compensation Relating to Management Transition” for further information regarding the amount and terms of such awards. These one-time 2018 awards are not included in the 2018 or 2019 target pay mix in order to allow the reader to more easily compare pay mixes relative to prior and future periods.

 

For senior vice presidents and above, we also have stock ownership guidelines that foster a long-term orientation. 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 2019, 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 19. Executive Stock Ownership Guidelines

 

   
   Position    Guidelines (lesser of)

President and Chief Executive Officer

   5x base salary or 50,000 shares

Executive Vice Presidents

   2x base salary or 10,000 shares

Senior Vice Presidents

   1x base salary or 5,000 shares

 

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Table of Contents

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 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.

 

 

II. EXECUTIVE COMPENSATION GOVERNANCE AND PROCEDURES

 

Role of the Compensation and Human Resources Committee

 

 

Our Board has delegated certain responsibilities to the compensation and human resources committee, or the “committee,” through a formal charter. The committee(1) oversees the compensation programs in which our president and chief executive officer and our 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/or 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 and Human Resources Committee” above.

In order to carry out these responsibilities, the committee receives and reviews information, analyses, 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

 

(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 and human resources committee.

 

 

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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 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 20. 2019 Peer Group Revenue and Market Capitalization

 

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

Revenue (last completed reported four quarters as of July 2, 2018)

    10,296     0.33 to
3 times Lam
    5,992  

Market Capitalization (30-day average as of July 2, 2018)

    30,657     0.33 to

3 times Lam

    23,030  

Based on these criteria, the Peer Group and targets may be modified from time to time. Our Peer Group was reviewed in August 2018 for calendar year 2019 compensation decisions and based on the criteria identified above, one company was added to the peer group (Qualcomm Incorporated). Our Peer Group consists of the companies listed as follows:

Figure 21. CY2019 Peer Group Companies

 

Advanced Micro Devices, Inc.

 

Micron Technology, Inc.

Agilent Technologies, Inc.

 

NetApp, Inc.

Analog Devices, Inc.

 

NVIDIA Corporation

Applied Materials, Inc.

 

ON Semiconductor Corporation

Broadcom Limited

 

Qualcomm Incorporated

Corning Incorporated

 

Skyworks Solutions, Inc.

Juniper Networks, Inc.

 

Texas Instruments Inc.

KLA Corporation

 

Western Digital Corporation

Maxim Integrated Products, Inc.

 

Xilinx, Inc.

Microchip Technology Incorporated

   

We derive revenue, market capitalization, and NEO compensation data from public filings made by our Peer Group companies with the SEC and from 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.

Base pay levels for each executive officer are generally set with reference to market-competitive levels and in reflection of

 

 

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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 2019 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.

2018 Say on Pay Voting Results; Company Response

 

 

We evaluate our executive compensation program and practices at least annually. Among other things, we consider the outcome of our most recent Say on Pay vote and input we receive from our stockholders. In 2018, our stockholders approved our 2018 advisory vote on executive compensation, with 91.17% 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 2019.

 

 

III. PRIMARY COMPONENTS OF NAMED EXECUTIVE OFFICER COMPENSATION; CALENDAR YEAR 2018 COMPENSATION PAYOUTS; CALENDAR YEAR 2019 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 2018 and the forward-looking actions taken with respect to our NEOs in calendar year 2019.

Base Salary

 

 

We believe the purpose of base salary is to provide competitive compensation to attract and retain top talent and to provide 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 2019 and 2018, base salaries for NEOs were determined by the committee in February of each year (other than the calendar year 2019 base salary for Mr. Bettinger, which was determined by the committee in November 2018 in connection with the management transition described under “Compensation Discussion and Analysis” above) 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 2019 were made to remain competitive relative to our Peer Group and reflect performance as follows: Mr. Archer’s base salary was increased by 45% following his

December 5, 2018 promotion to CEO (see “Compensation Discussion and Analysis” above for additional detail), Mr. Bettinger’s base salary was increased by 8% in light of his additional responsibilities associated with increased oversight for the operational performance of the Company, and the base salaries of Drs. Gottscho, Lord and Vahedi and Mr. Varadarajan increased by 3%. The base salaries of the NEOs for calendar years 2019 and 2018 are shown below.

Figure 22. NEO Annual Base Salaries

 

     
   Named Executive Officer  

Annual Base
Salary

2019 (1)
($)

   

Annual Base
Salary

2018 (2)
($)

 

Timothy M. Archer

 

 

1,000,000

 

 

 

688,418

 

Douglas R. Bettinger

 

 

640,000

 

 

 

592,770

 

Richard A. Gottscho

 

 

584,344

 

 

 

567,324

 

Patrick J. Lord

 

 

463,500

 

 

 

450,000

 

Vahid Vahedi

 

 

453,200

 

 

 

440,000

 

Seshasayee (Sesha) Varadarajan

 

 

453,200

 

 

 

440,000

 

Martin B. Anstice(3)

 

 

—  

 

 

 

1,025,000

 

 

(1) 

Effective February 25, 2019

 

(2) 

Effective February 26, 2018

 

(3) 

Mr. Anstice terminated his employment with the Company as of December 5, 2018.

 

 

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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 multiple of the target award opportunity. The maximum award for 2018 and 2019 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 2018, for calendar year 2018, 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 20% 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 following 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 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 2019 and 2018: amortization related to intangible assets acquired through certain business combinations; business combination acquisition and integration related costs; costs associated with business process reengineering; and restructuring charges.

 

 

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Figure 23. Annual Incentive Program Payouts

 

     

   Calendar

   Year

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

2018

     137      Strong operating performance and continued expansion of served available markets. Growth in demand for semiconductor equipment driven by the memory segment for both capacity and technology investments.

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.

 

Calendar year 2018 annual incentive program parameters and payout decisions

In February 2018, the committee set the calendar year 2018 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. In February 2019, the committee considered the actual results under these factors and made payout decisions for the calendar year 2018 program, all as described below.

2018 Annual Incentive Program Target Award Opportunities. The annual incentive program target award opportunities for calendar year 2018 for each NEO were as set forth below in Figure 24 in accordance with the principles set forth above under “Executive Compensation Governance and Procedures – Peer Group Practices and Survey Data.”

2018 Annual Incentive Program Corporate Performance Factor. In February 2018, the committee set non-GAAP operating income as a percentage of revenue as the metric for the calendar year 2018 Corporate Performance Factor, and set:

 

    a goal of 27% 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 0.40 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 29.6% for calendar year 2018. This performance resulted in a total Corporate Performance Factor of 1.26 for calendar year 2018.

2018 Annual Incentive Program Individual Performance Factors. For 2018, 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. Archer for calendar year 2018 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 2018 were considered.

 

    Mr. Archer’s Individual Performance Factor for calendar year 2018 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 2018 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 2018 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. Lord’s Individual Performance Factor for calendar year 2018 was based on the accomplishment of market share, strategic, operational, and organizational development goals for the customer support business group (CSBG).
    Dr. Vahedi’s Individual Performance Factor for calendar year 2018 was based on the accomplishment of market share, strategic, operational, and organizational development goals for the etch business unit.
   

Mr. Varadarajan’s Individual Performance Factor for calendar year 2018 was based on the accomplishment of

 

 

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market share, strategic, operational, and organizational development goals for the deposition business unit.

The committee’s consideration of the above accomplishments resulted in the following Individual Performance Factors for each NEO: Mr. Archer, 1.09; Mr. Bettinger, 1.10; Dr. Gottscho, 1.10; Dr. Lord, 1.15; Dr. Vahedi, 1.05; and Mr. Varadarajan, 1.05.

2018 Annual Incentive Program Payout Decisions. In February 2019, in light of the Funding Factor results and based on the above results and decisions, the committee approved for the calendar year 2018 annual incentive program payouts for each NEO, which were less than the maximum payout available under the Funding Factor as shown below in Figure 24:

 

 

Figure 24. CY2018 Annual Incentive Program Payouts

 

         
   Named Executive Officer (1)    Target Award
Opportunity
(% of Base Salary)
     Target Award
Opportunity
($) (2)
     Maximum Payout under
Funding Factor (225.0% of
Target Award Opportunity)
($) (3)
     Actual
Payouts
($)
 

Timothy M. Archer

  

 

125

 

  

 

860,523

 

  

 

1,936,176

 

  

 

1,181,842

 

Douglas R. Bettinger

  

 

90

 

  

 

533,493

 

  

 

1,200,359

 

  

 

739,421

 

Richard A. Gottscho

  

 

90

 

  

 

510,592

 

  

 

1,148,831

 

  

 

707,680

 

Patrick J. Lord

  

 

85

 

  

 

382,500

 

  

 

860,625

 

  

 

554,243

 

Vahid Vahedi

  

 

85

 

  

 

374,000

 

  

 

841,500

 

  

 

494,802

 

Seshasayee (Sesha) Varadarajan

  

 

85

 

  

 

374,000

 

  

 

841,500

 

  

 

494,802

 

 

(1) 

Mr. Anstice did not receive a payout under the annual incentive program for calendar year 2018 because he terminated his employment with the Company as of December 5, 2018.

 

(2) 

Calculated by multiplying each NEO’s annual base salary for calendar year 2018 by his or her respective target award opportunity percentage.

 

(3) 

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 “2018 Annual Incentive Program Corporate Performance Factor” above and the specific goals set forth in the second paragraph under “Annual incentive program components” above).

 

Calendar year 2019 annual incentive program parameters

In February 2019, 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. The target percentages increased for Mr. Archer to reflect his promotion to CEO and Mr. Bettinger to reflect a more competitive level and his additional responsibilities associated with increased oversight for the operational performance of the Company.

Figure 25. CY2019 Annual Incentive Program Target Award Opportunities

 

   
   Named Executive Officer (1)   Target Award
Opportunity
(% of Base Salary)
 

Timothy M. Archer

 

 

150

 

Douglas R. Bettinger

 

 

100

 

Richard A. Gottscho

 

 

90

 

Patrick J. Lord

 

 

85

 

Vahid Vahedi

 

 

85

 

Seshasayee (Sesha) Varadarajan

 

 

85

 

 

(1) 

Mr. Anstice did not participate in the annual incentive program for calendar year 2019 because he terminated his employment as of December 5, 2018.

The committee also approved non-GAAP operating income as a percentage of revenue as the annual metric for the Funding Factor and the Corporate Performance Factor, 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

 

 

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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 Market-based PRSUs 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.

 

 

Equity Vehicles

The equity vehicles used in our 2019/2021 long-term incentive program are as follows:

Figure 26. 2019/2021 LTIP Program Equity Vehicles

 

     

   Equity

   Vehicles

  

% of Target

Award

Opportunity

     Terms

Market-based PRSUs

     50     

•  Awards cliff vest three years from the March 1, 2019 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, 2019 through January 31, 2022).

 

•  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 27.

 

•  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, $169.46, 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

     20     

•  Awards vest one-third on the first, second, and third anniversaries of the March 1, 2019 grant date, or “Grant Date,” subject to continued employment.

 

•  The number of stock options granted is determined by dividing 20% of the target opportunity by the 30-day average of the closing price of our common stock prior to the Grant Date, $169.46, 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.

 

•  The exercise price of stock options is the closing price of our common stock on the Grant Date.

 

•  Awards are exercisable upon vesting.

 

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

Service-based
RSUs

     30     

•  Awards vest one-third on the first, second, and third anniversaries of the March 1, 2019 grant date, or “Grant Date,” subject to continued employment.

 

•  The number of RSUs granted is determined by dividing 30% of the target opportunity by the 30-day average of the closing price of our common stock prior to the Grant Date, $169.46, rounded down to the nearest share.

 

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

 

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Figure 27. 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 26, 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 2019 are shown below.

Figure 28. LTIP Target Award Opportunities

 

     
   Named Executive Officer (1)   Long-
Term
Incentive
Program
     Target Award
Opportunity
($)
 

Timothy M. Archer

 

 

2019/2021

(2) 

  

 

7,200,000

 

 

 

2018/2020

(3) 

  

 

5,000,000

 

 

 

2017/2019

(4) 

  

 

4,500,000

 

 

 

2016/2018

(5) 

  

 

4,000,000

 

Douglas R. Bettinger

 

 

2019/2021

(2) 

  

 

2,700,000

 

 

 

2018/2020

(3) 

  

 

2,250,000

 

 

 

2017/2019

(4) 

  

 

2,750,000

 

 

 

2016/2018

(5) 

  

 

2,750,000

 

Richard A. Gottscho

 

 

2019/2021

(2) 

  

 

2,250,000

 

 

 

2018/2020

(3) 

  

 

2,500,000

 

 

 

2017/2019

(4) 

  

 

3,250,000

 

 

 

2016/2018

(5) 

  

 

3,250,000

 

Patrick J. Lord (6)

 

 

2019/2021

(2) 

  

 

1,800,000

 

 

 

2018/2020

(3) 

  

 

1,900,000

 

 

 

2017/2019

(4) 

  

 

1,350,000

 

 

 

2016/2018

(5) 

  

 

1,100,000

 

Vahid Vahedi (6)

 

 

2019/2021

(2) 

  

 

1,575,000

 

 

 

2018/2020

(3) 

  

 

1,700,000

 

 

 

2017/2019

(4) 

  

 

1,200,000

 

 

 

2016/2018

(5) 

  

 

1,100,000

 

Seshasayee (Sesha)
Varadarajan (6)

 

 

2019/2021

(2) 

  

 

1,575,000

 

 

 

2018/2020

(3) 

  

 

1,700,000

 

 

 

2017/2019

(4) 

  

 

1,200,000

 

 

 

2016/2018

(5) 

  

 

1,100,000

 

 

(1) 

Mr. Anstice did not participate in the 2019/2021 LTIP. His unvested awards under the 2016/2018, 2017/2019 and 2018/2020 LTIPs were canceled as of December 5, 2018 when he terminated his employment.

 

(2) 

The three-year performance period for the 2019/2021 LTIP began on February 1, 2019 and ends on January 31, 2022.

 

(3) 

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

 

(4) 

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

 

(5) 

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

 

(6) 

Of the target award opportunities for the awards to Drs. Lord and Vahedi and Mr. Varadarajan under the 2016/2018 and 2017/2019 vice president long-term incentive programs, 50% were awarded in Market-based PRSUs and 50% in service-based RSUs on terms otherwise similar (except in determining the number of shares representing the Market-Based PRSUs and number of RSU, using 50% as the percentage) to those of securities awarded to other NEOs under the 2016/2018 LTIP and 2017/2019 LTIP, respectively.

 

 

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Table of Contents

Calendar Year 2016/2018 LTIP Award Parameters and Payouts

On March 1, 2016, the committee granted to each then current NEO (Mr. Archer, Mr. Bettinger, Dr. Gottscho and Mr. Anstice) as part of the calendar year 2016/2018 CEO staff long-term incentive program, or “2016/2018 CEO Staff LTIP Awards,” Market-based PRSUs, and service-based RSUs and stock options, with a total target award opportunity shown below. On March 1, 2016, the equity award grant board committee granted to the remaining current NEOs (Dr. Lord, Dr. Vahedi and Mr. Varadarajan) as part of the 2016/2018 vice president long-term incentive program, or “2016/2018 VP LTIP Awards” and collectively with 2016/2018 CEO Staff LTIP Awards, the “2016/2018 LTIP Awards,” Market-based PRSUs and service-based RSUs with a total award opportunity shown below. The service-based RSUs and stock options (only under the 2016/2018 CEO Staff LTIP Awards) vested over three years, one-third on each anniversary of the grant date. The Market-based PRSUs cliff vested three years from the grant date. The terms of the Market-based PRSUs and service-based RSUs granted to all of the NEOs as part of the 2016/2018 LTIP Awards were the same.

Figure 29. 2016/2018 LTIP Award Grants

 

         
   Named Executive Officer (1)(2)   Target
Award
Opportunity
($)
    Market-
based
PRSUs
Award
(#)
    Stock
Options
Award
(#)
    Service-
based
RSUs
Award
(#)
 

Timothy M. Archer

 

 

4,000,000

 

 

 

28,935

 

 

 

34,722

 

 

 

17,361

 

Douglas R. Bettinger

 

 

2,750,000

 

 

 

19,892

 

 

 

23,871

 

 

 

11,935

 

Richard A. Gottscho

 

 

3,250,000

 

 

 

23,509

 

 

 

28,209

 

 

 

14,105

 

Patrick J. Lord

 

 

1,100,000

 

 

 

7,957

 

 

 

 

 

 

7,957

 

Vahid Vahedi

 

 

1,100,000

 

 

 

7,957

 

 

 

 

 

 

7,957

 

Seshasayee (Sesha) Varadarajan

 

 

1,100,000

 

 

 

7,957

 

 

 

 

 

 

7,957

 

 

(1)

All of the Market-based PRSUs and one-third of the stock options and service-based RSUs granted to Mr. Anstice under the 2016/2018 LTIP that were scheduled to vest in February 2019 were canceled upon his termination of employment with the Company as of December 5, 2018.

 

(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 2019, the committee determined the payouts for the calendar year 2016/2018 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 26 and 27, the Company’s stock price performance over the three-year performance period was equal to 89.93% and performance of the SOX index (based on market price) over the same three-year

performance period was equal to 84.47%. Lam’s stock price outperformed the SOX index by 5.46%, which resulted in a performance payout of 110.93% to 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 2016/2018 LTIP Award of Market-based PRSUs.

Figure 30. 2016/2018 LTIP Market-based PRSU Award Payouts

 

     
   Named Executive Officer (1)   Target
Market-
based
PRSUs
(#)
   

Actual

Payout of
Market-based
PRSUs (110.93%
of Target Award
Opportunity)

(#)

 

Timothy M. Archer

 

 

28,935

 

 

 

32,097

 

Douglas R. Bettinger

 

 

19,892

 

 

 

22,066

 

Richard A. Gottscho

 

 

23,509

 

 

 

26,078

 

Patrick J. Lord

 

 

7,957

 

 

 

8,826

 

Vahid Vahedi

 

 

7,957

 

 

 

8,826

 

Seshasayee (Sesha) Varadarajan

 

 

7,957

 

 

 

8,826

 

 

(1) 

All of the Market-based PRSUs granted to Mr. Anstice under the 2016/2018 LTIP that were scheduled to vest in February 2019 were canceled upon his termination of employment with the Company as of December 5, 2018.

Calendar Year 2019 LTIP Awards

Calendar year 2019 decisions for the 2019/2021 long-term incentive program. On March 1, 2019, the committee made a grant under the 2019/2021 long-term incentive program, of Market-based PRSUs, stock options, and service-based RSUs on the terms set forth in Figure 26 with a combined value equal to the NEO’s total target award opportunity, as shown below.

Figure 31. 2019/2021 LTIP Award Grants

 

         
   Named Executive Officer (1)(2)   Target
Award
Opportunity
($)
    Market-
based
PRSUs
Award
(#)
    Stock
Options
Award
(#)
    Service-
based
RSUs
Award
(#)
 

Timothy M. Archer

 

 

7,200,000

 

 

 

21,243

 

 

 

33,988

 

 

 

12,746

 

Douglas R. Bettinger

 

 

2,700,000

 

 

 

7,966

 

 

 

12,744

 

 

 

4,779

 

Richard A. Gottscho

 

 

2,250,000

 

 

 

6,638

 

 

 

10,620

 

 

 

3,983

 

Patrick J. Lord

 

 

1,800,000

 

 

 

5,310

 

 

 

8,496

 

 

 

3,186

 

Vahid Vahedi

 

 

1,575,000

 

 

 

4,647

 

 

 

7,432

 

 

 

2,788

 

Seshasayee (Sesha) Varadarajan

 

 

1,575,000

 

 

 

4,647

 

 

 

7,432

 

 

 

2,788

 

 

(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.

 

(2) 

Mr. Anstice did not participate in the 2019/2021 LTIP because he terminated his employment with the Company as of December 5, 2018.

 

 

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Lam Research Corporation 2019 Proxy Statement   31


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Compensation Relating to Management Transition

 

 

The independent members of the Board consulted with the committee and the committee’s compensation consultant to determine the appropriate amount and vesting schedule for Mr. Archer’s award. The independent members of the Board, on December 6, 2018, granted to Mr. Archer a $5,000,000 equity award consisting of 50% service-based RSUs and 50% stock options with a four-year vesting schedule, as shown below. No adjustment was made at that time to his annual base salary or his target award opportunities under the AIP or LTIP. These were adjusted to be competitive with CEOs in our peer group as part of the normal annual compensation review in February 2019.

In light of Mr. Bettinger’s critical role, his expanded responsibilities, and the intense competition in the technology industry for proven CFO talent, he received a special equity award on November 30, 2018. The committee consulted with its compensation consultant and with the Board to determine the amount and vesting schedule for the award. The committee granted to Mr. Bettinger a one-time service-based restricted stock unit (RSU) award with a nominal value of $8,000,000 and a four-year vesting schedule, as shown below.

 

 

Figure 32. 2018 Special Equity Award Terms

 

       

   Named Executive  

   Officer

  Equity Vehicle   Granted
(#)
  Terms

Timothy M. Archer

  Stock Options   71,430  

•  Award vests one-quarter on the first anniversary of the December 6, 2018 grant date, or “Grant Date,” and the remainder on a pro-rated basis on the sixth day of every month thereafter for the next 36 months, subject to continued employment.

 

•  The number of stock options granted was determined by dividing 50% of the $5,000,000 nominal value of the equity grant by the 30-day average of the closing price of our common stock prior to the Grant Date, $146.87, rounded down to the nearest share and multiplying the result by approximately 4.2. The ratio of options for every RSU was based on a Black Scholes fair value accounting analysis.

 

•  The exercise price of stock options is the closing price of our common stock on the Grant Date.

 

•  Award is exercisable upon vesting.

 

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

Timothy M. Archer

  Service-based
RSUs
  17,021  

•  Award vests one-quarter on the first anniversary of the December 6, 2018 grant date, or “Grant Date,” and the remainder on a pro-rated basis on the sixth day of every month thereafter for the next 36 months, subject to continued employment.

 

•  The number of RSUs granted was determined by dividing 50% of the $5,000,000 nominal value of the equity grant by the 30-day average of the closing price of our common stock prior to the Grant Date, $146.87, rounded down to the nearest share.

 

•  Award is distributed in shares of our common stock upon vesting.

Douglas R. Bettinger

  Service-based
RSUs
  54,884  

•  Award vests one-quarter on the first anniversary of the November 30, 2018 grant date and the remainder on a pro-rated basis on the last day of every month thereafter for the next 36 months, subject to continued employment.

 

•  The number of RSUs granted was determined by dividing the $8,000,000 nominal value of the equity grant by the 30-day average of the closing price of our common stock prior to the November 30, 2018 grant date, $145.76, rounded down to the nearest share.

 

•  Award is distributed in shares of our common stock upon vesting.

 

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 Mr. Archer (amended on March 16, 2018 and August 8, 2019), Mr. Bettinger (amended on November 30, 2018), Dr. Gottscho and Mr. Anstice, and new change in control agreements with

Dr. Lord, Dr. Vahedi and Mr. Varadarajan. 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.

 

 

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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 is obligated to pay 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 2019 and reflected the retirement benefit obligation for the NEOs as shown below.

Figure 33. NEO Post-Retirement Benefit Obligations

 

   
   Named Executive Officer   As of
June 30, 2019
($)
 

Timothy M. Archer

 

 

889,000

 

Douglas R. Bettinger (1)

 

 

—  

 

Richard A. Gottscho

 

 

662,000

 

Patrick J. Lord (1)

 

 

—  

 

Vahid Vahedi

 

 

932,000

 

Seshasayee (Sesha) Varadarajan (1)

 

 

—  

 

Martin B. Anstice

 

 

—  

 

 

(1) 

Mr. Bettinger, Dr. Lord and Mr. Varadarajan are not eligible to participate under the terms of the program.

 

 

IV. TAX AND ACCOUNTING CONSIDERATIONS

 

Deductibility of Executive Compensation

 

 

Prior to 2018, and where applicable for grandfathered awards, 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

 

 

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Lam Research Corporation 2019 Proxy Statement   33


Table of Contents

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.

Compensation Committee Report

The compensation and human resources 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 and human resources 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 AND HUMAN RESOURCES COMMITTEE

Youssef A. El-Mansy

Catherine P. Lego (Chair)

Abhijit Y. Talwalkar

Lih Shyng (Rick L.) Tsai

Compensation Committee Interlocks and Insider Participation

None of the compensation and human resources 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 2019 between any member of our compensation and human resources committee and any member of any other company’s board of directors or compensation committee.

 

 

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Table of Contents

Executive Compensation Tables

The following tables (Figures 34-39) show compensation information for our named executive officers:

Figure 34. 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
($)

 

 

Timothy M. Archer

President and

Chief Executive Officer

 

 

2019

 

 

 

809,512

 

 

 

—  

 

 

 

7,829,921

 

 

 

3,911,321

 

 

 

1,181,842

(4) 

 

 

12,513

 

 

 

13,745,109

 

 

 

2018

 

 

 

674,922

 

 

 

—  

 

 

 

4,180,920

 

 

 

600,122

 

 

 

1,599,068

(5) 

 

 

9,856

 

 

 

7,064,888

 

 

 

2017

 

 

 

646,945

 

 

 

—  

 

 

 

3,950,881

 

 

 

426,531

 

 

 

1,165,193

(6) 

 

 

11,301

 

 

 

6,200,851

 

Douglas R. Bettinger

Executive Vice President and
Chief Financial Officer

 

 

2019

 

 

 

620,518

 

 

 

—  

 

 

 

9,856,919

 

 

 

529,186

 

 

 

739,421

(4) 

 

 

9,073

 

 

 

11,755,117

 

 

 

2018

 

 

 

586,874

 

 

 

—  

 

 

 

1,881,292

 

 

 

270,066

 

 

 

914,560

(5) 

 

 

9,123

 

 

 

3,661,915

 

 

 

2017

 

 

 

572,561

 

 

 

—  

 

 

 

2,414,365

 

 

 

260,640

 

 

 

849,190

(6) 

 

 

7,983

 

 

 

4,104,739

 

Richard A. Gottscho

Executive Vice President,
Chief Technology Officer

 

 

2019

 

 

 

584,126

 

 

 

10,971

(7) 

 

 

1,755,652

 

 

 

474,750

 

 

 

707,680

(4) 

 

 

9,553

 

 

 

3,542,732

 

 

 

2018

 

 

 

567,324

 

 

 

5,867

(7) 

 

 

2,090,283

 

 

 

316,208

 

 

 

1,072,242

(5) 

 

 

9,384

 

 

 

4,061,308

 

 

 

2017

 

 

 

559,837

 

 

 

6,171

(7) 

 

 

2,853,402

 

 

 

362,059

 

 

 

833,015

(6) 

 

 

9,307

 

 

 

4,623,791

 

Patrick J. Lord

Senior Vice President and
General Manager, CSGB

 

 

2019

 

 

 

463,327

 

 

 

—  

 

 

 

1,404,389

 

 

 

352,790

 

 

 

554,243

(4) 

 

 

8,668

 

 

 

2,783,417

 

 

 

2018

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

2017

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

Vahid Vahedi

Senior Vice President and General Manager, Etch Business Unit

 

 

2019

 

 

 

453,031

 

 

 

4,171

(7) 

 

 

1,229,006

 

 

 

308,609

 

 

 

494,802

(4) 

 

 

8,755

 

 

 

2,498,374

 

 

 

2018

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

2017

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

Seshasayee (Sesha) Varadarajan

Senior Vice President and General Manager, Deposition Business Unit

 

 

2019

 

 

 

453,031

 

 

 

—  

 

 

 

1,229,006

 

 

 

308,609

 

 

 

494,802

(4) 

 

 

8,785

 

 

 

2,494,233

 

 

 

2018

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

2017

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

Martin B. Anstice

Former Chief Executive Officer

 

 

2019

 

 

 

465,192

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

465,192

 

 

 

2018

 

 

 

1,001,442

 

 

 

—  

 

 

 

7,526,050

 

 

 

1,080,493

 

 

 

3,229,875

(5) 

 

 

10,785

 

 

 

12,848,645

 

 

 

2017

 

 

 

969,808

 

 

 

—  

 

 

 

7,023,914

 

 

 

758,314

 

 

 

2,396,304

(6) 

 

 

10,541

 

 

 

11,158,881

 

 

(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 2019 are set forth in Note 5 to the Consolidated Financial Statements of the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2019. For additional details regarding the grants see “FY2019 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 2019 are set forth in Note 5 to the Consolidated Financial Statements of the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2019. For additional details regarding the grants see “FY2019 Grants of Plan-Based Awards” table below.

 

(3) 

Please refer to “FY2019 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 2018 AIP.

 

(5) 

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

 

(6) 

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

 

(7) 

Represents patent awards.

 

Continues on next page  u

 

Lam Research Corporation 2019 Proxy Statement   35


Table of Contents

Figure 35. FY2019 All Other Compensation Table

 

 
All Other Compensation Table for Fiscal Year 2019  
    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
($)
 

Timothy M. Archer

 

 

10,013

 

 

 

—  

 

 

 

—  

 

 

 

2,500

 

 

 

12,513

 

Douglas R. Bettinger

 

 

8,186

 

 

 

—  

 

 

 

—  

 

 

 

887

 

 

 

9,073

 

Richard A. Gottscho

 

 

8,477

 

 

 

1,076

 

 

 

—  

 

 

 

—  

 

 

 

9,553

 

Patrick J. Lord

 

 

8,545

 

 

 

—  

 

 

 

123

 

 

 

—  

 

 

 

8,668

 

Vahid Vahedi

 

 

8,604

 

 

 

—  

 

 

 

151

 

 

 

—  

 

 

 

8,755

 

Seshasayee (Sesha) Varadarajan

 

 

8,634

 

 

 

—  

 

 

 

151

 

 

 

—  

 

 

 

8,785

 

Martin B. Anstice

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

 

—  

 

 

(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 36. FY2019 Grants of Plan-Based Awards

 

                                                                                                                        
 
Grants of Plan-Based Awards for Fiscal Year  2019  
                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

 

 

Award

Type

 

 

Grant
Date

 

 

Approved
Date

 

 

Target
($) (1)

 

   

Maximum
($) (1)

 

   

Target
(#) (2)

 

   

Maximum
(#) (2)

 

 

Timothy M. Archer

 

Annual Incentive Program

 

N/A

 

2/12/19

 

 

1,500,000

 

 

 

3,375,000

 

                                               
 

LTIP-Equity

                                                                       
 

Market-based PRSUs

 

3/1/19

 

2/12/19

                 

 

21,243

(4) 

 

 

31,864

(4) 

                         

 

3,521,665

 

 

Service-based RSUs

 

3/1/19

 

2/12/19

                                 

 

12,746

(5) 

                 

 

2,096,717

 

 

Stock Options

 

3/1/19

 

2/12/19

                                         

 

33,988

(6) 

 

 

176.75

 

 

 

1,411,328

 

 

Special Equity Award

                                                                       
 

Service-based RSUs

 

12/6/18

 

12/5/18

                                 

 

17,021

(7) 

                 

 

2,211,539

 

   

Stock Options

 

12/6/18

 

12/5/18

                                         

 

71,430

(8) 

 

 

145.73

 

 

 

2,499,993

 

Douglas R. Bettinger

 

Annual Incentive Program

 

N/A

 

2/11/19

 

 

640,000

 

 

 

1,440,000

 

                                               
 

LTIP-Equity

                                                                       
 

Market-based PRSUs

 

3/1/19

 

2/11/19

                 

 

7,966

(4) 

 

 

11,949

(4) 

                         

 

1,320,603

 

 

Service-based RSUs

 

3/1/19

 

2/11/19

                                 

 

4,779

(5) 

                 

 

786,146

 

 

Stock Options

 

3/1/19

 

2/11/19

                                         

 

12,744

(6) 

 

 

176.75

 

 

 

529,186

 

 

Special Equity Award

                                                                       
   

Service-based RSUs

 

11/30/18

 

11/29/18

                                 

 

54,884

(9) 

                 

 

7,750,170

 

Richard A. Gottscho

 

Annual Incentive Program

 

N/A

 

2/11/19

 

 

525,910

 

 

 

1,183,297

 

                                               
 

LTIP-Equity

                                                                       
 

Market-based PRSUs

 

3/1/19

 

2/11/19

                 

 

6,638

(4) 

 

 

9,957

(4) 

                         

 

1,100,448

 

 

Service-based RSUs

 

3/1/19

 

2/11/19

                                 

 

3,983

(5) 

                 

 

655,204

 

 

Stock Options

 

3/1/19

 

2/11/19

                                         

 

10,620

(6) 

 

 

176.75

 

 

 

474,750

 

Patrick J. Lord

 

Annual Incentive Program

 

N/A

 

2/11/19

 

 

393,975

 

 

 

886,444

 

                                               
 

LTIP-Equity

                                                                       
 

Market-based PRSUs

 

3/1/19

 

2/11/19

                 

 

5,310

(4) 

 

 

7,965

(4) 

                         

 

880,292

 

 

Service-based RSUs

 

3/1/19

 

2/11/19

                                 

 

3,186

(5) 

                 

 

524,097

 

 

Stock Options

 

3/1/19