UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.)

Adobe Systems Incorporated

345 Park Avenue

San Jose, California 95110-270495110

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held April 9, 201512, 2017

Dear Stockholders:

You are cordially invited to attend our 20152017 Annual Meeting of Stockholders to be held on Thursday,Wednesday, April 9, 201512, 2017 at 9:00 a.m. local time at our EastAlmaden Tower building located at 321 Park Avenue,151 Almaden Boulevard, San Jose, California 95110. We are holding the meeting to:

If you owned our common stock at the close of business on February 13, 2015,14, 2017, you may attend and vote at the meeting. A list of stockholders eligible to vote at the meeting will be available for review during our regular business hours at our headquarters in San Jose, California for the ten days prior to the meeting for any purpose related to the meeting.

We are pleased to continue to take advantage of the U.S. Securities and Exchange Commission rule that allows companies to furnish proxy materials to their stockholders over the internet.Internet. As a result, we are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this proxy statement and our 20142016 Annual Report. We believe that this process allows us to provide our stockholders with the information they need in a timelier manner, while reducing the environmental impact and lowering the costs of printing and distributing our proxy materials. The Notice contains instructions on how to access those documents over the internet.Internet. The Notice also contains instructions on how to request a paper copy of our proxy materials, including this proxy statement, our 20142016 Annual Report and a form of proxy card. All stockholders who have previously requested a paper copy of our proxy materials will continue to receive a paper copy of the proxy materials by mail.

Your vote is important. Whether or not you plan to attend the meeting, we hope that you will vote as soon as possible. You may vote your shares via a toll-free telephone number or over the internet.Internet. If you received a proxy card or voting instruction card by mail, you may submit your proxy card or voting instruction card by signing, dating and mailing your proxy card or voting instruction card in the envelope provided.

San Jose, California

Our Board of Directors (the “Board”) is soliciting proxies for our 20152017 Annual Meeting of Stockholders (the “2015“2017 Annual Meeting”) to be held on Thursday,Wednesday, April 9, 2015,12, 2017, at 9:00 a.m. local time at our EastAlmaden Tower building located at 321 Park Avenue,151 Almaden Boulevard, San Jose, California 95110. Our principal executive offices are located at 345 Park Avenue, San Jose, California 95110, and our telephone number is (408) 536-6000.

The proxy materials, including this proxy statement, proxy card and our 20142016 Annual Report, are being distributed and made available on or about February 27, 2015.March 3, 2017. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the 20152017 Annual Meeting. Please read it carefully.

In accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission (the “SEC”), we have elected to provide our stockholders access to our proxy materials over the internet.Internet. Accordingly, a Notice of Internet Availability of Proxy Materials (the “Notice”) will be mailed on or about February 27, 2015March 3, 2017 to most of our stockholders who owned our common stock at the close of business on the record date, February 13, 2015.14, 2017. Stockholders will have the ability to access the proxy materials on a website referred to in the Notice or request a printed set of the proxy materials be sent to them by following the instructions in the Notice.

The Notice will also provide instructions on how you can elect to receive future proxy materials electronically or in printed form by mail. If you choose to receive future proxy materials electronically, you will receive an email next year with instructions containing a link to the proxy materials and a link to the proxy voting site. Your election to receive proxy materials electronically or in printed form by mail will remain in effect until you terminate such election.

Choosing to receive future proxy materials electronically will allow us to provide you with the information you need in a timelier manner, will save us the cost of printing and mailing documents to you and will conserve natural resources.

We will bear the expense of soliciting proxies. In addition to these proxy materials, our directors and employees (who will receive no compensation in addition to their regular salaries) may solicit proxies in person, by telephone or email. We have also retained Innisfree M&A Incorporated to help us solicit proxies from brokers, bank nominees and other institutional owners. We expect to pay Innisfree a fee of $15,000 for its services and will reimburse Innisfree for reasonable out-of-pocket expenses. We will reimburse banks, brokers and other custodians, nominees and fiduciaries for reasonable charges and expenses incurred in forwarding soliciting materials to their clients.

As required by the NASDAQ Global Select Market’s (“NASDAQ”) listing standards, a majority of the members of our Board must qualify as “independent,” as affirmatively determined by our Board. Our Board consults with our legal counsel to ensure that its determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in the applicable NASDAQ listing standards.

After review of all relevant transactions and relationships between each director, any of their family members, Adobe, our executive officers and our independent registered public accounting firm, the Board has affirmatively determined that a majority of our Board is comprised of independent directors. Our current independent directors are: Ms. Banse, Mr. Barlow, Mr. Barnholt, Mr. Burgess, Mr. Calderoni, Mr. Cannon, Mr. Daley, Ms. Desmond, Dr. Geschke, Mr. Rosensweig Dr. Sedgewick and Dr. Warnock.

The Audit Committee has the authority to obtain independent advice and assistance from internal or external legal, accounting and other advisors, at Adobe’s expense. See “Report of the Audit Committee” contained in this proxy statement.

In carrying out its function to nominate candidates for election to our Board, the Nominating and Governance Committee considers the Board’s mix of skills, experience, character, commitment and diversity—diversity being broadly construed to mean a variety of opinions, perspectives and backgrounds, such as gender, race and ethnicity differences, as well as other differentiating characteristics, all in the context of the requirements and needs of our Board and Adobe at that point in time. In reviewing potential candidates, the Nominating and Governance Committee will also consider all relationships between any proposed nominee and any of Adobe’s stockholders, competitors, customers, suppliers or other persons with a relationship to Adobe. The Nominating and Governance Committee believes that each candidate should be an individual who has demonstrated integrity and ethics in such candidate’s personal and professional life, has an understanding of elements relevant to the success of a publicly traded company and has established a record of professional accomplishment in such candidate’s chosen field. Each candidate should be prepared to participate fully in Board activities, including attendance at, and active participation in, meetings of the Board, and not have other personal or professional commitments that would, in the Nominating and Governance Committee’s judgment, interfere with or limit such candidate’s ability to do so. Each candidate should also be prepared to represent the best interests of all of our stockholders and not just one particular constituency.stockholders. Additionally, in determining whether to recommend a director for re-election, the Nominating and Governance Committee also considers such director’s past attendance at Board and committee meetings and participation in and contributions to the activities of our Board. The Nominating and Governance Committee has no stated specific minimum qualifications that must be met by a candidate for a position on our Board. The Nominating and Governance Committee does, however, believe it appropriate for at least one member of our Audit Committee to meet the criteria for an “audit committee financial expert” as defined by SEC rules, that each member of our Executive Compensation Committee be a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the “Exchange Act”) and an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as

amended (the “Code”), and that a majority of the members of our Board meet the definition of “independent director” within the meaning of applicable NASDAQ listing standards.

The Nominating and Governance Committee’s methods for identifying candidates for election to our Board include the solicitation of ideas for possible candidates from a number of sources, including from members of our Board, our executive officers, individuals who our executive officers or Board members believe would be aware of candidates who would add value to our Board and through other research. The Nominating and Governance Committee, from time to time, retains for a fee one or more third-party search firms to identify suitable candidates. The Nominating and Governance Committee considers stockholder recommendations for candidates for the Board of Directors. The name of any recommended candidate for director, together with a brief biographical sketch, a document indicating the candidate’s willingness to serve if elected, and evidence of the recommending stockholder’s ownership of company stock must be sent to the attention of our Corporate Secretary.

AnyIn August 2016, the Board amended our Bylaws to implement proxy access. Under Article III, Section 6 of our Bylaws, a stockholder (or group of up to twenty stockholders) owning at least three percent of Adobe’s outstanding shares of common stock continuously for at least three years may nominate and include in our annual meeting proxy materials director nominees constituting up to the greater of two directors or twenty percent of the Board, provided the stockholders and nominees satisfy the requirements specified in our Bylaws. In addition to proxy access nominations, any of our stockholders may nominate one or more persons for election as a director at our annual meeting of stockholders if thestockholders. In either case, a stockholder complieswho wishes to formally nominate a candidate must comply with the notice, information and consent provisions contained in our Bylaws. In addition,Bylaws, including that the notice must include any other information required pursuant to Section 14 of the Exchange Act. In order for the directorproxy access nomination to be timely for our 20162018 Annual Meeting of Stockholders, a stockholder’s notice to our Corporate Secretary must be deliveredreceived at our principal executive offices no later than November 3, 2017 nor earlier than October 4, 2017. In order for a stockholder nomination of a director candidate that is not a proxy access nomination to be timely for our 2018 Annual Meeting of Stockholders, a stockholder’s notice to our Corporate Secretary must be received at our principal executive offices no later than December 14, 20153, 2017 nor earlier than November 14, 2015.3, 2017. Our Bylaws specify additional requirements if stockholders wish to nominate directors at special meetings of stockholders.

The Nominating and Governance Committee will consider all candidates identified through the processes described above, and will evaluate each candidate, including incumbents, based on the same criteria.

The Executive Compensation Committee is also responsible for oversight of our overall compensation plans and benefit programs, as well as the approval of all employment, severance and change of control agreements and plans applicable to our executive officers. In connection with this oversight, the Executive Compensation Committee reviews and certifiesapproves annual performance objectives and goals relevant to executive officers. The Executive Compensation Committee oversees all matters related to stockholder approval of executive compensation, including the advisory vote on executive compensation, and evaluates the risk-taking incentives and risk

We separateEach year, our Board evaluates whether its leadership structure is appropriate to effectively address the rolesspecific needs of our business and the long-term interests of our stockholders. Given the dynamic and competitive environment in which Adobe operates, the Board believes that Adobe and our stockholders are best served by a Chairman who has broad and deep knowledge of Adobe’s business operations and the competitive landscape, the ability to identify strategic issues and the vision to create sustainable long-term value for stockholders. Based on these considerations, the Board has determined that, at this time, our Chief Executive Officer, Shantanu Narayen, is the director best qualified to serve in the role of Chairman. The Board believes that Mr. Narayen’s combined role enables decisive leadership, ensures clear accountability and Chairmenenhances the Board’s ability to focus its meetings on the issues most critical to Adobe’s success, as

To maintain an appropriate level of independent checks and balances in our Board. Our Board is currently chaired by Dr. Geschke and Dr. Warnock, Adobe’s founders and former President and Chief Executive Officer, respectively. The dutiescorporate governance, our Corporate Governance Guidelines provide that if the Chairman of the Chairmen of our Board include:

Our Board believes that stockholders are best served by the Board’s current leadership structure because it provides Adobe with the benefits of combining the leadership role of Chairman and Chief Executive Officer, while at the same time featuring a strong and senior management in seekingempowered independent Lead Director who provides an effective independent voice and adopting successful business strategies and risk management policies and in making successful choices in management succession. The Board also believes that it is advantageous to have Chairmen with extensive history and knowledgefurther enhances the contributions of Adobe, our corporate culture and the industries in which we compete, as is the case with Dr. Geschke and Dr. Warnock.independent directors.

Risk assessment and oversight are an integral part of our governance and management processes. Our Board takes an active role in reviewing Adobe’s corporate strategy and priorities on an ongoing basis, and also encourages management to promote a culture that actively manages risks as a part of Adobe’s corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management meetings, and conducts specific strategic planning and review sessions during the year that include a focused discussion and analysis of the risks facing Adobe. Throughout the year, senior management reviews these risks with the Board at regular Board and committee meetings as part of management presentations that focus on particular business functions, operations or strategies, and presents the steps taken by management to mitigate or eliminate such risks. The Board regularly provides management with input on these risks and mitigation steps.

Our Board does not have a standing risk management committee, but rather administers this oversight function directly through our Board as a whole, as well as through various standing committees of our Board that address risks inherent in their respective areas of oversight. In particular, our Board is responsible for monitoring and assessing strategic risk exposure, and our Audit Committee has the responsibility to oversee our major financial risk exposures, cyber-security exposures and the steps our management has taken to monitor and control these exposures, as well as oversight of our enterprise risk management program. The Audit Committee also monitors compliance with legal and regulatory requirements and oversees the performance of our internal audit function. Our Nominating and Governance Committee monitors the effectiveness of our Corporate Governance Guidelines and considers and approves or disapproves any related-personsrelated-

persons transactions. Our Executive Compensation Committee assesses and monitors whether

Section 16(a) of the Exchange Act requires our executive officers and directors, as well as any person or entity who owns more than 10% of a registered class of our common stock or other equity securities, to file with the SEC certain reports of ownership and changes in ownership of our securities. Executive officers, directors and stockholders who hold more than 10% of our outstanding common stock are required by the SEC to furnish us with copies of all required forms filed under Section 16(a). We typically prepare Section 16(a) forms on behalf of our executive officers and directors based on the information provided by them.

Based solely on review of this information and written representations by our executive officers and directors that no other reports were required, we believe that, during fiscal year 2014,2016, no reporting person failed to file the forms required by Section 16(a) of the Exchange Act on a timely basis.basis other than the following exception: Board member Dan Rosensweig submitted a late filing in July 2016, on account of a broker error.

As part of the assumption of the Macromedia plans, effectiveEffective December 3, 2005, our Board adopted the Adobe Systems Incorporated 2005 Equity Incentive Assumption Plan (the “Assumption Plan”). The Assumption Plan permits the grant of non-statutory stock options, stock appreciation rights, stock purchase rights, stock bonuses, restricted stock, restricted stock units, performance shares and performance units using shares reserved under certain of the assumed Macromedia plans (as described below). In connection with our assumption of the Omniture plans, on November 16, 2009, the Assumption Plan was amended by the Executive Compensation Committee to include shares reserved under certain of the assumed Omniture plans (as described below). The Assumption Plan has not been approved by our stockholders. The terms and conditions of stock awards under the Assumption Plan are substantially similar to those under our 2003 Equity Incentive Plan. In accordance with applicable NASDAQ listing requirements, we may grantpreviously granted new stock awards under the Assumption Plan to our employees who were not employed by or providing services to us or any of our affiliates prior to December 3, 2005 (other than employees of Macromedia before December 3, 2005, and Omniture before October 23, 2009,certain acquired companies prior to the acquisition dates, and their respective affiliates and subsidiaries).

Under the Assumption Plan, an aggregate of 28,644 shares of our common stock were reserved for issuance as of November 28, 2014. SuchOur Executive Compensation Committee elected to retire all remaining outstanding share reserve consists solely of the unused and converted share reserves and potential reversions to the share reserves with respect to certain Macromedia and Omniture plans (as described below). The share reserve is divided into Reserves A through E. As of November 28, 2014, the reserves were as follows:

In addition to the Assumption Plan, as of the fiscal year ended November 28, 2014,December 2, 2016, we maintained equity compensation plans covering stock awards that were assumed by us as follows: four plans in connection with the Macromedia acquisition; seven plans in connection with the Omniture acquisition; two plans in connection with the Day Software acquisition; one plan in connection with the Demdex acquisition; one plan in connection with the EchoSign acquisition; one plan in connection with the Typekit acquisition; two plans in connection with the Auditude acquisition; one plan and one non-plan stock option agreement in connection with the Efficient Frontier acquisition; one plan in connection with the Behance acquisition; two plans in connection with the Neolane acquisition; one plan in connection with the Aviary acquisition; and one plan in connection with the AviaryFotolia acquisition, in each case under which stock awards had been granted by these predecessor entities that remained outstanding at the time of the respective acquisition. We did not assume the reserves of the plans from which these awards were issued. The “Equity compensation plans not approved by Adobe’s stockholders” row in the “Equity Compensation Plan Information” table above shows aggregated share reserve information for these awards in addition to the Assumption Plan. Other than through the Assumption Plan, noNo future awards may be granted under any of our acquired plans.

Please see Part II, Item 8 “Financial Statements and Supplementary Data” of our 20142016 Annual Report on Form 10-K inand the notes to Consolidated Financial Statements at Note 12,11, “Stock-based Compensation” for further information regarding our equity compensation plans and awards.

This Compensation Discussion and Analysis provides information regarding our executive compensation programs during fiscal year 20142016 for the following executive officers of Adobe:

These executive officers are referred to in this Compensation Discussion and Analysis and in the accompanying compensation tables as our named executive officers, or “NEOs.”

This Compensation Discussion and Analysis describes the material elements of our executive compensation programs for our executive officers during fiscal year 2014.2016. It also provides an overview of our executive compensation philosophy, including our principal compensation programs. Finally, it analyzes how and why the Executive Compensation Committee of our Board (the “Committee”) arrived atmade its material compensation decisions for our executive officers, including our NEOs, in fiscal year 2014.2016.

OverAdobe continues to execute on its mission of changing the past several years,world through digital experiences with its best-in-class cloud businesses: Creative Cloud, Document Cloud, and Adobe has been in the midst of a vital transformation of our business model, shifting from a focus on pre-packaged software to a services-based business built around subscription offerings and recurring revenue.Marketing Cloud. In fiscal year 2014 this transformation culminated2016, the company’s cloud strategies continued to produce strong results and steady, predictable growth, with mostapproximately 82% of our revenue coming from recurring sources byat the end of the year. In terms of financial results, our 2016 fiscal year. Withyear was a record-breaking year for the continued growthcompany, in terms of Creative Cloud, Adobe’s leadership team has achieved a monumental shift in our core Digital Media business, driving growthrevenues, earnings and increasing the predictability of our financial results. At the same time, our NEOs have continued to drive growth in our Digital Marketing business that has achieved leadership in its category. While executing on this strategy, our NEOs have continued to produce strong financial results.operating cash flow. For the fiscal year ended November 28, 2014:December 2, 2016:

Our executive officers also delivered on key strategic performance objectives established by the Committee for fiscal year 20142016 and other corporate initiatives. TheseIn addition to producing strong financial results in fiscal year 2016, achievements included:

Our executive compensation programs are designed to directly tie the outcomes of our incentive compensation awards for our executive officers to the achievement of our key strategic performance objectives and returns to our stockholders, and drive the creation of sustainable long-term stockholder value. Our fiscal year 20142016 compensation programs reflected this philosophy, and compensation earned reflected our business achievements discussed above.

Further, because Adobe common stock underlies our equity-based compensation awards, the immediate value of these awards is wholly subject to fluctuations in our stock price, strongly aligning the interests of our executive officers, including our CEO, with those of our stockholders.

Our pay-for-performance philosophy is reflected in the chartpie charts below, which depictsdepict the composition of our CEO and other NEOs’ targeted 20142016 compensation:

Adobe values the input of our stockholders on our compensation programs. We hold an advisory vote on executive compensation on an annual basis. We also regularly communicate with our stockholders to better understand their opinions on governance issues, including compensation. The Executive Compensation Committee carefully considers stockholder feedback and the outcome of each vote and this stockholder outreach feedback as part of its annual review ofwhen reviewing our executive compensation programs for our NEOs. each year.

At our 20142016 annual stockholders meeting, over 90% of the votes cast approved, on an advisory basis, our NEO compensation and disclosures for fiscal year 2013.2015. This high percentage of votes in favor of our compensation approach validated the updates to our compensation programs in response to stockholder feedback received in previous years. In particular, we believe this improvementthe strong approval was largely driven by a numberthe following attributes of changes to our fiscal year 20132015 executive compensation programs, including:programs: (1) lengthening the three-year performance period under our Performance Share Program to three years;Program; (2) basing our Performance Share Program on a single objective metric—relative TSR—to more closely alignaligning the compensation opportunity of our NEOs to long-term stockholder interests; (3) having a clawback policy applicable in the event of a material restatement of our financial statements (as described further below), and (3)(4) basing our short-term cash incentive program on financial metrics that align with our corporate growth strategy.

In addition to taking stockholder feedback into account, the Committee has evaluated a number of other factors discussed below in making decisions about our executive compensation approach. Following this evaluation, the Committee determined (1) to continue the general approach of our short-term cash incentive plan, with an update to the strategic objectives component to focus more specifically on customer retention and satisfaction, and (2) not to make significant changes to our executive cash bonus plan or equity compensation programsprogram for fiscal year 2015,2017, continuing the general approachesapproach from the two previousrecent fiscal years. These programs wereThis program was designed to align with our three-year operating plan and the multi-year growth strategy of our Digital Media and Digital Marketing businesses as our executives guide Adobe through a planned period of significant business transformation.growth. The Committee believes it is important to maintain consistencythese programs have created the desired pay-for-performance incentives, and that these incentives have been driving the intended outcomes in our compensation programs for executives as we complete this transformation.

Additional information regarding our fiscal year 20152017 executive compensation programs is available in our Current Report on Form 8-K filed with the SEC on January 28, 2015.27, 2017.

We believe that the skills, experience and dedication of our executive officers are critical factors that contribute directly to our operating results, thereby enhancing stockholder value. In order to continue to develop and bring to market the products that drive our financial performance, we must attract, motivate, and retain the top talent within our industry. As such, our compensation programs for our employees generally, including our executives officers, are designed: (1) to provide competitive compensation opportunities that attract, as needed, individuals with the skills necessary for us to achieve our business objectives and retain those top performing individuals; (2) to relate directly to our corporate performance and meaningfully drive our business objectives; (3) to reward and motivate strong individual performance, but with a substantial majority of compensation tied to corporate objectives; (4) to avoid undue compensation-related risk; and (5) to create direct alignment with our stockholders by providing equity ownership in the company. Further, the following aspects of our compensation program underscore our continued commitment to corporate governance and compensation best practices:

We believe our executive compensation program hasprograms have been effective at driving the achievement of our target financial and strategic results, appropriately aligning executive pay and corporate performance and enabling us to attract and retain top executives within our industry.

Peer Group and Competitive Positioning

The Committee regularly reviews relevant market and industry practices on executive compensation. We do so to balance our need to compete for talent with the need to maintain a reasonable and responsible cost structure while aligning our executive officers’ interests with those of our stockholders.

These allocations reflect our belief that a significant portion of our NEOs’ compensation should be performance based and therefore “at risk” based on company and individual performance, as well as NEO service requirements. Since our cash incentive opportunities and equity incentive awards have both upside opportunities and downside risks, and our actual performance can deviate from the target goals, the amount of compensation actually earned will differ from the target allocations.

The fiscal year 20142016 target total direct compensation (“TDC”) for each of our NEOs was set by the Committee based on a number of factors, including: competitive pay practices reflected in the peer group data; each executive’s importance and contribution to Adobe; company and individual performance; anticipated future contributions; internal pay equity; and historical pay levels. The Committee also reviewed the positioning of the total target cash and equity elements of compensation against levels at our peer companies, but these individual elements of NEO compensation may vary based on the importance of the other factors noted above in any given year with respect to any given NEO. Because our fiscal year begins earlier than most of our peer companies, our target TDC attempts to foreseeanticipate what the competitive compensation positioning for each role will be for the coming fiscal year. Our fiscal year 2014 target TDC pay mix for each NEO is summarized above under “Fiscal Year 2014 Compensation Highlights.”

Base Salary

For fiscal year 2014,2016, the Committee reviewed the base salaries of our NEOs, comparing these salaries to the base salary levels at the companies in our peer group, as well as considering the roles and responsibilities, performance and potential performance of the NEOs and their mix of other compensation elements (cash and equity incentives). Following its review, the Committee determinedmade no change to moderatelyMr. Narayen’s salary and chose to increase the base salaries of our NEOs as shownfor Messrs. Garrett, Rencher and Thompson in order to better align their base pay with peer companies and, in the table below. The moderate increases were based on individual performance as well as our independent compensation consultant’s surveycase of comparable salaries at our peer companies.Mr. Rencher, in recognition of his promotion to executive vice president.

Cash Incentives

At the outset of 2014,2016, the Committee approved the Fiscal Year 20142016 Executive Annual Incentive Plan (the “Executive BonusIncentive Plan”), which operates under the terms of a stockholder-approved 20112016 Executive Cash Performance Bonus Plan, to provide cash compensation opportunities to our NEOs based on the company’s achievement of pre-established performance goals. The Committee set threshold, target and maximum performance levels for these goals that were based on our Board-approved operating plan for fiscal year 20142016 (the “Operating Plan”).

Plan Design and Target Annual Incentive Opportunity

The Committee set the target annual cash incentive opportunity for fiscal year 20142016 (expressed as a percentage of base salary earned during the year) for each NEO early in the fiscal year. In setting the target levels, the Committee considered each NEO’s fiscal year 20142016 target total cash opportunity against the peer group data provided by our independent compensation consultant, internal pay equity and the roles and responsibilities of the NEOs. The Committee set the fiscal year 20142016 cash incentive targets for Messrs. Narayen, Garrett and Thompsoneach of the NEOs at the same percentage as their target opportunities in fiscal year 2013, resulting in modest increases to the dollar values of their targets on account of the salary increases described above. The Committee moderately increased the percentage targets for Messrs. Rencher and Wadhwani on account of their increased leadership and importance to Adobe’s business and to better align their compensation with peer group practices.2015. The Committee believes that the target annual cash incentive opportunity should make up a larger portion of an NEO’s total target cash compensation as the executive’s level of responsibility increases.

As with our fiscal year 20132015 program, the Executive BonusIncentive Plan was designed to align our NEOs’ cash bonus incentives with the company’s strategic priorities of driving financial performance based on ARR growth in Digital Media and net bookings growth (“Bookings”) in Digitalour Adobe Marketing in order to build significant recurring revenue streams as we continued to transitionCloud. Focusing our business towardson subscriptions and cloud-based services, such as Creative Cloud and Adobe Marketing Cloud.Cloud, encourages our executives to continue to grow our recurring revenue streams. As discussed in our recent Annual Reports, the Committee and the company’s management feel that these metrics are the best indicators of the forward-looking health of Adobe’s business while we near completion of a significant businessfollowing our transition during whichaway from perpetual revenue (recognized up front)(generally recognized at the time of sale), which has been largely replaced withby subscription or SaaS revenue that is generally recognized over time.  During this transformation, traditional financial metrics such as revenue and profitability have been less reliable indicators of the performance of our core businesses as we shift our focus toward recurring revenue.

Portions of the cash opportunity for each NEO arewere also tied to a customer advocacy objectivegoals related to unifying our cloud platforms and increasing the value we provide to our customers, as well as an individual goal component tailored to each executive, including in appropriate circumstances, objectives related to profitability.executive.

The Committee determined that, for purposes of earning any award under the Executive BonusIncentive Plan for fiscal year 2014,2016, we must have achieved a threshold goal of 85% of the GAAP Revenue set forth in the Operating Plan. If

Actual awards earned by each participant (which are a reduction from the maximum award funded once the GAAP Revenue threshold is met) are based on a formula with the company’s achievementwhereby 50% of its performance goals (ARR, Bookings and Customer Advocacy, collectively referred to as the Corporate Result) weighted at 75% of thea participant’s target award opportunity is tied to corporate performance and achievementthe remaining 50% is tied to his or her individual performance. Actual awards

under the participant’s individual goals weighted at 25% ofExecutive Incentive Plan are determined according to the participant’s target award, as follows:following formula:

The Corporate Result“Corporate Performance Result” (expressed as a percentage) is the weighted averageproduct of three elements:(1) Financial Performance and (2) Strategic Objectives. The company’s financial performance for the 2016 fiscal year performance period is determined by a metric comprised of both (1) net new Digital Media ARR and (2) Bookings for the Adobe Marketing Cloud, in both cases as set forth in the Operating Plan. As described in our Annual Report on Form 10-K for the fiscal year ended December 2, 2016, we define annualized recurring revenue, or ARR, in our Digital Media business as the sum of Creative ARR and Document Cloud ARR. We define Creative ARR as the sum of (1) the ARR result (weighted at 2x);annual value of Creative Cloud subscriptions and services, plus (2) the Bookings result (weighted at 2x) andannual contract value of Digital Publishing Suite, plus (3) the Customary Advocacy result (weighted at 1x)annual contract value of Creative Enterprise Term License Agreements. We define Document Cloud ARR as the sum of (1) the annual value of Document Cloud subscriptions and services, plus (2) the annual contract value of Document Cloud Enterprise Term License Agreements. The Bookings target for Adobe Marketing Cloud is also based on the target set forth in the Operating Plan.

The Financial Performance result is also subject to adjustment by the Committee by up to 20 percentage points up or down based on the Committee’s assessment of the company’s qualitative performance during the fiscal year (with a maximum achievement of 200%).

The results for ARR and Bookings areFinancial Performance payout percentage, after any adjustment as described in the preceding sentence, will cap the Corporate Performance Result. The Corporate Performance Result may be adjusted downward based uponon the company’s performance againstoutcome of company strategic objectives (“Strategic Objectives”) established by the Committee in consultation with the Board at the outset of the fiscal year targets as set forthyear. The percentage achievement of the Strategic Objectives (assessed on a scale of 0% to 100%) is multiplied by the Financial Performance result to determine the Corporate Performance Result.

The remaining 50% of each participant’s bonus opportunity under the Executive Incentive Plan is based on individual performance including, without limitation, achievement of individual performance goals specifically tailored to each participant and aligned with the achievement of strategic objectives contained in the Operating Plan. As described in our 2014 Annual Report, we define annualized recurring revenue in our Digital Media business as the sum of (1) the number of current paid subscriptions, multiplied by the average subscription price paid per user per month, multiplied by twelve months; plus (2) twelve months of contract value of Enterprise Term License Agreements where the revenue is ratably recognized over the life of the contract, plus (3) twelve months of Adobe Digital Publishing Suite contract value where the revenue is ratably recognized.

Fiscal Year 20142016 Results and Payouts

At the time the corporate and individual goals were set for fiscal year 2014,2016, the Committee believed that the Executive BonusIncentive Plan goals were aggressive, achievable but only with significant effort.

In fiscal year 20142016, we achieved $4.147$5.85 billion of revenue, exceeding our GAAP Revenue threshold level. Our business generatedThe combined performance of our Digital Media ARR approximatelygrowth and Bookings growth in line with our internal goals at 98.2%Adobe Marketing Cloud during the fiscal year resulted in a Financial Performance Result of 96% based on the rigorous targets in the Operating Plan, target, generating an ARR resultaccording to the matrix included as Exhibit A to the Executive Incentive Plan, as set forth in our 8-K filed with the SEC on January 29, 2016. The Committee did not make a discretionary adjustment to the Financial Performance Result.

The Committee considered the company’s achievement during the fiscal year of 98%the strategic objectives established under the Executive BonusIncentive Plan. InThese objectives related to generating value for Adobe customers and unifying the company’s cloud platforms. After considering various achievements during the fiscal year and challenges that remain, the Committee certified the Strategic Objectives Result at 87.5%, underscoring the need for Adobe to continue to focus on providing a world-class experience to our Digital Marketing business, Bookings performance was also approximately in linecustomers. When multiplied with our Operating Plan target at 98.1%, resulting in a Bookings result of 98%. The Committee set the Customer Advocacy result at 90%, resulting in96% Financial Performance Result, this produced a Corporate Performance Result of 96.4%, which the Committee viewed as outstanding achievement in light of the relative difficulty of the targets under the Executive Bonus Plan. The Committee chose not to exercise its discretion to adjust the Corporate Result.84%.

The Committee monitored each NEO’s progress toward their individual goalsperformance on a periodic basis during the year and measured total achievement at year end. The Committee determined that our NEOs successfully droveBased on the accelerated transformationCommittee’s assessment of our business model to emphasize recurring revenue through ARR in our Digital Media business and Bookings in our Digital Marketing business, which generated growth and value for the company’s stockholders. In assessing each NEO’s individual performance during the fiscal year, including progress against the individual goals achievement at 96.4%,shown above, the Committee focused oncertified the Corporate Result and coordinated teamwork among the executives, as well as each executive’s high level of contribution and key role in driving the business transformation in each of their respective areas.

The Committee retains authority to pay additional discretionary bonuses outside the Executive BonusIncentive Plan but declined to grant any such awards in fiscal year 2014.2016.

Equity Incentives

For fiscal year 2014,2016, the Committee, with input from its independent compensation consultant, management and our Chief Executive Officer, took a number of factors into account in determining the target value of the equity compensation opportunity for each of our NEOs. Among these factors were the individual performance of executives, peer group positioning, internal pay equity, employee retention and the other factors for determining compensation discussed under “Compensation Philosophy and Objectives” above. With regard to peer pay positioning, the Committee reviews the value of equity awards in the aggregate because of the different mix of equity awards granted by our peers, and the aggregated manner in which this data is presented in the peer group surveys. The Committee increasedset Mr. Narayen’s target equity opportunity inwith respect to fiscal year 20142016 to reflect his individual achievements and company performance achievements,the company’s success coming out of a significant business transformation. The target was also determined in part to better position his equity in relationrelative to high market cap peer companies with market caps similar to create better alignment with our stockholdersAdobe’s and to enhance the retentive value of his total compensation. For our other NEOs, theThe Committee increased theirthe target equity opportunities of Messrs. Rencher and Thompson to better align their equity in relation to peer group companies with a higher market cap companies in our peer group as well as to better align internal pay equity. Likewise,equity and, in the case of Mr. Garrett’s target value was returnedRencher, in recognition of his promotion to a position aligned with both peer and internal equity practices after it had been decreased in fiscal year 2013 on account of a one-time retention award issued to him in fiscal year 2012. As with cash incentives, theexecutive vice president. The Committee believes that the target equity incentive compensation opportunity should make up a greater portion of an NEO’s potential TDC as the individual’s level of responsibility increases.

The following table sets forth the total target value determined by the Committee, as well as the resulting number of performance shares (target maximum and earned)maximum) and RSUs granted to each of our NEOs at the outset of fiscal

As with our 20132015 Performance Share Program, under our 20142016 Performance Share Program shares are earned based on a single objective financial measure—relative TSR over a three-year performance period. All earned performance share awards will vest upon the later of the Committee’s certification of results which will occur followingand the expirationthree-year anniversary of the three-year performance period.grant date. Accordingly, the performance shares will align our NEOs’ interests with those of our stockholders over the long term, while also providing key retention incentives, as the shares will only

Because our 20142016 Program is based on a three-year performance period, none of the performance shares can be earned until the certification of the performance period closes at the outset of our 20172019 fiscal year.

For more information on performance shares granted during fiscal year 2014,2016, see the “Executive Compensation—Grants of Plan-Based Awards in Fiscal Year 2014”2016” table and accompanying narrative.

The three-year performance period under Adobe’s 2014 Performance Share Program closed at the end of our 2016 fiscal year. As with our 2016 program described above, shares under the 2014 Performance Share Program were earned based on relative TSR over a three-year performance period. At the end of the performance period, there were 90 firms remaining in the relative peer group identified in the 2014 program. During the three-year performance period Adobe’s TSR was approximately 101%, calculated based on the methodology set forth in the program.

2016 RSU Program

Recognizing that a substantial portion of our NEOs’ compensation is performance based, and therefore inherently at risk, the Committee granted time-based RSUs to our NEOs in order to promote retention and continuity in our business. In fiscal year 2014,2016, our time-based RSUs were subject to vesting at a rate of 1/3 per year over three years to provide additional retention incentives. Accordingly, our RSU program provides our NEOs with strong incentives to remain employed by Adobe, while providing additional rewards for growth in our stock price with less dilution to the company than time-based stock options, which were not granted by Adobe to any executive officer in fiscal year 2014.2016.

Realizable pay reflects the real value of equity awards and increases or decreases with fluctuations in market value.  When determining the annual equity grants to our executives in January of each year, the Committee believes it is important to take into account not only the grant date values included in our Summary Compensation Table, but also to consider the effect of the value of our stock on those awards at the end of our fiscal year.

Given that approximately 86 percent88% of our CEO’s and 80 percent80% of our other NEOs’ target pay is equity based, the Committee and the company consider it especially important to focus on realizable pay when evaluating pay for performance.  If stock options awarded in previous years were “out of the money,” they could expire without any

As the table belowfollowing chart illustrates, when the company’s stock price increases and generates positive returns for Adobe’s stockholders, the increase impacts an executive’s realizable pay during the present fiscal year and for past fiscal years during which the executive received equity awards that are held or still subject to vesting. Accordingly, a significant portion of our NEOs’ TDC is closely linked to the performance of Adobe’s stock over time, motivating our executives to generate positive returns to Adobe’s stockholders.

The following chart demonstrates the relationship between the target and realizable values of our CEO’s total direct compensation and Adobe's indexed TSR for the past five completed fiscal years 2012, 2013 and 2014:years:

We do not provide our employees, including our NEOs, with a defined benefit pension plan, any supplemental executive retirement plans or retiree health benefits, except as required by local law or custom for employees outside the United States. Our NEOs may participate on the same basis as other U.S. employees in our Section 401(k) Retirement Savings Plan (the “401(k) Plan”) with a company-sponsored match component.

We also maintain an unfunded, nonqualified deferred compensation plan (the “Deferred Compensation Plan”). Our executives and our Board members are eligible to participate at their election. The Deferred Compensation Plan provides the ability to defer receipt of income to a later date, which may be an attractive tax planning opportunity. We generally do not contribute to the Deferred Compensation Plan on behalf of the participants; therefore, our cost to maintain the Deferred Compensation Plan is limited to administration expenses, which are minimal. NoOther than Mr. Narayen, no other NEOs participated in or had an accrued balance under the Deferred Compensation Plan in fiscal year 2014.2016.

In addition, we maintain a limited membershipmemberships in a private jet program.programs. Our policy related to this program,these programs, adopted to enable efficient travel, allows our Chief Executive Officer the use of a private jet for business travel only. A limited number of other executive officers and employees may accompany our Chief Executive OfficerCEO only if required for business purposes, and none of our executives or employees are permitted to use our private jet program for personal or other non-business-related travel. Our policy allows family members to accompany the CEO during business travel only if additional costs for the family members are paid for by the executive officer.CEO. The CEO complied with this policy at all times during fiscal year 2014.2016.

We also provide the following benefits to our NEOs, on the same terms and conditions as provided to all other eligible employees: health, dental and vision insurance; life insurance; an Employee Stock Purchase Plan; health savings account; medical and dependent care flexible spending account; and short- and long-term disability, accidental death and dismemberment. We believe these benefits are consistent with benefits provided by companies with which we compete for executive-level talent.

Stock Ownership Guidelines

In 2003, our Board adopted stock ownership guidelines for all employees at the senior vice president level and above (including our executive officers) and directors, which the Committee reviews periodically. The Board amended theUnder these guidelines, during our 2014 fiscal year to require our executive officers toCEO must hold 50% of net shares acquired (up from 25% underuntil the previous guidelines) until they satisfyCEO satisfies (and continuecontinues to satisfy) the threshold share ownership requirements listed in the table below. The Board amended the guidelines applicable to our Executive and Senior Vice Presidents during our 2016 fiscal year. Under the amended guidelines, our executive officers (excluding our CEO) must hold 50% of net shares acquired until they satisfy (and continue to satisfy) half of the threshold share ownership requirements listed in the table below. Once they achieve half of the share ownership requirements listed in the table below, andthey must hold 25% of net shares acquired until they satisfy (and continue to require that suchsatisfy) the share ownership requirements listed in the table below. Such threshold ownership levels must be maintained indefinitely, as long as the individual remains an employee at the senior vice president level andor above of Adobe. These guidelines are designed to align our officers’ interests with our stockholders’ long-term interests by promoting long-term share ownership, which reduces the incentive for excessive short-term risk taking.

Shares that count toward the minimum share ownership include: shares owned outright or beneficially owned; shares acquired through the company’s Employee Stock Purchase Plan; vested restricted stock; vested RSUs, performance shares and performance units in our Deferred Compensation Plan; and shares issued from the exercise of vested options.