BRIEFING DOCUMENT: NVIDIA CORPORATION 2011 ANNUAL MEETING PROXY STATEMENT
Source: nVidia Proxy Statement for Stockholders Annual Report 2010
I. Executive Summary
This document is a Proxy Statement for NVIDIA Corporation's 2011 Annual Meeting of Stockholders. It outlines the proposals to be voted upon, provides information about the company's board of directors and corporate governance, details executive and director compensation, and includes financial information and stock ownership details. Key proposals include the election of directors, an amendment to the certificate of incorporation, an advisory vote on executive compensation, an advisory vote on the frequency of future executive compensation votes, and the ratification of the independent registered public accounting firm.
II. Key Themes and Proposals
Annual Meeting Logistics: The document provides details on how stockholders can attend and vote at the 2011 Annual Meeting, either in person or online. It specifies the record date for voting eligibility (March 21, 2011) and the number of outstanding shares entitled to vote (595,125,429). It also explains the quorum requirement for the meeting.
Election of Directors (Proposal 1): Stockholders are asked to elect directors to the Board. The document provides biographical information and qualifications for each director nominee and director continuing in office.
Amendment to Certificate of Incorporation (Proposal 2): A significant proposal is the amendment to eliminate the classified board structure, aiming for all directors to be elected on an annual basis by 2014. This proposal requires the affirmative vote of at least 66 2/3% of the outstanding shares entitled to vote.
Advisory Vote on Executive Compensation (Proposal 3): Stockholders are given the opportunity to cast an advisory vote on the compensation of named executive officers. The Board recommends a vote FOR this proposal.
Advisory Vote on the Frequency of Executive Compensation Votes (Proposal 4): Stockholders will vote on how frequently future advisory votes on executive compensation should be held (1 Year, 2 Years, or 3 Years). The Board recommends a vote FOR "1 YEAR" as the preferred frequency.
Ratification of Independent Registered Public Accounting Firm (Proposal 5): Stockholders are asked to ratify the Audit Committee's selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the fiscal year ending January 29, 2012. The Board recommends a vote FOR this proposal.
Corporate Governance: The document highlights NVIDIA's corporate governance policies, including the requirement for 75% independent directors, director stock ownership guidelines (at least 25,000 shares), the ability of the Board and committees to retain outside advisors, and the existence of Worldwide and Financial Team Codes of Conduct.
Executive and Director Compensation: Details are provided on the compensation philosophy, which emphasizes aligning executive and director interests with stockholder interests, primarily through equity compensation (stock options and restricted stock units). The document outlines the elements of compensation, the process for determining compensation (including benchmarking against peer companies), and provides detailed tables of compensation for named executive officers and directors. Key facts include the significant value of stock ownership held by the CEO and other executive officers, and the company's "no-hedging" and "clawback" policies.
Financial Performance Highlights: A table summarizes key financial metrics for fiscal years 2010 and 2011, showing an increase in revenue, GAAP Gross Margin, GAAP Net Income, GAAP Income Per Share, and Cash, Cash Equivalents, and Marketable Securities.
Stock Ownership: The document lists the beneficial ownership of common stock for directors, named executive officers, and significant stockholders (those owning 5% or more). As of January 30, 2011, Jen-Hsun Huang, the CEO, beneficially owned 24,100,335 shares (4.07%), FMR LLC owned 87,086,348 shares (14.80%), and PRIMECAP Management Company owned 39,414,891 shares (6.70%).
Equity Compensation Plan Information: Details on the company's equity compensation plans are provided, including the number of securities outstanding and available for future issuance under various plans.
III. Most Important Ideas or Facts
Proposed Declassification of the Board: The proposal to eliminate the classified board structure by 2014 is a significant change aimed at increasing accountability to stockholders. It requires a supermajority vote (66 2/3%).
Emphasis on Equity Compensation: NVIDIA heavily relies on stock options and restricted stock units (RSUs) to compensate executives and directors, believing this approach strongly aligns their interests with those of stockholders and helps attract and retain talent. "The Compensation Committee believes that equity compensation is the most important element of our total compensation package, and for that reason, more than 50% of the total target value of the annual compensation opportunity for each of our executive officers is provided as equity compensation."
Strong Stock Ownership by Leadership: The document highlights that executive officers and directors exceed the company's stock ownership guidelines, with the CEO's beneficial ownership value exceeding 835 times his base salary.
Growth in Key Financial Metrics: Fiscal year 2011 showed positive growth compared to fiscal year 2010 in revenue, profitability (GAAP Net Income), and cash position. For example, "GAAP Net Income (Loss)" went from "($68.0 )" million in Fiscal Year 2010 to "$ 253.1" million in Fiscal Year 2011, a change of "$ 321.1" million.
Significant Institutional Ownership: FMR LLC and PRIMECAP Management Company are identified as significant beneficial owners, holding 14.80% and 6.70% of outstanding shares, respectively.
Shareholder Engagement and Corporate Governance: The document outlines procedures for stockholder communications with the Board and the consideration of stockholder-proposed matters. It also details policies like the majority vote standard for director elections in non-contested situations, the "no-hedging" policy, and the "clawback" policy for performance-based compensation.
IV. Notable Quotes
"You are cordially invited to attend the 2011 Annual Meeting of Stockholders of NVIDIA Corporation..."
"To ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for our fiscal year ending January 29, 2012..."
"The SEC has adopted rules that permit companies and intermediaries... to satisfy the delivery requirements for Notices and proxy materials with respect to two or more stockholders sharing the same address by delivering a single Notice or set of proxy materials addressed to those stockholders." (referencing "householding")
"Our corporate governance policies... require our Board to affirmatively determine that at least 75% of our directors do not have a relationship that would interfere with their exercise of independent judgment..."
"The Board believes that directors should hold a significant equity interest in NVIDIA."
"We have a Worldwide Code of Conduct that applies to all of our executive officers, directors and employees..."
"As a part of our continuing process of enhancing our corporate governance procedures and to provide our stockholders with a more meaningful role in the outcome of the election of directors, in March 2006, our Board amended our Bylaws to adopt a majority vote standard for non-contested director elections."
"The Compensation Committee believes that equity compensation is the most important element of our total compensation package..."
"Since 2009, we have maintained a 'clawback' policy for the recovery of performance-based compensation in the event of a financial restatement..."
V. Appendices (Summarized)
Appendix A: Details the proposed Certificate of Amendment to the Amended and Restated Certificate of Incorporation, specifically Section 2 of Paragraph A of Article V, to eliminate the classified board structure.
