Briefing Document: NVIDIA Corporation 2009 Annual Meeting of Stockholders Proxy Statement
Source: nVidia Proxy Statement for Stockholders Annual Report 2008
Key Themes and Important Ideas:
This proxy statement outlines the agenda and procedures for NVIDIA Corporation's 2009 Annual Meeting of Stockholders. The primary focus is on corporate governance, executive and director compensation, and the mechanisms for stockholder participation in the meeting. Key themes include the election of directors, ratification of the independent registered public accounting firm, and detailed information about the company's board structure, compensation practices, and equity plans.
1. Annual Meeting Logistics and Voting:
Date and Time: The annual meeting is scheduled for Wednesday, May 20, 2009, at 9:00 a.m. pacific daylight time.
Eligibility to Vote: Only stockholders who owned NVIDIA stock at the close of business on March 30, 2009, are entitled to vote.
Voting Methods: Stockholders can vote via the Internet (www.proxyvote.com), by telephone (1-800-690-6903), or by mail using the provided proxy card.
Internet Availability of Proxy Materials: NVIDIA is utilizing the SEC rule allowing companies to furnish proxy materials over the Internet. Stockholders were sent a Notice of Internet Availability of Proxy Materials with instructions on accessing the materials online and voting.
Householding: The company employs "householding," delivering a single copy of proxy materials to multiple stockholders sharing the same address to reduce costs and environmental impact. Stockholders can request separate copies.
Quorum Requirement: A quorum is necessary to hold the meeting, which is a majority of outstanding shares entitled to vote on the record date (March 30, 2009). As of the record date, 544,633,196 shares of common stock were outstanding, meaning 272,316,599 shares must be represented.
2. Proposals for Stockholder Vote:
The proxy statement presents two main matters for stockholder vote:
Proposal 1: Election of Directors: Stockholders will elect three directors to serve until the 2012 annual meeting: Tench Coxe, Mark L. Perry, and Mark A. Stevens.
The Nominating and Corporate Governance Committee and the Board of Directors recommend a vote "FOR" the election of each named nominee.
Proposal 2: Ratification of Independent Registered Public Accounting Firm: Stockholders are asked to ratify the Audit Committee's selection of PricewaterhouseCoopers LLP (PwC) as the independent registered public accounting firm for the fiscal year ending January 31, 2010.
Stockholder ratification is not legally required but is presented as a matter of good corporate governance. The Audit Committee will reconsider the selection if not ratified, but retains the sole discretion to appoint a different firm at any time.
3. Information about the Board of Directors and Corporate Governance:
Board Structure: The Board is divided into three classes with staggered three-year terms.
Director Independence: The Board has determined that all members are "independent" as defined by SEC and NASDAQ rules, except for Jen-Hsun Huang, the President and CEO.
A supplement to the Corporate Governance Policies, expected to be effective around April 17, 2009, will require at least 75% of directors to be independent. As of the proxy mailing date, 80% of the Board members are independent.
Nominating and Corporate Governance Committee: This committee reviews director qualifications, including independence, and evaluates candidates proposed by stockholders using the same criteria as other candidates.
Majority Vote Standard: In non-contested director elections, if the votes "FOR" an incumbent director do not exceed the votes "WITHHELD," the director must tender their resignation. The Nominating and Corporate Governance Committee reviews the circumstances and recommends whether to accept or reject the resignation.
Board Committees: The proxy statement details the membership of the Audit, Compensation, and Nominating and Corporate Governance Committees.
A Special Litigation Committee was formed in August 2007 to investigate stockholder derivative lawsuits related to historical stock option practices. This committee's responsibilities concluded with the settlement of the derivative actions in March 2009, pending the Settlement becoming effective.
Compensation Committee Interlocks and Insider Participation: No member of the Compensation Committee is an officer or employee of NVIDIA, and no executive officer serves on the board or compensation committee of an entity with one or more executive officers on NVIDIA's Board or Compensation Committee.
4. Director and Executive Compensation:
Non-Employee Director Compensation: Directors are compensated through stock options granted under equity incentive plans.
Historically, two annual grants were made: one for committee service and one for board service.
For fiscal 2010, the annual board and committee grants will be combined into a single grant of 48,000 shares, vesting quarterly over the year following the annual meeting.
Initial Board Grants are made to new non-employee directors.
Vesting schedules can be adjusted if a director fails to attend at least 75% of regularly scheduled meetings.
In case of termination due to disability, Annual Board and Committee Grants vest on a pro rata basis.
The aggregate number of stock options held by each non-employee director at the fiscal year end is detailed in the document.
Executive Compensation Philosophy: The compensation program aims to align executive interests with stockholder interests and attract and retain top talent. Key elements include base salary, variable compensation (incentive plan), and equity compensation (stock options and RSUs).
Competitive Market Analysis: Compensation is compared against a peer group of companies in various industries, including employee peers, executive peers, and semiconductor peers.
Variable Compensation: For fiscal 2009, variable compensation was tied to the achievement of annual net income targets. No corporate targets were established for fiscal 2010 due to payouts for corporate performance.
Equity Compensation:Historically, stock options were the primary form of equity compensation for executive officers, granted semi-annually.
Beginning in March 2009 (for fiscal 2010), Restricted Stock Units (RSUs) were introduced as a form of equity compensation for all employees, including executive officers. Executive officers and other top leaders will receive a combination of RSUs and stock options (target mix 50% value each), while other employees will receive RSUs only.
The Compensation Committee believes RSUs, combined with options, maintain the pay-for-performance culture, provide potential upside, promote retention, and reduce dilution compared to solely relying on options.
Grant dates for new hires and semi-annual grants to executives are outlined.
No reload options, loans for option exercises, or discounted stock options are granted. Semi-annual or off-cycle grants are not made during stock trading blackout periods for executive staff.
Dilution Rate: The company monitors its annual dilution rate, the net number of new equity grants as a percentage of outstanding common stock. For fiscal 2009, the net dilution budget was 2.0% to 2.75% (later increased to 3.0%). For fiscal 2010, a total dilution budget of 3.5% to 4.0% based on gross dilution is established, with a net dilution budget of approximately -1.25% to -1.75% after accounting for a completed tender offer. Each RSU is counted as more than one share (currently 1.5 shares) for dilution calculations based on RiskMetric's policies.
Tender Offer: In March 2009, NVIDIA completed a cash tender offer for approximately 33.1 million "out-of-the-money" stock options held by employees, with approximately 28.5 million tendered for cancellation. Members of the Board and executive officers were not eligible to participate. This aimed to provide cash value to employees while reducing overhang and potential dilution.
Stock Ownership Guidelines: Directors and executive officers are required to hold at least 25,000 shares of common stock, including vested but unexercised options, within 18 months of becoming a director or executive officer. All current directors and executive officers meet this, except for a newly hired executive with time to meet the threshold.
SFAS No. 123(R): The company adopted this accounting standard for stock-based awards, measuring compensation cost at grant date based on fair value using a binomial option pricing model.
Off-Cycle Grants: Grants to existing executive officers and employees are made on the 6th business day of the month following the event leading to the grant, provided approval is obtained. Executive officer off-cycle grants require Compensation Committee approval and are not made during blackout periods. No off-cycle grants were made to executive officers in fiscal 2009.
5. Equity Compensation Plan Information:
As of January 25, 2009, there were 97,454,280 securities to be issued upon exercise of outstanding options, warrants, and rights with a weighted-average exercise price of $13.83.
74,111,396 securities remained available for future issuance under equity compensation plans approved by security holders.
The document provides details on several equity compensation plans, including the 2007 Plan, 1998 Employee Stock Purchase Plan, 2000 Nonstatutory Equity Incentive Plan, and the PortalPlayer, Inc. 2004 Stock Incentive Plan and 1999 Stock Option Plan (assumed in the PortalPlayer acquisition).
6. Option Exercises and Stock Vested in Fiscal Year 2009:
The table shows information regarding option exercises by named executive officers during fiscal 2009.
Jen-Hsun Huang exercised 1,488,000 shares with a value realized on exercise of $18,408,982.
Marvin D. Burkett exercised 11,436 shares.
No named executive officers had stock awards outstanding or vested during fiscal 2009.
7. Potential Payments Upon Termination or Change-in-Control:
The 2007 Plan outlines provisions for accelerated vesting of outstanding stock awards in the event of a corporate transaction or change-in-control, particularly if the surviving corporation does not assume, continue, or substitute the awards.
Based on the closing stock price of $7.71 on January 23, 2009, none of the named executive officers would have received any benefit from the full vesting of unvested options as of January 25, 2009, as the options were "out-of-the-money."
8. Transactions with Related Persons:
NVIDIA has indemnity agreements with executive officers and directors to indemnify them for expenses, damages, judgments, fines, and settlements in actions or proceedings related to their position, to the fullest extent permitted by law.
9. Other Matters:
The Board is not aware of any other matters to be presented at the meeting.
A copy of the Annual Report on Form 10-K for the fiscal year ended January 25, 2009, is furnished concurrently with the proxy materials and can be requested in writing.
This briefing document summarizes the essential information presented in the NVIDIA Corporation 2009 Annual Meeting of Stockholders Proxy Statement, highlighting the key decisions and information provided to stockholders.
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