GENERAL INFORMATION (continued)
The Board recommends that you vote your shares as follows:
•“For” the adoption of the 20192022 statutory annual accounts as described in Item 1;
•“For” the discharge of members of the Board for their responsibilities in the financial year 20192022 as described in Item 2;
•“For” the(re-)appointment re-appointment of the tennine directors and appointment of one new director listed in Item 3 to the Board;
•“For” the authorization of the Board to issue ordinary shares par value€0.20 per share, of the Company (“ordinary shares”) and grant rights to acquire ordinary shares as described in Item 4;
•“For” the authorization of the Board to restrict or excludepre-emption rights accruing in connection with an issue of shares or grant of rights as described in Item 5;
•“For” the authorization of the Board to repurchase ordinary shares as described in Item 6;
•“For” the authorization of the Board to cancel ordinary shares held or to be acquired by the Company as described
in Item 7;
•“For” the appointmentre-appointment of Ernst & Young Accountants LLP as our independent auditors for a three-year period, starting with the fiscal year ending December 31, 20202023, as described in Item 8;
and“For” the determination of the remuneration of the members and Chair of the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee of the Board as described in Item 9;
“For” the amendment of the Company’s Articles of Association as described in Item 10;
•“For” the approval, on anon-binding, advisory basis, of the compensation of our Named Executive Officers compensation as described in Item 11; and
9.“
1 year” as the recommendation, on anon-binding, advisory basis, of the frequency of future advisory votes on Named Executive Officer compensation as described in Item 12.
2
If your shares are held in a stock brokerage account or by a bank, trustee or other nominee, which we refer to as your “broker,” you are considered to be the beneficial owner of these shares, and these proxy materials are being forwarded to you by your broker. As the beneficial owner, you have the right to direct your broker how to vote on your behalf, and you are also invited to attend the Annual General Meeting. Your broker will send you a voting instruction form to direct the broker how to vote your shares.
However, sinceSince you are not the shareholder of record, you may not vote these shares in person at the Annual General Meeting unless you obtain a legal proxy from your broker giving you the right to vote the shares at the Annual General Meeting. The
overwhelming majority of our shareholders are beneficial owners (i.e.
, hold their shares through a broker rather than directly in their own name). Please refer to the voting instruction form provided by your broker for specific voting procedures.
If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Co., you are considered to be the shareholder of record with respect to those shares and these proxy materials are being sent to you by us. As the shareholder of record, you have the right to vote your proxy directly to NXP by submitting a written proxy or to vote in person at the Annual General Meeting. If you request printed copies of the proxy materials by mail, you will receive a proxy card. Please refer to the summary voting instructions and those included on your proxy card. Submitting your
•Internet—You may vote by proxy will not affecton the Internet until 4:00 p.m. Eastern Time (10:00 p.m. Central European Time) on May 23, 2023. The website for Internet voting is http://www.proxyvote.com. Easy-to-follow prompts allow you to vote your rightshares and confirm that your instructions have been properly recorded. If you vote on the Internet, you can request electronic delivery of future proxy materials.
•Telephone—You may vote by proxy until 4:00 p.m. Eastern Time (10:00 p.m. Central European Time) on May 23, 2023 by using the toll-free number listed on your proxy card. Easy-to-follow prompts allow you to attendvote your shares and confirm that your instructions have been properly recorded.
•Mail—Mark, sign and date your proxy card and mail it to the address listed on the card or NXP at High Tech Campus 60, 5656 AG, Eindhoven, The Netherlands, Attention: Secretary. In order for your vote to be counted, we must receive your proxy card no later than two days before the Annual General Meeting or to vote in person.• | | Internet—You may vote by proxy on the Internet until 4:00 p.m. Eastern Time (10:00 p.m. Central European Time) on May 26, 2020. The website for Internet voting ishttp://www.proxyvote.com.Easy-to-follow prompts allow you to vote your shares and confirm that your instructions have been properly recorded. If you vote on the Internet, you can request electronic delivery of future proxy materials.
|
• | | Telephone—You may vote by proxy until 4:00 p.m. Eastern Time (10:00 p.m. Central European Time) on May 26, 2020 by using the toll-free number listed on your proxy card.Easy-to-follow prompts allow you to vote your shares and confirm that your instructions have been properly recorded.
|
• | | Mail—Mark, sign and date your proxy card and mail it to NXP at High Tech Campus 60, 5656 AG, Eindhoven, The Netherlands. In order for your vote to be counted, we must receive your proxy card no later than the day before the Annual General Meeting.
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Meeting.
If you are a beneficial owner of shares, please refer to the instructions provided by your broker regarding how to change your vote.
In addition, if you have obtained a legal proxy from your broker giving you the right to vote your shares in person, you may change your vote by attending the Annual General Meeting and voting again in person.If you are a shareholder of record, you may revoke a proxy given to a representative of NXP in any of the following ways:
•by sending a written notice of revocation to NXP at High Tech Campus 60, 5656 AG Eindhoven, The Netherlands; Attention: Secretary, which notice must be received before shares of such shareholder are voted at the Annual General Meeting;
or•by properly submitting a later-dated, new proxy, which must be received before shares of such shareholder are voted at the Annual General Meeting (in which case only the later-dated proxy is counted and the earlier proxy is revoked); or
•by attending the Annual General Meeting and voting in person. Attendance at the Annual General Meeting will not, however, in and of itself, constitute a vote or revocation of a prior proxy.
Pursuant to Dutch law, (i) common shares which are represented by “broker
non-votes” (i.e. common shares held by brokers which are represented at the Annual General Meeting but which
the broker isbrokers are not empowered to vote on a particular proposal) and (ii) common shares represented at the Annual General Meeting, but which abstain from voting on any matter, are not included in the determination of the common shares voting on such matter, and are only counted for quorum purposes.
3
VOTING PROCEDURES (continued)
If you do not submit specific voting instructions to your broker, your broker will not have the ability to vote your shares in connection with proposals which are considered“non-discretionary” “non-discretionary” items for which brokerage firms require your voting instructions to vote your shares.
Each share will be entitled to one vote. According to
the Company’s Articles of Association,
all votes will be tabulated by the
chairmanchair of the Annual General Meeting
who will countdetermines the method of voting, establishes the outcome of the votes
determinetaken, determines the existence of a quorum and validity of proxies and ballots, and
certifycertifies the results of the voting.
The adoption of resolutions at the Annual General Meeting shall require that at least
one/third (1/3)the majority of the issued and outstanding shares of the Company’s issued share capital is present or represented, excluding shares for which no vote can be cast pursuant to article 29, paragraph 2 of the Company’s
articlesArticles of
association.Association. Unless otherwise provided for in this proxy, resolutions can be adopted with a simple majority of votes cast.
Other than the proposals described in this proxy statement and matters incident to the conduct of the Annual General Meeting, we do not expect any matters to be presented for a vote at the Annual General Meeting. However, if you grant a proxy and additional
matters are properly presented for a vote at the Annual General Meeting, the persons named as proxy holders, Jennifer B. Wuamett or
Jean A.W. Schreurs,Timothy Shelhamer, will have the discretion to vote your shares on these additional matters.
If for any unforeseen reason one or more of our nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board.We
have electedexpect to
provide access to our proxy materials over the Internet, and accordingly will send the Notice to our shareholders of record and beneficial owners. The Notice contains instructions on how to access the proxy materials over the Internet or to request a paper copy, how you may request access to proxy materials in printed form by mail or electronically on an ongoing basis, and how to submit your proxy electronically over the Internet or by mail.We will announce preliminary voting results at the Annual General Meeting. Final voting results will be published in a Current Report on Form8-K filed with the SEC within four business days of the Annual General Meeting. If the final voting results are not available within four business days after the Annual General Meeting, we will provide the preliminary results in the Current Report on Form8-K and the final results in an amendment to the Current Report on Form8-K within four business days after the final voting results are known to us.
CORPORATE GOVERNANCEWe are
NXP Semiconductors N.V. is the parent company of the NXP group.
We are a holding company and ourThe only material asset
of NXP Semiconductors N.V. is
ourthe direct ownership of 100% of the share capital of NXP B.V., a Dutch private company with limited liability
(besloten(besloten vennootschap met beperkte aansprakelijkheid)aansprakelijkheid).
We were incorporated in the Netherlands as a Dutch private company with limited liability
(besloten(besloten vennootschap met beperkte aansprakelijkheid)aansprakelijkheid) under the name KASLION Acquisition B.V. on August 2, 2006. On May 21, 2010, we converted into a Dutch public company with limited liability
(naamloze vennootschap)(naamloze vennootschap) and changed our name to NXP Semiconductors N.V. In August 2010, we listed our common shares on the Nasdaq Global Select Market (“Nasdaq”).
We are subject to various corporate governance requirements and best practice codes, the most relevant being those in the Netherlands and the United States. The
current Dutch Corporate Governance Code (the “DCGC”)
, dated December 8, 2016, replaced the former 2008 code and applies to all Dutch companies listed on a
government-recognizedgovernment- recognized stock exchange, whether in the Netherlands or elsewhere. The
codeDCGC is based on a “comply or explain” principle. Accordingly, companies are required to disclose in their
statutory annual reports filed in the Netherlands whether or not they
are complyingcomply with the various rules of the
Dutch corporate governance codeDCGC and if they do not comply with those provisions, to give the reasons therefore. The
codeDCGC contains principles and best practice provisions for
managing boards,
supervisory boards (which also apply to thenon-executive members ofone-tier boards), shareholders and general meetings of shareholders, financial reporting, auditors, disclosure, compliance and enforcement standards.
Our long-term strategy is to maximize value for our shareholders and other stakeholders and create a strong cash flow generation by driving relative market share leadership with profitable growth at 1.5 times the semiconductor market and exceeding customer expectations. We are committed to innovating for a better tomorrow for our customers, employees,team members, communities, and society as a whole. Our purpose is bringing together bright minds to create breakthrough technologies that make the connected world better, safer and goal is to provide Secure Connections for a Smarter World, a mission inspired by our customer-focused passion to win. In order to do so, we place five key elements high on our culture agenda: (i) raising the bar, (ii) engaging curiosity, (iii) taking initiative, (iv) working together and (v) developing deep core competence. These values define uniquely who we are, and what we aspire to, as an organization. They are the guiding principles that we believe will help us and our employees succeed. They inform the decisions we make and the actions we take—individually and collectively—every day in order to drive market success.more secure. The Board strivesis committed to maintaining a dialogue with shareholders to ensure that they understand our differentiated strategy and business model and have an opportunity to discuss and engage on a broad range of topics, including our strategy. The Board will review the implementation of our strategy at the AGM.
We conduct our operations in accordance with internationally accepted principles of good governance and best practice, while ensuring compliance with the corporate governance requirements applicable in the countries in which we operate:
•We have a transparent corporate structure, with approval rights of our general meeting of shareholders for any significant change in the identity or nature of our Company or business;
•Each share of our common stock confers the right to cast one vote at the general meeting of shareholders;
•Our directors are appointed for one year terms;
•We do not have a culture focused on long-term value creationpoison pill in place;
•We only have outstanding common stock, and believes that these values enable usno preference shares are issued, and such shares cannot be issued without majority shareholder approval;
•Our share capital consists only of common shares and preference shares, no priority or other shares with special voting rights are included in our share capital;
•Any issuance of common or preference shares, for any reason, is subject to reach that goal.4
the approval of the general meeting of shareholders; and
CORPORATE GOVERNANCE (continued)
•We allow special meetings of our shareholders to be called upon the written request of shareholders holding at least 10% of our outstanding voting stock.
The Board, as well as the management team and the NXP Ethics Committee, promote openness and engagement through
SpeakUp, a
SpeakUp grievance mechanism.confidential reporting system described in more detail below. Furthermore, we maintain a Code of Conduct in order to promote a culture of good governance, excellence and consistency that applies to all of our directors, officers and employees and complies with the requirements of the Sarbanes-Oxley Act of 2002, and the rules thereunder, as well as applicable Nasdaq listing standards. A copy of the Code of Conduct is available on our Investor Relations website at
http://investors.nxp.com under the “Corporate Governance” section. We will post any amendments to, or waivers from, our Code of Conduct (to the extent applicable to any director or any of our executive officers)
toon this website.
The Code of Conduct outlines our general commitment to be a responsible social partner and the way in which we attempt to interact with our stakeholders, including shareholders, suppliers, customers, employees and the market.
The Code of Conduct expresses our commitment to an economically, socially and ethically sustainable way of working. It covers our policy on a diverse array of subjects, including corporate gifts,
privacy, child labor, International Labor Organization conventions,
trade compliance, working hours, sexual harassment, free-market competition, bribery and the integrity of financial reporting.
The Code of Conduct is built around the campaign “Know Right, Do Right” and consists of a framework of a variety of controls, a strict
non-retaliation policy, a training program for employees, the SpeakUp telephone line where people can report potential issues in a confidential manner, a confidential investigation process, risk assessments, background checks and audits. Any reports related to the Code of Conduct are brought to the attention of our Ethics Committee to ensure that all reports are properly investigated and addressed. Each quarter the Ethics Committee communicates to the Audit Committee
a summary of all reports and investigations.
5
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
Enabling a better, safer, more secure, and sustainable world
As a company focused on innovation, we are known for our ability to solve problems and address societal challenges, and we have continued to advance the scope of our ESG efforts to align with new challenges and opportunities. We recognize that stakeholder interest and expectations regarding our ESG efforts have evolved considerably over the last fifteen years. Today, we are focused on integrating ESG into our business and leveraging our technology to enable a more sustainable world.
In our view, the rapid pace of technological change is not without its challenges, but we look to the future with optimism. We believe in furthering our legacy of sustainable innovation, and we will continue to apply our technologies in ways that ahelp advance global sustainability. We embrace the opportunity to both inspire people and shape the future while also positioning ourselves for sustained success.
We report our progress annually in our corporate sustainability report, which includes more details about our commitment to sustainability is a critical part of our mission to deliver innovative solutions that accelerate our customers’ success and address stakeholder needs. We consider sustainability issues an integral part of our business oversight and are proactive towards developingsustainable practices, products that support a sustainable future, driveand transparency and accountability in our operationsbusiness and supply chain for focused ESG topics. Our corporate sustainability report is available on our website (http://www.nxp.com/CSR). The corporate sustainability report and any other information on our website are expressly not part of this proxy statement. Any targets or goals discussed in our corporate sustainability report and in this proxy statement may be aspirational, and as such, no guarantees or promises are made that mitigatethese goals will be met. In addition, statistics and metrics discussed in this proxy statement and in the corporate sustainability report may be based on assumptions that turn out to be incorrect.
2022 ESG Highlights
| | | | | | | | |
| Environment | Social | Governance and Economic Impact |
| Developed Roadmaps for Carbon Neutrality and Water Recycling | 97% Favorability from Winning Culture Survey Respondents | AAA MSCI ESG Rating |
| 9% Decrease in Normalized Scope 1 & 2 Emissions from 2021 | 2+ Percentage-Point Increase of Women Team Members in R&D and Executive Positions | $1B USD Green Innovation Bond |
| 35% Renewable Electricity Use | 2 Percentage-Point Increase of US Underrepresented Minority Representation | Published NXP's First Human Rights Policy |
| Joined the Semiconductor Climate Consortium as a Founding Member | Of US New College Graduate Hires, 35% were Women and 66% were Underrepresented Minorities | 99% of Suppliers Signed the NXP Supplier Code of Conduct Conformity Statement |
| 48% of Wastewater Recycled | 19 Employer Awards and Recognitions from 10 Countries | Added a Sustainability Component to our Short-Term Annual Incentive Plan for All Employees |
| 83% of Waste Recycled | Maintained a low Total Case Incident Rate (TCIR) of 0.10 | King Willem I Award For Sustainable Entrepreneurship |
| 11% Decrease in Hazardous Waste | Published NXP’s First Extended Minerals Reporting Template (EMRT) | KLM Royal Dutch Airlines Sustainability Award |
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
Our ESG Goals
Our ESG mission is to enable a better, safer, more secure, and more sustainable world through innovation. That mission has given rise to a series of aspirational goals that inform our efforts and enable us to gauge our performance and celebrate our accomplishments.
| | | | | | | | | | | |
| Innovation | Environment | Social | Governance |
| | | |
| Design and manufacture technology that positively impacts the planet and society | Carbon neutral by 2035 | 25% women in R&D by 2025 | Work with our supply-chain partners to reduce their environmental footprint |
| | | |
| Develop higher-performing, more energy-efficient products | Reduce carbon emissions by 35% in 2027 (2021 baseline) | 50% underrepresented minorities in our US workforce | Integrate ESG into our business so we can foster ownership and accountability |
| | | |
| Optimize natural resources by 2027 50% renewable energy 60% of wastewater recycled 90% of waste recycled | Zero tolerance of forced labor and human-rights abuses | |
| | | |
| | Zero workplace injuries | |
Sustainability Scorecard for 2022
We know that, as a large, multinational company, our operations are stronger when we leverage workforce diversity. We are also committed to reducing the environmental impact of our operations while being good stewards of our planet and doing our part to create a more sustainable world.
In 2022, we added a sustainability component to our short-term Annual Incentive Plan (AIP) to reinforce our corporate commitments is these areas. Our Human Resources and Compensation Committee (HRCC) approved the introduction of a sustainability scorecard. The scorecard contains multiple metrics and targets that support measurable year-on-year progress toward our long-term environmental and people-related aspirations. It is important to us that all team members participate in this progress. Therefore, the scorecard is applicable to the AIP for all team members and the target weighting of the sustainability component is set at 20% of our AIP.
Please reference the "Executive Compensation—Compensation Discussion and Analysis—2022 Compensation Decisions—Annual Incentive Plan" section of this proxy statement for a list our specific 2022 annual sustainability scorecard goals, why we chose them and the progress we made toward meeting those goals over the past twelve months.
ESG Governance
Our ESG strategy is aligned with and incorporated into the company’s long-term business strategy. NXP's Board of Directors has ultimate oversight responsibility for ESG matters. The full Board focuses on
significant ESG matters, with Board Committees undertaking oversight of ESG issues relevant to their responsibilities, and then integrating committee work on these issues in their reports to the
environment.full Board.
ESG Program oversight is delegated to the Nominating, Governance, and Sustainability Committee, which oversees integration of a broad set of ESG considerations into business functions, and delegates aspects of ESG oversight to the Audit Committee and the Human Resources and Compensation Committee for ESG matters within their core areas of expertise.
•Nominating, Governance, and Sustainability Committee – Oversight of sustainability policies, goals, and programs
•Audit Committee – Oversight of ESG disclosure processes and controls, and internal and external assurance over ESG reporting
•Human Resources and Compensation Committee – Oversight of human-capital management policies, programs, and initiatives, including company culture, talent development, employee retention, diversity and inclusion, and compensation, including the alignment of ESG goals to incentive pay programs
The Nominating, Governance, and Sustainability Committee receives quarterly updates from representatives of the ESG Management Board and, in turn, reports on these efforts in plenary meetings of NXP’s Board of Directors.
The CEO and the NXP Management Team, under the supervision of NXP’s Board of Directors, are responsible for implementation of NXP's ESG strategy, policies, and goals.
NXP's ESG Management Board, which is comprised of Management Team members and other senior leaders, oversees the implementation of ESG strategy and policy, and ensures appropriate resourcing. The ESG Management Board is chaired by our General Counsel and Chief Sustainability Officer, and supported by our Chief Financial Officer, Chief Strategy Officer, Chief Technology Officer, Chief Human Resources Officer, and Executive Vice President (EVP) Global Operations. The ESG Management Board meets regularly to ensure our ESG performance is in line with our strategy and goals.
Environment
Optimizing our use and consumption of resources, minimizing waste, and continuously improving
| | | | | | | | | | | | | | |
| Environmental Long-Term Ambitions |
Carbon Neutral
by 2035 | Minimize Impact on
Global Water Supplies | Develop Collaborative
Solutions for Circular
Economy | Reduce Use of
Targeted Chemicals
of Concern | Collaborate with our Suppliers to Reduce their Environmental Footprint |
| | | | | | | | | | | | | | |
| 2027 Environmental Mid-Term Goals |
35% Reduction in Scope
1 & 2 Carbon Footprint
(2021 Baseline) | 50% Renewable
Electricity Use | 60% of Wastewater
Recycled | 90% Waste
Recycled | Work with Our Supply Chain to Reduce Impacts and Measure Our Portion of Their Carbon Footprint |
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
| | | | | | | | | | | | | | |
| 2022 Environmental Performance |
1% Decrease in
Absolute Scope 1 & 2 Emissions and 9% Decrease in Normalized Scope 1 & 2 Emissions Compared to 2021 | 35% Renewable
Electricity Use | 48% of Wastewater Recycled | 83% Waste Recycled | Updated Supplier Questionnaires to Determine NXP's
Upstream Scope 3 Emissions |
As an environmentally responsible manufacturer committed to continuous improvement, we strive to optimize our use of natural resources, minimize releases to the environment, and achieve operational efficiencies. To support these objectives, we maintain and implement an environmental management system and several programs. In accordance with criteria from the International Organization of Standardization (ISO), our environmental management system is certified to ISO 14001 at all our manufacturing sites.
Emissions
Our manufacturing sites generate Scope 1 (direct) and Scope 2 (indirect) greenhouse gas (GHG) emissions. We measure our carbon footprint according to the GHG Protocol, a set of internationally recognized standards for quantifying and reporting GHG emissions. We report on all three of the protocol's defined categories: Scope 1 (direct emissions), Scope 2 (indirect emissions, owned), and partial Scope 3 (business travel and product transportation).
Electricity, Perfluorinated Compounds (PFCs), and heat transfer fluids (HTFs) are essential to semiconductor manufacturing. Since it is not currently feasible to eliminate the sources of these emissions from our progress in these efforts and include more details about the waysproduction processes, we arehave set reduction goals for both Scope 1 & 2 emissions. In 2022, to keep ourselves accountable, we committed to sustainable practicesaligning our targets with the Science Based Targets initiative (SBTi). We are compiling data for SBTi validation and supportinghave identified a number of mid-term goals.
In 2022, the demand for our global communityproducts increased 9% compared to 2021. That meant our electricity, PFC1, and HTF consumption increased as well. However, due to conservation and reduction projects, our absolute Scope 1 & 2 emissions decreased 1% compared to 2021 and our normalized Scope 1 & 2 emissions decreased by 9% from 2021. While a 9% production increase is significant, our ongoing efforts to conserve electricity, optimize our processes, increase renewable electricity use, upgrade tools, and install abatement equipment resulted in a decrease for absolute and normalized Scope 1 & 2 emissions.
Market-based emissions reflect actual data directly from energy providers.
Energy
Primary sources of energy for our
annual sustainability report. Our corporate responsibility report is publiclymanufacturing, testing, and office sites come from the electrical grid. We purchase renewable electricity when available,
at our website nxp.com, by clicking on “Company”, then “Corporate Responsibility”.Greener products—In the same way that we commit ourselvesand continue to deliveringpurchase electricity from fossil-fuel sources in jurisdictions where reliable and abundant alternative energy sources are not available.
Electricity
We produce increasingly complex products that
can improve life, we commit ourselves to minimizing our impact on the environment. Our chips can make systems smarter and contribute to energy savings in multiple ways. In many cases, our chips are designed to consume less power themselves than earlier chips. In other cases, our chips are tailored to minimize the energy consumption in theend-products they are embedded in. Below are some examples of how our products are minimizing the impact on the environment.Battery management in electric cars is a core strength of NXP. The progressive growth of the numbers of electrical vehicles in the world demands for optimization of battery management. Our smart chips can make a difference in battery management, leading to significant power savings and extension of car battery lifetimes.
Advanced Driver Assistance Systems (ADAS), ranging from simple features like cruise control, up to fully self-driving cars, have a huge impact on fuel consumption. Theon-board systems are more capable than humans to smoothen the ride and save fuel. Speed limits are automatically respected, andcar-to-car communication systems help avoid traffic congestion. NXP’s experiments with multiple trucks showed spectacular fuel saving results.
The application of ADAS technology is independent of the engine type of the vehicle: conventional ICE, hybrid or fully electric.
2. | Wireless communication infrastructure
|
Base-stations for wireless communication transmit huge amounts of data over long distances. The power amplifiers and antennas together typically consume kWatts of electric power per station. The upcoming superfast fifth generation mobile internet standard 5G is expected to further boost energy consumption, asinvolve many more base-stations will be requiredprocessing steps, requiring greater electricity consumption. In 2022, we continued our expansion of our Systems on Silicon Manufacturing Company (SSMC) wafer fab in a 5G network. NXP already delivers very energy efficient power amplifiers and beamforming antenna systems for 5G.
OurLow-power i.MX microcontrollers offer the lowest power consumption in the industry; only 15 microWatt in deep sleep mode. OurLow-power Graphic Processing Units (GPU’s) expand the battery lifetimes of consumer wearables. NXP’s advanced application processors enable complex and fast computing “at the edge” (in the immediate vicinity) of IoT devices, like camera’s, wearable devices, domestic appliances, industry equipment, contributing to energy savingSingapore, as well as a remote facility in Tianjin, China. This, coupled with an increase in product demand of 9% in 2022, resulted in our absolute electricity consumption increasing by 6%, while our normalized electricity decreased by 3% compared to 2021.
1 We have updated our calculation of PFC emissions and, by extension, the safetytotals of our Scope 1 emissions. We use the IPCC 2006 methodology for data leading up to and securityincluding 2020, and the IPCC 2019 methodology for 2021 and all the years following.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
Our ongoing efforts to conserve electricity and optimize our manufacturing processes have helped us use electricity more efficiently, despite increases in our manufacturing capacity and higher demand for our products. Compared to 2012, our absolute electricity consumption has increased only 7%, despite high product demand, and our normalized electricity consumption has decreased by 10%.
Water
Since drastically reducing the amount of
end-users.Edge computing means water used within our manufacturing processes is not currently feasible, we anticipate that more and moreour demand for water will increase in line with our increases in production. To reduce the amount of incoming water we consume, we focus on a mid-term goal of increasing our water recycling rate to 60% by 2027.
In 2022, the smart connected devices around us can do complex data processing (e.g. artificial intelligence)demand for our products increased 9% compared to 2021. As a result of this demand, our absolute water consumption increased by themselves, making vulnerable and power consuming data transfer8% compared to the cloud unnecessary. NXP’s Secure Edge Computing solutions offer a range of processing options coupled to connectivity and security to ensure that a wide range of solutions are available2021. However, our normalized water consumption decreased by 1% from our i.MX and RT families. With low, mid and high-end computing processors and crossover processors we offer the ability to address secure edge artificial intelligence/machine learning systems in the industrial, IoT and automotive markets. Data from end nodes, gateways and mobile devices are pre-processed at the edge prior to that data then being either re-issued to the same end node or others locally or passed2021.
Our decade-long focus on
to data centers for combining with other end nodes at the edge.Artificial intelligence (AI), running on our microcontrollers will make many electric appliances smarter and more energy efficient. Machine learning, sub-domain of AI, will make machines and industrial robots much more adaptive to use-patterns and circumstances, reducing waste and saving energy.
4. | Building control systems
|
According to the International Energy Agency, 35% of final energy consumption is used in buildings; more than in transportation, and more than in the industry. Vast amounts of energy can be saved bywater conservation, which has emphasized the use of smart control systems forair-conditioning, heating, lightingmore efficient tools, taking advantage of opportunities to increase water recycling, and other interior climate provisions. By adapting the equipment’s usagefinding ways to human presence, activity,optimize processes, has kept our absolute water consumption lower and preference settings, the energyhas helped us achieve a 1% decrease in normalized water consumption can be decreased significantly compared to the“always-on” setting often applied today. Also,
6
2012.
SUSTAINABILITY (continued)
Artificial Intelligence can make these systems self-learning, further minimizing energy usage fully autonomously. NXP develops the systems and components
Waste
We continue to
further “smarten” buildings and homes.Product stewardship—Our goal is to provide environmentally preferred products that not only meet both regulatory requirements and specific restrictions on hazardous substances and minerals but to also proactively restrict and phase out additional hazardous substances that are not in legal scope. We maintain a catalog of restricted substances and product compliance data that are made available toevolve our customers upon request. We adhere to global restricted substance regulations, including the European regulation regarding the Registration, Evaluation, Authorization and Restriction of Chemicals (“REACH”), and the Restriction of Hazardous Substances (“RoHS”) “Recast” Directive, as amended by Directive (EU) 2015/863. We regularly participate in industry-wide reviews and discussions to assist in leading the development of industry standards.
Our policy is to ethically source minerals from responsible suppliers to ensure our supply chain does not contribute to human rights abuses. Our products may contain 3TG (tin, tantalum, tungsten, and gold), which are necessaryapproach to the functionality or productionsourcing, consumption, and disposal of materials critical to the manufacturing and testing of our products. We have implemented due diligence measuresset a mid-term goal of recycling 90% of our waste by keeping products and materials in use via reuse, resale, repurposing, and recycling.
In 2022, we recycled 83% of our total waste (hazardous and non-hazardous), an increase of 10 percentage points compared to conform2021. Our recycling rate reflects waste-to-energy activities, which include the conversion of non-recyclable waste materials into usable heat, electricity, or fuel through incineration. If we exclude waste-to-energy, the 2022 recycle rate is 78%.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
Human Capital Management
Our People: The Heart of NXP
Our diverse and talented team members drive the innovation that sets our company apart and fuels our success in the market.
Our Purpose
Our purpose is to bring together bright minds to create breakthrough technologies that make the connected world better, safer, and more secure.
Our Values
Our values are our fundamental beliefs and guiding principles. They speak to how we operate, how we engage with and develop our team members, and how we push the boundaries of creativity and innovation. Our values are built on a strong foundation of trust and respect for and among our team members. We hold ourselves accountable to these values by ensuring they are reflected in our talent programs, including hiring, learning and development, our performance enablement process, our rewards programs and our promotions.
We have a long history of empowering our team members to develop their skill sets and expand their capabilities. We want our team members to grow, progress, and advance across job types, functions, organizations, geographies, and levels — all at a pace that is unique to the Organization for EconomicCo-operationindividual.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
Our Policies and
Development Due Diligence (“OECD”) Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. We have established strong management systems for 3TG supply chain due diligence, identified and assessed 3TG risks in our supply chain, designed and implemented strategies to respond to identified risks, and we report on 3TG supply chain due diligence activities annually. In 2018, our suppliers identified 255 smelters or refiners that provide materials likely to be incorporated into the functionality of our products. All smelters identified were compliant with a third-party audit program (conformant). For three years in a row, 100% of the smelters within our supply chain are certified conflict free. We are extending the scope of our due diligence procedures to include additional minerals that may originate from conflict-affected or high-risk areas.Respect for human rights—As part of our commitment to respect and protect human rights, we seek to uphold the highest standards in our labor practices. Our company policies adhere to applicable local labor laws, are consistent with both the United Nations Global Compact and the International Labor Organization (“ILO”) core labor principles and conform to the NXP Auditable Standards (standards which are stricter than the Responsible Business Alliance Code of Conduct). We conduct annual risk assessments in our manufacturing sites to identify and mitigate labor and human rights risks that could arise. We also participate in third party internal audits to ensure policies and practices are aligned with local legislation and the NXP auditable standards. Our Human Rights Policy includes clear statements about our commitment to labor and human rights in which we do not tolerate harassment in the workplace, involuntary labor, child labor, payment of fees, withholding of personal documentation and excessive working hours. We also look to foster open communication and provide employees access to the NXP Global Speak Up hotline. In November 2016, the Thomson Reuters Foundation awarded NXP with the Stop Slavery Award. NXP was chosen because of its deep commitment to the fight to end modern slavery. Since 2012, the company has made this a key corporate initiative through its own operations and across the supply chain.
Investment in human capital—NXP invests in the engagement and development of our current and future employees to ensure we have the talent to deliver our short and long term strategy. Programs
Across the globe, we have policies and programs to find and maintainretain the best talent possible including robust employeewith a specific focus on driving team member engagement; building thought leadership; embracing diversity, equality and inclusion; providing competitive and fair compensation and benefits; enabling talent development programs, a strong commitmentand growth opportunities; investing in future talent; focusing on team member retention; and giving back to our university internship program,communities.
Workforce Demographics
NXP’s workforce includes direct labor (“DL”) and collaborative engagement withindirect labor (“IDL”). DL are those team members directly involved in manufacturing our products and typically work in our factories, while IDL consists of individual contributors, managers, and executives in other functions such as research universities.and development (“R&D”) and selling, general and administrative (“SG&A”). At December 31, 2022, we had approximately 34,500 employees, which includes approximately 1,500 employees in our joint venture. Our NXP global workforce spans three regions encompassing 30+ countries and includes more than 10,000 team members dedicated to the research and development of our products and solutions.
Focusing on Team Member RetentionNXP aims to retain team members and minimize turnover. The graph below shows our turnover rate from the past five years.
Voluntary turnover varies by country, and our turnover rate remains below the competitive benchmark in each country where we have team members. 2021 and 2022 had higher turnover rates than previous years, but these increases can be explained by
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
conditions in the individual markets where our team members reside. We consistently monitor ourcontinue to drive programs centered around retention actions for strategic roles and top-performing talent, pool, assess turnover trends closely, as well as gatherprograms targeting all team members
Driving Team Member Engagement
Engaging, developing, and analyze employeevaluing our team members is how we create long-term value for our stakeholders.
To assess and improve team-member engagement, we regularly conduct our global Winning Culture Survey. We invite NXP team members to share their feedback on a variety of factors, including engagement, strategy, culture, leadership, continuous improvement, collaboration, execution, ownership, work environment, support and diversity, equality and inclusion. Surveys are administered by a third party to ensure confidentiality.
Our 2022 survey solicited input from our IDL team members and showed positive momentum, with an increase in favorability to 97% when compared to responses from our previous survey cycle. Year-over-year, NXP saw improvements in 33 of the original 34 items in the survey. The third-party administrator of the survey reported that 88% of the survey items scored more positively than the 75th percentile benchmark, composed of companies operating in the technology sector. The results show that collaboration and ownership are the cornerstones of NXP’s culture and that our team members are engaged, feel pride in the company, and believe that NXP is also a great place to work.
| | | | | | | | | | | | | | |
| Response Rate | Engagement | Great Place to Work | Proud | Valued |
| 89% | 85% | 83% | 88% | 84% |
Insights from our survey equip us to improve the team-member experience as well as our policies and processes. Using team-member feedback, we have created and improved company and/or country-specific programs and made updates to our tools and resources. This includes focusing on talent growth and development as well as initiatives to support the balance of work with life commitments.
External Awards & Recognition
NXP is honored to have received external awards and recognition for our commitment to the development of human capital. Some of the honors received include:
•Austria
◦For the fourth year in a row (2019 - 2022), NXP received the Leading Employer Award in Austria, and was rated the number-two semiconductor company in Austria by the Leading Employer Institute
◦NXP was recognized for its strong mentoring efforts and active participation in the Business Cross Mentoring Program in Austria, which supports women who are high-potential managers in technical domains by growing their skills and network.
◦NXP was officially certified as a “Family Friendly Employer” by the Austrian federal ministry. Certification reflects our conformance with various requirements, and confirms that we have a strategy, with targets, for becoming even more family friendly.
•China
◦In 2022, NXP was awarded the 2021 Tianjin Economic-Technological Development Area (TEDA) Top 100 Enterprises Award, recognizing enterprises in TEDA that are outstanding and contribute to local government and economic development
◦NXP received the 2022 AspenCore World Electronics Achievement Award by AspenCore Media Group, recognizing the company as Processor/DSP/FPGA provider of the year
•France
◦NXP received the 2022 Top 25 Companies in France Award, recognizing the company as one of the best companies to grow your career in France, as judged by the online professional network, LinkedIn
•Germany
◦NXP Germany was presented with a 2022 Stevies Award, recognizing the effectiveness of our Virtual Showroom, which connects NXP with our audiences and allows them to experience the company's breakthrough technologies in a new, interactive way
•Malaysia
◦NXP was recognized for being one of the 46 companies honored with the 2022 MY AMCHAM CARES award recipients, making the company one of 46 companies to be honored. The award recognizes NXP Malaysia's support of corporate sustainability initiatives throughout 2022, based on the five pillars of Strategy, Sustainability, Communication, Measurability, and Partnership
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
◦NXP was awarded the Certificate of Recognition for Excellence in Corporate Social Responsibility by the American Malaysian Chamber of Commerce. The certificate demonstrates understanding of the link between business operations and society by conducting business in a way that creates both long-term economic and social values.
•Mexico
◦In November 2022, the Mexican Chamber of Electronics, Telecommunications, and Information Technologies (CANIETI) honored NXP for 30 years of partnership and active collaboration. Together with CANIETI, NXP Mexico has consistently participated with the local “triple helix” of industry, academia, and government in many initiatives around Science, Technology, Engineering, and Math (STEM) education, social initiatives, and collaboration with peers for the benefit of the Guadalajara high-tech ecosystem and society overall.
•Netherlands
◦For the third year in a row (2020 - 2022), NXP was awarded the title of Most Attractive Employer in the Netherlands by Kantar, the international research partner of the Dutch staffing agency Randstad
◦NXP received the 2022 Konig Willem I Prijs Award, naming the company as the winner of the large-business category for sustainable entrepreneurship
•Taiwan
◦NXP Taiwan received the Outstanding Foreign Firms Award from the General Chamber of Commerce of Taiwan. The Minister of Economic Affairs (MOEA) nominated NXP for this honor, which recognizes the company’s contribution to the semiconductor industry in Taiwan and NXP’s commitment to investing in the country. The award is known as the Oscar of Taiwan’s business sector.
◦NXP was one of only 10 companies to receive the 2022 National Industrial Relations Excellence Award in Taiwan, recognizing our collaborative and healthy working relationship with the union representing our team members
◦NXP received the 2022 National Charity Award and the 2022 Waste Recycle Award from the Ministry of Economic Affairs Authority in Taiwan
◦NXP received a 2022 EE Award from EE Times Asia, which recognizes companies that help with "creating the future with the electronics industry and changing the world with engineers"
•Thailand
◦NXP Manufacturing Thailand received a certificate from the Metropolitan Health and Wellness Institution (Department of Health), recognizing the company’s commitment to support the health of women of childbearing age and driving action to promote the consumption of vegetables, fruits, and other nutritious foods
•United States
◦NXP was recognized as one of the 2022 Best Large Employers in Texas, as determined by the Forbes media company and Statista, a statistics portal for market and consumer data
◦The online recruiting platform, Handshake, recognized NXP with a 2022 Early Talent Award, acknowledging the company’s best-in-class talent engagement in the Software and Technology category
Building Thought Leadership
Investing in R&D
NXP's breakthrough technologies help to create a connected world that is better, safer, and more secure – targeting edge devices for the automotive, industrial, smart home, communications, infrastructure and mobile markets.
Developing Thought Leaders
We are committed to building thought leaders, which is evidenced by the more than 10,000 team members (representing 56% of our IDL workforce) who are specifically dedicated to R&D. Through broad exposure to job-based development activities, we have been able to advance 14% of R&D team members in 2022 through internal promotions. In addition, we hired 3,185 new R&D team members, named 49 technical directors and 9 new fellows. Our consistent focus on R&D and innovation resulted in NXP being awarded 957 individual patents during 2022.
Embracing Diversity, Equality, and Inclusion
At NXP, inclusion is key to living our values, which are built on a foundation of trust and respect. We recognize the importance of representation, value diversity, equality, and inclusion, and respect the unique talents, experiences, backgrounds, cultures, and ideas of our team members. We invite everyone to be their authentic selves at work. This is what makes us who we are at NXP. As an ongoing demonstration of our commitment, we invest in initiatives and resources to drive cultural awareness across the company, spearheaded by our Vice President and Head of Diversity, Equality and Inclusion (DE&I).
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
In 2022, we continued making progress on our DE&I journey. We started the year by reflecting on our year-over-year progress towards achieving our 2025 aspirational representation goals and our efforts to embed inclusion deeper within the organization. Some key highlights for the year include: implementation of DE&I questions within the Winning Culture Survey; unconscious bias training for people managers; establishing a Diversity & Inclusion Council; focusing on diverse hiring practices; introducing an exit interview process; participating in the Bloomberg Gender Equality Index; and increasing our ERG footprint. NXP now has nine primary ERGs, with 23 chapters represented in Asia, Europe, Mexico, and the United States.
Approach
NXP’s approach to diversity, equality and inclusion is centered around leadership commitment and ownership; building and sustaining a qualified, diverse talent pipeline and equitable processes; and fostering an inclusive culture and a sense of belonging to attract and retain the best talent by welcoming and embracing our team members’ diversity and fostering respect for everyone’s differences, leveraging the diversity of thought and life experiences and cultivating a collaborative work environment where team members feel valued and are comfortable being their true selves.
We also support and adhere to all diversity-related legal and compliance requirements, which vary by country.
Representation Goals
To support our diversity, equality and inclusion approach and demonstrate our commitment to transparency and accountability, we have established aspirational 2025 DE&I goals to improve our gender representation globally and, in the United States, our minority race and ethnicity representation.
We continue to focus on hiring, development, and retention across all global sites to meet our 2025 representation goals among our team member population.
| | | | | | | | | | | | | | |
| 2025 Diversity, Equality and Inclusion Goals |
40% Women in
Overall Global
Workforce | 30% Women in Global IDL Workforce | 20% Women in
Executive Positions | 25% Women in R&D Positions | 50% Minority Representation in the United States |
|
| 2022 Diversity, Equality and Inclusion Performance |
37% Women in
Overall Global
Workforce | 25% Women in Global IDL Workforce | 16% Women in
Executive Positions2 | 19% Women in R&D Positions | 51% Minority Representation in the United States3 |
In a competitive hiring market, our overall team-member population grew by 11% compared to 2021. Of this increased population, we saw an increase of 1 percentage point with women in the global IDL workforce, 2 percentage points with women in R&D positions, and 3 percentage points with women in executive positions. Women in the global workforce remained the same in 2022 compared to 2021. While we present gender representation data according to men and women classifications for reference purposes in this statement, we acknowledge this does not specifically encompass of all gender identities and designations, which we continue to recognize for other purposes internally.
Gender Representation
At NXP, women represent 37% of our global workforce, and we continue to strive for noticeable improvements in hiring women across all global sites. Additionally, we are committed to increasing, developing, and promoting more women into technical and leadership positions within our organizations.
To that end, subject to applicable law, we monitor gender statistics globally, across all roles, and look for continuous improvements, which include an evaluation of the practices at the country level. Each country's leadership team ensures focus on how to ensure we are striving to make improvements, where needed.
Race and Ethnicity Representation
In the United States, we monitor race and ethnicity representation to ensure we are attracting, retaining and developing diverse team members.
A breakdown of NXP’s United States population, as of December 31, 2022 and detailed information related to NXP's team member population demographics can be found in NXP's 2022 Corporate Sustainability Report.
2 Executive positions are defined as individuals at the level of Vice President and above.
3 Minority representation includes employees who self-identify as Asian, Hispanic or Latino, Black or African American, American Indian or Alaska Native, Pacific Islander or two or more races. We also include within minority representation employees who have not self-identified an ethnicity.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
Providing Competitive and Fair Compensation and Benefits
NXP’s competitive compensation and benefits programs are designed to attract the best talent as well as drive and reward the best performance across all areas of our diverse workforce.
Compensation
NXP provides team members with total rewards packages consisting of base salary and short-term incentives for all team members, as well as and equity-based long-term incentives for other team members. We also offer locally competitive benefits aimed at supporting team members’ financial, physical, and mental well-being.
Rewarding performance is a critical foundation for our overall program. NXP is committed to managing all reward-based compensation programs, including merit increases, annual incentive program (AIP) payouts, Sales Incentive Program (SIP) payments and long-term incentive awards, to deliver on our pay-for-performance philosophy.
NXP has policies and procedures in place to promote pay equity. We perform pay reviews twice a year, alongside NXP's rewards processes, to ensure we are delivering pay decisions with an appropriate focus on fairness. We developed this proactive process to evaluate each reward-based compensation program in real time, to provide leaders with feedback to create
a robust employee focused environment.more visibility into fair and equitable compensation while decisions are being made. We have a strongalso analyze potential compensation recommendations or changes within functional areas and departments in order make appropriate adjustments and promote pay equity. Review results are presented to our CEO and Chief Human Resources Officer, reflecting our commitment to ongoingevaluate compensation-related decisions based on a variety of factors, including, where applicable, gender, race, and ethnicity.
We believe that pay decisions should be made based on three factors: external considerations (i.e. market conditions), employee performance/contributions and internal equity. NXP utilizes third-party data to formulate compensation and benefits programs that are fair, equitable, and competitive. We then empower leaders to recognize both individual and team accomplishments through a variety of compensation programs. Each year, we conduct a formal assessment of the individual's specific achievements and the demonstrated behaviors – consistent with our values – to deliver those achievements.
Benefits
NXP helps our team members maintain their health and financial well-being by supplying benefits that may include an employee stock purchase plan, life insurance, business travel accident insurance, personal accident insurance, paid maternity and paternal leave, personal time off, tuition reimbursement and other employee assistance programs.
We also offer a global Flexible Work Arrangement program, which offers eligible team members the ability to work a combination of onsite and remotely. Although our way of working focuses on meaningful face-to-face interactions, we have incorporated flexibility into our work arrangements in a way that allows us to maintain the focus on strong and effective teamwork, collaboration, and community.
In some countries, we also support part-time work schedules, helping to support the overall well-being—and greater work-life balance— for our team members.
Enabling Talent Development & Growth Opportunities
NXP has a long history of empowering our team members to develop their skill sets and expand their capabilities.
NXP is committed to continuous learning, including mechanisms for learning
from others, formal training opportunities and a variety ofthrough on-the-job development
experiences. Our development programs begin with Day 1 Orientationsexperiences (70%), through others (20%), and
continue throughoutthrough formal education (10%). We believe that by utilizing the
lifecycle of employment with regular70/20/10 model, learning can achieve new levels through experience, collaboration, and
ongoing programs for the growth and development of key talent.education. Using a blend of
internally-designed internally designed and
externally-sourcedexternally sourced courses and learning resources, we
bringoffer our team members around the globe a variety of training programs that provide real-time learning
to our employees real-timeopportunities in support of key business processes, requirements,
&and initiatives. We also provide a
complete library of on-demand skills development and microlearning resources to all
of our
non-factory populations. And we support continuing educational endeavors by providing tuition assistance programs.In 2019, NXP granted more than 800 internships to university students. team members.
Investing in Future Talent
NXP’s strong commitment to itsour internship programs is a key contributor to growingdeveloping the new generation of talent, including engineers, in our industry and at NXP. company.
Interns
Our internship programs focus on the students’ technical advancement as well as growth in additionaland skills development that are needed as they prepare to enter the professional workforce in the future. Theworkforce. In 2022, we continued to welcome university students to NXP. In 2022, NXP granted more than 1,100 internships to university students and converted 39% of our interns into an NXP team member.
New College Graduates
Our internship programs build a highly capable and energetic pipeline
that contributedof new college graduates. In 2022, we were pleased to
welcome approximately more than 1,000 new college graduates, an increase over the
over 600644 new college graduates we hired in 2021. These hires represent 23% of our overall IDL hiring activity, in which 35% of the new college graduate
positions we offeredhires were women and 66% were underrepresented minorities in
2019.the US.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
University Partnerships and Engagement
Through our partnerships with universities across the world, we fund and support advanced research programs and projects that demonstrate our commitment to investinginvest in the future of not only technologies but students’ knowledge and skills which quitepeople as well as technology. Quite often, translatesthese partnerships translate into new and exciting solutions for our customers and markets.
To complementdrive deeper awareness and engagement with our university partnerships, NXP maintains a University Relations Council, which has the goal of driving a coherent and aligned approach towards university partnerships by linking recruitment, global sales and marketing, and R&D programs. In 2022, we strengthened this global and local collaboration and successfully implemented many initiatives and activities.
Our 2022 university funding and support was diverse, and allowed us to support advanced research programs and sponsorships, including the following:
•~80 university projects led by NXP – Projects in countries across the globe, including Austria, Belgium, China, Czech Republic, France, Germany, India, Netherlands, Romania, the United Kingdom and the US, led by NXP and supported by various business lines and functions. As part of this engagement, NXP sponsors students, professorships, and lab equipment.
•70-plus projects with the Semiconductor Research Consortium (SRC) – Projects engaged NXP liaisons in Canada, India, and the United States with university professors and students on advanced silicon design, production, and manufacturing processes. These programs also provides several program7
SUSTAINABILITY (continued)
sponsorships, including: EcoCar,provided students with a USpath for technology transfer and expertise in the industry.
•EcoCar – A United States Department of Energy program workingthat allows NXP to work with dozens of Universities12 universities across the USUnited States to develop more economic,economical, environmentally friendly, and connected vehicles; Stanford University’s SystemX Alliance,vehicles
•2022 NXP Cup – Invites participants to an autonomous robotics and automotive challenge. Participants build, program, and race a research collaboration of business andmodel car against other teams, aiming for the fastest time with precise maneuvering. The 2022 event engaged more than 100 university teams in Europe. The virtual events and live finals drew more than 2,300 views on YouTube.
•NXP HoverGames – A virtual coding and hardware challenge, incorporating NXP technology in drones. The challenge takes place over several months and addresses some of the biggest challenges facing society, such as disaster management, health crises, environmental protection, and wildlife preservation. NXP has engaged more than 313 teams (registrations ongoing), with a large number of participants from India and the United States.
•2022 NXP Smart Car Race Design Challenge – Engineering students in India spent two days focused on advanced topicsartificial intelligence in mobility. Participants raced their driverless vehicle prototypes on a virtual racetrack, using skills in the areas of coding, AI algorithms, sign recognition, sensors, motion detection, camera vision, image processing, and more. More than 620 registered for the event from silicon design,more than 24 states and 87 universities. Seventeen teams of 57 students each were short-listed for the Internettwo-day grand finale of Everythinglive races, with an in-depth evaluation from external judges.
•National University Students Intelligent Car Race – By sponsoring the "Intelligent Vision" segment of this event, hosted by Chinese universities, NXP provided 680 students and technological advancements354 teaches, from 200+ universities, with our specially designed products for image classification
Giving Back to our Communities
At NXP, we believe in
medicine; and our own global university event called The NXP Cup,making a positive difference in the communities in which
over 10,000 students usewe live and work. We are committed to supporting these efforts across the globe and encourage our
technologyteam members to give generously of their time, resources, and
compete intalents to impact our communities. Many major NXP
sponsored events in Asiasites have their own volunteer and
Europe.Supply chain—To ensure integrity throughoutdonation programs that focus on education, poverty, hunger, health, and well-being within their respective communities.
Social Responsibility
NXP recognizes that our supply chain, we require key, high-risk suppliers, as well as selected indirect suppliers, to undergooperations can impact the NXP supplier audit process. We completed 17 supplier audits through the calendar year 2019. Our audit closure rate in calendar year 2019 was 85% for all related findings. Our top findings include Freely Chosen Employment, Emergency Preparedness and Working Hours. The highest riskhuman rights of forced laborour team members, workers in our supply chain, and the people in our host communities. We respect human rights through our own actions and decision-making and we expect our suppliers and partners to do the same.
To identify potentially adverse human-rights impacts and put in place prevention and mitigation measures, in 2022, we updated the NXP Human Rights Management System. The Management System provides clear guidance on how human-rights due diligence is where foreign laborto be conducted across our business value chain. We use input from internal and external resources to inform our approach and responses.
Supply Chain Due Diligence
NXP works collaboratively with suppliers to help them achieve and maintain our standards and expectations. Our preference is utilized.to work with suppliers to address potential deficiencies by helping them develop and implement a corrective action plan. In 2022, the 14 supplier audits we completed identified a total of 710 nonconformances. Of those nonconformances, 530 reached the 90-day maturity mark. We remain vigilantclosed 466 of those 530 nonconformances, yielding a closure rate of 88% for audits at or beyond the 90-day mark, and exceeding our goal of an 85% closure rate.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
Since 2013, when we began our Supplier-Audit Program, we have conducted 184 supplier audits. That includes labor-agent audits as well as verification audits, which began in 2014.
Two ratios – the number of nonconformances identified compared to the
risknumber of
forced labor, child laboraudits conducted, and
threatsthe number of priority violations identified compared to the
freedomnumber of
association withinaudits conducted – are higher in 2022 than in 2021. There are several reasons for this. To begin with, we conducted more audits in 2022, and this tends to increase the number of nonconformances we find. Also, our
supply chain.Protecting our environment and employees—We understand and acknowledge that climate change is contributed to by human activity, and will lead to2022 audits included a number of social, economichigh-priority suppliers that we knew were facing challenges due to the COVID-19 pandemic. We based our selection, in part, on our 2020 supplier pulse survey, which was conducted during what proved to be the most challenging phase of the COVID-19 pandemic.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
In 2018, we set a goal to close 80% of our supplier nonconformances within a 90-day timeframe. In 2021, we set a new goal at an 85% closure rate. We chose this 5% increase after reviewing improvements in closure-rate performance from audits performed in 2019 and environmental consequences if not properly dealt with.2020.
The closure rate for 2022 was 88%, compared to 89% in 2021. The lower closure rate is largely due to the fact that we conducted nearly twice as many audits in 2022. The lower rate can also be attributed to increased strain on the supply chain during the pandemic, and the production ramp-up to overcome the semiconductor shortage. These overlapping trends created ongoing challenges at our suppliers, in terms of working hours and labor supply, in 2022.
Health and Safety
NXP is committed to ensuring a safe and healthy workplace for our team members, partners, and visitors. We
continue to set sustainability goals, trackensure the health and safety of our
progress, and audit ourteam members by using advanced management systems
to reduce energy consumption, carbon emissions, waste and
water usage throughoutcertifications that enable adoption and consistent implementation on a global scale. All manufacturing sites, as well as our
global footprint. These efforts are both important to and are fully supported by senior management. We report our metrics based on the calendar year 2019.All of our manufacturing facilitiesheadquarters, are certified to the ISO 14001 Environmental Management System and45001 standard for Occupational Health and Safety, Assessment Series (“OHSAS”) 18001-certified. and are audited both externally and internally for third-party certification.
We
reducemaintained a low Total Case Incident Rate (TCIR) of 0.10 in 2022, and remain well below the
amount of carbon emissions, energysemiconductor-industry averages published by the Semiconductor Industry Association (SIA) and
water consumption by setting targets, identifying emission reduction, energy and water conservation opportunities, auditing management systems, creating awareness among employees and reportingthe European Semiconductor Industry Association (ESIA), which, based on
progress for our operations. Our sustainability policy details our commitmentthe latest data available, ranges from 0.38 to
environmental responsibility and a safe workplace.Emissions—Carbon emissions are measured using three scopes: Scope 1 emissions are all direct emissions; Scope 2 emissions are indirect emissions from electricity purchased and consumed by NXP, and Scope 3 are all other indirect emissions. In calendar year 2019, our carbon emissions under Greenhouse Gas Protocol for Scope 1, Scope 2 and Scope 3 totaled ~1,288,000 tons CO2, which1.03. NXP's low injury rate is a normalized 24% decrease since 2010.
Energy—To achieve our objective of reducing energy consumption, each manufacturing site is requiredattributed to achieve annual energy saving goals. In calendar year 2019, our total grid electricity consumption was~1,500-Gigawatt hour (“GWh”). Compared to calendar year 2010, the site-initiated energy conservation projects reduced the normalized energy consumption by 6.5%.
Water—Our progress in reducing water consumption has been driven by reducing water use through more efficient processes and recycling the water we use. In calendar year 2019, our water withdrawal was ~10,800,000 m3 and our percentage of water recycled was 39%. Compared to calendar year 2010, the site-initiated water conservation projects reduced the normalized water consumption by 13%.
robust Health and safety—All ofSafety programs we have in place at all our manufacturing sites have health and safety management systems certified to OHSAS 18001. We work hard to keep our employees safeEHS awareness initiatives at many of our office and healthy. Our injury rate in calendar year 2019 is 0.12, a rate that is well below the semiconductor industry average.
8
R&D sites.
ITEM 1: ADOPTION OF THE
20192022 STATUTORY
ANNUAL ACCOUNTS
The Company has prepared two sets of financial statements, one based on accounting principles generally accepted in the United States of America (“US GAAP”) and filed with the SEC in the
2022 Annual Report on Form
10-K, and one based on Dutch law and International Financial Reporting Standards as adopted by the European Union (the “Statutory Annual Accounts”).
For internal and external reporting purposes, the Company
followsprepares financial statements based on US GAAP. However, as a public limited liability company incorporated under the laws of the Netherlands, the Company is required by Dutch law to prepare the
20192022 Statutory Annual Accounts and submit them to the Annual General Meeting for adoption. The report of
KPMGErnst & Young Accountants
N.V.LLP (“
KPMG”E&Y”) for the fiscal year ended December 31,
2019,2022 and the
20192022 Statutory Annual Accounts
isare included in the
20192022 statutory annual report (the “Statutory Annual Report”),
andwhich is published on the Company’s website
(http:(http://investors.nxp.com)investors.nxp.com) and
is also available at the principal offices of the Company.
THE BOARD RECOMMENDS A VOTE “FOR” THE ADOPTION OF THE
20192022 STATUTORY ANNUAL ACCOUNTS.
ITEM 2: DISCHARGE OF THE
MEMBERS OF THE BOARD
OF DIRECTORS FOR THEIR RESPONSIBILITIES IN THE
20192022 FINANCIAL YEAR
It is proposed to discharge the members of the Board, in accordance with Dutch law, for the performance of their respective duties in the financial year
2019.2022. The proposed discharge only covers the matters that are disclosed in the Statutory Annual Report or otherwise publicly disclosed at the time the resolution to discharge is adopted.
THE BOARD RECOMMENDS A VOTE “FOR” THE PROPOSAL TO DISCHARGE THE
MEMBER OF THE BOARD FOR THEIR RESPONSIBILITIES IN THE
FISCALFINANCIAL YEAR ENDED DECEMBER 31,
2019.9
2022.
ITEM 3:
(RE-)APPOINTMENT OF DIRECTORS
AND APPOINTMENT OF ONE NEW DIRECTOR
The Company has aone-tier board structure, consisting of one or more executive directors and (independent)non-executive directors. The Board currently consists of ten directors, one executive director and ninenon-executive directors. The number of executive andnon-executive directors is determined by the Board.
Sir Peter Bonfield is retiring from our Board at the expiration of his term as of the end of the Annual General Meeting and is not standing for re-election. If each nominated director discussed below is appointed at the AGM, the Board will consist of ten directors.
As announced on March 5, 2020, the Board proposes the appointment of Kurt Sievers as the Company’s executive director and chief executive officer to succeed Richard Clemmer who has successfully led NXP since 2009. In connection with his nomination as executive director and president/chief executive officer, Mr. Sievers and the Company entered into a management agreement (the “Management Agreement”) and NXP Semiconductors Germany GmbH, a wholly owned indirect affiliate of the Company, and Mr. Sievers entered into an addendum to Mr. Sievers’ existing employment agreement (the “Secondment Addendum” and together with the Management Agreement, the “CEO Agreements”). A copy of the CEO Agreements can be found as Exhibits 10.1 and 10.2 on Form8-K filed by the Company on March 9, 2020.
The CEO Agreements provide that effective May 27, 2020, subject to the condition that the Company’s AGM appoints Mr. Sievers as Executive Director and President/CEO, Mr. Sievers will serve in these capacities until the date of the following annual general meeting, and will be extended if NXP‘s general meeting reappoints Mr. Sievers as Executive Director and President/CEO of NXP. Under the CEO Agreements, effective upon his appointment as president/chief executive officer on May 27, 2020, Mr. Sievers will receive a gross annual base salary of EUR 1 million and will be eligible for payment under the AIP, theon-target cash incentive percentage being 150% of the annual base salary for Mr. Sievers, with the maximum annual incentive opportunity equal to 200% of the at target incentive opportunity. The actual amount payable to Mr. Sievers as an annual incentive bonus will be dependent upon the achievement of performance targets which are set every year by the compensation committee of the Board and which are expected to be substantially the same as the targets established under the plan for other executives. Depending on performance, the actual amount payable as an annual cash bonus to Mr. Sievers may be less than, greater than or equal to the stated target bonus (and could be zero).
In connection with Mr. Sievers appointment as executive director and president/chief executive officer, Mr. Sievers will be awarded long term incentive equity awards with a total grant value of USD 3 million, 30% in the form of restricted share units and 70% in the form of performance restricted share units, subject to substantially the same terms and conditions (including vesting and performance conditions) as established for other executive officers of the Company. The CEO Agreements provide that in the event that Mr. Sievers employment is terminated at the initiative of the Company and other than for cause, Mr. Sievers will be entitled to a severance amount of two times the gross annual base salary and apro-rata payment of the annual cash bonus, depending on achievement of thepay-out conditions and the period in which Mr. Sievers has performed actual work for the Company.
Under our Articles of Association and Dutch corporate law, the directors are collectively responsible for the management, general and financial affairs and policy and strategy of our Company. Our executive director
(who serves as our President and Chief Executive Officer) is responsible for the
day-to-day management of the Company and for the preparation and execution of Board resolutions, to the extent these tasks are not delegated to a committee of the Board. Our Chief Executive Officer or all directors acting jointly may represent the Company with third parties.
Consistent with
established Dutch law and our Articles of Association
and Dutch law, the executive director
and non-executive directors are appointed by the
shareholders at a general meeting of shareholders
fromupon a binding nomination
proposed by the Board. The Board has nominated
all current ninenon-executivethe ten directors listed below for
reappointment, as well as Kurt Sievers as executive director and president/chief executive officer for appointment
to be elected to serve until their term expires at the end of the
20212024 Annual General Meeting,
of the Shareholders, or until their appointment is terminated in accordance with the Articles of Association. The binding nominations by the Board are made in accordance with Section 14.4 of the Articles of Association. The shareholders at an annual general meeting may at all times overrule the binding nature of such a nomination by a resolution adopted by at least a two thirds majority of the votes cast, provided such majority represents more than half of our issued
and outstanding share capital. If the nomination is not overruled, the nominated member of the Board shall be appointed.
In caseIf the nomination is overruled, the Board may then make a new nomination. If a nomination has not been made or has not been made in due time, this shall be stated in the notice and the general meeting of shareholders shall be free to appoint a member of the Board at its discretion. The latter resolution of the general meeting of shareholders must also be adopted by at least two thirds majority of the votes cast, provided such majority represents more than half of our issued share capital.
Our directors are appointed for one year and will be, if nominated by the Board,re-electable each year at a general meeting of shareholders. Our directors may be suspended or dismissed at any time by the shareholders at an annual general meeting of shareholders. A resolution to
ITEM 3: (RE-)APPOINTMENT OF DIRECTORS
suspend or dismiss a director
will have tomust be adopted by at least a two thirds majority of the votes cast, provided such majority represents more than half of our issued share capital unless the proposal to suspend or dismiss a director is made
10
ITEM 3:(RE-)APPOINTMENT OF DIRECTORS (continued)
by the Board, in which case resolutions shall be adopted by a simple majority of votes cast. An executive director can also be suspended by the Board.
If appointed, each director’s term begins at the annual general meeting at which he or she is appointed and, unless such director resigns or is
suspended or dismissed at an earlier date, his or her term of office
lapsesends immediately after the next annual general meeting held after his or her appointment.
The Board and the Nominating,
Governance and
GovernanceSustainability Committee have carefully considered the experience, structure, culture, diversity, operation, interactions, collaboration and performance of the current Board; the talents, expertise and contributions of individual directors; the growth and creation of shareholder and other stakeholder value under the Board’s leadership; the continued evolution of the Company; the Board’s critical role in continuing to develop and lead the strategic direction of the Company; the continued change and consolidation in the semiconductor industry; anticipated future challenges and opportunities facing the Company; and the Board’s ongoing commitment to ensuring the long-term sustainability of the Company to the benefit of shareholders and other stakeholders.
As announced on March 5, 2020, the Board considers Mr. Kurt Sievers to be the ideal candidate to become NXP’s next executive director and chief executive officer, succeeding Mr. Rick Clemmer. After a distinguished career establishing NXP as the world leader in Automotive semiconductor solutions, the Board believes Mr. Sievers has all of the requisite skills to lead NXP, and to drive the strategy that Rick Clemmer and the management team have developed over the past years. Mr. Sievers is unique in his ability to translate vision and strategy into world-class execution, bringing together teams to drive results. He has the demonstrated ability to focus, motivate and lead a globally diverse organization, and embodies NXP’s ethos of a “Customer Focused Passion to Win”.
The Board and the Nominating,
Governance and
GovernanceSustainability Committee also believe that, at the current time, fostering continuity on the Board by nominating
all of ournine current
ninenon-executivedirectors
for re-appointment and one new director is instrumental to the ongoing execution of our mission and strategy as well as the delivery of sustainable long-term value to shareholders while also serving the interests of our other stakeholders. Based on these considerations, among others, NXP’s Board recommends a vote “FOR” the appointment of each director. The persons named as proxies intend to vote the proxies for the election of these nominees to the Board.
Each of the proposed appointments is considered a separate voting item under Dutch law. Information concerning each of the ten nominated directors is set forth below.
Each nominee is currently on NXP’s Board, other than Kurt Sievers who is being nominated for the first time this year, and allAll nominees consented to act as directors if appointed at the AGM. This Item 3 comprises the “explanatory notes” to the agenda of the Annual General Meeting as referred to in Section 25.5 of the Articles of Association.
In accordance with the recommendation of the Nominating,
Governance and
GovernanceSustainability Committee, the Board has unanimously adopted resolutions to nominate
the persons set forth below
persons for director. Our nominees for director, their ages, principal occupations or positions, experience and the year first elected as a director, are described below.
As part of our board refreshment process, a third party search firm provided a pool of candidates to the Nominating, Governance and Sustainability Committee for consideration. From this pool of candidates the Nominating, Governance and Sustainability Committee determined, according to the process described below, that the new nominee for director had the appropriate qualifications and experience and would positively contribute to the mix of talent, experience and perspective on the Board. None of the nominees are related by blood, marriage or adoption to each other or to any other director or to any executive officer of NXP or its subsidiaries. Except for Mr. Kurt Sievers, who is currently
President and will began serving as executive director,
president and
President and Chief Executive Officer immediately after the AGM,chief executive officer, no nominee for director has been an employee of the Company within the past five years.
11
Board Diversity Matrix
(As of April 10, 2023)
| | | | | | | | | | | | | | |
| Country of Principal Executive Offices: | The Netherlands |
| Foreign Private Issuer | No |
| Disclosure Prohibited under Home Country law | No |
| Total Number of Directors | 10 |
| Female | Male | Non-Binary | Did Not Disclose Gender |
| Part I: Gender Identity | |
| Directors | 4 | 6 | 0 | 0 |
| Part II: Demographic Background |
| African American or Black | 0 | 1 | 0 | 0 |
| Asian | 0 | 1 | 0 | 0 |
| White | 4 | 4 | 0 | 0 |
Note that the table above, in accordance with NASDAQ disclosure requirements, describes the board diversity characteristics of the members of the Board as of the date of this proxy statement, including the current members of the Board who will depart the Board at this year’s Annual General Meeting and excluding the new director nominee.
ITEM 3:
(RE-)APPOINTMENT OF DIRECTORS
(continued)
THE BOARD RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF EACH NOMINEE FOR DIRECTOR LISTED BELOW.
Kurt Sievers
CurrentCEO-elect and President; Future
Executive Director, President & CEO of NXP
| | | | | |
| |
Kurt Sievers (1969, German) is currentlyexecutive director, president and memberchief executive officer since May 2020, after a successful track record as the president of the management team,NXP, overseeing all of the company’s business lines. As discussed above, Mr. Sievers was nominated by the Board for appointment as executive director in connection with his appointment as Chief Executive Officer. In addition, he is Managing Director at NXP Semiconductors Germany GmbH.lines, since 2018. Mr. Sievers joined NXP in 1995, and rapidly moved through a series of Marketing & Sales, Product Definition & Development, Strategy and General Management leadership positions across a broad number of market segments. He has been a member of the executive management team since 2009, where he has been instrumental in the definition and implementation of the NXP High-Performance Mixed Signal strategy. In 2015, Mr. Sievers was influential in the merger of NXP and Freescale Semiconductor.
Mr. Sievers serves on the Boardboard of the German National Electrical and Electronics Industry Association (ZVEI), the Global Semiconductor Alliance (GSA) and chairsCapgemini S.E. Mr. Sievers is president of ESIA (European Semiconductor Industry Association). He chaired the Advisory Boardadvisory board of the international trade-fair Electronica.Electronica until June 2021. He is also serves as a board memberpresident of PENTA and AENEAS, the clustersan industrial association for application and technology research in Europe on nano-electronics. In his role as managing director for NXP Germany,Mr. Sievers serves as a member of the Asia-Pacific-Committee of German Business (APA) and as a member of the Boardboard at the German Asia-Pacific Business Association (OAV), acting as the spokesperson for the Republic of Korea.
Mr. Sievers earned a master’s degree in physics and information technology from Augsburg University, Germany.
|
| Executive Director Nominee
Director since 2020
Other Current Public Boards:
Key Qualifications and Expertise: •International Experience •Industry and Technology Experience •Strategic Planning, Growth, Mergers & Acquisition •Manufacturing and Operations •Human Capital/Talent Development •IT and Cybersecurity |
| |
Sir Peter Bonfield CBE FREng
Annette Clayton
Chief Executive Officer and President, Schneider Electric North America
| | | | | |
| |
Sir Peter Bonfield (1944, British) was appointed anon-executive director and the chairman of our board of directors in August 2010. Prior to that, Sir Peter was the chairman of the supervisory board of NXP B.V. from September 29, 2006. Sir Peter served as chief executive officer and chairman of the executive committee for British Telecom plc from 1996 to 2002 and prior to that was chairman and chief executive officer of ICL plc (now Fujitsu Services Holdings Ltd.). Sir Peter also worked in the semiconductor industry during his tenure as a divisional director at Texas Instruments Incorporated, for whom he held a variety of senior management positions around the world. In addition, Sir Peter has served as a director of twelve large technology companies. Sir Peter currently holds anon-executive directorship at Taiwan Semiconductor Manufacturing Company Limited, is Chair of Council and SeniorPro-Chancellor at Loughborough University, Board Director at East West Institute USA and Board Mentor at CMi in London. He is Advisor to Longreach LLP in Hong Kong, Alix Partners UK LLP in London and is a Fellow of The Royal Academy of Engineering. Sir Peter is named Outstanding Director for 2019 by the Financial Times. | | Chairman of the Board
Independent Director
Director since 2010;Director of an NXP affiliated entity since September 2006*
Age 75
Board Committees:
• Compensation Committee
• Nominating & Governance Committee
Other Current Public Boards:
• Taiwan Semiconductor Manufacturing Company Limited
Key Qualifications and Expertise:
• International Experience
• Executive Leadership
• Industry and Technology Experience
• Strategic Planning, Growth, Mergers & Acquisition
• Corporate Governance, Legal, Global Compliance Experience
• Human Capital/Talent Development
|
* | Until August 2010, when NXP Semiconductors N.V. became a public listed NASDAQ, company, Sir Peter Bonfield (since September 2006) was a director of certain NXP subsidiaries. According to the Dutch corporate governance code and EC Recommendation 2005/162/EC, the tenure of Sir Peter Bonfield, calculated as from August 2010 when the current NXP Semiconductors N.V. became listed at NASDAQ, would be 9.8 years.
|
12
ITEM 3:(RE-)APPOINTMENT OF DIRECTORS (continued)
Kenneth A. Goldman
Chief Financial Officer of Yahoo!, Inc. (retired)
| | |
| |
Kenneth A. Goldman (1949,Annette Clayton (1964, American) was appointed anon-executive director of our board of directors effective August 6, 2010. Mr. GoldmanMay 2021. Ms. Clayton is formerthe chief financialexecutive officer of Yahoo!Schneider Electric North America, a region of Schneider Electric, a multinational firm specializing in energy management and automation solutions.
Through December 2018, Ms. Clayton also held the title of chief supply chain officer for Schneider Electric and led the transformation of its $13 billion global supply chain operation for seven years and from 2011 to 2016 led the environmental and social governance function. She is also a member of the Schneider Electric’s executive committee. From 2006 to 2011, Ms. Clayton led Dell Inc.’s supply chain transformation and oversaw the global manufacturing and fulfillment operation. She was also responsible for the Americas’ commercial order management and customer care operations. From 1983 to 2006 Ms. Clayton worked at General Motors Corporation in senior management roles in engineering and production, including president, Saturn Corporation. Ms. Clayton is a member of the board of directors of the National Electrical Manufacturers Association and the National Association of Manufacturers.
She serves on the board of Duke Energy Corporation and the Schneider Ventures boards of AlphaStruxure, GreenStruxure, Uplight Inc., Inc. PriorQMerit, EnergySage, Autogrid and previously served on the board of Polaris Inc until April 2021.
|
Independent Director
Director since 2021
Age 59
Board Committees: •Human Resources and Compensation Committee
Other Current Public Boards: •Duke Energy Corporation
Key Qualifications and Expertise: •International Experience •Executive Leadership •Industry and Technology Experience •Strategic Planning, Growth, Mergers & Acquisition •Corporate Governance, Legal, Global Compliance Experience •Manufacturing and Operations •Risk Management •Human Capital/Talent Development •IT and Cybersecurity •ESG Expertise |
| |
ITEM 3: (RE-)APPOINTMENT OF DIRECTORS
Anthony Foxx
| | | | | |
| Anthony Foxx (1971, American) was appointed a non-executive director of our board of directors effective May 2021. From October 2018 to October 2012,January 2022, Mr. GoldmanFoxx served as the chief policy officer and senior vice president, finance and administration, and chief financial officer of Fortinet, Inc, a provider of unified threat management solutions, from September 2007advisor to September 2012. From November 2006 to August 2007, Mr. Goldman served as executive vicethe president and chief financialexecutive officer of Dexterra,Lyft. Prior to joining Lyft, Inc. From August 2000 until March 2006,, Mr. GoldmanFoxx served as senior vice president, finance and administration, and chief financial officera managing partner of Siebel Systems, Inc., andrelated infrastructure, the infrastructure development group of Related Companies, a real estate firm, from December 19992017 to December 2003,October 2018. From July 2013 to January 2017, Mr. GoldmanFoxx served onas the Financial Accounting Standards Board’s primary advisory group.seventeenth United States Secretary of Transportation. Mr. Goldman currentlyFoxx served as the mayor of Charlotte, North Carolina from 2009 to 2013 and as a Charlotte City council member at-large representative from 2005 to 2009. Mr. Foxx also has held a variety of legal positions in the public and private sectors. Mr. Foxx serves on the board of directors of TriNet Group,Martin Marietta Materials, Inc., GoPro, Inc., RingCentral, Inc., Zuora, Inc., and several private companies, including serving as President of Hillspire, LLC. Mr. Goldman also is a member of the Sustainability Accounting Standards Board (SASB) Foundation, and in 2015 was appointed to a three-year term on the Standards Advisory Group which advises the PCAOB. Mr. Goldman was a member of board of trustees of Cornell University from 2005 to 2013 and was designated as Emeritus Trustee.CDW Corporation. He was formerly a member of the Treasury Advisory Committee on the Auditing Profession, a public committee that made recommendations in September 2008 to encourage a more sustainable auditing profession. Mr. Goldman holds a B.S. in Electrical EngineeringDoctor of Law (J.D.) from CornellNew York University School of Law, and an M.B.A.a Bachelor of Arts (B.A.), History, from the Harvard Business School.Davidson College. |
|
•Nominating, & Governance and Sustainability Committee
Other Current Public Boards: • TriNet Group,CDW Corporation •Martin Marietta Materials Inc.• GoPro, Inc.
• RingCentral, Inc.
• Zuora, Inc.
Key Qualifications and Expertise: •Industry and Technology Experience •Strategic Planning, Growth, Mergers & Acquisition • Corporate Governance, Legal, Global Compliance Experience•
Financial, Audit & Accounting Expertise • Manufacturing and OperationsRisk Management •ESG Expertise |
| |
Josef Kaeser
Chunyuan Gu
President
of Asia, the Middle East and
Chief Executive OfficerAfrica regions of
Siemens AGABB Ltd (retired) | | | | | |
| |
Josef Kaeser (1957, German)Chunyuan Gu (1958, Swedish) was appointed anon-executive director of our board of directors effective September 1, 2010.June 2022. Mr. Kaeser isGu has over 30 years of experience working at ABB Ltd, a global pioneering technology leader in electrification and automation serving customers in utility, industry, transportation and infrastructure. Mr. Gu began his career at ABB Corporate Research in Sweden in 1989, and has held various roles and functions in R&D, manufacturing operations and general management. Since 2020, Mr. Gu serves in an advisory capacity as chair of the president and chief executive officerboard of Siemens AG since August 2013. Prior to this, from May 2006 to August 2013, heABB (China) Ltd. From 2017-2019, Mr. Gu was a member of the managing boardABB group executive committee and chief financial officerpresident of Siemens AG.the Asia, the Middle East and Africa region. From 2004 to 2006,2014-2017, Mr. KaeserGu served as chief strategy officer for Siemens AGpresident and CEO of ABB China. Since 2020, Mr. Gu has served as a non-executive director of CLP Holdings Limited. Since 2021, Mr. Gu has served as senior advisor at Blackstone Ltd. Mr. Gu holds a bachelor of engineering from Shanghai Jiao Tong University and a PhD, school of aeronautics from the chief financial officer forRoyal Institute of Technology, Stockholm. He is a fellow of IVA, the mobile communications group from 2001 to 2004. Mr. Kaeser has additionally held various other positions within the Siemens group since he joined Siemens in 1980. Mr. Kaeser also serves on the managing boardRoyal Swedish Academy of Siemens AG and the board of directors of Siemens Ltd., India, Daimler AG, Allianz Deutschland AG andMercedes-Benz AG.Engineering Sciences. |
|
• Nominating & GovernanceAudit Committee
Other Current Public Boards: • Siemens AG• Daimler AG
CLP Holdings Limited
Key Qualifications and Expertise: •International Experience •Industry and Technology Experience • Strategic Planning, Growth, Mergers & Acquisition• Corporate Governance, Legal, Global Compliance Experience
• Financial, Audit & Accounting Expertise
•
Manufacturing and Operations •Human Capital/Capital Talent Development •IT and Cybersecurity •ESG Experience |
| |
13
ITEM 3:
(RE-)APPOINTMENT OF DIRECTORS
(continued)
President and CEO of Mycronic AB (retired)
| | | | | |
| |
Lena Olving (1956, Swedish) was appointed a non-executive director of our board of directors in June 2019. SheservedShe served as Presidentpresident and CEO of Mycronic AB (listed on NASDAQNasdaq OMX Stockholm) , between from 2013 and 2019, a Swedish high-tech equipment company serving the electronics industry. Before that Ms. Olving worked at Saab AB, a listed Defence and Security company, as Deputydeputy CEO and Chief Operating Officer .chief operating officer. Her earlier career also includes various managerial positions within Volvo Car Corporation, in total 25 years, of which 5 years in Asia Pacific and 7 years in the Executive Management Team.executive management team.
Ms. Olving is a board member of Assa Abloy AB, Vestas Wind Systems A/S Investment AB Latour, Munters Groupchair of Akind Universe AB, (all public listed), Chairman of Academic Work Holding AB, Chairmanchair of the Boardboard at the Royal Swedish Opera and board member of ScandiNova Systems AB and board member of Stena Metall AB. Ms. Olving has declined re-election as chair of Akind Universe AB, and her current board service will end in April 2023. She is elected as a fellow of IVA, the Royal Swedish Academy of Engineering Sciences. She holds a Master of Science in Mechanical Engineering from Chalmers in Gothenburg, Sweden.
In January 2018, Ms. Olving was presented H.M., The King’s Medal of the 12th size with blue ribbon for outstanding efforts within Swedish business sector. In October 2019, she was awarded IVA’s Gold Medal for pioneering and outstanding leadership within the tech sector.
|
|
•Human Resources and Compensation Committee
Other Current Public Boards: • Munters Group ABVestas Wind Systems A/S Key Qualifications and Expertise: •International Experience •Industry and Technology Experience •Strategic Planning, Growth, Mergers & Acquisition •Financial, Audit & Accounting Expertise •Manufacturing and Operations •Human Capital/Talent Development •IT and Cybersecurity |
| |
Peter Smitham
Member of Permira Advisors LLP
Julie Southern
Chief Commercial Officer, Virgin Atlantic Airways Ltd. (retired)
| | | | | |
| |
Peter Smitham (1942, British) was appointed anon-executive director of our board of directors effective December 7, 2015. Mr. Smitham retired from his position as a partner of the private equity firm Permira on December 31, 2009, but until August 1, 2015, he was a member of Permira Advisers LLP, which he joined in 1985, the year the London office was founded. Mr. Smitham was the managing partner of the London office from 1994 until 1998 and led Permira’s European business from 1996 until 2000. He has worked on numerous transactions focusing on technology, including Memec Group Holdings Limited, The Roxboro Group, Solartron Group and Technology plc. Until its merger with NXP, Mr. Smitham was a director of Freescale. He joined the Freescale board in June 2007 and was a member of the Compensation and Leadership Committee and the Nominating and Corporate Governance Committee of the Freescale board. He has a degree in Geography from Swansea University, Wales, and attended the Senior Executive Program at Stanford Business School. | | Independent Director
Director since 2015
Age 77
Board Committees:
• Compensation Committee (Chair)
Other Current Public Boards:
• None
Key Qualifications and Expertise:
• International Experience
• Executive Leadership
• Industry and Technology Experience
• Strategic Planning, Growth, Mergers & Acquisition
• Corporate Governance, Legal, Global Compliance Experience
• Financial, Audit & Accounting Expertise
• Human Capital/Talent Development
|
14
ITEM 3:(RE-)APPOINTMENT OF DIRECTORS (continued)
Julie Southern
| | |
| |
Ms. Julie Southern (1959, British) was appointed anon-executive director of our board of directors in October 2013. She was with Virgin Atlantic Limited (UK) from 2000 to May 2013. From 2010 to 2013 Ms. Southern was chief commercial officer and from 2000 to 2010 she was chief financial officer of Virgin Atlantic. Prior to joining Virgin Atlantic, she was group finance director at Porsche Cars Great Britain and finance and operations director at W H Smith—Smith - H J Chapman & Co Ltd. Prior to that, she was a chartered accountant at Price Waterhouse Coopers. Ms. Southern currently holdsnon-executive directorships at Rentokil-Initial plc, Ocado Group plc, and easyJetRWS Holdings plc. and serves as chair of the audit committee at Rentokil-Initial plc and is Chair of the respective Audit Committees.Ocado Group plc. Ms. Southern is alsonot standing for re-election as a board member at Rentokil-Initial plc, and her current board service will end in May 2023. Ms. Southern serves as chair designate and member of the audit committee at RWS Holdings plc. In addition, Ms. Southern is a member of the Remuneration Committeesremuneration committees at OcadoRentokil-Initial, and easyJet.Ocado. Previously, Ms. Southern held directorships at Stagecoach Group plc (2016-2018), DFS Furniture plc (2015-2019), Cineworld Group plc (2015-2019) and easyJet plc (2018-Feb 2023).
|
|
Other Current Public Boards: • Rentokil-Initial Plc• easyJet plc
•
Ocado Group plc •RWS Holdings plc •Rentokil-Initial plc (ending May 2023)
Key Qualifications and Expertise: •Strategic Planning, Growth, Mergers & Acquisition •Financial, Audit & Accounting Expertise •Human Capital/Talent Development |
| |
ITEM 3: (RE-)APPOINTMENT OF DIRECTORS
Chief Executive Officer of Alpiq (retired)
| | | | | |
| |
Jasmin Staiblin (1970, German)German and Swiss) was appointed anon-executive director of our board of directors in June 2019. She served between 2013 and 2018 as Chief Executive Officerchief executive officer of Alpiq, a leading Swiss energy services provider and power producer in Europe. She successfully led the company through a major transformation in a fundamentally changing energy market. She began her career in 1997 at the ABB Group, the Swedish-Swiss global technology company, starting in ABB’s group research center. From 1999 to 2005 she served in various global functions and as a member of the management team for ABB’s power technologies division. She held the position of chief executive officer of ABB Switzerland from 2006 to 2012.
Ms. Staiblin is a board member of Georg Fischer AG, Schaffhausen Rolls-Royce plc, London and Zurich Insurance Group Ltd.Ltd and chair of the supervisory boards of Rolls-Royce Power Systems AG and Rolls-Royce Solutions GmbH. She formerly served on the board of Rolls-Royce plc. Ms. Staiblin studied Physics and Electrical Engineering at the Karlsruhe Institute of Technology, Germany and the Royal Institute of Technology in Stockholm, Sweden. She completed her studies with a Degree in Physics and has a Master of Science in electrical engineering.
|
|
Other Current Public Boards: • Rolls-Royce plc•
Zurich Insurance Group Ltd.
Key Qualifications and Expertise: •International Experience •Industry and Technology Experience •Strategic Planning, Growth, Mergers & Acquisition •Corporate Governance, Legal, Global Compliance Experience •Financial, Audit & Accounting Expertise •Manufacturing and Operations •Human Capital/Talent Development •IT and Cybersecurity |
| |
15
ITEM 3:(RE-)APPOINTMENT OF DIRECTORS (continued)
Managing Partner of Glen Capital Partners
| | | | | |
| |
Gregory L. Summe (1956, American) was appointed anon-executive director of our board of directors effective December 7, 2015. Mr. Summe is the Managing Partnermanaging partner of Glen Capital Partners, a Boston based hedge fund, whichan investment fund. Recently, he founded in 2014.was the co-chair and co-founder of NextGen Acquisition Corp. I & II. Previously, Mr. Summe was the managing director and vice chairmanchair of Global Buyout at The Carlyle Group, a leading global private equity firm, from 2009 to 2014. Prior to joining Carlyle, he was the chairmanchair and chief executive officer of PerkinElmer, Inc., a global leader in Health Sciences, a company he led from 1998 to May 2009. He also served as a senior advisor to Goldman Sachs Capital Partners, from 2008 to 2009. He was a director of Freescale Semiconductor from 2010 until its merger with NXP in 2015 and served as Chairmanchair of the Freescale board from 2014-2015. Prior to PerkinElmer, Mr. Summe was with AlliedSignal, now Honeywell International, serving as the president of General Aviation Avionics, president of the Aerospace Engines Group and president of the Automotive Products Group. Before joining AlliedSignal, he was the general manager of Commercial Motors at General Electric and was a partner with the consulting firm of McKinsey & Company, Inc. Mr. Summe holds B.S. and M.S. degrees in electrical engineering from the University of Kentucky and the University of Cincinnati, and an M.B.A. with distinction from the Wharton School at the University of Pennsylvania. He is in the EngineeringUniversity of Kentucky’s Hall of Distinction at the University of Kentucky.Distinction. Mr. Summe also serves on the board of directors of the State Street Corporation, Avantor Corporation and two private companies, Ohana Biosciences,Virgin Orbit Holdings. and Pella Corporation.formerly served on the boards of directors of NextGen Acquisition Corp. I and NextGen Acquisition Corp II.
|
|
•Nominating, & Governance and Sustainability Committee (Chair)
Other Current Public Boards: •State Street Corporation •Virgin Orbit Holdings, Inc. •Avantor Corporation
Key Qualifications and Expertise: •International Experience •Industry and Technology Experience •Strategic Planning, Growth, Mergers & Acquisition •Corporate Governance, Legal, Global Compliance Experience •Financial, Audit & Accounting Expertise •Manufacturing and Operations •Human Capital/Talent Development |
| |
ITEM 3: (RE-)APPOINTMENT OF DIRECTORS
CEO of Stora Enso (retired)
| | | | | |
| |
Karl-Henrik Sundström (1960, Swedish) was appointed anon-executive director of our board of directors in June 2019. He served as CEO of Stora Enso from 2014 until his retirement in 2019. He joined Stora Enso in August 2012 as CFO and member of the Group Leadership Team.group leadership team. In June 2013 he took on the role as Executive Vice Presidentexecutive vice president for division Paper and Wood Products. Prior to joining Stora Enso, Mr. Sundström held the role asof CFO of NXP Semiconductors N.V. (2008–2012). Before that, he held several managerial positions in Ericsson, including CFO. He is the chair of Boliden AB and Mölnlycke AB, member of the board of Mölnlycke and chairmanVestas AS, chair of the tax delegation for Swedish Business and CommerceClimate Leadership Coalition and member of the board of the Marcus Wallenberg Foundation and Tracklib Holdings AB.Foundation. Mr. Sundström participated in an Advanced Management Program at Harvard Business School in 1997 and holds a degree in Business Administration, Finance and Accounting from the Uppsala University, Sweden. |
|
•Human Resources and Compensation Committee (Chair)
Other Current Public Boards: • Mölnlycke Health CareBoliden AB •Vestas Wind Systems A/S
Key Qualifications and Expertise: •International Experience •Industry and Technology Experience •Strategic Planning, Growth, Mergers & Acquisition •Corporate Governance, Legal, Global Compliance Experience •Manufacturing and Operations •Financial, Audit & Accounting Expertise •IT and Cybersecurity •ESG Expertise |
| |
16
Moshe Gavrielov
| | | | | |
| Moshe Gavrielov (1954, United States and Israel) is nominated as a non-executive director of our board of directors. Mr. Gavrielov served as president and CEO of Xilinx, Inc. from January 2008 to January 2018 and as director of Xilinx, Inc. from February 2008 to January 2018. Prior to that, he served at Cadence Design Systems, Inc. as executive vice president and general manager of the verification division from April 2005 to November 2007, and CEO of Versity, Ltd. from March 1998 to April 2005. He also served at a variety of executive management positions in LSI Logic Corp. for nearly 10 years, and engineering and engineering management positions in National Semiconductor Corporation and Digital Equipment Corporation. Since 2019, Mr. Gavrielov has served on the board of Taiwan Semiconductor Manufacturing Company Limited. In addition, Mr. Gavrielov is the chair of SiMa Technologies, Inc. and Foretellix, Ltd.
Mr. Gavrielov holds a bachelor's degree in electrical engineering and a master's degree in computer science from Technion-Israel Institute of Technology. |
Independent Director Nominee
Age 68
Other Current Public Boards: •Taiwan Semiconductor Manufacturing Company Limited
Key Qualifications and Expertise: •International Experience •Executive Leadership •Industry and Technology Experience •Strategic Planning, Growth, Mergers & Acquisitions •Corporate Governance, Legal, Global Compliance Experience •Financial, Audit & Accounting •Manufacturing and Operations •Risk Management •Human Capital/Talent Development •ESG Expertise |
| |
ITEM 3:
(RE-)APPOINTMENT OF DIRECTORS
(continued)
Nominee Skills and Experience
Our director nominees have a wide variety of relevant skills, professional experience and backgrounds, and collectively bring to our Board diverse viewpoints and perspectives that strengthen its ability to represent the interests of all corporate stakeholders, such as shareholders, creditors, employees, customers and suppliers. The chart below illustrates broad categories of skills and expertise that our
non-executive director nominees offer that we believe contribute to the effective leadership and exercise of oversight responsibilities by the Board.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| Name | Kurt
Sievers | Annette
Clayton | Anthony
Foxx | Chunyuan Gu | Lena
Olving | Julie
Southern | Jasmin
Staiblin | Gregory
Summe | Karl-Henrik
Sundström | Moshe Gavrielov |
| President and Chief Executive Officer, NXP Semiconductors N.V. | Chief Executive Officer Schneider Electric North America | Former Chief Policy Officer, Lyft Inc. | Former President of Asia/ME/Africa, ABB Ltd | Former President and Chief Executive Officer, Mycronic AB | Former Chief Commercial Officer, Virgin Atlantic Airways
Ltd
| Former Chief Executive Officer, Alpiq | Managing Partner, Glen Capital Partners | Former Chief Executive Officer, Stora Enso |
Former President and CEO of Xilinx, Inc.
|
| Diversity | | | | | | | | | | |
| Ethnic Diversity | | | X | X | | | | | | |
| Gender Diversity | | X | | | X | X | X | | | |
| Age | 54 | 59 | 52 | 64 | 66 | 63 | 53 | 66 | 63 | 68 |
| Director Since | 2020 | 2021 | 2021 | 2022 | 2019 | 2013 | 2019 | 2015 | 2019 | 2023 |
| Skills | | | | | | | | | | |
| Executive Leadership | X | X | X | X | X | X | X | X | X | X |
| Industry & Technology Experience | X | X | X | X | X | | X | X | X | X |
| Strategic Planning | X | X | X | | X | X | X | X | X | X |
| Financial Expertise | | | X | | X | X | X | X | X | X |
| Manufacturing & Operations | X | X | | X | X | | X | X | X | X |
| International Experience | X | X | | X | X | | X | X | X | X |
| Human Capital | X | X | | X | X | X | X | X | | X |
| Risk Management | | X | X | X | X | | X | X | X | X |
| IT and Cybersecurity | X | X | | | X | | X | | X | |
| Corporate Governance | | X | | | | | X | X | X | X |
| ESG Expertise | | X | X | X | | | | | X | X |
| Board Committees | | | | | | | | | | |
| Audit | | | | X | | Chair | X | | X | |
| Human Resources and Compensation | | X | | | X | | | | Chair | |
| Nominating, Governance and Sustainability | | | X | | | | | Chair | | |
International Experience:Experience: living and working in various regions, in the USA, Europe and/or Asia, and/or experience within businesses with substantial international operations.operations
Executive Leadership:Leadership: executive management experience with large or international organizations
ITEM 3: (RE-)APPOINTMENT OF DIRECTORS
Industry and Technology Experience:Experience: experience with and understanding of the technology industry, including the semiconductor and automotive industries Strategic Planning, Growth, Mergers & Acquisition:Acquisition: planning knowledge of corporate strategy and strategic planning, and experience with mergers, acquisitions, and other strategic transactions Corporate Governance, Legal, Global Compliance Experience:Experience: knowledge of corporate governance issues applicable to SEC registered companies listed on the NASDAQ,Nasdaq, and having experience within international regulatory affairs or legal sectors Financial, Audit & Accounting Expertise:Expertise: financial, audit & accounting expertise and experience with corporate finance, including financial experts as named in the company filings and experience as a CFO, Auditors,Auditor, and Corporate TreasurersTreasurer and public company CEO Manufacturing and Operations:Operations: experience with sophisticated large-scale international manufacturing operations Risk Management:Management: experience in assessing and managing enterprise risks Human Capital/Talent Development:Development: experience with human resources management and culture development in large international organizations, in particular in overseeing succession planning, talent development and executive compensation programs IT and Cybersecurity:Cybersecurity: experience in understanding and managing information technology and cybersecurity threats17
ITEM 3:(RE-)APPOINTMENT OF DIRECTORS (continued)
ESG Expertise: experience in understanding and addressing strategic environmental, social and governance issues
NXP’s Board has determined that all
non-executive directors director nominees are independent
directors under the applicable Nasdaq listing standards, the Rules of Procedure (as defined below), as well as practice 2.1.8 of the DCGC. The current executive director, Mr.
Clemmer,Sievers, as our
Chief Executive Officer,president and chief executive officer, is not an independent director under the above standards.
The executive director nominee, Mr. Sievers, would not be an independent director under the above standards if elected. If each nominated director is appointed at the AGM, the full Board (including both
non-executive directors and our executive director) will consist of 90% independent directors.
Our
As of April 10, 2023, our non-executive director nominees
excluding the executive director nominee,who are nominated for re-appointment have an average tenure of
5.34.2 years,
which is lower than the average tenure of independent directors on boards of S&P 500 companies, and
threeseven of our independent nominees, have been members of the Board for four years or less.
The lower than average tenure of ournon-executive directors must be seen in connection with the pendency of the Qualcomm transaction period between October 2016 and July 2018, during which a number of board members stepped down from the board, and no new board members were appointed.
(1) | Until August 2010, when NXP Semiconductors N.V. became a public listed NASDAQ company, Sir Peter Bonfield (since September 2006) was a director of certain NXP subsidiaries. According to the Dutch corporate governance code and EC Recommendation 2005/162/EC, the tenure of Sir Peter Bonfield, is calculated here from August 2010 when the current NXP Semiconductors N.V. became listed at NASDAQ.
|
18
HOW OUR BOARD GOVERNS AND IS GOVERNED
Rules
governingGoverning the Board
The Board has adopted written Rules Governing the Board (the “Rules of Procedure”) governing its performance, its decision making, its composition, the tasks and working procedures of the committees and other matters relating to the Board, the
Chief Executive Officer,chief executive officer, the
non-executive directors and the committees established by the Board. In accordance with our Rules of Procedure, resolutions of our Board will be adopted by a simple majority of votes cast in a meeting at which at least the majority of its members is present or represented. Each director has the right to cast one vote. In a tie vote, the proposal will be rejected.
In addition to the Rules of Procedure, the Board has adopted charters of its committees, to which the plenary Board, while retaining overall responsibility, has assigned certain tasks: the Audit Committee, the Nominating,
Governance and
GovernanceSustainability Committee, and the
Human Resources and Compensation Committee.
Each committee reports to the plenary Board. The
Articles of Association, Rules of Procedure and the committee charters
were amended during 2019, and are posted on our Investor Relations website at
http://investors.nxp.com under the “Corporate Governance” section. Copies of our corporate governance materials are also available to shareholders who request them. Requests must be in writing and sent to: NXP Semiconductors N.V., High Tech Campus 60, 5656 AG, Eindhoven, The Netherlands, Attention: Secretary.
The Board is assisted by the Secretary. The Secretary sees to it that correct procedures are followed and that the Board acts in accordance with its statutory obligations and its obligations under the Articles of Association. Furthermore, the Secretary assists the
ChairmanChair of the Board (the
“Chairman”“Chair”) in the functioning of Board business (information, agenda, evaluation, introductory program). The Secretary, in this capacity, is appointed and dismissed by the
Board.ShareholdersBoard. Shareholders or other interested parties who wish to communicate with the Board, including the
ChairmanChair and the
non-executive directors individually or as a group, may send correspondence in care of the Secretary at NXP’s principal offices at High Tech Campus 60, 5656 AG, Eindhoven, The Netherlands. Our Secretary will receive all communications sent to this address, and will provide all substantive communications to the
Chairman,Chair, excluding simple administrative requests that are appropriately addressed by the Secretary.
Ournon-executive directors oversee the general affairs of the Company and supervise and provide general advice to the executive director. Furthermore, thenon-executive directors perform such acts that are delegated to them pursuant to our Articles of Association or by our board regulations. One
Under the Rules of
Procedure, Board members must comply with any provisions on the
non-executive directors maximum number of directorships and board memberships as decided by the Nominating, Governance and Sustainability Committee. Currently, the Nominating, Governance and Sustainability Committee has
been appointed Chairman and anothernon-executive director has been appointed Vice-Chairmandetermined that members of the
Board.Board shall have no more than four board
HOW OUR BOARD GOVERNS AND IS GOVERNED
memberships in public companies in addition to service on the Board of NXP, and not more than two of such board memberships if they are an executive officer.
Each director owes a duty to us to properly perform the duties assigned to him or her and to act in the corporate interest of our Company. Under Dutch law, the corporate interest extends to the interests of all corporate stakeholders, such as shareholders, creditors, employees, customers and suppliers.
Board Leadership and Role in Risk Oversight
Our
ChairmanChair works closely with our
Chief Executive Officerchief executive officer to set the agenda for Board meetings and to facilitate information flow between the Board and management. Sir Peter Bonfield currently serves as the
Chairman.Chair. As previously noted, Sir Peter is retiring from our Board at the expiration of his term as of the end of the AGM and is not standing for re-election. The
ChairmanBoard has announced its intention to appoint Ms. Julie Southern as the successor Chair, subject to her re-election at the AGM. The Chair presides at the Board meetings, as well as regularly scheduled executive sessions of the
non-executive directors.
Our independent directors regularly meet in executive session without executive directors or management present. Additionally, the Board and each committee have the power to hire, at the expense of the Company, independent legal, financial or other advisors as they may deem necessary, without consulting or obtaining the approval of any officer of the Company in advance.
19
HOW OUR BOARD GOVERNS AND IS GOVERNED (continued)
The Board believes that its current structure continues to provide robust and highly effective oversight based on, among other factors:
| • | |
All
•The ninenon-executive directors nominated for (re-) appointment are independent; the sole board member who is not being independent is the nominated executive director (the President and CEO); | |
|
• | | Robust Corporate Governance principles, which are reviewed annually; | |
|
• | | A Chairman with deep experience in and knowledge of our business and industry with a demonstrated unique and successful strategic vision, including leading our Board during our successful transformation from amid-size specialty semiconductor supplier to a top 10 global supplier(non-memory or foundry), with clear market share leadership in the Automotive semiconductor market. During Rick Clemmer’s leadership, since 2009, our Chairman worked closely with him, and he played a key role in the leadership succession planning, resulting into the nominated new executive directorship appointment of Kurt Sievers. Our Chairman continues to be actively focused on his role of providing the overallChair that provides strategic leadership for the Company, consistent with Dutch law and the Company’s organizational documents—a role that the Board believes remains critically important as our industry continues to experience significant change and disruption at a rapid rate.; | |
| rate;
• | | The Audit, Human Resources and Compensation, and Nominating, Governance and GovernanceSustainability Committees all are composed entirely of independent directors (as defined in the applicable Nasdaq listing standards and within the meaning of the DCGC); | |
|
• | | Approval of any appointment of members to the Audit, Human Resources and Compensation, and Nominating, Governance and GovernanceSustainability Committees must include at least a majority of the independent directors; | |
|
• | | All Board committees operate pursuant to written charters and conduct annual self-assessments; | |
|
• | | The independent directors of the Board and its committees receive extensive information and input from multiple layers of management and external advisors, engage in detailed discussion and analysis regarding matters brought before them (including in executive session) and consistently and actively engage in the development and approval of significant corporate strategies; | |
|
• | | theThe Board and its committees have unrestricted access to management;
| |
|
• | | theThe Board and its committees can retain, at Company expense, any advisors they deem necessary with respect to any matter brought before them; and
| |
|
• | | In 2019,2022, the Board held four executive sessionsof non-management members, and its committees collectively held seventeen23 sessions. |
|
The Board met
five5 times in
2019.2022. In addition to these meetings, directors attended meetings of individual Board committees of which they were members. Each of the directors attended at least 75% of the aggregate of the Board meetings and meetings of committees of which they were a member during the periods for which they served in
2019.2022. NXP does not have a formal policy regarding Board members’ attendance at annual general meetings, but all
of our Board members are invited to attend the Annual General Meeting.
In 2022, Sir Peter Bonfield, current Chair of the Board, as well as Kurt Sievers participated in the Annual General Meeting.
The Rules of Procedure require the independent directors to meet in executive session from time to time, and at least twice annually, without any members of management present.
During 2019, the independent directors of the Board met in executive session four times.
NXP’s Board Committees
Since September 2019, the
The standing committees of the Board are the Audit Committee, the
Human Resources and Compensation Committee, and the Nominating,
Governance and
GovernanceSustainability Committee.
Effective September 1, 2019, the Board split the Nominating and Compensation Committee into two separate committees: the Compensation Committee and the Nominating and Governance Committee. The Board determined that it was desirable that a new
20
HOW OUR BOARD GOVERNS AND IS GOVERNED (continued)
Nominating and Governance Committee be formed to, among other things, determine Board member selection criteria and appointment procedures, Board evaluation procedures and certain other corporate governance activities. The Board determined that this would allow the Compensation Committee to focus on the important talent management activities of the organization, such as managing CEO and executive succession, evaluating organizational effectiveness and reviewing leadership development practices. The Board believes that having separate committees to oversee these practices allows the proper support to these crucial activities.
All members of the Audit, Human Resources and Compensation, and Nominating, Governance and GovernanceSustainability Committees are independent directors, as defined in the applicable Nasdaq listing standards, applicable SEC rules and the Rules of Procedure, which includes the requirements of the DCGC. Board approval of any director appointment to the Audit, Human Resources and
HOW OUR BOARD GOVERNS AND IS GOVERNED
Compensation, and Nominating,
Governance and
GovernanceSustainability Committees must include at least a majority of the independent directors, as defined in the applicable Nasdaq listing standards.
Our Audit Committee is a separately-designated standing committee established in accordance with Section 3(a)(58)(A) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and currently consists of Ms. Southern (Chair), Ms. Staiblin,
Mr. Gu and Mr. Sundström, each of whom are independent for purposes of the Nasdaq listing standards, our Rules of Procedure and
Rule 10A-3 of the Exchange Act.
In November 2019, Ms. Staiblin joined the Audit Committee in place of Mr. Goldman. Before September 1, 2019, the Audit Committee consisted of Ms. Southern (Chair), and Messrs. Goldman, Kaeser (until August 1, 2019) and Summe.Subject to the requirement under Dutch law that independent auditors be appointed by the shareholders at a general meeting of shareholders, the Audit Committee has ultimate authority and direct responsibility to appoint, compensate, retain, oversee, evaluate and, where appropriate, replace the independent auditors. In addition, the Audit Committee reviews the performance and independence of the independent auditors and also oversees internal audit activities, compliance with the Code of Conduct,
related-party transactions and legal matters, including
litigation and intellectual property
litigation.disputes.
Our Audit Committee reviews our annual audited financial statements and quarterly unaudited financial statements and certain other public disclosures prior to publication. The Audit Committee also meets periodically with senior management to discuss risk assessment and risk management policies.
The Board has determined that all Audit Committee members are able to read and understand fundamental financial statements in accordance with Nasdaq listing standards and that
all three current members of the Audit CommitteeMs. Southern, Ms. Staiblin and Mr. Sundström meet the SEC’s definition of “audit committee financial expert” as that term is defined in Item 407(d) of
Regulation S-K. As noted above, all Audit Committee members are independent for purposes of Nasdaq listing standards, our Rules of Procedure, and
Rule 10A-3 of the Exchange Act. For a description of the education and experience of each of the members of the Board’s Audit Committee please refer to the “Nominees for Director” section above.
The Audit Committee meets at least quarterly, and as often as it deems necessary to fulfill its responsibilities.
Number of meetings in 2019: 9.
2022: 13.
This committee operates under a written charter adopted by our Board. The charter complies with SEC regulations and Nasdaq listing standards. The charter is reviewed and reassessed regularly to ensure continued compliance with these requirements. The charter is available for public viewing on our website at
http://investors.nxp.com,, under the “Corporate Governance” section.
Human Resources and Compensation Committee
Our
Human Resources and Compensation Committee currently consists of Mr.
SmithamSundström (Chair), Sir Peter Bonfield,
Ms. OlvingMses. Clayton and
Mr. Sundström.Olving. As previously noted, Sir Peter Bonfield is retiring from our Board at the expiration of his term at the end of the AGM and his service on the Human Resources and Compensation Committee will cease after the AGM. Our Board has determined that all of the members of the
Human Resources and Compensation Committee are independent for purposes of Nasdaq listing standards, our Rules of Procedure and Rule
10C-1 of the Exchange Act. Pursuant to its charter and the authority delegated to it by our Board, the
Human Resources and Compensation Committee is responsible for overseeing our compensation and employee benefit plans and practices, including formulating, evaluating and approving the compensation of our executive officers, including the compensation of our
Chief Executive Officer,chief executive officer, and for overseeing all compensation programs involving the issuance of our equity securities.
In addition, the Human Resources and Compensation Committee is responsible for overseeing the Company’s strategy, initiatives and programs related to the Company’s culture, talent management and talent development, including but not limited to talent acquisition, talent retention, talent development and succession, employee engagement and diversity, equality and inclusion. For more information regarding the
Human Resources and Compensation Committee and the determination of executive compensation, see the “Executive Compensation” section below. The
Human Resources and Compensation Committee meets as often as it deems necessary, but not less than four times a year.
21
HOW OUR BOARD GOVERNS AND IS GOVERNED (continued)
Number of meetings in 2019 (including meetings of the Nominating and Compensation Committee prior to September 1, 2019):2022: 6.
This committee operates under a written charter adopted by our Board. The charter complies with SEC regulations and Nasdaq listing standards. The charter is reviewed and reassessed regularly to ensure continued compliance with these requirements. The charter is available for public viewing on our website at
http://investors.nxp.com,, under the “Corporate Governance” section.
Nominating,
Governance and
GovernanceSustainability Committee
Our Nominating,
Governance and
GovernanceSustainability Committee currently consists of Mr. Summe (Chair), Sir Peter Bonfield
Mr. Kaeser and Mr.
Goldman.Foxx. As previously noted, Sir Peter Bonfield is retiring from our Board at the expiration of his term at the end of the AGM and his service on the Nominating, Governance and Sustainability Committee will cease after the AGM. Our Board has determined that all of the members of the Nominating,
Governance and
GovernanceSustainability Committee are independent for purposes of Nasdaq listing standards and our Rules of Procedure. Pursuant to its charter and the authority delegated to it by our Board, the Nominating,
Governance and
GovernanceSustainability Committee is responsible for determining selection criteria and appointment procedures for members of our Board, periodically assessing the scope and composition of our Board and evaluating the performance of its individual members.
In identifying and evaluating candidates,addition, the Nominating, Governance and GovernanceSustainability Committee may takeoversees the Company’s corporate sustainability policies and programs, oversees the integration of a broad set of environmental, social and governance (ESG) considerations into account allbusiness functions and delegates aspects of the factors it considers appropriate, which may include: (i) whether the candidate is independent in accordance with any applicable independence requirements of Nasdaq and our Rules of Procedure; (ii) the structure and membership of the Board; (iii) specific qualifications, expertise or experiences that would complement the existing Board members including education, financial expertise, and industry experience; (iv) a candidate’s personal traits such as mature judgment, diverse background, age, professional relationships, strength of character, level of integrity, ethical standards and other intangibles that would make the candidate a positive additionESG oversight to the BoardAudit and its committees;Human Resources and (v) special skills, expertise, and background that add to and complement the rangeCompensation Committees for ESG matters within their core areas of skills, expertise, and background of the existing members of the Board. When the committee considers diversity, it will consider diversity of experience, skills, viewpoints, race and gender, as it deems appropriate. While the committee has not established any specific minimum qualifications for director nominees, the committee believes that demonstrated leadership, as well as significant years of service, in an area of endeavor such as business, law, public service, related industry or academia is a desirable qualification for service as a director of NXP.
expertise.
HOW OUR BOARD GOVERNS AND IS GOVERNED
The Nominating,
Governance and
GovernanceSustainability Committee will consider timely written proposals for nomination from shareholders and will evaluate a shareholder’s prospective board nominee in the same manner that it evaluates other nominees, but only if it receives the request to consider such matter no later than on the
60th60th day prior to the day of the Annual General Meeting. The Nominating,
Governance and
GovernanceSustainability Committee
may engagefrom time to time engages consultants or third-party search firms to assist in identifying and evaluating potential nominees. A shareholder who wishes to recommend a prospective Board nominee for the committee’s consideration may write to us at NXP Semiconductors N.V., High Tech Campus 60, 5656 AG, Eindhoven, The Netherlands, Attention: Secretary. For more information regarding shareholder proposals and nominations see “Future Shareholder Proposals and Nominations for the
20202024 Annual General Meeting.”
The Nominating, Governance and GovernanceSustainability Committee meets as often as it deems necessary to fulfill its responsibilities, but not less than four times a year. As the Nominating and Governance Committee only was installed in September 2019, the number
Number of meetings in
2019 was only 2.2022: 4.
This committee operates under a written charter adopted by our Board. The charter complies with SEC regulations and Nasdaq listing standards. The charter is reviewed and reassessed regularly to ensure continued compliance with these requirements. The charter is available for public viewing on our website at
http://investors.nxp.com,, under the “Corporate Governance” section.
Information about each of the standing committees is provided on the following
page and pages
and page 24 provides31-34 provide an additional discussion of committee responsibilities in relation to risk oversight.
22
HOW OUR BOARD GOVERNS AND IS GOVERNED
(continued) | | | | | |
| AUDIT COMMITTEE |
AUDIT COMMITTEE | | |
Members
MEMBERS Mr. Sundström Mr. Gu
Number of meetings during 2022: 13
| | KEY OVERSIGHT RESPONSIBILITIES INCLUDE, BUT ARE NOT LIMITED TO: •The integrity of the Company’s financial statements and its accounting and financial reporting processes •The effectiveness of the Company’s internal control over financial reporting •Compliance with applicable legal and regulatory requirements •Oversight of information technology risks, including cybersecurity •The qualifications, independence and performance of the independent registered public accounting firm for U.S. public reporting purposes and the Company’s external auditor for purposes of Dutch law •The Internal Audit group •The Company’s processes and procedures related to risk assessment and risk management •Related party transactions |
Number of
meetings during 2019:
| | 9 |
| | | | | |
| HUMAN RESOURCES AND COMPENSATION COMMITTEE |
COMPENSATION COMMITTEE (until September 1, 2019 Nominating and Compensation Committee) | | |
| |
Members
MEMBERS Mr. Smitham Sundström Ms. Clayton
Number of meetings during 2022: 6
| | KEY OVERSIGHT RESPONSIBILITIES INCLUDE, BUT ARE NOT LIMITED TO: •CEO and senior management compensation, including the corporate goals and objectives relevant to such compensation and evaluating performance in light of those goals and objectives •Board and committee compensation •Relationship between the Company’s compensation policies and practices and risk management •Management Team succession plans •Compensation and benefits-related disclosures• Equity and equity compensation plans in which executives participate
•Various human capital management topics, including diversity, equality and inclusion, workforce trends and surveys, as well as University Relations Program |
Number of
meetings during 2019:
| | 6 |
| | | | | |
| NOMINATING, GOVERNANCE AND SUSTAINABILITY COMMITTEE |
NOMINATING AND GOVERNANCE COMMITTEE (as of September 1, 2019) | | |
| |
Members
MEMBERS Mr. GoldmanMr. Kaeser
Foxx
Number of meetings during 2022: 4
| | KEY OVERSIGHT RESPONSIBILITIES INCLUDE, BUT ARE NOT LIMITED TO: •Corporate governance matters •Nominationor re-nomination of director candidates and approval of other annual general meeting of shareholders agenda items •The annual self-evaluation of the Board and its committees •Review NXP top identified risks and make proposals to the Board on oversight •Initiatives and reporting on Environment, Social and Governance |
Number of
meetings during 2019:
| | 2 |
23
HOW OUR BOARD GOVERNS AND IS GOVERNED (continued)
Setting and Overseeing Strategy
The Board actively determines the Company’s strategy and continues to focus on those strategies designed to ensure the continued durability and sustainability of the Company, while creating long-term value for our shareholders, and serving the interests of our other stakeholders. The Board and its committees regularly and extensively reviewed during their meetings throughout
20192022 the Company’s strategy, the Company’s primary risks as well as the design and operation of the internal control systems to ensure it supports the
long-termlong- term growth and sustainability of the Company and reflects, among other considerations, market challenges and opportunities, and the interests of shareholders and other stakeholders. This has substantially impacted the long-term value creation strategy as referred to in practice 1.1.1 of the
DCGC. During 2019, specific attention has been paid to the leadership succession planning, which ultimately resultedDCGC as further outlined in the
proposed appointment of Kurt Sievers as executive director, PresidentSustainability section and
CEO, who will succeed Rick Clemmer who successfully ledin the
company since 2009.Company’s Corporate Social Responsibility Report. In addition to quarterly updates on the business performance and detailed presentations by the various business managers, the Board
as part of its annual meeting schedule, spent afull-day in November to reviewreviewed and
discussdiscussed the
mid- to long-term strategy of the
Company.Company in its November meeting.
HOW OUR BOARD GOVERNS AND IS GOVERNED
The Board is committed to maintaining a dialogue with shareholders to ensure that they understand our differentiated strategy and business model and have an opportunity to discuss and engage on a broad range of topics, including our strategy. The Board will also
reviewsreview the implementation of our strategy at our annual general meeting of shareholders, giving attendees the opportunity to discuss our annual Dutch
management board report and the accompanying financial statements prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”). We also regularly discuss our strategy in shareholder engagement sessions.
Our management is directly responsible for executing the Company’s risk management processes. Our Board is responsible for overseeing these risk management processes. In exercising its oversight, the Board and, as appropriate, the relevant Board committees, assesses the material risks facing the Company and evaluate management’s plans for managing material risk exposures.
The Company conducts a formal annual risk assessment to identify, analyze and report on enterprise risks. The results of this risk assessment are reported to and discussed with the Board.
Our Board performs this oversight function through periodic reports from management and Board committees. While our Board generally has ultimate oversight responsibility of the Company’s risk management processes, it has delegated to its committees the responsibility to oversee risk management processes associated with their respective areas of responsibility and expertise. For example, the Audit Committee has oversight responsibility for the Company’s internal audit function, compliance with the Code of Conduct, internal controls and financial reporting practices,
information technology and cybersecurity risks, litigation, and compliance processes. The
Company conducts a formal annual risk assessment to identify, analyzeHuman Resources and
report on enterprise risks. The results of this risk assessment are reported to and discussed with the Audit Committee. The Compensation Committee has oversight responsibility for the Company’s executive talent management and succession planning,
the Company's policies and practices relating to significant issues of sustainability, environmental, social and governance of concern including executive succession, and risks related to the Company’s compensation policies and practices, as described in more detail in the Compensation Practices and Risk section of the Compensation Discussion and Analysis. The Nominating,
Governance and
GovernanceSustainability Committee has oversight responsibility for the Company’s compliance with its corporate governance principles,
CEO succession planning and
leadership succession planning.proposes recommendations to the Board for updates to risk oversight responsibilities of the committees and the Board. The Board receives regular reports from each committee chair regarding the committee’s considerations and actions. The Board also receives regular updates from management on the Company’s business operations, financial results and strategy and, as appropriate, discusses and provides feedback with respect to risks related to these topics. Annually, the Board holds strategic planning sessions with senior management to discuss strategies, key challenges, and risks and opportunities for our business.
NXP, similar to other semiconductor companies, operates in a complex and rapidly changing environment that involves many risks. In addition to general market, research and development, and economic risks, the Company faces potential risks related to its industry; information technology and cybersecurity; data privacy; financial controls and reporting; legal, regulatory and compliance; finances and taxation; global operations; environment and social responsibility; and product portfolio and commercialization, among others. As a company committed to operating ethically and with integrity, we proactively seek to manage and, where possible, mitigate risks to help ensure compliance with applicable rules and regulations, maintain integrity and continuity in our operations and business and protect our assets. Risk management is an enterprise-wide objective subject to oversight by the Board and its committees.
It is the responsibility of management and employees to implement and administer risk-management processes to identify material risks to our business. In addition, management must assess, manage and monitor those risks, all while maintaining flexibility in how we operate. To further embed risk management and compliance into our culture, we implement relevant policies and procedures and train employees on the specifics of such policies and procedures. All of our committees have regular access to management and the Board and committees also schedule sessions without members of management
present.24
presentThe purpose of our enterprise risk management ("ERM") is to timely identify, evaluation, prioritize, respond to, and manage material business risks impacting NXP Semiconductors’ strategic objectives.
The objectives of ERM are to:
•Enhance our understanding of risks across the organization and their impact on our strategy
•Improve our ability to respond to risks, particularly those that could result in a strategic impact event
•Ensure there is an effective system of management for key risks
•Prioritize and align risk management efforts and resources effectively
•Provide reasonable assurance, in line with the three lines of defense model, to stakeholders that there is a system in place to manage risk and that legal requirements are complied with, and the integrity of the company’s financial reporting and related disclosures is safeguarded.
Key ERM activities include:
•Assessment (identification and evaluation of risks)
•Response (building capabilities, mitigation)
•Management Assurance (effective management methods, clear accountabilities)
HOW OUR BOARD GOVERNS AND IS GOVERNED
(continued)•Monitoring (audit, inquire, verify)
•Communication (internally and externally)
•Periodically evaluate effectiveness method
The procedures plan for reasonable coverage of the potential risks. Despite the thoroughness of the process unforeseen events that impact the strategy may happen.
Risk management governance
The Board of Directors oversees NXP’s processes and procedures related to risk assessment and risk management, reviews NXP top identified risks and the Nominating, Governance and Sustainability Committee makes proposals to the Board on oversight.
Our management team oversees, identifies and manages the top risks NXP faces in executing its strategy, defines the risk appetite and manages risks consistently with the risk appetite. The ERM function enables management to make risk management more efficient and effective by providing and maintaining a risk management framework, a risk monitoring mechanism and facilitation of the execution of the ERM process to mitigate the risks to levels consistent with the risk appetite of NXP. We believe that our risk appetite is consistent with our peers in the semiconductor industry and a reflection of the risk in the semiconductor industry. This risk appetite varies for the different identified risks and therefore the level of mitigation can be different. For mitigation of the operational, financial disclosure and compliance risk we merely rely on our framework of business controls, processes, authorizations and “tone at the top.” For more strategic risks a more top down approach to mitigating the risks is applied.
A risk owner performs an assessment and prioritizes the most likely and impactful risk elements and takes appropriate measures to mitigate the risk within the given appetite. The Internal Audit function, as part of annual audit plan approved by the Audit Committee, provides assurance of effectiveness of NXP’s risk management. A structured risk management process is put in place to identify and manage the most crucial risks for NXP, taking into account both internal and external information sources. The ERM process consists of the following elements:
•Yearly interviews with all NXP MT members, starting from the strategy and seeking their insight in the most important risks for NXP
•Assessment of a consolidated risk list on both likelihood and impact by different layers in the organization
•Based on likelihood and impact, the top risk list is (re-)confirmed by the MT and reported to the Board of Directors
•Risk owners drive required mitigation actions to ensure the risk meets the risk specific appetite
•Corrective action are taken where necessary as a result of evaluation of the controls by internal audit and/or self-assessments
•Effectiveness of the controls are measured by specified risk indicators, updated on at least a quarterly basis
•Risk status and controls in place are discussed each quarter in Board or the selected board committee
•At least once per year, the risk process is review with the Board of Directors on effectiveness and improved where needed.
Information Technology Risks
The Company’s Audit Committee has oversight responsibility for reviewing the effectiveness of NXP’s governance and management information technology risks, including those relating to business continuity, cybersecurity, malware, regulatory compliance and data management. NXP senior leadership briefs the Audit Committee quarterly on information security matters and briefs the full Board on information security matters at least annually. NXP is certified and externally audited to ISO 27001 with certain additional certifications such as Common Criteria 6+, PCI DSS and GSMA Security for focused functions, and we maintain information security risk insurance coverage. We have multiple cybersecurity training initiatives as part of our information security training and compliance program. We deploy simulated attacks and related trainings at least quarterly. We deliver a Cyber Security orientation to all of our new employees and maintain a library of cyber security learning sessions available to our employees.
NXP uses a multi-layer approach to identify and mitigate information security risks. On a tactical level, NXP maintains a 24x7x365 Security Operating Center (SOC) that actively monitors for and identifies cyber security threats and initiates appropriate mitigation processes. The SOC reports to Computer Security Incident Response Team (CSIRT). When needed, a task force containing Security, IT, Communications, Legal and Business representatives is established. This task force leads mitigation activities where the potential threat or risk is elevated. In addition to SOC the NXP IT Service Desk and NXP employees are trained to identify Cyber Security issues and to escalate them to correct owners. On a strategic level, NXP’s information technology risk management program is a component of the ERM process described above. NXP’s chief information security officer manages the information security risks identified in the ERM process, performing an initial risk assessment, prioritizing the most likely and impactful risk elements and recommending appropriate measures to mitigate the risk. This assessment and recommended mitigation strategies are validated and refined by senior leadership and reviewed in quarterly meetings with the Audit Committee and annually with the full Board.
HOW OUR BOARD GOVERNS AND IS GOVERNED
The Board, in turn, directly or through its committees, oversees management’s implementation of risk management. We have approved a robust Code of Conduct and other related policies, and the Board and its committees rigorously review with management actual and potential significant risks at least on a quarterly basis.
Individual members of the Board participate in director
educationaleducation seminars, conferences and other director education programs presented by external and internal resources, on matters that relate to, among other topics, compensation, governance, board
process,processes, risk oversight, business, industry, audit and accounting, credit and financial, regulatory and other current issues.
The Company organized in August 2019 atwo-day Induction Program for newly elected directors. A number of directors that were elected in previous years also participated in the Induction Program. Various management members gavein-depth presentations on the Company’s strategy, including presentations on the finance organization and reporting, legal, intellectual property, corporate governance, human resources, internal audit and sales and marketing.
HOW OUR DIRECTORS ARE SELECTED AND EVALUATED
Consideration of Director Nominees
For purposes of identifying individuals qualified to become members of the Board, the Nominating,
Governance and
GovernanceSustainability Committee considers the following general criteria, among others, in nominating director candidates. These criteria reflect the traits, abilities and experience that the Board looks for in determining candidates for election:
•Directors shall have relevant expertise and experience and be able to offer advice and guidance to the CEO based on that expertise and experience;
•Directors shall have the ability to exercise sound business judgment;
•Directors shall represent diverse viewpoints; the personal backgrounds and qualifications of the directors, considered as a group, should provide the Company with a significant composite mix of experience, knowledge and abilities; and
•Unless otherwise approved by the Board, directors shall not be a member of the board of directors or an officer or employee of a competitor (or an affiliate of a competitor) of the Company.
In addition to the criteria set forth above, and any others the Nominating,
Governance and
GovernanceSustainability Committee or the Board may consider, a majority of the Board’s members must be “independent,” as that term may be defined from time to time by the applicable Nasdaq listing standards, the Rules of Procedure, as well as practice 2.1.8 of the DCGC, including that an independent director must be free of any relationships which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
As needed, the Nominating,
Governance and
GovernanceSustainability Committee may identify new potential director nominees by, among other means, requesting current directors and executive officers and external advisors to notify it if they become aware of persons meeting the criteria described above who would be suitable candidates for service on the Board. The committee also may, as needed, engage one or more firms that specialize in identifying director candidates.
As appropriate, the Nominating,
Governance and
GovernanceSustainability Committee will review publicly available information regarding a potential candidate, request information from the candidate, review the candidate’s experience and qualifications, including in light of any other candidates the committee might be considering, and conduct, together with other members of the Board, one or more interviews with the candidate. Committee members or their designees also may contact one or more references provided by the candidate or may contact other members of the business community or persons who may have first-hand knowledge of the candidate’s talents and experience.
25
HOW OUR DIRECTORS ARE SELECTED AND EVALUATED (continued)
The Board is committed to supporting, valuing and leveraging
diversity, including gender and ethnic/cultural diversity, in its composition, among other qualities that the Board believes serve the best interests of the Company and its stakeholders. As part of
these efforts, the
Company’s policy to appoint a well-balanced mix of women and men to its Board, while taking into account the overall profile and selection criteria for appointments of suitable candidates,
has proposed a slate of nominees to the Board
after the appointment by shareholdersin which at
the general meetingleast 40% of
shareholders of June 17, 2019 of Mses. Olvingdirector nominees are women and
Staiblin, as nominated by the board, 30% of the seats of the Board are now taken by women.that includes a director nominee from an underrepresented ethnic group.
The Board, with the support of the Nominating,
Governance and
GovernanceSustainability Committee, maintains an orderly, robust process for Board refreshment and succession that is aimed at maintaining an appropriate balance with respect to the expertise, experience and diversity on the Board. The Board and its Nominating,
Governance and
GovernanceSustainability Committee regularly evaluates the Board composition with respect to, among other matters, director independence, skills, experience, expertise, diversity and other factors to ensure the Board remains well-qualified to provide effective oversight of the Company and management. The Board and the Nominating,
Governance and
GovernanceSustainability Committee regularly consider the Company’s strategy, performance, operations, relevant industry and market conditions, and current and anticipated needs in terms of particular areas of experience and expertise (e.g., risk oversight, industry, science), among many other factors, to inform these refreshment practices.
The Board continues its orderly Board succession and refreshment process, refreshing six director seats since 2015, including this year’s new executive director nominee.
The Board also remains focused on committee composition and refreshment. In August 2018, the Board refreshed the chairs of the then two Board committees (the Audit Committee,and the Nominating and Compensation Committee) and, following the installment of the Nominating and Governance Committee in September 2019, the Board refreshed the composition of all three committees.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under the Rules of Procedure, a conflict
needs toof interest must be reported to the Board and the Board shall
resolve ondetermine the consequences
of such conflict, if any. In case of a conflict of interest, the director concerned is not allowed to participate in discussions or vote on such matter. If all directors have a conflict of interest, the resolution concerned will be
adoptedvoted on by shareholders at the general meeting of shareholders.
Other than the compensation items described below, no decisions to enter into material transactions in which there
arewere conflicts
of interest with directors
have occurred during the financial year
2019.26
2022.
HOW OUR DIRECTORS ARE COMPENSATED
Non-Employee Director Compensation for 20192022
The
Human Resources and Compensation Committee has responsibility for reviewing and considering any revisions to compensation for
non-executive directors. The Board reviews the
Human Resources and Compensation Committee’s recommendations and makes the final
determination regarding compensation fornon-executive directors. In accordance with Dutch law,recommendation to the
remuneration of thenon-executive directors of the Board’s committees has been set for the last time at the annual general meeting of shareholders
held in 2016. Since September 2019, the Board has three—instead of two—permanent committees (the Audit Committee, the Compensation Committee and the Nominating and Governance Committee), which is reasonregarding compensation for
the Board to consider it advisable tore-set the committee membership remuneration to conform to market levels. Refer to Item 9 below for the board proposals to the Annual General Meeting to set revised committee membership fees.non-executive directors. It is our policy to reimburse all directors for reasonable expenses incurred in performing their duties as a director.
Sir Peter Bonfield receives an annual fixed fee of
€275,000 €275,000 for serving as
non-executive director and
chairmanChair of the
board.Board. The other
non-executive directors receive an annual fixed fee of $85,000.
Subject to the approval of the Annual General Meeting to be held on May 27, 2020 as further explained in Item 9, membersMembers of the Audit Committee,
Human Resources and Compensation Committee and Nominating,
Governance and
GovernanceSustainability Committee receive an additional annual fixed fee of $15,000 and the
chairsChairs of each of these committees receive an additional annual fixed fee of $15,000.
In
2019,2022, each
non-executive director received an annual restricted share unit award with a
grant value of
$200,000.$225,000. The awards were granted at the same time as the NXP annual equity grants for NXP employees
in November, and the restricted share units fully vest on the earlier of the first anniversary of the date of grant or the next annual general meeting of shareholders. Unvested portions of their equity award are forfeited upon the termination of a
non-executive director’s service on the Board, except in the case of termination of service upon death or at the request of the Board, in which case the unvested portion is fully accelerated.
Share Ownership Guidelines
Members of our Board are subject to share ownership guidelines.
Non-executive directors are prohibited from selling any shares of the Company until they own shares that are valued at no less than five times the annual cash fixed fee paid to the director. Our executive director and President/CEO is subject to the share ownership guidelines described in Item
119 below.
Non-Executive Director Compensation in 2019
| | | | | | | | | | | | |
Name | | Fees Earned
or Paid in
Cash ($) | | | Stock Awards
($)(1) | | | Total
($) | |
Sir Peter Bonfield | | | 326,275 | | | | 195,031 | | | | 521,306 | |
Kenneth A. Goldman | | | 100,000 | | | | 195,031 | | | | 295,031 | |
Josef Kaeser | | | 98,750 | | | | 195,031 | | | | 293,781 | |
Lena Olving2 | | | 50,569 | | | | 195,031 | | | | 245,600 | |
Peter Smitham | | | 111,667 | | | | 195,031 | | | | 306,698 | |
Julie Southern | | | 115,000 | | | | 195,031 | | | | 310,031 | |
Jasmin Staiblin2 | | | 50,569 | | | | 195,031 | | | | 245,600 | |
Gregory Summe | | | 113,000 | | | | 195,031 | | | | 308,031 | |
Karl-Henrik Sundström2 | | | 55,569 | | | | 195,031 | | | | 250,600 | |
Johannes Huth3 | | | 44,997 | | | | — | | | | 44,997 | |
Eric Meurice3 | | | 39,431 | | | | — | | | | 39,431 | |
1. | On October 29, 2019, Sir Peter Bonfield, Messrs. Goldman, Kaeser, Smitham, Summe and Sundström and Mses. Olving, Southern and Staiblin each received an annual restricted share units (‘RSUs’) grant of 1,749 under the terms of the NXP Semiconductors N.V. 2019 Omnibus Incentive Plan and the Director Restricted Stock Unit Award Agreement. The values in this column represent the grant date fair value of the RSU awards calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“ASC 718”). See note 2—Summary of Significant Accounting Policies ‘Share-based Compensation’ and Note 18—Share-based Compensation, both found in Part II, Item 8, “Financial Statements and Supplementary Data” in the Notes to Consolidated Financial Statements in the Annual Report onForm 10-K for the year ended December 31, 2019 for additional information. As of December 31, 2019, Sir Peter Bonfield, Messrs. Goldman, Kaeser, Smitham, Summe and Sundström and Mses. Olving, Southern and Staiblin each held 1,749 RSUs and nonon-employee director held options.
|
2. | Mses. Olving and Staiblin and Mr. Sundström received a prorated portion of their annual fees as a result of their appointment asnon-executive directors at the 2019 annual general meeting of shareholders (the “2019 AGM”).
|
3. | Messrs. Huth and Meurice received a prorated portion of their annual fees as a result of their decision not to stand forre-election to the Board at the 2019 AGM.
|
27
HOW OUR DIRECTORS ARE COMPENSATED
| | | | | | | | | | | | | | | | | |
| Name | Fees Earned or Paid in Cash ($)1 | All Other
Compensation ($) | Stock Awards ($)2 | Total ($) | |
| | | | | |
| Sir Peter Bonfield | 320,373 | | — | | 215,868 | | 536,241 | | |
| Annette Clayton | 100,000 | | — | | 215,868 | | 315,868 | | |
| Anthony Foxx | 100,000 | | — | | 215,868 | | 315,868 | | |
Kenneth A. Goldman3 | 41,944 | | — | | | 41,944 | | |
Chunyuan Gu4 | 58,333 | | 1,002 | | 215,868 | | 274,201 | | |
Josef Kaeser3 | 41,944 | | — | | | 41,944 | | |
| Lena Olving | 100,000 | | — | | 215,868 | | 315,868 | | |
Peter Smitham3 | 48,236 | | — | | | 48,236 | | |
| Julie Southern | 115,000 | | — | | 215,868 | | 330,868 | | |
| Jasmin Staiblin | 100,000 | | — | | 215,868 | | 315,868 | | |
| Gregory Summe | 115,000 | | — | | 215,868 | | 330,868 | | |
| Karl-Henrik Sundström | 123,750 | | — | | 215,868 | | 339,618 | | |
1.Messrs. Foxx, Goldman, Gu, Kaeser, Smitham, Summe and Sundström and Mses. Clayton, Olving, Southern and Staiblin’s cash compensation and Sir Peter Bonfield’s committee fees are determined in dollars and paid in Euros using the exchange rate at the time of payment. Sir Peter Bonfield’s annual fixed fee is determined and paid in Euros; his fee has been converted to dollars using an exchange rate of 1.0559. 2.On November 1, 2022, Sir Peter Bonfield, Messrs. Foxx, Gu, Summe and Sundström and Mses. Clayton, Olving, Southern and Staiblin each received an annual restricted share unit (‘RSU’) grant of 1,482 under the terms of the NXP Semiconductors N.V. 2019 Omnibus Incentive Plan and the Director Restricted Stock Unit Award Agreement. The values in this column represent the grant date fair value of the RSU awards calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“ASC 718”). See Note 2— Significant Accounting Policies ‘Share-based compensation’ and Note 17—Share-based compensation, both found in Part II, Item 8, “Financial Statements and Supplementary Data” in the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2022 for additional information. As of December 31, 2022 Sir Peter Bonfield, Messrs. Foxx, Gu, Summe and Sundström and Mses. Clayton, Olving, Southern and Staiblin each held 1,482 RSUs and no non-employee director held options. 3.Messrs. Goldman, Kaeser and Smitham received a prorated portion of their annual fees and no 2022 equity award as a result of their retirement from the Board at the 2022 AGM. 4.Mr. Gu received a prorated portion of his annual fees as a result of his appointment as a non-executive director at the 2022 AGM. The amounts reflected in All Other Compensation for Mr. Gu represent third-party administrative expenses paid on Mr. Gu's behalf to obtain his Dutch tax number and Dutch tax gross up costs, as these third-party administrative expenses are taxable income under Dutch tax requirements. 5.The annual incentive amount is related to the performance in the year reported, which is then paid to the individual in the subsequent year. The amounts reported are the amounts that have been accrued as annual incentive bonus for our chief executive officer for our performance in the respective years.
| |
ITEM 4: AUTHORIZATION OF THE BOARD TO ISSUE ORDINARY SHARES AND GRANT RIGHTS TO ACQUIRE ORDINARY SHARES
The Board considers it in the best interest of the Company and its stakeholders for the Board to be able to react in a timely manner when strategic business opportunities arise that require the issuance of ordinary shares.
For example, this designation has been used in the past in relation to the issuance of convertible bonds in 2014.At the
20192022 AGM, the shareholders authorized the Board to issue
ordinary shares and to grant rights to acquire ordinary shares equal to 10% of the issued share capital for a period of 18 months, effective from June
17, 2019 to1, 2022 until December
17, 2020,1, 2023, and to exclude
pre-emptive rights in connection with such issue or grant of rights. It is proposed to renew
thisthe authorization
to issue ordinary shares and to grant rights to acquire ordinary shares for a new period of 18 months, effective from May
27, 202024, 2023 until November
27, 2021,24, 2024, and up to 10% of the issued share capital. The Company’s issued share capital as of March
29, 2020,27, 2023 was
315,519,638274,519,638 ordinary shares.
Although we presently do not have specific plans to issue ordinary shares for any purpose, the Board believes that it is advisable and in the best interest of our shareholders for our shareholders to provide this general authorization in order to avoid the delay and expense of obtaining shareholder approval at a later date, and to provide us with greater flexibility to pursue financing opportunities, such as the issuance of convertible notes, or acquisitions when market conditions are favorable.
The issuance of a large number of ordinary shares could be dilutive to existing shareholders or reduce the trading price of our shares on Nasdaq.
Therefore, in accordance with standard Dutch practice, it is proposed to grant the Board the authorization to issue ordinary shares and grant rights to acquire ordinary shares (up to 10% of the issued share capital as per May 24, 2023) for a period of 18 months, effective from May 24, 2023 until November 24, 2024, within the limits provided in the Articles of Association, (up to 10% of the issued share capital), which authorization can be used for general purposes. If this proposal is approved the prior authorization (from the 20192022 AGM) will immediately expire.
THE BOARD RECOMMENDS A VOTE “FOR” THE PROPOSAL TO AUTHORIZE THE BOARD TO ISSUE ORDINARY SHARES AND GRANT RIGHTS TO ACQUIRE ORDINARY SHARES.
ITEM 5: AUTHORIZATION OF THE BOARD TO RESTRICT
OR EXCLUDE
PRE-EMPTION RIGHTS ACCRUING
IN CONNECTION WITH AN ISSUE OF SHARES OR GRANT
OF RIGHTS
To the extent that the Board issues ordinary shares or grants rights to acquire ordinary shares under the authorization as set out in
itemItem 4, it is proposed to authorize the Board for a period of 18 months, effective from
the Annual General Meeting,May 24, 2023 until November 24, 2024, to restrict or exclude
pre-emption rights accruing in connection with such
issuance. In accordance with Dutch law, if less than 50% of the issued capital is represented at the Annual General Meeting, this proposal can only be adopted by a majority of at leasttwo-thirds of the votes cast. If 50%issuance or
more of the issued capital is represented, a simple majority is sufficient to adopt this proposal.grant.
THE BOARD RECOMMENDS A VOTE “FOR” THE PROPOSAL TO AUTHORIZE THE BOARD TO RESTRICT OR EXCLUDE
PRE-EMPTION RIGHTS ACCRUING IN CONNECTION WITH AN ISSUE OF SHARES OR GRANT OF RIGHTS.
28
ITEM 6: AUTHORIZATION OF THE BOARD TO
REPURCHASE ORDINARY SHARES OF THE COMPANY
At the
20192022 AGM, shareholders authorized the Board to acquire ordinary shares in the Company’s capital for a period of 18 months. It is proposed to renew
and revise this authorization for a period of 18 months from the Annual General Meeting, as set out below.
The purpose of this Item is to create flexibility to return capital to the shareholders and to cover obligations of the Company to deliver ordinary shares. In addition to being a means to return value to shareholders, repurchases of shares of the Company’s own share capital could be used by the Board to demonstrate a commitment to the Company’s business and confidence in the long-term growth of NXP, provide increased liquidity for investors and cover obligations under the Company’s share-based compensation plans. Since 2017, the Company has returned
$7.128$14.996 billion to shareholders through previously announced share repurchases and dividend payments, reducing our diluted share count by approximately
1724 percent, or
6082.3 million shares.
The number of ordinary shares to be repurchased, if any, and the timing and manner of any repurchases will be determined after taking into consideration, amongst other things, prevailing market conditions and available resources. Under Dutch law, the number of shares held by the Company and its subsidiaries may not exceed 50% of the issued share capital.
As perof March 29, 202027, 2023 the Company holds 36,518,52014,784,336 treasury shares or 11.65.4 percent of the issued share capital. The Board considers it desirable to propose to the shareholders create the flexibility to continue with share repurchases. As such, it is proposed to the shareholders to authorize the Board for a period of 18 months, with effect from the Annual General Meeting, to repurchase ordinary shares up to 10% of the issued share capital as per the date of the Annual General Meeting. Shares may only be repurchased pursuant to this authorization so long as the total number of shares held by the Company in treasury does not exceed 20% of the Company’s issued share capital. The repurchases may take place on the open market, through privately negotiated repurchases, in self-tender offers, or through accelerated repurchase arrangements.
Such repurchases may be made at prices ranging between
€0.01 €0.01 and a price equal to 110% of the market price of the ordinary shares on Nasdaq, market price being the average of the closing prices for the ordinary shares on Nasdaq on the five trading days prior to the date of the acquisition, provided that (i) for self-tender offers, the market price shall be the volume weighted average price (“VWAP”) for the ordinary shares on Nasdaq during a period, determined by the Board, of no less than one trading day and no greater than five trading days prior to the expiration of the tender offer, and (ii) for accelerated repurchase arrangements, the market price shall be the VWAP for the ordinary shares on Nasdaq over the term of the arrangement. If this authorization is granted, the existing authorization as granted in
20192022 will cease to apply as per the moment this authorization takes effect.
THE BOARD RECOMMENDS A VOTE “FOR” THE PROPOSAL TO AUTHORIZE THE BOARD TO REPURCHASE THE COMPANY’S ORDINARY SHARES.
ITEM 7: AUTHORIZATION OF THE BOARD TO CANCEL
THE COMPANY’S ORDINARY SHARES HELD OR
TO BE ACQUIRED
It is proposed to authorize the Board to cancel any or all ordinary shares in the share capital of the Company held or repurchased by the Company resulting in a reduction of the Company’s issued ordinary shares. The cancellation may be executed in one or more tranches. The number of ordinary shares that will be cancelled (whether or not in a tranche) will be determined by the Board, with a maximum equal to the number of ordinary shares
that may be acquired pursuant to Item 6.held or repurchased by the Company in its issued share capital.
Pursuant to Dutch law, cancellation may not be effected earlier than two months after the resolution to cancel ordinary shares is adopted and publicly announced; this will apply for each tranche. The purpose of this proposal is to authorize the cancellation of ordinary shares held by the Company or that have been acquired in accordance with Item 6, to the extent that such ordinary shares shall not be used to cover obligations under share-based remuneration or other obligations.
THE BOARD RECOMMENDS A VOTE “FOR” THE PROPOSAL TO AUTHORIZE THE BOARD TO CANCEL THE COMPANY’S ORDINARY SHARES HELD OR TO BE ACQUIRED.
29
ITEM 8:
APPOINTMENTRE-APPOINTMENT OF ERNST & YOUNG ACCOUNTANTS LLP AS THE
COMPANY’SCOMPANY'S INDEPENDENT AUDITORS FOR
A THREE-YEAR PERIOD, STARTING WITH THE
2020 FISCAL YEAR
In accordance with ENDING
DECEMBER 31, 2023
Independent Registered Public Accounting Firm
The Company's current independent auditor, Ernst & Young Accountants LLP (“E&Y”), was appointed for a period of three years at the
procedures set forth inCompany's 2020 Annual General Meeting (for the
Company’s policy on auditor independence, the Audit Committee conducted a competitive process to determine the Company’s independent registered public accounting firm as referred to in Article 32audit of the
Articles for the Company’s fiscal years
ending December 31, 2020,
through December 31, 2022.2021 and 2022). The
Company invited several independent registered public accounting firms to participate in this process.As a resultmandate therefore expired after the audit of the review of proposals from the independent registered public accounting firms that participated, on November 19, 2019, the2022 fiscal year.
The Board as advised by the Audit Committee
determined to recommendrecommends that
Ernst & Young Accountants LLP (“E
&Y”)&Y stand for
appointmentre-appointment as the Company’s independent registered public accounting firm for the Company’s fiscal
yearsyear ending December 31,
2020 through December 31, 2022 at2023 pursuant to article 32 of the
2020 AGM under the requirement under Dutch law and as set forth in theCompany's Articles
subject to the completion of
E&Y’s standard client acceptance procedures.During the years ended December 31, 2018 and December 31, 2017, and the subsequent interim period through the date hereof, neither the Company nor anyone acting on its behalf consulted with E&Y regarding (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and no written report or oral advice was provided to the Company that E&Y concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue, or (ii) any matters that were the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of RegulationS-K and the related instructions, or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of RegulationS-K.
Association.
Representatives of
both KPMG and E&Y will participate in the
20202023 AGM, will be available to respond to appropriate questions from our stockholders and may make a statement if they desire to do so.
Independent Registered Public Accounting Firm
KPMG has been the Company’s independent registered public accounting firm, as referred to in Article 32 of the Company’s articles of association (the “Articles”), since 2009. KPMG was the Company’s independent registered public accounting firm until the completion of KPMG’s audit of the Company’s statutory annual accounts as of and for the year ended December 31, 2019 prepared in accordance with IFRS and consolidated financial statements in conformity with US GAAP as of and for the years ended December 31, 2018 and December 31, 2019.
The aggregate fees for professional services rendered by
KPMGE&Y to NXP were
$4.9$7.3 million for
20192022 and
$5.4$6.4 million for
2018.2021.
ITEM 8: RE-APPOINTMENT OF ERNST & YOUNG ACCOUNTANTS LLP
The following table
showssummarizes the fees for professional audit services
renderedprovided by
KPMGE&Y for the audit of
ourthe Company’s annual financial statements
for the years ended December 31, 2022 and
review of our interim financial statements for 2019 and 2018, andDecember 31, 2021 as well as the fees
billed for other services rendered by
KPMG for 2019 and 2018: | | | | | | | | |
| | | Year Ended December 31, | |
Fees | | 2019 (in millions) | | | 2018
(in millions) | |
Audit Fees(1) | | $ | 4.7 | | | $ | 5.3 | |
Audit-Related Fees(2) | | | 0.2 | | | | 0.1 | |
Tax Fees | | | — | | | | — | |
All Other Fees | | | — | | | | — | |
Total Fees | | $ | 4.9 | | | $ | 5.4 | |
(1) | Audit fees relate to professional services rendered in connection with the audit of NXP’s annual financial statements and internal control over financial reporting, quarterly review of financial statements, and audit services provided in connection with other statutory and regulatory filings
|
(2) | Audit-related fees relate to professional services that are reasonably related to the performance of the audit or review of NXP’s financial statements.
|
30
E&Y during these periods.
ITEM 8: APPOINTMENT OF ERNST & YOUNG ACCOUNTANTS LLP AS THE COMPANY’S INDEPENDENT AUDITORS FOR A THREE-YEAR PERIOD, STARTING WITH THE 2020 FISCAL YEAR (continued)
| | | | | | | | | | | |
| Year Ended December 31, | |
| | | |
| | | |
| Fees | 2022 (in millions) | 2021 (in millions) | |
| ($) | ($) | |
| | | |
Audit Fees1 | 7.0 | | 5.9 | | |
Audit-Related Fees2 | 0.3 | | 0.4 | | |
Tax Fees3 | — | | 0.1 | | |
All Other Fees4 | — | | — | | |
| Total Fees | 7.3 | | 6.4 | | |
| | | |
1.Audit fees relate to professional services rendered in connection with the audit of NXP’s annual financial statements and internal control over financial reporting, quarterly review of financial statements, and audit services provided in connection with other statutory and regulatory filings 2.Audit-related fees relate to professional services that are reasonably related to the performance of the audit or review of NXP’s financial statements. 3.Tax fees relate to tax compliance services, including the preparation of original and amended tax returns and claims for refund, and other tax advice and tax planning services, including assistance with transfer pricing documentation. 4.All other fees relate to all other services provided, including permissible people advisory services. | |
Audit Committee
Pre-Approval Policies
The Audit Committee has adopted rules for thepre-approval by the Audit Committee of all services to be provided by the external auditor.
Proposed services may be
pre-approved at the beginning of the year by the Audit Committee (annual
pre-approval) or
may bemaybe pre-approved during the year in respect of a particular engagement (specific
pre-approval). The
pre-approval is based on a detailed, itemized list of services to be provided, designed to ensure that there is no management discretion in determining whether a service has been approved and to ensure the Audit Committee is informed of each service it is
pre-approving. Unless covered by the
pre-approved services, each proposed service requires specific
pre-approval during the year. Any
pre-approved services where the fee for the engagement is expected to exceed
pre-approved cost levels or budgeted amounts will also require specific
pre-approval. During
2019,2022, there were no services provided to the Company by the external auditors which were not
pre-approved by the Audit Committee.
In
2019,2022, the external auditor attended all formal meetings of the Audit Committee. The findings of the external auditor, the audit approach and the risk analysis are also discussed at these meetings. The external auditor also refers in its reporting to the Audit Committee of the Board to the financial reporting risks and issues that were identified during the audit, internal control matters, and any other matters, as appropriate, requiring communication under the auditing standards generally accepted in The Netherlands and the United States.
THE BOARD RECOMMENDS A VOTE “FOR” THE APPOINTMENT OF ERNST & YOUNG ACCOUNTANTS LLP AS NXP’S INDEPENDENT AUDITORS FOR THE FISCAL
YEARSYEAR ENDING DECEMBER 31,
2020, 2021 AND 2022.2023.
ITEM 9:
REMUNERATION OF THE MEMBERS AND CHAIRS OF THE AUDIT COMMITTEE, THE COMPENSATION COMMITTEE, AND THE NOMINATING AND GOVERNANCE COMMITTEE OF THE BOARDIn accordance with Dutch law, the remuneration of thenon-executive directors of the Board’s committees has been set for the last time at the annual general meeting of shareholders held in 2016. Since then, in September 2019, the Board installed three permanent committees (the Audit Committee, the Compensation Committee and the Nominating and Governance Committee), which is reason for the Board to consider it advisable tore-set the committee membership remuneration to conform to market levels.
The board proposes to the Annual General Meeting to set the following committee membership fees, applicable as of September 1, 2019:
Members of all permanent committees (the Audit Committee, the Compensation Committee and the Nominating and Governance Committee) will receive an annual fixed fee of $15,000; and
Chairs of all permanent committees will receive, in addition to their committee annual fixed fee remuneration, an annual fixed Chair fee of $15,000.
No further changes in cash remuneration or equity grants to members of the Board are proposed.
THE BOARD RECOMMENDS A VOTE “FOR” THE REMUNERATION OF THE MEMBERS AND CHAIRS OF THE AUDIT COMMITTEE, THE COMPENSATION COMMITTEE AND THE NOMINATING AND GOVERNANCE COMMITTEE OF THE BOARD.
31
ITEM 10: AMENDMENT OF THE COMPANY’S ARTICLES OF ASSOCIATION
Effective August 1, 2019, the Company has elected to transition to U.S. domestic filer status under the U.S. federal securities laws and to cease making use of the “foreign private issuer” accommodations. As part of this transition, we also had to comply with a Nasdaq listing standard that the Company’sby-laws provide for a quorum of at least 33 1/3 percent of the outstanding shares of the Company’s common voting stock.
Given that Dutch law does not requireby-laws, in November 2019 the Board inserted in its Rules of Procedure a requirement that the chair of the shareholder meeting would not hold the meeting unless shareholders representing at least 33 1/3 of outstanding issued share capital were either physically present or represented by proxy. As a next step, the Board also wants to reflect in the Articles of Association that the quorum requirement is at a level high enough to ensure that generally a broad range of shareholders are represented in person or by proxy. In line with best practices, the Board proposes a quorum of more than 50% of the issued and outstanding shares.
The Board proposes to the Annual General Meeting to make the following amendment—new proposed text underscored—of the Articles of Association (in the English and Dutch text):
| | | | |
English text | | | | Dutch (leading) tekst: |
| | |
“28.1Subject to any provision of mandatory law and any higher quorum requirement stipulated by the Articles of Association, the General Meeting can only pass resolutions if at least the majority of the issued and outstanding shares in the Company’s capital are present or represented at such General Meeting. A second meeting as referred to in Section 2:120(3) DCC cannot be convened. | | | | “28.1Met inachtneming van enige dwingende bepaling van de wet en enig hoger quorum bedongen in deze Statuten, kan de Algemene Vergadering slechts besluiten nemen indien meer dan helft van de geplaatste en uitstaande aandelen in het kapitaal van de Vennootschap aanwezig of vertegenwoordigd is in de Algemene Vergadering. |
| | |
Resolutions proposed to the General Meeting by the Board shall be adopted by a simple majority unless the law or the Articles of Association determine otherwise. Unless another majority of votes or quorum is required by virtue of the law, all other resolutions shall be adopted by at least a two thirds majority of the votes cast, provided such majority represents at least half of the issued share capital. | | | | Besluiten op voorstel van het Bestuur worden door de Algemene Vergadering genomen bij volstrekte meerderheid van de uitgebrachte stemmen, tenzij de Statuten of de wet anders bepalen. Tenzij de wet een andere meerderheid of quorum voorschrijft, worden alle overige besluiten genomen met een tweederde meerderheid van stemmen, welke meerderheid ten minste de helft van het geplaatste kapitaal vertegenwoordigt. |
| | |
For the purpose of this paragraph 28.1, a second meeting referred to in article 120, paragraph 3 of Book 2 Dutch Civil Codecannot be convened.” | | | | Voor de toepassing van dit artikel 28.1 kan een tweede vergadering als bedoeld in artikel 120, lid 3 van Boek 2 Burgerlijk Wetboekniet worden gehouden.” |
Shareholders at the Annual General Meeting will only be able to resolve to amend the Articles of Association at the proposal of the Board. A proposal to amend the Articles of Association whereby any change would be made in the rights which vest in the holders of shares of a specific class in their capacity as such, shall require the prior approval of the meeting of holders of the shares of that specific class.
THE BOARD RECOMMENDS A VOTE “FOR” THE AMENDMENT OF THE COMPANY’S ARTICLES OF ASSOCIATION.
32
ITEM 11:NON-BINDING, ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
We are providing the following
non-binding, advisory vote to approve the compensation of our Named Executive Officers as required under Section 14A of the Exchange Act. We are requesting our shareholders to approve, on a
non-binding, advisory basis, the compensation of our Named Executive Officers as disclosed in the Compensation Discussion & Analysis (“CD&A”), related compensation disclosure tables and narrative disclosures of this proxy statement.
For the reasons more fully discussed in the CD&A, the Board unanimously recommends a vote “For” the following resolution:
“RESOLVED, that the shareholders approve, on a
non-binding, advisory basis, the compensation of the Named Executive Officers, as disclosed pursuant to Item 402 of Regulation
S-K, including the Compensation Discussion and Analysis, the accompanying compensation tables and related narrative disclosure in this proxy statement.”
You may vote “For” or “Against” this proposal, or you may abstain from voting. Although the vote on this Item
118 is advisory and
non-binding, the
Human Resources and Compensation Committee and the Board will review the voting results on the proposal and will consider shareholder views in connection with our executive compensation program. For shareholders to adopt the
non-binding resolution approving the compensation of our Named Executive Officers, a majority of the votes cast must vote “For” this proposal. Abstentions and broker
non-votes will be entirely excluded from the vote and will have no effect on the outcome of this proposal.
The Board has determined that the current frequency of our “say-on-pay” advisory vote shall be annually, and the next “say-on-pay” advisory vote will be held at our 2024 AGM.
THE BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE
NON-BINDING, ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION.
Richard L. Clemmer (1951, American). Mr. Clemmer became executive director and Chief Executive Officer of NXP on January 1, 2009. Mr. Clemmer will be succeeded as Chief Executive Officer by Kurt Sievers immediately after the AGM and will not stand forre-election as executive director at the AGM. Prior to his role as Chief Executive Officer, he was a senior advisor to KKR & Co., Inc., a private equity firm, a position he held from May 2007 to December 2008. Mr. Clemmer previously served as President and Chief Executive Officer of Agere Systems Inc., an integrated circuits components company that was acquired in 2007 by LSI Logic Corporation, from October 2005 to April 2007. Mr. Clemmer is a member of the board of directors and Chairman of Privafy, Inc., a security SaaS company, and he is a member of the board of directors of NCR Corporation and HP Inc.
Kurt Sievers(1969, German).
Mr. Sievers is currentlyexecutive director, president and memberchief executive officer since May 2020, after a successful track record as the president of the management team,NXP, overseeing all of the company’s business lines. As discussed above, Mr. Sievers was nominated by the Board for appointment as executive director in connection with his appointment as Chief Executive Officer. In addition, he is Managing Director at NXP Semiconductors Germany GmbH.lines, since 2018. Mr. Sievers joined NXP in 1995, and rapidly moved through a series of Marketing & Sales, Product Definition & Development, Strategy and General Management leadership positions across a broad number of market segments. He has been a member of the executive management team since 2009, where he has been instrumental in the definition and implementation of the NXP High-Performance Mixed Signal strategy. In 2015, Mr. Sievers was influential in the merger of NXP and Freescale Semiconductor. Mr. Sievers serves on the Boardboard of the German National Electrical and Electronics Industry Association (ZVEI), the Global Semiconductor Alliance (GSA) and chairsCapgemini S.E. Mr. Sievers is president of ESIA (European Semiconductor Industry Association). He chaired the Advisory Boardadvisory board of the international trade-fair Electronica.Electronica until June 2021. He is also serves as a board memberpresident of PENTA and AENEAS, the clustersan industrial association for application and technology research in Europe on nano-electronics. In his role as managing director for NXP Germany,Mr. Sievers serves as a member of the Asia-Pacific-Committee of German Business (APA) and as a member of the Boardboard at the German Asia-Pacific Business Association (OAV), acting as the spokesperson for the Republic of Korea.
Mr. Sievers earned a master’s degree in physics and information technology from Augsburg University, Germany.
Peter Kelly (1957,William Betz (1977, American).
Mr. KellyBetz is executive vice president, chief financial officer and a member of the management team. He joined NXP in March 2011In this role, he is responsible for all aspects of the company’s financial and serves as NXP’s chief financial officer.accounting functions including treasury, investor relations, audit, tax and mergers and acquisitions. Mr. KellyBetz has over 30more than 20 years of applicablefinance experience in the global technologysemiconductor industry and has extensivewith a strong track record focused on results. Prior to joining NXP in 2013 he held several financial expertise having worked in financial managementleadership positions in several other companies, including as CFO of UGI Corp.with Fairchild Semiconductors, LSI Logic and Agere Systems Inc.Systems. Prior to being named CFO in October 2021, Mr. Kelly also serves onBetz was senior vice president, business planning & analytics and finance business group controller for NXP’s business lines and shared service centers, and led the boardcorporate financial planning, analysis and is Chairbusiness intelligence teams. Mr. Betz holds a Master of Business Administration from the Audit CommitteeUniversity of Plexus, Corp.Chicago Booth School of Business and a Bachelor of Science in Business Administration from West Virginia University.
33
Christopher Jensen (1969, American)
EXECUTIVE OFFICERS (continued)
Stephen Owen (1960, Dutch). Mr. OwenJensen is executive vice president, global sales & marketing and member of the management team. He has extensive experience in developing business internationally and served in various marketing and sales leadership positions at NXP and Philips since 1998.
David Reed (1958, American). Mr. Reed is executive vice president of Technology and Operations at NXP. He joined NXP in 2015, having served as general manager at Freescale until the merger with NXP. He has 30 years of extensive international experience with global execution of fabs, assembly/test, packaging, R&D, foundries and joint ventures for Analog, Automotive, Logic and Wireless customers. He joined Freescale Semiconductor in 2012 as Senior Vice President, Manufacturing Operations. Previously he was vice president and general manager at GLOBALFOUNDRIES. He began his career at Texas Instruments in 1984 where he held multiple overseas and leadership assignments.
Keith Shull (1951, American). Mr. Shull is executive vice president and chief human resources officer for NXP. He joined NXP in 2015 and has over 35 years of experience, having led global HR organizations in a range of industries worldwide, including Arrow Electronics, Visteon and Walter Energy.
Jennifer Wuamett (1965, American). Ms. Wuamett is executive vice president, general counsel, secretary of our board of directors and member of the management team and has served in this role since September 2018.June 2020. In this role, he is responsible for all aspects of the Company’s global human resources function, the Company’s people strategy and fostering an inclusive culture to achieve NXP’s business objectives.
Mr. Jensen has been with NXP since the merger with Freescale in 2015 and was integral to the cultural integration of the two companies. He has extensive experience in leading the various functions across human resources, with strength in change management, compensation and benefits design, and mergers and acquisitions. Prior to Freescale, Mr. Jensen held executive human resources positions at Applied Materials and Tandem Computers. Mr. Jensen also serves as an adjunct professor at Baylor University, teaching in their Executive MBA Program.
Ron Martino (1965, American)
Mr. Martino is executive vice president of global sales and member of the management team. In this role, he is responsible for driving the company’s top line growth initiatives, enabling solutions in support of our customers and ensuring high customer satisfaction. Mr. Martino is an established leader with more than 30 years of experience in the microelectronics business focused on automotive electronics, embedded processing applications, high performance computing applications and semiconductor research and development. Mr. Martino's prior responsibilities include executive vice president and general manager of Edge Processing and general manager of the i.MX application processor business across automotive and industrial applications. Additionally, he led NXP’s global microcontroller R&D organization, developing products for multiple application segments. Mr. Martino joined Freescale (now NXP) in February 2008 from IBM, where he worked for 20 years focusing on high performance computing, networking, radio frequency (RF) communication, and gaming microelectronics.He holds a Master of Science from University of Vermont and a Bachelor of Science from Drexel University.
Andrew Micallef (1965, American)
Mr. Micallef is executive vice president of global operations at NXP and a member of the management team. He joined NXP in May 2021 and is responsible for creating and executing NXP’s end-to-end manufacturing, quality and supply chain strategies. Mr. Micallef has more than 20 years of semiconductor industry experience, including senior operational roles overseeing manufacturing, procurement, supply chain management, logistics, quality, product and test engineering, information technology and facilities. Prior to NXP, Mr. Micallef was chief operations officer for Marvell. Prior to that, he held operations leadership roles at Intersil Corporation, Audience, LSI Corporation and Agere Systems.
Jennifer Wuamett (1965, American)
Ms. Wuamett is executive vice president, general counsel, corporate secretary and a member of the management team for NXP since 2018, and chief sustainability officer since 2022. In this role, she is responsible for worldwide legal, governance, compliance and intellectual property matters for NXP and for oversight of NXP’s environmental, social and governance (ESG) and risk programs. Previously, Ms. Wuamett served as Senior Vice Presidentsenior vice president and Deputy General Counseldeputy general counsel at NXP. Prior to that, she was
Freescale’s Senior Vice President, General Counselsenior vice president, general counsel and Secretarysecretary and has served in various other positions at Freescale and Motorola sincebeginning in 1997. Ms. Wuamett is also on the board of directors of Plexus Corp.
34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information regarding beneficial ownership of our common shares as of March
29, 2020,27, 2023, by:
each•Each person or entity who is known by us to beneficially own more than 5% of our common shares;
each•Each of our directors;
current directors and director nominees;each•Each of the Named Executive Officers; and
all•All of our current directors and executive officers as a group.
Percentage computations are based on
279,001,118259,735,302 common shares outstanding as of March
29, 202027, 2023 and excludes
36,518,52014,784,336 treasury shares held by the Company.
Beneficial ownership is determined in accordance with the rules of the SEC. Each person named in the table has sole voting and investment power with respect to all of the securities shown as beneficially owned by such person, except as otherwise set forth
above and in the notes to the table.
Information with respect to each fund described in the table is based on information provided to us by such funds. Unless otherwise indicated, the address of each person named in the table is c/o NXP Semiconductors N.V., High Tech Campus 60, 5656 AG, Eindhoven, The Netherlands.
| | | | | | | | |
Name of Beneficial Owner | | Common
Shares
Beneficially
Owned | | | % of
Common Shares
Beneficially
Owned | |
FMR LLC1 | | | 24,660,005 | | | | 8.84 | % |
T. Rowe2 | | | 24,617,255 | | | | 8.82 | % |
BlackRock, Inc.3 | | | 16,560,729 | | | | 5.94 | % |
Richard L. Clemmer4,5 | | | 987,612 | | | | * | |
Sir Peter Bonfield6 | | | 27,300 | | | | * | |
Kenneth A. Goldman6 | | | 24,589 | | | | * | |
Josef Kaeser6 | | | 39,556 | | | | * | |
Lena Olving6 | | | 1,749 | | | | * | |
Peter Smitham6 | | | 5,641 | | | | * | |
Julie Southern6 | | | 12,581 | | | | * | |
Jasmin Staiblin6 | | | 1,749 | | | | * | |
Gregory Summe6,7 | | | 13,342 | | | | * | |
Karl-Henrik Sundström6 | | | 1,749 | | | | * | |
Kurt Sievers4 | | | 77,150 | | | | * | |
Peter Kelly4,8 | | | 314,861 | | | | * | |
Stephen Owen4 | | | 1,883 | | | | * | |
David W. Reed4 | | | 48,385 | | | | * | |
Directors and executive officers as a group9 | | | 1,574,968 | | | | * | |
* | Represents less than 1%.
|
1. | Information about the number of common shares owned by FMR LLC (“FMR”) on December 31, 2019, is based solely on a Schedule 13G filed by FMR LLC with the SEC on February 2, 2020, reporting share ownership as of December 31, 2019. The address of FMR is 245 Summer Street, Boston, Massachusetts 02210. FMR, along with certain of its subsidiaries and affiliates, and other companies, beneficially owned an aggregate of 24,660,005 common shares, has sole power to vote 2,929,729 shares and the sole power to dispose of 24,660,005 shares of our common stock. Abigail P. Johnson is a Director, the Chairman, and the Chief Executive Officer of FMR. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR, representing 49% of the voting power of FMR. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR.
|
35
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(continued)2. | Information about the number of common shares owned by T. Rowe Price Associates, Inc. (“T. Rowe”) on December 31, 2019, is based solely on a Schedule 13G/A filed by T. Rowe with the SEC on February 14, 2020. T. Rowe’s address is 100 E. Pratt Street, Baltimore, Maryland 21202. T. Rowe beneficially owned an aggregate of 24,617,255 common shares, has sole power to vote 9,092,895 shares and the sole power to dispose of 24,600,772 shares of our common stock.
|
3. | Information about the number of common shares owned by BlackRock, Inc. (“Blackrock”) on December 31, 2019, is based solely on a Schedule 13G filed by Blackrock with the SEC on February 10, 2020. Blackrock’s address is 55 East 52nd Street, New York, NY 10055. Blackrock beneficially owned an aggregate of 16,560,729 common shares, has sole power to vote 15,010,079 shares and the sole power to dispose of 16,560,729 shares of our common stock.
|
4. | These amounts include shares that may be acquired upon exercise of stock options that are currently exercisable or will become exercisable within 60 days of March 29, 2020, as follows: 138,734 shares for Mr. Clemmer, 35,886 shares for Mr. Sievers, 206,346 shares for Mr. Kelly and 30,143 shares for Mr. Reed.
|
5. | Includes 5,000 and 100 shares held by his spouse and son respectively.
|
6. | Includes 1,749 RSUs that vest within 60 days of March 29, 2020.
|
7. | Includes 3,000 shares held by the G L Summe Irrevocable Trust.
|
8. | Includes 40,000 shares held by 2019 GRAT.
|
9. | Includes 419,503 shares that may be acquired upon exercise of stock options that are currently exercisable or will become exercisable within 60 days of March 29, 2020.
|
36
| | | | | | | | |
| Name of Beneficial Owner | Common Shares Beneficially Owned | % of Common Shares Beneficially Owned |
JPMorgan Chase & Co.(1) | 26,696,565 | 10.27% |
FMR LLC(2) | 23,391,863 | 9.00% |
BlackRock, Inc.(3) | 18,070,515 | 6.95% |
| Kurt Sievers | 176,085 | * |
Jennifer Wuamett(4) | 53,963 | * |
| Sir Peter Bonfield | 17,224 | * |
Gregory Summe(5) | 15,525 | * |
| Julie Southern | 11,071 | * |
| Christopher Jensen | 10,196 | * |
| Jasmin Staiblin | 5,817 | * |
William Betz(6) | 5,397 | * |
| Karl-Henrik Sundström | 3,679 | * |
| Lena Olving | 3,673 | * |
| Andrew Micallef | 1,498 | * |
| Annette Clayton | 2,194 | * |
| Anthony Foxx | 2,194 | * |
| Chunyuan Gu | 1,482 | * |
| Moshe Gavrielov | — | * |
Directors and current executive officers as a group (16 individuals)(7) | 326,182 | * |
* Represents less than 1%. 1.Information about the number of common shares owned by JPMorgan Chase & Co. (“JPMorgan”) on January 31, 2023, is based solely on a Schedule 13G/A filed by JPMorgan with the SEC on February 9, 2023. JPMorgan’s address is 383 Madison Avenue New York, NY 10017. JPMorgan beneficially owned an aggregate of 26,696,565 common shares, has sole power to vote 23,418,305 shares and the sole power to dispose of 26,969,565 shares of our common stock, as well as the shared power to vote 160,073 shares and the shared power to dispose of 271,408 shares of our common stock. 2.Information about the number of common shares owned by FMR LLC (“FMR”) is based solely on a Schedule 13G/A filed by FMR with the SEC on February 9, 2023, reporting share ownership as of December 31, 2022. The address of FMR is 245 Summer Street, Boston, Massachusetts 02210. FMR, along with certain of its subsidiaries and affiliates, and other companies, beneficially owned an aggregate of 23,391,863 common shares, has sole power to vote 21,801,740 shares and the sole power to dispose of 23,391,863 shares of our common stock. Abigail P. Johnson is a Director, the Chairman, and the Chief Executive Officer of FMR. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR, representing 49% of the voting power of FMR. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed to form a controlling group with respect to FMR. 3.Information about the number of common shares owned by BlackRock, Inc. (“Blackrock”) on December 31, 2022, is based solely on a Schedule 13G/A filed by Blackrock with the SEC on February 13, 2023. Blackrock’s address is 55 East 52nd Street, New York, NY 10055. Blackrock beneficially owned an aggregate of 18,070,515 common shares, has sole power to vote 16,358,825 shares and the sole power to dispose of 18,070,515 shares of our common stock. 4.Includes 8,394 shares that may be acquired upon exercise of stock options that are currently exercisable. 5.Includes 3,000 shares held indirectly by the G L Summe Irrevocable Trust. 6.Includes 365 shares held indirectly by custodial account for child. 7.Includes 8,394 shares that may be acquired upon exercise of stock options that are currently exercisable.
|
Compensation Discussion & Analysis
This Compensation Discussion and Analysis (“CD&A”) describes our
20192022 executive compensation program for the following executive officers (collectively, the “Named Executive Officers” or “NEOs”):
| | | | | |
| Name | | Title |
Richard Clemmer
Kurt Sievers | | Executive Director, President and Chief Executive Officer |
Kurt Sievers
William Betz | | President |
Peter Kelly
| | Executive Vice President and Chief Financial Officer |
Stephen Owen
Christopher Jensen | Executive Vice President and Chief Human Resources Officer |
| Andrew Micallef | Executive Vice President Global Sales and MarketingOperations |
David Reed
Jennifer Wuamett | | Executive Vice President, TechnologyGeneral Counsel and OperationsChief Sustainability Officer |
We encourage shareholders to understand
NXP pays for the performance and contributions of our beliefs in rewarding our executives. Therefore, we are providingNEOs through an overviewintegrated rewards program with a variety of the philosophies, principles and practices that we employ, as governed by the Board of Directors of NXP (the “Board”).components. The NEOs, under the leadership of our Executive Director, President and Chief Executive Officer (our “CEO”) and the other members of the Board, are held accountable for delivering results, while simultaneously creating a culture of innovation and customer focus.growth.
This CD&A explains our strategy in incentivizing, compensating and rewarding our NEOs. We are providing an overview of the philosophies, principles, and practices that we employ, as governed by the Board of Directors of NXP (the “Board”). The compensation of our CEO is determined by
the HRCC under a delegation from the Board in accordance with the principles set forth in the remuneration policy for executive and
non-executive directors previously approved by our general meeting of shareholders, as required under Dutch corporate law.
2019 Performance
| | |
2022 Was a Strong Year “The semiconductor industry is on an exciting journey of transformation. As part of our ongoing strategy, NXP will continue to prioritize and protect our R&D investments and address our accelerated growth areas, driven by our automotive and core industrial businesses, to help drive long-term, profitable growth.” Kurt Sievers, President and CEO |
2022 Financial and Operational Context
In 2022, NXP had strong execution that resulted in record revenue, solid profit growth, and healthy free cash flow generation. We also saw unprecedented year-on-year design win traction across our entire portfolio. Overall, we continue to focus on investing in solutions that will drive long-term, profitable growth, superior free cash flow and robust capital returns to our shareholders. Our strategy is to attain high relative market share positions within our target end markets, enabling our customers to succeed.
Our financial performance in 2022 was strong despite the continued supply chain challenges. Given the softening demand environment through the second half of 2022, we have adopted a vigilant operational stance, aiming to improve service to those customers who continue to experience material shortages while managing the distribution channel inventory levels well below our long-term targets. In 2022, we:
•Delivered Strong Despite Market HeadwindsIn 2019, the global semiconductor market in which NXP competes experienced a significant decline dueYear-on-Year Revenue Growth
: Revenue was $13.21 billion, up 19.4% year-on-year. •Continued to Drive Robust Profitability: GAAP gross profit was $7.52 billion, up 23.9% year-on-year, equating to a varietyGAAP gross margin of macroeconomic dynamics that were generally outside56.9%, up 210 bps from 2021. Non-GAAP gross profit was $7.64 billion, up 23.2% year-on-year, equating to a non-GAAP gross margin* of the control of our management team (e.g.57.9%,US-China trade disputes, global supply and demand dynamics, political uncertainty, delayed capital investment decisions by a number of companies). This resulted in revenue reductions across the industry and for NXP. Despite these challenges, we achieved a number of financial, strategic, and operational successes during 2019:
* | non-GAAP gross margin andnon-GAAP operating margin are financial measures that do not comply with US GAAP. Appendix A to this Proxy Statement quantifies and reconciles these measures to the comparable US GAAP financial measures.
|
Following the termination of the Qualcomm acquisition in July 2018, 2019 marked the first full fiscal year of there-established NXP. up 180 bps from 2021. We continued to implementinvest in our strategic business plan that sets us on a solid path for growthpeople and increasing shareholder value, while also maintaining the flexibilitytechnology portfolio so as to adjust to the ever-changing global market environment. The business plan also ensures we meetdeliver unique and differentiated products enabling our customers’, employees’ and other stakeholders’, including suppliers’ and local communities’, needs while maximizing shareholders’ returns.
37
EXECUTIVE COMPENSATION (continued)
Furthermore, we continued to maintain a high standard with respect to incentive plan goal setting, even in the face success. GAAP operating expenses were $3.72 billion, up 6.9% year-on-year or 28.2% of the market headwinds we experienced during 2019. Our strong commitment to our pay for performance philosophy was reflected in the performance goals we established for 2019, and ultimately in the results and amounts thatrevenue. Non-GAAP operating expenses* were earned$2.86 billion, up 11.4% year-on-year or vested under our annual and long-term incentive programs for our NEOs.
Perspectives on Shareholder Performance
On October 27, 2016, Qualcomm and NXP announced an agreement in which Qualcomm would acquire NXP for $110 per share; on February 20, 2018, the agreed price was increased to $127.50 per share. After failing to receive the necessary regulatory approvals in China, Qualcomm ultimately dropped its acquisition bid on July 26, 2018.
Company performance and its link to pay for performance is often measured via a company’s three-year total shareholder return (“TSR”). However, a three-year analysis is not an appropriate reflection21.6% of management performance in the case of NXP as management had very little influence on NXP’s stock price performance in the first half of the three-year period ending December 31, 2019, given the Qualcomm transaction period.
Following the acquisition announcement andrevenue consistent with most transactions, NXP’s stock price immediately increased to at or near the acquisition price in the fall of 2016 and traded within a narrow range, and tighter than our peer group average over the same period, until the dealstated long term non-GAAP financial model. Taken together GAAP operating income was terminated inmid-2018. During this time, NXP’s management had very little potential influence on the stock price, regardless of management’s actions and the organization’s success. Once the transaction was terminated and after a period of volatility driven by the change in our shareholder base, NXP’s stock price began to trade again based on management’s decisions, company performance and the general market conditions.
Thus, instead of comparing results since the beginning of 2017, a more appropriate comparison is to review NXP’s results relative to its peers since the acquisition was officially terminated. Any assessment of pay for performance alignment should also be conducted in this manner. NXP’s stock price performance was strong in 2019, both on an absolute basis and relative to our peers, with our stock price ranging from $71.56 on January 2, 2019$3.8 billion, up 47% year-on-year, equating to a highGAAP operating margin of $129.50 on December 20, 2019. While stock price performance is unpredictable, we believe that strong, stable leadership28.8%, up 550 bps from 2021, and aligned shareholderour non-GAAP operating profit* was $4.79 billion, up 31.6% year-on-year, equating to a non-GAAP operating margin* of 36.3%, up 340 bps points from 2021.
•Generated Strong Cash Flow: Full-year cash flow from operations was $3,895 million, with net capex investments of $1,061 million, resulting in non-GAAP free cash flow of $2,834 million up 22.6% year-on-year or 21% of revenue*.
•Returned Consistent and Company interests are contributing factors. The following table shows NXP’s stock price performance following the terminationRobust Capital to Shareholders: NXP returned $2.24 billion to shareholders through previously announced share repurchases (8.33 million shares for a total cost of the acquisition in July 2018 to the end of 2019.
NXP initiated a sharebuy-back program which has reduced the$1.43 billion) and cash dividends ($815 million), reducing our diluted share count by 19%approximately 4%.
*non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating profit, non-GAAP operating margin and non-GAAP free cash flow are financial measures that do not comply with direct impactUS GAAP. Appendix A to this Proxy Statement quantifies and reconciles these measures to the shareholders. comparable US GAAP financial measure.
Accelerating Profitable Growth
In 2018,2022, our extraordinary accomplishments supported our overall strategy and product portfolio, including the following:
| | | | | |
AUTOMOTIVE | •Significant updates to our industry-leading automotive radar portfolio, which included ramping our flagship automotive radar processor into mass production, while also introducing a new processor that extends 4D imaging radar’s benefits to a much larger number of vehicles •Started production of our 2nd generation 77GHz RFCMOS radar transceivers for ADAS and autonomous driving •Introduced the S32K39 series of microcontrollers for electric vehicle control applications, optimized to extend driving range and provide a smoother EV driving experience •Expanded global customer engagements for the S32 family of automotive processors, including a major OEM selecting the S32 family for its fleet of future vehicles •Won the 2022 Embedded Award in the hardware category for the S32Z and S32E real-time processors which help streamline today’s software development needs •Launched automotive TSN Ethernet Switch with integrated 100BASE-T1 PHYs for next generation vehicle architectures •Won the prestigious BMW Innovation Award for UWB smart car access solution, supporting NXP’s innovation leadership in this important market segment |
| |
INDUSTRIAL AND IOT | •Expanded the industry’s broadest Matter portfolio with two new wireless MCUs designed to simplify the development of IoT and industrial IoT solutions •Continued the expansion of our EdgeVerse™ portfolio for the intelligent edge with the introduction of the MCX portfolio of microcontrollers, combining the capabilities of NXP’s popular LPC and Kinetis MCUs to support a broad array of industrial and IoT edge applications, as well as the i.MX RT 1180 crossover MCU to support both real-time Ethernet and Industry 4.0 systems •Announced a new tri-radio chip that makes it easy to add Matter, as well as Wi-Fi 6, Bluetooth 5.2, and Thread, to smart home devices •Announced ultra-low power Bluetooth® audio solution NXH3675 to help revolutionize the wireless listening and hearing experience |
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MOBILE | •Collaborated with ING and Samsung to pilot the industry’s first UWB-based, peer-to-peer payment application which allows people to transfer money by simply pointing their phone at another person's smartphone •Powered the Xiaomi Redmi Note 10T smartphone with our SN110 convergence eSIM solution |
| |
COMMUNICATION INFRASTRUCTURE | •Helped expand 5G coverage with new family of RF power discrete solutions that enable smaller, lighter weight 5G radios to ease deployment in urban and suburban areas •Improved 5G network coverage and quality with new NXP 5G front end solutions with our new higher power RX Front End Modules (FEM) and pre-drivers for 5G massive MIMO and our silicon germanium (SiGe) process |
| |
Our People: The Heart of NXP
We are committed to our purpose to bring together bright minds to create breakthrough technologies that make the connected world better, safer and more secure. In delivering this purpose and living our values we:
•Maintained our significant investment in R&D, especially focused on growing and preserving critical R&D talent to continue delivering projects and setup future growth
•Continued to take targeted actions to ensure talent continuity, recognizing that a loss of our key management and other team members, or an inability to attract qualified new team members, could negatively impact our business in a highly competitive environment
•Drove further progress toward our diversity, equality and inclusion program and commitments to ensure that every team member is able to contribute to their best potential
•Developed and delivered a manager effectiveness program aligned to our values to ensure that all leaders are equipped to lead according to the NXP DNA
We continued to take measures to ensure the safety and well-being of our team members, customers and suppliers, including:
•We executed world-class health and safety protocols at all NXP sites to mitigate the safety risks to our team members who were onsite running our fabrication plants and R&D laboratories
•We continued our commitment to open communications with team members
•We continued focusing on areas of physical, emotional and financial well-being for our team members across the world
Shareholder Engagement and Results of 2022 Advisory Vote on Executive Compensation
At our annual general meeting of shareholders held on June 1, 2022, we also initiatedreceived approximately 92% of the votes in favor of the proposal to approve our NEOs’ compensation, on a dividendnon-binding, advisory basis. This represented a significant improvement from our 2021 results, a result of our multi-year effort to increase the overall shareholder support for our compensation program. We recognize the importance of engaging with our shareholders to ensure that we understand their perspectives about our compensation program which was increasedphilosophy and design.
Our investor outreach efforts were aimed at supporting two major goals. First, we maintained a consistent, proactive and timely engagement with current and potential shareholders to present our long-term strategy, the tangible proof points and measurement of our execution and our resulting financial performance. These engagements are undertaken throughout the year by a combination of our CEO, CFO and other executives. During 2022, our management team held over 450 virtual and in 2019. This program has delivered over $6 Billion in valueperson investor meetings. Second, we facilitated on-going dialogue between the governance and stewardship groups of our major shareholders and key members of our board of directors. These discussions focused on company management oversight, corporate governance, human capital management and environmental, social and governance (ESG) topics.
Following our 2022 AGM, we sent invitations to 9 major investors, representing 28% of shares outstanding, to hold discussions with our board leadership. In September, our Chair of the Board, and the Chairs of the Human Resources and Compensation Committee and Nominating, Governance and Sustainability Committee met with governance and investment stewardship teams of six of our major shareholders, representing approximately 20% of outstanding shares, providing an opportunity for these shareholders to speak directly to
shareholders.our board leadership. In these discussions, our Board members sought ideas and feedback on environmental, social and governance-related matters as well as NXP’s executive compensation program.
What We Heard
The shareholders expressed appreciation for the opportunity to dialogue directly with board members on governance and sustainability issues. A majority of investors expressed support for NXP to issue carbon neutrality goals. The consistent feedback was that we should establish a long-term goal combined with specific intermediate targets. Several shareholders specifically noted that they preferred these goals to be set/verified under the Science Based Targets initiative.
A majority of investors supported using ESG metrics in our compensation plans and noted they favor giving companies flexibility in choosing appropriate metrics and determining whether to include ESG metrics as components of short or long term compensation. The investors also asked that we provide transparent disclosure on why we select certain metrics and how they relate to our business so they could evaluate for appropriateness to our business.
The shareholders with whom we connected generally provided positive feedback on our overall ongoing executive compensation program design and found that we have an appropriate balance of short and long-term rewards, with sufficient performance related elements. They acknowledged our commitment to include sustainability and people metrics in our annual incentive plan and looked forward to understanding the details of these metrics that we outline later in this CD&A. The shareholders also supported the use of relative total shareholder return as a long-term performance metric within our overall compensation program.
In addition to specific comments on executive compensation, shareholders noted that we continued to make progress in 2022 to advance our disclosures regarding human capital as well as diversity, equality and inclusion and expressed a continued interest in understanding important information about our workforce including monitoring and managing team member retention.
We have included an explanation of these topics in the ‘Human Capital Management’ section of this proxy statement beginning on page 9. More details about these topics are included in our 2022 NXP Corporate Sustainability Report which can be found on our website at http://nxp.com/CSR. The contents of our website and our Corporate Sustainability Report are referenced for general information only and are not incorporated by reference in this proxy statement.
How We Responded
Our Board and the Human Resources and Compensation Committee of the Board (the “HRCC” or the “Committee”) thoughtfully evaluated information gathered from our shareholder engagement process and considered it, together with feedback and input from our independent executive compensation consultant, when making decisions throughout the year.
Ongoing Shareholder Engagement
We will continue a regular, proactive shareholder engagement approach with portfolio managers, sector equity analysts and governance teams. We believe that regular engagement with our shareholders is important and will allow us to continue to understand and respond to their questions and concerns on a real-time basis. Throughout this process, we will seek to gain feedback and answer shareholder questions on our business strategy, compensation practices, governance topics, ESG and other related issues.
As previously described in the
Governance‘Corporate Governance’ section of this
Proxy,proxy statement, our long-term strategy is to maximize value for
our shareholders and other stakeholders
and generate strong cash flows.of the Company. By driving
relative market share, exceeding customer expectationsrevenue growth, strong adjusted gross margin and
enhancing the product portfolio as well as developing, rewarding and retaining a highly
engaging our employeesengaged workforce, we
expect to be able to grow 50% faster than the market in general.have shown a strong return for shareholders. Our purpose
is bringing together bright minds to create breakthrough technologies that make the connected world better, safer, and
goalmore secure. This purpose is
to provide Secure Connections for a Smarter World, a mission inspiredreinforced by our
customer-focused passion to win.values of innovation, expertise, collaboration, ownership and growth built on a foundation of trust and respect. We have directly
and deliberately linked NEO pay to stakeholder interests
and to the innovations we deliver through our products.38
including shareholders. This will be discussed in detail in following sections of this CD&A.
EXECUTIVE COMPENSATION (continued)
We operate globally and our executives are located in multiple countries. As a result, our pay philosophy considers both the overall importance of consistency across the geographiesworld and specific competitive pay practices in which we operate andthe local country where our executive talent resides, as well as the need to ensure competitive practices within a local country. resides. Our overarching pay strategy is to:
| | |
| Pay for Performance — delivering highly competitive overall pay for market leading performance. |
Our executive compensation program is designed to:
✓ | Enable the organization toattract, retain, motivate and grow highly qualified talent with competitive and comprehensive programs
|
✓ | Align to stakeholder interests, including shareholders, customers, employees, suppliers, as well as local and international communities where we operate, by delivering short and long term corporate strategic goals
|
✓ | Create, develop and reward oursmart, dedicated, hard-working and innovative executive and management team
|
✓ | Reward bothcollective and individual performance with highly competitive rewards for outstanding performance consistent with our top pay for superior performance
|
✓ | Deliverfiscally sound practices while maximizing the value to individuals and NXP
|
✓ | Align to and rewarddemonstration of corporate values in support of our strong corporate culture
|
✓Align to stakeholder interests, including shareholders, customers, team members, suppliers, as well as local and international communities where we operate, by delivering short and long term corporate strategic goals
✓Enable NXP to attract, retain, motivate, and grow highly qualified talent with competitive and comprehensive programs
✓Hire, develop, and reward our dedicated, hard-working and innovative team members
✓Reward both collective and individual performance
✓Ensure fiscally sound practices while maximizing the value of the various compensation programs to individuals and NXP
✓Align to and reward demonstration of corporate values in support of our strong corporate culture
✓Focus our innovations and rewards on our commitment to sustainability
Key Practices in Determining Executive Compensation
The compensation of our CEO
Mr. Richard Clemmer, is determined by
the HRCC under delegation from the Board, in accordance with the principles set forth in the remuneration policy for executive and
non-executive Directors directors previously approved by our general meeting of shareholders, as required under Dutch corporate law.
The compensation of our other NEOs is also
governeddetermined by the
BoardHRCC with
a number of specific actions taken to ensure the direct connection of rewards to key performance outcomes aligning executive pay to short and long-term stakeholder interests. Overall, our programs are competitive in the
marketplaceindustry and highly incentive-based, with a
majoritylarge percentage of
overall compensation
at-risk which can be ‘at-risk’ earned via our
shortshort- and
longlong- term incentive programs based on overall Company and individual performance.
| | | | | |
| What We Do | | | | What We DoNOT Do |
| | | | |
✓Emphasizepay for performance
✓Tie a significant majority of our executives’ pay to Company performance
✓Use both long- and use multipleshort-term performance metrics both long
✓Cap annual incentive and short term✓ Cap incentivelong-term performance share unit plan payouts at 200% of target
✓ Maintain meaningful stock ownership guidelines for executives and Directors✓ Use an independent Compensation Consultant to guide the Compensation plans
✓
Include a “double-trigger” provision under our cash and equity incentive plans in the event of achange-in-control
✓Maintain meaningful stock ownership guidelines for executives and directors
✓Use an independent executive compensation consultant to guide the design of compensation plans
✓Evaluate competitive market practices to establish program design and targeted payout amounts
✓Conduct an annual risk assessment of our compensation programs
✓Maintain a robust clawbackclaw back policy consistent with Dutch corporate law covering cashthe executive director and equity incentive plan awards for executives and DirectorsCEO
✓Follow principles of our shareholder approved executive andnon-executive director remuneration policy
✓Conduct board-level outreach to shareholders to elicit feedback on our compensation program
✓Cap PSUs potentially earned at 100% of target if total shareholder return for the performance period is negative, regardless of the Company’s relative performance compared to the Peer Group
| | | | × Re-price options
×
✗Provide for guaranteed salary increases or payouts for performance-based awards×
✗Provide dividends or dividend equivalents on unearned performance share units
✗Provide for excise taxgross-ups× resulting from M&A activity or terminations
✗Provide for excessive separation payments, liberal definitions of change in control, or single-trigger cash severance upon a change in control
✗Provide above market returns on deferred compensation plans×
✗Permit short sales, hedging, and transactions involving derivatives of our stock×
✗Provide personal loans, guarantees or other similar arrangements to executives
✗Allow the pledging of Company stock by directors, executive officers, and certain other employees
✗Re-price or buyout options without shareholder approval
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39
EXECUTIVE COMPENSATION
(continued)Proactive Shareholder Engagement
We recognize the importance of regular engagement, communication, and transparency with our shareholders. As a result, we maintain an ongoing process to proactively engage with existing and potential shareholders to provide insights into the operating performance of the Company. Throughout this process, we seek to gain feedback on our business strategy, compensation practices, governance topics, and other related issues. During 2019, management held discussions with a cross-section of our shareholders owning 60 – 70% of our shares at the time. Consistent with past practice, management and members of the Board continued ongoing engagement with shareholders and the investment community. In connection with these discussions, our shareholders approved the 2019 Omnibus Incentive Plan which provides for parameters of cash and equity-based incentive awards for employees including our NEOs.
Our Board and executives thoughtfully considered and evaluated important information and decided upon the most appropriate next steps considering all relevant stakeholders. We believe our current executive compensation programs reflect current market practices and align with our shareholder concerns. Especially important is the connection between our operational and financial goals and results to the pay of our executives along with the benefit of our shareholders. We look forward to continuing the engagement process in future years.
Key Components of Our Executive Compensation Program
| | | | | | | | |
Pay Component | Approach and Structure | What It Does
| | How it Reinforces
Connection to Our Compensation Philosophy
and 2022 Key Points |
| | |
| | |
Base Salary | | •Provides a competitive fixed component of cash compensation based •Based on an individual’s role, experience, capability and contributions aligned with •Reviewed annually against competitive benchmarks in local, regional and global talent markets | | •Attracts, retains, motivates, and enables us to develop highly qualified executive leaders •Key Point: 2022 salary increases to align with market levels and increases of responsibility and tenure for NEOs |
| | |
| | |
Annual Incentive Plan (“AIP”) | | •Variable, at-risk compensation •Rewards achievement of business/function, and/or overall corporate results against key Company near-term goals •Performance measures and targets evaluated semi-annually and set by the Board •Focuses on absolute revenue growth, non-GAAP gross margin and annual sustainability goals | | •Rewards Company performance against challenging short-term targets, with highly competitiveappropriate and capped rewards for outstanding performance •Key Point: 2022 1H financial performance targets and annual sustainability goals were established at the beginning of the year. 2H performance targets were established midyear to best reflect the market dynamics as discussed further on page 55 Key Point: 2022 performance measures included a sustainability component focusing on environmental and people initiatives |
| | |
| | |
Performance-Based Restricted Stock Units (“PSU”) | | •Meaningfully incents management to execute on our longer-term business objectives driving •Drives long-term shareholder value creation •Vesting based on 3-year cliff using 3-year relative total shareholder return (RTSR) measured against a defined compensation peer group | | •Aligns with shareholder interests by driving superior performance against longer-term corporate financial, operational, and strategic goals •Key Point: Target awards represent 70% of long-term incentive compensation value at time of award for NEOs •Key Point: Payout is capped at 200% for top quartile performance and capped at 100% if RTSR is negative regardless of relative ranking |
| | |
| | |
Restricted Stock Units (“RSU”) | | •Aligns executives’ interests with those of shareholders •Helps the Company retain key talent •Vests ratably over time3 years | | •Aligns with shareholder interests, while also establishing strong retention of our highly qualified executive talent over time •Key Point: Target awards represent 30% of long-term incentive compensation at time of award for NEOs |
| | |
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Benefits and Other Compensation | | •Generally, delivers local programs, consistent with other employees,executives to plan for various life events of our executives; supports •Supports the varying needs of executives operating in a complex, global environment; allowsenvironment •Allows executives to maximize time and attention on activities driving company performance | | •Attracts, retains, motivates, and enables us to develop highly qualified executive leaders while providing a competitive overall total rewards program •Key Point: Benefits and other compensation are generally consistent with those offered to other executives within the same country of residence as the NEOs. We do not offer excessive perquisites to our NEOs |
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40
EXECUTIVE COMPENSATION (continued)
A Large Majority of Our NEOs’ Target Pay is
At-RiskOur performance-based high performance culture andpay-for-performance pay for performance philosophy strongly align the interests of our executivesNEOs with those of our stakeholders. As shown in the following charts, our 20192022 target executive compensation program was focused extensively onheavily weighted towards at-risk compensation. Our CEO has 94% of his target compensation at risk with variable components. More than 68% is directly
linked to performance of the company and himself through the value of his target AIP and performance-based
equity awards, which is 70% of the target LTI award made each year. While these graphs represent target awards made during the year, actual earned pay is impacted directly by performance measures as well as stock price performance during the year. Our other NEOs also have approximately 84% of their target compensation at risk and
at-risk compensation. 62% of their compensation linked directly to performance. These figures include annualized salary, target AIP and annual target equity award grant values. Figures exclude the items outlined in the Summary Compensation Table as All Other Compensation. The average NEO figures exclude the CEO.
Peer Group Analysis and Benchmarking
Competitive data associated with our Peer Group is evaluated annually by the HRCC to:
•Use as the basis for setting target total compensation
•Drive appropriate pay levels to attract, retain, motivate, and develop our executives
•Ensure that we provide market competitive programs—both individually and in aggregate
•Determine relative shareholder return ranking which establishes the vesting of performance-based stock unit plans (see further discussion later in this proxy)
For 2022, NXP's peer group (the "Peer Group") consisted of the following companies:
| | | | | | | | |
 |
| Advanced Micro Devices | Lam Research |  |
| Analog Devices | Marvell Technology | Seagate Technology |
| Applied Materials | Microchip Technology | Skyworks Solutions |
| ASML Holding | Micron Technology | STMicroelectronics |
| Broadcom | NVIDIA | TE Connectivity |
| Corning | ON Semiconductor | Texas Instruments |
| Infineon Technologies | Qorvo | Western Digital |
Peer Group
For
2019,2022, the
Compensation Committee—in conjunctionHRCC — with
assistance from Mercer, the
Compensation Committee’sHRCC’s independent
advisor,executive compensation consultant, and
management—management — reviewed
and updated NXP’s peer group (the “Peer Group”) for use in understandingdetailed data of the Peer Group to understand market competitive pay levels for various executive positions, as well as other competitive compensation practices and plan
designs. To determine the companies to include in the Peer Group, a variety of factors were considered by the Compensation Committee, including revenue, market capitalization, enterprise value, similarities to the industries in which we operate, and the overlapping labor market for top management talent. As a result of this review, the Compensation Committee added three companies to the group for 2019: Marvell Technology Group, Maxim Integrated Products, and Microchip Technology. The Compensation Committee reviews the Peer Group regularly to ensure the most appropriate information is used in making executive compensation decisions.For 2019, our Peer Group consisted of the following companies:
| | |
PEER GROUP |
Advanced Micro Devices
| | Microchip Technology
|
Analog Devices
| | Micron Technology
|
Applied Materials
| | NVIDIA
|
ASML Holding
| | ON Semiconductor
|
Broadcom
| | QUALCOMM
|
Corning
| | STMicroelectronics
|
Infineon Technologies
| | Seagate Technology
|
Lam Research
| | TE Connectivity
|
Marvell Technology
| | Texas Instruments
|
Maxim Integrated Products
| | Western Digital
|
41
design components.
EXECUTIVE COMPENSATION
(continued)Competitive data associated with this Peer Group is evaluated annually by the Compensation Committee to:
Use as the basis for setting target total compensation, after promotions or at time of hire
Drive appropriate pay levels to attract, retain, motivate and develop our executive team
Ensure that we provide market competitive programs—both individually and in aggregate
Calibrate relative shareholder return for purposes of determining the vesting of performance-based stock unit plans (see further discussion later in this proxy)
In addition to our Peer Group, the Compensation Committee,HRCC, along with Mercer and management, reviews compensation information from published surveys in order to assess select roles and provide a broader view of the local and global competitive marketplace. From time to time, we will evaluate information on pay levels and plan designs from other comparable companies that we believe are important for a more comprehensive understanding of our industry and/or broader technology market employment practices. We believe
This market research is used to inform program design principles along with the amount of each pay program and overall total compensation package. The HRCC uses competitive benchmark data focusing on the median of the Peer Group to inform various compensation related decisions including base salary, incentive targets and target equity award levels. While this broader lookbenchmark information is relevantused as a guideline, it is not used as a specific target. Other factors are also considered in certain instancesmaking final decisions for each pay component such as experience, performance, role complexity, leadership capability and impact.
The HRCC reviews the Peer Group annually to ensure the relevance of the members and that the most appropriate comparison is used in
ordermaking executive compensation decisions. To determine the companies to
capture competitorsinclude in the Peer Group , a variety of factors were considered by the HRCC, including revenue, market capitalization, enterprise value, number of employees, similarities to the industries in which we operate, and the overlapping labor market for
customers, capital,top talent. As a result of this review, the HRCC added two new companies to the Peer Group for 2022 – Qorvo and
talent.2019Skyworks Solutions. With the addition of the two new peers, NXP moved closer to the median of the Peer Group in size metrics including revenue, market value and enterprise value. In addition, Maxim Integrated Products was removed from the Peer group due to the completion of its acquisition by Analog Devices. The peer group was last modified in 2019.
2022 Compensation Decisions
Below we provide more details about each pay component and how the related amounts were determined.
Base salary represents annual fixed compensation and is a standard element of our executive compensation program
we believe is necessary to attract and retain talent. The
Compensation CommitteeHRCC reviews
base salaries annually and approves each NEO’s base salary after assessing the following:
An•The individual’s role complexity, performance and contributions, experience, impact and internal equity considerations relative to other executives with similar level roles and responsibilities;
responsibilities•The competitive landscape, including the compensation practices of the companies in our Peer Group (andand, where appropriate, survey data from a broader index of comparable public companies); and
companies•Our business strategy and compensation philosophy.
philosophy•Past actions related to base salary and whether any further change is warranted
After
thoughtful consideration
of all of these factors, the
Compensation Committee decided not to provideHRCC determined the following annualized base
salary increases to any of our NEOs in 2019. As a result, the 2019 annual base salarysalaries for each of
our NEOs was as follows: | | |
Name | | 2019 Annual Salary ($) |
Richard Clemmer
| | $1,345,200
|
Kurt Sievers
| | $745,465
|
Peter Kelly
| | $750,000
|
Stephen Owen
| | $504,450
|
David Reed
| | $525,000
|
the NEOs.
| | | | | | | | | | | | | | |
| Name | Annualized Base Salary
as of December 31, 2022
($) | | Year over Year Increase | |
| | | | |
| Kurt Sievers | 1,140,372
(€1,080,000) | | 8.0 | % | |
| William Betz | 540,000 | | | 20.0 | % | |
| Christopher Jensen | 510,000 | | | 8.5 | % | |
| Andrew Micallef | 535,000 | | | 7.0 | % | |
| Jennifer Wuamett | 550,000 | | | 6.8 | % | |
Note: The average exchange rate of
1.1211.0559 (internal annual average rate) was used to convert from Euros to USD for
Messrs. Clemmer,Mr. Sievers
and Owen who
are eachis paid in Euros.
The year over year increase is based on his salary in Euros.
During the annual review process in June 2022, the HRCC reviewed each of the NEO’s salaries in relation to the market median and also considered other factors such their performance, contribution and experience, any added responsibilities to the role, and for roles other than the CEO, the recommendation of the CEO. When determining the CEO’s salary, the HRCC looked at a number of performance indicators including leadership, team performance, winning culture survey, investor feedback, net promoter score and the general financial performance on the Company. For Mr. Betz, upon taking the role of CFO in 2021, the HRCC acknowledged a need to advance pay incrementally over time to reach a competitive level. For the other NEOs, an assessment of competitive levels and individual contribution determined that an increase to base salary was appropriate in 2022.
The Annual Incentive Plan (“AIP”) is the primary
short-term incentive vehicle that we use to drive performance on
an annuala short term basis. The AIP focuses on
annualfinancial performance metrics critical to NXP’s
success. Thesesuccess that are measured on a six-month performance period. Starting in 2022 NXP also included a sustainability component focusing on environmental and people metrics linked to our sustainability commitments measured over an annual performance period. The financial metrics and goals and their associated performance ranges are established
by the HRCC near the start of each six-month performance period. The sustainability goals and associated performance ranges are established by the HRCC near the start of the
fiscal year and approved by the Compensation Committee.annual performance period. The AIP is a plan under the Company’s 2019 Omnibus Incentive
Plan.42
Plan which was approved by shareholders in 2019.
EXECUTIVE COMPENSATION (continued)
The Compensation Committee alsoHRCC reviews and approves the AIP program and targets at the start of the year for each NEO after holistically considering the individual’staking into consideration:
•Each NEO’s role, experience and expected contributions
•The competitive market for determining targets as a percentage of base salary
•The measures that best reflect the company’s short-term strategy and performance expectations in the fiscal year and their alignment to the Company, market data, and internal equity with other executives with similar level roles and responsibilities. stakeholder interests
The
20192022 AIP targets approved for
theeach of our NEOs
were as follows and remainremained unchanged from
2018:2021. | | | | | |
| Name | | AIP Target
(% of Base Salary)
|
Richard Clemmer
| | 150%
|
Kurt Sievers | | 100%
150% |
Peter Kelly
William Betz | | 100%
80% |
Stephen Owen
Christopher Jensen | | 80% |
David Reed
Andrew Micallef | 80% |
| Jennifer Wuamett | 80% |
For 2019,2022, our AIP had twofive equally weighted components, consisting of financial components within each 6-month performance period and an annual sustainability component, each weighted at 20% of the annual incentive target.
•1H Revenue
•1H Adjusted Gross Margin
•2H Revenue
•2H Adjusted Gross Margin
•Annual Sustainability Scorecard
The overall payout opportunity
is capped at 200% of
target:target. Our NEOs and other members of the management team receive only one AIP payout per year. It is calculated using the average realization from the components above; and any payout earned is made in the second quarter of the following year, i.e. 2022 payments will be made in the second quarter of 2023. The financial and sustainability measures were as follows:
•Revenue Growth & Market Share Gain:: NXP is a market leader in multiple markets. Continuing to growend markets, and our revenues and market leading positioncontinued success is dependent on our ability deliver revenue in these markets,markets. We continued our focus on a straightforward metric related to absolute revenue targets to deliver shareholder value. Specifically, the revenue metric is GAAP revenue as well as expand revenues and market share in our other targeted markets, is vital to our continued successpublicly reported for the two quarters comprising the 6-month performance period.
•Non-GAAP Gross Margin* ExpansionMargin:Non-GAAP Gross Margin gross margin forms the cornerstone to driving our overall profitability. Successfully delivering differentiated new products that drive value to our customers is critical to deliveringdriving profitable growth.
This is consistent with the measure used in the previous three years representing continued focus on gross margin. Non-GAAP Gross Margin is a non-GAAP financial measure. We calculate Non-GAAP gross margin by adjusting Gross Margin to exclude the effects of purchase price accounting, restructuring, stock-based compensation, merger-related costs, and other incidentals. These measures should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.* | Non-GAAP Gross margin is a financial measure that does not comply with US GAAP. Appendix A to this Proxy Statement quantifies and reconciles it to the comparable 2019 US GAAP financial measures.
|
•Sustainability Scorecard: In 2022, the HRCC approved the introduction of a sustainability component to our AIP which contains multiple metrics and short-term targets that support our long-term environmental and people related aspirations. It is important to us that all team members participate in this journey; therefore, these sustainability goals are applicable to
the incentive plan for all team members, including NEOs. The specific goals, why we chose them and our 2022 performance is listed below.
The semiconductor industry historically has experienced cyclical performance, especially in the markets NXP serves. Starting in 2021, NXP developed financial performance targets for each half of the year to be measured and judged independently for purposes of the Annual Incentive Plan. This practice was successful in two ways. First, it allowed us to recognize the volatility that has persisted in the industry and ensure that we are setting the most appropriate performance targets while living up to our commitment not to change performance targets once they are set or make discretionary payments to our NEOs when performance is not achieved due to material external factors. Second, it allowed us to more clearly align to shareholder interests and more transparently communicate with our team members about our performance commitments, building momentum to achieve them. Increased engagement with our team members and clear prior focus has been a very positive outcome of this change.
In 2022, taking the cyclical nature of the industry along with the continued uncertainties of COVID 19 and supply chain challenges, the HRCC determined once again that it was appropriate to set performance targets for two separate financial performance periods near the start of the performance period – i.e. January 1 – June 30, 2022 (“1H 2022 Financial Performance Period”) and July 1 – December 31, 2022 (“2H 2022 Financial Performance Period”), rather than on an annual basis near the start of the year. The sustainability component was established on an annual basis at the same time as the 1H financial performance targets.
They then established the specific performance targets for the second half of the year after the first performance period ended. The performance targets set for each half were intended to improve on the performance of the previous half’s performance. The revenue targets for 1H 2022 and 2H 2022 were approximately 20% and 17% improvements over the actual revenue results of the respective 6-month prior year performance periods. For 2H 2022, the targets set by the HRCC near the start of the 2H 2022 Financial Performance Period were more challenging than if 2H 2022 targets would have been set at the beginning of the full financial year based on our annual operating plan. The adjusted gross margin targets for 1H 2022 and 2H 2022 were approximately 130 and 110 basis point improvements over the actual adjusted gross margin results of the respective 6-month prior year performance periods. Setting targets for each 6-month performance period at the beginning of the performance periods is reflective of the nature of business performance and allows us to better align rewards to realistic performance expectations considering the dynamics of the market. This approach allows the HRCC to consider many factors including significant uncontrollable impacts like COVID and geopolitical pressures as well as changing market conditions.
The semiannual performance periods enabled us to gauge performance and respond to volatility in the market without having to make disruptive mid-cycle modifications, a key philosophy for the program. It also allowed for greater transparency on the progress towards the goals communicated to our team members. For team members other than our NEOs and other members of the management team, payouts were made twice – in October 2022 using the 1H 2022 Performance Period Payout Factor and April 2023 using the 2H Performance Period Payout Factor and Annual Sustainability Payout Factor. This practice has been very well received to build confidence and create a more open communication with team members and links to our commitment to shareholders. However, for our NEOs and other members of the management team, the payout, like prior years, will be made for all payout factors in one payment on an annual basis in second quarter 2023 using the formula below.
*Bonusable salary was determined based on year end base salary.
The following table shows the metrics, weightings,measures and performance levels for the Corporate Financial Performance Component and resulting Pay Factortargets of our 2019 AIP: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | CORPORATE FINANCIAL
PERFORMANCE(3) | | | PAYOUT (% OF TARGET) | |
Metric | | Weighting | | | Threshold | | | Target | | | Maximum | | | Threshold | | | Target | | | Maximum | |
Market Share(1) | | | | | | | Gating factor: market share must be maintained for revenue to payout | |
Revenue Growth | | | 50 | % | | | 0 | % | | | 5 | % | | | 10 | % | | | 20 | % | | | 100 | % | | | 200 | % |
Non-GAAP Gross Margin(2) | | | 50 | % | | | 54 | % | | | 55 | % | | | 56 | % | | | 20 | % | | | 100 | % | | | 200 | % |
(1) | If market share is not maintained, the payout for the revenue metric will be zero. Market share is based on the “World Semiconductors Trade Statistics” (WSTS) an industry association in which NXP participates. WSTS collects the revenue (billings) of several major semiconductor companies and calculates the size of the total available market (TAM) based on this input. We have set a target for market share growth and measure our performance against this commonly recognized source of reliable market share data. We calculate our market share2022 AIP approved by dividing our revenue by the total available market size adjusted for sectors NXP is not active in (TAM focus) and incidental adjustments for material deviations as determined by CMA.
|
(2) | If NXP’snon-GAAP gross margin is below 53%, it would result in zero funding for the plan regardless of revenue growth performance
|
(3) | For performance between those levels shown in the table, the percentage of target awards that would be earned is determined using linear interpolation.
|
In keeping with our strong pay for performance philosophy, the measures that were set forthHRCC at the beginning of each performance period:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 AIP Framework, Performance Targets & Results |
| Measures | 2021
Results | Threshold (25%) | Target
(100%) | Stretch (200%) | Annual
Weighting | 2022
Results | Measure Realization |
| | | | | | | | |
| 1H 2022 | Revenue
($ millions) | $5,163 | $5,800 | $6,200 | $6,600 | 20% | $6,448 | 162.0% |
| Non-GAAP Gross Margin | 55.2% | 56.1% | 56.5% | 57.5% | 20% | 57.7% | 200.0% |
| 1H Performance Period Payout Factor | 181.0% |
| 2H 2022 | Revenue
($ millions) | $5,900 | $6,450 | $6,900 | $7,500 | 20% | $6,757 | 76.2% |
| Non-GAAP Gross Margin | 56.9% | 57.7% | 58.0% | 58.5% | 20% | 58.03% | 106.0% |
| 2H Performance Period Payout Factor | 91.1% |
| Annual | Sustainability Payout Factor | N/A | 10 pts | 14 pts | 18 pts | 20% | 17 pts | 175.0% |
| Annual NXP Payout Factor | 143.8% |
NXP’s performance in 2022 was a continuation of strong financial performance delivery. And our performance against our sustainability goals was strong as determined by the NXP ESG Management Board Committee and the HRCC. Revenue was up 19% year were not adjusted for market conditions. Theseover year. Non-GAAP gross margin expansion was exceptional, increasing 180 basis points year-on-year versus 2021. We believe the structure of AIP helped motivate our NEOs, management team and broader team members to build this momentum.
The following table lists our specific 2022 annual sustainability scorecard goals,
were aggressively set at stretch performance expectations.43
why we chose them and the progress we made toward meeting those goals over the past twelve months. | | | | | | | | | | | |
2022 Sustainability
Scorecard Goal | Why it was chosen? | Achievement | Score/Possible Points |
| Roadmap for Carbon Neutrality Publish carbon neutrality commitment, submit Science Based Targets initiative (SBTi) commitment letter and develop a comprehensive roadmap | After engaging with external and internal stakeholders, climate change, in particular carbon neutrality, emerged as an important environmental topic to be addressed in a transparent and measurable way. We also received feedback from shareholders that committing to the science-based targets is important. A roadmap with the interim steps to achieve the long term goals is a fundamental part of that SBTi commitment. | We sent a formal commitment letter to SBTi, stating a goal of carbon neutrality by 2035 using science-based targets. We developed a roadmap for scope 1 and 2 emissions with specific actions to achieve the given goal recognizing that key steps and investments must be taken along the journey. | 2/3 |
| Renewable Electricity Attain renewable electricity usage ≥ 29% | Because we have global manufacturing operations, including wafer fabrication and assembly and test, we recognize the importance of using renewable electricity to power our facilities around the world. It is also an important component of our roadmap towards carbon neutrality. | As of year-end, we have achieved 35% usage of renewable electricity. | 3/3 |
EXECUTIVE COMPENSATION
(continued)Based
| | | | | | | | | | | |
2022 Sustainability
Scorecard Goal | Why it was chosen? | Achievement | Score/Possible Points |
| Minimize Impact on Global Water Supplies For the countries where we have manufacturing, assembly and/or test facilities, update water-recycling goals | We acknowledge water as an important part of our production processes and understand that, as a good steward, we should look to limit our use or reuse. Since it's not currently technically feasible to drastically reduce the amount of water we use in manufacturing, we focused instead on increasing our water recycling rate so we use less incoming water. | We established a detailed roadmap of actions and investments to improve water management through future investments and process improvements. | 2/3 |
| Reduce Carbon Emissions Reduce carbon emissions to ≤ 1250kTons CO2e by end of 2022 | Our roadmap to carbon neutrality includes annual emission reduction targets to put NXP on a clearly-defined path to reduce emissions in line with the Paris Agreement goals. | As of year-end, we reduced our absolute carbon emissions to 1,099 kTons CO2e. | 3/3 |
| Worker Safety Conduct a global safety survey and ensure team members are properly trained on safety | A safe and healthy workplace protects workers from injury and illness. It can raise employee morale, increase productivity and quality while also lowering injury/illness costs and reducing absenteeism and turnover. While safety is important for all our team members, we especially focus on those who work in our various factories around the world. We want to maintain our historically low injury rate and remain among the best in the industry for this metric | We conducted safety surveys to identify areas of safety risk. As a result, we developed and conducted safety training for 99% of relevant team members and implemented corrective actions where needed. | 2/3 |
| Diversity & Inclusion Increase women in global indirect labor by ≥10% by end 2022 | Inclusion is a foundational part of our values of trust and respect. We recognize the importance of representation, value diversity, equality and inclusion, and respect the unique talents, experiences, backgrounds, cultures and ideas of our team members. To make measurable progress, we established aspirational goals for women representation by 2025 with interim milestones of achievement | We focused on improving our representation within the indirect labor (IDL) portion of the workforce by increasing the diversity of qualified candidates, introducing more acts of engagement and inclusion and ensuring retention of diverse talent. We accomplished an overall net increase of 20% in our women in IDL in the period December 31, 2021 to December 31, 2022. | 3/3 |
| Cultural Transformation Demonstrate that we have made innovation and growth essential components of our corporate culture | Our diverse and talented team members drive the innovation that sets our company apart and fuels our success in the market. We aim to create a clear purpose connecting to underlying values that define the way we work and the everyday behaviors that demonstrate those values.
| The purpose and values were defined through engaged leadership ideation. The values were further defined and connected to demonstrable behaviors built on a foundation of trust and respect. These values are now embedded in our people systems and programs from enabling performance to NXP manager training. | 2/3 |
Our NEOs only receive one annual incentive payment after certification of the second half performance period, as previously discussed. It also provided for an additional element of retention for our 2019NEOs, after the end of the performance period, as they play a vital role in leading the Corporate Financial Componentorganization throughout the year. Below are the 2022 AIP payments that will be made to our NEOs in the second quarter of 2023 assuming they do not voluntarily leave the Company prior to the payout date.
| | | | | | | | |
| Name | 2022 AIP Payment
($) | |
| | |
| Kurt Sievers | 2,459,782 | | |
| William Betz | 621,216 | | |
| Christopher Jensen | 586,704 | | |
| Andrew Micallef | 615,464 | | |
| Jennifer Wuamett | 632,720 | | |
Note: The average exchange rate of 1.0559 (internal annual average rate) was used to convert from Euros to USD for Mr. Sievers whose AIP payment is paid in Euros.
For 2023, the HRCC has determined to continue the AIP framework of 2022 given the continued volatility in the semiconductor market, positive response from employees and clear alignment between pay and performance. We will also continue to utilize the sustainability scorecard in order to continue momentum of our
AIP was not earned at threshold: | | | | | | | | |
| Metric | | Weighting | | | Actual Performance | | Payout (% of Target) |
Revenue Growth(1) | | | 50% | | | Revenue performance was -6% not meeting threshold performance | | 0% |
Non-GAAP Gross Margin(2) | | | 50% | | | 53.5% which did not meet threshold performance | | 0% |
Payout Earned | | 0% |
(1) | NXP’s performance for revenue growth was-6% yielding a 0% payout
|
(2) | NXP’snon- GAAP gross margin is below 54% threshold though it did improve year over year to 53.5%
|
environmental and people aspirations.
Long-Term Incentive (“LTI”) Program
A fundamental underpinning of our LTI program design is to align our NEOs’ and other key strategic decision makers’ interests with those of our shareholders. The roles that our executives playOur NEOs are critical to NXP’s long-term success, including driving our vision, strategy, and corporate culture. As a result, we tie over 70%culture along with delivering results benefiting our shareholders.
In establishing the LTI program for 2022, consistent with the previous three years, the HRCC considered the following:
•Expected long-term contribution of each role and individual
•Competitive market practice for each role as compared to our executives’ target payPeer Group and general competitive talent market practice
•Connection to both Company and NXP’sshareholder interests through recognizing stock price performance throughappreciation
•Simplicity and relativity of the usemeasure
•Importance of LTI. For 2019, weestablishing and retaining our high performing executive team
•Appropriate balance between time-based and performance-based LTI
NXP granted the following types of LTI awards to our
NEOs:NEOs in 2022: | | | | | | | | | | | | | | |
LTI Award Type | Target Weighting | Target
Weighting | | | Vesting Schedule | | Vesting Provisions |
PSUs
| | | 70% | |
| PSUs | 70% | 100% after year 3 to the extent earned once results have been certified by the Committee | | Performance-based contingent on NXP’s Relative Total Shareholder Return (“TSR”)RTSR performance against the Peer Group with a vesting range of 0 – 200% |
RSUs | 30% | | 30 | % | | 1/3rd3rd per year starting on the first anniversary of the grant date | | Service-basedTime-based |
PSUs:
PSUs: For all grants made under our 2019 PSU grants,2022 LTI program, the number of shares earned will be contingent upon NXP’s relative TSRRTSR performance versus the Peer Group from October 29, 2019November 1, 2022 through October 28, 2022. TSR31, 2025. The peer group used for this purpose is a powerfulthe same Peer Group described above in the section ‘Peer Group Analysis and Benchmarking.’
The HRCC determined to continue RTSR as the performance measure
thatused for our PSUs after reviewing other options and evaluating the prevailing market practice. RTSR aligns directly with shareholder interests
forvia stock price appreciation
that also reflects the important performance factors influencing TSR including financial performance as well as other considerations such as items discussed in the Governance and
Sustainability sections of this proxy.returns to shareholders via dividends. The number of PSUs ultimately earned at the end of the
three-year performance period will be based on the
following payout schedule
in the table below, with the overall payout opportunity capped at 200% of target for performance at or above the 75th percentile of the Peer
Group:Group. Prevailing market practice within our Peer Group shows similar payout structure to that presented in the table below. For the awards granted in 2022, the Committee evaluated the full payout structure, considered shareholder feedback and determined not to make any significant changes from the previous year.
| | | | | | | | |
| NXP Relative TSR Percentile Rank vs. Peer Group | Target PSUs Vesting |
| | |
NXP Relative TSR
Maximum | 75th Percentile Rank vs. Peersor Greater—Top Quartile | | % of Target PSUs Vesting200% |
75th Percentile or GreaterTarget | 50th Percentile—Third Quartile | 200%100% |
50th Percentile
Threshold | 25th Percentile—Second Quartile | 100%25% |
25th Percentile
| | 50% |
Less than 25th Percentile 25th Percentile—First Quartile | | 0% |
For performance between
thosethe levels shown in the preceding table, the percentage of target PSUs
tothat will vest will be determined using linear interpolation. The final number of PSUs earned will be capped at 100% of target if NXP’s
TSRtotal shareholder return for the performance period is negative, regardless of the Company’s relative
performance.RSUs:performance compared to the Peer Group.
Realization of Previously Granted PSU Awards
Since establishing the PSU program in 2018, the awards have had following performance realizations:
| | | | | | | | |
| Year of Grant/Start of Performance Period | Year of Vest/End of the Performance Period | Performance Realization |
| | |
| 2019 | 2022 | 84.21% |
| 2018 | 2021 | 135.29% |
This reflects a direct connection between our relative total shareholder return as compared to our Peer Group and demonstrates its intended relationship to pay.
RSUs: The RSUs granted to our NEOs vest 1/3rd3rd per year starting on the first anniversary of the grant date.44
EXECUTIVE COMPENSATION (continued)
2019 LTI Awards
In determining the target LTI award levels We believe that RSUs provide an important long-term retention incentive for 2019, the Compensation Committee holistically assessed each individual’s role, experience, contributions to the Company, market data,our NEOs and internal equityfurther align their interests with other executivesthose of our shareholders, but in accordance with similar level roles and responsibilities. The Compensation Committee also considered the appropriate balance between time-vested and performance-vested awards and the strong Compensation Philosophies of aligning to shareholder interests and payingour pay for performance as outlined earlier. philosophy, we limit the time-based RSUs to 30% of the LTI awards.
2022 Target LTI Awards
Following thoughtful consideration of all relevant factors including the Compensation Committeecompetitive market, the complexity of and contribution to their role, expected future growth and contribution, the HRCC approved the individual annual target LTI levels and grantsawards to our NEOs for 2019in November 2022 as follows to be earned over the next three years: | | | | | | | | | | | | | | | | | | | | |
| Name | | Target LTI ($) | | | 70% PSUs ($) | | | PSUs Granted (at Target) (#) | | | 30% RSUs ($) | | | RSUs Granted (#) | |
Richard Clemmer | | $ | 15,000,000 | | | $ | 10,500,000 | | | | 91,776 | | | $ | 4,500,000 | | | | 39,333 | |
Kurt Sievers | | $ | 6,500,000 | | | $ | 4,550,000 | | | | 39,770 | | | $ | 1,950,000 | | | | 17,044 | |
Peter Kelly | | $ | 3,000,000 | | | $ | 2,100,000 | | | | 18,356 | | | $ | 900,000 | | | | 7,867 | |
Stephen Owen | | $ | 2,500,000 | | | $ | 1,750,000 | | | | 15,296 | | | $ | 750,000 | | | | 6,556 | |
David Reed | | $ | 2,000,000 | | | $ | 1,400,000 | | | | 12,237 | | | $ | 600,000 | | | | 5,245 | |
2018Re-Bootyears. These grants were made in the customary granting cycle for NEOs and other employees. The grants are fully outlined in the Grants of Plan Based Awards
In 2018, on page
64. For the anticipated acquisition of NXP by Qualcomm was terminated. Our Board and CEO recognized that keeping key, strategic leaders focused on delivering future performance was crucial. In addition,annual LTI award granted to our CEO, the HRCC considered many important factors including:
•Record breaking revenue, solid profit growth and NEOs met with our top shareholders to discuss our intent.Therehealthy free cash flow generation in 2022
•Exceptional leadership in advancing NXP’s strategy and cultural transformation
•Continued professionalism in handling the COVID-19 pandemic impacts especially regarding team member safety, engagement, and well-being
•Customer support, inventory management and collaboration through supply chain challenges
| | | | | | | | | | | | | | | | | |
| Name | 2022 Target LTI Award Value
($) | 70% PSUs
($) | PSUs Granted
(at Target)
(#) | 30% RSUs
($) | RSUs Granted
(#) |
| | | | | |
| Kurt Sievers | 14,800,000 | | 10,360,000 | | 68,226 | 4,440,000 | | 29,240 |
| William Betz | 2,750,000 | | 1,925,000 | | 12,677 | 825,000 | | 5,433 |
| Christopher Jensen | 2,400,000 | | 1,680,000 | | 11,064 | 720,000 | | 4,742 |
| Andrew Micallef | 2,200,000 | | 1,540,000 | | 10,142 | 660,000 | | 4,347 |
| Jennifer Wuamett | 2,400,000 | | 1,680,000 | | 11,064 | 720,000 | | 4,742 |
The number of shares awarded under the LTI program are determined by taking the target annual LTI award value and dividing it by the grant date closing price. For the annual LTI awards on November 1, 2022, the grant date closing price was
an immediate need to secure$151.85. The amounts reported in the
continued services and drive performance of our strong, committed, and well-equipped leadership team to ensure that NXP continued to be a high performing, innovative, and customer-focused organization. The loss of our key, strategic leaders was identified as a risk to continued business performance. To help accomplish this objective,2022 Summary Compensation Table reflect the
Nominating and Compensation Committee awarded our CEO and other NEOs, as well other executives, LTI grants with a higher target value than in previous years.For our NEOs, a large majority of these awards were performance-based; comprised of 70% PSUs contingent upon NXP’s relative TSR performance over a three-year performance period, and 30% RSUs that vest ratably over a three-year period. The Compensation Committee believes that these awards enhanced alignment of the interests of our executives and other key employees with those of our shareholders and other stakeholders, as it secures continued services of a well-equipped leadership team and drives the immediate focus to restore NXPspre-transaction share price. The grant date fair values (i.e., accounting values) of the awards, as required under U.S. Securities and Exchange Commission proxy disclosure rules, and not the target award value of these awards is shown for 2018noted in the Summary Compensation Table of this proxy. The total target value of allre-boot grants to the approximately 150 recipients (including the NEOs) represented approximately 10% of thebreak-up fee NXP received from Qualcomm due to the termination of the transaction. The Compensation Committee believed that thesere-boot LTI grants were an appropriate investment to ensure our leadership team was engaged, retained, and fully focused onre-establishing and successfully executing ourgo-forward corporate strategy.
45
table above.
EXECUTIVE COMPENSATION (continued)
Executive Share Ownership Guidelines
In addition to our strong
pay-for-performance philosophy and overall executive compensation program design, we further align our executives’ interests with those of our shareholders through the NXP Executive Equity Ownership Policy (the “EOP”). The EOP applies to all NEOs as well as other senior executives of the Company. All
of the NEOs are in compliance with their respective ownership guideline.
| | | | | |
| EOP Level | | NXP EOP Policy |
CEO
| |
| President & CEO | 6.0x base salary |
President & EVPs
Management Team: Section 16 Officers | | 3.0x base salary |
Board of Directors | | 5.0x annual cash retainer |
Compliance Window | | 5 years |
Policy if EOP not met | | Retain 100% of the net shares received from LTI grants until EOP is met, with Committee to retainHRCC discretion to assess special situations on acase-by-case basis |
Shares Counted towards EOP | | Shares directly or beneficially owned; unvested time-based restricted stock units (RSUs) |
Other Practices & Guidelines
In addition to the components of pay described previously in this CD&A, we have some other arrangements with our CEO and other NEOs.
Retirement Benefits
As approved by the Compensation Committee, the
The Company provides retirement and deferred compensation benefits to help the Company attract and retain the most highly talented senior executives. Our NEOs participate in various pension and retirement arrangements consistent with other employees in their respective jurisdictions. In addition, Messrs. Clemmer and Owen receive cash payments in lieucountry of participation in a defined benefit pension arrangement. Due to legislative changesemployment. Our US NEOs participate in the Netherlands effective January 1, 2015, a new pension arrangement applies providing these cash payments. The values of all retirement related payments made to our NEOsCompany sponsored 401(k) program. Employer matching contributions for the Named Executive Offers are included in the "All Other Compensation" column in the Summary Compensation Table on page 51.63. In connection with Mr. Sievers’ employment by our German subsidiary, NXP Semiconductors Germany GmbH, he participates in the Defined Benefit Plan offered by that subsidiary. Information related to this pension plan is included in the Pension Benefits Table on page 67. Other Benefits and Perquisites
Our NEOs
other than our CEO, participate in medical and dental insurance, life insurance, short- and long-term disability programs, leave of absence, and other similar policies on the same terms as our other employees in their country of
residence. Ourresidence except our CEO is
enrolled inprovided with an international medical
plan that provides access to medical care globally due toinsurance policy, reflective of the international travel required in his
demanding, global travel requirements.position.
We also provide limited perquisites and personal benefits based on considerations unique to each NEO’s position and location. These additional arrangements can include one or more expenses such as housing, family travel, relocation allowances,tax preparation, car lease and mobility arrangements which are broadly in line with those typical for global executives. Certain executives are also provided benefits under the Global Transfer Policy as described below.residential security. The values of all perquisites and other personal benefits provided to our NEOs are included in the “All Other Compensation” column of the Summary Compensation Table on page 51.63. Consistent with regulatory requirements, the
Company’s policyCompany forbids personal loans, guarantees or similar arrangements to members of our Board and NEOs, and consequently no loans, guarantees or similar arrangements were granted.
Employment Arrangements of Named Executive Officers
We have a management services agreement with Mr. Clemmer, our Executive Director and CEO, and employment agreements with Messrs. Kelly, Sievers,each of our NEOs setting forth the terms and Owen.Mr. Clemmer
Untilconditions of their employment. These agreements establish the AGM, the employment arrangements for Mr. Clemmer are outlined in the management services agreement as amended over time from his hire in 2009. A subsidiary of the Company entered into an employment agreement with Mr. Clemmer effective as of January 1, 2009. As of the Company’s initial public offering in August 2010, Mr. Clemmer became Executive Director and CEO of a listed
46
EXECUTIVE COMPENSATION (continued)
company. His contract was extended and amended, most recently as of November 28, 2018. In addition to hisNEOs' base salary, annual incentive target, potential equity awards under the Long Term Incentive Plan and bonus, Mr. Clemmer’s current management services agreement also provides him withparticipation in certain benefits plans, policies and perquisites as described previously,programs applicable to other NXP executives, and participation in certain severance arrangements. The agreements also outline share ownership requirements as well as with severance upon a qualifying termination of employment. Mr. Clemmer is subject tonon-competition provisions that remain in effect for a period of one year following the termination of his management services agreement. This agreement and underlying compensation of our CEO is determined by the Board in accordance with the principles set forth in the remuneration policy for executive andnon-executive directors previously approved by our general meeting of shareholders, as required under Dutch corporate law.
To ensure a smooth CEO transition, Mr. Clemmer will remain a strategic advisor to the CEO under an agreement with NXP USA, Inc. (“NXP USA”), a wholly owned indirect subsidiarynon-solicitation requirements. A detailed description of the Company (the “Advisory Agreement”). Under the Advisory Agreement, effective May 28, 2020, Mr. Clemmer will serve as strategic advisor to the Company’s Chief Executive Officer until October 31, 2021, unless terminated on an earlier date by NXP USA. During the term of the Advisory Agreement, Mr. Clemmer will be paid abi-weekly salary of the US$ equivalent of EUR 46,153.86. Mr. Clemmer will be eligible for a cash bonus under the Company’s annual incentive plan for the period January 1, 2020 until May 28, 2020, but will not be entitled to a cash bonus or equity grants as of May 28, 2020. In the event Mr. Clemmer’sNEOs' employment is terminated prior to October 31, 2021, other than for cause, he will be entitled to a fixed gross severance amount equal to the amount of the base salary he would have received from the date of termination of employment through October 31, 2021. The Advisory Agreement provides the Mr. Clemmer’s equity awards will continue to vest, subject to achieving the targets, through his employment under the Advisory Agreement, including any extensions thereof and accelerated vesting upon death and change of control would continue to apply during this period. Unless in the event of termination of Mr. Clemmer’s employment for cause, Reboot RSUs and Reboot PSUs granted on July 26, 2018 shall continue to vest until July 26, 2021 (full vesting), subject to achieving the targets. The Advisory Agreement containsnon-compete andnon-solicitation provisions that apply until the earlier of (i) one year from the end of his employment under the Advisory Agreement or (ii) June 1, 2022. A copy of the Advisory Agreementagreements can be found as Exhibit 10.3 onForm 8-K filed by the Company on March 9, 2020.
Mr. Sievers
On October 23, 2009, Mr. Sievers entered into an employment agreement with the Company’s wholly owned subsidiarypage 69. Key practices related to these agreements were outlined on page 49. We do not provide excessive separation payments, any excise tax gross ups or single trigger change in Germany, NXP Semiconductors Germany GmbH, where Mr. Sievers’ employment is based. This agreement was amended effective September 7, 2018, in connection with Mr. Sievers’ promotion to President. In addition to his base salary and bonus, Mr. Sievers’ employment agreement also provides him with certain benefits and perquisites as described above. German labor laws govern the entitlement, if any, of a severance payment in the event of termination of employment. Mr. Sievers is subject tonon-competition provisions that remain in effect for a period of one year following the termination of his employment agreement. See the discussion above for employment arrangements entered in 2020.
A description of the agreements entered into by Mr. Sievers in connection with his appointment as executive director and chief executive officer/president is included above under Item 3:(Re-) appointment of Directors.
Mr. Kelly
On June 19, 2012, the Company entered into an agreement with Mr. Kelly, as amended on August 17, 2018, providing Mr. Kelly’s base salary, bonus and certain benefits and perquisites as described above. Mr. Kelly’s employment agreement also provides him with severance upon a qualifying termination of employment. Mr. Kelly is subject tonon-competition provisions that remain in effect for a period of one year following the termination of his employment agreement.
Mr. Owen
On March 18, 2013, Mr. Owen entered into an employment agreement with the Company providing Mr. Owen’s base salary and bonus and certain benefits and perquisites as described above. Mr. Owen’s agreement provides that Dutch labor law governs the entitlement, if any, of a severance payment in the event of termination of employment. Mr. Owen is subject tonon-competition provisions that remain in effect for a period of one year following the termination of his employment agreement.
control arrangements.
Key Policies and Practices
Clawback
AIP payments and LTI grants are subject to the
clawbackclaw back provisions mandated pursuant to Dutch corporate
law.law for our board of directors, including the Executive Director and CEO. Under this provision, the Company is entitled to recover any performance-based compensation awarded in full or in part to the extent that such payment was made based on incorrect information regarding the performance against
pre-established goals or about the circumstances from which the entitlement to the award was made dependent.
47
EXECUTIVE COMPENSATION (continued)
Derivatives Trading, Hedging, and Pledging Policies
NXP employees and directors are prohibited
at all times from, either directly, or indirectly, purchasing financial instruments (including
pre-paid variable forward contracts, equity swaps, collars, and exchange funds), or otherwise engaging in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of NXP securities. No NXP employee or director may engage in hedging, pledging, hypothecating (including holding in margin accounts), or short selling NXP securities, or causing any other person to do so.
The Board believes that having a clear, consistent policy that determines the appropriate treatment of our NEOs in the event of a change of control of the Company is in the best interest of NXP. This ensures our executives are able to fully focus on the potential transaction in the best interest of the shareholders, without concern for their own disposition. The change of control benefits for our NEOs are described in the table and narrative under the “Potential Payments Upon Termination of Change of Control Table” section of this proxy onpages 55-57 page 68. All NEOs have a double-trigger provision such that, if they are involuntarily terminated without cause or leave with good reason (as defined in the applicable agreement) within 12 months following a change of control, they will receive the following benefits: •Severance payment of a minimum of 24 months of base pay and 2 times target bonus or the local regulatory program in their country of residence, whichever is higher
•Accelerated vesting of outstanding unvested equity in accordance with the applicable equity plan or award agreement
•For those NEOs who are either citizens of the United States or reside in the United States, 12 months of benefits continuation
•Our NEOs are not entitled to excise taxgross-ups in connection with these payments
Global Transfer Policy
NXP maintains policies pertaining to international travel and relocation in the event that an employee, including our NEOs, is expected to travel to, relocate to or maintain residences in an international location. The Company provides allowances and reimbursements for responding to:
The needs of the employee and accompanying/impacted family members
Competitive compensation policies that ensure equitable treatment
NXP’s business conditions and culture
Terms and conditions that follow host country practices
The policy provides for relocation support and ongoing housing and mobility allowances as well as medical care for the employee and their family who are required to reside in a host country for some period of time. The expatriation and repatriation activities include the moving of household goods, temporary storage, relocation allowances, travel and other such expenses related to moving to and from the transfer location. Between 2017 and 2019, our CEO and CFO participated in aspects of the policy that are included in the Summary Compensation Table under All Other Compensation.
Compensation Practices and Risk
The
Compensation CommitteeHRCC has oversight responsibility for evaluating risks related to the Company’s compensation policies and practices. The Committee believes our compensation programs balance an appropriate mix of short- and long-term performance objectives, cash- and equity-based compensation, and risks and rewards for our employees. Our programs incorporate key design features to mitigate the likelihood of excessive risk-taking behavior, including:
reasonable•Reasonable performance goals are established by the Compensation CommitteeHRCC for AIP, our short-term cash incentive program, incorporatingtop-line (e.g., revenue growth and market share gain)growth) and bottom-line (e.g., adjusted gross margin) business performance factors;
factors48
EXECUTIVE COMPENSATION (continued)
all•All eligible NXP employees, including NEOs, are measured against the same business performance factors for AIP;
AIPour•Our short-term cash incentive programs include maximum payout limitations of 200% and the maximum individual bonus payment under AIP is two times the applicable bonus target;
targetlong-term•Long-term incentive awards for our NEOs contain a mix of performance-based and time-based vesting, and the performance-based awards granted since 2018 measure relative total shareholder return performance over a three-year performance period; and
periodour•Our performance-based restricted share units have a maximum performance factor of 200%.
Additionally, we have a strong internal control environment, including a written Code of Conduct and ethics and compliance training for all employees including our NEOs. Based on a review of our compensation program design
including a risk assessment by the
Compensation Committeeindependent consultant, the HRCC believes that there are no significant risks and our policies and practices do not create risks that are reasonably likely to have a material negative impact on our Company.
The
Compensation CommitteeHRCC oversees the compensation and benefits programs for our NEOs and is comprised solely of independent,
non-employee members of the Board. The
Compensation CommitteeHRCC works very closely with its independent
compensation consultant and with management to examine the effectiveness of the Company’s executive compensation program throughout the year. The
Compensation CommitteeHRCC Charter, which may be accessed at
http://investors.nxp.com,, details full authority and responsibility.
The Role of the
Compensation CommitteeThe Compensation Committee is the successor of the Board’s NominatingHuman Resources and Compensation Committee that was split by the Board into two separate committees on September 1, 2019: the Compensation Committee and the Nominating and Governance Committee.
The Compensation CommitteeHRCC is accountable for ensuring that the links between our executive compensation program and our business goals are responsible, appropriate, and strongly aligned with shareholders’ and other stakeholders’ interests. Under the responsibility of and
as assigned by the Board, the
Compensation CommitteeHRCC annually establishes the compensation levels of our NEOs and reports to the full Board for their approval considering several factors, including:
•Each NEO’s role, responsibilities, experience, capability, and performance
The Company’s historical•NEO succession planning, excluding CEO, and anticipated future performance
important talent management activities•Human capital statistics and activities below NEOs
•Compensation practices of the companies in our peer groupPeer Group
•Survey data from a broader group of comparable public companies (where appropriate)
•Relationship between the Company’s compensation policies and practices and risk management
The HRCC is also responsible to review the remuneration of the non-executive directors, and recommend from time to time to the Board an amendment concerning the remuneration to be resolved by the General Meeting of Shareholders including retainers, fees and equity grants.
The HRCC has also taken on additional oversight responsibilities more broadly focusing on overall culture and human capital management.
Further, the compensation of our CEO is determined by the HRCC in accordance with the principles set forth in the remuneration policy for executive and non-executive directors previously approved by our general meeting of shareholders, as required under Dutch corporate law.
The Nominating,
Governance and
GovernanceSustainability Committee is accountable for
the important talent management activities of the organization.corporate governance matters and initiatives and reporting on environment, social and governance (ESG). Under the responsibility of and as assigned by the Board, the key focus areas for the Nominating,
Governance and
GovernanceSustainability Committee in these activities are: managing CEO and
executiveBoard succession,
nominating director candidates, evaluating organization effectiveness,
overseeing sustainability policies, goals and programs and reviewing
leadership development practices.The Board believes that having separate committees (the Compensation CommitteeNXP top identified risks and the Nominating and Governance Committee)make proposals to oversee the above practices allows for the proper support to and oversight of these important initiatives.
Further, the compensation of our CEO is determined by the Board in accordance with the principles set forth in the remuneration policy for executive andnon-executive directors previously approved by our general meeting of shareholders, as required under Dutch corporate law.
on oversight.
Our CEO makes key pay recommendations for his direct
leadershipmanagement team to the
Compensation Committee.HRCC. In addition, staff from NXP’s Human Resources
Grouporganization provides support to the
Compensation CommitteeHRCC on various compensation and benefits issues, including market practices, Company policies, and recommendations for program changes.
Mr. Clemmer and NXP’s other executive officers doOur CEO does not make recommendations to or participate in the deliberations of the
Compensation CommitteeHRCC regarding
such officer’sthe CEO’s own compensation.
49
EXECUTIVE COMPENSATION (continued)
The Role of the Independent Consultant
The
Compensation CommitteeHRCC has retained Mercer
during 2019since 2014 to serve as its executive compensation consultant. Mercer provides advice directly to the
Compensation Committee.HRCC. Other teams within Mercer
and its affiliates perform services for us
primarily in benchmarking employee compensation and benefits in ournon-US operations. They also operate as
our broker of record for somenon-US countries and assist in the selection of benefits related vendor selection and management.described below. The individuals supporting the
Compensation CommitteeHRCC did not perform any services for us other than as directed by the
Compensation Committee.HRCC.
During fiscal
2019,2022, Mercer advised the
Compensation CommitteeHRCC on a variety of subjects such as compensation plan design and trends, pay for performance analytics, external competitive compensation reference points, and other such matters. Mercer reports directly to the
Compensation Committee,HRCC, participates in meetings as requested and communicates with the
Compensation CommitteeHRCC Chair between meetings, as necessary. The
Compensation CommitteeHRCC has the sole authority to:
modify•Modify or approve Mercer’s compensation
determine•Determine the nature and scope of its services
evaluate•Evaluate its performance
terminate•Terminate the engagement and hire a replacement or additional consultant at any time.
timeAs noted above, in 2022 other teams within Mercer or its affiliates provided services at the request of management to the Company not related to advising the HRCC on executive officer and director compensation matters. Fees paid to Mercer and its affiliates for services provided in 2022 related to executive and director compensation totaled approximately $368,000. Fees paid to Mercer and its affiliates for actuarial valuations of pension plans, market compensation survey data and consulting services related to broad-based employee benefit plans totaled approximately $171,000. In addition, Mercer acts as the broker of record for broad-based employee benefit plans in various countries in which we operate. As broker of record they received commissions directly from the benefit providers of approximately $636,000. In addition, in 2022, the Company paid Marsh, an affiliate of Mercer, approximately $100,000 for fees related to insurance brokerage services unrelated to employee benefit programs and site services. Additionally, as part of its insurance brokerage services, Marsh receives insurance premium payments from the Company which Marsh pays to insurance carriers on behalf of the Company. Because these other services were in the ordinary course of business, the HRCC did not specifically approve such services, although the HRCC reviewed these other services in connection with their independence review. Mercer informed us that it has safeguards and procedures in place to maintain independence in its executive compensation consulting practice. These safeguards include a rigidly enforced code of conduct, a policy against investing in client organizations and separation between Mercer’s executive compensation consulting and their other administrative and consulting business units from a leadership, performance measurement and compensation perspective. Specifically, Mercer has adopted Global Business Standards for Executive Compensation to manage actual or perceived conflicts of interest and ensure the integrity of their advice. It
addresses how they manage the executive compensation consulting relationship, ensure the quality of consulting services and structure their business to prevent conflicts of interest. Mercer’s executive compensation consultants are not managed or rewarded based upon client revenue from other lines of business or other Marsh & McLennan (MMC) companies other than to the extent all employees benefit from overall success of MMC. The HRCC has assessed the independence of Mercer under NASDAQ listing standards and has concluded that no conflict of interest exists.
Human Resources and Compensation Committee Report
We, the
Human Resources and Compensation Committee of the Board of Directors of NXP Semiconductors N.V., have reviewed and discussed the CD&A set forth above with management of the Company, and based on such review and discussion, recommended to the Board that the CD&A be included in this
report.proxy statement.
NXP
Human Resources and Compensation Committee:
Peter Smitham,
Karl-Henrik Sundström, Chair
Annette Clayton
Lena Olving
Karl-Henrik Sundström
50
EXECUTIVE COMPENSATION
(continued)
Summary Compensation Table
The following table presents information regarding compensation of each of the NEOs for services rendered during the prior three fiscal years. A description of our compensation policies and practices as well as a description of the components of compensation payable to our NEOs is included above under “Compensation Discussion and Analysis.”
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | | Salary
($)1 | | | Stock
Awards
($)2 | | | Nonequity
Incentive Plan
Compensation
($)1,3 | | | Change in
Pension Value &
Nonqualified
Deferred
Compensation
Earnings
($)1,4 | | | All other
Compensation
($)1,5 | | | Total
($) | |
Richard Clemmer6
Executive Director and Chief Executive Officer | | | 2019 | | | | 1,345,200 | | | | 17,455,843 | | | | — | | | | — | | | | 1,756,959 | | | | 20,558,002 | |
| | | 2018 | | | | 1,369,730 | | | | 72,924,573 | | | | 1,388,390 | | | | — | | | | 2,278,070 | | | | 77,960,763 | |
| | | 2017 | | | | 1,291,625 | | | | 15,902,770 | | | | 774,006 | | | | — | | | | 1,780,198 | | | | 19,748,599 | |
Kurt Sievers7
President | | | 2019 | | | | 745,465 | | | | 7,564,222 | | | | — | | | | 970,378 | | | | 39,453 | | | | 9,319,518 | |
| | | 2018 | | | | 671,498 | | | | 24,308,253 | | | | 513,059 | | | | 674,480 | | | | 49,840 | | | | 26,217,130 | |
| | | 2017 | | | | 593,786 | | | | 3,710,732 | | | | 508,959 | | | | 211,867 | | | | 45,357 | | | | 5,070,701 | |
Peter Kelly
Executive Vice President and Chief Financial Officer | | | 2019 | | | | 750,000 | | | | 3,491,327 | | | | — | | | | — | | | | 77,667 | | | | 4,318,994 | |
| | | 2018 | | | | 601,878 | | | | 12,761,961 | | | | 490,000 | | | | — | | | | 97,771 | | | | 13,951,610 | |
| | | 2017 | | | | 545,000 | | | | 3,180,577 | | | | 350,000 | | | | — | | | | 65,286 | | | | 4,140,863 | |
Stephen Owen
Executive Vice President Global Sales and Marketing | | | 2019 | | | | 504,450 | | | | 2,909,363 | | | | — | | | | — | | | | 165,659 | | | | 3,579,472 | |
| | | 2018 | | | | 471,778 | | | | 8,507,984 | | | | 277,170 | | | | — | | | | 168,592 | | | | 9,425,523 | |
| | | 2017 | | | | 424,133 | | | | 2,438,524 | | | | 299,720 | | | | — | | | | 159,576 | | | | 3,321,953 | |
David Reed
Executive Vice President Technology & Operations | | | 2019 | | | | 525,000 | | | | 2,327,541 | | | | — | | | | — | | | | 16,500 | | | | 2,869,041 | |
| | | 2018 | | | | 473,077 | | | | 7,292,528 | | | | 275,000 | | | | — | | | | 13,750 | | | | 8,054,355 | |
| | | 2017 | | | | 450,000 | | | | 2,120,385 | | | | 300,000 | | | | — | | | | 16,000 | | | | 2,886,385 | |
1 | All amounts presented in the Summary Compensation Table, and in the supporting tables that follow, are expressed in U.S. dollars. Certain amounts payable to Messrs. Clemmer, Sievers, Kelly (prior to September 2018) and Owen were paid in euros. The exchange rate used for the purpose of the Summary Compensation Table is the average monthly rate for the full year, and in the supporting tables that follow, was (i) 1.1210, the average euro to U.S. dollar conversation rate for 2019, (ii) 1.1794, the average euro to U.S. dollar conversation rate for 2018, and (iii) 1.1310, the average euro to U.S. dollar conversation rate for 2017.
|
2 | These amounts represent the aggregate weighted grant date fair value of RSU and PSU awards. During 2018, we granted “reboot’ grants to our NEOs, as described on page 45 which distort the year over year comparison of awards. The total stock award value is calculated in accordance with ASC 718. See note 2—Summary of Significant Accounting Policies ‘Share-based Compensation’ and Note 18—Share-based Compensation, both found in Part II, Item 8, “Financial Statements and Supplementary Data” in the Notes to Consolidated Financial Statements in the Annual Report on Form10-K for the year ended December 31, 2019 for additional information. For a description of the grant terms, see the footnotes of the Grants of Plan-Based Awards table below. Assuming maximum achievement of performance metrics in the performance period, using the Company’s closing stock price on the date of grant and 200% of the target shares, the maximum values of the 2019 PSUs at the date of grant are as follows: Mr. Clemmer—$21,000,184; Mr. Sievers—$9,100,171; Mr. Kelly—$4,200,220; Mr. Owen—$ 3,500,031 ; Mr. Reed—$2,800,070.
|
3 | No incentive awards were earned in 2019 under the Annual Incentive Plan due to a failure to meet the minimum performance thresholds determined in the plan.
|
4 | NXP does not maintain defined benefit plans except for those in countries where it is standard practice. These amounts for Mr. Sievers, who is located in Germany, is the only NEO who participates in a defined benefit pension plan. The amounts shown in this column represent the actuarial change in the present value of accrued benefit for the defined benefit plan of Mr. Sievers, as described in the ‘Pension Benefits’ table below.
|
5 | The 2019 amounts shown in the All Other Compensation column include the incremental cost to the Company of the following:
|
Mr. Clemmer—amounts paid by the company for tax return preparation, travel expenses for family members, security costs, Company contributions to a defined contribution plan, global transfer policy payments ($644,424), retirement allowance ($587,068) and taxgross-up payments ($382,676).
Mr. Sievers—amounts paid by the company for tax return preparation, a company car and taxgross-up payments ($19,365).
Mr. Kelly—amounts paid by the company for tax return preparation ($38,628), Company 401(k) contributions ($14,000) and taxgross-up payments ($25,039).
Mr. Owen—amounts paid by the company for tax return preparation, mobility allowance ($22,868), retirement allowance ($128,528) and Company contributions to a defined contribution plan ($12,916).
Mr. Reed—amounts paid by the company for executive physical and Company 401(k) contributions ($14,000).
6 | Mr. Clemmer received an increase in base salary and corresponding increase in his target annual cash incentive opportunity in 2018, the first such increases in nine years. He did not receive any additional increases in base salary or target annual cash incentive opportunity in 2019.
|
7 | In July 2018, Mr. Sievers was promoted to President of the Company. His salary and incentive target annual cash incentive opportunity were increased to reflect his new, increased role. He also received a larger stock award reflective of the strategic role and the need to ensure his longer term retention as well as alignment to company shareholder interests.
|
51
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | Year | Salary ($)(1)(2) | Stock Awards ($)(3) | Nonequity Incentive Plan Compensation ($)(1)(4) | Change in Pension Value & Nonqualified Deferred Compensation Earnings ($)(1)(5) | All Other Compensation ($)(1)(6) | Total
($) | |
| | | | | | | | |
Kurt Sievers
Executive Director, President and Chief Executive Officer | 2022 | 1,098,136 | | 17,119,017 | | 2,459,782 | | — | | 94,916 | | 20,771,851 | | |
| 2021 | 1,181,800 | | 16,314,944 | | 3,331,790 | | — | | 83,358 | | 20,911,892 | | |
| 2020 | 759,968 | | 16,063,333 | | — | | 2,293,073 | | 136,928 | | 19,253,302 | | |
William Betz
Executive Vice President,
Chief Financial Officer | 2022 | 495,346 | | 3,180,859 | | 621,216 | | — | | 36,871 | | 4,334,292 | | |
| 2021 | 351,115 | | 2,913,589 | | 525,000 | | — | | 22,435 | | 3,812,139 | | |
| | | | | | | |
Christopher Jensen
Executive Vice President and
Chief Human Resources Officer | 2022 | 490,154 | | 2,776,173 | | 586,704 | | — | | 15,250 | | 3,868,281 | | |
| | | | | | | |
| | | | | | | |
Andrew Micallef
Executive Vice President
Global Operations | 2022 | 517,635 | | 2,544,850 | | 615,464 | | — | | 37,260 | | 3,715,209 | | |
| 2021 | 317,308 | | 3,193,031 | | 488,105 | | — | | — | | 3,998,444 | | |
| | | | | | | |
Jennifer Wuamett
Executive Vice President, General
Counsel and Chief Sustainability Officer | 2022 | 532,635 | | 2,776,173 | | 632,720 | | — | | 18,644 | | 3,960,172 | | |
| 2021 | 494,654 | | 2,564,043 | | 774,354 | | — | | 17,000 | | 3,850,051 | | |
| 2020 | 382,779 | | 2,582,960 | | — | | — | | 16,873 | | 2,982,612 | | |
| | | | | | | | |
1.All amounts presented in the Summary Compensation Table, and in the supporting tables that follow, are expressed in U.S. dollars. Certain amounts payable to Mr. Sievers were paid in euros. The exchange rate used for the purpose of the Summary Compensation Table and the supporting tables that follow is the average monthly rates for the full year: (i) 1.0559 for 2022, (ii) 1.1818 for 2021 and (iii) 1.1412 for 2020. 2.For Mr. Sievers and Ms. Wuamett, the 2020 salaries listed reflect a 25% voluntary reduction in their base salary from April 1, 2020 to December 31, 2020. Mr. Micallef joined the Company on May 17, 2021. 3.These amounts represent the aggregate weighted grant date fair value of RSU and PSU awards in the fiscal years shown. The stock award value is calculated in accordance with ASC 718. See Note 2—Significant Accounting Policies ‘Share-based compensation’ and Note 17— Share-based compensation, both found in Part II, Item 8, “Financial Statements and Supplementary Data” in the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2022 for additional information. For a description of the grant terms, see the footnotes of the Grants of Plan-Based Awards table below. Assuming maximum achievement of performance metrics in the performance period, using the Company’s closing stock price on the date of grant and 200% of the target shares, the maximum values of the 2022 PSUs at the date of grant are as follows: Mr. Sievers—$20,720,236; Mr. Betz—$3,850,005 ; Mr. Jensen—$3,360,137; Mr. Micallef—$3,080,125; and Ms. Wuamett—$3,360,137. The realized value of these awards, if any, will not be determined until October 2025 based on the comparative RTSR over the performance period. 4.The payout amount for 2022 represents 143.8% of the NEO’s target AIP as discussed in the section ‘Annual Incentive Program’ above. The payout amount for 2021 represents 187.95% of the NEO’s target AIP. No incentive awards were earned in 2020 under the Annual Incentive Plan due to a failure to meet the minimum performance thresholds determined in the plan. 5.The amounts shown in this column represent the actuarial change in the present value of accrued benefit for the defined benefit plan of Mr. Sievers, as described in the ‘Pension Benefits’ table below. Based on the actuarial assumptions, primarily the discount rate, used to value Mr. Sievers’ accumulated benefit in 2022, the value of Mr. Sievers’s pension decreased by $2,448,260 from 2021. NXP does not maintain defined benefit plans except for those in countries where it is standard practice. Mr. Sievers is the only NEO who participates in a defined benefit pension plan in connection with his employment with our German subsidiary. 6.The 2022 amounts shown in the All Other Compensation column include the incremental cost to the Company of the following: –Mr. Sievers—amounts paid by the Company for residential security, international insurance, executive physical, tax return preparation, a company car, and tax gross-up payments ($48,106) associated with the services included in ‘All Other Compensation’ –Mr. Betz—amounts paid by the Company for tax return preparation and Company 401(k) contributions ($15,250), and a tax gross-up payment for the tax return preparation services –Mr. Jensen—amounts paid by the Company for 401(k) contributions ($15,250) –Mr. Micallef—amounts paid by the Company for home office allowance, tax preparation, and Company 401(k) contributions ($15,250) and a tax gross-up payment for the tax return preparation services –Ms. Wuamett—amounts paid by the Company for executive physical and Company 401(k) contributions ($15,250). | |
EXECUTIVE COMPENSATION
(continued)
Grants of Plan-Based Awards Table
The following table sets forth certain information regarding grants of plan-based awards to each of our NEOs for 20192022 under our compensation programs and plans. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Plan Name | | | Grant date | | | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1) | | | Estimated Future Payouts
Under Equity Incentive Plan
Awards(2) | | | All Other
Stock
Awards:
Number of
Shares or
Stock
Units (#)(3) | | | Grant
Date Fair
Value of
Stock and
Option
Awards
($)(4) | |
| | Threshold
($) | | | Target ($) | | | Maximum
($) | | | Threshold
(#) | | | Target (#) | | | Maximum
(#) | |
Richard Clemmer | | | 2019 AIP | | | | | | | | 403,560 | | | | 2,017,800 | | | | 4,035,600 | | | | | | | | | | | | | | | | | | | | | |
| | | 2019 OIP | | | | 10/29/2019 | | | | | | | | | | | | | | | | 45,888 | | | | 91,776 | | | | 183,552 | | | | | | | | 13,069,820 | |
| | | | 2019 OIP | | | | 10/29/2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 39,333 | | | | 4,386,023 | |
Kurt Sievers | | | 2019 AIP | | | | | | | | 149,093 | | | | 745,465 | | | | 1,490,930 | | | | | | | | | | | | | | | | | | | | | |
| | | 2019 OIP | | | | 10/29/2019 | | | | | | | | | | | | | | | | 19,885 | | | | 39,770 | | | | 79,540 | | | | | | | | 5,663,646 | |
| | | | 2019 OIP | | | | 10/29/2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 17,044 | | | | 1,900,576 | |
Peter Kelly | | | 2019 AIP | | | | | | | | 150,000 | | | | 750,000 | | | | 1,500,000 | | | | | | | | | | | | | | | | | | | | | |
| | | 2019 OIP | | | | 10/29/2019 | | | | | | | | | | | | | | | | 9,178 | | | | 18,356 | | | | 36,712 | | | | | | | | 2,614,078 | |
| | | | 2019 OIP | | | | 10/29/2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 7,867 | | | | 877,249 | |
Stephen Owen | | | 2019 AIP | | | | | | | | 80,712 | | | | 403,560 | | | | 807,120 | | | | | | | | | | | | | | | | | | | | | |
| | | 2019 OIP | | | | 10/29/2019 | | | | | | | | | | | | | | | | 7,648 | | | | 15,296 | | | | 30,592 | | | | | | | | 2,178,303 | |
| | | | 2019 OIP | | | | 10/29/2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 6,556 | | | | 731,060 | |
David Reed | | | 2019 AIP | | | | | | | | 84,000 | | | | 420,000 | | | | 840,000 | | | | | | | | | | | | | | | | | | | | | |
| | | 2019 OIP | | | | 10/29/2019 | | | | | | | | | | | | | | | | 6,119 | | | | 12,237 | | | | 24,474 | | | | | | | | 1,742,671 | |
| | | | 2019 OIP | | | | 10/29/2019 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,245 | | | | 584,870 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards: Number of Shares or Stock Units (#)(3) | Grant Date Fair Value of Stock and Option Awards ($)(4) | |
| Name | Plan Name | Grant
Date | Threshold ($) | Target
($) | Maximum ($) | | Threshold (#) | Target
(#) | Maximum (#) | |
| | | | | | | | | | | | |
Kurt
Sievers | 2022 AIP | | 85,528 | | 1,710,558 | | 3,421,116 | | | | | | | | |
| 2019 OIP | 11/1/2022 | | | | | 17,057 | 68,226 | 136,452 | | 12,859,919 | | |
| 2019 OIP | 11/1/2022 | | | | | | | | 29,240 | 4,259,098 | | |
William
Betz | 2022 AIP | | 21,600 | | 432,000 | | 864,000 | | | | | | | | |
| 2019 OIP | 11/1/2022 | | | | | 3,169 | 12,677 | 25,354 | | 2,389,488 | | |
| 2019 OIP | 11/1/2022 | | | | | | | | 5,433 | 791,371 | | |
| Christopher Jensen | 2022 AIP | | 20,400 | | 408,000 | | 816,000 | | | | | | | | |
| 2019 OIP | 11/1/2022 | | | | | 2,766 | 11,064 | 22,128 | | 2,085,453 | | |
| 2019 OIP | 11/1/2022 | | | | | | | | 4,742 | 690,720 | | |
Andrew
Micallef | 2022 AIP | | 21,400 | | 428,000 | | 856,000 | | | | | | | | |
| 2019 OIP | 11/1/2022 | | | | | 2,536 | 10,142 | 20,284 | | 1,911,666 | | |
| 2019 OIP | 11/1/2022 | | | | | | | | 4,347 | 633,184 | | |
| Jennifer Wuamett | 2022 AIP | | 22,000 | | 440,000 | | 880,000 | | | | | | | | |
| 2019 OIP | 11/1/2022 | | | | | 2,766 | 11,064 | 22,128 | | 2,085,453 | | |
| 2019 OIP | 11/1/2022 | | | | | | | | 4,742 | 690,720 | | |
| | | | | | | | | | | | |
1.Future payouts under the Annual Incentive Program (AIP) are shown in USD from 5% if threshold of the Sustainability Scorecard portion is met but not exceeded and no other portion of the AIP is earned; target if performance target is achieved at 100% and a maximum of 200% of target AIP using the salary and target AIP as of December 31, 2022 per the terms of the 2022 AIP as described above. Actual 2022 AIP payments are listed in the Summary Compensation Table. 2.These amounts represent the number of PSUs granted to Messrs. Sievers, Betz, Jensen and Micallef, and Ms. Wuamett as part of the 2022 annual grant under the NXP Semiconductors N.V. 2019 Omnibus Incentive Plan (2019 OIP). Each PSU, which cliff vests on the third anniversary of the date of grant, entitles the grant recipient to receive from 0 to 2 common shares for each of the target units awarded based on the relative total shareholder return (TSR) of the Company’s share price as compared to the Peer Group. See Long-term Incentive (LTI) Program above for a more detailed descriptions of the terms of these awards. 3.These amounts represent the number of RSUs granted to Messrs. Sievers, Betz, Jensen and Micallef, and Ms. Wuamett as part of the 2022 annual grant under the 2019 OIP. These awards vest in equal installments on the first, second and third anniversary of the date of grant, subject to continued employment through the applicable vesting date. See Long-term Incentive (LTI) Program for a more detailed descriptions of the terms of these awards. 4.Amounts in this column represent the weighted average grant date fair value of awards granted in fiscal year 2022 calculated in accordance with ASC 718. With respect to the PSUs, in accordance with SEC rules, amounts reflect the fair value at the grant date determined using a Monte-Carlo simulation model and based upon a discounted cash flow analysis of the probability-weighted payoffs of a share-based payment assuming a variety of possible stock price paths. It represents the estimate of aggregate compensation cost to be recognized over the requisite service period determined as of the grant date under ASC 718 resulting in a per share grant date value of $188.49. The fair value for RSUs is determined by using the grant date closing price corrected for future dividend payments resulting in fair value of $145.66 per share for grants.
The Monte Carlo Simulation value used in calculating the value of PSUs was determined based on the following: the valuation date was November 1, 2022; the NXP share price on the grant date was $151.85; the performance period was November 1, 2022 to October 31, 2025; the volatility assumption was 48%; and the initial TSR performance of 3.4%. PSUs are subject to a relative TSR performance hurdle, where vesting is dependent on NXP’s TSR performance relative to its Peer Group. TSR is based on the average closing share price over the 20 trading days prior to the start of the Performance Period compared to the average closing share price over the 20 trading days up to and including the end of the Performance Period. Dividends were assumed to be re-invested on the ex-dividend date. | |
Outstanding Equity Awards at Year-End Table
The following table summarizes the number of securities underlying outstanding equity awards for each of our NEOs as year end 2022, using the December 30, 2022 closing stock price of $158.03.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | | Share Awards | |
| Name | Number of Securities Underlying Unexercised Options Exercisable (#) | | Option Exercise Price
($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested
(#) | | Market Value of Shares or
Units of
Stock That Have Not Vested
($) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($) | |
| (a) | (b) | | (e) | | (f) | | (g) | | (h)(1) | | (i) | | (j)(1) | |
| | | | | | | | | | | | | | |
| Kurt Sievers | | | | | | | 2,604 | (3) | 411,510 | | | | | | |
| | | | | | 8,258 | (4) | 1,305,012 | | | | | | |
| | | | | | 13,556 | (5) | 2,142,255 | | | | | | |
| | | | | | 29,240 | (6) | 4,620,797 | | | | | | |
| | | | | | | | | | 115,590 | (8) | 18,266,688 | | |
| | | | | | | | | | 47,444 | (9) | 7,497,575 | | |
| | | | | | | | | | 136,452 | (10) | 21,563,510 | | |
| William Betz | | | | | | | 657 | (4) | 103,826 | | | | | |
| | | | | | 2,421 | (5) | 382,591 | | | | | | |
| | | | | | 5,433 | (6) | 858,577 | | | | | | |
| | | | | | | | | | 3,942 | (8) | 622,954 | | |
| | | | | | | | | | 8,473 | (9) | 1,338,988 | | |
| | | | | | | | | | 25,354 | (10) | 4,006,693 | | |
| Christopher Jensen | | | | | | | 434 | (3) | 68,585 | | | | | | |
| | | | | | 1,165 | (4) | 184,105 | | | | | | |
| | | | | | 2,179 | (5) | 344,347 | | | | | | |
| | | | | | 4,742 | (6) | 749,378 | | | | | | |
| | | | | | | | | | 16,288 | (8) | 2,573,993 | | |
| | | | | | | | | | 7,625 | (9) | 1,204,979 | | |
| | | | | | | | | | 22,128 | (10) | 3,496,888 | | |
| Andrew Micallef | | | | | | | 3,167 | (7) | 500,481 | | | | | | |
| | | | | | 1,840 | (5) | 290,775 | | | | | | |
| | | | | | 4,347 | (6) | 686,956 | | | | | | |
| | | | | | | | | | 6,439 | (9) | 1,017,555 | | |
| | | | | | | | | | 20,284 | (10) | 3,205,481 | | |
| Jennifer Wuamett | 8,394 | (2) | 86.25 | | | 12/7/2025 | | | | | | | | | |
| | | | | | 1,652 | (4) | 261,066 | | | | | | |
| | | | | | 2,131 | (5) | 336,762 | | | | | | |
| | | | | | 4,742 | (6) | 749,378 | | | | | | |
| | | | | | | | | | 23,118 | (8) | 3,653,338 | | |
| | | | | | | | | | 7,456 | (9) | 1,178,272 | | |
| | | | | | | | | | 22,128 | (10) | 3,496,888 | | |
1 | Future payouts
| |
1.Market value is calculated based on the closing price of NXP’s common stock on December 30, 2022 as reported on the Nasdaq equaling $158.03. 2.Options granted under the Annual Incentiveterms and conditions of the Global NXP Stock Option Program (AIP) are shown2015/16 on December 7, 2015. The option vested in USD from threshold payout at 20% toequal installments on October 29, 2016, 2017, 2018 and 2019. 3.RSUs granted under the maximum of 200% of target per plan rules. |
2 | Amounts represents the number of PSUs granted to Messrs. Clemmer, Sievers, Kelly, Owen,terms and Reed as partconditions of the 2019 annual grant under the NXP Semiconductors N.V. 2019 Omnibus Incentive Plan (OIP). Each PSU, which cliffplan on July 28, 2020 in connection with Mr. Sievers’ promotion to CEO and Mr. Jensen’s promotion to Chief Human Resources Officer. The restricted stock unit vests on the third anniversary of the date of grant, entitles the grant recipient to receive from 0 to 2 common shares for each of the PSUs awarded based on the Relative TSR of the Company’s share price as compared to a set of peer companies. See Long-term Incentive (LTI) Program for a more detailed description of the terms of these awards.
|
3 | Amounts represent the number of RSUs granted to Messrs. Clemmer, Sievers, Kelly, Owen and Reed as part of the 2019 annual grant under the OIP. These awards vest in equal installments on the first, second and third anniversary of the date of grant, subject to continued employment through the applicable vesting date. See Long-term Incentive (LTI) Program for a more detailed description of the terms of these awards.
|
4 | Amounts in this column represent the weighted average grant date fair value of awards granted in fiscal year 2019 calculated in accordance with ASC 718. With respect to the PSUs, in accordance with SEC rules, amounts reflect the fair value at the grant date determined using a Monte-Carlo simulation model and based upon a discounted cash flow analysis of the probability-weighted payoffs of a share-based payment assuming a variety of possible stock price paths. It represents the estimate of aggregate compensation cost to be recognized over the requisite service period determined as of the grant date under ASC 718 resulting in a per share price of $142.41. The fair value for RSUs is determined by using the grant date closing price corrected for future dividend payments resulting in fair value of $111.51 per share.
|
The Monte Carlo Simulation value used in calculating the value of PSUs was determined based on the following: The valuation date was October 29, 2019. The NXP share price on Grant Date was $114.41. The performance period was October 29, 2019 to October 28, 2022. PSUs are subject to a relative TSR performance hurdle, where vesting is dependent on NXP’s TSR performance relative to its Peer Group. TSR is based on the average closing share price over the 20 trading days prior to the start of the Performance Period compared to the average closing share price over the 20 trading days up to and including the end of the Performance Period. Dividends were assumed to bere-invested on theex-dividend date. The risk free interest rate was based on US Government Bonds of appropriate term. NXP dividend yield was based on historic and future yield estimates. The share price volatility was based on the actual volatility of NXP’s and each peer company’s daily closing share price over the three year period from October 31, 2016 to October 31, 2019. The NXP initial TSR was 5.9%
52
EXECUTIVE COMPENSATION (continued)
Outstanding Equity Awards atYear-End Table
The following table summarizes the number of securities underlying outstanding equity awards for each of our NEOs as of December 31, 2019, assuming a year end closing stock price of $127.26.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | | Share Awards | |
| Name | | Number of
Securities
Underlying
Unexercised
Options Exercisable (#) | | | Option Exercise price ($) | | | Option
Expiration Date | | | Number of Shares or Units of Stock That Have Not
Vested (#) | | | Market Value of
Shares or Units
of Stock That
Have Not
Vested ($) | | | Equity Incentive Plan Awards: Number of Unearned
Shares, Units or Other Rights That Have Not Vested (#) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned
Shares, Units or Other Rights That Have Not Vested ($)(1) | |
| Richard Clemmer | | | 40,419 | (2) | | | 64.18 | | | | 10/23/2024 | | | | | | | | | | | | | | | | | |
| | | 82,939 | (3) | | | 73.00 | | | | 10/29/2025 | | | | | | | | | | | | | | | | | |
| | | 15,376 | (4) | | | 76.31 | | | | 2/4/2026 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 45,455 | (11) | | | 5,784,603 | | | | | | | | | |
| | | | | | | | | | | | | | | 129,297 | (12) | | | 16,454,336 | | | | | | | | | |
| | | | | | | | | | | | | | | 39,333 | (17) | | | 5,005,518 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 71,918 | (13) | | | 9,152,285 | |
| | | | | | | | | | | | | | | | | | | | | | | 13,105 | (14) | | | 1,667,742 | |
| | | | | | | | | | | | | | | | | | | | | | | 905,076 | (15) | | | 115,179,972 | |
| | | | | | | | | | | | | | | | | | | | | | | 183,552 | (16) | | | 23,358,828 | |
| Kurt Sievers | | | 9,819 | (2) | | | 64.18 | | | | 10/23/2024 | | | | | | | | | | | | | | | | | |
| | | 26,067 | (3) | | | 73.00 | | | | 10/29/2025 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 10,607 | (11) | | | 1,349,847 | | | | | | | | | |
| | | | | | | | | | | | | | | 43,100 | (12) | | | 5,484,906 | | | | | | | | | |
| | | | | | | | | | | | | | | 17,044 | (17) | | | 2,169,019 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 22,603 | (13) | | | 2,876,458 | |
| | | | | | | | | | | | | | | | | | | | | | | 301,692 | (15) | | | 38,393,324 | |
| | | | | | | | | | | | | | | | | | | | | | | 79,540 | (16) | | | 10,122,260 | |
| Peter Kelly | | | 65,000 | (5) | | | 16.84 | | | | 11/1/2021 | | | | | | | | | | | | | | | | | |
| | | 40,000 | (6) | | | 23.49 | | | | 10/25/2022 | | | | | | | | | | | | | | | | | |
| | | 35,247 | (7) | | | 39.58 | | | | 10/24/2023 | | | | | | | | | | | | | | | | | |
| | | 42,401 | (2) | | | 64.18 | | | | 10/23/2024 | | | | | | | | | | | | | | | | | |
| | | 23,698 | (3) | | | 73.00 | | | | 10/29/2025 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 9,091 | (11) | | | 1,156,921 | | | | | | | | | |
| | | | | | | | | | | | | | | 22,628 | (12) | | | 2,879,639 | | | | | | | | | |
| | | | | | | | | | | | | | | 7,867 | (17) | | | 1,001,154 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 20,548 | (13) | | | 2,614,938 | |
| | | | | | | | | | | | | | | | | | | | | | | 158,390 | (15) | | | 20,156,711 | |
| | | | | | | | | | | | | | | | | | | | | | | 36,712 | (16) | | | 4,671,969 | |
| Stephen Owen | | | | | | | | | | | | | | | 6,970 | (11) | | | 887,002 | | | | | | | | | |
| | | | | | | | | | | | | | | 15,085 | (12) | | | 1,919,717 | | | | | | | | | |
| | | | | | | | | | | | | | | 6,556 | (17) | | | 834,317 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 14,384 | (13) | | | 1,830,508 | |
| | | | | | | | | | | | | | | | | | | | | | | 105,594 | (15) | | | 13,437,892 | |
| | | | | | | | | | | | | | | | | | | | | | | 30,592 | (16) | | | 3,893,138 | |
| David Reed | | | 5,250 | (9) | | | 36.61 | | | | 1/5/2021 | | | | | | | | | | | | | | | | | |
| | | 7,120 | (10) | | | 58.66 | | | | 1/5/2022 | | | | | | | | | | | | | | | | | |
| | | 17,773 | (8) | | | 86.25 | | | | 12/7/2025 | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | 6,061 | (11) | | | 771,323 | | | | | | | | | |
| | | | | | | | | | | | | | | 12,930 | (12) | | | 1,645,472 | | | | | | | | | |
| | | | | | | | | | | | | | | 5,245 | (17) | | | 667,479 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 10,435 | (13) | | | 1,327,958 | |
| | | | | | | | | | | | | | | | | | | | | | | 90,508 | (15) | | | 11,518,048 | |
| | | | | | | | | | | | | | | | | | | | | | | 24,474 | (16) | | | 3,114,561 | |
53
EXECUTIVE COMPENSATION (continued)
1 | Market value is calculated based on the closing price of NXP’s common stock on December 31, 2019 as reported on the Nasdaq equaling $127.26.
|
2 | Options granted under the terms and conditions of the Global NXP Stock Option Program 2014/15 on October 23, 2014. The options vested in equal installments on the first, second, third and fourth anniversary of the date of grant.
|
3 | Options granted under the terms and conditions of the Global NXP Stock Option Program 2015/16 on October 29, 2015. The options vested in equal installments on the first, second, third and fourth anniversary of the date of grant.
|
4 | Options granted under the terms and conditions of the Global NXP Stock Option Program 2015/16 on February 4, 2016. The options vested in equal installments on October 29, 2016, 2017, 2018 and 2019.
|
5 | Options granted under the terms and conditions of the Global NXP Stock Option Program 2011/12 on November 1, 2011. The options vested in equal installments on the first, second, third and fourth anniversary of the date of grant.
|
6 | Options granted under the terms and conditions of the Global NXP Stock Option Program 2012/13 on October 25, 2012. The options vested in equal installments on the first, second, third and fourth anniversary of the date of grant.
|
7 | Options granted under the terms and conditions of the Global NXP Stock Option Program 2013/14 on October 24, 2013. The options vested in equal installments on the first, second, third and fourth anniversary of the date of grant.
|
8 | Options granted under the terms and conditions of the Global NXP Stock Option Program 2015/16 on December 7, 2015. The options vested in equal installments on October 29, 2016, 2017, 2018 and 2019.
|
9 | Options granted under the terms and conditions of the Freescale Semiconductor, Ltd. 2011 Omnibus Incentive Plan on January 5, 2014 and were assumed by NXP on December 7, 2015. The options vested in equal installments on the first, second, third and fourth anniversary of the date of grant.
|
10 | Options granted under the terms and conditions of the Freescale Semiconductor, Ltd. 2011 Omnibus Incentive Plan on January 5, 2015 and were assumed by NXP on December 7, 2015. The options vested in equal installments on the first, second, third and fourth anniversary of the date of grant.
|
11 | 4.RSUs granted under the terms and conditions of the Restricted Stock Unit Plan 2017/182019 Omnibus Incentive plan on October 26, 2017.27, 2020. The RSUs vestrestricted stock unit vests in equal installments on the first, second and third anniversary of the date of grant, subject to continued employment through the applicable vesting date. |
12 | 5.RSUs granted under the terms and conditions of the Restricted Stock Unit Plan 2018/192019 Omnibus Incentive plan on July 26, 2018.November 2, 2021. The RSUs vestrestricted stock unit vests in equal installments on the first, second and third anniversary of the date of grant, subject to continued employment through the applicable vesting date. |
13 | 6.RSUs granted under the terms and conditions of the 2019 Omnibus Incentive plan on November 1, 2022. The restricted stock unit vests in equal installments on the first, second and third anniversary of the date of grant, subject to continued employment through the applicable vesting date. 7.RSUs granted under the terms and conditions of the 2019 Omnibus Incentive plan on August 3, 2021 as a new hire grant to Mr. Micallef. The restricted stock unit vests in equal installments on the first, second and third anniversary of the date of grant, subject to continued employment through the applicable vesting date. 8.PSUs granted under the terms and conditions of the Performance Stock Unit Plan 2015/162019 Omnibus Incentive plan on October 29, 2015. Subject27, 2020. These awards vest 100% on October 26, 2023 subject to performance achievement based on relative TSR compared to the achievementPeer Group. Maxim Integrated Products was part of the applicable performance metrics,peer group. Upon the PSUs vest in equal installments on eachcompletion of the first, second, thirdacquisition of Maxim Integrated Products acquisition by Analog Devices, the Committee determined to allow the period of time in the program to be a determining factor for the performance awards granted. In accordance with SEC requirements, as results indicate achievement between target and fourth anniversaries of October 29, 2015. Performance measures were not achieved in each ofmaximum performance, the four years endingamounts reflected above are the maximum amounts. Based on actual performance as of October 29, 2019. There is an additionalDecember 31, 2022, the performance would be approximately 153% of target resulting in a vesting possibility of 100% of the unvested PSU’s subject to achieving the full compounding EBIT growth performance under the plan by the fifth anniversary of October 29, 201588,213, 3,008 and also subject to continued employment through such date. As a result, the amounts shown in respect to these PSUs are at the target level of performance. The performance results12,430 shares for Messrs. Sievers, Betz and vesting amounts will be determined atJensen, respectively and 17,643 shares for Ms. Wuamett. After the end of thisthe performance period, NXP’s TSR will be compared to those of the peers pursuant to the Relative TSR performance and payout scale to determine the level of vesting, which will be certified by or on behalf of the Board. |
14 | 9.PSUs granted under the terms and conditions of the Performance Stock Unit Plan 2015/162019 Omnibus Incentive plan on February 4, 2016. Subject to the achievement of the applicable performance metrics, the PSUs vest in equal installments on each of the first, second, third and fourth anniversaries of October 29, 2015. Performance measures were not achieved in each of the four years ending as of October 29, 2019. There is an additional vesting possibility of 100% of the unvested PSUs, subject to achieving the full compounding EBIT growth performance under the plan by the fifth anniversary of October 29, 2015 and also subject to continued employment through such date. As a result, the amounts shown in respect of these PSUs are at the target level of performance. The performance results and vesting amounts will be determined at the end of this performance period and will be certified by or on behalf of the Board. |
15 | PSUs granted under the terms and conditions of Performance Stock Unit Plan 2018/19 on July 26, 2018.November 2, 2021. These awards vest 100% on the third anniversary of the date of grant,November 1, 2024 subject to performance achievement based on relative TSR compared to a peer groupthe Peer Group. Maxim Integrated Products will be excluded from the calculation of companies and also subjectrelative total shareholder return since its acquisition occurred prior to continued employment through such date. In accordance with SEC requirements, asthe start of the performance period. As results as of December 31, 2019 indicate achievement betweenat target performance and maximumwould be capped at target performance because NXP’s TSR for the performance period is negative, the amounts reflected above are the maximumtarget amounts. After the end of the performance period, NXP’s TSR will be compared to those of the peers pursuant to the Relative TSR performance and payout scale to determine the level of vesting, which will be certified by or on behalf of the Board.
|
16 | 10.PSUs granted under the terms and conditions of 2019 Omnibus Incentive plan on October 29, 2019.November 1, 2022. These awards vest 100% on the third anniversary of the date of grant,October 31, 2025 subject to performance achievement based on relative TSR compared to a peer group of companies and also subject to continued employment through such date.the Peer Group. In accordance with SEC requirements, as results as of December 31, 2019 indicate achievement between target and maximum performance, the amounts reflected hereabove are the maximum amounts. Based on actual performance as of December 31, 2022, the performance would be approximately 110% of target resulting in a vesting of 74,724, 13,884, 12,118 and 11,108 shares for Messrs. Sievers, Betz Jensen and Micallef respectively and 12,118 shares for Ms. Wuamett. After the end of the performance period, NXP’s TSR will be compared to those of the peers pursuant to the Relative TSR performance and payout scale to determine the level of vesting, which will be certified by or on behalf of the Board. |
17 | RSUs granted under the terms and conditions of the 2019 Omnibus Incentive plan on October 29, 2019. The RSUs vest in equal installments on the first, second and third anniversary of the date of grant, subject to continued employment through the applicable vesting date.
|
54
EXECUTIVE COMPENSATION
(continued)
Option Exercises and Stock Vested Table
The following table shows the value realized for stock options that were exercised and restricted stock
unit and performance stock unit awards vested during
2019. | | | | | | | | | | | | | | | | |
| Name | | Option Awards | | | Stock Awards | |
| | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($)(1) | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($)(2) | |
| Richard Clemmer | | | — | | | | — | | | | 152,157 | | | | 15,842,930 | |
| Kurt Sievers | | | — | | | | — | | | | 43,930 | | | | 4,562,294 | |
| Peter Kelly | | | — | | | | — | | | | 30,497 | | | | 3,182,142 | |
| Steve Owen | | | 32,255 | | | | 1,112,300 | | | | 22,250 | | | | 2,324,538 | |
| David Reed | | | — | | | | — | | | | 21,686 | | | | 2,225,995 | |
1 | The dollar amounts shown above for option awards are determined by multiplying (i) the number of exercised common shares under the vested option award by (ii) the difference between the sale price of the Company’s common shares on the date of exercise and the exercise price of the options.
|
2 | Amounts represent the dollar value of shares released upon vesting based on the closing price of our common stock on the date vested for the grants made under the 2011 Omnibus Incentive Plan or the day prior to the date vested for Restricted Stock Unit plans 2016/17, 2017/18 and/or 2018/19.
|
2022.
| | | | | | | | | | | | | | | | | | | | |
| Option Awards | | Stock Awards | |
| Name | Number of Shares acquired on exercise
(#) | Value Realized
on exercise
($) | | Number of shares acquired on vesting
(#) | Value Realized on vesting ($)(1) | |
| | | | | | |
| Kurt Sievers | — | — | | | 72,155 | 10,956,318 | | |
| William Betz | — | — | | | 4,307 | 649,503 | | |
| Christopher Jensen | — | — | | | 7,557 | 1,151,595 | | |
| Andrew Micallef | — | — | | | 2,503 | 425,386 | | |
| Jennifer Wuamett | — | — | | | 14,770 | 2,226,806 | | |
| | | | | | |
1.The value realized is calculated by multiplying (i) the number of shares released upon the RSU or PSU award vesting by (ii) the closing price of the Company’s common shares on the day prior to the vest date, or the previous business day if the market was closed on the day prior to the vest date. This amount includes the restricted share units and performance share units granted in previous years that vested in 2022 according to the terms and conditions of the applicable equity award agreements including performance share units granted on October 29, 2019 for Messrs. Sievers, Betz and Jensen and Ms. Wuamett and July 28, 2020 for Messrs. Sievers and Jensen as promotion awards which vested in 2022 at a 84.21% achievement realization. | |
The following table sets forth certain information with respect to the potential benefits to Mr. Sievers as of December 31,
2019.2022. No other NEO participates in a Company-sponsored defined benefit pension plan.
| | | | | | | | | | | | | | | | |
Name | | Plan Name | | | Number of Years Credited Service (#) | | | Present Value of Accumulated Benefit ($) | | | Payments During Last Fiscal Year ($) | |
Kurt Sievers | | | Germany DBP | | | | 21 | | | | 4,254,270 | | | | — | |
| | | | | | | | | | | | | | | | | |
| Name | Plan Name | Number of Years Credited Service
(#) | Present Value of Accumulated Benefit ($) | Payments During Last Fiscal Year
($) | |
| | | | | |
| Kurt Sievers | Germany DBP | 24 | 3,758,005 | | — | | |
In connection with Mr.
Sievers is an employee ofSievers’ employment by our German subsidiary, NXP Semiconductors Germany GmbH,
andhe participates in the Defined Benefit Plan offered
throughby that subsidiary (the “Germany DBP”). This Germany DBP is closed to new employees but was available to all eligible employees of that subsidiary until December 31, 2006. The value in this table has been converted from Euros
using the rate of 1.0559, the average euro to U.S.
dollars using a 1.1210 conversion rate.dollar conversation rate for 2022.
Under the Germany DBP, participants receive notional contributions that are credited to their personal pension accounts in an amount of 11% of monthly base salary in excess of a calculated social security contribution ceiling that does not factor in the 2003 exceptional adjustment step (leading to a
20192022 ceiling value of
€6,000) €6,350/month), less the additional contribution paid by the employer in the staff pension insurance. Contributions and returns on investments accumulated at retirement (normal retirement age is defined as between 60 – 67) are converted into an annuity based on fixed standard actuarial factors as mentioned in the plan rules. The Germany DBP also provides for certain disability, widow(er) and orphan beneficiary pension benefits.
In calculating the amounts shown in the column titled “Present Value of Accumulated Benefit” in the table above, we calculated the amounts reflected for Mr. Sievers in accordance with ASC 715 using the following assumptions: a calculation date of December 31,
2019,2022, a
1.10%3.65% discount rate, a
1.25%2.25% pension increase rate, retirement occurring at age 63, and applicability of the “Heubeck-Richttafeln 2018 G” mortality table.
Potential Payments upon Termination or Change of Control
The following table shows the estimated value of potential payments that each NEO would be entitled to receive upon termination of employment in connection with specific events. The amounts shown below assume that the termination of employment or change of control occurred on December 31,
2019.2022. Where benefits are based on the market value of NXP’s common stock, the table below uses the closing price of NXP’s common stock as reported on the Nasdaq on December
31, 201930, 2022 ($
127.26158.03 per share). To the extent applicable, the terms and conditions of our employment, change of control and severance agreements with our NEOs, are discussed above under “Employment Arrangements of Named Executive Officers” and “Compensation Discussion and Analysis—Key Policies and Practices; Change of Control.”
55
EXECUTIVE COMPENSATION (continued)
Amounts shown below are in USD and do not include (i) benefits earned during the term of the NEO’s employment that are available to all benefit-eligible salaried employees, (ii) the value of vested equity awards and (iii) the value of retirement benefits that are reported in the tables above.
| | | | | | | | | | | | | | | | | | | | | | |
| Name | | Payments | | Involuntary
Separation /
Termination at
the
Convenience of
the Company /
Separation due
to Disability(1) | | | Death(2) | | | Change of
Control with
Termination
within
12 months(3) | | | Retirement(4) | | | Involuntary
Termination
for Cause or
Voluntary
Resignation(5) | |
| Richard Clemmer | | Equity Related Payments | | | 60,699,301 | | | | 159,229,438 | | | | 159,229,438 | | | | 1,491,055 | | | | 0 | |
| | Cash Payments | | | 2,054,595 | | | | 2,054,595 | | | | 6,726,000 | | | | 0 | | | | 0 | |
| | Benefits Continuation | | | 0 | | | | 0 | | | | 25,059 | | | | 0 | | | | 0 | |
| | | Total | | | 62,753,896 | | | | 161,284,033 | | | | 166,027,449 | | | | 1,491,055 | | | | 0 | |
| Kurt Sievers | | Equity Related Payments | | | 20,382,046 | | | | 51,027,279 | | | | 53,903,737 | | | | 0 | | | | 0 | |
| | Cash Payments | | | 1,490,930 | | | | 0 | | | | 2,981,860 | | | | 0 | | | | 0 | |
| | | Total | | | 21,872,976 | | | | 51,027,279 | | | | 56,885,597 | | | | 0 | | | | 0 | |
| Peter Kelly | | Equity Related Payments | | | 10,660,005 | | | | 26,650,700 | | | | 29,265,639 | | | | 298,196 | | | | 0 | |
| | Cash Payments | | | 1,500,000 | | | | 0 | | | | 3,000,000 | | | | 0 | | | | 0 | |
| | Benefits Continuation | | | 0 | | | | 0 | | | | 13,419 | | | | 0 | | | | 0 | |
| | | Total | | | 12,160,005 | | | | 26,650,700 | | | | 32,279,058 | | | | 298,196 | | | | 0 | |
| Stephen Owen | | Equity Related Payments | | | 7,156,318 | | | | 18,594,715 | | | | 20,425,222 | | | | 248,488 | | | | 0 | |
| | Cash Payments | | | 1,050,000 | | | | 0 | | | | 1,816,020 | | | | 0 | | | | 0 | |
| | | Total | | | 8,206,318 | | | | 18,594,715 | | | | 22,241,242 | | | | 248,488 | | | | 0 | |
| David Reed | | Equity Related Payments | | | 6,119,730 | | | | 15,745,890 | | | | 17,073,848 | | | | 198,780 | | | | 0 | |
| | Cash Payments | | | 0 | | | | 0 | | | | 1,890,000 | | | | 0 | | | | 0 | |
| | Benefits Continuation | | | 0 | | | | 0 | | | | 11,871 | | | | 0 | | | | 0 | |
| | | Total | | | 6,119,730 | | | | 15,745,890 | | | | 18,975,719 | | | | 198,780 | | | | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | Payment Type | Involuntary Separation / Termination at the Convenience of the Company ($(1) | Death ($)(2) | Disability ($)(3) | Change of Control with Termination within 12 months ($)(4) | Retirement($)(5) | Involuntary Termination for Cause or Voluntary Resignation ($)(6) | |
| | | | | | | | |
| Kurt Sievers | Equity Related Payments | 16,503,389 | | 41,725,609 | | 16,503,389 | | 41,725,609 | | — | | — | | |
| Cash Payments | 4,740,526 | | 2,459,782 | | 4,740,526 | | 8,161,642 | | — | | — | | |
| Total | 21,243,915 | | 44,185,391 | | 21,243,915 | | 49,887,251 | | — | | — | | |
| William Betz | Equity Related Payments | 1,336,618 | | 5,353,424 | | 1,336,618 | | 5,353,424 | | — | | — | | |
| Cash Payments | 1,161,216 | | 621,216 | | 621,216 | | 2,565,216 | | — | | — | | |
| Benefits Continuation | — | | — | | — | | 21,125 | | — | | — | | |
| Total | 2,497,834 | | 5,974,640 | | 1,957,834 | | 7,939,765 | | — | | — | | |
| Christopher Jensen | Equity Related Payments | 2,436,665 | | 6,430,557 | | 2,436,665 | | 6,430,557 | | — | | — | | |
| Cash Payments | 1,096,704 | | 586,704 | | 586,704 | | 2,422,704 | | — | | — | | |
| Benefits Continuation | — | | — | | — | | 21,125 | | — | | — | | |
| Total | 3,533,369 | | 7,017,261 | | 3,023,369 | | 8,874,386 | | — | | — | | |
| Andrew Micallef | Equity Related Payments | 998,750 | | 4,251,165 | | 998,750 | | 4,251,165 | | — | | — | | |
| Cash Payments | 1,150,464 | | 615,464 | | 615,464 | | 2,541,464 | | — | | — | | |
| Benefits Continuation | — | | — | | — | | 21,125 | | — | | — | | |
| Total | 2,149,214 | | 4,866,629 | | 1,614,214 | | 6,813,754 | | — | | — | | |
| Jennifer Wuamett | Equity Related Payments | 3,022,008 | | 7,228,450 | | 3,022,008 | | 7,228,450 | | — | | — | | |
| Cash Payments | 1,182,720 | | 632,720 | | 632,720 | | 2,612,720 | | — | | — | | |
| Benefits Continuation | — | | — | | — | | 22,125 | | — | | — | | |
| Total | 4,204,728 | | 7,861,170 | | 3,654,728 | | 9,863,295 | | — | | — | | |
1 | | | | | | | | | | | | | | |
1.In the event of an involuntary separation or termination at the convenience of the Company (other than for cause, as defined in the applicable employment agreement and equity plan or award agreement) as well as separation due to disability,, estimated value of payments includes the following: |
Cash Payments: Amount for Mr. Clemmer represents the value of salary payments until the end of his employment agreement in July 2021; amount for Messrs. Sievers and Owen represents an estimate of what the Company would be required to pay to the executive per the local labour laws as specified in their respective employment agreement; amount for Mr. Kelly represents one times gross annual base salary and target annual AIP payment as specified in his employment agreement, which is subject to signing a general release of claims in favor of NXP.
Equity Related Payments:
RSUs: Amounts represent the value of the accelerated vesting of the 2018 and 2019 RSU awards prorated from the grant date to termination date as per the terms of the equity award documents.
PSUs: Amounts represent the value of the 2018 and 2019 PSU awards prorated from the grant date to termination date as per the terms of the equity award documents using the share delivery factor based on actual performance results as of December 31, 2019—1.82 for the 2018 PSUs and 1.40 for the 2019 PSUs. The prorated portion of the PSUs would not be delivered until the PSUs’ original vesting date (as stated in the applicable equity award agreement) and is subject to the final share delivery factor based on the achievement and certification by or on behalf of the Board of the relevant performance goals during the award’s original performance period.
2 | Cash Payments: All NEOs would receive the 2022 AIP payment earned. Amount for Mr. Sievers also includes two times his gross annual base salary as specified in the Secondment Addendum, which is subject to signing a general release of claims; amount for Messrs. Betz, Jensen and Micallef and Ms. Wuamett also includes one times gross annual base salary as specified in their employment agreement, which is subject to signing a general release of claims in favor of NXP. Equity Related Payments: RSUs: Amounts represent the value of the accelerated vesting of the 2020, 2021 and 2022 RSU awards prorated from the grant date to termination date as per the terms of the equity award documents. PSUs: Amounts represent the value of the 2020, 2021 and 2022 PSU awards prorated from the grant date to termination date as per the terms of the equity award documents using the share delivery factor based on actual performance results as of December 31, 2022—153% for the 2020 PSUs; 100% for the 2021 PSUs; and 110% for 2022 PSUs. The prorated portion of the PSUs would not be delivered until the PSUs’ original vesting date (as stated in the applicable equity award agreement) and is subject to the final share delivery factor based on the achievement and certification by or on behalf of the Board of the relevant performance goals during the award’s original performance period. 2.In the event of death while still employed by NXP, estimated value of payments includes the following: |
Cash Payments: Amount for Mr. Clemmer represents the value of salary payments until the end of his employment agreement in July 2021. No cash payments would be made to other NEOs
Equity Related Payments:
Effective August 30, 2018, the Nominating and Compensation Committee of NXP, approved a death benefit for members of NXP’s Management Team (“MT”), which includes the NEOs, whereby, unless otherwise provided in a separate employment agreement, in the event of death of a MT member while employed at NXP, all outstanding and unvested equity awards at the time of death will vest as soon as administratively practicable thereafter, except that in the case of PSU awards, such vesting will be subject to the performance targets being met.
RSUs: Amounts represent the value of the accelerated vesting of the 2017, 2018 and 2019 RSU awards.
PSUs: Amounts represent the value of the 2018 and 2019 PSU awards as per the terms of the equity award documents using the share delivery factor based on actual performance results as of December 31, 2019—1.82 for the 2018 PSUs and 1.40 for the 2019 PSUs. The PSUs would not be delivered until the PSUs’ original vesting date (as stated in the applicable equity award agreement) and is subject to the final share delivery factor based on the achievement and certification by or on behalf of the Board of the relevant performance goals during the award’s original performance period. In addition, Mr. Clemmer’s amount includes the value of the 2015 and 2016 PSUs granted to him at target.
56
EXECUTIVE COMPENSATION (continued)
3 | Cash Payments: All NEOs would receive the 2022 AIP payment earned. Equity Related Payments: Equity Related Payments: Effective August 30, 2018, the Nominating and Compensation Committee of NXP, approved a death benefit for members of NXP’s Management Team (“MT”), which includes the NEOs, whereby, unless otherwise provided in a separate employment agreement, in the event of death of a MT member while employed at NXP, all outstanding and unvested equity awards at the time of death will vest as soon as administratively practicable thereafter, except that in the case of PSU awards, such vesting will be subject to the performance targets being met. RSUs: Amounts represent the value of the accelerated vesting of the 2020, 2021 and 2022 RSU awards. PSUs: Amounts represent the value of the 2020, 2021 and 2022 PSU awards as per the terms of the equity award documents using the share delivery factor based on actual performance results as of December 31, 2022—153% for the 2020 PSUs; 100% for the 2021 PSUs; and 110% for 2022 PSUs. The PSUs would not be delivered until the PSUs’ original vesting date (as stated in the applicable equity award agreement) and is subject to the final share delivery factor based on the achievement and certification by or on behalf of the Board of the relevant performance goals during the award’s original performance period. 3.In the event of disability while still employed by NXP, estimated value of payments includes the following: Cash Payments: All NEOs would receive the 2022 AIP payment earned. Amount for Mr. Sievers also includes two times his gross annual base salary as specified in the Secondment Addendum, which is subject to signing a general release of claims; no additional payment would be made for Messrs. Betz, Jensen and Micallef and Ms. Wuamett. Equity Related Payments: RSUs: Amounts represent the value of the accelerated vesting of the 2020, 2021 and 2022 RSU awards prorated from the grant date to termination date as per the terms of the equity award documents. PSUs: Amounts represent the value of the 2020, 2021 and 2022 PSU awards prorated from the grant date to termination date as per the terms of the equity award documents using the share delivery factor based on actual performance results as of December 31, 2022—153% for the 2020 PSUs; 100% for the 2021 PSUs; and 110% for 2022 PSUs. The prorated portion of the PSUs would not be delivered until the PSUs’ original vesting date (as stated in the applicable equity award agreement) and is subject to the final share delivery factor based on the achievement and certification by or on behalf of the Board of the relevant performance goals during the award’s original performance period. 4.In the event of a termination within 12 months following a change of control either by the Company or by the NEO for good reason, in either case not under certain conditions involving misconduct (also known as double trigger), estimated value of payments includes the following (amounts assume that both the change of control and termination occur on December 31, 2019)2022): |
Cash Payments: Amounts represent two times gross annual base salary and two times target annual AIP payment for each NEO as specified in the Change of Control Severance Policy.
Equity Related Payments:
RSUs: Amounts represent the value of the accelerated vesting of the 2017, 2018 and 2019 RSU awards as per the terms of the equity award documents.
PSUs: Amounts represent the value of the 2015, 2016 (for Mr. Clemmer only), 2018 and 2019 PSU awards as per the terms of the equity award documents. For the 2019 amounts represent the value of the PSUs using the share delivery factor based on actual performance results as of December��31, 2019—1.82 for the 2018 PSUs and 1.40 for the 2019
Cash Payments: All NEOs would receive the 2022 AIP payment earned. Amounts also include two times gross annual base salary and two times target annual AIP payment for each NEO as specified in the Change of Control Severance Policy.
Equity Related Payments:
RSUs: Amounts represent the value of the accelerated vesting of the 2020, 2021 and 2022 RSU awards as per the terms of the equity award documents.
PSUs: Amounts represent the value of the 2020, 2021 and 2022 PSU awards as per the terms of the equity award documents using the share delivery factor based on actual performance results as of December 31, 2022—153% for the 2020 PSUs; 100% for the 2021 PSUs; and 110% for 2022 PSUs. In the case of a change of control, the performance period would end effective as of the date of the change of control and the share delivery factor would be determined as of that date, subject to determination and certification by or on behalf of the Board. For the 2015 and 2016 PSU awards, amount represents the value of the target number of shares awarded.Benefits Continuation: Amounts represent an approximate cost for benefits continuation as specified in the Change of Control Severance Policy for Messrs. Clemmer, Kelly and Reed, who are US citizens or residents.
4 | In the case of a change of control, the performance period would end effective as of the date of the change of control, assumed here as December 31, 2022, and the share delivery factor would be determined as of that date, subject to determination and certification by or on behalf of the Board. Benefits Continuation: Amounts represent an approximate cost for benefits continuation as specified in the Change of Control Severance Policy for Messrs. Betz, Jensen and Micallef and Ms. Wuamett, who are US citizens or residents. 5.No NEO is currently eligible for retirement, as defined in the 20192020, 2021 and 2022 equity award agreements estimated valueand the 2022 AIP as the participant’s termination of payments includesemployment where the following (only for Messrs. Clemmer, Kelly, Owenparticipant has attained both five (5) years of service with NXP and Reed who would be are eligible for ‘retirement’ as of December 31, 2019): |
Equity Related Payments:
Only the 2019 equity award agreements contain provisions related to prorated awards in retirement.
RSUs: Amounts represent the value of the accelerated vesting of the 2019 RSU awards prorated from the grant date to termination date as per the terms of the equity award documents.
PSUs: Amounts represent the value of the 2019 PSUs prorated from the grant date to termination date as per the terms of the equity award documents using the share delivery factor based on actual performance results as of December 31, 2019 or 1.40. The prorated portion of the PSUs would not be delivered until the PSUs’ original vesting date (as stated in the applicable equity award agreement) and is subject to the final share delivery factor based on the achievement and certification by or on behalf of the Board of the relevant performance goals during the award’s original performance period.
5 | age sixty (60). 6.All unvested equity will be cancelled. No cash payments would be made. |
Our equity awards agreements contain
non-solicitation and
non-competition provisions that are effective for 12 months following the termination of employment. Except as described above, unvested equity awards lapse if a participant’s employment terminates and such participant is no longer employed by NXP. If there is a violation by the participant of any provisions contained in the applicable equity award, plan or grant letter, then the equity award lapses on the date of such violation. The
2019 equity award agreements also require participants to execute and deliver a general release of claims upon termination.
NEO Employment Agreements
Mr. Sievers
In connection with Mr. Sievers’ nomination as Executive Director and President and Chief Executive Officer, Mr. Sievers and the Company entered into a management agreement (the “Management Agreement”) and NXP Semiconductors Germany GmbH, a wholly owned indirect affiliate of the Company, and Mr. Sievers entered into an addendum to Mr. Sievers’ existing employment agreement (the “Secondment Addendum” and together with the Management Agreement, are the “CEO Agreements”). A copy of the CEO Agreements can be found on Form 8-K filed by the Company on March 9, 2020.
The CEO Agreements provide that effective May 27, 2020, Mr. Sievers serves as Executive Director and President and Chief Executive Officer until the date of the following annual general meeting, and will be extended if NXP‘s general meeting reappoints
Mr. Sievers as Executive Director and President and CEO of NXP. The CEO Agreements outline terms and conditions of Mr. Sievers' employment including his base salary, annual incentive target and participation in certain benefits plans, policies and programs applicable to other NXP executives and officers.
Considering Mr. Sievers’ tenure—he has been employed at NXP since 1995—the HRCC considered it reasonable to provide in the CEO agreements that in the event that Mr. Sievers’ employment is terminated at the initiative of the Company and other than for cause, Mr. Sievers will be entitled to a severance amount of two times the gross annual base salary and a pro-rata payment of the annual cash bonus, depending on achievement of the pay-out conditions and the period in which Mr. Sievers has performed actual work for the Company. One additional element the HRCC took into account was that Mr. Sievers, being employed by the Company’s German subsidiary NXP Semiconductors Germany GmbH, in the absence of the severance arrangements in the CEO Agreements, would be entitled to a severance amount that could be as high as four times his base salary, according to German employment law, in the absence of the lesser severance arrangements in the CEO Agreements.
Mr. Sievers is subject to non-competition provisions that remain in effect for a period of one year following the termination of his employment agreement.
Mr. Sievers is also subject to the change in control policy, which states that in the event Mr. Sievers' employment is terminated within twelve months following a change of control or if Mr. Sievers resigns for “good reason” within twelve months following a change of control, in either case not under certain conditions involving misconduct, then Mr. Sievers is entitled to the change of control arrangements approved from time to time by the Company’s HRCC, as described on page 60. These payments are estimated in the table above. Other Executive Officers
Mr. Betz, Mr. Jensen, Mr. Micallef and Ms. Wuamett have entered into employment agreements with NXP USA, Inc. ("NXP USA"), a wholly owned indirect subsidiary of the Company, setting forth the terms and conditions of their employment, including their base salary, annual incentive target and participation in certain benefits plans, policies and programs applicable to other NXP executives. Each officer may terminate employment for any reason upon three months’ written notice and either NXP USA or the officer may terminate their employment immediately under certain conditions involving misconduct. In the event that NXP USA terminates an officer's employment absent certain conditions involving misconduct, such officer is entitled to receive a lump sum cash severance payment of one year's base salary and pro rate payment of the annual incentive bonus for the period that such officer performed actual work, to the extent the conditions for a bonus payout have been met. In the event an officer's employment is terminated within twelve months following a change of control of the officer resigns for "good reason" within twelve months following a change of control, in either case not under certain conditions involving misconduct, then such officer is entitled to the change of control arrangements approved from time to time by the Company’s HRCC, as described on page 60. All severance payments are contingent on the officer signing and not revoking a release of claims. Each officer is subject to non-competition and non-solicitation restrictions for twelve months and customary prohibitions on disclosing confidential information following the termination of his employment for any reason. The annual total compensation for the median employee of NXP (other than our Chief Executive Officer) in
20192022 was
$50,294.$53,974. The annual total compensation for our Chief Executive Officer was
$20,558,002.$20,771,851. We used the total compensation for Mr. Sievers, our CEO, as reported in the 2022 Summary Compensation Table. Based on this information,
the ratio of the annual total compensation of our CEO to the
median of the annual total compensation of
all employeesthe median employee was approximately
409:1385:1.
We have a global workforce operating in 33over 30 countries. The countries that have predominantly manufacturing activities are in China, Malaysia, Taiwan and Thailand with total headcount of 14,297approximately 16,800 employees or 51%48% of our global population. Thesepopulation as of December 31, 2022. Excluding employees from those four countries, have an average headcount of 3,573 and anthe global average base pay of $21,483 as compared towould be approximately $82,000.
We have determined a
global average of $54,917. Excluding manufacturing employees, our average base pay is over $83,600.new median employee in 2022. To identify the median employee, we used the following methodology:
•We identified our median employee by considering an employee population as of December 31, 2019
2022•To determine the median employee, we used a consistently applied compensation measure that included the total of annualannualized base pay, local allowances, AIP Bonus at target or 20192022 target sales incentive plan and the approved value of the annual equity awards granted during 2019.
2022•We applied the exchange rate we utilize in our HR system as of December 31, 2019
2022•Salaries were annualized for all employees who were hired or were on an unpaid leave during the fiscal year
To determine the pay ratio:
•We calculated the compensation elements for the median employee in accordance with the requirements of item 402(c)(2)(x) of the SEC’s RegulationS-K. The exact median employee using the methodology above joined NXP in mid-year. Because this would have a significant impact on the pay ratio, we used another employee with substantially similar structured compensation to the original median employee who had less than a 1% variance of the compensation measure used to determine the median.
57
The median employee resides in the US in a fabrication equipment operator role.
EXECUTIVE COMPENSATION
(continued)
Human Resources and Compensation Committee Interlocks and Insider Participation
During 2022, Mr. Sundström (Chair), Sir Peter Bonfield, Ms. Clayton and Ms. Olving served on the Human Resources and Compensation Committee. Other than Mr. Sundström, none of the members of the Human Resources and Compensation Committee is or has been an executive officer or employee of NXP. Mr. Sundström held the role as CFO of NXP Semiconductors N.V. (2008–2012). None of our executive officers serves on the board of directors or compensation committee of a company which has an executive officer who serves on our Board or Human Resources and Compensation Committee.
Equity Compensation Plan Information
The following table summarizes NXP’s compensation plan information (including individual compensation arrangements) as of the fiscal year ended December 31,
2019. | | | | | | | | | | | | |
| 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)1 | | | Number of
securities remaining
available for future
issuance under equity
compensation plans
(excluding securities
reflected in
column (a))(c) | |
| Equity compensation plans approved by security holders | | | 11,092,972 | 2 | | | 52.08 | | | | 40,329,564 | 3 |
| Equity compensation plans not approved by security holders | | | — | | | | — | | | | — | |
| Total | | | 11,092,972 | | | | 52.08 | | | | 40,329,564 | |
| | | | | | | | | | | |
| 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 ($)(b)(1) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities
reflected in column (#)(a)(c)) |
| | | |
| Equity compensation plans approved by security holders | 6,849,320(2) | 66.72 | | 30,868,319(3) |
| Equity compensation plans not approved by security holders | — | — | | — |
| Total | 6,849,320 | 66.72 | | 30,868,319 |
| | | |
1.Shares of common stock issuable upon vesting of RSU and PSU awards have been excluded from the calculation of the weighted average exercise price. 2.Represents 346,202 shares of common stock subject to outstanding stock options and 6,503,118 shares of common stock that may be issued upon vesting of outstanding RSU and PSU awards (PSU awards are assumed at maximum performance level), in each case pursuant to equity awards issued under the Company’s equity compensation plans. 3.Includes 20,894,427 shares of common stock available for future issuance under the NXP 2019 Omnibus Incentive Plan and 9,973,892 shares of common stock available for future issuance under NXP’s Employee Stock Purchase Plan. |
Pay Versus Performance Disclosure
In accordance with Item 402(v) of Regulation S-K, which was adopted by the Securities and Exchange Commission in 2022 pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we are providing the following disclosure regarding executive compensation versus Company performance for the fiscal years listed below. The Human Resources and Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the fiscal years shown. The amounts in the table below are calculated in accordance with SEC rules and do not represent amounts actually earned or realized by NEOs.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | Summary Compensation Table Total for Richard Clemmer ($)1 | Compen- sation Actually Paid to Richard Clemmer ($)1,2 | Summary Compen-sation Table Total for Kurt Sievers ($)1 | Compensation Actually Paid to Kurt Sievers ($)1,2 | Average Summary Compen- sation Table Total for Non-PEO NEOs ($)1 | Average Compensation Actually Paid to Non-PEO NEOs ($)1,2 | Value of initial fixed $100 investment based on:3 | Net Income
($ in millions) | Revenue
($ in millions) | Non-GAAP Gross Margin4 |
| Company TSR ($) | Philadelphia Sox Index TSR ($) |
| | | | | | | | | | | |
| 2022 | n/a | n/a | 20,771,851 | | 4,693,294 | | 3,969,488 | | 2,053,189 | | 129.76 | | 142.94 | | 2,787 | | 13,205 | | 57.9 |
| 2021 | n/a | n/a | 20,911,892 | | 43,710,558 | | 3,649,332 | | 8,137,948 | | 183.30 | | 219.51 | | 1,871 | | 11,063 | | 56.1 |
| 2020 | 2,256,509 | | 15,746,714 | | 19,253,302 | | 25,421,027 | | 3,366,167 | | 5,613,773 | | 126.56 | | 153.66 | | 52 | | 8,612 | | 51.1 |
1.For the year 2020 Richard Clemmer served as our PEO through May 27, 2020. Kurt Sievers was appointed as our PEO on May 27, 2020 and has served as our PEO since that date. The Non-PEO NEOs for whom the average compensation is presented in this table are: (i) for fiscal year 2020, Peter Kelly, David Reed, Steven Owen and Jennifer Wuamett; (ii) for fiscal year 2021, Peter Kelly, William Betz, Andrew Micallef, Steven Owen and Jennifer Wuamett; and (iii) for fiscal year 2022, William Betz, Christopher Jensen, Andrew Micallef and Jennifer Wuamett.
2.The amounts shown as Compensation Actually Paid have been calculated in accordance with Item 402(v) of Regulation S‑K and do not reflect compensation actually realized or received by a PEO or the other NEOs. Mr. Sievers is the only NEO who has participated in a pension during the reporting years. The amounts shown as Compensation Actually Paid reflect total compensation as set forth in the Summary Compensation Table ("SCT") for each year, adjusted as outlined in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | Summary Compensation Table Total ($) | Grant Date
Fair Value of Equity
Awards Granted
During Applicable
Year from SCT ($)
( — ) | Year-End Fair Value of Equity Awards Granted During Applicable Year ($)
( + ) | Change in Fair Value as of Year-End of Any Prior Year Awards that Remain Unvested as of Year-End ($)
( + ) | Change in Fair Value as of the Vesting Date of Any Prior Year Awards that Vested During Applicable Year ($)
( + ) | Change in Pension Value for the Applicable Year from SCT ($)
( — ) | Pension Service Costs Attributable to the Applicable Year ($)
( + ) | Compensation Actually Paid ($) | |
|
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | (j) | |
| 2022 | Kurt Sievers (PEO) | 20,771,851 | | 17,119,017 | | 17,610,633 | | (10,844,605) | | (5,979,095) | | — | | 253,527 | | 4,693,294 | | |
| 2022 | Average Non-PEO NEO | 3,969,488 | | 2,819,514 | | 2,900,481 | | (1,420,415) | | (576,851) | | N/A | N/A | 2,053,189 | | |
| 2021 | Kurt Sievers (PEO) | 20,911,892 | | 16,314,944 | | 17,663,519 | | 8,603,541 | | 12,546,522 | | — | | 300,028 | | 43,710,558 | | |
| 2021 | Average Non-PEO NEO | 3,649,332 | | 2,316,850 | | 2,503,293 | | 1,298,335 | | 3,003,838 | | N/A | N/A | 8,137,948 | | |
| 2020 | Kurt Sievers (PEO) | 19,253,302 | | 16,063,333 | | 19,616,920 | | 4,671,282 | | 2,323 | | 2,293,073 | | 233,606 | | 25,421,027 | | |
| 2020 | Richard Clemmer (PEO) | 2,256,509 | | — | | — | | 13,429,197 | | 61,008 | | N/A | N/A | 15,746,714 | | |
| 2020 | Average Non-PEO NEO | 3,366,167 | | 2,847,268 | | 3,357,471 | | 1,719,732 | | 17,671 | | N/A | N/A | 5,613,773 | | |
For the equity values included in the above tables, the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of the grant. Equity values are calculated in accordance with FASB ASC Topic 718. PSU awards outstanding as of December 31 of the reporting year have been valued using a Monte Carlo simulation. RSU awards outstanding as of December 31 of the reporting year have been valued using the value date closing stock price discounted for future dividend payments. The fair values as of the vesting date are calculated using the closing share price on the vesting date. No dividends or dividend equivalents are paid or earned on unvested equity awards and no equity awards were granted and vested in the same year.
3.The Peer Group Total Shareholder Return ("TSR") set forth in this table utilizes the Philadelphia Stock Exchange Semiconductor Index (“Philadelphia Sox Index”), which we also utilize in the stock performance graph in our Annual Report on Form 10-K. The comparison assumes $100 was invested for the period starting December 31, 2019 through the last trading day of the reporting, year in the Company and in the Philadelphia Sox Index, respectively, assuming the reinvestment of any dividends. Historical stock performance is not necessarily indicative of future stock performance.
4.Non-GAAP Gross Margin is a non-GAAP financial measure. We calculate Non-GAAP gross margin by adjusting Gross Margin to exclude the effects of purchase price accounting, restructuring, stock-based compensation, merger-related costs, and other incidentals. These measures should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. Appendix A to this Proxy Statement quantifies and reconciles this measure to the comparable US GAAP financial measure.
Relationship Between Performance Measures and Compensation Actually Paid
Below are graphic representations that help illustrate the relationship between 'compensation actually paid' ("CAP") and the financial measures in the table above as well as the relationship of NXP’s TSR and the TSR of the Philadelphia SOX Index. CAP, as required under SEC rules, reflects adjusted values to unvested and vested equity awards during the years shown in the table based on year-end stock prices, various accounting valuation assumptions, and projected performance modifiers but does not reflect actual amounts paid out for those awards. Because our NEO compensation is heavily weighted on equity, specifically performance based equity, the largest determinants of CAP are year over year changes in NXP’s stock price, realized achievement on PSUs awards that vested during the reporting year and projected PSU realizations on the unvested PSU awards in the form of Monte Carlo valuations.
Graphic 1
Graphic 1: A large portion of the NEO’s compensation is in the form of equity-based long term incentive awards which vest over three years. In 2022, it was 82% of the PEO compensation and 71% of non-PEO compensation as a percentage of the total compensation reported in the Summary Compensation Table. Consistent with our pay for performance philosophy, 70% of the target annual LTI award value is granted as performance-based restricted share units (“PSUs”), where the performance is measured against our 3 year TSR relative to the compensation peer group of semiconductor companies as described earlier in the proxy statement.
From 2020 to 2021, PEO CAP and non-PEO CAP increased by 72% and 45%, respectively, largely due to the vesting of a 3-year cliff PSU award at a 135.29% achievement. For that award, achievement was measured over the performance period July 2018 to July 2021 with achievement above the median of the select peer group. The increase in the 2021 CAP also reflected the increase in fair market value at year end for unvested equity awards. NXP’s stock price increased from $159.01 at December 31, 2020 to $227.78 at December 31, 2021. In 2022, PEO CAP and non-PEO CAP fell by 89% and 75%, largely due to the vesting of 3-year cliff PSU awards at an 84.21% achievement based on a performance period of October 2019 to October 2021 as well as decreases in fair market value for unvested awards due to a decline in NXP’s stock price — $158.03 at December 31, 2022. No performance based equity awards were granted in 2017 which would have vested in 2020.
Graphic 2
Graphic 2: Net income increased 3,498% from 2020 to 2021 and 49% from 2021 to 2022. PEO CAP and non-PEO CAP increased by 72% and 45% from 2020 to 2021, respectively and decreased by 89% and 75% from 2021 to 2022. Net income is not a performance measure used in our compensation program.
Graphic 3 Graphic 4
Graphics 3 & 4: Revenue and Non-GAAP Gross Margin are the two equally weighted financial performance elements of our annual incentive plan for the reporting years and are our company selected measures for purposes of this pay vs. performance disclosure. Because the SEC has stated that multi-year performance measures cannot be used as the Company's measure selected to be included in the table and our PSUs use a 3-year relative TSR performance measure, we have used the financial measures in our annual incentive plan. Non-equity incentive plan compensation from our annual incentive plan earned by the PEO and non-PEO NEOs (average) was $0 in 2020, $3,331,790 and $799,343 in 2021 and $2,459,782 and $614,026 in 2022, respectively. These amounts are reflected in the CAP amounts listed above. However, because most of the NEOs' compensation is in the form of equity, the CAP changes in any year are mainly driven by the equity valuations required for the CAP calculation. The results of these calculations are shown in Footnote 2 above.
Tabular List of Most Important Performance Measures
The following table lists the most important performance measures that we used in 2022 to link the Compensation Actually Paid (CAP) to our PEO and other NEOs to the Company’s performance.
1. | Shares of common stock issuable upon vesting of RSU and PSU awards have been excluded from
| |
| Three-Year Relative TSR* |
| Revenue |
| Non-GAAP Gross Margin |
Sustainability Goals Used in the calculation of the weighted average exercise price. |
2. | Represents 1,202,909 shares of common stock subject to outstanding stock options and 9,890,063 shares of common stock that may be issued upon vesting of outstanding RSU and PSU awards (PSU awards are assumed at maximum performance level), in each case pursuant to equity awards issued under the Company’s equity compensation plans.
|
3. | Includes 29,210,196 shares of common stock available for future issuance under the NXP 2019 OmnibusAnnual Incentive Plan and 11,119,368 shares of common stock available for future issuance under NXP’s Employee Stock Purchase Plan.
Sustainability Scorecard |
58
ITEM 12:NON-BINDING, ADVISORY VOTE ON THE FREQUENCY OF FUTURE SHAREHOLDER ADVISORY VOTES ON NAMED EXECUTIVE OFFICER COMPENSATION
*As describedstated above, the SEC has provided guidance that multi-year performance measures cannot be used as the Company's selected measure included in Item 11 above, NXPthe table; however because it is required to include an advisory resolution subject to anon-binding, advisory shareholder“say-on-pay” vote on the executiveimportant part of our compensation program for our Named Executive Officers. Section 14A of the Exchange Act requires that, at least once every six years, we ask our shareholders to vote, on anon-binding, advisory basis, to determine whether shareholder advisory votes to approve our Named Executive Officers’ compensation should occur every one, two or three years. Shareholders may also abstain from voting.
Our Board has determined that an annualsay-on-pay vote is appropriate for NXP and its shareholders at this time, and, therefore, our Board recommends that you vote for aone-year interval for the advisorysay-on-pay vote.
Like thenon-binding, advisorysay-on-pay vote on Item 11, this Item 12 is advisory and will not be binding on NXP. However, our Compensation Committee and Board will review the results of the vote and will consider shareholders’ views in determining the frequency of future advisorysay-on-pay votes. Thenon-binding, advisory vote on the frequency of future advisory votes on executive compensation is a plurality vote, which means that NXP will consider shareholders to have expressed anon-binding preference for the option presented to shareholders that receives the greatest number of votes cast.
THE BOARD RECOMMENDS THAT ANON-BINDING, ADVISORY VOTE ON“SAY-ON-PAY” BE HELD ANNUALLY AND THAT SHAREHOLDERS SELECT “1 YEAR” WHEN VOTING ON THIS PROPOSAL.
59
listed it here.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Related Party Transactions
There
arewere no transactions or series of similar transactions, since January 1,
2019,2022, to which we were a party or will be a party other than compensation arrangements which are described under “Executive Compensation,” in which:
•the amountsamount involved exceeded or will exceed $120,000; and
•a director or director nominee, executive officer, holder of more than 5% of our common shares or any immediate family member of their immediate familya director, director nominee or executive officer had or will have a direct or indirect material interest.
Statement of Policy Regarding Transactions with Related Persons
The Board has adopted a written policy that requires our
Nominating and GovernanceAudit Committee to review and approve or ratify all related party transactions that involve a value of $120,000 or more (excluding employment relationships). The
Human Resources and Compensation Committee is responsible for reviewing and approving or ratifying any employment relationship with a related party that involves compensation of $120,000 or more. In determining whether to approve or ratify, as applicable, a related party transaction, these committees are guided by our Code of Conduct which, among other things, requires that business decisions and actions be based on the best interests of NXP and not be motivated by personal considerations or relationships.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed and discussed the audited financial statements with NXP’s management and its independent auditor,
KPMG.Ernst & Young Accountants LLP (“E&Y”). The Audit Committee has also discussed with
KPMGE&Y the matters required to be discussed by
Auditing Standard No. 1301, “Communications with Audit Committees,” issued bythe applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”)
. and the SEC. In addition,
KPMGE&Y provided the Audit Committee with the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence, and the Audit Committee discussed with
KPMGE&Y its independence from NXP and its management. The Audit Committee has also considered whether the provision of other
non-audit services by
KPMGE&Y to NXP is compatible with the auditors’ independence and has concluded that it is.
In reliance on these reviews and discussions, the Audit Committee recommended to the Board, and the Board approved, the
20192022 Statutory Annual Accounts and the inclusion of the audited financial statements in NXP’s Annual Report on Form
10-K for the year ended December 31,
2019,2022, for filing with the SEC.
Chunyuan Gu
FUTURE SHAREHOLDER PROPOSALS AND NOMINATIONS FOR
DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of such securities. To our knowledge, based solely on a review of such reports filed with the SEC and written representations that no other reports were required during 2022, we believe that all required reports were timely filed, except for one Form 4 for Ron Martino to report a vesting of his restricted stock units that was filed one day late due to an administrative delay in obtaining the reporting person's filing codes with the SEC.
THE
20212024 ANNUAL GENERAL MEETING
Any shareholder desiring to present a resolution for inclusion in the Company’s proxy statement for the
20212024 Annual General Meeting of Shareholders must deliver such resolution to the board of directors at the address below no later than
[ ]December 12, 2023 (120 days before the anniversary date of
the release of this
proxy)proxy statement). Only those resolutions that comply with the requirements of Rule
14a-8 under the Exchange Act will be included in the Company’s proxy statement for the
20212024 Annual General Meeting of Shareholders.
Shareholders may present resolutions that are proper subjects for consideration at an annual meeting, even if the resolution is not submitted by the deadline for inclusion in the proxy statement. In order for resolutions of shareholders made outside of Rule14a-8 under the Exchange Act to be considered “timely” within the meaning of Rule14a-4(c) under the Exchange Act with respect to the 20212024 Annual General Meeting of Shareholders, such resolutions must be received by the Board at the address below by [ ]. February 25, 2024.
Shareholder resolutions should be sent to NXP’s Secretary at NXP Semiconductors N.V., High Tech Campus 60, 5656 AG, Eindhoven, The Netherlands, Attention: Secretary.
In addition, our articles of association provide that one or more holders of shares representing solely or jointly at least such part of the issued share capital as required by
Dutch corporate law, may present a resolution for consideration at the
2021 Annual General MeetingBoard of
Shareholder by delivering such resolution to the board of directorsDirectors at the address below no later than sixty days prior to the date of the
20212024 Annual General Meeting of Shareholders. Notice of such matter will be placed on the notice convening the
20212024 Annual General Meeting of Shareholders.
In addition to satisfying the foregoing requirements, to comply with the SEC’s universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than our nominees must provide timely notice that sets forth the information required by Rule 14a-19 under the Exchange Act.
We have provided to you with this proxy statement a copy of our Annual Report on Form
10-K for the year ended December 31,
2019,2022, including audited financial statements. Copies of these materials are also available online through the SEC at www.sec.gov. We may satisfy SEC rules regarding delivery of proxy materials, including this proxy statement
the Notice and the Annual Report on Form
10-K, by delivering a single set of proxy materials to an address shared by two or more holders of ordinary shares, unless contrary instructions are received prior to the mailing date. This delivery method can result in meaningful cost savings for us. We undertake to deliver promptly upon written or oral request at the address or phone number below a separate copy of the proxy materials to a shareholder at a shared address to which a single copy of the proxy materials was delivered. Similarly, if you share an address with another shareholder and have received multiple copies of our proxy materials, you may write or call us at the address or phone number below to request delivery of a single copy of the proxy materials in the future. If you hold ordinary shares and prefer to receive separate copies of the proxy materials either now or in the future, please contact Broadridge at
(866) 540-7095 or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, NY 11717.
Our
20192022 Statutory Annual Report and Annual Report on Form
10-K for the fiscal year ended December 31,
2019,2022, including audited financial statements, as filed with the SEC, is available to shareholders free of charge on our Investor Relations website at
http://investors.nxp.com or by writing us at NXP Semiconductors N.V., High Tech Campus 60, 5656 AG, Eindhoven, The Netherlands, Attention: Secretary.As of the date of this proxy statement, we are not aware of any other matters to be brought before the Annual General Meeting other than those referred to in this proxy statement. However, if any other matters are properly presented for action, in the absence of instructions to the contrary, it is the intention of the persons named in the accompanying proxy to vote in their discretion the ordinary shares represented by all properly executed proxies.
61
AppendixAPPENDIX A
Reconciliation of Non-GAAP Measures (unaudited)
| | | | | | | | |
($ in millions) | | December 31,
2018 | | | December 31,
2019 | |
Revenue | | $ | 9,407 | | | $ | 8,877 | |
GAAP gross profit | | $ | 4,851 | | | $ | 4,618 | |
Purchase Price Accounting (PPA) effects | | | (78 | ) | | | (84 | ) |
Restructuring | | | — | | | | (3 | ) |
Stock-based compensation | | | (40 | ) | | | (42 | ) |
Merger-related costs | | | (11 | ) | | | (2 | ) |
Other incidentals | | | — | | | | — | |
| | | | | | | | |
Non-GAAP gross profit | | $ | 4,980 | | | $ | 4,749 | |
| | | | | | | | |
GAAP Gross Margin | | | 51.6 | % | | | 52.0 | % |
Non-GAAP Gross Margin | | | 52.9 | % | | | 53.5 | % |
GAAP research and development | | $ | (1,700 | ) | | $ | (1,643 | ) |
Restructuring | | | — | | | | (16 | ) |
Stock-based compensation | | | (133 | ) | | | (141 | ) |
Merger-related costs | | | (24 | ) | | | (7 | ) |
| | | | | | | | |
Non-GAAP research and development | | $ | (1,543 | ) | | $ | (1,479 | ) |
| | | | | | | | |
GAAP selling, general and administrative | | $ | (993 | ) | | $ | (924 | ) |
PPA effects | | | (8 | ) | | | (9 | ) |
Restructuring | | | (7 | ) | | | (9 | ) |
Stock-based compensation | | | (141 | ) | | | (163 | ) |
Merger-related costs | | | (78 | ) | | | (24 | ) |
Other incidentals | | | (21 | ) | | | (16 | ) |
| | | | | | | | |
Non-GAAP selling, general and administrative | | $ | (738 | ) | | $ | (703 | ) |
| | | | | | | | |
GAAP amortization of acquisition-related intangible assets | | $ | (1,449 | ) | | $ | (1,435 | ) |
PPA effects | | | (1,449 | ) | | | (1,435 | ) |
| | | | | | | | |
Non-GAAP amortization of acquisition-related intangible assets | | $ | — | | | $ | — | |
| | | | | | | | |
GAAP other income (expense) | | $ | 2,001 | | | $ | 25 | |
Restructuring | | | 1 | | | | — | |
Merger-related costs | | | 1,961 | | | | — | |
Other incidentals | | | 39 | | | | 19 | |
| | | | | | | | |
Non-GAAP other income (expense) | | $ | — | | | $ | 6 | |
| | | | | | | | |
GAAP operating income (loss) | | $ | 2,710 | | | $ | 641 | |
PPA effects | | | (1,535 | ) | | | (1,528 | ) |
Restructuring | | | (6 | ) | | | (28 | ) |
Stock-based compensation | | | (314 | ) | | | (346 | ) |
Merger-related costs | | | 1,848 | | | | (33 | ) |
Other incidentals | | | 18 | | | | 3 | |
| | | | | | | | |
Non-GAAP operating income (loss) | | $ | 2,699 | | | $ | 2,573 | |
| | | | | | | | |
GAAP operating margin | | | 28.8 | % | | | 7.2 | % |
Non-GAAP operating margin | | | 28.7 | % | | | 29.0 | % |
Non-GAAP Financial Measures
In addition to disclosing financial results in accordance with US GAAP, this document contains references to non-GAAP financial measures and adjustments as included below. In managing NXP’s business on a consolidated basis, management develops an annual operating plan, which is approved by our Board of Directors, using non-GAAP financial measures. In measuring performance against this plan, management considers the actual or potential impacts on these non-GAAP financial measures from actions taken to reduce costs with the goal of increasing our gross margin and operating margin and when assessing appropriate levels of research and development efforts. In addition, management relies upon these non-GAAP financial measures when making decisions about product spending, administrative budgets, and other operating expenses. We believe that these non-GAAP financial measures, when coupled with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of the Company’s results of operations and the factors and trends affecting NXP’s business. We believe that they enable investors to perform additional comparisons of our operating results, to assess our liquidity and capital position and to analyze financial performance excluding the effect of expenses unrelated to operations, certain non-cash expenses and share-based compensation expense, which may obscure trends in NXP’s underlying performance. This information also enables investors to compare financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management.
These non-GAAP financial measures are provided in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. The presentation of these and other similar items in NXP’s non-GAAP financial results should not be interpreted as implying that these items are non-recurring, infrequent, or unusual.
The non-GAAP information excludes
| | | | | | | | |
| Non-GAAP Adjustment or Measure | Definition | Usefulness to Management and Investors |
| | |
| | |
| PPA Effects | Purchase Price Accounting ("PPA") effects reflect the fair value adjustments impacting acquisition accounting and other acquisition adjustments charged to the Consolidated Statement of Operations. This typically relates to inventory, property, plant and equipment, as well as intangible assets, such as developed technology and marketing and customer relationships acquired. The PPA effects are recorded within both cost of revenue and operating expenses in our US GAAP financial statements. These charges are recorded over the estimated useful life of the related acquired asset, and thus are generally recorded over multiple years. | We believe that excluding these charges related to fair value adjustments for purposes of calculating certain non-GAAP measures allows the users of our financial statements to better understand the historic and current cost of our products, our gross margin, our operating costs, our operating margin, and also facilitates comparisons to peer companies. |
| | |
| Restructuring | Restructuring charges are costs associated with restructuring programs and are primarily related to employee severance and benefit arrangements. Charges related to restructuring are recorded within both cost of revenue and operating expenses in our US GAAP financial statements | We exclude restructuring and other charges, including any adjustments to charges recorded in prior periods, for purposes of calculating certain non-GAAP measures because these costs do not reflect our core operating performance. These adjustments facilitate a useful evaluation of our core operating performance and comparisons to past operating results and provide investors with additional means to evaluate expense trends. |
| | |
| Stock Based Compensation | Stock based compensation consists of incentive expense granted to eligible employees in the form of equity based instruments. Charges related to stock based compensation are recorded within both cost of revenue and operating expenses in our US GAAP financial statements. | We exclude charges related to share-based compensation for purposes of calculating certain non-GAAP measures because we believe these charges, which are non-cash, are not representative of our core operating performance as they can fluctuate from period to period based on factors that are not within our control, such as our stock price on the dates share-based grants are issued. We believe these adjustments provide investors with a useful view, through the eyes of management, of our core business model, how management currently evaluates core operational performance, and additional means to evaluate expense trends. |
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| Non-GAAP Adjustment or Measure | Definition | Usefulness to Management and Investors |
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| Other Incidentals | Other Incidentals consist of certain items which may be non-recurring, unusual, infrequent and directly related to an event that is distinct and non-reflective of the Company’s ongoing business operations. These may include such items as process and product transfer costs (which refer to the costs incurred in transferring a production process and products from one manufacturing site to another), certain charges related to acquisitions and divestitures, non-ordinary course litigation and legal settlements, costs associated with the exit of a product line, factory or facility, environmental or governmental settlements, and other items of similar nature. | We exclude these certain items which may be non-recurring, unusual, infrequent and directly related to an event that is distinct and non-reflective of the Company’s ongoing business operations for purposes of calculating certain non-GAAP measures because these costs do not reflect our core operating performance. These adjustments facilitate a useful evaluation of our core operating performance and comparisons to past operating results and provide investors with additional means to evaluate expense trends. |
| | We exclude these costs for purposes of reporting Non-GAAP Financial income (expense) to facilitate a useful evaluation of our core financial income (expense) performance by removing results associated with factors that are not within our control or are not regularly recurring in nature. We believe this also provides the most appropriate basis for comparisons to past results. |
| Foreign exchange gain (loss) | Foreign exchange gain (loss) includes foreign currency translation gains and losses. |
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| Gain (loss) on extinguishment of long-term debt | Gain (loss) on extinguishment of long-term debt include costs associated with (early) debt extinguishment. |
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| Other financial income (expense) | Other financial income (expense) adjustments include such items as gains and losses on investments in marketable and non-marketable equity securities, interest related to non-forecasted uncertain tax positions, debt issuance costs, etc. |
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| Free Cash Flow and Free Cash Flow as a percentage of Revenue | Free Cash Flow represents operating cash flow adjusted for net additions to property, plant and equipment. This is also used as the numerator for our Free Cash Flow as a percentage of Revenue. | We believe that free cash flow and the associated ratios provide insight into our cash-generating capability and our financial performance, and is an efficient means by which users of our financial statements can evaluate our cash flow after meeting our capital expenditure. |
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| Reconciliation of Non-GAAP Measures (unaudited) |
| ($ in millions) | Full-year 2022 |
| Revenue | $ | 13,205 | |
| GAAP Gross Profit | $ | 7,517 | |
| PPA Effects | (58) | |
| Restructuring | 3 | |
| Stock Based Compensation | (47) | |
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| Other incidentals | (24) | |
| Non-GAAP Gross Profit | $ | 7,643 | |
| GAAP Gross margin | 56.9 | % |
| Non-GAAP Gross margin | 57.9 | % |
| GAAP Research and development | $ | (2,148) | |
| Restructuring | 2 | |
| Stock based compensation | (183) | |
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| Other incidentals | (6) | |
| Non-GAAP Research and development | $ | (1,961) | |
| GAAP Selling, general and administrative | $ | (1,066) | |
| PPA effects | (5) | |
| Restructuring | 2 | |
| Stock based compensation | (134) | |
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| Other incidentals | (35) | |
| Non-GAAP Selling, general and administrative | $ | (894) | |
| GAAP amortization of acquisition-related intangible assets | $ | (509) | |
| PPA effects | (509) | |
| Non-GAAP amortization of acquisition- related intangible assets | $ | — | |
| GAAP Other income (expense) | $ | 3 | |
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| Other incidentals | — | |
| Non-GAAP Other income (expense) | $ | 3 | |
| GAAP Operating income (loss) | $ | 3,797 | |
| PPA effects | (572) | |
| Restructuring | 7 | |
| Stock based compensation | (364) | |
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| Other incidentals | (65) | |
| Non-GAAP Operating income (loss) | $ | 4,791 | |
| GAAP Operating margin | 28.8 | % |
| Non-GAAP Operating margin | 36.3 | % |
| GAAP Financial Income (expense) | $ | (434) | |
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| Foreign exchange gain (loss) | (13) | |
| Gain (loss) on extinguishment of long-term debt | (18) | |
| Other financial expense | (17) | |
| Non-GAAP Financial income (expense) | $ | (386) | |
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| Free Cash Flow (unaudited) |
| ($ in millions) | Full-year 2022 |
| Net cash provided by (used for) operating activities | $ | 3,895 | |
| Net capital expenditures on property, plant and equipment | (1,061) | |
| Non-GAAP free cash flow | $ | 2,834 | |
| Non-GAAP free cash flow as percent of Revenue | 21 | % |
Forward-looking Statements
This document includes forward-looking statements which include statements regarding NXP’s business strategy, carbon emissions, energy consumption, water consumption, and other environmental targets, external ESG commitments, and workplace diversity goals as well as any other statements which are not historical facts. By their nature, forward-looking statements are subject to numerous factors, risks and uncertainties that could cause actual outcomes and results to be materially different from those projected. These factors, risks and uncertainties include the amortizationfollowing: market demand and semiconductor industry conditions; the ability to successfully introduce new technologies and products; the demand for the goods into which NXP’s products are incorporated; potential impacts of acquisition related intangible assets, the purchase accountingCOVID-19 pandemic; trade disputes between the U.S. and China, potential increase of barriers to international trade and resulting disruptions to NXP’s established supply chains; the impact of government actions and regulations, including restrictions on the export of US-regulated products and technology; the ability to generate sufficient cash, raise sufficient capital or refinance corporate debt at or before maturity to meet both NXP’s debt service and research and development and capital investment requirements; the ability to accurately estimate demand and match our production capacity accordingly or obtain supplies from third-party producers; the access to production capacity from third-party outsourcing partners and any events that might affect their business or NXP’s relationship with them; the ability to secure adequate and timely supply of equipment and materials from suppliers; the ability to avoid operational problems and product defects and, if such issues were to arise, to correct them quickly; the ability to form strategic partnerships and joint ventures and to successfully cooperate with alliance partners; the ability to win competitive bid selection processes; the ability to develop products for use in customers’ equipment and products; the ability to successfully hire and retain key management and senior product engineers; the invasion of Ukraine by Russia and resulting regional instability, sanctions and any other retaliatory measures taken against Russia, which could adversely impact the global supply chain, disrupt our operations or negatively impact the demand for our products in our primary end markets; the ability to maintain good relationships with NXP’s suppliers; and a change in tax laws could have an effect on inventoryour estimated effective tax rate. In addition, this document contains information concerning the semiconductor industry and property, plantNXP’s market and equipment, merger related costs (including integration costs), certain items relatedbusiness segments generally, which is forward-looking in nature and is based on a variety of assumptions regarding the ways in which the semiconductor industry and NXP’s market and business segments may develop. NXP has based these assumptions on information currently available, if any one or more of these assumptions turn out to divestitures, share-based compensation expense, restructuringbe incorrect, actual results may differ from those predicted. While NXP does not know what impact any such differences may have on its business, if there are such differences, its future results of operations and asset impairment charges, non-cash interest expenseits financial condition could be materially adversely affected. There can be no assurances that a pandemic, epidemic or outbreak of a contagious diseases, such as COVID-19, will not have a material and adverse impact on convertible notes, extinguishment of debt,our business, operating results and foreign exchange gains and losses.
VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until May 26, 2020 at 4:00 p.m. Eastern Time (10:00 p.m. Central European Time). Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until May 26, 2020 at 4:00 p.m. Eastern Time (10:00 p.m. Central European Time). Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return itfinancial condition in the postage-paid envelopefuture. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak to results only as of the initial publication date of this document. Except for any ongoing obligation to disclose material information as required by the United States federal securities laws, NXP does not have any intention or obligation to publicly update or revise any forward-looking statements after we have provideddistribute this document, whether to reflect any future events or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. IN PERSON ATTENDANCE AND VOTING Duecircumstances or otherwise. For a discussion of potential risks and uncertainties, please refer to the COVID-19 outbreak,risk factors listed in person AGM attendance and voting may be limited. Please check https://investors.nxp.com/annual-general-meeting-2020 for updated information. NXP SEMICONDUCTORS N.V. HIGH TECH CAMPUS 60 5656 AG EINDHOVEN, THE NETHERLANDS D00093-P37036-P36868 NXP SEMICONDUCTORS N.V. The Boardour SEC filings. Copies of Directors recommends you vote FOR the following proposals: Abstain Against For 1. Adoption of the 2019 Statutory Annual Accounts 2. Discharge of the members of the Board for their responsibilities in the fiscal year ended December 31, 2019 For Against Abstain 5. Authorization of the Board to restrict or exclude pre-emption rights accruing in connection with an issue of shares or grant of rights 3a. Appoint Kurt Sievers as executive director 3b. Re-appoint Sir Peter Bonfield as non-executive director 6. Authorization of the Board to repurchase ordinary shares 7. Authorization of the Board to cancel ordinary shares held or to be acquired by the Company 3c. Re-appoint Kenneth A. Goldman as non-executive director 8. Appointment of Ernst & Young Accountants LLP as independent auditors for a three-year period, starting with the fiscal year ending December 31, 2020 3d. Re-appoint Josef Kaeser as non-executive director 3e. Re-appoint Lena Olving as non-executive director 9. Determination of the remuneration of the members and Chairs of the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee of the Board 3f. Re-appoint Peter Smitham as non-executive director 3g. Re-appoint Julie Southern as non-executive director 10. Amendment of the Company’s Articles of Association 11. Non-binding, advisory vote to approve Named Executive Officer compensation 3h. Re-appoint Jasmin Staiblin as non-executive director Abstain 3 Years 2 Years 1 Year The Board of Directors recommends you vote 1 YEAR on the following proposal: 3i. Re-appoint Gregory Summe as non-executive director 3j. Re-appoint Karl-Henrik Sundström as non-executive director 12. To recommend, by non-binding vote, the frequency of executive compensation votes 4. Authorization of the Board to issue ordinary shares of the Company and grant rights to acquire ordinary shares For address changes and/or comments, please check this box and write them on the back where indicated. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
Important Notice Regarding the Availability of Proxy Materials for the Annual General Meeting:The Notice and Proxy Statement and Annual Reportour SEC filings are available at www.proxyvote.com.
D00094-P37036-P36868 NXP Semiconductors N.V. Annual General Meeting of Shareholders May 27, 2020 2:00 PM CET This proxy is solicited byon our Investor Relations website, www.nxp.com/investor or from the Board of Directors The undersigned shareholder(s) hereby appoint(s) Jennifer Wuamett and Jean A. W. Schreurs, or either of them, as proxies, each with the power to appoint (his/her) substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of NXP Semiconductors N.V. that the shareholder(s) is/are entitled to vote at the Annual General Meeting of Shareholders to be held at 2:00 PM, Central European Time on May 27, 2020, at the Company’s Head Office, High Tech Campus 60, 5656 AG Eindhoven, The Netherlands, and any adjournment or postponement thereof.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. Address Changes/Comments: (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)
(Continued and to be signed on the other side)
SEC website, www.sec.gov.
