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
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Illumina, Inc.
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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April 8, 20166, 2018
Notice of Annual Meeting and Proxy Statement
Date: | May | |
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This year’s annual meeting will be a completely virtual meeting of stockholders.
To participate, vote, or submit questions during the annual meeting via live webcast, please visit:www.virtualshareholdermeeting.com/ There will not be a physical location for the annual meeting.
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The agenda for this year’s annual meeting includes the following items:
1. | Elect the three nominees named in the proxy statement to our Board of Directors; |
2. | Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending |
3. | Hold an advisory vote to approve the compensation |
4. | Hold an advisory vote on a stockholder proposal to |
5. | Transact such other business as may properly come before the meeting and any adjournment or postponement. |
Stockholders as of the record date of March 21, 2016,29, 2018, are entitled to notice of and to vote on the matters listed in the proxy statement.
By Order of the Board of Directors,
CHARLES E. DADSWELL
Senior Vice President, General Counsel and Secretary
You can vote in one of three ways prior to the meeting: | ||
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VIA THE INTERNET. You may vote atwww.proxyvote.com, 24 hours a day, seven days a week, prior to 11:59 p.m. (Eastern time) on May | |
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Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on May 18, 2016:23, 2018: The proxy statement and annual report to Stockholders are available atwww.proxyvote.com..
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Illumina, Inc.
20162018 Proxy Statement – Summary
This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider. You should read the entire proxy statement carefully before voting.
GENERAL INFORMATION (see pages 2 to 9)
Meeting: Annual Meeting of Stockholders Date: Wednesday, May Time: Location: Internet webcast only at: www.virtualshareholdermeeting.com/ There will not be a physical location for the annual meeting. Record Date: March
Stock Symbol: ILMN Exchange: The NASDAQ Global Select Market Common Stock Outstanding: Registrar & Transfer Agent: Computershare State of Incorporation: Delaware Year of Incorporation: 1998 in California; reincorporated in Delaware in 2000 Public Company Since: 2000
Corporate Headquarters: 5200 Illumina Way, San Diego, California 92122 Corporate Website:www.illumina.com Investor Relations Website:investor.illumina.com
EXECUTIVE COMPENSATION (see pages
CEO: CEO • Salary: • Annual Performance Cash Incentive: • Long-Term Incentives: • All other compensation: $57,351 CEO Employment Agreement: No Change-in-Control Agreement: Yes (double trigger) Stock Ownership Guidelines: Yes Hedging Policy: Yes | CORPORATE GOVERNANCE (see pages 18 to
Director Nominees: 3 • • John W. Thompson (independent) •
Director Term: Three years or until a successor is elected Director Election Standard: Majority voting standard for uncontested elections Term Limits: 10 years for non-employee directors joining after December 31, 2015 Board Meetings in All Directors Attended at Least 75% of Board and Committee Meetings: Yes
Standing Board Committees (meetings in • Audit • Compensation • Nominating/Corporate Governance All Standing Board Committees Comprised Entirely of Independent Directors:Yes
Stockholder Rights Plan: No
ITEMS TO BE VOTED ON (see pages 12 to 17)
1. The election of the three nominees named in this proxy statement. • Board recommendation:FOR Each Nominee 2. Ratification of appointment of independent registered public accounting firm • Board recommendation:FOR 3. Advisory vote to approve compensation paid to the named executive • Board recommendation:FOR 4. Advisory vote on stockholder proposal to • Board recommendation:AGAINST |
Illumina, Inc. 20162018 Proxy Statement • 1
This proxy statement is furnished in connection with the solicitation of proxies by ourthe Board of Directors of Illumina, Inc. for the Annual Meeting of Stockholders. This proxy statement and accompanying proxy are being mailed to our stockholders on or about April 8, 2016,6, 2018, concurrently with the mailing of our annual report on Form 10-K for the fiscal year ended January 3, 2016.December 31, 2017.
We will be hosting the
Any stockholder can listen to and participate in the annual meeting live via the
Stockholders may vote and submit questions while connected to the annual meeting on the | ||
What do I need in order to be able to participate in the annual meeting online? | You will need the
Instructions on how to connect and participate via the
If you do not have your
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What is the purpose of the annual meeting? | At our annual meeting, stockholders will act upon the matters described in this proxy statement. In addition,
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What am I voting on at the annual meeting? | Stockholders will be asked to vote on four proposals. The proposals are to:
1. Elect as directors the three nominees named in this proxy statement to hold office for three years or until
2. Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending
3. Hold an advisory vote to approve the compensation paid to the “named executive
4. Hold an advisory vote on a stockholder proposal to
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Illumina, Inc. 20162018 Proxy Statement • 2
Could other matters be decided at the annual meeting? | Our bylaws require that we receive advance notice of any proposal to be brought before the annual meeting by our stockholders, and we have not received notice of any such proposals. If any other matter were to come before the annual meeting, the proxy holders appointed by the Board of Directors will have the discretion to vote on those matters for you.
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What is the recommendation of the Board on each of the matters scheduled to be voted on at the annual meeting? | The Board of Directors recommends that you vote:
• FOR each of the nominees to the Board of Directors (Proposal 1); • FOR ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the • FOR approval, on an advisory basis, of the compensation •
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Who can vote at the annual meeting? | Only holders of our common stock as of March
At the close of business on the record date, there were
You have one vote for each share of common stock that you hold. A list of stockholders entitled to vote at the annual meeting will be available for examination at our principal executive offices at the address listed above for a period of 10 days prior to the annual meeting, and during the annual meeting such list will be available for examination atwww.virtualshareholdermeeting.com/
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What is the difference between holding shares as a stockholder of record and as a beneficial owner? | Stockholders of Record. You are a stockholder of record if at the close of business on the record date your shares were registered directly in your name with our transfer agent, Computershare Trust Company, N.A.
Beneficial Owner. You are a beneficial owner if at the close of business on the record date your shares were held by a brokerage firm or other nominee and not in your name. Being a beneficial owner means that, like many of our stockholders, your shares are held in “street name.” As the beneficial owner, you have the right to direct your broker or other nominee how to vote your shares by following the voting instructions your broker or other nominee provides. If you do not provide your broker or other nominee with instructions on how to vote your shares, your broker or other nominee may be able to vote your shares with respect to some of the proposals, but not all. Please see “What will happen if I do not vote my shares?” below for additional information.
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How do I vote and what are the voting deadlines? | Stockholders of Record. If you are a stockholder of record, there are several ways for you to vote your shares. | |||
Via the Internet. You may vote atwww.proxyvote.com, 24 hours a day, seven days a week. You will need the | ||||
By Telephone. You may vote using a touch-tone telephone by calling 1-800-690-6903, 24 hours a day, seven days a week. You will need the | ||||
By Mail. If you received printed proxy materials, you may submit your vote by completing, signing, and dating each proxy card received and returning it in the prepaid envelope. Sign your name exactly as it appears on the proxy card. Proxy cards submitted by mail must be received no later than May | ||||
During the Annual Meeting. Instructions on how to vote while participating in our annual meeting live via the | ||||
If you vote via the | ||||
Beneficial Owners. If you are a beneficial owner of your shares, you should have received a Notice of Internet Availability of Proxy Materials or voting instructions from the broker or other nominee holding your shares. You should follow the instructions in the Notice of Internet Availability of Proxy Materials or voting instructions provided by your broker or nominee in order to instruct your broker or other nominee on how to vote your shares. The availability of telephone and | ||||
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Can I revoke or change my vote after I submit my proxy? | Stockholders of Record. If you are a stockholder of record, you may revoke or change your vote at any time before the final vote at the annual meeting by:
• signing and returning a new proxy card with a later date;
• submitting a later-dated vote by telephone or via the
• participating in the annual meeting live via the
• delivering a written revocation to our Corporate Secretary at Illumina, Inc., 5200 Illumina Way, San Diego, California 92122, to be received no later than May
Beneficial Owners. If you are a beneficial owner of your shares, you must contact the broker or other nominee holding your shares and follow their instructions for revoking or changing your vote.
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What will happen if I do not vote my shares? | Stockholders of Record. If you are the stockholder of record and you do not vote by proxy card, by telephone, via the
Beneficial Owners. If you are the beneficial owner of your shares, your broker or nominee may vote your shares only on those matters on which it has discretion to vote. Under the rules of the New York Stock Exchange, or NYSE, your broker or nominee does not have discretion to vote your shares on non-routine matters such as Proposals 1, 3, and 4. However, your broker or nominee does have discretion to vote your shares on routine matters such as Proposal 2. The broker’s inability to vote on non-discretionary matters for which the broker has not received instructions from the beneficial owner is referred to as a “broker non-vote.” Please see “What is a ‘broker non-vote’?” below for more information.
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What is a “broker non-vote”? | The NYSE has rules that govern brokers who have record ownership of listed company stock (including stock such as ours that is listed on The NASDAQ Global Select Market) held in brokerage accounts for their clients who beneficially own the shares. Under these rules, brokers who do not receive voting instructions from their clients have the discretion to vote uninstructed shares held by such clients on certain matters (“discretionary matters”) but do not have discretion to vote uninstructed shares as to certain other matters (“non-discretionary matters”). | |
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Illumina, Inc. 20162018 Proxy Statement • 5
What is the effect of a broker non-vote? | Broker non-votes will be counted for purposes of calculating whether a quorum is present at the annual meeting but will not be counted for purposes of determining the number of votes present in person or represented by proxy and entitled to vote with respect to
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Why did I receive a Notice of Internet Availability of Proxy Materials in the mail regarding the | Pursuant to rules adopted by the Securities and Exchange Commission, or the SEC, we are making this proxy statement available to our stockholders electronically via the
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What does it mean if I receive more than one proxy card or Notice of Internet Availability of Proxy Materials? | If you receive more than one proxy card or Notice of Internet Availability of Proxy Materials, your shares are registered in more than one name or are registered in different accounts. To make certain all of your shares are voted, please follow the instructions included on the Notice of Internet Availability of Proxy Materials on how to access each proxy card and vote each proxy card over the
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Can I vote my shares by filling out and returning the Notice of Internet Availability of Proxy Materials? | No. The Notice of Internet Availability of Proxy Materials only identifies the items to be voted on at the annual meeting. You cannot vote by marking the Notice of Internet Availability of Proxy Materials and returning it. The Notice of Internet Availability of Proxy Materials provides instructions on how to cast your vote. For additional information please see “How do I vote and what are the voting deadlines?” above.
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How is a quorum obtained, and why is a quorum required? |
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How many votes are required to | ||||||
Proposal
| Vote Required
| Votes that May be Cast
| Board of Directors’
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Proposal 1 — Election of three nominees to the Board of Directors | A nominee for director will be elected if the votes cast |
Shares voted
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Proposal 2 — Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending | Majority of the shares present in person or represented by proxy and entitled to vote on the proposal must vote FOR in order for this proposal to pass |
If you abstain from voting on this proposal, the abstention will have the same effect as an
| FOR | |||
Proposal 3 — Advisory vote to approve the compensation of the “named executive officers” as disclosed in this proxy statement | Majority of the shares present in person or represented by proxy and entitled to vote on the proposal must vote FOR in order for this proposal to pass |
If you abstain from voting on this proposal, the abstention will have the same effect as an
| FOR | |||
Proposal 4 — Advisory vote to | Majority of the shares present in person or represented by proxy and entitled to vote on the proposal must vote FOR in order for this proposal to pass |
If you abstain from voting on this proposal, the abstention will have the same effect as an
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Illumina, Inc. 20162018 Proxy Statement • 8
How can I find the voting results of the annual meeting? | Preliminary results will be announced at the annual meeting. Final results also will be published in a current report on Form 8-K to be filed with the SEC within four business days after the annual meeting. If the official results are not available at that time, we will provide preliminary voting results in the Form 8-K and will provide the final results in an amendment to the Form 8-K as soon as they become available.
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Who is conducting this proxy solicitation? | Illumina’s Board of Directors is soliciting your vote for matters being submitted for stockholder approval at the annual meeting. Solicitation may be made by our directors, officers, and other Illumina employees telephonically, electronically, or by other means of communication. Directors, officers, and employees who help us in the solicitation will not be separately compensated for those services, but they may be reimbursed by Illumina for their out-of-pocket expenses incurred in connection with the solicitation. Brokerage houses, nominees, fiduciaries, and other custodians will be requested to forward soliciting materials to beneficial owners and will be reimbursed by Illumina for their reasonable out-of-pocket expenses incurred in sending proxy materials to beneficial owners.
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Illumina, Inc. 20162018 Proxy Statement • 9
Proposal 1: Election of Directors
General
Our certificate of incorporation and bylaws provide for a classified Board of Directors consisting of three classes of directors with staggered three-year terms. The Board of Directors currently consists of the following nine10 directors, having terms expiring at the respective annual meetings of stockholders noted below:
A. Blaine Bowman* Jay T. Flatley John W. Thompson Gary S. Guthart, Ph.D. | ||||
Frances Arnold, Ph.D. Francis A. deSouza
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Robert S. Epstein, M.D.
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Election of Three Directors to Hold Office for Three Years until the 20192021 Annual Meeting of Stockholders
Upon the recommendation of the Nominating/Corporate Governance Committee of the Board, the Board of Directors has nominated for election at the annual meeting the following slate of three nominees to hold office for three years until the annual meeting of stockholders in the year 20192021 and until their successors are duly elected and qualified:
Name | Age | Director Since | Principal Occupation | |||
Frances Arnold, Ph.D. | 59 | 2016 | Dick and Barbara Dickinson Professor of Chemical Engineering, Bioengineering and Biochemistry at the California Institute of Technology and Director of the Donna and Benjamin M. Rosen Bioengineering Center | |||
Francis A. deSouza | 45 | 2014 | President | |||
Karin Eastham, CPA | 66 | 2004 | Former Executive Vice President and Chief Operating Officer, and member of the Board of Trustees, of Burnham Institute for Medical Research |
Name | Age | Director Since | Principal Occupation | |||
Jay T. Flatley | 65 | 1999 | Executive Chairman and Former CEO of Illumina, Inc. | |||
John W. Thompson | 61 | 2017 | Former CEO of Symantec Corp.; Former CEO of Virtual Instruments; Chairman of Microsoft Corporation | |||
Gary S. Guthart, Ph.D. | 56 | 2017 | President and CEO of Intuitive Surgical, Inc. |
Mr. Thompson and Dr. Arnold wasGuthart were appointed to the Board of Directors in January 2016May 2017 and December 2017, respectively, to fill a newly created position.positions. In accordance with our Corporate Governance Guidelines, any new director appointed to fill a newly created position on the Board of Directors will stand for election at the first annual meeting of stockholders following such appointment. In accordance with our certificate of incorporation and bylaws, each director is to be elected for a term expiring at the third succeeding annual meeting of
Illumina, Inc. 2016 Proxy Statement • 10
stockholders after such election.election or until his or her successor is elected. Accordingly, any new director appointed to fill a newly created position on the Board of Directors is assigned to the class of directors that will stand for election at the first annual meeting of stockholders following such appointment.
Illumina, Inc. 2018 Proxy Statement • 10
Additional Information
For more information about each nominee and each of the other directors serving on our Board of Directors, please see “Information about Directors” in this proxy statement. Each of the director nominees is currently serving as a director. These nominees have agreed to serve if elected, and management has no reason to believe that such nominees will be unable to serve. In the event any of these nominees is unable or declines to serve as a director at the time of the annual meeting, the proxies will be voted for any nominees who may be designated by the present Board of Directors to fill the vacancy. The persons designated as proxies on the form of proxy card attached to this proxy statement intend to vote such proxy “FORFOR” the election of each of the three nominees named above, unless the stockholder validly indicates otherwise on the proxy.
Vote Required for Approval
Our bylaws require that a director nominee will be elected only if he or she receives a majority of the votes cast with respect to his or her election in an uncontested election (that is, the number of shares voted “FOR” that nominee exceeds the number of votes cast “AGAINST” that nominee). Each of our director nominees currently serves on the Board of Directors. If a nominee who currently serves as a director is not re-elected, Delaware law provides that the director would continue to serve on the Board as a “holdover director.” Under our Corporate Governance Guidelines, each director submits an advance, contingent, irrevocable resignation that the Board may accept if stockholders do not re-elect that director. In that situation, our Nominating/Corporate Governance Committee would make a recommendation to the Board about whether to accept or reject the resignation, or whether to take other action.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE
DIRECTOR NOMINEES SET FORTH ABOVE
Illumina, Inc. 20162018 Proxy Statement • 11
Proposal 2: Ratification of the Appointment of Independent Registered Public Accounting Firm
The Audit Committee has selectedof the Board is directly responsible for the appointment, compensation (including advance approval of the audit fee), retention, and oversight of the independent registered public accounting firm that audits our financial statements and our internal control over financial reporting. The Audit Committee annually reviews Ernst & Young’s independence and performance in deciding whether to retain Ernst & Young or engage a different independent auditor. At the annual meeting, our stockholders are being asked to ratify the appointment of Ernst & Young LLP as ourIllumina’s independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending January 1, 2017, and the Board of Directors has determined that it would be desirable to request that the stockholders ratify such appointment. Before selecting Ernst & Young LLP, the Audit Committee considered the firm’s qualifications as independent registered public accountants and concluded that, based on Ernst & Young LLP’s prior performance and its reputation for integrity and competence, it was qualified. The Audit Committee also considered whether any non-audit services performed for us by Ernst & Young LLP would impair Ernst & Young LLP’s independence and concluded that they did not. Even if the selection is ratified, the Audit Committee, in its sole discretion, may change the appointment at any time during the fiscal year if it determines that such a change would be in our best interests of our stockholders.December 30, 2018.
A representative of Ernst & Young LLP is expected to be present at the annual meeting, will have an opportunity to make a statement if he or she desires to do so, and is expected to be available to respond to appropriate questions.
Fees Paid to Ernst & Young LLP
During the fiscal years ended December 31, 2017, and January 3, 2016, and December 28, 2014,1, 2017, the aggregate fees billed or accrued by Ernst & Young LLP for professional services were as follows:
Year Ended | Year Ended | |||||||||||||||
January 3, 2016 ($) | December 28, 2014 ($) | December 31, 2017 ($) | January 1, 2017 ($) | |||||||||||||
Audit Fees | 3,901,500 | 2,505,648 | 3,383,373 | 3,345,639 | ||||||||||||
Audit-Related Fees | 6,338 | 112,895 | 7,565 | 5,194 | ||||||||||||
Tax Fees | 390,543 | 74,500 | 9,656 | 24,392 | ||||||||||||
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Total | 4,298,381 | 2,693,043 | 3,400,594 | 3,375,225 | ||||||||||||
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Audit fees consist of amounts for professional services rendered in connection with the integrated audit of our consolidated financial statements and related schedule and internal control over financial reporting, review of the interim condensed consolidated financial statements included in quarterly reports, and statutory audits required internationally. For the fiscal years ended December 31, 2017, and January 3, 2016, and December 28, 2014,1, 2017, audit-related fees were primarily incurred for accounting consultations. Tax fees for the fiscal years ended December 31, 2017, and January 3, 2016, and December 28, 2014,1, 2017, related to services rendered for the preparation of foreign tax filings. For the fiscal years ended December 31, 2017, and January 3, 2016, and December 28, 2014,1, 2017, Ernst & Young LLP did not perform any professional services other than as stated under the captions Audit Fees, Audit-Related Fees, and Tax Fees.
Pre-Approval Policies and Procedures
The Audit Committee, as required by the Securities Exchange Act of 1934 (the “Exchange Act”), requires advance approval of all audit services and permitted non-audit services to be provided by our
Illumina, Inc. 2016 Proxy Statement • 12
independent registered public accounting firm. The Audit Committee must approve the permitted service before the independent registered public accounting firm is engaged to perform it. The
Illumina, Inc. 2018 Proxy Statement • 12
services listed as Audit Fees, Audit-Related Fees, and Tax Fees in the table above were pre-approved by our Audit Committee in accordance with this policy.
Vote Required for Approval
StockholderAlthough ratification is not required to appoint Ernst & Young LLP asby our independent registered public accounting firm forbylaws or otherwise, the fiscal year ending January 1, 2017, because the Audit Committee has responsibility for the appointment of our independent registered public accounting firm. Nevertheless, our Board of Directors is submitting this proposal as a matter to stockholders in conformance withof good corporate governance practices. No determination has been made as to what action the Board of Directors or the Audit Committee would take ifIf stockholders do not approveratify the appointment of Ernst & Young LLP.LLP, the Audit Committee and the Board of Directors would consider such a negative vote in their consideration of what, if any, action to take. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent audit firm at any time during the fiscal year if it is determined that such a change would be in the best interests of the CompanyIllumina and its stockholders. Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm requires the affirmative “FOR” vote of a majority of the shares present in person or represented by proxy and entitled to vote on the proposal.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Illumina, Inc. 20162018 Proxy Statement • 13
Proposal 3: Advisory Vote to Approve the Compensation of our Named Executive Officers
As required by Section 14A of the Exchange Act, we are seeking an advisory vote to approve the compensation of the named executive officers as disclosed in the section of this proxy statement titled “Executive Compensation.” Following the 2011 annual meeting of stockholders, and consistent with results of the advisory vote on executive compensation taken by our stockholders at that meeting, the Board of Directors adopted a policy to submit this advisory vote to the stockholders on an annual basis. Accordingly, stockholders are being asked to vote on the following advisory resolution:
RESOLVED, that the compensation paid to Illumina’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion, is hereby APPROVED.
We urge stockholders to read the “Compensation Discussion and Analysis” beginning on page 3944 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our HR and talentbusiness objectives, as well as the Summary Compensation Table and other related compensation tables and narrative, appearing on pages 5864 through 61,67, which provide detailed information on the compensation of our named executive officers. The Board of Directors and the Compensation Committee of the Board believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our named executive officers reported in this proxy statement has contributed to our recent and long-term success.
Vote Required for Approval
The vote is advisory resolution set forth above, commonly referred to as a “say-on-pay” resolution, isand not binding on Illumina, the Board of Directors.Directors, or the Compensation Committee. Although not binding, the Board of Directors and the Compensation Committee will review and consider the voting results when making future decisions regarding executive compensation. Approval of the advisory resolution set forth above requires the affirmative “FOR” vote of a majority of the shares present in person or represented by proxy and entitled to vote on the proposal.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE FOREGOING RESOLUTION TO APPROVE, ON AN ADVISORY BASIS, THE COMPENSATION OF ILLUMINA’S NAMED EXECUTIVE OFFICERS
Illumina, Inc. 20162018 Proxy Statement • 14
Proposal 4: Advisory Vote on Stockholder Proposal to Ratify Certain Supermajority Voting Provisions in our Certificate of Incorporation and BylawsElect Each Director Annually
IntroductionIn accordance with SEC rules, we have set forth below a stockholder proposal, along with the supporting statement of the stockholder proponent, for which we and our Board accept no responsibility. As explained below, our Board unanimously recommends that you vote “AGAINST” the stockholder proposal.
James McRitchie, 9295 Yorkship Court, Elk Grove, CA 95758, a beneficial owner of the Company’s common stock on the date the proposal was submitted, has notified the Company of his intent to present the following proposal at the Annual Meeting.
RESOLVED: Illumina, Inc. shareholders ask that our Board take the steps necessary to reorganize the Board of Directors into one class with each director subject to election each year. This will not affect the unexpired terms of directors elected prior to the Proposal’s implementation.
Supporting Statement
Arthur Levitt, former Chairman of the Securities and Exchange Commission said, “In my view it’s best for the investor if the entire board is elected once a year. Without annual election of each director shareholders have far less control over who represents them.”
In 2010 over 70% of S&P 500 companies had annual election of directors. Now that number stands at 89%. Most (65%) mid-caps have also declassified their boards. It is time for to [sic] join the 21st century.
Shareholder resolutions on this topic won 81% support at Kite Pharma, 63% at Netflix, 83% at New Media Investment, 71% at Citizens First, and 87% at Sevcon.
According to Equilar, “A classified board creates concern among shareholders because poorly performing directors may benefit from an electoral reprieve. Moreover, a fraternal atmosphere may form from a staggered board that favors the interests of management above those of shareholders. Since directors in a declassified board are elected and evaluated each year, declassification promotes responsiveness to shareholder demands and pressures directors to perform to retain their seat. Notably, proxy advisory firms ISS and Glass Lewis both support declassified structures.”
This proposal should also be evaluated in the context of our Company’s overall corporate governance: Shareholders cannot take action by written consent and cannot call special meetings. The combined effect is to reduce board accountability to shareholders.
Please vote for: Special Shareowner Meetings [sic] – Proposal 4
Illumina Opposing Statement
The Board has considered the stockholder proposal and, for the reasons described below, believes that the proposal is not in the best interests of Directors is seeking stockholder ratification of the retention of certain provisions of the Company’s certificate of incorporationIllumina and bylaws that require a vote of 66 2/3% of the Company’s outstanding stock in order to take certain actions (the “Supermajority Provisions”). The following is a summary of the Supermajority Provisions:
The Board of Directors is submitting these provisions to the stockholders for ratification at the annual meeting.
Purpose of the Supermajority Provisions
Require Broad Stockholder Support for Key Actions
The existing requirements are sound corporate governance principles as they require that any significant changes on the topics listed above are made with broad stockholder support. With respect to the most fundamental aspects of the Company, these requirements ensure stockholders are not subject to the whims of a few largeour stockholders. By requiring the support of a supermajority in
Illumina, Inc. 20162018 Proxy Statement • 15
orderWhile the Board acknowledges that declassification proposals continue to take these actions, any changesbe popular among stockholder activists and many investors, the Board nonetheless continues to our corporate structure truly reflect the stockholders as a group.
This prudent approach to stockholder votes on significant corporate changes is common – many publicly-traded companies require supermajority votes to take crucial actions.
Protect Minority Stockholders
Simple majority votes allow relatively few, large stockholders to dominate more numerous but smaller stockholders. Those large stockholders could act either unwisely or in outright self-interest if they go unchecked by higher vote requirements. Supermajority requirements demand consensus across many stockholders and protect small stockholders from being overwhelmed by large stockholders.
Furthermore, our bylaws require onlystrongly believe that the holders of a majority of stock be present at a meeting in order to transact the businessdeclassification of the Company — without these provisions, a simple majority ofthat majority (i.e., 25.1% of all outstanding shares) could impose radical changes on our corporate structure and functionality.
The Board of Directors has a fiduciary duty to pursueIllumina board would not be in the best interestsinterest of all stockholders. By reserving certain fundamental functions for supermajority votes, these provisions insulate us from self-interested or misguided votes by a minority of stockholders holding a majority of shares present.
Promote Long-Term Corporate Management
Robust vote requirements enable stockholders, the Board of Directors, and third parties to make long-term plans and investments in the Company. Although changes to these provisions may be appropriate over time, by requiring a supermajority to make changes we ensure that such changes will not be sudden, nor will they be quickly reversed. Although this permanence is not necessary for all aspects of our structure and governance, it is beneficial and appropriate for these elements.
Limited Scope
The Board of Directors recognizes that a simple majority vote is appropriate for many stockholder actions. We do not require more than a simple majority unless it is appropriate and necessary to protect the interests of small stockholders. By requiring a supermajority vote only in these limited circumstances, we can empower stockholders to take many actions by a simple majority while ensuring that changes to certain sensitive provisions occur if and only if there is a broad consensus among stockholders that such changes are beneficial. The existing provisions allow stockholders the power to make changes to our governing documents without concentrating that power in the hands of only the largestIllumina stockholders.
The Board believes that it greatly benefits from its classified board, which encourages directors to focus on the long-term best interest of Directors regularly considersIllumina and its stockholders by strengthening their independence against the often short-term focus of certain investors and special interests. Since Illumina’s initial public offering in 2000, stockholder interests have been well served by the Board’s long-term perspective, as our multi-year strategic plans and research and development programs have required significant investments of human and financial capital over extended periods of time.
The Board also believes that a classified board reduces vulnerability to hostile and potentially abusive takeover tactics by encouraging persons seeking control of Illumina to negotiate with the Board and thereby better positions the Board to negotiate effectively on behalf of all stockholders. These benefits are particularly important for our stockholders as Illumina operates in a highly competitive and extremely dynamic marketplace. Illumina successfully resisted a hostile takeover proposal in 2012 after our Board determined that the potential acquirer’s offer was inadequate. If, in the future, we are again the subject of a hostile takeover attempt, our Board believes that our classified board structure will enable the Board to negotiate with maximum leverage on behalf of our stockholders.
Moreover, recent research suggests that declassification is not in stockholders’ best interest. For example, the findings of a 2016 study by Ge, Tanlu and Zhang, “...suggest that destaggering does not result in improved firm value, as argued by the Harvard Law School Shareholder Rights Project; on the contrary, our evidence is more consistent with the view that destaggering eventually leads to reduced firm performance.” (Ge, Tanlu and Zhang, 2016 at 832). Other studies have found that staggered boards increase shareholder value. A 2013 study using data from a comprehensive set of companies from 1978-2011 concluded that “firm value goes up if the board changes from a single class of directors to a staggered board (and the reverse for de-staggering)” (Cremers, Litov and Sete, December 2013, at 4). This finding is “robust and both economically and statistically significant.” Id. at 4. “These results challenge the common understanding that staggered boards are primarily a mechanism to help entrench management from the discipline of stockholders or the market of [sic] corporate governance developmentscontrol. In addition, [these results] question the guidelines of the shareholder voting (proxy) advisors that generally recommend to vote against the adoption of a staggered board and, best practices,likewise, in favor of the removal of a staggered board.” Id. at 37 (citing ISS and discusses whether changesGlass Lewis guidelines). A similar 2016 study by Cremers and Sete found that, “[a]dopting a staggered board (‘staggering up’) is associated with a statistically and economically significant increase in firm value, while decisions to destagger a board (‘staggering down’) are appropriate.associated with a corresponding reduction in firm value.” (Cremers and Sete, 2016, at 72).
Another study (Johnson, Karpoff, and Yi, 2014) examined companies that went public from 1997-2005, a sample that includes Netflix. It found that “at IPO firms whose values depend heavily on their relationships with customers, suppliers, and strategic partners, takeover defenses appear to increase value…” (id. at 41) “These takeover defenses include the use of classified boards (at 17, 46-47, Internet Appendix). The management stability induced by these defenses appears to “encourage[ ] … counterparties — including large customers, dependent suppliers, and strategic partners — to make long-term relationship-specific investments.” Id. at 5.
Illumina, Inc. 20162018 Proxy Statement • 16
Thus, recent research supports the position of the Board in opposition to the proposal and calls into question the efficacy of declassifying boards as a matter of good corporate governance.
Vote Required for Approval
The vote is advisory and not binding on Illumina or the Board of Directors. Although not binding, the Board of Directors will review and consider the voting results when making future decisions regarding the classification of the Board. Approval of the advisory resolution set forth above requires the affirmative “FOR” vote of a majority of the shares present in person or represented by proxy and entitled to vote on the proposal. Although not binding, the Board of Directors will review and consider the voting results when making future decisions regarding our corporate governance practices, including with respect to our certificate of incorporation and bylaws.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION“AGAINST” APPROVAL OF THE SUPERMAJORITY VOTING PROVISIONS IN OUR CERTIFICATE OF INCORPORATION AND BYLAWSSTOCKHOLDER PROPOSAL TO ELECT DIRECTORS ANNUALLY
Illumina, Inc. 20162018 Proxy Statement • 17
The following table sets forth the names, ages, committee assignments, and positions of our directors as of April 8, 2016.6, 2018. Our directors’ respective backgrounds and a discussion of the specific experience, qualifications, attributes, or skills of our directors that led the Board of Directors to conclude that each such person should serve as a director are described following the table.
Name | Age | Position with the Company | Audit Committee | Compensation Committee | Nominating/ Corporate | Age | Position with the Company | Audit Committee | Compensation Committee | Nominating/ Corporate | Other Public Company Boards | |||||||||||
Jay T. Flatley | 63 | Chairman and CEO | 65 | Executive Chairman | 3 | |||||||||||||||||
A. Blaine Bowman | 69 | Lead Independent Director | 71 | Lead Independent Director |
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| 0 | |||||||||||||||
Francis A. deSouza | 45 | President | 47 | President & CEO | 1 | |||||||||||||||||
Frances Arnold, Ph.D. | 59 | Director | 61 | Director |
| 0 | ||||||||||||||||
Daniel M. Bradbury | 54 | Director | ||||||||||||||||||||
Caroline D. Dorsa(2) | 58 | Director |
| 3 | ||||||||||||||||||
Karin Eastham, CPA | 66 | Director | 68 | Director |
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| 2 | |||||||||||||||
Robert S. Epstein, M.D. | 60 | Director | 62 | Director |
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| 2 | |||||||||||||||
David R. Walt, Ph.D.(2) | 63 | Director | ||||||||||||||||||||
Roy A. Whitfield | 62 | Director | ||||||||||||||||||||
Number of Meetings in 2015 | 11 | 7 | 4 | |||||||||||||||||||
Gary S. Guthart, Ph.D.(3) | 52 | Director | 1 | |||||||||||||||||||
Philip W. Schiller | 57 | Director |
| 0 | ||||||||||||||||||
John W. Thompson(4) | 68 | Director |
| 1 | ||||||||||||||||||
Number of Meetings in 2017 | 6 | 5 | 5 |
Chair Member Audit Committee Financial Expert (for purposes of Section 407 of Sarbanes-Oxley Act)
(1) | Mr. |
(2) | Ms. Dorsa will become the chair of the Audit Committee, effective immediately before this year’s annual meeting. |
(3) | Dr. |
(4) | Mr. Thompson will become the lead independent director of the Board of Directors, |
Illumina, Inc. 2018 Proxy Statement • 18
The following figures reflect the current independence status and tenure of our Board:
Jay T. Flatley
Director since: 1999
Executive Chairman since: 2016
| Mr. Flatley has served as our |
Illumina, Inc. 2016 Proxy Statement • 18
Other Public Company Board Service: Coherent, Inc. Past Public Company Board Service (since 2013): None
In selecting Mr. Flatley as a
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Illumina, Inc. 2016 Proxy Statement • 19
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Illumina, Inc. 2016 Proxy Statement • 20
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Francis A. deSouza
Director since: 2014
| Mr. deSouza has served as President and Chief Executive Officer since |
Illumina, Inc. 2018 Proxy Statement • 19
Senior Vice President, Enterprise Security Group, from 2009 to 2011. Prior to joining Symantec, from 2001 to 2006, he was Founder and CEO of IMlogic, Inc., an enterprise instant messaging software company that was acquired by Symantec in 2006, and Mr. deSouza served as Product Unit Manager, Real-time Collaboration Group, at Microsoft Corporation from 1998 to 2001. Prior to joining Microsoft, from 1997 to 1998, Mr. deSouza was co-founder and CEO of Flash Communications, an enterprise instant messaging company that was acquired by Microsoft in 1998. Mr. deSouza received a B.S. in electrical engineering and computer science with a minor in economics and a M.S. from Massachusetts Institute of Technology.
Other Public Company Board Service: The Walt Disney Company (since February 2018) Past Public Company Board Service (since 2013):Citrix Systems, Inc. (2014 to |
Illumina, Inc. 2016 Proxy Statement • 21
In selecting Mr. deSouza as a past nominee for election to the Board of Directors, the Board considered, among other things, Mr. deSouza’s extensive experience with entrepreneurial companies experiencing rapid growth and maturation. The Board of Directors believes thatMr. deSouza’s experience directly managing a growing portfolio of products and services contributes to the Board’s understanding of the risks and opportunities faced by a rapidly growing global business, such as Illumina, as it develops and introduces an increasing number of products and services.
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Frances Arnold, Ph.D. Director since: 2016 Independent | Dr. Arnold has been a director since 2016. Dr. Arnold manages a research group at the California Institute of Technology and is the Linus Pauling Professor of Chemical Engineering, Bioengineering and Biochemistry at the California Institute of Technology and Director of the Donna and Benjamin M. Rosen Bioengineering Center. She joined the California Institute of Technology in 1986 and has served as a Visiting Associate, Assistant Professor, Professor, and Director. Dr. Arnold’s laboratory focuses on protein engineering by directed evolution, with applications in alternative energy, chemicals, and medicine. She is the recipient of numerous honors, including the Millennium Technology Prize, induction into the National Inventors Hall of Fame, Fellow of the National Academy of Inventors, the ENI Prize in Renewable and Nonconventional Energy, the U.S. National Medal of Technology and Innovation, and the Charles Stark Draper Prize of the U.S. National Academy of Engineering. Dr. Arnold is an elected member of all three U.S. National Academies of Science, Medicine, and Engineering, as well as the American Academy of Arts and Sciences. Dr. Arnold serves as a director of Provivi, Inc., a privately-held agriculture pest management company. Dr. Arnold received a B.S. in mechanical and aerospace engineering from Princeton University and a Ph.D. in chemical engineering from the University of California, Berkeley. Other Public Company Board Service: None Past Public Company Board Service (since 2013): None |
Illumina, Inc. 2018 Proxy Statement • 20
In selecting Dr. Arnold as a past nominee for election to the Board of Directors, the Board considered, among other things, Dr. Arnold’s scientific and technical expertise in biological engineering. Our continued growth is dependent on scientific and technical advances, and the Board believes that Dr. Arnold offers both strategic and technical insight into the risks and opportunities associated with our business. In addition, Dr. Arnold’s academic and research experience provides the Board of Directors with valuable insight into the needs of our customers, many of which are scientific research institutions, and the opportunities associated with serving the research market. |
Caroline D. Dorsa Director since: 2017 Independent | Ms. Dorsa has been a director since January 2017. Ms. Dorsa served as Executive Vice President and Chief Financial Officer of Public Service Enterprise Group Incorporated, a NYSE-listed diversified energy company, from April 2009 until her retirement in October 2015, and served on its Board of Directors from 2003 to April 2009. From February 2008 to April 2009, she served as Senior Vice President, Global Human Health, Strategy and Integration at Merck & Co., Inc., a NYSE-listed pharmaceutical company. From November 2007 to January 2008, Ms. Dorsa served as Senior Vice President and Chief Financial Officer of Gilead Sciences, Inc., a NASDAQ-listed life sciences company. From February 2007 to November 2007, she served as Senior Vice President and Chief Financial Officer of Avaya, Inc., a NYSE-listed telecommunications company. From 1987 to January 2007, Ms. Dorsa held various financial and operational positions at Merck & Co., Inc., including Vice President and Treasurer, Executive Director of U.S. Customer Marketing, and Executive Director of U.S. Pricing and Strategic Planning. Ms. Dorsa received her M.B.A. from Columbia University and a B.A. from Colgate University. Other Public Company Board Service: Biogen, Inc. (since 2010); Intellia Therapeutics (since 2015); Goldman Sachs ETF Trust, the Goldman Sachs MLP and Energy Renaissance Fund and the Goldman Sachs MLP Income Opportunities Fund, investment funds within the Goldman Sachs fund complex (since 2016) Past Public Company Board Service (since 2013): None In selecting Ms. Dorsa as a past nominee for election to the Board of Directors, the Board considered, among other things, Ms. Dorsa’s significant financial and accounting expertise and deep knowledge of clinical markets. As our technology and products are increasingly utilized in clinical settings, Ms. Dorsa’s experience will contribute to the Board’s understanding of these markets and the risks and opportunities associated with operating in markets regulated by the U.S. Food and Drug Administration. |
Karin Eastham, CPA
Director since: 2004
Independent | Ms. Eastham has been a director since July 2004. Ms. Eastham serves on the boards of directors of several life science companies. From 2004 to 2008, she served as Executive Vice President and Chief Operating Officer, and as a member of the Board of Trustees, of Burnham Institute for Medical Research, a non-profit corporation engaged in basic biomedical research. From 1999 to 2004, Ms. Eastham served as |
Illumina, Inc. 2018 Proxy Statement • 21
Senior Vice President, Finance, Chief Financial Officer and Secretary of Diversa Corporation, a NASDAQ-listed biotechnology company. She previously held similar positions with CombiChem, Inc., a computational chemistry company, and Cytel Corporation, a biopharmaceutical company. Ms. Eastham also held several positions, including Vice President, Finance, at Boehringer Mannheim Corporation, a biopharmaceutical company, from 1976 to 1988. Ms. Eastham received a B.S. and an M.B.A. from Indiana University and is a Certified Public Accountant.
Other Public Company Board Service: Geron Corporation
Past Public Company Board Service (since
In selecting Ms. Eastham as a past nominee for election to the Board of Directors, the Board considered, among other things, Ms. Eastham’s understanding of biomedical research institutions combined with her business leadership and finance experience. Our customers include biomedical research institutions, and the Board of Directors believes that Ms. Eastham provides the Board with greater insight into the needs of such institutions. Ms. Eastham also contributes to the Board’s understanding of governance and strategy for life sciences companies through her experience as a director in our industry. Additionally, Ms. Eastham’s extensive senior management experience in the biopharmaceutical industry, particularly in key corporate finance and accounting positions, also provide the appropriate skills to serve on our Board of Directors.
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Robert S. Epstein, M.D.
Director since: 2012
Independent | Dr. Epstein has been a |
Illumina, Inc. 2016 Proxy Statement • 22
device, and diagnostics industries. Prior to this role, Dr. Epstein was Medco’s Chief Medical Officer for 13 years, where he led formulary development, clinical guideline development, drug information services, personalized medicine program development, and client analytics and reporting. Dr. Epstein is also the former President of the International Society of Pharmacoeconomics and Outcomes Research (ISPOR), and has served on the boards of directors of the Drug Information Association (DIA) and the International Society of Quality of Life. In addition to the public company directorships noted below, Dr. Epstein serves as a director of the following privately-held companies: Intellos LLC, a diagnostics company; |
Illumina, Inc. 2018 Proxy Statement • 22
Association). Dr. Epstein received his M.D. and B.S. in biomedical science from the University of Michigan and an M.S. in preventative medicine from the University of Maryland.
Other Public Company Board Service: Fate Therapeutics, Inc.
Past Public Company Board Service (since
In selecting Dr. Epstein as a past nominee for election to the Board of Directors, the Board considered, among other things, Dr. Epstein’s in-depth experience and practical knowledge of how molecular diagnostic tests are reimbursed and the issues raised by payors and other evidentiary authorities. As our technology and products are increasingly utilized in
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Director since: 2017 Independent | Dr. Guthart has been a director since December 2017. Dr. Guthart serves as President and CEO of Intuitive Surgical, Inc., a NASDAQ-listed developer, manufacturer, and marketer of robotic-assisted, minimally invasive surgical systems. Dr. Guthart joined Intuitive Surgical in 1996, became President in 2007, and was appointed CEO in 2010. Prior to joining Intuitive Surgical, Dr. Guthart was part of the core team developing foundation technology for computer-enhanced surgery at SRI International (formerly Stanford Research Institute). He received a B.S. in engineering from the University of California, Berkeley and an M.S. and a Ph.D. in engineering science from the California Institute of Technology. Other Public Company Board Service: Intuitive Surgical, Inc. (since 2009) Past Public Company Board Service (since 2013): Affymetrix, Inc. (2009 to 2016) In selecting Dr. Guthart as a nominee for election to the Board of Directors, the Board considered, among other things, his deep business, operating, financial, and scientific experience as an executive and CEO of a public life sciences company. The Board of Directors believes that Dr. Guthart’s leadership experience as the CEO of a public life sciences and technology company in complex, high growth markets will provide valuable perspective to the Board and the company’s strategic planning and business development efforts. |
Philip W. Schiller Director since: 2016
Independent | Mr. |
Illumina, Inc. 20162018 Proxy Statement • 23
Other Public Company Board Service: Past Public Company Board Service (since 2013): None
In selecting Mr.
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John W. Thompson Director since: 2017 Independent | Mr. Thompson was Chief Executive Officer of Virtual Instruments, a privately-held company that provides infrastructure performance analytics for virtualized and private cloud computing environments from 2010 until it merged with Load DynamiX in March 2016. Since 2009, Mr. Thompson has been an active investor in early-stage technology companies in Silicon Valley. Mr. Thompson served as Chairman and Chief Executive Officer of Symantec Corp. beginning in 1999, helping transform Symantec into a leader in security, storage, and systems management solutions. Mr. Thompson stepped down as Chief Executive Officer of Symantec in 2009, and left Symantec’s board of directors in 2011. Previously, Mr. Thompson held leadership positions in sales, marketing, and software development at IBM, including general manager of IBM Americas. He was a member of IBM’s Worldwide Management Council. Mr Thompson received a B.S. in business administration from Florida A&M University and an M.B.A. from MIT Sloan School of Management. Other Public Company Board Service: Microsoft Corporation (since 2012) Past Public Company Board Service (since 2013): United Parcel Service (2000 to 2013) In selecting Mr. Thompson as a nominee for election to the Board of Directors, the Board considered, among other things, Mr. Thompson extensive technology leadership experience, including as a CEO at Symantec and Virtual Instruments and Chairman of the Board at Microsoft. The Board believes his depth and breadth of knowledge in technology, other private sector industries, and the public sector greatly contribute to the Board’s strategic leadership of the Company. |
Illumina, Inc. 20162018 Proxy Statement • 24
Board of Directors and Corporate Governance
Our business is managed under the direction of the Board of Directors. Our certificate of incorporation and bylaws provide for a classified Board of Directors consisting of three classes of directors with staggered three-year terms. The Board has determined that a majority of the members of the Board, specifically Dr. Arnold, Mr. Bradbury, Mr. Bowman, Ms. Dorsa, Ms. Eastham, Dr. Epstein, Dr. Walt,Guthart, Mr. Schiller, and Mr. Whitfield,Thompson, are independent directors under the rules of The NASDAQ Global Select Market.NASDAQ.
The Board of Directors intends to hold executive sessions of the non-managementnon-employee directors following each regularly scheduled in-person meeting of the Board of Directors. Executive sessions do not include any employee directors of the Company. At its meetings during the fiscal year ended January 3, 2016December 31, 2017 (“fiscal 2015”2017”), the Board of Directors regularly met in executive sessions of non-employee directors.
The Board of Directors has adopted Corporate Governance Guidelines, outlining its duties.which outline the Company’s significant corporate governance policies and procedures. These guidelines can be viewed on our website atwww.illumina.cominvestor.illumina.com under “Corporate Governance.” The Board of Directors meets regularly to review significant developments affecting the Companycompany and to act on matters requiring the Board of Directors’ approval. The Board of Directors held eight formalsix meetings during fiscal 2015.2017. Board members are requested to make attendance at Board and Board committee meetings a priority, to come to meetings prepared, having read any materials provided to the Board of Directors prior to the meeting, and to participate actively in the meetings.
Attendance at MeetingsatMeetings
During fiscal 2015,2017, each director attended, in person or by telephone, at least 75% of the total number of meetings of both the Board of Directors and Board committees on which such director served during the period. Board members are invited to attend our annual meetings of stockholders. We reimburse the travel expenses of any director who travels to attend the annual meetings. TwoWe do not have a policy under which all directors are expected to attend the annual meeting of stockholders. Five members of the Board of Directors attended our 20152017 annual meeting of stockholders.
The Board of Directors and our management believe that good corporate governance is an important component in enhancing investor confidence in the Companycompany and increasing stockholder value. The imperative to continue to develop and implement best practices throughout our corporate governance structure is fundamental to our strategy to enhance performance by creating an environment that increases operational efficiency and ensures long-term productivity and growth. Sound corporate governance practices also ensure alignment with stockholder interests by promoting fairness, transparency, and accountability in business activities among employees, management, and the Board of Directors.
Illumina, Inc. 20162018 Proxy Statement • 25
We maintain a corporate governance page on our website that includes key information about our corporate governance initiatives, including our Corporate Governance Guidelines, Code of Ethics,Conduct, and charters for each of the committees of the Board of Directors, including the Audit Committee, the Compensation Committee, and the Nominating/Corporate Governance Committee. The corporate governance page can be found on our website atwww.illumina.cominvestor.illumina.com under “Corporate Governance.”
Currently, our Board leadership structure consists of a Lead Independent Director, aan Executive Chairman, (who is also our CEO), and strong committee chairs. Our CEO also serves as a member of the Board. This structure allows one personour Executive Chairman, who served as our CEO from 1999 until 2016, to speaklead our Board and continue to be a critical resource for and lead both the Company and the Board,our executive management team, while also providing for effective independent board oversight through a Lead Independent Director. We believe that, in a time of business and leadership growth and transition, Illumina is very well served by having our Board led by an Executive Chairman who is intimately familiar with our business, culture, and opportunities, and who liaises regularly with our CEO, acting as a critical link between management and our independent lead director. At a Company growing as rapidly as Illumina and serving increasingly diverse markets, we believe the CEOdirectors. Our Executive Chairman is in the best positionable to focus the independent directors’ attention on the issues of greatest importance to the Companycompany and our stockholders. We also believe that our structure provides independent Board leadership and engagement while providing the benefit of having our CEO, the individual with primary responsibility for managing the Company’s day-to-day operations, chair regular Board meetings as key business and strategic issues are discussed.
In January 2016,Absent special circumstances agreed to by a majority of the Board of Directors adopted a 10-year term limit for(excluding the affected member(s)), no non-employee directorsBoard member joining the Board after December 31, 2015.2015, may serve for more than a total of 10 years, and no non-employee Board member serving as of December 31, 2015, may stand for reelection after serving for more than a total of 10 years as a non-employee director.
Board’s Role in Risk Oversight
Risk Oversight Generally
The Board of Directors is responsible for overseeing our risk management. To assist its oversight function, the Board has delegated many risk oversight functions to the Audit Committee. Under its charter, the Audit Committee is responsible for providing advice to the Board with respect to our risk evaluation and mitigation processes, including, in particular, the processes utilized by management for identifying, evaluating, and mitigating strategic, financial, operational, security, regulatory, and external risks inherent in our business. The Audit Committee also oversees our internal audit function. In addition to the Audit Committee’s work in overseeing risk management, our full Board regularly engages in discussions of the most significant risks that we face and how these risks are being managed, and the Board receives reports on risk management from our senior officers and outside consultants engaged to provide an enterprise-level review of the risks facing the Company.company.
Each of the Board’s committees oversees the management of company risks that fall within that committee’s areas of responsibility. In performing this function, each committee has full access to management and may engage advisors. For example, the Nominating/Corporate Governance
Illumina, Inc. 2018 Proxy Statement • 26
Committee is responsible for overseeing governance risks facing the company, while the Compensation Committee oversees the company’s executive compensation program and considers the impact of the program and of the incentives created by the compensation awards on the company’s risk profile.
Members of the Board also are invited to participate in the Company’s management-led information security working group, which is charged with the protection of intellectual property; confidential and sensitive business data from hostile or malicious attack; the protection of sensitive personal data from unauthorized access; product security; and enterprise technology risk review.
Our senior executives provide the Board of Directors and its committees with regular updates about ourCompany strategies and objectives and theassociated risks inherent within them at Board and committee meetings and in regular reports. Board and committee meetings also provide a venue for directors to discuss issues of concern with management. The Board of Directors and committees call special meetings when necessary to address specific issues or matters that should be addressed before the next regularly scheduled meeting. In addition, our directors have access to our management at all levels to discuss any matters of interest, including those related to risk. Those members of management most knowledgeable about the applicable issues attend Board meetings to provide additional insight into
Illumina, Inc. 2016 Proxy Statement • 26
items being discussed, including exposures and mitigation strategies with respect to various risks. The Board of Directors believes that the work undertaken by the Audit Committee, together with the work of the full Board and the CEO, enables the Board to effectively oversee our risk management function.
Compensation Programs
The Compensation Committee, together with senior management and external compensation consultants, reviews compensation programs and benefits plans affecting employees generally (in addition to those applicable to our executive officers), and we have concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.company. We also believe that our incentive compensation arrangements provide incentives that do not encourage risk-taking beyond our ability to effectively identify and manage significant risks; are compatible with effective internal controls and our risk management practices; and are supported by the oversight and administration of the Compensation Committee with regard to executive compensation programs.
Committees of the Board of Directors
The Board of Directors has three standing committees to facilitate and assist the Board in the execution of its responsibilities. These committees are currently the Audit Committee, the Compensation Committee, and the Nominating/Corporate Governance Committee. All of the committees are composed solely of non-employee, independent directors. Charters for each committee are available on our website atwww.illumina.com under “Committee Composition.”
Illumina, Inc. 2018 Proxy Statement • 27
Audit Committee
The Audit Committee represents and assists the Board by providing oversight of the Company’s accounting and financial reporting processes and audits of its financial statements on behalf of the Board of Directors and provides advice with respect to the Company’s risk evaluation and mitigation processes. The Audit Committee’s duties and responsibilities under its charter include monitoring and advising the Board on:
Purpose | • Oversee the company’s accounting and financial reporting processes, including audits of its financial statements | ||
Responsibilities | • Ensure the integrity of the |
• | Review and confirm the independent auditor’s qualifications and |
• | Monitor the performance of the |
• | Evaluate the adequacy and effectiveness of the |
• | Oversee the |
• | Supervise the processes utilized by management for identifying, evaluating, and mitigating strategic, financial, operational, regulatory, and external risks inherent in the | company’s business |
The Board of Directors has unanimously determined that all Audit Committee members satisfy the additional independence requirements that apply to Audit Committee members under NASDAQ listing standards, are financially literate under current NASDAQ listing standards, and at least one member has financial sophistication under NASDAQ listing standards. In addition, the Board of Directors has unanimously determined that all Audit Committee members qualify as an “audit committee financial expert” under SEC rules and regulations. Designation as an “audit committee financial expert” is an SEC disclosure requirement and does not impose any additional duties, obligations, or liability on any person so designated.
Illumina, Inc. 2016 Proxy Statement • 27
Compensation Committee
The primary function of the Compensation Committee is to discharge the Board’s duties and responsibilities relating to compensation of our non-employee directors and executive officers, and oversee the design and management of our equity and other compensation plans. The Compensation Committee’s duties and responsibilities under its charter with respect to the compensation of our directors and executive officers include:
Purpose | • Discharge the Board’s duties and responsibilities relating to compensation of our non-employee directors and executive officers • Oversee the design and management of our equity and other compensation plans | ||
Responsibilities | • Report annually to our stockholders on executive compensation |
• | • Recommend to the Board the amount and | form of CEO compensation, taking into account the Board’s annual performance evaluation of the CEO • Review and approve the amount and form of compensation to be paid to our other executive officers and senior, non-executive employees |
Illumina, Inc. 2018 Proxy Statement • 28
• Oversee our compensation practices for all other |
The Compensation Committee’s primary goal under its charter is to align closely the interests of our executive officers with those of our stockholders by its efforts to:non-executive employees
• |
• |
• | company • Review and make initial (in the case of new hires) and periodic (in the case of then-current company employees) determinations with respect to who is (i) an “executive officer” of the company with reference to Rule 3b-7 of the Exchange Act and (ii) a “Section 16 officer” of the company with reference to Rule 16a-1(f) of the Exchange Act |
The Board of Directors has unanimously determined that all Compensation Committee members satisfy the additional independence requirements that apply to Compensation Committee members under NASDAQ listing standards, qualify as “non-employee directors” for the purposes of Section 16 of the Exchange Act, and qualify as “outside directors” for the purposes of Section 162(m) of the Internal Revenue Code of 1986.
The CEO may not participate in or be present during any deliberations or determinations of the Compensation Committee regarding his compensation.
The CEO has been delegated limited authority to grant stock options and restricted stock unitsequity incentive awards to any employee who has a title of or below the rank of “Vice President,” who is not designated as a “Section 16 Officer,” and who does not report directly to him. The CEO may exercise this authority without any further action required by the Compensation Committee; however, the Compensation Committee approves grant ranges based on employee job levels to guide the CEO in the exercise of his authority and sets maximum individual award values that may be granted under this authority. The purpose of this delegation of authority is to enhance the flexibility of equity administration and to facilitate the timely grant of equity awards to non-management employees, particularly new employees, within the specified limits approved by the Compensation Committee. At least annually, the Compensation
Committee reviews this authority and grant guidelines to ensure alignment with market and good governance practices. The CEO reports at least annually to the Compensation Committee on his exercise of this delegated authority. In addition, the Compensation Committee reviews our equity award usage forecast on a quarterly basis as part of its administration duties within our stockholder-approved 2015 Stock and Incentive Plan.
Illumina, Inc. 20162018 Proxy Statement • 2829
Nominating/Corporate Governance Committee
The Nominating/Corporate Governance Committee is responsible for overseeing matters of corporate governance, including the evaluation of the performance and practices of the Board of Directors. In particular, the Nominating/Corporate Governance Committee’s duties and responsibilities under its charter include:
Purpose | • Oversee matters of corporate governance, including the evaluation of the performance, composition, and practices of the Board of Directors | |
Responsibilities | • Identify individuals qualified to serve as members of the Board of the company • Select nominees for election as directors of the company • Evaluate the performance of the Board and its Committees • Develop and recommend corporate governance guidelines to the Board • Provide oversight with respect to corporate governance and ethical conduct |
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is, or ever has been, an officer or employee of the Company.company. Furthermore, during fiscal 2015,2017, none of our current executive officers served as a member of a board of directors or compensation committee (or other board committee performing equivalent functions) of another entity where an executive officer of such entity served as a member of our Board of Directors or Compensation Committee.
We have adopted a codeCode of ethicsConduct that applies to all of our directors, officers, and employees, including our principal executive officer and principal financial officer. This codeOur Code of ethicsConduct is reviewed by the Nominating/Corporate Governance Committee of our Board of Directors on an annual basis and modified as deemed necessary. Our codeCode of ethicsConduct is available for download from our website,www.illumina.com under “Corporate Governance.” A copy of the Code of EthicsConduct may also be obtained free of charge from us upon a request directed to Illumina, Inc., 5200 Illumina Way, San Diego, California 92122, Attention: Corporate Secretary. We will disclose within four business days any substantive changes in or waivers of the Code of EthicsConduct granted to our principal executive officer, principal financial officer, principal accounting officer, or controller, or persons performing similar functions, by posting such information on our website as set forth above rather than by filing a Form 8-K with the SEC.
Illumina, Inc. 2018 Proxy Statement • 30
The Board of Directors has delegated to the Nominating/Corporate Governance Committee the responsibility for reviewing and recommending to the Board nominees for Board membership. In accordance with our Corporate Governance Guidelines, the Nominating/Corporate Governance Committee, in evaluating Board candidates, considers factors such as depth and breadth of
Illumina, Inc. 2016 Proxy Statement • 29
experience, wisdom, integrity, ability to make independent analytical inquiries, understanding of our business environment, and willingness to devote adequate time to Board duties, all in the context of an assessment of the needs of the Board at the time. The Nominating/Corporate Governance Committee seeks to ensure that at least a majority of directors are independent under the rules of The NASDAQ Global Select Market,listing standards, that members of our Audit Committee meet the financial literacy and sophistication requirements under the rules of The NASDAQ Global Select Market,listing standards, and at least one of them qualifies as an “audit committee financial expert” under the rules of the SEC.
The Nominating/Corporate Governance Committee’s objective is to maintain a board comprised of individuals of the highest personal character, integrity, and ethical standards, and that reflects a range of professional backgrounds and skills relevant to our business. For each of the nominees to the Board, the biographies shown above highlight the experiences and qualifications that were viewed as being among the most important by the Nominating/Corporate Governance Committee in concluding that the nominee should serve as a director of the Company.director. The Nominating/Corporate Governance Committee considers diversity as one of many but not dispositive, factors in identifying nominees for director, including personal characteristics such as race and gender, as well as diversity in the experience and skills that contribute to the Board’s performance of its responsibilities in the oversight of a complex and highly-competitive global business. The Nominating/Corporate Governance Committee does not assign specific weights to particular criteria and no particular criterion is necessarily applicable to all prospective nominees.nominees or dispositive in any specific instance.
Process for Identifying and Evaluating Nominees
The Nominating/Corporate Governance Committee believes we are well-servedwell served by our current directors. In the ordinary course, absent special circumstances or a material change in the criteria for Board membership, the Nominating/Corporate Governance Committee will re-nominate incumbent directors who continue to be qualified for Board service and are willing to continue as directors. If an incumbent director is not standing for re-election, or if a vacancy on the Board occurs between annual stockholder meetings, the Nominating/Corporate Governance Committee will seek out potential candidates for Board appointment who meet the criteria for selection as a nominee and have the specific qualities or skills being sought. In addition, from time to time the Board may seek to expand its ranks to bring in new Board members with special skills or experience relevant and useful to us at our particular stage of development. Director candidates will be selected based on input from members of our Board of Directors, our senior management, and, if the Nominating/Corporate Governance Committee deems appropriate, a third-party search firm. The Nominating/Corporate
Illumina, Inc. 2018 Proxy Statement • 31
Governance Committee will evaluate each candidate’s qualifications and check relevant references; in addition, such candidates will be interviewed by at least members of the Nominating/Corporate Governance Committee. Candidates meriting serious consideration will meet with each member of the Board of Directors. Based on this input, the Nominating/Corporate Governance Committee will evaluate which of the prospective candidates is qualified to serve as a director and whether the committee should recommend to the Board that this candidate be appointed to fill a current vacancy on the Board or presented for the approval of the stockholders, as appropriate.
Illumina, Inc. 2016 Proxy Statement • 30
The Nominating/Corporate Governance Committee will consider written proposals from stockholders for nominees for director under the same criteria described above but, based on those criteria, may not necessarily recommend those nominees to the Board of Directors. Any such nominations should be submitted to the Nominating/Corporate Governance Committee, via the attention of our Corporate Secretary, and should include the following information:
• | all information relating to such nominee that is required to be disclosed pursuant to the Exchange Act (including such person’s written consent to a background check, to being named in the proxy statement as a nominee, and to serving as a director, if elected); |
• | the names and addresses of the stockholder(s) making the nomination and the number of shares of our common stock that are owned beneficially and of record by such stockholder(s); and |
• | appropriate biographical information and a statement as to the qualification of the nominee, including the specific experience, qualifications, attributes, or skills of the nominee, demonstrating the relevance and usefulness to our company of such experience, qualifications, attributes, or skills at our particular stage of development. |
Nominations should be submitted in the timeframe described in our bylaws and under the caption “Stockholder Proposals for our 20172019 Annual Meeting” below.
Our bylaws permit a stockholder, or a group of up to 20 stockholders, owning 3% or more of the company’s outstanding capital stock continuously for at least three years, to nominate and include in the company’s proxy materials the greater of two directors or 20% of the number of directors currently serving on the Board, provided that the stockholder(s) and the nominee(s) satisfy the requirements specified in the bylaws.
Communications with the Board of Directors
All interested parties who wish to communicate with the Board of Directors or any of the non-managementnon-employee directors may do so by sending a letter to the Corporate Secretary, Illumina, Inc., 5200 Illumina Way, San
Illumina, Inc. 2018 Proxy Statement • 32
Diego, California 92122, and should specify the intended recipient or recipients. All such communications will be forwarded to the appropriate director or directors for review, except for spam, junk mail, mass mailings, product complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate material.
In addition, you may send, in an envelope marked “Confidential,” a written communication to the Chair of the Audit Committee, via the attention of our Corporate Secretary, at Illumina, Inc., 5200 Illumina Way, San Diego, California 92122. All such envelopes will be delivered unopened to the Chair of ourthe Audit Committee.
Illumina, Inc. 2016 Proxy Statement • 31
Director and Officer Stock Ownership Policy
The Board of Directors, acting on the recommendation of the Compensation Committee, has adopted stock ownership guidelines that are applicable to each of our non-employee directors, each of our executive officers who is subject to the restrictions of Section 16 of the Exchange Act, and each of our officers having a title of “Senior Vice President” or above. Under the ownership guidelines eachEach individual subject to the guidelines is expected to own and hold shares of our common stock having an aggregate value at least equal to:
Title | Multiple | |
| ||
Chief Executive Officer | 5x base salary | |
| ||
Executive Vice President | 2x base salary | |
Senior Vice President | 1x base salary | |
Section 16 officer, if not covered above | 1x base salary |
Under the ownership guidelines, each individual subject to the guidelines is required to achieve compliance with the applicable ownership levels set forth above within three years from the date such individual director or officer first became subject to the guidelines, either as a result of a new hire or promotion.
As of the end of fiscal 2017, each individual subject to the guidelines was in compliance with applicable ownership levels. Unvested performance stock units (“PSUs”) and unvested stock options do not count towards satisfaction of the ownership guidelines.
During such time as a covered officer or director is not in compliance with his or her applicable ownership guidelines, such officer or director:
• | is required to retain an amount equal to 100% of the net shares of common stock received as a result of the vesting of restricted stock or restricted stock units (“net shares” are those shares that remain after shares are sold or netted to pay withholding taxes); and |
• | may not establish a qualified trading plan (i.e., a Rule 10b5-1 trading program) or modify an existing qualified trading plan to increase the number of shares of our common stock to be sold under such plan (under our Insider Trading Policy our directors, executive officers, and each of our officers having a title of “Senior Vice President” or above may only sell shares of our common stock pursuant to a qualified trading plan). |
Illumina, Inc. 2018 Proxy Statement • 33
Our directors play a critical role in guiding our strategic direction and overseeing the management of the Company.company. Ongoing developments in corporate governance and financial reporting have resulted in an increased demand for such highly qualified and productive public company directors. The many responsibilities and risks and the substantial time commitment of being a director of a public
Illumina, Inc. 2016 Proxy Statement • 32
company require that we provide adequate incentives for our directors’ continued performance by paying compensation commensurate with our directors’ workload. Our non-employee directors are compensated based upon their respective levels of Board participation and responsibilities, including service on Board committees. Directors who are members of our employees,management team, such as Messrs.Mr. Flatley and Mr. deSouza, receive no separate compensation for their services as directors.
Our director compensation is overseen by the Compensation Committee of our Board of Directors, which makes recommendations to the Board of Directors on the appropriate amount and structure of our programs in light of various factors, including then-current competitive practice. The
2017 Compensation Review
For fiscal 2017 compensation purposes, the Compensation Committee typically receives advice and recommendations fromretained an independent compensation consultant with respectfrom Radford, an Aon Hewitt Company, as the Compensation Committee’s advisor, in order to its determinationprovide guidance and recommendations on the Board’s non-employee director compensation matters.
We useprogram and to determine recommendations for policy changes. Radford conducted a combinationcomprehensive formal review and analysis of our non-employee director compensation and incentive programs relative to certain competitive benchmarks. This review included a benchmarking analysis of our non-employee director compensation philosophy and practices against prevailing market practices of identified peer group companies and broader industry trends. The analysis included review of the total direct compensation (inclusive of cash retainers and stock-based compensation) of our non-employee directors as compared with such market benchmarks. It involved an assessment of market trends covering available public information in addition to proprietary data provided by Radford.
For purposes of this benchmarking analysis, the Compensation Committee, in consultation with Radford, identified a list of 19 peer group companies from the Pharmaceutical, Biotech and Tools; Healthcare Equipment and Supplies; Technology Hardware and Equipment; Semiconductor and Semiconductor Equipment; and Software and Software Services sectors to capture companies in a similar sector as well as the broader technical market. The criteria used in developing this list of peer companies included revenue growth, actual revenue (0.5x to 4x Illumina), market capitalization (0.5x to 4x Illumina), research and development expenses as a percent of revenue, and total shareholder return. The Compensation Committee also considered criteria applied by corporate governance groups. In 2016, when the Compensation Committee reviewed peer benchmarking data in preparation for the adoption of a compensation peer group for fiscal 2017, Illumina was positioned at the 36th percentile for revenue and the 55th percentile for market capitalization.
Illumina, Inc. 2018 Proxy Statement • 34
There were no changes to our director compensation peer group for fiscal 2017, which consist of the following companies:
Alexion Pharmaceuticals, Inc. | Intuitive Surgical, Inc. | salesforce.com, inc. | ||
Biogen Inc. | Jazz Pharmaceuticals plc | Thermo Fisher Scientific Inc. | ||
C. R. Bard, Inc. | Juniper Networks, Inc. | Varian Medical Systems, Inc. | ||
Celgene Corporation | QIAGEN N.V. | VMware, Inc. | ||
The Cooper Companies, Inc. | Regeneron Pharmaceuticals, Inc. | Waters Corporation | ||
Edwards Lifesciences Corporation | ResMed Inc. | Workday, Inc. | ||
IDEXX Laboratories, Inc. |
Use of Benchmarking Data in Setting Compensation
The Compensation Committee reviews director compensation practices and program design at peer group companies to inform its decision-making process so that it can set total compensation levels that it believes are commensurate with the company’s scope and performance. However, the Compensation Committee believes that market data is only one factor in setting compensation. Director compensation determinations are the result of many factors, including the Compensation Committee’s business judgment, which is informed by the experiences of the members of the Compensation Committee, as well as input from, and peer group data provided by, the Compensation Committee’s independent compensation consultant. No one factor is intended to be dispositive in setting compensation.
The consultant to the Compensation Committee gathers market data from the approved peer group and examines a range of pay at the 25th, 50th, and 75th percentiles, and reviews with the Compensation Committee on an annual basis the total direct compensation and each pay element comprising total direct compensation. This provides the Compensation Committee an understanding of the distribution of compensation in the market for directors of peer group companies. The Compensation Committee has set the director total direct compensation target above the 50th percentile as a reflection of the performance and goals of the Company, and in an effort to attract and retainthe most qualified candidatesdirectors to serve on the BoardBoard.
The largest component of Directors.total direct compensation, approximately 85%, is delivered through equity-based awards. This represents a larger percentage of total direct compensation than that of our peer group and serves to retain our directors and align their interests with those of our stockholders. Our equity ownership guidelines also serve to align the compensation of our directors with an emphasis on long-term decision making and company performance.
Annual Retainer
During fiscal 2015,2017, each of our non-employee directors was eligible to receive an annual cash retainer of $55,000 and the Chairman of the Board, if not an employee of the Company,Lead Independent Director was eligible to receive an additional $50,000.$27,500. In
Illumina, Inc. 2018 Proxy Statement • 35
addition, in October 2016, the Board appointed Dr. Epstein to serve as the Board’s observer, and an advisor to, the board of directors of GRAIL, Inc., for which he would be compensated $40,000 per year. Dr. Epstein’s service as the Board’s observer of, and an advisor to, GRAIL’s board of directors ended on March 1, 2017.
Committee Fees
In addition, during fiscal 20152017 each of our non-employee directors serving on one or more Board committees was eligible to receive the applicable fees set forth below.
Fiscal 2015 Board Committee Fees ($) | Fiscal 2017 Board Committee Fees ($) | |||||||||||
Audit Committee | Compensation Committee | Nominating/Corporate Governance Committee | Audit Committee | Compensation Committee | Nominating/Corporate Governance Committee | |||||||
Chairperson | 25,000 | 25,000 | 15,000 | 25,000 | 25,000 | 15,000 | ||||||
Member | 15,000 | 15,000 | 10,000 | 15,000 | 15,000 | 10,000 |
Stock in Lieu of Cash Compensation
Non-employee directors may elect to receive shares of our common stock in lieu of all, but not less than all, cash retainers and Board committee fees otherwise payable by the Companycompany to such director in a given calendar year. Shares issued to an eligible director electing to receive cash compensation in the form of shares will not be subject to vesting or forfeiture restrictions and will be issued on a quarterly basis. The number of shares issued to an eligible director electing to receive shares in lieu of cash will equal the amount of cash compensation otherwise payable by the Companycompany to such director for the immediately preceding calendar quarter, divided by the weighted average closing price of our common stock during the immediately preceding calendar quarter (calculated by reference to each trading day during such quarter). No fractional shares will be issued, and in lieu of fractional shares, the Companycompany will pay to such electing director an amount of cash equal to any such fractional share multiplied by the weighted average closing price of our common stock during the immediately preceding calendar quarter (calculated by reference to each trading day during such quarter).
Illumina, Inc. 2016 Proxy Statement • 33
Annual Awards
In connection with our annual meeting of stockholders, each of our non-employee directors is eligible to receive a restricted stock unit (RSU) award having an award value of $400,000 (as determined based on the fair market value of the Company’scompany’s common stock on the date of grant), which award is to be made automatically on the date of such annual meeting of stockholders. If $400,000 is not wholly divisible by the fair market value of the company’s common stock on the date of grant, then each non-employee director will receive the smallest whole number of shares with a total value above $400,000 as of such date (and no fractional shares will be issued in connection with such RSU award). Such annual RSU awards will vest on the earlier of the first anniversary of the grant date or the day prior to the annual meeting of stockholders immediately following the annual meeting at which the award is granted, in both cases subject to continued service as a board member through the vesting date
Illumina, Inc. 2018 Proxy Statement • 36
Accordingly, in connection with our 20152017 annual meeting of stockholders, on May 27, 2015,30, 2017, each of our non-employee directors who were serving at the time of the 20152017 annual meeting received an award of 1,9102,305 RSUs (having an award value of $400,088$400,101.90 based on the closing price of our common stock on May 27, 2015,30, 2017, of $209.47)$173.58). The RSUs will vest on the earlier of (i) the one year anniversary of the grant date of the award and (ii) the date immediately preceding the date of the 20162018 annual meeting of stockholders.
Awards Upon First Joining the Board of Directors
During fiscal 20152017, each non-employee director, upon first joining the Board, whether through election by our stockholders or appointment by our Board to fill a vacancy, was eligible to receive a one-time RSU award having an award value of $1,070,000 (as determined based on the fair market value of the Company’s common stock on the date of grant). An employee director who ceases to be an employee but remains a director will not receive this initial RSU award. Such initial RSU award will vest over a four-year period, with 25% of the RSU vesting on each of the first four anniversaries of the grant.
In January 2016, the Board of Directors, acting on the recommendation of the Compensation Committee, determined that each non-employee director upon first joining the Board after January 28, 2016, whether through election by our stockholders or appointment by our Board to fill a vacancy, would be eligible to receive a one-time RSU award having an award value of two times the annual RSU award (currently $800,000 based on an annual award value of $400,000), as determined based on the fair market value of the Company’scompany’s common stock on the date of grant. If $800,000 is not wholly divisible by the fair market value of the company’s common stock on the date of grant, then each non-employee director will receive the smallest whole number of shares with a total value above $800,000 as of such date (and no fractional shares will be issued in connection with such RSU award). Initial RSU awards vest over a four-year period, with 25% of the RSU vesting on each of the first four anniversaries of the grant. An employee director who ceases to be an employee but remains a director will not receive this initial RSU award.
Directors who receive RSUs are given the opportunity, at the time they execute award agreements providing for the RSU grant, to elect to receive, at the time the RSU vests, a portion of the award in cash rather than in shares.
In addition to the cash and equity compensation described above, we reimburse our non-employee directors for their expenses incurred in connection with attending Board and committee meetings. We do not provide directors with additional compensation for attending Board or committee meetings.
Illumina, Inc. 20162018 Proxy Statement • 3437
Non-Employee Director Compensation
The following table summarizes the total compensation paid by the Companycompany to our non-employee directors for fiscal 2015.2017.
Name(1) | Fees Earned or Paid in Cash ($)(2) | Stock Awards ($)(3)(4) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other Compensation ($) | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(2)(3) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||
William H. Rastetter(5) | 120,000 | 400,088 | — | — | — | — | 520,088 | |||||||||||||||||||||||||||||||
Frances Arnold | 68,000 | 400,102 | — | — | — | — | 468,102 | |||||||||||||||||||||||||||||||
A. Blaine Bowman | 95,000 | 400,088 | — | — | — | — | 495,088 | 112,500 | 400,102 | — | — | — | — | 512,602 | ||||||||||||||||||||||||
Daniel M. Bradbury | 87,500 | 400,088 | — | — | — | — | 487,588 | 34,981 | — | — | — | — | — | 34,981 | ||||||||||||||||||||||||
Caroline D. Dorsa(6) | 64,885 | 1,200,111 | — | — | — | — | 1,264,996 | |||||||||||||||||||||||||||||||
Karin Eastham | 91,250 | 400,088 | — | — | — | — | 491,338 | 93,000 | 400,102 | — | — | — | — | 493,102 | ||||||||||||||||||||||||
Robert S. Epstein | 73,462 | 400,088 | — | — | — | — | 473,550 | 92,442 | 400,102 | — | — | — | — | 492,544 | ||||||||||||||||||||||||
Jeffrey T. Huber(6) | 55,000 | 400,088 | — | — | — | — | 455,088 | |||||||||||||||||||||||||||||||
Gerald Möller(7) | 31,577 | — | — | — | — | — | 31,577 | |||||||||||||||||||||||||||||||
David R. Walt | 66,250 | 400,088 | — | — | — | — | 466,338 | |||||||||||||||||||||||||||||||
Roy A. Whitfield | 85,000 | 400,088 | — | — | — | — | 485,088 | |||||||||||||||||||||||||||||||
Jay T. Flatley(7) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||
Gary S. Guthart(8) | 4,685 | 800,052 | — | — | — | — | 804,737 | |||||||||||||||||||||||||||||||
Philip W. Schiller | 60,923 | 400,102 | — | — | — | — | 461,025 | |||||||||||||||||||||||||||||||
John W. Thompson(9) | 46,519 | 800,063 | — | — | — | — | 846,582 | |||||||||||||||||||||||||||||||
Roy A. Whitfield(10) | 39,096 | — | — | — | — | — | 39,096 |
(1) | Mr. |
(2) |
This reflects the grant date fair value of awards granted during fiscal |
Each of the then-serving directors received an award of |
(4) | Mr. Bowman will retire from the Board effective immediately before this year’s annual meeting. |
(5) |
Mr. |
(6) | Ms. Dorsa was appointed to the Board of Directors on January 26, 2017. In connection with her appointment, she received an award of 4,996 RSUs on January 26, 2017, with a per share value of $160.13 (the closing price of our common stock on NASDAQ on January 26, 2017). |
(7) | Mr. Flatley, our Executive Chairman, did not receive compensation for his service as a director. As an employee of the Company, Mr. Flatley received a salary of $500,000, stock awards valued at $2,000,002, non-equity incentive plan compensation of $530,000, and other compensation valued at $17,602. |
(8) | Dr. Guthart was appointed to the Board of Directors on December 1, 2017. In connection with his appointment, he received an award of 3,552 RSUs on December 1, 2017, with a per share value of $225.24 (the closing price of our common stock on NASDAQ on December 1, 2017). |
(9) | Mr. Thompson was appointed to the Board of Directors on May 3, 2017. In connection with his appointment, he received an award of 4,262 RSUs on May 3, 2017 with a per share value of $187.72 (the closing price of our common stock on NASDAQ on May 3, 2017). |
(10) | Mr. Whitfield retired from the Board effective as of May 30, 2017. |
Illumina, Inc. 2018 Proxy Statement • 38
The following table shows the total number of unvested RSUs and total stock options held by each of our non-employee directors, other than Mr. deSouza, as of January 3, 2016:December 31, 2017:
Name | Unvested RSUs Outstanding | Vested Stock Options Outstanding | Unvested Stock Options Outstanding | Unvested RSUs Outstanding | Vested Stock Options Outstanding | Unvested Stock Options Outstanding | |||||||||||||||||||||
William H. Rastetter(1) | 1,910 | 108,700 | — | ||||||||||||||||||||||||
Frances Arnold | 6,814 | — | — | ||||||||||||||||||||||||
A. Blaine Bowman | 1,910 | 57,700 | — | 2,305 | 18,400 | — | |||||||||||||||||||||
Daniel M. Bradbury | 1,910 | 12,200 | — | — | — | — | |||||||||||||||||||||
Caroline D. Dorsa(3) | 7,301 | — | — | ||||||||||||||||||||||||
Karin Eastham | 1,910 | 23,400 | — | 2,305 | 7,600 | — | |||||||||||||||||||||
Robert S. Epstein | 2,910 | 17,183 | 6,417 | 2,305 | 21,600 | — | |||||||||||||||||||||
Jeffrey T. Huber(2) | 6,773 | — | — | ||||||||||||||||||||||||
Gerald Möller(3) | — | — | — | ||||||||||||||||||||||||
David R. Walt | 1,910 | 108,700 | — | ||||||||||||||||||||||||
Roy A. Whitfield | 1,910 | 46,450 | — | ||||||||||||||||||||||||
Jay T. Flatley | 47,725 | — | — | ||||||||||||||||||||||||
Gary S. Guthart(4) | 3,552 | — | — | ||||||||||||||||||||||||
Philip W. Schiller | 6,004 | — | — | ||||||||||||||||||||||||
John W. Thompson(5) | 4,262 | — | — | ||||||||||||||||||||||||
Roy A. Whitfield(6) | — | — | — |
(1) |
(2) | Mr. |
(3) | Ms. Dorsa was appointed to the Board of Directors on January 26, 2017. |
(4) | Dr. Guthart was appointed to the Board of Directors on December 1, 2017. |
(5) | Mr. Thompson was appointed to the Board of Directors on May 3, 2017. |
(6) | Mr. Whitfield retired from the Board effective as of May 30, 2017. |
Illumina, Inc. 20162018 Proxy Statement • 3539
Stock Ownership and Section 16 Compliance
The following table sets forth the number of shares of our common stock beneficially owned by each of our directors and director nominees and each executive officer named in the Summary Compensation Table (the “named executive officers”), and by all of our directors, director nominees, and executive officers as a group.
The information set forth below is as of March 21, 2016,29, 2018, and is based upon information supplied or confirmed by the named individuals. The address of each person named in the table below is c/o Illumina, Inc., 5200 Illumina Way, San Diego, California 92122.
Name | Common Stock Beneficially Owned (Excluding Stock Options)(1) | Stock Options Exercisable Within 60 Days of February 28, 2016(2) | Total Common Stock Beneficially Owned(1)(2) | Percent of Common Stock(3) | ||||||||||||
Jay T. Flatley(4) | 444,173 | 380,000 | 824,173 | * | ||||||||||||
Francis A. deSouza | 41,476 | — | 41,476 | * | ||||||||||||
Marc A. Stapley | 26,698 | 46,297 | 72,995 | * | ||||||||||||
Christian O. Henry | 31,333 | 18,000 | 49,333 | * | ||||||||||||
Tristan B. Orpin | 72,503 | 40,000 | 112,503 | * | ||||||||||||
Frances Arnold | 200 | — | 200 | * | ||||||||||||
A. Blaine Bowman | 14,483 | 52,700 | 67,183 | * | ||||||||||||
Daniel M. Bradbury | 14,376 | 7,600 | 21,976 | * | ||||||||||||
Karin Eastham | 10,335 | 23,400 | 33,735 | * | ||||||||||||
Robert S. Epstein | 5,635 | 20,516 | 26,151 | * | ||||||||||||
David R. Walt(5) | 668,800 | 104,700 | 773,500 | * | ||||||||||||
Roy A. Whitfield | 13,648 | 42,700 | 56,348 | * | ||||||||||||
All directors, director nominees, and executive officers as a group (17 persons, including those directors and executive officers named above) | 1,473,302 | 891,453 | 2,364,755 | 1.6 | % |
Name | Common Stock Beneficially Owned (Excluding Stock Options)(1) | Stock Options Exercisable Within 60 Days of March 29, 2017(2) | Total Common Stock Beneficially Owned(1)(2) | Percent of Common Stock(3) | ||||||||||||||||
Francis A. deSouza | 66,122 | — | 66,122 | * | ||||||||||||||||
Marc A. Stapley(4) | 19,555 | 46,297 | 65,852 | * | ||||||||||||||||
Sam A. Samad | 315 | — | 315 | * | ||||||||||||||||
Garret Hampton | 526 | — | 526 | * | ||||||||||||||||
Omead Ostadan | 5,095 | — | 5,095 | * | ||||||||||||||||
Mark Van Oene | 8,922 | 6,000 | 14,922 | * | ||||||||||||||||
A. Blaine Bowman(5) | 17,736 | 12,400 | 30,136 | * | ||||||||||||||||
Frances Arnold | 8,008 | — | 8,008 | * | ||||||||||||||||
Caroline D. Dorsa | 3,554 | — | 3,554 | * | ||||||||||||||||
Karin Eastham | 13,288 | 5,600 | 18,888 | * | ||||||||||||||||
Robert S. Epstein | 7,088 | 20,600 | 27,688 | * | ||||||||||||||||
Jay T. Flatley(6) | 358,199 | — | 358,199 | * | ||||||||||||||||
Gary S. Guthart | 18 | — | 18 | * | ||||||||||||||||
Philip W. Schiller | 3,537 | — | 3,537 | * | ||||||||||||||||
John W. Thompson | 1,119 | — | 1,119 | * | ||||||||||||||||
All directors, director nominees, and executive officers as a group (18 persons, including those directors and executive officers named above) | 579,461 | 212,897 | 792,358 | * |
* | Represents beneficial ownership of less than one percent (1%) of the issued and outstanding shares of common stock. |
(1) | Includes shares of stock beneficially owned as of March |
(2) | Includes stock options that are exercisable as of March |
(3) | Percentage ownership is based on |
(4) | Includes |
(5) | Includes 868 shares owned by Mr. Bowman’s trust and partnership. |
(6) | Includes 140 shares owned by Mr. Flatley’s minor children. |
Illumina, Inc. 20162018 Proxy Statement • 3640
As of March 21, 2016,29, 2018, the following are the only persons known to us to be the beneficial owner of more than five percent of our common stock:
Name and Address of Beneficial Owner | Common Stock Beneficially Owned | Percent of Common Stock(1) | ||
Baillie Gifford & Co.(2) Calton Square, 1 Greenside Row Edinburgh EH1 3AN Scotland UK | 17,495,160 | 11.9% | ||
Capital Research Global Investors(3) 333 South Hope Street, 55th floor Los Angeles, CA 90071 | 11,828,195 | 8.0% | ||
BlackRock, Inc.(4) 55 East 52nd Street New York, NY 10022 | 9,909,750 | 6.7% | ||
The Vanguard Group(5) 100 Vanguard Blvd. Malvern, PA 19355 | 8,555,575 | 5.8% |
Name and Address of Beneficial Owner | Common Stock Beneficially Owned | Percent of Common Stock(1) | ||||||
Baillie Gifford & Co.(2) Calton Square, 1 Greenside Row Edinburgh EH1 3AN Scotland UK | 17,756,134 | 12.1 | % | |||||
BlackRock, Inc.(3) 55 East 52nd Street New York, NY 10022 | 11,658,770 | 7.9 | % | |||||
Capital Research Global Investors(4) 333 South Hope Street, 55th floor Los Angeles, CA 90071 | 11,487,809 | 7.8 | % | |||||
The Vanguard Group(5) 100 Vanguard Blvd. Malvern, PA 19355 | 10,250,911 | 7.0 | % | |||||
The Growth Fund of America(6) 6455 Irvine Center Drive Irvine, CA 92618 | 8,051,971 | 5.5 | % |
(1) | Percentage ownership is based on |
(2) | This information is based on a Schedule 13G/A filed with the SEC on |
(3) | This information is based on a Schedule 13G/A filed with the SEC on |
(4) | This information is based on a Schedule 13G/A filed with the SEC on February |
(5) | This information is based on a Schedule |
(6) | This information is based on a Schedule 13G/A filed with the SEC on February 14, 2018. The Growth Fund of America, Inc. reports that it does not have sole or shared voting or dispositive power with respect to any of the shares. We understand that The Growth Fund of America, Inc. is an investment company and is advised by Capital Research and Management Company. Capital Research and Management Company manages equity assets for various investment companies through three divisions, Capital Research Global Investors, Capital International Investors and Capital World Investors. Accordingly, these shares may also be reflected in the Schedule 13G/A filed with the SEC on February 14, 2018 by Capital Research Global Investors referenced in note (4) above. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of the our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company.company. Executive officers, directors, and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms that they file.
To the our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended January 3, 2016, all Section 16(a) filing requirements applicable to2017 each of our executive officers,
Illumina, Inc. 2018 Proxy Statement • 41
directors, and greater than 10% beneficial owners were compliedin compliance with applicable Section 16(a) filing requirements, except for the following:
• | A late Form 3 report was filed for |
• | A late Form |
Illumina, Inc. 20162018 Proxy Statement • 3742
The following table sets forth the names, ages, positions, and business experience during the past five years of our executive officers as of March 21, 2016:April 6, 2018:
Name | Age | Position | Year Joined Illumina | Recent Business Experience | ||||||||
Jay T. Flatley | 63 | Chairman and CEO | 1999 | 2016 – present: Chairman and CEO 2013 – 2016: CEO 1999 – 2013: President and CEO | ||||||||
Paul L. Bianchi | 54 | Senior Vice President, Human Resources | 2012 | 2012 – present: present position 2009 – 2012: senior vice president human resources at Risk Management Solutions, Inc. | ||||||||
Charles E. Dadswell | 57 | Senior Vice President, General Counsel & Secretary | 2013 | 2013 – present: present position 2011 – 2013: vice president, general counsel for North and Latin America, and corporate director of global intellectual property at bioMerieux | ||||||||
Francis A. deSouza | 45 | President | 2013 | 2013 – present: present position 2011 – 2013: group president, enterprise products and services for Symantec Corporation 2009 – 2011: senior vice president, enterprise security group at Symantec Corporation | ||||||||
Christian O. Henry | 48 | Executive Vice President & Chief Commercial Officer | 2005 | 2015 – present: present position 2014 – 2015: Senior Vice President & Chief Commercial Officer 2012 – 2014: Senior Vice President & General Manager, Genomic Solutions 2010 – 2012: Senior Vice President, Chief Financial Officer & General Manager, Life Sciences | ||||||||
Nicholas J. Naclerio, Ph.D. | 54 | Senior Vice President, Corporate and Venture Development | 2010 | 2015 – present: present position 2014 – 2015 : Senior Vice President, Corporate Development & General Manager, Enterprise Informatics 2010 – 2014: Senior Vice President, Corporate and Venture Development | ||||||||
Tristan B. Orpin | 50 | Executive Vice President, Clinical Genomics | 2002 | 2015 – present: present position 2014 – 2015: Senior Vice President & General Manager, Reproductive and Genetic Health 2010 – 2014: Senior Vice President & Chief Commercial Officer | ||||||||
Omead Ostadan | 44 | Executive Vice President, Operations, Products and Strategy | 2007 | 2015 – present: present position 2015 – 2015: Senior Vice President, Operations and Development 2011 – 2015: Senior Vice President, Product Development | ||||||||
Mostafa Ronaghi, Ph.D. | 47 | Senior Vice President & Chief Technology Officer | 2008 | 2008 – present: present position | ||||||||
Marc A. Stapley | 46 | Executive Vice President, Chief Administrative Officer & CFO | 2012 | 2015 – present: present position 2012 – 2015: Senior Vice President & CFO 2009 – 2012: senior vice president, finance at Pfizer, Inc. |
Name | Age | Position | Year Joined Illumina | Recent Business Experience | ||||||||
Francis A. deSouza | 47 | President and CEO | 2013 | 2016 – present: present position 2013 – 2016: President 2011 – 2013: Group President, Enterprise Products and Services for Symantec Corporation | ||||||||
Charles E. Dadswell | 59 | Senior Vice President, General Counsel & Secretary | 2013 | 2013 – present: present position 2011 – 2013: Vice President, General Counsel for North and Latin America, and corporate director of global intellectual property at bioMerieux | ||||||||
Garret Hampton, Ph.D. | 52 | Executive Vice President, Clinical Genomics | 2017 | 2017 – present: present position 2014 – 2016: VP and Global Head, Oncology Biomarker Development and Companion Diagnostics at Genentech 2009 – 2014: Senior Director, Oncology Biomarker Development and Companion Diagnostics at Genentech | ||||||||
Aimee Hoyt | 47 | Senior Vice President, Chief People Officer | 2018 | 2018 – present: present position 2015 – 2017: Executive Vice President, Chief Human Resources Officer, Rackspace 2010 – 2015: Executive Vice President, Human Resources, IGT | ||||||||
Omead Ostadan | 46 | Executive Vice President, Operations and Products | 2007 | 2017 – present: present position 2015 – 2017: Senior Vice President, Operations, Products and Strategy 2015 – 2015: Senior Vice President, Operations and Development 2011 – 2015: Senior Vice President, Product Development | ||||||||
Mostafa Ronaghi, Ph.D. | 49 | Senior Vice President & Chief Technology Officer | 2008 | 2008 – present: present position | ||||||||
Sam A. Samad | 48 | Senior Vice President, Chief Financial Officer | 2017 | 2017 – present: present position 2012 – 2016: Senior Vice President & Corporate Treasurer at Cardinal Health 2009 – 2012: Senior Vice President & CFO, Pharmaceutical Segment at Cardinal Health | ||||||||
Marc A. Stapley | 48 | Executive Vice President, Strategy and Corporate Development | 2012 | 2017 – present: present position 2017 – 2017: Executive Vice President, Chief Administrative Officer 2015 – 2017: Executive Vice President, CAO and CFO 2012 – 2015: Senior Vice President & CFO 2009 – 2012: Senior Vice President, Finance at Pfizer, Inc. | ||||||||
Mark Van Oene | 45 | Senior Vice President & Chief Commercial Officer | 2006 | 2017 – present: present position 2016 – 2017: Senior Vice President and General Manager, Americas Commercial Operations 2014 – 2016: Vice President and General Manager, Americas Commercial Operations 2012 – 2014: Vice President, Global Sales |
Illumina, Inc. 20162018 Proxy Statement • 3843
Compensation Discussion and Analysis
The Compensation Committee of the Board of Directors determines the compensation for our executive officers. The Compensation Committee considers, adopts, reviews, and revises executive officer compensation plans, programs, and guidelines, and reviews and determines all components of each executive officer’s compensation. Compensation programs, and the compensation components, for the CEO are, additionally, subject to approval by the Board of Directors. The Compensation Committee also consults with management and Illumina’s employee compensation and benefits group regarding both executive and non-executive employee compensation plans and programs, including administering our equity incentive plans.
This section of the proxy statement explains how our executive compensation programs are designed and operate with respect to Illumina’s “named executive officers,” who are the CEO, CFO, and the three other most highly compensated executive officers in a particular year. are:
• | all individuals serving as the company’s principal executive officer during fiscal 2017; |
• | all individuals serving as the company’s principal financial officer during fiscal 2017; and |
• | the company’s three most highly compensated executive officers other than the principal executive officer and principal financial officer who were serving as executive officers at the end of fiscal 2017. |
For fiscal 2015,2017, our named executive officers are:were:
Named Executive Officer | Position | |
| ||
Francis A. deSouza | President & CEO | |
Marc A. Stapley | Executive Vice President, | |
| ||
| Executive Vice President, Clinical Genomics | |
Omead Ostadan | Executive Vice President, Operations, Products & Strategy | |
Mark Van Oene | Senior Vice President, Commercial |
In May 2015, we held a stockholder advisory vote to approve the compensation of our named executive officers, commonly referred to as a “say-on-pay” vote. We received favorable consideration, with over 96% of stockholder votes cast approving the proposal. As a result, the Compensation Committee decided to retain our general approach in the 2015 fiscal year. The Compensation Committee will consider the outcome of the annual say-on-pay votes when making future compensation decisions.
(1) | Mr. Stapley served as CFO during part of January 2017. |
Compensation Philosophy and Objectives
Our executive compensation and benefit programs aim to encourage our executive officers to continually pursue strategic opportunities, while effectively managing our day-to-day operations. Specifically, we have created a compensation package that combines short- and long-term components (cash and equity, respectively) at the levels we believe are most appropriate to motivate and reward our executive officers. The Compensation Committee and our management believe that the proportion of at-risk, performance-based compensation should rise as an employee’s level of responsibility increases.
Illumina, Inc. 2018 Proxy Statement • 44
Our executive compensation program is designed to achieve four primary objectives:
• | attract, retain, and reward executives who contribute to our success; |
• | provide economic incentives for executives to achieve business objectives by linking executive compensation with our overall performance; |
Illumina, Inc. 2016 Proxy Statement • 39
• | strengthen the relationship between executive pay and stockholder value through the use of long-term compensation; and |
• | reward individuals for their specific contributions to our success. |
Executive Summary of Compensation Practices and Governance
As described more fully below, the following highlights are the key features of our compensation practices and governance policies.
✓ | Compensation Committee Independence. Our Compensation Committee is composed solely of independent directors and routinely meets in executive session without management. | ✓ | Independent Compensation Consultant.Our Compensation Committee directly retains an independent compensation consultant compliant with the rules set forth by the SEC and Nasdaq. | |||
✓ | Annual “Say-on-Pay” Vote. Our Board of Directors has elected to hold an annual advisory “say-on-pay” vote, and our Compensaiton Committee considers the outcome of the vote in making compensation decisions. | ✓ | Comprehensive Review and Analysis of Executive Compensation. Our Compensation Committee annually reviews our compensation philisophy, prevailing governance and market trends, and each element of total direct compensation. | |||
✓ | Peer-Group Pay Benchmarking. The Compensation Committee reviews compensation data of peer group companies, with particular focus on data falling within the 25th and 75th percentiles. The Committee also considers factors suchs as an executive’s performance, future criticality, and retention risk. | ✓ | Pay for Performance. Over 65% of our Executive Officer total direct compensation is “at-risk” and contingent on the achievement of corporate financial objectives that are linked to shareholder value. | |||
✓ | Incentive Thresholds and Caps. Our performance-based cash compensation and performance-based stock units require a minimum level of Company financial performance before any awards are earned and are capped to avoid excessive risk taking. Awards can range from 0% to 150% of target. The Compensation Committee retains negative discretion to reduce our Executive Officer cash incentive payments. | ✓ | Pay for Sustained Performance. The majority of our Executive Officer long-term equity compensation is contingent on the Company’s achievement of a pre-established earnings-per-share goal at the end of a three-year peformance period. |
Illumina, Inc. 2018 Proxy Statement • 45
✓ | Stock Ownership Guidelines. All of our Executive Officers are required to hold a minimum number shares, ranging from 1x to 5x of base pay. All of our Executive Officers were in compliance at the end of fiscal year 2017. | ✓ | Double Trigger Change in Control. Our Executive Officer change–in-control severance agreements are aligned with industry practices and subject to a double trigger, thus limiting severance benefits to involuntary termination of employment following a change in control. | |||
No Employment Agreements. We do not enter into employment agreements with our Executives Officers. | No Excessive Perquisites. We do not provide a matching contribution or preferential interest rates in our deferred compenstation plans. | |||||
No Excessive Change in Control Payments. Our base salary and cash incentive award payments upon termination or change in control do not exceed two times annual target cash compensation. | No Excise Tax Gross Ups. We do not provide for “golden parachute” excise tax gross ups. | |||||
No Option Repricing. Our 2015 Stock and Incentive Plan prohibits repricing of equity awards without stockholder approval. | No Hedging or Pledging. Our executives are prohibited from engaging in short sales, hedging, pledging or entering into any transaction with put or call options or any other derivative security on our common stock. |
In May 2017, we held a stockholder advisory vote to approve the compensation of our named executive officers, commonly referred to as a “say-on-pay” vote. We received favorable consideration, with over 97% of stockholder votes cast approving the proposal. As a result, the Compensation Committee decided to retain our general approach in the 2017 fiscal year. The Compensation Committee will consider the outcome of the annual say-on-pay votes when making future compensation decisions.
Use of Market Data and Benchmarking
We strive to set executive compensation at competitive levels. This involves, among other things, establishing compensation levels that are generally consistent with levels at other companies with which we compete for talent.
DuringFor fiscal 2015,2017 compensation purposes, the Compensation Committee retained an independent compensation consultant from Radford an Aon Hewitt Company, as the Compensation Committee’s advisor reporting directly to the Chairperson. After considering allChair of the factors required by applicable NASDAQ rules,Compensation Committee. As noted above in the “Director Compensation” section, the Compensation Committee has concluded that no conflict of interest exists that would prevent Radford from serving as an independent consultant to the Compensation Committee. The Compensation Committee maintains sole authority to retain and determine the work to be performed by Radford. With respect to fiscal 20152017 compensation, the Compensation Committee directed Radford to conduct a comprehensive formal review and analysis of our executive compensation and incentive programs
Illumina, Inc. 2018 Proxy Statement • 46
relative to competitive benchmarks. This review consisted of a benchmarking analysis of our executive compensation philosophy and practices against prevailing market practices of identified peer group companies and broader industry trends. The analysis included the review of the total direct compensation (inclusive of salary, cash incentives, and equity awards) of our executive officers. It was based on an assessment of market trends covering available public information in addition to proprietary data provided by Radford.
As our product and industry roadmap evolves and diversifies, we compete increasingly with technology sector companies for talent with the experience ofin integrating biology, chemistry, fluidics, and material sciences with hardware and software. This trend led the Compensation Committee to consider broadening the Company’scompany’s peer group to include companies whose talent reflectreflects the next generation of leaders required to support the transformation, at the clinician level, in genomics cloud computing and analysis of real-time data. Also, in light of our significantly increased market capitalization, accelerating growth rate, and evolving business characteristics, in fiscal 2015 the Compensation Committee asked Radford to conduct an analysis to inform the Committee’s consideration of including relevant, high-growth companies as input for the compensation peer group for fiscal 2015. The peer group that was ultimately selected for fiscal 2015 has largely carried forward to fiscal 2017.
The criteria used in the fiscal 2017 review included taking a broaderbroad industry view as well as emphasizing revenue growth, actual revenue (0.5x to 4x Illumina), and market capitalization (0.5x to 4x Illumina), total shareholder return, and research and development investmentexpenses as a percentagepercent of revenues.revenue, and total shareholder return. The Compensation Committee also considersconsidered criteria applied by corporate governance groups. The revised criteria resulted in Illumina’s placement between the 25th and 75th percentiles of peer group companies for both revenue and market capitalization, whereas the previous peer group resulted in Illumina being at the 25th percentile for revenue growth and above the market 75th for market capitalization. Radford compiled relevant companies from the Pharmaceutical, Biotech and Tools; Healthcare Equipment and Supplies; Technology Hardware and Equipment; Semiconductor and Semiconductor Equipment; and Software and Software Services sectors. The result was 13 new additionssectors to capture companies in a similar sector as well as the broader technical market. Many of the peer group for fiscal 2015, with
Illumina, Inc. 2016 Proxy Statement • 40
four of these companies being outside our traditional industry group but whose executive officers manage similar strategic and operating complexities. Many of companies comprising the updated peer group are located in geographic areas in which we compete for talent, which includes high cost-of-livingcost-of-labor areas and therefore impacts rates of pay. In 2016, when the Compensation Committee reviewed peer benchmarking data to assist in determining executive compensation for fiscal 2017, Illumina was positioned at the 36th percentile for revenue and the 55th percentile for market capitalization.
The Compensation Committee reviews compensation practices and program design at peer group companies to inform its decision-making process so it can set total compensation levels that it believes are commensurate with the Company’scompany’s scope and performance. For fiscal 2017, the Compensation Committee determined not to target specific percentiles within a peer group in connection with executive compensation decisions. The Compensation Committee believes that market data is only one factor, and its executive compensation determinations are the result of many factors, including an executive’s historical performance, future criticality, retention objectives, the Compensation Committee’s business judgment, which is informed by the experiences of the members of the Compensation Committee, as well as input from, and peer group data provided by, the Compensation Committee’s independent compensation consultant.
Generally, we target our total direct compensation, considering base salary and short- and long-term incentives, for executive officers between the 60th and 75th percentiles of compensation paid to executives within our compensation peer group. The Compensation Committee reviews on an annual basis each pay element, and total direct compensation, in a rangeas compared to compensation market data between the 25th25th and 75th percentiles.75th percentile compiled by the independent compensation consultant. This provides the Compensation Committee
Illumina, Inc. 2018 Proxy Statement • 47
with an understanding of the distribution of pay in the market assuming similar levels of experience, as well as individual and company performance. We aim to deliver total direct compensation between the 60th and 75th percentiles assuming achievement of our business goals and performance under our long-term incentive plan. We have set this target above the 50th percentile as a reflection of the level of stretch in the business plan as approved by our Board of Directors. Our focus on pay for performance ensures that we then only provide above market pay if we outperform the market.
The largest component of total direct compensation is delivered through equity-based awards, which, at greater thanapproximately 75%, represents a larger percentage of total direct compensation than that of the average of our peer group and serves to retain our executives and align their interests with those of our stockholders such that higher compensation is realized only for exceptional performance. We believe that our targeted compensation percentiles appropriately reflect our position and historical and anticipated growth rates, in each case relative to those in our peer group. We may deviate from these general target levels to reflect the executive’s experience, the executive’s sustained performance level, and market factors as deemed appropriate byFor fiscal 2017, the Compensation Committee. The Compensation Committee reviewsreviewed the information prepared by management from the Radford assessment, reviewsreviewed each component of an executive’s compensation during the current yearfor fiscal 2017 and prior years, and considersconsidered an executive’s contribution to the achievement of our strategic goals and objectives, the executive’s overall compensation, and other factors to determine the appropriate level and mix of compensation. An executive’s compensation is not determined by formula but, instead, in comparison to the market and within Illumina to positions with similar responsibility and impact on operations.
Illumina, Inc. 2016 Proxy Statement • 41
Fiscal 20152017 Compensation Peer Group
The following companies made up the compensation peer group for fiscal 2015:2017 is the same as that used in fiscal 2016 and in connection with the Compensation Committee’s review of director compensation, and includes the following companies:
Alexion Pharmaceuticals, Inc. | salesforce.com, inc. | |||
Biogen Inc. | Thermo Fisher Scientific Inc. | |||
C. R. Bard, Inc. | Varian Medical Systems, Inc. | |||
| ||||
Celgene Corporation | QIAGEN N.V. | |||
The Cooper Companies, Inc. | Regeneron Pharmaceuticals, Inc. | |||
Edwards Lifesciences Corporation | ResMed Inc. |
The following 11 companies were removed from our prior compensation peer group for fiscal 2015:
| ||||
|
The following 13 companies were added to our compensation peer group for fiscal 2015:
| ||||
| ||||
Role of the Compensation Committee
The Compensation Committee has overall responsibility for approving and evaluating our executive officer compensation plans, policies, and programs. The Board of Directors has determined that each member of the Compensation Committee is independent within the meaning, and meets the requirements, of Rule 16b-3 of the Exchange Act and the rules of The NASDAQ Global Select Market. The Compensation Committee functions under a written charter, which was adopted by the Board of Directors. The charter is reviewed annually and updated as appropriate. A copy of the charter is available on our website atwww.illumina.com under “Committee Composition.”
Illumina, Inc. 2016 Proxy Statement • 42
The primary responsibilities of the Compensation Committee are to:
The Compensation Committee meets as often as it considers necessary to perform its duties and responsibilities. The Compensation Committee held five meetings during fiscal 2015,2017, and it has held two meetingsone meeting so far in 20162018 to review and finalize compensation elements related to fiscal 2015.2017 and 2018 performance-based compensation. The Chairperson works with the CEO and the head of our human resources departmentSenior Vice President & Chief People Officer (CPO) to establish the meeting agenda in advance of each meeting.
Illumina, Inc. 2018 Proxy Statement • 48
The Compensation Committee typically meets with the CEO, CFO, CPO, General Counsel, head of our human resources department, our external counsel, and, on occasion, with an independent compensation consultant retained by the Compensation Committee. When appropriate, such as when the Compensation Committee is discussing or evaluating compensation for the CEO, the Compensation Committee meets in executive session without management. The Compensation Committee receives and reviews materials in advance of each meeting. These materials include information that the independent compensation consultant and management believe will be helpful to the Compensation Committee, as well as materials that the Compensation Committee has specifically requested, including benchmark information, historical compensation data, performance metrics and criteria, the Board of Directors’ assessment of our performance against our goals, and the CEO’s assessment of each executive’s performance against pre-determined, individual objectives.
Illumina, Inc. 20162018 Proxy Statement • 4349
Components and Analysis of Fiscal 20152017 Executive Compensation
The Compensation Committee evaluates each component of our executive compensation program, but its primary goal is to ensure that total direct compensation aligns with market trends and is commensurate with the Company’s near- and long-term performance. For fiscal 2015,2017, the principal elements of our executive compensation program are summarized in the following table and described in more detail below.
Compensation Element | Objective | Designed to Reward | Key Features | |||
Base Salary | To provide a competitive, fixed level of cash compensation for the executive officers | Experience, expertise, knowledge of the industry, duties, scope of responsibility, and sustained (and expected) performance | Adjustments are based on an individual’s current | |||
Performance-Based Cash Compensation | To encourage and reward executive officers’ contributions in achieving strong financial and operational results by meeting or exceeding established goals | Success in achieving annual results | Annual performance-based cash compensation is based on a formula that includes achievement of corporate revenue and operating income goals and achievement of individual performance goals | |||
Long-Term Equity Compensation | To retain executive officers and to align their interests with those of our stockholders in order to increase overall stockholder value | Success in achieving long-term results | Grants typically consist of both restricted stock units (RSUs) and performance stock units (PSUs)
RSUs typically vest over a four-year period, with 25% of the RSU vesting annually, which
PSUs vest at the end of a three-year performance period based on the achievement of pre-determined earnings per share targets at the end of the three-year period, which
Given our rapid growth and continued high growth profile, a majority of our executive officers’ compensation has been delivered, and is expected to be delivered, through long-term equity awards, with PSUs representing 75% of the total value of annual long-term equity awards granted for fiscal |
Illumina, Inc. 20162018 Proxy Statement • 4450
Compensation Mix
The following charts show the mix of base salary, cash incentives, and long-term equity compensation and all other compensation for each of our CEO, Mr. deSouza, and our other named executive officers (NEOs), for fiscal 2015:2017:
The following charts show the mix of non-performance-based compensation (base salary, RSUs and all other compensation) and performance-based compensation (cash incentives and PSUs) and non-performance based compensation (base salary and RSUs) for each of our CEO, Mr. deSouza, and our other named executive officers (NEO)NEOs for fiscal 2015:2017:
Base Salary
Base salary is the primary fixed component of our executive compensation program. In general, executive officers with the highest level of responsibility have a lower percentage of their compensation fixed as base salary and a higher percentage of their compensation at-risk, being tied to performance. Base salary represented a relatively small percentage of total compensation (14% in 2015) for the named executive officers.officers (approximately 12% in 2017).
Salary levels are considered as part of our annual executive performance review process, as well as upon promotion or other material change in job responsibility. Our CEO makes recommendations to the Compensation Committee for base salary changes for executive officers (excluding himself) based on performance and current pay relative to market practices for executive officers, other than
Illumina, Inc. 2018 Proxy Statement • 51
himself. The Compensation Committee reviews these recommendations, makes any adjustments it considers necessary, and then approves the salary changes. The Compensation Committee
Illumina, Inc. 2016 Proxy Statement • 45
recommends to the Board of Directors the base salary for our CEO based on performance and his current pay relative to other chief executives in our peer group. The Compensation Committee believes that increases to base salary should reflect the executive’s performance for the preceding year and take into account our CEO’s pay level relative to similar positions at companies in our peer group. Base salary increases also reflect anticipated future contributions of the executive.
Fiscal 20152017 Base Salaries
Named Executive Officer | Position | 2014 Base Salary ($) | 2015 Base Salary ($) | % Increase | ||||
Jay T. Flatley | Chief Executive Officer | 860,000 | 1,000,000 | 16% | ||||
Francis A. deSouza | President | 700,000 | 750,000 | 7% | ||||
Marc A. Stapley(1) | Executive Vice President, Chief Administrative Officer & CFO | 463,700 | 500,000 | 8% | ||||
Christian O. Henry(1) | Executive Vice President & Chief Commercial Officer | 475,100 | 500,000 | 5% | ||||
Tristan B. Orpin(1) | Executive Vice President, Clinical Genomics | 440,900 | 461,000 | 5% |
Named Executive Officer | Position | 2016 Base Salary ($) | 2017 Base Salary ($) | % Increase (decrease) | ||||||||||
Francis A. deSouza | President and CEO | 825,000 | 850,000 | 3 | % | |||||||||
Marc A. Stapley | Executive Vice President, Strategy & Corporate Development | 540,000 | 556,200 | 3 | % | |||||||||
Sam A. Samad | Senior Vice President & CFO | — | 450,000 | — | ||||||||||
Garret Hampton | Executive Vice President, Clinical Genomics | — | 450,000 | — | ||||||||||
Omead Ostadan | Executive Vice President, Products & Operations | 540,000 | 556,200 | 3 | % | |||||||||
Mark Van Oene | Senior Vice President & Chief Commercial Officer | — | 450,000 | — |
The increase in fiscal 2015the salaries reflects strong operational and financial performance during the prior fiscal year overseen by our executive management team. In addition, the increase inof Mr. Flatley’sdeSouza, Mr. Stapley, and Mr. Stapley’s salaries reflectsOstadan reflect the positioning of our CEO and CFOeach of their compensation respectively, relative to market conditions. Each of Mr. Samad and Dr. Hampton joined the updated compensation peer group for fiscal 2015. The increaseCompany in 2017, and Mr. deSouza’s salary also reflects additional responsibilities assumed by Mr. deSouza with respect to our commercial operations during fiscal 2015.Van Oene became Senior Vice President and Chief Commercial Officer in May 2017.
Performance-Based Cash Compensation
Overview
In the first quarter of 2015,2017, the Compensation CommitteeBoard of Directors approved a performance-based cash compensation funding mechanism for executive officers that operates under the terms of the Illumina, Inc. 2015 Stock and Incentive Plan, approved by stockholders in May 2015, pursuant to which the Compensation CommitteeBoard of Directors sets pre-established financial performance goals at the beginning of the fiscal year. The Compensation Committee then determines whether a cash incentive opportunity has been earned based on the achievement of thethose pre-established performance goals following the filing of the applicable annual report on Form 10-K. This funding mechanism is intended to qualify cash incentive payments as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986;1986 for payments made before 2018; however, the Companycompany makes no assurances regarding final determinations under Section 162(m).
For fiscal year 2015, If the Compensation Committee approved a funding mechanism goal for the executive officer cash incentive programopportunity has been earned, or funded, the Board of at least $719,000,000 in non-GAAP operating income. Additionally,Directors then makes a recommendation for actual payout as described below.
The Tax Cuts and Jobs Act of 2017 (“US Tax Reform”) changed the Compensation Committee approved financial performance goals162(m) rules effective January 1, 2018. The new rules eliminate the exception for performance-based compensation and expand the definition of at least $2,115,000,000 in revenue and $719,000,000 in non-GAAP operating income for our variablecovered employees whose compensation program, which is subject to the non-executive officer bonus program for eligible employees. The initial payout recommendations forannual $1 million deduction limitation. Covered employees now include the executive officer cash incentive program are based onCFO plus any individual who has previously been a covered employee, even after the
Illumina, Inc. 20162018 Proxy Statement • 4652
metricsindividual, even after the individual no longer holds that position or has separated from service. In addition, any executive who is identified as a covered employee for a tax year after December 31, 2016, remains a covered employee for all future years under 162(m). Due to the elimination of the non-executive officer bonus program. However, in no event wouldperformance-based exception, the actual payout recommendations exceed the maximum funded amounts as determined under the executive officer funding mechanism. Following the Compensation Committee’s determination of achievement of the pre-established financial performance goal of non-GAAP operating income for fiscal 2015 under the executive officer cash incentive program,payments will be subject to the Compensation Committee funded a maximum of $3,000,000 for the CEO and a maximum of $1,500,000 for each other named executive officer. The Compensation Committee then applied negative discretion to determine final payments considering such factors as (i) achievement of the financial performance goals set forth162(m) limitation in the variable compensation program, (ii) the executive officer’s target cash incentive amount, calculated as a percentage of each executive officer’s base salary, and (iii) the executive officer’s individual performance, contribution, and impact.future.
Our executive officer cash incentive program is an “at-risk” compensation program and is designed to foster a performance-oriented culture, where individual performance is aligned with corporate financial objectives. Any executive officer
To formulate a recommendation for actual payout under the executive officer cash incentive program, the Compensation Committee considers pre-approved target amounts based on each executive officer’s base salary and achievement of two separate financial performance goals that align with our non-executive officer bonus program For fiscal 2017, the following weighting (as a % of the target cash incentive amount)
•
•
At the end of the performance period,
|
For fiscal year 2017, the Compensation Committee set a minimum performance goal to fund the cash incentive program for executive officers of at least $855,000,000 in non-GAAP operating income. In parallel, the Compensation Committee approved a revenue target of at least $2,525,000,000 and a non-GAAP operating income target of at least $855,000,000 for our variable compensation program, which is the non-executive bonus program for eligible employees. The initial payout recommendations for the executive officer cash incentive program are based on how well the company performed against the revenue target and the non-GAAP operating income target of the variable compensation program. However, in no event would the actual payout recommendations exceed the maximum funded amounts as determined under the executive officer funding mechanism.
Target Amounts
For fiscal 2015,2017, the Compensation Committee established target cash incentive amounts under the executive officer cash incentive program, calculated as a percentage of each executive officer’s base salary.
Illumina, Inc. 20162018 Proxy Statement • 4753
Named Executive Officer | 2014 Target Incentive % | 2015 Target Incentive % | ||
Jay T. Flatley | 100% | 125% | ||
Francis A. deSouza | 80% | 80% | ||
Marc A. Stapley | 55% | 65% | ||
Christian O. Henry | 55% | 65% | ||
Tristan B. Orpin | 55% | 55% |
Named Executive Officer | 2016 Target Incentive % | 2017 Target Incentive % | ||||||||
Francis A. deSouza | 100 | % | 100 | % | ||||||
Marc A. Stapley | 65 | % | 65 | % | ||||||
Sam A. Samad(1) | — | 55 | % | |||||||
Garret Hampton(1) | — | 65 | % | |||||||
Omead Ostadan | 65 | % | 65 | % | ||||||
Mark Van Oene(1) | — | 55 | % |
(1) | Mr. Samad, Dr. Hampton, and Mr. Van Oene were not named executive officers in fiscal 2016. |
Weighted Components
Under the variable compensationexecutive officer cash incentive program, which the Compensation Committee considers as part of approving actual cash incentive payouts for executive officers, the Compensation Committee approves minimum, commit, and maximum levels for each of the revenue and operating income targets. Payments of the applicable component of the annual cash incentive amounts to executive officers reflect the achievement of such objectives for the year. If the applicable minimum objective levels are not met for both the revenue target and the non-GAAP operating income target, then no executive officer cash incentive payouts would be recommended by management. The commit level represents a level of performance that the Compensation Committee and the Board of Directors believe is both attainable and practical based on a realistic estimate of our future financial performance. The maximum level is designed to motivate and reward realistically achievable superior performance. Payments of the applicable components of the annual cash incentive amounts to executive officers reflect the achievement of such objectives for the year. Each of the revenue and operating income targets, if achieved, trigger payment for the applicable component, irrespective of whether the other target is achieved.
At the beginning of each year, our CEO develops corporate objectives focused on financial performance and other critical corporate goals, such as new product introductions, market penetration, infrastructure investments, and consistency of operating results. The corporate objectives are based on our annual operating plan, which is approved by the Board of Directors. In addition, our CEO, together with each executive officer eligible to participate in the executive officer cash incentive program, develops a corresponding set of objectives to measure individual performance for the year. The Compensation Committee and the Board of Directors approve the corporate objectives and the individual objectives for our CEO.
Shortly following completion of the fiscal year, the Compensation Committee and the Board of Directors assess our performance against the non-GAAP operating income goal for the executive officer cash incentive program funding mechanism, and the revenue and non-GAAP operating income targets under the variable compensation program, comparing the actual fiscal year results to the pre-determined minimum, commit, and maximum levels for each objective, and an overall percentage amount for the corporate financial objectives is calculated to form the basis of the cash incentive recommendation. The Compensation Committee (and the Board of Directors with respect to our CEO) also reviews the performance of each named executive officer against such officer’s individual objectives, and an overall percentage amount for the individual performance objectives is calculated. The Compensation Committee (and the Board of Directors with respect to the CEO) may exercise negative discretion to reduce the funded maximum amounts determined under the funding mechanism.
Illumina, Inc. 20162018 Proxy Statement • 4854
Revenue Target (50%)
For fiscal 2015,2017, the actual cash incentive payout for each executive officer may reflectcould have reflected a maximum of 150% of the revenue target under the non-executive variable compensation program based on the Company’scompany’s performance against the following fiscal 20152017 revenue objectives (with the cash incentive amount calculated as a linear ratio for points between the minimum, commit, and maximum revenue objective levels):
Minimum | Commit | Maximum | Minimum | Commit | Maximum | |||||||||||||||
Revenue Objective ($ in millions) | $2,115 | $ | 2,265 | $2,415 | $2,525 | $ | 2,675 | $2,825 | ||||||||||||
% of Revenue Target Paid | 50% | 100% | 150% | 50% | 100% | 150% |
Operating Income Target (50%)
For fiscal 2015,2017, the actual cash incentive payout for each executive officer potential may reflectcould have reflected a maximum of 150% of the non-GAAP operating income target under the non-executive variable compensation program based on the Company’scompany’s performance against the following fiscal 20152017 non-GAAP operating income objectives (with the cash incentive amount calculated as a linear ratio for points between the minimum, commit, and maximum non-GAAP operating income objective levels):
Minimum | Commit | Maximum | Minimum | Commit | Maximum | |||||||||||||||
Operating Income Objective ($ in millions)(1) | $719 | $ | 804 | $889 | $855 | $ | 930 | $1,005 | ||||||||||||
% of Operating Income Target Paid | 50% | 100% | 150% | 50% | 100% | 150% |
(1) |
Example Calculation
We have included a hypothetical example to demonstrate the calculation on a general basis. For example, assume Executive A’s base salary for fiscal 20152017 was $400,000 and that Executive A’s target cash incentive amount as a percentage of base salary was set at 55%. Executive A’s target cash incentive amount would be $220,000 (i.e., 55% x $400,000). Following determination of the foregoing amount, the Compensation Committee may use its discretion to decrease (below the maximum funding amounts approved by the Compensation Committee) the actual cash incentive payment based on the executive officer’s contribution and personal performance, including achievement against goals and overall business impact. Assuming that Executive A at least met all of his or her individual performance goals, Executive A’s actual cash incentive below the minimum and at the minimum, commit, and maximum financial objective levels would generally range from between $0 and $330,000 and would be determined as follows:
Below Minimum ($) | At Minimum ($) | At Commit ($) | At or Greater than Maximum ($) | |||||||||
Revenue Target (65% x $220,000 = $143,000) | — | 71,500 | 143,000 | 214,500 | ||||||||
Operating Income Target (35% x $220,000 = $77,000) | — | 38,500 | 77,000 | 115,500 | ||||||||
|
|
|
| |||||||||
Total | — | 110,000 | 220,000 | 330,000 | ||||||||
|
|
|
Below Minimum ($) | At Minimum ($) | At Commit ($) | At or Greater than Maximum ($) | |||||||||
Revenue Target (50% x $220,000 = $110,000) | — | 55,000 | 110,000 | 165,000 | ||||||||
Operating Income Target (50% x $220,000 = $110,000) | — | 55,000 | 110,000 | 165,000 | ||||||||
|
|
|
| |||||||||
Total | — | 110,000 | 220,000 | 330,000 | ||||||||
|
|
|
Illumina, Inc. 20162018 Proxy Statement • 4955
Performance-Based Cash Compensation Payments to NEOs
The Compensation Committee met during the first fiscal quarter of 20162018 to review fiscal 20152017 corporate and executive goal performance, make determinations for fiscal 20152017 executive officer performance-based incentive cash compensation awards based on the performance reviews, and establish the fiscal 20162018 executive officer cash incentive program as well as the 20162018 non-executive officer variable compensation program.
The following table presents the performance-based cash incentive targets as a percentage of base salary and the actual amounts earned by each named executive officer for fiscal 2015:
Named Executive Officer | 2015 Target Incentive (% of Salary) | Actual Incentive Payout ($)(1) | Actual Incentive Payout (% of Salary)(1) | |||
Jay T. Flatley | 125% | 1,158,750 | 116% | |||
Francis A. deSouza | 80% | 556,200 | 74% | |||
Marc A. Stapley(2) | 65% | 401,275 | 74% | |||
Christian O. Henry | 65% | 301,275 | 56% | |||
Tristan B. Orpin | 55% | 235,041 | 51% |
Performance-based cash incentive compensation awards made to named executive officers for performance in fiscal 2013 and 2014 are reflected in the column titled “Non-Equity Incentive Plan Compensation” of the Summary Compensation Table on page 58. These cash incentives were paid in the first fiscal quarters of 2014 and 2015, respectively.
Long-Term Equity Compensation
The Compensation Committee believes it is appropriate to align the interests of executivesexecutive officers with those of stockholders. Accordingly, we award long-term incentives to reward performance and align executivesexecutive officers with long-term stockholder interests by providing executives with an ownership stake in the Company,company, encouraging sustained long-term performance, and providing an important retention element to their compensation program. We believe that one of the most effective ways to accomplish this objective is to provide executive officers with a substantial economic interest in the long-term appreciation of our stock price through equity grants, which in fiscal 20152017 were in the form of performance stock units (PSUs) and restricted stock units (RSUs).
Illumina, Inc. 2016 Proxy Statement • 50
Fiscal Compensation |
Type
|
PSUs and RSUs
| ||
Vesting for RSUs
|
25% annually over four years
| |||
Vesting for PSUs
|
Single vesting date on the last day of the third fiscal year following grant
| |||
PSU Metrics
|
100% tied to pre-determined EPS targets Minimum vest: zero Target vest: 100% Maximum vest: 150%
|
Performance Stock Units
During fiscal 2012, theThe Compensation Committee approved changes to the long-term equity incentive compensation program for our executive officers that placed greaterplaces particular emphasis on performance-based long-term incentives by replacing annual stock option grants withthrough the use of PSUs that vest at the end of a three-year performance period based on the achievement of pre-determined earnings per share targets at the end of the three-year period.
The PSU awards are intended to be an ongoing part of our long-term equity incentive compensation program. It is anticipated that the Compensation Committee will grant new PSU awards each year, based on earnings per share targets (or other appropriate financial metric as determined by the Compensation Committee) established for a new three-year performance period commencing each year; however, the Compensation Committee is not obligated to grant PSUs or any other equity incentive awardsaward each year.
In keeping with our compensation philosophy to tie executive pay to stockholder value creation, executives realize full value from PSUs only to the extent that we achieve pre-determined earnings per share targets at the end of a three-year period. For instance, the number of shares issued will
Illumina, Inc. 2018 Proxy Statement • 56
range from 0% to 150% of the number of shares specified in the PSU agreement based on performance relative to the earnings per share objectives approved by the Compensation Committee. If we fail to achieve the pre-determined earnings per share target at the end of the three-year performance period, then the number of shares issued will range from 0% to 100% of the award amount, depending on the actual earnings per share. If, however, we exceed the pre-determined earnings per share target at the end of the three-year performance period, the number of shares issued will range from 100% to 150% of the award amount, depending on the actual earnings per share.
Restricted Stock Units
Since fiscal 2008, long-termLong-term equity compensation packages to executives have includedexecutive officers include grants of time-based vesting RSUs. RSUs granted to executive officers for fiscal 20152017 vest over a four-year period, with 25% of the RSU vesting annually. Vesting in all cases is subject to the individual’s continued service to us through the vesting date.
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Like PSUs, RSUs also provide a long-term incentive for executivesexecutive officers to remain with us; however, because RSUs do not have a performance component they provide some amount of value to recipients unless our stock price is zero. For fiscal 2015,2017, we awarded 75%76% of our annuallong-term equity grants (not including new hire inducementnew-hire-inducement or promotion-related grants) to our named executive officers in the form of PSUs and 25%24% in the form of RSUs.
Determination of Long-Term Equity Compensation
To determine the value for long-term incentives granted to an executive officer each year, we consider the following factors:
• the proportion of long-term incentives relative to base pay;
• the
• long-term business objectives;
• awards made to
• the market demand for the
• the amount granted to other
• prior grants and the retention value of outstanding grants;
• the
• the
|
In addition, theThe new hire equity grant made to an executive officer upon first joining the Companycompany is based primarily on competitive conditions applicable to the executive officer’s specific position. The Compensation Committee also considers the number and type of equity awards owned bymade to executive officers in comparable positions, including the executive’sexecutive officer’s prior position. Subsequent equity grants to executive officers are generally considered and, if appropriate, awarded in connection with their annual performance review. Such subsequent grants serve to maintain a competitive position for us relative to new opportunities that may become available to our executive officers and to enhance the retention features of the program.
Illumina, Inc. 2018 Proxy Statement • 57
Fiscal 20152017 Long-Term Equity Compensation
The following table presents the long-term equity compensation awarded to each named executive officer based on grant date fair value and as a multiple of base salary for fiscal 2015:2017:
Named Executive Officer | PSUs (Grant Date Fair Value) ($)(1) | RSUs (Grant Date Fair Value) ($)(1) | Total ($) | Multiple of 2015 Base Salary | PSUs (Grant Date Fair Value) ($)(1) | RSUs (Grant Date Fair Value) ($)(1) | Total ($) | Multiple of 2017 Base Salary | ||||||||||||||||||||||||||||
Jay T. Flatley | 5,250,105 | 1,750,156 | 7,000,261 | 7.0 | ||||||||||||||||||||||||||||||||
Francis A. deSouza | 3,000,164 | 1,000,115 | 4,000,279 | 5.3 | 5,250,191 | 1,750,135 | 7,000,326 | 8.2x | ||||||||||||||||||||||||||||
Marc A. Stapley | 1,725,076 | 575,025 | 2,300,101 | 4.6 | 1,875,176 | 625,201 | 2,500,377 | 4.5x | ||||||||||||||||||||||||||||
Christian O. Henry | 1,725,076 | 575,025 | 2,300,101 | 4.6 | ||||||||||||||||||||||||||||||||
Tristan B. Orpin | 1,725,076 | 575,025 | 2,300,101 | 5.0 | ||||||||||||||||||||||||||||||||
Sam A. Samad | 1,875,100 | 625,152 | 2,500,252 | 5.6x | ||||||||||||||||||||||||||||||||
Garret Hampton | 3,375,216 | 1,125,262 | 4,500,478 | 10.0x | ||||||||||||||||||||||||||||||||
Omead Ostadan | 1,875,176 | 625,201 | 2,500,377 | 4.5x | ||||||||||||||||||||||||||||||||
Mark Van Oene | 1,950,328 | 450,059 | 2,400,387 | 5.3x |
(1) | Reflects the grant date fair value of awards granted |
Illumina, Inc. 2016 Proxy Statement • 52
Potential Payments upon a Termination or Change in Control
Our executive managementofficers and other employees have built Illumina into the successful enterprise that it is today. We believe that the interests of stockholders will be best served if the interests of our executive managementofficers are aligned with them, and providing change-in-control benefits may eliminate, or at least reduce, the reluctance of executive managementofficers to pursue potential change-in-control transactions that may be in the best interests of stockholders. As such, we provide change-in-control severance benefits to our named executive officers that are subject to a double trigger (i.e., change in control and loss of employment). The change-in-control severance agreements automatically renew annually for additional one year periods unless a notice of non-extension is provided by either party. None of the named executive officers have an employment agreement with us.
For purposes of these benefits, in general, a change in control is deemed to occur in any of the following circumstances:
• | any merger or consolidation in which we are not the surviving entity; |
• | the sale of all or substantially all of our assets to any other person or entity; |
• | the acquisition of beneficial ownership of a controlling interest in the outstanding shares of our common stock by any person or entity; |
• | a contested election of our directors as a result of which or in connection with which the persons who were directors before such election or |
• | any other event specified by the Board of Directors. |
Under the change-in-control severance agreements, the executive would receive benefits if he or she were terminated within two years following the change in control either:
• | by the |
Illumina, Inc. 2018 Proxy Statement • 58
turpitude, or engagement in an act of malfeasance, fraud, or dishonesty that materially damages our business; or |
• | by the executive on account of “good reason,” which is defined in each change-in-control severance agreement to include certain reductions in the executive’s annual base salary, cash incentive, position, title, responsibility, level of authority, or reporting relationships that existed immediately prior to the change in control, or a relocation, without the executive’s written consent, of the executive’s principal place of business by more than 35 miles from the executive’s principal place of business immediately prior to the change in control. |
Pursuant to the change-in-control severance agreements, if a covered termination of the executive’s employment occurs in connection with a change in control, then the executive is generally entitled to the following benefits:
• | Mr. |
Illumina, Inc. 2016 Proxy Statement • 53
incentive or other target incentive amount or (b) the annual cash incentive or other incentive paid or payable to the executive for the most recently completed fiscal year; |
• | for each |
• | a lump sum payment of the executive’s earned but unpaid compensation, including any earned but unpaid cash incentive or other incentive payment from any completed fiscal year, and a pro rata portion of the executive’s annual target cash incentive or other target incentive amount for the fiscal year in which the termination occurs; |
• | payments of the executive’s group health insurance coverage premiums under COBRA law, including coverage for the executive’s eligible dependents enrolled immediately prior to termination, for a maximum period of one year; however, our obligation to pay such premiums ceases immediately upon the date the executive becomes covered under any other group health plan; |
• | continuance of the executive’s indemnification rights and liability insurance for a maximum of one year following termination; |
• | continuation of the executive’s perquisites to which the executive was entitled for a period of 12 months or, in the case of Mr. |
• | automatic vesting of the executive’s unvested stock options and equity or equity-based awards; and |
• | certain professional outplacement services consistent with the executive’s position for up to two years following termination. |
The change-in-control severance agreements provide that each executive’s total change-in-control payment may be reduced in the event such payment is subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, and such a reduction would provide a greater after-tax
Illumina, Inc. 2018 Proxy Statement • 59
benefit for the executive. Additionally, change-in-control benefits are subject to limitations under IRCthe “golden parachute” provisions of Section 280G “golden parachute” provisions.of the Internal Revenue Code. A full analysis of the financial impact of these limitations will be performed based on the facts and circumstances in the event a change in control were to occur.
Illumina, Inc. 2016 Proxy Statement • 54
Based upon a hypothetical change in control date of December 31, 2015,29, 2017, the last trading day of fiscal 2015,2017, the potential payments upon a termination following a change in control for our named executive officers would have been as follows:
Named Executive Officer | Multiplier for Base Salary and Cash | Nature of Benefit | Payment following Change in Control and Subsequent Loss of Employment (within 2 years)($) | |||||||||||
| 2x | Salary Severance | 1,700,000 | |||||||||||
Cash Incentive Severance | 1,802,000 | |||||||||||||
Earned Compensation(1) | 917,346 | |||||||||||||
Equity Compensation Acceleration(2) | 23,370,783 | |||||||||||||
Pension/NQDC(3) | 927,323 | |||||||||||||
Perquisites/Benefits(4) | 74,963 | |||||||||||||
Total Benefit | 28,792,415 | |||||||||||||
| 1x | Salary Severance | 556,200 | |||||||||||
Cash Incentive Severance | 383,222 | |||||||||||||
Earned Compensation(1) | 393,918 | |||||||||||||
Equity Compensation Acceleration(2) | 8,927,064 | |||||||||||||
Pension/NQDC(3) | — | |||||||||||||
Perquisites/Benefits(4) | 51,981 | |||||||||||||
Total Benefit | 10,312,385 | |||||||||||||
| 1x | Salary Severance | 450,000 | |||||||||||
Cash Incentive Severance | 259,727 | |||||||||||||
Earned Compensation(1) | 268,380 | |||||||||||||
Equity Compensation Acceleration(2) | 3,206,122 | |||||||||||||
Pension/NQDC(3) | — | |||||||||||||
Perquisites/Benefits(4) | 51,460 | |||||||||||||
Total Benefit | 4,235,689 | |||||||||||||
| 1x | Salary Severance | 450,000 | |||||||||||
Cash Incentive Severance | 303,849 | |||||||||||||
Earned Compensation(1) | 312,503 | |||||||||||||
Equity Compensation Acceleration(2) | 5,639,008 | |||||||||||||
Pension/NQDC(3) | — | |||||||||||||
Perquisites/Benefits(4) | 51,460 | |||||||||||||
Total Benefit | 6,756,820 |
Illumina, Inc. 2018 Proxy Statement • 60
| Multiplier for Base Salary and Cash Incentives | Nature of Benefit | Payment following Change in Control and Subsequent Loss of Employment (within 2 years)($) | |||||||||
Omead Ostadan | 1x | Salary Severance | 556,200 | |||||||||
Cash Incentive Severance | 383,222 | |||||||||||
Earned Compensation(1) | 393,918 | |||||||||||
Equity Compensation Acceleration(2) | 8,927,064 | |||||||||||
Pension/NQDC(3) | 2,888,281 | |||||||||||
Perquisites/Benefits(4) | 49,604 | |||||||||||
Total Benefit | 13,198,289 | |||||||||||
Mark Van Oene | 1x | Salary Severance | 450,000 | |||||||||
Cash Incentive Severance | 247,500 | |||||||||||
Earned Compensation(1) | 171,311 | |||||||||||
Equity Compensation Acceleration(2) | 6,654,331 | |||||||||||
Pension/NQDC(3) | — | |||||||||||
Perquisites/Benefits(4) | 45,897 | |||||||||||
Total Benefit | 7,569,039 |
Illumina, Inc. 2016 Proxy Statement • 55
(1) | A lump sum payment of the executive’s earned but unpaid |
(2) | The value of the RSUs and PSUs is based on the number of outstanding shares that would not ordinarily have vested by December |
(3) | As described below, under the deferred compensation plan upon a separation from service within 24 months of a change in control, each named executive officer will be entitled to his or her retirement benefit or termination benefit in a lump sum payment equal to the unpaid balance of all of his or her accounts. All of the amounts for all of the named executive officers consist of the termination benefits. |
(4) | Represents payment of (i) the executive’s group health insurance coverage premiums under COBRA law, including coverage for executive’s eligible dependents enrolled immediately prior to termination, for a maximum period of one year (two years for Mr. |
Deferred Compensation Plan
Illumina’s Deferred Compensation Plan, effective December 1, 2007, (the “Deferred Compensation Plan”), provides key employees and directors with an opportunity to defer a portion of their salary, annual cash incentive, and other specified compensation. The named executive officersNEOs participate in the Deferred Compensation Plan. The plan permits us to make discretionary contributions to the Deferred Compensation Plan on behalf of the participants, although we have not exercised such discretion.participants. A participant is always fully vested in accounts under the plan attributable to a participant’s contributions and related earnings on such contributions. Upon a “change in control” (as defined in the plan) a participant will receive his or her “retirement benefit” or “termination benefit” (each as defined in the plan) in a lump sum payment equal to the unpaid balance of all of his or her accounts if a “separation from service” (as defined in the plan) occurs within 24 months following a change of control.
Other Benefits and Perquisites
We do not provide pension arrangements or post-retirement health coverage for our executives or employees, other than the change-in-control severance benefits previously discussed. Our executive
Illumina, Inc. 2018 Proxy Statement • 61
officers are eligible to participate in a Company-sponsoredcompany-sponsored executive health screening program in addition to being offered medical and other benefits that are generally available to other full-time employees, including dental, vision, and group term life insurance, AD&D premiums, a 401(k) plan, and an Employee Stock Purchase Plan. Our discretionary contributions to the 401(k) plan on behalf of each employee participating in the plan are set at up to 50% of the first 6% of the employee’s contributions to the plan, based on our meeting certain financial targets. ExecutivesExecutive officers are treated in the same manner as all other eligible employees.
All of our named executive officersNEOs participated in our 401(k) plan during fiscal 20152017 and received matching contributions.
No Hedging or Pledging of Company Stock
Our directors and executive officers, including named executive officers, are prohibited from engaging in short sales, hedging, pledging, or entering into any transaction with put or call options or any other derivative security on our common stock.
Illumina, Inc. 2016 Proxy Statement • 56
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility of compensation payable in any tax year to the CEO and the other fourthree most highly compensated executive officers.officers prior to 2018. Section 162(m) stipulates that a publicly held company cannot deduct compensation to its top officers in excess of $1 million. Compensation that is “performance-based” compensation within the meaning of the Internal Revenue Code does not count toward the $1 million limit. We believe that compensation paid under the executive incentive plans is generally fully deductible for federal income tax purposes with the exception of RSUs. However, in certain situations, the Compensation Committee may approve compensation that will not meet these requirements in order to ensure competitive levels of total compensation for our executive officers.
The Tax Cuts and Jobs Act of 2017 (“US Tax Reform”) changed the 162(m) rules effective January 1, 2018. The new rules eliminate the exception for performance-based compensation and expand the definition of covered employees whose compensation is subject to the annual $1 million deduction limitation. Covered employees now include the CFO plus any individual who has previously been a covered employee, even after the individual no longer holds the position. Thus, once an individual is identified as a covered employee, the deduction limitation applies to the compensation paid to that individual, even after the individual no longer holds that position or has separated from service. In addition, any executive who is identified as a covered employee for a tax year after December 31, 2016, remains a covered employee for all future years under 162(m). Due to the elimination of the performance-based exception, cash incentive payments will be subject to the 162(m) limitation in the future.
Illumina, Inc. 2018 Proxy Statement • 62
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth above and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
RESPECTFULLY SUBMITTED BY THE COMPENSATION COMMITTEE:
A. Blaine Bowman (Chairperson)
Robert S. Epstein, M.D. (Chairperson)
Roy A. WhitfieldBlaine Bowman
Karin Eastham, CPA
Illumina, Inc. 20162018 Proxy Statement • 5763
The following table provides information concerning the compensation of our CEO, CFO, and the three other most highly compensated executive officersNEOs for fiscal 20152017 and, for those executive officers who were namedNEOs in the 20152017 and 20142016 proxy statements, for fiscal 20142016 and 2013. For a complete understanding of the table, please read the narrative disclosures that follow the table.2015, as applicable.
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | |||||||||||||||||||||
Jay T. Flatley | 2015 | 995,693 | — | 7,000,261 | 1,158,750 | 62,903 | 9,217,607 | |||||||||||||||||||||
CEO; Chairman | 2014 | 859,192 | — | 12,733,556 | 1,204,000 | 59,688 | 14,856,436 | |||||||||||||||||||||
2013 | 829,386 | 250,000 | 5,212,140 | 986,870 | 17,878 | 7,296,274 | ||||||||||||||||||||||
Francis A. deSouza | 2015 | 748,462 | — | 4,000,279 | 556,200 | 97,070 | 5,402,011 | |||||||||||||||||||||
President; Director | 2014 | 689,231 | — | 4,800,210 | 784,000 | 100,079 | 6,373,520 | |||||||||||||||||||||
2013 | 13,462 | 140,000 | 6,573,787 | — | 240 | 6,727,489 | ||||||||||||||||||||||
Marc A. Stapley | 2015 | 501,039 | — | 2,300,101 | 401,275 | 11,079 | 3,213,494 | |||||||||||||||||||||
Executive Vice President, Chief | 2014 | 463,310 | — | 3,300,415 | 357,073 | 16,331 | 4,137,129 | |||||||||||||||||||||
Administrative Officer & CFO | 2013 | 447,749 | — | 1,472,517 | 288,074 | 12,465 | 2,220,805 | |||||||||||||||||||||
Christian O. Henry | 2015 | 499,465 | — | 2,300,101 | 301,275 | 66,891 | 3,167,732 | |||||||||||||||||||||
Executive Vice President & Chief | 2014 | 467,497 | — | 3,025,440 | 365,839 | 62,821 | 3,921,597 | |||||||||||||||||||||
Commercial Officer | 2013 | 457,111 | — | 1,472,517 | 295,146 | 19,592 | 2,244,366 | |||||||||||||||||||||
Tristan B. Orpin(5) | 2015 | 460,381 | — | 2,300,101 | 235,041 | 60,964 | 3,056,487 | |||||||||||||||||||||
Executive Vice President, ClinicalGenomics |
Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1) | Bonuses ($) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total ($) | |||||||||||||||||||||
Francis A. deSouza | 2017 | 849,039 | 7,000,326 | — | 901,000 | 57,351 | 8,807,716 | |||||||||||||||||||||
President and CEO; Director | 2016 | 799,558 | 7,500,177 | — | — | 109,098 | 8,408,832 | |||||||||||||||||||||
2015 | 748,462 | 4,000,279 | — | 556,200 | 97,070 | 5,402,011 | ||||||||||||||||||||||
Marc A. Stapley(4) | 2017 | 556,076 | 2,500,377 | — | 383,222 | 17,700 | 3,457,375 | |||||||||||||||||||||
Executive Vice President, Strategy and Corporate Development | 2016 | 540,000 | 2,300,154 | — | — | 16,467 | 2,856,621 | |||||||||||||||||||||
2015 | 501,039 | 2,300,101 | — | 401,275 | 11,079 | 3,213,494 | ||||||||||||||||||||||
Sam A. Samad(5) | 2017 | 425,769 | 2,500,252 | — | 259,727 | 104,602 | 3,290,350 | |||||||||||||||||||||
Senior Vice President and Chief Financial Officer | ||||||||||||||||||||||||||||
Garret Hampton(5) | 2017 | 424,039 | 4,500,478 | 200,000 | (6) | 303,849 | 494,293 | 5,922,659 | ||||||||||||||||||||
Executive Vice President, Clinical Genomics | ||||||||||||||||||||||||||||
Omead Ostadan | 2017 | 552,512 | 2,500,377 | — | 383,222 | 17,433 | 3,453,544 | |||||||||||||||||||||
Executive Vice President, Products and Operations | 2016 | 528,486 | 2,300,154 | — | — | 11,462 | 2,840,102 | |||||||||||||||||||||
Mark Van Oene(5)(7) | 2017 | 518,161 | 2,400,387 | — | 162,657 | 25,652 | 3,106,857 | |||||||||||||||||||||
Senior Vice President and Chief Commercial Officer |
(1) |
This reflects the grant date fair value of awards |
Reflects performance-based cash incentives earned during fiscal |
These amounts represent |
(4) | Mr. Stapley served as CFO during part of January 2017. |
(5) | Dr. Hampton, Mr. |
(6) | Represents a sign-on bonus. |
(7) | Mr. Van Oene’s salary for 2017 includes sales commissions of $91,623. |
Illumina, Inc. 20162018 Proxy Statement • 5864
Grants of Plan-Based Awards Table
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (Annual Cash Incentive) ($ in thousands)(1) | Estimated Future Payouts Under Equity Incentive Plan Awards (PSUs): Number of Shares(2) | All Other Stock Awards: Number of Shares or Stock or Units (#)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | |||||||||||||||||||||||||||||||||
Name | Award | Grant Date | Threshold | Target | Maximum | At Threshold | Target | Maximum | ||||||||||||||||||||||||||||
J. Flatley | Cash | — | 625 | 1,250 | 1,875 | — | — | — | — | — | ||||||||||||||||||||||||||
PSU(5) | Dec. 8, 2015 | — | — | — | 14,444 | 28,888 | 43,332 | — | 5,250,105 | |||||||||||||||||||||||||||
RSU | Dec. 8, 2015 | — | — | — | — | — | — | 9,630 | 1,750,156 | |||||||||||||||||||||||||||
F. deSouza | Cash | — | 300 | 600 | 900 | — | — | — | — | — | ||||||||||||||||||||||||||
PSU(5) | Dec. 8, 2015 | — | — | — | 8,254 | 16,508 | 24,762 | — | 3,000,164 | |||||||||||||||||||||||||||
RSU | Dec. 8, 2015 | — | — | — | — | — | — | 5,503 | 1,000,115 | |||||||||||||||||||||||||||
M. Stapley | Cash | — | 163 | 325 | 488 | — | — | — | — | — | ||||||||||||||||||||||||||
PSU(5) | Dec. 8, 2015 | — | — | — | 4,746 | 9,492 | 14,238 | — | 1,725,076 | |||||||||||||||||||||||||||
RSU | Dec. 8, 2015 | — | — | — | — | — | — | 3,164 | 575,025 | |||||||||||||||||||||||||||
C. Henry | Cash | — | 163 | 325 | 488 | — | — | — | — | — | ||||||||||||||||||||||||||
PSU(5) | Dec. 8, 2015 | — | — | — | 4,746 | 9,492 | 14,238 | — | 1,725,076 | |||||||||||||||||||||||||||
RSU | Dec. 8, 2015 | — | — | — | — | — | — | 3,164 | 575,025 | |||||||||||||||||||||||||||
T. Orpin | Cash | — | 127 | 254 | 380 | — | — | — | — | — | ||||||||||||||||||||||||||
PSU(5) | Dec. 8, 2015 | — | — | — | 4,746 | 9,492 | 14,238 | — | 1,725,076 | |||||||||||||||||||||||||||
RSU | Dec. 8, 2015 | — | — | — | — | — | — | 3,164 | 575,025 |
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (Annual Cash Incentive) ($ in thousands) | Estimated Future Payouts Under Equity Incentive Plan Awards (PSUs): Number of Shares(1) | All Other Stock Awards: Number of Shares or Stock or Units (#)(2) | Grant Date Fair Value of Stock and Option Awards ($)(3) | |||||||||||||||||||||||||||||||||
Name | Award | Grant Date | Threshold | Target | Maximum | At Threshold | Target | Maximum | ||||||||||||||||||||||||||||
Francis A. deSouza | Cash | — | 425 | 850 | 1,275 | — | — | — | — | — | ||||||||||||||||||||||||||
PSU(1) | Dec.11, 2017 | — | — | — | 12,261 | 24,521 | 36,782 | — | 5,250,191 | |||||||||||||||||||||||||||
RSU(2) | Dec.11, 2017 | — | — | — | — | — | — | 8,174 | 1,750,135 | |||||||||||||||||||||||||||
Marc A. Stapley | Cash | — | 181 | 362 | 542 | — | — | — | — | — | ||||||||||||||||||||||||||
PSU(1) | Dec.11, 2017 | — | — | — | 4,379 | 8,758 | 13,137 | — | 1,875,175 | |||||||||||||||||||||||||||
RSU(2) | Dec.11, 2017 | — | — | — | — | — | — | 2,920 | 625,201 | |||||||||||||||||||||||||||
Sam A. Samad | Cash | — | 124 | 248 | 371 | — | — | — | — | — | ||||||||||||||||||||||||||
PSU(1) | Jan.6, 2017 | — | — | — | 3,313 | 6,626 | 9,939 | — | 937,513 | |||||||||||||||||||||||||||
RSU(2) | Jan.6, 2017 | — | — | — | — | — | — | 2,209 | 312,551 | |||||||||||||||||||||||||||
PSU(1) | Dec.11, 2017 | — | — | — | 2,190 | 4,379 | 6,569 | — | 937,588 | |||||||||||||||||||||||||||
RSU(2) | Dec.11, 2017 | — | — | — | — | — | — | 1,460 | 312,601 | |||||||||||||||||||||||||||
Garret Hampton | Cash | — | 146 | 293 | 439 | — | — | — | — | — | ||||||||||||||||||||||||||
PSU(1) | Jan.6, 2017 | — | — | — | 5,299 | 10,598 | 15,897 | — | 1,500,041 | |||||||||||||||||||||||||||
RSU(2) | Jan.6, 2017 | — | — | — | — | — | — | 3,533 | 500,061 | |||||||||||||||||||||||||||
PSU(1) | Dec.11, 2017 | — | — | — | 4,379 | 8,758 | 13,137 | — | 1,875,175 | |||||||||||||||||||||||||||
RSU(2) | Dec.11, 2017 | — | — | — | — | — | — | 2,920 | 625,201 | |||||||||||||||||||||||||||
Omead Ostadan | Cash | — | 181 | 362 | 542 | — | — | — | — | — | ||||||||||||||||||||||||||
PSU(1) | Dec.11, 2017 | — | — | — | 4,379 | 8,758 | 13,137 | — | 1,875,175 | |||||||||||||||||||||||||||
RSU(2) | Dec.11, 2017 | — | — | — | — | — | — | 2,920 | 625,201 | |||||||||||||||||||||||||||
Mark Van Oene | Cash | — | 124 | 248 | 371 | — | — | — | — | — | ||||||||||||||||||||||||||
PSU(1) | May. 22, 2017 | — | — | — | 1,716 | 3,431 | 5,147 | — | 600,151 | |||||||||||||||||||||||||||
PSU(1) | Dec. 11, 2017 | — | — | — | 3,153 | 6,306 | 9,459 | — | 1,350,178 | |||||||||||||||||||||||||||
RSU(2) | Dec. 11, 2017 | — | — | — | — | — | — | 2,102 | 450,059 |
(1) |
(2) | Stock awards consist of restricted stock units (RSUs). RSUs vest in 25% increments on each of the first four anniversaries of the grant date. Vesting is subject to the individual’s continued service through the vesting date. |
(3) | This reflects the grant date fair value of awards granted during fiscal 2017 and is computed in accordance with FASB ASC Topic 718, based on the closing stock price on the grant date. |
Illumina, Inc. 20162018 Proxy Statement • 5965
Outstanding Equity Awards at Fiscal Year-End Table
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Un- exercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(2) | Market Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | ||||||||||||||||||||||||
J. Flatley | — | — | — | — | — | — | 168,875 | 32,415,556 | ||||||||||||||||||||||||
— | — | — | — | 21,910 (3) | 4,205,625 | — | — | |||||||||||||||||||||||||
— | — | — | — | 16,542 (4) | 3,175,237 | — | — | |||||||||||||||||||||||||
215,000 | — | 36.30 | 1/28/2020 | — | — | — | ||||||||||||||||||||||||||
225,000 | — | 70.82 | 2/1/2021 | — | — | — | ||||||||||||||||||||||||||
F. deSouza | — | — | — | — | — | — | 90,709 | 17,411,593 | ||||||||||||||||||||||||
— | — | — | — | 7,426 (3) | 1,425,421 | — | — | |||||||||||||||||||||||||
— | — | — | — | 8,169 (4) | 1,568,040 | — | — | |||||||||||||||||||||||||
M. Stapley | — | — | — | — | — | — | 48,447 | 9,299,402 | ||||||||||||||||||||||||
— | — | — | — | 10,900 (3) | 2,092,255 | — | — | |||||||||||||||||||||||||
— | — | — | — | 4,793 (4) | 920,016 | — | — | |||||||||||||||||||||||||
43,453 | 2,844 (5) | 36.30 | 1/20/2022 | — | — | — | ||||||||||||||||||||||||||
C. Henry | — | — | — | — | — | — | 47,361 | 9,090,944 | ||||||||||||||||||||||||
— | — | — | — | 6,324 (3) | 1,213,892 | — | — | |||||||||||||||||||||||||
— | — | — | — | 4,522 (4) | 867,998 | — | — | |||||||||||||||||||||||||
12,500 | — | 37.04 | 1/27/2020 | — | — | — | ||||||||||||||||||||||||||
5,500 | — | 69.34 | 1/31/2021 | — | — | — | ||||||||||||||||||||||||||
T. Orpin | — | — | — | — | — | — | 48,447 | 9,299,402 | ||||||||||||||||||||||||
— | — | — | — | 6,087 (3) | 1,168,400 | — | — | |||||||||||||||||||||||||
— | — | — | — | 4,793 (4) | 920,016 | — | — | |||||||||||||||||||||||||
35,000 | — | 37.04 | 1/27/2020 | — | — | — | — | |||||||||||||||||||||||||
5,000 | — | 69.34 | 1/31/2021 | — | — | — | — |
Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(2) | Market Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | ||||||||||||||||||||||||||||
Francis A. deSouza | — | — | — | — | — | 84,326 | 18,424,388 | ||||||||||||||||||||||||||||
— | — | — | 2,029 (3) | 443,316 | — | — | |||||||||||||||||||||||||||||
— | — | — | 20,610 (4) | 4,503,079 | — | — | |||||||||||||||||||||||||||||
Marc A. Stapley | — | — | — | — | — | 31,738 | 6,934,436 | ||||||||||||||||||||||||||||
— | — | — | 703 (3) | 153,598 | — | — | |||||||||||||||||||||||||||||
— | — | — | 8,417 (4) | 1,839,030 | — | — | |||||||||||||||||||||||||||||
46,297 | 36.30 | Jan. 20, 2022 | — | — | — | — | |||||||||||||||||||||||||||||
Sam A. Samad | — | — | — | — | — | 11,005 | 2,404,482 | ||||||||||||||||||||||||||||
— | — | — | 2,209 (3) | 482,644 | — | — | |||||||||||||||||||||||||||||
— | — | — | 1,460 (4) | 318,995 | — | — | |||||||||||||||||||||||||||||
Garret Hampton | — | — | — | — | — | 19,356 | 4,229,092 | ||||||||||||||||||||||||||||
— | — | — | 3,533 (3) | 771,925 | — | — | |||||||||||||||||||||||||||||
— | — | — | 2,920 (4) | 637,991 | — | — | |||||||||||||||||||||||||||||
Omead Ostadan | — | — | — | — | — | 31,738 | 6,934,436 | ||||||||||||||||||||||||||||
— | — | — | 703 (3) | 153,598 | — | — | |||||||||||||||||||||||||||||
— | — | — | 8,417 (4) | 1,839,030 | — | — | |||||||||||||||||||||||||||||
Mark Van Oene | — | — | — | — | — | 23,586 | 5,153,305 | ||||||||||||||||||||||||||||
— | — | — | 787 (3) | 171,952 | — | — | |||||||||||||||||||||||||||||
— | — | — | 6,083 (4) | 1,329,075 | — | — | |||||||||||||||||||||||||||||
6,000 | 29.44 | Dec. 5, 2021 | — | — | — | — |
(1) | Market value of stock awards was determined by multiplying the number of unvested shares by |
(2) | These stock awards consist of |
(3) |
(4) |
Illumina, Inc. 20162018 Proxy Statement • 6066
Option Exercises and Stock Vested Table
Name | Option Awards | Stock Awards | ||||||||||||||
Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | |||||||||||||
J. Flatley | 555,000 | 91,811,801 | 176,683 | 34,818,928 | ||||||||||||
F. deSouza | — | — | 4,602 | 831,607 | ||||||||||||
M. Stapley | 13,422 | 2,197,139 | 8,706 | 1,696,555 | ||||||||||||
C. Henry | 21,500 | 2,804,514 | 49,524 | 9,794,116 | ||||||||||||
T. Orpin | 50,000 | 7,506,888 | 1,856 | 337,492 |
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||
Francis A. deSouza | — | — | 19,824 | 4,357,652 | ||||||||||||
Marc A. Stapley | — | — | 10,751 | 2,272,150 | ||||||||||||
Sam A. Samad | — | — | — | — | ||||||||||||
Garret Hampton | — | — | — | — | ||||||||||||
Omead Ostadan | — | — | 10,532 | 2,237,267 | ||||||||||||
Mark Van Oene | 5,838 | 1,061,907 | 6,212 | 1,233,935 |
(1) | Value realized on exercise of option awards is computed by determining the difference between the closing market price of our common stock on The NASDAQ Global Select Market on the dates of exercise and the exercise price per share exercised. |
Nonqualified Deferred Compensation for Fiscal 20152017
Name | Executive Contributions in Last Fiscal Year ($)(1) | Illumina Contributions in Last Fiscal Year ($) | Aggregate Losses in Last Fiscal Year ($)(2) | Aggregate Withdrawals / Distributions ($) | Aggregate Balance at Last Fiscal Year-End ($)(3) | |||||||||||||||
J. Flatley | 250,000 | — | (30,214) | 479,785 | 2,271,238 | |||||||||||||||
F. deSouza | 766,017 | — | (25,220) | — | 740,797 | |||||||||||||||
M. Stapley | — | — | — | — | — | |||||||||||||||
C. Henry | — | — | — | — | — | |||||||||||||||
T. Orpin | 331,513 | — | (30,914) | 6,638 | 770,710 |
Name | Executive Contributions in Last Fiscal Year ($)(1) | Illumina Contributions in Last Fiscal Year ($) | Aggregate Earnings in Last Fiscal Year ($)(2) | Aggregate Withdrawals / Distributions ($) | Aggregate Balance at Last Fiscal Year-End ($) | |||||||||||||||
Francis A. deSouza | — | — | 128,918 | — | 927,323 | |||||||||||||||
Marc A. Stapley | — | — | — | — | — | |||||||||||||||
Sam A. Samad | — | — | — | — | — | |||||||||||||||
Garret Hampton | — | — | — | — | — | |||||||||||||||
Omead Ostadan | 131,542 | — | 349,206 | — | 2,888,281 | |||||||||||||||
Mark Van Oene | — | — | — | — | — |
(1) | Amounts included in the Summary Compensation Table in the “Salary” and “Non-Equity Incentive Plan Compensation” columns. |
(2) | These amounts are not included in the Summary Compensation Table because plan earnings were not preferential or above market. |
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are required to disclose the ratio of our median employee’s annual total compensation to the annual total compensation of our principal executive officer.
During fiscal 2017, the principal executive officer of Illumina was our Chief Executive Officer, Francis deSouza. For fiscal 2017, the annual total compensation for Mr. deSouza was $8,807,716, and for our median employee was $102,920, resulting in an estimated pay ratio of 86:1.
In accordance with Item 402(u) of Regulation S-K, we identified the median employee by (i) aggregating for each applicable employee (A) annual base salary for permanent salaried employees, or hourly rate multiplied by expected annual work schedule, for hourly employees, as of December 31, 2017 (the median employee determination date), (B) the target bonus, commission, or incentive compensation for 2017, and (C) accounting value for all equity awards granted in 2017, and (ii) ranking this compensation measure for our employees from lowest to highest. This calculation was performed for all employees, excluding Mr. deSouza, whether employed on a full-time, part-time, or seasonal basis.
Illumina, Inc. 2018 Proxy Statement • 67
The following report of the Audit Committee, the report of the Compensation Committee under “Compensation Committee Report,” along with statements in this proxy statement regarding the Audit Committee’s charter, are not considered “soliciting material” and are not considered to be “filed” with the SEC as part of this proxy statement. Any current or future cross-references to this proxy statement in filings with the SEC under either the Securities Act of 1933 or the Exchange Act will not include such reports or statements, except to the extent that we specifically incorporate it by reference in such filing.
The Audit Committee oversees our financial reporting process on behalf of the Board of Directors and provides advice with respect to our risk evaluation and mitigation processes. In fulfilling its oversight role, the Audit Committee monitors and advises the Board of Directors on:
• | the integrity of our consolidated financial statements and |
• | the independent registered public accounting firm’s qualifications and independence; |
Illumina, Inc. 2016 Proxy Statement • 61
• | the performance of our internal and independent audit functions; |
• | the adequacy of our internal controls; |
• | our compliance with legal and regulatory requirements; and |
• | the processes utilized by management for identifying, evaluating, and mitigating strategic, financial, operational, regulatory, and external risks inherent in our business. |
The Audit Committee meets with the independent registered public accounting firm, internal auditor, and our outside counsel, with and without our management present, to discuss the results of their examinations, their evaluations of our internal controls, and the overall quality of our financial reporting.
The Audit Committee, in its oversight role, has reviewed and discussed the consolidated financial statements and related schedule with management and Ernst & Young LLP, our independent registered public accounting firm. Management is responsible for the preparation, presentation, and integrity of our financial statements; accounting and financial reporting principles; establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)); establishing and maintaining internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)); evaluating the effectiveness of disclosure controls and procedures; evaluating the effectiveness of internal control over financial reporting; and evaluating any change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting. Ernst & Young LLP is responsible for performing an independent audit of the consolidated financial statements and related schedule and expressing an opinion on the conformity of those financial statements with U.S. generally accepted accounting principles, as well as expressing an opinion on the effectiveness of internal control over financial reporting.
During the course of fiscal 2015,2017, management completed the documentation, testing, and evaluation of our system of internal control over financial reporting in response to the requirements set forth in
Illumina, Inc. 2018 Proxy Statement • 68
Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations. The Audit Committee was kept apprised of the progress of the evaluation and provided oversight and advice to management during the process. In connection with this oversight, the Audit Committee received periodic updates from management and Ernst & Young LLP at each regularly scheduled Audit Committee meeting. At the conclusion of the process, management provided the Audit Committee with, and the Audit Committee reviewed, a report on the effectiveness of our internal control over financial reporting. The Audit Committee also reviewed the report of management contained in our annual report on Form 10-K for the fiscal year ended January 3, 2016,December 31, 2017, filed with the SEC, as well as Ernst & Young LLP’s Reports of Independent Registered Public Accounting Firm included in our annual report on Form 10-K related to its audit of (i) the consolidated financial statements and related schedule and (ii) the effectiveness of internal control over financial reporting. The Audit Committee continues to oversee our efforts related to our internal control over financial reporting and management’s preparations for the evaluation for the fiscal year ending January 1, 2017.December 30, 2018.
The Audit Committee has reviewed and discussed the consolidated audited financial statements with management, discussed with the independent registered public accounting firm the matters required
Illumina, Inc. 2016 Proxy Statement • 62
to be discussed by SAS 61 (CodificationAuditing Standard 1301 of Statements of Auditing Standards),the Public Company Accounting Oversight Board, has received the written disclosures and the letter from Ernst & Young LLP required by Rule 3526 of the Public Company Accounting and Oversight Board (communication with Audit Committees Concerning Independence), and has had discussions with the independent registered public accounting firm regarding their independence. Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in our annual report on Form 10-K for the fiscal year ended January 3, 2016,December 31, 2017, for filing with the SEC.
RESPECTFULLY SUBMITTED BY THE AUDIT COMMITTEE:
Karin Eastham, CPA (Chairperson)
A. Blaine Bowman
Daniel M. BradburyCaroline D. Dorsa
Roy A. Whitfield
Illumina, Inc. 20162018 Proxy Statement • 6369
Certain Relationships and Related Party Transactions
GRAIL Transactions
In January 2016, we formed GRAIL, Inc. Utilizing our sequencing technology, GRAIL will seek to develop a pan-cancer screeningblood test by directly measuring circulating nucleic acids in blood. In connection with GRAIL’s formation, two former members of our Board of Directors, Mr. Huber and Dr. Rastetter, made personal investments in GRAIL, with Mr. Huber investing $7.5 million and Dr. Rastetter investing $2 million.for early-stage cancer detection.
Mr. Flatley, our current Executive Chairman, and Chief Executive Officer, Richard Klausner, M.D., our former Chief Opportunity Officer, Dr. Rastetter, and Mr. Huber, were eachwas appointed as membersa member of GRAIL’s board of directors. As members of GRAIL’s board of directors, Drs. Rastetter and Klausner will receive compensation in the form of a GRAIL equity grant with a value to be determined, vesting over a four-year period. Mr. Flatley, as an employee of Illumina, will not be compensatedhe received no compensation for his service as a member of GRAIL’s board of directors.
In additionOctober 2016, our Board of Directors appointed Dr. Epstein to servingserve as a memberthe Board’s observer of, and an advisor to, the board of directors of GRAIL, for which he would be compensated $40,000 per year. In fiscal 2017, Dr. Epstein was paid $6,462 for such service. Dr. Epstein’s service as the Board’s observer of, and an advisor to, GRAIL’s board of directors ended on March 1, 2017.
On March 1, 2017, GRAIL announced that it raised over $900 million through the first close of its Series B financing. In connection with the first Series B closing, GRAIL repurchased a portion of our equity stake, following which Illumina now owns slightly less than 20% of GRAIL. In addition, Mr. Huber was appointed as GRAIL’s chief executive officer. As chief executive officer, Mr. Huber will receive a salary of $500,000 per year, in addition to an annual cash bonus opportunity based on performance objectives pre-established byFlatley resigned from GRAIL’s board of directors, resulting in Illumina no longer having board representation. Mr. Flatley currently serves as well asan observer of the right to acquire additionalboard of directors of GRAIL equity, some of which will be based on the achievement of certain qualifying events.in his personal capacity.
The foregoing GRAIL-related transactions were approved by a majority of the independent and disinterested members of our Board of Directors.
We entered into a license agreement with Tufts University in 1998 in connection with the license of patents filed by Dr. David Walt, one of our directors. Dr. Walt is the Robinson Professor of Chemistry at Tufts University. Under that agreement, we pay royalties to Tufts University upon the commercial sale of products based on the licensed technology. Tufts University pays a portion of the royalties received from us to Dr. Walt, the amount of which is controlled solely by Tufts University. During fiscal 2015, the portion of royalties received from us that Tufts University shared with Dr. Walt was approximately $200,000.
Tristan Orpin, our Executive Vice President, Clinical Genomics, has a brother who is currently serving as General Manager, Asia Pacific Commercial Operations, and has been employed by the Company in various capacities since December 2, 2002. In fiscal 2015, he received compensation in an amount consistent with the compensation paid to other employees at the general manager level (base salary generally ranging between $250,000 and $350,000) and consistent with the Company’s overall compensation principles based on his years of experience, performance, and positions within the Company.Related Party Transactions Review
All future transactions between us and our officers, Directors,directors, principal stockholders, and affiliates will be subject to approval by a majority of the independent and disinterested members of our Board of Directors, and will be on terms determined by such members of the Board of Directors to be no less favorable to us than could be obtained from unaffiliated third parties.
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As of the date of this proxy statement, we know of no other matters that will be presented for consideration at the annual meeting. If any other matters properly come before the meeting, it is the intention of the proxy agent named in the enclosed form of proxy to vote the shares represented as the Board of Directors may recommend. Discretionary authority with respect to such other matters is granted by the execution of the enclosed proxy.
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Stockholder Proposals for our 20172019 Annual Meeting
Stockholder proposals that are intendedUnder SEC Rule 14a-8, a stockholder who intends to be presentedpresent a proposal at our 20172019 annual meeting of stockholders must be received at our principal executive offices no later than December 8, 2016, in orderand who wishes the proposal to be included in the proxy statement and form of proxy relating tofor that meeting must submit the proposal in writing to our principal executive offices. The proposal must be received no later than December 7, 2018. The proposal and its proponent must satisfy all applicable requirements of Rule 14a-8.
Our bylaws permit a stockholder or group of stockholders (up to 20) who have owned at least three percent of our common stock for at least three years to submit director nominees (up to the greater of two nominees or 20% of the Board, as determined in accordance with the bylaws) for inclusion in our proxy statement if the nominating stockholder(s) satisfies the requirements specified in the bylaws. With respect to stockholder nominees for director election submitted for inclusion in our proxy statement for our 2019 annual meeting, written notice of nominations must be provided by the stockholder proponent(s) to us in accordance with our bylaws. The notice must be delivered to, or mailed and received by, our Corporate Secretary between November 7, 2018 and December 7, 2018. These deadlines are based on the 150th day and 120th day, respectively, before the one-year anniversary of the date of the proxy statement for the 2018 annual meeting (which date, for purposes of our bylaws, is April 6, 2018). The ability to include a nominee in our proxy statement is subject to the terms and conditions set forth in our bylaws.
With respect to stockholder nominees for director election at our 2019 annual meeting (other than nominees submitted for inclusion in our proxy materials) and stockholder proposals for consideration at our 2019 annual meeting that are not submitted for inclusion in our proxy materials under Rule 14a-8, written notice of nominations and proposals must be provided by the stockholder proponent to us in accordance with our bylaws. The notice must be delivered to, or mailed and received by, our Corporate Secretary between January 23, 2019 and February 22, 2019 and must meetcomply with all other requirements as specified inapplicable provisions of our bylaws. You may obtain a copy of our bylaws and Rule 14a-8 underby writing to the Exchange Act. In addition,Corporate Secretary at the address shown on the cover of this proxy solicited by the Board of Directors for the 2017 annual meeting will confer discretionary authority to vote on any stockholder proposal presented at that meeting, unless we receive notice of such proposal not later than February 17, 2017.statement.
Our annual report on Form 10-K for the fiscal year ended January 3, 2016,December 31, 2017, including our audited financial statements for fiscal 2015,2017, is being mailed to you along with this proxy statement. In order to reduce printing and postage costs, in certain circumstances only one annual report, proxy statement, or Notice of Internet Availability of Proxy Materials, as applicable, will be mailed to multiple stockholders sharing an address unless we receive contrary instructions from one or more of the stockholders sharing an address. If your household has received only one annual report, proxy statement, or Notice of Internet Availability of Proxy Materials, as applicable, we will deliver promptly a separate copy of the annual report, proxy statement, or Notice of Internet Availability of Proxy
Illumina, Inc. 2018 Proxy Statement • 71
Materials, as applicable, to any stockholder who sends a written or oral request to the Corporate Secretary of Illumina, Inc., at 5200 Illumina Way, San Diego, California 92122 Attention:or makes an oral request to the office of the Corporate Secretary.Secretary at (858) 202-4500. If your household is receiving multiple copies of our annual reports, proxy statements, or Notices of Internet Availability of Proxy Materials and you wish to request delivery of a single copy, you may send a written request to Illumina, Inc., 5200 Illumina Way, San Diego, California 92122, Attention: Corporate Secretary.
Where You Can Find More Information
We maintain an Internetinternet site atwww.illumina.com. We use our website as a channel of distribution of material company information. Our website and the information posted on it or connected to it shall not be deemed to be incorporated by reference into this proxy statement
Illumina, Inc. 20162018 Proxy Statement • 6572
ILLUMINA, INC. 5200 ILLUMINA WAY SAN DIEGO, CA 92122 ATTN: | VOTE BY INTERNET Before The Meeting- Go towww.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
E04129-P75446E43362-P00732 KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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The Board of Directors recommends you vote FOR | ||||||||||||||||||||||||||||||||||||||
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1. | Election of Directors with Terms Expiring in | |||||||||||||||||||||||||||||||||||||
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The Board of Directors recommends you vote FOR proposals 2 | For | Against | Abstain | |||||||||||||||||||||||||||||||||||
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To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending |
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To approve, on an advisory basis, the compensation of the named executive officers as disclosed in the Proxy Statement. |
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The Board of Directors recommends you vote AGAINST proposal 4. | ||||||||||||||||||||||||||||||||||||||
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To approve, on an advisory basis, |
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | ||||||||||||||||||||||||||||||||||
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com.
E04130-P75446E43363-P00732
ILLUMINA, INC.
Annual Meeting of Stockholders
May
This proxy is solicited by the Board of Directors
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The stockholder(s) hereby appoint(s)
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations.
Continued and to be signed on reverse side
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