| Page General This Proxy Statement is being furnished to holders of common stock, par value $0.001 per share (the “Common Stock”), of Monolithic Power Systems, Inc., a Delaware corporation (the “Company” or “MPS”), in connection with the solicitation of proxies by our Board of Directors (the “Board”) for use at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Thursday, June 13, 201916, 2022 at 10:00 a.m., Pacific Daylight Time, and at any adjournment or postponement thereof for the purpose of considering and acting upon the matters set forth herein. TheThis year’s Annual Meeting will be held at our principal executive office located at 4040 Lake Washington Boulevard NE, Suite 201, Kirkland, Washington 98033. The telephone number at that location is (425) 296-9956.a virtual meeting. You will not be able to attend the meeting in person. Please follow the instructions carefully on how to access and attend the virtual meeting in “Annual Meeting Attendance.”
Internet Availability of Proxy Materials Pursuant to the rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice Regarding the Availability of Proxy Materials (the “Notice”) to certain of our stockholders of record, and upon request, we will send a paperprinted copy of the proxy materials and proxy card to other stockholders of record.card. Brokers and other nominees who hold shares on behalf of beneficial owners will be sending their own similar notice. Stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to request a printed copy by mail or electronically may be found on the Notice and on the website referred to in the Notice, including an option to request paper copies on an ongoing basis. We intend to make this Proxy Statement available on the Internet at www.monolithicpower.com, and to mail the notice,Notice or to mail the Proxy Statement andother proxy card,materials, as applicable, on or about May 3, 20192022 to all stockholders of record at the close of business on April 16, 201921, 2022 (the “Record Date”). Record Date;Date and Outstanding Shares Only stockholders of record at the close of business on the Record Date are entitled to notice of, and to vote at, the Annual Meeting and any adjournment thereof. These stockholders are entitled to cast one vote for each share of Common Stock held as of the Record Date on all matters properly submitted for the vote of stockholders at the Annual Meeting. On the Record Date, 43,036,45046,625,000 shares of Common Stock were issued and outstanding. No shares of our Preferred Stock were issued and outstanding. For information regarding security ownership by management, directors, and beneficial owners of more than 5% of the Common Stock, see the section ““Security Ownership of Certain Beneficial Owners and Management.” Procedure for Submitting Stockholder Proposals and Director Nominations Requirements for stockholder proposals to be considered for inclusion in our proxy materialsmaterials. . Proposals of stockholders which are to be presented by such stockholders at our 20202023 annual meeting of stockholders must meet the stockholder proposal requirements contained in Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and. Such proposals must be received by us no later than January 3, 20202023 in order that they mayto be included in the proxy statement and form of proxy relating to that meeting. Such stockholder proposals should be submitted to Monolithic Power Systems, Inc., 4040 Lake Washington Boulevard NE, Suite 201, Kirkland, Washington 98033, Attention: Corporate Secretary. No such stockholder proposals were received by us prior to the deadline for this year’s Annual Meeting. Requirements for director nominations to be considered for inclusion in our proxy materials. Pursuant to the proxy access provisions of our Amended and Restated Bylaws (the “Bylaws”), an eligible stockholder, or a group of up to 20 stockholders, who has held at least 3% of our Common Stock continuously for at least three years may nominate one director and have that nominee included in our proxy materials. To be timely for the 2023 annual meeting of stockholders, notice of proxy access director nominations must be received by us between January 3, 2023 and February 3, 2023. In addition, the notice must set forth the information required by our Bylaws with respect to each director nomination that a stockholder intends to present at the 2023 annual meeting of stockholders. Requirements for stockholder proposals to be brought before an annual meeting but not included in our proxy materials. If a stockholder wishes to present a proposal at our 20202023 annual meeting of stockholders, and the proposal is not intended to be included in our proxy statement relating to that meeting, the stockholder must give advance notice to us prior to the deadline for such meeting. To be timely for the 2023 annual meeting as determined in accordance with our Bylaws (which are attached as Exhibit 3.4 to our Form S-1/A Registration Statement filed with the SEC on November 15, 2004). Under our Bylaws, in order to be deemed properly presented,of stockholders, notice of proposed business must be delivered to or mailed and received by our Corporate Secretary at our principal executive office not fewer than 90 or more than 120 calendar days before the one-year anniversary of the date on which we first mailed the proxy statement to stockholders in connection with the previous year’s annual meeting of stockholders (the “Notice Period”). As a result, the Notice Period for our 2020 annual meeting will begin onus between January 3, 20202023 and end on February 3, 2020.2023. However, in the event the date of the 20202023 annual meeting of stockholders will be changed by more than 30 days from the date of this year’s meeting,Annual Meeting, notice by the stockholder to be timely must be so received not later than the close of business on the later of: (1) 90 calendar days in advance of the 20202023 annual meeting of stockholders and (2) 10 calendar days following the date on which public announcement of the date of the 20202023 annual meeting of stockholders is first made. A stockholder’sIn addition, the notice must set forth the information required by our Bylaws with respect to each proposal that a stockholder intends to present at the 2023 annual meeting of stockholders. All proposals described above must be submitted to our Corporate Secretary shall set forth as to each matterusing the stockholder proposes to bring before the 2020 annual meeting: (a) a brief description of the business desired to be brought before the 2020 annual meeting and the reasons for conducting such business at the 2020 annual meeting, (b) the name and address, as they appear on our books, of the stockholder proposing such business, (c) the class and number of shares of Common Stock that are beneficially owned by the stockholder, (d) any material interest of the stockholdermethods outlined in such business, and (e) any other information that is required to be provided by the stockholder pursuant to Regulation 14A of the 1934 Act, in his or her capacity as a proponent to a stockholder proposal. If a stockholder gives notice of such a proposal after the Notice Period, the stockholder will not be permitted to present the proposal to the stockholders for a vote at the 2020 annual meeting.“Stockholder Communications.” Annual Meeting Attendance Attendance: The Annual Meeting will be held solely by remote communication. You will not be able to attend the meeting in person. Stockholders as of the close of business on the Record Date who duly registered to attend the Annual Meeting will be able to listen to the webcast, vote their shares and submit questions during the virtual meeting. The Annual Meeting can be assessed at: www.meetnow.global/MJQHUHA. You must have your 15-digit control number to join the event. We encourage you to access the Annual Meeting ten minutes prior to the start time for check-in and registration. Registration Process: Stockholders of record. If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A. (“Computershare”), you are considered, with respect to those shares, the stockholder of record. As a stockholder of record, you are already registered for the virtual meeting and will be able to listen to the webcast, vote and submit questions during the meeting. Questions pertinent to meeting matters and that are submitted in accordance with our rules of conduct for the Annual Meeting will be answered during the meeting, subject to applicable time constraints. Beneficial owners. If you hold your shares through a broker, bank, trust or other nominee, you must register in advance in order to vote and submit questions during the virtual meeting. To register in advance, you must obtain a legal proxy from the broker, bank, trust or other nominee that holds your shares giving you the right to vote the shares. You must submit proof of the legal proxy reflecting our holdings, along with your name and email address to Computershare. Requests for registration must be labeled as “Legal Proxy” and be received no later than 2:00 p.m., Pacific Time, on June 9, 2022. You will receive a confirmation of your registration by email after we receive your registration materials. Requests for registration can be made in the following methods: By e-mail: | legalproxy@computershare.com | By mail: | Computershare | | Monolithic Power Systems Legal Proxy | | P.O. Box 43001 | | Providence, RI 02940-3001 |
Alternatively, you may join the meeting as a guest and listen to the webcast without advance registration. As a guest, you will not be able to vote or submit questions during the meeting. Voting Voting prior to the Annual Meeting. If you are the record holder of your stock, you have three options for submitting your votes prior to the Annual Meeting: | | ● | by following the instructions for Internet voting printed on the Notice or your proxy card; |
| | ● | by using the telephone number printed on your proxy card; or |
| | ● | by completing the enclosed proxy card, signing and dating it and mailing it in the enclosed postage-prepaid envelope. |
If you have Internet access, we encourage you to record your vote on the Internet. It is convenient, and it saves us significant postage and processing costs. In addition, when voting over the Internet or by telephone prior to the meeting date, your vote is recorded immediately, and there is no risk that postal delays will cause your vote to arrive late, and therefore not be counted. All shares entitled to vote and represented by properly executed proxy cards or properly granted proxies submitted electronically over the Internet or telephone received prior to the Annual Meeting, and not revoked, will be voted at the Annual Meeting in accordance with the instructions provided. If no instructions are indicated, the shares represented by that proxy will be voted as recommended by the Board. If any other matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn the Annual Meeting to another time or place (including, without limitation, for the purpose of soliciting additional proxies), the persons named as proxies and acting thereunder will have discretion to vote on those matters in accordance with their best judgment. We do not currently anticipate that any matters other than the proposals described herein will be raised at the Annual Meeting. If your shares are held in a stock brokerage account or by a bank, trust or other nominee, you will receive a notice from your broker, bank, trust or other nominee that includes instructions on how to vote your shares. Your broker, bank, trust or other nominee will allow you to deliver your voting instructions over the Internet and may also permit you to submit your voting instructions by telephone. YOUR VOTE IS IMPORTANT. You should submit your proxy even if you plan to attend the Annual Meeting. Voting by attendingAttending the Annual Meeting. A stockholderThe Annual Meeting will be a virtual meeting. Stockholders of record may also vote his or her shares in person atand beneficial owners as of the Annual Meeting. A stockholder planningclose of business on the Record Date who duly registered to attend the Annual Meeting should bring proof of identification for entrancewill be able to listen to the Annual Meeting. If a stockholder of record attendswebcast and vote their shares during the virtual meeting. Please follow the instructions carefully on how to access and attend the virtual meeting, and vote in “Annual Meeting he or she may also submit his or her vote in person, and anyAttendance.” Any previous votes that were submitted by the stockholder, whether by Internet, telephone or mail, will be superseded by the vote that such stockholder casts at the Annual Meeting. If you wish to attend the Annual Meeting in person but you hold your shares through a broker, bank, trust or other nominee, you must bring proof of your ownership to the Annual Meeting. For example, you could bring an account statement showing that you beneficially owned shares of our Common Stock as of the Record Date as acceptable proof of ownership. You must also contact your broker, bank, trust or other nominee, and follow its instructions in order to vote your shares at the Annual Meeting. You may not vote your shares at the Annual Meeting unless you have first followed the procedures outlined by your broker, bank, trust or other nominee. Changing vote; revocabilityRevocability of proxy. Any proxy given by a stockholder of record pursuant to this solicitation may be revoked by the person giving it at any time before it is voted at the Annual Meeting. Proxies submitted by stockholders of record may be revoked by: | | ● | filing a written notice of revocation bearing a later date than the previously submitted proxy which is received by our Corporate Secretary at or before the taking of the vote at the Annual Meeting; |
| | ● | duly executing a later dated proxy relating to the same shares and delivering it to our Corporate Secretary at or before the taking of the vote at the Annual Meeting; |
| | ● | submitting another proxy by telephone or via the Internet (your latest telephone or Internet voting instructions are followed); or |
| | ● | virtually attending and voting at the Annual Meeting and voting in person (although attendance at the Annual Meeting will not in and of itself constitute a revocation of a previously submitted proxy). |
Any written notice of revocation or subsequent proxy card must be received by our Corporate Secretary prior to the taking of the vote at the Annual Meeting. Such written notice of revocation or subsequent proxy card shouldmust be hand delivered to our Corporate Secretary or should be sent so as to be delivered to Monolithic Power Systems, Inc., 4040 Lake Washington Boulevard NE, Suite 201, Kirkland, Washington 98033, Attention: Corporate Secretary, prior tosubmitted using the date of the Annual Meeting.methods outlined in “Stockholder Communications.” If you hold your shares through a broker, bank, trust or other nominee, you may change your vote by submitting new voting instructions to your broker, bank, trust or other nominee. 2
TableNo Right of Contents
Neither Delaware law nor our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) provide for appraisal or other similar rights for dissenting stockholders in connection with any of the proposals to be voted upon at the Annual Meeting. Accordingly, our stockholders will have no right to dissent and obtain payment for their shares. Expenses of Solicitation We will bear all expenses of this solicitation, including the cost of preparing and mailing this solicitation material. We may reimburse brokerage firms, custodians, nominees, fiduciaries and other persons representing beneficial owners of Common Stock for their reasonable expenses in forwarding solicitation material to such beneficial owners. Our directors, officers and employees may also solicit proxies in person or by telephone, letter, e-mail or other means of communication. Such directors, officers and employees will not be additionally compensated, but they may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation. We may engage the services of a professional proxy solicitation firm to aid in the solicitation of proxies from certain brokers, bank nominees and other institutional owners. If we hire a professional proxy solicitation firm, we expect our costs for such services would be approximately $10,000.$25,000. Quorum;Quorum, Required Votes; Abstentions;Votes, Abstentions and Broker Non-Votes
Holders of a majority of the outstanding shares entitled to vote must be present at the Annual Meeting in order to have the required quorum for the transaction of business. Stockholders are counted as present at the meetingAnnual Meeting if they: (1) are present in personduly registered to attend and vote their shares at the Annual Meeting, or (2) have properly submitted a proxy card by mail or voted by telephone or by using the Internet. If the shares present at the Annual Meeting do not constitute the required quorum, the Annual Meeting may be adjourned to a subsequent date for the purpose of obtaining a quorum. The required votes to approve the proposals to be considered at this Annual Meeting are as follows: | | ● | The affirmative vote of a plurality of the votes duly cast is required for the election of directors. As further described in Proposal One below, any nominee for director who receives a greater number of votes “Withheld” from his or her election than votes “For” his or her election will promptly tender his or her resignation to the Board following certification of the election results.results for the Board’s consideration. |
| | ● | The affirmative vote of a majority of the shares of stock entitled to vote thereon which are present in person via attendance at the Annual Meeting or represented by proxy at the Annual Meeting is required to ratify the appointment of Ernst & Young LLP (“Ernst & Young”) as our independent registered public accounting firm. |
| | ● | The affirmative vote of a majority of the shares of stock entitled to vote thereon which are present in person via attendance at the Annual Meeting or represented by proxy at the Annual Meeting is required to approve, on an advisory basis, the compensation of our named executive officers. While this vote is advisory and not binding on us or our Board, the Board and Compensation Committee intend to take into account the outcome of the vote when considering future executive compensation arrangements. |
Under the General Corporation Law of the State of Delaware, both abstaining votes and broker non-votes are counted as present and entitled to vote and are, therefore, included for purposes of determining whether a quorum is present at the Annual Meeting. An abstaining vote is not counted as a vote cast for the election of directors, but has the same effect as a vote cast against each of the other proposals requiring approval by a majority of the shares of stock entitled to vote thereon which are present in person via attendance at the Annual Meeting or represented by proxy at the Annual Meeting, such as the ratification of our independent registered public accounting firm.Meeting. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. A broker non-vote is not counted as a vote cast forwill have no effect on the electionoutcome of directors or as being present and entitled to vote for proposals requiring approval by a majority of the shares of stock entitled to vote thereon which are present in person or represented by proxy at the Annual Meeting and, therefore, does not have the effect of a vote against such proposals. For purposes of ratifying our independent registered public accounting firm, brokers have discretionary authority to vote. Stockholder List A list of stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder for any purpose germane to the Annual Meeting during ordinary business hours at 4040at: 5808 Lake Washington Boulevard NE, Suite 201, Kirkland, Washington 98033 for the ten days prior to the Annual Meeting, and also at the Annual Meeting. PROPOSAL ONE ELECTION OF DIRECTORS Classified Board of Directors;Directors and Nominees The Board currently consists of sixseven members. Under our certificateCertificate of incorporationIncorporation and bylaws,Bylaws, the Board has the authority to set the number of directors from time to time by resolution. In addition, our certificateCertificate of incorporationIncorporation provides for a classified Board consisting of three classes of directors, each serving staggered three-year terms. As a result, a portion of the Board will be elected each year for three-year terms. TwoThree Class III directors are to be elected to the Board at the Annual Meeting. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the Board’s nominees,, Michael Hsing, Herbert Chang and MichaelCarintia Martinez. Mr. Hsing,. Mr. Chang and Mr. HsingMs. Martinez are standing for re-election to the Board. Each person nominated for election has agreed to serve if elected, and the Board has no reason to believe that any nominee will be unavailable or will decline to serve. In the event, however, that any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who is designated by the current Board to fill the vacancy. The term of office of each person elected as a Class III director will continue for three years or until his or her successor has been duly elected and qualified. If elected, the term for Mr. Hsing, Mr. Chang and Mr. HsingMs. Martinez will expire at the 20222025 annual meeting of stockholders.
Our directors are elected by a “plurality” vote. The nominees for each of the twothree Board seats to be voted on at the Annual Meeting receiving the greatest number of votes cast will be elected. Abstentions and shares held by brokers that are not voted in the election of directors will have no effect. In addition, we have adopted a corporate governance policy requiring each director nominee to submit a resignation letter if more “Withheld” than “For” votes are received. See the section ““Director Voting Policy”Policy” for more details on this policy. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR”“FOR” THE ELECTION TO THE BOARD OF EACH OF THE PROPOSED NOMINEES. Information Regarding Nominees and Other Directors The following table summarizes certain information regarding the nominees and other directors: Name | | Age | | Director Since | | Principal Role | | Age | | Director Since | | Principal Role | Michael Hsing | | 59 | | 1997 | | Chairman of the Board, President and Chief Executive Officer / Nominee | | 62 | | 1997 | | Chairman of the Board, President and Chief Executive Officer / Nominee | Herbert Chang (1)(2)(3) | | 57 | | 1999 | | Lead Director / Nominee | | 60 | | 1999 | | Lead Independent Director / Nominee | Eugen Elmiger (1)(3) | | 55 | | 2012 | | Director | | 58 | | 2012 | | Director | Victor K. Lee (2) | | 62 | | 2006 | | Director | | 65 | | 2006 | | Director | Carintia Martinez | | | 56 | | 2021 | | Director / Nominee | James C. Moyer | | 76 | | 1998 | | Director | | 79 | | 1998 | | Director | Jeff Zhou (1)(2) | | 64 | | 2010 | | Director | | 67 | | 2010 | | Director |
(1) | Member of the Compensation Committee. |
(2) | Member of the Audit Committee. |
(3) | Member of the Nominating and Governance Committee (the “Nominating Committee”). |
Nominees for Class III Directors Whose Term Will Expire in 20192022
Michael Hsing has served on our Board and as our President and Chief Executive Officer since founding MPS in August 1997. Prior to founding MPS, Mr. Hsing was a Senior Silicon Technology Developer at several analog integrated circuits (“IC”) companies, where he developed and patented key technologies, which set new standards in the power electronics industry. Mr. Hsing is an inventor on numerous patents related to the process development of bipolar mixed-signal semiconductor manufacturing. Mr. Hsing holds a B.S.E.E. from the University of Florida.
Herbert Changhas served on our Board since September 1999. SinceMr. Chang is currently the general partner of GrowStar Partners Group Limited. From March 2014 until December 2019, Mr. Chang has beenwas the general manager of Mutto Optronics Corporation, an OEM/ODM knife manufacturer listed in on the Taiwan OTC. Mr. Chang is also a Managing Member of Growstar Associates, Ltd., which was the General Partnerventure capitalist and the Fund Manager of VCFA Growth Partners, L.P. from 2007 to 2013 and is the Chief Executive Officer of C Squared Management Corporation. Mr. Chang’s companies focusfocuses on investing in companies in the semiconductor, telecommunications, networking, software and/orand Internet industries. Mr. Chang was the President of InveStar Capital Inc. from April 1996 until 2015 and serves on the board of directors of a number of private companies.companies and a TWSE-listed company. Mr. Chang received a B.S. in geology from National Taiwan University and an M.B.A. from National Chiao Tung University in Taiwan. Thales Alenia Space, a European aerospace manufacturer specializing in satellite systems, which position she has held since January 2018. From February 2008 to December 2017, Ms. Martinez held various senior positions, including Vice President of Renault-Nissan Alliance Quality and Vice President of Information Systems for Marketing and Sales, at Renault Group, a French automobile manufacturer. Prior to February 2008, Ms. Martinez held a variety of managerial roles in information systems and other corporate functions under different entities within Renault Group and Nissan Motor Corporation. Ms. Martinez holds a master’s degree in Architecture and City Planning from Pontificia Universidade Catolica do Parana in Brazil, a master’s degree in Project Management from Université de Technologie de Compiègne in France, and a master’s degree in Urban Planning from Université Paris XII - Val de Marne and Ecole Nationale des Ponts et Chaussées in France. Incumbent Class I Directors Whose Terms Will Expire in 20202023 Victor K. Leehas served on our Board since September 2006. Mr. Lee was a member of the board of directors at MoSys, Inc., a fabless semiconductor company from June 2012 to June 2016. Mr. Lee served as Chief Financial Officer of Ambarella, Inc., a fabless semiconductor company, from August 2007 to March 2011. From December 2002 through June 2007, Mr. Lee served as Chief Financial Officer and Secretary of Leadis Technology Inc., a fabless semiconductor company. From December 1999 to January 2001, Mr. Lee served as the Chief Financial Officer and Secretary of SINA Corporation, an Internet media company. From September 1998 to August 1999, Mr. Lee was the Vice President and Acting Chief Financial Officer of VLSI Technology, Inc., a semiconductor manufacturer, and from 1997 to 1998, Vice President, Corporate Controller of VLSI Technology, Inc. From 1989 to 1997, Mr. Lee was a finance director at Advanced Micro Devices, Inc. Mr. Lee holds a B.S. in Industrial Engineering and Operations Research and an M.B.A. from the University of California, Berkeley. James C. Moyerhas served on our Board since October 19981998. Mr. Moyer is a retired business executive and served as our Chief Design Engineer from September 1997 tountil his retirement in January 2016. Before joining MPS, from June 1990 to September 1997, Mr. Moyer held senior technical positions at Micrel, Inc. Prior to that, Mr. Moyer held senior design engineering positions at Hytek Microsystems Inc., National Semiconductor Corporation, and Texas Instruments Inc. Mr. Moyer holds a B.A.E.E. from Rice University. Incumbent Class II Directors Whose Term Will Expire in 20212024 Eugen Elmigerhas served on our Board since October 2012. Mr. Elmiger currently serves as Chief Executive Officer of Maxon group, a leading advanced motion company, awhich position that he has held since January 2011. From 1991 to 2011, Mr. Elmiger held senior executive positionscurrently serves on the board of directors of Kardex, a global leader in the sales, marketingautomated storage solutions and engineering divisions of Maxon motor.material handling systems. Mr. Elmiger holds a B.S. in Electrical Engineering from the Lucerne (Horw) University of Applied Science and Art.
Dr. Jeff Zhou has served on our Board since February 2010. Dr. Zhou currently servesis a retired business executive. Before his retirement, Dr. Zhou served as the Executive Vice Chairman of MiasoléMiaSolé, which develops thin film solar technology, awhich position he has held since 2018.from 2018 to 2019. Dr. Zhou served as the Chief Executive Officer of MiaSolé from 2013 to 2018. Dr. Zhou also served as Executive Chairman of Alta Devices, a developer of flexible mobile power technology, from 2014 to 2015. Before joining MiaSolé, Dr. Zhou was President of Hanergy Holding America, Inc., a developer and operator of solar power plants, from 2012 to 2013. Dr. Zhou was Vice Presidentalso served as Executive Chairman of Product Engineering of Nanosolar, Inc.,Alta Devices, a developer of solarflexible mobile power technology, from 20112014 to 2012. Dr. Zhou was Chief Operating Officer at NDS Surgical Imaging, a medical imaging technology company, during 2010. From 2008 to 2009, Dr. Zhou was Vice President of Global Engineering and General Manager of Asia Pacific Business at NDS Surgical Imaging. From 2005 to 2007, Dr. Zhou was Vice President of Engineering for several business divisions and General Manager of the China and India Design Centers at Flextronics Inc. From 2000 to 2005, Dr. Zhou was Vice President and General Manager of several divisions at Honeywell International Inc.2015. Dr. Zhou holds a Ph.D. degree in Electrical Engineering from the University of Florida.
There is no family relationship among any of our executive officers, directors and nominees. Board Diversity The following table presents the Board’s diversity statistics: Board Diversity Matrix (As of May 2, 2022) | Total Number of Directors | 7 | | | Female | Male | Non-Binary | Did Not Disclose Gender | Part I: Gender Identity | Directors | 1 | 6 | 0 | 0 | Part II: Demographic Background | African American or Black | 0 | 0 | 0 | 0 | Alaskan Native or Native American | 0 | 0 | 0 | 0 | Asian | 0 | 4 | 0 | 0 | Hispanic or Latinx | 1 | 0 | 0 | 0 | Native Hawaiian or Pacific Islander | 0 | 0 | 0 | 0 | White | 0 | 2 | 0 | 0 | Two or More Races or Ethnicities | 0 | 0 | 0 | 0 | LGBTQ+ | 0 | Did Not Disclose Demographic Background | 0 |
Director Independence At least annually, the Nominating Committee reviews the independence of each non-employee director and makes recommendations to the Board, and the Board affirmatively determines whether each director qualifies as independent. Each director must keep the Nominating Committee fully and promptly informed as to any development that may affect the director’s independence. The Board has determined that each of Herbert Chang, Eugen Elmiger, Victor K. Lee, Carintia Martinez, James C. Moyer and Jeff Zhou are “independent” under the applicable listing standards of The NASDAQ Stock Market. Director Qualifications Our Board includes sixseven members who are well-qualified to serve on the Board and represent our stockholders’ best interests. Our Board consists of directors who have the following characteristics: | | 1.●
| Are seasoned executive leaders with strong corporate governance experience; |
| ● | Possess a professional background that would enable the development of a deep understanding of our business;global business and operations; |
| | 2. ●
| Have strong interests in innovations and emerging technologies; |
| ● | Have skills or experience in risk management and cybersecurity; |
| ● | Have the ability to embrace our values, diversity and culture; |
| ● | Bring diversity to the Board through their experiences in various industries, both domestically and internationally; |
| | 3. ●
| Are independent thinkers and work well together; |
| | 4.
| Have the ability to embrace our values and culture;
|
| 5. ●
| Have high ethical standards; |
| | 6. ●
| Possess sound business judgment and acumen; and |
| | 7. ●
| Are willing to commit their time and resources necessary for the Board to effectively fulfill its responsibilities. |
We believe that each of the directors and director nominees and the rest of the directors possess these attributes. In addition, the directors bring to the Board a breadth of experience, including extensive financial and accounting expertise, public company board experience, knowledge of the semiconductor business and technology, broad global experience, and extensive operational and strategic planning experience, and the ability to assess and manage business risks, including risks related to cybersecurity and information security, in complex, high-growth global companies. The Board and the Nominating Committee believe the skills, qualities, attributes, experience and diversity of backgrounds of our directors provide us with a diverse range of perspectives to effectively address our evolving needs and represent the best interests of our stockholders. The following describestable highlights the specific key qualifications, business skills, experience and perspectivesattributes that each of ourthe directors and director nominees brings to the Board, in addition to the general qualifications described above and described in their individual biographies:Board: | Michael Hsing | Herbert Chang | Eugen Elmiger | Victor K. Lee | Carintia Martinez | James C. Moyer | Jeff Zhou | Executive leadership | ● | ● | ● | ● | ● | ● | ● | Corporate governance | ● | ● | ● | ● | ● | ● | ● | Global business and operations | ● | ● | ● | ● | ● | ● | ● | Innovations and technologies | ● | ● | ● | ● | ● | ● | ● | Risk management | ● | ● | ● | ● | ● | ● | ● | Cybersecurity | ● | ● | ● | | ● | ● | ● | Finance and accounting expertise | ● | ● | ● | ● | ● | | ● | Human capital management | ● | ● | ● | ● | ● | ● | ● | Diversity | ● | ● | ● | ● | ● | ● | ● |
Michael Hsing:Hsing | | Mr. Hsing, the co-founder of MPS, is a visionary in power management technology as well as a strong leader, motivator and successful entrepreneur. Mr. Hsing provides the Board with valuable insight into management’s perspective with respect to our operations, and he provides the Board with the most comprehensive view of our operational history. Under his leadership, we have experienced significant revenue growth and profitability. Since our initial public offering in 2004, stockholder value measured by market capitalization has increased significantly. Having worked in the semiconductor industry for over 30 years, Mr. Hsing’s experiencevision, insight and insightexperience enable him to understand how toand expand the markets we serve, control costs effectively, assess and maximizemanage business risks, including risks related to information technology, supply chain and cybersecurity, and enhance our technology advantages for our products, which hashave helped to fuel our growth and created value for our stockholders. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Hsing should serve as a director of MPS. |
| | | Herbert Chang:Chang | | Mr. Chang has been a member of the Board since 1999, which gives him significant knowledge of our recent experiencesexperience and history. We also continue to benefit from the broad experience gained by Mr. Chang through his numerous successful investments in both public and private high-technology companies. Mr. Chang has served on several boards of the companies in which he has invested, which has given him significant leadership skills, risk management and oversight experience. In addition, through these board and investor responsibilities, as well as his tenure on the Board, Mr. Chang has developed a deep knowledge of our industry, our operations, and the accompanying complex financial transactions and controls necessary for us to succeed. Mr. Chang’s financial expertise has also helped the Board analyze significant complex financial transactions that we have considered from time to time. Mr. Chang also has very relevantimportant international experience based on his educational background and work experience in the countries where we do business. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Chang should serve as a director of MPS. |
| | | Eugen Elmiger | | Mr. Elmiger is a seasoned business executive with over 30 years of experience, including extensive international marketing, sales and product management expertise, executive board experience, knowledge of high-tech component business and technology, broad global experience and operational and strategic planning experience, including the oversight of information technology and cybersecurity, in complex, high-growth global companies. This experience allows him to contribute his valuable executive leadership talent, risk management and understanding of international business to Board deliberations.deliberations and oversight duties. His industrial, medical and automotive background is a valuable asset to the Board as we expand our business in these markets. Mr. Elmiger’s appointment to the Board also allows him to bring a new perspective, new ideas and outlooks to the Board. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Elmiger should serve as a director of MPS. | | |
Victor K. Lee:Lee | | Mr. Lee is the audit committee financial expert on the Audit Committee of the Board. He has been the Chief Financial Officer at several public and private companies, and has worked in the semiconductor industry for over 30 years. Mr. Lee is familiar with not only the inner workings of the semiconductor industry, but also has intimate knowledge of the financial issues and business risks that semiconductor companies often face. His experience has allowed him to understand the broad issues, in particular those affecting the financial and accounting aspects of our business, that the Board must consider and to make sound recommendations to management and the Board. Mr. Lee also provides the Board with valuable insight into financial management, risk management, disclosure issues and tax matters relevant to our business. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Lee should serve as a director of MPS. | | | | Carintia Martinez | | Ms. Martinez brings to the Board a diverse background with more than 30 years of information systems and technology experience in high-growth, multinational companies in the aerospace and automotive industries. The Board believes that Ms. Martinez’s valuable executive leadership talent, risk management experience, including the oversight of information technology and cybersecurity, diverse background, and understanding of complex international business issues allow her to bring new perspectives, ideas and outlooks to the Board. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Ms. Martinez should serve as a director of MPS. | | | | James C. Moyer:Moyer | | Mr. Moyer is a technical expert in the design of analog semiconductors. As co-founder of MPS, Mr. Moyer is intimately familiar with us and our products. Mr. Moyer brings insight to the Board because of his cumulative experience gained as an engineer and technical leader in the semiconductor industry. This experience gives him a highly developed understanding of the needs and requirements of the analog market for our complex products and allows him as a director to lead us in the right direction in terms ofguide our strategy and business approach. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Moyer should serve as a director of MPS. |
Dr. Jeff Zhou:Zhou
| | Dr. Zhou is a senior business executive with over 30 years of industry experience at large, multi-national corporations with global footprints. Dr. Zhou has an extensive background in the global manufacturing, electronics and electronicsrenewable energy industry. This experience allows him to contribute his valuable executive leadership talent, risk management skills, including the oversight of information technology and cybersecurity, and understanding of international business to Board deliberations. Dr. Zhou’s appointment to the Board also allows him to bring a new perspective, new ideasdeliberations and new outlooks to the Board.oversight duties. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Dr. Zhou should serve as a director of MPS. |
Board Leadership Structure The Board currently consists of sixseven members, fivesix of which the Board has determined are independent. Leadership Structure. Our current leadership structure and governing documents permit the roles of Chairman and Chief Executive Officer to be filled by the same or different individuals. Should the Board determine that it remains in the best interests of MPS and its stockholders that the Chief Executive Officer serve as Chairman, the independent members of the Board then elect a Lead Independent Director. The Board has currently determined that it is in the best interests of MPS and its stockholders to have Michael Hsing, our President and Chief Executive Officer, serve as Chairman, coupled with an active Lead Independent Director. As such, Mr. Hsing holds the position of Chairman, President and Chief Executive Officer, and the Board has designated one of the independent directors, Mr. Chang, as the Lead Independent Director. Our Lead Independent Director becauseis appointed by the Board on an annual basis. The Board believes our Presidentleadership structure, with its strong emphasis on Board independence, an active Lead Independent Director, and Chief Executive Officer, Mr. Hsing, also serves as the Chairman of the Board. We believe that the number of independent, experienced directors that make up ourstrong Board along with the independentand committee involvement, provides sound and robust oversight of our Lead Director, benefits usmanagement, and our stockholders by providingprovides a counterbalance to the management perspective provided by Mr. Hsing during Board deliberations. WeThe Board considers and discusses the leadership structure every year. As part of this evaluation process, the Board reviews its leadership structure and whether combining or separating the roles of Chairman and CEO is in the best interests of MPS and our stockholders. The Board also considers:
| ● | The effectiveness of the policies, practices, and people in place at MPS to help ensure strong, independent Board oversight; |
| ● | MPS’s performance and the effect the leadership structure could have on its performance; |
| ● | The Board’s performance and the effect the leadership structure could have on the Board’s performance; |
| ● | The Chairman’s performance in the role; |
| ● | The views of MPS’s stockholders; and |
| ● | The practices at other companies and trends in governance. |
While we recognize that different board leadership structures may be appropriate for different companies. Wecompanies, we believe that our current Board leadership structure is optimal for us. Our leadership structure demonstrates to our employees, suppliers, customers, stockholders and other stakeholders that we are governed by strong, balanced leadership, with a single person setting the tone and consistent message for the Board and management and having primary responsibility for managing our day-to-day operations.operations, with appropriate oversight and direction from our Lead Independent Director and other independent directors. This message is increasingly important as we continue to seek to achieve business success through new product releases and gaining market share in our industry. At the same time,We also believe that our leadership structure sends the message that we also value strong, independent oversight of our management operations and decisions in the form of our Lead Director.Independent Director and other independent directors. Further, having a single leader for both MPS and the Board eliminates the potential for strategic misalignment or duplication of efforts, and provides clear leadership for us. Benefits of Combined Leadership Structure. The Board believes that MPS and our stockholders have been best served by having Mr. Hsing in the role of Chairman and Chief Executive Officer for the following reasons: | ● | Mr. Hsing is most familiar with our business and the unique challenges we face. Mr. Hsing’s day-to-day insight into our challenges facilitates a timely deliberation by the Board of important matters; |
| ● | Mr. Hsing has and will continue to identify agenda items and lead effective discussions on the important matters affecting us. Mr. Hsing’s knowledge and extensive experience regarding our operations and the highly competitive semiconductor industry in which we compete position him to identify and prioritize matters for Board review and deliberation; |
| ● | As Chairman and Chief Executive Officer, Mr. Hsing serves as an important bridge between the Board and management and provides critical leadership for carrying out our strategic initiatives and confronting our challenges. The Board believes that Mr. Hsing brings a unique, stockholder-focused insight to assist MPS to most effectively execute its strategy and business plans to maximize stockholder value; |
| ● | The strength and effectiveness of the communications between Mr. Hsing, as our Chairman, and Mr. Chang, as our Lead Independent Director, as well as our other independent directors, result in comprehensive Board oversight of the issues, plans, and prospects of MPS; and |
| ● | This leadership structure provides the Board with more complete and timely information about MPS, a unified structure and consistent leadership direction internally and externally and provides a collaborative and collegial environment for Board decision making. |
Lead Independent Director Responsibilities. As discussed above, the positions of Chairman of the Board, President and Chief Executive Officer are held by Mr. Hsing, and the Board has appointed a Lead Independent Director, Mr. Chang. Mr. Chang’s primary roles and responsibilities as the Lead Independent Director include: | | 1. ●
| Reviewing meeting agendas,agendas; |
�� | ● | Reviewing schedules and information sent to the Board; |
| | 2. ●
| Retaining independent advisors on behalf of the Board, or committees, as the Board may determine is necessary or appropriate; |
| | 3. ●
| Assuring that there is sufficient time for discussion of all meeting agenda items; |
| ● | Ensuring personal availability for consultation and communication with independent directors and with the Chief Executive Officer/Chairman of the Board, as appropriate; |
| | 4. ●
| Performing such other functions as the independent directors may designate from time to time; |
| | 5. ●
| Presiding at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors; |
| 6.
| Serving as liaison between the Chairman and independent directors;
|
| 7.
| Calling meetings of independent directors; and
|
| | 8. ●
| Ensuring that the Board is at least two-thirdsCalling meetings of independent and that key committees are independent.directors.
|
Our independent directors meet in executive session during a portion of every regularly scheduled Board meeting,meetings, and otherwise as needed. Our Lead Independent Director presides over meetings of our independent directors and we believe that these meetings help to ensure an appropriate level of independent scrutiny of the functioning of the Company and the Board. Board Oversight of Risk The Board is primarily responsible for the oversight of risks that could affect MPS. Our senior management team, which conducts our day-to-day risk management, is responsible for assisting the Board with its risk oversight function. ThisThe Board believes that a fundamental part of risk management is understanding the risks that we face, monitoring these risks, and adopting appropriate controls and mitigation activities for such risks. We believe that the risk management areas that are fundamental to the success of our enterprise include the areas of product development, supply and quality, regulations and legal compliance, sales and promotion, and business development, as well as protecting our assets (financial, intellectual property, and information, including cybersecurity), all of which are managed by senior executive management reporting directly to our Chief Executive Officer. Our Board members have extensive experience in risk oversight arising from their current or prior experience as a Chief Executive Officer, Chief Financial Officer, other senior leadership position or board member of other companies, with responsibility for risk oversight obligations. As such, the Board believes that its members are qualified and experienced at identifying and addressing risk throughout MPS’s operations. The Board’s oversight is conducted principally through committees of the Board, as disclosed in the descriptions of each of the committees below and in the charters of each of the committees, but the full Board has retained responsibility for general oversight of risk. The Board satisfies its responsibility by requiring each committee chair to regularly report regarding the committee’s considerations and actions, as well as by requiring officers responsible for oversight of particular risks within MPS to submit regular reports. As these reports are submitted independent of review by Mr. Hsing, our President, Chief Executive Officer and the Chairman of the Board, the Board believes that its leadership structure has no impact on the conduct of its risk oversight function has no impact on the Board’s leadership structure other than to reinforce the involvement of the Board in ongoing management of MPS. In addition to requiring regular reporting from committees and officers, the Board also hears from third-party advisors in order to maintain oversight of risks that could affect us, including our independent auditors, outside counsel, compensation consultants and others. These advisors are consulted on a periodic basis, and as particular issues arise, in order to provide the Board and its committees with the benefit of independent expert advice and insights on specific risk-related matters. At its regularly scheduled meetings, the Board also receives management updates on the business, including operational and environmental, social and governance (“ESG”) issues, financial results, cybersecurity and information security matters, and business outlook and strategy. These updates enable our Board to discuss enterprise risks with our senior management on a regular basis, including as a part of its annual strategic planning process and annual budget review. For a discussion of the Board’s oversight of our ESG compliance efforts, refer to “Corporate Social Responsibility.” Our Audit Committee also assists the full Board in its oversight of risk by discussing with management our compliance with legal and regulatory requirements, our policies with respect to risk assessment and management of business risks that may affect us, including risks related to information technology and cybersecurity, and our system of disclosure control and system of controls over financial reporting. Risks related to our company-wide compensation programs are reviewed by our Compensation Committee. For more information on the Compensation Committee’s compensation risk assessment, see the section ““Named Executive Officer Compensation – Compensation Risk Management.” Our Nominating Committee provides compliance oversight and reports to the full Board on compliance and makes recommendations to our Board on corporate governance matters, including director nominees, the determination of director independence, and board and committee structure and membership.membership, and our governing documents and policies. We believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing us and that the Board leadership structure supports this approach. Board Meetings and Committees The Board held a total of four meetings during 2018,2021, and all directors attended at least 75% of the meetings of the Board and the committees upon which such director served. Audit Committee. The Board has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the 1934 Act, which currently consists of three members: Herbert Chang, Victor K. Lee and Jeff Zhou. Mr. Lee is the chairman of the Audit Committee. This committee oversees our financial reporting process and procedures, is responsible forThe primary responsibilities of the appointment and terms of engagement of our independent registered public accounting firm, reviews our financial statements, and coordinates and approves the activities of our independent registered public accounting firm. Audit Committee are to: | ● | Provide oversight of our accounting and financial reporting processes and the audit of our financial statements; |
| ● | Appoint the independent registered public accounting firm to audit our financial statements; |
| ● | Assist the Board in the oversight of the integrity of our financial statements, our compliance with legal and regulatory requirements, the independent registered public accounting firm’s qualifications, independence and performance, and our internal accounting and financial controls; and |
| ● | Provide to the Board such information and materials as it may deem necessary to make the Board aware of financial matters requiring the attention of the Board. |
The Board has determined that Mr. Lee is an “audit committee financial expert,” as defined under the rules of the SEC, and all members of the Audit Committee are “independent” in accordance with the applicable SEC regulations and the applicable listing standards of NASDAQ. The Audit Committee held four meetings during 2018.2021. The Audit Committee acts pursuant to a written charter adopted by the Board, which is available in the “Investor Relations” section of our website at http://www.monolithicpower.com. Compensation Committee. The Board has designated a Compensation Committee consisting of three members: Herbert Chang, Eugen Elmiger and Jeff Zhou. Mr. Zhou is the chairman of the Compensation Committee. This committee is responsible for providing oversight of our compensation policies, plans and benefits programs and assisting the Board in discharging itsThe primary responsibilities relating to (a) oversight of the Compensation Committee are to: | ● | Provide oversight of our compensation policies, plans and benefits programs; |
| ● | Assist the Board in discharging its responsibilities relating to oversight of the compensation of the executive officers, and approval and evaluation of the executive officer compensation plans, policies and programs; |
| ● | Assist the Board in administering our equity compensation plans for the executive officers and employees; and |
| ● | Provide oversight of our ESG practices and compliance efforts with respect to executive compensation policies and programs, as well as human capital management. |
All members of the Compensation Committee are “independent” in accordance with the applicable listing standards of NASDAQ. The Compensation Committee held four meetings during 2018.2021. The Compensation Committee acts pursuant to a written charter adopted by the Board, which is available in the “Investor Relations” section of our website at http://www.monolithicpower.com. Nominating Committee. The Board has designated a Nominating Committee consisting of two members: Herbert Chang and Eugen Elmiger. Mr. Elmiger is the chairman of the Nominating Committee. This committee is responsible for the development of general criteria regarding the qualifications and selection of Board members, recommending candidates for election to the Board, developing overall governance guidelines and overseeing the overall performanceThe primary responsibilities of the Board. Nominating Committee are to: | ● | Review the composition and qualifications of the Board, recommend director nominees for the selection of the Board, and evaluate director compensation; |
| ● | Review the composition of committees of the Board and recommend persons to be members of such committees; |
| ● | Develop overall governance guidelines and oversee the overall performance of the Board; |
| ● | Recommend to the Board whether to accept or reject a tendered director resignation, or take other action, in circumstances where a director receives a greater number of “withhold” votes than “for” votes in an uncontested election of directors as set forth in the director voting policy adopted by the Board; and |
| ● | Provide oversight of our ESG practices and compliance efforts with respect to corporate governance matters, environmental initiatives and human capital management, including company culture, talent development and diversity. |
All members of the Nominating Committee are “independent” in accordance with the applicable listing standards of NASDAQ. The Nominating Committee held four meetings in 2018.2021. The Nominating Committee acts pursuant to a written charter adopted by the Board, which is available in the “Investor Relations” section of our website at http://www.monolithicpower.com. The information contained on our website is not intended to be part of this Proxy Statement and is not incorporated by reference into this Proxy Statement. Nomination Process The Board has adopted guidelines for the identification, evaluation and nomination of candidates for director. The Nominating Committee considers the suitability of each candidate, including any candidates recommended by stockholders holding at least 5% of the outstanding shares of our voting securities continuously for at least 12 months prior to the date of the submission of the recommendation for nomination. If the Nominating Committee wishes to identify new independent director candidates for Board membership, it is authorized to retain and approve fees of third party executive search firms to help identify prospective director nominees. It is the practice of the Board that our Lead Independent Director interviews each Board candidate. In April 2018, in response to shareholders’ feedback, the Board considered and adopted an amendment to the Nominating Committee Charter (available in the “Investor Relations” section of our website at http://www.monolithicpower.com) on the evaluation of prospective candidates. In addition to the minimum qualifications the Nominating Committee has established for director nominees, the Nominating Committee will also consider whether the prospective nominee will foster a diversity of genders, backgrounds, skills, perspectives and experiences in the process of its evaluation of each prospective nominee. The Nominating Committee also focuses on skills, expertise or background that would complement the existing Board, recognizing that our businesses and operations are diverse and global in nature. While there are no specific minimum qualifications for director nominees, the ideal candidate should (a) exhibit independence, integrity, and qualifications that will increase overall Board effectiveness, and (b) meet other requirements as may be required by applicable rules, such as financial literacy or expertise for audit committee members.
The policy of the Nominating Committee is to consider properly submitted stockholder nominations for candidates to serve on the Board. Stockholders who wish to nominate a candidate for election to the Board, including nominations using proxy access, must comply with the procedures set forth in our Bylaws. Refer to “Procedure for Submitting Stockholder Proposals and Director Nominations” for further details. The Nominating Committee uses the same process for evaluating all nominees, regardless of the original source of the nomination. After completing its review and evaluation of director candidates, the Nominating Committee recommends to the Board the director nominees for selection. A stockholder that desires to recommend a candidate for election to the Board should direct such recommendation in writing to Monolithic Power Systems, Inc., 4040 Lake Washington Boulevard NE, Suite 201, Kirkland, Washington 98033, Attention: Corporate Secretary, and must include the candidate’s name, home and business contact information, detailed biographical data and qualifications, information regarding any relationships between the candidate and us within the last three years and evidence
Stockholder Communications The Board has approved a Stockholder Communication Policy to provide a process by which stockholders may communicate directly with the Board or one or more of its members. You may contact any of our directors by writing to them at c/o Monolithic Power Systems, Inc., 4040 Lake Washington Boulevard NE, Suite 201, Kirkland, Washington 98033, Attention: Corporate Secretary. using the following methods: | By e-mail: | corporate.secretary@monolithicpower.com | | By mail: | Monolithic Power Systems, Inc. Attn: Corporate Secretary 5808 Lake Washington Blvd. NE Kirkland, WA 98033 |
Any stockholder communications thatto the Board is to receive will first go to the Corporate Secretary, who will log the date of receipt of the communication as well as the identity of the correspondent in our stockholder communications log. The Corporate Secretary will review, summarize and, if appropriate, draft a response to the communication in a timely manner. The Corporate Secretary will then forward copies of the stockholder communication to the Board member(s) (or specific Board member(s) if the communication is so addressed) for review, provided that such correspondence concerns the functions of the Board or its committees, or otherwise requires the attention of the Board or its members. Attendance at Annual Meetings of Stockholders by the Board of Directors We do not have a formal policy regarding attendance by members of the Board at our annual meetings of stockholders. In 2018,2021, no Board members attended the Annual Meeting. Code of Ethics and Business Conduct We have adopted a Code of Ethics and Business Conduct, which is applicable to our directors and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions. The Code of Ethics and Business Conduct is available in the “Investor Relations – Corporate Governance” section of our website at http://www.monolithicpower.com. We will disclose on our website any amendment to the Code of Ethics and Business Conduct, as well as any waivers of the Code of Ethics and Business Conduct, that are required to be disclosed by the rules of the SEC or NASDAQ. Policy on Hedging We have adopted a policy that prohibits our directors, officers (including our NEOs), and other employees from engaging in hedging or monetization transactions with respect to our stock that they obtained through our plans or otherwise, without prior approval by our Chief Compliance Officer. We also prohibit our directors and officers (including our NEOs) from engaging in any short sales of our stock. Director Voting Policy The Board has adopted a director voting policy, which can be found in the “Investor“Investor Relations – Corporate Governance”Governance” section of our website at http://www.monolithicpower.com. The policy establishes that any director nominee who receives more “Withheld” votes than “For” votes in an uncontested election held in an annual meeting of stockholders shall promptly tender his or her resignation. The independent directors of the Board will then evaluate the relevant facts and circumstances and make a decision, within 90 days after the election, on whether to accept the tendered resignation. The Board will promptly publicly disclose its decision and, if applicable, the reasons for rejecting the tendered resignation. 2021 Director Compensation Analysis of 20182021 Compensation Elements For 2018,2021, the Board engaged Radford, an Aon Hewitt company,independent compensation consultant, to review theour non-employee director compensation. In its analysis, Radford gathered the market data onrelating to the size and type of compensation paid by our industry peer group for 20182021 (see the section ““Named Executive Officer Compensation — Peer GroupGroup and Use of Peer Data for 20212018” for more information on the selection of the peer group). Based on its review of the results of this market review and recommendations by Radford, the Board approved the following compensation changesprogram for our non-employee directors for service in 2018: (i) increase2021, which did not change from the annual board retainer fee from $45,000 to $50,000, (ii) increase the lead director fee from $12,000 to $18,000, (iii) increase the Audit Committee chairperson fee from $22,500 to $25,000, and (iv) increase the annual RSU grant to incumbent directors from 140,000 to 175,000. Accordingly, the compensation paid to our non-employee directors for service in 2018 was as follows:prior year: Fee Description | | Amount ($) | Annual board retainer fee | | $50,000 70,000
| Lead director fee | | $18,000 20,000
| Compensation Committee chairperson fee | | $18,000 20,000
| Compensation Committee membership fee (excluding chairperson) | | $8,000 10,000
| Nominating Committee chairperson fee | | $13,500 15,000
| Nominating Committee membership fee (excluding chairperson) | | $6,000 7,500
| Audit Committee chairperson fee | | $25,000 30,000
| Audit Committee membership fee (excluding chairperson) | | $10,500 15,000
| Initial restrictedRestricted stock unit (“RSU”) grant to new directors
| | Number of RSUs equal to $175,000 200,000
| Annual RSU grant to incumbent directors | | Number of RSUs equal to $175,000 200,000
|
The initial grant of RSUs to new directors vestvests as to 50% of the underlying shares of Common Stock on each of the first and second anniversaries of the date of grant. The annual grant of RSUs to incumbent directors vests as to 100% of the underlying shares of Common Stock on the first anniversary of the date of the grant. All awards will become fully vested in the event of a change in control. All of our non-employee directors are subject to stock ownership guidelines that are described below in the section ““Named Executive Officer Compensation — Compensation Discussion and Analysis — Stock Ownership Guidelines.” The following table sets forth the total compensation paid tofor each non-employee director for serviceservices rendered in 2018.2021. Mr. Hsing, who is our employee, does not receive additional compensation for his services as a director. Mr. Hsing’s compensation as a named executive officer is reflected in the section ““Named Executive Officer Compensation — 2021 Summary Compensation Table.” Name | | Fees Earned or Paid in Cash | | | Stock Awards (1) | | | Total | | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($)(1) | | | Total ($) | | Herbert Chang | | $ | 92,500 | | | $ | 175,000 | | | $ | 267,500 | | | | 122,500 | | | | 200,000 | | | | 322,500 | | Eugen Elmiger | | $ | 71,500 | | | $ | 175,000 | | | $ | 246,500 | | | | 95,000 | | | | 200,000 | | | | 295,000 | | Victor K. Lee | | $ | 75,000 | | | $ | 175,000 | | | $ | 250,000 | | | | 100,000 | | | | 200,000 | | | | 300,000 | | Carintia Martinez | | | | 35,000 | | | | 200,000 | | | | 235,000 | | James C. Moyer | | $ | 50,000 | | | $ | 175,000 | | | $ | 225,000 | | | | 70,000 | | | | 200,000 | | | | 270,000 | | Jeff Zhou | | $ | 78,500 | | | $ | 175,000 | | | $ | 253,500 | | | | 105,000 | | | | 200,000 | | | | 305,000 | |
| (1) | Reflects the aggregate grant date fair value of the awards granted to each director in 2018,2021, computed in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 718, which was calculated using the closing price of our Common Stock on the datedates of grant for such awards.awards (May 27, 2021 for Ms. Martinez’s initial grant and February 2, 2021 for the other directors’ annual grants). Assumptions used in the calculation of these amounts are included in Note 1 and Note 78 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018,2021, filed with the SEC on March 1, 2019.February 25, 2022. |
The following table summarizes the number of shares of our Common Stock that are subject to unvested RSU awards held by each of the non-employee directors as of December 31, 2018:2021. There were no outstanding stock option awards as of December 31, 2021. Name | | Stock Awards (#) | | Herbert Chang | | | 1,590533 | | Eugen Elmiger | | | 1,590533 | | Victor K. Lee | | | 1,590533 | | Carintia Martinez | | | 583 | | James C. Moyer | | | 1,590533 | | Jeff Zhou | | | 1,590533 | |
CORPORATE SOCIAL RESPONSIBILITY Since MPS was founded in 1997, one of our core values has been to run a responsible and responsive business for the long term. We believe that positive ESG business practices strengthen our company and foster strong relationships with our stockholders, employees, business partners and communities where we operate. We are committed to making our workforce diverse, our business sustainable and our stakeholders engaged by maintaining strong ESG practices and policies, some of which are highlighted below. For a full description of our initiatives, we encourage you to visit and explore our ESG website at https://www.monolithicpower.com/about-mps/investor-relations/esg-report.html. The information contained on our website is not intended to be part of this Proxy Statement and is not incorporated by reference into this Proxy Statement. Environmental | ● We track our greenhouse gas emissions and submit annual Carbon Disclosure Project reports for our largest facility in Chengdu, China. Scope 1 emissions produced at this location decreased from 47 metric tons in 2019 to 45 metric tons in 2020. Additionally, while our production volume nearly doubled over the past four years, during the same period we maintained a steady rate of Scope 2 emissions generated per product unit. We are developing our supply chain outreach plan to understand our Scope 3 emissions baseline and to partner with our suppliers to develop reduction goals. ● Our products and solutions are integrated into a broad array of electronic devices and products worldwide – including energy-efficient and green technologies, many of which are used every day, such as data center solutions, notebook solutions, electric vehicles, LED lighting controller and driver solutions, smart home and building applications, and solar power. ● At our largest U.S. facility in San Jose, California, we installed 30,000 square feet of solar panels. This power generator produces 650 kWh of electricity annually, saving approximately 1,700 metric tons of greenhouse gases. We installed over 27 solar-powered EV charging stations in San Jose, California and at our corporate headquarters in Kirkland, Washington. We continue to identify other opportunities to implement additional renewable energy projects for our global facilities. ● Our products are shipped in compliance with the European Restriction of Hazardous Substances (“RoHS”) Directive and exclude banned substances. ● We are ISO 14001-certified and have developed an environmental management system that is integrated into our business management processes. ● We have a long-term environmental and climate change policy that focuses on hazardous waste management, greenhouse gas emission, energy and water conservation, new product design and the supply chain. | Social | ● We participate in the Equal Employment Opportunity-1 (“EEO-1”) survey each year. Women in engineering/technical and managerial/supervisor roles comprised approximately 22% and 46%, respectively, of our worldwide workforce, and held approximately 47% of total non-technical roles at MPS in 2021. We continually recruit new talent from a diverse candidate pool. ● We are committed to creating an inclusive workplace that supports all employees. We provide unconscious bias trainings for managers and human resources employees administered by independent third parties to ensure we solidify an environment of inclusivity. ● In our annual employee pulse surveys, 92% of respondents said they were valued and treated with respect, and 91% of respondents agreed that MPS believes in putting customers first. ● Our Conflict Minerals Policy prohibits the use of cobalt and other conflict minerals originating from the Democratic Republic of the Congo or adjoining countries. We require this same certification from all our key manufacturing suppliers. ● Our Worker Health and Safety Plan is certified to ISO 45001 standards. ● We adhere to the standards established in the Universal Declaration of Human Rights, and condemn the use of forced, slave, or child labor in any form. ● We are a member of the Responsible Business Alliance (“RBA”), the world’s largest industry coalition dedicated to corporate social responsibility in global supply chains. We successfully passed onsite Validated Assessment Program audits by the RBA. ● Our key manufacturing suppliers are required to sign our Vendor Code of Conduct, and we conduct audits to ensure their compliance with the RBA and other important industry standards. ● Our philanthropic arm, the MPS charitable foundation (the “Foundation”), is dedicated to giving back to our communities by supporting many local non-profit organizations. |
Governance | ● Our Board has demonstrated strong independent oversight, with a robust Lead Independent Director role. Other than our CEO, all of our directors are independent. ● We have regular executive sessions of independent directors. ● All independent directors have access to management. ● Our Board committees have the authority to retain outside advisors. ● We review the Board leadership structure annually to ensure that it aligns the interests of MPS and our stockholders. ● Under our director voting policy, any director nominee who receives more “Withheld” votes than “For” votes in an uncontested election held in an annual meeting of stockholders is required to promptly tender his or her resignation, which will be considered by the Board. ● We have a clawback policy that permits the Board to recoup any excess performance-based cash compensation paid to NEOs if the financial results are restated due to fraud or intentional misconduct by the executive. ● We have stock ownership guidelines for our executive officers and directors. ● Our Bylaws provide a proxy access right to our stockholders who meet certain eligibility requirements. ● Our Code of Ethics and Business Conduct, Bribery and Anti-Corruption Policy, and Code of Social Responsibility are consistent with the principles promoted by the RBA emphasizing compliance, transparency, whistleblower protection and avoidance of any business practices that could contribute to corruption, bribery or conflicts of interest. ● We promote Board diversity, with five of our seven directors being ethnically diverse. The Board also appointed one female director in 2021. ● The Nominating Committee and the Compensation Committee provide oversight on ESG initiatives and review regular updates on our strategy, goals, risks and opportunities. ● We continue to engage with our stockholders and seek their feedback. In 2021, we engaged in discussions with stockholders holding a majority of our shares. |
2021 - 2022 Highlights  | Board Diversity |
We believe diversity drives innovation and is key to our success. Currently, the Board consists of members with a wide variety of skills, industry experiences and backgrounds, and five of our seven directors are ethnically diverse. We are committed to diversity and inclusion at every level of MPS, including the Board. We believe a diverse, balanced and cohesive Board is critical in facilitating strong oversight, as well as supporting the achievement of MPS’s objectives, including its strategic priorities to improve long-term operational and financial performance and enhance stockholder interests. In May 2021, after conducting a rigorous search, the Board appointed one female Board member, Ms. Martinez, who brings to the Board a diverse background with more than 30 years of information systems and technology experience in high-growth, multinational companies in the aerospace and automotive industries. | | ESG-Related Disclosures |
As part of our commitment to transparent disclosures on our ESG efforts, we made significant enhancements to our ESG reporting through our corporate website under the Investors Relations page. The ESG website provides important information regarding our values, policies, practices and progress in one centralized location. In addition, the website also highlights new initiatives and meaningful goals that are relevant and important to our overall business strategies. | | Giving Back and Supporting Our Communities |
We believe in being an active corporate citizen and making a positive impact on communities where we do business. Through the Foundation, we are committed to fostering and increasing the resources of local communities by supporting non-profit organizations that focus on areas such as education, arts, healthcare, food banks and youth programs with monetary contributions or investments. In 2021, we contributed $1.1 million to the Foundation. Since its inception, the Foundation has donated to organizations including the Virginia Mason Foundation, Boys & Girls Clubs of Bellevue, Second Harvest Food Bank, and the Palo Alto Medical Foundation. As we continue to build our charitable contribution program, we are committed to forming relationships with organizations supporting the education and empowerment of underrepresented groups within the STEM fields. | Stockholder Engagement |
We continue to engage with our stockholders, seek their feedback and address their concerns on corporate governance matters. In April 2022, the Board amended our Bylaws by providing proxy access to our stockholders who meet certain eligibility requirements. Proxy access gives our stockholders the right to nominate director candidates in our proxy materials and gain representation on the Board. | Commitment to Environmental Initiatives |
We take environmental stewardship seriously, and the Board and the executive team recognize the importance of implementing measures to reduce our overall impact on the environment. In February 2021, as part of our commitment to promoting environmental sustainability, the Compensation Committee implemented changes to our executive equity compensation program to include long-term performance conditions with a three-year performance period that are tied directly to environmental metrics. The Compensation Committee believes that incorporating key environmental sustainability initiatives into our annual incentive equity awards for the NEOs will help drive our efforts in these important areas of focus for MPS. PROPOSAL TWO RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Change in Independent Registered Public Accounting Firm
OurThe Audit Committee completed a process to reviewof the appointment of our independent registered public accounting firm for the year ending December 31, 2019. As a result of this process, on March 18, 2019, our Audit Committee approved the appointment ofBoard has appointed Ernst & Young LLP (“EY”) as our independent registered public accounting firm for the year ending December 31, 2019, and dismissed Deloitte2022. Ernst & Touche LLP (“Deloitte”), whoYoung has served as our independent registered public accounting firm since 1999, from that role.
Deloitte’s reports on our consolidated financial statements as of and for the years ended December 31, 2018 and December 31, 2017 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. In addition, the audit reports of Deloitte on the effectiveness of internal control over financial reporting as of December 31, 2018 and December 31, 2017 did not contain any adverse opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.
During the years ended December 31, 2018 and December 31, 2017, and the subsequent interim period through March 18, 2019, there were (i) no “disagreements” as that term is defined in Item 304(a)(1)(iv) of Regulation S-K, between us and Deloitte on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Deloitte, would have caused Deloitte to make reference to the subject matter of the disagreement in their reports, and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
We provided Deloitte with a copy of the disclosures made in a Current Report on Form 8-K (the “Report”) prior to the filing of the Report with the SEC on March 22, 2019. In addition, we requested that Deloitte furnish a letter addressed to the SEC stating whether or not it agreed with the statements made in the Report. A copy of Deloitte’s letter dated March 22, 2019 was attached as Exhibit 16.1 to the Report.
During the fiscal years ended December 31, 2018 and December 31, 2017, and the subsequent interim period through March 18, 2019, neither we nor anyone acting on our behalf has consulted with EY with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither a written report nor oral advice was provided to us that EY concluded was an important factor considered by us in reaching a decision as to any accounting, auditing, or financial reporting issue or (ii) any matter that was either the subject of a “disagreement” or “reportable event” as those terms are defined in Item 304(a)(1) of Regulation S-K.
Representatives of EYErnst & Young are expected to be present at the Annual Meeting with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions. We do not expect that a representative of Deloitte will be present at the Annual Meeting. Although ratification by stockholders is not required by law, the Board has determined that it is desirable to request ratification by the stockholders of this selection. Notwithstanding its selection, by the Audit Committee, in its discretion, may appoint a new independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interest of us and our stockholders. If the stockholders do not ratify the appointment of EY, ourErnst & Young, the Audit Committee may reconsider its selection. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR”“FOR” RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THETHE YEAR ENDING DECEMBER 31, 2019.2022. Audit and Other Fees The following table showssummarizes the fees paid by us for the audit and other services provided by DeloitteErnst & Young for 20182021 and 2017.2020 (in thousands):
| | | 2018 | | | 2017 | | | FY 2021 | | | FY 2020 | | Audit fees | | $ | 2,002 | | | $ | 1,392 | | | $ | 1,168 | | | $ | 1,138 | | Audit-related fees | | | - | | | | 56 | | | | - | | | | 10 | | Tax fees | | | 79 | | | | - | | | | 5 | | | | 5 | | Total | | $ | 2,081 | | | $ | 1,448 | | | $ | 1,173 | | | $ | 1,153 | |
Audit fees consist of fees billed for professional services rendered for the audit of our annual financial statements and review of the interim financial statements included in our quarterly reports and the audit of our internal control over financial reporting. Audit fees also include services that are normally provided by the independent auditors in connection with foreign statutory and regulatory filings, and advice on audit and accounting matters that arise during, or as a result of, the audit or the review of interim financial statements, including the application of proposed accounting rules, statutory audits required by non-U.S. jurisdictions and the preparation of an annual “management letter” containing observations and discussions on internal control matters. Audit-related feesrepresent assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under "Audit“Audit Fees."” These services include accounting consultations in connection with attestation services that are not required by statute or regulation, and consultations concerning financial accounting and reporting standards. Tax fees represent professional services for federal, state and international tax compliance, tax advice and tax planning. Pre-Approval of Audit and Non-Audit Services The charter of our Audit Committee requires that the Audit Committee pre-approve all audit and non-audit services provided to us by our independent registered public accounting firm or subsequently approve non-audit services in those circumstances where a subsequent approval is necessary and permissible. All such services for 20182021 and 20172020 were pre-approved by the Audit Committee. PROPOSAL THREE ADVISORY VOTE ONTO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION As required under Section 14A of the Securities Exchange Act of 1934, we are asking stockholders to again cast an advisory (non-binding) vote on the following resolution at the Annual Meeting: RESOLVED, that, on an advisory basis, the compensation of our named executive officers, as disclosed in the Compensation Discussion and Analysis, compensation tables and related narratives and descriptions of this Proxy Statement for the Annual Meeting, is hereby APPROVED. This advisory vote, commonly known as a “say-on-pay” vote, gives our stockholders the opportunity to express their views about the compensation we paid to our named executive officers in the prior year, as described in this Proxy Statement. Before stockholders vote on this proposal, they should review the Compensation Discussion and Analysis in this Proxy Statement and the tabular and narrative disclosure that follows it. We currently conduct say-on-pay votes every year. We are committed to responsible compensation practices and structures. As described more fully in the Compensation Discussion and Analysis section of this Proxy Statement, the primary goal of our executive compensation program is the same as our goal for operating MPS — to create long-term value for our stockholders. To achieve this goal, we have regularly sought out the feedback of our major stockholders over the past several years to hear their suggestions on how we can better achieve our primary compensation goal. After taking their feedback into consideration, we have continued to update our compensation program for our named executive officers, implementing those recommendations of our stockholders that the Compensation Committee believes will help us create long-term value for our stockholders. We believe these annual reviews of our programs, in coordination with our conversations with our stockholders, allow us to motivate and reward our executives for sustained financial and operating performance and leadership excellence, to align their interests with those of our stockholders, and to encourage them to remain with us for long and productive careers. Stockholders may vote “ “for”for” or “ “against”against” the resolution or abstain from voting on the resolution. The affirmative vote of a majority of the shares of stock entitled to vote thereon which are present in person via attendance at the Annual Meeting or represented by proxy at the Annual Meeting is required to approve, on an advisory basis, the compensation of our named executive officers. The result of the say-on-pay vote will not be binding on us, the Board or the Compensation Committee. However, we value the views of the stockholders. The Board and the Compensation Committee will review the results of the vote and expect to take them into consideration in addressing future compensation policies and decisions. FOR THESE REASONS, THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR”“FOR” THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THE COMPENSATION DISCUSSION AND ANALYSIS, COMPENSATION TABLES AND RELATED NARRATIVES AND DESCRIPTIONS OF THIS PROXY STATEMENT FOR THE ANNUAL MEETING. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of April 16, 2019,the Record Date, information relating to the beneficial ownership of our Common Stock or securities exercisable for, or exchangeable into, our Common Stock by: (i) each person known by us to be the beneficial owner of more than five percent (5%) of the outstanding shares of our Common Stock, (ii) each director (or nominee), (iii) each of the named executive officers named in the 2021 Summary Compensation Table, and (iv) all directors and executive officers as a group. Unless otherwise indicated, the address of each beneficial owner listed below is Monolithic Power Systems, Inc. at 40405808 Lake Washington Boulevard NE, Suite 201, Kirkland, WA 98033. Name of Beneficial Owner | | Number of Shares Beneficially Owned | | | Percent of Shares Beneficially Owned (1) | | | Number of Shares Beneficially Owned (#) | | | Percent of Shares Beneficially Owned (1) | | | | | | | | | | | | | | | | | | | | Named Executive Officers and Directors: | | | | | | | | | | | | | | | | | Michael Hsing (2) | | | 554,471 | | | | 1 | % | | | 696,738 | | | | 1.5 | % | James C. Moyer (3) | | | 584,083 | | | | 1 | % | | | 270,694 | | | | * | | Maurice Sciammas (4) | | | 162,970 | | | | * | | | | 130,134 | | | | * | | Deming Xiao (5) | | | 46,301 | | | | * | | | | 108,192 | | | | * | | Saria Tseng (6) | | | 17,312 | | | | * | | | | 85,435 | | | | * | | Bernie Blegen (7) | | | 21,199 | | | | * | | | | 40,676 | | | | * | | Herbert Chang (8) | | | 11,363 | | | | * | | | | 1,281 | | | | * | | Eugen Elmiger (9) | �� | | 16,598 | | | | * | | | | 19,518 | | | | * | | Victor K. Lee (10) | | | 25,952 | | | | * | | | | 28,872 | | | | * | | Jeff Zhou (11) | | | 20,152 | | | | * | | | Total (12) | | | 1,460,401 | | | | 3 | % | | Carintia Martinez (11) | | | | 292 | | | | * | | Jeff Zhou (12) | | | | 5,509 | | | | * | | Total (13) | | | | 1,387,341 | | | | 3.0 | % | | | | | | | | | | | | | | | | | | | 5% Stockholders: | | | | | | | | | | | | | | | | | BlackRock, Inc. (13) | | | 4,168,792 | | | | 10 | % | | The Vanguard Group (14) | | | 3,660,323 | | | | 9 | % | | Franklin Resources, Inc. (15) | | | 2,254,578 | | | | 5 | % | | BlackRock, Inc. (14) | | | | 5,979,931 | | | | 12.8 | % | The Vanguard Group (15) | | | | 4,794,054 | | | | 10.3 | % |
* Represents beneficial ownership of less than 1%.
| | (1) | Based on 43,036,45046,625,000 shares of our Common Stock outstanding as of the Record Date on April 16, 2019.Date. Beneficial ownership is determined in accordance with the rules of the SEC.SEC rules. In computing the number of shares beneficially owned by a person and the percentage of ownership of that person, RSUs held by that person that are subject to release within 60 days of April 16, 2019the Record Date are considered to be outstanding and beneficially owned by such person. Those shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person. |
| | (2) | Includes (i) 356,214526,765 shares held of record by Michael Hsing, (ii) 133,040 shares held of record by Michael Hsing, Trustee of the Michael Hsing 2004 Trust, (iii) 29,00012,825 shares held of record by Michael Hsing, Trustee of the HsingZH Family Foundation,Trust, and (iv) 36,21724,108 shares underlying RSUs scheduled to release within 60 days of April 16, 2019.the Record Date. |
| | (3) | Includes (i) 512,2601,581 shares held of record by James C. Moyer, and (ii) 71,8233,450 shares held inof record by James C. Moyer, Trustee of the Moyer Family Revocable Trust, and (iii) 265,663 shares held of record by James C. Moyer, Trustee of the JCM Management Trust. |
| | (4) | Includes (i) 136,907 shares50,213 held of record by Maurice Sciammas, (ii) 15,24623,015 shares held of record by Maurice Sciammas and Christina Sciammas, Co-Trustees of the Sciammas Family Living Trust, (iii) 11,310 shares held of record by Maurice Sciammas, Trustee of the Grantor Retained Annuity Trust FBO of Oski Crew, (iv) 11,310 shares held of record by Christina Sciammas, Trustee of the Grantor Retained Annuity Trust FBO of Oski Crew, (v) 5,446 shares held of record by Maurice Sciammas and (iii) 10,817Christina Sciammas, Co-Trustees of the Sciammas Family Trust, (vi) 5,000 shares held of record by Maurice Sciammas, Trustee of the Clement Sciammas Family Trust, (vii) 17,597 shares held of record by Maurice Sciammas and/or Christina Sciammas, trustees for various other trusts, and (viii) 6,243 shares underlying RSUs scheduled to release within 60 days of April 16, 2019.the Record Date. |
| | (5) | Includes (i) 35,029101,494 shares held of record by Deming Xiao, (ii) 455 shares owned by Julia Chu, Mr. Xiao’s wife, and (iii) 10,8176,243 shares underlying RSUs scheduled to release within 60 days of April 16, 2019.the Record Date. |
| | (6) | Includes (i) 6,49579,192 shares held of record by Saria Tseng, and (ii) 10,8176,243 shares underlying RSUs scheduled to release within 60 days of April 16, 2019.the Record Date. |
| | (7) | Includes (i) 16,51625,742 shares held of record by Bernie Blegen, (ii) 5,331 shares held of record by Bernie Blegen and (ii) 4,683Judy Blegen, Co-Trustees of the Trust FBO Sarah Blegen, (iii) 5,331 shares held of record by Bernie Blegen and Judy Blegen, Co-Trustees of the Trust FBO Theodore Blegen, and (iv) 4,272 shares underlying RSUs scheduled to release within 60 days of April 16, 2019.the Record Date. |
| | (8) | Includes 11,3631,281 shares held of record by Herbert Chang. |
| | (9) | Includes 16,59819,518 shares held of record by Eugen Elmiger. |
| | (10) | Includes 25,95228,872 shares held of record by Victor K. Lee. |
| | (11) | Includes 20,152292 shares underlying RSUs scheduled to release within 60 days of the Record Date. Ms. Martinez was appointed to the Board in May 2021 and has five years from the appointment date to attain the ownership level required by our stock ownership guidelines. |
| (12) | Includes 5,509 shares held of record by Jeff Zhou. |
| | (12)(13)
| As a group, includes 73,35147,401 shares underlying RSUs scheduled to release within 60 days of April 16, 2019. |
| (13)
| Pursuant to a Schedule 13G/A filed with the SEC on February 6, 2019, BlackRock, Inc. beneficially owns 4,168,792 shares, and has sole voting power over 4,009,102 shares and sole dispositive power over 4,168,792 shares. BlackRock, Inc. lists its address as 55 East 52nd Street, New York, NY 10055.Record Date.
|
| | (14) | Pursuant to a Schedule 13G/A filed with the SEC on February 11, 2019, the Vanguard GroupJanuary 28, 2022, BlackRock, Inc. beneficially owns 3,660,3235,979,931 shares, and has sole voting power over 21,8435,447,964 shares and sole dispositive power over 5,979,931 shares. BlackRock, Inc. lists its address as 55 East 52nd Street, New York, NY 10055. |
| (15) | Pursuant to a Schedule 13G/A filed with the SEC on February 10, 2022, the Vanguard Group beneficially owns 4,794,054 shares, and has shared voting power over 7,90474,024 shares, sole dispositive power over 3,634,3834,612,815 shares and shared dispositive power over 25,940181,239 shares. The Vanguard Group lists its address as 100 Vanguard Blvd., Malvern, PA 19355. |
| (15)
| Pursuant to a Schedule 13G filed with the SEC on January 28, 2019, Franklin Resources, Inc. beneficially owns 2,254,578 shares, and has sole voting power over 2,254,578 shares and sole dispositive power over 2,254,578 shares. Franklin Resources, Inc. lists its address as One Franklin Parkway, San Mateo, CA 94403.
|
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the 1934 Act and regulations of the SEC thereunder require our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of initial ownership and changes in ownership with the SEC. Based solely on our review of copies of such forms received by us, or on written representations from certain reporting persons that no other reports were required for such persons, we believe that, during 2018, all of the Section 16(a) filing requirements applicable to our executive officers, directors and 10% stockholders were complied with.
Certain Relationships and Related Transactions We have a written policy on related party transactions, as defined in our Code of Ethics and Business Conduct and the Audit Committee Charter. In accordance with our Code of Ethics and Business Conduct, it is the responsibility of our employees and directors to disclose any significant financial interest in a transaction between us and a third party, including an indirect interest, through, for example, a relative or significant other. It is also the responsibility of our Audit Committee, as described in the Audit Committee Charter, to review on an ongoing basis all related party transactions and approve these transactions before they are entered into. For 2018, we did not enter into any transactionsWe have a CHF 3,000,000 equity investment (or $3,300,000 on the acquisition date) in a privately held Swiss company (the “Investee”) specializing in mobile robotics for industrial applications. The investment represents a 5% equity interest in the Investee on a fully diluted basis. Mr. Elmiger is an executive officer of a company that has a commercial relationship with related persons that are required to be disclosed under Item 404(a)the Investee, and Mr. Hsing had personally invested CHF 2,700,000 in the Investee. In addition, Mr. Hsing currently serves on the Investee’s board of Regulation S-K.directors.
NAMED EXECUTIVE OFFICER COMPENSATION Compensation Discussion and Analysis This Compensation Discussion and Analysis describes our compensation philosophy and programs, compensation decisions made under those programs, and factors considered in making these decisions for our “named executive officers” (“NEOs”) who, for 2018,2021, were: | | ● | Michael Hsing, Chief Executive Officer, President and Chairman of the Board; |
| | ● | Bernie Blegen, Chief Financial Officer; |
| | ● | Deming Xiao, President of Asia Operations; |
| | ● | Maurice Sciammas, Senior Vice President, Worldwide Sales and Marketing; and |
| | ● | Saria Tseng, Vice President, Strategic Corporate Development, General Counsel and Corporate Secretary. |
For further information regarding each current NEO’s professional background, please refer to the section ““Information About Executive Officers of the Registrant” ” under Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2018,2021, filed with the SEC on March 1, 2019.February 25, 2022. Executive Summary Executive SummaryImpact of COVID-19
In 2021, management continued to execute MPS’s business plan and mitigate the effect of the pandemic on our financial position and business operations. The Board and its committees received regular updates from management on our pandemic response and closely monitored our efforts to follow governmental guidelines and ensure the safety of our employees, suppliers and customers. Despite the ongoing challenges of the pandemic and an uncertain economy, demand for our products continued to grow, and we achieved record revenue and financial results in 2021. Performance goals under our executive compensation program were established by the Compensation Committee in February 2021, and no downward adjustments to these performance goals were made due to the ongoing pandemic. Compensation Philosophy The primary objective in designing our compensation program for our NEOs is the same as the primary objective for operating MPS — to create long-term value for our stockholders. To achieve this goal, we have designed and implemented our compensation programs for our NEOs to: | | ● | Motivate and reward them for sustained financial and operating performance and leadership excellence; |
| | ● | Align their interests with those of our stockholders; |
| | ● | Encourage our NEOs to focus on achieving both short-term goals as well as long-term developmental goals; and |
| | ● | Encourage our NEOs to remain with us for long and productive careers. |
Each one of our executive compensation elements fulfills one or more of our performance, alignment and retention objectives. These elements primarily consist of salary, long-term equity awards and short-term cash incentive compensation, as well as severance benefits and broad-based employee benefits. In deciding on the type and amount of compensation for each executive, we focus on both current pay and the opportunity for future compensation. We believe that maintaining a balance of short-term and long-term compensation elements encourages decision-making that optimizes short-term results and, at the same time, advances our long-term goals. We combine the compensation elements for each NEO in a manner we believe optimizes the executive’s overall contribution to us and our stockholders. Our Compensation Practices Are Built on Stockholder Feedback and Requests InAt the 20182021 Annual Meeting of Stockholders, approximately 97%88% of the votes cast by 92% of our stockholders were in favor of our executive compensation program. At the 2020 Annual Meeting of Stockholders, approximately 98% of the votes cast by 96% of our stockholders were in favor of our executive compensation program. InAt the 2017 Annual Meeting of Stockholders, approximately 98% of the votes cast by 95% of our stockholders were in favor of our executive compensation program. In the 20162019 Annual Meeting of Stockholders, approximately 99% of the votes cast by 97%96% of our stockholders were in favor of our executive compensation program. While these say-on-pay votes are only advisory and not binding on us, the Compensation Committee discusses the vote results each year with our independent compensation consultant.
Our management team continued the practice of reaching out to our most significant stockholders from time to time to discuss how those stockholders view our executive compensation program, and what kind of changes they would like to see implemented in future years. Based on the overwhelming multi-year support by the stockholders in favor of our pay-for-performance compensation structure, the Compensation Committee decided to continue to grant equity awards based on performance conditions under the executive compensation program in 2018. In addition, the Compensation Committee granted equity awards based on market conditions, which will motivate our NEOs to focus on long-term stock price appreciation.2021. In the past several years, we have continued to improve our executive compensation policies and programs, incorporating the suggestions of our stockholders. We believe these improvements, as highlighted below, have supported our financial and strategic successes in the last several years. | | 1. | Commitment to short-term profit-based cash incentives, mid-term performance-basedperformance-based equity awards,, long-term market-based equity awards, and alignment of executive compensation with stockholder interests.the interests of our stockholders and other stakeholders. |
| | A. | In 2018, the Compensation Committee removed the discretionary bonus and the individual performance components of the short-term cash incentives.2021, 100% of the bonusannual cash incentives earned by the NEOs wascontinued to be tied to specific, pre-established non-GAAP operating income metrics. In 2018,2021, no stock awards were granted to the NEOs solely based on continued service. 100% of the total equity awards granted to our NEOs were tied to the achievement of performance and market-based conditions. We grantedThe Compensation Committee continued its practice of granting performance-based equity awardsRSUs (“PSUs”) based on the achievement of an average revenue growth rate as measured against the analog industry’s average revenue growth rate over thea two-year performance period of 2018 and 2019.period. In addition, we granted market-based equity awards based on achievement of five stock price targetsthe Compensation Committee implemented additional performance metrics that emphasized rigorous long-term performance goals designed to promote environmental sustainability over a five-yearthree-year performance period throughperiod. These goals align with the end of 2023. No stock awards were grantedBoard's continued efforts to the NEOs solely based on continued service.be deliberate about our role in society and improve our ESG practices. |
| | B. | OurOver the last decade, our executive compensation program is designedcontinued to evolve with the objectives to align our executives’ short-, mid- and long-term interests towith those of our stockholders. For example:
|
| ●
| In 2013, we grantedstockholders, which included PSUs, market-based stock units to our NEOsRSUs (“MSUs”) and market and performance-based RSUs (“MPSUs”) that containedcombined various operating goals and/or price hurdles requiring sustained increases in our stock price with a five-yearprice. These awards contain performance periodperiods ranging from two to five years, and a ten-year vesting period.periods ranging from two to ten years.
|
| | ●
| In 2015, we granted market and performance-based stock units to our NEOs that combined operating goals and price hurdles requiring sustained increasesWe believe the significant increase in our stock price and year-over-year outperformance in revenue growth in the past several years demonstrate the effectiveness of our performance-based compensation program in motivating our NEOs to build a sustainable business model and to focus on long-term value creation for our stockholders. Furthermore, linking ESG performance to our executive long-term compensation in 2021 demonstrates our commitment to environmental sustainability and alignment with four-year performancethe long-term interests of our stakeholders, including our stockholders, employees, suppliers and vesting periods.communities where we operate.
|
| | ●2. | In 2018, we granted market-based stock units to our NEOs that contained price hurdles requiring sustained increases in our stock price with five-year performance and vesting periods. |
| ●
| Since 2014, we have granted performance-based stock units to our NEOs that require significant outperformance against our peers in sustained revenue growth with a two-year performance period and a four-year vesting period.
|
We believe the significant increase in our stock price and year-over-year outperformance in revenue growth in the past several years demonstrate the effectiveness of our performance-based compensation program in motivating our NEOs to build a sustainable business model and to focus on long-term value creation for our stockholders.
Stock Performance:
Our one-year total stockholder return was approximately 4% and our three-year total stockholder return was approximately 88%, as shown in the graphs below in comparison to our peer group and the PHLX semiconductor sector index:
| (1)
| Represents our 2018 peer group approved by the Compensation Committee. See the section “Peer Group and Use of Peer Data for 2018” for further discussion.
|
Market Capitalization:
Our strong financial performance in the past several years has led to a significant increase in our market capitalization, surpassing $4 billion in 2017. Because a significant portion of our NEOs’ total target compensation has been in the form of market-based stock units with stock price performance components, the value of our NEOs’ compensation is closely tied to our market performance. The following table illustrates our market capitalization compared to our CEO’s compensation (as reported in the Summary Compensation Table below) in the past three years:
| 2.
| Capping payouts under our non-equity incentive plans. | | | | | | Our Compensation Committee has capped maximum cash payouts under our annual non-equity incentive plans. at 400% of target for all of the NEOs. |
Our Compensation Committee has capped maximum payouts under our annual non-equity incentive plans at 250% of target for the CEO and the remaining NEOs.
| | 3. | Selection of performance goals. | | | | | | Our stockholders expressed a preference for the use of different performance metrics across plans. In determining performance metrics, our Compensation Committee selected those that have a greater connection to the stock performance. Therefore, we use non-GAAP operating income for our short-term cash incentive plan, and, to balance that metric, a mix of revenue, stock price performance and operating goals. for our long-term performance equity incentive plan. By using a non-GAAP operating income metric in our short-term incentive plan and various performance and stock price appreciation metrics in our long-term incentive plan, we can reward our executives for achieving our short-term financial objectives while at the same time planning for long-term growth, without encouraging excessive risk taking. | | | | | | The following table shows the three-year history of our performance in revenue, GAAP operating income and non-GAAP operating income, which demonstrates a balance of our overall financial health, compared to our CEO’s total compensation (as reported in the 2021 Summary Compensation Table): |
In the past several years, our stockholders indicated a preference for the use of different performance metrics across plans, so that not all performance-based plans relied on the same metric. In addition, our stockholders told us they wanted to see a greater connection between stock price performance and executive compensation. Therefore, we use non-GAAP operating income for our short-term cash incentive plan, and, to balance that metric, a mix of revenue, stock price performance and operating goals for our long-term performance equity incentive plan. By using a non-GAAP operating income metric in our short-term incentive plan and various performance and stock price appreciation metrics in our long-term incentive plan, we can reward our executives for achieving our short-term financial objectives while at the same time planning for long-term growth, without encouraging excessive risk taking.
The following table shows the three-year history of our performance in revenue and non-GAAP operating income, which demonstrates a balance of our overall financial health, compared to our CEO’s total compensation:
| (1) | The reconciliation of the GAAP operating income to the non-GAAP operating income and related disclosures are provided in Annexure A. |
| | 4. | Clawback policypolicy.. | | | | | | We have a Compensation Recoupment Policy, which permits the Board to recoup any excess performance-based cash compensation paid to key members of our executive team if the financial results on which the performance-based compensation awards were based are restated due to fraud or intentional misconduct by the executive. |
In 2011, we heard investors tell us that compensation recovery policies, or clawbacks, were a best practice and should be adopted. In February 2012, we adopted our Compensation Recoupment Policy, which permits the Board to recoup any excess performance-based cash compensation paid to key members of our executive team if the financial results on which the performance-based compensation awards were based are restated due to fraud or intentional misconduct by the executive.
| | 5. | Stock ownership guidelines. | | | | | | We have significant stock ownership guidelines. for our NEOs and directors, requiring ownership levels by our officers of two to five times their base salary, and by our directors of three times their annual retainer. |
In 2011, we heard investors tell us that board members and officers should have ownership interests that are aligned with stockholders, and encouraged us to adopt stock ownership guidelines. In 2012, we adopted significant stock ownership guidelines for our NEOs and directors, requiring ownership levels by our officers of two to five times of base salary, and by our directors of two times of annual retainer. In 2016, we amended the stock ownership guideline by increasing the required levels for our directors from two times to three times of annual retainer.
| | 6. | Tax gross upsgross-ups.. | | | | | | Since 2008, we have not adopted any new employment agreements (or modified any existing employment agreements) to provide for tax gross-ups to our officers. |
Since 2008, we have not adopted any new employment agreements (or modified any existing employment agreements) to provide for tax gross-ups to our officers.
| | 7. | Responsible share ownershipownership.. | | | | | | We have a policy prohibiting our directors, officers (including our NEOs), and other employees from engaging in certain hedging and monetization transactions with respect to our stock that they hold without prior approval by our Chief Compliance Officer. The policy also prohibits our directors and officers (including our NEOs) from engaging in any short sales of our stock. |
We have adopted a policy prohibiting our directors and officers (including our NEOs) from engaging in certain hedging and monetization transactions with respect to our securities that they hold without prior Board approval. The policy also prohibits our directors and officers (including our NEOs) from engaging in any short sales of our securities. In summary, we regularlyroutinely engage with our stockholders to exchange ideas on our existing executive compensation programs and potential future programs. We listen to their feedback and carefully consider it. Our engagement with stockholders does not begin and end with the say-on-pay vote – that vote is just one part of a larger dialogue and partnership we have with our investors.
Returns to Stockholders Total Stockholder Return (“TSR”): Our one-year TSR was approximately 35% and our three-year TSR was approximately 335%, as shown in the graphs below in comparison to our peer group and the Philadelphia Stock Exchange (“PHLX”) semiconductor sector index.
(1) | Represents our 2021 peer group approved by the Compensation Committee. See “Peer Group and Use of Peer Data for 2021” for further discussion. |
Cash Dividends: The following table summarizes our cash dividend payments to our stockholders in the past three years (in thousands, except per-share amounts): | | FY 2021 ($) | | | FY 2020 ($) | | | FY 2019 ($) | Quarterly dividend per share | | | 0.60 | | | | 0.50 | | | | 0.40 | Total cash dividend payments | | | 110,206 | | | | 89,832 | | | | 69,196 |
In February 2022, the Board approved an increase in our quarterly cash dividends to $0.75 per share. 2018Market Capitalization
Our strong financial performance in the past several years has led to a significant increase in our market capitalization, surpassing $20 billion in 2021. Because a significant portion of our NEOs’ total compensation in the past several years has been in the form of market-based stock units with stock price performance components, the value of our NEOs’ compensation is closely tied to our market performance. The following chart illustrates our CEO’s compensation (as reported in the 2021 Summary Compensation Table) compared to our market capitalization in the past three years: 2021 Financial and Business Performance Highlights As noted above, the Compensation Committee has focused our executives on accountability in revenue, operating income and earnings, as well as maximizing stockholder return through the structure of our executive compensation program. We believe our 2018In 2021, despite the ongoing COVID-19 pandemic which negatively affected the global economy, we achieved record results in revenue and other key financial results, on both a GAAP and a non-GAAP basis, andmetrics that significantly outperformed the resulting compensation for our NEOs demonstrate a strong pay-for-performance connection.semiconductor analog industry. Our revenue growth rate was 43% in 2021, compared with the analog industry’s 33% reported by the Semiconductor Industry Association (“SIA”). Our financial results are summarized as follows (in millions, except per shareper-share amounts and percentages): | | | GAAP | | | Non-GAAP (1) | | | GAAP | | | Non-GAAP (1) | | | | | 2018 | | | 2017 | | | Change | | | 2018 | | | 2017 | | | Change | | | FY 2021 ($) | | | FY 2020 ($) | | | Change | | | FY 2021 ($) | | | FY 2020 ($) | | | Change | | Revenue | | $ | 582.4 | | | $ | 470.9 | | | | 24 | % | | $ | 582.4 | | | $ | 470.9 | | | | 24 | % | | | 1,207.8 | | | | 844.5 | | | | 43 | % | | | 1,207.8 | | | | 844.5 | | | | 43 | % | Operating income | | $ | 113.5 | | | $ | 77.4 | | | | 47 | % | | $ | 174.3 | | | $ | 134.9 | | | | 29 | % | | | 262.4 | | | | 158.9 | | | | 65 | % | | | 391.1 | | | | 250.1 | | | | 56 | % | Net income | | $ | 105.3 | | | $ | 65.2 | | | | 62 | % | | $ | 166.8 | | | $ | 127.5 | | | | 31 | % | | | 242.0 | | | | 164.4 | | | | 47 | % | | | 356.7 | | | | 236.8 | | | | 51 | % | Diluted EPS | | $ | 2.36 | | | $ | 1.50 | | | | 57 | % | | $ | 3.74 | | | $ | 2.93 | | | | 28 | % | | Diluted net income per share | | | | 5.05 | | | | 3.50 | | | | 44 | % | | | 7.45 | | | | 5.04 | | | | 48 | % |
| (1) | The reconciliation of the GAAP financial measures to the non-GAAP financial measures and related disclosures are provided in Annexure A. |
Our revenue growth rate of 24% in 2018 outperformed the analog industry’s 11% growth rate reported by the Semiconductor Industry Association (the “SIA”). We also achieved significant success in our targeted end markets in 20182021 as follows:
| | ● | AutomotiveCommunications sales grew 49%15% from the prior year, primarily due to higher sales of products for infrastructure and wireless applications.
| | | | | ● | Consumer sales grew 28% from the prior year, primarily driven by increased sales of products for infotainment, safetyhome appliances and connectivity applications.smart TVs. |
| | ● | Computing and storage sales grew 58%47% from the prior year, primarily due to strong sales growth in the solid-state drive storage,for enterprise notebooks, cloud computing and high-performance notebook markets.storage applications. |
| ● | Industrial sales grew 41% from prior year primarily fueled by product sales for applications in power source, security and meter products. |
| | ● | CommunicationsAutomotive sales grew 11%88% from the prior year, primarily reflecting higher demand in networking applications.driven by sales growth for highly integrated applications supporting the digital cockpit, advanced driver assistance systems and connectivity.
|
| ● | Industrial sales grew 55% from the prior year, primarily fueled by broad-based growth with each of our primary product lines enjoying better than double-digit revenue growth. |
Cash Dividends:
In February 2018, our Board of Directors approved an increase in our quarterly cash dividends to $0.30 per share and we paid a total of $47.5 million of dividends to our stockholders in 2018. In February 2019, our Board of Directors approved an increase in our quarterly cash dividends to $0.40 per share.
The Roles of the Compensation Committee and Our Officers in Setting Compensation The Compensation Committee, which is comprised solely of independent directors, has primary responsibility for overseeing the design, development and implementation of the compensation program for our CEO and other NEOs. The Compensation Committee Charter, which is available in the “Investor Relations” section of our website at http://www.monolithicpower.com, was originally adopted on October 26,in 2007, and is updated periodically. Pursuant to the Compensation Committee Charter, the Compensation Committee reviews and approves the compensation arrangements for our executive officers,NEOs, including the CEO, and administers our equity compensation plans. The Compensation Committee meets at least once a quarter. In 2018,2021, the Compensation Committee met four times. The Compensation Committee reviews the performance of each officer taking into account the evaluations provided by the CEO for all officers other than himself. The Compensation Committee makes the final determination of performance achievement for each officer. The CEO, Chief Financial Officer and General Counsel present information to the Compensation Committee as requested from time to time, including financial results, future budget information, business operations and legal developments. The Compensation Committee regularly meets in closed sessions without the CEO or other management personnel present. Our officers also provide information to the Compensation Committee’s independent compensation consultant, if requested to do so, to help the consultant perform its duties for the Compensation Committee. Our officers are responsible for implementing the decisions made by the Compensation Committee. Compensation Consultants In 2018,2021, the Compensation Committee again engaged Radford an Aon Hewitt company, as the compensation consultant with respect to our non-employee director and executive compensation programs. Radford did not perform any other work for us. In 2018,2021, the Compensation Committee assessed the independence of Radford pursuant to SEC rules and concluded that no conflict of interest exists that would prevent them from serving as independent consultant to the Compensation Committee for 2018.Committee. In 2018,2021, the Compensation Committee requested and received the following services from Radford: (1) updates on evolving compensation trends, (2) recommendations for additions or deletions to the peer group used for 2018,2021, (3) compensation data for officers and directors (gathered from public filings for our peers and broader surveys), and (4) general advice on analyzing and responding to stockholder feedback on our compensation programs. Peer Group and Use of Peer Data for 20182021 In February 2018,2021, based on the recommendations of Radford, the Compensation Committee reviewed and selected the peer group of technology companies selected by managementthat have similar growth profile and recommendedare the primary competitors for talent. In addition, the Compensation Committee took into account that the industryrevenue of our peer group continue tocompanies should be determined by reference to publicly traded companies in the semiconductor industry with revenue primarily between 50% and 300% of our revenue for the most recent four quarters. In addition, Radford took into account that the market capitalization should be in similar range of us primarily from 50% to 200%. Guided by this set of parameters, and taking into account the recommendations of management, Radford proposed the following peer group, which was reviewed and approved by the Compensation Committee. The peer group consisted of the following companies: Ambarella, Inc. | MKS Instruments,Rambus Inc.
| Cree, Inc.
| ON Semiconductor Corporation
| Cypress Semiconductor Corporation
| Power Integrations, Inc.
| Integrated Device Technology,Cirrus Logic, Inc.
| Semtech Corporation | MACOM Technology Solutions Holdings,Coherent, Inc.
| Silicon Laboratories, Inc. | Mellanox Technologies, Ltd.
| Synaptics Incorporated
| Microsemi CorporationMKS Instruments, Inc.
| Teradyne, Inc. | ON Semiconductor Corporation | Xperi Corporation | Power Integrations, Inc. | Wolfspeed, Inc. (formerly Cree, Inc.) | | Qorvo, Inc. | |
We removed Cavium, Inc.Inphi Corporation from the peer group for 20182021 because it was acquired during the year. In addition, we removed MACOM Technology Solutions Holdings, Inc. and Synaptics Incorporated because these companies ceased to fit within the desired parameters, and added Cirrus Logic, Inc. and Qorvo, Inc. Named Executive OfficerNEO Compensation Components
The table below summarizes the core elements, objectives and key features of our 20182021 compensation program for our NEOs: Compensation Components | | Objectives | | Key Features | Base salary | | Designed to reward individual effort associated with job-related duties and to attract and retain talented executive officers. | | ● Paid in cash. ● Reviewed annually. | Short-term cash incentive compensation | | Designed to encourage outstanding MPS performance by motivating the NEOs to achieve short-term financial goals. | | ● Paid in cash. ● 100% of the compensation is subject to corporate performance goals. ● Maximum payoutsPayouts capped at 250%400% of target for the NEOs.target. ● Subject to clawback policy. | Long-term incentive compensation | | Designed to align the interests of our executives with the interests of theour stockholders by focusing on our long-term revenue growth compared to the industry, and stock price appreciation.performance that is tied to environmental and sustainability goals. | | ● 100% of total target award sizethe awards is subject to performance and market conditions. ● SizeMaximum payouts at 400% of award is a multiple of target cash compensation.target. ● Awards subject to performance conditionsThe PSU awards contain a purchase price feature, which requires the NEOs to pay MPS $30 per share upon vesting of the shares.shares in certain circumstances. |
Cash dividendDividend equivalents
| | Designed to treat equity award holders equally with stockholders under our dividend program. | | ● Paid in cash and equalEqual to the dividend declared and paid on a share of Common Stock. ● Accumulate during the vesting period of the underlying equity awards. ● Subject to forfeiture if the underlying equity awards do not vest. ● Paid in cash. |
Analysis of 20182021 Compensation Elements Base Salaries: We provide base salary as a stable source of compensation for the NEOs’ day-to-day duties, and seek to set base salaries at levels that will attract and retain talented executive officers. To attract and retain talent, we have to understand the levels of salary offered by our peers. Accordingly, ourthe Compensation Committee considers peer data as one key factor in reviewing base salary each year. OurThe Compensation Committee also considers each individual executive’s role and the scope of his or her responsibilities, the executive’s experience, his or her tenure with us, and size of recent salary changes. For 2018, our2021, the Compensation Committee considered all of these factors and approved the following salaries for our NEOs: NEOs | | 2018 | | | 2017 | | | Change | | | Name | | | FY 2021 ($) | | | FY 2020 ($) | | | Change | | Michael Hsing | | $ | 650,000 | | | $ | 600,000 | | | | 8 | % | | | 720,000 | | | | 650,000 | | | | 11 | % | Bernie Blegen | | $ | 300,000 | | | $ | 290,000 | | | | 3 | % | | | 350,000 | | | | 320,000 | | | | 9 | % | Deming Xiao | | $ | 340,000 | | | $ | 340,000 | | | | 0 | % | | | 380,000 | | | | 340,000 | | | | 12 | % | Maurice Sciammas | | $ | 340,000 | | | $ | 340,000 | | | | 0 | % | | | 380,000 | | | | 340,000 | | | | 12 | % | Saria Tseng | | $ | 340,000 | | | $ | 340,000 | | | | 0 | % | | | 380,000 | | | | 340,000 | | | | 12 | % |
In 2018,For more than a decade, the Compensation Committee has only made small increases to the base salary, and did not make significant changes to the short-term cash incentive program for the NEOs. Specifically, the size of the target and maximum bonus for the NEOs had not had signficiant increases for more than ten years. During this same period, MPS has experienced significant growth and its annual revenue increased to more than $1 billion, while the market capitalization increased to more than $20 billion. As a result, based on the recommendation of theby our independent compensation consultant and consistent with MPS’s compensation philosophy, the Compensation Committee approved an increase of Mr. Hsing’s base salarymajor changes to the compensation program in 2021 to better reflect our current size in the semiconductor industry and align hiswith the pay withpractices of our peer group, given that his base salary had not been increased since 2014. In addition,group. Furthermore, the Compensation Committee approved anbelieved that this increased payout should tie to performance, and therefore allocated a significant portion of the increase of Mr. Blegen’s base salary to better align his pay with our peer group.the target and maximum bonus (as discussed further below).
Short-Term Cash Incentive Compensation: We provide a short-term cash incentive opportunity to each of our NEOs to encourage them to achieve our corporate short-term operating income goals. Consistent with 2017, theThe Compensation Committee used non-GAAP operating income as the sole corporate performance metric in 2018 for determining the short-term cash incentive compensation. The Compensation Committee believed that non-GAAP operating income would best reflect our short-term performance. See Annexure A for a reconciliation of the GAAP operating income to the non-GAAP operating income used in the short-term cash incentive plan. In response to our stockholder feedback, the Compensation Committee removed the following components under the short-term cash incentive plan in 2018:
| ●
| Discretionary bonus for all the NEOs.
|
| ●
| Individual management by objectives (“MBOs”) for the NEOs (other than our CEO who did not have this component in prior years).
|
As a result of these changes, 100% of the short-term cash incentives were tied to a specific, pre-established non-GAAP operating income metric for all the NEOs. Our CEO’sThe target bonus for each NEO was 100%200% of his annual base salary. The remaining NEOs’ target bonus was 80% of theiror her annual base salary. For 2018,2021, our non-GAAP operating income target was $145.6$279.6 million as established in the annual operating plan approved by the Board. Achievement of 120% of the non-GAAP operating income target would result in a maximum 400% payout of the maximum 250%target bonus payout for each NEO, achievement of 100% of the non-GAAP operating income target would result in thea 100% target bonus payout, and performance below 80% of the non-GAAP operating income target would result in no bonus payout. For performance withinbetween the maximum,minimum, target and threshold range,maximum levels, the percentage of payout would be determined based on a linear interpolation.
For 2018,2021, we achieved non-GAAP operating income of $400.3 million (see Annexure A), which resulted in a payout of 400% of the achievement of 250%target bonus payout for each NEO. The following table summarizes the 2021 bonus payout approved by the Compensation Committee for each of our NEOs: NEOs | | Target | | | Maximum | | | Achieved | | | | | | | Bonus Amount | | | | | | Name | | | Minimum ($) | | | Target ($) | | | Maximum ($) | | | Earned ($) | | Michael Hsing | | $ | 650,000 | | | $ | 1,625,000 | | | $ | 1,625,000 | | | | - | | | | 1,440,000 | | | | 5,760,000 | | | | 5,760,000 | | Bernie Blegen | | $ | 240,000 | | | $ | 600,000 | | | $ | 600,000 | | | | - | | | | 700,000 | | | | 2,800,000 | | | | 2,800,000 | | Deming Xiao | | $ | 272,000 | | | $ | 680,000 | | | $ | 680,000 | | | | - | | | | 760,000 | | | | 3,040,000 | | | | 3,040,000 | | Maurice Sciammas | | $ | 272,000 | | | $ | 680,000 | | | $ | 680,000 | | | | - | | | | 760,000 | | | | 3,040,000 | | | | 3,040,000 | | Saria Tseng | | $ | 272,000 | | | $ | 680,000 | | | $ | 680,000 | | | | - | | | | 760,000 | | | | 3,040,000 | | | | 3,040,000 | |
Long-Term Equity Incentive Compensation: We provide long-term equity compensation awards to reward and retain our valued executives, to help us effectively compete for executives who can strategically position us for future growth and financial success, and to encourage our executives to focus on achieving long-term development goals for the future. In determining the number of shares subject to long-term equity compensation awards granted to each of the NEOs, the Compensation Committee establishes the aggregate value of such awards to be granted as a multiple of each NEO’s target cash compensation. The Compensation Committee believes these multiples properly reflect the relative position and responsibility of each NEO as well as the officer’s ability to develop the vision for the future of MPS, drive the strategy to obtain such vision, and effect certain cost savings for us. Over the past several years, we have regularly engaged with our stockholders to take into account their opinions in setting performance metrics. In response to investor feedback and to align the NEOs’ long-term incentive compensation with our performance and stockholders’ interests, the Compensation Committee decided that 100% of the equity compensation awards granted to our NEOs in 20182021 would vest based on the achievement of performance and market-basedperformance-based criteria. No equity awards that vest solely based on continued service were granted to our NEOs in 2018.2021 that would vest solely based on continued service. In February 2018,A Balanced Approach to Our Equity Compensation Program
The Compensation Committee is committed to establishing a rigorous yet balanced equity compensation program with medium-term and long-term performance periods, by overlapping a revenue-based PSU program over a two-year performance period and a long-term stock-based award over a longer performance period. Taken into account of the semiconductor industry’s cyclical nature and stockholders’ feedback, the Compensation Committee determined that two years is the most optimal performance period for the revenue-based PSU awards. A revenue-based performance period that is longer than two years makes it impractical for the Compensation Committee to determine appropriate performance goals due to the volatility from the global pandemic, macro-economic and industry-specific conditions. Accordingly, the Compensation Committee granted the NEOs a target dollar amount of long-term equity compensation awards which included RSUs with performance conditions based on revenue achievement as measured against the performance of the analog industry overPSUs to each NEO that are subject to a two-year (2021 and 2022) performance period with a total vesting period of four years (“PSUs”). In addition, in October 2018, at a time when the overall stock market was experiencing an unexpected downturn, the Compensation Committee decided to grant the NEOs a long-term, market-based equity compensation awards based on the achievement of stock price targets overrevenue during that period. In addition, in 2021, the Compensation Committee responded to our stockholders’ desire to set additional long-term, non-financial objectives that can benefit other stakeholders, and therefore introduced several initiatives that focus on corporate sustainability as additional performance conditions with a five-year vesting period (“MSUs”). The Compensation Committee’s decision to implement this market-based equity awards in October 2018 was driven by management’s continued confidence in MPS’s future and long-term stockthree-year performance despite challenging macro-economic conditions at the time.period.
The following table summarizes the target number of shares subject to the 2021 PSUs that can be earned by the NEOs at the minimum, target and MSUs grantedmaximum performance levels, subject to our NEOs in 2018:the criteria described below. The number of shares earned will be linearly interpolated for actual achievement between the minimum, target and maximum performance levels. | | | PSUs | | | MSUs | | | | | | | Number of Shares | | | Maximum Components | | NEOs | | Target Number of Shares | | | Percentage of Total Awards | | | Target Number of Shares | | | Percentage of Total Awards | | | Total Target Awards | | | Name | | | Minimum (#) | | | Target (#) | | | Maximum (400%) (#) | | | Revenue Goal (300%) (#) | | | Environmental Goals (100%) (#) | | Michael Hsing | | | 97,500 | | | | 82 | % | | | 21,600 | | | | 18 | % | | | 119,100 | | | | - | | | | 37,613 | | | | 150,452 | | | | 112,839 | | | | 37,613 | | Bernie Blegen | | | 14,850 | | | | 61 | % | | | 9,600 | | | | 39 | % | | | 24,450 | | | | - | | | | 7,619 | | | | 30,476 | | | | 22,857 | | | | 7,619 | | Deming Xiao | | | 25,245 | | | | 72 | % | | | 9,600 | | | | 28 | % | | | 34,845 | | | | - | | | | 11,580 | | | | 46,320 | | | | 34,740 | | | | 11,580 | | Maurice Sciammas | | | 25,245 | | | | 72 | % | | | 9,600 | | | | 28 | % | | | 34,845 | | | | - | | | | 11,580 | | | | 46,320 | | | | 34,740 | | | | 11,580 | | Saria Tseng | | | 25,245 | | | | 72 | % | | | 9,600 | | | | 28 | % | | | 34,845 | | | | - | | | | 11,580 | | | | 46,320 | | | | 34,740 | | | | 11,580 | |
The PSUs contain a purchase price feature, which requires the NEOs to pay MPS $30 per share upon vesting of the shares. Shares that do not vest will not be subject to the purchase price payment to MPS. The target number of shares granted to each NEO was determined based on the target equity compensation value for such PSUs, divided by our closing stock price on the date of grant ($374.57) less the purchase price. The MSUs do not contain aThis $30 purchase price feature.requirement is deemed satisfied and waived if the average stock price for 20 consecutive trading days at any time during 2021 and 2022 is $30 higher than $374.57. Revenue Goal PSUs:
The Compensation Committee set a two-year (2018 and 2019) revenue performance period asFor 2021, the basis to grant each NEO a target number of PSUs. The number of PSUs that can ultimately be earned at the end of the two-year performance period on December 31, 20192022 is based on theMPS’s average two-year (2021 and 2022) revenue growth rate as measured against the average two-year revenue growth rate for the analog industry published by the SIA. In selecting the minimum, target and maximum performance levels, the Compensation Committee carefully considered our historical and projected performance and the fundamentals of the analog industry at that time. The Compensation Committee took into account SIA’s projections which are updated twice a year in May and November, for the anticipated revenue growth in the analog industry for the two-year performance period. Instead of benchmarking against the broad semiconductor sector, the Compensation Committee elected to focus solely on the analog industry in setting the performance objectives, which are measured against our closest and most relevant peers within the semiconductor sector. In addition, the Compensation Committee chose the revenue projections reported by SIA as a baseline because the SIA report is well-respected in the semiconductor industry and used by Wall Street financial analysts in preparing their analyses, forecasts and recommendations.
Based on the Compensation Committee's evaluation, the performance criteria and the threshold,minimum, target and maximum levels of the PSUs that can be earned are as follows: MPS’MPS'ss Average Two-Year Revenue | | | | | Growth Rate Exceeds the Analog Industry by: | | | Percentage of Target PSUs EarnedPSU Earn-Out
| | lessLess than 3%
| | | 0% | | 3% | | | 50% of Target | | 5% | | | 100% of Target | | 15% | and above | | 300% of Target | |
The two-year performance period provides a mid- to long-term incentive for our NEOs through overlapping cycles so that each year of performance is equally critical as we work toward meeting our two-year goals. The Compensation Committee believes the revenue goals are challenging and that performance metrics measured relative to our peers will provide objectivity when setting long-term goals while minimizing uncertainties caused by external economic factors that are beyond our control. At the end of theThe performance period on December 31, 2019is two years and uponthe total vesting period is four years. Upon certification of performance by the Compensation Committee and no earlier than December 31, 2022, 50% of the actual award earned will become vested in February 2020,2023, and the remaining 50% will vest quarterly over the following two years, thereafter, for a total vesting period of four years, subject generally to continued employment.employment through such dates. The NEOs will be required to pay MPS $30 per share upon vesting of the shares.shares, unless the stock price target as described above is achieved.
MSUEnvironmental Goalss:
The Board recognizes that our ESG efforts related to environmental sustainability are important to many of our stakeholders and are an integral part of corporate citizenship. In support of this commitment, in 2021, the Compensation Committee introduced new and additional qualitative performance metrics that tie a portion of the increased executive compensation to environmental goals. The objectives of the goals are to build long-term scalable and effective programs and processes aimed to mitigate the environmental impacts of our business operations. In 2013, ourdesigning the program, the Compensation Committee grantedbelieved that the goals should be rigorous and impactful, align with our long-term market-based equity awards tobusiness strategy, and create positive values for our NEOs with a five-year performance period. In addition, in 2015, our Compensation Committee granted long-term, market and performance-based equity awards to our NEOs with a four-year performance period. Instakeholders. Guided by this set of criteria, the past several years, MPS’s financial success has been reflected in our strong stock performance, which resulted in the achievement of the stock price targets established in both the 2013 and 2015 equity awards. In October 2018, our Compensation Committee approved another long-term MSU program to a groupthe following environmental goals, which consist of key employees, including our NEOs, that can only be earned if our Common Stock trades for sustained periods of time at a series of price levels substantially higher than the average stock price for the preceding twelve months. These MSU awards are intended to focus the CEO and the other NEOs on leading us to sustained, excellent financial and operational performance over the next five years which we believe will result in higher stock prices. The awards, designed by the Compensation Committee in consultation with our independent compensation consultant, emphasize sustainable stockholder value creation over time. To realize the value from the awards, the NEOs will have to grow our revenue and earnings substantially over the next five years, and thereby achieve significant increases in our stock price.
The key terms of the MSUs are as follows:three categories:
| | Summary of Environmental Goals | | PSU Earn-Out | 1. | The awards consistEstablish an MPS Environmental and Climate Change Policy that identifies key areas with respect to environmental matters affecting our business. These key areas primarily include greenhouse gas emission, energy and water consumption, hazardous waste management, and the environmental impacts of our new product design (the “Key Objectives”).
| | 25% of Target | 2. | Establish an aggregateEnvironmental, Health, Safety and Sustainability taskforce and complete an assessment of the existing baseline performance on the Key Objectives. | | 25% of Target | 3. | Establish a long-term improvement plan, including target of 60,000 sharesgoals for reductions, for the NEOs. The NEOs can earn up to five timesKey Objectives. | | 50% of the target if our average stock price reaches the following five price levels (the “Price Hurdles”):Target |
Price Hurdles | | | Percentage of Stock Price Increase (A) | | | | $140 | | | | 29% | | | | $148 | | | | 36% | | | | $156 | | | | 44% | | | | $164 | | | | 51% | | | | $172 | | | | 59% | |
(A) The percentage representsEach of the increase from our stock price of $108.43 on October 25, 2018,performance goals would require the dateNEOs to establish specific actionable plans and develop strategies and processes, including, but not limited to, the MSU program was approved by the Compensation Committee.following:
| 2.
| To earn the shares associated with any Price Hurdle, the average
● Establish a cross-functional working committee and identify leads from health and safety, facilities, human resources, legal, sales, operations, quality assurance, engineering, procurement, and information technology (“IT”). The comprehensive membership helps ensure that each of the closing price ofbusiness functions is actively overseeing progress on our Common Stock over a 20-consecutive day trading period must equal or exceed that Price Hurdle. The performance period forESG efforts, goals and disclosures, while maintaining regular communications with the first two Price Hurdles is from October 26, 2018 to December 31, 2021, and the performance period for the last three Price Hurdles is from October 26, 2018 to December 31, 2023.management team. |
| 3.
| Shares credited during
● Research historical metrics, conduct materiality assessments, and evaluate the relative importance of each of the Key Objectives and its potential impacts on the organization. ● Evaluate risks and opportunities associated with the Key Objectives, and integrate the performance period upon achievementgoals into business practices and processes. ● Solicit inputs from stakeholders (employees, the Board and stockholders, as well as customers, vendors and suppliers) through meetings, interviews and surveys, and define performance goals that align with their expectations and priorities. |
| | ● Develop an effective approach to streamline the intensive data collection process related to sustainability metrics across the organization into a centralized platform. ● Validate, analyze and test data to ensure they are accurate, reliable, relevant and auditable. |
| | ● Evaluate and develop data software, analytics platforms and measurement tools to track key metrics and performance. ● Implement management systems to facilitate the planning, execution and oversight of our policies, strategies and progress. ● Establish a strong IT control environment to support the Price Hurdles will fully vestintegrity and security of data. |
| | ● Assess regulatory requirements, monitor emerging issues and ensure performance goals are in compliance. ● Examine third-party sustainability assessments and benchmark peer disclosure trends, best practices and the semiconductor industry’s challenges and opportunities. ● Assess reporting requirements on January 1, 2024, subject to continued employment. In addition,performance and progress in accordance with global frameworks, such as the Compensation Committee imposed a post-vesting holding period which prohibitsSustainability Accounting Standards Board and the sale of a portion of the vested shares for up to an additional two years.Task Force on Climate-Related Financial Disclosures. |
The following table summarizes the number of shares that can be earned by the NEOs under the MSU program,PSUs subject to the criteriaenvironmental goals have a maximum earn-out of 100% of the target, and the goals may be achieved at any time during a three-year performance period ending on December 31, 2023. Upon certification of achievement of the performance goals by the Compensation Committee, the PSUs will vest immediately, but no earlier than December 31, 2022. In addition, the Compensation Committee imposed a post-vesting holding period which prohibits the sale of the vested shares for an additional year. The NEOs will be required to pay MPS $30 per share upon vesting of the shares, unless the stock price target as described above:above is achieved. | | | | | | | Price Hurdles | | NEOs | | Less Than $140 | | | $140 | | | $148 | | | $156 | | | $164 | | | $172 | | Michael Hsing | | | 0 | | | | 21,600 | | | | 21,600 | | | | 21,600 | | | | 21,600 | | | | 21,600 | | Bernie Blegen | | | 0 | | | | 9,600 | | | | 9,600 | | | | 9,600 | | | | 9,600 | | | | 9,600 | | Deming Xiao | | | 0 | | | | 9,600 | | | | 9,600 | | | | 9,600 | | | | 9,600 | | | | 9,600 | | Maurice Sciammas | | | 0 | | | | 9,600 | | | | 9,600 | | | | 9,600 | | | | 9,600 | | | | 9,600 | | Saria Tseng | | | 0 | | | | 9,600 | | | | 9,600 | | | | 9,600 | | | | 9,600 | | | | 9,600 | |
Dividend Equivalents. In connection with our quarterly cash dividend program, all outstanding and unvested time and performance-based full value awards granted to employees, including the NEOs, have the right to receive dividend equivalents in order to maintain the economic alignment between the value of such awards and the value of a share of our Common Stock. The dividend equivalents are accumulated during the vesting periods of the shares underlying such awards and are paid in cash to employees only if and when the underlying shares vest. Dividend equivalents accrued on the underlying shares are forfeited if the employees do not fulfill their service requirement during the vesting periods. Dividend equivalents paid to the NEOs in 20182021 are included in the section ““2021 Option Exercises and Stock Vested” Vested” below.
Certifications of Prior-YearAchievement of Prior Performance-Based Awards As previously disclosed in our proxy statement for the 20182021 Annual Meeting of Stockholders, the Compensation Committee granted each NEO a PSU award in February 20172020 that could be earned based on theMPS’s average two-year (2017(2020 and 2018)2021) revenue growth rate as measured against the average two-year revenue growth rate for the analog industry published by the SIA. The PSU award consisted of a target award, as well as a maximum award equal to 300% of the target grant. The actual results at the end of the two-year performance period on December 31, 2018,2021, as approved by the Compensation Committee, were as follows: MPS's Average Two-Year Revenue | MPS's Average Two-Year Revenue | | | | | | MPS's Average Two-Year Revenue | | | | | Growth Rate Exceeds the Analog Industry by: | Growth Rate Exceeds the Analog Industry by: | | | Percentage of Target | | Growth Rate Exceeds the Analog Industry by: | | | | Percentage of | Target | | | Maximum | | | Actual Achievement | | | PSUs Earned | | | Maximum | | Actual Achievement | | PSU Earn-Out | | 5% | | | | 15% | | | | 11.6% | | | | 260.0 | % | | 15% and above | | 20.6% | | 300.0% |
The following table shows the actual shares earned under the program2020 PSU awards for the NEOs: NEOsName
| | Earned (#) | | Michael Hsing | | | 254,220153,324 | | Bernie Blegen | | | 43,89327,174 | | Deming Xiao | | | 74,33139,699 | | Maurice Sciammas | | | 74,33139,699 | | Saria Tseng | | | 74,33139,699 | |
The NEOs are required to pay MPS a purchase price of $30 per share upon vesting of the actual awards earned. 50% of the actual awards earned vested in February 2019,2022, with the remaining 50% vesting quarterly over the following two years through February 2021,2024, for a total vesting period of four years, subject to continued employment. employment through such dates.
Broad-Based Benefits Our NEOs are eligible to participate in our broad-based employee benefit programs on the same terms offered to our employees. These benefit programs include the Employee Stock Purchase Plan, medical, dental and vision insurance, long-term and short-term disability insurance, life and accidental death and dismemberment insurance, and health and dependent care flexible spending accounts. We do not provide pension arrangements or post-retirement health coverage for our NEOs or other employees. In addition, we do not provide matching contributions onto the 401(k) plan or the deferred compensation plan for our NEOs or other employees. Severance and Change in Control Arrangements We offer severance benefits to our NEOs, including severance in connection with a change in control of MPS. In general, severance does not exceed six to twelve months of base salary, target bonus and other benefits, and is conditioned on a release of claims and compliance with ongoing obligations. We believe these modest benefits balance the costs to MPS with the retention benefits that are commonly understood to come from offering severance and change in control benefits. For all change in control arrangements, the NEO is entitled to benefits if his or her employment is terminated without cause or if he or she leaves for good reason within one year following a change in control. This approach is commonly referred to as a “double-trigger” arrangement and is favored by many institutional investors and their advisors. We believe the size and conditions to receipt of these severance benefits are consistent with market practices. These arrangements are discussed in more detail in the section “Named Executive Officer Compensation — Potential Payments Upon Termination or Termination Upon Change in Control.” Stock Ownership Guidelines In February 2012, the Board establishedWe have stock ownership guidelines for our executive officersNEOs and directors. These guidelines reinforce the importance of aligning the interests of our executive officersNEOs and directors with the interests of our stockholders.
For the NEOs, the guidelines are determined as a multiple of each NEO’s base salary, and then converted to a fixed number of shares. Currently, the multiple for our CEO is five times his base salary, while the multiples for other NEOs are two times each NEO’s base salary. Equity interests that count toward the satisfaction of the ownership guideline include shares owned directly or indirectly by the executive, including restricted or unrestricted shares or stock units (excluding restricted shares or stock units that remain subject to achievement of performance goals), and any shares owned in our savings plans, such as our 401(k), plan, or acquired through the Employee Stock Purchase Plan. Executives have five years from the date of adoption of the guidelines or their appointment as an executive officer, as applicable, to attain these ownership levels. levels. As of December 31, 2018,2021, all of the NEOs met the stock ownership guidelines. For the non-employee directors, the stock ownership guidelines are determined as a multiple of the annual retainer paid to the non-employee director and then converted to a fixed number of shares. In February 2016, based on our compensation consultant’s best practice recommendation, we amended the stock ownership guidelines to increaseCurrently, the required level for our non-employee directors from two times tois three times of each such director’s annual retainer. Directors have five years from the date of adoption of the guidelines or their initial appointment, as applicable, to attain these ownership levels. As of December 31, 2018,2021, all of the directors met the stock ownership guidelines. Policy Regarding Clawback of Incentive Compensation In February 2012, the Board adoptedWe have a Compensation Recoupment Policy, which requires the Board to recoup any excess performance-based cash compensation paid to key members of our executive team, including the NEOs, if the financial results on which the incentive compensation awards were based are restated due to fraud or intentional misconduct by the executive, if the Board determines, in its sole discretion, that it is in the best interests of us and our stockholders for the executive to repay or forfeit all or any portion of the subject performance-based cash compensation.
Anti-Hedging and Monetization Transactions and Short Sales We prohibit our directors, officers (including our NEOs), and officers, including our NEOs,other employees from engaging in hedging or monetization transactions with respect to our securitiesstock that they obtained through our plans or otherwise, including transactions involving the use of financial instruments such as prepaid variable forwards, equity swaps, collars, forward sale contracts and exchange funds, without prior Board approval.approval by the Chief Compliance Officer. We also prohibit our directors and officers including(including our NEOs,NEOs) from engaging in any short sales of our securities.stock. Tax and Accounting Impacts of Equity Grants Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1 million in any taxable year for “covered employees.employees,” Prior towhich, following the enactment of the 2017 Tax Cuts and Jobs Act (the “2017 Tax Act”) enacted in December 2017, covered employees consistedconsist of our Chief Executive Officer and eachall of the next three highest compensated officers serving atNEOs, including the end of the taxable year other than our Chief Financial Officer, and compensation that qualified as “performance-based” under Section 162(m) was exempt from this $1 million deduction limitation. As a result of the 2017 Tax Act, this exemption was, with certain limited exceptions, eliminated. In addition, the definition of covered employees was expanded to include all named executive officers.Officer. Our Compensation Committee is aware of current rules governing the taxation and accounting for cash and equity compensation as applicable to public companies. Our Compensation Committee believes that, in establishing the cash and equity incentive compensation plans and arrangements for our executive officers,NEOs, the potential deductibility of the compensation payable under those plans and arrangements should be only one of a number of relevant factors taken into consideration, and not the sole governing factor. The Compensation Committee believes it is important to maintain cash and equity incentive compensation at the requisite level to attract and retain the individuals essential to our financial success, even if all or part of that compensation may not be deductible by reason of the Section 162(m) limitation. Compensation Committee Report The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis with our management. Based upon such review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Proxy Statement for the Annual Meeting.Meeting and incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2021. | Members of the Compensation Committee: Jeff Zhou, Chairman Herbert Chang Eugen Elmiger |
Compensation Committee Interlocks and Insider Participation No Compensation Committee member was at any time during 2018,2021, or at any other time, an officer or employee of us or any of our subsidiaries. No executive officerNEO of MPS serves on the board or compensation committee of any entity that has one or more executive officers serving on the Board or Compensation Committee. Compensation Risk Management In 2018,2021, our management, including members from our internal legal, accounting, finance and human resources departments, undertook a subjective review of our compensation policies and practices that applied to all of our employees, including the following: annual base salaries and bonuses, equity incentive awards under our equity incentive plans and the Employee Stock Purchase Plan. This review was designed to review, consider and analyze the extent to which, if any, our compensation policies and practices might create risks for us, and this review also focused on variable and incentive compensation elements, as well as policies and practices that could mitigate or balance any such incentives. After conducting this review, management determined that our compensation policies and practices for our employees do not create any risks that are reasonably likely to have a material adverse effect on us. The results of the review and management’s determination were reviewed and independently considered by the Compensation Committee, which concurred with management’s assessment. 2021 Summary Compensation Table The following table sets forth the compensation for our Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers serving on December 31, 2021, which officers together constitute our NEOs: Name and Principal Position | | Year | | Salary | | | Bonus (1) | | | Stock Awards (2)(3) | | | Non-Equity Incentive Plan Compensation (4) | | | All Other Compensation (5) | | | Total | | | Year | | Salary ($) | | Bonus ($) | | Stock Awards ($) (1)(2) | | Non-Equity Incentive Plan Compensation ($) (3) | | All Other Compensation ($) (4) | | Total ($) | Michael Hsing | | 2018 | | $ | 643,846 | | | $ | - | | | $ | 9,446,868 | | | $ | 1,625,000 | | | $ | - | | | $ | 11,715,714 | | | 2021 | | 711,923 | | - | | 13,782,908 | | 5,760,000 | | - | | 20,254,831 | Chief Executive Officer, President and | | 2017 | | $ | 600,000 | | | $ | 90,000 | | | $ | 5,909,642 | | | $ | 1,386,977 | | | $ | - | | | $ | 7,986,619 | | | Chairman of the Board | | 2016 | | $ | 600,000 | | | $ | 90,000 | | | $ | 5,228,852 | | | $ | 1,113,212 | | | $ | - | | | $ | 7,032,064 | | | Chief Executive Officer, President | | | 2020 | | 650,000 | | - | | 12,395,153 | | 1,625,000 | | - | | 14,670,153 | and Chairman of the Board | | | 2019 | | 650,000 | | - | | 7,945,677 | | 761,269 | | - | | 9,356,946 | Bernie Blegen | | 2018 | | $ | 295,308 | | | $ | - | | | $ | 1,870,950 | | | $ | 600,000 | | | $ | - | | | $ | 2,766,258 | | | 2021 | | 342,500 | | - | | 2,791,906 | | 2,800,000 | | - | | 5,934,406 | Chief Financial Officer | | 2017 | | $ | 281,692 | | | $ | 34,800 | | | $ | 1,020,348 | | | $ | 384,149 | | | $ | - | | | $ | 1,720,989 | | | 2020 | | 320,000 | | - | | 2,311,155 | | 640,000 | | - | | 3,271,155 | | | | 2016 | | $ | 237,890 | | | $ | 23,400 | | | $ | 669,667 | | | $ | 222,718 | | | $ | - | | | $ | 1,153,675 | | | 2019 | | 317,308 | | - | | 1,408,217 | | 299,823 | | - | | 2,025,348 | Deming Xiao | | 2018 | | $ | 340,000 | | | $ | - | | | $ | 2,720,429 | | | $ | 680,000 | | | $ | - | | | $ | 3,740,429 | | | 2021 | | 375,385 | | - | | 4,243,375 | | 3,040,000 | | - | | 7,658,760 | President of Asia Operations | | 2017 | | $ | 340,000 | | | $ | 40,800 | | | $ | 1,727,919 | | | $ | 450,382 | | | $ | - | | | $ | 2,559,101 | | | 2020 | | 340,000 | | - | | 3,482,786 | | 680,000 | | - | | 4,502,786 | | | | 2016 | | $ | 340,000 | | | $ | 40,800 | | | $ | 1,587,624 | | | $ | 388,328 | | | $ | 157,265 | | | $ | 2,514,017 | | | 2019 | | 340,000 | | - | | 2,057,358 | | 318,562 | | - | | 2,715,920 | Maurice Sciammas | | 2018 | | $ | 340,000 | | | $ | - | | | $ | 2,720,429 | | | $ | 680,000 | | | $ | - | | | $ | 3,740,429 | | | 2021 | | 375,385 | | - | | 4,243,375 | | 3,040,000 | | - | | 7,658,760 | Senior Vice President, | | 2017 | | $ | 340,000 | | | $ | 40,800 | | | $ | 1,727,919 | | | $ | 450,382 | | | $ | - | | | $ | 2,559,101 | | | 2020 | | 340,000 | | - | | 3,482,786 | | 680,000 | | - | | 4,502,786 | Worldwide Sales and Marketing | | 2016 | | $ | 340,000 | | | $ | 40,800 | | | $ | 1,587,624 | | | $ | 388,328 | | | $ | - | | | $ | 2,356,752 | | | 2019 | | 340,000 | | - | | 2,057,358 | | 318,562 | | - | | 2,715,920 | Saria Tseng | | 2018 | | $ | 340,000 | | | $ | - | | | $ | 2,720,429 | | | $ | 680,000 | | | $ | - | | | $ | 3,740,429 | | | 2021 | | 375,385 | | - | | 4,243,375 | | 3,040,000 | | - | | 7,658,760 | Vice President, Strategic Corporate | | 2017 | | $ | 340,000 | | | $ | 40,800 | | | $ | 1,727,919 | | | $ | 450,382 | | | $ | - | | | $ | 2,559,101 | | Vice President, Strategic Corporate | 2020 | | 340,000 | | - | | 3,482,786 | | 680,000 | | - | | 4,502,786 | Development and General Counsel | | 2016 | | $ | 340,000 | | | $ | 40,800 | | | $ | 1,587,624 | | | $ | 388,328 | | | $ | - | | | $ | 2,356,752 | | | 2019 | | 340,000 | | - | | 2,057,358 | | 318,562 | | - | | 2,715,920 |
| (1) | Includes discretionary cash bonuses approved by the Compensation Committee. Beginning in 2018, the Compensation Committee removed the discretionary cash bonus component from the executive compensation program.
|
| (2)
| For more information regarding the stock2021 PSU awards, see the section refer to ““Named Executive Officer Compensation — Compensation Discussion and Analysis.” The amounts reflect the aggregate grant date fair value of the awards calculated in accordance with FASB ASC Topic 718, excluding the impact of estimated forfeitures. |
| | The PSUs included in the table above contain a purchase price feature, which requires the NEOs to pay MPS a purchase price per share upon vesting of the shares. The purchase price is $30 per share for PSUs granted in 2018 and 2017, and $20 per share for PSUs granted in 2016. Shares that do not vest will not be subject to the purchase price payment to MPS. The grant date fair value of thesethe 2021 PSUs was estimated using the Black-Scholes model, which takes the purchase price feature into consideration.
|
| | The grant date fair value of MSUs was estimatedcalculated using a Monte Carlo simulation method.
|
| | model. Assumptions used in the calculation of all the stock awards are included in Note 1 and Note 78 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018,2021, filed with the SEC on March 1, 2019.February 25, 2022. |
| (3)The 2021 PSU awards contain a purchase price feature, which requires the NEOs to pay MPS $30 per share upon vesting of the shares. This $30 purchase price requirement is deemed satisfied and waived if the average stock price for 20 consecutive trading days at any time during 2021 and 2022 is $30 higher than the grant date stock price of $374.57. Upon vesting, the portion of the PSUs subject to the environmental goals has a post-vesting sales restriction period of one year.
|
(2) | Assuming the achievement of the highest level of performance criteria,for the 2021 PSUs, the aggregate grant date fair value of the stock awards in 2018 would be as follows: (a) $31,298,940$53,785,462 for Mr. Hsing, (b) $6,927,666$10,894,941 for Mr. Blegen, (c) $9,476,104$16,559,053 for Mr. Xiao, (d) $9,476,104$16,559,053 for Mr. Sciammas, and (e) $9,476,104$16,559,053 for Ms. Tseng. Assuming the achievement ofThere is no guarantee that the highest level of performance criteria,will be achieved by the aggregate grant date fair value of the stock awards in 2017 would be as follows: (a) $17,728,926 for Mr. Hsing, (b) $3,061,044 for Mr. Blegen, (c) $5,183,757 for Mr. Xiao, (d) $5,183,757 for Mr. Sciammas, and (e) $5,183,757 for Ms. Tseng. Assuming the achievement of the highest level of performance criteria, the aggregate grant date fair value of the stock awards in 2016 would be as follows: (a) $15,686,556 for Mr. Hsing, (b) $1,933,785 for Mr. Blegen, (c) $4,762,871 for Mr. Xiao, (d) $4,762,871 for Mr. Sciammas, and (e) $4,762,871 for Ms. Tseng.NEOs. |
| (4)(3)
| The 2021 amounts reflect the short-term cash incentive compensation earned by the NEOs under our non-equity incentive plan, as described under the section ““Named Executive Officer Compensation — Compensation Discussion and Analysis.” |
| (5)(4)
| The “other compensation” for Mr. Xiao represents the value of the vested equity interest in a subsidiary of MPS that owned a corporate apartment in Chengdu, China, which was provided to Mr. Xiao in connection with his extended stay in China due to his increased responsibilities in our operations in Asia. See the section “Executive Officer Compensation — Potential Payments Upon Termination or Termination Upon Change in Control - Employment Agreements and Change in Control Arrangements” for more information. Other than these amounts, weWe did not provide other benefits or compensation for the NEOs that is required to be disclosed under Item 402(c)(2)(ix) of Regulation S-K.
|
CEO Pay Ratio For 2018,2021, our CEO pay ratio was determined as follows: | | ● | The annual total compensation of our CEO was $11,715,714,$20,254,831, as reported in the “Total” column in the 2021 Summary Compensation Table disclosed above. |
| | ● | The median of the annual total compensation of all employees (other than our CEO) was $31,798.$48,913. The median employee was located in China. |
| | ● | The ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 368414 to 1. This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. |
For purposes of calculating the amount of compensation paid to our median employee in 2018,2021, we used the same median employee that we identified in 2017.2020, as permitted under the SEC rules. There have been no significant changes in our employee population or employee compensation arrangements that we believe would materiallysignificantly impact the pay ratio disclosure. The SEC rules for identifying the median employee and calculating the pay ratio based on that employee'semployee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. Therefore, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Alternative Measure:
As discussed in the Compensation Discussion and Analysis section above, more than 94%96% of our CEO’s annual compensation iswas tied to rigorous performance conditions in 2021, while the annual compensation of our median employee iswas not tied to performance goals. Accordingly, as an alternative measure, management believes that a more direct and meaningful pay ratio is to compare compensation that is not tied to any performance objectives. Based on this alternative method, our alternative CEO pay ratio was determined as follows: | | ● | The alternative annual total compensation of our CEO was $643,846.$711,923. |
| | ● | The median of the annual total compensation of all employees (other than our CEO) was $31,798.$48,913. |
| | ● | The ratio of the alternative annual total compensation of our CEO to the median of the annual total compensation of all employees was 2015 to 1. |
Grants of Plan-Based Awards for the Year Ended December 31, 20182021 | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards (#)(2) | | | Grant Date Fair Value of Stock | | | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1) | | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | | Grant Date Fair Value of Stock and Option | NEOs | | Grant Date | | | Threshold | | | Target | | | Maximum | | | Threshold | | | Target | | | Maximum | | | Awards (3) | | | Name | | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | Awards ($)(3) | Michael Hsing | | | - | | | $ | - | | | $ | 650,000 | | | $ | 1,625,000 | | | | - | | | | - | | | | - | | | | - | | | - | | - | | 1,440,000 | | 5,760,000 | | - | | - | | - | | - | | | | 2/7/2018 | | | | - | | | | - | | | | - | | | | - | | | | 97,500 | | | | 292,500 | | | $ | 7,967,700 | | | | | | 10/25/2018 | | | | - | | | | - | | | | - | | | | - | | | | 21,600 | | | | 108,000 | | | $ | 1,479,168 | | | 2/2/2021 | | - | | - | | - | | - | | 37,613 | | 150,452 | | 13,782,908 | Bernie Blegen | | | - | | | $ | - | | | $ | 240,000 | | | $ | 600,000 | | | | - | | | | - | | | | - | | | | - | | | - | | - | | 700,000 | | 2,800,000 | | - | | - | | - | | - | | | | 2/7/2018 | | | | - | | | | - | | | | - | | | | - | | | | 14,850 | | | | 44,550 | | | $ | 1,213,542 | | | 2/2/2021 | | - | | - | | - | | - | | 7,619 | | 30,476 | | 2,791,906 | | | | 10/25/2018 | | | | - | | | | - | | | | - | | | | - | | | | 9,600 | | | | 48,000 | | | $ | 657,408 | | | Deming Xiao | | | - | | | $ | - | | | $ | 272,000 | | | $ | 680,000 | | | | - | | | | - | | | | - | | | | - | | | - | | - | | 760,000 | | 3,040,000 | | - | | - | | - | | - | | | | 2/7/2018 | | | | - | | | | - | | | | - | | | | - | | | | 25,245 | | | | 75,735 | | | $ | 2,063,021 | | | | | | 10/25/2018 | | | | - | | | | - | | | | - | | | | - | | | | 9,600 | | | | 48,000 | | | $ | 657,408 | | | 2/2/2021 | | - | | - | | - | | - | | 11,580 | | 46,320 | | 4,243,375 | Maurice Sciammas | | | - | | | $ | - | | | $ | 272,000 | | | $ | 680,000 | | | | - | | | | - | | | | - | | | | - | | | - | | - | | 760,000 | | 3,040,000 | | - | | - | | - | | - | | | | 2/7/2018 | | | | - | | | | - | | | | - | | | | - | | | | 25,245 | | | | 75,735 | | | $ | 2,063,021 | | | 2/2/2021 | | - | | - | | - | | - | | 11,580 | | 46,320 | | 4,243,375 | | | | 10/25/2018 | | | | - | | | | - | | | | - | | | | - | | | | 9,600 | | | | 48,000 | | | $ | 657,408 | | | Saria Tseng | | | - | | | $ | - | | | $ | 272,000 | | | $ | 680,000 | | | | - | | | | - | | | | - | | | | - | | | - | | - | | 760,000 | | 3,040,000 | | - | | - | | - | | - | | | | 2/7/2018 | | | | - | | | | - | | | | - | | | | - | | | | 25,245 | | | | 75,735 | | | $ | 2,063,021 | | | 2/2/2021 | | - | | - | | - | | - | | 11,580 | | 46,320 | | 4,243,375 | | | | 10/25/2018 | | | | - | | | | - | | | | - | | | | - | | | | 9,600 | | | | 48,000 | | | $ | 657,408 | | |
| | (1) | The amounts reflect the threshold, target, and maximum awards under the short-term cash incentive compensation program, which is described in detail in the section “NamedExecutive Officer Compensation — Compensation Discussion and Analysis.” |
| | (2) | The amounts reflect the threshold, target, and maximum number of sharesthe PSUs that may be earned under the long-term equity incentive compensation program, which is described in detail in the section “NamedExecutive Officer Compensation —Compensation —Compensation Discussion and Analysis.” The PSUs granted in 2018 contain a purchase price feature, which requires the NEOs to pay MPS $30 per share upon vesting of the shares. Shares that do not vest will not beThis $30 purchase price requirement is deemed satisfied and waived if the average stock price for 20 consecutive trading days at any time during 2021 and 2022 is $30 higher than the grant date stock price of $374.57. Upon vesting, the portion of the PSUs subject to the purchase price payment to MPS. The target numberenvironmental goals has a post-vesting sales restriction period of shares granted to each NEO was determined based on the equity compensation value divided by the closing stock price on the date of grant less the purchase price. MSUs granted in 2018 do not contain a purchase price feature.one year.
|
| | (3) | The amounts reflect the aggregate grant date fair value of each award based on the target level of performance andawards calculated in accordance with ASC Topic 718, excluding the impact of estimated forfeitures. The amounts reflect the target level of performance. The grant date fair value of the PSUs was $81.72 per share, which was calculated using the Black-Scholesa Monte Carlo simulation model and factored in the purchase price requirement of $30 per share. The grant date fair value of the MSUs was $68.48($366.44 per share which was calculated usingfor the Monte-Carlo simulation model.
PSUs subject to the revenue goal and $330.65 for the PSUs subject to the environmental goals). Assumptions used in the calculation of the grant date fair value of the stock awards are included in Note 1 and Note 78 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018,2021, filed with the SEC on March 1, 2019.February 25, 2022. |
Narrative Disclosure to 2021 Summary Compensation Table and Grants of Plan-Based Awards During for the Year Ended December 31, 20182021 A discussion of 20182021 salaries, incentive plans and awards is set forth under the section ““Named Executive Officer Compensation - Compensation Discussion and Analysis,” including a discussion of the material terms and conditions of the short-term cash incentive compensation PSUs and MSUs.PSUs. For information regarding our employment agreements with the NEOs, see “NamedExecutive Officer Compensation – Potential Payments Upon Termination or Termination Upon Change in Control – Employment Agreements and Change in Control Arrangements.” Equity Incentive Grant Policies We maintain the Monolithic Power Systems Equity Award Grant Policy, which is designed to work in concert with: (1) the administrative provisions of our Amended and Restated 2014 Equity Incentive Plan (the “Amended 2014 Equity Plan”) and such other plans as we may adopt from time to time (which we refer to collectively as the Plans), (2) the requirements of the Delaware General Corporation Law, (3) the corporate governance requirements of NASDAQ, (4) applicable rules and regulations of the SEC, including those relating to Section 16 of the 1934 Act, and (5) relevant sections of the Internal Revenue Code. Grants to our NEOs are made pursuant to this policy, must be approved by the Compensation Committee and will only be granted at specific times during the year, as described in further detail below. Plan and Corporate Authorization Under the Plans, the authorization to administer the grant of equity incentive awards is conferred upon the Board or any committee of the Board as properly constituted under applicable laws. The Board has delegated to the Compensation Committee the authority to serve as administrator of the Plans (including the authority to grant awards under the Plans), and has approved a charter outlining the responsibilities of this committee which also includes this express authority. The delegation of authority to the Compensation Committee is not exclusive; the Board retains the right to formally approve award grants as well. The Compensation Committee may form and delegate authority to subcommittees when appropriate. In addition, the Board has delegated limited authority for grants of equity awards under the Plans to new employees and consultants to a committee consisting of the Chief Executive Officer (which committee we refer to as the Equity Award Committee). The authority does not extend to grants to the NEOs. The delegation of authority to the Equity Award Committee is not exclusive; the Board and Compensation Committee retain the right to formally approve award grants as well. Equity Grants to New Hires Grants to newly hired employees and consultants (other than Executive Officers as defined below) will generally be made on the date of the next regularly scheduled Board meeting subsequent to the employees’ start date. Management submits the employee equity award recommendations to the Compensation Committee and, if such equity awards are approved by the Compensation Committee, such equity awards will be granted effective as of the date of a meeting approving such awards as evidenced by written minutes of such meeting or the date of the last verification signature or electronic verification over email in the event of a written consent in lieu of the meeting. New hire grants made to “Executive Officers” (currently defined as the Chief Executive Officer, Chief Financial Officer, Chief Legal Officer, Chief Operations Officer, President, employees who are members of the Board and any other employee determined by the Board to be an Executive Officer) generally will only be granted on the date of the next regularly scheduled Board meeting subsequent to the Executive Officer’s start date and following the recommendation of such grant by the Compensation Committee. Equity Grants to Existing Employees or Incumbent Members of the Board Generally, annual grants of equity awards shall be made to key performers at a regularly scheduled Board meeting. Equity awards to non-employee members of the Board shall be made by the Board or pursuant to any automatic grant provisions in the Plans. OutstandingOutstanding Equity Awards at 20182021 Year-End
The following table sets forth, as to the NEOs, certain information concerningregarding their outstanding stock awards atas of December 31, 2018.2021. There were no outstanding option awards held by the NEOs as of December 31, 2018.2021. | | | Stock Awards | | | Stock Awards | NEOs | | Grant Date | | | | | Number of Shares of Restricted Stock Units that Have Not Vested (#) | | | Market Value of Shares of Restricted Stock Units That Have Not Vested (1) | | | Equity Incentive Plan Awards: Number of Unearned Restricted Stock Units That Have Not Vested (#) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Restricted Stock Units That Have Not Vested (1) | | | Name | | | Grant 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) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | Michael Hsing | | 12/14/2013 | | | (2) | | | 550,000 | | | $ | 65,917,500 | | | | - | | | | - | | | 12/14/2013 | (2) | 220,000 | | 110,908,600 | | - | | - | | | | 2/3/2015 | | | (3) | | | 14,123 | | | $ | 1,678,021 | | | | - | | | | - | | | | | | 12/31/2015 | | | (4) | | | 95,960 | | | $ | 11,292,903 | | | | - | | | | - | | | 2/7/2018 | (3) | 18,078 | | 9,100,761 | | - | | - | | | | 2/2/2016 | | | (5) | | | 101,641 | | | $ | 9,971,127 | | | | - | | | | - | | | 10/25/2018 | (4) | 108,000 | | 53,821,800 | | - | | - | | | | 2/7/2017 | | | (6) | | | 254,220 | | | $ | 22,122,046 | | | | - | | | | - | | | 2/11/2019 | (5) | 72,633 | | 36,137,104 | | - | | - | | | | 12/31/2015 | | | (7) | | | - | | | | - | | | | 8,557 | | | $ | 1,018,711 | | | 2/4/2020 | (6) | 153,324 | | 75,864,204 | | | | | | | | 2/7/2018 | | | (8) | | | - | | | | - | | | | 97,500 | | | $ | 8,526,375 | | | 7/21/2020 | (7) | 96,500 | | 47,857,245 | | - | | - | | | | 10/25/2018 | | | (9) | | | - | | | | - | | | | 21,600 | | | $ | 2,517,480 | | | 2/2/2021 | (8) | - | | - | | 37,613 | | 18,645,892 | Bernie Blegen | | 12/14/2013 | | | (2) | | | 36,000 | | | $ | 4,314,600 | | | | - | | | | - | | | 12/14/2013 | (2) | 14,400 | | 7,259,472 | | - | | - | | | | 2/3/2015 | | | (10) | | | 155 | | | $ | 18,463 | | | | - | | | | - | | | 2/7/2018 | (3) | 2,753 | | 1,386,097 | | - | | - | | | | 2/2/2016 | | | (11) | | | 133 | | | $ | 15,834 | | | | - | | | | - | | | 10/25/2018 | (4) | 48,000 | | 23,920,800 | | - | | - | | | | 2/2/2016 | | | (12) | | | 312 | | | $ | 30,722 | | | | - | | | | - | | | 2/11/2019 | (5) | 12,876 | | 6,406,193 | | - | | - | | | | 7/19/2016 | | | (5) | | | 12,973 | | | $ | 1,270,551 | | | | - | | | | - | | | 2/4/2020 | (6) | 27,174 | | 13,445,605 | | | | | | | | 2/7/2017 | | | (6) | | | 43,893 | | | $ | 3,819,553 | | | | - | | | | - | | | 7/21/2020 | (7) | 20,105 | | 9,970,673 | | - | | - | | | | 2/7/2018 | | | (8) | | | - | | | | - | | | | 14,850 | | | $ | 1,298,633 | | | 2/2/2021 | (8) | - | | - | | 7,619 | | 3,776,967 | | | | 10/25/2018 | | | (9) | | | - | | | | - | | | | 9,600 | | | $ | 1,118,880 | | | Deming Xiao | | 12/14/2013 | | | (2) | | | 216,000 | | | $ | 25,887,600 | | | | - | | | | - | | | 12/14/2013 | (2) | 86,400 | | 43,556,832 | | - | | - | | | | 2/3/2015 | | | (3) | | | 4,289 | | | $ | 509,597 | | | | - | | | | - | | | | | | 12/31/2015 | | | (4) | | | 52,340 | | | $ | 6,159,554 | | | | - | | | | - | | | 2/7/2018 | (3) | 4,679 | | 2,355,470 | | - | | - | | | | 2/2/2016 | | | (5) | | | 30,862 | | | $ | 3,027,638 | | | | - | | | | - | | | 10/25/2018 | (4) | 48,000 | | 23,920,800 | | - | | - | | | | 2/7/2017 | | | (6) | | | 74,331 | | | $ | 6,468,261 | | | | - | | | | - | | | 2/11/2019 | (5) | 18,807 | | 9,357,049 | | - | | - | | | | 12/31/2015 | | | (7) | | | - | | | | - | | | | 4,668 | | | $ | 555,725 | | | 2/4/2020 | (6) | 39,699 | | 19,642,933 | | | | | | | | 2/7/2018 | | | (8) | | | - | | | | - | | | | 25,245 | | | $ | 2,207,675 | | | 7/21/2020 | (7) | 32,165 | | 15,951,588 | | - | | - | | | | 10/25/2018 | | | (9) | | | - | | | | - | | | | 9,600 | | | $ | 1,118,880 | | | 2/2/2021 | (8) | - | | - | | 11,580 | | 5,740,553 | Maurice Sciammas | | 12/14/2013 | | | (2) | | | 216,000 | | | $ | 25,887,600 | | | | - | | | | - | | Maurice Sciammas | 12/14/2013 | (2) | 86,400 | | 43,556,832 | | - | | - | | | | 2/3/2015 | | | (3) | | | 4,289 | | | $ | 509,597 | | | | - | | | | - | | | 2/7/2018 | (3) | 4,679 | | 2,355,470 | | - | | - | | | | 12/31/2015 | | | (4) | | | 52,340 | | | $ | 6,159,554 | | | | - | | | | - | | | 10/25/2018 | (4) | 48,000 | | 23,920,800 | | - | | - | | | | 2/2/2016 | | | (5) | | | 30,862 | | | $ | 3,027,638 | | | | - | | | | - | | | 2/11/2019 | (5) | 18,807 | | 9,357,049 | | - | | - | | | | 2/7/2017 | | | (6) | | | 74,331 | | | $ | 6,468,261 | | | | - | | | | - | | | 2/4/2020 | (6) | 39,699 | | 19,642,933 | | - | | - | | | | 12/31/2015 | | | (7) | | | - | | | | - | | | | 4,668 | | | $ | 555,725 | | | 7/21/2020 | (7) | 32,165 | | 15,951,588 | | | | | | | | 2/7/2018 | | | (8) | | | - | | | | - | | | | 25,245 | | | $ | 2,207,675 | | | 2/2/2021 | (8) | - | | - | | 11,580 | | 5,740,553 | | | | 10/25/2018 | | | (9) | | | - | | | | - | | | | 9,600 | | | $ | 1,118,880 | | | Saria Tseng | | 12/14/2013 | | | (2) | | | 216,000 | | | $ | 25,887,600 | | | | - | | | | - | | | 12/14/2013 | (2) | 86,400 | | 43,556,832 | | - | | - | | | | 2/3/2015 | | | (3) | | | 4,289 | | | $ | 509,597 | | | | - | | | | - | | | 2/7/2018 | (3) | 4,679 | | 2,355,470 | | - | | - | | | | 12/31/2015 | | | (4) | | | 52,340 | | | $ | 6,159,554 | | | | - | | | | - | | | 10/25/2018 | (4) | 48,000 | | 23,920,800 | | - | | - | | | | 2/2/2016 | | | (5) | | | 30,862 | | | $ | 3,027,638 | | | | - | | | | - | | | 2/11/2019 | (5) | 18,807 | | 9,357,049 | | - | | - | | | | 2/7/2017 | | | (6) | | | 74,331 | | | $ | 6,468,261 | | | | - | | | | - | | | 2/4/2020 | (6) | 39,699 | | 19,642,933 | | - | | - | | | | 12/31/2015 | | | (7) | | | - | | | | - | | | | 4,668 | | | $ | 555,725 | | | 7/21/2020 | (7) | 32,165 | | 15,951,588 | | | | | | | | 2/7/2018 | | | (8) | | | - | | | | - | | | | 25,245 | | | $ | 2,207,675 | | | 2/2/2021 | (8) | - | | - | | 11,580 | | 5,740,553 | | | | 10/25/2018 | | | (9) | | | - | | | | - | | | | 9,600 | | | $ | 1,118,880 | | |
| | (1) | The market value of the unvested stock awards is based on the closing market price of our Common Stock of $116.25$493.33 as of December 31, 2018, less any applicable purchase price,2021, and includes any outstanding dividend equivalents accumulated on such awards. |
| | (2) | These shares areReflects MSUs granted in December 2013. The performance goals with respect to thesethe MSUs were achieved as of December 31, 2015. The shares willThese MSUs vest quarterly over five years from January 1, 2019 to December 31, 2023, for a total vesting period of ten years, subject to continued employment.
|
| | (3) | These shares areReflects PSUs granted in February 2015.2018. The performance goals with respect to thesethe PSUs were achieved as of December 31, 2016.2019. 50% of these sharesPSUs vested in February 2017,2020, and the remaining 50% vest quarterly over the following two years through February 2019,2022, for a total vesting period of four years, subject to continued employment.
|
| | (4) | These shares are market and performance-based awards ("MPSUs")Reflects MSUs granted in December 2015.October 2018. The performance goals with respect to these MPSUsthe MSUs were achieved as of December 31, 2018.2019. These shares will fully vest on January 1, 2020, for a total vesting period of four years, subject to continued employment. In addition, the MPSUs contain a post-vesting sales restriction for up to an additional two years.
|
| (5)
| These shares are PSUs granted in February or July 2016. The performance goals with respect to these PSUs were achieved as of December 31, 2017. 50% of these shares vested in February 2018, and the remaining 50% vest quarterly through February or July 2020, for a total vesting period of four years, subject to continued employment. The PSUs contain a purchase price feature, which requires the NEOs to pay MPS $20 per share upon vesting of the shares.
|
| (6)
| These shares are PSUs granted in February 2017. The performance goals with respect to these PSUs were achieved as of December 31, 2018. 50% of these shares will vest in February 2019, and the remaining 50% will vest quarterly over the following two years through February 2021, for a total vesting period of four years, subject to continued employment. The PSUs contain a purchase price feature, which requires the NEOs to pay MPS $30 per share upon vesting of the shares.
|
| (7)
| These shares are MPSUs granted in December 2015 and reflect the target level of performance. Upon achievement of the pre-determined performance and stock price targets during the performance period ending on December 31, 2019, the shares will fully vest on January 1, 2020, for a total vesting period of four years, subject to continued employment. In addition, the MPSUs contain a post-vesting sales restriction for up to an additional two years.
|
| (8)
| These shares are PSUs granted in February 2018 and reflect the target level of performance. Upon achievement of the pre-determined performance targets at the end of 2019, 50% of these shares will vest in February 2020, and the remaining 50% will vest quarterly over the following two years through February 2022, for a total vesting period of four years, subject to continued employment. The PSUs contain a purchase price feature, which requires the NEOs to pay MPS $30 per share upon vesting of the shares. See the section “Executive Officer Compensation — Compensation Discussion and Analysis” above for further discussion.
|
| (9)
| These shares are MSUs granted in October 2018 and reflect the target level of performance. Upon achievement of the pre-determined stock price targets during the performance period from October 26, 2018 to December 31, 2023, the shares will fully vest on January 1, 2024, for a total vesting period of five years and two months, subject to continued employment. In addition, the MSUs contain a post-vesting sales restriction for up to an additional two years. See the section “Executive Officer Compensation — Compensation Discussion and Analysis” above for further discussion.
|
| | (10)(5) | These shares areReflects PSUs granted in February 2015.2019. The performance goals with respect to the PSUs were achieved as of December 31, 2020. 50% of these PSUs vested in February 2021, and the remaining 50% vest quarterly over the following two years through February 2023, for a total vesting period of four years, subject to continued employment. |
| (6) | Reflects PSUs granted in February 2020. The performance goals with respect to these PSUs were achieved as of December 31, 2016.2021. 50% of these shares vestedPSUs will vest in February 2017,2022, and the remaining 50% will vest quarterly over the following two years through February 2019,2024, for a total vesting period of four years, subject to continued employment. |
| (11)
| These shares are time-based RSUs that vest quarterly over four years from the date of grant, subject to continued employment.
|
| | (12)(7)
| These shares are PSUsReflects MPSUs granted in February 2016.July 2020. The performance goals with respect to these PSUsthe MPSUs were achieved as of December 31, 2017.2020. 75% of the MPSUs will vest in July 2023 and 25% of the MPSUs will vest in July 2024, for a total vesting period of four years, subject to continued employment. In addition, the MPSUs contain a post-vesting sales restriction for one year.
|
| (8) | Reflects PSUs granted in February 2021 at the target level of performance. For the revenue goal, upon achievement of the pre-determined performance goals at the end of 2022, 50% of these shares vestedPSUs will vest in February 2018,2023, and the remaining 50% will vest quarterly over the following two years through February 2020,2025, for a total vesting period of four years, subject to continued employment. TheFor the environmental goals, upon achievement of the performance goals at any time through December 31, 2023, these PSUs will fully vest immediately, but not earlier than December 31, 2022, for a total vesting period of up to three years, subject to continued employment. In addition, the PSUs related to the environmental goals contain a purchase price feature, which requires Mr. Blegen to pay MPS $20 per share upon vesting of the shares. post-vesting sales restriction for one year. See “Named Executive Officer Compensation — Compensation Discussion and Analysis” for further discussion. |
2021 Option Exercises and Stock Vested The following table sets forth certain information on the stock awards vested for our NEOs in 2018.2021. There were no option exercises in 2018.2021. | | | Stock Awards | | | Stock Awards | | NEOs | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting (1) | | | Name | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($)(1) | | Michael Hsing | | | 303,386 | | | $ | 31,112,525 | | | | 358,007 | | | | 140,445,978 | | Bernie Blegen | | | 19,422 | | | $ | 1,851,987 | | | | 49,277 | | | | 18,803,753 | | Deming Xiao | | | 92,115 | | | $ | 9,446,487 | | | | 107,946 | | | | 42,935,566 | | Maurice Sciammas | | | 91,362 | | | $ | 9,358,314 | | | | 107,946 | | | | 42,935,566 | | Saria Tseng | | | 91,362 | | | $ | 9,358,314 | | | | 107,946 | | | | 42,935,566 | |
| | (1) | Value realized on vesting is equal to (a) the closing price of our Common Stock on the vesting date less any purchase price, multiplied by the number of shares that vested, plus (b) accumulated dividend equivalents attributable to such shares. |
2021 Non-Qualified Deferred Compensation Plan
In July 2013, after taking into account trends in federal personal income taxation, as well as the practices of our peer companies, our Compensation Committee adoptedWe have a non-qualified, unfunded deferred compensation plan, which allows key employees, including our NEOs, to defer the receipt of, and taxation on, cash compensation. Plan participants may defer up to 70% of their salary and up to 90% of their non-equity incentive plan compensation. Plan participants may elect to receive the deferred funds either in a lump sum or in annual installments of up to ten years, and to begin receiving distributions either at retirement or at a future date not less than 24 months from the election date. Investment returns on deferred balances are linked to the performance of the investment choices made available in the plan. We do not make contributions to the plan or guarantee returns on the investments. The following table summarizes contributions made by the non-qualified deferred compensation activity for our NEOs from compensation payable for 2018:in 2021:
NEOs | | Executive Contributions in Last FY (1) | | | Aggregate Earnings (Losses) in Last FY (2) | | | Aggregate Balance at Last FYE | | | Name | | | Executive Contributions in Last FY ($)(1) | | | Aggregate Earnings in Last FY ($)(2) | | | Aggregate Balance at Last FYE ($)(3) | | Michael Hsing | | $ | 1,890,401 | | | $ | 11,777 | | | $ | 10,164,363 | | | | - | | | | 498,446 | | | | 11,909,237 | | Bernie Blegen | | $ | 239,439 | | | $ | 94,940 | | | $ | 1,282,661 | | | | - | | | | 8,785 | | | | 1,379,806 | | Deming Xiao | | $ | 809,141 | | | $ | (33,705 | ) | | $ | 3,736,564 | | | | - | | | | 256,026 | | | | 5,915,096 | | Maurice Sciammas | | $ | 435,462 | | | $ | (53,276 | ) | | $ | 2,695,531 | | | | - | | | | 313,361 | | | | 3,718,727 | | Saria Tseng | | $ | 814,605 | | | $ | (175,832 | ) | | $ | 3,872,478 | | | | 122,400 | | | | 953,629 | | | | 8,000,766 | |
| | (1) | All executive contributions are reported as salary or non-equity incentive plan compensation in the section ““Named Executive Officer Compensation —2021 Summary Compensation Table.” |
| | (2) | Represents the net amounts credited to the NEOs’ accounts as a result of the performance of their investment choices. The amounts are not included in the section ““Named Executive Officer Compensation—Compensation — 2021 Summary Compensation Table”Table” because plan earnings are not “preferential or above-market” under the SEC rules. |
| (3) | Includes the following cumulative amounts reported as compensation for the NEOs in the Summary Compensation Tables for previous years: Mr. Hsing, $9,237,379; Mr. Blegen, $786,811; Mr. Xiao, $4,286,146; Mr. Sciammas, $2,565,913; and Ms. Tseng, $4,950,820. |
Potential Payments Upon Termination or Termination Upon Change in Control Employment Agreements and Change in Control Arrangements We have entered into employment agreements with each of our NEOs. The employment agreements establish the initial titles, salaries, and reporting responsibilities for the NEOs. The employment agreements also provide that each NEO may participate in our equity, bonus and benefits programs. Each of the employment agreements with Mr. Hsing, Mr. Xiao and Mr. Sciammas was amended in December 2008 to bring the agreements into compliance with Section 409A of the Internal Revenue Code. The employment agreement with Mr. Xiao was subsequently amended in March 2011 to grant Mr. Xiao an equity interest in Hue Ming LLC, a Delaware limited liability company formed by us, (see further discussion below). a corporate apartment in Chengdu, China, to Mr. Xiao. The equity interest became fully vested in March 2016 and Hue Ming LLC was dissolved. In addition to the terms described above, the employment agreements also provide certain severance benefits upon termination without cause or for good reason, including within one year following a change in control (a “Change in Control with Termination”), as described in the following table. We have followed general market practices for senior executives in allowing limited change in control arrangements for selected officers. NEOs | Agreement and Date | | Termination Withoutwithout Cause or Departure for Good Reason | | ChangeChange in Control
Withwith Termination
| Michael Hsing | Employment Agreement dated March 10, 2008, as amended December 16, 2008. | ● | Base salary, target annual bonus and COBRA premiums for group-health plan benefits for 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration of vesting of equity grant equal to the number of equity grant that would have vested had the executive remained an employee for 12 months following the termination of employment.company. | ● | Base salary, target annual bonus and COBRA premiums for group-health plan benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and accelerationcompany. | | | ● | Acceleration of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for 12 months following the termination of employment. | ● | Acceleration of vesting of 100% of the executive’s unvested equity grant.grants.(1) |
Bernie Blegen | Employment Agreement dated July 19, 2016. | ● | Base salary, target annual bonus and COBRA premiums for group-health plan benefits for six months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration of vesting of equity grant equal to the number of equity grant that would have vested had the executive remained an employee for six months following the termination of employment.company. | ● | Base salary, target annual bonus and COBRA premiums for group-health plan benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and accelerationcompany. | | | ● | Acceleration of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for six months following the termination of employment. | ● | Acceleration of vesting of 100% of the executive’s unvested equity grant.grants.(1) | Deming Xiao | Employment Agreement dated March 10, 2008, as amended December 16, 2008 and March 3, 2011. | ● | Base salary, target annual bonus and COBRA premiums for group-health plan benefits for six months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration of vesting of equity grant and ownership interest in Hue Ming LLC equal to the number of equity grant or equity interest that would have vested had the executive remained an employee for six months following the termination of employment.company. | ● | Base salary, target annual bonus and COBRA premiums for group-health plan benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and accelerationcompany. | | | ● | Acceleration of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for six months following the termination of employment. | ● | Acceleration of vesting of 100% of the executive’s unvested equity grant.grants.(1) | Maurice Sciammas | Employment Agreement dated March 10, 2008, as amended December 16, 2008. | ● | Base salary, target annual bonus and COBRA premiums for group-health plan benefits for six months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration of vesting of equity grant equal to the number of equity grant that would have vested had the executive remained an employee for six months following the termination of employment.company. | ● | Base salary, target annual bonus and COBRA premiums for group-health plan benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and accelerationcompany. | | | ● | Acceleration of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for six months following the termination of employment. | ● | Acceleration of vesting of 100% of the executive’s unvested equity grant.grants.(1) | Saria Tseng | Employment Agreement dated December 16, 2008, as amended February 9, 2010. | ● | Base salary, target annual bonus and COBRA premiums for group-health plan benefits for six months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration of vesting of equity grant equal to the number of equity grant that would have vested had the executive remained an employee for six months following the termination of employment.company. | ● | Base salary, target annual bonus and COBRA premiums for group-health plan benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and accelerationcompany. | | | ● | Acceleration of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for six months following the termination of employment. | ● | Acceleration of vesting of 100% of the executive’s unvested equity grant.grants.(1) |
| | (1) | With respect to the PSUs that have not been earned because the performance period is still in progress, a pro-rata portion of such awards shall vest to the extent the applicable performance levels are achieved through the date of the change in control, provided thatin accordance with the date of the change in control occurs after the first calendar year of the performance period. With respect to the MPSUs that have not been earned because the performance period is still in progress, such awards shall vest if the per-share price paid in the change in control is greater than the price hurdles. In addition, the operational objectives requirement for the MPSUs will be deemed satisfied. With respect to the MSUs that have not been earned because the performance period is still in progress, such awards shall vest if the per-share price paid in the change in control is greater than the price hurdles.individual grant agreements. |
Each of the employment agreements with our NEOs also contains a provision whereby during the period of employment and thereafter, the executive shall not, without the prior written consent of us, disclose or use any confidential information or proprietary data other than for our interest. These employment agreements also contain a covenant not to solicit, beginning with the date of the executive’s termination and until one year thereafter. All payments due under the severance benefits provided under the employment agreements with our NEOs are conditioned on the execution and non-revocation of a release for our benefit and the benefit of our related entities and agents. A “change in control” of MPS means a merger or consolidation after which our stockholders do not hold a majority of our outstanding voting securities, any transaction involving the transfer of greater than 50% of our voting power (unless otherwise provided for in an award agreement), a change in the composition of the Board occurring within a 12-month period, as a result of which less than a majority of the directors are incumbent directors (as such term is defined in the employment agreements), or a sale of all or substantially all our assets. “Cause” generally means the NEO’s failure to perform the duties or responsibilities of his or her employment, the NEO personally engaging in illegal conduct that is detrimental to us, the NEO being convicted of or pleadingnolo contendere to a felony or other crime involving moral turpitude, or the NEO committing a material act of dishonesty, fraud or misappropriation of property. “Good Reason” generally means the NEO’s termination of employment following the expiration of anyan applicable cure period (as designated in each employment agreement) following the occurrence of: a material reduction in compensation (except where a substantially equivalent reduction is applied to all our officers), a material, adverse reduction in the NEO’s authority, responsibilities or duties, or a material change in the location at which the NEO performs services. On March 3, 2011, we entered into an amendment to the employment agreement with Mr. Xiao to provide an additional benefit to him in connection with his extended stay in China due to his increased responsibilities. Pursuant to the amendment, we would transfer ownership of a corporate apartment in Chengdu, China, that was originally owned by our wholly-owned China subsidiary, to Mr. Xiao. In order to effect the transfer, we formed a new wholly-owned subsidiary Hue Ming LLC and granted Mr. Xiao 100% ownership in such subsidiary, subject to vesting conditions. The equity interest became fully vested in March 2016 and Hue Ming LLC was dissolved.
Estimated Payments Upon Termination or Change in Control with Termination The following table sets forth the estimated payments required to be made to each NEO in connection with the termination of his or her employment upon specified events, assuming a stock price of $116.25$493.33 per share, the closing price as of December 31, 2018.2021. The estimated amounts shown also assume that the termination was effective as of December 31, 2018,2021, and include estimates of severance benefits which would be paid to the executives upon their termination. The actual amounts payable to each NEO can only be determined at the time of the termination of the executive’s employment. | | | Termination Without Cause or Departure for Good Reason | | | Change in Control With Termination | | | Termination without Cause or Departure for Good Reason | | Change in Control with Termination | NEOs | | Base Salary and Target Bonus | | | Acceleration of Vesting of Equity Awards | | | Other | | | Total Compensation | | | Base Salary and Target Bonus | | | Acceleration of Vesting of Equity Awards | | | Other | | | Total Compensation | | | Name | | | Base Salary and Target Bonus ($) | | Acceleration of Vesting of Equity Awards ($) | | Other ($) | | Total Compensation ($) | | Base Salary and Target Bonus ($) | | Acceleration of Vesting of Equity Awards ($) | | Other ($) | | Total Compensation ($) | Michael Hsing | | $ | 1,300,000 | | | $ | 37,330,038 | | | $ | 8,993 | | | $ | 38,639,031 | | | $ | 1,300,000 | | | $ | 113,917,206 | | | $ | 8,993 | | | $ | 115,226,199 | | | 2,160,000 | | 146,205,607 | | 26,716 | | 148,392,323 | | 2,160,000 | | 342,356,616 | | 26,716 | | 344,543,333 | Bernie Blegen | | $ | 270,000 | | | $ | 2,952,886 | | | $ | 11,754 | | | $ | 3,234,640 | | | $ | 540,000 | | | $ | 10,128,515 | | | $ | 23,508 | | | $ | 10,692,023 | | | 525,000 | | 12,978,779 | | 9,552 | | 13,513,331 | | 1,050,000 | | 64,442,705 | | 19,104 | | 65,511,809 | Deming Xiao | | $ | 306,000 | | | $ | 7,803,967 | | | $ | 8,496 | | | $ | 8,118,463 | | | $ | 612,000 | | | $ | 42,491,821 | | | $ | 16,993 | | | $ | 43,120,814 | | | 570,000 | | 27,325,767 | | 13,358 | | 27,909,125 | | 1,140,000 | | 117,339,095 | | 26,716 | | 118,505,811 | Maurice Sciammas | | $ | 306,000 | | | $ | 7,803,967 | | | $ | 11,788 | | | $ | 8,121,755 | | | $ | 612,000 | | | $ | 42,491,821 | | | $ | 23,576 | | | $ | 43,127,397 | | | 570,000 | | 27,325,767 | | 18,910 | | 27,914,677 | | 1,140,000 | | 117,339,095 | | 37,819 | | 118,516,914 | Saria Tseng | | $ | 306,000 | | | $ | 7,803,967 | | | $ | 11,598 | | | $ | 8,121,565 | | | $ | 612,000 | | | $ | 42,491,821 | | | $ | 23,196 | | | $ | 43,127,017 | | | 570,000 | | 27,325,767 | | 20,334 | | 27,916,101 | | 1,140,000 | | 117,339,095 | | 40,668 | | 118,519,763 |
In the event the NEOs resign without good reason or we terminate their employment for cause, we will have no obligation to pay or provide any compensation or benefits as a result of the employment agreements between us and the NEOs. In the event of the NEOs’ death or disability, except as required by applicable law, we will have no obligation to pay or provide any compensation or benefits under the employment agreements between us and the NEOs. Equity Compensation Plan Information The following table summarizes certain information with respect to shares ofunder our Common Stock that were outstanding and may be issued under the equity compensation plans as of December 31, 2018:2021: Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | | Weighted-average exercise price of outstanding options, warrants and rights (b) | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (#)(a) | | Weighted-average exercise price of outstanding options, warrants and rights ($)(b) | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (#)(c) | | Equity compensation plans approved by stockholders (1) | | | 4,633,000 | (2) | | $ | 28.41 | (3) | | | 6,600,000 | (4) | | 2,509,000 | (2) | | 2.58 | (3) | | 10,079,000 | (4) |
| | (1) | Our equity compensation plans approved by stockholders include the following: |
| | (i) | 2004 Equity Incentive Plan (the “2004 Equity Plan”), which expired in November 2014. We can no longer grant equity awards under the 2004 Equity Incentive PlanPlan. Certain equity awards granted prior to its expiration date remained unvested and shares that were available for issuance under the plan expired in November 2014.outstanding as of December 31, 2021. |
| | (ii) | Amended 2014 Equity Incentive Plan, which became effective in November 2014June 2020 and provides for the issuance of up to 5.510.5 million shares. The Amended 2014 Equity Incentive Plan has a ten-year term. |
| | (iii) | 2004 Employee Stock Purchase Plan (the “ESPP”), which incorporates an evergreen provision pursuant to which on January 1 of each year, the aggregate number of shares of Common Stock reserved for issuance can increase by a number of shares equal to the least of: (i)(a) 2% of the outstanding shares of Common Stock on the first day of the year, (ii)(b) 1.0 million shares or (iii)(c) a lesser number of shares determined by the Board. The 2004 Employee Stock Purchase PlanESPP has a 20-year term. |
| | (2) | Includes the following outstanding awards: 125,000 RSUs, 945,000 PSUs, 1,218,000 MSUs, and MPSUs granted under221,000 MPSUs. The number of securities reported for performance awards was generally based on the 2004 Equity Incentive Plan andactual number of shares that have been earned, but are subject to additional service conditions before they vest. For those performance awards that have not been earned because the 2014 Equity Incentive Plan.performance period was still in progress, the number of securities reported was based on the probable outcome of the performance conditions. |
| | (3) | Includes the purchase price related to the PSUs, which require employees to pay MPS $30 per share upon vesting of the shares. Beginning in 2020, the purchase price requirement for the PSUs granted from 2016 onwards.is waived if certain price targets are met during the performance period. All other outstanding RSUs, PSUs,awards (RSUs, MSUs and MPSUsMPSUs) have no purchase price and are excluded.price. |
| | (4) | Includes 2.0 million5,590,000 shares that remained available for future issuance under the Amended 2014 Equity Incentive Plan and 4.6 million4,489,000 shares that remained available for future issuance under the 2004 Employee Stock Purchase Plan.ESPP. |
Audit Committee Report The purpose of the Audit Committee is to provide oversight of the Company’sour accounting and financial reporting processes and the audit of the Company’sour financial statements; appoint the independent registered public accounting firm to audit the Company’sour financial statements; and assist the Board in the oversight of: (i) the integrity of the Company’sour financial statements, (ii) the Company’sour compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications, independence and performance, and (iv) the Company’sour internal accounting and financial controls. In addition, the Audit Committee provides the Board with such information and materials as it may deem necessary to make the Board aware of financial matters requiring the attention of the Board. The Audit Committee has a duly adopted charter, which it reviews on an annual basis. The Audit Committee is responsible for recommending to the Board that the Company’sour financial statements be included in its Annual Report on Form 10-K. The Audit Committee took a number of steps in making this recommendation for 2018,2021, including: | | ● | reviewing and discussing the audited financial statements with the Company’sour independent registered public accounting firm and management; |
| | ● | discussing with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board; and |
| | ● | receiving the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accountant’saccounting firm's communications with the Audit Committee concerning independence, and discussing with the independent registered public accounting firm their independence. |
Based upon the reviews and discussions described in this report, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 20182021 for filing with the SEC. Members of the Audit Committee:Committee (as of the date the actions above were taken): Victor K. Lee, Chairman Herbert Chang Jeff Zhou Other Matters We know of no other matters to be submitted at the meeting. If any other matters properly come before the meeting, it is the intention of the persons named in the enclosed form of proxy to vote the shares they represent as we may recommend. Forward-Looking Statements Safe Harbor Statement This Proxy Statement contains forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts or guarantees of future performance or events, are based on current expectations, estimates, beliefs, assumptions, goals, and objectives, and involve significant known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from the results expressed by these statements. Readers of this Proxy Statement are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. Forward-looking statements involve significant risks and uncertainties, including those identified in our SEC filings, including, but not limited to, our Annual Report on Form 10-K filed with the SEC on February 25, 2022. The forward-looking statements in this Proxy Statement represent our projections and current expectations, as of the date hereof, not predictions of actual performance. | | BY ORDER OF THE BOARD OF DIRECTORS | Dated: May 2, 2022 | | | Dated: April 30, 2019
| | | | | Saria Tseng | | | Vice President, Strategic Corporate Development, General Counsel and Corporate Secretary |
Annexure A | | RECONCILIATION OF GAAP ANDTO NON-GAAP MEASURES (1) | (in thousands, except per-share amounts) |
| | | FY 2018 | | | FY 2017 | | | FY 2016 | | | FY 2021 | | | FY 2020 | | | FY 2019 | | GAAP operating income | | $ | 113,488 | | | $ | 77,424 | | | $ | 54,447 | | | $ | 262,417 | | | $ | 158,882 | | | $ | 102,562 | | Stock-based compensation expense | | | 60,607 | | | | 52,617 | | | | 44,989 | | | | 123,479 | | | | 85,551 | | | | 78,699 | | Amortization of acquisition-related intangible assets | | | 841 | | | | 2,051 | | | | 2,051 | | | | 44 | | | | - | | | | 110 | | Deferred compensation plan (income) expense | | | (591 | ) | | | 2,769 | | | | 1,069 | | | Deferred compensation plan expense | | | | 5,124 | | | | 5,650 | | | | 3,995 | | Non-GAAP operating income | | $ | 174,345 | | | $ | 134,861 | | | $ | 102,556 | | | | 391,064 | | | | 250,083 | | | | 185,366 | | Litigation expense (benefit) | | | 1,922 | | | | 1,243 | | | | (229 | ) | | Litigation expense | | | | 9,225 | | | | 7,804 | | | | 2,464 | | Non-GAAP operating income used in short-term cash incentive plan | | $ | 176,267 | | | $ | 136,104 | | | $ | 102,327 | | | $ | 400,289 | | | $ | 257,887 | | | $ | 187,830 | | | | | | | | | | | | | | | | | | | | | | | | | | | | GAAP net income | | $ | 105,268 | | | $ | 65,203 | | | $ | 52,720 | | | $ | 242,023 | | | $ | 164,375 | | | $ | 108,839 | | Stock-based compensation expense | | | 60,607 | | | | 52,617 | | | | 44,989 | | | | 123,479 | | | | 85,551 | | | | 78,699 | | Amortization of acquisition-related intangible assets | | | 841 | | | | 2,051 | | | | 2,051 | | | | 44 | | | | - | | | | 110 | | Deferred compensation plan (income) expense | | | 431 | | | | 238 | | | | (188 | ) | | Deferred compensation plan expense | | | | 561 | | | | 1,057 | | | | 189 | | Tax effect | | | (313 | ) | | | 7,402 | | | | (3,265 | ) | | | (9,434 | ) | | | (14,229 | ) | | | (10,128 | ) | Non-GAAP net income | | $ | 166,834 | | | $ | 127,511 | | | $ | 96,307 | | | $ | 356,673 | | | $ | 236,754 | | | $ | 177,709 | | | | | | | | | | | | | | | | | | | | | | | | | | | | GAAP net income per share - diluted | | $ | 2.36 | | | $ | 1.50 | | | $ | 1.26 | | | $ | 5.05 | | | $ | 3.50 | | | $ | 2.38 | | Non-GAAP net income per share - diluted | | $ | 3.74 | | | $ | 2.93 | | | $ | 2.30 | | | $ | 7.45 | | | $ | 5.04 | | | $ | 3.88 | | Shares used in the calculation of diluted net income per share | | | 44,602 | | | | 43,578 | | | | 41,915 | | | | 47,889 | | | | 47,014 | | | | 45,763 | |
| (1) | These non-GAAP financial measures are not prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. MPS utilizes both GAAP and non-GAAP financial measures to assess what it believes to be its core operating performance, and to evaluate and manage its internal business and assist in making financial, operating and compensation decisions. Our Compensation Committee also evaluates non-GAAP financial measures when reviewing management’s performances and reaching compensation decisions. MPS believes that the non-GAAP financial measures, together with GAAP measures, provide investors with an alternative presentation useful to investors'their understanding of MPS’s core operating results and trends. Additionally, MPS believes that the inclusion of non-GAAP measures, together with GAAP measures, providesmay provide investors with an additional dimension of comparability to similar companies. However, investors should be aware that non-GAAP financial measures utilized by other companies are not likely to be comparable in most cases to the non-GAAP financial measures used by MPS. |
|
