UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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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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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 years 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
Stephen G. Newberry
Chairman of the Board
Notice of 2019 Annual Meeting of Stockholders |
4650 Cushing Parkway
Fremont, California 94538
Telephone: 510-572-0200
LAM RESEARCH CORPORATION
Proxy Statement for 2019 Annual Meeting of Stockholders
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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 Companys 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 Companys 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.
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 Lams solutions to our customers.
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Lam Research Corporation 2019 Proxy Statement | 1 |
FISCAL YEAR 2019 FINANCIAL HIGHLIGHTS
Figure 1. Proposals and Voting Recommendations
Voting Matters |
Board Vote Recommendation |
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Proposal No. 1: Election of Directors |
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FOR each nominee |
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Proposal No. 2: Advisory Vote to Approve Our Named Executive Officer Compensation, or Say on Pay |
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FOR |
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Proposal No. 3: Ratification of the Appointment of Ernst & Young LLP as our Independent Registered Public Accounting Firm for Fiscal Year 2020 |
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FOR |
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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 |
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61 |
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2019 |
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Yes |
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Timothy M. Archer |
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52 |
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2018 |
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No |
* |
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Eric K. Brandt |
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57 |
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2010 |
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Yes |
C/FE |
M |
Altaba (formerly Yahoo!), Dentsply Sirona, Macerich | ||||||||
Michael R. Cannon |
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66 |
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2011 |
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Yes |
M/FE |
M |
Dialog Semiconductor, Seagate Technology | ||||||||
Youssef A. El-Mansy |
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74 |
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2012 |
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Yes |
M |
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Catherine P. Lego |
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62 |
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2006 |
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Yes |
* |
C |
M |
Cypress Semiconductor, Guidewire Software, IPG Photonics | |||||||
Bethany J. Mayer |
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57 |
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2019 |
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Yes |
M/FE |
Marvell Technology Group, Sempra Energy | |||||||||
Abhijit Y. Talwalkar |
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55 |
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2011 |
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Yes (Lead Independent Director(2)) |
* |
M |
C |
Advanced Micro Devices, iRhythm Technologies, TE Connectivity | |||||||
Lih Shyng (Rick L.) Tsai |
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68 |
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2016 |
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Yes |
M |
MediaTek | |||||||||
Leslie F. Varon |
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62 |
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2019 |
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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
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 nominees 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 |
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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 |
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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 |
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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 |
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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
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Age
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Gender Diversity
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Lam Research Corporation 2019 Proxy Statement | 3 |
Figure 5. Corporate Governance Highlights
Board and Other Governance Information |
As of September 2019 |
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Size of Board as Nominated |
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10 |
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Number of Independent Nominated Directors |
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9 |
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Number of Nominated Directors Who Attended ³75% of Meetings |
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10 |
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Number of Nominated Directors on More Than Four Public Company Boards |
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0 |
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Number of Nominated Non-Employee Directors Who Are Sitting Executives on More Than Three Public Company Boards |
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0 |
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Directors Subject to Stock Ownership Guidelines (Page 12) |
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Yes |
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Hedging and Pledging Prohibited (Page 9) |
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Yes |
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Annual Election of Directors (Page 50) |
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Yes |
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Voting Standard (Page 50) |
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Majority |
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Plurality Voting Carveout for Contested Elections |
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Yes |
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Separate Chairman and Chief Executive Officer (CEO) |
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Yes |
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Lead Independent Director (Page 11) |
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Yes |
(1) | |
Independent Directors Meet Without Management Present (Page 11) |
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Yes |
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Annual Board (Including Individual Director) and Committee Self-Evaluations (Page 12) |
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Yes |
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Annual Independent Director Evaluation of CEO (Page 14) |
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Yes |
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Risk Oversight by Full Board and Committees (Page 14) |
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Yes |
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Commitment to Board Refreshment and Diversity (Page 10) |
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Yes |
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Robust Director Nomination Process (Pages 9-10) |
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Yes |
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Significant Board Engagement (Page 14) |
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Yes |
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Board Orientation/Education Program (Page 11) |
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Yes |
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Code of Ethics Applicable to Directors (Page 9) |
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Yes |
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Stockholder Proxy Access (Pages 10, 63) |
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Yes |
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Stockholder Ability to Act by Written Consent |
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Yes |
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Stockholder Engagement Program (Page 14) |
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Yes |
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Poison Pill |
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No |
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Publication of Corporate Social Responsibility Report on Our Website (Pages 14-15) |
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Yes |
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(1) | Effective as of November 5, 2019, there will be no lead independent director position and only an independent chairman. |
4
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 Dont 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. |
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Lam Research Corporation 2019 Proxy Statement | 5 |
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Security Ownership of Certain Beneficial Owners and Management
Figure 7. Beneficial Ownership Table
Name of Person or Identity of Group
|
Shares
|
Percentage
|
||||||
5% Stockholders |
||||||||
The Vanguard Group, Inc. |
|
11,885,413 |
(2) |
|
8.21 |
% | ||
BlackRock, Inc. |
|
11,429,062 |
(3) |
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7.89 |
% | ||
Ameriprise Financial, Inc. |
|
9,286,271 |
(4) |
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6.41 |
% | ||
Directors |
||||||||
Sohail U. Ahmed |
|
470 |
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|
* |
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Timothy M. Archer (also a Named Executive Officer) |
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118,447 |
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* |
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Eric K. Brandt |
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26,195 |
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* |
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Michael R. Cannon |
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16,090 |
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* |
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Youssef A. El-Mansy |
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22,176 |
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* |
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Christine A. Heckart |
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15,540 |
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* |
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Catherine P. Lego |
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50,598 |
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* |
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Bethany J. Mayer |
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470 |
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* |
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Stephen G. Newberry |
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9,847 |
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|
* |
| ||
Abhijit Y. Talwalkar |
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13,727 |
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|
* |
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Lih Shyng (Rick L.) Tsai |
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4,870 |
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* |
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Leslie F. Varon |
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470 |
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|
* |
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Named Executive Officers (NEOs) |
||||||||
Douglas R. Bettinger |
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114,489 |
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* |
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Richard A. Gottscho |
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63,345 |
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* |
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Patrick J. Lord |
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1,620 |
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* |
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Vahid Vahedi |
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33,423 |
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* |
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Seshasayee (Sesha) Varadarajan |
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43,425 |
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* |
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Martin B. Anstice |
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81,037 |
(5) |
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* |
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All current directors and executive officers as a group (20 people) |
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628,915 |
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* |
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* | Less than 1%. |
6
(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 |
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50,042 |
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Eric K. Brandt |
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1,350 |
| |
Michael R. Cannon |
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1,350 |
| |
Youssef A. El-Mansy |
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1,350 |
| |
Christine A. Heckart |
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1,350 |
| |
Catherine P. Lego |
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1,350 |
| |
Bethany J. Mayer |
|
470 |
| |
Stephen G. Newberry |
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1,350 |
| |
Abhijit Y. Talwalkar |
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1,350 |
| |
Lih Shyng (Rick L.) Tsai |
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1,350 |
| |
Leslie F. Varon |
|
470 |
| |
Douglas R. Bettinger |
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57,982 |
| |
Richard A. Gottscho |
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1,753 |
| |
Patrick J. Lord |
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1,333 |
| |
Vahid Vahedi |
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1,192 |
| |
Seshasayee (Sesha) Varadarajan |
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1,192 |
| |
Martin B. Anstice |
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|
| |
All current directors and executive officers as a group (20 people) |
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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. ODowd 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. ODowd have terms consistent with the terms reflected in Figure 37. FYE 2019 Outstanding Equity Awards, except for the grant to Ms. ODowd 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 whollyowned 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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Lam Research Corporation 2019 Proxy Statement | 7 |
(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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Lam Research Corporation 2019 Proxy Statement | 11 |
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Lam Research Corporation 2019 Proxy Statement | 13 |
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Lam Research Corporation 2019 Proxy Statement | 17 |
|
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 Companys long-term incentive programs. In order to create a long-term, stable leadership structure, the Board took the following actions. Pursuant to the Companys succession plan, the Board immediately appointed Mr. Archer, the Companys 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. Bettingers 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.
18
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 CEOs compensation in relation to each of our revenue and net income, as well as the Companys 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
Continues on next page u
Lam Research Corporation 2019 Proxy Statement | 19 |
The graph below compares Lams cumulative five-year total shareholder return on common stock with the cumulative total returns of the Nasdaq Composite Index, the Standard & Poors (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
* | $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 & Poors, a division of S&P Global. All rights reserved.
20
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Lam Research Corporation 2019 Proxy Statement | 21 |
Figure 18. NEO Compensation Target Pay Mix Averages (1)
(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 Companys 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. |
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 |
22
24
26
Figure 23. Annual Incentive Program Payouts
Calendar Year |
Average NEOs 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. |
Continues on next page u
Lam Research Corporation 2019 Proxy Statement | 27 |
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 NEOs 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). |
28
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 Lams 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 Lams 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 Companys 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 Companys 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 |
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. |
Continues on next page u
Lam Research Corporation 2019 Proxy Statement | 29 |
30
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Lam Research Corporation 2019 Proxy Statement | 31 |
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. |
32
34
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
|
Salary
|
Bonus
|
Stock
|
Option
|
Non-Equity
|
All Other
|
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 |
|
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, |
|
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 |
|
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 Companys 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 Companys 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 |
Figure 35. FY2019 All Other Compensation Table
All Other Compensation Table for Fiscal Year 2019 | ||||||||||||||||||||
Company Matching Contribution to the Companys 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 of Shares of Stock or Units
|
All Other
|
Exercise
|
Grant Date Fair Value of Stock Option
|
|||||||||||||||||||||||||||||||||
Name
|
Award Type
|
Grant
|
Approved
|
Target
|
Maximum
|
Target
|
Maximum
|
|||||||||||||||||||||||||||||||
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) |