Briefing Document: Review of NVIDIA Corporation 2008 Annual Meeting Proxy Statement
Source: nVidia Proxy Statement for Stockholders Annual Report 2007
Overall Purpose of the Document:
The primary purpose of this document is to solicit proxies from NVIDIA stockholders to vote on three specific proposals at the upcoming annual meeting:
Election of three directors to hold office until the 2011 Annual Meeting.
Approval of an amendment to the NVIDIA Corporation Certificate of Incorporation to increase the number of authorized shares of common stock.
Ratification of the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the fiscal year ending January 25, 2009.
The document also provides information regarding the annual meeting logistics, voting procedures, corporate governance practices, and executive and director compensation.
Key Themes and Important Ideas/Facts:
Annual Stockholder Meeting Logistics and Voting:
The Annual Meeting will be held on Thursday, June 19, 2008, at 10:00 a.m. local time in Building E of NVIDIA's headquarters at 2800 Scott Boulevard, Santa Clara, California, 95050.
Only stockholders who owned stock at the close of business on April 21, 2008, are entitled to vote.
Stockholders have several voting options: in person at the meeting, by proxy card, by telephone, or over the Internet.
An audio webcast of the meeting will be available on the Investor Relations page of NVIDIA's website (www.nvidia.com) but will not allow for voting or asking questions.
"Householding" is practiced, where only one copy of proxy materials is sent to addresses with multiple stockholders unless otherwise requested. This is done to reduce printing and postage costs and "preserve the environment."
Stockholders can elect to receive future proxy materials electronically via email.
Director Elections and Board Independence:
Three directors are up for election for a three-year term expiring in 2011: Dr. Steven Chu, Harvey C. Jones, and William J. Miller.
Biographical information is provided for each nominee, highlighting their relevant experience and other board memberships.
The Board has affirmatively determined that all members of the Board, except for Jen-Hsun Huang (President and CEO), are "independent" as defined by SEC and NASDAQ rules and regulations.
All members of the Audit, Compensation, and Nominating and Corporate Governance Committees are also deemed independent.
Corporate Governance and Stockholder Engagement:
Stockholders can communicate with the Board by sending written communications to the Secretary at NVIDIA's headquarters.
The Nominating and Corporate Governance Committee evaluates both incumbent directors and new candidates. They use a network of contacts and may engage professional search firms.
Stockholders can recommend prospective nominees by following specific procedures, which include providing detailed information about the proposed nominee and their consent to serve.
NVIDIA has adopted a majority vote standard for non-contested director elections. If votes FOR an incumbent director do not exceed votes WITHHELD, the director must tender their resignation, which the Board will review and publicly disclose its decision and rationale within 90 days. A plurality vote applies in contested elections.
Increase in Authorized Common Stock:
Proposal 2 seeks stockholder approval to increase the authorized number of shares of common stock from 1,000,000,000 shares to 2,000,000,000 shares.
The additional shares would have the same rights as existing common stock but could dilute existing stockholders if issued in the future.
The stated purpose is to have sufficient authorized shares for future corporate purposes such as stock splits, stock dividends, equity financings, employee benefit plans, and acquisitions.
The Board is not aware of any takeover attempts and is not presenting this proposal as an anti-takeover device.
Approval requires the affirmative vote of a majority of the outstanding shares.
Auditor Selection and Fees:
The Audit Committee has selected PricewaterhouseCoopers LLP (PwC) as the independent registered public accounting firm for the fiscal year ending January 25, 2009.
Stockholder ratification of this selection is requested as a matter of "good corporate governance."
The Audit Committee has policies for pre-approving all audit and permissible non-audit services rendered by PwC.
Details of fees paid to PwC for audit, audit-related, tax, and other services are provided for fiscal years 2008 and 2007. Audit fees in fiscal 2007 included approximately $1.9 million "relating to the restatement of certain of our historical financial statements as a result of the findings of the review of our historical stock option grant process."
Executive and Director Compensation:
Information is provided on the beneficial ownership of common stock for named executive officers, directors, and 5% stockholders. Jen-Hsun Huang is the largest individual stockholder listed, with 28,694,448 shares (5.1%). AXA and affiliates are the largest beneficial owner with 48,491,541 shares (8.7%).
The Compensation Committee uses peer company data to review and determine executive and director compensation. A list of "employee peers," "executive peers," and "semiconductor peers" is provided.
Executive compensation is heavily biased towards long-term incentive compensation, primarily through stock options.
The Compensation Committee establishes corporate targets based on "adjusted annual net income" for variable compensation plans.
The vesting of executive stock options is structured to encourage building long-term stockholder value, with delayed vesting periods.
Stock option targets for executive semi-annual grants in fiscal 2008 were set, but later reduced due to the company's stock price performance.
NVIDIA has stock ownership guidelines requiring directors and executive officers to hold at least 10,000 shares of common stock. All current directors and executive officers meet this requirement.
The company does not grant re-load options, make loans to executives, grant stock options at a discount, or allow semi-annual or off-cycle grants to executives when the stock trading window is closed.
Information on stock option grants and vesting for named executive officers in fiscal 2008 is detailed.
Named executive officers are "at-will" employees and the company does not have employment, severance, or change-in-control agreements with them.
The 1998 Plan and 2007 Plan provide for the acceleration of vesting of outstanding stock awards upon a change-in-control if the awards are not assumed or substituted by the acquiring entity.
A table estimates the potential payments upon a change-in-control based on unvested options held as of January 27, 2008. Jen-Hsun Huang's estimated benefit is the largest at $31,576,125.
Director compensation for non-employee directors is solely in the form of stock options. Cash compensation is not provided, but expenses are reimbursed.
Annual stock option grants for non-employee directors were reduced in fiscal 2009 compared to fiscal 2008, as the Compensation Committee believed similar incentive values could be achieved with fewer shares given the stock price performance.
Vesting schedules for director stock options are detailed, with adjusted vesting provisions in case of death or disability.
Equity Compensation Plans:
Information on outstanding stock options and shares available for future issuance under equity compensation plans as of January 27, 2008, is provided.
The PortalPlayer, Inc. 1999 Stock Option Plan was assumed during an acquisition and is now terminated, with no new shares available for issuance.
Transactions with Related Persons:
NVIDIA has indemnity agreements with executive officers and directors.
The company's policy requires employees, officers, and directors to avoid conflicts of interest.
A review of related party transactions is conducted for potential conflicts, with transactions involving executive officers or directors requiring Audit Committee approval.
No transactions with related persons requiring disclosure or Audit Committee approval occurred in fiscal 2008.
Key Quotes:
"The Board of Directors recommends a vote F OR Proposals 1, 2 and 3."
"Only stockholders who owned our stock at the close of business on April 21, 2008 may vote at the Annual Meeting..."
"We are distributing this proxy statement and the accompanying proxy card on or about May 15, 2008."
"...you are entitled to vote on any other matters that are properly brought before the annual meeting."
"This practice, known as 'householding,' allows us to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single copy of these documents."
"Opting to receive proxy materials electronically will assist in our efforts to protect the environment and will save us the cost of printing and mailing these documents to you."
"Consistent with the requirements of The Nasdaq Stock Market LLC... our Corporate Governance Policies require our Board to affirmatively determine that a majority of our directors do not have a relationship that would interfere with their exercise of independent judgment..."
"After considering all relevant relationships and transactions, the Board determined all members of the Board are 'independent'... except for Jen-Hsun Huang, our President and Chief Executive Officer."
"Our Bylaws now provide that in a non-contested election if the votes cast F OR an incumbent director do not exceed the number of votes W ITHHELD , such incumbent director shall promptly tender his resignation to the Board."
"No member of the Compensation Committee is an officer or employee of NVIDIA, and none of our executive officers serve as a director or member of a compensation committee of any entity that has one or more executive officers serving as a member of our Board or Compensation Committee."
"The Compensation Committee believes that payment for services in equity best aligns the interests of our non-employee directors with those of our stockholders..."
"...the size of the initial Board grants and annual Board and committee grants should be reduced... as the Committee believed that similar incentive values could be achieved with a fewer number of shares given NVIDIA’s stock price performance over the past year."
"We are requesting stockholder approval of an amendment to our Amended and Restated Certificate of Incorporation to increase our authorized number of shares of common stock from 1,000,000,000 shares to 2,000,000,000 shares."
"The increase in the authorized number of shares of common stock and the subsequent issuance of such shares could have the effect of delaying or preventing a change in control of NVIDIA."
"Stockholder ratification of the Audit Committee’s selection of PwC is not required by our bylaws or any other governing documents or laws. As a matter of good corporate governance, we are submitting the selection of PwC to our stockholders for ratification."
"Audit fees for fiscal 2007 also include approximately $1.9 million of fees relating to the restatement of certain of our historical financial statements as a result of the findings of the review of our historical stock option grant process..."
"Our executives are 'at-will' employees and we do not have employment, severance or change-in-control agreements with our executive officers."
"It is our policy that all employees, officers and directors must avoid any activity that is or has the appearance of conflicting with our interests."
This briefing document provides a concise overview of the key information presented in the provided NVIDIA proxy statement excerpts, focusing on the main themes and important details relevant to stockholders.
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